Hexatronic Presents Interim Report Q1 2023
Read the full report here.
Events during the quarter
- Hexatronic invests 30 MUSD in a new duct and pipe production facility in the Western USA.
- Hexatronic completed, on March 3, 2023, the previously announced acquisition of Rochester Cable in the U.S., from TE Connectivity.
- Hexatronic adjusted the profitability target to an EBITA-margin of 15% to 17% over a business cycle. The previously set profitability target was at least 12% EBITA-margin over a business cycle.
- The Board of Directors will propose a dividend of 0.10 SEK (0.10) per share for the financial year 2022 to the Annual General meeting
Events since the end of the period
- Hexatronic has signed a one-year, with extension possibilities, Strategic Partner agreement with a newly established, fully funded, network operator in the USA, to a value of approximately 20 MUSD.
Hexatronic CEO Henrik Larsson Lyon, in an interview about Q1, 2023
Comments from CEO
A record-breaking quarter!
The first quarter of the year was a record-breaking quarter in terms of both sales and profitability. In particular, sales in North America and Europe, excluding Sweden, developed very strongly. Total sales increased by 52%, of which 24% was organic growth, compared with the corresponding period last year. Profitability (EBITA) increased 98% to a margin of 17.2%.
Sales in our largest market, North America, continued to develop very strongly, growing by 73%. The sales increase is explained by both duct and our FTTH systems. The one-year agreement of 20 MUSD, with the possibility of extension, signed with a new US Fiber To The Home (FTTH) network operator after the end of the quarter, is an example of the good development we see in North America. To meet the increased demand for duct, our new factory in Clinton, South Carolina, was inaugurated during the quarter, and the production rate is increasing continuously. Full production in the factory will be reached during the latter part of the third quarter. To further respond to the increased demand for ducts we are seeing in the North American market, it was decided in the quarter to invest 30 MUSD in a duct and conduit factory in Utah. With three geographically dispersed factories, we will establish ourselves as a national player who can efficiently deliver to customers throughout the US.
Sales in Europe, excluding Sweden, also continued to develop strongly, mainly thanks to the UK and Germany. Sales in the region increased by 55% compared to corresponding period last year.
Sales in Sweden remained strong and increased by 15% compared to corresponding period last year.
Sales in APAC (Asia Pacific) grew by 20%, mainly due to the acquisition of KNET, which was consolidated from 1 December 2022.
During the quarter, we completed the acquisition of Rochester Cable in the US, which strengthens our offering in the business area Harsh environment (fiber optic solutions for harsh environments). Rochester Cable was consolidated from 1 March 2023.
Order intake has continued to develop well. At the end of the quarter, we have an order book that is organically 21% higher than at the same time last year. In 2021 and 2022, the order book grew partly due to increasing demand but also because of long delivery times resulting from disruptions in various supply chains. The uncertainty regarding delivery times has resulted in some customers placing orders as far as 4-5 months before expected delivery, compared to a more normal delivery time of 1-2 months. As supply chains become more reliable, it is reasonable to expect the order book to normalize in the future.
We have recently noted a shift in demand, where several of our customers at the beginning of the year have prioritized connecting customers to their networks over the general fiber rollout. This has resulted in an increase in demand for blown fiber and nanocables, while demand for micro cables has decreased. Because of this shift in demand, it was decided at the beginning of April to reduce staffing in micro cable production in Hudiksvall by 27 temporary employees. After the transition, we still have more employees in Hudiksvall than we did on average in 2022. In the total group, we have close to 2,000 employees compared to just over 1,300 employees a year ago.
We believe that the market for fiber expansion is to some extent affected by increased inflation and rising financing costs for those who invest in fiber networks. However, our assessment is that it has a minor negative effect on our customers, and we see a continued positive development during the year, with both existing and new customers choosing Hexatronic as their partner.
Welcome to join us on our growth journey.
Henrik Larsson Lyon
President and CEO
Hexatronic Group AB (publ)
Publication
The information was submitted for publication, through the agency of the contact person set out above, at 07:00 CET on April 27, 2023.
This is a translation of the Swedish version of the interim report. When in doubt, the Swedish wording prevails.
