Improved margins despite global supply chain disruption

Stockholm, Sweden

In the latest published figures from Tagmaster in the company's interim report, the CEO, Jonas Svensson, says that despite major global challenges, "we managed to improve our already good gross margin during the second quarter, which is significantly higher than it was during the second quarter last year".

In his statement, Svensson says, "demand for our solutions is stable and in the US for example revenues increased by over 6 percent in local currency corresponding to 24 percent in SEK compared with the same period last year. Like so many other technology companies, we were affected by a continued shortage of components. We were also affected by a deficiency of capacity at our main European supplier. We have been able to handle these imbalances in a good way through great flexibility and with price increases towards our customers".

During the quarter, the company was also affected by cost increases for both electronic components and input goods. "We have therefore continued to increase our purchases via the spot market to be able to keep our commitments to our customers. With price increases to customers and internal efficiency, we managed to reach a gross margin that is significantly higher compared to the second quarter of 2021. Given the challenging purchasing situation and deficiency of capacity in our outsourced production, we are very pleased that we continue to have such a good gross margin. This shows that our offer can withstand price increases without losing attractiveness", states Svensson.

He estimates that the loss in sales of delayed deliveries due to component shortages and capacity shortages corresponded to approximately 5 percent of sales during the quarter, which is slightly less than in previous quarters. "We are prepared for continued challenges in the coming quarters and we will continue to work with price compensation for the cost increases we suffer." 

The company's focus is increasingly on solutions that can contribute to a more sustainable transport system where analysis, AI and Deep Learning play an important role.

During the quarter, the company continued to intensify its work to achieve profitability via its latest acquisition Citilog, and reached break-even during the quarter. Citilog's strategy is to focus on the areas where the company is a world leader such as Incident Management and the business model is adjusted towards less risk.  Tagmaster intends to continue with this work and estimates that profitability at the same level as the other Tagmaster Group company will be reached at the beginning of next year.

Rail Solutions' sales has been hesitant for most of the quarter, but during the latter part of the quarter there has been an increased level of activity and increased intake of orders.

"Today, Tagmaster is well positioned in a market with long-term good conditions for growth and good profitability, and we are determined to continue to make Tagmaster a stronger and more resilient company while reaching a higher growth curve. The fact that we work to improve the traffic environment in cities and metropolitan areas around the world gives us a very good position in the face of the massive restart packages that are being launched in Europe and the USA and which are largely focused on green investments.

The strategy and value-creating potential have not changed due to the short-term limitations in the supply chain and our investments in growth through innovation, commercial focus and acquisitions mean that we have a positive view of the company's development for the coming years", concluded Jonas Svensson.


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