Bufab AB (publ)
STO:BUFAB
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
269.9965
455
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good day, and thank you for standing by. Welcome to the Bufab Q3 2021 Earnings Release Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, CEO of Bufab, Johan Lindqvist. Please go ahead.
Thank you, operator. Good morning, everybody, and welcome to the presentation of Bufab's Q3 report. My name is Johan Lindqvist. I'm the CEO of Bufab. I am in the call together with our CFO, Marcus Söderberg. The presentation we will be going through today can be found on bufab.com in the Investor pages. So let's start from Page 1 then. The good demand that we saw during the first half of the year continued in the third quarter. Bufab delivered a high organic growth together with strong earnings despite the continued very challenging operational situation due to the issues that we have with the supply chain. This high demand we see across all the segments. And the bullet points, organic growth up 20%, good underlying demand and improved market shares. But we will also see -- we'll see that we had a weak comparison quarter last year, 2020, of course. We have a good order intake, so no sign of slowdown yet. And we still in excess of phase is good, of course. Operationally, very challenging quarter, of course, because we have this strained supply chain, an increase of raw materials. On top of that, we have the freight situation from Far East mainly and also the really high prices for containers. But despite this, we have a strong improvement of EBITA, plus 16% and also net profit with plus 24%. During the quarter, we have made an acquisition of Component Solutions Group, but also just in the beginning of October, we also had 2 other acquisitions, Jenny | Waltle in Austria and also Tilka Trading in Sweden. We also announced in the beginning of Q3, Staffan Pehrson will be the new CEO of Bufab, and he will start in February 22. Let's go on to Page 2, and then I'll leave the word to Marcus.
Thank you very much, Johan. And as Johan said, we turn to Page #2, and we'll talk a bit about the financial highlights for the group. As you can see, the strong demand that we saw during the first half year of 2021 continued into the third quarter as well. Net sales amounted to strong SEK 1.4 billion, meaning a total growth of approximately 21%. The organic growth was also strong, about 20%. But of course, this should be compared to a quite weak comparative quarter 2020. But still down the line, strong underlying demand that we saw during the first half year continued into the third quarter. And on top of this, we also continue to take market shares. The gross margin, as you can see, rose to a solid 28.4%. The high gross margin relative to the comparison quarter is mainly attributable to higher volumes and that we have successfully so far passed on increased costs for raw materials and freight that Johan talked about to our customers. And on top of this, there is also a slight positive mix affecting some of the -- product mix affecting some of the segments in the quarter. If we look at the operating expenses, as you can see, it increased to -- in comparison to net sales, it increased to 16.9%. The increased proportion of operating expenses is mainly coming from segment North as they remeasured its provision for additional purchase consideration in connection to the acquisition of HT BENDIX, and that had -- that increased cost with SEK 15 million in the quarter. And on top of that, in segment Other, we recorded SEK 5 million in acquisition costs in relationship to the acquisition of Component Solutions Group that Johan also mentioned. So if we adjust for this, the share of operating expenses amounted to approximately 15.5%, which is a very low figure from a historical perspective. So really nice to see that the good cost control that we have seen during the last couple of quarters continues even into the third quarter. All in all, this summarizes to an operating profit or EBITA of SEK 164 million, corresponding to a margin of 11.5%. But if we adjust for those acquisition-related costs, so to say, and the remeasured additional purchase consideration, the operating profit increased to strong SEK 182 million, an operating margin of approximately 12.8%. With that said, we turn to Page #3. You can see some growth about the quarterly net sales growth and net sales and EBITDA, along the 12 months development. As you can see in the left graph, we are recording, as I said earlier, a strong organic growth in the quarter, of course, partly driven by a weak comparison quarter, but still strong underlying demand continue into the third quarter. It's really nice to see strong organic growth. If we take a look on the right graph, as you can see, steady blue dotted line showing the net sales development along in 12 month's net sales development, so before continue growing and showing a good track record, so to say. What's even more nice to see is that this big leap upwards in the gray-dotted line showing the EBITDA along 12 months is still continuing in the right direction, so to say. And that is, of course, the result of hard work, of course. The strong result is a combination really of strong growth, good operational leverage, high flexibility on the cost side, given the fact that we are seeing high volumes right now. And on top of that, also a successfully implemented cost savings program during 2020 that has shown effect during the last quarters of 2021 as well. If we turn to Page #4, I will just quickly go through the segment figures for the group. We start with segment North. As you can see, segment North also showed good growth in the quarter, 16% up, approximately 17% came from organic growth. The strong demand in the quarter comes from more or less all the company, but it's especially strong in the Danish operating business, as you can say, together with higher volumes from the manufacturing companies compared to the comparative quarter of 2020. As you can see, also strong gross profit development mainly due to a good work with forcing price increases on raw material prices and freight over to customers, but also due to higher underlying volumes, mainly also here then in the manufacturing units. Higher costs due to revaluation of earnouts, approximately SEK 50 million affecting the quarter in North, as said, connected