Beijer Ref AB Q4-2020
Stable profits and increased dividend
Fourth quarter
Net sales decreased by 0.8% in the fourth quarter compared to the same period last year and amounted to SEK 3,408 million (3,435).
Operating profit before depreciation, interest and tax (EBITDA) amounted to SEK 367million (363), corresponding to an EBITDA margin of 10.8% (10.6). Operating profit for the quarter amounted to SEK 256 million (256). The operating margin amounted to 7.5% (7.4%).
Profit before tax was SEK 239 million (242). Net financial items are SEK 3 million higher (-16M vs -13M) than in the previous year, mainly due to financing acquisitions and costs of an extended credit capacity.
Profit per share before and after dilution amounted to SEK 1.42 (1.42) and SEK 1.41 (1.41) respectively, which is unchanged from the previous year.
Cash flow from current activities was positive during the quarter and amounted to SEK 559 million (480). Unused credit amounted to SEK 1,516 million (1,752).
During the fourth quarter of 2020, Beijer Ref invested in a minority holding in Fenagy A/S in Denmark, which develops environmentally friendly industrial pumps.
Beijer Ref also acquired 85% of the air conditioning company Sinclair in the Czech Republic. The company has an annual turnover of SEK 400 m with good profitability. Consolidated in the group from 2021.
The board will propose to this year's Annual General Meeting an increased dividend to SEK 2.50 (1.75) and an additional dividend of 0.50 to compensate for lower dividend in 2020.
Full year 2020
Net sales decreased by 5.1% during 2020 compared to the same period last year and amounted to SEK 14,062 million (14,817). Organic change was -6.2% (0.9%).
EBITDA amounted to SEK 1,477 million (1,655), corresponding to an EBITDA margin of 10.5% (11.2%). The operating profit for the period amounted to SEK 1,036 million (1,230), a decrease of 15.8% compared with last year. The operating margin amounted to 7.4% (8.3%).
Profit before tax was SEK 977 million (1,174). Net financial items are SEK 3 million higher (-59M vs -56M) than in the previous year, mainly due to financing acquisitions and an extended credit capacity.
Profit per share before and after dilution amounted to SEK 5.71 (6.82) and SEK 5.67 (6.78) respectively, which is a decrease of 16.4%.
The acquisition of the wholesale company ACD Trade in Australia was completed in the first quarter of 2020. The company has 60 employees across 9 branches. The company is included in the group's financial statements with effect from 1 February 2020 and it has contributed SEK 554 million to sales.
2020 has been greatly marked by the Covid-19 pandemic and its effects. Measures have been taken in all parts of the business to fend off the effects, in the second and third quarters in particular.
Comments by the CEO
Stable conclusion to a challenging year
2020 was a year largely marked by the corona pandemic and we took swift action to mitigate the negative effects of a market that was characterised by tough restrictions and shutdowns. Our savings programme and rapid reorganisation have paid off. Compared to the second quarter, which was the period most affected by closures, markets have remained relatively stable in the last few months in spite of new restrictions.
The group's net sales for the fourth quarter are in line with sales in the same period last year and amounted to SEK 3.4 billion. Organically, our Central Europe and Asia Pacific regions have experienced growth and southern Europe is in line with the previous year.
Operating profit amounted to SEK 256 million in the fourth quarter, which is in line with the corresponding quarter of 2019. Apart from the acquisition of ACD Trade, it is mainly the effects of Covid-19 and lower prices of refrigerants that have affected earnings. Volume, but above all the fall in the price of refrigerants, has led to a loss of sales of approximately SEK 60 million in the quarter, and almost SEK 450 million on an annual basis. There are some indications that refrigerant prices are stabilising. The EU rules for phasing out f-gases, which regulate the permissible amount of CO2 equivalent emissions, were further tightened at the end of the year, which may affect the price. However, we do not expect the same development as in 2018. My assessment is that future price changes will not affect Beijer Ref's performance to the same degree as they have in the last two years.
Our HVAC product area shows growth of just over 3 per cent in the fourth quarter. In general, the demand for air conditioning and heat pumps is rising and therefore it is positive that we succeeded in performing an acquisition in this area at the end of the year. The Czech HVAC company Sinclair is from 1 January 2021 part of our group, which strengthens our overall offering. The company distributes products to several countries in Europe, mainly through its own brand. A brand that we will further develop and launch in other Beijer Ref markets. It is also gratifying that our Dutch company Coolmark had one of its strongest quarters ever with an organic sales increase of 14 per cent. Coolmark's profits increased by approximately 50 per cent for the full year, which shows that there will be a big impact on profits as sales increase.
Apart from lower refrigerant prices, the Commercial refrigeration product area grew by approximately 2 per cent in the quarter. This part of our business is socially important, which has allowed us to keep activity at a stable level even during periods of shutdowns.
