Nilfisk Holding A/S
CSE:NLFSK
Earnings Call Analysis
Q4-2023 Analysis
Nilfisk Holding A/S
The company navigated a tough climate in 2023, contending with market headwinds, particularly in North America and EMEA, and muted demand. Despite these challenges, they reported total revenues of EUR 252.9 million in Q4, propelled by growth in the APAC region and contributions from the Services and Specialty businesses. However, organic growth fell by 2.9% for the quarter. Yet, the company managed to achieve a EUR 1,033.6 million turnover for the full year, a slight decrease from 2022, largely due to unfavorable exchange rates and soft demand in certain markets.
Favorable margin trends were evident, with gross profit margins improving from 40% to 41.8% year-over-year, thanks to effective price management and reduced freight costs. EBITDA for Q4 stood at EUR 35.1 million, and the EBITDA margin reached 13.9%. Across the full year, the company posted an EBITDA of EUR 132 million, resulting in a flattish organic growth and a steady EBITDA margin of 12.8%. Looking ahead, the company aims to continue gross margin expansion and maintain financial discipline.
Adapting to an evolving market, the company restructured its operations to improve service integration with regional activities and enhance focus on Parts, Accessories, and Consumables (PAC). They saw organic growth across their service business and have laid the groundwork for expected acceleration in growth, especially with R&D investment increasing across 2022 and 2023 to fuel a robust product pipeline. Efforts also included strengthening the supply chain and initiating dual production for high-demand Floorcare products.
The company is intensifying its commitment to sustainability and innovation, boasting a series of product launches including a revamped autonomous machine and the first consumer cyclonic stick vacuum. Notable is the introduction of their professional vacuum made with 30% post-consumer recycled plastic, a first in the market, signaling a strategic direction towards sustainable products. They marked a 16% reduction in Scope 1 and 2 greenhouse gas emissions and a 25% reduction in Scope 3, demonstrating substantial progress towards their 2030 science-based targets.
The organization made significant strides in gender diversity with women holding 30% of top management positions, an increase from 26% in 2022. Maintaining employee engagement scores at 8.1, above the industry average, they have positioned themselves within the top quarter of global manufacturing companies, showing a keen focus on inclusive growth and a positive corporate culture.
With a free cash flow increase of EUR 60.7 million over the previous year, totaling EUR 115.2 million for 2023, the company's financial health appears robust. They managed to lower net interest-bearing debt by EUR 73 million and achieved a gearing of 1.9%, in line with their strategic targets. Cost-efficiency measures brought about a reduction in overhead costs, which promises a leaner cost structure moving into the coming years.
Looking into 2024, the company anticipates a rebound in demand and an increase in output, coupled with a solid order book. Projecting a top-line growth of 3% to 6% and an EBITDA margin in the range of 13% to 15%, the company expects to benefit from continued gross margin expansion and efficiency improvements realized in 2023. Capital expenditure is planned at approximately 4% of revenue, with a significant portion allocated toward product development and innovation. Meanwhile, special items are forecasted to hover in the low to mid single-digit million euros range. With new product launches and strategic initiatives in place, the company is poised to harness growth opportunities and drive forward their ambitious Business Plan 2026.
You don't have any saved screeners yet
Good morning, and welcome to Nilfisk's Earnings Conference Call for the Fourth Quarter and the Full Year of 2023. I'm Elisabeth Klintholm. I'm the Head of Investor Relations and Group Communications here at Nilfisk and to cover our results today we have our CEO, Rene Svendsen-Tune; and our CFO, Reinhard Mayer, presenting. For the call today, we'll cover a number of topics. First, Rene will give an update on the Q4 2023 and full year 2023 numbers and then a business plan '26 update, and Rene will also cover our progress with sustainability during 2023. Then Reinhard will give a detailed run-through of our financial performance in '23 and comment on our outlook for the coming year 2024. We appreciate that you take the time to listen in on the call this morning. The presentation will take approximately 30 minutes, after which we look forward to taking your questions during the Q&A session at the end of the webcast. And moving on for the usual practicalities. Before we begin today's presentation, please note that this presentation, including remarks from management, may contain forward-looking statements that should not be relied upon as predictions of actual results. For more details, please read the content on this slide. And with this, welcome, Rene. We are ready for your message on 2023.
