Systemair AB
STO:SYSR
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
Abbvie Inc
NYSE:ABBV
|
Biotechnology
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Realty Income Corp
NYSE:O
|
Real Estate
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
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.
This note will be permanently deleted.
Systemair AB
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Systemair's Q1 Teleconference. [Operator Instructions] And I would now like to hand the conference over to your speaker today, Roland Kasper. Please go ahead.
Good afternoon, and warm welcome to the Q1 report of Systemair.
Good morning, Anders Ulff, here also, CFO of Systemair. First of all, I would like to say we have a new web page, and where you can find a presentation here that we will go through. So you have to go in under Investor, and I think in the first page, you see 5 lines down or so you can press the presentation, it can be downloaded here. So if you press that, you will have the presentation available also. Then I lean over to Roland here.
So hello, welcome again. So if you just proceed for first slide. Systemair, as you know, established in 1974 and in our last fiscal year with turnover of annually EUR 730 million. We are on stock exchange market since October 2007. And today, we have our own sales companies in 50 countries. We have an average number of [indiscernible] product items of more than 1,400 in our main distribution centers. Today, we have on an average little more than 5,500 employees within the Systemair group. And more gladly that we have more than 20,300 customers. All in all, within this organization, we export consequently to more than 100 countries around the world.Next slide. Coming to net sales quarter 1. In the quarter 1 in this year, we achieved a net sales of SEK 2.013 billion compared to SEK 1.8 billion in the same quarter the year before. This corresponds to a growth of 9.6% with organic 5.4%.Changing to the next slide, where I'll break this down. Organic, especially good organic growth in Western Europe and Eastern Europe. It contributed 5.4%. Acquisitions, which was mainly affected by the acquisition of Syneco in Switzerland and a divestment of our company in Reftec in Norway contributed with 0.4%. And then we have the strength in euro, the currency effects that contributes [indiscernible] this time with 3.8%, which gives us the total of 9.6%.Slide #5, next slide. The operating profit in quarter 1. The gross margin in this quarter decreased to 32.3% versus 33% last year. The lower gross margin is partly due to the major project for which a loss was recognized in the fourth quarter and for which the final invoicing took place in this quarter. We had a slight restructuring within Menerga and also an impact by the move of Frivent’s production from Austria to our existing facilities in Maribor, Slovenia, which amounted to SEK 6.3 million. The sales and admin expenses for the quarter increased 8.4% for comparable units. A provision for doubtful receivable for Middle East operations amounted to SEK 4.9 million in the quarter. So the operating profit for the first quarter thereby amounted to SEK 144.9 million compared to SEK 132.9 million, which corresponds to 7.2% operating profit for the first quarter in 2018, '19 for Systemair.Next slide, Slide #6, profit after tax in quarter 1. For the first quarter, the net financial items amounted to SEK 35.4 million. Currency effects on our long-term receivables, loans and bank amounted to SEK 28.7 million. This relates mainly from our long-term liabilities for Swedish subsidiaries in the Europe currency, but also from the weakened Turkish lira during the past couple of weeks and months. The interest expense for the quarter totaled SEK 6.9 million and a tax for the quarter amounted to SEK 37.5 million or -- which corresponds to 34.2% attributable to non-capitalized tax loss carry-forwards in some loss-making companies. All in all, this all resulted in a profit after tax of SEK 72 million for the first quarter.Going to next slide, Slide #7. Our cash flow analysis for quarter 1. Cash flow from the operating activities resulted in SEK 120.2 million. Changes in working capital SEK 45 million. The net capital expenditure excluding acquisitions and divestments SEK 103.8 million and the free cash flow a negative of SEK 28.7 million. The net debt arose to total of SEK 1.8 billion. The negative impact on the working capital due to increased inventory and some trade receivables, and the main parts of the investment that we've done is correlating to machinery and equipment in Canada, in Turkey and Lithuania in the quarter.Next slide, Slide #8. Looking a little bit into the market and breaking down in volumes. For the Nordic market, the sales were 7% higher than the same period last year. Adjusted for the foreign exchange effects, acquisitions and disposals, sales rose 4% organic.The Norwegian, Finnish and Swedish markets reported good growth during the quarter, while sales in Danish market somewhat declined.Next slide, Western Europe. Sales in Western Europe were up 16% higher