Ladies and gentlemen, welcome to the NCAB Group audiocast for teleconference Q4 2021. Today, I'm 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, and afterwards there will be a question and answer session.
Thank you. Today, I will start up, Peter Kruk here, followed by my colleague, Anders Forsén. If we move to page three, we can start by summarizing Q4 . We're ending the year on a very strong note with a good Q4 . We amounted to net sales of SEK 977 million, which corresponds to strong organic growth as well of 55% in US dollar. US dollar is the trading currency we have, which better represents the true development of the market.
If we then add the effects of acquisitions, our growth is 87% in US dollars. Also positive is that the order intake continues on a high note. Total orders amounted to SEK 1,067 million, up 55% in US dollars. If you look upon comparable units in US dollars, the increase was 27%. Also very positive is to note that our strong performance is across all regions and sectors, and we're seeing growth with both old and new customers.
We've also seen in the quarter that lead times have stabilized and our order book is normalized so that there is a good correlation between order intake and net sales. Also very positive is that our acquired companies are doing well, very well. All in all, this has resulted in an improving EBITDA to SEK 121 million, up from SEK 52 million the previous year, which is an increase of 132%.
This of course has been good development here leveraging our increased sales. Our margin for the quarter amounted to 11.6% compared to 10.1% in prior year. If we move to page four, that summarizes the full year, also here a very positive overall view with growth in net sales amounting to SEK 3.2 billion , up from around SEK 2.1 billion in prior year.
An organic growth of 39% in US dollars, and with the acquisitions, a growth of 63%. I think we can also see, and we will show later in the chart, how our organic growth is actually significantly outperforming the market development, which further sort of cements the fact that we're gaining market shares.
Also good is that our order intake has been very strong or clearly higher than our sales number, amounting to SEK 4.39 billion. It's up 93% in US dollars, and for comparable units, the increase was 63%. We've also been able to announce five acquisitions during 2021. In February, we announced the acquisition of PreventPCB in Italy.
In June, we announced Sas-electronics in Germany. In September, we had RedBoard Circuits in the U.S., and in October, Elmatica in Norway, and finally in December, META Leiterplatten in Germany. EBITDA for the full year increased by 111%, up to SEK 406 million, and our EBITDA margin rose to 12.6%, up from 9% in prior year. Anders, over to you again.
Next page, then some important events during the last quarter. We have a new financial situation in place with a new borrowing agreement with our bank, Nordea, meaning that we have replaced all the old loans, and we do have a new credit facility for further acquisitions, which gives us more opportunities in the future.
We also held an extra general meeting in December that decided to make an extra dividend of SEK 10 per share before the split. That also was announced on that meeting. The split was made at the end of December. As Peter said, we announced two acquisitions in Q4 , and we also have a proposal for dividend that will be decided at the main meeting in May t he dividend proposal is 60 Öre per share, and that will be paid out in two installments, just to better match our cash flow.
Coming back to the acquisitions, in the next page, in October, we acquired Elmatica, which has been one of our sort of main competitors in the Nordic and Northern European market. They're a very strong quality-focused PCB trader, actually been in the market for over 50 years. They have a very similar structure and culture as NCAB, very quality-focused. They have their head office and main employees in Oslo, Norway, but also subsidiaries in Sweden, Denmark, Germany, and Hong Kong. Big part of the sales is actually happening in Germany, in France, in Italy, and so on.
Elmatica has about 45 employees and net sales around SEK 370 million t his is the biggest acquisition we have done so far. They also have a very good profit level which adds on to NCAB profits going forward. We have paid an enterprise value of SEK 350 million, and there will be an additional earn-out based on the development of gross profit until end of 2021 t hat will be settled here in Q1 .
We can see a number of synergies w e can see synergies on the purchasing side. Elmatica has not a strong organization in China, so we think that we will benefit from our purchase organization in China and support pricing and so on.
We also know that we have a lot of high quality people or well-experienced people from Elmatica that will join us. One of those has actually been appointed as technical director for NCAB Group, which is good. We also see that they have much more experience in the defense and aerospace industry, which will be an add-on for NCAB w e see a lot of positive synergies from that one.
Also in end of December, we announced an acquisition of META Leiterplatten in Germany. The acquisition was closed here in the beginning of January. It was a privately owned company, started from 2020. They had net sales of about SEK 85 million and 17 employees, high quality company and also focusing on the customer segment that we are focusing on in Germany.
There will be some synergies, especially from the supplier side, where we think even here we can add on with new factories and better pricing and better payment terms. Also META had its own logistics set up with its own warehousing that will support our existing business in Germany in a good way. We see a number of good potential here as well.
