Q1 21/22

Aug 26, 2021

Hello, and welcome to the Systemair Interim Report Q1 2020 1 to 2022. Throughout the call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. And just to remind you, this conference call is being recorded. Today, I'm pleased to present Oren Kesseler, CEO and Anders Ulf, CFO. Please begin your meeting. Thank you very much. Welcome to everyone to this telephone conference. You can find today's presentation on our group systemair.com page. And under Investor Relations, we find a quarterly report and there also our PDF, the presentation. By that, I hand over to Roland here to do the presentation. You, Anders, and welcome everyone to our quarter one report for the year 2021, 2022. I'll right away start the presentation with our slide number 2. So Sysomer, as you all know in this summary Sysomer and Brief, Sysomer is established in 1974. Today, we have our headquarter here in Kvinskatteberg in Sweden where we are founded. Our last fiscal year, we had a total turnover of €850,000,000 and we are since October 2007 listed on the Nasdaq Nordic Stock Exchange Market. Today, we operate our own sales companies in 54 countries all over the world. And we Have our own production facilities in 20 countries with total book value of SEK 1,200,000,000. We employ around about 6,500 employees and we constantly export to more than 135 countries all over the world. Shifting to slide number 3. By that moving directly into our quarter report. Net sales for quarter 1 amounted to SEK2.29 billion. This corresponds to growth of 9.1 percent. Totally, We're up 13.3 percent organic. On the right side of the slide, you can see the development in graphs. And you can of course also see the impact of the pandemic throughout last year and the development since then. Going over to slide number 4. The growth analyzed for our Q1. Organic, We had actually a good organic growth in all our regions that we report. The impact from acquisitions was rather small, driven by the acquisitions of the Divit in Sweden, Service Products in Sweden and Borda in Germany, which contributed with 0.5%. And then we have a negative impact of 4.7 percent mainly due to the strength in Swedish kroners, which brings us to a total Growth of 9.1 percent in total for the Q1. Slide number 5, our operating profit for the Q1. Our gross margin in the Q1 increased to 34.8% compared to 33.6% the quarter the year before. Our sales and admin expenses for the quarter have increased to 2.7% for comparable units. The operating profit for the Q1 thereby amounted to SEK209.6 compared to SEK182.1 the year before. This contributes to 9.2 percent operating profit for the quarter. Slide number 6, profit after tax. The net financial items ended the Q1 at negative SEK3.4 million compared to negative SEK66.6 million the year before. The effects of the foreign exchange and long term receivables, loans and bank balances were calculated at SEK 5,000,000 compared to negative SEK58.1 million the year before. The interest expense for the quarter totaled a negative SEK6.5 million compared to Negative SEK8.7 billion and the estimated tax for the quarter amounted to SEK49.4 million compared to SEK33.5 billion the year before. This brings us to a profit after tax for the Q1 to SEK177 1,000,000 compared to 82 the year before. Moving to Slide 7, our cash flow analysis for the Q1. The cash flow from the operating activities amounted for the Q1 in year 2021, 2022 to SEK249,800,000 compared to SEK 197,500,000 the year before. Looking at the change in working capital, it's negative SEK 91,200,000 in the quarter compared to a positive SEK 37,900,000 the year before. These changes in the working capital are mainly due to increased inventories of SEK182,000,000 that are due to the component situation we have in the world. Our net investments, excluding the acquisitions, amounted to SEK 87,000,000 compared to SEK 93,000,000 and our preliminary the Investments in buildings and machineries in Czech Republic and in Canada. Thereby, the free cash flow amounted to SEK 71,600,000 compared to SEK 1 100 and SEK2.4 billion the year before. Our net indebtedness compared to last year has decreased to SEK1.5 billion compared to SEK1.83 billion. Looking at our Slide number 8 and moving into the picture to visualize our cash flow from the operating activities. Here you can quite simply see the development and the slightly lower amount of cash flow from the operating activities in our first quarter mainly due to as mentioned the component situation. Next slide, Slide number 9 and by that Going in to have a look into the different geographic markets. Starting with the Nordics. Sales in the Nordic countries increased by 10.3% in the Q1 compared to the previous year. Here adjusted for the foreign exchange effect and acquisitions, sales increased by 7.6 The Swedish and especially Norwegian markets showed very good growth during the quarter, while sales in the Danish and the Finnish markets decreased slightly. So again, gross 10.3 percent were of organic 7.6%. And moving to Slide number 10 and Western Europe. Sales in Western Europe market increased during the year by 10.5% compared with the corresponding year before. Adjusted here for foreign exchange