Earnings Call: Q1 2021

May 5, 2021

Hi, everyone, and welcome to the presentation of Gauru's First Quarter 2021. My name is Patrick Anderson, and I'm the CEO of Gauru. And with me today, I have Helene Klasson, our CFO, to present the financial performance. Next slide, please. I will start with an introduction of Gauru Group. Gauru was founded in 1939, which means that we have been over 80 years in Business. We develop and produce innovative products and turnkey solutions for the electrical installation markets. We divide our business into 2 business areas: Sweden, which consists of our Swedish operation and Gauru International, which cover our business in Norway, Ireland, Finland, Poland and in UK. We have production on 4 sites, 2 in Ginnukhoe in Sweden, where we also have our head office, 1 in Branimo in Sweden and the 4th site in Stetsching in Poland. And we are approximately about 4.20 people in the group. Next slide, please. Our business consists of 4 product area. And on this slide, you can see the share of the total sales in the Q1 2021 compared to the same period last year. Our largest product area, electrical distribution products, consists of approximately 3,500 products and turnkey solutions for the electrical installation market and contributes to 42% of the revenue. Our fastest growing product area is e mobility, which developed and markets all type of vehicle charges accounted for 32% of the total sales up from 28% in the year earlier. Our product area project, which provides complete and customized solutions for all type of power supply accounted for 19% of the total sales. And the 4th product area, temporary power, with a product portfolio consist of temporary electricity, lightning, Heatening and Charging. This is product used on construction sites and events. This area accounted for 7% of the sales up 1 percentage points to last year. Next slide, please. The year has started positively. We can report 70% net sales growth, driven by GORU Sweden, while GORU International was in line with last year. The main growth Driver among the product area were again e mobility, but also other product areas combined increased sales versus last year. The good sales developments also contribute to a strong improvement in the profitability, And Helena will come back to that later on in the presentation. The market for construction related products Have been good in Sweden with a high activity for new buildings and renovation, which benefit products Area Electrical Distribution Products, where we estimate that we have taken market shares. We can also see that rental companies have increased their investment in equipment following a positive outlook for the underlying markets. In our international markets, we see continued recovery on most markets. Our sales of e mobility product in Sweden increased by more than 100%, Strong sales in Sweden all over the product range, but also increased sales to the European market through contract customers. GARU International, we saw a decrease of 12% in sales, mainly due to postponed deliveries of part charger in Norway due to the pandemic. Worth mentioning is that we launched a new product called Kastra, a new e mobility product for camping sites that enables charging cars and a caravan simultaneously. Market conditions. Overall, we have a positive view of the market condition, But the industry is facing some challenges in a limited access to raw material and components. Also, we do not currently experienced major problems. And now over to Helena for financial performance. Next slide, please. Thank you, Patrick. Let us start by looking at some financial highlights. As Patrick just mentioned, Gauru has had a strong Q1 with a SAIL increase of 17% where the Lion part came organically and driven by growth within the first areas, e mobility and electrical distribution products. Net sales amounted to $291,000,000 compared to $248,000,000 in the same period last year. However, one should keep in mind that our Q1 in 2020 was relatively weak. We had a positive currency effect on operating profit in the quarter of EUR 2,900,000 to be compared with a negative effect of EUR 6,500,000 in the same quarter last year. So in other words, the currency fluctuation between the Q1 2020 2021 Amounts to €9,000,000 Operating margins in the quarter came in at 15.8%, giving an EBIT of almost EUR 46,000,000. The main reason for our strong EBIT was positive scale effects from higher volume. Net income for the quarter amounted to €38,300,000 which is a strong improvement from last year. Next slide please. And now let's look into net sales by product area. Our largest product area, electrical distribution products, increased in Gauru, Sweden by 8% which was slightly down in Gauru International. The project business was slightly down in Gauru, Sweden, but showed significant growth of 45% in Gauru International, where we have had some interesting customer projects in U. K. And Ireland. Gauru E Mobility had a growth of 63% compared