The strongest quarter to date
Net sales in the second quarter of 2017 increased by 10 percent compared with the same period last year, amounting to SEK 2,657 million (2,417). The increase is due to strong growth in demand on several of our key markets and positive currency effects.
The OEM and Comfort Cooling product segments continued the year strong, while Commercial Cooling remains stable.
The operating profit for the second quarter of 2017 was SEK 223 million (186). This is an increase of 20 percent on the same period last year.
The profit for the period was SEK 154 million (121), an increase of 27 percent on the same period last year.
Earnings per share amounted to SEK 3.56 (2.82).
Comments by the CEO
Our strongest quarter to date
Despite a slightly weak start to April, the second quarter of 2017 ended up being the strongest quarter in Beijer Ref’s history. We had double-digit growth in both sales and profit and saw growth in both geographical segments and our product segments.
The warm spring on the major markets in Southern Europe and increased focus on air conditioning are two of the reasons for the good growth. Another important factor is that HFCs, the refrigerants which have a negative climate impact, have dramatically increased in price as a result of import restrictions. The recently initiated phasing-out of HFC refrigerants means a faster switchover to greener alternatives, both natural and synthetic. A step in the right direction. Europe is leading developments and, as many non-European countries are following suit, we expect a corresponding increase in demand on these markets as well.
We therefore continue to develop our own solutions and have presented CUBO2 Smart during the year. This is an environmentally friendly cooling unit for installation in small stores, petrol stations and other small premises. Our own-developed heat pump TripleAqua also attracted attention during the quarter, winning several innovation prizes. It uses the natural refrigerant propane.
We enjoyed strong, double-digit growth for our two product segments OEM and HVAC. The growth in the Commercial Cooling product segment was also positive but at a slower rate.
Positive on many markets
In France, which is our biggest market, we enjoyed strong growth during the quarter. One factor was the warm weather, which boosted sales of air conditioning units.
There has also been excellent growth in the Netherlands and the UK/Ireland. In the UK/Ireland we have seen major commercial effects of our integration work after the acquisition of HRP. Our concentration on factors such as back office and logistics has produced good results in terms of costs, while we are also seeing sales growth.
Asia Pacific is another region with stable growth and an organic increase in profit. Our work to restructure operations in Australia has begun to have an impact on costs.
In Africa, we had weak growth for the second quarter in a row. We estimate that this is a temporary decline and retain our confidence in the African market. We are planning to expand and supplied our first transcritical CO2 solution to South Africa in the quarter. We estimate that there are good opportunities to expand sales of environmentally friendly CO2 solutions on the African market as well in the long term.
The good growth on most of our key markets, combined with increasing demand for green solutions, means that we begin the third quarter with confidence.
Per Bertland
Second quarter 2017
Sales
Beijer Ref increased net sales by 9.9 percent to SEK 2,657 million (2,417) during the second quarter of 2017. The increase in sales is due to strong growth in demand on our European key markets and positive currency effects. Adjusted for exchange rate fluctuations and acquisitions, there was a 2.5 percent organic change in sales. During the first half of the year, net sales increased by 11.2 percent to SEK 4,874 million (4,384). Adjusted for exchange rate fluctuations and acquisitions, there was a 2.9 percent organic change in sales.
Profit
Group operating profit amounted to SEK 223 million (186) during the second quarter, an increase of 19.6 percent. The growth in profit is due to the warm spring having contributed to increased demand for air conditioning, primarily in Southern Europe and there have been price rises for refrigerants with a severe negative impact on global warming. Cost savings as a result of increased coordination in administration and logistics also contributed to the higher profit. Adjusted for exchange rate fluctuations and acquisitions, there was a 13.7 percent organic increase in operating profit. During the first half of the year, the operating profit increased by 19.7 percent to SEK 330 million (275). Adjusted for exchange rate fluctuations and acquisitions, there was a 12.6 percent organic increase in operating profit. During the first half of the year, Group net financial items amounted to SEK -14 million (-15). Pre-tax profit was SEK 316 million (260). The profit for the period was SEK 226 million (182). Earnings per share amounted to SEK 5.20 (4.17).
Cash flow
Cash flow from operating activities before change in working capital was SEK 308 million during the first half of 2017, compared with SEK 230 million during the corresponding period of the previous year. During the first half of the year, the working capital increased by SEK 247 million against an increase of SEK 340 million during the same period of the previous year. This results in cash flow from operating activities of SEK 60 million, compared with SEK -110 million in the previous year. Working capital at the beginning of 2017 was higher than at the beginning of 2016, which meant higher cash flow than during the corresponding period of the previous year.
