Afry AB

STO:AFRY

Earnings Call Transcript 2021-Q3

[Jonas Gustavsson, President & CEO]

So dear all, a warm welcome to this presentation on the third quarter for AFRY. My name is Jonas Gustavsson, CEO of AFRY. And I will do part of the presentation. As always, Juuso Pajunen, our CFO, will take care of the numbers and related to that. And we will also have time for questions just after the presentation. So thanks again, and let's move into the numbers for the third quarter.Starting with an overview, I mean, the positive part was that we delivered a strong organic growth in the quarter, really driven from the industrial segment, as you have seen. And the numbers is pretty clear for you. We ended up at SEK 4.4 billion, EBITA on SEK 369 million and margin 8.3%.And what we saw is that on the industrial side, really good demand. And I mean, if you look on our divisions, 4 division have delivered strong margin. And if you look on 3 of them, really strong growth. So 10% is the total growth in the quarter because we have done some good acquisitions, but organic is 7.5%. And again, then 4 divisions have delivered really strong performance. I mean, we know energy still are focused in getting back to growth, but the margins are stable and high.It is absolutely clear that the challenge in the quarter was infrastructure and part of infrastructure where you could even narrow it down to the Swedish part of transportation; road and rail, where we had a slower start and lower utilization during the quarter even though the market is stable.We have also so far announced acquisitions this year equal to SEK 1 billion in net sales. Really good. And yesterday, we will get back to that, we announced a really good fitting acquisition in Finland, the Vahanen Group that adds really a really good complement to our infrastructure business in Finland. So I would say most of the quarter is solid and good. And then we have a bit more challenging situation in part of the infrastructure. And obviously, we are not really happy with that result, and we are really working a lot to bring that back on track.Market, as we said, it's a general good demand, I would say, especially when you look on industrial segments. And I would say that we really see now the effect from the transformation that is done in the industry. We see a big demand on software support. We see a lot of things going on. And we also, of course, see a recovery from the pandemic. Infrastructure, I would say, overall stable. So if you look on the markets, also Sweden, it's been a stable quarter. And I will say even in Sweden, the market as such, is good. It's just that we had a challenge in this quarter, ramping up of the vacation, especially down in the transport part of our business, road and rail.Industrial and Digital Solutions, strong demand across all segments. And, for example, automotive, really good pace. And I think here we see now the effect of the transformation is going on with more electrification and software, the manufacturing for the life science. So industry and digital had a really, really nice quarter with strong demand, a bit recovery from the pandemic from a weak last year, but also a solid good demand.Process Industry strong. The market remains very stable, especially on the OpEx service, but we also see that the CapEx is on a solid level.Energy, I would say we are really happy with the margin that energy is delivering. And then of course, now the focus is to get back on growth. And we have a lot of good projects in the pipeline also. So I know there is a strong focus to drive growth.And Management Consulting, for sure, really positive trends. So I would say, on the overall picture, it's a favorable market. But of course, it's easy to zoom into that area where we have had a bit more of a challenge. And I could imagine there will be a few questions related to that.Then looking on the projects to highlight. I mean we have done some really nice projects in the quarter. And more and more of them have a digital part of them. And one that we are really proud of is with Hitachi ABB Power, where they, together with us, use the digital twin. So that's a really nice part.We have also a nice assignment to the Swedish Transport Demonstration for AFRYs Flowity, and this is an AI-driven intelligence for measuring traffic flows.We had good engineering assignment from Metsa Board. We have also a nice rail engineering assignment in Finland and also a nice big solar plant in Thailand. So I will say, and Juuso will confirm that the overall order backlog remains stable and good.Now with acquisitions, we have added, as we said, SEK 1 billion in acquisition so far this year. And it's total 16. So it's been an intense acquisition focus this year. And we did some nice one in the third quarter. One, to highlight, Cubiq Analytics in Finland is an analytic company into the digital area. Zert was a nice one and INSUCO in Denmark. And then yesterday, and Juuso probably will comment a bit more on that, we did a really good -- announced a good one, Vahanen Group in Finland. And this is a Finnish consulting company in the real estate, really nice complement to us in Finland. And Vahanen Group, together with our current infra business will really strengthen our operation and focus on infra in Finland.And of course, with the Poyry in Finland and the history, this really adds to a good infra position in Finland. And that's roughly SEK 500 million, I believe, SEK 470 million. And I'm really happy that we could come to an agreement, and of course, another process to start then with Vahanen Group. So on the acquisition part, we are happy. And again, the SEK 1 billion that we have added to the top line.Also one thing I want to highlight because a couple of years back, we did the rebranding to AFRY. And of course, now we're working in many ends, sustainability, but also to make sure that AFRY is seen as one of the most attractive employers in Sweden. And we are climbing the ranking, and this is a recent ranking, where we can see that we are again ranked as one of the most attractive employers in Sweden. We are #1 in the industry among senior professionals, #3 by young, I would say, bachelor engineers and #8 among master science engineer. And again, it shows also that companies that have a clear sustainability focus. And interesting projects, of course, is able to attract the best competence. So this is key for us, and we are happy with that.Now I will leave it over to Juuso, our CFO, who will take you through the numbers.

