Good morning, and welcome to the Ferronordic Q4 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, signal a conference specialist by pressing star and zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lars Corneliusson, CEO. Please go ahead, sir.
Thank you very much, welcome everybody to this presentation of the fourth quarter 2022. If we move to slide number two, we call the report Moving Forward. Obviously, we managed to divest our Russian business in the third quarter for SEK 1.3 billion . Cash proceeds from the sale was SEK 1.1, which then brought the group to a net cash position of SEK 957 million. This also means that after a very time-consuming process, we can now focus our time and resources for developing Germany and CIS more, but also looking for new opportunities.
It also means that the numbers in the report, that we published today, are very different in comparison to what we published, last Q4 in that the Russian numbers are in most cases not included. This is a comparison basically between Germany and Kazakhstan. Germany went well in the quarter. We increased our truck sales by 43%. In the market that was more or less flat. Revenue increased 38%, mainly due to the growth in the new truck sales. Towards the end of the quarter, we reached breakeven pace for operating profits in Germany. In CIS then after the sale of the Russian business, Kazakhstan is now the only current country that remains in the CIS segment. Here we had even more increase of...
In local currency rate increased by 112% and almost 200% in SEK. Big numbers down 48% overall increase in revenue, 47% in operating profit, and we had a -1.9% operating profit margin and earnings per share obviously went down. We'll come back to that. Okay, if we turn the page to number three. obviously, the conflict in Ukraine made it more or less impossible for us to conduct business in Russia. It was not easy to manage to sell it. again, it took a lot of time and a lot of complicated processes, but we managed to do it for a price close to net asset value, and we're very happy about that. Actually, we need more.
We think it was an achievement and the best way forward for us. Again, net cash receipts of almost SEK 1.1 billion and a cash position of SEK 957. The plan for us is to use the sales proceeds and strong management now to invest in furthering in our operations in Germany and Kazakhstan and also in new opportunities. We continue to develop our organization and network in Germany. We work with our partners to accelerate bringing electric trucks and sustainable transport solutions to the market. We also develop our organization and are looking for opportunities for contracting services in Kazakhstan. As I said, we look actively for new markets and opportunities. The board proposes a 7.5% Swedish krona share as dividends.
We turn to page four. Some repetition we made it, but I think it's important that we talk a little about that before going into the results, which are then different as in comparison. Both the SEK 1.3 billion, SEK 1.334 billion, I should say, was the price, and the net asset value was SEK 1.292 billion. Of this, SEK 237 million was used by Ferronordic AB to repay debt to resolve Russian subsidiaries, meaning a net cash receipt of SEK 1.097 billion. The cash was received in EUR in our account in Austria on the 23rd of December. Basically, with the sale, Ferronordic has substantially divested all its assets and liabilities in Russia.
Turning the page to number five. A summary again, 48% group revenue increased to SEK 705 million. Out of this German revenue +38% to SEK 616 million. Equipment sales up 57%. Automotive sales 21% and other sales. The CIS revenue was 69%. The equipment sales tripled, and aftermarket sales grew by 20%. We went from -SEK 25 million in group operating profit to -SEK 13 million. We saw increase, and turning profitable in CIS and Kazakhstan [revenue] corner. We also saw good trend in German operating profits from -SEK 12 million to -SEK 5 million. That meant an adjusted operating margin increasing from -5.4% to -1.9% with 58% equity to assets.
As we took, now we have a strong net cash position at the moment. If you turn the page to page six, again, turning operational highlights, market declined by 1% in Q4. Ranges declined more, by 5%. Tractors actually grew by 6%. There are, of course, growing concerns about the economy, what will happen, but despite this, the market demand, is firm. We see, however, rising inflation and energy prices, higher interest rates, and weak business indicators that may affect demand for trucks negatively. However, we also see a pent-up demand from, in the fleets, coming all the way now for almost three years from starting from COVID times, which probably can make up for the, indicators that are not, very positive at the moment.
