Ladies and gentlemen, welcome to the NCAB Group Q3 Report 2021. Today, I am pleased to present CEO Peter Kruk, CFO Anders Forsén, and Head of IR Gunilla Öhman. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. Peter, please begin.
Thank you very much. Today, myself, Peter Kruk, and Anders Forsén will be presenting. If you move to page three, we will be covering a number of topics. We have a strong result in the quarter and good growth that we want to present. We're also giving information about two recent acquisitions. We have also landed a new credit facility which will add SEK 750 million for further boosting acquisitions. We have also yesterday called for an extraordinary general meeting where we are proposing an extra dividend of SEK 10 per share, and we're also proposing a split of 10 to one. We have also taken the decision that given our current performance, we will be reviewing the financial targets in 2022. Okay.
If you move to the next page, if we start by looking at quarter three. We've had yet another strong quarter. The order intake, which has been very strong already in quarter one and two, have continued strongly in quarter three. The order intake is up 86% in U.S. dollar, which is our trading currency. If you look at comparable units where we exclude the effect of acquisitions, the increase is 68% in growth. We have also seen during the quarter that lead times have stabilized. In the first half of the year, we saw increasing lead times, but these have now normalized in the quarter, also stabilized. We can also see therefore that our order book is normalizing.
We continue to see benefits of our local presence in Asia, close to the main manufacturing hubs, and that is giving us a competitive advantage and helps us to grow our market positions. Positive is also that our recently acquired companies are all performing very well. Looking at net sales, we grew to SEK 864 million in the quarter, which is an increase of 66% in US dollars, and 50% increase in comparable units excluding acquisitions. This in combination with a well-preserved gross margin and development there has led us to generate a new record EBITA and EBITA margin. The EBITA in the quarter amounted to SEK 123 million compared to SEK 50 million in 2020, which is an increase of 146%.
Our EBITA margin amounted to 14.3% versus 9.3% in prior year. Anders.
Okay. Thank you, Peter. We are happy to announce that we have made another good acquisition in October. We acquired Elmatica, a former very good competitor to us and located mainly in Norway. It is an old PCB trading company with a long history, a lot of good technical skilled employees and people, so that is really, really positive for us. I think we have a very similar business model selling in the high-mix, low-volume area. Of course, they also have very high quality focus. They have some 45 employees. Main customers are in Germany, Sweden, Denmark, Norway. They have rather good sales. They expect about SEK 370 million in revenue for the full 2021, with the profit level of some SEK 45 million.
The purchase price was SEK 350 million, and we have a potential additional earnout based on the gross profit development for 2021. We see some synergies in purchasing power. Elmatica do not have the same presence in China or Asia as we have. We see also that we get a lot of good competence from aerospace defense business, and with the highly skilled people they have in Elmatica. We think this will be a really good win-win for all of us. Also in September, we acquired RedBoard Circuits in the U.S. Smaller company, revenue estimated to some $5 million, five employees. They also is a rather good fit to our business. We're adding on some customers that we are looking for.
We see even here that we can then sort of add synergies in purchasing power and how we can use the benefit of our factory management team in China to improve the conditions for the customers of former RedBoard. It's good to see that the acquisition path is continuing. On the next page seven, as Peter said, we did have some good decisions by the board yesterday, which says that we will propose an extra dividend of 10 SEK per share. The purpose is a little bit to actually add on some net debt. We have a target on net debt to be much higher than it is. We also have a strong balance sheet for that. At the same time, we propose to do a 10-to-one share split.
In connection with that, we have created a new loan facility with Nordea, which means that we will replace all our existing loans with the new loan, and we will add on roughly SEK 750 million. That means that even if we do the dividend, we will have boosted our possibilities for further acquisitions. We will roughly have SEK 350 million more after the acquisition of Elmatica and the dividend than we had before. This is a boost to the possibilities to continue growth through acquisition. Peter.