The entire OEM product area had an organic sales loss of 6 per cent compared to the same quarter last year. The decrease can be attributed to geographical areas such as the Nordic region and Africa,
where restrictions due to the pandemic have made investment decisions delayed for a quarter. In Italy, we are now preparing to open operations in our new, environmentally friendly production facility, which will double capacity in the sustainable self-produced segment. Orders received in Q4 have been strong, meaning that we are entering the new year with a well-stocked order book.
OEM is a focus area and it is therefore positive that we were able to perform another acquisition that strengthens our offering in the product area. By investing in the Danish company Fenagy, with the option to take over as principal owner within a few years, we will be able to offer sustainable industrial heat pumps on the northern European market based on the environmentally friendly refrigerant CO2.
At the end of the year, Beijer Ref had a new principal owner in EQT when Carrier decided to sell its holding. This is a statement of strength and a recognition that what we have built up is considered to be viable for a long time to come. EQT will greatly contribute to Beijer Ref's continued journey of growth, through its knowledge and broad network.
I would also like to take this opportunity to thank Carrier for eleven years of successful cooperation. They have been involved in the globalisation of Beijer Ref and have opened many doors for us. I am pleased that in the future we will continue our cooperation, since Carrier is an important supplier.
As I mentioned, 2020 has been a special year in many ways. When we sum up the year, we still have a lot to be proud of. The rapid adaptation to a new reality has required a great deal from our employees, who made it possible through their sacrifices, carried out with great loyalty.
Our balance sheet is strong and we have every opportunity to continue growing, both organically and through acquisitions.
The board's proposal for an increased dividend reflects our optimistic confidence in the future and hopefully 2021 will be the year in which the business returns to normal.
Per Bertland, CEO
Fourth quarter of 2020
NET SALES
Net sales decreased by 0.8 per cent to SEK 3,408 million (3,435) in the fourth quarter of 2020. The decrease in sales has been greatest in the Nordic region, southern Europe and Africa and is due to exchange rate changes and Covid-19. Apart from exchange rate changes and acquisitions, the organic change in net sales was -0.6 per cent (0.9).
Air conditioning has however developed strongly during the quarter and has grown organically by 3.4%, largely thanks to good cooperation with Toshiba, Mitsubishi Heavy, Carrier and Gree. Sales development in air conditioning has been strong in all regions except Africa and Eastern Europe, and particularly strong in the Nordic region and Central Europe. A stronger Swedish krona resulted in exchange rate effects of SEK -216 million (111), corresponding to -6.2 per cent (3.4), since most sales are in currencies other than Swedish kronor.
Net sales decreased by 5.1 per cent to SEK 14,062 million (14,817) during 2020. Adjusted for exchange rate changes and acquisitions, the organic change in net sales was -6.2 per cent (4.4). The main reasons are the effects of Covid-19 and lower prices for refrigerants. The decrease in sales has affected all geographical segments and had the greatest impact in Southern and Central Europe.
PROFIT
The group's operating profit amounted to SEK 256m (256) in the fourth quarter, which is unchanged compared to the previous year, thanks to savings achieved and positive acquisition effects of SEK 19.7m. The operating margin amounted to 7.5% (7.4%). Exchange rate effects of SEK -19.2 million (7.5) are included in the operating profit figures. Profit before tax was SEK 239 million (242) and profit for the period was SEK 180 million (183). Profit per share before dilution amounted to SEK 1.42 (1.42).
The group's operating profit for the full year 2020 was SEK 1,036m (1,230), which is 16 per cent lower than in the previous year. Exchange rate effects of SEK -32.8 million (36.1) are included in the operating profit figures. The operating margin amounted to 7.4 per cent (8.3). In 2020, the company made net savings of approximately SEK 300 m. The operating profit also includes positive acquisition effects of SEK 39.6 million for the year. Profit before tax was SEK 977 million (1,174) and profit for the year was SEK 729 million (873). Profit per share before dilution amounted to SEK 5.71 (6.82).
CASH FLOW
Cash flow from current operations before changes in working capital during the fourth quarter was similar to the previous year at SEK 210 million (250). Working capital decreased by SEK 350 million during the quarter compared with SEK 231 million during the corresponding period of the previous year. Normally, the group binds capital in the first half of the year and frees up capital in the second half of the year. The change in working capital between the years is due primarily to a decrease in goods in stock. Altogether, this gives cash flow from current operations after changes in working capital of SEK 559 million (480).
Cash flow from current operations before changes in working capital amounted to SEK 1 112 million in 2020, compared with SEK 1,280 million for the corresponding period in 2019. The change is mainly due to a lower operating profit. Working capital decreased by SEK 426 million in 2020 compared with an increase of SEK 25 million the previous year. Altogether, this gives cash flow from current operations after changes in working capital of SEK 1,538 million (1,255).
