Beijer Alma AB (publ)

Good morning everybody and welcome to our webcast where we will today present our first quarter 2024. My name is Henrik Perbic and with me I have our CFO Johan Luvenmark. Good morning. Today we will present the overall performance of our group. In addition we will also discuss our reporting segments, our two main subsidiaries. These are Leche Force which is a full range supplier of standard and customized industrial springs and other wire and flat strip components. Le Chaux-Poche is acting globally with the majority of sales in Europe and the US. And then the other, BayerTech, acts mainly in the Nordics within specialized manufacturing, value-adding industrial trading and automation in profitable niches. And BayerTech is also a platform for acquisitions into new industrial niches. So starting off with some comments from my side. Today I will present to you what I think is a fairly good report, given the world around us and where we are in the business cycle. We saw our first quarter with strong development in Chassis Springs and several other niches. Overall, for the group, we had some growth, both organically and thanks to acquisitions. Of course, demand was still quite varied within our very diversified customer base. The automotive aftermarket, medical technology, and other niches posted good growth, whereas broad industrial segments were softer. In Leche Forge, we saw a mixed demand between customer segments and geographies. As mentioned, Chassis Springs business area posted good growth and is now in high season. This was driven by strong end customer demand, normalized inventory levels, and also our high delivery speed and service level. Within industrial springs, the Nordics, UK and US, and also Asia, contributed some organic growth. Not a lot, but still. In Central Europe, however, demand was weaker in relation to general industrial and construction activity. But perhaps most importantly for Lesch & Foch, we could see the sequential improvement of margins compared with previous quarters, This is thanks to actions taken, but also favorable mix effects. For BayTech in the Nordics, demand was generally stable. As you will have seen in the report, BayTech is now presenting a new business area called niche technologies. And this is actually the area that is delivering high growth in this quarter, thanks to a combination of acquisitions and organic growth. Fluid technology and industrial products experienced a softer market. Norwegian markets stood out more positively and contributed growth, whereas, for example, Finland was somewhat weaker, partly due to the indirect effects of the strikes. In the quarter, we also completed one new acquisition, AVS Power in Finland. AVS is a leading wholesaler and manufacturer of pneumatics, industrial valves, and compressors, And we think the company fits very well into BayTech fluid technology, also with potential for cooperation within the Nordics. And generally, the activity level within the M&A is good, and we can see several opportunities in our pipeline. Having said that, business cycle and the operating environment is still uncertain, and we will balance investments for growth with savings. So looking into our financial performance of the group. Looking at the performance, we can see that order bookings grew by 4%, but was down 4% organically. This is not so dramatic, and I will comment on this in more detail when speaking about BayTech. The net revenues grew by 8%. 7% of which 3% was organic, which I think better mirrors the demand we are experiencing in the market. And also worth pointing out, which cannot be seen on this graph actually, but we have reached 7 billion in net revenues over the last 12 months. And that's a kind of milestone. During the quarter, Demand has been fairly stable and healthy since the start of the year, and certainly better than the end of Q4. The comparables for Q1 last year are fairly strong, and not the least since March this year had three trading days less than last year due to early Easter. And of course, this should come back in April, but still. So adjusted operating profit was 242 million kronor, with a margin of 13.3%. So moving on to the performance of the reporting segments, starting with Lesch & Foch, our spring manufacturers. Lesch & Foch is organized into two business areas. These are industry, with mainly Customized products to a very diversified customer base globally. And chassis springs that are standardized replacement springs sold to car part wholesalers, mainly in Europe. And you can see the share of revenues down on the right, where chassis springs a little bit more than a fifth this quarter. Order bookings for Lechefors, 6% increase, of which 3% is organically. And net revenue also grew by 6%, where 5% was organically, with Chassis Springs being the key growth driver, of course. But starting with industry, the largest business area, growth was 3% and mainly organic, since the net of acquisitions and divestments this quarter were neutral. As mentioned, volumes grew somewhat in the Nordics, UK, US, and Asia. In Central Europe, including Alcomex, the operating environment remained tougher, and demand was affected by lower industrial and construction activities. For Chelsea Springs, net revenues increased by 19% thanks to good demand during the first quarter, and we have now entered the high season. Inventory levels at wholesalers were estimated to be normalized in the beginning of the quarter, and consumer demand drove volumes in actually all key markets. The adjusted operating profit for Leche Foch increased to 200 million with an EBIT operating margin in the quarter of 15.8%. And as you can see top right, the operating margin improved sequentially. versus preceding quarters, almost reaching the level of last Q1. And this is an improvement, of course, and thanks to product mix effect, but also several actions taken. And for example, the divestment in December of a German subsidiary, which had a slightly positive effect. Moving over to BayTech. So Baytech is, since the beginning of this year, operating in three business areas, fluid technology and industrial products, you know, both acting within industrial trading and manufacturing. The third business area, a new one, is called niche technologies, which includes companies with strong market positions in various industrial niches, such as building automation, waste management, and specialized machinery. Typically, these companies have other market drivers than a more general industrial demand. For Beotech overall, order bookings decreased in the quarter by 1%, of which minus 21% organically. Negative organic growth in the order bookings does not really mirror the demand we're seeing in the market and order bookings, in fact, are higher than net revenues in the quarter. Instead, this minus 21% is related to very high comps last year. And some of you might remember that when we, a year ago, showed 25% organic growth, it was actually attributed to certain specific projects. So trading-wise, it is As I said, book-to-bill is positive. So net revenue grew by 9%, of which 2% was organic. And here, of course, we can see some negative calendar effects towards the end of the quarter in March. Now, within business area, industrial products and fluid technology, demand was overall stable, but on the weaker side with slightly declining volumes. mentioned norway was stood out as stronger whereas finland was weaker and we did not actually have any direct effects of these strikes but several of our customers had um so industrial products decreased net revenues by six percent versus last year and fluid technology grew by by three percent in the new business area niche technologies growth came both from acquisitions um which now is only Finamix in this quarter, but also organic growth. So in total growth of 51%. Batex operating result decreased to 49 million kronor. But here I want to point out that it did include some acquisitions cost late in the quarter, including Finnish transaction tax. So the reported 9% operating margin is not such a trend down, the underlying margin would be well above 10%, adjusting for that. Good. Now I will hand over to Johan for some more comments on the financials.