Moving to slide eight, some overview around NCAB. Our focus is to supply printed circuit boards for demanding customers, and we're also specifically focusing on what is the high-mix, low-volume market in printed circuit boards. Our aim is to supply on time with zero defects, produced sustainably at the lowest total cost. We are rarely the lowest in piece price, but we provide a superior value for our customers.
Our vision is to be the number 1 PCB producer wherever we are. We are already, by some distance, the leading supplier in the world. Our aim is to be number 1 in each and every market, and there are also some markets which we can add to our current markets being served.
We pride ourselves on being local, both close to the customers, and we're serving the market through 16 companies, but we also have a strong presence locally with the factories. We have some main 29 factories. We don't have any factories in-house. We're all working with partner factories. But out of our 562 employees, we have roughly 100 employees working only with factory management and continuous improvement in this area.
If we move to page nine, printed circuit boards, what we do are the printed circuit boards you see to the far left. So the board upon which then the semiconductors and the integrated circuits are mounted to create a printed circuit board assembly. That then creates the fundamentals in any electronic product. Moving to page 10, about our history w e started out as a company in 1993 by three gentlemen, started out as a private company in Sweden, stepping out from PCB manufacturing to actually starting trading with products from Asia.
They were able to grow the company expanding into Scandinavia and some countries in Europe. In 2007, R12 Kapital came in as a new owner and bought the company. From there on, we have expanded the internationalization of the company. In 2018, we took the company public. From there on, we have continued both with the strong organic growth and also further acquisitions. All in all, we've seen, you can see in the chart below that from 2008, we've had a continuous growth annually roughly 18%. We can see that growth has been accelerating in later years, notably from the effect of further acquisitions.
Going into acquisitions now, we see a huge opportunity going forward for further acquisitions to grow the market presence for NCAB. The market is very fragmented with many smaller companies. I mean, typically, as we said before, there might have been a factory closed down, a management team or sales team started some trading business, and they've done that maybe for 10, 15, 20 years. Typically, the owners are now in the age of 60-something.
There will be a succession plan, and that is a perfect match for them to sell. We can also see that the pandemic has created more reasons for the smaller ones to sell because they have difficulty to give the customers good value since they are not present in China as we are, for example. We still have a long list of potential targets? and we are trying to contact them one by one and see what we can do. I mean, so far we have been successful in concluding five acquisitions this year. There are still opportunities in the market.
Just a few words on the next page regarding our integration process. We really try to make all the acquired companies as an NCAB company w e think that's important. We typically start on the marketing branding side and make sure that we have the same brand everywhere and then w e focus very much on the employees and on the customers, because what we are acquiring actually customer relationship and good employees with this competence.
A lot of focus is made on putting in our values, our way of working, making sure that the customers continue to buy from us. Often we can give the customers more benefits because we can have a broader factory base in China w e can support them with broader technology than the smaller ones before.
We have safely secured all that w e focus on the operation, looking into pricing, payment terms, looking into IT systems and finance and so on. After 12 to 18 months, the target is to have all acquired companies as a fully NCAB company working in our system and as much as possible in the same way of working.
On page 13, we have a slide which gives you a background to where the market is going w e can see this is the data from Prismark, which is the authority on following the printed circuit board market. We can see that 2021 was a strong growth market for printed circuit boards worldwide, with the market growing from $65 billion to around $80 billion.
However, we can also see that while the market was growing by some 23%, our organic growth has in this year been 39% i t's a clear testament to the fact that we are growing within the market and gaining further market share. Moving to page 14, we come back to the Q4 numbers.
We can see again here in the summary, the sales up 90% to SEK 977 million. If we look at in US dollars, which is our trading currency, we are up 87% to $111 million. Our EBITDA up to SEK 121 million from SEK 52 million, so up 132%. Our EBITDA margin of 12.4%, an improvement of 2.3 percentage points from 10.1% in prior year. Also, looking at the same summary for the full year, we can see our sales amounted to SEK 3.22 billion, an increase by 52%. If we look in US dollars, it's $376 million, an increase of 63%.
Our EBITDA at SEK 406, an improvement of 113%, and a full year EBITDA margin of 12.6%, which is an improvement by 9.6% from prior year. If we move to page 16, we mentioned in the introduction that we see good growth in all regions, which is very positive. Nordics growing by some 125%, 44% excluding acquisitions. Europe up 97% or 57% excluding acquisitions. North America, 64% up, 51% excluding acquisitions, and in East, 40% up s trong growth in all three regions.
