Lagercrantz Group AB

STO:LAGR B

Earnings Call Analysis

Lagoon Q2: Strong Margins and Stable Growth

Lagoon reported a solid Q2 with revenue up 12%, although organic growth dipped slightly by 1%. Acquisitions contributed 9% to growth, while currency effects added another 5%. A notable highlight was a record EBITDA margin of 17.8%, with broad-based improvements across all divisions. Cash flow remained robust at SEK 219 million, sustaining a strong 12-month cash flow close to SEK 1.4 billion. Profits after financial items rose by 21%, mainly due to higher interest rates, with minimal impact from currency exchange. Over six months, revenues increased by 20%, organic growth at 2%, acquisitions at 13%, and a cash flow surge of 137% to SEK 505 million. Profit after tax improved by 19%, with earnings per share hitting a new high.

Strong Q2 Performance with Record Margins and Robust Revenues

The company's Q2 demonstrated robust financial health, marked by a net revenue increase of 12% and a record-high EBITDA margin of 17.8%, signaling broad-based margin improvements across all divisions. Profit after financial items and after-tax both surged by 21%, and a healthy cash flow sustained the company's financial stability.

Solid Growth Momentum and Strategic Acquisitions

With a 30% return on equity and 36% equity ratio, the firm's financial parameters remain strong. Organic growth was at 2%, and acquisitions contributed an impressive 13% to net revenues. The company completed 4 strategic acquisitions in the first 6 months, infusing approximately SEK 300 million in annual net sales and bolstering its market position. The company's diversification strategy also manifested in the varied performance across divisions, navigating through market dynamics notably in the electrification and infrastructure sectors.

Expanding Horizons: A New Financial Goal and Strategic Outlook

The company's executive team exuded confidence in their revised goal of achieving SEK 2 billion, doubling profits within the next 5 years. In alignment, the divisions are expected to focus on growth opportunities, emphasizing sustainability and structural growth in emerging sectors such as electrification and security solutions. The company also recommitted to its achievements in proprietary products, striving to raise the bar from 75% to 85%, which is testament to their pursuit of high-margin, controlled business expansions.

Sustainable Future Commitments and Success in Recent Acquisitions

Sustainability goals were given prominence, as the company integrated these values across business practices, including acquisition strategies. Recent acquisitions have demonstrated promising results, with the addition of innovative products and expansion into new markets. They've also indicated a commitment to employee well-being and ethical practices within the value chain, and efforts toward carbon emission reductions showcased their dedication to a sustainable future.

Earnings Call Transcript 2024-Q2

[Jörgen Wigh, executive]

Yes. Welcome, everyone, to this morning's conference around Lagoons Q2. Me speaking is Jorgen Wigh and together with me here on the call this morning is Peter Thysell, CFO, and we will jointly try to guide you through the report and the presentation that we have here up on the screen. I hope you were all sort of prepared for that. We will do the presentation in sort of 3 sections. We will start out with giving everyone that are new to the group, a little bit of a short introduction, then we will jump right into the numbers and look at Q2. And after that, we will talk quite a lot today around the new sort of we are expecting to raise the bar and how we move -- plan to move on with Lagercrantz going forward.

For those of you that have been with us for some years, we have always been sort of trying to find growth and been in the group with some 15% per year. And a couple of years back, we raised the Board to the SEK 1 billion in profits that we reached here this summer. And now we'd like to talk a little bit about what comes next and they're raising the bar and doubling once again. That is the message that we have communicated here this morning as well in the report. So we'll jump right into it, but -- and go through these sections. We will then, in the end, have an open discussion and with some Q&A. So you can -- there's a queue that you can add on yourself to, if you'd like to put some question out later on.

So we will start off with a short introduction then I mean, we're building the group continuously around tech group or an industrial group, trying to find niche oriented preferably product companies that we would like to have within our portfolio of companies. You can see here on the slide that we have sort of put them into the 5 divisions that we have, the electrify control, tech sense products, international, and you can see how many companies we have in each of these divisions. Each company are working autonomously, independently in their own market under their own brand name. So we try -- we keep the companies as they are when we acquire them and build them from sort of the standpoint that they have, finding new growth opportunities in terms of exports or new initiatives within the companies and thereby growing them along the way when we acquire them.

