My name is Viveka Hirdman-Ryrberg, new Head of Corporate Communication here at Investor. We will start out the day with our CEO, Johan Forssell, going through the results, followed by our CFO, Helena Saxon. There will be a Q&A session and also opportunities for media afterwards to have individual interviews. The presentation from the press conference will also be available on our website directly after the presentation. Warm welcome everyone, and please, Johan.
Thank you, Viveka, and once again, welcome to this Q3 report. Let's quickly dig into some key figures. In the quarter, we had adjusted net asset value that amounted to SEK 421 billion. That was up 7% compared to previous. You can see that in this quarter the main driver was the listed core investment that was up 9%, while Patricia Industries was up 2%. In this quarter, actually EQT was down 2%. Our Total Shareholder Return amounted to 13%, which is about the Swedish stock market that was up 7%. We all know that after the end of this quarter, we have seen a correction in the market. The question, of course, is what is happening out there in the world. I think it's fair to say that we have seen a good development on the macroeconomy for some time.
The level where we are right now is at a good level. We are also seeing that leading indicators are coming back, that might indicate that we are heading into a softer demand environment. I will not speculate how this will play out, the macroeconomy, this is what we see. For us, the most important part is that we make sure that we are prepared if we are entering a tougher environment. On that note, I think it's important to highlight that during the quarter we issued a 12-year bond, EUR 500 million bond at the fixed rate of 1.5%. That will, of course, give Investor a good financial flexibility for the years ahead.
Secondly, you have heard me many times talk about the importance of flexibility and agility among our companies, that is the second area that is a top priority, supporting our companies to make sure they can handle both strong and weak markets. That is our focus, being prepared for whatever comes up. With that comment about the world, let's go back to the quarter. Starting with the listed core investments. You can see here that there were a number of important activities on the listed side during the quarter. Boeing was awarded a $9.2 billion deal from the U.S. Air Force, of course, this is highly important for Saab being a risk-sharing partner to Boeing. Atlas Copco have brought up this vacuum technology business area over the last four or five years.
During the quarter, they did another sizable acquisition to further strengthen this business area, and now I think it is fair to say that they are really a market leader in this business. Ericsson was awarded a $3.5 billion order from T-Mobile in the U.S. in the quarter. Of course, a very important one both for the importance of the U.S. market and also given the size of the order. Finally, Husqvarna here. Husqvarna had four divisions. Three of them are working very well. One has not performed in line with expectation, and that is the consumer brands division. They take decisive actions to focus on the core brands of Husqvarna and Gardena and basically resolve the consumer brands division. We are fully supportive of taking that action.
Nasdaq has announced a bid for the Swedish fintech company Cinnober. This one will strengthen their position within the market technology area. Finally, in Wärtsilä. Wärtsilä is reorganizing the business, basically putting the service closer to the energy market and the marine, the two key segments to act even more efficient and faster towards both these two end markets. As you can see, a number of important activities in the quarter in the listed portfolio. Moving over to Patricia Industries, the major subsidiaries, if we would have owned Piab, BraunAbility, and Sarnova last year, pro forma, you can see that the reported growth was 14%. Out of that, 3% was organic growth. You can see that the profit growth was 13% in the quarter. When it comes to Mölnlycke, the organic growth was 2%.
In this quarter, the surgical part was flat. Importantly, wound care grew by 4% organically, and this is actually the third quarter in a row that wound care is growing 4% organically. I think we have a good development of our two latest acquisitions that we did this year with Piab, BraunAbility, Sarnova. Both these companies were growing 6% organically in the quarter. Perhaps if I can say to the highlight of the quarter is the development of Laborie that generated a very strong organic growth, double-digit growth, where we importantly saw the profitability coming back to more normalized levels. In the quarter, the profit margin was about 25% in this business. Moving down over to Aleris before moving over to yesterday's announcement, just a short comment about the quarter.
