Alimak Group AB (publ)

STO:ALIG

Earnings Call Analysis

Strong Financial Performance Signals Future Growth Potential

In the latest quarter, the company reported an order intake of SEK 1,592 million, a decline of 5%, yet revenues rose to SEK 1,742 million, up 1%. Notably, the EBITDA margin expanded to an all-time high of 17.8%. The Facade Access division showed remarkable resilience with a 20% increase in order intake and increased efficiency pushing its EBITDA margin to 11.5%. Looking ahead, the company aims for 6% to 10% revenue growth and an EBITDA margin exceeding 18%. With strategic initiatives in place, management expects upcoming market recovery, particularly as interest rates decline in 2025.

A Positive Financial Performance Amidst Challenges

In the latest earnings call, the company reported revenues of SEK 1,742 million, marking a 1% growth or 4% when adjusted for constant currency. This slight increase was supported by strong performances in the Facade Access, Industrial, and Wind divisions, indicating a solid operational backbone despite facing a challenging construction market. Importantly, adjusted EBITDA saw a more significant uptrend, rising to SEK 310 million from SEK 279 million last year, which translates to a margin improvement from 16.1% to an all-time high of 17.8%. This divergence between revenue and EBITDA growth reflects the company’s successful cost-cutting measures and improved operational efficiencies.

Operational Highlights from Key Divisions

The Facade Access division stood out with an impressive order intake increase of 20% (25% at constant currency) to SEK 453 million, buoyed by significant infrastructure projects secured in North America. However, revenue was reported down 6% to SEK 479 million, demonstrating a transition phase that focused on project margins and execution quality. The Industrial segment also exhibited resilience, with revenues reaching SEK 352 million, up 7%, supported by increased service technician activity. The Wind segment reported stability with revenues of SEK 180 million and a margin reflecting good control, despite the turbulent landscape driven by regulatory challenges.

Future Growth Projections and Strategic Focus

Looking forward, the company remains cautiously optimistic about its growth trajectory. It has set ambitious targets for revenue growth between 6% to 10% for the next phases. EBITDA margins are anticipated to exceed 18%, indicating ongoing profitability enhancement measures. Additionally, management is actively exploring acquisition opportunities, which they believe can complement organic growth strategies across its diversified segments. This proactive outlook aligns with their 'New Heights' program, aimed at transforming the company towards higher operational competencies and profitability.

Addressing Cost Concerns and Margin Stability

Operating expenses as a percentage of revenue are expected to improve in the upcoming months, with a strategic focus on maintaining tight control over costs while continuing to invest in research and development. The company aims to bring the OpEx percentages down, benefiting overall EBITDA performance. The recent financials indicated a slight decrease in net debt, amounting to SEK 157 million, with leverage now at 2.12, comfortably below the targeted threshold of below 2.5. This healthy liquidity positions the company favorably to navigate market fluctuations.

Challenges Ahead: Market Conditions and Construction Sector

Amidst optimism, the company acknowledged the challenging conditions within the construction market, primarily due to heightened interest rates affecting investment levels. While lower order intake across the construction sector was observed—down 28% to SEK 350 million—the overall diversified business model helped cushion against potential revenue declines. Management foresees a gradual recovery starting in mid-2025, aligned with improving market sentiment.

Concluding Remarks: Steady Leadership Amidst Fluctuations

Despite market vicissitudes, the management team reaffirmed their commitment to steering the company through these challenges while focusing on strategic initiatives that enhance customer satisfaction and operational efficiency. With a robust service backbone and continuous investments in technology and product development, the company is well-positioned to leverage future opportunities, particularly as economic conditions are expected to stabilize and improve.

Earnings Call Transcript 2024-Q3

[Operator]

Please go ahead.

[Ole Jodahl, executive]

Thank you, and welcome, everyone, to this quarter 3 2024 call. And with me, as you know, I have Sylvain. So, turning page. First, a short recap. I guess most of you know, we are a diversified global industrial company present all around the world, operating out of 5 customer-centric divisions.

And I think also important to mention is that we have some good fundamentals for our business, supported by global trends like the health and safety focus, more regulations in this area, urbanization, more happening at height, but also in general, industrial investments. I think it's also a very important element, which is helping driving our fundamentals for growth.

