Short-term "blip" in the curve
CTT has published key Q3 numbers ahead of its report on Friday, 25 October. Temporarily lower revenues to distributors in the Aftermarket channel (due to inventory adjustments among customers) together with lower VIP/private jet sales resulted in net sales declining 18% organically (ABGSCe +18%) to SEK 57m (-33% vs. ABGSCe and CTT's guidance of SEK 160-180m for H2'24). The lower margin-accretive AM revenues in turn held back profitability, as EBIT declined 51% y-o-y to SEK 15m (ABGSCe 34m), for a margin of 26% (ABGSCe 40%, 41% Q3'23). Looking ahead, CTT maintains the implied Q4 revenue range of SEK 80-90m (ABGSCe 93m), driven by flat OEM sales q-o-q, a recovery in AM sales and "significantly higher revenues in Private Jet". Thus, we believe today's announcement combined with CTT's historically good visibility should mean that the temporarily lower AM revenues in Q3 were a short-term issue. From Q1'25, CTT expects its system sales to grow in-line with customers' aircraft build-rates. However, we note that both Boeing and Airbus have recently flagged issues in their ramp-up plans, which we believe raises estimate uncertainty for CTT also into 2025.
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