Most welcome to the presentation of the third quarter report. I will start by giving you my three highlights. Order intake increased by 31% to the new record level of SEK 8 billion, with most business segments and all markets contributing to the growth. Eastern Europe, Latin America, and Asia made up 53% of the group's order intake in the quarter. My second highlight concerns the process technology division that, again, had a very strong quarter where large orders reached SEK 525 million. Finally, Alfa Laval continues to deliver a strong operating margin, 18.9%, despite increased resources in R&D and sales presence. Let's take a look at the key figures. Order intake rose by 31% to SEK 8 billion, and net sales increased 30% to SEK 7.6 billion. Adjusted EBITDA was up 25% to SEK 1.43 billion. The EBITDA margin reached 18.9%.
For the first nine months, orders received rose 25% to SEK 21.9 billion. Net sales increased 17% to SEK 20.5 billion. Adjusted EBITDA was up 17% to SEK 3.9 billion. The EBITDA margin reached 19%. Moving over to the next slide, we see that orders received on rolling 12 months rose to SEK 28.3 billion. The increase in order intake was 37% year-on-year at constant exchange rates. The SEK 8 billion was a new record. The newly acquired Aalborg Industries contributed with SEK 700 million. Large orders exceeded SEK 500 million for the second quarter in a row, which is a very high level. On the next slide, we see on the order analysis, you find that acquisitions contributed with 16 percentage units and negative currency effects with 7 percentage units. The organic growth was 21 percentage units.
On the next slide, we see that in the quarter, we reached an operating margin of 18.9%, and the operating result was SEK 1.4 billion. Let's take a look at the highlights in the quarter. In the quarter, we won large orders for a total of SEK 525 million. In Singapore, we won an order of SEK 110 million for plate heat exchangers for a large petrochemical plant. From a South Korean contractor, we won an order of SEK 60 million for heat exchangers to the United Arab Emirates' first nuclear power plant. From China, we won an order of SEK 50 million for heat exchangers to petrochemical plants. Through a Japanese contractor, we won an order of SEK 90 million for a natural gas project in Qatar. In India, we won an order of SEK 100 million for a baby food processing line.
In Kazakhstan, we won an order of SEK 55 million for plate heat exchangers to a refinery. In Canada, we won an order of SEK 60 million for newly developed decanters for industrial wastewater cleaning. Now we move over to the development per segment. Here we can see that in the process technology division, demand for oil and gas exploration remained high by continued capacity-related investments. We enjoyed continued high activity for process industry. There was a very strong development for food, boosted by investments in vegetable oil plants. In the equipment division, which we see on the next slide, sanitary and OEM, with their fast-moving businesses, were affected by the macroeconomic uncertainty. We saw a continued strong development for marine and diesel. On the next slide, we see that all segments delivered growth during the first nine months. I will give some forward-looking comments for the next quarter.
The first one is that we expect the high activity level in oil and gas exploration and refinery to continue. The second is that we expect the high activity level in marine and diesel to continue. The third one is that for the fast-moving businesses, such as OEM and sanitary, we expect a continued softer demand level. Now we move over to the regions. There we see that all regions delivered growth, and Asia had an outstanding growth. Asia and Latin America were supported by the acquisition of Aalborg. The low growth figure in North America comes from a SEK 23 million order last year that didn't repeat. In the quarter, Asia, Latin America, and Eastern Europe made up 53% of the group's order intake. Now we move over to the Americas.
There we see that in North America, demand from oil and gas exploration was lifted by continued capacity investments. Base business had good development, as did parts and service. In Latin America, both divisions reported growth. We had particularly strong development in process industry, food, and industrial equipment. Moving over to Europe, we see in Western Europe, including the Nordic countries, we achieved continued growth in the base business. Industrial equipment, marine and diesel, and process industry performed the best. In Central and Eastern Europe, process industry, marine and diesel, and food did particularly well. Russia was the strongest-performing country. Moving over to Asia, we see there that in Asia, the process technology division was boosted by good project activity. Marine showed continued growth. Geographically, the increase was broad-based.
