Welcome to the Aalberts Full Year Results 2022 webcast. All participants in the call are in listen only mode. Questions can be asked after the presentation. Now I would like to hand you over to your host, Mr. Wim Pelsma, the CEO of Aalberts N.V. to begin today's presentation. Please go ahead, sir.
Yes, good morning. Welcome ladies and gentlemen, joining our webcast of today. The agenda for today is that we go through Aalberts and also the operational developments, and then of course, the financial development of the year. We will also discuss the outlook, how we look forward towards 2023, and hopefully we have a lot of questions which we can answer. Coming to Aalberts. Yeah, you will find Aalberts where technology matters and real progress can be made. I think, also in 2022, you can see that focusing on the right markets, innovation, continuously improving the portfolio, brings us to a higher performance of the total company. The brand Aalberts, where does it stand for? It stands for that we engineer mission-critical technologies enabling a clean, smart, and responsible future.
Also in 2022, the second part, again, proved to be very true that for us, good is never good enough. We are a company who is, who goes beyond the line of duty. It needs a tremendous effort every time to overcome all the challenges we also had in 2022. I talk about supply chain issues, I talk about labor shortages, but also the inflation we had to tackle actually from the summer onwards, very aggressively to make these results. One of the biggest synergies we have in the group, when you would like to use that word, is that we exchange a tremendous amount of knowledge.
We could create greatness through sharing that knowledge on many parts in the business, from best practices to technology, innovations, and that makes that we are one company. Endless we pursuit of our excellence every day. That's the essence of Aalberts. Our way of value creation, as we also did last year, we focus on our Aalberts playing field, where we pursue, you could say four end markets with our mission critical technologies, where we focus more and more on these markets and also with our technologies and get more and more a better market position. Our culture, our way of working, our playbook, our management, our...
We sometimes call it our way of working, our handbook, that good is never good enough, is continuously improving our results and continuously improving the margin, generating cash investing in new activities, focusing these activities, and that leads to compounding returns. All guided by our culture, the Aalberts Way, winning with people, where we share a lot of knowledge. This brings us to, yeah, the also again, in 2022, the record results we made, and we are relentless in that pursuit of excellence every day. That's, that's how we create these results. Our playing field, of course, I think a lot of people know that of course, we engineer mission-critical technologies enabling a clean, smart, and responsible future.
I will come back to that also in our sustainable entrepreneurship progress. We focus on four end markets. We are shaping eco-friendly buildings. We are increasing semicon efficiency. We are driving sustainable transportation and enhancing our industrial niches. Within these markets, you will find Aalberts, where technology really matters, where we can make progress through innovations, through our customer contacts, through our uniqueness in technology, but also in our uniqueness in our manufacturing. That combination, that's our playing field. We, we brought a lot of focus to the business, and we will do that also in the future. The Aalberts playbook. Good is never good enough. For us, it does mean that we want to win with the best teams.
That's a continuous challenge to improve our teams to also bring the talent to other positions in the companies. Our operational excellence and leverage what we pursue every day. We have to keep on doing that to improve our margin, but also to improve our position in our manufacturing from a service point of view towards our customers. It's a continuous improvement which we pursue, and that leads to a strong cash conversion, which we want to reinvest on a very disciplined way. Also last year, we invested in 2022, we invested EUR 200 million in equipment to actually to facilitate the growth for the future, but also to drive our innovations. Looking to the portfolio every day, can we improve that? Where do we make our margin?
What is the margin we can pursue in the future situation? Yeah, we have the mentality that when the margin is not able, that we can't, improve that or we can't grow the business, that we should step out of that business. That's a continuous, actually, situation which you have to pursue. Winning with the best teams, coming back to that and, is that we're also very proud that we developed last year 550 talents inside the group, where 21% was promoted to other positions in the group. Also through the segments and through the technology clusters, we moved a lot of people. This gives a lot of energy in the company with all the same culture. Yeah, you need that. You need new ideas.
You need to move people to other positions because that's creating ideas. That's driving also the innovations, because a lot of the growth we generated also last year, and I said it many times, is coming through the driving our innovations. The innovation roadmaps, which we started seven, eight years ago, are really paying off. That's a big part of the organic growth we generated. We, you can also see the picture on this page, the relentless pursuit of excellence, the focus, and that gives the compounding returns. Driven by entrepreneurship and the relentless pursuit of excellence. This is culture. This is our playbook every day. The Aalberts way, I already described it. Greatness is made of shared knowledge. That's what we do.
Yeah, the first, let's say the first ball, we call it, but the first item is be an entrepreneur, take ownership, go for excellence, share and learn, and of course, act with integrity. Very important. The Aalberts way, winning with people, that's how we drive our culture. That's how we win in our positions every day. It's, it's in my opinion, the biggest success we also created, that the whole company is more and more behind this culture and that we also drive, therefore, the brand of Aalberts every day, combined with this great culture, where greatness is made of shared knowledge. We do it all together. Now, the strategy and objectives we presented in December 2021, and, of course, not changed because we are busy to execute this strategy.
It was the first year, 2022. Yeah, the strategy is that we accelerate value created with high entry barriers, pricing power. Again, I think in 2022, we proved that we have pricing power, yeah, because the inflation was very high and is still high, but we were able to keep our margin, our added value margin on a high level of 62.4%. The second point is we have to create sustainable, profitable growth with high added value margins, EBIT margins, innovation rates. Also there, we saw a good progress in 2022, but we are not there compared to the goal we have eventually.
As I already mentioned, driving operational excellence and portfolio optimization is very important to continuously improve and also achieving world-class operations, where we still have a lot to do to come there. Allocating capital in a disciplined way, very important. Where do you allocate the capital? The decision you make will have effect after one or two years, the growth or the improvement of your profit. Sustainable entrepreneurship, we added to our strategy and objectives with clear impact and commitment. We see, I will have a slide more later, that we really made progress there. We went to roughly 68% of our revenue is now linked, related to Sustainable Development Goals, the sub goals we have defined.
Yeah, that's really going the right direction. That means that for us, sustainable and sustainability and sustainable entrepreneurship is really integrated in our strategy. That's really the case. We drive the business also in that direction. To do that, we need a very open, pragmatic culture, lean structure, and using the Aalberts strength and the Aalberts brand and the Aalberts culture to bring that all together, because therefore, this the essence of Aalberts is also so important that people are behind that. That we, that our open and pragmatic culture, that's how we started the company, that we also keep that, huh? because that's also, yeah, how you create the results and utilizing these strengths.
The objectives we defined in December is that organically, a revenue growth annually of 4%-6%. EBIT margin, our goal is 16%-18%. ROCE 18%-20%. Innovation rate more than 20, we are now at 17. SDG rate more than 70, we are now at 68. A leverage ratio be below 2.5. Also the EBIT margin, we are now at 15.5% and our goal is of course to bring it to between 16% and 18%. Organic growth, we showed 8.7% in 2022. We are above the 4%-6% and the ROCE, of course, because we invested in additional inventory and also we increased our CapEx, we are below our target.
