Welcome to the Indutrade Q4 presentation for 2022. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to CEO Bo Annvik and CFO Patrik Johnson. Please go ahead.
Thank you. Good morning on our behalf as well. We are, of course, glad to present the strong Q4 and the full year 2022 report from Indutrade. We will, as normal, start with a summary overall 2022. The Indutrade model once again demonstrated its strength, decentralization linked with entrepreneurial leaders with a passion for business is a successful model for us. That model has been in place now for plus 40 years and is still proving to work well. We had broad and strong demand with total growth in order intake of 18% and 24% for net sales. We reached for us a respectful level of SEK 27 billion in overall net sales.
We had a record high EBITA margin in 2022 of 15.2%, reached SEK 4.1 billion, again, a respectful level for us. We achieved this, basically, our companies achieved this despite very challenging business conditions, which I am sure of all of you are aware of. Towards the later part of last year, we also increased our EBITA margin target to be above 14% over a business cycle, equal or above 14% over a business cycle. We had lower operational cash flow than the year before, that's mainly due to the supply chain disruptions we have experienced. We had a very successful acquisition year. We have over some time now strengthened our acquisition capabilities, both on group level and in the business areas.
We're able to acquire 16 great companies in 2022 with a total turnover of about SEK 1.9 billion. We have also taken large steps forward in terms of sustainability, we have initiated Scope 3 reporting now and also committed to the Science Based Targets initiative. The board is proposing a dividend of SEK 2.6 per share, which is an increase from previous year, which was SEK 2.3 per share. I would say that we are building a company with a stronger structural capital, less dependency on individuals, with a clear scalability for further sustainable, profitable growth. If we now turn to the highlights for the fourth quarter. In summary, continued stable demand in terms of order intake, significant sales level growth and really good profit level as well.
It was actually so that the majority of our companies had a positive order development, but there was increased variations between companies and segments and markets. We have now reached on a quarter four level SEK 7.2 billion in sales with a very strong order book. EBITA increased in total with 29% to SEK 1.1 billion, and the EBITA margin came in at 15%, and a year ago it was 14.6%, and that's excluding one-off effects, and we will explain a bit more about this further on in the presentation. The inventory buildup trend we have seen is leveling off sequentially, but cash flow not significantly, slightly lower than the same period last year.
Still worth to note that it was our second best cash flow quarter ever, so quite good anyway. We finalized four acquisitions in Q4, and we have also finalized three acquisitions so far in 2023, and we have maintained a strong financial position. Many of you, I think, are interested in our order intake situation, so I'll try to paint the picture for you a bit more here. As I said, demand was stable at a good level through the quarter, and orders were organically unchanged versus a strong reference last year. If you remember Q4 2021, we had an organic order intake increase of 15%. The reference was quite difficult and still we were able to be stable with that level.
We continue to see good demand in many segments, but as I said, variation between companies. Customer segments that stand out positively are, again, I would say the process industry, the energy segment broadly, and also the med tech and pharma segments. Companies exposed to the infrastructure and construction segment had the most challenging situation, and that's more the construction part rather than the infrastructure part. We have also some companies in that segment with good demand. The majority of our companies continue to show organic order growth in the quarter, so more companies had growth than lack of growth, and aggregated orders grow organically in Business Area Industrial Components, in Flow Technology and Fluids & Mechanical Solutions.
The weaker development was in Business Area Benelux, that I would say was mostly due to challenging references last year with high order intake from the medtech and pharma segment, pushed a bit by COVID-19 and also the infrastructure and construction segment in that particular market. Total growth in the quarter was 12% organic, was unchanged acquisition effects +8% and currencies +4%. We are obviously experiencing high interest rates, inflation, more difficult energy situation, and this will probably have some negative effect on the business climate going forward. I'm still rather optimistic and not least based on the transformational effect sustainability has on the economy around us.
If we start with the energy segment broadly, there is a lot of investments into renewable energy, into hydrogen-related projects. We see the early phases of new nuclear projects, there are quite a lot of investments linked to lessening the dependency on Russian gas, so building LNG terminals, et cetera. Our companies are having positive effect from this in everything from the pure products being built linked to these energy plants and also the actual facilities and infrastructures around these plants. There is still a strong trend making brown products green, as you obviously know, in the transportation sector, in everything from passenger cars to commercial vehicles to construction vehicles and aerospace and marine.
