Troax Group AB (publ)

STO:TROAX

Earnings Call Transcript 2023-Q1

[Operator]

Hello, and welcome to the Presentation Troax Group AB First Quarter 2023 Report Call. My name is [ Francois ] and I'll be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions].I'll now hand you over to your host, Thomas Widstrand to begin today's conference. Thank you.

[Thomas Widstrand, executive]

Thank you, and thank you, everyone, who is listening in. Thanks for taking your time. And as usual, I will present on the quarterly results. And as usual, also, I will follow a bit of a report that we have done to summarize in a simple way, how the development has been. And for those of you who have access to the Internet, you can find this on our own homepage troax.com. And you'll find it on the investors. And under that, you will find it on the reports and then, of course, Q1 2023. If you don't have it, I think you will be able to follow what I'm saying in any case, but could be a little bit easier. And of course, if you follow this report. So first quarter presentation, we start with talking very briefly about active and aware and this was explained a little bit how we are working right now that we try to be very active towards the customers as regards safety and guiding them and helping them in finding the right safety solution. And obviously, aware is that we try to make the customers aware of the safety possibilities. And we have recently come we do 1 or 2-- now is the business quite interesting new development, which makes that we can increase the safety standards for those who are interested to do that. And we think that this will be something which will become even more interesting as more and more companies and persons will understand that there are bigger opportunities for highest and what it is today. So with this short introduction, I then go into what we do. And of course, we are safe and on solving ground. And then I come to a few pictures, which are normally then describing what we are doing. And obviously, we are working with safety nets or parameter as we call it. And the first [ reg ]segment that we're working with is what we call Machine Guarding, which is approximately 60% of our turnover. And a typical example of what we're doing is this page here this picture where you can see 2 people or maybe not typical, but at least an installation with the core industry. And you see then, obviously, that a lot of robots are working on, in the case we're lean in other assembly operations. And of course, you want to avoid that people working outside of the paramedic ordering get hold. So therefore, of course, you have this kind of installations to make sure that your people are safe and some. This is also what's growing the most, I would say, I'll come related to the main drivers, but I would say that due to the continued mechanization and so forth, this is, of course, an interesting future growing segment. Next one, when we talk about product segment is what we call warehouse petitioning. It's approximately 30% of our turnover. And for those of you who have the page open, you can see here that this picture, which shows not full automate where else, but more traditional warehouse where you see people are running [Indiscernible] but they are working on handling forklift trucks, and they are working then with some new operations on the other side of the fence. So it's our say typical example of more tractional warehouse when we install everything from the shelves, which you have on the pellet ranks and also the net regarding you have on the backside of the [ regs ] to prevent and what you have on the shelves and falling down. And then, of course, you have the divides between the people who are working then with forklift trucks and the people are working with the other types of assembly or dispatch cost. I go to the third one, with the co-property protection well, and this is the one where we actually got started many years ago. This is not so much of safety from protecting people. It's more to protect them, of course, bicycles, luggage’s and whatever, you and I have that you don't keep flat every time. So this is, of course, primarily and aim for multi-story flats, where you might have in your seller a cage way which is value and you find and can put your things which you don't use at the moment. This is, as I said, approximately 10% of our turnover and is primarily a North European and parameter or inflation. Then the next page shows what we call [Indiscernible]. And it's a variant of the warehouse installations, obviously, but we are merely using the machine rolling. We saw more connected with the machines or both. And obviously, and what many implies is that this is much more alternative either then that there are no people that are working there, or at least there might be some maintenance people, but it nevertheless by definition. There are few people working with it, transport of goods to unfound the different sharing we saw in the primary place where the case stuff. We don't show this officially a segment, but this is a combination of what I said with machine wording and with warehousing. Last year, this was growing very much at the beginning of the year. So we had quite a big turnover of that. But as