In 2023, we will lower our inventory again because the supply chain issues are more and more resolved, what we see. We also can generate more cash in 2023. Also that KPI will then become better towards our goals. Still, our aim is to go to 2026 or earlier to reach these targets. We still have a few years to go. Operational development. Very important slide. The Aalberts highlights. First time we hit more than EUR 3 billion revenue. That's. But you know, for us, it's not about revenue. For us, it's about results.
We are proud that we can show EUR 500 million EBIT performance is 10% more than last year. We had many challenges to overcome. Our added value margin, very important. We hit 62.4%, so we were even able to increase it a little bit compared to 2021 with 0.2%. Our EBIT margin ended on 15.5%, also an increase of 0.3%. I think half a billion EBIT. That sounds nice. Net profit, we realized EUR 372 million, also 10% up. The earnings per share, yeah, 3.37. That was 10% more than EUR 305 we had in 2021.
Also our dividend, we want to propose to the general meeting EUR 1.11. CapEx, as already guided also during our capital markets day, will go up because we have so many business development plans at the moment to drive growth organically. We ended up with an increase of 38% to more than EUR 200 million. Our expectation is that that will go further up this year. We have a strong balance sheet, so we will continue investing. We see also that we made a difference there compared to many competitors who had, like us, needed also more working capital to drive their business. We are able to having more working capital, but also to keep on investing. That, I think, will make a difference in the coming years.
We see that already. ROCE, as explained, is down because we invested in more capital expenditure, but especially, and my colleague Arno will explain it also in additional inventory because of the supply chain issues. We decided that actually already in September 2021. When I look back, it was a very good decision because we were able to grow our business, keep our market position, strengthen our market positions organically, and that in the end, ended also in a 9% organic revenue growth in 2022 on top of the already double-digit organic growth we realized in 2021.
Do not forget, we also did three acquisitions in 2022, and 2 divestments that also we spent money on to strengthen our position, especially in hydronic flow control and advanced mechatronics. Very important to mention also is our free cash flow. Due to the fact that we invested in additional inventory and therefore more working capital, and we invested in more CapEx, free cash flow was down compared to 21, but we guided that already in the last year. We expect this year that we will see a reduction of our inventory, especially also in IDAs, DDO, and because that's the most important.
That we will again generate more cash, free cash flow in 2023. It was, yeah, it was a decision we made ourselves to as a management to go this route. We have now to reduce our inventories when the supply chain is also improving. Innovation rate, our new KPI, we realized 17%. That was 15 in 2021. You should also know that we started once by measuring this when it was below 10%. Innovation expenditure is more than 5% of our revenue. The SDG rate, our goal is more than 70, that there we hit 68%.
That means that 68% of our total revenue of Aalberts is linked, related to the sustainable development goals as we have defined it. The line we also put on our press release that we realized 9% organic growth, revenue growth, and an EBIT margin of 15.5. Operational development. As said, we delivered a strong and resilient performance because in 2022 we had many challenges, ongoing pandemic, supply chain challenges, raw material and labor shortages, especially labor also in North America, we had a lot of difficult times, especially in the beginning of 2022, where we could almost get no labor and ramping up our product.
Of course, the inflation, which increased during the year, especially during the summertime, where we did additional actions immediately after the summertime to take pricing initiatives with our customers. That took a lot of effort to get it all done. It led to inefficiencies and additional costs and higher work in progress. Also that I think Arno Monincx will further explain that when you look to our drop-through of our organic revenue growth. We invested in additional inventory on purpose because we knew we have to protect and increase our market shares in these times to secure customer deliveries, deliver the strong order book, because we also in the start of 2023, we have a very good order book, 37% up compared.
As you know, last year was already up. I think we made a good start of this year with this strong order book. We have to facilitate the many, many good business development organic revenue. When you want to do that, you need also inventory towards the future. As explained, we have to bring that down, especially looking to the days inventory outstanding. Our Aalberts people did a great job. I think we find solutions every time to continue the service to our customers. Every time you have to find solutions because you have to go to other suppliers, second suppliers.
The point is that because you can't sometimes not completely finish your product or system, that you still make the cost, but you can't deliver it to the customer. Our backlog was increasing. We see now that we are decreasing that backlog. That's also the time to also decrease our inventories. It needed a tremendous effort of all these people to get these results. Besides that, our people had to drive the long-term business plans and make a great performance by achieving this result we made, as I just explained in the highlights. We trained, what I already said, more than 550 talents in the group. That's through all the segments.
We made a people and culture network in our group, and we do that more and more jointly. We train them all. We have, yeah, and fantastic is that 21% of these talented people, which were trained, we also promoted in other positions. That is the real strength we have because the best people, that is where you make the difference. Our Aalberts people delivered a strong and resilient performance despite many challenges. CapEx explained 38% up. It was allocated to... actually it's all in all, in all our business team segments, long-term organic revenue growth plans, which we have in every end market and every business team. That makes it also very, yeah, nice and spread out.
A lot of energy in the company by doing that. Our capacity increase with fast-growing product lines and technologies. We put a lot of money in because, yeah, that's innovation driven. Yeah, many examples here. We, in our press fitting range, we have a new line introduced in North America. I think we spend a lot of money on new machinery in hydronic flow control, in advanced mechatronics of course, because we had a tremendous ramp up also in 2022, and we expect also a ramp up further in 2023, 2024. Yeah, we need to invest to support this, facilitate this growth. Operational excellence is very important to continue manufacturing efficiency and reducing costs. Of course, the reshoring trend.
Yeah, we see more and more requests for that. We anticipate on that to put the capacity in place. We have some very nice projects, especially also in surface technologies, where you see that in sustainable transportation, where in e-mobility, where you see customers take business back to Europe and they ask us to make plans for that. That's a real trend which will increase more and more. That's what we see. We flagged it already early, but it's a real strength of Aalberts towards the future. Now we further accelerate our program to optimize and structure and to optimize our structure in many places, and also consolidate and close locations further.
Our roadmap towards 26 is that we bring our locations down to the 108 locations which we have presented in December 2001, we are good on track there. Also there, my colleague, Arnold, will explain more about the financial part of this, that also will give a good payback for the coming years. In 2022, it was our first year of execution of our strategy and of course we just started. I think the thing's going in the right direction to achieve our objectives as presented.
When we look to, the different end markets, as also explained in our press release, I think, in the shaping eco-friendly buildings made a good start of the year in all regions. What you saw in the second half of the year that our distributors, in beginning it was Europe, later we saw it also in North America, they reduced inventories. That's also part of the performance, you also see in our eco-friendly buildings activities. We had inventory reductions in the second half of the year. That was also in quarter four.
On top of that, we had of course our supply chain issues, labor constraints, and that combination brings that you have to reduce your inventories also yourself so you produce less. Also in our production we still had disruptions because you could not, in many cases, not finish the complete product or system, 'cause one part or two parts were missing. You make the costs, but you can't ship it to your customer, so you have more OpEx and you have less revenue. That we call that inefficiency. On top of that we had reduction of inventory. Also our margin suffered there a little bit. We guided that with our trading update on the 9th of November 2022.
