Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarterly report 2018 conference call. Today's speakers will be CEO, Mr. Jonas Gustavsson, and CFO, Mr. Stefan Johansson. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask the question, you will need to press star and one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today, Thursday, 7th of February 2019. I would now like to hand the conference over to our first speaker today, Mr. Jonas Gustavsson. Thank you. Please go ahead, sir.
Thank you very much. Good morning to all of you, and welcome to this presentation of the fourth quarter and the full year 2018 for ÅF. I am sitting here, Jonas Gustavsson, and on my side I have Stefan Johansson, our CFO. We will take you through a presentation, obviously focusing on the result for the fourth quarter, but we will also talk a few words about the ongoing deal we have with Pöyry. That will be a part of the presentation, and there will be time for questions in the end of the presentation. The part that we would like to talk about today, a short business overview, a bit on the market and highlights. Stefan will talk a bit about the financials, each division's performance.
We will shortly talk about the strategy, and then, of course, a few words about the ongoing work we are doing with Pöyry, then on a summary. When looking at the fourth quarter, we came in at SEK 3.9 billion on the top line compared to SEK 3.5 billion, that was up 13%. EBITDA SEK 357 million, compared to last year, SEK 344 million. The margin ended up at 9%, lower than last year on the margin side. Stefan will go into that a bit more into detail. But on the overall level, we feel that it was a strong growth in the fourth quarter, which we are very happy about, that our organic growth are actually picking up. The margin is stable. We know where we have work to do. We continue to see a good demand on the market.
The strategy that we've been working on is, I would say, step by step, also becoming more solid and clear. Of course, we are now focusing a lot on acquisition on Pöyry. When you are looking on the full year, we had a 10% growth. I think also historically, maybe Stefan will comment that, I think on the organic growth side, we are quite pleased to see that it's picking up, and that we also could improve the margin and also, of course, EBITDA in absolute numbers. All in all, I would say that it's been a solid and good year for us, and now we are looking very much forward to what we can do together with Pöyry. That I will get back to. A few words then, when we summarize 2018 without going in details, and these numbers are then updated based on 2018 numbers.
We are just about 11,000 employees, we are just on SEK 14 billion in top line. We are a very strong Nordic company, and we have activities in quite a few countries. We will get back to a few words on that when we are looking on us jointly together with Pöyry. We have, as you all know, a quite broad portfolio of services and projects that we're delivering towards infrastructure, industry, also a strong portfolio of digitalization. This is split in different segments. This is a core part of the strength of ÅF, that we have a wide portfolio, balanced portfolio, that we have one third of the business going to public sector, as you see here, 70% to the private sector. ÅF has, since many years, a very strong customer base.
These are the top 10 customers. These represent around 25% of the total revenue, roughly. This is as close to recurring revenue you can come. Many of these clients have been on the top list for ÅF since, we made a contract with Ericsson, somebody told me that it was 1906. One of the strengths we have is that we have a very deep and strong core customer base, that we have been working with for many years. For many of these, we are a strong partner, and we are continuing jointly together to expand and improve our offering. That feels very good. ÅF as a company, providing, as we say, innovation leading solutions, these trends are driving a lot of our businesses.
Everything going on the smart city infrastructure, the whole challenge on mobility with electrification, autonomous cars, the industrial digitalization. Also, th e energy market that is changing is driving a lot of the business that we are doing. Moving into the fourth quarter on the market side, we will say that the general market trend is remaining good. We see that in the industrial sector, the demand for digitalization, electrification, automation remains strong. We also see on the infrastructure side, if you look on our core market, which is basically as of today, Sweden, Norway, Denmark, and Switzerland. These are still very strong. We see a demand on, which is a big portfolio of commercial and public buildings, road and rail, as well as these interesting niche areas where ÅF has taken a strong position in architecture and design.
We continue to see a strong and good demand in this segment. On the energy market, the business we have in the Nordics is continuing to be good. Where we have been struggling a bit is to position ourselves correctly on the international energy market. That has affected our margin as you have seen in the fourth quarter. I feel I have a good confidence that we will step by step improve that. Together with Pöyry, we will be able to set up a completely different energy business that is much more profile and strong towards our customers. In general, the market for digitalization service continues to be very good for all sectors. All in all, we ask ourselves quite a lot these days, what about the market development?
