Nolato AB (FRA:NBF) Q2 2025 Earnings Call Highlights: Strong Growth Amid Currency Challenges

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Revenue: SEK2.4 billion, with a currency-adjusted organic growth of 4%.
EBITA Margin: Increased by 1.6 percentage points to 11.6%.
Operating Profit: Increased by 13% to SEK277 million.
Medical Solutions Sales: SEK1.350 million, a 5% increase adjusted for currency.
Medical Solutions Operating Profit: SEK170 million.
Engineered Solutions Sales: Increased by 1% adjusted for currency.
Engineered Solutions EBITA Margin: 11.2%, an increase of 1.2 percentage points.
Effective Tax Rate: Decreased to 20.3%.
Net Investments: SEK188 million, with high CapEx for expansion in Hungary.
Cash Flow After Investments: SEK128 million, compared to SEK336 million last year.
Earnings Per Share: Increased to SEK0.79 from SEK0.63 last year.
Return on Capital Employed: Increased to 13.4%.
Net Financial Liabilities to EBITDA: 0.7x after dividends of SEK404 million.
Warning! GuruFocus has detected 6 Warning Signs with FRA:NBF.
Release Date: July 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Nolato AB (FRA:NBF) reported a currency-adjusted organic growth of 4% in sales, reaching nearly SEK2.4 billion.
The EBITA margin increased by 1.6 percentage points to 11.6%, with operating profit rising by 13% to SEK277 million.
The Medical Solutions business area saw a 5% increase in sales, adjusted for currency, and an operating profit increase to SEK170 million.
The company is expanding its operations in Hungary and establishing new operations in Malaysia to support growth in Asia.
Earnings per share increased to SEK0.79 from SEK0.63 the previous year, indicating improved profitability.
Negative Points
Nolato AB (FRA:NBF) faced strong currency headwinds, impacting financial performance.
The automotive market within the Engineered Solutions business area is experiencing weaker market conditions.
High capital expenditures, particularly for expansion in Hungary, resulted in a decrease in cash flow after investments to SEK128 million from SEK336 million.
The company is still working on improving margins in the US, which are currently below the rest of the segment.
Overcapacity issues in China have not yet been fully resolved, affecting utilization rates.
Q & A Highlights
Q: In the Medical Solutions segment, you reported 5% organic growth. Can you elaborate on the growth drivers and the importance of the eye business to the group's sales and profitability? A: The eye business is not a significant part of the group but has shown good growth this quarter. The profitability aligns with our business area targets. This growth is due to additional business with existing customers.
Q: Could you provide details on the expansion in Malaysia, particularly regarding its impact on production and whether it will replace any Chinese operations? A: The expansion in Malaysia adds 3,500 square meters and focuses on consumer electronics for Engineered Solutions and drug delivery products for Medical Solutions. It is an addition for new growth opportunities, not a replacement for Chinese operations.
Q: The Medical segment showed impressive margins this quarter. Can you explain the factors contributing to this improvement and the role of the US market? A: The margin improvement is due to broad-based efforts, including pricing, cost adjustments, and efficiency improvements. The US market is part of this improvement, but the overall margin enhancement is a result of global efforts.
Q: Regarding Engineered Solutions, how is the overcapacity issue in China affecting margins, and is it resolved? A: The overcapacity issue in China is improving and contributing to margin improvements. While not yet at the business area target, there is still room for further improvement.
Q: With the recent margin improvements, are there still opportunities for further margin increases, or are they becoming limited? A: While the recent speed of margin improvement has been high, we are confident in reaching our midterm target of 12% for the group. Future improvements may not be as rapid, but we are on track to meet our goals.
Q: With ongoing expansion investments, should we expect above-average CapEx in 2026 as well? A: While it's early to predict exact numbers, we anticipate continued high growth, which will require additional CapEx. Although 2025 has seen high CapEx, we expect a decline in 2026, but it will remain above previous levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.