Hello, and welcome to the Beijer Ref Audiocast Teleconference Q1 2022. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a Q&A session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Christopher Norbye and CFO, Ulf Berghult. Your speakers, please go ahead.
Hello. Welcome, everyone. Christopher here together with Ulf. We'd like to present our Q1 numbers and results. I think we can get started right away, and then we'll finish off with some Q&A. We can move the slide forward to slide number three. We can start just seeing this is our rolling 12 months after Q1. I think most relevant, you've seen this slide every time, is that we're now in 42 countries. We continue to grow the business and entering new countries, especially through acquisitions. Let's move into the next slide. A little bit of the highlights on slide four. We call it a good start to the year. I think it's a great start to the year.
Sales around SEK 4.9 billion, 31% growth, 16% organic growth. We'll come back a little bit how that's where it came from. Acquisition continues to be developing well, adding about 10%, or actually 10.0%, for Q1, and then a positive FX of almost 6% in the quarter. This leads us then to an EBITDA of SEK 407 million, which is a growth of 48%. We're very happy with the leverage on the higher volume that we're getting through, and also continued good development on our acquisitions. We have then record sales and also absolute EBITDA in Q1.
All in all, a good start to the year and, of course, in this very uncertain times. Cash flow, we'll come back to. This is our heavy season as we're building inventory because it's moving into Q2, Q3. That's our peak season in the European countries, which is our major market. I think we'll also come back to this year. We have secured more inventory than normal to make sure we can cover both Q2, Q3 as it's a very complex supply chain situation out there that we'll come back to as well. Then finally, EPS growing 50%. Financial, I mean, highlights for the quarter is, I would say, pretty good. Moving on to the next slide. Here's a little bit how it came, that's the growth.
We can see the refrigeration growing 14%, with OEM growing 7%, HVAC 20%, which gives us then a total of 16%. All regions were positive, continuing to go very fast in East Europe, also together with acquisitions we're doing in that region. HVAC grew 20%. You know, it's strong Q1. Here we of course also see some of the patterns of some of our bigger customer buying ahead of time as well to secure that they have inventory for the high season. It's a very good number, but I also think we should look at this a little bit in Q1 and Q2 for us.
We also, as we said last year, launched in air-to-water heat pumps with Toshiba as they opened a factory in April last year. We can see a very strong growth pattern here, but still from small levels. It's not significant for us yet. As I said before, we'll come back to you with more guidance on this when it becomes significant for us. It's a very good start for us in the heat market. OEM, we grew 7%. Here we do have ambition to grow double digits every quarter, and we believe we'll come back to that in Q2. Our natural gas CO2-based solution for Europe grew 17%, which is the main business here. We did have shutdowns in our APAC region.
Of course, it's summer region for them in Q1, so it did have an impact on us to reduce the number. All in all, still a very good development. We'll come back to the commercial industrial cooling grew 14%. We'll come back a little bit. I'm sure you usually question the refrigerants and how that affects our business. Then we did make three acquisitions, one in Eastern Europe, in Croatia, and Bosnia and Herzegovina, Deltron, the leading HVAC distributors in those regions. Then two smaller ones in Australia. We're more buying complementary both branches and products, and we'll continue to do that throughout the year. We are very happy with this first quarter.
As I said, it's very good to get a nice start to the year. Moving up a little bit on what's happening out in the world, in general. We did talk about the heat pumps, and we'll continue to do that. Of course, the heat pump season, which is positive for us, is strong in Q1 and Q4, which is usually the lower season for us. It mixes our business very well in a good way to maximize our assets, as well. Moving into some of you have read, some have not, but there's an EU proposal to further accelerate the step down of using F-gases in Europe, where they wanna.
It's a proposal around the EU now, I believe, the indication is the decisions are made towards the end of the year. That would mean that they would further reduce from 30% in 2024 to 24% F-gases and then reduce the 20% in 2030 to 5%. It's a fairly steep acceleration of the F-gases. We don't see any effects on that right now, but of course, if this becomes a regulatory law, then we expect that will of course create even further demand on both the equipment and the refrigerants that we are very strong within.
On that note also, we can see that the refrigerants have a positive price trend that's been going on the last couple of quarters. It's not massive. I think it's 14% up versus Q1 last year and fairly stable with Q4. We can see this right now, the trend is that it keeps creeping up, but not at any fast paces. That's actually the best way we think also for us and the market is to have a stable pricing here, but it is positive for us. Maybe compared to if you have followed this company for years in 2018, 2019, Beijer Ref today is a company where the refrigerant is almost only 5% of our sales.
