Good morning, and welcome to the Alimak Group Q3 2022 results conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Chief Executive Officer, Ole Kristian Jødahl, to begin the conference. Ole, over to you.
Thank you, welcome to this Q3 2022 call for Alimak Group then. As always, with me today I have our CFO, Thomas Hendel. If we turn page and we look into the highlights of the quarter. Q3 has been a very busy and good quarter for the group, where we have made significant steps forward on our profitable growth journey. During the quarter, we continued to execute on our New Heights program, delivering solid organic growth. We increased our margins. We also improved significantly our cash flow from the first six months, and also, as you know, accelerated our M&A activities. We have signed and closed Tall Crane Equipment out of Canada, Vancouver, and we have also signed the acquisition of Tractel.
Both have a long, solid history and leading positions in their businesses with high margins, higher than ourselves. It will be a nice add-on to the group, and we are of course, very excited about the opportunities that this will bring forward for us. If we turn page and look a little bit more closely into the details, we see order intake was up 25% in the quarter. 10% organically with solid contributions from Facade Access, Construction and Industrial. The wind market is still challenging, but we see very good opportunities ahead. Revenue was up 21%, 7% organically, with solid organic growth in Construction, Industrial and Facade Access. Also service revenues continued to be a strong growth driver for the group.
EBITDA adjusted increased to SEK 150 million, up from SEK 119 million last year, and delivered a margin of 13.7% versus 13.2% last year. Driven and supported, of course, by higher volumes, but also that we are very active in price management to mitigate the cost increases that we are facing. If we turn page and start to look into the divisions. Facade Access, order intake was up 57% and 36% organically. Another very strong quarter for Facade Access. Strong equipment order intake in all regions and especially in Asia. We also see increased investment activity in the US. Revenues were up 28%, 11% organically. Strong equipment revenue driven by Asia, but also improved service revenue in most regions and especially Europe delivered a strong quarter.
EBITDA increased to SEK 12 million, another step up from last year of SEK 5 million, and the margin was 3.7% versus the 1.8% last year. Of course, supported by higher revenues. Still we have, of course, the effect here that that it's a project type of business with long lead times from we take the contract until we actually deliver. Most of this industry is also in fixed cost terms, which means that, you know, there is a challenge to manage when, of course, the you see these raw material price increases that we've had lately. I'm happy to see that we are making real steps forward in the right direction. If you turn page and a little bit more details for Facade Access.
We continue to work on standardizing and improving our range. This is of course a very important piece going forward. I'm also very happy to see that the CoxGomyl 4000 series that I mentioned in the last quarter we launched for the Asian market is gaining traction in the Hong Kong residential markets. That's been a good quarter for this. We have sold quite a bit. We see the US market continue to rebound with good order intake during the quarter. Also as I mentioned, there is a high pressure on gross margin of course from the increased raw material costs. We continue to be very selective and do not take contracts below our thresholds. As this is project business also, it's important to remember that there will be volatility in order intake between months and quarters.
However, we see, of course, you know that with our strong focus on the service business, which is continuing to grow and develop very solidly for us, this brings much more resilience and stability through this business. Here also Tractel will add a lot of value as they have a stronger position within the lower and medium height buildings and solutions, which is also a more stable business, and also the fact that they have a very, very solid profitability, which they bring into the group in this area. Turning page, moving into construction. Order intake was up 20% in the quarter, 3% organically, and mostly driven then by improved new equipment sales and also rental sales in Europe and increased parts and service sales in Asia-Pacific and Americas.
The revenue was up 27%, 12% organically, where we see strong rental activity and also increased deliveries to the emerging markets. EBITDA was up to SEK 65 million from SEK 49 million last year, delivering a margin of 18.6% versus 17.7% last year, supported by high volumes, but of course, also our pricing management and activities to mitigate cost increases. Turning page. Of course, you know, this is, as we have said in our strategy, these divisions are there to focus now much more on the customer's perspective. Here you see a couple of examples where we actually not only provide products, but we are much more moving into this solving productivity and logistics issues for our customers.
