Beijer Electronics Group — Interim / Quarterly Report 2021

Apr 21, 2021

1 JANUARY–31 MARCH 2021

Good order intake paves the way for higher sales and improved earnings

• Order intake increased by 3% to 417 MSEK (406).
• Net sales amounted to 351 MSEK (395).
• EBIT was 4.6 MSEK (8.4).
• Profit after tax of 1.6 MSEK (5.2).
• Earnings per share were 0.06 SEK (0.19).
• Acquisition of ELTEC of Germany strengthens Westermo's train offering.

Interim Report, Beijer Electronics Group AB

Comments from CEO Per Samuelsson

"The progress of beijer group's orders in the first quarter underscores the economic recovery, with increased demand. Order intake in the first quarter 2021 increased on the previous quarter, and the first quarter of the previous year. We also note that order intake of 417 MSEK is one of the Group's best quarters to date, driven by the Beijer Electronics business entity's excellent progress.

As CEO, I'm obviously not satisfied with our earnings level in the first quarter, but we're heading in the right direction now. Sales were unchanged on the fourth quarter, while earnings were faintly positive. At the same time, I think we incurred a sales loss of 8-10% in the first quarter due to a global shortage of some components, which restricted delivery capacity. In turn, this impacted earnings in the period, which otherwise, would have been higher.

So the previous poor demand caused by Covid-19 has transformed into a capacity shortage. We're focusing on dealing with this situation by working on improving our delivery capacity, while making sales and growth our top priorities. And the trend is clear—after passing the bottom during the third quarter of 2020, we've secured a gradual demand recovery, a trend that has accentuated month by month.

We're delighted by a marked upturn in order intake for the Beijer Electronics and Korenix business entities, whose sales were in line with the fourth quarter 2020, but down on the corresponding quarter 2020. But despite lower sales volumes compared to the first quarter 2020, both business entities were able to improve earnings thanks to good cost control and savings programs implemented last year. This means they are now close to break-even level. With increasing volumes and a better product mix for Beijer Electronics, there is good potential to improve earnings. This improves the prospects of these business entities to deliver consistent with our strategy—achieving yearly growth of 10%, and the potential to generate an EBIT margin of 15%. The partnership between the Beijer Electronics and Korenix business entities has also progressed well, with notably, the combined product offering both in-demand and appreciated by customers.

The Westermo business entity is later cyclical than Beijer Electronics and Korenix. Its financial results were lower than the first quarter of 2020, which actually, was a record quarter for Westermo. Results were consistent with the fourth quarter 2020 apart from order intake, which can fluctuate fairly widely between individual quarters depending on when large orders are placed in the period. Covid-19 also still had an impact through some customers deferring orders, and transactions are taking a little longer to execute. Westermo's products and solutions are often specific to, and part of, customers' complete solutions, with lifecycles up towards ten years. This enables good planning on current business accounts, even if order placings do vary. At the beginning of the year, the business entity also

		Sales Quarter 1	EBIT Quarter 1
MSEK	2021	2020	2021	2020
Westermo	187.4	214.6	17.0	33.4
Beijer Electronics	143.8	164.0	-0.5	-4.61
Korenix	22.3	20.7	-1.4	-9.02
Intra-group sales	-2.6	-4.0
Group adjustments and parent company			-10.5	-11.4
beijer group	350.9	395.3	4.6	8.43

Business entity net sales and EBIT

1 Including restructuring expense of 9.4 MSEK.

2 Including restructuring expense of 2.9 MSEK.

3 Including restructuring expense of 15.0 MSEK. signed a supply agreement with Alstom worth at least 250 MSEK. Overall, Westermo has a strong list of prospects for new and current business customers, which we expect to produce future growth.

Westermo also advanced its positioning in the train segment through the acquisition of ELTEC of Germany in March. ELTEC complements Westermo with its focus on smart connectivity via onboard wireless communications on trains and subways. This acquisition is also fully consistent with our strategy for growth and EBIT margin goals. ELTEC will be consolidated into the Group's accounts effective the second quarter. With annualized sales of 65 MSEK, ELTEC is a good contributor to Westermo's and the Group's growth. In earnings terms, we expect ELTEC to contribute consistent with Westermo's profitability level from 2022 onwards.

