Beijer Alma AB (publ)

Welcome to the Bezier Alma Q4 2024 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Henrik Pierbeck and CFO Johan Duffenmark. Please go ahead.

Good morning everybody and welcome to our webcast where we will be presenting the fourth quarter of 2024. I am Henrik Perbic and with me I have our CFO, Johan Löfvenmark.

Good morning everybody.

As it has been announced, this is the last time Johan and I will present in such a call and next time acting CEO Johnny Alvarsson will be here instead of us. So today, we will present the overall performance and recent developments of the group. And in addition, of course, we will discuss our reporting segments, our two main subsidiaries. These are leisure force, which is a full range supplier of standard and customized industrial springs, and other wire and flat strip components. And that force is acting globally. with majority of sales in Europe and the USA. And it is Beotech, our second subsidiary, which acts mainly in the Nordics within specialized manufacturing, value adding industrial trading and automation in profitable niches. Beotech is also a platform for acquisitions into new industrial niches for our group. have a new system here. Running. Sorry. Okay. So today, we present what I think is overall fairly good Q4 report in today's economy, and where we managed to grow organically as a group. Industrial economy and the cycle has remained weak in the final quarter of the year. Nevertheless, the group grew organically. Overall, you could say that demand was stable, but it was quite varied across the group's diversified customer base. For example, the group's operations in Asia have continued to improve and delivered good growth. also the key nordic market has weathered weak economic climate well and also supported in in the uk and the us markets whereas i would say as usual central europe remains weak and in particular of course germany um if we're good yeah in leisure force um the mixed demand picture um is is uh is the same and um the organic but we do have organic growth in order bookings which is positive uh the chassis bring a business area um which you you probably know it has a low season now late in the year still With that in mind, it ended the quarter in a stronger note and came in nearly on par with quite tough comparable figures from last year in the quarter. In the industrial segment, for Leche Forge, as I said, Asia, but also Nordics contributed with the profitable growth. In the US, we also have good development in industrial segments, somewhat lower volumes in the medical technology segment. Germany, demand from Lesch & Persch customers remains weak, and this, of course, also has an impact on companies in the rest of Central Europe, and we have further savings implemented in units concerned. In particular, I should point out here that Alcomex, which is one of our Le Chauffeur's big daughter companies, they operate in the industrial segment in Central Europe in particular, and also, of course, have a strong position in the door spring market, which has it's exposed to the continued weak construction industry in a way indirectly. So that has been challenging for Alchemix in the end of this year. Moving over to Baytech, demand overall stable, but also here a little bit varied across the business, but overall good growth in order bookings and also organically. If we look at the different parts of Baytech in fluid technology, it was basically thanks to acquisition the growth came from. We have the AVS in Finland and Brisman Brandeskap here in Sweden. as new acquisitions in industrial products here is a mixed picture weakest in finland followed by sweden and danmark but whereas the norwegian market stands out positively and with with good growth both organically and also actually through acquisition of chemco um the new business area niche technologies um grew this quarter organically and despite tough comps and it's exposed to more to non-cyclical markets of course so two um Acquisitions came into the books during the quarter. First, it was Lacroix, which I mentioned already last call, of course. It was closed in the first of October. And also Brismans Brandredskap came into our group in November into Baytech. I will come back to these acquisitions and comment a little bit more later in the presentation. So with this report, I think we conclude 2024 in a good way. As a matter of fact, for the fourth year in a row, we achieved the highest operational result to date. So moving on a little bit to the financial performance. So looking at, we can see that order bookings increased overall by 10% and 6% organically. Net revenues also grow by 8% in total and 3% organically. That means that the adjusted operating profit came in at 220 million kronor. and an operating margin of 12.1% for the group, which is up 1.7 points versus last year. And okay, the comps from last year were not the toughest, but still, I think this is a good improvement in this environment. So now, going in a little bit more into the detail to our segments, starting with Le Chiffoche. Our spring manufacturer is organized into two business areas. These are industry with mainly customized products to a very diversified customer base globally. The other business area is chassis springs, and these are standardized replacement springs sold to car part holders, wholesalers, mainly in Europe. So for Lesch & Fors, order bookings increased somewhat by 4% and also 4% organically, since we have some negative impact from acquisitions and divestitures, but some positive impact from currency netting out to zero. In the net revenue, increased by six percent where five percent was organically up so in the industrial segment and the largest business area especially now in in q4 as you can see bottom right where where the chassis spring has a bit of a low season so the main part is the industrial area growth was eight percent and as mentioned strongest from asia and nordics but also the UK and the parts of the US. And whereas Central Europe and Germany was weaker. um so as mentioned yeah the we had an impact there especially in in alchemex uh who which is active both in central europe and also in the door spring business and the several actions have been taken um to restore uh profitability And actually, a further note on this is that in the beginning of January after the quarter, we have also acquired the minority stake in that company in order to further enable other actions. So that's on the industrial side. the chassis springs um i mentioned q4 is a bit of a low season every year but nevertheless finished end of the quarter well and some markets some key markets such as uk still still soft but this was compensated by some some eastern european markets for example so a good mix um so for leisure force operating profit adjusted operating profit increase to 165 million kroner with an ebit adjusted ebit margin of 13.7 percent moving over to bay tech um So Baytech, since the beginning of this year, last year, 24 operating in three business areas, fluid technology, and industrial products are both acting within industrial trading and manufacturing. And the third business area we call 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. Typically, these companies have other market drivers than general industrial demand in niche technologies. In Q4, order bookings increased by 21% in Baytech and 11% organically. Good ending there. Net revenue increased by 10% with a small 2% organically decline. Within the business area, industrial products, demand was Overall, a bit weaker and revenues increased thanks to the acquisition that came in, Clamco. Still, it varied a lot. Norway continued strongly. including the new company Clamco, which is acting in Norway. And as mentioned before, Finland is what we see is the softest market, whereas the Sweden and Denmark are somewhere in between. Fluid technology grew by 22% thanks to the acquisitions, AVS and also Brisman in Q4. And niche technologies, we're happy to see that the business area could beat its good comps from last year, and they grew by 5%, which is mainly organic. So BayTech came in with a good Q4 quarterly result of 68 million kroner, with operating margin around 11%. Now I will hand over to Johan for some more comments on the financials.

