Afry AB

STO:AFRY

Earnings Call Transcript 2022-Q3

[Jonas Gustavsson, executive]

So, warm welcome to this Quarter 3 presentation from AFRY. My name is Jonas Gustavsson, I am the CEO of AFRY, and I will also shortly be joined here from our CFO, Juuso Pajunen. So, let's start then with a summary of the third quarter.

And one of the big highlights for us is of course, the strong growth. So, we see a continued demand and all divisions are delivering strong organic growth in the quarter. So total growth ended up at close to 20%, and the net sales SEK 5.3 billion and the organic growth was 10.4%, adjusted for the calendar effects. So I will say this is really a strong number from our view. And again, all divisions have delivered solid growth. And the order stock is actually on historical high level.

EBITA SEK 384 million and the margin ended up at 7.3%, and Juuso will, of course, take you through the bridge compared to last year. Also I want to highlight that announced cost saving program that we started up beginning of the year, we have not completed that and it has delivered according to plan.

And we have seen, for example, then in Infrastructure, which actually is improving the margin in the quarter, that it also have gave us effect in the quarter. But with that said, we are continuing the focus on driving cost efficiency across the whole company and also pricing as an important component, of course.

We also would like to highlight that we have reached a very important milestone in the rollout of our new ERP system. So we are now live with some 6,000 users using our new system. And with that, we are not continuing the rollout. And of course, this is a big project. It goes through the whole company. But again, we've reached this very important milestone during the fall.

And we have also highlighted during the quarter that we have now reached an agreement to divest our Russian business to local management.

Now, looking on the market, I will say we are living in the interesting times, of course. That, for sure, we are seeing the increased uncertainty, geopolitical, but also increasing inflation and interest rates. And we have seen some projects, not that many, but some projects being delayed or decision making taking some longer time, obviously effective from the uncertainty.

But in the other hand, we still see a very strong market. Of course, because we are growing, on a really high level organically across all divisions. So there's still a lot of investment ongoing, for sure, driven from the big industrial transformation.

So we see a strong demand specially on our industrial segments like Pulp & Paper, mining and metals, we are entering in a very good way in South America and the whole energy transformation and electrification, just to highlight a few sector, that drives the demand in the industry side.

Infrastructure, in general, continue to be stable. So the only segment that we have highlighted is the private real estate, private housing, which is a smaller part of AFRY's business, but still. Other than that, we also see stable demand in the whole Infrastructure segment.

Of course, we are bringing home a lot of interesting orders. And I'm really happy to see that, I mean, in the core of AFRY, even if you go back to when AF was founded or our company was founded 120 years ago, the roots is Energy and Process Industry. We see a lot of demand in that dual sectors.

So this is 3 products. One is engineering service for Ardagh Group's new recyclable metal and glass packaging in Brazil. So again, I will get back to that, because South America is a very strong market for us.

We had also an assignment for the Cargo sous terrain, it's in the Swiss part -- or in the France part of Switzerland, logistics systems. And then an advisory service to Keppel Infrastructure Trust, their investment in offshore wind energy assets.

So of course, Energy, Process Industries is in the core of AFRY and we see really strong demand and more and more projects in those sectors.

Just a highlight on the divisions, and again Juuso will go more into depth. Infrastructure, solid growth, 8.5% organic growth. And we are really happy to see that Infrastructure improves the margin compared to a year ago. Of course, 6.1% is not the end of it, we want more.

But we are happy that the cost program, the work we do with efficiency is a giving effect in the Infrastructure. But we continue to work to improve our result in or in the performance in the Infrastructure division.

Industrial & Digital, obviously, a solid organic growth and also solid margin. Process Industries, to highlight the top line, close to 20% organic growth. And here again, the South American market supported a lot in that number. Margin slightly lower, but that was also due to that we had a really favorable product mix last year.

In general, this segment is really good and this is in the core of AFRY, and we will continue to push to improve and drive our business in the Process Industries.

Energy, also grows, strong and solid, 8% EBITA margin, lower than last year. Last year we had one big Energy product that was close, that gave us a really strong boost in the margin last year. And that explains the delta from last year. But in general, good demand and solid result.

