Beijer Ref AB (publ)

STO:BEIJ B

Earnings Call Transcript 2021-Q2

[Operator]

Welcome to the Beijer Ref Audiocast with Teleconference Q2 2020. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present CEO, Per Bertland and CFO, Maria Ryden. Please go ahead with your meeting.

[Per Bertland, Director]

Okay. Good morning, everyone, and nice to talk to you. This will be my last call, at least my last call after a quarterly report and it is with great proud and happiness, I can now tell you about our best quarter ever in terms of revenue, in terms of profits, in terms of growth, and also, I think we will guide you that we have a quite positive outlook towards share. So Maria and I will take you through the presentation. So if we go to Slide #3, at the glance, you can see -- how we see [ hot numbers ] right now, rolling 12 months. I just want to comment on the sales numbers. As you can see, we are 6 months, 8.23 something. So if you take that, we will reach and exceed I would say, 16.5 in terms of 12 months possible outcome, current take, also taking in mind that we yesterday announced a new very nice acquisition. I will tell you more about this acquisition later on, but that 1 we'll probably consolidate it from Q4 this year and could also add to the revenues this year around SEK 150 million. So that is the current pace. We will do so much as we can to exceed it, of course, and that could be more also acquisition opportunities that are acquisition opportunities, but we don't know it can be more acquisitions this year as we are working with that, of course. All right. If we continue, so I will give some update what happens in the environment and what happened in our market. If you remember in the beginning of the year, we had some complaints about the shortage of containers and the very high prices for containers that make it difficult to buy, especially from Asia. The reason for that was that the ore campaigns at that time went to America due to new implemented tariffs valid from 1st of January of this year. But that was in -- after a couple of months, we saw it much better because containers came back to Asia, and they were available to Europe as well. So the prices went down. It looks very good, but now, again, I think mainly due to the huge demand worldwide we have in all different industries, the prices have increased a lot again. So I think they are even on a high level today then they were in the beginning of the year, and now it's North America, we can blame. I think now it's mainly Europe and other parts of the world that are asking for these containers. However, for us, we have been able to get access to containers, but of course, that will have an impact on the prices. I think the latest I heard is around 16,000 [indiscernible] [ are up ] for container now. And of course, that's a minor problem. I think the shortage of components that also is -- especially in Europe, it's not a problem, but can be a problem during the autumn, if our suppliers are not able to supply. We have not been affected yet in our business, and we are quite confident for this quarter. We have a lot of this stock, so we can deliver. And -- but only in some cases for our OEM business that we are waiting for maybe 1 or 2 parts to fulfill. So in our outgoing deliveries, we are having much more to deliver right now. We're just waiting for some small components than is to be ready with. The COVID situation is also in good shape now. I was -- I was myself in Italy last week, so we could see that open up. It was nice to see that Europe is more and more opening up, and we -- this has for sure a positive impact on our business, and I think we will talk more about that later. One concern also you see this slide I tell you now that let's say, is a fact of our concerns for the future. The rest of the slides will tell more about that we are positive and see better opportunities. But also, I think everyone has seen that there are some rises of Africa that took an [indiscernible] this morning just half an hour ago with our MD in South Africa and this is same about the situation right now. We have 57 branches in South Africa, and we have closed 7. All of these 7 are in the Durban area that is where [indiscernible], but we have open a [indiscernible] last week. For the moment it is calm and see and see that we'll open everything and run the business at normal from Monday. And this, we have 7 branches out of 56 branches, it's not so much. So we have platforms [indiscernible] its impact on the revenue. [indiscernible] And I think what will happen is [indiscernible]. If we continue to Slide#5. So this is also the -- Maria and I, we have talked a lot about the pent-up demand [indiscernible]. And as of now, I can confirm that the pent-up demand has come and we are very happy with it. [indiscernible] is Italy last week and then we see all of these restaurants open. We see all these restaurants open in Sweden right now, and people are allowed to go to restaurants in the evening that makes this business also visible for us. We could see that the demand is increasing here. And still our [indiscernible] and still are increasing much, people are confirmed to dine in restaurants. I'll also give you an example on this hotel in Italy. I asked about how it was the reservation. And they told it was around 50% reservation when I was there. But I said from July 15, it was almost fully booked. So they were also in a very good shape and very optimistic for the future.All right. That I proceed, also from this side, we also see this long story about refrigerants. And this quarter is the first quarter out of the last 14 quarters, I think, but we actually had a small gain comparing quarter-to-quarter on the trading refrigerants. So this is -- we think we have reached the turning point. We've talked about it a long time. We don't expect kind of this very high impact in the future as it will make sense, but it's much better for us to have a profit gain on this compared to have the losses we have had. So that is, for us, a good news and also to remind you today, I think it's around 7% of our total business. So it's not so important for Beijer Ref as it used to be in the past. If we continue to Slide #6, you can see what we have done in Q2. I will start with Fenagy. And remember Fenagy is a startup company doing