Indutrade AB (publ)

Thank you and good morning on our behalf as well. We are of course glad to present the strong Q4 and the full year 2022 report from Indutrade. And we will as normal start with a summary overall 2022. The Indutrade model once again demonstrated its strength, decentralization, linked with entrepreneurial leaders with a passion for business is a successful model for us and that model has been in place now for plus 40 years and is still proving to work well we had broad and strong demand with total growth in ordering take of 18 and 24 for net sales And we reached for us a respectful level of 27 billion SEK in overall net sales. We had a record high EBITDA margin in 2022 of 15.2% and reached 4.1 billion SEK. Again, a respectful level for us. And we achieved this, basically our companies achieved this despite very challenging business conditions. which I am sure all of you are aware of. Towards the later part of last year, we also increased our EBITDA margin target to be above 14%

We had lower operational cash flow than the year before. mainly due to the supply chain disruptions we have experienced. And we had a very successful acquisition year. We have, over some time, strengthened our acquisition capabilities, both on group level and in the business areas, and were able to acquire 16 great companies in 2022 with a total turnover of about 1.9 billion SEK.

We have also taken large steps forward in terms of sustainability and we have initiated scope 3 reporting now and also connected to the science-based targets initiative

The board is proposing a dividend of 2.6 SEC per share, which is an increase from previous year, which was 2.3 SEC per share.

And I would say that we are building a company with stronger structural capital, less dependency on individuals.

with a clear scalability for further sustainable profitable growth. Then turn to the highlights for the fourth quarter.

In summary, continued stable demand in terms of over intake, significant sales level growth,

and a really good profit level as well.

And it was actually so that the majority of our companies had a positive order development, but there was increased variations between companies and segments and markets. And we have now reached on a quarter four level 7.2 billion SEC in sales with a very strong order book. EBITDA increased in total with 29% to 1.1 billion SEC. And the EBITDA margin came in at 15%. And a year ago, it was 14.6%. And that's excluding one-off effects, and we will explain a bit more about this further on in the presentation. The inventory build-up trend we have seen is leveling off sequentially, but the cash flow significantly, or not significantly, slightly lower than the same period last year. Still worth to note that it was our second best cash flow quarter ever, so quite good anyway. We finalized four acquisitions in Q4, and we have also finalized three acquisitions so far in 2023. And we have maintained a strong financial position. Many of you, I think, are interested in our order intake situation, so I'll try to paint the picture for you a bit more here. So, as I said, demand was stable at the good level through the quarter and orders were organically unchanged versus a strong reference last year. If you remember Q421, we had an organic order intake increase of 15%. So the reference was quite difficult and still we were able to be stable with that level. And we continue to see good demand in many segments, but as I said, variation between companies. And customer segments that stand out positively are, again, I would say the process industry, the energy segment broadly, and also the medtech and pharma segments. And the companies exposed to the infrastructure and construction segment had the most challenging situation. And that's more the construction part rather than the infrastructure part. But we have also some companies in that segment with good demand.

The majority of our companies continue to show organic order growth. In the quarter, some more companies had growth and lack of growth, and aggregated orders grow organically in business area industrial components, in flow technology, and fluids and mechanical solutions. And the weaker development was in business area Benelux.

And that, I would say, was mostly due to challenging references last year with high order intake from the medtech and pharma segment.

pushed a bit by COVID-19 and also the infrastructure construction segment in that particular market.

Total growth in the quarter was 12%. Organic was unchanged. Acquisition effects plus 8% and currencies plus four.

So we are

obviously experiencing high interest rates, inflation, more difficult energy situation, and this will probably have some negative effect on the business climate going forward. But I'm still rather optimistic, and not least based on the transformational effect

sustainability impacts on the economy around us.