Thank you, Elisabeth, and good morning to all of you, and thank you all for joining us on our earnings webcast this morning. So let's get started with some commentary on the main financial results. And please go to Slide 4. So in Q4, the Services and Specialty business each contributed with growth and for consumer, we saw a strong recovery. The professional business declined due to market headwinds in U.S. and Canada. The quarter was generally impacted by challenging climate with muted demand in North America and EMEA, but as a result, we saw total revenue of EUR 252.9 million. For the regions, APAC delivered growth, EMEA remained flattish and Americas declined. Overall, organic growth was negative with 2.9% for the quarter. Growth was supported by the easing of supply chain constraints across all our production sites. We do note that the order book has come down and is now lower than in Q4 of 2022, but it still remains elevated around large industrial Floorcare. The gross profit margin recovery continued. Price management and lower freight costs more than offset headwinds from cost inflation on raw material and labor. As a result, the gross margin reached 41.8%, up from 40% over last year. EBITDA before special items were EUR 35.1 million and EBITDA margin before special items was 13.9% for the quarter. Free cash flow was strong, leading to continued improvement of net interest-bearing debt and our gearing. So let's move to Slide 5 to look at the results for 2023 full year. So 2023 was a year of steady progress with our financial business metrics and with business plan 2026. I will revert to our progress with the strategy in more detail in a moment. So in 2023, we delivered a set of results that we consider acceptable in a challenging climate. This was achieved by pursuing pockets of growth in a market impacted by a muted demand. Revenue landed at EUR 1.033 billion and EBITDA before special items was at EUR 132.4 million. This allowed us to deliver flattish organic growth of minus 0.3% and an EBITDA margin before special items of 12.8%, both was in line with our outlook for the year. With the annual report, we also confirm our financial targets for 2026. These targets are supported by the foundations for future growth built during 2022 and 2023. With this, we conclude 2023 with strong foundation that will act as a catalyst for the acceleration of business plan 2026 in the years ahead. So let's move to Slide 6 for an update on the business plan. 2023 was a year of steady progress with Business Plan 2026. We invested in our growth platforms and structured the organization to optimize the way we work. And let me cover the main progress areas. The service business benefited from our strategic focus and solid demand and delivered organic growth of 5.5% in the year. This increased the share of revenue from service to 29% in 2023 from 28% in 2022. While the contract detachment rate increased to 12% from 10% the year before. However, this progress is not fully according to our expectations. So to accelerate execution, we have adjusted the operating model adopting an implementation that connects services closer with our regions. In practice, this means that the service business is integrated with EMEA, removing any geographical distance from -- between the front line and the back line of organizations. Another measure taken to accelerate execution is ensuring that we have an increased focus on PAC. PAC is parts, accessories and consumables and this accounts currently for 59% of the revenue of our service business. For our priority to grow in large-scale markets, we saw flattish growth in the U.S. despite a muted second half of 2023. The soft demand was particularly within the high-pressure water category and specialty business. Meanwhile, we continue to ramp up for large industrial equipment from our Brooklyn Park production facility. This will facilitate accelerated growth also in 2024. To serve another future large-scale market, the APAC region was established early 2023. And during the year, we saw solid growth in most of this region, driven by solid demand. Turning to products. We stepped up investments into innovations pipeline in 2022 and 2023 with increased R&D spend. And we saw the first results