Expensive bags, gas turbines and chips
LVMH, ASML, Wacker Chemie, SAP, ID Logistics, Sartorius, Siemens Energy, RENK and Lonza
LVMH (MC) A slight improvement, but margins remain under pressure
LVMH’s full-year results for 2024 paint a picture of a company navigating a challenging environment with mixed outcomes. While there are signs of improvement, particularly in the fourth quarter, margins remain under pressure, and patience is still the watchword for investors.
The company reported sales of €84.7 billion and an EBIT of €19.6 billion, resulting in a margin of 23.1%, down from 26.5% in 2023. This decline reflects the broader pressures facing the luxury sector, particularly in key markets like Asia.
In Q4, sales rose by 1%, with Fashion and Leather Goods seeing a slight improvement, dropping just 1% after a 5% decline in the previous quarter. This was helped by a bit of a rebound in Chinese spending and growth in the U.S. and Europe, though Japan's demand stayed weak.
Margins were a big worry, dropping significantly; the EBIT margin fell to 20.7% from 25.6% the year before. Wines and Spirits were hit hard, and Fashion and Leather Goods, along with Watches and Jewelry, saw margin declines, partly due to Tiffany's renovation.
Despite these challenges, there are some positive signals. The company has managed to rein in commercial expenses, which grew by just 1% over the year. This suggests that LVMH is positioning itself for better operational leverage if demand continues to recover. Additionally, the firming up of demand in January, particularly for flagship brands like Louis Vuitton and Tiffany, offers hope for a more tangible return to growth in the coming months.
LVMH’s outlook remains cautious. With margins still under pressure and the luxury market facing ongoing uncertainties, the road to recovery may be gradual.
ASML (ASML) Looking good
ASML ended 2024 on a high note, delivering fourth-quarter results that exceeded expectations and setting the stage for a promising 2025.
Revenues of €9.3 billion, above the consensus estimate of €9.0 billion due to higher-than-expected installed base management revenues, which came in at €2.1 billion, well above the guided range of €1.5 billion.
Geographically, the U.S. and South Korea were standout markets, accounting for 28% and 25% of sales, respectively. China, which had been a significant contributor in previous quarters, saw its share of sales drop to 27%, reflecting shifting dynamics in the global semiconductor market. On the product side, immersion lithography accounted for 41% of revenues, while EUV technology made up 42%.
The company’s gross margin was another highlight, coming in at 51.7%, above the consensus estimate of 49.7%. This was driven by additional upgrade business in the fourth quarter and lower-than-expected costs related to the revenue recognition of two EUV High NA tools.
Net system bookings were a standout metric, totaling €7.1 billion, with €3 billion coming from EUV orders. Logic customers accounted for 61% of orders, reflecting strong demand for advanced technologies, particularly in the context of the growing AI sector. Memory customers made up the remaining 39%, indicating a balanced and robust order book.
ASML reiterated its guidance for 2025, with sales expected to range between €30 billion and €35 billion and a gross margin of 51% to 53%. They also provided a long-term outlook, projecting sales of €44 billion to €60 billion by 2030, with a gross margin of 56% to 60%. These targets reflect ASML’s confidence in its role as a key enabler of technological advancements, particularly in AI and other high-growth areas.
No signs of slowing down.
Wacker Chemie (WCH) A tough solar market
Wacker Chemie’s preliminary results for the fourth quarter of 2024 show resilience amid challenges. The company managed to outperform expectations in some areas, but it’s clear that not everything is smooth sailing.
The standout figure was the EBITDA of €285 million, which came in 6% above what analysts had predicted. This was largely thanks to tighter cost control in the polysilicon (PolySi) segment and some unexpected gains in other areas. However, the company’s free cash flow took a significant hit, dropping to -€325 million. This was primarily due to a buildup in solar inventory, a reminder of the ongoing struggles in the solar market.
