Good morning. Welcome to this presentation covering the second quarter and the first half of 2023 in Ratos. Our President and CEO, Jonas Wiström, and our CFO, Jonas Ågrup, will guide us through the results. In the end of the presentation, of course, you will be able to raise questions in our Q&A session. This webcast also is recorded, and you will find it afterwards at ratos.com. Now, without further ado, I'll hand over to Jonas Wiström.
Thank you, Sophie, and thank you everyone attending this conference with Ratos. I know we are not the only company reporting today in this sunny day in Stockholm, so we're happy you are here. If we look at the second quarter, I think it's a sunny quarter also for Ratos. Our EBITDA increased with 12%, organically 9%. Cash flow was up 92%, I think, and almost SEK 1 billion up, and our leverage continue to decrease. If we look in closer, we used to mention Plantagen separately. It was actually the strongest quarter for Plantagen ever, with the exceptions for the two pandemic years.
In local currency, the EBITDA sorry, in SEK, the EBITDA was a little bit lower due to the weak Norwegian crown, which I think is the only currency I know that has developed even worse than the Swedish crowns. A strong quarter in sales, up 19% and organic sales up 7%, and the order intake continue to be good, and we have very strong order books. Strong cash flow, SEK 2 billion versus SEK 1 billion, and leverage continue to decrease. let's take a look into our business areas.
No, we should take a look at the trends here. We are growing our net sales the last two years, this by 15%, which is a good growth, and also this quarter, again, was very even stronger. Our adjusted EBITDA also continues to increase with 12% in this quarter. Looking into the business areas, starting up with construction and services, we had 20% sales growth in construction and services. I'm very satisfied with that as well. The organic is 90%, so it's almost all organic growth. We have continued strong earnings development in the construction companies, as you know, with very limited exposure, if any, to real estate and housing constructions.
EBITDA up 17%, EBITDA margin 6.4% down a little bit, the reason for that is that the construction business has grown even more than the infrastructure business in this quarter. I want to say that our margins in the construction companies are higher than peers in general, due to the fact that we work so much with partnering projects rather than fixed price projects with the risks that also is connected with those projects. Coming back to Plantagen and consumer, before I talk about Plantagen, I want to mention KVD, I'm sure that you can calculate KVD's result now since we disclosed the business area and also the Plantagen number.
There you can see that KVD has developed very strong when it comes to EBITDA in the quarter. Sales is down in KVD, but that is only because the fact that we have less. We used to buy cars for a period of time to get quicker sales, but now we're again back to more brokering. That's why sales numbers goes down, even though sold cars goes up. Plantagen, again, a must check the number here. It's Plantagen is having an EBITDA of SEK 543 versus SEK 565 last year. In Norwegian crowns, in their local currency, in Norway and Sweden, it would be a better EBITDA result.
The EBITDA margin for the quarter was growing from 21.7%- 22.1%. We're coming into industry. Strong EBITDA growth. Industry have got two new siblings in the quarter and forward, that is Speed, who is working with industry companies. That's their customer group, they're also doing more than just storing things in their warehouse. They are assembling things for their customers as well. We think they fit in much better there. Oase is a company that designs, develop outdoor equipment. They have outsourced their production to mainly Asia, but it is an industrial company. With these two new siblings, we have some effects in this quarter.
It comes to the organic growth, which was down 8%, and that's solely dependent on Oase, who had a strong first quarter, and Speed, who have lower volumes, which we explained in the report. It's one key customer that has gone down, what we believe temporarily, quite a lot. Again, if we look at the numbers, sales increased 46%. Of course, Semcon and Knightec is a big contributor. Adjusted EBITDA is up 43%, and that's not only Knightec and Semcon, but also the other companies, and the strongest EBITDA development was in Diab. I'm looking forward to hand over.
Yeah.
-this to you and go through the details in the financial, Jonas.