But I think still with 15.0% margin for building technology, we do a great job. We also created organic growth in that area despite these inventory reductions. Our renovation and new build, and that's I think also part of that explanation. That continued, especially renovation continued. In new build, also I will explain a little bit more in outlook. We see here and there some postponements, but also you see recoveries of new builds, so it's a little bit diverse picture.
Renovation is accelerating, driven by sustainable heating and cooling system and accelerate by all kind of government supporting programs, and legislation like the Green Deal, E.U. Taxonomy, the subsidies in many countries to go more to heat pumps, to use heat pumps. Very important is around the heat pump, you need this nice expansion vessel, which you see also on the picture, but also many other products. Every change of a source of heating and cooling means for us business. Now we explain now that in only in Europe towards 2030, they expect to install 65 million heat pumps. You can imagine what it means for renovation. It means more flow heating, it means more products of hydronic flow control piping systems.
More in district energy where we see a tremendous conversion also to sustainable energy systems. We see that really the change from gas this case to district energy and our company in Denmark did very well through that in 2022 as a tremendous order book already in 2023. These innovations and these trends will not go away. That's very important to know. We are very well positioned there. Innovation of new products, but also the trend of sustainable heating and cooling systems is driving our growth. On top of that, we made a nice acquisition of UWS in Germany, where we bought a company which has a fantastic service portfolio for the water treatment in heating and cooling systems.
Yeah, it's a real add-on for our service and digitalization in this market. Renovation to sustainable energy systems in buildings is accelerating even faster. It could be the new build. Yeah, we see some postponements through inflation, but the renovation part, which is 70% of our business in eco-friendly buildings and that's very important, yeah, that there we are very well positioned. Increasing semicon efficiency. Yeah, we continued our strong growth. We had, we could almost not cope with the growth, I must say in 2022 it was very challenging.
Actually, you could also say luxury situation. I think when we talk to our companies, they had a lot of effort to do because there was a high demand of our customers to serve them, especially in the second half the ramp up went up. I think we performance with all our teams to do the ramp up. We had a great performance and growth. We have to improve our efficiency here and also our flows in our factories because we are to further ramp up. We need to optimize and invest and strengthen the organization, to keep with the growth.
But it was a fantastic year. From a growth point of view, and also, we did 2 fantastic acquisitions, in my opinion, really nice add-ons, easily in KML, which will ramp up further the coming years. Also, having a good margin, a good growth. This market looks very good, also look into 2023, 2024 because we are in the right spot of semicon efficiency increasing. That means there where you increase also the efficiency of the chip, and there we have the OEMs and customers who are active in that field. Long-term drivers, everybody knows. We also saw an increase in system refurbishment for a new life, a new purpose. That means that systems we put in the market with our OEMs.
Yeah, they come back, and we refurbish them and give them a new life. We are aiming to bring that in a separate location because we see so many business they are coming towards us. Also driven by sustainable entrepreneurship again that, yeah, that we can boost that business together with our OEMs. That's, again, the strength of Aalberts. We look to our footprint, where do we have people and space, yeah, to drive this new business? Examples of reshoring of microchip manufacturers who are expanding their regional capacity is further accelerating. You can read it in the news, but we also see that the factories are built more in Europe, North America, so we will take our advantage of that.
Do not forget that Aalberts is a key enabler to realize the capacity growth of the OEMs. That means the customer of ASML, ASMI, and Applied Materials, Lam Research, that we are one of the big enablers to also realize their growth. We will further develop that also with co-developments. We have many NPIs in progress, but we have to strengthen our process, our capacity expansion, but also the organizations. In all our locations, we are doing that at the moment. We are building, we are also expanding the buildings. We have a new greenfield project in the Netherlands, where we bought land, which we gonna build. Of course, the acquisitions which strengthen the portfolio. Continued strong growth with a record order book and strengthened portfolio.
Driving sustainable transportation. Very good performance despite disruptions in the supply chain of our customers. Also in countries like Germany, France, and we made a very well performance. Also in Q4, Q3, very good, and that is driven by the big demand of passenger cars, motorbikes, especially also motorbikes and commercial vehicles. They're continuing to need our parts, but also our specialized surface technologies where we are more and more focusing on specialization. You see many new developments in e-mobility. When we look, for example, to the companies who make precision manufactured parts, we see 70% to 80% of the new projects we get in automotive are linked to e-mobility. We are ahead of the game there.
What is the driver of that? Materials, because electric vehicles with a battery are much heavier. They need connectors, because everything is more with current. You need that in combination with metal strip coatings, where we acquired some nice companies. The many new passenger cars models and light truck models, they generate additional business anyway because we are in the programs of these new cars. Yeah, that's very good news. You see-- Besides, you see that there's a big backlog in this area. Production after the supply chain issues get solved now step by step, production is increasing. We saw that in especially quarter four, and we see that also ongoing the coming 6 months. That is ramping up, so we have good volumes.
Also we could keep our margins. We do that through surcharges. You see again at the tremendous strong market position we have in this business. Aerospace and marine, which were behind, perform now very well. Order book further increased, also here, driven by sustainable solutions for lightweight materials and reduction of the carbon footprint. Many new trends here, also in marine. We made a fantastic year with many new developments, but also with innovations where our management was very creative to bring it to the market. That continued operational excellence, consolidating our footprints, is very important to keep our margin also going up. A good year, a good performance in this area, despite many disruptions. Industrial niches. You saw also a strong growth and performance here despite supply chain disruptions.
Market recovered fast in industrial. Industrial machine build is a very important part of that. Order book increased strongly. We invested in many new business development projects and further optimized the technology portfolio. Already explained, we received several requests for customer reshoring projects, which will continue in our opinion. We put a lot of attention to expand our activities in Eastern Europe, where we expanded our locations. The trend of more producing there also linked to reshoring is really visible. Our order book in this area was fantastic. You see a nice picture here of a precision extrusion plant in the Netherlands. We have a fantastic order book in our company there.
Here we had to, we put a lot of additional capital expenditure into to cope with the growth. Industrial valves business in North America realized a strong growth, and we launched, end of the year, a new patented system for connections and valves for the industrial market. We developed this innovation together with Europe and North America. Production is in three places in Aalberts, and we expect a lot of this system. We launch it on the fair in February, and we already get a lot of, let's say good feedback on the system, which is patented. It's a stainless steel system and also that we did.
Innovation, I can't explain it enough, is really driving our growth also for the coming years. Strong growth and performance and our order book increased strongly. This I already explained, innovation. It's our KPI. We went from 15% to 17%. Our goal is more than 20, we are still 4 years to realize that. Our innovation expenditure is more than 5% of our revenue. That means when we have a revenue of EUR 3.3, EUR 3.230, yeah, we spend more than EUR 150 million on innovation. Which was it almost, it was a little bit more than 10% of that. We are driving the business from our strong market positions. SDG impact, our goal is more than 70%.
We reached, in 2022, 68%. It's also nice to explain, and we will explain it also in our webcast on this specific topic, that we already see based on our strategy, that we will hit, when we pursue our strategy further as we defined it. This is really integrated in our business, as you see. That is very, in my opinion, it's not greenwashing. We really do it. Yeah, that's also we engineer mission-critical technologies, enabling a clean, smart and responsible future. Now looking to our net zero carbon roadmap, also here we had set ourselves a target in December 2021. Which is now 14, 15 months ago. Our target was less than 30, reduced 30% of our Scope 1 and 2 energy use versus 2018.
