Nibe Industrier (B) Aktie

Welcome to the NIBE Q1 presentation for 2026. [Operator Instructions]

Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead.

Thank you very much. Good morning to you out there. Good morning, everyone. And we're going to start like we usually do, and I'll be going through some slides, and then Hans following up. And we hope that this will be no more than 22, 23 minutes, and then it's a room for questions.

And as you know, this day coincides with our Annual Shareholders Meeting starting at 5:00. So quite a number of discussions and interviews today. So at 12:00, we have to stop this session if we are not impolite suggesting that.

So with that said, once again, welcome, and let's dive into the presentation. And of course, you've already read the report and the main headlines or the main numbers are, of course, the organic growth in the fixed exchange rate of just north of 7%, operating margin 9%, and the net debt in EBITDA like 2.7, all indicating that we are in the right way.

And it's the fifth consecutive quarter when we are reporting positive sales and margins and results. We're very pleased to note that. Of course, the Swedish krona, the Swedish currency diminishes that to a point at least when you look at it just briefly. But that's a very solid growth behind there.

Of course, we've been able to fight off the tariffs within Climate Solutions and Element fairly well, whereas Stoves have been hit the hardest there. But we can say that the world around us, that's, of course, pretty unstable.

And there are typically 2 reactions that we see among customers. And that's, of course, that the fossil fuel dilemma, it's once again pretty much pronounced. And then again, people start to look away for other alternatives. But it's also so that, of course, when there are wars and political turbulence, people are a little bit hesitant to spend money, which we also see, of course, on the consumer spending, particularly on Stoves.

And the -- look at it, the figures themselves, you see the SEK 9.650 billion here with the operating margin coming in around 9% versus the 8.1% in the previous year. And of course, that's a fairly hefty growth in also in the profit after financial items. And that is, of course, an illustration of the fact that we are borrowing less and interest rates are a little bit lower anymore, which is pleasing, of course.

And this graph is, of course, indicating something flattish, but then again, it's not in the fixed currency, that looks, again, fools the eye a little bit.

The profitability goes like this. And that's an indication that we are in an uptick as we write about. And coming to Climate Solution, which is the largest business area. It's a solid improvement both in sales and margin. And we've been talking about that for the fifth consecutive quarter.

And the pleasing thing is that both in residential and commercial, it's moving in the right direction. Here again, of course, the Swedish crown is shadowing part of the development. And when it comes to residential heat pump of hydronic kind, the European market has been fairly, if not buoyant, but pretty decent, really aligned with what we anticipated on growth.

And also, the heat pump sales in commercial is very pleasing to say to see. And in those countries, in particularly Germany, they've been a bit more hesitant. If you go back historically, they're really back to a growth pattern now like Switzerland, And the Nordics, we continue up here to have a decent growth.

And when it comes to the U.S., of course, we all know that the tax subsidies were taken away in the beginning of this year. And we must say that we anticipated perhaps a harder hit than actually happened.

And we sort of interpret that as the interest of heat pumps also in the U.S. is to a lesser degree dependent on subsidies but also a true interest in changing over from fossil fuels to another more environmentally friendly alternative.

And we also see, and we've been preaching about that, that the traditional pattern of first quarter, third quarter and so on goes more and more into the second half of the year when it's coming to a crescendo, if we like to call it, and that's reestablished. There were some years here between '22, '23 when you couldn't really see that pattern. And '24, of course, when we had that downturn in demand from wholesalers and installers, there wasn't really either a real picture of the demand.

And we are bold enough to say that now we are there to make money on the historical levels again. And that's pretty much shown on the next slide, comparing to the 9.2% and 10.3% in operating margin now. We are fairly confident that for the full year, we're going to be up in that range between 13% and 15%. We just touched the 13% base last year, which was a very, very clear ambition.

And I think you see our historical development here. And of course, it's very obvious that we like to climb into that 13%, 15% margin. And that is an indication that we believe that the remainder part of the year also going to be fairly decent to us.

Element -- excuse me, my voice is a little bit weak today. I had a cold, and I almost lost my voice a few days ago, but I'm on the go again. And of course, here also electrification and digitalization. Those are the main drivers, whereas white goods and those sectors are more down or more neutral, we can say. And also the heat pump segment is, of course, vital for the Element group.

So it's very pleasing to see that Element is coming along fine. And of course, the war is affecting us to a point, but we've been able to fight that off fairly well. Swedish krona, the same again, of course, it's disturbing the immediate visible figures. But for the full year, also here, we are bold enough to say that, well, we should be back within the historical range between 8% and 11%.

And that is, of course, viewed here going from 6.2% to 6.6% in operating margin and also looking at the development last year. There, we had a very clear ambition that we should be up to 8%. We missed that with the percentage unit, mainly due to some shortages in orders from the semiconductor industry, but that is coming along now. So we are fairly confident that we're going to be within that band between 8% to 11%.

On the Stoves side, as we so precisely have explained, it's tougher for us because there, the tariffs, of course, in North America, they are in the U.S., they are coinciding also with consumer reluctance when it comes to investing in Stoves when they feel on a daily basis that the wars and political turbulence reviewed in front of them. So that's tough enough.

But then around Easter, another message came about from the U.S. government, when they said that now they were going to increase the already burdening tariffs with 25% all sales going into the U.S. And it so happens that we have all our 3 factories in Canada. So of course, immediately, it will be very difficult to compensate for that. But as with the first slide of introduction of tariffs.

We're trying to fight those off with price increases and with, of course, rationalization and also selling more rather than trying to, in the short term, protecting the margin. I think we are taking a hit. But in the long term, we're going to come back, of course, selling more and having price increases, but also adjusting our costs.

And the European market is as soft as it was last year, but we can see some signs of recovery, but we like to be a little bit cautious there because typically, Stoves, they are a few quarters behind the others when it comes to coming up again. And we just feel that there might be some positive signs eventually where Europe might come out of this, whereas in North America, the demand is going to be good, but the tariff is going to be hard to beat.

Seasonal pattern, again, that's very pronounced in the Stoves side typically, also disturbed during those years that I mentioned before. And there we see clear signs of the second part of the year being stronger again, as it's been prior to '22, you can say. And yes, that's a return to that span will come short, of course.

We will not be able to do that. And the illustration here that the first quarter last year was relatively good. And this year, we came out with 4.4%, and it will be unrealistic, we believe, to say that we would come up to the 10% to 13% this year, although there was the target when we budgeted and we entered the year.

And now, of course, adding those SEK 150 million in the burden will be cumbersome. Of course, we'll do our utmost. That's why we suggest a span of 6% to 8% rather than the 10% to 13%, and that is short and midterm.

And as before, if we just look at the pie charts before I hand over to Hans, it's pretty much the same where 2/3 come from Climate Solution and NIBE Element like 30%. And of course, the first quarter NIBE Stoves being relatively small, whereas their peak is at the end of the year.

Geographically, of course, or -- yes, I don't know whether this is correct description really, NIBE Element sales is not geographical distribution, it's a distribution of the operating margin.

And the Element then is coming in at 22% and Climate Solution, of course, having both the size and the better margin on their hands is like almost 3/4 of their profitability, and Stoves, again, being very minor during the first quarter for obvious reasons.

And geographically, of course, the Nordic country is pretty much stable around the 19% and 45% in Europe, excluding the Nordics, and North America, 30%. And outside those continents and including the Nordics, we have Asia and that's pretty much an Element that's active there.

So I think that's -- I'll hand over the monitor to you now, Hans.

All right. Thank you, Eric. Thank you very much. Before digging into the individual business areas and balance sheet and cash flow, I would just like to -- well, first of all, I would like -- I hope that you appreciate our new format. For those of you who have been following our reports before.

Not only is it in landscape format, making it a little bit easier on the screen, hopefully, to read, but it also contains a little bit more information where the currency is much clearer stated, of course, The cash flow statement is also more in detail. So I hope this is appreciated. If you have further views, please holler and we'll listen to you.

And one little small detection that we've made is that the sales by geography on Page 12 had a little some error in it for the Nordic countries. The sum is not SEK 1,850 million, it's SEK 1,840 million. And then just one more comment on the group before heading into the business areas. For those of you who have seen it already, the elimination line in the group accounts is a positive one, and typically, it's a minus 10 to 30, 35.

And that's where we typically have one-off costs of different kinds, very often related to acquisition costs. It could be for due diligence work, for purchase price allocation work or consultancy or advice of some sort. And as you know, we've not been that active on the acquisition side for a while now. So the costs are much, much lower. And in this specific case, with the positive 1 there, we actually had to reverse costs set aside for an anticipated acquisition that didn't happen.

So we had to reverse that. So it has nothing to do with any revaluations or anything. It was just the cost that didn't come for which we had to set aside some money. Then looking into Climate Solutions and continuing with the business areas. As Eric stated, we've seen a decent and sound demand in the quarter for the business area, both in Europe and the U.S. In Europe, it's been very much Germany, Switzerland and the Nordics driving demand. And in the U.S., we've actually seen a quite decent demand as well and not as a sharp fall on the residential side as we could have expected. But of course, there has been an effect when the tax credits went away.

Anyway, this has resulted then in an organic growth of 10.3%. I mean the face value of the growth is 3.4% due to the currency effect there of 6.9%, as you see. But the underlying growth has been quite decent. And when we get volume into our factories, we also, of course, improve our gross margin. So that has risen by more than a percentage unit, then leading to an operating profit there, which itself has risen with almost 16%. So it's been a decent development, we think.

In terms of geographical distribution of sales within Climate Solutions, there have not been many very large movements from last year. The pie chart looks basically the same as before. So we instead move on to Element. And overall, the Element business area has also seen a quite decent growth as a matter of fact.

But it's been very different between the different segments, whereas semiconductor, the HVAC, for example, process heating have been quite nice. The process heating being very important for the electrification of the industry that is going on. Whereas, of course, automotive, white goods and also on the industrial side, it's been a little bit weaker. But the growth, underlying growth there was actually plus 6.7%.

But with the currency effect there, we came in at minus 1.5%, the contribution from the acquired company is from Selmo that we have announced before. And also here, of course, more volume generates a better gross margin, but it's also a combination of the cost saving program that we ran in 2024 and trying to keep a tight cost control. And all in all, we came in at the 6.6% of operating margin, which is decent, but of course, we can improve from there as well. And we will, as the year moves along.

Also here, the distribution of sales per geography is very much similar to what it looked like last year. So it's our most global business area with a good portion of the business in North America, which is continuing quite well.

Moving on to Stoves. Well, for Stoves, demand has been reasonable or stable in North America. I mean, the tariffs don't necessarily influence the demand as such. It's more on the profitability side, of course. But in Europe, it's been very cautious for the reasons that Eric mentioned before. And this despite a relatively cold winter and high energy prices.

But it is, of course, a signal of people holding very tightly to their cash for discretionary products given the world around. And when it comes to North America, we will see an effect on -- due to the tariffs going forward. The news that were announced just a couple of days ago. But here, we didn't decline in sales with 10.1% if you dig into the numbers, if you take away the currency effect. So if you look into local currency, we had a drop of just above 2%.

But of course, it is a tough period that we're going through. But it should, of course, be seen under the light of the difficult time right now in general, but also the more or less overconsumption that took place during COVID and then when Putin invaded the Ukraine, the initial phase of that. But when we lack volume here, it has an effect on gross margin, taking a hit.

We've been very, very careful on cost here and also taken out a lot of costs. So with been able to defend an operating profit here of SEK 37 million and an operating margin of 4.4%. And as always, within Stoves, the Q1 and Q2 are the weaker quarters of the year, and it's always in the second half where things pick off.

Also here in terms of geographical distribution of sales, the picture is fairly much similar to what it has been before. And also on the balance sheet side, both on the total asset side and total equity and liability sides, there have not been very many movements, you can say, from the end of the year, more a natural development of the business simply.

So we'll move on to the cash flow statement instead. And I think that it's pleasing to see that the cash flow from the operating activities basically has doubled compared to a year ago. So we've generated a good portion of cash there. But then we're also back into our more seasonal -- or traditional seasonal pattern, meaning that we are building inventory and preparing for the sales to come during the latter part of the year.

So we're tying up more in working capital. So here, we've increased inventory slightly receivables, but also the payables. But there is also a currency effect here running in the wrong direction, which hurts that number a little bit more than necessary, so to speak.

But overall, the cash flow has almost doubled and investments, they have been cut in a third almost from a year ago. So we are clearly seeing the end of this very large investment program that we were running, which, of course, then has an effect on the depreciation side instead, which I'm sure many of you have seen.

So all in all, operating cash flow plus SEK 324 million, whereas it was minus SEK 376 million of last year.

A few key financial numbers. We have a pretty good cash on hand, so to speak, which we can start to use for acquisitions. As Eric mentioned, the net debt is seemingly on the same level as at the end of the year. If you look at the second decimal, which is not displayed on the picture, it's actually come down a little bit further.

And the interest-bearing liabilities in relation to equity have also come down and the equity assets ratio has improved. So overall, I would say it's a fairly stable balance sheet that we're looking at. Working capital is also on the right track. It's slightly lower than a year ago. It's a little bit up from the end of the year, but for the reasons I just mentioned that this is the time of year where we build up working capital for the second half. But of course, an intermediate target is to come down to 20% here, as we've mentioned several times before.

And then just on the last slide, some additional key figures. They are also all moving in the right direction. Return on capital employed a year ago, 7.3% at the end of the year, 8.5%, now up to 8.7% return on equity from 6.2% to 8.5% to 9%. It's, of course, not where we want them to be, but we are on the right track towards our goals. And one should not forget either that it's communicating vessels with our equity assets ratio, which, of course, is fairly strong, where a target in a way is to have at least 30% and we're almost up to 50%. So that has an effect on those key numbers. And then net profit per share has also increased nicely.

