Earnings call transcript: BEWI Q3 2025 sees solid growth, stock dips

BEWI ASA reported its third-quarter earnings for 2025, showcasing a robust financial performance, although its stock dropped by 4.19% to 16.7 EUR. The company experienced a 6% increase in sales and a 12% rise in EBITDA, reflecting strong operational improvements. Despite these gains, the market reacted negatively, potentially due to broader economic concerns or sector-specific challenges.

Key Takeaways

• Q3 sales increased by 6% to 87 million EUR.
• EBITDA rose 12% to 23 million EUR, with margin improvement.
• Stock price fell by 4.19% post-earnings announcement.
• No specific financial guidance was provided for the upcoming quarters.
• Significant investments in recycling and automotive sectors.

Company Performance

BEWI ASA demonstrated solid performance in Q3 2025, with sales climbing 6% year-over-year to 87 million EUR. The company also reported a 12% increase in EBITDA, improving its margin from 10.8% to 11.4%. These results highlight BEWI's successful cost management and strategic focus on higher-margin segments.

Financial Highlights

• Revenue: 87 million EUR, up 6% YoY.
• EBITDA: 23 million EUR, up 12% YoY.
• EBITDA margin: Improved from 10.8% to 11.4%.
• Operating cash flow: 11.4 million EUR.
• Free cash flow: 9.5 million EUR.

Market Reaction

Despite BEWI's positive financial results, its stock price declined by 4.19% to 16.7 EUR. This drop occurred within a broader market context and might reflect investor caution regarding future economic conditions or sector-specific uncertainties. The stock remains closer to its 52-week low of 15.74 EUR, indicating potential investor concerns.

Outlook & Guidance

BEWI did not provide specific financial guidance for the upcoming quarters. However, the company is targeting a 15% EBITDA margin across its business segments and continues to invest in key growth areas, such as recycling and automotive components. The company has secured long-term financing to support these initiatives, including a 250 million EUR bond maturing in 2029.

Executive Commentary

CEO Christian emphasized the company's commitment to improving profitability, stating, "We will not be satisfied until we reach an average of about 15% EBITDA." He also highlighted the strategic importance of recycling, saying, "We are 100% confident that this is the solution for the future." These comments underline BEWI's focus on sustainability and operational efficiency.

Risks and Challenges

• Salary inflation and volume growth could increase costs.
• The automotive market faces challenges, despite BEWI's 25% sales increase.
• Potential macroeconomic pressures may impact future performance.
• Circular segment profitability remains a concern.
• Market consolidation efforts could face regulatory hurdles.

Q&A

During the earnings call, analysts inquired about the profitability challenges in the circular segment and the impact of salary inflation. BEWI confirmed a CAPEX run rate of 15-20 million EUR annually and emphasized a prudent market approach. These discussions reflect ongoing efforts to balance growth with cost management.

Full transcript - Bewi Asa (BEWI) Q3 2025:

Christian, CEO, BEWI: We have never just been passive waiting for a market recovery in BEWI. We have continuously worked on cost reductions and adapting our capacity. Although EBITDA is up this quarter, we are not satisfied with the Group's profitability. We will not be until we reach an average of about 15% EBITDA. The measures we have implemented earlier this year are already yielding positive results this quarter. We are working to expand this, and this will improve our profitability going forward. Even at the current market and volumes we see now. The effect will increase with the further volume increase in the market. Furthermore, we completed the merger of RAW and Unipol at the start of this quarter. This was the right decision for several reasons. It was the right decision for RAW, as it strengthens and makes the part of the business more competitive.

It was the right decision for BEWi, as we are now sharpening our focus on our core businesses around areas with higher margins. We have also been working to secure long-term financing for the Group, and Marie will talk more about this later on. With that, I'll hand the word over to you, Stein Inge, to talk us through the segments.

Stein Inge, Segment Leader, BEWI: Thank you, Christian. I will go through the results for our segments and take a look at some of the drivers for our markets. First, an overview of the segments. We have a very close collaboration with RAW and continue to consider ourselves integrated with a circular business model, even after we've reduced our ownership in RAW to 49%. Our share of RAW's net profit is now on a separate line below the EBITDA we report, together with the contribution from other partly owned companies. On a side note, all figures, including the comparable figures for last year, have been adjusted for this fact. After the merger in RAW, we are left with three segments. As you can see, insulation is our largest segment in terms of revenue, while packaging contributes the most to EBITDA.

