BEIJER REF Q2 2021
Strong second quarter
Second quarter
Net sales increased by 36.6% in the second quarter compared to the same period last year and amounted to SEK 4,561 million (3,338). Organic growth was strong at 33.8%. Acquisition effects amounted to 6.4%, which is offset by currency effects amounting to -3.5%.
EBITA amounted to SEK 431 million (253), corresponding to an EBITA margin of 9.4% (7.6%). The operating profit amounted to SEK 418 million (241), an increase of 73.5% compared with the previous year. The operating margin amounted to 9.2% (7.2%).
Profit before tax was SEK 402 million (227). Net financial items were slightly more affected than in previous years because of increased financing in connection with completed acquisitions. Net debt/EBITDA amounted to 2.1 (2.1).
Cash flow from current activities before change in working capital was positive and amounted to SEK 499 million (303). The company's liquidity remained good and the company's balance sheet is strong, with unutilised credit amounting to SEK 1,206 million (1,029).
Profit per share before dilution amounted to SEK 0.79 (0.44) and after dilution to SEK 0.79 (0.43), which is an increase of 81%.
Beijer Ref and Emerson signed a three-year partnership agreement for the European market, covering 25 markets in Europe and more than 260 branches. The company also extended its agreement with Tecumseh for two years.
At the end of June, the assets of Industrial Refrigeration Components (IRC) were acquired; the company has sales of SEK 20 million and two employees. In connection with the acquisition, Beijer Ref signed an exclusive agreement with LU-VE products in Australia and New Zealand, one of Beijer Ref's partners in heat exchangers.
The company's CEO Per Bertland announced his resignation in the first quarter of 2021 and the recruitment of a successor was completed during the second quarter. Christopher Norbye, new President and CEO of Beijer Ref, will join the company on 30 August. He comes most recently from a position as Executive Vice President och Head of Entrance Systems Division på Assa Abloy.
First half 2021
Net sales increased by 21.6% in the first half compared to the same period last year and amounted to SEK 8,292 million (6,816). Organic growth amounted to 20.4% (-10.9%). Acquisition effects amounted to 5.7% (2.9%). Currency effects amounted to -4.5% (-0.3%).
EBITA amounted to SEK 706 million (462), corresponding to an EBITA margin of 8.5% (6.8%). The operating profit for the period amounted to SEK 681 million (438), which is an increase of 55.4% compared with the previous year. The operating margin amounted to 8.2% (6.4%).
Profit before tax was SEK 649 million (409). Net financial items are slightly higher compared to previous years due to increased borrowing in connection with completed acquisitions during the period.
Profit per share before dilution amounted to SEK 1.27 (0.79) and after dilution to SEK 1.26 (0.78), an increase of 61%.
At the end of 2020, the acquisition of 85% of the shares of Sinclair in the Czech Republic was completed, which is included in the group's financial statements with effect from 1 January 2021. During the period, the acquisition of all shares of Complete Air Supply in Australia and 60% of the shares of Coolair in Germany were concluded; these are included in the company's accounts from February and March 2021 respectively. At the end of June, the assets and liabilities of Industrial Refrigeration Components (IRC) in Australia were acquired.
After the end of the period, Beijer Ref entered into an agreement to increase its holding in the Danish refrigeration technology company Fenagy A/S, which produces environmentally friendly industrial heat pumps. With an investment of DKK 19 million, Beijer Ref expands its ownership to just over 50 per cent and thus becomes the majority shareholder. The company will be included in the financial statements with effect from 1 July 2021 and will have a minor impact on the company's results and position.
After the end of the period, an agreement was signed to acquire 80% of the shares in the air conditioning company Inventor AG in Greece, with the takeover expected in autumn 2021. The company has sales of just over SEK 600 million and about 80 employees. This will be Beijer Ref's 38th market and an important complement to Beijer Ref's existing product portfolio.
Thus far, acquired annual sales amount to approximately SEK 1.4 billion, of which approximately SEK 800 million has an effect on the current year, and contributes positively to the group's operating margin.
Covid-19 has had little effect on the company's profit during the period, although individual regions such as South Africa, Southeast Asia and Australia have been affected. The company does not expect any major impact on earnings related to Covid-19 in 2021 unless new outbreaks occur.