Overall, there is cause for more optimism. Short-term uncertainty regarding demand has diminished. By the end of the first quarter, beijer group's order book was at an all-time high. The focus is on continued growth, and our challenge is dealing with the component shortage, as well as increasing and ensuring our delivery capacity.

We are maintaining our view for the full year 2021. beijer group has good potential to achieve better financial performance in 2021 than in 2020."

The Group in the first quarter

The Group's order intake increased by 3% to 417 MSEK (406) in the first quarter 2021. Adjusted for currency effects, order intake increased by 8%. The order intake of the Beijer Electronics and Korenix business entities increased, but decreased for Westermo. beijer group's order book at the end of the first quarter was 12% higher than the corresponding point of 2020.

The Group's sales were 351 MSEK (395). Korenix's sales increased, while Westermo's and Beijer Electronics' decreased. The Group's sales were unchanged compared to the fourth quarter.

The Group's EBITDA was 39.3 MSEK (43.6). Depreciation and amortization amounted to 34.7 MSEK (35.2). EBIT was 4.6 MSEK (8.4), corresponding to an EBIT margin of 1.3% (2.1). EBIT was charged with negative currency effects of 1.4 MSEK. Earnings in 2020 were charged with restructuring expenses of 15 MSEK. Total development expenditure was 45.5 MSEK (52.3), which corresponded to 13.0% (13.2) of Group sales.

Profit before tax was 3.1 MSEK (7.2). Net financial income/expense was -1.6 MSEK (-1.2). Profit after estimated tax was 1.6 MSEK (5.2). Earnings per share after estimated tax were 0.06 SEK (0.19).

Order intake of nearly 420 MSEK is one of the Group's best quarters to date, driven by the Beijer Electronics business entity's excellent progress.

Group order intake

The bars and left-hand scale indicate quarterly order intake. The curve and right-hand scale show rolling four quarter order intake.

Group EBIT

The bars and left-hand scale indicate quarterly EBIT. The dashed bar and line for Q1 2020 is excluding restructuring expenses of 15 MSEK.

Group net sales

The bars and left-hand scale indicate quarterly sales. The curve and right-hand scale show rolling four quarter sales.

As CEO, I'm obviously not satisfied with our earnings level in the first quarter, but we're heading in the right direction now.

Westermo Business entity

In the first quarter 2021, Westermo faced a tough comparative period 2020, when sales and earnings exceeded previous records for an individual quarter. But compared to the fourth quarter 2020, sales and earnings both increased somewhat in the period. Sales in the quarter were also impacted by some loss of deliveries due to a global shortage of certain components. In turn, this affected earnings, which otherwise, would have been higher.

Order intake was down on the corresponding period of 2020, because the business entity did not sign any large orders in the period this year. Westermo has an element of project business, which means that order intake can fluctuate fairly widely between individual quarters. Covid-19 also still had an impact through some customers deferring orders, and transactions are taking a little longer to execute. Overall, Westermo has a strong list of prospects for new and current business customers, which are expected to produce future growth. At the same time, Westermo is working on managing its component shortage, and ensuring delivery capacity.

In March, Westermo signed an agreement to acquire 100% of German enterprise ELTEC Electronik AG. This transaction was completed on 1 April 2021, with ELTEC consolidated into Westermo's accounts on the same date. The enterprise specializes in wireless communication solutions for connected trains for passenger information, infotainment and passenger WiFi networks. The company has a strong customer base, including the largest train operators and system integrators for connected trains in Europe. ELTEC complements Westermo's business on the train side, and the acquisition is fully consistent with the strategy for growth and EBIT margin goals. ELTEC has some 35 employees and annualized sales of 65 MSEK. This, combined with the supply agreement with Alstom worth at least 250 MSEK, consolidates Westermo's strong positioning in the train segment.

First quarter

Order intake was 172 MSEK (202). Sales were 187 MSEK (215) and EBITDA was 33.3 MSEK (47.9). Depreciation and amortization was 16.2 MSEK (14.6). EBIT was 17.0 MSEK (33.4), equivalent to an EBIT margin of 9.1% (15.6).

