Inwido AB (publ)

STO:INWI

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, welcome to the Inwido audiocast with teleconference Q1 2022. Today, I'm pleased to present CEO, Henrik Hjalmarsson; and CFO, Peter Welin. [Operator Instructions] Speakers, please begin.

[Henrik Hjalmarsson, executive]

Thank you very much. Good morning, everybody, and welcome to this presentation of the first quarter 2022 results for Inwido. My name is Henrik Hjalmarsson, I'm the President and CEO. And with me, I have Peter Welin, CFO and Deputy CEO.

Next page, please, Page 2. We're going to spend the coming 25 minutes or so going through a brief introduction to Inwido for those of you who are new to us, the highlights and performance numbers of the quarter, a brief update on M&A, an outlook into the market. Peter will then go through the details of the financials, and I will close with a summary, after which there will be plenty of time for questions.

Next page, please, Page 3. So for those of you who are new to us, we are a leading window group in Europe, a clear market leader in the Nordic region with a strong and growing presence in the U.K. and Ireland. We have a rolling 12-month net sales of SEK 8.2 billion, with a return on operating capital over the same period of 17.8%. And we've got roughly 4,800 employees in the geographies highlighted in -- on the map on the right-hand side. And we market and sell all the spectacular brands that you can see on the bottom part of this slide.

Next page, please, Page 4. We run and believe in a clear and proven value creation model, which is our approach to drive sustainable shareholder value over time for the business. These are 5 elements that are the basis for the value creation model that ensures that we deliver long-term and cost-efficient, both customer and employee value, with sustainability at the heart of our business model and development, which then drives long-term shareholder value. It's based on our proven ability to improve businesses to drive profit. And we acquire and plug in acquired businesses, obviously, being sensitive to their starting point to protect the base, to deliver further value from the acquisitions and amongst other areas, sourcing synergies.

Next page, please, Page 5. So looking then into the highlights of the first quarter of the year, which was a strong start to the year for Inwido. We continued to see fairly robust markets in general, and we've continued in the quarter our good order intake. We achieved a record-high order growth rate, I'll come back to that, and posted the eighth consecutive quarter of organic growth. We closed the acquisition of Dekko Window Systems in the U.K., which I'll also come back to.

We saw strong growth and higher margins in 3 out of the 4 business areas, the exception being our e-commerce business, which due to problems with an implementation of an investment in a factory in Estonia, achieved lower sales held back by the problems with the capacity due to the investment. And obviously, as many others in the market saw input material cost increases, which we continuously compensate with price increases in close dialogue with our customers, however, with some time lag.

Next page, please, Page 6. So as I said, we started the year with a strong first quarter, in effect, the best first quarter to date for the Inwido Group. Sales grew 26% to just north of SEK 2 billion. Organically, we had 19% growth. We see operating EBITDA go up by SEK 59 million to SEK 180 million, which meant that the operating EBITA margin strengthened by 1.4 percentage points to 8.7%.

Order intake grew 28% in the quarter or 23% adjusted for acquisitions, which means that the order backlog remains very strong, up 57% year-over-year or at SEK 2.3 billion, up 49% if we adjust for acquisitions. We continually, despite the closure then of the acquisition of Dekko done, with a strong balance sheet, with a net debt versus operating EBITDA at 0.8x, down by 0.4 from last year. Or if we look at that excluding IFRS 16, it's 0.6.

Next page, please, Page 7. Looking then into the 4 different business areas, starting with Business Area Scandinavia. As you can see in the charts on the right-hand side of the slide, we started the year strongly in Scandinavia with good growth across all our business units. We saw good growth in all the geographies as well as increased profitability. And what was very pleasingly is not only have we continued to strengthen our position in the market and improve development in the premium and niche units, but also saw a large and the biggest contribution, in fact, profit increase in the largest business unit.

Sales grew 24% to SEK 1.175 billion. Our operating EBITA margin strengthened by 2.9 percentage points to 12.7%. And the order backlog at the end of the quarter is up 41% versus same time last year.

Next page, please, Page 8. If we look then at Eastern Europe, we saw a strong growth and improved margin in the quarter. Overall, we've continued to see higher-than-expected activity in the Finnish industrial market, which has contributed, in combination with a continued robust consumer market, to a significant increase in sales in the quarter. The largest business unit in Finland grew considerably with improved profits. We also continue to strengthen our position in the smaller Finnish units, which means that, overall, we continue to strengthen our position significantly in the market. Very pleasingly, we also saw a good sales and profit development in a Polish operation. All in all, that means that sales for Eastern Europe grew by 44% to SEK 507 million. The operating EBITA margin grew by 0.8 percentage points to 5.4%. And the order backlog at the end of the quarter is up 146% versus the same time last year.

