This call is being recorded. Welcome to the Alimak Group Q2 2023 Report Presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to the speakers, CEO Ole Kristian Jødahl, and CFO Sylvain Grange. Please go ahead.
Yeah, thank you, welcome everyone to this quarter two call of 2023. As always, with me, I have Sylvain. If we turn page, we will first just to recap a little bit, we will start to bring some slides, to put this a little bit in perspective also. You know, we are Alimak Group, a well-diversified global industrial company, with presence all around the world, driven in the daily business by these five customer-centric and fully diversified divisions. We have leading market position in focus niches around the world.
We have a solid global footprint, which also means that we have a huge installed base of our machines, which build the base then for our spare part and service business, which is a very, very important part of the business model of the group. Turning page. I came to the group June 2020, then we kicked off a strategic program or a roadmap, if you like, the New Heights program, which we then put in three phases. First was to establish the base, which we have done then during 2020. Then doing the securing margin improvements during 2021, which we also then delivered upon, and then the focus has been from 2022 and onwards to deliver profitable growth. This overall thing was, of course, to ensure that we are delivering upon our financial targets.
We had a capital market day a little bit more than a month ago, where we then presented the fact that we have delivered upon the financial targets we set out to make two and a half years ago, and that we're now raising the bar going forward to the next level. Turning page, the new financial targets for the group is to have a revenue growth then of 6%-10% annually going forward, where a major part should be organic growth, but also, of course, supported by M&A. The EBITDA margin should be above 18% within 2-3 years range from now, and also that we have a leverage ratio of below two and a half times, but something we can overshoot for shorter term for the right type of investments.
A dividend payout ratio of 40%-60% that we should deliver upon every year. Turning page and coming into where do we stand then, coming into Q2. Very happy to say that we are continuing on our profitable growth journey, delivering another strong quarter. We have an Adjusted EBITDA margin in the quarter of 16.5%, which is then up from the 13.1% last year. Aggregated, this is, if you then take in Tractel full year 2022, it's an operational improvement of 6% in the quarter. Revenues increased by 65%, where we both deliver organic growth and also, of course, a solid piece of the acquired.
This means that we are, you know, both taking care of the integration of Tractel in a very solid way, continuing it, and also that we are showing good operational improvements. Order intake was equal to the revenue in absolute value, around SEK 1.8 billion. book-to-bill ratio was 1, which is also a good level for the quarter, of course, meaning that we maintain our order book going forward and into quarter three. Especially, we see strong performance in Wind, Industrial, and the Height Safety & Productivity Solutions divisions, very positive, which has been for a long time. We also report a strong and good cash flow in the quarter. This means that we have delivered a very solid first half of the year.
Aggregated, looking if Tractel would have been part of the full year last year, we have an order intake increase of 4% the first half. We have a revenue increase of 13%. We have an increase in Adjusted EBITDA of 19%, a very strong also operational improvement, and an EBITDA margin of 16.5% on a year-to-date basis. Turning page, a little bit more details about the quarter. Order intake was SEK 1,782 million, up 43%, 53% coming from acquisitions, a negative growth of 15% on an organic base. The organic decrease is mainly coming from high comparables, we also have a very strong in the quarter, organic growth in Industrial and Wind.
I want to highlight, you know, the fact that I've been talking about many times, that we have high variations, both in months and quarters, but also between geographies. We are happy with this order intake, and looking back, we see that it's a good level and also that it's a level of the revenue. Revenues was at SEK 1,784 million, up 65%, where then 59% is coming from acquisitions and 1% organic. And again, strong organic growth in Industrial and Wind. Year-to-date base, we report 6.5% organic growth on the revenue side.
EBITDA adjusted increased to SEK 295 million, up from SEK 148, sorry, SEK 141 last year, and a margin of 16.5% versus the 13.1% last year. Aggregated EBITDA, as I pointed to, was up 6%. We see high performance in Industrial, Wind, and the Height Safety & Productivity Solutions. Turning page and going into more on the division side, Facade Access, and here we continue to execute on our transformation plan. Order intake was in the quarter, SEK 433 million, up 4%, 56% coming from acquisitions, and it's down 55% organically. Service continues to contribute on a very positive way.
