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Somero Enterprises Inc. (LSE:SOM) has reported mixed results for the first half of 2024, reflecting both challenges and strategic responses across its global operations. Despite encountering various headwinds, the company remains optimistic about its performance in the latter half of the year.
Revenue Trends and Regional Performance
- North America: Revenue declined by 8% due to project delays exacerbated by elevated interest rates, labor shortages, and concrete rationing. Additionally, severe weather conditions in H1 2024 further impacted trading activities.
- Europe and Australia: Trading in Europe remained stable compared to the prior year. However, Australia experienced adverse effects from inclement weather, similar to North America.
- Rest of the World (ROW): Revenue from ROW saw a significant decline of 38%, primarily due to reduced volume in the Middle East compared to the previous year.
Product and Financial Performance
- New Products: Revenue from products released since 2019 increased to US$3.1 million, up from US$0.8 million in H1 2023, indicating positive traction for new offerings.
- Profitability: The reduction in revenues affected overall profitability. However, operational efficiencies allowed the company to achieve EBITDA margins of 23.8%.
- Cashflow: The decline in sales and higher working capital investment led to cash flow challenges.
Outlook and Expectations
- H2 2024 Expectations: Somero Enterprises anticipates improved trading conditions in the second half of 2024. The company expects full-year revenues to be approximately US$110.0 million, with EBITDA around US$30.0 million and year-end cash of approximately US$27.0 million.
Operational Highlights
- New Product Launches: The company introduced two new products in H1 2024, including the first electric-powered laser screed. A third product is scheduled for release in H2 2024.
- Innovation and Development: Ongoing activities include site visits, innovation council events, and exploring new technologies and automation for future products.
- New Facilities: A new service, repair, and training center has been established in Belgium to enhance service efficiency for EU customers.
- Cost Management: In response to the revised revenue expectations, Somero implemented a 15% reduction in workforce and stringent cost controls for the remainder of 2024 to mitigate the profitability impact.