We do have a leading market position in the niches where we operate. We have a large installed base through our history out in the market all around the world, and we also drive a very important service business in all our divisions. And with that base, of course, we have a lot to service and provide spare parts too. Overall, we also have a strong balance sheet and cash conversion as a group.

Turning page. Here, the New Heights Program, our strategic road map, 2020, we started this thing, it was basically a reset of the group. It had not delivered on financial targets. We had the fundamental issues with the 2 acquisitions that was done and also operated with a heavy [Mistra REES] organization.

So, we put up this 3-step plan, which I would say we have delivered upon. We've delivered or reached the first set of financial targets last summer and now we are full speed to reach the next level, which we set out to do within 2 to 3 years, which means then 1 to 2 years from now.

And turning page, we see we have a target of growing revenue 6% to 10%, EBITDA margin north of 18%, leverage below 2.5 and a dividend payout between 40% to 60% of net profit.

Turning page, we, of course, also have sustainability targets. So, first and foremost now, it's the CO2 target of 30% reduction, 25% over '19, but we're also in the process for science-based targets.

Net Promoter scored towards our employees with higher than 40, injury rate for our employees or our people here at the group for less than 2, and that we also do an ESG assessment for more than 80% of our suppliers.

Turning page and diving into the quarter, we delivered a solid performance in the quarter, I believe, and all divisions contribute well considering where they are at. As a group, we delivered 17.8% EBITDA adjusted, which is another significant step towards our financial targets north of 18% And also year-to-date now, we are above 17%, 17.1%.

We continue our transformation of Facade Access; they made another step up in the quarter now well into the double-digit with 11.5% EBITDA margin.

We still have, of course, this challenging construction market, which has been here for some time. But we also see now or expect as the interest rates will start to come down that, that market will start to improve going into 2025.

We continue to manage the business and drive this New Heights plan that we have, and this is also generating a good cash flow again for us, and we are down to SEK 212 million versus SEK 229 million in quarter 2.

A little bit more detail of the quarter. Order intake was SEK 1,592 million, down 5%, but down 2% at constant currencies and this, you could say, organic. Strong performance we see in Facade Access, Industrial and the Wind divisions, while Construction and HSPS division reported a lower order intake.

Of course, we would have liked to see a higher order intake overall as a group but again, considering, I think, where we see the market, this we think is okay. But we continue to work hard also in all parts of the group to really accelerate profitable growth.

Revenue was SEK 1,742 million, up 1% or 4% in constant currencies, positive contribution from HSPS, Industrial and Wind. And EBITDA adjusted at MSEK 310 versus MSEK 279 last year, giving us this margin of 17.8% versus 16.1%.

And it's an all-time high, both in earnings and margin and also, as you know, supported by Facade Access, but also all divisions, I would say.

Turning page, service. It's a fundamental part of our business, and each division has its own global service organization. And this is to ensure that we can attend to the full asset life cycle, the full customer journey, and it provides both the customer and us with a sustainable business model.

We help them with the machine throughout the life to optimize it and prolong it and it also gives us this closeness to customer. It gives us a resilient business model and also a nice profitable business.

So, we see order intake increased 2% in the quarter, 6% at constant currencies to SEK 638 million, up from SEK 625 million. Revenues increased 1% or 4% at constant currencies to MSEK 640, up from SEK 633.

And as I said, creates resilience opportunities continues to grow, and we continue also to actively grow or drive growth initiatives in service.

Turning page and diving into divisions. First of all, happy to see that we make another significant step in our transformation journey of Facade Access division.

Order intake was SEK 453 million, up 20% or 25% in constant currencies, and it's supported by a significant infrastructure project won in North America.

We also see good equipment orders in China and Australia and in general, a good service or aftermarket where we also drive retrofit, refurbishments. And as I talked about before, that a lot of machines are coming to end of life, and that gives us a very nice opportunity to work on this concept.

Revenue was SEK 479 million, down 6% or 2% down in constant currencies but also supported here by a significant service growth. EBITDA at SEK 55 million, up from SEK 40 million last year giving this margin of 11.5%, up from 7.8%.

