Hello, everyone, and welcome to this live webcast. Today, we will present the result for the fourth quarter for Eltel of 2022. My name is Elin Otter. I'm Head of Investor Relations here at Eltel. With me today, I have our President and CEO, Håkan Dahlström, and our CFO, Saila Miettinen-Lähde. During the presentation, you will have the opportunity to answer or ask questions through the webcast and also dial in on the phone conference. Yeah. With that, I'm handing over to you, Håkan.
Thank you, Elin. Very welcome to this session. I will start with a few highlights of the quarter of 2022, the last quarter of 2022. I'm particularly pleased with the significant increase we have in the value of contract signed. During the last quarter, we achieved a bit more than EUR 200 million. That is significant more than what we did the year before, but also looking at the full year of 2022, we had EUR 825 million in new contract. That's, of course, something we are really happy about. Looking at the net sales in the last quarter, we did in line with the previous year. In the local currency in the segment, we had a minor growth of 2.5%.
What was not satisfying, more or less, I will say, a big disappointment for me and the management team is the Operative EBIT margin-wise came out on - 1.8%. This is, of course, the main problem we have today in the numbers. This is caused by the inflation that we have talked about before, but is now sort of also clear for us that the development of the inflation during the year started out early with fuel, asphalt, that sort of thing. Later on, it came into material and all different things we need, like tools and cars, and over the year, it has become an increased problem for us.
We see increased cost in many areas, and this is something that we are fighting, of course, but this has not been reaching the reasonable level of cost compensation in our dialogue with our customers. We see a weak result here. We also have some operational challenges and with this, together with production change in production mix, it means that we have a mishmash between the capacity we have out in the field and the workflow of work orders that we are addressing. When these are not in perfect balance, it hurts us badly on the cost by low utilization and more internal hours. This is then visible in the EBIT margin, as you see here.
What has been good in the end of the year and reflecting the seasonality is a very strong cash flow in the last part of the year. That's really good to see. With the situation we have on the EBITDA, we have taken the action to launch a saving program, and we believe that that is something that will give us benefit mid-term and long-term. Open up a little bit about this new contract. As I said, EUR 212 million in the fourth quarter, really good. It's also so that when we now are tendering new contract, we also have used the possibility to increase our prices. We have done that since early autumn.
Looking at the outcome of this and the value that you could see on new contract in fourth quarter, our conclusion is that this works well for us, and we'd have not had any negative impact on our hit rate. This is something we will also continue going forward. We also have been able to go into adjacent market and also broaden our customer base.
Both of these two is very important so that we have a more mixed portfolio of business going forward. If you look at the contract that we have mentioned on the lower part of this slide here, you could see that five of these seven is a frame agreement. That means that there is no volume commitment in this agreement, but the value that we have here is the value that we have estimated together with the customer contract by contract.
With the uncertainty we have in the world, we could also expect that there will be a fluctuation on this in relation to unexpected level here. The savings program. Due to the weak result and the shift we have experienced and our view that some of this will continue also into this year, we have taken initiative to adjust our organization to this situation.
We estimate that the savings will be more than EUR 10 million in a running yearly operation. That will, of course, not come from day one, but I'm convinced that we, during the first quarter here, will be able to finalize all of those activities that will give us this cost decrease. The effect of this cost decrease will gradually grow during second quarter, and then somewhere in the third quarter will be at full speed.
What will this impact then? Unfortunately, this will impact more than 200 roles or position in our organization of yesterday, and this will also impact our subcontractors. We will, for sure, reduce the amount of subcontractors that we're using. This is mainly in Norway and in Finland. We have a cost to do this shift to adjust our organization, and we judge that cost to be in the neighborhood of EUR 5 million.
We take a restructuring cost of EUR 5 million in the first quarter of 2023. I'm convinced that this program will help us to adapt the organization and get a better balance between the need of the customer of tomorrow and our organization's capacity. A long-term benefit from this program is something that we are looking forward to here. With that said, I would like to hand over to Saila to let us know more about the numbers.
Thank you, Håkan. Let's go and take a look at the whole group first. Basically, I would draw the attention actually to one positive fact, which is that for the full year, we did manage to increase the net sales, not by a mile, but somewhat, from EUR 813 million- EUR 824 million, by 1.4%. For the quarter, as already mentioned, the net sales were more or less in line with previous year at EUR 224 million. However, we do want to note that for the Nordic segments, we saw adjusted for the currency effects, an increase of 2.5%.
The net sales development for the full year basically reflects a very high demand that we saw for our services through the first three quarters. The quarter four does reflect reduced customer investments and thereby orders that we saw over the last few months of the year. In terms of operative EBITA, as Håkan already mentioned, we of course cannot be happy about the outcome of - EUR 1.9 million for the full year, and for the quarter, the EUR 4 million on the negative side that we saw. As already also mentioned, a major factor impacting the result was inflation across the board, across the cost base. Not to forget also the fact that COVID still played an important part in sick leave rates in the beginning of the year.
