Byggmax Group AB (publ) (BMAX) Earnings Call Transcript & Summary

Good afternoon, and warmly welcome to this investor update from Byggmax Group. This update is on strategic process, on new sustainability initiatives and of course, on the way forward, the goals moving ahead for Byggmax. You will meet the CEO, Mattias Ankarberg, who will present, followed by Q&A also together with the CFO, Helena Nathhorst and the sustainability head, Per Haraldsson. My name is Mia Odabas, I'm a business journalist with experience from print, television and radio, and I'll be your moderator and guide you through the coming Q&A session. Just a couple of practical things before we set off. Now I think you'd like to view this event in full-screen mode, that's probably the best way. But when you want to post questions, which I'm sure you will, you need to exit the full screen mode. And you'll find a question field at the bottom of the screen. So exit full screen mode and the question field is at the bottom of the screen, and you can already now start posing questions and make comments, and they'll end up in an iPad that I will have together with me here on stage for the Q&A session. So it's time for me to introduce Byggmax CEO, Mattias Ankarberg. Welcome, Mattias, to your own update.

Thank you, Mia.

I was reading Dagens Industri this morning, and I was reading that almost half of the Swedish companies, 48%, they say that the war in Ukraine will affect them. They talk about different effects like uncertainty, lots of uncertainty in the world right now. They talk about inflation, of course, raising prices, energy prices are rising, supply chain constraints. In what way would you say that the war affects Byggmax?

Well, first of all, of course, the war is a horrible humanitarian tragedy. But in terms of business impact, there is very little direct impact on Byggmax. We obviously have no business or operations there, and we don't source any products from Russia, Belarus or the Ukraine. So, I think the big theme to your point is the uncertainty. That could increase in general going forward, but no direct impact for Byggmax.

No direct impact, but uncertainty affects all of us, of course, we might come back to that in the Q&A session. So it's time for the strategic update.

