Byggma ASA — Earnings Release 2021

Feb 24, 2022

Q4 2021 results 24 February 2022

Questions can be directed to ir@byggma.no

[Byggma at a glance]

Company

Byggma is a leading Nordic supplier of building product solutions

Introduction

• Leading supplier of building product solutions in the Nordics, with a special focus on various boards, beams, windows & doors, and lighting products
• Byggma owns 8 companies/ brands, operates 6 manufacturing facilities and distributes its products to all the leading building materials chains
• Byggma is headquartered in Vennesla and employs ~730 people in total
• The company has been listed on Oslo Stock Exchange since 1997 with ticker "BMA"

NOK 70m Proposed dividend for 2021

#1 market position for boards and beams in the Nordics and growing internationally

Highly attractive offering towards all the major building material chains in the Nordics

Financials

6

P&L Summary

NOKm	Q4 2021	Q4 2020	2021	2020
Sales revenue	631,9	548,0	2 3 4 4 , 3	2 0 5 2,4
EBITDA	98,4	77,7	320,1	269,6
EBIT	69,4	58,1	230,2	192,6
Net financials	$-4,2$	1,3	$-9,0$	$-32,9$
Profit before tax	65,1	59,4	221,2	159,7
Tax	$-13,1$	$-12,6$	$-47,1$	$-34,8$
Net profit	52,0	46,8	174,1	124,9

• Strong demand for wood-based building materials. Mainly satisfactory development in all segments.
• Sales growth of 15.4% from Q4 2020 to Q4 2021, and sales growth of 14.2% from YTD 2020 to YTD 2021
• EBIT margin of 11.0% in Q4 2021, compared to 10.6% in Q4 2020, and EBIT margin of 9.8% in YTD 2021, compared to 9.4% in YTD 2020
• Price increases implemented as of 1 October to compensate for increased prices on raw material and energy, and further price increases to be implemented with effect from 1 April
• Non recurring item booked in Q4 2021: Non operating property in Kvam written down by NOK 8.6 million in connection with sale in 2022
• CO2 compensation for 2021 is not booked pending approval by the Norwegian Parliament and EMU
• NOK 19.4 million from sale of CO2 quotas booked as other operating income in Q4 2021

Consolidated balance sheet

Assets (NOK million)	31 Dec 2021	31 Dec 2020
Fixed assets	926	932
Intangible assets	22	25
Deferred tax assets	5	7
Long-term financial derivatives		O
Other long-term receivables	O
Total non-current assets	954	964
Inventory	357	264
Customer receivables	446	379
Short-term financial assets	O	O
Cash and cash equivavelents	71	525
Total current assets	874	1 1 6 8
Total assets	1828	2 1 3 2

• Payment of dividend in Q2 2021 is the main driver for the movement on cash and equity
• Growth in trade receivables, inventory and accounts payable due to increased sales and pruchase of goods, mainly due to price increases
• Equity ratio of 33% as per 31 December 2021

Equity and liabilities (NOK million)	31 Dec 2021	31 Dec 2020
Share capital and share premium	53	53
Other equity not recognised in P&L	9	17
Retained earnings	536	921
Total equity	598	990
Long-term debt	466	453
Long-term financial derivatives	$\Omega$	10
Deferred tax liabilities	92	90
Total long-term liabilities	559	552
Accounts payable and other short-term liab	483	409
Tax payable	43	33
Short-term debt	145	144
Short-term financial derivatives	$\Omega$	3
Total short-term liabilities	671	589
Total liabilities	1 2 3 0	1 142
Total equity and liabilities	1828	2 1 3 2