to last year and will be looking upon in a separate slide in just a few moments. Finally, we are happy to see that the sales within temporary Power was up in GORU, Sweden by 25%. And it's our feeling that the rental companies are starting to invest again in the new equipment. Next slide please. And as I said, let's look into the product area eMobility separately. Sales within Inmobility amounted to CHF 93,000,000 in the quarter, which is an increase of 62% for the group, where the growth came entirely from GORU Sweden, which was up with 108%, and we had seen a good demand across the whole product range. Also reporting under Goro Sweden is a safe to contract customers such as energy companies An automotive company established in Europe, where we have had a good performance during the quarter and several deliveries have been made under earlier signed framework agreement. Sales of e mobility within GORU International was down with 12% As a result of limitations on sales activities and postponed deliveries in Norway due to COVID-nineteen. In UK and Finland, we saw a continued growth in sales compared to last year, although from lower volumes. Chargeable vehicles in Sweden increased by 73% during the Q1. And as we can see, the market for chargers It's driven mainly by households and offices. Also in the international markets, the number of EV vehicles are increasing strongly, And we see a good trend in Ireland, U. K. And Finland. Furthermore, the strong growth in e mobility has the beneficial effect In place of standard components within electrical distribution products and cabinets within the project business, A synergy effect perhaps in including Gauru. Next slide, please. Looking into the 2 business areas separately, starting with GORU Sweden. Net sales amounted to CHF206,000,000 in the quarter, which is an increase of 25% compared to the same period last year. And as I said earlier, this was dominantly organically and through eMobility. New construction on houses And the renovation sector continues to be good during the quarter, which drove sales in all product groups within the product area electrical distribution products. Also, the cold winter has created good sales of car heaters. EBIT increased to almost €33,000,000 And margins improved to 15.9% from a relatively weak quarter last year. This is explained by higher sales volume, favorable product mix and a good cost control. Next slide, please. Looking into the business area at Goro International, sales amounted to EUR 83,000,000, which is in line with sales in the same quarter last year. During the quarter, we have seen a mixed picture. In some countries and product areas, the market is recovering from COVID-nineteen, at the same time as we continue to have a negative impact from COVID-nineteen in other countries and product areas. Sales within electrical distribution product was in line with last year, 1st phase with projects increased by 45%, driven by high demand of customized solutions in U. K. And Ireland. Several of Gauru's wholesalers in the U. K, Ireland and Finland have now chosen to offer Gauru's products in their standard range, which enables fast deliveries. The EBIT amounted to €13,000,000 compared to €8,500,000 last year, And operating margins in the quarter came in at 15.8%. Next slide please. Cash flow from operating activities amounted to CHF 16,600,000 Compared to negative SEK 8,800,000 in the same quarter last year. This is the result of a stronger EBITDA. In the quarter, we have had investments of about SEK 8,000,000, of which SEK 7,000,000 were related to product development. We have a strong balance sheet with a small net debt for March amounting to CHF 6,600,000. We have an equity asset ratio of 59.3 percent and available liquidity, including overdraft Facilities of almost €168,000,000 If the AGM later today approves The Board's proposal for a dividend per share of DKK 4.75. Goro will make a payment of €47,500,000 in dividends with shareholders now in May. Also later today, if the AGM approves the share Split proposed by the Board. A share split of 5 to 1 will be implemented. Record date for this It's expected to be for May 26. Now back to you, Patrick. And next slide, please. Thank you, Helena. Sustainability is important for Gauru and our stakeholders. We have chosen to focus on 6 on Essen's Global Goals. We believe Gauru can make a difference. You can see on the slide which goes that we have been chosen. I will give you some examples of our sustainable actions. When we develop new products, Goro focus on the choice of material with the aim of developing highly functional products with good cost efficiency while minimizing impact on the environment during both manufacturing and use. Together with other companies, Goro participates in local projects that work to have 0 emissions in the country's transportation system. The vision is to be an energy plus country that is easy to live, reside and work in with energy efficient and fossil free travel. As part of