Rotork PLC (RTOXF) (Q4 2024) Earnings Call Highlights: Record Margins and Strategic …

Release Date: March 11, 2025

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

Positive Points

• Rotork PLC (RTOXF, Financial) achieved an 8.2% year-on-year revenue growth on an organic, constant currency basis, with significant contributions from the oil and gas, water, and power sectors.
• The company’s adjusted operating margin increased by 70 basis points to 23.6%, the highest level since 2014, reflecting higher sales and solid operating leverage.
• Return on capital employed rose year on year to above 37%, showcasing Rotork PLC (RTOXF)’s efficient capital usage.
• The rebranded Rotork Service division performed strongly, growing faster than the group and contributing 23% to group revenues.
• The acquisition of NOAA, a South Korean electric actuator manufacturer, is expected to generate sales of 17.5 million pounds in 2025 at a 20% EBITDA margin, with potential for significant sales synergies.

Negative Points

• The CPI division’s revenues were 1.1% lower year on year on an OCC basis due to reduced nickel mining project activity.
• The company faced a foreign exchange translation headwind of 24 million pounds, impacting reported revenue growth.
• The ERP system implementation costs increased from 17 million pounds to 30 million pounds, indicating a significant rise in expenses.
• The UK defined benefit pension scheme incurred a one-time non-cash settlement loss due to a buy-in policy.
• The effective tax rate increased by 70 basis points, largely driven by the increase in UK tax rates.

Q & A Highlights

Q: Can you discuss the current status of LNG orders and the impact of large projects on your business?
A: We are starting to see LNG orders coming through, as expected at the beginning of 2025. Valve makers are receiving their orders, and while our lead times are shorter, we anticipate seeing these projects materialize in about 6 to 12 months. Large projects returned to normal levels in 2024, with a notable increase in Q4. (Kiet Huynh, CEO)

Q: Why has the ERP cost increased from £17 million to £30 million, and what is the timeline for completion?
A: The increase is due to bringing in external expertise to ensure continuity and technical delivery, which de-risks the program. We anticipate completing the ERP implementation by the end of 2027. (Ben Peacock, CFO)

Q: How is the M&A pipeline looking, and what are your criteria for acquisitions?
A: Our M&A pipeline is strong, with several actionable opportunities. We focus on financial discipline and strategic fit. NOAA is a recent acquisition that aligns well with our product enhancement strategy. We typically target privately owned companies to build relationships over time. (Kiet Huynh, CEO)

Q: Can you explain the order momentum in H2 2024 and the outlook for 2025?
A: Order momentum picked up significantly in H2 2024, driven by all divisions, particularly oil and gas and water and power. We enter 2025 with good momentum and a positive outlook, despite macro and geopolitical uncertainties. (Kiet Huynh, CEO)

Q: What is the expected impact of the NOAA acquisition on your divisions, and can its margins align with group margins over time?
A: NOAA complements our water and power and CPI divisions, with potential in oil and gas electrification. While NOAA’s margins are slightly below our group margins, we are confident in leveraging our operations to improve them over time. (Kiet Huynh, CEO)

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