Thank you very much, and welcome to our presentation of quarter three this year. You will be listening to myself, our CFO, Pernilla Lindén, and our Deputy CEO, Martin Åberg. So the agenda, we will first look at Hexatronic at a glance, some Q3 highlights, acquisitions, a financial overview, business overview, and then we end with a summary and outlook. And after that, we will have a Q&A session. So starting at Hexatronic at a glance. So overall, on rolling twelve months basis, we have revenues of 8.1 billion SEK, and an EBITDA of 1.4 billion SEK. And over the last four years, we have seen a yearly growth of 45% of revenue and 79% of EBITDA.
On rolling twelve months, we have an EBITDA margin of 17%, and we are currently more than 2,000 employees in the group. Looking at the markets we operate in, we have a very positive medium and long-term view. There are a number of reasons. One is there is a very low fiber penetration in many of our strategic growth markets and other countries also. We'll come back to that. We also see significant government initiatives, subsidies to support the fiber expansion, and I'll come back to that regarding U.S., U.K., and Germany. But I would say in most countries, Western countries today, there are subsidies, and primarily they are focused on rural deployments, where operators have difficulties to get the business case together. We also see that 5G deployment drives the need for fiber networks.
5G is totally dependent on the strong fiber networks to transmit the high speed and the amount of data. So that is a big driver of fiber networks. We also see an increasing use of data-intensive technologies like AI, and that creates a need for more data centers that need connectivity and also connection to the data centers. And I would say more in our harsh environment space, we see a shift from copper-based solutions to fiber, and that is very much in the demanding, harsh industries like oil and gas, sensing, defense, and so on, where also the data need is increasing, and also, it's also about weight. So I would say today, reliable networks, it's a must in modern society, and in most countries, fiber optic networks are regarded as a critical infrastructure, just like the energy utility network.
If we move on, and here we look at the fiber to the home penetration in some countries, and we have highlighted our three strategic growth markets, Germany, U.K., and the U.S. We still see these figures are mainly from September last year, but also some from April this year. We see that the fiber penetration is low in many countries. If you compare this to Sweden, which is a quite mature market when it comes to fiber to the home, it's at 68%. But big markets still have a long way to go, and that's a driver, and this will happen. We also see that there are big governmental subsidy programs, as I said before, primarily for rural expansion of the fiber networks.
So in the U.S., we have the BEAD program, which is $42.5 billion, and there are other programs also. So in total, you can say it's roughly $65 billion in subsidies to build out the fiber network. In the U.K., they have a similar program, that's a fund of GBP 5 billion. And in Germany, they have their Gigabit Strategy, where they have changed, the system. I will come back to that for allocation, but now it's a EUR 3 billion program per annum, that they have deployed. So big subsidies in order to make more people connected, with fiber. Looking at Hexatronic, we see—we have four different business areas, and the largest one, representing roughly 80% of our total revenue on rolling 12-month basis and also pro forma, it's, it's fiber solutions.
There you have our fiber to the home business, you have transport networks, you have the submarine cable business that we have. That's a major part of the Hexatronic Group today. But we see an increase then in our business area, harsh environment, today representing roughly 12% after the latest acquisition of our total revenue, and data center activity roughly 6% of our total revenue. Then the smallest one and less mature, it's wireless, which is only roughly 2% of our total revenue. We'll come back to that when we talk about acquisitions further on. Moving into Q3 highlights. We saw a growth of revenues of 11% compared to the corresponding quarter last year. But in this growth, we had a decline, a negative organic growth of 13%.
EBITDA was down 7% to SEK 296 million, corresponding to a margin of 15.4%, and compared to 18.3%, the corresponding quarter last year, and that was a record quarter in terms of EBITDA margin. Earnings per share, 0.85 SEK per share, and we saw a cash flow from operating activities of SEK 107 million, and that corresponds to a cash conversion of 49%. Our leverage ratio was, at the end of the quarter, 1.8, and that's measured as financial net debt, including lease liabilities and to rolling 12-month EBITDA pro forma. The increase from the end of Q2, where we had 1.5, it's primarily due to the acquisition of Fibron that we did during the quarter.