And if we start with the energy segment broadly, there is a lot of investments into renewable energy, into hydrogen-related projects. We see the early phases of new nuclear projects. There are quite a lot of investments linked to lessening the dependency on Russian gas, so building LNG terminals, et cetera. And our companies are having positive effects from this in everything from the pure sort products being built linked to these energy plants, and also the actual facilities and infrastructures around these plants. There is still a strong trend making brown products green, as you obviously know, in the transportation sector, in everything from passenger cars to commercial vehicles to construction vehicles. and aerospace and marine, everybody wants to be more energy efficient and electrification is increasing and all of this is having a lot of large capex investments in products, in infrastructure, in facilities where our products can gain business opportunities. And there are of course particular segments like mining, like steel, We see water and waste water investments becoming more efficient in terms of water usage and so on. All of this is business opportunities for a large number of industry companies. Even if the central banks are trying to push business climate down a bit in order to cope with inflation, there is quite a lot of opportunities to work with for our companies. If we then turn to net sales, as I said, the sales growth continued to be very strong during the quarter, and the positive development was also backed up by the strong backlog and slightly better supply chains we are experiencing. The supply chain issues are however not over and many companies still see long lead times from suppliers and components and product shortages. And the worst impact is still with business area measurement and sensor technology linked to more electronics content in their portfolio.

Net sales was 2% higher than orders in the quarter. And obviously, price is in this quarter a large component of the growth. And in our structure with a lot of different companies with different pricing methodology and so on, it's difficult to get an exact consolidated view of the balance between price and volume, but we estimate the pricing effects to be around the same as last quarter, and then we said about seven to eight percent, and that would then mean that the volume growth was around five to six percent in our estimate.

Total net sales up 26 percent versus last year, organically plus 13 percent, acquisitions plus seven, and currency plus six.

Q3, we had the plus 27% overall, and now sequentially an increase with plus 26%.

And these are our two best sales quarters in the last two years, so a very strong situation towards the end of 2022. also included a slide visualizing our sales over our main segments and we have We have singled out 12 particular segments, and you can see that we have three larger segments, being infrastructure and construction, medtech and pharmaceutical, and a broader engineering segment, and they are all above 15% of our sales mix. Among those three segments, I would say that the med tech and pharma segment is the one which is developing most positively and increasing. And then we have three segments between 5% and 10% of our sales mix, energy, process industry, and water and wastewater. And I think all of those three segments are very sort of important for us and geared for future growth. And then we have six segments a bit below 5% commercial vehicles, marine, the automotive aftermarket, food, pulp and paper, and mining and steel. And maybe stating that we had some smaller business linked to Russia in the automotive market so we had a decline in that segment but otherwise no really significant changes on a year-over-year basis. We are also trying to paint some sort of color in terms of where our growth is developing better or a bit more stable in a geographical country perspective. So we have built this in size order, you can say. So it starts with the Swedish flag and that's our largest market in terms of sales with a bit more than 6 billion SEK on an annual basis, 2022. And then comes UK and Ireland. And then Benelux, which is primarily the Netherlands, Finland, Denmark, Germany, Norway, and then Switzerland and Austria. Lastly, Asia and North America are not as large in our sales mix. And here you can see that Denmark has three pluses and the UK and Ireland also three pluses in terms of sales growth development and the driving force for that is It's the Medtech and Pharma segment in Denmark and primarily in Ireland, in the UK and Ireland total. So those industry segments are developing really well. Otherwise you see two pluses in basically all other markets except for Switzerland, Austria. and we are still having a good business in Switzerland, but the reference was quite difficult. We have had a really strong development in the Swiss process industry and also in the medtech and pharma industry in 2021.

So, mostly broadly, of a geographical sales development situation. If we then look at organic sales growth in a quarterly perspective and in a trend perspective, You can see that's been a strong sales trend development, and we are particularly happy about this since organic growth is a very high strategic priority for us, and you can see in the slide here now that we have grown nine consecutive quarters in terms of organic sales and it's been a stable and high growth rate and increasing Obviously, the combination of volume and price and the price impact has been higher towards the end of the trend development here. Also good to say that the organic growth has been in every business area and in most companies.

