Indutrade AB

STO:INDT

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the Indutrade audiocast teleconference Q3 2021. [Operator Instructions] Today, I'm pleased to present CEO, Bo Annvik; and CFO, Patrik Johnson. Please begin your meeting.

[Bo Annvik, CEO, President & Director]

Good morning, and welcome on our behalf as well. We are obviously happy to present a new good quarterly report from Indutrade. And as usual, we have a highlight page to start with. The quarter had continued strong demand, positive development in almost all companies, segments and countries. So the dashboard is really green in an overall perspective, I would say. If we take the numbers organically, order intake was plus 14%, then net sales plus 8%. I think it's important to remember that the net sales a year ago in quarter 3 2020, we had a flat situation. So the plus 8% should be seen in that perspective. But I will explain more of that later on here. We have increasing supply chain issues, but I would say that the overall impact continue in a group perspective to be limited. We had an all-time high EBITA margin in quarter 2. And now we were able to beat that in quarter 3 here, even if it was slightly, it was still a small improvement, which is obviously very positive. We are also improving our working capital efficiency and the acquisition side is really continuing to be positive and optimistic with now 13 acquisitions so far this year, an annual turnover of over SEK 1 billion, and a strong pipeline also going forward. If we talk about order intake more specifically. As I said, the demand was continued strong in the quarter. We had an extremely strong Q2 with order intake of above SEK 6 billion. Quarter 3 is seasonally generally slower for Indutrade, but I would say that plus 14% organic growth is still very good. And it is very broad-based. Absolutely most companies and segments and countries show a clear positive development. If we should elaborate on something standing out, the MedTech and pharma segment is still developing very well for us, and we have invested both acquisition-wise and organically in this segment, and it's performing very well. Infrastructure, a lot of investments, obviously, in this area, not least linked to perhaps to the pandemic to some part, also going well. The process industry in general, everything from steel, pulp and paper, but also chemicals are developing in a good way. And also the, I would say, the general engineering sector has been strong. So perhaps it's easier to mention what has not really developed that strong versus a year ago. I think the Marine segment is still -- has still improvement potential or catch-up potential. We see that the order intake for building new ships is increasing. But our companies in this segment have not started to really deliver higher amounts of components yet, but there is an improvement. Basically the same for airplane building. And I would say that the automotive sector is also a bit slower. We don't deliver any direct material, but investments in certain production equipment and so on has still some improvement potential. But all I think, develop positively.We have a large business in the valves for power generation. And in that business, we also saw a growing order intake in the quarter. If we talk about our business areas, all business areas actually grew their orders organically during the quarter. So it's a broad-based improvement. And standing out most positively is Industrial Components and Fluid & Mechanical Solutions, but I will also explain more about that. So order intake was 3% higher than sales in the quarter and is 7% higher year-to-date. Our order backlog is now record strong and also important to say that I think it's in good quality. Total growth in the quarter was plus 21%, organic, as I said, plus 14%, acquisition effects plus 7%, and currencies and divestments were very marginal this quarter. No real impact.If we then turn to our net sales situation, I think it was also very good and strong. We increased with 15% versus last year, and the organic development was plus 8%. And again, reinforcing that a year ago in Q3 2020, we had a flat sales situation. So the plus 8% was from a good level, I would say. Acquisitions added plus 7%. And again, currencies and divestments had a very marginal impact this quarter.In a geographical sales perspective, I would say that all our larger countries developed positively. So it was again broad-based from a geographical perspective, standing