Inwido AB (publ)

STO:INWI

Earnings Call Transcript 2022-Q4

[Operator]

Welcome to the Inwido Q4 2022 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Henrik Hjalmarsson; and CFO Peter Welin. Please go ahead.

[Henrik Hjalmarsson, executive]

Good morning and welcome to this presentation of Inwido's fourth quarter and full year 2022 results. My name is Henrik Hjalmarsson. I'm the President and CEO and with me I have Peter Welin, CFO and Deputy CEO.

We will spend the coming half hour or so, where I will start by going through some of the highlights of the quarter as well as a brief look into the development of the different business areas. Peter will then go through the details of the financials after which I will wrap up. And after this there will be plenty of time for questions.

So just for those of you who are new to us, we are Inwido, the leading window group in Europe. We are a clear market leader in the Nordic Region with a strong and growing presence in the U.K. and Ireland.

In 2022, we had net sales of SEK 9.5 billion with a return on operating capital of 18.3%. And at the end of the year, we had roughly 4,600 employees in the countries marked in dark blue on the map on the right hand side. The white dots that you see there are the production locations we have across Northern Europe. And we market and sell all the fantastic brands that you can see on the bottom part of this slide.

We believe that we are uniquely positioned to drive long-term sustainable shareholder value. And we think that we have 5 key shareholder value propositions to achieve that.

The first one is that we are active in an attractive market that is driven by the green transition as the European Union strives towards the delivering the Paris Treaty targets in terms of reducing greenhouse gas emissions. Addressing the emissions from the building sector is absolutely critical. And here energy-efficient windows and doors will be one very important component in achieving that which we believe will drive long-term growth in the sector. Secondly, we have strong positions in our core geographies, which will allow us to further drive growth and profitability.

Thirdly, we have a strong proven track record through economic cycles, exploiting better markets as well as tackling more challenging environments in a successful way. Fourthly, we have a scalable and successful e-commerce platform uniquely positioned in the space we're in with a market-leading position across the Nordic countries and with a clear possibility to roll out successfully into further geographies in Europe.

And then, lastly and very importantly, we see a clear potential for us to be a driver of the European consolidation in a very fragmented industry, exploiting synergies and driving value out to the new acquisitions added to the Inwido family.

Looking then very briefly at the highlights of the fourth quarter, it's very pleasing to note that the fourth quarter was the best quarter to date for Inwido. It's the 11th consecutive quarter with organic growth on a high level. We exceeded both our long-term financial targets in terms of growth as well as profitability in the quarter and in the year.

We crossed the SEK 300 million barrier in operating EBITA for the first time ever. It's also very pleasing to see that after a challenging year, business area e-commerce rebounds in the quarter with stronger sales, stronger order intake as well as higher profit.

In the quarter we saw a continued healthy demand from the consumer segments, but a successive weaker demand development in the industry side, particularly then in terms of units. It's also very pleasing to see as we close the fourth quarter and then the full year 2022 as the progress we continue to make on sustainability.

We launched a couple of years ago or a few years ago the ambition to cut our scope 1 and scope 2 carbon dioxide emission per units by 50% by 2030. Thanks to a consistent and strong work, we have actually achieved this ambition already in 2022 with a 22% decrease achieved now which means that versus 2019 base, our scope 1 and 2 emissions per unit have already been more than halved versus that start point. I'll come back a bit to sustainability in a little bit.

Looking at the numbers for the fourth quarter, sales grew 20% to just north of SEK 2.6 billion. That's a 10% organic growth. Operating EBITA strengthened considerably from SEK 244 million last year to SEK 315 million this year, which meant that the operating EBITA margin strengthened by 0.9 percentage points to 12.1%.

Order intake grew 2% whereas order backlog is down 15% versus last year to almost SEK 1.6 billion. And we continue with good cash flows and a strong balance sheet with the net debt versus operating EBITDA at 0.6, same level as last year, or 0.2 excluding IFRS 16 impact.

Looking at the full year, it's really pleasing to see a record year, both in terms of sales, profit and earnings per share. We closed the full year 2022 with a sales growth of 24% to just north of SEK 9.5 billion. Organically that's a 14% growth.

