Geo Week News

October 27, 2011

Hexagon 3Q results

Had a chance to listen in today on Hexagon AB’s 3Q results call (you can listen to the archive yourself here, until they take it down), run by CEO Ola Rollén, who’s one of the more entertaining CEOs in the business. I love his blunt style and his way of moving through information in rapid fashion. The guy’s all business.

Anyway, maybe he’s enjoyable because he likes what he’s talking about: Organic growth of 13 percent, gross margin of 54 percent, operating margin of 19 percent, first time they’ve ever had 20 percent EBIT in a 3Q, which is seasonally weak. Plus, net earnings are up 45 percent over 3Q 2010. Can’t argue with the numbers.

YTD, they’re up 56 percent in net earnings, and up almost three points in operating margin to 20.1 percent. All while net sales are only (only) up 15 percent, so clearly they’re creating some efficiencies somewhere.

In terms of where most of you are working, surveying biz is 24 percent of Hexagon’s sales, and surveying was up everywhere except China. North America and Western Europe were up less than other parts of the world, but that’s probably because they’re much more established markets for Hexagon. Power and energy were up everywhere, as was aerospace and automotive. Really, the only thing down in the western world was public safety and security, which was a bit off in Western Europe.

Most of Hexagon’s growth in Europe is coming from Western and Northern Europe. Southern Europe was deemed “weak.” Considering Italy and Greece’s woes, that can’t be surprising. What demand there was in Europe came mostly in industrial segments, while construction and infrastructure remain slow, if growing.

For North America, Hexagon is seeing growth in automotive, aerospace, general engineering, and infrastructure projects, while residential housing is still weak (no kidding – tried to sell a house lately?).

The Americas are growing quickest of all, with organic growth around 25 percent in 3Q, while EMEA sat around 15 percent.

The Geosystems business has grown in North America, yes. “On top of that,” Rollén said, “things like laser scanning and new technologies – mobile mapping. When you look into Google maps, that’s the technology we call mobile mapping, and that’s grown significantly in North America. We’ve also had a recovery in the defense related market, from UAVs from us to the Air Force, and metrology has had significant growth in aerospace and other manufacturing, like Caterpillar and automotive.” Plus, he noted, South America has grown by double digits in all segments (though it’s only 7 percent of the overall business).

Speaking of segments, measurement technologies was the superstar, bringing in €508 million, up from €326 in the same quarter last year, but that was helped by acquisitions and represents about 13 percent organic growth, which still isn’t shabby.

Geosystems was essentially flat, organically, company-wide.

In terms of specific company highlights, Rollén noted Hexagon’s first installation integrating Hexagon and Intergraph technology, a landslide monitoring system in Ancona, Italy. “We couldn’t have delivered this without the joint effort,” he said. “We’ve done R&D, and it’s about the interface between the sensor and the ability to send that information to a geo-referenced map. And you couldn’t have done that without having both pieces. This area where you talk about monitoring natural disasters and having warning systems, that’s a very interesting field and we see great opportunities there, both in mature economies like Japan and Italy, where there are fault lines, and in emerging markets like China and countries throughout Southeast Asia, where you do have natural disasters and you do have a need for early warning.”

Rollén also highlighted Ecovix’s use of Hexagon’s 2D and 3D software for construction of ship hulls to support oil exploration off the cost of Brazil; a new Danish order for emergency dispatch; a new 911 system in Brazil to support the 2016 Olympics; a new workforce management solution in Kansas City for Westar; a location-data-management system with the Colombian Army; and an incident response system with Richmond, Va.; among others.

But you care about the 3D. Both Malawi and Kenya have contracted with Hexagon for photogrammetric mapping solutions, working to establish borders (those are kind of important) and help with coastal management.

And, in laser scanning, the Georgia Bureau of Investigation has purchased solutions for forensic support; the University of Miami has purchased scanning solutions to support the BMW Accident Research Mapping Team in its collision investigation; and the Air Force bought some scanners for exterior and interior mapping of domestic and foreign fixed wing aircraft.

I’ll be following up on those to see if I can learn more.

On the software end, Rollén noted 1200+ enhancements to the new Smart 3D release, plus 10x improvement in rendering speed in Cyclone 7.2 and better point cloud management in CloudWorx.

Finally, he put in a pitch for the Hexagon 2012 conference. Get ready to be in Vegas, at the MGM Grand (hey, they have a great sports book – hopefully the NBA playoffs will be happening then, if they ever get their acts together), June 4 through 7.

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