Everybody wants to be more energy efficient and electrification is increasing and all of this is having a lot of large CapEx investments, in products, in infrastructure, in facilities, where our products can gain business opportunities. There are, of course, particular segments like mining, like steel, we see water and wastewater investments becoming more efficient in terms of water usage and so on. All of this is business opportunities for a large number of Indutrade companies. Even if the central banks are trying to push business climate down a bit, in order to cope with inflation, there is quite a lot of opportunities to work with for our companies.
We then turn to net sales, as I said, the sales growth continued to be very strong during the quarter, and the positive development was also backed up by the strong backlog and slightly better supply chains we are experiencing. The supply chain issues are however, not over, and many companies still see long lead times from suppliers and component and product shortages. The worst impact is still with Business Area Measurement & Sensor Technology linked to more electronics content in their portfolio. Net sales was 2% higher than orders in the quarter. Obviously price is in this quarter a large component of the growth.
In our structure with a lot of many different companies with a bit different pricing methodology and so on, it's difficult to get an exact consolidated view of the balance between price and volume. We estimate the pricing effects to be around the same as last quarter, and then we said about 7%-8%, and that would then mean that the volume growth was around 5%-6% in our estimate. Total net sales up +26% versus last year, organically +13%, acquisitions +7%, and currency +6%. Q3, we had +27% overall, and now sequentially an increase with +26%. These are our two best sales quarters in the last two years, so a very strong situation towards the end of 2022.
We have also included a slide, visualizing our sales over our main segments, and we have singled out 12 particular segments. You can see that we have three larger segments, being infrastructure and construction, med tech and pharmaceutical, and a broader engineering segment. They are all above 15% of our sales mix. Among those three segments, I would say that the med tech and pharma segment is the one which is developing most positively and increasing. We have three segments between 5% and 10% of our sales mix: energy, process industry, and water and wastewater. I think all of those three segments are very, sort of important for us and geared for future growth.
We have six segments, a bit below 5%, commercial vehicles, marine, the automotive aftermarket, food, pulp and paper, and mining and steel. Maybe stating that we had some smaller business linked to Russia in the automotive aftermarket, so we had a decline in that segment, but otherwise, no really significant changes on a year-over-year basis. We are also trying to paint some sort of color in terms of where our growth is developing better or a bit more stable in a geographical country perspective. We have built this in a size order, you can say. It starts with the Swedish flag, and that's our largest market in terms of sales, with a bit more than SEK 6 billion on an annual basis, 2022.
comes U.K. and Ireland, then Benelux, which is primarily the Netherlands, Finland, Denmark, Germany, Norway, and then Switzerland and Austria. Lastly, Asia and North America are not as large in our sales mix. Here you can see that Denmark has three pluses, and U.K. and Ireland also three pluses in terms of sales growth development. The driving force for that is the med tech and pharma segment in Denmark and primarily in Ireland, in the U.K. and Ireland sort of total. Those industry segments are developing really well. Otherwise you see two pluses in basically all other markets except for Switzerland, Austria, we are still having a good business in Switzerland, but the reference was quite difficult.
We have had a really strong development in the Swiss process industry and also med tech and pharma industry in 2021. Mostly a broadly good sort of geographical sales development situation. If we look at organic sales growth in a quarterly perspective and in a trend perspective, you can see that's been a strong sales trend development. We are particularly happy about this since organic growth is a very high strategic priority for us. You can see in the slide here now that we have grown nine consecutive quarters in terms of organic sales, and it's been a stable and high growth rate and increasing. Obviously a combination of volume and price and the price impact has been higher towards the end of the trend development here.
Also good to say that the organic growth has been in every business area and in most companies. The backlog is still strong. It's 24% higher than the end of 2021, and whereof 12% is an organic increase. If we then turn to our EBITA development and situation, as I said before, in the quarter, EBITA in total increased with 29%, whereof 15% was organic, 7% linked to acquisitions, and 7% was currency related. The EBITA margin in the quarter was 15% versus 14.6 last year. But the underlying EBITA, excluding one-offs was 14.6% versus 15% last year.