[Juuso Pajunen, Chief Financial Officer]

Thank you, Jonas. So let's talk about a bit on the numbers. So as usual, let's start from the net sales development. Before going to that one, I still highlight that we have now 2.9% structural growth from M&A, but then when acquiring Vahanen and complementing our Finnish platform. As it closes after competition authority approvals, we will get a bit of boost on that one. So I'm really happy that we can improve our total offering in Finland with the real estate now.So if we go for the net sales development, we are just a couple of million shy of double-digit growth, 9.9%. And ending up on SEK 4.4 billion compared to SEK 4 billion previous year. Out of that one, organic growth is 7.4% and adjusted organic growth 7.5%. So we are accelerating on the revenue part. I'm absolutely happy that we get there. And at the same time, it is highly supported by our industrial offering, whether it comes from Industrial and Digital Solutions, Process Industries, or then in the Management Contracting who have quite impressive organic growth numbers, while then infrastructure in a modest growth track and Energy still in the negative ones, on the growing part. But going back there with -- after the COVID pandemic as the major projects can start-up.At the same time, order stock is continued at a stable level. We are continuously winning projects like Jonas explained in the earlier slides and having a solid, strong backlog to be implemented in the future.Going from net sales to EBITA development, we made SEK 369 million of EBITDA, excluding items affecting comparability. Previous year, we were at SEK 288 million. That SEK 288 million also included SEK 62 million of state subsidies within those numbers. We ended up into the EBITA margins, which are solid. But at the same time, we need to recall the salary accounting method. So compared to previous year, we have gained on the salary periodization in the Q3, not to the amount we expected and guided. I will come back to that one. But with that adjustment, we end up into 7.1% EBITA margin.We have especially strong development in the industrial segments, whether it is Industrial and Digital Solutions, Process Industries, Energy or Management Consulting. But as Jonas highlighted, our issue is within the infrastructure, it is especially in transport infrastructure in Sweden where we basically are facing a lower utilization. And at the same time, we can say that we had a slow start after the summer.And we can basically split that slow starting to 2 different impacts. And this is now happening across Nordic portfolio, not only Sweden, and to a certain degree, not only in infrastructure. We have seen that people have taken more vacation time, especially in Nordics compared to expectations and previous years. And at the same time, people have come out from the vacation later than in the previous years, which has impacted -- which has been more probably coming from our client behavior. So clients also ramped up slower after the vacation. And this jointly then impact our EBITA, especially in infra, but slightly in other parts of the portfolio also.A couple of words on the changed salary accounting method, we have SEK 57 million positive on Q3, while we earlier guided SEK 91 million. And basically, if we step back and first go to the methodology, what we are talking about, we are periodicizing salaries throughout the year. And that periodization logic has gone from actual fixed salaries or from daily salaries to actual fixed salaries. So for example, an employee, most of our employees are having fixed monthly salary. So in February, you get, let's say, SEK 50,000 and in March you get SEK 50,000, irrespective how many working days you work. And earlier, we accounted that salary based on those working days. And today we account them based on the actual fixed salary.And the change in the holiday behavior impacted this calculation in a manner that we were not able to expect earlier. So all in all, the impact on full year basis is still 0. We are splitting salaries between 12 months. But the positive impact is now hitting more the heavy working months of October and November compared to our earlier expectation.So with that one, let's talk about a couple of words on the divisions. We have basically solid market conditions, solid delivery in the industrial segments. We have increased from the profitability, 7.2% to 8.3%. The salary accounting method has been supporting infrastructure and Industrial and Digital Solutions, especially. And basically, the 1 more day vacation spend and delayed start after summer is especially in the Nordic portfolio, so also having a minor impact in Process Industries and Energy.Calendar was more or less stable. It's a minor negative, not worth mentioning in the totalities. Then we have the common costs that are SEK 37 million below previous year. We have now gone live successfully in the ERP in the second quarter, and we start to pay a bill on depreciation and then rolling out in the new entities in the third quarter, and that is impacting the group common. But then we are also building up our digital offering, and we have some investments there in AFRY X that we are making to make us better and better in the digital world and especially in the software offering. So all in all, 4 out of 5 shooting well and one where we have clearly more work to be done.Going to growth and profitability. We have basically 3 divisions on double digits, Management Consulting even starting with the tree, those are very solid, supported by the market, and we are really happy to see this type of a growth. And then especially in the third quarter, also solid profitability. We have 3 entities in double-digit profits, Energy, Process Industries and Management Consulting. Then while infra lagging behind previous year despite being supported by the salary accounting changes and only modest 0.7% growth. So as said, we have more work to be done within the infra to push it back, but the market is there, and we are working on it.Then a couple of words still further in the profits. Energy was continued strong results. It is supported by very solid execution of larger projects. But at the same time, the negative growth is arising from projects that are continuously awarded. So they are in our order stock, but they are not progressing to the execution phase due to COVID and due to travel restrictions and due to still continued restrictions, especially in Southeastern Asia. So this is something that has impacted the growth. But at the same time, we see very solid project execution in the larger projects that supports the margins.Then Management Consulting has been benefiting both the favorable market environment, and they are supported by the high transaction volumes in the M&A market. We are doing lots of services in there for due diligences, supporting the transactions from advisory perspective and so on, which helps us both in the growth and then on the profit perspective. So really happy to see that high numbers also in there. But as you know, it is a volatile business that goes up and down, but in the end deliver solid results.On the net debt development, basically, we are having a stable cash flow. There is basically net working capital impact a bit. We are at SEK 4.2 billion net debt and still at SEK 2.3 billion. And remembering our acquisitions, it is quite a solid one, and we are happy where we have, and we still have available liquid asset as well. During the quarter, we have bought shares back. We have always mitigated convertible program in the markets that we have had earlier, and we have bought those shares again back. And then obviously the acquisitions. So the underlying operating cash flow is stable and ticking. And then we have been investing into our future with the acquisitions.Maybe good to note from the group level at this page is that we are also seeing then EPS growing, our earnings per share, and the profit -- other profits are dropping down to earnings per share. We have some 70% increase in the quarter 3 and some 30% increase year-to-date. So we are delivering both on the income statement and in the balance sheet to our investors also.With these words, handing back to Jonas.

