Good morning, and welcome to the Beijer Ref conference call. All participant lines will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to the CEO, Christopher Norbye. Please go ahead, sir.
Thank you. Hi, everyone, Chris here together with Ulf. Welcome to our Q2 call. I think we'll get started right away. We'll start on page 3, which is more our rolling 12-month. We show this on a regular basis. As we continue to grow our sales, we're now almost rolling at SEK 20 billion. We added some countries through acquisition this year. We'll continue to drive our business through our 450 branches. Let's move on to the next slide, number 4. We reached sales of SEK 5,938 million, so we had a very good sales quarter, I would say, +30% in total.
Organic sales +13%, and we'll come back a little bit how the build-up was of that. Also a good summer season for our acquisitions that we made over the last year. We had a very positive support by +11.5% on the acquisition side. It is acquisitions, some of the bigger ones that European-based, like Inventor and Deltron that had a strong start here to the summer. Then we also get some tailwind to FX, as you know, around 5%, which adds up to the +30%.
If you look down on the EBITDA, SEK 618 million, which was also a very good growth of +43% on a margin of 10.4% versus 9.4%. We did pick up 1% based on, of course, higher sales volume. I would also say good development in the gross margin, and also good development in acquisitions. All in all, on the margin side, I would say a very good continued development in all categories. The cash flow is negative, as it is during our Q2, and also go a little bit deeper into that because, of course, a lot of the cash flow is now moving from inventory into accounts receivable, as the business model for Q3 and Q4 is more cash positive.
With our earnings per share, that increased by 35%. On the financial side, I would say a very solid quarter for us. Moving on to slide five. If we then break down the business a little bit more, we also think it's a good reference point that we did have a very good Q2 last year, that we're almost 34%. I think that's why we're extra happy that we could deliver these numbers and compared to very strong Q2 last year. If you then go in per category, we see our commercial industrial cooling growing 13%. Continued good activity in the, you know, branches, on replacement parts, service and aftermarket.
Also continue, I would say, good development in our business around different type of CO2 and other solutions that we continue to sell through this channel. Also on the OEM, up 6%. I think here is where we continue and be challenged with the supply chain issues, but also during the quarter, a lot of closing down our factory in China as well. That's now opening up again, but almost being closed all of Q2. Plus 6%, we expect this now to be double digits as we move into Q3 and Q4, as we see some better development in this area. On the HVAC, I would say a very strong plus 15% in the quarter.
We have good development in most of regions, very good in Eastern Europe, but also in other parts of Europe, also in APAC. Of course, APAC now is more in winter season and will ramp up as we come into October, November. We do see here also, we'll discuss a little bit later that that's an area we don't expect to be growing at these high levels as we move into Q3 and Q4. Then with that, all regions, good development with double-digit growth, especially Eastern Europe continues to be very positive. Here's where we made acquisitions around Sinclair and Deltron, and Poland and other markets continue to be strong. Also some of that driven by also accelerated into heat pumps in these segments.
In all areas, as I would say, very good. The OEM, we expect to be back at double digits now as we move into Q3 and Q4. Moving on to the next slide, number six. What are we seeing a little bit in the world out there? I think the big discussions that's on everybody's mind is, of course, the inflation that keeps being very high and now also as interest rates are coming up. I think, as I said on the call this morning, that it does create uncertainty for us. I mean, closed off Q2 very good, but of course, in the short term, I would say, we would have more uncertainties in the market related to this, which I think is very normal.
What we see on the long term journey, we see both on the HVAC side and also the OEM side, very good trends. I will be cautious about the short term related to the interest rate and inflation and see how that plays out in the market and in the world going forward. The Kigali Amendment is getting more traction in the U.S., and we see that also as we are meeting companies there and interest in CO2 and other type of solution as they are by 2025 moving into more regulated markets for HFC gases. A little bit different structure than in Europe.
It's almost like every state is still making different type of solutions, but they also marketing more and more into this type of regulation as we have now in EU for quite some time. Just interesting on Greece, I think I mentioned before, they have now signed off, and if you today in Greece replace your AC, you get 70% back from the government on the back of more energy efficiency driving that in the market as today's solution is about 30% more efficient if you bought something 10 years ago. It's also an interesting trend we see in a lot of countries working on how do they reduce the need for electricity and balance more on the basis of what's happening in the world.