We can also see that on the order side, similar growth numbers or growing numbers in all regions equally, with the strongest growth coming from Europe and North America on the order side, and also good and healthy margin development in all of our regions at the same time. Moving to page 17, we can all see here the top line number and also our growth margin development. We've been able to grow with high growth and also stable margins.
The fact that our growth margin has declined slightly from 2019 is in fact only related to the fact that we have acquired companies that have had a starting point, a lower growth margin than the legacy NCAB business. Our aim is to be able to continue to continuously make improvements on our growth margin. Over to you, Anders Forsén, on page 18. 18?
Page 18. Thank you. Of course, we were really happy to see that we could end a fantastic year with a strong Q4 as well. Orders continue to grow i mean, we have been sort of thinking that maybe the orders will slow down a little bit since we had a lot of extra orders for this longer lead time during the first half of the year. We see that it continues to grow, and we seem to continue to have a higher order intake than revenue, which means that we are on a stable market position in that way. Orders increased 55% in US dollar, Q4 f or comparable companies, 27%.
We have to remember that Q4 was a rather good quarter from the order point of view in 2020 because with that we saw that the market took off a little bit. Revenue-wise, we saw 87% growth in U.S. dollar. For comparable companies, 55%, which is really strong development of course. We can also see stabilized lead time, which means that the orders we take now will be delivered with shorter lead time than before t hat was a good sign, and that's very positive that the orders continue on a good level, so it's not boosted by any longer lead times anymore.
On next page, we go into the result and the EBITDA, and the quarter ended up with a very strong EBITDA result n ormally, Q4 is a little bit weaker because we have little bit lower revenue in December, since many customers would like to have shipments in January, not before year-end. Still, we're very happy to present that we made the 12.4% EBITDA margin. I think this is also proof that we have managed the price increases from the factories in Asia in a good way.
We see a lot of benefits of scale from the acquisitions and from the higher revenue. Also the acquired company have actually performed very well, and we see good synergies from the integration so far. This means, of course, that the earnings per share will more than double. The only negative part maybe is that we see a little bit more higher working capital.
Working capital relationship to last 12-month revenue is 11% compared to just below 8% last year. This is due to the freight situation w e need to have more goods in sea w e need to have some more buffer stock and so on. Hopefully that will go down when everything settles on the freight market.
Next page, we go into the different segments. Nordic is of course very much boosted by the acquisition of Elmatica, which we did in October. Elmatica will so far be belonged to Nordic segment t here might be some change going forward since a lot of the business is actually done outside Nordic. The order intake increased a lot due to Elmatica.
For comparable companies, it was only 4%, but we had a very, very strong order intake Q4 2020, especially from Norway and from the EV charging market. Net sales, on the other hand, grew very steadily, 127%, including Elmatica, and 46% for comparable companies. We saw growth in all markets, all countries, and we had a strong development of EBITDA, which more than doubled. EBITDA margin is a little bit below last year's Q4 , but if we exclude Elmatica, we end up in 16.9%. We have actually developed EBITDA margin for the comparable companies.
Going into next page, Europe, which has been the market that has been growing most, and we see the strongest development, both for the full year and also for last quarter. We see a very strong growth in all markets and also very good performance from the acquisitions we have made. Order intake for the quarter increased by 80% to SEK 510 million f or comparable units, it was 46% in U.S. dollar. Net sales almost doubled, in fact, and just below in U.S. dollar.
We also see a very good increase in EBITDA. We went from SEK 12 to 39 million for the quarter. It is a good margin of 9.6%. We're very happy with development of the European segment. Going into North America on the next page. Here we can see, I mean, North America has been growing for us t hey were maybe a little bit slower in the beginning of 2021, and we see that the growth, both in orders and in revenue, have accelerated during the year.
We end up with 42% growth in orders for the quarter. The net sales increased by 64% s till very high number again. We can see a good development in profitability. We go from close to SEK 7 to 22 million. The main reason is here that we have sort of changed little bit of the business model of Bare Board Group that was acquired 2020.
We have mainly phased out some smaller customers and focused more on the bigger customers w e have also worked a lot with pricing and value add, so the gross margin has increased a number of percentage points for NCAB Group, which is the main reason for the improved profitability. We also have this PPP loan, which was given 2020 t hey were sort of forgiven in Q2 to give us an extra boost for the year of SEK 11 million , but the quarter is of course not boosted by that. We see some good synergies from the RedBoard Circuits that was acquired in September.
