Welcome to the VBG Group Q4 2023 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 five on their telephone keypad. Now I will hand the conference over to the speaker's CEO Anders Erkén, CFO Fredrik Jignéus. Please go ahead.
Thank you very much, and very welcome to the presentation of VBG Group Q4 report. As mentioned, my name is Anders Erkén, President and CEO of the group, and together with me Fredrik Jignéus, our group CFO. Just a short recap of VBG Group: we have operations in 15 countries and sales in an additional 50 countries. We are now 2,000 employees across the globe, and we are organized in three different divisions with a delegated authority and responsibility. Main importance for our companies are the brands that we work in selected niches, and we have 10 brands at the moment. We act in many different industrial applications and provide industrial solutions, creating a safer society. As mentioned, we are organized in three different divisions.
The first one on the left-hand side is the Truck and Trailer Division, mainly working with commercial vehicles, connecting Truck and Trailer, sliding roofs for semi-trailers, and our automatic tire chains. Second division is Mobile Thermal Solutions, which was acquired in November 2016, which mainly works with mobile climate system heating, ventilation, and air conditioning for vehicles as well. Our third division, Ringfeder Power Transmission, works in a lot of industrial segments, and the main application is to transmit torque. It's mechanical power transmission and mechanical damping in a lot of different applications. Just to give a recap of the full 2023, it was a record year from many perspectives. Sales grew to SEK 5.7 billion, which was an improvement by 25%. Adjusted for currency and acquisitions, it ended up with 18% growth.
Our profit measured in EBITA grew to SEK 858 million, which is an improvement by 54% compared to 2022. Last but not least, earnings per share increased with 54% as well to SEK 22.74 . All in all, we had three stable divisions, and the conclusion is it was a fantastic year. All three divisions made all-time high when it comes to revenues and all-time high when it comes to the EBITA result. We have two financial targets. The first one is our growth target, and we can see that our target is to grow by more than 10% yearly over a five-year period. We have achieved 10.4% including this year from 2018. Our second financial target is the EBITA margin, where we want to reach 15% EBITA margin. We were a few hundred thousand SEK away from the 15%. The improvement from last year is 270 points.
If you look also, which I'm very, very proud of, that we have achieved growth of the profit by 14% yearly over the last five years. On top of that, the cream on the cake that is the cash flow. We also hit a record with SEK 705 million in operating cash flow. A few words around quarter four. You will have all the details by Fredrik very, very soon. But let me talk about a few highlights in quarter four. We are an activity-driven organization like many other companies. I just want to highlight a few things that has made the result so really good in quarter four and that we will continue to ride on in the future as well. On the 9th of November, we made an acquisition of Rathi Transpower in India, and it's now integrated into the division Ringfeder Power Transmission.
We can already see now that the integration process is following our plan and that the company delivers according to our expectations. We can also see that all the activities that we have been driving over the past years, and especially during 2023 with the improvement of the bus business in North America, has really, really made an impact on the result in quarter four. Well done to everyone in the organization, but it's a really great achievement and a big impact to the result. We also see a really strong demand in the North American market. And you can see with the growth in the Mobile Thermal Solutions division, you will see and later hear from Fredrik that it's really good growth in the organization. We have also ended up our consolidation project within Ringfeder Power Transmission division, where we have consolidated 3 units into one.
This is finalized. We took the lease cost and we sold the leased building during the quarter. It has had a negative net effect of SEK 6 million during the quarter, but now it's finalized. Last but not least, in our organic growth agenda, we launched our BTMS system, and we will have our first revenues now in the first quarter. So by that, Fredrik, please go ahead with the details.
