Afry AB
STO:AFRY
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Afry AB
Earnings Call Analysis
Q2-2024 Analysis
Afry AB
In Q2 2024, Afry reported net sales of SEK 7.2 billion and an EBITDA of SEK 572 million, reflecting a stable performance amidst a mixed market landscape. While total growth improved to 5% compared to the previous quarter, adjusted organic growth was at 2.2% supported by a modest 4% pricing increase. The year-over-year EBITDA margin stood at 8.0%, maintaining consistency with previous periods.
The company's performance varied across its divisions. The Energy division showed a remarkable uplift in adjusted organic growth from 1.3% in the previous quarter to 8.8%. In contrast, the Process Industries saw a decline, with a reported negative growth of 6%, largely due to weaker demand in the Pulp & Paper sector. This division also experienced some margin pressure, seeing a decrease in adjusted EBITDA margin, now just above 9%.
Afry's order stock was reported at SEK 20 billion, a decrease of 3% year-over-year and 2% from the previous quarter. Notably, this marked the first negative foreign exchange impact on order stock seen in some time, contributing to the total decline observed. The Energy division remained robust, boasting an order stock exceeding SEK 5 billion.
The cash flow from operating activities showed signs of weakness compared to last year, yet the overall cash flow generation over the past year remains healthy, with available liquidity normalizing at SEK 3.8 billion. Financial net debt rose to SEK 5.5 billion, although it remains lower than levels a year prior. The company maintained a leverage ratio of 2.6x, aiming to deleverage in the coming quarters.
Afry’s EBITDA margin improvements can be attributed to ongoing infrastructure initiatives, which have consistently outperformed past year figures. The leadership emphasized the importance of maintaining profitability and the strategic focus on the energy sector as a significant growth opportunity. Looking forward, the management continues to navigate both growth and headwind strategies flexibly, aiming to adjust human resources in alignment with market demands.
Management provided no revised full-year guidance but emphasized the need to be opportunistic in capitalizing on the strong demand in the energy segment while being prudent in response to the stagnation observed in Pulp & Paper. Afry is preparing to leverage strong existing order backlogs while addressing underperformance in specific markets. Long-term expectations for the book-to-bill ratio are set above 1, signifying future growth potential.
Afry's second quarter reflects a company that is adapting to the prevailing market conditions—strengthening in energy while managing declines in industrial segments. Investors can take comfort in the consistent margins and focus on profitability, yet they should remain cautious about areas of concern, especially in the Pulp & Paper division. As such, the overall narrative remains one of adaptation and strategic positioning for future growth rounds.
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Dear all, a warm welcome to Afry's webcast for the second quarter. My name is Jonas Gustavsson, CEO at Afry. And I will start to introduce a couple of summarizing slides, and then I will introduce Bo Sandstrom on stage, our CFO, who will take you through a bit more on the financials. But again, a warm welcome to this webcast. Starting, for us, it was a stable quarter where we also were able to improve profitability. As you know, that has been really our main focus over the last quarters. So we were happy with that. And again, stability, we saw stability in the quarter.
If you look on the top line, we had a total growth of SEK 4.7 billion -- 4.7%, sorry, and adjusted organic of 2.2%, ending up at close to SEK 7.2 billion in sales. The market was mixed. I have a slide -- the next slide, I will go through that a bit in detail. We saw some really strong segment, and then we saw a couple of segments with some more challenges for us, but a bit mixed. The order stock is stable around SEK 20 billion, some movement between the divisions, but there's a total stability throughout the quarter on the order stock.
Moving down to EBITDA. We ended up at SEK 572 million compared to SEK 421 million last year, equal to 8% compared to 6.1%, so a clear improvement. We had a strong calendar effect supporting us, but also adjusting for the calendar effect, we saw an improvement of approximately 0.5% unit. The main driver in the quarter was Infrastructure division, where we see the ongoing improvement program continue to deliver results as we hope. So good performance from Infrastructure and also stability in a couple of other divisions.
