Welcome to the Alfa Laval Q3 earnings call. 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 a question, you will need to press star one on your telephone. I would now like to hand the conference over to your speaker today, Lars Renström. Please go ahead, sir.
Thank you very much. Good morning, most welcome to the presentation. I will start by giving you my three highlights. Orders received continued on the higher level established in the second quarter, supported by all-time high in Process Technology division. Year-on-year, we were up 2% organically. The second highlight concerns Asia, that grew significantly, China's growth continued due to large orders and marine. Finally, we are very pleased to report that service grew 10% year-on-year, excluding currency effects. Let's move on to the key figures. Orders received rose 2% to SEK 7.4 billion. Net sales increased 2% to SEK 7.2 billion, adjusted EBITDA grew 2% to SEK 1.2 billion. The adjusted EBITDA margin reached 16.6%. Year to date, orders received declined 4% to SEK 22.2 billion. Net sales dropped 2% to SEK 21.3 billion, adjusted EBITDA declined 3% to SEK 3.5 billion.
Finally, adjusted EBITDA margin reached 16.5%. Now we move over to orders received and margins. Orders received on rolling 12 months reached SEK 29.5 billion. The increase was 4% year-on-year at constant exchange rates. The somewhat higher order intake that we reached in the second quarter also continued in the third. We also expect that to be the case in the fourth quarter as well. Next slide. From the order analysis, you find that year-on-year, acquisitions contributed with 2.1 percentage units, Organic growth was 2.2%. We had negative currency effects of 2.1%, giving a total of plus 2.2%. Sequentially, negative currency effects of 1.2% contributed to a total of minus 1.5%. On the next slide, we see that the EBITDA margin reached 16.6%, The operating result was SEK 1.2 billion. We have now had seven consecutive quarters around 16.5%.
Moving over to the highlights in the quarter. Process Technology had a record quarter, We booked an order of SEK 185 million for a petrochemical plant in India. In the U.S., we booked an order of SEK 50 million to a plant processing shale gas. In the food application, we booked SEK 60 million for a brewery in Ireland SEK 70 million for a vegetable oil plant in Brazil. In Marine and Diesel, we received an order of SEK 80 million for a waste heat recovery system to a diesel power plant in the Middle East. Moving over to the development per segment. We see that year-on-year in the quarter, six segments grew, three were unchanged, and only two declined. Let's take a closer look at the divisions. Please note that all comments are sequential. We start with the equipment division. That was down 4%, partly due to vacation in Europe.
Sanitary was unchanged, with good demand for products going to beverage, pharma, and personal care. Industrial equipment was affected by a drop in demand for refrigeration, whereas HVAC had continuous good demand. Finally, OEM declined due to non-repeats. Moving over to the Process Technology division. They delivered an all-time high quarter and grew 11%, thanks to several large orders. In energy and environment, oil and gas had a continued positive development. Power had a strong development from pent-up demand for nuclear power. Food was down due to non-repeats. However, we had growth in brewery and vegetable oil. Process industry was lifted by refinery. Finally, demand for parts and service rose with large orders contributing. On the next slide, we see that marine and diesel was down as expected due to non-repeats for ballast water treatment and SOx systems. The decline was 15%.
The diesel power had a strong development following a large order in the Middle East, and we had continued good demand for oil boilers. Next slide. Year to date, four segments have grown. Among them, parts and service within Process Technology division, which is one of our most important segments due to size and profitability. Also, marine and offshore systems has grown, driven by exhaust gas cleaning and oil boiler systems that come early in the order cycle and has benefited from increased bookings at the yards. Four segments are unchanged and three are down, mainly due to non-repeats. Moving over to the geographical developments. Order intake in the quarter shows that year-on-year, Asia stands out with 20% growth. Latin America grew with 9% and Nordic with 8%. Central and Eastern Europe was down due to non-repeats.
It's interesting to notice that Latin America, Asia, and Central and Eastern Europe made up 50% of the order intake. We haven't seen that for quite some time. Let's take a closer look at Asia. Asia is up 9% as all three divisions reported growth, lifted by investments in refinery, oil and gas projects, pent-up demand for nuclear power, as well as rising demand for products to LNG and product carriers. China had a positive development driven by large projects and marine. The base business decline in China declined somewhat, however, reflecting a continued wait-and-see mode. Moving over to Europe. Western Europe, including Nordic, declined due to vacation impact on component businesses. Non-repeats contributed to the significant decline in Nordic. However, year-on-year, we achieved growth which is more relevant. We had continued growth in mid-Europe, and U.K. was boosted by large projects in brewery and process industries.