Operating EBITA grew then considerably from SEK 907 million last year to SEK 1.090 billion this year. Operating EBITA margin slightly down by 0.3 percentage points to 11.4% driven then by the slight lag in price increases particularly in quarter 2 and quarter 3 to meet the considerable input material inflation.

However, back to my point before on Q4, we now see that coming into full effect in Q4 strengthening the margins in Q4 again. Earnings per share grew nicely to SEK 13.74 per share. And the Board of Directors as a consequence of this then proposes to the AGM a dividend payout of SEK 6.5 per share up from SEK 6.15 last year.

Looking then at the different business areas starting with Scandinavia, where we saw another good quarter with good growth and improved margins and the growing order intake in the quarter. We've seen very clearly that the strong and the healthy implementation of price increases to meet the material input inflation has paid off and is really impacting profits positively in the quarter.

The Danish business units have continued to drive success in the consumer segment. And all in all, it means that the sales grew by 16% to just north of SEK 1.4 billion. Operating EBITA margins strengthened by 1 percentage point to 14.8%. And the order backlog at the end of the quarter is down 27% year-over-year as is normal in the winter season coming into what's seasonally a weaker first quarter for Inwido.

Looking at Eastern Europe, we posted a quarter -- fourth quarter with a very strong growth and significantly higher margins. Again, good and solid implementation of price increases throughout the year to meet the input material inflation is now paying off, in combination then with good development in the recent acquisition, which is driving margin up.

Sales grew a very healthy 29% in the quarter to SEK 724 million. The operating EBITA margin then strengthened considerably from 7.6% last year to 11% this year. Order intake down 15% in the quarter and the order backlog at the end of the quarter 4% down versus last year.

Looking at business area e-commerce. As I mentioned it's after a challenging year following the implementation of capacity increasing investments in the largest factory, really pleasing to see a quarter with growing sales, growing profit and order intake. The capacity investment is now fully implemented and the efficiencies are approaching the target levels. The operating EBITA for the quarter grew by SEK 1 million versus last year to SEK 21 million and the order intake grew by 7%. Sales grew 13% in the quarter up to SEK 246 million. And this means that the operating EBITA margin was slightly down at 8.6%. The order backlog at the end of the quarter is 11% down year-over-year.

And lastly then, looking at Western Europe, which was another quarter of strong growth and improved profits, however, with slightly lower margins mainly due to business units and product segments mix.

Dekko Windows Systems, which we acquired earlier in the year, has continued to contribute well as a part of the Inwido family, contributing both in terms of goods sales and profit development. That is then a key contributor to sales growing 45% in the quarter to SEK 230 million. Operating EBITA margin, as I mentioned, slightly down to 7.3%. Order intake grew and the order intake -- sorry, by 34% and the order backlog at the end of the quarter then 9% up versus last year.

As I mentioned previously, one key element of our aspiration in terms of driving long-term shareholder value is value-creating M&A which we see as a key growth driver for the group. We evaluate and negotiate and implement M&A based on the 8 criteria that you see in the graph on the right-hand side. We've made good progress during this year with the 3 acquisitions, one in Finland, one in Sweden and one in the U.K. And in combination they've contributed well, both in terms of sales and profit and are trailing well along the integration plans in terms of delivering both synergies and both potential.

Very importantly then obviously closing the year with a strong balance sheet, we see a considerable room for continued acquisitions going into 2023.

Another key element of the shareholder value creation proposition for Inwido and one key aspect of our strategy is obviously our ambition to contribute positively to society. Therefore, it's worth mentioning a few updates on our sustainability performance in 2022.

As I mentioned, it's very pleasing to see our considerable reduction of carbon dioxide emission per unit by 22%, which means that, as I mentioned, that the emissions have gone down by more than 50% since 2019. The share of sales that aligns with the taxonomy -- EU taxonomy criteria grew by 4 percentage points to 65% in the year. We've seen a positive trend, which I'm personally very happy about in terms of making Inwido a safer place to work for all my colleagues, with fewer accidents, with lost working days during the year. Energy we use has continued to go down, both in production and in the office space.

Unfortunately, however, we've had a slight negative development in terms of sick leave with increases in both short-term and long-term sick leave, mainly driven by remnant effects from the pandemic. But we continue to see positive development both in terms of the share of wood that's sourced from sustainable sources as well as the number of suppliers that have committed to abide by our code of conduct.