In the quarter, we have also continued to see what we had talked about for many quarters, a normalization of the customer behavior when it comes to placing orders. Today, the supply chains work as pre-pandemic level, so we are back to customers putting in orders, I would say, in four-six weeks lead time. And that has contributed to a shorter order book, but also, I would say, a softer market. On the 22nd of September, we issued a trading update, a press release, where we saw softer market conditions in the U.S. and Germany, and we stated for the second half of this year that we expect a negative organic growth. But we also said we expect an EBITDA margin that is within the range, the long-term financial goal, we have 15%-17%.
During the quarter, we completed the acquisition of Fibron, and that is strengthening our position in harsh environments. They produce electro-optical subsea cables, primarily for ROVs, renewables, like wind farms and so on, and it's very complementary to Rochester, that we acquired earlier this year in the U.S. We made a small acquisition in New Zealand of a fiber optic material distributor called ATG, and we also, after the end of the quarter, announced the acquisition of US Net that strengthen our position in the U.S. data center market. If we look year-over-year here, we have, regarding revenues, as I mentioned before, had a growth, yearly growth of 45%, and you see the very strong development starting in 2021, continuing into 2023.
We have a stable margin development, increasing up to 17.7% in last quarter, now 17% on rolling 12-month basis. We have a yearly growth of 79%, and you also see the development of our earnings per share, and that is 92% over the same, over these four years, yearly growth of that. When we talk about acquisitions, I will hand over to our Deputy CEO, Martin Åberg, also responsible for M&A.
Thank you, Henrik. During the quarter, we acquired ATG. That is a value-add distributor, servicing the New Zealand market with passive telecommunication products. The acquisition is a bolt-on to our existing Optical Solutions Australia, that has a very strong foothold in the Australian market. ATG has annual sales of approximately NZD 3 million, and the acquisition was financed with available cash. Over to US Net. After the quarter, we acquired US Net, that is based in Texas and has annual sales of approximately $10 million. It will complement Data Center Systems or DCS, that is our existing company within the U.S. data center market. It is a strong fit between the companies, that both are, again, based in Texas. US Net is more focused on services, while DCS is mainly focused on product sales.
There's also strong potential for cross sales, where DCS are more focused on the enterprise segment, and US Net are more focused on the large data centers that is expected to have high growth, going forward. The acquisition of US Net further strengthens our position in data centers and also diversifies Hexatronic Group. So on a pro forma basis, data center account for 6% of our total group sales, and US Net was also financed fully with available cash.
Thank you very much, Martin. We will hand over to Pernilla, our CFO, to walk us through the financial highlights of the quarter.
... Thank you, Henrik. We had a total net sales of SEK 1.9 billion in Q3, which is an overall growth of 11% or SEK 189 million. That was driven by acquisition-driven growth of 18%, coming from HomeWay, IDS, and K-net that was acquired during 2022, but also from Rochester Cable, Fibron, and ATG that was acquired in 2023. The acquisition-driven growth was offset by an organic decline of 13%, primarily related to softer market in U.S. and Germany. The organic decline in U.S. and Germany was partly offset by double-digit growth in Canada, APAC, Austria, and Finland. We also had a positive FX effect of 5% for the quarter, mainly driven by the strengthening of U.S. dollar, euro, and sterling.
A gross margin at 42.4%, which is 1.6% lower than last year, and that is mainly due to lower manufacturing utilization, low product production efficiency in Rochester Cable, and some price pressure in some markets. Regarding operating expenses, that has increased compared to last year due to the acquisitions and some integration cost. Overall, the OpEx declined with 13% compared to Q2 in 2023, due to both a reduction of variable cost and also due to good cost control. OpEx in percent of sales is at 25.3%. We had an EBITDA of SEK 296 million, a 7% decline compared to a record quarter last year, and an EBITDA margin of 15.4%.