It does not have a significant impact on us, but of course, it's positive, which is good for us. The final point that I think is on everybody's mind, and especially, you know, ours on the cost and inflation, is that we do see, as last year, prices were coming up and this year it did continue. I think we expected a calmer year on the prices, but it is going up. I think also related to the situation and war we have here and the horrible situation in Ukraine and Russia, you still have closed down in the harbors, you have Shanghai issues and all in general, a very unstable situation.
As you see our numbers in Q1, we have been able to pass it on a quick note to the market, and we'll continue and do this also as we move forward. We're fairly confident on the timeline we are now in price increases versus maybe where we were last summer. I think it continues to be an issue of course for all of us. I think also as I said before, we do have very strong market position and being able to pass it to our customers in a good way to protect our margins. Moving in a little bit more on the financials, summarizing it, Q1 31% growth on sales is, as I said before, an organic level 16%, so very good organic growth.
I know in Q1 last year, we had 7% plus on organic growth. I would say very solid quarter on that level. EBITA 48%, very good drop through and leverage on our organic growth, improved gross margin and also acquisitions continued to work well for us. Finally, the EPS grown almost 50%, which is of course a very good number. Move on to the next slide number nine. Here we can see the bridge on the sales where we have the 16% organic growth, but also helped by FX almost 6% in Q1. The M&A continued to add here double-digit sales for us, which leads us to SEK 4.9 billion for Q1. For us, a very strong Q1 and as we 'll come back a little bit more on the regions as we move through this presentation.
Moving on to the next slide number 10. Here you can see a little bit more the timeline of our growth. Here you saw the where we had a big impact in 2020 on the COVID situation, -7% in Q2 2020. Since then, Q1 2021, we've been growing in good numbers. Here you will also see of course that Q2 last year was a fantastic quarter for us with 34% organic growth. We're coming into very tough comparable numbers in Q2 versus Q1 of course. That will have an impact on our business.
All in all, you see here that the last five quarters has been very positive for us on a total growth, but also on the organic side and then having a very good start to the year with 16% organic growth. Moving on to the next slide. You can see it spread across in all our regions, which is what we're very happy about. Good activity levels in the Nordic growing 29%. You have Central Europe also being very positive starting out the year. I mean, it's for every region here. Sticking out is East Europe, but of course, they will have acquisition affecting the numbers, but underlying a very good high activity level in Eastern Europe. Africa, a region that we are very strong in and the market has been challenging.
Here also a good finish to the year for them because it's summer season and I mean, it's opposite of ours. I also say very good in APAC, where we have also the summer season, especially Australia and New Zealand, they're peaking in Q1. We're happy with the development in all our regions from a sales perspective. Then on the EBITA, we've gone over this, almost 50% growth in Q1. Also an EBITA margin that also improved by almost 1%. Both good volume, but also we're happy that moving the EBITA margin by almost 1% into one.
We move on to the next slide 13, you also see the development here on, and as I said, on Q1 versus last year and the year before, which is a good trend for us there, Q1 being 1% above last year, and last year was also a good Q1. Q1 2020 was affected by COVID in March. We'll see that's relevant. Here you can also see we're coming into very tough comparables there in Q2. That was a very good quarter for us last year. Then also the EBITA per region, also here, we see very strong numbers, happy across the board.
I think also relevant there is APAC, that is closing out a big Q1, as peak of their summer season, also a good development. Also a good development in all our acquisitions and the underlying business. All in all, a very satisfying, you know, summer season in the APAC region. Now we move on to summer season here in Europe in Q2 and Q3. That was it for me. Now I'll hand over to Ulf that goes more in detail of the P&L and balance sheet.
Now we're on page 15, and there you can see the P&L for the group. As Christopher Norbye took you through down to the EBITDA, and then we have the net financial income, which is then slightly higher than on a year-on-year basis. That is basically impacted by higher net debt. Taxes then of course, slightly higher due to the higher profit, but if you look on the tax rate, that is the same tax rate this quarter as we had in quarter one, 2021, so that's about 25%. If I move over to the next page 16, then you can see the net earnings per share. We continue the positive development. In the quarter, we had a, you know, a growth of 49%.