environmental-friendly industrial heat consoles, mainly based on CO2 technology. And this is the same technology as we do work with the commercial racks, consumer markets, et cetera, but this is for much bigger applications. What we have done, we have invested more in this company. And the reason we have done it is that it has started much better than expected. We fought this year to be just a year of costs and try to find some business we are quite -- I think already we are around SEK 30 million in revenues, and that is exceeding over the plans we had. And we could also see the quotation list we have. So for next year, we are very positive with this business. So it's growing much faster than expected, and that is we need more working capital in the company. And this is the reason why we invested more. We want to speed up. And also, we took -- we will consolidate now from July 1, we have 51% in the company. And we have also the call option to acquire the remaining 49% in the future, looks very promising. And it's also a new business for us with industrial [ fuel ] pumps. In Australia, we took a small company, Industrial Refrigeration Components only SEK 20 million, but it is a good profitability, and it's complementary business to our current business in Australia. It will -- it's an asset, so this will be incorporated in our current business. And yesterday, maybe you could see that we have announced that we have acquired 1 of the leaders in Greece. Greece has been a white box for us on the map. We haven't been there before. Inventor is a brand. Actually, coincidentally, I saw [indiscernible] was begun in Sweden that are doing convertible mobile app [indiscernible]. But I don't think it's a big brand in Sweden, but it's a big brand in British, it's a big brand in Romania. They are also distributing for Amazon and so that is also a new distribution channel for us that will be exciting to see what we can do. Good profitability and the sales, SEK 600 million is increasing this year. We don't know the outcome this year. But I would say the good profitability is double-digit and a little north of that. Probably, we will take over this 80% in first around October, beginning of October. We are waiting for the [indiscernible] control in Romania. And that is mandatory. We have to go through that procedure, but we don't see any problem with it's very low limits to what you are required to do this in Romania. So probably, this will happen in beginning of October or end in September. The remaining 20%, we have also a core option. So we will -- what we can what we can use in 2 years time from now. The talent management will remain and work and we run the company together with that in the future. And also you can see here this year, we have acquired revenues, full revenues for SEK 1.4 billion and about SEK 800 million of this will have an impact this year in terms of revenue. All right. Internally, we, like I said that I was in Italy and that was through the integration of our new OEM plant, and this plant is dedicated to do a sustainable environmental primarily CO2 business. And it is really fully loaded. And with this one, we doubled the capacity for producing this kind of items. And it was very nice to go into a factory. We see all this equipment and all these orders and that is really full with work and also to our Italian stuff, so happy that they have had the factory. That will give us a lot of business in the future. We have signed agreements with important supply. If you see Emerson and Tecumseh and there will be more of this. But this is funding business as we always do. All right. Next slide, e-commerce sales Slide #8. This is also amazing to see how much and how fast this e-commerce is developing. It's now 10% of our total business. This is -- there are parts of new business here, but you must also remember that this is also some cannibalism, but we are moving distribution from ordinary business to e-commerce effects. But we are building it up that will continue to grow, and we have target '23 that we think we will receive. How much was -- well, I think we will exceed our e-commerce target in '23 anyway, with pace we have right now. And then Slide #9. Also, as I said in the beginning, that for me, it's a privilege to have this manage this report with all-time high on all lines in the P&L. Christopher will start here on Monday, first week of August 30, but it has already been here many times. And we have met all with detail. He has met the Board a couple of times, and he will also work together with some 1 week in August. His team and he is already very, very much trained with direct and he is also having already a huge knowledge of our business in our industry coming from as a Assa Abloy, very used to do acquisition, very used to decentralize the organization. It seems that we really have found a good successor, and I'm very hopeful that the Beijer Ref journey will continue in the past speed or even faster with Christopher. All right. And this is the mega trends in [indiscernible], and it's the same as usual, but they are giving us tailwind. A new tailwind is now that we also with the refrigerant prices will be due to a phase out out scheme will maybe support us in the coming quarters instead of [indiscernible]. And I will also -- I will also underline that global warming or [indiscernible] warm summer also give an impact on the air condition business that you can see. And now Maria will tell you about the figures later on. But this support us and also about the legislation. Remember [indiscernible] but we are doing in Europe, more than 100 tankers in the world are committed to do the same before [indiscernible]. So this will go around for a long time. All right, Slide #11, my favorite and it's nice to see that we have organic growth again. And as you know, it was 34% in Q2, of course, it was a very easy comparison due to COVID situation that impacted us negative last year. But also remember to compare Q2 '19, it was 14% growth. So we have a disorganic growth we had in Q2. First of all, of course, it's a normalization due to last year's COVID close down of societies, but that is also an additional real growing business for the moment. And this was what I have, so now we're coming to Slide 12 and further the financials, and Maria will take you through.