The organic growth was 1% in the quarter. We saw an improvement in the margin in the care side. We saw it coming back in the healthcare side. Yesterday's big announcement. If I can take a step back. Investor acquired Aleris in 2010. Since then, we have invested in total SEK 5.4 billion into Aleris. On the one hand side, the positive part of the development during our time is that both on the healthcare and on the care side, the company has really developed high quality care services. We have received high user satisfaction for these two businesses. It is also fair to say that the financial development has not been satisfactory. As of today, it is just fair to say that so far from a financial perspective, this has not been a good deal. Sometimes the environment around you changes.
Sometimes the plans does not play out as you planned. That is part of business life. In our view, if that happens, what you do is you pull up your sleeves, you try to fix it, you do the best to really develop from where you are, and that is what we are trying to do. What have we then done? Well, since some time, the company has been internally split in two divisions, care and healthcare. Yesterday it was announced then that the care part of the business is divested to Ambea. We believe that deal is truly a win-win deal. First of all, we believe we give care a good home with Ambea. This will be a pure-play market leader within the care segment.
We also get a good price for our business that will lead us to, or for the company, to reduce the net debt in the company by SEK 2.6 billion-SEK 2.7 billion. If you look on our quarterly report to date, you will see that the net debt in Aleris as of the latest quarter is SEK 2.8 billion, and with this deal, we can reduce it by SEK 2.6 billion-SEK 2.7 billion. The financial situation will significantly improve. Our focus can now be to really make sure to develop the pure-play healthcare company in Aleris. Just to show a little bit figures then. What we divest. The company Aleris has sales of SEK 10.5 billion-SEK 11 billion. What we divest now is the care business with revenues of about SEK 5 billion and 6,000 employees.
What we will keep is the healthcare business with revenues of about SEK 5.7 billion and about 5,000 employees. This will now be the focus of our development. What are then the key priorities going forward? First of all, of course, we need to make sure that we close the transaction, which we believe will happen at the latest during the second quarter next year. High focus, of course, on quality, service, and efficiency in the operations. There are also a number of specific areas that the company right now is focusing on. Number one is to improve the healthcare business in Sweden that is not performing in line with expectations, and they have recently announced a big restructuring of that operation.
Secondly, to grow and develop the digital offering, Doktor24, and finally adapt and manage the new radiology contract that will come into force during the first quarter next year. The fact is that contract will have lower prices. That is why it's so important for us now to manage this work as hard as possible with efficiency improvement to try to counteract this. As you can hear, restructuring healthcare, handling this contract, this will not be a quick fix. Having a good position both within radiology and in specialty care, we believe that with these actions, we should really be able to develop this. Of course, in the short term, we will need to take a couple of actions to drive this business forward. All right. With that on Aleris, let's move over to Mölnlycke. I mentioned the growth figures before.
If I should give you a couple of additional remarks on that, the emerging markets business is really a good key growth driver, in the quarter, emerging markets grew by a little bit more than 20%. If we look on the development on the other geographical regions, U.S. was more or less flat, if we look on the European side, we can see that the northern part of Europe performed well, while it was tougher. It continued, I should say, to be tough in the U.K. Strong markets were, for example, here in the Nordics. The underlying profitability was more or less unchanged, importantly right now is the launch of the Mepilex Border Flex wound dressing. In this quarter it was launched in two, of course, very important markets, being the U.S. and the U.K., and the initial response has been positive.
Moving over to Thermodyne, organic growth of 1%. If you look here on the different product categories, different geographic regions, no big differences. The profit margin declined. This is partly related to some costs related to the CEO transition. We also had an asset disposal loss related to one of the acquisitions. Small part, but after the acquisition, the company decided this is not our core business. I would say the main focus is now that we need to address, or the company needs to address the operating expenses, and actions have already been implemented to make sure that happens. Piab, as I mentioned, good organic growth, 6% in the quarter. The profit margin at a good level of 28%.