Thank you, Anders. The strong growth in North America within MTS division continued during fourth quarter. The group's turnover increased by 21.7%, of which the organic growth adjusted for FX and acquisitions amounted to 15.4%. The recent acquisition of Rathi Transpower in India is consolidating the group since November 1st. In North America, sales growth was primarily driven by volume, while the other divisions, Truck and Trailer and Ringfeder Power Transmission, price was main driver. The EBITA result increased by 62% compared to 2022 and reached SEK 280 million in fourth quarter. The EBITA margin improved from 11.3% to 15%. Factors that increase the profitability are high growth and volume in North America, stabilization and profitability in bus climate control, and price increases overall divisions.
During 2022, MTS division, and especially MCC bus climate control, had a quarter with high inefficiency and high cost in relation to the startup of the new facility in York and also scrapping costs from the factory move. Truck and Trailer Division experienced fourth quarter with a strong EBITA margin. The sales decline in the fourth quarter is related to the trailer segment in Europe, where we see or experience a deep slowdown. Traditional coupling business is still strong, even if it has lower volume growth in fourth quarter compared to previous quarters. Ringfeder Power Transmission division is affected in the fourth quarter by the consolidation of the U.S. operations. Three sites are now one site, and the project is closed. A negative effect, like Anders said, amounts to $600,000 in fourth quarter. So adjusted for that, the EBITA margin for Ringfeder Power Transmission would be above 15%.
We can also see that the profit follows through. So the profit per share has increased by 43% and amounted to SEK 5.18 per share. We're also very glad that the operating cash flow is still strong and increased to SEK 163 million compared to SEK 106 million in fourth quarter in 2022, mainly driven by the higher result but also what we have experienced through the 2023 reduction of net working capital. What we can see from this picture is that the growth within MTS division has increased their share of total turnover and at the same time, MTS has managed to increase the EBITA margin, which means that when 2023 is said and done, MTS accounts for the larger part of the group's EBITA result. In the fourth quarter, the relation was 55% for MTS, 28% revenue for Truck and Trailer, and 17% for Ringfeder Power Transmission.
Now, in the fourth quarter, MTS stands for 48% of EBITA versus Truck and Trailer, 38%, and Ringfeder Power Transmission, 14%. VBG Group started an investment in Vänersborg in 1951. Today, VBG Group has approximately 6% of total sales in Sweden. Before the acquisition of MTS in 2016, we were mainly a European operation. With the acquisition of MTS, we have the highest portion of our sales in North America and the U.S. market. Given the good market development in North America for our product, the proportion of sales in North America has increased and amounts now to 55% for 2023. Note that we have an aftermarket business of 25% in the group on an average. It is slightly higher in Truck and Trailer Equipment and Ringfeder Power Transmission and slightly lower in MTS division.
Following the last quarters and the sales development of the last quarters, the high growth rate in 2023 in combination with the increase in the EBITA margin within MTS at the same time explains most of the EBITA development during 2023.
Thank you, Fredrik. It's just to summarize that we have a really strong financial position. If we exclude pension and leasing liabilities, we are practically debt-free. And this gives us a good maneuverability for the future to grow the business in a really sustainable, profitable way. As you have read probably in the quarter four report, the proposal from the board of directors is a dividend of 7% that equals to 7 SEK that equals to roughly 31% of the profit or earnings per share, which is in line with our policy of 30%. If you look at the improvements since last year with the 550, it's an improvement by 27%. And of course, as many other companies, we are working quite intensively with our sustainability agenda. Our Board of Directors set a new target for us in September last year.
We are working with a lot of different targets here, but our main target is to reduce the CO2 footprint by 50% until 2030. Currently, in quarter four, we have worked intensively with being compliant and working to be compliant with the new reporting directive, CSRD. To summarize it on a helicopter level, why have we been successful during 2023 and in the quarter? Yes. As you have seen, Fredrik, we are a balanced industrial group. We have a more balanced product offering in the different segments compared to 10 years ago. We have another geographic footprint compared to 10, 15 years ago. We have really strong brands in our selected niches where we act. We have a clear strategy when it comes to the decentralized responsibilities for the divisions, to being close to the customer when it comes to decision-making. We have a diversified customer base.
