Okay, so it's 9:00 A.M. in Sweden, and we'd like to wish you welcome to AQ Group's Report for the Third Quarter. I will try to speak quickly, and then we have questions in the end. So let's go. So we think you should—we like to invest in AQ Group because we have an earnings per share CAGR of 40% over the past 10 years. We made profit every quarter since the foundation in 1994. We have an exposure to the industrial market segment with underlying growth, such as electrification, defense, and medtech. We have a long history of acquisitions, and this year we have made both two factories and a design office in Germany and the Czech Republic. We have an extremely strong balance sheet with a net cash position. Some quick facts: so we are 8,000 employees in AQ.
We have had a turnover in 2024 of about SEK 8.5 billion . We have seven business areas. We cater 15 plus market segments, and we are manufacturing in 17 countries, two to 4,000 customers globally, and we made profit every quarter for the last 30 years, and then I mean profit in the earnings line, the bottom bottom line, not anything else, and we have a 14% earnings per share CAGR for the last 10 years. We make acquisitions, as I said, and our sustainability initiative is UN Global Compact that we have been part of since 2012. Okay, let's move to the third quarter. We increased net sales with 8% to SEK 2.1 billion. It is shy of our goal of growing net sales with 15%. Our operating profit increased with 2% to SEK 191 million, and our profit after financial items increased with 5% to SEK 187 million.
Our profit margin before tax was 8.8%, and after tax we had a profit of SEK 154 million. The cash flow from operating activities was, as usual in quarter three, quite high with SEK 322 million, but a little bit lower than last year. Earnings per share before dilution mounted to 1.67, which is about 4.5% increase compared to the same period last year. We talk about the first nine months. Our net sales increased with 5% to SEK 6.7 billion, and our operating profit decreased with 2% to SEK 624 million. Our profit after financial items increased with 1% to SEK 619 million, and our profit margin before tax was 9.2%. Profit after tax was SEK 509 million, a little bit lower than last year. Cash flow from operating activities was SEK 799 million, and earnings per share before dilution was 5.54, which is a slight decrease versus last year.
Our equity ratio is super high with 67% versus our target of 40%. If we go to the earnings per share growth, we are still on 14%, and it is a little bit decreased versus last year if we look on the rolling 12 months. Let's see if we can do something about that in the last quarter. Our target is to double the earnings per share every year, but of course on an average over a cycle sort of. Regarding the net sales development quarter- over- quarter, we had an organic growth of 5%, which is positive but not good enough. I think we should be able to do more and deliver out more. Our acquired growth was 7%, and then we had a negative currency effect of 4%, which means we had a net sales growth of 8%.
If we go a little bit more into the detail, so the organic growth was 4.6%, which is below our target of 10%. We have low demand from buses in North America, where one of our customers closed down a plant last year. We have low demand for food equipment machines or food packaging equipment machines, and also a little bit lower demand for big transformers for big ships from our factory in Finland. On the other hand, we have very high demand for grid electrification in the defense sector, which is sad but true, and in data centers, which is a very exciting, you can say, new opportunity because we started to receive orders last year, but now we see big orders coming and big deliveries coming, which is fun. But we have developed this for quite some time.
I will get into a little bit more detail later on in the presentation. Some recent customer and project wins. So we have won what is called the electrical control cabinets for one of our customers for a high voltage DC power line, which is called Korridor B in Germany. This is control cabinets for about EUR 7 million that we will do in our factory in Pernik in Bulgaria. Then we have extended our contract with a big inverter company from Germany for cabinets, which will amount to about EUR 15 million per year, and we will have that volume now for another two and a half years, which is fun. We are also working with some other projects with this customer, but it is fun to see that they are happy with our performance and that they want to continue.
And then we have this on the right, transformers and inductors in an enclosure for data centers where we have received from one of our legacy big customers orders for EUR 15 million for one data center, one hyperscale data center, we should say. So it's quite a big one, but not the biggest one. And I think there is possibility to do more. I will get into it now. So what is this product then? It is what we are doing. We are doing medium voltage transformers and inductors. We've started to design this in Germany in what was then Schaffner Power Magnetics, but now is AQ Inductives Germany in 2018 together with this customer. And it is a legacy AQ customer with more than 100 years of electrification experience. And the end product is a medium voltage solid state uninterrupted power supply for data centers.
What it does is that if the power is cut to the data center, then several of these modules will make the data center run for an additional seven minutes, I think, and then the data center has the opportunity then to switch to alternative power sources such as diesel engines or gas turbines or similar, so this will be a key thing here, and the key thing that you should take with you also is that this is medium voltage, and why do you go to medium voltage? It's that you can reduce the energy consumption and the installation costs for the data center tremendously as the data centers require more energy, so yeah, we think this is exciting new technology. Our customer claimed that they are the only one that has a solution for this problem at the moment.