The bars and left-hand scale indicate quarterly net sales. The curve and right-hand scale show rolling four quarter net sales.

Westermo advanced its positioning in the train segment further through the acquisition of ELTEC of Germany in March.

Beijer Electronics Business entity

Beijer Electronics' progress in the first quarter is pointing in the right direction. The business entity's order intake, the primary indicator of future sales growth, was up by 17% on the corresponding period of 2020. All geographic regions contributed to the positive progress. Order intake has now increased for three consecutive quarters, and by 38% on the fourth quarter 2020.

Beijer Electronics' sales decreased on the corresponding period of 2020, but were largely in line with sales in the fourth quarter. However, sales were negatively impacted by some 10% due to lost deliveries because of a global shortage of certain electronic components, which had a negative impact on earnings. But earnings still improved on the corresponding period of 2020, which however, was charged with structural expenses.

Savings from the program of measures had their intended effect. With similar sales volumes, earnings improved by 11 MSEK in the first quarter of this year compared to the fourth quarter of 2020. The business entity's lower cost level will keep generating positive effects as sales volumes increase. Beijer Electronics also anticipates that it will benefit from a better product mix in 2021, as Europe and the US are forecast to become a growing share of total sales, consistent with the order intake pattern. This product mix was unfavorable in 2020.

The business entity has maintained its level of product development, and safeguarded its organization's skills. An updated version of the X2 base HMI was launched in the first quarter. The partnership with the Korenix business entity has continued as planned, and in the quarter, Beijer Electronics became a sales channel for Korenix's products, and a combination of the business entities' products in the US.

First quarter

Order intake increased by 17% to 220 MSEK (188), and adjusted for currency effects, order intake increased by 25%. Sales were 144 MSEK (164). EBITDA increased to 11.9 MSEK (9.0). Depreciation and amortization was 12.4 MSEK (13.6). EBIT was -0.5 MSEK (-4.6). Earnings in 2020 were charged with restructuring expenses of 9.4 MSEK.

The bars and left-hand scale indicate quarterly net sales. The curve and right-hand scale show rolling four quarter net sales.

With increasing volumes for Beijer Electronics, there's good potential to improve earnings.

Korenix Business entity

Korenix's order intake increased strongly in the first quarter on the corresponding period of 2020, with the business entity's OEM customers being the main source of the upturn. Korenix also secured a large order in Europe.

Korenix was also able to break its trend of lower sales, which increased by 8% in the first quarter in year-on-year terms. Combined with positive effects from the program of measures in the previous year, the business entity achieved a pronounced earnings improvement in the period, even if it actually reported a small loss. Korenix can benefit from a lower cost level as sales volumes increase.

The partnership with the Beijer Electronics business entity went to plan, with a partnership established in the US for the sale of Korenix products through Beijer Electronics' distributor network.

First quarter

Order intake increased by 35% to 27 MSEK (20). Sales increased by 8% to 22 MSEK (21). EBITDA was 1.1 MSEK (-5.7). Depreciation and amortization was 2.5 MSEK (3.3). EBIT was -1.4 MSEK (-9.0). Earnings in 2020 were charged with restructuring expenses of 2.9 MSEK.

The bars and left-hand scale indicate quarterly net sales. The curve and right-hand scale show rolling four quarter net sales.

Other financial information

Group investments, including capitalized development expenses and acquisitions, amounted to 19.8 MSEK (24.1). Cash flow from operating activities was 8.3 MSEK (37.2). Equity was 670 MSEK (732) on 31 March 2021. The equity ratio was 34.4% (35.1). Cash and cash equivalents were 130 MSEK (117). Net debt was 703 MSEK (763). The average number of employees was 769 (819).

Significant events

In January 2021, beijer group signed a five-year supply agreement worth a minimum of 25 MEUR (250 MSEKplus) with train manufacturer Alstom through its Westermo business entity. This deal specifies shipments of network equipment in a framework agreement between the parties. Alstom is already one of Westermo's key accounts. Shipments to Alstom's train side will progressively increase in the five-year period from 2021 onwards.

