Beijer Ref AB (publ)
STO:BEIJ B
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Beijer Ref AB (publ)
Earnings Call Analysis
Q4-2023 Analysis
Beijer Ref AB (publ)
The company closed Q4 with nearly 10% EBITDA margin, which is consistent for a business experiencing low seasons in Q4 and Q1 and high seasons in Q2 and Q3 due to seasonal demands in the U.S. The quarter was marked by stable margins and the completion of two acquisitions. Despite the seasonality, the company managed positive growth in private labels and is exploring new branches as well as forging strategical agreements with suppliers that are expected to support and propel business growth into 2025.
Reflecting on the broader financial performance, Q4 showcased a significant revenue surge of 31%, primarily acquisition-driven, while organic growth contributed 4%. EBITDA climbed by 26%, and despite a change in the number of shares due to a share issue, the overall picture is of a company on an upward trajectory. Notably, M&A activities were central to the 33% boost, easily outpacing the organic decline of 4%. The overall annual performance was strong, with EBITDA up 53% for the full year, indicating robust profit growth and healthy margins throughout the seasons.
The company's business, particularly in the EMEA region, has been thriving on organic growth, with an upward spike in the previous quarters due to high demands primarily influenced by energy constraints. While this demand is expected to normalize, the company has one more quarter to leverage these unusually high comparables before transitioning into their peak season in Q2 and Q3.
Despite macroeconomic pressures that have affected many industry peers, the company's trading has been relatively immune due to its focus on segments like replacement, repair, and aftermarket services. Its customer base of small to mid-sized installers, who usually don't stock up on inventory and work on daily transactions, has contributed to the stability and resilience of the business model. Moreover, the trends toward natural refrigerants and changes in OEM product portfolios, which are independent of economic swings, are expected to continue to support the company's growth.
For Q1 of the following year, the company is eying strong existing market comps, particularly in EMEA, with a 17% organic growth projection. A noteworthy seasonal shift could temporarily affect Q1 performance due to two fewer working days as Easter moves from March to April, but this isn't expected to have an annual impact. This temporary shift is duly noted as part of the normal ebbs and flows of a trading business heavily influenced by the number of working days.
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Welcome to the Beijer Ref Q4 presentation for 2023. [Operator Instructions] Now I will hand the conference over to CEO, Christopher Norbye; and CFO, Joel Davidsson. Please go ahead.
Welcome, everyone, to this Q4 and full-year call. Sitting here together with Joel Davidsson, CFO. So we will run through the normal presentation and then we'll open up for Q&As.So on the first slide that we usually go over is more a rolling 12 more the trend. We continue to grow. I keep saying this when I started 3 years ago, our rolling 12 was SEK 16 billion. So it's nice to see it's doubled now to SEK 32 billion. We continue to add people across the world. And we're now active in 45 countries in the world. So we continue to grow. We continue to add businesses around the world and of course, we'll cover some of that today.So just a little bit of a recap. I think it's worth also mentioning the full year 2023. I think the heading says a lot on it. And it's been a very eventful year and also a year with good development, strong development that we're very proud of as Beijer Ref, I would say, developed extremely good doing a 2023, which is a little bit of a year with a lot of different phases.But growing the business over 40% in sales, EBITDA, 50%, driven, of course, by a strong acquisition year and entering the U.S. to the Heritage, but also good development, I would say, in all of our acquisitions and also in the underlying business across not only the U.S., but also Europe and the APAC region.Also, the cash flow being on the agenda for some time going through the pandemic, building up inventory to support that longer lead times, issues with supply chain and I think the company has managed extremely well. And then, also, as we have stated over the last quarter, we started our inventory alignment during the end of Q2.And of course, we expected a good cash flow in Q3, which we delivered on and also an even stronger in Q4, driven by inventory adjustment and also the seasonality. So in the end, I think it's a decent cash flow here, operational SEK 2.5 billion for the year. And we'll come back a little bit. But we see opportunities in 2024 as well to continue the