Welcome to the NCAB Q4 presentation for 2022. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the CEO, Peter Kruk, and CFO, Anders Forsén. Please go ahead.
Thank you and welcome, everyone. Speaking today will be myself, Peter Kruk, and my colleague, Anders Forsén, and joining us also is Gunilla Öhman, our investor relations responsible. Starting with summarizing a little bit where we are, we can see that we are in a market with continued solid customer demand. We're continuing to grow despite very tough comparables in 2021, although we are also seeing some temporary softness in the order intake and which we'll comment on later on. Good improving margins and profitability throughout the company.
We see improvements in all of our regions and in the quarter, especially East and North American regions, we're showing standout performance. Throughout the year, we have been working on a strong cash flow, which has continued also in the fourth quarter. This is a result as lead times are improving dramatically, and that has also helped us improve our working capital. Acquisition climate remains positive. We announced an acquisition in the fourth quarter of Bare Board Consultants in the quarter, we have a number of discussions ongoing.
Some more details around the quarter in numbers. Again, stable quarter in net sales. Sales growing by 5% to SEK 1,026 million, showing a growth of 5%. Organic growth was 2%. Order intake is stable at SEK 1,009 million, which is 5% below last year. Book-to-bill is still showing a healthy 98% given that lead times are improving. EBITA amounted to SEK 141 million in the quarter, which is an improvement by 17%. Our EBITA margin was 13.7%, an improvement from 12.4% in prior year. Again, a strong cash flow of SEK 189 million compared to just SEK 19.8 million in the fourth quarter of 2021.
We had, as we mentioned, the acquisition of BBC in Italy. Summarizing... Yeah. Sorry. For BBC, again, it's a company in Italy, Bare Board Consultants, founded in 1990, serving domestic customers in Italy. Sales in 2022 amounted to SEK 90 million for the company and showed an EBITA of SEK 9 million for the year. We paid a purchase price of EUR 5.6 million, and the company is very much like NCAB, focused on printed circuit boards and in the high-mix, low-volume segments, focusing mainly on industrial applications and medical sectors, so very much in the sweet spot of where also NCAB is trading.
For this company, we expect synergies in the areas of suppliers and payment terms and our Factory Management as well as in logistics. The transaction was now closed here in January, on January tenth. Looking back at the full year for 2022, we can see we had another record year for NCAB. Our net sales amounted to SEK 4,458 million, which is a growth of 38% in Swedish krona and 70% in US dollars. Organic growth was 26% in Swedish krona and 6% in US dollars.
Order intake was stable, showing a growth of 5% and reached SEK 4,227 million. For comparable units in US dollars, it however, showed a decrease of 20%. As we have communicated in earlier quarters, lead times were extending during 2021, which caused an extreme order intake situation in 2021. In 2022, lead times have been improving and thus we see a reduction in order flow as goods are delivered with a shorter lead time. Positive for the year is that our acquired companies in the last two years are all doing very well. We generated an EBIT of SEK 631 million, which is an increase of 55% over 2021.
Also looking at our EBITA margin, we reached a record level of 14.2%, which was above last year's 12.6%. Again, for the full year, a strong operating cash flow of SEK 568 million compared to SEK 48 million in 2021. 2021, of course, was impacted by the extending lead time and the increase in working capital. For 2022 or in the spring of this year, we, the board has suggested a dividend of 1.1 Swedish krona per share. Some background. What NCAB does is printed circuit boards. Well, that goes into becoming printed circuit board assemblies.
We do the boards showed on the left here, which then when one mounts the semiconductors and microprocessors becomes a printed circuit board assembly, and that basically forms the brain in any modern electronic product. NCAB has no in-house manufacturing. In fact, we're working only with outside partner factories. However, we take a big responsibility in developing the factories, that also includes our focus on sustainability.
It starts already when we are choosing the factories that we check, of course, their performance in terms of technical capabilities, quality performance, cost competitiveness, but equally important is our focus on sustainability, looking at social conditions, as well as checking or following up on environmental aspects. This is continued through sustainability audits. As well as being on site more or less every day.