I would say what we see in our numbers, what we see in our order intake, it remains all over quite good in all sectors. Of course, during a quarter, we are taking in a lot of projects. We should remember that we are step by step increasing our project portfolio. Yes, we have a large share of service business, but we also know that many of our clients are moving towards getting a package project. These are just a selection of some of the projects that we were bringing in quarter four. We have a lot of ongoing business with Swedavia. Here we have a SEK 35 million project. A lot of different building projects, and automotive for us remains strong. Automated product lines is also a core part of our business.
We have taken business in energy, I will also say that the digital part, for example, the defense sector, is also continuing to be very strong. On top of that, we have orders to the telecom business in Sweden. There's a good balanced project order intake portfolio also in the fourth quarter. I would say that our order intake remains very strong as a consequence on the good market then. During 2018, we closed 11 acquisitions, that's basically one per month, smaller and larger. These ones adds up to roughly SEK 500 million, which then adds up to approximately 5% acquired growth. So around 5% on the organic, and then 5% on the acquired growth. A good performance on that side also. Stefan, a few words more on the growth side.
Thank you, Jonas. As Jonas mentioned, we were close to SEK 4 billion in sales in the quarter, which is up by 13% compared to last year. If you look at the growth mix compared to last year, we see more organic growth this year compared to last year. Over 13%, 8.2% units was organic growth. Even if we adjust for the currency effect and the number of working days, we ended up in 8.2% compared to 5% last year. If you look at last year-to-date, we ended up at 3.5% for the whole year 2017. If you then look at our performance and our progress this year, we started the year of growth rate by 3% and then increased quarter-by-quarter and then ending up at 8.2% organic growth. We have improved our underlying growth quarter-by-quarter during 2018.
The conclusion is that we have put together the organization, it took some while, especially in the industry division. Now we also see growth rates in the industry, which we didn't see in the beginning of the year. We are very happy on the growth rate from industry. In front, digital continue to report a very high growth rate, about 10%, whereas energy, which is flat, they come in according to our expectations. The profitability came in at 9%, which is slightly below last year. The main driver, Jonas will come back to each of the division, is the energy division, which we also indicated when we released our Q3 report that we should have a rather weak Q4 report when it comes to the energy division.
If you look at the other divisions, digitalization is improving, reporting a 10.6% margin, which is up versus last year. Industry had a slow start in the quarter, and we had some capacity utilization concerns, and we struggled with the capacity utilizations. But when entering into January and February, we see good utilization in the industry division again. It is not a main concern. We think that the margin will continue to increase. Cash flow. Very strong cash flow during the quarter, ending up at a cash conversion rate for the year of more than [1%], despite the organic growth rate of 6%. Of course, there are fluctuations since we are in the product business with payment terms that are slightly different from our professional service side. Still, a good cash flow. We are very happy on that.
The net debt position was SEK 2.6 billion, burdened by the acquisition, the 11 acquisition that Jonas talked about, of close to SEK 400 million. The dividend of SEK 5.0 per share. If you look at 2018, the board proposed an unchanged dividend. I hope you understand the reasons behind. That is because we are going to make a right issue of SEK 2.8 billion. We felt that there were no reason to increase the dividend since we are asking for more cash from our shareholders. Another position that burdened our cash was, of course, the purchase of the shares in Pöyry, which we now own 10.5% in the company. The net debt to EBITDA ratio was 2.5 end of 2017. Adjusted for the purchase of the shares in Pöyry, we have ended the year by 2.0%. A good cash flow generation in Q4.
Okay. Thank you, Stefan. Just a few words about each division Stefan was mentioning a bit and starting with infrastructure. I would say infrastructure division at ÅF that continues to deliver very strong performance, growth, and also stable profitability level on good levels. As we have said before that the underlying demand across the market that we are focusing on is, in general, very good. We have a big rail and road business. We have a big building, I would say building technology business, focusing on electrical and ventilation, all the complexities that you can have in commercial building, continue to deliver in very good rates. We see a lot of interesting projects related to everything from schools to hospitals to shopping malls to airports. We can see the demand for high complexity solutions in buildings continuing to be very, very interesting for us.
