Release Date: February 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CTT Systems AB (LTS:0GUO) reported a solid quarter with stronger development in all three product areas.
• The company received its largest single order ever for 146 A321s, valued at approximately $120 million.
• Net sales increased by 1% to 82 million, and operating profit (EBIT) increased by 2 million to 34 million.
• CTT Systems AB has a strong financial position with a net cash position and an equity ratio of 74%.
• The private jet market is showing strong momentum, driven by successful cooperation with Airbus Corporate jets.

Negative Points

• Earnings per share decreased by 12% to 1.93% from 2.19.
• Operating cash flow decreased to 16 million from 30 million last year, mainly due to negative working capital.
• Net sales for the full year of 2024 decreased by 3% to 300 million compared to 309 million in 2023.
• A sharp but temporary sales drop is expected in Q1 2025 due to well-stocked distributors leading to fewer orders.
• The aftermarket sales are experiencing volatility due to inventory adjustments and changing buying patterns.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with LTS:0GUO.

Q: Can you elaborate on the expected duration of the inventory destocking process and its impact on aftermarket sales growth? A: We anticipate the destocking effects to gradually diminish in Q1 and partially into Q2. The underlying market demand is expected to grow at a single-digit rate, which will help stabilize sales in the latter half of the year. - Unidentified_1

Q: How do you view the lead times for OEM system deliveries as production rates increase? A: We expect to align with Boeing and Airbus build rates in 2025. For instance, our Q4 sales to the 787 program were about $1 million below the actual shipset value, which we expect to recover. Boeing plans to increase production rates from 5 to 7 per month this year, and Airbus aims for 10 per month by 2026. - Unidentified_1

Q: Have there been any changes in pricing for shipsets due to inflation or currency fluctuations? A: Our contracts with both Airbus and Boeing are long-term with fixed prices, so there are no price adjustments between 2024 and 2025. - Unidentified_1

Q: Regarding the private jet market, how do you foresee the delivery schedule for orders received in Q1? A: Not all orders will be delivered in Q1, but some will. We will continue to work on orders received last year as well. - Unidentified_1

Q: How does the mix of revenues from the VIP private jet side impact group profitability? A: We do not disclose gross margins for specific product areas, but the mix will affect overall margins. With more system sales expected this year, margins might be slightly lower compared to previous years, which aligns with our long-term plan. - Unidentified_2

Q: Can you provide insights into the contractual phase duration for private jet agreements? A: The duration is variable and not entirely within our control, as it depends on the OEMs. Typically, if successful, deliveries could start within a 12-month timeframe, but this can vary. - Unidentified_1

Q: Are the 300+ retrofit opportunities mentioned outside of the orders already received? A: Yes, the 350 aircraft opportunities are in addition to the 146 orders we have already received. - Unidentified_1

Q: How do currency fluctuations impact your financial results, and what can be expected in the future? A: The US dollar was strong in Q4, resulting in a positive currency effect of about 3 million. Currency impacts are difficult to forecast, but we will monitor them closely in 2025. - Unidentified_2

For the complete transcript of the earnings call, please refer to the full earnings call transcript.