In March 2021, beijer group signed an agreement to acquire 100% of German enterprise ELTEC Elektronik AG. ELTEC is an innovative technology enterprise in communication solutions for connected trains. The enterprise specializes in wireless communication solutions for passenger information, infotainment and passenger WiFi networks. Its customers include the largest train operators and system integrators in connected trains in Europe. ELTEC has some 35 employees an annualized sales of 65 MSEK. ELTEC complements Westermo's operations on the train side. The purchase consideration was 10.5 MEUR on a debt-free basis, financed through the Group's existing finance facilities. The acquisition was completed on 1 April 2021, and will be consolidated into Westermo's and the Group's accounts effective 1 April 2021. ELTEC will have a limited impact on beijer group's earnings in 2021 but is expected to contribute from 2022 onwards, consistent with Westermo's profitability level.

Financial targets for the Group

The Board of Directors has set financial targets for Beijer Electronics Group. The targets are that the Group will have a minimum organic growth rate of 7% per year, and achieve a minimum EBIT margin of 10%, measured as an average over a business cycle.

Per Samuelsson President and CEO Malmö, Sweden, 21 April 2021

For more information, please contact: President and CEO Per Samuelsson, tel +46 (0)40-35 86 10, +46(0)708-58 54 40 or EVP and CFO Joakim Laurén, tel +46(0)40-35 84 96, +46(0)703-35 84 96

This Report has not been subject to review by the company's auditors.

Accounting policies

This Interim Report for the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable provisions of the Swedish Annual Accounts Act. The Interim Report for the parent company has been prepared in accordance with the Swedish Annual Accounts Act's chapter 9 Interim Financial Reporting.

Interim Report in Summary

Income Statement–Group

SEK 000	Quarter 1, 2021	Quarter 1, 2020	Full Year, 2020
Net turnover	350,893	395,270	1,437,747
Other operating revenue	3,148	2,086	-2,636
Operating expenses excluding depreciation and amortisation	-314,715	-353,743*	-1,270,827*
Operating profit before depreciation and amortization	39,326	43,613	164,284
Amortization, intangible assets	-19,427	-19,297	-83,715
Depreciation, property, plant and equipment	-5,483	-5,798	-23,889
Depreciation and amortization, right-of-use assets	-9,780	-10,145	-40,866
Operating profit	4,636	8,373	15,814
Net financial items	-1,584	-1,212	-21,653
Profit before tax	3,052	7,161	-5,839
Estimated tax	-1,438	-1,945	-251
Net profit	1,614	5,216	-6,090
Attributable to equity holders of the parent	1,658	5,349	-5,647
Attributable to non-controlling interest	-44	-133	-443
Earnings per share. SEK	0.06	0.19	-0.20

* Including restructuring expense of 15 MSEK.

Comprehensive Income

SEK 000	Quarter 1, 2021	Quarter 1, 2020	Full Year, 2020
Net profit	1,614	5,216	-6,090
Actuarial gains and losses			6,436
Net investment hedge effects	-3,200	-14,560	7,731
Translation differences	33,937	56,447	-58,503
Comprehensive income	32,351	47,103	-50,426
Attributable to equity holders of the parent	32,195	46,928	-49,754
Attributable to non-controlling interest	156	175	-672

Balance Sheet–Group
SEK 000	31 Mar. 2021	31 Mar. 2020	31 Dec. 2020
Assets
Intangible assets	1,048,252	1,129,685	1,033,016
Property, plant and equipment	93,594	103,238	96,110
Right-of-use assets	98,239	100,519	98,798
Financial assets	62,963	56,910	60,865
Current assets	527,682	589,266	474,412
Cash equivalents and short-term investments	130,176	117,201	120,719
Total assets	1,960,906	2,096,819	1,883,920
Equity and liabilities
Shareholders' equity	670,492	732,155	637,192
Non-controlling interest share of shareholders' quity	3,733	4,424	3,577
Long-term liabilities	800,631	839,558	803,884
Current liabilities	486,050	520,682	439,267
Total liabilities and shareholders' equity	1,960,906	2,096,819	1,883,920
Of which interest-bearing liabilities
Borrowing	564,432	607,269	534,306
Pension provisions	169,927	171,501	168,474
Liability related to right-of-use assets	98,304	101,913	99,909
Total	832,663	880,683	802,689

