Good morning. This is the conference operator. Welcome, and thank you to be at Addtech's fourth quarter presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Niklas Stenberg, CEO of Addtech. Please go ahead.
Thank you, welcome, everyone. All in all, another very strong quarter, concluding a highly successful year for Addtech. High customer activity and favorable business climate for our companies continued broad-based in the fourth quarter, and we summarize a very strong 21% organic sales growth. Our EBITDA growth, very strong, an increase of 47%, and then historically high margin of 14.4%. Strong markets, as I always point out, it's the people and a strong culture with a focus on entrepreneurship that's the main reason behind these strong figures. As I said, a very strong sales growth, 34% on aggregated level, and this is supported with solid double-digit numbers in all business areas. We should also remember it's challenging comps here as well.
Good contributions from acquisitions, positive currency effect, but it's primarily the satisfying organic growth that is driving here. Looking at the bottom graph, as you can see, also in this quarter, as in the rest of the year, it's really across the board. If I should highlight some drivers in the quarter, it's strong deliveries within the sawmill sector, electricity grids and energy, and then also electrification and the processing industry overall has remained very strong. In addition, sales growth is fueled by an overall good delivery capacity when the easing of disruptions in the value chain has occurred. Given the insecure macro climate, it's of course also satisfying to see the continued high customer activity.
Order intake continued at high levels during the quarter, and our backlog remains well-filled and of good quality. The positive profit and margin trend continued in the quarter with strong EBITDA growth, as I mentioned in the beginning. Active work in our company is to handle the inflation of pressure in parallel with a firm grip on the cost base, and we have improved the margins both sequentially and year-on-year from high levels. Good contribution from acquired companies and strong organic sales is what's giving this strong outcome. Also I want to highlight that we continue to strengthen the operating cash flow, and this is thanks to the strong results in high margins, of course, and also a welcomed decrease in stock levels in the quarter.
Malin will come back a bit more on that within short. This picture is showing development in all the business areas, and I'm just gonna give a very brief highlight. Automation, a very solid Q4, good sales trend, especially towards the defense industry and med tech. These two segments now stand for approximately 25% of the annual sales in automation. Improved margins, linked to some efficiency measures in some of the units, and also fueled by the good leverage on organic growth. Electrification delivers a very strong quarter, both organically and from acquisitions. Overall good sales growth in most key segments, so it's broad-based, but the battery companies are sticking out on the positive side. Energy has a continued very favorable business situation.
Demand from infrastructure products within electrical transmission and distribution continues to improve from already high levels, as you have seen throughout the year. We also see a continuous strong demand from building and installation, where as you are aware, we are primarily exposed to hospitals and data center and different kind of infrastructure projects. In Industrial Solutions, also, overall strong business situation. This is also the business area with the strongest, toughest comps. Sales within forest sawmill industry remain stable at high levels. Strong deliveries of projects in the quarter, but with a flattening demand on new projects that we have seen two quarters now in a row. This is undramatic for us due to the solid order backlog, where we have a visibility into 2024.
Very strong margin in the quarter, as you can see, and this was partly due to cautious cost calculations in some of the projects that was finally calculated at year-end closing. That gave a little extra push. Last but not least, process technology, a good momentum and good delivery. It's the process and energy segment in general having positive development. We also see an increased demand in a segment like oil and gas, with increased focus on production. Here we provide different solutions to analyze and measure different ingredients in that production. Marine segment, a clearly positive trend, especially relating to service and replacement, but also gas detection and some scrubber installations coming back.
Full year highlights, to summarize the full year, we can again conclude a successful year with strong sales increase of 33% and a record high margin of 30.6%. Here again, we should remind that we had a really strong year the year before as well. It's a clear sign of a strong end market, but also the strength in our business model and the strategic positions that we have in the group. Acquisition pace has been good and accordance with our growth targets. We also signed at the end of Q3 the Science Based Targets initiative to further clarify our ambitions in sustainability area.
