Revenue: EUR4 billion, down 9% year-over-year. EBITDA Margin: Approximately 9%. EBIT Margin: Stable at 8.8%. Sales in Rubber Reinforcement: EUR1.7 billion, down 9.5%. Steel Wire Solutions EBIT Margin: Increased to 10.4%. BBRG Sales: EUR552 million, down 6%. Free Cash Flow: EUR193 million for 2024. Proposed Dividend: EUR1.9 per share, a 6% increase year-over-year. Working Capital: Up EUR12 million compared to 2023. Joint Ventures Dividends: EUR51 million received. Restructuring Charges: EUR52 million, primarily related to changes in China, Belgium, and UK.

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Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

NV Bekaert SA (BEKAY) achieved a EUR4 billion top line and an EBITDA margin around 9%, which is on the higher end of their guidance. The company successfully integrated acquisitions in the synthetic rubber business, including BEXCO and Flintstone, contributing positively to their portfolio. Strong cash generation was reported, with a free cash flow of EUR193 million for 2024, despite lower sales and EBITDA levels. The Steel Wire Solutions segment saw an EBIT margin increase to 10.4%, thanks to mix improvements and footprint optimization. NV Bekaert SA (BEKAY) announced a proposed dividend increase of 6% year on year, reflecting their commitment to shareholder returns.

Negative Points

Sales were down 9% compared to the previous year, primarily due to lower sales in bead wire markets and reduced volumes. The company faced operational challenges in Europe and North America, impacting profitability in the first half of the year. There was a reported 9.5% decline in sales for the wrap-up reinforcement segment, mainly due to material and energy cost reductions. The Hydrogen business experienced project cancellations and policy uncertainty, slowing down expected progress. The specialty business segment saw a sharp profitability drop in the second half of 2024, reaching levels not seen since 2020.

Q & A Highlights

Q: Can you elaborate on the general cost outlook for 2025, including energy, raw materials, and salaries? A: Seppo Parvi, CFO: Inflation has stabilized, and we don't foresee significant changes compared to the past years. Salaries typically follow inflation rates. The main concern is logistics, particularly how tariffs might affect supply chains and freight costs globally. Yves Kerstens, CEO, added that wire rod prices are stable, with some increases noted in the US.

Q: Could you discuss your capital allocation strategy, including M&A and CapEx plans for 2025? A: Yves Kerstens, CEO: We are exploring M&A opportunities in growth areas and new segments where we can scale globally. Seppo Parvi, CFO, mentioned that CapEx for 2025 is expected to be around EUR190 million, similar to 2024, with potential increases if growth opportunities arise. The focus is on maintaining operational efficiency and productivity.

Story Continues

Q: What are your assumptions for flat revenues in 2025 regarding pricing and volumes? A: Yves Kerstens, CEO: We expect both volume and pricing to be relatively flat across our segments. However, there might be regional price increases, particularly in the US, due to evolving market conditions.

Q: Can you explain the increase in working capital and your plans to improve it? A: Yves Kerstens, CEO: The increase is mainly due to high inventory levels from slowed business and delayed customer payments. We are focusing on better inventory management, improving sales and operations planning, and enhancing receivables collection to bring the working capital ratio down to our target of 15%.

Q: Regarding the Steel Wire Solutions (SWS) division, is the improved margin of 10% sustainable? A: Yves Kerstens, CEO: The strong performance was driven by good business in energy and utilities in the US and strong operations in China. While we are pleased with the results, we must remain realistic about the segment's potential. The focus is on maintaining margins above 10% consistently over the years.

Q: Does the cautious outlook for 2025 affect your midterm EBIT margin target of 10% by 2026? A: Yves Kerstens, CEO: We are still targeting a 10% EBIT margin by 2026, driven by performance improvements and gradual contributions from growth platforms. However, the contribution from growth platforms may be less than initially expected due to market conditions.

Q: What is the impact of self-help measures on your 2025 EBIT guidance? A: Seppo Parvi, CFO: We have implemented cost reduction measures and footprint optimizations, which improve our cost competitiveness. These actions, along with strategic organizational adjustments, are expected to support stable margins in 2025 despite market uncertainties.

Q: Can you provide details on the divestment in Latin America and its impact on your guidance? A: Seppo Parvi, CFO: The divestment includes operations in Costa Rica, Ecuador, and Venezuela, expected to close by Q3 2025. The business is valued at around 6 times EBITDA, and the divestment is included in our guidance for flat sales and stable profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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