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

Welcome to the Beijer Alma Q2 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, acting CEO, Johnny Alvarsson; and CFO, Peter Forslund. Please go ahead.

Good morning, everybody, to this. I'm actually in the Arctic Blog of Sweden and the sun is shining and it's 25 degrees in there. The first picture you see now is just I mentioned, it's for actually Finn Lamex, one of our companies in Beijer Tech, which manufacturing windows, the front window for buses. And that's one of the businesses that are performing very well. And we're actually, at this moment, expanding the factory because the demand is higher than our capacity. So now you can see, it's myself and Peter Forslund, CFO, who will run this presentation.

Good morning, everybody.

And if you look at this quarter, I think we are rather satisfied with it, and we have managed to improve the profitability some points. If we go to the two business areas as we -- we are actually only have two business areas at this moment. So Lesjöfors has a mixed demand, and we can -- what we can see is the Nordic market is weak where we have all type of customers in all industries. So that's a weaker market compared to 1 year ago. And the same goes for United States also where the market is much weaker. And I guess it's depending on the industrial situation we have at this moment in United States. On the other hand, for us, Asia is performing better and Europe is growing. So the mix ends up in a positive development for the group. As we have mentioned earlier, we have one acquisition done a few years ago, Alcomex, that we are struggling with, that we have improved profitability, but still we have an ongoing program to make that up to our standard. And we have announced earlier the cost that will take for that in the second -- third quarter. We also have reduced staff people in Lesjöfors to have a more decentralized organization where the local MDs are taking higher responsibility and also are allowed to do that. And that's a trend we have started now, and I think there will come some further steps down the line. Beijer Tech is a smaller business area we have with a very -- like a normal serial acquirer has overall a stable demand, but we have, of course, variations between different companies. And if we look at the Nordic and they are only working in the Nordic area. So Norway is the strongest demand, weakest in Finland, then we have Sweden and Denmark in between. We had organic growth in the quarter, but especially also, we had a very nice growth from the Swemas acquisition we did in Q1, who has performed actually better than expectations. In the quarter, we announced earlier, actually the 1st of April, we acquired a company in India, and we own 51% of the shareholders and the former owner owns 49%, and we have a program then to buy him out in some years. And then, we made a small acquisition in Beijer Tech in Roykon A/S in Denmark. And if we look at on the group level, so the order bookings increased by 10% and revenue by 7%, where organically it was 3% for the revenue and for the bookings was 5%. And that's, I think, in the circumstances we have in the world today, that's very good figures. Our adjusted operating profit EBITA increased to SEK 305 million, and that's an operating margin of 15.1% on a group level. As you can see, 65% of the turnover comes from Lesjöfors and 35% from Beijer Tech. But the trends are at this moment, pointing a little bit upwards. If we look specifically at Lesjöfors Q2, order bookings increased by 6%, where everything was actually organically, and net revenue by 4%. And as you know, we have different types of business here. We have something called Chassis Springs, which is to the aftermarket for cars, and that was around the same level as last year. And the winter was rather mild. So that means and if it's a tough winter, then we have more sales of Chassis Springs. And if it's a soft winter, we have less sales. Industry increased by 5%. As I mentioned earlier, that was mainly Europe and Asia. And we increased the adjusted EBITA to SEK 234 million. Beijer Tech organically was 2%. And this, when you look at bookings, I mean, we have very different companies in there. Some of them are more machine or project oriented and orders comes in one quarter, maybe not in the next quarter and so forth. So it varies. But still on the positive side. And we think that the outlook, I mentioned, from the business area manager, he was -- is very satisfied how it looks for the coming quarter. And the operating profit increased to SEK 83 million compared to SEK 73 million the year before. As you can see, we have three different business areas here with different types of companies. And the growth you see, especially in Industrial Products comes from the acquisition of Swemas. I should mention here that we are -- actually four of the companies were manufacturing in Beijer Tech, just now are increasing their production capacity by making investments, because their demand is higher than they can meet, and that's also very positive for the future. If we look at the financials, we had a change of 7.3% operating profit, plus 13.3% and the EBITA margin is now 15.1%. And we are aiming to increase this by more focus on profitability and organic growth. So I hope we can see this trend for the future. And the EBIT margin was 14%, also up from 13.2%. Cash flow, about the same level as last year. Will you mention anything about the cash flow, Peter, where it comes from?

