Good day, and thank you for standing by. Welcome to the Prosegur Cash Q3 2023 results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Miguel Andrés, Head of IR. Please go ahead.
Good morning to everyone, and thank you very much for dialing into today's meeting. I want to welcome you to our 2023 Q3 results review, to be led by our CFO, Javier Hergueta Vázquez, and myself. The presentation is scheduled to take 30 minutes, where we will share the main events occurred in the first 9 months, as well as the levers behind the performance of our company. Of course, we will as well review our main financials and our key results by billion. After the presentation, we'll open a Q&A session, where we'll address the questions you might have. Should we not get to respond to all points today, we'll answer those remaining on an individual basis. I again want to thank you all for your participation and remind you that this presentation has been pre-recorded and is available via a webcast on our corporate webpage at www.prosegurcash.com.
To begin with, and before passing on to Javier, I'd like to highlight several recent events and news regarding the world of cash that can give us an idea of some important developments around it. The topics covered go from a credit card failure in Uruguay to the ECB position on cash acceptance, the use of cash in Colombia, or carding, a new and growing cyber scam. Turning now to page two, in the first piece of news, we can read from El País that Uruguay's Geocome connection suffered an operational failure, affecting more than 10,000 credit card payment transactions, leaving cash as the only available method of payment. This is yet another important example of how important for the correct functioning of economic activity cash resilience is
Moving on to the next news, in this case from the Spanish Cadena SER, it sets the European Central Bank's attention to begin with the phase two of the creation of the digital euro. As well, the ECB states that cash will remain the main means of payment in the foreseeable future. This news underlines the will of the European Central Bank to preserve cash while it offering the digital euro. In the third news, we can read from El Colombiano about a study conducted by the Bank of the Republic of Colombia, that found that 78.4% of total transactions in 2022 were accounted for in cash, making cash the most used payment method in the country. Once again, showing the preferred choice of citizens for cash, as they see in it, attributes that are not replicable in other payment means.
In this aspect, among others, inclusion, ability to manage expenses and control debt, or personal data protection. Lastly, and citing a Spanish newspaper, La Vanguardia, we learn about carding, a new cyber scam that is very fast growing. This scam is based on the use of different techniques that allow for the theft of bank card data in order to carry out transactions with them. The insecurity for citizens' assets, as well as the violation of their personal data, continue to be growing forces behind the support of cash as a means of payment by multiple individuals across all countries. This new summary gives us a good touch point that ratifies how important cash is in society, and how, for several reasons, it's constantly supported by both cash users and regulators. Obviously, the support to the use of cash eventually results in our performance.
Now, I will share with you today's agenda. First, Javier will review the highlights for the period, and then we'll review our PNL and our transformation strategy. After, I'll share key developments by region, then Javier will retake, reviewing our cash flow and our debt evolution, before leading to conclusions, after which we'll open the Q&A session. This being shared, I would like to pass over to Javier so he can walk us through the key highlights of the period.
Thank you, Miguel. I would like now to share with you the key points for the period that can be summarized as that of a very significant organic growth with a strong transformation, while recovering margins. In a nutshell, organic growth has been very strong, levered on both a strong core business and the good performance of new products. These two elements have been able to more than offset the impact in our figures due to currency effects. Particularly, new products contribute more and more to both the sales and the profitability of our venture, while overall margins have been consistently improving on the back of the good performance of our business. It's important to underline that net profit is notably affected by devaluation and hyperinflationary accounting that are, to a greater extent, of non-cash nature
Regarding currency impact, despite negative effects from different currencies, Argentina has had the lion's share, and to this extent, I would like to share some considerations. First, the country had a 20% devaluation in August, and despite such an effect, we can see how our operating margins have improved across in the same period, because all geographies have performed very strongly in general terms. Second, sudden currency changes are generally corrected over time. From a hyperinflationary accounting point of view, in the short to mid-term, thanks to the inflation itself, that catches up with devaluation, minimizing the impact on financial statements. From a business perspective, in the longer term, because our team, that has proven historically resilient and successful in all circumstances, has a strong pricing discipline and is able to pass on cost increases to the market, catching up with devaluation.