We can see also that, of course, on the heat pump side, as you see on the right side, still, not a huge segment for us, but continue to grow very fast, as we see, a lot of demand, I mean, in Southern Europe, but now also in Eastern, Europe, in countries like Poland, where they are now replacing a lot moving in heat pumps. It's a very interesting segment, long term for us. Moving on to the next, slide of financials, slide 8. Here on the sales, it's more a summary. We're about 30% sales growth. Organic growth 13% and 43% EBITA and EPS 35%.
For us a very positive quarter, and we're very, you know, proud of the numbers that we could produce in this quarter also, especially as Q2 last year was very strong as well. Moving on to slide 9. Here you see the buildup from different, but I think I've gone over it. It's more how you see it in a format building the SEK 4.5 billion-SEK 5.9 billion on the FX organic and M&A. I mean, good development, everything and good tailwinds from the currency, especially as the SEK has weakened against the euro, which is the big currency for us. Slide 10. We can see the trend.
Of course, here if you go back to after COVID, the balancing out, you know, as Q2 2020 was the big negative quarter for Beijer when everything stopped. It restarted already in Q3, Q4. Since then, if you look at both organic growth, I would say especially the organic growth. I mean, the acquisition is adding a lot of value, and we'll continue to do that, but we're also very proud of the trend that we have succeeded to achieve over the last six quarters on the organic side. I think it's a very impressive slide, if I may say so. We have the region. I would say also solid development. Nordics, good quarter and a good backlog, I would say. Central Europe, a little bit weaker.
We see some markets there in Germany. It's not our biggest market, but has not been strong all year. Southern Europe had a positive development, also a new acquisition coming in there in Inventor. East Europe, fantastic development, both organic and in our acquisitions. We're also happy to say that we succeeded to be a little bit better here in Africa, especially South Africa. We're also hoping here that we have a positive trend moving forward. It's been a tough economic market the last 2-3 years, especially since COVID. Also in APAC, we see good development in our main markets there. I mean, in Australia very good also together with acquisition with HRP. New Zealand continues to be strong. Markets like India and also Southeast Asia has opened up in Thailand, Malaysia.
Smaller market for us, but good growth. China fairly negative with closing down and of course our end customer here in hotel and restaurants and et cetera is not doing a lot of business right now. All in all, we're very happy with the development in all our regions. On that, I will leave it over to Ulf to go over the result, cash flow and some other things.
Thank you, Christopher. On page 12, you can then find the EBITDA development. As you can see then, as also Christopher mentioned, that we have a very solid growth of 43% in the quarter. With a return on sales of 10.4%, which is 1% better than Q2 2021. That is the result of that we have a good growth rate on the organic business, but also good contribution from our acquisitions. As also Christopher said, we had a good control of the pricing management. As you know, we had the price increase coming in, but we handled that very, very well. We have the fixed cost under control. I will then turn over to page 13, where you see then the EBITDA development quarter by quarter.
You can see then that we compare with the previous quarters. Say quarter 2 2021 and 2020, this is a very good performance. Also want to just point out that even though that in the Q2 2020, in the COVID, even despite that, we had a 17% organic decline, we still managed then to report return on sales to 7.6%. It shows that we are quite resilient in downturns. Page 14, you see the EBIT by region, again, also very good drop through from the volume. In particular then we have a good development South Europe and East Europe, and of course that's supported by the acquisitions that we have done the last 12 months.
Also then as Christopher Norbye mentioned that APAC, it is a winter season, but they are also managing that very, very well. Also the old markets, I would say Nordic is also performing very well. If you then turn over to page 15 where you see then the P&L statement for the group. We have an impact of the FX on EBIT, EBITDA on SEK 19 million. Interest is slightly higher in the quarter, coming from first that we had a higher debt than the previous year, but also then we had a negative FX impact in the quarter, which then is accounted under net financial income and expense. Tax is in line.
We had a tax rate of 25% in the quarter, and of course it's a higher amount due to that we have a higher profit. In prior year, we had a tax rate of 23%. All in all, very solid and good numbers. Earnings per share on page 16. Of course, that's slightly then impacted by the financial net of this FX loss, FX cost, but also then slightly higher tax. Otherwise, it's a very solid performance within the quarter, 45% and then 20% on the full year. If I then turn over to page 17 on the cash flow, you can then see that we have a good sort of operational performance from the EBITDA point of view.
