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Good morning, and welcome to the Nordic Waterproofing Holdings Q3 2022 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I'd now like to turn the conference over to Mr. Martin Ellis. Please go ahead, sir.
Thank you very much. Good morning, everybody, and thanks for attending our call. We delivered a solid quarter, and we did see some signs of reduced demand, which we're going to talk about. Turning to Page 2. You can see that our net sales increased by 13% in nominal terms and that is 4% organic growth, where volume was negative 9% and price plus 13% compared to last year. We had an impact of plus 5% from acquisitions in our sales and also 4% on currency effect. The EBITDA decreased slightly from SEK 176 million to SEK 162 million. This quarter, operating profit EBIT showed a similar decline. Cash flow from operating activities was very strong at SEK 244 million versus SEK 101 million last year. And earnings per share also increased to SEK 4.32 mainly due to an exceptional negative impact last year in the quarter.
Moving on to Page 3. Some comments on what we are seeing right now in terms of the demand. Demand has remained somewhat stable, but we do see signs, and we have had probably a slight impact from the slowdown in new build, new builds, as you might recall, is about half of our business. Renovation, on the other hand, has remained stable so far. We have a good level of demand in the roofing business. We have order books in Installation Services, which also continue to be on a high level so far. But we do expect the lower demand in new builds to continue for the foreseeable future, and we do expect an impact from that demand reduction also in 2023.
But as you know, we are in a relatively volatile environment. It's not to make predictions. And so will not also see improvements in demand. I'm thinking especially of the demand for more installation to react to the increased energy prices. So that clearly is a trend which might help us in the coming quarters. Waterproofing products showed a slight decrease in volume in the Nordics, a nominal value up double digits due to the price increases, while our EPDM synthetic rubber sales in Europe dropped both in volume and nominal value.
Prefab elements in Denmark and Norway had a negative development in sales compared to last year. Green infrastructure, mainly Sweden and also Finland had sales at the same level as last year. In Installation Services, our contracting business, mainly in Finland, we had an organic growth of 3%.
Moving on to Page 4. Input cost inflation, which obviously has been very strong in the last 1.5 years has stabilized now. And some we have pass this back on to our customers fully in both business segments. You might recall that in Installation Services, that has taken a bit more time than in Products & Solutions, but we are now basically at the end of the cycle and have passed on the effect.
We had strong cash flow from operations in the quarter, and that was mainly driven by positive development from operating liabilities and receivables. You might recall again that in the first half year, our working capital has increased. We momentarily increased inventories to be sure to be able to deliver to our customers, and that situation now is normalizing also. Our focus for new builds on our main market is now slightly negative. As I mentioned, our demand for renovation seems to remain stable. More importantly, I guess, we have contingency plans in place to mitigate the consequences of any negative development. So basically, we will adjust our cost structure very quickly in case we see a further downturn. In the high interest rate environment, which we now clearly have, we also have sharpened the focus on our debt level, and we are adjusting multiples we are prepared to pay for acquisitions.
Moving on to Page 5. You can see that we have continued to make acquisitions in the quarter. On 1st of July, we acquired 70% of the shares in the VKP Group, a group headquarters in Kajaani in Northeast Finland, providing roofing and waterproofing services. And that acquisition goes towards completing our geographical coverage in Finland, in Installation Services.
On the 14th of September, we acquired Annebergs Limtrae, glulam component manufacturer in Southwest Jutland. That acquisition allows us to upstream integrate the glulam supply to the Taasinge Group for wood-based prefab elements and it clearly extends our presence in wood-based construction solutions, which we continue to see taking market share against traditional cement-based solutions.
On the 3rd of October, we acquired 70% of the shares in EG Trading. That is a company headquartered in Tammisaari in South Finland, growing sedum. As we have been doing in Sweden for a few years now with Veg Tech and it offers a wide variety of different landscaping products. The acquisition expands our geographic presence in the green infrastructure solutions. So again, a further move towards sustainable building solution.
I pass it on to you, Palle, now for some additional figures on our results.
Okay. Thank you very much, Martin. Then we move to Slide 6, where we can, as we see that the net sales is about SEK 1.1 billion, up 13% organic growth of 4%, as we said, where volume had a negative impact of 9%. The price increases 13%, where acquisitions contributed in total 5% and currency had an impact of 4%.
On a rolling 12 basis, we are now close to SEK 4.2 billion in turnover. EBITDA slightly decreased as did the operating EBIT and margin -- EBITDA margin decreased to 14.3% in the quarter from 17.5% last year. Mainly the explanation for the installation in some areas in Products & Solutions, not matching the historically high margins we had last year. While in Installation Services, we see a significant profit improvement versus same quarter last year. Moving to Slide 7, then on the income statement. You can see that gross margin for the quarter was down about 2 percentage points at 28.0% versus 29.8% and the last 12 months, we have 27.8%. And we've been around 28% for quite some -- basically for 2 years now.