We realized already in 2022, 29%. Almost we reached our target. In Scope 3, we are now measuring. We are in 2023, we will probably go also to target setting. We are on track with our promise we made to be net zero by 2050 or earlier. That's where we stand. Very important. Also, we put a lot of effort in to get this done. Acquisitions, ISEL, UWS, KML. ISEL, a fantastic add-on in way of handling our robotics, with machine and also machine system with digital services. Yeah, we acquired it with an annual revenue of EUR 35 million. We can tell you it's already higher in 2022 and much higher in 2023.
A very good acquisition. We integrated it with our company IDE in Germany, and it's part of advanced mechatronics. A very nice add-on. UWS, hydronic flow control, eco-friendly buildings, water treatment of the heating and cooling system. All kind of services we do on site, but also we build products and systems for that with digital services. Very nice company. We also can scale up our service activities of total hydronic flow control. That was also the idea behind it with an annual revenue of approximately EUR 25 million. KML, we acquired in the second half of the year, fantastic company, mechatronic solutions, especially linear motion, which we didn't have as a technology, so sophisticated in our group.
We also got a fantastic key account in the semicon world, where we can do also other technologies with. The annual revenue was EUR 35 million. Also here we will ramp up quickly to a much higher level. Also this company is realigned already nicely with the existing management and the existing owner. Yeah, very nice add-ons in my opinion. We have divested ETI at the beginning of the year and VTI at the end of the year, because both companies, in our opinion, were non-core, or we could not grow it to the level which we wanted. We further optimized our portfolio. I would like to give the word to my colleague, Arno.
Thanks, Wim, for your presentation, and welcome everybody else from my side. I will lead you through the financial development of 2022. Starting with the revenue bridge. Where we came from the EUR 2.979 billion revenue of 2021. We added acquisitions of 2021 and 2022 with a revenue of EUR 126.3 million. We had the disposals, divestments, also in 2021 and 2022, who had a negative impact, quite a big negative impact of EUR 208.1 million. An impact of EUR 86 million, mainly the effect from dollars, U.S. dollars. That results at the end in an organic revenue growth of EUR 246.6 million.
When you add it all up, you come to the EUR 3.230 billion revenue of 2022. We do the same as always for the EBITA bridge. We started with the EUR 454.2 million last year, 2021, where we added the profit of acquisitions we made in 2021 and 2022 of EUR 28.5 million. We deducted the last EBITA we had from the divestments of EUR 23.9 million. Again, you see here quite clearly also the portfolio improvement that we constantly make with our M&A strategy. The acquisitions have in general a much better profitability than the disposals. The currency EBITA impact of EUR 10 million, also mainly the effect of US dollars.
That results then in organic EBITA growth of EUR 31.5 million. That when you add it all up, you finish at EUR 500.3 million EBITA in 2022. Also here you see of course a lower drop through of our organic growth, yeah, that had to do with the higher cost we had to make, due to the supply chain issues, due to the labor shortages, to get all the revenue out of our companies. That cost, we had to make more cost to make that happen. That is also what we already explained in November. The consolidated income statement, where you see again the revenue of EUR 3.2 billion versus EUR 2.9 billion last year.
We see, of course, a slightly higher depreciation as an effect from also the higher CapEx spend that we did over the last two years. EBITA improvement. You see also that the net finance costs increased. Yes, the interest expenses have gone up, but also we consumed more cash. I will come back to that later during the year with the higher working capital that we needed to finance for the decisions we made to accept a higher inventory level to serve the customers in the right way and to protect our market position, even improve our market positions.
The higher income tax expense in line with the profits, we have a net profit before amortization of EUR 372 million, which leads to an EPS before amortization of €3.37 per share versus the €3.5 of last year, an increase of 10%. We made a strong performance, 9% organic revenue growth and a EBITA margin of 15.5%. The balance sheet, also there you see the higher, let's say, capital assets, of course, from acquisitions, but also from higher inventory levels, higher working capital, that we still finance with a very solid equity position that slightly decreased, but still at a very good level, of 56.1%.
Then you see also that we that the net debt finished higher from EUR 492 million last year, where of course also the net debt was positively impacted by the divestments, the big divestment we made with Lasco. We have finished with the net debt within EUR 794 million at the end of this year at a leverage ratio of 1.3 versus 0.9 last year. It's still quite below our objective, but as Wim said, we will also work in 2023 to bring inventories back in line again, DIO-wise, DIO-wise, where it should be. That will then also go in a better direction.
The net working capital, higher, EUR 721 million versus EUR 452 million last year. The days, for the same reason, higher at 80 days versus 58 days last year. Now, solvability already touched, and the return on capital is a result of these elements, of course. 1.1% lower than last year. Also there we expect that to bring it back in the right direction when we also bring back the inventories in the right direction. Increase was only for good reason to invest in our additional inventories to serve the customers, and that is also, we believe, the reason why we could make two years organic revenue growth in these, let's say, challenging environments.
Now the free cash flow from the EBITDA, EUR 633 million in 2022 versus EUR 585 before exceptionals in 2021. There you see the gain of disposals, huh, we made in 2022 of EUR 34.4 million. This gain, of course, is part of our EBITA. It is reported in our holding eliminations line as we do that always. At the same time, we also made operational excellence costs of EUR 25.1 million, which is also reported in the same holding eliminations line. Both of these elements are in our, let's say, reported numbers. Besides the operational excellence costs of EUR 25.1 million, we also have our normal, let's say, one-offs, extraordinaries, and some other spend.
At the end, the advantage of this gain on disposals is only approximately EUR 4 million versus last year. That is what you also see in the press release in the holding elimination reporting of EUR 2.9 million negative versus EUR 7.3 million negative last year. You see the biggest impact for our free cash flow, at the change in working capital, with the, of course, the main reason, the higher inventory levels, but it's EUR 135 million impact year-on-year for the, let's say, the cash flow from ops or, let's say, performance.
The higher purchase of property, plant, and equipment of EUR 44 million versus last year, the cash out results at the end in a free cash flow of EUR 168 million versus EUR 310 million last year, and EUR 142 million lower. Main impact, changes in working capital. The segment reporting of both building and industrial, now where you see that building, of course, you see the impact of our disposals also there. Lasco and Standard Hidraulica both were part of building. That had impact. It's -1% revenue that way on the top line. Organically, we made a nice growth in these challenging times still of 6.1% growth last year, 15.9%.
At the EBITA, EUR 276.4 million, it's slightly lower than last year, 5% lower. The EBITA performance, the percentage is 50.0% versus 50.6% last year. There you see, yeah, where the, let's say the extra costs, the extra investments in work in progress, to missing components, supply chain issues, labor shortages, that all had to do with this performance, because therefore, you cannot operate in the way as it, yeah, normally should go. That is where you see the lower, yeah, profit performance. CapEx increased from EUR 75.8 million last year to EUR 94.3 million for all these good business development and organic growth plans, as Wim already explained quite clearly, 24% up.
