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Earnings Call Analysis
Q2-2025 Analysis
Bergman & Beving AB
In a challenging environment marked by a decline in employment within the construction and industrial sectors, Bergman & Beving has demonstrated resilience, achieving a 12% increase in EBITA this quarter. Moreover, the company has successfully reversed a stagnant trend in earnings per share (EPS) after 19 consecutive quarters of profit increases without corresponding growth in EPS. This change indicates a significant recovery in core profitability, driven largely by improved financial net figures and interest rate dynamics.
Despite the difficult market conditions, the company has persisted with its acquisition strategy, having completed three acquisitions this fiscal year, including a promising niche company, Spraylat, which boasts an EBITA margin exceeding the company’s target of 15%. Management is optimistic about the future growth potential of these acquisitions, envisioning a yearly earning capacity from acquisitions in the range of SEK 50 million to SEK 80 million within the next 1.5 years.
The group has maintained a robust gross margin. The ongoing phase-out of low-margin, high-volume products has enhanced the overall gross margin, which is now underpinning improved profitability across all business divisions. However, management cautioned that the rate of organic improvements in gross margins may moderate going forward, shifting focus onto future acquisitions with solid margin profiles.
Each of Bergman & Beving's divisions showed profitability growth this quarter. The Core Solutions division, although experiencing weaker demand, recorded an EBITA increase of 5% to SEK 39 million, with EBITA margin rising to 11.7%. The Safety Technology division has rebounded, showing an impressive 53% margin improvement despite revenue growth of just 2%. The Industrial Equipment division led in revenue growth with a 13% increase. Management has maintained strict cost controls while fine-tuning its focus on investing in businesses positioned for growth.
Bergman & Beving is striving toward ambitious goals, targeting an EBIT margin of 10% within 1.5 years, alongside achieving a profit-to-working capital ratio of 45%. Presently, they stand at 8.1% and 29% respectively. The road ahead may be influenced by anticipated improvements in market conditions, especially expected to materialize around early 2025, which could impact both revenue growth and operational efficiencies.
Despite recent pressures, the company has maintained net debt levels comparable to previous quarters, projecting a net debt-to-EBITDA ratio around 2.5. Cash flow has remained steady, and operational cash flow is closely aligned with expectations, reflecting a consistent approach to debt management amidst an uncertain market outlook. The focus remains on enhancing cash flows while judiciously managing operational costs and investments.
While management acknowledges a slower-than-expected market recovery, they remain optimistic about the company's position to capitalize on improving conditions through strategic acquisitions and operational efficiencies. The significant growth seen from specific acquisitions indicates a positive trajectory, while the phased reduction in inventories has helped bolster stability during this transitional period.
Welcome to the Bergman Beving Q2 2024 Report Presentation. [Operator Instructions] Now, I will hand the conference over to speakers, CEO, Magnus Soderlind; and CFO, Peter Schon. Please go ahead.
Good morning, everyone, and welcome to the Q2 report of Bergman & Beving. This is Magnus Soderlind, and I have beside me here, Peter Schon, our CFO. So, let's begin then.
Just to start with some highlights from the second quarter. So, we are proud to announce that we increased earnings. We increased profitability and earnings per share this quarter and the EBITA increased 12%, and the profitability that we measure as profit-to-working capital, increased 6 percentage units.
And also, I'm very glad that we now -- despite we had 19 consecutive quarters with increased profit, but not an increased earnings per share, that we now have reversed that trend and have a positive development of earnings per share with 12% and that is, of course, due to that we have [indiscernible] comparable financial net figures due to kind of the interest rate development mainly, I would say.
We are doing this despite a continued tough market, both within -- in construction [ and ] the industry sector. As communicated earlier, the most relevant KPI for -- aggregated for Bergman & Beving is the number of employees within the construction and the industrial sector in the Nordics, and if you look at that development during the last year, we can see a decrease of 3.4% in number of employees, and I think you will see that later on is partly reflected in the organic development of our revenue.
We have stated in the CEO words that diamonds are formed under pressure. We had some tough market conditions during the last quarters, but we have used that to kind of improve the efficiency of many of our companies and prepared them for a better market in the future. So we have continued to reduce cost in comparable units also in this quarter. We have maintained our strong gross margin.
We have earlier communicated [ that ] we show that later that we have done a lot of phasing out low-margin high-volume products. We are close to an end of that process and that is kind of reflected in the improvement in our gross margin. We have also continued to reduce the inventory. So we have in this quarter organically reduced that inventory level with SEK 180 million compared with previous year.
