Bergman & Beving AB (publ)

Welcome to the Bergman Beving Q1 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to speakers CEO Magnus Söderlein and CFO Peter Schoen. Please go ahead.

So good morning everyone and welcome to the presentation here of our financial report for the first quarter fiscal year 26-27. So I'm Magnus Södlind and I have also Peter Schoen here on the side. Hi everyone. So just to give you some highlights from the quarter. On the underlying market, the key things are two, I would say. I mean, we see some effect of the Iran conflict in rising raw material costs and energy prices and also in freight costs. And that is something that we had great focus to manage during the quarter. So I would say all the companies that are affected of these kind of increases have proactively worked with price adjustments. And on a group level, I would say we have been successful in doing so. So we don't currently see that we should have any negative effect of this, at least on the short term perspective. If we look at the market, we are, you know, 40% exposed to the construction industry, then mainly in the Nordic and the UK, and then 60% of revenue is to the industry segments. And both of them are current that we still we feel are cautious. We don't see they are declining, but they're not increasing in a big term anyway. And we had some positive signs in end last calendar year. But our kind of hypothesis is that the Iran conflict has partly put some damp on the recovery of the industries. There are some good signs in the construction area, but we don't see those kind of investment increases yet in the business we are running, but hopefully we should see that in the coming quarters. Still, we are able to increase earnings, increase margins and returns and also earnings per share. So if you look at the turnover, we had 1% organic growth. This is the third consecutive quarters with some organic growth, even if there are small numbers. So that, I think, is a good kind of sign that we have reached the kind of bottom of the kind of underlying market development and we hope then to see a continued growth going forward but still in low numbers. So we increased the EBTA with 9% and we now had 26 consecutive quarters with improved profits. And also we continue to improve the EBTA margin so it's now 10.7% above 10% and that is an improvement with 0.8% units compared with last fiscal year same period. And we also continue to work on improving the returns, measured as profit or working capital as well, KPI. And we continue to increase that and we reached 37% this quarter. And this is a rolling 12 number. So underlying, if we look at the three-month figure, it's even higher than that. So we have a positive momentum in in the profitable working capital ratio. And I expect that to continue going forward. And we had an earnings per share role in 12 improvement from 8.2 to 8.5. So all kind of our key parameters is moving in the right direction. And that's, I think is very positive despite that the market is still quite cautious. If we look at acquisition, this is the rolling 12 situation. We acquired one company in the Q1 quarter, All Coating. It's a Swedish company. As you see, we have been quite active in the UK during the last 12 months. So this was the first acquisition in Sweden from some time. And this is actually an add-on acquisition to Yveco, one of our platforms, working them in the coating segments. If we look at overall the acquisition situation, I mean, we still have the ambitions to acquire in the range of 50 to 80 million EBIT per annum. And that is something we aim for doing this year as well. Even if this acquisition was quite small, it's 25 million, but the profit is very, very good. But still, of course, we need to do additional acquisitions going forward to keep up that path. But that is still in the target to do so. I showed this before, and this gives you kind of the historical perspective. As you can see, we had this positive EBITDA growth. We also have this positive trend in the EBTA margin. As I said earlier, we are aiming to continue improving both the profit and the profit margin over time, even if some specific quarters may not have an increase. But over time, we should see a continued development like we see on this picture in both margins and profit in absolute terms. So the debt sales, as I said earlier, we had 1% organic turnover growth. We didn't have any currency effect in this quarter. You who have been following us for some time know that we made some divestments The biggest one was the Skydda Nordic operations, but we also divested Luna Baltica. And we also, earlier than that, divested the fastest development in Asia, even if that is not a part of this comparable period. But it's here you see the Skydda and the Luna Baltic effect that then the combined acquisition and divestment had a negative effect of 1%. So on the total it was a zero quarter compared with previous year. The gross margin, we had a steady positive development as you can see on this slide over time in the gross margin. I said it before, it's mainly organic driven. Even if we only acquire highly profitable companies, it's not per definition that they have a gross margin above 50%. So this improvement that you see is mainly organic driven. And that's also the case in the last quarter here. And we now have three consecutive quarters with a margin around 50%. I said it before, this is also a positive effect of the divestment we've done. So it's not per definition that new acquisition will enhance this development over time. But still, we are not happy really with this level. So I expect some improvement over time. Even also, it's not kind of big numbers and you see that as a development over time more than as in specific quarters. And the divestment and also the acquisition, as you can see on the right part of this, has brought us to 82% of our own product companies compared with 72% some years ago here, two years ago. We had had a positive development also in the MEX that is partly the explanation for the gross margin trend. So if we look at the group level, we set the target to reach profitable working capital of 45%, an EBIT of 500 million and an EBIT margin of 10%. We continue to improve and work towards those targets. As said before, we had hoped all it to be, at least on the EBIT and EBIT margin on those levels, but then we had expected the underlying market to kind of be stronger than it has been during the last quarters. But we expect to have a positive effect when the underlying market starts to pick up because we have now a higher gross margin. On a group level also, we have lowered costs organically, costs that we don't see we need to rebuild when the market pick up. So we should have a good leverage with the good and higher gross margin levels in combination with a more effective cost effective operations. And the top line then will be very good contribution to the margins and to the EBIT in absolute terms, and also then, of course, to the profit of working capital measurements. So we are still having those targets at sight, and we continue to work on that, but we need to get some help of the underlying market to get there in the coming quarters. So I will then hand over to Peter to talk about the earnings per share development and some other topics. Thank you, Magnus.