If we look at what this means in terms of numbers, as you can see, on the trend arrows on the right-hand side of the table, we've made good progress on 5 of the 7 key KPIs. Particularly happy about obviously the development in terms of carbon dioxide emissions, but also the energy usage and the positive trend we have there.

What we can also clearly see here though, is that obviously we have more work to do, both in terms of waste and improving sick leave, although really nice to see looking at the bottom ones that we continue to make progress in terms of not the least the amount of wood that's sourced from sustainable sources.

With that, I'm going to hand over to Peter who's going to take you through some of the details of the numbers.

[Peter Welin, executive]

Thank you so much, Henrik. On this page, you can see the results for Q4 as well as the full year for 2022 and for 2021. If we start with the Q4, the sales was plus 20% compared to last year. Organically that means a growth of 10%. The gross margin was slightly down compared to last year, mainly driven by the inflation. Inwido has increased the sales prices. However, we're not unable to fully compensate the gross margin, but we have compensated the EBITA margin when it comes to the inflation.

The gross margin was slightly down 25.5% compared to 25.9% last year. Operating EBITA for the first time ever, we reached more than SEK 300 million. We went to SEK 350 million, and increased by 29% compared to last year. The EBITA margin was improved from 11.2% to 12.1%.

Then we have a nonrecurring items. We have a positive nonrecurring items of SEK 4 million this year and thereby EBITA is higher than operating EBITA. The positive nonrecurring item is one of repayments of surpluses within the ADF collective health insurance plan. Last year it was a positive SEK 80 million, also mostly related to the ADF collective health insurance plan.

Further down the income statements we can see that profit after tax was plus 13% compared to last year and that earnings per share was plus 11% compared to last year from SEK 3.72 to SEK 4.11. For the full year, sales was 24% higher than last year, organically it's plus 14%, the growth from SEK 7.7 billion to SEK 9.5 billion. EBITA margin was slightly down from 11.2% to 11.4%.

However, the operating EBITA was up 20% compared to last year from SEK 907 million to SEK 1.090 billion. And for the first time ever, Inwido is above the SEK 1 billion mark in operating EBITA for full year.

The EBITA was up by 18% and EBITA margin was down from 11.9% to 11.4%. Further down the income statement, we see the profit after tax is plus 30% compared to last year and earnings per share ended at SEK 13.74 compared to SEK 12.29 last year, an increase by 12% and highest ever for Inwido.

On this page, we can see developments when it comes to sales and in the quarter, the fourth quarter and also the order intake in the fourth quarter, for 2020, 2021 as well as 2022. That was plus 20% compared to last year and increased by SEK 438 million. The currency impact gave us SEK 75 million in the sales increase across this weak Swedish crowns when we translate other currencies into Swedish crowns. Acquisitions gave us SEK 125 million in growth in the quarter and then organic growth was then SEK 237 million equal to 10%.

Scandinavia was plus 8% organically, Eastern Europe plus 21%, e-commerce plus 11% and then Western Europe a decline of 2% organically in the quarter. The order intake was plus 2%. If we take away that positions, the order intake was minus 5% compared to last year. The total order intake for Scandinavia was plus 5% and Eastern Europe had a minus 15% order intake and Western Europe had plus 34%.

And then e-commerce was plus 7% in the quarter. Scandinavia, Eastern Europe and Western Europe, they are impact from acquisitions, whereas the e-commerce doesn't have an impact from acquisitions, so that's organically -- the organic growth was plus 7%.

This page is showing the EBITA margin and an operating EBITA, and operating EBITA margin for the quarter as well as for the full year which is in '20, 2021 and 2022. And as I've said before, looking at the quarter for the first time ever the margin, the result was about SEK 300 million, SEK 315 million compared to SEK 244 million last year and SEK 231 million in the quarter 4 of 2020. The margin was improved compared to last year. However lower margin compared to 2020.

Scandinavia and Eastern Europe had a positive margin development in the quarter compared to last year, whereas Western Europe and e-commerce had lower margin compared to last year. However, both Western Europe as well as e-commerce had higher result in SEK compared to last year, but the margin was declined, was lower compared to last year.