[Maria Ryden-Persson]

Thank you, Per. So this quarter is our best quarter ever. Normally, Q2 is a very strong quarter for us. And we believe, so this quarter as well. We have had a nice growth, as Per mentioned, sales up with 37%. And whereof 34% is organic growth. We have acquisition impacts of [ 6.4 ] and negative FX of minus 35.3%. The FX impact is less than the first quarter, which is also positive. And if we look into the growth, I mean, we know we have low comparables with last year, where we have the COVID impacts. But if you also compare with 2019, which was an all time high when it comes to sales and results, we are above that well above with [indiscernible]-- the change in result and the EBITDA margin is 9.4%, and that is also an increase from Q2 2020 when it was 7.6%. And comparing with 2019, that is also an increase of about 14%. Net debt EBITDA, you have seen the figures before and we used to show them for you. These are including IFRS, which is what we report. It's 2.1, and that is also the same as last year. And for -- if we look back into 2019, it is a reduction because then it was 2.5. So we have good headroom for doing new acquisitions, and we are working continuously with that and with our bank partners. Earnings per share also pays off when the result is higher. So EPS is around 81% compared to last year and also above the 2019 figures. There a lot of figures on this slide, but the main takeaway is that a good quarter, best second quarter ever, and best quarter ever and also a solid growth here. If you look into Page 14, we can now see that HVAC is growing and it is now 50% of the business, year-to-date figure around 47, maybe that is the recurring figure. But Q2 is a very strong HVAC quarter due to, of course, the summer season and the waste. So I think it's good that we have 2 strong business areas of HVAC and also the commercial refrigeration, which also includes refrigerants and copper components. And the OEM business is 9% out of the total business. But the plan is, of course, to grow our OEM business. And as we mentioned, we have now doubled the capacity. So looking in the Page 14, which I have, we can see the organic growth. We have organic growth in all product segments, and that is carrying prominently. And that goes also for the refrigerants. We have had quarters of where we hadn't seen reduced refrigerant prices, but now it's the turning point here. So all our product segments shows good organic growth. And that is also what we have communicated later. And you can see also that OEM and HVAC are growing very nicely. Yes. Page 15, as I said before, strongest from Q2 ever. And you can also see the rolling 12 figures, what we have accounted for when it comes to EBIT. It was about SEK 1.3 billion. And also the margin -- the EBIT margin for this quarter was 9.2% compared with 7.6% and for '19, it was 9.3%. But it's also so when we see the volumes are increasing, sales are increasing. We get a nice drop through. And you can see that on the next slide, on Page 16, we have nice good contribution from our acquisitions this year. And if you recall, we acquired Sinclair at the end of last year, and they have contributed nicely to the prospect and opportunity margins. And FX, as I said, on the result, it's an impact of SEK 9 million, so not too bad in that regard and also a nice structure on the organic, which is mainly driven by the volume. Looking into the -- our segment, geography. One can see that all regions have increased. And we can see that also Southern Europe is increasing most, and that is also our biggest region, and they contribute well both on sales and EBIT. We can also see that East Europe, where we have the Sinclair acquisition have grown nicely and also increase the margin. Africa, as Per mentioned, they got a big hit last year from the COVID, of course, the situation is challenging, but we still believe in Africa and that they will come back. And before the COVID, they were actually booming up in terms of margin. Asia Pacific, we have done some good acquisitions, increasing the margins, but also some good efforts in cost control. Africa and Asia Pacific, they are more into winter season now. So despite that, we see nice profit improvement in Asia Pacific. You can see the Nordics is not increasing so much on the sales and a little reduction in EBIT. We can see that the Nordics didn't get so much tonnage from the COVID last year, and we also have pretty high comparables when it comes to the OEM business beginning 2020 that we didn't have in the beginning of 2021. So we don't feel too worried about that, and we will recover from that as well. Cash flow, a nice cash flow and an increase here. You can see on the Page 18 that the normal seasonality for the cash flow is that we tie up capital first half and release second. And I would say that 2020 was a very challenging year, where we stock all or deliver both. So we were able to actually have a positive cash flow in Q2. So I would say 2021 is more back to normal, and it's related to that we have increased sales, so increased assets because actually our inventory [ churn ] has increased. So the main reason for that, we tie up or have negative working capital is, but we had assets from sale. And net debt is pretty stable. You can see that on Page 19, and that we have reduced it from 2019 as well when it was about 2.5 and now it's down to 2.1, as said before. We have also on this Page 19. On Page 20, we have some nice information from the business paper does industry here in Sweden, and they have done a comparison about the share development of some large industry companies. And so there we have 100 and we were on #4 here, so 161. And the rationale behind this is, really, you can see link here between -- if you have a good, a nice organic growth year-over-year, which Beijer Ref had. It also pays off in a steady stock return and our return has been [ 29% ] over the last 10 years. It also, of course, impacts the price per earnings valuation here. So some good data, which we are very proud of. And then finally, before we let you in for Q&A, maybe you would wonder now what is the DNA of Beijer Ref and Per is leaving and handing over to Christopher Norbye. We have -- we are in a market that is growing, and we get some tailwind from the green technology and the shift in technology and also some strong [indiscernible] here. And we, as a company, have had a clear focus and a clear strategy over the years, and that has made us to stay focused and also focus on what we are good at. And when it comes to the employees, we have a very strong corporate culture and we get responsibilities since we are a centralized organization, meaning that business is local and MDs are responsible for taking care of all the customers out there, and then we have our synergies on the purchasing side. And last but not least, if we perform, we also get freedom and that pays off in a stable return. And I would say it has also been the value of having a strong owner base, both an industrial owner and now [ EQT ] that focus on growing the business and also making it better. So I think I know the future is green, and we are here to further develop the business.