The organic margin development was somewhat dampened by a slightly lower gross margin, and most of our companies are increasing their marketing and sales activity, product development activities, and hence the expense levels have gone up slightly. Underlying margin in newly acquired companies continue to be good, and temporarily slightly lower due to some one-offs. We have had a situation with sort of early sales price increases before we experienced the full impact of increased raw material and component price increases into our inventories. Now that is coming more and more into effect and impacting the gross margin.
The gross margin came in still at, I think a very good level, 34.9%, which is in a sort of historic perspective, a very strong level for Indutrade. If we now look at organic sales growth, in a business area perspective, it's good to see that there was growth in all business areas. The strongest growth above 15% was in the business area Benelux, in Flow Technology and Industrial Components. That was mostly driven by the energy segment and med tech and pharma segments. Fluids & Mechanical Solutions and Measurement & Sensor Technology in U.K. also had strong growth with around 10%. Again, med tech and pharma was a driving force, also energy and some HVAC-related customers had a positive development.
More dampened aggregated growth in DACH and Finland, but still a majority of the companies grow in those business areas. As I've said before, strong references last year in Switzerland and also in the Finnish process industry. We have in the energy sector, we have, for example, seen quite good development in gas energy projects. We have some companies involved in heat recovery and steam generations with high pressure valves and related products. Gas energy projects is still very relevant as a balancing factor to renewable energy. I think that sector will continue to be developing in a good way.
In the medtech area, we have, for example, a leading company in the Nordic markets, providing insulin pumps and dosing equipment for persons with problems relating to this and are doing fantastic job in that market. We have also companies linked to insulin manufacturing. There is a very successful company, Danish company, in insulin manufacturing, and some of our companies are helping that Danish company with production equipment. But also other type of medtech areas, facility expansions in the U.K. linked to cardiology areas. We see a lot of biopharma investments in Ireland, which has positive impact on some of our companies.
Some of our other companies are involved in the semiconductors, MicroLED areas, providing new production lines there, linked actually to smart glasses. There is also manufacturing expansion in food, in the food technology area, and so on and so forth, also water and wastewater. It's a number of good examples in growing segments which will continue to grow also going forward. EBITDA margin development for the business areas, a majority of our companies increased EBITDA margin versus last year, and strong growth in BA Flow, Finland and the UK. In Flow was strong organic growth as the main driver. In Finland and U.K., I would say it was more improved gross margin levels.
It was a bit dampened margin in several companies because of a slightly weaker gross margin as I spoke about, and also linked to a higher activity level. Again, the gross margin level I think is still at a good and high level. Underlying performance in newly acquired companies continue to be good. We acquired some companies towards the end of the year and had obviously some acquisition related costs there, which had some impact in Fluids & Mechanical Solutions and the business area MST. Perhaps also worth to note that Fluids & Mechanical Solutions had some positive one-offs in 2021, making the reference a bit more difficult for them this year.
You see in the slide that U.K. stand out in terms of a clearly lower level than the other business areas, which is unfortunate, and they haven't really bounced back to their pre-Brexit level. The team is working hard in the U.K., and I think step-by-step, we will see a positive development and increase in margin levels. If we now turn to acquisitions, very positive area for us and a successful 2022. This is a large part of our strategic development, and hence we have since some time strengthened our team, both on group level and particularly on business area level. It was good to see that 7 out of 8 business areas acquired 1 or more companies during 2022.
We have also had Germany as a focused country for acquisitions. It was good to see now that we were able to make three acquisitions in Germany in 2022, really good companies there. Q4 in particular, we bought a larger company in Denmark, BPI, sales of around half a billion SEK. We bought a very interesting company in Germany, Palas. I would say that they are the global leaders in air quality measurements, measuring particles in the air, with very innovative leading technology. They are very profitable, and they have very high potential for continued growth, organic growth development, so a very interesting company.