normalization of inventory in the business.Net profit, an increase of 44%, closed 15 acquisitions, of course, the biggest one in Heritage in the U.S. We did a rights issue, I'm sure you all know and then also had the first Capital Markets Day. So all in all, I would say a very good year. And then we'll come in here to a little bit more on Q4 in the next slide.So Q4, having record cash flow, which we -- which is good. And this is also what we've been seeing all along. We follow inventory on a daily basis. So we know what's happening in the different regions. So we continue to drive that down. And then, of course, you have seasonality, especially in your accounts receivable as your quarters are affected by seasonality. And I'm sure we'll come back to that when we talk about 2024.We had a total growth of 31%, mainly acquisitions and organic was minus 4%. We'll come back to that in the next slide. EBITDA developed well, stable margins across the board in the U.S., even a little bit better in APAC and stable in EMEA. Of course, we had some effects as we had negative organic growth. And it's not like we're restructuring the business. We still believe it's a good growth they have. So good, stable margin, which has also been key, as I stated before, that as we draw down inventory, we don't see any negative effects on our gross margin and that's also what's happening as we expected.Cash flow, good, at SEK 1.8 billion. Of course, a record, but it's been a record every quarter and also driven by as the business is growing, good increase of the profit. We'll come back a little bit on the financial on that. Earnings per share, as we have different amount of shares as we did average number of shares. We'll come back to that. And then also proposed a dividend of SEK 1.30, which is an increase of 38%. So also a strong signal on the market for the future of aligning the inventory according to the growth of the company.So moving on to the next slide, a little bit focus on the sales side. If you look at this picture, I would say on commercial, industrial, refrigeration, a stable quarter, continue to be positive on the OEM side, continue to be driven a lot on the transformation that we continue to see in Europe, both on the heating and cooling side. And Europe continues to grow double-digits in the OEM segment and a little bit weaker in APAC. And we'll come back to that a little bit later as well. But in general, good activity on the OEM segment.Also, we started another 40% drop of refrigerants here in January 1. So we expect long term, this segment to continue to accelerate as we draw down all these F-gases around in Europe and across the world.HVAC, minus 8%, I would say, very good comparing to plus 29% in Q4 last year. And I think most of you that has been close to Beijer has understood that we've been saying that Q3, Q4 last year and Q1 was very, very strong on HVAC, mainly driven in Europe, mainly driven by the energy crisis we had here. And we see that continuing to Q1 on very strong comps. And then it tails off as we move into the summer season, Q2, Q3. But I would say a good stable development in HVAC, especially if you compare to plus 29% in Q4 last year.Then, a little bit, we'll come back to the divisions, both EMEA, APAC and North America, I would say, stable development. And then, we also finished off with closing 4 acquisitions in the quarter. Another add-on in the U.S., a smaller one, in Gront Klima focused on HVAC accessories. Turner on HVAC in Australia and then also another nice add-on in India, Chillaire focused more on the HVAC segment. So it was a good stable development in Q4 on the acquisition side as well.So moving on to the next slide. If we talk a little bit about EMEA, I would say a stable quarter as they run down inventories quite a lot in the quarter as expected. And also HVAC here, EMEA would be the biggest affected by the strong HVAC growth last year in the energy situation in Europe. We can see a plus 43% last year. So I'd say a good stable still on the HVAC business.OEM continues to grow well, plus 16% and good double-digit growth for the year. As we usually talk about the OEM segment, that's what we expect as a well continued transition into other type of refrigerants. And of course, we're focused on CO2-based segment.Good, stable margins, good gross margin development. And then, of course, you have some dilution on the organic in the HVAC segment. But I would say we covered that very well in the business area.We continue to see that the transition into the technology on the OEM side. We'll continue to expand on our private label, both in refrigeration, but also on the HVAC side, as we talked about before in the Sinclair segment.And we also had another acquisition, Condex, one of the leading HVAC distributor in Eastern Europe and also a base with Mitsubishi we have with us a strong and strategic partner to