[Per Bertland, Director]

Okay. Thank you, Maria. So Maria and I, we are ready for questions. If anyone wants to ask us something.

[Operator]

[Operator Instructions] Our first question comes from the line of Carl Ragnerstam of Nordea.

[Carl Ragnerstam, Analyst]

It's Carl here from Nordea. A couple of questions from my side. First of all, of course, a strong report, but looking at the drop-through, I think in the quarter, it was 13%, 14%, and it seems a bit muted, especially looking at previous quarters, for instance, Q1, 25%. Could you perhaps give some flavor on that, I mean, you should be benefiting a bit from low selling and marketing expenses, cost savings, easing refrigerant headwinds and so on. So what is happening with the drop through in the quarter?

[Per Bertland, Director]

I think there are some things you should take into consideration here. Everything you said is correct. But also, you could see on the growth that the part -- the main part of the growth, not the main part but the most important piece on air condition. And air condition, as we said many times before, it's slightly lower gross margin than we had on the refrigeration. So this is 1 reason for drop-through. Second reason is that something we have not -- I'm not sure if we disclosed this in the report or not, but you shouldn't be aware we have had some at 1 timers in Q2. First of all, we have our LTIP program that has -- and we have also had all this recruitment costs, et cetera. So I will say, all in all, we have onetime costs in Q2 or more than [ 20 million ] or just around [ 20 million. ] That should -- due to this extraordinary items.

[Carl Ragnerstam, Analyst]

Okay. Very helpful. Okay. So we should expect the drop-through to normalize more in the coming quarters, I guess?

[Per Bertland, Director]

Well, yes, I'm not sure you could expect the same level as in Q1. Also, the comparison last year, we had a lot of subsidies in -- especially in April and May, and this will -- we'll not have in the future. But you should -- I think maybe it's more -- well, it's -- I think it should be something between Q1 and Q2, you should expect.

[Carl Ragnerstam, Analyst]

Okay. Perfect. Okay. And also regarding COVID-19, we have seen tightening restrictions in parts of Asia, we've seen it in Australia as well. Have you seen any impact on the current trading in the specific geographies?