out a bit more than others was Germany and Denmark. And Germany is perhaps a rebounding, automotive industry driving there, even if there's still room for improvement, the development is ongoing in a positive sense. And slightly slower growth was noted in the U.K. But again, all markets developing positively. I assume you have questions about supply chain issues. We obviously have our fair share of that, and they increased somewhat, I would say, in the quarter. Many of our companies have experienced longer lead times from suppliers and a few also have real supply shortages. And this has forced us also to extend lead times to our customers, in some cases, also delaying invoices or invoicing, and the consequences are slightly held back sales level and an increase of the order backlog. This is quite difficult for us to estimate since we have this portfolio of quite a lot of companies. But our best estimate at this time is that the effect was somewhere between SEK 100 million and SEK 200 million in delayed invoicing due to the supply chain-related issues. In general, most of our companies manage low to medium volume levels. So our situation is not as bad as high-volume producers within automotive or electronics or white goods and so on. So we have in that sense, a more favorable starting point. Coming back to organic growth. It's really encouraging to see a strong development. This is a real focus area for us. And as I've said earlier, there is a potential to improve this area versus the historical development we have had the last 5 to 10 years, and I will come back to this a bit more later on in the presentation. If we look at our EBITA results, we had an increase in the quarter of plus 18% versus last year. And as I said, the EBITA margin increased to an all-time high level of 15.3% versus 14.9% in Q3 last year. And organically, EBITA increased with 9%. Acquisitions added another 9% and again, marginal effect from currencies and divestments. The organic margin improvement was really driven by the strong sales development and also improved gross margin. It's really, I would say, comforting to see that when we ended year 2020, we had a gross margin level of 34%. And in quarter 1, it was 34.3%; quarter 2, 34.8%; and now 35.1%. So we have quarter-by-quarter really improved our gross margin despite all the difficulties with increasing prices for incoming material and freight and so on and so forth. So I would say that our companies are doing a terrific job in being agile and moving costs to our customer base. And I would say that the customer base obviously understand this in a good way. Newly acquired companies, also comforted to see that they are contributing with an improved margin. So we are buying quality companies with good financial performance. And we also had some one-off effects this time. We had that 1 year ago as well. And at this -- in this quarter, the net effect was plus SEK 17 million. Last year, it was plus SEK 21 million, and Patrik will explain the details of this when he presents the financial information in more detail. All in all, the EBITA margin, excluding one-offs, was 15% versus 14.4% last year.If we then turn our focus to our business area development and start with the organic sales, you see the bars for the different business areas. And quite a few of them have really high and strong development, as you can see, and all business areas grew organically, which I'm very happy about. Strong plus 10% growth was happening in DACH, Industrial Components, including Mechanical Solutions and Finland. So 4 business areas with a growth of well above plus 10%. Again, as I said, the increase was really broad in all these business areas. But MedTech/Pharma customer segments were particularly strong in DACH and Industrial Components and general engineering and infrastructure stand out more in Finland than Fluids & Mechanical Solutions. Most companies developed positively also in business area, U.K. and Measurement & Sensor Technology. But the overall growth was held back slightly by a few companies with strong references last year. Negative impact also from component shortages in what we call MST. And I would say that Brexit, in business area, U.K., had a negative impact. If we -- yes, if we should comment on broader sort of areas with more impact. Sales levels were also high in the Benelux area and Flow Technology. The aggregated organic growth was slightly weaker because of strong comparables last year. Last year, Flow had, for example, plus 