And I'm also happy that all our 3 divisions is increasing the profit in this quarter. So it's not a single company or a single division that contributes to this profit growth. It's kind of all the activities and the performance we have across the group and across the divisions that have delivered on this profit increase. And as said earlier, we now have 19 consecutive quarter with increased profit despite the kind of COVID situation we had some years ago and now the weaker markets.
And we continue to deliver on our acquisition strategy and I will go into the acquisition we made and what we aim for going forward later on.
So, let's look into the acquisitions. We have made 3 so far this year. It's actually one in the Q2 we left, it's Spraylat. It's a part now of the Core Solutions division. And this is a highly niche, highly profitable company. And I can say that much [ it's ] well, well above the hurdle of the 15% EBITA margin that we have set for acquisitions. So even if it's quite a small company, it have, I would say, a good contribution to the EBITA growth in the company.
And this company is actually having developed a very special fluid chemical that you use to protect windows mainly in construction and renovation projects. So you more or less spray this to the -- on the windows and then you peel it off when the construction is finished, and that is a way to make sure you don't damage window surfaces during building and construction.
This kind of fluid is also used with a different recipe to protect solar panels if there is a fire. And sorry, I don't have the time to get into the details, but that is a very interesting and promising application area of this -- one of the products within the Spraylat portfolio.
We also made one acquisition here the first day of the Q3 quarter, the 1st of October. It's a Finnish company called Levypinta and they are doing hard core laminates. It's really a niche, high-end area of this type of product category. And this is a kind of little bit bigger company with a turnover of roughly SEK 180 million and also in line with our acquisition criteria to acquire a company with a profit margin above 15% and a profitability above 45%.
So in total now we have acquired SEK 255 million in turnover. But we still have the ambition to get into the SEK 50 million to SEK 80 million earning capacity per year in acquisitions. We are on that route I would say now and we aim now to kind of close the gap we have to the SEK 50 million to SEK 80 million acquisition earning per annum in the rest of the year.
So I said it before, but we now have this 19 consecutive quarters with increased profit and we also have an increase in the EBITA margin, as you can see on this slide. And we also now have an increase also in EBIT with 11% and EBT of 14% this quarter.
And if you look at this full year period, the full period on this graph, we had an EBITA CAGR of 27% in profit improvement. And we are now -- I will not say -- we are now well above the 10%. So we are 10.5% compared with [ 9.8% ]. So I'm very happy to announce we are now double-digit on the EBITA margin and that is something we expect to be kind of our new level going forward as well.
If we look into the revenue development, you can see on this slide, we have an organic decrease of 3%. That is roughly in line with the KPI of number of employees' development in the Nordics during this last -- that is actually the Q2 figure -- calendar Q2 figure KPI. And we have a small currency effect with a minus 1%. And then acquisition contributed with 9% to the top line, ending up with a total group level of 5%.
And showed on the first slide, we have maintained the strong margin -- gross margin we have worked on. You can see on this slide we have a rolling 12 very positive development on the gross margin as such and also on the each individual quarter.
But as we now are more or less to the end of the phase out, we, of course, expect to have a continued gross margin development over time, but not in the level we have had historically, and that will then mainly going forward be through the acquisition we make with the aim of acquiring companies with very good gross margins and good profitability.
We also set a target to reach the 75% of own products. That is part of the journey to continue to improve the gross margin. We are now at 73%. So we have some percent units to get to the 75%, but I think we are on track to reach that target latest fiscal year '25-'26, as communicated earlier.
So, about targets we have communicated. We have communicated that we should [ see ] the profit-to-working capital of 45% latest fiscal year '26-'27. We are now at 29% rolling 12 figures ending in Q2 September this year. So we are on the [ traction ] to get to the 45%. We have this year and the next year and 1 more year to go. So it's 2.5 years to reach to the 45%. But we have activities and potential to reach the 45%, so we still are heading for that target.
We also communicated that we should reach SEK 500 million latest fiscal year '25-'26. That's 1.5 years from now. We are now rolling 12 in September at SEK 391 million. And I still feel it's possible to reach the SEK 500 million. And of course, that is partly dependent on that we get some better underlying market, of course, to get to the SEK 500 million. But hopefully, we will have that in the next coming quarter, kind of a pickup in the market that will help us to get to the SEK 500 million.