No, I think it's fine. I think, it's in line with what we expected.

Equity ratio is 44%, and that's on the safe side. And we have net debt-to-EBITDA is 2.1x. Of course, this is -- the reason is now compared to last year is the acquisitions we've done, but also the dividend that we do every year. Earnings per share dropped, but that's depending on the reserves we have made for future costs in the Alcomex case and the Turkish business. Acquisitions in the period was, what I said earlier, India. We acquired the first, really, step into India. And we think that's a future market. Now to be cautious, we have an arrangement where the former owner still keeps 49%. So we can, in a few years now, learn how the business works before we go into more than 51% ownership. I think that's wise because there is quite different culture in the Indian market. But long term, I think it's a very interesting area to be in, because we see that more and more production are moving now from China to India. And that's just the beginning of the future I expect. In May, Beijer Tech made an acquisition of Roykon A/S, is a minor company that also adds to the Beijer Tech business. So this is just to show you the acquisitions we've done over the years. And I must say it's a number of them are very nice companies with export around the world and some are working more in the Nordic region. But I think, this by keeping the companies very self-sufficient, running own business, that's the way to have success when you are an owner of the company. And well, conclusion is Lesjöfors organic growth, mixed demand over the world, and we have improved profitability, and I expect that will continue. Beijer Tech stable demand. We have made two acquisitions. And even though our focus is on margin and organic growth, we will do acquisitions in the coming future as well. By this short presentation, I'll open up for questions.

[Operator Instructions]

Hjalmar Jernstrom. A couple of questions here from my side. On this SEK 120 million of extraordinary items you have taken in the quarter, you obviously mentioned that SEK 70 million is an inventory write-down and the remaining SEK 50 million is related to the closing of a factory and staff layoffs. If you just circle in a bit more on this SEK 50 million, could you say anything here on which unit in Lesjöfors European operations this relates to? And also perhaps if you could give any split in terms of how much of these staff layoffs are related to Lesjöfors HQ versus how much are related to subsidiaries in Lesjöfors?

When we talk about factory, it's one factory within Alcomex. We have a number of factories that's closed down. That is announced also to the personnel. When we talk about how much it is on the headquarter, I have to ask you, Peter, do you have those figures?

Yes. The majority is, of course, in operations when it comes to the people headcount. There are, I would say, around -- between 10% and 20% that is on H2 level or so to say, on more of a white collar level, mainly production.

I mean, we are closing a factory within Alcomex, but also we are reducing the factory in Turkey with a lot of people. That's the number of people we are talking, I think, about 70 people or something in total.

Very clear. And also, I mean, in the report, you mentioned that Alcomex had a slightly better quarter. Could we just clarify here if this refers to an improvement year-over-year or Q-over-Q? And also, if this comment refers to order intake or sales or if it's primarily related to profitability?

I think Peter, should you answer that question?

Yes. I mean, in the first quarter, we guided that, so to say, the profitability in the Alcomex was negative in the first quarter. In the second quarter, we moved to a low single-digit positive profit in Alcomex for the first half year, but we are not higher than that.

Okay. Very clear. And in Lesjöfors Nordic operations here, you mentioned a bit of a weaker start to the quarter, but that then picked up throughout the quarter. Is it possible to quantify that in anyhow, like, how much organic growth in either sales or orders you saw here in June or in the beginning of July, perhaps on a year-over-year basis versus what we saw here in April and May?