with a handful of products launched in 2023 that I will revert to in a moment. But most importantly, we now have a solid product road map for 2024 and with increased focus on sustainability. For our largest market, EMEA, we finalized the operating model in 2023. This has led to the region being based on 6 equally-sized markets, and clusters driving all commercial activities, including the activation of service. With this structure and team in place, this market is well placed to pursue growth. On the supply chain robustness effort in 2023, these were centered around ensuring increased production capacity and enhancing efficiency across sites. In addition, we implemented dual production of high selling Floorcare products across geographies to improve delivery time. The focus on margin expansion continued with dedicated price management. Finally, our focus with specialty business was centered around the Industrial Vacuum solutions, which is that part of the business. Here, we rebuilt a center of excellence back in 2022. And in 2023, we have strengthened the R&D setup. Now we have a new and innovative product road map, and we are expanding our business into new segments. And with that, let's turn to Slide 7 and product launches. So over the last years, we stepped up investments into innovation pipeline and in 2023, we saw first results with a handful of product launches. Within our largest product category, Floorcare, we relaunched our first autonomous machine, SC50, in the version 1.5 we also relaunched the popular SC650 walk behind. We relaunched one of our best-selling products, the professional vacuum VP930 used in hotels and offices all over the world and we launched our first consumer cycling stick back S1, which has been very well received by the market. And today, we are excited to relaunch our new professional vacuum VP300. We are focused on meeting our customers' increased focus on sustainability by using 30% recycled plastic in the vacuum case. What really sets this product and part is the fact that we have succeeded in using post-consumer plastic rather than the more easily adaptable and less impactful route of using post-industrial plastic. This is the first machine in the market using post-consumer plastic. And with this launch, Nilfisk is off to a strong start on our 2020 product roadmap. Please turn to Slide 8. So an area that developed faster than planned in 2023 is sustainability, where we accelerated our efforts to reduce emissions. The progress with reducing Scope 1, Scope 2 and Scope 3 greenhouse gas emissions took a solid leap forward in 2023, and we are on track to meet our 2030 science based targets. In addition, we took important steps to further increase gender diversity. To align with new Danish legislation, we revised our gender diversity target. And meanwhile, or at the same time, we increased our emissions. The midterm target is revised from 25% women in senior management by 2026 to 34% women in top management in 2026. We also added a new longer-term target of equal representation by -- in top management by 2030. And let's look into the numbers. So we achieved a 16% reduction in Scope 1 and 2 greenhouse gas emissions in 2023 compared to the base year. This was a solid increase from a 10% reduction in 2022. We reached a 25% reduction in Scope 3 greenhouse gas emissions relating to the use of sold products in 2023 compared to the base year. This was also a solid increase from 11% reduction in 2022. For our new diversity target, the goal is minimum 34% women in top management 2026, and equal representation, minimum of 40-60 by 2030. We define top management at Nilfisk as a leadership team and its direct reports. For 2023, we reached 30% women in top management and increased from 26% in 2022. On employee engagement score, we were stable at 8.1 versus 7.7 for the industry. This places us in the top 25% of manufacturing companies globally. And finally, Nilfisk was awarded an EcoVadis silver medal scoring 65 out of 100 points, 3 points lower than the 68 points we scored in 2022. The score is 20% -- 20 points above the average in our industry, and we are placed at the 86th percentile. And with that, I conclude my introductory remarks, and will hand over to you, Reinhard.
