Beijer Ref AB (publ)

Welcome to the BayerREF Q4 presentation for 2024. 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 CEO, Christopher Norby, and CFO, Joel Davidson. Please go ahead.

Hi everyone, welcome. Christopher Norby here together with Joel. So we'll do the normal presentation and then after open up for questions. I think with that we'll get straight into the presentation for the year in Q4. So maybe just highlighting some highlights from the full year. I think it was a good year. Probably not all the tailwinds in the market for 2024. But despite that, we grew 11% with 2% organic growth. So pretty stable year in most of our markets and a positive development together with our acquisitions. uh also of course as you follow bayron on a quarterly basis it's been a good trend on the organic side uh of course with a very good finish uh six percent organic growth here in uh q4 uh margins stable uh 11 growth in ebda uh very good cash flow uh for the year which also sets up the balance sheet and the position to continue our journey with a good acquisition here as we roll on to Also worth mentioning, of course, the EPS growth of 6%, but in Q3 and Q4, I believe we've been growing on average 16%. So a solid year. Model works well. Also five acquisitions integrated into the business. So all in all, I would say a very good year. So based on that, we'll move into what happened in the last quarter a little bit. We grew 15%, so I would say a very good finish to the year. Extremely happy with organic growth. We'll come back to that when we go through the segments and the product areas. Continue to have a good effect on the acquisitions, plus 8%. So all in all, a good mix between organic and acquisition here in Q4, so very happy and I would say proud of that development there. On the margin side, good growth of 12% of the EBITDA. So well connected with the total growth of the company with a margin of 9.2% in the fourth quarter, which is a solid margin, I would say, in the Q4. And I think it's worth mentioning also, I think most of you know it, You can see it on this slide that we have a seasonal business with the strength in Q2, Q3. And also the way we're acquiring more and more company on the HVAC segment in the US, there will be more seasonality with higher margins in Q2 and Q3 as that's when the business is very, very active. We did have a couple of negative effects in Q4 that's worth Highlighting, we had an FX effect with a strength in the US dollar against the euro in a very short time span. Joel will come back to that a little bit more. We do have a dilution. Also, that affects negative in there, as I said, on the acquisition side, which is always more in the Q4 and Q1 quarters. So if you adjust for that, it was a solid margin in same levels as last year. And it's a good margin for a fourth quarter in an offseason for Bayref. Cash flow good. It's always good in Q4 and should be good. That's the other side of seasonality. Of course, you're... reduce inventories and and you you collect all your payments um and despite this is uh that we've built inventory in the us that we'll come back to uh also a very good eps plus 17 so a fantastic drop through uh and i think we look forward to this also in 2025. We did acquire or close Cool4You here in the beginning of January. So a very nice addition to the business, the leading HVAC company in Hungary. So we'll start, we have started to work with it already and it'll be integrated from January 3rd. And then also finally a dividend increase of 8%, moving it to 1.46. So I would say the highlight, solid quarter with very good growth. Let's move on to the next slide. We also saw the growth here across the different product segment, I would say, with commercial industrial refrigeration growing 4%, the other OEM up at 8%, and then HVAC also solid at plus 8%. So all in all, we could see this across the board on there. So I mean, It's not any revolution here. It's evolution. It's a solid business with a very good quarter behind us to finish the year. If you go into just trying to paint a little bit of a picture per geographic segments, because that's part of how we measure and look at the business. Of course, EMEA, our largest segment and also our most complex segment going across over 20 countries. And you will always have a mix, but to try and explain the year and the quarter, I think in the year, all in all, it was a solid quarter with very good growth on the eastern side of Europe, stable in the Nordics and Central, and a weak market in Southern Europe, driven by France. That's a big market for us. But all in all, keeping margins stable during the year, in an okay year, but not a strong year, mostly related to Southern Europe, which is, of course, a big market for us. In the quarter of Q4, you had a pickup on sales, continued to be driven by Eastern Europe. What we've seen also over the last couple of quarters is a very much improving