Welcome to the Q2 Q&A session. Here, Ulf and Niklas will answer some of the questions that we have received about the report that was published this morning. First question is for you, Ulf. With stable demand in most customer segments, but lower activity in some, such as pulp and paper, how is the company planning to address the challenges in these weaker segments to improve organic growth?
Measures include a number of activities towards existing customers within these sectors. It is important to deliver on our customers' promises in terms of availability, product knowledge, life cycle costs, et c, to make sure that the customer sees us as a value-adding partner. As a group, we also work with this question when we decide on the acquisitions themes we pursue. For instance, looking at the sectors pulp and paper, vehicles, steel and mining in 2021, they represented close to half of our revenue. Today, they represent about 1/3. Despite this, they have grown in absolute revenue, but other sectors have become more predominant in the group. This is part of the strategic planning we do to see which sectors can offer us good growth opportunities going forward.
Next question. The organic sales rate is down to 0.6% in Q2 and has decreased since Q3 2023. Is demand in your market good enough to maintain organic growth in the second half of 2024? Niklas.
Thank you, Ann Charlotte. As we state in the report, the demand in our markets remains stable on the overall level, with some customer sectors performing better and some having more challenges. It's very difficult to predict the future demand situation. Our aftermarket business is quite near term, with order stock not spanning that long into the future. Given that situation, we continue to throttle and brake based on the circumstances.
What does the pricing landscape look like in the market? Is it still possible to raise prices?
That the purchase prices continue to increase, but at a more moderate rate, and we therefore continue to adapt our pricing when there is a need. Some price adjustments are being made per 1st of July, for instance, in some of the companies to account for higher procurement prices.
Next question. How are the efforts to adapt to the market situation and maintain cost efficiency impacting organic revenue growth? What further steps are planned? Ulf.
I think that we have seen these last years after the pandemic, it's a relatively mild down pacing of economic activity in industry. If you exclude sectors such as building and construction, where we are not present. In this kind of environment, we keep to our corporate rule book, where we have plans prepared in each company that can be implemented if markets deteriorate or improve. This is a responsibility of local management, which means that the action can be quick and is not required to be initiated from executive management. Even though we are careful with our costs, we still do a lot of forward-leaning, not least in recruitment, where we continually look for and onboard skilled people. We also invest in ways to become more efficient. That way, we can balance a moderate cost increase with organic growth.
The increase in revenue during the quarter from acquisition of SEK 208 million, combined with the statements that acquisition was behind the EBITA increase of SEK 23 million, indicates a somewhat lower EBITA margin, approximately 11% for acquisition, compared to an organic of more like 12%. Can you see potential in increasing the margin for the acquired units? Ulf.
The short answer is yes. We continually work with margin improvements in all of our companies. We have seen a positive trend in the development for the new companies, although many have a short history in our group. However, I would like to point out that from quarter to quarter, the company mix effect can also have an impact.
Looking ahead, what does the acquisition pipeline look like for Momentum Group? Are there specific areas or industries you are targeting for further growth? Ulf.
So far, we have completed seven acquisitions, of which six in the second quarter. We continue to see a favorable market for doing M&A. We have a pipeline that supports continued M&A growth. As we have stated in our efforts, we are looking for companies that are in our sweet spot, up to SEK 100 million in revenue with double-digit margins. In terms of sectors, we have a number of clusters that we target that are aligned with our business units where most of the acquisitions should take place.
Now the final question. What do valuation multiples look like in the acquisition market? Has it increased slightly recently, given that certain macro indicators, such as the PMI and possible interest rate cuts, give positive confidence in the future? Niklas.
Thank you. As of now, we have not noticed any general changes in valuation multiples. It is still more dependent on case-by-case discussions that we have and the fundamentals of the companies that we are looking at.
Thank you for listening to our Q&A session. If you have any questions, you can always email us at ir@momentum.group. Thank you.