Welcome to the Alfa Laval Q3 Earnings Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Tuesday, October 27, 2015. And I would now like to hand the conference over to your first speaker today, Lars Rynstrom.
Please go ahead.
Thank you very much. Good morning and most welcome to our presentation. I will start by highlighting 3 matters. Firstly, both sales and operating results reached new record levels for the Q3. Continued strong cash flow has taken down the ratio net debt to EBITDA to less than €1,800,000,000 Secondly, order intake reached €8,700,000,000 a sequential decline of 5%.
This was somewhat lower than we expected since large orders were delayed. Finally, the order intake of the Process Technology division increased somewhat, thanks to segment Food and Life Science. The demand from the hydrocarbon industry increased for the Process Technology division since there was a strong recovery in Process and Transportation as well as Petrochemicals. Let's move to the key figures that I have basically covered for the quarter. And further down on the slide, you see that this is the best 9 months ever in absolute terms.
Orders received were up 6% to €27,700,000,000 net sales up 19% to €28,900,000,000 Adjusted EBITA was plus 28 percent to €5,100,000,000 and adjusted EBITA margin reached 17.5%. Now we move over to orders received and margins. Orders received on rolling 12 months reached €38,200,000,000 And in the quarter, we saw a decline of 15% at constant exchange rates. You see that the level of large order is the lowest since the Q1 2014 since some were pushed into Q4. Next slide.
From the order analysis, you find that year on year, we declined with 15% organically. Currency effects were 4%, giving a total of minus 10.5%. Sequentially, the organic development was minus 3.7% and currency effects were minus 1.5%, giving a total of minus 5%. Next slide. The operating margin reached 17.3% and the operating result of €1,700,000,000 was the best third quarter ever.
Moving over to highlights in the quarter. In Process Technology, we booked 2 large orders in segment food and one order for a petrochemical customer. In Marine and Diesel, we booked a large order for boilers aboard an FPSO. During 2016, we have seen that the ballast water treatment retrofit market has opened up. And we signed a frame agreement with an Asian shipowner to supply ballast water treatment systems at a value of €70,000,000 The lower fuel price has hampered the order intake for exhaust gas cleaning systems.
And year to date, we are at 50% of last year with 17 systems booked. Moving on to Development per segments. We had 15% negative organic growth year on year in the quarter. The segments Food and Life Science and OEM have grown and Food and Life Science is in a positive trend. Service has been stable both in equipment and marine and diesel divisions, whereas in Process Technology, it has declined impacted by the lower oil and gas prices.
Let's take a look at the development per division. And now all comments are sequential. We start with equipment that declined 11%. Industrial Equipment was affected by a non repeat large order. Sanitary saw lower volumes in food, while Pharma and Personal Care did very well.
OEM was down due to preordering in the Q2 ahead of the vacation. Service remained stable on a high level. Let's move over to Marine and Diesel that declined 6%. Equipment and Marine Offshore segments were affected by lower ship contracting earlier in the year. Underlying orders in Marine and Offshore Pumping was down as growth in Marine Pumping didn't compensate for a large non repeat offshore order.
Service had good growth, thanks to parts and pumping systems. Let's move to Process Technology that grew 5%. Energy and Process was unchanged, and we were pleased to see a somewhat higher demand from the hydrocarbon industry where petrochemicals and transport and process had a strong recovery. Food and Life Science was boosted by Brewery and Vegetable Oil Investments in Emerging Markets. In service, we saw a recovery of demand from the hydrocarbon industry.
Next slide. Year to date, the decline is 9.5% when we exclude Framo that was acquired in May 2014. Only Water and Waste has grown and 5 segments are unchanged. Let's move over to the geographical developments. Here you see the development year on year in the quarter at constant rates.
All Emerging regions had growth and represented 54%, while Western Europe, including Nordic and North America, had significant declines. The declines came mainly from non repeat large orders to Hydrocarbon Industries and exhaust gas cleaning systems. Let's take a look at the regions. And now all comments are sequential. In Asia, both Process Technology and Marine and Diesel Division grew.
In Process, food related demand was the main driver. And in Marine and Diesel, Promo Pumping Systems that benefited from a favorable ship contracting mix. We were pleased to see that China continued to grow both as a result of a positive onshore development and also due to an increase in Marine and Diesel. India, Japan and parts of Southeast Asia also did well. Moving over to Europe.
