Chemring (CHG) ((GB:CHG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Chemring’s recent earnings call painted a picture of strong performance and growth potential, particularly in the Energetics segment. The company reported a record order book and improved operational efficiency, showcasing confidence in its long-term growth strategy. However, challenges persist in the Sensors & Information segment due to delays in government spending and increased costs in Norway.
Record Order Book and Strong Growth Projections
Order intake for Chemring reached GBP 781 million, marking a 20% increase year-on-year, which contributed to a record order book of GBP 1.3 billion, up 32% since last year. The company has set an ambitious target to double its annual revenue to GBP 1 billion by 2030, underscoring its commitment to growth.
Energetics Segment Success
The Energetics segment was a standout performer, achieving record order books. Revenue in the Countermeasures & Energetics segment grew by 17%, with operating profit increasing by 37% and margins expanding to 19.1%. This success highlights the segment’s critical role in Chemring’s overall growth strategy.
Improved Operational Efficiency
Chemring reported an improvement in operational efficiency, with operating margins rising from 14.3% to 14.8%. Cash conversion also improved, reaching 114%. Despite higher tax and finance costs, earnings per share increased by 3%, reflecting the company’s effective cost management.
Safety and ESG Progress
The company made significant strides in safety and ESG initiatives, with the total recordable injury frequency rate falling to 0.48 from 0.69. This progress aligns with Chemring’s ambition of achieving zero harm in its operations.
Challenges in Sensors & Information Segment
The Sensors & Information segment faced difficulties, with revenue declining by 18% and operating profit decreasing by 25%. These challenges were attributed to delays in U.K. government spending and the absence of the previous year’s benefits from JBTDS LRIP.
Higher Infrastructure Costs in Norway
Chemring encountered higher infrastructure and groundwork costs in Norway, leading to an increase in expected total costs from GBP 145 million to GBP 180 million. This cost escalation presents a challenge that the company needs to address.
Forward-Looking Guidance
Despite short-term headwinds, Chemring reported a robust financial performance for the fiscal year ending October 31, 2025. The company achieved a record order book of GBP 1.3 billion, with a 20% increase in order intake. Looking ahead, Chemring is targeting significant growth in its Energetics and Sensors & Information segments, supported by strategic investments and acquisitions. The company aims to reach a long-term revenue goal of GBP 1 billion by 2030.
In summary, Chemring’s earnings call highlighted strong performance and growth potential, particularly in the Energetics segment, despite challenges in the Sensors & Information segment and increased costs in Norway. The company’s strategic focus on growth and operational efficiency positions it well for future success.