Again, welcome, everybody, and we will start this presentation by providing an update on our strategic progress. And we'll kick that off by a short introduction of Byggmax. Byggmax was founded almost 30 years ago with a business idea to sell building materials to consumers at the lowest possible prices. And at the time, that was a new idea that didn't exist in the market. And much has happened since, of course, but the low-price concept is still very fundamental to our business. Today, we express the business idea as everybody has the right to a fantastic home. And we are, of course, a much bigger company. Last year, we turned SEK 7.6 billion, growth of 12% versus the year before. We had an operating margin or an EBITA margin of 11.7%. We remain the price leader in the Nordic market. And we continue to have a very good sales momentum on e-commerce, which accounted for 22% of the business last year. And almost exactly a year ago, we had a Capital Markets Day, where we had 3 main things to convey. The first one was that there had been some old mishaps in the business history of Byggmax that the current management team now had fixed. The second point we shared was that we had been working hard on modernizing the customer offer in Byggmax, and that was taking a lot of market share. And thirdly, we presented some new financial targets. Today, we have 3 other key points to share with you. Firstly, the market share gains continue. Secondly, we see a lot of potential for continued organic growth. Actually even more potential than we did a year ago, and part of this is due to the fact that we made 2 acquisitions last year that have good growth potential going forward. And lastly, today, we will share a quite ambitious climate agenda where we believe that what we're doing has the potential to change Byggmax to actually have what we call a positive climate impact. We will come back to what that means. But there are 2 main parts to that. One is to reduce greenhouse gas emissions and the other one is to actively, on our own, work with circular products through something we call Byggmax Green Ventures. So initiating the strategic update. We'll start with the big picture on the journey here, and it's really been a journey. And a lot of success stories has happened over this almost 30 years. And some of them, I can take absolutely no credit for because it was before my time. But for example, we entered Norway in 2007, has become a really important and good business for us. Byggmax was really early with e-commerce in 2008, also a very good driver for us going forward. And then as happens in business, there were some things that did not turn out as well, and we covered these mishaps that we call them quite extensively at the Capital Markets Day last year. So I will not cover them today. But just note that we had a bit of a turnaround time during 2017 and 2018 when these were fixed, and we started building the modern customer offer that we see in Byggmax going forward. And that has given really good results. And as you can see on the right-hand side of this graph, sales has increased a lot during the last couple of years. And it is, of course, important to be really transparent and honest that we are one of these companies that have been impacted positively by the COVID-19 pandemic in the sense that people were home and everything basically that related to the home increased in sales. However, it's also really important to underline that a lot of this growth has come through our own work, through our own initiatives. And this is very visible when comparing our sales performance versus the market development. So in 2020, on the left-hand side of this chart, you can see that the market increased a lot, 20%, the B2C DIY market in the Nordic countries. And Byggmax Group, at the same time, increased sales by 32%, so 12 percentage points better than the market. Last year, I think some people expected the market to decline or go back, the market was actually flat. And then Byggmax Group increased another 12%. So another year of growing 12% faster than the market. And this growth, as I mentioned earlier, comes from a set of specific growth initiatives that we've been driving for a couple of years now. And we focus primarily on organic growth. And we have 3 main drivers that we've been working on for a few years. The first one is what we call store upgrades. So we have a new store concept that we call Store 3.0 that we are converting all of our stores towards. And we know that, that gives another 6% of sales per store. The reason is because we add some new assortment that is more relevant for today's DIYers, but we also change the whole customer experience in the store. Secondly, we've been focusing a lot on e-commerce, and a lot of time and effort have gone into that area and also given good results. So the e-commerce has doubled in sales over the last 2 years. And then thirdly, there are still a lot of locations out there that don't have a low-price offer still. So we open new stores, and that also contributes to sales growth, of course. And then last year, we also started doing some add-on acquisitions, businesses that fit with our low-price, low-cost model. And those, I will come back to you in a few minutes, but also clearly contribute to growth already last year. Now all these initiatives are also aiming to build what we call the modern discount offer. And it's quite an important concept. So let me explain what we mean by that. So for many years in retail, the low-price phenomenon has been strong and taken market share across basically retail categories and countries. But today's consumers want a bit more, just low prices is not enough. They also want to have a great experience. So to take an example from the Byggmax world, on the left-hand side of this page, you see the flooring department in the new store a few years ago, 2017. Here, we had the most important flooring products at the best possible prices, which was great, but that was it. To the right-hand side is a flooring department in our new store concept. You still have the best and most important products at the very best prices, but you also have more brands, better product information, a nicer store experience and, which you may be able to see on your screens below, the products, there are flooring samples that you can take home and decide if you would like to have the product picked up at store or delivered to your door. So we try to keep the same low price but add a more relevant assortment and a higher quality perception. And since we've been working on this now for a few years, we can see the effects. The consumers really appreciate this. And there are 2 things that I think is worth to highlight. First of all, we are still seen as the price leader in the market, which is, of course, crucial for us. And secondly, we're starting to mean more for more customers. So we see that in our internal brand metrics. We see that customers increasingly appreciate us for things like service, having many brands, having good selection, quality, et cetera. We also see it in external service and some recognitions and awards where we nowadays still get recognized for having the lowest prices on the market, but also for the best store experience or product quality. So in addition to developing a more modern and relevant customer offer and driving organic sales growth, we have become pretty good at converting that sales growth into additional profit, what we call scale effects. And for those of you who are particularly interested about the financial details of Byggmax and perhaps thinking about the expectations going forward, this could be a good page to think twice about. So here, we see the financial development since the end of 2018. On the orange bars, there is the sales development. And as you can see, the sales has grown a lot. And again, as you may remember, partly because the market has increased, but as you may also remember, even more so because we've taken market share. The topline, the gray line is the gross margin development, which is now structurally at the new level for us as a company. The reasons are mainly that we have a new kind of level of scale at the company, but also we have a new product mix, which is more profitable. The dotted line below is the OpEx share of sales or the cost share of sales. And the cost efficiency is sort of in our DNA. And as we say internally, you need to have the lowest costs to be able to offer the lowest prices. So even during the periods of really good sales development, we have still kept our efficiency initiatives and improved our cost position even further. And all that, of course, means a very nice development for the operating margin, which has more than doubled or almost tripled over the last 3 years. And the last part of the strategy update, which is, to some extent, the best part, at least in some of our minds, is that there is much more to get where this comes from. So there is much more room for organic growth. And firstly, we can mention that these 3 main initiatives we've been driving still have more to give all of them. And in fact, the 2 acquisitions we did last year have added to this. So I'll comment quickly on both of them. The first one is we entered Denmark through acquiring a business called Lavpris Trae in January last year. The Danish business has developed nicely in 2021. And we see that by using the Byggmax supply chain, we get synergies and higher profitability in the business. So now we can expand further into Denmark. And already this summer, we will have the first Byggmax-branded store opening in Denmark. It's our latest and biggest store concept that we have now adapted to the Danish market. So that opens up more growth opportunities compared to where we were before. And the other acquisition we did was a company called Right Price Tiles, a Norwegian company that has developed a really strong offer in, of course, particularly tiles. Both the great private label portfolio, but also a good go-to-market approach. And this autumn, we will be opening the first tiles-focused store in Sweden under the Byggmax brand. So another opportunity for us to continue to grow. All in all, when we do the math and sum things up, we see an organic growth potential of SEK 5 billion going forward, which is more than enough to meet our sales target that we've set for ourselves. And that summarizes the strategy update part, and we will now shift to the climate agenda. So let me introduce the climate agenda, which is also today where I will share some news. We, at Byggmax, have decided to make climate the biggest priority of our sustainability work. And the climate topic hardly needs to be introduced. It is perhaps the biggest topic of our time, and it's a topic that I believe all companies will find a way to relate to in the coming years or decades. And the good news for us, in our industry, is that our customers are really wanting this. They're wanting to find climate friendly solutions. In fact, our own research shows that 66% of today's DIYers would appreciate being able to make more sustainable product choices. Good news. The bad news is that the retail industry hasn't come very far. Today, only 5% of global retail revenues have targets that align with the Paris agreement. And to us, this means opportunity. That means that if we move fast and are future-proofing our business, so to speak, we can get an advantage with the customers, of course. We believe that this topic is also very important when it comes to recruiting people. We think we will have new and interesting conversations with our suppliers, perhaps even a bit more proud shareholders. But we are engaging in this topic both because it is the right thing to do, but also we see a clear business opportunity. And we have decided to take this challenge on with 2 main initiatives. The first initiative is about minimizing greenhouse gas emissions. And we have a particularly radical target to reduce emissions that happen in our own operations, but we also engage in the full value chain to reduce activities across the value chain and reach what's called the net zero value chain by 2040. The second initiative, which is a bit maybe unusual and above and beyond minimizing emissions is to engage in creating circular products, products that avoid greenhouse gas emissions in the first place. And we do this through what we call Byggmax Green Ventures. This is a little bit of a change in business model for us in the sense that as a retailer, we particularly -- primarily sell other's products. But here, we will move into developing and manufacturing and selling own products, but only circular products and products that meet some specific criteria. They should fit with our customer offer, which basically means that we can sell them in our own stores and e-commerce. They should have a positive benefit for the climate, but they should also be commercially viable products that generate sales and profit. And in all, we hope to do more good than harm. We see a potential for our company to have what we call a positive climate impact, which means that the climate benefits of the circular products would exceed the emissions. As a first step, exceed the emissions from our own operations, which we believe could happen actually already in next year. And as a second step, exceed the emissions in our total value chain. Let me now go through these initiatives in a little bit more detail. Firstly, as said, we have set ambitious targets to minimize greenhouse gas emissions in the first place. And before I mention the specific targets. Let me say something about how we have approached this because there are some important principles that we have decided to follow, 3. Firstly, we stick to what sometimes called the first order of climate business or climate mitigation hierarchies, which basically says that in order for the world to have the maximum amount of impact on reducing carbon dioxide at the maximum possible speed, it's important that companies start with minimizing emissions in their own operations rather than the indirect operations of somebody else's. So we have put extra focus on that. The second one is that we have decided to make all the impact in our own value chain. We will buy no carbon credits. We will make no offsets. And the last one is that we, of course, want to be data-driven and externally validated. So we follow the greenhouse gas protocol, which is the world's leading standard for carbon accounting. And we follow the methodology of the Science Based Targets initiative, which is the world's leading organization for validating climate targets. Those were long sentences, now I will move forward to the targets. There are specifically 3. The first one is what I mentioned briefly on the previous page. We have a quite ambitious target to reduce what's called emissions in our own operations, our own emissions. This is sometimes called Scope 1 and 2. And it's a new target that we haven't had before. Our ambition is to reduce those emissions by 90% in just over 5 years by 2027. The second target is a target that relates to emissions from transportation. And this is our suppliers' transportation. This is in what's called Scope 3. This is actually a target we had for quite some time already, since 2010 and are making good progress on. And the last target is a target for the entire value chain, Scope 1, 2 and 3, which then, of course, includes the previous 2 targets, and that is also a new target. And here, we have a target of reaching what's called net zero value chain by 2040. I will now briefly describe where we are on these targets because the good news is we already started working and making progress. So on the own emissions, the whole game here is about electrification and moving to renewable energy. And the 2 most operationally important things we can do is to shift to a 100% electric forklifts, we are today just below half and to move the entire store fleet to at least 90% to renewable energy, we are over 70% today. The second target regarding transportation is about optimizing logistics, routes and fill rates and improving vehicles and also shifting from, for example, truck to boat. And here, we've come quite far already at minus 41%, targeting minus 70%. And the last part, the value chain emissions includes all indirect emissions. And the biggest part is the emissions that happen when the suppliers produce the products. So it's important to work with the suppliers and the product choices. Here, we have, since last year, started asking all our suppliers of product level greenhouse data. And we've also set climate agenda into all our category strategies. And if you're interested in reading more about our climate footprint and actions, I would suggest reading our new sustainability report that will be available on Thursday this week. Now the second initiative, which is a bit different and perhaps more exciting is that we call the Green Ventures. So we have decided to move into circular products, developing and manufacturing and selling own circular products. Again, product should have a good fit with Byggmax customer offer. We sell them in our own channels. They should have a positive climate benefit. That means they should avoid greenhouse gases in the first place. And they should be commercially viable, generating sales and profit. In terms of setup and financial implications, this means that we will make investments into fully or partly owned entities. We've actually already made the first investment. We are looking at 3 more right now and, of course, welcome more ideas. And we can already now see that the opportunities that we are looking at have potential to either meet or exceed the profitability target for the group. Let's look at the first investment. We have invested in a company called More Wood, a Swedish start-up founded by 2 gentlemen with a long experience from the DIY and home improvement sector in Sweden and in many other European countries. And the aim of this company is to produce timber beams out of what's called cross-laminated timber, more specifically scrap from cross-laminated timber. Scrap that is today burned for heat, thereby releasing carbon dioxide into the atmosphere. We at Byggmax act as sort of an anchor for the company. We have been part of the funding. We've invested SEK 7 million. We are the main customer, and we support the customer -- the company, sorry, operationally in a few ways, and we have an option to become the majority owner if we would so like. This idea has the potential to avoid a lot of greenhouse gas emissions and which we think is fun, actually can do it pretty fast because we can have the first products in our stores already this autumn. And to describe a bit more about this initiative and idea, my colleague, Per, will explain that in more detail.