Next page, please, Page 9. Looking then at e-commerce. And as I mentioned, the e-commerce performance in the quarter has been impacted by the implementation of an investment, which has then had some problems. We've made -- given the past few years considerable growth in the business area e-Commerce, we've continuously taken investments into the supply chain to increase capacity to meet increasing demand. One of these investments has been in new machinery to increase production capacity at the largest factory in Estonia, and the implementation of this investment has not gone to plan, which has then, in the quarter, impacted capacity as well as sales negatively, and that in turn has impacted profits negatively.

The demand outlook, however, is still stable. The underlying market activity is still stable and the order book is larger than in the corresponding period last year. Sales then shrunk by 12% in the quarter to SEK 183 million, and the operating EBITA margin came in at minus 4.2%, down from 9.3% at the same time last year. The order backlog at the end of the quarter up 10% versus same time last year.

Next page, please, Page 10. And looking then lastly at Business Area Western Europe, we saw a continued profitable growth in the quarter with strong growth across the geographies, both U.K. and Ireland organically, but also then obviously bolstered further by the acquisition of Dekko Window Systems during the later part of the quarter. The top line comparables, however, are a bit weak given that we saw COVID shutdowns in these geographies in Q1 2021. However, in combination, the growing top line and improved profitability still achieved a strong quarter for the business area. Sales grew 62% to SEK 190 million. The operating EBITA margin strengthened considerably to 8.1% in the quarter. And the order backlog at the end of the quarter is up 10% versus the same time last year.

Next page, please, Page 11. Given the very dynamic environment in which we are currently acting, we thought it's prudent to give a short update on external factors. The ongoing war in the Ukraine is obviously a humanitarian disaster and a tragedy for all of those affected. And whilst the impact of the war in the short to medium term on the economy is very difficult to predict, it's still, from our perspective, gratifying that we have no operation in Russia, Belarus or Ukraine, the impacted geographies. And we have, in fact, very limited material flows from those countries.

If we look at the COVID-19 impact and how that's impacted the business, we saw some clear impact at the beginning of the quarter on our businesses, with high sick leave numbers, which has then impacted efficiencies. However, the impact for our business has gradually decreased over the quarter. In combination, obviously, these 2 factors are continuing to disrupt supply chains and also impacting material inflation, leading to continuously rising prices for input materials, which, as I mentioned earlier, we are continuously meeting with increasing prices into the market.

Next page, please, Page 12. As many of you know, we have ambitious growth plans for the business with a relatively new financial target in terms of growth objectives for 2030 of SEK 20 billion. One of the key drivers to achieve those growth targets is value-creating M&A. We're continuing to accelerate our M&A activities to deliver material acquired growth on an annual basis, and we continue to strive for a positive multiple arbitrage to drive further shareholder value and also, in case of stand-alone acquisitions, to leverage a 2-step acquisition process.

Next page, please, Page 13. And on that note, I'm very happy that we closed the acquisition of 70% of the shares of Dekko Window Systems in the U.K. in the quarter. Dekko is based in the Greater Manchester area with roughly 200 employees, and specializes in PVC and aluminum windows and doors in the market. We've got a strong position in the local trade market, particularly in geographies around the Manchester area, but also further south.

The owners of the business will retain 30% and these are key members of -- strong key members of management who in cooperation with us will continue to develop and further improve the business. Dekko will operate as a separate business unit within the group. However, obviously, benefiting from synergies, primarily in sourcing, but also in other areas of the business.

Next page, please, Page 14. As I mentioned previously, sustainability is at the core of our value creation model, both in terms of how we continuously can reduce our impact on the environment but also very importantly, how we can contribute to the sustainability transformation in society. I am very happy that we made good progress on 7 out of the 9 sustainability CapEx during 2021. Particularly I'm happy that we made considerable progress in terms of reducing our Scope 1 and Scope 2 CO2 emissions by 39% measured in kilograms per wing produced through good continuous efforts and focus in this area. I'm also happy that not only are we continuously striving for stronger circular flows to reduce our overall material usage, and hence, impact on the environment, also continue to reducing successfully then the waste we generate, both the hazardous waste as well as the nonhazardous waste.

