Beijer Alma AB (publ)

Good morning, everybody, and welcome to our webcast, where we today will present our second quarter of 2024, this beautiful summer morning. I am Henrik Perbeck, and with us is also Johan de Vermaak, our CFO. Good morning, everybody. So we will present today the overall performance and the recent developments of Beirama Group, In addition, we will discuss our reporting segments, our two main subsidiaries. These are Lecheforge, which is a full range supplier of standard and customized industrial springs and other wire and flat strip components. Lecheforge is acting globally with majority of sales in Europe and the USA. And it is Beotech. which acts mainly in the Nordics within specialized manufacturing, value-adding, industrial trading, and automation in profitable niches. And BayTech is also a platform for acquisitions into new industrial niches. So today, we'll present what I think is a solid report. Perhaps not super exciting, but in today's economy, words like solid and stable can be pretty good. We saw a second quarter with some organic growth. And overall, the group grew both organically and thanks to acquisitions. Of course, as we have seen in the last year, the demand was still quite varied within our diversified customer base. A big picture is that the Nordic region came back as our strongest region this quarter. The leisure force had a mixed demand picture but came out with the organic growth and the order booking side. The Chelsea spring business area has had a good year and the high season but it slowed down towards the end of the quarter or at least versus the strong comps from last year. But in industrial springs, the Nordics came back, as I said, as the strongest region and private growth, followed by UK. In the US, industrial segments were good, but deliveries to medical projects were somewhat lower. Central Europe and Asia were more disappointing with lower demand from our customers. For Baytech in the Nordics, demand was generally stable. And the newly formed business area, niche technologies, grew together with fluid technology. And just like last quarter, the Norwegian market stood out as the strongest, whereas Finland was a bit weaker. We have announced two new acquisitions since last call. Firstly, Beotech signed an agreement during the quarter to acquire Tlemco Norge. It's a well-managed niche player that strengthens Beotech's growing operations in Norway. And on July 1st, so actually after the end of the quarter, Lesapos acquired Clifford Springs, a UK energizer spring manufacturer. And this strengthens our focus on this attractive product area. And I will come back to these companies later in the presentation. And overall, we continue to feel that the activity level in the M&A market is good, which is interesting and creates opportunities to find new, attractive companies that could strengthen our group going forward. At the same time, of course, Economic uncertainty, including still high interest rates, leads us to a balancing act between investing for growth and the savings. Now, continuing with an overview of the group's financial performance. So looking at the performance, we see that order bookings grew by 5%, of which 2% was organic. Net revenues grew by 4%, of which 2% was organic. As I said up front, these are not the most exciting variations on group level, but it shows on stability for our group as a whole. The adjusted operating profit was 249 million kroner, which is a margin of 13.2%, a similar level as in Q1. And while I now will move over to the performance of our reporting segments, our subsidiaries, I can also point out, looking at the pie chart, that BayTech is now 33% of the group. And a year ago, this was 28%. So there's some shift there.

Starting with Les Reforges.

So our spring manufacturer, Lesch & Fors, is organized into two business areas. These are industry, but mainly customized products to a very diversified customer base globally. The other one is chassis springs, and these are standardized replacement springs sold to car part wholesalers, mainly in Europe. Order bookings for Leche Forge as a whole decreased by 1%, but grew 2% organically. And as the currency impact was neutral in the quarter, we have here actually for the first time a negative minus three impact from the acquisition and divestments made during the year. The net revenue also decreased overall by 4%. Organically, it was flat versus last year. Starting with the industry segment, the largest business area, growth was minus 3%, but actually positive organically. As mentioned, growth came from the Nordics and UK, whereas Central Europe, including Alcomex and Asia, was somewhat weaker. The US market was more of a mix. The industrial segments in the US grew, in fact, whereas deliveries within medical were lower than the high levels of last year. For Chassis Springs, the strong demand from first quarter continued in the beginning of the second quarter, but towards the end of the quarter, the high season slowed down. And all in all, we think it's been a good season, but in the second quarter, comps were high and revenues came in 6% below last year. Adjusted operating profit increased to 193 million kronor with an EBIT operating margin for the quarter of 15.2%.

Moving over to Bayer Tech.

Bayer Tech is, since the beginning of this year, operating in three business areas, fluid technology and industrial products. are both acting within industrial trading and manufacturing. The third business area 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 general industrial demand. So overall for Baytech, the order bookings increased in the quarter by 19%, of which 4% organically. The net revenues grew by 23%, of which 6% was organic. Within the business area industrial products, demand was overall stable. Still, demand varied across geographies. Norway is very strong, followed by Denmark, whereas Finland experienced weaker demand. Fluid technology grew by 32%. A part of this is thanks to the new acquisition of AVS in March this year, but also organic growth in Norway and Sweden. Niche technologies also grew significantly here by 69%, and there is still an acquisition effect from last Q2, but also very healthy organic growth that we have seen over the last 12 months. Baytech's operating result increased to 68 million kronor with a good operating margin of 11%. So I will now hand over to Johan Duvenmark or CFO for some more comments on the financials.

