Okay. Some seconds to go before we start with presentation. It's 10 and, yeah, welcome to AQ Group Investor Presentation for Q1 2023. Let's start. First quarter, January to March, we have a really good start of the year, which results in very strong growth and improved margin and a very good cash flow. Net sales increased by almost 37% to SEK 2.2 billion, operating profit, EBIT increased with 72% to SEK 194 million. Profit after financial items increased with 58% to SEK 184 million, and the profit margin was 8.2%, which is above our target.
Cash flow was excellent in the quarter from operating activities, which was SEK 225 million. Earnings per share after tax and dilution increased by 70% to a record 8.58 SEK per share. A very good quarter, I think you all agree. Earnings per share growth, if we look at rolling 12 months, we increase it now with 15.8% versus 2022 full year. We continue this trend that we've had the last 10 years with, yeah, roughly 70% on average growth in earnings per share. We're very proud of that. We would like to continue with that, as you can see on my AQ rocket. Our net sales grows quite fast because we are taking new projects from new customers, building new factories and increasing our output.
If we look at same quarter last year, then the growth is huge, but there we have some currency and also some price increases in that. If you look sequentially, we're growing with 14%, which I believe is extremely strong. We're starting now to deliver out from these new, newly invested factories that we have built. Despite that, we still have several big projects that we could not deliver in the quarter that are moved then to quarter two. It is due to capacity, ramp-up issues and a little bit lower productivity in new projects. We have started to see deliveries to this big truck cab project that we have talked about for a long time in Lithuania.
We've also started to de-deliver out battery systems from our factory in, our new factory in Panagyurishte, Bulgaria. We believe that these volumes will increase going into quarter two as well. The sales increase mainly related to electrification, I've said before, including in that the storage of energy and components for the defense industry and systems for MedTech are also growing very strongly. Very bright picture, but also bright future, I believe. Organic growth is super high, but it's a little bit tricky when you compare quarter versus quarter, because quarter one 2021 was maybe not the best and we have, as I write here, about 10% price increase in these numbers as well.
Increase is made in electrification, storage of energy, components for defense industry and systems for MedTech, but also the vehicle side is growing very strong. Everything's growing. It's very, very nice to be a contract manufacturer at the moment, and nice being AQ. Acquisitions, we have not done anything. I can comment a little bit about the Schaffner acquisition, which is the last acquisitions we did in 2022. They are now running at good EBIT levels, with very strong growth, mainly due to mining, railway, and UPS projects in U.S., EU, and Asia. This is developing according to plan, and we are starting to reap the benefits of that extra capacity that we acquired. We're happy with that.
EBIT margin, we're a little bit above our target, and it is nice to see that we are finally catching up. I must say that the previous quarters have been a bit disappointing, so it's nice to see that we are now above our target. Of course, we strive higher, but we are modest and believe that this is a sustainable level. The reason for the improvements in the quarter is that we have managed to improve our loss makers. Some subsidiaries have shown a loss for a couple of quarters, and that we have managed to eliminate those losses by improving the performance of a couple of factories. Still, we need to work smarter with high productivity to reach our full potential, as I see it.
It's nice to see that we still have some work to do. cash flow. Last quarter was getting back to normal. This quarter is really good. We see that our program for increasing inventory turnover is effective, even though we can do more with the low-performing companies in this regard. Of course, the turnover is catching up to our inventory levels. That gives a really good cash flow in the quarter. We are very happy with the cash flow, and it also, of course, improves our financial position. The inventory turnover is starting to become like a smiley mouth. It's the black line here. We were going down quite a lot, and now it's starting to pick up.
I really believe that we will be very close or a little bit above three at the end of the year. Meaning... I'm not sure if we will decrease the inventory that much, really. It will catch up by increased sales. We have dedicated resources put in place to educate and work together with our low performers in this area to improve their cash flow and inventory turnover. We're happy with what we are doing, but maybe not happy with the results yet in this area. Some investments increase capacity. We are in the quarter, we have invested SEK 48 million in new equipment, that is machines.
We have also signed an agreement of an extension of our cable harness factory in Lodz, Poland, which will increase the space with 5,500 sq m . This is rented factory area. You can see it on the picture on the top left. This will be finished in September 2023. This will enable us to grow 30% in this factory, like EUR 20 million. Our customers in this factory are producing forklifts, agriculture equipment, drive trains for boats, et cetera. We see a strong growth here. We have also invested in new punching capacity in Sweden, Finland and Estonia. This is a punching machine there on the bottom left picture. We had an inauguration with a lot of our customers, investors.
What these machines do is they punch holes in sheet metal, we get when we buy new machines, we get better productivity, but also reduced energy consumption and higher capacity. It is good that we have been able to get all. It has been quite long lead times on this machine, now we have got three in place lately. That's good, we can grow our business more. In this particular business, the factories where we have bought these ones is a lot about electrification, drives for electrical motors, railway and machinery equipment are produced in these factories. The net debt is decreasing since our cash flow is good. That is nice because of course, interest rates are becoming higher and higher. We like that.