situation in South Africa for us, which is a fairly large market. and also a positive outlook for 2025 in that region. So, continue to do well in those segments, both from an acquisition and a general growth. Continue to have some challenges in the southern European part of the market. The OEM segment continues to have a stable growth, good annual growth. Also, the OEM will also fluctuate between quarters, most related to our projects. are shipped or not at the end of the quarter. But still a solid underlying performance there. Good growth on commercial and industrial refrigeration in the quarter. The majority of the negative strength in the US dollar was related to the EMEA region, mostly as we buy a lot of products priced in dollars into our European business from Asia. And when you get this fast movement and you all get into it, It's actually revaluation of your accounts payable that hits you on the P now. It is more of a one-off in there and we'll continue to work with this as we go forward. But it's worth mentioning because it did have a fairly large negative impact in Q4. Another part that's more structural is the heat pumps. We've seen price pressure in Eastern Europe here in the fourth quarter. We expect that to continue in Q1. And then we're pretty comfortable that this will tail off for us. So we'll highlight that for Q4 and Q1. And then we feel good about that. It won't be having a negative effect as we move into the rest of 2025. But also worth mentioning here, a good quarter on sales on heat pumps. We did have an active Q4 and expect that in Q1 as well. But of course, it's still less than 10% of HVAC sales in EMEA. So it's not a big part of our business. uh we did uh continue an integration gia group that required this summer and look forward to their summer season and as you said cool for you uh it's the same thing and i think that's part as we talk with seasonality as we can continue to have this company they are having seasonality focusing on very high activities in q2 and q3 while q4 and q1 is more muted so all in all a solid quarter in in the mail then moving over to aipac I would say an excellent performance in Q4, both on the growth side and also on the margin side. APAC, of course, have their high season on seasonality in Q4 and Q1. It's hot in Australia, New Zealand and those markets. So it's a different measuring stick, I would say, versus the US and EMEA who's in off-season in Q4 and Q1. So we're very happy to see a good start to the season in APAC, especially driven by Australia. We do have a very good business model there and a strong market position through all the acquisition we've done over the years. And now we also can see happily the margin expanding. moving up towards thresholds that we set on a minimum 10%. They did reach 9.8 here in 24 with a good finish to the quarter. So we do see good trends here, especially in Australia, and have a good market position. Asia is a little bit mixed in their good underlying business-less projects right now. I think worth calling out that we did receive our first CO2-based project in South Korea, an acquisition we did about a little more than a year ago. So very happy for that and see how we can continue building that. And we did also see expansion on the margin related to good volume growth and also continue to drive more and more spare parts and integrated solution in Australia, working with the model that we successfully have in the US. So a good finish to the year from a very good year in the APEC region. Then moving over to North America. Another very active year. As you can see, sales growth of 32% and EBITDA growth of 26%. So as you know, we continue to be very active in the market and we expect that to continue into 2025 and moving forward. So good finish to the year also on the activity level, especially on the commercial side of the business and light commercial. So a lot of projects active in Q4, driving the volume. On the day-to-day business, it's a little bit harder to judge. It's off-season, so most of the work you do in the southern part of the US is maintenance and service. And also when you move up to the northern parts of the u.s like the acquisition we did in young supply q q4 especially in an into q1 the seasonality activity levels are always much lower because you it's so cold you don't really do any maintenance and service work and that's why they have more seasonality as you move into Q2 and Q3. And that's when you roll into the margin side of the business, you get quite a big dilution here in Q4 and Q1 from the acquisition side and less in Q2 and Q3. So that was a big impact on the margin. The other part is that last year we did a very good year end rebates because we bought a lot of inventory. So we have started to prune it Here in 24, and let's see how it plays out in 25, but underlying margin in the US very good. The heritage platform continued to do extremely well on