Thank you, Jonas. Let's move into the financials. On this first slide, you see the trends for net sales and adjusted EBITDA. You can see that we have good positive trends here. I just wanted to highlight that LTM sales is above 33 billion SEK. If we look at the adjusted EBITDA, we are a little bit above 2.1 billion SEK in adjusted EBITDA, the LTM numbers. Good trends on net sales and adjusted EBITDA. If we look at cash flow, I'm really satisfied with the cash flow in the quarter. As you, Jonas mentioned, we had the cash flow in the quarter, 2 billion SEK in the second quarter this year.
The cash flow in the second quarter last year was SEK 1 billion, and if we look at the LTM numbers, we have posted a cash flow in the second quarter LTM at SEK 3.3 billion. I was so glad to be able to say that all the business areas had positive cash flow in the quarter. This corresponds then to a cash conversion of 153%, if we look at the LTM numbers. I move over to net working capital. This is an area we will focus a lot on going forward to reduce the working capital. You can see that we have a slight increase in the quarter. This is only driven by acquisitions, and mainly the acquisitions that we made during the second half last year.
If we look at trade receivables, you can see that it's up to roughly SEK 4 billion. This is solely driven by the acquisitions. If I look at the DSO, the days sales outstanding in the group, we have a very positive, nice trend, that the DSOs are actually going down. If we look at the percentage, we are around 9% in working, net working capital to net sales LTM. I move over to the net sales bridge and the adjusted EBITDA bridge. We saw a growth in net sales of 19% in the quarter. Acquired growth was 13%, and this is related to industry and also construction and services. If we move to organic sales growth, it was 7% in the quarter.
We saw good sales growth in construction and services, while we had a negative organic growth in the industry and in consumer. We have been affected negatively by the Norwegian krona, it's NOK 50 million negative on net sales, as you can see here. We have a still a slight negative effect of deceased operations in Russia, and this is related to HL that closed down their business in Russia.
And-
Also, LEDiL had some sales into the region. Then move down to the adjusted EBITDA bridge, up 12% in the quarter, acquisitions, 6%, the organic growth, up 9%. This is strong, I think. A good growth for construction and services and industry. Again, as Jonas said, we saw very good improvements in the result for Diab in the quarter. Again, a negative effect of the Norwegian krona, SEK -18 million. Now the other effects here is actually restructuring costs that we have had in the quarter, and this is partly related to HL and the newly made acquisitions in Germany. Then move over to next slide. This is the inc...
the EPS. You can see that if you look at the LTM numbers for EPS, we are increasing 3%. In the quarter, we posted SEK 1.79 earlier, which was down a little bit, and this is driven by the finance net, which is negative because we have increased debt, but we have also higher interest rates, which has a negative effect. If we look at leverage, I'm really glad to see this development. We were at the high level in the upper part of our span, the leverage span 2.5x in the end of last year, and now we are down at 1.6x. We saw, as you saw before, very strong cash flow development in the quarter, but also increased LTM EBITDA numbers.
The net debt was at SEK 3,000,000,075 in the end of the quarter, we paid back debt roughly SEK 1.2 billion in the end of the quarter, reducing our outstanding debt in total. Return on capital employed, slight decrease in the quarter, down to 10.3%. Here we have, again, a negative effect of the acquisitions, where capital employed has an immediate effect in the balance sheet, while the EBITDA gradually improves LTM. Our financial targets, I guess you recognize these. We shall have an EBITDA at least SEK 3 billion by 2025. The leverage should be in the range of 1.5x to 2.5x .
On the dividend, we have a target of paying out 30%-50% of profit after tax. By that, I leave over to you, Jonas.
Thank you, Jonas. Now I will try to sum this quarter up. I think it was a very strong quarter for Ratos. Again, the organic EBITDA growth is what I like the most, actually, and our strong sales growth, including, of course, the organic sales growth. The fact that we still have a good order intake and record high order books. Especially since we're all sort of concerned about the market, Jonas, and we have, I at least have been worried, even nine months ago, but so far, very good. I don't know how many times we have repeated cash flow here.