And the backlog is still strong. It's 24% higher than the end of 2021, and where 12% is an organic increase. If we then turn to our EBITDA development and situation, as I said before, in the quarter, EBITDA in total increased with 29%. where 15% was organic, 7% linked to acquisitions and 7% was currency related. And the EBITDA margin in the quarter was 15% versus 14.6% last year. But the underlying EBITDA, including One of those was 14.6% versus 15% last year. And the organic margin development was somewhat dampened by a slightly lower gross margin. And most of our companies are increasing their marketing and sales activity, product development activities. and hence the expense levels have gone up slightly. Underlying margin in newly acquired companies continue to be good and temporarily slightly lower due to some one-offs. We have had a situation with sort of early sales price increases before we experienced the full impact of increased raw material and component price increases into our inventories, and now that is coming more and more into effect and impacting the gross margin. But the gross margin came in still at, I think, a very good level, 34.9 percent, which

in a sort of historic perspective, a very strong level for industry.

If we then look at organic sales growth in a business area perspective, it's good to see that there was growth in all business areas. The strongest growth above 15% was in the business area, Benelux, in flow technology and industrial components. That was mostly driven by the energy segment and the tech and pharma segments.

Fluid and mechanical solutions and measurement and sensor technology in the UK. We also had strong growth with around 10%.

And again, Medtech and Pharma was a driving force, also Energy and some HVAC-related customers had a positive development. More dampened aggregated growth in Dutch and Finland. But still, a majority of the companies grow in those business areas.

And as I've said before, strong references last year in Switzerland and also in the Finnish process industry. sector we have for example seen quite good development in gas energy projects we have some companies involved in heat recovery steel generations with high pressure valves and

and related products. And gas energy projects is still very relevant as a balancing factor to renewable energy. I think that sector will continue to be developing in a good way. In the MedTech area, we have, for example, a leading company in the Nordic markets providing insulin pumps and dosing equipment for persons with the problems relating to this and are doing fantastic job in that market. We have also companies linked to insulin manufacturing. There is a very successful company, Danish company in insulin manufacturing and some of our companies are helping that Danish company with production equipment. But also other type of medtech areas, facility expansions in the UK linked to cardiology areas, and we see a lot of biopharma investments in Ireland, which has positive impact on some of our companies, some of our Other companies are involved in the semiconductors, micro lead areas, providing new production lines there, linked actually to smart glasses. And there is also manufacturing expansion in the food technology area, and so on and so forth. Also water and wastewater. A number of good examples in growing segments, which will continue to grow also going forward. EBITDA margin development for the business areas. The majority of our companies increased EBITDA margin versus last year. Strong growth in BA flow, Finland and the UK. And inflow was strong organic growth as the main driver.

And in Finland and UK, I would say, was more improved cross-margin levels. It was a bit dampened margin in several companies because of the slightly weaker gross margin, as I spoke about, and also linked to a higher activity level.

But again, the gross margin level, I think, is still at a good and high level. Underlying performance in newly acquired companies continues to be good. We acquired some companies towards the end of the year and had some acquisition related costs there which had some impact.

in fluid and mechanical solutions and the business area MST. Perhaps also worth to note that fluid mechanical solutions had some positive one-offs in 2021, making the reference a bit more difficult for them this year. You see in the slide that you UK stand out in terms of clearly lower level than the other business areas, which is unfortunate, and they haven't really bounced back to their pre-Brexit level.

The team is working hard in the UK, and I think

step by step, we will see a positive development and increase in the margin levels. So if we then turn to acquisitions, a very positive area for us and a successful

2022 we this is a large part of our strategic development and hence we have since some time strengthened our team both on group level and particularly on business area level and it was good to see that seven out of eight business areas acquired one or more companies during 2022 and We have also had Germany as a focused country for acquisitions and it was good to see now that we were able to make three acquisitions in Germany in 2022. Really good companies there. And Q4 in particular, we bought a larger company in Denmark, BPI, sales of around half a billion SEK and then we bought a very interesting company in Germany, Pallas. I would say that they are the global leaders in air quality measurements, measuring particles in the air with very innovative leading technology. They are very profitable and they have very high potential for continued growth organic growth development so a very interesting company also a company we we paid a higher multiple for multiple four and and a larger quite a large sum of money for us in in the trade standards but we have put ourselves in a position to do that now with the size of the company we have become.