If you compare it with last year, it's down a little bit, we should also remember they have done a couple of acquisitions within the gripping area that has lower margins than the vacuum automation business. Overall, I must say it's a good start of this company. If you look on the different business line and the different geographic regions for Piab during the quarter, geographically, all key geographies grew in the quarter. If you look on the 3 business lines, vacuum automation, vacuum conveying, and ergonomic handling, they were all growing in the quarter. Sarnova, our U.S. acquisition that we did this year, strong development, 6% organic growth, and margin expansion quarter-over-quarter. We saw profit growth once again exceeding the base growth. Here it's good to see that the 2 initiatives are really bearing fruit.
One is the private label Cureplex brand that they are driving in the market. Good development on that one. The other one is these custom kits, where you put things together in a kit that is ready, for example, at school shootings, et cetera. Both those business lines are doing well. BraunAbility, organic growth 3% in the quarter. The profit margin was impacted by a voluntary product recall. This is a product or a component that was not good enough, and they were very quick to, of course, say to this the top priority for BraunAbility, so what they did was voluntarily bringing back that, and they will of course do it free of charge. The good part, there has been no incidents about it, but they will of course take the cost for that, and that you saw having an impact in the quarter.
Laborie, that I mentioned a little bit before that I saw as a little bit of a highlight. You see that the organic growth was 15% in the quarter, and here you can see after a couple of periods, I actually mentioned that in the last quarter when we had the negative profit, that we actually expect the profitability to come back because they have been working with two things, integrating the large acquisition, Cogentix, and restructuring the European operation. Both those actions are actually going well according to plan, so it's very good to see their profitability came back. Three, good development. Subscriber base increased 15,000, driven by the Hallon and Oister brands. Service revenue was up 1%. We should acknowledge that we had some help by the currency.
If you look on the EBITDA in our quarterly report, you will see that the profit is up in the quarter compared to last year. Here we have to remember that the accounting is actually helping us, because IFRS 15 now demands that we capitalize certain customer acquisition costs. If we adjust for that, the profit is actually not up, it's actually down 1%. On the other hand, we have a new Danish VAT ruling that is having a negative impact compared to last year. If we adjust for both of these, the profit is actually flat to slightly up in the quarter. On EQT, I mentioned that the value change was -2%.
I normally do not comment on individual companies, since one of the companies in the China, one of the China funds, LBX, is a listed company. You have seen what has happened on the Shenzhen and Shanghai stock exchanges, this has also affected this company. This is a company active in pharmacy retail chain. Actually, the company is developing well from an operational perspective, the stock market has come down, that has a big impact. If we adjust for this Chinese company, LBX, actually the value growth in constant currency was up slightly for us. The net cash flow was positive SEK 300 million plus in the quarter. You have seen that the decision has been taken that EQT is reviewing the options how to develop the business going forward, including strengthening the balances. This is something that we support these initiatives.
Of course, we will gradually, as an owner, participate in that work. Our strategic priorities, they are there, they are firm, we are working towards reaching them. With that, I will hand over to Helena.
Thank you, Johan. May I have the clicker?
Yeah.
Thank you. Let's look at some of the financial highlights. The net asset value, or I should say the adjusted net asset value, which is based on estimated market values of Patricia, landed at the end of the quarter at SEK 421 billion. This is an increase of 7% in the quarter. This was mainly driven by the listed core investment, and we can see that the two major drivers here were SEB and Sobi. Saab also had a great return in the quarter, while Husqvarna and Nasdaq had a tougher quarter. The TSR of this division was 9% compared to 7% of the stock market.
Looking at the market or the estimated market values of Patricia Industries, we can see that in the quarter, the value was up 2%, and this was mainly driven by Mölnlycke, Laborie, Permobil, and Three, while Aleris had a more difficult quarter, and the estimated market value actually decreased. If we go into details on all the specifics, you can see that for Mölnlycke, both higher profits and cash flow actually lowered the net debt, and currency unfortunately impacted negatively. We still had an estimated market value increase of SEK 1.2 billion. Permobil was up SEK 0.8 billion, and this was driven by both cash flow and higher profits. Laborie was also up SEK 0.8 billion because of the higher profits that you saw in Johan's graph there. Three was up SEK 300 million. Cash flow was higher.