EBITDA margin is affected negatively with 0.8% during the quarter due to integration cost and lower production efficiency in the Rochester Cable unit. Next. Cash flow from operating activities before changes in working capital, we had SEK 220 million . We had a negative overall effect of changes in working capital of SEK -113 million . The positive effect from accounts receivable of SEK 34 million , as well as the positive effect of further reduced inventory of SEK 21 million , was offset by decrease of our accounts payable. And the reason for reduced accounts payable is due to reduced purchase of raw material as we actively focus on reducing our inventory. So cash flow from operating activities amounted to SEK 107 million , which corresponds to a cash conversion of 49%.
CapEx at 4.6% of sales in the quarter. We have continued to have investment in capacity for further growth. The investments in the quarter is mainly linked to investment in the U.S., in the Blue Diamond Industries, investments in conduit and pipe capacity, as well as microduct capacity. And of course, also investment in our Swedish manufacturing plant in Hudiksvall. We also have done the acquisition of Fibron during this quarter, and also then continue to focus on... Yeah, overall, then we continue to focus on decrease on inventory levels. If you take the next slide. Net debt, including leased liabilities of SEK 3.1 million and a leverage of 1.8.
It's an increase of 0.3, and that is mainly due to the acquisition of Fibron and CapEx, CapEx investments. At the end of Q3, we had SEK 595 million of cash and an unutilized backup facility, which gives a liquidity of almost SEK 1 billion.
Thank you very much, Pernilla. So we will go through a bit about the business, and we start with Europe, excluding Sweden. That area represents 47% of our total revenues. The big markets here for us are the U.K. and Germany. In the quarter, we saw a sales growth of 90%, that's driven by the acquisitions we have made, IDS in the U.K., Rochester in the U.S., that is selling to some extent into Europe, and also Fibron that we acquired recently. We saw an organic decline of revenues, and that's was primarily due to Germany. We see a softer German market, but we also saw positive contribution in terms of organic growth in primarily Austria and Finland.
And when we look at the U.K. business, we had flat figures versus last year, in a market that I would say is also softer, but we increased rev, sales to one of our existing customers that has developed very well during the quarter. When we talk about the market development, we see a softer market in both U.K. and Germany, and I would say overall, we see that many markets are softer. The main reason being the cost of capital with the interest rates, the inflation, this has led to postponement of projects, and as I mentioned before, for us, especially in Germany. We also, in Germany, saw a change of the structure of the government subsidies, and that happened this spring.
And that has created a backlog of very few projects have been coming out on the market that are financed by these subsidies. So that has created a clear delay in these kind of projects. If we move on to North America, we had a growth, and that represents 35% of our total revenue. We saw a growth of 4%, and that was driven by the acquisition of Rochester Cable, but also a strong development in Hexatronic Canada, and that's organically. In total, we saw an organic decline in North America, and it's primarily due to the concrete and pipe business we have in Blue Diamond Industries, and partly also in the FTTH systems that we have in the U.S. We can say regarding FTTH systems, it was more delays, customer project delays.
They didn't get the permits they needed and so on. So we haven't really seen decrease of our FTTH systems market. We can say also that, regarding the South Carolina plant, all lines are now installed and fully commissioned in the plant, in the new plant in Clinton, and that's since the end of September 2023. And we continue to the investment we are doing in the factory in Ogden, Utah, and that is expected to be ready for production in Q3, and that will also open up a new market for Blue Diamond Industries in the western part of the U.S., where we previously have not been present. So that's a very interesting market, which is quite significant. If we talk about the market development, we see a softer U.S. market, primarily within concrete and pipe, partly in FTTH projects.
When it comes to the BEAD Program, we expect that to start to show effects in the second half of next year. Some states have come very far in the approval process. Five, six states are very well ahead, and some are a little bit slower. But second half of next year, that's when we expect that this will start to have an impact on the market and then growing into 2025 and onwards. Overall, it's at least a five-year program, and here I talk about these $42.5 billion in subsidies. Moving on to Sweden. Sweden represents 9% of our total revenue.
We saw a decrease of 15%, and that's organically, and it was primarily driven to lower activity in the fiber to the home, but also our sales to mobile operators in the quarter was lower. And I would say it's the same reason here as we have seen in many markets. It's a softer market, very much due to the cost of financing and inflation. Then moving on to APAC, Asia Pacific. There, they represent 10% of our total revenue. We saw a sales growth of 34% in the quarter. We had a number of project deliveries in Australia, and also the acquisition of K-net. And as Martin mentioned before, we did the acquisition of ATG in New Zealand. That strengthens our position there, and we see a lot of synergies with our OSA in Australia.
