Very good morning from Vantaa, from the Boreo headquarters, and welcome to Boreo's Q4 2023 webcast event. My name is Kari Nerg, the CEO of the company, and together with our CFO, Aku, we'll go through the highlights of Boreo's year 2023 and Q4 2023. Agenda, looking at that briefly, I will start going through the highlights of 2023, so looking at the bit on the whole year development. Then I'll still continue with the topic that we also communicated earlier today morning, so a strategic review we've carried out on our portfolio and recap the logic and kind of ideas there behind. And then I'll hand over to Aku to go through Q4 2023 performance more in detail. So feel free to use the Q&A function that's there available, and we'll take the questions at the end of the show.
So starting on from 2023, so first of all, I mean, looking at the big picture, I think the company continues to develop in the right direction with regards to the way we both steer the group from a parent company point of view, as well as how the companies operate as part of the portfolio. So a steady, continued progress we've made throughout, basically, during the last four years and significant steps there in 2023 as well. Three acquisitions during the year, three great companies which pretty much represent the kind of target profile of what we aim Boreo to be in the future.
So acquisition of Filterit, a filtration, water treatment, and UV disinfection company based in Finland, a company with a longstanding history of generating high profits, high margins, good returns on capital, and with good prospects going forward for creating sustainable earnings growth towards the future as well. Similar sort of characteristics, although a very different sort of a company, Delfin Technologies, acquired mid-2023, a great company which has started, both of the companies started the journey as part of Boreo quite nicely and as expected, but overall kind of demonstrate what sort of businesses we intend to acquire going forward. And last but not least, I mean, a small add-on acquisition we made to Muottikolmio with the purchase of Lammix in Q1 2023.
We also launched with regards to sort of the operating model and the playbook, overall the value creation playbook that we use here, Boreo, first version of the Boreo Book in mid last year. As a consequence of that, basically, also the strategic review that I'll go through in a bit more detail continues the same story. I think we've come a long way from Spring 2020 with regards to the way we operate the companies, steer our businesses, what sort of capital allocation priorities we have, and I'm happy to see that day by day we are continuing to move into the right direction. Then next week, we will publish, at the end of next week, we will publish our first proper annual report also, including then a sustainability report. So in 2022, 2023, we've done the work around sustainability in the group wide, including our companies.
So pleased to be there that we can kind of showcase what we've done to date as a first step of bringing sustainability also more of an integral part of the way our companies and the group overall operates. Strategically, the company went into the right direction in 2023. Financially, the year was a challenging one. The challenges increased towards the end of the year. So although we're looking at the key numbers from 2023, we see improvement pretty much in all of the figures. So a slight increase in net sales, a more significant increase in our profits, also in profitability margins, a very strong cash flow, operative cash conversion of close to 130%, and slight improvement in our return on capital employed. This is, however, not what in the first place we have started.
I mean, we have expected for the year, or neither are we satisfied with the performance. We feel that the company and the current portfolio of businesses can generate both higher sales, higher margins, and also have the ability to operate with higher returns on capital as well. Aku will discuss a bit more in detail the Q4, of course, later on. But if you look at full year performance, so starting on from sales, as you can see from this slide, pretty much, I mean, group wide, the pressure on sales generation increased towards the end of the year, pretty much throughout the portfolio. If we look at the key contributors to this, first of all, the organic growth was significantly negative by roughly EUR 12 million. From that, EUR 2.5 million roughly is a result of the exit in Sany businesses in Finland and Sweden.
And then the main contributors to the decline were a couple of the companies of which we communicated throughout last year where the challenges were. So Signal Solutions at first, Yleiselektroniikka, where in particular our RS business in four different countries faced quite significant decline in revenues, and then our excavator business in Estonia. Acquisitions, on the other hand, contributed and brought the overall group level reported sales numbers to the positive side. But I mean, goes without saying that with this sort of a portfolio and with the amount of acquisitions we've done in 2022, also 2023, I mean, we should be on a higher level when it comes to sales. On the more of the positive side, I would say, is the way our company, I mean, how resilient the portfolio in terms of margin generation has been.
