Alimak Group AB (publ)

STO:ALIG

Earnings Call Analysis

Alimak Group Sees Strong Q3 2023 Performance

In Q3 2023, Alimak Group highlighted its success under the New Heights program, with notable gains in profitability and market position. Revenue growth is targeted at 6% to 10%, supported by product development, customer focus, and strategic M&A, with EBITA margin goals exceeding 18% in the next 2-3 years, indicating a robust financial strategy. The EBITA margin rose to 16.1%, from 13.7% last year, driven by Industrial, Wind, and Construction sectors. Adjusted EBITA surged to SEK 279 million, up 58%, while order intake increased, albeit with negative organic growth due to Facade Access challenges. The company outperformed in cash flow, reducing leverage below the 2.5 target. Alimak's forward-looking plans include a stronger customer-centric approach, a new website for direct engagement, and a commitment to CO2 reduction.

Earnings Overview and Financial Highlights

In a challenging macroeconomic environment compared to 2022, the company has continued to grow with strong order intakes and revenues, largely driven by inorganic growth. With an organic revenue growth of 1% in the most recent quarter and a book-to-bill ratio of 99%, the company boasts a highly positive backlog that promises well for future quarters. Adjusted EBITA has reached 16.1%, surpassing the prior year's Q3 performance, indicating successful Tractel integration and operational improvements despite rising inflationary pressures.

Profit Margin Insights

The Facade Access division has seen legacy margins improve, while the integrated Tractel margin also remains robust, albeit with typical business fluctuations. A consistent effort is underway to match Tractel's historically high margins, with a target EBITA margin of 18-20% in the upcoming quarters for the combined entities, reflecting a significant commitment to taking the group to its next level of profitability.

Cash Flow and Debt Reduction

The company has experienced its historically highest cash flow generation in the quarter, leading to a significant reduction in net debt to SEK 3.4 billion and achieving a leverage ratio of 2.47, already meeting the long-term target of less than 2.5. While high levels of cash flow cannot be expected every quarter, a continued focus on working capital control is a priority.

Strategic Growth and Market Positioning

Despite a slight softening in the Industrial division's order intake, the company maintains a strong market position due to long-term strategic investments. Management emphasizes that there has been no shift in the balance between growth pursuits and cash flow generation. Ongoing investments aim to advance organic growth without compromising the strong cash conversion fundamental to the company's operating strategy.

Balance Sheet and Capital Allocation

Strengthened by a successful SEK 2.5 billion rights issue and robust operational cash flow throughout the year, the balance sheet reflects a solid foundation for pursuing the company's capital allocation priorities, including dividends, profitable growth, and selective mergers and acquisitions. Capital expenditures are strategically directed at growth, although not distinctly categorized from maintenance investments.

Industry Segmentation and Cyclicality

Management sees uneven cyclicality across different divisions but maintains confidence in growth opportunities due to dedicated focus and widened scope. The resilience of the Alimak Group is attributed to a favorable mix of stable service revenue, diverse industry exposures and backlog patterns that provide a buffer against sudden economic downturns.

Investor Questions and Management's Forward-Looking Statements

During the Q&A, executives addressed industry-specific questions, asserting their continued emphasis on smart investments and margin improvements. They highlighted the Wind market in China as an area of strength despite geopolitical challenges, and reiterated an opportunistic yet discerning approach to M&A activities in the current economic climate.

Earnings Call Transcript 2023-Q3

[Operator]

This call is being recorded. Welcome to the Alimak Group Q3 2023 Report Presentation. [Operator Instructions].Now I will hand the conference over to the speakers, CEO, Ole Kristian Jodahl; and CFO, Sylvain Grange. Please go ahead.

[Ole Jodahl, executive]

