Faced with a difficult market environment, the Geneva-based manufacturer of electronic enclosures and components LEM has launched a savings program. After a decrease in sales in the first half, its general manager does not expect any improvement in the second.
Turnover fell 29.9% to 156.5 million francs over six months, from April to September, in the first half of its staggered financial year, the Meyrin-based company said on Monday. The group has been weighed down by the slowdown in the electronics industry, weak sales of electric vehicles in Europe and North America and persistently high inventories in key sectors.
“Many customers in Europe and America are currently in the process of restructuring. In addition, visibility is low, and order developments have returned to the same level as before the coronavirus pandemic,” explained Managing Director Frank Rehfeld during a conference call.
Backsliding everywhere
Revenues declined in all regions. The decline reached 11.7% in China, 42.7% in the rest of Asia, 37.9% in the Europe, Middle East and Africa (Emea) zone and 29.4% in the Americas.
“The Chinese market, where we generate the majority of our turnover, remains volatile. The EMEA also continues to struggle with inventory reductions and pressured demand. The situation remains tense in the rest of the Asia and America,” detailed the boss.
The decline in sales is palpable in all sectors. The Automation, Automotive, Renewable Energy, Energy Distribution and High Precision and Rail divisions recorded decreases of 32.4%, 25.3%, 37.6%, 27.3% and 24.7% respectively.
Operating profit (EBIT) collapsed by 72.6% to 14.2 million and the EBIT margin stood at 9.1%. Net profit for the period under review fell by 80.2% to 8.6 million. These results are significantly below the expectations of analysts consulted by the AWP agency.
No recovery expected
LEM expects the market to remain sluggish in the medium term. “We do not see any signs of recovery in the second half of 2024/25. Our forecasts for the whole year are significantly lower than those of the previous year,” explained the resigning financial director Andrea Borla, whose position will be taken up this month by Thomas Mellano.
The company expects a turnover of around 290 to 310 million for the full year 2024/25 and an EBIT margin of between 5% and 9%. Given this outlook, LEM has launched a savings program to review the organizational structure and associated operating expenses, as well as indirect operational costs.
“This program aims to stimulate competitiveness,” said Mr. Rehfeld. “There could be job cuts during this exercise,” added Mr. Borla.
The group aims to grow at least as fast as the market, with the aim of double-digit growth. Despite this, the objective of reaching 600 million francs in turnover was postponed for two years. It is now planned for 2029/30, with an EBIT margin of around 20% to be achieved.
Despite everything, LEM does not intend to make any strategic changes. The group wants to continue investing in its new research and development centers in Munich (D) and Shanghai (CN).
Disappointed expectations
The sharp decline in results disappointed market expectations. “LEM has published another series of disappointing results, with a further decline in sales,” writes analyst Lucas Glemser of Berenberg Bank. He expects revisions to profit estimates for the 2024/25 financial year and a negative stock reaction.
For UBS, these results did not meet market expectations: “LEM does not yet see signs of recovery in demand. This means that the current financial year is probably ‘lost’. A cost reduction program has been launched, but we believe the company has almost reached its lowest point.”
Around 2:20 p.m. on the Swiss Stock Exchange, LEM shares tumbled 21.5% to 884 francs, in an SPI up 1.04%. The share price has fallen by 54% since the start of the year.
This article was automatically published. Sources: ats/awp
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