Byggma ASA

Earnings Release • Feb 23, 2023

Q4 2022 results 22 February 2023

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 7 manufacturing facilities and distributes its products to all the leading building materials chains
• Byggma is headquartered in Vennesla and employs ~740 people in total
• The company has been listed on Oslo Stock Exchange since 1997 with ticker "BMA"

NOK 70m Paid out dividend in 2022

3 Note: 1) As of 21 February 2022

Note: 2) LTM = Last twelve months (Q1 2022 – Q4 2022). EBIT contains a one-off gain on a realized forward contract of NOK 76,5m related to purchase of shares in Norske Skog ASA.

#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

P&L Summary and Highlights

NOKm	Q4 2022	Q4 2022	2022	2021	2020
Sales revenue	560	632	2508	2344	2052
EBITDA	60	98	408	320	270
EBIT	39	70	326	233	193
Net financials	$-26$	$-4$	$-25$	$-9$	$-33$
Profit before tax	13	66	301	224	160
Tax	$-3$	$-13$	$-49$	$-48$	$-35$
Net profit	10	53	251	176	125

• Negative sales growth of 11.5% from Q4 2021 to Q4 2022
• EBIT margin of 7.0% in Q4 2022, compared to 11.1% in Q4 2021.
• Price increases implemented as of 1 October 2022 to compensate for increased prices on raw material and energy.
• CO2 compensation for 2021 and YTD 2022 is not booked pending approval.
• Forestia granted NOK 80 million from Innovasjon Norge to the project Forestia Carbon Sink, a new factory for reception and cleaning of wood waste to be reused in new woodchip boards. This project will be value enhancing for Forestia. It will also make the woodchip boards from Forestia even more circular because the wood waste will be material recycled into new boards and sequestrate CO2 instead of energy recovered and release CO2 into the atmosphere through combustion.

Consolidated balance sheet

Assets (NOK million)		31 Dec 2022 31 Dec 2021
Fixed assets	854	821
Investment property	175	195
Intangible assets	21	22
Deferred tax assets	4	5
Long-term financial derivatives	14
Long-term financial investments	1 0 7 8
Other long-term receivables	$\Omega$	$\Omega$
Total non-current assets	2 146	1044
Inventory	386	357
Customer and other short term receivables	349	446
Short-term financial assets		$\Omega$
Cash and cash equivavelents	37	71
Total current assets	774	874
Total assets	2 9 2 0	1918

• Solid balance and hidden reserves in real estate and land
• Equity ratio of 28.6% as per 31 December 2022

Equity and liabilities (NOK million)		31 Dec 2022 31 Dec 2021
Share capital and share premium	53	53
Other equity not recognised in P&L	16	9
Retained earnings	797	606
Total equity	834	668
Long-term debt	617	387
Long-term leasing obligations	280	79
Long-term financial derivatives		$\mathbf{0}$
Deferred tax liabilities	113	112
Total long-term liabilities	1 0 1 0	578
Accounts payable and other short-term liabilities	463	483
Tax payable	47	43
Short-term debt	546	126
Short-term leasing obligations	19	19
Short-term financial derivatives		$\Omega$
Total short-term liabilities	1 0 7 6	671
Total liabilities*	2086	1 250
Total equity and liabilities	2 9 2 0	1918
*Of which interest-bearing debt (long-term and short-term)	1 4 6 2	611
Net interest-bearing debt	1 4 2 5	540
*Of which interest-bearing debt (long-term and short-term) ex. leasing	1 1 6 3	513
Net interest-bearing debt ex. Leasing	1 1 2 6	442

Consolidated income statement

NOKm	2022	2021	2020	2019	2018	2017
Sales revenue	2 5 0 8	2 3 4 4	2052	1783	1655	1619
Other revenue	25	44	23	23	22	18
Total revenue	2 5 3 3	2 3 8 8	2075	1806	1677	1637
COGS	$-1196$	$-1133$	$-955$	$-844$	$-780$	$-744$
Personnel expenses	$-501$	$-488$	$-439$	$-424$	$-405$	$-387$
D&A	$-82$	$-87$	$-77$	$-70$	$-54$	$-54$
Freight and complaints	$-176$	$-171$	$-163$	$-146$	$-143$	$-135$
Marketing	$-104$	$-96$	$-93$	$-91$	$-72$	$-75$
Other gains (losses)	53	$\pmb{0}$	$\mathbf{1}$	$-3$	$\mathbf{1}$	$\,$ 6 $\,$
Other OPEX	$-201$	$-179$	$-157$	$-156$	$-159$	$-154$
Total direct costs	$-2207$	$-2155$	$-1883$	$-1733$	$-1612$	$-1543$
EBIT	326	233	193	73	65	94
Net financials	$-25$	$-9$	$-33$	$-11$	$-9$	$-10$
Profit before tax	301	224	160	62	56	84
Tax	$-49$	$-48$	$-35$	$-13$	$-9$	$-20$
Net profit	251	176	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	>80% of revenues in the Nordics  Large, stable and growing underlying market  The Norwegian building materials industry is a NOK 50bn market 
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 revenue growth (CAGR of >10% since 2000), both organically and through acquisitions  Improving profitability, from >9% EBIT in 2020 to >13%* in 2022, and with high cash conversion  High dividend capacity, with NOK 70m paid in 2022. Policy of 30-50% of net income going forward.  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 
Long history of growth
Well positioned for further growth and cash generation