Thank you, and a warm welcome to this quarter 3 call for Alimak Group 2023. And as you heard that I'm Ole and I always -- as always, I have with me Sylvain.So if you move page and we look at a short recap of the group. So diversified, really global industrial company all across the world, organized in 5 customer-centric divisions that we will dive more into. And as you see on the right-hand side here, the key drivers for us.First of all, we are supported by global trends like urbanization, regionalization, health and safety, et cetera, which is giving us a good fundament for base growth in this business. We do have a leading market position in the niches that we operate, but also a huge market out there to grow from.We have this global footprint and a large installed base, which also means that we have a great base for our service and aftermarket business, which is very important to the group, and we do have a strong balance sheet and cash conversion model.Turning page. 3.5 years ago, I started -- came to this company, and we then launched what we call the New Heights programme, and this was these 3 steps, establishing the base, setting the base structure, how we want to run the group. Looking into number two, securing margin improvements, what areas and what should be the strategy for each of these divisions going forward, and then coming to Phase 3 where we could drive profitable growth.We have done, of course, as you see here, and I would say, successfully the first and the second and also gotten well off on the third, deliver profitable growth in '22 and now also continuing to deliver profitable growth in 2023.And we also updated our financial targets. So if you move page, we delivered upon our first target this summer already, and we updated the targets for the next 2 to 3 years. And it's about the revenue growth, 6% to 10%. And yes, we have a base support from the market normally, but then it's driven by our activities, of course, product development, being close to our customers, truly focusing on each of these markets and securing organic growth but also complementing with M&A going forward.Then we have an EBITA margin target of more than 18%, which we said we should achieve within 2 to 3 years, something we feel comfortable with. And that's, of course, supported by the growth that we believe that we will do, but also, of course, further that will drive operational efficiencies. It's about synergies together with Tractel which we have gotten off very well with, and also, of course, about improving Facade Access.We have a leverage target of 2.5, and I'm very happy to say that we are below and into this target now after Q3, and we have a dividend payout ratio of 40% to 60%, something we have done over the last years.So if we turn page and we move into the quarterly results. So of course, very pleased that we, as a group, now are delivering another very strong quarter and make another step up both in profit and cash flow compared to the same quarter last year. And this is also the highest EBIT and cash flow quarter ever for the group. So I think it's a proof that our strategy is working in this tough business climate, and we believe also strongly that we are taking market share in our business.The adjusted EBITA margin we delivered is 16.1%, up from the 13.7% last year and aggregated, which means if -- as if Tractel would have been part of the group fully also last year. We are improving our EBITA by 7% in the quarter, and we have a 15% improvement year-over-year year-to-date. So it means that not only have we managed the integration so far, but we are also becoming stronger together.We have outstanding cash flow from operations in the quarter, basically coming from a strong focus and that we are working intensely on this in all parts of the organization. And that has also, of course, been an important part in our target to deleverage and that we are now below the 2.5 at 2.47, if you look at running 12, including Tractel fully. So that's, yes, another good quarter for us.So turning page, looking more into the details. Order intake was SEK 1,678 million, up 55% on last year, where 55% is coming from acquisitions and negative organic growth of 4%. We saw strong organic growth in Construction and Wind, especially Construction [ very ] [indiscernible] of course. While what is pushing this down is Facade Access where we are facing some delays in award decisions due to the higher interest rates, but also, of course, because we are taking a tougher stance on what type of orders we take.Revenue was up -- was SEK 1,730 million, up 58%, 53% coming from acquisitions, up 1% organically and basically driven by a strong organic growth in Industrial and Wind, but also HSPS is doing well if you look aggregated. EBITA adjusted increased to SEK 279 million, up from SEK 150 million last year and this margin of 16.1% versus 13.7%, and its main contributor is Industrial, Wind and Construction. And also very happy to see that we are delivering a margin increase now in Facade Access. So we start to get some traction of the activities we do.So moving into the divisions. Turning page, and let's look at Facade Access. Order intake was SEK 376 million, up 9%, but then 55% is coming from acquisition and it's down 48% organically. Service continued to contribute in a very positive way, but it's -- what's pulling this down is the higher interest rates, and this is [ leading ] to that projects are more uncertain from an investment perspective and that we see delays or projects being put on hold, and this is basically something that we see in all geographies.We also need to take into account that we compare with the strong quarter 3 last year. And the fact that we are -- since we are tougher and we have higher margin expectations, we have also stepped out of a couple of tenders to ensure we only take orders that we should take.Of course, we would have liked to see a stronger order intake, but we do have these natural variations, and we also feel very confident with what we are doing. We are a stronger company together with Tractel. We have a very wide offer now, and we will make sure we only take the orders that we should take, but we also see significant growth opportunities going forward.Revenue was SEK 507 million in the quarter, up 56%, 68% coming from acquisitions and minus 16% organically. We do have a solid order book here. So this difference here is coming from timing of when we close our invoice projects.EBITA, strong with SEK 40 million, a margin of 7.8%, so the highest margin we've had in a very long time for this business and improving sequentially, which is good. And here, we will continue to execute on our transformation program and will continue to improve this business going forward.So turning page. So we see that the transformation program is well on the way. We have implemented the organizational structure to drive this business. We have a strong team here now led by Philippe, the former CEO of Tractel. Commercially, we are more or less there on driving terms and securing that we take the contracts that we issued. And then we are implementing how to drive the business and work with projects. And yes, this is a thing which is in progress, of course, and will take some time until everything is set.We have also been working on go-to-market and how we can streamline and become better in working with our customers. And this business is also heavily driven by middlemen, companies that are part of design works, and we are now taking a stronger stance in this. So we would like to be able to offer and be even a more complete partner where we can work directly with our end customers.We are launching a new website in quarter 1. So this is also a new step where all 3 brands -- and they will also be able to display completely our new offer, which I'm saying we are becoming much stronger together. We can both take [ the ] tall buildings, medium height buildings, lower buildings, inside, outside, all different type of access solutions. And whether it's buildings or bridges infrastructure, we will have an offer. So this means, again, that we see nice growth opportunities going forward.So -- and then we also have the strong focus on the aftermarket, where we see a potential for retrofitting, refurbishment and also replacement of older machines. And of course, an important piece is also that we are working on CO2 reduction initiatives, both for us and to help our customers.Turning page, and some few examples. Here, you see some of the buildings that we have done recently. The first one here in -- is [ in ] Pakistan, where we are adding 2 machines to an existing tower to provide even more and better access to the full building.We have this medical site in Atlanta where we are providing all different types of access solutions. You see the complexity of the building. So that requires Davit system, it requires lifelines, and -- yes, and we have this full assortment that we can provide and do -- for sites like this. Yes, so good growth prospects, very solid growth prospects going forward.Turning page and coming to Construction. And this I see many people have had concerns around that we should be too Construction focused and that this should hit us hard. But again, we see that our model to -- on how we work in Construction is very resilient, and that also our presence with being a global provider is helping us. So we deliver another very strong order intake in the quarter, even though there is a softer market out there, and