Thank you, Henrik. Let's take a look into these financials. As mentioned, the net revenue has increased. It is up 129 million SEK. Acquisitions together with divestments contributed with 56 million SEK. The divestment mentioned was the German company Stump, which was sold in December 2023. The organic growth was 48 million, corresponding to almost 3%. Leche Forge had an organic growth of 5% and for BayTech it was minus 2%, as Henrik mentioned. The revenue was also affected by currency effect of 24 million SEK. Order bookings increased with 164 million to 1,874. The change was mostly organic, plus 6%, where Baytex organic growth was 11%, the organic growth from Nexofor was 4%, and the growth from acquisition was 2%, affected by the divestment last year. Let's go to the next slide. Here we take a look on the segments and how they contribute to the revenue and operating result. As we saw in the previous slide, net revenue increased with 121 million SEK to 1,823 million SEK. Läkerfors revenue increased with 73 million SEK, related to good sales in the Nordics, Asia and parts of Central Europe, but to some extent with easy comparisons. Veitex revenue increased mainly related to this year's acquisitions. Adjusted operating profit was 220 million SEK in the fourth quarter, Lecheforge had a large increase in adjusted operating profit related to most areas with the exception of Alcomex, which was challenged both in the industrial part of Alcomex and as well in the door spring business. In Beitec, we saw a good contribution from this year's acquisitions, while the market is more challenging for industrial products. Still, that business area performed relatively well. Overall, the fourth quarter was strong in most areas and adjusted operating margin improved both for Leche Forge and Bayer Tech. Now to some of the key financial ratios. Adjusted EBITDA is up 50 million compared to last year. The difference to adjusted EBIT being higher depreciation following a number of acquisitions. The full year EBITDA surpassed 1 billion SEK and landed on 1,002 million SEK. Cash flow of the capital expenditure was positive, 128 million SEK in line with last year, but with some smaller negative impact from increased working capital. Net debt is higher than last year, which is mainly related to this year acquisitions. and here we actually have a question from in the chat and it asks us you know why is the long-term depth increasing and the short-term depth is not increasing as much and kind of the reason for that is the increased overall net depth rather than a change but of course we try to find a good balance between long and short-term depth and that is something we will continue to do as well The finance net was also in this question actually. The finance net is less negative compared to last year. It increased, actually is less negative with 22 million SEK, which was related both to lower base interest rates as well as no discounting effect from Jon Evansson's earn out. The finance net for the full year was 27 million SEK less negative than last year. And of course, the biggest effect then was in Q4. And as I said, lower base interest rates and less discounting effect from earnouts. And since we are standing here in the end of the year, we also would like to conclude the full year performance of Vejralma when it comes to financials. And it has been a year of uncertainty in the world around us and with slow markets, especially in some parts of Europe. Despite this, we have an overall organic growth in the revenue of 3%. In this slide, we can see that Lesch & Voss has grown some in revenue, which was related to organic growth as acquisitions and divestments together was slightly negative in growth. For BayTech, growth from acquisitions was 12%, and it makes up most of the increase of 263 million. Overall, it was once again a record year for BayTech, thanks to successful acquisitions on top of a healthy underlying business, a stable performance from Lechefort's chassis, Lechefort's industrial springs in the Nordics, US, UK, and Asia. we saw also a good development for the market segments in many markets adjusted operating result grew by seven percent whereas the margin as well increased to 12.8 percent and as well when the year has come to an end we usually talk about the dividend And for the year 2024, the Board of Bay Alma proposes to the Annual General Meeting a dividend of 395 kronor per share, which corresponds to 33% of the profit. This is in line with the dividend policy and the continued focus on acquisition growth. Thank you. And back to Henrik for a look on acquisitions and some final remarks.