This is in the center of the know-how of ÅF, having the deep technology from the industrial side and on top of that, understanding the whole infrastructure market, including everything from architecture design, lighting designers, and so on. That makes us, I would say, in an extreme well position for the upcoming fight for market shares, where I think we make a lot of good progress. All over, good performance from the infrastructure division, and we are so much looking forward to continue to deliver good result in that business. The industry division, I would say that we are very pleased on the progress during the quarter. Stefan mentioned that we started a bit slow, we see the progress picking up also on the growth, and by that, we expect that also the margin will improve step by step.
We did quite a big change in the industry division a year ago, a bit more than a year ago. We are becoming more and more clear on our offering. Robert Larsson and the team in industry is doing a very good job. I'm very confident that we will see continued good progress in the industry division. The underlying demand from the market is there, and we are, of course, then climbing the value chain, offering more and more concepts, projects, and solution on top of the well-established service business that we already have. We should remember when we talk about automotive and car sales, that the majority of our business in automotive is going towards electrification, autonomous cars, digitalization. I would debate that the cyclicality of ÅF business is slightly different in relation to sold cars.
That's why I think we see also a continued good demand from the automotive sector. That's what we see in the industry division. Energy, clearly this has been a struggle for quite some time for ÅF. As we have said before, the Nordic and the Swedish energy business is solid and stable. Of course, we are step by step adjusting ourselves towards the original business that we have in the energy sector. Picking up, and we have a good position with both service and projects. Then on the, I would say, the international energy business project that we have also in the portfolio, we know that we have been a bit too small scale. We have delivered good projects with high quality, but to get the margin then to the level that you expect has not been that easy.
We are now restructuring that, repositioning that, and that has taken down the margin a bit because we are doing that as we speak. What we see now very promising is that we know that the Pöyry energy portfolio is more scalable and more precise than ours. We know that when we combine our energy business with the Pöyry energy business to one division, we expect that, and we believe that that will improve. That's a part of our thinking related to the energy. In general, good work, but of course, we cannot say that we're happy with the margin that we deliver. The work we are doing will give us improvements down the road, especially when we combine this business, which we hope then with the Pöyry business. Family Digital, of course, continued very strong growth and also good profitability.
Stefan mentioned that we also pick up and continue to have a good underlying growth in that division. A lot of new contracts. We have a lot of long-term clients that we're working with, and step by step, we are also here improving our offering, becoming more precise on projects and delivering teams, on top of the kind of service business that we have. That concludes then quarter four, and if you look on the overall levels, I think we are, as we said, very much pleased with the growth that we have picked up. As Stefan mentioned, that we have improved the organic growth. I think it's a consequence on a good market, but it is also a consequence of the fact that we are becoming more clear on our offering.
The margin was slightly lower compared to last year, and we know that energy has been lagging a bit behind, but we know that we will improve that also. All over, it's a stable margin and good development on the growth side. With that said, moving a bit over a few words about the ongoing work we are doing with the Pöyry transaction then. This is the frame of our overall strategy, including our vision, mission, value that is important for us, that we have been working very much on. We had a clear plan to be more precise and decide on our expansion internationally. That's been the big part of our thinking, on top of the fact that we are climbing the value chain, delivering more and more concepts and projects. That has been on our mind the full year 2018.
One other thing that we always need to keep in mind that is an important part of work, we work a lot then to continue to be one of the most attractive working places to work at for engineers in Sweden and in the Nordics. We came out on fourth place this year in 2018. We had a few good competitors, IKEA, Volvo Cars, and Google. There was a study when there was 600 researchers, which company do you keep highest when it comes to technology research? ÅF had the first place with ABB and AstraZeneca. ÅF as a company is attractive, and we believe that with the changes we are doing now, including the Pöyry transaction, we will become even more attractive. This is a big part of the value that we can attract the best talent to our company.
Strategy I talked about, of course the first one, growth, where we said clearly we need to have a clear plan for international expansions into leading positions, and then we have the value creation, operations, and people then. With that said, the Pöyry transaction, we have been looking on different alternatives throughout last year, and Pöyry has been on the radar screen for many years, as you all know. Last year it was possible then to come together and ended up with the fact that we were putting a bid on Pöyry then. Why a platform? We believe absolutely that this market will continue to be consolidated. We see it. We have been a part of driving that, as you all know.
