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 Pirbeck and CFO, Johan Duffenmark. Please go ahead.

Good morning everybody and welcome to our webcast. We will be presenting the fourth quarter of 2024. I am Henrik Pirbeck and with me I have our CFO, Johan Duffenmark.

Good morning everybody.

As it has been announced, this is the last time Johan and I will present in such a call. Next time acting CEO, Johnny Alvarsson will be here instead of us. Today we will present the overall performance and recent developments of the group. In addition, of course, we will discuss our reporting segments, our two main subsidiaries. These are Leche Forge, which is a full range supplier of standard and customized industrial springs, and other wire and flat strip components. Leche Forge 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. So, I have a new system here. I'm running. Sorry. Okay. So, today we present what I think is overall fairly good Q4 report in today's economy and where we manage 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 the UK and the US markets. Whereas, I would say as usual, Central Europe remains weak and in particular, of course, Germany. In Leisure Forge, the mixed demand picture is the same, but we do have organic growth in order bookings, which is positive. The Chassis Spring business area, which you probably know, 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 Leisure 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 Leisure Forge customers remains weak, but 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 Alkomex, which is one of our Leisure Forge 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 is exposed to the continued weak construction industry in a way, indirectly. So that has been challenging for Alkomex 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 Brisbane Brandeskap here in Sweden as new acquisitions. In industrial products, here is a mixed picture, weakest in Finland, followed by Sweden and Denmark, but whereas the Norwegian market stands out positively with good growth both organically and also actually through acquisition of Chemco. The new business area, niche technologies, grew this quarter organically and despite tough comps, it's exposed more to non-cyclical markets, of course. So two acquisitions came into the books during the quarter. First it was Lacroix, which I mentioned already last call, of course, it was closed in 1st of October, and also Brisbane Brandeskap 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 .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 Leche Forge. So Leche Forge, 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, the wholesalers, mainly in Europe. So for Leche Forge, 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 6%, where 5% was organically up. So in the industrial segment, the largest business area, especially now in Q4, as you can see bottom right, where the Chassis Spring has a bit of a low season. So the main part is the industrial area. Growth was 8%, and as mentioned, strongest from Asia and Nordics, but also UK and the parts of the US. And whereas Central Europe and Germany was weaker. So as mentioned, we had an impact there, especially in Alkomex, which is active both in Central Europe and also in the door spring business. And several actions have been taken to restore 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. For the Chassis Springs, I mentioned Q4 is a bit of a low season every year, but nevertheless finished the end of the quarter well. And some markets, some key markets such as UK still soft, but this was compensated by some Eastern European markets, for example. So a good mix. So for Leche Forge operating profit, adjusted operating profit increased to 165 million kroner with an adjusted EBIT margin of 13.7%. Moving over to Beatech. So Beatech 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. So in Q4, order bookings increased by 21% in Beatech and 11% organically. So 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, Klemko. Still, it varied a lot. Norway continued strongly, including the new company Klemko, which is acting in Norway. And as mentioned before, Finland is what we see is the softest market, whereas the Sweden and Denmark 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 the group by 5%, which is mainly organic. So Beatech came in with a good Q4 quarterly result of 68 million kronor, 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 the investments contributed with 56 million SEK. The investment mentioned was the German company Stumpf, which was sold in December 2023. The organic growth was 48 million, corresponding to almost 3%. The Q4 had an organic growth of 5% and for Beatech 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 Beatech's organic growth was 11%. The organic growth from the Q4 was 4% and the growth acquisition was 2%. The net revenue was also affected by the investment 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. Lekkerfors' 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. Beatech's revenue increased mainly related to this year's acquisitions. Adjusted operating profit was 220 million SEK in the fourth quarter. Lekkerfors had a large increase in adjusted operating profit related to most areas, with the exception of Alkomex, which was challenged both in the industrial part of Alkomex and as well in the doorspring business. In Beatech 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 the adjusted operating margin improved both for Lekkerfors and Beatech. Now to some of the key financial ratios. Adjusted EBITDA is up 50 million compared to last year, the difference to adjusted EBITDA 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 after 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's acquisitions. Here we actually have a question in the chat, and it asks us why is the long-term debt increasing and the short-term debt not increasing as much. The reason for that is the increased overall net debt rather than a change. But of course we try to find a good balance between long and short-term debt, and that is something we will continue to do as well. The finance net is also in this question actually. The finance net is less negative compared to last year. It increased actually less negative with 22 million SEK, which was related both to lower base interest rates as well as no discounting effect from John Evansons' 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 earn outs. And since we are standing here in the end of the year, we also would like to conclude the full year performance of Veira Alma 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 Lechon Force 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 Lechon Force Chassis, Lechon Force Industrial Springs in the Nordics, US, UK and Asia. We saw also a good development for the market segments in many markets. Adapter operating result grew by 7%, whereas the margin as well increased to 12.8%. 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 BayAlma 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 acquisitions growth. Thank you and back to Henrik for a look on acquisitions and some final remarks.

