NIBE Industrier AB (publ)

Welcome to the NEBE Q2 presentation for 2025. 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 Eric Lindquist and CFO Hans Backman. Please go ahead.

All right. Good morning to everyone out there. Good morning from Hans as well. You're going to have very much the same procedure as before, where we, in 20 minutes or so, describe the report from our views. And then, of course, you are allowed to questions. We're going to come back to that. So with that said, let's shoot. We believe that the headline fairly much is a summary of the status for the Q2. It's a continued recovery. And we also feel it's a brighter outlook. And we've been claiming that for the last two quarters this year, and we saw an uptick already at the end of last year. So if not a trend, it seems like it's a fairly steady path when it comes to the market regaining. Of course, there are issues out there that have been difficult to assess, but we just have to combat those as far as tariffs and all that and also the currency. But we have to, as I said, just combat that. And we're very pleased to see that when the volume or the sales volume increases, then of course you also get a better productivity and then we have a good cost control. So then of course that results in a better margin. And it's also very pleasing to see that consumers in general have a preference for heat pumps. And we also feel that and judge that there'll be a continued growth in sales as the year goes by. We are coming back to a more seasonal pattern as we've described several times now. 21, 22, 23 demand also enormous. So we didn't really see that pattern. And of course, last but not least, our ambition to come back in an operating margin within the historical levels. I'm sure there are going to be a number of questions regarding that. So we leave it like that, but it remains, certainly it remains our ambition there. And of course, we also realize that there are uncertainties, but you can't always blame the world for everything. Our ambition is very clear. And at the same time, we can't say, well, now we have chiseled out the promise. It's 100% certainty. But that's how we work internally anyway. And I think that's pretty much what we see in this picture. The revenue, of course, is limited, the revenue increase. But that is dampened, of course, by the strength and crown. But the operating profit takes a significant jump and also the operating margin. And to address that more in figures, if we look at the combined two quarters, we're just sniffing at the 20 billion now. with an operating margin of some 8.7. And of course, we can also see that on a rolling basis, considering the program that we had last year, we're up at 9.2. And if we look very specifically into the second quarter, then we of course see that we again are on the right path. Now we're up at 9.4. And the growth is not so significant again. But here we have more of a headwind during the second quarter than we had during the first quarter. Gross margin is increasing, which is pleasing. And your operating profit is around those 944. So if we continue just with a few graphs, the profitability, of course, took a dive and we are on our way up again. And if we then look at the distribution of sales and profitability, now we're looking at the profitability, operating profit. Of course, climate solution is really having a, now you're, okay, some pictures now. So 76% of climate solution now is representing the operating profit. That's a little bit more than usual, which means that the other two business areas are lagging a little bit. When it comes to geographical distribution, we don't see that much of a difference and Europe is of course 45 and the Nordic 18 and North America is just under a third of sales. And if we look at the climate solution situation. I know that a lot of you out there, I think we had the wrong picture up. I don't know whether now we have it. Yeah. And of course, the second quarter shows a continued improvement in both sales and margin. And that's very clear signs, we believe, in the recovery in the heat pump market and implemented cuts in interest rate that also has a positive, naturally, impact on our sales. That's a totally different atmosphere today than it was a year ago when it comes to interest rates, of course. We continue to believe in long-term positive growth, and as climate changes, We can also always argue about the reasons, but when we get warmer, the cooling side of our business becomes stronger. We also see that our joint efforts have been bearing fruit. I mean, we've been working very close between Element and the Climate Solution and also cross-selling. So we have really opened up the gates there to a larger degree than we've done in the past. And there again, of course, it's very seasonal. And we haven't seen that. But in all three business areas, the seasonal pattern going to be more pronounced as we go by and again of course we repeat the ambition to be back at the margin levels or interval that we had in the past and I'm sure there again we're going to continue to discuss that with you and if we look at the next slide and I There's a little bit of confusion here with the slides, I think. We just continue with the heating element. It's a relatively stable demand. Of course, here we are represented in most of the industry around the world. So that isn't so really seasonal because the varying product categories, they have various patterns. we can say that the electrification is really meaning a lot to us and also the rail and semiconductor industries they are really showing significant improvements and we also see that although it's always a lag when the element is supplying the heat pump industry or the heating industry in general of course they come in at a slightly later stage where the producers have had perhaps in the past a little bit too much of an inventory, now it's slimming out and they don't experience the same growth we estimate that the manufacturers are experiencing. And the industry as such, typically that is a reflection of perhaps the weaker climate, perhaps very much so in Europe, that the industry, they invest a little bit less. And we noticed that in some segments. Of course, again, trade tariffs and currency always going to have an impact on us. But we try to say, okay, they are there, but we have to operate on a professional basis anyway. That's our