us, so a good quarter in the EMEA segment.APAC, moving into summer season here in Q4, so a very active season and good development. Q4, Q1 is for summer in our main markets in APAC and good growth here, both driven by acquisition and organics.HVAC here is not affected as much with the strong comps because it's mainly Europe. We continue to see the OEM segment a little bit lower. There is -- compared to very strong a lot of projects last year. But we're also seeing the trends now on orders within retail and other segments in the Australia and New Zealand picking up. But of course, quite long lead times when you transition from orders into sales as most of that is coming from our factories in Italy. So we see better activity in the OEM segment as we closed out Q4 and also starting Q1.Margin, good and improving in the segment as part of our work here is to, of course, move APAC into the margin target for all of the company. South Korea, new market for us has been a very good entering with acquisitions, the good synergies both on the sales side, product side and cost side. So it supports the business. And in the end, we also continue our journey into India, of course, smaller add-on acquisitions. So a good quarter in APAC finishing off the year.North America, I would say a stable quarter. You see the volumes are down a little bit. I think if you follow the statistics, we have some weakness in the housing market. That for us is probably most likely building up pent-up demand, a little bit more repair and replacement that, of course, we also start breaking in the future. So I think a very good quarter, very good margins for being in Q4, almost 10% EBITDA.Of course, U.S. is very seasonal with focus on Q2 and Q3, while Q4 and Q1 are lower seasons. So a stable quarter with good margins, stable gross margin development, 2 acquisitions, add-on and pipeline continues to look good. We continue to build the platform on refrigeration is growing nicely, private label. We have already launched for -- mainly for the season, new branches that we are evaluating and also working with our strategic suppliers here with more strategic agreements as we have in the rest of the world to support us and support them and drive growth for the business.So I'm very happy with the stable development in the U.S. And of course, interesting now talking to our key suppliers as in towards, I would say, Q3, Q4, transitioning into the ATL product side for the U.S. New product portfolio being launched by the OEMs and good cooperation with our strategic partner in that product and that should be coming towards the end of '24 and be a very good driver also for 2025 and going forward for the U.S.Next slide, so wrapping that up for Q4, 31% growth driven by acquisition, organic, 4% going over that. EBITDA growth of 26%. And then the EPS change, we'll come back to that as we all go through the numbers a little bit, change of number of shares because of the share issue we did.Moving on to next slide, the next slide here, you see again a summary where the currency continues to decrease. I think you have that in all your models as well in there and then organic, minus 4% and then M&A plus 33%.Next slide. I think we usually go over this slide is seeing a little bit on the sales side, how it developed. And of course, if you look for quite some quarters there, very, very good development. But also, if you look on the organic side, we're comparing the quarters here in Q3 of 19% last year, Q4, 18% and Q1, 15%. And those comps were mainly driven by the EMEA and Europe and the HVAC and the situation on energy last year.So we have another quarter to go to flesh that out and then we'll move into more normal comparables, but also moving into the high season for us in Q2 and Q3.Moving on to the next slide. Here, we focus a little bit on the HVAC. You could see the organic growth levels here last year, also again staying same driven by mainly EMEA, 29% up and only, I would say, 8% down. So if you look at more the trend of last couple of years, it's still a very, very good development. And then you see we have another quarter here in Q1 to flesh out with this situation we had last year.Next slide. EBITDA growth continued to be good, 26% and then for the full year, 53%. So a good year and a good quarter and continued to grow profit. And also we'll come back a little bit later on the cash flow with Joel.Here, you see the margin development. We are a seasonal business. The main difference on percentage margin is sales is higher in Q2, Q3. The main area we have is on cooling equipment, of course, also getting strong and strong in heating that will help Q1 and Q4 going forward. But good margin development in the business, good gross margin, stable as we continue to flesh out inventory. So I would say a very good Q4 on the margin side as well.Then, I'll hand over to Joel to go over the P&L.