[Jonas Gustavsson, President & CEO]

Thank you, Juuso. I will just then summarize this. Thank you so much, Juuso. And of course, if you look on the overall now, we are focusing in general on growth and profitability. And if you look on the industrial side, as Juuso highlighted, there is a lot of positive things ongoing, demand is increasing, and we are well positioned. Just looking on Industrial and Digital Solutions where we have a strong position in Sweden, but also now expanding in the Nordics. Software demand, we talk about asset management. We have really interesting position in food and life science.So for sure, we will continue to push. We see also a lot of projects evolving that goes across divisions with a big, big portion of industrial content. So we're happy with that.Then, of course, infrastructure. We are not happy with the performance that we have had in some of the units or areas this quarter. That's clear. This effect of many things, as Juuso said, coming back from vacation late and on the client side. So you could just imagine that we have a strong, strong focus on operational improvements in those areas. And we have, of course, seen an improvement during the quarter. But there is a strong focus to get back to where we think it should be in that those areas and, of course, the focus on growth and profitability.M&A, we will, of course, always continue and look for good acquisitions that complements or strengthen our portfolio. And of course, now to integrate those companies, we have done 16 so far this year, quite a few small ones in the first part of the year that are already integrating, delivering. And then again, for example, the Vahanen that we announced yesterday, which will be a super complement for us in Finland. We are really happy with that.And then 2 things then, digital and sustainability. We are scaling digital. And of course, building the AFRY X, being more and more clear and precise what to offer. A strong focus on service, on IoT, AI and even looking on cybersecurity, where we actually have at the AFRY a strong competence level, and we are delivering as of today too and how can we further expand that position. And also step-by-step climb up in the value chain on recurring revenue models, SaaS, service, et cetera. We highlighted 2 projects in the list earlier today here with Hitachi and the digital twin and the Flowity, which is also a very nice example of that. And then, of course, sustainability that goes across the whole company.So I think in total, we are well positioned, and we know where we need to be working a bit more to bring back -- bring the operation where we think it should be.So with that said, I will stop and open for any questions that you might have to me or Juuso. So I know Katherine or Abba, you are monitoring the questions, if you are.

[Operator]

[Operator Instructions] So we start with a question from Johan Sunden, Carnegie. [Operator Instructions]

[Johan Sundén, Research Analyst]

First, a few questions on the infrastructure business. When I listen to your presentation, I get a little bit different feeling for when I read the report this morning. When I read a report, my take was more that there was an issue in the market. Now when I listen to your presentation, I get a feeling that it's more kind of your own operation that has been the problem with slower start. How should we balance that message? Is it more market problem or is it your own issues?