Yeah, I've been through most of this, but to mention a couple of thing, organic growth over the year, 17%, a good contribution from acquisitions, 12%. Our companies, our ability to adapt to new business situation have also led to many of our companies have advanced their positions in various segments. EBIT over the year up 41%, very satisfying, and we have raised some margins, both from acquisitions, but also keeping control of the cost and good pricing power. Cash flow is improving, as I mentioned in the beginning, and a substantial increase also in earnings per share of 39%. This is also reflected in the board's proposal for a dividend of SEK 250 per share.
In summary, of course, we're very happy with this record year for Addtech with a broad-based delivery. Since we are ending a full year, I just want also to reflect some highlights of the business areas over the year as such. Automation, as you're aware, a large extent OEM related business here, mechanical process industry, Med tech being primary customer segments. Throughout the year, a strong demand in all of these main segments, which led to record high order stock buildup. What we now, when we have seen, towards the end of this year, a gradual ease in the value chain disruptions, we have seen a strong sales growth the last two quarters.
This in combination with good cost control have generated a very strong EBITDA increase. From an acquisition point of view, automation acquired one company in December, a Dutch company, MCS, with a good value proposition within industrial IoT. If we move on to electrification, as you see, very, very strong numbers. As you can see in the pie chart, we have a well-diversified customer base and a strong development in basically all of these segments. An exceptional 54% with a good mix of organic and acquired growth. From an acquisition perspective, electrification put their focus to consolidate and integrate Fey, a large acquisition we did last year, and also ABH in Germany.
Beginning of this year, we acquired a new company, Electrum, a very nice company north of Sweden, that adds important software integration competence to electrification. If we move on to energy, the key driver for energy is of course the high investment in electrical transmission and distribution. During the year, energy also complemented this position with the two acquisitions, Spanish Arruti and the U.K.-based Allied Insulators. With these two acquisitions, we elevate our position from being a strong Nordic player in this area to being a more global player. The demand among grid owners remains high. It's a positive outlook in most geographies. The sales growth last year is really broad-based, and we have very strong development in infrastructure, building installation, and public safety.
Industrial solution, as I said, also entered the year with very challenging comparisons. Despite that, net sales is up 21%, solid growth across the segments, special vehicles, thermal industry, waste management. Very solid margin development. We have acquired two companies here during the year. The Swedish company, Drivhuset, that adds frequency converters to our electrical driveline offerings, and ImpulseRadar, also Swedish company with a strong niche driven by the infrastructure segment. Finally, process technology is driven to large extent by measuring and decreasing environmental impact in industry production and also in marine. That has generated all in all a net sales growth of 27%. High activity in all segments. Also a comforting recovery throughout the year within the marine segment.
Process technology has been active in acquisitions, four new companies acquired that complement the strengths and the strategy in the different business units. This is a picture summarizing our segment development and segment spread during or by the end of the year. Just to summarize, I mean, our sales is a mix of OEM sales, infrastructure, and industrial aftermarket. It has been equally strong, if you look from that perspective, over the year. It's also comforting to see in the pie chart that our aim not to be too dependent on any singular segment has continued to develop. We have today a stable and well-diversified customer base. Acquisitions, during the year, we have completed 10 acquisitions, another four after closing.
Just in accordance with our growth plan, I would say, we deliver in a good way. We also continue to deliver on the strategy to do more acquisitions outside the Nordics. We have accelerated the activities in selected markets, and we see that the deal inflow is increasing when we are now being more present on the market. There are many well-run private, privately owned technical companies that adds very well into our strategy. We see great potential here going forward. In general, we continue to have a positive view of the acquisition market. We have a strong balance sheet and an attractive pipeline with high performance, high-performing companies. It looks very good going forward.
This picture is showing our geographical presence. We continue to increase our sales outside Nordics just as planned. It's both organically, of course, through export and to follow our customers to new markets, but also as I said, through acquisitions. As you see in the picture, if you summarize, as of now, we have about 36% of the sales on other markets than Nordics. Just to mention development geography-wise over the year, all Nordic countries developed strongly and also the strategic European markets for us, DACH, U.K., Benelux, also had a solid development. Before handing over to you, Malin, to give some more details, I think this is a picture to be proud of.