In Central and Eastern Europe, the drop is explained by decreasing base business and non-repeats. Russia reported good growth, especially for Equipment division. Service business developed well all over the region. Moving over to North America. In North America, the continued growth in the U.S. was mitigated by a decline in Canada, and we are pleased that both base and service business grew. Food technology did well, but strongest development was in energy and environment, where oil and gas grew despite a continued lack of execution resources in the industry. In Latin America, Brazil and Mexico had a very strong development. Brazil was boosted by large contracts for oil and gas, marine, and vegetable oil, and service developed well throughout the region. Next slide. Year to date, Latin America has grown with 6%.
The rest of the regions have been unchanged or had a modest growth, except Central and Eastern Europe, where we have non-repeats in Russia. We have to bear in mind that Russia had an exceptional growth last year. On the next slide, you see our top 10 markets 2012 and how they have developed. The yellow bar is LTM, and the green bar is whole year 2012. We can see that the U.S. has continued to grow thanks to acquisitions. China is almost keeping up with last year after a strong recovery. South Korea has declined due to lower activity at the Korean EPC contractors. The growth in mid-Europe reflects the good development in Germany. Russia is down, but I expect Russia to reduce the gap in the fourth quarter. Remember, last year was exceptionally good.
Adriatic should have recognition for the growth supported by successful Italian contractors on export. Finally, Canada's gap is caused by two large oil and gas non-repeats. It's interesting to notice that seven out of the 10 markets were unchanged or grew. Now I hand over to Thomas for the financials.
Good morning, all of you. Let's dive a bit deeper into the financials then. We move on to the next slide. Lars has covered orders in detail, so let's talk a bit about sales. In the quarter, we realized sales of SEK 7.2 billion. Let me already now confirm that that was marginally below our own expectations, largely due to phasing of revenue recognitions in the Process Technology division. If we look at the statistics, sales was up 2.4% organically compared to last year. Acquisitions added 2%. Then, of course, we continue to have substantial adverse translation effects. In the quarter, we had 2.2% negative. This is, of course, due to not least the development of the JPY and the INR generating substantial elements of these translation effects. In absolute terms, sales were, though, up 2.2% year-on-year. Sequentially, a reduction of 3.3%.
Looking at parts and service revenues, they represented 26.2% of the total in the quarter against 27.2% a year ago, so a slight decline. Parts and service represented, however, 27.2% during the first nine months, which is an increase of 0.3% against last year. If we then move on to gross profit margin, we ended the quarter with 36.7% gross profit margin. This represents a decline of 0.3% year-on-year and a reduction of 1.2% sequentially. Let me then remind you what I said with the quarter two report. I said, in the near term, we expect a slight negative mix effect. FX transaction effects are expected to be limited but negative. We do not foresee any material changes to load or factory results. Finally, gross margin in the backlog is not expected to present any material change to the just reported.
The actual for Q3 came out slightly below our expectations sequentially. The main reasons being a somewhat larger than expected adverse mix effect and a seasonal load impact in manufacturing. Of course, due to the fact that we have a substantial amount of the value delivered out of West European factories with a vacation period in the third quarter. Sequentially, an impact. Compared to last year, a decline of 0.3%, and this boils down to a negative FX and a tiny adverse mix effect. Let me then get on to the first forward-looking statement. In the near term, we expect, again, a negative mix effect, mainly from an increase in capital sales. FX transaction effects are expected to be negative. Finally, we do not foresee any material changes to load or factory results.
With that, let's look further down the P&L account and look at the overheads on the next slide. R&D ended at SEK 177 million in the quarter, which is an increase year-on-year of 8.9%. R&D spend representing 2.5% of sales for the first nine months, again, in line with our guidance for R&D spend. Sales and admin amounted to SEK 1.22 billion in the quarter, representing a like-for-like increase of 3.7% year-on-year. This effectively means that full effect from the savings program initiated late 2011 was reached in quarter two, and that salary inflation and the selective increases of resources to increase presence is behind the increase now in quarter three. We had adverse effects from FX of totally SEK 47 million. All in all, that gave us an EBITA margin of 16.6%.