Very good. Moving to page eight. This is where NCAB is at end of the quarter. We are today a little bit more than 500 employees in our company. We have 27 main factories which we're working with. Important to remember is that we don't own any factories ourselves, but we work with partner factories. Out of our 500 employees, we have close to 100 that are working only with factory management, sourcing, qualifying factories, as well as driving improvements in these factories and securing deliveries. Our focus is on demanding customers. We are focusing primarily in the high-mix, low-volume area, and we are aiming to supply with zero defects, produce products sustainably, and offering the lowest total cost for our customers. Our vision is to be number one PCB producer wherever we are.
We are already the global leader, but again, it is, as you may have heard before, it's a fragmented market where while we are the leader, we are still only in a market share of less than 2% in the high-mix, low-volume segment. A lot of opportunities for growth. If we move to the next page, what we do again is printed circuit boards. The products you see on the far left, the boards upon which semiconductors are mounted to then become an electronic brain in any kind of electronic product. Moving to page 10, a little bit of our history. The company was started in 1993, has had then a growth expansion first in the Nordics, then expanding into more of Europe and then further into the U.S., and other markets.
We can also see that since the IPO, we have further increased our activities in the acquisition area, and that is now a core part of our growth strategy, that is further boosting our overall growth. Anders?
Looking forward to the acquisition pipeline we have, still a lot of opportunities. As we have said before, that is a very fragmented market with many smaller companies. We have identified on a short list roughly 45 companies that could be suitable, and we are trying to actively contact them to get into discussion. The other good side is as well that, after the acquisitions that we have done, we see a lot of the companies that would like to sell contacting us actually. It's two ways of getting into new leads, which is really good. As you know, when we do the integration, we really see some good benefits from using the large team we have in China and on the factory panel.
Very often we can see that we can increase margin and increase payment term or, you know, improve payment terms and so on. There are a lot of good synergies on the sort of purchasing side. Still very positive pipeline out there. Going then to next slide, number 12. Just to give some very quick note of the quarter. As we said before, we're very proud of the result we have done. We saw a growth of 61% in net sales up to SEK 864 million, and measured in U.S. dollar, 66% up. What we also can see is that this growth really leveraged the EBITA because we don't need the same kind of resources to handle all the new revenue.
In some way, we can see that the increase is seen in net sales really converts into profit. We are happy to see that the EBITA increased 146% up to SEK 123 million. We also have a record high EBITA margin of 14.3%, which we are very proud of. The next slide shows the year-to-date numbers. It's more or less the same trend. We see in the Swedish krona, the growth is 40%, and in US dollar, 55%. Even here we can see that we have more than doubled EBITA, and we are year-to-date growing 12.7% EBITA margin.
Okay, moving then to page 14. One thing which is very positive is that we can see we have very strong growth in all regions. We can see that Nordics have really increased its growth rate and has now grown by 60% organically. Europe up similar growth rate excluding acquisitions and up 100% with acquisitions. Also now U.S., the growth rate here has been increasing. We're now at 25, roughly 25%, excluding acquisition effect. In prior quarter we were just below 10%. A good increase here now also, and East continuing strong with 50%, close to 50% growth still in the quarter. Also we can see a good full group and margin improvement in all four regions.
The growth which you see on the following page, there are some fundamentals that is helping our growth apart from the general market recovery. Our focus is on the high-mix, low-volume industries, which predominantly means industrial applications. The market analysis done by IPC a little bit highlights the benefits we probably seeing in the coming years. The fact that historically a lot of electronic growth has been driven by consumer PCs, mobile phones, audio video equipment. What actually we're seeing now is that there is a trend of, or a fast-changing trend of increasing the electronic content in industrial products and applications. Some of the drivers for this is Industry 4.0 or Internet of Things as an example, which means that you want to be able to access and control industrial equipment remotely.
That of course adds more intelligence and more electronics to these industries. This is something of course that we will be benefiting from in the coming years. That is a positive growth for us. On top of that, we see of course the continuous growth where local production in Western Europe and the U.S. is declining versus manufacturing in Asia. If we then move to the next page 16, positive for us as well, and it's also a key element in helping to generate the financial performance, is that we have been able to manage the situation this year with the raw material price increases that we started seeing in quarter one and quarter two.