AFRY X, well, we're still in adjusting, I would say, the product portfolio in AFRY X. So solid growth also because the demand for digital service is for sure there. But, of course, we will bring that division up to solid profits, so that work is ongoing. And in the next quarters we absolutely have an ambition that step by step we will have a solid profit and margin in the AFRY X business.

Management Consulting, I will stand on that, also solid organic growth, stable results, 15%. Last year we had one success fee that also boosted Management Consulting last year. But in general, we see a really strong demand in our Management Consulting business driven from bioindustry and Energy where we are actually focusing on then.

So of course, we want more, but as the third quarter with Infrastructure stepping up, it is a stable quarter, but we will, for push, for more.

With that said, I will invite Juuso Pajunen to take us through the financials. So please Juuso?

[Juuso Pajunen, executive]

Thank you, Jonas. Good, so let's talk about numbers slightly. I'm extremely happy to read you the number SEK 5.3 billion on quarter 3, it's almost a 20% growth. If we then take 6% of FX and 3.7% of the acquisition growth, there remain still more than half of that one on the organic growth and 10.4% in adjusted organic growth.

And even better on that one, when we look a bit under the hood, like Jonas explained on the divisional slides, all divisions reported strong organic growth, also including Energy who has had some struggles early on that part. So, we are growing in all segments.

Then if we think about what has been supporting that growth and how it has been coming, we have a continued high demand. We have been able to increase our number of FTE significantly. We have some 2,000 employees more, but we have also been able to push up our prices. So our active work in the price increases has also contributed on the adjusted organic growth.

Then if we look a bit further, we have also more sub-consulting than we had in the previous quarters. And then to reiterate the foreign exchange currencies, which of course when the Swedish crown at the levels of 11, boosts our revenues.

If we then look the order stock, it continues to grow. I am happy that we are at the moment of time in probably a record high order stock in comparison to revenues and in absolute terms, in adjusted with currencies or not adjusted with currencies. So we are at a strong point with order stock for the future quarters to come also.

If we then look a bit further into the EBITA development. Apparently now the slide started to move, apologies for small delay. So, we have delivered SEK 384 million of EBITA. That's an improvement compared to SEK 369 million compared to previous year. We have had strong growth that reports that improvement. We have implemented and completed our cost saving program in Infra and in group common, and we get benefit from the pricing.

So in absolute terms, we are improving our profitability. But at the same time, like you saw with record high revenues and organic growth, the margin was negatively impacted by high employee turnover. We have an increased use of sub-consultants who have a lower overhead coverage compared to own employees. And then we have somewhat less favorable project mix in some segments, but especially in Process Industries where we generate solid profits, but it's slightly less favorable than previous year.

And then if we look further, I will come a bit more into the details of the previous year quarter 3 and differences between the divisions. But we had several positive items impacting the quarter on previous year.

Then, still if we look the 7.3% in a historical context, it is good to note that this part making 8.3% previous year. If we go to 2020, yes burdened by COVID, I think it was 6.7%. 2019, without any COVID was 6.8%, and 2018 standalone it was 7.4%. So, this 7.3% in that context is quite an acceptable number. It is not up to our ambition, but it is quite okay. So it is a good place to start continuing the improvement.

Then if we go to the following slide on the EBITA bridge. We can look a bit further reading the divisions. Infrastructure has completed the cost savings program, is working heavily on price increases and on efficiency, and we can see that one in the numbers. Margin improved to 6.1% and that's SEK 32 million absolute improvement in the profitability.

At the same time, Industry & Digital Solutions continue to grow, but they have a large amount of sub-consultants in the revenues, and especially the IT related segments that we see also in a AFRY X have been impacted by the high employee turnover.

If we then look into the Process Industries, we have a slightly less favorable project and sales mix. And then there is normal seasonality, which is typical when you have projects compared to services. So you tend to have, based on absences and vacations, a bit of normal seasonality.

Looking then to Energy. Previous year was impacted by a closure of a major EPC project in Asia that provided additional profits. Also, that money is typical to project business. Now it happen to bring positives in Q3 2021.

If we then exclude that one, I am happy to see that all of our segments are improving. The operational improvement is -- the underperformance is on the solid level.