If you move to the right picture, you see a solution where we have a big Mammoth hoist in the middle, where they actually can load complete what you see here. They load a complete bathroom unit with a loader to take heavy loads and move huge pieces of material up a height. On the right side, there is a Scando hoist which is set up to transport people, which moves them at a very high speed. While the one on the left side, it's set up in this configuration to move both people and materials, so it moves at lower speed, but it gives you a very solid and flexible logistic solution.
It's a more or less a similar type of setup you see on the left picture, but there, instead of the Mammoth in the middle, it's a transport platform in the middle. This is of the size where you actually can load a full container onto this platform and move the container up, and then you unload the container at the right floor of the building. We see more and more of these type of developments around the world. In August, we also closed the acquisition of Tall Crane Equipment and established our own and totally own footprint in Canada for the first time. We see this, of course, as a very nice opportunity to grow both our Construction business in Canada, but also our Industrial business in Canada.
As for now, we do not see any major effect from the turbulent market in our order intake, but we are, of course, prepared for tougher times based on all you read in the newspaper. I will also like to say that with our diversified portfolio and our global presence, and also a very solid piece of aftermarket business into this, we have a more resilient business than ever on the Construction side. If you turn page to Industrial. Order intake was up 24% in the quarter, up 12% organically. We see strong order equipment intake in U.S. and in Europe. Continued strong development in the marine and power segments, and also increased order intake in parts and services in all the regions.
Revenue was up 30%, up 15% organically, and a strong growth driven by the strategic focus on service, as well as the high order backlog for equipment. EBITDA increased to SEK 50 million, up from SEK 47 million last year, a margin of 18.3%, down from the 22.2% last year. Happy to see that it's moving up from the previous quarter two. Here also we have this effect that it's a delay from when we take or it's a lead time from when we take the order until we actually deliver. The pricing effect that we have done has not fully come to effect yet.
Also, the fact that we have invested heavily into this division to make sure that we have a strong Industrial division, which has also paid off in very strong order intake over almost two years now. If you turn the page, we have increased our activities globally with this organization, with a dedicated and customer-oriented organization and being much closer to our customers through this segment focus. This has also allowed us to take the first and the biggest service contract ever in North America within the power segment, where we take the full responsibility for all lifting solutions at the customer site, which also means that we not only service our own equipment, but we also service competitive equipment on for this customer. It's a nice step forward in taking more responsibility and being closer to our customers.
We also have taken some nice orders in Asia at the ports, because there we saw an example of one customer that had tried to service their own crane lifts for a long time. Then they had an incident. When we made an audit, we see that basically all of them have serious issues, which puts us in a position to either refurbish or replace a huge number of ports. It also again confirms, you know, the importance of our service business and the follow up of these machines from a safety perspective. We still see solid demand globally in the Industrial market. Some segments like energy are very strong.
This is a place where we have traditionally as a group been very strong, so important to us, of course. The stronger regionalization that we also see as an effect from the more difficult and challenging geopolitical environments also supports further investments within industry globally. Then our service business and the significant installed base that we have around the world with where we see increasing needs for the refurbishments and service provides resilience in this business. Turning page to wind. Order intake was down 16%, 24% organically, and still the Chinese market continued to be challenging. Positive, we had strong order intake for ladders in the US in the quarter. The revenues was down 10%, 18% organically, and driven by the lower volumes in China.
However, equipment revenue in Spain and Denmark, as well as services in Germany improved. EBITDA increased to SEK 22 million up from SEK 18 million, a margin of 15.6% versus 11.3% last year. It's driven by our continuous focus on profit improving matters, cost reductions, and active price management. Turning page. The short term, the market challenges remain within wind. China is still a difficult market from the political perspective and, but it is also an important market because it's still the world's biggest wind market. We do have a good position there, but it is a challenging market condition. We also have, of course, the high cost inflation, which is also affecting our Western customers. We know Vestas has moved into losses due to this.
