Earnings Call: Q3 2021

Oct 21, 2021

Welcome to the Swedes Group AudioCast with Teleconference Q3 2021. Throughout the call, all participants will be in a listen only mode. Today, I'm pleased to present the CEO, Per Arnd Anderson and the CFO, Marc Lundmark. Please go ahead with your meeting, gentlemen. Thank And we have the 3 brands just for you who don't some words about Sverdrup's group for you who don't know so much about us. We will today present the Q3 figures. It's me, Per Andersson and Mats Lundberg, CFO. And now Slide 3, please. Some words about Next slide, please. Slide 3. So words about Swedeberg's group for you who do not know so much about us. We have Three different brands. Yes, Swede Baers Bard. It's located in Dalstorp in Southwest of Sweden, Around 116 employees. It was founded for a little bit more than 100 years ago. Then we have Makri Sain, who is located on in Holland, in Southwest also of Sweden, A little bit more than 50 employees. And it's shower cabins and shower walls production. And since 1st December last year, we acquired Kase in Hanning in Denmark, a small Sales, office and customer service and the warehouse, around 14 employees. And since August, we have established our headquarter in Halmstad with the group function. And today, it's me and the CFO, Mats Lundberg, who is Next slide please. Some words about our brands. Silberbus, As I mentioned, it's a wide range of products for the whole bathroom. It's included mixers, shower walls, Floor lights, furniture, everything you need in your bathroom. Makriasai was founded from the beginning as a shower wall, The shower cabin's producer and also had added some furniture in the range the last couple of years. And Kasse, who is the biggest product category is mixers and have some bathroom Thanks as well and also represent some strong brands on the Danish market. Next slide please. Some highlights from the 3rd quarter. It was a growth in sales with around 25 percent and an EBITDA margin of 14.8 percent or SEK 24,800,000. It's an increase with 36% compared with last year. And it's a very good Sales and Finance, we're very proud of that. Since the beginning of August, we also now are working in the group structure With strong management team in all brand companies, Swede Baader and Macquarie Science Manager Directors are in place. And With this new structure, we also expect that it will support the growth of the companies. Magrdesign has improved their supply chain, And it has some minor impact on the cost side, positive cost side and a positive effect on the cost side. But it's more to prepare for growth And also potential give the potential to in sourcing of products from suppliers. Severberg's cooperation with Halvor Bockje, the Norwegian interior designers and also the Finally, the distribution agreement with VVS Norway has starting to give good result in the Norwegian markets For the Sverdrup's brand. And during the quarter, the delivery service has been on a very good level in all companies. We I have focused very strong on delivery performance. And for that reason, as you can see, the figures we have also increased our stock at Some level as well. Next slide please. And the highlights for the year to date, for the 1st 9 months, We continue to invest in marketing in different areas. In Swedeberg, we are investing the shop in shop concept that is starting to roll out now. It's scalable for a small version to medium and big version, depending a little bit our dealers, Our big space they have for us. We continue our development in our digitalization of our sales process. Kiazza has increased the sales force and continued the sales growth journey. From the very beginning Of the corona pandemic, we have prioritized the delivery performance to clients as very, very important. And this has, of course, impact us with some higher stock value in all three companies. We have succeeded quite well to compensate for the increased on material costs and also freight costs. So we have worked out to improve our margin On new products and also reduce the number of SKUs. So I'm happy and proud That's all companies performing well and all of them have beat the earnings compared with last year. Next slide please. Sweden is our biggest market with 67% of the total sales. And Danmark is now our 2nd biggest market, close followed by Norway. And as you can see also, Swedeberg's brand is the biggest part, 2% and the Macro Design is 26% and Castor is 12% year to date 2021 of our total sales. Next slide, please. Financial highlights year to date 2021. The net sales year to date have an organic growth with almost close to 12% And increase in total sales around 26.7 percent, that have an FX effect of minus 0.5%. And the acquisition of Casa has been having good impact of more than 15% on our total sales. The book to bill index is above 100 for the 1st 9 months and very positive for that. We are performing well and we are taking good with orders. The EBITDA margin It's 2.3% higher than compared with last year. And so we are very close with this 14.7% to our financial target that 15%. So we are last quarter, we were above 50% of the quarter, this quarter a little bit lower, but we are See that the 50% is the target. We have improved the cash flow for the 1st 9 months and Both in the quarter and year to date. And some it's been some impact of the increase Stock value that we said that we have done to secure the delivery performance to the client. Next slide, please, and over to Max. Thanks, Jonas. Good morning, everybody. Some words about our net sales Comments this quarter and year to date. Sales amounted to DKK 162,200,000, Thanks. Which