Beijer Ref’s heating, ventilation and air conditioning systems help companies around the world get the temperature just right with efficiency.
When you walk into a shopping center on a blistering hot summer day, that refreshing blast of cold air feels like a basic necessity. Similarly, for companies around the world, getting the temperature right with efficiency has increasingly become a required cost of doing business amid the challenges created by climate change.
For Beijer Ref, solving that conundrum is the foundation for a thriving global business. The company, based in Malmö, Sweden, is a wholesaler of heating, ventilation, air-conditioning (HVAC) and commercial refrigeration systems. Yet it hasn’t simply ridden the wave of demand for sustainable climate-control systems. Over the last 20 years, Beijer Ref deployed an aggressive corporate strategy by completing more than 50 takeovers around the world.
“By scooping up companies in a fragmented market, Beijer Ref created a global platform that has bolstered its brand and business in 45 markets,” says AllianceBernstein’s Robert Hofmann, Portfolio Manager of European and Global Growth. “M&A is tough to do, but they’ve done it well in a market that’s benefiting from powerful, long-term growth drivers.”
Climate Change Is Driving Growth
Climate change has been a boon for Beijer Ref’s core products. Air-conditioning systems are becoming commonplace in countries that simply didn’t need them in the past. Regulation is leading to a phaseout of harmful gases, known as hydrofluorocarbons, in refrigeration systems. And a global push for energy efficiency has boosted demand from a growing list of customers around the world for sophisticated HVAC systems.
The company may not be a household name outside the industry, but its history stretches back to the 19th century. In 1866, Firma G Beijer was established as a trading company in Malmö. Ironically, the company traded heavily in coal and coke for decades, followed by oil during the 1950s and on—the very fossil fuels that ignited global warming. In the early 2000s it expanded into the refrigeration wholesale business, first in the Nordic region, then in Central Europe, to establish an industry-leading position across Europe. Today, the company generates 66% of its revenues in Europe, with another 18% in Asia-Pacific and 16% in North America—a new market, which it entered in 2022.
Steady Revenues from the Aftermarket
While the takeover strategy has added scale that supports competitive advantages, it’s not enough for consistent growth. For that, Beijer Ref relies on a business model based on a broad array of products, a vast network of more than 500 branches and more than 200,000 customers.
These features have helped Beijer Ref secure better pricing from its suppliers, which has often translated into gross margin improvements for its acquired businesses. What’s more, once its systems are installed, Beijer Ref enjoys a steady stream of business from the aftermarket for maintenance and replacement parts, which now accounts for most of its revenues.
“We think this is a high-quality business model that offers attractive potential for equity investors,” says Hofmann. “Consistent execution by management in an industry enjoying solid demand drivers is a great recipe for future growth potential.”