All right. Thank you, Christopher, and good morning, everyone. As Chris already covered the sales and EBITDA, I will focus here on the rest of the P&L. As communicated in the press release in connection with our Capital Markets Day, our Q4 net profit is impacted by items affecting comparability in both our operational results as well as on the tax line, which are related.The nonrecurring costs in the operational results amounts to SEK 60 million in Q4 and is primarily related to consultancy and advisory costs connected to the tax restructuring in the U.S. And those SEK 60 million is what is making up the difference between EBIT, excluding items affecting comparability and EBIT.Moving onto net financial expenses, which amounted to SEK 117 million in the quarter. And it's worth noting here that it was impacted by positive FX effect of approximately SEK 10 million in the financial net.Taxes in the quarter was positive of SEK 274 million and was impacted by the tax restructuring in the U.S. and the tax impact of items affecting comparability in the operating results. In total, the tax effects associated with these items affected comparability amounted to SEK 434 million.Taxes in the quarter, excluding items affecting comparability amounted to SEK 160 million, corresponding to an effective tax rate of 28.9%. The tax rate was impacted by high nontax deductible transaction expenses and an adjusted assessment of the local loss, tax loss carry-forwards.Net profit, excluding items affecting comparability amounted to SEK 393 million, which is an increase of 6% compared to Q4 in 2022.So moving over to next slide. Despite the increase in net profit, our EPS, as already mentioned by Chris, decreased by 14% to SEK 0.76 in the quarter. And that is, of course, related to a different number of shares as well following the rights issue in March 2023. EPS for the full year amounted to SEK 4.33, which corresponds to an increase of 23%.Next slide. As communicated, we continue to deliver a strong cash flow in Q4 amounting to SEK 1.8 billion, out of which SEK 1.1 billion was driven by release of working capital, which was essentially split 50-50 between lower inventory and seasonally lower AR.Moving over to next slide. Overall, the last 2 quarters has represented a significant pickup in our operational cash flow generation and the operational cash flow for the year amounts to SEK 2.5 billion.Moving over to next slide, net debt. Thanks to the strong cash flow, net debt was reduced by approximately SEK 500 million in the quarter despite our continued high M&A activity. And as a result, net debt to EBITDA, excluding leasing and pensions, decreased to 1.7x from 1.9 in last quarter.And with that, I hand back over to Christopher.
Thanks, Joel. So trying to wrap up the presentation with first a summary of 2023, we started off here. But we're very happy with not just the financial development, but also the business development during the year, entering the U.S., entering new markets, strong margin development, good growth, catching up on the cash flow that we've been talking about for a while.Also looking at what Joel just mentioned on the net debt, strong balance sheet here to continue to support our growth journey going forward. Good acquisition activity and are all good, I would say, development in this acquisition, plus, of course, entering North America that will have as a huge potential for us over the long-term future and a lot of things happening there that supports our business.We did, of course, do a rights issue, but also positive our shareholders oversubscribed by 44%. So very appreciated of our shareholders believing in us and the strategy that we're doing. And then, of course, also some of you were at our Capital Markets Day and [indiscernible] when we talked a little bit more about new financial targets, the vision and the strategy going forward. So we closed out '23 very strong, I would say and a good platform for the future.Then, moving on to the final slide, where we try and talk summing up Q4 and also talk a little bit on the business here going forward as we see it. So a good finishing off, stable on the year, I would say, a quarter as expected, at least from our side. Acquisition continued to perform well. HVAC negative compared to very, very strong Q4 last year.Cash flow coming in at our expectation and also then wrapping up the year with a good cash flow and we expect that to continue. Good activities on the acquisition side, 4 in the quarter and of course 16 on the year. And then, also with the dividend increasing that to our shareholders by 38%. So all in all, I would say, a stable quarter to finish off a very good year for B-Ref.So a little bit looking forward, we focus more in the long term. And we see the trends that we've been talking about all along continued to support. We have a lot of activities on phasing out the F-gases here on 40% cut on the quota levels in EU, 30% in the U.S. We continue to see in Australia and New Zealand. And of course, this is very positive for our whole business model and the OEM side as we move into in the next 5 to 10 years in that segment that will accelerate the pace on that business. And that continues to be very active.The U.S. here more, of course, short-term. We'll through regulation move into new type of HVAC equipment based on more natural refrigerants ATL. So we see that starting to -- talking to OEMs being active already in Q3 and Q4 of this year and that will also have an impact on our business.The U.S. platform continues to build up well. And we have a lot of good initiatives together with the team there and our expertise as they are on the refrigerant side, private label branches and also more active with our partners to have strategic agreements. And then the pipeline continues to look positive.Worth mentioning just short term for Q1 next year, I think I've been fairly clear on this. This is the quarter we continue to have very strong comps in, especially in EMEA, plus 17% organic in 2023. And again, we saw that ebbing out in March of last year. This is very, very high demand due to the energy prices. So we still have 1 quarter left of that.Another thing worth mentioning being a trading business like us, a number of working days matters quite a lot. We do have 2 less days in -- as Easter is moving from March to April. But of course, this will pick up in Q2 and Q3. So there's no effect in the year. But I think it's worth mentioning that it will affect Q1. But of course, on the year, it will be neutral.So that will be our last slide. So now we're open for questions from the audience. So thank you very much for listening. And we're ready for the questions. Thank you.