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 2022	Q4 2021	2022	2021	2020
Panel sales to external customers	344	399	662	588	450
Beam sales to external customers	105	124	457	418	293
Window sales to external customers	80	69	291	229	214
Lighting sales to external customers	30	39	98	110	95
Net sales revenues for the Group	560	632	2 508	2 3 4 4	2052

Operating profit (NOKm)	Q4 2022	Q4 2021	H1 2022	2021*	2020
Panel	18	45	162	140	163
Beam	12	12	70	55	26
Window	6	4	19	11	6
Lighting	$\overline{0}$	4	$-6$	5 5	$\overline{5}$
Real Estate*	10 °	10 °	24	41	$\overline{0}$
Group / eliminations	$-6$	$-4$	57	$-18$	$-7$
Operating profit for the Group	39	70	326	233	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

5.8%

The CO2 abatement from Byggmas board products corresponds to 5.8% 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 and 2021 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), price increases and other (incl. currency)

Byggma has more than doubled its EBITDA and more than tripled its EBIT since 2019

• The strong improvement is primarily due to realization of synergies from the Smartpanel 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	2022	2021	2020	2019	2018	2017
Operating activities
Cash flow from operations	389	193	230	102	94	205
Interest paid	$-38$	$-23$	$-24$	$-21$	$-19$	$-17$
Interest received	6	3	5	$\overline{7}$	$\overline{7}$	6
Taxes paid	$-41$	$-34$	$-4$	$-9$	$-28$	$-13$
Cash flow from operating activities	316	139	207	79	53	181
Investing activities
Purchase of subsidiaries	$\theta$	$\mathbf{0}$	$\Omega$	$-21$	$\mathbf{0}$	$\Omega$
Purchase of fixed assets	$-129$	$-89$	$-59$	$-90$	$-98$	$-107$
Sale of fixed assets	15	$\overline{0}$	$\theta$	$\mathbf{1}$	$\mathbf{1}$	5
Purchase of non-tangible assets	$-2$	$-2$	$-2$	$-2$	$-7$	$-10$
Purchase of financial investments	$-1016$	$\overline{0}$	$\Omega$	$\theta$	$\overline{0}$	$\Omega$
Group loans	$\overline{0}$	39	$-27$		$\overline{0}$	$\Omega$
Cash flow from investing activities	$-1133$	$-52$	$-87$	$-113$	$-104$	$-112$
Financing activities
Repurchase of shares	$\overline{0}$	$\overline{0}$	$\theta$	$-4$	$-11$	$\theta$
Dividend paid	$-70$	$-559$	$-7$	$-7$	$-7$	$-36$
Cash flow distributed to shareholders	$-70$	$-559$	$-7$	$-11$	$-18$	$-36$
Change in overdrafts	73	16	$-3$	$\Delta$	$\theta$	$\Omega$
New debt raised	814	72	150	50	149	39
Debt down payment	$-88$	$-67$	$-62$	$-49$	$-63$	$-34$
Loan from related parties	54	$\mathbf{0}$	$\Omega$	$\overline{0}$	$\overline{0}$	$\mathbf{0}$
Change in interest bearing receivables	$\mathbf{0}$	$\overline{0}$	$\Omega$	$-12$	$\overline{0}$	$\Omega$
Cash flow from external financing	854	20	85	$-7$	86	6
Cash flow from financing activities	784	$-538$	78	$-18$	68	$-30$
Change in cash and cash equivalents	$-33$	$-451$	197	$-52$	17	38
Currency gains (losses)	$-1$	$-4$	5	$-3$	$\overline{1}$

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

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

Warehouse facility: 6,500m2

Aneta Lighting AB Location: Växjö, Sweden Total area: 31,728m2

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

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

Key takeaways