HT BENDIX. And excluded for those the underlying cost development, so to say, is really good, still very good cost control and costs that are on a very low level. And on top of this, of course, the cost in the comparison quarter was extremely or exceptionally low, you can say. Going forward, the focus in segment North will be to continue growing and to handling the strained supply chain that Johan talked about as well that is affecting more or less all of the company throughout the segment. If we turn to Page #5, have a look at segment West. Also segment West grew quite much in the quarter, approximately 15% in total, 17% organic. And as you can see here, segment West had a strong development, not only sales wise, but also the order intake in the quarter was very strong as well. However, the gross margin came in at a lower level compared to previous year. And the main reason for that is due to some price pressure, not fully being able to offset high raw material prices and freight costs with price increases to customers and a somewhat unfavorable product mix, so to say. Cost level. On the other hand, even though the volumes are quite up, so to say, the operating expenses in comparison to net sales remained at a steady and historically quite low level, you have to say. All in all, the EBITDA increased with approximately 4% corresponding to an operating profit margin of 8.5%. Going forward, of course, the focus in the segment West will be on the price adjustment, moving over the increased costs to customers, so to say. And also here, which is quite obviously handling the strained supply chain and also to continue to recruit to ensure future growth, so to say. We turn to Page #6 and have a look at segment East. Even East had a good development in the quarter growth 18%, all of it organic. And top of that an order intake that was slightly over net sales. So outlook is good even here. Gross profit, however, was lower, mainly due to price pressure from a couple of larger customers in the segment. Same comment in the second quarter. Work is ongoing, of course, and one of the focus areas will be to continue focusing on price increases and move those over to customers, so to say. Higher costs in the quarter, mainly due to continued investments in future growth. But all in all, a solid result. EBITDA increased 2% and EBITDA margin ended up at 15.6%. Last segment, segment U.K. and North America. Here we can see segment U.K. and North America had a really strong development in the quarter. And this goes both with operations or for the companies in the North American markets, together with the ones in the U.K. market, both ABS and Apex, which are 2 major companies in this segment had a really strong development and saw a really strong demand in the quarter compared to the comparison quarter, so to say. This also had a good effect on the gross margin in terms of higher volumes, but also they have managed in a good way to push increased price increases on raw material and freight over to customer services. So a combination of higher volumes and increased prices to customers. As you can see also, good leverage. If you look at the operating expenses in percent of net sales, good leverage -- operational leverage, meaning a really strong development of the operating profit in the quarter. It increased with a very solid 49% or from SEK 42 million to SEK 62 million. The operating profit in the quarter was 16.9%, which is a really strong operating margin that the segment U.K. and North America shows in the quarter. Going forward, also here, focused on handling strained supply chain and to take market share and also to continue to recruit -- to ensure future growth as well. If we turn to Page 8, we'll have a quick look on the cash flow track record together with the development of the net debt to EBITDA. If we start with cash flow, of course, given the fact that we have been growing quite much organically and also in total growth the last 3 quarters that you can see the development of the operational cash flow is not really that strong. But however, the underlying EBITDA development is very strong. And the reason for this is, of course, that the strong organic growth drives working capital increases. We have seen it in form of increased accounts receivables during the first half of 2021 and during the last couple of quarters -- or last 2 quarters also through increased inventory levels. And the inventory levels were, you need to mention, were unusually low at the end of '20 and in the beginning of '21. So there is a normalization ongoing, you can say. And that normalization was also quite welcomed because the high demand that we see. If we take a look on the right graph showing net debt to EBITDA. As you have seen in the last couple of quarters, we have been able to push down the multiple of net debt to EBITDA from slightly higher levels of the 2 acquisitions of HT BENDIX and ABS back in late 2019, and we are now down below the long term target in terms of multiples, so to say. We were up slightly in the quarter, and that is, of course, a result of the acquisition of CSG or Component Solutions Group. So strong or strengthened balance sheet over the last couple of quarters. And this, of course, supports us and gives room for a strong execution also going forward when it comes to our acquisition strategy. With that said, just a quick look on Page #9, which shows the group's EBITDA bridge. If we start with the quarterly figure from last year SEK 142 million in the quarter. Currencies had a negative impact of minus SEK 3 million. Volumes increased EBITDA with approximately SEK 55 million; cost price mix and other, minus SEK 12 million and acquisitions minus SEK 18 million, and most of that is, of course, then reevaluated earn-outs or additional consideration. So all in all, SEK 164 million. And if we look at the same bridge, but from the perspective of how the different segments are contributing to the increased results, you can see that North added SEK 5 million, West added SEK 1 million, East added SEK 1 million; UK/North America, very strong contribution, SEK 20 million; and segment Other had a negative impact of minus SEK 5 million, and that is, of course, the acquisition cost that was recorded in the quarter for CSG acquisition. So with that said, I think you can turn over to Page #10, and Johan will talk a bit about our acquisitions.