[Operator Instructions] The next question comes from Adela Dashian from Jefferies. [Operator Instructions]
Yes. If we just start on current trading, it seems like you are experiencing less of an impact from the challenging macroeconomics than many of your industry peers are reporting or expecting to report. Could you give us some additional insights in why -- what's driving this? And if there's any specific market or region where you're expecting maybe a worsening effect going into the high season this year?
Yes. Thanks, Adela. It's a very good question and a very hard question to answer, of course, not paying enough attention to what other companies are experienced. But I think that, of course, we are also affected by a general climate in the business. I think we are a type of company that's more active in segments like replacement, repair, aftermarket service in our business model, being a wholesaler distributor.And of course, also most of our customers, not all of them, but most of them are smaller, midsized installers who doesn't build up inventory. They work in a segment where we work on a daily business. So those trends might be different in other type of industries and companies that we are not affected by.Then, I think in general, we continue to see a stable business in our markets. And then, of course, on top of that, you had long-term trends, that's independent on economy or the outlook will continue to drive.On the OEM side, you have to transition into natural refrigerants on the U.S. now moving in during in -- during the end of the year in phase base HVAC and you cannot buy the old product. So you have a mix of this long term. And of course, the business model that I would say is pretty resilient even in these times.We haven't seen a big difference in the market. It's been, as we said here in Q3 and Q4, fairly stable. And then, of course, we have the comps there coming into also in Q1. But in general, it continues to be pretty stable in our markets.
Got it. And my next 2 questions actually relate to the U.S. market and the first one specifically to the underlying sustainability trends. And let's say there is a change in presidency in the U.S. Do you feel like this could potentially affect your performance there?
No. So I keep -- I've asked my U.S. partners on that. And I think the answer, which is pretty straightforward is that the legislation that we see is already legislated.And whoever is the President, nobody believes that they will agree on changing existing legislation, because that means that both Democrats and Republicans needs to agree on doing it. So I think we feel pretty good about the sustainability of the trends we see because it's already legislated.So we don't expect anything affecting our business on the transition that's happening in this area, because it's already passed and it's already legislated.
Yes, let's see how that -- and then, finally, on the U.S. as well. Would it be possible for you to provide any kind of year-over-year performance in the business there? I understand that's difficult to do. But any type of year-over-year performance would be greatly appreciated.
Yes. So we don't disclose that on our acquisition, right? We have now the U.S. starting on January -- started in January 21 being part of the normal -- or the non-acquisition business of B-Ref as we closed the transaction in January 20, if I have the right date in front of me.But I think what we stated is that the way we saw the business developing was -- the way we saw the year was a stable Q1, a little bit weak in Q2, a stable Q3 and little bit weak in Q4. But overall, if you look at the market data out there, we have, by far, performed better than what we see on shipments, et cetera.But it's also related to that. Of course, we have aligned our inventory situation in there. We see more repair than replacement in the market. But I would still see it as a fairly stable year and good margins in the business. And then I think looking into 2024, I don't think we see any big changes over Q1 or Q2.But of course, there will be a pent-up demand in the U.S. as sales of housing and the new technology transition in towards the end of the year, which will be positive for our business. But in general, I mean, that's how we describe the U.S. business.
All right. And then just a final one for me. Should we expect any additional one-offs related to the tax restructurings in Q1?
No.
The next question comes from Carl Ragnerstam from Nordea.
