Q2 report due on 20 July

Weaker quarter expected due to lower share of VIP

Risk of 2018 guidance downgrade

Q2e sales in lower end of guidance, VIP sales expected in H2
We expect CTT sales of SEK 61.3m, down 19% y-o-y, in the lower end of CTT’s guidance of SEK 60-65m issued in its Q1 report. On a segment level, we expect that OEM sales will continue to grow steadily in line with the increasing Boeing 787 deliveries. Meanwhile, the other segments should face tough comps and we therefore expect them to see negative growth y-o-y, with a lower share of VIP sales in particular. However, the three previously announced VIP orders in Q1’18 are expected to lift sales in H2’18. Meanwhile, the lower share of VIP is expected to dilute the EBIT margin, resulting in opex decreasing by only 11%, arriving at an EBIT margin of 15.5% (18.2%). We therefore expect EBIT of SEK 9.5m, or SEK 10.2m adjusted for FX headwinds.

Strong H2 required for guidance not to be revised
CTT guided in its 2017 annual report for organic sales to “increase by the same rate as in 2017” (10.4% in 2017). In light of the expected weak H1 numbers and low share of non-OEM sales, H2 will have to be very strong for the full year to reach that level of sales growth (we have -2%, including FX tailwinds in H2).

Expect growth story to be back on track in 2019
Both the B787 and A350 aircraft models are expected to reach a full production rate of 14 and 13 per month, respectively, in 2019, according to Airbus and Boeing. This increase in deliveries is expected to continue to support OEM sales, where we estimate 2x humidifiers per B787 and 0.3x per A350. Additionally, the first Boeing 777X deliveries are scheduled for the end of 2019, of which we estimate CTT to deliver 2x humidifiers per plane. Furthermore, we believe that that recent increases in oil prices will provide incentives for both increased Retrofit and VIP sales. Key going forward will be continued efforts to increase A350 sales penetration while any news of sales t
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