Downturn – but the Group is standing strong for the future

Group

As expected, the second quarter was affected by COVID-19 in the form of extensive lockdowns across all of society and a historic downturn in the global economy. For Beijer Alma, the primary effect was a sharp drop in order bookings and sales across several businesses. Earnings were also impacted by restructuring costs totaling MSEK 22. The Group has successfully addressed developments through a strong, clear focus on cash flow and through measures to reduce our costs, such as the application of furlough schemes in large portions of production. Throughout the spring, we continued to deliver to our customers thanks to robust supply chains and the extraordinary efforts made by our employees.

Subsidiaries

For Lesjöfors, the weakened global economy resulted in significantly reduced demand for chassis springs at the beginning of the quarter, since workshops in large parts of Europe were closed. As societies began reopening, sales increased toward the end of the quarter to the preceding year’s level. Sales of industrial springs did not decrease as drastically, but have not recovered as quickly, either. Demand from automotive customers in particular declined. New customers have also been gained thanks to the company’s agile and flexible production

The decrease in sales compared with the same period in the preceding year at Habia Cable was not primarily related to COVID-19, but rather to lower volumes in offshore projects. During the spring, restructuring was carried out at plants in Sweden and China and some redundancies were made to ensure future competitiveness.

The performance of Beijer Tech was mixed, with negative sales trends for certain products and customer segments. The lockdown in Norway due to the COVID-19 pandemic affected demand more than in other Nordic countries.

Financial strength and additional acquisitions

The development of the global economy was characterized by a great deal of uncertainty. Beijer Alma has the readiness and the financial strength to manage periods of low demand, but is also well prepared to take advantage of the opportunities that will arise when the economy rebounds. It is especially positive that at the beginning of July, we agreed to acquire the INU Group, a successful company in building automation systems. Beijer Tech is thus continuing to pursue its strategy of acquiring companies in attractive niches and this acquisition provides a platform for a new growth area.

Finally, I would like to welcome our new CFO, Erika Ståhl, who will assume her position on Monday, August 24.

Henrik Perbeck, President and CEO

963

Net revenues amounted to MSEK 963 (1,248).

79

Operating profit totaled MSEK 79 (163).

8.2%

Operating margin was 8.2 percent (13.0).

75

Profit after net financial items amounted to MSEK 75 (160).

0.98

Earnings per share totaled SEK 0.98 (2.04).

880

Order bookings amounted to MSEK 880 (1,182).

Invoicing (MSEK)

Profit after net financial items (MSEK)

Beijer Alma in brief

Order bookings declined 23 percent during the quarter to MSEK 880 (1,143). Excluding corporate acquisitions and fluctuations in exchange rates, the decrease was 29 percent. Net revenues decreased 23 percent to MSEK 963 (1,248). Excluding corporate acquisitions and fluctuations in exchange rates, the decrease was 27 percent.

Order bookings, revenues and earnings were negatively impacted by the COVID-19 pandemic. Sales in all three subsidiaries declined during the quarter as a result of production stoppages and cutbacks among several customers, especially within the automotive and oil industries. April and May were weak in terms of sales, although some recovery was noted during June. Companies within the Group have taken measures to limit the negative effects on earnings, primarily through applying furlough schemes in a number of operating locations. Government grants and reductions in social security contributions of MSEK 37 were received during the quarter, of which MSEK 19 was in Sweden. They are recognized as cost reductions during the quarter. On Group level, no material impairment requirements or bad debt losses due to the pandemic were noted during the quarter.

Operating profit amounted to MSEK 79 (163) and profit after net financial items to MSEK 75 (160). Earnings were charged with nonrecurring costs of MSEK 16 for redundancies at Habia Cable and of MSEK 6 for impairment of fixed assets at Beijer Tech. Earnings per share amounted to SEK 0.98 (2.04). During the quarter, the return on shareholders’ equity was 9.9 percent (23.2) and on capital employed was 8.7 percent (21.2).

Cash flow from operating activities improved to MSEK 304 (148) as a result of reduced working capital. Cash flow after capital expenditures amounted to negative MSEK 60 (neg: 73). At the end of the quarter, the equity ratio was 52.3 percent (48.0) and the net debt/equity ratio was 31.9 percent (44.6). The Parent Company’s credit facilities, which were expanded by MSEK 300 during the first quarter, were expanded by an additional MSEK 300 during the second quarter through a new revolving credit facility. The revolving credit facility is subject to financial covenants linked to key figures, with the first point of measurement at the end of the 2021 financial year. The new credit facilities are undrawn.

During the first half of the year, order bookings declined 11 percent to MSEK 2,064 (2,307). Excluding corporate acquisitions and fluctuations in exchange rates, the decrease was 18 percent. Net revenues decreased 10 percent to MSEK 2,180 (2,414). Excluding corporate acquisitions and fluctuations in exchange rates, the decrease was 16 percent. Operating profit totaled MSEK 226 (324) and profit after net financial items amounted to MSEK 212 (315). Earnings per share amounted to SEK 2.76 (4.03).

The number of employees during the period amounted to 2,614 (2,767).

Equity ratio

52.0%

Net debt/equity ratio

31.0%

Number of employees

2,614

Lesjöfors in brief

Order bookings in the quarter decreased 26 percent to MSEK 475 (645). Net revenues decreased 25 percent to MSEK 510 (679). In organic terms, revenues decreased 28 percent. Operating profit during the quarter totaled MSEK 63 (118).