[Per Bertland, Director]

Well, I think you could see in Asia, while as the main part is we see an impact, but relatively small markets. Malaysia, Thailand, we, for sure, see a negative impact. We could see it partly in Australia. But I think Australia is running quite well for us without this. So it's -- the impact is mainly in Taiwan, Malaysia, and that is not so big countries for us. So it's limited for the moment.

[Carl Ragnerstam, Analyst]

Okay. Perfect, good to hear. And on the acquisition yesterday, it looks like, of course, a nice company with good margins, but do you see possibilities for purchasing and selling synergies. And also we know that Christopher's legacy is being active with price increase. Is it fair to assume that you have the intention to do the same with this acquisition as well?

[Per Bertland, Director]

Yes. Every acquisition we do, we always see synergies. So I would say we may be general, we have more synergies when we buy in refrigeration side when we buy on the air condition side. But this Inventor, they take that product from a Chinese factory. And the same Chinese factory, we're doing a lot of these with in other countries, we sell more or less the same products with other labels in other markets. And this is coming up to be 1 of our core suppliers, very important suppliers. So there is, for sure, 1 synergy in Romania, we are already. We could see some synergies. And we also think that this could -- we have not decided, but this is an opportunity, a synergy opportunity that this could also be a platform for us to start with refrigeration business in Greece. Now we are doing a air condition with Inventor. So yes, we see synergies.

[Carl Ragnerstam, Analyst]

Okay. Perfect. And also 1 more question here. I mean looking at the e-commerce growth, it's -- the share is growing nicely, as I said before, what costs are allocated to this project? And does it have a material earnings impact?

[Per Bertland, Director]

You mean the cost to implement the e-commerce?

[Carl Ragnerstam, Analyst]

Yes, to drive e-commerce growth exactly.

[Per Bertland, Director]

I don't have that in my mind right now, Carl. Of course, it's not free of charge because we have -- we have hired a new CIO. We have people working with this on full time. It's a huge work. But I think I mean it's not so much additional cost. I think the most important here is that when you sell on the web, you have fixed prices, if you sell through a branch, the branch manager or the sales guy could always give you 1 additional percent if you are a frequent customer, that's impossible to do. So I think there is an improvement on gross improvement opportunity on the gross margin and also that could be when we can scale it even more, it could be some cost reductions we think in the future. I'm not sure Maria...

[Maria Ryden-Persson]

Yes. So I think -- I mean, it's not -- the biggest part is really to do with the product categorization here, and that has been done over the years. And launching the e-commerce, we have a standard program for that. So that is taken in the current P&L. But the bigger portion has been here to map all the products within the group, the pin system.

[Carl Ragnerstam, Analyst]

Okay. Perfect. Sorry, 1 final one from my side. Could you also give some flavor on the sales development sequentially or year-over-year, if you like, for the HORECA segment. You touched upon it a bit, but I thought if you could be more specific.

[Per Bertland, Director]

Well, you know again, I think I said many times, it's very difficult for us to even really know what is the HORECA segment because we are doing business to business. And we -- but in most of the cases, we don't know the end customers. We know, of course, which sector is our end customers are in general, but that specific sector, we don't know. But we know when it's coming up as we have seen now in Q2 with a lot of commodities, with line components and maintenance products, but that is belonging in a quite big scale to HORECA segment. But it's very difficult to give numbers. But we can confirm that the pent-up needs that we have talked about has started. That means that the HORECA segment is opening up again, and that gives us, of course, additional business.

[Operator]

Our next question comes from the line of Erik Cassel at ABG Sundal Collier.

[Erik Cassel, Analyst]

Per and Maria, so my first question is on pricing. And you mentioned that you have been able to shut down price increases from suppliers very well. So any info on how much you have increased your prices on average would be helpful?

[Per Bertland, Director]

It's a very difficult question, Erik. You know we have so many suppliers. But I would say a massive range between -- I think 0% up to 8%, 9%. And I would say, if you take an average is -- of maybe it's less than 4.5%. I would say let's say, an average 3% to 4%, something like that.

[Erik Cassel, Analyst]

Okay. So is that sort of neutral on margins? Or has it created some kind of headroom for further price increases from our suppliers or do you expect to increase prices going forward as well?