Looking at profit before tax, we ended up SEK 1,075 million against last year, SEK 1,230 million in the quarter. This is a decline of 13% over last year. This, however, includes a difference in financial net due to exchange differences of SEK 266 million. A positive SEK 233 million last year, a negative SEK 33 million this year. Of FX differences in the financial net. Profit before tax was actually SEK 111 million higher as far as the underlying business is concerned. That is compared to last year. Before leaving the P&L, taxes ended with a charge of SEK 253 million. This is clearly lower than the guidance of 28% of profit before tax.
The background is, of course, the reduction in corporate income tax in Sweden, but also the fact that we've made a detailed review of deferred tax accounting for pension benefits, as well as tax effective step-up amortization in the U.S. following from acquisitions. This gave a non-recurring effect to the tune of SEK 30-plus million in the quarter. Year-to-date, we're at about 27.5% tax on profit before tax. Again, let me confirm that going forward, our guidance for tax is 28% of profit before tax. EPS for the quarter SEK 195 and SEK 214, excluding step-up amortization, a slight decline compared to last year, again, broadly explained by the FX differences in the financial net, as I commented on before. With regard to returns, return on capital employed 26.1% by September 30, return on equity 21.4%. Limited changes from quarter two as far as these return numbers are concerned.
If we then move on to the cash flow statement, I think we can summarize the cash flow statement as follows. Cash flow from operations ended on the same high level as Q3 of last year, almost SEK 1 billion. Lower tax payments in the quarter supported this year's outcome. Free cash flow reached SEK 850 million, compared with SEK 912 million last year. The decline is basically explained by differences in the financial net. I've said it on many instances before, I can say it again now, I think we had another really good quarter in terms of cash generation. Let's move on to foreign exchange. As we commented already, FX effect in the quarter were negative SEK 47 million, mainly coming from translation. We've updated our forecast for the full year on the back of not least, as mentioned earlier, a weaker Japanese yen and Indian rupee.
With the assumed rates for euro dollar and euro SEK as stated on the slide, applying the closing rates as per end of September for the remaining currencies, we expect net FX effects of a negative SEK 265 million, and then again, mainly coming from translation. I think it's important to point out in this context that the big reductions for the Indian rupee and Japanese yen are not expected to generate any material transaction effects due to the fact that we do have, not only imports to the two countries, but we do also have substantial exports. In the case of India, manufacturing of own products. In the case of Japan, exports of own products, as well as procurement of not least titanium. Applying the same rates into 2014, we expect an adverse transaction effect of a mere SEK 15 million. Let's move on to the backlog.
As for the end of September, we had a backlog of almost SEK 15.1 billion, representing 6.1 months of LTM sales. If we look at the backlog development by division, we've seen an increase in the backlog for all three divisions. You find that book-to-bill has been above one in Process Technology and Marine and Diesel, and 0.97 in Equipment in the quarter. Let me stress that we had another quarter of book-to-bill above one in Marine and Diesel. I think that confirms our projection of hitting the trough in marine as far as revenues are concerned in the mid-2013. Looking at the backlog to be shipped during 2013, it amounted to SEK 6.7 billion, almost the same as last year, and that is including acquisitions, of course, but also including a substantial adverse translation effect. So like for like, it's actually up a mere 0.2%.
Having said all that, let's move on to the bridge from whole year sales 2012 to whole year sales 2013. We started this year off with a backlog for shipment in the current year, about SEK 100 million below the level into 2012, so a negative SEK 100 million. Based on the closing exchange rates as per September 30, we expect a negative translation of some SEK 1.4 billion this year. This is an increase of SEK 500 million compared to the last report. The acquisitions completed in 2012 and 2013, we estimate will generate additional sales of SEK 800 million, an increase of SEK 100 million compared to the estimate after Q2. This gives a sum total for the known parameters of SEK 29.1 billion, a reduction from the situation after Q2 of SEK 400 million, entirely due to the increase in translation effects. Finally, the unknowns.
