Members of Kibbutz Jezreel in northern Israel must have pulled out their hair when they saw the stock price of pool-cleaning robot maker Maytronics (TASE: MTRN) fall nearly 30% in a single day following the release of disappointing first-quarter financials. The stock price collapse wiped out about NIS 1 billion from the company's market value, most of which was supported by the kibbutz, which owns 56% of Maytronics.
Just two and a half years ago, the value of shares held by Kibbutz Jezreel's 300 members was worth more than NIS 5 billion. But since then, Maytronics' share price has fallen by 74%, and its holdings are worth just NIS 1.3 billion, down NIS 3.6 billion from the peak. This means a loss on paper of about NIS 13 million per kibbutz member.
However, it is this company that has created an impressive value for the kibbutz compared to the NIS 180 million offer for its shares that members rejected in 2012 from Maytronics' US competitor Hayward. Even now, after the stock price collapsed, it has returned hundreds of percentage points since then. Along the way, the kibbutz sold part of its holdings to financial institutions for a total of NIS 230 million (in 2017 and 2020).
Those sales preceded the impressive rise in Maytronics' stock price in 2020-2021, when the COVID-19 pandemic led to a sharp rise in demand for specialty pool cleaning products, boosting the company's results. But in the past two years, the results have been in a sharp decline, reflected in the decline in the share price from the peak it reached in November 2021 to its level four years ago.
In the past two years, the company's management has tried to spread optimism and claim that the problems will end at any moment and Maytronics will return to growth. In its 2023 financial statements, the company projected revenue growth of 4-8% in 2024, and claimed that after a large backlog of stock at its distributors that caused its 2023 results to hit, “inventory levels declined… at the beginning of 2024.” Supporting a return to growth in the volume of sales of robots for cleaning private swimming pools.”
However, yesterday, when Maytronics, headed by Sharon Goldenberg, released its financials for the first quarter of 2024, investors were surprised to discover that nothing of the sort had happened. The company reported a sharp decline in revenue and earnings compared to the corresponding quarter of 2023 and, more importantly, sharply lowered its guidance. It now sees revenues in 2024 being 2% lower and 4% higher than the 2023 figure of NIS 1.9 billion.
For the first quarter, Maytronics recorded a 13% decline in revenue to NIS 456 million, and a 26% decline in gross profit to NIS 177 million, with gross profit margin (as a percentage of sales) falling from 46% in the corresponding quarter to 38%. During the current quarter. Operating profits fell by 48% to 60 million shekels, and net profit fell by 55% to 39.7 million shekels. Compared to the first quarter of 2022, the decrease in net profit amounted to 65%. The company's backlog of orders also decreased by 48% compared to the end of the first quarter of last year, reaching only 192 million shekels.
Distraught investors rushed to sell the stock, which, as previously mentioned, fell almost 30% today, bringing Maytronics' market value down to just NIS 2.3 billion, compared to a peak of NIS 9.1 billion, and destroying a value of NIS 6.8 billion. The previous CEO, Eyal Treiber, who led the company to the peak of profit and value, left the company at the right time, just before the decline. His successor, Sharon Goldenberg, who was the company's chief financial officer, had to deal with declines in both.
Maytronics develops and sells robots for cleaning private and public swimming pools and associated products (pool covers, anti-drowning devices, etc.). The company generates most of its revenue and profits in the first half of the year, before the pools open in the summer months. Its customers (mostly distributors in North America, Europe, and Oceania) buy from January to July, with the first quarter traditionally being the strongest.
The hit to the company's results is primarily a result of the fact that it makes a luxury product that becomes less popular when inflation and rising interest rates hurt consumers. During the pandemic, when people were confined to their homes, its distributors built up high inventories, which stayed with them when the pandemic subsided, dragging down the company's sales.
98% of Maytronics' sales are exports and were therefore not greatly affected by the Iron Sword War, and even benefited slightly from the 3.1% depreciation of the shekel against the US dollar and euro, which added NIS 12 million to its sales. Quarterly revenue figure.
It's too early to write off the company
Even after a recession, it's not a certainty that we should write off Maytronics. The company is the largest manufacturer of pool cleaning products, and estimates it has half of its market share, while the next two largest competitors have about 20% each. Translating Maytronics' guidance into numbers, it expects revenues of NIS 1.85-1.96 billion this year.
Maytronics stated in its 2023 annual report that it aims to achieve revenues of between NIS 3.2 and 3.6 billion in 2028 and an operating profit margin of 14-18%. So, while it probably won't grow much this year, for anyone who nevertheless chooses to believe the forecast the company made just a couple of months ago, it should grow at 14% annually in the coming years.
Published by Globes, Israel Business News – en.globes.co.il – on May 22, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
