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Investing.com -- Hexagon (ST:HEXAb) shares fell more than 10% Friday after the company reported weaker-than-expected first-quarter results and warned of softening demand in its largest markets, raising the possibility of cost-cutting measures if the downturn persists.
The Swedish industrial technology group said that while the quarter began on solid footing, March, typically its strongest month, saw a sharp decline in sensor sales.
The drop, combined with growing economic uncertainty in the NAFTA region and China, led to a flat quarter for organic growth and a decline in profitability.
Preliminary revenue for the first quarter came in at approximately 1,322.8 million euros, up slightly from 1,299.9 million euros a year earlier.
Reported growth was 2%, supported by a 1% contribution each from currency effects and structural changes. However, organic growth was 0%, down from 3% in the first quarter of 2024.
Operating earnings before adjustments (EBIT1) are expected to be about 345 million euros, compared to 376.5 million euros a year ago.
This corresponds to an adjusted operating margin of 26.1%, down from 29.0%. The company said a 6 million euro hit from currency transaction effects added to the margin pressure.
“Recurring revenues grew strongly during the quarter, but this was more than offset by weakness in sensor sales,” Hexagon said in a statement.
“The decline in sensor volumes in March, coupled with a 6 MEUR drag from currency transaction effects, had a negative short-term impact on EBIT1 margins.”
Hexagon’s said it is monitoring the situation closely and could take steps to reduce the cost base if market weakness continues.