Troax Group AB (publ)

STO:TROAX

Earnings Call Analysis

Improved Margins Amidst Weaker Order Intake

In Q2, the company faced lower production volumes, particularly in automated warehouse demand, but offset this with strong gross margins, inching closer to target levels. The EBITDA margin rose to 19%, up from 18% last year, reflecting higher gross profits. Earnings per share declined due to higher interest rates despite improved operating margins. Cash flow stayed robust as working capital was optimized. Orders in core segments like Machine Guarding remained strong, conveying confidence in long-term demand stability despite a short-term downturn in the automated warehouse segment, which is expected to last through late 2023 to early 2024.

Improvement in Order Intake and Margin Amidst Market Volatility

Despite a challenging economic backdrop, the company has recorded improvement in orders within the automotive sector, not just from North America but more significantly from Europe, while the Asia Pacific region remains subdued. Steel prices, previously a source of cost pressure, have stabilized or even declined in the second quarter, bringing some relief to the financials. Consequently, the company achieved a positive EBITDA margin, with an increase from 18% to 19%. They've made progress in addressing lower volumes from last year by managing working capital more effectively, particularly by reducing inventory levels to tackle the softer demand in automated warehouses, resulting in robust cash flow for the quarter.

Continued Expansion Despite Shifts in Automated Warehousing

The company seems to be navigating through a dip in demand from the automated warehouse sector, which affected overall financial figures. However, smaller acquisitions like Claitec in Spain and Svenska Cykelrum in Sweden show promise, despite their minor contribution to the overall figure. Continued investments, including the completion of Natom's manufacturing facilities in Poland, and planned expansion of the main manufacturing unit in Hillerstorp, Sweden, hint at preparations for anticipated future demand increases. A new development, 'Troax Panel Detection', has also been introduced to enhance safety levels in manufacturing environments, underscoring investment in product innovation.

Optimism for the Medium-Term Future on Industrial Automation and Safety Regulation

The company's medium-term outlook is positive. The increase in industrial automation, marked by heightened robotization, is seen as a key driver for sustainable growth, even if short-term market fluctuations occur. Similarly, the growth in e-commerce is a double-edged sword: it currently depresses demand in automated warehouses but is expected to be a positive driver in the medium term. Furthermore, ongoing trends like onshoring manufacturing to North America or Europe and increasing safety awareness and regulations worldwide are perceived as long-term positive influences on demand. This forward-looking optimism is tempered with caution, as the company plans to delay further machine investments in Sweden until there's a demonstrable uptick in demand.

Earnings Call Transcript 2023-Q2

[Operator]

Hello, and welcome to the Troax Group AB Q2 Report 2023. My name is Jeff, and I'll be your coordinator for today's event. [Operator Instructions]

I will now hand over to your host, Thomas Widstrand, to begin today's call. Thank you.

[Thomas Widstrand, executive]

Thank you very much for listening. I'm very pleased to be able to talk to you today about the second quarter development of the Troax Group. And as usual, for those who have been here before, we have already put on our homepage report, which you might find under the investor headline and on the reports that you will find today's date and then you'll find the structure of the review that I will take on in the coming 30 or 45 minutes, but you will be able to follow even if you don't have access to our page, that's not basic problem.

So I'll start directly by introducing and for those who haven't been around before that while, of course, safety solutions then for people in the industry or in other places. And what we try to do what you we'll see on this page, which comes more or less in the top of this presentation is that we try to make them the environment safe and sound on solid ground for the customers. That's basically what we are doing.

Short introduction, otherwise, to the company. We are working in 3 different product segments, whereas the biggest one is approximately 60%: coal machine guarding. And as you can see from this picture, which we show a number of times, you see here that what we try to do is to divide and the possible hazardous area, which could be around a robot or some other moving object, which is heavy enough to hold someone by then installing with ourselves or if the customer is installing these kinds of hard physical [indiscernible] which makes a possible albeit that is falling out or being kicked out, not at all since it will be caught by [indiscernible].