At the end of the period, credit facilities amounted to SEK 4,259 million (4,040), of which unutilised credits amounted to SEK 1,516 million (1,752). In total, net liabilities decreased by SEK 263 million.
Refinancing of SEK 2.9 billion of the company's granted credit facilities occurred, divided over four different banking partners and with an average maturity of 3 years 5 months.
INVESTMENTS
Cash flow from investment activities during the fourth quarter amounted to SEK 265 million (33), which relates primarily to acquisitions and investments in fixed assets.
Cash flow from investment activities during 2020 amounted to SEK 560 million (137), which relates primarily to business combinations and investments in fixed assets.
COMPANY ACQUISITIONS
In the fourth quarter of 2020, two acquisitions were made, a minority holding in Fenagy A/S in Denmark and 85% of the shares in the Czech company Sinclair.
Fenagy is newly formed and is in the process of developing and launching a new industrial product range in industrial heat pumps and cooling systems based on the environmentally friendly refrigerant CO2.The company is included in the consolidated financial statements with effect from 1 December and is reported as a financial asset.
Sinclair is headquartered in Brno in the Czech Republic with sales offices in Slovakia, Hungary and Croatia. Sinclair sells air conditioning and heat pumps to a number of countries and most of the sales consist of HVAC products of its own Sinclair brand.
IMPORTANT EVENTS 2020
The year has been greatly marked by the Covid-19 pandemic and its effects, although effects in the fourth quarter were less marked. Measures to counter the effects of the pandemic were taken immediately during the first quarter to mitigate the effects. It is estimated that the company will lose sales by approximately SEK 500 million as a result of the pandemic in 2020.
Beijer Ref estimates that net savings of SEK 70 million have been effected during the quarter, including support measures of SEK 7 million. For 2020, the net savings amount to SEK 300 million, including support measures of SEK 57 million, which have been reported as a reduction in costs.
Beijer Ref is relatively insensitive to economic cycles as about half of the company's sales are made to end customers active in the food industry. The general economic situation is having an effect, not least in the main markets of southern Europe. However, a possible decline is offset by the need for the food industry to switch to environmentally friendly systems, which increases the demand for the company’s products. This, together with an increased standard of living, is driving our sales development. The company’s current assessment is that Covid-19 will have a smaller effect on earnings 2021.
Carrier sold its entire holding of shares in Beijer Ref in December, corresponding to 29.6% of the capital and 26.4% of the votes, to EQT, a Swedish investment company, listed on Nasdaq in Stockholm.
IMPORTANT EVENTS AFTER THE END OF THE YEAR
After the end of the financial year, the company acquired 100% of the shares of Complete Air Supply (CAS) in Australia. This company is active in HVAC and has a range that in particular complements ACD Trade well and which makes what Beijer offers for residential and commercial properties more comprehensive. CAS has annual sales of SEK 140 million, with 40 employees in 2 branches. The company will be included in the company's financial statements with effect from 1 February 2021.
Per Bertland has informed Beijer Ref AB’s (publ) Board of Directors that he plans to step down as CEO. The transition will take place when a successor has been found or during the latter part of 2021 at the latest.
DIVIDEND
The board will propose to this year's Annual General Meeting an increased dividend to SEK 2.50 (1.75) and an additional dividend of 0.50 to compensate for lower dividend in 2020. The proposal is that the dividend is paid in two instalments, SEK 1.75 in April and SEK 1.25 in October, so as to meet the company's seasonal variations.
THE SHARE
Since 2 January 2019, Beijer Ref’s B share has been listed on Nasdaq OMX Stockholm's Large Cap list. The share capital in Beijer Ref totals SEK 371,684,513, made up of 127,434,690 shares, each with a quota value of SEK 2.92. There are two types of share, A shares and B shares, which represent ten and one votes respectively. Beijer Ref had 11,046 shareholders on 31 December 2020 (8,750). The proportion of foreign shareholders amounts to 4.3% (4.5), with a capital shareholding of 55.3% (59.8). As of 31 December 2020, there were 9,918,720 class A shares and 117,515,970 class B shares. The company's ten largest shareholders hold 76.6% (78.2) of the votes and 61.1% (63.8) of the capital. Average sales of the Beijer share in the quarter amounted to 244,101 shares (207,819) per day at an average purchase price of SEK 295 (252). The closing price on 31 December 2020 was SEK 376 (275). As of 31 December 2020, the market value was SEK 47.8 billion (35.0).
RISK DESCRIPTION
Beijer Ref group's operations are affected by a number of external factors whose effects on the group's operating profit can be monitored to varying degrees. The group's operations depend on general economic developments in Europe in particular, which govern demand for Beijer Ref's products and services.