And lastly, we have set the EBIT margin target to reach the 10%. We are now rolling 12 in September at 8.1%. So we have a continued improvement also in the EBIT margin. And what I can see today, we should be able to reach the 10% in 1.5 year time from now. Based on that we make improvements in the companies that we already have in the group in combination that we continue to acquire, as shown earlier, highly profitable companies.
So with that, I will leave over to Peter.
Thank you, Magnus. And the next slide is the EPS. And just as Magnus said, we now have 19 quarters with increased EBITA profits. But as you can see, the last 2 years we have had a sideways development and even for some quarters a decreasing earnings per share.
But now due to a bit lower interest rates and also that we have had a really good cash flow, so the net debt is also under control. We see that we now have reached a turning point again for earnings per share. So we will, [ yes ], stay on the course on increasing the earnings per share as well as the EBITA going forward.
And the inventory level, as you can see in the report, it's also a bit sideways. Organic inventory reduction since last year is SEK 180 million. So we've done a lot of work, as you can see in this slide, since the beginning of '22-'23. And as we have said earlier, we won't have the same development going forward, but we do still have potential for reducing the inventory and increasing the inventory turnover.
So -- and normally, in Q2 we have a seasonality that it's normally a bit higher, because now we're going into, call it, the high season for a lot of companies within safety technology and some of the old companies within industrial equipment such as Luna, for example. So yes, we will reduce inventory going forward, but it will be in a slower pace than it has been the last year or 2 years.
So cash flow from operating activities. And as we state here, in line with expectations, it was in line with our expectations. And the reason for that was 2 things. One is that we have a seasonality effect. If you look at the same quarters going back, it's a bit lower cash flow than average and also that we had really strong Q1. So we do have maybe a bit of [indiscernible] effect from that as well.
So I think one maybe new thing is that we have purchased the goods a bit earlier due to the logistic challenges from transportation from Asia. So we have paid some of the suppliers in this quarter, and also that the customers are really careful on not buying too much. So they buy more -- gradually every month what they're needing. So for the winter products it's not like large shipments. It's more gradually.
And the net debt situation, as you all know, [ we'd ] done a lot of acquisitions the last year, but been able to keep the net debt on the same level. And of course, now when we don't have the same extremely high cash flow, we will increase the net debt to -- sorry, the net debt. But I think the net debt-to-EBITDA will be, yes, around maybe 2.5 going forward, so between 2 and 3, we've said that we will keep it long-term.
Good. And one important thing is that the acquisition target remains intact. We do have really good credit facilities and we do have the cash flow under control. So we'll just continue doing the acquisitions, as Magnus mentioned, the SEK 50 million to SEK 80 million per annum, so -- yes.
So let's go into the different divisions then, starting with the Core Solution. [ And ] the core solution company is still facing a slow market, but managed to improve profit and profitability during the quarter. And the biggest company in this division is the ESSVE, the fastening company, and they are now facing a weaker demand in the Nordic as well in the Eastern Europe countries where they are present.
But despite this ESSVE in Sweden, which is one of the biggest markets for ESSVE, [ is the ] increase the turnover and that is due to [ they ] [ take ] [ in ] -- [ you ] have been taking new customer contract. That is now rolled out in Q2 and will have a continued rollout here in the next 2 quarters.
So we also acquired Spraylat as communicated and Levypinta into these divisions during this fiscal year. And as you can see now, the EBITA percent was a little bit down in Q1, but has now picked up again despite a weaker kind of revenue. That you can see on the left [ side ] here, the rolling 12 figures. And also the EBITA in absolute terms is now picking up again and hopefully, we will see that trend going forward as well. So a little bit weaker demand, [ a ] bit weaker revenue, the SEK 334 million compared with SEK 346 million last year.
And as you can see, the EBITA is increasing in 5% to SEK 39 million this quarter. This is typically a weaker quarter for Core Solutions. And the EBITA margin is steady above the 10% and increased with 1% compared with previous year, now at 11.7%, and that is partly due to acquisition of highly profitable companies with good margins in combination with the improvements in the companies within the division.
Safety Technology, they have improved profits by revenue increase, improved gross margins and lower cost. As you can see on the graphs below here, this has really been kind of a division with weak performance, both in terms of EBITA in absolute terms as well as EBITA margins.
Despite, as you can see on the left side, the revenue has been a little bit weak some quarters, but not really a big decrease in revenues, and that has been due to that the gross margin kind of improvement hasn't been there as expected and the cost has been too low, and that has now been addressed. And you can see that, that has affected the profit and the profit margin as such, and that is putting also the division in a stronger position when the markets start to pick up here.