[Jonas Gustavsson, President & CEO]

I can understand that, Johan. And I think the truth is a bit on both sides. If you look on the market and then include the clients, we have seen that clients as well as [indiscernible] after vacation started up slower. So -- and then we have also highlighted an increased competition and also even increased price pressure in segments like road and rail. But equally, Johan, we also know that we have -- we could have done better with the performance and how we drive the business in that area. So I think it's on both sides, I would say. I don't know, do you want to complement that, Juuso?

[Juuso Pajunen, Chief Financial Officer]

No, I think that is exactly the case, like always, it is a bit on both sides. We have the market there, but the market has been behaving a bit differently and then our reaction to that different behavior could have been swifter.

[Jonas Gustavsson, President & CEO]

Yes. And I wouldn't say that it's a swing in the quarter, I had that earlier today, if something dramatic have changed, I said, no. But we know that the third quarter with -- especially in Sweden and the Nordics, getting back from vacation, it's a weak quarter in general. And what we noted was that we and clients in those segments were later starting up the operation. And we -- it ended up with a lower utilization, especially in those 2 months. And if you look into August, that's in between months where you have part of the organization on vacation, part is ramping up. But we could see in the quarter that it improved. But then we know that we could do more. So for sure, right now, there's a tremendous focus on bringing our operational performance back on track where it should be.

[Johan Sundén, Research Analyst]

And also another follow-up on the infrastructure side. We have tried to call the bottom for this segment for maybe a year now. I think during Capital Market Day in November last year, you said that we are hitting the bottom and it should be improving from here. How should we see this segment developing going forward in Q4 and next year? Because maybe if you just look at the trends, then the kind of -- the margin continues to slide and the problems maybe, one can say, is escalating. How are we in the process of turning this segment around?

[Jonas Gustavsson, President & CEO]

Yes. I would say the segment, the infrastructure, which is a wide segment for us, then we know that we have issues, as you have seen in this quarter, especially on the Swedish side, especially on the transportation side. At the same time, we have units that is well balanced and improving according to plan. So I will say, we don't -- we are not in any, how to say, worried that the whole infra is not delivering and developing as we want. But we have had a hiccup in the quarter that was not in our plans either. So on the overall infra, I am not worried at all. But unfortunately, we had a hiccup in the quarter on some areas, and that had kind of impacted the overall result. So -- but we are working a lot and addressing that. And then, of course, we also need to understand that the infra market over the last year have been tremendously favorable. But we know that competition is increasing price pressures there. So it's not a market that will be stable forever, but the overall demand is there because we know there is a need for additional public spending. There's a need for new solutions in transport, et cetera. But I'm not that worried on the overall. And I agree, we said it bottomed out, and that's what we see also in the total. But again, then now we had a part of the infra that did not deliver according to plan in the third quarter.

[Johan Sundén, Research Analyst]

One more question, if I may. And that's regarding vacation outtake. From Juuso's presentation, I get a feeling that you had a little bit tougher development on the vacation outtake that's hampering your development. Is -- should I say that you are more on balance going into Q4? So where is for higher vacation outtake is behind us? Or is that something that we should be worried going into Q4 as well?

[Jonas Gustavsson, President & CEO]

No. I think you're right. And what happened is, and you know that part of our, especially infrastructure in Sweden is a quite decentralized business model, and that works very good. But I think when we had a quarter now where both on the client side and our side, there's been a slower ramp-up with a few more days of vacation in August, especially then, and that affected us. But I would not say that we are fearing an increased vacation moving forward in the fourth quarter, no.

[Operator]

So we take the next question from Johan Dahl, Danske Bank. [Operator Instructions]

[Johan Dahl, Analyst]

I was just wondering on infra again. Can you talk a little bit about the specific actions you're taking in this area? Again, just to reiterate, a bit surprising to hear you talk about the quarterly problem when it's -- margins have been sloping for 3 years. But what actions are you actually taking? And secondly, also, is this -- do you feel it's the right time to take on another 500 people in Finland in this business area right now given the operational challenges?

[Jonas Gustavsson, President & CEO]

Yes. Thank you for the questions. Well, if you look on the -- start with the Vahanen Group, which is a really solid company in Finland on building; that is a good complement. And you could just imagine that it does not have too much of causing problems on the Swedish transportation side. So we don't think that, that is not an issue at all. And if you look also outside Sweden and in different segments, we have really good development in infrastructure. So the fact that we have more challenge in part of that doesn't say that we should not continue to develop the overall business. And then what actions and I will leave it to Juuso, but right now, it's clear that we are monitoring and looking on that part on, how to say, on -- we have improved our performance management part on those parts that were starting up slower. So I don't know, Juuso, if you want to complement?