Like other global companies, Beijer Ref is affected by pandemics and in 2020 the Group was affected by Covid-19. The company has been taking the necessary steps to reduce its impact and is following the WHO recommendations.
Acquisitions are normally associated with risks, such as loss of key personnel. Other operating risks, such as agency and supplier agreements, product liability and delivery commitments, technical development, guarantees, dependence on individuals etc., are continuously analysed. If necessary, measures are taken to reduce the group's risk exposure. In its operations, Beijer Ref is exposed to financial risks such as foreign exchange risk, interest rate risk and liquidity risk. The parent company's risk pattern is the same as that of the group. For further information, see the group's annual report.
ACCOUNTING POLICIES
This interim report was prepared in accordance with IAS 34, the Swedish Annual Accounts Act and RFR 2. Beijer Ref continues to apply the same accounting policies and valuation methods as described in the most recent annual report. Information pursuant to IAS 34.16A, in addition to disclosure in the financial reports and their associated notes, also appears in other parts of the interim report.
Financial assets and liabilities by category and level of valuation
The group's financial assets and liabilities consist of financial assets measured at fair value through other comprehensive income and financial assets and liabilities valued at accrued acquisition value.
Financial assets valued at fair value through other comprehensive income consist of three holdings, one of which (SEK 11M) refers to listed shares and is valued at market value on the balance sheet date (valuation level 1). The two other holdings (SEK 29M) is unlisted holdings and is valued at estimated fair value (valuation level 3). Financial assets valued at accrued acquisition value, such as trade receivables and other receivables, as well as cash and cash equivalents, amount to SEK 3,953M on the balance sheet date and financial liabilities valued at accrued acquisition value such as accounts payable, leasing liabilities and borrowings, as well as other long-term liabilities, amount to SEK 6,517M.
Financial interest-bearing liabilities such as loans linked to financing are entered at accrued acquisition value and are considered to constitute a good estimate of fair value taking into account the fixed terms and the setting of interest rates.
TELEPHONE CONFERENCE Q4 2020
The company invites investors, analysts and the media to attend a telephone conference at which CEO Per Bertland and CFO Maria Rydén will present the interim report for the fourth quarter of 2020. The presentation is held in English and lasts about 20 minutes. The meeting is on 28 January at 10.00 CET.
Follow the link: https://financialhearings.com/event/12924.
Teleconference: Dial-in number
SE: +46 8 505 583 53
UK: +44 33 330 092 61
US: +1 833 526 8397
The presentation will also be available on the company's website www.beijerref.com from 08.40 on 28 January.
This interim report for Beijer Ref AB (publ) has been submitted following approval by the Board of Directors.
Malmö, 28 January 2021
Beijer Ref AB (publ)
Per Bertland, CEO & President
For more information on this report:
Per Bertland, CEO – switchboard, +46 (0)40-35 89 00
Maria Rydén, CFO – switchboard, +46 (0)40-35 89 00
This information is information that Beijer Ref AB is obliged to make public pursuant to the EU Market
Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the
agency of the contact person set out above, at 08.30 CET on 28 January 2021.
This interim report has not been the subject of examination by the Company’s Auditors.
Beijer Ref in short
The Beijer Ref Group is focused on trading and distribution operations within refrigeration products, air conditioning and heat pumps. The product programme consists mainly of agency products from leading international manufacturers and, in addition, some manufacture of own products, combined with service and support for the products. The Group creates added value by contributing: technical competence to the products; accounting for knowledge and experience about the market; and by providing efficient logistics and warehousing.
Operations are carried out by region within the Beijer Ref, which comprises Beijer Ref ARW (Air conditioning, refrigeration, wholesale) and Toshiba’s distribution operation within air conditioning and heating. The Beijer Ref Group is a leading operator within the refrigeration sector in Europe and has a significant position within air conditioning in Europe. The operation is split into six geographic segments: Nordic countries, Southern Europe, Central Europe, Eastern Europe, Africa and Asia Pacific. Growth is achieved both organically and through the acquisition of companies which supplement existing operations.
Seasonal effects
Beijer Ref’s sales are seasonally dependent as demand for refrigeration and air conditioning is at its peak during the warm months of the year. It means that demand in the northern hemisphere is at its peak during the second and third quarters whilst demand in the southern hemisphere is at its peak during the first and fourth quarters.
Financial calendar
Annual Report 2020 will be published in March 2021.
AGM will be held in Malmö on 15 April 2021.
The Interim Report for the first quarter 2021 will be published on 22 April 2021.
The Interim Report for the second quarter 2021 will be published on 15 July 2021.
The Interim Report for the third quarter 2021 will be published on 19 October 2021.
The Interim Report for the fourth quarter 2021 will be published on 27 January 2022.
www.beijerref.com