So now and then, if we find a particularly interesting company, we can move up in terms of size and multiple level without having

too much of sort of impact on the aggregate levels for industry as a group.

We also acquired an Austrian company linked to the flow technology area where we have a very strong leading position in Europe. It's an area we are very familiar with. Also, quarter one has started off in a very good way. We've been able to already now close three good acquisitions. We bought Saks Lift in Denmark, providing lift tables to the European markets. We bought again in Germany, making hard metal microtools. And we bought a somewhat larger company in the Netherlands, SKS, in the flow technology product area, trading company with a good and strong market position there. So, yeah, very, very strong situation in terms of acquisitions and a good start of the year and also a positive perspective in terms of the pipeline we are working with. You can also see an overview in terms number of acquired company per year here, and the financial effects of acquisitions. We are now on a three-year average at

at around 15 companies per year, and that's basically the level we want to be at going forward now that we have strength and also the resources. And you can also see that some years ago, we were basically adding around 100 million SEC in EBITDA contributions from acquisitions. And then we took a step up around 2015, 16, 17 up to 150 million SEK. And now for the last two years, we have added around 250 million SEK in EBITDA contribution. So step by step, we have increased that contribution in a really good way. So by that, I'll leave the word over to Patrick elaborate more on the financials.

Thanks Bo. Yes, let's look at the financials a little bit more in detail. Total growth for orders and sales was 12 and 26% respectively in the quarter. For the full year orders grew 18% and sales 24% and full year sales amounted to 27 billion. And orders were 2% below sales in the quarter. But actually, if you look at the full year, orders were actually 2% higher than sales. So for the full year, an increased backlog, as also Bo talked about. Gross margin for the quarter was 34.9, which is a good level. But it is slightly lower than last year's, very high level. And the decline primarily comes from higher price components, more expensive components, materials, products that our companies purchased earlier during the year that is now sort of filtering through the inventory and ending up into the P&L. So it's not sort of a sign of a weaker pricing power from our companies. It's more sort of an effect from previous purchases, I would say.

And what also has an impact on the gross margin is the weak Swedish krona. As you know, we have a lot of trading companies in Sweden, and they buy a lot of their goods in euro, dollar, these products are getting more expensive of course.

But again I think the pricing power from our companies is still good that they are working with continuous price increases to safeguard gross margin and profit levels going forward. The gross margin was 34.7 versus 35% in 2021. EBITDA grew 29% in the quarter and 28% for the full year. EBITDA margin 15% versus 14.6% last year and with the support then from

Bo talked about, connected to earn-out adjustments and some goodwill.

The net positive effect of 25 million in the quarter. Full year margin, 15.2, which is the highest ever for us. If you move further down into the P&L, the higher interest rates and increased borrowing, of course, now increases also our finance net in the quarter.

But I think still it's coming from a low level. I think that's important to note. Tax costs increased with only 10%. in the quarter, so that's substantially less than the profit increase.

Last year, we had very high tax costs in the last quarter because of the tax rate change in the UK. Full year tax rate was 22%, and that's compared to 23% in 2021, so no big change. Earnings per share up 29% in the quarter and 28% for the full year. And looking at return measurements, return on capital employed improved to 23% versus 22% last year. It's mainly the higher results that's creating this return increase. Cash flow, I think that was good. It decreased somewhat versus last year, but it's actually the second highest level that we've had in the quarter. And full year cash flow was down 70% versus last year. And I'll come back to that on the next slide. And lastly, then, net debt EBITDA increased versus earlier this year and compared to last year, mainly because of the higher acquisition pace. But it's still not higher than more long-term historical levels. And the year then ended at 1.8 versus 1.4 in 2021. So by that we move to looking on the cash flow more in detail and as I said and it was a good level and you can see that from the graph it's actually the second highest ever in the quarter but it's a decline with six percent versus last year and The decrease versus last year is mainly related to working capital changes coming from, I would say, the supply chain constraints that we've seen during the year. But I think it's important that we have the increasing inventory levels during the year, but that is clearly leveling off in quarter four, which is, I think, good and feels good also for the coming year. working capital efficiency important for us and we measure that as working capital in relation to sales and that has deteriorated somewhat during the year because of the supply chain issues and related inventory increases but if you compare the levels working capital efficiency levels they are better than we were a couple of years um yes so we want to earnings per share uh strong growth 29 in the quarter from 1.44 to 1.86 uh 29 and if you look at the more long-term perspective we've had