Currently, we have some revenues of approaching SEK 8 billion and some 2,600 employees. We are some 20 people or so, a little bit less really in the overhead. But otherwise, the rest of the employees that we have within the group are all working in the different subsidiaries that you can see over to the right here, where we have our needles and where we are. You can see that it's not in Europe, the map there. But you can also see all the way over to the right, but we also have some footholds in other parts of the world especially China, India and the U.S., where we have some growth ambitions and some companies that have some [indiscernible]. And we try to help our companies get abroad with exports in many different new markets that we see over there. We are strong believers in running things in a decentralized way. So we have some -- currently some 70 profit centers in the 5 divisions. So each company, as I said, is run independently to a large extent. And acquisitions is a very central part of our business model. We will probably -- we will today communicate the pace of the borrowing terms of the number of acquisitions that we have from the 5% to 8% that we're working with the 8 to 12, and that is also an initiative that is going on in the divisions more and more along the way. That we'll talk about a little bit later on.

We have been on the stock exchange in 2001. Before that, we were partnered the [ Permania ] Group. So we've been on the stock exchange in one form or the other since 1976 and the group was founded already in 1906. So we have a long heritage of doing what we're doing. And I think we have a very strong platform today. that has been built through a lot of business culture and philosophy around decentralization and working very sort of thoroughly with the companies along the way, building the group over the years. So that's an introduction to the group. We will communicate this morning than in the Q2 figures. We have the year the starting first of April. So this is our Q2 figures we communicated, which is up until the end of September then with some -- and you can see the very good trend that we have here. The good trajectory we've had for some years now and raising the -- and we surpassed the back bar here, the SEK 1 billion, you can see all over to the right. here this summer. And now we added to that even more in the last with a profit increase here in the quarter of some -- so it was a strong quarter, and we feel that we have a very strong path to continue building the group along the way. We'll come back to that.

You can also see that the scales are proportional from left to right here, and thereby also you can see along the way that margins have improved. That has been very important to us along the way. We are more keen on driving profits and margins rather and the profitability rather than focusing too much on top line. We would like to have the bottom line preferably to work for us. And that's been sort of part of our heritage in these many years now. So that's an introduction to the group. We will look further into the numbers and looking into the business conditions. The way we see it is that we feel that the market has held up better than expected. So we think this remains stable on a good level for most of our businesses. We see a broad-based. We have actually been -- as we have combined also expecting some slowdown, and we see some of the slowdown, but not to the extent that we expected really.

So we feel that it's holding up in many parts of the business. And we see the industrial sort of related type businesses are doing very well. The electrify -- electrification is holding up very well and a number of other niches. The [ Tech's ] also holding up better than expected. So we think it's -- the market has actually we're expecting sort of that we should work with our plan Bs and stuff for a year now. But so far, we have not been working with those very much. It's been holding up better than expected. And we also saw the order intake for comparable units was actually slightly above the same period previous year and in line with the revenues for the quarter. So I think it looks pretty promising. And we also feel why is that then. Well, we feel that the broad focus that we have with many different companies in different end customer segments and different geographies is working very well for us and especially with the focus that we have with more related to the green transition with electrification, with the infrastructure building that's going on and security and safety products and also some specialized products that we have other segments that we have, especially with the niche division and also in [indiscernible] International provide some good resilience for us.

And we see, of course, some type of slowdown in a couple of markets, but not worse than we've seen previously. And we also feel that is holding up very well, generally speaking, along across most markets. We will look further into the numbers here on the next slide. And Peter, can you take us through the numbers, please?

[Peter Thysell, executive]

Yes. Thank you, Jorgen. Overall, as Jorgen mentioned, we are quite happy with our Q2. We feel it shows solid numbers with broad-based margin improvements. Our net revenues increased by 12% and the organic growth was a little bit lower than previously minus 1% contribution from acquisitions were 9% and currency effects, 5%. But maybe the strongest part of the report is margin improvement that took us to a record high level of 17.8%.

And it was quite broad-based where all 5 divisions contributed to improved EBITDA and EBITDA margins. Our cash flow was a rather normalized cash flow from operations at SEK 219 million compared to SEK 211 million last year. And during the last 12 months, we have had close to SEK 1.4 billion in positive cash flow. So that's quite strong but now at more normalized levels. Our profit after financial items increased by 21%. And looking into the net financial items, we can see that they were more or less entirely driven by increased interest rates and currency translation effects were not significant. It didn't have any significant effect in this quarter. And profit after tax increased by 21%. If we look at accumulated numbers for the first 6 months, we had net revenues increased by 20%, and the organic growth were -- was at 2%, and acquisitions contributed with 13% and EBITDA margin was 17.6%. Cash flow increased by 137% to SEK 505 million. And profit after financial items increased by 20%. So it's very, very stable. And the same in net financial items were driven by increased interest rates rather than anything else, and currency effects were not significant didn't have any significant effect.