effects and acquisitions, Sales increased by 13.3%. Most campus in the region including Italy, France and England showed growth during the period, while Belgium, Austria and Switzerland reduced sales. So growth 10.5% were up organic 13.3%. Moving to Slide number 11 and Eastern Europe NCS. Sales in Eastern Europe NCS increased by 15% during the quarter. Here adjusted for foreign exchange effects and acquisitions, the sales increased by 23.9%. The sales, especially in Russia, increased by 14.4% compared with previous period, this though calculated in Swedish kroners. The Russian market accounts today for 1 third of the sales in this region reported. Other major markets growing in the region We're Czech Republic, Slovenia and Lithuania. So growth 15% were up organic 23.9%. Slide number 12, North and South America. Sales in North and South America region increased by 1.8% during the quarter compared with same period last year. Here adjusted for currency effects and acquisitions sales increased by 6.6%. What we can see here is that we have a by far lower organic growth compared to last Here, but it's mainly due to delays in supply of components. So growth 1.8 percent, organic 6.6%. Slide number 13, Middle East, Asia, Australia and Africa. Sales in Middle East, Asia, Australia and Africa increased by 2.4%. Adjusted for currency effects and acquisitions, sales increased by 15.3%. Year especially India, Morocco and South Africa showed good growth during the period, While Turkey and Australia reduced sales. Slide 14. Slide number 14, visualize the how we break up the volumes in the different geographic areas of the world. So today Eastern Europe and the CES countries contributed 15% of the total turnover of Sysdimer Group compared to 14% the year before. North and South America's Latin declined from 12% to today 11%. Middle East, Asia, Australia, Africa declined from 13% to 12%. Nordic region increased from 17% to 18% and Western Europe is stable at 44% of our total sales. Go on into Slide number 15, a short notice about our acquisition Of the remaining shares in the company Boda in Germany, we acquired the remaining 50.1% Shares of the company, Borde today develops, produces and supplies infrared radiant heaters and heating panels and associated control equipment with several Pentans. Sales in 2020 amounted to approximately EUR 4,000,000 BORDA is today market leader in infrared heaters for outer applications and therefore a perfect complement to our existing FREQOS product range. Next slide, Slide number Some of the projects we have executed in the period, for example, our entity system in Belgium selected has been selected supplier For the dehydrogenation of propane built by Borealis. Borealis is building this new world scale 750,000 tonne per year propane The hydrogenation plant in Efzard in Belgium. Our air handling units are prescribed in this high end explosion proof execution And the total value is €430,000 First units are delivered in August, produced in our factory in Valveijk in the Netherlands. Other products, fans and all the cooling equipment will be delivered from our system entities during fall in 2021. Next slide number 17. Also a nice reference in this And this time, it's that we from Systema deliver 50 solutions for this hospital in Bratislava and Slovakia. It's the Bore Hospital in Bratislava. It's the next generation health care project, currently under construction with the aim to open in 2022. Here, SystemeR, are pleased to be able to deliver a wide range of our air distribution products, specifically Plenty of our CFC A to this project. CFC A is a distribution cassette behind the displacement diffuser, which compromises HEPA filtration unit. This unique hospital in Solvaycare will treat patients with most complex needs for world class staff using state of the art technology. Moving to the next slide, Slide number 18. Another reference supplier by Systemair is Canal Bien in Kristiansand in Norway. Canal Bien is a new seaside district in the heart of Kristiansand. This project consists of 700 new apartments and has been under construction since 2018. The Power Systems has delivered 250 energy efficient residential air handling units for all the completed construction phases and we are set to deliver for all the remaining phases. Moving to Slide number 19. This is launched from all our Systemair entities in Europe set to start the 1st September, where Systemair exclusively Going in a partnership with DelTribird, we do so the air filters for air handling units. We would be able from 1st September to supply our air handling units With its outstanding filter solution, Delta Plus is the new efficient hygienic air filter, proven that neutralizes viruses and provides enhanced on solution to improve the indoor air quality in buildings. This filter has been tested in Luxembourg at the Institute of Science Technology and have shown proven efficiency and are Eurovent certified with A Class Energy. So this is something that will be a very good contribution to indirect quality moving forward. By that, I move to Slide number 20, Thank you and open up for questions. Thank 2. There will just be a brief pause while any questions are being registered. And as