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

Hello, and welcome, everyone, to the Byggmax Group Interim Report Q2 2025. My name is Becky, and I'll be your operator today. [Operator Instructions] I will now hand over to your host, Karl Sandlund, CEO, to begin. Please go ahead.

Thank you, thank you very much. And again, a very warm welcome to this conference call where we will present the Q2 report for 2025 for Byggmax Group. As you heard, I'm Karl Sandlund, the CEO; and with me is Helena Nathhorst, our CFO. We do as usual, we have a presentation available on our website, and we try to guide you to the correct page on that -- in that presentation during the call. And I'll begin with a brief business update, and then you will hear from Helena and more our Q2 financials. And once we are finished, we'll open up for your questions as usual. So let's start and move to Page #2 in the presentation on our website. And as you know, the second quarter marks the beginning of our high season. And those familiar with us know that the underlying demand patterns mean that sales in the second and third quarters are significantly higher than in the first and fourth. And throughout the spring this year, we have placed strong efforts on preparing for this high season across all parts of the group, and we are now seeing the results from this. The ramp-up from low to high season was well executed, and our operational performance during the quarter has been strong. Our like-for-like sales is 7.3% higher than last year. And the sales development was quite similar in Sweden and in the rest of Nordics, but changes in currency exchange rates impact sales increase outside of Sweden. So total sales increased by 5.6%. We see that several of our prioritized categories developed positively, for example, timber, building boards and paint. And we also saw continued positive development in our improved offering of customized online products. Quarterly growth was solid overall, though performance varied throughout the period. The quarter started off strongly, supported by early spring. However, the overall market climate continued to be shaped by cautious consumers in response to global uncertainty. We have, as you see, a high gross margin in the quarter, and there are 2 main reasons for this. And one is the fact that our financial stability has enabled early order placement and payments, and the other is improvements within e-com and especially logistics. And of course, increased sales and a strong gross margin mean better profitability. And as you see, profitability continued to improve for the fifth consecutive quarter, and the EBITA margin is 2 percentage points higher than last year in the second quarter. It's 10.8%. And in addition to improved results, we continue to strengthen the balance sheet. We reduced both net debt and leverage. And net debt over EBITDA was 0.8, down from 1.5 the same time a year ago. So overall, our preparations for the high season paid off, and we remain fully focused for the remainder of the season, of course. Before I get into more details when it comes to the business update on Slide 3, just a short overview, if someone of you maybe doesn't know us that well. We were founded back in 1993. Today, we have 212 stores across 4 Nordic markets. Our core is a strong selection of products for home renovation and maintenance, primarily to consumers. And we offer everything from building materials, paint, tiles, flooring and more. And our in-store assortment is enhanced by online, providing an either -- even wider range, but maybe more. It offers a home delivery of heavy building materials and also customized products. We are a true discounts, and offering the best prices requires maintaining the best possible costs in everything we do from our store design to how we work through our processes. In addition to the Byggmax brand, we also have Right Price Tiles in Norway, focusing on tiles and bathroom and Skanska Byggvaror, which offers products and buildings, both home and garden. On Page 4, you see that we size-wise, our sales last 12 months was SEK 6.2 billion, and we delivered SEK 325 million in EBITA, and that's an EBITA margin of 5.3%, some 2.4 percentage points higher than a year ago. Our business model is efficient with high cash generation, and this is seen in a strong cash flow, as you will hear more about later. And we have a strong mix of physical stores and e-com. And currently, we have about 18% of our total sales through our online sales channels. On Page 5, we have some general macro context. And as we all know, after a couple of challenging years, we began to see an improvement of macro factors during the second part of 2024, with inflation back to more normal levels and gradually improving consumer sentiment. The last couple of months, there have been some more general global uncertainty impacted consumer confidence. And I guess that the general view is that consumers continue to be cautious with increased household savings, and the overall recovery is still fragile. However, it's positive to see that house transactions continue to develop in the right direction. And together with lower interest rates and improved real wages, those are historical drivers for renovation. And as always, it's very hard to predict the future where we follow the market development carefully to position ourselves in the best possible way. We have short lead times, and we are used to quickly adapting our business to different level of demand, but we have been able to successfully navigate through the last quarters. If you turn to Page 6, I would actually give you some example of that, because operational control and flexibility are among Byggmax's core strength. Our ability to shift quickly between season is a fundamental capability. And this year, perhaps more than before, we have stayed focused to -- on this core. We have dedicated time and energy to strengthen our existing business. And as you know, sales in the second quarter are more than twice as high as in the first, reflecting the seasonal nature of our industry, because consumers carry out more renovation projects during the warmer months. And for us, that means that we need to be fully prepared to meet the surge in demand without losing quality. And to manage this, we have built, for years, strong capabilities in hiring and adapting work schedules and maintaining flexible supply chains with frequent deliveries of goods, all to ensure a smooth and scalable operation. And looking back at the quarter, we are satisfied with the ramp-up, and we continue to have strong in-store operations with low waste and satisfied customers and well-functioning supply flows in the quarter. Being prepared for high season, of course, also means securing that we have the right products in stock, if you look at Page #7. Optimizing inventory has been a key focus area for us since more than a year. It started with the need to adapt inventory levels to a lower sales volume. Now it's also about facilitating growth while securing capital efficiency. We have, as you have heard me say before, conducted a thorough review of our entire product range to fine-tune the inventory levels with even greater precision. And for high priority items, we have raised our stock levels while reducing inventory for products with lower turnover. Just to give a few examples, the stocks of timber, drywall, paint are all up 15%, 20% compared to last year. At the same time, our total inventory value is lower than last year. And we have put a lot of effort into securing smart buildup of the inventory for the season, resulting in good product availability and well-stocked stores. And this has been one of the drivers of growth. And in addition, this early ordering and also payment have had a positive impact on our gross margins. On Page 8, another positive contributor to the gross margin this quarter is the set of improvements we made to our e-com logistics. Our improved structure has enhanced our planning capabilities and increased overall efficiency. And as a result, we have improved our assortment. Additionally, we have optimized our assortment online by phasing out selected noncore products. And finally, we continue to see growth in our offering, our customized products sold lines, including garden buildings, doors, windows and more. And we see that this initiative has been positively received by our customers that supports both margin and sales in this channel. So several different areas of improvement when it comes to e-com. And the same goes for stores, looking at Page 9, because, as always, we strive to improve the store experience. And ahead of this season, nearly half of our stores were rearranged to better showcase our assortment, and we see that the response from customers have been positive. With updated layouts, improved customer flow and lower shelves, it's now easier for customers to navigate the store and find what they're looking for. At the same time, we continue to invest in technology to make shopping with Byggmax simpler and even more intuitive, both online and in stores. And to meet the demand for guidance from our customers, we have launched, for example, a beta version of an AI chat tool that provides personalized advice and product recommendations directly on our website. And together, we had redesigned the customer service pages. It's getting guidance and answers to questions will be even easier for our customers in the future. And also in the stores, we have further improved the handheld devices, both when it comes to sales flow and also when it comes to product information. So these initiatives are all part of a broader effort to create an even smoother and more consistent experience across all channels. And finally, during the quarter, we opened 1 new store in Southern Stockholm. The new store complements our existing network in the region and improves accessibility for both new and returning customers. So even if this is a quarter primarily focused on operations, we have also made meaningful commercial improvements last year across channels, and we continue to strengthen the customer experience. So to summarize before handing over to Helena and more financials, the preparations we made ahead of high season have paid off. And we have had a smooth transition from low to high season with strong operational execution and also a range of commercial improvements. Thank you, and over to Helena.