So moving ahead for us, of course, to continue the Infrastructure program will be 1 of our focus. We know that in Pulp & Paper within process industry, we have had a bit more challenging markets, so we are doing capacity adjustments. And then in general, we will be flexible in adjusting both when we see growth opportunities like we see in Energy segment, but also adjusting when we see some headwinds like we do in Pulp & Paper. But again, summarizing the quarter stability with improved profitability.
Then moving over to the market. So the market was a bit mixed, starting with the industrial side. We have seen really strong demand. If you look on automotive, of course, driven from the electrification and digitalization where we have a strong position in the Nordics. We saw strong demand. Defense sector is another strong segment for us, and we also saw strong demand in that one. However, in Pulp & Paper specifically, we have a lack of larger CapEx projects at the moment. And also telecom and IT has in the quarter been a bit weaker. Energy sector, easy to say, general very strong. And of course, here, we have also an international global position. So also subsegments within Energy have basically been strong crossover. So that is and will be a strong segment for Afry also moving forward. And then on the Infrastructure. There is a stable demand of public transport infrastructure, while the Real Estate segment continued to be quite weak. But here we are, in general, in much better balance now compared to a year ago. So it's mixed market, but some really, really strong market segment as well.
If you look on the divisional overview, when we start on what we call Cluster 1, which is the Process Industry, Energy & Management Consulting, what is -- what you can see here is that Process Industry in the quarter had negative growth, close to 6%, which is reflecting actually Pulp & Paper segment that is coming from really high levels. We have to remember that over the last year, we have been growing that division roughly 17% year-on-year. So here, we have a bit more challenging market on the Pulp & Paper side. So the margins were just about 9%, lower than last year, but still, I will say, on healthy levels, but for sure, market is a bit more challenging. We are doing capacity adjustments in that segment. I would say, Energy & Management Consulting division continues to be stable and good, and we will do -- we will work hard to take all opportunities ahead. Infrastructure. Here, we really saw some good improvement compared to last year. And the program that we did put in place after summer last year continues to deliver the result that we expect from them, and we will continue to work with the Infrastructure improvement program.
And finally, IDS. I would say it was a stable quarter in IDS. We have some really strong segment, some segments like IT and telecom that has been a bit weaker. But stable performance, but of course, the level of margin in Industrial & Digital is not where we want it to be. So we will continue to be focused also in that division to improve our margin.
Just highlighting 3 projects that we did win during the quarter, 1 in Norway, where we have been awarded to be the adviser to NRK, the public service company in Norway for the new head office. And here, we are working with project management as well as architecture works, a good project for us in Norway. Second one, this goes in to pump storage, and this the Vattenfall and we have then been awarded to be a technical analyst for a pump storage in Sweden to a power station, Juktan in Sweden. And this is really an interesting segment since pump storage actually works like a battery in the harder segment. So these kind of projects we see in the Nordic, but all over the world. And here, Afry have a leading position in pump storage. So a really cool and interesting project. And finally, we have also been awarded to be a partner to the food tech company, cReal for a new production facility in Sweden. So 3 great examples of projects that we have been able to win throughout the quarter also in 3 different divisions.
With that, I will invite Bo on stage to take you through the financials.
Thank you, Jonas. I will, as usual, cover the main financials for Q2 '24. Starting with the overview. Quarter 2 showed net sales of SEK 7.2 billion and EBITDA of SEK 572 million. Also in this quarter, the comparison to last year was heavily affected by calendar effects this time positively. On a rolling 12-month basis, we remain on SEK 27 billion on net sales, while we are increasing to SEK 2.1 billion on EBITDA. The same level as we were 12 months ago. Noteworthy is that in the 12-month comparison that I just did, we have now negative 15 hours in the comparison corresponding to approximately negative SEK 160 million in rolling 12 EBITDA.