specifically in the Nordic market. And also Scanclimber is still a business which is then being affected by this.So order intake was SEK 489 million, up 65%, 26% coming from acquisitions and 36% organic growth. We had strong rental and new equipment order intake and major rental orders are basically in these markets where we operate, Australia, Canada, [indiscernible], France, Germany. And often, we see more complex multistory type of projects.Revenue was SEK 440 million, up 25%, where 22% comes from acquisitions and 1% down organically. And overall, we see high activity and also on the rental side supporting us. EBITA at SEK 82 million, up from SEK 65 million, and had a good solid margin on 18.7% versus 18.6% last year.Turning page. We have, of course, good loyal customers that we are working very close with, and Sunbelt Rentals is one of them, important to us, and we have taken very nice significant orders, both in U.K. and in U.S. for construction hoists and transport platforms with them. We do have now a high order backlog going forward, which is, of course, important to us and for this business, as we also continue to see a weak market in the residential area.But as we have said, we continue to work wide, and we continue to work on infrastructure, energy, utility sectors, and we still expect that we are able to hold up a good solid business also going forward for the Construction business. And this is driven by the business model, so -- and our strategy, where we both can sell new machines. We can buyback and refurbish and resell used machines. We rent out machines, and we have the service and the spare part business, and also now supported by the digitalization so that we are becoming more intelligent and bringing a new type of offer and opportunity to our customers.And if you turn page, we see one more example of this. A new add that we have done now is this ALICALC, which is an online tool where we then give this tool to our customers so they can calculate themselves how to tie in and fix our machines, so to make sure that this is done in the correct and safe way. And it's all digital, so it's all documented and available at any time.Turning page, and we move to Height Safety and Productivity Solutions. Order intake was SEK 351 million. All regions performing well, and we see particularly strong in the Elevator, Construction and Energy segments. Revenue was SEK 326 million. And yes, contributions from both equipment and service, as you know, it's also an important part here.EBITA, SEK 51 million, a margin of 15.6%. And here, maybe we have been not so good at communicating and this is a new division of the group. So maybe not known to everyone that quarter 3 is typically a softer quarter. So last year, it was 17.9%.So that's the main reason why we see a softer margin in quarter 3 here, but also that we have done a management fee correction, which is affecting then, or influencing then HSPS negatively, while slightly positive than on the other division. So this is an internal type of allocation. So correction that we have done.But if you look at the overall business performance, this is a business that is up 13% EBITA level year-over-year year-to-date, and it is at the same margin as last year. So the business is performing well. Gross margins, everything is there. It's just this internal cost allocation that we have done in the quarter.Turning page. We do have an increased focus and investment into product development, marketing and sales. Historically, it's been a very resilient, solid business for Tractel and that we continue to see. But what we would like to do is also to accelerate the growth in this business, and that forces that we are doing more in these areas.We are preparing some geographical expansion.– [ Old ] Alimak were present in more countries than HSPS. So that allows us and make it easy for us to place some new salespeople on an HSPS side into countries where [ old ] Alimak have been like Australia, for example. So we will do things like this next year.We are increasing our web presence and using this as a lead generation tool, and we are launching several new products now before year-end, and it's something that we continue to work a lot on, of course, going forward.We have also done and are in the process of making some cost initiatives where we are merging offices and driving synergies between, let's say, the [ old ] Alimak and the Tractel business, which has led to some changes in Singapore, China and Spain so far. And then also here, identifying CO2 reduction initiatives so that we can both for our own footprint, but also help our customers become better in this area.Turning page. And a couple of examples on customer segments. Final segment that we are working on, Fire and Rescue, is an important segment, has always been for this business, and we're doing even more because there is so much more we can do globally on this. So we are having a dedicated webpage being developed now. And we see also then that even more focus on this helps us drive both sales and generate new customers for us.And it's also the same with Elevators, always been a very important segment. We received a very nice order from a Tier 1 elevator company again this quarter, but we are also signing up new customers on the Tier 2 level. We work with all Tier 1 [ ones ], but this is examples on how we are focusing to drive growth going forward.Turning page, and we come to Industrial. Order intake was SEK 328 million, up 2%, 1% down organically. Continue to have a strong development in service and overall strong activity both in Europe and APAC. Revenue was SEK 331 million, up 20%, 18% organically, and it's, of course, coming from both equipment and services.And also, even though the order intake is a little bit lower, the book-to-bill in the quarter is still 99%. So we are not [ eating ] on the order book here, and some small variations we need to -- expect to see. We continue also here to see immense growth opportunities going forward in so many countries and places and segments that we are not really attending to today. So we have nice prospects in front of us.EBITA increased to SEK 73 million, up from SEK 50 million last year and delivering a margin of 21.9% versus 18.3% and driven by good volumes and cost control.Turning page. We have a new EVP, Jens Holmberg, into this business with a strong industrial background coming from Sandvik and also with extensive manufacturing experience. So he is now driving the rack-and-pinion manufacturing, is also part of Jens's responsibility.We had another strong quarter in the marine segment, both in North and Central Europe with, again, nice orders for these gangway solutions that we have developed, which is then a solution for these offshore supply ships connecting and servicing offshore wind turbines.We also continue to work on our full range and focusing on these ship-to-shore cranes where we have lifts and we have received some nice orders both from a Chinese key customer of ours and also for -- from a German one. We also continue to drive, of course, our strategic agenda here, where we focus on the product portfolio and being close to our customers and expanding our direct sales force in the different markets.Turning page, and we come to the last division, Wind. And again, a very strong quarter for the wind team, which proves that what we have done is the right thing. Staying close to our customers, understanding them, doing product development, focusing on cost and [ pricing ] have put us into this preferred situation with our customers. So again a strong quarter. Order intake was SEK 152 million, up 24%, 16% organically. And we see robust equipment and service basically in all regions.Revenue was SEK 169 million, up 18%, plus 10% organically. And of course, this strong due to the very high order intake that we have had in quarter 1 and 2. And also we see that our service activities maintained at a high level in all markets. EBITA, SEK 33 million, up from SEK 22 million, a margin of 19.5%, up from the 15.6%. So -- and it's coming from this activity that we are having and of course, a good drop through when you have these volumes.Turning page. So the market continues to be attractive, but I think it's important to also note that it's nothing fundamental in the market yet that has changed. So there is a more positive sentiment and things are happening. But the big waterfall in volumes and stuff is more expected to come in the 2, 3 years and forward. So what we are delivering today is very much in our own hands and what we have done ourselves. So focusing this on being the preferred partner and being proactive is continuing to deliver results.So some other activities, we are launching -- we are doing e-learning here with our customers. So we are launching a new model. We have launched a new Octopus lift for the wind industry in China, which is the biggest Wind market in the world, where we also do have a solid presence. And quarter 3 is also with -- a lot with exhibitions and we are attending, of course, and driving this.So I think Wind is also -- if you remember the issues we had with Wind and the way we have worked through and turned this around, it proves that our work is working. We know what we are doing. And this, I would say, is the same thing that we're now applying to Facade Access, even though it's in a specific Facade Access way, and we feel convinced we will achieve the same thing there.Then I turn to -- we turn page, and I turn to Sylvain.