Profits were also higher, but multiples contracted in the quarter. Aleris was down SEK 300 million due to lower profits. Looking at the financial investment portfolio, which is part of Patricia Industries, we can see that it's still around SEK 8 billion, the value development was essentially flat in the quarter, and our strategic intent here remains, i.e., to realize the value of this portfolio through exit. Looking at our leverage development, we can see that we ended the quarter at 4.9% leverage, which is in line with our target range. The net debt is SEK 19 billion, and our cash position ended the quarter at SEK 13.6 billion. Johan mentioned that we raised a EUR 500 million bond. It's 12-year money at 1.52% interest rate, and at the same time, we bought back EUR 230 million of EUR bond maturing in 2021.
That extended our maturity profile to 10.6 years. That's about what I was going to say, that ends my presentation. I will hand over to Viveka. Do you need this one? Yes.
Okay. Thank you, Johan, and thank you, Helena. Now we will have a Q&A session. We will start with you in the room. We have a handout that will be circulated. Emily, please.
Thank you. Rikard Engberg from DNB Markets. One question on the EQT strategic review and three growth-related questions in Patricia. In regards of timeline, when would you say that you will actually have taken a stance on what strategic options would be the best for EQT? Basically, we could start there, I'll get back to Patricia afterwards.
The process has been initiated, I cannot give you a comment on how fast it will go.
Going to Patricia. In terms of growth, in Permobil and BraunAbility, the growth rates came down quite substantially in a sequential development. What is driving those declines? You didn't elaborate on that.
If I start with Permobil, what we can see is that it doesn't look like we have lost market share. On Permobil, I think the answer is that we have seen a weakening of the market in the quarter. When it comes to BraunAbility, what we can see in the quarter, as you know, there are a couple of different business lines. We have the commercial side, we have the lifts, and we have the consumer vans. If you look on the commercial side and the lifts and look on year-over-year, both business lines had good growth. What came down in the quarter was the consumer business.
I'll hand over to Magnus just briefly. In Mölnlycke, we saw ConvaTec shortly appear in the wound care segment with the profit warning earlier this week. You still managed to accomplish quite significant growth rates in the wound care business. Emerging markets is obviously driving growth here, but the basis there is significantly lower if we compare where you said that emerging markets were as a share of the total sales mix
I must say I cannot comment, of course, because I only saw the headline that ConvaTec was growing 0.8% compared to the 4% that Mölnlycke is growing. What I can say is I cannot comment on what's the mix from their business point of view. What I can say is that I think, first of all, we have a strong momentum in emerging markets, and that we see both in Asia and in Latin America, good momentum. I would guess that those could be areas where we outperform. The second area is that we do believe we have a good momentum when it comes out to the rollout of certain products.
They mentioned price pressure in developed markets, and you mentioned that U.K. is obviously challenging here. Is that something that you are seeing as well?
In the Medtech area and in the healthcare area, it is very common that you have price pressure. That's part of the game. For sure, in certain markets you have price pressure and you need to handle that. The way you handle that is, of course, to work with efficiency, but even more important is to work with product innovation. Prices on old products, they are going in one direction, and that is slightly down. You need to continuously bring out new innovative products, and that's what we're working on.
Just a final question. With Piab and Sarnova in Patricia, could you elaborate on the strategic priorities there in terms of, or split between organic growth and structural growth? Are these companies in fragmented markets? Are you looking at consolidating those, or how would you say the strategy is for growth there?
I think it's always, to be honest, it's very difficult to say how fast can you grow through acquisitions, because it always boils down to when does great opportunities arise. If great opportunities arise for these companies, we are willing to grow through acquisitions, for sure. These are platforms we believe have good growth potential, both organically and through acquisitions, but the timing will always depend on what becomes available. As always, it takes two to tango. If I should say something about the priorities from a more structural long-term point of view, if I take Piab, two prioritized areas for us in the long term is to grow faster in China and to grow the automotive business faster. In Sarnova, the priorities there is first really work hard where we stand today, much more to do.