I said, we have communicated several times over this year, we think then that this quite interesting segments long term will not have a very good development since these big international customers have, as I call it, overinvested during 2021 and perhaps in '22 as well, which means that I have given indications on that the big projects which we are planning won't take place in '23, they will come in 24 or later. But nevertheless, it's still a very interesting segment for us long term. Jumping then to sales per region. Now we're talking about 2022 and not the first quarter. And this is mainly for you who are not so acquainted with us, but we had a turnover last year of some EUR 284 million and Euro is the common denominator for currency. We had an operating profit of SEK 51 million and an EBITDA of 18%. And you can see that the sales per region of mainly Europe is 50%. North America 17, Nordic 13, et cetera. You can think which we sell. So the strategy is, of course, to get bigger in the areas outside of the [Indiscernible].Then if you look at the business area, which I already described, we have this [Indiscernible], which you saw previously on the pages shown. In brief last year, we are a growth company and we should grow but to be honest, 2022 didn't come with so much organic growth. It mostly came with growth from a pricing point of view. We increased pricing because of the steel price increases. So 2022 was actually quite turbulent year, and we hope that ‘23 will be much more stable. And the first quarter has indicated already started in a more stable way. Our relative market share versus our biggest competitor is that we assess them that we are 3x or you're approximately then the #2 players, we are in 45 countries, and we are obviously then the market leader in this near safety, which we call indoor permeated production or you can call it [Indiscernible]. If we go to the next page, we'll talk about financial targets. And regarding sales growth, we don't obviously say that we should grow with percent per year, but we have historically had an organic growth, excluding obviously acquisitions of some 8%, 9%, 10%, maybe 11%, depends on how to calculate rates. And I'm only saying then that going forward, there is not, of course, any promises also but we don't see anything we said that we could not continue to grow in those kind of figures as we do expect the market to continue to grow with some 4% to 6% per year. And on top of that, we know we take market share every year. So by that, we come to these kind of figures I try to explain before. And in a second, I'll come to the drivers, which I already touched upon. And those are the things that make us then enjoy the growth of the market irrespectively how we are doing this. For the first quarter, then we didn't have a good organic growth was actually minus 4%. We had a slight positive from a smaller acquisition we did last year. But I would say then that we should be reminded and we've had this very extreme growth in 2021, where we organically grow with 40%. And now we are going into this bigger volume. And as I said before, on top of this, we have this information that the ordinated warehouse with ‘22 or approximately -- sorry, 2021 was approximately 20% of our turnover and now more or less has disappeared for probably for 2023. Our target is to have an operating margin of 20% or higher. And now we are talking about EBITDA margin. And we reached for the first quarter, 18.7%, which is a decent figure, not yet up to where we want to be exactly, but it shows development in the right area with increased gross margin. And the thing we have bring us a little bit is, of course, that some of product units have had less to do because of this volume decrease for ordinary warehouse, especially our polish acquisition that we did EUR 2.5 that we suffered from the loss of this kind of volume and that, of course, has a negative impact on the -- both the gross margin and the operating margin. But we think there are still possibilities to continue to improve this. Net debt is not a major issue for us. Actually, so we have a good relationship between net debt in relation to EBITDA. I think we're even down to 25 of the first quarter. So which means that we have an excellent opportunity to continue to grow [Indiscernible] this organic growth or if it is acquisition, the issue the acquisition is more to find the right acquisition. If we then find it, or at least within a certain framework, we wouldn't have any problem that might have been due to finance that. Dividend, we've just decided today to pay the proposed dividend of EUR 0.32 for the first quarter [Indiscernible] relevant. But if we had the Annual General Meeting today, Macias confirmed and that we decided all the meeting decided to pay this [ 0.32 ] also the proposed dividend relating to the profit from 2022. So if we go to the next page and try to summarize in the first quarter, it was not as expected, hampered by the formal activities with out rate warehouse. But I would say on excluding automated warehouse, just for the sake of understanding, it is positive and that we see that the rest of the market continues to have good activity levels, and we are actioning if you exclude those main warehouse. So that's