My name is Per Haraldsson and I am a Commercial Director and Head of Sustainability at Byggmax. Byggmax has just announced the launch of our Green Venture initiative. We believe that our knowledge of what products the customer wants to buy in combination with modern techniques for production of circular products can make a big impact in reduction of emissions in the DIY sector. Being head of commercial development at Byggmax, but also head of sustainability, made it really easy for me to see the benefits and the potential in investing in manufacture of green circular products. As you can see, the store I'm standing in is a very new store. It's less than 1 year old. It's from our latest version, 3.0. And it's realizing our vision of being a modern discount. Now please come on with me outside, and I will show you the first product from the Green Venture initiative. This is a beam built in our More Wood factory. It's made from scraps into new products. Every year, we at Byggmax sell millions of meters and beams in different dimensions. As a product, this new beam is superior to traditional beams. It's made by exact standards and it's completely straight, and it's constructed from CLT timber, which means it's stronger than traditional beams. All in all, commercially, it's just better. In Sweden, we have recently started constructing large houses from timber frameworks instead of from concrete. When these big building blocks of timber frameworks, CLT frameworks, are produced, there are cutouts from windows and doors that remain as leftovers. Today, those cutouts are burned, thus creating CO2 emissions into the atmosphere. Instead of burning those cutouts, we can use those cutouts, those scrap products into making new products. By recycling this material and creating new products from which we create 2 benefits. First of all, we avoid emissions from when the scrap is burned. Second, we avoid cutting down trees for creating new beams. We can basically create and manufacture any size of beams. Also, it's possible for us to create any variety of wooden products. And we will retail it at the same low prices that we always do at Byggmax. And Byggmax customers get the fantastic products that they will enjoy a lot. It's as simple as that.