In recent quarters, recycled content from circular has contributed to market success for both of these segments. Circular material contributes to volume growth and to results, especially in the insulation business in the Nordic countries. Let us take a look at each segment, starting with the insulation business. Here, as Christian mentioned, we have volume growth in most countries, despite the fact that most markets are still cautious and come from low levels. The Nordic region has a somewhat more positive development than Germany and the Netherlands, which is partly due to the fact that we have good traction for the recycled content, which is made possible by circular. The top line is virtually flat, with a 1% decline as a result of lower prices in the market.

EBITDA is down 6% from 10.6% in Q3 last year to 9.9% this year, primarily as a result of a higher cost level for the segment. We're not satisfied with this. As Christian mentioned, we have implemented a number of measures, and we will continue to do so to improve profitability. Nevertheless, the fundamental picture is positive. If you look at the market drivers for insulation and construction, there are two strong drivers that provide strong long-term potential here. Firstly, increased construction activity as a result of housing shortage in Europe. Secondly, a structural increase in demand for more energy-efficient buildings, where insulation is seen as the most efficient way to achieve this. Here we show an overview based on the latest available figures from Euroconstruct of estimated building permits in the Nordic countries, Benelux, and Germany, which together make up more than 70% of our turnover.

Expected annual growth from the next couple of years is about 5% in starting new construction. Over to the packaging business. Here we simply deliver a very strong quarter in most product groups. Revenue is up 13% to EUR 87 million as a result of increased volumes of fish boxes, components to heat pumps, and automotive components. We are increasing sales of components to the automotive industry by over 25%, despite the fact that car manufacturers in Europe are facing challenges at the moment. Our increase is partly a result of the investments we have made over the past years. I want to highlight three automotive investments. We have increased our own raw material production in Poland, and we have invested in two sites in Germany, both with large OEMs on the customer side.

This has already led to cost reductions of more than EUR 2 million on an annualized basis. We have done this to exploit opportunities in the market, and we do expect the investments to stop in line with the completion of these initiatives. The current forecast for next year is that there is EUR 4 million in remaining investments. This strengthens our automotive business, which now constitutes almost 30% of packaging components and with solid margins. We have the same EBITDA target of 15% for this part of the business. For the total segment, EBITDA increased by 18% from EUR 12.6 million in Q3 last year to EUR 14.8 million this year. The segment delivered a margin of 17% in this quarter. The packaging components segment is the most diversified we have, with different end markets. Food packaging is the biggest one, almost half of the segment.

These are first and foremost our fish boxes. The Norwegian business is the largest here, where the main market is boxes for fresh salmon. This accounts for more than half of the food packaging business. In addition, we have factories in Denmark, Portugal, the U.K., Finland, and the Netherlands that supply EPS boxes for the transport of fresh fish. Automotive components constitute 27%. Here are the indicators to look for in this market. Firstly, production of cars in Europe. Secondly, the structural growth in the use of EPP components in cars. Lightweighting all the parts in a car is a clear trend. It is worth noting that electric cars and cars in the premium segment use more EPP than other cars. We expect this trend to continue. The third area, heat pumps and HVAC, currently amounts to only 8%.

It is an area where we believe we will grow well in the future, linked to the structural demand for more energy-efficient buildings. Finally, the long tail called OTHER, which is 20% of packaging components. That includes protective packaging and other technical components. We see growth specifically in the medical and defense sectors, both are markets we are well positioned in. It is a bit difficult to point to generic drivers, but the general GDP growth is perhaps the most important here. Of course, each product has its own market dynamics. The circular business continues to move in the right direction, quarter by quarter. We are continuing to increase the collection of used EPS and have now collected approximately 40,000 tons in the past year, which we are very pleased with. Sales increased by 22% compared to the third quarter last year, from EUR 12.3 million to EUR 15.1 million.

The production and sales of recycled polystyrene is also increasing. This now accounts for about 40% of circular's turnover. EBITDA has improved by EUR 900,000 since Q3 last year, from minus EUR 1.6 million to minus EUR 0.7 million this quarter. However, today's low prices for EPS raw material make it more difficult for circular to achieve profitability. Circular has long struggled with negative EBITDA, and it has been challenging to find the right model here. With the measures we have implemented over the last year, we believe that we are on track to mend this. As mentioned, both in insulation and packaging, access to recycled raw material is becoming increasingly important. In practice, all our EPS products can be supplied with recycled material. We have the value chain to do this ourselves, and we are actually doing it at the moment.

