Hello, and welcome to the Investor AB Q3 Report 2021. Throughout the call, all participants will be in listen only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present Vivekke Hirdmann Reiberg, Head of Communication. Please begin your meeting.
Welcome, all, to investors' Q3 record and the conference call we are hosting. We will, as usual, start out with our CEO, Johan Pochan followed by our CFO, Helian Nasaksson.
And after that, we'll have a Q and A session. So welcome all, and Joao, please go ahead.
Thank you, Wiebeke. And also from me, welcome everybody to this call. If we start on the first page, just to give an overview, I think that overall, we see a strong demand out there. And but we can also see that we see challenges from the supply chain, and that is a number of the companies during the quarter. And we also see, of course, continued effects from the pandemic, and I will come back to that later on.
But overall, the demand is strong during the Q3 or was strong during the Q3. With that as an introduction, let me then jump into the next page. Our net asset value grew by 4% in the quarter. The total share of the return was down 4%, And that should be compared with the stock market being at 1%. If we start then Commenting on the listed companies, the total share of the return was 3% in the quarter compared to the stock market up 1.
ABB continued to concentrate its portfolio, divesting the mechanical transmission business, And that was the divestiture close to US3 $1,000,000,000 Electrolux revised the dividend policy, Now targeting about 50% of earnings and also made an extra capital distribution of close to SEK 5,000,000,000, and that will give Investo About SEK 900,000,000 in extra distribution that would come in the Q4. Electrolux Professional, I'm glad to say that or glad to see, I should say, that they made a significant acquisition with the acquisition of Unified Brands That strengthened the position in the U. S. Market. It's within the food segment, and a significant part of the customer base is Within the chain business, and this acquisition will add roughly 15% to the sales of the company.
So it's a quite significant Acquisition for Electrolux Professional. Finally, down Sobe, there is a pending bid, And we have said that we support it. And at the bid price, our stake has a value of SEK 25,000,000,000. Moving then over to Patricia. The total return was minus 2% in the quarter.
The organic sales growth was minus 1%, and the adjusted profit growth was minus 9%. The reason for the negative figure is mainly due to distortions within Nellik that I will come back to later. If we exclude MELDIC and LUK on the performance of the remaining or the other 8 subsidiaries, combined the organic growth was Sales growth was 15%, and the profit growth was 24% in the quarter. A number of our subsidiaries made important strategic add on acquisition in very interesting growth segments, advanced instruments, Cernova and Atlas Antibody. And to support these acquisitions That combined had an enterprise value of about SEK 7,000,000,000.
Patricia injected more than SEK 5,000,000,000 in equity for this acquisition. And we continue to see a strong pipeline for further add on acquisitions in our company. Moving then over to Melnik. Let me spend some time to try to explain the performance and a little bit also what we see going forward. If I start with the quarter, the organic sales growth was minus 16%.
That was a combination of a good continued good development in Wound Care that grew 8% organically with good profitability, But the much tougher development within Certica that was down 37%, heavily distorted by the PPE business. And as you can see from the figure, the PP business had a significant sales in the Q3 last year. And this year and going forward now, it will be 0. So that was the main reason. But in addition to the drop, There is also supply chain constraints within gloves.
And as I mentioned in connection with our 2nd quarter Presentation. The factory, Malaysia, had a delta virus infections and actually have to temporarily close the plant during the quarter. This has affected The Q3, but the company also had some inventory that could take care of the beginning of the Q3. So actually, the worst effect we will see on the glove side in the Q4. So If we look forward then, we can say that the 4th quarter will be the toughest comparison with PPE sales Because as you can see from the bar, the Q4 last year was the highest sales of these PP contracts, and we will also have the effect On the closure of the Malenetian factory for gloves, which is a profitable product for Melenetica.
This will affect the Q4. The good part, of course, is that the underlying development in the company It's strong. There is a strong demand for gloves. The problem is just shortly or temporarily But Merneke cannot supply the gloves, but there is a very strong demand for gloves. And the wound care continued to develop well.
And if we talk about the PB contracts, there would be a smaller effect in the Q1 next year, but then it will more or less be gone. So I think short summary, Q4 will be challenging, but hopefully then moving to next year, It should be a more normal situation. My final comment is on the graph On the top graph, where you can see the wound care and surgical, just to give you a feeling for the development, where you can see The sales level in the Q3 2019, Q3 2020 and Q3 this year, and you can see that wound care continues to develop steadily, While the Surgical business had this temporary peak last year due to PD and now is more or less on the same level as the Q3 2019. So with that, moving down to the other 8 subsidiaries, and here we do not have Vectura, the real estate part of it, but the other 7, you can see that it was a strong development in the quarter. Atlas Antibodies, our most recent subsidiary grew organically by 39% with very high profit margins of about 50 PIA grew at 26%, and here we saw strong growth in all geographic regions And for all business areas and the profitability increased due to increased leverage.