We also noted that our profit after tax increased by 19% and our earnings per share increased to a record level of SEK [ 401 ] in the last 12 months. Our return on equity was 30%, and our equity ratio was at a very high level at 36%. And we completed 4 acquisitions during the first 6 months, contributing some SEK 300 million in annual net sales. If we look at the outcome per division, we can note that most divisions have over the past 12 months, improved their margins, except for the Control division. And I will come back and take you through the outcome per division, where, for example, for electrify we had a very stable and positive market situation driven by electrification and infrastructure investments. And most units within the division delivered strong results, although some entities were affected by lower volumes from the wind power industry, which is our biggest customer work, one of the biggest customer segments. One note where the thing is that within infrastructure, QD delivered a good quarter, but this time without any significant project deliveries. If you remember in our Q2 last year, we had some extra project deliveries in the order of SEK 30 million with high profitability that we didn't have in this quarter. So that explains some of -- you have to take that into consideration looking at the numbers.

We also noted that our recent acquisition within Electrify, [ Tico ] Flex had a very strong performance in the quarter and also the newest addition lead strong start in the group. For the Control division, we have been focusing on improving the profitability and EBITDA improved by 24%. And the EBITDA margin improved to [ 12.9 ] in the quarter compared to [ 10.4 ] in the same period last year. but we have a challenging market situation with a slowdown in demand for some businesses and seasonal effects or other business like, for example, Radonova with the radon measurement, which is in a low seas in the second quarter. We noted though, we had a positive development for several businesses like steered voice and electronic letting and others. If we move on to [ Tech Sec, ] we noted, if you remember, last year, we were quite acquisitive in this division, but not in these numbers. We had a healthy improvement of EBITDA was some 20%. And the EBITDA margin improved to 18.5%. And we noted a very stable and favorable market situation for most business units where Aron and ISG Nordic and COGS performed quite well, but also our biggest acquisition ever PCP and CWL also had a good performance and made the greatest contribution to earnings.

We also noted that our recent acquisitions, Fico and or and joiner in the U.K. delivered quite strong. Then for niche products, which is our, let's call it, the broadest spectrum of products had a very good performance. They had a good performance already last year. So quite tough comparables and we noted an improvement of EBITDA of some 13% and close to record high EBITDA margin of 21.3%. And the market situation was in general, quite stable. This is the division where we have noted maybe in the past 3 quarters some slowdown. But here, it shows some growth once again. And we noted particularly good improvements for accept PST macro, Westmark and also Tarmac. And last, international, but not the least, we had a very, very strong development for the International division, where the EBITDA improved by some 3% and the EBITDA margin improved to 16.6%. If you remember, this is the division that a few years back lagged behind the other divisions, but it's now closing in on the average performance. And it's particularly good performance in our Marine businesses. The Libra in Norway, in Finland and ISG in Denmark, but also for our Schmitz technique in Germany tech in the U.K. So it's a rather broad-based improvement.

And also the -- our recent acquisitions, Global Rail in Denmark and Supply Plus in the U.K. had a good development. And turning into the net sales per market segment. We show here first, the last year, financial year, but also the first 6 months. And you can see that it's very stable in between the different market segments. And I think I received the question quite often about our exposure to the building and construction segment particularly the residential and it's between 1% and 2%. So it's very, very small and remains quite small. But I think the takeaway here is that it's very, very stable and rather broad exposure to very different market segments. So back to you, Jorgen.

[Jörgen Wigh, executive]

Yes. Thank you. Thank you, Peter. And with that, we wrap up the sort of section around the quarter. I'd like to now talk about the future and what we have discussed and of course, you have realized that we surpassed the [ SEK ] 1 billion year this summer, and we feel that it's -- we have been revisiting our goals, and we're looking into that quite a lot here in the internal where we are for next. And for those of you that have been with us for quite some years, you know that we have a long-term financial goals, 2 of them.

One is that we should grow our profits by 15% per year, i.e., doubling in 5 years. And we also have the return on equity that should be about 25%. Those are our 2 financial goals that we have within the group. And of course, we've been revisiting those. In the last couple of years with sort of reaching the SEK 1 billion, we did that much faster than expected. And we feel that we now would like to raise the bar to SEK 2 billion. And you can discuss how long that will take the 15% is still there. So it should be within the 5 years. And given that we have a sort of new market situation in -- we have been a bit careful. So let's say, it should be within 5 years, we should reach the SEK 2 billion. We see that the opportunities for us and the platform we're working for out of is very strong. We've been talking quite a lot here now about the broad-based sort of setup we have with many good business and a very strong portfolio of companies within the group, and we feel that we have very good opportunities going forward and that the SEK 2 billion is definitely doable within the 5 years that we've been talking about.

