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Afry AB
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So dear all, a warm welcome to this quarter 1 presentation from Afry. My name is Jonas Gustavsson, CEO at Afry. I will do the presentation together with Bo Sandstrom, our CFO. And we will, of course, have time for asking questions in end of the presentation. So again, a warm welcome. So let's jump into the report, as you have probably seen. The overall headline is that we started up the year in a good way or a strong way. The growth for Afry in the quarter was 22%, so strong growth, ending up on net sales of SEK 6.9 billion, obviously, the highest number we have had in Afry. And what is also positive is that adjusted organic growth ended up at close to -- or 16%, 15.9%. So it's been a very strong quarter again when we come on the growth side.
EBITA. The EBITA margin was 10%, and this was a clear step up in all divisions, as you will see later on. But we were, of course, helped with a strong calendar effect in the quarter. The EBITA in absolute terms, SEK 689 million, of course, then getting a strong top line and also even improving the margin, that means that the EBITA in absolute terms also ended up to be very strong then.
The order stock in general is strong, even on historical high levels. So we're ending the quarter with SEK 20 billion in our order stock, which is very good. And I'll get back to the next slide, we see a general strong demand across sectors. We acquired 2 companies in the quarter, 1 company in Netherlands, BLIX, focusing on renewable energy; and then a smaller company in Norway, adding to our product management position in Norway.
And then in general, of course, moving ahead, we'll get back to that, too, we are focusing very much on executing the strategy and driving operations with pricing and operational improvements across all divisions. But again, the headline is it was a solid and even good start of the year for Afry with margin improvement as we have also been targeting.
Quickly about the market then. As I said, in general, good demand across many sectors, and of course, looking on the growth numbers that is mirrored into our numbers. If you look on the industrial industry and also energy, strong and good demand driven from the green transformation that we see.
We see some uncertainties in some sectors. Pulp and paper is one sector where we see a bit delayed decisions on CapEx projects. And then moving over to infrastructure, of course, highlighting then the real estate segment which is a segment when we know that there are less investments done. So these are 2 sectors where we see a bit of uncertainty in the pulp and paper, and we can also see that the real estate segment we see clearer signs of demand slowing down.
But again, I want to highlight that in many sectors, there is still a very strong demand, if you look on electrification, the Energy segment and driven again from this big green industrial transformation that we are in the middle of.
If I look on the divisions, we are happy that we can see that all divisions have improved the margin in the quarter, and Bo will talk more about that a bit later. But just highlighting that, as I said, all divisions are making a step up. And Infrastructure ending up at 9.8% and also strong growth. And you all know that we have been focusing a lot of improving Infrastructure, and we can now see signs of improvement in Infrastructure that we have been targeting.
Industrial & Digital Solutions also did a solid quarter, above 10% in margin and also growing. And then Process Industries, highlighting being very strong over the last years, but now ending up in the quarter with above 14%, 14.2% in the margin, which is a really strong performance and growing strongly and strengthening the order backlog.
Energy, another quarter above 10% and also growing. And of course, the market is very strong. And finally, then -- and then we have AFRY X. And you all know that we have been working to reposition AFRY X more into the service business. So making 7.5%.
And of course, last quarter -- a year ago is not really comparable because then we had a lot of investment in our product portfolio. But this is on a way to putting AFRY X on a clear service path and 7.5% EBITA is a step to where we want to be with that business. And then finally, Management Consulting, rock solid, I would say, as always. So in general, happy with the fact that all divisions have improved and also that we are growing.
Before leaving over to Bo highlighting 3 projects. Of course, we are bringing in a lot of projects. The first one in Denmark. We are supporting the Danish railway with technical expertise. This is a frame contract, a very good one for us.
Second project, APK. This is a project in Germany, building a new plant for plastic recycling, up to 40,000 tonnes per year recycled in that plant. So a very good project for Afry. And then finally, Ande, which is a project in Paraguay, where we are helping to make existing hydro plant more efficient, actually to being able to produce more power out an existing plant. So 3 projects that is very good for Afry. Of course, this is a selection of many projects that we are bringing in, in the quarter.
So with that, I will leave it over to Bo with just the conclusion that it is solid and good start of 2023. So with that said, I leave it to you, Bo, to take us through the numbers.