8.2% organic growth in the quarter. So they saw a strong growth in -- yes, in the process industry, but also more in the single use area, for example. In Benelux, the strong reference was mostly noted in valves for power generation. This business is developing well, but is slightly volatile to its nature, and most of -- they had a very strong Q3 last year. Yes, I think that is enough for comments. And if we turn to the EBITA margin development for the business areas, as I said, overall 15.3% for the group, all-time high level. And the key reason is that we managed to improve gross margin, as I said, despite price increases, both from components, raw materials and freight and so on. So really great work by our companies. Another key contributor to the margin increase is a good performance from our newly acquired companies, also very encouraging to see. The margin improvements were in general broad-based and most companies in the group really improved their margins. And the largest aggregated margin increase were in business area of DACH, Fluids & Mechanical Solutions and Industrial Components, basically driven by the higher sales. That's the most important dimension. And these levels are really high and great level for these business areas, not least if we compare a couple of years back when they were at very different levels. The BA Flow also managed an improvement from an already high level and sort of a difficult reference from a year ago. And Measurement & Sensor Technology is a high profitability area for us, and they were able to keep the high level of plus 18%. And 3 of the business areas had an EBITA margin decline. Finland, they came in at 17.5%. It's a very strong level for Finland and almost on par with a year ago. So underlying a very strong performance in Finland. And I would say many companies in the Benelux also improved their margins in the quarter. But the company we have in valves for power generation, they had lower sales this quarter and that impacted the EBITDA margin, and this impacted, I would say, overall, for Benelux to some extent. This company for valves for power generation, they are a project-based company, you can say, and this quarter, some of the deliveries were pushed from Q3 to Q4. So I think sales will be better in Q4. And so there is nothing sort of dramatic other than that, I would say, in that business. And also in the U.K., several companies improve their margins, but Brexit in general and some mix changes in a few companies caused the Q3 margin to be a bit lower than in Q3 2020.Then we turn to acquisitions. So far, we have had a really good year and been able to acquire 13 good companies. As I said, the total turnover of a bit above SEK 1 billion, so really good performance so far. We have a good record of making successful value-accreting acquisitions, and it's really based on a well-established platform we have. And we are really clear in terms of what we are looking for in our acquisitions. We are fairly open-minded when it comes to segments, but we obviously want the companies to really have a leading niche position in the segment they operate and with a technical edge, you can call it, and they should have a solid track record of profitability and have growth potential, and last but not least, strong management, sharing our values and culture. So not every company in the world fits our criteria, but there is a fairly large pool of companies in Western Europe, which does. So we have a strong pool to work with. The pandemic had some impact on our acquisitions, and we slightly sort of delayed our processes in order to really be sure that when we actually finalized an acquisition, it was going to be accretive, and we wouldn't experience any sort of problems. And our pipeline right now is very strong, I would say. And I would be very surprised if we wouldn't see more acquisitions from Indutrade before the year is over. Quarter 4 has started really good, and we have been able to acquire the companies Alflow, SILROC and Italprotec. And they are really into the scope of focus on MedTech/Pharma as we have detailed out as one really interesting area. So all these companies have Flow-related products linked to MedTech/Pharma, and they are involved in this fast-growing single-use areas with components established in [ quarantine room ] facilities and so on. So the acquisition side is very promising, I must say.By that, I will leave the word over to Patrik, and he will explain more about the financial development.

