Welcome to the VBG Group Q1 2024 report. For the first part of the conference call, the participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speaker's CEO Anders Erkén, CFO Fredrik Jignéus. Please go ahead.
So then I say welcome to the presentation of VBG Group's Q1 report. My name is Anders Erkén. I'm the President and CEO, and together with me is Fredrik Jignéus, our CFO. So a short recap of VBG Group: we are organized in three divisions. We operate in selected industrial niches with 10 strong brands with decentralized responsibility. From left to right then, Truck and Trailer Equipment acting in the commercial vehicle segment with drawbar couplings, sliding roofs, and automatic tire chains. In the middle, we have Mobile Thermal Solutions supplying heating, ventilation, and air conditioning systems to mobile applications like buses, all-terrain vehicles, excavators, mining trucks, and fire trucks in smaller series. And to the right, we have Ringfeder Power Transmission supplying industrial components for motion control and mechanical power transmission in a wide range of industrial applications. So we go to the Q1.
Fredrik will give you the details, but before that, let me comment on a few highlights during Q1. We had a really strong quarter with an all-time high revenue and profit. We had strong performance of all divisions. We could see if we look at Mobile Thermal Solutions, it was all-time high when it comes to revenue and profit. And Truck and Trailer Equipment, the second best quarter ever, and Ringfeder Power Transmission with a sales record. We can see also that margin increased overall for all divisions. And this is mainly sorry, can you back up a little bit?
Sorry.
Yeah. Sorry. This is driven mainly by strong demand in North America, mainly through Mobile Thermal Solutions. Fredrik will go into detail to explain that. We had a really strong improvement of our return on operational capital together with strong cash flow, which improved a strong financial to an even better position. Last but not least, in the quarter, we have now seen that we have our latest acquisition, Rathi Transpower, in the group for five months, and it has contributed according to the high expectations. So in summary, a really strong quarter.
Okay. In summary of first quarter 2024, the strong growth in North America and within MTS continued during first quarter, but we can now see that the demand and order intake are flattening out on high levels all over our markets. The group's turnover increased by almost 10%, of which the organic growth adjusted for FX and acquisitions amounted to 5%. The recent acquisition of Rathi Transpower in India has contributed in line with expectations. In North America, sales growth was a combination of volume in the off-road segment and price increases in the bus segment made during 2023. The EBITDA result increased by 28% compared to first quarter 2023 and reached high SEK 260 million in first quarter. We are glad to see that our activities pay off in an increased EBITDA and margin.
The margin improvement was from 14.5%-16.9%, and the factors that increased the EBITDA margin are still high volume growth in North America and MTS off-road segment, increased profitability in bus segment due to efficiency improvements in production, and also price increases made during the last two quarters in 2023. Truck and Trailer Equipment experienced a strong EBITDA margin in first quarter despite the sales decline in first quarter, which is related to the trailer segment in Europe. The trailer segment is experiencing a steep slowdown compared to the high numbers in first quarter 2023. Traditional coupling business is still strong even if it has lower volume growth in first quarter compared to last year, and the price adjustments made in the end of first quarter 2023 had a positive effect on the still strong margin.
Ringfeder Power Transmission is growing with the recent acquisition of Rathi, which are developing according to expectations with a good contribution to the EBITDA margin improvement within Ringfeder Power Transmission. Overall, the margin increase is due by price increases and a good momentum in the segments of products for the mining industry. The asset deal made in 2022 of TNZ Brakes for mining is developing very strong. So are the mining markets in Brazil and Australia. Ringfeder Power Transmission margin increased to 14.6 compared to 11.5 in the quarter. Earnings per share has increased by almost 38% to SEK 7.83 per share. Looking at the sales development over the last quarters, the higher growth rate in combination with the increased EBITDA margin in MTS at the same time explains most of the EBITDA development during the first quarter in 2024.
We can see that the growth within MTS the last 50 months has increased their share of total turnover, and at the same time, MTS managed to increase EBITDA margin through all the activities, especially within the bus business, which means that when first quarters added up, MTS accounts for a larger share of the group's EBITDA results, almost 50%. Like we commented in the fourth quarter of 2023, before the acquisition of MTS in 2016, VBG Group was mainly a European operation. With the acquisition of MTS, we have a larger portion of our sales in North America and U.S. And given the good market development in North America the last 50 months for our products, the proportion of North America sales has increased and amounts now to 54%, more or less in line with fourth quarter 2023.
Note that we have an aftermarket business for 22% in the group on average. The aftermarket business as a proportion of total group sales decreased during 2023 due to the high growth in MTS, and we expect it to start to increase the coming months as well. We are glad that the favorable market in North America continued in first quarter 2024 and that our activities have been successful, which shows in increased margins. In 2023 and the beginning of 2024, we have not only increased the results and strengthened the margin, but we have also a very good cash flow. The underlying good result is the main reason for that, but also low in working capital tied up. Today, we have a net cash position if we adjust for pension liabilities and leasing commitments, and the net cash position is almost SEK 260 million.