We would -- around this, we'd like to go over and clarify strategies and financial goals. We will continue working with the 5 divisions with a clear growth ambitions within around sustainability and in areas where we see some underlying structural growth. The thing we set up a few years back when we released the previous sort of setup, we will continue. We feel it's been very strong for us, and we will continue to be that for a couple of more years going forward really. And then we will increase the capacity and scope within the M&A and raise the bar there somewhat as well. And we will also then focus on sustainability. That is something that all companies are doing and us definitely also. We have just recruited a Sustainability Officer here and that is something that we will we will work even more with going forward, setting some clear targets and working with that as we will discuss here a little bit later on.

So let's dive in and begin to a view of this. I think that what we would like to build within larger [ crowds ] is the strong portfolio of very good companies. And I think we have a very strong portfolio today, and we would like to grow that even further. We are some kind of 70 companies within the group at present. And with the growth that we expect in the near coming years, we will probably reach the 100 or so within the 5 years. So that's sort of -- that's what we're aiming for. We feel that we should have these very strong, mainly these very strong product companies that have good sort of opportunities -- are very strong in their niches, but with some good growth opportunities for exports or by driving things in the sense of pruning and also working better in the market they're in and thereby performing even better than they did when we acquired them. And that has been sort of something been working with and working very well for us in many instances. We have quite a number of success stories at the moment in the companies that we have acquired.

So -- and we will stick to the annual profit EBIT growth of more than 15% that has been with us for many years, even since the listing. And we feel it's a very strong one, and we would like to continue on that level. We plan to generate our cash internally for the acquisitions, mainly. And therefore, we would like to sort of have a pace that we feel that we can live with. And that is what has been holding up for a longer period of time and that we feel is a good growth pace that we can have over the years. And we would think that at least 1/3 of that organically and the rest through [ 8 to 2 ] acquisitions per year. In the previous one, it was 5% to 8%. So that then we've raised the bar significantly. We feel that the setup with the divisions that we have currently is making our us more broad-based, and we also have greater resources and we can do that more in different markets and run more processes simultaneously. And also by that, adding more acquisitions around the year. And so that it is definitely doable.

We also feel that we should stick to the return on equity. The 25% has been with us for many years, and we still feel that, that's a very doable level. we have been a little bit over, a little bit on the different years. But here in the last couple of 2, 3 years, we've been more in the neighborhood of [ 30%, ] so we have been above that. And we plan to stay there, but we have decided also to keep the bar here for the time being. We will -- in these ambitions, we will continue building the 5 divisions. We feel that we have a very broad-based asset portfolio. And we also feel that where we've -- where we are building is very sort of attractive in the sense that we have found and segments that have some underlying structural growth and where we see the green transition taking place within the electrification, for instance, within the control where we more and more measure and control things from a distance. That is also something that is growing, an area which is growing and also in the Tech [indiscernible] division with the security and safety solutions, we also see some good underlying growth in that market also connected to -- that we would like to take better care of environment and people and everything. And that is driving the demand for safety and security products in different dimensions, and that is a good sector as well to be in.

Within the Niche Products division, we have -- there, we found quite a number of product -- proprietary product companies building around that. And we've done that in certain markets and building some clusters underneath in different sort of product segments -- our customer segments, building clusters around a couple of different sort of initiatives within the Niche Products division. Been working quite well for us for a number of years. Here, we've seen even the best performance over a longer period and we plan to continue to grow that going forward as well. And that sort of whole concept we are [ copying ] more and more into the international division. We do that concept, we're taking a broad setting up businesses in different -- and acquiring businesses in different markets, especially in Denmark. We're strong in Norway, but also in the U.K., where we are definitely growing quite significantly and lately with a number of acquisitions taking place there, but also some feet on the ground there working for us with building the international division. So we will continue building. We feel very satisfied with the divisions and the segments we're in. We will continue to build here, and we will really go for and be very even more clear around building around sustainable segments where we see some underlying structural growth, as we've pointed out many times, but we will be even more clear around that along the way.

I talked -- we talked about the different markets we're in. And I think it's -- and a broad-based strong portfolio of companies we have. And one way for you guys to understand that for us to illustrate it is to look at where we have our different companies. As you know that we do a lot of measuring comparing and challenging our companies listing the best -- from the best to the worst in terms of different dimensions. Here, we have the dimension on the return on sales, which is the net margin, the EBIT margin, where we have the companies listed from the best to the worst. And for us that have been within the group for many years, we see that this has gradually improved over many years. We have never had this many companies in blue and so few companies in yellow and red looking back a few years. And it's good to see that we are climbing and that the sort of comparison between the companies are working for us. And you can see that the number of companies in the 20 and 15 to 20 categories have increased here since last year.