In Europe, Nordic was down due to a non repeat offshore order. In Western Europe, there was a mixed picture, but the net outcome was a decline of 9%. Central and Eastern Europe grew driven by Russia and Turkey. Russia seems to have stabilized on a new level after the sanctions were imposed. Moving over to Americas.
In North America, both base business and large orders declined. In the U. S, the decline came mainly from larger orders that didn't repeat in water and waste as well as exhaust gas cleaning systems. The demand from the hydrocarbon industry was unchanged. After a soft second quarter in Latin America, both Equipment and Process Technology Divisions had a generally good development Despite the slow business climate in Brazil, we had growth, thanks to larger orders in food and process related areas.
Moving on to the next slide. Year to date, we've had very good growth in Nordic, thanks to the acquisition of Ramo. That applies also partly for Asia. The decline in Central and Eastern Europe reflects the Russian development. In Latin America, the drop reflects lower commodity prices and Brazil's decline.
North America's drop is a result of the sharp reduction in oil and gas prices. And now, I hand over to Thomas for the financials.
Good morning all of you. Let's get into the details of the P and L and the cash flows. So let's move on to the next slide and start off with sales. After quarter 2, I commented that we believe it's reasonable to expect a slightly lower level of sales in quarter 3 compared to quarter 2. The reasons being the limited reduction in orders received over the last few quarters and the vacation period in quarter 3 in many geographies.
We realized sales of €9,700,000,000 in quarter 3. In comparison with quarter 2, sales was down approximately 4% at constant rates. Compared to quarter 3 of last year, we came out flat. I think it is fair to say that we were correct in our expectation after quarter 2. Moving on to Service.
Service activities represented 26.1% compared with 26.4% percent a year ago and 25.8 percent in quarter 2. That is to say this will be causing a or has caused a slight adverse effect year on year and a slight positive mix effect sequentially. With that, let me then deliver the first forward looking statement. We believe it's reasonable to expect a higher level of sales in quarter 4 compared to quarter 3. However, the sequential decline in orders during 2015 is expected to result in lower in for out orders in quarter 4 compared to last year.
In addition, I would also like to mention that the likelihood of delays in deliveries initiated by customers, we believe, is somewhat greater this year compared to a year ago. Let's then get on to gross profit margin on the next slide. Gross profit margin for the quarter was 35.2%. This means almost the same level as in quarter 3 of 2014 and a decline of 1% sequentially. With the quarter 2 report, I said, in the near term, we do not expect any material changes to gross profit margin compared to the outcome in quarter 2.
The risk of adverse impact from load, we believe, can be compensated by lower metal prices and FX transaction effects. In comparison with this prediction after the Q2 report, we delivered a somewhat lower gross profit margin explained by 2 items. Let's move to the next slide for some further detail. As I just said, the actual for quarter 3 came out somewhat lower than expected due to 2 main reasons. Sequentially, gross profit margin was negatively influenced by a sizable adverse FX effect coming from revaluation of foreign currency denominated items in working capital in local balance sheets.
The background is, of course, the strengthening of the U. S. Dollar compared to mainly the Norwegian kroner, but also to the euro and the Danish kroner. An example to give you a sense of how this comes about. A customer advance in U.
S. Dollars in a Danish based company will give rise to an unrealized adverse FX effect, that is to say a translation effect, with the strengthening of the U. S. Dollar. As the order is increasing in value as well, there will be a realized benefit upon revenue recognition.
Again, it's important to note that this effect, everything else the same, will come back as positive realized transaction FX effects over the coming several quarters. In addition, we also experienced a worse than anticipated productivity development in the PTD engineering activities and overspend in some customer projects in the Process Technology division. This is reflected in the slide as loadvolume. Now let me deliver the second forward looking statement. In the near term, we expect adverse effects from mix due to higher capital sales and from somewhat lower load in some factories.
We expect positive FX effects and lower metal price to provide some compensation. Let's look at the overhead costs. For R and D, we ended at EUR 180,000,000 in the quarter, a reduction year on year like for like of 1%. The explanation for this reduction is, of course, the efficiency program that we initiated last fall. In percent of sales, R and D represented 2.3%.
Sales and admin ended at €1,430,000,000 in the quarter representing an increase like for like year on year of 1.1%. Sequentially, we report a reduction of 5.1%. Let me repeat from last quarter, the savings program continues to deliver the promised results on sales and admin. Other costs and income came out somewhat lower than in quarter 3 2014, That is to say delivering a positive variation, excluding the savings program charged last year. There are no specific really material items to comment upon.
