Now it's 9:00. Let's start our quick call after our release of our quarter three earnings. My name is James, and this is Christina. For those of you who are new to AQ. Let's go. Our third quarter in brief, we have very strong demand, especially in electrification. Go into that deeper later. We see net sales increasing by 31% compared to last quarter, same. Operating profit increased also with 30% to SEK 123 million. EBT increased with almost 34%. Profit margin before tax is 7.1%, which is not reaching our target, and we will get back to that.
Cash flow from operating activities was SEK 3 million due to strong organic growth, and yeah, we will get back to that more in the cash flow slide. Earnings per share after tax and deduction increased by 31% in the quarter. First nine months, net sales increased by almost 28% to SEK 5 billion. We've grown SEK 1 billion in the first nine months, which is really good, actually. Operating profit increased a little bit with 3%. It is far from our target, where we want to increase profit by 15% per year. We are a bit heavy on the backside of the year, but and we are catching up now from the previous two quarters. Profit after financial items also increased by four-
Sorry, James, you're muted.
That's amazing. You haven't heard anything or?
We missed the last 30 seconds.
That's very weird. Okay. Earnings per share after tax decreased a little bit by 0.4% due to the distribution of profits between different geographical markets. That's why. The equity ratio is still high, way above our target. Let's see if I can move. Earnings per share growth, this is the main thing for us to increase our earnings per share, and we want to do it. It should follow our growth, really. If we grow 15%, then the earnings per share should grow 15%. I've told before that I think that we will catch up since we were behind during the last quarter.
I think we're catching up now, and I still believe that we have a chance to reach our target for this year after the fourth quarter. We have a really good turnover in the quarter. We grow 30% for the same quarter last year, as I said. Still, we have some issues. Supply of these kind of computers that we put in the electrical cabinet and system products are still not coming as we want, and there's still long lead times, so it affects our ability to deliver. We had a big customer in the U.S., Canada, that were affected by strike in July, August. It affects about SEK 18 million. Of this increase, we see that it's mainly driven by electrification, its batteries, components for drives, inverter, and electric vehicles.
I mean, if you've seen ABB's report today, you can see that they are really growing strong. The Hitachi spin-off from ABB is also growing very strongly. I think that's also why we are growing. I mean, our customers are growing because there's a huge demand for electrifying the society as a whole. I think this will continue as I write in the report. Organic growth is super high. Of course, some of that is related to price increase. I think if we compare quarter three last year and quarter three this year, I think we have increased the prices roughly by 12%.
Although it's very hard to say an exact number because we have, I would say we have around 3,000 customers and then we have unique parts for all those customers. It's very difficult to say where we have increased and not and how much we have increased, but this is our approximation. This is to compensate, of course, then for higher cost for material, energy and transportation. Acquired growth will be 0 now. We had we acquired the Schaffner unit. It's now more than a year ago. I think you should not expect really to that we will. We are opportunistic, so maybe we will do an acquisition. I would say that we this is not our focus area now.
We are growing extremely strong with the existing companies that we have, and we need to focus our efforts on making profit and deliveries and good quality to our customers in those projects that we have for this year, but also for next year. I would not expect any large acquisitions. It is if we can add capacity and make a very cheap acquisition, then that and find that, then of course we will act. We see also that we hope that these multiples will go down now when the activity is a little bit lower in the market regarding acquisitions as we see it. The main focus is on organic growth. I think it also represents in our lower ambitions on percentages as well.
A comment on the Schaffner acquisition is that we see very strong growth in that acquisition, and we believe that we are now done with the integration and we are very happy with the synergies that we managed to get out of it and the capacity that we have increased due to it. I think this is a really good acquisition that we have made. I would say profit margin will be in the long term same as for AQ as a whole. Our EBT margin increased versus last quarter by about 1 percentage point.
I think, as I've said before, we will be 8 ± 2% in EBT margin every quarter, and I think, we are on the way to getting back to our target level of 8%. We still need more price adjustments versus our automotive customers, and we are working very hard with that. I believe that we will be finalized in quarter four. Very confident that we will be finalized with those. Of course if costs increase more, then we need to increase price more and so on. I think that we are in a good way with all our customers now. It has been really hard work for us, but I think we are able to do it.