So all in all, I think it's a solid balance sheet that we have now after Q1. But I'm sure that many of you have questions out there. So I guess we open up for that.

Thank you, Hans. I think we took like 25 minutes. Now we have 35 solid minutes for questions.

[Operator Instructions] The next question comes from Anders Akerblom from Nordea.

Yes. Firstly, I wanted to ask a bit on Climate margins, which you said you expect to land well within the 13% to 15% range despite higher D&A. I was wondering about how much of this remaining margin uplift do you expect to come from sort of volume recovery, vis-a-vis price cost productivity, mix and sort of what has to happen in Europe and North America for that margin range to be achieved?

Well, I think that we compare ourselves to the previous year where we arrived at 13%. And I think that would be a disappointment if we couldn't improve that based on, of course, growth, rational, more rational production with all the investments behind us, as Hans suggested.

So I mean there would be -- and the assortment, the product assortment now being even broader than before. And also the commercial side coming along very neatly. So all those factors, and of course, if something would happen even more dramatically in the world, but I think we've been able to demonstrate that despite the fact that the world isn't so neat all the time, we are moving in this direction.

'25 wasn't so glamorous either outside our world, but we were able to grow. And as we continue that, as I said initially, we have a pretty good momentum. And of course, to look into the crystal ball, it's always difficult, but those are the main factors.

Yes. No, that makes sense. And I was wondering, a bit as well sort of about what gives you confidence in sort of the H2 acceleration. And of course, with the crystal ball comment that you said, but I mean, how sensitive do you view that outlook to consumer confidence and housing related activity, especially in Europe then?

Well, I -- could you please repeat the question once more?

So you point to a return to sort of a more traditional seasonal effect, strong rates to despite cautious consumer and macro uncertainty. So that's kind of -- if you get my question.

Yes. No, no. It's a very traditional pattern, and that's been like that, as I said, all years, but for 2 or 3 in a long, long time. And also, of course, the confidence or the signals we get from each market is not that we just sit here and guess in [indiscernible]. Of course, that's also a combined picture from our companies out there.

In sales, crowd and marketing people saying, what do you expect or what's happening? And that's the picture we get. So combined with a, you can say, historical pattern, coupled with our own observations. And But of course, if we were hit by a severe war in Europe, of course, they wouldn't materialize, but we don't anticipate that. It's been bad enough and is bad enough.

And we are still performing as we are. And again, I mean, to stand here today on the 19th of May, and we know everything about the future, I think it's pretty bold of us to suggest what we do. It's not a pipe dream. Last year, we had the same ambition to come up to the 13%.

And very few of you out there are not the majority anyway, say, well, it shouldn't be possible. And now we say that we're going to dive well into the interval. And it's a lesser move now than percentage-wise than it was then. So that makes us fairly comfortable if we ever can be comfortable in this world.

No, that makes sense. I appreciate that answer. Final question from my end, a little bit on sort of Element and market mix and utilization. I mean, with some of your end markets, you're showing quite nice growth. Could you elaborate a bit more on sort of which of these are sort of earning the highest incremental returns on capital?

Where do you still have underutilized capacity? And how should we think about sort of Element to balance between organic investments and acquisitions as you work back towards the historical margin range?

Well, I think that the margin range that we are talking about for this year is, of course, as we run the show right now, that's not to be mixed with any major acquisition or anything like that. That's where we stand right now. And of course, we see the segments out there that would be very interesting to enter into or also make additional acquisitions to make the one segment that we already are making even more prominent.

So I don't know whether I fully understood your question, but I think that on the Element side, I think that we are very solidly charging ahead towards the target that we said in the report, and that's not a pipe dream either.

And contrary to the Stoves, which you're going to come back to, of course, there, we see a hindrance that we can't overcome in the short term. But with our position in the electrification, rail process industry, heat pump industry and very importantly and naturally on the semiconductor industry, we are as confident as you can be. Whereas white goods, of course, in the general industrial investment level, they are low. But that's always like that. So most of the times, not everything is glamorous, that's why we are present as we are in different segments. And then the main thing is that we are better represented in the segments where it's growing rather than the other way.

And of course, if you compare us 15 years ago, or even 20 years ago, we were pretty much into white goods. We were pretty much in segments that are not so buoyant anymore. And of course, process heating and heat pumps and the semiconductor, they are relatively new segments for us on a broader basis, And that fills us with confidence.

We just like to remind you folks out there that to allow as many as possible to put questions, please try to minimize them to 2 per interview.

The next question comes from Gustaf Schwerin from Handelsbanken.

Yes. I also had a question on the profitability and specifically, the operating leverage in Climate Solutions. Of course, I hear the comments on the margin range. But how should we think about this drop-through in the quarters to come?

The reason why I'm asking is, I think it looks a bit low now in Q1 versus recent quarters considering you have this organic growth in 3 years, and also relatively modest step-up in depreciation. So I'm wondering, is there something negatively sticking out in the EBIT bridge this quarter, FX revaluations, anything? And yes, what is the reasonable leverage to consider going forward?

Well, we don't look at it like that. Of course, you can't really take away your organization. You have the organization you have. And we don't adjust spending on marketing and sales and R&D depending on quarter. That has a steady course. And of course, if you divide that evenly over quarters, of course, then with the lesser sales relatively seen, you have -- you get a lower margin. I think that's the only immediate one I can give you there.

Sure. But I mean, that's a reflection of seasonality, right? I was more thinking about why is the incremental EBIT not high this quarter. Is there something that sticks out? And should we think about leverage being in the 30%-plus range going forward?

I think you're ahead of me math-wise here. I don't see that the growth in the first quarter would be raise any eyebrows. So perhaps I'm behind you there in your analysis. We typically know that the first quarter is relatively seen not as strong. And that's the only thing I can say. And I would have been -- had I had another answer, I could give you. I think that's a very plain one. Unless you have a math analysis there that, again, they are quite a bit ahead of me.

But if I just may add, I mean, the underlying growth, as we fairly clearly state is around 10%, and the operating profit grows by almost 16%. And I understand you would like to see an even higher growth in the profit there. One item that we don't fully track, but which we are, of course, aware of that happens. And you mentioned it yourself a little bit is, of course, currency effects in terms of transaction effects.

That's pretty difficult to measure within such a decentralized organization as the one we're running. The translation effect is, of course, easy to measure, and we do that. But the transaction effect between companies is a little bit tougher. And that has -- and we know that has had some impact to all of this.

But also, as Eric stated, we have the organization that we have. And of course, we try to trim it and so forth in the long run, but not that we do it between individual quarters to maximize the effect in that sense.

The next question comes from Vivek Midha from Citi.

And I have a couple of questions. I'll go one at a time. My first question was just wanted to understand more about your comments on Stoves. You've commented that Section 232 tariffs will have SEK 150 million impact. The starting point last year was around a 4% margin, and this is around a 4 percentage point margin headwind.

But at the same time, you've been cutting costs. So between all these factors, with you getting at -- to a margin of around 6% to 8% for the full year, would you be able to walk us through the moving pieces that help us get to that new level?

To start with the new tariffs, of course, they have not been affecting the present quarter, the quarter that we just left. So they are calculated very bluntly on sales into the U.S. and with the 25% tariffs on that. Then, of course, we already had tariffs that were now substituted with the new ones, and they came last year.

And those are the ones we've been trying to fight off with moderate price increases and cost rationalizations. So we may now come into the second or the second quarter. Then, of course, the new tariffs, they will hit us fully, but that doesn't mean that we're going to just say, well, okay, thank you very much.

We won't do anything. Of course, we'll try to do our utmost to be as effective as possible. And if there would be a possibility to further increase prices without harm our presence in the market, if anything, we like to sell more. But that's going to take, of course, quite a bit of sales increase to compensate for this.

But the presence in the market that we have been building up, and now I'm talking about also our predecessors and owners It's taken them 50 years to establish the market that we have now. And we are not going to diminish that or disrupt that by short-term decisions. But that's why we explain to you that if really things would hit us very, very hard, if we wouldn't do anything, it would be, I mean, SEK 150 million on a SEK 3.5 billion, that's pretty much 4%.

But of course, we'll try our utmost to compensate and we will not be able to compensate up to 10. That's unrealistic. So we give you a span of 6% to 8%, 6% if we wouldn't do anything and then anything better than that, that means that we've been able to counteract. I think that's the best answer I can give you on that.

Fairly understood. My second question is on Climate Solutions. I understand it's difficult to comment on shorter time periods that got your disclosure and some, but I'm just interested in some color as to how you saw trends developed through the quarter, post the quarter.

Really, what I'm interested in is whether you saw a pickup in activity into March or into April and trying to disaggregate what -- how much of this has been the pre-existing trend that was going into the quarter given the market's recovery versus whether you've seen an impact positively after the Middle East conflict?

Well, I think you answered the question part yourself how difficult it is. But I mean, we all are -- we are all affected by what we see on our screens, whether it's TV or telephones, whatever, of course, people are affected by what's happening in Ukraine, what's happening in the Middle East, what's happening in Gaza and so forth. And it's all around oil and gas.

And eventually, the thoughts will penetrate into our own actions. Are we going to do something differently? It's not only heat pumps, but it's also with cars. Should we continue to drive petrol-driven costs or should we do something else? And I think that every time something happens of this nature, the last weeks here with the Middle East development, of course, that is stirring the interest.

But at the same time, I think that we need to have -- we'll give consumers a little bit more time, not everyone is running out and say now, I like to have, for instance, a heat pump or I like to have an electric car. But I think the subconscious of people are affected by the negative news and they're more willing to change for alternatives. So in that sense, it has affected consumers. And we're a little bit hesitant to say now, the whole world is going to open up. We like to see a few more quarters.

But we are fairly confident that the development will continue as we said. And that's why we are bold enough again using that word to come back to a margin within that span 13% to 15%. So I guess that's an illustration of long term what we think about long term, but the remainder part of the year. So I think I don't dare to be more explicit than that.

Fairly understood. Just as a very quick follow-up to that. Is there any sort of color you can give us as to when you talk to that 13% to 15%? What organic growth assumption for the full year you are assuming that?

Well, there's also an answer that you know, you wouldn't get fully. But of course, without substantial or a relatively decent growth organically as we demonstrated this quarter, of course, you wouldn't get there. And we are always geared for growth. And that's not only because of the market, but also because of our own products and new products coming to the market, not substituting the ones we have, but adding to the assortment. So that's pretty much as deep as I can get.

The next question comes from Christian Hinderaker from Goldman Sachs.

I wanted to start on cost inflation and what you're seeing in terms of copper and steel prices, how you're managing those? And maybe you can help us scale the primary materials within a heat pump and whether you're able to pass that inflation on to customers?

Well, we, of course, are a bit cautious with price increases ourselves without being able really to explain to our customers the reasons. And of course, we are really holding back because of our purchasing power. You can always refer to the copper price going up. But we can always argue about the volumes we provide our suppliers with. So it's not so easy that it's one to one.

And of course, we could also say to our customers, we have such a good assortment of products we just like to propose price increases. So I think it has to be, if I use the word, again, civilized between suppliers and ourselves and our customers.

So we are really trying to fight back all price increases. It's not easy, but we are in a situation where we have long-term relationships with our suppliers mainly. And it's not a new phenomenon. We've been telling them, if you're going to be on board with us, don't come and tell us that now you need that and you need that.

You're on board because we trust you, you have to fend off price increases on your side. We're being more rational, just like we have to fend off our prices being more rational. And when we present ourselves anymore to our suppliers to say, we've invested like SEK 10 billion the last 4.5 years to become even more rational, you're part of that trip, you are part of that voyage, and you can come and penalize us by increasing prices. That's the reasoning we have when it comes to our suppliers.

And we're really tight with allowing any price increases. Sometimes, we might allow that, and we say, okay, fine. Can we fend it off with our own more rational production and our own products coming about? Or do we have to increase prices. But that's our general attitude A long answer to your question, Christian.

Yes, that's very helpful. And maybe turning to more of a top-down thoughts in terms of some of the policy changes this year. With the ROT allowance has declined from 50% to 30%. I wonder if you think heat pump sales in Sweden can grow in that backdrop?

And then secondly, you may have seen the France announcement spanning gas boilers in replacement settings in 2027. I just wondered if you could remind us your sales exposure to France and then whether you're hearing anything from customers on that change?

Well, in Sweden, I think that the subset is there, whatever you call it, the grants. I don't think that is affecting us that much of the industry. I think the market is so mature. So when it comes to retrofitting, if the heat pump breaks down, which very seldom does, but eventually, then of course, it's replaced with the heat pump, disregarding tax subsidies or not.

It could have been a better, of course, motivation had we had any new construction of sorts. But now very few houses are built. So that means that the -- even there, it's tough. So I think that it might be very blunt to say it doesn't have any effect. But well, in a mature market, I don't think it has that much of an effect as in a newly developing market would have been totally different.

In France, coming back to that. There, of course, we are in the hydraulic heat pumps, air to water, ground source and exhaust air. And the growth in France has been predominantly or very almost exclusively in the air-to-air segment. And for your interest, we are -- we've been very, very stubborn and not entering that sector.

But as you might have heard from the show in Stockholm during the second half of this year, we will also enter that segment, which is a totally new territory for us. And that is also adding to the sales increase that we talked about previously.

Our customers or installers, they appreciate our assortment. But to be fully equipped, we've understood, and we've been, as I said, a little bit reluctant, but there we are now. We were able to introduce air-to-air during the second half of the year to be complete, which we will be able to compete more in the long run in France in that segment. But so far, we've not been acting there. Hope I answered your question that, Christian.

Sure. Can I just squeeze a quick one maybe for Hans. The depreciation, SEK 391 million, is that sort of run rate what we should expect going forward?