Also a company we paid a higher multiple for, and a larger, quite a large sum of money for us in Indutrade standards. We have put ourself in a position to do that now with the size of the company we have become. Now and then, if we find a particularly interesting company, we can move up in terms of size and multiple level without having too much of, sort of impact on the aggregated levels for Indutrade as a group. We also acquired an Austrian company linked to the flow technology area where we have a very strong and leading position in Europe. So they. It's an area we are very familiar with.
Quarter one has started off in a very good way. We've been able to already now close three good acquisitions. We bought Sax Lift in Denmark, providing lift tables to the European markets. We bought Hobe, again in Germany, making hard metal micro tools. We bought a somewhat larger company in the Netherlands, SKS, in the Flow Technology product area, trading company with a good and strong market position there. Yeah, very strong situation in terms of acquisitions and a good start of the year and also a, I would say, a positive perspective in terms of the pipeline we are working with. You can also see an overview in terms of number of acquired company per year here and the financial effects of acquisitions.
We are now on a three-year average at around 15 companies per year, and that's basically the level we want to be at going forward now when we have strengthened also the resources. You can also see that some years ago, we were basically adding around SEK 100 million in EBITDA contributions from acquisitions. Then we took a step up around 2015, 2016, 2017, up to SEK 150 million. Now for the last two years, we have added around SEK 250 million in EBITDA contribution. Step-by-step, we have increased that contribution in a really good way. So by that, I leave the word over to Patrik to elaborate more on the financials.
Thanks, Bo. Yes, let's look at the financials a little bit more in detail. Total growth for orders and sales was 12% and 26% respectively in the quarter. For the full year, orders grew 18% and sales 24%. Full year's sales amounted then to SEK 27 billion. Orders were 2% below sales in the quarter. Actually, if you look at the full year, orders were actually 2% higher than sales. For the full year, an increased backlog as also Bo talked about. Gross margin for the quarter was 34.9%, which is a good level, but it is slightly lower than last year's very high level.
The decline primarily comes from higher price components, more expensive components, materials, products that our companies purchased earlier during the year that is now sort of filtering through the inventory and ending up into the P&L. It's not sort of a sign of a weaker pricing power from our companies. It's more sort of a effect from previous purchases, I would say. What also have an impact on the gross margin is the weak Swedish krona. As you know, we have a lot of trading companies in Sweden, they buy a lot of their goods in euro and dollar and these products are getting more expensive of course. Again, I think the pricing power from our companies are still good.
That they are working with continuous price increases, to safeguard gross margin and profit levels going forward. Full year gross margin was 34.7% versus 35% in 2021. EBITDA grew 29% in the quarter and 28% for the full year. EBITDA margin 15% versus 14.6% last year, with the support then from some one-offs that Bo talked about, connected to earn-out adjustments and some goodwill write-downs we did. The net positive effect of SEK 25 million in the quarter. Full year margin 15.2%, which is the highest ever for us. If you move further down into the P&L, the higher interest rates and increased borrowing, of course now increases also our finance net in the quarter.
I think still, it is, it's coming from a low level. I think that's important to note. Tax costs increased with only 10% in the quarter. That's substantially less than the profit increase. Last year we had very high tax cost in last quarter because of the tax rate change in the U.K. Full year tax rate was 22%. That's compared to 23% in 2021. No big change. Earnings per share up 29% in the quarter and 28% for the full year. Looking at return measurements, Return on Capital Employed improved to 23% versus 22% last year. It's mainly the higher results that's creating this return increase. Cash flow, I think that was good.
It decreased somewhat versus last year, but it's actually the second highest level that we've had in the quarter. Full year cash flow was down 70% versus last year. I'll come back to that on the next slide. Lastly, Net Debt/EBITDA increased versus earlier this year and compared to last year, mainly because of the higher acquisition pace. It's still not higher than more long-term historical levels. The year ended at 1.8 versus 1.4, 2021. By that, we move to looking on the cash flow more in detail. As I said then, it was a good level. You can see that from the graph.