You can see from these graphs that in all of the business areas, the gross margin profiles are improving. They are improving partially because of the reason that the latest acquisitions made, I mean, those companies carry a much higher average gross margin. But also then, importantly, that in this sort of a cycle, if we look at, for example, our construction businesses such as the Putzmeister business in Finland, Sweden, and Estonia, when machine sales, new machine sales are down, the aftermarket business supports profitability quite nicely. The gross margins are way more higher than in new sales, and profitability then, on the other hand, remains on a decent level. So this is a good message, of course, for many of our businesses of the resiliency of the portfolio in tougher times as we are currently experiencing.
Profitability also, I mean, not improving as nicely as we've expected, but still on a stable level. So despite the very significant 18% sales decline in 2023, the margins are still keeping up quite okay. Continuing on a positive note, as we've explained and discussed throughout the last couple of years, there's been in the firm a heavy focus since, I would say, 2021, 2022, in routing the mindset of capital efficiency, cash generation into our companies. I think to a great extent also, with support of those developments, we've been able to generate nice cash flow throughout the last 12 months, of course, partially also impacted through the inventory cycles we've seen in the world following the COVID years and then the developments in the market. But all in all, a good progress we made in terms of reduction of working capital.
At the year end, roughly at EUR 30 million in absolute terms and expecting gradually coming down in those numbers in case we remain at this sort of activity levels in the group. So towards the EUR 25 million mark in the short term, as we communicated earlier. Also, I mean, if we look at our group and company portfolio returns, so measured through return on capital employed at group level and through return on trade working capital at company level, throughout, I mean, during the year 2023, we took a step in the right direction, improving the margins from 27%-30%, I mean, without the Sany exited Sany business to over 32%. So a positive development, which is mainly driven by cash generation and then not as good of a development as we would have liked to see due to softer profit development.
But definitely, looking at this portfolio of companies, these companies can operate at higher levels of return on trade working capital. And in light of the communication we made earlier today, this is also the target of continuing to push and steer the portfolio towards the 50% mark that we've set for our companies. The final slide on 2023, I mean, looking at our strategic targets, after, I mean, if we look at the performance since 2021, we've grown profits quite significantly from EUR 3.9 million to EUR 9.5 million, a positive development as such. But looking at 2023, then 8% growth, especially in light of the amount of or the number of acquisitions made, should not where we would have liked to see the growth to have been.
Returns the same thing, continued improvement is expected, and we're working hard on that to steer the portfolio towards the 15% mark. Leverage has been really stable. If we look at it on a longer-term perspective, already at around 2.5x net debt to operational EBITDA. As we've communicated on our short-term priorities and given also the coming in less than a year time to maturity of our existing hybrid bond, our intention is to continue to maintain and prioritize financial standing overall in the group. We continue to evaluate alternatives on the financing and capital structure development side as well. Room to improve and to reach our strategic long-term targets. Finally, then I move forward to the strategic review part, which we published in the morning with a separate press release.
This is a, I mean, it's not a revolution of our strategy, but it's more of an evolution. As I said, having worked with, I mean, worked with the operating manual last year with the team, overall made more experience in how we best view the companies to be steered. We've communicated today morning that the sort of crystallized playbook on how we intend to both improve our earnings, but also improve the capital efficiency of the group. It's basically the playbook, which is laid out here in three different parts. So continuing to acquire similar sort of companies that we acquired in 2023, companies with the ability to generate earnings growth, cash flows, and high returns on capital. This is the goal toward which we steer the group systematically.
Secondly, we have a number of companies in our portfolio which possess a good organic growth potential, where with further investments, one can generate attractive or significant growth and with an attractive return profile. So clearly categorizing the portfolio from this perspective as well. And then finally, clearly, the 50% return threshold is something that we expect our companies to meet in the short- to mid-term. We have, if we look at our portfolio, I'll show a slide next which kind of illustrates a bit where we are. But clearly, a portfolio which has the potential to meet these targets if we look at a mid-term perspective. And as we are, I mean, we are a long-term owner of our companies.
We are a long-term owner of companies that can generate the sort of returns and margins that we expect to meet, also bringing the flavor in that our companies need to meet those targets over a longer period of time. If that's not the case, also structural considerations are something that we are ready to entertain. Then finally, providing a bit more flesh over the bone with regards to the update. I mean, this scatter plot illustrates, on the Y-axis, the profitability of our companies, on the X-axis, our return on trade working capital of the different companies, and divided our companies so that the gray rounds there, or the balls, are the old companies which were part of the group before the Boreo era started pretty much in 2020, and then the newly acquired companies since 2020.