Thank you. So before concluding, I would like to highlight a little bit what happens in terms of acquisitions in the quarter. Firstly, as we did discuss already in last call, Lechon Force acquired La Croix from 1st of October. It's a French industrial spring manufacturer with high technology specialization. And during the first quarter, La Croix has become an active part of our group and takes the role of our platform in France, which is key European market with the potential for cross sales of the Lechon Force Group's broad product portfolio. So good start. Later in the quarter, we were happy to welcome Drismans brand Redskap to Baytech. It's a company we know since many years as a business partner and together with our existing fire hose production, the product range within firefighting equipment adds very well to our offering. So welcome to the team at Brismans. With these two latest acquisitions, we continue our strategy to further grow in organically. And looking at this picture, which I have 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 CIEC in turnover throughout the year. So we're a core 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 Lechon Force 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 who 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 Lechon Force, 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. And for Baytech, growth driven by acquisitions in fluid technology and industrial products, and organic growth in niche technologies. One new acquisition announced, Britsman, Brandeskopp. 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.

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 Alkomex continues to face both seemingly challenging end market, as well as the US expansion burdening rights. So first, if we look into core business Europe, how did the underlying margin perform in the year or this quarter? So we can get a sense of what is happening underlying. And also secondly, looking into the US expansion, could you talk a bit about what you achieved so far, and what the plan is for short midterm, and also the e-Bridge and timeframe towards profitability in the US? Thanks.

Morning Carl. So your question related to Alkomex. 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. So, and as you point out that we mentioned also, we have started our business for Alkomex 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, to move into profitability in that business. It has been faced with some startup challenges, building the stocks and such. But as we, all in all, although we don't break out the exact numbers, Alkomex is not contributing this quarter to the Leche-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, already we have implemented a closer cooperation and organization with our European management. And we have also been able to build a new market in Leche-Fors. So it's a task ongoing as we speak to restore profitability in a good way. But having said that, they are, 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 limits 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 significant operation in Leche-Fors and Europe, we're now turning every stone and to find a good setup for the future together with the Alkomix companies.

Okay, perfect. And coming back once again to Alkomix here, I can recall the sort of both, I mean, the conf call in March last year, sorry, in I think it was April when we discussed Alkomix 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? And it's just so I get a sense of where we're heading there because it's seemingly a bit volatile, right?

I think the summary you made is, 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 US business came back, started coming in in the autumn and as we mentioned last call, there were some startup facing during the whole autumn up until the end of the year. So that is a combination of that. Having said that, also the markets are certainly not better. We don't see any pickup, for example, in the macro around the door spring business. So it's a combination and we continue to, or we have, as we stated, launched further initiatives and 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?

So basically, 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 Q2 then instead, I guess, because we're in mid.

That's a good assumption. Good assumption as anyone.

Yes. Okay, very good. And also you mentioned Chassis Springs, so 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 absolute numbers are not that high in Q4. The main focus for our business in, you know, for our operations in Q4 is also getting ready for the high season, which starts now soon. So I just wanted to sort of point out that we've had a trend since Q3. When we were in Q3, we had a trend where we were, you know, behind last year's numbers. Now we're where we were more on target this quarter. 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 still the high season is where the big volumes are. And we, you know, you cannot really say it's a trend into the new quarter as such, but it's a good news at least. That's what we wanted to bring out. So it's not really a sell in or sell out at this point. All customers start building up stock now in Q1 and of course then sell a lot in Q2. So we're ready for that.

