Beijer Alma AB (publ)

Good morning everybody and welcome to our webcast where we today present third quarter 2024. I am Henrik Perbeck and with me I have our CFO Johan Duvenmark. Good morning everybody. So today we'll present the overall performance and the recent developments of our group, AirAlma 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. Letroporsche is acting globally with majority of sales in Europe and the USA. And it is Baytech, 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 let us move on. So starting with some comments from my side, today we will present what I think is a solid and decent report in today's economy. Well, we can also report some organic growth in the quarter overall on the group level. And what we see is the industrial economy continued to slow down after the summer and demand was still varied within our very diversified customer base and in the different geographical regions. So the big picture geographically is that Nordics was our strongest region, but also supported by growth in Asia and UK. Germany stands out even more as the weakest market, also affecting, of course, the nearby Central European region. So for our two companies, if we start with Leche Foch, Leche Foch had a mixed demand picture and a flat development of order bookings organically. The Chassis Springs business area slowed down this quarter compared to the strong start of the year and has gone into low season now. Also compared to the strong Comparables from last year revenues were lower, particularly in key markets like UK and Germany. On industry or industrial springs, Nordics was indeed the key driver of some growth, followed by Asia and UK. In the US, a little bit mixed picture, where some industrial segments were good, delivering growth. deliveries to the medical projects were more volatile and on the lower um and as mentioned before germany and central europe's were the weaker markets for bay tech um acting mainly in the nordics uh demand was overall stable um but but also varied um fluid technology grew both organically and thanks to the to the abs acquisition in q2 um The newly formed business area niche technologies stood up well by meeting to the very tough comparables from last year. In industrial products, we see a little bit different dynamics. The Norwegian market was the strongest, whereas particularly Finland was weaker and also followed by Sweden and Denmark. Coming into acquisitions, in our last call, the two acquisitions announced were closed during the third quarter. Le Chapoche acquired Clifford Springs and also Baytech acquired Clemco. So these are two good companies that will support our profitable growth journey ahead. We have also announced one new deal since the last call, and that is the Lechefort acquisition of La Croix, which was further closed on the 1st of October, so after the end of this reported quarter. And I will come back to talk a little bit about La Croix later in the presentation. Overall, we continue to feel that the activity level in the M&A market is decent, which is interesting for us and creates opportunities to find new attractive companies that could strengthen the group going forward. But at the same time, of course, with this economic uncertainty, still including high interest rates, leads us to conducting a balancing act between investing for growth and savings. So, continue with an overview of the group's financial performance. Looking at the performance, we can see that order bookings declined by 1%, whereas growth was organically 1%. Net revenues grew only slightly, and about 1% organic growth. And these are, of course, modest growth numbers, but at least show some stability for our group as a whole. Um, operating adjusted operating profit was, uh, 212 million, million kroner, uh, with a margin of 12.6%. It's just down 0.8 percentage points versus last year. Um, I will now move on to the performance of the reporting segments, our subsidiaries, uh, and the Bay tech. Working with. Leche Forge, our spring manufacturer, is organized into two main business areas. These are industry, with mainly customized products to a very diversified customer base globally, which as you can see here is the main part. Chassis springs are standardized replacement springs sold to car part wholesalers, mainly in Europe. Order bookings for Leche Forge decreased by 5%. but with a flat organic development. And because we have a currency headwind of 2% and also a negative impact from the net of divestments and acquisitions last year. The net revenue also decreased overall here by 3% and organically up 1%. So starting with the industry, the largest business area, growth was minus two, but actually positive organic growth. And now, as mentioned, growth mainly from the Nordics, Asia and UK, whereas Central Europe, and in particular Germany, was weaker. And speaking of Central Europe, this also goes for Alcomex European operations. The U.S. market, as mentioned, was a bit of a mix. Some industrial segments grew, in fact, where deliveries within medical were somewhat lower than high levels of last year. And in addition, Alcomex launched its door springs in the U.S. over the last several months, and it had a positive impact on the growth in the quarter. However, with one of costs related to the launch and diluting the margin in this quarter. But it's a good start for that growth. For Chester Springs, the strong demand from beginning of the year has slowed down. Net revenues decreased by 8% facing tough comps from last year. In particular, some key markets, such as UK and Germany, slowed down. and also driven by wholesale customers actively reducing stock levels for the low season. Adjusted operating profits decreased 262 million with an EBIT operating margin adjusted of 14%. So I also want to mention in terms of adjustments that in the quarter, there is a significant adjustment on the operating profits. and we have released the provision for the earn out for John Evansson acquisition and affecting the operation profit with 187 million kronor and this was done since the specific targets in the agreement are not expected to be met despite an overall satisfactory performance good moving over to Baytech 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 we call a niche technologies, which includes companies with strong market positions in various industrial niches, such as building automation, waste management, specialized replacement parts, components, and machinery. And typically these companies have other market drivers than general industrial demand. So order bookings for Baytech increased in the quarter by 9%, of which 1% was organically. And the net revenues grew by 10% with 2% organic growth. Within the business area industrial products, demand was overall, I would say, a bit weaker and revenues decreased. Still, the demand varied across the geographies. Norway continued strongly, whereas in particular Finland and also Sweden and Denmark had weaker demand. Fluid technology stands out this quarter with a growth of 35%. Part of this is, of course, thanks to the acquisition of AVS in March, but also organic growth in Norway and Sweden. Niche technologies had tough comparables this quarter and with no acquisition effects anymore, managed to keep up with the performance of Q3 last year, which we're happy about. Overall, BayerTech's operating result increased to 58 million kronor with a good operating margin of over 11%. I will now hand over to Johan, our CFO, for some more comments on the financials.

