Third Quarter Performance Overview
In the third quarter, HMS Networks achieved a noteworthy order intake increase of 37%, reaching SEK 677 million, compared to SEK 492 million in the previous year. However, it’s important to note that, on an organic basis, order intake saw a decrease of 8%, influenced by customer inventory adjustments and currency translations that negatively impacted results by 4%.
Sales Insights
Net sales showed a slight uptick, totaling SEK 792 million compared to SEK 789 million in the previous period. This growth includes acquired gains, which contributed 31%, but organically, net sales reflected a decline of 30%. Currency translation had a nominal effect, leading to a decrease of 1%.
Profitability Metrics
The adjusted earnings before interest and taxes (EBIT) for the quarter landed at SEK 194 million, reflecting a healthy operating margin of 24.5%. For total EBIT, the figure was SEK 163 million, maintaining a margin of 20.6%. Adjusted profit after tax stood at SEK 126 million, translating to basic earnings per share of SEK 2.51.
First Nine Months Review
Over the first nine months of the year, HMS reported an increase in order intake by 2%, totaling SEK 1,918 million, in contrast to SEK 1,877 million in the prior year. Yet, organics revealed a decrease of 23%, with acquired growth at 26% alongside a minor currency impact of -1%.
Sales Report
Net sales slightly dipped by 1%, arriving at SEK 2,253 million against SEK 2,265 million previously. Both organic growth and recent acquisitions adjust the overall picture, albeit showing challenges with organic sales decreasing by 24%.
Profit and Cash Flow
For the nine-month span, adjusted EBIT was SEK 503 million, reflecting a margin of 22.3%. The net cash flow from operations amassed to SEK 415 million, alongside the previously announced cost-saving measures proving effective with operating expenses at SEK 343 million.
Subsequent Organizational Changes
Looking ahead, HMS plans to implement a new organizational structure effective January 2025, aimed at enhancing customer focus and cross-selling opportunities. This strategic change is expected to yield substantial savings of SEK 40 million annually.
Strategic Transactions
The company also announced the acquisition of PEAK-System Technik GmbH, a significant addition that aligns with future growth strategies. Additionally, plans for divesting the MB Connect Line were put in place to streamline operations under the HMS brand.
Market Analysis
Despite a stable profitability outlook, Commander Staffan Dahlström reflected on a hesitantly recovering market, noting the challenges stemming from weak demand across regions, particularly within Europe and North America. Adjustments in stock levels have contributed to the ongoing market unpredictability.
Regional Performance Insights
In Europe, the automotive sector exhibits signs of struggle, while North America displays a slight downturn amidst a continued challenge for embedded business sectors. In Asia, results vary, with Japan currently facing stock challenges contrasted by China’s positive trajectory which recorded the best quarter since early 2023.
Looking Ahead
Although the current inventory adjustments and macroeconomic uncertainties linger, HMS anticipates gradual improvements in order intake by mid-2025. The company maintains a commitment to long-term growth and sound cost management, citing the Industrial ICT market as a prime area for potential development.
Frequently Asked Questions
What was the order intake change for HMS Networks in Q3?
HMS Networks saw a 37% increase in order intake for the third quarter, amounting to SEK 677 million.
How did net sales perform over the first nine months?
Net sales decreased slightly by 1% to SEK 2,253 million compared to the previous year.
What organizational changes is HMS Networks planning?
Starting January 2025, HMS Networks will introduce a new structure focusing on customer engagement and cross-selling while aiming for annual savings of SEK 40 million.
What future expectations does HMS Networks have for market recovery?
The company expects gradual order intake improvements in the first half of 2025 despite ongoing macroeconomic challenges.
Who can be contacted for more information about HMS Networks?
For inquiries, contact CEO Staffan Dahlström at +46 (0)35 17 29 01 or CFO Joakim Nideborn at +46 (0)35 710 69 83.