On the next slide covering the first nine months, we see that Asia, Latin America, and Central and Eastern Europe grew with [40%, 50%]. Perhaps more remarkable is the fact that the strong growth of +20% for Western Europe, the Nordic countries, and North America. By that, we move over to the financials. Thomas, welcome.
Hey, thank you.
[ ].
Okay. Once again, good morning. Let's the other direction, yes. So Lars has elaborated on orders. So let's take a look at sales. Sales were up as much as 30% in the quarter. On a like-for-like basis, sales were up almost 19%. I think that is evidence that deliveries have moved, again, a step closer to the orders received levels. Moving on to gross profit margin. In the quarter, we ended at 38.3% gross profit margin. That is a decline of 3.4% compared to the third quarter of last year. Sequentially, a reduction of 2.8%. If we look at some of the main parameters giving this reduction in gross profit margin, if we look at mix, mix was on a year-on-year basis down 3/4 of a percentage unit. If we look at the FX transaction effect, there we have another 1.5% adverse effect to the margin.
So mix and currency alone represent a reduction of 2 1/4 percentage unit. On top of that, as main parameters, we've seen a slightly positive effect from lower metal prices. We have seen a negative impact from lower margins in the backlog, orders that we received during the weaker part of the cycle. This is something that I've commented upon on a couple of quarterly presentations already. Now we saw an effect of these orders. That then combined with recognizing revenues from some wide-scope contracts as well, where you typically have a lower margin with the wider scope, with more of bought-in products and the likes. If we look at the near-term future, the negative mix and the negative currency effect will continue. The backlog and the contents of margin in the backlog, there we will have about the same conditions as in the third quarter.
Assuming that the metals will remain on the current level, of course, will have a positive effect also in the fourth quarter. For the rest, you should not expect any further positives from load or from price. The price adjustments we made in the early fall, of course, they're flushed through the system now, basically. If we look at load, of course, with a lower demand level in some of the faster-moving businesses as well, we should not anticipate on a total basis any positive effects from load. In short, basically the same conditions or roughly the same conditions as in the third quarter. Moving on down the P&L, if we look at sales and admin, sales and admin year to date, on a like-for-like basis, we're up 9.8%.
Of course, that is a reflection of the fact that we have added resources, we have added activities, primarily in the emerging markets to capture the opportunities that we see in these markets. R&T, same thing, an increase, quite substantial increase, 15.5% year like for like compared to 2010. Of course, this is a reflection of our firm belief that continued development of our products is key to continue to develop our position as a company. Between EBIT and profit before tax, you find the financial net. The financial net in the quarter has been affected by a substantial adverse FX effect, FX differences. That is mainly unrealized FX differences to the tune of SEK 100 million and almost SEK 110 million. Then finally, taxes, almost 30%, which is exactly in line with the guidance we are giving for tax of 30%.
Moving on, EPS, slight improvement, including as well as excluding step-up amortization. If we look at the year-to-date numbers, 599 to as opposed to 570 last year, I think you must remember that last year we had a reversal of provisions, a non-recurring effect of some SEK 80 million. This year, we've had a non-recurring charge for integration of Aalborg of a - 80. If you look at the net effect of that after tax, that gives about SEK 0.25 . So the difference between 2010 and 2011, excluding these non-recurring effects, is of course greater than what you see on the slide. Cash flow from operating activity is just over a billion. I'll get back to that in a moment. If we look at return on capital employed and return on equity, I'm sure you agree, quite competitive numbers when it comes to the returns.
That is despite the fact that we got an additional SEK 5 billion of new intangibles from the acquisition of Aalborg just during the second quarter. So still 32% and 23% respectively when it comes to returns. Looking at the cash flow, as I said, from operating activities, SEK 1 billion in the quarter. That is despite a substantial increase in the volume of our activities and despite the following increase in working capital of SEK 200 million. In the quarter, we generated just over SEK 800 million or just under SEK 800 million of free cash flow. Year to date, we've generated just under SEK 2 billion in free cash flow. Again, that is despite an increase in working capital of just over a billion following the substantial increase in business activities that we have seen in the first nine months of 2011.