If we look at the full year, for the full year, the EBITA has been improved from SEK 907 million last year to SEK 1.090 billion in operating EBITA and operating EBITA margin declined from 11.7% to 11.4% for the full year.

For the full year, Scandinavia, Eastern Europe and Western Europe had a positive margin development as well as recent development. However, e-commerce had a lower margin development as well as lower recent development for the full year, but in Q4, the e-commerce had a higher result compared to last year.

This page is showing the order backlog, the order backlog since Q4 2018, or every quarter up until Q4 2022. The order backlog declined by 15% compared to last year. If we adjusted for acquisitions, it is 20% behind last year. However, the order backlog is still quite much higher compared to the periods before the pandemic. If we compare the backlog of 2022 compared to Q4 2019 and we take away that concessions, the backlog is about 85% higher now this year or December 2022 compared to December 2019.

Inwido has a high seasonality within the business. However the seasonality has -- was lower due to winter 2021 and 2022 and now we see that we are going back more to normal seasonality.

This page is showing return on operating capital. Return on operating capital is defined as EBITA rolling 12 months in relation to average operating capital. And the average operating capital is based on the past 4 quarters. The return on operating capital has continued to -- has continuously improved since Q4 2019, and during this year, it has been increased from 17.8% to 18.3%, an improvement by 0.5%.

The EBITA has been improved during this year. At the same time, the working capital in relation to sales has been quite stable. However, operating capital has increased due to acquisitions. So we have higher operating capital due to acquisitions, but EBITA has been improving more, so the return on operating capital has been improved and is now on 18.3% compared to the target of 15%.

This page is showing the net debts in SEK as well as the net debts in relation to operating EBITDA, including as well as excluding IFRS 16. We have continuously decreased our net debts and the net debts in relations to EBITDA has decreased and we are today on 0.6, including IFRS 16, and 0.2 excluding IFRS 16. Last year we were 0.3 excluding IFRS 16.

The IFRS 16 has increased in the quarter. In Q3, it was SEK 383 million. Now the net debts related to IFRS 16 has increased to SEK 474 million, an increase by SEK 91 million. Due to prolonged agreements, we have a prolonged summer agreements, both in Sweden and in the Finland, also Norway and also updated all the terms due to inflation and thereby we have a higher debt today. A net debts of -- and relation to operating EBITDA of 0.6 as well as an 0.2 ex-IFRS 16, that gives us room for investments for the future.

And this page is then showing the developments since the IPO. Inwido made an IPO in September 2014. Since the IPO in September 2014, sales have been growing by 94%. Operating EBITA has been -- is up by 117% and earnings per share is now up to SEK 13.7, an increase by 340% since the IPO.

And I'll hand it over back to Henrik to make some summary and then we open up for questions.

[Henrik Hjalmarsson, executive]

Thanks, Peter. So Q4 was a strong finish to what's a record year for Inwido with a net sales growth of 24% and an operating EBITA then that exceeds SEK 1 billion for the first time in a full year.

We come into 2023 with an order backlog that is a bit more back to a normal level, albeit as Peter mentioned considerably above the 2019 level. But a bit lower then compared to what we saw during the peak of the renovation boom during the pandemic.

The prices of input materials are falling back, but they are still at high levels and considerably higher than we saw before the pandemic. We see a high inflation and energy costs as well as rising interest rates obviously impacting consumers and households' disposable income.

On the other hand, we see a clear increased interest in windows and doors as a ways to save energy in the houses and buildings. All in all, it means that it remains difficult to predict demand in the short to medium term. We monitor the market closely and are fully prepared to adjust both up and down depending on the development of demand. And as usual, long term we continue to be very optimistic with the need for increasing need for energy-efficient windows and doors to support the more sustainable and a better life at home and at work.

So with that, we open up for questions. Operator, please.

[Operator]

[Operator Instructions] The next question comes from Victor Hansen from Nordea. [Operator Instructions] The next question comes from Rasmus Engberg from Handelsbanken.

[Rasmus Engberg, analyst]

I had one question, which is not mentioned in this report. Your valuation is still quite low. Is it a possible alternative to ask the Board for a buyback mandate in the upcoming EGM -- AGM, I mean, I'm sorry?