[Patrik Johnson, Chief Financial Officer]

Thanks, Bo, and hello, everybody. So let's dive into the details a little bit then. As Bo mentioned earlier, the total growth for orders and sales was plus 21% and plus 15%, respectively, in the quarter. Year-to-date at plus 19% and plus 13%. And order intake, as also noted, earlier than higher -- continue to be higher than invoicing, plus 3% in the quarter and plus 7% year-to-date and order backlog is now very strong. Gross margins higher than last year in the quarter despite increased prices, 35.1 versus 33.6 last year. There are multiple drivers for this improvement, I would say, the production efficiency, better sort of volume absorption in our factories. Product mix changes are on a aggregated level positive. And, of course, also the successful pricing work from our companies contributing to this improvement. And year-to-date, the gross margin is at 34.7 compared to 33.8 last year.EBITA grew 18% in the quarter and margin noted again an all-time high of 15.3% versus 14.9% last year. And accumulated EBITA grew with 24% and the margin is 14.8% versus 13.4%. And then if we then elaborate a little bit more on the one-offs Bo mentioned, net effect in the quarter plus SEK 17 million. And then these relate then to the reevaluation of earn-out provisions, and also on the positive side and then write-downs of goodwill impacting negatively. And as I said, net impact plus SEK 17 million. The main reason for these one-offs is the pandemic, which has made the market situation more difficult for some of the newly acquired companies. Then in general, I would also say that we have over the recent years, slightly increased the share of earn-outs in our acquisition contracts. And thresholds, the contracts are often based on seller's ambitious plans. So going forward, we will now and then also have these type of impacts with earn-out changes and potentially also goodwill write-downs. And I don't think this should be viewed as something extraordinary, and it's more of a sort of normal course of business for us.And maybe lastly, I think it is -- you can see from the disclosed numbers that we have a good development in newly acquired companies. Good sales development and good margin development in the newly acquired companies. So they are contributing in a really good way. So excluding these one-offs, EBITA margin was 15% in the quarter compared to 14.4% last year. So a good improvement. Moving further down into the income statement. Finance net, slightly lower than last year, thanks to both low -- slightly lower debt levels, but also slightly lower interest rates. Tax costs up 27% in the quarter, 32% year-to-date. But that's basically in line, I would say, with the increase we've seen in profits before tax. So the underlying tax rate, no big change in that one. Earnings per share up 19% in the quarter and 29% year-to-date. Return on capital employed improved a couple of steps to 22% versus 19% last year. And of course, driven by both the high results and also improvements in working capital efficiency. Cash, I think is still on a strong good level but decreased slightly versus last year to SEK 671 million, and I'll elaborate a little bit on the next slide on the details. But lastly then on this slide, net debt to EBITDA decreased further than to 1.3 versus 1.5. So that's historically low. And of course, also then thanks to favorable results and cash flow development. But moving ahead and going into detail on the cash flow. And as you can see from the graph, I think it's still on a good level, high levels, even though it's slightly lower than last year. And the reason for it being slightly lower is increasing working capital. And last year, we actually had reduction of working capital in the quarter that sort of boosted the cash flow. And I don't -- there's no drama in the increased working capital. It's quite natural, I would say, when you have this type of growth. And in addition to that, we have also had to, in some companies, add some buffer stocks to manage the strain -- more strained and supply chain situation. But despite this, the working capital efficiency is increasing despite these changes then. So that's a good -- that's good anyway.Okay. So moving to earnings per share. Grew in the quarter with 19% to SEK 1.27 -- from SEK 1.27 to SEK 1.51. And that's slightly higher than the improvement in EBITA. The main reason for the improvement is, of course, EBITA development, but also supporting by, for instance, the lower finance net I mentioned earlier and also a relatively stable amortization level. So that's also supporting the EPS development. On a more longer-term trend perspective, 3- and 5-year average, we see a strong growth in EPS, plus 17% and 16%, respectively. So that's -- those are strong developments.And finally then, the debt side. The interest-bearing net debt end of the quarter was slightly lower than SEK 5 billion, and that's also down slightly lower than last year. And the reason for the lower levels is, I would say, the strong cash flow that you saw from previous slides that we've had in the last, I would say, 1 year. The net debt-to-equity ratio decreased to 51% from 61% last year, and this is some historically low level. And to summarize the sum up sort of the financial position, I would say it's really strong and low debt ratios, as I said. And if you look at the short-term debt and comparing that with the long-term guaranteed facilities we have, we have a good headroom, so our flexibility is really good when it comes to financing. So thanks, and then I leave back over to you, Bo.

[Bo Annvik, CEO, President & Director]