The ultimate evidence on the business model is that we, over the 20 years +, have managed to create an average annual EBITDA growth exceeding 20%. You know that 15% over a cycle is one of the two simple financial targets that we run the entire operation on. Apparently, we've been able to exceed that target over long time. Also what you see, return on capital employed to the right, we're also proud of. It's the solid and stable earnings growth over time with the low CapEx operations and the product mix in the group that are the basis to maintain Return on Capital Employed at high levels. Malin, over to you.
Yes. Thank you. Some words on the financials, and as Niklas said, the strong sales growth is driven by very good and broad-based demand situation as well as a well-filled order backlog. Our profit margins continued to improve during the quarter, thanks to good leverage from both acquisitions and organic growth. In combination, of course, with our company's ability to offset the high inflationary pressure, and not least an overall good cost control. Our cost efficiency continued to improve quarter by quarter. In the Q4, the operating margin was strong at 12.4%, adjusted for the revaluations of contingent considerations and one-offs, which had a net positive effect on profits by approximately SEK 7 million.
We believe the full year margin level should persist throughout the fiscal year. Inventory levels have been a key topic throughout the year, and due to supply chain restraints, we have seen an inventory buildup that has been challenging, even though the levels have been in line with both growth and order backlog. We now saw that the levels improved in the quarter, and we saw a sequential decrease in inventory versus sales for the second quarter in a row. We expect this trend to continue. Our profitable working capital remains on high levels, thanks to profits, margins, and overall efficient management of total working capital. We are very happy to conclude a strengthened cash flow during the quarter, mainly due to contributions from higher profits and continuous strong margins. We also saw a release in working capital relative to previous year.
Thanks to this combination, we actually managed to break the pattern and improve our cash conversion during a period of very high growth, which is very pleasing. Our financial position remains strong and improved sequentially as expected. Our key KPIs are fluctuating over the year, but are on average on normal and very satisfactory levels. We have no worries for our interest rate sensitivity. It will not impose any restrictions on our strategy in the foreseeable future. We have comforting headroom to support our ambitions going forward.
Thank you, Malin. To summarize, before going into Q&A, I come back to this picture every quarter. It's our five areas for future growth, all strategically chosen areas, with growth drivers linked to underlying growth trends, as you can see in the bottom of the picture. Especially the green shift, that's an important driver. Even though the macro situation, as we all know, is uncertain, and we follow that development closely, of course, so far industry in general has showed a strong resilience. For us, demand has been stable on a high level, and outlook for next few quarters remains good.
The point with this picture is that we feel comfortable that we are positioned to generate some growth no matter what the industry average will develop going forward. Short summary, successful quarter and year, high sales profit growth, strong margins in all business areas. Despite the very strong invoicing in the fourth quarter, our backlog remains at high levels with good quality. Acquisitions proceed according to plan, and we have a well-filled pipeline and good firepower. Our outlook for the next few quarters remains good even though we are humble how the macro situation will affect the market conditions. One foot on the gas and one foot on the brake, we are well prepared to act if and where the business climate weakens.
We will also continue our growth journey in areas where we will continue to see growth. Thank you, and over to Q&A.
This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Carl Ragnerstam from Nordea. Please go ahead.
Good morning. It's Carl here from Nordea. A couple of questions. Firstly, you guide that the backlog is still at high levels and you have quite good visibility, but is it possible for you to give any flavor on sort of the order intake development during the quarter? It sounds at least like it was quite tough for you to reach a positive book-to-bill during the quarter given the higher organic sales growth. Could you also, on that note, remind us on what earnings visibility you have currently with your backlog?
Okay. Yes. Hi, hi, Carl. First of all, looking at the level on order intake, we haven't seen any change basically from the last quarter. If you look year-on-year in underlying companies, organically, it's on par with last year, which we think is strong because it was a very special situation last year with really strong order intake. If you look on book-to-bill in the quarter, it's like you say with this very strong order or sales, organic sales, it was our book-to-bill was slightly below one. If you then consider the very...
If you take out the very strong order intake with the long backlog in the sawmill industry, it's on par. In our view, it's a strong, continuous strong order intake in the quarter. Second question on visibility. I mean, we have very good visibility, I would say, for coming two quarters, if I put it that way. I mean, we have some visibility even longer than that. All in all in the group, I would say that. Good visibility for two quarters.