[Henrik Hjalmarsson, executive]

Thanks, Rasmus. Relevant question, I guess. And I guess the formal answer to that question is that the world is full of possibilities. I think that this has not been something we've had a mandate for historically, but the Board continuously evaluates all strategic options. So let's see what we come back with in time for the AGM.

[Rasmus Engberg, analyst]

Okay. Also, are there any developments in renovation or similar subsidies that this might impact your revenue growth or decline in 2023 in any of your core markets?

[Henrik Hjalmarsson, executive]

Yes, that's another very relevant question. We have not -- if you look at the bigger markets, starting with the Nordics, we have not seen any clear developments in that direction during the quarter yet. We still expect that might be an opportunity going into '23, depending a bit actually how the general economy develops, to be quite honest.

We've seen developments in parts of U.K., most notably in Scotland, where the focus has increased and also demand more than subsidies have increased, fueling on the energy efficiency agenda. But that's about as far as concrete developments that we've seen over the quarter.

[Rasmus Engberg, analyst]

And then a final question, a little bit on the costs and margins going into this year. Do you still experience gross margin headwind from raw materials or from other sources such as electricity or so?

[Henrik Hjalmarsson, executive]

I would say that in general, we feel that we have caught up to the vast majority of the extent in terms of the input material and cost increases that we have seen. We believe that that's -- we don't believe, we know that's one of the key reasons why we also saw strength in EBITA margins in the quarter. We still think that there could be some further potential to exploit a bit more out on the gross margin line than what we saw in the quarter coming into the coming few quarters. But we have, how shall I say, we've recovered fairly much in terms of increasing to meet the headwinds we've seen on material price increases.

[Rasmus Engberg, analyst]

And if you see sort of OpEx increases that are not related sort of to gross margin, what is your opportunity to compensate for such things such as transportation or whatever is not included in your gross margin?

[Henrik Hjalmarsson, executive]

As a general point of principle, we maintain, I mean, obviously, we have -- we are a very decentralized and fragmented structure with 32 business units operating independently. But as a general point of principle, maintain a fairly transparent price arrangements towards most of our customers, which means that we are able actually to take price for what we need to take price for as a general point of principle.

So in general, we've been able to get also energy price and transportation price increases in a decent way out into the market. Again, we saw some of that then trickle through in an improved EBITA margin, operating EBITA margin the first quarter and there could be a little bit more potential on the gross margin line going into next year.

[Operator]

[Operator Instructions] The next question comes from Sofia Sorling from Carnegie.

[Sofia Sörling, analyst]

I actually only have one question and it's about the order intake in the Scandinavian business area. So it seems like that one has to had the most significant drop in order backlog. And if you could give us some more details on if it differs between the countries within this business area, or is it similar and also could you give us some flavor on if it's the consumer segment or the industry segment?

[Henrik Hjalmarsson, executive]

Thanks, Sofia. I think there are a couple of dimensions to that. So order intake in Scandinavia actually grew in the quarter, but you're very right in the sense that the order backlog came down by 27%. I think the 2 main drivers of that is that Scandinavia is the business area where we have seen the most -- how should I say, most anomaly in terms of lacking a seasonality pattern in the past couple of years. So demand -- sort of order intake in Q4 and hence order backlog going into Q1 has been unnaturally strong versus normal seasonality patterns in Scandinavia, more so than in the other geographies.

The second reason is, as you also allude to that we have seen a weakening order intake activity in the -- mainly then in the industry segment that will be on the seasonality pattern. And as I also mentioned in the call, that's where we have seen a decrease in activity mainly linked then to new build activity.

[Sofia Sörling, analyst]

All right. And no difference between the different countries within the business area?

[Henrik Hjalmarsson, executive]

In the sense, there is a difference because the geography where we have the highest exposure to industry within Scandinavia is in Sweden. So that means that that industry slowdown impacts Sweden a bit more. On the other hand, I would say that the anomaly in terms of seasonality pattern in '20 and '21 has been even bigger in Denmark. But yes, it's a bit of a mixed bag. But if anything, probably Sweden and thanks to that industry activity slowdown.

[Operator]

The next question comes from Victor Hansen from Nordea.