Thank you, Henrik. Let's look further into the financials. As mentioned, the net revenue is up 66 million SEK compared to last year. Acquisitions together with divestments contributed with 38 million SEK and was equal to an increase of 2%. The divestment was the German company Stump, which was sold in December 2023. The organic growth was 28 million SEK, also corresponding to 2%. The Schofors organic growth was slightly negative, while the Beitex organic growth was 6%, mainly related to strong performance in the fluid and niche technologies companies. Order bookings increased with 83 million SEK to 1,892 million SEK. Acquisitions and investments together was 2% positive, and the total organic growth was as well 2%. Leif & Fors had a positive organic growth in order bookings, 2% as Hendrik mentioned, and Baytech almost 4%. Thank you. Let's continue then with a short look on the segments and how they contribute to revenue and operating result. As you saw in the previous slide, net revenue increased with 66 million SEK. Ökafors revenue decreased with 47, mainly related to the investment of the German subsidiary, as we said on the last slide, and also a weak ending of Q2 for Krassi Springs. While revenue in the Nordic was good, Bayetech's revenue increased both organically and from acquisitions, driven by strong performance in the last year's acquisitions as well as recent acquisitions. The adjusted operating profit was 249 million SEK. This was an increase both for Leisure Force and Bayetech. In Bayetech, the profit increase was in line with top line growth. This within niche technology and fluid technology. Within Leisure Force industry, operating result was as mentioned, mixed, and the resulting crusty springs was affected by lower volumes towards the end of the quarter. As you perhaps remember, in 2023, we had some one-off costs. The one that most affects the comparison between 2023 and 2024 was the market valuation of inventory, so-called step-up, related to the acquisition of Tolman Springs. This was 16 million SEK in 2023. In the quarter, we had one item affecting comparability, which was the finalization of the stamp divestment affecting EBIT with minus 6 million SEK. This makes up the difference between adjusted and unadjusted EBIT. And now to some of the key financial ratios. Just to mention a few, adjusted EBITDA is up 33 million compared to last year. the difference to adjusted EBIT being high depreciation following a number of acquisitions. Cash flows of the capital expenditure was 167 million SEK, lower than last year, but in last year we saw some extra release of working capital. This year follows a normal system pattern where buildup of inventory and receivables should normalize during Q3. Net debt is lower than last year, mostly related to the operating cash flow since then, and last year had two acquisitions, last year's second quarter two years acquisitions. The two acquisitions mentioned by Henrik earlier have not yet impacted this year's net debt. The financial net improved compared to last year. Some of the improvement is related to a more efficient use of cash. Thank you and back to you Henrik for a continued look on acquisitions.

Thank you, Johan. Yes, and before concluding, I would like to highlight the two acquisitions we have announced since last time. So on 3rd of June, Beitec signed an agreement to acquire Klemko Norge AS, which is a Norwegian supplier and retailer of corrosion protection and surface treatment to customers in the energy sector and the general industry, primarily in Norway. The company is a well-managed niche player and it strengthens Biotech's growing operations in Norway. Tlemco has an annual revenue of approximately 60 million NOK with a favorable profitability. Closing of the transaction is expected later in Q3. And recently on July 1st, so please note this is actually after the end of the second quarter, Lesch & Posch acquired the UK spring manufacturer Clifford Springs. The company has a strong offering in energizer springs to the seal and valve industry in the UK, Europe and US. This is an attractive product area for Lesch & Posch to develop further. The company has an annual revenue of approximately £3 million with good profitability. So with that, we also welcome John Clifford and his team now as members to Leche Forge and the Bayer Alma Group. So with these two latest announced acquisitions, we continue our strategy to further grow by acquisitions. And as I said, we have seen during the spring good activity on the M&A market, and we continue discussions with several good companies out there. And please note also this slide that I've shown us several times. It's an illustration of the overall impact from acquisition strategy, showing the run rate revenue and number of acquired companies. It's not showing the exact financial reported revenues. Good. So then just to conclude briefly, Our second quarter. Some organic growth in the overall, which I think is a fairly weak economy around us. For leisure force, mixed demand with organic growth in the order bookings, growth in the Nordics, UK, and in US industrial. Lower volumes in US medical, as well as Central Europe and Asia. And good high season for Chassis Springs, slowed down in the end of the second quarter. And for Baytech, growth driven by fluid and niche technologies, both organically and by acquisitions. And as just mentioned, two new acquisitions were announced. So with that, we will open up for 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 6 on your telephone keypad. The next question comes from Johan Dahl from Danske Bank. Please go ahead.

Yes, good morning, everyone. Just a question on margins or profitability in Leche Forge. I was just curious to hear your view on the sort of year-on-year progression there. I guess if you adjust for the one of last year and earnings were slightly down. In what buckets do you explain that relatively small decline but still a decline? Is it just chassis mix or just curious to hear your view there?

Yes, I think your question and your thinking is relevant. It is perhaps in the mix section. We have mentioned that compared to the quarter one year ago, chassis as you see is a couple of percent down. We also have a little bit of mix in terms of the customer segments, for example with medical. So I think, but it's fairly close to that As you said, a small difference in margin.

Would you argue that medical is a bigger impact compared to chassis?

I would say they both have some impact.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you everybody for joining us this summer morning. We wish you a great day and a good summer. Bye-bye, everybody.