In the East, the market we have for Russia and China. Also here we can see some good growth numbers. Order intake maybe not as high as the other segments, but here I think also we saw a rather big development in Q4 2020. Revenue, on the other hand, is growing by 40% for the quarter, and we still have a very strong profitability despite that we have all the factories sort of close to us in China. We focus very much on more high tech and very good service delivery to the customers, which really creates a relationship with the customers and also creates good margin.
Finally, going through some KPIs. Return on equity has been improved a lot. Of course, this is also connected to the extra dividend we did in December. We do have some net debt now i mean, we had some positive cash before, but we have done a number of acquisitions, and it's good to see that we are in some debt position that we would like to be.
Still have a solvency of 29%. Net working capital, as we said before, maybe it's the only one that goes a little bit in the wrong direction. But we see a certain need now for the freight situation where we need to have more goods in transit and more goods in buffer stock. Still, net working capital of sales of 11% is rather efficient, but we would like to be even better than that. We still have a lot of cash for further acquisitions.
Finally summing up by reiterating our overall strategy. We are focused on sort of continuing to grow and to increase our market shares, primarily in Europe, USA, and East w e also have growth opportunities in Nordics, but the main focus is on the areas where we have smaller market shares. We're also working on deepening our collaboration with existing customers.
In that we can provide more value to our customers, which helps them be more successful and will also helps us grow our margins and create stickiness with our customers. We're also looking for opportunities to expand geographically t hat may be adding new markets to the markets we are serving, but also strengthen our position in areas where maybe we could add more physical presence.
Finally, we are, as we mentioned, even if we are in a leading position, it's a very large fragmented market. It gives us opportunities to consolidate the market, and we're actively pursuing acquisition as part of our agenda. By that, we close our presentation and are open for questions.
Our first question comes from the line of Robert Redin from Carnegie. Please go ahead.
Yeah. Hi. On this order intake, I mean, if order backlog is increasing Q-over-Q, but could you say something about the average sort of delivery lead time? Is that also shorter now in Q4 versus Q3 so that this order backlog building is also there's a double effect in lead times being shorter than they were in Q3?
I would say that the effect on order lead time is marginally maybe moving. It's not a significant move in the order lead times at this time. While we may see some improvements from factory side, logistics has not really moved that much. There is no specific effect on shortening lead times on the order book at this time. We do see some positive signs which may be possible for the future. In the quarter numbers, there is no impact of lower lead times in the order numbers.
Right, cool. Overall ordering, that was sort of a theme in Q1 and Q2, but I think already in Q3 that it wasn't sort of a theme, and I guess, the same as triple Q4. How about sort of inventory at your customers' sites? Do you feel they have higher or lower inventories compared to their sales levels?
It's something that has not changed overall from, say, Q3 to Q4 . I would say probably generally many of our customers have slightly higher order inventory levels simply from the fact that they have lacking components. Sometimes they are prevented from completing their builds and ship to their customers. But it's something that's been. I'd say they're on a slightly higher level than maybe they were historically, but it's not something that has grown. It maybe grew during Q2 , and then it's been stable in Q3 and Q4 .
We see more of a kind of normalized order pattern right now from our customers, kind of thought.
Of course in general, you can see that the customers are really looking for the shipments and if we have some issues with freight, they are sort of concerned about that. It's not that they would like to push orders for the future, it's rather the opposite. Since I think that the customers see that they have need for the product.
Right. Orders were up quite a bit, Q- over- Q, compared to Q3. Is there a seasonality there or was there stronger sort of demand in Q4 than in Q3?
Well, normally you see some effect of orders being placed in kind of November, December timeframe for the Chinese New Year. Typically there's a little bit of seasonality, but we don't really have huge seasonality in our business. There could be some small effects there potentially, but we don't really have strong seasonality in our business overall.
I think maybe when you compare with 2020, we saw that much stronger in 2020 because then we were expecting the price increases, meaning that we pushed customers and customers placed orders Q4 2020 to avoid the new prices. We haven't seen that kind of effect this year i would say that it's lower seasonality impact this year than last year.
All right s ounds good because the number it was in fact very good for Q4. Okay t hat was that on orders. I had a question on Europe EBITDA margins i f you look at it over a couple of years, margins have come up quite a bit. Of course, you've done a lot of acquisitions. What would you say has been driving this move of margins moving up by, you know, several percentage points?
I think it's a combination of activities o f course, it's about how we are. We have the fact that we have existing customers where we're growing closer, so we are able to develop the business with existing customers. Of course, the significant organic growth is of course giving good leverage on that growth to our cost position. In fact one of the main reasons why European region has had lower EBITDA margins has of course been that we've been investing a lot in growth.
