Arjo (ARJO) Q3 2024 earnings summary

Executive summary

• Organic net sales grew 1.5% in Q3 2024, below expectations due to weak capital sales in Europe, China, and Japan, but with strong service and rental performance, especially in North America.

• Gross margin improved to 42.0% from 41.4% year-over-year, despite negative currency effects and lower capital sales.

• Adjusted EBITDA was SEK 434 million, and adjusted EBIT fell to SEK 164 million from SEK 186 million, reflecting currency headwinds and product mix.

• Operational cash flow reached SEK 437 million, with a cash conversion rate of 102%.

• Two European acquisitions (Tech Med and GerroMed) were completed to strengthen rental, service, and diagnostics businesses.

Financial highlights

• Net sales were SEK 2,734 million in Q3; gross margin reached 42.0% (up from 41.4%); adjusted EBITDA was SEK 434 million; adjusted EBIT margin decreased to 6.0% from 6.7% year-over-year.

• Operational cash flow was SEK 437 million, with cash conversion at 102%.

• Net debt reduced to SEK 4.4 billion, leverage (net debt/adjusted EBITDA) improved to 2.2, the lowest since spin-off.

• Equity/assets ratio at 50.2%, slightly up from previous quarter.

• Working capital days improved to 78 from 86 year-over-year.

Outlook and guidance

• Full-year 2024 organic net sales growth expected within the 3–5% target range, likely at the lower end.

• No anticipated bounce-back in European capital sales in Q4; low visibility expected to persist for several quarters.

• Gross margin for Q4 expected to be lower year-over-year due to product mix and currency headwinds.

• Cost efficiency and profitability initiatives to accelerate, with most effects expected from 2025 onwards.