Regarding our net debt position, we see several one-time effects due to Australia, without which we would be seeing a deleverage in the period. Going a bit into detail. The first interesting point to highlight is the fact that our total revenue has grown by 5.7% in the first nine months of the year. This growth is backed on a strong organic improvement of our business, climbing over 38% and showing the strength of our underlying business performance. As well, I would like to highlight the fact that the growth in euros, excluding M&A, is positive 2.4% in the period, despite adverse current headwinds, particularly in this last quarter. On the growth front, it is as well relevant to underline that all geographies have shown a solid double-digit organic growth.
If we move next to our profitability on EBITDA margins, we can see that we have reached a relative level of 13.7% of sales. This figure, backed by a remarkable 14.9% in the third quarter, shows an improvement on Q3 2022 standalone, which I find particularly important, and results in a constant improvement quarter on quarter throughout the year, leading to a catch-up in the accumulated figure. This profitability performance is the result of both the continued operating leverage that we have been able to extract on growing volumes, and the good performance of new businesses, especially a good third quarter outcome for the foreign exchange business. Looking at new products, which you know are extremely relevant for us, as we are sure they best prepare us into the future, they have reached a share of 29.7% of sales.
This resulting positive acceleration of new products, well over 30% in the standalone quarter, is heavily backed by the very good performance, as just mentioned, of our Forex business, as well as a constant and sequential improvement of our Cash Today solutions. Cash generation, which, as you know, is very important for us, has totaled EUR 88 million year to date. This cash flow shows a constant improvement quarter-on-quarter, despite financing strong organic growth of over 38%, as we previously mentioned, and the continued investment in growing the business through CapEx. If we look at the third quarter standalone, free cash flow generation reaches EUR 53 million, very much in line with that achieved one year ago. After all these efforts, our resulting total net debt over EBITDA stands at 2.2 times, well beyond our internal threshold of 2.5 times.
Lastly, I would like to highlight that starting from September this year, we have completed the merge of our Australian business with [armagard] after this had been approved mid-June. And as well, it is very important to remark the renewal of our triple-B stable rating by S&P, which certifies the solvency of our company as recognized by such a relevant firm. Turning now to page four, I will share with you the key highlights from our profit and loss statement. Looking at our top line, we can observe that sales have reached almost EUR 1.5 billion, implying an increase of EUR 81 million over the same period a year ago, that is an increase of 5.7% in the period.
This growth is based on a solid performance of organic growth totaling 38.5%, which underlines the trust customers put on our company across all geographies. M&A brings a positive 3.3% additional growth, helping our continuous transformation. We must as well highlight the headwinds we found in the currency front in all our regions, and particularly in Latin America. The total negative effect of currencies amounted to 36.1%. It is important to underline that despite these currency headwinds and netting off the positive effect of M&A, sales in euro terms accounted for a 2.4% positive improvement.
Going down to EBITDA, we see it has grown to EUR 287 million, a 4.5% improvement, and reaches a relative level of 19.2% of sales, while depreciation in the period totaled EUR 81 million, a minimal 1 million growth over the 80 million shown last year. EBITDA has improved in the first nine months of 2023 by 5.7% versus last year, amounting to EUR 206 million, which is 13.7% of sales. This shows a very positive recovery of margins quarter after quarter, despite the mentioned effects of strong currency headwinds, both on the country mix and the hyperinflationary accounting.
This margin recovery is based fundamentally on operating leverage on the back of returning volumes, as well as on the positive evolution of the new products, especially the Forex business, as the year progresses. The financial result has reached EUR 72 million, up from EUR 32 million in 2022, driven to a significant extent by non-cash items, such as the increase of the accounting value of some of the liabilities in our balance sheet due to higher interest rates, higher IFRS 16 and deferred payments charges related to our inorganic activity, and hyperinflationary accounting charges. These elements, having a non-cash impact, explain why, in our cash flow statement, interest payments are way lower than in our P&L. Tax expenses summed EUR 52 million, representing a tax rate of 45.3%, which shows an improvement over past performance.
These all results in a net consolidated profit of EUR 63 million, 4.2% of sales. When compared to last year, we see a decline that is driven largely by the financial results that are said are mostly of a non-cash nature. Now, turning to page five, we will review the highlights of our transformation strategy that once again delivers a significant growth, as shown both in absolute terms as well as in the share of sales that new products represent. We can observe total new product sales have reached EUR 445 million, EUR 95 million more than a year ago, or a 27% improvement in relative terms. Our transformation strategy execution continues to deliver. Penetration has improved, climbing by 500 basis points in one year, and new product sales now account for 29.7% of total sales.