[Per Bertland, Director]

We have seen slightly growing margin for us. We are measuring the gross margin very important for us, even if we don't disclose it. But what we said, the message and what we are really pushing out because with this environment, with this demand in the market and also in some cases from -- especially from our competitors with shortage products, this is an opportunity to increase prices that never have been -- we have not seen in the last 10 years. So we are pushing for price increases, and we want to -- the strategy is, of course, to compensate in addition to what the price increases we have because we're also pushing back on oil price increases we get from some of suppliers. But this is -- this is a battle field. Sometimes you are successful and sometimes you are not so successful. And sometimes, you have a delay. The good thing here is, of course, when we can push our price increases from our suppliers. We say, we are not accepting that for 3 or 4 months from now, but then we could always try to come out and compensate with our price increases in advance, that is an opportunity for us. But we are really pushing for price increases and we think we do it quite well. The target is to improve, of course, here. But as I said, it's a battle field. It's a market, and we have competitors on the market as well.

[Erik Cassel, Analyst]

Okay, very good. Do you think this is sort of a temporary margin boost? Or could you defend prices going forward as well?

[Per Bertland, Director]

Well, I think our margin is quite stable and when we know we're not suffering so much as we have done in the past from refrigerants, for example, but it's an opportunity for us to grow the margin. But on the other hand, if we do more in the air condition, of course, we grow the EBIT margin, but we don't grow the gross margin because we so much more volume there. So it will be good for the EBIT margin in the long run. But all in all, that is always on as a focus area to see what we can do to improve margin. The e-commerce could also support that in the future, as I said before. So yes, we think we can grow the margin absolutely. And this is what we always were. But we have also an competitive market outside. So sometimes even if we are a market leader in many cases, and there are many followers, they are always -- could be a competitor who [ dumps ] prices. But is -- that is what's always happened also.

[Erik Cassel, Analyst]

Okay. Very good. So HVAC demand was obviously very, very high this quarter. But do you think volumes has been pulled forward in any way from Q3 due to customers perhaps being scared of shortages going forward.

[Per Bertland, Director]

Well, I think -- no, I don't think so. The last fees, it's a seasonality product in many cases we now sell a lot in Q2 and Q3. Warm weather is always supporting us. And I think most people have learned from the last summer. So it's nice to have air condition units, and they want to buy air condition units. I don't think that customers who really understand the shortage. And you know also, even if we are selling more than 1 brand in air condition. We are dealing with Toshiba. We're dealing with MHI, Mitsubishi, we are dealing with our own brands, noting plan, but I can also tell you has been a success for us. It's our own brand, our own pipeline that is launched in many markets since we took over. But when you are dealing with more brands, even if you run out of 1 brand, you can sell another brand. I think we can handle that quite good. And I also believe we can do it during the autumn, even if that could be some disturbance in the deliveries.

[Erik Cassel, Analyst]

Okay. And then on margins, as Carl highlighted, I also would have assumed you would be able to reach a higher margin with sort of drop-through as the volumes were so high. But then you had 10% EBIT margins in Q2 2018 when refrigeration grew a lot. So is it possible to have those sort of margins through HVAC growth as well or primarily from refrigeration?

[Per Bertland, Director]

Yes, I think that is even if the gross margin is lower on HVAC, I will say that the EBIT margin is higher, because we have so much more volume. And we have double-digit margin in many, many markets. Now we have additional costs, but we have a negative impact on the margin, but we could also see the new [indiscernible] company, I said it's north of 10%. I mentioned for you in inventory. We have more opportunities to buy companies that have a higher margin. And in general, we have higher EBIT or EBITDA margin in HVAC because it is not -- it doesn't require so much of [indiscernible] cost. It doesn't require so many people working in the SG&A costs. So absolutely, I think if we continue to acquire companies combined with nice organic growth, it's more likely that we will have more HVAC business in the future -- sorry, air condition business in the future when we are [indiscernible] as it's much more [indiscernible] in that piece. And the good news is that if you buy companies in that feed, that's also higher EBIT margin. It was a higher growth rate for the moment. So it's a very high growth rate.

[Erik Cassel, Analyst]

Yes, exactly. And then the last 1 for me. You talked about a high level of order intake last quarter, particularly for OEM. Have you seen similar order intakes throughout Q2, Q2 and perhaps the first 2 weeks of Q3 as well? Or has there been any shift in demand?

[Per Bertland, Director]

Do you mean order intake in -- for delivery now in Q3? Yes, we have had nice -- you're now in July and in 1, 2 weeks in August, there is a case on holiday that is away. So -- but for the moment, we -- our order backlog is good. And also Maria mentioned about the Nordics was not so good as you remember in Q2. I can tell you the backlog in Nordics is bigger much bigger than it was 1 year ago. So yes, we have a good backlog and order intake for the moment.