We see that many of the projects that we are coming closer to now is also, I would say, we see larger players moving into that. We see our clients wanting us to take on bigger part of that cake. We knew and know that we need to have a better structure for the international growth in some of the niches that we are today already operating in. We know and believe that size and scale will be important. We need to continue to have great opportunities for our employees. International work is one of them, and I believe what we said now with the structure we have in ÅF, with the business models we have, we are ready to take on that challenge now. I will not spend too much on the transaction.
You all know that we announced the public tender of Pöyry in December. We are right in the middle of the integration planning. We expect the deal to be closed in quarter one. We have good beliefs that that will be like that. We had to prolong two weeks due to competition filings. From my point of view, everything points on the fact that we will be able to close the deal during quarter one. My feeling with the planning we have ongoing is that it will be a very good fit for us, and that we will be very early up and delivering on the promises we have done. Pöyry, as you know them as a company, they have done a turnaround over the last three years. We believe and feel that it is a very solid company, being very good on process industry.
Of course, that is the heritage from Finland, but also have a very strong energy business globally. They have an infrastructure business where they have been struggling a bit. They are repositioning that, and then the management consulting that is delivering good. These things that Pöyry offers together, what we have at ÅF, we believe will be very strong. I am so confident that we will take out at least SEK 180 million from cost synergies that we have committed to externally. Of course, our internal ambitions is even higher. On top of that, there are, of course, significant revenue synergies. We will be more precise on them when we are really down together with Pöyry to do the real integration planning as soon as the deal has been announced.
Far, there are clear guidance what you can do in this process, but I can assure you that we are all very keen on closing the deal so we can move from the left part, cost synergies, towards the top line synergies that we really feel are significant. We are all thrilled of forming a leading European engineering design and consultancy company. I think in many of the areas, we will be unique. We have a fantastic mix of talented engineers with industrial heritage from both companies, but going down from engineers, designers, and also to advisors in the new company then. Of course, scale matters, and we will be one of the largest players in the Nordics.
I think also step by step then on the different segments that we have decided to be on, we will also be significant and have a good position also internationally. That has been a key driver for us. Again, coming back to the energy business that we today feel that we are too small scale to be able to deliver a performance. Together with Pöyry, our international energy business will be scalable with a good footprint, and that is something that we are looking forward to. We already have set out divisional structures, which is very good. We will be early up and running. We will have an infrastructure business that is just about SEK 7 billion. As you all know also, we announced that Malin Frenning actually joined us from 1st of February.
Mats Påhlsson, who has done a fantastic job building up this, will retire during next year, but he is remaining as an advisor, supporting us also in the integration of the Pöyry infrastructure business. I am so much looking forward to having Malin here, and I think she will add a lot from her competence from different businesses before. Robert, as you know then, been with us a bit less than a year. Long, long experience from ABB, and he is doing a fantastic job together with his team in industry. That will be just below SEK 6 billion, includes also the digital offer. We will have two, I would say, segment divisions. One is our process industry business, also around SEK 3 billion.
Nicholas Oksanen is the plan that we will appoint him, and he is a guy that has been working in Pöyry for some 20 years. Extreme know-how in process industry. Richard Pinnock, same with him. South African that has been in the energy business for all his life. You see both of these divisions will be around SEK 3 billion. Clearly on the process industry, we will be a world leading player. On the energy business together, we will also be one of the top players. For us, it has been important that if remaining on this international, we have to take a position that is one of the leaders. As ÅF today, we were too small in some of these. Together with Pöyry, we will be significant. With that said, I think the fit then is very good for us because we believe in both of these two segments.
On top of that, we will have the management consulting business that really gives us access in energy and processing this high up in the value chain, actually as high as you can get them. Again, as soon as we close the deal, these guys will be appointed, and we will be up and running day one already. The planning is ongoing. One of the things that we feel is important that we are not spreading ourselves thin in the new organization, that some people says that, "Are you not getting too spread out?" Which is completely wrong. You see here that we will have over 10,000 employees in the Nordics, which is the core part.