Thank you, Henrik. As mentioned, net revenue is up 119.6 million compared to last year. The largest part of this is due to acquisitions together with divestments, which contributed with 60 million SEK, and it's equal to an increase of 4%, while organic growth was 3%. Leche Forge had an organic growth of 5%, mainly affected by strong sales in the Chasse Springs business area, and Beitech had a negative organic growth of minus 2%. As Henrik mentioned, this was an effect from general demand, calendar effect, and as well as strikes in Finland. It was also a small positive effect from currency in the quarter. Order bookings increased with 68 million SEK to 1,876 million SEK. Acquisitions were positive 7%, while the organic growth was minus 4%. And as Henrik mentioned, the main reason for the effect that order bookings were negative was that there was very strong comparables in BayTech for last year, but orders related to projects were delayed from the previous year. Leche Force had a positive organic growth in order bookings, plus 3%. Let's continue with a short look on the segments and how they contribute to revenue and operating results. As we saw in the previous slide, net revenue increased with 119 million to 1,812 million SEK. We had an increase from all three factors, organic growth, net effect from acquisitions and divestments, and as well currency. While the biggest factor for the growth in Läxjöfors was organic, pay-tax growth was related to acquisitions. Adjusted operating profit was 242 million in Q1. Increase compared last year was, among other things, related to Kassel Springs, which also is in the high season, but somewhat more challenging environment in Central Europe contributed less positive. Baytech's operating result was affected by acquisition cost of minus 7%. Adjusted for this, Baytech was on par with last year. Underlaying, we see a strong development for the companies within niche technology and parts of fluid technology, but a softer demand for some of the companies within industrial products. These companies also experienced a stronger calendar effect compared with last year. We did as well reverse an additional 2 million from the Russia closed down provision that we made in 2022, which is the difference between adjusted and unadjusted EBIT. Now to some of the key financial ratios. Adjusted EBITDA is up 4 million compared to last year. The difference to adjusted EBIT being higher depreciation following a number of acquisitions. Cash flow after capital expenditure was minus 38 million SEK, almost in line with last year. The negative cash flow is mainly related to seasonal effects, especially within chassis springs. Overall, we are satisfied with the development of the working capital, even though the seasonality effect in Q1 ties a little more capital. Net debt is higher than last year, and this is related to acquisitions, and most recently, the acquisition of RBS Power in Finland. The financial net has improved compared to last year. A small part of the improvement is related to more efficient use of cash, but also there are some positive FX effects in the quarter. Thank you. And back to Henrik for a continued look on acquisitions and also sustainability.

