Beijer Alma AB (publ) (BEIAB) Earnings Call Transcript & Summary

Welcome to the Beijer Alma Q2 2024 report presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Henrik Perbeck; and CFO, Johan Dufvenmark. Please go ahead.

Good morning, everybody, and welcome to our webcast where we today will present our second quarter 2024 this beautiful summer morning. I'm Henrik Perbeck, and with us is also Johan Dufvenmark, our CFO.

Good morning, everybody.

So we will present today the overall performance and the recent developments of Beijer Alma Group. In addition, we will discuss our reporting segments, our 2 main subsidiaries. These are Lesjofors, which is a full-range supplier of standard and customized industrial springs and other wire and flat strip components. Lesjofors is acting globally with majority of sales in Europe and USA. And it is Beijer Tech, which acts mainly in the Nordics within specialized manufacturing, value-adding industrial trading and automation in profitable niches. Beijer Tech is also a platform for acquisitions into new industrial niches. So today I present what I think is a solid report. Perhaps not super exciting, but in today's economy, words like solid and stable can be pretty good. We saw a second quarter with some organic growth. And overall, the group grew both organically and thanks to acquisitions. Of course, as we have seen in the last year, the demand was still quite varied within our diversified customer base. A big picture is that the Nordic region came back as our strongest region this quarter. Lesjofors, I had a mixed demand picture but came out with organic growth in the order booking side. The Chassis Springs business area has had a good year and high season, but it slowed down towards the end of the quarter or at least versus the strong comps from last year. Within Industrial Springs, the Nordics came back, as I said, as the strongest region and valuable growth followed by U.K. The U.S. industrial segments were good, but deliveries to medical projects were somewhat lower. Central Europe and Asia were more disappointing with lower demand from our customers. For Beijer Tech in the Nordics, demand was generally stable, and the newly formed business area, Niche Technologies grew together with Fluid Technology. And just like last quarter, the Norwegian market stood out as the strongest whereas Finland was a bit weaker. We have announced 2 new acquisitions since last call. Firstly, Beijer Tech signed an agreement during the quarter to acquire Clemco Norge. It's the well-managed niche player and that strengthens Beijer Tech's growing operations in Norway. And on July 1, so actually after the end of the quarter, Lesjofors acquired Clifford Springs, a U.K. energizer spring manufacturer, and this strengthens our focus on this attractive product area. I will come back to these companies later in the presentation. And overall, we continue to feel that the activity level in the M&A market is good, which is interesting and creates opportunities to find new and attractive companies that could strengthen our group going forward. At the same time, of course, economic uncertainty, including still high interest rates, leads us to a balancing act between investing for growth and the savings. Now continuing with an overview of the group's financial performance. So looking at the performance, we see that order bookings grew by 5%, of which 2% was organic. Net revenues grew by 4%, of which 2% was organic. As I said upfront, these are not the most exciting variations on group level, but it shows some stability for our group as a whole. The adjusted operating profit was SEK 249 million, which is a margin of 13.2%, similar level as in Q1. And while I now move over to the performance of our reporting segments, our subsidiaries, I can also point out, looking at the pie chart that Beijer Tech is now 33% of the group and, a year ago, this was 28%. So there's some shift there. Starting with Lesjofors. So our spring manufacturer, Lesjofors, is organized into 2 business areas. These are industry, mainly customized products to a very diversified customer base globally. The other one is Chassis Springs, and these are standardized replacement springs sold to car part wholesalers, mainly in Europe. Order bookings for Lesjofors as a whole decreased by 1%, but grew 2% organically. As the currency impact was neutral in the quarter, we have here actually for the first time a negative minus 3% impact from the acquisition and divestments made during the year. The net revenue also decreased overall by 4%. Organically, it was flat versus last year. And starting with the Industry segment, the largest business area, growth was minus 3%, but actually positive organically. As mentioned, growth came from the Nordics and U.K., where Central Europe, including Alcomex and Asia was somewhat weaker. U.S. market was more of a mix. The industrial segments in the U.S. grew, in fact, whereas deliveries within medical were lower than the high levels of last year. For Chassis Springs, the strong demand from first quarter continued in the beginning of the second quarter. But towards the end of the quarter, the high season slowed down. And all in all, we think it's been a good season, but in the second quarter, comps were high and revenues came in 6% below last year. Adjusted operating profit increased to SEK 193 million with an EBIT operating margin for the quarter of 15.2%. Moving over to Beijer Tech. Beijer Tech, since the beginning of this year, operating in 3 business areas. Fluid Technology and Industrial Products are both acting within industrial trading and manufacturing. And the third business area is called Niche Technologies, which includes companies with strong market positions in various industrial niches, such as building automation, waste management and specialized machinery. Typically, these companies have other market drivers than general industrial demand. So overall for Beijer Tech, the order bookings increased in the quarter by 19%, of which 4% organically. The net revenues grew by 23%, of which 6% was organic. Within the business area, Industrial Products, demand was overall stable. Still demand varied across geographies. Norway is very strong, followed by Denmark whereas Denmark experienced weaker demand. Fluid Technology grew by 32%, and part of this is thanks to the new acquisition of AVS in March this year, but also organic growth in Norway and Sweden. Niche Technologies also grew significantly here by 69%, and there is still an acquisition effect from last Q2, but also a very healthy organic growth that we have seen over the last 12 months. Beijer Tech's operating result increased to SEK 68 million with a good operating margin of 11%. So I will now hand over to Johan Dufvenmark, our CFO, for some more comments on the financials.