The chemicals segment had a mixed performance. Silicones held up well, but polymers faced more pronounced seasonality, leading to a noticeable decline in combined chemicals EBITDA. Despite this, the PolySi segment delivered a bright spot, with EBITDA doubling compared to the previous quarter. This improvement was driven by cost-cutting measures and a €30 million tax credit from the U.S. Inflation Reduction Act (IRA).
Still, the solar-PolySi market remains a tough environment, and Wacker has had to reduce plant utilization to 50% starting in early 2025. This decision, while difficult, is aimed at preventing further inventory buildup, which has been a drag on cash flow.
For 2025, but much will depend on how the solar market evolves. Wacker’s ability to manage costs and navigate these challenges will be critical.
SAP (SAP) Balancing resilience and growth in a shifting market
Stand-out growth, +10% in revenue, which came in at €9.34 billion, above expectations. This growth was driven by the impressive resilience of the on-premise business, which continues to play a key role in the company’s success. Profitability also exceeded expectations, with operating profit rising 24% year-over-year to €2.44 billion, supported by a better mix of business and effective cost management.
However, the company’s guidance for 2025 was slightly below expectations at the midpoint, particularly in terms of free cash flow. SAP expects cloud and software revenue growth of 11% to 13%, which is a bit lower than what analysts had hoped for.
Despite this, the company’s track record suggests it could still outperform its targets as the year progresses. The ability to maintain strong on-premise performance while growing its cloud business will be critical to SAP’s success in 2025.
SAP has shown it can navigate complex market dynamics and deliver value to its stakeholders, so let’s see what will happen.
ID Logistics (IDL) Strong finish to 2024 and optimism for 2025
ID Logistics wrapped up 2024 on a high note, with Q4 sales of €925.1 million, up 19.2% year-over-year, significantly surpassing expectations.
The performance reflects excellent momentum across all regions, driven by strong demand during Black Friday and the holiday season, as well as the successful ramp-up of new warehouse operations. France saw an impressive rebound with 15% growth in Q4, aided by recovering consumer demand and new contracts. Meanwhile, international markets continued to excel, particularly the United States, which posted a remarkable 39% increase in sales.
The strong growth trajectory is expected to carry into 2025, with over 20 new projects slated for launch, particularly in the U.S., which is quickly becoming a key growth engine. Organic growth is projected to remain robust, driven by ongoing contract wins and expansions across regions.
The company’s solid performance shows its ability to outpace market trends, thanks to its strategic global footprint and operational excellence.
2025 will bring challenges, but ID Logistics is well-positioned to continue its upward trajectory with strong international momentum and a rebound in French consumer activity.
7.7x ev/ebitda on FY24, for >10% ebitda growth over the medium-term and healthy free cash flow generation makes this one interesting.
Sartorius (SRT3) Strong Q4 signals recovery, 2025 could look good
Sartorius delivered a robust finish to 2024, with Q4 revenues of €907 million, up 6.7% year-over-year, beating expectations. The highlight was the company’s order intake, which surged 21.5%, reflecting strong demand recovery and increasing normalization of customer purchasing patterns. The sequential growth in orders points to a positive trajectory as the life sciences market continues to recover.
Bioprocess Solutions, Sartorius’s key division, performed particularly well, achieving €731 million in Q4 revenue, up 6.6%. Growth was driven by strong consumables sales and advanced therapy products, which more than offset a slowdown in bioprocess equipment investments.
Meanwhile, the Lab Products & Services division, though supported by 8.3% growth, faced softer demand, particularly in China, and ongoing cautious spending from customers.
Sartorius remains optimistic about 2025, with expectations for a gradual recovery in demand and moderate sales growth. While the company has only provided qualitative guidance for now, quantitative targets are set to be released with Q1 results, leaving room for potential upside.
Despite lingering market uncertainties, Sartorius’s strong finish to 2024, coupled with positive momentum in order intake, sets a solid foundation for continued growth. The focus now shifts to capitalizing on recurring revenue streams, especially from consumables, and leveraging recovery in key markets.