task. Again, the margin here takes a jump again. up from the pre-first quarter. And our ambition is still the same to return within the interval that we've had in the past prior to 24 setting in. And when we look at stoves, okay, now we are coming up some other figures here, I don't know, but we can comment on those, of course. But the stoves, that is a little bit unexpected, perhaps, that the development in North America, disregarding all the rumors and all the issues over there it's been pretty good of course it's been tough for or tougher for the stoves business since we produce in canada so we've decided to continue to sell and not to just protect the margin here but continue the volume because we've been working so many years building up that market and one of the reasons that we have a considerably lower margin is of course that takes a hit when the tariffs come in. And also in Europe there is a weak performance or a weaker performance and I guess that the consumer confidence is not 100% here. And that, of course, we feel. But again, we believe that the second half is going to be considerably stronger, returning to that pattern as we said ago, as we said again. And the product launches and the marketing activities that we've had also is a very important factor or important factors for the positivism that we feel for the second half of the year. uh here again i mean perhaps more pronounced so hands will uh return to that perhaps but the the the margin on stoves there we realize that with such a start during the first half it'll be cumbersome to arrive at the historical level so there i think we um we had we need a few more quarters to really bring that up to par And I think I stopped there. I hope I haven't confused you by the slides perhaps coming in. A little bit of a disarray of order. But I think I'll hand it over to Hans and then you can continue more with precise figures for the quarters respectively.

Yeah, well, thank you, Erik. And once again, we apologize for the slide mix up here. The slides are correct, you can say, but for some reason the order has been a little bit mixed up. But anyway, I will take you through each business area now with the numbers and then also through the balance sheet and then working capital, cash flow. And then, of course, we will leave room for questions. If we look at the numbers then for climate solutions, I mean, year to date, the business area has step by step improved, both in sales and in operating margin, which is thanks to this underlying growth for a sound demand for our products, as Erik mentioned. Of course, there are some clouds out there with the geopolitical situation that is difficult and also with the currency working against us. So the growth that we see here of 4%, that is, of course, the net effect, including translation effect. If we were to remove that, we would see a considerably stronger increase in underlying sales. What's pleasing to see is that the gross margin has improved from the 30.9 this time last year up to 32.6, continuing to head in the right direction, so to speak. And then an operating margin that has improved by some 66 or even 67%. And there we see what effect a good volume has on our structure, so to speak. If we just get the volumes into our factories, we have a phenomenal opportunity here to generate a good profit. So the first half year came in at 10.9. And over the past 12 months, we're now at 11.2, up from last year's full year of 9.3. If we head over to the second quarter, that was an even better improvement, you can say, where sales grew by 4.7 on a netted basis, but where currency hit us even more, as Erik said before. So, I mean, more than half of the improvement there was erased by translation effects. But here the gross margin took another step up in the right direction, hitting 33%. And the operating profit came in at 840 million, up with 66%, and showing an operating margin of 12.3%. So as stated, step by step, we're definitely moving in the right direction within the business area. in terms of geographical distribution of sales. We see a slight increase here, you can say, in the Nordic countries compared to last year. That's the area that came back first, you can say. North America has been almost surprisingly stable, you can say. You would think that a lot of things would not be working as normal over there, but the business actually is. So it's Europe that has fallen a little bit behind compared to last year. But it's on its way now again in the right direction. If we move on to Element. element has had this development with a rather fluctuating demand it's not been as fluctuating as neither stoves nor climate solutions it's been more stable all along but it's of course exposed to many many segments out there where the hvac segment is step by step coming back semiconductor is more and more back already you can say whereas other segments like automotive is still struggling a little white goods as well here it seems as if we only grew by some two to three percent but also here of course we had a currency effect taking away more than than half of that growth so the underlying growth has actually improved and we also here see an improvement in gross margin coming up to above 20 it's a slightly different business model than the other business areas that's why it is lower and where the operating profit has grown with some 30%. So we're up at the 6.4 margin, not where we want to be, but definitely on track and in the right direction, which we want to be on, so to speak. And here over the past 12 months, we're now at 6.3 compared to some 5.7% operating margin for the full last year. If we look at the individual quarter here for Element, It seems as if we have actually declined in growth. And of course, that is also the true number in our reporting, so to speak. But here the currency hit us even harder, taking away the whole growth. So the underlying growth here has been mid single digit, you can say. So also on the right track going forward. and improved gross margin here. And again, a profit that has risen by some 30% coming in at an operating margin of 6.6. In terms of the geographical distribution of sales, there have not been many movements here. It's been fairly stable between the different geographies. And it is, as we've pointed out many, many times, our most global business area. If we then head on to stoves, As pointed out a couple of