Thank you, good afternoon, and welcome on our behalf as well. We are obviously looking forward to present this report. We are happy with the content of the report, we start immediately by introducing some of the highlights from the third quarter. You see on the slide that we gradually improved the market situation, or we experienced a gradually improved market situation, still the overall demand impacted negatively by the COVID-19 situation. We will obviously elaborate a lot more on this further along in the presentation. Briefly, organic order intake -2% and organic net sales unchanged. A strong demand situation. Significant variations, as we have said in the previous quarters, between companies, segments, and markets.
We are presenting a record high EBITA margin to some extent driven by positive demand in certain segments, and also to a large extent, very good cost management. We had, as also in quarter two, very strong cash flow, and we are also happy with our acquisition pipeline. Now we have acquired nine companies, very good companies so far during this year, and we will talk a bit more about the acquisition situation further down here. In terms of the situation overall now, I would say that we have had the same priorities this last quarter since the pandemic started. First of all, obviously the health and safety of our people and also the people around us, being customers, suppliers, and others having reasons to interact with Indutrade. Secondly, to really try to protect our profit margins.
Thirdly, in the dynamic situations like this, there are always business opportunities arising. Try to basically capture on the volatile and dynamic landscape around us. If we then turn slide, and we thought it would be helpful and meaningful to, quite early in the presentation, start to try to describe the effects we have had of the COVID-19 situation this quarter. We have a couple of points trying to explain this. First of all, perhaps not surprising, again, demand has improved gradually but a majority of the companies were still, to some extent, negatively impacted by the pandemic. I would also say then that some med tech companies have had a positive impact by COVID-19, but this impact is slightly less in quarter three than in quarter two.
From a market perspective, a majority of the companies had negative impact, and a lower number of companies in the med tech sector has had a positive COVID-19 push. It was much stronger in quarter two, but some impact in quarter three. The cost measures have been taken, I would say, strongly by all companies who have experienced decreasing volumes, so that's a broad type of activity. We have had short-time work which has declining. At the end of this quarter, we had approximately 600 persons involved in short-time work activities out of 7,200 employees approximately. Number of permanent reductions since quarter one is 260. Just as a reference then, in quarter two, we had approximately 1,000 persons furloughed. It's a dramatically lower number now than it was at the end of quarter two.
We have been given some governmental support, that corresponds to approximately 0.5% in relation to net sales, and in absolute terms SEK 22 million approximately. That's also dramatically lower than in quarter two where we had 1.5% of sales in profit impact and approximately SEK 70 million. That's also decreasing but having some impact on profitability. We also had in this quarter now a total of SEK 21 million in non-recurring items. This is primarily relating to the pandemic. What we've done is that we have basically released earn-out provisions of SEK 197 million, they correspond to a bit more than a handful of companies. Unfortunately, these companies haven't been able to realize their top line, nor their bottom-line plan, you can say. We have made these earn-out provision releases.
Linked to this, we have written down the goodwill in some of these companies with SEK 141 million. In addition to that, based on the difficult cost situation in some of the companies, we have also made some restructurings, and this has been primarily done in the U.K. and Sweden, and this accounts for about SEK 35 million. The net result of these activities is SEK 21 million, which had a positive impact on our profit in the quarter here. By this, you should have a good understanding of COVID-19 effects of our numbers. All one-off items are reported in the consolidated financial statements and no effects on the business area level. I think we turn to the order intake slide and try to explain this a bit more.
As I said, the pandemic continued to have negative impact on the majority of our companies, but less impact than in quarter two. Again, just stating that there is large variations between company segments and business areas. We have seen strong development in some companies, primarily in the sectors in med tech and pharmaceuticals. Some of that has been COVID-19 related, but actually a majority of it has not. Other good segments is infrastructure related and in specific, more water and wastewater, good segment, and quite a lot of companies having positive impact from that. We have also had the demand for valves for power generation continue to be good, but this is sequentially flattening out and is also having a difficult reference from 2019.