New trucks registered in our sales area represented increased by 3% and it was then 18% of the total Russian market. We had slight constraints in Q3, and following that actually increased the marine sales by 43% in Q4 2022. And in sales that was actually 58%. We also saw 21% increase in aftermarket, of which 14% was organic growth, and the rest then came from acquisitions. Despite the increase in, well, more increase in equipment sales, we actually grew the gross margin from 11.8% to 13.4%, obviously on improved price realization. Moving on to CIS operational highlights on page seven. It's now the only market currently in our CIS segment.
The market increased by 25% in 2022. The Kazakhstan market is supported by Kazakhstan's growing role now as a regional hub, strong commodity prices and big infrastructure projects. Numbers are fairly small so far in Kazakhstan, but we increased the sales in the quarter to 26, which was an increase by 117 or in terms of money, that's 300%, due to product mix and price. Aftermarket sales increased by 20% in Kazakhstan, 9% local currency, and we also saw an increase in the gross margin here. Gross profit increased to SEK 15 million from SEK 4 million. If we go to slide eight and talk about business development, as we said, we are actively looking at new markets and business opportunities.
In Germany in Q4, we opened a workshop and a used trucks center, big used trucks center in Kostrzyn, northern part of our territory. We will open a workshop in Peine, which is east of Hanover in the end of February. We moved into a newly built greenfield service and sales hub in Hanover in the end of the quarter, which is just west of Hanover. We're working very intensively to continue to develop our rental products for electric trucks to set up the EV rental company that we are then renting electric trucks out in the market. As we became a dealer for Sandvik in Germany, we also set up a parts warehouse and service organization for Sandvik mobile crushers and screens.
In Kazakhstan, in Q4, we opened a workshop in Astana with a special focus on the road construction segment. We are taking and further developing our digital sales programs and systems that we have successfully implemented in Russia to Kazakhstan and further develop it to improve the service and sales team's performance and also customer satisfaction, of course. We're moving to branch organization to improve customer focus. Also here in Kazakhstan, we have been become dealer for Sandvik mobile crushers and screens, and we're then setting up the service and sales support for Sandvik also in Kazakhstan. Next page number nine, we can now see how we look in Germany.
We have now 21 outlets, as you might remember, which is over 10 outlets from Volvo in 2020. Simultaneously we bought two outlets from a private dealer. Since then we have made a number of acquisitions and investments. This is now how we look like. To reach a sustainable profitability in our German business, we need to take a bigger part of the aftermarket that is out there. These investments are intended to partly do that, to get a bigger share of the aftermarket, but obviously also to improve image and customer satisfaction, and improve and grow the market share.
On page number 10, you can see how our Kazakhstan network looks like, and we now have seven outlets in Kazakhstan, and we're continuing to grow and expand there. I think the Kazakhstan business is going well. We have many opportunities to further grow in Kazakhstan and we will do that. Thank you. I'll hand over to Erik for more on the economic developments.
Thank you very much, Lars. I'll continue on slide nine with a little bit of macroeconomic context, as we usually provide, relying on external sources here. Germany, starting with what is now our biggest market and business. We saw a 0.5% growth in GDP in Q4. Looking into 2023 for the environment we'll be working in there is a lot of uncertainty among forecasters there. Ranging between -0.5% and +1%, somewhere there, have a reading here of 0.1%+. Looking at slightly better growth in 2024 than at 1.4%. Inflation is high as we are aware in many parts of the world.
In Germany, it reached 8.7% in January. Energy prices also up significantly, 24%. These are indicators that impact us and impact our customers. We do see some cost pressure, believe that we're managing those. Kazakhstan saw stronger growth in 2022, 3%. Looking there at 4% in 2023, and about 4.5% in 2024. A resource- dependent economy still, oil and gas make up some 1/3 of the GDP. Growth there obviously dependent on where commodity prices move. If we go into slide 10 and rather look at the financial a bit, starting with the income statement.