Looking at the third quarter, transformation sales reached another record of EUR 160 million, that is 30.9% of total sales. The rise in new products has fundamentally been backed by the mentioned growth of the Forex business, whose third quarter is the strongest one in the year, a sustainably strong Cash Today performance in all geographies, and a continuously solid performance of Corban in Latin America. The growing trust customers deposit on our new product solutions reinforce our strategy and underlines how well positioned we are to face the future of the company with the most of confidence. I'll ask Miguel to share our key developments on a regional basis.
Thank you very much, Javier. Turning to page six, we can first see our KPIs for Latin America, our large- largest region, representing 62% of total sales with EUR 941 million. In this region, we see a strong organic sales growth of 50.9%, propelled by a combination of a strong volume from the region, resulting from a high level of cash being used, paired with the effect of inflation, that, as you all know, has a positive impact on our business, as it forces money to be moved faster, and a solid pricing discipline, which helps offsetting the impact on inflation and cost increases. On the flip side, currencies have continued to have a relevant negative impact in different countries of the region, making the FX effect reach 52.7%.
This effect has been particularly adverse in recent months, and M&A had a minor positive impact of 0.1% of total sales. New products have increased by 9% in the period, reaching EUR 286 million and more than netting off the negative impact currencies have on them. As well, the penetration has reached 30.4% of total sales, implying an improvement in their share of 310 basis points. Moving on to Europe now, its weight over total sales is of 30%, being our second largest market. Total sales in the region reached EUR 451 million, EUR 89 million more than a year ago. That is a 25% increase. Relevant to Europe is the continuously strong organic growth that has reached 11.1%.
This shows that volumes in the region consistently overtake the combined inflation rate, hence underlining the health of the business. As well, inorganic growth builds an extra 14.6%, resulting from the Change acquisition, strong performance, and to a minor extent, the acquisition of [audio distortion] that is strengthening our presence in Germany. If we analyze the performance of our transformation strategy for the region, we can see a very significant advancement. New product sales have doubled in the period as a result of a combination of both the inorganic effort related to the Forex business, as well as the very strong organic performance of both the former and that of Cash Today solutions. New products have increased by over 1,100 basis points and now represent almost 30% of total sales, in line with company-wide figures.
Now turning to Asia Pacific, we observe as well a very positive evolution. The region sales represent 7% of the company and reached EUR 106 million after having grown by 5% in euro terms, despite having been affected by currency headwinds that adversely impacted by 7.1%. This growth is sustained by, on one side, a remarkable development of organic growth, reaching almost 19%. This growth shows, for another quarter yet, the comeback of the business, together with achievements of our commercial strategy. And on the inorganic front, we can see a negative impact of 6.8% due to the effect of the successful merge of our Australian operation from September, when we started to account for it under the equity method.
This completes a formal process initiated over one year ago, and that will enable us to provide complete and sustainable solutions to the country going forward. To achieve that, we are already working in major restructuring and multiple initiatives that will be finalized within the next 9-12 months. New product sales reached EUR 24 million in the region, implying a 14.8% growth over the prior year, and now representing 22.8% of sales, 200 basis points more than in 2022, and ratifying the resilience of our transformation strategy across all regions. With this, we complete our region overview, and I'll turn over to Javier so he can continue to share our financials.
Thank you, Miguel. I will now review our cash flow and net debt evolution on page seven. If we commence with the EUR 287 million EBITDA achieved in the period, provisions and other items impact by -EUR 14 million. Income tax outflows reached a total EUR 50 million in the first nine months of the year, EUR 21 million less than last year, showing the positive impact of multiple initiatives across, together with the effect of advanced payments that took place last year in some geographies. CapEx reaches EUR 73 million, an increase of EUR 24 million from one year ago. Here, we can observe on one side, the impact of last year's slow start due to the Omicron period, as well as the strong performance of customer CapEx, fundamentally due to sustained Cash Today growth.