[Juuso Pajunen, Chief Financial Officer]

Yes, maybe just to complement on the acquiring 500 employees in Finland, we need to remember that we have a very strong double-digit delivering platform in Finland. And we are bringing another solid mini platform with 500 employees into that community, complementing the services. So I think that our capability to integrate that one is especially strong in Finland. And also after the Poyry merger, we have rehearsed quite many things quite well. So this is something that I would not feel uncomfortable. I feel actually really happy on that. It both complements the Finnish offering and it complements our position in Finland, but also then it makes infra stronger and less reliant on one single big market. So now we start to be in the thousands or so talking in infra people in Finland once the deal closes after the competition authority approval. So this is something that I definitely don't have a stomach pain with.

[Johan Dahl, Analyst]

And just on cash flow. Can you just possibly share with us how we should look at this for the full year? I mean, you reversed the gains that you had last year in the 9-month period. But can you give us some sort of indications where you think this could end up for the full year? It doesn't look too good on the 9-month basis?

[Juuso Pajunen, Chief Financial Officer]

Yes. Basically, first of all, if we take 9 months, you're absolutely correct. We have had the net working capital tie up back, if you look at our organic growth and growth figures from that perspective. So the net working capital that we released during the pandemic in the previous year has been now being tied back to net working capital. We have a bit work to be done in there to improve it. But at the same time, like you see, our traditional cash curves, Q4 is the time when we actually make quite a big bulk of our money or cash flow. And I'm not worried on that. But then also in a way, thinking about where the cash flows are working on is then important to note that 9 months is quite a short time on that one. So our cash delivery last year was very strong. And part of that one has been now tied back. So then Q4 should be strong. But obviously, not to expect similar type of cash conversion rates as a year ago when it was, as said, supported by the pandemic and the net working capital release from that one. So strong Q4 ahead of us. And then there's lots of questions like always in there, will the clients pay before Christmas? Or will they pay after New Year? That's always the big question. And nobody ever knows in detail the answer on that one. It's highly dependent on client behavior.

[Johan Dahl, Analyst]

Just finally, on the sort of management agenda looking into next year, there's a new Chairman of the Board, I guess. And how has that sort of changed lately into next year? Any specific items you want to mention, Jonas, on that topic?

[Jonas Gustavsson, President & CEO]

No. No. I mean, there has been a [indiscernible] but there has been a change. Tommy Eriksson have stepped in. And I know Tom since long time back, even a bit through the Sandvik days. And I think Tom shares a lot of the ideas and thoughts that Anders had, Narvinger, who left. So I think from that perspective, it's not a big change. But we are, of course, now spending -- we have spent some time on looking on those areas where we really think and believe that AFRY can excel and where we should continue to build our strong. So for example, digital is one area that we strongly believe that AFRY have a good position. We also see that our industrial part will be and is so important moving forward because many of the products that are evolving will have an interesting mixture of infra-related part, but the equally industrial part and digital part. So I think this is not a new agenda, but for sure, it's always with the new chairman and a few new board members, we are looking on the play field with open eyes and strengthening and focusing on those areas that we believe in. So I feel really -- so it's really good and really supportive on the journey ahead. And so we will continue to push and develop AFRY.

[Operator]

Next question is from Dan Johansson, SEB.

[Dan Johansson, Equity Research Analyst]

A couple of more questions from me. First, maybe a follow-up question on the acquisition in Finland. In terms of the margin level, is it roughly in line with your current group margin? Or is it lower, higher?

[Juuso Pajunen, Chief Financial Officer]

Basically, it is above group margin, but obviously we want to benchmark it in our own operations in the same market, and I would say that it is delivering market-level returns.

[Dan Johansson, Equity Research Analyst]

And on demand, you mentioned in the report that pandemic continues to affect certain decision-making processes for major projects. Has the situation improved now in the beginning of Q4 with reducing our restrictions? And could we see a better situation now already in Q4? Or do you see it take perhaps well longer into next year?