Thank you, Karl. I'll talk you through the financial development during the second quarter, starting with a longer-term perspective. On Slide 10, we look at our rolling 12-month performance over the past 3 years. After a period of declining sales and extensive cost-saving measures, we have now delivered a fourth consecutive quarter of organic growth. However, as Karl pointed out in today's presentation, growth varies throughout the quarter, and the general global uncertainty continues to influence cautious consumer behavior. What is particularly encouraging is that we have a consistent improvement in EBITA margin, now for the fifth consecutive quarter. The margin expansion is a result of the disciplined execution and structural improvements presented across the business. On the next page, we will look more closely into sales figures and margin improvement in the quarter. Our strict focus on improving assortment and availability of core products in stores has contributed to a top line growth of 5.6%. Adjusted for currency, mainly from a weakened Norwegian kroner, like-for-like growth exceeds 7% across all regions. It's 7.4% in Sweden and 7.2% in the other Nordics. The increased sales are combined with an improved gross margin. We have a gross margin improvement of 0.6 percentage points versus last year. That margin expansion was driven by early supplier payments, unlocking cash discounts and improvements in our e-commerce offering. This includes assortment streamlining, optimizing of site trends and the logistics setup. The combination of stable sales and improved margin has a clear impact on the bottom line, as illustrated on the next slide. EBITA reached SEK 237 million, an increase of SEK 53 million compared to the second quarter last year. EBITA margin rose to 10.8%, up from 8.8%, highlighting the impact of our focus on margin and cost discipline. The improvement in the quarter is mainly driven by higher volumes, combined with the gross margin expansion. We continue to manage costs with discipline. After 2 years of significant cost reductions, we have capped overall operating expense to secure scalability. Cost is up, mainly related to salary increases and store personnel, to secure service hours in high season. Moderate investment levers have also contributed to lower depreciation in the quarter. On next page, we can see how the performance translates into cash flow and strengthens the balance sheet. In the quarter, we saw continued strong cash generation. Cash flow before working capital changes improved by SEK 77 million, reflecting the stronger operating results. As expected, we have temporarily negative working capital effects from reduced accounts payable due to early payments for margin-enhancing discounts. Investment levels remained low and disciplined. We continue to invest in areas that support the customer experience, such as electric forklifts, store layouts and digital tools while, at the same time, ensuring that the store network is well maintained. We have also opened a new store in Stockholm during the quarter, and we continue to evaluate our store portfolio, looking for new locations. Our performance puts us in a solid financial position. And on the last slide, as we move deeper into the high season, we entered from a position of strength. Our net debt to EBITDA now stands at 0.8x, down from 1.5x last year and well below our long-term target of 2.5x. This reduction reflects both improved earnings and disciplined capital allocation over the past 24 months. We maintain access to committed credit facilities and benefit from strong relationships with our banks, ensuring stability and flexibility going forward. And that concludes the update from my side, and I'll hand back to Karl before we move to questions.