So we believe that if we are successful together with our customer, that this can be a sort of a standard for these bigger hyperscale data centers. And what do we do then? The cabinet you see here on the right, which is a little bit behind my bald head, is the inside. There is a medium voltage transformer and a medium voltage inductor. This enclosure weighs about seven tons. Then there is another cabinet where we have 18 pieces of low voltage inductive components as well. So in total, in every unit, we deliver 20 inductive components and then also the enclosure for this part. And then our customer puts these together and it becomes a unit. And then in this data center that we have orders for, it is about 180 units. So it is quite a lot of volume in one data center.
Currently we are, as I said, have designed it in Germany. We are producing the full unit in our factory in Hungary, but we have also produced units in our factory in the U.S. In October now we start to produce the inductor in Czech Republic, but the target is to produce the complete unit also in Czech Republic in 2026. Then we produce the internal inductive components for these units also in Hungary, Czech Republic, China, Finland, and the U.S. This is except India and Brazil where we have our transformer factories. The volumes are big and it will take a lot of manpower to do this, but also a lot of equipment. We've decided already now in 2025 to do investments of EUR 2 million in winding equipment, testing equipment, and impregnation equipment in order to increase our capacity.
And as we have stated in the press release, we have orders on hand for EUR 15 million for one data center, and the deliveries are ongoing now in October. And the whole delivery should be finished before June. And we expect, and our customer expects that we will receive many more orders for these products. And our application, as I said, is a hyperscale medium voltage data center. So this is fun, we think. It is a lot of design work for us to get the UL approval for the products and so on. And I think we have a bit of a head start since we have been working with this in seven years. So we know what we are doing, but it is still a very, very challenging project because in the data center world, everything goes extremely quickly.
So we have to run, run, run very fast, which is of course interesting, but it's also a risk. If we make a mistake with these products, there will be a bang and it will burn and it is not good, so there is also a risk in this that I think investors should know about, but we believe we have done transformers for a very long time. We believe we are very good at it. We believe we have a great design, which is very cost competitive, so yeah, we hope to support our customer with this. In the quarter, we have also moved our factory in Estonia or in Tallinn, and the new building you can see on the photo, it is AQ Trafotek where we produce inductors for inverters and drives for ABB, Danfoss, Siemens, and others. We believe that this business will continue to grow.
It has grown rapidly for us since we bought Trafotek in 2019. And that is why we have made this move. But it's also a cost-saving move for us because we get 30% more space, but the cost is the same. The previous building we had was rented. Now we are renting from another landlord, but a new building. As you can see, there's also solar panels on the roof, which reduce our CO2 footprint, but also make this more cost-efficient because it is costly with energy in Estonia where they use a lot of shale oil in their energy mix. So we are happy to be able to contribute to reducing the CO2 in this country as well. The move has been done, and with no major disturbances.
We had a little bit lower volumes, I would say, in June, July, maybe a little bit in August as well, but we are in full speed from September. And also there is a big optimization work done in the production flow, which is really good, which will improve our productivity in this factory. And I would like to say thank you to the team who have done this move without disturbing our customer because it's been a big, big project for us. So fun to be ready with that one to deliver full speed now because we see that the forecast from our customer is increasing for the coming quarters. Regarding the acquired growth, we are above our target of 5% per year. We have bought this Riedel in Trutnov.
We are also looking continuously at several different targets, but we believe it's very hard to find good companies and factories that we want to buy for a reasonable price. So we are fighting regarding the valuation and making the deals happen, but we are working very hard on this. And yeah, I think we will see something going forward as well, hopefully. We have always done acquisitions, but I cannot say when. So it will be present when that time comes. A little bit of update on mdexx and Riedel. The total net sales is much lower than we anticipated when we did the acquisition for different reasons. I think their main customer, as you have heard before, is Siemens, and they have maybe not been super successful in the market. But on the other hand, it is our job to fill this factory up.
We have done a lot of work to reduce the personnel costs, and we have managed to reduce them from when we took over until September with about 10%. And a lot of the redundancies were made during August because we couldn't do them earlier because they had short-term work and legal things in Germany. But some of them are done now. We're continuously working to improve the productivity, especially in the offices. Then we reduced purchasing costs with about 2%. We are reducing the financing cost with 2%, but the full impact will not be until December because it has taken us quite some time together with our customers to get out of these factoring agreements that were in place when we bought the company. So it's taken a little bit longer to get out of those than we had imagined.