So this, I think, proves the broad-based sort of strong portfolio that we have within the group, a number of very good companies that can do good things for us in the future. And that is, I think, very promising when we look forward. We're also raising the borrowing in terms of proprietary products. For those of you that have been with us for quite some years, we, I think, in some 10 years ago or so we set the bar for ourselves to for and that we reach here now last year or so. So we will continue growing that we will work with the other parts as well, but we will along the way, gradually become more and more dependent upon the proprietary products. We see within proprietary products that we have higher margins and also we control the situation better ourselves when we have that type of setup in the companies the company controls their markets, their products, their customers much better. And that means that they -- when they do that in a good way, they also can earn better margins. And that also gives opportunities in terms of growth. And you can see some things to find growth in terms of new products, but also to go for new markets in terms of exports.

So we see a significant difference in performance when we look at the proprietary product type companies, and therefore, we would like to continue raising the bar here to 85%. We will still acquire a few of the others as well, and we will work with those. We feel that some of them are doing quite but we can be scrutinized that even harder and be even more selective when we look at the companies that we have within and adding through acquisitions also in value-added distribution, for instance. So there will be exceptions, but most of it will be around proprietary products as seen here. And we're raising the bar from 75% to 85% is the new communicating. Along the way, you know that we've also been very keen on keeping focus on value add. We are very profit driven, and we would like deliver shareholder value in terms of increased earnings per share and good growth in earnings per share along the way. And to do that, we feel that the margins and that we do the right type of business and generate the right type of cash flow is very, very important along the way. And here, you can see our good trend in terms of the focus on value add and the gross margin that we have within the group.

And it's good to see here now that we have an all-time high here in the year-to-date, and we also had an all-time high here in the last quarter. We've seen some raw material prices coming down. We have seen some currency effects sort of working for us. but we've also done a very good job in keeping prices and raising prices in our companies, less so now maybe than a couple of years back, but also less needed when we see inflation rates coming down a little bit, and we see that cost inflation, especially in raw materials, when we talk about metals and things like that, that we buy quite a lot of has come down to some extent, then we also see some improvements in terms of gross margins. So good to see that we have this good trend. And if you isolate Q2, then it's an even stronger number for those of you who would like to do that. In terms of acquisitions, we were also raising the bar, has talked about the 8 to 12 companies. I mean this is really important to us to do more M&A. We feel that the M&A landscape is looking quite good. We feel that there are a number of good companies to look at, and we see that there's been reasonable multiples and reasonable price tags attached to that. So we are definitely looking at more acquisitions.

We have been quite acquisitive here in the couple of last years here. And since July 2022, we have made 11 acquisitions that add about SEK 735 million in terms of business volume. We have been even more selective, a couple of instances here now lately, but we still feel that it's very good, and we will keep up the pace, and we see some really good opportunities in our pipeline at present. So this is really promising. Along the way, looking at the Lagercrantz towards the SEK 2 billion, we also have -- we are increasing the capacity along the way within -- for those of you that are close to us, you know that we have added with some home resources in the U.K. We have made some 34 acquisitions there. We've also been looking quite a lot into the Benelux with a couple of instances there and a couple of in Germany. So we are along the way, also broadening our scope and the capacity in different sort of nearby markets that we have not been into previously. We have some companies that we have come across through add-on acquisitions and similar to what we already have in this market. But along the way, we will increase the capacity and the number of deals that we conclude in these markets.

We will probably also look at add-on acquisitions in other markets. We have been looking, for instance, in a couple of add-ons companies that we already have in the U.S., for instance. So we will along the way grow here. But gradually and doing it very sort of deliberately but gradually along the way, learning as we go into new markets. So that's also very promising when we look further down. We usually in this meeting also comment a little bit on the more recent acquisitions. So here is the latest one we did. We tried to put together these fact sheets on all of the companies that we acquire. This is a fairly small company in Norway, the [indiscernible] . But we've been working with them. We have been distributing their products in Sweden for some years through our Norwesco company. So we know the company quite well. and now it came up for sale, and we feel that this is a very sort of strong company, a very established and very well thought through product range, doing their job for people working with this and a very strong company that has been performing very well for many, many years. and we expect it to continue to do so.