As always, it's up to you to form an opinion about demand. Please remember that the opportunity to land orders in quarter four for shipment before year-end is largely limited to the after-market and the Equipment division. With regard to prices, again, we made minor adjustments at the beginning of the year for standard products. With that, I give the word back to Lars for the outlook and closing remarks.
The outlook for the fourth quarter is as follows. We expect that demand during the fourth quarter will be on about the same level as in the third, which means that it will be somewhat higher than the same quarter the previous year. For each division, our demand expectation for the fourth quarter is as follows. Process Technology, unchanged due to continued high activity level for large orders and brisk tendering activity. Equipment, unchanged. Finally, Marine and Diesel, somewhat higher, thanks to expected development for exhaust gas cleaning. That completes our presentation, and now we hand over to the operator for the Q&A session.
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Your first question comes from the line of Peder Frölén. Please ask your question.
Yes, good morning, gentlemen. This is Peder Frölén from Handelsbanken. My first question relates to the outlook, Lars and Thomas. You mentioned, Thomas, that there were some seasonality affecting especially the short cycle business of Equipment. Are you talking about the daily rates when you talk about the outlook? That's my first question. We're not seeing demand falling, but still, I guess there are some efficiency opportunities in the group. What do you say about the need for another program to be launched? That's my two first questions. Thank you.
Could you clarify your first question, Peder?
Yes. Hi, Lars. The outlook, Thomas mentioned that the seasonality, the summer shutdowns affected the equipment division somewhat. Is your outlook based on daily activities, or should we expect somewhat better seasonality Q on Q in fourth quarter, on top of the flat outlook, so to speak?
Well, my comment was relating to the factory load or the factory output, as we have a vacation period in quarter three. Of course, there was an adverse impact as opposed to quarter two. Year-over-year, there will be no difference in quarter four. It was not at all relating to equipment or any specific division. It was generally for the operations division.
Okay. In the comment on the equipment division on OE and industrial equipment, it was down around 4%, mainly due to seasonality effect, was the comment during the presentation.
Yes, it was seasonality in Europe and also lower demand for refrigeration.
Yes.
We expect that we will be on the same rates for the rest of the year.
Okay. Thank you.
I think you had a second question relating to the need of another savings program, I guess you were touching upon. If we look at the load year-to-date for the operations division, we are at a somewhat higher rate than last year. If we look at that as a measure, no. Again, let me remind you that the operations division is on a weekly basis, watching the load and adjusting capacity as far as resources are concerned. That is continuously adjusted for. If we look at the overhead resources, we take every measure we can to rationalize where we judge that feasible in order to accommodate revenue investments, more resources in faster-growing areas.
Okay. That's very clear. Thank you. I get back in line.
Thank you, Peder.
Your next question comes from the line of Sven Weier. Please ask your question.
Yeah, good morning. A couple of questions from my side. First, on the P&L, you kind of compensated the decline of the gross margin by the other expense line, which decreased quite a bit to SEK 136 million. I was just wondering what was behind that reduction. The second question relates to your guidance. If you say stable demand, does that include everything, also including big tickets and currency? Thirdly, when I look at the marine order intake sequentially down SEK 270 million, which was quite a bit more than the change in the big tickets. I am a bit surprised by that, given that shipyard orders were still rising in the months during Q3. Was there an effect from lower power plant demand, or how would you explain that sequential change? Thank you.
Should I start off with the first question, maybe? Yes, a better outcome on other costs and other income is exactly that, other cost and income. What you find there is non-recurring items like project initiatives that come and disappear. We of course have commissions, royalties to third parties where we can have swings depending on individual contracts. No particular item to really comment on. You will inevitably have swings on this line. I think if you look over a longer period of time, you tend to see a net of others in the order of SEK 100 million. Sven, your question about our outlook is that demand will be on about the same level. Of course, we don't give an outlook for the currency. That comes on top. We only talk about the demand as such.
Your third question was really about marine and the sequential development. On top of the big tickets that you can, of course, calculate as a deviation, we had underlying a lower order inflow for ballast water treatment systems from quarter two to quarter three, substantially lower. In our internal vocabulary, large orders above half a million EUR, but not 5 million EUR items. Ballast water was really a main explanatory factor for the balance.
Do you see anything specific behind that, or is it?