Profit before tax was €1,340,000,000 Year on year that is of course a substantial increase, but of course this is mainly explained by the $260,000,000 onetime charge that we had for the savings program last year. Before leaving the P and L, taxes ended with a charge of €350,000,000 This is clearly below our guidance for taxes, but still well within a range of normal variations. We maintain 28% of profit before tax as our guidance. Finally, on the P and L, EPS was up 42% year on year, of course, very much explained by the nonrecurring charge in last year, quarter 3. For return on capital employed and return on equity, we consider the levels achieved very competitive in the engineering arena.
They both ended at 20 1.8%. Let's then move on to additional performance. Note that my comments, they will relate to operating margin. The comments on the slide relate to profit in absolute terms. That is to say you get it both ways.
Equipment to start with came out higher than last year as well as quarter 2. The sequential improvement in margin is thanks to a combination of the factors listed on the slide, that is to say volume, FX and cost reduction. For Process Technology, operating margin came out lower than both last year and quarter 2. This is partly due to lower volume and partly due to a deterioration in engineering productivity combined with an overspend in delivering certain customer contracts. This situation in the engineering and supply activities in Process Technology have, of course, been addressed.
Finally, Marine, they came in lower sequentially in terms of operating margin at 20.3%. This came mainly from negative FX relating back to the revaluation of the FX denominated items in local balance sheet that I mentioned before. With that, let's get on to the cash flow statement. And in summary, cash flow from operations amounted to almost €1,400,000,000 a reduction of 18 percent compared to a year ago. The explanation is entirely the small increase in working capital compared to a large reduction a year ago.
The increase in EBITDA could not fully compensate. Regular CapEx ended somewhat over last year's level, however, having no impact on the expected full year level. Financial net paid was a negative €191,000,000 against a negative of €526,000,000 a year ago. This improvement entirely explained by less of negative realized exchange differences this year. In summary, free cash flow was just over EUR 1,000,000,000 compared to almost EUR 1,300,000,000 a year ago, where, of course, the variation in working capital is the explanatory factor.
Let me here again stress that we have already arrived at EUR 1.79 billion debt to EBITDA. We were at EUR 1.96 billion at June 30, a fast deleveraging after the Fromo acquisition. Then a few words about FX. FX effects in EBITA in the quarter, they were positive with €40,000,000 An outcome for quarter 3 worse than expected. The reason for this is attributed to non realized revaluation effect, everything else the same.
These effects will come back in the P and L as positive effects in the coming several quarters. The ordinary, so to speak, translation and transaction effects were as expected. The forecast for the full year 2015 is following the events in quarter 3 adjusted to a full year effect of €500,000,000 dollars And in that, a share of the quarter 3 revaluation effect is coming back as a positive effect in quarter 4 to the tune of €20,000,000 The estimation of possible transaction effect in 2016 has been updated to reflect a realization of the remainder of this revaluation effect in quarter 3 and giving a total positive of EUR 555,000,000 next year. Then our order backlog as per end of September is amounted to €22,100,000,000 representing approximately 6.9 months of LTM sales. For shipments before the end of this year, we had a backlog amounting to €8,000,000,000 as per end of September.
Having said that, let's move on to the sales bridge for full year sales 2015 and look at the known and unknown parameters. If we start with the year to date sales of €28,900,000,000 we can add 2 known parameters: the backlog for shipments before the end of the year of €8,000,000 that we just talked about. And added to that, last year's level of orders in quarter 4 of EUR 3,400,000,000 that was actually delivered in invoice before the end of 2014. This adds up to a subtotal of SEK 40,300,000,000 Looking at this number SEK 40,300,000,000 it's very important to remember that order intake has declined gradually during the year and was some 20% lower in quarter 3 than in quarter 4 of last year on a like for like basis. I would also like to mention that the likelihood of delays in deliveries initiated by customers, we believe is somewhat greater this year compared to a year ago.
With regard to prices, as we've said earlier in the year, we've only made small adjustments to prices for Standard Products at the beginning of this year. With that, I give the word back to Lars for the outlook and the closing remarks.
The outlook is as follows. We expect that demand during the Q4 will be in line with or somewhat higher than in the Q3. And for each division, our demand expectation is as follows: Process Technology somewhat higher, thanks to expected large orders while underlying demand is unchanged. Equipment division, unchanged Marine and Diesel division, somewhat higher thanks to expected large orders. And that completes our presentation.