And earnings per share continues to improve. Rolling 12, it's increased from 8.45 to 8.50. And there is a slight reduction in the quarterly EPS. And that's mainly caused by slightly higher interest costs and currency revaluation. But still, we're on an EPS growth path going forward. If we look at the inventory levels, we do have a lower organic reduction, as we said, for a few quarters now. We had a quite high organic reduction rate going back a few quarters, but now it's a bit slower. The organic inventory decrease is 18 million. in the quarter, and it's affected partly that some of our companies have decided to increase their safety stock. As Magnus said before, it's a bit turbulent in the wake of the Iran crisis. So they have decided to increase their safety stock somewhat. And that of course also makes the reduction rate a bit slower as well. And that also reflects on the ITO. It's relatively flat and it's negatively impacted also from the divestments that we've made. So both divestments and the increased safety stock has influenced that one, so. But the work still continues. We do have some stocks to reduce going forward, but we'll see how it plays out with the safety stock. But it's not on the level that we had in COVID or so. It's just a slightly bump up in the safety stock. The cash flow was more or less according to plan. It's normally a quite strong quarter. So it was this quarter as well. So not much to say. As I normally say, it's the Q4 we have quite a bad cash flow. And it's based mainly due to SV spring order. that they get paid now in this quarter and the coming quarter. So this is a normal seasonality pattern. But as we acquire more and more companies, of course, this seasonality pattern will be more spread out, I think so. But yeah, according to plan. And We decreased the net debt, mainly due, of course, to the good cash flow. So we decreased the net debt by 100 million in the quarter. And the net debt EBTA is back on the same level as it was a year ago, so 2.5. And from that point one year ago, we made acquisitions of 550 million and divestments of 280 million. And as Magnus said, we just made a smaller acquisition in this quarter, but the acquisition target remains intact and we have a good pipeline as well. So we will continue on that path going forward. So I think back to you, Magnus.