It shows also that we have some kind of moat that we can really increase prices when we need to. We still have a number of companies, three, with needed improvement program to improve profitability. This is a little bit business as usual in AQ. I mean, we always have some companies that are performing not as good as others. Some are performing better. I think we are in a good way and we are improving these companies, and we write a little bit about that in the report as well. Cash flow then. Yeah. It's not great, I must say. We are still increasing our inventories a little bit.
We are getting more accounts receivable, of course, with this rapid organic growth that we have also going forward. If you look quarter-over-quarter, then actually this quarter is a little bit lower than the quarter before. There is summer holidays and so on in this quarter. It's normally a little bit lower than quarter two. We will continue to grow. AQ is a growth company, and we will continue to grow, and we have committed to grow 15% per year. We will continue to grow also next quarter and next year and hopefully the year after that as well. Of course, that I cannot see now. I'm no oracle.
We see also that we need to focus more on our inventory. We have put a program together with a strong leader that is focusing on certain companies where we see that the inventory turnover is lower than in the peers of the group. It will be run now during quarter four and for the whole next year. This is not a fast thing to implement. It takes time to get the things in place. Once you have all the parameters set in the system in the right way and so on, then you will see the inventory start going down slowly. I think it will be something that we will be working on during next year as well. Also, here is a little bit about inventory turnover.
As I said, we are very far from our target. However, you should notice that I've also put in how we calculate it. We calculate it based on rolling twelve months backwards. If you have a strong growth in the future and then you have to build inventory for that, then the inventory turnover at this present day will be low. It doesn't excuse for, I would say, really very low still development in this area. We, as I said, have a program in place and we aim to get back. I believe it will be hard for us to get back to three turns per year by the end of the year, depending on the high growth that we and our customer are having at the moment.
I started this presentation with the picture of our factory in Panevėžys, Lithuania. It is the picture on the left there. It is a finished building. We own the building. We have invested a lot of money in this factory to double the capacity in Lithuania. It was ready in April 2022. We have made investments in machinery, but more will be needed. We have recruited now during this quarter 500 people, but we will recruit during quarter four another 300 people. Of course, it takes time for these people to reach the productivity level of the people who have been doing wire harnesses for 10 years. I think normally we say it takes like 6 months to learn how to produce a harness with good productivity if you have the skill set to do so.
We believe that this factory should increase turnover with EUR 40 million in 2023. It's really. We have won and communicated previously, if you look back in our press releases, that we have won major projects with truck OEM manufacturers. In the last quarter, we reported that we won an order for EUR 9 million to a big construction equipment supplier. We see also that bus volumes are doubling going forward. This factory will have a huge organic growth in quarter four, but mainly during next year, it will be substantial. That's why I'm telling you now. The next photo you see looks like a construction site. It is our brownfield in Bulgaria.
We bought it in July. We signed the contract in June and communicated during last report, but we gained access to the building now in July. This is the way it looks like. We have fixed the roof. We have cleared out all the walls. I think now there are walls, actually. It goes really at Bulgaria speed over there. When we bought this place, it was trees and everything inside, but now we have cleared everything, and we're gonna make an industrial floor. Here we're going to make a battery systems factory. We will deliver out the first batteries now in October. We believe that this factory will be in full production in April 2023.
This is typically an AQ project where we take something that is really for some outsiders, it would look like this isn't worth anything and we will make gold out of this. We believe that the turnover in this factory with full utilization will be EUR 40 million per year. We will then build about 1,000 of these huge batteries per year and around 500 control cabinets that sits together with not each battery, but many of them. That is very exciting project. It will be sheet metal fabrication first, so it will be sheet metal processing, a lot of welding robots. There will be a surface treatment, meaning painting, and then we will assemble these big batteries that come from different suppliers, both from Europe and China.
We will send these ones to our customers, which are, of course, located all over the world, and it will go to renewable storage of renewable energy and backup power. Very exciting project, we believe. When we talk about net debt and you see that it's increasing quarter-over-quarter. We can say that our cash out in the quarter is SEK 90 million for investments we're doing in equipment. Also this Panevėžys facility is included in that in the quarter. Since we have high increase in working capital, and then we're doing investments, then our net debt is increasing. We're not really worried about this.
I would say I think we will get back to normal levels, and we're not geared in a big way anyway. I think there are two good growth opportunities to catch to continue to grow. On-time delivery is still an issue for us, and I have actually found a competitor that also reports this, and we are on the same level as them at the moment. It is not unique for us to be on this level, but normally we like to be a little bit better than our competition. We're putting in more efforts to improve here. I think once our wire harness factories will be back on track because they've had problems with components, I believe they will be back on track.