This shows our commitment to continue to transform our company, and however, we see how the gap has narrowed by EUR 4 million from the 28 million difference year-on-year at the end of the second quarter. Investments in working capital summed EUR 61 million, slightly above last year's figure by 4 million, and driven by the financing of our 38.5% organic growth, while implementing a strict and constant discipline to minimize its impact and the impact of FX evolution. With this, we reach a free cash flow of EUR 88 million with a very positive evolution as the year advances, since 53 million of them have been generated in this last third quarter, a figure similar to this same quarter one year ago. These results in a EUR 20 million decrease in free cash flow over the EUR 108 million achieved in 2022.
However, we must recall that for the entire 2023, we observed the impact of the exceptional regulatory items we carry from the first quarter of the year, together with the business organic development financing, the sustained development of Cash Today, and the aforementioned normalization of CapEx expenditure in a post Omicron comparison. All these being accounted for, results in a very significant cash performance from which to grow. Below free cash flow, interest payments reached EUR 2 million and deferred M&A related payments from acquisitions, EUR 19 million. Next, shareholder compensation totals EUR 37 million as a result of combining both EUR 29 million in dividends year to date, with an additional EUR 8 million resulting from the execution of our share buyback program.
The other line increased to EUR 73 million, affected by fundamentally the one-offs in Australia related to the deconsolidation of the existing cash and the funding for future restructuring requirements of the merged Australian entity. With all the above impacts, total net cash outflow reached EUR 42 million. Looking at the evolution of our total net debt on the right-hand side of the page, we see it has reached EUR 808 million, which is a 30 million increase over the figure reported three months ago and driven by the previously shared reasons. Our net financial position at the end of the third quarter amounted to EUR 597 million. Deferred payments due to M&A total EUR 126 million. IFRS 16 related debt remained at EUR 114 million, while treasury stock increased by EUR 3 million in the quarter to a total EUR 29 million.
In terms of total net debt to EBITDA on a trailing twelve-month basis, we've reached 2.2x, a minimum increase of 0.1x after all the impacts shared, and very much in line with that achieved in the last five quarters, proving on a strict financial discipline. Now, I want to bring the presentation to an end before taking any questions, and to that point, I will underline and remind some relevant elements to our environment and performance. The business continues to show its resilience with an underlying organic growth of 38.5%, and once again, showing double-digit organic growth across all geographies. This is particularly important when we have sustained headwinds, particularly recently on the currency front, that the company has been able to more than offset.
Just a reminder note on this line is the fact that isolating M&A growth in EUR terms expanded by 2.4%. While looking at profitability, our EBITDA margins have recovered the levels we were at one year ago. This is particularly relevant for two reasons. First, because we show a constant improvement quarter after quarter, with a very strong third quarter standalone profitability. And second, because this occurs in an environment that, as said, has been quite adverse in terms of how currency impact has affected our country mix. We continue at a very strong pace on our transformation effort, product of which new product sales now account for 29.7% of total revenue. And if we look at the third quarter standalone, their share is beyond 30%.
As said earlier, we are particularly happy with the performance of our Forex acquisition, as well as Cash Today and Corban, the latter focused in the LATAM region. Cash flow has reached EUR 53 million in the quarter, taking the year-to-date figure to EUR 88 million. We must recall when comparing this figure with the one reported a year ago, that we continue to invest in the organic growth of the business and in customer CapEx, fundamentally for Cash Today. All this, while we maintain our leverage ratio at 2.2 times, well within our internal comfort levels. Lastly, just recall the completion of the merger in Australia, enabling us to accelerate the execution of the agreed plan that will transform our company there and its profitability profile in the next 12 months. Last but not least, the renewal of our BBB stable rating by S&P.
That underscores the solvency and resiliency of our company. With this being said, I would like once again to thank you for your attention, and we will be pleased to open the Q&A session.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile a Q&A roster. We will now take the first question. From the line of Enrique Yagüez from Bestinver Securities. Please go ahead.
Good morning, Javier and Miguel. Have three different topic of questions. The first one is regarding shareholder remuneration, capital allocation, and the question is if we should expect further share buybacks when the current program will be over and completed, probably at the end of November or December, or if not, if we should expect an increase in the dividend. Second, regarding the acquisition announced today in Germany, what is the value of this acquisition, and what contribution should we expect? If you see further opportunities in this country going forward, taking into consideration that recently you have acquired several companies in Germany. And finally, I would like to have more details about the process of integration with [amaranthine] in Australia.