Looking into the fourth quarter, our expectation when it comes to particularly inventory is that we will see a reduction in the inventory levels as we've seen a decline in demand for the faster-moving businesses. We have also, with adjustment of certain capacities, seen a reduction or will be seeing a reduction. Mid-September, we launched an effort in India, an effort with the aim to increase our ownership of our main Indian subsidiary, Alfa Laval India Limited. The ultimate goal is, of course, to become 100% owners and also to be able to delist the company. This is an effort in steps. The first step is that a postal ballot exercise has been started with the minority shareholders of Alfa Laval India.
In order to get into the next step of this process, it is required that 2/3 of the shareholders participating in this postal ballot, they vote in favor of the proposed delisting. Given that we get past that hurdle, a reverse bookbuilding process starts. Given that minority shareholders tender their shares at a price acceptable to Alfa Laval, representing at least 50% of the outstanding shares, then we can apply for a delisting. If we look at the amounts involved and the possible investment, we've set a floor price for these shares of INR 2,045. If we look at the 100% of the outstanding shares, that represents just under SEK 600 million. Of course, the ultimate investment to Alfa Laval is dependent on the final price reached in a delisting in the reverse bookbuilding. This exercise will continue still for a number of months.
The deadline of the postal ballot is the 12th of November. Then there, of course, would be a count of the ballot. Then eventually, we would get into the next step, the reverse bookbuilding. Moving on to FX. In the quarter, we saw quite some changes in currencies. We had a strengthening of the U.S. dollar. We had a weakening of the Swedish krona, which typically gives a positive effect to the Alfa Laval P&L as we're long in dollars and short in Swedish krona. Our expectation for the full year 2011 as an effect of these swings is that we're now anticipating an adverse effect of SEK 410 million to be compared with SEK 455 million three months ago. If we look at the expectation given the assumptions of [1.34 and 9.20] for euro/dollar, euro/SEK, is -SEK 180 million .
That then compared to the - SEK 225 million that we presented three months ago. Of course, that is on the basis of the assumptions, the rates as specified on the slide. The order backlog amounted to just over SEK 15 billion at the end of September, out of which SEK 6.4 billion is to be shipped before the end of the year. If we look at the backlog on a like-for-like basis, we have SEK 5.7 billion of order backlog to be shipped in 2011. That compared to SEK 5.9 billion a year ago. So a slight decline in the backlog to be shipped in the very short term. If we look at Aalborg, Aalborg represents SEK 2.7 billion of the SEK 15 billion of backlog, out of which just over SEK 2 billion is to be shipped after the end of 2011.
With these numbers on the backlog as a basis, let's take a look at sales for the full year 2010. As you know, we ended with SEK 24.7 billion of sales in 2010. With the current exchange rates, we anticipate an adverse translation effect of SEK 1.5 billion. That gives us SEK 23.2 billion. With acquisitions, we have landed up to now. We expect an additional sales of SEK 2.7 billion. Then we're at SEK 25.9 billion. If we then assume that for the total of 2011, we have an increase following increased demand and increases in prices of totally 15%, that would give an additional SEK 2.1 billion of sales. So assuming a 15% increase in infra-outer orders and prices combined, SEK 2.1 billion. Just as a reference, let me remind you that sales on a like-for-like basis is up 14.1% in the first nine months.
With that, I hand back to Lars for the outlook.
The outlook for the fourth quarter is as follows. We expect that demand during the quarter will be in line with or somewhat lower than in the third quarter. This excludes large orders as they come in a bit lumpy. That completes our presentation. Now I hand over to Peter Torstensson for the Q&A session.
Thank you, Lars. Let me start with a question to you, Lars. Can you give us some more flavor to the sequential development?
The sequential development for the segments looks pretty much the same as we had on the year-on-year comparison.
Okay. Any questions from the floor in Stockholm? Please state your name and company. Please wait for the mic.
Thomas, [foreign language ].
If you want, I guess first regarding production level here during the fourth quarter compared to the third quarter, if you could give some more guidance there. And then about the marine exposure here, you mentioned the marine continue on a gold note pair and expect to do so in the fourth quarter. And given the somewhat slow ordering in yards and new order of vessels, if you could sort of give some more flavor about the marine. Thank you.