So you can, I think this graph illustrates quite nicely what we've done in terms of where the focus has been in terms of capital allocation historically. So 1, 2, 3, 4, 5, 6 companies operate at the sort of at the type of financial profile where we expect those to be. A couple of the businesses we've acquired, you can see there being in between of 5%-10% profitability margins and below the 50% return on trade working capital threshold. [This] also reflects some of the challenges that we've had with a couple of businesses discussed last year in our updates. And I think finally, if we look at the portfolio of the older companies, which primarily still sits below the 10% profitability threshold and also the 50% return on trade working capital threshold, there's clear potential in these companies to improve both profitability and returns.
We have in all of these companies action plans and plans in place which are either already in progress or will be in progress in the short term with the focus to improve both the return and margin profile of these companies. So very confident, very happy of this refinement or crystallization of the value creation playbook that we've communicated. And overall, also in terms of culture of the group, very important sign as to the way we think about the portfolio of companies that we own. So with that said, that's a brief run-through of 2023 and today's updates. And then I'll hand over to Aku for Q3 before him.
Okay. Thanks. So let's wrap up the year from Q4 point of view and also some repetition on the full year's perspective.
So Q4, in brief, challenging end for the year, as mentioned, declining sales, decline of roughly EUR 7 million compared to Q4 2022 due to the softer weak market conditions in different businesses and in different companies. Moderate profitability, a bit below Q4 2022 level. However, positive is that margin, we were able to improve despite of the aforementioned facts. Cash conversion, still very good in Q4, a bit landing to the normal levels compared especially to the Q4 2022 and also to the previous quarter, but 73% is very good level, as well as the operational cash flow of EUR 2.1 million was also positive. Cost optimization actions are ongoing, and we are expecting over EUR 1 million net cost impacts affecting the profitability and supporting the profitability from mid-2024 onwards. Then some short-term priorities to defend our profitability and performance.
So from the profit side, firstly, of course, very many different actions from sales side, from pricing and gross margin management side, cost control actions group-wide, meaning in headquarters operations as well as in the operative companies ongoing. Already mentioned the net cost saving target of over EUR 1 million per annum. So the full run rate impact we expect to see then starting from the mid this year onwards, so in mid-2025. And then cash flow has been very positive during the Q4, and we definitely focused there onwards also and expect to still release the capital, especially from the trade working capital side. The speed has been quite fast now in the latter part of last year. I think the curve will level out a bit, but still where we landed, roughly the EUR 30 million level in the end of last year, target is to go towards EUR 25 million.
So there is still great room for improvement. And finally, number three there, financial standing. We have today announced that the board proposes to AGM that no dividend will be paid from 2023, and that is to prioritize the financial standing. And as Kari mentioned, we are evaluating the ongoing and continuously the different alternatives also in the capital structure development side. Shortly, recapping full year picture, rolling 12-month sales in par with 2023. We see the decreasing trend in the end of the year. And then on the right, rolling 12-month EBIT development. So that also very stable during the past quarters. Luckily, and very good was the improvement in the margin side. So rolling 12-month EBIT increased by 8% year-on-year. Same in quarterly figures. I will not go into details anymore here as this was already mentioned.
But moving on to the bridge, which we have normally used in the quarterly presentations. This shows the sales bridge between organic companies, meaning companies that were already in the group before Q4 2022. Then the dark blue bar, which is then the acquisitions upon that one, meaning Sematic in the end of 2022 and also Filterit and Delfin. Minus 10% sales development in organic companies; organic businesses were a bit offset by the positive bar from the inorganic companies side. And here even more, we can see the positive offsetting of the new companies' impact to the profit, which basically offset the negative development in the organic businesses side. EUR 2.1 million Q4 operational EBIT compared to EUR 2.2 million year back.
Then, longer-term trend of our cost development, cost ratios on the left here, direct cost ratio and quite sharp decrease, meaning positive in terms of gross-margin development. There are several factors, and the main factor is the company mix. So the newcomers to the group have a higher gross-margin profile than the old companies, which then in the group level impacted positive. Then on the other hand, in indirect cost ratio side, vice versa. So these new companies have a bit higher indirect cost ratio profile compared to the rest of the group, but also, of course, the declining sales now in the end of the previous year impacted also on the gross-cost ratios. Then moving on to business areas, electronics first. Operational EBIT margin landed on 7.5% level, a bit below 2022 Q4 level.