Thank you, Jonas. I will then, as Jonas said, I will cover the main financials for Q1, and I'll start with sales. So total net sales in the quarter was SEK 6.9 billion, more than SEK 1 billion higher than Q1 last year. And on a rolling 12-month perspective, we now approach SEK 25 billion.
Q1 was the third in a row 20-plus percent growth quarter. This time, 22% in total growth and almost 16% on adjusted organic growth. Growth was clearly driven by strong demand across our segments, supported by price increases of approximately 5% in the quarter, slightly higher than we've seen in the last 2 quarters.
We see a continued strong development of the order stock, which is now at SEK 20 billion. The increase of the order stock compared to last year was 14%, still a healthy level, although somewhat lower growth rate than seen during the last quarters.
On EBITA, EBITA came in at SEK 689 million, 46% higher than last year. And the EBITA margin ended at 10%, an improvement from 8.3% corresponding quarter last year. Improvement was supported by a positive calendar effect and higher attendance in the quarter. With an increased margin focus, we managed to -- managed in the quarter to take growth to EBITA in a better way than previous quarters despite a somewhat lower utilization level on average.
And we managed then to deliver the strong growth without, in general, increasing the level of subconsultants. We -- for Q1, we report no items affecting comparability this quarter, and there are, for the group, no material project one-offs affecting the quarter.
Looking then at the development by division. We see a very consistent quarter. We see strong growth in all divisions, in combination with an EBITA margin improvement in all divisions. We're quite happy to see improvements across the divisions on EBITA margin with Process Industries this quarter as the shining star.
In addition, besides calendar effects and others, the improvement in AFRY X was, as Jonas mentioned, supported by the restructuring of the product portfolio in Q4, where we now have reduced investments into the product portfolio.
Margin improvement in terms of divisions then supported by calendar effect, but those calendar effects noticeably different for different divisions related to their respective geographical footprint and share of subconsultants that also affect the impact on EBITA.
To the cash flow and financial position, some highlights from there. So cash flow from operating activities was again weaker than last year. We continue to build up working capital related to work in progress and accounts receivables. Partly, this is fully expected and related to the strong growth levels, but our ambition is, in general, to address the working capital development in the upcoming quarters.
Financial net debt increased somewhat on the back of the weak operating cash flow with 2 acquisitions contributing also in the quarter. Available liquidity remained very strong, currently at SEK 4.2 billion.
Finally, then an update on the financial targets that the Board reiterated during the quarter on a rolling 12 perspective. Growth continued to strengthen from a healthy level, well above the 10% level -- 10% target. On EBITA margin on a rolling 12, we took a significant step from the 2022 full year margin of 8.0% to 8.5% now on a rolling 12-month perspective. The calendar effect supporting this improvement is estimated at 0.3 percentage points.
Finally, despite the increase in financial net debt, we deleveraged somewhat during the quarter to 2.2x, given the strong improvement on EBITA in the quarter.
And with that, I leave back to you, Jonas.
Thank you, Bo. So then getting quickly to the summary. As you all know, just to recap, we presented an updated strategic framework at the Capital Markets Day a few weeks back, and in general, we are fully occupied to execute on that.
Just to remind ourselves, we have 6 levers and especially on the -- on our businesses, we are looking on that in 3 clusters, where 3 divisions are more in the cluster 1, global decarbonization and the energy transformation. And these are also 3 divisions doing very well, growing with good margins. So full speed ahead.
Infrastructure, the second cluster. It's a clear focus, as Bo said, and we have talked about to improve our margin. And the third is the Nordic Industrial and Digital portfolio. Also here, to keep and improve the margin, but also growing and finding our niches and then supporting with how do we work with clients, making sure that we are an attractive employer and then finally, how we drive operations.
So we are very much occupied in executing on that strategy. And then that means basically that right here and now, it's all about, again, then operations. We are looking on pricing all the times and making sure that this strategic framework are going into actions and being very close to the market because we see some segments doing very well. And then, of course, if you look in the real estate, we are very close to the market to adjust if we need. So that's where we are in operations, but again, a solid start of 2023.
So with that, I will invite Bo back, and we will open up for any questions that you might have. So let's...
Yes. So we open up for questions, as Jonas said. [Operator Instructions] And we take the first question from Johan Dahl at the Danske Bank. Please go ahead, Johan. Johan, you can go ahead with your question. Don't forget to unmute if you have a question. We don't hear you right now in the room. So let's just hang on a few seconds.