Next one. Next page. We call it the warehouse partitioning. Next product segment is approximately 30% and as you can see from the picture to the right, this is more the traditional warehousing where we have people not running around, but they're actually moving about in some sort of forklift trucks and what we then actually are supplying or then the shelves for these pallet racks, and it could be the back racking system that prevents the pallets from falling down on the people who are working there and it could be the dividers that you see to the right dividing on the forklift truck with the people. And later, I'll talk to you about the automotive warehouse, which is an automated version of this. And you also have a lot of -- more the machine guarding, which are introduced and where you have more automation in their warehouses.

I go to the next one, which is called property protection. It's not safety in the sense that it will protect people from hazardous material. It's more to protect them from blurry or theft and you have these multi-story buildings, of course, normally the sellers. These are 10% approximately of our turnover. And as you can see from the picture, this is then clearly things that you and I, we like to use then in different parts of the season, but not every time. So there could be bicycles, skis, luggage or whatever you want to have in these kind of pages that are then used for keeping the properties in.

Then I go to the next page and for those of you who are following me, and I will then briefly talk a little bit about the automated warehouse. We have done, as we say, safety in all levels. And this is, I would say, maybe it's not a typical example because it's a bit of an advanced system, which is standing installed in this specific case. But you see here we have these pallet racks and we have a huge stand as you can see where we have huge called as robot systems or different [indiscernible] material and then it's being in an automated way, brought them to some sort of picking impact in place where normally then in an automated way, also, it's being done -- you throw the plastic round at the wrapper and then after it goes on a fixed pallet and well in order to transport media like a truck that will take it on to the end customer, which could be anything from someone who's selling close to full staff or something between spare and what have you.

This is something which has been growing substantially over the last couple of years until I would say than the beginning of '22. So we had a fantastic organic growth in this, let's call it subsegment during 2020 and 2021. And then it's up during 2022, because these customers -- these major international customers, we talk about 5, 8 big ones. They are actually overinvested and based on the big demand that was during the COVID period and after the COVID period was over, I think it's very clear then that these kinds of customers need now to see the demand coming back so that we will be on further investments and we do think that this is coming, but it's not coming during 2023.

Our indication is that it will start in a small scale during 2024 and maybe reach full scale again during 2025. So that's the main reason then why we as a growth company doesn't show growth now during 2022 and '23 but behind the automated warehouse influence we do have that the core of our traditional customer segments and products that are still growing perhaps at the moment, not at a fantastic figures but nevertheless is growing.

So if you look a few years back and compare it with today, you see then that we still have an organic growth, but it was distorted and during 2020 and '21, let's call it, the two big organic growth. Now I would say that you have the other side of the comment that we actually done in decreasing the short term.

Going to the next page, you will see a little bit the safe region. This is for 2022. I won't go through this in detail with you. But you see, of course, standard still, we are quite dependent on Europe. And our target is, of course, long term to grow especially in North America and in new markets, which could be anything from China to Japan to Asia Pacific over time.

Going to the next, it's the year in brief. And this is more the long-term development. And you will see then that these figures indicate that we are a growth company even if '22 and '23 will -- or rather '23 will not be a growth from this point of view. We are approximately 3x bigger than our biggest competitor, we are in 45 countries, and we've had during a number of years, compounded annual growth of -- depending on how what kind of yields you talk about, but somewhere between 8%, 10% or in a more positive scenario, we've been exceeding 10% in organic growth. And there's no reason why we shouldn't come at that when then this automated warehouse had not done, have faded out, which is more or less doing that as we speak.

Financial targets is the next page. We have not set a target directly in figures on sales growth, but we should grow more than the market.

We normally take market share every year one way or another. And since we're saying that the market is growing over a business cycle with some 46% per year, we think then that the historical growth plan or not a bad indication of what is possible to achieve going forward, assuming then, of course, that there is no big lack of demand in the market or more that the financial conditions are negative. But if you look at actual slide, it's actually show that for this year, we have an organic decrease of 11%, and this is not, of course, offset by a small increase of the M&A activities, meaning then that it's only 1% of the acquired companies that has a positive effect this year.

