Hello, welcome to Investor's Q2 results presentation. As usual, we will start off with our CEO, Johan Forssell, presenting the results, and also followed by our CFO, Helena Saxon. Then we will welcome you to a Q&A session. We will start, as usual, with questions over the phone, when we will have our facilitator, Sharon, helping us out with that. Then we will take some questions over the web as well. By that, welcome once again, and Johan, please.
Thank you, Viveka, and also from me, warmly welcome to this presentation. If I start with a short summary, we had a very strong performance in the Q2. Actually, we recorded the highest net asset value ever at SEK 773 billion. We saw that the listed companies outperformed the Swedish stock market, and the subsidiaries within Patricia Industries reported very strong performance with double-digit organic sales growth and also sharply rising profits. Gladly, I have to say, is that after a couple of weak quarters, we saw that cash flow conversion came back to more normal levels. However, the macro outlook remains uncertain. We see that even though inflation is coming back around the world, it's still on a high level, forcing central banks to increase interest rates, which, of course, continue to put pressure on the consumer.
In addition to that, of course, we have a pretty tough geopolitical situation, not the least between China and the U.S. There is also more and more debate toward when it comes to the strengths of the recovery in China after the pandemic. There is clearly a lot of uncertainties out there. On the other hand, we continue on a positive note. We continue to see that the supply chains are improving. We are also seeing, for a number of industries, significant investments related to mega trends, climate change and digitalization. Due to the geopolitical situation, we are also seeing more investments regionally to increase the resilience in the companies. There are plus and minuses.
In this environment, we continue, which is key for us, make sure we have high flexibility in our companies and that we can act swiftly to changes in the environment around us. I move over to the quarterly figures, you can see that our net asset value was up 9% in the quarter. Our TSR was up 6%, both outperforming the Swedish stock market that was up 2%. If we look during the first half of the year, you can see that both our net asset value and TSR had grown some 60% and 70% compared to the stock market, up 11%. A few words about the listed companies. Sharp outperformance in the quarter, 9% compared to the stock market being up 2%. The key reason here is that.
our two biggest companies, Atlas Copco and ABB, representing 45% of the listed portfolio, they were up 80%-90% in the quarter. That, of course, clearly helped the performance. We also divested nearly 30% of our holding in Sobi for about SEK 1 billion. Moving over to Patricia Industries, very strong performance. Total return amounted to 11% in the quarter, and that actually means that the total return year to date is 25%. If we look on the operational development, strong development, sales growth of 22%, of which 13% organically in constant currency, and the profit growth was strong at 34%.
Vectura divested its portfolio consisting of elderly care properties, which is almost half of the property value in Vectura, and that is in line with the company's new strategic focus on developing real estate for innovation clusters. It is clusters like Forskaren in Stockholm and GoCo in Gothenburg. I think this is important because these innovation clusters are not only attractive opportunities in itself, it also creates synergies with other companies in our portfolio. For example, AstraZeneca, Mölnlycke, and Atlas Antibodies. Here you can see the development in Patricia Industries. As you can see, we are now running on a twelve-month rolling basis at the level of SEK 60 billion in sales and an EBITDA of SEK 14 billion. You can see here that it was really a record quarter.
If we look forward, one should remember that the Q3 last year, as you can see here, was a very strong quarter, while the Q4 last year was a weaker quarter due to the fact that Mölnlycke's profitability was below normal levels in the Q4 last year. This will, of course, impact the year-over-year growth figures in the Q3 and the Q4. If I look on the operational performance in the companies, we saw strong and good organic growth in many companies. All companies grew organically except Advanced Instruments and Atlas Antibodies. These two companies continued to be affected by soft development from the biopharma sector. That is the key reason.
Other than that, strong development, and also, as you can see to the right in the picture, all the other 6 companies actually recorded very good operational performance in terms of profitability. A few words on Mölnlycke. A continued good quarter with organic sales of 6% in constant currency. We also saw margin improving year-over-year, and that was driven by both the sales growth and also lower logistic cost. This was partly offset by investment in R&D and the sales force, as well as that in the margin, there was actually negative currency impact in the quarter. Also for Mölnlycke, the cash conversion improved significantly compared to last year. It's great to see that Wound Care continue to perform strongly with an organic sales growth of 8%.
