Beijer Ref : Reg AB Financial Report

Beijer Ref AB

Q2-2021

English version

Beijer Ref AB	1
Q2 2021 - Published on 15 July 2021

Beijer Ref AB

Q2-2021

Strong second quarter

Second quarter

Net sales increased by 36.6% in the second quarter compared to the same period last year and amounted to SEK 4,561 million (3,338). Organic growth was strong at 33.8%. Acquisition effects amounted to 6.4%, which is offset by currency effects amounting to -3.5%.

EBITA amounted to SEK 431 million (253), corresponding to an EBITA margin of 9.4% (7.6%). The operating profit amounted to SEK 418 million (241), an increase of 73.5% compared with the previous year. The operating margin amounted to 9.2% (7.2%).

Profit before tax was SEK 402 million (227). Net financial items were slightly more affected than in previous years because of increased financing in connection with completed acquisitions. Net debt/EBITDA amounted to 2.1 (2.1).

Cash flow from current activities before change in working capital was positive and amounted to SEK 499 million (303). The company's liquidity remained good and the company's balance sheet is strong, with unutilised credit amounting to SEK 1,206 million (1,029).

Profit per share before dilution amounted to SEK 0.79 (0.44) and after dilution to SEK 0.79 (0.43), which is an increase of 81%.

Beijer Ref and Emerson signed a three-year partnership agreement for the European market, covering 25 markets in Europe and more than 260 branches. The company also extended its agreement with Tecumseh for two years.

Key figures	Q2-21	Q2-20	∆%	H1-21	H1-20	∆%	R12	FY 20
Net sales, sek m	4 561	3 338	36.6	8 292	6 816	21.6	15 538	14 062
EBITA, sek m	431	253	70.4	706	462	52.9	1 330	1 085
EBITA, %	9.4	7.6		8.5	6.8			7.7
Operating profit, sek m	418	241	73.5	681	438	55.4	1 279	1 036
Profit margin, %	9.2	7.2		8.2	6.4		8.2	7.4
Net profit, sek m	308	168	83.8	492	303	62.6	918	729
Earnings per share before dilution, sek	0.79	0.44	81.4	1.27	0.79	60.8	2.38	1.90
Earnings per share after dilution, sek	0.79	0.43	81.6	1.26	0.78	60.9	2.37	1.89
Return on operating capital, %	5.3	3.3		8.7	5.9		16.4	13.9
Return on equity, %	6.7	3.9		10.7	7.0		20.6	16.5
Average number of employees				4 068	3 768	7.9		3 856

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.

2	Beijer Ref AB
Q2 2021 - Published on 15 July 2021

At the end of June, the assets of Industrial Refrigeration Components (IRC) were acquired; the company has sales of SEK 20 million and two employees. In connection with the acquisition, Beijer Ref signed an exclusive agreement with LU-VE products in Australia and New Zealand, one of Beijer Ref's partners in heat exchangers.

The company's CEO Per Bertland announced his resignation in the first quarter of 2021 and the recruitment of a successor was completed during the second quarter. Christopher Norbye, new President and CEO of Beijer Ref, will join the company on 30 August. He comes most recently from a position as Executive Vice President och Head of Entrance Systems Division på Assa Abloy.

First half 2021

Net sales increased by 21.6% in the first half compared to the same period last year and amounted to SEK 8,292 million (6,816). Organic growth amounted to 20.4% (-10.9%). Acquisition effects amounted to 5.7% (2.9%). Currency effects amounted to -4.5%(-0.3%).

EBITA amounted to SEK 706 million (462), corresponding to an EBITA margin of 8.5% (6.8%). The operating profit for the period amounted to SEK 681 million (438), which is an increase of 55.4% compared with the previous year. The operating margin amounted to 8.2% (6.4%).

Profit before tax was SEK 649 million (409). Net financial items are slightly higher compared to previous years due to increased borrowing in connection with completed acquisitions during the period.

Profit per share before dilution amounted to SEK 1.27 (0.79) and after dilution to SEK 1.26 (0.78), an increase of 61%.

At the end of 2020, the acquisition of 85% of the shares of Sinclair in the Czech Republic was completed, which is included in the group's financial statements with effect from 1 January 2021. During the period, the acquisition of all shares of Complete Air Supply in Australia and 60% of the shares of Coolair in Germa- ny were concluded; these are included in the company's accounts from February and March 2021 respecti- vely. At the end of June, the assets and liabilities of Industrial Refrigeration Components (IRC) in Australia were acquired.

After the end of the period, Beijer Ref entered into an agreement to increase its holding in the Danish refrigeration technology company Fenagy A/S, which produces environmentally friendly industrial heat pumps. With an investment of DKK 19 million, Beijer Ref expands its ownership to just over 50 per cent and thus becomes the majority shareholder. The company will be included in the financial statements with effect from 1 July 2021 and will have a minor impact on the company's results and position.