On a total, we have a very low net debt and we have good cash flow generation. We're not really worried about our debt, but it is good to see that the trend is going in the right direction. Regarding our on-time delivery, it is improved a little bit at the end of March, but we are still struggling. Now I would say this material shortened situation is back to normal, meaning that like we have always had, we are struggling sometimes to find material, but it's not a general topic anymore. Now it's more about finding people, production space, getting productivity up so that we can deliver according to our customers' demand.
We are working very hard to improve the, in this area, meaning getting more capacity so we can deliver out more on time to our customers. It's a big focus area for us to improve. It's 92%, so it's still much better than it was in quarter four last year. Some projects for future growth then. It's normally the exciting bit. We are still working with our battery energy storage project. You can see on the top right, our facility in Bulgaria, where we are producing these big batteries. You can see if you look at, there are some people in the picture, how big these batteries are and how big this factory is.
We are ramping up now, and we are trying to deliver out as much as possible because there's a huge demand for this. It will be a huge demand if we're going to manage this energy transition that we are going through. If we are going to have as much renewable in our system and replace coal and oil, then we need a lot of battery and balancing power of different kinds. Batteries are one of them. Second picture there, you can see on the top of this GE windmill, there is a cooling, some orange cooling mechanism. We are delivering from our factory in Estonia, a aluminum frame for cooling of the generator in the wind turbine.
This has been growing now for last year, it will continue to grow also this year. It is a nice, very nice project that we think is fun. This one I had also last quarter, growing very strongly is inverters for mechanical enclosures for motor drives. It's the top left picture, different types of drives that we deliver. Drives are used to control the motors. If you have an electrical car, for instance, you push the gas pedal, what is happening is that the drive is increasing the frequency in the motor, it runs faster. These kind of drives can be used in all type of equipment. If you have an efficient drive, you can reduce the energy consumption of a motor with 40%.
There's a lot of investments going on in factories and buildings for running fans and pumps and whatever it is to run with this kind of equipment. There is a big demand for ships at the moment, and we are delivering power transformers and auxiliary transformers for ships from our factory in Finland, and order books are full. We're having some struggles to deliver out everything we want from this factory, but we have a huge order backlog here for 2023 and 2024, which is nice. Defense industry, we are trying to grow here as much as we can. There's huge growth in this market to build more vehicles for defense market. We see a strong growth in wiring harnesses in Sweden and Poland.
We have also got certificate in our factory in Poland to produce military equipment for the Polish army. This actually in March. We are also working with sheet metal fabrication in Sweden, Estonia, and other factories. We try to spread this business area. We have in the quarter set up a number of, we have had engineering offices, but now we have grown. We've set up an engineering office in Sofia, Bulgaria, one in Östersund, one in Västerås, and one in Trollhättan to complement our existing office in Torslanda to help in this case, mainly Swedish defense customers with design engineering of mechanical and electrical parts to speed up the development of their many big projects. It's really fun.
Hopefully, that will also result in production later on. It's good to be there from the start and being able to support them with good design for manufacturing. Since we have some time, I will show a little film now. Let's see how it works. This is from our factory in Lithuania, our newly built factory. I talked about it several quarterly reports. It's 5 minutes long. It is a lot of drone flying inside the factory, let's see if it works. We try. That is the factory. It's in Panevėžys, 18,000 sq m , and it has now 1,500 employees. Here we go through the lobby building, we will drive through the offices.
We have 200 engineers here who help their commercial vehicle customers in mainly Northern Europe, but also Australia, U.S., and Brazil to design wire harnesses for their vehicles. See one engineer there designing very long drawings because it's normally very long harness in a bus or truck. Here's a daily production walkthrough with the production manager. Some more engineers, planners, and drawn office making up in this factory. It's very nice office. Here you can see that we are educating people. Here in quarter four, we have educated more than 500 people. These are the people there. They're not here, but they're here the next. They educate in our core values, in our ERP systems, and they're trained to build and produce. Work environment in our factories should be nice.
You can see that this is the canteen where they are eating and having lunch. We like to treat people like we want to treat ourselves. They are doing a great job for us, so we want them to have a good working environment to stay with us. This is the warehouse of the wire and the length has grown. This factory has doubled in size compared to our last factory that we had in the same city. We come into the factory. We start with some wire preparation and incoming inspection. It's a lot of manual work with ladies, but we have also a lot of machine work. This is, I think, the core machine that does its strips, marks, and crimps, terminates the wire harnesses. We have, at the moment, 25 of these machines.
These nice machines that are really high productivity. What you see here is another type of machine that does twisting of wires. Sometimes you want to twist wires, so it is like twisting them. It's very long also because, as I said, we have very long harnesses. A bit more complicated, I'd say. Orange tables you see on the right, that's more like power tables. Here is a branch forming a machine which cut and strips power tables. Remember, if orange table, that means it's high voltage, and that means it's an electrical vehicle that we try to produce before. There is other steps, of course, in a wire harness factory. Now I'm with no wire factory.
That's this laser marking of connectors, so that it's possible to identify which connector with the right marking compared to the right vehicle and the right position that the connector should be in. We have an inkjet marking of the connectors done in a very good way. It's going in there on the small connectors are going on the pad link. Very long assembly tables. You can see the harnesses are very long. Here's the start of production of a harness. This is several harnesses. This is a production line where the assembly boards are moving, and this is for a truck customer. We're producing one harness every four minutes. You can see the harnesses are not so small. They are quite big and complex.