The industrial technology segment, where we see an increase of 24% in the top line, which is actually 12.6% organic growth over 2022 versus 60.1% last year. That's 3.5% lower. The EBITA is EUR 226.8 million, and that is 16.3%, which is higher than the 50.2% last year. It's 1.1% improvement. Good performance we made in industrial technology. There the CapEx spend also increased from EUR 68 million last year to EUR 108.3 million this year, 59% up.
The revenues per end market, where you see eco-friendly building with 54%, semicon efficiency with 12%, really increasing rapidly, as we also have already explained quite a lot over the, over the last years, that we expected that to take an to become a bigger piece of the pie. That is now happening with the, with the strong growth that semicon efficiency is making over the last years. sustainable transportation at 15% and industrial niches 90% of the total revenue. The revenue per region, where we see Western Europe 59%, America 24%, Eastern Europe 12%, and APAC, Middle East, Africa, 5%.
The dividend, like Wim said, we propose to the general meeting a cash dividend of EUR 1.11 per share, which is 10% up versus last year, where we had EUR 1.01 as normal, regular dividend. Of course, last year, we also made a special dividend of EUR 0.64 that had to do with the exceptional benefit of EUR 100 million that we did last year. The EUR 1.01 is the regular dividend of last year, and compared to that dividend, we increase it again with 10%, which results in a CAGR of more than 12% over the last 10 years when you look to our dividend development. From EUR 0.35 in 2012 to EUR 1.11 in 2022.
Our track record, picture every year, of course, we adapt that for the last year. Here you see the steps every 5 years, what the performance has been. It's a proven sustainable business model where we also see now that we went for the first time through the EUR 3 billion of revenues, but also for the first time through the EUR 500 million of EBITA performance, which ends up then to this picture with a nice, sustainable, profitable growth development over the last 45 years. This is how we believe that the value creation of Aalberts is really presented.
Earnings per share, let's say also over the last 10 years you see a CAGR of over 9%, while the dividend over the last 10 years has a CAGR of over 12%. Also there you see that in the course of the years, we also paid a little bit more dividend than than the earnings per share development went up. The, let's say the earnings per share, EUR 3.37, the dividend per share now at EUR 1.11. At a return on incremental capital employed, for us, a very important KPI. How you are able, yeah, to to make the returns on all the capital that has been allocated, including acquisitions, including the goodwill, very important to understand.
When you compare the last 10 years, 2012 to 2022, we added EUR 280 million of EBITA, and at the same time we added capital employed for EUR 1.5 billion, which is 80.7%. That number is lower than we presented last year from 2011 to 2021. It was 23.5%. We also expect this number to go up again, when we have normalized our inventory levels again. The supply chain issues become better. That number, and we believe this is really showing the trend, how the return on capital employed will be.
Of course, when you take it over the last 10 years, you see that it is having a trend towards already over 18% at this moment. The long term shareholders who have more than 3% holdings, that is approximately 50% result is of our value creation. Yeah. The outlook for looking forward. Now, I think, what's very important to start with is that we have a strong order book. Our order book increased with 37%, that means a good start of the year. Also looking to the already strong order book we increased, we saw increasing in 2021 on top of that.
The second thing I think I would like to mention on this topic, strong order book, is that, yeah, we keep on investing. Our, our CapEx will was EUR 203 million in 2022. That go up further. Yeah, could be in the range we also, and the top of the range, which we also guided on December 21, so close to EUR 250. We would of course not keep on investing when we would not have a positive feeling about the future because again, the main driver of the business is our innovations. The long-term growth plan, so we will pursue them further. That needs capital investment and also that we have to create and develop.
Our biggest issue in my opinion is that we need the best people to also drive the growth. Then, of course, we will relentlessly execute our strategy. We are one year, we are now finished in 2022, so we go in the second year. And, yeah, we are still on track to achieve our objectives in our opinion and as also explained, we will try to reach them as soon as possible, but at least the end of 2026. Now looking to the end markets and giving a little bit more flavor there. I think semicon that will continue. We have a great record order book. We are almost not able to, yeah, to let's say, cope with the demand.
But we are increasing our capacity and we will see there a good 23, what we see at the moment. But also again, a good growth, strong growth and performance. Now in our building eco-friendly building activities, sustainability is really driving there and accelerating the renovation business. It could be that new build here and there, get some slow down, slow down through inflation, but it's 30% of our business. We showed it already also last year that people were a little bit hesitating because of the inflation. But in the other hand, there is a tremendous demand for buildings. We also see that
After some adjustment of the consumer to the higher price, in the end, they need a demand for a building. I think we are there very well positioned, also combined with our innovations. Again, 70% of our business is their renovation, driven by the sustainability trend towards sustainable systems for heating and cooling. Do not forget also the fact that there are many legislation subsidies in place to drive this business. Sustainable transportation, yeah, we see many new developments on e-mobility. We have good volumes also coming out of the in the new year, a good order book. The visibility here, of course, is a little bit shorter, but I think for the coming months it doesn't look so bad.
Let's see how that progress is. We are able to, yeah, to put also our prices towards the customers through our surcharge system. That's again, a very best practice of the group. We share that in all our industrial companies, how we do that. Yeah, now the, let's say, the energy price is going down. That at least gives also lesser pressure on this topic. Yeah, we see there, yeah, at least we see there a good start of the year. Industrial, enhancing industrial niches, good order book. At the moment we do not see postponements of our order book.
I think the second half is a little bit less visible, so I'm also there a little bit cautious in that area. I think the coming months will be good. But let's see how that plays out. When inflation keeps on going, of course, that will not have a. It can have a more disruptive effect in the end. But, let's say we made a good start also with the order book. Crucial for us is operational excellence has to continue. That's also why I think we did again, we accelerated again, and that should actually become a practice. Every year, we have to drive operational excellence. The EUR 25 million we invested in operational excellence will have a payback of two years.
It will also have a EUR 12.5 million effect on 2023 and a EUR 12.5 million effect on 2024. That also helps. Pricing excellence, protecting, increasing our margin is part of our culture. Even when raw materials here and there go down, we still protect our margins and. It's a very volatile world. We are also cautious. We are at the beginning of the year, but let's say we are not so negative, huh? It's the beginning of the year and we drive our strategy. That's I think a little bit more flavor on the outlook. I think there will be.
I hope there will be a lot of questions and, which we can answer.
Thank you. We will now start the Q&A session. For the people dialing in, press star one to register your question. For the people joining the webcast via aalberts.com, questions can be asked via the Ask a Question button. We'll now move on to our first participant, David Kerstens from Jefferies. Please go ahead. Your line is open.
Good morning, gentlemen. Thank you very much for taking my question. I've got 3. First of all, maybe can you explain what drove the accelerated organic growth to around 8.5% in the final months of the year? Was that mainly that the destocking trend that you referred to in eco-friendly buildings, have we seen the worst of that? Is that behind that acceleration? Is it more in the semicon efficiency business where you had by far the strongest growth, if you look at the end markets? The second question is on the innovation rate, 17% of revenues. Can you confirm you are already spending at least 5% of your revenue on R&D, or is that the target for 2026? How much did you actually spend in 2022? Then a question on the request for customer reshoring projects.
