Good morning, and welcome, everyone. I'm Henric Hintze, Equity Research Analyst at ABG, covering Inission. And, with me here today, I have Inission's CEO, Fredrik Berghel, here to present the Q3 results. There is a chat where you can ask questions during the presentation, and I will then ask them, when Fredrik is done presenting. With that, I think I leave it to you, Fredrik.
Thank you very much, Henric. Yeah, welcome to Inission Q3 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 started this company 16 years ago, and we are still both active. I am working as the CEO and Olle as working chairman. Inission per today consists of two business areas. We have old Inission EMS contract manufacturing, and then we have the company Enedo, which is developing, manufacturing, and producing power supply. Both these business areas are in customized, high-end, high-mix, low-volume industrial electronics. This is the agenda for today. I will take the numbers. I will explain a little bit the highlight of the quarter, and then go through our financial targets, and then we will end with a Q&A, as Henric said.
Yes, running with last 12 months, net sales of just over SEK 2.2 billion , and an EBITDA amounting to SEK 159 million , or 7.1%, measured as a margin. Then we are running at the highest speed ever and with the highest profitability ever. The quarter, as such, our turnover was SEK 550 million , which corresponds to a growth of 18%, all of that organic. We have an earning, measured as EBITDA of SEK 45 million or SEK 80 million more compared to last year, which corresponds to 8.8% in profit margin or 2.6 percentage points better than last quarter, which corresponds to an earning per share of SEK 1.38 , an increase with SEK 0.49 .
A high-level explanation of the very good result in the quarter is really the beauty of organic growth. These extra SEK 76 million that we were selling compared to last year, if we deduct the material, we have a net added value there of SEK 37 million more, and the cost of running those extra SEK 37 million is SEK 18 million, which gives then this extra SEK 18 million EBITDA level. And, and that means really that every measured on, on, on the NAV value, that every second krona higher NAV actually falls down all the way to EBITDA, which we are, of course, very proud of and really emphasizes the importance of organic growth. If we look at the year-to-date number, the net sales amounted to SEK 1.6 billion, which is 23% more than last year, all, also that, organic.
We have an EBITDA year to date of SEK 131 million, or SEK 68 million more compared to last year, which give an EBITDA margin of 8%, 3.2% better than last year, and earnings per share just about SEK 4, which is SEK 1.70 more than last year. The high-level explanation also for the year-to-date numbers are really the same as for the quarter. These extra sales falls through the P&L, so that explains the higher profit on a high level. I will get back to some details later. Just to explain what happened in the quarter, we have got a new CFO. We had an interim CFO for a while, but now we have John Granlund in place. John comes nearest from a company called Segula in Gothenburg.
He is both an engineer and educated in finance. He has an executive MBA from University of Gothenburg. We have also appointed Fredric Grahn, our sales manager, as Marketing Manager or Marketing Director. Fredrik has been with us for 10+ years, starting off as a salesman, and then for a while now being our sales manager, and now he will also be responsible for our marketing activities. For the business area Enedo, we welcome Kalle Huittinen as the new CEO. Kalle is former regional division manager for at ABB Large Motors and Generators Europe. He lives in Helsinki, but he also has experience from both living and working in Italy, where Enedo has its biggest daughter company. We have launched our 10th edition of Inission innovation award.
We have started up a cooperation with South Pole in order to increase and also prepare for the sustainability work and sustainability measurement that we are will do for 2024 and present 2025. So that is quite an extensive work that we have started now there. We have decided quite recently to enlarge the factory in Malmö with about 50% to make room for more production. Our partner, Part Development, is still keeping on working with us, and they have now also started project in our Stockholm factory. They started off in Munkfors, as I have told you, and they continued in Løkken, and now they have moved on to Stockholm as well. So now they are actually working and developing three of our six companies, so to say.
Regarding the component situation, that has been a hassle for all electronics industry for the last two years. We see less and less of that, even though some lead times are still long, and there are still some, yeah, strange behaviors, maybe from both the producer of some components and also the distributor. But all in all, we have a more and more normalized situation regarding the components. We have a good order intake, and we have an order book. The order book is shrinking, but it's also getting shorter in length. So order book or order backlog measured as next coming three months, we are still on record level, but the total order book as such has shrunk. We, however, foresee maybe a slower organic growth going forward.
That is, that would be our projection there. I have shown this picture before, but I like it, so I show it again. Internally at Inission, we have this 2- 5,- 20 25 as a slogan. And here we have combined our ambitions, our financial ambitions, and our sustainability ambitions with the means how to achieve those. From 2020 to 2025, we want to double the turnover, and we want to double the profitability. And we also want to be top five in profitability in the Nordics. And how to achieve this? Yeah. We want, partly, with the help of Part, increase the amount of flow production that we have in our factories. We are going towards carbon neutrality, carbon dioxide neutrality, and we are doing a lot of savings.