Consolidated income statement

NOKm	Q4 2021	Q4 2020	2021	2020	2019	2018	2017
Sales revenue	632	548	2 3 4 4	2052	1783	1655	1619
Other revenue	27	$5\phantom{.0}$	44	23	23	22	18
Total revenue	659	553	2 3 8 8	2075	1806	1677	1637
COGS	$-232$	$-184$	$-1133$	$-955$	$-844$	$-780$	$-744$
Personnel expenses	$-140$	$-124$	$-488$	$-439$	$-424$	$-405$	$-387$
D&A	$-29$	$-20$	$-90$	$-77$	$-70$	$-54$	$-54$
Freight and complaints	$-44$	$-45$	$-171$	$-163$	$-146$	$-143$	$-135$
Marketing	$-45$	$-42$	$-96$	$-93$	$-91$	$-72$	$-75$
Other gains (losses)	$-1$	$-2$	$\mathbf 0$		$-3$	$\mathbf{1}$	6
Other OPEX	$-98$	$-77$	$-179$	$-157$	$-156$	$-159$	$-154$
Total direct costs	$-589$	$-495$	$-2158$	$-1883$	$-1733$	$-1612$	$-1543$
EBIT	69	58	230	193	73	65	94
Net financials	$-4$	$\blacktriangleleft$	$-9$	$-33$	$-11$	$-9$	$-10$
Profit before tax	65	59	221	160	62	56	84
Tax	$-13$	$-13$	$-47$	$-35$	$-13$	$-9$	$-20$
Net profit	52	47	174	125	49	47	64

Byggma is set to continue demonstrated growth through identified growth avenues

Large growth potential for further consolidation within building material products

Several attractive M&A targets has been identified

Breakdown of identified M&A targets (# targets) Byggma M&A strategy and track record

Adjacent products New products

By

By revenue (2019)

product offering

• Adjacent products include wood fibreboards, particle and MDF boards, and wall panel
• New products include wind- and moisture barriers for roofs and walls, surface products, timber, decking and cladding panels
• Majority of the targets have revenues in the range of NOK 100-1,000m
• 4 targets have revenues exceeding NOK 1bn

Fragmented building material product market with large M&A potential

• Byggma has a strong M&A track record having completed 9 acquisitions since IPO in 1997
• ̶ The acquisitions have been highly successful and allowed Byggma to strengthen its position in established markets as well as expand the product offering and make Byggma a diversified provider of building material solutions
• ̶ Company integration has been a core focus and Byggma has successfully grown the companies' topline and profitability post implementation
• The Nordic building material market is highly fragmented with large potential for consolidation
• Going forward, Byggma intends to be a part of a wider industry consolidation and has identified a shortlist of 11 potential M&A targets with a combined revenue of approx. NOK 17.6bn1
• The shortlist includes companies with supplementary product offering as well as new product segments with significant potential for synergy realization
• ̶ Revenue synergies from capitalizing on Byggma's well-established and experienced sales and distribution channels to grow the revenues of the acquired companies
• ̶ Cost synergies from utilizing Byggma's organisation and operational experience

Investment highlights

	Market leading position	The leading Nordic provider of woodchip boards, decorative interior panels, wood fibre boards, MDF  interior walls & ceiling panels, and I-Beams Growing position in Europe and within adjacent product areas  Sales agreements with all major building materials chains 
	Strong underlying market	>90% of revenues in the Nordics  Large, stable and growing underlying market  The Norwegian building materials industry is a NOK 50bn market, expected to grow ~4% in 2022 
	Strong brands and broad portfolio of sustainable products	Recognized brands and continuous focus on product development  Diversified portfolio from commodity products to highly refined products  Utilizing renewable raw materials to provide sustainable building material solutions 
	Long history of growth	Long history of revenue growth (CAGR of 10% since 2000), both organically and through acquisitions  Improving profitability, from 4% EBIT in 2018 to >9% in 2020 and 2021, and with high cash conversion  High dividend capacity, with NOK 70m proposed for 2021. Policy of 30-50% of net income going forward. 
	Well positioned for further growth and cash generation	Well defined growth strategy within all business areas, both organic and inorganic  Large potential from transition to higher share of innovative and value-added products with higher average  sales price Set to leverage on demonstrated M&A capabilities – with several targets identified 

Large potential from recent product innovations

13 Note: 1) Product launched in October 2020; 2) Product launched in September 2020

Segment information

Sales revenue (NOKm)	Q4 2021	Q4 2020	2021	2020
Panel sales to external customers	399	373	1 5 8 8	1450
Beam sales to external customers	124	86	418	293
Window sales to external customers	69	55	229	214
Lighting sales to external customers	39	34	110	95
Net sales revenues for the Group	632	548	2 3 4 4	2052

Operating profit (NOKm)	Q4 2021	Q4 2020	2021	2020
Panel	47	43	168	163
Beam	17	8	56	26
Window	3	5	11	6
Lighting	4	6	5	5
Group / eliminations	$-2$	$-3$	$-10$	$-7$
Operating profit for the Group	69	58	230	193

