Czechoslovak Group reported a six percent revenue increase to 4.76 billion euros for the first nine months of the year, falling short of analyst expectations and triggering a steep decline in the defense manufacturer’s stock value, according to Novinky.
The drop marked a sharp reversal for the company founded by billionaire Michal Strnad, which went public on the Prague and Amsterdam stock exchanges in January with an initial share price of 25 euros.
Novinky reported that shares traded on the Prague bourse fell by roughly 15 percent to 285 crowns following the release, while Investiční web said that prices on the same exchange dropped under 260 crowns, down from an early post-debut peak of 864 crowns. Seznam Zprávy reported that shares on the Amsterdam exchange dropped roughly 18 percent to 11 euros shortly after trading opened.
Management pointed to a shift in product mix and postponed shipments as the primary drivers behind the weaker third-quarter performance. Czechoslovak Group sold older large-caliber ammunition from inventory at lower prices than historical averages to meet surging customer demand for munitions with extended ranges, according to Investiční web.
The company also deferred a portion of expected ground system deliveries into the final quarter of the year, Patria.cz reported. „CSG management said that approximately 300 million euros of revenue, originally expected in the third quarter, was postponed to the final quarter of the year. This factor was the main reason for the weaker quarterly result,” said Adam Kahánek, analyst at Patria Finance, as reported by Novinky.
The production adjustments reduced operating margins across the group. Czechoslovak Group lowered its full-year EBIT margin forecast to approximately 21 percent from an original range of 24 to 25 percent.
Despite the quarterly slowdown, the group expanded its total order book and confirmed its full-year revenue guidance between 7.4 and 7.6 billion euros, according to Seznam Zprávy. The value of new and pending orders climbed by one billion to reach 18 billion euros, Hospodářské noviny (HN.cz) reported.
Investiční web said that the defense division, Defence Systems, generated 3.79 billion euros in revenue during the nine-month period, reflecting a 9.5 percent increase with an EBIT margin of 27.9 percent.
The rapid expansion required heavy investments in raw materials, components, and supplier deposits, pushing the group’s net debt higher by the end of September, Seznam Zprávy reported. Operating cash flow remained negative for the first three quarters, though management expects liquidity to improve as orders are finalized and delivered through the end of the year.
The company reduced its full-year EBIT margin forecast to 21 percent because it sold older standard-range ammunition from inventory at lower prices to accommodate customer demand for extended-range munitions, according to Investiční web. An increased share of lower-margin ground vehicle deliveries also weighed on profitability, Hospodářské noviny (HN.cz) reported.
Investors sold off shares across both the Prague and Amsterdam bourses following the announcement. Seznam Zprávy reported that Amsterdam shares dropped about 18 percent to 11 euros, while Novinky said that Prague shares fell by roughly 15 percent to 285 crowns.
Czechoslovak Group reported a record order backlog valued at 18 billion euros, representing an increase of one billion euros compared to previous totals, according to Hospodářské noviny.
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