Yeah, I can start with the marine and then, Thomas, you take the other question. When it comes to marine, the marine business as such, we should remember that about 1/3 of the marine and diesel business is aftermarket, parts and service. When it comes to the capital sales in marine and diesel, it consists of environmental solutions like ballast water, where we have seen a high activity level and that we expect to continue also in the fourth quarter. We have land-based diesel power stations, where typically customers are [MIN, Wärtsilä]. Then we have had a good activity level in the third quarter and that we expect to continue in the fourth quarter. Finally, you have order intake from the shipyards. There we had a good order intake in the end of last year that we are still benefiting from.
Also, it's important to see that when it comes to offshore, it's a high activity level in offshore drilling, FPS, FPSO, where we also are quite active. So to sum it up, we expect the demand level to be on about the same level in the fourth quarter as we saw in the third quarter.
Martin had a question about production levels in quarter four. Just to give you a bit of detail of what's actually happening in quarter three, I can tell you now that we have actually adjusted capacity in a couple of our manufacturing units following the weaker demand for products going into these faster-moving businesses, faster-moving segments. So we've adjusted manufacturing capacity in Denmark, in Italy, following this decline in demand. Going forward, what we're saying is that we expect demand to be on about the same level or somewhat lower. Of course, we're watching the development very closely. We know what to do, and we will make the adjustments to capacities as we see necessary to adjust for demand. What I said in relation to gross profit margin was as well that you should not expect any positive effects from load in the short term.
I think that implies as well that we do not foresee any benefits from production levels, rather the same or slightly lower following our guidance.
Should we take one more question from the floor before we go over to the conference call? Mat, did you have a follow-up?
Yeah, just a short one on financials. Also, looking at the FX impact on financials, if you could sort of give guidance for the fourth quarter also, I mean the negatives there. And also regarding pension liabilities, if you can sort of give some indication about the potential repairing thing there towards the end of the year.
When it comes to the financial, yes, to the extent that exchange rates remain on this level, the unrealized elements of the SEK 108 million, they will eventually be realized. So given the same rates, we will have this effect. To the extent, again, the rates stay the same until year-end, we should not expect any further adverse effects, not anything significant anyway. As I'm sure you appreciate, it is very difficult to make an exact prognosis because this has to do with when certain payments are actually happening, what the rates are at the specific date, and so on and so forth. When it comes to pensions, we, of course, have to wait for the actuarial valuations coming in in the very early part of 2012 or at the very end of this year.
Given reductions in discount rates, of course, that will have an increase to the obligations, to our defined benefit obligations. On the other hand, given that there is a reduction in growth expectations for the economy and consequently salaries and wages, that will have a reducing effect. So again, it's very much about the combined effects of the assumptions of the actuaries in a number of countries where the U.S. and the U.K. are the most important for us. We'll have to wait and see, basically.
Okay. Thanks a lot.
Thank you. Oscar [Dahl] in Danske Bank. You had two fantastic quarters when it comes to large orders, and you typically have pretty good visibility on that. Can you say something on what you see now in the fourth quarter when it comes to large contract orders? And the second question, the equipment division seems to have a pretty flat development on the parts and sales business year-over-year in the quarter. Can you say something about that? Is that a worrying fact for you, demonstrating some kind of slowdown? Or is there anything special in that?
If we take the parts and service business in the equipment division, that was flat year-on-year. That is a reflection of the low rates that shipowners are getting. So they defer maintenance or refurbishing. It's simply a reflection of the lower rates that they earn. Then you had the question on the equipment division.
On large contracts in general.
Yeah, yeah. Large contracts, we see a continued high activity level when it comes to large contracts. Whether they will materialize into orders during the fourth quarter, that, however, remains to be seen. But the activity level is there.
Have you seen any change recently, given the turmoil in the world, on speed to find the contact and speak?
Yeah.
Or faster for the customers to make their decisions?
Yeah. In some cases, we have seen that it has taken a bit longer time. That is quite natural given the macroeconomic environment.
Thank you.
Okay. Let's move over to the teleconference operator.
Thank you. Just to remind telephone participants to register a question, please press star one on your telephone keypad. To cancel questions, please press the hash or pound key. The first question comes from the line of [Guillermo Pignet]. Please go ahead with your question.