Yes, I think you can work with that number.

The next question comes from Karl Bokvist from ABG Sundal Collier.

I just have one really, it's more about when we look into 2026 in Climate Solutions, if you have anything left to realize from savings actions apart from volumes and other things that could help the margins now and you have potentially cost inflation also, the depreciation charging affecting the margins.

Cost reductions. I don't -- you mean going back to the program we had 1.5 years ago, what you're referring to?

Yes, exactly. And then potentially some other actions you took in -- well, in connection to that, but essentially, we're not part of the original plan.

I think that we've been -- we have completed in the programs. Now we are out on fresh fields again. So that might be, of course, if a company would have difficulties, then it's always up to individual company to do some cost savings, but not any programs or anything like that. Now we are, in Climate Solutions, we are charging ahead. And if there are any local adjustments, they have to be done fine, but nothing that we orchestrate from [ America ].

No. But if I just may add there. I mean, with a group of 200 companies, I mean, we did run the big program then back in '24. But with so many companies within the group, you will always have one or the other company not performing as planned, so to speak.

I mean I think that's part of daily life where, as Eric just mentioned, the local management sometimes supported by the division management or business area management, we look into that company to deal with cost savings, of course.

And then in the background, also, we have a continuous deeper cooperation and collaboration between our companies. Purchasing has always been on the radar screen very clearly, but it's evolving into more and more areas. So it's something that we're continuously working upon.

All right. So the kind of -- when we look at the margin of 13% in '25 and how this can develop into '26, the kind of biggest plus sign that can help you is volume growth. And then you have potentially some minuses that you expect to manage in a good way then?

Yes. And of course, when you have volume growth, and I mean that also allows you to produce more irrationally that's why we have invested as we have. So it's like they're all intertwined. Of course, if you produce a unit 15,000 versus 20,000. Of course, you can benefit from a more efficient setup, if you produce 20,000.

And that comes on top of the actual gross margin added to the actual sales growth. So it's not only that you grow sales, but you also produce in a more rational fashion. That's been the whole idea of the investment program.

The next question comes from Uma Samlin from Bank of America.

So I just have one, please. Could you give us a bit more color on the demand picture you see? Have you started to see any impact or any positive dynamics since the conflict in the Middle East since the gas prices have increased in your key markets? Does that change your expectation for the year? And also on top of that, how should we think about the market share dynamics in your key markets, as is Germany, Nordics, Benelux, would be really helpful to hear a bit more about that.

I think we've been touching upon it early here, and it's very sad to realize that it takes a war to -- for people to think differently. We believe that people are smarter than that. So of course, that's again announced, of course, that, okay, gas and oil going to be more expensive. It's not totally reliable.

And that's something that doesn't leave you even if the oil price will go down tomorrow, the gas price is something -- that isn't totally reliable. Just like among friends, if you have a friend that isn't trustworthy, don't necessarily trust that friend even if you say, well, I'm a good guy again. I think it's -- we are like that. We are like human beings.

And of course, the situation in Iran and the sound down there, that, again, is an illustration of how we are affected subconsciously about that. And we believe that Europe, we just have to get -- stay away and get away from fossil fuels for many reasons, dependence and climate and being respectful for next generations. So everything is speaking for the advantage of going for electrification, heat pumps or have you in a new world. It's old fashioned to go with oil and gas.

It might again be bold to say, but I think younger people, and everyone is young in my world, they -- I'm sure they look at it, it's very old fashioned to burn oil or burn gas. I think they're willing to change over for many reasons. So of course, what's happening now in the world that is affecting demand for newer ways of doing things in a positive way. Hello?

What about market share?

We monitor the market shares very, very closely. And of course, we answered that question indirectly. On hydronics systems, we defend our market shares very well. Where we haven't been is in the air-to-air.

And we realized that perhaps we should have been there, it's a very difficult market. But to be complete, not to say that we're going to stay out of that. We will also enter that market. But on the hydronics side, we are very confident that we are on the ball.

Your next question comes from Daniel Khajenouri from Morgan Stanley.

Just a follow-up question on the margins for Q1, if I may, focusing on Climate Solutions. You delivered a very strong organic, but the operating leverage appears to be lagging versus recent performance. And one of your peers flagged volume growth outpacing sales in Germany alongside some elevated promotional activity weighing on margins. Is this a market dynamic that you've noted? If not, what explains the outperformance?

I think that you have to repeat that question for at least me. Could you repeat that question?

Sure, sure. So just a follow-up question on the margins for the quarter, focusing on Climate Solutions. You delivered a strong organic, operating leverage appears to be lagging versus recent performance. One of your peers in the market flagged outpacing sales over -- outpacing volumes over sales in Germany alongside elevated promotional activity weighing on their margins. Is this something you've noted as well?

Well, of course, we notice activities all the time. And I think that we are more structured in our marketing activities. We don't look so much at what the competitors are doing. We do that naturally to a point.

But we've been very cautious about protecting our margins, but at the same time, growing. And we know that price initiatives, if we might call it in a gentle way, they will always be eaten up by something following that. If there was a question, I think that's the answer.

And of course, we noticed from time to time and perhaps more aggressively so during '24, and also '25, part of '25, I think it's a bit of a lesser, should I say, important or yes, in later quarters. But I mean that doesn't mean that it's gone away. Of course, particularly if you feel that you're losing, you'll try to do something, obviously. I don't know whether that helps you, but it's as good as I can answer the question.

I think that was it for today. See whether what the voice is saying here.

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

Well, thank you very much for all the questions. And we hope that we've been trying to help you somewhat. Some questions, as you know, we can't answer for discrete reasons. But the other questions we've been trying to explain to you as good as you possibly could have. So with that said, thank you very much for calling in.

Now it's the Annual Shareholders Meeting in a little while, and we are getting prepared for that. Thank you once again.

Thank you very much, everyone out there. Thank you.

Welcome to the NIBE Q4 Presentation for 2025. [Operator Instructions]. Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead.

Thank you very much. Good morning or good afternoon to all of you out there. Hello also from my side. We appreciate you calling in. And just for the sake of order, we would like to present the report now in 20, 25 minutes at most, and then allow for questions, of course. And then we have, as a target, to stop the whole interview here around 12:00 o'clock. And just another sake of order, we could possibly allow 2 questions per analyst or per person and then you have to queue up again to allow as many as possible to put questions to us.

All right. With that said, once again, welcome. And we're going to go through a number of slides. And I think that the headline as such gives a pretty good picture of what we're going to talk about, and we hope that you read the report. And of course, it's been a very transparent year to you regarding our recovery, if we call it. And we saw the signs already at the end of '24, and then gradually quarter-after-quarter, we've seen the improvement. And then with the fourth quarter, which is typically a good quarter for us when we return to seasonality, it's a very robust development.

Of course, there have been hindrances out there, political and tariffs and what have you and Swedish currency, which is very good to note on one foot that it has strengthened, but it's been, of course, also quite dramatic when you invoice in other currencies. Nevertheless, that's our task to solve or work with these issues. And there are no excuses, but rather saying, okay, we have arrived where we are, given all the conditions in the world.

And if we just have a quick look at the figures themselves, there you see, of course, the quarter and you see the year as such. And the summary is, when we look at the figures, that the growth is fairly modest. It is even minus in the fourth quarter. But taking into account the currency effects on the full year, it's a little bit better than 5% growth. And in the quarter, it's even more than, so it's like just under 7%, I think, which means that we are truly recovering and the margin is with us.

The operating margin has come from just north of 10% in the quarter to 13.1%, which we think is fairly solid. And also for the year, as such, we are back on track with 10.5% versus the 8% that we weren't so pleased with a year ago. But again, solid demonstration of strength. And we're going to go through respective business area. And we look at these bars here in the graphs that you have ahead of you, of course, they are a little bit diminished by the fact that the currency has been so strong. The last years, I think, cut down with SEK 1.8 billion. So that graph would have been different had we had a fixed currency ratio.

And it's -- here, when we look at the profit after financial items, there, of course, they are not directly influenced of -- course, they are influenced, but to a lesser degree. Now we see that the curve is going in the right direction again, which is very pleasing. And we see also that the seasonality is reinstalled. And we've been talking about that quite a bit, because unless you've been following us for several years, the years '21, '22, '23 weren't really, if you call it, normal because the seasonality was not pronounced at all. But prior to that, we had a curve just like we more or less have had '25.

On Climate Solutions, which is the business area that you look at the most perhaps, and sometimes we even call the heat pump company, which we'd rather be called like -- something else, like a heating technology company, because that is, again, diminishing the other 2 business areas. And even Climate Solutions is not 100% heat pumps.

Nevertheless, it's been a good year for us. And of course, we have fulfilled all the investments in product research and product development, and our factories and our equipment is up spick and span, which means that we are very ready to take on the challenges coming in the future. So that's a very positive attitude within the whole group, what we have achieved together. And it's -- I mentioned that earlier this morning when I had a short interview saying, well, this is really a very good demonstration of strength.

Hans and I can only do so much, but we have a phenomenal organization behind us that fully understand -- who understands the task, and we have been working together, now for many years together, of course. And we had a slowdown in '24. We just said, let's analyze that, make a program and then charge ahead again. And that's pretty much what you see in -- during the year and during the quarter for Climate Solutions and also the other business areas, which we're going to come to.

And if we just have a quick look at the figures for the year for Climate Solutions, we see that -- of course, again, the modest might look not so phenomenal, but it's actually a growth of 7.6%. And for the quarter, it's just under 9%, which, of course, is contributing to the margin of 13%, which we have been working so hard to achieve and which we're also going to show you on the next slide that -- of course, it was not very pleasing to be under even 10%, which is the immediate target for all business areas. But to be under, that was a little bit painful we had to admit. And now we're back on 13%. And it's a very clear signal in the report that we don't aim to stand there, but rather move into this, I'll say, broad span in the future and already this year where we're standing.

Looking at Element, same thing, it's been a challenging year for them. But some sectors are good. The heat pump sector, the semiconductor sector has really improved during the last months. We had a weak period in the third quarter, and that was one of the main reasons why we couldn't really catch up to the targeted 8% operating margin. And we indicated that already in November. Other than that, they are working very determinedly. And with all the challenges that we've all had, so I won't dwell on each bullet point here. But, of course, there, again, we like to be back within the span of 11% to 10% -- 8% to 11%. So growth and margin recovery, I mean, those are the headlines for the year to come.

And here again, it's a very narrow expansion if you look of growth. But if we look at it from a fixed currency point of view, then we have a growth of 6% for the year. And also for the full year, it's -- or for the full quarter, it's well above 5%. So it's catching up. Here, of course -- there, we have the icicle sticking down 2005, where we had a very difficult year, but there was some money set aside. But now we've had 2 years below 8%, and we are very determined to bring it back within that span, as I just mentioned a few minutes ago here.

And looking at Stoves, of course, they've been dragging. And there, we misinterpreted the market come back, we can say. Stoves hit the tougher situation a little bit later than the other 2. And even the first quarter '25 was not so bad really. But then, of course, consumers were certainly influenced by all the worries in the world. And we've taken away costs, of course. And we are fully determined also here to return to a margin that we are more used to.

And if we look at that -- the precise figures, we can say that the growth, of course, was very, very modest, is even minus, and we are not really used to that. It was 5 percentage units drop if we discount the currency. But still, even the fourth quarter was just on the verge being equal, taking the currency effect away. We feel that we are scraping the bottom, and we hope now that it will be a big leap jumping into that span, but that's certainly our target, together with, of course, a volume increase or organic growth.

And before Hans comes in, I'd like to just look at or show you the bars that we typically show. And of course, we had a phenomenal growth there, '22, '23, even '21. And then we dropped down painfully so. And now we are even including the real currency effects, just passing the previous year. But of course, had we add another SEK 18.8 billion there, we would have been at a different situation.

Profit after financial items, we have a bit to go there. They are determined to come back as far as the margin improvements we've said already. And of course, that's a combination of being very frugal with cost, utilizing our investments that we've had now, so determinedly fulfilled, and of course, being very aggressive in the market. So that's the good old usual tools. And we hope to be able to show you better bars as the years are coming by.

When it comes to sales distribution, it's fairly much the same as in the past, where 2/3 roughly come from Climate Solutions and Element 1/3 and Stoves a little bit less than 10%. And of course, with Climate Solutions coming out with a fairly good margin, the result, as such, is, of course, dominated by that, and with Stoves fairly marginalized because of the relatively weak performance during the year.

Geographically, last slide before Hans steps in here, it's, yes, North America, 31%; the Nordic country, we consider being our home market, it's like less than 20%; and then 45% in Europe outside the Nordic countries. So that's fairly stable we'd say.

So I think I hand over the range to you, Hans, there.

Thank you very much, Eric. Yes, I'll continue as usual, so to speak, and then we'll, of course, leave room for the questions. Just one comment on the group before I head into the divisions again and then the balance sheet and so forth.

As you saw, we have adjusted numbers. That's something we very seldom have really. We like to present exactly what we have performed. So in reality, we've only made adjustments twice, and that was back in 2005, as you mentioned, when we had a savings program back then, and then for '24 for that savings program.

This year, we did, however, decide to mention that these acquisition-related revaluations of contingent liabilities would need to be mentioned separately because they have very little to do with the underlying operations, so to speak, the SEK 178 million, SEK 179 million. That's what we do every fourth quarter every year for all of our future payments for remaining shares in companies that we owned. And they are, of course, based on future projections.

And this year, we had a very fortunate situation in a way, where a couple of companies and owners wanted to remain on board as owners for a number of more years and not step out soon, so to speak. And we always welcome that because we want the people to be involved with flesh and blood. So that was the reason for that adjustment.