And as communicated earlier, we have a new Division Head. He started here early in the Q1 quarter, Eric Persson, and Fredrik Valentin has now left the group. And as said earlier, we have now a positive development in many companies, so 5 out of 7 companies is showing increased profit in this quarter. And Skydda is one of the biggest companies within the divisions. And here we have taken a lot of efficiency measurements along during the last 2 years and that's still in continuations.
And we have some -- had a lot of product phase-out of low-margin, high-volume [ project ] and that has now had an impact both on the gross margin development, but also the profit development. But Skydda still has an underlying slow market as such. But those type of activities [ now ], lower cost and improved margin has helped the performance of Skydda.
So on the division, we have a revenue increase, even if it's only 2%, but that's positive at least. But here we have a really strong EBITA improvement with 53%. We're ending up with SEK 29 million in this quarter and also a significant improvement in the EBITA margin now at 8%, but this division should absolutely be about 10%. So this is hopefully a start of a journey getting back to the 10% profit margins.
And lastly, [ in ] the Industrial Equipment division, the profit continues to grow [ and ] this division is mainly driven by acquired companies. As communicated and said earlier, the Nordic industry customer demand is stable, but on a lower level. We don't see any signals actually that, that will improve in the next coming months. We still face a lot of uncertainties also within the industrial sector in the Nordics, and that is, I would say, relevant for all our divisions.
And the Luna, we had made some major cost reductions during the last quarters in Luna and also made some product phase-outs here. That had a positive impact that outweighed actually the slower market that Luna now is facing. So it's kind of [ on ] the same theme on -- as on Skydda, improving the gross margins and reducing the cost and by that compensating for a weaker top line.
So here you have the best revenue increase with 13% and EBITA continued to increase here by -- in this division is 10%, reaching the SEK 55 million this quarter. And the EBITA margin is 12.1% compared with 12.4%. And I now see they are stable above the 10%. And I think this is more kind of a quarterly effect as such. And I expect them to be kind of on this level or even improving over time.
And as you can see on the graphs here, it has been a steady development, both in terms of the EBITA development. And also, you can see this is a division that historically have had the best revenue development. And once again, that's mainly due to the acquisition we made. Here, Luna is a big company within the division and they have had a declining revenue for many quarters, and that has then well been compensated by mainly acquisition made in this division.
So, to try to sum up, what we are aiming to do going forward to reach the SEK 510 million and 45%, that we have communicated. We will continue to do what we'll always be doing, focus more on profit than revenue. We make sure we grow the profit over time and not so focused on growing top line. And we will continue to allocate capital according to our Focus Model, i.e., companies that in our model is on -- in the red zone, having a profit-to-working capital below 25%. We don't want them to grow top line. We want them to focus on reduce cost and improve the margins.
So we don't allocate growth capital to those. Instead, we allocate the growth capital to companies in the green zone, and that is companies with having a profit-to-working capital above the 45%, those companies who want to grow the top line. And they can do that both through organic growth and invest in measurements to get that going as well as doing add-on acquisitions. So we will continue on that.
And it's really company-by-company strategy based on where they are in the Focus Model. And we also make sure they have goals and activities aligned with those -- with our capital allocation models and where they are in that model.
And of course, we add value to our companies through our B&B Tool Box. It's different type of measurements we have to support our companies in the development based on where they are in the Focus Model, of course. And we will continue to acquire companies in line with our acquisition strategies. And then we have some current themes in the group and they haven't changed much since the last quarter.
We'll continue to work on [ strengthen ] our cash flow and that is mainly through improving the stock levels and mainly then the ITO levels as a first step to get back to the pre-Corona levels, that is 2.5, and we are now at 2.1 on a group level. So we still have some work to be done there. And we are still very cautious on assets investment based on the kind of [ uncertain ] underlying markets that we are facing currently.
And on the same theme, we still have a tight cost control. And we have a lower kind of cost increase on a group level compared with our revenue increase, and that is kind of a balance, I think, is good and that we should continue to have going forward.
And as communicated, we continue to kind of have a strong gross margin and really work company by company to make sure we protect that good gross margin that we have had during the last quarters. We still make some price increases in companies, but it's much, much tougher now to get them through at customers. And it's really a lot of things that need to be done to make sure we continue to protect and improve our gross margin going forward in the companies that we own in the group.
And lastly, and that is maybe a new theme since the last quarter. We don't see many concrete signs that the underlying market is picking up. But based on kind of the interest rate development and the investment that is done, we hope, at least maybe starting -- beginning 2025 that, that market will pick up in -- to some degree at least. And we are now preparing to capitalize on that economical kind of pickup that we hope will materialize [ here ] earliest, I would say, beginning 2025 now, as we know today.