It's actually a broad demand improvement, even though APAC showed the strongest growth. To further support growth going forward, investments are being made in the key factory in Mikkeli in Finland, investment will also be made in localized China manufacturing. We continue to invest behind the strong growth we see. Operating Room Solutions also had a good performance with organic growth of 10%. It's driven by increased elective surgery activity, price increases, and also improved mix. From a product perspective, Trace is really driving it. Gloves actually saw lower sales than last year, organically -6% in the quarter. The key reason here is the US market, where distributors are reducing excess inventory that has been built up during the second half of 2022.
We expect that we will probably see challenges also in the Q3, but let's see how it plays out. Moving on to EQT, the total return was 3%, and we had a positive cash flow, SEK half a billion in the quarter. If we look on the listed company, EQT AB, the total return was almost flat, while the fund investments were up 8%, of which about half is currency related. In summary, strong performance during the Q2, record net asset value, strong outperformance in the listed companies, double-digit organic sales growth in Patricia, combined with sharply rising profits. If we look forward, we will continue all the efforts we are doing to make sure that our companies come out stronger, compared to competition.
It's investment in R&D, investment in sales force, we are clearly trying to drive improvements related to the mega trends we see out there. I think we are well prepared. We have a strong portfolio, companies with strong market positions, high profitability, and cash flow. I think also that we and our companies are ready both for upsides and potential downsides, should they come. With that, I will hand over to Helena.
Thank you, Johan. Let's have a look at our net asset value development over a little longer period. We can see that we landed the quarter at a record level of SEK 773 billion, this means a 16% average annual growth with the dividend added back for the last five years. Of course, that compares favorably to SIX RX 11%. As Johan already described, there was a little bit of a mix in the portfolio. The three business areas developed differently, but all in all, 9% in Listed, 11% in Patricia, 3% in EQT, and that is a total then of 9% for the quarter. Looking at listed companies, almost 70% of the portfolio, SEK 546 billion.
Johan explained that a couple of companies contributed the most. This slide shows, in absolute terms, that Atlas Copco and ABB had stellar performance, and in absolute terms, they contributed almost 20 and SEK 18 billion in the quarter, respectively. The TSR of 9% is then outperforming SIX RX 2%. Moving over to Patricia, 22% of the portfolio and as much as SEK 173 billion at the end of the quarter. The main drivers in the quarter were earnings, currency, multiple, and cash flow, so tailwind from all of this quarter. Excluding cash, the development or including cash, the development was 10% compared to the 11% mentioned.
Looking at the sequential development of estimated market values during the quarter, we can see here, by company, that 5 of the companies contributed significantly in the quarter, which is, of course, very positive. Mölnlycke, as the largest company in the portfolio, of course, in absolute term, contributed the most. Here we see all 4 factors that I mentioned on the last page, contributing positively, but earnings and currency being the main drivers of the value there. Moving over to Vectura, in this graph, maybe not so interesting from a value perspective. We know that there were a couple of contributing, contradicting factors in the quarter, resulting in a net development of roughly flat, from a value perspective.
Here I want to flag that we're planning a capital contribution of three and a SEK half billion in the quarter, in the quarter to come, i.e., Q3. This is as Johan Forssell mentioned before, the company is going through a strategic change and divesting its community services properties, and now focusing more on developing innovation clusters, building properties for innovation clusters. Therefore, in this transition, we are contributing capital. Some of the larger projects in that new strategic portfolio is entering an intensive phase. It's also true that a couple of the larger ones, Forskaren, for example, in Solna and GoCo in Mölndal, are both expected to generate cash flow already next year, as they are close to completion and almost fully rented.
When the community services transaction closes in Q1 next year, we expect to be repaid a majority of the capital contribution. From an Investor and Patricia point of view, with a strong balance sheet we have, we believe this is the most efficient financial solution to support Vectura in this strategic transition. Talking about our strong balance sheet and the financial position, we can see that our leverage ended the quarter at 1.7%. Here at our, at my final slide, and also the final slide of this presentation, we can see that the performance of the Investor share has been strong, not only in the long term, short term, and medium term, but we have also managed to achieve our internal return requirement for all these periods.
With that, I will hand over to Viveka for the Q&A session.
Thank you, Helena and Johan. We are now open, to take questions, and I will hand over to our operator or facilitator, who will start off by, moderating or handing the questions over the phone. Over to you, Sharon.
Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. If you wish to withdraw your question, please press star 1 and 1 again. If you wish to ask a question via the webcast, please type it into the box and click Submit. We will now go to your first question. One moment, please. Your first question comes from the line of Joachim Gunell from DNB Markets. Please go ahead.