We will have some 2,000 in Europe, gives us good access to an interesting core part in the infra market in Europe, also on top of the other kind of segments. We will have some scalable units in Asia, for example, and in South America, that, for example, have a lot of the process industries and so on. We are becoming then maybe from a very Swedish-centric, we will become a very strong Nordic player. Of course, getting Finland into the Nordic, which we did not have before at ÅF. I think the footprint is very good. This is then the change, as you can see, using numbers that we have worked on. You will see that the portfolio will not dramatically change, but I think we will be more precise on energy and process industry.
We will get a strong infrastructure business adding on Finland and together with a Nordic footprint. I would say that also the coming portfolio for ÅF and Pöyry then will have a very broad and balanced, and if anything, a stronger, less Swedish dependent. We will have bit more balance to other markets also that I think will be favorable moving forward. Some of the key numbers, obviously when we close the deal and we will get out to the pro forma numbers, some of these will change because we will have the 2018. You can see that, of course, today we are a very strong Swedish Nordic, with 90%, that goes down to 75% approximately, and we will get a stronger than European sales then.
Of course, we are very thrilled of this says 14,500, you will see, I think we might even be close to 16,000 employees when the deal is closed. Rounding up to this picture then that I think balanced portfolio, strong Nordic, with also a significant European platform. We had a country presence which is 50 now, which I think is important. Some of the core countries that we add together with Pöyry, we can scale. Instead of having offices with 15, 20, we will have offices with 200 or 250, where you really can do the work, detail engineering for the local markets, and that will make a difference. Yes, we will increase the fixed price project a bit. Some people see that as risky, but I can tell you what we are seeing is that Pöyry is extremely good in handling these projects.
Still balanced 16% fixed price, 50% project delivery, and then 34% service delivery. All of that then summarizing, as we talked about, that the quarter and the full year 2018 has been solid. We see the market continuing to be good. The strategy we have executed last year was good, including the 11 small acquisitions. Now then we are prepared then to take on the integration of Pöyry, and set the platform for this company that I'm sure will be very good moving forward, that will create value for our shareholders, that will give extreme opportunities for our employees, and also be able to deliver the best solutions to our customers. That's what we are working on, and I can tell you that our energy in our company is as high as ever then.
With that said, I would like to open up for any question or comments.
Thank you, ladies and gentlemen. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, star one if you wish to ask a question. Our first question comes from the line of Predrag Savinovic from Nordea. Thank you. Please ask your question.
Hello, and good morning. You mentioned a couple of projects in the energy division in the report. Could you talk about the order values here and how they're priced and what to expect on the margin side, considering that energy was quite weak in the quarter and would like to know if it has improved here with new orders?
I'm not sure that we will be able to deliver you the margins on each of these projects, but I can tell you that if you look on the margin that we are delivering in the quarter, you are completely right. It's been on the lower side, which is an effect of, I would say, more on the repositioning of the whole energy business that we are doing then rather than any specific project being bad.
One of the reasons why you see a flat development in energy, one of the reason is that we are more selective when it comes to the project portfolio. We will really now make sure that the margins will increase over time. Of course, and as always, we are not releasing any numbers of order values or margins.
All right, thank you. On the energy side, or sorry, industry side, you really accelerated the growth here in Q4, it will be interesting to hear why and how this happened, also, the margin was a bit lower, did you maybe lower pricing here to gain sales, or was it some other effect? Also you did write that the utilization was lower in the beginning of the quarter but did it improve in the latter part of Q4?
I can start with the EBIT margin. Jonas can discuss the top-line performance, which we are very happy with. When it comes to the EBIT margins, as we comment in our report, we struggled slightly in the beginning of the quarter. As I mentioned, we are in a good shape now as starting the new year. The capital utilization has increased. As we also mentioned in our report, the margins in recognized project was, w as very high in Q4 last year. We didn't reach exactly at the same level as last year. That's also one of the reason why the margin dropped compared to last year's quarter. We are on average, having a good margin development in our project portfolio.
It's not a negative trend when it comes to the margin portfolio. More that we had some very good revenue recognition Q4 last year. I think we'll improve the margin portfolio to more normalized level going forward.