Also, in the APAC area, we see the same softness of the market and the same reason with the cost of capital and inflation. Moving on to first the summary and then the outlook. So, summary, what we have talked about, net sales increased 11%, driven by acquisition, but we saw this organic decline of 13%, and that's primarily in the U.S. and German market. And we partly offset that negative growth with growth in Canada, Australia, Austria, and Finland in the quarter. The EBITDA margin decreased to 15.4%, compared to 18.3% in the corresponding quarter last year. And main reasons, lower capacity utilization, following the softer conditions, and then I talk about our plants, and we have also seen some price pressure in some markets.
We will continue to adjust our capacity and cost going forward to balance. We have a strong balance sheet with a leverage of 1.8, so that provides flexibility for further expansions, and we still continue to look for complementary acquisitions to strengthen our primarily new areas, and then I repeat, harsh environment, data center, and wireless. And then coming to the outlook, and I just repeat what we communicated in the press release of the twenty-second of September, that we expect a negative organic sales growth in the second half of 2023, but an EBITDA margin that is within our financial target of 15%-17%.
When we talk about the market development, overall, the market for investments in fiber optic telecommunication infrastructure in the coming quarters, we expect that the market to be roughly on the same level as we have seen in the third quarter, meaning a softer market. And I repeat myself again, but the main reasons being the higher cost of capital and inventory buildup in some markets, meaning that, investors, telecom operators, and so on, are a little bit more careful. We expect to see the governmental subsidies to have an increased impact on the market going forward. We have talked about the huge program in the U.S. in the second half of next year, but also the German program that we expect that will start to kick in, sooner.
And this, in combination with normalizing inventory levels in the market, we expect a gradual market recovery from the second half of next year. Then we are done with our presentation, and now it's time for Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Adrian Gilani from ABG Sundal Collier. Please go ahead.
Yeah, hi, it's Adrian here at ABG. A few questions from my end. First of all, on the margin side, you say that the market is expected to be at the same level in the coming quarters, and then meanwhile, you have more capacity coming online that should make for a higher cost base. So can you outline sort of how the South Carolina and Utah plants that you're adding will... How much that will add to the fixed cost base compared to the Q3 run rate?
Not in detail, Adrian, but of course, when we talk about the Utah plant, it's under construction. So it's primarily CapEx investments that we are doing there. We have started to hire a few people, like a plant manager, and technical people, but I would say that's to a lesser extent. When we talk about the plant in Clinton, there, the CapEx investments have been done, it's up and running, so it's very much due to the capacity utilization. As usual, we will adapt the cost structure there, so it fits the utilization we see.
I understand that, but there's obviously going to be a lot of—there's going to be fixed cost as well when you add a new plant. And given that you're already close to the lower end of your margin target, and it sounds like with flat sales going forward in absolute numbers and then costs coming up, there should be downside to the 15%-17% margin range. Is that a fair assumption or am I missing something in that?
At first, I would say we don't provide guidance on our sales. We provide guidance on how we see the market developing. When it comes to the Clinton plant, I mean, we have been ramping up the cost base over the last, I would say, year. So, a lot of that cost is already in our P&L in the Q3 report.
Okay, I understand. And then I guess on cash flow as well, you have had a few years now of working capital buildup, and the reasoning was always that it's due to the high growth figures, which I think is very reasonable. But now growth is coming down, and you still have to tie up working capital. I mean, should we expect a release coming in the next few quarters? And sort of what was it that drove the working capital buildup in this quarter as well?
So overall, when it comes to the buildup of the working capital for this quarter, is that we have a reduction of our accounts receivable and a reduction of inventory for the quarter, but that is offset due to that we have lower accounts payable due to that we are not purchasing as much as we have done before. That's the main reason, and as we have communicated early, we continue to focus on reducing our inventory, and that is... we will continue to do. And of course, also being watching our accounts receivable, as we do on a monthly basis, and making sure that our customers are paying on time.
