Beijer Ref AB (publ)

We went through double digits in the quarter. SM Frigo, very good order. Backlog continued to be active, strong, especially in EMEA. Got our first or continue to get orders in the US. We continue to build the organization in the US. So very interesting for the future. and a little bit weaker in the APAC region, especially in the food retail, but still some nice opportunities also in Asia that we addressed on the OEM. So continue to be positive on the green OEMs, continue to grow double digits as we go forward. Moving on to the next slide, focusing in a little bit on EMEA. Good quarter in EMEA, 17% growth, stable on the organic side. We continue to do well here on acquisitions, good growth in Eastern Europe, and also seeing a good trend there in June and July across, I would say, all regions in EMEA. So very happy to see some higher activity levels on there. OEM, as we said, on the SEM Freedom Fender, continue to do well in the business. Record margins in the quarter driven by good strategic initiatives on the private label side, but also on purchasing. So we continue. I mean, EMEA had, I would say, a fantastic quarter here in Q2 and started well here in Q3 as well. So happy with our largest region here. Moving on to APAC. APEC, of course, now is a little bit in off season. It's a smaller quarter on there, fairly stable across the board. Some nice winds on natural refrigerant in South Korea. Also working on some bigger projects around in Southeast Asia. That looks very promising. Slow market on the OM side in Australia and New Zealand. Less investment from the food retail. Good backlog, but a little bit slower to move forward. So generally a stable quarter in APEC after having very good organic growth the last couple of quarters in high season. And the other thing we continue to work a lot with in the region is our margin. And you can see a nice continued margin development and moving for the year above those 10 that's been the target for a couple years so all in all a stable quarter but very good on the on the profit side and then moving on to uh north america a lot of things happening in north america maybe start off a little bit with a transition as some of you know that we are transitioning into a new solution based on more Lower GWP refrigerants, 454B on there. So in the quarter here, I think we're about 30 to 40% transition, and we expect to be 100% transition by the end of Q3. So I would say things developing well in that transition. For us, we had some issues with, and I think the whole industry, with missing refrigerant that has hold us back a little bit in Q2. And we also had some worse weather this year compared to last year. So we had a good momentum coming out of June and started in July. So it'd be an interesting quarter for us. We continue to open branches. We also launched our private label Sinclair in the market with very good response. So it'd be very interesting to follow that here as we go through Q3. And also on the M&A pipeline, we'll have a more back end back end heavy year here but there's a good pipeline and i would say it's actually increasing for uh for the future here so also be very interesting to see as we run through the year next year on the platform in the us so things continue to develop stable but with a lot of good opportunities going forward it's also happy with the development in the us So moving on to the next slide, you can see here we continue to grow, of course, turning a negative here on especially the currency underlying with 12% up here in Q2. Stable on the organic side, as I said, we missed the days. I would say it's similar level as Q1, but with some positive development in June and July. So hopefully that transition into a good second half of the year on the sales growth. Moving on to the record margins, as we said, it's more of a nice result on 2% organic growth and continue to expand the margin shows the strength in the business model and also the work we do as you Don't get anything for free in this type of environment. So I would say this is what I'm mostly proud of in the quarter, the margin side and development there that shows that we're, of course, on the right path in everything we do. So summering the quarter, sales goes to 5% despite the 6% currency. Organic growth around 2%. EBITDA growth eight and still despite currency double digit EPS growth. So I would say a strong Q2 and a good first half of the year with some uncertainty in the markets, but also some good trends in June and July for us. So we look forward to the second half of the year. And also Q3 is a big quarter for us starting here in July. So we'll continue to drive the business forward. So on that, I will hand over to Joel to get down into some of the details.

Not so much details, but lower in the P&L anyhow. So thank you, Christopher, and good morning, everyone. On the EBIT side, I mean, we already touched on EBITDA and all the rest of it, but good growth, 8% compared to last year. if you come to our financial net it continues to develop well both sequentially and against last year and came in 12 million below last year and there is obviously a nice tailwind for us on lower base rates here being slightly more than one percent down compared to last year in the quarter On the tax expense side, 264 million representing a effective tax rate of 25% in the quarter, slightly up from last year. But all in all, resulting in net profit of 793 million, which is up 9% compared to last year. So moving on to our EPS growth. EPS in the quarter as you have seen 1.56, translated 10% increase. I mean all in all of course we are very happy with the quarter and development on the margin side. on the interest net and so on. So very happy with the 10% growth here despite the currency headwinds. And if you look at it year to date, we are at an EPS growth of 13%. Cash flow side, we continue to deliver a solid operational cash flow in Q2, 635 million, despite the seasonal buildup of network and capital that we're having. I would say it's in line with our expectations. Cash flow in the quarter was almost 300 million higher than last year and it's the main difference here is lower networking capital tied up compared to last year which is primarily driven by our continued efforts to optimize our inventories. On the next slide here, you see our positive trend on operational cash flow. We are year to date, our cash flow amounts to 1.1 billion, which is up from 900 million last year. And as we said here before, I mean, we are coming in here in Q3 and Q4 are the bigger cash flow quarters for Bayer FSA Group. On the leverage side, very stable development, net debt to EBITDA excluding lease and pensions came in at 1.9, sequentially stable and 0.2x lower than a year ago on higher EBITDA. So all in all, we feel a really strong balance sheet, especially now we're coming into H2, which I just said is the major cash flow quarters for us. So we're really looking strong here for our future M&A pipeline and so on. So with that, I hand over back to Christopher for a summary.

