Stable quarter ends a good year
Net sales for the fourth quarter of 2016 increased by 8.5 per cent compared with the corresponding period in the previous year and amounted to SEK 2,199M (2,027). The increase is mainly due to the acquired companies, HRP and Realcold.
Good development for Commercial & Industrial refrigeration. Slightly weaker development for HVAC.
Operating profit for the fourth quarter of 2016 amounted to SEK 145M (134). It is an improvement of 8.0 per cent compared with the same period last year.
Profit for the quarter amounted to SEK 100M (84), an increase of 18.6 per cent compared with the same period last year.
Profit per share amounted to SEK 9.17 (8.64).
The Board of Directors proposes that the Annual Meeting of shareholders resolves that an increased dividend of SEK 5.50 (5.25) per share shall be paid.
Comments by the CEO
Stable quarter ends a good year
Beijer Ref ended 2016 with a stable quarter and a profit increase. The development was especially positive during November and December and we are of the opinion that this trend will continue into the new year. Our largest market segment, Commercial & Industrial refrigeration, enjoyed a positive development during the quarter, whilst HVAC was slightly weaker than in the corresponding quarter of the previous year. Viewed over the full year, however, HVAC enjoyed a stronger development than Commercial & Industrial refrigeration.
Strong quarter in Central Europe
In Central Europe, the restructuring work with HRP in the United Kingdom is beginning to generate an effect. We were delayed by the examination by the Competition & Markets Authority in the UK (CMA), but were able to complete our work of integrating HRP during the autumn and contributed to a positive result for the fourth quarter. The other companies in the region also enjoyed a positive development.
In the Nordic countries, the result was slightly lower than for the corresponding period in the previous year. This is mainly because the comparative figures for the corresponding quarter in the previous year were unusually high.
The result in Southern Europe was affected by the fact that we took on costs in order to achieve better logistics and a more cost-efficient organisation in France. In addition, demand in the market for indoor climate control slowed down slightly. On a full year basis, however, the region reports a positive stable development.
Asia Pacific developed strongly in line with forecasts and Africa shows a stable positive development. During the quarter, we opened an operation in Tanzania, which becomes our seventh market in Africa.
Taken together, it is gratifying that we have reversed the development in the newly-acquired company in the United Kingdom. This acquisition now shows positive results.
Important resolution in Kigali
At a summit meeting in the capital of Rwanda, Kigali, in October, 170 countries agreed to phase out hydrogen fluoride carbon gases (HFC gases), which contribute to global warning. A decision to phase out HFC has already been taken within the EU, but through the agreement in Kigali the phasing out of HFC will also be initiated in other large markets such as the USA and Japan starting as early as 2019. Other countries in the agreement will follow in accordance with an established timetable, with a final start in 2028 in countries such as India and Pakistan. Through our broad offer of eco-friendly alternatives to HFC solutions, the decision provides good opportunities for Beijer Ref in a growing global market.
Continued investment in OEM
During the quarter, we continued to expand the range of products manufactured internally and will launch new products during 2017. This operation is now increasing more rapidly than the traditional distribution operation. The OEM investment strengthens our offer in the market towards, among others, food stores. The OEM offer is important in enabling us to meet the increasing demand for eco-friendly solutions which we see in Europe and also increasingly in Australia and New Zealand.
We are also continuing our work in digitalising our operation, which will lead to cost savings and increased efficiency in the long term. Our local presence is decisive for good customer relations, but through the digitalisation we also see new market opportunities.
Taken together, I look back on a good last quarter of 2016 and a year that has involved an all-time-high for both sales and results. Beijer Ref’s Board of Directors proposes an increased dividend to SEK 5.50 (5.25), which should be seen as a confirmation of yet another good year for the Group. We stand well equipped to face the future and are looking forward to 2017 with confidence.
Fourth quarter of 2016
Beijer Ref increased its net sales by 8.5 per cent to SEK 2,199M (2,027) for the fourth quarter of 2016. The sales increase emanates mainly from the acquired companies, HRP and Realcold. When adjusted for exchange rate fluctuations and acquisitions, the organic sales change was -1.0 per cent. The decrease in organic sales is attributable to the weaker HVAC market in Europe. In 2015, the HVAC market in Europe was strongly influenced by the heat wave, the effects of which on demand continued into the fourth quarter and gave strong comparative figures in 2016. The market segment, Commercial & Industrial refrigeration, increased by one per cent.
During the year, net sales increased by 8.2 per cent to SEK 9,045M (8,361). When adjusted for exchange rate fluctuations and acquisitions, the organic sales change was 2.8 per cent.
The Group’s operating profit amounted to SEK 145 M (134) for the fourth quarter, equivalent to an increase of 8.0 per cent. The increase in profit is partly explained by the contribution from the acquired companies, HRP and Realcold.
The operating margin in the quarter is on a par with the same period in the previous year, 6.6 per cent (6.6).
When adjusted for exchange rate fluctuations and acquisitions, the organic change in operating profit was -1.7 per cent for the quarter, for the same reason as sales. For the full year, operating profit increased by 4.5 per cent to SEK 593M (567). When adjusted for exchange rate fluctuations and acquisitions, the organic operating profit increase was 2.7 per cent. The Group’s financial income/expense amounted to SEK -33M (-42) for the year. Profit before tax was SEK 560M (525). Profit for the period was 399M (373). Profit per share amounted to SEK 9.17 (8.64).
The Board of Directors proposes that the Annual Meeting of shareholders resolves that a dividend of SEK 5.50 (5.25) per share shall be paid for the 2016 financial year. This is equivalent to a total of SEK 232.7M if the shares currently held by the company are excluded.
Cash flow from the current operation before change in working capital was SEK 481M for the 12 months of 2016 compared with SEK 488M for the corresponding period in the previous year. During 12 months, the working capital has increased by SEK 416M (-7), partly as a result of the increased business volume and the acquired companies, HRP and Realcold. This gives a cash flow from the current operation of SEK 65M compared with SEK 495M in the previous year.
The Group’s capital expenditure including business combinations amounted to SEK 80M (237) for the year. The difference when compared with the previous year is due to minor influence from acquisitions.
Significant events during the year
During the first quarter, the UK Competition & Markets Authority (CMA) began 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. The planned restructuring work could therefore begin. HRP is included in the consolidated 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, 16 February 2017
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 interim report has not been the subject of examination by the Company’s Auditors.
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 16 February 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.
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 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.
The Annual Meeting of shareholders will be held on 6 April 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.