Bufab AB (publ)
STO:BUFAB

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Bufab AB (publ)
STO:BUFAB
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Price: 389 SEK 1.25% Market Closed
Market Cap: 14.7B SEK
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Earnings Call Transcript

Earnings Call Transcript
2019-Q1

from 0
J
Jörgen Rosengren
Chief Executive Officer

Okay. Good morning, everybody. This is Jörgen Rosengren. I'm the CEO of Bufab, and I welcome all of you to this conference call introducing the first quarter 2019 results for -- from Bufab. I am here with Bufab's CFO, Marcus Andersson, and we will be going through our PowerPoint presentation, which is available on our extranet under the Investors section. And throughout this call, we will be referring to the page numbers in that PowerPoint presentation. And I'm going to start off -- I'll start off with Page 2. So to summarize the first quarter of 2019 in a few basic points, we can say that firstly, we had a very continued -- very good growth, in fact, a healthy growth as we have had now for quite some time of 15%. The order intake was slightly less than the net sales, but in line with it. And this growth of 15% consisted of 16% -- 6% acquired business, 6% organic growth and a contribution of 3% from currency FX. The organic growth in turn was the result of a stable demand in the quarter relative to the first quarter of last year, which was also a good quarter. And on top of that, we increased our market share significantly. So 6% acquired, 6% organic and 3% currency, that's a total of 15% growth. Our operating profit also increased by 13%, so not quite but almost the same rate as the net sales at the top line indicating a stable margin. Within the P&L, there were some movements on the individual lines. We had a lower gross margin mainly due to our segment Sweden. But we also had lower percentage of operating expenses, thus, keeping the net margin, the operating margin stable. We had overall a very good performance in our segment, International, basically on all metrics. But as I mentioned just before, our operating segment Sweden was burdened mainly by a low gross margin. We'll get back to details on that. But in summary, the quarter was our best ever, and it topped last year's first quarter, which also was an all-time high, and we had in this quarter our best-ever net sales but also our best-ever operating profit and net profit in a single quarter. And we are using this [ area of ] development to continue to invest in our strategy to become the leading player in the world in this field and the strategy we call Leadership 2020. And with that, I would like to turn over to our CFO, Marcus Andersson, who would be taking you through the details of our financial results starting on Page 2.