This, then if you come to the working capital, this is a normal seasonal pattern that we have, that we are then transferring the inventory into accounts receivable, and then, accounts receivable then in Q3 and Q4 should then turn into cash. We still have issues on the inventory. We are very cautious, and we want to have good delivery performance. So we still have reasonable high inventory, but that is a deliberate decision from our point in order to have a good service. If I then turn over to page 18, which is then the quarterly cash flow. Of course, it's impacted the last three quarters by the working capital in order to be able to have a good delivery service to our customers.
Turning over to page 19 where you see the net debt development, that is all in all, and of course, it's impacted by the acquisition that we have done in the last 12 months and also then the high working capital. We are now on a leverage all in on the 2.8. But again, then the IFRS 16, that is mainly then coming from a rental contract on our 450 offices. All in all now, I will then turn over to Christopher on page number 20 to conclude.
Yeah. We know that is good profitable sales growth. We see it both on the top line, but also the bottom line, which is of course extremely important, and also shows that we have a business model that manages these type of complex situation in the world from both supply chain and also pricing and timing of that. We feel very confident in our decentralized business model continuing to work in this type of environment in a good way. Also the EBITDA both strong growth in money, but also a margin of 10.4%. I think it's a good achievement. This is our top quarter, so it should also be our top margin, but also a good development sequentially and also compared to last year.
Also looking at all regions, double-digit growth in all regions. There's nothing really sticking out on issues in region. That's also South Africa or Africa seems to have turned a corner. Let's continue to follow that. We're also developing acquisition according to our plans. Good development both on the sales side and on the profit side that continue to support the BRF journey now and going forward. As I said, I think we've continued to manage the inflation and pricing in a good way and also on the supply chain. I think a little bit alluding to what Ulf said. We still see issues in supply chain, but I think it shifted a little bit now from uncertainty to more certainty, but still very long lead times.
We still see long lead times in the supply chain, but at least it's being more accurate, which gives us opportunity to plan a little bit more going forward. We're not back by any means to where we were before the COVID pandemic. I also want to highlight a little bit short term. We move now in more uncertain markets. We're very confident on the long-term trends we see, continued development in the electrification and moving on the heat pump side, the penetration and the replacement of AC around in Europe and also how we grow the business. The way our business we expect to accelerate.
On the short term, we are a little bit uncertain how the market will react to inflation and interest rates around here and especially on the European side in South Europe and in some of the Central Europe regions. We are a little bit cautious, and we are following this very closely as a company. We do have this on the agenda now on the short term. That's something I'm sure we'll discuss here in the Q&A as well, the short term and the long term for us. In summary, great start to the year, both Q1 and Q2, but moving in short term a little bit more uncertain times until we know how the world will be developing now with interest rates and inflation pressure out there.
Based on that, thank you very much for listening. Now we open up for Q&A. We're ready.
Thank you. We will now begin the question and answer session. To ask a question, star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question is from Viktor Trollsten with Danske. Please go ahead.
Thank you operator for taking my question. Firstly, I'm just a bit curious on the weather effects that you mentioned on the extreme heat in Europe during Q2. Just to understand, how fast does that flow through into your P&L? Could there be some positive effects also in Q3 during the high season from this? And also secondly, if you could elaborate a bit on the positive impact on the acquisitions that you mentioned. Do you have, you know, this in any way accelerated your private label launches, so you're basically ahead of what you initially anticipated? That's my first. Thank you.
Thank you. Yeah, you know, I think it's lovely talking about the weather, but it is a part of our business, so I now have my app looking at especially Southern Europe weather and development. We do talk about it in with our market as well. It's of course not 100% scientific, but a little bit what I understand now is that the weather patterns for June, where you had a lot of heat waves, is that they were a little bit too short to really make a difference. They need to be supposedly a week or 10 days, and if they're 3, 4 days, it doesn't change that much. We didn't see a huge impact of it.
I also think with the way the system is built up right now it's also that most bigger customer has stocked up fairly well because not only for the season but also because of all the issues that's been in the market. I think it's more now as we move into July we know there's some longer heat waves coming in here inside of Europe and we're following that closely. At least I mean there's no negative effect. We haven't seen a huge impact but I think it's more related also that it it's been fairly well stocked up in most of the regions even higher same as we are.
we do see it as, I mean, of course, not from a weather, human point of view, from business point of view, that will continue to support and drive our business. If you move in on that-
Okay.