Yes. And during that quarter 3 then we made the acquisition of Component Solutions Group. Company located in the U.S. in Dayton, Ohio. It's a company that we have been in contact since 2013. So it was a long process. That's quite nominal, to be honest if we have that long process when we acquire companies. The turnover is close to SEK 300 million. And we see this is a good step for us in U.S. and have also -- will give us a better footprint there, of course, together with ABS that we acquired in 2019. We also, as mentioned, made 2 acquisitions just after the Q3 in beginning of October. It was Jenny | Waltle, a company in Austria, turnover of SEK 200 million and mainly working with the components in aluminum, that will be also adding on to us a new product segment that we can definitely increase the business in all other companies in the group. And the last one is Tilka Trading, smaller trading company in Sweden. Pretty much looked like as, let's say, a standard book of company trading C-parts to the industry. And we think it is really a solid company with a good track record, well managed since many, many years. I think we, together with the company, the Bufab Group can develop that sales heavily, I think, in the next coming years. It's a great contribution to the Bufab Group, I think, all the 3. I will also mention that we have a really good pipeline for acquisitions. So we think that we can be able to do more of this in the future. That is also one of our partner strategy. And then to Page 11, a summary. The third quarter also operationally is challenging, but we have strong sales and also a strong profit. Demand improvements in all segments and increased market share is also really nice to see. But we still have this continuous supply chain disruptions and increase in components and freight costs together with this selling situation regarding containers and electricity and so on. But I think if we look forward a little bit, we see good demand. We have a strong order intake for Q4, and that's also, of course, very positive. We will still fight with the raw material increase and shipping costs and so on and put this cost also to our customers because that's necessary. And we will also try really hard to be at that level in the operation margin that we outlay. Priorities going forward then. Recruitment, starting now after the pandemic, you can say, because we need to get more people into the group to continue the growth and also all other projects that we run. We will continue to find solutions for our customers in supply chain. We will keep a steady gross margin, as mentioned before. But we also see that we need to increase the productivity work because we see higher cost in the future, but we are also sure that we can find a lot of productivity within the organization still. All in all, we're very proud that we, despite the challenging environment, have succeeded to maintaining supplies to our customers in a favorable manner. I want to sincerely thank all of our 1400 solutionists for their incredible focus and flexibility that they have demonstrated during the year. A hard year and hard work, but we have made a really good job, I think. So I think that was all from us. And I think, the operator will take over for questions.
[Operator Instructions] And your first question comes from the line of Walter [indiscernible].
Can you hear me now?
Yes.
Good. We have a very positive response from customers regarding sustainability, Johan. So it would be great to hear about the work we are doing here to follow the long-term plan that we have.
Hello, Walter, and good morning, it's Marcus speaking here. Just to touch upon that, of course, just as you said, sustainability is a highly prioritized area with Bufab, I think by the other companies right now. And we are working with this long term. And as you might have seen, we signed up to those science-based target initiatives, 6 months back or so. And the work with that is highly ongoing. So we hope to release some news about that in not the too far time from now. Of course, the work with sustainability, as I said, is ongoing. From a Bufab perspective, the main big part areas is, of course, our suppliers. So that is where we put most of our attention to, and that's where we can make the most difference, so to say. So it's a work that is ongoing, and it will be reflected more and more in our communication going forward. I'm pretty sure about that.
Maybe I can add also that Carina Lööf, our Sourcing Director, has been appointed a sustainability inventory also responsible for that work in the future. And we have also strengthened the organization regarding sustainability with more people there because it's definitely a focus area for us going forward.
And your next question comes from the line of Herman Eriksson.
So Herman here from Danske Bank. So I have two questions. Just first, regarding your latest two acquisitions, in the press releases you are not providing as much information as you have done for your previous acquisition. So I was just wondering is there any specific reason for this? And also, can you provide any information regarding the margins in these acquired companies and the price you paid for them?