We will see these numbers improving a lot. In business area Electrical Cabinet and System Products, we still have issues to find these kind of PLCs, which have semiconductors inside that product. It is not much we can do about that really, because we don't want to start to manufacture PLCs ourselves that we hand over to ABB and these kind of companies. We are working with our customers, rescheduling and so on, and I think it works quite well. Of course, it has an impact also on our working capital. Some projects for future growth. This I normally try to share. Battery storage, we've talked about that. That was the Panevėžys factory. There you can see our first prototype.
We build the whole sheet metal structure, we paint it, we put in all the batteries and fans and electrical components and so on, and sell it as a complete module. Normally in a battery installation, you will see four of these packs. You see how big it is, and it weighs, I think, 14 tons when it's ready. Four of these batteries and then an electrical switchgear at the end. It is our customer has secured a lot of orders going into the future, so we believe that we have a good opportunity here to continue to deliver to them. I talked about these supercapacitor banks before. We are working with one of the leading power grid suppliers in the world. We have co-developed this supercapacitor cabinet together with them.
We have helped them to do the electrical design and so on. They are trying to get their first project. Difference between the battery storage, like you see on the picture, which is run with lithium-ion batteries, is that it is very slow energy. You charge it slow and you discharge it slow. But in order to balance the power grid, you need to sometimes charge and discharge energy very fast. That is when you need a supercapacitor. It is similar stuff but different speeds, and you need both. Electrification wind power. On the left you see a stator housing of a wind power, yeah, a windmill really. You see that there is, it is a little bit hard to say, but in the circle, outside circle, you see a lot of white dots there.
That is pole shoes. Our site, a new site in Hungary is in negotiation with one of the major players in wind turbine manufacturing, that we will manufacture all these pole shoes for the European market and for their new development projects. It is a big project, I would say. We are selected as a supplier, but we have not signed the contract yet because this is a new product and a new customer, and then you need to be a little bit careful on how the contract looks like. I'm confident that we will get this signed, and then we have a nice growth potential for several years going forward in Hungary. On the bottom there is a water-cooled transformer, which is used for the inverter in a wind power plant.
You have water and electricity combined, so the water cools the transformer. This particular product we have already sold 10,000 pieces of, and we continue to see growing volumes in wind power. Our factories in Estonia, India, China, Hungary, and U.S. are delivering these kind of products, and we will continue to see growth in this area as well. We see a big growth potential also in our factory in Brazil for this type of product. That is nice. That's what we talk about when we talk about electrification. On the top left there, I've talked about this before. This is the Tesla of the railway. It is a battery electric locomotive for the American market because the American railway is not electrified, so they need to change their diesel locomotives for battery electric ones.
We're delivering several components to this solution, and it is the first one in the US, and we think that Wabtec, which you see the customer name on the train, is going to be a leading player in delivering these type of drive systems in the US. We will be a part of that through our factory in Virginia in the US. There's an e-bike drive system from Bosch also on the picture, and we deliver components for that from one of our factories in Hungary. It's a sheet plastic injection molding, overmolding over magnets that are part of the drivetrain for Bosch. We have a new contract of EUR 15 million with 3 years from Bosch.
We had another contract before that, but we think that this is really good business and it is electrified bikes. Just you see them everywhere. Then you have a typical bus harness for a electric bus on the right. We see a dramatic increase in electrified vehicles in our factories. If you see orange cables, then that means it's high voltage. That is typically bus and truck cables. We have learned now during our years working with the electrification of Volvo's buses and Scania's buses how to do these high voltage cables, and it's really nice growth in that area at the moment. We believe that AQ will continue to grow, and that's why we have written like we have written in the report.
We have grown already this year, first three quarters, that we will grow with SEK 1 billion, that we have grown with SEK 1 billion. We believe that for next year we will be able because of the projects we have already won or are in negotiation or have forecast for, that we have the opportunity to grow with new customers and new products with the same amount next year. Now we open up for questions. I will close the presentation also, I think. We can see us instead. See here if I can do that. Yes, Sindre.
Yes, I, James, do you hear me okay?
Yes, I do.
Okay, excellent. Congrats with strong number, James. Just two, yeah, three questions. I mean, if you take out the what you claim is approximate price-driven growth, I think you have implicitly said that your organic growth increased from approximately 11% in the second quarter to 15% now.