Thank you, Per. So how much of a difference could this Green Ventures initiatives have in terms of climate impact? Let's look at some data and some scenarios. First of all, the entire value chain emissions in Byggmax Group was just below 225,000 tons last year. Now this is the total value chain. So this is all the way from the emissions that happen when the supplier produced the product to our own handling of the product to actually the consumers' use of the product. If we were to continue to grow according to our sales target and the same trend forward with the existing value chain footprint in the year 2030 our emissions would almost have doubled, 420,000 tons. The good news is, of course, there's a lot of policies and actions happening to mitigate this. And if we model out national policies, industry policies, actions that we are taking and we draw a line in the year 2030, we have around 230,000 emissions in the year 2030 in the Byggmax entire value chain. So how does Green Ventures stack up against this? Well, if we look at the first 4 initiatives, the investment we have made and the 3 we are reviewing, and assess the potential of those, they have a potential to avoid about 250,000 tons of emissions by the year 2030. It is, of course, the case that maybe not all these initiatives are successful. But of course, we just started, so we hope that there will be more than 4 ideas by the time we get to 2030. But the point is that circular products, products that avoid greenhouse gas emissions in the first place can make a real contribution to the climate challenge. We see that it also is commercially viable and have therefore decided to invest in this area. So summing up the climate agenda, we have decided to be part of the solution, both because it's the right thing to do, but also we believe there is a great business opportunity. We do it through 2 main initiatives: reduce emissions, particularly focused on our own emissions, but also engage in the full value chain and through launching Byggmax Green Ventures to produce climate-friendly products. And in all, I think we, as a company and definitely myself, believe that if we can combine sort of the low prices that are the hallmark of the Byggmax business, with a better quality experience that we're now building and climate-friendly solutions, that would really strengthen our brand and our business going forward. So let me summarize the presentation part of this event with just 2 or 3 pages to describe what all this means for us going forward. How to think about Byggmax given what you just heard. Well, first of all, the business idea hasn't changed. We still believe that everybody has the right to a fantastic home. And we think you should think about Byggmax in 3 important points, particularly. Firstly, we are a retailer. We are a modern discounter that takes market share. We are the leading discounter in the DIY sector in the Nordics, in a big consumer market, SEK 120 billion in market size. We have an offer that is taking market share, and we are now successful in 4 Nordic countries, which means we can continue to grow. Secondly, we aim to have what we then call positive climate impact. We will try to future-proof our business by trying to do more good than harm, focusing a lot on minimizing the emissions and moving into circular products. And in all, that means that we are here to drive what we call sustainable profitable growth. In addition to what's mentioned, we have organic growth initiatives that we know have a lot of potential left. We have the lowest cost in the industry, and we also have opportunities to do some add-on acquisitions that fit in. We also are a very cash-generative business. So that means we generate cash to sufficiently fund our own growth investments and investments in Green Ventures while still being able to pay dividends to our shareholders. So a year ago, as I mentioned in the beginning, we set new financial targets. We've since had a very good business momentum and are currently trending above those targets. So let me say a few comments around that. On the sales side first, where we aim for SEK 10 billion. We continue to see a good momentum last year, good growth with a still good market and gaining market share, as mentioned. The operating margin, EBITA margin, we are clearly above, 7% to 8% is the target and we are at 11.7%, which also gives us opportunities to continue to invest in growth to reach the sales target. Similarly, for the leverage target, we are clearly below the net debt-to-EBITDA target, which also gives room to invest in growth initiatives and in further Green Ventures. And then the dividend target is set to pay 50% of net income. Last year, we paid out 35%, plus we did some buybacks of shares. And this year, the Board of Directors have asked the AGM to approve a dividend of SEK 4 per share compared to the 2.75 that happened last year. Lastly, those of you who follow us know that we've actually had a climate target for quite some time that we always share when we talk about financial targets. But now we, of course, update this to include the points that we covered earlier today. Lastly, short term, what's ahead in this year in 2022? Well, in the last quarterly report, we were quite optimistic on the 2022 outlook, both in terms of the market and our own ability to continue to drive growth. And of course, there is now a lot of uncertainty in the world. But so far, we see no reason to revise that optimistic outlook. That means that we are positive on the market development. We continue to see a DIY market that is larger, significantly larger after the pandemic that boosted than before the pandemic, although not as large as during the pandemic. And importantly, we continue to see an acceleration of a shift to low price. Particularly in the higher sort of inflationary environment, it's probably as simple as more customers take the time to make price comparisons on the Internet and choose the cheaper option. We've never had so much activity for growth in our own company as we have right now. We are upgrading stores at the highest pace we've ever done this quarter. We have the biggest ambition for improving e-commerce and adding e-commerce assortment that we've ever had. We aim to open 15 new stores this year, and we already made the first add-on acquisition, small Danish e-commerce company, which we will include in the group as of January 2022. And then lastly, we are now quite excited about embarking on the climate journey that we have set out. We have already actions in place to start reducing emissions, and we hope to see the first circular timber beams in our stores and e-commerce already this autumn 2022. And that summarizes the presentation part of this event. So now I will turn over to moderator to take questions.