[Operator]

Our next question comes from the line of Viktor Trollsten of DNB.

[Viktor Trollsten, Analyst]

You have touched a bit upon on it, but I have a couple of questions on the sales and little bit bridges on pages 16 and especially looking at the M&A contribution, it looks like a very healthy EBIT margin of [ 16% ]. And you touched on that with the Sinclair acquisition with own brands having good profitability and so forth. But could you expand a bit on is that the sort of targets you are looking for going forward as well with higher profitability than the 5% EBIT bit margin you have talked about as the classic characteristics historically. So basically, should we expect a smaller dilutive effect on margins from M&A going forward versus historically?

[Per Bertland, Director]

That was a good question. Well, we have learned that it's much more interesting to acquire a company we have profitability and low profitability. And we have not -- we haven't seen so much more companies with high profitability and higher margin. Now when we look more into the air condition business also because it's higher no doubt about that. If you go refrigeration, it's normal price companies, it's, let's say, around 5%, 6% companies because it requires more people, but also know all the synergies we can implement. So we can increase that to have the double-digit also, but then we need much more work for us. So I think it's also when we look into what we have in our pipeline. That is something I think mentioned before, what has happened since -- we have a new principal shareholder from EQT instead of carrying that we are working much more focused now on acquisition. We have always been working with acquisitions, you know that. But now we have a pipeline and we have a long list, we have a short list. We have a hot list. We have a possible list, et cetera, et cetera, on possible targets, and we could see also that many, many targets that should also deliver more than 10% profit. I mean 10% to double digit is something that is level for us. So the answer is yes.

[Viktor Trollsten, Analyst]

Okay. That is clear and interesting. And just an observation on that, looking at the Sinclair acquisition, it seems you are able to maintain the fair multiple [indiscernible] for for those sort of targets despite higher profitability. Are you confident that the M&A multiples you will remain in a...

[Per Bertland, Director]

Well, I think if you compare with -- that could be different multiples and different negotiations. That's for sure, different markets, but it's in that level. So we think it's very easy to make the M&A calculation to see that it will be a good gain for Beijer Ref on that level we discuss on everyone. And that will be a good contribution in the cash flow and a good contribution on the EBIT. That's no doubt about that. And of course, if we could like if 1 asked me about the synergy now with Beijer Ref, inventories also a private label, own brand like Sinclair. Now we will go for Sinclair International, but I think we could also interact with Inventor in that area around Greece, because it's very well-known brand in that area. So that is for sure a synergy. And as I also said, Sinclair we could -- when we launched it in the big markets like France, Italy and Spain it is of improved margin, of course, when you do it with your own private label. And we believe -- we, as I said, about Sinclair that it has been. That's not a little slow, but now it has been exceeded our expectation, and we are very, very keen to continue to launch it even more markets in the future and develop that brand. And that's what has happened with Beijer Ref.

[Viktor Trollsten, Analyst]

Okay. That's clear. And just final for me, the Inventor brand, does that have the same sort of margins like Sinclair i.e., at 16% or?

[Maria Ryden-Persson]

Well, I think you have mentioned on that before it's in double digits in there...

[Per Bertland, Director]

Well, Inventor today is a double-digit company, and that's even north of the double digits. So it's a profitable company.

[Operator]

Next question comes from the line of Andreas [ Block ] of [indiscernible].

[Unknown Analyst]

I only have 1 big picture question, and the other questions have been answered. And when I think about all these heat waves, heat wave in Europe, heat wave in the U.S. The planet is getting hotter and hotter. Is there any way that you -- have you done any analysis if the number of air conditionings in France increased to 50% of what they are in Spain or anything like that or if the air conditioning units is [indiscernible] Europe increased by 20%. Have you done any kind of analysis or thought or read anything that can give us kind of any hint of what the market potential is? If the air conditioning spreads because of the global warming?