We have a target of having an operating margin in excess of 20% than we've seen the last years adjusted that to become the EBITDA margin. And after the first half year around 90%, which I think is not a bad achievement seeing the fact then that we are still lacking some volume in our manufacturing units. But of course, it's not yet up to the target. So we are still, of course, aiming for reaching and exceeding this 20% as soon as we can.

Regarding the capital structure, we are in a very good position and since the net debt in relation to EBITDA is only 0.7x at the moment or plan of June, which means that we are in an excellent position to do further acquisitions if we find the right one. And I must stress, which I've run several times before that for us, it's more problems of finding the right acquisition target than to finance it on the normal circumstance.

Dividend policy, we don't need to discuss right now. So if I do a little bit summary, which is the next page for Q2, which you can afterwards put some question to me about I think that Q2 was characterized by a continuation of these lower activity from the alternative warehouse customers, which started already down, let's say, one year ago? But positive is -- and the rest of the market or rest of the segments, we continue to have good activity levels.

So we are not really complaining at all over the development in other customer segments and we've seen a continuation of the improvement of orders within the automotive sector. So some of you remember that I talked about in last year that we saw quite a good increase ton of requests for coal. And I think this year, we've seen really an improvement of orders, both from North America and especially, I would say, from Europe. Asia Pacific is still, I would say, on a low level.

Steel price has been stable or even reducing during quarter 2 so this problem what we have had during most of last year with steel prices going up, going up and we introducing higher prices to customers have not -- we have not had this so far this year, and it looks like it's quite stable, even, of course, you never know what can happen. But so far, it seems stable.

So we recorded a positive EBITDA result margin in quarter 2 and I would say then, as I started with to say before that, in delight of the volume situation, which contend that this was quite okay. As the volume produced and in Q2 was lower of the obvious reasons then that the invoicing for the alternate way and was substantial for instance comparing with quarter 2 last year.

The gross margin, which was a little bit low, I would say, during last year because of the delay, so to speak, in getting the price increases into our results account coming from the increased steel prices last year and now started to approach our targeted levels. It's still, of course, somewhat hampered by the lower volume. But nevertheless, I will say that we are not far away from where we would like to be. And there are reasonable sales levels also during Q2. And Nordic region in North America, whereas Great Britain was, of course, very negatively influenced by the huge projects, which was invoiced in Q2 last year. And this year, I haven't had to. We haven't had this kind of project at all, so obviously, then you get quite negative figures from sales point of view. I'll come back a little bit to the regional development later.

Earnings per share then a little bit lower even if the operating margin is higher but in absolute figures, of course, it's lower also because that the interest rates are higher and that's also something, of course, we are working with. So we are trying to reduce working capital. And we lose especially the metro level to balance the lower demand, especially within automated warehouse, which means that the cash flow was actually quite strong in the quarter. We have more to do in the inventory level, but I think we've taken the big chunk out of what was so to speak, remaining to be done because of the lower demand in automated warehouse.

Going to Poland, Natom Logistics, which was bought a couple of years ago. And this quarter, same development as last one, they have been negatively influenced by the lower activity in automated warehouse customers. On the other hand, the small acquisition we've done in Spain called Claitec and also in Sweden, called Svenska Cykelrum, they continue to develop well, both in Q1 and continue now in Q2. But of course, these are smaller figures. So it won't really influence the overall figure that much.

During the quarter, we continue to be building work for yet another expansion of our facilities in Hillerstorp, Sweden. Steel are our main manufacturing units, and we are preparing them for roughly 5000 meter expansion. And when the time is right, we will then have more space putting more manufacturing machines in as the demand will increase.

During the quarter, we have also introduced what we think is a very interesting new development called Troax Panel Detection that has a possibility and to further enhance the safety levels in manufacturing environments. I have 2 slides for this a little bit later. So I will come back to you about this if you will be with me for a couple of minutes.