Thank you, Henrik. Let's take a further look into the financials. As mentioned, net revenue is relatively unchanged compared to last year, up 7 million SEK. Acquisitions together with divestments contributed with 10 million SEK. The divestment was the German company Stump, which was sold in December 2023. The organic growth was 24 million SEK, corresponding to a little over 1%, and both Lecheforce and Baytech had a positive organic growth. The revenue was also affected by currency effects, minus 27 million SEK. Order bookings decreased with 60 million to 1,650 million SEK. Acquisitions and divestments together with organic growth was slightly positive and combined almost 1% in growth. Bayer Tech's organic growth was 1% and the growth from acquisitions 9%, while Lechefort's order bookings decreased related mainly to the divestment last year. Let's continue with a short look on the segments and how they contribute to the revenue and operating result. As we saw on the previous slide, net revenue increased with 7 million to 1,683 million SEK. Leche Force revenue decreased with 39 million SEK, related to lower sales in the Chassé Springs business area, and as well as divestment last year. While revenue in the Nordics, Asia and UK was good. VETEX revenue increased both organically and from acquisitions, mostly driven by the acquisition. Adjusted operating profit was 212 million in Q3 this year. In last year's operating profit, we'd had an item of other income related to energy subsidization in Sweden, so-called elstöd, of 7 million SEK. In biotech, fluid technology was the main reason for the profit increase. Within Läker Fors industry, operating result was, as mentioned, positively affected by markets at the Nordic and UK. And the development in chassis paints was affected by lower volumes, but also strong comparables. And now to some of the key financial ratios. Adjusted EBITDA was 230 million SEK, 50 million SEK lower compared to last year. The difference to adjusted EBIT being high depreciation following a number of acquisitions. Operating profit was affected by the reversal of the provision for Jon Evans' son's earnout amounting to 187 million SEK, and this is treated as an item affecting comparability. Cash flow for operating activities was 212 million, lower than last year, and last year's interest and taxes paid was lower in the quarter, but the effect this year will even out during the rest for the year. Release of working capital was a little bit lower than last year, but still it follows a normal seasonal pattern. Net debt was as well in line with last year, and that was also true for the financial net. This quarter we introduced net debt EBITDA as a financial KPI. Net debt is used without the IFRS 16 leasing and is the same as in this picture. With a debt leverage of 1.8, we have a strong financial position to support our growth strategy. Thank you. And back to Henrik for some look on the acquisitions.