times, stoves is back to a more traditional seasonal pattern, which means that the first half is not as strong as the second half. As an average before we had these strange years, you can say with the pandemic and then the Russia invading Ukraine, we had like an average operating margin here of some four or five percent. And then we had a very strong second half and we believe we're back to that pattern. But of course, there is a large uncertainty right now with a lack of consumer confidence, low new build rates and such things that have an effect on us. So here we lost some 13.5% in sales, but less if we adjust for the currency effect. which however was not as strong as in the other business areas. But the gross margin has improved, it's at 34%. We did generate a small profit for the first half year, but expect more to be done here during the second half. If we just look at the individual quarter, This is, of course, also part of the weaker part of the year, the first half. But here we have fallen below, so to speak, our breakeven point, which has led us to generating and operating loss. And here also the currency hit in stronger than it did in the first quarter. So obviously we have some homework to do, but we believe that the cost saving program that we ran last year has had a very good effect and it's more a matter of volume rather than any structural issue. In terms of geographical distribution of sales, there have been some movements compared to last year where North America actually has come back very nicely, being at 38%. It was at 32% last year, whereas then the other ones have lost slightly. But all in all, no really large movements in that respect. If we then leave the business areas and move on to the group again and the balance sheet, I would say that there are no major movements here, really. You can see that intangible assets have been amortized a little. Tangible assets were depreciated as well. Financial current assets are fairly stable at 5.6 billion. So the total balance sheet is roughly at the same level, slightly lighter, if you like. And we can... in a way, jump the equity and liability side and move on to the cash flow analysis, because I think that attracts a little bit more of attention. I mean, we've generated considerably more cash than we did last year at this point in time. It's been almost 900 million Swedish kronor more, which of course is a sign of the recovery that we are seeing. Then the change in working capital might seem severe, so to speak, eating up all of that change. And typically what we do during the first half year and have done traditionally is to build inventory for the latter part of the year, since we often close down our factories, run maintenance in them during the summer, and we need to be fully equipped when we come back from vacation. And we've done that to some extent also this year, but not at all to the same extent. We've been building a little bit of finished goods inventory, but we've nicely reduced our components inventory. So the effect from inventory in that number changing working capital is actually positive. And we've also had more favorable conditions with our suppliers. So our accounts payables have also contributed positively. So the whole change in working capital here comes from increase in receivables. And we had a fairly strong sales period just before the summer where we invoiced a lot to our customers and that came in fairly late that's also a little bit of a pattern that we have that in the latter part of a month that's when products really leave our doors so we've not yet been paid for those but they are coming in so it's all a matter of or a consequence of the higher sales that we see this negative change in working capital Then if we look at the investments in current operations, they are at 1.1 billion. It's very much related to this program that we announced some years back where we're finishing off the last bits and pieces. It's come down from the 1.2, will continuously come down. So we believe the cash flow after all is very much or rather much under control. If we move on to some key financial figures, we once again have the investments there. They're all in current operations. We have the unappropriated liquid assets, which of course is the cash and undrawn but already existing credit facilities. So they're at 6 billion, which leaves room for both acquisitions and what have you, so to speak. interest bearing liabilities continuing to come down. A net debt that hasn't moved much. It's up a little bit of a tick, but as many of you know, we have bonds outstanding on the market and we refinanced some of those before the summer because we thought it was a good time. Although the maturity doesn't come until after the summer. And then an equity assets ratio, which we believe is quite decent here with 44%. And then coming back to working capital I mean obviously that is something that we continuously are working with and you can say especially on the inventory side and as I mentioned we've actually been able to bring that down despite a period where we typically increase it. So again here it's very much related to these receivables that I mentioned but of course we're looking into inventory returns receivable and payables I mean the the days there, the terms, so that we optimize this. But we're not either brutal to our suppliers because we need them in both good and bad times. And if you haven't treated them well when things are, well, when it's in your favor, they might not be there for you when things are tough. So it's always a balance, you can say. And then last but not least, the key financial figures. Of course, return on capital employed, return on equity, they still need to come up, you can say. They will do so with an increased level of sales and profit coming. We're a fairly equity assets rich company in a way with a 44% equity assets ratio, as I mentioned. So you have these communicating vessels there, how they will develop. But they will step by step come up. Net profit per share has, of course, taken a good jump upwards. And also the equity per share has improved slightly. And as always, we never comment upon the share price. That's up to you guys out there to sort of control. And by that, I think we're through with the presentation. I don't know if you would like to complement with something, Erik. No, no, no. I think we are ready for the questions.