Okay, that's very clear. I mean, you mentioned that the marine business picked up a bit during the quarter. Could you give some flavor on the growth contribution from this to process organic growth perhaps? Also historically it used to be a quite profitable sub-segment. Did it have any considerable positive mix effect on the segment? Also finally on that note, I mean, you took out quite a bit of cost in the marine business a couple of quarters back to adjust the cost base to sort of lower volumes. Do you have capacity to meet the current demand over the coming quarters?
Yes. I mean, marine sector is still on a quite low point. If you look on in the presentation we are when you look on the market segment in process technology, 15% of process technology is transportation and the absolute majority of that is marine. There you can calculate approximately the size of the marine segment. It's still. It's an important segment, but it's not anywhere near when we were in the real boost period a few years back. It is good margins in the marine segment, especially this quarter where we had lots of service and maintenance in certain areas.
We see what we can see, we will continue to have a good development in marine, but we are not foreseeing that we will come back to the glory heydays with the scrubbers. It's not something like that. Which also links back to your second question. I mean, we have done a lot of efficiency measures, as you said, we for sure have capacity to grow in accordance with the markets.
Okay. That's, that's very clear. On industrial solutions also they're quite strong margin year-over-year. I mean, to what extent is it driven by the strong forestry industry where Which might at some point, of course depending on how that end market develops, but might have a reverse effect when the backlog is sort of fully delivered, or is it also when you adjust for the forestry industry still a quite good year-over-year margin uplift?
Yeah. I mean, even if you take that out, we had a good margin development in the whole business area. Of course, the strong margin in that sector is giving some extra cream on top. As I said, we had a very good margin development overall and also good acquisition contribution here for a couple of companies we added. I mean, if you look on this quarter was especially strong, as I also mentioned before. We have had the margin increase in the underlying business, even if you take that out of the equation.
The final one from my side is on energy and especially the grids business there, which been historically following its own cycle, perhaps with slightly softer volumes a year after a year with strong underlying volumes.
Yeah. Yeah.
in order for them to manage, I guess, capacity, et cetera. What's your view on next fiscal year? Do you think it will be a more muted year, or do... Obviously you sound pretty optimistic in your CEO statement here.
Yeah. I mean, you have done your homework, Carl. You know, historically, we have always guided that one strong year is followed by a weaker year. What we foresee is that we'll be a stable growth development in the transmission sector also the coming year. It's a lot of projects out there to calculate on. Also, we have added the acquisitions that enter us into new markets that is also giving some fuel there. What we can say today is that and most likely we will see a steady growth.
Mm-hmm. Okay. Very clear. Thank you. That's all for me.
The next question is from Karl Bokvist from ABG. Please go ahead.
Thank you. Good morning. Many questions have already been asked. Just staying on the energy topic there. To understand just based on what you see, is it mainly these kind of when you say transmission, are we talking about actual kind of, state and municipality grid locations? Or are we talking, you know, transmission and grid capabilities related to EV charging points and those kinds of solutions?
Hi, Karl. Well, actually, I mean, if you look on the situation in the quarter that passed, I mean, we have these two different things are going hand in hand because when you expand the national and regional grids in the next phase, you also have to implement the electrical infrastructure like chargers. We are present in both of these sectors. The quarter that passed, I mentioned before that we have had a good development in transmission, but also on the more distribution side and the installation side of that. I would say both, but it's the main underlying driver is of course more the state-owned grids.
Understood.
Is that helpful?
Yeah. Yeah, good. That's, that's helpful. There are some companies who have highlighted this. You, you did give some comments on kind of underlying orders, et cetera, but have you also perhaps seen a kind of still good order intake, but that perhaps the level of pre-ordering has come down or normalized as lead times have also improved?
Sorry, can you repeat the question?
Yeah. No, we've heard from some other industrial players that, for example, the level of pre-ordering that, you know, perhaps, 6 or 12 months ago, companies would perhaps order a bit earlier than what they usually would because of the supply chain conditions, et cetera. Now it's-
Yeah.
more of, as supply conditions have improved, the kind of lead times and standard order placements from the time they want things to be delivered has also improved. I'm just curious to hear if you feel that kind of the level of pre-ordering has also normalized.