Thank you very much. Good afternoon. Starting off with the divestment of Sobi shares and perhaps also the timing and how you think about the what role that holding plays as a core listed holding over the coming years?
Okay, thank you, Joachim, for the question. We divested shares during the Q2, so we went from about 14% ownership to just above 10%. We have flagged after that we have gone just below 10%. We have said all the way that we will do when it comes to the ownership in Sobi, that we will do what we believe will maximize the value for our shareholders, and that is the comment I will continue to make. Let's see what happens.
Understood. Since you very seldom comment about, or make any, call it, forward-looking statements, you mentioned here, Johan, that we should bear in mind that Q3 will face a rather challenging year-over-year comparison. Is there anything that you can tell us about, call it, the operating environment today versus, say, 90 days ago, that is adding to this more cautious view? Or are there any, call it, other drivers that make you actually accentuate this tougher comparison?
No, there is nothing that I have seen in the first month weeks of this quarter. The only reason why I wanted to mention it is that normally for Patricia, there has been some changes due to the pandemic and so forth, but normally the Q4 is a strong quarter for Patricia. As you can see, last year, the Q3 was very strong, while the Q4 was actually relatively weaker. I just wanted to pinpoint that when people like you make your forecast, that the comparison base are very high in the Q3 last year and weak, actually, in the Q4. That has nothing to do with what I see in the demand situation at the moment.
That's very clear. That's all from me for now. Have a great summer. Thank you.
Same to you. Thank you.
Thank you. We will now go to your next question. Your next question comes from the line of Derek Laliberté from ABG Sundal Collier. Please go ahead.
Okay, thank you very much, hello. I wanted to ask you on Mölnlycke. You mentioned that the wound care segment that APAC showed the strongest growth. Was this also the case last quarter? Is the Chinese reopening boosting this turn a meaningful degree?
The development between the quarters in the different geographical regions can always vary a bit. I actually don't recall exactly whether APAC was higher or lower in the first quarter compared to this one. It was a strong quarter in the first quarter, and the growth in China for Mölnlycke in the Q2 was very strong.
Okay. Sounds good. Also in Mölnlycke, you had some negative effects from destocking in gloves and the supply chain issues and antiseptics. You mentioned that the gloves should improve at least after Q3. Can you say anything about whether the supply chain issues and antiseptics are being alleviated, or what to expect over the coming quarters?
If you go back a bit, a couple of quarters, actually, Mölnlycke had challenges when it comes to supply chain, both in the US and Europe, when it comes to the antiseptics business. The situation is much, much better in the US, and management is working heavily on improving the situation also in Europe. I hope that this will improve going forward. The exact timing, we will have to see how fast, but they are working hard on it.
Okay. Thanks for that clarity. That's all I have right now. Have a great summer.
Okay
Keep up the good work. Thanks.
Thank you. Same to you.
Thank you. We will now go to your next question. Your next question comes from the line of Oskar Lindström from Danske Bank. Please go ahead.
Yes, good afternoon. A couple of questions, still from me. The first one, just on the Vectura capital contribution. When did you say you expected to get repaid, this money, and what share? That's my first question. Should I go ahead with the other two questions?
Let me I can take that rather quickly. The plan is to inject about SEK 3.5 billion and we expect to take back most of that in the first quarter next year, when we get the proceeds from the divestments of the elderly care properties. The remaining part, we expect to get back later when the rents start to kick in the innovation clusters of Forskaren and GoCo. it, for us, it's actually a very financially efficient way of doing this bridge financing instead of paying too high rates and fees to banks.
Right. Thank you, I understand. That brings me to my second question, which is the topic of acquisitions, which you've talked about on and off recently, that you would like to sort of make a more substantial addition to your unlisted holdings. I'm wondering a little bit about the sort of macro, uncertain macro environment. Is that sort of creating more opportunities for acquisitions, or is it actually making owners, you know, less willing to divest? What's your feeling here? Also, on this topic, I mean, have the private prices come down to where the public market prices are, or are they still substantially higher, the expectations?
Thank you. I mean, it's a very difficult question to answer, but I think the way I would say it is that our focus is, number one, to try to find the right segments within our prioritized industries. Secondly, find good leading players there. Then, of course, the second part to your question is, it takes two to tango. We are working on it, and I've said it before, and I continue to say it, we have a good pipeline. We are working on it, and let's see how many that will kick in.
Right. Thank you. My, my third and final question is more of a detailed one on Mölnlycke. Mölnlycke and the Malaysian factory, was that sort of operating at full in Q2, or is there sort of further positive net impact during H2 from ramping up that factory?