EBIT margin down to 11.3% versus 14% last year, and we have almost spot down 10%. We had 10.1% over the last 12 months. There's no positive value on net financial items is explained by a revaluation of debt for options and earn-outs for companies where we're planning to buy the full company further on.
In the balance sheet, you can -- sorry, move on to Slide 8 and looking at the balance sheet. We can see that we continue to have a strong balance sheet with a net debt-to-EBITDA ratio at 1.6x compared to the 1.5x we had at the beginning of the year and remains well below the covenants we have in our financing agreement. The interest-bearing net debt is at SEK 861 million. So continued good values for the balance sheet here.
Moving to Slide 9. We can see that ROCE remains stable at 16.6% at the same level as we started here. And we have an increased capital employed, both from higher cost and prices but as well as some increased activity in acquisitions. The cash flow from operations and increase on a roaming 12 basis to SEK 358 million versus SEK 311 million last year. And the cash conversion is basically on the same level of 63% compared to 61%. There has been a factor from the pandemic and the Russian compete on Ukraine, where we have built up inventory that has had an impact on the cash conversion for the last few years. But the improvement we see in the quarter from working capital is mainly due to operating liabilities and we see those improving in the quarter.
Moving to Slide 10 and looking at Products & Solutions, where we had an increase of 11% of net sales, up to SEK 831 million. Organic growth 5%, where price represents 15% and volume declined 9%. Acquisitions contributed 2% and currency had an impact of 3%. The double-digit growth, as you can see on all markets, except Sweden, where it's worth pointing out that the development, the waterproofing membranes was good in the quarter, but other areas was slightly negative. Net sales for Products & Solutions on a rolling 12 basis, close to SEK 3.3 billion.
EBITDA decreased the SEK 20 million from SEK 155 million last year SEK 135 million and then similar development for EBITDA. Margin in the quarter at 16.3% versus 20.8% last year. And we're rolling on 12 at 17.0% in margin. And as mentioned before, the decrease is related to a few areas where we had very high margins last year.
Then moving to Slide 11 and Installation Services. We had a net sales of SEK 333 million (sic) [ SEK 337 million ] in the quarter, up 20%, and as you can see in the graph the first quarter where Installation Services surpassed the SEK 300 million in turnover. Acquisition. Organic development was 3% whereof price 6% and volume dropped 3%. Impact from acquisitions 12% and currency had an impact of 5%. EBITDA increased SEK 10 million from SEK 27 million to SEK 37 million and the EBITDA margin increased from 9.7% to 11%. So it's a nice uptick in result here. And for the latest 12 months, the EBITDA margin is now rolling at 4.5% for Installation Services.
So with that, moving over to Slide 12 and back to you, Martin.
Yes. Thank you, Palle. So this is the recap of our financial targets, and we basically tick all these boxes. The 1 comment I would like to make is on sales growth because obviously, in volume, we have not grown in the quarter compared to last year. But I think it's important to say that we do not believe that we've lost market share on the contrary, we are still taking market share in the Nordics and the waterproofing business. So that is an important aspect, I think. But obviously, we have had the impact of somewhat reduced demand in the quarter.
In terms of profitability, we are still significantly above the 13% threshold, which we find for our ROCE. Capital structure, you've seen has been improved in the quarter with the working capital performance. And in terms of dividends, we will obviously propose a minimum 50% of net profit distribution in the beginning of next year.
So that is our presentation, and we very much look forward to your questions now.
Thank you very much, sir. [Operator Instructions] The first question comes from Adrian Gilani from ABG.
It's Adrian here at ABG. Just I'd like to start off with a few questions on the volumes. It looks like we're starting to see more of a volume decrease. And can you just give us some insight of how was this during the quarter? Did you see an accelerating decline sort of month-over-month? Or was volume -- overall volumes fairly flat during the quarter, what do you say?
Yes. I think we have, right now, a relatively stable situation where we have seen clearly new build projects getting canceled and that has started already a few months ago. So I would say right now, we can see that we are seeing an acceleration to the downside. So we've had an impact. And I think in the foreseeable future it's going to continue in the same manner.
And then people might actually adapt to a new set of basic parameters like interest rates, the high level, et cetera. So I think it's difficult for us to predict whether that be an acceleration or not and we are not seeing it right now.
Okay. I understand. With that being said, what's your sort of best estimation if are we getting sort of close to the trough on volumes in terms of new build activity? Or would you say that there is significant downside to go in coming quarters potentially?