Statement of Changes in Equity –Group

SEK 000	31 Mar. 2021	31 Mar. 2020	31 Dec. 2020
Attributable to equity holders of the parent
Opening balance, shareholders' equity, 1 January	637,192	684,434	684,434
Paid-up capital after deducting for transaction expenses		-54	-54
Share repurchase		-22	-22
Share-based payment	1,105	869	2,588
Comprehensive income	32,195	46,928	-49,754
Closing balance, equity	670,492	732,155	637,192
Attributable to non-controlling interests
Opening balance, shareholders' equity, 1 January	3,577	4,249	4,249
Comprehensive income	156	175	-672
Closing balance	3,733	4,424	3,577

Key Figures–Group

	31 Mar. 2021	31 Mar. 2020	31 Dec. 2020
Operating margin, %	1.3	2.1	1.1
Profit margin, %	0.5	1.3	-0.4
Equity ratio, %	34.4	35.1	34.0
Equity per share before dilution, SEK	23.4	25.6	22.3
Basic earnings per share, SEK	0.06	0.19	-0.20
Return on equity after tax, %	-1.4	7.0	-0.9
Return on capital employed, %	1.0	5.5	1.3
Return on net operating assets, %	1.2	8.0	1.6
Average number of employees	769	819	790

Cash Flow Statement–Group

SEK 000	31 Mar. 2021	31 Mar. 2020	31 Dec. 2020
Cash flow from operating activities before
changes in working capital	35,771	53,233	149,588
Change in working capital	-27,510	-14,941	44,702
Cash flow from operating activities	8,261	38,292	194,290
Cash flow from investing activities	-19,766	-24,087	-81,931
Cash flow from finance activities*	15,036	-25,258	-101,286
Change in cash equivalents	3,531	-11,053	11,073
Cash equivalents and short-term
nvestments, opening balance	120,719	121,903	121,903
Cash equivalents	5,926	6,351	-12,257
Cash equivalents and short-term
investments, closing balance	130,176	117,201	120,719
Free cash flow	-17,921	3,503	70,420
*Of which amortization of lease liability.	-10,118	-10,703	-41,939

Operating segments

SEK 000	Quarter 1, 2021	Quarter 1, 2020	Full year, 2020
Net sales
Westermo	187,410	214,614	768,990
Beijer Electronics	143,848	163,965	599,104
Korenix	22,343	20,740	83,513
Group adjustments	-2,708	-4,049	-13,860
Group	350,893	395,270	1,437,747
Operating profit before depreciation and amortization
Westermo	33,251	47,935	149,909
Beijer Electronics	11,878	9,0351	34,230
Korenix	1,070	-5,7002	904
Parent company	-8,461	-6,374	-25,131
Group adjustments	1,588	-1,283	4,372
Group	39,326	43,6133	164,284
Operating profit
Westermo	17,024	33,376	85,913
Beijer Electronics	-530	-4,6071	-22,418
Korenix	-1,395	-9,0402	-12,125
Parent company	-10,311	-8,446	-33,035
Group adjustments	-152	-2,910	-2,521
Group	4,636	8,3733	15,814

1 Including restructuring expense of 9,365,000 SEK.

Including restructuring expense of 2,870,000 SEK.

Including restructuring expense of 15,000,000 SEK.

Revenue

SEK 000	Quarter 1, 2021	Quarter 1, 2020	Full year, 2020
Geographical market
Sweden	52,195	61,567	193,761
Rest of Nordics	29,666	37,830	137,716
Germany	24,163	23,777	93,474
UK	27,056	29,851	101,728
France	34,850	28,025	122,472
Turkey	6,453	7,181	31,460
Rest of Europe	57,793	66,876	229,404
USA	38,698	55,970	168,414
Taiwan	19,507	15,603	83,847
China	24,251	22,270	102,995
Rest of Asia	28,922	37,972	145,852
Rest of world	7,339	8,348	26,624
Group	350,893	395,270	1,437,747
Category
Operator panels and accessories	120,020	139,398	510,368
Network equipment	207,085	232,843	840,028
Other products and services	23,788	23,029	87,351
Group	350,893	395,270	1,437,747