Thank you, Johan. So before concluding, I would like to highlight a little bit of what happens in terms of acquisitions in the quarter. Firstly, as we did discuss already in last call, Le Chauffeur acquired Lacroix from 1st of October. It's a French industrial spring manufacturer with high technology specialization. And during the first quarter, Lacroix has become an active part of our group and takes the role of our platform in France, which is, you know, key European market with the potential for cross-sales of the group's, Lesfors Group's broad product portfolio. So good start. Later in the quarter, we were happy to welcome Brismans Brandredskap to Baytech. It's a company we know since many years as a business partner. and together with our existing fire hose production um the product range within firefighting equipment adds very well to our offering so welcome to to the team at brismans with these two latest acquisitions um we continue our strategy to to further grow um inorganically And looking at this picture, which I've shown you many times, it's also a chance for me to conclude personally on our achievements during these years. So what we list here is 27 acquisitions bringing in or having brought in around 2.7 billion SEK in turnover to our group with good profitability. And of course, in addition, not seen on the slide, but we have also divested three companies, Habia Cable in 2022, and also two of the German Lesch & Fors companies. On the right, you can see a list of logotypes. And of course, for me, each single one of these logotypes represent a talented, hardworking team of good people that I know personally. The companies have a strong product offering on markets where Bayer Alma wants to be present long term. So these companies have strengthened Bayer Alma significantly and already they are an important contributor to our organic growth. So some short concluding remarks on the quarter. So once again, healthy organic growth in a weak economy. And for Leche-Porsche, mixed demand, but overall organic growth in order bookings with the best growth or most growth coming from Asia and Nordics supported by UK and US industrial and lower volumes in Germany and Central Europe. And positively, the chassis springs picked up during the fourth quarter again. And for Baytech, growth driven by acquisitions in fluid technology and industrial products and organic growth in niche technologies. One new acquisition announced, Britsman Brandeskop. And finally, of course, we also note that we do change management and the new CEO, as of 1st of April, we will have an interim CEO with Johnny Alvarsson. So with that, I thank you for your attention today and over the years. And of course, now we are open 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 Carl Ragnarstam from Nordia. Please go ahead.

Good morning. It's Carl here from Nordia. A couple of questions from my side. Firstly, I think you mentioned that Alcomex continues to face both seemingly challenging end market as well as the U.S. expansion burdening, right? So first, if we look into core business Europe, how did the underlying margin perform either year to year or this quarter? So we could get a sense of what is happening underlying. And also second, looking into the US expansion, could you talk a bit about what you achieved so far and what the plan is for short, mid-term and also the EBIT bridge and timeframe towards profitability in the US? Thanks.