Thank you, Rene. Let's turn to financials on Slide 10. Total revenue was EUR 1,033.6 million, a reduction of 3.4% from 2022. Foreign exchange rates had a negative impact of 2.9% with Turkish lira, U.S. dollars and Argentinian pesos as the main drivers. Organic growth for the total business was flattish at minus 0.3%. The organic decline was driven by muted demand, mostly driven by market headwinds in EMEA and Canada. This was partly offset by increased service revenue and active price management. Looking at our business segments, Service delivered strong organic growth of 5.5%. Professional & Specialty declined 1.8% and 2.6%, respectively. We note that without the effect from private label, organic growth of Professional was largely flattish with just minus 0.4% growth. Consumer declined by 8.9%, negatively impacting overall organic growth for the full year. It should be noted that the Consumer business returned to a strong double-digit growth in the second half of 2023. Let's turn to Slide 11 for a look at the regions. Revenue in our largest region, EMEA, was EUR 586 million, corresponding to negative organic growth of 2.5%. Demand across the region was muted while price management mitigated part of the negative volume. Central and Northern Europe saw volume decline, while Southern Europe remained relatively flat. In Americas, revenue was EUR 366 million, delivering organic growth of 1.4%. The growth was driven by strong performance in Latin American markets throughout the year benefiting from both higher volume and price management. U.S. was flattish at 0.1%, while Canada saw negative organic growth. Demand weakened in the second half of the year as the business climate became more challenging, resulting in lower volumes compared to last year. In APAC, revenue reached EUR 82 million for 2023, which corresponds to strong organic growth of 8.3%. Growth was driven by continued strong demand in Australia and New Zealand. China contributed significantly with double-digit organic growth benefiting from the reopening after COVID-19 lockdowns that affected 2022. Moving to Slide 12, the gross profit and gross margin development. Gross profit for 2023 came to EUR 423 million. The gross margin increased through dedicated actions, most importantly, price management, structural efficiency measures and savings on material spend. The gross margin reached 40.9% compared to 39.5% in 2022. Looking at the gross margin drivers. It is visible that the main positive was price management and to a lesser extent, mix effects. Lower freight and distribution costs also benefited the margin. Lower volumes increased costs and labor and inflation on raw materials offset to a good part, the margin expansion. We are satisfied with this progress that we made during 2023. Moving to costs on Slide 13. Overhead costs came to EUR 351 million in 2023, and the overhead cost ratio was 34%. And the overhead cost increase was primarily driven by merit and inflation, partly offset by a higher capitalization of R&D activities. We also continued investing in our growth platforms of Business Plan 26, while funding these through structural efficiency measures implemented in Q2 2023. The overhead cost ratio increased to 34% from 32% in 2022 because of lower revenue in combination with the increased overhead cost. As usual, let's have a closer look into the evolution of our major spend categories. Sales and distribution costs increased by EUR 8.2 million, driven by merit, travel costs and increased facility expenses. Administration costs rose EUR 4.5 million, mainly from merit in Hungary and Mexico, investments into BP26 with focus on our digitalization initiatives and driven by general inflation. Total R&D spend increased by EUR 2.3 million compared to 2022, this is equivalent to 3.2% of revenue, an increase from 2.9% in 2022 and 2.6% in 2021. The increase was driven by investments into modular platforms and the new product pipeline related to our efforts of leading with sustainable products. This is in line with our Business Plan 2026. Total R&D expenses declined by EUR 3.7 million due to higher capitalization and lower depreciation and lower impairment cost. Turning to Slide 14 to look at the effects on cost from our structural efficiency measures. In connection with our Q1 2023 results, we announced efficiency measures, targeting structural cost improvements. We plan to reduce the cost by EUR 10 million to EUR 12 million in a year with full year effect of EUR 15 million to EUR 18 million. The measures were concluded in 2023 and have delivered the targeted outcome, reducing our overhead run rate going into 2024. In Q1 2023, the overhead run rate was almost EUR 360 million. As reported, overhead costs landed just over EUR 350 million for the year costs were reduced by around EUR 8 million. During the year, costs rose from general inflation on freight and distribution, while we also kept investing into Business Plan 2026, increasing cost by around EUR 5 million. This was then partly offset by increased R&D capitalization of EUR 3 million, and most importantly, by efficiency measures of EUR 10 million. Overhead costs in Q4 landed at EUR 86.3 million, indicating a full year run rate of around EUR 345 million