Thank you very much, Mattias, for your presentation. Before we move into the Q&A session, just a couple of follow-up questions after your presentation. Now Byggmax is a success story in many ways. You showed it here in numbers. But looking at the stock market and the share price, I was watching it has fallen from SEK 90 here like in the beginning of the year, low 60s in March here, and now I just checked SEK 67.50. What is it here that the investors don't understand?

Well, I think I will leave for the investors in the market to set the share price and refrain from commenting on that. But I think in the last couple of months, there's been a lot of uncertainty in the world and a lot of shares have tumbled. And longer view, I think it also has been a lot of change in Byggmax. And I think it's probably difficult as an investor to separate what is our own performance and what is COVID and other market boosts. So have to do a little bit of work to try to make the analysis.

Time may bring clarity to this. Now you mentioned inflation in your presentation, I was wondering you say that you're a modern discounter. How will inflation, that is rising prices, affect you? You said like it might actually spur your business?

Yes. Well, there's never a guarantee for anything. But if we look at historically, all the macroeconomic shifts that have happened during my time, which have increased costs, have actually led to increased consumer prices. Now that's both a good and a bad thing because, of course, we as a low-priced company would like the customers to buy at low prices. So -- but for business, it's good because sales go up if we have higher prices. And then you have to look at the world in an optimistic way. When there -- everything is more expensive, we also see that more customers choose the low-price option. So 2 reasons for why that actually has helped our business in the last couple of years.

Okay. Interesting. Now the COVID situation, it's kind of post pandemic, not in China, but in our part of the world. It has been a COVID bump for you, a very good year 2020, record year, thanks to the pandemic effect. If you compare 2022 to 2020, where will 2022 land do you think?

No, but I think we have to be really honest to say, we had a really big boost of that. But what we see now, which actually started happening already this autumn when the -- I think, situation opened up a bit, is that some of the habits that people have gotten are sticky. So the DIY and other sectors related to the home are decreasing compared to the pandemic, but not as much as before the pandemic. So we see that the housing market is still strong. People have summer houses. They have boats, pets and the DIY market is actually continuing very nicely.

It's kind of a sticky effect because you said after Q4 that when society opens up, people would do other things, but we are not doing other things.

But we are doing other things compared to the sort of pandemic, but compared to before the pandemic, we are not traveling as much and more people have summer homes, et cetera.

So kind of a sticky effect.

In between. Yes.

Okay. Thank you, Mattias. And let's move on to the Q&A session. Welcome also the CFO, Helena Nathhorst, welcome and also the Commercial Director and the Head of Sustainability, Per Haraldsson. Welcome to all 3 of you for this Q&A session. Just a couple of questions for you before I look into my iPad already, a lot of questions for you there. Now Helena, the -- Mattias was talking about the Green Ventures, the new initiative from Byggmax. How would you say -- what will be the financial consequences of the Green Ventures for Byggmax?

We see a lot of positive consequences from Green Ventures, as mentioned in the presentation, 66% of our customers are interested in more sustainable alternatives. Internally, in the organization, sustainable targets are positively received. And in combination with the commercial aspects and our long-term initiatives, this will, over time, give a positive impact on our financials.

And how will you fund these new investments? Where will you take the money from?