Siemens Gamesa are also in a loss situation, which means that they are also focusing now strongly on coming back to profits and reduce the number of projects to make sure that they get back on the right side of the bottom line. Which means that this market will remain challenging for some more quarters. We see attractive long-term opportunities and not least driven by this increased demand for renewable energy that we all see coming.
Also very, very positive for us, of course, is that still with all this around us, we are, you know, having a strong position with our customers and with active cost and pricing management, we have been able to lift the result up to record high 15.6% in the quarter. Also to note that, as we announced earlier, that the strategic review of the wind division has been concluded, and it will remain part of the group. The future looks bright for this business, and we do not see really any significant uptick starting until 2024. We have a strong position in this market and adding also the capabilities, products and solutions from Tractel, we feel very well set for the future, of this business. Turning page.
You know, in June 2000, I came to this group and we then looked into the strategy and we defined a new vision, which was then what you see here, moving people, material and businesses safely to new heights. We also defined a program which would make us able to take us there. That was called the New Heights program. If we turn page. This program consisted basically of three steps, you know, establishing the base 2020, secure margin improvements during 2021, ensuring that we knew what we were supposed to to drive forward. From 2022 and onwards, we should be in a situation where we had a solid base, where we could drive profitable growth.
Since the launch of the New Heights program, late 2020 then, we have established a customer-centric, decentralized, cost-efficient, people-focused organizational platform where we can serve our customers efficiently around the world. It's also very pleasing to see now that this platform continue to deliver result. We have done step one and step two in a solid way, and we are also now establishing ourselves solidly in step three by delivering profitable growth. That also means, you know, as I've talked about earlier, to step up our M&A activities. Since we have now the base set, we feel well set then to take on these acquisitions. Turning page. Tractel is the big acquisition that we have then signed up during quarter three, and this will then significantly accelerate the group's profitable growth going forward.
If we look at running 12 months for June 2022, annual revenues with Tractel on board will be exceeding SEK 6 billion and also around an EBITDA margin of 17%. Tractel is and have been a high-performing organization with a very resilient business model and has actually delivered stable margins for the last 10 years or more than 10 years. We are of course very excited to get this 1,100 highly competent Tractel people on board, and I'm convinced that we can create significant shareholder value over time. This transaction is expected to close then during quarter four of this year. Turning page. Tractel brings a lot of things to the group, and one of the things is a new vertical, which is this Height Safety & Productivity Solutions.
You see some of the products in this picture. This will of course create significant synergies for cross-selling of solutions, both within divisions and across. I'm coming a little bit back to this in the next page. Tractel also contributes with a global network of distributors, a lot of new customers, and also new segments where we see, of course, synergies. End customers are found within the construction segment, so that's also a very important segment for Tractel, but also important to note, also all other or most other industrial segments out there, like we see for Alimak. Turning page. If you look a little bit more into the commercial opportunities.
Here you see in orange, you know, the customer focused, let's say, structure of Alimak Group, just to visualize a little bit. If you look into Construction, this is not an organizational chart, but more to explain. If you look into Construction, we have our business there, but also Tractel brings in a strong leading brand and position in the mast climbing business, which is something where we are not very strong. It will be a very, very nice complement, something we sell and take to the same customers globally. If we look into Facade Access, we have our Facade Access business focusing mostly on the taller structures, while Tractel, as I've also mentioned before, have focused more on the medium to lower structures.
They also bring in a very solid profit where we struggle on the profit, so they have a better structure on how to drive that business. Here it's a lot of good combinations and things to learn from each other, and we will create a very solid piece of this Facade Access business. On the wind side, we have our wind business focusing on the lifting solutions inside the tower, while Tractel have developed solutions to access and do things more outside, you know, to access blade for blade maintenance. They have also these emergency systems to actually to quickly get down from the nacelle outside if you have an emergency, and also systems inside the nacelle to lift and handle heavy pieces when you do maintenance or service inside the nacelle. Combined also a much wider portfolio and lots of opportunities together.
You have this Height Safety & Productivity Solutions piece, which is not something you know comparable in the Alimak Group today, where it's all these products, they go into all these type of segments. It's synergies across the board here with of course these markets and customers. Something we look forward to be able to dive much more into. I would also like to highlight you know the service business. Of course, it's extremely important to Alimak, and it's the same thing for Tractel.