It's Carl here from Nordea. A couple of questions as well. Firstly, on pricing, now that you see that demand is soft, it's been a little bit soft here for a couple of quarters, what do you hear from the OEMs in terms of the pricing environment? Are they starting to consider lowering prices in order to potentially regain some volumes in maybe both AC as well as there to water sub-segments?
Yes. I think across the board, it's a little bit different if you look at segments and regions, right? You're in the middle of the summer season in the APAC region. And there we haven't seen any changes on the pricing side.In EMEA, of course, you're now into Q4 and Q1, it's a little bit of off-season. And as we are talking now to our customers and suppliers, it looks pretty stable as well. On the heat pump side, I keep saying that it's not a core or a big, big segment for us. We're still doing okay in that segment. So it's not really affecting us so much on the pricing side anyway.So it wouldn't be good information on that side. In general, I would say it continues to look also stable in the EMEA region. And in the U.S., there are announced price increases from all the OEMs for -- kicking in here in towards, I think, the end of Q1. How are they going to stick or how they will develop? I don't know. But all OEMs are increasing prices on the HVAC in the U.S. as we move into end of Q1.
And what magnitude do you see for your business remains in this case?
Yes, I would have just looked at.
But it's low single-digit, I guess.
Yes, mid-single-digits maybe, give or take.
Okay. Very good. And also, I mean, you seemed or you sound a little bit more confident in that your biggest customer Rheem is ready to launch your products already perhaps in Q3. Is that -- did I understood you correctly there?And also, would you say that it would be a full product offering right away? Or do you expect to gradual launch throughout the second half? And the final point, a lot of questions, I guess, on this is in terms of the pricing ambition, what do you hear from your OEM there as well because we have heard several different pricing strategies from competitors on the ATL regulation?
Yes, maybe you know more than me on the last part of the question. But now talking to Rheem, met them last week and they feel very confident on their -- the product setup and if not everybody knows here on the call, but in the U.S. by the end of this year, you're not allowed to manufacture the old products, HVAC products anymore.So all the OEM needs to fully transition into these new types of solution based on more natural refrigerants. And it's a big product change for them. Of course, our comfort with Rheem is that they did most of the product upgrades, started that last year. And they feel very confident on their product manufacturing and development with the ATL.So we expect them to be fairly good in that. I can't talk about OEMs, of course. But on our main supplier Rheem feels stable. And it will be a gradual launch as you move into Q3. Out there, of course, you need to start launching it then because by the end of the year, all product lines will be transitioned into the ATL-based product.So on the pricing side, I don't have factual. It's anything from 10% to 20% uplift on price on these new ATL-based products. And I would hope and assume that you're hearing similar when you have more discussions with different type of OEMs.
Okay. Very clear. And also a little bit on capital allocation. Now that we see working capital coming out nicely here, how should we look at it over the year? I guess it will continue as well over the coming next 12 months here, will work capital releases, I guess and leverage is, what is it 1.5 perhaps ex-leasing pro forma. Will you keep the leverage here? Or will you delever a bit here to lower net financials and/or you exceed cash, keeping it as a stable leverage ratio and you just exceed cash to M&A? Or how should we look at the capital allocation?
Yes. I would say and that we will not change our strategy. It will continue to be like it's been over the last 3 years. We see, of course, we'll have or expect in 2024, a good cash generation seasonality. So in Q3, Q4 will be very good again, the way we see the business. And we'll continue to be active here on the acquisition side.We have a good pipeline, very good track record. And we see good opportunities, of course, in the U.S. as we're building a platform. We still see good opportunities in Europe and APAC. So I wouldn't expect any changes in the capital allocation.I mean, you'll have some changes depending on timing. But our focus will be on continue to improve the net working capital and we'll release inventory, of course, more on Q3 and Q4 and then continue to be active on the acquisition side as we see it as a continued good opportunity for us here going forward.
Okay. That's good. And final one from my side, you said that order intake is improving your parts related to OEM. Is it some way driven by sort of a quarterly volatility? Or do you see -- I think that you said that retail is picking up a bit. But have you seen the real effect from the tightening quotas yet or is it sort of -- does it come with a lag? Or how does it work, you think?