Advanced instruments that we acquired about a year ago continue to develop very strong with an organic growth of 26%. The profit margin was lower than last year, but still, as you can see on a high level, the reason for the lower margin is, number 1, That's Celentim that was acquired has a lower margin than the old Advanced Instruments business. The old business was close to 50%, while Solentim has a margin of about 30%. The second reason is that we are investing heavily to continue to grow and develop this business, both on the commercial side and within R and D. Grownability Grew organically by 17%.
Here, the profitability was 2 percentage points lower than last year. And this is a company that is heavily affected by the supply chain challenges that we see. It's clearly so that the chassis that they need To converge to their vehicles that they sell has significant problems due to the lack of ships globally. And there are also, in addition to that, increased freight costs for the company. Moving to Sironova, strong development in the quarter, organic growth of 14%.
The underlying profitability develops well. And also the recent acquisitions that they have made, the Digitech continued to perform well. So overall, the strong development, the fastest growth in the quarter we saw in the Acute segment. Core Mobile organic growth of 11%. Here, the situation is a little bit similar to BraunAbility.
1st of all, higher freight costs, higher sourcing costs, but also challenges related to the supply chain, And that affected the profitability in the quarter. And then finally, Lubboree. Lubboree only Grow 6% organically in the quarter. But here, I should stress that for Laboree, the order intake was significantly better than the revenues And once again related to the supply chains, you need chips in the instruments that they sell. So here, the backlog has increased, and the profitability remains at a reasonably good level, but of course, that's been affected by the supply chain situation.
So overall, this company grew 50% organically with a profit growth of 24%. Moving then over to EQT. Total return was up 16%, and as you can see, almost equally contributions from IKIT AD and the funds. The net cash flow was slightly positive in the quarter, And we see very high activity level within Equity, both when it comes to investment, but also divestitures. Then a few words going forward, we see an increasingly Fast, rapidly changing environment around us, and we have crystallized our targets Our strategic and operating priorities, and I think this page summarizes this well.
We have a purpose to create value for people and society by building strong and sustainable businesses. Our ultimate target We have 3 strategic priorities: grow net asset value, pay a steadily rising dividend and deliver on our ESG targets. And finally, we have 4 operating priorities. That is how we work to actually achieve the above, and that is our role as an engaged owner, make sure we have an attractive portfolio, operate efficiently at the Investor and of course, maintain financial flexibility so we can act on interesting opportunities. And as Lilianne will come back to, we have a very strong financial position at the moment.
Moving to next page, We have sharpened our climate targets, and now we target for investor net 0 at 2,030. And for the combined portfolio of companies, a 70% reduction of CO2 compared to 20 The previous target was to cut the CO2 in half over this period. So we have significantly set up the ambition level. And then we also have a value chain ambition to reach net 0 in 2,050.
And we,
of course, also encourage our companies to report and For example, in accordance with TSFD. Finally, Dan, I think we are well positioned to continue to deliver a good return. We have a proven governance model. We are great companies, companies with good tailwinds And also high profitability and cash flows. And the strong cash flow supports our ability to continue to develop Our business, invest for the future and also pay steadily rising dividend.
So with that, I soften hand over to Helena.
Thank you, Johan. Moving over then to Page 14. This graph Describe the net asset value development for the last decade, and we see that the quarter ended at SEK 682,000,000,000 in adjusted net asset value. Looking closer at listed companies, a total of SEK 465,000,000,000, We see that the TSR of 3% in the quarter compared to 6.1%. And year to date, These numbers are 29% compared to 24% for fixed areas.
Looking at the graph, we can see that There was some mixed performance in the quarter. So we and SOD were the strongest performers, while Electrolux and Wartsila On Page 15, yes, Patricia Industries' total return of Minus 2% in the quarter. And looking at 17, Page 17, we see the sequential change in estimated market values, I. E, the change since we reported Q2. And On this graph, you can see on the left hand side that we significantly or there is a significant contribution from the strategic add on The acquisitions that Johan already mentioned, while on the right hand side, we can see the impact it had on cash, Patricia's cash, as well as increases in the estimated market value of non nuclear.
And on the next Page 18, I will go through the major drivers of value in the quarter. And it was, of course, Mannlica, but also Navorin and So non liquid estimated market value was down SEK 7,400,000,000 in the quarter, And this was mainly due to lower multiples, but also lower earnings, and it was partly mitigated by cash flow in the quarter. The release value was up almost SEK 2,000,000,000 due to higher earnings, higher multiples as well as a positive currency effect. And then Tiryab also up SEK 700,000,000 in the quarter due to higher earnings. Moving over to Page 19.
Johan already mentioned our financial position. It It remains strong as well as the credit ratings and the average maturity of the debt portfolio still being 10 years and our leverage landed the quarter at 2.5%. Talking about the leverage at the end of the quarter, I want to say something about the leverage And the dividend, I want to mention that during the quarter, we have updated our policies To reflect that we are increasingly focused on adjusted asset values, I. E, based on estimated market values for Patricia Major subsidiaries and partner owned companies. Regarding the leverage, we now aim for 0% to 10% net debt to adjusted net The net asset instead of previously 5% to 10% net debt to recorded assets.