We obviously have 2 areas where we have not made the same progress during the year on energy consumption, primarily due to a very cold winter at the start of the year, which despite continuous good efforts in this area then led to a slight increase as well as lost time accidents where we have very, very high ambitions and we continuously work and strive to improve that area.

Next page, please, Page 15. Looking then briefly at the outlook. We closed the first quarter with a very strong order backlog, which will obviously then support the sales in the near term. However, we see continued disruptions in supply chains and continuously rising increases in input materials, which we are then taking out into the market.

Looking at the medium term, the increase in inflation as well as rising interest rates could obviously pose some challenges. On the other hand, we see a continuously increasing household focus on the home and the home environment, and hence, a continuously increasing desire to invest in a good life indoors. Continued long-term optimistic outlook from our side with an increasing demand for energy-efficient windows and doors makes us optimistic in the long run.

Next page, please, Page 16. So with that, I'm going to hand over to Peter, who's going to take you through the numbers. Peter, please?

[Peter Welin, executive]

Thank you so much, Henrik. Please page -- turn page to Page #17. On this Page #17, we can see the income statement for the quarter 2022 as well as last year 2021. And then further right, you can see the latest 12-month development.

This quarter gave many records. It was the best sales ever for Inwido for Q1 and also the best result ever for Inwido in Q1. For the first time, sales in the first quarter was above SEK 2 billion. And also looking at the latest 12 months, the first time Inwido is above SEK 8 billion in sales for a 12-month period.

This quarter, 2022, sales was up 26%, organically was plus 19%. Gross margin was down compared to last year from 23.5% to 22.8%, and the main reason is the material inflation. Inwido has higher material costs this year compared to last year. It has been mitigated by higher sales prices but also by improved efficiency and better capacity utilization. The overhead cost has also increased, however, not to the same extent as sales, so the operating EBITA margin was improved from 7.3% to 8.7% (sic) [ 8.5% ] . Operating EBITA was SEK 180 million compared to SEK 121 million last year.

Looking further down in the income statement, you can see that profit after tax was up 23% and the earnings per share was up 22% from SEK 1.71 per share to SEK 2.08 per share. Looking at the development for the latest 12 months. Sales is above the SEK 8 billion mark, landed at SEK 8.154 billion. Operating EBITA margin of 11.9%. EBITA is slightly higher because we had some positive one-offs in Q4 last year. So EBITA margin is 12%. And earnings per share rolling 12 months is now on SEK 12.66 per share.

If we then turn page, we go to Page #18. On this Page #18, we can see the sales development for the quarter. To the left, you can see net sales development for 2020, 2021 and 2022. And to the right, you can see the development when it comes to the order intake. When comparing to last year, Inwido has made 2 acquisitions. We acquired Metallityö Välimäki in April last year in Finland; and this year, we acquired Dekko Window Systems in U.K. and they were acquired in March.

When comparing to last year, we have 2 acquisitions that we should consider. The sales was plus 26%. The 2 acquisitions, they gave an increase of sales of about 3%, and then we have a positive currency impact of about 3% as well. The organic sales growth was 19% in the quarter.

Scandinavia was plus 21%. Eastern Europe was plus 33%. e-Commerce was minus 19%, and that was due to the capacity investment Estonia that Henrik talked about. And the capacity investment had some implementation problems affecting capacity and thereby sales negatively in the quarter. The e-Commerce was minus 90%. And then Western Europe organically had sales growth of 25% in the quarter.

If we then look at the order intake to the right, the order intake is also on a record level, highest order intake ever for Inwido in the first quarter. The order intake was plus 28%. If we then take away the acquisitions, the order intake was plus 23%. When we acquire a company, the backlog of acquisition is booked as an order intake in that quarter when we do acquisition. So excluding MV Center as well as Dekko Window Systems in U.K., the order intake was plus 23% compared to last year.

E-Commerce had a negative order intake, whereas other business areas had a positive order intake compared to last year. Scandinavia was plus 20%. East was plus 55% including MV Center. West was plus 83%, including Dekko. And e-Commerce then was minus 14% in the quarter.

If we then turn page, we go to Page #19. On this page, we can see the development of operating EBITA and operating EBITA margin for the first quarter 2020 to 2022. As you can see, we have a positive development since 2020. We had a margin of 3.3%. Last year, it was improved, thanks to higher sales in Q1 last year because we had a larger order backlog end of 2020. And that -- we improved the capacity utilization in Q1 last year. So the margin was improved to 7.3%.