VBG Group has a strong financial position that can be used to develop the group going forward. VBG Group has a dividend policy of 30%, and the proposed dividend of SEK 7 per share means that almost 31% of 2023 profits are distributed to the shareholder now in the mid of May. Then I'll leave it back to Anders.
Yeah. This is just a summary of the rolling 12 months after the first quarter, and we see, as Fredrik has mentioned, the growth continues. The operating profit measured in EBITA continues, and it's nice to see that the incremental sales flows through to the bottom line. Rolling 12 months, we reached an EBITA margin of 15.6%, which is above our target. Again, it's a stable situation by all the divisions going forward as well. Go to the next. As mentioned in the development, we have worked internally very much to free up cash. We have had a good cash flow, and our return on operating capital reached 40.3% now rolling 12 months. Can go to next. As mentioned in earlier quarters, we put a lot of effort now to work with our sustainability targets. We also work intensively to be compliant with the CSRD.
It has, as you know, also been postponed in Sweden for one year, but we continue in a little bit slower pace, but we will be compliant in this area as well. Can jump that. So if we look at the future, as Fredrik has mentioned, we have a very strong financial position. We are ready for challenges in the uncertain macroeconomic and geopolitical environment. We have a strong balance sheet that we want to utilize to grow the company with sustainable profitability, and this means both organically and through acquisitions. We have a lot of products in the pipeline, and we also look to develop different markets in a better way. Coming back to acquisitions, we will never be an acquisition machine, but we aim to make one to three acquisitions per year with companies ranging from SEK 150 million-SEK 500 million in revenues.
And this we will manage with our cash flow and bank agreements. And to look in the future, as we have mentioned many times, we have a visibility of 3-4 months, and we see a stable market situation with excellent demand in America. Of course, there are segments like the semi-trailer industry and the machine manufacturing industry in Europe that has a clear reduction, but it's offset by other segments like the defense sector and the mining sector especially. So by that, we can say we are ready for questions.
If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Yes. Hi. It's Gustav here from Nordea. If we maybe start with the truck and trailer equipment here, I mean, the organic growth for the segment is down 12% basically year-over-year. I mean, still you maintain very strong EBITDA margin of 22.9%. I mean, can you talk a little bit more about this? For example, are you seeing an increased aftermarket sales supporting this for this specific segment, or is it something else driving this?
Hi, Gustav. Yes, it's clear. We have a clear drop in the semi-trailer market, but as mentioned, we have a stable situation in the drawbar trailer or drawbar coupling segment. It's related also that we get a better product mix to our customer base. I would say the split between first installations and the aftermarket products in quarter one, comparing quarter one to quarter one 2023, is on the same level.
Oh, that's clear. And then, I mean, is it fair to assume then basically, I mean, as long as the couplers business is holding up, I mean, we can expect probably quite solid margins for these segments, right?
Correct. It's clear that the coupling market within truck and trailer equipment has better margins than in the semi-trailer segment.
Perfect. And then if we move to Mobile Thermal Solutions, I mean, can you comment a bit more on, you say, record high demand in off-road specifically? Is this mainly driven by you penetrating new vehicles, or is it something else driving this?
When we look at Mobile Thermal Solutions, it's really the, as mentioned, in the off-road sector. It's mainly driven by these all-terrain vehicles where we see the biggest increase in demand. It's overall in all segments on the off-road side that is growing, but the biggest growth is in the all-terrain or what we call the compact segment.
Okay. Great. And then, I mean, you also comment on potentially adding capacity to the Toronto plant for off-road. I mean, should we interpret this as you expect this strong demand to sort of continue for a longer period of time, or are we reading too much into this?
Yeah. I think you're reading too much into that. It's something that we have started to investigate, and we need to come back to that. But it's clear that we are starting to investigate how we will act long-term with our off-road side in Toronto.
Okay. And then also, I mean, without sort of giving any guidance and so forth, but would you say, I mean, you've done a lot of work in mobile thermal solutions, and I mean, put it in a scenario, if we assume all else equal, is it definitely possible to reach an annualized margin of 14% or above for this segment going forward, or?
Again, I think we have shown now in four or five consecutive quarters that we can improve margin. I think it's clear that we have come out of the restructuring of the bus business, and it's more of continuous improvements. We will continue to keep the fire burning when it comes to the efficiency part, especially in the bus business. So I see that we can continue at least on this level and even improve it depending on the volume development, of course.
Perfect. And then just the last question for me here. I mean, you comment on the order book remaining strong. Is it possible to give any more nuance to this, sort of how has it developed since Q4?
Will you take it, Fredrik?
The order intake is flat between the quarters, quarter 1 2024 and first quarter 2023, but still we have sort of say the same level in the order book still. That's what we mean with a strong order book. We still have an order book for what we have said before, 3-4 months. That's what we never see, so to say.
Oh, that's perfect. All right. That was all for me. Thank you very much.
Thank you, Gustav.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
What we can see, there are no written questions at this time.
So then I take the opportunity to thank all listeners for the attention, and we will come back to you on July 19th with our quarter two report. Thank you very much for listening in.