So decent performance, but quite heavily impacted especially in H2 last year due to the weakening market conditions, especially in the electronic component distribution businesses in Finland and in Baltics also. To mention that in YE Finland, we have done the reorganization actions, and that should then also support the profitability going forward. Few exceptions, Milcon, strong end for the year where the defense industry is still supporting the business well, and also the outlook remains positive. Also, SSN has had a very difficult year, slight positive signs towards the end of the year, but still the main reason is the main customers' investment holiday, which at least in the short term now impacts on the performance. And Delfin result moderate, however, pretty much according to the plan.
Capital efficiency, return on trade working capital decreased from the previous quarters, however, being in relatively good level, although we are targeting above 50 here. This was basically because of the decreased profitability in the end of the year. Technical Trade, good performance throughout the year and also in Q4. However, depending and differing quite a lot between businesses and even within the companies, starting from Machinery, power business, very strong 2023, and still the latter part of the year and Q4 was good. There is decent order backlog supporting still the outlook, and especially in the generator business and service business, we see very good growth possibilities. Construction businesses or construction-related businesses in Muottikolmio and in Machinery's construction equipment business, very difficult year, I would say the whole year, but especially again the last part of the year, weak performance, definitely not satisfied there.
But also in these businesses, we have initiated cost actions to support performance in the short term and in the long term also. Then from the more investment-related businesses, welding business in Fronius and metal machines business in Machinery, difficult market environment, but especially in Fronius side, very good performance during the year and in Q4. Sematic and Filterit, as said, the newcomers to the group very well supported the business and performance over the year and in the end of the year also. And there we have steady outlook going forward. Capital efficiency, one of the positives in technical trade side, improvement, decent or gradual improvement during the past quarters, still room to improve definitely, but especially in Machinery side, we have been able to release capital nicely during the year.
And then heavy machine side, same here, a bit differing situation per company, but if we start from the profitability, although being on a very low levels, but we can see that the profitability has improved from the comparison period. And same goes with the return on capital employed, where we have seen now the change in the trend, but of course, we are not even close to the levels that we aim to be there. In Putzmeister business in Sweden, we have decent outlook and very or not very, but good result during the Q4 supported by the aftermarket and service business, and with that also higher margins in Q4. In Finland, on the other hand, we have worse market environment, and also the outlook is soft, and the performance was definitely not in the good level.
Positive sign here, FNB that we have reported during the year that there have been different challenges, internal challenges and also from market side, delivery capabilities, ERP implementation, etc. But now we saw in Q4 that these struggles have eased up, and we returned to the good level of sales and also profit in Q4 and expect that to continue. And as mentioned, capital efficiency improved, where also the exited Sany business in the mid last year impacted positive. Finally, our other operations, so again, EUR 1.2 million sales in the quarter, that is not a mistake. That has been really the stable development during the past quarters. So no major ups or downs in that business. Then our strategic target, once again, return on capital employed. As we can see from the blue bars, it has been very stable.
The return on capital employed has been very stable during the year, basically. The return on capital employed has also been very stable during the past quarters because of very stable EBIT rolling 12. Return on equity then, on the other hand, a bit sharper decline towards the end of the year, and that is because of the increased interest expenses we have seen, especially during 2023. This was already pointed out by Kari, but still the net debt to operational EBITDA is one of our strategic targets. We are in the mid-range there, so that has been also very stable now 1.5 years, basically. Cash conversion and cash flow overall, definitely positive. That has to be highlighted from the previous year. Then earnings per share and cash flow per share, blue bars on the left.
So of course, the positive cash flow development impacted positively there also. And to end Q4, operative cash flow of EUR 2.1 million, a bit lower, green bar as we have seen during the previous quarters, but still very happy on that one. So I think that was the wrap-up of 2023 from financials side.
Okay. Thank you, Aku. So we head over to Q&A. I think I've tried to publish pretty much all the questions which are there. So 25 of those, thank you. Appreciate that. So let us do our best to go through this in an efficient manner. I tried to take this partly. There are some overlapping questions. So first of all, there's a few questions on cost initiatives we said. So can we provide some color on the cost initiatives and their magnitude by BAs also? So what sort of savings these are?