For each vehicle, it's a different harness because there are so many options that you can choose on a truck. There's the testing. Every harness is tested so that it works. We are delivering now with 100% efficiency. This factory is a zero claim ratio to our customers. You can see a lot of orange cable, means power cable, means that it's electrical vehicles, also very long cables. We're talking about big projects. Bear with me a little bit more. It's a huge factory, as you see. Here's an almost finished harness that is made. Now I have some problems. I think we get the picture. It simply never ends. There is one more flyby of the assembly place where we are assembling these different parts. I think I will skip the rest.
It is an amazing factory, so I thought that you as investors should know what you're investing in and As a famous person in Sweden said, "What do you get for the money?" This is what you get. It is not easy to for our customers to replace us, I can say. Do we have any questions? Feel free to unmute in that case, and David, please unmute and ask your question.
Hello, James. Congratulations on a great quarter. I was just wondering about the cash flow going forward in the full year of 2023. We saw some easing up in the working capital part. Should we expect this trend to continue during the year, or are you seeing some other maybe indicators that working capital should be a bit higher, lower?
I think that it is extremely good this quarter. I think if you take quarter four, quarter one, this is where the level we should be at because we will, of course, since we believe that we can continue to take market share and continue to grow, we will continue to grow the accounts receivables. I believe that our inventory level is already at the pace where we shouldn't need to increase it more.
Okay.
We should have a good cash flow in the year, and our target is to have the same cash flow as our EBT really. That's our target.
Okay. Yeah. a target of 1:1 ratio there.
Yeah.
Yeah. Great. Thank you.
Thank you. Any other questions? Sindre?
Yes. Hi, James. Congrats with a very, very strong report. It seems like you still are running a little short on deliveries in the sense that you said that you were not able to fulfill all your orders in the first quarter, and then you will have a, let's say, positive spillover with regards to second quarter. On a more critical note, do you see any signs that some customers are starting to catch up in the sense that they have now filled up their inventories and might see a slowing demand? I guess you know what I'm asking about because if there's been a kind of restocking among customers, is there any, let's say, risk that that situation will stabilize and might reverse, let's say, into the second half?
No, I don't think so. I mean, we are delivering to industrial customers that deliver big industrial systems mainly. There's not really any stocking up in our business, I would say. A truck is delivered. When we deliver the harnesses you saw, when we deliver the harness, it is consumed after two days in our customer side. We have a delivery window of 50 minutes. They have no stock, I can say, of these parts at all because it's a unique harness for every single vehicle. If we look at these electrification products, they are more for industrial use, not so much for home use. I would say that the there is not a huge amount of stock there either. Order books are still full.
I was speaking to Swedish newspaper this morning that, I mean, recession looks very far away from our point of view. We aim to beat this quarter again. I mean, we want to beat the record every quarter, so to speak, in terms of turnover. Of course, profit should follow also.
Okay. Excellent. It seems like, I mean, even though we had the very strong profit margin, I mean, especially taking into the account that you have had large price increases, because sometimes, I mean, you would expect margins to slip a little when you increase prices. I mean, barring seasonality effects, shouldn't it look even better when you entering second quarter?
Yeah. We can. Yeah. It's hard to look into the future, of course, but I can say like this, that in quarter one, there was a lot of working days, and the working days are good for us. In quarter two, it's a little bit less working days. That means that if we're going to maybe deliver out everything, we need to work a little bit more weekend overtime, and that hurts us a little bit, I would say. On the other hand, if we can, if we can get out everything that we want, we believe that it will still look very good going forward. I mean, that is really our focus: increase capacity, increase productivity, get the goods out to customer on time.
Okay, great.
Yeah.
Final question from my side. It appears that you've been successfully or at least partly successfully turning around your businesses in Mexico and China. You write something about that in the report. Is it so that, let's say our... Also Schaffner you said was had no good profitability. Is it so that, let's say, those businesses are already at or close to the group margins, or do we might see positive, let's say a still positive tailwind from those businesses?
I try to explain this, but normally we have always some companies to work on, the way we can improve. We still have companies that are not at our target in terms of margin. What I can say is that they are not contributing negatively now, which is a really good improvement. That is what brings our margin up almost 1.1% in this quarter compared to, let's say, an average of last year.
Okay. Thanks.
Yeah. Any more questions? Stine, do you want to ask another one or? Feel free in that case.
Hello, James. It's Johan here at Danske Bank. Will this be recorded that we'll see afterwards?
Yeah, yeah. You can see it in this quarter app, we will also upload it on our website and the presentation is also available on the presentation site.
Thank you so much.
It is recorded.
Excellent.
Yeah.
Thanks.
Any other questions? I think we close the call and I mean we have also annual general meeting today. It will be fun to meet a lot of shareholders here in Västerås. Yeah, it will be a great day.
I wish you all a fantastic spring and, then hope to see you on, the quarter two investment call as well in July. Thanks, guys. Have a good day.