Absolutely. That's very clear. When we look at our big customers, I mean, the lead times overall has normalized. We are still having long lead times on some, for instance, some electrical components. Overall, the lead times have shortened. Clearly the customers are not making the same kind of long orders. That is apparent. We are more back to normal.
Understood. My final one is just on the kind of gross margin compared to the SG&A. We've had a couple of quarters now in a row where the gross margin year-over-year is still a bit down, but you've offset this with, you know, strong SG&A discipline. I heard a comment there on the kind of full year margin and how we should think about it for the coming fiscal year. Is there anything here which you feel, you know, you feel you can lift the gross margin and therefore that is what will help support the operating margin now, or is it still kind of a continued productivity potential on the SG&A side?
I would say it's a combination. If you look on the gross margin, as you indicated, it has decreased somewhat during the year, but that is primarily due to the product mix. We have taken some high volume business to a lower margin from a strategic point of view to take market share in a couple of areas. That is the main reason that the gross margin as such has gone down. Looking forward, it's a combination of all steady or an improvement of the gross margin and in combination with strict cost control.
Understood. That's all for me. Thank you.
Thank you.
The next question is from Johan Sundén from Carnegie. Please go ahead.
Thank you, Niklas and Malin Enarson, for taking my questions. I had a question on the industrial solutions business, and we already touched upon the topic, but is it possible to give some ballpark estimation of the effect from the project completions in the quarter?
Hi, Johan. Sorry, what did you say? To give some ballpark measure on...
On the effect on profits from the project completions. You highlighted that in the report that it boosted margin somewhat in this quarter.
Yeah. Maybe somewhere around, let's say 1/2 percentage.
On the margin? Yeah.
Yeah.
Perfect. Then I also noted a step up on the vehicle side in the industrial solutions business in the quarter. Just interesting to hear the underlying development here. We've seen from many other industrial players that there's been somewhat of a catch-up effect when the kind of supply chains are normalized. How much of this step-up is just this kind of supply chain easing effect, or what, and what is kind of structural good step-up in demand?
Yeah. It's like you say, it's been a strong development on the special vehicle side. It is a combination of the two, how much that is so to say, released of the old orders and how much is continued end market demand. That is difficult to really give some guidance on. Clearly, the indications we get from our main customers here is that it is still good end market demand. At least for coming couple of quarters, we get good guidance from our customers. It is still a strong market.
I mean, we talk here about mining, forestry and, you know, entrepreneurial kind of trucks. This market has held up very well.
Perfect. I think my other questions has already been answered. Thanks a lot. Congratulations for good results.
Thank you very much.
Thank you.
The next question is a follow-up from Karl Bokvist from ABG. Please go ahead.
Yes. Thank you. Just one comment, I understand if it's a bit difficult to, or if you are not willing to give a precise answer, but a very strong organic growth. Can you give some indication on the split between price mix and volume or essentially just price and volume?
Yes. Malin, you haven't said anything. Maybe you want to answer.
Well, we have, I think we can conclude that it's quite the same as earlier quarters. It's around 1/3 of the organic growth is from price increases. Also this quarter, I think it was.
Same. Same.
I t was the same in Q3.
Yes, it was same.
Understood. Malin, if I may, the cash conversion was very strong, and it seems like the working capital levels are, you know, normalizing. Just how much more potential do you see given that you're also, you know, clearly growing at a very strong rate?
Yeah, that is a very good question, of course, since the inventory built up is in line with both growth and the order backlog. Of course, as long as we grow, that will increase the inventories in a natural way. Also the focus we have now and also because of the strong invoicing, I think that there is still relieves to see in the coming quarters. We believe that the inventory levels will be able to come down, even though we see a further growth.
Okay. Understood. Thank you.
Thank you.
For any further question, please press star and one on your telephone. Mr. Stenberg, there are no more questions registered at this time.
Okay. To conclude then, thank you for all good questions. Have a nice day. Goodbye from us.
Bye. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.