And it's driven by that we signed projects at better margin that is now starting to more and more come in, into the business, our improved project execution, which we have talked a lot about, but also, of course, supported by the service business, which is an important piece.

Turning page. And the focus for this business remains. We drive the aftermarket service business. We drive customer-focused technology leadership. We work on our product portfolio.

We drive operational efficiency and the closing of the Manntech factory is going according to plan. We work on project execution, et cetera. But we also work intensely on putting more focus on to the infrastructure to become less dependent on the construction market, which we are sure will start to improve soon.

But nevertheless, it's nice to see that we had a nice infrastructure project last year, and now we also get once again this year. However, also want to mention that this business is driven by smaller, stable type of contracts and businesses, but also larger contracts.

So, yes, we had a larger contract in this quarter, but that's also quite normal that we do have larger contracts. But it's extra nice now that it's an infrastructure project.

Turning page into construction. And here, we continue to face a challenging market. But still, I think overall, we delivered a solid result. Order intake was SEK 350 million in the quarter, down from the SEK 489 million, 28% down or 27% at constant currency.

And this is, of course, lower than what we wanted to see, but we also need to keep in mind that we measure towards an all-time high quarter last year, and that we have had 2 good quarters in the bag. So, again, a little bit of the lumpiness.

But again, the market is also very soft and especially in Europe. So, while we saw still new equipment and rental orders in North America and APAC, relatively stable.

Service continued to support and also the used equipment is an important factor for us in this. So, this diverse, well-diversified business model that we have. Revenue was SEK 427 million, down 3% or flat at constant currencies. EBITDA, SEK 74 million, down from SEK 82 million, giving this margin of 17.4% versus 18.7%.

And the margin is affected by the lower revenue, but also the fact that we keep up our investments in product developments because we know that the market will come back, and we know that we have a lot of opportunity in widening our product portfolio.

And also, of course, our focus on reducing costs and becoming more resilient is also continuing. And that's also what you see, I think, and we'll continue to see that this business is much more resilient than before. 

Turning page. Market, as I said, is challenging, and we expect this to continue also in the next 2, 3 quarters. But when we come to the mid part of 2025, we do expect that we should start to see some improvement in the investment will also in Europe.

We continue to drive our well-diversified business model. So, you see on the mass climbing work platform, for example, we are working on that market specifically and driving this product range. And this has an enormous opportunity for the group because it's a technology that can start to replace scaffoldings, making a better, safer, more efficient today for workers than working in a scaffolding system and just scratch on that surface is a significant piece of business.

So, these are things we continue to work on. Of course, the used market to have that flexibility in our business model, but also, as I said, in general, product development. So, we feel very well positioned to capitalize when the market will start to rebound. 

Turning page and into Height Safety and Productivity Solutions. We see that they deliver a resilient and good quarter overall. Order intake was SEK 312 million, down 11% and 8% down at constant currency.

Here, we see distribution business, which is the core of this business continue to develop well and grow, while we see some softer order intake for the elevator customers. And that also comes after a very strong 2023, but also some of the business that we have towards rental and other direct customers affected by the construction market. So, overall, the underlying business is good here.

Revenue was SEK 335 million, up 3%, 7% at constant currency. And, yes, good performance, mainly driven by the distribution business. EBITDA, SEK 64 million, up from SEK 51 million, giving a margin of 19.2% versus the 15.6%, again, reflecting a good top line performance and cost control. And it's the margin level that it should be on this business. 

Turning page. And here also, we continue our focus to grow the business, accelerate growth. We are working closer to our customers and try to develop the product portfolio with them. We work on end-user verticals. We work towards our distributors, both to create push and pull. So, it's a full, let's say, set of tools to ensure that we continue to grow this business. And you have some nice examples in this slide. 

Turning page to industrial. Here, another strong quarter. Market, I would say, is stable. It's good for us, but it's really that we continue to execute on our plan. Order intake was SEK 342 million, up 4% in the quarter or 8% at constant currency.

Solid development for new equipment, where we see North America is the main driver in this quarter, but also in general, steady aftermarket, solid for this business. Revenue was SEK 352 million, up 7% or 11% at constant currency. So, strong equipment revenue in the quarter, but also deliveries or projects and we also, of course, drive more feet on the ground, so service technicians we recruit, and that is also, of course, generating higher revenues.