No, those, both SOx and ballast water, they come in a bit lumpy. It's nothing particularly behind it. As for example, when it comes to SOx, we are expecting good order intake in the fourth quarter.
just finally, a follow-up question on the marine margins sequentially, which were down. You've been mentioning mix. Has that to do with the greater share in the revenues from environmental products, or how should we look at the mix impact sequentially?
Well, I think what you should say is that we are at a trough as far as we see it, and our expectations when it comes to revenue. There is a leverage element if you look at the operating margin, obviously.
Thank you.
Thank you, Sven.
Your next question comes from the line of Ben Maslen. Please ask your question.
Thank you. Morning, everyone. Just a quick question on pricing, if I could. If you could just give some color on how you see the pricing environment overall and maybe where in your portfolio is pricing toughest. Then maybe just to follow up on Sven's question, I think your comments on the marine margin talk about price and mix being negative, a specific reference to the pricing environment in marine and whether this is just weaker orders in the backlog flowing in and things are better going forward, or whether there is a new price level in marine, which is just tougher. Thank you.
Okay. If we look at pricing overall, I think if we look at products that are considered to be more of a standard nature, of course, there is a more severe price pressure, and of course, that is to some degree supported by the declining metal prices that we've seen some time ago. For contract orders, no change in the pricing environment. You had a particular question about marine and prices. We've talked about a normalization of the price levels for products to the shipbuilding industry for a couple of years already. We were at an extraordinary level if we go back to the peak, and we've seen a gradual decline of prices over the last few years. Our belief is that we have found this normalized level now.
This is the base level for now, as far as we can judge, and as far as our colleagues being close to this market can judge.
Got it. Thank you very much.
Your next question comes from the line of Andre Kukhnin. Please ask your question.
Good morning. Thanks for taking my questions. It's just a couple of quick follow-ups. Firstly, on the marine margin, what you were just talking about, the normalization and reaching the finally normalized level. Should we think about 15% as normalized given that revenue level of activity of SEK 1.5 billion? Or was there anything of one-off nature in there, maybe a seasonal manufacturing load or something like that? Then just on the other line, sorry to labor that, but was there anything in there that, the IT spend leveling off that points to that other line running at a lower run rate than in previous quarters on a more sustainable basis? Or should we just model it as before at around 1.72% of sales and stick with that? If you could give us some help on going forward on that'd be great. Thank you.
Marine, when I say normalized, I refer to price level. I think that is important to note. You were talking about the 15% operating margin, and there I commented that, of course, we have an adverse leverage effect as sales, as revenues have been declining. We have less of revenue, less of gross profit margin to cover the overheads. We've seen overheads come down. They have done savings. They have implemented savings in Marine. But at this, what we expect to be trough, there is not enough of volume to generate the kind of margins that we've seen if we go back a year or so of 20%. In order to get to higher levels of operating margin, of course, a larger volume is required. Remember, book-to-bill has been above one for the last couple of quarters, so there is a trend in the right direction.
Other cost and income. No special items to comment about. Going forward, again, I mentioned on Sven's question, we've been at about SEK 100 million as an average per quarter over a number of years, and that's the kind of level that I think you should model with going forward as well.
Got it. Thank you.
Once again, if you wish to ask a question, please press *1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the # key. Your next question comes from the line of Ben Maslen. Please ask your question.
Yeah, thank you. Just a follow-up, please, on oil and gas markets. I think you said at Q2 there were delays that were stopping the orders coming through, and I guess your commentary suggests that's reversed a little bit in Q3. Maybe just a little bit more color on what you are seeing in oil and gas markets and how big a kind of pipeline or pent-up level of work do you see in those markets that could be executed if resources became available in the industry? Thank you.
We see a very good activity level in the U.S. coming from shale oil and shale gas, both to prepare for the export of the shale gas and also for refining the products. We see a very good activity level offshore for the North Sea, for instance. In general, we see a good demand and somehow it seems that the industry manages to launch a number of projects even though they are, let's say, using their full capacity.
Yeah. Okay. Thanks very much.
Your next question comes from the line of Peder Frölén. Please ask your question.