Many people ask me, "Yes, you are a sub supplier to Volvo and Scania assembly lines." Yes, it's clear, but that's just 2% of our revenues in the company. We have more than 10,000 customers globally, which means we have a really diversified customer base. As Fredrik mentioned, we have a strong aftermarket business, and we share a lot of industrial knowledge in the company, which is important for our continuous improvements. So if we look in the future, it's clear, as you have seen, that we have a strong financial position. We are ready for challenges in this uncertain macroeconomic and geopolitical environment. We have a strong balance sheet that we want to utilize to grow the company with sustainable profitability. It's both organically with our product offering in our sales channels, but it's also through acquisitions.
We will never be an acquisition machine like some companies, but we aim to make 1-3 acquisitions per year with companies ranging from SEK 150-500 million . As you see with our financial position, we will manage that with our cash flow and bank agreements. Talking about the future also, how we see that. We have a visibility of 3-4 months. When we look ahead these 3-4 months, we see a stable market situation with a good demand in the North American market, a flat demand in Europe, where certain segments see a decline like the trailer industry and the machine manufacturing in, for example, the southern parts of Germany, but it's compensated by other segments. We look ahead and see a good future with a lot of good activities going forward.
We will continue to create a safer society with sustainable industry cultivation. Thank you very much for your attention. Now we are ready for questions, if any.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Yes. Good afternoon, and thank you for taking my questions. Maybe just to start off with the Truck and Trailer Equipment. I mean, the trailer market has been very weak, but I mean, it's a small part of your business. But I mean, looking at Truck and Trailer Equipment as a whole, I mean, you reached a -8.8% organic growth. So maybe just to get some more clarity in regards to the truck business, I mean, you comment on somewhat lower sales of couplings. Just can you give us your view on the overall market and looking ahead here?
Thanks for your question, Gustav. It's clear if we divide these two parts, it's clear that the coupling business is still really doing well. The decline in the business for Truck and Trailer is all related to the negative trend in the trailer market. That is how we see it.
Okay. That's perfect. Very helpful. And then, I mean, looking at the margin profile in Truck and Trailer Equipment, I mean, then you, of course, have a very solid aftermarket business to fall back on. But I mean, if we are to see rather significant declines in the truck industry for 2024, I mean, Volvo is guiding for some 15%-20% decline in Europe. How should we think about the overall margin impact for this segment?
It's clear. I agree that the bigger OEMs, they guide for a slower pace during 2024 from high levels. The interesting thing with the truck business in Europe is also how you divide the truck volumes. On one side, you have the tractors with the semi-trailer trailer. And on the other hand, you have more the Artic trucks, more for infrastructure, gravel trucks, and these kind of things. So it's hard to say that the decline of 15% will hit our segments. That's number one. And the second thing is, as Fredrik guided, we have a general view of 25% aftermarket business as a whole in the group. But we can also see that the Truck and Trailer aftermarket business is higher. That means we are really not so cyclic as many people think. And of course, we are ready.
We have shown it historically also that we can take the swings in the business cycle and with a stable profit margin.
Perfect. Then if we move to Mobile Thermal Solutions, can you just expand a little bit? I mean, basically, during the year, we have seen a very strong organic growth and the margins sort of recover. I mean, you continue to comment on record demand. What is really driving this trend shift, would you say? And do you see this demand situation potentially holding up also in 2024, or are you seeing any signs of weakness here?
Let me come back to what I ended my presentation. We have a visibility of 3-4 months. It's clear. In this time period, 3-4 months, we don't see any changes in the excellent demand that we have in North America. And it's driven mainly on what we call the off-road business in North America and also a good demand on the bus side. We get indications that, for example, the school bus business is growing by 20% during 2024 with good order books going forward. But the main driver is the off-road segment in North America.