So it seems to me that we have some problem with the questions.
Okay. Let's try Raymond Ke at Nordea instead. If you can, Raymond, go ahead with your question instead and...
Yes. Hello, can you hear me?
Yes. Perfect.
Yes. We hear you.
Okay. So 3 questions for me. First one, were there any, should we say, onetime effects that were very positive such as success fees in process industries or management consulting that perhaps should be considered when we look forward or this is a normal level of performance, so to speak?
There were no real success fees. I mean as we always said, if you look on process industry being above 14, this is a level that they can be on, but we always know that the mix in the portfolio varies, but there were no specific one-offs in the quarter.
No. And also on -- as I said, on a group perspective, there were no material one-offs, either in divisions or in group as a whole. But from a divisional perspective, of course, there are minors in each of the divisions, but nothing that affects the comparability of the result.
Perfect. And second question, out of 3. You write about strong performance in nuclear. And I think it would be interesting to just know this is from new sort of nuclear projects or from still like decommissioning old projects?
I would say there's quite a few of them that is existing projects. But as you know, there is a big interest in new projects. So we are involved in many pre-studies. But I will say the volume that we have had in this quarter is mainly from existing projects. But clearly, we see increasing interest for different nuclear projects even if it goes into the new small modular vectors. But currently, the performance is coming mainly from existing projects that we have.
Yes. And finally, the strike in Norway for a week, were you impacted by that at all in any material way?
No, not in a material way.
Okay. So we take the next question from Stefan Knutsson at ABG. Please go ahead, Stefan.
Yes. Congrats on the report. And just a question regarding your market comment there where you said that you still see continued weakness within the real estate segment and that you also see some delayed decision times in certain industry segments. I mean are you afraid that we are on top of the cycle here in industry investments or how do you view the market? What are the clients saying to you?
Yes. And this is, of course, a big question, and we are following very closely and we are discussing it internally also since the numbers are very strong. I mean the real estate segment, I think we all know that especially on commercial offices, shopping malls, here, we see a weakened market.
We are very much into industrial buildings. So still quarter 1 has been a good quarter for us, but we are very close to the real estate with interest rates and inflation affecting that segment. The other comment goes very much, as I said, for example, pulp and paper and maybe you have seen that many of the clients have said -- being slightly more careful or how they spend their investments, not closing investment, but we can see a bit of maybe delayed decisions in some industrial segment. But taking that aside, it's been a very strong quarter with strong demand across many, many segments for -- since we're a very broad company.
And also a follow-up on profitability. I noticed that the utilization rate was down 1 percentage point year-over-year, yet you have this margin improvement. Can you talk a little bit about your pricing strategies and also what you expect on the salary side going into Q2 here?
Yes. On the pricing, it's, of course, a never-ending focus area for us. And I think it's been, in that sense, ongoing for a very long time for us, but clearly intensified our focus on the pricing side in relation to, I would say, the last couple of quarters and probably then ongoing for the remainder of the year.
I mean, we are -- as you say, we are expecting a bit different type of salary increase numbers this year than we've seen historically. And the only reason for us not to get margin dilution is to work with pricing in a systematic way. We're quite happy in a sense where we are. Still a lot of work to do. But kind of moving into the year, we get more and more clarity of what type of salary increases that we are facing in our respective markets.
And we're not expecting anything much different to where the different markets are landing in a sense in terms of negotiation and agreements. We expect plus/minus to be somewhere like that. But it's still not finalized in terms of Sweden specifically.
Okay. So we try again with Johan Dahl at Danske Bank.
Yes. Is it working?
Now we hear you, Johan.
Can you hear me?
Yes. Now we hear you.
So sorry about those difficulties. I'm terribly sorry. But just on pricing, what's the risk? I mean you've reported your Q1 here, prices up 5%, you claim that sort of this is being offset here in the coming quarter by price -- by cost inflation. I'm just saying that is it a -- have you raised prices sort of preemptively here in Q1 to be able to meet cost inflation that is coming in the future or do you see it as price increases will continue, so you will have the net effect being similar in the coming quarters compared to Q1? Sorry for that long question.
No, it's okay.