We have a solid balance sheet and very strong cash flow. In 2021, we invested more than SEK 200 million in our growth initiatives. We had a dividend to our shareholders. We had 2 acquisitions, and we concluded a share buyback program. So we foresee that going forward, we will have sufficient cash flow to combine these investments with continued dividend to our shareholders.

So you have money to invest. Now will these Green Ventures in any way change your financial targets?

We updated our targets last year, and we still see that meeting our targets is an achievement. We are not updating them now, but absolutely, we are on a good path. And in time, we will revise the targets if needed.

That was actually the answer to my next question, which is Mattias said you're already trending above the financial targets. Good way there. Are you being too modest? Is it already now time to raise the financial targets?

As mentioned, I think still, it's achievement to reach these targets for the moment.

So Per, a couple of questions for you. Mattias was talking about the Green Ventures, the More Wood, the first investment you've done. What is the business plan for this?

Well, the business plan is to build the first factory, which will be located in Hässleholm in Skåne, south of Sweden. It's being built as we speak. Machinery is being purchased and installed right now. And production will start in limited quantity in May or June, in June, I think. So that is the first factory. We see potential for more factories over time, we'll see. But right now, it's the first factory and the business plan is to run it on one shift, which produces around 12,000 cubic meters of wood products.

Okay. And this was your first investment. Now Mattias was mentioning that this is not the last investment. Could you elaborate a little bit on what's coming up ahead?

Yes. Well, we have, like Mattias said, a few initiatives, and I don't want to go into detail exactly on the details of what they are. But I can say this much, it's -- a lot of them have to do with the circular wooden fibers. We believe that reusing wooden fibers instead of burning them and instead, making new products from them is a great opportunity.

So more initiatives coming up ahead.

Absolutely.

And Mattias also talking about your own emissions. Now you're promising radical cuts, quite radical cuts there. What would you see is the main risk that you want to succeed?

Well, to be frank, I think it's not that difficult. It's about electrification, and that technology is already there. Electrification of forklifts, electrification of cars. And then, of course, we have the production of the renewable energy, electricity. And that is probably -- if I need to choose one that is more risky or difficult than the others, that's probably the one because about quarter of all the electricity is purchased through our landlords. So we need to have them change their energy production or how they buy the energy. Some of our landlords still heat with gas or oil, for example. So some investments will be needed. I don't think it's very difficult. But of course, that may take some more time compared to electrification of forklifts.

Well, if it isn't difficult, why haven't you done it so far?

Well, we just now have this strategy, and we're proud to present it. And now we have realized that it's high time for us to have very aggressive targets on this, and now we decide to do it. So we have been pursuing electrification of forklifts, which is one of the major parts of CO2 emissions from us for 4 years. But now, we see that there are reasons for us to proceed with more initiatives in this area.

It's full steam ahead on cutting emissions.

Absolutely.

Now Mattias, a question on M&A. You were talking about you -- you are now present in 4 countries, almost 200 stores, and you made acquisitions, 2 last year, or this February, the Danish Byggmax. And you talked about also organic growth, potential of SEK 5 billion. What would you say is the potential for the M&A agenda? What's the coming -- I mean, the agenda?

No, I think the main potential is the organic growth, the SEK 5 billion in organic growth that we see. And M&A is sort of, as they say, a lumpy business, it's 0 or 1. So if you want to buy something big, then you can go really big. We are not interested in making a huge acquisition. We buy smaller businesses that fit into our strategic agenda. So I would expect that the very vast majority of our growth comes from organic growth.

But also other M&As in pipeline, are you doing -- you're doing M&As both geographically and product-wise. Will that continue?

Yes. Now we have chosen to -- yes, actually exactly so. There are 2 main reasons we do M&A. One is geographical footprint and the other one is to strengthen in new categories.

So that will go on. Now lots of questions coming in here. Let's pick one about the margin target, 7.5% or 7% to 8% is quite a bit below the margins in 2021, how will that impact the profits, Helena?

Yes. We spoke about it in the presentation that it has been a period of high economic of scales and growth in this period. And we still see that investments going forward could sort of have some impact on the margins. But as said, we are on a good way on trading above those margins.

Coming back to the M&A situation, Mattias, what differences do you see in terms of price competition comparing Denmark, Sweden and Norway?

Well, good question. Maybe I will start and then, Per, you can add to this. But I think in general, Denmark is a very price-driven market. So that is my experience also from other retail sectors. So we actually like that because that's something that speaks to our favor. We're good at keeping costs down and prices low. So we are quite optimistic on that. But I think in our sector, we have quite aggressive price competitors in almost all our markets. Don't you say, Per?

I agree. And we can see a clear position for us on the Danish market that we aim to fulfill. And I think price-wise and margin-wise, I think it will be okay. So I'm looking forward to the first store to see that being proven.

You're looking forward to this competition. Now coming back to the circular products here for you, Per. Will circular products be available in all stores or only in selected ones?

It's absolutely our ambition to have circular products available in all stores. But like I said, the first initiative, More Wood, is we're setting up the first factory now, and volumes need to be ramped up. Over time, it will be available in all stores.

Over time, when is that a little bit more exactly?

It could be in a year's time, something like that, if everything goes well.