[Jonas Gustavsson, President & CEO]

I mean, generally, as you are saying, Dan, I mean, if you look on the Nordics restriction or release, but some of the projects that we are referring to, especially on the annuity side, they are really global. I mean, we have a lot of things in Southeast Asia and even Africa. And of course, here, the situation is slightly different. So I think on the overall, you will say that the pandemic releases are supporting us, but there are still on our global business still effects on projects that we are awarded, but for different reasons, they are not able to start up. We believe it will step-by-step also on that side improve. But still we have some effects. And especially on the energy side, they feel it the most on some of these CapEx projects that we have been sometimes even on and off to be started up because then suddenly, there's a lock-in of a country or part or a site.I want to complement the acquisition. I mean, this is an acquisition that we really, really like. It's a sizable one, 500 employees. It's a super fit in Finland because we have not had that strong offering on the buildings, real estate development in Finland. We have a strong already platform in Finland with, of course, the former part. We know the market. So in a way, it's a really, really good acquisitions that I'm super happy that we could bring in. And it will strengthen our operation in Finland, significantly on the infra part. And I think it's important that you are not getting -- of course, we know that we have not delivered on expectations on part of infra, no question about that, and we will not even try to hide from that. But we also know that there are part of infra that have delivered really good and where we are really stable and solid. And of course, when these opportunities occurs like with Vahanen, we are going for them, and we will continue to do that. But I will agree to you on part of the Swedish operation right now to add a lot of acquisition, it's probably not on our core agenda, but drive improvements and operational performance. But since we are now having a footprint with Finland, Sweden, Norway, Denmark, even Switzerland, we have opportunities to strengthen part of the intra without interfering with those parts where we have operational challenges.

[Dan Johansson, Equity Research Analyst]

I think you answered my second question as well in terms of the focus now going forward, perhaps with the integration and operational improvements.

[Jonas Gustavsson, President & CEO]

Yes. Yes, you should not try. I mean, of course, we know that we need to improve those areas where we have not delivered. There's no question about that. And there, we will not have any other focus than bringing the operation back. And of course we are not happy that somebody said that you have -- you promised and so on. And we know that our base plan, of course, is to bring infra to the level on where it should be. I want to highlight that part of the infra business is doing well. But in the third quarter, it has been a bit more challenging for us, and we see it in the numbers. So in those areas, there is no other focus than bringing the performance back. That's a strong promise from our side.

[Operator]

Next question is from Erik Elander, Handelsbanken.

[Erik Elander, Research Analyst]

So I was actually also wondering about the infrastructure part. So your growth the last 12 months has been minus 2%. And over that same period, the EBITA margin has been 7.5%. I mean, you have a group target of 5% organic growth and 10% margin. When do you expect to get back on that level?

[Jonas Gustavsson, President & CEO]

Well, I will say, Erik, on the growth level, I agree with you that if you look on the infra part after the pandemic, that was a bit more challenge for us last year, we would have believed and hoped that we would be back on stronger growth number for Infra. When we will be back on that, I will not commit to, but we will, for sure, do our utmost to bringing the growth in the total infra business back. And on the margin side, we have a plan. And last year, remember, we were challenged because we did focus too much on cost and margin and maybe not enough on growth and the higher we are. But for sure, we are -- we have a plan to bring the whole group up on the 10% level for a full year. And when that will happen, I will also not commit to, but it should happen sooner than later. Now we had a hiccup in the third quarter, and you're correct, and Erik, if you look on the infra over the longer period, it's not super fantastic. We know that. And yes, we are working on bringing that on the levels that we expect. I don't know, Juuso, if you want to complement?

[Juuso Pajunen, Chief Financial Officer]

No, I think that was exactly the same words was in my mind too.

[Jonas Gustavsson, President & CEO]

So I would love to say when, Erik, but we will not do that because it's -- but we know where we are not happy with the performance. And it's -- the good thing is and referring to a few other answers that it's not spread all over, which I think is good. It's really central to areas that we now can address. And I think it's -- part has been a third quarter, I would say, I think third quarter challenge for us for different reasons. So for sure, we will do everything, as we have said before, to address them.

[Erik Elander, Research Analyst]

All right. Because the thing here is that you have actually done a really impressive job in bringing energy back to levels in terms of margins that you want to have. It took you pretty much exactly 2 years to get from 7.2% up to 10% today. And this is basically where infrastructure is. Infrastructure basically is energy 2 years ago, something like that in terms of margins, at least. When you improve the margins of the energy business, you pretty much downsized the business. Is this kind of what you can expect also for infrastructure, meaning that it will take around 2 years to get back to 10% margins in that area, and you will do it through downsizing of the business? Or how will you actually achieve those 10% in infrastructure.