It's the actually the second highest ever in the quarter, but it's a decline 6% versus last year. The decrease versus last year is mainly related to working capital changes coming from the, I would say then the supply chain constraints that we've seen during the year. I think it's important then that we have the increasing inventory levels during the year, but that is clearly leveling off in quarter four, which is, I think, good and feels good also for the coming year. Working capital efficiency important for us, and we measure that as working capital in relation to sales, and that has deteriorated somewhat during the year because of the supply chain issues and related inventory increases.
If you compare the levels, working capital efficiency levels, they are better than we were a couple of years ago. Yes. Moving on to EPS. Strong growth, 29% in the quarter from 1.44 to 1.86. 29%. If you look at the more long-term perspective, we've had, we'd have an increase with 22% as an average the last three years. If you look at the five-year period, 19% per year as an EPS increase. Lastly, Net Debt. The interest-bearing Net Debt increased during the year, it was at the level of SEK 8.6 billion at the end of the quarter, end of the year.
The increase is mainly connected to the high acquisition pace during the whole year, but especially during the last quarter when we acquired a couple of bigger companies Bo talked about. Of course, also the dampened operational cash flow, of course, also impact this. Again, net debt ratios, they are still relatively stable. You can see the net debt/equity in the graph, for instance, 67%. If you look at the Net Debt/EBITDA, 1.8. I think it's also important to reflect on how it looks if you exclude the earn-out liabilities, it was 1.5. That's also one step lower. In conclusion, our financial position remains strong, relatively stable, low debt ratios, balanced debt maturity profile over a five-year period.
I think we have also good headroom between the short-term debt and the long-term guaranteed bank facilities we have. I say thank you, and back to Bo.
Okay. Our group financial targets, I thought I should speak a bit briefly about those and primarily the growth target, which states that we should grow with minimum 10% per year. That growth should come from organic growth, potentially in our companies and also an increasing acquisition ambition. Over time, as I said before, it's a strategic priority for us to step by step improve our organic growth capability, and we work very actively in the group and in our companies to do that with different types of support. Also we want to increase the number of acquisitions, targeting these stable and profitable companies with leading positions in niche markets and again, good prospects for organic growth.
We would prefer to be really seen also going forward as a very growth-oriented group, but also balancing more perhaps between organic growth and acquisition growth, without sort of decreasing our ambition in terms of acquisitions, but more balancing since we are a much bigger group now than we were some years ago. We also fairly recently increased our EBITA margin target from equal or about 12% over a business cycle to equal or about 14%. To give you some sort of business cycle reference, between 2018 and 2022, we have now a five-year average at 13.7%, so slightly below the target level.
Our ambition is over the medium term to step by step try to improve and strengthen also our EBITA margin target, but not drastically or significantly, but with a smaller step of continuous improvement. I really want to finish off here by speaking a bit about our sustainability ambitions and efforts. We have really had good progress during 2022. I would say dramatically increased our frequency of internal workshops and knowledge sharing activities. We see really good work in our local companies in terms of sustainability developments. We have added KPIs and the companies have now also started to report some Scope 3 categories. I think it was a real new and good milestone for us to commit to the Science Based Targets initiative.
If you take the broad ESG area, we have primarily singled out decarbonization as our focus area. That's obviously based on our materiality analysis and the individual materiality analysis in our companies. Now we are really focusing to improve our CO2 footprint. We do that in our processes, in our facilities, and not least we are also having a lot of companies which really see sustainability as a clear business opportunity, and more and more of our companies can express the CO2 impact of their offering towards their customers, and hence basically supporting the customers to reduce their CO2 impact as well. The key takeaways, the summary for this presentation. Strong Indutrade model based on our decentralization and balanced diversification.
Really having a group of 200 companies with entrepreneurial managing directors who are really passionate about doing good business. We have a stable demand situation in general. Really lower demand in particularly the construction building segments, but also experiencing increased variations. I would say that this green transformation is also creating a lot of business opportunities for our companies going forward. Continued sales increase and really good profit levels. The strong order backlog supports good invoicing and profit development in the coming quarters, although knowing that the references will be step by step more difficult. Three acquisitions so far in 2023 and a good acquisition pipeline to work with. Overall, Indutrade has a strong platform for long-term, sustainable, profitable growth going forward here. We end our formal presentation.
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 Karl Bokvist from ABG. Please go ahead.