Yeah. Shall we first answer these first two questions, David?
Yes, please. Yep.
Yeah. The first question was about the organic growth. I think, I think, yeah, you're, you are right. I think in quarter 3 that was really a reduction of inventory in eco-friendly buildings. It started already a little bit in July. Especially, I think after the summer. We saw a very slow ramp up after that. It was not only in eco-friendly buildings, it was actually also in some other parts. I think there was a sort of reset after the shock of the inflation increase that a lot of companies, let's say, also looked to their inventories. Now in eco-friendly buildings, it was in the beginning, firstly Europe. That's also what we guided.
We saw also later in the year that it was also in North America, especially towards the end of the year. I think the increase in quarter four is mainly explained by also the ramp-up of the industrial part of the company. There you saw that after December it was a little bit slower, but then it increased
Especially in the last part of the year where eco-friendly buildings were still suffering also from inventory reduction, the orders were again increasing. Yeah, your question is there a big part of the inventory reduction, is that done in eco-friendly buildings? I think the answer is yes, but we are not done yet. I think there's still optimization. Through the softening of the supply chain issues, you see that, yeah, customers optimizing their inventories everywhere. We will also do ourselves. That, yeah, that's probably explanation for the quarter four organic growth. Innovation rate. Innovation rate 70%. I think it's a real achievement. We went from 15 to 17.
That will go up further in 2023, I'm convinced, because we have so many projects running in the pipeline, which are just starting. Innovations are in the market, but they are ramping up. Again, innovation takes a long time. It can take four, five years in our business sometimes before you really see some results. The start was seven, eight years ago, and you see there are really, yeah, effect from that. The expenditure, I think we will be close to the 5%.
Yeah.
We didn't disclose that number, we also not gonna do that. I think we were very close with the 5%, and that will further increase because the portfolio is changing also through acquisitions. That is helping that innovation rate. Companies like UWS, KML, ISEL, they are all very innovative. A lot of engineers. The second thing is that, yeah, business development roadmaps are further pursuing towards the future. That's so that will further pursue. The answer is, yeah, let's say close to the 5% and the 17 will go up further in 2023 to hit our goal as soon as possible, more than 20%.
Yeah.
Your third question?
Yeah. A question on the working capital. How much are you targeting inventory to come down this year? What is the best way to look at that and how much cash will be released as a result?
Yeah, let's say, we will bring it, let's say mainly inventories, yeah, we will bring further in line because actually our DSO and DPO are okay. They are not about the inventories, yeah, like Wim said and also I said, we will bring it further in line in the course of the year. We will do that gradually in line with what we can do. Fortunately, we, that's also what we explained in the press release. Let's say, of the total increase of EUR 223 million of inventories, it's about EUR 125 million related to volume, and the remainder is inflation and an acquisition divestment, let's say, results or effects.
so it's EUR 125 million is the real volume. Let's say we will bring that further in line. We believe we can do so because also still a big part is in work in progress and in raw materials. Because normally, when raw materials are less available or there's more insecurity about availability, normally the companies take more on stock to be sure to have it on stock to be able to produce. That is, by the way, the reason that in these critical times we could continue to produce and to continue to deliver our customers. Also, the raw material, especially, you can really manage, of course, down when the availability improves again. That is what we will do.
We will not make a rapid change, but we will make a gradual improvement in the course of the year.
Sounds good. Maybe final question, for Wim. You announced your retirement. Congratulations. Maybe a bit sooner than we had expected. I was wondering if you could comment on the progress for us in terms of search for a successor, please.
Yeah, as we also stated in the press release, we are busy with the process and I think that's on track. Yeah, let's see how that works out the coming months. We are talking to candidates, so... Further, I can't say so much anymore. When we have clarity on that, we will come as soon as possible with a press release.
Okay. Thank you very much.
Okay.
Thank you. We'll now move on to our next participant, Martijn den Reijer from ABN AMRO Oddo BHF. Please go ahead. Your line is open.
Yes. Good morning, gentlemen.
Morning.
the questions one by one. Good morning. On the organic growth per reporting line, could you roughly split that 6.1% and 12.6% in price and volume, roughly?
Let's say, when we see the total organic growth, Martijn, of 8.7%, we, let's say the pricing and volume effect is about 50/50. That's not so much a change.
Okay.
It's not so much change versus the last communication in November, of course.
Is there a material difference between the two reporting lines?
I think, let's say the pricing impact is a little bit higher in Building than in Industrial.
Got it. Moving on to my second question, the supply chain disruptions and the inefficiency in production in Building Technology in 2022. If you, if you take the 15.0% relative to last year, which was 15.5%, would it then be fair to assume that if supply chains normalize, you could get back to that 15.5% again in 2023, also taking into account the effect of divestments? Or would that be too positive?
No, I think, when that would normalize again, that should be possible again, yes.
Okay. Thank you. On industrial, you had very good organic growth, yet your EBITA margin was slightly underwhelming. I heard Wim say something about the efficiency of semicon, how that has to improve and that the organization needs to, in my words, step up. Is that the right interpretation that in fact, surface technologies and industrial niches did reasonably well, but that semicon, because of that high growth, wasn't generating the efficiency that we might have expected?
Yeah. First of all, I think 16.3% margin is a very good. We're very happy with that. That's the first thing. On top of that, you grow 12.76% organic. Also here, also here we had supply chain issues. It's not only in eco-friendly buildings. Also here we had supply chain issues. Also in advanced mechatronics, we had, yeah, we had especially electronic parts which we didn't get. That means you build a system, a complete system which you want to test and deliver, and you can't ship it. You have to find second suppliers, which are not there, third suppliers.
You have to talk to the customer because the third and second supplier has to be approved. It's so many disruptions we had also there.
Yeah.
That has absolutely affected our efficiency. The answer is yes. Still we made 16.3%. I think we did a very good job in also other parts of industrial technology.
Mm-hmm.
Also there we suffered, because of material shortages, like in companies like also in Mifa. We also had in the beginning of the year difficulties and.
Mm-hmm
... also the second half. I think it could have been better. We could have shipped more. I think that is not said so much. Because our backlog is low, we are now reducing that. Still, I think 16.3% is a very good performance. The answer is yes.
I'm gonna try again on the on the inventory and the net working capital, Arno, if you don't mind.
Try.
Net working capital. Oh, here's my question. Net working capital as a percentage of sales was slightly over 22% in 2023. Normally, net working capital is 15%, 16%, 17%. Would that be the target that you're aiming for in 2023 if markets of supply chains normalize as you now see? Or will you be still slightly more cautious in order for you to still continue to service your customers?
Look outside, what is all happening around the world. You will understand, I'm sure you will understand how, yeah, insecure still everything is. It looks like it's improving a bit, huh, so it's more stabilizing. We are quite sure that we can improve in the course of this year, on 2023.
Mm-hmm.
How far we get there is really depending of the situation outside. But let's say, assume that in the coming 2 years, 2, 3 years, we will go back to normal again. When we can do faster, we will do faster. That is just how we, how. Let's say we made. We are absolutely convinced we made the right decision, because of the performance that we could realize despite all these effects. That's also why we could make these organic growth developments.