Yes. Hello, Herman. That's right. We haven't commented on that in the last 2 press releases. And the main reason for that is the size of the company, of course. They are not that big, so to say, so that we felt that we needed to go with that information, so to say. When it comes to multiples, those latest 2 acquisitions is not so that they stand out in any ways in comparison to other acquisitions that we have made, so to say, in terms of pricing, or such. They are in line with our overall acquisition strategy. That's basically what you can say about that. Then you had a second question, which I didn't help to note down. Yes, it was margin. Yes, sorry, Yes. When it comes to margin, it's basically like that as well. They are somewhat in the mid, you can say. From a Bufab perspective, they do not really stand out in either direction, so to say. So it's a standard acquisition from a perspective, you can say. And that also goes with the business for those companies as such. There are very Bufab-alike companies, who will fit good into the group, so to say. So solid acquisitions in accordance with our growth strategy. That's a summary, I guess.
Yes, perfect. And then just on the UK/North America business, it's continued to be performing very well. Is it still mainly the RV segment in North America that is driving the growth? Or are you seeing from other segments as well?
It's a combination, you can say. We have a comment on this also in the report, if I remember correctly. If we look at the North American markets for -- in the first place, talking about American Bolton Screw, of course, it's still the RMB industry that is still going very strong, and that industry has been strong for approximately a year or so now. And as you see, the order intake is also strong. So there are good outlooks as well, so to say. On top of that, we have seen very strong development also in the U.K. market and especially in our older acquisition, Apex, who is more into the stainless C-parts business, you can say. And the demand for those kind of items has been higher now and that is also reflected in the quarter.
[Operator Instructions] And the next question comes from the line of [indiscernible].
[indiscernible] from DNB Markets. Just a quick one on given the constraints you see in the supply chain, do you also see clients trying to prebuy a lot driving organic growth? Or do you see that the delivery packing is quite normal for you?
No, I don't think. To be honest, I don't think prebuying so easy today because it's a lot of, let's say, a headache to get the parts to the customer now. So it's the long lead times -- and yes, a lot of difficulties you can say. So I don't think it's really possible to buy ahead, so to say. So I think it's a normal way to handle it from the customer side. And I mean on that, it is long lead time. So they need to be in time with order sort of say if you should have any deliveries also in the next year, I think. So no, we don't see that in that way.
And your next question comes from the line of Robert Redin.
Two questions, if I may. I mean on the -- I mean, the development was a bit different maybe between the business areas. But as a group, you've passed along the higher procurement cost and freight costs and so on to customers because gross margins were up a bit Q-over-Q year-over-year. But in the outlook there, you say something about the supply chain disruptions and so on, like they will remain and put pressure on operating margins in Q4. So is there a bigger pressure in Q4? Or how should we read that comment?
Hello, Robert. Marcus here. I think that the outlook comments should be seen in the following perspective that the severe situation that has been ongoing on the market in terms of strained supply chain and freight issues during the last couple of quarters, that will continue going forward. So far, Bufab has been successful through very hard work, very, very hard work, you have to say, to offset those negative impacts by pushing the costs over to customers. That challenge, so to say, has not ended. It will continue going forward as well. We aim to do exactly the same work that we have done so far, offsetting the negative impact with price increases, so to say, but it's still a challenge, so to say. I think you should see it from that perspective, that we are all set doing what we have done, keeping the gross margin steady, but there is a challenge. We don't really know what will happen going forward.
All right. But would you say the challenge is the same as it has been?
Yes. Yes, of course, I would say definitely that the challenge is more or less unchanged compared to, let's say, the second quarter or so.
Okay. Perfect. Then on acquisitions. You've done quite a bit now lately, but you still had the comment there about the good M&A pipeline. So I would have imagined that when you've done 3 acquisitions in a fairly short time period, the pipeline could be a bit worse than normal. But what do you say there? Do you feel that the pipeline is building, nonetheless? I guess if acquisitions come after 8 years of discussions, I guess, it could be the case that the pipeline grows over time?
Yes, Johan here. And I mean that the thing the acquisition is, of course, a little bit, how to say, it's a long-term work. I think, as I said, this company we've acquired in U.S. was -- my first call with them was 2013. And the other one was, I think we started 2014 with one of them and 2016 with the other one. With many years of discussions, maybe not every day, but anyway. So we need to have a good pipeline. And I think we have a strong one. Then that this 3 happens in social time. It's mainly maybe a coincidence, but I think we have a really strong pipeline compared to a year or 2 back.
And of course, this is a result as you are all very familiar with, Robert, we built many of the acquisition cases based on long-term relations, so to say. And now given the fact that we are kind of post-COVID, so to say, travel relation building and things like that are a bit more easy now compared to, let's say, a year ago or so. So from that perspective, it's possible to meet and discuss, negotiate and build relations. So just to add on top what you just said.
And there are currently no further questions at this time.
Okay. Then we say thank you here from Johan Lindqvist and also Marcus.
Thank you.
Thanks very much. Bye-bye.
Nice day, bye.
That does conclude the conference for today. Thank you for participating. You may all disconnect and speakers, please standby.