The reason for the organic decrease is that we had a very strong quarter two last year, so it's a high comparable, where we had then a big project in the Middle East with a substantial contract value. We also start to see, or we have seen a little bit in the quarter, that some projects have been put on hold or delayed, and this is driven by higher interest rates or and cost, which means that it's an uncertainty for the contractors, they are pushing it a little bit forward. These are not projects that are disappearing.
Also the fact that we, of course, as I said, we are executing on our transformation plan, which means that we are not taking contracts which are not meeting the standards or the profit levels that we are now saying it's a base for us, which also have led to that we have stepped away from a couple of tenders during the quarter. Still, a good, decent level, and we move into quarters three also with a high order book. Revenue was SEK 495 million, up 58% or 57% coming from acquisitions, slightly down then 4% organically. EBITDA, we reported SEK 26 million, up from SEK 6 million last year, and a margin of 5.3% versus 2% last year.
Again, you know, we continue to execute on this transformation program, which has also led to that, you know, the new project management model that we're now applying, have led to that we have taken some more costs earlier in the project phase for some legacy Alimak projects. We are more conservative in this respect. That we saw partly in quarter 1 and also now in quarter 2. The Tractel piece is continuing to develop exactly like it has done and very solid, and this is then, you know, this conservative approach is also something of temporary base, as you understand. Moving page. The management team is now fully in place. We are applying the new contracting policy.
We are tendering according to also the new guidelines and the margin levels that we have said, and we also are running these strict project reviews. Overall, we see, of course, that we have a very strong and nice strengthened position with the combined offering, Tractel and Alimak. We are in a good position going forward, and we feel very, very sure that we will continue to deliver on our plans here that we have set forward. Turning page, a couple of examples of what we are doing.
We have a big stadium, football stadium in Spain, where we are doing a nice project where we combine the T-TRAC hoists, which is coming down from the HSPS division, and also solutions within Facade Access, which is actually a system to lower and take up nets inside the stadium to separate spectators for security reasons. A nice project. We also have another example from Austria, where we are providing shaft access down to a railway tunnel. Here, we actually combined both Scanclimber platforms, two of them, with the systems from Facade Access and also fiber ladders from the HSPS division. Again, showing the strength of our combined offerings.
Turning page, looking into construction, order intake was at SEK 476 million in the quarter, up 34%, 33% coming from acquisitions and slightly down 4% organically. We see strong order intake in used, rental, and service. This is also, even though it's slightly down organically, much higher than invoice level, it is a very good level of order intake in the quarter. Revenue was reported at SEK 402 million, up 19%, where 28% comes from acquisitions and 14% down organically. We see high level on the rental side, we had a little bit lower, as we have also talked about before, in the Nordic region, mostly driven by Scanclimber overall, and also Australia had a softer quarter.
Here it's also important to look at this more over a time period. If you recall, we had a 20% organic increase in quarter one, this means that we still have a solid order intake during the first half of the year. This is the swings again between months and quarters that we typically see in this type of business. EBITDA was SEK 71 million, up from SEK 64 million last year. A slight drop in margin to 17.5% versus the 18.8%. Here also, it's, you know, the legacy Alimak part is continuing to deliver very strong results, we are affected by the fact that we are selling less Scanclimber machines than most of them in the Nordic region, where we also have a factory.
We have some fixed costs there in the factory that is affecting this. This is also of a temporary base, and we are sure that this will come back, so it's not triggering for now fundamental cost activities other than managing, of course, day-to-day in a good way. We see overall a strong performance in also a challenging market. Turning page. Some developments here. We have had a significant order in the Middle East for construction hoists, and this is little bit extra nice because it's also machines then that we are developing in the China factory, so bringing up the loads there. We also see that we are now able to sell these machines out of China.
We also received multiple rental orders in Germany, and this is an important market for us and also where we see our main competitors in this business. Of course, it's something that we appreciate. We see that higher interest rates and material pricing affects development in certain geographies. We have talked about this in the Nordics for a while, and there are, of course, some uncertainties also going forward, but compensated very well by investment in infrastructure, energy, and utility sectors, which also brings then resilience in this segment. Turning page. We have launched a nice new product, so first time we have done, and this is a small then hoist, which can then transport people based on a transport platform.