Total growth shifted to positive 5% in Q2 from being negative in Q1. Adjusted organic growth is reported at 2.2% supported by continued positive pricing of 4 percentage or 4%, which is exactly the same level as we saw in Q1. We continue to report negative volume given the mixed market and the capacity adjustment that has been done following that during the last 3 quarters.
With Q2, we broke the sequential trend of declining organic growth that we have carried since the peak in the beginning of 2023. The increase is largely driven by the Energy division with an uplift from 1.3% to 8.8% on adjusted organic growth since last quarter. Process Industries report negative 6% adjusted organic growth being the only division sequentially declining in growth.
Order stock reported at SEK 20 billion, which is then 3% lower than last year and 2% lower than last quarter. FX impact on the order stock is now negative for the first time in many quarters, and that corresponds to close to 3% on the year-over-year comparison. So almost the full amount on the year-over-year decline. The Energy division continued to report the largest increase to last year and remain well above SEK 5 billion in order stock, whereas the decline year-over-year for Process Industries amount to SEK 1 billion.
EBITDA for the quarter came in at SEK 572 million, and the EBITDA margin was at 8.0%. As in last quarters, well in line with last year, also calendar-adjusted. On a divisional level, the calendar effect is the main driver on year-over-year EBITDA margin development but the calendar effect is quite different by division also in this quarter. Division infrastructure is close to 2 percentage points ahead of adjusted last year with the largest relative calendar effect. And the adjusted EBITDA improvement from Infra matches the adjusted EBITDA improvement for the group as a whole. Divisions Energy and IDS with much smaller calendar effects, are slightly ahead and in line with last year, respectively, on margin. Process Industries maintains a good margin, but a somewhat increased decline on adjusted EBITDA margin sequentially, now right above 3 percentage points. The result from the Energy division and positive contributions from management consulting and group common costs compensate in the quarter for the relative decline in Process Industries.
Utilization remained lower than last year and the vast driver of the negative 0.8 percentage point decline, again, related to Process Industries. Infrastructure is above last year. IDS is in line and Energy is somewhat below last year on utilization. We have no material project write-downs in the quarter, and we report no items affecting comparability.
Let's look a bit on movements related to the underlying margin. This shows our reported EBITDA margins for Q1 and Q2, this year and last year as well as last year's margin adjusted to this year's calendar. Clearly, with larger calendar swings as in Q1 and Q2, direct calendar effects are the primary driver of the quarterly EBITDA margin movement. Adjusted for that, we see that the underlying margin is improving somewhat and in Q2, increasingly driven by infrastructure.
In general, available hours, as you can see in the graph, works quite well to, on a quarterly level, predict the calendar impact. However, if the change in available hours coincides with vacation periods, the effects will, to a large extent, be absorbed. This is mainly a question for the third quarter in the year where we have longer vacation periods.
Cash flow from operating activities was somewhat weaker than last year. But on aggregate, last 12 months, we continue to generate a healthy cash flow. Nonetheless, working capital development and cash flow generation continue to be a focus area for us as it has been over the last year. Available liquidity normalized at SEK 3.8 billion at the end of the quarter as we have finalized refinancing activities in parallel with distributing dividends. Financial net debt increased to SEK 5.5 billion, but we are at a lower level than we were a year ago. Given the positive effect on EBITDA, we maintained leverage at 2.6x in the quarter despite the dividend payout corresponding to approximately 0.3x. In general, except for any M&A activities, we are expecting to deleverage during the last quarters of the year.
And with that, I leave back to you, Jonas.
Thank you, Bo. So just before we will invite you for Q&A, just to summarize, and this is actually the same slide we had in the last quarter. So there are 3 areas that we will continue to focus on. Number 1 is, of course, to continue the good work that we're doing in Infrastructure with the whole Infrastructure improvement program. We are not done. We have done steps throughout the last quarters, but that work will continue also in coming quarters.
Secondly, there are for sure areas where we see some strong demand where we are also well positioned mentioning [ Energy ]. So take the opportunities to grow in those segments where we see strong demand.