than in the corresponding period last year. And adjusted here for foreign exchange effects and acquisitions, sales rose by 8% organic. Here several markets in the region performed rather well during the period. Gladly to say it's Italy, the Netherlands, U.K. and Germany, while sales in Austria, Spain and Switzerland slightly decreased.Next slide, #10. Eastern Europe and CIS countries. Sales in Eastern Europe and CIS rose by 11% during the quarter. Adjusted for a foreign exchange effect and acquisitions, 8% organic. Sales especially in Russia decreased slightly during the quarter, compared with the same period in preceding year. Here now the Russian market accounts of 5% of Systemair's total sales, as against 6% in previous year, same quarter. I have to mention here that major markets in the region are showing really good period and here especially including Czech Republic, Slovakia and Slovenia.Next slide, Slide #11 shows exclusively the development on the Russian market and you see it developed in the last 2 quarters where it's striking out, but we see here a slight increase in activities again.Next slide, Slide #12. North and South America. Sales in North and South America region, during the quarter, is 1% higher than the same period last year. Organic, it is a decrease of 1% in the region. Here, especially the Canadian market has performed well, while U.S. market has declined slightly. But here we have some currency effect, also some export effect out of America into South America. South America, as a region, is slightly stagnant.Next slide, Slide #13, other markets. Sales in other markets declined by 2% during the quarter, compared with same period, proceeding year, but adjusted for foreign exchange effect and acquisition, actually sales rose by 2% organic. Here especially sales in India, South Africa and Middle East, increased during the quarter, but it declined in Turkey, measured in Swedish kronor.Next slide, Slide #14. As announced last week, the acquisition of the company Greentek. Greentek in Canada produces and sells residential air handling units for North American markets, Canada and U.S. Systemair, after this acquisition, will be one of the major 3 producers of residential air handling units in Canada after its full integration. Greentek's turnover at the time amounts to around SEK 70 million. The transfer -- full transfer of the ownership is planned by 4th September 2018, which is next week. And we will immediately -- after this we will relocate the production to Bouctouche where Systemair has production of residential air handling units already.Next slide, Slide #15, acquisitions and divestments. During the period, the Systemair has acquired 49.9% in Burda, basically in Germany. Burda sells and develops radiant heaters for outdoor use with a turnover of about EUR 2.8 million annually. Systemair has also acquired a minority share of 21% of the company, Pacific HVAC Engineering in Australia. The company is a wholesaler of ventilation products on the Australian market and has generated sales of around AUD 29 million annually.Then the Norwegian company Reftec A/S has been divested to the former management. Company will continue to operate though as our distributor of Systemair's air conditioning products in Norway. Next slide, Slide #16. During the last year, and especially in the quarter, as we are going into the intensive rollout phase where we've introduced our new product database. Including in that product also that we're having new webpages with easier access to information and improved structure and access to our PIM system, which is our product information management system. An increased service level due to technical improvements and new improved functionality within our e-sales, product selection and product management functionalities. And by that, I am switching over and say, thank you, and welcome your question and ask you to open up the line for Q&A.
[Operator Instructions] And your first question comes from the line of Douglas Lindahl.
I was wondering if you can talk a little bit about the profitability levels of your current order backlog and then the products that you're taking on now on gross margin levels. That's my first question.
Yes, okay, Douglas. In general, of course, as announced, I think, in last quarter also, we have done our internal reviews, and we are quite, with some effect, we're getting a stepping away from this megaproject and big projects. Why is, of course, the reason that you're mentioning because the megaproject have -- they have a, how to say, the nature of -- in many, many areas being -- to lower profitability. So you will not see that many big, more complex projects in the next coming reports I assume. There might be some, but if they're, then everything is rather to a standardized level.
Price increase of 2%, it is now.
And is that globally or just for a specific region?
Globally.
Maybe we will not have 100% effect on 2%, but well above 1% at the end.
And that should be sufficient to offset the raw materials you're seeing, right?
Yes, raw material has also lately flattened out price wise so...