I mean, these are so this is everything what has been already decided, part of them in Q4, part of them already in Q3, and then now Q1. These are, I would say, there are more than EUR 1 million of savings, gross savings that we are generating. On the other hand, then there are other both personal expense plus OpEx increases in our company. So the net impact minimum that we're looking at is sort of the minimum of EUR 1 million that we expect starting from 1st of July onwards. But they are both parent company-related actions. We've reduced both the OpEx in HQ, also downsizing of the team. We're talking about roughly EUR 500,000 there.
Then in all of the business areas, we're looking at something closer, I mean, something between EUR 200,000 close to more towards EUR 500,000 in gross savings. And as said, some new costs that typically then offset part of those savings. But we've completed, as there was one question on YE Finland, YE reorganization. So that is the most sizable reorganization that has been completed. This is pretty much related to reorganizing the organization so that it still, let's say, brings efficiency into the company, of course, accounts for some of the declines in activities that we've seen and reflects the view on market outlook, but also structurally changes which we see to improve the quality of the business going forward.
So all in all, touching those cost initiatives, touch all of the different sort of layers in the group, are everything designed on a business company-to-company basis because of the reason that the companies are different within the group and actions need to be taken company-wide, company-specifically. Then let me give a few questions to Aku here. First of all, can you comment on the drivers of technical trade revenue decline in more detail? I think you already touched upon that, but we recap quickly. Technical trade revenue decline.
Yeah. There are many factors behind, and now when comparing to Q4 2022 also, situation is different to that. But firstly, in machinery side, I think the engine sales figures were higher in Q4 2022. No material deviation there.
But definitely, the construction business and the volumes, both in Muottikolmio and in Machinery, construction business were higher in Q4 2022 than now in the end of last year. I don't think there was any major other factors behind. These are definitely the ones.
If we continue to take these, let's say, business area-related questions, do you think that the significant sales decline in heavy machines in Q4 illustrates the market development, or was the decline partly due to lower season when, possibly, single deliveries play a bigger role? It's both. So the market, I mean, first, there is an impact of roughly EUR 0.5 million in Q4, EUR 2.5 million 2023 as a whole, which comes from the exited Sany business. So that's one. Secondly, lower amount of Putzmeister deliveries. They deviate one quarter by quarter significantly anyways. Q4 typically is not the highest delivery season there anyways.
But in Sweden, I would say normal seasonality. In Finland, as Aku commented, tougher market overall. So last year was a strong year in Finland and Sweden overall. If we look at the amount of machines delivered, but now, I mean, if we look at the world as of now, there is a clear signal are more softer from the Finnish market compared to the Swedish market. On the positive side, as Aku said, FNB is back on track and successful, excellent work done by the team locally. There are now heavy machines business area organization also to come from a negative operative result in H1 to a significantly positive H2. And outlook continues to be rather good going forward as well. Then there were M&A. There are, I think, M&A-related questions, some. So a bit of expectations there.
So there is, for example, one question: would you consider doing M&A transactions in 2024? What kind of targets? There was, I think, another one on M&A also. But if I take you through that question, I mean, as we communicated on short-term priorities already at the end of last year, we prioritize currently the performance of the existing portfolio, also financial standing, if we look at kind of capital allocation-wise, where the focus clearly is. This doesn't mean that we're not active in the M&A market. We continue to screen targets, have discussions with companies that fit our refined acquisition criteria and asset thresholds as well. It's, however, clear that there will not be a spree of acquisitions this year. This we do not expect. But look definitely returning back to that developments also, not in a very distant future. But as of now, short-term priorities are elsewhere.
Continuing on that topic, I think there were a couple of financing structure, capital structure development-related questions. So would you consider raising interest-bearing debt in 2024? There was another one that is, what is the situation regarding the renewal of the hybrid bond that we have in place? Are you satisfied with your current capital structure, or could we see more on this front goes to the same bucket? So definitely, as we said, I mean, we have been continuously already in the last six to nine months thinking about alternatives for capital structure development. We have pushed our if you look at our financing structure today, our senior loans are at maturity currently at early 2026. Early 2026, and the hybrid bond sort of reset date is in Q1 2025. And definitely, we've been looking at different continuously considering different alternatives that we could entertain.
