Bergman & Beving AB (publ) ($BERGB)

Welcome to the Bergman & Beving Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to speakers, CEO, Magnus Soderlind; and CFO, Peter Schon. Please go ahead.

Good morning, everyone, and welcome to the Bergman & Beving financial report for our Q4 quarter. I here on my side also Peter Schon that will come in later on in this presentation. But I will start to give some highlights from our fourth [ full ] quarter. And related to the market, the market uncertainty continued. As you all are surely aware of is, it's still a geopolitical, a lot of uncertainties, and there has happened a lot of unpredictable things in the world that has caused what we perceive the customers to be a little bit cautious about the future, and that has partly reflected what we see the demand in some of our companies at least. And overall, I would say the underlying market from the Group level has been cautious during the quarter. And the recovery we kind of had in the last quarter, last calendar year in our Q3 quarter has weakened a little bit, I would say. It's still very uncertain to give a steady forecast what we expect going forward. But overall, I would say it's not more favorable than it was some months ago at least. But that could change, hopefully, in the next coming weeks or months. But still, we achieved, I think, it was a good quarter. We continue to have improved earnings, margins, returns and also earnings per share improvements. We have a focus on profit over turnover. So the turnover was in total 1% down, even if we had some organic growth, 1% in this quarter. And the adjusted EBITDA was plus 11%, and we now have 25 consecutive quarters with improved profits. And also the margin continues to improve. We then had an adjusted EBITDA margin in the quarter of 11%. That's 1.5% unit improvement compared with the previous year quarter. And our profitability measured as profit and working capital increased 5% units and is now up to 36%. And the earnings per share rolling 12 adjusted improved to SEK 8.45 compared with SEK 8.05 previous year. So overall, we have improvement in, I would say, all the important financial metrics during the quarter despite the weak market. We also took some structural initiatives to further strengthen Bergman & Beving long-term. We divested Logistikpartner that has been our internal logistic company that has up to 90% only supplied Group companies, i.e., a very small portion of external customers. So we thought that we were not a good long-term owner to owning a logistic company. We're not expert in that functional area. And also, it's a scale business, and we are not interesting in building a scale within the logistics space. So we choose to divest that company to a company called Boxflow. So our companies will continue to use the Logistikpartner services, at least in the next coming years as it looks now. So there will be no change in the way we operate. It's just a question about who owns the operation as such. We made one acquisition during the quarter. It's a U.S.-based company called A1S -- sorry, U.K. company based in the U.K. with an annual sale of roughly SEK 110 million with good profitability and good returns. And they are a product company making fire curtains, mainly for commercial buildings. And that is a space where we already have presence through one of our company, BVS, who is present in Sweden and Norway currently. So this is, I would say, strengthen our position within that space, and it looks very promising. The underlying market has a good kind of outlook. So we expect some good development in that company as well as the current company, BVS, operating in the Nordic region. We also made one acquisition after the quarter end. It was one of our subsidiaries within the sheet metal space, Uveco, who acquired All-Coating April 1. It's quite a small company, SEK 25 million with very good profitability and very good return figures. So that will strengthen our position within this sheet metal space in the Nordic region mainly. If we summarize the year in terms of acquisition, we had a very good year. As you can see in this slide, we made 8 acquisitions. And we had set a target to acquire SEK 50 million to SEK 80 million per annum. So if you sum up the volume in turnover we acquired and map that towards the profit margin, i.e., all of them have a profit margin above 15%, you realize that we are kind of above the target this calendar year -- sorry, fiscal year. So it has been very successful in terms of acquisitions, and those acquisitions will strengthen the Group going forward in many aspects, both in new niches, but also add-on acquisitions within our current niches. I mentioned initially that we have now had 25 consecutive quarters with an improved EBITDA, and this is despite that we have been facing a weak underlying market for the last 3 years, I would say. And we also have strengthened our EBITDA margin along the way. And I don't see any reason and I expect us to continue on this path going forward as well, even if there are a lot of uncertainties around the market development going forward. If we look at the net sales, I mentioned that we had an actual decline in this quarter, the 3%, and that is correspond more or less to the currency effect of minus 3%. And we then had an organic growth of 1%. Previous quarter, we have 4%, and this is 1%. And as indicated, we could see that we have a little bit of weakening in the underlying demand during this quarter. And our kind of hypothesis is that this is very related to the uncertainty on a macro level that we have been facing during the quarter. The gross margin continued to improve and increase. We have now an all-time high gross margin in this quarter, and that is a result of divestments, Skydda, that we divested earlier this -- in mid-summer last year. That divestment had a positive effect on the gross margin. We've also done a lot of organic improvements phasing out -- continue to phase out low-margin businesses. And we also have a positive mix that has this contribution to the gross margin. And as said earlier, the improvement in the gross margin is mainly driven from organic improvements. We actually made a calculation and concluded that we have a 10% organic gross margin improvement roughly that has been the result of the last 5 years. So that is kind of the result of a systematic work quarter-on-quarter to optimize each individual business unit in terms of what they should focus on going forward. And you can also see on the right part here, as we have phased out some low-margin business that typically distribution-related businesses, our portion of all product has increased now to 80%. So that's also an effect of the organic kind of development we had across the Group during the last years as well as that the acquisitions we made during the last year has been mainly product companies as such. So if we take a kind of look into the targets that we set, it's related to profit of working capital, EBIT and EBITDA margin. And as you can see on this development, we had a positive development across all those 3 dimensions during the last quarters. We set the target to reach a profitable working capital of 45%. We are now at 36%. We had the aim to get into the 45% this fiscal year. That's still reachable even if it's challenging that we still aim for that. And the EBIT margin is now 8.6%, and we had a target of 10%. So we have some improvement here. We're not really happy with the speed of the development. So we have still some work to be done. I'll come back to that later on when we get into the division results as such. And the EBIT margin, as you can see, has also steadily improved, but we still have some headroom to the SEK 500 million. That's partly a result of the divestment of Skydda that had an underlying earning of SEK 45 million in EBIT, but we still are aiming to get into the SEK 500 million here in the next coming quarters. So with that said, I hand over to Peter to talk about the earnings per share.