For the full year on a rolling 12-month basis versus the full year 2021, we have a growth of 9%. I move over to page 17 on the cash flow. This is the movement from the comparison with the cash flow of Q1 2021. We had +SEK 386, and now we have in this quarter -SEK 295. As you can see, we have a very good performance in our operations on the EBITDA with +SEK 149 million. We have a negative development of working capital, which is also something that you saw the same pattern in Q4 2021.
That is, as Christopher said, that we are building up to the price for the season here. The main season is then quarter two and quarter three. We have deliberately then increased service level on the inventory in order to have a good delivery service. If I now would come, CapEx is a small movement, and leasing is a small movement, and then others, that's just the delta. Last year we had +SEK 127 million, and this year SEK 40 million, so that is non-cash items, basically. If you're coming into the page 18, then you can see the development over the years.
You can see then that both Q4 2021 and Q1 2022, that's impacted by the working capital that we deliberately have done in order to increase the service level. You can also see that we had a negative in Q2 2021, which is also then coming up that we had a very good organic sales development of 34%, and then building up working capital, which then should be then released in Q3 and onwards. If I turn over to the next slide, nineteen, the net debt development. We have a leverage right now on a 2.7, reported leverage on 2.7. If I then exclude the IFRS 16, which is basically the rental contract on buildings, and then the pension, we have a leverage of 2.3.
That is on the pure net debt excluding pension and leasing liabilities. Then if you also see that the Q4 2021 and Q1 2022, that's a step up from the previous quarters. That is basically we have been very active now on the acquisition side. In 2021, we closed 10 acquisitions, and then in Q1 2022, we have already closed three acquisitions. Also there for your information that after closing, we also secured an additional financing of SEK 1.6 billion, of which SEK 0.6 billion goes to repay available existing facilities. We are increasing available funds with another SEK 1.0 billion. In total, SEK 1.8 billion available facilities. I hand over to Christopher again.
Yeah. Conclusion, the first point, I think you've seen there a couple times, but we do see the positive long-term trends for us. Of course the situation here in... I mean, you know, the unfortunate situation we are in now, we do see that this will continue and most likely accelerate on driving this electrical solution versus gas-driven solution. You know, I mentioned a couple of quarters ago that we acquired this Danish company, Fenagy, who make CO2 industrial heat pumps. That's a brand new market for us and a brand new market, I would say, in the world. You know, countries like Denmark now will ban long term even having natural gas. We see a lot of opportunities on the industrial side.
It's just been the starting point as well. A lot of orders on the industrial CO2-based heat pumps in the last six months and then the order stock just keeps growing. It's also an interesting part of business. We talk about air-to-water heat pumps. We talk about the AC penetration and also the CO2-based solution that we have in refrigeration, commercial market as well. You know, it's a long term. We feel that this market is of course moving in a very positive direction for us. I think it's more on how you manage, you know, the short term situation we're in from supply chains, uncertainties, the inflation.
For the long term, we're very positive on the position Beijer Ref are in and then combined also with the acquisition pipeline to further strengthen that, gives us very good confidence. Sales, we talked about SEK 4.9 billion, 31% up. EBITA, 48% up, you know, best quarter. We believe we'll continue to have that in the future. Also very proud of that all regions performing well. All regions are improving, across the board, and you saw the product groups. Also very good job from the organization. As you know, we pride ourselves that we have a very decentralized organization, and I think also it shows in times like this how fast you move when you have local decision makers supported and coordinated across from us.
These local organizations are adjusting very fast to the environment out there. I think it also shows the strength of and the speed of this type of business model in a situation like this. Acquisition, we talked about. We did close three of them this quarter, and we do have a good pipeline going forward, so we expect that to continue. Then also we move into the what we call Europe's peak season. That's still the majority of our business. And also with good service levels as all alluded to in inventory as we decided to move fairly quickly both in Q4 and beginning of Q1 and building up stock especially on the HVAC side to support the season. Then we thought it was the right decision.
Now we know it's the right decision because of course that supply chain is even more complex today than it was three to six months ago. With that, I think we're finished and open for Q&As.
Thank you. Ladies and gentlemen, we will now start our Q&A session. If you wish to ask a question, please press zero one on your telephone keypad. Thank you for holding until we have our first question. Our first question comes from Carl Åkesson, Nordea. Sir, you go ahead.
