All right. Good morning, and welcome to this presentation of Inission's Q4 2023 results. My name is Henric Hintze . I'm an analyst with ABG, who covers the company. Without further ado, I give the word to Fredrik Berghel, co-founder and CEO of Inission, to present the results for us.
Thank you, and thank you and welcome. Welcome to Inission Q4 presentation. My name is Fredrik Berghel. I am one of two Co-Founders and one of two principal owners of this company. Myself and Olle Hulteberg started it 16 years ago, and we are still both active. I am the CEO, and Olle is the Chairman. Today, Inission Group consists of old Inission EMS, contract manufacturing of industrial electronics, and Enedo, which is a company developing, marketing, and selling and producing power supplies. Both these business areas are operating with customized, high-end, high-mix, low-volume industrial electronics. I will present the Q4 and the full year financial performance for Inission. I'll go through the main items for the quarter and for the start of this year. I will also give you updated financial target, and at the end, there will be a Q&A session together with Henric.
With net sales of close to SEK 2.2 billion and an EBITDA amounting to SEK 162 million, or 7.4% as a margin, 2023 was the best year ever in Inission history regarding sales and profitability. Reported sales declined 5.9%. However, we sold a lot of material in 2022, so if we adjust for that, and that was SEK 48 million, there was a small growth in the quarter, 2.4%. So the net sales, all in all, was SEK 554 million, and we had an EBITDA with SEK 31 million, which is actually SEK 4 million better than last year. And despite the lower turnover of SEK 35 million, the net added value still was SEK 11 million higher.
This is mainly due to the fact that I just was referring to, the sales through our material that we had last year with practically zero profit. We had somewhat higher cost for running this extra net added value and a little bit of higher depreciation, and that ends the result then with SEK 4 million more in EBITDA. If we look at share, profit per share, we had higher financial cost in the quarter compared to last year, and also, we have 2 million more shares now, which made the profit per share decline with 0.15 SEK. As a profit margin compared to last year, we were 0.9 percentage point better.
Going to the full year, as I said, we are close to, close to SEK 2.295 billion, which is 14% more than last year. We have an EBIT of SEK 162 million, which is SEK 72 million better than last year. Our EBITDA margin ending up at 7.4%, which is 2.7 percentage points better than last year, and the earnings per share ended at 4.46 SEK, which is 1.9 better than last year. A gain, then, adjusting for this extra sales of material, which was quite a lot higher, 128 against 56 for 2022, or 72 more. If we put back this, we have a growth for the year of 19%, which we are quite proud of.
If we want to see where, what the result ends up, we have these 274 extra in sales, which give a net added value of SEK +134 million. And of course, again, a lot of these comebacks comes back to the material trading that we didn't have this year, meaning that material share is quite a bit lower. However, running this is costing us SEK 60 million more to produce this higher NAV, a little bit higher depreciation, and we end up with this EBITDA SEK 72 million better, meaning that we have a very good fall through from top line, measured from top line. Every fourth krona that we sell more, it's coming down to EBIT, and that is quite, quite good, I would say.
Then, despite the higher financial cost of SEK 19, and we are paying more tax, and again, then 2 million more shares, we still increase profit per share with SEK 1.89, or as much as 74%. Highlights for the quarter, we hired a new MD for our Stockholm company, Ari Kempinen. He has a background and a long career at Ericsson. He has also, by an accident, been involved in Inission and worked for Inission, the telecom part of Inission that was divested earlier. MLB Electronics, the fusion, the co-location, and the merge of the company with our own in Lohja has been completed. N ow these both organizations and the companies are melted down to one.
We held the tenth edition of Inission Innovation Award, and it was a fantastic music instrument. Two young ladies that have invented a music instrument that is made and designed, so also people with function variations can take part and then play together. It was quite an interesting product. We have invested quite a bit in the quarter. One example is a new coating line in Munkfors. We are also keep on working together with product development consultants, Part Development, and they have been in, as we have reported earlier, they have been in Munkfors, they've been in Løkken, and now this quarter they have shifted over and focusing on our Stockholm operation.
We also, during the quarter, started a strategic cooperation with a company called Dynamic Precision, and they have a component database, which is very much appreciated in product development. W e think this will be an enabler for Innovate to make more business, and next step also for Inission EMS then to be able to attract new businesses. We had, in the period, including that we are paying back this tax-related deferral, we had a cash flow of SEK 69 million, which is quite strong. The last bit of the Enedo acquisition fall in place early January, where we paid actually the shareholders the 4 last percentage of the shareholders. It all ended up that all shareholders that were selling Enedo shares was paid 26%.
Quite a tedious process, took, yeah, eight months actually. It was very, very long. Then we had the pleasure of presenting seventeenth of January a new acquisition. We acquired, or we signed, the deal with the owners of Axxe AS. Axxe is an EMS company located in Halden, southeast of Norway. They have about 46 staff members. Turnover last year, or 2023, was NOK 190 million, and with an EBITDA of NOK 80 million. W e have acquired this company with quite a large portion of earn-out structure, where we have acquired 100% in the deal, but we pay now for half of the shares, 5x EBITDA, and then we pay 6x EBITDA for 2024-2026.