It's a compact, and, you know, cost-efficient solution, which then can be transported easily and put up and taken down easily. It can fit into lift shafts, which makes it also very flexible and have a quick and easy installation. As I said, the components are shared with the TPL, so you share the same mast, and you share the same frame. It's also something which is of, you know, an effective and nice solution for our rental customers. Nice example of how we drive product development today. Turning page and moving into Height Safety & Productivity Solutions.
First of all, I'm very happy to see that this acquired business continue to show great results, and I think it proves again that we are not stuck with this old thing, that the group struggled with integrating acquisitions. This we show now that we are more than capable of doing and continuing a good trend. The order intake was SEK 350 million in the quarter, remaining at the high level. Revenues was SEK 373 million, with a strong sales in Americas and Germany, and also strong sales to customers in the Elevator segment, which is an important segment for this business. EBITDA was SEK 79 million, very solid margin of 21.2%. Turning page.
We are, of course, continuing here to work on the synergies, and this is where we see a lot of synergies, you know, with the other divisions. As you have seen in some examples, we already have them, and working on them with towards Facade Access, but also towards other divisions. We are continuing to work with our customers there, being close to our customers and develop products and solutions that really they need. As you know, this is also a business where we mostly use distributors, so we work with our loyal partners in this respect to also come even closer to our customers and help them in their daily work.
We have a fiberglass guardrail solution, and this is something we see is coming back more now because of 5G masts. This is then a solution which is not interfering with the signals. It's actually something that is coming back very nicely for us now, and we see growth. As an example, we also Tractel or Tractel, you know, the HSPS division, have these nice solutions like you see an example of here, that also hangs in a bigger crane to be able to turn and place exactly heavy loads, just to give an example of other things that we are, you know, some of the product range in this diversified business.
Turning page and moving into Industrial, here, we just continue deliver another very strong quarter. Order intake was SEK 373 million in the quarter, up 12%, 8% organic. We, after sales continued to be an important piece, but also, of course, several of the segments that we have seen for a long time, cement, marine, power, bridges, all deliver good growth for us. Revenue was SEK 339 million, up 15% or 11% organic. Again, you know, I would say this is driven by the fact that we have a dedicated, focused, organization working close with our customers, and that provides business, and of course, also that the market in general, the Industrial markets are good.
EBITDA increased to SEK 81 million, up from SEK 52 million, a year, last quarter, last year, a margin of then 23.9% versus 17.7%. A very solid margin, and happy to see that this is continuing to deliver. We have good drop through, of course, you know, and also our cost focus and active pricing management continue to help lift margins in this business. Turning page. Couple of examples, we have received a large refurbishment order in Spain, and this is an iconic communication tower at 288 meters, where we have had the two Alimak elevators operating for more than 30 years. One is for service of the tower, and the other one is for more touristic and panoramic, you know, so people can go up and have a view.
These we will now refurbish, but it also says something about the durability and the long life of our machines, and the good service business that comes with them, of course. We had a good quarter also in Asia Pacific, in order intake, and also out of the China factory, we have these Alimak SL lifts, which we are then selling. This is a very nice and big bridge project where we have then several of our machines in the construction phase of this bridge. Turning page, moving to Wind. Another very strong quarter also here. Order intake was SEK 187 million, up 28% to last year, and 21% organic. Continued strong order intake in U.S.
We see and continue to see positive development in China, also now that the European markets are improving. Revenue was up, or was SEK 188 million, up 41%, 32% organic growth. Substantially increase in revenue in U.S., driven, of course, by the order intake there, but also Europe and China are contributing, and the service is also here, an important contributor to the overall business. EBITDA doubled to record level SEK 38 million, up from SEK 19 million last year, and a margin of 20.2%, up from 14.4%. Again, you know, it's a good drop through, it's a good sales, cost follow-up. We have done the right thing with product development and being close to our customers.