Thank you, and good morning, gentlemen. My first one is just on, you came back to it several times on the call, of course. When you look at the kind of organic earnings growth in relation to your organic sales growth, do you expect that even though you continue to implement price increases and similar aspects, that the organic earnings could become a bit more difficult to match the sales increase given tougher reference numbers and the headwinds that we are seeing?
Yeah, I think there has been a situation now, as I said, where we were early out increasing our prices, and then we had some room before we experienced our inventories being sort of filling up with components and raw materials with higher price levels, and that has impacted the gross margins a bit. The level we have in terms of gross margin now is a high level and I think a dependable level for us going forward. I think we have good track records, or our companies have good track records in defending gross margins in a good way.
It's somewhat more difficult to increase prices, definitely, but we are fortunate enough to have high quality brands, products, people and are quite confident that we can handle the situation in a good way.
Understood. Just in terms of portfolio, it might be a difficult question to answer, but do you feel that the already relative high achieving companies in your portfolio are the ones that just keep on going at a high level? Or have you seen also, again, relative underperformers starting to make a climb towards the kind of median or going towards the top quartile in recent quarters or recent years?
Yeah, there is a dynamic movement in the portfolio, and we are quite dedicated to really make sure that those with the performance levels which are not at the levels where we want them to be, we work very actively with those companies to improve their situations. I think we successfully have seen good development in many of those companies. Sometimes a few companies can sort of new companies can fall back into difficulties. It could be leadership issues, management issues or some sort of business cycle issue or something like that. Overall, when I joined Indutrade in 2017, we ended 2016 with sales of SEK 13 billion and an EBITA margin of 11.5%.
Now we are closing a year at 15.2% and SEK 27 billion. I think we have demonstrated that we really have the capability to, over time, improve companies in the portfolio. We have added accretive sort of companies via acquisitions, but that's definitely not sort of explaining the improvement we have shown over the years. No, there is definitely movement in the portfolio, mostly positive and good and sometimes some bad as well.
Understood. My final one is just on the acquisitions. I realize now in the latest quarter that, for example, one company in particular, you, it seems at least when we look at press releases from the seller, for example, it seems that the multiple paid is a bit higher than usual.
Yeah.
Can you just elaborate a bit on your thoughts on why you, let's say it, went above your usual kind of multiple range?
Yeah. It's, it's really linked to that we have a strategic priority of improving organic growth. That's again then linked to that, I think organic growth is a financially sound way to develop the group, but it's also a way to de-risk the group strategically a bit and be not as, sort of dependent on acquisitions growth going forward. We have said that from time to time, we can make a single acquisition which portrays really interesting profitable organic growth capabilities and potential going forward. It was sort of linked to that we came across a really unique company, global leading technology, sizable, knowledgeable, great management team.
We felt that we could take that opportunity and still not sort of, put the group in any type of risk or distort our numbers drastically or impact our financing situation drastically. We have the size and capability to handle something like that now and then, but it's gonna be seldom and we are still gonna continue to predominantly make the normal sort of Indutrade acquisitions going forward.
Understood. That's all for me. Thank you.
Thank you.
The next question comes from Johan Dahl from Danske Bank. Please go ahead.
Yeah, good morning, gentlemen. Just a few questions. Back to the issue here of operating leverage. I presume in your reported invoicing and sales that is sort of a larger part is order book compared to previously. To what extent is it a problem here with sort of a pricing that occurred in this order book quite some time ago? Is that an issue at all, or are there other things which you talked about earlier here driving sort of a poor operating leverage?
No, I think, we have already expressed our view on this. I don't know, Patrik, if you want to elaborate anything more on it or...
No. The order book has increased, and it is at a good level. If you, I mean, if you really zoom out, I think it's, Indutrade in general have a relatively short order book. I think that sort of we are not committed to price levels in the order book, which means that profit levels will decline going forward. I don't think that's the case. Most of the companies have agile price model and can adjust prices upwards continuously. I don't think it is a problem.