As Lars mentioned, I'd maybe start off with just saying that the sale of the Russian business does change a lot of the financial statements. Looking at the income statement, worth pointing out that you see it here then without what we call the discontinued business. Only the continuing, so Germany and CIS, so CIS then being only Kazakhstan at the moment. Balance sheet on the 31st of December shows also the continuing business, whereas there the comparables would include Russia. If you look at Q3 or end of 2021. Cash flow statements again, continuing business excludes the Russian business, the discontinued business, but it's included in a separate line on each category of cash flows.
From operations and investments and financing. Looking at the income statement for Q4, we see a different picture. We have now CIS making up 30%, Germany 87% of revenue. The revenue split more similar to what we had before. 76% equipment and trucks, 21% aftermarket, so about one-fifth there, and then 4% of other, mainly rental business there. Gross margin stood at 13.8%. That's up from last year. Again, looking at the continuing business now. That's a reflection of a different revenue mix, but also strong price realization that we had in the fourth quarter.
SG&A, if we look as a percentage of revenue, that stood at 16.2%, 2% of which is group costs. That's down a bit from last year, and Germany there being lower than CIS in the last quarter. CIS did carry some extra costs of relocation of staff from our Russian office, some that will be working on the CIS development in Kazakhstan for us. Margin improved then year-over-year to a -1.9% operating profit +47% to -13%. Maybe worth pointing out there again, looking at this income statement, historically, we have allocated group costs, group overheads on a revenue and gross profit basis.
In this fourth quarter for consistency and to allow readers of the reports to compare with previous periods, we have continued to do so. Germany got its share of the total that we have including the discontinued business in the quarter and also for 2022. That is why you will see that the operating profit from the segments don't add up to the group. In the group, we include then the unallocated part of those group costs. Moving on to the full year on slide 11. 13, sorry. 13. Here we see then the revenue split for the full year. Germany making up 90% and CIS about 10%.
A similar split on the equipment, about 2/3 on the equipment and trucks, 1/4 on aftermarket and 5% of other. Again, a gross margin that performed better year-over-year, revenue mix being the driver, and also some improvements on the cost efficiency, speaking of OpEx, that is. The operating margin also improving year-over-year and therefore, also the adjusted operating profit. Remind you also that when we speak of adjusted operating profit, this excludes the one-off compensation we had from [CE] in the third quarter of this year or of 2022. If we move to the next slide, 14, just to look at the trend of operating results and margin.
We have shown an positive trend in Germany throughout the year and actually starting from fourth quarter of last year, which we of course will work very hard and expect to continue. We did hit positive operating profit run rate towards the end of the year, and we do expect to have a positive EBIT in 2023 from Germany. If we move to slide 15, next slide, and look at the similar slide for Kazakhstan, we see a similar trend, but in positive territory, except for Q4 of 2021. Moving higher, a small base, but moving in the right direction, and we do believe a lot in the potential of the Kazakh market.
If we move to slide 16 and look at the balance sheet, this is again something that changed a lot as a result of the sale here. I again emphasize that the comparable periods includes the discontinued business in Russia. That's why quarter-on-quarter and year-on-year look very different. At the time of divesting the Russian business, the working capital there was about SEK 825 million. That's left with the business. If we look at CIS, the net working capital decreased over the quarter from 4% to -3%, actually negative working capital there as a result of payables growing faster than inventories and receivables.
In Germany, we were at flat working capital, more or less, around 17%. We aim for that to come down. It is higher than it should be, so working towards higher efficiency on that metric in Germany. As a result, much of the sale of the Russian business, net debt turned into a net cash position of SEK 957 million, which put also net debt to EBITDA at about -30 as of the 31st of December. Equity to assets, Lars mentioned that, at 58%. A very strong balance sheet indeed as we move into this year and to new opportunities for us as a business.