So going to the financial highlights. I think you read this before. Unfortunately, then the order intake is a little bit weaker than last year because of this automated warehouse. But on the margin side, as you see, we have substantially improved the margin compared with last year and we are starting to reach now the profit level, as I say. This means that despite under volume decrease, the EBITDA is not far away from last year. So we've increased the margin from 18% to 19%. And that means, of course, that is coming mainly from the increase of gross profit and the gross margin.

If you look more to the right, you see then that the 12 months rolling, which is still in the last column, we are at around SEK 260 million in order intake. And I guess that that's somewhere where we are at the moment and because most of the influence now of the big orders from automated warehouse are now gone from our figures, both in orders and also in safety invoice. So this shows probably reasonably well, and we are at some sort of baseline by the end of June.

Next one is the regional development, which I was briefly referring to before. You can see them on the order intake on the 3 months comparison figure that the European regions. So from an order point of view or a little bit lower, but not too far away. Whereas in North America, we still enjoyed some good orders from within anywhere else last year or, of course, on reducing EBIT.

On the sales invoice, which is further lower on this page, you see team development, except the United Kingdom, the last year had a number of projects being invoiced. So you compare with a substantially higher figure. That's why you get the subsidy lower percentages here, which, of course, influenced the total figure in a negative way. So we talk about total order intake 10% lower this year than on sales 20%.

Going to some conclusions. We've continued to get several important orders in all segments in the quarter. Also in the automated warehouse where we see that smaller and medium-sized customers are starting to improve the activity level. And that's in mind thinking very good because that means that the positive view we have over the more long-term activity in this segment is true and it should continue to increase. So we're quite positive over this segment or medium term. But again, the remaining part of '23 and probably the beginning of '24, we will not see a major impact on productivity within this segment. So the big -- let's say, the best development we had in the quarter was customers within Machine Guarding and which generally is a lot of the core of our business and it's positive that it's continuing.

Continued positive development result despite the lower volumes, I have already explained. And we see them no signs of any major decreases in demand as per end of June. I mean, we, of course, look at the papers, and many people expect some sort of reduction in demand that we see about this. But until the end of June, to repeat myself, we didn't see any major decreases at all in activity level or in demand.

The investments in Natom in the Polish manufacturing is more or less finished. We are still doing some movement of an old factory, which we are trying to substantially reduce activity to the new ones that we have outside of Poznan and this is still ongoing. But the investments, otherwise from a machining point of view is more or less finished. And integration otherwise, all the small newcomers, I was referring to before is ongoing in a positive way.

So regarding the total development, we see that as positive, even, of course, if you look at the overall figure, the demand from automated warehouse was weak and that, of course, had a negative impact on the total figure.

Going to the next page, I then go away a little bit from the quarterly figures. I'm just for those who have maybe not followed exactly why the growth factors [indiscernible] influencing us in a positive way. It is still so, of course, then -- what is extremely important for us is that we increase the industrial automation in general, meaning increased robotization or automatization in general terms. And that certainly, we can't we get maybe some sort of reduction in demand around the corner. Hypothetically, this sort of increase will continue because companies want to increase the efficiency, and thereby, of course, increasing their own possibility to be competitive. The other one, which right now is not so good is the growth in e-commerce, which is, of course, then driving the demand for what we call automated warehouse. And I've already explained and that this is, of course, short term, also very good, but medium term, I'm quite positive over this.

There are also other positive things influencing, but these 2 are the two really big ones. But on top of this, of course, you have the onshoring or manufacturing, regardless if it is to North America or to Europe, which is somewhat positive, even if it should not be exaggerated. And then, of course, the biggest safety awareness and regulation, it is coming step by step in different regions. It's having a positive impact. More that people understand and the safety is important and does not neglect that. It's not so that the stricter regulation only increase the potential demand for us or the activity level, but of course, makes people aware and that's something which long term is very positive.