Mm-hmm.
Also because we knew, we know that we can finance it. We really leverage the balance sheet in the right way. In these times, yeah, we should accept and finance higher inventory levels to be able to deliver to the customers. Now, of course, also we like good returns on capital employed, yeah? We have a good focus on that number also, and we will bring it back in line again as soon as we can do that. Again, I really believe we should improve this year, and let's see how far we can get there. Especially in the coming years, it will go back to normal again.
Fair enough. My final question is on the operational excellence. You mentioned EUR 25 million in the holding one-off line. My understanding is that usually when you go through such an exercise, there's also a savings target attached to that. Restructuring elements.
Absolutely.
Can you please share with us your thoughts about the savings for 2023, 2024?
Yes. That is, let's say the payback is two years. It's about EUR 12.5 million per year. That's how we earn back this EUR 25.1 million restructuring projects. Again.
Mm-hmm.
Besides the restructuring projects, we have also other one-off costs as always. We these operational action projects are really investments in recurring annual benefits. That's also the situation with this program. It's about EUR twelve and a half million recurring annual benefits. In two years' time, you have to pay back.
Okay. sneaking in one final one. You divested VTI. Wim Pelsma already mentioned didn't fit the profile that you were looking for. Is that on the growth or on the EBITDA margin? In other words, was this materially below the average, or how should we think about that?
Actually, VTI is a profitable company. The reason that we divested it's a good company also. The reason that we divested it is that the growth potential is limited. It's not in line with the ambition that we have for our total portfolio. When you allocate your capital every year to such a company, the return is always less than in the fast-growing product line. That's the real main reason to divest it. As we have explained earlier, it's not always profitability, which is the reason to divest the company. Actually, VTI has a very good profitability, it's a small company. When you look over the performance and the development of the growth over the last, let's say, 10 years or so, we don't see the progress that we should see.
There's not enough, let's say, synergy with the rest of our portfolio to really also help them to a higher level. We should really make that a special focus and make maybe another activity around that. That's not what we want to do, of course. It's really for the reason that we saw too less growth potential.
All right. Thank you very much, gentlemen.
Thank you. We'll now move on to our next participant, Henk Veerman from Van Lanschot Kempen. Please go ahead. Your line is open.
Hi. Hi. Good morning, Wim, Arno, and the rest of the team, and thank you for taking my questions.
Good morning, Henk.
On building technology, the implied organic growth rate in the second half is about 2%. I'm assuming that implies a slight decline in volumes in the second half of the year. Can you give a bit more color on that volume decline in the second half in building technologies? You are quite bullish on renovation. I'm assuming that the new build segment, at a 30% of that segment, that saw quite a steep decline in the second half of the year. Is that correct?
I. Could you repeat? Because I couldn't hear you. You fell away for some time, so.
Oh, okay. Apologies. In the building technology segment, in the second half of the year, you report an organic sales growth of about 2%.
Mm-hmm.
Given that your selling prices have moved up a lot, I'm assuming that that organic sales growth implies an organic volume decline. Given that you in the call, you were quite bullish on the renovation part of the building technology segment. I'm assuming that this volume decline, is that fully explained by the weakness in the new build segment of the business?
No, no. I think, I think you're right. I think we had a very small decline in volume. It was, let's say, zero minus, something like that in the second half. Main reason was inventory reduction.
Yeah.
I think we had in quarter three, we had tremendous inventory reduction, and that continued on a lesser scale in quarter four. That was the main reason. The new build was not really visible because that's not how quick it goes, because projects are financed, they will be built. We saw some effect of it, but that was not the main reason. I think the new build, that's. Okay. With the new build, you have a strange situation. Therefore, I think we just have to be cautious but also not negative. Okay. There's a tremendous demand also in Eastern Europe, for example, for buildings in the Netherlands, in France, everywhere.
The moment the prices go up for new builds, then you see that people, consumers get a shock about it, and they wait a little bit. When inflation goes down and people get salaries, they have to step in because in the end, they need a space to live. It could be that you get some postponements. Here and there we see that. If that has a big effect, then let's just see, but let's be cautious. Renovation is accelerating, and that's 70% of our business, combined with our innovation. Therefore, I'm, you could say bullish. I don't know what it means, but I'm not negative. I'm positive, let's say, about the renovation market in combination with our innovations.
You could have some pressure on the new build in the course of 2023 and maybe 2024. That's a little bit situation.
Okay. That's, that's clear. Second question is on the one-offs in your, in your results. That may be a question for Arno. Do I understand correctly that the full benefit of the disposals, being about EUR 34 million last year, is that fully included in EBITA? Is that correct?
That is correct. The full benefit is included, but also the disposal costs and the restructuring projects and the one-off costs, normal one-off costs, which we have every year, a few million, are included in this number, which at the end results in this negative holding elimination result of EUR 2.9 million negative in 2022 versus EUR 7.3 million in 2021. That is the real difference, I would say, of these, yeah, special effects.
Right. Okay. Okay, that's clear. On the inventories and yeah, I'm coming back to that topic. I'm aware of the previous questions that have been asked on that. I remember in 2019, specifically on inventories, you guided for a reduction of EUR 100 million-EUR 150 million at the time, which implied sort of inventories as a percentage of sales being 17%-18.5%. Today, or at least at the period end last year, we stood at about 28% of sales. You already commented on, let's say, the normalization of working capital in the next 2-3 years.
Do you think over the medium to long term, this inventory position being less than 20% of sales, is that still a realistic target?
Yes, I think so. I think so, Henk. Let's say. We did not stop with the inventory improvement plan. We started that off at the end of 2019, and the ambition was that we, in calculating days, that we would improve about EUR 150 million. We had the ambition to do that with reducing the slow-moving, giving it more attention, having regular meetings with the teams to solve that, to improve that. Also, of course, the improvement of the distribution footprint, with less locations do more, more efficiency, both in North America and in Europe. We continued with all these investments. We continued with the attention for these, let's say, slower-moving parts.
As I also, let's say, explained earlier, I think to Martijn, is that a big part of this higher inventory level at this moment is in the work in progress and in the raw material. That means it's not even a finished good. It's quite fresh stock. It's more, let's say, really the decision that we made to ready of these stocks. It is because we could not finish the application because of a missing component or a missing also a missing chip in our application for hydronic flow control, for instance, or for advanced mechatronics. These are the reasons that these numbers are higher.
Let's say, we expect it to improve also this year so that we can bring it back to more normal levels. How quickly it goes, that is a little bit depending of the outside world. We will do what we can, of course, to bring it back in line again. I'm absolutely not worried that we are not able to do so for these reasons. It's fresh stock, it's raw material, and these are just decisions that you can change again, and that is also, of course, how we act and deal with our teams. We continued with the improvement of the, let's say, the slower-moving parts of our inventory. That is actually quite well under control.
Clear. Last question is on the backlog, which was still at 37% higher year-on-year, quite a significant growth. Can you remind us as to how much of that, of that backlog now how much of the, how much does that constitute as % of the total business? You know, I think it's, the backlog is mainly measured in the industrials business, is it not?