Yeah. So let's get into the different divisions performance. So the core solution continued to have a very strong development. They had a revenue increase of 11% in the quarter, and half of that were organically driven, and half of that was due to acquisitions. This is the division with the biggest exposure, I would say, on aggregate labor to this construction sector, with SV being a company with a turnover of roughly 1 billion SEK. They faced quite a flat quarter, but there are companies in this division exposed to the public property sector as well as the infrastructure, and they faced a good demand actually in this quarter. The EBTA increased by 30% and the EBTA margin is now 14.7% and you can see on the slides here on the lower end that we have had a good EBTA development rolling 12 as well as the EBTA margin here rolling 12 and partly due to increased revenues but also strengthening the margins and the profit levels organically as well. So I'm happy with this division. And they also have a profit of working capital well above their 45%. So it's a good cash conversion in this division. The next division is safety technology. And here the revenue increased 27% and actually have some growth across the majority of all companies. This is partly facing, you know, the industry segment as well as the construction segments. And they also had a very positive EBITDA increase by 29% in the quarters. And that is also a combination of organic development as well as successful acquisitions. And the latest acquisition in this which was A1S is fire curtain companies based in the UK. and they have come in in a very good way in the group and performed even a little bit better than expected in the first month here. So overall, we had a strong contribution in the fire safety segment as well as safety signage and safety equipments. And also here, the margin increased to 16.8%. And there was previously on 16.4, but still a very good development. And also you can see on the lower end here, a strong revenue development, mainly for acquisition, but also some organic growth. And we also have some improvement in the EBITDA margin, despite they are already on a good level. The foremost, we have a strong development here in the EBTA in absolute terms. So I'm very satisfied with this division as well. The machine equipment was a disappointment in this quarter. This is a division and a cluster of companies that has performed on a much higher level historically. They have been, as you can see here, on the EBTA margin well above 10%. They are actually now in this quarter only at 4.2% compared with 11.6% last fiscal year. And also we had a decline in EBTA here, and that is mainly due to a less favorable business mix and also that we have some one-off cost here. We also have a flat revenue here in the group. I think if we look at the revenue development, one of the reasons is that this is more of investment products. Machinery is typically investments taking over the customer's investment budgets. We feel there are some hesitations due to the uncertainties, partly due to the Orion conflict and maybe some other uncertainties, but They have kind of prolong the order time for some machineries, some that the companies expected to come in this quarter. But they are needed by the customers, but maybe we will see them in the quarter we are currently or the quarter after that. So there are some needs out in the customers that they need to fulfill, and we hope and expect them to come here in the coming quarters. I assume and expect this to be a temporary dip and I expect them to be back on a much more healthy level in this Q2 quarter. This was also the division, UVEKO, they made the add-on acquisition of all coating and they have come in in a very good way as well, even if they've only been here since April 1. But I would say they are also a little bit above the expectation we've had in terms of performance. So that is promising for the future. So once again, a big disappointment, but my expectation is that this will bounce back already in this current quarter. Then we have the PPE & Utilities Division, and this is, I would say, more of the traditional old Berman & Beving products and the Luna Group, who is the big wholesalers. in this group. And if you look here, the revenue totaled 360 million compared with 485 million last fiscal year. But if you adjust for the divestments, it's more or less a flat revenue development in this division. And that is also the case for the profit. The EBTA is 9 million compared with 19 million, but if you would kind of make the adjustments for the divestments, the EBTA level is on the same level as last fiscal year. But here we still have some work to be done and we are continuously working to improve and improve the efficiency and the margins and also look into if we need to make some other activities to get this division on a better level. So this is not a quick fix. You shouldn't expect this division to bounce up back on a higher level in the next quarter and the next coming quarter. So this is more kind of a long-term plan task to improve the performance of this division. But there are good improvement opportunities and there are a lot of good activities going on. So I expect also that we should see some improvements here. But as I said, it will be a much slower improvement path in this division compared with the machinery equipment division. So what are our priorities going forward? Yeah, the underlying market is still a little bit uncertain and difficult to predict. And we have these emerging cost increases that I said in the beginning that we have, I mean, addressed and I think is under control and shouldn't affect our gross margin here in near term at least. So I think that is under control. I don't expect a big kind of underlying mark growth in this current quarter, but hopefully we will see that in the end of this calendar year, but that is still uncertain, I would say. As you know, there are, you know, an increased conflict again in the Iran area, and we don't really, it's very difficult to predict what type of effect that on the global economy and ultimately on our companies. But we will continue to do what we've always been doing to focus on profit expansion over revenue growth, even if we hope and expect to get some support from the underlying market going forward. We continue to allocate capital in line with the focus model. and we continue to support our companies with the BBB toolbox. Here is a very hot topic, AI. We have really encouraged our companies and supported them to approach AI and really look into how that could support their businesses. And we have some good traction, I would say, across many companies currently, companies that have been able to leverage AI increase their kind of service level, increase their cost efficiency, and also enhance their sales performance. So we see some positive effect already now, and I expect to see some positive effect on that going forward as well. And if you're interested, we have a separate section in our annual report we released some weeks ago. about some case examples and some more in-depth details of what we are doing within the group and our companies in the AI space. And then last but not least, acquisition is part of our DNA and as Peter was saying, and I earlier also mentioned, we continue to work on acquisitions and we expect to deliver on the acquisition target that we have set during this fiscal year as well. And we have some group theme. Peter showed the ITO and also mentioned that some companies are now building some extra safety stock. It is not on the magnitude that we had during the corona and I don't hope and expect we should be need to go there. This is of course monitoring on a daily basis based on what's happening with the logistics flows and so forth. But inventory turnover is a key KPI. We measure and follow up on all our companies and that is a focus that all our companies are working on. We had some good development in this and we are close to be back on the pre-corona level and we expect to have our companies to continue to work on that going forward. And as I said, we're very focused on the gross margin, making sure our companies are focused on the value-add, the highly value-add business that they have. And that is the business they are focusing on. And also to make sure that we proactively address the price adjustment triggered by the emerging cost increases that we have seen in raw material and freight and also in production costs. And last but not least, we are still, you know, as said earlier, we had work on the gross margin improvements across the group. We have worked on the cost efficiency, taking out some 100 millions in cost during the last quarters. And we think we are in a much stronger position when the underlying market starts to pick up. And hopefully we will see that in the next coming quarter. And then we expect to have a good leverage in the position that we have. So with that said, I think we're ready to open up for the Q&A.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Anton Ingves from Nordia. Please go ahead.