If we then look into the Management Consulting, this one you already know by heart. They are having transaction related success fees that time every now and then. Previous year they had a big success fee on the quarter 3. Now this quarter 3 they didn't have. And despite that one they are delivering benchmark profits, high growth, both in absolute levels and in relative levels. So, I'm very happy on the performance of Management Consulting.

Finally, then AFRY X, they are having a high employee turnover that is characteristics to -- especially to IT segments. We have also reduced the development of own software that has impacted positively the results, but it has been eaten out by the ramp up of the new employees and subsequent power utilization in the division.

Group common, is slightly spending more than previous year Q3, but we see clearly the impact of the completed restructuring or cost program and I'm quite happy where we are on the cost levels there. But having said that one, this is a work that never ends. We continue to optimize and work on our cost structure. We have not yet reached our margin targets.

Then if we look the financial position, we continue to have strong liquidity. We reported net debt to EBITA at 2.5 when adjusted for items affecting comparability, and excluding the IFR 16 impacts. We have a good position on that one. And as you know the seasonality of our cash flows, Q4 normally is a strong cash quarter.

During Q3 and during year-to-date we have -- the net debt has been increased by the acquisitions. It has been reduced by the cash flow from operations. Our cash flow from operations was slightly better than previous year on the same quarter, but not reaching fully the ambition. I think this is also a topic that we continue to working on.

But at the same time we have seen that some of the client behavior has pushed from last week of September payouts of the invoices to first week of October, which is also typical in certain circumstances. So room to improve in cash flow, but we are in a fairly good position.

Then it is good to know that our net debt, we have parts of our debt structure is in euros. With the volatile in FX rates we are seeing that the euro denominated debt is higher and at the same time some pension liabilities increase. So FX creates some volatility in our net debt, but we do hedge it and we are in a good position from that perspective.

And then finally earnings per share, SEK 1.59, but adjusted with the write-down divestment of Russian entities it would have been SEK 2.18. It is good to note that the Russian divestment to management has signed, but the closure is subject for final approvals. And until that closure happens it is a ruble based deal. It may create some volatility in the FX or via the FX changes in our figures.

But with these ones, I would like to hand over back to Jonas.

[Jonas Gustavsson, executive]

Thank you so much, Juuso. Thank you for that. So just to close before we go to questions. Just highlight a few things -- positive things, starting with the mid one. We are happy that we are once again ranked in the big Universum ranking, Sweden as one of the top 10 employers in Sweden.

And you also mentioned it, we are now more than 2,000 -- we are 2000 more colleagues in AFRY now compared to a year ago. So we are getting close to 19,000 fantastic employees in AFRY. So we're very proud of that.

Also, the EcoVadis that we are ranked the highest award in sustainability -- global sustainability and social responsibility rating. And this is something that we take extremely serious and it goes very much hand-in-hand with our mission, of course, at AFRY.

And then also one thing on the left side is, in South America, our operation in Brazil, and we have a long and really good history in South America. And we are now growing in both bioindustry, Pulp & Paper, but also in mining. And we were receiving a very good award in Brazil for one of the highest ranked engineering companies.

So, these are 3 awards that we are proud of. So, despite we have a lot of uncertainty in the market, we see a lot of opportunities. And I will say the spirit in AFRY is very, very good.

So closing down before questions, this one we have used before. It is actually what we are working on 3 major areas. One is, of course, to continue to work with cost efficiency. The cost program that Juuso also said we have closed, but we are continuing the whole work in group, but also in divisions to optimize, optimize, optimize and pricing.

Then we are, of course, getting prepared, depending on where the market is going to act if the market is getting weak. Right now we see a solid demand, but we have plans if we will see demand going down.

The second one is more that we are taking all opportunities we can see. Looking at the Energy sector, Process Industries sector, the electrification, digitization, there's still strong demands, and this is in the core sector at AFRY. I mean, we are a company that is grown from industry, and right now, we see this big industrial transformation with a lot of opportunity in the Nordics, in Europe, but also, for example, in South America.

And the third one is, we continue to do those investments that we think are absolutely important. The ERP system that has been is a long-term project for us. We will continue now to roll out that step by step and then start to get the benefit from those investments. So these are the 3 boxes that we drive in all directions, but also from group.