Thank you, Johan. Yes, before concluding, I would like to highlight the one acquisition we announced since last time. In late July, Lecheforce signed an agreement to acquire La Croix, It's a French industrial spring manufacturer with high technology specialization. The company focuses primarily on small to medium sized batches for a broad customer base. Customers are mainly in hydraulics and general industry, but also very interesting segments such as aerospace and medical. The acquisition provides a platform on a key European market with further potential for cross sales of the group's broad product portfolio. The acquisition was completed after the end of the quarter, now on 1st of October, and I want to take this opportunity to a warm welcome to MD Johan Dettel and his team in Orléans, and now members of Lecheforge and the Bayer Alma Group. Looking at These last new companies within our group, we can see that we continue our strategy to further grow by acquisitions. And as mentioned, we also continue to see decent activity on the M&A market, where we have discussions with several good companies in our pipeline for the future. And please note on this slide, this is just an illustration of the overall impact from our acquisition strategy, showing the run rate revenue at the time of acquisition and number of acquired companies. So four this year with a revenue of 325 million kronor. It's not the slide showing the reported revenues impact this year. Good. So now just a short summary. of our third quarter. Key message, some organic growth in a weakened economy. And for Lescheporsk, mixed demand with flat organic growth in order bookings. Growth, Nordics, Asia, UK, and US industrial. And lower volumes, mainly in Germany and Central Europe. And the Chelsea Springs slowed down in the third quarter compared to the strong start of the year. And for Baytech, growth was driven mainly by fluid technology, both organically and by acquisition. And as I just recently spoke about, the one new acquisition, Lacroix Spring Company in France going into Lechefort. So with that, we conclude on the presentation and we open up for Q&A.

If you wish to ask a question, please dial £5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial £6 on your telephone keypad. As a reminder, if you wish to ask a question, please dial £5 on your telephone keypad. The next question comes from Carl Noren from SEB. Please go ahead.

Yes, hi there, Henrik and Johan. I got into the call a little bit late, so I didn't catch everything. But if we start off with a question on Lesjöfors, I'm just wondering a bit if it's possible to say anything regarding the profit development if you split up, let's say, the industrial segments versus the chassis springs a little bit. I guess the industrial segment of that. better performance year-over-year in terms of profits than the chassis. Is that correct?

Good morning, Karl. Yes, regarding the profit development or the margin or how you would like to see it in Läschefors. We have mentioned during our call today in our report a couple of areas having an impact. And firstly, it is indeed as you, it's the chassis slow down. Number one, we have also mentioned, Johan also mentioned the more of a comparable effect with this, the energy support last year. And also, as I mentioned, we had this, actually the positive launch of the Dwarf Springs in the US where, for Alcomex, where we had some one-off costs there. But then of course also, as we point out several times regarding the European and in particular German economies, it's weaker. So those are some of the key impacts in what you could call a bridge between. But yes, definitely.

And yes, on the weak demand in Germany and Central Europe, I guess it's nothing specific for you really, but... I'm just wondering if the demand deteriorated, you would say, during the quarter. And do you see Q4 being sequentially worse, let's say, than Q3? Or what are you seeing in terms of demand there?

Well, I would say that we heard a lot of comments in the spring that towards the autumn things will improve. And I think what I said is that we actually saw after the summer still weak performance. I would not want to go out and speculate in when we can see an upturn again. But it's just a matter that

We don't see... You see that's quite stable now or during the quarter, you would say. It was not likely a significant drop in the end of the quarter or so. That's good. And then just one question here on niche technologies, which saw a little bit slower growth here. I mean, last year, would you say that or is the comparables getting easier or how should we see the niche technologies development year-over-year going forward, do you think?

Yes, well, talking about the current quarter, as I said, we did have a very strong development last year in several of these niche companies, and we were actually quite happy that we could keep up with that. As I said, the drivers of demand in these companies are not the same as the general economy. and the industrial economy in that sense. But overall, it's a group of companies that we have a very positive view on in terms of future growth. And it does not, as I said, match entirely with the economic development in the economy. We're talking about really certain niches here. But long-term, certainly we have acquired these companies for their long-term growth opportunities. But these are small companies. You can also go back and forth a little bit during quarter. And we're actually quite satisfied with this quarter.

Yeah. That's great. And I think that's all for me as of now. So have a good day. Thank you. Thanks. You too.

See you later.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions from the telephones, so I hand the conference back to the speakers for any written questions and closing comments.

We don't have any written questions coming in, so we will thank you all for having joined on this busy report day and wish you a very nice day wherever you are. Okay, bye-bye. Thank you.