Okay. And maybe just to sort of come back to the bus segment. I mean, correct me if I'm wrong, but you did move the North American production in H2 last year, or you were ramping up in H2, and you had some operational headwinds, if I recall correctly. And I mean, that must have made the segment loss-making H2 last year. But can you give some indications of where the margin is today for the bus segments in MTS?
Gustav, it has improved dramatically from H2 last year. It's not in line with our overall targets, but it has moved drastically.
Okay. Perfect. And do you see this potentially progressing even further upwards, or are you?
As I said, we are activity-driven, and we do a lot of things. I would say the move going from Indiana to Pennsylvania, York, is closed, but we see a potential for improvement over time. It's hard for me to judge what the improvement will be, but definitely that we will see improvements, no doubt about that.
Okay. That's very helpful. Thank you very much. That's all for me.
Thank you, Gustav.
Thank you. Then we have.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
Okay. Then we have a written question from Peter Hammarud. Will Chinese EV trucks, which have aggressive plans for the European markets, be competitive to the VBG Ringfeder couplings?
Thanks for the question, Peter. Yes. It's clear that it doesn't matter what kind of driveline you have, if it's a combustion engine or an electrical driveline. Our coupling business, the VBG brand and the Ringfeder brand, is compatible with these drivelines.
We have a question from Karl Norén, SEB. Hello. Congrats to another strong quarter and a strong year. What do you think is reasonable to assume for MTS in 2024 in terms of sales? Is it possible to grow net sales in MTS to 2024?
Thanks for the question, Karl. As mentioned, we have a visibility of 3-4 months. It's hard for us to have a longer perspective on 2024, but we can say that we don't see any dark clouds within this time period of 3-4 months.
Okay. Then we have the final questions from Niklas. One, I'm curious to hear more about your acquisition of Rathi Transpower. How has the company developed during the last years, and what growth potential do you see in the company ahead?
Thank you for the question. As mentioned, we acquired the company on the 9th of November. We have really started the integration process. As I also mentioned, the first three months, the company has delivered according to our expectations. We see potential now to take this complementary product range out in our global sales channels. They have a strong position in selected niches in the Indian market, but we see really a potential to grow outside India with this product range where we have our own sales channels. Just a comment when it comes to the Indian market. I think this is an important step for the VBG Group to have access to manufacturing units in the Indian market. We see stable GDP development in the country, and we have a long-term commitment in the Indian market. Then I take the next question.
You mentioned in the report that you want to make acquisitions going forward. Can you tell us more about the process for how to find potential targets?
Thank you for the question. We can say like this. We are a pretty small head office with 10 people, but we have operations all over the world. Our process here is that we work together with our business units. We look at each local market with our organization in that market. We're also working with a very broad network of M&A advisors in order to get all the potential possible acquisition targets. But of course, I mean, the history has been that we have not made that many acquisitions yet. But this is something that we intend to increase the focus on going forward, and we intend to use our strong balance sheet and cash flow in order to develop our growth both organically but also structurally via M&A.
The third question is, "The board decided on a pretty low dividend increase considering the strong result and your rock-solid balance sheet. Should we read into this that you see good potential for acquisitions ahead? How does the acquisitions pipeline look like?" You should read into this that we aim to increase our pace when it comes to doing acquisitions. Like Anders said, we will not be an acquisition machine, but we intend to add around SEK 150 million-SEK 500 million in acquired turnover year-on-year going forward. We like to be in the discussions directly with owners. We acquire small companies, very niche companies, very profitable companies, leading brands in these local markets. These kind of discussions tend to take long time. The recent activity that we made with Rathi Transpower, it was a process over and discussions for almost three years.
But of course, we are working intensely with having these kind of discussions on all continents almost. So yeah. Thank you. So by that, if there aren't any questions, we thank you very much for your attention. We had a fantastic 2023 with a record result. We followed that up in quarter four with a really strong result, and now we look ahead as a company with a lot of good activities. Thank you very much.