We have had a higher SG&A cost compared to, for instance, Europe, where we're much more well established and well known to our customers, whereas in Germany we are meeting a lot of new customers. It's something that has an impact now that we see a lot quick organic growth in Europe throughout the year. That of course gives a better leverage on our fixed costs.
I think the growth of the revenue is really important here because, I mean, before we had many companies in Europe that were mid-sized to small. Now we see that the main companies in Netherlands, Germany, U.K., Italy are getting rather big actually, and they still have the same kind of management cost, and we see higher revenue after that w e can find a lot of benefits of scale.
Maybe you also can see that the new customers are actually quicker to ramp up the volume than before, probably due to the pandemic. I think we maybe have a sort of quicker ramp up which boosts the revenue and the profitability as well. Maybe even if we have added the same number of new employees every year, of course there will be a lower part of the total number of employees. There are also some impacts in that. I think the size is important here to get the leverage.
Right. Perfect. All right. Sounds good t hanks t hose were all questions. Thanks.
Thank you, Robert.
We have just one more question from Klas Danielsson from Nordea. Please go ahead.
Yes. Hi. Thank you very much. Just a few questions from my side, starting with a follow-up on the lead times i just want to be very clear. Lead times are still at around that five-month level in this quarter, right? Then in Q4 twenty-
Yes. [Unintelligible]
Yeah. Okay, good. In Q4 2020, they were roughly the same, right?
I'd say lead times actually started growing up in Q1, Q2, last year t hat's when we really started to see both i mean, in Q4 of 2020, then we started to see issues from factories, and we started to see price increases being pushed. And then we saw with the rapid growth both from us and from the whole market growing in 2021, that created strains on the lead times from factories w e could see that the lead time issue was growing significantly in Q1 , Q2 last year.
T hen they kind of stabilized in the summertime i n Q3 , there was more kind of stable lead times no longer extending, and it's been similar in Q4 , maybe some slight improvements from the factory side, but logistics have been continuously difficult. Compared to Q4 2020, the lead times are still longer now than what they were at that time. They're not longer than what they were in Q1, Q2 of 2021.
They are not increasing at least, so that's important.
Because in Q1 , Q2 , you can see part of the ordering intake which we received was of course the fact that they were placing orders with even further out in time. That pattern has been broken since Q3 , you could say.
All right. Because if I remember correctly, you guys did have somewhat of a boost from kind of reordering on the price rises and so forth, correct?
Yeah w e could see in Q4 2020 we saw some effects from pricing, in Q1, Q2 from longer order lead times. But since Q3 we've actually seen more of a normalized order book.
Okay. That's fantastic. Moving on. On the new customer growth side, I mean, you've been highlighting that you've been winning for a long time in light of the supply chain situation being quite strained. Is the customer growth continuing sequentially here? I mean, looking out once the kind of supply chain situation eases a bit, would you expect any kind of churn levels to rise, or what should we expect from that?
I think what we can see from historical patterns is that the churn is quite low when we win new customers i think we are very good at retaining customers and business over time and y ou can lose individual projects, but over time, we normally keep our customers and continue to develop them positively. We don't really see that risk, and right now we can see that we have had a very strong continuous pace of winning both new customers and new part numbers throughout the quarter. All signs in that direction are positive.
Fantastic o kay. Then on margins and OpEx, I mean, I understand that it's a bit of a lower season and so forth. Margins were down a bit sequentially still. I mean, you want to recruit some more to capture growth opportunities as well. Is this showing up in this quarter? or when should we kind of expect you to have kind of normalized those OpEx investments?
You can partly see this in this quarter, but this I think more is related to that the Q4 is normally the weakest. I mean, we are adding on resources all the time, and revenue is normally in the most comparable capacity, weaker in Q4 due to what we said before. Shipments will be more in January.
We, of course, I think during 2021, we have had a very strong growth and we haven't been able to recruit in the same speed. Probably long term, we would like to need more resources to run the business. Of course, we always try to be more efficient at the same time as well. In some respect I think we have had a little bit too low costs during 2021 to be sustainable in the future.
Okay. That's perfect. Those were all my questions. Thank you.
Thank you.
As there are no further audio questions, I'll hand it back to the speakers.
Okay. Thank you so much. I just want to remind you that our Q1 report is on the 28 April, and our AGM, which would be only digital, is the 3 May. Welcome back, and thank you so much for today.
Thank you.
Thank you.
This concludes our conference call. Thank you all for attending y ou may now disconnect your lines.