[Victor Hansen, analyst]

Hi, Henrik and Peter, it's Victor here. A couple of questions from my side. And can you just try that, I missed a bit in the middle here, so sorry if I repeat any previous questions. But first, I'm wondering if you could provide us with the price effect for the organic sales and orders?

[Henrik Hjalmarsson, executive]

Yes. So it's low double-digits, so 10% to slightly above 10%. And as you know, given the fragmented structure we have, it's a bit difficult to give an exact number on that given the considerable mix impacts. But it's in around the 10% mark or slightly above.

[Victor Hansen, analyst]

Yes. Understood. And then perhaps if we could get some flavor on your staffing here as we went to a weaker macroeconomic outlook. So we've seen also that you are reducing personnel. So maybe you could tell us in what regions you are taking the most dramatic measures?

[Henrik Hjalmarsson, executive]

Yes. I mean there were 2 -- again, I think 2 answers to that question. So first of all, it's back to the point we made before that it's very normal for us to reduce staffing in Q4 -- sorry, going into 2021 and 2022 were anomalies in the sense that the seasonality pattern was a lot weaker than we normally see. So as we would normally do, we have, basically across the board, taken out people here during the -- staff during the fourth quarter to adjust to Q1, which has lower seasonality.

And that is actually has happened in all the geographies where we are active. And the biggest impact will be in the geographies where we have the most employees, so that will be in Sweden and Finland and Denmark. Yes, I think that was the answer to your question.

[Victor Hansen, analyst]

Yes. Great. And then on order intake, I'm wondering if you saw a different in -- a different pace in the beginning versus the end of Q4?

[Henrik Hjalmarsson, executive]

We saw -- it was actually a little bit of a mix, but what we did see was that coming into the Christmas period was a little bit slower than we had seen earlier in the quarter. But on the other hand, if anything, the middle was probably the strongest. So it was a bit of a mixed bag, to be quite honest.

[Victor Hansen, analyst]

Yes. Yes. Okay. And there are some seasonalities there as well. But then a follow-up here. Maybe you already answered it, and sorry. But for Scandinavia, the order backlog was down 27% and if we exclude pricing, FX and M&A, maybe this could be down more than 40% for organic volumes then, is that correct?

[Henrik Hjalmarsson, executive]

That's probably a little bit on the high side. The FX and also the M&A impact, given the size of Scandinavia and the relative size of the acquisition is limited, but it is down more than 27%. That's correct. I think -- and I answered it very briefly before actually. It's a consequence mainly of 2 things. First of all, Scandinavia is the business where we have seen the most and normal -- biggest anomaly in terms of lacking seasonality in the past couple of years. That also obviously means that the core order input has been unnaturally high in quarter 4 in the past couple of years.

Secondly, also, as we mentioned in the report, the industry market has, particularly then on the new build side, has slowed down and with a fairly considerable exposure there, particularly in Sweden, that also impacts that number negatively.

[Victor Hansen, analyst]

Yes. Okay. So not 40%, but almost for organic volumes, okay.

[Henrik Hjalmarsson, executive]

Yes. And I would look at it different. I mean I think the key thing to keep in mind there is because the number to look more at, it's very hard to say that in terms of order backlog, given that order backlog is something that's in nature spread out over time. If you look at order intake for Scandinavia, that grew by 5%. But obviously, if you do a similar type exercise there, excluding pricing and excluding FX and acquisition, that's in slightly negative in the quarter, but maybe around the 0 mark, something like that.

[Victor Hansen, analyst]

Yes. Yes. Okay. Got it. Finally here, in e-commerce, you improved sequentially and you grew your order intake. Should we expect this segment to be more resilient in a downturn, or was the Q4 increase here mainly driven by pent-up demand?

[Henrik Hjalmarsson, executive]

I think in general, we are very careful in terms of short-term outlook, to be honest, not just on a total level, but also on a segment-by-segment level because consumer and household activity at the moment is difficult to predict. But if anything, given that more of a value proposition that we see in those segments, we would expect that consumer segment to be a little bit more resilient, particularly also as we see perhaps this tactical energy renovation opportunity growing, there ought to be slightly more resilience there. And definitely much more so obviously than the businesses that are exposed to industry and new build, but also on a general level. So I guess a careful yes to that question. We have received...