Okay, so I should take the lower payables as a one-time thing, and now you, now you are going to work down inventories from here, so it should be positive and absolute numbers going forward.
We have reduced our inventory since beginning of the year, and we will continue to work on that.
Yeah, but the significantly lower payables part, is that a one-time thing, or will that have to-
Well, of course, that-
continue to decrease?
Of course, that takes time to reduce inventory, and of course, that has an effect for us overall. So the accounts payable will, as we reduce inventory, will also be less.
Okay. And then finally, on the orders, as far as I can see, there's no mention of the organic order book growth. Can you give any sort of quantitative figure on that? And if not, how come you chose to stop report that figure?
No. I mean, we have seen, and we have communicated this for a long time, that the order book is coming back to a more normal situation as we had pre-pandemic. So we mentioned it's down to a little bit more than two months of sales, what we normally had before. And I would say in the corresponding quarter last year, we were a little bit above 5%. So clearly, it has gone down a lot, and a lot in percentage also. Then, we are looking into going forward, should we communicate our order book and order intake, yeah? But we will come back on that in coming reportings.
Okay.
Mm-hmm.
And so the reason for pulling the number now was that it's a short order book?
It's a short order book, yes.
Okay.
What we were used to pre-pandemic.
I mean, you did report the orders when it went from two months to five months, then you reported the positive numbers, and you did report it before the pandemic as well. For me, I think, that's a bit inconsistent, to be honest.
I hear what-
Okay, yeah.
I hear what you say, Adrian.
Okay, I mean, in that case, yeah, that's all for me.
Mm.
Thank you for taking my questions.
Thank you.
The next question comes from Max Bäck from SEB. Please go ahead.
Yes, thank you, operator, and hello, Henrik, Pernilla, and Martin. To follow up on Adrian's question regarding the margin ahead, I mean, if I don't mistake myself, you have, for H2 at least this year, guided for, for the margin being within the financial target of 15%-17%. Should we interpret that as on a quarterly basis or on rolling twelve months?
No, what we guided on there was for the second half of this year, so it's both Q3 and Q4, and that's where we see a negative organic growth. We expect that, and we expect to have EBITDA margin within the 15%-17%, so that's for the six-month period this year.
Okay.
Mm.
Perfect. Thank you. And regarding the price pressure that you mentioned, that you have started to see in some markets, can you elaborate a bit on that and, and the magnitude of it, where you see it and in which segments?
Yeah. So if I start by, we have seen in the U.S., for Blue Diamond Industries, you know, they produce pipe. In a softer market, the competition tightens, so there we have seen some price pressure. We have seen the big material, resin, the cost of resin, plastic resin, being quite stable. I wouldn't say that it's a dramatic price effect, but I would also say that we have seen effects in Germany and the U.K. regarding, you know, a bit lower price with tougher competition. In a softer market, there is always someone who is desperate for volumes and put out lower prices, and sometimes we have to meet or we have to adjust our pricing. So I would say some effect of that, but not huge.
Okay, perfect. In Germany, with the government subsidiaries that was changed during the spring, and projects being postponed, do you have a sense of the timeline here going forward? Is it... I mean, will these projects come to the market quite soon, or is it quite far away still?
We don't know. What we hear is there is a huge number of projects that are for approval, but very little has happened. And, you know, we cannot tell when it will happen, when will they be released? But I think, you know, it's a bit of an inconsistency when the government put in EUR 3 billion in subsidies for this year, and then, you know, it's not really approved, the different projects that comes in. So, I think it's clear it will happen, but the timing, we don't know.
Okay, perfect. And, just a short question on the comment on Rochester Cable, that it had a negative impact by 0.8 percentage points on the group level. I mean, is this... I guess you have seen the same effect during, Q2, also and to some extent Q1, I guess. It's nothing new, right?
So, in terms of Rochester Cable, it was a carve-out. It's actually the third carve-out we are doing, and we know it's always a long process. Normally, it takes 9-12 months, as we have communicated in the previous quarters, and we saw a higher impact this quarter. It was to a less degree in the previous quarter. But again, I mean, as we communicated, we expect it to be back to be at normal levels early next year.