But as a positive, the m dexx margin in September was on breakeven, which is good. We have managed to change the name. So from now on, we will call mdexx AQ Magnetronics. So we have AQ Magnetronics in Czech Republic, and we have AQ Magnetronics also in Germany now. The design office is in Bremen. We believe that we can do further product improvements in both Czech Republic and in Bremen, and we want them to be completed by the end of quarter four. We are now working, as I said before, very hard to start to produce also the transformers. The inductors have already started for the data centers mentioned in the previous slide. And we have done the first deliveries in October of inductors, but this will continue. And we have a lot of capacity in this factory, and we believe that it will be good.
We still have a target to reach AQ average margin at the end of Q4, but the target is still valid, but it will be challenging, but we are working hard to achieve that, so we come to the margin, and in Q3, our EBT margin was 8.8%. This is the 11th consecutive quarter above our target of 8%. I believe the cost control is good. We still have opportunities to improve operationally at several of our production sites, and mdexx despite the improvements we have made, dilutes the margin with about 0.7% in the quarter. We believe that still it will improve sequentially, and as I said, in September, it was on breakeven. We will continue to improve it so that it will be a contributor rather than a diluter going forward. We are not happy with the margin despite it being above our target in the quarter.
Regarding inventory value and turnover, we have a target of 3.5% of inventory turnover. This is super important for us because a big part of the risk for you as an investor and for us is our inventory that becomes old, and the faster we can turn the inventory, the less the risk is for you and for AQ and for investors, so I see that I have missed that, but the red bars are the inventory level in SEK, and the black line is the inventory turnover. It's Series 1 and Series 2. I made the slide myself, so that's why it's not great. We see also that we like this product with the data centers. There are more internal deliveries in AQ, meaning that the goods are in our inventory and work in progress a little bit longer time, which have an impact on our inventory turnover.
However, we believe that this is a good way for us to have better margins and utilize all the good factories that we have. So it's still the right thing to do. We have an ongoing project with the project manager, Grzegorz. He's doing a great job with our teams, and we are improving in many of our sites. What we see, however, is that many of the companies that we purchase, they have a lot of improvements to be done regarding inventory turnover. And we continue with this project because it has been, as I see it, quite successful. So we continue with the focus of electric in Bulgaria with Canada, U.K., India, and Mexico to improve the inventory turnover further, even though it's improved already in the quarter a little bit. We continue. Cash flow is super important.
I think it is a good measure to see if the things that I say are true or not, and our net cash flow from operating activities is on a high level, which it usually is in the third quarter because we have a little bit less deliveries, and then we get paid for what we delivered in quarter two. I think you understand that, which is normally a high delivery quarter, which means the net debt also decreases, or it's not a net debt, it's a net cash position, and we have now net cash of SEK 429 million. However, we will see a slight working capital increase at the end of the year since we terminate now all this factoring for mdexx and Riedel, but I mean, of course, it should not have a huge impact.
We have plenty of cash to invest in equipment for data center production, this transformer production, or other customers that want to invest with us, and also to buy companies, of course. As you know, I will always show this on-time delivery, and we are decreasing a little bit in the delivery performance. It's not as good as we want. We can see that several of our factories are under quite a lot of pressure since our electrification customers are growing rapidly, but also in the defense sector, it's growing very fast, and also for these data centers. So it's a challenge for us to increase the capacity, and we have some constraints in Rockford, which are mostly in defense, in JIT Mech which is defense and electrification, in Transformer Solutions, which is electrification, and in Inductive Hungary's data centers.
The quality level still remains on a very good level, but of course, we always want to improve. So we get back to this one. I will not go through it again. I think you understand why to invest in AQ. And I go to questions. So please raise your hand if you have a question. Albin was first, I think. Please unmute if you can. Otherwise, we will unmute for you. Maybe we will unmute. It's possible.
All right. Can you hear me now, James?
Yes.
Y es. Perfect. Thanks for taking my question. So firstly, with the data center order, you mentioned the order book of some EUR 50 million, and you also mentioned better margin but lower inventory turnover. So firstly, can you give us some sense of the margin of those products?
And then also, are you the only source here for your customer, or are you sourced?
We are the only source at the moment, but of course, our customer will try to have a second source. But as I mentioned, I think we have a bit of a head start since we've been working with this since 2018. However, we don't have any patent or such things that will protect us. I would like also to add that if this will be the standard for data center, which of course I have no clue about, but I can only listen to what my customer tells me, then there will be so much work for the dry-type transformer manufacturers in the world that it will be enough work for everybody. I would say currently our customer is not concerned about pricing. He only wants speed in delivery.
So I hope that tells you something about margins as well. But of course, during the ramp-up, it can be so that we have a bit of extra cost because we are not optimized in our flows and so on. But I believe that this is profitable and that it will continue to grow. But we have to be successful. We have to prove that the concept is successful. There are a few smaller data centers already live with this technology, which seems to be working well, but who knows? The development is very fast in this area. But I believe that we will, at least for a couple of years, have a good volume for this new product for us.