Hi, it's Carl here from Nordea. A few questions from my side. Firstly, I wonder in terms of the inventory build up, as you said, it's fairly significant in the quarter. Firstly, could you maybe specify in which segments you are building inventory? And also if we should interpret that as you see a very strong demand currently, and by that want to build inventory in order to maybe gain market shares from the mom-and-pop shops.
Yeah. I would say that the majority of inventory built is on the HVAC side. Also to explain a little bit why, and I'll come back to the second part of your question, is that most of our inventory when it comes to HVAC is a fairly long lead time because our, the main factories are in Asia. You both have the production time, you have being on a boat and moving over. We do also always have around 12-week lead time on this type of product. We do always build inventory here in Q1 to support them at the season in Q2 and Q3.
I think the biggest difference there is that we're trying to cover most of Q3 as well in inventory, and we usually don't do that early on. I think that's the biggest difference. If you then relate it to is it because of a bigger demand out there, I think that'll slip a little bit still to see how the market develops in Q2 and Q3. We do have effects, you know, if it's a 40-degree summer in southern France, and then things are extremely high and if it's somewhere in the middle. It's still a little bit, of course, uncertain. We do see, you know, in Q1, as you said, we grew almost 20% on HVAC and also think there's some patterns there from some customers buying ahead of it.
We need to look at Q1, I think, and Q2 together on the HVAC side. The underlying development, the order book on HVAC is very good. Right now we still see a good trend in this market. Maybe a final touch on the, you know, are we in a better situation on the inventory versus, you know, the competitors? I think the big competitors are probably in a good position as well. Of course, we see some of the smaller ones having more challenges in this situation on the inventory side, and that's our ambition to take advantage of this. This is mainly we're focused on the HVAC side.
Perfect, very helpful. Also on the refrigerant prices, as you said, it's fairly limited in relation to group sales. Historically, you have provided some kind of numbers on maybe the EBIT impact from them. Would you mind to give some flavor at least in Q1 what the EBIT impact is from the rising prices?
No, I'm sure we maybe did impact because it was significant. We don't tend to do it now because it's not a significant part of our EBIT development. It's less than 5% of sales, and thereby it doesn't move the needle enough to be an indicator that we would guide or tell you what the difference would be. But of course, it's better that it's positive than negative that it's been for a couple of years to that. But it's not a significant part of the EBIT with less than 5% of sales. I think also that is because Beijer Ref has grown so much over the last couple of years, also the HVAC side, so we have a different mix today.
Of course, the price changes are not as critical as they were some years back. It's not something that we would guide, and also to be fair, you know, guide on the other side as well if it moves in the other direction because it won't move the needle enough on the EBIT side.
Okay, fair enough. I mean, you're pushing more on products. Could you maybe update us how it's progressing with maybe regards to Sinclair and Inventor? What portion of HVAC sales is currently coming from own products on a run rate basis maybe? What's your mid-term ambitions?
Yeah, no, maybe we can come back to that type of more strategic question later on. I think that the main thing we see here on where we're pushing is on the HVAC side with especially Sinclair, as we have communicated before, that it's our private label that we're launching now around, you know, markets on the HVAC side. Of course, the Inventor brand is mainly our strong brand acquisition made in Greece less than a year ago, and they'll continue to focus on the markets they're active on today. I would say that the Sinclair, except for their own sales in Eastern Europe, is now being launched and being prepped and is in inventory around in our countries here in Europe.
Let's come back maybe in a couple of quarters' time, and I can be more direct on, you know, how the sales is going from building it up to also launching it now in the key markets as we move into the high season. It has a very good growth rate for us. Of course, you think there is one of the main products in our Eastern Europe business, and you can see a very good growth rate there. It's moving positive for.
Perfect. The final one from my side is on the OEM side. You grew 7% organically. What would you say was the impact from component issues? If you add them back, what could the organic growth have been? If you could give any flavor on that?
Yeah, I don't have it directly. I think it's as we said in our numbers, so we had 17% growth in SCM Frigo, which is our CO2-based solutions for the world. I would say that also, of course, the APAC region had their summer heat, so that's why they affected it negatively. I will continue, and we're good on guide, but that we should continue to grow that double digits going forward. That should not change.
A tough component situation in the very short term, I guess it will continue.
Yeah, it continues. Then as we had called between here, and we kept or keep saying and said that we didn't see any, you know, significant improvement in the supply chain. Now I think everybody's coming back to that view. It's continually tough, but we still manage through it. It continues to be very uncertain and very. Especially, I think as everybody says, it's lead times is one issue. The other issue is that the delivery dates are not correct, right? I think that the uncertainty when you will get the product is a big problem as the long lead times. That will continue as we understand it for the foreseeable future.