Good morning, Carl. So your question related to AlcoMix. And as mentioned, they are in two market segments that have a challenging macro environment, both the central European industrial demand and the door springs specifically. And as you point out that we mentioned also we have started our business for Alchemix in the US still during this first period it is not contributing positively to the overall profitability and the time frame for that is certainly as we speak uh to to uh move into um profitability in that business it has been faced with some startup challenges building the stocks and and such uh but but as we we all in all um although we don't break out the exact numbers, Alcomex is not contributing this quarter to the Lesch & Fors profitability. And of course, there are, as mentioned, several actions being taken. This also on the backdrop that we now have acquired the last minority stake in the company. So we can see, or already we have implemented you know, a closer cooperation and organization with our European management in Leche Foch. So it's a task ongoing as we speak to restore profitability in a good way. But having said that, they are in, of course, in the markets where tougher macro conditions.

And you touched upon it, you bought the minority stake. To what extent did the minority stake hinder you to drive various efficiency measures? Because I guess they also want to have better profitability, right?

Sure, of course. So if we look a little bit generally on the way we are a very decentralized group, first of all, which both from acquisitions, but also in our existing companies, The key structure is the local management and what we can achieve with that. When you do have, as we do in certain companies, minorities that in a way limit certain actions, of course, that are If we look at integrating parts and moving around parts of the business, that would be, in general, what is hindered. In many of the, what should we say, in the beta companies, it's very rarely that there are any of these kind of initiatives on the plate anyway. But as I said, now in this situation where we have a strong infrastructure significant operation in in electric force in Europe we're now you know turning every stone and and to find a good setup for for the future together with with the Alchemix companies okay perfect and and and and coming back here once again to Alchemix here I can recall the the sort of both

I mean, the conf call in March last year, or sorry, I think it was April, when we discussed Alcomex being loss-making, then it seemingly turned into profitability, and now it's back at losses again. Is it the market getting worse, or is it US being the main driver behind the volatility between the quarters, or is it low season? It's just so I get the sense of where we're heading there, because it's seemingly a bit volatile, right?

I think the summary you made in terms of timing is partly the case. We have, during the whole last year, worked with a focus on the core business and improving profitability. At the same time, the volumes in the U.S. business came back, started coming in in the autumn. And as we mentioned last call, there was some startup facing during the whole autumn. up until the end of the year. So so that is a combination of that. Having said that, also, the markets are not certainly not better for for we don't see any pickup in the, for example, in the in the macro around the door spring business. So it's a combination and we continue to to to or we have, as we stated, launched further initiatives and and we'll we'll work hard on this as we speak.

And in the US, coming back to it, sorry for being into details, but if you look into the US, is it a volume issue that you have too low volumes in the production? Is it that you are learning the machinery, production machinery? Is it the supply chain? What is sort of the issue in the US, sir?

basically it's uh we're setting up a business and it's been mainly related to supply chain and keeping the right product range on stock for the local market so that's mainly what it's related to and you expect it to be resolved here in the coming one two quarters or is it more of a year or It is our ambition to resolve it. We are working to resolve it as we speak, but certainly with a focus on the next two quarters.

Okay, so Q1 maybe not the full impact of a Q2 then instead, I guess, because we're in mid.

That's a good assumption, as anyone, yes.

Okay, very good. And also you mentioned Chassis Springs saw a good end to the year. Would you say that it's sell-in or sell-out driven or a combination perhaps?

To be fair, hard to say. It is low season, as you know, and if you look at the numbers, the absolute numbers are not that high in Q4. The main focus for our business, for our operations in Q4 is also getting ready for the high season, which starts now soon. uh so uh i just wanted to sort of point out that we've had a trend since you know in q3 and q3 we had a trend where we were you know behind last year's numbers now we're we're uh we were more on target this quarter uh and in particular to just to give you a little bit of dynamics we saw a little bit of improvement in the end you know it's it's still uh the high season is where the big volumes are um um we we know where if you cannot really say it's a trend into the new quarter as such but but it's a good um it was good news at least that's that's what we wanted to bring up so it's not really selling ourselves at this point all customers start building up stock now in in q1 and and of course then sell out sell a lot in q2 so um so we're ready for that okay okay fair enough and and the finder one uh

from my side is on BayerTech here, order intake up, what is it, 11% organically? I know it's a lot of, of course, book and bill, meaning that it's delivered during the same quarter, but what reads should we draw from the quite strong orders?

