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

Hello, everybody, and welcome to the Byggmax Group Q4 Interim Report. My name is Elliot and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Karl Sandlund, CEO. Please go ahead.

Thank you very much. And again, a very warm welcome to this conference call where we will present Byggmax Group's year-end report for 2025. I'm Karl Sandlund, the CEO; and with me is Helena Nathhorst, our CFO. And as always, the presentation we will be referring to is available on our website and we will try to direct you to the relevant section during this call. I'll start with a brief business update followed by Helena's walk-through of the financials and after the presentations, we will open the floor for questions. So let's begin and please go to Page #2 in the presentation. For Byggmax, 2025 has been a strong year. We defined clear focus areas for the year and through determined efforts, we have secured both increased profitability and a further strengthened financial position. And I will come back to some of the drivers for this later, but I'll start with the overall results. Our EBITA margin increased to 5.9% for the full year, that's 2 percentage points higher than in 2024. Earnings per share were SEK 3.25, almost tripled versus the year before. If we look then from a balance sheet perspective. When we closed 2025, we had a net debt of SEK 354 million and this year level is the lowest we have had for more than 10 years, a clear sign of our successful work when it comes to secure a strong financial position. Our like-for-like sales growth was 3.4% for the full year and that's despite a refined e-com assortment, which led to lower sales, and the growth was supported by product range supply chains and very high standards in our stores. If we zoom in on the fourth and final quarter of the year, which is part of our low season, it's a quite small quarter for us, we see a quarter where we continue to improve profitability. But sales was down somewhat negatively impacted by currency effects and, as mentioned, the streamlining of our e-com business. So overall, a year of further improvements where we see the effect of the focus on our core. And in recognition of the group's solid financial position, the Board has decided to propose to the Annual General Meeting a dividend of SEK 1.65 per share and that's more than doubled versus last year. Before we get into more details, on Slide 3 a short overview for those who may not know us that well. We were founded back in 1993 and today, we have 212 stores across core Nordic markets. Our core is built on a strong selection of products for home renovation and maintenance for consumers. We offer primarily building materials, but also paint, tiles, flooring and more. And our in-store assortment is enhanced by online providing an even wider range, home delivery and also customized products. We are a true discount retailer and offering the best prices requires maintaining the lowest possible cost. And our store design not only keeps operational cost low, but also ensures an efficient shopping experience, which our customers highly appreciate. And in addition to the Byggmax brand, we have Right Price Tiles in Norway focusing on tiles and bathroom and Skanska Byggvaror, which offers products and building materials for home and garden such as conservatories and greenhouses. If we move to Page 5, we have some brief macro context. And overall, the market showed significant variations during the last year and development is different between categories, but also markets and seasons. The year began with more positive consumer sentiment. But during the spring, households became more cautious again with quite sharp dip in consumer confidence in both Sweden and Denmark. And this coincidently matched a time when many customers start or are planning their larger outdoor projects. During the second half of the year, consumer confidence once again improved. But in Sweden, the index has actually still been below the level shown in 2024. So in summary, a market with significant variations where some categories developed strongly while others have not yet gained full momentum. If we continue to the next slide #5, for an overview of our focus areas. Over the past year, we have focused on further improving our profitability through 3 main areas. And one is to be close to our customers; two, to drive volume and sales; and three, do this while maintaining operational excellence. And this focus has touched, I would say, every part of the organization from the work we do in our stores to e-com channels to admin and business development. And through the hard work and strong dedication of our teams, we have, as you know, improved profitability while we also built a business that is both flexible and robust, making us very well prepared for the future. To give you some examples of the improvements we have made in terms of customer experience, you can look at Page #6. For example, a large number of our stores have been rearranged to better present our assortment and make it easier for customers to find what they are looking for. Combined with improved customer flows and more self-service checkouts, customers are offered an even smoother purchasing experience. We have also continued to develop the digital support tools we offer to our customers and this includes expanded functionality in our employees' handheld devices, further strengthening of our customer support functions and also the continued development of, for example, our AI-driven shop-in-shop on our website, a function that supports customers with their projects and also adds the selected products directly to their shopping carts. We also see improvements in customer experience when it comes to our customized product offering where enhanced online tools have been 1 key contributor to increased sales of windows, doors and cabins during the year. On Page #7, you see some of the actions we have done to make sure that we can also increase volumes. One main thing was that in 2025, we put a significant amount of effort into securing a very strong seasonal ramp-up resulting in high standards across our stores. Staffing levels were increased earlier to ensure full service capacity from the start of the season while improve supply planning, strengthen service levels and our product availability. And this position has been maintained throughout the year supporting volume and sales by minimizing out-of-stock situations. We also continue to develop both customized products and our private label range. Our modular houses, for example, were expanded with additional options allowing customers to tailor size, design and features to broaden their intended use. And we expanded also our private label offering in greenhouses and conservatories with several new products showing strong performance during the year. As mentioned, within e-comm, we have refined the assortment to increase relevance and profitability and while this had a negative impact on sales, it has strengthened margins and also improved the quality of our online sales. In current marketplace, operational control is extra important. Please see Page #8. And operational excellence is always one of our most important priorities and we dedicate a lot of time and energy to secure a strong performance. Starting from a very efficient position where we have reduced our OpEx 2 years in a row, we managed last year to keep it almost stable. In total, OpEx grew by 2%, which I would say is a strong performance taking into account volume, inflation and the very low starting point. We have also continued to have very efficient supply flows., Despite improving the service levels, product availability, we have managed to have slightly lower inventory than the year before. And also our revised logistics setup has not only improved their control over the transportation flows, but also made it possible to reduce costs and also enable us to increase volumes very efficiently. You will now hear a little bit more about the financials and figures from Helena and I will come back at the end.