Comments from the CEO
All Time High
To begin with, I would like to emphasise that it is gratifying to see how we are now approaching the light at the end of the pandemic tunnel. The world seems to be moving towards a gradual recovery and there are clear signs that societies are slowly but surely opening up; restrictions are easing, travel is increasing and everyday life is starting to normalise once again. In these circumstances, it feels good to report our strongest quarter to date, in terms of both sales and profit. Sales in the second quarter, compared to the corresponding period last year, increased by 37%, of which 34% is organic (an increase of 14% compared to Q2 2019). It is positive that large markets such as the Netherlands, France and Italy have performed well.
It is gratifying that we have been able to obtain majority ownership of Fenagy, a company that manufactures industrial air heat pumps based on environmentally friendly CO2 technology. Developments in the company have exceeded expectations and optimism for the future is great.
Another exciting piece of news is that after the end of the quarter we have signed an agreement to acquire Inventor, one of the leading air conditioning distributors in Greece, which is highly profitable. The acquisition is in line with our strategy and means that Beijer Ref is establishing itself in a new market, the 38th in the world.
I am also happy with the acquisition of Sinclair, which was made in the first quarter. The investment in own brands is becoming increasingly important for Beijer Ref and it is satisfying to see how we have successfully launched Sinclair in our markets. The own brand for line components, Freddox, will also be gradually launched in an increasing number of markets.
In the beginning of July, it was an honour to inaugurate our new and energy efficient factory in Italy, which mainly produces sustainable refrigeration units based on natural refrigerants. As a result, we are doubling our capacity to produce environmentally friendly refrigeration units. At the same time, we are seeing prices of traditional refrigerants stabilise. In our assessment, future changes in the price of refrigerants will not have a significant impact on profit. I see this as a turning point for falling refrigerant prices.
Digital sales are increasing, partly as a result of the Covid-19 pandemic. During the quarter, our e-commerce accounted for 10% of sales, compared to 6% last year. This is an area Beijer Ref will continue to invest in and where we see great development opportunities.
Like many other companies, Beijer Ref had to adapt quickly to prevailing conditions during the pandemic. Although we are in an industry that is quite insensitive to economic fluctuations, I think we have handled the situation well. We have largely compensated for price increases that have partly been due to component shortages in the world. Our assessment is that the component shortage has only affected the quarter to a limited extent.
I would also like to draw attention to all our ambitious and talented employees. Throughout the pandemic, our core values have clearly permeated everyone's commitment: we have been committed, engaged, straightforward and united. Everyone within the organisation has shown enterprise and innovation. Beijer Ref continues to consolidate its position as a world-leading refrigeration wholesaler and I look forward with hope to both the next quarter and the future.
A big thank you
Q2 2021 will be my last report as CEO of Beijer Ref and I would like to extend a big thank you to all the people I have had the privilege of working with. The milestones are many, as are my memories. Far too many to fit into this text. I am very proud that we, as a decentralised organisation, have succeeded in creating a unified corporate culture, with common values and behaviour. Together we have taken a fantastic journey and laid the foundation for continued success. All my Beijer Ref colleagues will be missed. I would also like to thank my family, who have been by my side for all these years.
It is also with pride that I note that the concept of sustainability continues to be an important and integral part of Beijer Ref's strategy. Our ambition is to contribute to sustainable social development that creates long-term values for future generations. It is an honour to have been CEO of a company that actively works on these important issues.
In my new role as a board member, I will continue to engage in Beijer Ref's development. It is now with great confidence that I will hand over to our new CEO, Christopher Norbye, on 30 August. I am convinced that Christopher, together with our experienced employees, will continue to drive Beijer Ref's spirit and strategy forward. He has many years of experience in both global operations and decentralised organisations.
Per Bertland
CEO
Second quarter of 2021
NET SALES
Beijer Ref increased its net sales by 36.6 per cent to SEK 4,561 million (3,338) during the second quarter of 2021. Adjusted for exchange rate fluctuations and acquisitions, organic sales growth amounted to 33.8 per cent (-17.8), mainly due to price and volume increases. The group has had no negative effects from the falling prices for refrigerants during the quarter. A stronger Swedish krona resulted in currency effects of SEK -87 million (-63), corresponding to -3.5 per cent (1.3), since most sales are in currencies other than Swedish kronor.