we have an increase with 22 percent as an average the last three years and if you look at the five year period 19 percent per year as an eps increase Lastly, net debt.

And the interest-bearing net debt increased during the year, and it was at the level of $8.6 billion at the end of the quarter, end of the year, and the increase

is mainly connected to the high acquisition pace during the whole year but especially during the last quarter when we required a couple of bigger companies and we talked about and of course also the dampened operation of cash flow of course will also impact this but again net debt rate

They are still relatively stable. You can see the net debt equity in the graph, for instance, 67%. And if you look at the net debt EBITDA, 1.8. And if you, I think it's also important to reflect on how it looks if you exclude the earn-out liabilities. In conclusion, our financial position remains strong, relatively stable, low debt ratios, balanced debt maturity profile over a five-year period, and I think we have also good headroom between the short-term debt and the long-term guaranteed bank facilities we have. Then I thank you and be back to book.

Okay. Our group financial targets. I thought I should speak a bit briefly about those and primarily the growth target, which states that we should grow with the minimum 10% per year and that growth should come from organic growth potential in our companies and also an increasing acquisition ambition. And over time, as I said before, it's a strategic priority for us to step by step improve our organic growth capability. And we work very actively in the group and in our companies to do that with different types of support. But also we want to increase the number of acquisitions targeting these stable and profitable companies with leading positions in niche markets and again good prospects for organic growth. So we would prefer to be really seen also going forward as a very growth-oriented group, but also balancing more perhaps between organic growth and acquisition growth without sort of decreasing our ambition in terms of acquisitions, but more balancing since we are a much bigger group now than we were some years ago. We also fairly recently increased our EBITDA margin target from equal or about 12% over a business cycle to equal or about 14%. And to give you some sort of business cycle reference,

between 2018 and 2022, we have now a five-year average at 13.7%, so slightly below the target level. But our ambition is over the medium term to step-by-step try to improve and strengthen all-star EBITDA margin target.

But not drastically or significantly, but with smaller step of continuous improvement. Then I really want to finish off here by speaking a bit about our sustainability ambitions and efforts. We have really had good progress during 2022 and I would say dramatically increased our frequency of internal workshops and knowledge sharing activities.

It's a really good work in our local companies in terms of sustainability development.

We have added the KPIs and the companies have also started to report some scope three categories. I think it was a really good work. new and good milestone for us to commit to the science-based target initiative. If you take the broad ESG area, we have primarily singled out decarbonization as our focus area.

And that's obviously based on our materiality analysis and the individual materiality analysis in our companies.

And now we are really focusing to improve our CO2 footprint. And we do that in our processes, in our facilities. And not least, we are also having a lot of companies which really see sustainability as a clear business opportunity and more and more of our companies can express the CO2 impact of their offering towards their customers and hence basically supporting the customers to reduce their CO2 impact as well. So then the key takeaways, the summary for this presentation. Strong in the trade model based on our decentralization and balanced diversification. And again, really having a group of 200 companies with entrepreneurial managing directors who are really passionate about doing good business. We have a stable demand situation in general, really lower demand in particularly the construction building segments, but also experiencing increased variations. However, I would say that this green transformation is also creating a lot of business opportunities for our companies going forward. Continued sales increase and really good profit levels. and the strong order backlog supports good invoicing and profit development in the coming quarters, although knowing that the references will be step-by-step more difficult. Three acquisitions so far in 2023, and a good acquisition pipeline to work with. And overall, Indutrade has a strong platform for long-term, sustainable, profitable

growth going forward here. So by that, we end our formal presentation.

