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Investing.com -- Shares of Interpump (MIL:IP) dropped 1.5% on Monday after already experiencing a sharp selloff on Friday, following a disappointing fourth quarter of 2024.
The company's EBITDA fell 12% below estimates, despite reporting revenue in line with expectations. Organic growth was down 7.8%, which was slightly better than the forecasted decline of 8.9%. However, profitability suffered, with margins dropping to 19% for the quarter, leading to a full-year figure of 22%, which was 50 basis points below the guided range of 22.5-23%.
The unexpected decline in profitability was attributed to a year-end inventory valuation process, which, due to accounting rules and specific KPIs impacted by lower sales, necessitated a write-down. The Hydraulics division felt the brunt of the impact, with its fourth-quarter margin tumbling to 15.3%, compared to the anticipated 18.9%.
Management highlighted that without the inventory adjustment, EBITDA in Hydraulics would have seen a 20% decline rather than 30%, suggesting a result nearly in line with the lower end of their guidance.
Despite the setback in profitability, Interpump reported a strong cash flow, with free cash flow (FCF) in the quarter reaching €48 million. The company also reduced its net debt to €409 million from €486 million at the end of 2023 and €441 million at the end of September 2024. Additionally, management noted that the organic decline in sales was solely volume-driven, with prices remaining stable.
Looking ahead, the company has reassessed its estimates for 2025, indicating that the challenging conditions of 2024 have not significantly changed in the early months of the new year. Interpump forecasts an organic growth range between +1% and -5%, with the initial months of 2025 expected to be the most difficult.
While some sectors show positive signs, others are yet to recover from the normalization cycle. The company plans to continue implementing countermeasures to protect and possibly improve margin levels and cash generation.
Stifel analysts commented on the results, stating: "The double-digit negative share price reaction post results rightfully, in our view, reflects the disappointment on 4Q24 results and consequent miss on 2024 guidance, but also a revision to estimates and expectations going into 2025.
Despite the fact that this performance was not driven by operating causes, and that the company still performed well on cash generation and M&A strategy (and we would expect them to repeat this performance in 2025, considering also a more favourable M&A environment), we believe it's imperative now to avoid any further misstep."
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