Thanks, Johan. So a short summary of of the quarter and then a little bit on the long-term fundamentals that hasn't changed. But as we said, good double digit growth with 2% organic, good development in the acquisitions on here in our high season. So as we said in Q1, This is one of our most important quarters of the year, and I think it was a very good execution out there. EBITDA growth 15% and record margins across the board, I would say, and very good development, both, I would say, in EMEA and the US and APAC on the margin side. Also on the cash flow, positive for being a second quarter and now eight quarters in a row with positive cash flow and also expect know a good trend here in the third and fourth quarter and then a double-digit eps growth uh this quarter as well so based on that long term we continue to see you know transition in the us to to a 12 product we see good development of green oem in emea and we also seen in asia now more and more initiatives we're getting orders on the green solutions in the us very early days we'll continue to invest in that organization to build that up And also a lot of things happening in the US opening branches, launching private label and also on the acquisition pipeline. As I said, it'll be more back end heavy, but it looks I would say it looks stronger now than it did a quarter ago. So also very happy with that. So in general, we would summarize this as a strong quarter in uncertain times, but also with we could trends we see wrapping up the quarter and starting in here in July. So with that, we'll finish our presentation and open up for Q&A.

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 Gustav Schwerin from Handelsbanken. Please go ahead.

Firstly, can I ask on the comment on customer activity in EMEA and the uptick throughout the quarter? What do you think drove this and how much stronger was quarter end versus start? That's the first one.

Sorry, what was the first sentence?

Sorry, you were calling out in the report that you saw somewhat cautious customer activity in EMEA and an uptick throughout the quarter. Just looking for reasons and also quarter end versus start.

oh okay so now it was more a timing in the quarter i'm not so much i would on the courses side but we saw a stable development in the beginning of the quarter and then acceleration in june and we've seen that continuing in july so it's pretty high activity part of it is of course seasonal you know the further you move into june and july the activity level picks up on there but it's been on a on a level, it's still early days, right? We're a couple of weeks into July, but the end of June and July has been very promising to see if the market are picking up, especially market like France, another market that's been less active on the residential side. And we see good active levels there. We see good in Spain, Italy, the whole Southern Europe, Central Europe also. So in general, we haven't seen this type of activity levels in a couple of years across all regions in EMEA towards the end of June and beginning of July. So it's promising development, but still early days in the business.

Okay, perfect. Secondly, what kind of price contribution are we looking at for North America in the quarter? And any update on how you see that developing into a second half?

Yeah, so in the Mayan APEC, I would say pricing is flat. I know your question was the US. I'll come back to that. In the US, if you look at our mixed development, I would say a couple of percent coming in in pricing in Q2, and I expect that to go up a little bit in Q3 as we transition more and more into the A2L solutions, as we expect to, by the end of Q3, to be 100% transition into the A2Ls, and they carry somewhere between 7% to 10% higher price depending on solution and etc. So that will show itself also on the pricing as we move into Q3.

Perfect. And then just lastly, mentioned the increased activity on the M&A discussions. Why are you calling this out now? Should we expect you guys to close some deals before end? Thank you.

Yeah, the reason I'm calling out is, of course, it's a complex process that you do. And of course, we know what's under LOI and we know those are going to close. It's just more timing. And that continues to be at a good level that we expect to close during the year. So we still expect that a good. m&a year as last year this year nothing has changed but what we've seen especially in the us over the last four to six weeks is that quite a lot new activities coming up where we are in discussions uh uh on there so that's why i'm calling it out because it's some uh interesting developments for us at least uh and those will be more likely to come you know if we do something on the discussion square that's the end of the year in 2026 so that that's the reason i'm calling it up Okay, thank you. Thank you.

Next question comes from Adela Dashian from Jefferies. Please go ahead.

Thank you, and good morning, gentlemen. Thanks for taking my questions. A couple from me. Firstly, maybe just a confirmation on the commentary here around EMEA. Would it be fair to say that the acceleration and demand is related to the significant heat waves that we've seen across Europe?