If you wish to ask a question, please dial star 5 on your telephone keypad. To enter the queue, If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Carl Bockvist from ABG. Please go ahead.

Thank you, and good morning, gentlemen. So my first one is just on... You came back to it several times on the call, of course, but when you look at the kind of organic earnings growth in relation to your organic sales growth, do you expect that even though you continue to implement price increases and similar aspects that the organic earnings could become a bit more difficult to match the sales increase given tougher reference numbers and the headwinds that we are seeing.

I think there has been situation now, as I said, where we were early on increasing our prices and then we had some room before we experienced our inventories being sort of filling up with components and raw materials with higher price levels and that has impacted gross margins a bit.

But

The level we have in terms of gross margin now is a high level, and I think a different level for us going forward.

So I think we have good track records. Our companies have good track records in defending gross margins in a good way. difficult to increase prices definitely but we are fortunate enough to have high quality brands, products, people and are quite confident that we can handle this situation in a good way.

Understood and just in terms of portfolio it might be a difficult question to answer but do you feel that we already high achieving relative high achieving companies in your portfolio are the ones that just keep on going at the high level or have you seen also again relative underperformers starting to make a climb towards the kind of median or going towards the top quartile in in recent quarters or recent years?

Yeah there is a dynamic movement in the portfolio and we are quite quite dedicated to really make sure that those with the performance levels which are not at the levels where we want them to be, we work very actively with those companies to improve their situations and I think we successfully have seen good development in many of those companies. Sometimes a few new companies can fall back into difficulties. It could be leadership issues, management issues, or some sort of business cycle issue or something like that. But overall, when I joined Indutrade in 2017, we ended 2016 with sales of 13 billion SEK and an everyday margin of 11.5%. And now we are closing year at 15.2% and 27 billion. So I think we have demonstrated that we really have the capability to over time improve companies in the portfolio.

We have added accretive sort of companies via acquisitions, but that's definitely not sort of explaining the improvement we have shown over the years.

So there is definitely movement in the portfolio.

positive and good, and sometimes some bad as well.

Understood. My final one is just on the acquisitions. I realize now in the latest quarter that, for example, one company in particular, at least when we look at press releases from the seller, for example, it seems that the multiple paid is a bit higher than usual. So can you just elaborate a bit on your thoughts on why you, let's say, went above your usual kind of multiple range?

Yeah. It's really linked to that we have a strategic priority of improving organic growth, and that's again linked to that I think organic growth is a financially sound way to develop the group, but it's also a way to de-risk the group strategically a bit and be not as

as sort of dependent on acquisitions growth going forward.

And then we have said that from time to time we can make a single acquisition which portrays really interesting profitable organic growth capabilities. abilities and potential going forward. So it was sort of linked to that, that we came across a really unique company, global leading technology, sizable, knowledgeable, great management team. So then we felt that we could take that opportunity and still not sort of... put the group in any type of risk or distort or numbers drastically or impact our financing situation drastically. So we have the size and capability to handle something like that now and then, but it's going to be seldom and we are still going to continue to predominantly make the normal sort of in the trade acquisitions going forward.

Understood. That's all for me. Thank you. Thank you.

The next question comes from Johan Dahl from Danske Bank. Please go ahead.

Good morning, gentlemen. Just a few questions. Back to the issue here of operating leverage. I presume in your reported invoicing and sales that a larger part is order book compared to to what extent is it a problem here with sort of a pricing that occurred in this order book quite some time ago? Is that an issue at all or are there other things which you talked about earlier here driving sort of the poor operating leverage?

No, I think we have already expressed our view on this. I don't know, Patrick, if you want to

elaborate anything more on it the order book has increased and it is at a good level but if you i mean if you really zoom out i think it's in detail in general have a relatively short order book and and i think that that that sort of we we have not committed to price levels in the order book which sort of which which means that profit levels will will decline going forward i don't think That's the case, and most of the companies have agile price models and can adjust prices upwards continuously. So I don't think it is a problem.

All right. Secondly, just on working capital, I think you talked about sort of initiatives to reduce working capital throughout. the second half here of 2022.