I think the company we are putting some energy and some new structure maybe into the company. We will go more for exports. They're very established in Norway and also in Sweden, but we are -- I think there are more to do in Finland and in Denmark, for instance. So there are other markets that we can go for with this company as well. So this is a good start. Not very big, but still a good sort of performance and a good add-on to what we have within the Electrify division. Here in the last 6 months, we've also concluded will go global. Global is the market leader or a strong market player really in vacuum toilets for cranes. And this as we communicated earlier, but it's also a good example of what type of companies we're looking for. Very niche-oriented strong player in the market and with some excellent good numbers, adding to what we have within the group with 25%, you can see down there. And Global rail has came in to -- has come on come into the group in a very good way. So performing well in the first 4, 5 months, whatever is.

Fire Co is another one. Here, we're talking about the U.K. A couple of companies here that we have acquired in the U.K. Manufacturing fire doors, hardware, as you can see up there, a very strong company and very -- the [ Door Guard ] is very, very well established in the U.K. and also in -- with some exports with some sales of SEK 7 million. So it's -- and the strong performance there as well picked up and overachieving the expectations really so far in the group. So it's been a strong start from the [ Fire Co ] team and the team working with that. We also acquired here another good example of companies that we would like us to supply us. is a product company with the ladders and hose reels for firefighting very niche-oriented for emergency rescue services, especially in the U.K., but also with some, I think, it's around 25%, 30% exports outside of the U.K., into Central Europe, most of it, but also into the Nordic space. We see some of these ladders on fire engines and those type -- a very niche-oriented product with high demands from customers. So the firefighters really need these things to work and the quality issues here are very important. And this is a very good example of a company that we can bring into our group -- you can see some good numbers down to the right, but here, we also expect some even better improvements along the way. So it's looking promising to have that type of company within the group as well.

So those were the companies and the acquisitions around larger cans towards the SEK 2 billion. We also have some set some high aspirations and good goals in terms of the sustainability. And here is the framework we communicated already this spring. Maybe, Pete, do you have something you're responsible for this? Or maybe you have something to add here or....

[Peter Thysell, executive]

No, it's I think the key takeaway is that we are working actively with sustainability and in 4 areas where we take into consideration sustainability factors when we do acquisitions and we're -- as many companies, we work quite actively with reducing our climate and environmental impact.

And also important is we keep our employees motivated and it's a top priority for us to have safe work conditions with no workplace accidents, and we work also with diversity, inclusion and equality in the workplace. And also that we push our code of conduct and ensure our value chain is with high standard of ethics. So that's our 4 main areas. And we're preparing for [ CSRD ] that will come into play in about a year for us or starting in April next year.

[Jörgen Wigh, executive]

Yes. And I also think it's worth mentioning that we have been working quite a lot with the CO2 emissions here in the last 6 months or so, we had that for our MD conference this year, that was a key theme to discuss CO2 emissions on a company-by-company level. to make everyone understand the importance, but also understand what's driving it and understand their own situation and be able to take measures along the way to make changes in terms of CO2 emissions. So that has been a key theme for us for quite some time and now recently even more around the CO2 emissions.

Well, thank you for that. We move on here. Just to sum up the [indiscernible] towards the SEK 2 billion. I think what we try to do and the ambitions we have there, I think it's good to see that we are raising the bar. We are really like to keep the trajectory and keep the pace that we've had. We'd like to keep it up. We would like to build a strong group with some 100 companies or so within the next few years. We are at 70 currently with a lot of leading product companies in the different niches. And we feel that there has been what we've been doing for some years now. It's been working very well for us and also for our development along the way. We're aiming for 85% proprietary products. We were aiming some 5% organic growth and some good EBITDA margins. You can see how it looked at each of the divisions.

We are slightly -- we are above this number currently. But we're so well above the 15% EBITDA margin is where we would like to be and are currently so that, that we will continue driving margins. we have also gone on to limit the scope too much by selling the EBITDA margin too high. We still would like to have a lot to look at and see companies that continue into the group. But the EBITDA margins will definitely be higher than [ 15%. ] We will still run things in a very decentralized way with the company level is still the most important. So each company by company and working very independently in each of the companies -- kind to encourage people and empower people to do good things for us out in the different companies. But we will also build some increased capacity when it comes to different things, especially M&A and divisional level. We have been doing that for a couple of years now, but they're a little bit left to be done there. But otherwise, we will get the divisions fully sort of operational to really go and be a strong sort of driver of the division's sort of growth and profitability development over time.