Hi. Good morning. It's [Guillermo Pignet] from Morgan Stanley. Just a question regarding your gross profit margins. So when do you expect the gross profit backlog of adverse effects to reverse? Do you have any guidance on where we should be actually seeing a bottoming out of those negative impacts coming out of your low margin orders in the worst part of the recovery, let's say? And then secondly, apart from marine, in terms of retrofit and parts and service, which end markets you've seen the, let's say, the sharpest slowdown? Thank you.
Okay. [Guillermo], when it comes to the gross profit margin, I gave you a pretty explicit short-term outlook for gross profit margin. And that is to say what we expect in the fourth quarter. And to cut it very short, I said that the conditions are not materially different in quarter four compared to quarter three. And then, of course, further out, that is dependent not only on what we have in the backlog, but of course, also what is happening in the next coming months.
Would you say that this quarter was and next quarter will be hit hardest by your backlog and then improve somewhat? Or just the backlog, just looking at the backlog?
Let me say like this. What we saw in the third quarter and what we expect to see in the fourth quarter is in line with what I have talked about as a lower gross margin in backlog already for some time. We are providing a specific guidance for the fourth quarter. We're not going further into the future. But what we also said for six months is that we've had less of price pressure in contract-based sales since the beginning of the fall up to now compared to what we had in a weaker part of the cycle earlier. So that proposes that conditions normalized during the spring and summer of this year. What the future will bring, of course, remains to be seen.
Thank you.
The lower demand that we saw in the fast-moving businesses of sanitary and OEM is very much driven by we could see that our customers, instead of buying versus a prognosis, they started to buy against orders. So they are very cautious not to build up any stock. There, they learned the lesson since the previous downturn.
Did you see anything in process or in food ?
We could see a continued very high activity level in the process industry division. There we had good growth.
Thank you.
Please, operator, let's continue with some questions from the teleconference.
The next question comes from the line of [Samid Gan]. Please go ahead with your question.
Thank you for taking my question. I just wanted to know, we have seen roughly 64% growth in order inflow in Asia. I wanted to know from which geographies are these order inflows pretty strong and what is our outlook in each of those geographies in Asia?
Yeah. Your question, was it from what geographies that the growth was?
We have seen 64% growth in Asia in order inflow. Hello?
Yeah, yeah.
I wanted to know the geographies that have been pretty strong and what is the outlook from the next 6 months to 12 months perspective in each of those geographies?
So you can say that the growth in Asia was broad-based. It's easier to say the countries that were flat, that was Indonesia and Thailand. For the rest, we had good growth. Going forward, we give an outlook for we take one quarter at a time. However, what I could say about Asia is that we have a continued positive view on Asia. The growth rate might go down in China from 10% to 8% GDP growth, but still, it is good numbers. We are quite optimistic also regarding Asia going forward.
Okay. And what are the pricing pictures that we are witnessing in each of these geographies?
We have not seen any change in the pricing situation in the third quarter compared to the previous quarters.
Okay. Just last question from my side. We have said in our slide that to delist Alfa Laval India from the exchanges in India, our total cost is turning out to be SEK 583 million. So I wanted to check what is our outer limit beyond which we will not go?
Again, as described in the slides, it's a reverse bookbuilding process. It's up to the minority shareholders of Alfa Laval India to tender their shares at a price that they feel is their expectations in terms of value. Then it is up to Alfa Laval to make a judgment what is a reasonable price. There is no limit to be communicated, obviously, at this juncture. It's up for the minority shareholders to tender their shares at what they feel reasonable. Then we have to make a call about whether we are prepared to pay a price in order that we get at least 50% of the outstanding shares. The opportunity is, of course, there. If we feel it's too expensive, then we will not take the opportunity. Then we will have a 25% free float of the shares eventually.
That is, of course, a risk that the minority shareholders are taking if they set too high expectations for price on their shares.
But are we ready to spend something like SEK 1 billion here?
Operator, we continue with questions from the teleconference.
The next question comes from the line of Ben Maslin. Please go ahead with your question.