As we see the orders intake, I guess in volume terms, I guess it's down some 78% organically.

Does that change the priorities in terms of cash flow reduction here going into 2023? And secondly, also on potential cost-out initiatives, whether that's up on the table to, you know, more compared to previously?

Yeah, we... The first question was that, now again, you said...

I mean, it's always interesting for a sort of decentralized company like InterTrade, how you drive initiatives to improve cash flow, sort of off the working capital. You know, we all see the brilliant slides here. But it just seems as if you've talked about producing working capital for quite some time now, orders are looking weaker here. So I'm just interested in knowing how that changes your priority.

But I would say that we had primarily a strong capital efficiency initiative, inventory reduction initiative prior to COVID and prior

to all of these supply chain disruptions and we made great impact and moved forward in this area in terms of knowledge and how to work the importance of it and so on and so forth.

take a half step back and open up for building some safety stocks because of the situation.

And since we are experiencing a better situation now, even if there are still some problems, we are really turning up the

emphasis on reducing inventory levels and working with capital efficiency again now. So I'm very confident that we will see improvements in this area in 2023. There is obviously an inflationary effect in the inventory but there is also a volume effect. So step by step there will be capital released definitely from inventories in

2023 and and you want uh sort of the question on how should we work with this it's of course both from a more general perspective where we talk talk about this and and and uh explain sort of the the importance of it and and and uh highlight things for for both companies and business areas but then you you need to remember that we said that that it more than half of the companies are still showing order growth in quarter four. So it needs to be a sort of a company-specific activity. And that, of course, we identify companies which have a more challenging situation and we make sure that the discussions are held in their board on what they do to get into a better situation. So it's not sort of a generic activity for the whole group.

Yeah, okay. But you're right in reading in sort of that organic volumes. If you look on the order intake, it's down some 7-8%. Is that just the right way of looking at it?

Yeah, you're right, of course, that underlying volume is, and that, of course, also differs a lot by company by company, and we still have companies with also pure volume growth. But you're right, that demand is slower now, and that's why, of course, the capital I mentioned is higher up on the agenda, and we are, for sure, working with business areas and companies to make sure that

the companies standing out with the more problematic situation are really looking into this issue and have the right actions in place. That's true.

Thanks. The next question comes from Robert Redding from Carnegie. Please go ahead.

All right, so two questions. First, on those Evita models, they were adjusted down slightly year over year.

We talked about costs more than just being down and domestic costs coming up. So that sort of sounded to me like Evita models were down, down year over year organically, but... It was still growing faster than sales organically. So organically, the monies were up slightly year over year. So I guess the acquisitions that drove the mix of margins and the acquisitions that drove the margin lower year over year was those acquisition costs. Could you say something about that?

Well, if you take acquisition, the newly acquired companies as the first, I mean, if you look at an overview of the numbers, they are basically in line with group average, profits growing as much as sales. That is, of course, a good, decent level, but slightly lower than we have seen in the last quarters. But that, I would say, is more temporary effects, primarily acquisition costs and also some sort of initial costs that was taken by a couple of the newer companies coming

coming into the group. So underlying, we are still active. I think that's the big message on acquisitions, also in the fourth quarter.

Looking at the organic dimension, and if you take away the one-offs, the earn-out adjustments, the goodwill items, we are slightly slightly lower on organic leverage, which has also been the case last quarter. So it is slightly lower and then comes from gross margins being a bit lower and activity levels pushing up expenses, I would say. But I think also here the comparisons are relatively low. If you go into 2021, you still have pandemics effect and low activity levels. So I think it's understandable that you get this more flat dish development on the organic side. I don't know if that was answered.

Yeah, I got it. Perfect. And then on that order intake, I also sort of struggled a little bit.

You're right that the order backlog is historically large. That makes you confident not just about Q1, but the next few quarters. but I'm still there with the zero organic growth in order intake. So what's the comparisons on ordering take very tough or should we expect that zero organic growth in order intake should translate into zero organic sales growth in seven quarters?