EBITDA at SEK 81 million, up from SEK 73 million, giving this margin of 23% versus 21.9% and is driven by increased revenue, good solid gross margin and cost control. 

Turning page. So, yes, as I said, we continue to execute on our plan. We are segment focused, really driving more and more down to each segment to learn more about our customers. We get more people on the ground, closer to our customers. We spend time and money on product development and all to continue to drive this profitable growth journey that we have been on for a while.

We see some nice developments in the Power and Infrastructure segment in the quarter. Also, we had some nice orders on SOV, service operation vessels servicing offshore wind turbines. And we saw the first business coming through to data centers where we have sold transport platforms. 

Turning page and into wind. Also here, wind has become a much more resilient and high-performing business. Those of you that have followed us for a while know how this looked some years ago. And now quarter after quarter, they deliver a very good set of results.

Order intake was SEK 161 million in the quarter, up 6% or 11% at constant currency. Solid performance, new equipment across all, but also especially China. We are successful with our China for China strategy. And we continue also to have and see good progress in the aftermarket as more and more machines are installed out there.

Revenue was SEK 180 million, up 7% or 11% at constant currency and strong sales, yes, North Europe, China. EBITDA at SEK 35 million, up from SEK 33 million last year, giving a margin of 19.4% versus the 19.5% last year. And it's a continued stable margin driven by good control over all of the business. 

Turning page, Wind update. Overall, this market, as I've been alluding to many times, it is very different to what we see for the other divisions. Here, we have some few bigger OEMs. And also, these bigger OEMs, they are challenged. They have been in losses, most of them, even though we see better and more stabilized results this year.

It's an industry dependent on governments, regulation, subsidies, central decisions, et cetera. So, it is a challenging market in that respect, where we have less control over it, but still, it's a growing business. And we believe that this is a business that will also continue to grow as the roll goes more electric. Wind will not disappear. It's an important part of electrification. 

And as you see, it's a good business for us, which we believe will continue. So, with that, we are turning page and profit and loss, and then I hand over to Sylvain.

[Sylvain Grange, executive]

Thank you, Ole, and good morning, everybody. So, on this slide, we now present a summary profit and loss statement. Regarding revenue and order intake, I'd like to make one technical comment for clarity. This year, organic and constant currency are the same as our perimeter has not materially changed. And the foreign exchange rate evolution had a negative impact on our Q3 growth performance.

Once again, we are glad to see an adjusted EBITDA growing significantly more than revenue in the quarter. It's an 11% growth for adjusted EBITDA versus 1% for revenue. This clearly indicates that we have overcompensated cost inflation by additional operational efficiencies. 

Items affecting comparability relate to the closure of the Mammendorf assembly facility, partially compensated by an earn-out adjustment with respect to the Toll Crane acquisition made in 2022.

Last year, IAC represented a significant profit. The negative difference of SEK 36 million explains why reported EBITA is almost stable. Below EBITA, quarterly amortization is at its normal level, around SEK 50 million. Some intangible assets related to the Tractel acquisition will be fully amortized by the end of this year. So, quarterly amortization should be closer to SEK 40 million next year. 

Finance net is slightly down, mostly due to the reduced debt. Taxation rate in the quarter is down to 22.4%, mostly thanks to favorable country mix. More marginally, improved profitability and prospects allowed us to recognize some deferred tax assets related to tax losses carried forward, but our typical tax rate remained closer to 25%, and overall, that means we grow the bottom line, i.e., the net result by 10%.

So, let's now review the 2 main EBITA drivers, gross margin and operating expenses. 

Gross margin is 120 basis points above Q3 2023. The most significant contributor to the improvement is the Facade Access division. But as mentioned by Ole, Industrial, Wind, and HSPS achieved as well some more marginal improvements.

As a percentage of revenue, operating expenses are going up versus Q3 last year, but most of it is due to items affecting comparability. Beyond IAC, we have taken on some specific additional expenses such as sale expenses for the Industrial division or product development in Construction and HSPS. We see those expenses as an investment for the future. 

