Hexagon: CEO to change in conjunction with a big strategic shift

Hexagon is in the process of replacing the company’s CEO. We believe that the change stems from a disappointment in the company’s recent results and the Board’s desire to boost growth going forward. The timing of the CEO change coincides with the proposed splitting of Hexagon group into two separate entities with the aim of improving the company’s growth potential through more focused strategies.

CEO being replaced

Hexagon announced on Monday morning that the Board of Directors and Paolo Guglielmini have mutually agreed that Guglielmini will step down from his position as Hexagon’s President and CEO. Norbert Hanke has been appointed as interim President and CEO with immediate effect to oversee the day-to-day operations. Hanke joined Hexagon back in 2001 and most recently served as Chief Operating Officer. The Board of Directors is starting the recruitment process for a new CEO but it’s hard to predict when a new candidate will be found and announced.

The Board seems unimpressed by the current state of affairs

Our conclusion from the announcement and Hexagon’s webcast is that the main reason for the management change stems from the company’s recent weak sales growth. The Board of Directors, chaired by Hexagon’s former CEO Ola Rollen, is actively shaping the company’s future direction with management changes and the proposed spin-off of the Asset Lifecycle Intelligence division that was announced on October 25.

Our view is that the current weakness in growth is especially linked to the difficult market conditions and cyclical downturn in certain important customer segments such as construction and automotive industries. However, it could still be true that a more-focused structure could better facilitate growth in the long run.

Hexagon’s share declined modestly to the news of the CEO change. We feel that replacing the CEO could be seen as a negative signal for the next few quarters’ sales performance. Rollen stressed that the change does not mean Hexagon is giving up on its financial targets for 2026. Hexagon targets, for example, organic growth of 5-7% p.a. and operating margin improvement to >30% by 2026 (2023: 29.4%). If the spin-off plan proceeds, we feel it is very likely, however, that the two companies will get new financial targets specific to the characteristics of each of the companies.