So, with that said, I will invite Juuso also again here and open up for any questions.

[Operator]

[Operator Instructions] We take the first question from Johan Dahl at Danske Bank.

[Johan Dahl, analyst]

Can you just address and frame the more cyclical parts in AFRY. You talked about the real estate, commercial properties, et cetera. But also adding to that, if you look on the industrial R&D that you're doing, for example, can you just sort of frame it as part of your total portfolio, what you're seeing in those areas now and potential contingency plans here heading into '23? It would just be interesting to hear your view on that.

[Jonas Gustavsson, executive]

Yes, thank you, Johan. One thing, what we see in the more -- you talk about automotive, I think we continue to see really strong demand, Johan. I think the whole electrification and the investment ongoing into our automotive clients, more software, more styling and the whole electrification drives our demand. And I think during the pandemic, we also repositioned our offering. So I think we are in a good place. And so right now, we don't see any signs that demand will go down.

And on the real estate that we have highlighted, the portion that we have to the private housing sector is really small. But that's the sector that we would highlight as the one that is in risk. But it's a small sector Juuso?

[Juuso Pajunen, executive]

Absolutely correct. It is very insignificant in our total portfolio.

[Jonas Gustavsson, executive]

So, it's more, Johan, that we, of course, follow all the indicators, we can see that housing projects are postponed. But right now, I wouldn't say that we really feel it, but it's one area that we are following closely.

At the same time, on the real estate side, we see the increasing demand on industrial buildings. So when all these big industrial investments are done, they require a new factory building. So we see partly that is compensating. And of course, we are then steering a lot of our real estate building technology teams towards that segment. But I think we are more highlighting that we see a potential week on that.

[Johan Dahl, analyst]

I'm just trying to get a feel for -- in your review, how much of the portfolio was exposed to this type of cyclical variations. I mean you have all these megatrend driven short projects in AFRY. But is it a 1/4, is it 40% of the total?

[Jonas Gustavsson, executive]

No.

[Johan Dahl, analyst]

In your minds how you look at it?

[Jonas Gustavsson, executive]

Yes, no. I would say that the private real estate segment is below 5%, 4%.

[Juuso Pajunen, executive]

Yes, it's around 4%, including residential, commercial buildings, shopping malls, offices and such. I'm now talking about the total AFRY revenues.

[Jonas Gustavsson, executive]

And to the automotive, Johan, we were up to 10% before the pandemic, and then we were shrinking because we actually restructured. And I would say now, maybe we are around roughly 7% or something to the automotive sector.

[Juuso Pajunen, executive]

Yes, slightly above then 7%.

[Jonas Gustavsson, executive]

Slight above 7%. But the beauty with automotive is that we are growing our business in other segments through the R&D process automotive than we did before. But that's roughly the numbers, Johan.

[Johan Dahl, analyst]

All right. Just a quick one before getting back in line again. Can you just address the less favorable project mix that you're talking about? What's your visibility on that point going forward? And what sort of impact are we talking about in that sense?

[Jonas Gustavsson, executive]

Do you want to take it?

[Juuso Pajunen, executive]

Yes, I can take it. So basically, the biggest impact on the less favorable project mix comes from the Process Industries. We have been growing heavily in Brazil. We are #1 --- and actually just elected as the best engineering company in Brazil in the industrial segments, but we are growing heavily in there.

And there we have traditionally done a lot of Pulp & Paper projects and some metals and mining projects. And now in the active implementation phase is more of the metal and mining projects. They come with an inherently lower, but still a lucrative and strong margin, but compared to Pulp & Paper, where we are the world leader, they are on a lower level. And that is, at the moment, impacting the Process Industries' relative profitability, especially.

[Jonas Gustavsson, executive]

Yes. Not dragged out too long, Johan, but I was actually in Brazil a couple of weeks ago, and we are entering the mine -- metal and mining sector. And just in a couple of years, we have now more than 500 employees, and a slightly lower margin, what you Juuso said. But a super interesting segment, more helping the clients in sustainable mining. So we said we want to grow, but the margin is slightly lower than our top end Pulp & Paper plant, for example.