[Per Bertland, Director]

Well, not market by market, but I can -- we have the plans. I think I mentioned in the penetration of installed air condition units, residential, we have seen 1 investigation, if you compare U.S. with Europe. And that was around 25% of all installed residential units in the world is in the U.S. That is the population around 330 million, and Europe's 455 million million represents here 6%. So that is 1 investigation we have done. But we could also see how the penetration is increasing now in Europe. We think that is 1 of the factors that we pursue growth now. But Europeans had learned to understand how convenient it is to have air condition and how convenient. And also now when the heat wave is coming, that has started the boom and now today, we have a heat -- I think we have a heat wave in Spain against close to 50 degrees in South Spain. In Greece, it's 35 degrees. And all of you have been in this heat wave. We have also 30 degrees in Sweden right now. When you have learned to understand the convenience to have air condition and to shield it down, it had wings on the water. So we strongly believe. We have not done that on a country-by-country. But you can just go to your own home. I can go to my wife. And we have a air condition in our house as normal Swedish people, but it's running during the summer time always. So you get used to it. So it's our conviction that the penetration will continue. I'm not sure if it fully answer your, Andreas -- your question, but this is what we can say. I think we see it right now.

[Unknown Analyst]

No, no, but it makes sense. The biggest investment pieces are in the strongest case I have a very risk beyond acquisitions and excellent management and all that is -- that it's the HVAC business I'm interested in. And you're basically saying that if Europe becomes half of what the U.S. is over time. I mean I'm thinking 15, 20 year time the whole business could double. It's just a very strong tailwind. So thank you very much. All the best, and I look forward to meeting up on the other side.

[Operator]

And the last question in the queue so far. [Operator Instructions] The last question so far is from the line of Robert Redin of Carnegie.

[Robert Redin, Research Analyst]

Yes. Just a few follow-ups. Just the nonrecurring items in the quarter. Did you say they were SEK 20 million to 0?

[Maria Ryden-Persson]

Yes.

[Robert Redin, Research Analyst]

Yes. Cool. Then on the price increases you talked about, you said 0% to 8%, 9%. Were those with the procurement price increases or were they -- your pricing business towards customized.

[Per Bertland, Director]

Sorry, Rob, I'm not sure what happened. We are difficult to hear your question.

[Robert Redin, Research Analyst]

Okay. I was asking about those price increases you talked about earlier. You said something about 0% to 8%, 9% price increases, maybe on average 3%, 4%. Were those price increases that your suppliers have communicated towards you, or were those your price increases towards customers?

[Per Bertland, Director]

No, I think that was what the supplier has communicated to us and -- but as you know, you know how it works in our industry. When we announce price increases, we put out our full army to have a counter attack. So if they announce 8% or 7%, 6%, it will never end up so much because there is always long hard negotiation before we find a level that also we accept as customers. So of course...

[Robert Redin, Research Analyst]

But that -- but I think, Maria, you said that the organic growth in Q2 was mostly volume. So this sort of needed or necessary price hikes, is there more of a Q3, Q4 thing? Or was there already a certain level of price hikes taking into Q2?

[Per Bertland, Director]

I think the price -- if I answer and Maria can add, I think the price increase has mainly come now in mid end of Q2. Now, but really shortage has started. So we could see it from May, I would say.

[Robert Redin, Research Analyst]

All right. So more of a total quarter effect next quarter then.

[Per Bertland, Director]

And you have price increases, but you can not be affected for -- after 3 or 4 months or something like that.

[Robert Redin, Research Analyst]

Exactly what I was asking that the organic growth in Q2 was mostly driven by volume versus -- while price could be more of a component from Q2 before.

[Per Bertland, Director]

Yes. But we -- in Q2, we didn't have big price increases really.

[Robert Redin, Research Analyst]

Perfect. And then on M&A, I mean, it sounds positive, your comments. That's my final question. But you've done SEK 1.4 billion acquisitions with SEK 1.4 billion of sales so far year-to-date that sort of 10% of your 2020 sales. So you brought a lot of companies in your M&A pipeline. So is the M&A pipeline still strengthening or [indiscernible]? Or have you bought off lots from the pipeline?

[Maria Ryden-Persson]

No, we are evaluating charges all the time, as you know. And we have also allocated more resources to the M&A activities. So maybe we have seeded up a little bit. But there are still many companies, still in the pipe. We have a lot of companies that we are evaluating and also new markets, et cetera. So there are more to come.

[Operator]

And as there are currently no further questions in the queue, I'll hand back to our speakers for the closing comments.

[Christopher Norbye, CEO & President]

Okay. Thanks to all. Maria and I will have another internal call out to organizations. So thank you. And if anyone wants to have additional information, you know we are always available to your support. So you are free to call us if you want to add more questions. If not, wish you all a nice summer and hot each way, of course. Thank you.

[Maria Ryden-Persson]

All the best. Thank you.