Teqnion (TEQ) Q2 2024 earnings summary

Executive summary

• Net sales rose 4% year-over-year to 399.7 Msek in Q2 2024, with profit after tax up 5% to 34.5 Msek, but EPS declined 1% to 2.01 sek due to an increased share count from a capital raise.

• The group faces a tougher economic climate, especially in industrial niches and Swedish house building, leading to operational and financial challenges.

• Strengthened the team with new hires in accounting, CEO coaching, and commercial operations to improve performance and reporting quality.

• Focused on operational improvements and supporting struggling subsidiaries, with a hands-on approach to working capital and management transitions.

• Recent acquisition of Avelair Limited, a high-quality UK compressor manufacturer, expands international presence with strong management and competitive advantages.

Financial highlights

• Organic growth rates have fluctuated: Q4 -8%, Q1 -1.5%, Q2 -6%, reflecting a challenging market rather than a clear trend.

• EBITA for Q2 was 46.7 Msek (+1% year-over-year), with an EBITA margin of 11.7% (down from 12.1%).

• Free cash flow (excluding acquisitions) was 32.4 Msek in Q2, a significant improvement from -20.1 Msek last year.

• Year-to-date net sales reached 781.4 Msek (+6%), but profit for the period fell 10% to 55.6 Msek.

• Other operating income showed significant quarter-to-quarter variation due to revaluation of earn-outs from recent acquisitions.

Outlook and guidance

• Management remains confident in achieving the long-term target of doubling EPS every five years, despite current headwinds.

• No formal forecasts are provided, but management expects to improve performance and is focused on profitability and resilience across cycles.

• No immediate plans to list on another stock exchange or to acquire minority stakes in public companies, but open to future opportunities.

• Expect continued operational focus and gradual improvements rather than sudden leaps in performance.