The drivers for circular are partly the activity in the construction industry, where the majority of volumes go, but also regulatory requirement drives this market. With that, Marie, if you want to take us through the financials.

Marie, CFO, BEWI: Thank you, Stein Inge. I will take you through the financials. Overall, the sales for Q3 were up by 6%. This increase is mainly from the packaging business, but the circular business also contributes to this growth. Percentage-wise, it is circular that has the largest growth. The insulation business is relatively flat. As mentioned before, volumes were up, but sales prices were down following the lower raw material prices. EBITDA is up 12%, and the margin is up from 10.8% to 11.4%. It is the packaging and the circular businesses that contribute to this increase, while we do have a lower EBITDA for the insulation business. It is due to the higher cost levels.

If we then turn into the income statement, I would like you to bring attention to the cost of goods sold, approximately 42% of net sales to compare with 45% last year. This is explained by the lower raw material prices, but it's also so that we have a higher share of sales from packaging and components. Personnel expenses increases, and this is explained by salary increases. Please remember now that salary increases in some of the European countries are essentially higher compared to what we see in the Nordics. Of course, higher volumes, higher headcounts. We do have a new facility in automotive in Germany. Depreciations increases. This is primarily related to properties and the IFRS 16 accounting. We have the share of income from associated companies. This is BEWi's share of the net income in our joint ventures.

From this quarter, our ownership in RAW is reported on this line. In the quarter, RAW has a negative contribution of EUR 1 million. Net financial then came in at EUR 15.8 million. You need to remember that we have done a refinancing in the quarter. That means that we have had one-offs in relation to this of EUR 5.6 million. Underlying net financial is actually decreasing approximately 14%. You will find all the details around this in the note in the report, and that's note 10. That means that the loss from continued operation is EUR 10.1 million negative. Adjusted for the one-offs that we have in the financials, it's a negative EUR 4.5 million. That should be compared to EUR 9.2 million last year. Moving then into cash flow and CapEx. We have in the quarter an operating cash flow of EUR 11.4 million.

Q3 last year, we had a positive impact from the financing of our accounts receivable of EUR 41 million. This year, we have a negative impact of EUR 3.5 million, and that's also related then to the refinancing. Adjusted for this, you should compare EUR 15 million in operative cash flow this year to EUR 8 million last year. We have spent EUR 6.7 million in CAPEX. A smaller part of this is related to the customer projects within automotive, which Stein Inge just commented upon. That brings us to our free cash flow. With reference to what Christian mentioned earlier here today, we can see that we gradually improve our EBITDA. In the quarter, we do have an EBITDA of EUR 23 million. We have lease payments of approximately EUR 10 million. We have maintenance CAPEX, approximately EUR 4 million. These levels we consider to be relatively stable. Working capital fluctuate between the quarters.

is driven by seasonality, but it is relatively stable over time. With RAW no longer now consolidated into our books, and we do have the financing agreement for the accounts receivable, the volatility in working capital will decrease. This results then in a free cash flow in this quarter of EUR 9.5 million. With the new financing in place, we have net financing cost of approximately EUR 5 million. That this free cash flow should cover for. We end with the capital structure. It is well known that we have refinanced the group in this quarter, which means that we have secured long-time financing. This includes then a EUR 250 million bond with maturity in 2029. It is also an RCF of EUR 75 million with maturity in 2028. As a part of this refinancing, we also raised EUR 75 million in equity.

That together with the cash from the RAW transaction and the divestment of the trading leveraging is now decreasing. Other financial assets, it's a new item within net debt. This relates mainly then to the estimated value of the earnout agreement related to the RAW transaction. Please note here then that this is a discounted value. Cash and credits available by the end of the quarter now amount to approximately EUR 150 million. That includes then the EUR 72 million that we have in cash and EUR 75 million that we have in an unutilized RCF. With that, I leave the word back to Christian.

Christian, CEO, BEWI: Thank you, Marie. I'll then summarize and talk about our key priorities today and going forward. We in BEWI are delivering on our strategic priorities. We sharpen our focus on our core business, and we increase profitability across the group. Through the reduced ownership in RAW, as well as the sale of the food trading operations, we have now streamlined our structure. The strategic review of the automotive business is still ongoing. In the meantime, we have used the time on significantly strengthening this part of the business. This means that our key offering going forward is on energy-efficient solutions, including insulation, HVAC, as well as packaging. Furthermore, we will improve our profitability through continuous focus on improvements, as we always have done, and we will be the most competitive player in our industry going forward.