Y eah, understood. Let's hope it doesn't burn or explode from what you mentioned.
Absolutely.
Also, you mentioned you reduced the personnel in mdexx in the quarter 10%, but still managed to increase personnel overall QoQ outside of Sweden. So is there anything that sticks out there?
I mean, the personnel increases anyway because we add the acquisition. So I mean, there are a couple of hundred people there. So I mean, that and then we grow organically as well. So then the personnel will increase. So I think that is the answer because we didn't have Trutnov this quarter last year.
Yeah, but it's a QoQ, still a growth. But yeah, I guess it's not too much for me. It's organic. Yeah.
Yeah, that's what I mean. I mean, we didn't have Trutnov last year. So the QoQ growth will be the net between, I mean, the amount of people we have in Trutnov now, we didn't have at all.
There was zero last year because we didn't have Trutnov. And then, of course, we grow organically as well. So yeah.
Yeah. Yeah. Maybe I think you misunderstood. I mean from Q2 to Q3. So that's a little bit of growth. But I guess that's organically done.
That is organic. Yeah. Okay. Sorry. Yeah.
All right. And just lastly, given the net cash position here, active M&A agenda, but still the ramp-up of mdexx, how would you say that your capacity is to take on further large acquisitions here?
I mean, capital-wise, it's no issue, I would say. Then again, I would maybe choose which business area I would buy in, but depending on the load in those. But when we find the right company, we try to buy it. So yeah, we have the capacity to do it.
Perfect. Thanks. That's all from me.
Thank you. Any other questions?
Tomas. A little bit to unmute him, or?
Can you hear me now?
Yeah.
Y es. Perfect. Perfect. Good morning. First question, I was just wondering if you could give some color on the sequential development in construction equipment and trucks in Europe. I understand that Q3 is like seasonally lower, but some comments on the order intake, for example, would be very interesting.
Order intake is very hard to say because, I mean, we have very short lead times in construction equipment, but especially in trucks. I mean, we received the order two days in advance before we should deliver it. But despite that, I would say that the construction equipment we see, it is growing in Europe in all our sites, and trucks are decreasing a bit in our sites. So then it's a little bit mixed between the biggest customers that we have.
I mean, Scania and Volvo, I think Volvo is doing a little bit, I wouldn't say better, but I mean, the decrease is lower at least than for Scania. That's my feeling, but yeah.
Perfect. Thank you. My last question here and sort of on the other customer segments and the market in terms of new product launches and customer wins, are you seeing any significant delays in new product launches from customers, and if so, in which segments?
No, I don't really see any delays like that. I wouldn't say, but I don't know what you really mean with product launches. Yeah.
I mean, either new customer wins or customers that are launching new product lines, sort of any deterioration from Q2, for example?
No, I don't think so. I think it is rather stable.
And our customers, I mean, they are huge international companies, and I mean, their product and project management is not changing, I would say. I think they are trying to, yeah, they are pushing on with their new projects. We have Scania with the Traton new modular system. We have Volvo with all the electrification projects they are doing. They launched this new battery as well where we are doing the enclosure and all the wire harnesses, for instance, and so on. So no, I think what I believe that our customers are very profitable and have a lot of capital and that they are continuing as usual, so to speak. I mean, we're not in cars and these kind of things, so that I cannot really comment. But for the segments that we are in, I believe that there's a lot of new products.
And in defense, it's like crazy, a lot of new products that are coming. So yeah.
Understand. Thank you. I'll get back in line.
Thanks. Do we have any more questions? Linus?
Hi, James. Good morning.
Hi.
Hi. Just one quick question here from me. You cited weak demand in buses in North America here. I was just wondering if you could comment a bit on the New Flyer ramp-up and how that is progressing.
New Flyer ramp-up is progressing. On the other hand, no, I don't remember which quarter we announced it, but I mean, Nova Bus closed the factory in New York State, which we delivered until November 2024. And that volume is zero. So we are replacing it with New Flyer, but the volumes are not as big as the Nova Bus yet. So I think the ramp-up is going okay.
We have had some delivery issues in the U.S., but overall, I think customer is happy, and they are especially happy with our Canadian site. We have started to deliver small volumes from Mexico, and we have started with, you can say, serial deliveries from the U.S. as well, but it is not on the level that we expect in the long term. So yeah, I hope that answers a bit of your question at least.
Yeah. That's super clear. Thanks.
Do we have more questions? Very good questions today, I must say. As usual. Okay. It seems that we don't have any further questions. So then I thank you for showing interest in AQ, and I hope you have a good reporting season. Thank you so much, and bye-bye. Bye.