In quarter three now that these orders are translating to sales, we can actually see that we have successfully been able to manage those price increases and transfer them over to our customer base. We are preserving and in fact improving our margins for this entire year. Okay, 100.
Okay, next page then. We, as I said before, the order intake continues to be very strong, and we see also an increase of 86% in US dollar. Even if we take that for comparable companies excluding acquisitions, we are up 68%. It's really good to see that the market continue to grow. The good part for that is to also say that we don't see any increased lead times. I mean, we could note this huge order intakes first and second quarter due to longer lead times, but we estimate that those are stable right now. Now it's more real market growth we can see.
Of course, the order intake we have had in the first half year shows up in the good revenue, and we had a growth in net sales of 66% or for comparable companies, 50%, which we of course are happy for. Next page, going into the result. As I said before, I mean, the increased revenue really goes down to the EBITA, which means that we can have a good leverage, and we have managed to have 14.3% in EBITA margin for the quarter, which we're really so proud of. That means, of course, earnings per share is increasing. The only thing that is maybe a little bit negative in this report is that we see increasing working capital.
We estimate that to be temporary, and it's very much due to longer lead times on sea shipments and so on. We also need to have some buffer stock because we have made pre-orders to secure deliveries to the customers. All of that has, of course, created a lot of extra working capital. When we see that the lead time's going back to normal, and we expect that to go down to a more normal level. Normally, we have something around 8% of our last 12-month revenue as working capital, and we are this quarter up to 11%. We are working actively on getting back to lower numbers again. If looking into the different segments, on next page, we start with Nordic. Nordic, we see a very good growth in order intake.
We could have seen that Nordic has been a bit slower in the beginning of the year, but we see that third quarter really picking up, and we see an increase of 76%. Also, net sales is growing about 58%, measured in U.S. dollar. We can see here that we see growth in all our companies in Nordic, but Norway is the leading star, where we do have a lot of business to electric vehicle charging, et cetera. So Norway is really booming. EBITA for the segment more or less doubled compared to last year, of course, connected to strong growth but also increased profitability and increased improved margin. We ended up with 18.6%, EBITA margin for the quarter, which was really good.
Next page, we can see Europe, which is the most fastest growing segment for us. We also have seen very strong growth in our main markets, Germany, Netherlands, and U.K. Of course, that will boost the growth for the segment. Also here, we can see order intake increased by 132%. For comparable units, almost doubled, increased by 92%. We see also strong growth in net sales, both for including acquisitions and for the comparable companies. Also here, we can see a lot of synergies from the acquisitions made both in Italy with PreventPCB and in Netherlands and how we can together see better improvement in the results. That's one reason why the EBITA margin has increased so sharply between the years.
As I said before, the acquired company is really doing well. I think we can see some add-ons with our old customers when we use our factory panel and can maybe upsell to the customers.
It's good to see.
Next page, going to North America. Also here, we see a sales growth a little bit slower than the other one, but still, in good numbers. Order intake up 42%, and net sales up 28%. You can say maybe here the net sales is little bit impacted from the Weber Group acquisition. There are some customers with low margins, smaller customers that was not really fitting in Trans-C AB. We therefore see this slower growth. On the other hand, profitability is increased much more.
We see strong profitability increase, and that is sort of the plan that we add on the gross margin for those customers. We have seen a good effect on that one in U.S. Also happy to see that we could acquire RedBoard here in September. As mentioned last time, we had this Paycheck Protection Program loans in U.S., of about 11 million SEK that were granted in second quarter. Then we have an extra boost to the profit. This dotted line is more or less the real development of the EBITA margin. Finally, next slide, going to segment East. Here, maybe we can see a little bit of a slowdown in the order intake, still increasing, but not as much as in the other segments.
I think maybe Russia has been the market where we see the slower growth, and I think a lot of customers in Russia have had some issues with components, lack of components and so on. Anyway, revenue is still increasing with 48%, and we see an improved profitability. Here, China is driving that well, and we are selling a lot of high tech products into the Chinese market, which means that we can have a good profitability in China. EBITA improved here as well. Some KPIs, return on equity 31%, up versus last year. Net debt versus EBITA a little bit increased, but they're still far below our target. Solvency is good. Net working capital, as I said before, it is the only parameter we think is not really good in this report.