our efforts, Goro has the goal that all of Goro's transports will be fossil free according to the conditions set by Fossil Free Sweden. Strategically, important suppliers are audited and monitored based on quality and sustainability factors. A new law on conflict minerals will take effect in the EU from 2021, and Goro has commenced to status analyze and start to collect data to prepare the right procedures to ensure regulatory compliance. Goro has made a deliberate choice as far as possible to primarily use supplies from Eurogroup. This reduced transport needs and also the risk of human rights violations. It is given for Goro to offer everyone the same opportunity for develop and support for retaining the motivation, staying working at the company and serving good ambassadors. Next slide, please. Strong growth and development opportunities. And here, our strategy remains the same. The main driver of growth will be organic growth. Our successful product development has been and will continue to be the key of this Growth. On top of this, we are always looking for potential acquisitions where we can add either new additional products, product areas for companies with an edge. An example of this is the acquisition of EV Charge Partner last year to strengthen our offer in the e mobility business. We are also looking for new geographical markets with a focus mainly on North part of Europe. And Goro's vision is to become the leading brand of the chosen markets. Next slide, please. COVID-nineteen. The ongoing pandemic had a relatively limited impact and Goro, Sweden during the Q1. And for Goro International, we saw a mix of recovering and continuity negative impact depending on country and product area. At this moment, demand in the market is generally healthy, And Gauru has not applied for or received any financial support from the Swedish agency for economic and regional growth as a result of COVID-nineteen. Next slide, please. Outlook. The strong market recovery has brought about certain challenges for Gauru. Lack of components Access is currently impacting the industry to various degrees. In the Q1, Goro managed to secure supplies, But limited access to raw material and components may impact our production. We assess that the core market conditions have essentially not changed aside from the pandemic. Even So great uncertainty prevails in society in regards to the pandemic's long term consequences on the economy. The market for charging infrastructure is growing structurally with rising number of rechargeable vehicles, and we see continuing strong trend with further expansion of the charging infrastructure in all markets. Demand for construction related products in Sweden, combined with the important renovation sector, is expected to remain stable. The trend in other markets served by Gauru aside from the pandemic is expected to be similar. All in all, GARO has a positive view at the long term market condition, mainly driven by growth in the charging infra sector. Thank you for listening, and we are now ready for questions. Gauru. Our first question today comes from Kenneth Tal of Carnegie. Kenneth, your line is now open. Yes. Thank you. So Just a question. So I understand it. When we sell e mobility products under those Claim agreements, they are reported as e mobility sales in Sweden. Is that correct? That's correct. Okay, great. So that could help explain the very strong growth in Sweden, I guess. Yes, a part of it. Of course, we have a good growth also in the Swedish customer, but also in the external exports, so to say. And then there is a lot of discussion in the industry right now about supply chain issues and also that Raw material costs are increasing, both steel and plastics and so on. So do you foresee that you You could run into supply issues and that your costs for the components you buy or The price of those are being raised dramatically. As we said in the presentation, it does not affect us So much in the Q1. Of course, we are also secure the material for the Q2, But we have to fight for the material, of course. And of course, some components will increase. That's the case, but we will handle that, of course, with the pricing to the customers. So But we have done it great during the Q1, so far and so good. Great. And a question on the e mobility side. I mean, you showed very good growth there. I was wondering how you think about pricing versus growth in that area. I mean, If you were to lower prices a little bit, would that accelerate growth a lot? Or is it More other parameters that are important in the sales process? We have said it before that we are not the Cheapest brand, so to say. We will have a professional brand, and as we said, we're not the cheapest one. We think it's important to sell all the function, and so that will not affect. Okay. Then the very strong balance sheet you have, now you're going to pay dividends Very soon, of course. But still, you will have a very, very strong dividend. So are you looking for