And this year, we have a further improvement because even higher sales and higher volume in the quarter. So the margin ended at 8.7%. If we look at history, if we go back before 2020, the margin has been around 3% to 5% for Inwido for the first quarter. And before the IPO, we were more or less from 0 to 4% EBITA margin in the first quarter. So it is a substantial improvement compared to previous year.

We had a seasonality within the business and the Q1 is the lowest quarter for Inwido. So with this year with higher volume and improved efficiency, the margin has been improved.

If we then turn page, we go to Page #20. This page is showing the order backlog end of each quarter from Q1 2018 to Q1 this year. The order backlog is plus 57% compared to last year or an increase by SEK 839 million. If we exclude the 2 acquisitions, Dekko and the Metallityö Välimäki, the growth is 49% or SEK 714 million.

Scandinavia has a higher backlog of 41%. East has a higher backlog of 146%, including Metallityö Välimäki. e-Commerce is plus 10%. And West is plus 10% as well, including the Dekko Window Systems. Comparing the backlog this year to previous year, it is the highest backlog ever for Inwido, and it's more than double the size compared to the backlog of 2020 -- March 2020. So this backlog indicates higher sales in the beginning of Q2, everything else equal.

If we then turn page, we go to Page #21. On this page, we can see the return on operating capital development. Return on operating capital is defined as EBITA rolling 12 months as a percentage of average operating capital. And average operating capital is defined as latest -- average latest 4 quarters. Operating capital is total assets less cash and equivalents, less other interest-bearing assets and noninterest-bearing provisions and liabilities, including taxes. Or I normally say it's a net debt plus the equity.

Return on operating capital has been improved this quarter from 16.9% in December to 17.8%, and the main reason is the higher results. EBITA has been improved by SEK 56 million, and that's the main driver behind the improvement of return on operating capital. The operating capital has been increased slightly in the quarter. The average operating capital has increased compared to December due to seasonality in the business. We have higher operations now in March compared to December. And we also made the acquisition of Dekko in March this year. And the target is 15%.

If we then turn page, we go to Page #22. This page is showing the net debt development and the net debt in relation to EBITDA development since Q1 2019 up until today. The net debt increase in Q1 compared to December. It was an increase by SEK 327 million due to seasonality as well as acquisitions of Dekko Window Systems. And we have an always increase in the net debt in Q1 compared to December because of our seasonality with high operations in March compared to December.

If we look at net debt versus EBITDA, it has also been increased compared to December from 0.6 to 0.8 including IFRS 16, and excluding IFRS 16 it's from 0.3 to 0.6, once again, due to seasonality and acquisition of Dekko. Comparing to last year to Q1 last year, it's a decrease from 1.2 to 0.8, including IFRS 16, and from 0.9 to 0.6 including IFRS 16. And the target is 2.5. So we still have a good headroom to the target and thereby ability to make more acquisitions. The IFRS 16 debt is SEK 363 million for Inwido in the quarter.

If you then turn page, we go to Page #23. This page is showing the sales and operating EBITA development since the IPO. We made the IPO in September 2014. And since the IPO, sales has been growing by 7%, whereas the EBITA margin has been growing even more. Sales is plus 66% in 2014 and EBITA is plus 93%. The margin has been improved since we launched the Simplify model. The Simplify model is the new organization that we launched beginning of 2019, with a more decentralized organization compared to previous. And since then, we have improved the margin, and we are today on 11.9% operating EBITA margin rolling 12 months.

I'll now hand over back to Henrik. He will make a short summary and then we'll open up for questions.

[Henrik Hjalmarsson, executive]

Next page, please, Page 24. So if we summarize the first quarter then, as I said, this is the best Q1 to date for Inwido. We saw favorable markets in general, but very importantly, we have also continued to strengthen our position in our core markets. We achieved a record-high growth rate with the eighth consecutive quarter of organic growth. We saw higher margins in 3 of the 4 business areas. We closed another important acquisition in the growth trajectory of Inwido with the acquisition of Dekko Window Systems to strengthen our position in the U.K. And as Peter recently talked about, the order backlog remains very strong, and we entered the high season with a record strong order backlog.

Next page, please, Page 25. With that, we're going to open up for questions, and I will hand back to you, operator, please.

[Operator]

[Operator Instructions] The first question comes from the line of Victor Hansen from Nordea.

[Victor Hansen, analyst]

Six questions from me, I hope that's okay? Firstly, if you could give some details on volume and the price components of the organic sales growth.

[Peter Welin, executive]

It's a bit -- given the considerable mix impact we have in the business and given the geographical spread and also the continued shift in mix, it's a little bit difficult to be exact. But a fair estimate is that a bit more than half is price and a bit less than half of the growth is volume.