Thereafter, the sick leave rates unfortunately kept being on a very high level due to other common colds and other viruses spreading around. That thereby did actually impact basically the full year. Also a high employee turnover rate, particularly in Sweden, was a factor that affected the EBITA negatively. With that, moving on to the segments, and firstly, Finland. Finland has for some time been our steady performer. For last year as well, the Q4 net sales were more or less in line with last year at EUR 80.3 million. For the full year, we saw a slight decline by 3.2% to EUR 290.1 million. Again, we saw some lower investment levels from our customers, particularly in Power services, impacted some regulations changes in Finland.
Also, Finland had a six week-long ICT strike in the springtime, which actually then turned out to have an impact for the full year even. Some project postponements from the fall into actual this year just as well. All this said, we continue to see throughout the year quite strong demand, especially in fiber, and also healthy markets in 5G, and also in power transmission, which do carry on into this year as well. As Håkan already mentioned, we had very good sort of amount in signed contracts, and that holds true also for Finland, where the number came into more than EUR 400 million at EUR 412 million versus EUR 90 million the year before. On operative EBITA, Finland is still firmly positive for the full year at EUR 8.2 million.
However, Q4 turned out negative at -EUR 1.2 million. There the main reason is indeed increased material, fuel, and subcontracting costs, i.e. inflation, and also the sick leave rates playing a role. As said, even the full year was actually impacted also by the strike in the springtime, as well as the long winter conditions that continued well into April. Moving on to Sweden. Sweden has been suffering a long, several years period of some darker times. I think we're extremely happy to note that those are seemingly coming to an end. For full year 2022, Sweden in local currency actually saw a very healthy growth rate of 11.6%. Even in Q4 alone, that was 8.3%.
The currency effect played a fairly major role in net sales, meaning that impact was EUR 9.5 million for the full year and EUR 4.5 million for Q4, meaning that in EUR, the growth percentages were not quite as impressive, but nevertheless, worth noting. Where the growth came from, we have a very good portfolio and ongoing Smart Grid projects, which have been ramping up and are performing quite nicely at the moment. It's also worth noting that Communication, our main core business, also saw growth in the year. For Operative EBITA, the full year number came to - EUR 1 million, meaning that it was still negative. However, again, substantially better than - EUR 1.8 million the year before.
We are also very happy to note that the second half of the year, all in all, was positive, with quarter four alone on the plus side by EUR 1.2 million. The positive impacts are coming from the increase in volumes all in all, and as said, strong performance in the Smart Grids projects. The improvement again comes despite the negative impacts that are common to all our markets, meaning inflation, employee turnover, and the sick rates. Also noteworthy is that during the course of the year, we spent a fair bit of money on increased cost due to the One Eltel efficiency program, but are happy to note that during the last quarter we are also starting to see the positive impacts of that program. Moving on to Norway.
On the good note, for the full year, Norway actually saw a net sales growth in local currency by EUR 9.4 million- EUR 177 million. For the quarter four, reflecting actually developments in the year, net sales were largely in line with a very slight decline of -0.8%. There the developments through the year basically showed a very good demand for fiber and 5G all the way through the third quarter. However, as Håkan already did mention, we saw reduced purchase volumes from main customers compared to their forecasted volumes, especially in quarter four, which then on one hand reduced volumes but also impacted utilization rates and thereby also the result. The operative EBITA for the full year still remained positive at EUR 2.1 million.
Quarter four saw these aforementioned impacts and ended up at -EUR 2.2 million. Along with the mismatch of operational capacity, we also of course saw the common denominators of inflation and high sick leave rates in Norway. On top of that, yes, some change also came from the business mix, cost overruns, both due to inflation as well as then the capacity mismatch and also some operational challenges in certain projects. Moving on to Denmark. Denmark in quarter four particularly showed a nice growth of 8.4%.
For the full year, we still saw a significant decline of 15.5% to EUR 74.3 million. This is due to the insourcing by a major customer which happened already in Q2 2021. This year, of course, that comparison is out of the way, and we look forward to continuing or sort of seeing the continuing good performance from Denmark, which they have basically demonstrated ever since last summer. That is coming with the progressing ramp-ups of certain quite new but already existing customer contracts, as well as then price increases that are being implemented. On the profitability side, Operative EBITA for the full year came to EUR 0.4 million. In Q4, particularly, to 1.9%, meaning...