I want to say to you, Jonas, and to everyone, we know that cash flow is not the financial issue, only it's about, you know, collecting, getting the invoices out, have contacts with the clients, not the finance department, but the one who bought from us, et cetera. The cash flow we have the focus on the cash flow we had from when we decided that in and put it into Ratos Business System, has really made changes in actually in all companies. Last but not least, we are focusing on technology and infrastructure solutions. We want to be even more focused on that, and we're working hard to come there.
We have done a lot, actually, if you look at the acquisitions we have done, but we want to do more. And we just wait and hope for a better M&A market so we can accelerate this process. Thank you so much for attending. Maybe there is one or two questions, Josefine?
Yeah. Let's have a look if we have any questions. It's time for our Q&A session. I'm going to start to open up the line for Nordea, Victor Hansen and/or Anders Åkerman. Please, shoot. Do we have Anders or Victor on the line? Nope.
Anders.
Anders is on the line, I hear from the control room. Let's give it a few seconds.
We all have sound issue.
Just going to give it a few more seconds to see if we could fix the sound. Could you please, who has called in to pose your questions, double-check that you are unmuted when it's your time, when you're being addressed? If Anders Åkerman at Nordea, could you please double-check so that you are unmuted? We have some trouble with having the sound working. We should see if we could have the questions in text instead, so I can repeat them. Is that a possibility? I'm looking into the control room. Should we post the questions in the chat function instead in Teams?
Yes.
Yes. Please, we are sorry for this sound issue, let's move on with the questions posted in text instead. Anders, if you would like to type your question in the Teams functions chat, we will repeat it.
Anders, can you not?
We can see that you're writing, Anders. Very good. The rest of you, which are online, could you also please prepare to type your questions instead? Again, sorry for this inconvenience. We can't hear anyone? No, I will have to repeat the questions. We'll see. Maybe it will be fixed along the way, but the first question I will have to.
I will answer that. You said in the report that Plantagen's earnings were up, year-on-year in local currency. How big was the currency effect there?
Okay, I will repeat it. You said in the report that the Plantagen result was up. Could the control room help me?
How big was the currency effect, I guess, was the question.
How big was the currency effect? On sales or EBITDA. Yes, please, Jonas and Jonas.
On EBITDA, Plantagen posted a positive EBITDA in Norwegian crowns, but the effect was roughly SEK 20-21 million Swedish crowns negative in the quarter.
And sales?
Sales, I don't know, actually.
Oh.
No.
It's more.
Yeah.
Sales is more. Very good indeed. Do you have any more questions on the Sjögren-Bloms? Please post them in the chat function.
Aibel with a strong quarter, will it still be a back-end loaded year, or did you see some contribution in Q2 that you previously expected in H2?
Okay, a question about Aibel. Maybe you, Jonas Ågrup, could repeat it, so we hear it all.
Yes. we have communicated that Aibel should have a back-end heavy year this year, and, the question is this, still the case?
Yeah.
Have they sort of increased their profits a little bit in Q2?
We believe still it's a back-end, heavy year. We can't give any forecasts, as you know. They are in early phase in quite a number of projects. We are in that phase of Aibel's project phasing, then comes a period when they are in the end, then sales go down and EBITDA go up.
Okay. Let's move on to the next question. It's Henrik Lempka from ABG asking: "You mentioned significantly improved earnings in Diab. Could you expand a bit on this?
Yes. We did in early Q1 last year, we did a restructuring program to handle the wind market that went down against all odds. Of course, we see effects of that. We also see a growing aerospace industry and marine industry during the first half year. Also, the defense industry is very interested in Diab's solutions for lightweight constructions. But we, it is much better and I can at the same time say that wind, which is a, I'm not gonna give you the percentage, but it's a small minority of their sales today that is wind. That market is still very low.