Maybe to add on then what you talked about, what about how do we increase the organic growth and about the industry? First of all, we are setting up industry division now, which we have done over the year. Robert and team is now driving that to really drive long-term performance and to be a key player in this segment for the coming years. One thing that we have done, and which is important, is that we are more precise what are we offering. We have some segments where we believe that we can be a leader, not only the Nordic, but also playing internationally. That's advanced manufacturing solutions where we deliver really automated state-of-the-art manufacturing lines to both manufacturing industry, to automotive. It is automotive R&D.
We have a fantastic position in that, starting with acquiring LeanNova, which was the former sub-automotive team, adding on all the digital competence that we have included and embedded in here. We are a key player in the Nordics, but also towards, for example, China. Food and pharma, we have a long tradition in being able to support those segments with different kind of project. Process industry, where we now have the opportunity to get it really to be even better. There are four clear segments that we have over the last year positioned ourself to not only to deliver service, kind of hours, but also deliver value project concept. On top of that, we have three areas, plant engineering in the Nordics, product development, and also specialized technical service, where we sell smaller project or larger project wide to the different industries.
Over the year, we have gone from a regional setup, selling a lot of service to be more precise on climbing the value, and of course, that takes a bit time. I think the transition we have done without losing momentum is starting to pay off. We want to be a key player selling interesting large, high advanced project to the industry, and this is what we're aiming for. I think that's why we see also the growth rate picking up. They do a fantastic job, and I'm looking forward to see what they can do more.
It's very good. Thank you very much. One final one for me, on digital solutions, where we see decent momentum here. As I believe it here is the segment where you previously had some issues with wages and staff churn, but now the operations look quite solid. There are good margins, et cetera. Has there been any changes to any of these as in churn and wages, and how is the pricing developing here towards your clients?
Since you can see that we report a very good margin in Q4, and if you look at the whole year, we are at record margins for this division. Which means that we are, when it comes to margins, we are working on different perspectives, both when it comes to pricing, as Jonas mentioned, we are trying to, and we are climbing the value chain, providing teams, et cetera, to the clients that both parties benefit from. We have also been able to protect the wage increases by price increases in general. Otherwise, the margins would have started to drop. We still see a big demand from other people wanting to get hold of our resources. The war is not over, no.
We are struggling every month to really keep the growth rate and the turnover down.
Just to add on to what Stefan said, one of the things that we add on as a value to people starting at ÅF is that it's not that you only can work with generic digitalization project. You can be a relevant player in some of the industrial verticals, meaning that we are more and more using this digitalization in specific project related to either infrastructure or the industry or also to other areas. We had a few examples when we took an interesting project together with Volvo when it came to road conditions. I think that's a value that this company can offer, few others can. That will then, I'm sure, also improve the people turnover because we will be more relevant in enabling to offer even more interesting assignments to these fantastic talents that today have different choices. They can choose different companies.
ÅF needs to be the most relevant, has the best leadership, and by that, we can serve our clients with project that few others can.
Very good. Thank you very much.
Once again, for those who wish to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Viktor Lindeberg from Carnegie. Thank you. Please ask your question.
Thank you. Good morning. Three questions from my side. First, on the restructurings taken in the energy division. Partly, can you elaborate on the initiatives that you've now taken? Maybe I missed it, sorry, in that case. Also, if you could quantify, are there any tangible non-recurring effects that we should be aware of that you did not report as one-offs, given that it is sort of a growing concern to handle the up and downward swings in a technical consultancy business? Starting on that, then I have two more questions.
Maybe I'll start. First of all, I think what we are doing, and then the discussion on this international business, that we are doing the repositioning that we feel that we need to do, and that is smaller changes, smaller offices that we are taking as we speak, running. It's not significant down writings or problematic like that. It's more that we are step by step changing. Stefan, you-
Of course, since we are planning to take out synergies when it comes to the combination of Pöyry's energy business and our business, of course, we will take some cost. Those should be a part of the integration costs that we have announced. Beside that, Jonas is correct, that we will of course adjust the organization. If we should take some big steps, that will be part of the integration cost.
Okay. Also from time to another in the past, we've been, often in Q4, taking pension revaluations. Is this something that has affected any numbers in the divisions this year, or is it a neutral impact?
No, it hasn't. This year, it's always with those kind of pension benefit plans that you have to reevaluate from time to time or change from time to time. Last year, we made a change in the pension plan in Switzerland related to our current infrastructure division. When you look at the comparable numbers Q4 for infrastructure, the margin has actually improved quarter-on-quarter on a comparable basis since we had an adjustment on the pension plan in Switzerland last year. This year, we have nothing in that sense.