We really think that Axxe is complementing our presence in Norway. They have a very interesting customer list with some coming startups, but the base there is stable industrial companies that is doing very well. They have also lately invested in state-of-the-art equipment. P roduction, equipment-wise, they are really strong in that factory. They also have a management philosophy and core values, which is very much in line with the way we think at Inission. T o the business areas then, the financial performance per business area. I think 2023 was quite a good year for the Inission EMS part. We had, I'm talking a lot about this material adjustment, but they actually are hitting the growth here quite a bit.
Putting back the material here, our actual growth during the year was 26%, which is well above our target. T he result, the very good and strong result, if you see the margin development, 2021, 2022, 2023 here, it's really again the beauty of organic growth. When you have more top line, you get better NAV, and then you, on the margin, you don't use up as much resources. T hen, of course, also we are step by step being more efficient with our investment and our education programs. We have also, during the year, the material prices of components have flattened out. W e have, in a way, caught up there. Also, of course, very, very good for our material share.
If we look at business area Enedo, the power supply portion of Inission Group, they had a tough quarter. They were shipping low volume. They were also taking stock depreciations, old, obsolete material that maybe should have been depreciated long time ago, but now we have cleaned it up even further. T hen remembering where Enedo is coming from, I think we have to judge the full year of Enedo as quite good, coming from a disaster performance 2021, when we started our ownership turnaround, 2022, and now we have. Yeah, not good margin, but we have decent margin for this year. W e should be reasonably proud of what we have achieved, I think.
In the quarter, we made the first delivery to a train customer, a brand new platform that we have developed in the Finnish portion of the Inission organization. We have worked on that for quite a bit of time. We have invested money, and now we have the first deliveries that are function tested at our customer, and they are pleased, so we are happy about that. The board of directors of Inission have decided to update the financial targets for 2024. Our target for sales have been set to SEK 2.4 billion, and our target for EBITDA have been set to 7%. Target for net debt over EBITDA remains at less than 2.5, and the target for equity ratio remains at higher than 30%.
We have also shown here the split, the way we see this year is gonna end up 1.9, roughly, for the EMS portion, and SEK 500 million for the OEM portion. Knowing also where we are coming from, we think targeting 7.5 for the EMS and 5 for the OEM is reasonable. There are, as you have read in the report, some headwind in order taking. Still, we think we can run on the levels where we are, and if we are doing that, adjust our cost to that situation, we think that this is really where we should end up profitability-wise. N ow our net debt ratio is actually down to 1.9, and our equity ratio is up to 39%.
We have quite a bit of headroom to this, both the capital structure target and to the equity ratio target. R egarding targets for long, midterm, I should say, 3years-4 years, we have decided, or the Board of Directors have decided to make them unchanged. Thinking of the historical performance, we have always been growing faster than 15% per year, almost any time span you would like to choose. Regarding profitability, of course, we have more to prove. We have been on this 5-ish as a sort of Inission standard. I think, however, our strategy that we have been implementing the last years have taken the EMS portion of the business from these 5-ish- 8-ish.
then going to our midterm target here on nine, that step is not too far. T hen thinking of Enedo being on a recovering path, Enedo as a product company should actually, if we do it right, be more profitable than a contract manufacturing company. We are at Inission working very systematically with our profitability, and the key items that we are working on is larger business units. One example during this quarter is this Inission Lohja and MLB co-locating and merging, as I talked about. We are also moving further when it comes to central sourcing. We have been doing it, but there are more to do. Same story for central sales.
We have implemented that, and we are moving in that direction, but there are also more to do. Shifting, shifting to organic sales rather than acquired sales is also part of this strategy. H ere, here we think that we are really helped by these mega trends. Nearshoring that is driven by sustainability demands and regionalizations. We have the automation, robotization, and digitalization. We have Internet of Things. Everything should be connected these days. Everything should be able to collect data, and not the least, we have the electrification trend. All of this requires electronics. It requires industrial electronics. It's exactly where we are. O n top of this, we have the consolidation in our industry that have created a balance in the market that I have talked about before.
We are very positive, and we are very optimistic about the future. T hat was all from me. Then let's see if Henric has got any questions.
All right. Thank you very much for that, Fredrik. I'll start off with some questions of my own, and, while I do that, feel free to type any questions in the chat if you're listening in, and I'll read them out. T o begin then, Fredrik, you talk about a weaker order situation, but you still expect to be able to keep sales at current levels. Could you just explain that a bit more? Is it just that orders are coming down from a very high growth situation, or, how should I put that?