Now, we're not, just to be clear, we're not affected in our industry with any supply chain out of places like Russia and Ukraine. None of our components or suppliers are coming from there. Our situation is still related more to the shortage in the market, the Chinese supply chain and the logistics challenges. It's, for us, I think it's very similar to what it's been the last some months.
Perfect. Very helpful. Thank you.
Thank you, Carl Åkesson.
Thank you. Our next question comes from Viktor Trollsten, Danske Bank. Please go ahead.
Thank you, operator. Good morning, Christopher and Ulf. Thanks for taking my questions. Firstly on price, how much of the 16% organic growth now in Q1 is coming from price? Are you raising prices more in any particular segment? That's the first question.
Yeah, no, we will not guide exactly on that price number. It's also a very complex question in the sense of such a diverse business from project sales to day-to-day customers. It's more when we look at it, the majority of our growth is on the organic side. But pricing is a bigger part of it now than it's been historically with when pricing was related to basic inflation. I would still see this as a big majority is organic, but pricing is a larger part of it than it's been historically. If you go into the segments, I think where you have a more, I would say faster price movement is more on the commercial refrigeration because it's a more daily moving product type.
For example, if our biggest supplier raises prices on compressors, it's usually moving into the market, you know, in the next couple of weeks because it's not a product where our customers buy and hold stock. They come into our stores every day to buy these type of products. It's a very fast-moving product. While on the other OEM and HVAC, you have other type of supply chains where it's both from the supplier into us and also to the market, I would say that the lags there are more months than weeks. I think it moves very differently in our different segments. But we see that in general, as I said on the call, that we are fairly aligned on the price increases.
We do also have more structured discussion with our suppliers on how we manage timing together than maybe what was last year, even if that almost sounds counterintuitive at this stage.
Okay. It sounds like you're offsetting, you know, let's say cost inflation on your side. I guess listening to other HVAC players, it sounds like prices are up, let's say 6%-8% in the quarter, for the year, 8%-9%. You know, just for you in Beijer Ref, you highlighted previously, you know, the potential with price management as a focus area. I guess what I'm after is that, you know, in this environment, are you able to accelerate that? You know, more importantly, how sticky would you say that your current price increases are in an environment when raw mats, logistics, you know, roll over? Would you say that, you know, this is sticky price increases?
Yeah. I would say that again, it's a little bit that you allude to that it's a different type of business we're in, right? Let's go back again to the Refrigeration Component business. That's more a sales and aftermarket business, a daily running with hundreds of thousands of customers. More an aftermarket service business. Of course there, I would say it's very sticky. It's product you need to replace and fix your product. You allude more to the HVAC, and HVAC is a more structured market. You know, you have to follow together with the leaders in certain countries and where we are stronger. I'd say these are the list price increases that you probably could see in the market.
You always have a negotiation and net price list and other things. At the moment, you know, everybody's moving in the same direction on here, on the price side. Right now I would say it's sticky, and you can see that in our numbers as well.
I guess if that is correct, when, or maybe I should say if, raw materials and logistics roll over, then we should see quite nice margin uptake, it sounds like, if you can stick to current prices. Let's see that in the future.
Let's. If one plus one plus one plus one adds up, yes, but I think it's too early to make that assumption. I think you
Yeah.
You know that too.
Yeah. On the inventory build-up, if I interpret you correctly, it sounds like by year-end, maybe inventory levels to sales should be normalized. Just, you know, putting that into context of your current gearing, net debt to EBITDA 2.7, do you see that as a limit to, let's say, your acquisitive growth ahead?
No, we don't see it like that because again, I have to say that we are entering now the peak season. From a seasonal pattern point of view, much of the inventory will transfer over to accounts receivable in Q2, and then we will need to pay the accounts payable. It's about funding the accounts payable. We should have a positive cash flow coming in in Q3 and Q4. Again, depending on how the situation looks, we also have a main season next year, and then we need to see how to handle that. Theoretically, yes, we should have a good cash flow by releasing working capital in Q3 and Q4.
Okay.
We don't see any limitation on the M&A side.
Okay. No, brilliant. Just finally on my side, on the air-to-water heat pump side, where you mentioned it as a growth area in the report, could you just, you know, briefly update us on your current position and how you aim to grow in that area?