I don't know if you could disclose what is the extent of the restructuring that you are implementing in this country, when this restructuring should be over, and what impact should we expect from this business in Equity Method next year? Thank you very much.
Good morning, [gideon]. We'll take the three questions one by one. So the first one is related to the shareholder remuneration. In this front, I mean, just say that the current buyback program remains in place until the end of December. And then whatever is going to happen there will depend on decisions at the board level, which for sure will be, as it has always been the case, very sensitive to all the different alternatives in terms of capital allocation. So it's too early to say whether or not there will be another share buyback program and what will happen to the dividend. But what I can definitely highlight here is that there's a very strong and genuine commitment with shareholder remuneration since the time of the IPO.
I think that in the current context, there's a very strong willingness to keep on that pace. Therefore, whether it is in the form of dividend or in the form of share buybacks, I mean, we should be seeing that same trend going forward, and an increase in the shareholder remuneration is a reasonable scenario. Second to that, you were asking about the M&A in Germany. The WSN acquisition, I mean, it's a deal that will be contributing around EUR 10-15 million in terms of sales. It's important for us, especially because it's helping us consolidating our market share in the northeast part of the country.
In terms of value, I mean, we've made an acquisition which is well below the one-time sales that we typically see as an average in the industry, so it should be quite value enhancing, despite the size of it. And going forward, I don't think there might be much more opportunities in the market. I think that with the acquisitions we've made, we have completed well our footprint, and we are happy where we are right now. Nevertheless, if there will be anything else, we will be looking at it, but I wouldn't expect much more. And the third one is related to the Armaguard integration.
In terms of timing, as you were asking for, I think that the integration plan has just started and it's on track right now, so it should take around 9-12 months to fully execute it. And going forward, in terms of impacts, I mean, what we will be expecting is that on a run rate basis, and once that is executed, it will be providing us with an improvement in margins, which could be over the 100 basis points reference. We'll be improving the tax rate as well, so in terms of EPS, it could be accretive by double-digit and the same in terms of cash flow. During these 9-12 months, it will be impacted by the execution of the restructuring plan itself.
But, for the time being, I mean, there was a capital gain, a one-off capital gain in transaction, but we've booked a provision on more or less the same amount for the restructuring cost that will take place in the remaining part of 2023. So for 2023, I mean, there shouldn't be any relevant impact on that coming from the equity method because of the provision we've booked. In 2024, there might still be part of that, I mean, which I think should not be too significant, while we remain executing that, which I said will take 9-12 months from now.
Thank you very much, Javier.
Thank you. We will now take the next question from the line of Francisco Ruiz from BNP Paribas. Please go ahead.
Hello, good morning. I have also three questions. The first one is a follow-up on Quique's question. Could you give us an idea of what is the remaining perimeter of your AOA division? I mean, what we should expect in terms of sales and a EBITDA or EBITA contribution for next year, excluding already Australia. The second question is regarding the interest charges. I mean, you commented the fact that they are very high on PNL, very low in cash flow, but the difference is huge. Could you give us an idea of the breakdown on the PNL interest charges in order to have an idea of what is cash and what is non-cash?
Last but not least, on the others, on the cash flow, which is a recurring question, but I think in this case, you have already included the extraordinary items from the merger in Australia. Could you quantify for us how much of the EUR 73 million comes from this one-off? Thank you.
Good morning, [pato]. In relation to the first question, what remains in AOA, things that the Australian business will remain under the AOA region, but under the equity method, from a consolidation perspective. So that leaves you a picture for 2024, where you will see some impact from the inorganic perspective in terms of sales in the way we report it, coming from the change of consolidation method. But on the organic side of it, as we provide that breakdown, you will see basically the impacts coming from the Forex business in Australia, which still remains on our side, but also for the remaining countries there, basically Philippines and Indonesia, because India is also accounted for under the equity method.
So when it comes to EBBA or EBITDA, the way we report it, and you will see the performance of those countries we were just mentioning, plus the impact from the equity method contribution in, in Australia. So all that will be part of the EBITDA going forward. So I think that clarifies. Second question on, on the interest charges and, and, the comparison from P&L to cash flow. I think it's, it's good that we spend a couple of minutes on this one, to, to make sure that you fully understand that. So if we take the P&L charges, which amount to EUR 72 million, I mean, there are several components there, part of which are non-cash. So we have the impact from the hyperinflationary accounting, which is a non-cash item itself. Then we have the Forex impact, which is non-cash as well.