Okay, perfect. And regarding the balance sheet and the leverage, I mean, given the highly uncertain market, wouldn't it be wise to put acquisitions on hold for a while, to not stretch the balance sheet too far? Or how do you think on that subject?
So, I mean, we evaluate acquisition by acquisition, of course, and always have cost of capital and leverage in mind. And we have seen a shift of focus from FTTH to our new business areas, and with the exception of Fibron and Rochester, that was a bit larger, we tend to do small, rather small acquisition, right? So I would say that you should expect to continue to see a few smaller acquisition, but the mid or larger size will be more unlikely that we do going forward.
Okay, perfect. And the last question, yes, detailed, but on page 23 in the report, relating to acquisitions, you mentioned doubtful accounts receivable amounting to SEK 2 million that are reserved. Is this isolated to specific acquisitions, or is there a risk for this to escalate on a group level, given the some customers being distressed?
No, it's related to the acquisition, as you stated. So no, I don't see any bigger risk. As we are following, as I said, the accounts receivable and the DSO and the overdue on a monthly basis, and I have not seen any big changes on that. We are very close to that.
Okay.
Mm.
Perfect. That was all from me at the moment being. I will jump back in the line. Thank you very much.
Thank you.
The next question comes from Jakob from Edler. Please go ahead.
Hi, thank you so much for taking my questions. I think most of my questions have already been answered, but I just have one, to start with regarding Rochester, kind of continuing that discussion. You've previously in the years talked about the strong kind of order development in this unit, despite margins being kind of suppressed, as you alluded to, regarding it being a carve-out. How is that order intake progressing, would you say, in the kind of harsh environment area and also specifically the Rochester?
No, I would say generally in the segment and also for Rochester, it's still a strong market, reflected also in a strong order intake for the harsh environment area.
Okay. Perfect. Also, you talked about some delays on the system sales in the U.S. this quarter. Is this related to the new order that you started to or you should have started to deliver upon in August? Or, what is this—what are you kind of referring to here, so to speak?
No, it's not that. That customer we have started to deliver to, and it's ramping up. It's a couple of other customers, you know, then they go into a town or city, and they plan to build, and then they need to get different permits. And there, they had delays in the permit process from the city council or town council, and that has been the reason in Q3 why we saw a little bit softer sales in FTTH systems. I can add also there that, I mean, we are expanding our customer base regarding FTTH systems. And as I mentioned before, I mean, the customers there are quite often private equity-funded fiber optic network builders building networks locally or regionally. We haven't seen in that sector that there is any capital squeeze.
I mean, they plan, and they continue to build.
Okay, perfect. And then also just getting back a bit to gross margins. We've already talked about kind of the low production efficiency in Rochester, but what else is kind of dampening the margin? You talk about production utilization. Is this primarily then related to Blue Diamond Industries, or are you also seeing that across many of the other units? Or what would you say else there? Just so I get that clear.
No, I would say in general, with the softer market, we have a lower capacity utilization in several of the plants. But of course, just like when it's, you know, going up, we hire more people, when it goes down, we have to adjust the staffing and the cost level in the plant. So that's continuously ongoing.
Okay. And then, just a last question, kind of jumping back a bit, I guess, to the last reporting season, where you thought that most markets would grow 0%-5%, and then you came out with a different view in September and now expect a negative development in the market. Was this due to kind of, you know, September all of a sudden kind of falling off the cliff? Or, can you maybe talk a bit about how the market developed, you know, during Q2 and then into this quarter? Maybe also comment a bit, if you can, on the kind of current trading in the market at the start of the quarter and what you've seen so far.
... Yeah, I would say what we communicated regarding the markets in Q2 was that we saw they would be flat or low single-digit growth, huh? And then I would say in September, we started to see a slower market, and we also went out with that press release, the 22nd of September. Now, we report this report today, 27th of October. So of course, we have seen the first weeks of Q4, and what we have seen is in line with what we communicate today regarding the market. Had we seen something different, we would have communicated that.