Yes. Thank you, Magnus. Hi, everyone. Okay. If we look at the EPS, and it's the adjusted EPS after dilution, it continues to increase, even though not at the same pace as the EBITA due to higher amortization and a bit higher financial costs, but still it improves over time. So we're on track there. If we go forward to the inventory levels, so the inventory amounted to SEK 1.086 billion. It's a SEK 70 million reduction towards last year. But then we have divested the Skydda business, for example, that had a positive impact. So the organic reduction was SEK 20 million. So as we said before, the inventory reduction pace is a bit slower going forward and also now in this quarter. If we look at the ITO, it is somewhat decreased, and it's mainly an effect of divestments and then especially Skydda that had a bit higher ITO actually than the Group. So if we move forward to the cash flow from operating activities, it was according to plan. It is a seasonally weaker quarter, the Q4, as you can see also in this slide, but a bit over last year. So as expected. And the main reason why we have this cyclicality is due to our company, ESSVE, that has spring orders that they invoice with higher -- longer payment terms. So yes, good. And moving forward to the net debt, it increased to SEK 1.656 billion. The net-debt-to-EBITDA went up to 2.7 and it is in total, I would say, an effect of the high acquisition rate that we have had during the year and also in the quarter. So we made acquisitions for SEK 200 million in the quarter and almost SEK 800 million during the year. We also repurchased some shares in Q3 that was SEK 65 million. And the divestments, of course, had a positive impact, a bit offsetting the acquisitions with SEK 36 million in the quarter and almost SEK 300 million in the accumulated during the year. And yes, even though the net debt has gone -- EBITDA has gone up a bit, the acquisition target remains intact, and we still have possibilities to make an acquisition and we will continue to do that going forward as well. We did one acquisition after this Q4 quarter as well, as Magnus mentioned, the All-Coating acquisition. Good. And then I'll hand back to Magnus.