I think the first thing you should draw is just that it is always good news with a growing order book. But coming back to, you know, we have seen it could say a little bit volatility, but a bit different order book performance in Bay tech during the last one and a half year, because going back several years, it was basically everything was ordered and sold during the quarter. Uh, but now when we have a certain of our new companies, uh, they are more involved in, in, uh, in types of business where you actually have a real order book. Uh, and this is, I should say mainly related to niche technologies. Um, so, um, It means it can mean that it can be projects and within building automation, it can be projects or, you know, orders for machinery. It can also be that, you know, we have some of our business where, where we have a very good demand and we are actually in, in Baytech investing, expanding our production in several of our companies and because they have a good and long order book, maybe too long. So we need, we need to expand the capacity, which is actually good news. So, you know, you cannot just automatically map it onto the next quarter as such, but it's good.

Very clear. Thank you so much. Thank you, Mark.

The next question comes from Carl Korshiden from Carnegie Investment Bank. Please go ahead.

Good morning. Good morning, Henrik and Johan. A couple of questions here from my side. If we circle back a bit here to the extraordinary items taken here in the quarter, you mentioned restructuring costs in Germany, right? Is that fully related to Alcomex? And could you elaborate a bit on or a bit more on what costs have actually been taken here? Thank you.

Yes, so this external costs, it's not related to Alcomex. It is in that way, this is a German company within the European organization where we have adopted production costs and then we have had a reduction in employees in that company. just to be lower cost and an adaptation between volumes and the overall production capacity. And that is also fully implemented in the fourth quarter as well.

Okay, so we shouldn't expect any similar items here in the upcoming quarters.

For this part of the European organization, it's all done already.

Got it. And I mean, industrial springs obviously saw quite a strong quarter. Could you perhaps walk a little bit more into what specifically drove this growth? Because I mean, you mentioned that both medical springs, I guess also door springs was quite poor, right? So what was the key sort of product segment that contributed in a positive way during the quarter?

okay so uh i have i tried to explain during our the call that you know we it's re if you look at the regional uh aspect of it uh we had certainly in uh in asia we we saw that our business has improved over several quarters now which is good and achieving good growth there is um fair share now these days of medical business in asia which is uh one of our you know organic growth initiatives in lechaport which is starting already to to pay off and uh and looks for an interesting future um so that was in terms of growth numbers the leading uh nordic markets It's not really product dimension. We're very satisfied with the way they stand up in what we also feel in Nordics is quite a tough organic climate. But the Leche Poche Industrial Springs has delivered on that. But it's a very diversified customer base and it's all the big industrials in a way, our customers and a lot of small companies too. It's not really a product dimension as such or customer segment dimension. When I commented on the US, there, you know, looking at and comparing to a year ago, as I said, we do have, you know, several companies that are more in sort of general industrial diversified customers. So it's a broad-based, some growth there, decent development, whereas volumes-wise, we are a little bit smaller. lower on medical in the US versus a year ago. It's not really driven by industrial demand or something like that. It's more related to certain projects and the volumes needed. That's one way to describe it. If you look at the door springs you asked, we come back a little bit to the Alchemix question, of course, then European markets are challenging. Looking at the top line, however, We, of course, have now started delivering volumes in the US. So that is actually not, you know, a negative organic. It's actually a growth in terms of that. But as we just discussed, the first months and the quarters of that business has not brought the profitability with it, which is related to the startup phase. So, yeah, so that's a little bit more flavor to it.

