Elekta Q1 profit soars 50% as cash flow strengthens despite sales decline

Investing.com -- Elekta (ST:EKTAb) on Thursday posted a 50% increase in net income in its fiscal first quarter, climbing to SEK 106 million from SEK 71 million a year earlier, as lower costs and improved cash flow offset weaker reported sales.

The Stockholm-based medical technology company said earnings per share rose to SEK 0.28 from SEK 0.18. 

Reported operating income grew 26% to SEK 219 million from SEK 174 million, while adjusted operating income declined 17% to SEK 235 million from SEK 283 million. 

The adjusted EBIT margin fell to 6.5% from 7.4%, reflecting currency headwinds and tariffs totaling SEK 176 million that weighed on gross margins. The reported EBIT margin improved to 6% from 4.5%.

Net sales decreased 5% to SEK 3,646 million from SEK 3,825 million, though revenue at constant exchange rates increased 3%. Sales in Europe, the Middle East and Africa rose 15% in constant exchange rates, supported by new product launches, while sales in the Americas and Asia-Pacific both declined 4%. 

In China, sales fell following last year’s weak order intake, while U.S. sales were lower as customers awaited clearance for Elekta Evo. Latin America remained stable but could not offset the decline in North America.

Organic sales growth for the quarter reached 2.5%, above the 1.9% consensus cited by Jefferies. 

Elekta shares edged slightly higher after the report. 

"Slow start to the year as guided with Q1 results broadly in line," Jefferies analysts commented in a post-earnings note. 

"No mention of mid-term guide for margin returning to 14% and higher," they noted.

The company’s order intake dropped 8% in reported terms to SEK 3,838 million, down 1% at constant exchange rates. The book-to-bill ratio stood at 1.05, compared with 1.10 a year earlier.

Gross income declined to SEK 1,342 million from SEK 1,417 million, with the adjusted gross margin falling to 37% from 37.8%. 

Tariff costs reduced the margin by 90 basis points, while foreign exchange changes had a negative impact of 100 basis points. Price improvements partly offset these effects.

Cash flow after continuous investments improved by SEK 529 million year-over-year, narrowing the outflow to negative SEK 361 million from negative SEK 891 million. 

The company said the improvement was driven by working capital management and lower investment levels. 

Net debt decreased to SEK 3.86 billion from SEK 4.13 billion, with a net debt-to-EBITDA ratio of 1.17 compared with 1.37 a year earlier.

Elekta also announced developments during the quarter. Its Leksell Gamma Knife system received U.S. Food and Drug Administration clearance for treating refractory mesial temporal lobe epilepsy. 

The company acquired assets from its distributor in Croatia to strengthen its position in the region’s cancer treatment market. 

In June, Elekta named Jakob Just-Bomholt as its new president and chief executive officer, effective Sept. 1, 2025, succeeding Jonas Bolander.

“We expect net sales for Q2 to be negatively impacted by a continued weak US development as well as a negative effect from last year’s low order intake in China,” the Swedish medical technology company said in a statement. 

It expects sales in China to begin recovering in the second half of the fiscal year. The company reiterated its outlook for full-year sales growth in constant currency.

“Furthermore, we expect a continuous negative impact on earnings from FX at current exchange rates and from tariffs in Q2,” the company added.

(Navamya Acharya contributed to this report.)