And the third 1 is, of course, to be flexible and agile to adjust. So right now, for example, we see a bit weaker in Pulp & Paper segment, and we are adjusting to that. But at the same time, we are also looking into other segments, but these are basically the 3 ones to be fast and adjusting when we see demand dropping and equally fast and adjusting when we see growth opportunities. And always, as we have said, keeping a strong focus on improving profitability and to bring stability in the journey ahead. So that's basically the overall focus Afry also moving forward.
With that, I will invite Bo on stage again, and we will open up for Q&As.
[Operator Instructions] And we will start with Raymond Ke from Nordea.
We don't hear Raymond. So let's [Technical Difficulty]. We seems to have some problem with getting the question through to us. So yes -- hold on. So let's see if we can find the problem with the sound. Do we have an alternative? Should we try and shift to [indiscernible] from Handelsbanken.
[Foreign Language]
All right. Let's try a new 1 and see if there is something with a specific line. So go ahead, [indiscernible] from Handelsbanken. No? Could we maybe have the sound directly in the computer and maybe...
[Foreign Language]
So we seem to have a problem with the sound here. So we encourage all to post your questions in the chat, and we will read them. And we'll try to get back with the sound hopefully as quick as possible. But in the meantime, if you could post your question on the chat in Teams, and we will answer them and then hopefully we'll get back with the sound as soon as possible.
So we have a first question from Raymond Ke from Nordea. An industry peer of yours claim to see more requests for larger projects in Q2 which they look as a positive sign for the market overall healthy. In your opinion, has this been your experience also? Or do you pick up any other behavioral changes from the customers that you could share with us?
So coming to an industrial peer stating that we are more -- I would say there is no real material change for us. I mean, we have stated that we see strong demand, especially in the Energy segment. And of course, here, we see also some larger products coming in. We have seen a bit weaker in the Pulp & Paper side. So I think for us and then transport Infrastructure has been stable. So for us, I don't see any material shift in that respect. So there are some really strong areas that we also have communicated earlier, especially related to the Energy transition, some industrial segments as well and stability in transport infrastructure. But I wouldn't say that we see a big shift at the moment, but more stability and according to what I said with Energy as a driver.
Good. And the second 1 from Raymond. Regarding the utilization rate, if Pulp & Paper was to be excluded, how would the utilization rate have been developed year-over-year then?
As I said, the vast majority of the decline for Afry as a whole relates to the decline that we see in Process Industries. And the very vast majority of the decline in Process Industries related to Pulp & Paper. So practically, looking at a free total, the utilization would be flat year-over-year if you exclude the Pulp & Paper segment from that.
And we will move on to questions from Johan Dahl from Danske Bank. Could you explain low group common cost in the quarter? Are they sustainable?
Yes, the group common cost in the quarter was somewhat lower than in corresponding quarter last year. It's no specific events that, that related to. They were on the high side last quarter 2 and then on the lower side this quarter. In general, we are, of course, with such a profitability focus that we have, we are quite diligent in keeping our costs as efficient as possible. But we are not redirecting any guidance on expectations for group common costs from a full year perspective with the cost that we have in Q2.
And second 1 from Johan, do you see any improvement in real estate or architects, early cyclical in real estate?
I would say at the moment, not -- I mean, of course, in -- when we see inflation going down, interest rates potentially going down that we expect and believe that there will be a positive impact on the real estate segment. And -- of course, I mean, real estate driven from industrial real estate have been keeping up better than the more private-driven real estate. But I would say, quarter-by-quarter still flat for free. But of course, we are hoping to see some positive signs when maybe effect from inflation and interest rates start to be visible. But for us at the moment, still flat.
And we will move on to a question from [indiscernible] from Handelsbanken. What is your take on weaker telecom and IT demand within digital solutions? Any signs of recovery here or still at stable but lower levels?