Of course, we have had some cost inflation as well, typically labor, but we have worked on our cost base and broadly managed to compensate inflation by some cost optimization. So, the result for the period was SEK 155 million. It's a 10% increase versus Q3 last year, as already mentioned.

Excluding IAC, the result for the period was SEK 157 million. It's a 47% growth versus Q3 last year. And as a reminder from previous page, this high growth comes from a higher adjusted EBITA, combined with below EBITA items all coming down.

EPS was SEK 1.46 in the quarter versus SEK 1.32 in Q3 last year. And adjusted for IAC and acquisition-related amortization, EPS was SEK 1.79 versus SEK 1.46 in Q3 2023. 

So, we move now to operating cash flows, and I start with a comment on Q3 2023, which is a high comparable. We enjoy an unusually strong reduction in working capital in that quarter. In Q3 2024, cash flows were overall good with strong performance in Facade Access, HSPS, and Industrial.

Last quarter, I mentioned some temporary working capital increases in the Facade Access and Construction divisions. This was reversed in Q3 for Facade Access, but not yet for Construction, where we see now this happening in Q4.

Looking forward in the coming quarters, we plan a bit more CapEx as it has been temporarily very low in the first 3 quarters of this year, around 1% of revenue, whilst we expect to be on average around 2%. So, our business model definitely remains a CapEx-light model, but I just want to indicate that 1% has not become the new norm. 

So, moving now to net debt and ROCE. Net debt decreased by SEK 157 million in the quarter, and that is mostly driven by the operating cash flows. Leverage is at 2.12, down from 2.29x at the end of Q2 2024, in line with our target of being below 2.5x. And, as already mentioned, we will continue to focus on operating cash flows, which will contribute to future deleveraging.

Our priorities for capital allocation remain unchanged. We will invest in organic growth. I alluded earlier to sales and R&D expenses. We continue to actively work on acquisition opportunities allowed by the decreasing leverage. And we will apply the dividend policy, although ultimately, this is a Board proposal and an AGM decision. 

One word on ROCE to conclude the financial section. It's an important metric for us, and it is slightly growing in the quarter to 21.7%, excluding goodwill, and 9.1%, including goodwill. We will continue our work to gradually uplift ROCE. And on this, I hand over to Ole.

[Ole Jodahl, executive]

Thank you, Sylvain. So, turning page then to the summary slide. It was a solid quarter where we see that we continue to develop the group into new heights. And new heights, yes, it's a short recap, 4 strategic drivers that was fundamental and still is fundamental to our business. It's the customer obsession, technology leadership, driving everyday operational efficiency, and recognizing people being the most important asset of the group.

We also set up an effective decentralized organization in the beginning with 4 divisions, now 5, which have full responsibility for their business, both P&L and balance sheet. And they are driving also the full customer journey or asset life cycle, as I talked about, they both take care of the customer needs, understanding what that is, the products, the solutions, and the full aftermarket they attend to.

We have built a strong culture around this and also to ensure that we can make decisions locally close to customers and drive a business-minded attitude throughout the organization. I think this has been a fundamental piece, which is continuing to service the group well. So, we have a solid financial position now. As Sylvain also was saying, we can continue to invest, and we will do that.

And also, we expect that this difficult or challenging, if you like, market sentiment, especially around construction due to the higher interest rates will start to improve and that we, in the midst of next year should start to see also positive effects in the market for us. And we will also talk in general more about these things.

We have an investor update coming up on November 20, where we will give you a little bit more insight into also how we will continue to drive accelerated growth going forward.

So, with that, I would like to thank all our employees, customers, and partners for this quarter, and we turn page and move into Q&A.

[Operator]

[Operator Instructions] The next question comes from Andreas Koski from BNP Paribas Exane.

[Andreas Koski, analyst]

Three questions. Starting with Facade Access, where we had another solid margin improvement, I would say. If you look at your backlog in Facade Access specifically, would you say that the margins are higher in the backlog compared to what we have seen in Q3 and Q2? And where should we expect the margin for Facade Access to be in 2026 in relation to your margin target for the group of more than 18%?

[Ole Jodahl, executive]

Yes. Andreas, thank you for that question. You know that we -- it's a small echo here. It's a bit annoying, but I hope that it works well on the line. We continue to work on this transformation of the product test business, and that's something we will continue. And part of that was to ensure that we take contracts at the right pricing and part of it is contract project management and part of it is operational efficiency in our daily operations.