And now we hand over to the operator for the Q and A session.
Thank And your first question today comes from the line of Max Yates of Credit Suisse. Please ask your question.
Hi, good morning. Just the first question me will be on the process margins. If you look at the absolute EBIT, it's down about SEK170,000,000 year on year. I think the operational leverage within that or the negative volume should be about SEK 100,000,000 of that. Just trying to understand how much of the rest of it is accounted for by these higher costs, the cost overruns on projects and how much of it is from other factors?
That was my first question.
Well, the effects of the lower productivity and the cost overruns on these customer projects represents the balance of the shortfall to put it simple. Of course, there are smaller variations costs and in FX effects. But the main element is, of course, what I just mentioned.
Okay. Thank you. And just the second question would be on Marine and Diesel margins into next year. Obviously, this year as process revenues have come down, margins have followed to a fairly significant amount. In terms of marine and diesel into next year, revenues are likely going to be coming down based on orders falling in the second half of this year.
Can you give us confidence on how defendable margins should be in that division into next year and what you're doing to prepare the business as orders start turning negative as they did this quarter?
Well, if we look at it in if we look at the Marine business in 3 elements, so to speak, as far as the traditional Alfa Laval products are concerned, remember that we have supply chains common with the other 2 selling divisions. So the combined demand is what will have an impact on load. For the all boy product range, Remember that one of the biggest elements of the savings program was the relocation of donor production from Denmark to China. And that, of course, the effects of that, we will only have the full annual effect of that initiative during 2016. As far as the Froma range of products is concerned, remember that already at the beginning of this year, we confirmed to you that the backlog for Framo products is keeping sales on the same level until mid of 2016.
And of course, since then, we have landed quite a number of orders for Marine Pumping Systems. So as far as the Marine the promo product range is concerned, we have a good level of deliveries throughout most of 2016.
Okay. Thank you. Maybe just one follow-up on pricing. When you give your sales bridge, obviously, the other element in there is pricing. Could you talk a bit about, firstly, what your expectations are for the full year versus last year and in Q4?
And also, how pricing is trending on orders and particularly in oil and gas orders that you're taking currently?
Well, as I commented just before, we have made small changes on standard items. If we look at certain segments, particularly OEM, of course, we have arrangements, agreements with the major OEM customers, including clauses, where we have adjustments for metal prices if they go up or they go down. So there, we will have an effect of declining metal prices. For the rest, there is nothing to report as far as pricing is concerned. I think we'd like to remind you here that the leading position in the 3 technologies means a responsibility when it comes to price levels, and we stick to that.
Okay. Thank you very much.
Thank you. Your next question today comes from the line of Lars Brosson of Barclays. Please ask your question.
Hi, good morning Lars, good morning Thomas. My side if I could. Just on the demand outlook into Q4, I wonder whether you did talk obviously about the delays on large orders. I wonder what sort of visibility you have generally speaking in terms of closing those. And then last, if I just could on Marine and Diesel, the chemical and product tanker market has held up comparatively well.
I wonder whether you can give us your assessment of how regulatory changes here has supported demand recently in 2014 2015 and what the outlook for this segment is as you go into 20 16?
Well, if we take the chemical tankers and the product tankers to start with, they are benefiting from the regulatory demand of NOx that will be implemented. KILs must be laid before year end to, let's say, to avoid the new regulations. So that, of course, has helped to keep up demand during the Q3, and we also envisage a good demand up to the end of the year. And when it comes to our visibility on the launch orders, some of them we expected to receive already in the 3rd quarter. And of course and since we state that in our outlook, we have a good visibility, and we expect to book them in the Q4.
In several cases, we have signed the contracts, and we are waiting for the down payment since we only booked when we have received the money.
On that Tanger segment, can I just ask what your thoughts are on 2016? I know it's a couple of quarters away, but do you expect that segment to be underperforming other vessel segments based on, say, demand pull forward ahead of the implementation?
So we don't give an outlook on that for 20 16. I mean, we refer to the general data that you can that is readily available for everybody.
That's understood. And Thomas, if I could just could a quick one on group cost. You've done well since late 2013. We're now at €55,000,000 for the quarter. What's the normalized level here?
And how should we think about modeling that out for the next few quarters?
What item was that? Or you said group costs. What do you actually mean?
Yes. So the group items within your P and L, so the EUR 55,000,000 that falls outside of your divisional costs?