Sorry.
No, no, please, go ahead. Just on the private label launches, if there's any.
Yeah
You know, potential acceleration.
No, the private label continues and follow our plan a little bit what I said last time, especially on the HVAC side as we're launching now Sinclair as a private label. Q1 and Q2 or Q1 and Q4 was more related to building stock in Southern European countries. Now we're going into launch mode. It is developing well according to our plan, a little bit ahead of plan, I would say. It's not changing the world yet for us. It's more a long-term journey. Now in Southern Europe and in countries like France and Spain and Italy and the main large countries, we have launched a product and it's selling well. We'll continue and develop this journey.
also in step two here in the Sinclair, we're also gonna launch a heat pump as part of that package, especially in step one in Southern Europe, and that should give us a little bit more opportunities long term also in the colder season of the year. so far so good, I would summarize it.
Okay. No, that's clear. Secondly, just thinking a bit about your price hikes versus cost inflation. Sorry if this is a tricky question, but just thinking about your sort of inventory turnover. I'm just thinking about, you know, are you still in the part of the cycle where you are selling products at lower input costs with your recent price hike? So you have a positive margin impact from this, and or you know, basically meaning that cost inflation will accelerate up ahead. Or would you say that cost inflation is fully in the figures? If you understand my question.
Yeah. No, I understand it and I of course can't answer it with 100% accurate. The way we see it and follow it is that there's positive and negatives, right? In the system. You have some price increases. We even have some of your suppliers raising prices on your order book. We do not do that towards our customers. We have negative effects on that side, where some of the inventory that we bought cheaper and have been able to pass on a price increase. We see it, I would say, as a more of a zero-sum game, but hopefully with a little positive timing. We don't.
When we talk now to our suppliers, we don't see, you know, if the world doesn't change again, and again, and again, any big price hikes coming, you know, for the rest of the years. The rest of this year it's been fairly stable here after, I would say, mid-June. Most of them are done with a cost alignment right now. I would say it's more a zero-sum game where some positive and some negatives. I mean, there's no huge differences in our underlying margin per product group, where some areas that we improved and some that we lost to. In total, I would say it's fairly stable with a positive, maybe a positive edge on the situation.
Okay. That's very clear. I guess, you know, confident message given that, you know, at least I was impressed that margins were up year-over-year in that extent, and it sounds like we shouldn't expect any, you know, further pressure at least ahead. Just finally on my side, and you touched upon it, but, you know, that you're saying that OEM should see double-digit growth ahead. How much of that is just, you know, from a comparables perspective and how much is that you actually are seeing easing in component shortage?
No, I think it relates, as you said, to that, we are growing and we have been growing, through this situation in our European SCM Frigo, the big part of business, double digits all through this. We had negative development in China, which is also a big part of our supply chain when it comes into the APAC region. It's more based on that Europe will continue with double digits, and that we get some, you know, some opportunities to produce and sell parts in the APAC region as we move into Q3 and Q4. Of course, a statement like that can change if everything closes down again for three months in China.
Mm.
That's what we're seeing right now. It's more the mix between the APAC and Europe that's been holding it back from a double digit. The underlying order book and activities continues to be high.
Okay. No, that's very clear. Thank you so much, and I step back in line. Thank you.
Thank you. Thank you.
Thank you. Our next question is from Carl Ragnerstam with Nordea. Please go ahead.
Hi, it's Carl here from Nordea. A few questions. Firstly, looking at the margin, the EBITDA margin is up some. I think it's 100 basis points year-over-year. Could you perhaps give some comments on how much of that is driven by margin accretive acquisitions as we have seen volume drop through, as well as other operating measures you're currently working on?
Yeah. I think we won't divide on the acquisition and organic, but we do have a slight pickup in the gross margin, and that falls through to the bottom line. Then we're also running a good, you know, 20% drop through on the sales, on the organic sales. We expected, you know, the acquisitions, especially the Inventor and Deltron that are, you know, HVAC companies to have a strong market in Q2 as that's absolute high season of theirs. It's a combination of, I would say, of those three. Of course, as we move into Q3 and Q4, you have less, you know, the strength on the HVAC business, as you know, as the seasonality.