a good sign. Of course, for all our newspapers, there is a possible downturn in the market in the coming quarters or maybe during the year. We have to see about this. But so far, during this year, we haven't seen any will change in activity or demand. We do have seen an improvement of orders within the automotive sector. In a couple of previous quarters noticed that the request for calls were increasing from automotive sector, which, of course, probably implies an increased possibility of getting new orders, and we have seen increase of orders in the first quarter, which is first quarter where we see this coming. It's also there is a dramatic increase of orders, but is scale seeing a trend change compared with before.Regarding sales invoice is positively influenced still by net effect due to receive price increase, which we had [Indiscernible] with our customers with approximately some 6%, if you want to compare [Indiscernible]. But the still price has more or less been stable since the summer period. Stable is perhaps a bit a strong word, but it's been stable in the sense that we have more natural fluctuations, which we normally have the quarter-by-quarter. So during Q1, it went up a little bit, and then the expectations are that it should go down a little bit yet during the year, we see about that. But these are, at the moment, is more the normal fluctuations, not very extraordinary ones that we saw last year in connection with the outbreak of the Ukrainian world. So going to the next bullet point that we have a positive EBITDA result and margin. And we say then that it's not so we think it's a fantastic result. It's not at all, but we think it's quite decent. Seen in the light of the turbulent situation. And in the quarter, as we go automate were since that was not coming in at all to only with Sansone project. And which means then that we were hampered by the lower volume than produced in our manufacturing units. Gross margin is starting to approach to targeted levels, which are, for us, 39%, 40%. As I said already, you have to see then that the sales price transfer to customers have been successfully implemented. But organically, is going on, which I already said several somewhat lower volume [Indiscernible]. I would say that if we look at the regions, I'll come to that in a second. We've seen good sales levels in the Nordic region and also what we call the new markets. Otherwise, it's been a little bit lower sales levels. So for the first quarter, the earnings per share was almost at the same level as last year despite the weak demand of format warehouse. Working capital is on expected level. So the inventory is going down now. We have increased that during last year because of the long-ranging connection with first with COVID and then of course, we can do more. So cash flow was positive in the quarter. And then as I already started commented, [Indiscernible] as this quarter is similar as was in the quarter 4 being negatively influenced by the lower activity from new automated warehouse customers. They are ones who are mostly hit by this. They had a very good development we have first half year. And after this, of course, it's been more tough for because of the lack of activity in this specific market where they are operating. The small acquisition we did in Spain called Satech before the summer last year, continued to develop well. And the same goes for the very small one with [Indiscernible] where we have products for the bicycle stores, also went well for the first quarter and the integration work is ongoing at full speed. And this will be important in the Nordic region and not so much with the other regions least notion a later base. And during this quarter, we have continued to do the ground preparation for ethanol expansion of the facilities in [Indiscernible] and this extension of the building, we hope to have finalized them by the end of the year. And then we are prepared, of course, over time and to do more machine purchases in order to then to cope with hopefully becoming volume increases going forward.And the one thing which we are not doing often, we have actually changed the organization a little bit. So we haven't pointed internally a completely new [Indiscernible] versus marketing. In practice, you could say that I was in that before. And of course, I'm not probably the right person to do that. So I'm looking forward we have a full-fledged functions of exercise marketing very good personal and for the group. So that's a positive thing going forward. Going to the next page, we've gone through this indirectly. So I won't go through it so much. But you see, of course, that if you compare the first quarter with the same period last year, do you clearly see then in the order intake that these ticket projects within automated we have not come in. So that explains more than the difference compared to last year, whereas the sales is more following than the figure of last year. On the margin, on the other hand, we have increased the margin totally. And the EBITDA, it is also slightly more improved or improvement compared with last year. And if you look at the net [Indiscernible] is almost on the same level. It's SEK 1.7 million compared with EUR 12.8 million last year despite the