Thanks and good morning Magnus and Peter. Thanks for taking my questions. Maybe starting off on the rising input cost that you allude to. Would you say that how much worse has the situation become here sequentially since Q4?

It has been very volatile. For example, some plastic components, they peaked at 50% price increases. They are now down to 30. But of course, if this situation in the Holmessund will kind of escalate, I mean, maybe we will see some additional price increases on those plastic components. In the steel area, for example, we have a 10% year-on-year increases, mainly triggered by increased energy costs. So this is something that we're actually monitoring more or less on a daily basis, actually partly support by AI. Some companies have built agents following, you know, in real time, the freight and raw material cost development, making them to take tactical decisions on when to order. But also to monitoring and make sure that they can make some compensation for those increases that they are facing. But still, it's very uncertain what kind of an escalation of the conflict will kind of result in terms of price increases on both freight and energy and raw material cost. And it needs to be monitored very, very closely. I don't know if that was an answer on your question, but it's really kind of measured in a follow-up on a daily basis currently.

And maybe a follow-up on that as well. You said that you sort of put some price hikes to mitigate this quite successfully, but Looking at the 1% organic growth, how much is volume versus price in that? It seems fair to assume that volume is a bit down given the price increases.

I mean, it's very few companies that can change the pricing overnight. And it also takes time before the price increases actually affects the cost of goods sold. in our companies, because then you need to consider, you know, the current stock levels and the delivery times and so forth. So you don't really see the effects, neither of the cost increases or the price adjustment in this quarter. So that is effect that have some delays. And partly you will see some effects in this current quarter, the Q2 quarter. But as I said, it takes some time before those two factors actually influence the margins and the costs.

And when they come through, then you think you're quite well prepared with price tags to mitigate this? Yes. Yes. Great, understood. And in Core Solutions, obviously very impressive margins here in the quarter. Is there sort of any temporary effects driving this? And how much is sort of organic versus acquired in this sort of margin uplift?

No, I would say that this is the result of the work we have been doing organically in combination with good acquisitions. So there is no kind of temporary effects in this division. As you see, this is kind of a result of the work that has been done over time. And that's also relevant for the safety technology division.

Perfect. Understood.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Emanuel Jansen from Danske Bank. Please go ahead.

Good morning Magnus and Peter. Just two questions from my side. Obviously strong development within safety technology and core solutions which are currently carrying the group forward, looking at earnings. But how are you thinking about the capital allocation between the divisions going forward? Should we expect acquisitions to be concentrated in this high performance or are you willing to deploy capital into machine equipment and PP and utilities to accelerate their turnaround?

Yes, we have said that we currently have the four divisions and the PP and utility division, you shouldn't expect acquisitions within that division in the coming quarters. This division is focusing on improving the performance in the current portfolio of companies. The acquisition activities will then be run across the three remaining divisions, including machinery and equipment. If you look at the turnover of that division, it's much significantly smaller than both the core solution and safety technology division. So with that said, they have some capacity to be active within the acquisition space. So you should also expect to have some acquisition within the machine and equipment division going forward.

Understood. Thank you. and also looking at operational leverage and obviously to improve the gross margin in a very impressive way. I know that the Luna business, which does not have the same margin profile, if that company continues, will start to turn around and grow again, will you be able to maintain the gross margin around 50%?

I mean, if Luna has quite a broad exposure, including the industrial sector as well as the construction sector, so if they would have some underlying market increase, I expect that effect also to take place across the group. So I think that the portion of the Luna business will not increase on a group level. So, yes, I expect us to be able to maintain the margin level that we have if Lina starts to grow their business. Perfect. That sounds promising.