PROFIT
The group’s operating profit totalled SEK 418 million (241) during the second quarter, an increase of 73.5 per cent. Exchange rate effects of SEK -9.4 million (-2.3) are included in the operating profit figures. The operating margin amounted to 9.2 per cent (7.2). Aside from acquisition effects, the improved profit is mainly due to volume increases. Profit before tax amounted to SEK 402 million (227) and profit for the period was SEK 308 million (168). Profit per share before dilution amounted to SEK 0.79 (0.44).
CASH FLOW
Cash flow from current activities before change in working capital during the second quarter amounted to SEK 499 million (303). Working capital increased by SEK 653 million during the quarter compared with a decrease of SEK 24 million during the corresponding period of the previous year. Normally, the group binds more 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 higher accounts receivable. Altogether, this gives cash flow from current operations after changes in working capital of SEK -154 million (327).
Cash flow from current operations before changes in working capital amounted to SEK 823 million during the period, compared with SEK 521 million for the corresponding period in 2020. The change is mainly due to a higher operating profit in 2021. Working capital has increased by SEK 639 million in 2021 compared to a decrease of SEK 3 million the previous year, mainly due to more acquisitions and higher accounts receivable as a result of the increase in sales. Altogether, this gives cash flow from current operations after changes in working capital of SEK 183 million (524).
At the end of the period, credit facilities amounted to SEK 4,253 million (4,041), of which unutilised credits amounted to SEK 1,206 million (1,029). In total, net debts increased by SEK 606 million, mainly due to lower cash and cash equivalents due to dividends paid and increased interest-bearing liabilities in connection with acquisitions.
INVESTMENTS
Cash flow from investment activities during the quarter amounted to SEK -55 million (-48), which relates to business combinations and investments in non-current assets. During the second quarter, the company acquired Industrial Refrigeration Components.
Cash flow from investment activities during the period amounted to SEK -371 million (-267) and relates to Sinclair Global Group, Complete Air Supply, Coolair and Industrial Refrigeration Components.
COMPANY ACQUISITIONS
Acquisitions are a priority area and in 2021 a number of companies have been acquired. At the end of 2020, the acquisition of 85% of the shares of Sinclair in the Czech Republic was completed, which is included in the group's financial statements with effect from 1 January 2021. During the period, the acquisition of all shares of Complete Air Supply in Australia and 60% of the shares of Coolair in Germany were concluded; these are included in the company's accounts from February and March 2021 respectively. At the end of June, the assets and liabilities of Industrial Refrigeration Components were acquired.
After the end of the period, Beijer Ref entered into an agreement to increase its holding in the Danish environmentally friendly refrigeration technology company Fenagy A/S. With an investment of DKK 19 million, Beijer Ref expands its ownership to just over 50 per cent and thus becomes the majority shareholder. The company will be included in the financial statements with effect from 1 July 2021 and will have a minor impact on the company's results and position.
After the end of the period, Beijer Ref signed an agreement to acquire 80% of the shares in the air conditioning company Inventor AG in Greece. The takeover is expected to take place during the autumn of 2021. The company has sales of just over SEK 600 million and about 80 employees. This will be Beijer Ref's 38th market and an important complement to the group's existing product portfolio.
In total, these companies have annual sales of approximately SEK 1.4 billion and contribute positively to the group's operating margin.
ANNUAL GENERAL MEETING
The annual general meeting was held on 15 April 2021 and the meeting decided, in accordance with the board's proposal, on a dividend totalling SEK 3.00, divided into SEK 1.80 with payment in April and SEK 1.20 (0.40 after split) with payment in October. Total dividend amounts to SEK 380 million, where of SEK 228 million has been paid during the quarter. The meeting also decided to perform a share split 3:1 with 26 April 2021 as the record date. The meeting also decided to introduce a long-term share-based incentive programme LTIP 2021/2024 for key employees in the group. In accordance with the board's proposal, it was decided to offer the participants in LTIP 2018/21 repurchase of purchase options, which occurred during May.