But also, Douglas, I just want to mention, because this is -- the global that we do on all companies. But of course, we are -- locally, we are looking into some of our production entities where we see the need either due to local, let's say, restraints in the sourcing when it comes, for example, look at the Turkish market, or if you have other general impacts on their local markets where we have done selective price increases and cost reductions. So global is one thing, but then of course, you need to look at several entity by entity and that we're doing activities, of course.
And just 2 more questions from my side, if I may. With the strong growth here in Western Europe, do you see that, that's continuing? Are you continually positive on that? Or what are your expectations?
From what we see just now, we see that -- or at least we're confident that it will continue. We're just having a little question mark what the impact of -- when you are talking about Western Europe, what the impact of the Brexit will be, but I cannot answer that myself just now. We're awaiting that.
Yes, okay. This is the last question from my side. I was a bit surprised to see that the U.S. market was so weak. And I didn't really fully understand you talked about selling into the South American market and so on. But do you see the U.S. market's decline being temporary or because from other parts we see that the U.S. is very strong market, but I guess...
Yes, it's only temporary.
Only temporary. You also have to see there's a certain seasonality also in residential buildings in these camps. And this is our main market when it comes from the export from Canada into U.S. What we do from U.S., down to Latin America, for example, there's quite good activity, and we're doing quite a lot there. So it will not affect us as we have seen now. We also have a rather positive outlook actually.
And your next question comes from the line of Predrag Savinovic.
Could you maybe quantify how much the Linde order impact in the gross margin? As it's down year-over-year, but does that explain the whole difference year-over-year?
In the quarter, the impact would be 0.7%.
Okay. And can you talk a little about the Norwegian market, as I think you previously have alluded to Norway being tough both volume and price wise, has this passed now?
We discussed the Norway, I think, in the last quarter. We saw that there's little bit more pressure on the Norwegian market, but we conquered it a little bit together with the market itself as it was a shift more in product mix that we saw. There was a pressure on the residential, which we -- is a big lag for us and the market shifted over to more infrastructure investments where we are rather strong when it comes to tunnels, for example, on the tunnel ventilation. So we see a positive outlook, it's just that we're a little bit seeing a shift where the volumes are coming from what kind of applications.
But I think our management locally is positive in all areas for the moment, both residential and infrastructural.
And finally, a follow up on another question, if you step down from this bigger and more complex projects, could that lead to a slower sales trend and could that impact your aftermarket sales? Or do you think you can get all that from, I mean, from smaller sized orders?
If it changed our system, no, I don't think so for the time being, actually. It was a little bit -- I mean you can't shift overnight. So we have been planning, and we have been making this little moves since a longer time. And as you see also in this quarter report, I don't see a negative impact in this, rather that we strengthen our order backlog with some positive input.
[Operator Instructions] And your next question comes from the line of Henrik Alveskog.
Okay. Henrik here. Can you hear me? First question regarding Greentek. Could you care to comment on what kind of profitability the company has had so far? And also the relocation of production that you mentioned, what kind of costs will that incur?
Yes. The company as such, Greentek, has so far in our conclusions have double-digit profitability. And because of relocation, they were quite happy because their facilities are in [Langton], we have our factory in Bouctouche and it's roundabout 40 kilometers in-between. So we will move machinery, just a very, very limited amount of employees, as they are needed in the company we bought the operations from. And we will absorb most of it with existing personnel in our facilities. So we'll try to make this as fast and efficient as possible starting by the end of next week. So from the cost side, I think we will absorb it in the daily operation now.
Yes, there won't be any huge cost for personnel or so since we're only taking a few employees. It's an asset deal here or operational deal so...
Okay. Looks great. Sounds great.
[indiscernible]
All right. Also regarding your Turkish operation, could you give us some more color on that? How much you're impacted by the turmoil that we hear about?