Many of our companies exposed to the general engineering and automotive sectors still have lower demand, but slightly improved versus quarter two. Picking up step by step. If we look at business areas, I would say that business area Flow Technology and Fluids & Mechanical Solutions had the best development, and the more weaker situation in Measurement & Sensor Technology and in DACH. I will come back to this in a separate slide. The book to bill was slightly , -2%. If we exclude the power generation impact, it was more or less flat actually. To sum up, all in all, total growth in the quarter, -3%, organic growth, -2%. If you exclude power generation, more flattish I would say, acquisition effects +3%, currency, -3%.
If we comment on a more general dimension, I would say, which I've said before, that what I call the day-to-day business is on a good level, I would say, generalizing. What we lack is more project-related sales, which on a customer level involves CapEx investments and things like that. That's where many of our companies are behind versus last year, I would say. We turn to net sales, and obviously a bit in line with the order intake development, also negatively impact by the pandemic, but there has been a strong backlog, which been positively used to invoice and the sales situation is hence a bit better than the order intake. We were flat in terms of total net sales and acquisitions made it + 3%, and currencies again, - 3%.
If we try to talk about sales in more of a geographic perspective, it's a lot of markets where we are rather flat, I would say. Standing out positively is Denmark. Not sure I can explain exactly why, but maybe more that we have some really good companies in Denmark gaining market share in a positive sense. Weaker development in Germany and Finland. Germany, I think is easier to understand, high impact on the automotive sector there. Finland, a lot of base industry, process industry, CapEx intense, less investments. We see in general that Finland is going down a bit. U.K. is also problematic, and we'll see what happens in terms of Brexit there. Yeah, difficult quarter for many of our companies there.
That was more or less on the sales side, all I wanted to say. If we look at the profitability, despite flat sales development, we grew with 16%, and the EBITA margin in total was record high with 14.9%. A great result, all-time high, organic impact increased 16%, acquisition 3%, currency, again, - 3%. We usually really want to follow profitability more in an underlying perspective or organic perspective. Obviously we want to exclude these one-offs I spoke about earlier, if you do that, the margin was 14.4%. The contribution improvement is again coming a lot from the med tech sector, pharma sector, strong invoicing, and enhanced profitability in the power generation sector, wastewater sectors. Also really a good proof of the agility in our companies, great cost measures taken and cost management in a lot of the companies.
They really try to follow expenses in relation to sales and bring this down as quickly as they see order intake negatively affected. I already spoke about the headcount situation, I don't think I need to reiterate that. The governmental support was also impacting approximately 0.5%. Perhaps more true underlying, we were at 13.9% then compared to 12.8% last year. The governmental support, I would say, are good to have, but if we wouldn't have been given this or awarded this, we would have dealt with our costs more resolutely anyhow. I think we would have managed well even without them. I would say that a lot of our companies is in a situation now where they basically will balance, should I invest now in quarter four, going forward for a potentially better market, and bring up the cost base a little bit?
Should I be cautious and keep the low-cost level? I think this will differ between different companies, but I think it's going to be difficult for us to keep the very low-cost level we have right now as an ongoing level going forward. Cost will, for sure, I think, go up to some extent, but I think our MDs in our different companies will manage top line and try to balance this as best possible. We still think we will manage this in a good way going forward. If we then look at how the different business areas have dealt with top line in the quarter, you see that in the graph here. Again, there are large variations as I have said, and the pandemic have had impact basically in all business areas, obviously.
The strongest development we saw in business area Benelux, explained by good power generation sales and also the med tech sector, I would say. We have companies involved in pharmaceutical, can call it packaging broadly, and also a lot of single-use type of equipment in a broad number of application areas med tech-wise. Good development there. The decline in DACH is, I would say, mostly related to the automotive and engineering sector in Germany. The Swiss cluster in the DACH region is much more stable. It's more of a Germany impact area one can say. In Finland, I spoke about that already, fewer projects, CapEx related investments. We see bigger customer companies in Finland like Wärtsilä, Neste, John Deere, forest machinery, and so on having more of a slightly difficult situation. I think Q4 will be a bit more difficult in Finland.
There are some investments. I know the Metsä companies investing heavily, and we gain some business from that. Business area Flow stand out very positively, great performance, and driven again by biopharma investments and med tech investments, but also in general, some process industry, and again, infrastructure, water, wastewater related. They also, I would say, in general, benefit from not being that involved in general engineering and automotive. If we take Fluids & Mechanical Solutions, they had good development, and that was driven by the aftermarket in the automotive sector and also to some extent, water, wastewater. More problems, I would say, in terms of filters and hydraulics linked to the pandemic.