And another one on the climate agenda, how much of a competitive advantage do you see that the climate agenda will give Byggmax versus the competitors?

That's a good question. And I think, going back to Mattias' presentation, for us, it's, first of all, and again, it's the right thing to do. So we need to have a climate agenda because it's the right thing to do. But once now that we decided to take on this again, that we decided to do something really positive and good from it. So investing in this sort of businesses is right for us. Do you want to add to that, Mattias?

Yes. But maybe something, I think, obviously, it's sought after by customers and such. But I think there's a really important part, which is actually my own experience also from before that. I mean, young people and people that are looking for jobs today are really passionate about this topic. And I remember the last -- when we have quarterly report, we always do an internal presentation afterwards. And it was one of the last few quarters, we had like a really, really great quarter. And the first question was, what do we do on sustainability? So I think being able to recruit and keep people is a really important core of our business and that can help to be a bit more frontal on sustainability part.

To show your feet here on the sustainability agenda. Now we talked about the financials, Helena, about these new circular products. What about the margins? How will they affect the margins, the new circular products? Can you say something more about it?

Over time, hopefully, a more positive impact. But I'd say to begin with, they are in line with what we have today.

Okay. So it's in line with today. Will the new sustainability investments have any tangible impact on the CapEx profile? Is that for you?

That's for Helena. Helena can start.

Yes.

Sort of will have an impact on...

CapEx profile. Capital expenditures.

Yes, as said, we do invest already a lot in our growth. And I think that this should be seen as a normal part of our growth investments going forward. So we will have cash flow to finance this. It's prioritized between all other investments.

And the question on price also, maybe, Mattias, this is for you. The pricing power. That is how you can actually make the higher costs come over to the consumer. You've been fairly good on that already. Can you get full compensation also moving forward for increased costs?

Well, there's never any guarantee, but it's sort of always been the case, the last couple of years. And we have a little bit of a special situation because we have a pricing strategy that is quite simple, and Per can explain the details. But -- actually, I can probably do it because it's so simple. It always have the lowest price on every product compared to every competitor. So for us, it's more about following the market. And what happened, you look at the NOK development in Norway 2, 3 years ago, everything became more expensive in Norwegian krone. All the prices went up on the costs and the consumer prices. When it happened on timber prices last year, it was the same. When it happens to some logistics prices, it was the same. When it happens now with some products that are impacted by heat costs, for example, it happens. So I think it's a very much a pattern that we have seen. So based on that, yes, it seems very plausible.

It seems you can go on with this. Okay. Consumer behavior, we were talking about this, Mattias, a little bit before. What do you see in terms of consumer behavior as of late -- as the Nordic customer returns to their workplaces? Now we can go back to work and we cannot be at home, building on our own houses during the lunch break.

Exactly. Constrained to the hammers.

Yes.

No. I think this is something we were actually really curious about internally. What will happen when things normalize? But we have seen very limited change. I think the biggest change in behavior was probably, I would say, during summer, when people were starting to sort of travel domestically and meet outdoors again. And since then, the market is below the pandemic level but still much better than it was before. So that has just sort of continued, I think, is the -- my experience.

And I can add to that also. Last year, we saw, especially in some periods when a lot of stores were closed, for example, we saw, of course, naturally, a very large expansion of the e-commerce because that was the way how we could buy it. So today, it's still higher than it was the previous years, but the e-commerce share has adapted depending on where the consumer is at for the moment, so to speak.

So following up on e-commerce. Now do you have a target for e-commerce today, it's 22%, around 22%? No?

No specific target, but it's a really important prioritized growth area for us.

And 22%, is that kind of where you want to be or...

Yes, but we think talk in tournament, it's no secret. We think 25% or 30% is more realistic. Maybe it would be even 35% at some point. But obviously, it's a growing consumer behavior that will also continue to grow. We also see, by far, the fastest growth the last 2 years in the combination of stores and e-commerce, or click and collect, for example, is growing almost double the pace of sort of regular e-commerce.

Is it click and collect? Because what are the key factors that will drive e-commerce, do you think?

Would you like to start?

I think, of course, having a relevant assortment to customers is really important. So that's something that we are prioritizing a lot and also to have the right distribution channels, so you can have an offer for the customer to have products easily delivered home quickly and at a very -- in a way that is very plannable, if you will, that you know when things are going to come. So really work on the fundamentals of the offer is really important.

And I think something that is interesting when it comes to Byggmax and e-commerce, which is very different from almost any other retailer is that we are coming from a situation where we had low prices on just a few products to have high volume on those products. But with e-commerce, we can offer a lot of products because we can have them at our central warehouse or at our suppliers. So it is a big opportunity for us to mean more for the customers. So we have increased the assortment a lot compared to where we were just a few years ago. That also, of course, helps the growth.

It does, certainly. So a question on buybacks. What do you say, Mattias? Can we expect more share buybacks?

Well, it's a question for the Board, obviously. But I would be surprised if the Board did not ask the AGM for a mandate, and I -- the AGM approved the mandate last year. So if that happens again, the Board has the tool. And as Helena says, we are generating a lot of cash flow and have opportunity to do last year sort of everything we wanted basically or could do with the cash. So I'm sure it'll be part of the toolbox, and then the Board has to decide.

