Lifco shares fall 9% as Q2 profit slips on weaker margins, slower growth

Investing.com -- Shares of Lifco AB (ST:LIFCOb) fell over 9% on Monday after the company reported a 3.8% drop in second-quarter net profit to SEK 880 million, down from SEK 914 million a year earlier, as weaker margins and slowing organic growth offset acquisition-driven gains.

EBITA fell 2.8% to SEK 1.56 billion, with the margin narrowing to 22.5% from 23.9%.

Second-quarter net sales rose 3.2% to SEK 6.94 billion. Acquisitions contributed 7.2%, while organic growth was 0.5%. 

Currency effects reduced reported sales by 4.4%. The company cited a negative product mix and weaker organic performance in Systems Solutions as key factors in the margin decline.

Contract Manufacturing also reduced profitability due to onward invoicing of surplus materials.

Cash flow from operating activities in the quarter dropped 8.5% to SEK 971 million. Profit before tax decreased 4.3% to SEK 1.18 billion. Net financial items showed an improvement, with a cost of SEK 103 million compared to a cost of SEK 127 million previously.

For the January–June period, net profit rose 6.7% to SEK 1.72 billion, with earnings per share up 7.1% to SEK 3.75. 

Net sales increased 9% to SEK 13.88 billion, with acquisitions contributing 7.3% and organic growth at 4.1%. Exchange rate effects reduced sales by 2.4%.

EBITA for the half-year grew 5.9% to SEK 3.06 billion, but the margin declined to 22% from 22.7%. 

Operating cash flow fell 3.9% to SEK 1.74 billion. Net financial items represented a cost of SEK 207 million, an improvement from the SEK 230 million cost incurred last year. Profit before tax rose 6.4% to SEK 2.31 billion.

Net debt stood at SEK 12.84 billion at the end of June, up from SEK 11.59 billion at year-end. 

Interest-bearing net debt increased to SEK 8.88 billion. Net debt to EBITDA was 1.9 times, with interest-bearing net debt at 1.3 times EBITDA.

Lifco issued two unsecured bonds totaling SEK 1.75 billion during the period, bringing total outstanding bonds to SEK 4.50 billion.

Seven companies were consolidated during the first half, contributing approximately SEK 800 million in annual sales. Acquisitions included three firms in Dental and four in Systems Solutions.

Dental posted a 1.1% increase in half-year net sales to SEK 3.24 billion, while EBITA declined 1.1% to SEK 684 million. In Q2, net sales fell 2.4%, and EBITA declined 5.4%, partly due to the Easter holiday.

Demolition & Tools reported a 13.7% rise in EBITA to SEK 861 million and a 5.5% increase in sales to SEK 3.41 billion. The margin improved to 25.2% from 23.4%, though Q2 EBITA declined 1.7% due to product mix effects.

Systems Solutions recorded a 14.8% rise in sales to SEK 7.22 billion, with EBITA up 5.1% to SEK 1.60 billion. The EBITA margin declined to 22.2% from 24.3% as most divisions saw weaker organic sales.

The company expects to consolidate HedoN Electronic Developments and Toppy in Q3.