Thank you, Karl. On Slide 9, we can see how our focus areas, as just described by Karl, are clearly reflected in our financial performance. Here we show the development of sales and EBITA margin on a rolling 12-month basis quarterly over the last 3 years. In a period of uneven demand, we have improved the EBITA margin for 7 consecutive quarters and the full year rolling 12 margin amounts to 5.9%. The sales levels are still below those of 2022. This year's sales is more in line with 2023 while at the same time, the EBITA margin has doubled. This clearly shows that the improvement in profitability is a result of structural improvements in gross margin, cost base and our ways of working. Our strategy in the period of simplifying and clear focus on our core business has paid off. Strong operational excellence, as described by Karl, is a clear focus area for us. Over the past years, we have adopted our cost base, focused on core business and simplification while maintaining flexibility in the organization. After 2 years of significant cost reductions, both personnel and other operating expenses, we have in 2025 developed costs in a controlled manner despite inflation and increased activity levels. The number of stores remains largely unchanged in 2025 and we have built a cost structure that is robust and scalable, both up and down. On Slide 11, we summarize the profit development for the full year. EBITA amounts to SEK 361 million corresponding to a EBITA margin of 5.9% compared with 3.9% the previous year. The improvement is driven by both higher sales and strengthened gross margin combined with continuous strong cost control. The net sales increased by 2.5% during the year with sales negatively impacted by currency, primarily from the Norwegian kroner by approximately minus 1.1%. In addition, our active and deliberate assortment decisions within e-com have had a negative short-term impact on sales of around minus 1.5%, fully in line with our strategy to simplify and focus on improved profitability. Gross margin in the period has been strengthened by a combination of factors; an improved product mix, purchasing initiatives including early supplier payments with cash discounts, a more focused e-com offering with improved logistics and low inventory waste levels in the year. In addition to the sales and margin, the lower investment level has contributed to reduced depreciation, which further strengthened the EBITA. If we look specifically at the fourth quarter, the improvement is largely in line with the full year, but with somewhat weakened sales development. Like-for-like sales in the fourth quarter declined by 0.8% while EBITDA in the quarter improved by SEK 13 million to minus SEK 39 million, fully in line with our seasonal pattern. Finally, on Slide 12, we see how the improved profitability also transfer into strengthened balance sheet and cash. Cash flow from operating activities driven by improved earnings and gradual reduction in capital funding. Investment levels remained disciplined. We continue to invest in areas that strengthen the customer experience while ensuring that the store network is well maintained. During the year, we have 1 new store opening. This gives a net debt excluding IFRS 16 at year-end now at SEK 354 million compared to SEK 618 million previous year. The net debt in relation to EBITDA performance strengthened to 0.7x, down from 1.6x last year. The low leverage gives us both stability and flexibility going forward. And as Karl mentioned, we have maintained the flexibility to continue developing the business. With that, I conclude the financial update and I hand back to Karl before we open up for questions.