Short summary of the production units are shown in the next page. And we are -- we have the main units in Sweden. In the southern part of Sweden, we have a reasonable capacity utilization and we are now preparing them for the next machine investment, but we will, of course, wait until demand picks up a little bit. We have a smaller one in U.K. We have a small one in China, which actually is more of a satellite to the Swedish one. Very good one in Italy, which was just invested in from a greenfield 2 years ago, is it I believe -- we have one in Chicago, which, over time will not be sufficient for our needs. So we have to look into to do some further investment in the U.S. since we are growing there. And then we have Poland, which we bought a couple of years ago were mainly they have production on our shelves and divide it and not tolerated these mesh panels and Machine Guarding products that otherwise is, let's call it, all core of Troax.

In the Troax Group, we have a number of brands but it's, of course, so that we give the best solution for the customers based on what they are aiming for. So the real brands that we are working with really Troax, Satech, Folding Guard, and the other ones are more, let's say product brands, which are used -- could be used technically and as well as the distribution channels that we are using.

Going to a little bit further. I put in a little bit add here about since we are not only the biggest one in our niche. We also have been around -- we've been around since 1955 and we do intend to continue to do so. So we focus a lot on, of course, this sustainability, the energy consumption, which is, of course, is hurting us with the energy cost at the moment. And the real target for us is, of course, to increase the recycled steel in our products. It's quite important and from a CO2 point of view. But there are, of course, also advantages by increasing the recycled steel. You can read a little bit about more what we do on this page or on the home page. But -- so -- but I would like to point out that these are perhaps the most important things that we do at the moment.

Our R&D Center, the Safety Center are doing a lot of the work on the -- of course, on the R&D side. We are certified by TÜV Rheinland, which means on that the customers don't have to worry so much that we are telling them things we are not correct. There is someone who is checking us as well, which is good for the customer and we now have a good impact.

So in other words, you can say we are protecting people property and processes. And that brings me to a little bit this panel detection, which is actually what we think a very good product development, where we can automatically monitor the panels, which are included in the sale. And that means then that if you take the next page, you see here is the drawing of the sale. And there is, of course, a potential risk that someone during maintenance product -- sorry, project or something else is removing the -- a panel or part of the sale. And this is, of course, not very good from a safety point of view, it means that the person who is passing here could theoretically maybe also practically newer cases be here because someone has forgotten to put that appointment.

And this simple system that we have developed is quite clever done. It means then that we buy a signaling that panel is missing, then this could either just be signal as an information to the operator or It could be connected to a robot. For instance, then that robot will not get stopped, if not the current, which is going through the [indiscernible] is not broken because if it's broken, then that means there's a problem and then someone should review it before you can start the production.

So if you take the next one, and this is another example of our philosophy that the customers should sleep well at the night time and should have the highest safety standard. So this is really reducing the risk we apply for patents for this, and it's definitely the first of its kind. And that's something, which means that the customers who are quite oriented to put good safety now have a higher level to go to assuming, of course, that they want to have continue to protect their people in the best possible way that they can because these sort of inventions were not around before. So we are, as I said, in the first half of its kind at the moment. Good. I'm starting to round off. We are the original and we try to say that safety equals to Troax.

So with this, I'd like to just end my presentation and give the words for you out there, and I'll be prepared to answer any questions you got, hopefully, please? Go on with the questions on the Q&A.

[Operator]

[Operator Instructions] The first question comes from the line of Gustav Berneblad from Nordea.

[Gustav Berneblad, analyst]

I guess my first question here is regarding the orders. I think it was quite positive commentary in the report regarding demand. And you are saying that you're seeing increased interest from especially automotive in Europe and North America. But how should we interpret this? This increase in order something that we have already seen now in Q2? Or should we interpret it as it slightly an uptick in the coming quarters or?

[Thomas Widstrand, executive]

Now from an order point of view, you should see then that there has been an increase of orders in Q2 compared with Q1 and earlier quarters, what happens in Q3 and Q4, we can primarily only speculating. But in my mind, it's, of course, a good sign that this important segment for us or customers is increasing its investment because we've been waiting a long time for them to really take off. And hopefully, this will continue. But again, we don't have the facts yet.