Yeah. Morning, everyone. It's Ben from Merrill Lynch. Three questions, please. Firstly, marine orders are very strong. Can you just give us a sense of what the marine book-to-bill was during the quarter? I think you said it was 70% - 80% in the first part of the year. Secondly, Thomas, you mentioned that the wider scope, some of the larger contracts is a bit of a drag on the margin at the moment. But if I look at your order intake this quarter and what you're saying going forward, the service business looks to be fairly flat and you've got a lot more larger orders coming into the mix. Does that mean that a negative mix effect in theory should run into next year or even become more significant? And then finally, just on the FX volatility in your financial net, can you just explain what exactly that is?
Is that the hedging effect, if you like, of the hedges that relate to your EBIT move, your cash flows, and so forth? Or is it just derivatives related to your balance sheet financial items? Thank you.
If we start with the marine book-to-bill, we were about 90% or 0.9 book-to-bill in the quarter. So we got closer with bookings to our billings. If we look at the gross profit margin, the bottom line of what you said Ben was basically, will the negative mix effect continue into the next year? Of course, that has a lot to do with the demand. Given the development of the demand in the short term, that will really decide what kind of mix will we have between aftermarket and capital sales in the beginning of next year. I think it's too early to tell. But if you look at the recent five or six years, you have seen Alfa Laval having a swing between about 20% aftermarket sales of total to 30% aftermarket sales to the total. In the trough, 30%; in the peak, 20%.
So quite a big difference between peak and trough. Of course, it remains to be seen what comes to us in the quarters, the first quarters into 2012. The financial net and the FX impact. If we, let's say we have a balance sheet item, we book the item. It's a Forex balance sheet item in one of our companies. We book it into our balance sheet at a certain exchange rate. We have a quarterly closing. Of course, we have to adjust the value of this asset or liability to the closing rate. There is typically a difference. In the case of the third quarter, we had an impact of SEK 108 million because of revaluation of FX liabilities or assets into the individual balance sheets of the companies in Alfa Laval.
Given that the rates stay on the same level, of course, the unrealized FX effects, they will eventually be realized. To the extent we have swings, we can have further adverse effects to the financial net, or we can eventually get positives as well. So it's all dependent on the development of exchange rates. The bottom line is, Ben, it's mainly to do with balance sheet items and the revaluation of balance sheet items.
Got it. No, that makes sense. If I just follow up on the mix, did you look at this quarter's order intake where you have a lot of large projects and you know flattish service business? Intuitively, that seems negative for the mix. Is that correct?
Agreed.
Okay.
Thank you.
Do we have any questions from the floor here in Stockholm? Okay. Then we move back to the teleconference operator.
The next question comes from the line of [Ben Bayer]. Please go ahead with your question.
Yeah. Good morning. Just one question following up on sanitary and OEM. Could you just give us a sense of the magnitude of the sequential decline you've seen in Q3? Are we talking about a double-digit decrease, or is this just still only happening on a fairly low basis, this decline? Do you see the same kind of magnitude also for the running quarter? Just also to get a better understanding on how you are included in the value chain of your OEM customers. Did I understand you correctly that they typically do not carry much inventory in your kind of products? Thank you.
The decline was single-digit for OEM and sanitary. It's correct that they carry a limited stock. Especially when they expect, when they are uncertain about the future demand, they don't buy to forecast. They buy exactly what they need. So they buy according to their current demand.
That must be shocking that you are suffering from, basically.
Not really. Not really.
And the single-digit decline is that also sort of the magnitude that we should be penciling in for Q4? Or what do you think about that?
Our outlook is that it's in line with or somewhat lower than in the third quarter.
So also for OEM and sanitary?
Yes.
Thank you.
We continue with the teleconference.
The next question comes from the line of [Peter Folan]. Please go ahead with your question.
Yes. Good morning. Two questions, if I may. On the delivery capacity or getting sort of closer to the order here, could you please explain to us what has been done operationally in order to sort of increase deliveries? Secondly, when you look at the parts and service sales as a ratio of the entire revenues, you give the nine-month figure. The difference is around 1.2 percentage points year-on-year, if I understand it correctly. Was the difference much bigger in the third quarter year-on-year? And in order to understand the negative mix here going forward. That's it. Thank you.