Well, I think if you look on our exposure, it's really driven from the Swedish market, where we have a position in IT and telecom with a few -- a couple of larger clients, Swedish clients, but also a bit more decentralized IT business. And what we have seen over the last quarters have been a bit careful from some of the clients in the IT business equally to telecom. So I think it's not the biggest position we have, but of course, it affects specially Industry & Digital Solutions that are adjusting and working on that business. But I wouldn't say that we see any big shifts upwards or downwards, but more stability where we are. And of course, we are working to improve that business for us. And of course, looking ahead, we still believe that the IT business as such will be interesting because we believe many companies in area of cybersecurity, et cetera, will need to look into the IT structure and also to invest in them. But stability so far, and we will adjust and improve the business in the current market environment.
And we will move on to Johan Sundén from Carnegie, who has a question. Given the current margin run rate on IDS, is it naive to believe that you will be able to lift margin year-over-year, excluding calendar in Q3 in that segment, especially in light of the poor performance in IDs in Q3 last year?
I mean I would say, in line with what Jonas said, the level of profitability that we see in IDS and that we have seen over the last quarters, is not on par where we want to have that division from a profitability perspective over time. Whether that will -- whether we will see an uplift already in next quarter or so, that we will see. But we are, of course, working diligently to, over time, lift the performance and the profitability level in the IDS division.
And we will move on to a question from Dan Johansson from SEB. Is it possible to quantify the magnitude of the transaction-related project fee in management consulting?
Yes, it's approximately SEK [ 50 million ].
Clear. And we will have a follow-up from Johan Dahl. How do you aim to capitalize on the very strong demand in energy? Should margins be sub-10% given the very strong order intake and organic growth?
Yes, it's a good question. And of course, we are scaling. And of course, the whole transformation. Energy goes quite fast. So it will be a balance for us to both be able to grow the business, but also to step-by-step improve margins. So I think we will keep a good eye on both. We believe that the market and the transition in Energy will be for many years ahead. So we are, of course, looking at how can we scale and grow. And I think the quarter 2 show that we are having a decent growth in Energy. But at the same time, step by step, we should be able also to tweak and improve the margin. So I think it will be keeping a good eye on both. So to build a healthy order stock, but at the same time, being able to grow. And of course, it's all about we need to find and attract good people, project managers. We are moving into bidding and larger projects. And of course, it's not only in the Nordics because in Energy, we are -- we have a global footprint. I mean, Southeast Asia is a very interesting market for us and so on. So I think Energy segment and the Energy division for us will be very interesting moving forward.
Thank you. And we have a follow-up from Johan Sundén. How was the margin level in Q2 in Process Industry segment compared to what you expected at the end of Q1?
So it's always difficult to relate to exactly what we expected. But if we look at the calendar adjusted margin in Process Industries, we were at 2, 2.5 percentage points behind in Q1, and now we report somewhat above 3%. So it is a bit of an increase, but then also looking at how the order intake has been in Process Industries over the last couple of quarters. That is not a surprise as such. So I would say that it's not -- the performance is not better than we anticipated, but it's not vastly worse either in that sense. It is more -- it's more a consequence of the order intake or the market demand that we have seen for a number of quarters.
Yes. And just to add on that, of course, now we are doing capacity adjustment in the big markets where we have a lot of employees as well. And then, of course, we are looking on because it's really the CapEx projects in Pulp & Paper that have been going down in volume. They will pick up down the road. But at the same time, we are then hunting for more service orders. So the OpEx part of Pulp & Paper is important. But we have had also since a few years, a strategy to diversify Process Industries offering into mining metals, so steel industry as one, but also chemicals. So there are a lot of activities going on to mitigate Pulp & Paper that currently is a bit weaker on the big CapEx projects.
And we will move on to Ebba Bjorklid from DNB. What caused the decline in energy capacity utilization and how much did that contribute at the group level?