[Jonas Gustavsson, President & CEO]

Yes. It's a good question, Erik, and I understand it's tempting to do the comparison. I don't think really that it's the same medicine though. I fully agree with you. We are super happy with the development in energy. And I know that many also challenged our beliefs that it will bring the margin up, and we had a good plan. It was also a combination where we integrated the former [indiscernible] business, as you remember, with the Poyry business, and we could get a good kind of leverage into that, and it's a very solid segment. On the infra business, we fundamentally believe it's a growth segment. And the plan we have is to both improve profitability because it is not on the level we expect, but at the same time, driving growth. And coming back to -- because infra is roughly 40% of the portfolio. And when you slice infra in, our division into -- we have a building, we have road and we have rail and we have water, we have environment and architect. And we know today pretty well where we have the challenges on that.So I will say it is a combination of performance improvement, but at the same time, leaning forward into growth. And I hear you and -- but -- so it's not a copy/paste from energy to infra. But of course, things that we have done in energy in driving performance, product execution, et cetera, all the good things we can copy and use, we are doing.

[Juuso Pajunen, Chief Financial Officer]

But maybe it is good to complement on the comment that energy and infra business are different, both from the geographical footprint and the volume-based perspective. So infra is driving a couple of big volume bases; Sweden, Finland, Norway, Switzerland. While energy is an international business with more scattered footprint. So obviously, then the problematics on that part are quite different. Then the other part that is important to note, especially in kind of the time spend, how you take actions is that energy profitability, obviously, when it is driven also by top line energy projects are bigger and lengthier than infra projects. In infra, we obviously have the transportation part where you have longer projects, but those are not as long as in energy or the structure is different. And then at the same time, there's a big portion of the revenues, 40+% is building projects. That is normally a short order stock structure in the portfolio. So the turnaround times can't be compared between energy and infra from that perspective. Obviously, the methodology on how you drive performance in people business is quite a lot the same, but the levers maybe between infra and energy are slightly different.

[Jonas Gustavsson, President & CEO]

And finally, to say it should not take 2 years to bring it back.

[Erik Elander, Research Analyst]

That's what I wanted to hear.

[Jonas Gustavsson, President & CEO]

And I strongly believe that because when you zoom out, for sure, I believe that the market will not always be constant without increased competition on price pressure. But what we believe is that the market is favorable. It's shifting. But I believe that we are well positioned. You could say, as Juuso said, that if you go back a few years, we had some big projects also in transportations, like Bypass Stockholm was a big one. And now the project sizes for AFRY has gone down slightly. So it's a bit of a different landscape. And -- but we will be on it, and we will do our utmost to bring it to the level that we expect it to be.

[Operator]

So we have another question from Johan Sunden, Carnegie. You raised your hands. So I think you have an additional question, go ahead.

[Johan Sundén, Research Analyst]

Yes. I have an additional follow-up question on the energy segment, if I may. And that's regarding the margin profile there. I have asked you multiple times of how sustainable these levels are. You said that it's lumpy. It depends on where you are currently in specific projects and so on. And given your -- I think your comments on the outlook is a little bit more positive than you have had for the last 2 quarters or so. Can we expect -- can we be -- extrapolate this good margin level this time? Or is this the similar thinking that it's lumpy? Or where are we in the -- in facing there?

[Jonas Gustavsson, President & CEO]

I mean you'll see. But I think as you said, it is a corridor that we -- because, as Juuso said, we have an effect from big projects. And also, as we talked about, the pandemic, we believe that and we have seen the energy division have reached a robust level, but to really knock it down to say it will not go below this or will go above this, I think it's a bit challenging in a product environment. We know that it's been proven now that we have reached a sustainable good level, but it will vary over time. And I believe now, in general, when you sum out with ongoing transformation in the energy segment. I believe that when we are getting back because now we are delivering solid margins with negative growth. And of course, keeping the operational performance and getting top line growth, I mean, who knows what we can deliver, but I will not commit to it because I think we have done a good job reaching the level we are today.

[Juuso Pajunen, Chief Financial Officer]

And then maybe to complement on that one. I've said it earlier in a way that the project curve in energy is like S-curve. So you start slowly, then you accelerate and then you end slowly. And in the margin management of those projects, obviously, when you are in the hectic phase or early phase, you evaluate your future margins, you go through your project processes and you make sure that you deliver. And then if you deliver more efficiently, these are quite often lump sum projects, then when you reach the end part of the cycle, then you may have positive surprises in there. And that is typical in the project business. And now we are in a situation where we are expecting many of the newly awarded projects to enter those hectic spaces. So during those times, they deliver solid normal profits. And then obviously, when we execute them within the plan or even better than plan, it can come out with a kick. Now this is normally fully smoothened over time. But now due to the COVID pandemic and delayed starts in the projects, we have maybe now a portfolio that is slightly at the end part of that S cycle, more than in the beginning part. And that one has boosted the margins despite we see reduction in the revenue. And that is, of course, a pattern that will not continue forever, and then that means that energy comes back to the -- a bit more normalized margin levels. But in the smooth portfolio, of course, when we get to the growth, and like Jonas says, we have quite a good potential also in the future.