compared with the run rate of EUR 360 million in Q1. This indicates delivering the targeted full year effect of around EUR 15 million. Moving to the EBITDA margin development on Slide 15. EBITDA before special items amounted to EUR 132 million in 2023 compared to EUR 141 million in 2022. The soft demand in Q4 '23 negatively impacted EBITDA, but this was mostly offset by the strong gross margin expansion and cost management. Consequently, we realized an EBITDA margin before special items of 12.8% compared to 13.2% in 2022. Let's have a closer look at the moving parts. Price management was the largest positive for the margin, while tailwinds from freight and distribution also benefited EBITDA. We saw advents from volumes and raw material inflation in combination with higher overhead year-on-year. As a result, EBITDA before special items declined by 0.4 percentage points. Looking into the business segments. Professional contributed with an EBITDA margin expansion from 9.9% in '22 to 11.4% in 2023. Service saw a decline in its EBITDA margin from 26.6% to 24.1% as investments in the ramp-up was taking effect. Specialty business realized the highest EBITDA margin across the businesses with 32.3%, in line with 32.4% in prior year. maintaining the margin quality despite the negative organic growth in this business. Consumer business delivered an increase of 1 percentage point EBITDA margin to 6.9%. Lower overhead cost and gross margin expansion more than offset the negative volume. Moving on to cash flow on Slide 16. Free cash flow increased by EUR 60.7 million compared to 2022 and amounted to EUR 115.2 million in 2023. Operating cash flow amounted to a net inflow of EUR 143 million compared to a net inflow of EUR 82 million in 2022. The development was driven primarily through lower working capital in the amount of EUR 60 million -- EUR 63 million, of which the nonrecourse factoring program contributed with EUR 13 million. The CapEx ratio increased to 3% in 2023 from 2.5% in 2022, as CapEx spend increased in line with business plan 2026. Net interest-bearing debt was lowered to EUR 252 million, a decline of EUR 73 million from 2022. The decline was primarily driven by the initiatives to lower working capital. As a result, the gearing declined to 1.9% versus 2.3% a year ago. The gearing is now within the Business Plan 2026 target range of 1.5 to 2.0. Please go to Slide 17. Well, with this, we conclude the financial section. Let's move on to Slide 18, the outlook for 2024. Looking into 2024, we expect that both demand and output will pick up. We expect that this will lead to volume growth across both our products and our services. We note that the muted demand in North America that particularly affected second half of 2023 brings some uncertainty around the top line. For organic revenue growth, we expect a range of 3% to 6% growth in 2024. This is mainly supported by demand in combination with increased output and a solid order book. We know that we only expect minor effects on the top line from pricing actions. The EBITDA margin before special items is expected in the range from 13% to 15%. The margin is expected to be supported by increased revenue, continued gross margin expansion and effects from the structural efficiency improvements realized in 2023. CapEx spend is expected around 4% of revenue with more than half directed towards product investments. And finally, special items are expected in the range from low to mid single-digit million euros. Now to Slide 19. And with this, we will conclude our presentation, and we are now ready and able to take any questions you may have. Operator, please.
[Operator Instructions] The first question comes from the line of Claus Almer with Nordea.
Yes, I have a few questions. So the first one goes for the guidance for 2024. I'm really struggling to bridge how you ended 2023 with the outlook of '24. Maybe you could give a color to how revenue decline is going to grow 3% to 6% in this year and then also the expanding margins? That would be the first question.
Thank you, Claus, for the question. Well, I think the main reasons for our, let's say, positive outlook with 3% to 6% is clearly our product pipeline. So we have launched more products in 2023 than in '22. That will have a positive effect to '24 and we will even launch more products in '24 than in '23, firstly. Secondly, we are going to increase our output from the healthy order book, which we still have, due to the investments we have taken in 2023, and that will support as well our volume growth. And thirdly, we have actually a continuum of good growth momentum in Asia Pacific. We have actually seen the momentum changing as well in Europe and clearly got better perspectives in Europe. There is a bit of a, let's say, risk which we address. It's the North American markets, where we have seen somewhat a declining and accelerating declining market in the United States, though with a number of new products and especially also the initiatives around our service business, we see clearly good perspectives to grow in 2024 over 2022 in the given range. And that volume growth, as we have talked about, is going to be the major driver for the margin expansion. And yes, that's the reasons.