That has increased due to mainly increased inventory or goods in transit from Asia to Europe and USA, which also means that we have increased net working capital versus revenue. Available liquidity is SEK 320 million. And if we then say what happened after the new loan facility, the acquisition of Elmatica, and the proposed dividend, that number will be between SEK 550 million and SEK 600 million. That means that we will even if we do the dividend, we will boost our possibilities to further grow with acquisition.
Mm-hmm. Very good, Peter.
Summarizing a bit, looking at our strategy, we can see that we are still very much in a growth focus. We're focusing primarily on growing our market shares in Europe, USA and East, even if there are also growth opportunities in Nordics. Those are our primary focus. We're also working on deepening our collaboration with existing customers. With that, we can provide them with more services and drive both growth, but also provide higher value services and improve our margins. We are also looking to expand geographically, and that might be by adding new markets to enter it, but also to strengthen our local presence in certain regions of market where we are already active.
Finally, we are acting in a very fragmented market with a lot of small local family-owned companies, and that also offers opportunities for us to drive consolidation through acquisitions, which is a core part of our strategy. With that, I believe we close today's presentation and open up for questions.
Yes. Oh, please.
Ladies and gentlemen, if you have a question for the speakers, please press one on your telephone keypad. We receive the first question. It is from Klas Danielsson, Nordea. Your line is now open.
Thank you. Good morning and congratulations on the great report. A few questions from my side. To begin, I was just wondering between the kind of longer lead times, I guess there's still longer year over year, and new customers price increases, and I guess you have some underlying volume growth as well. Could you help us break down the components in the order intake growth in this quarter, please?
Yeah, I think we can maybe comment and say we've seen and throughout this year to give you a bit of background, we saw already in quarter one where we have an order intake of something like SEK 980 million, and we were a bit above SEK 1 billion in quarter two. I think in the beginning of the year, we saw a very quick ramp up as lead times were increasing. People were forced to place orders further out. We had a non-negligible additional order intake, which was primarily for people securing future deliveries. I think what we have seen in quarter, so starting in the summertime, has been that the order situation has kind of stabilized. We don't see order lead times increasing anymore. With that, we have now come into more of a normal order pattern.
We're now seeing order volumes being closer to reflecting the actual need. I guess as we will see if and when we see order lead times declining, then we can expect that we will have a say short-term correction in the order influx, where that extra order buildup that we saw in quarter one, quarter two will normalize. If you look upon the revenue side, then we can now see that order intake that we saw in quarter one and quarter two are now translating over to sales. Which also then confirms that what we saw that the order intake we saw in quarter one and two was not just an event of people placing orders with longer lead time to be safe, but actually they're reflecting actual need also.
All right. That's fantastic. Essentially the kind of 68% organic order intake is. That's pretty much reflecting underlying volume increases.
Part of that is also, of course, new pricing. I think we said that the pricing maybe have increased some 8%-10%, on average. We saw the price increases starting in fourth quarter 2020 and then into first and second quarter 2021. I think it's first now in the third quarter we can see that realized or materialized in the revenue. Of course, part of that is also price impact.
All right. Fantastic. That's super interesting. I mean, you mentioned that you do need to increase personnel a bit. Can you give us some more flavor on this? I mean, how much do you need to add in OpEx? Is there an expectation there?
I think we overall have a plan to continuously develop new markets, and I think we can see that especially with that growth, we will need. An important part is supporting our customers and the inside sales as well as the outside sales activities. I don't have a number to give you exactly here now. I think we'll need to come back on that one. I think it's fair to say that during the spring especially, there has been a big workload on our teams, not only because the volumes are up, but also because you've had an unstable delivery situation where both prices and lead times have been fluctuating.
There has been, let's say, an extra work during the springtime especially, where for each and every order there's been a lot more work in our organization. That thing is improving somewhat now. That's a little bit an offset, but at the same time we will be investing in further growth.