We also, you know, made a good and the right decision when we then took out the tower internals, which was also hurting this business. Turning page. In Europe, E.U. signed off the Renewable Energy Directive, which means that we believe and hope that this 80 gigawatt projects that is in the pipeline will be speeding up and coming to reality, which then, of course, should be good for us. Wind division, we continue to work close with our customers and develop products both for on and offshore, which is, of course, key.
A nice example, we have also been working with a big wind farm in China, where we have successfully delivered phase I and II, and now we also got the orders for phase III, and also connected with this, a five-year service contract for all our lifts here. Yep, important part of the business, also service. That takes us to the next page, financial summary, and Sylvain.
Thank you very much, Ole. Good morning to all of you. We are now coming to an overview of our key financial indicators for the quarter and the semester. Many of those indicators have already been mentioned by Ole, and we are pleased to present an overall good performance despite the macroeconomic challenges. Regarding revenue, we posted some small organic growth in the quarter, resulting from significant growth for the Industrial and Wind divisions and some organic decrease for Facade Access and construction. The quarterly order intake is down organically, but equal to revenue in absolute value. That means the backlogs was unaffected in quarter two and remains on the same high level.
If now we look at the semester, the backlog grew, as in Q1 order intake was bigger than Q1 revenue, that obviously gives some comfort for the revenue in the coming months and quarters. Quarterly Adjusted EBITDA is moving up to SEK 295 million, and this is 16.5% of revenue in Q2 2023. Assuming Tractel had been acquired on the 1st of January 2022, the aggregated EBITDA performance would have been SEK 279 million in Q2 2022. We are growing Adjusted EBITDA, aggregated Adjusted EBITDA by 6%, which we find is a good performance, and that is mostly due to higher aggregated revenue and operational improvements.
Operating cash flow has grown to SEK 206 million in the quarter, from a low base of SEK 37 million in Q2 2022, and I will come back later to cash flows. Let's now focus on the bottom part of the profit and loss statement. I've just mentioned the growing Adjusted EBITDA. To be more specific, we have maintained our total overall gross margin on a stable, high level, on an aggregated basis, notably reflecting our active price management policies and our continuous efforts to optimize the costs of our products and solutions. The gross margin was close to 40% in Q2 2023. That was the level we were at in Q1 2023.
To give a base of comparison, gross margin was reported at roughly 35% in Q1 2022. Solid gross margin. At the same time, we pay continuous attention to controlling the cost below the gross margin. At constant Forex, SG&A have increased organically by less than inflation in the quarter, so the higher revenue has led to a higher Adjusted EBITDA. Below EBITDA, we do see the impact of the recent acquisitions. That applies obviously to amortization. We had to make minor adjustments in the quarter, and the normative quarterly charge is expected to be around SEK 45 million in the future. The increase in financial net mostly comes from the interest related to the debt we raised for the Tractel acquisition.
The increase in the average tax rate is due to the evolution in country mix. Legacy Tractel operations are overall located in countries with higher tax rates, and that explains the increase. Turn page, please. We now come to the result for the periods, which was SEK 130 million, versus SEK 91 million in Q2 2022. Adjusted for items affecting comparability, that was SEK 136 million, and this represent an increase of 38% versus Q2 2022. EPS was SEK 1.21, versus SEK 1.38 in Q2 2022, and the decrease is basically due to the increased number of shares. Adjusted for ISE, the EPS was SEK 1.26 in the quarter, versus SEK 1.38 in Q2 2022. Let's turn page, please.
Now, coming back to the cash flows, in the quarter, we paid more cash interest. We paid more taxes, SEK 86 million, in Q2 2023, versus 13 only in Q2 2022. This has been overcompensated by much stronger earnings, and as well, you know, much lower working capital increase. We grew very slightly, the working capital in the quarter, but much less than in Q2 2022. The outcome is a cash flow from operations at SEK 206 million in the quarter, versus 37 in Q2 2022, and that is definitely a very positive development.