Byggma still has ample available production capacity and high growth potential from value-added products

Company / brand	Key financials (2021)	Nominal production capacity	Available capacity	Growth potential	Other potential
		300,000 m3 / year		Large potential from transitioning to higher share of innovative/ value-added products with higher average sales price HIGH	Production capacity can be expanded by ~10% by extending the manufactoring line
		60,000 ton / year		Growth potential both through available production capacity and innovative, higher priced products such as "Proff Vegg" HIGH
		3.5 million m2 / year		Growth potential both through available production capacity and innovative, higher priced products such as HIGH "Fuktbestandig"	Wet Wall production to ramp up in 2022
		15 million running meters / year		Large potential through utilizing significant available production capacity. High international sales HIGH potential

Note 1: The numbers for Huntonit includes the beam revenue and costs still legally belonging to Huntonit AS

Note 2: The numbers for Masonite Beams include all revenue and costs related to the Beam segment, including the beam revenue and costs still legally belonging to Huntonit AS

Targeted approach towards environmentally friendly production and initiatives

16

Byggma's manufacturing and product offering contribute to a more environmentally friendly society

5.6%

The CO2 abatement from Byggmas board products corresponds to 5.6% of the Norway's total road traffic emission

47%

Masonite's I-beam systems use 47% less raw material compared to massive tree constructions

12%

Huntonit's specific energy consumption has been reduced by 12% over the last 5 years

48%

Forestia's new closed cooling system has contributed to 48% reduction in use of cooling water

Byggma takes an active role towards sustainability and responsible production

Byggma's main goal is to develop and deliver sustainable solutions based on renewable raw materials and unique competense. Sustainability is, and has always been, a core element in Byggma's business model and a natural part of its overarching goal. Management and Board of Directors in Byggma wish for sustainability to be a natural part of operations and innovation in the Byggma group

Leading Nordic presence, with growing international customer base

Strong topline and profitability improvements last few years

• Organic growth from 2015-2018, while the growth from 2018 is a combination of organic growth initiatives and the acquisition of Smartpanel (2018) and Byggform (2019), adding NOK 117m in revenues in 2019, and NOK 34m in 2020 (full-year effect of the Byggform acquisition)
• The growth in 2020 is partly related to realized market synergies from increased market share following the Smart Panel acquisition. Other growth drivers include change in product mix, volume increase (partly off-set by a drop in Europe), normal price increases and other (incl. currency)

Byggma has more than doubled its EBITDA and more than tripled its EBIT since 2018

• The strong improvement is primarily due to realization of synergies from the Smart Panel acquisition, product mix optimization and normal price increases. Byggma has seen an increase in raw material prices and experienced unfavorable currency development, but has been able to offset this by increase prices to end users and ultimately improve the margins
• In 2019, the EBITDA and EBIT have been adjusted for normalizations following the acquisition of Smartpanel in 2018

Robust cash conversion ratio

• Byggma has a history of strong cash flow generation over the last years which is set to continue going forward
• This has allowed the company to invest significantly in product innovation in addition to increased manufacturing capacity and efficiency
• Since 2016, annual Capex amounts to approx. NOK 100m while maintaining an attractive dividend capacity
• If desired, Byggma can manage annual maintenance Capex in the range of NOK 30- 50m and hence generate even stronger free cash flows going forward
• Byggma has targeted a long-term dividend payout ratio of minimum 30%-50%
• ̶ The company will pay out a higher dividend when possible after evaluating various growth opportunities