fact that we have a little bit lower turnover. So our [Indiscernible] stable start of the year [Indiscernible] extraordinary increases seen at a stable start. Going to the next page, which I think is interesting for some people. We see the regional development of our intake and sales. And you see here that the negative impact of in U.K., where we have all these big projects continue to be seen. Whereas if you go to the sale invoice, you also see in the U.K. that has a negative impact, but also more in Continental Europe. And I will say that there you see on this post Nordic development explained and interact in these figures here. So for the rest, we are doing quite okay, I would say, in Continental Europe.As I said, very strong development in the Nordic region in new markets. Also, North America is increasing, even if they are also hit by the development in automated warehouse, which means that there will be a little bit—one quarter might be good for North America. One might be a little bit lower. But over time, of course, we should come back to the more steady growth, both in North America and in the group. So totally then it's a bit disappointing or intake, but it's more than the whole difference and more than that is related then to the ordinate warehouse is [Indiscernible].If I go to the next page, we try to use a bit of a conclusion. And we have, as previously continued to receive several important or in the quarter in all segments from different companies in different customers in different places. So our clear conclusion is even if we don't have any big official is to relate to that, we will continue to take market share. And the orders this quarter is maybe our most important to communicate and that is mainly in machine volume tiers for the automotive warehouse which we now meanwhile said that the orders are increasing from the automotive sector. And it seems like finally, and it is a bit late in our opinion compared to what we thought it will be. But it looks now that also they have decided and that they need to do more investments because of the new platforms, which are obviously coming out for the electrical hybrid vehicles. Positive development in results, reflecting both improved sales gross margins. And unfortunately, [Indiscernible] inducting levels generally, and we continue success in words in most markets in the first quarter of the year. We have not during the first quarter, we'll see [Indiscernible] major increase in demand, but of course, it's something which we follow closely in a month. And going to the next bullet point, the plan investments, which we going now for some time and for this acquisition method is more or less famous. We are then moving also in it from another factory. We bought 2 old factories. One is closed with the old one. And we are right now moving part of the remaining ones to the new one that we have acquired and invested in [Indiscernible] let's call it, the Western part of Poland. And the integration of Playtech and casual acquisition that we used last year is ongoing in a number of ways, so no problem there. So as some sort of summary of the conclusion, we see encoded positive [Indiscernible] has been very weak. But in the case of the rest of the business has continued to do quite well but just to repeat what we said before, we expect the demand from this sector to continue to be weak during the whole year of 2023. Even if we do see that long term, this will still be an interesting growth opportunity for us. Coming down to the growth factors we saw on the next page. It has not really changed compared with before. We see a main driver, of course, for this, what is called increased industrial automation, regardless if it's done with robust without-- so make an cation because there is a continued increased demand for utilization. People want to be efficient. They want to grow. They want to be able to compete. And now also, we see that some signs of what is called onshoring means that you bring home manufacturing from far away countries is ongoing. It doesn't maybe changed for us so much because if we get the project in China, we don't at so much for us. But of course, if we in Europe and United States, it is a little bit easy, of course, to be in control of it. So that's positive but just a more general comment on the onshoring, we see it's happening even if there are still more talks than actual, but we do see some action at the moment also that this is happening. Then we e-commerce which has been substantially 2019, 2020 and '21. And now right now, we are into some sort of go and stop mode, and it's right now stop and it should go again in 2024. My gut feeling is if we have to take it for a filing nothing more that it might take slightly longer before this gets through because we are late in the process so they need, of course, to erect the building and get started to be buying machines for the logistic process of e-commerce within the building before they order maybe all the safety equipment and pension from us. So we will take a little bit more time. But I do see that it is very positive in the coming years if you exclude lease 2023 and maybe the beginning of '24. Generally taking safety and regulation, this is generally important, but nothing is