[Henrik Hjalmarsson, executive]

Of the organic growth.

[Peter Welin, executive]

Of the organic growth, correct.

[Victor Hansen, analyst]

Helpful. And then within e-Commerce on top line. So your sales were 19% lower organically, meaning that, that volumes must have taken quite a hit since the numbers include the price hikes as we just discussed. And I'm wondering if you could provide some color on if this volume decline is fully driven by the hiccups in the factory expansions, which you also saw and continue to see that have any weaker consumer demand compared to last year as the order intake was also down.

[Henrik Hjalmarsson, executive]

So the impact on volumes in the quarter is, in principle, solely driven by the supply chain challenges that we've had. Those have actually also impacted the order intake. So although we closed the quarter with a stronger order backlog year-over-year, we have a negative impact because the longer lead times due to the supply chain challenges we've had. So the top line impact in the quarter is basically solely driven by the supply chain challenges we've had.

[Victor Hansen, analyst]

Got it. And then what can you tell us about the price level in your longer-than-usual order backlog? Perhaps what's your view on the impact here from the ongoing cost inflation? Are you satisfied with the price levels in the backlog?

[Henrik Hjalmarsson, executive]

It is obviously a challenge as we normally refer to in the sense that our order backlog is unusually long, whilst at the same time, inflation is unusually high. We're obviously being very, very active, and I want to stress in very close dialogue with our customers to act with force but also responsibly. So we will see continuous more price increases coming through. But obviously, the impact from the Ukraine invasion here in quarter 1 has hiked inflation further, and we continue then with the price increases with a lag.

So -- and some of those price increases, obviously, not fully taken into account in the order backlog for orders that were taken before that happened. But overall, I'm in general, happy with a continuous, very active progress in the area. However, we are, as we have been now for the past 9 months or so, chasing our tail a little bit given that we have some lag before this comes through fully.

[Victor Hansen, analyst]

Yes. And Peter, you mentioned the better capacity utilization. It would be interesting to hear what you achieved here in Q1 and what it is normally. And then also perhaps if you're implementing additional shifts to cater for demand here?

[Peter Welin, executive]

No, we have not implemented more shifts now in Q1. Because normally, we have quite much lower sales or capacity utilization in Q1 due to our seasonality. So this year, we didn't actually reduce the capacity as much as we normally do in Q1. So we didn't have to add shifts. So the big difference compared to previous year is that we didn't reduce the capacity as we normally do for Q1. So normally, we send people home in the beginning of the year, and we didn't have to do that in the same extent as previous year.

[Victor Hansen, analyst]

Understood. And then for you, a very important Danish market, it had the lowest year-on-year sales growth in Q1 here out of all of your countries, up 14%. But I remember that the comps were particularly tough from last Q1 after the [ mint-related ] pent-up demand. And it would be interesting to hear what you see here for the Danish market, in particular in terms of consumer interest.

[Henrik Hjalmarsson, executive]

Yes. I think it's a couple of things that are worth mentioning there. First of all, the Danish market is one of the stronger markets for the e-Commerce business. And given the challenges they've had in deliveries, obviously, their sales, their invoicing in the market has been held back by the supply chain challenges. So in clear terms, we have quite considerable material flows coming from the factory in Estonia that we've been challenging -- struggling with into the Danish market. So that's impacting part of that.

In general, our view is that the market is -- has continued to be fairly robust in the quarter. And we -- in very short term, there was nothing that indicates a shift in that outlook. But obviously, as I highlighted in the outlook slide here a few minutes ago, there are both opportunities in the medium term as well as some threats, partially then driven by the development in Ukraine and Russia.

[Victor Hansen, analyst]

Yes, understood. And my final question, also on the outlook. What are your thoughts here on the risk that renovations have been pulled forward in the last 2 years during the pandemic, which perhaps could hamper demand some in the medium term?

[Henrik Hjalmarsson, executive]

I mean is there a -- has there been -- and how should I say, has there been an increased interest in this period for home improvement that has created some opportunity for us, which, obviously, in combination with the considerable challenges we've also had in several pockets in the COVID times, have had a net positive effect. Yes. I think that's fair to say.

However, our view is, as I also mentioned in the outlook, that the interest in your home environment, I think potentially partially driven by COVID, but potentially also by this anti -- somehow anti-globalization moment -- movement that's ongoing at the moment. The interest to invest in the homes remains very high. We see that clearly out in the market. What the net effect for that is going to be is hard to say. And the same also goes actually for some of those increases that we're seeing in the market.