Thank you, Henrik. Let's look further into the financials. As mentioned, the net revenue is up SEK 66 million compared to last year. Acquisitions together with divestments contributed with SEK 38 million and was equal to an increase of 2%. The divestment was the German company, Stumpp, which was sold in December 2023. The organic growth was SEK 28 million, also corresponding to 2%. Lesjofors' organic growth was slightly negative, while Beijer Tech's organic growth was 6%, mainly related to strong performance in the Fluid and Niche Technologies companies. Order bookings increased with SEK 83 million to SEK 1,892 million. Acquisitions and divestments together was 2% positive, and the total organic growth was as well 2%. Lesjofors had a positive organic growth in order bookings, 2%, as Henrik mentioned, and Beijer Tech almost 4%. Thank you. Let's continue then with a short look on the segments and how they contribute to revenue and operating result. As we saw in the previous slide, net revenue increased with SEK 66 million. Lesjofors' revenue decreased with SEK 47 million, mainly related to the divestment of the German subsidiary, as we said on the last slide and also a weak ending of Q2 for Chassis Springs, while revenue in the Nordic was good. Beijer Tech's revenue increased both organically and from acquisitions, driven by strong performance in the last year's acquisitions as well as recent acquisitions. The adjusted operating profit was SEK 249 million. This was an increase both for Lesjofors and Beijer Tech. In Beijer Tech, the profit increase was in line with top line growth. This is within Niche Technologies and Fluid Technology. Within Lesjofors industry, operating result was, as mentioned, mixed and the result in Chassis Springs was affected by lower volumes towards the end of the quarter. As you perhaps remember, in 2023, we had some one-off costs, the one that most affects the comparison between 2023 and 2024 was the market valuation of inventory, so-called step-up related to the acquisition of Tollman Spring. This was SEK 16 million in 2023. In the quarter, we had one item affecting comparability, which was the finalization of the Stumpp divestment affecting EBIT with minus SEK 6 million. This makes up the difference between adjusted and unadjusted EBIT. And now to some of the key financial ratios. Just to mention a few, adjusted EBITDA is up SEK 33 million compared to last year, the difference to adjusted EBIT being higher depreciation following a number of acquisitions. Cash flows after capital expenditure was SEK 167 million, lower than last year, but last year, we saw some extra release of working capital. This year follows a normal season pattern where buildup of inventory and receivables should normalize during Q3. Net debt is lower than last year, mostly related to the operating cash flow since then. And last year had 2 acquisitions -- last year's second quarter 2 acquisitions. The 2 acquisitions, as mentioned by Henrik earlier, have not yet impacted this year's net debt. The financial net improved compared to last year, some of the improvement is related to a more efficient use of cash. Thank you. And back to you, Henrik, for a continued look on acquisitions.

Thank you, Johan. Yes. And before concluding, I would like to highlight the 2 acquisitions we have announced since last time. So on 3rd of June, Beijer Tech signed an agreement to acquire Clemco Norge AS, which is a Norwegian supplier and retailer of corrosion protection and surface treatment to customers in the energy sector and the general industry, primarily in Norway. The company is well-managed niche player, and it strengthens Beijer Tech's growing operations in Norway. Clemco has an annual revenue of approximately NOK 60 million with a favorable profitability. Closing on the transaction is expected later in Q3. And recently on July 1, so please note, this is actually after the end of the second quarter, Lesjofors acquired the U.K. spring manufacturer, Clifford Springs. The company has a strong offering in energizer springs to the seal and valve industry in the U.K., Europe and U.S. And this is an attractive product area for Lesjofors to develop further. The company has an annual revenue of approximately GBP 3 million with good profitability. So with that, we also welcome John Clifford and his team now as members to Lesjofors and the Beijer Alma Group. So with these 2 latest announced acquisitions, we continue our strategy to further grow by acquisitions. And as [ Magnus ] has said, we have seen during the spring good activity on the M&A market, and we continue discussions with several good companies out there. And please note also the slide that I've shown several times, it's an illustration of the overall impact from acquisition strategy, showing the run rate revenue and number of acquired companies. It's not showing the exact financial reported revenues. Good. So then just to conclude, briefly, our second quarter, some organic growth in the overall, I think, a fairly weak economy around us. For Lesjofors, mixed demand with organic growth in the order bookings, growth in the Nordics, U.K. and in U.S. industrial; lower volumes in U.S. medical as well as Central Europe and Asia; and good high season for Chassis Springs slowed down in the end of the second quarter. And for Beijer Tech, growth driven by Fluid and Niche Technologies, both organically and by acquisitions. And as just mentioned, 2 new acquisitions were announced. So with that, we will open up for questions.

[Operator Instructions] The next question comes from Johan Dahl from Danske Bank.