Yes. It's of course a little bit, how to say, it's in, I would say, exciting times. If you ask us, we see there's a turmoil as you said, asking our Turkish colleagues, they see possibilities because now our production cost is a little bit less. That's how they see it. But of course, it isolates Turkey a little bit more from the export markets. What we have done, I mean, we saw this coming, and it's not just the last couple of weeks that things are shifting and changing in Turkey. So what we have done is we have reoriented our Turkish operations to be more focused onto the Middle East, where they have an excellent access still to other more isolated markets with still good demands like Qatar, and they are good in lot of Middle East markets where there is still a lot of projects they have and especially in terms of there -- this Expo 2020 coming that we look for. So there are a couple of projects, and we see good possibilities for that. And where we see restraints though is the normal project business that Turkey would do in Turkey, but also in neighboring countries, whereas it's a little bit more tricky to do for the time being, but as I said, we have redirected a little bit to be export-oriented in the Middle East, and we see that we can maintain most of what we do today.
And you are not making reductions in your staff or anything like that?
I can say that this -- as we have reported before, in Turkey, we actually built a new factory and we relocated from the old to the new premises. And during the relocation, I mean, the traffic and the environmental situation in Turkey is quite unique, but we're moving from the European side of Istanbul to 2 hours into the Anatolian side means that we were aware, and we were planning of losing 70% of staff, and we have replaced just as much as we need and that was part of this relocation, and we'll all handle during the move. Actually, the grand opening of the new factory together with all customers, everything is planned for 20th of September, which is in full operation since first week of June.
All right, great. Finally, just the good old question about your CapEx. What's the level approximately of this year's CapEx?
Well, total year, round SEK 200 million that's what we have communicated. And right now, we don't see any need to change that.
And your next question comes from the line of Emmi Östlund.
I have a question on sort of you announced or you said sort of previously that you're sort of evaluating further restructuring at some of your plants. Could you tell us what the progress is there? I mean, in this matter?
Yes, of course. We are on the constant evaluation, and we're, of course, adopting according to market needs, and how it turns in terms of technical and, of course, also volume demands. But what was also reported in some lines here in the reports, of course, that we have done a little bit in Germany, in Menerga. Other activities there are ongoing, I can tell. But also that of course, we did some restructuring into the -- in the move of Frivent to Austria -- sorry, from Austria to Slovenia. There is also reduction that you might have seen in the figures. It's, I think, all in all, 20 people there also. And then of course, we are further looking into the next steps within the air conditioning segment.
And do you have sort of a timeline for that?
As I said, we are constantly evaluating, of course, also so, for example, now in this first and second quarter, are the high tides for the air conditioning, so we are, of course -- during full load, we of course looking into efficiency measures, and they will of course have effect later on in the year. We also been looking into the operations in Czech, but also to our operations in South Africa, we also done the same measures.
Okay. And if I could just proceed to other markets, if I may. So it was, I mean, you had organic growth there after sort of 4 disappointing quarters. Do you think that this is sustainable? And what are the moving parts here? I mean, I assume that there are some sanctions in Iran and obviously turmoil in Turkey, so I mean, how should we see this going forward? Is this sustainable?
That's actually a very good question, but also loaded with a lot of political insights. To be really frank here is that we, of course -- we are very, very cautious and, how to say, careful, on what we do nowadays in Middle East. We are restructuring a little bit in terms of how we set up the organization...
Roland, is your line on mute? [Technical Difficulty]
Thank you. Hello? Can you hear me? Hello, Emmi, are you there?
Yes, I'm here.
Okay, sorry for technical disturbance here. No, if -- going back. What happened in Middle East, of course, is a little bit of, how to say, to try to predict what is happening politically there. It's very hard. So what we -- from Systemair side will be anticipated for next coming years, as I answered to one of your colleagues before is that there will be and there are projects related to infrastructure, airports, metros, but also related to the 2020 exhibition, but after that some 2, 3 years down the road, we are rather unsure for time being, how the development will be. So we're a little bit cautious in taking a more secured footprint for the area. If it's sustainable, time will tell. But today, we see that there is opportunities, but we will not be, how to say, very enthusiastic and build up big organizations for that purpose. We will [indiscernible] as much as possible within existing.
[Operator Instructions] There are currently no more further questions. Please continue.
Okay. Perfect. Then we finalize this teleconference.
Thank you very much. We will have Annual General Meeting now, so we will proceed with that. And if you have any questions here, please call us before 3:00 o'clock or after 4:00 or after 5:00.
Thank you very much. Charlotte, back to you.
Thank you. That does conclude our conference for today. Thank you all for participating. You now all may disconnect. Speakers, please standby.