NIBE Industrier AB (publ)

Ladies and gentlemen, welcome to the NIBA Q1 report. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question-and-answer session. Today, I'm pleased to present Eric Lindquist, CEO, and Hans Bachmann, CFO. Please begin your meeting.

Good morning, everyone. Eric speaking here, and Hans, of course. Yeah, I'm right here. Good morning. And we're going to pursue, you know, the usual path, when we comment ourselves upon the report and then we allow for some questions which we will try to answer as expediently as possible then of course we have to go for other issues here no later than 12 so we don't like to be impolite but that's the time schedule we have today and we think that it's been a fairly strong start to the years we would say And most of the market segments that we deal with have shown a good growth. And we've also seen some improvements in the supply chain, which is very pleasing. But not necessarily all the way, but every week that's better than the previous one is, of course, pleasing to us. And again, it's primarily driven by the sustainability profile of our company and the three business areas we have. And of course, energy prices going up and down, that's also a worry to customers and also becoming more independent or totally independent of the gas and oil supply from the east that we all talk about. And of course, everything is around investments here now that we are into and trying to cope with the growth that's at hand. And the result is also coming around in a good way. It's overall a healthy margin. The acquisitions so far this year haven't been extraordinary. We've only had one acquisition. That's in Canada. And that happens to be in the same province where we have two other entities of legal nature. So from a practical point of view, It's very good to have them concentrated in one province when we travel there. And if we just have a quick look at the figures that you have in front of you. And of course, the growth has been like 33%. And the gross margin has recovered. And I think Ron's going to come back to that, which is very pleasing, of course. And there are a number of factors behind that. It's sales, naturally, where you always get a slightly better margin and then increased productivity. And also they were in better balance when it comes to our own prices and the prices we are paying to our sub-supplies. And the operating margin has taken a great leap from those 10.8 to 15.1. But in all fairness, like we also point out, last year we took a hit. when the invasion or the Russian aggression on Ukraine was a fact. Then we said, okay, let's write off everything as far as values are concerned over there. And that meant 140 million were written off or written down. That means that the margin operationally last year was 12.1. So it's still quite a bit of a jump, but it's more like a three percentage Bertrand de La Chapelle. Units rather than the five indicated. Bertrand de La Chapelle. The same thing with a net profit margin goes from 12 point 10.4 to 14.2 but in all fairness, you should have been from 11.7 to 14.2 if you we compare apples to apples. Bertrand de La Chapelle. And then we have the the graph or the graphs that are coming here, indicating that we are. on a on a pattern that we know since before, we still have some seasonality. But it's more a growth pattern, lesser seasonality than it was in the past. And we also see that the past 12 months, we are now approaching 44 billion in sales. So nothing really to comment more about that. And also on the profit after financial items, it's the same thing. The bars are following the usual pattern. And of course, the past 12 months have a healthy direction when it comes to the profit after interest. If we just have a quick look at the pie charts, have a typical look at the climate solutions, typically around 65, so it hasn't changed that much, an element around a quarter, and stoves like 10%. And because of the margin, of course, the climate solution, they represent some 75%, and the other two, 16 and 9, respectively. Geographically, of course, Europe has had a strong growth due to primarily the heat pump growth. In North America, it's now around 27. In Europe, of course, we include the Nordic countries also in Europe, but outside the Nordic countries, like 46, and the Nordic themselves, 23. And outside North America and Europe, it's 4%. And that's mainly element, of course, that's represented there. If you just dive very quickly into climate solutions, strong growth, and of course, it's Like before, a lot of people would like to get away from gas and oil as quickly as possible. And we also have new attractive products that we have been able to present to the market. And there are also clear improvements in our supply chain, but not to the level where we would like it to be. But we hope from the promises we've been given and from our work with the alternative supply roads, we believe that during the second part of the year, we'll have a, if we can call it a more normal situation. Investments, of course, are ongoing to be able to cope with the coming growth. The growth right now, we're able to cope with, but the growth we anticipate to continue. So we feel that we are well in line with the market growth when the new facility is going to kick in. J. And the operating margin, of course, on climate solution has also increased due to the. J. The volume of naturally or the sales volume, we also been prepared or women able to have a better productivity, since raw material and components are coming in at a better