I mean, energy is the key driver of the inflation at the moment, which obviously somehow limits the disposable income for households. On the other hand, one way to reduce your energy consumption in your home is actually to change your windows and doors. So there is a potential positive aspect to that as well. So it's a bit difficult to actually draw a conclusive answer on the impact of the specific question.

[Operator]

The next question comes from the line of Sofia Sörling from Carnegie.

[Sofia Sörling, analyst]

Congratulations on this great result. I want to start with the outlook. Do you see continued stable demand in both consumer and industry market? Or do you see any slowdown in any of these going forward? And if you can give some color on how it differs between your business areas.

[Henrik Hjalmarsson, executive]

Yes. Thanks, Sofia. I would say that at the moment, we see continued fairly stable activity with no immediate impact actually in either of the segments. However, there are a couple of unpredictables out there, to be very transparent as we also mentioned. As we said, the impact of inflation and interest rates in the medium term could have a negative impact, although the interest remains high, and as I said, in investments in home. The absolute cost level then obviously impacts that as well.

And then I think that there is a little bit of an uncertainty in terms of will material scarcities for the industrial segment in other categories and windows impact the construction rate. So -- in areas such as concrete or whatever it might be. But a specific moment, the activity level is still robust for us.

[Sofia Sörling, analyst]

All right. And you mentioned in your report good activities in Finland. What is driving this? And what is the outlook here in the Finnish market?

[Henrik Hjalmarsson, executive]

I think that it's a combination of things in Finland, to be quite honest. One thing to remember in general is that we've actually done a very, very good job in this period, strengthening our position. We've -- and I think it's -- although we can pride ourselves in some really good sales and marketing efforts, strengthening our position, one key driver of this has actually been, that thanks to our size and professionalism, we have been able to secure material, which means that we have been able to deliver in the market. So we have consistently serviced our customers, and this means that we've actually taken a position.

So I think our strengthening is actually a key driver of the very impressive improvements we've seen there. And the market has also been a little bit better than we expected, particularly on the newbuild side, where the newbuild activity has been higher than we had expected, let's say, 12 or 18 months ago.

[Sofia Sörling, analyst]

Okay. And then do you see any potential risk with cancellation of orders? For example, with the e-Commerce now with a negative organic growth, do you believe that orders will be kept or -- and executed in Q2? Or do you believe that customers now have already left?

[Henrik Hjalmarsson, executive]

We don't see any risk -- any material or imminent risk of order cancellations. And in terms of we have continuous order intake, obviously, at a lower level than thanks to the supply chain challenges that we would have liked to. But we have continuous order intake, obviously, in the e-Commerce business. So we don't see that this will impact -- lead to any order cancellations or lost confirmed business in any way.

[Sofia Sörling, analyst]

All right. And my last question here regarding M&A was, on whole during the pandemic, do you see any risk that, that will happen again now when we have uncertainties related to Ukraine, et cetera, and other macro factors?

[Henrik Hjalmarsson, executive]

I think that we are happy with where we stand in terms of the -- both the long list and the short list. We have a number of ongoing dialogues. We are not taking any conscious action at the moment to hold back on those dialogues. And I think where we stand now, there is a -- I think it's reasonable to expect that we can do at least another couple of transactions during the rest of the year.

Then depending on where we stand, given the strong balance sheet we have, if we were to see a slight slowdown in the market, that could actually create an opportunity for us in terms of transaction because we stand with a very strong balance sheet. And if we see some lower valuations and/or lower basis for valuation, that could, if anything, create an opportunity. But at the moment, we remain active in the area.

[Operator]

The next question comes from the line of [ Peter Treston ] from One Investments.

[Unknown Analyst]

I have a couple, please. I'll go one at a time. Firstly, just to try to understand a bit on the order backlog and the price material cost question. If you look at the order backlog, can you give any sense as to how the, say, input prices that you have in the intake or backlog compared to material prices, and how that spread may be different than what you just executed in Q1? And the extent to which also in the backlog, do you have any particularly large orders, thinking more in the industrial area, that have also come in, in Q1?

[Henrik Hjalmarsson, executive]

I don't think we see any shift -- thank you, Peter, for the question. We don't see any shifts in terms of any considerable specific orders or so. That's a fairly -- overall fairly robust development in the area. The one thing that has obviously happened in the quarter, which is then partly in the order backlog is the Ukraine situation and the impact that, that has had, which has then forced us to take further price increases, but obviously, implemented only after we had the information that this was actually happening. So only after the 24th of February.