Consolidated cash flow statement

NOKm	2021	2020	2019	2018	2017
Operating activities
Cash flow from operations	193	230	102	94	205
Interest paid	$-23$	$-24$	$-21$	$-19$	$-17$
Interest received	3	5	7	$\overline{7}$	6
Taxes paid	$-34$	$-4$	$-9$	$-28$	$-13$
Cash flow from operating activities	139	207	79	53	181
Investing activities
Purchase of subsidiaries	$\overline{0}$	$\overline{0}$	$-21$	$\Omega$	$\Omega$
Purchase of fixed assets	$-89$	$-59$	$-90$	$-98$	$-107$
Sale of fixed assets	$\overline{0}$	$\overline{0}$	$\mathbf{1}$	$\mathbf{1}$	5
Purchase of non-tangible assets	$-2$	$-2$	$-2$	$-7$	$-10$
Group loans	39	$-27$		$\mathbf{0}$	$\overline{0}$
Cash flow from investing activities	$-52$	$-87$	$-113$	$-104$	$-112$
Financing activities
Repurchase of shares	$\overline{0}$	$\overline{0}$	$-4$	$-11$	$\overline{0}$
Dividend paid	$-559$	$-7$	$-7$	$-7$	$-36$
Cash flow distributed to shareholders	$-559$	$-7$	$-11$	$-18$	$-36$
Change in overdrafts	16	$-3$	$\overline{4}$	$\Omega$	$\Omega$
New debt raised	72	150	50	149	39
Debt down payment	$-67$	$-62$	$-49$	$-63$	$-34$
Change in interest bearing receivables	$\overline{0}$	$\overline{0}$	$-12$	$\Omega$	$\Omega$
Cash flow from external financing	20	85	$-7$	86	6
Cash flow from financing activities	$-538$	78	$-18$	68	$-30$
Change in cash and cash equivalents	$-451$	197	$-52$	17	38
Currency gains (losses)	$-4$	5	$-3$	$\mathbf{1}$	$\mathbf{1}$

Byggma has a rich history characterized by successful acquisitions and product innovations

Byggma operates 8 high-end manufacturing and distribution facilities

Huntonit Eiendom AS Location: Vennesla, Agder Total area: 78,112m2 Production area: 19,664m2 Year of construction: 1948-1988

Uldal AS (Birkeland Eiendom AS) Location: Birkenes, Agder Total area: 15,100m2 Production area: 4,930m2 Year of construction: 1967-1991

Forestia Eiendom AS Location: Våler, Innlandet Total area: 321,460m2 Production area: 21,079m2 Year of construction: 1969-1987 and 1997

Aneta Lighting AS Location: Kristiansand, Agder Total area: 6,300m2 Warehouse facility: 3,500m2

Aneta Lighting AB Location: Växjö, Sweden Total area: 31,728m2 Warehouse facility: 6,500m2 Year of construction: 1970 and 1979

Masonite Fastighet AB Location: Nordmaling, Sweden Total area: 187,585m2 Production area: 38,107m2 Year of construction: 1921-2001

Smartpanel AS Location: Fredrikstad, Viken Warehouse facility: 7,100m2 Production area: 13,700m2

AS Byggform Location: Slemmestad, Viken Year of construction: 1989

24 Note: Byggma also owns another manufacturing facility which is leased to a third party – see next slide

Experienced management team and organization

Geir Drangsland

• CEO in Byggma since 2009 and chairman from 2000-2009 Currently CEO of Investor AS, main shareholder in Byggma Previous roles include CFO in Idun AS, CFO in Elkjøp and
• MSc. in Economics and Business Administration from Norwegian Business School, BI

Roy Kenneth Grundetjern Head of IT

• CIO in Byggma since 2008
• Board member of Forestia, Smartpanel and Masonite Beams
• Former experience includes position as CEO at Hunonit and various managerial positions in both private and public sectors
• BSc. In Engineering and MBA from the University of Agder

Jens Unhammer CFO

CFO in Byggma since 2003 after joining as Finance Manager in

2000

• 12 years of experience from the Øglænd Group, including positions as finance director in Cubus AS and CFO of Fibo-Trespo AS
• MBA from the Norwegian Business School in Oslo (BI)

Richard Thompson Head of Logistics

• Head of Logistics in Byggma since 2011
• Joined Byggma 20 years ago, first as Manager customer service centre and later as Head of Logistics for Hunonit and Fibo-Trespo
• Bachelor in Economics from Business Academy in Stavanger

Terje Sagbakken

Forestia

Forestia

Erlend Jordet Knut Nilsen

Sales Director Huntonit CEO Huntonit

CEO Smartpanel

Sales Director Masonite VD Masonite Beams

Tore Hansen

Lighting

Egil Sandve

Torunn Mangseth

Marketing Director

Product development and innovation is conducted in each separate company on a continuous basis

Board of directors

Key takeaways