But, of course, we started early on to ensure that we price in a different way than before. And that also means that our order book is better today from a profitability perspective than it was before. But we are still working through all contracts. We still have, as we have said also before, some of that with us this year, and we also expect some of it to be with us next year, but then it will start to fade out.

So 2026, we clearly see that or expect that we should be at a higher level. We should be higher in '25, and we should also fundamentally be higher in '26. The target for us is that we see that this business should deliver margins in line with the group targets. Whether we will be fully there [ 2025 ] or not, but we should be significantly closer at least from where we are today.

[Andreas Koski, analyst]

And then my second question is related to the group overall. I tried to calculate the backlog development for the group, and I sort of conclude that the backlog for the group is down between 5% and 10% compared to the end of Q3 last year. And maybe if you want to confirm if that is correct but if it is correct, how do you look at the possibility to be able to grow sales in 2025 versus 2024 despite quite meaningfully lower backlog? Do you think it will be possible to grow sales next year?

[Ole Jodahl, executive]

We absolutely think it will be possible to grow sales next year, and it's also about timing of the backlog. I can't give you an exact number, but, yes, the backlog is a little bit lower, but it's also higher quality. And then also we work and continue to invest.

And we also believe that when market starts to improve that, that will also [indiscernible] the shorter-term type of business, it doesn't need that type of long order book or doesn't have that type of long order book. So, we absolutely still believe that next year will or should be a good decent year for the group, absolutely.

[Andreas Koski, analyst]

And then lastly, just on construction because we saw a relatively weak order intake in this quarter. And I think the book-to-bill was close to 0.8. We saw a similar situation in Q4 2023 when the order intake was meaningfully below the revenue level. And then in Q1 2024, we saw a significant sequential drop in sales.

Is that what we should now also expect for the Construction division in Q4, i.e., that sales will come down because of the weak order intake that we have seen in this quarter? And coming back to the Q1 development, when that happened, the margin was relatively weak in the Construction segment. And is that also what we should expect for Q4 or will there be different dynamics this time?

[Ole Jodahl, executive]

Definitely, it will be some different dynamics. But, of course, the fact that when the order intake comes down, it also affects sales. So, as it looks, yes, we also expect that we should see some lower sales coming through in Quarter 4 due to the lower order intake this quarter. But it's also different dynamic, a lot of business that you can compensate or get during the quarter. 

We don't expect the same type of effects like we saw last time. And then we have also worked on the flexibility in the cost. And, as I also said last time, we were a little bit unprepared with what things there we should have seen, which we didn't see. And now we are well prepared. So, it will not be the same type of result effects neither as we had in quarter 1.

[Andreas Koski, analyst]

And what does the order pipeline look for you in Construction for the fourth quarter? Are we going to see a solid bounce do you think? On the order side?

[Ole Jodahl, executive]

I can't comment upon that. We have [indiscernible] into those details, but the market remains still, and we expect the market to remain challenging, as I said, in the next 2 quarters. But then there is a natural lump in the business, so you can have lower quarters and you can have higher quarters. The market was the same in quarter 1 and 2 this year, where we had much better order intake. So, it was nothing in the market in quarter 3. So, we are continuing.

[Operator]

[Operator Instructions] 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]

Yes. Thank you. We have a written question here, and I think I will leave that to Sylvain, but I can read the question. Could you elaborate on why purchase of property, plant and equipment are much lower this 9-month period?

[Sylvain Grange, executive]

Thank you, Ole. I don't think you should read anything specific in the phasing of the CapEx this year. We have had some plans for this year, and it happens that we will invest more in Q4 than in the first 3 quarters in comparison with the average in the first 3 quarters. But just phasing of the projects internally, nothing really specific to be reported on that. And on the second comment, we are…

[Ole Jodahl, executive]

The question I will read it first, so you know what it is. What is the estimated OpEx run rate for the group?

[Sylvain Grange, executive]

We work on both accelerating the growth and controlling our costs. So, looking forward, we do expect some improvement, so a lower OpEx percentage as a percentage of revenue. We will not give a specific number, but clearly, that's the objective, and that's one of the way to drive higher EBITDA.