Thank you so much. I thought I'll elaborate a bit on how we sort of drive sustainable, profitable growth. And the slide you have in front of you now is really illustrating what we call our strategic cornerstones. And it's what we try to add to drive primarily organic growth among our companies, which obviously is a key part of the overall sustainable, profitable growth. And this is also, I would say, a benefit part from entering into the Indutrade group from being an individually sort of managed owned company, you get a lot of extra dimensions here, which you don't really have when you work by yourself as a family company. And I would say that the base is structured governance framework. And here, we also have a portfolio perspective on our companies and we try to adapt to company needs and potential, but this is well working since many years, and I would say, a really professional structure. And then we have 4 key cornerstone areas. We have people and talent management, where we offer a lot of different development programs, training programs tailored to, I would say, in the trade MDs and key professionals in our companies. We have organized knowledge sharing in market segment perspectives, in technologies, sectors and so on, which also is a value realizing for our companies. We have a sustainability block where we add knowledge and framework to take steps forward in terms of sustainability. And we also have more of a general Indutrade Toolbox where our companies can have modern theories, trainings, practical examples in everything from driving sales to evaluate pricing to capital efficiency and things like this. And this is, to a very large extent, voluntary and the uptake from our companies is high and appreciated. And as an addition to those 4 cornerstones areas, we have added digitalization, and we are trying to move into a new normal situation and use all the learnings we have built during the pandemic to operate in a more efficient and with more quality with the help of digitalization. And we are, I think, taking big steps forward here in a good way. So this is very much driving organic growth. And in addition to this and also in parallel to this, we are also step-wise increasing our acquisition capabilities. And basically, as we speak now, we are adding resources at the business area level to build both scalability and capability with primarily focusing on internally generated projects. So where our -- where people in our companies basically find acquisition opportunities, and then we have the resource and the capability to take care of those opportunities in a better way. So all in all, I am very confident that we have the right initiatives to continue delivering sustainable, profitable growth also going forward.Back to Q3 and the key takeaways. Continued strong demand with positive development in most companies segments and countries. And we think that the demand and the positive market will continue also into quarter 4. We had an all-time high EBITA margin, and we also have improved capital efficiency. We have a strong order backlog, and we expect as I said, a continued good demand. Our supply chain issues are likely to continue, but also they are likely to be manageable, potentially increasing a little bit sequentially from Q3 to Q4. So far, 13 acquisitions this year, SEK 1 billion extra revenue and a very good pipeline ahead of us, and all in all, well positioned for continued sustainable profitable growth organically as well as through acquisitions.So by this, we end the formal presentation, and we open up for potential questions.

[Operator]

[Operator Instructions] Our first question is from Carl Ragnerstam of Nordea.

[Carl Ragnerstam, Analyst]

A couple of questions from my side. Firstly, when you say that you had a strong development from Pharma/MedTech, could you give some flavor or further flavor on which subsegments or categories that is still driving growth?

[Bo Annvik, CEO, President & Director]

Do you mean within pharma or...

[Carl Ragnerstam, Analyst]

Exactly. Exactly. Yes.

[Bo Annvik, CEO, President & Director]

Yes. It's -- the broad development is from the single-use area where we basically deliver components which are used when you design and develop a new drug and also when you produce new drugs. And I would say it's mostly linked to biological drug development, where we see new drugs, which are more targeted to more narrow specific scopes and the volumes are not as large as broader drug productions but the substances are extremely expensive. So here, the single use is coming to its best rights, and this is really increasing. But it's -- so it's narrow mix-oriented drugs but also more broader cancer treatment drugs and also actually COVID-19 vaccine production. And in addition to the single-use silicon-based components assembled in clean rooms, we also have more of the traditional stainless steel Flow Technology components for high-volume drug production in some companies. So I would say, well positioned in Europe for this. Then we have also companies involved in medical equipment for drug production, different types of tablet production. For example, we are one of the leaders in insulin sort of product for the Nordic markets. So it's quite broad-based, but the bigger growing area is the single-use area.

[Patrik Johnson, Chief Financial Officer]

And if I can add a if I can add a little bit. I think if you go back 1 year, we also had a very strong development. But at that time, it was partly at least and related to COVID. And I would say that the COVID impact in what we see now is very limited. Now it's more broad-based and a more long-term structural development, I would say, rather than COVID.

[Carl Ragnerstam, Analyst]

And do you see a tailwind or a headwind from the segments, which actually grew quite nicely during COVID as of now?

[Patrik Johnson, Chief Financial Officer]

Of course, comparables are, for a few companies, tough. So in -- we have quite many companies working in the MedTech/Pharma. And there are a few ones with really tough comparables and they are flat or even declining a few of them, but the aggregated is still increasing a lot. And so even though we have tough comparables because of COVID, I think we are continuing to grow.

[Carl Ragnerstam, Analyst]

Perfect. And a quick question. Could you please help just to give -- I mean, at least indication on your 8% organic growth, how much is volume and how much that comes from price increases?

[Bo Annvik, CEO, President & Director]

Well, that's a great question. And for us, with plus 200 companies extremely difficult too as well.

[Carl Ragnerstam, Analyst]

If you have a guesstimate, that's fine as well or an indication.