Investments
Group investments in non-current assets amounted to SEK 50 million (50) in the first six months.
Significant events during the year
As part of Beijer Ref’s objective to be at the cutting edge of the transition to environmentally friendly cooling technology, the first environmentally friendly, carbon dioxide-based cooling system was delivered to Chile at the beginning of the year. This was the Group’s first installation in South America and is in line with Beijer Ref’s focus on carbon dioxide and other environmentally friendly cooling technology to contribute to lower impact on the greenhouse effect.
During the second quarter, Maria Rydén was appointed as the new CFO and member of the Group management team. Her most recent position was as CEO of Ikano Vårdboende and she was previously CFO of Ikano Fastigheter, Dole and Switchcore. Maria Rydén will take up her position no later than 1 December 2017.
Risk description
The Beijer Ref Group’s operations are subject to a number of business environment factors, the effects of which on the Group’s operating profit can be controlled to varying degrees. The Group’s operations depend on general economic trends, primarily in Europe, which determine demand for Beijer Ref’s products and services. Acquisitions are normally associated with risks, for example staff departures. Other operating risks, such as agency and supplier agreements, product liability and delivery commitments, technical development, warranties, dependence on key individuals, etc., are analysed continually. Where necessary, measures are taken to reduce the Group’s risk exposure. In its operations, Beijer Ref is subject to financial risks such as currency risk, interest rate risk and liquidity risk. The Parent’s risk profile is the same as that of the Group. For further information, see the Group’s Annual Report.
Accounting policies
This interim report was prepared in accordance with IAS 34, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2 ‘Accounting for legal entities’. Beijer Ref continues to apply the same accounting policies and valuation methods as those described in the most recent annual report, except as specified in the following. New and amended standards applied as from 1 January 2017 are not expected to have any material effect on the Group’s or Parent’s profit or financial position.
For more information:
Per Bertland, CEO – switchboard +46 (0)40-35 89 00
This interim report has not been reviewed by the Company’s auditors.
The Board of Directors and the President assure that the six-month report is prepared in accordance with generally accepted accounting principles for listed companies. The information provided corresponds with the actual conditions in the operation and nothing of significant importance has been left out which could affect the picture of the Group and the parent company that has been created by the six-month report.
Malmö, Sweden, 14 July 2017
Bernt Ingman
Chairman
Peter Jessen Jürgensen
Board Member
Frida Norrbom Sams
Board Member
William Striebe
Board Member
Ross B Shuster
Board Member
Monica Gimre
Board Member
Joen Magnusson
Board Member
Per Bertland
President
This information is information that Beijer Ref AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.30 CET on 14 July 2017.
Beijer Ref in short
The Beijer Ref Group is focused on trading and distribution operations within refrigeration products, air conditioning and heat pumps. The product programme consists mainly of agency products from leading international manufacturers and, in addition, some manufacture of own products, combined with service and support for the products. The Group creates added value by contributing: technical competence to the products; accounting for knowledge and experience about the market; and by providing efficient logistics and warehousing.
Operations are carried out by region within the Beijer Ref, which comprises Beijer Ref ARW (Air conditioning, refrigeration, wholesale) and Toshiba’s distribution operation within air conditioning and heating. The Beijer Ref Group is a leading operator within the refrigeration sector in Europe and has a significant position within air conditioning in Europe. The operation is split into six geographic segments: Nordic countries, Southern Europe, Central Europe, Eastern Europe, Africa and Asia Pacific. Growth is achieved both organically and through the acquisition of companies which supplement existing operations.
Seasonal effects
Beijer Ref’s sales are seasonally dependent as demand for refrigeration and air conditioning is at its peak during the warm months of the year. It means that demand in the northern hemisphere is at its peak during the second and third quarters whilst demand in the southern hemisphere is at its peak during the first and fourth quarters.
Financial calendar
The Interim Report for the third quarter 2017 will be published on 20 October 2017.
The Year-End Report for 2017 will be published on 31 January 2018.
The Annual Report for 2017 will be published in March 2018.
Beijer Ref
Stortorget 8, SE-211 34 Malmö, Sweden
Telephone +46 40-35 89 00
Corporate ID number 556040-8113
www.beijerref.com
The total amount in tables and statements might not always summarize as there are rounding differences. The aim is to have each line item corresponding to the source and it might therefore be rounding differences in the total.
This document is a translation of the Swedish language version.
In the event of any discrepancies between this translation and the original Swedish document, the latter shall be deemed correct.