So, with that said, we now open up for questions.
[Operator Instructions] The next question comes from Zino Engdalen Ricciuti from Handelsbanken.
I would just like to start out in Safety Technology, of course, a great improvement there. I would just like to hear about how you're feeling about the sustainability of the improvements when you are looking ahead in that segment?
I would say, if you look at the comparable figure, I think they were too low. So I think it's more getting back Safety Technology to where they should be. So I think they were underperforming if you look at the Q2 quarter last year. So this year is more in -- kind of in line with what they should deliver. And I would say there should even be some improvement opportunities on the level they are today.
Yes. If you look back 2 years, they made like SEK 35 million in this quarter, now it was SEK 29 million. So still it's an improvement for sure for last year, but it was also a very weak quarter last year.
Very good. And going into the cost measures which you're mentioning that you have implemented but have not yet reached their full impact, can you elaborate on what kind of -- or roughly on the proportions, which -- how much we're seeing in this quarter and how much we should expect when we're looking ahead?
I mean, we have been running efficiency activities across the group for, I would say, the last 2 years. In some companies, we have extended those activities or expanded those activities along the way. And there are many kind of cost elements that we have been working on, but of course, one of those is number of employees.
And as you know, it takes time to get out that cost out of the system. So we still have some delay effect on the kind of decisions and activities we already implemented in that respect. But we don't communicate how much of that effect we will have in exact terms going forward. But there are several million still that we will get out of the systems in the next coming quarters.
Okay. And last question for me, given that you might be a bit more, I don't know, pessimistic to the economy than before and when you were seeing this -- maybe this pickup earliest in '25, if [ we were ] looking at it from the context of acquisitions, does that make you more cautious when you're evaluating targets and being confident that you're paying the right multiples on sustainable earnings?
It's a very good question. I mean, given the economical situations in the companies that we have continuous dialogue, we will face also in some of those companies weaker kind of trends. And we take different measurement in those type of situation. But one of the measurement is kind of that we delay or push the kind of discussion forward just to [ outwait ] and then see if and when it picks up.
So without saying too much, there are several cases that we have a little bit on hold currently based on the uncertainties in the markets. But some of the companies still have good tractions and still facing kind of good demands. So in those instances, we are willing to get to a closing, and we have made 3 of those this far -- so far this year.
The next question comes from Albin Nordmark from Nordea.
So first, you mentioned some cost measures there as per the last question. But are you increasing costs as well in some areas in terms of capitalize on an improved economic situation as you mentioned there [ lastly ] in the presentation?
Yes. I mean, we have our Focus Model. As I mentioned earlier, that is guiding how we allocate capital across the group. And the majority of our companies in the green zone, i.e. those are companies where we like them to grow top line. And in some of them we now currently, of course, invest to grow those companies, especially in those companies that [ doesn't ] facing a weaker market. We have those companies in the green zone as well. So yes, we are making investments -- growth investments in several of our companies currently.
That makes sense. And then for the M&A market, has anything changed in terms of activity? And is there a difference between the [ countries ] in the Nordics?
I wouldn't say it's a big kind of change. I feel that there are many processes. And I guess that's also -- in other companies that is kind of delayed due to the uncertainties and the lower kind of trends they have currently due to the market conditions.
So my general impression is that there are a lot of activities, but maybe that isn't reflected in the number of closings due to kind of the uncertainties that many companies are facing currently. So I -- my estimate is when kind of the markets start to pick up that the activity level actually will go up.
[ All right ]. And any sense of when the market starts to pick up?
Yes, it's vary company by company once again. I mean if you look at our company, we have some companies with having a great kind of increase in demand currently and some companies really facing significant weaker demand. So it's really company by company. You cannot generalize. And that is dependent on they are present in different markets, in different geographies and different product categories as well.
Right. So which -- and lastly, which market and the product categories is the most positive one?
I go back to our Focus Model. I mean, most of our companies in the green zone are actually having decent or good market conditions. And that's still the majority of our companies. The -- Then the challenge we have is that some of our bigger companies like Luna, Skydda and also [indiscernible] [ as ] mentioned on a kind of company level have weaker demands. And that is, of course, affecting on a group level since they represent close to -- is more than half of the revenue on a group level. So those 3 companies have an impact on the total as such.
The next question comes from Emanuel Jansson from Danske Bank.