Yes. Well, we're not providing any specific forecast for individual items on the P and L. I think you know that if you look at that specific item, you have certain variations between quarters because of individual initiatives that are taken on a group level. So there is no forecast for 2016.
Thanks.
Thank you. Your next question today comes from the line of Andreas Koski of Deutsche Bank in London. Please ask your question.
Yes, good morning. Hi, Thomas. Hi, Lars. Can you talk a bit more about the costs in Process Technology division related to certain customer projects? I wonder how many projects are part of this?
Are they still ongoing? And should we expect higher costs from certain customer projects also going forward in Q4 and into 2016? And what would the margin in Process Technology have been if you exclude these projects?
Well, to start with, it's a number of projects, which is more than 10. And some of them, they've been completed, but some are still ongoing. And of course, the closing as for end of September is a reflection of the best estimate of the final outcome to this extent the projects have not been completed by September 30.
And if you exclude them, what would the margin have been in process of Technology Division?
We have seen adverse effects to the tune of, say, SEK 50,000,000 or so because of this in the quarter.
Okay, perfect. Thanks. And then on Marine and Diesel Division. On the outlook, do you expect demand to be somewhat higher, thanks to large orders, but you didn't mention what you expect for the underlying demand in Marine and Diesel Division. So if you can do that, please.
And also, do you think that underlying demand in Marine and Diesel division now reflects the contracting level that we have seen during the past 6 months?
We have not seen the full effect of the decline in contracting at the yards.
So on an underlying basis, you expect it to be somewhat down?
Yes, we do.
Okay. And then on the M and O pumping that rose due to backlog revaluation, what kind of impact did the revaluation have on backlog?
We mentioned in the commentary through the order bridge that we're looking at an effect to the tune of 2%. And that is as stated as well mostly due to the appreciation of the dollar against the NOK. So Great.
Thank you very much.
Thank you.
Thank you. Your next question today comes from the line of Sven Weier of UBS in Frankfurt.
Questions are focused on the equipment division. I guess there you had the most notable deviation to your original guidance. You expected demand to be flat in equipment and it was down 10% on orders, which I guess is a bit of an unusual development for the division. I guess the lower big ticket was something that you expected. So I was just wondering if you could give us some more color of what's been happening in the food segment.
You said demand was lower. Does it mean it was down 10% sequentially or more? Maybe you can give us some more color. And more specifically, what's been going on in the dairy segment and the other food segments within equipment? And do you think that this has now reached sort of a bottom level here that you would expect to be flat into Q4?
Thank you.
Well, let's start off by establishing that the large order that we got in China in quarter 2 is truly rare as far as Equipment Division is concerned, and that represents 4% alone. If we then look at the remainder, we have seen a lower level, particularly during July August. And our read on that is really that many of our channels, they were early out to stock up in front of the vacation period. So we had a decline larger than anticipated in the summer months. As far as the sanitary segment is concerned, we had a decline in the food area, and we had a strengthening in the personal care and pharma area.
As far as the food decline is concerned, it is a broad decline. We're looking at agri as well as sorry, we are looking at the dairy as well as other applications. I think it's important to note here that the Tetra Pak, they were slightly up in fact. So it was other channels to the market that declined.
And when you say decline, does it mean more than 5%? Or would you otherwise say decline slightly? Just to get the quantification on that.
There is out of the 10% that you mentioned to begin with 4% is the large orders. So across we have an average decline of 6% for the rest. So it's in that neighborhood, right?
Yes. Again, I'm just I was a bit surprised given that you guided the segment flat and the big ticket was something that was expected. So there must be some unforeseen things in the other areas.
Well, again, we had a lower level of orders from several channels during the first 2 months of the quarter. And our take of that is that they had done a great deal of their purchases for the summer months already during the back end of Q2.
And the other food outside of dairy, is that really broad food, everything in food or any focus there?
It's a large variety of applications.
Yes. And should we assume that your stable outlook for equipment also holds true for sanitary? Or do you not want to provide more color on that?
We stick to the divisional level for qualifying our outlook.
Okay.
Your next question today comes from the line of Ben Maslin of MS London. Please ask your question.
Firstly, if we could just come back to your commentary around potential delays in deliveries in Q4, maybe a bit more color on which segments you see that risk in and how significant they are in terms of scope and duration? Thank you.
Hi, Bjorn. Yes. Well, the risk for delays that is our assessment. Of course, we're looking at where we were in the situation a year ago. And the sense we have now is that the risk is greater.