Well, we -- probably if you look in the figures, you can find out, but I think it's also -- and we have a very diversified customer base. And -- it's also in new -- we have some new areas we're going into heavy springs, like, for trains. And those projects comes as a few big orders. So I think, it's hard to see. The message we got from the management is that, it's a weaker market generally in the Nordic from all customers more or less.

Perfect. And just finally from my side, on this fire there in Autumn in Lesjöfors, impacting you here in H1. You mentioned in the report that you have decided to shut this factory down permanently now and relocate that production to other factories. Do you foresee any additional cost savings related to this that could then be seen, I guess, on top of this SEK 35 million in annual cost savings that you already communicated? Or is that already, I guess, bundled into that figure, if you get my concern?

No, it's not bundled in, but I mean, we talked maybe SEK 2 million or something like that. So it's -- and that will probably show up in, let's say, end of next year or something, because we have ordered new machines now, but it's a long delivery time and before it's really -- so we're trying to solve the problem through the manufacturing we have and also actually buying some external products to supply to our customers. But of course, there will be some synergies when we have one factory less.

The next question comes from Johan Dahl from Danske Bank.

Just wondering, Johnny, you talked about the decentralization initiatives. I was just thinking, can you in any way sort of see the opportunities there in terms of cost savings? And I was wondering, is that something that, sort of, impacted already here in Q2 positively in Lesjöfors? Or was the, sort of, the earnings improvement in Lesjöfors, was it more related just to the swing in Alcomex in the second quarter?

I think it's mainly -- it's a minor cost savings in the quarter. And it's the swing in Lesjöfors, but also actually Asia doing well and general Europe doing well. So it's a combination of all that. But the cost reductions effect in Q2 is very small that will come later on.

Would you say, Johnny, that being into -- obviously, you've been in the Board for some time, but I was just thinking, do you think you have identified sort of more cost savings potential and productivity improvement potential as opposed to a quarter ago? Or is it fairly much the same plans that you're executing on as we look at it now?

Of course, I have learned more, I think -- but I mean, the real driving thing in this is, when you give the end, these clear goals, you have now -- you own your business, you're supposed to run it, you have supposed to improve it. And that is something that takes quite a while before they change their mindset from what they've been used to during the last years. But the feedback we received so far, we haven't heard that much of feedback, but that has been positive. So...

Got you, Johnny. And just a final question. Do you have any sort of updated view of the inventory cycle in Chassis Springs? And where would you say, sort of, in that -- I mean, it's been volatile in the past depending on your customers' inventories, et cetera. But where would you say we are right now in the Chassis Spring, sort of, cycle?

Can you comment that, Peter?

No, I think we should still continue to see it to be volatile. Of course, we are in the end of high season and that we generally have had more inventory buildup during Q4 for fairly well the patterns from earlier. There is no -- there is very little change in the underlying business as such.

So just looking from an LTM perspective, it's fairly neutral, you'd argue on the Chassis, if not, sort of, below average or above average?

No, I would say, it's fairly neutral. That's right.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

So Johnny, we have a question in the chat from Karl Noren. So he asks, can you talk a bit more about acquisition strategy going forward?

Yes. Well, it's -- I'm supposed to stay here some few months more before Oscar comes. But I mean, the ideas basic should continue as before, but we are, for the future, going to use all the contacts we have around the world now through Lesjöfors. And try to use and to find local businesses in other areas like components. We have not really activated that yet, because now the focus is in Lesjöfors is to improve the margin and go for organic growth. But the idea is to grow other areas around the world with other components and not only springs. And that, as I understand, is what Oscar also is going to push for in the future. So we have a fantastic network around the world now through the companies owned by Lesjöfors and use those MDs and their contacts around where they are located, should be a very good way to improve our -- or actually to grow our market outside in other type of components.

Great. Then there are no more questions in the activity feed.

Okay. Then, I thank you for the attention from everyone. And we will meet again in next quarter, Q3, and that will be my last webcast in Beijer Alma, because then for the Q4, then Oscar will be in position. Thank you very much, and have a nice day and summer. Bye-bye.

Bye-bye.