flow not satisfactory, but still a bit better that has increased productivity. and also the price situation is more in balance. So we can see that it's a healthy growth, some 38%, and the operating margin is up naturally from 11 to 17 and a half, but in all fairness, again, there we have to add back the 114 to compare it operationally, and then it would have been like 13 last year, but still it's a substantial increase J. step in. J. In margin, the stove side is particularly the the board burning side that is expanding and for same reason this. J. On the climate solution, of course, people are not so willing to invest in in gas burning stoves and there's a shortage of wood pellets so that's a hindrance on the other main category of the world of stoves. J. We spend quite a bit on continue to spend quite a bit on the. J. On the r&d side when it comes to improving the emissions, we like to get rid of all the particles to. J. Have a totally clean combustion and we feel that we are now coming to or we are not launching anything on as far as part of the concern, but we are launching our concepts now, as you saw in the report. So we feel we are getting closer to the actual product launch. Also here, of course, we are in a very ambitious investment program. We're opening up a new factory in Britain in a month's time, for instance. And of course, we're also an ongoing investment here in . And here, for the same reason on the climate solution, better sales volume. We've been able to also increase productivity. a better price leverage than some 12 months ago has given us a a healthy growth but also an operating margin that is like a considerable improvement from 11.5 to 13.2 if we just dive into element very quickly we can say that here we have a market some market segments that are not the of course, self-prosperous, particularly when we talk about consumer goods segments, whereas on the sustainability side, there we have the opposite. So there we have sort of two worlds. And the semiconductor industry, as we explained in the fourth quarter, took an unexpected dive in the fourth quarter due to restrictions from the US to China. But we assume that will pick up. because everyone is striving now to build factories in America and even in Europe. Of course, we also invest quite ambitiously in this area, but due to the product mix, the margin has somewhat went south from 10.1 to 9.3. So I think that's very quickly, you know, the headline for the first quarter. And of course, I forgot to mention that this is a very special day here in Markary. We have our annual shareholders meeting, and we're going to have that meeting in one of our factories that has been erected for producing heat pumps. So we're just in the process of moving in equipment there. We kept one sort of, yeah, room, we can call it, or area uh we kept that open for this particular event so it's a it's like a really noble prize dinner or that's wonderfully set we can say weather isn't so cooperative here today it's a little bit grayish but we just pray that around fifth or 1700 today everything gonna be you know very very uh sunny again So thank you for that. I hand over the words or the microphone to you, Hans.

Well, thank you, Erik. And some more than a thousand shareholders will be visiting us this afternoon as well. So that's quite pleasing, being able to show also what we're building all around here before they head into the factory. Anyway, let me just take you through the business areas here quickly on a slightly more detailed level and then open up for the questions. Climate Solutions then has continued its very strong growth, you can say, from previous quarters, driven by the sustainability and also cost awareness amongst customers wanting to shift away from oil and gas. And with improvements in our supply chain, although we're not fully through there, this has had a good impact on the numbers. So as Erik mentioned, growth has been some close to 39%. Jone Peter Reistadler, A portion of that small one, you can say is acquired what's a little bit hidden in the numbers, there is the divestment portion of the shoulders part. Jone Peter Reistadler, So in the growth figure there, there is like five and a half percent of that portion of business leaving us, so to speak, but with such a good increase in sales that has a good impact on the. Jone Peter Reistadler, profitability as well, so gross margin has taken a jump there from 32 and a half up to 36.2. Jan-Willem Wasmann, Coming them from sales improve productivity and, of course, a portion of price as well. Jan-Willem Wasmann, And the operating margin has then landed in at the 17.5 from the 13 adjusted for the write off, we made last year so it's of course almost a doubling in the in absolute terms and, on top of that, we have also. continuously been investing in both increasing our manufacturing capacity, but also in R&D facilities and a new marketing center. In terms of geography split or geographical split of sales, the picture has slightly moved in favor of North America, you can say. Last year at this point in time, they made up some 19% of the chart and are now up to 22. So the Americas there, and North America in particular, of course, has shown a nice increase compared to last year. So the sustainability message is coming across also over there. If we head into stoves, Nibe Stoves has shown a very strong Q1. Those of you who have followed us for some time know that Q1 and Q2 typically have been the weaker quarters. But now, since some time back, wanting to shift away from oil and gas, the picture