Yes, we believe that the construction industry will recover because there is a housing shortage, but we do not know how long this will take. I also want to be clear that we do not currently have any ongoing acquisition processes. That said, we will continue to consolidate the industry in which we operate. Acquisitions and strategic growth are in our DNA, and it is an important part of our strategy going forward as well. However, right now, the main focus is to improve profitability and to be in line with our financial targets. That includes our net debt to EBITDA ratio of trying to reach 2.5, so that we will be in a position to continue our growth journey. Finally, we have now secured refinancing and raised equity through our private placement.

Moving forward, we will continue to work hard to increase our EBITDA and thereby bring down our leverage further. In summary, we will continue to increase profitability at current volumes. Our packaging business continuously delivers strong results. We have secured long-term financing, and the long-term potential for our solution remains strong in a growing market. By that, I leave the word to you, Charlotte.

Marie, CFO, BEWI: Thank you, Christian. We will have a Q&A session. Please post your questions in the webcast console. I will read the questions we have received. The first one is from Herman Dahl in Nordea. Do the Q3 CAPEX give a good picture of the runway CAPEX level into 2026?

Christian, CEO, BEWI: As we have stated in the presentation also, we have invested in automotive in this year. We are now at the end of the investments in automotive. If you look at the other divisions, we are looking at a run rate between EUR 15-20 million, which also should be the run rate you would expect going forward in the next 12 months. The answer to the question is the run rate should be between EUR 15-20 million.

Marie, CFO, BEWI: Thank you, Christian. We have a couple of questions from Ivar Larsen. The first one is related to the circular segment. He says that the circular segment has been hampering the shareholders' return for five years. When do you say enough is enough?

Christian, CEO, BEWI: That is a good and difficult reflection or question. I think that, as we have stated clearly, it is not acceptable that we are losing money in circular. We have set forward a process where we are going to start, or we have started, and we have also improved the circular division, and we will continue to improve to get circular into a positive result. That is also a difficult and hard journey. I think when you put upon yourself to be responsible in the industry, it is not easy to change an industry. For example, when changing from cars to electrical cars, that takes time. Also, if you want to change from producing polymers to recycled polymers, it takes time. We are 100% confident that this is the solution for the future.

We see that customers now are demanding more and more recycled products. We are also convinced that we are going to, in the short run, get up to profitability in circular.

Marie, CFO, BEWI: Thank you, Christian. Another question from Ivar. Other external costs and personnel costs are up by 11% year over year. Why this sharp increase, Marie?

Yes. I think one, of course, we try to be as efficient and be careful on cost as much as possible. It is back to, again, that the volumes now are increasing. I think if you start with the personnel costs, it is easy. You can say that, yes, you have one-third of the increase that is coming from the inflation in salaries. You have one-third that is coming from volume growth. One-third is that we do have a new factory. That goes also for the other external costs. We do have more volumes in packaging. That means that, yes, cost for utilization increases. You have higher costs for transportation. You have higher costs for other materials in production besides the raw materials. It comes from the increasing volumes. That is the easy answer.

Thank you. This is something we are working on also, I guess.

At all times, of course.

Yes. So then a question from S. Fernandes, Sebastian. Thanks for the presentation. It feels like the full-year guidance is set very prudently, given the continued progress you are making, and even with the construction market still to show a market recovery. Would you say that is correct, Christian, I guess?

Christian, CEO, BEWI: We do not give a full-year guidance. I am many times, over and over again, recommended not to be exclusive about what we have done historically. I am not going to excuse that, but we were in a process many years ago where we did give guidance. We have said clearly that we are not going to give any guidance. We are going to inform the market about where we are and where we are going. That is what we are going to continue to do. Obviously, as every industry company like BEWI is, we are going to continue to be prudent in our way of thinking and think very prudent upon the market, not because of the external communication, but because we need to be very prudent in how we preserve our position as the cost leader in our industry.

To accomplish that, we need to be very careful in thinking too much about good markets ahead. Again, what we see is that we are in a better and better market, and we see no signs of that not continuing.

Marie, CFO, BEWI: Thank you, Christian. We have no further questions. We say thank you for joining us today and see you again in February.

Thank you.

Christian, CEO, BEWI: Thank you. Bye-bye.

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