In this year, we can now see that we continue to have a very diversified industry segment exposure, very little exposure to consumer industries, predominantly different industrial applications. We also have a very low dependency on large customers. Our top 50 customers represents only 44% of our total revenue in 2022. Anders?
Thank you, Peter. Just to give you a background about NCAB Group, the company started 1993. We are turning 30 years this year. We have been showing growth almost all years since the start. Since the last 10 year, we can show an average growth of 23%. After the IPO made in 2018, we have focused on adding on more acquisitions together with organic growth and are presenting a 28% annual growth year by year. Going into next slide, we see a summary of the quarter. We see that our revenue increased 5% to just above SEK 1 billion.
In the US dollar, however, it was a little bit lower revenue due to the increased exchange rate for US dollar. EBITDA ended up SEK 141 million, up 17%, and we improved the EBITDA margin compared to fourth quarter 2021. Also for the full year, as Peter mentioned, we ended up with SEK 4 billion, 458 million in revenue, up 38%. We also showed a very positive growth in US dollar. We are very happy to present the improvement in the EBITDA, where we can see effect from our larger scale and synergies and so on.
EBITDA is up 55% and EBITDA margin is 14.2%, which is a new record for us, which we're very proud of. Of course, one reason behind the improved profitability is that we continue to develop our gross margin. As you know, we are selling most of the printed circuit board to US dollar, and we are buying almost everything in US dollar. There are no really currency impact in the improved gross margin, so it is sort of a pure currency neutral gross margin which has improved.
The decline we could see in 2020 and 2021 was due to acquired companies with lower margin and where we have been able to sort of adjust them into the NCAB model and way of working and so on. It is good to see that the margin continues to improve. It also proves that the customers are prepared to pay for the quality and the product we are delivering. If you then look on the quarter, we discussed about the growth, about 5%.
It was a bit lower in US dollar. We also can see that the order intake decreased in the quarter. If you're going back to the revenue side, I think we saw a stable trend in October, November. We saw a weaker December, especially last two weeks. We could see a lot of our customers were closed during Christmas and after Christmas. That also had an impact on the revenue. We also had some extra COVID outbreaks in December, which probably have caused some delivery issues and also postponed some invoices from December. There are some seasonality reasons also why the lower revenue.
On the order side, it's important to remember, I mean, this high order intake we had during 2021, I think we tried to calculate this extra orders to about SEK 500 million that was due to the longer lead times. Of course, when lead time is now going back to normal and we see that we have good capacity in the factories, order will shrink when the lead time is going back to normal. Profitability, we are proud to present another increased profitability in the fourth quarter. EBITDA is 17% and the EBITDA margin up to 13.7, which is the best EBITDA margin for a fourth quarter.
Fourth quarter is normally a little bit lower for us since we have the seasonality effects on the revenue side. We continue to work with our inventory and our working capital, so we had another strong cash flow for the quarter. As Peter mentioned before, the board has suggested a dividend of 1.10 SEK per share, which is about 49% of earnings per share. Peter?
When looking into the different segments, we can see that Nordic order intake was flat in the quarter, but decreased in US dollars. Net sales, however, increased by 10% in SEK to SEK 296 million over SEK 269 million, but also showed a decline in US dollars. Positive development in a number of markets, Denmark and Norway particularly doing very well, EBITDA improved to SEK 45.2 million over SEK 41 million. We continue to show a very healthy EBITDA margin in the Nordic segment of 15.3% over 15.2% last year. For the full year, the growth was 71%.
One can also see that on full year EBITDA, we reached 16.8% over 16.1% last year. Overall in the year, also an improvement. Looking at Europe, strong net sales in all markets. We can see especially countries like Germany, Netherlands and U.K. U.K. have done quite well. A growth by 19% to SEK 484 million over SEK 407 million, which and still showing a growth of 6% in US dollars. However, in comparable units, we saw a decrease of 15%. Order intake showed an increase by 5% in Swedish krona to SEK 536 million over SEK 510 million. That was again showing a decline in US dollars by 13% and in comparable units by 23%.