[Sylvain Grange, executive]

Thank you very much, Ole. Good morning to everybody. We present here a summary of our key financial indicators. Order intake and revenue grow strongly, and most of the growth is inorganic. Organic revenue growth is slowing down in the quarter but still positive at 1%. Book-to-bill ratio is 99% in the quarter and 100% -- 109% on a year-to-date basis. The backlog remains very high, and this definitely brings [ comfort ] for the coming quarters. Adjusted EBITA reaches 16.1%, and this is above the aggregated performance of Q3 2022 when we reached 15.7% of adjusted margin.So we are not only mechanically benefiting from the high EBITA of Tractel, we are improving the operational performance and raising the combined margin. And this is happening in a more challenging macroeconomy today than in 2022. So we take this as a clear sign of a successful Tractel integration. The cash flow generation has been outstanding in the quarter, as mentioned by Ole, and I will come back later with a few additional details.Next, please. We now come to the bottom part of the P&L. I would like to make one additional comment regarding the EBITA performance improvements. We maintain our gross margin on a high level and SG&A costs keep being contained. So inflationary pressures have changed in nature with a lower pressure on [ base metals ], but a higher pressure on labor cost, and we carry on navigating through this in an effective way with a good level of margin.IAC, items affecting comparability, includes income from an [indiscernible] adjustments, which is related to the Tractel acquisition and the new grants obtained from the U.S. government regarding COVID-19. Finance net is mostly made of interest and the quarterly interest charge results from the higher interest rates, partially compensated by the reduced RCF drawing. And finally, tax rate is consistent with what we have been experiencing since the Tractel acquisition and reflects the [ currently ] profit distribution.Next, please. Result for the period was SEK 141 million versus SEK 77 million in Q3 2022. And EPS was SEK 1.32 versus SEK 1.08 in the same quarter last year. No specific comment here.Next, please. I am very, very pleased with the quarterly cash flow generation. We have been saying since the beginning of this year that we would be focusing highly on cash flows, and we are very pleased to present numbers consistent with both our external communication and our internal efforts.As mentioned by Ole, such a cash flow generation is unprecedented in Alimak's history, and this, to be absolutely transparent, reflects as well an element of working capital reversal from the prior period. So we can't expect this high level every quarter, but we can expect indeed the focus on the effective working capital control to continue.Next, please. The high cash flow from operation imply a significant quarterly reduction in net debt, now down to SEK 3.4 billion. Combined with a growing EBITDA, this has led to a strong deleveraging in the quarter. Factoring rolling 12 months of Tractel EBITDA, we are now at 2.47. This means we are already reaching our long-term financial target of less than 2.5.I said earlier, we will continue to pay special attention to the operating cash flows in the future in order to fund our capital allocation priorities, dividends, profitable growth and M&A. And M&A remains [indiscernible] on the list, and we will be looking at opportunities in a selective way, in particular when it comes to the target valuation.Next, please. And we now come to balance sheet. In the course of 2023, our balance sheet has been significantly strengthened [ via ] the successful SEK 2.5 billion rights issue in the first semester and high cash flow from operations in the course of the year.By the end of September, the long-term borrowings consist of the EUR 300 million term loan, which matures in 2026, and we still have a 1-year extension option. The revolving credit facility mature in July next year and the outstanding balance, which is less than SEK 400 million, is now classified in current liabilities. We are obviously working on implementing the new RCF in the coming weeks and months.And that's it for me.