Only a portion of that is implicit in the net debt variation, but the remaining portion is non-cash impact in all cases. And then the remaining is the pure financial cost. So out of that financial cost, I mean, there's also a mix of things there. So part of that is IFRS 16 impact, which is included in the cash flow in the provision and others line, so it's not in the financial expenses in the cash flow. Part of that is the revaluation of balance sheet items, which is a non-cash item itself. And part of that is as well M&A interest, which is either in the M&A caption or in the balance sheet variation of the deferred payments.
So when it comes to the cash flow line, it is basically the net of the pure interest cost minus the financial incomes, and that net position is minus EUR 2 million, which is what you see in the cash flow. So that makes the whole bridge between the EUR 72 million figure to the minus EUR 2 million in the cash flow. So I hope that that clarifies. And with regard
Yeah, Javier
Go ahead.
Javier, in that sense, as there are other cash items included in other items like M&A or provision, could you quantify what is cash and what is non-cash out of the 72, without giving a detail, but?
Yeah, I would say that the pure financial cost is EUR 26 million. I think that is disclosed in what we reported to the regulator today. So all these impacts that I'm referring to, IFRS and M&A, whatever it is, is out of these EUR 26 million. So I would say that in any case, all those are of a single digit figure, so it's gonna be around the EUR 5 million for IFRS 16 and another EUR 5 million for M&A, roughly speaking. So that gives you more or less the full background on it.
Okay, thank you.
Then, on the others line, okay, you're seeing there EUR 33 million. So as we said, I mean, there are one-offs related to the closing of the transaction in Australia. Without those one offs, we will be more or less where we were last year, which is around the 30 million figure mark, more or less, which has to do with the business as usual evolution of the cash certification from clients. So the one-off impact coming from Australia amounts to the difference, let's say EUR 40 million, roughly. And there, 60% of that comes from the deconsolidation or the change in the accounting consolidation of the existing cash in Australia, and the other 40% refers to the funding of the restructuring plan for Australia.
So although 73 are composed as we described, but I would like to make a couple of remarks here, which I think are important. So the first one is that this is just an impact coming from the change in the accounting method, so all that cash remains in our Australian subsidiary, which is an important point, and only the funding for the restructuring is likely to be consumed going forward, as per the execution of the restructuring. But as of today, all that cash remains in our Australian subsidiary.
Second, which I think is also good to keep in mind, is that this means that going forward, I mean, for 2024 onwards, we should have no more volatility in the others caption in the cash flow, which I think will also simplify the reading of our cash flow statements going forward.
Thank you. Thank you very much.
Thank you. We will now take the next question from the line of Álvaro Bernal from Alantra. Please go ahead.
Hi, thank you for taking my questions. Most of them have been answered already, but I'll elaborate regarding Australia to some clarification with what you just mentioned. So we can basically extrapolate 40% of the one-off going forward in the cash flow impact. And the other question is, can you give us some visibility regarding the FX and inflation mix in Latin for Q4? Thanks.
Hi, Álvaro. Not very sure I understood the first question, but to try to keep it simple, I would say that, I mean, there's, when you mean extrapolating, I don't see what you're referring for. If you're referring to the impacts on the full year basis for 2023, those EUR 73 million will be there, and going forward, in this line, you should not see anything relevant. So it should be close to zero from 2024 onwards. And then in relation to the inflation and FX impact, I mean, in LATAM, and I think when we look at it, I mean, it's different if you look at it on a short-term basis than on the longer term one.
I mean, so I think that of course, when there are very sharp hikes in the FX on a certain moment in time, I mean, it gives you an unbalanced picture, which, as we said during the presentation, tends to be corrected both from the accounting perspective on a hyperinflationary basis, through the inflation and from the business perspective through our pricing review efforts. But all in all, I mean, if you look at it all together right now, I mean, what we are seeing is that the organic growth remains very high. But of course, when you look at it in the quarter, it has accelerated because of higher inflation.
So I think it probably all, all of it, I mean, is a bit distorted in the short term because of the recent hikes we've seen, especially in Argentina. So I think that when you take Argentina out of the equation, which I think makes easier the reading of the numbers, what we're seeing is a strong growth, both in absolute terms and in organic terms. So I think that's a good reading of it, I mean.