[Ole Jodahl, executive]

Yes. But as you have said several times also and we have said during the presentation, we focus a lot on investments in sales and marketing and product development. That's why this is also somewhat higher than what we would expect longer term, as you say.

[Sylvain Grange, executive]

It's a combination. But if you look at the performance this year, we've managed to keep it almost stable, excluding IAC, despite the cost inflation. So, that's a sign that we work actively on our cost base and that allow us to make those investments I referred to.

[Ole Jodahl, executive]

So, then we have another question here. Could you again tell us about the working capital strategy for the short-term differences per segment?

[Sylvain Grange, executive]

Absolutely. The strategy is clear. We want to control working capital and when we can reduce it. But at the same time, we need to be flexible when we see opportunities in the market when we can take some businesses with temporary increase in working capital, we do it. And this happens. This has happened this year.

In Q2, we increased working capital in Facade Access. This was reversed in Q3. Now we have increased as well in construction. We do expect some reversal in Q4. In the long run, we don't expect working capital to grow much more than revenue as a percentage of revenue. So, that is clearly our strategy.

[Ole Jodahl, executive]

Okay. So then that was the last question…

[Operator]

We have one more question in the queue from the teleconference.

[Ole Jodahl, executive]

Yes. Okay. Good. Let's take that.

[Operator]

The next question comes from Anders Jafs from Kepler Cheuvreux.

[Anders Jafs, analyst]

Just one more question on the margin side relating to wind. You have now had a relative stable margin, at least above 18% for at least maybe 5 out of 6 quarters. It was a bit of a drop there in Q4. But looking ahead now, is this 18% to 20% margin sort of a margin we should calculate within wind going forward? Or can it also be a bit lumpy for maybe 1 out of 4 quarters going forward? Or how should we look on the profitability on wind?

[Ole Jodahl, executive]

Yes, it's a good question, but also partly a difficult question and as I was alluding to and I've been saying many times, that market is something which is more out of our control and it's also driven by some bigger OEMs. But we have been doing extremely well, I would say, with a solid business model and with a strong team being close to our customers over time, which has given us this good position.

And we, of course, expect and we work every day to remain in that position. But I also have highlighted before that it is a high margin to be in this business. If you look into our main customers, they are some of them in losses, some of them with very, very marginal profit levels so that if we are north of 15%, 16% over time, I think overall, we should be pleased. But at the same time, now we have, as you said, been used to north of 18% for a while. So, we will work hard to also do what we can to remain that level.

[Anders Jafs, analyst]

And also maybe some quick comments relating to potential M&A going forward. As you're right, the funnel is starting to fill up with interesting candidates. I understand you can't maybe say too much on this but is there anything you can say on maybe any geographies or any particular area which you are more focused in complementing with M&A in the business compared to other segments? Or, yes, is there anything you could mention regarding that?

[Ole Jodahl, executive]

Not much without being too specific. But, of course, we have 5 divisions. We think that all 5 divisions have a potential to handle acquisitions for the time being, not in every geography, in all divisions, but all divisions can do. So, we look for things, and we are actively building up the funnel for all divisions. It's around service, it's around product, it's around market technology, et cetera.

So, it's a quite wide thing. And then it's, of course, not only in our hands. It's also someone on the other side of the table that we need to come together at the right timing. So, where you will start to see the first things in which geography or which division will be very difficult to say, and we are not ready to disclose anything around that.

But the funnel starts to fill up. We have the means to do things now, and that's part of our strategy. So, we will do, but we will ensure that we do the right things and at the right price, et cetera. So, I don't want to or we don't want to create something that we shouldn't do. So, we also have patience in that.

[Anders Jafs, analyst]

Thank you for answering my questions.

[Ole Jodahl, executive]

We have a couple of other questions, but they have already been answered, I think, that we got on the written side. So, unless there are anything more now in the next second, it's nothing here on the written, then I think we are over with the questions, and I hand back to you, [indiscernible]

No. Then nothing happens there. Then I would like to say a big thank you for everyone listening in. And thank you to our employees, delivering another strong quarter and until next time. Thank you.