[Gustav Berneblad, analyst]

Yes. Okay. And then I guess in terms of the margin, given sort of the same volumes as you have today, is it possible to drive the margin expansion even further? Or would you say that to exceed the level you are today, do you need that extra volume, sir?

[Thomas Widstrand, executive]

No, it will be easier, of course, if you get the extra volume, but to answer your direct questions. Now we can drive the margins even further. We have further improvement project going on in Europe. And we still have a few units who can do better. So everything else equal, we still have a potential to come. On the other side, the positive side has begun the 40% despite the fact that, of course, we would like to have a bit more volume to help us through that.

[Gustav Berneblad, analyst]

What is the sort of the fact that you can adjust the most? Is it sort of wages or cutting down on personnel or?

[Thomas Widstrand, executive]

It's the efficiency in still in a few manufacturing, it's not all. So it's basically, you could say, personnel, if I'm really blunt. But it's not only personnel, there are other things as well.

[Gustav Berneblad, analyst]

Okay. Perfect. And then maybe on the CapEx level here, I think in H1, it's been rather on the lower side if we compare to last year. Is -- first, is it fair to assume that H2 is likely to be on a similar level? And then also for 2024, should we expect that the CapEx level should be more closer towards 2022 then?

[Thomas Widstrand, executive]

Yes. So I think 2023 right now is a little bit on the lower side as we do not see any increase of volumes, which obviously means that we are -- the plans that we still have to continue with CapEx. They are coming a little bit later. So yes, you're right that the rest of the year will probably be on the low side. I think next year, we have a few investments coming in. So it will probably be a little bit higher, but not as high as it was here when we did the bigger investment plans here during always now '21/'22.

[Gustav Berneblad, analyst]

Okay. Perfect. And then the last one on M&A here. And you touched upon it a little bit, but would you say that it's hard for buyers and sellers to meet sort of in the price negotiations, sir?

[Thomas Widstrand, executive]

Well, it's a good question. It is a bit difficult, yes. Half year ago, one year ago, the deal price difference was more or less much more difficult to come over. Right now, I would say there is a possibility to achieve a mutual content between seller and buyer. So it's much more positive now, to be honest. But we need to have tax, and that means that you have signed a contract. And until then, everything is speculation.

[Operator]

Next question comes from the line of Anna Widstrom from Handelsbanken.

[Anna Lindholm-Widström, analyst]

So my first question is regarding the capacity reductions, which are helping to reduce costs in North America and Poland, in what stage would you say that you are currently? Meaning, should we expect some further reductions going forward?

[Thomas Widstrand, executive]

Yes, there will be some further reduction during Q3. I can't give you any figure, but there will be some further reduction in Q3 in both places.

[Anna Lindholm-Widström, analyst]

Perfect. And my second question is, have you seen any trends during the quarter, meaning differences in the first month compared to the last one?

[Thomas Widstrand, executive]

Sorry, could you repeat, I lost you there little bit Anna.

[Anna Lindholm-Widström, analyst]

Have you noted any shift in trends during the quarter, meaning you've seen differences in the last month in comparing to the first month?

[Thomas Widstrand, executive]

No, it's been rather, I would say, similar to what we've seen already during 2023, so a little bit lower activity then, of course, coming from mainly automated warehouse. But the other type of customer segments or product segments are ongoing -- so forth -- an ongoing pace, which is still positive, albeit not any impressive figures. So not any major shifts within the quarter so far.

[Anna Lindholm-Widström, analyst]

Okay. And have you seen any trends of -- because you mentioned in the report that you have had some easing in some of the costs, which have been helping margins a bit?

[Thomas Widstrand, executive]

Yes.

[Anna Lindholm-Widström, analyst]

Which trends have you been seeing in your different cost segment, the biggest one?