We should evaluate can we add other product categories to the portfolio. Finally, I would add also add-on acquisitions.
Thank you.
Thank you. My name is Andreas Håkansson. I'm getting back to EQT, you mentioned here, of course, the goal to strengthen the balance sheet, can you describe to us why you want to strengthen the balance sheet on the mother company level so we understand that? I guess the model now works in the way that you raise capital in the funds itself.
I think that is actually a question you should raise to EQT. The question should be raised to them, there could, of course, be numerous reasons why you want to have a good balance sheet. Just to mention one reason could, for example, be if you enter a new business line as a private equity company, initially you might not have a track record, you haven't started it. If you have it in your own balance sheet, you can, of course, start to get going, after you have done that, you can raise capital, you can gain a little bit speed. That is one example, there are a number of examples why that could be of strength to have a strong balance sheet, you should take that question with Tomas.
Right. Do you see other alternatives for EQT in strengthening the balance sheet than a public listing?
I will not make any comments. They have said that they will really look into the opportunities to do that, and that's an evaluation that will take place, and we'll see what comes up.
Okay. In the valuation of EQT funds, Investor's valuation of your EQT fund stakes, I guess that is valued at the cash that you have invested. How come you do not value those funds on a market value estimate basis as you do in-
The investments we have done in the funds, call it as an LP, of course, they are valued in line with the market values, but our ownership in EQT, we have at book value. That is for sure lower than the true market value. The reason why we are not doing, call it estimated market value on that side as we do for Patricia, is actually due to the fact that for competitive reasons for EQT, we do not want to reveal it.
Okay. You have mentioned that when it comes to your unlisted subsidiaries under the Patricia Industries, that you want in the organization to focus on the existing holdings to develop those for some time after having done several acquisitions as of lately. What is that timeline that you see there? Do you think that you have enough capacity in the Patricia Industries organization to make the number of acquisitions that you have the capacity financially to do?
On the first question, I think it's extremely important. Some of the companies we have owned for a long time, like the Mölnlycke and the Permobil, et cetera, we know them well. If you make acquisitions like we have done these years with Piab, with Sarnova, we believe they are great companies. Of course, when you get them new, you really need to get your arms around them. You need to make sure you have the right board, you need to work close with the management, and to be honest, you need to really learn more of the details into the business. For that reason, I believe it's important that when you acquire new companies, you focus on really getting your arms around them, and I think we have had a good start on that with both Piab and Sarnova.
Do we have the right financial resources in Patricia to find new investments in the medium term? Yes, I do so. We have done a capital over recruitments during the year on the Patricia side, on the investment side, both in the U.S. and here in Sweden.
Okay, thank you. I have a final one, perhaps to Helena. On Aleris, when you showed the breakdown in the divested care unit and the healthcare division that you will keep, on the healthcare division side, I saw that depreciations were quite high.
What expectations should we have for depreciations going forward?
The healthcare business is, as you have already figured out, more CapEx-intense. We're talking about radiology, for example, where you have to invest in significant machines to actually carry out the services. I think this level is nothing extraordinary for Aleris, and it is something that you should expect for this type of business.
You should also remember that both when it comes to the figures on profits on EBITA and EBITDA of both care and healthcare, we have over the last year taken a couple of big restructuring, That could of course affect those figures. Of course, call it the radiology business has a higher capital intensity than some other business.
Would you care to comment the radiology business share of group revenues in healthcare?
No, we will not do that. The company has a very strong position in radiology. It's a size of the business with good profitability, and we have also built up a good business on that side in Norway.
I guess when you mention profitability in that perspective, you mean historic profitability, and now with the new tender, there's another situation.
That's what we need to handle.
That's the tender in Stockholm, while the Norwegian business is the Aleris Care business that we acquired from Aleris is not affected.