Yeah, thank you. That's very helpful. And if we look at the Bayer Tech, if you could perhaps help me bridge a bit here, the year-over-year margin increase, because, I mean, it was down a few percentage points organically. Would you say that the margin increase here is driven by the acquisitions conducted during the year, or is it due to some organic initiatives taken?

it's uh both uh the certainly we have some some good effect from from acquisitions um it is not highly accreted but somewhat but it's also a mix of the the The existing business where we have, you know, some of the trading segments such as industry within industrial product. I mentioned, you know, Finland and also Sweden, a little bit down on volumes. And there, whereas the niche technology organic growth is, of course, yeah. having some margin creative effect. I don't think that it's a huge shift. I mean, it's a good and healthy development of some percentage basis points. So we're happy with the margin development.

As Henrik said, it's a little bit of everything that just the segments is performing well and acquisitions are performing well and also the parts where we have a little bit higher margin are as well performing well. So it's a little bit of everything actually.

All right, gotcha. And just the last one from my side, looking at the cash flows here, it's still obviously quite strong, but we're down a bit year over year, I guess, due to some more working capital build up and slightly higher capex. Could you elaborate a bit on what is driving this? purely some inventory build-ups ahead of the chassis season here or is there anything in particular you're taking into account?

Yeah so it's not really that that stands out. Last year we did have a reduction in working capital so of course that it's you know if you compare year on year so it could be as well a little bit of mixed effects with new companies we have acquired last year. But overall, it's nothing that we really worry about. We are, of course, always looking into the working capital and trying to be more efficient. But that is not a huge shift per se. CapEx, as you have seen, have increased some and we are running some projects within BayerTech to increase organically. very very happy that we have a very high demand in in some of our companies and we have started to to increase capacity uh in in three or four of these companies it's semi you know it's like you increase capacity you know with maybe 10 to 20 percent in some businesses so it's not huge numbers uh but it's a little bit higher in bay technology but we are quite happy to have this uh strong demand in the companies or yeah do you expect it to to normalize at this level or was this quarter particularly impacted or how should we look at that so you know it's only one of these projects that will run for for a little bit you know longer period of time for the full of 2025 but yes so it will be normalized and we think you know just looking on what you know now that that they take over time will go down a little bit more to normal levels but once again you know should we have more interesting opportunities then we will of course pursue those opportunities as well excellent thank you very much that was all my questions thank you Yes, thank you.

We also have two- As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

Okay, so we also have two questions from the chat. And one of the first question is, we have quite an increase within order intake in both companies. Could this be an effect of tariffs that are talked about in the US that customers have bought more goods or put in more orders just to come for the tariffs.

So I think in general, if we look at our business in the US, our companies are American companies. It's as simple as that. So we're not in general trading in our industrial business between the continents or into US in that sense. final effects would be of any final tariffs, we should see this more as American companies and perhaps even they can be somehow benefited. There's one exception, and that is one we have touched upon before. It's related to Alchemex, where we actually do not produce in the US. I don't see any sort of immediate effects on what you ask about, certainly not in Q4, but we'll follow tightly, of course, what the development will be there, but not something that is shown in the customer behavior.

Thank you. And then we have another question. It's about Jon Evans. We didn't pay any earn out. And what can you say about Jon Evans' performance?

uh so this i think we discussed a little bit in our last call uh that uh you know we where we uh sort of uh um added back the the earn out reservation uh so uh john evans is uh you know overall i think that is uh we when we acquired the companies uh with the company we um uh made sure that we had you know a good structure for for how we pay for the company. So in that sense, it is for us as acquirer, it's a way to manage risk and not pay too much. And of course, also in the upfront valuation and what was disclosed in the press release, there is also growth in sort of the upfront valuation, except for the earn out. So the company is in general over these years have performed well. I mentioned before when we talked about the different demand and the deliveries in different segments. Customer segments, I mentioned the medical in the US is somewhat lower than last year. And that's, of course, mainly John Evans we're talking about here. Not entirely, but mainly. But overall, a stable performance in John Evans Group.

Yes. And that was all the questions we have in the chat.

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 today. And during these last years in these calls, it's been very, very interesting times, in particular, of course, in the last year, but also during the seven years, it's been not not the most stable of times, but very, very intensive. And I think we have strong group in beiralma going into the future very resilient and and a good base for for organic and acquisitive growth so thank you everybody for joining us and have a good day thank you