Cavotec SA - Interim report January-June 2023

Strong increase in revenues and growing profitability

APRIL–JUNE 2023

• Revenues increased 44.4% to EUR 45.7 million (31.7)
• EBIT amounted to EUR 1.2 million (-0.9), corresponding to an EBIT-margin of 2.6% (-3.0%)
• Net result for the period was EUR -0.9 million (0.9)
• Operating cash flow amounted to EUR -4.6 million (2.2)
• Earnings per share basic and diluted amounted to EUR -0.009 (0.017)

JANUARY–JUNE 2023

• Order backlog decreased -8.2% to EUR 140.3 million (152.8)
• Revenues increased 44.3% to EUR 85.3 million (59.1)
• EBIT amounted to EUR 1.5 million (-2.4), corresponding to an EBIT-margin of 1.7% (-4.1%)
• Net result for the period was EUR -2.3 million (1.3)
• Operating cash flow amounted to EUR -7.5 million (2.1)
• Earnings per share basic and diluted amounted to EUR -0.022 (0.014)

Key events during the quarter

• Cavotec made a strategic decision to expand its operations in India to drive growth and support global sourcing.
• Cavotec won a major turnkey order for on-shore power worth approximately EUR 5 million.
• Joakim Wahlquist officially started as CFO as of 1 May 2023.
• Jörgen Ohlsson has been appointed Senior Vice President Global Operation and will be a member of the Cavotec Management Team starting from August 2023.
• At the end of the quarter Cavotec agreed with the lenders to a covenant waiver for the remainder of 2023.

Comment from the CEO

Strong revenue and continued positive EBIT development

In the second quarter we reported revenues of EUR 45.7 million, an increase of 16% compared to the first quarter, and an increase of 44% compared to the same period last year. Revenues in Ports & Maritime increased by 65.3%, to EUR 28.8 million and revenues in Industry increased by 18.9%, to EUR 17.0 million compared to the same period last year.
 
Due to a combination of an uptick in deliveries and delays in order intake, our order backlog decreased to EUR 140.3 million, an -8% reduction compared to the same period last year. The slightly lower order intake is explained by delayed orders in our Ports & Maritime and Industry businesses with customers carefully evaluating the macroeconomic environment. During this and recent quarters, we have improved our delivery performance and lead-times. Our total installed base continues to grow and this provides considerable opportunities for our Services business which performed strongly in the second quarter.
 
Due to increased volume and improved profitability of new orders, we continued to build on the positive EBIT performance in the first quarter. EBIT in the second quarter amounted to EUR 1.2 million, corresponding to an EBIT improvement of EUR 0.9 million versus the first quarter of 2023 and EUR 2.1 million compared to the same period last year. We remain fully focused on deriving more profitability from our existing order book, while at the same time taking actions to win new orders with improved margins. We are starting to see the benefits and effects of the changes we have introduced, but there is still much we want to do. Further improvements to our profitability will come after we have delivered the portion of our Ports & Maritime orderbook which was booked before the global supply chain disruptions and emergence of inflationary pressure. It will still take some time for those orders to fully unwind due to long delivery schedules. However, we are actively identifying ways to offset higher costs with the introduction of cost optimization programs. Finally, similar to many companies, we were forced to increase our prices to counter the impact of higher costs. Our pricing now better reflects the value we deliver to our customers. These effects combined are set to contribute to a steady improvement in profitability throughout the year.
 
On the back of the above and encouraging EBIT improvement and revenue growth, we agreed at the end of the quarter with our lenders to a covenant waiver for the remainder of 2023.
 
We have recently developed a strategy focused on production and sourcing to ensure that Cavotec also in the future is well equipped to continue delivering high-quality products at competitive prices going forward.

On June 23rd Jörgen Ohlsson was appointed Senior Vice President Global Operations effective August 21st, 2023. With his strong track-record of driving transformation projects and implementing processes aimed at optimizing site production and global sourcing costs reduction programs, Jörgen is an ideal addition to the team. I have asked Jörgen to focus initially on setting up a global sourcing function with commodity managers to build an efficient and scalable supply chain organization across all Cavotec sites. I believe this will play a key role in building “One Cavotec” from an operations and procurement standpoint.
 
Furthermore, I am delighted to share the exciting news that Cavotec has decided to expand its operations into India by opening a new scalable facility, marking a pivotal step towards our vision of growth and customer-centricity.
The expansion, which will not involve major investment, is required to fuel our growth, and will focus on serving our customers primarily located in India and Southeast Asia. By capitalizing on India’s robust manufacturing capabilities and cost-effective resources, we expect to support all our operations globally with new and competitive suppliers from the region as well as enabling us to increase our overall capacity.
 
I have now completed my first year as Cavotec CEO, during these 12 months I have spent considerable time meeting our valued customers and partners and visiting our offices and operations around the world. My most important observation from this time is that demand for our solutions is strong. I am confident that we are well positioned to capture the technological shift to sustainable electrical solutions. I am also proud of the passion I have seen in our people, and of the work that has been put in to get Cavotec back on a profitable track. Most of all, I am excited at the prospect of what we are yet to achieve, and I am certain that Cavotec will continue to grow, and to grow profitably.
 
Stockholm, July 28, 2023
David Pagels
Chief Executive Officer

Webcast
A webcast - in English – will be held on 28 July 2023 at 10:00 CEST. CEO David Pagels and CFO Joakim Wahlquist will present the Quarterly Report. If you wish to participate via webcast, please use the link below. Via the webcast you may submit written questions. https://ir.financialhearings.com/cavotec-q2-2023
 
If you wish to participate via teleconference, please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference. https://conference.financialhearings.com/teleconference/?id=2001423
 
Quarterly Reports on www.cavotec.com
The full report for the period January-June 2023 and previous quarterly and full year reports are available at: http://ir.cavotec.com/financial-reports