[Operator]

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

[Peter Welin, executive]

Okay. We have received some questions online and I'll start to read them. My first one is from Jonas Bay. Can you give an update about the M&A process that you talk about regarding new markets in Europe?

[Henrik Hjalmarsson, executive]

Yes. So we've been clear that in terms of the priorities for M&A, we see some opportunity for continued tactical consolidation of positions in the Nordics. But obviously, the key drivers are going to be in Europe, most notably then in the U.K., continuing to grow the position there, where we took one step now in '22 with the acquisition of Dekko Windows Systems, but then also breaking in on a larger scale to one of the larger markets than most notably, likely France or Germany.

We are in continuous dialogue with several very interesting targets. As we normally point out, we do look at privately held and in many cases, family-owned and family-led businesses. So predicting the process is -- in detail is a bit tricky. But we have interesting and relevant dialogues ongoing and we are hopeful that we can make some continued good progress in '23.

[Peter Welin, executive]

Then we received 2 questions from Johan Dahl. The first question is related to price increases. The organic orders is down 5% and how much is in volume terms, meaning excluding prices?

[Henrik Hjalmarsson, executive]

Yes. So as we said, looking at that the other way around, we see that price increases is 10% or slightly above. So that will answer that question basically.

[Peter Welin, executive]

And the second question from Johan Dahl is related to planning. How do you plan staffing in the manufacturing ahead of seasonality, intense production season beginning of 2023?

[Henrik Hjalmarsson, executive]

Yes. So if we look at -- as I mentioned before, we have taken staff down and across the board basically. And if we look at factory-related staff, that number is down considerably now as we close the quarter versus where we were in the peak. But it comes very naturally in a business like ours then which has the seasonality pattern. So it's what we normally do.

[Peter Welin, executive]

And then receive a question from Steven of Goldman Sachs. Hi, Henrik and Peter, congratulations on the good results. On e-commerce, given the CapEx plan is fully up and running, what has kept the margin below in Q4 2022 compared to Q4 2021?

[Henrik Hjalmarsson, executive]

I think there are 2 key drivers of that. First of all, as we also mentioned in the report, is that efficiency in the production system has continued to improve and is now approaching the level we wanted it to be, but wasn't fully there all through the quarter, so production efficiency has been one.

And secondly, obviously, regaining growth momentum, which we really desired, it has meant that we have taken some investments, most notably in marketing, which then also impacted the EBITA margin slightly negatively in the quarter.

[Peter Welin, executive]

And then we have a question from Gustav. How is the flow usually of new orders over time? Given new orders, how long will it take to fulfill your current order agreements?

[Henrik Hjalmarsson, executive]

If -- I mean if you just look at the order backlog, I guess you could do the math and divide the order backlog by normal first quarter monthly sales and see that we have orders to cover us at least through a quarter or so depending a bit on how you look at or maybe a little bit less arguably.

But in reality, the order backlog is typically spread out because you also have -- or industry orders in there that might be for delivery in quarter 2 or maybe even into quarter 3. So I would look at it to -- back to Peter's point from before that we sit with a healthy order backlog for Q4 compared to a multiyear comparison. We do expect a seasonality pattern that's at least slightly more normal than we have seen in 2021 and 2022.

[Peter Welin, executive]

And then we received 3 questions from Peter Ludick at Lorenz. The first question is related to operating capital. So question number one, what has been a key driver for lower operating capital compared to 2018 compared to today?

I can start with that answer, and that is related to working capital. Inwido been quite focusing on working capital. And we have reduced our working capital by about -- roughly about SEK 600 million compared to 2018. And then also related to CapEx. During the last 2 years, the CapEx level has been lower compared to the normal level of 3%. So we have a little bit lower CapEx levels during 2020 until 2022.

We have taken -- we have placed orders of machines, but the delivery times has been so long, so it will impact the CapEx in 2023 instead. So it's related to operating -- it's related to working capital as well as CapEx.

Then second question. Can you quantify in percentage terms what increase...

[Henrik Hjalmarsson, executive]

Yes, what increased focus on energy efficiency translates into organic sales growth. No, it's -- unfortunately, I mean, we do believe and are certain that that's an underlying driver of the increased interest and also growth potential. It's very hard to quantify that in any level though. We don't have any real data-point to support a detailed estimate of that.