Regarding the market here, can you see any change in activity from the resellers, I mean, looking at the development in the Safety Technology division?
Yes. We can see some kind of indications. One is that we have communicated earlier, I would say, more or less all the reseller in the Nordic has really worked down their stock. And maybe some of the effect is now that they need to kind of fill up part of the stock, they kind of run dry.
At the same time, as Peter was indicating that they are really not building stock ahead of demand. So we see that they are much now cautious ordering lower order quantities and to get those deliveries more speedy. But generally speaking, we don't see any indications from the reseller that they see an increased demand in their markets.
Okay. Perfect. That's very helpful. And I think in general, looking at the recent years of acquisitions, at least my view of this is that you have focused or maybe increased the number of companies in the group which are more related to maybe the industry versus the construction segment. And if you still see some uncertainties within the industry, how do you expect these like new B2B companies in the group to handle a downturn? And would you also say that these new companies are as dependent on the number of employees as the older companies in the group is?
To answer your first -- your last question [ here ], the correlation to number of employees in the new companies you acquire are less relevant, I would say, generally. I think if you look at the kind of old companies within Safety Technology, it's very, I would say, directly related to number of employees.
If you look at the Luna business, it's also very much related to number of employees as well as, I would say, partly ESSVE if it's more [ like ] to the construction sector as such. So if we look at our new companies, I mean, we made some acquisitions in the U.K. during the last week -- last year. So they are not kind of correlating.
And also, if you look at for example Levypinta that we acquired in Finland, if [ we ] look at Itaab this -- in the roof metal product [ companies ] and those are not related to number of employees to that degree. So I think that KPI over time will kind of lose in significance.
If we then go to the kind of what type of companies we have acquired and will acquire, I haven't made a count. But for me, it's not so over-weighted to industrial-oriented companies. I mean, look at Levypinta, Spraylat, that's more to the construction sector. We have Itaab, Kiilax and some other companies we acquired last year that is related to the construction sector, Elkington as well, by the way.
So we have acquired companies within the construction sector mainly focused on infrastructure and the commercial building segments. That hasn't had close to that kind of decrease in the underlying demand that other parts of the construction sector have had. And those have had -- many of those have had a very positive development during our ownership.
So I don't see that there will be a preferred type of focus on the [ industry ] [ or the ] construction segment going forward in terms of acquisitions. I think it really once again will be company by company and making sure that the company are addressing sub-segments, sub-markets that we think have a positive development over time and that the company have a strong position in that niche and can leverage on that underlying growth in that specific market.
Perfect. That's a very good answer, Magnus. And maybe a last question from my side regarding on trying to capitalize on the -- when the market recovers here, do you think that there is any need of any significant growth investments that are required in order to capitalize on the market when it recovers, do you think?
No, not significant. My expectation is that the efficiency measures we have taken during the last quarters, that we will kind of benefit from that when the market is picking up. So with that said, my expectation is that the revenue and the top line should increase and the gross margin and the cost base should be kind of more or less on the current level.
There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.
Yes. So we have some additional written questions. What is the main reason for the decrease in revenue in other countries?
Yes, I think that's more or less the business climate in certain geographies. So I think that's the main reason for that.
And regarding the gross margin, what are the key drivers going forward with respect to potential improvements? Is it mainly acquisition, for example?
Yes. As said, we have been working really to make sure our companies are focusing on the market segments and geographies with the best kind of business conditions. And we are getting to the end of that now. We have made a lot of efforts phasing out low-margin, high-volume products.
And saying by that, that kind of organic improvement in the gross margin, you shouldn't have a high expectation on that improvement going forward, even if I still think there are some potentials. So the future growth in gross margin will be mainly driven by the acquisitions that we aim for going forward.
Good. And then the next question is, what share of revenues do Luna constitute now compared to 2 years ago in Industrial Equipment?
I don't know. We don't really give that kind of numbers. But I would say it's -- yes, I think it's around 15%, I would say, percentage units difference without being more specific than that.
Good. And then the next question is, what is the other operating income items and what is the impact on EBIT from these items?
So -- and the other operating income items is generally changed of -- yes, I would say, exchange rate changes, insurance contributions. So, yes, I guess the effect is the amount that you see there. Yes. Good.
Okay. We don't have any more written questions [ from ] what I can see and no more in the queue for direct questions.
So if there are no further questions, I thank you for participating in this report presentation and the Q&A and looking forward for -- to talk to you again in the next quarter presentation. Thank you very much.
Thank you very much.