[Ole Jodahl, executive]

Thank you, Sylvain. And then we turn to the last page, the summary. So yes, another good quarter for the group and very happy that we are, of course, continuing to show this positive development of profitable growth and also the strength then in the New Heights programme. You know that we both have our organizational structure supporting this way of working and that they are all working now in the same manner so that we can actually deliver a continuous solid development. The 2 2022 acquisitions have been integrated successfully. And of course, the big one, Tractel, now have 3 quarters in the bag where not only we have not lost any value to Tractel, we have together lifted the group and EBITA year-to-date, if you look consolidated, is up 15%.We have an outstanding cash flow from operations. And that, as Sylvain just talked about, very important to us, as we all know, also then since we made the big acquisition and brought in some depth. It was important to bring this back down again. And we show on top now that we have also managed that in a very short time frame, which opens up new opportunities for us.But of course, we'll continue to deleverage, while we, at the same time, are now more -- having the eyes more also on smaller and medium-sized acquisitions that will complement the group.So we are well diversified, as we have talked about, and -- both from a geographical perspective, from the fact that we work in multiple segments. We have a very solid aftermarket business that brings resilience. So overall, a good model. So we will continue to execute on the New Heights programme, of course. And what we have in mind is now to deliver on the financial and sustainability targets we talked about this summer, and we have set out to reach within the next coming years. So we will continue also to invest in sales, marketing and product development to ensure that we drive the group forward.So thank you to all employees for another good quarter, and we turn page on to the Q&A.

[Operator]

[Operator Instruction.] The next question comes from Hanna Lindbo from DNB.

[Hanna Lindbo, analyst]

My first question is on the organic order intake in Facade Access. So you talked about the project being put on hold or delayed. So my question is, would you expect this to continue or maybe even getting worse in the coming quarters? And if also somehow you maybe can quantify how much of the order decline that comes from the weaker market?

[Ole Jodahl, executive]

Yes, this -- the negative order intake on Facade Access is mainly driven by a softer market and the impact of the interest rate, which creates more uncertainty in investment decisions, which again leads to that -- projects are either put on hold or pushed forward. And that -- we don't expect that will fundamentally change in the next -- foreseeable future because we still have that inflationary environment around us, and it's not really peaked or landed yet where it will end. So we expect that to continue. But at the same time, we also are working on our program. We have a stronger offer. We see that we are expanding our footprint, and we are expanding the type of solutions we brings to market and where we can work. So that should help us going forward, like you have seen on the other divisions.If you take Construction, for example, also a difficult market, but you see how we can still achieve growth by seeing the market, how it really is, and working the way we should. So we will do that also in Facade Access.It's not a quick fix. As I've said many times, this takes time because it's longer cycles, but you start to see that we are also doing it. You start to see the results of the -- on the bottom line this quarter. And you will start to see results also on the order intake side from this. But fundamental market situation, I think, will remain for a while.

[Hanna Lindbo, analyst]

And if we move over to the Facade Access margin, it seems like the legacy margin has improved, which is [ found safe ]. But it also seems like the margin within Tractel in this division maybe has declined a bit. Could you just give me some color what is happening here in -- there? What improvements have you seen? And have you seen somewhere it has declined?

[Ole Jodahl, executive]

No, it's not really -- it's not declining. The Tractel part is still performing very well. You -- of course, you have a natural effect because it depends on how many projects you close and which phase they are in. So it's natural to have swings in this type of business. The typical situation is for all Tractel. Most -- you know that the more projects they closed in a month or in a quarter, the better the results were because they always had some contingencies that they could release because they have such good control over the projects. While it was the opposite of the [ old ] Alimak. The more projects you closed, the worse results because you had to write-off -- the write-offs a little bit.So you will have mix effects here. And we see this business as one now going forward. We have put the organization together, we drive it as one and we see it as one, and that's how it is. And we are happy to see that we are improving the margins sequentially and that we are starting to be on this journey. So...

[Hanna Lindbo, analyst]

Just one question because -- I know you said that -- now I -- in the legacy part that you see no reason that you couldn't reach the similar types of margins as in the Tractel part. Is that now when you have [ coming ] a bit into the integration? Is this still the case that we can see 18%, 20% EBITA margins here in a couple of [ quarters ]?

[Ole Jodahl, executive]

That's -- absolutely. It's still clearly our target. But it's not something that happens overnight. It needs to be steps -- step up and a good solid work that we need to continue to do over time. But we know that this is what Tractel have done over a long, long time. So we know that, that's achievable, and we see no reason why we should not be able to do that. And of course, lifting the margins here is also a significant part of taking the group up to the next level.

[Hanna Lindbo, analyst]

And the last question is, how should we view the margin within Height Safety going forward? I'm thinking about this management fee allocation. How that will impact margins forward?

[Ole Jodahl, executive]

Yes, that was also -- a retroactive type of adjustment, which means that you need to look at the year-to-date and not the quarter. And then you need to also, of course, learn the quarterly differences. And quarter 3 is typically a softer quarter from a profit perspective, as you can see now. And -- but if you look at the overall profit for that division year-to-date, it's up -- what is it, 13%, if I recall correctly, on EBITA level, and it's also from a margin perspective at the same level as last year. So -- and we are also investing in this division. So that's also important to note.We want to see more growth. We want to ensure that we increase the organic growth element here going forward. So we will increase investments slowly and steadily. So -- that said, I don't expect that this is a division where we will see major margin increases. It -- but it should be stable in this type of area where we see it now on a year-to-date basis.