Yeah
by that tender.
For us, it's hard to know the splits.
Of course. Yes.
Thank you. Maria, Scherer and Media. Regarding the ongoing review in EQT, with an IPO being one option, are you considering putting a market value already now on your holding in EQT?
No.
Also, with regards to the discount staying at so elevated levels, are you considering a share buyback program?
If you look at the discount, just to get the facts, on the reported figures, the discount at the end of the quarter was about 16%, then adjusted, it was 25%. If you take 10 and 20 years on the reported, which is where we have the figures average has been 25%. Of course, this fluctuates over time. Having said that, as I've said before, our key job is to make sure we get our ultimate target is to create a good total share of the returns. Of course, if the discount can be lower, we will be happy, but it needs to be structurally lower. That is the top priority. Our priority to achieve that is what we have talked about today.
Trying to really work as an active, engaged owner in our companies, build new platforms like the Piab and the Sarnova, and develop those companies, work continually efficiency on our cost, then stick to our dividend policy of a continued gradual increase in that. By doing that and executing and generated good TSR as we have done historically, that is our way to do it, our priority is not to buy back shares.
Okay, thank you. One final question on Aleris. With Aleris operating close to debt-free if the transaction is approved, can we expect to see a distribution to investors in 2019?
It's too early. We have been totally focused now on closing this deal, and the next focus will be on really taking care of the healthcare and developing that business. It's a little bit too early to look into that question.
Thank you.
I am Gustav Söderström from Pareto Securities. I was wondering whether you could provide, you mentioned some weaker macroeconomic development here in looking at the leading indicators. I was wondering if you could provide any more detail on that. Do you see certain sectors? What is it more specifically that you're worrying about? Perhaps most importantly, do you see any effect on business activity as of now, or is it just that you see these leading indicators kind of losing momentum? Thank you.
I think my comments refers to the overall economy, and the things we look, if we look on all the things, the data that comes out from the macroeconomic perspective. If I take a couple of ones, you learn that you always have to bring up the positives because otherwise it looks so bleak, and I have to say, I don't see any ghosts out there. What I do see is that we are at a good level. That in combination with a couple of things that I will mention, it indicates that we might enter a soft period. I don't have the crystal ball. For us, as I said before, it's important to be ready if it happens. What do we see?
If you look on the leading indicators in Europe, in Asia, in China, and a couple of areas, you will see that leading indicators are coming down. There are, for example, J.P. Morgan's global leading indicator. If you look at that, you will see trends down. You see on the auto side, you see weaker. You see it in Europe, you see it in China. If I remember correctly, the September figure was down 12%. The auto sector is one. I think we are most likely starting to see some effects of the trade war in China. If you look on the emerging markets, you can see countries like Turkey, Argentina, those countries have currencies that have devalued by about 40%, 50%. These companies also have a large foreign debt, of course that put the state in a very difficult situation.
In addition, of course, if these countries have a currency that lose 40%, 50%, many companies in those countries will have difficulties buying stuff priced in EUR or USD. Finally, we have the situation in Europe with Italy, Brexit, and so forth. If you look in Italy, you can see rates have come up if you look on the 10-year bond. Brexit, I will not even try to see what will happen on that side. The only conclusion that I think one can draw is that the difficulties for them to come to an agreement, I think shows how integrated the countries really are in Europe. Of course, as you would expect, I hope that they will come to a reasonable agreement, because otherwise it will be a lot of uncertainty, and uncertainty is never good for business.
Any final questions here from the room? No. We'll see if we have any questions from the participants on the call.
Thank you. Ladies and gentlemen, if you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name's announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. Once again, that's 01 to ask a question or 02 if you need to cancel. There'll be a brief pause now whilst we register any questions. Okay, there seems to be no questions from the phones at this time.
Okay, we'll see if we have any questions that come in on written questions. No. No questions. By that, thank you for joining us today, all of you who are here in the room and also all the participants on the call. Thank you for today. We will now do some interviews with Johan.