Okay. That's fantastic. I mean, I do have respect for that. This is very difficult. On the kind of working capital swings here, I mean, do you have any kind of time estimate when we should kind of expect this to normalize a bit? Is it over the coming three quarters or in the coming 12 months, essentially, that we'll have to live with this? Do you have any kind of broad estimate for us?
It's difficult to say, of course, but this will last for a while. Hopefully we will see some improvement in spring, I would say, but it's just a huge guess right now. We can see some, I mean, the freight situation is not getting worse anymore, at least. That's a good sign, and hopefully that will help us.
Yeah. I mean, you can see it in two ways. You can say when you have more stability in the delivery time, even if they're long, that means that we can start trimming down some of the buffers and the sort of safety networks, and that will help us to gain some.
Mm-hmm.
Some days on the working capital as well. Of course, as we see delivery lead times come down, we'll see the benefits of not having additional weeks of both transport between them in our books business, so.
Mm-hmm. Sounds fantastic.
That second part is a bit harder to judge.
Mm-hmm.
I think the first part we are seeing now.
Mm-hmm.
Hopefully we can drive some improvements. Really coming back, for that to happen, we will need to get a number of weeks-
Mm-hmm.
out of the transport lead times.
All right. Fantastic. I mean, just one last question from my side. You mentioned the kind of increasing trends in electrification in the under- industrial segments. Could you help us understand what type of magnitude that is on the market growth? Is it going from 4%-8% or something like that? Or how much are volumes increasing in broad perspective?
I think what we have seen is based on this also, this market study, that historically the electronics market has been growing on average by roughly 3% as a market. Now I think the view is that, yes, the electronics market is gonna be overall quite positive in the coming years, and maybe we'll be growing more like 4%-5%. Then if you look more into this bubble chart I showed with the kind of different segments, then actually the more industrial segments which are typically our customer focus, then we're looking at growth rates maybe more 6%-7% instead. We are looking at a high underlying growth rate.
Of course, on top of that, there is the change between local manufacturing or smaller local manufacturing in Western Europe or U.S., which is translated over to the bigger players. You also on top of that have the fact that we think that we are really making gains in terms of market shares, because we have a very strong offering for that industrial customer base. We are able to provide access to the leading factories, the leading technologies, and of course have the purchasing power to provide them at reasonable terms as well. We have a number of things that are helping us drive the growth beyond what is the pure market.
All right. Thank you very much for us. Have a great day.
Thank you very much.
Thank you, Klas.
The next question is from Robert Redin, Carnegie. Your line is now open.
Yeah. Hi. Couple of questions, if I may. On that organic growth, I mean, comparable units in $ up 50% year-over-year. New customers, has that been a big contributor to that 50% number? I'm thinking also about next year. I mean, if you can in the coming years ramp up a lot on those new customers, if that has been a big contributor.
Yeah, that's a very good question, Robert. Thank you. I think actually this is something where I feel quite confident also for the longer term development of our company is that throughout the whole pandemic situation where there's been sort of fluctuations in demand and also very strong comeback in the overall market, we have continuously focused very much on building the long term by working on winning new customers and also winning new part numbers. I'm also very happy that we are seeing a lot of new part numbers. That pipeline is very good. We're winning new customers, and we have high record levels of new part numbers being won.
I cannot give you exact number of the growth we're seeing, because typically, when we win new customers and new part numbers, then that translates into real sales volumes a year out or so.
Mm-hmm.
Normally, you start with quite low volumes. The fact that we are winning a lot of new part numbers and we are adding new customers to our portfolio, that is a very good basis for driving sustainable long-term growth.
Mm-hmm.
Of course, there are some, I mean, third quarter 2020 was lower maybe than normal. Anyway, we have to remember our organic growth 2020 was in U.S. dollar maybe minus 1%.
Mm-hmm.
We have this high growth right now. It's really new customers, new part numbers, new activities.
Right. If there is a lag, we should be, you know, when you can ramp those up, it's something that supports, you know, next year and the year after.
Yeah. Yeah.
When you'll be up against what will be looking like very tough comparisons.