Book-to-bill still showing a good number of 111%. We can see that 2021 Q4 had a significant boost in the orders for comparison. We can see that EBITA showed a good improvement now. EBITA reaching SEK 53.2 million over SEK 39.2 million. Also showing a good margin improvement from 9.6% - 11%, and a good full year growth of revenue by 49%. Also here on full year EBITA margin increased from 10.6% in 2021 to 12.4% in 2022. Looking at North America, we've seen a decline in the order intake by 13%, and 30% in US dollars.
Net sales increased by 2% in the quarter to SEK 191 million over SEK 187 million, but showed a decrease by 17% in US dollars. EBITA showed a good, again, a good growth by 55% to SEK 33.9 million over SEK 21.9 million . Our EBITA margin increased to a very strong record number of 17.7% in North America over 11.7% in last year. Also for the full year, a good growth of 31%. Also for the EBITA side, on the full year side, North America improved from 12.1% - 15.1%.
Finally, East, the segment that has seen the biggest changes throughout the year, of course, through the exit from Russia, where we stopped sales by end of February last year, and we sold the company on April 8th. For comparable units, we can still see that there is a decrease in sales by 13% to $ 51 million and by 29% in US dollars. I think clearly here, the business in Asia, especially in China, has been very much impacted by the COVID restrictions that were still in force during the fourth quarter. Comparable unit sales decreased by 22% to $ 55 million and with 37% in dollars.
EBITA decreased to SEK 11.6 million over SEK 15.4 million. However, the margin improved to 21% compared to 13.6%. The customers in China, as we said, had a lot of problems with lockdowns. Full year EBITA also improved for the segment despite the exit from Russia from 14.7% - 7.5%. Over to you again, Anders.
Thank you. I think we still have a very positive climate for further acquisitions, and we are in a number of discussions. I mean, we have announced seven acquisitions the last two years. We are looking into companies that are very similar to NCAB, working with the high-mix, low-volume, having a high tech profile and working with the right customers in the mainly industrial segments. Out of our long list, we have about 40 companies that we are step-by-step targeting to approach. As I said, we are in a number of discussions already.
We can see our way of working with acquisitions is that we really try to focus on one brand, making sure that we use the strength of NCAB in that way. After a takeover, we go into the marketing side, we work with the sales and the customer side, and then of course, work a lot with the employees because, I mean, that is people's business and it's very much relationships that we are acquiring. Then we see the synergies coming mainly from better purchase conditions, better purchase prices, payment terms and so on.
Also that we can use our huge Factory Management team that we have in Asia to support the newly acquired companies and their customers. That is normally very positive for both the employees and the customers. Our target is that after 12 - 18 months, all acquired companies should be a fully integrated NCAB office.
Mm-hmm.
Going back to our financial KPIs and balance sheet, we still have a very, very strong balance sheet, so we have no problem to continue this journey. I think we should be very proud of our return on equity, over 40% for the last quarter, year. We also have a net debt of 0.8 versus EBITA. We have a financial target of not exceeding two, so we still have a lot of headroom to continue to invest. Solvency is good, 39%. We have been very successful this year to work with the working capital. I mean, that increased when the lead times increased 2021.
We have seen now that when lead times getting shorter, we don't need to have the same kind of buffer stock. We don't need to have as much buffer in the logistic, et cetera, to run out back to a normal level. We are very asset light business with our net working capital less than 10% of our last 12-month sales. Also, we have over SEK 1 billion in available cash, so we are in a strong position to continue with our growth activities.