has changed where the stove product has moved from being a decorative item, so to speak, to a security product. So sales have increased there quite substantially as well, up some 39%. But of course, a good portion of that is the acquisition that Erik mentioned. But even if you take out that we have an organic growth, including a small portion of currency of some 17% or 17 and a half even. So sales have gone up from 900 to 1250. And also here we've seen a good improvement in the gross margin moving from 34.5% up to 38.3%. which then has had a good impact on the operating profit as well, taking a jump of almost 62%. And it's always pleasing to see, of course, when the growth and the profit exceeds that of the growth in sales. It means that we're doing something right, at least. And also here, just like in climate solutions, we have an ambitions investment program that's being carried out both in the forms of increasing capacity, but also in R&D of developing new and even better products. If we then move to the pie chart for the geographical distribution of sales, we also here have a strong increase in the North Americas, of course, and this is where the pie chart has really changed. It's up from 19% up to 29% following the acquisition, meaning that we have a more even spread of sales per geography than before between the Nordics, mainland Europe and North America. making the whole business area more balanced, you can say. Then heading into NIBE element. NIBE element has during Q1 seen somewhat varying demand, you could say. I mean, clearly the segments with a sustainability profile have continued to develop quite nicely and driven the whole business area. Whereas those with more consumer-oriented focus Jone Peter Reistadler, have experienced, you know, a varying demand and and weaker in some spots as well, and on top of that the the ban from the US on on exporting semiconductors has continuously had an impact, although we think that is more of a. Jone Peter Reistadler, One time effect in the sense that capacity will be needed to be built elsewhere, but it will of course take some time to achieve that. But all in all, the growth for Nibe Element was close to 22%, with only a small portion being acquired. Then this is our most global business area with a larger exposure also to North America. So here the currency impact has helped us slightly more than in the other business areas. But the majority of the growth comes from pure organic growth. but due to the product mix change you can say with semiconductor being reduced slightly we've seen a small shift in operating margin here going down then to 9.3 from the 10.1 in previous years but also here we're investing and keeping up a quite ambitious investment program this has been and continuously is our most J. global business area, you can say, and there have been no large shifts in the pie chart here nordics some 17% mainland Europe 38 and then North America being basically just as big and then with a portion of some 9% over in Asia. J. Then just quickly move on to the balance sheet there is nothing that really sticks out here it's. J. Stable and sound. The one part that perhaps sticks out a little bit is the non-financial current assets. And we will come back to that. It's our inventory that has continued to increase, which then also has had an impact, of course, on the cash flow a little. But whereas we during the post-pandemic period were increasing our inventory for the reason of getting hold of components, it's now more a matter of building finished goods inventory. which has traditionally been done by us during Q1 and Q2 for the sales coming after the summer break. If we look at the, we jump to the cash flow analysis, we've actually generated quite a healthy amount of cash, some 1.4 billion compared to 900 last year. But then The change in working capital for the reason I just mentioned has, of course, consumed a portion of that and then the ongoing investment programs that I also have mentioned. So there is a slight negative change in the operating cash flow, but we know where the money is, so to speak, and we are generating good cash from the underlying business. And this results, of course, in the number of key financial figures, and we don't need to go through each and every one of them. But if we look at some of them, I mean, we continuously keep a good portion of cash on the balance sheet, like 4.5 billion. The interest bearing liabilities have continuously decreased. The net debt to the DA is below one. And we have an equity assets ratio of well above 50. So I think we're ticking many of the boxes here for being in a position for further good growth. I think the next picture shows the working capital that I just mentioned. So it's of course high and higher than where we want it to be, but it's now much more a matter of building finished goods for the sales that we need to perform both now and after the summer. And on the last piece of paper or picture here, return on capital is coming closer to the 20 which we have and the return on equity to the 20 target that we have up from 14.2 and 15.6 respectively so it's a good development the net profit per share has basically been doubled since last year so again i think we're very well positioned for for further growth organically and through acquisitions Although there are, of course, always rooms for improvement. I'm sure there are going to be questions around this now. Things we have not told you about, so to speak. Would you like to add something, Erik? No, I think it's fine. We are ready for questions.