Now heading into Climate Solutions again. I mean, as Eric mentioned, we had a good and strong finish to the year by performing quite well in the fourth quarter, almost a little bit better than I had expected since December was the last December now for many years which was employer-friendly, so to speak. You could take a few days off and get a long vacation. But that did not hinder our companies from continuing to deliver and perform, which was very pleasing to see.

So it was a good finish to the year, where we had good sales in the Nordics, especially Sweden, Denmark kicking in, and then Germany and the Netherlands, and to some extent the U.K. as well. And then in North America, with the commercial sector being very strong, so to speak, or relatively seen strong -- that's our bigger area over there, but also U.S. being a very stable country in terms of business. So that contributed to this good performance.

And thanks to the volume coming in then, which you don't see due to the currency, but Eric went through it quite in detail. I mean, we've had an underlying good organic growth. And that, in combination with the savings program that we launched and where we have been really focusing on holding on to costs, have generated both a better gross margin, up by some 3, 3.5 more percentage units from Q4 of last year, and then holding on to the SG&A costs as well, making it possible for us to deliver a growth in operating profit of some 34-plus percent, coming in at this margin of 15.7%. So quite an achievement coming up from the 12% of last year and then landing in the full year for Climate Solutions at 13%, up from the 9.3%. So we're back on track. And as Eric mentioned, we, of course, want to continue to develop from this level.

In terms of split of sales per geography, there have not been many movements. We're very stable in this situation. The Nordics always represent just below 1/4. The rest of Europe is basically half, and then North America is about the same as the Nordics or slightly, slightly bigger.

Moving on into Element. Also had a relatively strong finish to the year, almost coming in at 8%, which is the bottom range of the interval where we want to be. And this was not a given in a sense as this is the, as we typically say, our most global business area where we are exposed both to many geographies and also many segments, where the majority have been stable, some have been growing nicely or kicked in again. HVAC with heat pumps being one of them. Of course, semiconductors coming back in the quarter. They were up in the first part of the year but then had a decline in Q3 and came back. Whereas white goods, automotive in Europe and industrial still are in a slightly more challenging situation.

But all in all, we were able to increase gross margin here as well in the quarter by some 2 percentage units. The operating profit coming in almost 17% above from last year, leading us then to landing a full year at 7% operating margin with a slightly better gross margin, keeping the SG stable. But still a little bit of road to go to get back into the 8%, but clearly on the right track.

In terms of split of geographies per sale, as I said, this is the most global business area. Not so much of movements within this area. It's the others portion that has grown or changed a little, you can say, being the Asian part, which declined slightly, since the other ones have grown or come back, you can say. But no major changes here.

Stoves then, as you all know, the business area is still struggling a little bit due to a difficult market. I mean, on the one hand, the low new build rates, people being a little bit uncertain due to the geopolitical situation and so forth have been holding on to these types of products. But one should not either forget that we come from a very special situation in the sense that during the pandemic and the homeowner trend that followed, we had a very strong demand in the business area, which then was continued once again, you can say, when Russia invaded Ukraine and people were really looking for a heating device which was not dependent on anything else than wood, so to speak.

So with that in mind, we think that the business definitely will come back, but that it still is lagging a little bit behind before it will kick up. But also here, we have obviously been working on cost control and focusing on trying to grow the business and keeping up the profit. And gross margin improved by 2 percentage units almost or 1.5% at least in Q4, and we were able to basically maintain the profit and coming in at an operating margin just north of 10%. And for the full year, the 4% that Eric mentioned before.

In terms of geography or sale per geography, no big movements. Since quite some years back now, as you know, we have a big operation in North America based in Canada, in the Vancouver area, and that has developed quite well in terms of sales. But of course, the tariffs have hit us in that respect.

If we then move on to the balance sheet and eventually cash flow statement and so forth, you see that the total assets have actually declined from SEK 70 billion to SEK 65 billion. A lot of this has to do with currency. If you see the intangible assets there, they have come down from SEK 32 billion to SEK 29 billion. There's a good portion of currency in there. But of course, also a result of depreciation, and that goes also for tangible assets. Although we have continued to look at acquisition opportunities and always do, we have not brought so many companies on board. So we have not had any add-ons here in the same way as before, where the balance sheet always has expanded.

And you basically see the same effects on the equity and liability side, where equity is lower than before, but that is very much a result of these currency translation effects that I just mentioned. But also the fact that we have handed out dividends, and you have the bridge on this in the report on Page 12, I believe it is.

Pleasing to see is that both the long- and short-term interest-bearing liabilities have come down. We've amortized on our loans. So we've reduced those by some roughly SEK 2.2 billion, which has improved our financial strength, you can say, for future acquisitions.

And very pleasing to see is that the cash flow has from the underlying operations generated some SEK 400 million more than compared to last year, which is pleasing in itself. But we've also now had a release in working capital that we have been talking about. And in previous quarters, we've had a good development on inventories. We've step-by-step reduced those. We've slightly increased our payables, which also has had a good effect. But we didn't in Q2 and Q3 get the immediate effect of our increased sales.

Typically, we invoice a lot at the end of the month, and then it takes a little while before the effect of that kicks in. But a good portion of that did kick in now in Q4. So we released some SEK 700 million then, leading us up to having a good cash flow from operations after change in working capital of close to SEK 4.9 billion.

The investment in current operations has come down and will come down even further following the big investment program that we have gone through and are just about to finish. And then a small portion there on acquisitions. And then the financing activities, that's, of course, repaying debt and also paying out dividends. So the fact that the change in liquid assets is slightly negative there, that's fully planned. So I think a very good and strong cash flow behind us.

And just a few key financial numbers here. We still have a good portion of cash on hand. It's at SEK 5.9 billion basically, slightly down, but just for the reasons that I mentioned, that we have used part of the cash to amortize on our loans. And as you see, the interest-bearing liabilities in relation to equity has further come down. And very pleasing to see is that the net debt to EBITDA has now come down even further from the 2.9 in the previous quarter to 2.7. And regardless of us having adjusted that number or not, the number is basically the same. It's either 2.72 or 2.67. So it's a very small difference coming from that effect. And then an improved equity assets ratio, making us a solid company.

And the working capital, we're continuously looking into that and working on that. It's given a good effect during the year. We have as an intermediate target to land in at 20%. We came close here with the 21.2%, but having taken it down about -- well, from the 22.8%, as you see there in the picture. So that's also heading in the right direction.

And just the very last key financial numbers. Obviously, return on capital employed and return on equity still have some ways to go to meet our targets, but they have definitely taken a step, both of them, in the right direction. So that's what we are continuing to focus upon. And with this year behind us, we're well positioned for that improvement.

And the very last page here is a little bit of a summary of what I just talked about in terms of these financial numbers, where you can see the development of these key financials over the years. And up until the very special year 2024, we've gradually improved both the operating margin and the net margin and also the equity assets ratio.

Return on equity has been suffering a little bit, but that is, of course, due to the strong equity in a way, it's communicating vessels in a way. But following now the recovery here in 2025, we think we are heading in the right direction again to continuously improve these numbers.

And by that, I think we are basically ready for questions. And would you like to add something, Eric?

No, no, no. I think that we are -- we spent 26 minutes all in all. So now we have 34 for questions. And I was trying to speed up as much as I possibly could. Perhaps I was too short in some instances, but you covered nicely, Hans. So that's fine. You go ahead with your questions, please.

[Operator Instructions]. The next question comes from Christian Hinderaker from Goldman Sachs.

My first question is on the cost base. It looks like the margin improvement is mostly coming through in the gross margin line, as you talked to cost of goods sold in the quarter down from 69% last year to 66% of sales. Can you help us break down that cost a little bit? Interested how much of your cost base is driven by raw materials like copper and steel, for instance, and how much is labor? And then how we think about the moving parts year-on-year?

All right. Well, when it comes to -- as we say, we have a more intensive cooperation between both the companies in Climate Solutions and between Element and Climate Solutions. And that is bearing fruit, both when it comes to raw material reductions -- and also our new facilities, of course, they also allow us to be more rational, although the volumes are not totally satisfying yet. But those are the 2 major factors that I would say. And we kept pretty much the fixed cost at a level that is a little too high in the spring time and not too low in the fall, but the seasonality is very important. That's why we point on that. We have to have a very stable R&D fleet of people and so forth, and we can't diminish them and go up in the fall. We have to have a fairly even amount of indirect and clerks and developers and so forth. I hope I answered some of your issues there.

Yes. Just maybe any comment there in terms of your copper mix exposure?

Well, copper is, of course, an important factor. But we are mitigating that to a point with vessels now being, to a larger degree, also produced in stainless steel. So that is -- and the alloys there are not hindering the mix to be slightly more positive.

Okay. Maybe just secondly, I was interested in the North America performance for Climate Solutions. It looks like flat revenues year-on-year at around SEK 6.8 billion. If we look at the data from AHRI, that's showing a 37% decline year-on-year in November in volumes. Interested in what's behind that outperformance versus the market? Is it a timing dynamic? And any thoughts on the North American business would be great.

Well, I think that -- I mean, there are perhaps many or several factors. But one factor we believe is that we've been fairly quick to monitor and to adjust the refrigerants to the market demands. In North America, it's not so much propane or 290, but rather the 454. I think that's one factor where the assortment has been adapted to the market, presumably a bit quicker than some of our colleagues in the industry. And also the fact that the commercial segment has really been positively developing. So those are 2 factors that I think that makes our performance fairly stable.

The next question comes from Uma Samlin from Bank of America.

So my question is on the Climate Solutions margin. So you had this nice chart in the presentation where you could see the historical margin levels. And you also guided that 13% to 15% in 2026. So I guess my question is, from where we stand today, what do we need to have to get to the historical level of like 14% to even close to 15% margins? You talked about that you have a bit more efficiencies in your new factories. I guess that should help you to get a bit easier than it was in the past. So what are your sort of expectations for volume growth to get there? And do you see any further benefit from efficiency gains or cost cutting in the past 2 years to contribute to the margin improvement in 2026?

Well, of course, the factories are more efficient. But then, of course, we have to realize that the depreciations are kicking in. So we are mitigating that with the higher efficiency. And to bring it further into the interval of the span, that is a combination, of course, of growth and polishing even further on productivity and maintaining cost. That might be a hide and seek answer, but that's exactly how it is. It was painful to bring down the cost. We are doing our utmost to keep it at that. And of course, when we add cost, we know that, that is for a very good purpose.

And realistically, productivity is coming along as the volumes grow. Not saying that, well, we have to wait several years. We believe that we are on the growth pattern, and we believe that the growth, continued cost control and increased efficiency, although dampened a little bit by depreciation, will bring us into that interval. That's the whole organization's target when it comes to Climate Solutions.

That's helpful. My second question is around market share and pricing. So just wondering if you have any comments you could share in terms of your ambitions on market share? And what are the pricing trends you have seen in Q4 and going forward?

Well, we believe -- now it's very difficult to comment on the whole industry, but we are not very much friends of decreasing prices. And that's why we have always said that the price decreases we've seen in the market, they've been mostly linked to inventories being sold out, which we -- and we believe that's been a fair analysis in the past. And we believe also that once those overstocking items are out through the distribution channel, we have a more realistic pricing situation. So we do not believe that there is any dramatic activities on that line. And in some instances, we even recognize that there will be some slight increases of pricing. So I think it's been matured, if I may use the word, when it comes to the pricing situation. I hope I answered your question there, Uma. Or was that fulfilled or...

Yes, yes, yes, absolutely. And any commentary you can have on market share?

Well, we believe that we are definitely not losing market share, but to say that we are gaining tremendously. But we are on a very solid ground with the assortment, our activities. And we also understand and acknowledge that our partners out there in the market, they appreciate that we've been disciplined with our prices, with our product launches. And the feeling is that we are on the right track when it comes to also gaining market shares. But I'd like to be more humble about an overall comment on that.

The next question comes from Carl Deijenberg from DNB Carnegie.

So 2 questions from my side. And first of all, if I could come back a little bit to the U.S. and the commercial offering. I wanted to ask a little bit -- I mean, I see that you're mentioning, for example, [ shellers ] being a product that is in good demand for you right now. And I can also see, when I look, for example, in water furnace, that you seem to have a product portfolio that is suitable for data centers. So just asking, has that been a positive growth driver for you in the U.S. that could explain the discrepancy in the last couple of quarters relative to the data points that were mentioned in an earlier question here on the call?

Well, we must say that we haven't really concentrated on data centers. We've rather been very strict when it comes to penetrating those segments, where we are historically relatively strong. But that doesn't mean that we don't have the ability, but there are so many companies rushing into that. So we are not standing by the side and saying, well, we wait and see. But we've been continuously preparing our products for the very suitable market in hospitals, educational centers and so forth and also governmental buildings, not neglecting perhaps the data centers.

But we couldn't say that we have really put massive efforts in there, but rather maintain where we are and, of course, gradually looking at that and moving in there without forgetting at all our customers and our segments that we've been working so hard and working up or fostering, you can say. That was a long answer to because we know that, that is, of course, very inspiring. But I think that is still to be further developed by us. That's not the reason why we have seen the growth that we've seen.

Okay. Good. Then I also wanted to ask, you mentioned Italy here as a market that is seeing sort of a return to growth, and I think this is the first time this year you're mentioning that country. And from what I know, you also predominantly have a more of a commercial offering in that market with Rhoss and so on. But just wanted to hear a little bit, are you seeing better residential dynamics in that market as well? Or could you spend some extra time on that also given the size of that market from a European standpoint?

Well, on the commercial side, we see an uptick, and that again has to do with the product ranges that we have now launched with modern refrigerants and the appetite from the market to install those. So I think we've been fortunate when it comes to the R&D.

On the residential side, we don't see any major change really. So it's predominantly on the commercial one. But Hans has a comment.