THE SHARE
Beijer Ref’s B share is listed on Nasdaq OMX Stockholm's Large Cap list. The share capital in Beijer Ref totals SEK 371,684,512, made up of 382,304,070 shares, each with a quota value of SEK 0.97. There are two types of share, A shares and B shares, which represent ten and one vote respectively. Beijer Ref had 11,948 shareholders on 30 June 2021 (10,246). The proportion of foreign shareholders amounts to 4.0% (4.3), with a capital shareholding of 53.73% (59.5). As of 30 June 2021, there were 27,956,160 class A shares and 354,347,910 class B shares. The company's ten largest shareholders hold 72% (80) of the votes and 65% (67) of the capital. Average sales of the Beijer share in the quarter amounted to 405,869 shares (281,976) per day at an average purchase price of SEK 140 (94). The closing price on 30 June 2021 was SEK 153 (95). As of 30 June 2021, the market value was SEK 58 billion (36). All amounts refer to value after the split and reconstruction of shares.
OPTIONS PROGRAMME 2018/2021
The company's first option program expired in June 2021 and included about 60 employees. The maximum number of options after the split amounted to 2,574,000. In accordance with the Board's proposal, the participants have been offered to repurchase their own shares or to sell the options back. The sale of shares had a positive effect on liquidity of SEK 45 million and the repurchase of options had a negative effect on the company's liquidity of SEK 144 million. The effect of the option programme is included in equity.
OPTIONS PROGRAMME 2021/2024
The company has a new call option programme that includes about 90 employees within the Group. The programme runs for a three-year period from 2021 to 2024. The maximum number of options amounts to 2,262,000 and the number of subscribed options amounts to 1,476,000. A total of SEK 21.5 million has been received in respect of the options, and is included in equity.
SUSTAINABILITY
Sustainability is a well-integrated part of Beijer Ref. Doing business based on sound standards is a responsibility that the group takes very seriously, while at the same time it is woven in as a natural approach in all parts of the organisation. Beijer Ref's sustainability strategy is based on the UN's sustainable development goals in Agenda 2030, which cover economy, society and the environment. Beijer Ref believes that it is in the environmental field that Beijer Ref can make the biggest difference. In order to further strengthen the work to develop environmentally friendly refrigeration technology, the group measures the proportion of Beijer Ref's OEM sales that shall be environmentally friendly. The goal is for it to increase from today's 35% to 50%. On our website and in the annual report, we give more information about our goals and how we perform in relation to the goals.
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’s assessment is that Covid-19 is having a smaller effect on earnings in 2021. The company is 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 etcetera, 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 20M) refers to listed shares and is valued at market value on the balance sheet date (valuation level 1). The two other holdings (SEK 34M) 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 4,550M 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 7,997M. 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 Q2 2021
Beijer Ref invites investors, analysts and the media to attend a web meeting at which CEO Per Bertland and CFO Maria Rydén present the interim report for the second quarter of 2021. The presentation will be held in English and lasts for about 20 minutes. The meeting is on 15 July at 10.00 CET.
Audiocast with teleconference
Webcast: https://financialhearings.com/event/13649
Teleconference: Dial-in number SE: +46 8 566 427 06
UK: +44 33 330 092 70 US: +1 646 722 4904
A presentation will be available on the company's website from 08.40 CET on 15 July.
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 interim report has not been the subject of examination by the Company’s Auditors.
The Board of Directors and the President assure that the six-month report provides a fair overview of the operations, position and results of the Group and Parent Company, and describes material risks and uncertainties faced by the Parent Company and the companies that are included in the Group.
Malmö, Sweden, 15 July 2021
Kate Swann
Chair
Albert Gustafsson
Board Member
William Striebe
Board Member
Frida Norrbom Sams
Board Member
Joen Magnusson
Board Member
Kerstin Lindvall
Board Member
Per Bertland
Board Member & CEO
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 persons
set out above, at 08.30 CET on 15 July 2021.
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
• 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.
• The Annual Report for 2021 will be published in March 2022.
• The Annual General Meeting will be held in April 2022 in Malmö (Sweden).
BEIJER REF
Stortorget 8, 211 34 Malmö
Telefon 040-35 89 00
Organisationsnummer 556040-8113
www.beijerref.com