I think we do believe that we are building-
Mm-hmm.
a portfolio to also sustain growth in the future.
Perfect. Anders, I didn't quite hear what you said. You said something about the Europe margins, 'cause Europe margins used to be a bit lower than the group average, and now they were sort of twice what-
Mm-hmm.
two times what they were last year. There has been acquisitions, and so on impacting that. What do you say about margins? Are they sustainable at these kinds of levels?
Yeah. I would say they are maybe a little bit high, of course, because we look going forward, we need to recruit, and the segment where we recruit most people is probably Europe. To have sustainable organic growth, we need more resources. Probably we'll add on some more resources there. On the other hand, we see that the acquired companies in Italy is doing very well with the high profitability of
Well over 12%-13%. We also see a good development in Flatfield that we acquired one and a half year ago. We can see that we have in our main markets, Germany, developed a lot. We see good synergies, and we can see an improving gross margin and also an improving EBITA margin. We can see, I think there's a lot of synergies of scale which we can see right now in Europe. I mean, before it was a lot of many smaller customers, but we see that we have grown all the markets, all companies, and of course, we still have the same only one MD, only one finance person, et cetera.
There are some advantages of scale that is now visible much stronger in Europe segment. I think we can sustainably see a much higher EBITA margin than before, even if maybe this quarter is boosted in a good way.
The rapid growth we've seen in the last two quarters, we are getting a lot of it on top volume right now without costs following the same speed. Overall, we are long-term developing positively.
All right. Yeah, makes sense, covering sort of country I mean, yeah. And then just a reflection on sort of delivery performance. I mean, your company stand they're delivering 50% more stuff. Not quite because prices are up. But going into Q4, do you feel you have the same or better delivery capacity? Call it in just sheer volume delivery capacity.
If you look at where we are in terms of delivery performance and quality, I think one thing which is very positive, that we have throughout the whole pandemic actually been able to keep quality at extremely high level, which is very good because it means also our factories, we have been able to avoid anyone taking shortcuts to get goods out by compromising quality.
So that, I think is very positive. And also, if you look upon delivery reliability, we are actually improving continuously. We work. We had I say our low point was maybe somewhere in the early first second quarter, but from that position, which was also reasonably okay, we are continuously improving. So whilst we are not at our ideal position, we are at a good level and we are improving on time. So EP is somewhat optimistic also for the fourth quarter and we don't see a risk of things going everywhere right now.
All right if anything in superior.
Perfect that sounds great . Thanks so much.
Thank you.
Thank you.
The next question is from Anders Rudolfsson on DNB Markets. Your line is now open.
Thank you. First of all, congratulations on fantastic report. It seems like you used all the battery chargers in Norway to really energetic your growth here. So very well done. First question, I have two actually. The first one is, where do you see the, so to speak, new normal growth will be? I mean, 68% growth is kind of hard perhaps to continue to grow at that. When we look into a few quarters next year, where do you think this new normal growth will be? Second one, can you say anything about how Q4 have started?
Going back to the growth question, of course, we have to remember that we are comparing to a somewhat lower revenue in 2020. Of course, 68% is not really sustainable. We've also acquired companies in that. It's really difficult to predict the future growth rate. Anyway, I think we do a lot of activities that should secure a good growth, but what that is tricky to say.
I mean, overall we have a good fundamental underlying growth in the industry. We are making gains in terms of market share. We know for sure that, say, when we come back again in 2022, the first two quarters in 2022 or at least first quarter was low in comparison to current sales numbers. There, of course, we will be able to show very high growth numbers. Second half of next year is gonna be, then as you say, we will have tougher comparables, but overall we foresee a growing market and growth opportunities.
My second question were, can you say anything about how Q4 have started?
We cannot comment really on Q4, but I think we can see that we are exiting Q3 at a good pace, so.
Very well. Thanks so much.
Thank you.
Thank you.
We have no further questions via the telephone lines.
We have no questions in or on email either. Thank you very much.
Thank you.
Thanks for listening.
Ladies and gentlemen, thank you for your attendance. This conference has been concluded.