Okay. Then on the Pöyry transaction, you now have [SEK 25 million] plus, I think it was SEK 15 million in transaction costs from taken in the OpEx and some in the financial net. Could you help us quantify your expected transaction cost in the P&L, both in OpEx and the financial net in the coming six months so we know what model?
I think we indicated some numbers when we announced the deal, the transaction cost will be in the range between SEK 55 million-SEK 70 million, the financing cost will be slightly below that range, in that range.
Okay. Final on the industry division, just trying to bridge the margins 2018 also Q4 2018 versus last year, you had a slight change in the mix in the contract portfolio, maybe on a lower margin terms. Also you've had quite a nice tailwind from, or you should have had a good tailwind from the cost savings program that you initiated in 2017. Still the margin is down quite a lot on now what the better organic growth. Jonas, I know you elaborated a bit on that.
Maybe if you could talk a bit about the cost-saving initiatives that you should have seen. Is it something that you have seen coming through, it has been lost in space? The, I don't know, market share gains, what have you?
Yeah.
If you could just elaborate on that so we know?
Yeah.
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No, we have seen the cost saving coming through for sure. You are correct that in, I would say the repositioning we are doing, in taking a bit moves in the, I would say after the summer to increase the capacity, having a bit on the utilization, and as a consequence of this rearrangement, I think we lost a bit. That was maybe eating up a bit on the margin side. That's the way it has been. I think now then moving forward, we are becoming more and more clear, and I have a good feeling that we will see continued good trend in this industry division. I think it was not one single issue that you can point on. It was a bit s pread out, losing a bit momentum here.
We had a bit down in some of the segments, right now I think we are becoming more and more clear. There's not one project or there's not one area that you can point on.
As I mentioned, Viktor, we started the quarter on the lower side. We had some capacity utilization issues, and combined with that, the recognition of profit margins were on the lower side compared to a normalized level. Whereas last year they were on the upper side on a normalized level. It was a quarter that we were not that happy with, as I mentioned, ending the year in a good way and starting the 2019 on a good capacity utilization level. I think we are confident with the margins going forward.
Got it.
9% is not a bad number.
No.
Keep that in mind. It's not completely bad. I think, of course, we want to do more, and I think when we are being able to package our offering even more, of course, we have high ambitions for margin development. I know that on the process industry side now, jointly together with Pöyry, we will be one of the leaders, and we will even be higher up in the value chain. That's a big share of our, it's a significant part of our current industry business process industry, which is petrochemical. It's of course pulp and paper. It is mining and metals. There's a big underlying demand also for disruptive changes, digitalization related to all these segments, smart solutions, and all of these we can offer. Be sure that we are not satisfied at all to be on [9%-ish].
We want to be well above that. That journey has started, and we see good progress.
Yeah. Okay. You press released a few days ago that you have now extended the offer period for the shares a few days, a few weeks now. Should we expect this is pushing everything out in time by approximately two weeks as well? Or is this something you can catch up, still be able to close the transaction before the end of the first quarter?
I think we will be able, or I'm very confident that we will be able to close the transaction by quarter one. We had that, we wouldn't call it slack, but we had that as a potential in our plans already from beginning. We knew it was a bold saying that we might close it end of January.
We are very close to that. Of course, working a lot on the transactional part of the deal, and we feel confident right now that we will be able to close it, which is good because the integration planning is progressing in a very good way. We know what we are allowed to do, and that we are doing, of course. As soon as we have closed the deal, we can of course then open all the books and focus a lot on the top line also, besides the fact that we see good progress in planning also on the synergy side that we have committed to deliver. All in all, as you know, I was in some industrial companies where we did a lot of acquisitions. I feel that there's a very strong sharing the core values, the values, between Pöyry and ÅF.
End of the day, it's people, and here we feel that we are talking the, I wouldn't say the same language because Finnish is slightly different, but we share the same kind of fundamental beliefs where this business is heading.
Got it. Thank you. Thanks, guys.
Thank you.
Thank you. Your next question comes from the line of Erik [audio distortion] from SHB. Thank you. Please ask your question.