Siemens Energy (ENR) A strong start to a promising Year
Siemens Energy is off to a strong start in its fiscal year 2024-25, with preliminary results exceeding expectations. The company’s performance is a testament to its ability to capitalize on opportunities and deliver solid results even in a complex market environment. Orders came in at €13.7 billion, and revenue grew by 18.4% to €8.9 billion. This growth was driven by strong performances in key divisions, including Gas Services, Grid Technologies, and Transformation of Industry.
One of the most impressive aspects of the results was the company’s profit before special items, which reached €481 million. Margins in the key divisions all surpassed expectations, reflecting efficient operations and strong demand.
But the real standout was the free cash flow, which soared to €1,528 million, far above the consensus estimate of €69 million. This was largely due to strong customer advances and improved operating margins, showcasing the company’s ability to manage its finances effectively.
Siemens Energy is poised for what could be a historic year in 2025. The company is expected to revise its targets upward, with potential increases in revenue growth, operating margins, and free cash flow guidance. This positive momentum has led analysts to raise their estimates for the coming years, reflecting growing confidence in the company’s trajectory.
RENK (R3NK) More growth ahead!
Renk delivered a good finish to 2024 and set the stage for continued growth in 2025. The company reported a 23% increase in revenue to €1.1 billion, driven by strong demand across all three of its segments. Adjusted EBIT came in at €189 million, up 26% year-over-year with a margin of 21.2%, reflecting improved efficiency and operating leverage.
Order intake was another highlight, reaching €1.4 billion, a 13% increase year-over-year, with a book-to-bill ratio of 1.3x. The fourth quarter was particularly strong, with a book-to-bill ratio of 1.6x, indicating robust demand and a healthy pipeline of future business.
The company’s performance was driven by improved production control at its VMS facilities in Augsburg and Muskegon, as well as ongoing efficiency gains. These improvements are expected to continue driving earnings growth in the coming years, with the first benefits visible in Augsburg by the first half of 2025 and in Muskegon by mid-year.
While RENK has not provided specific guidance for 2025, the company emphasized that the positive growth and profitability trends are expected to continue, with all three segments contributing to growth. Consensus estimates project a 23.2% increase in adjusted EBIT to €222.7 million for 2025, reflecting confidence in RENK’s ability to sustain its momentum.
RENK is trading at ~13x ev / FY24 ebitda for >20% ebitda growth projected over the medium-term. Cash flow generating will be ramping strongly, and this one could be fire.
Lonza (LONN) Strong momentum in CDMO, but still tough CHI
Lonza’s full-year 2024 results confirmed the company’s strong momentum in its Contract Development and Manufacturing Organization (CDMO) activities, even as challenges in its Capsules & Health Ingredients (CHI) division continued to weigh on performance.
Adjusted for the impact of the cancelled Moderna mRNA contract, underlying sales grew by around 7%, reflecting the strength of Lonza’s core business. The standout performance came from the Biologics division, which delivered low-teens underlying sales growth and a core EBITDA margin of 34.8%, up significantly from the prior year. This was driven by a favorable product mix and high asset utilization, underscoring Lonza’s position as a leader in biologics manufacturing.
The Small Molecules division also performed well, with sales growing by 9.3% and core EBITDA increasing by 21%, reflecting the ongoing shift toward high-value solutions.
However, the CHI division faced ongoing headwinds, with sales declining by 9% and core EBITDA dropping by 22%. Soft demand and low asset utilization continued to weigh on the division’s performance, though Lonza expects a recovery in 2025, with low-to-mid-single-digit sales growth and a core EBITDA margin in the mid-twenties. The company has reiterated its plans to divest the CHI division, though no specific timeline has been provided.
Lonza has confirmed its 2025 guidance, expecting CER sales growth approaching 20%, including contributions from the recently acquired Vacaville site. Organic CER sales growth is projected to be in the low teens, with the core EBITDA margin approaching 30%.
While the Vacaville acquisition is expected to dilute the group margin in the near term, Lonza’s strong momentum in its CDMO business and the anticipated recovery in CHI support a positive outlook. The successful divestment of the CHI division and the integration of the Vacaville site will be key factors to watch in the coming year.
All said, this one is not cheap (but quality ;)).
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