Slide 17, we did present NAV slides previously in a different context, but we continue that here. For the group overall, a very heavy point, which is a natural effect of the sale, of course, of the Russian business. We see cash and equivalents making up about SEK 1.7 billion there at the end of the year. We have trade and receivables, and inventory, and of course, fixed assets, a lot of which is in Germany in our workshops and the infrastructure that we have invested there and continue to invest in.
Then we have, of course, on the liability side our payables on the one hand and then the borrowings on the other, landing us at a NAV of about SEK 1.9 billion. With that, I would hand the word over back to Lars.
Thank you. Let me look this forward here. Obviously, following the sale of the Russian business, we look into the future with renewed optimism. In Germany, we continue to see strong demand for trucks and service. This despite the concern about the economy and supply constraints continue to limit the market growth actually. Our sales area, as you know, is at the heart of Europe's transport business, and it benefits from the commercial activity across industries. We see also growing interest in electric trucks and sustainable transport solutions. Our operations in Kazakhstan continue to develop, and we also actively seek opportunities to grow our product and business portfolio. Demand for construction equipment being supported by Kazakhstan's growing role as a regional hub, its big infrastructure projects, and strong commodity prices.
In a longer perspective, we believe that the underlying conditions and business opportunities in the German and Kazakhstan markets are strong. We obviously also continue to look for new growth opportunities in other parts outside our current areas of responsibility. That's the outlook. Now I think I'll hand over for the question and answer session.
We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question come from Viktor Hansson from Nordea. Please go ahead.
Thank you. Good morning. First question here. I'm wondering how you managed to take so much market share in Germany within new trucks.
I think it's work that has been going on for a long time. We see a good trend in increasing the market share. It's one of our objectives obviously. We want to take more market share in order to have a stronger aftermarket business. When it comes to... We basically, already from the beginning, it was clear that one of our tasks was to improve the market share. As it is currently, market shares are unfortunately to a certain extent dependent upon the supply and how that looks like. As we said, in Q2, we had a bit of supply constraints, whereas in Q4, when we increased sales units and 43%.
Of course, overall, we are taking market shares in Germany, and we see a good trend, and that's absolutely necessary for us to have a sustainable profitability in Germany.
Okay, great. On Kazakhstan. Earnings in Kazakhstan were much stronger year-on-year, the margin was slightly lower sequentially. Is there anything positively impacting this in Q4? Was it business as usual in the quarter here?
I would say, I mean, well, business as usual, I mean, it really is a lot down to the revenue mix, and we had a very strong, if you look, compared to previous periods, sale of new equipment. So as mentioned, yeah, plus 300%, whereas the aftermarket was more moving as usual. That's not an unusual picture. The deliverance or sales of machines can vary significantly over the quarters, whereas the aftermarket serving the population is more stable. That would affect the gross margin, Viktor, quite a lot, with the, as you know, margin in the aftermarket being bigger, and then the margin in the new sales, equipment sales being lower.
That, yeah, shifts the margin when it grows and contracts.
Okay. Okay. Finally here, I'm wondering if you could tell us anything more about the new growth opportunities that you mentioned in the report. I'm wondering here, could there be a similar transformation as we saw with the acquisition of Germany a few years back? Also, are you searching outside of Europe?
Yeah. What we can say is that we're looking for new opportunities. We don't limit ourselves in terms of geography. We're looking for opportunities that fits us best. That's probably what I can say. We will see during the year what will happen and what will come out of this. Clearly, as we say, I mean, the sale of the Russian business have taken a lot of time, efforts, and hard work, and now we can focus going forward. It's like we have put the destiny in our own hands now, and we can move forward, and we're very, very happy about that. We'll come back to what happens in our expansion plans.
Thanks a lot. That's all from me.
Thank you.
As a reminder, if you wish to register for a question, please press star and one. The next question is from Adrian Gilani from ABG. Please go ahead.