Just to understand this better. So if you look at 2023, is the main reason for the performance and/or the just called flattish revenue was caused by the product assortment. It sounds like you will do new product, and that will drive revenue growth. Is that new segments within current segments? Is that as simple as that?
I think what -- this is Rene here. So what Reinhard just said, I mean there's a couple of matters here. One major driver is launch of new products that has already taken place. I mean so we have new products in the field that we just spoke about. And we have a pipeline. We are not going to say, of course, at this point in time what exactly when it will happen, but we have a pipeline of new products. We are still focusing on the same segments. I mean Floorcare is a major part of our business. High-pressure washers as you can see, has been in a decline, but it's still a major part of our business. And the consumer execution is, as we speak, strong. So this is one contribution to the growth pattern. Second, what Reinhard talked to, of course, is that the environment we think is perhaps more predictable except that we have this uncertainty about the U.S. and the output matter to somehow to finalize does support, you can say, if you have too high order backlog, the new orders don't come until you bring it back down. That's sort of naturally in many types of businesses. So product plays a big role, but it's not everything.
Right. Okay. And then as you mentioned the order backlog. Is it possible to get some flavor or number to how much a normalization or whatever you assume in 2024 of the backlog will contribute from -- of revenue growth in '24?
I don't think for competitive reasons that it's a good place to somehow be too detailed here. So we have an elevated order backlog still. It is down from a year back because of higher output but exactly where it sits, we can't comment.
But is it meaningful of your revenue growth is insignificant. Any way of understanding this impact?
I mean, Claus, it is, let's say, a meaningful one, but it's not half of the growth. It's so to say, at lower end of the growth range where we expect to see some additional volume from the backlog reduction.
Okay. That's very helpful. Then my second question is about the 2026 targets. You reiterated these targets. But if you do the math, then the revenue growth on average until 2026, has to be 5%, even the low end of the guidance range. There's a lot, at least compared to what you have achieved in the past. Is this the most realistic scenario.
We have a very realistic, let's say, planning and that takes into account what is in the product pipeline, what we are going to work on and the service business and where we see, so to say, the markets to develop. And we should not forget that we come out of a 2023 with significant volume declines. In Europe, and that is normalizing as we expect that to be. And then with the new products, the relevant services, the innovations we bring to the market, we have actually very tangible plan to arrive at our Business Plan 2026 target range.
That sounds promising. That was all from my side.
The next question is from Casper Blom with Danske Bank.
Now Claus asked about the revenue guidance. So I will ask about the EBITDA margin guidance. You have now roughly 2 years in a row delivered 13% EBITDA margin. And I can understand that in '23, there was a lack of growth and there were also investments into improving the gross margin going forward. If I look into '25 -- or sorry, into '24, you are now actually guiding for at least 3% organic growth. And you will also get the benefit of these initiatives that were started in the first half of '23. You will get the full year benefit in '24. So what is it that could potentially drive the margin to 13%? I mean wouldn't the sort of natural expectation be that you actually grow the margin in '24, given these circumstances?
I mean I would agree that we have an expectation to be sort of above just 13%. That's our expectation, clearly. But there's uncertainty and we have still wars out there and we have still supply chain uncertainties given those wars. And then we have the North American, let's say, market dynamic, which we cannot fully judge though. Obviously, we have, let's say, be a perspective, which sort of assumes when we are at the lower end of the revenue target range then this would be definitely delivering again the lower end of our EBITDA range. Whilst there was scale effects, volume effects, supporting better utilization of factories but also of our structure, organizational structure. We basically just can see positive volume helping our profitability. So it's actually rather scalable what we have now in our plan 2024.
But it almost sounds as if the revenue guidance and margin guidance hasn't been made on the same assumptions. I mean when it comes to the revenue guidance, you say that there is an uncertainty. But when it comes to the margin guidance, it is as if you already built that uncertainty into the range.