Yes. So just comments on our acquisition strategy. We continue to... for the growth by acquisitions. During the spring, we have seen good activity on the M&A market, and we have discussions with several good companies in our pipeline. Last year, the acquired companies added over half a billion SEK to our run rate revenue with good profitability. And now in 2024, one new company has been added to contribute profitable growth. And here, I would also like to take the opportunity to welcome Matti Velipeke and the whole AVS team to our group. Now, on a bit different note, during this webcast, I would like to mention some of the highlights from our sustainability report, which was published recently, together with our annual report. We set our sustainability targets five years ago and have now reached the end of that goal period. I will not go through everything here, but overall, I think we have developed very well as a group in many of these areas. In particular, I want to point out in terms of climate impact, as you can see in the middle of this busy slide, we have reduced our carbon intensity by 55% during these years. well above the target of 25%. This is driven by a range of activities such as, and most importantly, reduced energy consumption of 36%, but also a larger share of renewable energy, solar panels, and transition to bio-based fuel. So good progress during these years. So now we move over to a new target period, and we're now setting ambitious targets for the future and the year 2030. These are now aligned with that we have set so-called science-based targets for reducing our climate impact, and 2030 is what is called our near-term target. Here, it is not only our own impact that matters, but the climate impact from the whole value chain. Significant improvements can only be achieved through close partnership with our customers and suppliers. And of course, at the same time, we will continue to focus and reduce our own footprint. Also in other sustainability areas, we must work closer within our value chain. One example is within business ethics, where we have started steps with our business partner, Code of Conduct. Over the time, we'll develop a closer due diligence process of suppliers, also in conjunction with the development of the legislation in this field. Further, we must use resources such as energy and materials more efficiently. For this, we will develop circular solutions for waste, but perhaps even more importantly, to bring sustainability into our innovation and design process. Then we can really add value to our customers and their strive to reduce impact from their final products. So a new journey ahead. So now just summarizing what we said regarding Q1. Growth this quarter came in particular from Chassis Springs and industrial niches, but demand was varied and the broader industrial segments were softer. In Leche Forge, the strong performance in Chassis Springs, Nordic, UK, US, and Asia contribute some organic growth, whereas weaker demand in Central Europe and Alcomex in relation to general industrial and construction activity. And also for Leche Forge, sequentially improved margins and the recovery from the end of last year in that sense. For Baytech, the new business area niche technologies contribute growth, Industrial trading was particularly strong in Norway, a little bit weaker in Finland, and underlying margins remained stable. And finally, our new acquisition of AVS Power in Finland, a good fit into Baytech fluid technology. So with that, we will open up for some questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Carl Norwin from SEB. Please go ahead.

Hello and good morning, Henrik and Johan. A couple of questions from my side. Maybe if we start off with Lechefors and the chassis springs. I mean, quite a strong quarter. I think the best Q1 ever. I didn't really catch what you said there on the normalized inventory levels. Did you say that they were normalized in the beginning of the quarter or at the end of the quarter? So just some commentary on that would be helpful. Thank you.

Good morning, Carl. That's a good question. So I did say, in fact, say it was normalized in the beginning of the quarter, meaning that First of all, a year ago, we had some strong effects on inventory reduction still from the supply chain issues. But then in the high season in general, there is a natural buildup of inventory with our wholesalers. of course we have good sales now when we're entering the high season and the part of that is of course also the fact that they have increased demand and they are building up stock for the season so you could also say that it has been normalized levels in the quarter no nothing particular there it's more the end consumer demand and that is driving and also as I wanted to point out you know the fact that we have a service model that is very strong in the market, so we can respond quickly. And we do, in fact, build up stock. As Johan said also, we tie a little bit more capital in the first quarter in order to meet the spring demand. So it's also part of our business model to really be able to respond to this. So yeah, a very good quarter indeed.

Yeah, good. And on Beatech then, a little bit weaker margins there than we're used to in the last quarters there. So can you help us understand if it's more blip on the curve driven by some calendar effects and maybe impact on strikes in Finland or if there is some, let's say, company specific issues in some of the subsidiaries?

Well, first of all, I want to once again just reiterate the fact that we did get this M&A cost late in the quarter, meaning that we had very little contribution from that acquisition in terms of profitability, but the full cost of that transaction. you know, say for that margin level is around 10.3%, which I think is absolutely fine for Baytech. We do see, as mentioned, you know, a little bit softer markets in industrial trading, and you could see the industrial products is down by 6%. And of course, that matters as well. So I think nothing that stands out as such. But, you know, we are still in a in a market which is fairly flat or... Yeah, that's clear. And as you said, the calendar days in the end of the quarter was part of the... Yeah, I guess that can impact profitability a little bit or one extra work, et cetera.