Secondly, just on working capital. I think you talked about sort of initiatives to reduce working capital throughout the second half of 2022. As we see orders intake, I guess in volume terms, like I guess it's down some 7%-8% organically. Does that change the priorities in terms of cash flow reduction here going into 2023? Secondly, also on potential cost out initiatives, whether that's up on the table to, you know, more compared to previously.
Yeah. We... The first question, what was that now again? You said?
I mean, it's always interesting for a sort of decentralized company like Indutrade, how you drive initiatives to improve cash flow sort of off the working capital.
Yeah.
You know, we all see the brilliant slides here, but it just seems as if you've talked about reducing working capital for quite some time now, sort of orders are looking-
Yeah.
A bit weaker here. I'm interested.
Yeah.
... Knowing how that changes your priority.
I would say that we had a primarily a strong, capital efficiency initiative, inventory reduction initiative, prior to COVID and prior to all of these supply chain disruptions. We made great impact and move forward in this area in terms of knowledge and how to work, the importance of it and so on and so forth. Then we had to take a half step back and open up for building some.
Safety stocks, because of the supply chain situation. Since we are experiencing a better situation now, even if there are still some problems, we are really turning up the emphasis on reducing inventory levels and working with capital efficiency again now. I'm very confident that we will see improvements in this area in 2023. There is obviously an inflationary effect in the inventory, but there is also a volume effect. Step by step, there will be capital release definitely from inventories in 2023.
You want, sort of the question on how should we work with this.
It's of course both from a more general perspective where we talk about this and explain sort of the importance of it and highlight things for both companies and business areas. You need to remember then that we said that more than half of the companies are still showing order growth in Q4. It needs to be a sort of a company specific activity. That of course, we identify companies which have a more challenging situation and we make sure that the discussions are held in their board on what they do to get into a better situation. It's not sort of a generic activity for the whole group.
Yeah. Okay. We're right in reading in sort of that organic volumes, if you look on the order intake is down some 7%, 8%. Is that just, you know, the right way of looking at it?
Yeah, you're right, of course, that volume underlying volume is. That of course also differs a lot by company. We still have companies with also pure volume growth.
For sure.
You're right that demand is slower now. That's why also the capital dimension is higher up on the agenda. We are for sure working with business areas and companies to make sure that the companies standing out with the more problematic situation are really looking into this issue and have the right actions in place.
Got you. Thanks.
The next question comes from Robert Redin from Carnegie. Please go ahead.
Hi. Two questions. first on those EBITDA margins, they were adjusted down slightly year-over-year. You talked about gross margins being down and some SG&A costs coming up. That sort of sounded to me like EBITDA margins were down year-over-year organically, but EBITDA was still growing faster than the sales organically. Organically EBITDA margins were up slightly year-over-year. I guess with then the acquisitions that drove the mix of margins and the acquisitions that drove the margin lower year-over-year, was those acquisition costs? Could you say something about that?
If you take acquisition, the newly acquired companies as the first then, I mean, if you look at an overview of the numbers, they are basically in line with group average, profits growing as much as sales. And that is of course a good decent level, but slightly lower than we have seen the last quarters. But that I would say is more temporary effects, primarily acquisition costs and also some sort of initial costs that was taken by one of a couple of the newer companies coming into the group. So underlying we are still accretive. I think that's the big message on acquisitions also in the fourth quarter.
Looking at the organic dimension, if you take away the one-offs, the earn-out adjustments, the goodwill items, that we are slightly lower on organic leverage, which has also been the case last quarter. It is slightly lower and comes from gross margins being a bit lower, and activity levels pushing up expenses, I would say. I think also here the comparisons are relatively low. If you go into 2021, you still have pandemic's effect and low activity levels. I think it's not, it's understandable that you get this more flat, flattish development on the organic side. I don't know if that was answered.
Yeah, I got it. Got it. Perfect. On that order intake, I also sort of struggled a little bit. I mean, 'cause you write that the, the order backlog is historically large, that makes you confident not just about Q1 but the next few quarters. Still there was the zero organic growth in order intake. Was the comparisons on order intake very tough or should we expect that that zero organic growth in order intake should translate into zero organic sales growth in coming quarters?
Yeah, I think it's difficult now to talk about an outlook in terms of order intake. We obviously don't really guide in any details regarding that.