In Industrial Components, we saw a stable, slightly positive situation, lot of variations within Industrial Components, but strong positive clustering in the med tech sector, but they also have quite a lot of engineering, automotive-related companies with clearly lower order intake and sales. As I said, sequentially improving a bit, at least. Then we have business area Measurement & Sensor Technology and U.K. noting the largest declines. This is related, I would say, mostly to the automotive sector in the U.K., the aerospace sector, where we have a couple of companies usually having a great performance. Mix-wise, having quite a lot of impact there. We have a few companies also related to oil and gas in that region.
If we look at the profitability in terms of the business areas, it's anyway comforting to see that seven out of eight business areas had an improving EBITA margin. Broad, stable, most part of the groups actually improved. Strongest improvements in Flow Technology and Industrial Components, but also actually all-time high in Finland. I think I've already mentioned the sectors driving this. I don't need to reiterate that. Very good cost management. I've also spoken about along basically all areas, all companies, and really impressive work by our management teams in our companies. Even if we take out the governmental support and so on, this doesn't really change the situation in any significant way. It's still a broad and solid profit improvement.
The only area where we saw a decline was, as you see, in the U.K., and this is definitely linked to the pandemic and a broad number of companies being challenged by that, but still presenting a 12.5% margin is actually great work. If we then look at acquisitions, we have made three great acquisitions recently in, I would say, really good segments where we want to be. We bought the company HoFa in the Netherlands, involved in specialized fasteners, critical component in a lot of systems applications, low piece price, and used very broadly in terms of customer base and so on and so forth. Really a product area we want to be in and a product area we know well from other companies.
Then we acquired UK Gas Technologies, and Cheirón in Czechia, also a med tech company, both of them with low cyclicality, underlying growth in the segments as such, and good profit potential. Very pleased with that. So far, we have now made nine acquisitions totaling sales of slightly more than SEK 700 million. Even if we have the pandemic, we are able to close some good transactions or projects. We are also quite happy with the inflow of companies, so we feel that we have a good number of interesting companies to work with. However, we are prolonging the project time or activity time in these cases, just to make sure that when we close, we close at a time where we have a stable business environment and the acquisition can be accretive basically immediately when we finalize the case.
I think still the acquisition perspective is very positive, and I would be surprised if we wouldn't continue to do something before year-end here. With that, I leave the word over to Patrik to elaborate on the financials a bit more in detail.
Thank you, Bo, and good afternoon, everybody. Let's dive a little bit more into the financial details then. As we noted earlier, total growth for orders was -3% and unchanged for net sales in the quarter. Year- to- date, we are +4 for orders and +5 for sales. As Bo spoke about earlier, order intake was 2% below invoicing, and that is explained by valves for power generation. They had a very strong quarter in terms of delivery and sales, while orders are more flattening out a little bit. That explains the book-to-bill situation very much. Gross margin is slightly lower than last year, both in the quarter year- to- date. It's primarily, I would say, the mix related, slightly less favorable mix regarding companies and products. On top of that, we also have some extra costs for inventory obsolescence in the quarter.
That also explains part of the lower gross margin. EBITA grew 16% in the quarter, and margin improved to a record high 14.9% versus 12.8% last year. Again, repeating a little bit what Bo said, if you exclude the non-recurring costs and also governmental support, the underlying margin would have been then 13.9%, still well ahead of last year. Accumulated 30.4% versus 12.5% last year. Going further down the P&L, finance net is lower than last year, and that's partly driven actually by some positive impacts from the non-recurring items, also on the finance net connected to the release of earnout provisions. That's a one-time effect that helps us a little bit in the quarter. On top of that, we have also a lower debt, which also reduces the finance costs.