Thank you. And I will dig into the divisions. As communicated earlier, as of 1st of October last year, we expanded into 4 divisions from 3 divisions, and we partly regrouped some of the companies across the different divisions. You can see all the company names here on the slide that is part of the Core Solution. You will see also the company names on the other divisions in the coming slides. But overall, in this division, Core Solutions division, ESSVE is a big part of that division, having a turnover just below SEK 1 billion. And as you can see on the lower end of this slide, this division have had a very positive development in terms of EBITDA. You have the rolling 12 figures there. It has increased quarter-on-quarter. And also, we had some improvement along the way on the EBITA margin as such during the last quarters. And this is partly due to revenue increase and acquisitions, but also that we have had a positive organic development in many of the companies, including ESSVE. ESSVE had a major 3 new customers last year. And when ESSVE get new customers within fastening, you typically need to take back the customers' current supplier stock and then replace that with the ESSVE products. And that caused some margin decline when you do that type of change. But that is now out of the book sort of. So we now see the running ESSVE margin that has been improved. And ESSVE is making a very good result in this quarter and had a very positive profit development in this quarter that contributes in a good way to the Core Solution development as such. We also face in the Public Properties segment and the Infrastructure segment a continued good demand. As said earlier, we are not so exposed to new building of housing. So overall, the Core Solutions division have had a good demand in this quarter. And as you can see on the slide, the EBITDA now is at 14% and the EBITA profit is now 56%. Sorry, it was not the margin. The margin has increased to 13.4% compared to 11.9%. So a lot of things is going in the right direction here within the Core Solutions. And my hope and expectation is that we should have a continued good development in this division going forward. If we look at the Safety Technology division, has also had a very good development during the last quarters. As you can see, the EBITDA rolling 12 figure has been in a good kind of increase, except for one single quarter in Q2 last year. But overall, we have a very good EBITDA development here and also a good margin development. That is driven partly by acquisitions and revenue, but we also have some organic improvement that is contributing to the good development in these divisions. So the revenue increased 33% in this division, and we had a very good development in this quarter in Cresto and Orbital. Cresto has been delivering some good orders within the Wind segment. They have Vestas, they had GE and they have Siemens Gamesa as customers. And they got some good order delivery order and [ good ] -- some deliveries from all of those 3 customers in this quarter. And the EBITDA increased 128% to SEK 57 million compared with SEK 25 million last fiscal year. And the EBITDA margin increased to just above 16% compared with 9.4%. So that's a significant improvement in this quarter. And the acquisition of A1S is part of this division and also will contribute to this division going forward as well. The Machinery Equipment division, the revenue increased 7% here. They were facing a lower demand within welding and sheet metal cluster and also within process equipment companies. One of the companies here in this division is Polartherm making mobile heaters, selling a lot to the U.S. They are still very affected by the U.S. trade tariffs. Overall, on a Group level, we only have 3% in revenues in the U.S. and some of that is actually produced in the U.S. but specifically, Polartherm has facing some challenges based on the tariffs that they currently face exporting to that market. But still, we had an increase. EBITDA increased 23% to SEK 27 million compared with SEK 22 million last quarter. And we also have an EBITDA margin increased to 21.4% compared with 18.6%. And we acquired April 1, Uveco, one of the companies within the sheet metal cluster acquired -- All-Coating April 1. And even if it's a small company, it will have a very healthy profit margin and we give some contribution to this division going forward. This is division, as you can see on the slide, that had a negative development in EBITDA. It will take a longer kind of time horizon on this as well as the margin, and that is partly due to the tough underlying market conditions that the companies are facing in this division. And the fact that there has been very few acquisitions in this division in the last quarters. But still, we have some good potential, and it's historically been on a very good level. And my expectation is that we should continue to see an improvement in this division in the next coming quarters. Lastly then, the PPE & Utilities division. This is a division that has a lot of companies, the majority of the companies here are selling through the Nordic industrial and construction reseller sellers. And this is, I would say, mirroring the underlying market in the construction and the industry as a total