Hi, it's Adrian here at ABG. Just first of all, a quick follow-up question on the new sort of opportunities going forward. Is it fair to say that you're primarily looking for partnerships with Volvo CE in new geographies? Are you looking for other opportunities as well?
Primarily, we are of course looking for opportunities with our current partners, yes. That's correct.
Okay. Looking at Germany and the quarter here, can you just help us understand the mix effects of it? On one hand you significantly increase your equipment sales share, but the gross margin also increased quite a bit year on year. That seems to be working sort of the wrong way around. Can you just explain how... What drove the gross margin increase?
Yeah. I think we had in Q4 quite strong price realization, as I said, on the equipment sales or truck sales. That's a contributing factor. We also had good margins in the aftermarket. I would say that those are the most significant factors in the quarter driving it. Yeah, I think that there are always some smaller one-offs as well, but I think the biggest factor is the stronger price realization on the equipment.
Just to understand that better, were the prices then raised during Q4, so we should then expect a higher pricing component in growth for the next three quarters as well?
Well, I think it's hard for you to model it that way. It depends on the, you know, input prices we had and the pricing we had against our customers. I wouldn't necessarily, Adrian, model it that way. It can swing between the quarters.
Okay. Okay. Also you mentioned in the report that you've set up your parts warehouse and service organization with Sandvik in Germany. Can you just sort of once again remind us how we should think about the revenue ramp-up in Germany from the Sandvik deal specifically?
What we've said and communicated, Adrian, is that we think that Sandvik could make up 15% of revenue in Germany. Remind you that in Germany, Sandvik, we have for effectively all of Germany. There is one area around Düsseldorf which we don't cover. This will take time. No question about that. We are investing in the infrastructure. We are investing in organization. So, management, leadership, service, support, and as we state explicitly here, also taking in the parts stock to be sure that we can provide parts availability and very high uptime for our customers. It will take time, Adrian. We don't give a precise timeline.
Yeah, we think over time, even considering other growth in Germany, that it can reach such numbers in Germany.
Okay. Then looking at Kazakhstan, you talked a lot about you believing in the market and expanding contracting services specifically. Is it also that you want to expand sort of the base, the workshop network? At the moment, I believe you had 7 workshops. How might that coverage look, you know, a few years from now?
Clearly, I mean, we will grow our network going forward with the sales rather. I think from a strategic position, we are more or less covering the main areas now. As we have done before, we grow with our customers. There is no reason to believe that that will not happen in Kazakhstan also. Yes, they're not ready yet, but we have a good base now in Kazakhstan to be a good platform to move from and continue. I mean, we haven't been in Kazakhstan for that long time and clearly we have a good footprint or good platform and now we also have, as Erik said, we have deployed people that usually were working in...
Previously were working in Russia and moving to our CIS segment, and based now in Kazakhstan. We look very positive beyond with Kazakhstan.
Okay. Just a final question from my end. Regarding the sort of dropping margins in Kazakhstan, how should we think of this in a more long-term context? Is there any structural reasons why margins in Kazakhstan should be below what they were in Russia? Is it a similar margin picture over time?
I think over time, it should be a similar margin picture. I think for some period we will carry bigger overheads, of course. I mean, it was a economies of scale, working very well for us in Russia. That will weigh on for some time until we ramp up the sales there really. Then, you know, if you look at the gross margin, of course, Adrian, it will depend on that revenue mix ultimately. It will depend on when and to what scale we can start with contracting services, which does or carries a very different gross profit contribution. That's how I would think about it.
Okay. Thank you. In that case, that was all from me.
Thank you.
This concludes the question and answer session. I would now like to turn the conference back over to Mr. Corneliusson for any closing remarks.
Okay. Thank you very much, and thank you for listening in and putting the questions forward. I then close this presentation over Q4 2022, and I look forward to present Q1 in the new year 2023. Thank you. Bye-bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.