changing from month to month or quarter by quarter. But of course, overall, this has done a positive impact all the time because no one wants to get stuck today that I haven't [Indiscernible] small money in this kind of permitted or in which would have to prevent maybe an excellent so this is positive for us over time. But as I said, doesn't really change from quarter-to-quarter. Next page shows our production units. Not a lot has happened there. I would say then the [Indiscernible], where we have invested in a lot in a couple of years, we have to get up the capacity utilization going forward. We're not too worried about that. But 2023 would be a little bit weak. We do have some issues in China and United States, where the long term need to move to the bigger premises. But at the moment, they're okay. And then we have the main ones in Sweden, where, as I said, we are extending the building as we speak. So we also have the opportunity when the themes requires to expand and buy just simply buying machines. Italy is quite okay other than the U.K. Next one, soon that the Troax Group is working with different [Indiscernible] as the Troax solution. And over time, this [Indiscernible] will be part also towards a solution where we integrate their interesting solutions within then the Troax offering to customers. And the bicycle storage cost [Indiscernible] will also be part of the forward offering. But as a group, this is how we operate today. So trying to summarize a little bit before I leave you for some Q&A. Safety tomorrow, we will work with since 1955, and we do intend to stay in the forefront of this. So for safety tomorrow, we focus, of course, on finer compensating, decrease of energy consumption. We have recertified the [Indiscernible]. We have regional manufacturing. We are in good situations in 9%, as we say selling or made of steel, which means it could be recycled, which also happening. We want to have increased and recycled steel long term or midterm, and it's, of course, actually important from a CO2 point of view. We have also shown then that the CO2 consumption [Indiscernible] is available on were paid to indicate for the customers if they want this to be deciding factor. Even if we are also saying at the same time then that if you want them the most earlier solution, a safer solution, you will use more keels of steel, which means that seem consumption will be high. So you have to value then, of course, then the safety versus a little bit due to consumption. When we make new investments, we of course, looking into the possibility of obviously solar patterns. [Indiscernible] that will come more in the future. So full Italian factory, we have -- which was installed just a couple of years ago, that we have solar panels [Indiscernible]. Going to the next one. We have what we call the safety center, where we do the tests, and it's based on and of course, our own development, what we do in our lead department, I'll also test competitors' products. And we see in all cases then that we are always from a safety forms of view have a higher standard of what competitor is having. This is, of course, good because it gives us [indiscernible] of course, to go out to the market and propose the customers of good solutions, both from a safety point of view and also, of course, also from a practical point of view from the customers point of view. We, of course, limit an external body Testa, so we don't solve customers. So we used to try on to test any processes. And in this segment and where our lead words are we protect people property and processes. We have now lately next day turned out that we think are very interesting new solution, which we call panel detection or you can actually then see if there's a missing panel. So when you have bigger installations, it's not easy to see on the other end of the installation, if there is a missing part, which could estates be home for people who are posting by without knowing and that is a problem. So we've done then, we think, a very good solution here where we then make all the panels connected with each other. And that means that at least there is a break which is so good and you will either I see the red light being light or you could actually connect it also with the customers on safety system, which means that you can't start a robot or started machine, which is inside the perimeter line. So this will take then the standard to a higher level than before. And we're quite proud of that we're, of course, first in the market to introduce this. And it's, of course, on being patent. And we see a good future for this because we think that the big companies with high requirements for safety will be quite interesting in this as this reduces the risk, and it means, of course, that those are deciding the safety level can sleep well at night. And I think that's also quite important for this kind of decision process. Next one is just a round off a little bit. We are hearing in and safety equals products. We want people are working possible hazardous areas to come home to the families in a good way every day. So this is a target to happen to work with, through this product and in the first quarter presentation. Now I'm eagerly waiting your questions. Please go ahead.