No, I think it comes with a lag, right? I think you have always had some timing. And now we're talking about the OEM segment and mainly Europe where you have this very active transition. Of course, you went through a period with the inflation and the retail side being more cautious and trying to postpone it.Now so that you don't really see big effects, because we're so strong in a lot of industrial segments and other segments that continue to grow nicely. So I think the common relates the retail is picking up their heads again. They need to do the transition. You can't wait for too long.I was hearing here actually on a side note that even U.K. and Sweden, you only have 50% of your stores transitioned. The rest is they're running [indiscernible]. So they now are talking in Sweden. So there is a huge tail ahead of us to transition. And now we haven't seen the effects yet because the quotas of course was cut here. But it's getting tight out there to get that type of gases to run your system.So I expect more to start seeing that as we transition throughout the year on the OEM side. But in general, it continues to be positive.
The next question comes from Karl Bokvist from ABG Sundal Collier.
My first question is partly related to one you were just asked. But just to clarify, the order intake comments and retail activity that -- can you say anything about those kinds of indications for HVAC in general and in regions outside of Europe?
So we don't -- to be clear, when we talk order intake, it's pretty much just the OEM segment. And it's not the full OEM segment. On the HVAC side, it's not a order intake business as the majority of our business is repair, replacement and service. So it's a daily business. And you don't really do orders there in our business model.So just on order intake, we do follow it on our OEM business. And it's not related to the project business on there. So it's a limited part of the business that we're referring. To the rest, we don't have really order intake. It's more a daily business as it a service aftermarket business.
Understood. And then on working capital and inventory, you see a continued normalization or improvement throughout this year. But what can you say about the inventory levels throughout the value chain? Is it mainly in the distribution part of it now where you see things need to normalize further? Or do you still see higher inventory levels among OEMs?
No. I mean, I can't speak for the OEMs, right? The inventory situation we talk about it in the distribution side. So it's sitting on our side of the fence. Of course, we are in Q3 is selling more than we're buying because we're flushing out inventory.We will start buying here from OEMs in Q1 to set up for the season in Q2, Q3. But we'll buy less than we did last year because we're still flushing out inventories. So we still have a normal seasonality. Inventory will go up in Q1 and Q2. And then it will -- but it go up less, if that makes sense and then we'll flush it out even more in Q3 and Q4.So we still have some destocking to do towards the OEM. But we are picking up our purchasing with them from being very low in Q3 and Q4.
Understood. And then just my final one is outside of Heritage, what can you say overall in terms of performance among your acquired units as integration progressed well or and the strategic initiatives you're taking? Do you see that companies continued to perform after you've acquired the most recent ones?
Yes. So they're doing very well. I would state it more. And of course, that's part of the business model on the companies that we buy. There is a very firm pathway on how they will develop over the 3 years, independent of the market.There is -- entering South Korea, just as an example, we have -- we could expand their exclusive product portfolio. They get access to 30%, 40% more products that couldn't even and talked to in the past. We have better pricing. We're also moving into CO2-based products in that. The same on the HVAC side.Now in the U.S. when we're accessing the 2 acquisitions, they'll get access to spare parts they couldn't get before. So with the business model we have, it would take a lot for them to not do well if that doesn't sound too confident. So they are developing well, margin expansion.And then of course, you need in the end also the market of a HVAC side to flush out these costs. But in general, they are moving towards our target because, of course, a lot of the acquisitions we do on the margin side is lower than B-Ref. And the plan is, of course, to get them up there. So they are developing well. And they fit very nicely into our strategic platform, so yes.
The next question comes from Douglas Lindahl from DNB Markets.
I'll have a few ones. On the margins in the quarter, I was curious to hear you said obviously seasonality in there. But the weakness is even including the seasonality bit on the weak side I think. Would you explain that mainly through volumes or anything in the mix that's impacting that? Yes, comment on that will be useful.