And if possible, is it possible to help us to quantify the leverage that you expect? once the volumes are returning. So if you were to see like 5% organic volume increase, what kind of EBITDA margin expansion would you expect to flow through, given the current cost structure?

I don't know, Peter, if you'd like to... No, we don't really, you know, devolve figures like that. So I think I'll pass on that answer. But of course, we will, you know... There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

The next question comes from Anton Ingves from Nordia. Please go ahead.

Hi again. Just a couple of follow-ups here. You mentioned here in the machinery and equipment business that you see sort of a bounce back already in Q2. But how good visibility do you have here for the coming quarters? Obviously quite

Yeah, as mentioned in the report, we had some extra cost in this division during this quarter that we don't foresee to have in this current quarter. And we also have some projections in terms of revenues and margins in our companies. Some of the companies, for example, ATE Solution is quite project-oriented business. They had a little bit weaker result in the Q1, but we know already now that the Q2 will be much stronger for them. We also have the Polartem business, the company doing mobile heaters that we also have quite a good kind of forecast on where they will land in this current quarter. So yes, we have already now indications that we will have improvements in this division in this quarter.

Okay, sounds good. And sort of on the extra cost, can you sort of quantify that a bit more?

I mean, the main reason for the division not to deliver according to expectation in the Q1 is a product mix component, but the majority of of the description is related to increased costs. And a lot of that cost is kind of a more temporary characteristic.

Okay, perfect. I think that's all for me now. Thanks again.

Thank you.

Thank you.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Yeah, we have one written question, and it's the machinery and equipment EBITDA trend is clearly negative. Many of these companies have acquired in recent years, such as Polartam, Timanaju, Maschinab, and LabSense. Have these acquisitions performed worse than expected, and what has gone wrong here?

I mean, we are a long-term owner to our companies. And, I mean, if we look, take some concrete example, the PolarTerm, we have owned them for, is it four years roughly, I think?

Yeah.

And they have performed very well during the last, you know, two and a half years.

The first two and a half, yeah.

Yeah, the first two and a half years. And then, They were hit by the tariffs because the US is quite a big market for polar tar. So that kind of stopped a lot of the sales temporary and they also deliver quite big volumes to the US Air Force. There was a lot of uncertainties around the tariffs and the ordering also within the defense segment. That has loosened up partly now. But still, so they have some firm orders that they expect to deliver out in near terms, but they haven't materialized yet. And they also were quite exposed to the rental market because they were selling to renters, Kramo and similar companies and some companies in the German market. And when the kind of construction demand weakened, the renters didn't buy anything for some period. But if we look at the PolarTerm order book situation now, it's improving significantly. So I'm confident that PolarTerm over time will deliver according to the expectations and maybe even better. I would say the ATE, I said earlier, that's very project based business. They have volatile invoicing But they perform better still currently than expected when we acquired the companies. But you get some volatility in some quarters and this Q1 quarter was affected by that volatility in ATI. Then LabSense, for example, as another example, they are more stable. But on a general level, I would say The companies selling machineries and equipment have some negative effect of the underlying market situation. But over time, I mean, in a more normal market, I expect all of them to pick up to get to the level they have been before or even better. So, yes, if you take a very short perspective, you know, some single quarters, if you look at this division and the performance, yes, I agree they haven't performed according to the expectation. But over time, I'm still confident that they will be at least on the level that we expected when acquired. So it's not a situation that the companies have shown to be something different than expected. when we made acquisitions. It's more a reflection of the underlying market situation as such. Peter, do we have any other written questions?

No, that's all the questions. I think there's nothing else.

Okay, so thank you very much for listening. As said earlier, we now have a quarter with improved margins, improved returns, improved profit levels. We have the aim to continue on that path going forward as well. As said before, the core solution division and safety technology, there are no extraordinary effects in those divisions, and I expect them to continue to perform on a very good level. And then I expect the machine equipment to perform better in the Q1 compared with the Q2, and then we will continue the steady work within the PPE and utility divisions. to steadily improve the performance of those companies, even if that performance not will be enhanced by acquisitions. So with that said, thank you very much for listening once again, and have a really, really nice summer when that period... At least I will start now to slow down a little bit and get some... Some hopefully two weeks of some vacation and if you are getting some vacation now, I really wish you a very nice summer vacation.