Okay. Okay, fair enough. And the final one 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 should we draw from the quite strong orders? I

think the first thing you should draw is just that it is always a good news with a growing order book. But coming back to it, to you know, we have seen, I could say a little bit volatility, but a bit different order book performance in BayerTech during the last one and a half year. Because going back several years, it was basically everything was ordered and sold during the quarter. But now when we have a certain of our new companies, they are more involved in types of business where you actually have a real order book. And this is, I should say, mainly related to niche technologies. So it means it can mean that it can be projects and within building automation, it can be projects or orders for machinery. It can also be that, you know, we have some of our business where we have a very good demand and we are actually in BayerTech 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 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 Korsheden 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 Alkomex? And could you elaborate a bit on or a bit more on what costs have actually been taken here? Thank you.

Yes, so this extraordinary cost, it's not related to Alkomex. 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, you know, lower cost and 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 strong quarter. Could you perhaps walk a little bit more into what specifically drove this growth? I mean, you mentioned that both medical springs, I guess also door springs was quite for right. So what was the key sort of product segment that contributed in a positive way during the quarter?

Okay, so

I

tried to explain during the call that, you know, if you look at the regional aspect of it, we had certainly in Asia, we saw that our business has improved over several quarters now, which is good and achieving good growth. And there is a fair share now these days of medical business in Asia, which is one of our, you know, organic growth initiatives in Lechevich, which is starting already to pay off and looks for an interesting future. So that was in terms of growth numbers leading 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 Lechevich Industrial Springs has delivered on that. But it's a very, very diversified customer base. And, you know, all the big industrials in a way are our customers and a lot of small companies too. So it's not really a product dimension as such or customer segment dimension. When I commented on the US, they're, you know, looking at and comparing to a year ago, we, 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 and decent development. Whereas volumes wise, we are a little bit lower on medical in the US versus a year ago. So, but that has, you know, different, it's not really driven by industrial demand or something like that. It's more related to certain projects and the volumes needed. So, yeah, that's one way to describe it. If you look at the door springs you asked, we come back a little bit to the alchemist question, of course, then European markets are challenging. And 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, so the, if you could perhaps help me bridge a bit here, the year over year margin increase, because I mean, it was down a few percent of support 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 both. Certainly we have some good effect from acquisitions. It is not highly accretive, but somewhat. But it's also a mix of the existing business where we have some of the trading segments, such as 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, having some margin-accretive effect. So, I mean, I don't think that it's a huge shift. I mean, it's a good and healthy development of some percentage point, basis points. But so we're happy with the margin development.

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

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

Yeah, so it's not really that that stands out. Last year we did have a reduction in working capital. So, of course, that is, 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 working capital and trying to be, you know, more efficient. So, but that is not the huge shift. So, per se, capex, as you have seen, have increased some and we are running some projects within Veotech to increase, you know, organically. We're very, very happy that we have a very high demand in some of our companies and we have started to increase capacity 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, but it's a little bit higher in Veotech than usual. But we are quite happy to have this strong demand in the companies.

Yeah, John, do you expect it 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 a little bit 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 Veotech 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 to as a reminder,

if you wish to ask a question, please dial pound key five on your telephone keypad.

OK, so we also have two questions from the shot. 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 they bought more goods or, you know, put in more orders just to

the

tariffs?

So I think in general, if we look at our business in the US, we our companies are American companies. It's a simplest act. So it's we're not in general trading in our industrial business between between the continents or into Europe to US in that sense. So, you know, what what any final effects would be of any final tariffs, you know, we should see this more as 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 Alchemyx, where we actually do not produce in the US. I don't see any sort of immediate effects on what what you ask about in certainly nothing in Q4, but we'll follow tightly, of course, what the development will be there, but not not something that is shown in the customer behavior.

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

So this I think we discussed a little bit in our last call that, you know, we where we sort of added back the the the earn out reservation. So John Evans is, you know, overall, I think that is we when we acquired the companies with the company, we made sure that we had, you know, a good structure for for how we pay for the company. So in that sense, it is, you know, for us as as acquirer, it's it's a way to to manage risk and not pay too much. Looking at the and of course, also in the upfront valuation and what was disclosed in the press release, you know, there is also growth in sort of the upfront valuation. And except for the earn out. So the company is 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 so. But but overall stable performance in general.

Yes, and that was all the questions we have in 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 for joining us today and and during this last year's 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 a strong group in Bayer Alma going into the future, very resilient and a good base for organic and acquisitive growth. So thank you, everybody, for joining us and have a good day. Thank you.