No, I think it's too easy to say. That's part of it. As we usually say, it's been a better development across the board on there. And part of that is, of course, weather. But we also see some activity levels, you know, we haven't seen so well on the on the side on refrigeration and exchange service maintenance and other things. But in the end, it's early days. Don't want to completely secure it as a big shift in the market, but there are some positive signals also not just related to the weather in the different product segments.

That's good to hear. Then secondly, on the record high EBITDA margin here in the quarter, could you specify, I mean, you already have mentioned some, but a bit more specific on the main drivers behind this performance. And then also going forward, I guess, how sustainable is this level of profitability? And the reason why I'm asking is because we have been seeing North America specifically being diluted by the recent acquisition, and that's tapering off now unless you start to accelerate them any towards the end of the year. So what's your view on that?

Yeah, I think our, I mean, again, two tents here and one there and etc. It's, of course, not the revolution of the world, but I think we're calling out part of it to go across the 12% for the first time. But I would say, of course, it's sustainable. The things we do in our margin development is driven mainly in improving the gross margin, if it's from purchasing synergies, private label, and other initiatives. And I think also I said before that normally our underlying margin is always higher than reporting because we continue to make acquisitions. if i exclude acquisition side this is a you know a sustainable development that these these volumes and we see continued opportunities to improve the margin we also do continue to do as in the us investment opening new branches e-commerce launching a private label i mean that's not for free in the beginning you have to do quite a lot of work so i think we always want to balance the margin in percentage with the growth initiatives that we're doing across the world and the globe. And in the US, you're right, but we'll continue to open branches in the US. We'll have two, three more in the pipeline to be sorted, and we believe that's the right strategy. So I think we're running at a good margin, and we believe it's sustainable. And then also, depending on how we do acquisitions, that will always be something we will call out when and if or not when, but if it happens and how dilutive it is and how long term it takes to bring it back on.

Makes sense. Thanks for that. And then maybe just lastly on the A2L transition, I appreciate the commentary around expectations that you will be 100% transitioned by Q3. But could you highlight what level of transition you experienced in Q2? especially in light of the fact that the pricing only, maybe you could say, increased a couple of percentage points.

Yeah, I think we're somewhere around less than 40% in Q2. And remembering HVAC is around 40% of our sales. And the rest is, you know, parts and supplies and other type of products. So we're around 40% transition in Q2. So a little bit less.

Perfect. Thank you.

Thank you.

The next question comes from Carl Ragnarstam from Nordia. Please go ahead.

Good morning. It's Carl here from Nordia. A few questions first. We're coming back a little bit to the A2L regulation. You said the vast majority in Q3 will be 454 products. Do you still have the sell-back agreement with your supplier on the R410 products, or do you think that the replacement market should be enough for you if you don't sell out everything during the year? And also, you said that there has been a shortage of 454 lately. Something has been quite widely written about the press. Do you think that you manage to keep market shares or how have you managed your sourcing compared to peers and potential lost sales on the back of it?

Yeah, so on the first one, it's not a concern. I mean, we're fighting to keep some 14A equipment for replacement and spares and other things at the end of the year. So that will not be. a problem at all. And a lot of areas are already sold out in there. So that's still a highly attractive product to sell in the market on there. So not an issue. It's more by the end of the quarter how much for spares and replacements. do we keep as you cannot of course get all of it so on the second part on the on the 454 b i would say pretty much everybody is in the same situation on the i mean there's some pockets and it's easing up now but of course the the you know if you if you're selling R32, a Daikin or something, I mean, you would have access to it. So that's why we said we might have lost some sales short term, but we're not concerned of losing market share because our main competitors are all in the same. And that's why we call it out. And we see it easing up now on the 454B. uh on there and we're a good position on the charges on on the private label instinct clear so we do have good solution to balance it and hopefully as we transition out of july it's not an issue anymore but it's it's pretty much the same for everyone um on the 454b was it one more question okay that's very clear no no that was good for that that part of this thank you and and and on maybe for joel but

of course you're seasonally building up working capital in the quarter less so the last year I mean because you did pre-buying obviously of R410 you built up quite a bit of inventory into the transition is that totally flushed out or how much is flushed out of what you built up your before year end 24 and then how much do you think will come out here in Q3 of that because you said you'll be you'll be fully transitioned

Yeah, I mean it's overall it's not yet fleshed out fully of course. I mean we do carry our inventory as long as we are continuing to sell the 410A being still in Q2 more than half. I don't have the exact numbers, but I would assume we are somewhere around halfway through the inventory, the extra inventory that we have on stock in the US.

I think maybe just add to that, if I have to do an assumption, I mean, the easy one I think is to to go by the end of the year, we should be back to normal levels. But I think the other point we're having a discussion deal with, it'd be very nice. I mean, it's nice that these transitions are happening, don't get me wrong. But we can also focus a little bit more on aligning inventory in 2026 as we have a more normal year from a product point of view in that area on there.