in the Nordics because it's mainly Nordic business in this division. And here, we have a decline in the revenue, but then you need to consider that Skydda and Luna Baltic has been divested, and they had a turnover of SEK 130 million in the comparative period. And Luna and TengTools, however, had a tough quarter and have continued facing a lower demand for the products, and that is affecting the result of this division. Whereas the PPE, the Personal Protective Equipment product companies had quite a good demand in this quarter. So if you look at the development in this, it is mainly due to the Luna Group and the TengTools that is affecting the result in this quarter. And the EBITA was only at SEK 11 million compared to SEK 34 million last quarter, and the EBITDA margin went down from 6.6% to 3.0% in this quarter. And based on the current situation, we have continued to take on actions to address the underlying market and the lower kind of expectation we have on that going forward. But still, this is not a quick fix, and you shouldn't expect this division to be on a very good profit margin level in the next coming quarters. We still will have some things we need to address and to get really this division getting into a reasonable profit level, we need to have some help on the underlying market as such. So with that said, we continue to strive for the target 500/ten/45, but we are some quarters delayed, mainly due to the weak underlying market, but also partly due to the divestment of Skydda, as I said earlier, that had an underlying profitability of SEK 45 million on a yearly basis. But we still are perceiving that we have kind of an underlying market that is a little bit volatile. Some of the markets are facing stronger demand, but we are still facing a kind of weaker demand in some segments and an uncertainty among the customer base, not contributing to the underlying market demands. And we will see what that will take us in the next coming months. But still, currently, we are kind of facing a lot of uncertainties in what type of demand we can expect in the next coming months. But we will continue to do what we always do to focus on profit before revenue growth. We will continue to use our capital allocation model to make sure we allocate capital to the companies with the greatest growth potential in terms of profit. We continue to support our companies within -- using our B&B Toolbox. There is a lot of AI initiatives taking place across the Group now, and we really try to support our companies in that space because we see some great benefits and contribution in that area. in many of our companies that has taken on some good movements within that space. So that is a priority for the Group going forward. And last but not least, we will continue to, as Peter was saying, acquisition is an important growth vehicle for the Group, and we continue to acquire companies and focus on companies that have a good profitability and good return figures and to help them grow going forward. And we currently also have some specific Group teams. As Peter was saying, we need to work down the debt ratio over time. And one important part is that is continue to work with the inventory and improve the ITO to get it back to the pre-Corona level. We are close to that level, but still not there yet. So we need to work on that. And we also need to work on our gross margin protection. As shown, we have had a very good development in the gross margin during the last years, but we are currently facing some price increases, mainly due to the kind of Iran conflict. We see some increases in raw material costs, and we have taken some actions across the Group to kind of address that. And that is something we will continue to do and make sure our companies are proactive in that area. So already now, some of our companies has had to increase the prices to meet the cost increases that we are facing due to increased raw material costs and also increased freight costs and also some production are energy intensive, and that will also -- that also are affected due to the increased oil prices as such. So that is something that we work on specifically now across the Group to make sure we are not behind those cost increases that we will be facing and has already faced. And -- but we still are kind of preparing for kind of a strong underlying market, especially in some of the companies that we see some positive signs now, and we are making sure that we capitalize on the strong underlying market that we expect in some and we face already in some markets, but we hopefully will see in several more markets in the next coming months or quarters. So overall, I would say we are happy with the quarter. We are improving in all the financial kind of key parameters that we have despite that we are still facing on a Group level, a weaker underlying market. We have some organic growth, the 1% in this quarter, but we are increasing profit well above those 1% and also the margins. So even if we will continue to face a slower underlying market, we will continue to work both organically to further improve our businesses, but also continue to work on acquisitions to add on to the Group going forward in the next coming quarters. So with that said, we open up for questions.