[Peter Welin, executive]

And then a last question from Peter is what countries and type of companies are at the top of your list when it comes to acquisitions?

[Henrik Hjalmarsson, executive]

Yes. And I think I answered that partly before in terms of tactical opportunities in the Nordics, continued consolidation in the U.K. and then breaking into one larger geography in Europe, be that France or Germany.

[Peter Welin, executive]

Then we received a question from Axis Jokela. What are the expectations for the order intake and backlog development in 2023?

[Henrik Hjalmarsson, executive]

Yes. And I think I also commented that before. We are very, very careful in terms of doing short- to medium-term predictions of demand. We remain very flexible and agile and prepared to meet any demand scenario, I would say. There are -- the industry markets, we are expecting a slowdown on the consumer market. We see clear both threats, but also clear opportunities. So it's very hard to predict.

[Peter Welin, executive]

Then we have a question from Eurozone Capital. How looks the pipelines when it comes to M&A, the companies acquired? And how are discussions with these companies compared to 1 year ago?

[Henrik Hjalmarsson, executive]

The M&A discussions as such are actually quite robust over time. I would say that the overall development that we've seen on many capital markets in the past year with quite turbulent development, it's not that visible in the dialogues. We have in many of the dialogues we have are much longer actually than even over a cycle. In terms of the dialogues, we have a short list at the moment of about 20 businesses that we are in dialogue with at different levels of intensity. And as I mentioned before, we have good hope that we will continue to make some progress and good progress in '23.

[Peter Welin, executive]

Then we have one question from Johan. Are there any upcoming votes in countries for subsidies -- legalization of subsidies for changing to more energy-efficient windows that we are aware of?

[Henrik Hjalmarsson, executive]

There are movements going on both in terms of carrots and whips, I would say. I mentioned before what's happened in Scotland as a good example of considerably increasing demand on both public and private housing to allow for subletting this, which is creating some considerable opportunity in terms of end-of-year renovation. We expect more of that to come through in other geographies, but there is nothing concrete at this moment specifically.

[Peter Welin, executive]

And then we received some questions here, 2 questions from Daniel Utebeck. The first question is, how is the multiple on private companies? Is it still on decreasing trend for prices for nonpublic companies?

[Henrik Hjalmarsson, executive]

What we see typically, again, the processes that we run typically span over a longer time. So we normally say that a typical multiple that we'd pay would be in the range of, let's say, around 6.5 to 7x EBIT. That's typically what we'd be looking at. And we haven't seen any massive movements actually in those longer discussions that we had over the past years, up nor down.

[Peter Welin, executive]

And then a question related to our timber purchase. What is the biggest market where you're buying most of your timber? And how is the timber prices developed at? Are they decreasing a lot during Q1 2023? It's a lag between reaches -- when it reaches your gross margins? And then do you buy your timber on the spot markets, or do you have agreements with your suppliers, such as [ SCA ] or [ Holman ], et cetera?

[Henrik Hjalmarsson, executive]

Okay. We have agreements with varying lengths depending on the outlook for the market. So sometimes a little bit shorter, sometimes a little bit longer. The main supply countries for timber for us is out of Finland and out of Sweden and some also come out of the Baltic countries. We have seen timber prices coming down coming into Q1 and we are clearly below the peak levels that we saw 9 months or a year ago or so, but arguably still slightly above the levels before the pandemic.

[Peter Welin, executive]

And then the last question is from Lars, a private investor. How did the quarter end in terms of order intake? Did you have any weaker end of the quarter?

[Henrik Hjalmarsson, executive]

Yes. As I mentioned before, it was a bit varying both between business units and between periods in the quarter. The strongest part of the quarter was actually in the middle. We saw a bit weaker activity going into the Christmas period, but that is not a typical leader given that activity -- general activity slows down and given the typical seasonality pattern.

[Peter Welin, executive]

So that was the last question. So with that, we thank you very much for your attention and see you all soon.

[Henrik Hjalmarsson, executive]

Thank you very much. Bye-bye.

[Operator]

The Inwido Q4 2022 Report Presentation has now ended. Thank you for your participation.