[Operator]

Thank you, Thomas. [Operator Instructions] And our first question comes from the line of Gustav Berneblad from Nordea.

[Gustav Berneblad, analyst]

Maybe just to dig into the order intake in North America here. Can you expand this a little bit, maybe give a bit more flavor here?

[Thomas Widstrand, executive]

Yes. Firstly, I would like to say you should be careful when you compare quarter-by-quarter because since we have this a little bit erratic order coming in from automotive as historically you could get the wrong conclusion if you just compare one quarter by quarter. I think you have to see it in a longer period. But this quarter looks decent from North America, but you should be reminding that the order from this automated around have already gone down than last year. So you compare with the quarter which is actually not very positive on automated well in the U.S.Whereas in U.K. and then also [Indiscernible] part of Continental Europe, you have clearly effects [Indiscernible]. Orders start coming in, in '23, where you had the corresponding orders from the ordinary warehouse in '22. That's one thing. And number two, I can say it's quite stable in most places even if as I already said, it is in some cases, then positively then by price increases and not so much by volume. But if you exclude these kind of big international customers working in [Indiscernible] warehouse. There is an increase in new orders, albeit not very high, I would say, for the first quarter. So let's say, how it becomes now for quarter 3 and now we can draw some conclusions. But the ordinary business-- saying a stable and decent way.

[Gustav Berneblad, analyst]

And if we move to Nordics, then quite solid in the quarter as well. Should we interpret that this -- the decline in new builds and residential is not really reflected in your order intake yet?

[Thomas Widstrand, executive]

Yes, it's not at all reflected on the contrary. We've had a very good demand from this sector in the first quarter. We are expecting that there will be some sort of reduction in demand going forward, probably of the vacation period, but we don't know since we are late in the process, we also see, of course, that the licenses for new build is already decreasing substantially. But of course, the project is on ongoing that will write finalize. I think we are more or less one of the suppliers who are coming at the latest state of the finalization, we won't one later stage.

[Gustav Berneblad, analyst]

And then you noticed some positive signs in related to automated warehouse among small- and medium-sized customers you said, what kind of customers are these?

[Thomas Widstrand, executive]

These are more new customers is more or less smaller integrators. You could call it an engineering bureau engineering company, who doesn't have on production, but they make an installations for a bigger end user could be one of these big and you said to read about the peso we all know about, but it could also be a smaller one. But we see that as a complement to the big ones, we have been quite active for a number of years. We also see that some of these smaller ones come up now showing an interesting development. Having said this, it's, of course, so that these ones cannot to compensate the big ones that have said that I will not give any orders, but it still shows and that is an increase in general perception, I would say that customers are to go into automated were. Also on the not the really big retail worldwide companies. So it seems to me is my conclusion is that over time, the customer was is increasing, but the potential customer base is increasing.

[Gustav Berneblad, analyst]

But should we interpret what kind of end market would you assume this is more like grocery stores or similar to that exposure? Is it possible to say?

[Thomas Widstrand, executive]

No. There could be not anything, but growth is, of course, an obvious one. Clothing is another one. You also have those who deliver components of payers in retail. It could be anything from spares for course to machines that you and I are seeing as private persons. Those kinds of things you also see it's quite widespread, but it's, of course, the common denominator is that they have a lot of articles and they have a lot of small end customers in the end.

[Gustav Berneblad, analyst]

And then just a final one here, on the gross margin heading into Q2, how should one think here? I understand it's very much volume driven, but is Q1 sort of a good proxy for Q2? Or should we expect an even more recovery, would you say?

[Thomas Widstrand, executive]

I think you should see it like we have now got the full effect in Q1 of the price increases made. We see also that the steel price is obviously an important component has been rather stable in Q1. So I think this is a good denominator for the quarters going forward. Until then, the volume starts to increase again, which, of course, will help us to cover the fixed cost, I mean direct to increase the gross margin and the everyday more. So it's a good indicator, I think, going forward. We have, of course, had a little bit up and down because of steel price and price and whatever. But at the moment, this is a bit typical, I would say, where we are at the moment.

[Operator]

The next question comes from the line of Daniel Lindkvist from Danske Bank.

[Daniel Lindkvist, analyst]

Thomas, just keeping it at the gross margin just a touch more. So that would mean that the cost reductions in Poland and Chicago has kicked in already in the gross margin in Q1 then and not the...

[Thomas Widstrand, executive]

The main part of that has kicked in already in Q1. Yes, correct. The small part still remaining, but the main part has kicking in Q1.

[Daniel Lindkvist, analyst]

And that would also mean that there's no major difference from selling out old inventory and selling out newly bought inventory.

[Thomas Widstrand, executive]

No, there's no difference.