Mm-hmm. We have continued high aims for our continued development as a company. We launched the financial targets during last year, in these targets we are targeting to reach a net sales of SEK 8 billion by 2026, and at the same time also deliver an EBITA result of at least SEK 1 billion in 2026. As Anders mentioned, we aim to have a net debt over EBITDA low, less than 2x . We will continue to make dividends of available cash that we have available beyond what we need for our acquisition and investment activities.
We expect that to be around 50%, which is in line with what we're proposing for this year also. Our strategy is the same basically since 2018, where we continue to deliver on this plan. It's about continuing to increase our market shares in all of our markets, but primarily in Europe, U.S.A. and East. We continue to deepen our collaboration with existing customers, both growing our sales with them but also developing our relationships and working with more advanced technology. We continue to look how we expand geographically into new regions and new markets.
Finally, we also see opportunities of consolidating what is a very fragmented market. We still only have. Even though we're a globally leading player, we only have around 2% of our target market in the high-mix, low-volume segment.
We are also proud to have a very stable and solid shareholder list with a lot of good names. What has happened during the year is that R12 Kapital has decreased 2% and the rest is quite stable in the list. Lannebo Fonder has increased somewhat during the year. The ownership of group management is 2%.
Mm-hmm.
Mm-hmm.
Well, I think with that, we end our presentation, and we'd open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Claes Danielsson from Nordea. Please go ahead.
Yes, fantastic. Thank you for taking my questions. Just wanted to just kind of start off with the order side. Last quarter, you said that you were back in a pattern where orders and sales would be roughly equal, right? This quarter it seems like you're in a pattern where rather lead times are small, and so you should probably see a bit more orders being taken in the quarter and then delivered on in the same quarter. Could you maybe try to help us understand the kind of relationship between orders and sales and how that's going to develop over the coming couple of quarters from here?
Yeah. Yeah, sure. Peter here. I think, yes, I think what we're saying is that lead times have been improving. I think what we have seen in the last quarter is that things have become even better in terms of lead times than maybe what we were expecting, which has had maybe a slightly negative effect on the order side. We actually see the same strong customer commitment in terms of their activity levels.
I think what we're also seeing, which I think has also potentially played into the order intake in this quarter, is, I mean, you've followed the work we have done in 2022, in sort of addressing the working capital throughout the year. I think what we're seeing is that I think many of our customers have been doing a little bit of the same journey, but maybe starting a bit later than we did. I think that is also impacting the order intake in the short term or in the temporary term.
All right. Just to follow up on that, could you kind of help us understand how much within those SEK 1 billion in orders on average, I guess, is deliverable upon in January and February? I mean, how much of a difference year-on-year is that basically or so to speak?
I mean, it's a bit hard to judge. I think we said in the third quarter, we believe that we had roughly like SEK 75 million with us in the order book, and we expected to maybe have around SEK 25 million in the fourth quarter. Maybe that has moved a little bit. I think also at the same time, on the revenue side in the quarter, we can see that we had in Q2 and Q3, we had order intake of 1,036 and 1,011 in those quarters. I think our revenue is coming in largely in line with those numbers.
Maybe we have seen that lead times improve a little bit better, so the impact we saw on orders would have been a little bit more than those SEK 25 million we estimated it to be in fourth quarter. At the same time, I think we might be seeing some element of some of our customers, typically contract manufacturers, EMS companies, we can see from their reporting also that their inventory levels have been quite high, and have maybe not been as successful during 2022 to reduce their inventory.
I think that is maybe a little bit what we're seeing now that they are coming back in. As lead times are improving, supply chains are more stable, that helps them also now to sort of come back into a normal inventory planning in their side.
Okay. I don't fully understand personally, but just so we can understand better, on average how long is the lead times on the orders within that SEK 1 billion?
I think we. The old, say, pattern that, say, orders in one quarter translates into revenue the following quarter is still largely sort of true. You will always have some movements up and down around this regarding you have some seasonality effects, and you can have, as we have right now, customer situation where customers have a lot of inventory, and that will lead to a correction during a quarter or two, we don't know.