It's up to the Board. Back to your geographical expansion here. How much of your sales growth target of the SEK 10 billion you mentioned do you see taking place outside of Sweden?

Well, for the first few next sort of few years, there's still a lot of potential in the Swedish markets. It's also because we have developed more store format to be able to address more types of towns. But in the next sort of -- when we approach 2025 and there beyond, it's much more focused on the other markets that we're in.

So mostly Sweden as of now, but more...

Shifting forward. Yes.

Okay. What's the prediction for the growth of the overall do-it-your-own market for 2022?

I don't know if there is such a prediction. I don't -- I think -- I was on a meeting last week with a lot of CEOs of different European DIY retailers. And I think everybody is expecting somewhat of a sort of shift back given the COVID boost first half of last year. But I don't have a number. Have you guys seen any?

I haven't seen any. Sorry.

So back to the Nordic markets here. You mentioned the price competition. You talked a little bit about that. What about the competition overall, not just price? What does it look like? What's your strategy?

We have 2 main sets of competitors. We're a little bit of a niche company in between the 2 blocks, you could say. On the one hand side, we have the companies that we call big boxes that pretty much have everything under one roof. Here in Sweden, it's sort of a Bauhaus and Hornbach and there are different players in the different markets. K-Rauta is really big in Finland, for example. So that's one set of competitors. And then the other one is what's called -- typically called trade players in English, focused on craftsman or professional players. And there are a lot of these kind of companies. And they are, again, not that focused on the consumers, but of course, the consumers are allowed to shop. So we are a little bit in between those 2. And we -- on the -- versus the big boxes, we have a quicker and faster experience and a more focused offer and versus the trade players, we are, of course, much lower prices.

So a little bit in between when it comes to the Nordic competitors. Now, Per, coming back to this cuts of emissions, will it be controlled by any outside experts? Or how will you manage?

That's a very good question. And I think it's -- first of all, all the calculations that we do are based on the best standards, the greenhouse gas standards, GHG, and of course, the targets are set in -- together with SBTi, Science Based Targets Initiative. And then, of course, we are -- there's a world around us that is evolving very quickly. So at this time right now, there's not a lot of -- there is a lot of mechanisms that still are not in place. So we're looking forward to having more details on how this sort of emissions should be measured because currently, it's not clear. And we will follow that and of course, do our best to calculate and follow and do it by the book, so to speak.

On the sustainability agenda, we're talking about ESG. What is Byggmax doing on the S and the G, the social and governance?

Well, we do a lot, of course. We have -- if you take the S, the social aspect of it first. We work a lot on the -- for us, it's about the employees and the suppliers in this case. We have substantial reporting since 10 years, where we do a lot of calculations, and we show all the data very transparently. And for us, it's about working on health and security for the employees in this case. And on the supplier side, first of all, I'd like to say that we are -- we have a lot of our suppliers based within the EU. So very few of our suppliers are outside the EU. So we don't have a lot of risk suppliers, but those risk suppliers we have, we have strategies and we have code of conducts, and we do visits on the premises of those suppliers also. So that's for the S. And for the G, well, that's a different story. Of course, it's for us to have the whole way of governing the company set up properly with the Board and instructions for all the employees and how they should work and so on. And all of that is in place for us. So that should be okay.

It's time to sum up here. Mattias, what would you say now moving, you have a good position in many ways. You've described this during this investor update. So moving forward now in 2022, what are your main focus points?

Well, our main focus points is getting towards the sort of longer-term targets that we've set in 2025 and actually not be that focused on 2022, to be honest.

2022 is already...

No, but we have to be -- we can talk every quarter and every year, but have to be a little bit more long term than that. But we have a really ambitious growth targets. We definitely feel that we have the potential to get there and we have the record amount of activities to build for growth this year. So that, I'm really looking forward to in 2022 and of course, embarking on this climate journey is really, really fun.

With the new circular products. Now I was reading in Dagens Industri, you got the question, if you should choose another career. And you said, "Oh, maybe I want to become a professional soccer player or maybe I want to play guitar in a hard rock band," but then you were thinking that it might be too late and you said, soccer coach. But I don't think -- I don't get the feeling that you're changing career here.

No, I'm not. I was so hoping you would say you have the opportunity for me to become one. No, I do not. I have a lot of fun where I am.

Well, the soccer coach, it's probably not too late for that.

It could be.

Okay. Thank you very much, Per. Thank you very much, Helena, and thank you very much, Mattias.

Thank you.

And also, of course, thank you to you, posing questions and listening to this update. Just a bit of information before we close this update. Now the sustainability report, Mattias was mentioning that in his presentation, it will be published on the Byggmax Group website already on Thursday, March 21. And the questions that we didn't have time to answer, but I actually think we answered them all. But if there are questions that you didn't get your answer to, that you will find the answers also on Byggmax website as well as this film, if you want to review parts of this update. And the next good opportunity to follow up on these questions and other ones will be the Q1 report, the first quarterly report for Byggmax, which is on April 21. Thank you very much for attending and listening to this update.