Yes, hello. I was just wondering how much of the decline in capacity utilization is related to the energy segment and the industrial segment?
Well, of course, we have a number, but there are, of course, those divisions that has impacted the utilization rate, mainly from the energy division, but a small portion on the industry as well. You have to keep in mind that you are looking on an average number, and the mix will have an impact on the utilization rate. As we discussed last year, in infrastructure, which has also a slightly lower utilization rate when moving from very large project in which you have more or less 100% utilization rates going to more mid-sized and small projects with a slightly higher margin but have an impact on the utilization rate. Utilization rate is not the only indicator how the organization performs.
Just to follow up on that, I think you're onto something very important. I think utilization will always be a key KPI for this business. I think over time, compared to how important it was in the past, it might not be the only one. I compare that myself from my 20 years in the industry, focusing a lot on manufacturing. If you have a factory producing standard products, which was, if you go back, you push out a lot of standard products, you keep the utilization high, maybe the margin is not perfect. You start to add and change the mix, so you produce more high-value products in your factory. That could also cause a bit more challenges, maybe in the production supply chain.
End of the day, as long as the client is prepared to pay more for that combined special product and solution, you will increase your margin. I think we will see that.
When we climb the value chain, when we spend more time in pre-sales or concepts, when we spend more time on solutions, maybe you see the utilization will not mirror that completely. If you don't see the margin picking up, well, then you have a problem. We will also, I believe, be more precise on that because again, simplified said, if you only sell hours, professional service, utilization is key. If you sell more and more concepts, project utilization is one KPI, not the only one, but key end of the day, if your margin is not picking up and you're pointing down on the problem in industry and energy, clearly we have had the challenge to get the margin on the level we have. Here we have had some challenges.
A good example is our digital division, which has, as I mentioned, record high margins, but a drop in utilization rate. That's the mix that Jonas is talking about. We are climbing the value chain, which are hitting the utilization rate slightly, but improving our margins.
All right. Interesting. Then a second question from me, also regarding the energy segment. Do you think we have actually hit the bottom now in terms of margins? How is the restructuring going there in the division, and should we expect the margin to pick up during the coming quarters and the year?
I think, if you look on ÅF standalone, I have a good feeling that we have reached maybe on the margin, the lower side. It will take a few months more, but then I expect us to see a pickup on the margins.
We believe that we will see a slight improvement on the margin during the first half year, and see when we are taking the measures needed. We expected the division to report the same margin level as the rest of the division.
Of course, looking strategically on energy business, we know that we have a very strong position in Sweden and also a bit in Norway, but that's the long heritage you have in ÅF being working to Vattenfall and some of the key clients for a long years. There's a strong connection. On the international energy side, which came quite a lot with the acquisition of Colenco maybe 10 years ago, where we have that position in Switzerland, we knew that that has not been strong or scalable enough. You have a few options, what do you do? We decided to start to reposition it more than half a year ago. Now together with Pöyry, which has a much stronger, solid position, we can do things that we cannot do on our own.
They have scalable units in Southeast Asia, where you actually, I would say, produce detailed design drawings for that market. We are working today with an export model, doing a lot of the designs in Switzerland and maybe even the Nordic, and then exporting these to these big projects. That is over time, not the thing you can do. We will still have a lot of concept designs in the core, like Switzerland and Finland and so on, but a lot of the detailed design will be done locally, and that's a big change. It's like you can also compare that to the manufacturing or product industry that, of course, at a certain point, if you want to compete in China or in Asia, you need to have some kind of operational footprint that is scalable. This is exactly what we are looking for.
I can tell you the SEK 3 billion business that we will jointly have on energy, yes, to Stefan's point, we will have as high demand on that business on margin as on the remaining ones.
All right. Thanks, guys. That's all from me.
Thank you.
Thank you. There are no further questions at this time. Please continue.
Okay. Thank you all for taking the time to call in, and we are looking forward then to hopefully within this quarter announce that we have closed the deal with Pöyry. We will be, as I see it, this amazing company with 16,000 employees. We will get back to you because then we will be even more precise, not only on the cost synergies but also on what we can do on the top line synergies in the overall. Thank you again for listening in and talk and see you soon again, and have a great day.
Thank you. That does conclude our conference for today. Thank you all for participating.