They also have a significant service business and lots of their equipment need also, even though it's smaller equipment, not these big installations that we specifically have a lot of it, these products also require service and recertification, being brought into a workshop to be dismantled and refurbished and then put back into business with the customer. So also repetitive and revenue generating business over time. Turning page. We also or not in quarter three, but just after quarter three, but I mentioned this also slightly in quarter two. Now we have signed a strategic partnership with OO Software, a Borås based small company which are developing a web-based tool for field service management. We have acquired 45% of this company.
It's so small, so it's nothing material to us. But it's strategically very, very important because service, as I mentioned, is a key for the group. Having a tool which makes our people effective and that we can reduce downtime, that we can manage our time of our engineers in the best possible way and have full control over all information and what we are doing with the customers is of course vital. Here we are then getting access to a tool that we will develop together to help us get to that point. Turning page. That takes us to the financial summary, and I leave the floor for Thomas.
Thank you, Ole. Financial summary, as usual, the financial overview then both the quarter and year to date. I'm very happy to report back a very strong quarter and year to date values in terms of volumes and earnings, and also an important recovery on cash flow in the Q3 versus the first two quarters this year. We have now increased our backlog during the year by almost SEK 300 million, ending up with a SEK 3 billion backlog, which is a record high level. That supports, of course, our further growth in revenues. Next page, please. Earnings summary. EBITA adjusted. The margin improved versus last year, mainly due to the increased revenues, but also that we have kept the gross margin on a high level through active price management, offsetting a challenging market with high cost inflation.
I will also add the items affecting comparability, the SEK 32 million that we now booked in the Q3, that is around SEK 25 million is transaction and advisory costs, and SEK 7 million is our exit from Russia. This further, the items affecting comparability will impact 2022 and 2023 as previously communicated. The financial net year-over-year is actually the same, and that is, but to break it down, the interest net is minus SEK 4 million year-over-year, and the currency effect is plus SEK 4 million year-over-year. Tax rate for the quarter is 20.9% versus the 26.2%, reflecting the country profit distribution, but also a prior year adjustment impacting around 3% on the Q3 tax rate. Next page, please. Results for the period and EPS.
Yeah, the results for the period reported SEK 77 million versus the 74. If you adjust for the items affecting comparability to find a more of an operational level of the net profit, then it would be 103 versus 74. Earnings per share, the same story. The reported is 4% up, but adjusted for our items affecting comparability, that would have been an EPS growth of 39% quarter-over-quarter, which more reflects the operational improvement. Next page, please. Cash flow. Cash flow from operations 134 versus the 244 the Q3 last year. As I said, it's an improvement of the cash flow versus Q1 and Q2. We are in a growth mode, as you know, and we are now focusing very much on the working capital.
To explain the deviation between the years is the timing of project payment milestones, which means that we have increased our contract assets at the moment. We have a selective inventory build-up to secure deliveries of critical components, and we have also high level of trade receivables in spite of the improved cash collection trend end of Q3. Next page, please. Net debt. We have an increased debt in the quarter, but mainly due to, you know, we made the acquisition of Tall Crane Equipment, approximately cash out SEK 200 million, and the lower cash conversion year-to-date is also, of course, impacting the current debt level. We continue to have a very strong financial position, and when we ended September, we had an unutilized credit facility of around SEK 1.7 billion.
Just to recap again, our capital allocation priorities remains profitable growth, investing in sales and development, M&A, very clear this quarter, and also that we expect to deliver according to our dividend policy, which is 40%-60% of net income. With that, thank you, and back to Ole.
Thank you. If you turn to page 10 to the summary. Yeah, as you understand, we are in this third phase of the New Heights program, executing on this now, which means accelerated profitable growth. That we have done in the quarter. We have solid organic growth. We have solid step up in operational profit. We have also made then and closed the Tall Crane acquisition as of August 24. We have signed the acquisition of Tractel. As I mentioned, important to this, they both have a long, solid, resilient business model, where they've also delivered very solid profits over a long time, and especially Tractel with more than 10 years of more or less the same profit level.