Income Statement–Parent Company

SEK 000	Quarter 1, 2021	Quarter 1, 2020	Full year, 2020
Net turnover	8,211	8,803	35,210
Operating expenses	-18,522	-17,249	-68,245
Operating profit	-10,311	-8,446	-33,035
Net financial items	4,182	8,541	-16,230
Profit before tax	-6,129	95	-49,265
Appropriations			48,200
Estimated tax	477	-448	-1,984
Net profit	-5,652	-353	-3,049

Balance Sheet–Parent Company

SEK 000	31 Mar. 2021	31 Mar. 2020	31 Dec. 2020
Assets
Fixed assets	940,943	1,003,429	912,366
Current assets	64,268	83,966	66,168
Cash equivalents and short-term investments	1,166	1,166	1,166
Total assets	1,006,377	1,088,561	979,700
Liabilities and shareholders' equity
Shareholders' equity	298,892	303,263	303,253
Long-term liabilities	541,145	586,257	534,348
Current liabilities	166,340	199,041	142,099
Total liabilities and shareholders' equity	1,006,377	1,088,561	979,700
Of which external interest-bearing liabilities	563,876	618,104	530,560

Parent Company Statement of Changes in Equity

SEK 000	Share capitala	Other restricted equity	Share premium reserve and retained earnings	Net profit	Total equity
Opening equity, 1 Jan. 2021	9,617	5,799	287,837		303,253
Net profit				-5,652	-5,652
Total changes to net worth, exc. transactions with company's shareholders	9,617	5,799	287,837	-5,652	297,601
Share-based payment			1,291		1,291
Closing equity, 31 Mar. 2021	9,617	5,799	289,128	-5,652	298,892

There are 28,627,219 ordinary shares and 225,181 class C shares.

Financial definitions

Average

Average values are computed as the median value of the current reporting period and the corresponding item in comparative periods 12 months previously.

Capital employed

Equity plus interest-bearing liabilities.

Development expenditure

Expenditure on product development work, such as personell expenditure and external consulting expenditure, including expenditure capitalized as intangible assets.

Earnings per share

Net profit attributable to parent company shareholders divided by the number of shares at year-end.

Equity ratio Equity in relation to total assets.

Equity per share

Equity attributable to parent company shareholders divided by the number of shares.

Free cash flow

Cash flow from operating activities, investments in property, plant and equipment, and intangible assets, as well as amortization of lease liability.

Net debt

Interest-bearing liabilities less cash and cash equivalents and investments in securities, etc.

Operating assets

Total assets less cash and cash equivalents, and interest-bearing liabilities.

Operating margin

Operating profit in relation to net sales.

Profit margin

Net profit in relation to net sales.

Return on capital employed

Profit before tax plus financial expenses rolling 12 months in relation to average capital employed.

Return on equity after tax

Net profit rolling 12 months in relation to average equity.

Return on net operating assets

Operating profit (profit after depreciation and amortization) in relation to average net operating assets.

Beijer Electronics Group AB (publ)

Beijer Electronics Group (publ) is a high technology company active in industrial automation and data communication. The company develops and markets competitive products and solutions that focus on the user. Since its start-up in 1981, Beijer Electronics Group has evolved into a multinational group with net sales of 1.4 billion SEK in 2020. The company is listed on Nasdaq Stockholm Main Market under the ticker BELE.

More Information

You can subscribe for financial information on Beijer Electronics Group via e-mail. Subscribe easily at our website, www.beijergroup.com. If you have any questions about the Beijer Electronics Group, please call +46 (0)40 35 86 00, or send an email: info@beijergroup.com

Financial Calendar

6 May 2021Annual General Meeting
	14 July 2021Six-month Interim Report
25 October 2021Nine-month Interim Report

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Head office Beijer Electronics Group AB (publ) Box 426, Stora Varvsgatan 13a 201 24 Malmö, Sweden Corp. ID no. 556025-1851 www.beijergroup.com | +46 (0)40 35 86 00