Yes. Thank you. You mentioned Asia now together with the other emerging markets being half of the order intake, Asia in particular were quite strong, I guess, due to large orders. How should we see upon Asia and maybe China in particular ahead as the base business is somewhat of a wait-and-see mode? Do you expect this to come back, the base business to re-accelerate? There's a certain hesitation going on that will ease a bit. Are you sensing that? Or is it more that you expect continuous good large orders and the base business to be running at this level?
If we go one year back in time, China was moving sideways when it came to order intake for quite a number of quarters. We had, in the second quarter this year, we had double-digit growth in China, so there was an uptick. We could see also now in the third quarter that the growth that started in the second, it continued at a good rate, also in the third quarter, boosted by large orders and marine. When it comes to marine, we expect a continued good demand based on the good order intake to the yards. Your question regarding base business. Base business was up in the second quarter, and it was down in the third now. It reflects a wait-and-see mode. In general, we have a positive view on Asia and on China.
Okay. Thank you for that.
Your next question comes from the line of Lars Brorson. Please ask your question.
Yes, thank you very much. A couple of questions, Lars Thomas, if I could. First of all, be interested to understand the dynamics bit by segment within your marine and diesel division. Am I right in understanding that all of the decline sequentially is really in the environmental segment? Are you seeing softness in, particularly your shipbuilding and your diesel segment sequentially?
Diesel has been slow for quite some time. The diesel end customers, the diesel power plant end customers, they have been cautious in making investments, and that has held back the demand. When it comes to the diesel power plants, we had this good order intake, this large order in the second quarter, and we see that there are some potential projects that could come in also going further. When it comes to the decline in the marine and diesel division, you can say it's basically coming from non-repeat large orders in ballast water treatment that is booked under the equipment segment, and the marine equipment segment, and the SOx plants that are booked in the marine systems segment.
Your shipbuilding and offshore segment is growing sequentially, and by what order of magnitude?
We are busy. It varies between the products, but if you take, for instance, the marine, the oil boilers that come early in the ordering cycle, they started to go up in the second quarter, and we had a very strong third quarter for the marine boilers. We see that the good order intake to the yards, there we have benefited from it, and we expect to see positive effects from the order intake to the yards also in the coming quarters.
That's clear, Lars. Secondly, if I can just ask to some granularity on your divisional outlook for PT. What is that predicated on in terms of the base order business in emerging markets ex China? You talk about large orders coming through expectedly in Q4, but if you look at your, particularly your Southeast Asia exposure, Russia, Brazil, India, i.e., the bigger markets, emerging markets outside of China, what do you see here in light of currency volatility and some macro uncertainty in the base order business in those markets?
We can see. It's a mixed picture. We could see in Russia, we saw good order intake, also for the base business. Whereas if you take India, it's struggling a bit. It varies. You cannot simply answer with one general question, Russia, fine, India, struggling. Brazil looked fine in the third quarter. China, there we said that base business was declining, large orders and marine gave us good growth. It's a varying picture.
Thanks.
Your next question comes from the line of Aaron Ibbotson. Please ask your question.
Hi there. Good morning. Thanks for taking my question. Lars, I've got two slightly bigger picture questions, if that's okay with you. The first one is just looking at environmental marine regulations, the ballast water and SOx, NOx regulation. I know that on the Capital Markets Day maybe a year or so ago, we were all calculating, number of ships, times unit price, et cetera, and got to quite large numbers and spread out over the next few years. How are you feeling about this opportunity if you think going into 2014, 2015, 2016? Do you see this as meaningful? With that, I mean, taking up maybe a third or a quarter of your total marine division sales over the next few years, or should we more think about this as the occasional order that's dripping in over the next two to five years?
My second question, if I may, actually just relates to the general demand level. If I organically link your order intake back since 2007, we're still hovering around 10% below the demand level you saw pre-crisis. This is a good six years ago now. I'm just thinking, do you think when you talk to your customers, when you talk to industrial customers, both outside and the marine and within the marine environment, do you think, 2014, 2015, you will actually start to see some decent growth or should we expect to see continued, or do you expect to see continued more or less flatlining of demand? Thank you.
When it comes to 2014 and 2015, we don't give any forecast.