The primary -- I mean, as in the earlier question, looking at the Energy division, very specifically, the Energy -- the performance of the Energy division is really a long-term game. In a specific quarter, it can be a relative focus between building up order stock, and it can be just, in a sense, producing from that order stock. And that can balance between 1 quarter and another, also having some effect on the utilization. As I said, utilization was somewhat down on Energy on a year-over-year comparison, which is then also on the contrast, it's reflected partially by order backlog continuing to increase in that sense in the quarter. The contribution to group total from a utilization perspective, it's more on the marginal side, I would say, rather than big numbers.
And we will go to [indiscernible] from Handelsbanken again. Given the improving profitability trend in Infra, will you be ready to ramp up the recruitment pace in the division? And the adjustment that has been done and will -- okay, we will start with that one.
Well, I think we will continue to operate the Infra in the current kind of model. And I think it's to be careful and very rigorous in recruiting at the right place. I mean we did capacity adjustment throughout last year, especially in the third, but also in fourth quarter, mainly driven from the real estate. Now looking ahead, as we have said, we are in balance, I would say, between demand and supply. But now it is all about, of course, getting back to growth in those areas where we can drive profitable growth. But I think in general, we will increase and hire where we see the strong demand and need and where we have profitable products but also being a bit careful, keeping a good eye on our profitability journey where we have come a step ahead, but of course, we have also said that our target is between 9% and 11%. So with careful approach, but -- of course, when we see projects, good order intakes, we will hunt and hire good expertise to Afry.
Just in addition to that, if you look also in the reported numbers a bit more in detail, you see that the FTE development on the Infrastructure side has now, following a reduction in Q4 and Q1 this year, it's actually flat in Q2. So to some extent, still on the cautious side, but to some extent, we are slowly kind of moving into a more stable phase in infrastructure.
Good. And the second end of that question was, and the adjustment that has been done and will be done in process. Is it mainly related to consultants or also general headcounts, i.e., administrative roles?
We will, of course, look on both, but it's primarily driven down from the demand situation. And we have to remember, we have a rather big footprint or operation in South America with Brazil as a main where we have had a lot of Pulp & Paper product but also in mining and metals. So here, we have adjusted a lot, but also then in Finland, Sweden as being 2 big markets. So for sure, the main driver is to get in balance when it comes to consultants and the projects. And -- but then I also know that the division is looking on cost optimization across all levels. So it will be both. But the main driver at current is to meet that weaker demand primarily driven from fewer large CapEx products in Pulp & Paper. And then we will redirect people into operational service. So there's a lot of actions, I would say, ongoing in Process Industry.
And also here, if you also look at the same that I just referred to, if you look at the kind of sequential development on the FTE development in Process Industries, this is not -- we're not ramping up restructuring efforts in the Process Industry. It's rather something that has been ongoing quite structurally and proactively over a number of quarters by now.
And the next 1 is from Stefan Knutsson from ABG. Have you seen any changes from the cautious clients within the Pulp & Paper for CapEx project? And additionally, what is a sustainable book-to-bill ratio long term?
I can take the first and maybe Bo the second. But if you look on -- of course, we are in very close dialogue because if it's 1 segment where we are leading in the world is real in Pulp & Paper. So we are very close and in dialogue with all the clients. And I will say maybe it's too early to say that we have seen some signals, but I know that every month that goes, we will come closer to some of these clients deciding for new investment because in general, many of these clients have good cash flow and balance sheet. But I will say right now, we stick to what we have said. It's a bit weaker, and we are adjusting. We will adjust in a way that we can also take the opportunities when they are coming. So it's a balance act for us, but no real clear signs. So we'll have a bit of a cautious view on it, but at the same time, being able to ramp up when these projects will occur again because they will come.
And on the book-to-bill question. I mean, now we've been operating in the below 1 territory for a while. Of course, a bit up and down, which is natural, but on a consistent level, clearly below 1. I think from a long-term perspective, I think we are at such a low level and have been for a while. So I think it's fair to say that the kind of long-term perspective that we have on the book-to-bill expectation is clearly above 1. Then how much above 1, if it's 1.2 or 1.1 point rather. That is, of course, extremely tricky to say. But that it should be on the north side of 1. That's for sure is our expectation on a long-term perspective.