On the tax side, where the tax costs are only up 12%, while the profit before tax is up 21%. That's also connected to the non-recurring costs in the quarter. Underlying, I would say we are relatively stable on a tax rate close to last year. Earnings per share up 25% in the quarter and 12% year to date. Return on capital employed, basically the same level as last year, 19%. Cash flow as last quarter, very strong, up with 43% to SEK 761 million. I will elaborate on that a little bit more on next slide. Net debt EBITDA lower than last year, that's, among other things, driven by the good cash flow, I'll elaborate a little bit more on that also in a few slides. Okay. Cash flow then. As you can see, very strong, grew 43% versus last year.
The improvement is mainly driven by an improved working capital development. Last year, we actually increased the operating working capital slightly. This year it's going down slightly. That's the biggest impact. Of course, the higher result helps us also a lot. Inventories show a slight decrease organically, we still feel it's on a slightly high level, we have deliberately chosen not to push too hard in this area during the pandemic so far to make sure we safeguard service levels. That's important in the competition about the customers. I think this has actually supported us in some market share growth during the quarter, during the pandemic so far. Earnings per share grew, as I said earlier, with 25% to SEK 3.8 . The improvement, of course, mainly comes from the strong EBITDA.
Also thanks to lower finance cost and tax cost I talked about earlier. If you look at the more longer-term perspective and the three- and five-quarter rolling earnings per share, they are up 12% and 13%, respectively. Debt. The interest-bearing net debt continued to decline and was at the end of the quarter basically at SEK 5.8 billion compared to SEK 6.1 billion last year. Basically SEK 1 billion lower. The decrease comes from the strong cash flow, of course, also the fact that we did not pay any dividend this year helps us, of course, on the debt situation. Slightly fewer acquisitions also completed during the year so far. That, of course, helps us also on this side. Net debt equity ratio decreased to 61% from 85% last year. From a historical perspective, I think this is a low level.
Consequently, our financial position is very strong. In general, the debt ratios are relatively low. Another perspective then on the financial position, if you look at the end of quarter three, our short-term funding was slightly lower than SEK 0.5 billion, and our long-term unutilized credit facilities were SEK 3.5 billion. Good headroom and good flexibility and the capability to act if we want to. I am there. Thank you, and I lead over back to Bo.
Okay. Thank you, Patrik. Here you see a slide basically describing our main segments. I just want to reiterate that we are fortunate to have a broad customer segment portfolio with basically no or low segment dependency and a bit of a business cycle hedging. I would say that we are very resilient in weak cycles relative a stereotypical industrial company. Strong position to have. Very importantly, I would like to spend some time on digitalization and sustainability. I think we are making great progress and taking a lot of large steps forward in very short time here. To start with digitalization, we are basically forced to do this in a positive sense based on the pandemic. There is great progress made in our different companies.
Perhaps mostly in the area of sales where you basically constructively question outside sales versus inside sales and invest a lot more in electronic tools to, I would say, improve quality, lower cost basis, and increase efficiency and so on. Both marketing and training, a lot of new, I would say, tools using online webinars and things which are also actually improving quality and reducing cost. We see also in the industrial system a lot of more control-related opportunities which can be cloud-based and so on, which are more and more used. Also in administration, we are trying to become more efficient, and I know that even one company are investing in some sort of robot in the bookkeeping area, basically. A lot of interesting things happen, and we are keen to progress in this area.
In sustainability, we think we are quite good and have been quite good for some time based on our long-term perspective and our commitment to things. We are wanting to become even better, and we are working as a team now and have been working on this for quite some time on our long-term sustainability vision. We are basically soon going to launch a new set of goals in this area, which are, I would say, challenging and inspiring and hopefully also comforting for the external audience in terms of what Indutrade is targeting in this area. We have also launched ESG-related KPIs for this year for all our companies to work with, and we have introduced systems to manage this efficiently. I would say positive commitment and great engagement in this area broadly in the group.
This is not something we do for basically the external world or pressuring us. We believe this is good business sense and creating business opportunity and also making us obviously a relevant and good employer and being relevant for both customers and suppliers. Good progress in this area. Important. If we go to the summary slide, try to elaborate a bit on the key takeaways of our presentation. We see a gradual improvement during the quarter, but still majority of the companies have been impacted negatively by the pandemic. Large variations between company segments and markets. We have said that before, it's still true but the total outcome of all of those variations are still positive. We had record high earnings, and this was driven by some strong segments but also very good cost management and agility in our companies.