Yes. I think you actually -- that's not how we see it. And the reason I think sometimes -- I think it's good you're asking the question, because it would be good to clarify it.And of course, as B-Ref now, based on having a big new platform in the U.S., our seasonality in the margins are changing. So if you look at it and compare is that our U.S. business has even higher seasonality maybe than the rest of it, the Europe, because it's very much focused on HVAC, right?So their Q2 and Q3, if you look at the margins they had, I might be right or wrong in my head [indiscernible]. But in Q2, there was 15% and 13.5%. And then they're running around 10% in Q4 and Q1. So you will have more seasonality in the numbers. So when we adjust for this, we didn't see any weakness in Q4 at all. So the U.S. will drive bigger swings between Q2, Q3 and Q4 related to the U.S.
Okay. Understood. So that was, I guess, underestimated then externally. But that is for Q2? [Indiscernible].
Yes, that's a good question, because as B-Ref is changing, the Q2 and Q3 would be on the margin side affected more positively on Q2 and Q3. And then Q4 and Q1 is more -- you won't get that boost from the U.S. It's more in line with the rest.
Okay. Interesting. And just you already touched upon M&A and I believe I can sort of sense your answer to the question. But it would just be interesting to hear about your pipeline, how you're thinking with regards to that geographically product categories et cetera.
Yes. So now we're playing in 3 parts of the world in the way we define our business EMEA, Africa, APAC and the U.S. We do have a pipeline in all those 3 parts. It is within U.S., just trying to explain you a little bit.Of course, HVAC, but we're also focusing in the U.S. on refrigeration. So we also would expect, as we continue to acquisition in the U.S., we'll build up also a stronger position on the refrigeration side. So it's in the U.S. It's refrigeration HVAC. In Europe, it's more focused on the HVAC side. As you know, on the refrigeration, we are already extremely strong. And then, in APAC, it's both refrigeration and HVAC.So it's in those areas that -- so if you've seen -- if you take out Heritage from 2023, it will be that type of acquisition through 2024 as well. So no big changes in the acquisition pipeline versus what you see in the last couple of years.
The next question comes from Daniel Johansson from Pantechnicon Advisors LLP.
I was wondering a little bit about the working capital. The benefit that you saw in the quarter of SEK 1,159 million, how much of that came from Heritage?
We won't disclose that.
Okay. But was that a significant part?
No, it was across the board. There's nothing -- in general, there's nothing sticking out. I think a good assumption if you want to do a mathematical exercise is just looking at the size of the business and seasonality.And it follows it's going to be similar. If you look at it, it's, of course, mainly EMEA and the U.S. as APAC is more into the high season. And they'll flush out inventory in Q2, Q3 and the opposite. So size of the business is usually a good indication on how it plays out.
Okay. And then, given the comments you made on seasonality and Heritage being a little bit different relative to rest of Beijer so to say. How should we think about seasonality for '24 as a whole now? Because I guess, last year was pretty evenly distributed profit-wise between the first half and the second half. Is that something that's not going to be the case in this year?
No. I think we talk seasonality, of course, mainly Q2 and Q3. And in general, we talk when it's getting hot. So I mean Q2 is back-end-loaded and Q1 is -- Q3 is front-end-loaded, if you understand what I say. Well, but in Q4 and Q1, I mean, most of what we sell is heating and your maintenance service and repair and other things.But I think if you look at -- if you want to cut the year in Q1, Q2 and Q3 and Q4, I would assume I think 2023, as Heritage came in, of course, January 20, if you just adjust for that, the seasonality should be similar in 2024 as you had in '23.Then, you can always -- if you really want to get into the weeds, Q2 and Q3 can always switch, which is the highest quarter. And that's mostly related on weather and heat waves. If it comes early, Q2 is higher. If it comes later, Q3 is higher. So you have some seasonality between Q2 and Q3, depending on how the heating waves play out.
Okay. And lastly, I happen to notice that if I look at Page 18 in the quarterly report, there was a little bit change in the acquisition of -- how you distributed the acquisition value, so to say, on Heritage, where goodwill went up a little bit relative to the previous quarter. What is this relating to?
This is Joel. Yes, we did some revision of the PPA related to adjusting inventory values according to guidelines within B-Ref Group. So final adjustments to the obsolescence on the inventory and so on.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Thank you all. Thanks for good questions. And also wrapping up, I think, an interesting year and look forward to the journey in 2024, together with you. So have a great day and thanks for calling in. Thank you very much.