I think, Aaron, there is one important or a couple of important elements to remember if you look at the peak in 2008. If we look at metal prices, we were at a situation where, for instance, nickel was priced at $55,000 a ton. We are now at $13,000, $13,500. Of course, that combined with copper being at $9,000 plus a ton against, say, six or something right now. That had a fundamental impact on, say, the monetary volume. Again, we had an extraordinary cycle. Generally speaking, we can leave that aside, but we had an extraordinary cycle in marine with contracting to the tune of 5,500 ships. We said that, and we said it then, and we've said it ever since. It was extraordinary and should not be expected to come back.
For the rest, there is not a vast difference in terms of, for instance, tons of stainless steel sold, to make it very simple. I think it's a bit dangerous to look at it the way you just did.
Thomas, just to clarify, I'm not talking about your profitability here. I'm just talking about.
No
your organic volume order intake.
I was as well, Aaron.
Okay.
Orders and sales was inflated with, for instance, the metal prices and most certainly the extraordinary peak in marine. That, again, it starts with orders and continues with sales. Eventually, of course, it had an impact further down the P&L as well. I think it's very important to have in mind, if we measure it in terms of tons of steel, there is not a vast difference. Then coming back to your questions about the environmental regulations in marine and what to expect, let me remind you all that when we had our Capital Markets Day almost a year ago, what we tried to provide to you was, on the one side, what are the regulations that will kick in or are expected to kick in eventually, as far as ballast water is concerned. We painted our picture of what we thought the market was.
For ballast water, we said 30,000 ships, which is less than half of the total number of ocean-going ships. We talked about a few thousand as the total opportunity for SOx cleaning, for instance. We were talking about the opportunity. We outlined the guidelines as they ought to be applied, we did not commit to any specific revenue number as far as we're concerned. I think a general experience is that, new markets, they evolve at a somewhat slower rate than, well, you would like to see, and we would like to see, the opportunity is there. Coming back to Last questions about quarter four, we have some expectation that we will see orders in SOx in quarter four. It will be lumpy. The opportunity is there, the timeline is maybe not what you would have expected and what we would have liked to see.
It's important to stress the trend is positive. It's on its way.
Okay. Thank you.
Your next question comes from the line of Daniel Schmidt. Please ask your question.
Hi there, guys. My question has already been answered, actually, just a minute ago.
All right.
Okay.
Okay, your next question comes from the line of Andre Kukhnin. Please ask your question.
Hi, it's Andre from Credit Suisse again. Just a couple more questions, please. Firstly, on the factory load comment into Q4, you said you don't expect a significant change. Should we think about it as kind of adjusted for seasonality that was a negative in Q3? Secondly, on the gross margin comment that you're seeing no significant change coming through from backlog at the group level, would you say that's true for the marine division as well? Marine and diesel division?
My short answer to both of these questions would be yes. Yes, the factory load, no major change, of course, considering seasonality and backlog, margin, no material difference. That applies for all of the three divisions.
One final question. On the new product momentum in the marine and diesel division, if we exclude the environmental product portfolio and PureDry and look at it as a kind of standard product on standard product basis, how would you characterize the new product momentum in that currently or say this year compared to a year before or three years before that? Are you launching more or less, more standard products apart from the environmental product portfolio and PureDry?
In the product development, we are focusing on products that either increase the energy efficiency of the ship or that takes care of an environmental challenge for the ship owner. I would say that we have more new products introduced today than what we had three years ago. That also goes for products outside SOx and ballast water. We are constantly renewing our product portfolio and for instance, increasing the efficiency of the fuel line for the ship owner.
Got it. Thank you. Appreciate your time.
I think we have to round off now because we are off for some other meetings. Should we have one final question and that's it?
No problem. Your next question comes from the line of Anders Idborg. Please ask your question.
Morning. Yeah, just quickly, finally, perhaps on services, pretty good momentum. Any particular efforts you've made or areas of improvement that you've seen in parts and service, and do you expect this double-digit rate to be sustainable over the next couple of quarters?
It was unusually good, the 10%. We were very successful landing large orders for the Process Technology division. We want to increase our focus on the aftermarket, and we have, during the last six years, increased our service centers with 50%. Number of service centers with 50%. We are slowly, steadily improving the growth of the aftermarket. You can say the 10%, that was unusually good due to large orders.
Okay, thanks.
Okay. Thank you very much for your attention, and wishing you a good day. Thank you and goodbye.
That does conclude our conference for today. Thank you for participating. You may now all disconnect.