And I would say, there is an increased risk of delays, particularly when it comes to the hydrocarbon supply chain.
But are we talking kind of large projects, significant revenue impact on Q4 or it's fairly modest?
Well, we only know that when we when we closed the books a few months ago. I'm sorry. This is our best assessment from well, the interaction with customers, the general sense in the markets that we serve. And if there is an impact and the tune of that impact, I mean, that remains to be seen. It's not the fact yet because then, of course, it would have been reflected in the numbers we present.
But we would just like to highlight that there is a sense or we sense a risk of somewhat more of delays by customers.
Thanks. And then a clarification on the demand outlook. So you're saying that demand will be flat to slightly up. Is that versus the €8,700,000,000 of orders you booked? I think that was helped by a small currency revaluation or is it all against say 8.5x the revaluation?
It's 8. It's versus the 8.7.
Percent. Okay.
Thank you. And then finally, just on working capital. Customer advances are coming down now, I think, as you're winning less large orders. If we continue to see a kind of soft environment for these big tickets, would you expect to see further outflows of working capital? Thank you.
Well, if we for the sake of your question then assume that there is a continuing decline in activity levels, that normally should lead to a decline in or a reduction in working capital because it's not only the advances that disappear. Of course, it's the buildup of work in progress that reduces as well.
Got it. Thank you.
Thank you. Your next question today comes from the line of Nathalie Folkman of Carnegie Stockholm. Please ask your question.
Good morning, Lars and Thomas. A couple of questions. First on the ballast water treatment market. You have booked orders for the retrofit market. Wartsila Stavver has done that in their report also for the retrofit market.
Could you give us just some details on how awakening this interest is? It still feels like more of a one off or is it more broader interest from this type of equipment for the current fleet?
Yes. Well, it's we see an increased interest, and we see that some shipowners taking are preparing to take decisions to retrofit significant parts of their fleet. And it takes some time to retrofit the fleet. So therefore, they sign frame agreements. It's like the one I talked about, the €70,000,000 for an Asian ship owner.
Half of it comes in half of it comes in the second half of twenty fifteen and the other part comes early 2016. And then it will be retrofitted over a period of time. And we see an increased interest. And so we can see that ship owners regard that this will be a reality within Zoom.
Thank you. And then the question on the as you mentioned, the delays in some projects. Is that the delays of the kind of end phases of the older products projects? Or is that fresh projects that are being delayed, the kind of starting phase of this fresh project?
Well, we are really assuming that we will be looking at delays in final deliveries of the individual contracts. Suspensions of contracts that were recently landed as orders. If we have significant suspensions or suspensions that are pushed far out into the future, then we would likely reflect that as a negative orders received. So it's really to reflect a delay of taking delivery of the final stages of contracts.
Thank you. And just the last question for the Process Technology division and the margin there. You mentioned that some of that was because of the lower load and efficiency and so on. How and you said that you will address that. How long time do you believe you would need to address that?
Are we talking about 1 quarter? Are we talking about 3, 4 quarters?
Well, as far as productivity is concerned, it has been addressed and it is being addressed. And I think it's important to know that as far as our E and S activity in PTD is concerned, we have a great deal of flexibility as we have a substantial amount of contract engineering resources involved in realizing customer contracts.
Thank you very much for taking my questions.
Thank you. Thank you. And your next question comes from the line of Daniel Schmidt of SEB Stockholm. Please ask your question.
Yes. Hello. Good morning. I think most of my questions have been asked. But you're right in terms of the oil and gas exposure that midstream and downstream compensated for the decline that you've seen and seeing are seeing in upstream.
Can you give us some more details on that? There's been sort of other anecdotal evidence in the market that downstream is about sort of look a bit better with divestments coming onstream. What do you think about that?
We had a strong recovery in petrochemicals, and that we also expected since they are benefiting from lower feedstock prices and lower energy prices. And when it the other portion that was that we had a good development that was in processing and transportation. It's people are still preparing in the U. S, they're still preparing to export LNG, for instance. And if you look at so for the total process technology division, the whole hydrocarbon chain sequentially, they were up 20% because of processing and transport and petrochemicals had a very strong recovery.
But of course, for drilling and exploration, it is a subdued market naturally.