[Bo Annvik, CEO, President & Director]

I think we refrain from that. Or, I don't know, Patrik, if you have any...

[Patrik Johnson, Chief Financial Officer]

No, it's really difficult. But of course, there is a price component that we can agree to, and it's slightly more in sort of and what we normally see as inflation, yes. But I can't comment more than that.

[Carl Ragnerstam, Analyst]

It's fine. And obviously, you had a strong order intake growth just again here. What read should we do when entering Q4 from that? You on one hand, talked about delayed delivery times, et cetera. So how should we look at it? And how much that will be delivered in sort of short to midterm.

[Bo Annvik, CEO, President & Director]

Yes. The -- if you take quarter 4 2020, we had -- that's the first quarter when we basically started to grow organically again after the more difficult parts of the pandemic. We had an organic growth of 3% quarter 4 in net sales 2020. So the comparables becoming a little bit tougher. But if we look at our daily rates now and compare that to sequentially with Q2 and so on, I think that we will continue to grow, but flatten out slightly in growth rate in Q4.

[Carl Ragnerstam, Analyst]

Perfect. And also the final question from my side, sorry for that. In -- I mean in the Fluids, for instance, you report an all-time high margin, at least from the data I have, incremental margin, 33%, I guess. Do you have any extraordinary effects there, which should imply that we will -- we should not extrapolate it?

[Patrik Johnson, Chief Financial Officer]

And no, there's no bigger one-offs, I would say. They have had a fantastic development. A lot of -- of course, in Fluids, specifically, you have a lot of production companies. And when you have volume growth in these type of companies, you have normally a quite good leverage. So I think that's the main reason for the development and no big one-offs, no.

[Operator]

Our next question is from Johan Dahl of Danske Bank.

[Johan Dahl, Analyst]

Can you just talk briefly about the gross margin improvements that you referred to that's happened sort of sequentially throughout '21? I guess it's a fair mix there between prices, product mix and [indiscernible] cost-outs possibly. But if you look at those various buckets, where do you see the main sort of contribution coming from? That's just one question. Secondly, you talked, Bo, about the quality of the order book, can you elaborate a bit exactly what's so positive about that order book that you've built throughout the year?

[Bo Annvik, CEO, President & Director]

Yes. If we start with the gross margin, I think it's, as you say, it's a bit of mix and pricing. But I would -- I will give credit to that we have been good in terms of pricing perhaps more than the mix element. I don't know, Patrik, if you have any other...

[Patrik Johnson, Chief Financial Officer]

No. I think that the pricing and the mix are bigger than the -- production efficiency is important. But given that we don't have big factories with a lot of fixed cost compared to many others. So even if we are good in that, it's not the most contributor, I would say. So the pricing and mix or these three more contributing. But the difficulties of sort of saying who contributes more.

[Bo Annvik, CEO, President & Director]

Yes. And the order book -- in some industries, the order book can be a certain number, certain day and all of a sudden, it's down 20%, 30%, 40%, 50% if the market shifts dramatically. I think we have more quality, more stability in our order book than those types of industries for examples. And we try to be careful not adding in sort of projects, which we don't find are realistic and relevant, reliable in the order book. So that was my comment linked to the order book.

[Johan Dahl, Analyst]

So it's more a question of sort of the visibility of those projects, perhaps more than the profitability. Is that correct?

[Bo Annvik, CEO, President & Director]

Okay. Yes, yes. And yes, the deliverability of the more than -- yes, I didn't mean that maybe the order book has extremely high margin versus where we are today. It was more that -- yes, that the order book will actually be delivered at some point.

[Johan Dahl, Analyst]

Okay. On your M&A growth, I mean interesting, you talked about adding resources in the group. I mean, apparently, you see need for that. We also see net debt coming down quite significantly. But still, you referred to extremely strong pipeline. Can you just clarify why we're not seeing more on M&A or how we should read this?

[Bo Annvik, CEO, President & Director]

Yes, there is a very high activity level, which hasn't been finalized yet. So you can expect good deliveries in terms of acquisitions in the next couple of quarters, I would say.