Well, I mean, we often talk about people, so to speak. And of course, you do need to have a company that is in good shape and obviously very good products, but you also need very good people running the businesses. And I think we have been very fortunate to get good people on board in that country to drive the business, taking the portfolio, the assortment that we have and penetrating the market. And that has definitely contributed also to a good development over there.

You're absolutely right, Hans. I'm always a little bit concerned about mentioning that because then the headhunters are out there trying to recruit people from us.

I'm sorry.

No, no. No, no, no. I'm saying that jokingly. The whole success we started with that is built on people and that we've been able to improve now. It's just the 2 of us here. But the other 21,000 people out there, they are the one that -- they are the ones that make a difference. And we appreciate -- of course, the management in Italy is very, very good. Both the companies, in Climate Solution and also the people on the Element side, very professional, very devoted. So I'd just like to underline what you said. Thank you for bringing it about, okay?

Yes, yes, absolutely. They're probably all listening into the call as well.

The next question comes from Karl Bokvist from ABG Sundal Collier.

So first one is just on the talk -- we've talked a little bit about what you've done on the product side in North America. But in the report, you do mention the cross collaborations, et cetera. So when looking at the European market, any particular product categories worth mentioning? For example, you talked about the potential to expand into size-wise, smaller heat pump products by using CFL, for example. So just curious to hear your -- what you've done on that side.

That is very much to come. The figures for '25 had not been really influenced. Of course, we've started, but that's really to come during '26. So that is one factor that is -- we believe is positive. But we have to be cautious here not to mention too much compared to what we mentioned in the report. But of course, product presence and cross collaboration is important. We already mentioned purchasing and also R&D. That is coming -- really coming on very good. And Winston Churchill, if you like to refer to him today, he said there shouldn't be any crisis that you shouldn't use for a purpose that you -- that's necessary. And we believe that we have come closer to one another, both within the Climate Solution and within the Element and across.

So the psychology -- and, of course, stoves, they also benefit from the material savings programs. So I mean, we always felt that we were tight, but I must say -- we must say that we're even tighter today than we were before '24. So that is to come as far as more to be seen. And if you attend the show in Stockholm in 2 months, I'm sure you're going to see that what we are talking about today.

Understood. And then the second question and a follow-up on that is perhaps more directed towards Hans. The investment level when looking at capital expenditure, just above or roughly SEK 2.1 billion for the year. And either in how you view it in relation to sales or in absolute monetary terms, how one should think about investments into the next couple of years? And then I have a follow-up on that.

Yes. I think we've been fairly clear on this, that we had in a way an exceptional period now of investments that was launched some 5 years ago of SEK 10 billion that we have basically come to an end with. Prior to that period, our investments typically were at some 3.5% of sales, and depreciation about the same. So we kept a stability between the 2 categories.

And now in terms of investments going forward, we're finishing off these larger investment programs and will come down to a more normalized level in terms of investments in percentage to sales as before, you can say. It will be, of course, a little bit of a step-wise way coming there. But as Eric mentioned, of course, depreciations will kick in instead now when these programs are being launched or these facilities and product programs are being taken into production. But all in all, I mean, after this period, we aim at coming back to the historical levels, you can say.

Understood. So -- because on a quarterly level for the group, capital expenditure was up a few hundred million on a group level, but in Climate, it was up from around SEK 300 million to I believe, SEK 1.2 billion. So is this related to finalization of something or something else that we should keep in mind into '26?

No, it's very much a matter of finalizing projects that have been going on. It takes quite some time to build a factory, for example, or take a new building into operation. And then depending on what the market looks like, we have been adjusting the investment in the equipment, the machinery and everything according to market demand. And when we see that there is such an opportunity, so to speak, we go. And so it can be -- or it is linked rather to such finalizations.

The next question comes from Anders Roslund from Pareto Securities.

I have 2 questions regarding growth in Climate Solutions for this year. I assume that you -- some of the growth -- organic growth last year was due to that you have heavy destocking in '24. And now in '26, you will confront the sort of normalized demand. However, you saw a little bit of uptick in the second 9% organic growth, and we also know that we've seen quite dramatic increases in gas prices, but also in electricity prices. But overall, a cold climate here in Europe, et cetera, that drives maybe a higher replacement. How do you see this short-term development here, but also if you can manage to see organic growth in '26 on a similar level as last year, even though you have a tougher comparison?

Well, that was a long question. See if we can chop that up into a number of answers. To start with, I mean, if you talk about the destocking, we believe that the market now knows that the industry as such and the manufacturers they can deliver. So we believe that whatever comes in as orders goes out fairly quickly. So there is no buffer. I mean, when I say there's no buffer, those days are over. And of course, the market knows that we are all able to deliver. That's what I'm saying.

Gas prices, of course, they are one factor when it comes to installment of heat pumps, but it's also linked to the price of electricity. If we just look strictly at gas and electricity and say, well, electricity goes up and then gas goes up equally, well, then nothing has been gained. So I think it's when you see that gas is going up and electricity is being reduced that you really see the effect. And I think that, that's still in the -- should I say, in the politicians' hand how should we maneuver or how should they handle gas prices knowing that the gas still is not totally free of hands in the eastern part of our world. Gas is still coming in. So I think that's a political issue.

We believe that people in general -- I mean, that's an analysis that perhaps is too quick to make. But we believe anyway that people are looking into the way of using electricity and heat pumps rather than gas. We believe that, that understanding is there now. And that's what we see in Germany. That's what we see in Holland. That's what we've seen in a long time in Sweden.

I don't know whether you like to add anything. It was a long question. I hope I answered that as good as I possibly could.

Yes. My question was specifically if energy prices in general are on the rise, maybe you start to look at more energy-efficient solutions, even if the relation of electricity, gas has not changed.

Yes. No. I mean we talk about the spark spread, and that's -- perhaps we are so influenced by the difference between gas and electricity. But of course, if energy takes a larger part of your -- of the economy for each family, I mean, everyone would say, well, what should we do about it? And then, of course, a heat pump comes in very naturally saying, well, I'm going to save energy. We are going to save energy in our household, and then you start looking at that. So that is correct, that, if energy prices are going up, then the interest is stirred by installing something more efficient.

And we've typically said, and I think you know this, that if the spark spread is more than 2.5, 3, we believe that -- it should be at that level or below to really be helpful or trigger the sales of heat pumps. The electricity price can be much higher than the gas price and you're still very efficient or saving costs with the heat pump. But it cannot -- the difference shouldn't be too high. And here, we also, to some extent, need the help from politicians to be a little bit more bold to make sure that these fossil heating devices pay for the damage they do, so to speak.

But do you see any of those effects coming into force in the beginning of this year?

Sorry, your connection is a little bit...

If you see any of this demand increase coming to be seen in the beginning of this year?

Well, I mean, in all respect, we do not make forecasting month-by-month. I think that you have to read the last sentence in our report, and the aim is to continue to grow and increase the margins. I don't think it's fair to say anything today that we haven't said in a report because we have although a very healthy portion of people calling in, we have to have that fairness to all investors.

The next question comes from an unknown person.

It's Cedar Ekblom calling from Morgan Stanley. Apologies. I don't know why my registration didn't come through. I've got 2 questions specifically on the cash flow statement, please. So in the fourth quarter, you benefited from quite an attractive working capital inflow, which is very encouraging. And I know that you've had an ambition to continue to reduce working capital. I'd like to understand how we should think about the working capital expectations into 2026, if we should continue to expect this to decline relative to revenues, because obviously that's quite helpful for margins? So that's the first question.

And then the second question relates to your cash flow from investing activities. Just a little bit of confusion here for me in terms of what's in the slides and what is in your report. So in the slides, you allude to acquisition spend of SEK 943 million in 2025. But in your report, you talk about your investments being SEK 179 million. So I just wanted to understand, is the difference between what is in the report and what is in the slides contingent consideration for acquisitions that you've already done in the past? I'm just trying to understand that delta because it's quite large. That would be helpful for a bit of color.

All right. On the first question -- I mean, I need to refer to what Eric just said, that we can't really give any projections here for the future, that only a portion of you here, so to speak. But I think we were fairly clear on this anyway that we as an intermediate target have to reach a working capital that is 20%. We came in at 21.2% or 21.3% this year. So I mean, obviously, we're continuing to look into working capital to bring it down, to turn the inventory quicker and so forth. So that is the next step. Then we won't be happy with that. I mean we would like to bring it down even further. But it takes quite some time and it's a stepwise process, if you like. But I think that's as much as we can say on the goal or target for the coming year in terms of working capital.

Then on your second question, I think it's important to point out that these contingent considerations, so to speak -- I mean, the ones -- the SEK 178 million, SEK 179 million that I mentioned earlier, they don't have any effect at all on the cash flow, obviously. I mean that's a liability that we're booking for future possible payouts. What these payouts will be will be determined upon the performance of these companies, and that is several years down the road. But then, of course, we have during the year had some payouts for if we have bought another 10% or what have you according to the contract. So they, of course, run through the cash flow statement. But I won't suggest that -- we can take this in a call this afternoon or tomorrow to run through them.

That's great, Hans. Yes, that's perfect. And just on the write-down that you took or the acquisition-related impact that was not in the reported or in the underlying numbers. I know that that's been taken through the central line. Could you give us some details, though, on what those assets actually are? Was it assets that have been acquired for the Climate Solutions business? Or is it assets that have been acquired for Element? Because there's really no detail in the release on what that charge relates to. So just a little bit of color on the business units or the division that, that actually -- I know it's centrally taken, but which division it actually is aligned with.

First of all, it was not a write-down of any sort. We've not written down any assets or anything like that. This is just a consequence of -- we have a contract. For example, we've purchased or we own 60% of the company, and we have both option and obligation to acquire the remaining 40% in a couple of years. That's typically how we set up deals when acquisitions come on board. Then we sometimes renegotiate these. And in this case, we had a couple of companies and owners saying we would like to be owners for our 40% or what have you for the -- for another -- for a number of more years. And then we need according to IFRS and all the accounting rules to predict a possible payout going -- or looking into the future. So that's the money, so to speak.

We made an adjustment or a calculation and then adjusted the liabilities according to that. So it's a positive thing in a way. And that's the funny thing. If you think that things are going to develop better, you will have a cost. If things are going to develop worse, you might need to dissolve one of these contingent liabilities and then they have a positive effect.

So that's on the methodology, if I was halfway clear there. Then, yes, we do take them on central level. Years back, and it's quite some years, we had them on each and every business area. But that distorted reading the numbers for each and every business area. So we changed the accounting principle there on recommendation from the auditors actually to take them centrally. And that's what we do then basically once per year, where we make these adjustments when we have a budget in place, a 3-year plan so that we feel a stability with the numbers. But they relate to acquisitions within the 3 different business areas. In this case, we made adjustments relating to 2 companies belonging to Climate Solutions.

Well, there were more adjustments made, but the ones having a larger impact were 2 companies within Climate Solutions. And one adjustment, so to speak, or a payout that we did during the year was to get a further portion of the Turkish company, Untes, on board, which we acquired quite some years back, which has been a very good investment for us. So there was a payout related to that. But if you like to do the number crunching, we can do that in a separate call.

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

Well, thank you very much for calling in. Really appreciate that. And as usual, we try to be as transparent as possible. Sometimes we believe that the ethics would discipline us and say, well, we can't really answer that fully. But we really appreciate having the ability or the possibility to talk to you and try to answer your questions. And as Hans said, if it isn't totally clear, you can always contact us directly. So now we have another year ahead of us, and we are just charging ahead. Thank you.

Thank you very much.

Welcome to the NIBE Q3 presentation for 2025. [Operator Instructions] Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead.

Thank you very much. Good morning, everyone out there.

Good morning from me as well.

And just a few things when it comes to the order we are going to introduce, of course, ourselves and some figures afterwards, we have the Q&A sessions, and we will be pleased if there would only be 2 questions per individual and also try to end this Q&A session around 12 because we have other commitments shortly afternoon there. So with that said, once again, welcome to this conference call. And I think that the headline is that we are very proud to be able to present these figures as we are today. We've said several times that the organization that we represent, Hans and I, is very, very strong, very, very proud to have the ability and possibility to lead this organization. So that's the headline.

Of course, it's a gradual recovery that we -- as you go through for the group. And of course, when comparing the situation in the world today, compare what it was when we started [Audio Gap] environment like that. And also the increased strength of the Swedish crown from many perspective, is very nice, of course. But when you compare figures, it's a little bit shadowing the real organic growth, which we, therefore, have explained very explicitly when separating it from the currency effects.

And we gave a very bold promise from the very beginning of the year that we're going to be back at the intervals of the historic levels for each respective business area. And we are, of course, very proud that as far as we've come, and we are very transparent with where we are as we are with the targets. And of course, those disturbances that I just described, of course, they are causing some hindrances, but we are trying our best to give you some kind of a guidance where we possibly could land at the end of the year. You've seen them. We don't have to dwell so much about it. It's very pleasing, of course, that there is growth there well beyond the 1.2, like 4.6% organic growth. And what's also very pleasing is that we see that the gross margin is going up and the operating margin is moving in the right direction.

And of course, moving into the quarter as such, the third quarter, then we see that the gross margin to be improving and the operating margin is now up to 11.3%, which is, of course, what we like when the margin that corresponds well to where we like to be. And if we just continue a little bit about the graphs that we typically look at, I mean we see now that the income is gradually coming back, and that's even more described perhaps in the next graph, where we see the curve is going in the right direction.