[Operator Instructions] The next question comes from Zino Engdalen Ricciuti from Handelsbanken.

Just following up on the price increases you mentioned now. Could you talk a bit about which of the segments you see that you are more protected or more likely to be able to pass on these costs and maybe where you see that you might be a little bit more vulnerable?

It's a little bit too early to answer that question. We are currently in the process with many of our companies to try to anchor the new price points based on what we already faced in terms of increasing prices, but also taking some headrooms for expected price increases in the next coming months and quarters. So it's a little bit too early to kind of answer that question, but we are really pushing all our companies to make sure we are proactive in this aspect. But still once again, too early to see what the result will be.

Yes. But they have been successful in the past. And I think there's a big acceptance also in the customer segments as well so.

Understood. And is it possible to describe a bit how the demand developed throughout the quarter? And if you saw a big pickup when the conflict began in the beginning of March and if there was some recoupment in the latter half of the month.

No, I wouldn't say, I think as myself, we are very uncertain what the end effect will be of this conflict. What we know is that we will -- once again, we will face some price increases. But what this will take the economy in each individual country that we're operating in, also, I would say, still uncertain. So I can't see any pattern that we see a different purchasing behavior from customers from different weeks as such.

Understood. And lastly from my side on the margin in Machinery Equipment, which very impressively rebounded. You wrote, Magnus, in the report that it is above the 17% margin and that that's maybe what one should expect going forward. Is that for a normal full year? And should we expect, say, the seasonality in the margin, which we have seen in the past 2 years?

Yes. As you say, this is the kind of the margin we've had within that division historically. But many of those companies are facing a little bit lower demand from their customers in the last quarters. So when that demand rebounds up again, they should be back on that level. But exactly when that will happen is still uncertain. But that is kind of the potential in a more normal market, I would say, within that division.

Understood. And just a quick additional question on that segment. You highlighted that Polartherm is still affected by the -- what's happening in the U.S. How did the company I shall say, perform in this quarter?

I mean they have 2 type of -- 2 customer base in the U.S. One is the defense sector and the other one is the kind of commercial, the private sector. And the private sector is more affected by the tariffs since they are less competitive in that market based on the new tariffs that is quite high. Since there is a lot of steel in the Polartherm product, and that is kind of the tariff that they have to face. Within the defense, they are excluded from tariffs. But based on all the uncertainties, there has been a delay in the ordering from the defense sector based on the piling up of kind of orders they need to manage during this tariff turbulence. And Polartherm had some deliveries to the defense for this -- in this quarter that was not -- those were kind of delayed from the previous quarter, but they haven't delivered as expected even within the defense area. So Polartherm did a better quarter this quarter compared with our Q3 quarter, but they are not on the level they used to be.

[Operator Instructions] The next question comes from Albin Nordmark from SB1 Markets.

Just first on the follow-up on the input pricing versus price hikes there from your companies. Does that give effect directly or do you see any lag of the price push through or are you trying sort of to front run it as you touched a bit on.

Sorry, I missed Albin. Were you referring to a specific division or?

No, generally across the Group.

In terms of the pricing and the lagging. I mean we try to.

Input price versus price hikes.

We try to be proactive in our companies. As I said earlier, some companies have already faced a price increase, but some of our companies are expecting some price increases in the next coming months or quarters. And there, we try to be proactive. So there's a little bit mixed situation, but we don't want to be lagging behind. So I would say we are more on the offensive side and the defensive side on a Group level in terms of price increases compared with what they actually have what has been materialized.

Okay. That's clear. And then on the all-time high record gross margin here, how much would you say is mix from Skydda/Luna Baltic versus proprietary organic pricing stuff? And also the proprietary share of products, what level would you say is realistic in 1, 2 years from here?