[Operator]

The next question comes from Johan Dahl from Danske Bank.

[Johan Dahl, analyst]

Just a few questions, please. Just on that, you have had a very good sort of order intake over the last couple of years, I guess, in Industrial, weakening slightly in Q3. Could you add some flavor to that, to what's going on in the industry, perhaps some comments on certain segments and geographies, what you see is going on there?

[Ole Jodahl, executive]

Yes. No, I think it's -- also here, we have had -- as you were pointing out, we have had a very strong order intake and -- over a long, long time for Industrial, driven by the fact that we, for the first time, really put an Industrial division in place. If you go back before I came, it was also something called Industrial division, but it was no Industrial division. It was no one focusing on that, driving it. Now we have a dedicated structure. So that meant in the beginning that the margin went down somewhat because we invested in it. Still, we have huge needs to continue to invest and drive it.We -- but it needs to be driven, of course. We have maybe a small gap here also that we had changed this from EVP. The market is there. We still see huge growth opportunities which is sitting in our hands, of course, reading about other industrial companies. The market also on the Industrial side is a little bit softer. But I believe that we have so much in hand so we can continue to drive. So -- but it maybe a little bit combination of both, but we feel very comfortable about this business going forward.

[Johan Dahl, analyst]

Has there been any sort of reprioritization in Alimak in terms of growth versus cash flow? I mean, obviously, we're in a different sort of funding situation at the moment, and it's always -- either you go for growth or you have to sort of put more for cash flow. You're seeing very good cash flow in the quarter. Is there any such discussion in the management for more reprioritization?

[Ole Jodahl, executive]

No, it's not. We drive cash flow. That's very important to us, we have said a long time. We should have a strong cash conversion. We have not had cash conversion on the levels that we should have had in the previous 2, 3, 4 quarters. So that I'm happy to start to see that we're getting back to it. So we see some sort of catch-up effect of that in quarter 3. But that said, if you look into it -- but that's not really cash flow, but if you look into Facade Access, of course, but that's [Technical Difficulty] all our business. We make sure that we are taking orders which we make the right margins on. That was something we will -- we cleaned up in Wind, something we are now working on Facade Access and philosophy -- and something we drive in all divisions. So we will not start to take -- turn it the other way. We will not start to take orders just to fill the order book. We will make sure we take the right orders.Philippe or Sylvain, you may -- they want to add something?

[Sylvain Grange, executive]

Yes. So we work on both, definitely growth and cash flow generation. And cash flow generation includes a special focus on working capital management. But of course, it's profitability and cost as well. And we are aware that times are bit more difficult, so we have to carry on being very considerate in terms of costs, but in a way that we are not impacting on our capacity to grow the business. So it's a challenge. It's always more difficult when times are a bit more challenging, but we believe at this stage, we can achieve it.

[Ole Jodahl, executive]

Yes. And maybe also there, we are in the long-term strategy. So we are not making short-term decisions. We are driving the group forward for the long-term also.

[Johan Dahl, analyst]

Just finally on the renegotiation of the RCF. When was that expiry again? Can you say anything on progress on this renegotiation of the RCF? And also, if you could just help me out on the earnings per share. You talked about the 22% increase, I think, in the Q3 report last year, you reported SEK 1.40 something per share. Just how you calculate, that would be nice to hear.

[Sylvain Grange, executive]

So on the first question, the RCF expires in July next year and the progress for renewing the RCF is good. This is what I can say. We are very confident. On the EPS calculation, I'm not sure exactly what you refer to, but basically, the EPS is calculated based on IFRS. So you -- which means prior period EPS is restated according to that standards, but there is nothing -- I mean it's just a mechanical calculation based on the number of shares.

[Ole Jodahl, executive]

And I'm thinking, maybe if you -- feel free to talk with Sylvain after the meeting if there are something about -- details here about the calculation you would like to [ speak to ].

[Operator]

The next question comes from Andreas Koski from BNP Paribas Exane.

[Andreas Koski, analyst]

I have a few questions. The first one is on the large orders you received in Construction. Is it possible for you to quantify those large orders and how that compares to large orders in previous quarters?

[Ole Jodahl, executive]

No, I don't really have that detailed -- or that we are disclosing. But this business -- all our business, I would say, is also to some extent driven by both smaller orders and some bigger orders. And that's why, as I've been pointing to many, many times, basically every quarter -- there are variations between quarters for that reason, as you are alluding to. So this is a quarter where we have also received some nicer bigger orders for Construction. But -- so that supports that order intake, of course, but it's nothing fundamental. That -- we see this -- we have nice orders also everywhere. So it's not something specific that points out in this quarter versus the comparable quarter last year.It's driven by our consistent, persistent work with our customers. And then the timing of the different orders we cannot always control, but it's nothing that should point at a dramatic drop or -- But you see also backwards that we have some natural swings.

[Andreas Koski, analyst]

And then you talked about the higher interest rates impacting demand in Facade Access and that projects are postponed or cancelled even. Why should higher interest rates not have that kind of impact for your Construction business or your Construction division?