We will, along the way, increase our geographical scope. So the U.K. is definitely on our map currently and has been growing quite significantly in the last couple of years. We will, in the next phase look for Germany, Benelux, Poland and the Baltics. We are in those markets already, but we will definitely increase our capacity and also ambitions in those markets as well to find even better or a greater extent our growth opportunities. We still feel that there's a lot to look at. And especially now, I think the M&A market looks quite promising also in the Nordics. So we will -- we feel very happy with where we are currently. But along the way, we will also increase the scope gradually along the way. So to sum up, I have -- we -- I think we posted another very strong quarter we feel that the growth in profits were around 20%. And you can see the EPS growth here is around 23%. So very strong numbers continue from us. We feel that the market has been holding up better than we expected earlier on. So it's even though it's -- the organic growth was slightly down in the quarter, we still feel that it's holding up very well for us. So it's better than we expected maybe 6 months ago.

So with that, I think we round off and open up for questions.

[Operator]

[Operator Instructions] The next question comes from Max Bacco from SEB.

[Max Bacco, analyst]

Yes, Jorgen. Three questions from my side, if that's all right. First off, could you perhaps provide us with the growth split on EBITDA level, organic growth, FX and acquisitions?

[Jörgen Wigh, executive]

You take them one at a time? No. We feel that -- that number is a bit misleading. It is lower than it has been, but we also, last year, had quite a lot of extra profit coming in from the -- more of the project-based sales that we had within electronics. So this time, we're not giving out that number. We think that the total growth is very good. Most of it is coming from M&A. But it's still at a good level and definitely when we compare it to the extra volume we had last year.

[Max Bacco, analyst]

Understood. And during the quarter here, Q2, did you see -- I mean, adjusted for seasonal effects month by month, but did you see any and it changes to demand? Or was it quite stable throughout? And perhaps if you can comment on October also, what you have seen so far?

[Jörgen Wigh, executive]

As we have communicated, I think that is holding up very well for us. We have not seen a deterioration in September or late here in the quarter or recently been holding up very well, we think, in the same sort of pace that we've had before.

[Max Bacco, analyst]

Perfect. And the last one also, as you stated yourself, I mean, you have raised prices quite significantly here during the last 2 years, and now we start to see that material prices are coming down. Have you seen any tendencies among customers that they are pushing you to decrease your prices?

[Jörgen Wigh, executive]

Yes, they always do that, right? It's a discussion you have all the time with customers on how to elaborate on that and how to change prices. I think the raw materials prices has come down maybe for 9, 12 months for the last 9, 12 months, right? So the discussion has been going on for quite some time. So -- and I think to some extent, we have also lowered prices in some couple of instances, but we also raised prices in other instances.

So I don't think the price effect now is very significant at already. We don't measure that as I think you're aware of. So we don't -- we can't measure that with the structure we have. But I think that we see in some companies that we have actually been lowering prices a little bit, but not to the extent where we see the raw materials, you can see the gross margin is picking up. So it's still that we are holding up very well. And the price effect I don't think the price effect is very significant at the moment, if any at all.

[Operator]

The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.

[Karl Bokvist, analyst]

My first one is on the, let's say, next 5-year plan with the M&A opportunities there? Are there any divisions in particular or regions where you see particularly good potential to do this step up to 8 to 12 acquisitions?

[Jörgen Wigh, executive]

I think we are working with it in a very broad -- that also in a very broad-based sense. We're expecting some maybe 2 acquisitions per division. That's the way we would like to look at it. And it is up to really the divisional teams to find those attractive M&A deals to be made each year to the multiple sort of ranges that we have defined. So that's the way we look at it.

I think there are some good opportunities if we look into the electrification sector that there are some good opportunities there. But we also feel that others are also aiming for that sector. So maybe we also feel some increased competition there. we have been within control. We've been looking at a few cases. Some of the cases are more software related. We are still interested in that, but then we also see price ranges pick up a little bit. And therefore, we have we have not concluded a few deals there. So there are some ups and downs in different markets. But generally speaking, I think there are good opportunities and a balanced set of opportunities among -- between the divisions.

[Karl Bokvist, analyst]

Understood. And then on end market dynamics, you did mentioned that the wind power segment, for example, which was a relatively important area for Electrify was a bit weaker. But are there any other end markets here worth commenting that our of bigger importance to the group such as power electricity distribution, infrastructure and transport.

[Jörgen Wigh, executive]

Yes. We have those dependencies. And that's where I think it's holding up better than expected I think the electrification we have been discussing. And I think generally in society also, we've been discussing that we need to invest quite a lot in our power grid. And people have been discussing quite a lot about sort of the approval processes around that inside in general.

