Thursday, 17 February 2022

NIBE Industrier - Full Year Results

NIBE is a heating technology company based in Sweden. It has three basic business areas - Element, Climate Solutions and Stoves. Climate is the fastest growing segment and over the past year accounted for around 2/3rds of sales and 72% of the groups profits. Clearly climate change is rising to the top of the political agenda on a global basis and the company is well positioned to take advantage of the opportunities this provides - especially in the field of heat pumps which will become an option for heating our homes as an alternative to fossil fuels such as natural gas. It is one of the leading companies in Europe and North America in the area of sustainable solutions for domestic heating.

The company has been trading for over 70 years and has a long-standing ethos of working on sustainable solutions and energy efficiency. It was floated on the stockmarket in 1997 and has grown sales at an average of 18% p.a. over this period with an ever increasing global presence.

Heat pumps and related technology are tried and tested solutions for space heating in Scandinavian countries but relatively unknown in many parts of the world. Many countries, including the UK are actively looking at ways to decarbonise the domestic heating sector which accounts for around 40% of carbon emissions.


Climate change is the greatest challenge of our time. We need to reduce greenhouse gas emissions by 50% by 2030 compared to 2010 levels to keep on track for net zero by 2050. All of the products offered by the company are designed to make a significant contribution to tackle climate change. They offer sustainable, energy-efficient solutions such as heat pumps that reduce energy consumption by up to 80% and reduce GHG emissions in all types of buildings both domestic and commercial.

Last year, the EU announced their 'Green Deal' and proposals to target net zero carbon emissions by 2050. A central part of the strategy will be the goal to decarbonise the energy sector and prioritise energy efficiency and transition to a power sector based on renewable energy. In the US, the new Biden administration has pledged to cut greenhouse gas emissions by at least 50% by 2030. This is double the country's previous commitment under the 2015 Paris agreement.

Heat Pumps

The largest sector for the group is climate solutions and within this sector, the largest element is heat pumps. These pumps extract the stored energy from the sun contained in the soil or air and transfer this energy indoors to provide indoor heat as well as hot water. The two main types of heat pump are ground source where pipes are laid under the soil and air source where heat is extracted directly from the air.

In the UK (and much of Europe) around 85% of our homes are heated by gas central heating. However we have legislated for net zero emissions by 2050 and will need to find alternative ways to heat the nations homes as fossil gas (fossil fuel) will not be an option. We have already ruled out gas central heating for all new homes built after 2024 so electric heat pumps (as well as green hydrogen and battery storage) could play a big part in the huge transition of our energy use.

Air Source Heat Pump

The UK still offers financial incentives to install a heat pump via its Renewable Heat Incentive. This covers a period of 7 years from installation and will provide payments for a typical home of £1,300 p.a for air source heat pump and a higher figure of £3,300 p.a. for a ground source heat pump. In addition there will be a significant saving on heating bills. These incentives will go a long way towards the costs of installing a heat pump system which range between £6,000 for air source and maybe up to £20,000 for a ground source heat pump. However,the scheme is due to be closed from March 2022 and will be replaced by a new scheme offering a grant of £5,000. The aim is to offer 30,000 grants in each of the first three years on a first come first serve basis. (see article)

Obviously the demand for solutions which support the switch from fossil fuels to renewables will grow and grow. As the market grows so prices fall which in turn creates greater demand. Companies like NIBE who have a clear commitment to sustainable solutions will be the likely beneficiaries of the transition to a new way of doing things. This is why I have decided to add this company to my portfolio.

Results for 2021

The company have this week released full year results for 2021 (link via company website).

Combined sales increased by 13.6% to SEK 30.8bn and generated net profits of SEK 4.3bn which reflects a margin of 14%. The company pays dividends which will increased by 29% this year to SEK 0.5 per share after taking account of the 4:1 share split (subject to FX considerations for UK shareholders!).

Given the backdrop of the global pandemic, this has been an excellent performance and another step closer to achieving the sales goal of 40bn by 2025.

The shares were added to my green portfolio in June 2020 at the price of SEK 50 and have advanced steadily to reach an all-time high of SEK 135 by the end of 2021 - a gain of 170% plus dividend. The shares have retreated quite sharply in recent weeks and I may well look at a top up around the current price of SEK 85. The holdings currently makes up around 8% of my green portfolio.

NIBE - One year share price

From what I have seen so far, this appears to be a very well run and profitable company with a focus on providing solutions to the global problem of climate change. As the world increasingly moves away from its dependence on fossil fuels, this will provide huge opportunities for growth from companies such as NIBE which offers ready-made, energy efficient systems using renewable energy.

The biggest challenge we face is the reduction of greenhouse gas emissions to slow down the current rate of climate change. There is now a growing awareness of the changing climate and the rise in extreme weather which threatens our living conditions, biodiversity and political stability. NIBE and its products will increasingly be part of the solution and is a good example of how businesses are an essential part of solving the climate crisis we face.

This is likely to be a long term hold for my portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

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