there seems to be no questions, I'll hand it back to the speakers. Okay. Okay. We actually have some questions coming in now. Okay. Yes. Our first question is from the line of Henrik Alberskog From Redeye, please go ahead. Okay. Hello. Do you hear me? Yes. Hello, Henrik. We hear you. Yes. Great. Well, I was just wondering if you could maybe give us a little bit more color on The situation with, well, shortage of certain components, how you experience that now? Absolutely, Henrik. We actually we have very good, how to say, pre preparation for this issue. So we were quite Well, prepared with a little bit higher stocks for the urgent goods. We were hit by this During our last month in the quarter, 1 week into the last month, Actually now it is almost everything of what we see is in the problem area is motors. And yes, specifically, it's the control equipment, The control part of the motors and the cabling. This is specifically going to bigger projects And some specific motor models, and has been hitting us in both Canada and in some of the European countries. Okay. And Is there any way you can, well, assess when this will be resolved and go back to normal? Is there Any visibility, Lutz? I think if you look out to the normal news that we have out here, you hear Similar background and information from other industrial actors. We all have the same problem just now when it comes to electronics. And if you look at the most efficient motor combinations that are available on the market today, they are all Equipped with these electronics that are just now in a shortage. We have so far and also going further, we Have a good balance between the factories that we can prioritize the available components. But it has been a further shortage over the last couple of weeks. And we're working hard with our main suppliers to solve or mitigate the situation. It is actually A little bit up and down on a weekly basis for the time being. I'm not able to make a 100% prediction how it will continue and how for how long it will continue. It is just a matter of supply of certain electronic components. It's the main problem. Thank you. Thanks. Thank you, Henrik. And we have just one more question from the line of Douglas Henley from Kepler Cheuvreux. Please go ahead. Yes. Hello, gentlemen. Two questions from my side, starting with Inventory and raw materials. I see you're building inventories here in the quarter. So I wanted to see if you could just give a comment on the raw material situation And pricing discussions with clients, that's my first question. Thanks. Yes. I can start with the pricing discussions. Pricing discussions, of course, that's where everything started when the raw material prices increased quite dramatically. But so far, we are in the 3rd wave of price adjustments. There hasn't been any problems with that. All customers are Because everyone has the same problem in all the different leads of our industry. We have the bigger, I would say, challenge when it comes To the availability of components. And as the speaker before had the question, it is Specifically on controls on electronics where we have an issue. When it comes to our warehouse, our stocks, What increased during the quarter is actually safety stock, but also that we have work in progress, almost finished goods Waiting for certain components that did not arrive on time, which led to that we couldn't invoice and we couldn't ship. So this is a little bit what happened in our Q1. Okay. And assuming These shortage issues sold themselves throughout, I guess you will see even further the organic growth in the upcoming quarter or how would you see that sequentially? I would say it's hard to guesstimate. I can say like this, Douglas, the order intake and the market development is positive. The challenge that we have is the availability of the components. And we are as our sub suppliers, which are major actors on the market, We're all looking for alternatives. So it's really hard to predict or to make a good guesstimate just now. It's just the order situation is really good. We have an increased order intake versus last year, very nice and it's a good development. Just the shortage of components that is an issue. Okay. And The component shortage, just to understand, they've obviously I guess they've increased during the quarter with the issues with shortage. It has not Been easier, so to say, throughout the quarter or rather the contrary. Is that For us specifically, it started in the 2nd week of July, And it has not been better since then. Okay. And is it possible to give some sort of similar comment on the demand situation, The development over time? From what we see just now, the demand situation when it comes to our end customers, That is stable and good. Okay. Thanks. Thank you so much. And as there are no further questions, I'll hand it back to the speakers. All right. Thank you very much for calling in, and hope To see you soon again. And please don't hesitate to contact anyone else if you have any further questions. We would look forward to that. Paredes, thanks a lot. Hope to hear and see you soon again and then at the quarter 2 report. Exactly, in the beginning of December. Correct. Thank you. Thank you.