[Daniel Lindkvist, analyst]

And then just on North America again, but not on the order intake this time around, but on the sales in Q1, the Q1 sales came as a bit of a surprise given the order intake, we had in Q3 and Q4. So was there something special in the quarter?

[Thomas Widstrand, executive]

There were 1 or 2 projects that were postponed by these big automated warehouse customers, but I still wanted 1 or 2 of these products to be delivered in quarter 1. So that came not as a surprise, but let's say, on a positive signal during that period from a delivery and a new working point of view. Another thing as well. We've had quite decently is also to the automotive industry in the U.S. in the first quarter, deliveries.

[Daniel Lindkvist, analyst]

So many things that we've been waiting for them quite some time and then just lastly from my side. On the M&A, I guess, now with the EBITDA instead of EBIT, and you have put more emphasis on the M&A side. So the questions on that have you seen prices come down on objects -- and what about competition has something changed with the competitive landscape on M&A targets?

[Thomas Widstrand, executive]

We don't see that, as you know, we don't have so many objects. So we can say that's a trend also. But yes, we can say that the valuation at the moment are more at least than before. So it's a positive. And we do have a feeling. I remain set we can succeed that it's more possible to than to close deals compared with 1 or 2 years before. But this is just very low stage to say something like it. So nothing might happen this year, but we do see it's that the gap between seller buying is getting smaller at least. And then you asked about something more on the M&A, so sorry for what that.

[Daniel Lindkvist, analyst]

Yes. It wasn't on the competition some [Indiscernible] financing landscaping.

[Thomas Widstrand, executive]

Not really. It's more or less the same as far as we can see. There are a few things happening out there in the market right now. So maybe we will get some new players for industry, but what we know up until we say the end of the first quarter, nothing has changed.

[Daniel Lindkvist, analyst]

And then just my final on the -- you have a financial target now or a target at least on the gross margin of 39% to 40%. Is that just a curiosity. What's been the target before has there been changes in this area? Or is it just to give some guidance for the...

[Thomas Widstrand, executive]

This is more just to give some guidance to people like you and others, of course, to get the feeling of where we are going. Because of course, when we would turn because of the more simple products, lower added value, everything else equal the gross margin will increase in the group when you consolidate with approximately 1 percentage unit -- but on the other hand, of course, we think that since we are growing, we have possibilities to continue to improve cost efficiency. So this goes a little bit again. So that's why we've just given some not official guidance, but more just more net bond so you will get the defiling where we are saving for.

[Operator]

The next question comes from the line of Gustav Österberg from Carnegie.

[Gustav Österberg, analyst]

My question from my side on the CapEx. Could you elaborate a bit on if there are any particular reason for the increase? Is this related to sort of anticipation of a better order intake in automated warehouses from very, very low levels or sort of what's driving the CapEx decision here?

[Thomas Widstrand, executive]

You mean from the customer point of view.

[Gustav Österberg, analyst]

Yes. No, no, sorry, from your point of view, from expanding your production footprint?

[Thomas Widstrand, executive]

No, we haven't done a lot, I would say, CapEx lately. If I remember correctly, we did SEK 2 million or so in first quarter, which I think is more or less in line with what we should do and being a moment that we are still finalizing the CapEx in Poland, which has been decided for quite a long time based on that we want to go from these old fashion factories that we bought to a much more modern factory, which is much more efficient. And we are still in the process of doing that. Beside that, we are not doing any big investments at the moment with one exception, and that is that we have one in line, which is being commissioned in the helistop as we speak. And that has been taken CapEx quarter-by-quarter. So there's probably some part still have, but not be a major figure. So we are not changing any let's say, strategy to increase capacity or not to reduce short term because of orders going up or down for the quarter. It's more based on the long-term expectations we have on the movie, which basically is supposed to be on from our point to you. The question is more how quick I go.

[Operator]

We currently have no questions coming through. [Operator Instructions].There are no further questions, so I'll hand you back to Thomas to conclude today's conference.