Well, actually EUR 0.4 million for the quarter and 1.9%, EUR 0.6 million for the full year, or 0.9%. Where we are seeing the promising signs indeed are that the rolling 12 months profitability is really starting to show an increase in trend despite, like I said, the drop that we have been fighting our way away from that we saw from the insourcing in Q2 2021. With that, moving on to other business. There the Q4 net sales showed a slight decline from previous years at EUR 25.6 million. However, full year net sales actually showed a slight growth, up to EUR 99.4 million, resulting from the realization of certain postponed projects in Poland.
While Poland contributed for that increase, the net sales in Smart Grids Germany were more or less steady and in line with the previous year. Operative EBITA for other business for the full year came to - EUR 4 million, and the biggest contribution there again being High Voltage Poland with - EUR 7.6 million, impacted very heavily by inflation on the local market as well as then the impacts of the war in the neighboring Ukraine. Smart Grids, again, continued on a very good level in terms of profitability, and also in favorable market conditions. With that, just ending up with some trends on the balance sheet side and, of course leverage reflecting the rather difficult year that we saw profitability-wise, meaning that that shows in the increase in leverage rates.
net debt actually came to EUR a hundred and twenty-five and a half million last, at the end of last year, which is more or less in line with EUR 123 million the year before. Reflecting the strong and good seasonal cash flow that we got in at the end of the year, and with the same note, I would actually end with a very positive thing, noting that net working capital, again with the strong cash flow at the year-end, ended up at - EUR 21 million, which indeed is a very healthy level and a good start for 2023. With that, I will hand it back to Håkan.
Thank you, Saila. Thank you. I would like to start by just confirming that we have the target as before. By the end of 2025, we will have an EBIT margin of 5% on group level. We will have an annual growth between 2% and 4%. This is our target, and we will stick to them. We will now talk a little bit about our journey forward to reach this target. During 2023 and the coming years, we see a need of improving the efficiency and the profitability in the current business, sort of what we see as the core business in the segment today. Here is of course, price increases and working with the price tool, a very important part of this.
We also see that what we have started recently to go into adjacent market, a new market close to what we do and have done for many years, so that we could use the same competence and the same skills we have, but use them in adjacent areas, partly in renewable energy and partly in public infrastructure. That is something that we have good experience of up to now, and we will increase our effort to go in this direction. We also see that sustainability becomes more and more important for us, for people that consider starting working in Eltel, but also our customers and investors. I'm really happy to have been able to appoint a head of sustainability and that we have this work integrated in our function of business development.
This is a part of our ambition to strengthen our capability when it come to develop new business but also commercial concept and skills. With our new established business development function, with the sustainability part integrated, we see that we have much better possibility today to implement new business model. With this, we also can have ambition to expand out our traditional role in the value chain. The first indication or first feedback, sort of, our initiatives here is very positive. Looking at in one of these areas, the e-mobility, I would like to open up how we see that area. On the upper part here, you could see the value chain and what part you could contribute to in that business. During this year, we will have active e-mobility teams in all Nordic countries.
In Finland, Norway, and Denmark, we have dedicated resources that just are doing this, and in Sweden, we are more in an establishing phase. Today, we offer turnkey projects, and that includes both the planning and the build, and then going forward, we are looking at possibility to expand our role in this value chain. That is something we do together with our partners and something that I believe will be very good for us going forward. Here and today, we are in the later part of the planning and the build phase. The market of e-mobility and how we see that is described on this slide here. What you can see is that there is a significant growth in this market in all Nordic countries.
At estimate of the fleet of electronic vehicle or electrical vehicle, we see that in the traffic of 2027, we expect it to be 4.5 million, it mean one out of three cars would be of this kind. What we see is that infrastructure is very much behind, it came new numbers yesterday for the Swedish market stating that we have 450,000 EV cars in Sweden today. With that, you would expect it to be 10% of that as a number of charging points, meaning that we in Sweden should today have 45,000 charging point in the public domain. That's not the case. We are very much behind, Sweden have today 18,000 charging point in the public domain.
On the lower right side, you could see how we have divided this market and how we will address them, meaning that we will start with the area one and two, and then later on we will also address three and four and five. We will not address area six, meaning consumer market. We have experience from that market since before, and we have made a choice to not be active in that market segment going forward. Eltel is addressing the enterprises and the professional segment now. Our ambition in numbers then. We believe that the addressable market in 2025 in our areas is 3.2 billion, and we believe that it's reasonable for us to have a 3% market share at that time, meaning that we expect to have a net sales of EUR 50 million.
This is mainly driven by our great partnership we have today with Siemens and Kempower. We also see that the expansion in value chain will support this market share. To reach this, we are increasing, as we speak, our cross-border activity, building cross Nordic sort of vehicle for building this business concept and building the capability to deliver. With that said, I would also like to come back to other areas that we have talked about before, namely wind.