Okay. I think there was one more question from Henrik Lempka, if the control room just can scroll up.
Yeah.
There we go.
... down a little bit.
There we go.
Yeah.
Up a bit. Sorry again for the inconvenience with the sound. Hopefully, you get the answers again.
Where should I look?
I can read it.
Stop, stop.
If you go up a little bit, Peter.
One second, we will have the second question from Henrik Lempa.
No, no, the other way, please.
There we go. Stop.
Stop.
you say the organic decline in the industry segment was entirely due to waste and Speed, but you also mentioned that demand varied. Could you expand a bit on that, please?
Yeah, thank you for that question. Yes, we saw a little bit lower order intake in the beginning of the quarter. In the end of the quarter, we had better order intake. That's the variation. Good question.
Okay, thank you. Let's move on. Luckily enough, we are able to see the team's chat at least, so we can see your posted messages.
Yeah, that's very good.
Could we scroll down a bit, so we see the next question? Thank you. Stop. It's Georg Attling from Pareto asking, "Semcon Knightec, growth and outlook, could you specify the negative calendar effect?
Very good question also. Again, we're not doing forecast, but we had one working day less in the Q2. Doesn't sound much, but together with the... Now, can you please stay with the question I'm on? Together, I have to use a Swedish word, "" was also part of the calendar effect, but one day less. I can also say that goes for Q3, in Q3, the month that is shortened is September. That's not good either, but then we have a strong Q4 after that.
Yeah, if you have any follow-ups on the answers, please keep on posting questions, and we will sort of take them.
Yeah
... one by one. Yes, moving on to Sina Engdalen at Handelsbanken, asking, "The cash flow was very strong in the quarter.... how do you expect strong cash flow to continue in Q3?
Shall you take that, Jonas?
Yes. Unfortunately, Sina, we are not able to give you any forecast on results or cash flow. A boring answer. I'm sorry, but.
That's how it is.
Yeah.
If you scroll up a bit in the Teams chat. Thank you very much. Georg Attling, another question: "Aibel with a strong quarter, will it still be a back-end loaded year?" No, we had that question.
I think we had that.
Okay, sorry. Move on. Let's see. There we go. Sina, I have another question: "You reduced the sales from KVD's inventory. How much inventory do you still have on their own books?
I don't know that number, Jonas. Do you that?
I think, for the KVD part, it's around 30-40 million SEK, I would guess, roughly in that for the KVD, car bit part.
Inventory today.
Yes. Yeah.
How much is that down from the peak?
Well, it's down SEK 50 million, SEK 60 million, roughly, I would say.
Yeah, I thought we were.
Yeah
... up to SEK 150 million.
Mm. Yeah. Even more maybe, yeah.
Okay. "Your view on your view of acquisition pace and leverage going forward, given the gearing is now in the lower end of the financial target?
Yeah, it's just very good questions today. I'm sorry, we just can't have the dialogue. No, we don't want to be in the lower end of the span, but we don't want to be in the higher end either. 2.5, I think, Jonas, we agree on that, we should avoid to be up there. Since we're still, it's very hard to assess the future market. I sort of feel sometimes watching television that anything can happen, but certainly we want to do acquisitions or other things that could increase our leverage. But the market is still slow for transactions.
I think that was the last question, looking into the control room here. That was the last question. You have sort of a final chance to post a follow-up, or we have a few more minutes if there are more questions.
Could I say, Josefine, that, and again, sorry for this technical issue, that you're very welcome to call any of us for more of a dialogue, or I think we even can buy you lunch if you come here. Give us a call, and thank you for attending, I just want to say.
Thank you very much. There is no more questions. Just to remind you, this webcast is recorded, and you can see it afterwards at ratos.com. Thank you, Jonas and Jonas, and thank you for both the questions and for being with us this morning. We at Ratos also want to take the opportunity to wish you all a lovely summer. Thank you very much, and goodbye.