[Operator]

Our next question is from Max Bacco of ABG.

[Max Bacco, Analyst]

Congratulations on a very solid report. Just one question for me, which is a bit more long term regarding your margin. Since 2019, the margin has come up a few percentage points, looking at EBITA level and is now well above your 12% target. And if we look ahead, consensus estimates from our side, expect your margin to remain at the high 14.5% in 2022 and 2023. So the question is basically, do you think this is reasonable? And if so, do you consider to raise your margin target? Or is the organic growth prioritized?

[Bo Annvik, CEO, President & Director]

Good and relevant question. We -- first of all, the margin should be seen in a business cycle perspective. So not in an individual quarter or even in an individual year, it's over a business cycle the 12% relates to. And we have been in a good business cycle now for some time, I would say. But even so, we are obviously discussing the margin objective. Right now, we feel that the market has impact from COVID and from other sort of more specific situations. So we -- the planning right now is that we will come back to this when the market is more normalized perhaps in the spring or similar. So it's definitely -- we are actively discussing this, and we will, at some point, most likely during next year, we'll come back with a new perspective on the EBITA margin target.

[Operator]

Our next question is from Robert Redin of Carnegie.

[Robert Redin, Research Analyst]

On that comment you had about organic growth, if anything, moderating a bit in Q4. Was that for order intake or for sales?

[Bo Annvik, CEO, President & Director]

Which comment you specifically mean now, Robert?

[Robert Redin, Research Analyst]

You said something about organic growth, if anything, I think, growing at a slower pace in Q4 than Q3. That's what I heard, maybe I misinterpreted what you said.

[Bo Annvik, CEO, President & Director]

No. Yes, I said that in Q4 2020, we had an organic sales growth of plus 3%. And I think we will -- so the reference is increasing a bit, but we still expect a good quarter 4 in terms of organic sales growth, but perhaps the growth rate will flatten out a bit in relation to the curve we have seen so far, but still at a good level.

[Robert Redin, Research Analyst]

Yes. Okay. I mean the order intake has been...

[Patrik Johnson, Chief Financial Officer]

Robert, it is -- I mean, we believe that the underlying demand will continue on the good level we've seen and that sort of the mathematics comparing to more tougher comparables means that the growth rates will probably decline, flatten out a little bit, but still demand, we believe, will continue on the high levels we've had.

[Robert Redin, Research Analyst]

All right. Yes. Because I mean the order intake has been very strong and growing at a faster pace and so on. So maybe the order backlog is then the duration is longer than normal in the order backlog?

[Bo Annvik, CEO, President & Director]

Yes, I would say that, that's the right assumption. The order backlog is a little bit longer now due to supply chain related -- the supply chain-related situation.

[Patrik Johnson, Chief Financial Officer]

Both, I would say -- both in general, in most businesses, we have longer lead times but also, I would say, mix related with Bo talked about this single use that's growing above sort of the average and that business has longer lead time than our average business, both sort of from a mix perspective and a general perspective.

[Robert Redin, Research Analyst]

All right. Perfect. And then, Bo, when you said something about recruitment, adding resources into the M&A organization in the business areas. Is this sort of more of the same, just more people? Or is there some type of change in direction and responsibility with regards to M&A?

[Bo Annvik, CEO, President & Director]

Not really. We have a central team who are obviously active, but the business areas already today very active and more or less self-sufficient to make an acquisition for me to set. But it will be -- the volume of projects now are increasing and to have sort of local feet on the ground with a little bit more specific capabilities will help definitely. So it's not really changing focus we have had our set-up like this for a while, but it's more adding resources with the right capabilities and, no, shouldn't read in anything else than that into this.

[Robert Redin, Research Analyst]

Okay. So the volume of, yes, potential acquisitions is increasing, so you need to more people looking after that process?

[Bo Annvik, CEO, President & Director]

Yes.

[Operator]

[Operator Instructions] There are no further questions at this time. So I'll hand back over to our speakers.

[Bo Annvik, CEO, President & Director]

Then we say thank you for your interest and wish you a continued good day. Bye-bye from us.