And when we look at, again, it's an improvement quarter after quarter. And of course, it's a recovery all over, you can say, but in smaller portions, of course, where it's Germany and Sweden and Netherlands, particularly on the residential side, the U.S. remaining stable and also Italy, very much on the commercial side, which is very pleasing to see. We also see that there is a more traditional seasonal pattern, particularly with Stoves and with Climate Solutions. And it is also pleasing to note that all the efforts that we've done during the year despite the action program that we took, R&D remained at the same level and also the sales forces, and that is paying off now, of course. You can't look at things shortsighted. You have to be very determined long term to be successful.

And here, we, of course, have now come up to the third quarter when it comes to the margin that is just in the right, can I say, level and the right span. And of course, we are giving a little bit of an indication here on this slide saying that, well, within margin of error, we should be close to the 13%. And that's, of course, again, a very bold statement, but you've been following us. We've been giving you very clearly the intervals. And now with 6 weeks remaining, it's very important we are into a quarter that is typically decent when it comes to invoicing and order intake. So we -- the best thing we can state is exactly what you read there, and that's also stated in the report.

We are very cautious not to do anything or mention anything or do any saying here that wouldn't correspond to the report as such. So Hans, of course, is going to dwell a little more on the quarter as such on Climate Solutions. It's a good growth organically, and we've seen that, of course, and the margin here so far just south of 12%, whereas the quarter is coming in above the 13%. So it's a balancing act, a very delicate balancing act for the rest of the year.

And coming into Elements, they, of course, at when the whole industry of heat pumps went down all over Europe, and of course, being a main supplier there of components, they also took a dive. They're a little bit behind [Audio Gap] but we also see now that, that is coming along. And electrification in general, of course, and also the rail segment, which is very pleasing to see. Industrial segment is more a reflection of somewhat cautious or subdued market, particularly in Europe. As a comparison, we can say that in general, Europe seems to be a little bit more cautious or subdued compared to the U.S. or the North American market.

And if we just look at the same sort of forecast again if we dare to say or what we could offer as far as margin predictions, we say, well, it's going to be some close to the 8%, of course, but we also give a little bit of a buffer for ourselves depending on how the last weeks will look like. And particularly on the Element side, being a supplier or sub-supplier, we know that although the order intake could be good, but for obvious reasons, no customer wants to sit on too large inventories. It's always delicate to do the forecasting for the Element side.

But looking at the figures there again, good growth. Operating margin is back at 6.8%. And when we look at the quarter as such, as Hans is going to come back to that. It's again, of course, on the higher level, up to 7.4% for the quarter. Quickly into Stoves. And there, of course, we noticed that had already indicated in the second quarter that, that would be difficult to arrive at the old or the interval of that we have been -- where we've been or where we used to be. So there, we need a few more quarters. And I think that is what we think that is more referred to -- be referred to the overall cautiousness, particularly in the European market.

In North America, it's -- the markets are fairly buoyant, but there, we have difficulties with the manufacturing of stoves that's taking place in Canada and then being shipped into the U.S. So there, we take a hit when it comes to the margins. And there, we very consequently say that they're going to take us a few more quarters to come back to the span that we typically talk about between 10% and 13%. And there we see, of course, it's a thin margin and the quarter as such, that is around 3%. So it's not getting any worse. If we were bold enough, we could say that we've seen the bottom of also the stove market with the figures that we've seen during quarter 3 with a margin of 8%, which, of course, is not satisfying, but still is slightly higher than the previous quarter '24.

And just a few concepts in here. I mean, Climate, it's a typical graph really on the pie chart here with climate being like 2/3 roughly and then Element and then Stoves. And on the distribution side, profitability, then we see that, of course, Climate Solutions coming out quite dominating here. And then geographically, not that much has happened. North America remains slightly above 30%. The Nordics, slightly below 20% and then Europe, of course, around the 45%. So no dramatic changes really there. So I think with those quick comments, I hand over to Hans, but I have a lot of eager people out there that would like to put questions to us. All right?

All right. Thank you, Eric. Yes, I'll try to be quick, but not rushing it, but to allow for questions, of course. Before we jump into Climate Solutions here, I would just like to mention from the main report, speaking for the tax rate. Some of you might have seen that the tax rate in the quarter is above 30%. And that is not a new normal as we see it. It's rather a matter of timing differences now, very much related to the introduction of the so-called Big Beautiful Bill in the U.S. where the rules and regulations around capitalization of R&D expenses has changed, and that has led to a couple of one-off effects, but that doesn't change anything in the long run really. That's the major reason for that tax rate going up.

If we then move into Climate Solutions, I mean, Climate Solutions definitely shows a very robust performance in what still is a challenging world in a way. It's a very strong comeback from the challenges we faced last year and the profitability level at the time. We've been able now to grow sales with some 7% organically, but then, of course, current [Audio Gap] but due to increased sales and also our cost efficiency programs that we have undertaken, profit has improved by close to 50%, coming up from the SEK 1.5 billion to more than SEK 2.3 billion, landing in this operating margin at 11.9%, mentioned. And on a 12-month rolling basis, we are up to roughly that level, 11.8%. In the quarter, sales grew by some 8% and gross margin improved even further, coming up to 35.4%, up from 32.5%. So that's a good achievement as well coming from the volume that we get.

And profit grew by another close to 29% or almost 30%, more than 29%, landing in the operating margin there at 14%. So it's a very robust performance and a robust and strong comeback from last year, showing our ability to adapt the cost levels when market conditions change and also to reap the benefits of a good volume that comes in.

In terms of split of sales per geography, there is virtually no change at all from last year. It's very stable with Europe, Mainland Europe being 50%, our home turf here up in the Nordics being slightly north of 22% and North America with a solid quarter of total sales. NIBE Element has also shown a very robust in a challenging world. And here, we are really exposed, as you know, to many segments in many parts of the world. Organic growth here was above 6%. But then again, the Swedish currency took away a large portion of that, landing it in then at 2.9%.

Gross margin took a jump up here from 19.8% to 21.1%. So that's a nice improvement. And then the profitability itself coming up with more than 30%, landing in on the 6.8%, which leads then to a 12-month rolling that is around that level as well. In Q3, sales actually grew even more organically, that is close to 9%, but again, with a headwind from the Swedish currency. Gross margin continued to improve and profitability again, and we came very close to at least the lower range in the interval for our historical profitability ranges there at 7.5% and a nice step in the right direction. Neither here have we seen any large changes in terms of split of sales per geography. So that's basically how it looked last year with North America being a very strong portion of that business.

I would say when it comes to Stoves that despite these very challenging market conditions that they have experienced, first, an overconsumption, you can say, during the COVID period when everyone renovated their homes and then when Putin invaded Ukraine, leading to a lot of people wanting a freestanding and alone off the grid type of heating system. And after that, a period with low energy prices, higher interest rates, low new build. Despite all of those challenges, the business area has defended its position quite well. Despite, I mean, an organic decline there of 8% and more than 11% when you include currency, they have been able to generate a profit here and continue to spend time and money on interesting products and market activities for the future.

Here, the -- yes, performance for the last past 12 months is just above 4% and far from where we're used to being, but not that we see that there is any in coming back to a stronger performance as soon as the market returns. And I think we see that a little bit in Q3. Here, sales dropped organically by 1.6%, so much less than before. With currency again, it's obviously a drop there, which is much larger than that. But despite this drop then of 7%, we were able to defend the operating profit from last year. So it remained on the same level, generating a margin there of 3%, which shows the ability also here to take out costs and of course, keeping a portion of them on board or a good portion to be able to meet an expected better demand going forward.

In this area, we see a small shift or a clear shift in a way in the distribution of sales in the sense that North America has increased up to 37% from 32% of last year. That's the major change. And that shows that North America has actually, from a sales point of view, been quite decent. What then has hampered the picture for us is, of course, that we have our manufacturing in Canada, and this is where the tariffs have hit us from a profitability point of view. Moving then into the balance sheet. There are no major changes here. We have a fairly stable balance sheet. We've been able to amortize both on intangible and or depreciate rather -- intangible and intangible assets. The investment level has come down a little as well, which we will see on a slide later.

On the liability side, you can see that both the interest-bearing -- long-term interest-bearing liabilities and the current interest-bearing liabilities, both have come down, which we also will see the effect of when we look at the net debt figure soon. The performance then and what we have on stock, so to speak, has an effect on the cash flow. We have had a good cash flow from the operating activities of slightly more than SEK 2.9 billion, up from just below SEK 1.8 billion for the corresponding period of last year. Then you see a change in working capital, which is negative with SEK 1 billion. That is solely related to an increase in receivables. It's the exact same situation we actually had -- inventories have been reduced and accounts payables have contributed in a positive way.

So it's a result of us invoicing more, and we've not changed any payment terms really. So this should come eventually. And on the next line, you see that the investment in the current operations has decreased by some SEK 500 million, then leading to an operating cash flow, which is plus SEK 420 million rather than minus SEK 450 million of last year. And then we've had some amortization of loans and things affecting the change in liquid assets -- the currency change, we cannot do much about. A few comments here on the key financial figures. The -- we have a fairly decent amount of cash on hand, the unappropriated liquid assets. The number there is actually correct. I mean, the SEK 5,119, which was the exact same. But if you look into the report on Page 13, I think it is, you see that the composition is different. But it's a good portion of cash there.

And then interest-bearing liabilities have come down and the net debt is now [Audio Gap] which is very pleasing to see. We typically amortize our loans and liabilities effectively after acquisitions. And what took a little longer this time was, of course, the acquisition of Climate for Life, one of the largest acquisitions we've made and then a market that took a very strong downturn after that. But we're definitely heading there in the right direction. And the equity assets ratio is solid as well, being above 45%.

Just a quick comment there on the working capital. If we look upon it, excluding cash, it's also been improved from last year with more than a percentage unit. We are still targeting 20% as an intermediate target. So we still have some work to do imminently moving in the right direction. And moving in the right direction are also these key figures, although they are, of course, not where we want them to be yet, but they are heading there. Return on capital employed, now 9%, up from [indiscernible] return on equity also above 9% there, up from just below 7% and a profit per share that has increased just like equity per share. So things are slowly but surely moving in the right direction. And as always, we don't comment upon the share price, especially not today, I think I think. By that, I'm done. So, if you want to add something before we open up.

No, I think we open up now. And as we say, about 2 questions per individual and then we take it from there. All right.

[Operator Instructions] The next question comes from Uma Samlin from Bank of America.

Two for me, please. So first question is on the Nordic market. I was wondering if you could give us a bit more color on the lower growth in the Nordic this quarter. It seems like it's minus 1.5%. So what is the main drivers there? What are the trajectories do you expect in Q4?

Okay. So we should [Audio Gap] in general or you're referring to Climate Solutions now or you're talking about the whole NIBE group?

Yes, the whole group is the one that you have reported.

Yes. Okay. That's fine. Well, I think that, of course, the contraction is substantial, as we said, in the Nordic when it comes to Stoves. That's very obvious. And also, we noticed that the industry as such is not that strong in the Nordic region when it comes to the heating element. And I think what's keeping it up at a decent pace is still the Climate Solution. So I think the consumer -- so cautiousness when it comes to Stoves, that's certainly an observation. Also that the industry in general is not that strong in performance, which is heating element where heat pumps are keeping up fairly decently.

Okay. That's super. My second question is on your margin guidance. So I guess if you assume that Climate Solutions will reach the corridor of 13% to 15% for the full year with some margin of error, let's say, around 13%, does that indicate, I guess, significant upside in your EBIT margin profile in Q4? Would that be then like trending more close to 15%? So what would you expect to be the drivers of the step-up in Climate Solutions margins in Q4?

Well, I think that to start with, as we mentioned, the seasonal or the seasonality is back. So here is a little bit weaker and the second half is a little stronger. That's the traditional pattern that we've had prior to pandemic and the -- and those years with crazy, if I may call it, energy prices. So of course, quarter 3 and 4 traditionally should be stronger. And it's very difficult to predict anything, and we try our utmost to give you some kind of an indication that if we now say, as we say, regarding Climate Solution, of course, that is the best hint we can give you.

It's impossible to say it's going to be so and so common. I think that's as far as we get -- the Stove side, of course, we saw after Q2 that it would be difficult, very difficult to arrive at within the span. And that's also clearly indicating now. That doesn't mean that we wouldn't have an uptick again. It's just that they came into this downturn a little bit later. First quarter '24 was not bad at all, whereas the other ones were really taking a hit. So it's more a matter of that has staggered a little bit when it comes to sales and profitability.

The next question comes from Karl Bokvist from ABG Sundal Collier.

The first one is just a follow-up to the margin here and especially if we think about Climate because historically, the fourth quarter's margin is on average lower than the third one. So if possible, if we take aside the seasonality effect here, I see volume is one thing, but what other drivers do you think could help the margin in the fourth quarter help you approach the full year target that you guide towards?

Things that are moving in the right direction when you talk about the strengthened productivity. I mean, that continues quarter after quarter. Productivity is one factor and also the ambitious program that we have across the business areas, Element and Climate Solutions. So I mean, there are no magic factors, but there are some factors that we feel will continue to assist the profitability.

Understood. Yes. Understood. The second one is on the receivables point that you mentioned, Hans. Historically, the kind of balance between receivables and payables have kind of yielded a net neutral situation. But the last couple of quarters, the receivables have increased more than the payables. So how long do you think this kind of gap will be before they normalize?

That's very hard to predict. I think the result of the increase in the receivables is a consequence of the seasonality kicking in and with us invoicing more, so to speak. And typically, the invoicing takes place in the latter part of each month as well. So it's typically weaker in the beginning and then a lot happens and that you don't collect it until the next period. On the payables side, we have a little bit more deliberately than before, begun reviewing payment terms without treating our suppliers bad in any way, but to make sure we have competitive terms. And when it's going to level out, it's hard to predict.

The next question comes from Christian Hinderaker from Goldman Sachs.