Yes. I think we've seen a pretty abrupt effect over the last 3 months where new projects have really depending on which country is talking of course, differences. But for example, in Denmark, which is probably the hardest is we've seen a pretty hard stop to new projects. And that means that we will obviously have the impact of that during the next 3 to 6 months, but it's difficult to see a further reduction in terms of the new projects that come online.
Okay. And also, you mentioned that EPDM rubber in Europe had a sort of worse development than Bitumen in the Nordics. What are the main dynamics there as to why 1 is doing better than the other?
Yes. I think in Europe, you have -- we had very strong sales in the rubber area in the past. So I think that could probably explain part of the phenomenon. But I would say the rest is very speculative. And as I mentioned, even in the Nordics, you have different situations. So again, Denmark are probably getting a bit harder hit than other countries, Norway, basically having not a strong effect at all. Obviously, there the Norwegian economy is quite different from the 3 other Nordic countries. So it's -- I think it's difficult to give any more specifics on the differential.
Okay. And looking a bit more, the sort of pricing and input cost situation, you say that you're seeing costs stabilizing and in some cases, even going down. In a scenario where input costs do go down significantly, would you be able to retain your price increases? And for how long would you be able to retain those? Should we expect a negative pricing component into 2023 if input costs go down?
Yes. What usually happens historically is that we have about a 6-month window where we don't have to reduce our prices when input costs start to decline. So basically, we would expect that to happen again. To give you some more color is that right now, as you said, there have been some decreases in input costs and we have not seen any significant demand from our customers to reduce our prices. I think we're still an attractive supplier to them. And price is not the only element on which they make their choice of sourcing. So we probably will see the same phenomenon again.
Okay. And regarding the sort of pricing component in this quarter of plus 13%, were there any new price increases in the current quarter? Or are these just the old ones that are sort of still in the numbers?
Yes. New ones have been quite marginal. We have had a few and most of them are energy related, so energy surcharges, which we also still see from our suppliers to some extent. So that's the only increases we see and we still have increase where we have to make with our product plans.
Okay. And regarding the margins, obviously, in Q3 last year, you were at very high margins and sort of looking at the year-over-year delta. Is this mainly from the Prefab business that was doing very well last year? Or are there other effects to keep in mind here?
Yes. I think Prefab has had an impact clearly. And we're now in a situation where we are again adjusting our capacity in that area because Prefab is the 1 area where new build for us is close to 90% of the total business. So obviously, it's getting harder hit than the other areas where we're talking about a 50%, 50% to 60% renovation share. So we've adjusted our capacity already. But yes, that's the area which has been harvested by the new growth slowdown.
Okay. And looking at the cash flow as well. Obviously, we saw you released some working capital during the quarter and had strong cash flows. Can you just give us an update on where you are right now? Are you still sitting on some extra working capital that can be released in the coming quarters? Or have you basically are at normalized levels at the moment?
Yes. We still have potential in inventories. As I explained before, we've built inventory to make absolutely sure we have enough input material, we have enough finished products to supply our customers without interruption and we've succeeded in doing that. And it means that towards the end of the year, we're going to reduce our inventory quite aggressively to come back to a totally normal level.
And just 1 final question from my end regarding sort of the acquisition multiples and the landscape there. We've seen multiples on the stock market come down significantly, but obviously, the private markets are -- tend to lag that quite a bit. Are you seeing sort of multiples going down on the private markets for your acquisition targets? Or are we still at the same levels that we were sort of last year when the stock market peaked?
Yes. I think that's very fair discussion. And yes, so far, I think if you look at the related acquisition, you're probably still in the previous environment. Clearly, our decision now is to be more selective and to basically target lower multiples as we go forward. And it might mean that we -- over the next 3 to 6 months make a bit less acquisitions that we usually do. But going forward, a year from now, 1.5 years from now, we probably see a window of opportunity in terms of making acquisitions at significantly lower multiples which time over the last 3 years. So it's good news in that respect.
[Operator Instructions] The next question comes from Sofia Sörling from Carnegie.
I want to have a follow-up question on the volume for this growth. That was negative 9%. Could you please elaborate a little bit on your comment about renovation has remained stable. And is it possible for you to split this negative volume growth between the new build and renovation.
Yes. The volume and nominal figures we give, obviously, our estimate. You can't have it totally precise figure on the volume effect, but we have a reasonably good grasp on it. And what it really means is that renovation being stable, you could say that we have this 50%-50% split. So we are talking about close to 20% drop in new build volumes. So that's the picture we have. But again, you have to be a bit careful. We can't calculate it to the last quarter. Of course, we're talking about as good as possible estimate here. So that's sort of the baseline.
At this time, we have no further questions. And this does conclude the Q&A session. I would now like to turn the conference back to Mr. Martin Ellis for closing remarks. Thank you, sir.
Yes. Thank you very much for calling in and look forward to our next quarterly call in 3 months' time.
Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.