[Operator]

So we take the next question from Raymond Ke at Nordea.

[Raymond Ke, analyst]

So fist question, a couple from me. Volume and price, could you give us sort of mix between those -- that contribute to the organic growth?

[Juuso Pajunen, executive]

Yes. Thank you, if I'll take this one. So basically, as you saw, the organic growth was 10.4%. We have some 7% of that one is coming from the FTE increases. And then the rest is more or less coming from pricing with some positive impacts, and then there are some negative down pooling factors.

If I take our core countries and basically on local currencies, we have rounded 5% price increases visible in there that are then slightly diluted by some other impacts, and then we go back into that 10.4% organic growth. But that's give or take the range we are talking about.

[Raymond Ke, analyst]

And secondly, you talked about project delays. Are these material enough to have had an impact in the Q3 report, would say?

[Jonas Gustavsson, executive]

I would say not really. It's more a market sign. And so, I wouldn't say that it's material. It's more kind of an indicator that -- for example, in the real estate building segment in Sweden, we are doing a lot of small projects and some of them have been delayed. So nothing really material, I would say.

[Raymond Ke, analyst]

And one final question, if I may. So, the increased use of sub-consultants. Could you perhaps put it into context and say how much higher the current level is compared to, say a normal level? And is the elevated use of sub-consultants something that is expected to remain in the medium term?

[Jonas Gustavsson, executive]

First of all, our operation is based on using a sub-consultant structure. And so, we have a good actually structure on using them, especially when we have some experts that we -- but in the quarter, with the high attrition we have seen in some areas, we have used that a bit more. And Juuso stated earlier, we get a bit margin dilution for using sub-consultant.

So I think moving forward -- we are not disclosing the number. But moving forward, I don't see it as a risk. We will always have some quarters more or less. But just in quarter 3, in some areas, we mentioned Industrial & Digital Solutions division, we used a bit more, and we could see that impacting a bit on the margin.

But I wouldn't say it's anything critical, anything like that. We, of course, need to work a lot to reduce attrition, making AFRY the most attractive employer and having a even better onboarding of new employees. Because as we mentioned, we have actually increased with 2,000 employees in a year, so we are building up our employee base. But using sub-consultant is a way also to take on bigger projects and in some areas when we have higher attrition.

[Operator]

So we take the next question from Johan Sunden, Carnegie.

[Johan Sundén, analyst]

My question is related to nuclear power. There's been a lot of talk in Sweden over the last month or so regarding a restart and a focus on nuclear power. My view -- or it seems like it will be quick and the new government are in a hurry to kind of get things in place. What's your view on the nuclear market and what's basic -- now when can we expect projects to enter your order books?

[Jonas Gustavsson, executive]

Yes, it's a good question. First of all, A, we have a very deep nuclear competence, and we have kept that because we were very much involved in the build-out of the nuclear plants in the 70s, for example. And of course, we are following it super closely now, and we have been involved in some of the big ones in Finland, for example, and so on.

So your question, how fast it will be. I think I'm not maybe the guy to say how quickly it will be there. But I want to say that we are very actively involved with our experts in those products. So for all these smaller modular vectors are very interesting, and it's not only here in the Sweden or the Nordic that is on discussion, we see a lot of pre-study discussion about small modular vectors not only in Sweden but in other countries, too. And we are very actively with our experts involved in those projects.

And of course, as I said, we have a strong international nuclear competence, not only in Sweden that we will use for this product when they arrive. My view is that it probably will take a bit longer than many hope. So as we have said, we have also released a lot of energy report at AFRY where we absolutely believe that nuclear can be an important part, but there are other things that needs to be done like wind and the way you optimize the total energy system, including energy savings. But all that you know. But nuclear for sure will be one part, but maybe it will take a bit longer than some people hope.

[Johan Sundén, analyst]

Thanks for clarifying that point. And then back to Johan's you asked question on the visibility ahead. You talked about that you have good order books as of now and the strengthen and the record high levels. How long visibility of turnover do you have in your current order book?

[Jonas Gustavsson, executive]

Yes. I think on the kind of product order book, we have quite good visibility since it is a project business. And Juuso mentioned it, we have an all-time high, actually, in all our product business, both Infrastructure and but also in our Process Industries.