Looking at the delivery capacity to begin with, we have talked about an increase in CAPEX in the last several quarters. We've talked about SEK 650 million- SEK 700 million of CAPEX in 2011. Our current forecast is that we'll probably end up at SEK 650 million. So a slight reduction in CAPEX for the full year. Of course, some of that has to do with increasing capacities for specific product areas where we see a growth in demand. We have also broadened our manufacturing capabilities when it comes to certain products in emerging markets, air products in Russia, in India, in China, in Brazil as examples. So we have an increase in capacity there. Of course, it has to do with manpower in relevant areas as well.
On the other hand, as I commented, we have adjusted capacities in Denmark and Italy following weaker demand on OEM products, brazed heat exchangers as well as fluid handling equipment. Looking at parts and service, we've had a decline of about 1.25% aftermarket relative to the total. This has been a continuing trend. Remember that at the trough of the cycle, we started at 30% parts and service to the total. So there's been a continuous decline of the relative element of parts and service to total sales.
Okay. Follow up there, if I may. Do you have, Thomas, on top of you r head the mix effect on the gross margin in 2009 as a full year?
I have to admit that the effect in 2009 as opposed to 2008, I can't recall.
Okay. I have a figure here, but I don't know if it's my estimate or your communication. So, okay, final question. Aalborg added SEK 700 million on orders. It was slightly lower than I expected. Is there any sort of catch-up effect here to be seen in the fourth quarter? If I recall correctly, it should be, or my estimate at least, was a run rate of around SEK 850 million per quarter or so when fully implemented.
You can still, you can expect about the same level in the fourth quarter as in the third quarter.
That's very .
To be clear though, SEK 850 million, that was your estimate. I don't think we've communicated SEK 850 million per quarter.
I was afraid of that. Okay. Thank you all.
Thank you.
Thank you. Let's take the final question from the telephone conference.
Thanks. The next question comes from the line of [Martin Pruszenski]. Please go ahead with your question.
Good morning, everyone. It's [Martin Pruszenski] from Bernstein. Two questions, please. I just want to get back to Aalborg. In terms of the integration, can you give us an update on how that is proceeding, both in terms of your estimates for custom revenue synergies? And then the second question on the oil and gas strength. Can you give us a bit more color on which specific geographies and product segments you saw the biggest demand? Thank you.
Well, I can start with the oil and gas demand. We see oil and gas demand in several geographies. We see it in North America. We have a high activity level of both on oil exploration, gas exploration, and the same goes for the Middle East. I would say that the oil and gas activity, it's broad-based. It's broad-based, and there is also a high activity level when it comes to offshore FPS, FPSO, and the platforms. So it's generally a good demand and a high activity level, broad-based.
Talking about the Aalborg integration, I think so far we've seen progress, I would say, rather exceeding expectations than undershooting expectations. As we speak, co-location is ongoing in about half a dozen countries, cities. We are, of course, pursuing opportunities in the procurement area, particularly at this point in the area of bill of material procurement. We can see possibilities. We do see effects, positive effects, deriving from this collaboration on bill of material procurement. We've had some changes in the organization as well, but it is all entirely in line with our expectations when it comes to organization and structure as well. So the bottom line is, I would say, slightly better than planned so far.
Thank you very much.
Thank you. Do we have a final question from the floor in Stockholm?
Thank you, Oscar [Dahl] again. On China, can you say something about the sequential growth rate in the third quarter versus the second if you exclude the marine business? And also what you see into the fourth and what you expect for the fourth quarter?
We see a continued good activity level in China. We have so far seen little of the activities from the government to dampen the growth. So all in all, we think China looks fine for the demand of our products.
What is marine? We're up in the third quarter versus the second?
Yeah. Well, that.
Yeah.
Yes. They were up, yes. But of course, not to the turn out of the increment we saw in marine. But still, it was a double-digit growth, also excluding marine. You know in China, we had a high activity level for large orders in the third quarter that also helped.
Thank you.
All right. Thank you. That concludes the Q&A session, Lars.
All right. So thank you very much for your attention. Thank you and good bye.