Q2 and HY results 2024

• HY1 2024 revenue down by 4% to EUR 261.6 million, normalized EBITDA up by 1% to EUR 30.0 million
• Q2 2024 revenue of EUR 128.6 million, down 6% from EUR 136.9 million in Q2 2023
• Normalized Q2 2024 EBITDA at EUR 13.9 million (Q2 2023: EUR 14.0 million)
• Reported net profit from continuing operations in HY1 2024 of EUR 5.2 million (HY1 2023: EUR 9.9 million)
• Strong emphasis on cashflow; leverage ratio at 2.8, unchanged from Q2 2023 (Q1 2024: 2.7)
• Kendrion will become a pure-play industrial company following the sale of the Automotive business in Europe and United States to Solero Technologies; closing expected at the end of Q3 2024

Key figures

*From continuing operations exclusive of the Automotive business held for sale.

¹ Invested capital excluding intangibles arising from acquisitions.
²  Normalized for costs and benefits outside the ordinary course of operations and including revenue and results from activities that are classified as held for sale and discontinued operations. A reconciliation from reported to        normalized figures can be found on page 11.

Joep van Beurden, Kendrion CEO:

“We had a solid first six months of 2024, particularly considering the ongoing challenging market, especially in Germany. This resulted in lower revenues for our Industrial business, partly compensated by growth in Automotive. We maintained our focus on the added value margin, which improved by 80 basis points, with contributions from both the Industrial and Automotive segments. We implemented strict cost control measures, particularly in Industrial Brakes, which remained impacted by the ongoing market slowdown. For Kendrion’s total operations, this led to a stable normalized EBITDA of EUR 30.0 million for the first half of the year, representing 11.5% of revenue, a slight increase compared to the same period in 2023. For our continued operations, we realized normalized EBITDA of EUR 20.7 million, or 13.5% of revenue, despite the lower industrial revenues. Our focus on cash flow management remained strong, keeping both net debt and our leverage ratio at steady levels, while also paying out EUR 4.2 million in cash dividends.

We are making progress in carving out our European and US Automotive business for the sale to Solero Technologies and anticipate closing the transaction by the end of Q3 2024. The sale of our Automotive franchise reflects a significant strategic decision to focus exclusively on opportunities within our Industrial Brakes and Industrial Actuators and Controls Business Groups in Europe, China and the US. We expect that the divestment will enhance our ability to invest in substantial opportunities within the Industrial sector, driving further profitable growth. During our Capital Markets Day on 5 September 2024, we will deliver a strategic update on the new, post-automotive Kendrion, share progress towards the 2025 financial targets, and announce new financial goals.

For the near term, we anticipate an economic environment similar to HY1 2024. We will continue our strict cost measures in Industrial Brakes and maintain our focus on the added value margin. Looking ahead, we maintain optimistic about our long-term prospects as a pure-play Industrial company focused on the global shift towards cleaner energy and other opportunities. We look forward to sharing our plans and outlining our medium- and long-term ambitions at our Capital Markets Day on 5 September this year.”

Progress on strategy

Kendrion is a global leader in innovative actuator solutions, driving the transition towards electrification and clean energy. The company operates through three distinct Business Groups: Industrial Brakes (IB), Industrial Actuators and Controls (IAC), and Automotive (Core and E). In IB, we are capitalising on the expanding market for electromotors and electrified solutions in sectors such as intralogistics, medical and collaborative robots, and wind power. The IAC portfolio includes inductive heating systems, industrial locks and beverage dispensing valves. Following the sale of the Automotive business in Europe and the US to Solero Technologies, Kendrion will integrate its remaining automotive activities, including the Automotive electronics business and China Automotive, into IAC. The transaction is expected to close by the end of Q3 2024.

As part of the strategic repositioning, Kendrion will focus its product development resources exclusively on the industrial segments and China. Investments in product development for Automotive Sound will be discontinued. The organisation will be rightsized to better align resources with the remaining activities. This, along with the termination of Automotive sound product development, is expected to generate annual cost savings of approximately EUR 8 million, with the full effect anticipated by 1 January 2025.

Financial review

Results from continuing operations
In accordance with IFRS 5, all assets and liabilities related to the Automotive activities that will be divested or discontinued following the announcement on 12 April 2024, are classified as held for sale and discontinued operations. The results of discontinued operations are reported separately from continuing operations in the financial statements. At the end of HY1 2024, the net loss from discontinued operations was EUR 1.0 million (HY1 2023: loss of EUR 1.3 million).