I would say that this is a combination of the organic drop through in our existing business, double-digit margins in our acquisition as expected in Q2, as very strong HVAC business. I think those are the key parts. In a little bit, we'll continue to talk, you know, about being good on developing the long-term trends in private label and other, and I would say it still has a more minor part still in development of the margin. Summary is it's a high sales quarter, I mean, very high, and that gives us good drop through when it runs through the bottom line with these type of sales volumes.
Okay, very good. Also, we have seen inflation in many commodities. Could you comment where we are on the traditional refrigerant prices currently? I guess you had slight EBITDA win this quarter, right?
I mean, it has. I would say the way we see on the refrigerants, as we discussed that many times and the significance of it is of course less than it used to be in 2017 and 2018. The prices we set in Q1 and here in Q2 has stabilized on a positive level, so it continues to be up 20-some+ versus last year. I would say a couple of percentage sequentially, so it's right now fairly stable, but it has been a positive trend for us versus negative. It's nothing revolutionary. It's fairly stable at a good level for us at this moment and also in Q1.
Okay. Very good. Also of course, you remark on the inflation and the impact on demand. Is it anything you have seen so far during the quarter or entering Q3? Or is it more of a thing that could happen theoretically?
Yeah.
in the coming months or?
Oh, I'm glad you asked that question because I would like to answer it, but I don't have the crystal ball. I would say that, you know, you released the Q1 report and, you know, I didn't see any really clouds on the sky, which has turned in also to very good Q2. Now I am more cautious, and we're all looking closer. I think I would wanna answer it in this way, but no, I don't have specific issues right now, but I believe that, you know, on the HVAC side has been growing a little bit faster than the market related to also our big customers building inventory to manage the season and being extra stocked.
I would say on the HVAC side, I don't expect this type of development here as we move into Q3 and Q4. The OEM side will, I think, have a possibility to double digits 'cause it's still, you know, less driven by inflation and the market and there's not that much stock out there because of issues. The ref business will tick on. I would be a little bit more cautious here if you just talk about Q3, Q4. We're still positive, but not at the pace that we delivered here in Q1 and Q2, if that helps a little bit. There are clouds on the sky. There's no, you know, rain or storms yet.
I think also that we need to understand that we need to be cautious, a little bit more cautious as we move in here in Q3 and Q4, because I think it will affect our business.
I mean, it's super helpful comment. Also the final one from my side. Your net debt to EBITDA is 2.8 at the end of the quarter, a bit lower on the pro forma basis, I guess. Do you feel that you have the means to execute on your M&A pipeline still, or is it constraining you in any way?
No. We have the available facilities and of course on this then the 2.8 we have as a leverage that is on including then IFRS 16 and net on a pro forma basis on those acquisitions that we have done. We still believe that we have the means and then we can we will. We don't see a hindrance to continuing our M&A track path. I guess we'll aim for the underlying EBITDA and the generation we expect also in Q3 and Q4 on cash and development business. We continue and drive our M&A agenda, and we are looking to be fairly active here in Q3 and Q4 on that.
I would say right now we still feel comfortable with the business model, how it looks and the acquisition we have in the pipeline. The short answer would be no. Of course we continue to look at our net debt and need to manage that in a good way.
Okay. All from my side. Thank you.
Thanks, Carl.
Thank you. This concludes our question and answer session. I would like to turn the conference back over to Christopher Norbye for any closing remarks.
Yeah. Thank you very much, calling in here on a summer's day, and a very busy day I'm sure for the people on the call on all the reports here. I think summarizing a great Q2, great start to the year, and as we said, I think the organic growth we had over the last six quarters shows the Beijer Ref is in a very good business. We see the underlying long-term trends on our products being very good in combination also with opportunities to continue the M&A pipeline. I just wanna highlight, without any strong signals or anything like that I am a little bit more cautious about at least the short term in relations to interest rate inflation and how that will affect.
At least give that view as we look at short term and long term. We of course run our business long term, but I think also we do have a very good business model to create value in both areas. On that, I would like to wish everybody a good summer, and then if you need any more clarification, me and Ulf will be around, or at least I will be around the rest of the day. If not, then we'll talk soon and have a great summer as well when it comes to you. Thank you very much.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.