I think It's difficult now to talk about an outlook in terms of order intake, and we obviously don't really guide in any details regarding that. But there are some clearly sort of decisive movements by central banks, obviously, as you know, to bring inflation down, which will have impact on certain segments. which are perhaps interest rates, where that has a big part of the calculations and so on. But I see, as I said in my presentation, a lot of opportunity linked to a broad sustainability green transformation in the economy driving forward.

It's going to be stable, flat, or slightly decreasing or increasing. It's probably not going to improve drastically, you know, in Q1, Q2 versus Q4, but it's not going to be a drastically more negative marketplace, I don't think. All right. Thanks so much.

The next question comes from Carl Ragnastam from Nordea. Please go ahead.

Good morning. It's Carl here from Nordea.

First,

you guided that construction slash infra is developing a bit softish.

Is it possible to quantify whether you saw organic growth in that sub-segment during the quarter and could also give some flavor on how that end market's order intake developed

during q4 perhaps also during q1 whether you have seen an accelerated negative order from that market in entering q1 if you saw on the on a i can't remember which page but

We had a slide over the different segments where infrastructure and construction was the biggest segments, up towards 20% of our sales, just below that, and that construction is

is a smaller part, if I say, so the infrastructure dimension is bigger, so we don't follow, or at least I don't have that number, but maybe construction as such is four or 5% of our total mix.

And we have had companies perhaps more companies with a bit of declining order intake into that segment in Q4, but there has also been some companies gaining order and having a positive situation in terms of construction actually. So it's a quite mixed picture, but overall slightly negative would be my estimate in Q4 organically. and how that will develop going forward. There are some constructions which have to be done driven by certain pressing situation, I guess, in different cities and towns, municipalities and so on. And there are definitely some which will be delayed and starting of private homes that seems to be slowing down more dramatically than perhaps larger residential areas.

I think also in the infrastructure and construction area there is a handful of companies with really good backlogs going into 2023 as well. So even though we have a general softer demand situation, I think invoicing can still also be held up relatively good in a weaker climate for a couple of quarters.

Okay, very good. And also looking at your medtech farm as an aggregate, if you were to sort of exclude the fairly significant, I guess, in the quarter deliveries to the NOVO project, what organic growth would you underline, see in that sort of

and the market in the quarter. That calculation we can't give you. I don't have that. But there are a lot of other sort of customers and products that are driving the MedTech growth.

a good contribution but there are also absolutely i think okay so you see underlying good growth anyway in the metric that's good and and maybe you mentioned touched upon it later the call but could you perhaps mention what's behind the good will write down and and also gives some flavor on the positive continued consideration comes from just a few companies or sectors or where it comes from basically.

The routine we have is that when we have companies not reaching their earn out we also then do an impairment test and And I would say, in general, first of all, most of the companies, I don't know, I have a percentage, but the clear majority of the companies reach their earn-out, even though the plans are normally ambitious.

So I think that's the first thing to mention. Then there are a handful of companies, of course, that don't reach their earn-out in full, and then we do the good will testing. And there are a couple of companies, of course, with really high ambition coming into inter-trade and that impacts then how much good will we book. And sometimes we

need to adjust it a little bit. But all in all, I mean, we're talking about one or two companies of the total, if you look at the total earn-out liability we have right now, it's 1.2 billion.

So if you zoom out, it's a very small percentage, I would say.

From what segment would you say that those one to two companies is in?

If you look at it, I think it's relatively broad. It's not one or two segments. I don't have that, to be honest.

Okay, perfect. And the final one, I mean, you closed just about 1.8 billion in acquired sales last year. With, of course, the turbulence, I mean, with the interest rate, etc. Is it realistic to reach 1.8 in 2023 as well? Obviously, you had a good start with two nice acquisitions here, but is it realistic to come up to that level with perhaps buyers and sellers having a tough time to meet?

It's not unrealistic. So that it is realistic. So we have a good pipeline. So I would find that realistic.

Okay, very good. Thank you.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Adam, we thank you for listening and being engaged with good questions. and here by then we end the call and wish you a nice day.