As you might remember, last quarter, I opened up a bit about wind, and we can now see that since then, we have been able to sign two large agreements during November to build power lines and substation within the Finnish market. Great progress in that area, and we are today active in five other projects in the wind sector. That is developing according to plan. Now in e-mobility, we have our cooperation with Siemens and Kempower, what can we expect next? Yes, next quarter, our intention is to talk more about solar PV. With that, I think we have said what we wanted to say today, time for questions, over to you, Elin.
Thank you, Håkan. As said in the beginning of the conference, you can post your questions through the webcast. I know that we already have questions on the phone conference. We start with that. The next question comes from Adrian Gilani from ABG Sundal Collier. Please go ahead.
Hi, it's Adrian here at ABG. Just a few questions from my end. On some of the new contracts that you were talking about, you were pretty clear on the value of the contracts. Can you talk a bit about sort of the margins on the... specifically on the new contracts that you're signing? Are they more in line with your long-term margin target, or are they similar to the kind of margins we're seeing at the moment?
We have, in all our new contract, improved margin. I'm convinced that this new contract that we are signing during the fourth quarter and going forward will, in a very good way, support our target that we have for 2025.
Okay. Now that we are into 2023, we're gonna see some, you know, price indexation effects on the existing contracts that are still running, but also perhaps on the input side. Can you just help us how to think regarding the net effect on the EBITDA from the price indexations?
Yeah. It has been proven that working with index is much more complex than we might have expected. I would say that the index, I don't expect it to totally reduce the headwind we have from inflation. I would say that the indexes will help us to reduce that headwind, but I don't expect it to give any tailwind. If we have an inflation, like in Sweden just now, 10%, the indexes will not compensate us fully for that. We need to do that with other means, and working with prices and efficiency improvement and try to find more attractive areas to do business. Indexes is a part of the solution, but not fully the solution. That's my view.
It also take time until they actually help us, meaning that first you measure some, like a year, and then you get that into the price list, and then it impact prices after that date. When the cost increases are significant, and it goes fast upwards, it's a delay in the effect before we get the benefit. We cannot sort of settle just by having index. We need to work with more pricing questions than indexes.
Okay, I understand. Also, what's sort of the general status right now, would you say, on cost inflation? Are you seeing costs at least stabilize, even if they're still at a high level, or are you still seeing sort of increasing costs?
It's very different in different areas. If you look at fuel, I'm sure you have noticed that if fuel prices is coming down, so it's also with some part of the metal prices, but then cabling is still high, and so asphalt is-- It's very different from areas to areas. I don't have a good sort of number for you, but we still experience cost increases. Yes, we do.
Okay. Just a question on the cost savings program as well. You reiterated your long-term margin target of 5%. I mean, the cost savings program, it's a fairly significant sort of scaling down of the operations. Do you see any risk that that smaller scale could impact your ability to reach the long-term margin target?
I see that this saving program will support our ambition to reach that long-term target. There is an adjustment of the organization from areas where we don't see so great demand into areas where we believe there will be great demand in the future. In this shift and adaptation to the situation of today and what we believe is the situation of tomorrow, some of our people, we don't have work for them now, so unfortunately, we have to let them go. That is, of course, a sad thing. That's the situation.
Okay. A question on the slide that you showed on sort of targeting the e-mobility or e-mobility sector.
Yeah.
Could you just be a bit specific? You were talking about broadening your position in the value chain. What kind of new revenue streams does that entail?
Yeah. Yeah, I foresee a scenario down the road where we take a larger portion of the planning phase, but also a portion of the operation. That's things that we don't do today. Also see a possibility to represent some of the equipment provider, meaning that we will work as a distributor or reseller of the equipment, and by that take a larger responsibility for a solution, but that will also give us the possibility to deliver our managed services on an SLA basis. By that, exploring a new business model where we could have a monthly fee and delivering customer value based on a service level agreement.
Okay. Just to follow up, when you say parts of the operation, does that also include things like payment services?
Well-
For charging, that is. Yeah.
...that we will have to see down the road. I hope I can maybe-
Okay
... to come back to you, in one quarter per year to give you an update on the EV mobility part. We are not there yet. We don't do any payment or that type of solution today, but might be a part of the scope in the future.
Okay. One final question from my end, a bit more on the financials. We saw a significant step up from previous run rate of around EUR 2 million in financial expenses to EUR 4 million in Q4. Was there anything abnormal here, or is sort of EUR 4 million the rough run rate that we should expect going forward?
Nothing very abnormal in that sense. It does reflect the increase in interest rates across the board from commercial paper to our other financing instruments that we have in play.
Okay. In that case, thank you. That was all from me.
Thank you, Adrian.
All right. There are no further questions, so that concludes today's call. Feel free to contact me if you have any further questions after this. If not, I hope to see you on May fourth when we present the first quarter. Thank you.
Thank you.