Beijer Alma AB (publ)

Good morning, everybody, and welcome to our webcast, where we today will present our second quarter 2024, this beautiful summer morning. I'm Henrik Perbeck, and with us is also Johan de Weymark, our CFO. Good morning, everybody. So we will present today the overall performance and the recent developments of the ARMA group. In addition, we will discuss our reporting segments, our two main subsidiaries. These are Les Reforges, which is a full range supplier of standard and customized industrial springs and other wire and flat strip components. Les Reforges is acting globally with majority of sales in Europe and the USA. And it is Beutech, which acts mainly in the Nordics within specialized manufacturing, value adding, industrial trading and automation in profitable niches. And Beutech 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. And a big picture is that the Nordic region came back as our strongest region this quarter. Les Reforges had a mixed demand picture, but came out with organic growth and the order booking side. The Chassis 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 driver of 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 and the Nordics, demand was generally stable. The newly formed business area and 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, Baytech signed an agreement during the quarter to acquire Klimco Norge. It's the well-managed niche player and it strengthens Baytech's growing operations in Norway. And on July 1st, so actually after the end of the quarter, Les Reforges acquired Clifford Springs, a European market. 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 some stability for our group as a whole. The adjusted operating profit was 249 million kroner, which is the margin of 13.2%, 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 Leche Forge. So our spring manufacturer, Leche Forge, is organized into two business areas. These are industry, with mainly customized products to a very diversified customer base globally. The other one is Chassis Springs, and these are standardized replacement springs. So to car part wholesalers, mainly in Europe. For the 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. And 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, where Central Europe, including Alkomex, and Asia was some of the largest. And the market was somewhat weaker. 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 Beatek. Beatek 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 Beatek, 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, where Finland experienced weaker demand. Fluid technology grew by 32%. 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. Beatek's operating result increased to 68 million kronor with a good operating margin of 11%. So I will now hand over to Johan Duvemark, our 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 KFORF organic growth was slightly negative, while Beatek's organic growth was 6%, mainly related to strong performance in the Fluid and Niche Technologies companies. All the bookings increased with 83 million SEK to 1,892 million SEK. Acquisitions and divestments together was 2% positive and the total organic growth was as well 2%. The KFORF had a positive organic growth in all the bookings 2%, as Henrik mentioned, and Beatek 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 we saw on the previous slide, net revenue increased with 66 million SEK. The KFORF's revenue decreased with 47, mainly related to the divestment of the German subsidiary, as we said on the last slide, and also a weak ending of Q2 for Chassis Springs. While revenue in the Nordics was good, Beatek'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 Legefortz and Beatek. In Beatek, the profit increase was in line with top-line growth. This within niche technology and fluid technology. Within Legefortz industry, operating result was, as mentioned, mixed, and the result in Chassis 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 Tollman 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 higher 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 bill above inventory and receivables should normalize during Q3. Net depth 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 had two acquisitions. The two acquisitions mentioned by Henrik earlier have not yet impacted this year's net depth. 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, before concluding, I would like to highlight the two acquisitions we have announced since last time. So on 3rd of June, Beitek 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 Beitek's growing operations in Norway. Klemko has an annual revenue of approximately 60 million NOC with 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. Lesher-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. And this is an attractive product area for Lesher-Posch to develop further. The company has an annual revenue of approximately three million pounds with good profitability. So with that, we also welcome John Clifford and his team now as members to Lesher-Posch 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 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, I think is a fairly weak economy around us. For Lesher-Posch mixed demand with organic growth in the order bookings, growth in the Nordics, UK and US industrial, lower volumes in US medical as well as central Europe and Asia. And good high season for Chassis Springs, slow 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 six 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 Lesher-Posch. 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 in Lesher-Posch, earnings were slightly down. How do you, in what buckets do you explain that 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, small difference in margin.

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

I would say they both have some impact.

Thanks. 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. And we wish you a great day and a good summer. Bye bye everybody.