And the final one, if I may, is on OEM. You mentioned sort of the setback in the non-green part of OEM, the heat exchanger business. Did it come as a surprise to you? And what do you hear when you talk to your customers as well as suppliers? Are they expecting a worsening situation in the short term? Or will it improve a little bit? Or what is the discussion when you talk to both suppliers and customers?

Yeah, we think it will start to improve a little bit as we move forward.

Already from Q3?

Yes.

Okay, was it a surprise for you? What actually happened, do you think?

It's a very project related business and it was a very strong last year. We're talking about people on the call, the heat exchanger in OEM business, non-green on there. That's the project. It's mainly a heat exchanger to wind turbines at the sea. And there are longer lead times on projects. We see it starting to improve second half of the year. And in the meantime, as we discussed that the green business of uh sm3 on fenergy uh continues to grow double digits so we expect that apart to start improving in the second half of the year compared to the first half so perfect very clear thank you thank you the next question comes from carl degenberg from dnb carnegie please go ahead

Thank you very much. Good morning, guys. So two questions from my side. Firstly, on the commentary regarding acquisitions or let's say ongoing discussions in the US, I just wanted to ask a little bit on sort of acquisition pricing and multiples and so forth, because I guess we heard a little bit from other your peers as well that M&A activity looks to be quite solid right now and yeah question is do you see you know competition on acquisition if that has been increasing and follow-up is of course do you see target multiples being high in our relative say six twelve months ago yeah so

on the projects that we're having under LOI of course I know what the multiple is and that's not that that's at you know levels that we've seen before and a lot of this discussion are one-on-one as well so all of them we have on LOI of course that the discussions we're having now that's not on the LOI I don't have an answer yet so we'll see how that the quarter and the next couple of quarters develop on that. I don't see, you know, this big discussion on expansion of multiples. The discussion we have is a little bit much more related to where are we in the cycle, housing sales, volumes, you know, these type of discussion, because that's also, you know, the biggest value creation I would say on M&A, if you take the U.S., is that we believe that you know the activities in the market they're not acquisition but in the business will start picking up uh you know in the next uh year or two which means the timing right now is is is pretty good on the acquisition side so let's see how how it pans out but the answer right here right now is not any significant marketing oh sorry uh multiple extensions now okay okay

And then maybe following up on that one as well, I mean, just looking at sort of the latest acquisitions you've done in the U.S., you've had a couple of branches which have been, you know, let's say in other states, at least relative where you came from on the heritage side. So just out of curiosity, you know, the LOIs and the inbound that you're having right now, do you see them being in the presence where you are, let's say, relatively present already now or...

you see you entering a new state totally with the ones that you're having in discussion right now there will be uh i mean discussion um that i can't uh go into because it's uh that's a different uh topic but if the loi and those that we we most likely now we will close here next up quarters there are expansion of the areas where we we have so it it's it's expanding our territories into new territories and states, but close to where our core business is. So no, it's a new area. So of course, every time we do these type of exhibition, our potential to then complement with new branches will continue to increase. And I would say we have a good track record and good toolbox to do that and it's not the only thing we do we're also expanding into refrigeration in our hvac branches and other things through there and that's usually why i say that there's a lot of things ongoing in the us and will be for the next five to ten years as well as we continue to build up the business model yeah yeah fair enough and maybe just finally um on the commentary uh let's see the rollout of six here in the us uh

Just wanted to hear also, you know, assortment-wise and so on, and where you come from on the MSI, would you say that the full assortment, is that fully compliant and so forth with, you know, your US branches and so forth? And how does that rollout, you know, work out in practice? Do you go full wide directly or is it with selective branches gradually, you know, filling it out over the period?

Yeah, so I'll try and summarize it in a short minute here. What we've done in the US, the product side is different than Europe. So the launch we've done now is ducted 454B. So we're not doing, of course, all technology. And we built up what we call a heritage imports. So we have, you know, central warehousing for this. And then we, you know, step by step roll it out to to the branches but it will not be at all all branches uh short term it's it's focusing in in areas where we think also we need to be a little bit more competitive on the product side and also have custom interests so it's it's a rolling build up of an expansion and and it will take time the next step is adding also ductless type of equipment we'll do that for the season uh next year so there's a lot of activities on there i think the The reason I'm calling it out is more it's been a very positive response. I mean, but it's early days, as I usually say as well in this, but it looks like we have a good possibility in this year to build the business with this type of product as well as we've done in Europe.

Okay, very well. That was everything from me. Enjoy the summer. Thank you. You too. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you all for calling in. And I think I usually say that let's hope for a really hot, nice summer out there everywhere. And I hope you hope you all have a nice break when it comes to you. And thanks for thanks from us and appreciate the time. Thank you very much. Thank you.