The reason or the way I try and keep this a little bit not mute, but it's still not like the refrigerant side of the business. When we talk about that, it will not have a segment because this is a very fast-growing segment for us, but it's too small today to make that it's driving any big part of the business for us. What we can see is that especially on, and I think I said that before, on Toshiba side, where we have the exclusive distribution in the biggest markets in Europe, and they built a factory in Poland in April, and now we launched it in two, three of the biggest markets in Southern Europe. We're seeing extreme demand and fast growth and keeping up with that.
Our expectation is that we'll grow into this the next couple of years, and then I will guide more as it makes a difference for us. At this moment, the short term, it's a nice add-on, but it's not driving our numbers, yet. I think we'll come back more and more to this as it makes a bigger impact on our business, as we launch it also in more countries, in Europe, when the product supply chain is ready. We're more building up the organization to drive it, and we have a fantastic product in Toshiba, one of the leading, of course, brands, within this segment.
I wanna keep this a little bit still in early days, but of course you look at all the trends and the regulations of this will be a bigger part of our portfolio long term.
Okay. Short term, just growing with Toshiba, if you want, and then the long term look at the strategic opportunities?
Yeah.
Okay.
That's good.
Yeah. Thank you very much for that, and thank you. I step back in line.
Thank you.
Ladies and gentlemen, as a reminder, if you wish to ask a question, please press zero one on your telephone keypad. Our next question comes from Andreas Brock, Coeli. Sir, please go ahead.
Thank you. Hi. Andreas here, Coeli Global. My question is to you, Ulf. First of all, welcome on board. Good to have you back, you know, in a very public role. Look forward to talking to you. My question to you.
Thank you.
Ulf, you know, what are you gonna be focused on for the next 12 months? What are your focus areas in this role?
Basically, first of all to make sure that we have the balance sheet and then the financing in order to continue this growth, both organically and then manage from operating working capital, but also then from a funding point of view to make sure that we can continue the M&A story. Also then to basically come in to see what opportunities that we can drive the efficiency, internal efficiency within my area as well, both from a treasury, tax and also from an accounting point of view. But it's a well-run company, I must say. It's lean and mean, but it's a well-run company.
There are some opportunities, but basically, and to make sure that we can continue to drive the growth.
Excellent. You know, it is an amazing company. You know, just a final question that, you know, when you think of net debt EBITDA, you know. In your calculations, you did, you know, expansions, et cetera, down to 2.3. In your experience, what's the ceiling for. I mean, this is a less cyclical kind of business than a Trelleborg, et cetera. I mean, it doesn't have. It has its smoothness with the and et cetera. Is it possible to, you know, is it 3.5 adjusted EBITDA? Is that the ceiling in this kind of business?
Yeah. Again, let me come back. Again, it is, as I say, I mean, it's not that you have a captive company. Also the way you see the numbers now, as a tech company, and then the way we handle the COVID pandemic was also very, very good, even so from an EBIT point of view and also from a cash point of view. Basically, I mean, we are tying up working capital in SEK 5 billion. Out of that SEK 5 billion is inventory, SEK 5 billion. It's, and we have a very tight control of it. Let's see how much we can drive the efficiency on the working capital, particularly on inventory.
Let me come back on how, where we see. Because we are in the planning or talking about how to reach next term targets and then but we are not ready there yet. Let us come back about this later on this year.
Fair enough. Thank you so much. Cheers.
Okay. Thank you very much.
Thank you. Our next question comes from Karl Bokvist, ABG Sundal Collier. Please go ahead.
Thank you, and good morning. Just my first one, I believe, a quarter back, you commented on a possibility that the supply chain situation could improve towards halfway through this year. Is this still something you believe could happen based on what you're hearing from your different parties in the supply chain?
No. I don't recall that I made that comment. If I did, maybe it was in different context. No. I see, as I said a little bit before to Carl, is that we're less affected right now, at least, on the situation that has developed since the last Q4 report. From a supply chain, we don't see the big mess still now on the logistics side except for the cost, but those has been stable on a high level also since Q4. It continues to be the main issues around the electronic side in our products on HVAC compressors, condensers. I would say that you still get similar answers from your big suppliers, but they're not reliable yet.