After the end of the period, an agreement was signed to acquire 80% of the shares in the air conditioning company Inventor AG in Greece, with the takeover expected in autumn 2021. The company has sales of just over SEK 600 million and about 80 employees. This will be Beijer Ref's 38th market and an important complement to Beijer Ref's existing product portfolio.

Thus far, acquired annual sales amount to approximately SEK 1.4 billion, of which approximately SEK 800 million has an effect on the current year, and contributes positively to the group's operating margin.

Covid-19 has had little effect on the company's profit during the period, although individual regions such as South Africa, Southeast Asia and Australia have been affected. The company does not expect any major impact on earnings related to Covid-19 in 2021 unless new outbreaks occur.

Beijer Ref AB	3
Q2 2021 - Published on 15 July 2021

Comments

from the CEO

All Time High

To begin with, I would like to emphasise that it is gratifying to see how we are now approaching the light at the end of the pandemic tunnel. The world seems to be moving towards a gradual recovery and there are clear signs that societies are slowly but surely opening up; restrictions are easing, travel is increasing and everyday life is starting to normalise once again. In these circumstances, it feels good to report our strongest quarter to date, in terms of both sales and profit. Sales in the second quar- ter, compared to the corresponding period last year, increased by 37%, of which 34% is organic (an increase of 14% compared to Q2 2019). It is positive that large markets such as the Netherlands, France and Italy have performed well.

It is gratifying that we have been able to obtain majority ownership of Fe- nagy, a company that manufactures industrial air heat pumps based on environmentally friendly CO2 techno- logy. Developments in the company have exceeded expectations and optimism for the future is great.

Another exciting piece of news is that after the end of the quarter we have signed an agreement to acquire In- ventor, one of the leading air conditioning distributors in Greece, which is highly profitable. The acquisition is in line with our strategy and means that Beijer Ref is establishing itself in a new market, the 38th in the world.

4	Beijer Ref AB
Q2 2021 - Published on 15 July 2021

I am also happy with the acquisition of Sinclair, which was made in the first quarter. The investment in own brands is becoming increasingly important for Beijer Ref and it is satisfying to see how we have successfully launched Sinclair in our markets. The own brand for line components, Fred- dox, will also be gradually launched in an increasing number of markets.

In the beginning of July, it was an honour to inaugurate our new and energy efficient factory in Italy, which mainly produces sustainable refrigeration units based on natural refrige- rants. As a result, we are doubling our capacity to produce environmentally friendly refrigeration units. At the same time, we are seeing prices of traditional refrigerants stabilise. In our assessment, future changes in the price of refrigerants will not have a significant impact on profit. I see this as a turning point for falling refrigerant prices.

Digital sales are increasing, partly as a result of the Covid-19 pandemic. During the quarter, our e-commerce accounted for 10% of sales, compared to 6% last year. This is an area Beijer Ref will continue to invest in and where we see great development opportunities.

Like many other companies, Beijer Ref had to adapt quickly to prevailing conditions during the pandemic.

Although we are in an industry that is quite insensitive to economic fluctua- tions, I think we have handled the situation well. We have largely compensated for price increases that have partly been due to component shortages in the world. Our assessment is that the component shortage has only affected the quarter to a limited extent.

I would also like to draw attention to all our ambitious and talented employees. Throughout the pan- demic, our core values have clearly permeated everyone's commitment: we have been committed, engaged, straightforward and united. Everyone within the organisation has shown enterprise and innovation. Beijer Ref continues to consolidate its position as a world-leading refrigeration wholesaler and I look forward with hope to both the next quarter and the futu- re.

A big thank you

Q2 2021 will be my last report as CEO of Beijer Ref and I would like to extend a big thank you to all the people I have had the privilege of working with. The milestones are many, as are my me- mories. Far too many to fit into this text. I am very proud that we, as a decentralised organisation, have succeeded in creating a unified corporate culture, with common values and behaviour. Together we have taken a fantastic journey and laid the foun-

dation for continued success. All my Beijer Ref colleagues will be missed. I would also like to thank my family, who have been by my side for all these years.

It is also with pride that I note that the concept of sustainability continues to be an important and integral part of Beijer Ref's strategy. Our ambition is to contribute to sustainable social development that creates long-term values for future generations. It is an honour to have been CEO of a company that actively works on these important issues.

In my new role as a board member, I will continue to engage in Beijer Ref's development. It is now with great confidence that I will hand over to our new CEO, Christopher Norbye, on 30 August. I am convinced that Chris- topher, together with our experienced employees, will continue to drive Bei- jer Ref's spirit and strategy forward. He has many years of experience in both global operations and decentralised organisations.

Per Bertland

CEO

Beijer Ref AB	5
Q2 2021 - Published on 15 July 2021