[Ole Jodahl, executive]

It's a very intelligent question. It do have the same impact there. It's just that we are not at the same maturity level, I feel. We have a very solid Construction business now with a good solid model where we do both rental, we sell newer machines, we buyback used machines, refurbish them, sell them again or put them in our own rental business, service, aftermarket, et cetera. So we have something good going we have been working on for a long time.On the Facade Access, we are not fully there. So we need to get more of that same thing. Then we will affect it, but also that some of these projects, it's -- they -- it depends also a little bit geography where we are present. A strong element for us has been northwest of North America, and that's a softer region now for us. So you also see some sort of geographical elements through that.

[Andreas Koski, analyst]

And then on Facade Access, and as I am pretty new to the company still, when do you normally come into the project, because we normally see long lead times here and I'm just thinking whether we are yet to see the worst in terms of demand for Facade Access? So when do you enter the project? Is that long after the planning stage has been taken place or, yes, when do you enter?

[Ole Jodahl, executive]

Yes, from order intake to really start, average maybe around 2 years.

[Andreas Koski, analyst]

That I know. I mean more when do customers come to you? How long have they been working on their projects when they come to you? Are you entering the customer projects at the beginning of when they start the project, or do they come to you after 6 months or so? Because I guess, if that's the case, we could continue to see further weakness in Facade Access.

[Ole Jodahl, executive]

Yes, we are in the projects in a very early phase because it is -- but it depends a little bit on what the project is also. But of course, bigger projects where you talk more significant access solution, BMUs,, et cetera, they need us at an early stage because you need to design in the [ load ], the weight and the reach and the technicality of the solution, while you're still doing the drawing of the building. So then we are in an early phase. Then you have more simpler buildings where you can actually come in at a much later stage. It's something they do towards the end. So it depends a little bit on the complexity of the project. But more complex, the earlier we are part of it. So [indiscernible] been there for long-term.

[Sylvain Grange, executive]

Yes, absolutely. But in majority of projects, we are involved in the planning phase, Andreas, to make it simple.

[Andreas Koski, analyst]

Yes. So hopefully, we have started to see the worst of it. My last question is on HSPS margin, yes, cyclicality or seasonality. So Q3 is typically a weak margin quarter. Looking at your slides here in Q4 last year, the margin was 27%. I think that had something to do with the integration of Tractel, et cetera.

[Sylvain Grange, executive]

Yes.

[Andreas Koski, analyst]

But should we expect the Q4 margin being the strongest quarter? And then we have Q1 and Q2 at a lower rate, and then Q3 is the weakest quarter, or how to think about seasonality in Q4 for HSPS?

[Ole Jodahl, executive]

Yes. Sylvain, he has known this for 15, 16 years, so he can take that.

[Sylvain Grange, executive]

I think you are right to say, Andreas, that 27% was a bit of an abnormal margin because it was only 5 weeks. But you look at the rolling 12 months performance or year-to-date performance, and this is where we should end. So Q4 is not expected to be much above Q1, Q2, but Q3 is a bit below the others, to make it simple.

[Operator]

[Operator Instructions]

[Ole Jodahl, executive]

Yes, it seems like we don't -- maybe do not have more questions on the phone, but we do have some on the page here, yes. [indiscernible], According to this I should also have [Audio Gap]

[Operator]

The next question comes from Anders Jafs from Kepler Cheuvreux.

[Anders Jafs, analyst]

I just have a quick question on the Wind business. It's another strong quarter there. And you mentioned that all regions performed well. If I'm not mistaken, I think the Chinese market is the largest one for you in this segment. Could you maybe give us some color on how that market is looking currently?

[Ole Jodahl, executive]

The China market in the world -- it's the biggest Wind market in the world, China. So therefore, it's also, of course, of high importance to us, and it has always been an important part for Avanti, and Avanti do have manufacturing base in China, which means that we are in there together with our customers. So we know that market well and have close ties with the customers. So -- and that had very tough times also a couple of years ago because the Chinese government took away subsidies or support both for onshore and offshore turbines.So 2021 was tough years, but it's more stabilized. And we have also there been working very closely with our customers. And they like us. They like our products, even though they have domestic suppliers. So we get a good, nice share of that business. So that's developing good for us now, even though it's not the fundamental type of subsidy program from the government driving that. But we have built and we are building a stronger position with our customers also there.

[Anders Jafs, analyst]

And could you maybe give some -- how fragmented is the Wind market in China currently? And would it be possible to maybe consolidate that over there, or how does it look for maybe foreign companies in that market?

[Ole Jodahl, executive]

Yes, we are really the only foreign player in what we are doing else. We have domestic competitors that we should start to consolidate and so forth. Of course, we are looking always at all opportunities and look -- and -- but that -- it's very likely that we should start investing heavily in China with the current geopolitical situation, business, everything. I doubt. I think it's more about us making sure that we continue to do the right things with the assets and the stuff we have there.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

[Ole Jodahl, executive]

So I start -- we have -- let's say, we start in the bottom list here. That was the first question [ come ], capital allocation. What is the split between growth CapEx and maintenance CapEx? How do you invest for growth? Can you elaborate on the cyclicality for the different divisions, the company -- yes, it's many questions here. Maybe, Sylvain, you want to take this with capital allocation?

[Sylvain Grange, executive]

Yes, I do. We don't track cost CapEx versus maintenance CapEx. But we do invest for growth in different ways in our plants, and that it goes beyond pure accounting CapEx when we've been investing for growth. That may mean as well investing in resources. So it's a variety of different actions, yes.