the margin side. And of course we expect this to continue. In general, other worth mentioning, you know, we continue to open and develop branches. We have two, three more coming in here in Q1 and Q2. We are active on the private label side. We'll start coming into the portfolio in Q2. And in general, positive. I'm sure the big question, you know, we're moving into this year on the A12 transition. We expect that to start coming into Q3 and Q4. We have a good inventory position in general. So it's been a nice year and a good finish the year in the US. And of course, worth mentioning, we are going to be active on the acquisition side here again in 2025 for sure in the US. So that was a little bit on the business in the fourth quarter. Then on the sales side, you've seen this slide before. Nice trend. Again, 15% growth, 6% organic. So I think it's a very strong development here as we move through the year. And of course, the history is extremely good. On the margin side, you see it's been a solid year with good margins across the year, which gives us a similar level as last year. And then on the fourth quarter, it's still a solid 9.2% in the quarter. And then dilution from acquisitions and some currency bring it down compared to last year. So all in all, in good shape on the margin side. Danny, if you summarize it, the EBITDA grew 12% and 11% of the year. So within our financial targets, and I would say a good year in a market where we didn't get a lot of tailwinds, but I think also proves the strength of the business model that in a year like 2024, we'll continue to deliver the type of growth numbers. And of course, it also relates to being a very consolidator in our industry and good underlying trends in the business. And then finally from me, we'll summarize this fourth quarter with You know, pretty good numbers. I still think it's really good numbers, but 15% sales growth, organic of six, EBITDA growth of 12. And then I think also very good finish to the year on the EPS growing 17%. And so I think we're in a very good position to get into the 2025. Look forward to this year. And on that last note, I'll hand over to Joakim.

All right, thank you very much, Christopher. And good morning, everyone. I will jump straight to our EBIT of 756 million, which is up 13% compared to last year. Below EBIT, we start to see some upside from central banks continuing to lower interest rates and our financial net in the quarter of 130 million is down 23 million sequentially from Q3, attributable to lower base rates on a financing portfolio. On the tax side, we recorded tax expense in the quarter of 169 million, which is representing an effective tax rate of 27%. It is some improvement versus last year, and as you see, the effective tax rate in Q4 is slightly higher than that we have in the higher earnings quarters. All in all, resulting in a net profit of 457 million, which is 16% up compared to last year. So if we're just moving over to the EPS, that is translating, as Christopher mentioned, to an EPS growth of 70% in the quarter. And if you look at it for the full year, adjusting for items affecting comparability and the same number of shares, EPS for the year is up 6%. Moving over to cash flow, we continue to deliver a strong operational cash flow in Q4, 1.3 billion, supported by a strong operating result and the release of networking capital of approximately 500 million. The networking capital release was primarily driven by continued effort to reduce our inventory and then seasonally low AR. inventory levels in the quarter were reduced despite the extra buildup of inventory in the US that we mentioned already last quarter and it's related to the change to H2L refrigerants. On the next slide, you see that we have generated a positive operating cash flow throughout the year. And in total for the year, it amounts to 3.5 billion, which is 1 billion ahead of last year. And it's clearly supported by a higher EBITDA and also more tightly managed networking capital. So all in all, we're very happy about the cash flow that we're generating for the full year. Finally, moving over to net debt and leverage. I mean, the effects of our strong operating cash flow is clearly visible in our balance sheet, where we, despite another active M&A year, enter 2025 here with a very strong balance sheet. Our leverage ratio measured as net debt versus EBITDA, excluding pension and leasing liabilities, has now declined to 1.8 from 2.0 here in Q3. And we closed the year at basically the same level as last year. Net debt increased by 1.3 billion during the year related to the five acquisitions that we have closed. And also worth mentioning there, for those of you who have looked into our balance sheet, we had an unusually high cash position at the year end of 3 billion, but it was in anticipation of closing the Cool4U transaction the first days of January here. So by that, I will hand back over to Christopher.