Thank you, Helena. And please move to Page #13 messages, our key messages again. Last year was a very strong year for Byggmax with improved profitability and a solid financial position where the Board proposes an increased dividend. Our strategic efforts have secured a solid foundation with an attractive assortment, high customer satisfaction and very short lead times. And during 2026, we will continue to improve our core business. Focus will be on becoming even more relevant to our customers, increasing sales within our existing infrastructure and continuing to drive high efficiency across the entire organization. And with our strong foundation, our short lead times and our dedicated teams; we are very well prepared for 2026. Finally, before I conclude, I would like really to highlight our employees who have delivered this strong year and also to our customers and shareholders for their trust. And together, we have taken important steps forward and we look to the future with confidence. And with that, thank you a lot for your attention and we're now happy to answer your questions.

[Operator Instructions] First question comes from Benjamin Wahlstedt with ABG.

I was wondering if you could give us some flavor on the market growth in the quarter, please. Building Material Index that was out a couple of days ago was very positive. Do you have any insight into the relative performance when it comes to B2C and the B2B part of the market, respectively?

Well, as mentioned, we see market with significant variations where some categories are developing strongly while others have not yet gained full momentum. I guess that also makes comparison based on aggregated sales figures quite challenging. We can see some lower volumes in the larger projects and at the same time we see solid development in smaller projects and products, including garden, large building, but also bathroom actually. When it comes to the Building Material Index, the market statistics in Sweden, my read in the press release itself was the ROT tax duction in Sweden had significant effect on that index towards the end of the year. And we primarily sell to private individuals doing their own DIY projects. So that is nothing with a large effect impacting us. Looking at our total sales for the year, like-for-like was, as mentioned, 3.4% and that was with sharpened finer e-com assortment offering that actually reduced our sales, as Helena mentioned, by some 1.5%. And I think looking at that total figure, I would say that we have a strong position and we maintain a strong position on the market.

Perfect. Second question. During 2025 and 2024 for that matter, you've improved your gross margin to an all-time high level. You mentioned several drivers over the last 2 years, including product mix, better shipping prices online, cash discounts, et cetera. I was wondering if you could give us some flavor on the relative importance of these factors and then perhaps say what factors you believe could drive incremental gross margin gains in 2026, if any?

If I start, Helena, you might add on to my answer. As you said, Benjamin, the gross margin is driven by several factors, right? Demand has been more soft than usual towards categories. So projects with higher margin, that is one impacting factors. In addition, we have made improvements to our e-com when it comes to assortment and logistics, which have a positive effect on the margin. We have effect from purchasing actions and early payments and also from very low waste levels. So there are several factors contributing to the outcome. And in addition to our own measures, margins are subject to market conditions; it's demand patterns, currency and so on. Our ambition is naturally always to optimize net income and volume are and costs are the key drivers for this. We don't guide on specific amounts of them and it's hard to specify amounts. But I don't know if you would elaborate, Helena, or if it's possible to give some more insights.

Correctly, we have sort of clustered the 4 drivers. It's matters as said is also the competitive situation and market conditions. The proportions of them, the success of them this year, I would say that they're fairly distributed equally between the 4 factors for the full year.

[Operator Instructions] We now turn to Niklas Ekman with DNB Carnegie.

Can I just follow up on the gross margin question because it is a pretty dramatic increase of the gross margin not just in the last 2 years, but in the past 5, 6 years. I noticed that your margins -- your gross margin now is 36%. It's up 2.5% in the past 2 years, but it's 5, 6 percentage points above pre-COVID levels. And I'm wondering kind of the same thing here is when market conditions normalize, do you see that growth then in other categories might drive that lower? And this might not be necessarily negative for the EBIT margin. But is it likely in a more normalized market that you'll see a different gross margin development without necessarily pushing the EBIT margin lower? If you could just elaborate on that, it would be interesting.

I will start with repeating myself and then try to give some more. But as I mentioned, it's margin driven by several factors. Well, one of them is product mix, right, and where demand has been more tilted towards maybe smaller projects with higher margin. But if you compare with who we were like 5 years ago, we have a different offering we have a different assortment. We have also added more companies to the group. We have right Right Price Tiles and others, right? So I would say that comparing to 5 years ago, we have changed our assortment and have an assortment with slightly higher margin. So that is a change towards a couple of years ago. When it comes to more recent development, I think I need to refer to the answer to Benjamin, right? That it's a combination of things that we are really focused on and tried hard, but also market and it's hard to predict the future when it comes to the market side of it.