Q2 2024 revenue from continued operations was EUR 77.7 million, compared to EUR 83.9 million in the same period last year. Normalized EBITDA from continued operations was EUR 10.6 million (Q2 2023: EUR 11.9 million). The resulting EBITDA as a percentage of revenue of 13.6% compares with a 14.2% margin from continued operations in the previous year and the 10.8% normalized total group margin realized in Q2 2023. Net profit for the continuing operations amounted to EUR 1.0 million in the second quarter, down from EUR 4.6 million a year earlier.

In the first six months of 2024, revenue from continuing operations totalled EUR 152.8 million compared to EUR 166.4 million in the same period last year. Normalized EBITDA for continuing operations was EUR 20.7 million in HY1 2024, down from EUR 24.4 million in HY1 2023. Net profit for continuing operations decreased from EUR 9.9 million in the first half-year of 2023 to EUR 5.2 million in the first half of 2024.

Following the anticipated completion of the Automotive business divestment by the end of Q3 2024, Kendrion will initiate a rightsizing of the organisation, aligning its overhead resources more effectively with its remaining activities.

Revenue
Q2 2024
In the second quarter of this year, the normalized revenue was EUR 128.6 million, a decrease of 6% compared to the same period last year (Q2 2023: EUR 136.9 million). Currency translation did not have a material impact on revenue in the second quarter.

IB’s Q2 2024 revenue decreased by 16%, coming in at EUR 30.2 million (Q2 2023: EUR 36.0 million) due to lower trading activity in both Germany and China as the machine building market remains weaker than a year ago. IB’s trading has stabilized though, with revenue in Q2 EUR 2.0 million higher than in Q1 2024.  IAC experienced the same weakness in its machine building related revenue, however, saw positive developments in the aircraft, engineering, and food and beverage segments. As a result, the year-over-year revenue decline was limited to 3% and came in at EUR 32.2 million (Q2 2023: EUR 33.2 million).

In Automotive, trading weakened throughout Q2 2024, from healthy levels in Q1 2024, resulting in revenue of EUR 66.2 million, a 2% decrease compared to the same quarter last year (Q2 2023: EUR 67.7 million).

HY1 2024
Normalized group revenue in the first six months of 2024 was EUR 261.6 million, down 4% from EUR 273.7 million in HY1 2023. Currency translation did not materially affect revenue in the first half of the year.

Due to low trading activity in key markets, IB saw its HY1 2024 revenue decline by 22% to EUR 58.4 million (HY1 2023: 74.8 million). As mentioned, Q2 was a bit stronger than Q1. Meanwhile, IAC generated a revenue of EUR 64.5 million which is 3% below HY1 2023’s level of EUR 66.3 million.

Automotive’s revenue for the first six months of this year was EUR 138.7 million, up 5% from EUR 132.6 million in HY1 2023, benefiting from both higher volumes and prices. Revenue from the discontinued Automotive activities was EUR 108.8 million in the first six months of the year (HY1 2023: EUR 107.3 million), while revenue from other Automotive activities was EUR 29.9 million (HY1 2023: EUR 25.3 million).

Results
Q2 2024
The normalized operating result before depreciation and amortization (EBITDA) was EUR 13.9 million in Q2 2024 (Q2 2023: EUR 14.0 million). An improved added value margin, combined with the continued focus on cost savings and operational performance, compensated for the loss of revenue in the second quarter. The added value as a percentage of revenue increased by 90 basis points, from 45.9% in Q2 2023 to 46.8% in Q2 2024.

In Q2 2024, normalized depreciation charges were EUR 6.0 million (Q2 2023: EUR 5.8 million), resulting in a normalized operating result before amortization (EBITA) of EUR 7.9 million (Q2 2023: EUR 8.2 million).

A total of EUR 1.9 million in costs were normalized in Q2 2024, with the main portion relating to an impairment charge and an inventory write-off in connection with the bankruptcy of an Automotive Sound customer.

HY1 2024
The normalized operating result before depreciation and amortization (EBITDA) was EUR 30.0 million in HY1 2024, up 1% compared to EUR 29.7 million in HY1 2023, absorbing wage inflation and the 4% decline in revenue. The added value margin increased by 80 basis points, from 46.1% to 46.9%.