Acquisitions, do you have anything that could be landed soon, you think? Nothing we can talk about, but as I said, in our growth plan, we are, of course, looking for interest in new markets, But also it could be a product to product area, but nothing we can mention here and now. Okay. Yes, great. That's all for me. Thank you. Thank you, Kenneth. Our next question comes from Jacob Sedolone from ABG. Jacob, your line is now open. Please go ahead. Thank you so much. I have a question. You reported that sales in the international segment declined by 12%. And you said that is mainly a result of the postponed deliveries due to the pandemic. I was wondering, can you share with us How has it been so far in this quarter? And what's the outlook looking like going forward? Thank you. About the outlook, we don't give any outlook for the quarter 2. But as you said, for the quarter 1, we had some Deposed deliveries, but that is mainly due to the fast charger, not to the AC charger, which is the wallbox and the public charger, but the postponed deliveries is by DC, a fast charger. But we are not talking about outlook Gauru. Our next question is from Ofelia Asp from ABG. Ofelia, your line is now open. Thank you, Ophelia from ABG. Thank you for hosting this conference call. And you, of course, reported a very strong margin this Quarter. And you mentioned that this was primarily driven by higher volumes and a favorable product mix And combined with the tight cost control, of course. Can you comment on the product mix and if you expect it to remain The same during the following quarters? Yes. The product mix was, of course, we think It will be a quite similar product mix during the quarter 2, so to say. We can't see any change in that at the moment. But then when we're talking further on this year, it's more hard to say. But we think we will have a quite similar product mix during quarter 1 quarter 2, sorry, so to say. Okay. That's good. And I think that Kenneth touched upon this question, but I wonder if you could how you are working with the price increases in order to hedge against the Upcoming increases in the potential upcoming increases in raw materials and covenant prices? Of course, this is a focus area, As you said, with this, we were fighting to get the components and the raw material to the production, and that prices is, of course, increasing, but we are also working with pricing that to, of course, to our customer. So that is a Focus area at Gauru all the time to have the right margin and to push this type of cost in the markets. But this is a quite special situation in the world at the moment with the raw material and the components. But this is, of course, and focus our area So I have good margins. Okay. That's Very helpful. Thanks a lot. And you, of course, had a really strong growth in the e mobility segment. I wonder if you could comment on the demand in Gauru Sweden and International. During the quarter, if you did see any higher demand during the first half or at the end of the quarter, Which could imply solid momentum in April landing going to Q2. Of course, quarter 1 is always a special quarter because January is often quite It's low, then it's increasing during the quarter. So of course, the end of quarter 1 is always Stronger in the than the beginning. So, yes. Okay. So the end of the quarter is always stronger, so to say, when we talk to quarter 1. So that's ramping up during the quarter. And then in quarter 2, we have more of public holidays, And that will give us less working days, so that gives some seasonal change in between the quarters. But Otherwise, it's normal business. Okay. Okay. Thanks a lot. That was all for me. Thank you. No further questions are present. We do indeed have a question from Vincent Mannen from Carnegie. Vincent, please go ahead. Your line is open. Yes. Thank you. Just a quick question coming back to The postponed deliveries in Norway to from Q1, do you expect to deliver into Q2? Or is it going to take longer? Or Could you elaborate on that? No. We are expecting that deliveries during quarter 2, yes. Okay. Thank you. We have a follow-up question from Ophelia of ABG. Ophelia, please go ahead. Vicki Li from ABG. Your line is open. Please ask your question. Sorry, I was muted. I have a follow-up question there as well. I wonder if we should see any Catch up effect in Q2 from the Norwegian business then? That depends how many of this postponed business, of course, we will deliver during quarter 2. So that's quite hard to say when you say ketchup effect. Of course, we will see some increase, But how much increase it will be, it's quite hard to say due to how many we will deliver during the quarter, too. So of course, higher Increased, but I will not call it ketchup effect, but it will increase, yes. Okay. Thank you. No further questions are present. As we have no further questions, I'll hand back to the management team for any closing remarks. Thank you for listening to the presentation, and have a good day.