It's continued uncertainty going forward, and perhaps it has increased a bit even based on that we see further spread of COVID-19 in some countries. Brexit is coming up for the final decision between the EU and the U.K. There is a U.S. election and so on and so forth. October is, I would say, still what we see now looking good, but November and December is more uncertain. In terms of invoicing days, we have one less invoicing day in October, and theoretically we have two more in December. It still depends a little bit on how different customer companies will manage the last week 52 there. If they keep open a bit in the beginning of the week or if they close early. Hopefully they are open. Even if the world is a little bit uncertain, we are focused on what we can impact.
There is a large desire to make progress in the Indutrade group. We are still cautiously optimistic going forward. By that, we end the formal presentation, and thank you for listening so far, and we open up for question session.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Johan Dahl of Danske Bank. Please go ahead.
Thank you. Good afternoon. Just on the clearly impressive margins in the quarter here, even if we exclude all this, both one-offs and government support. What I'm curious about is, primarily in your minds, is it business mix or is it cost out that have explained this rapid improvement in margins? You took out, I think you said in the report, 260 people. That seems it would explain a lot of the productivity improvement. Is it rather business mix?
I would say both, actually. There is a lot of dynamic movements below the surface. We have a large number of companies who have suffered a bit, but been extremely good at reducing costs, so protecting margin. We have some companies then having a great performance top-line wise, gross margin wise, and improving profit levels. I think there is an impact from both, but Patrik is smarter than me, so he can perhaps explain this even better.
No, I don't think so. It's both, of course. Elaborating a little bit on the cost side, I think our companies have been extremely good in managing the costs and taking out people permanently has been one tool, but definitely not the only one. Of course, they work with all sort of levers they can. Travels, other types of external costs have been held very low during the quarter, of course, and that impacts a lot as well. Cost management has helped the suffered companies a lot, and they protected their margin in a really good way. On top of that, we have also a good number of companies performing really, really strong. I don't know if we disappoint you, Johan, but it's both.
No, I'm just trying to get the numbers right here. You made a charge here in the quarter, a one-off charge for redundancies, I think. Was that for the 260, or if that's for new productivity measures? Secondly, the 600 people on furlough, is that also a representation of further productivity improvements, or is it something else?
Well, the one-off we took is related to the 260, and we will see some more in quarter four that relates to this one-off. I would say 80% of the headcount reduction related to the one-off is seen in the Q3 numbers. Let's see. The companies are still evaluating what potentially needs to be done more. That's the balance, of course, how quickly sales recovers and governmental support and furlough solutions are disappearing.
Just finally, before getting back in line, how concerned are you that these health med tech-related products that are selling very well at the moment becomes a difficult comp going into next year? Is that something you're thinking about, or do you think it's more of a structural growth story in this healthcare exposures?
A minority of the healthcare cluster is having a positive COVID push, and they will obviously have a very difficult reference in quarter two next year, perhaps also a little bit in quarter three. A majority of the sales from that cluster is not having a COVID.
COVID-19 push. That's very positive organic growth which hopefully will continue going forward. Every company is unique, and every company's situation is a little bit unique, so it's always dangerous to generalize. That's the overall perspective, I would say.
Thanks.
Our next question comes from the line of Carl Ragnerstam of Nordea. Please go ahead.
Hi, it's Carl Ragnerstam from Nordea. First of all, on Johan's topic here, you mentioned that you've been taking out 260 FTEs since Q1. How many of these did you take out in Q3, or was it all of them?
I don't have that number exactly, but I would say slightly more than half of it is in quarter three, yes.
Should we expect the majority of that to be, or the effect of that to be seen already in Q4? Or is it more of a going into 2021 thing for the half that you took out in Q3, that is?
No. I would say that the sort of the savings effect from that will come already in quarter four. It is partly, as we also wrote in the report, it's much related to the business area or country that did most in this area is U.K., and they are already now reducing furloughs. It's sort of this permanent reduction is replacing the temporary reductions, the furloughs. It helps them going forward.
Okay, perfect. You also mentioned, talked about the cost ramp-up as a function of sales recovering. Is it possible for you to sort of quantify what impact less traveling, and thereby less selling expenses had in Q3, and a little bit how we should look at the cost ramp-up going into Q4?