means an increase of around 25% on Comparison to previous quarter or quarter 3 2020. Currency effect is close to 0 in this period. In the quarter, sales in the Swedish market were at NOK 109,000,000, An increase of nearly 13% in the quarter. When we did market, it had a slight growth in Q3, 0.5%. The increase is linked to Fiat with an increase of close to 39%, while market design was down. Finished sales increased by 11.4%. And as a result of the acquisition of Keesert, sales in Denmark that Accounts for 13% of the sales in the quarter and then that's our 2nd biggest market. Sales sales in Sweden accounted 35% this year versus 27% quarter 3 previous year. Note the seasonal decrease in sales in quarter 3 compared to quarter 2, where normally you realize our low sales month in the year. For the 1st 9 months this year, net sales amounted to CHF 588,000,000, which means an Increase of 26.7% compared with previous year. The currency had a negative impact that's had with the 0.5%. Sales in the Swedish market amounted to €284,000,000 compared to € 258,000,000 previous year, An increase of roughly 12%. Norwegian market is growing on a year to date basis with nearly Well, per se. Finnish sales increased by 6.6%. And the cash flow sales on a year to date basis is Well, about 4% of the total sales. Sales out of Sweden accounted for 33% this year compared to 20 4% last year. Next slide please. If we then repeat some of the growth Numbers that Perona already mentioned, we see that the quarter 3 Growth was around 25%, of which the acquisition of Casa amounts for around 16%. We have a flat impact on the currency and thus the organic growth is around 9 point 2%. If we talk about the 9 month numbers, it's close to 27%, where just Yes, we're sitting in the halls. There is a small currency effect, which is negative with 0.5%. And then the overall growth for the 1st 9 months is 12 Percent. In the organic growth, there are price increases included. Next slide, please. Some comments then on our profit and margins For quarter 3 year, respectively, the 1st 9 months, the gross margin has improved quarter over quarter With 1.1 percent in 9 months, the increase is 0.9% and quarter 3 versus quarter 2 is 2.2%. The margins have been improved due to the fact that we have implemented price increases 1st February and also second one At the 1st August, we have improved volumes, which Improves the gross margin. Also, we have successful product launches with more efficient production and higher price points. If we then go to the EBITA percentage, We have quarter over quarter an increase of 1.2% for the 1st 9 months compared to previous year, an increase So the 2.3%. And if we talk about in between quarter 3 quarter 2 this year, there is a slight Change to with 0.3%, which is mainly volume driven as we have lower sales in quarter 3. So in total, the EBITA percentage is 14.8 percent in quarter 3 compared to 13.6% previous year. And the cumulative EBITA percentage is at 14.7% compared to 12.4% previous year. The EBITA percent change is a little bit higher due to mainly a difference in Appreciation. Next slide, please. If we then go into a little bit talking about our segments. First segment is Wielbergs, Where we have external sales Of €105,000,000 in the quarter, which is Compared to quarter 3 20 at an index of 1.13, if we talk about 9 months, we have 366 0.6 compared to 328.4, which is an increase of 112% or Index 1 Well, if we talk about a little bit of the sales in the different markets, the sales in The Swedish market amounted to close to SEK 80,000,000 compared to SEK 75,000,000 previous year, an increase with nearly 12%. The development in the Norwegian market has been very positive with a really successful cooperation with the Norwegian designer hardware back end Sales increased by 38.5% in the quarter. Sales in the Finnish market increased by 8%. If we talk about the 1st 9 months, external sales in the Swedish market is at €284,000,000 compared to 2 €58,000,000 last year, an increase of roughly 10%. Norwegian market has increased by 34.8%, Sales sales in the Finnish market increased by close to 6%. The beta result for the quarter amounted to SEK 70,000,000 Compared to SEK 12,200,000, which corresponds to an EBITA margin of SEK 16,200,000 compared to 13.1%, an increase of 3.1%. For the 1st 9 months, correspondingly, the EBITA result is at Goes to €54,000,000 compared to 41.4 percent sorry, 41.4 percent In increase, I would say, which corresponds to an EBITDA margin of 14.8% Compared to 12 an increase of 2.2 from 12.6 last year. Next slide, please. If we then go to market design, You see that the sales in the quarter is 40 €300,000 compared to €40,100,000 last year. If you talk about the full Period, close to €150,000,000 compared to €136,000,000 last year. Indexing in the quarter at €100,000,000 Index in For the full year or for the full for the 9 months at 1,010. During the quarter, external Sales in the Swedish market increased by 14.8 percent to 29 €500,000 compared to €25,700,000 last year. Norwegian sales decreased by around About 9% to €10,000,000 versus €12,800,000 last year. Partly sales is partly affected in Norway with some timing issues of deliveries. The EBITDA result amounted to €4,900,000 slightly lower than previous year of €5,300,000, Which corresponds to an EBITDA margin of 12.2% versus 13.2% last year, a decrease of 1%. Release of provisions 2020 as well as the timing issues affect And explain the slide margin drop. During the 1st 9 months, Exelio sales in the Swedish market increased by 18.1 to €108,000,000 compared to €91,000,000 last year. Norwegian sales decreased by close 3% from €40,000,000 down to €38,900,000 EBITDA result amounted in period to close to SEK 20,000,000 compared to close to SEK 15,000,000 last year, which corresponds to the EBITA margin 13% compared to 10.8% last year. One thing to remember there is There was a corona support subsidy received last year over around €1,000,000 during the full year Period. But no impact in the quarter. Next slide, please. Then the performance of Casio. Please note that these are reference numbers as regards 20 20, those numbers are not included in the report, but they are presented here as Showing the performance of the company or the segment. External Sales in the quarter was at €21,600,000 compared to €20,900,000 and mix of €1,400,000 The full year sales is at €72,000,000 compared to €64,000,000 and the Haltz, which is an index of EUR112,000,000 EBITA ends up at EUR4.7 billion, an improvement with 24% versus last year in the quarter. And for the full year, the improvement is 15%, And we are at €16,800,000 Correspondingly, EBITA percentage is at close to 2012 compared to 2018 and Q2 last year and there's an improvement for the year over year full period of 0.7% and ends up at 23.3%. Next slide please. Some words about our cash flow and some There are KPIs. Operating cash flow in the period was at SEK 32,300,000 SEK 1,000,000 and it's an improvement with around SEK 11,000,000 In that respect, mainly driven, of course, by the improved result. For the full year period, we had We are now at €75,000,000 with a corresponding period last year at close to €61,000,000 Full year last year was €94,000,000 as reference. And the Cash flow has been pretty strong compared to especially quarter 1 this year, which was pretty down. Working capital in the Quarter is pretty flat versus the end of quarter 2. The increase that we have had this year It's mainly related to the stock increase and the increase in size of receivers during Especially quarter 1 and also quarter 2. Talking about our equity ratio, We are at 37.2%. The ratio in Q2 was at 34. It is less than previous year, but this year, we have paid out dividend of SEK 1 €25,000,000 which is corresponds to €26,500,000 which was not made during 2020. Net debt has decreased to EUR 153,000,000 and the ratio to EBITDA It's trading at 1.1%, down from 1.4% end of quarter 2% and 1.8% at year end 2020. Investments are a little bit lower this year. It is for the period of EUR 3,600,000 compared to EUR 4,800,000 last year. For the full year, we are €40,000,000 compared to €19,000,000 last year. Less product development CapEx So for this year and some larger machinery investments during 2020. Next slide, please. Some words about our work with sustainability. These are the overall objectives, which Can be found in our annual report for 2020, which is reducing environmental impacts of our products, reduce greenhouse Yes. Emissions, resource efficiency, Woodfin Sustainable and Durable Forestry and Responsible Business. And as an example of the activities that we are working with at the moment is that we have finalized our DHT protocol reporting scope 12. We are working with scope 3 at the moment. We have improved the heating efficiency and Energy consumption, including monitoring the various activities, we are working with updating our sustainability communication and also with the sustainability training for all of our employees. Next slide, please, and then over and back to Pero Oleg. Thank you, Mats, for that. Our market outlook, On this slide, you can see the big starts index for the Swedish market, the product business. And there is a red line there that We put where we are delivered now. It means we have a delay of around 12 months. We can see what how it's performing. So from the product business side, Swedish market It seems quite promising, I think. So it's difficult to plan for the product business. We continue to invest in the product Gents and product news. We've also a sustainable approach in our product, and we can see the huge positive effect that we had on the new product launch in Under the Swede Beige brand, this beginning of this year. We've followed very close development on the market About the corona pandemic and also the potential impact of the cementa case on the cost front, how that will Yes. And how in that case do we influence our business? So we are very close on that. I will not be surprised if more of our purchase will be closer to our factories We can see that we have a challenge with the delivery from Asia and also the customer side. So we see what we will do on that side. The work that we did together with our client, in this case, Bonava, that we developed Special and efficient packaging and logistics system, and we work with a little bit of open books to each other, have performed very well and we're very successful. Now we have worked with other clients, and we have get some new contract on this. And we are very happy that we start to work on this. And One main thing in this is that we have our own productions. That is a key for what this is set up in this process. And as we have communicated earlier, we have The target to have an annual growth of 10% and half of that from organic growth and half from acquisition, we are Still looking for interest companies to acquire, and now we have the organization in place that can handle this. So The first question from John Hebert from Susquehanna. Sir, please go ahead. Okay. And Mir Modanok update, unlike me. Okay. Because at the level 4, Saker, as we can highlight, the answer is what Okay. Next question from Anna Berg, Borsch, Aberdeen. Please go ahead. Thank you. We have no more questions for the moment.