We now come to the net debt, which has increased slightly in the quarter, and that's mostly due to a dividend payment we made in the quarter of close to 200 million SEK. To a lesser extent, the revaluation of the EUR term loan. The weakening SEK has just led to approximately 150 million SEK of additional SEK debt on our balance sheet. In the semester, you can see that the net debt is down, and that is mostly due to the successful 2.5 billion SEK rights issue in the first quarter. Leverage ratio has decreased to 3.36, and factoring rolling 12 months of Tractel EBITDA, the leverage was 2.97 at the end of Q2.
You surely remember that we have a non-leveraged ratio of 2.5 as a financial target, or below 2.5. We are not there yet. We believe we are on track. Deleveraging will continue to be a top priority in the coming months and quarters. The other capital allocation priorities are unchanged. We will continue to apply the dividend policy, which we confirm last month at the CMD. Also practically, it's no more a matter for next year, when we expect to make the next dividend payment. At some stage, as we said as well, we come back to the M&A trail, as it is a very important part of our strategy, and definitely we believe this can be value creative.
Finally, we carry on making the necessary investments to support our organic, profitable cost journey. If we can now come to the balance sheet. As you all know, the most significant changes in the balance sheet relate to the acquisitions we made in the second semester last year, and in particular, the Tractel acquisition and its financing. This definitely applies to goodwill and other intangible assets, which have grown significantly versus Q2 2022. Equity was impacted by the SEK 2.5 billion rights issue, which I mentioned earlier, and which we concluded in Q1 2023.
Maybe one, you know, additional comment regarding the debt, I referred earlier to the EUR 300 million term loan, which is making the biggest component of our debt at the end of the quarter. This loan matures in 2025, and we have two one-year extension options, so that may take us to November 2027. That's it for the key financial information, and I will now hand over to Ole again.
Thank you, Sylvain. If we flip page and into the summary, we see that we are continuing very solidly on our profitable growth journey. This means that we are both managing continuously the integration of Tractel in a very solid way, but also that we are continuing to deliver operational improvements on a day-to-day basis. We have specifically strong performance in Industrial, Wind and the Height Safety & Productivity Solutions. We start to see, as I have said also, that the higher interest rates have impacted or started to impact a little bit our business, but also, you know, our well-diversified business model, our good cost control and active pricing management brings us resilience, which I, which you can clearly also see now in the first half of this year.
We will continue to execute on the New Heights program. That's our continuing to be our route forward, and this is, of course, to ensure that we are now also then delivering on our financial and sustainability targets that we have set out for the coming years. That will be with us, and we feel very comfortable around this. With that, I would like to say thank you to all employees for another good quarter and a great first half of the year. With that, we turn page, and we move to Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Hanna Lindbo, from DNB Markets. Please go ahead.
Yeah. Thank you. Good morning, everyone. My first question is on the higher interest rate. If you can give some more color on how you expect it to impact you in the near term?
Yes. Hi, Hanna. Yeah, you know, that's a very, very difficult question, you know, how that will impact the business overall. You see that. That's what I'm referring to, you know, we have had some effect in the Nordic region for some time. That we know that the residential piece of that business is down, and this is basically what it's serving also, residential, globally. We also have seen some effects on some projects on Facade Access that are being pushed forward in the decision process. I think, you know, that we will see much more effects than what we are seeing now, no? Again, it's, we don't know where the interest rates and, you know, this is ending.
If we start to see the end of maybe the interest rate hikes, then most likely also we will not see, let's say, stronger effects in the market about these things. Yeah, we feel confident about the business momentum, and that we will continue to manage this in a good way also going forward.
Great. On the Tractel Facade Access margin, it looks like it declined again. I know that you're doing a lot of stuff here, but could you give us a bit more of an update of how it's going, and when do you expect to see a turnaround here?
Yeah. I think First of all, you know, as we have said this, and as we all know, you know, this needs a turnaround, you know? We know we have a very solid piece in the Tractel business. There, we know how to do it, and this is the logic and, you know, the way of working that we're now applying. This is moving forward according to plan. It's step by step, you know, first it was to get the organization in place, so to get the base structure there. Then it's of course, about commercial terms and how, you know, and we act in the market with from a contract and pricing. Then it's our internal perspective on how we manage our own operations, project management, et cetera.