But that's good. And then just a question on the M&A as well. I mean, in the report you said that they have a good pipeline and are in discussion with several targets, but they also mentioned You know, there's high uncertainty, high interest rates. I mean, you want to hear your view on your balance sheet and ability to take on more acquisitions in the near term and what to expect. I mean, you mentioned 0.5 billion in M&A during 2023. Is that also possible for 2024, I think?

And yes, so first of all, on the market, as I mentioned, we have just, you know, it's, it's been very interesting that there's a lot of activity. Of course, you know, when looking into companies in these, what should we say these times, you know, you need to evaluate, you know, what is the performance of the company, and you know, there's maybe less growth. So it's, it's a matter of meeting, you know, buyer and seller in a good way. But But that's, you know, there's plenty of interesting opportunities. And I think Yes, I think we do have capacity for a similar amount of acquisitions this year with our debt ratio. So that is not holding us back, but we will continue to be selecting very good companies to work with because we're in it for a long time, forever, hopefully. So we really want to make sure we acquire the right companies. We should be able to, in terms of financial capability, we should be able to similar numbers.

Yeah. Good. That's all for me. Thank you.

Thank you, Carl. The next question comes from Johan Dahl from Danske Bank. Please go ahead.

Yes, good morning, everyone. Can you hear me? Yeah.

Good morning, Jens.

Good morning, Johan. Just on the Leche Forge order intake, you reported up 3%, I think, organically in the quarter. Obviously, we have this issue with the chassis being high season and good end-user demand there. But on the industrial side, on order intake, are you seeing any sort of trend shifts there? You talk about UK being a bit better. I'm just trying to sort of pin down whether this market is... could be close to bottom or if you're seeing any cross selling impact here?

Good question. If we start on the market side, I mean, the numbers are not, let's say, big in any direction as you know, 3% up and we have an effect, of course, there also from Chassis Springs. So I think last quarter we reported that Nordic was a little bit softer. So that is more normal now, you know, perhaps a percentage point or something positive. I wouldn't want to speak about a big trend shift, but it's certainly not worse than Q4. But it's a fairly stable and fairly low numbers. But at least they are positive in a way in these regions that you mentioned. feel that Europe is softer and a bit tougher. And this, so this balance between the regions and Europe and Alcomex is a little bit weaker, whereas the others somewhat positive side. So it's really hard to say. In terms of cross selling effects, these are, I think, you know, it's a constant work ticking in. We do have some some more specific segments where it's clearer, like we have mentioned before, the medical technology area, where we cooperate very well across the companies and even the continents. But it's hard to break out that in this quarter with such low numbers, but it's positive at least. And I think that's what we should bring with us.

all right and on on uh you talk about both growth and savings in your sort of management agenda uh what new savings initiatives uh are on the um on the on the table right now i mean you did stump and schuler last year have you identified any new sort of avenues here uh so you know there

Several things going on in a big group, and we're working in many ways decentralized. So I would say it's a general sort of cost consciousness as the basis for everything. We do have certain initiatives where we really try to get the companies together, for example, in procurement, where these are times when you really need to work together to find the best deal. In terms of, I mean, I think what we did with Stumpf was quite, you know, it's not very often we do structural moves like that. But definitely, you know, we are looking for opportunities also related to footprint and where to produce the product in the best way. But it's a little bit of just, you know, hard work done in the subsidiaries and being cost conscious and right now. But then, as I said, it is a balance because we do have some very interesting areas that we want to invest in and make sure we have salespeople. So it's really the balance that's the trickier at the same time.

All right. Just finally, the minus eight in minority interest, which subsidiary is that primarily? Just to remind us there. Thanks. That's it.

Which one?

I don't know if we, but it could be, there are some in Bay Tech in the satellite business, for example.

Yeah, but we have, if you go through all the press releases, you will see there is a minority stake in Alchemex. There is a minority stake in some of the Bay Tech companies, like the satellite business, like Finlamex in Finland, et cetera. So there are a few companies with, like a handful of companies with minority interest.

That was just fairly big. We can take it offline later. Thank you so much.

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

So thank you everybody for joining our webcast this morning and I wish you all a great day. Thank you very much.