For the... Your first question is, we can't do that because we didn't disclose that. No, it's, the backlog is in every business, yeah. But as you know, there's of course a different dynamic in the backlog. Like, what you also see is that by changing our portfolio, you get also another backlog situation. Take, I sometimes hear, yeah, the backlog says nothing with Alpas because it's, but that's not true because the whole portfolio changed the last 8 or 10 years tremendously. The backlog is saying a lot. That's also because it's complete other company than 10 years ago. The backlog is in industrial, but it's also in building technologies.
It's of course, also in the industrial part, industrial niches, but also sustainable transportation. Okay. Where we have a low backlog because that's the character of the business. That's of course in service technology because it's a service business. You look only maybe one or two weeks, three weeks ahead. That would be my explanation. It says also something about the change of the portfolio we made in the last 10 years.
Okay. Thank you very much. Those were my questions.
Thank you. We'll move on to our next participant, Marta Bruska from Berenberg. Please go ahead. Your line is open.
Hello, good morning and congratulations on the excellent result.
Good morning.
were actually. Thank you. Most of my questions were actually already answered, but I have maybe the last two clarifying questions. With regards to this 37% order book up, is that this relates to the order book, not to the new incoming orders, right?
That's correct. Order book, yes. The book.
Yes.
per year end.
Some of your peers in building technology commented on a very strong order intake in December. I know you already mentioned, you know, how the end markets developed within your outlook. Can you comment specifically on that whether the for you as well, the order intake in December for eco-friendly building had developed at all
Yeah. You're correct. That order intake was also not bad in December. It says something about the inventory reductions.
Exactly.
U.S. customers made in the second half of the year. They were very heavily reduced in quarter three. It continued quarter four. They ordered again back for the next year in December. Let's see how that plays out. That's correct. A good research.
All right. Thank you. Now, it seems like there are two effects, right? There is an underlying demand for renovations you mentioned, still very, very strong, and then there are the stocking effects at the wholesalers that may be on the quarter basis a little bit cloud the picture, but it's very helpful on your comment. Thank you. That's, that's basically it from my side. Thank you very much.
Okay, Martha.
Thank you, Martha. We'll now move on to our next participant, Marianne Bulot from Bank of America. Please go ahead. Your line is open.
Hello. Yes, good morning. Thank you for taking my question. I was wondering first if you could comment on what you see in terms of pricing dynamics coming into next year and more specifically in the building part, what you see in terms of volume and risk of decline in the new build. Thank you very much.
On building technology, let's say, our end market shaping eco-friendly buildings. I think the pricing dynamics, we increased our prices further at the 1st of January based on the inflation costs. Hopefully, what we see now is that inflation is stopping. Let's see what happens. When it's further increasing, we will also further increase our price. Pricing excellence and pricing increase, pricing power is very important 'cause you have to keep your added value margin. That's our goal. That's my first question. The second is the dynamics of the business. I think a lot of inventory reduction has been done in 2022, but it's not finished.
That's also what your colleague just mentioned. Especially in the wholesalers, they're further optimizing. Looking to the end user of our building technology products, which is the installer, which is a project developer, there's still a lot of demand. That means in the end, that's much more important that when the stock reduction is more and more finalized, that you will see the demand. We saw that already end of the year in our order intake. That's a little bit the situation we have. Yeah, we have to be on top of our margin as we always do, and especially also on top of our OPEX, because the OPEX is increasing also through inflation.
We have to counterattack that by efficiency and by operational excellence projects, which we again accelerated.
Okay, thank you. Another question, if I may. On your M&A pipeline, do you still intend to continue to develop the hydronic flow control and semicon? If you could give, you know, any color on your pipeline.
Yeah, no. We're always busy with add-ons, and we have a list pipeline as always. That's mainly in advanced mechatronics, hydronic flow control, but also surface technologies. I must say our biggest priority, as we always said, is organic growth. We have a tremendous amount of organic growth initiatives. Yeah, we are very busy to handle that all. That's also explaining our CapEx increase. That could go towards EUR 250 in 2023. That needs a lot of operational management handling. On top of that, we still look to some nice add-ons when we can find them in 2023, when they have the good price and they have the good management as always.
That's that situation is actually not changed. Yeah. We will really focus to improve our free cash flow again during 2023 also by improving our inventory and our performance.
Okay. And just, on the CapEx, is there any specific technology cluster in markets where you want to more focus than others?
No, no. I think, in every area we are investing at the moment. Yeah, also through the here and there, we have some additional buildings we have to build. That gives a little bit a peak the coming two years what we also explained. We need, of course, place to, yeah, to expand. That's in hydronic flow control, but it's also in advanced mechatronics. In surface technologies and also integrated piping systems, we have many innovations in the pipeline, but also fast-growing product lines, fast-growing technologies, at which we are pursuing.
The strategy is, I think that is really paying off and it will pay off, is we will not stop with the investments even when we have a higher working capital temporary. You see also that in other in the markets in competitors that they are more cautious, but we keep on investing, and that will pay out. You see it already in our organic growth of 9%. And we have also the financial power to do it.
Yeah.
Okay. Thank you very much. Thank you. We will now move on to our questions from webcast. First question is from Henk Kleijn, Paul Hoese. Looking at the EBITDA bridge, EUR 23.9 million of revenue is lost due to divestments. In the cash flow statement, the line item, disposal of subsidiaries total is EUR 65 million. Could you give some color on the disposal item? A proceed of EUR 65 million for a loss of EUR 23.9 million seems not attractive.
Yes, you should understand that the disposal is of course only for the divestments that we made in 2022. That's in the cash flow statement of 2022. The loss of EBITA, it has also partly related to the disposal we made in 2021, that's for 2 years. You cannot compare these numbers or relate these numbers to each other.
All right. Thank you. Second question from the webcast is from Walter DeBlair from AlphaValue. It could be in the press release, but could you give more color on what is behind the other income of EUR 54.8 million?
Yes, of course. The EUR 54.8 million other income that is part of that is the EUR 34 million of income that we made with these disposals. That is where we always report that income. You saw last year that number was let's say EUR 177 million, including the disposal of Lasco, that was also in that line at that time. The remainder is about EUR 20 million, which is actually normal, which we have every year about other income issues which we book there, like insurance income or, yeah. Let's say, whatever has to be booked there, but it's every year, it's around EUR 20 million, which is the normal level of other operating income.
Thank you.
Governmental grants are also booked there.
Thank you. The third question is from Sonia Fasolo from Eleva Capital. Could you give a little bit of details regarding the increase of inventories? How much is the price? How much is from work in progress? How much is from the finished goods?
Let's say, these are, let's say three different things. Yeah, so from price, we guided. Yeah. So, we have explained the inflation impact in our inventory line, which was EUR 69 million. And let's say the work in progress and the finished goods, of course, we did not disclose, and we will not disclose that, but I can tell you that the majority of the total income or, sorry, of the total increase of our inventories was in raw materials and in work in progress.
All right. Thank you. It appears there is no further questions. I will now hand over for any additional or closing remarks. Thank you.
Yeah. Okay.
Yeah. Thank you very much for joining the webcast and all the questions. We hope we gave some clarity and we wish you a nice day.
Thank you.
Thank you.
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