Elekta AB Unsponsored ADR Class B ((EKTAY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Elekta AB Unsponsored ADR Class B painted a mixed picture of the company’s financial health. While there were strong performances in the EMEA region and successful new product launches, challenges in the U.S. and China markets, as well as declining margins, were notable concerns. The improvement in cash flow and FDA clearance for the Leksell Gamma Knife were positive, but the overall financial performance showed signs of strain.
Positive Sales Growth in EMEA
Sales in the EMEA region increased by 15% in constant exchange rates compared to the previous year. This growth was driven by a strong performance in Europe, with significant contributions from countries like France, the U.K., and Poland.
Strong Performance of New Products
Elekta’s latest innovations, including the Elekta Evo linear accelerator and the Elekta ONE software suite, are gaining traction in the market. These products have contributed positively to sales growth and have been instrumental in securing new customer wins.
Cash Flow Improvement
Operating cash flow after continuous investments showed a notable improvement, amounting to negative SEK 361 million, which is an enhancement of SEK 529 million year-over-year. This improvement was mainly driven by better working capital management.
FDA Clearance for Leksell Gamma Knife
A significant milestone was achieved with the FDA clearance for the Leksell Gamma Knife to treat certain types of epilepsy. This expands the scope of stereotactic radiosurgery and opens new avenues for Elekta in the medical field.
Decline in Order Intake
The book-to-bill ratio came in at 1.05, with a 1% order decline in constant exchange rates compared to last year. This indicates challenges in maintaining order momentum, which could impact future growth.
Decline in EBIT Margin
The adjusted EBIT margin decreased to 6.5% from 7.4% last year. This decline was mainly due to a reduction in gross margin and increased R&D expenses, highlighting the financial pressures faced by the company.
Challenges in the U.S. and China Markets
Sales in the Americas declined by 4%, and APAC sales also saw a 4% decline in constant exchange rates. These declines were primarily due to lower volumes in North America, awaiting clearance for Elekta Evo, and ongoing challenges in China and India.
Gross Margin Decline
The adjusted gross margin declined to 37% from 37.8% last year, negatively impacted by foreign exchange rates and increased tariff costs. These factors have put additional pressure on the company’s profitability.
Forward-Looking Guidance
Looking ahead, Elekta anticipates continued challenges from tariffs and foreign exchange impacts in the second quarter. However, the company expects a sales recovery in China during the second half of the fiscal year. Despite the current hurdles, Elekta remains optimistic about its growth prospects, particularly in the EMEA region.
In conclusion, Elekta AB’s recent earnings call highlighted a mixed financial performance, with strong growth in the EMEA region and successful new product launches offset by challenges in the U.S. and China markets and declining margins. The company’s forward-looking guidance suggests cautious optimism, with expectations of overcoming current challenges and achieving sales recovery in key markets.