Thank you.
Thank you. We will now take the next question... From the line of Enrique Yagüez from Bestinver Securities. Please go ahead.
Hey again, Javier. Just a follow-up on [paco's] question regarding the financial cost. You said that pure financial costs in PNL were roughly EUR 26 million, excluding the Forex impact, the hyperinflationary impact, and this kind of non-cash impact. While in cash flow, there is just an outflow of EUR 2 million. What is the difference between those EUR 26 million of pure financial cost in PNL and the EUR 2 million on cash flow? Thank you.
Hi, Enrique. Happy, happy to elaborate on that a bit further. I mean, when you take the EUR 26 million, I mean, there's a mix of things there. So, as I mentioned, you have IFRS 16 impact, which is in the region of EUR 5 million. Then you have M&A interest as well, which can be around that mark, so around the EUR 5 million. And the revaluation of balance sheet items, which is also between EUR 5 million-EUR 7 million . All those three are more or less on that region. So that leaves you a net, let's say, which is composed of pure interest cost and financial income. And that is what is, at the end of the day, what you see in the cash flow thing. So that's the EUR 2 million.
So basically, to put it the other way around, I mean, if you take the difference between the 26 and the two, I mean, those 24, that is, I mean, the combined effect of those three elements that we were saying, the IFRS 16, the revaluation of balance sheet items, and the M&A interest. I mean, those are all of them between EUR 5 million-EUR 7 million each.
Oh, okay. Okay, understood. I, I thought that the M&A and the FRS were in pure financial costs. And another question, if I may. In the third quarter, we have seen a sequential improvement in profitability. Where this improvement in profitability comes from? From Europe, from rest of the world, with the, the consolidation of Australia?
No, it's coming I mean, it's a general trend, so all countries are performing quite strongly on an individual basis. The consolidation of Australia, as I said before, I mean, it's neutral there because the capital gain has been offset by a provision that we just booked for the restructuring cost. So that is having no impact itself. It's just the pure performance of the businesses. Of course, I mean, seasonality of the Forex business also helps in this front, in the quarter, but I would say that it's all of the business performing strongly.
Thank you, Javier.
Thank you. We will now take the next question... From the line of Miguel Medina from Mirabaud. Please go ahead.
Yeah, good morning. Can you hear me? Hello?
Yes, we can. Yeah.
Ah, yeah, sorry, I had some problems with the telephone line. Apologies if this question was made previously. It's just two questions. I'll take them one by one, if you don't mind. Both are related to Australia. Just to make sure that I understand the accounting, in Q3, you have basically consolidated just two months of the Australian operations. And then because they were, you know, the contract was finalized in September, then that was from then on, it's going to be accounted as equity method. Is that right?
Yeah, correct.
So September already was accounted for under the equity method.
Yeah. The other bit, if I look at the balance sheet, the increase in the equity method assets, which shows a delta of roughly EUR 50 million versus December 2022. Is that more or less the value of the 35% stake in the joint venture?
No, that is, there's a net effect of several things there. I mean, so, I mean, the impact or the valuation of the 35% of the Australian subsidiary is higher than that. So, there's a mix of impacts there, so you cannot get that straightforward conclusion.
Okay. And then the second question, again, on Australia, just to make sure that I understand the regulatory environment. Basically, during three years, you are able to increase prices. There is a cap, which is, I believe, inflation plus 7 or 7.5%, and then after three years, you are totally free to set your pricing policy. Is that correct?
Yes, that is the case.
And the synergies that obviously you are going to generate from this restructuring in the coming 9-12 months, that those are all for you. The regulator has not imposed any sort of clawback or anything in that sense? So basically, you know, that's all for the operator of the joint venture, and there are no caps on price increases after three years.
Yeah. Correct.
Okay, perfect. Thank you, thank you very much.
You're welcome.
Thank you. There are no further questions at this time. I would like to hand back over to the speakers for final remarks.
All right, so thank you all for taking the time and connecting to today's call. If you have any further questions, our Investor Relations team will be more than happy to take them, going forward. In any case, we'll see all, all of you again in the Q4 results presentation. Thank you and goodbye.
That does conclude our conference for today. Thank you for participating. You may now disconnect.