Yeah, we have two effects. If you are growing, of course, order intake or book-to-bill, as we measure it, have to be higher than one, of course, otherwise it's impossible to grow. W e have also had a situation where we have had the material constraints, meaning that our customers have actually been forced to order with a longer horizon, with a longer time span. T hen the book, the value of the order book, since it's longer, becomes bigger. N ow when they are, they don't. They see now that they don't need to order 18 months perhaps not even 12 months. They can back off to 6 months-8 months where they used to be. Then, of course, order intake is decreasing.
Then also, order book for near deliveries has also stabilized at a certain level, meaning that our factories has caught up with the deliveries, so to speak. N ow we are bringing in orders about the same time as we are receiving orders, and it's always going up and down a bit. When we talk to our customer, they are still very optimistic and positive, and we have project that are supposed to ramp up, and of course, other customers are breaking. We have customers that are in the construction industry, and of course, they have really tough times, and they are ordering close to zero. I f you sum all of this up, we still anyhow think that we should be able to ship, sell and ship at the speed of Q4. That is what we are predicting. Yes.
All right, thank you. You also mentioned in the report that utilization varies quite a bit between the different factories. What do you think is the cause of that, and how difficult is it to compensate by moving production around?
We are load balancing. However, since this is low volume, quite complicated test equipment, material, you know, so it's not just that you can just shift production around super efficient, but it can be done, and we are doing that. N ow we have a span. We have one factory, our Norwegian factory, still overloaded, and they are letting go of jobs, and when they get new jobs, they will start sharing within the group. T hat is done. On the other hand, we have two sheet metal factories, and the example that I just mentioned, one of these sheet metal customer, they are into construction industry, buildings. They are making ventilation systems, a Danish company, and they are ordering quite close to zero.
There we have difficulties, for obvious reason, to shift in new jobs in that sheet metal factory. T hat is, t hat one is underloaded. The Tallinn sheet metal factory is underloaded. W e have that span. They are running on three-quarter speed, somewhat. T hen we have all the way the span is up to the Løkken factory, that is still a little bit of overloading, even though we see there that we will, during first half year of this year, we will shoot through the backlog there also and catch up totally with the deliveries.
All right. Finally from me on Enedo, which performed a bit worse this quarter, yet you mentioned in the report that Tunisia performed, sort of in line with last year. Could you just elaborate a bit on how the different parts of Enedo are performing at the moment?
Yeah, exactly the same pattern. I mean, we have the same type of customer in Inission EMS and Enedo OEM. T he material shortage exactly the same way have forced Enedo customer to place orders in a long horizon. T hen when everybody was fighting for getting orders, then they also overbooked. S ome of our customer now at Enedo they are de-stocking actually. O n the Italian portion of Enedo, customers are de-stocking. However, our total order book there is quite good. W e have a room to run now quite a while anyhow, at least this first half year, on decent speed, and that will give us, hopefully, time to actually fill up the backlog again.
On the Finnish side of Enedo, we have a weaker situation, and there we are actually taking measures to adapt cost. We are going down on a lower speed and keeping some of our employees actually staying back home in order to regulate cost, this both Q1 now and Q2. W e have to compensate lower demand with actually lower cost also, and we are. Yeah, that is absolutely doable.
All right. Thank you for that. Let's move on to some audience questions, and we have two questions here about the inventory write-downs in Enedo that you mentioned. Could you just explain a bit more about that?
Yeah. We have the policy, and we have the system, where we should actually take out material. Material that is not moving, we take out. On the EMS portion, we are really used to this because we buy always material on behalf of our customer, so there we are strict. We are every month checking, has it moved? Hasn't it moved? Who is responsible for this? T hen we try to sell it back to the customer or get new orders so that we can actually produce from them instead. Enedo is a product company. They are responsible for their own material in a different way, but somewhat similar because a lot of the Enedo production is customized, meaning there is a customer that have asked for this modified or customized product.
If they stop buying that or a revision change, there is a risk material being not used, you know? We call that obsolete. There is also a risk that material is being excess, that we have actually bought too much. N ow they have identified, both in Finland and in Italy or in Tunis, it is Italian company, but it's the material is in Tunis. Quite a bit of material that has been written off, and we have done it earlier, and we have talked about it earlier, and so of course, at some point, we have cleaned up this situation also. I'm not super worried, even though it's, yeah, it's unfortunate, yes.
Could you comment anything on the, on the size of this compared to what you normally do in a quarter?
We haven't written about it, but it was like SEK 4 million or SEK 5 million , about split on these terms. I n December alone, that's where we really took the blow. Yes.
All right. Thank you very much for that.
It was not, it was not worse than that, but still, Inission is not that big company. They have small margins, so if you deduct SEK 5 million extra, you know, and then they also ship low volumes. T hey ended up with a zero result in the quarter, which was, yeah, below our expectations. Yes.
Yeah. All right. I don't see any more questions in the chat from the audience. W ith that, I think we'll conclude the Q&A session. I will give the word back to you, Fredrik, for final remarks.
Thank you. Thank you, Henric, and thank you for everyone that is taking part of this presentation. A s said, we are really optimistic on building this company further and there are a lot of things to do and a lot of things to improve. Y es, thank you for listening in and take care.