Okay. Okay. I was wondering if you maybe could elaborate a bit on the OpEx side as well. It seems to me like OpEx is up a bit more than usual in Q4 versus Q3. The seasonality seems to be a little bit more pronounced. Is there anything happening especially in there or is it just, you know, a continued execution of the strategy?
No, no, not really. I think what was. You can say that since we are working on with growth all the time, we add on more employees, we add on more cost during quarter by quarter. Since we had a little bit lower revenue than average for the year in the fourth quarter, of course, little bit lower revenue and the costs slightly increasing quarter by quarter, that might be the effect for. I think typically, if you look on the history, our fourth quarter is normally the weakest from a profitability point of view.
I think we will have a situation where we still are in a growth mode and expect to grow, meaning that we add on with resources and then the cost will increase. If a quarter is little bit lower revenue, that will have an impact on the profitability level. I would say that is the main reason. There are no really significant other changes in the quarter and no specific things.
Yeah. Then this enhances the planning and how are you considering that? Because clearly this quarter, I mean, on a, on a comparable units level, the, I mean, sales was actually down 16%.
Mm-hmm.
It sounds like it's going to be down a bit in Q1 as well, right? How are you planning for that? Because obviously it's
Of course, we are following the order intake very carefully and, as it has been a little bit softer the last time, of course, we try to postpone new recruitments and work with the cost side in a smart way. We're not aiming to do any big things that will impact the further growth capabilities. Of course, we try to adjust what we can do. I mean, also we have 75% of our revenue is or our cost is variable, so it's a big part is our variable directly. I think of course, we monitor this carefully and we do what we can to keep up a good profitability, but we will not do anything that will harm the future growth.
I think we can say that it. From our customer interactions and seeing what's happening in their pipelines and what's happening on new customer acquisition activities, things there are still looking very positive. We know that there could be some corrections in inventory and other things here in the near term, but that has not really changed our outlook for growth, nor our confidence in our long-term targets. Right now it might mean that we are sort of. We're not putting on any breaks, but you could say maybe we're not sort of. We're lifting the foot a bit from the gas pedal. I think we are in a healthy state going into 2023 and have confidence around that.
All right. I'll step back in queue. Thank you.
Mm-hmm. Thank you.
The next question comes from Robert Redin from Carnegie. Please go ahead.
Morning. Hi. Can I ask you what handles the order intake and sales?
Mm-hmm
... I mean, if you combine 2021, 2022 order intake, and compare it with sales, order intake is sort of SEK 600 million higher than sales. Have there been sort of any cancellations or do you still have that order backlog, call it, of SEK 600 million left into 2023? Can you sell for more than your order intake, say, in Q1, Q2, or is it more this one to one now?
Yeah. No, we have no order cancellations. I think that is, say, still a healthy order book. I mean, it's always a bit tricky exactly which quarters to capture exactly to see if the number is exactly the 600 you mentioned or not. I think we still have overall, if you look back, say, one, two, three years, we still have an order intake which is slightly higher than our revenue side. We are in a good position for 2023 in terms of order book.
Okay, good. This inventory reduction at customers, I mean, maybe you've now completed your inventory, sort of resetting.
Yeah.
Have customers done that too or is it continuing as customers?
No, I think that is probably what we've been seeing now in the latter part of the year. Let's say some of the order softness that we may have seen has been partly due to the fact that lead times have been improving. We can also see also from the communication from a number of, say, listed companies that we sell to, that their inventory side has been high and they're working on getting that addressed and that somehow trickles down also to our products.
Even if our product typically are not products that are you tend to keep in large inventory due to the, say, the shelf life or when you need to run them into production with good quality, but it can still have some impact. We can see a number of our customers are in a mode where they are high on historical inventory levels, and that is playing a part in this, we believe.
Okay. Can you say something about the sort of price component of the US dollar denominated growth in comparable units in sales and orders for Q4? Was price negative or...?