To answer your first question, I mean, since Skydda was representing many of our product companies, the sale of Skydda didn't have that big impact on the gross margin on a Group level after the divestments. And the Luna Baltic, given the size, it was not a significant effect on the gross margin. So the gross margin improvement is more related to the organic development that we have had in the companies that is current present -- the current companies within the Group. Related to the portion of proprietary products, I mean, we are now -- we had the target of 75% this fiscal year, and we're now at 80%. And I don't see any reason why we -- that figure could increase over time as we acquire more product companies, product proprietary companies as well as we will typically focus our growth within our current product companies organically. So over time, I expect the 80% to be higher.

All right. Good. And then last one for me, just organic growth in April, if you can say something about that, that differ -- does that number differ anything from the rate in Q1?

Sorry, did you ask about the April figure?

Yes.

That's a little bit too early.

The next question comes from Emanuel Jansson from Danske Bank.

Hope you can hear me? Following up, I think you mentioned that the market has become a bit more uncertain during the quarter. But I mean, given that you have had a quite a tough market for quite some time now and you still display an organic sales growth in terms of what I think it is, at least is volume at the moment. Do you think it's fair to expect that organic growth will continue in the coming quarters as well or -- I don't think you answered the question on how the trend has developed during the quarter, but do you think it's still possible to achieve volume growth in the coming quarters as well?

That's the million-dollar question. I mean, given all the uncertainties on a macro level, I think it's too early to kind of judge how this will play out. I mean the comparable figure last year is not that strong. So my expectation is that there will not be a big deviation top line-wise from the previous quarter. If that then in the end will be a very -- it will be some type of organic growth on top line or even have some weakening. I think that's still too early to say. But hopefully, we get some positive growth also on the top line organically this quarter.

Perfect. I totally understand. And looking at PPE & Utilities, obviously, there's still a lot to be done within that segment. But if we're looking in a long-term perspective, what do you think is the sustainable EBITDA margin for that division?

Yes. I mean we have the profit -- the margin target of the Group of 10%. I think with the company constellation we have current in that division, it will be challenging to meet those 10% profit margin. I think to get there, we need to acquire some companies to that division with good profit margins in combination with further take some measurements within some of the companies within that division to get to the 10%. But it will not be enough to just do what we continue to do what we have been doing historically to get to those 10%. We need to do something differently. And once again, we plan to make some acquisitions to that division, maybe not in the near-term, but over-time. And we have taken some measurements within that division based on the current performance level of the companies in that division.

And then just jumping quickly to your financial targets. I mean, looking at profit on working capital, you have a target of reaching 45% in this coming fiscal year. If you feel that you are not able to reach those -- these targets, is it likely that you will postpone the target or update the target or how should we view the situation?

As said earlier, we still aim for the 45%. When we measure and to have that measurement, it's a rolling 12 figure. So there is a delay in the kind of improvements. So if we look where we are today on a rolling 3 level, we are higher than the 36%. But we still aim for the 45%. And of course, if we don't deliver on that, we need to kind of revise our targets, but we are not willing to do that at this point in time.

And it will only be a timing issue then, we will never decrease the target of 45%.

I understand. But coming back then to PPE & Utilities, you think that target is achievable with the current development that you are experiencing in the PPE & Utilities if you don't see the market will be improving in the near-term?

No. There is a challenge to reach that target within this time frame, and we need to take some measurements to achieve that. But we work on that, and we still aim for this Group target of 45%, and we will act along the line accordingly.

And it could be -- you're talking about acquisition, but it could also be potential divestment as well in order to improve that division, right?

I mean we have divested Skydda Nordic. We have divested Luna Baltic. We have divested Logistikpartner with the logic that we don't see that those operation fits into the Group. And when we get to that point, within our company group, we will look into structural kind of solutions to address that. But -- so I don't exclude anything actually in respect to what to be done to reach the 45%.

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

Yes. And since we had no written questions, I think we'll end the conference there. And thank you all for participating today. And see you again next quarter.

Thank you very much.

Thank you.