[Thomas Widstrand, executive]

Well, we have -- since we've already done some cost reduction during this year, we've seen some reduction in -- on the salary part, wages and salary. We've seen negative influence, of course, on everything connected with energy if you compare with last year like electricity and gas and what have you. We've also seen some reduction, I would say, in Q2 on the, let's call it, the general inflation area pressures even if the wages and salary went up, I would say then that the increases we saw, especially during second half year of 2022 in everything from spares to maintenance and what have you, that has been more or less not subdued, but it stopped at least to increase that it is used through during last year. So those are also positive things we've seen during at least the second quarter.

[Anna Lindholm-Widström, analyst]

Okay. Perfect. That's very clear. And my last question is regarding the press release that was sent there after the report. In your opinion, what will be important for the upcoming CEO? And are there any internal candidates that you think would handle the role well?

[Thomas Widstrand, executive]

Yes. That's a good question. We've sent out what's been standing in the annual report now for couple of years. But since I'm reaching then an age where I should not work so much longer, I will then retire and go within pension, and -- more or less at the end, General Meeting in the spring. And to answer your question, yes, we have internal candidates. And we are also searching for external candidates in order to match these against each other, and then we will see, which person we think will be the best one for the future for the company.

And I will still remain for those who are interested in the Board. So I will not disappear from the company, but there will be a new CEO or president of the company appointed probably somewhere during the beginning of next year.

[Operator]

The next question comes from the line of [ Perry Jorgensen ] from I&T Asset Management.

[Unknown Analyst]

Yes. I missed the first part of the Q&A, but [indiscernible] interrupted but just coming back to the dynamic about order intake and sales, you mentioned in your presentation that the automatic warehouses, they were out of the book, so to say, is it fair to assume that it's around 10%, 15% of your business when it was relatively okay? And how should -- how is the dynamic in the basic trucks business? Is it still fair to assume that book-to-bill around 1 is fair as it has been on the historic level. So we are around this SEK 260 million, that's, let's say, the bottom level of your revenue and then you can actually grow from there. That's my question to you.

[Thomas Widstrand, executive]

That was a big question but I'll answer you in a way, yes. The negative figures is coming from the automated warehouse, otherwise I think we would have shown a small increase compared with last year. And it is indeed so that the automated warehouse is more or less, gone up from the books. I think we have some smaller projects still coming from, let's say, historic orders. Otherwise, there are new things coming in from small and medium size customers. So it's not bad at all from that respect. But of course, you don't have these kind of huge projects that we had during 2020, 2021 going to '22, which means also that you don't have these big projects, which are distorting to be [indiscernible].

So we are right now, you can see it in more in the way, that these are still the old products without these big [indiscernible] going forward. And you should see it like this, and indeed, when I'm saying that we are right now on 12 months, SEK 260 million or something like this. Yes, this is probably something that which you should see some sort of zero level. And then, of course, it depends how the market will be during the second semester, if it will go down or some things? Or if we just continue the growth that we have had since a long time back.

[Operator]

The next question now comes from the line of Kenneth Toll from Carnegie.

[Kenneth Johansson, analyst]

Yes. So most good questions have been asked, but I have a few ones still left. On this Panel Detection product that you're launching now, how easy is it to use? Does it mean that Troax employees have to go out and service installations? Or can that be maintained by -- well, factory workers?

[Thomas Widstrand, executive]

It is the sign that we should be able to maintain by the customers' own people, sort of factory worker or at least the maintenance person. So it's not that complicated from a let's say, installation or maintenance point of view, not at all. It's fairly total from that respect.

[Kenneth Johansson, analyst]

Great. Then one question also, you talked about some lower prices for some input costs. Do you think that you will be able to keep your own prices up? Or do you think -- is it more price pressure on your prices are customers complaining that steel prices have come down and now you need to cut your prices or do you think you will keep your prices?

[Thomas Widstrand, executive]

Yes. Good question, Kenneth. In general, I think we can keep our prices, but I will be here and there some reduction because of absolutely your correct assumption and that the price is going down and some customers will, of course, put pressure on us and are already doing this.