I'm going to follow up on the working capital side, if I may, and on inventories, 23.9% of last 12 months revenue. I appreciate we're improving quarter-on-quarter, but still above the sort of long-run average. I guess, firstly, do you anticipate a seasonally strong Q4 for inventory? And then longer term, how do we think about the inventory level required to support growth either as a percent of sales or perhaps on an inventory days basis? That's the first one.

Well, I mean, as Hans mentioned, of course, we like to drive down the inventories. And I think that there's been a little bit of cautiousness here now from sales because we don't like to have any disturbances when it comes to deliveries. We know that everyone is on the tip toes out there. And of course, it's very tempting to say we are -- now we're going to bring down the inventories. And I think that we and our colleagues, we really have to restore our, should I say, reputation in the market by really delivering promptly.

And I think that the discipline is coming back. And I think the next step is keeping the discipline and then very diligently moving down inventory levels further. So there is a cautiousness on our side and also our colleagues, I'm sure, that no one wants to sit out there saying that, now we have like so many more weeks of delivery. That is no, no go for us. And I don't think that's -- I think that's pretty much a symbol for the whole industry. And that was my immediate answer...

No, no, absolutely. It's very correct. And if I just may add, I mean, what we are taking down also step by step. It takes a little bit longer, but it's a deliberate work to do it, level of component inventory. We -- as you know, we had delivery issues, so to speak, during COVID because we couldn't get products on board to the extent we needed. And when we could source something, we sourced it to the extent possible. And that inventory, given the strong shortfall that came afterwards, is now being used step by step and being reduced. So -- but without, as Eric is pointing out, disturbing any production that we have throughout the group or deliveries to the customer.

Okay. So just to be clear, the pre-2020 levels is probably an unfair number to think about in the immediate term?

Well, I think it's the reverse picture. Then there was an enormous demand or if I say, quite a heavy demand. And then we were lagging. And then, of course, the figures turned out to be very nice, perhaps a little bit bigger than -- or better than we really deserved being viewed for or criticized for, evaluated for. And now we come from the other side. Now sales are picking up, we are cautious. So I think that we have to take it step by step and bringing it down perhaps to '20 at least and then take it from there.

My second one is on the action program. In the Q4 presentation last year, you gave a summary of the potential split for those savings by segment. I suppose, firstly, is it fair to assume that the 73% of savings have come in Climate Solutions as was set out in that slide? Or has there been a sort of readjustment as we move through the year?

No. Hans, you...

Yes. No, I think that the calculations we made at the time and as the program evolved, so to speak, they were pretty accurate. And that's what we see has come in as well. And given that the stretch in the return to normality has dragged out a little, we've undertaken a few more saving actions. But that's all kicking in now, you can say, according to the program. And then -- well, running a business, you always have cost reduction initiatives. So it's -- but it's mainly related to the program, kicking in as we planned.

The next question comes from Johan Sjöberg from Kepler Cheuvreux.

I have a question starting off with the Climate Solutions, Eric, if you could. You talk about sort of demand being back to -- or demand for next year, you're talking about external consultants and they share -- or you share their view upon sort of the growth. There are a lot of reports out there on the heat pump market in Europe, especially. Could you sort of give some sort of ballpark range what is the sort of the underlying assumptions you are looking for or basically the consultants are looking for, which you agree with?

Well, as you say, there are so many reports out there. And some are very biased and some are more -- I don't know where statistics come from. But I think that you can get reports anything from 5% to a few double digits plus, like anything from 5% to 12%, depending on which report you read. But the common denominator is that no one foresees a decline any longer, but rather growth, but in various sizes or various numbers, whether it's 5% or 7% or 11% or 12%, it's very difficult to predict.

But what we take away from all those reports is that we -- the tide has turned. We are back on a market that is getting or growing again, which is very pleasing. Then, of course, it's up to all the colleagues out there, including ourselves to do as much as possible out of those figures. But perhaps, as we said before, we all love when the growth figures are phenomenal, but not necessarily do the customers always benefit from that. I think that we believe that a growth in an orderly fashion is better for everyone because then the installation work is done professionally and the distribution flow works much better. So those figures indicated that I think that would, to us, mean that it's a healthy growth possibility, but still in a way that they're going to make things materialize in a profitable and decent way for us as manufacturers, but also for the installers out there and for the end users.

That's very clear. And also just looking at the different segments in Climate Solutions also. I mean, looking at sort of what is heat pumps and of course, the different segments within the heat pump and also you got the water boilers. Is it a big difference between the growth rates right now between sort of -- if you take sort of the bigger sort of subsegments, not going out to sort of add to water or anything like that, but more sort of between the different bigger segments within Climate Solutions, it's a bigger -- it's a big difference in growth right now?

Yes. Well, I think that the water heaters, if you talk about them, they have a more modest growth, and that goes for all over, of course. And that's pretty much -- construction is down -- new construction is down, and that's where you typically, you install those and when you build new houses and so forth, although the houses themselves, they might have heat pumps or district heating. But you have those modules there we typically have 1 or 2 of those water heaters.

When construction is down, it's also down. So the water heater market is very, very cautious, a few percentage units, but doesn't have the same growth at all as the heat pumps, but stable, decent margin. So it's not something that we should neglect by any means, but the growth pattern is strictly on, you can say, on heat pumps.

Got it. Hans, also a few questions for you, if I may here. You mentioned in the report the impact on sales from the currency. Could you also talk about the impact on EBIT just to get sort of a feeling for the dilution, if any, from FX in the quarter, if that's something you can provide us with?

Yes. It's roughly the same. I mean the margin is not influenced to a large extent. Of course, you can convert less dollars or euro or what have you at a poorer rate, so to speak, or stronger or weaker rate, which has an impact. But in percentage-wise, it doesn't deviate too much from the effect on the sales side either.

Okay. And also your comments on the Stoves business also, the tariff, of course, impacting -- of course, impacting even more now when you have a higher share of sales in the North America coming from Canada. But what are sort of the impact from tariffs in the quarter, if that -- just give us some sort of feeling? And also what are your -- how can you mitigate that? And how long time will it take before you can mitigate these tariffs?

It is substantial. We won't dwell on any [Audio Gap] of course, partly will be taken like -- in any case, will be taken by price increases. But we -- at the same time, we've said we're never going to put our position on the market in jeopardy by being ridiculous in that. We just have to trim and trim and trim and be more efficient, try to come back to a margin that is decent. So we have taken quite a bit of a hit during Q3 and of course, during the whole year, and we don't expect that to improve, but price increases takes away a little bit. And then we just have to be more efficient and streamlined.

Those are the only 2 recipes. And then thirdly, you could possibly -- but that's more of a guess. I mean the American manufacturers might be tempted to increase their prices when they see that's difficult to import from other countries. But that's a speculation. I wouldn't dwell on that. So we are between a rock and a hard spot, as I say, but we're going to come back to a decent margin by streamlining and doing everything possible without jeopardizing our position in the market. That was a long answer to you, but because that is a little bit of a long answer to us. We are, of course, doing our utmost just to keep and increase our position in the U.S. because we are well positioned. And now it's really up to productivity and doing everything we possibly can to combat the difficulties with those tariffs. That was a long answer. That's it.

The next question comes from Anders Roslund from Pareto Securities.

Yes. I was curious about your thoughts about next year for Europe and heat pumps. I mean this year have been characterized by de-stocking coming to an end, and now it's the true market growth we are looking for. And at least in Germany are sort of coming with some growth into next year. How do you see structurally on Europe for next year?

No. As I said there, we assume that Europe will grow overall. And of course, Germany is going to be one important contributor to that growth. And then, of course, there are -- it's important to distinguish between those applications and the number of heat pumps really being installed because you have a sort of a period once you have the application in and is approved, you don't necessarily start to install the week after. You have an allowance or is it like how many quarters was it now like -- many months...

Yes, yes, I don't recall exactly.

And then, of course, the true figure is around 40% -- or well above 40% that's been installed, partly taken from inventories, of course, and partly from producers directly. And we believe strongly that there will be a real organic growth for the manufacturers next year because now we should be out of the inventory, has been dampening things.

So the overall picture, I mean, now again, sitting here or standing here on the 14th of November making predictions for '26, but if you ask us, we look at the European market in a fairly positive way because also that the interest rate die or at least they come down, that is also sending a report to consumers or sending a signal to consumers that, okay, now it's more decent. They can start to build homes, which is very important when you start to build homes in a country. That's a driver for the whole economy. So without too many other disturbances, but then you never know about Europe what's going to happen. We believe that it's going to be a stronger year '26 than this year. And then, of course, that is a prediction. I don't know whether I answered your question, but I tried.

The next question comes from Christian Hinderaker from Goldman Sachs.

I boldly went back in the queue, so I'm surprised to be fit in for the follow-up, but I appreciate it nonetheless. Yes, I wanted to ask the Selmo acquisition you made in Italy during the quarter, I guess, interesting in terms of its components, focus, smart thermostats and so forth. How should we think about that transaction and the scope of your broader M&A priorities looking forward? Is that illustrative of the type of deals you're looking at? Or are you still balanced in terms of also reviewing sort of OEM type transactions?

I think that we have received a number of questions earlier on today in other forums, and we say we're always working on acquisition. Nothing has come down. Of course, '24 was a year when there weren't that many signings carried out. But I think this is a decent acquisition for Element with a turnover around EUR 20 million. It's not gigantic, but it's profitable. It's a company that we've known for a long time. It's a company that we've been working with for a long time. We don't foresee any [Audio Gap] issues if I had to say that because we know the founders and has a very good relationship.

So it's one of those add-on acquisitions that we really like to do, family-owned companies, and they remain helping us, it's perfect. I don't know whether I answered that question fully, but we have similar activities within Stoves and within Climate Solutions, ideal partners and that we try to trim and try to bring on board. But everything is timing, just like anything else in life. And this Italian acquisition was something we've been discussing with them for a long time. And then all of a sudden, they say, we are fine. Should we really -- now we really go and then we are ready.

An acquisition takes more than a quarter or 2 in our world, we like to come in on a friendly basis, not coming in as an intruder or -- yes, exactly like that. We like to come in as partners, and it takes time to develop that over years. So those are the most successful ones in our book. Okay?

The next question comes from Carl Deijenberg from DNB Carnegie.

I was a little bit late, so apologies if this question has already been asked. But I wanted to come back a little bit on the topic of pricing. I mean we talked about this for roughly 2 years now. And I guess earlier this year, we were talking about inventory reductions amongst the distributors and increased campaigns on the back of elevated inventories. But now we hear, I guess, also from some of your listed peers that pricing environment on the hydronic side seems to have been improving here a little bit towards the latter part of the year. So I just want to hear your view here on sort of pricing in general and maybe if yourself have done any sort of definite price adjustments here in the latest months.

Well, I think that's one area we've been very cautious that we are one of the leading actors because to sell premium product, you can't devaluate the value because short term, they just deteriorates everything. So coming back again to the overstock situation, we had some of that. We've been very cautious of reducing prices. And therefore, it might have taken a little bit longer to reduce those inventories because you know that if you sort of spoil the market with lower prices, then that is very contaminating.

But further on in the distribution chain, and I'm repeating this again, of course, when our distributors or installers have been sitting on inventories, knowing that also might have been refrigerants and stuff like that, they see a new wall coming towards [Audio Gap] well, and they have to be gone. Of course, it's very tempting just to free the capital tied up.

And our own method has been sit still in a boat, be very cautious. And as far as price increases are concerned, monitor that very, very cautiously again, being very observant. Of course, we agree what you say. We also see that there is some signs of price increases in the market, which is very natural once it's been stabilized as it's been. And I think no one is the winner in the price war, just like any other war, all are losers.

Fair enough. Then I wanted to ask also a little bit coming back to the balance sheet and sort of gross margin development. I mean, quite a good rebound here in Q3, but still, as you evaluated earlier on, you're still in the situation where inventories -- your own inventories are on the way down. And I just wanted to ask a little bit on the sort of internal production rates for you. Obviously, you've been adding capacity quite dramatically in the last couple of years. But would you say that sort of the shipments you are delivering on right now is the sort of utilization in sort of your base production sort of excluding the capacity expansion, is that fairly much 1:1 right now? Or are you still suffering quite tangibly on the gross margin from some utilization?

Well, I mean, we can't avoid depreciation. I think that's kicking in, of course. So of course, they're going to be lesser than what we sell. That's very obvious. But at the same time, on the other direction, those new facilities that we have, that's also offering better productivity. So it's not so easy to say that, okay, now we sit with a tremendous depreciation. Of course, it's going up. But they're also built for a reason, not only for volume increase, but also to do things more rational. So that's working in the other direction. I don't know whether I answered your question, but there was...

No, no, no, but -- yes, yes, yes, absolutely. No, but I guess, I mean, my question was a little bit, and I understand there's multiple variable components to it. But I mean, assuming if you would see further volume support next year, it sounds like you could still have some upside on that gross margin development even now when we look at Q3, where you saw quite a good development year-on-year at least.

I think that we have to give you right there, yes. Correctly, so...

The next question comes from Karl Bokvist from ABG Sundal Collier.

But I just wanted to go back to one thing that you've been very good at in the Nordics, which has been kind of heat pump products towards new buildings or new residential buildings. And if we think about both Nordics and Europe potentially seeing a bit of an uptick in new residential construction, how have you worked with that kind of product assortment in other areas than Sweden?

No, I think that if you talk about the exhaust air heat pumps, we've been working with that as well, but that comes to legislation -- the construction legislation and also preferences for what you can do. And I think that we see very positive view on our next generation of heat pumps where you also can -- like I'm talking about the exhaust air heat pumps now in well-insulated homes, that we also have a cooling capacity. When you come a little bit further south, then there's been a question, could you also possibly cool our facilities in the summertime.