Depreciation charges were EUR 12.1 million in HY1 2024 (HY1 2023: EUR 11.6 million), resulting in an unchanged normalized EBITA of EUR 17.9 million. Amortization charges on intangibles arising from acquisitions remained unchanged at EUR 1.6 million. Total finance charges decreased to EUR 4.5 million in the first six months, from EUR 4.9 million in HY1 2023. Interest costs benefited from EUR 0.9 million more favourable realised and unrealised currency results, partially offset by EUR 0.5 million higher interest cost on borrowings, driven by increased borrowing rates. Tax charges on normalized income were EUR 3.5 million (HY1 2023: EUR 2.8 million), leading to an effective tax rate of 30.0% (HY1 2023: 24.7%). Normalized net profit before amortization charges stemming from acquisitions amounted to EUR 9.5 million (HY1 2023: EUR 10.0 million).

A total of EUR 5.7 million costs (EUR 4.1 million net of tax) was normalized in HY1 2024. These normalized operating costs consist of EUR 1.9 million costs related to a customer bankruptcy in Automotive, EUR 0.4 million restructuring charges and EUR 3.4 million costs associated with the measurement to fair value of the held-for-sale Automotive business. Normalized net costs in HY1 of the previous year amounted to EUR 0.2 million.

Financial position
Total net debt at the end of Q2 2024 was EUR 149.7 million, up from the EUR 145.7 million in Q1 2024 but significantly down from EUR 160.9 million in Q2 2023. This puts the leverage ratio at 2.8, well below our covenant of 3.25, maintaining our solid financial position. A cash portion of EUR 4.2 million from the optional dividend was paid out in May 2024. As of 30 June 2024, Kendrion had EUR 60.6 million available in cash and unused credit lines.

The free cash flow for the first six months was breakeven, compared to a negative free cash flow of EUR 12.5 million in the first half of 2023. This improvement was primarily due to a decrease in working capital (EUR 73.0 million compared to EUR 83.0 million at the same time in 2023) and lower total investments (EUR 11.5 million compared to EUR 15.4 million in the same period in 2023). 

Number of employees
The number of FTEs at the end of Q2 2024 was 2,527 compared to 2,652 at the same time last year. The reduction of 78 direct FTEs and 47 indirect FTEs was driven by the cost-saving measures in IB and a reduced number of direct FTEs in Automotive, in line with the lower activity level towards the end of the quarter. IAC reported no significant changes in the number of FTEs.

Outlook
Looking ahead to the second half of 2024, we expect a similar economic climate, with a stable US economy, a continued weak trading environment in Europe — particularly in Germany — and low economic activity in China compared to historical levels. For the longer term, we are confident that as a pure-play industrial company, we can leverage significant organic growth opportunities driven by the global transition toward cleaner energy sources and other opportunities. We will share our plans and our new medium- to long-term financial targets for the ‘new’ Kendrion at our Capital Markets Day on 5 September this year.

Analysts’ call Q2 2024 results
Kendrion CEO Joep van Beurden and CFO Jeroen Hemmen will present the interim results on Wednesday 21 August 2024, at 11:00 a.m. CET via an analysts' webcast.

Capital Markets Day
Kendrion will hold a Capital Markets Day for analysts, investors, and shareholders on Thursday, 5 September 2024 2.00 p.m. CET in Amsterdam. During this event, Kendrion’s medium- and long-term ambitions will be presented.

Profile of Kendrion N.V.

Kendrion develops, manufactures and markets high-quality electromagnetic systems and components for a broad range of industrial (and automotive) applications. For more than a century, we have been engineering precision parts for the world's leading innovators in industrial applications and passenger cars and commercial vehicles. As a leading technology pioneer, Kendrion invents, designs and manufactures complex components and customised systems as well as local solutions on demand.

We are committed to the engineering challenges of tomorrow, and taking responsibility for how we source, manufacture and conduct business is embedded into our culture of innovation. Headquartered in the Netherlands and listed on the Amsterdam stock exchange, Kendrion's expertise extends across Europe, to the Americas and Asia. Created with passion and engineered with precision..

Amsterdam, 21 August 2024

The Executive Board

For more information, please contact:

Kendrion N.V.
Mr. Joep van Beurden
Chief Executive Officer
Tel:+31 6 82 56 85 65
Email: IR@kendrion.com
 

• Press release
• Presentation
• Analysts' webcast recording