Thank you, Helena. And please move to Slide, I think it's, #15 in the presentation, our key messages again. As you have heard, we continue to increase sales and profitability in the second quarter of 2025. Like-for-like sales up 7.3% in the quarter, and we have a strong and stable position, leverage ratio down to 0.8. Last year's strategic efforts secured a strong core, and our preparations ahead of this season paid off the transition from low to high season was successfully carried out with strong operational control and several commercial improvements at the same time. Going forward, we are approaching 3 things, and it's staying close to our customers, it's driving sales and doing so by high -- with high operational efficiency. We continue to focus on simplicity and speed and execution, which gives us the flexibility we need in our day-to-day operations. And with this, a clear operational focus, efficient supply flows and improved in-store experience. We are now continuing to focus on the high season. And our dedicated teams across the Nordics, they do a fantastic job every day and making sure to help our customers to succeed -- to make them succeed with their home improvement projects. So with that, thank you for your attention, and we are happy to answer any questions. So let's open up the floor for questions, please.

[Operator Instructions] Our first question comes from Benjamin Wahlstedt from ABG.

First of all, I was wondering what is your view of the overall market growth in the quarter, please?

Benjamin, thank you. Well, in Q2, we noted that the market continues to be characterized by uncertainty with cautious consumers and increased household savings. At the same time, key macro indicators like interest rates, inflation and housing transactions have improved compared to a year ago. And against that backdrop, the quarter started off strongly, partly thanks to an early spring that gave both demand, and that effect was strongest in the beginning of the period, which means that the growth for the full quarter was lower than the strong start would suggest.

Perfect. And then sort of following on that question then, the start of Q2 was strong. You note Easter was in April this year compared to March last year. Any idea of how that might have impacted you? I assume it's a positive sort of one-off calendar effect in Q2.

I think in the combination maybe of Easter moving from different month, but also the fact that spring came early to the Nordic region this year gave an extra boost in demand just in the beginning of the quarter.

And are you able to quantify the positive Easter impact?

No, we don't report. We are happy with the overall growth in the quarter. It's 7.3% overall like-for-like. So we're happy with the overall growth. And then we don't report sales by month as comparisons are affected by factors as weather, holidays, campaign, timing and number of trading days. So we conclude that sales were strong in the beginning of the quarter, but we are happy with the overall growth in the quarter.

Yes. Fair enough. It's tricky to quantify exactly. Another one on the gross margin. Since your balance sheet has improved, you've also started talking more about cash discounts supporting your gross margin. And I was wondering if you could give us an idea of how your use of cash discounts have developed in recent quarters. And are there more savings to be had from this use of cash discounts, please?

Yes, absolutely. We have -- I would say that we have -- since we have a strong balance sheet and a fairly low CapEx, and they've been really focused on preparing for the high season as usual this year, we have started with a cash discount earlier. It has given us a flexibility to trigger it already at the ramp up, while we normally have it more weighted towards the third quarter of the year. But still, there are possibilities for further margin enhancing discounts. In general, volume drives possibilities for these kind of improvements.

Perfect. And just could you remind us, were you getting any cash discounts in Q2 last year?

Yes, but not material.

Right. But in Q3 last year, savings from cash discounts were material, right?

Yes.

[Operator Instructions] We currently have no further questions, so I'll hand back to Karl for closing remarks.

Well, thank you. Thank you a lot for your participation, and we wish you a wonderful summer. And if not before, we are really looking forward to meeting you again after our third quarter. So thank you.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.