We are changing energy consumption, and we are switching to green energy, and then we are taking this step by step. By 2025, we have the ambition to be carbon dioxide neutral. That is our ambition. We work with our employers to increase the employee engagement. On the scale 1-100, we are now 70, and our ambition is to be 80+. As customer satisfaction index, we measure that on a six-grade scale, and that, there we want to be about five. So to the business areas performance, I think the EMS portion of this group is doing a tremendously good quarter, both for the quarter and the year-to-date number.
And then we have to remember that this is a lot of these factories or all of the factories are in the Nordics, where we have vacation in this quarter. So doing a quarter like this in a vacation quarter, that is really, that is really... We haven't done it before, so that is really something. We also see that component prices has flattened out. So when it comes to our customer, our supplier increased price, and then we increase the prices to our customers to compensate, but there are always a time lag there. Now, we see that we have caught up in that time lag. That is also one of the explanations here.
For Enedo, they are also doing a very good quarter compared to last year, which was about zero. The year compared to Q2, Enedo is a little bit performing a little bit less, but then also we have to remember that we also have a vacation period, both in Finland and in Italy, where we are doing the main activities. The factory in Tunis is still doing very well and are still on an improvement path going upward. We have decided and bought new SMT lines that will come to us late this year and hopefully up running early next year, so that we can improve the Tunis performance even further.
We presented in January this year our financial targets, and now, as said, with SEK 2.2 billion+ in turnover and 7.1% in EBITDA, we are very comfortable of making the short-term target here. We are extremely comfortable of doing that. We also have a shrinking balance sheet, as you might have seen, which improved the equity ratio quite a bit. Net debt, EBITDA, is also quite okay, remembering that we have our deal with the bank or covenant with bank language, we have 3.0. So there will be room here now to actually do investments, both in machines for improving quality and efficiency, but also to be able to make acquisition if we find good opportunities.
We keep on scouting there, as we have explained. Regarding the more long-term or mid-term goals, at least, I think that Q3 now shows that Inission are capable of running these 9%, since we made 8.8%, very close to the midterm goal. Also, the year-to-date number with 8% in EBITDA, that is not far off either. And we work really systematically here now with our organic growth and with our profitability. And as I have said a few times, but I think it's worth repeating, at Inission, we like evolution. We are not so fond of revolution. We are steering towards larger business units, and this year, Syd, Stockholm, and Lohja has become substantially larger by co-organization and co-location.
So we have very much bigger factories now and companies compared to a few years ago. We invest in organic growth by having central sales resources. We also have central sourcing resources. We keep on, as I have explained, working together with Part Development to improve our internal processes, to be more efficient, to be more productive, to have higher quality. We also invest continuously in new machines that also have higher productivity and higher quality output. There is also a balance in the market, and that has been like that for the last one, two years. So there is very few of our colleagues now chasing job for with price.
So we don't see that, so we think that that is very good. And we also have an underlying growth in this, in the industry that we are in, due to the mega trends: electrification, automation, robotization, Internet of Things, and then we have this, regionalization of the world, good or bad, you can, you can, debate on that on a philosophical level. But this means that we are- we see job coming home from Asia, reshoring, they call it. Yep. So, then I have used 15 minutes to explain our Q3 activities and result. Then, Henric, do we have any questions?
I'll start us off with some questions of my own. If anyone does have a question, feel free to post them in the chat. So this was obviously a very strong quarter, profitability-wise, as you mentioned. Impressive to achieve that in Q3 of all quarters as well. What would you say that this means for the profitability level in Inission going forward as we go into Q4 or even further? Is this level of profitability sustainable, or will it be even higher in other quarters?
I think this is to be a holiday quarter. It's maybe not sustainable, but to be a normal quarter, absolutely. I mean, I think where we are now, when with prices to our customer, with efficiencies in our factories, and we have been in some of our factories. We have been running with high load, and that is okay, but in some other factories, we have been running with overload, and that has created inefficiency. When we have to put in new employees every week, every month, you know, and the number, and that is not the problem either, but if the share of new employees becomes too high, that is actually taking down even the capacity.
And of course, it's a disaster for the efficiency. Now, we see that our employees that came in a year ago, half year ago, they are starting to get more familiar how we work, how we do things, you know, so the efficiency there, and when I say efficiency, I mean the combination of productivity and quality, has improved significantly. So absolutely, I think this is doable for the future, and this is should be the sustainable level. It's not where we want to be midterm, because I think we, we have, and we are on an improvement journey when it comes to profitability. Absolutely. But also it shows, as I said, in the presentation, it shows that if you can push through more sales through the same factories, organic growth, that is really helpful here.
That is really helpful here. Yes.
But what was it that made you say that maybe it's not sustainable for a vacation quarter? Was there anything special this Q3 that made it so good?