Well, on the margin guidance, we have several effects. I mean, first of all, we know already now what sort of price and cost inflation we have because we have just launched the salary increases at the beginning of the year. That we know. On the, let's say, top line effects. I mean there is the volume that we see, let's say, clearly upside potential from what we have been delivered in 2023. So this is a main driver. But how well price comes into play in 2024. This is the uncertainty piece, and that's where we need to be, let's say, cautious.
Okay. Fair enough. Then a second question goes the working capital, a very strong and impressive development in 2023. Is it the expectation that you can sort of hang on to this working capital level in '24? Or should we expect some sort of rigorous bounce back?
Well, it was a very good development in all aspects. So receivables, inventory, but also payables. Obviously, helped by somewhat lower revenues. As we expand our top line, we will also have also higher receivables. And we expect actually not to expand our nonrecourse factoring. This would rather be, let's say, slightly below the current level and in 2023. So there would be a slight negative on that. As we go out with new products, there is a ramp-up of product inventory and necessity, and that will lead into some increased inventory levels. So there, I would actually see not a further improvement currently with lower inventories. And then the accounts payable, we'll see what sort of improvements we can deliver, but not too much. So I would say that actually, the working capital side is not going to be in 2024 a major cash generator, but also not going to be a super strong cash consumer. So I think it's more EBITDA and profitability, which will go and drive net cash flow.
We have a follow-up question from Claus Almer with Nordea.
Just a question regarding pricing. So we discussed this after Q3, as I remember. What is your pricing strategy for 2024? Have you already communicated price increases both in EMEA and U.S.? Yes, an update on that point would be interesting.
Yes. So Rene here. So yes, there are pricing decisions out there in the field. We have seen solid price increases for a couple of years, and you should not expect anything like that for this year to come here. So we think we are well in the market, but it's clear we cannot grow by price increases to the extent we have seen in recent 2 years.
And you raised price both in U.S. and Europe?
It's -- you can say it's a segment and product driven. Exactly what it is, but it's across the world.
The next question is from Mads Quistgaard with Carnegie.
I just have a question on the capital allocation because you're now within your target range of 1.5 to 2x but what is meant by the gearing to be sustainably within the target range before you will potentially pay out dividends?
Yes. Thank you Mads for the question. I mean, for me, first of all, it's good that we have been really tapping into the range for 2023. Sustainably is, so to say, somewhere in the middle pocket. That's my definition. So around 1.7 or below. That's sustainably. And yes, we are not yet there.
Okay. But giving the question around working capital before, I guess, you will be below 1.7x by the end of this year. That must be the target, right?
I would think that, that is in a reachable rate. And then we can basically discuss capital allocation. Maybe we have also good ideas on new products. Maybe we have other good ideas and that certainly will drive the topic around how to use the available cash.
That's fair. And then I just have a final question on the backlog. Previously, you had commented that the order backlog was tilted to the industrial segment in the Americas. Is this the same thing going on in this quarter? Or has it changed your order backlog?
It's the same thing. We have still, let's say, an elevated and higher than pre-COVID, so to say, level on industrial Floorcare, large industrial Floorcare machines tilted to the Americas. But that, of course, had also impact, as Rene stated to all the collection in other regions as we have ramped up now, manufacturing capacities in different sites, we certainly are more actively going to commercialize our, let's say, improved situation. So yes, higher order backlog still in the Americas, 4 large industrial equipment is there.
[Operator Instructions] There are no more questions at this time.
Well, then we would like to say thank you all for participating in the call today, and we look forward to meeting with some of you over the coming weeks. We know that we would at least see, yes, a couple of you in a good week's time and if you have any follow-up questions before then, please just reach out, and we are available for that. We will be back with the Q1 report on 16th of May 2024, and yes, until then and until we see each other, then please have a nice day. Thank you.