Yes.
If you can give some comment on what is, let's say, demand driven of that acceleration and what is more due to the fact that you have caught up with your supply chain, if you understand my question?
I would say it is more demand driven than supply chain-driven. I think we still have the same problems like we had last quarter. We are catching up some backlog in some segments, but I would say it's demand driven. I mean, two of our biggest customers have reported today. It's AB Volvo and Hitachi, and they are growing strongly, and they have strong order books and we see in the forecast that they will continue to grow. I mean, we are very confident that we see a continued strong demand and I must say that I cannot at all see a recession coming.
Okay. Because that was my next question. You are not seeing any weakness in any of.
No
your market segments?
Not the only one, the only market segment that we have seen a decline is power tools, but it's very small for us. We do plastic parts for Makita and Bosch, and it is not a huge part of our turnover. If we look on the trends for electrification, renewable energy, and I mean, all this, these things also need to be transported somehow, and then we come into trains and trucks, and people need to go to work, and then we come into trains and buses. I mean, I have very difficulty to see the recession that people are talking about, but maybe market is much more ahead of us. We can only see one year in advance.
Okay, fine.
I mean, I'm, as I said, I'm no oracle. I cannot say to look into the future. I can just say what I see now, and I'm confident of the volumes that we have and that we will continue to grow also next year.
Good. How should we think about your 8% EBT margin target? The reason for asking is that, I mean, even if you given inflation of cost of goods and energy and so on, I mean, even if you compensate for that, let's say dollar for dollar or SEK for SEK.
Mm
You will get a slightly or actually significantly lower margin, I mean, even if I count SEK for SEK, due to that you compensate nominally.
Yeah
Would you also, should we expect that to compensate margin-wise as well? 'Cause I mean, that's actually-
Yeah. Absolutely. I mean, we need in order for us to grow with our customers, and this I tried to explain to both investors and customers and to say that, "Okay, you want to grow with me, then I need to have 8% profit if I'm going to be able to finance it without using banks." Because if I'm lower than 8%, then it's very hard for me to finance a very high growth. I think we.
I'm telling all my salespeople and customers and investors the same thing, that we need to be 8%, otherwise, and I write it in the report as well, otherwise, it's hard for us to follow our customer with the growth without spending money and borrowing so on. Of course, there is also an efficiency coefficient that we should be able to get also when we get higher volumes in a single factory. If you produce more of the same part, then you should get higher productivity as well.
Okay.
We are of course working with our productivity every day. In some factories, in the wire harness side, when we recruit so many people as we are, then I think it can be so that we get lower productivity for a while, like I said before.
Okay. Finally, if I may, China, I think you mentioned in the report that you are doing or you have still some, let's say, profitability issues there. How should we look at China? Is it, I mean, given all we hear about weakness in the Chinese economy, is it a internal problem, or would you expect as soon as your, let's say, issues are fixed, profitability and growth should come back in China?
I mean, I'm a little bit worried, to be honest, with China. That I can say. I think we should remember that they have not really gotten over COVID yet. We saw what happened in Europe and the US when finally COVID was over. I would say it's over. I mean, it's still, the virus is still here, and it is terrible and so on, but basically we have stopped with the restrictions. It's a huge boost to any market. I think that when the Chinese are gone through their COVID, then I think that they will get back to growth again. Of course, I don't know.
I mean, I've lived in China for 10 years, but it is very tricky to understand how that economy works. For our side, we see that they will continue to build the railway products. They will continue to invest in renewable energy sources. We have a mixed picture there. We have four companies in China, and we have a couple of them which are running nicely, and then we have two that we still need to do some improvements. As I write in the report, I think we have by eliminating the distributors that the Schaffner company had, they had distributors between them and the customer, and we removed that, then we are able to gain some margin from that.
Now we're working with productivity in those two factories that we believe that we will be able to get back to normal AQ margins going forward. Growth-wise, I think they are still growing. I wouldn't say that China is growing. I would say that we have stronger growth now in Europe and U.S. than we have in China.
Okay. Thank you, James.
Thank you, Sindre. Any other questions? Just feel free to speak up in that case. No? If you don't want to take the questions in the call, you have my number and Christina's as well. I think we try to write everything in the report, and we want to be transparent. Just send us an email or give us a call, and we will try to answer all your questions. Yeah. I wish you a very nice report period. Have a good day. Bye-bye.
Bye-bye.