M
Marcus Andersson
Chief Financial Officer

Thank you very much, Jörgen. If we start by going through the financial highlights for the group on Page 3, you can see that the order intake was up 15% or SEK 140 million compared to the comparable quarter. And then total net sales was up SEK 146 million, also 15%, and as Jörgen said, out of this 15%, 6% was organic. And organic growth was driven mainly by a higher underlying demand and increased market shares mainly from segment International. Gross profit, as you can see, the gross profit margin was down with 1.3 percentage point. The reason for this is mainly due to the negative development effect in Sweden, which we will talk about in a moment. But on the other hand, we're having good development when it comes to operating expenses. So due to a good operational leverage, the negative effect of the EBITA margin was not fully eliminated but almost, and all in all, the operational -- the operating profit rise with 13% and also by SEK 30 million, meaning SEK 119 million in EBITA, which is the best quarterly results that we have seen ever. So another all-time high, you can say. If we take a look at the EBITA bridge, you can see that currency has contributed with SEK 1 million during the quarter. Volumes was SEK 15 million. Price/cost/mix/other, minus SEK 7 million and acquisition contributed SEK 3 million. If we turn to Page 4, we can now see that we have seen a solid growth for 23 consecutive quarters. Also good growth in the last quarter, as said, and it should be mentioned that it is not only growth, it is also organic growth that we have seen for those 23 consecutive quarters. If you take a look on the right graph, you can see that we have had growth, as said, for a long time. And when we -- if you look -- take a look at the longer 12-month EBITA growth, you can see that we have had a good development now for 15 consecutive quarters despite a slight dip in Q2 and Q3 2017 that was due to increased raw material prices. But since then, there's a good development for the group as a whole. If we turn to Page 5 and take a look at segment International, you can see that segment International's order intake increased to 12% or SEK 78 million. Net sales increase is 13% or SEK 83 million and out of those 13%, 8% was organic. And this organic growth was mainly driven by higher underlying demand and increased market shares. As you will see on the next page, the development of the gross profit was good in the quarter as well compared to the comparable quarter. The gross margin is on a high level for the segment. And that is mainly driven by price increases to customers and a strong euro impact. Also, we had developments when it comes to operational expenses due to operational leverage. Operating expenses percentage gains in comparison with net sales were down with almost 0.6 percentage points, meaning a good development on the EBITA margin, which was up with 0.7 percentage points to 11.7%, meaning an operating EBITA of SEK 85 million, an increase with impressive 20%.If we take a look at the EBITA bridge on the lower right corner, you see that currency is contributing with SEK 5 million compared to last year. Volumes was plus SEK 16 million, price/cost/mix/other was minus SEK 7 million and acquisitions, there were none, so to say. If we turn to Page 6, you can see now that segment International have shown not only growth but also good growth the last 24 consecutive quarters, still on a pretty high level even though we had strong comparable months in Q1 2018. If you take a look on the right graph, you also see that segment International has had a really good development profit-wise or EBITA-wise during the last 7 consecutive quarters driven by an increased gross margin, good cost control and also due to some positive currency effect when it comes to a strong euro. If we turn to Page 7 and take a look at segment Sweden, we can see that segment Sweden's order intake increased with 21% or SEK 62 million. Net sales increased with 21% or SEK 63 million. Out of those 21%, 1% was organic and 20% was due to acquisition of Rudhäll. The underlying demand and the market share it deems to be unchanged compared to the comparable quarter. The gross margin is down quite much, 4.6 percentage points, and the reason for that is mainly the weak Swedish krona, purchase prices and also due to acquisition of Rudhäll. So about 50% of the decrease in gross margin is due to the acquisition of Rudhäll. And Rudhäll, I've mentioned in earlier presentations, has a different mix when it comes to the gross margin, so that explains about 2.3 percentage points of the total decrease. On the other hand, as you can see, the cost development in the segment was positive leading to good operational leverage, but, all in all, if you take a look at the operating profit or the EBITA margin, it was down with about 3.5 percentage points, meaning a decrease with 10% compared to the comparable quarter and the segment landing on an EBITA of SEK 38 million. And of course, this is a disappointing result for the segment as a whole. If we take a look on the right, lower right corner at the bridge, we can see that currency FX had -- the EBITA was minus SEK 4 million; volumes, 0; price/cost/mix/other, minus SEK 3 million; and acquisitions and -- with acquisitions, it is Rudhäll, which is up SEK 3 million. If we take a look at Page 8, we can now see that the segment Swedish have shown growth for 12 consecutive quarters. As you can see, the organic growth last 2 quarters are pretty much lower than the early quarters, but sales level are still on a high level, so to say. If we take a look at the right graph, you can also see that the growth is going in the right direction but on the EBITA side, it has been somewhat a bumpy ride, you can say, which is mainly driven by price increase -- sorry, increased pressure prices and of course a weak Swedish krona compared to comparable quarters and also due to the mix in Rudhäll, so to say. That was the presentation of the financial figures for the group and the 2 segments. And I leave the word to Jörgen Rosengren to talk about Page 9.