On the other hand, we have done things going against this, meaning that the salaries and wages are, of course, going up higher than what it's been done at least historically. And we have, of course, the energy also which is going again. So it's a bit of a discussion. So in a general way, I would say you can sort of speak probably think that there might be some small reduction on prices overall, but not any major implications for [indiscernible].

[Kenneth Johansson, analyst]

Yes. So I was thinking the last couple of years, when steel prices and other costs were going up, the organic sales were benefiting from that. So do you think that now if prices are rather coming down a little bit, that it will be noticeable also in organic sales numbers?

[Thomas Widstrand, executive]

That is a possibility at least for that, yes, Kenneth. I agree.

[Kenneth Johansson, analyst]

Yes. Then you talked also about margins and efficiency in plants and so on. But how are you doing on your sales force? Are you hiring new salespeople at a normal rate? Or are you a little bit more cautious? Or how do you reason for that?

[Thomas Widstrand, executive]

Yes. We are hiring still, but on a more cautious rate. So you are correct in the assumption and that because of that, the demand right now, and especially as I've said now several times for automated warehouse, this of course, has an impact on the overall let's call it, the more under pressure on the organization so we don't need too high. But we are continuing to hire both geographically and in some specific product areas, so we see some potential.

[Kenneth Johansson, analyst]

And the final one, again, coming back to acquisitions. Now when the business cycle is probably softening a bit, do you think that could be a trigger for the owners of attractive assets for you that they will sort of finally agree to give in and actually do the sale? I think they'd rather wait -- yes.

[Thomas Widstrand, executive]

The simple answer is Kenneth, yes, I think so. Now whether that will happen is, of course, another story. But if you just trying it from a logical point of view, it is normally so it works in a market over a business cycle that in the beginning, when things are not so bright, [indiscernible] then also some time, you get to reach a some sort of at least a discussion point where you can discuss things in a better way and we are there now.

[Operator]

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

[Daniel Lindkvist, analyst]

I understand the need to be much faster pressing the star 1 in the future. Almost all my questions have been answered already, but just a few quick ones. On North America, should we interpret the reduction of capacity something just temporary and no change in your long-term very positive view on the outlook for that market?

[Thomas Widstrand, executive]

No, that's correct. It's just to reflect the lower demand for automated warehouse, which was, as I call it, pump up too much during 2020 and '21. Long term, we are still quite positive over North America and we will continue to do further investment there. Also in the organization and also, let's say, physically.

[Daniel Lindkvist, analyst]

You're long term, you're more afraid of not having the capacity than having too much capacity in that market?

[Thomas Widstrand, executive]

Yes, correct.

[Daniel Lindkvist, analyst]

And then on the order conversion. Now we have reached the level where we have been almost close to converting the order book in the previous quarter in the upcoming quarter. Is there anything that's affecting that now that you get the automotive orders back business once again?

[Thomas Widstrand, executive]

Not really. You will not see a lot of that on the overall side. You can see it for one single project, but it has -- these orders or not of that dignity that it will have an impact on the total group figures either way. So if you look at the specific markets or specific months, you will see some, let's say, distortional figures. But overall, you shouldn't see main distortion that we've seen now in the last couple of years because of the big orders for automated warehouse.

[Daniel Lindkvist, analyst]

So then if I do the calculations, it seems like you have some backlog apart from what was the order intake for this quarter from [indiscernible]?

[Thomas Widstrand, executive]

Yes. But that's the normal backlog, if you see my point. I mean we got the orders from May, June. That will obviously be delivered in July and August normally. And -- but those are the normal ones.

[Operator]

We currently have no questions in the queue. [Operator Instructions].

[Thomas Widstrand, executive]

Alright.

[Operator]

We have no further questions in the queue. So I'll turn the call back over to your host for any closing remarks.

[Thomas Widstrand, executive]

Yes. Just like to thank you very much for listening in, for your interest and inputting questions, which I appreciate, as you know, very much. So I look forward to meet you all again in this sort of occasion at the end of October when we are going to report the third quarter results. Thank you, and see you later.

[Operator]

Thank you for joining today's call. You may now disconnect your lines.