There are some clearly decisive movements by central banks, obviously, as you know, to bring inflation down, which will have impact on certain segments which are perhaps interest rates where that has a big part of the calculations and so on. I see, as I said in my presentation, a lot of opportunity linked to a broad sustainability green transformation in the economy driving forward. If it's going to be stable, flat or slightly decreasing or increasing, it's probably not going to improve drastically in Q1, Q2 organically versus Q4, but it's not going to be a drastically more negative marketplace, I don't think.
All right. Thanks so much.
The next question comes from Carl Ragnerstam from Nordea. Please go ahead.
Good morning. It's Carl here from Nordea. Firstly, you guided that construction/infrastructure is developing a bit softish. Is it possible to quantify whether you saw organic growth in that subsegment during the quarter? Could also give some flavor on how that end market's order intake developed during Q4 and perhaps also during Q1, whether you have seen an accelerated negative order trend from that market entering Q1?
If you saw on, I can't remember which page, but we had a slide over the different segments where infrastructure and production was the biggest segments up towards 20% of our sales, just below that. Of that, construction is a smaller part, if I say. The infrastructure dimension is bigger. We don't follow, or at least I don't have that number here now, but maybe construction as such is 4% or 5% of our total mix. We have had companies, perhaps more companies with a bit of declining order intake into that segment in Q4, but there has also been some companies gaining order and having a positive situation in terms of construction, actually. It's a quite mixed picture, but overall, slightly negative would be my estimate in Q4 organically.
How that will develop going forward, there are some constructions which have to be done, driven by certain pressing situation, I guess, in different cities and towns, municipalities, and so on. There are definitely some which will be delayed and starting of private homes, that seems to be slowing down more dramatically than perhaps larger residential areas.
I think also in the infra and construction area, there is, I would say, a handful of companies with really good backlogs going into 2023 as well. Even though we have a, in general, softer demand situation, I think invoicing can still also be held up relatively good in a weaker climate for a couple of quarters.
Okay, very good. Also looking at your MedTech pharma as an aggregate, if you were to exclude the fairly significant, I guess, in the quarter deliveries to the Novo project, what organic growth would you underlying see in that end market in the quarter?
That calculation we can't give you. I don't have that.
There are a lot of other customers and products that are driving the MedTech growth. That's a good contribution, but there are also a lot of that.
Absolutely.
Okay, you see underlying good growth anyway in the MedTech business.
Absolutely.
That's good. Maybe you touched upon it, I arrived a bit late to the call, but could you perhaps mention what's behind the goodwill write down and also give some flavor on the positive continued consideration revaluation, if it comes from just a few companies or sectors or where it comes from, basically?
The routine we have is that when we have companies not reaching their earn-out, we also then do an impairment test. I would say in general, first of all, then most of the companies, I don't know, I have a percentage, but a clear majority of the companies reach their earn-out, even though the plans are normally ambitious. I think that's the first thing to mention. There are a handful of companies, of course, that don't reach their earn-out in full, and then we do the goodwill testing. There are a couple of companies, of course, with really high ambition coming into Indutrade and that impacts then how much goodwill we book. Sometimes we need to adjust it a little bit then.
All in all, I mean, we are talking about one or two companies of a total. If you look at the total earn-out liability we have right now, it's SEK 1.2 billion. If you zoom out, it's a very small percentage, I would say.
From what segment would you say that those one-two companies is in?
No, if you look at the... I think it's relatively broad. It's not one or two segments. I don't have that, to be honest.
Okay, perfect. The final one. I mean, you closed, I mean, close to or just about SEK 1.8 billion in acquired sales last year. With, of course, the turbulence, I mean, with the interest rates, et cetera, is it realistic to reach SEK 1.8 billion in 2023 as well? Obviously, you had a good start with two nice acquisitions here. Is it realistic to come up to that level with perhaps buyers or sellers having a tough time to meet?
It's not unrealistic, so that it is realistic. We have a good pipeline and yeah. I would find that realistic.
Okay. Very good. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
We thank you for listening and being engaged with good questions. Hereby then we end the call and wish you a nice day.