Yeah. So would you say October is kind of in line with what you saw in September then? Or-
Yeah.
Is that how I should read you or kind of the full quarter performance?
I mean-
Would you have anything to add there? Yeah.
What I talk about is the market, again.
Yeah
... it's both all the context we have had, but we have, of course, we have also seen how we develop.
Okay, perfect.
Mm.
Thank you so much. That was all for me.
Mm-hmm.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
Mm.
The next question comes from Fredrik Nilsson from Redeye. Please go ahead.
Hi, just one question that you haven't really touched upon yet. As you say, your outlook is about the market, and it seems like so far, and particularly in the first half of the year, that you did a lot better than the market. So, I mean, should we expect you to continue to do better, or do you see a risk that your performance will converge towards the market in general?
I mean, I think you're right with the comment on the first half, and I don't see that we have lost market share in the third quarter. Our ambition is always to gain market share. So that's our focus.
Okay, I see. Thank you. That's all from me.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions.
Okay, so let's start with the first question. "Hi, how much are you planning to reduce production? CFO said HTRO have reduced raw materials purchases, so how much are you planning to reduce production?
I think I commented on that before, that of course we are adapting our capacity to the demand we see. So I will not go into figures, but clearly, when it's a softer market, we reduce the capacity in our plants.
Next question here: "Looking at 2024 as a whole, would you expect a positive organic growth for the year, or how do you characterize the level of visibility and your confidence in your view?
No, and just to be clear, that we don't provide guidance. We refer to our financial targets, where we have, and that's long term, over a business cycle, a yearly growth of 20%, but we don't comment on the organic growth or guide on that. I'm sorry.
Next question: "How do you expect the impact of the Utah factory production starting in Q3 2024? Do you see a large setup in H2 2024 sales in the USA, from this in combination with the BEAD subsidy?
I think we will not see, you know, a big jump start when we start up Utah. It's always some time before everything is ramped up. We are already working on, you know, creating a market position in the western part of the U.S. So what I believe we will see a gradual increase in revenues from that plant. Then, of course, with the BEAD funding, it will put more fuel into the demand for ducts, and that will be a positive for that plant.
The cash conversion cycle is taking a hit this quarter, primarily due to accounts receivables. Do you see any signs that customers are not able to meet their obligations to you?" As I said before, we are following the overview very carefully, and I see very limited signs or none, where the customers are not able to meet their obligations to us. "Could you please provide an approximate revenue split between Germany, U.K., and others when it comes to revenues in rest of Europe?
I mean, we don't disclose that in detail, but, I mean, the big part is U.K. and Germany in, in the market outside, Europe, outside, Sweden. And they represent a little bit more than 60% in total of, of that figure.
... What actions are you taking to be able to sustain EBITDA margins at 15%-70% the coming quarters amid the weaker market?
Yeah, and one thing is, of course, what we already said, that we adjust our capacity. A tight cost control all over the group in order to ensure that, you know, we optimize our cost base. And then we shouldn't forget, I mean, we are extremely active on the sales side, getting into new customers and also defending our price levels.
And then you have, you mentioned that Rochester had a negative impact on EBITDA margin of 0.8%. What's the reason for this, and do you expect quick rebound here?
Yes. As we previously communicated, we expect that the carve-out to take 9-12 months, so, in 2024, we want.
There are many large projects ongoing within marine cables globally, and we have also seen a few incidents with these cables in recent months. What's your view on your possibilities to win larger orders in the near and mid-term?
I think, this is a correct and good question. I mean, the market for submarine telecom cables, but also submarine energy cables, is very strong. There are a lot, there are a lot of links planned. So when we look at that market, it has a very positive outlook for, I would say, the coming five years, because these projects takes time. And I think we are well positioned. We are an independent player there in that market. We have some limitations because of production. I would say, and normally say that maximum per year, we would have a sales revenue of, say, SEK 150 million-SEK 160 million out of our submarine cable business. But it's a very positive market outlook. I think we have come to an end when it comes to questions.
I want to thank you for participating, listening in, asking good questions, and I hope to see you when we present the Q4 results beginning of next year. So thank you very much!