The rights issue, we aim to do as soon as practically possible after the closing of Tractel. There is still a turbulent and uncertain macro environment around us, and this is of course also expected then to continue during the remainder of the year, which means that in addition to drive the New Heights program, we also have a very tight focus on cash, cost, and pricing, of course, as we have had throughout the year. We will continue also then to execute on the New Heights program as a team. I would like to end up saying a big thank you to all the committed and dedicated employees helping lifting Alimak Group to New Heights. With that, I say thank you. We turn page and move into the Q&A.
Thank you, gentlemen, for the presentation. As we are at Q&A, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Johan Hähnel from Alimak. Your line is open.
Anyway, can you hear me?
Yeah. Yep. We, it's weak, Johan, but I think try to be loud. Yes. Mm-hmm.
Okay. I try to be loud. Firstly, just asking about the sort of visibility in the Tractel operations. You talk about an order backlog of SEK 3 billion in the legacy Alimak business. How does that look in Tractel and in terms of visibility in 2023, can you say anything there?
Oh, unfortunately, I can't disclose anything more about the Tractel figures than what we have already done. We, of course, as soon as we are able to close the deal, you will get that full setup, you know. What I'm saying is that they have shown a very resilient business model over many, many years. I think that's important to understand.
As for a financial perspective, I think you talked about net debt EBITDA of 2.9, I think, when you talked about this transaction. You know, arguably things look slightly worse at the moment, but what sort of leeway do you have in your debt covenants, et cetera, to finance this?
Yeah, we have a solid leeway that we took into account, of course, you know, when we signed this up. We feel it's no risk at all for us, you know, going forward with this. You know, we have what we need in the initial agreements that we made. Mm-hmm. That I feel very confident about. Yeah.
All right. Also finally, just on foreign exchange. I think you write in your annual report that you have some, you know, just short of 400 million SEK net flows in dollars to the company. Can you just try to explain to us where we are at the moment in realizing those effects in terms of flows in dollars? Is that being competed away on pricing in the markets where you sell in dollars? Or just to understand where we stand, or is it hedged? We'll very much appreciate some clarity there.
Yeah, I'll leave that for Tomas.
No, but we haven't left that to the market, so to speak. We have, of course, hedge all our firm orders, which takes part of that, of course, in a hedging situation. Then we also realize, of course, the FX actual rate as well. I would say that you see that in the tailwind on our top line, obviously. When it comes to the profit on the EBITDA currency impact, we have, of course, both income and cost in different currencies. You see that very clearly in our report, what the impact is.
I mean, is it possible to say what sort of dollar rates you have in the P&L, what you're actually reporting profits on in the Q3 here? What you're realizing
Yeah.
In terms of dollar rates?
I will come back to you separately on that one.
I would appreciate that. Thanks.
Mm-hmm.
Yeah. Thank you, Johan.
Thank you, Johan. As a reminder, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Gustav Österberg from Carnegie Investment Bank. Your line is open.
Thank you, operator, and good morning, Ola and Tomas. I just wanted to follow up with a question on the demand environment on the equipment side. I mean, we've seen coming from obviously a weaker growth in 2020 and then some recovery in BMU or also Facade Access, but then in Construction. Overall, the recovery hasn't been that high. I was wondering, where do you see sort of the current equipment demand relative to trend? I appreciate that sort of there's a lot of news and comments about the much weaker macro environment, but just trying to understand where we are today.
Yeah. It's a complicated question also, you know, because this varies from division to division, I would say, you know. If you look into Construction, that has been, you know, relatively resilient and solid. I don't see that, you know, there has been. These are also natural swings, you know, so it's difficult to say that this is really driven by the pandemic, you know. Some of these bigger deals was not coming through during the pandemic. Now we have seen some more of them, you know, but I can't really say that we have had some sort of pent-up demand really from the pandemic. It is a better market in general, and that will remain to see. We have not really seen any effects of what you read so much about.