But then, of course, we have a business that is more service-driven, where we have shorter order books. So, it is the fact that we have a longer visibility in the projects and less in the service business. So that's why we follow very closely the signs in the service business.

But what I think is, again, then that a lot of our service business is also kind of into that industrial transformation. We talked about automotive as one. So, I don't know if you want to complement that, Juuso?

[Juuso Pajunen, executive]

No, I think that is quite a comprehensive answer. And then I can just reiterate that, compared to revenues, we have higher order stock than earlier. So it's easy to you to check the annual report order stock number and extrapolated from there also. Unfortunately, I don't recall exact from the top of my head.

[Operator]

And we take the next question from Dan Johansson from SEB.

[Dan Johansson, analyst]

First on a bit on staff turnover, I suppose the high staff turnover has been a bit of a pain during this year so far. Are you seeing any signs that easing now September, October, people are getting more scared of their jobs, perhaps?

[Jonas Gustavsson, executive]

Yes. Good question. I think if you look on our turnover, put it a bit on order. It's not significantly higher than last year, I have to say, but it is on a high level. But if anything, it's stabilizing. And my belief is like yours, with a bit more worrying on the market, there is maybe belief that it will maybe at least not go up again.

At the same time, I would say that we have a -- we are working quite a lot on doing what we can to both attract, but retain our people at AFRY. So it goes to sites. But it is something that for a company like us is very crucial that we can reduce the employee turnover, and we are doing what we can. But if anything, I believe that it will not continue to increase, but rather, hopefully, we will decrease it.

[Dan Johansson, analyst]

And perhaps going to your cost savings in the Infrastructure. Have you reached the full run rate now, the SEK 100 million you initially target that. And is there any plans to increase that scope given what was in the private real estate market right now compared to when you set that target. Are you planning on increasing that efforts more now or is that -- the SEK 100 million the relevant number to look at?

[Jonas Gustavsson, executive]

I would say that we have reached that. But with that said, for sure, looking on all the kind of signs that we can enter a more difficult market. We are working with cost and efficiency across without launching a cost program.

So, yes. And as I said, we are improving our Infrastructure business. At the same time, we are not on absolute level where we want to be. But we want to see this more as a continuous systematic work on the functions.

We talk about the real estate structure, the whole IT operation, which is a big thing. But also then in the divisions, management layer, how we optimize -- so there's -- and we are doing it more systematically now than we have maybe done if you go back 2, 3 years without having a new cost program at this stage.

[Juuso Pajunen, executive]

And maybe to clarify, Dan, it's SEK 100 million, SEK 80 million in Infra and SEK 20 million in group common, to avoid having mislabels in people's heads.

[Dan Johansson, analyst]

Thanks for that clarification. And on the topic of costs, in AFRY X, you're onboarding some new people there and also take SEK 20 million charge for the software part of that business. How should we think about that cost development going forward now? Should we expect it to remain -- the investments to remain at these levels or increase, decrease going forward in the next few quarters?

[Jonas Gustavsson, executive]

I mean, as Juuso said, we have then reduced the kind of product program in AFRY X step by step, and now we are stabilizing it. But then, of course, that kind of reduction of cost, if you want to put it like that, have been eaten up a bit on the high attrition and what we had in the third quarter.

But moving forward, we should expect an improvement in AFRY X when you look on the total number because it's clear for us that we can't carry a division that makes breakeven on the margin when we are in a market, which is in general, good. So, getting our attrition and onboarding stabilized and then we are getting where we want to be.

So we have a couple of 2, 3 software products that we really believe in, but we have scaled it down over the quarter. So, step by step, you should expect an improvement on the profit in AFRY X.

[Operator]

I think we have a follow-up question from Johan Dahl at Danske Bank.

[Johan Dahl, analyst]

I heard your comments regarding the ERP milestones here. Could you just repeat to us the anticipated effect of this implementation updated as of today? And why this is such a milestone for the company?

[Jonas Gustavsson, executive]

Yes. I will leave it to you. But I just want to comment on that. So far, it is an investment, Johan. I would love to say that it is a positive effect still. But -- so that will come. But the point is that our implementation products have reached a very important milestone, and Juuso have been, of course, very much involved in that. So, I will leave it with warm hands to Juuso.