We comment more on those when the time is right. But definitely, it is something that, let's say, all of the options available there are what we consider at this stage. So more to comment when we have something more precise to say. Then there are some. Let me give you, Aku, some of these financial questions more. Your operating expenses increased from Q3, not only personnel expenses, but also OpEx were up Q and Q comparison. So does the Q4 fixed cost level represent the level going forward before cost-saving actions or not?
Before cost-saving actions, yes, but after cost-saving actions, no. And one of the reasons of higher OpEx is that we have also some new companies that we did not have in the comparison period, like Filterit and Delfin, for example.
Yes. And there's another question on Q4 still.
Your sales have traditionally been highest in Q4, but now it was the smallest quarter in 2023. Was this an exception to the seasonality and indication of a weaker trend, or do you expect this kind of seasonality to continue also in the future?
We don't expect that to continue. I think the market environment decreased or deteriorated in Q4 quite heavily in different businesses, as mentioned. So when the market environment normalizes, of course, we also then expect that Q4 going forward will be looking different like.
Yes. Agreed. And then your financial expenses increased on Q4 compared to Q3. Could you comment on the increase, and is this the level the cost will be also going forward?
Yes. There are several different factors. One is definitely the increased interest levels compared to end of 2022.
But then there are also some one-off costs impacting different fees, for example, impacting on the quarterly figures, as well as the valuation of the interest hedging instrument. In 2022, we saw quite big positive impact on that one in Q4 2022. And now during 2023, vice versa. So that kind of impacts quite a lot year-on-year. And what comes to then the expectations going forward, keeping other things intact and taking into account the expected decrease in interest levels, we should see some positive development.
Yes. And there is another question on interest rate sort of development. So how does the current rising interest rate environment affect our business in general, the result? I mean, overall, I think, as Aku mentioned, of course, there's increased through the increased financing cost.
Now, we've managed to manage that quite okay throughout the last couple of years through the fixed instruments that we have, the hybrid, plus also then hedging arrangements. But definitely, an increase there. Then, however, the bigger impact, of course, is what the interest is causing for the demand side of things. So definitely, part of our business and a great share of our business is CapEx-related. And the lack of investment or the impact of rising interest rate on investment activity is what we're experiencing as of today in many of our companies. So definitely, that is the biggest impact there. As mentioned on the other side, then now the aftermarket businesses, which we have there and quite nice positioning in many of the businesses, provide protection but doesn't, of course, make us, let's say, intact out of the impacts. Then there are quite many questions on outlook short.
We don't provide any guidance. But if there are—I mean, there are questions which say that what kind of outlook do we have for the year 2024? Then another one, your comment on sales under pressure. Could we see better conditions for sales already during Q1 and Q2 2024? I think there were more. Yes. We expect the outlook to improve in Electronics through 2024. Where is this based on? So if we talk about this briefly, on a group level, we said that we expect market to be challenging in the first half of this year. In part of the businesses, we have a stronger and more of a longer-term pipeline, including, for example, our Swedish businesses, including also the Machinery business, for example, which provide kind of good outlook for the entire year. However, I mean, we don't have a crystal ball here in our hands.
I mean, extremely difficult to judge where the world will be at the end of 2024. What is relevant? I mean, we focus on what we can influence. So basically, we base our assumptions so that there will definitely there will not be a significant, let's say, help from the market short term. We take care of the fact that costs are in control. We take care of the fact that the balance sheet is not too heavy. And we are definitely coming out then stronger out of the situation when the market will help us. But I mean, some of the businesses remembering Milcon, for example, Delfin Technologies, Filterit, so forth, quite stable, good outlooks. Sematic, the same, for example. So no significant issues. But some of the businesses looking at construction-related business, not all, but some of them expect to face a tough time.
But on the other hand, if we maintain good market positions there and strong market positions, we will definitely be there when the cycle turns sooner or later. Some questions. There was a working cap question still. Working capital was released in 2023. Are we able to release more cash from working cap in 2024?
Yes. That I think was mentioned also already. But yes, that is exactly what we expect and continue working.
Then that way, so I tried to iron out. There are a few questions then on, well, one still that was unanswered with regards to market is when do we are we already at the rock bottom or still sliding towards spring 2024? We do expect that we are at the bottom. We do not see significant risks of, let's say, further deterioration if we look at where we stand today. I mean, Q1 is seasonally.