No, not, there are no one-offs or like that, but still, we know, we all know that when we have more or less in three in a quarter or three months, most of our employees are back home for one of these three months. That is normally, if I historically, Q3 is always lower in profitability for that simple reason. Sales goes down, and that is also this, if you compare Q3 now with Q2, sales is coming down. So normally, it is difficult. It's a challenge to keep up the profitability. So now I think we have this, we have good circumstances coming with us here.
As I said, you know, we have the components floating in and disturbing us a lot less compared to Q3 last year. We have higher efficiency in the new employees, as I have explained. We have a good mix also. There is a mix factor here, meaning that material share comes down a little bit. But that I rather place in the bucket of price increases catching up with price increases of component coming to us. So I don't think that is a valuation effect, really. So we, yeah, yes, I am there.
All right. Sounds good. So you talk about that the order book is shrinking a bit, getting a bit shorter time-wise as well, but you also say at the same time that you're still seeing good demand. How do you think this will unfold as we move into 2024?
Yeah, we haven't guided for 2024, of course, but we see that this increased. I mean, we have an order build-up, where we had a situation. First, order building up, component shortage, capacity shortage, and we have now increased capacity and shipping out this order backlog. So the organic growth we see this year and also this quarter is partly orders that we have pushed in front of us that we are shipping out now. So meaning that is a little bit, how should I put it, doped. So but I still foresee organic growth, but not perhaps on 20+% , maybe half of that. And that is perfectly in line with our midterm goals.
Actually growing 10% organically, that, that is, that is where we want to be. But growing 20%, we, we don't foresee that next year, no.
All right,
But we also, just saying this, we having this huge workload in front of us, we were afraid that our customer has overbooked, and we can see that in some of our colleagues in the business, where their customer have actually overbooked. So now they are destocking. We see some destocking, some customer, but very little effect of that. But we have been afraid of a hard break here, and now we are so far in this process, and we are shipping in that speed now, and all the products we ship, our customer really wants those, you know, because we are still behind. And some factories, we are still pushing some jobs in front of us.
So there are still a little bit of this order backlog actually to be shipped out. And we have an order intake in a very good speed, but maybe not in the speed that we are running now. So more... The situation will be more normalized. That is, would be my prediction. Yes.
All right, and could you also just clarify a bit, cash flow this quarter, operational cash flow took a bit of a hit from current liabilities changing there, and you mentioned the COVID-related tax deferral affecting this. Could you just clarify exactly what?
Last year, we have to remember that we used to finance us, we used this COVID sponsored loan, tax deferral loans. So just for the comparison purpose. But the tax, the cash flow now, this quarter, seven-something in our, we have a good profit. We have a stock standing still. We have a receivables standing still or even, even. So we are earning from the profit, the inventory, and the receivables, plus, plus, plus. But then we are paying back, we are paying off debts to, mainly to, yeah, there are some, of course, other debts, but mainly, we are shrinking in, in payables. And, and one reason there is really that our business area in Enedo, they have been behind paying their payables.
So their payables, that is a portion of this. It's not all, but that is—there is a portion there where they have caught up with payables due, actually. So that has been happened, and that will not happen again. But then we also have the pattern. We also have the pattern when our, and that is the biggest reason here, really. We are buying too much, our stock increase, payables increase, but now when we are increasing capacity, and the order backlog is still not growing because we have improved our capacity. Now we are in a situation where we are not buying so much to our factories. We are actually using the stock instead of pulling in new material.
So we have a swing effect here, and that is the biggest reason why payables have come down. So payables may be more on a normalized level, and that will not further go down. So I foresee actually payables from this level either comes back a little bit, or stays, and I foresee receivables also quite stable. But hopefully now with this improved capacity, we can actually decrease our inventory. So I foresee a quite strong cash flow in Q4. That would be my prediction.
But just to double-check, did you pay off any of this tax deferral in this quarter?
No, not yet. Not yet.
Oh, okay.
Not yet.
What exactly made the change in liabilities be so high, SEK 86 million?
Yeah, yeah, yeah. Look, the comparison quarter, there when we had this state loan of SEK 119 million, that's why the comparison quarter, Q3 2022, was extremely high in cash flow-
Yeah
... because we brought in those SEK 119 million, and those will be paid back now in Q4 a little bit, so that will drop out from there. And then also, but we have them in our debt, of course. So from balance sheet point of view, that, meaning that we are shrinking our balance sheet, and or replacing them with our because we have come down in using our factoring, we have come down in using our cash credit. So maybe we are just switching credits with credits here. But from cash flow point of view, it seems like a huge shift here from last quarter. That's why I put it there-
Mm, mm
... to explain it. Yes.
All right. Thank you for that. Unfortunately, we seem to have some technical difficulties with the Q&A chat-
Mm.
So we'll have to wrap it up there, unfortunately.
Yes.
But, thank you all for listening, anyway, and have a good day.