Weak start of the quarter but gradual improvement
Net sales for the third quarter of 2016 increased by 5.4 per cent compared with the corresponding period in the previous year and amounted to SEK 2,461M (2,335). The increase is mainly due to the acquisition of HRP in the United Kingdom and Realcold in Australia/New Zealand.
Weak month of July. Organic growth in August and September.
Operating profit for the third quarter of 2016 amounted to SEK 173M (181).
Profit for the quarter amounted to SEK 117M (121).
Profit per share amounted to SEK 2.71 (2.82).
Comments by the CEO
Weak start of the quarter but gradual improvement
Although profit for the quarter did not reach the level of the previous year, the third quarter of the year was one of our strongest quarters ever. Only the month of July was the weak month of the quarter, whilst both August and September showed growth, organically as well as incrementally. The heatwave Europe experienced in July last year, which at the time had a strong impact on demand, was not repeated this year.
In our regional markets, the Nordic countries stand out negatively, mainly due to a weaker development in Sweden. We see this as a normal fluctuation as there is no business cycle or structural signs that would indicate demand is declining. Central Europe shows growth, mainly due to the fact that the acquisition of HRP in the United Kingdom has been consolidated. In the region, we can also see a positive development in markets such as the Netherlands, Switzerland and Germany. The Southern Europe region was affected by the cooler weather during July compared with the previous year. Eastern Europe shows a positive development in Czech Republic, Slovakia, Romania and the Baltic States. The markets in Africa also show growth in local currency and in Asia Pacific we see an excellent development, especially in Malaysia and New Zealand.
The work of making our own organisation even more efficient continues through the creation of a clear structure with a country manager and a joint back-office in every country. The United Kingdom, France, the Netherlands and Norway are the remaining countries in which we are currently implementing these measures which will give us a more efficient organisation and clear cost savings.
During the quarter, we have initiated the work of strengthening our digital competence. There are significant opportunities with digitalisation in our sector and the objective is to develop our digital capacity.
We are working with our own organisation and our cost side, and are also continually evaluating new acquisition opportunities. Taken together, the outcome for the quarter is lower than anticipated. However, the development in August and September gives us confidence for the next quarter.
CEO, Beijer Ref
Third quarter of 2016
Beijer Ref increased its net sales by 5.4 per cent to SEK 2,461M (2,335) for the third quarter of 2016. When adjusted for exchange rate fluctuations and acquisitions, the organic change in sales was -2.0 per cent. The decrease in sales is attributable to the fact that sales for the month of July did not reach the previous year’s level. The month of July in the previous year was strongly influenced by a heatwave through large parts of Europe.
Net sales for the first three quarters of the year increased by 8.1 per cent to SEK 6,845M (6,334). When adjusted for exchange rate fluctuations and acquisitions, the organic sales change was 4.1 per cent.
The Group’s operating profit amounted to SEK 173M (181) for the third quarter, equivalent to a decrease of 4.5 per cent. The result decrease is mainly explained by the lower sales in the month of July as described above under the section about sales.
The lower operating margin for the quarter, 7.0 per cent (7.7), is mainly explained the fact that HRP and Realcold were acquired and that these companies initially have lower margins that the average in the Group.
When adjusted for exchange rate fluctuations and acquisitions, the organic decrease in operating profit was 6.7 per cent during the quarter. For the first three quarters of the year, operating profit increased by 3.4 per cent to SEK 448M (443). When adjusted for exchange rate fluctuations and acquisitions, the organic increase in operating profit was 4.1 per cent. The Group’s financial income/expense amounted to SEK -25M (-27) for the first three months of the year. Profit before tax was SEK 423M (406). Net profit for the period was SEK 299M (289). Profit per share amounted to SEK 6.88 (6.69).
Cash flow from the current operation before change in working capital was SEK 381M for the first nine months of 2016 compared with SEK 411M for the corresponding period in the previous year. During the first nine months of the year, the working capital increased by SEK 352M compared with SEK 130M for the same period in the previous year, as a result of the increased business volume and the acquisitions of HRP and Realcold. This gives a cash flow from the current operation of SEK 29M compared with SEK 281M in the previous year.
Consolidated capital expenditure, including acquisitions, amounted to SEK 66M (188) for the first nine months of 2016.
Significant events during the year
During the first quarter, the UK Competition & Markets Authority (CMA) initiated an examination of our acquisition of HRP Ltd with 15 branches in the United Kingdom. On 8 June, CMA announced that it had no objections to the transaction. As a result, we were able to start our planned restructuring work. HRP is included in the Group’s accounts as from June.
The operation of the Beijer Ref Group is affected by a number of external factors, the effects of which on the Group’s operating profit can be controlled to a varying degree. The Group’s operation is dependent on the general economic trend, especially in Europe, which controls the demand for Beijer Ref’s products and services. Acquisitions are normally linked with risks such as, for example, staff defection. Other operating risks, such as agency and supplier agreements, product responsibility and delivery undertaking, technical development, warranties, dependence on individuals, etc., are continually being analysed and, when necessary, action is taken to reduce the Group’s risk exposure. In its operation, Beijer Ref is exposed to financial risks such as currency risk, interest risk and liquidity risk. The parent company’s risk picture is the same as that of the Group. For further information see the Group’s Annual Report.
Malmö, 19 October 2016
Beijer Ref AB (publ)
Per Bertland, CEO
For further information, please contact:
Per Bertland, CEO – switchboard +40 35 89 00
Jonas Lindqvist, CFO – switchboard +40 35 89 00
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 19 October 2016.
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.
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.
The Year-End Report for 2016 will be published on 16 February 2017.
The Annual Report for 2016 will be published in March 2017.
The Interim Report for the first quarter 2017 will be published on 24 April 2017.
The Interim Report for the second quarter 2017 will be published on 14 July 2017.
The Interim Report for the third quarter 2017 will be published on 20 October 2017.
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.