I mean, there was a seasonality question earlier on. Q1 is historically looking at the toughest or the weakest of our quarters. And this has been for many years. But if we look at the not an optimistic version of our view of the future, but let's say rather realistic, we don't expect that we would be taking a further hit on sales or activity-wise anymore. Then there are a few questions still on sort of the strategy review that we put. One, you mentioned that you're able to take actions if needed if you are not convinced that companies can meet your return on trade working cap targets by 2026-2027. Could you thereby exit companies already before 2026-2027 if you're not convinced about the development? I mean, I would say the straight answer to that question is yes, as we formulated in the release this morning.
We believe in the ability of our portfolio to meet those targets. We also need to be confident together with the companies that we get there. Should that not be the case, then we will not be waiting for reaching those actions. There needs to be a sufficient level of confidence of achieving those numbers as well. Definitely, the preparedness to do things are there. However, I mean, this release from today is not to be interpreted in a way that there is a spree of divestitures that we would be contemplating. We believe there is a great both profit potential but also capital efficiency improvement potential in the businesses as we complete the actions that we have now initiated. Continuing on the same front, what is the plan for improving the performance of the heavy machines business area?
What can be expected from the business area? Well, we've had a tough time at FNB this year as we last year, as we said. Now, if you look at run rate performance last 6 months, FNB is pretty much there where it has historically been. We hope then and trust them that we continue. So that will contribute to the positive development. We have there work to do on working capital reduction that is in the plans there. On the Putzmeister side, we are still in the 3 countries we operate, clearly a market dominant player, so clearly above 50% market share in the Baltic Sea markets, Finland, Sweden, and Estonia. Nothing has changed on that front, nor do we expect that will change.
Those businesses have last year demonstrated also that even though sales are quite not there where they have been taken, produce a decent profit and a return that we expect to continue going forward. But now we've been, I think, at around EUR 1 million profit in the last years for the business area. Definitely, if you look at where the businesses have been, we're talking about the plus EUR 2 million portfolio companies. And then, of course, we do our best to be on those levels in the future. Then finally, three last questions. Do the current geopolitical global tensions have any impact on your business? Do you take risk management actions to manage these?
So, maybe a bit political answer, but the biggest risk from that comes to the market and to the market uncertainties that would continue and continue and with that creating uncertainties in the customer side also and investment decision-making. So I think that.
Yeah. We have a limited direct impact if we talk about, for example, supply from certain countries in Asia at the moment. It is a limited exposure we have. I mean, of course, if something happens dramatic, I mean, that will, as Aku said, through the kind of broader economic developments, I mean, have surely an impact on us. If we, for example, look at acquisitions and new companies to be acquired, whether we would acquire something with heavy exposure from the supply side in China, for example, at the moment, not really in the cards. So these sort of actions we definitely take.
But overall, I would say that, well, direct risks are limited. Indirect risks are existent for sure. Then what is the most significant risk for Boreo in 2024? Well, it would be, I think, the biggest risk that we would not be able to manage the cost side and manage the balance sheet side properly. Whether we feel that do we have the capability to do that? Yes, we definitely feel on the back of the fact that a great amount of actions have been already taken. Whether there will be new actions, most likely, yes. We're still working with some of the companies to make sure that fixed costs are under control and also the quality of balance sheet in terms of quality of inventories, absolute amount of inventories, quality of receivables is there. But definitely, it relates to, I would say, biggest risk related to market developments overall.
As I mentioned before, we don't see that there will be a significant decline. We're only at very low levels compared to recent history. But that I would comment and the resultant, let's say, impact it would have on the business overall. And then last but not least, you comment on new acquisitions during 2023. How have the integration processes been going? Any issues? No issues. I would say a very positive development. We've developed in the last years a very systematic onboarding. We don't call it integration. We call it onboarding of companies to the system. I think if we look at the latest Delfin deal, for example, I think earlier on, the same amount of actions which were completed in maybe 4-6 months are now completed within 1-2 months. So I think we've improved a lot.
And if we look at, for example, the personnel surveys we've completed in the new companies, very good developments there, or satisfied people, satisfied personnel, committed, motivated also after the change of ownership. So very happy on those developments overall. But with that said, I think it became the most longest of our webcast. Appreciate the questions. I'm glad to see there are still quite many people online. Really appreciated one hour. I think with this said, we say thank you and look forward to seeing you again in the coming months.
Thank you.