Okay. Of course. Could you then sort of try to update us, if you look at your orders right now, what is the mix? I think you basically said at the CMD in November last year that you had around 19% of group sales in oil and gas of which I think 9% was in midstream and 4% or 5% in downstream. If you look at the orders right now, how has that changed since November last year?
Yes. Well, it's interesting you bring up this subject. The total order intake for the group for the hydrocarbon chain amounted to 15.7% of group total. And out of that out of those 15.7%, 2.8% was in Drilling and Exploration, 6.6% came from Processing and Transportation, 2 percentage units came from refinery and 4.4% came from petrochemicals. So there you see the mix as it looked in the Q3 this year.
Again, Again, it's an interesting reflection one can make. The grand total for the group of the hydrocarbon chain is 15.7%. Just to give you a perspective that food, beverage and Pharma makes made up around 30% of the group's total order intake. To give you perspective on the magnitude of the numbers.
Thank you, Lars. That's very helpful. And that's all for me. Thank you. Thank you.
Thank you. There appear to be no further questions at this time. We have some follow-up questions coming through, the first of which is from Natalie Folkman. Please ask your question.
Hi, Lars. It's Jess. A follow-up question from me. You've also kind of give us the exposure for food and oil and gas and hydrocarbon. Could you do the same for Marine, if possible, to understand your exposure to tankers?
Yes. Well, it's what we can give you is it's not specifically on tankers. It's more if you take that the total LTM in after the Q3, we have that parts and service stands for 29% of marine total marine and diesel. And you have that environmental products stands for 11%, offshore oil and gas 11%. And then you can say traditional marine business at the shipyards stands for 46%.
And out of those 46%, we don't give a breakup on ship types. But we can say that in the Q3, we have been benefiting from a favorable ship contracting mix with good quantities for all types of tankers, crude, chemical product tankers as well as LNG carriers and container ships.
Thank you.
Thank you.
Thank you. And we have another follow-up question from the line of Max Yates. Please ask your question.
Hi, thank you. Just two questions to follow-up. Firstly, just a lot I mean, there's a lot of discussion over what overall Clarkson's data has done. Obviously, you've mentioned in the past you're more exposed to tankers. Could you give us an idea of what you think new orders new ship orders relevant to your business mix have done over the past 12 months or in 2013 2014?
That's the first question.
Well,
it's I don't quite get your question. But I think as Lars said just before, we've enjoyed a favorable ship contracting mix during this year with strength in tankers, in crews. The bulk carriers, they have taken the biggest hit in this decline of some 30% to 40% so far this year. And this is favorable in that our opportunity, our value opportunity is much bigger in the segments that have been strong during this year. And as far as the past few years are concerned, I think the actual statistics, they are available through the Clarksons data for everyone to see.
I don't think that I can or any one of us can provide from the top of our heads the history of contracting over the last few years just like that. I'm sorry.
I guess it was just more asking of you. I mean, you gave a figure I think within your Marine and Diesel division, Marine OE is sort of 46%. Just another way of asking how much of that is tankers, how much is bulkers and how much is offshore?
Offshore is separate. That's it's 11 percentage units that is offshore. Okay. But you can say that bulkers is a small portion because in value, it is not important to Alfa Laval. It's tankers and containers that represent high values.
So if I thought 2 thirds, 1 third, is that fair?
Let's say like this. If we look at the last 12 months of orders received, the Framo range has represented about 30%, just to give you a sense of, say, the pumping systems waived in marine and diesel. But for the rest, I don't think we want to get into guessing and get it wrong.
Okay. Thank you. And just one final question is just on acquisitions. Could I mean, you've said sort of still target, I think, 5 percent or 4% or 5% from M and A per year on average. Just how do you see your pipeline at the moment?
Are there any areas where you see interesting opportunities? And whether there's, I don't know, an average size of acquisition targets in your pipeline?
Out of 8% growth target, we have said that 3% to 4% should be bolt on acquisitions. And of course, we are continuously developing our pipeline. We're talking to a number of companies. We're in various stages of different processes. That's really what there is to say about M and A at this juncture.
You should not expect the press release tomorrow or the day after tomorrow on a new acquisition, but we are certainly working on it.
Is there a certain leverage when you'll some net debt to EBITDA level where you feel more comfortable stepping up these deals or
We are comfortable in making acquisitions with the balance sheet we have today.
Great. Thank you very much.
Thank you. And that completes the Q and A session. So thank you very much for your attention and looking forward to speaking to you in a quarter. Thank you and goodbye.
Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect. Speakers, please stand by.