You maybe read more about it and hear more about it here in the Nordics. Important to remember that we have a global footprint for our Construction business. If you come to Industrial, you know, it's the investment level has been high, and we have had a very strong order intake now, you know, over two years, and that remains. We still see it. It is some swings a little bit between some segments, you know. Overall, the development is solid and remains to be solid. As for Facade Access, there it's a little bit more, you could say, coming back from the pandemic because it was very little happening, you know, during the pandemic on new equipment.
There we have seen now higher levels over the last quarters or this year. That I do believe is something coming back from the pandemic or that we see. There is higher activity level there. How that will be impacted and by when it's difficult to say. For now, we don't really see any demand changes on that side neither for new equipment. That's high, but it is a very, very tough price pressure. Because the expectations on prices is more like it used to be, while the cost has gone up heavily, you know. That's why we also choose to opt out on a lot of these contracts, because we don't compromise on our thresholds there. Mm-hmm.
I appreciate the color. Then I just wondered if you could give some more color on Tractel. I appreciate you cannot share any numbers, but has there been any sort of larger changes to Tractel in, over the past 10, 15 years in terms of acquisitions, divestments, or big changes to the product portfolio? Or has it been a very stable business over time from an organizational point of view?
Yeah, that's been relatively stable. They have made a couple of acquisitions of some significance, and that was Scanclimber back in 2019. The Finnish, you know, the mast climbing business, which is, you know, fitting well with our construction business. They also made another one in U.S., a year or two before, which was related to height safety products on construction sites, and also on top of buildings, et cetera. Mm-hmm.
Yeah.
Their core has been this Height Safety & Productivity. You know, this Minifor, Tirfor, Tralift, you know, that's been the core. The company is from 1948, you know, and you know, so it's more or less the same as us and longstanding legacy high quality safety products where customers adopt. You know, when they become happy with this, they don't change it for safety reasons, you know, because they are happy with it. It always performs. It's something which is also a repetitive business because these products, a lot of them go back into a service workshop for servicing and recertification and then back to the customer.
It is a very resilient and actually going back more than 10 years, as I said, you know, the margin has been very stable. That has also, I think, been a very clear target of that group and the business, you know, is that first and foremost, you know, is to make sure that we keep our margin and that they have done. That means also that they have not had enormous growth, but they have been growing all the way. That they have done, but not enormous growth, but very solid, resilient business.
Perfect. Thank you very much. That was all the questions from my side.
Mm-hmm. Thank you, Gustav.
Thank you. Your next question comes from the line of Hanna Lindblom from DNB. Your line is open.
Hi. Hi, thanks, and good morning. I also have one question. I'm kind of impressed by the margins within wind, and I'm wondering if this is sort of a new level we can expect, and also if you could say something about like the operational leverage within wind. Thanks.
Yeah. Good morning, and thank you. We are also very happy with these margins, of course. If you look back into our previous quarters, you know, we have had some stable, steady improvements here. This is not something that just comes by accident. It's very solid hard work over time, but it's also always some mix and so forth, you know? I can't say and promise now that it will. But it's a level that I'm for the time being happy with, to put it this way. Now I'm more often, you know, to really get back into the growth mode.
For that to happen, you know, then we need to start more to see 2024, where, you know, the real investments are really coming back into the wind market. Also I think, you know, that when we now get Tractel on board and we have their expanded portfolio into this, we will become a more important player and that will feed opportunities for us to develop even more and better solutions. Remember, you know, that we have a very, very solid position. It's basically just these four Western customers, you know, that are our key customers there, and we have a very solid position with them. They don't make money, but we do in a solid way.
This also says something about the resilience in the business, you know, that, when they have reliable suppliers taking care of their safety needs, bringing people safely up and down, you know, the, that's something to stick to, you know. Mm-hmm.
All right. Thanks. That's me.
Yeah. Thank you.
There are no further questions at this time. I would like to turn the call back over to Ole for closing statements.
Yeah. Thank you. Thank you everyone for listening in and, yeah, looking forward to next time. Thank you.
This concludes today's conference call. You may now disconnect.