I think we refrain from that. It's a little bit too much sort of detail.
Okay, perfect. The final one from my side, if you could give some flavor on the med tech or medical segment growth in the quarter, also how much med tech represented in terms of group sales in Q3.
We don't have the quarter. We only disclose these numbers on an annual basis, they represent, I would say, then 30% of our group sales last year. They have grown more than group average, it's slightly more now then. That's basically all we can say.
Could you say anything about the general growth pace for the sub-segment in broad terms?
Sorry, could you repeat that?
Could you please give some information about the general growth pace for the sub-segment med tech or med tech plus pharma in more broader terms?
It's a lot of actually different application areas comprised under the heading Med Tech Pharma. It's impossible to generalize there to actually still be professional, I must say. We can't really do that.
Okay. Thank you.
All right.
Our next question comes from the line of Robert Redin of Carnegie. Please go ahead.
Yeah. Hi. Two questions if I may. Listening to your comments basically on the business areas, what I heard was basically pharma, med tech, energy, waste water, positive in Q3. Engineering, automotive, I guess that includes heavy trucks, and maybe you said oil and gas and aerospace in the U.K. weak. If I generalize, the cyclical segments still weak, non-cyclical segments strong. What I'm thinking, could you say something about how that developed during Q3? If those cyclical parts were at all improving throughout Q3? Were they stronger at the end of Q3 or at the start?
That's a good question. Yes, general engineering and automotive was sequentially stronger in the quarter. Aerospace and oil and gas, which are obviously much smaller segments were still on a very low level unfortunately. No real progress there.
If we generalize for those cyclical sort of end markets, were they then improving? If oil and gas and aerospace is so much smaller.
Yeah. Yes.
All right. On order intake, it was 2% below sales, and you talked about the valves having a strong delivery quarter, but I guess then more modest order intake. My question will be, is there also seasonality in ordering, say, core book-to-bill? I looked into my model here, and I see that over the past 10 or so years, the average for book-to-bill in Q3 is 0.98. Is there some type of seasonality in book-to-bill or orders and sales in Q3?
I'm not really sure. It's not actually something We've not calculated as an empirical evidence that it is like that. Could be, I'm not sure.
Patrik, do you believe that a book-to-bill below one is some sort of negative sign for Q4?
As I said, November and December is very uncertain in terms of order intake, more certain in terms of invoicing sales. A lot of companies have a fairly good order book now. I feel more certain about an okay invoicing quarter. How order intake will develop in second part of November and December and so on is more difficult to guide, unfortunately. If a lot of companies follow Ireland now with more complete shutdowns, we can go quite quickly downwards. Yeah.
Okay.
Can't really guide there, no.
Okay. You said something about October having started well?
Yeah.
Okay, t hank you so much.
Our next question comes from the line of Johan Dahl of Danske Bank. Please go ahead.
Just a quick follow-up. I just did the back of the envelope calculation on the acquisition multiples year to date. Seem to be some inflation there up to 10. Is that something that you agree with, and do you make any conclusions from that? Finally, also on the margin target of 12% for the group, I believe it is currently at a substantially higher level that amidst a pandemic. Any thoughts on that? Thanks.
If you talk multiples first, we are not buying at any sort of higher prices now than before. You can go wrong a little bit looking at the numbers in the report because there are several reasons for that. Partly, there are some more smaller acquisitions that we have not published, which is also part, of course, of the numbers in the report. It's also the fact that we have earn-out clauses in basically all of our contracts. Normally, we hope and think that these earn-outs will be reached, so we book these as goodwill. They, of course, are not in the current sales and profit. You're not comparing apples with apples, really, when you compare the disclosed information of sales of the companies and booked goodwill and so on. If that makes sense.
Your second question, it's a good question, and we are actually obviously considering that. At the appropriate time, we will come back to the market with views on that. We will let you know when that will be going forward.
All right.
Thanks.
Just to remind everyone, if you would like to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you can do so by pressing zero two to cancel. There will now be a further pause while any questions are being registered. And there are no further questions at this time. Please go ahead, speakers.
We say thank you for participating, and thank you for your questions. Have a nice afternoon.