J
Jörgen Rosengren
Chief Executive Officer

Thank you, Marcus. So let's talk a moment about acquisitions. We researched our acquisition strategy in 2014. Bufab has had a long history of acquisitions. We made a little more than 1 acquisition a year for the last 42 years or something. But in last 4, 5 years, we've made 7 acquisitions. And we're happy to be able to say that they have all developed in a good way. And they were all contributing firstly, to the financial results, and secondly, also to the relevance of Bufab for our customers and our suppliers thereby making us a stronger company. Our latest acquisition, which is our last one, is the company Rudhäll Group, which you can see on Page 9 on the bottom left corner. We made that acquisition in October, and it's then the only acquisition that is now contributing year-on-year to our financial development. We believe that also that, that company will be a good change for us going forward and not the least in terms of widening our relevance to our customers. From Page 10 then, we have a summary of the quarter results and the EBITA effects. And we have explained before the various segments, but just to summarize for the group, we are then seeing an effect of -- starting with SEK 106 million of EBITA in the first quarter of 2018, which was, in itself, by a good margin, our best-ever quarter at the time. And this year, we have then enjoyed a slight positive effect of currencies or plus SEK 1 million. There's a split, however, between strong positive effect in International and strong negative one in Sweden. As you know, the Swedish krona has developed quite negatively over the past year and also into this year. However, we've had a good effect of organic growth and, therefore, good contribution to our profit from volume. And that effect is much larger than the negative effect of price/cost/mix/other, which includes operation costs, meaning we have had also a good operational leverage in our growth. And finally, the acquisition of Rudhäll contributed SEK 3 million to the EBITA, which does increase from SEK 106 million to SEK 119 million in the quarter, which as mentioned, is another all-time high. So to summarize the quarter and maybe speak a bit about the outlook as well, we can turn to Page 11. On it, we can see that we see the quarter as a very good one. First, we want to mention that we have continued in the quarter, as before, to execute on our strategy, Leadership 2020, and continue to invest also significantly in various areas of it. We saw a strong growth in the quarter, partly because demand continued to in a relatively stable way, but also because we took market share and also because we had a good effect from our acquisitions. Our gross margin was weaker in the quarter due to these effects that we spoke about in segment Sweden, but the percentage of operating cost was lower. We had good leverage and thereby, the good growth resulted in record results in International and for the group as a whole. For the outlook then, we can see that the raw material prices leveled off towards the end of 2018. Some had risen further, some have gone down, but we see also, generally speaking, a better purchasing environment now than we did last year. And that leads us to our focus for this year, which is in the short term, of course, the management cycle, meaning that we have to be prepared for a shift in demand and not in decreases in demand, but we also have to be prepared to continue to service our customers if there is a surge in demand, and that takes up some effort. But we think that we'll be able to manage it well in 2019 as we have in the 2 previous years. We want to continue to increase share, that's a big value driver for us. We have done so for the past many years by now, and we think we can continue to do so and certainly, that's our mission also in 2019. And of course, looking at one of the good [ response ] from this report, we want to improve the gross margin from its current level and mainly by price increases but also by purchasing savings, which we deem now are easier to achieve now than they were last year. And that's also certainly is our mission. Long term, we want to continue to invest in our Leadership 2020 initiatives and -- because we see good preliminary effects from them and believe that we can have good effects with them also going forward. And always, of course, we have to put quality and our customers first and always also look for opportunities to strengthen Bufab in different ways, for instance, by further value-creating acquisitions. Looking at the outside world, we can see that there is still a lot of uncertainty and if anything, the macro indicators, I think, have turned down in the first quarter of 2019. Certainly, if you look at the PMI indices around in Europe and especially, in Continental Europe, we see a very negative trend there. But on the other hand, we have strong confidence in our ability to take market share, and we have also not seen dramatic decrease certainly not in our customer's demand. And therefore, we retain a lot of optimism about the remainder of the year. So a good quarter, in fact, this is our best ever and a good outlook also, we believe, for the rest of the year. And with that, that concludes our formal presentation. And now if you should happen to have any questions, the operator will instruct you for -- on how to ask a question. So operator, please.

Operator

[Operator Instructions] There are no questions at this time. Please continue.

J
Jörgen Rosengren
Chief Executive Officer

Okay. Since there are no questions, then we'll conclude this call. And thank you for your interest this morning in Bufab's First Quarter Results 2019. Have a great day. Thank you. Goodbye.

Operator

That does conclude our conference for today. Thank you for participating. You may all disconnect.