But I think it is -- as we see it, it is picking up a little bit along the way. There are some significant investments ahead of us in the coming 3 to 5 years. So it is picking up to the better looking at other sectors. So I think the sort of segments we're in is the segments we are in is working in our favor at the moment.

[Karl Bokvist, analyst]

Understood. And my final question is, and apologies for being a bit blunt here. But -- so if I understand it correctly, you decided to report organic earnings during a period where you felt you had extra profit growth, and now you don't disclose it. So -- and then my question is just for sales in the divisions, you have for 5 straight quarters, reported organic growth and not any longer. So my question is just why have you stopped disclosing organic sales on a divisional level?

[Jörgen Wigh, executive]

Basically for the same reason. We had a discussion around that internally. And for the same reason, really, that we see it's -- the project-based sales that we have within electrification is sort of skewing the numbers and making people through the wrong conclusion. That's why we decided to do that. But generally speaking, the organic growth has been slowing down. We see a better uptick in a better sort of development in terms of order intake as we have commented along the way.

Looking at the divisional split. The organic growth was slightly stronger within the International division, while it was held back for these reasons in other divisions. But generally speaking, we don't see that the international is doing very much better than anyone else. And then we see -- it's more sort of broad-based, and we think it's holding up. And therefore, I think that the sort of the aggregated number gives you a good picture of what's happening.

[Operator]

The next question comes from Niklas Savas from Red Eye.

[Niklas Sävås, analyst]

I have a question with regards to PicoFlex, which you bought in the winter last year. It seems like the business is continuing to perform really well in a cyclical downturn for the telecom industry. Can you elaborate a bit on the reasons for why it's managing so well in this environment?

[Jörgen Wigh, executive]

I'm not sure I am fully aware of all the details there, but my understanding is that they are positioned with their products, the products are very well sort of established. They've been with the company for many years, and they were initially the company -- it's a product company. They have very sort of niche-oriented products that has a strong market at the moment. So there is a good demand for these specific products, even though others are struggling a bit more. That is one key thing.

The other key thing is that they're running some bigger projects around globally, and they are working especially with one in the U.S. that is also holding up the numbers are going well for them here in this period. Not huge, but still for that company, a good sort of a good sort of platform to work from. I think the [ Tikoflakes, ] as you may be suggesting is that [indiscernible] is holding up better than the industry on that industry in general. But they've been well positioned and we're doing it very well. Whether that is -- the company is fairly new, so whether that will be the same situation in 3 years, I don't know really. But so far, it's been good.

[Niklas Sävås, analyst]

Perfect. And then another question on that you're raising the target for proprietary products from 75% to 85%. I just wonder, will that mainly come from acquisitions also because of, I mean, organic growth in the existing units?

[Jörgen Wigh, executive]

It will be both because we see that companies with proprietary products have a higher growth rate than the distributing type companies. So it will come to some extent organically, but most of it will be through acquisitions.

[Niklas Sävås, analyst]

My last question is with regards to the Control division, which has struggled for the last few quarters. But now you come into the seasonally strong third and fourth quarters. I mean, what's your take on the coming 2 quarters for the division?

[Jörgen Wigh, executive]

I think we have been through the companies. We have a new division head there since 1.5 years now. And he's been working quite a lot through the different companies making some changes and really finding new growth paths for many of the companies. I think many of that -- a lot of that work is done now. So now we expect it to pick up and also find the right type of acquisitions there.

We also feel that there are some big contributors in that division. One is the rather [indiscernible] Nova has had a strong sort of a stronger start to the season this year than last year. So that's a bit promising. And we also have the [indiscernible] which is very, very important to the division. And then it's about sort of the -- how the development of the aluminum market will develop. And then also, what would happen to electricity prices in Europe. So there are quite a number of external factors going into the Precimeter situation. So that's a bit of a hard thing to judge, really.

[Niklas Sävås, analyst]

Yes, I understand that

[Jörgen Wigh, executive]

That looks better in control along the way, I think.

[Operator]

[Operator Instructions] As a reminder, if you wish to -- there are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Jörgen Wigh, executive]

See how we do this now then? We have a couple of long questions written here. Let's see Peter, have you looked into these?

[Peter Thysell, executive]

Yes. But maybe we should take them offline.

[Jörgen Wigh, executive]

Yes. Okay. Let's do take them individually with a few people that posted those questions. I think that will -- that will do.

So thank you, everyone, for listening in. Thank you for being patient with us. Today was a bit longer today than -- but we wanted to communicate our new ambitions and our new SEK 2 billion goal. And hopefully, that will -- I think we're all set to have number of good years ahead of us. So thank you very much for listening in.