No. I mean I would say to start there, I mean, Q1 is typically a quarter for -- with the long agreements and the frame agreements that we have. So Q1 is a price-adjustment heavy quarter in itself in that sense. Then, of course, we're very diligent to make sure that we adjust prices on a relevant level, well aware that the salary increases are coming up. And I think to some extent, of course, you will, in a quarter like this when you're in the middle of things, you will have some positive marginal effects in relation to what salary increases that we have de facto in the quarter compared to the price increases that we have realized in the quarter from a seasonality type of perspective.
Okay. Secondly, can you just help us evaluate the Infrastructure margin performance here? I mean margins are up 150 bps year-over-year, but I presume that's very much boosted by the calendar. And you've talked a lot about efficiency initiatives in Infra. When you look at the results, can you just sort of drill down a little bit what's going on there?
Yes. I mean I can start. Of course, we have the calendar effect and depend how you calculate maybe 1% unit even, but what we see one in this quarter is a clear improvement, and it varies a bit between different business areas in Infrastructure that has improved. So for sure, we see real improvement in Infra also being aware that the calendar was also helpful in the quarter. But I think step by step, as we said also in the Capital Markets Day in the Infrastructure, we are absolutely targeting the margin even ahead of the top line.
Now we were able to grow, but also deliver a margin improvement. So part of the big step-up in Infra year-on-year was, for sure, real improvements. And remember, in quarter 1 last year, we had a bit of a heavier sick leave situation in the beginning of the quarter that was also one reason why the comparable quarter for Infra was slightly lower.
But we see some real improvement in there, but we are also aware of, for example, the real estate for us is something that we need to maneuver moving forward, but a step-up in Infra, and we will work a lot to make sure that, that trend will remain.
On working capital, you talked about lifting this priority in the coming quarters. What exactly do you aim to do here on working capital?
No, I mean what we -- this is, of course, an important area for us in a sense. But it seems to be related to -- not on a general perspective, but we have working capital buildup related to specific segments, specific geographies and cross settings of those. And what we clearly have to do is to analyze that further to see where can we take actions in that sense instead of only building up working capital the way we go because it clearly deflates our cash flow in the business. So further analysis and then actions that will be more tailor-made, I think, rather than general actions.
Okay. Just finally on the billing ratio. What was -- when you sort of analyze why it ended up where it ended up, what were sort of the main reasons behind it just to understand how we should read that particular measure of efficiency in Afry?
Yes. I think, as you said, 2 areas where we -- real estate clearly had some effect on the utilization in end of the quarter, especially. And then I would say Energy have also -- even though Energy delivers 10-point -- above 10% in the margin, they have had to use a bit more subconsultant in the quarter meeting those products that we are delivering.
So these are 2 areas that had a bit lower utilization in the quarter. But clearly, Johan, I mean, we see the 1% unit lower than last year, so we are on to maximize the utilization moving forward.
So it's a bit different between division and even business areas. I mean we have the ones we're really good and solid, and we have the ones where we need to do a bit more work to make sure that we bring utilization up.
Okay. We don't -- yes, we have a question from -- no, we don't have -- a question from [ Kurash Nuyami ]. Please go ahead. No? Okay. So that's gone. So...
Hello? Do you hear...
Hello?
Me, [ Kurash ], I'm also part of the company and also stockholder as well. So I have a question. About -- as I am part of the Infrastructure as well, I wonder how to keep and develop the employees and also attract better quality projects with the higher margins? How do you think about that because we have...
You're putting the finger on one of our clear objectives, how do we retain good employees and attract good employees, and how do we bring in the best projects? So I think we have a clear program in Infrastructure now with the team, both to make sure that we improve our margin. But of course, to do that, we need to make sure that we can keep and retain and bring in good projects. So basically, that's the story of Infrastructure. And I think the Infrastructure team in the different countries are working on the plans to make sure that we do that.
Exactly. And I understand as you have forward -- I mean you are talking a lot about the building market, but we have some booming markets somewhere else and those projects could be also Afry's, we should track those.
Absolutely. And I think you're absolutely right. So when you look at industrial building that goes along with these big investments, a lot of our building competence we are using in that area. So you're absolutely right, and we are trying to do our best then to use all these competencies in those areas.
Super. Thanks for the question. Thank you. All right. With that said, thank you all for listening and looking forward to see you soon again when we present, probably we have some meeting in between, but then we have the quarter 2 coming up in the quarter. Thank you so much for listening. Have a fantastic day. Thank you.
Thank you.