[Ole Jodahl, executive]

Yes. But -- yes, so for -- from [ then ], it's about sales, it's about product development, marketing, lead generation. It's things I mentioned many times that we work on. In the factories, as you say, we have no major programs going, but we constantly drive smaller investments to keep it up. And then we also, of course, take care of our sites when that's needed. But in relative terms, a relatively CapEx like model, and that will be continued.Cyclicality for the different divisions. Yes, a little bit challenging because they are all having their different cyclicality. But I think also what you have seen, we believe that it's a fundamental growth opportunity in all of them because we have widened the scope and we have dedicated focus in each of these industries.So the -- in that way, I'm also trying to take away some of that cyclicality that we are, as an organization, working on the growth opportunities. And as you see in Construction, even though that's a segment which is under pressure globally, still, we are growing nicely. So yes, I think it's something that we are having a good balance on from a group perspective.Then we have the company -- and the Construction in particular had a tough period following the financial crisis. A better, more stable business now. Absolutely. The group is completely different. Financial crisis, it was just Alimak that was here. So we had no Avanti, we had no Tractel, you had no Facade Access.And -- so you had old Alimak, which you could say, in principle, is the Construction and the Industry divisions. But they had one common sales force also back in those days. And that meant that the business we're focusing mostly -- people were focusing on Construction. So the Industry focus was not really there, I would argue, plus the group was sitting with a very heavy rental organization globally, which put a lot of pressure on the group, which then was taken down or sold off -- closed down with exception of some few markets, which is something I'm very happy that we have today because it gives us an ability to be flexible in our way of working. But we will not go back to become a global rental company. That we will not do, but we will keep what we are having in that sense.Then next question here, HSPS segment has negative investment of SEK 24 million. Did you sell some assets since this is negative? You have adjusted earn-out from Tall Crane. This implies the Tall Crane is delivering not as good as expected.I will take the Tall Crane thing first. And then yes, in a way, correct, since you are returning or not paying out some of the earn-out. The Tall Crane acquisition was having a 2-step earn-out, so one step after 1 year and another step after the second year. We -- but it's the market conditions that have put us in that situation. So I'm very happy with what we have done with Tall Crane, and this earn-out was also structured so that the multiple that we paid would be the same, whether we delivered or met the earn-out or not.But of course, the best would have been to deliver earn-out because then the company would have grown more. But it has not -- but we have taken a lot of orders now. So the outlook going forward is very strong, and we are happy with the performance. But it means that we are returning some of the money that we've set aside for the earn-out. And the investment of '24, it's -- [ Sylvain ]?

[Sylvain Grange, executive]

Maybe we'll take this off-line because I don't think we have -- I mean, we have not sold any assets. And just to clarify, Tall Crane is part of the Construction division, not HSPS. So maybe you send me your question offline.

[Ole Jodahl, executive]

Yes. Then we have, what areas in the Industry segment, do you see greatest potential to improve your market position?Well, I'm not sure if I can point out a single segment. But I know that we are selling well in some segments, and I know that we are selling much less in many, many segments. And I know also this varies heavily from geography to geography. So again, I'm coming back to the old setup. When I got here, it was something called Industrial division, but this was no longer really working on the Industrial market.Now we do have a dedicated global structure. But there's still many markets that we are not in that we want to drive stronger. So it's no clear answer to that. We both drive it from a geographical perspective, and we drive it from a segment perspective. And we are, yes, focusing on segment by segment. So I can't single out one of them or some -- few of them. We see solid growth potential, I would say, across the bar.And then, is the downturn in the economy making it easier or cheaper to acquire quality companies?It's a little bit too early to say because we haven't closed any deals, but of course, with the deleveraging that opens up, and we do have a funnel. We work on M&A. And it could very well be that at least multiples need to go down. That's given because the pricing of companies are different now than compared to before with different return on investment. So absolutely, that needs to come down.And you could expect also that you will see more companies [ forced ]. But at the same time, we don't want problem companies. We want solid companies, companies that either add something to us from a margin or a product or segment or -- so they need to be contributing in a way. I don't want to take on a lot of issues and be faced with that. So -- but multiples needs to be right, of course, yes. Sylvain, you maybe want to...

[Sylvain Grange, executive]

Yes, I mean, I think it's likely to be cheaper, easier. I mean, sellers have to come to terms with the new multiples and purchasers have to make sure they don't overpay. So that is still to be seen in the coming months, but yes, we are confident we'll have some opportunities. And maybe I'd like to -- in one minute to come back to one of the questions regarding the resilience and refer to the discussions we had in the Capital Markets Day.The resilience of the Alimak Group is coming from different angles. The share of the service revenue, which is deemed to be very stable, the exposure to some industries or cycles, which did not apply to Alimak during the financial crisis. Typically, the Wind division is exposed to cycles, which have nothing to do with Construction.And the book-to-bill patterns. We have in certain divisions very short book-to-bill patterns, typically HSPS. But for some divisions, we have backlog of 2 years -- around 2 years like Facade Access. So if ever there was a lot of financial crisis tomorrow, then it will take quite some time to hit hard our P&L. So just a quick reminder, and I will refer to the CMD material we shared a few months ago

[Ole Jodahl, executive]

Yes, very good point, Sylvain. So thank you. That was the last question we have on the list. So with that, I thank you for the interest, good questions, and until next time thank you. Bye-bye.