And that could obviously have, at least for part of the order backlog then, a negative net price impact. But we have, in general, remained very active throughout the entire period with prices, both in the fourth quarter and also now in the first quarter, continuously taking prices out into the market. So it is -- given the considerable, both segment, product and business unit mix that we have, it's a bit hard to answer your question specifically.

And as I said, the only one thing that we could point to that could have an impact is the -- that we saw a jump particularly then in energy prices as a consequence of the Ukraine innovation. And it obviously takes some time for us to react to that after that has happened.

[Unknown Analyst]

And in terms of giving order visibility to customers on longer -- pricing visibility for customers on longer lead time orders. Are you basically pricing up if they want an order that's 2, 3 months out?

[Henrik Hjalmarsson, executive]

Typically -- let me phrase it differently. The orders with the longest lead time are typically industrial orders, project orders in our business. And if you look on average across the group, the orders which have taken and the business where we've taken the highest percentage increase in sales prices has been on the project sales. So albeit not specifically order by order, the way you're phrasing it, in general, that will then lead to the same effect basically.

[Unknown Analyst]

Okay. And then just a question in terms of market share and some ways of maybe looking at it. Can you give any sort of sense of what you see, what you've experienced in terms of increase in number of installers in Inwido products or share of installer sales or anything that you would be able to track to understand how your kind of market opportunity and market share might be growing?

[Henrik Hjalmarsson, executive]

So I think it's a very relevant question. It is very, very difficult for us or almost impossible to answer because of both the fragmentation and the lack of consolidated data in the market. The sets of data that are available out there is whatever is reported in the different markets from the industry associations that gather this data from producers. And obviously, there is always a level of lack of data integrity in that. Given that there are imports, et cetera, et cetera.

But what we can see in that is that we have continued throughout the past year, 1.5 years to strengthen our position. I think we've done that through robustness, to be quite honest. We are a transparent and robust player. And as I said, although we take pride in the products we have and in the marketing and sales efforts we do and the brands we have, and one key driver has been the fact that we have the most resilient supply chain, and we have the best and most professional sourcing power in the market, which means that we've been able to deliver when competition has not been able to.

[Unknown Analyst]

Yes. That was partly why I was asking based upon, say, the number of installers you work with or share of installers. I understand market data is very hard, but maybe some internal data on installer growth or share of installer business using Inwido products might give some proxy understanding of how your base of business is developing in terms of taking market.

[Henrik Hjalmarsson, executive]

Yes. I understand and unfortunately, don't have any such data that would be of any -- any consolidated data that would make any sense. So no, sorry, I can't answer that one.

[Unknown Analyst]

Okay. And last question is just if you could give a sense on your labor planning into Q2 in terms of shifts being added or productive production headcount being added Q2 versus Q1, just so we understand how you're planning your business, please.

[Henrik Hjalmarsson, executive]

Yes. And the answer to that question varies a lot business units by business units, and there are 2 factors to take into consideration. First of all, obviously, our order backlog remains very strong. So there is orders out there to fill the factories. However, at the moment, we are now working in 30-plus factories planning for -- planning around what I would say, are scarce resources.

The first one being actually continuously making sure that we have people. Because, obviously, average number of employees, as you've seen, has grown considerably over the past 1.5 years in the group. So we need to make sure that we have good people. But the other one is actually around the material availability and material sourcing. So I think we are -- we expect that we will be able to -- although the Q1 activity levels we saw were very high from our perspective given our seasonality in the business, we expect to be able to increase that a bit further than into Q2.

Exactly how much, depends. So far, we've been -- I think we've shown through the past 3 quarters or so that we've been able to deliver the backlog that we have. We've been able to run our businesses in a robust and also resilient way. But obviously, the situation out there in terms of material supply is dynamic. So what the exact outcome will be is a bit hard to say.

[Unknown Analyst]

Okay. But you mentioned that in Q1, you hadn't taken your shift down. I was wondering whether the extent to which you've been adding shifts in Q2, for example, on the labor side. And I guess on the material side, there's been some questions around glass and so on, I suppose that's what you're referring to. But it seems to be available in other businesses and industries, if you're as important a customer as you are. So...

[Henrik Hjalmarsson, executive]

Yes. And that we expect there to be some capacity added into the second quarter as there normally would be with some incremental shifts in certain businesses. So -- but the increase, obviously, in percentage terms won't be as big as we would have seen in quarter 1 to quarter 2, let's say, 3 or 4 years ago.