I mean, you can say yes. I think there are some tendency. We can see some softness in the pricing side. I think historically in 2021, we saw a very rapid increase in pricing for printed circuit boards. In the last year with the dollar strengthening, I think that has created an opportunity for largely factories in Asia to be a little bit more aggressive.
I think also the fact that Chinese market was at running at a much lower pace, the domestic market during 2022 also meant that the loading rate or how busy the factories were in 2022 was decreasing. That also showed that we can see that for newer projects, we've been able to see that there are new pricing opportunities. I guess that also has of course a little bit of an impact on the order number.
Right. The outlook for that now going forward, are the factories better utilized now? Is the outlook positive with the Chinese economy?
I think it's something we'll need to monitor to see how it develops. I think what we can see now is that there has been a very rapid change in the Chinese economy from sort of having been in lockdown, and then we could see that more or less COVID was done and dusted by mid-January. If we just look at our own activities, our teams are now fully mobile, meeting with customers, interacting with customers. I think we can expect the Chinese domestic market will ramp up, and that will have an impact on the factory loading. How these things play out with currency and existing loading in the factories and pricing, I think we'll need to follow closely on how that develops.
All right, perfect. Finally, I think that there's a SEK 10 million positive from the Elmatica earn-out.
Mm-hmm
that's included in the Nordics, EBITA, right?
No, it's not. It's in the central part of the central costs. So the Nordic.
Okay
is not impacted by that one, so that is in the central overhead.
Okay, it's in central overhead. Okay, yeah.
Yeah. Yeah.
That number swings a little bit from quarter to quarter, but then that number was a fairly large negative in the first quarter.
Yeah, it is. I mean, we have a situation where we sort of take a percentage of the revenue from the, all the companies to cover for the central costs. The difference will be end up in that line. Since we now had a little bit lower revenue in the fourth quarter, that means it's sort of lower revenue for the group than covering the cost. That is the main reason. There are no really other things that increases the cost.
Okay, got it. Thank you.
There are no more questions at this time, I hand the conference back to the speakers.
There are a few questions on the web here, two questions about the gross margin. The gross margin is up 4 percentage points year-on-year and almost 2 percentage points sequentially. What is the main driver of this improvement?
I think, I mean, we have been constantly working on improving our gross margin. That has been sort of our way to increase the business and secure profitability. I think also we have seen from some of the acquisitions that maybe I'm being big improvement. There also are some, as Peter said, some lower occupancy or utilization in the factories, which have given us opportunities to get better pricing. Of course, we try to partly give that to customer, but also work with our own gross margin.
There are a number of reasons, but of course, it's our aim for all of the sales people is to try to sell on value and use the possibilities where we can increase the margin if possible. That I would say is the main reason. But if you're looking long term, we have always been able to step by step in a slowly pace increase the gross margin. Of course, within the different quarters, you can have some currency revaluations on timing of orders and invoicing, et cetera.
There is another question about the backlog and lead times. Maybe we were into this before, but maybe we could just repeat a little bit about the lead time in the backlog. Is it back to pre-COVID levels?
Yes, I'd say so. You can say that they're back to good pre-COVID levels. I think we saw this, it was something where the lead times extended dramatically during 2021, and also not just longer lead times, but unstable lead times. I think that caused basically our customers, in order to secure their smooth production, had to make longer forecasts and place orders earlier ahead. I think that really changed. If I just compared 2020, you had orders of SEK 2.2 billion and revenue of SEK 2.1 billion. In 2021, then we had orders of more than SEK 4 billion and revenue of SEK 3.2 billion.
Now in this year, we are now back to the numbers of SEK 4.4 billion in revenue and SEK 4.2 billion. You had a tremendous increase in the orders in 2021 over revenue. I think that is now readjusting back, which is a major contributor to why we have been showing lower order numbers here in the second half of this year.
Okay, thank you. I think those were all the questions that we had. I just want to kindly remind you of our next quarterly report, which is on the 26th of April, and our AGM, which is on May 9th.
Thank you very much.
Mm-hmm. Thank you for listening.