That's a little bit also why we built this inventory ahead of time, because lead times in factories and running out of components continue to be, I would say, on a complex level, and also as I said to that question before, you know, on the HVAC side and also the air-to-water heat pump side, it's okay as we have the factory in Poland. It's been more on the OEM side, especially the CO2-based OEM product we have out of our built in Italy that's more component heavy and more electronics and more specified in the sense of, yeah, you run out of a specified steering control, you know, you cannot run the product.
That I see continues to be hit and miss on delivery times from our suppliers to put the components on. I would say if I stated before that I saw it improve. I would say it's on the same level as it's been for the last 12 months. I think we need to see more moving into Q3, Q4 if we see improvements on it.
Yeah, understood. The improvement comments might have been an impression from my side, but okay.
Yeah.
You know, still managing the situation in a fairly good way, at least given the.
Yeah, that's what I keep saying in my team, that we have a lot of issues and complaints, but we still manage to grow double digits, so.
Mm.
I guess they're doing something right.
Yeah. As you touched upon here with new lock-downs towards the end of the quarter in Asia, and that you were a bit preemptive here in, you know, making sure the inventory was already shipped and everything like that. Do you feel that given the way you look at the demand and the season, could there be a risk that you might need to, you know, order another batch of products from Asia which could be impacted by lock-downs we've seen early this year?
Yeah. I would say that. I mean, when we look at our inventory, and it's mainly, as I said before, on the HVAC side, where you have this also very long lead times on ordering boats and moving it over across to Europe as now the high season is in Europe in Q2, Q3. I think we're more looking at that, you know, if it's a very strong season, you will always have, like, a mix issue, right? You might run out of certain product parts or groups because you're still estimating and you bring in all the big runners. I think that could still happen.
All in general, I have a hard time seeing that, you know, we brought in what we thought we could to protect the Q2, Q3 season. We still need, you know, products for closing out the Q3. It's on both. It's been ordered, and we still see you know it's not what I would say on the HVAC. It's been running, you know, decent throughout the supply chain issue. With longer lead times, but you can adjust to longer lead times as we have. The transportation has been okay, but very expensive. I think we still see it as being an okay situation and what we see right now.
I think like everybody else, you put a caveat on, you know, let's keep in touch and let's see how the world develops moving forward. I think the short answer is that we see ourselves in an okay situation. You can see that, of course, on our inventory build up as well in our balance sheet and on the cash flow.
Understood. Thank you. Just two other questions. Is the heat pump venture with Toshiba possible that you can obtain other kinds of these exclusive partnerships with some of your other larger key clients? Or have they already committed with similar kind of arrangements with competitors? The second one is just on the e-commerce side, which has been growing very strongly. Do you think there is a possibility or potential to have, you know, a positive effect on profitability from higher e-commerce sales, or will that be compensated for by other types of costs?
Yeah. The reason I mention the heat pump on the Toshiba, because that's the only one that I would say that has, you know, you can start seeing, you know, increased or significant volumes within a limited scope still because it's been moving for the last nine months. Of course, in our other exclusives that we have with Mitsubishi Heavy in the countries we have there, and we have the products within the Sinclair and Inventor. We absolutely have exclusivity on that product portfolio as well. There we still have, you know, need to launch it, focus on it, and drive it. That's why I mostly mention Toshiba because it's already running.
On those products, brands, yes, we have exclusivity for those products as well.
All right.
Then what we-
Yeah, sorry. The e-commerce side
Yeah, the e-commerce side. Yeah.
It's growing very strong.
I think we had maybe with you or somebody else we had discussion on how big of a. It's running now at, I think Q1 it was 10.2% of our sales on e-commerce. It continues to pick up and being a significant part of our sales. But we don't see it as much as. You know, we're not skipping a you know, a distributor or a wholesaler or somebody and going and having you know, double the margin or whatever I think some companies try to do or do. For us, it's more that we make life much easier and better for our installers on availability, on ordering, when they want it, getting delivered when they want it to create a better value and efficiency for our customers.
The margin driver we see on the e-commerce is positive, because we give less discount in that channel than in the physical one. There will be a positive margin, but not something that is gonna change the world for us.
Okay. That's all for me. Thank you.
Thank you, Tom.
Thank you. Ladies and gentlemen, as a final reminder, if you wish to ask a question, please press zero one on your telephone keypad. We have no further questions. The speakers, back to you.
Okay. Thank you, everyone. Of course, I think my notes will be available going forward there if there's any more question or comments. Thanks for calling in, and thanks for the good questions.
Yeah. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, this now concludes our conference call. Thank you all for attending. You may now disconnect.