[Operator]

[Operator Instructions] The next question comes from the line of Rasmus Engberg from Handelsbanken.

[Rasmus Engberg, analyst]

I wanted to start by asking about the e-Commerce business. Where are you in terms of sorting out the issues there? And when are you back to a more normal profitability there, you think?

[Henrik Hjalmarsson, executive]

So if you look at the supply chain challenges we've had here in the first quarter, we are in the process of sorting that out, and we're very occupied with doing that in a controlled and "sustainable" way where we've made good progress. And our current expectation is that by the end of Q2, we will be fully through that situation. We've already, at this point, taken some good steps in the right direction and have increased capacity materially, but for that to be fully operational at the new higher level, which we obviously then have planned for with the investment, we expect that to be at -- towards the end of the quarter.

[Rasmus Engberg, analyst]

So you're saying whatever hit you have on kind of efficiency and sales in the second quarter, it will be clearly smaller than in the first quarter?

[Henrik Hjalmarsson, executive]

Well, we expect that to be relatively smaller, yes, in the second quarter than in the first quarter.

[Rasmus Engberg, analyst]

Yes. All right. Very good. And second question, you experienced a bit of a gross margin impact in this quarter. But what can you say about the coming quarter as far as it stands right now? I would assume that with the big increases during the quarter, we -- and also the fact that you can't really add as much capacity relatively as you did this quarter, is that going to be a materially bigger impact on gross margins? Or how should we think about that in the second quarter?

[Henrik Hjalmarsson, executive]

I mean, that's obviously a bit of a million dollar question. Where we stand at the moment is that we have taken continuous increases in the market, but obviously material prices have also continued to increase. And the exact net impact with that is a bit hard to say, particularly if you look at it from a timing perspective.

We will expect where we stand now gross margin to continue to be a little bit lower year-over-year. I mean our focus obviously is on growing the business and growing the profits and growing the net margin. But in the current high inflation environment, we will see short-term downsize on the gross margin. However, as we've done in this quarter, if we look, how should I say, in a bit longer perspective going forward, the ambition is still then to increase the EBITA margin.

So without being able to give you an exact answer in terms of timing, but the expectation is that the trend that we've seen here in the first quarter with some pressure on GM will likely continue as long as we have the inflationary environment that we're in at the moment.

[Rasmus Engberg, analyst]

And how long does it take for your price increases to sort of impact -- I guess those are list prices to consumers. Or how does it actually work? When do we see the -- that you are back? Is it immediately when prices stop going up? Or is it sort of how often do you raise prices? I know you have many businesses, it's a silly question. But what do you think about the timing impact?

[Henrik Hjalmarsson, executive]

That's very good. And that will have to be sort of an average across the group. But I'd say, typically, it's in the span of 1 to 2 quarters before you see the full impact coming through and obviously a bit longer in some area and a bit shorter in another. But obviously, it's also -- we have -- given our level of activity, we are obviously making sure that we take -- as we've done, I think, in many pockets successfully in Q1, which also now helps us with the margin, we take -- we make sure that we take sufficient and force collection on the prices to protect the margins that we have.

So in reality, whereas theoretically, it should take, let's say, somewhere in that 1 to 2 quarter range. It might actually sometimes go quicker because we've actually taken more action than potentially we would need it to. So -- but some level of indication anyway.

[Rasmus Engberg, analyst]

Correct. And just 2 sort of questions. I've been away from the company for a while, as you might know. But in terms of industry orders as opposed to consumer orders, is there still a significant difference in profitability in those 2? Or have you managed to bring those closer together?

[Henrik Hjalmarsson, executive]

On average, yes, there is still a material difference in margin between consumer orders and industry orders. However, with some -- actually some mix within that. So in some geographies, industry sales is considerably more profitable than in other segments. So it depends a bit on where we grow in the industry. But on average, you're still right, yes.

[Rasmus Engberg, analyst]

And just a final question. When you talk about the order backlog growth or increase, is that local currency or Swedish krona? I'm just trying to get my head around these things.

[Henrik Hjalmarsson, executive]

That is in Swedish krona, the total reported number that you see.

[Rasmus Engberg, analyst]

And your comments about how it's grown, that's Swedish to Swedish krona then?

[Henrik Hjalmarsson, executive]

Correct.

[Operator]

There are currently no further questions. I'll hand the conference back to your speakers.

[Henrik Hjalmarsson, executive]

Okay. Then thank you very much for your interest and for good questions. We thereby close this call, and hope to see you soon. Thank you very much, everybody. Bye-bye.