I would say like this: when it comes to the factory in Malaysia, we have seen a gradual improvement in the utilization of that factory, but it's still not at the, call it a top maximum level. In the quarter, the key problem from a sales point of view, was actually the demand situation in the U.S., which was negatively impacted by destocking among the distributors. That was the key effect in the Q2, not the factory.
Right. Thank you very much.
Thank you.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. If you wish to ask a question via the webcast, please type it into the box and click Submit. We will now go to your next question. Your next question comes from the line of Zino Engdahi Ricciuti from Handelsbanken, please go ahead.
Thanks for taking our questions. Just wondering a bit on the supply chain side, which you're mentioning, seeing, that you see continuing easing. How much do you feel that you have left in further recoupment, from further supply chain improvements?
It's an important question that you raise. I would rather say like this, that for some companies that are certain product groups that are still being hit by supply chain challenges, while others might have a much easier situation, so it's very company dependent. If I give you a few examples, I mean, we talked about the antiseptics in Mölnlycke previously. Another example is that in Laborie, the urology equipment part have a number of components where we see continued challenges to get them in time. While in other companies like Permobil, we have seen a much better supply chain. It differs a little bit between products and thereby which components you need, and also, of course, which supplier base you have.
Many companies are also working on redesigning certain products to be able to have more flexibility when it comes to the suppliers. It's really a mixed picture, but overall, we see an improvement.
Okay, thank you. Maybe on a bit on a similar note, the increased CapEx you feel is required, is that also a bit mixed or company specific, or do you see that's required basically across the board?
That comment is actually more from a macro perspective than we are not expecting. It's not the comment on increased CapEx is not related to increased CapEx in our subsidiaries. It's more a comment on the global macroeconomy, where we do see that due to the geopolitical situation, not the least, between China and the U.S., many global companies need to invest in, for example, the U.S. right now to get more regional manufacturing and supplier base to increase the resilience, given the geopolitical situation. On a global level, of course, that also leads to higher demand and CapEx. It's not related to the subs.
Okay, okay.
Even though they are also investing, of course.
Yeah, of course. Thank you. Awesome.
Thank you.
Thank you. There are currently no further phone questions. I will hand the call back for the webcast questions.
Thank you, Sharon. We have some questions over the web. Let's take them 1 by 1. From Saima Hussain, we have a question on: how do you explain the positive development recorded by Atlas Copco and ABB over the quarter?
I mean, of course, the strong performance relates to the excellent performance both had in the first quarter. They delivered strong top line and also very good margins. I think it was overall good development.
We have a second question from Michael Gilson relating more to the macro. We have seen several months of declining economic indicators, especially the manufacturing PMI. Can you comment on the what-if any impact you can see within the Investor portfolio, either listed or Patricia Industries?
No, I will not comment the listed portfolio, given the fact that they are coming up with their Q2 reports in the coming days and weeks, so I will refrain from that. When it comes to our companies, in the Patricia portfolio, I can only conclude that for this knock, so far so good, with the exception of capital equipment to the biopharma segment, where we have seen continued subdued demand also in this quarter.
We have two questions from Samarth Agrawal, who starts out with congratulating on the result. The questions are: First question is on impact from China to your industrial portfolio, particularly as the economic data released today was weaker, what impact do you think would be around volumes and margins, given muted stimulus expectation? Let's take that one first.
Yeah. No, I think it's a very tricky question to answer because the companies we have been big in China, companies like Atlas Copco and ABB, but also AstraZeneca, and they are active in many different segments. Overall, what we see is a quite, to be honest, quite a mixed picture in China. You see certain sectors being tougher and certain sectors actually continuing well. I am, of course, watching closely and following, and our companies are, to see to what extent the recovery will continue or if we will see a softening party in China, and of course, what actions needs to be taken should that materialize.
We have a second questions relating to the margins within Patricia, where EBITDA margins improved 70 basis points Q on Q. Is this largely driven by operating leverage, given 5%-6% increase in sales Q on Q, or are there any other factors?
I would say there are, if I would generalize it, because it differs between the different companies, it's definitely operating leverage. You saw the strong sales growth. Secondly, we have lower transportation costs, lower logistics costs. That is also a broad-based phenomenon. Thirdly, we have price increases filtering through.
That were all the questions we had over the web, and if there are no more questions, over the phone, we would like to thank you for today, and we will be back in October with our Q3 results. Thank you for joining us today.
Okay, thank you.