Next question comes from Johan Sundén from Carnegie. How much of a calendar effect is to be expected on group EBITDA year-over-year in Q3 2024?
That is really -- that is a very good question. And of course, on paper, we have available hours that is expected to be at plus 10 hours for Q3 on a year-over-year comparison. Then if you look a bit more in detail, that corresponds to approximately 1 working day. If you look a bit more in detail, then you noticed that actually, we have 2 more working days in July we have 1 less in August, and then we have the same in September. So all in all, the full and even more than the full positive calendar effect is actually in the vacation period. So my expectation would be at the end of the day that we will have rather limited financial calendar effects on group level for Q3. But of course, there's an opportunity, in a sense, with a positive calendar to at least get some type of effect in the books. But that is, in a sense, for execution to be done.
Yes. And the second question from Johan, do you think you have control of the situation in this industry?
Yes. I think we have control as Bo said, we have seen this decline for quite some time. And of course, we have adjusted quite a lot in South America, in Finland, we have really flexibility, and we are looking also into Sweden. So for us, it's always a balance also how much do you adjust. And how much are we prepared for being active in new bids but also when the business is picking up. And I also want to say that we are also, of course, Process Industry have roughly half of the volume in Pulp & Paper and half of the volume and the SEK 5.5 billion business is into mine and metals, chemicals, et cetera. So there's a lot of activities into bid processes and activities in other segments as well. But yes, I absolutely see that we have control of the business. And as we said in the quarter 2, we saw that the margin was just shy of 10%. So it's still on healthy levels. But of course, looking back, we have had some really, really strong development. And now we will need to adjust to a bit more weaker market, but that we will do.
Thank you. And then we have a follow-up from Raymond Ke from Nordea. With leverage at 2.6x by the end of Q2, do you still expect to be able to make more M&A towards the end of this year and it is your intention to continue hover around the leverage target for next year also?
I think seasonally, typically, we -- if you look at the kind of quarter-by-quarter development on leverage, then we're normally up in a sense in Q1 and Q2, and then we kind of fall back down Q3 and Q4. I think the cash flow generation that we would reasonably be expected for the second half of the year, by far surpasses the 0.1 difference that we have to our leverage target in a sense at the end of the year. Our intention is the same as it has been for a number of quarters. We are aiming to rather be on the low side of the financial target than on the high side at the end of the year. We do have room for M&A if we find the attractive targets, but we are a bit stricter on M&A activities. And thus, you could reasonably expect us to be on the south side of the leverage target at the end of the year.
And we have 2 final questions from Ebba Bjorklid from DNB. When do you believe you should see material improvement in CapEx demand within Process Industry?
Yes, it's a very good question. I think as we said, I mean, there are a lot of activity speculation, when will we see these products being decided and awarded. And of course, I think there's a lot playing into that. I think we have seen now a bit more general positive sentiment into that area. But still, for us, it's still too early to say. I think as we said, every month that is progressing, we are coming closer to that because we know the business is cyclical, and this project will be needed, but exactly when it will come, it's too early to say. So we will do our adjustment accordingly.
And the final question is, can you give indication on the magnitude of the improved infrastructure capacity utilization year-over-year? And how was the development quarter-over-quarter?
We have consistently been above last year for Infrastructure over the last 6 months now. We're slightly above in Q1, and we're slightly above again in Q2, quite consistently. Not -- we're not reporting the detailed numbers in a sense on the divisional level, but we are comfortably also month by month above last year's level for Infrastructure in Q2.
All right. So if there are no further questions, we would like, first of all, to apologize that we couldn't get the sound to work, and we hope that we will see and hear you next quarter but I hope that you could put your questions in the chat and that we could answer them. So sorry for that, and we will make that -- sure that it works next quarter. But with that said, for me and Bo, thank you all for listening in, and we wish you all a great summer and looking forward to see you again probably in the third quarter.
Yes.
Thank you so much.
Thank you.