This broadening of the range in absolute terms was upwards and downwards increases our financial flexibility. Our goal to be steady rising dividend remains firm. While we have also replaced The dividend policy, this is just to clarify that it's supported by cash flow from all 3 business areas, and it should not fit in as a Fundamental change. My last page describes the return The average total shareholder return for the investor share during Several periods, year to date, 1 year, 5 years, 10 years or 20 years. And it shows that we did the Stock market index and our internal return requirements for all these periods.
The first question
Thank you very much, and good afternoon. So I had a question on LUK, and I was wondering if you could give us The growth of the Surgical segment adjusted for this contribution from pitu sales, I know Johan, you talked around this quite a bit, and I have some idea, but very helpful to get the figure for Surgical In addition to what we got for wound care. Thank you.
Okay. Thank you, Derek, for the question. If you look on the Surgical PP, the organic growth was negative high single digit in the quarter. And that means that for the group, Excluding PP, there was a growth of, call it, low single digit in the quarter.
Excellent. Thank you for that. And then I just had a question on your The gearing or leverage policy here, if there's anything to be interpreted in this, why it's coming at this At a particular time, is it in any way related to your current investment or acquisition agenda? Or is it just an Adjustment that you decided to make one day here in the quarter that it was appropriate, especially with the overhaul Of the strategic priorities or clarification rather?
I think it's more connected to the clarifications We've made Johan also mentioned the strategic and operating priorities. So it should not be interpreted in Maybe you want to add something, Yaron?
No. I think since we are adjusting we are focusing more and more on the adjusted values Rather than the book accounting. And for that reason, of course, we are also increasing the base. So by doing this, we will increase basically the band, both downside down and up. And we think that you never know how many investment opportunities arise.
But with this plan, we should have a good flexibility to act Both upwards and we get an increased flexibility basically.
Okay. Sounds very good. That's very clear. That's all for me. Thank you.
Thank you.
The next question comes from the line of Joakim Ghanal from DNB Markets. Please go ahead. Your line is open.
Thank you, and no worries whatsoever. So just to continue where Derek left off. So So I see a SEK 8,000,000,000 net cash position post the SUGA divestment here and this more flexible You're in target. Can you talk a bit about the opportunities you see to deploy this and to build NAV growth for shareholders in terms So by administrative, call it a more generous dividend policy or allocating this towards unlisted assets given that we have not
I'm sorry Joakim, but we hardly hear you. But if I try to Yes, your question, it is how we plan to use our financial strength. And the answer to that is that we will continue to invest In add on acquisitions, like we did in the Q3 with the 5 plus 1,000,000,000 investment in Solenti, Melite 100 And in that area, we have a strong pipeline for our subsidiaries. So we would target that. And of course, you never know how many we'll be able to close, but there are very interesting opportunities out there when it comes to add ons.
In addition to that, we are, of course, also flexible for investment in other areas, for example, enlisted Selected once if we find good opportunities in that. In addition to that, we, of course, will stick To our dividend and distribution policy that we have.
That's clear. And a final question for me then. Across the Fisher Industries, we talked about some of the ones that have faced some headwinds. But are there any holdings here that has weathered tight supply chains with more You would have anticipated.
Yes. I think that if we take where did we have that, Let me see. I think that the development of advanced instruments has been very strong since we acquired it, as I mentioned. And that has clearly been a, call it, positive surprise. It has actually delivered stronger than we expected when we bought it.
And then, of course, also TIAB has delivered strongly now for a couple of quarters. And finally, we saw a very strong revival in Cernova. And as I mentioned before, That was, to a large extent, also related to the acute segment. So I mean, it's a broad good demand for in many areas, but these are 3 that
Thank you. The next question comes from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Your line is open.
Hi, thank you. I'd like to follow-up a little bit On the net zero target,
and
Which part of your unlisted assets is this target going to be The greatest challenge for I mean, are there any parts of your unlisted operations, which will need to make a larger adjustment Than the others? And then as sort of a follow-up, I mean, obviously, your net zero ambition is going to impact your acquisitions. Could it also lead to divestments as you seek to reach this target?
Okay. Thank you for these questions. If I start with the first one, the net 0 is only for Investor AD. So that's a very, very small part of the total CO2 emissions. The portfolio, that includes both our listed companies and the companies within Patricio Industries.
So for these companies combined, the target is to reduce the CO2 emissions by 70% compared to 2016. Of course, for these 20 plus companies, some have more ambitious targets than this. And for some, it will be more Challenging, so it differs between the different companies. More importantly, I think is and this we should also remember is scope 1 and scope 2. We are, from an ownership perspective, really driving through the boards that our companies focus on improving when it comes to scope 3 Because that is actually where the biggest emissions are.
And on your question, I would not say that You shouldn't say never, but the divestment is not our focus. The focus for us is to make sure That our companies are changing moving forward to adapt to the new future. And that work is ongoing in all our companies at a very High speed at the moment.
All right. Thank you.
Thank you.
Thank There will now be a further pause while any further questions are being registered. We have no further questions, so I will pass back to the speakers.
Okay. By that, we We'd like to thank you for joining us today. We will be back with our Annual Report early next year. Thank you so much for the day.