[Johan Sundén, Research Analyst]

And just a follow-up on your explanation, Juuso, the timing for this kind of normalization, is it one quarter ahead? Or is it 6 months or 9 months or so? How should we think about it?

[Juuso Pajunen, Chief Financial Officer]

In the normal perspective, we are talking about 1 to 2 quarters, normally. But this is, of course, highly driven, how the volumes start ramping up and how the projects start ramping up, especially in the Southeastern Asia part. But as in general, this is normal behavior in the project business. This is how it works. So it's nothing abnormal. You get a bit of volatility in there. And when you manage your projects well, obviously, then you are happy to see volatility more in the positive side than in the negative side.

[Operator]

So we have one more question from Erik Paulsson.

[Erik Paulsson]

It's Erik Paulsson at Enter Fonder. I was just thinking about the engineering side and hiring of new personnel there, if you see any tight supply, et cetera, and the potential how inflation coming up on that side? What do you see there?

[Jonas Gustavsson, President & CEO]

Yes. I can start and Juuso complement. I mean, right now, I think we are able with AFRY brand and with our development to attract really good talents. But we are also aware that the fight for talents will only increase, especially in those segments where many industries, clients are going like digitalization. So we will fight to offer a really interesting company, good development, sustainability being the base, diverse company, international company. And right now we have not seen inflation taking off dramatically in the overall business. It is stable. But from a stomach feeling, with all the transformations ongoing, it will be a fight for competence, and we are getting prepared for that and doing our utmost to stick out as a company that you would like to start with that offers a really interesting career and that you can actually make meaningful thing because large -- our portfolio is gearing towards really sustainable projects to our clients. So we are keeping a good eye on that. But right now, from an inflation point of view, no dramatic changes.

[Operator]

One last question from Johan Dahl.

[Johan Dahl, Analyst]

Can you just -- in your -- the acquisitions that have been made year-to-date, it seems that the multiple have been roughly 10x, just doing the math. Is that where you peg the market at right now? Or should we take into consideration what the last 12 months, the pandemic, et cetera, or have prices gone up in your view?

[Jonas Gustavsson, President & CEO]

Good question. Good last question. I think -- and I will ask Juuso to support me. I think I would say that we are also looking on companies that are maybe not the same companies we looked at 3 years back. So that's one reason why I think we pushed multiple up, Johan, because we have some really interesting, in asset management or digital companies like we acquired a company in Finland, Cubiq Analytics was really a analytic company that will complement our digital offering. We did the one in Vahanen now in Finland. So I think on the overall, we are pushing our appetite to bringing companies with higher, I would say, niche competence than before, and that pushes the multiple up slightly. But then on the total valuation, I don't know Juuso, if you want to?

[Juuso Pajunen, Chief Financial Officer]

Yes. I think that we see on those multiples, 2 different impacts. The other one is the portfolio impact. What we buy and like Jonas explained, we have entered more and more the digital world where the valuations are different compared to traditional engineering world. So that impacts the numbers you referred, Johan, a bit. But then the second part is that, as you all probably have seen equity markets have been quite positive after the pandemic first outbreak and decline. And that is also, to a certain degree, trickling down to [indiscernible] market in the non-listed company. So we can see that the valuations compared to 2 years ago have been modestly going upwards. But that is highly, I would say, fragmented market. And as I said, we are operating the engineering part. We are operating in the different parts of the consulting part, and we're operating in the digital part. So all of those ones have different valuation, multiples or principles on the acquisitions. But in general, it is fair to say that when equity values go up in the stock market at some kind of like, it's also visible in the non-listed market.

[Operator]

So we have no more questions. So Please go ahead, Jonas.

[Jonas Gustavsson, President & CEO]

Okay. So thank you again then, good questions. And so thank you for that. And just again, then summarizing the quarter. I think the third quarter with vacations is normally the most challenging quarter for us. So when you sum out a bit, we are happy with the close to 10% growth. We are not hiding away from the fact that we have issues and challenges to bring infra back on business on the level it should be. We believe that the market is stable, solid, and we will focus on those areas that has not performed on the level of expect. No question about that. But then zooming out a bit still then, we are really happy with industrial recovery and the impact it has on our divisions, like IDS, process industries, stable management, consulting, energy good levels. And again, we have acquired a lot of companies like Vahanen, which is a really good complement in Finland. That will have no real impact in the negative side into the areas where we have our challenges. So there's a lot of positives, but we know where we need to work and bring the performance up on a better level.So with that said, thank you so much for listening and taking the time and looking forward to see you soon again. Thank you so much.