[Juuso Pajunen, executive]

Thank you, Jonas. So, Johan, as you know, ERP projects always come with some obstacles, and they always require iteration until you are happy. And now we're reaching this milestone, we start to be in a place where we see a functional tool that starts to fulfill our needs and allows us to go to the next phases of implementation in larger units, in other countries and so on. So now we have reached a one stepping stone further that allows us to take the next steps into the direction. And then in the end allows us to start to gain some benefits also on those ones.

[Jonas Gustavsson, executive]

So maybe put it like that, now we are actually prepared to accelerate the rollout of the ERP system and start to grasp the benefit from the system after a couple of years of getting the system where we want to be. But right now, I feel we are in a stable and good place with the ERP rollout.

And we are still operating in a very fragmented system landscape and very not modern. And this one will be a big thing for AFRY when we start to get -- to take the effects of it. But still a bit ahead, Johan. But I believe we are now over the hill and we start to do this rollout.

[Johan Dahl, analyst]

And can you possibly comment to any type of time frame with regards to profitability in AFRY X?

[Jonas Gustavsson, executive]

We have a time plan that we are continuing to follow you, Juuso. So, I think this is -- we just wanted to highlight that, again then that we reached this important milestone. We have now a system that actually fulfills the needs of AFRY. So in one hand support our big projects and getting better control on the other hand, also supporting our service business. But in general, we have a plan to be done in a couple of years, Juuso?

[Juuso Pajunen, executive]

Yes. So basically, materially, we will continue on the rollout in '23, we will exit Nordics then and start to have a material part of the portfolio implemented in '24. And that has not changed anywhere. So that continues to be there, and I can only reiterate that exiting Sweden covers more than 50% of our portfolio at that point of time where we have had also most of the legacy systems used.

And the benefits will then roll out slightly afterwards when we have exited Sweden in a timely manner, but also always difficult to put fully, fully quarter-by-quarter on to the table, especially when we talk about future.

[Jonas Gustavsson, executive]

And I want to -- sorry, Johan. Go ahead.

[Johan Dahl, analyst]

I just wanted a final clarification. You talked about positive price effects on your reported EBITA, I presume that's net of wages you're talking a positive effect on EBITA or just to clarify that remark..

[Juuso Pajunen, executive]

On a year-to-date basis, yes, we have higher price increases compared to salary increases. That is absolutely correct.

[Operator]

And we don't have any more questions. So Jonas?

[Jonas Gustavsson, executive]

All right. But then thank you all for good questions. And just before closing for today, then, I just want to highlight that as of November 7, we will have a new CFO at AFRY, Bo Sandstrom and we will welcome him and that will be very good.

But with that said, I also would like to take the opportunity to thank you, Juuso. We started to work together and Juuso joined as CFO in conjunction with the acquisition of Poyry and the merger between AF and Poyry.

And as I said, we would not have been able to do what we have done then, first of all, bringing the 2 companies together, but also meeting a quite difficult time with the pandemic then without Juuso's fantastic work. And then also Juuso has been very instrumental in the ERP rollout.

So I would like to thank you, Juuso, for the fantastic work you have done, and it's been really cool to work with you. Wish you all the best for the future. There's still a few more weeks to go.

And at the same time, we will welcome Bo then, so to the finance community. You will, of course, meet Bo then next quarterly report, but we will also introduce Bo to you guys in the next coming weeks then. So, thank you, Juuso.

[Juuso Pajunen, executive]

Thank you, Jonas. It's been thrilling years. It's been absolutely pleasure to work with AFRY and all the entities back until 2004.

At the same time, I'd like to thank you all in the investor community and especially the analysts, I have had magnificent time, and you have taught to me a lot about the Swedish market, the capital markets and, of course, a bit about AFRY too. So, thank you all. It's been a pleasure, and I wish both AFRY and the whole community all the best.

[Jonas Gustavsson, executive]

Thanks a lot, Juuso. So, with that said, we wish all of you a fantastic weekend, and thank you so much for listening and see you soon again. Thank you so much.