Both business areas have been affected negatively by the COVID-19 pandemic. The effects in Chassis Springs was stronger and appeared earlier than in Industry, but recovery was also faster at the end of the quarter.

Net revenues for Industry amounted to MSEK 392 (491). The decrease is primarily related to production cutbacks among customers in the automotive industry. Lesjöfors has applied furlough scheme hours at many of its production facilities.

Net revenues in Chassis Springs amounted to MSEK 118 (187). Customers are primarily automobile workshops and retail chains that sell spare parts for cars. Sales during the second quarter are usually seasonally strong, since springs are changed more often after a period of winter conditions. This year, however, purchases from customers decreased drastically from the end of the first quarter, since automobile workshops and vehicle inspections were shut down in large parts of Europe. Toward the end of the quarter, order bookings rose again. Lesjöfors has healthy inventory levels and can meet any possible increase in demand moving forward. During the quarter, the development of accounts receivable was carefully monitored and no significant bad debt losses were noted.

During the first half of the year, order bookings decreased 12 percent to MSEK 1,148 (1,299). Net revenues decreased 10 percent to MSEK 1,236 (1,369). Net revenues in Industry decreased to MSEK 931 (995) and to MSEK 305 (373) in Chassis Springs. Operating profit totaled MSEK 186 (243).

Habia Cable in brief

Order bookings in the quarter decreased 14 percent to MSEK 186 (215). Net revenues decreased 22 percent to MSEK 221 (283). Currency effects had a positive impact of 2 percent on order bookings and revenues. Operating profit was charged with nonrecurring costs of MSEK 16 and totaled MSEK 13 (32).

COVID-19 had a limited effect on sales to most customer segments. The decrease in revenues compared with the second quarter of the preceding year is due to lower volumes in offshore projects. During the quarter, a decision was made to restructure operations, which entailed the termination of nearly 70 positions in Sweden and China related to overcapacity for manufacturing certain types of cable. The estimated cost is MSEK 16, all of which was charged to second-quarter earnings.

During the first half of the year, order bookings decreased 6 percent to MSEK 425 (452). Net revenues decreased 11 percent to MSEK 449 (502). Operating profit totaled MSEK 29 (47).

Beijer Tech in brief

Order bookings in the quarter decreased 32 percent to MSEK 219 (321). Net revenues decreased 19 percent to MSEK 232 (287). In organic terms, revenues declined 26 percent. Operating profit during the quarter totaled MSEK 10 (23), charged with nonrecurring costs of MSEK 6.

The COVID-19 pandemic had negative effects in the form of reduced demand from customers in certain industries and difficulties conducting sales through normal customer visits. Furlough schemes were introduced by several companies during the quarter. The delivery problems from suppliers in southern Europe observed during the first quarter have been resolved.

Net revenues for the Industrial Products business area declined to MSEK 127 (155). The decrease in revenues pertains primarily to operations in Sweden, Denmark and Norway with customers in industries such as automotive and oil. Operations in Finland, however, continue to develop well. After an impairment test, some technical equipment in one of the Swedish companies was written down by MSEK 6, which had a negative impact on the quarter’s earnings.

Net revenues for the Fluid Technology business area declined to MSEK 105 (132). Acquisitions completed did not compensate for reduced sales income from, among other items, fire hoses and products for the automotive industry.

During the first half of the year, order bookings decreased 12 percent to MSEK 491 (556). Net revenues declined 9 percent to MSEK 494 (543). Operating profit totaled MSEK 23 (47).

Corporate acquisitions during Q2 2020

No corporate acquisitions were made during the quarter.

Q2 in summary

	2020 Q2	2019 Q2	Change %	2019 full-year
Net revenue, MSEK	962,7	1 248,1	–22,9	4 621,7
Operating profit, MSEK	79	162,7	–51,4	582,6
Operating margin, %	8,2	13,0	–	12,6
Profit after net financial items, MSEK	75,4	159,8	–52,8	557,4
Earnings per share, SEK	0,98	2,04	–51,8	7,15
Order bookings, MSEK	880,2	1 181,5	–25,5	4 459,6
Net liabilities, MSEK	765,4	986,9	–22,4	720,9
Net debt/equity ratio, %	31,9	44,6	–28,5	29,9
Cash flow after capital expenditures, excl aquisitions, MSEK	244,1	74,2	229,0	385,4

Net revenue per segment (subsidiaries) MSEK

	2020 Q2	2019 Q2	Change %	2019 full-year
Lesjöfors	510,4	678,5	–24,8	2 563,5
Habia Cable	220,7	282,6	–21,9	977,8
Beijer Tech	231,6	287,2	–19,4	1 080,1
Parent company and intra-group	0,0	–0,2	–100,0	0,3
Total Group	962,7	1 248,1	–	4 621,7

Operating profit per segment (subsidiaries) MSEK

	2020 Q2	2019 Q2	Change %	2019 full-year
Lesjöfors	62,9	117,7	–46,6	441,3
Habia Cable	12,8	31,5	–59,4	80,1
Beijer Tech	10,1	22,8	–55,7	81,4
Parent company and intra-group	–6,8	–9,3	–26,9	–20,2
Total	79,0	162,7	–	582,6

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Q2: President’s statement