In all these areas, we work, and a lot of it is implemented. You know, the element that will take time is, of course, you know, the most time it's the project management and how we are fully, let's say, organized and managing that internally. Then we have a pipe of projects that will take time to clean out, as we have said, you know, so this is not a quick fix. But we have done now a strict review, which means that we have been through quite a lot during quarter one and quarter two. As we also said at the CMD, we should start to see improvements already in 2023. Then it's a gradual improvement going forward. This is the expectancy that we are having today about this.
All these measures that you're taking and, like, going away from certain contracts, can you comment on, like, how much on the top line in Facade Access, this new strategy will impact?
You mean how much, the impact from that?
Yeah, same.
That we are turning out-
Yeah.
Yeah, away from some tenders?
Yeah, exactly.
I honestly, I don't think that will impact us a lot. At the same time, you know, if it impacts the turnover slightly, then it's good for the result, you know? It'll be good for the business that we are doing it that way. We are also the leader in this business, so it's also good that we are leading the way in the market, actually, with, you know, being firm on what we are doing. It's the only right way. It will have a heavy impact on our top line? No, it will not. That will, that you can see some impact in some contracts, you know, from time to time, absolutely, yes.
We are also stronger and better, you know, so we also win the new stuff based on the new group or the new division we are here, you know. I don't think that this will be an important piece, but it is a piece of the puzzle.
All right, great. My last question is on Wind, which was very impressive in the quarter.
Mm.
My question is, do you expect demand to continue to accelerate, and how should I view the margin going forward?
Yeah, you know, you see, we have a huge step up, you know, in order intake in quarter one and quarter two. Quarter two was slightly bit less than, you know, on a level, and then you see that on the revenue side, it's, you know, as we have talked about, the, you know, the lead time from order to revenue is normally within 2 to 4, 6 months. You see the order intake quarter one is coming down to revenue quarter two. But that this market will continue to grow 30% or, you know, that is again, impossible for me to predict. What we do see is that this market is much better.
It's a completely different market than before, and we are, of course, expecting to be continuing to grow this business. That it will be on the same growth levels, that's too optimistic to say today that we will grow 30%, 40%, 50% every month.
Great. That was everything from me.
Yeah.
Just one little additional piece of information regarding wind. As we said, we have benefited from a favorable product mix in the quarter and the semester. You know, this may vary, from one quarter to the other. We have positive effects in the quarter, definitely.
All right. Great. Thank you. Yeah, that was all for me.
Yeah. Thank you, Hanna.
Thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
Yeah. Does it mean we don't have more questions online? We have something on the net here that I can see written questions. I think I will move and take these two. The first question I have here: Can you give us an idea what the volume growth is coming from cross-selling after the Tractel acquisition, compared to what's coming from growth of the market size? I would say that the volume growth today coming from cross-selling is neglectable. You know, this is the work we are starting and, but it's not really affecting the figures today. The growth that you see is from, let's say the regular business performed both from Tractel and from legacy Alimak.
That we do expect cross-selling, as you know, that we have synergies planned here, and that we start to see that this will come, absolutely. I had some examples in the presentation. We had another question here: How much of organic order decline in Facade Access is driven by weaker market demand versus stricter margin requirements? I think this was basically a little bit what I already said. It's difficult, you know, just to give some sort of exact split on this, we have three effects in the quarter. The major effect, the big effect was high comparables, this big project that we had last year. Correcting for that, it's nothing really strange with our order intake in the quarter.
We also had some effects, as I said, you know, that we see some delays and some effects that we have turned back to a couple of projects, which could have maybe, you know, lifted again, you know? Again, these are, you know, It's the right decision for us to turn the back to, to those projects. It's also, you know, not disappearing. These projects that are put on hold or delayed, they are, they are in the pipe, they are just, most likely than coming at a later stage. That was the two questions I have here on the, on the, on the net. I don't know if there is nothing more. No?
I would like to take this opportunity to thank you all for listening in. Again, thank you to all employees and partners for a good quarter and a very solid first half of this year. With that, I wish everyone a great summer, and looking forward to speak again after quarter three. Thank you.