And I think that has given us quite a stir in demand. So that's one way of mitigating that. But of course, when you have lower standards, then you have to adapt to that when it comes to building standards. Here, we have a very tough situation up -- for instance, Sweden or that's pretty much the same, in the Nordic markets, you can say that you can only use 40 watt per square meter a year, and that limits your amount of energy of 6,000 kilowatt hours per year in house, and that's including tap water. So of course, that is -- that's quite a challenge.

But that's also something we can -- we use when selling that to house manufacturers and customers when we go in other countries, ventilation and heat pumps in Holland or Netherlands, for instance, that's very, very important. So they are tagging along the same lines. And also in Germany, that is pretty much the standard that you have to recapture the ventilation air or the energy in the ventilation air.

So the larger heat pumps, they are typically for renovation when you have -- when you're replacing a gas burning boiler or an oil burning boiler with an output of some 16, 20, 18 kW, then, of course, you have to have a larger heat pump and then you talk about a different vehicle or a different animal, but you still supply the same sufficient amount of energy to the radiators. But then you talk about refurbishment. I hope I answered your question.

Yes, partly one, I mean it is just that you've built up a strong position in the Nordics. And I mean, as you expand in the other countries, how you work to kind of get close to that level of relationship with the important stakeholders, house builders, et cetera, so that you're in their blueprint, so to say.

Yes, yes. Of course. And also working with house builders and giving them the upper hand, the advantage of using our products and demonstrating what can be achieved having the Nordic market as references.

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

Well, once again, thank you for the disciplined way you've all times, you would like to have very, very much of a decimal, comma and so forth. And we, of course, couldn't do that. But I hope we've put some flesh on the figures in the report. So once again, thank you for calling in, and we see you, if not earlier, beginning of next year when we report the full year. Thank you again.

Thank you, everyone. Thank you. Bye-bye.

Welcome to the NIBE Q2 presentation for 2025. [Operator Instructions]

Now I will hand the conference over to the CEO, Eric Lindquist; and CFO, Hans Backman. Please go ahead.

All right. Good morning to everyone out there.

Good morning from Hans as well.

We're going to have very much the same procedure as before, where we, in 20 minutes or so, describe the report from our views. And then, of course, you are allowed to questions. We're going to come back to that. So with that said, let's shoot. We believe that the headline fairly much is a sum of -- a summary of the status for the Q2. It's a continued recovery, and we also feel it's a brighter outlook. And we have been claiming that for the last 2 quarters this year, and we saw an uptick already at the end of last year. So if not a trend, it seems like it's a fairly steady path when it comes to the market regaining.

Of course, there are issues out there that have been difficult to assess, but we just have to combat those as far as tariffs and all that and also the currency. But we have to, as I said, just combat that. And we're very pleased to see that when the volume or the sales volume increases, then, of course, you also get a better productivity and then we have a good cost control. So then, of course, that results in a better margin. And it's also very pleasing to see that consumers in general have a preference for heat pumps. And we also feel that -- and judge that there will be a continued growth in sales as the year goes by.

We are coming back to a more seasonal pattern as we've described several times now. '21, '22, '23, the demand was so enormous, so we didn't really see that pattern. And of course, last but not least, our ambition to come back in an operating margin within the historical levels. I'm sure there are going to be a number of questions regarding that. So we leave it like that. But it remains -- certainly, it remains our ambition there. And of course, we also realize that there are uncertainties, but you can't always blame the world for everything. Our ambition is very clear. And at the same time, we can't say well now we have [indiscernible] promise it's 100% certainty. But that's how we work internally anyway.

And I think that's pretty much what we see in this picture. The revenue, of course, is limited the revenue increase, but that is dampened, of course, by the strength in crown. But the operating profit takes a significant jump and also the operating margin. And to address that more in figures, if we look at the combined 2 quarters, we're just sniffing at the SEK 20 billion now with an operating margin of some 8.7%. And of course, we can also see that on a rolling basis, considering the program that we had last year, we're up at 9.2%.

And if we look very specifically into the second quarter, then we, of course, see that we again are on the right path. Now we're up at 9.4%. And the growth is not so significant again. But here, we have more of a headwind during the second quarter than we had during the first quarter. Gross margin is increasing, which is pleasing. And the operating profit is around those SEK 944 million.

So if we continue just with a few graphs, we -- the profitability, of course, is -- took a dive, and we are now way up again. And if we then look at the distribution of sales and profitability, now we're looking at the profitability, operating profit. Of course, Climate Solutions is really having a -- now you are okay, some pictures, no. So 76% of Climate Solutions now is representing the operating profit.

That's a little bit more than usual, which means that the other 2 business areas are lagging a little bit. When it comes to geographical distribution, we don't see that much of a difference. And Europe is, of course, 45% and the Nordic 18% and North America is just under 1/3 of sales. And if we look at the Climate Solutions situation, I know that a lot of you out there -- I think we had the wrong picture up. I don't know whether -- there we have it, yes. And of course, the second quarter shows a continued improvement in both sales and margin. And that's very clear signs, we believe, and the recovery in the heat pump market and implemented cuts in interest rate that also has a positive and naturally impact on our sales at totally different atmosphere today than it was a year ago when it comes to interest rates, of course.

And we continue to believe in the long-term positive growth. And as climate changes, we can always argue about the reasons. But when we get warmer, the cooling side of our business becomes stronger. We also see that our joint efforts have been bearing fruit. I mean, we've been working very close between Element and Climate Solution and also cross-selling. So we have really opened up the gates there to a larger degree than we've done in the past. And there, again, of course, the -- it's very seasonal, and we haven't seen that.

But in all 3 business areas, the seasonal pattern is going to be more pronounced as we go by. And again, of course, we repeat the ambition to be back at the margin levels or interval that we had in the past. And I'm sure there, again, we're going to continue to discuss that with you.

And if we look at the next slide, there's a little bit of confusion here with the slides, I think. We just continue with the heating element. It's a relatively stable demand. Of course, here, we are represented in most of the industry around the world. So that isn't so really seasonal because the varying product categories, they have various patterns. But we can say that the electrification is really meaning a lot to us. And also the rail and semiconductor industries, they are really showing significant improvements. And we also see that although it's always a lag when the element is supplying the heat pump industry or the heating industry in general, of course, they come at a slightly later stage where the producers have had perhaps in the past a little bit too much of an inventory. Now it's slimming out and they don't experience the same growth we estimate that the manufacturers are experiencing.

And the industry as such, typically, that is a reflection of perhaps the weaker climate, perhaps very much so in Europe that the industry, they invest a little bit less and that we noticed that in some segments. Of course, again, trade tariffs and currency always going to have an impact on us. But we try to say, okay, they are there, but we have to operate on a professional basis anyway. That's our task. Again, the margin here takes a jump again up from the pre first quarter. And our ambition is still the same to return within the interval that we've had in the past prior to '24 setting in.

And when we look at Stoves, say -- okay, now we are coming up to some other figures here. I don't know, but we can comment on those, of course. But the Stoves, that is a little bit unexpected perhaps that the development in North America disregarding all the rumors and all the issues over there, it's been pretty good. Of course, it's been tough for -- or tougher for the Stoves business since we produce in Canada. So we have decided to continue to sell and not to just protect the margin here, but continue the volume because we've been working so many years building up that market. And one of the reasons that we have a considerably lower margin is, of course, that takes a hit when the tariffs come in.

And also in Europe, there is a weak performance or a weaker performance. And I guess that the consumer confidence is 100% -- not 100% here. And that, of course, we feel. But again, we believe that the second half is going to be considerably stronger, returning to that pattern as we said ago -- as we said again. And the product launches and the marketing activities that we've had also is a very important factor or important factors for the positivism that we feel for the second half of the year.

Here again, I mean, perhaps more pronounced so Hans will return to that perhaps, but the margin on Stoves there, we realize that with such a start during the first half, it will be cumbersome to arrive at the historical level. So there, I think we need a few more quarters to really bring that up to par. But I think I'll stop there. I hope we haven't confused you by the slides perhaps coming in a little bit of a disarray or order. But I think I'll hand it over to Hans, and then you can continue more with precise figures for the quarters, respectively.

Yes. Well, thank you, Eric. And once again, we apologize for the slide mix-up here. The slides are correct, you can say. But for some reason, the order has been a little bit mixed up. But anyway, I will take you through each business area now with the numbers and then also through the balance sheet and then working capital, cash flow. And then, of course, we will leave room for questions. If we look at the numbers then for Climate Solutions, I mean, year-to-date, the business area has step-by-step improved both in sales and in operating margin, which is thanks to this underlying growth for a sound demand for our products, as Eric mentioned.

Of course, there are some clouds out there with the geopolitical situation that is difficult and also with the currency working against us. So the growth that we see here of 4%, that is, of course, the net effect, including translation effect. If we were to remove that, we would see a considerably stronger increase in underlying sales. What's pleasing to see is that the gross margin has improved from the 30.9% this time last year up to 32.6%, continuing to head in the right direction, so to speak. And then an operating margin that has improved by some 66% or even 67%. And there, we see what effect a good volume has on our structure, so to speak. If we just get the volumes into our factories, we have a phenomenal opportunity here to generate a good profit. So the first half year came in at 10.9%. And over the past 12 months, we're now at 11.2%, up from last year's full year of 9.3%.

If we head over to the second quarter, that was an even better improvement, you can say, where sales grew by 4.7% on a netted basis, but where currency hit us even more, as Eric said before. So I mean, more than half of the improvement there was erased by translation effects. But here, the gross margin took another step up in the right direction, hitting 33% and the operating profit came in at SEK 840 million, up with 66% and showing an operating margin of 12.3%. So as stated, step by step, we're definitely moving in the right direction within the business area.

In terms of geographical distribution of sales, we see a slight increase here, you can say, in the Nordic countries compared to last year. That's the area that came back first, you can say. North America has been almost surprisingly stable, you can say. You would think that a lot of things would not be working as normal over there, but the business actually is. So it's Europe that has fallen a little bit behind compared to last year, but it's on its way now again in the right direction.

If we move on to Element. Element has had this development with a rather fluctuating demand. It's not been as fluctuating as neither Stoves nor Climate Solutions. It's been more stable all along. But it's, of course, exposed to many, many segments out there where the HVAC segment is step-by-step coming back. Semiconductor is more and more back already, you can say, whereas other segments like automotive is still struggling, a little white goods as well. Here, it seems as if we only grew by some 2%, 3%.

But also here, of course, we had a currency effect taking away more than half of that growth. So the underlying growth has actually improved. And we also here see an improvement in gross margin coming up to above 20%. It's a slightly different business model than the other business areas. That's why it is lower and where the operating profit has grown with some 30%. So we're up at the 6.4% margin, not where we want to be, but definitely on track and in the right direction, which we want to be on, so to speak. And here, over the past 12 months, we're now at 6.3% compared to some 5.7% operating margin for the full last year.

If we look at the individual quarter here for Element, it seems as if we have actually declined in growth. And of course, that is also the true number in our reporting, so to speak. But here, the currency hit us even harder, taking away the whole growth. So the underlying growth here has been mid-single digit, you can say. So also on the right track going forward and improved gross margin here. And again, a profit that has risen by some 30%, coming in at an operating margin of 6.6%.

In terms of the geographical distribution of sales, there have not been many movements here. It's been fairly stable between the different geographies. And it is, as we've pointed out many, many times, our most global business area.

If we then head on to Stoves, as pointed out a couple of times, Stoves is back to a more traditional seasonal pattern, which means that the first half is not as strong as the second half. As an average before we had these strange years, you can say, with the pandemic and then the Russia invading Ukraine, we had like an average operating margin here of some 4%, 5%. And then we had a very strong second half. And we believe we're back to that pattern. But of course, there is a large uncertainty right now with the lack of consumer confidence, low new build rates and such things that have an effect on us.

So here, we lost some 13.5% in sales, but less if we adjust for the currency effect, which, however, was not as strong as in the other business areas. But the gross margin has improved. It's at 34%. We did generate a small profit for the first half year, but expect more to be done here during the second half.

If we just look at the individual quarter, this is, of course, also part of the weaker part of the year, the first half. But here, we have fallen below, so to speak, our breakeven point, which has led us to generating an operating loss. And here also, the currency hit in stronger than it did in the first quarter. So obviously, we have some homework to do, but we believe that the cost-saving program that we ran last year has had a very good effect, and it's more a matter of volume rather than any structural issue.

In terms of geographical distribution of sales, there have been some movements compared to last year where North America actually has come back very nicely being at 38%. It was at 32% last year, whereas then the other ones have lost slightly. But all in all, no really large movements in that respect.

If we then leave the business areas and move on to the group again and the balance sheet, I would say that we -- I mean, there are no major movements here really. You can see that intangible assets have been amortized a little. Tangible assets we've depreciated as well. Financial current assets are fairly stable at SEK 5.6 billion. So the total balance sheet is roughly at the same level, slightly lighter, if you like. And we can, in a way, jump the equity and liability side and move on to the cash flow analysis because I think that attracts a little bit more of attention. I mean, we've generated considerably more cash than we did last year at this point in time. It's been almost SEK 900 million more, which, of course, is a sign of the recovery that we are seeing.

Then the change in working capital might seem severe, so to speak, eating up all of that change. And typically, what we do during the first half year and have done traditionally is to build inventory for the latter part of the year since we often close down our factories, run maintenance in them during the summer, and we need to be fully equipped when we come back from vacation. And we've done that to some extent also this year, but not at all to the same extent.

We've been building a little bit of finished goods inventory, but we've nicely reduced our components inventory. So the effect from inventory in that number, change in working capital is actually positive. And we've also had more favorable conditions with our suppliers. So our accounts payables have also contributed positively. So the whole change in working capital here comes from increase in receivables. And we had a fairly strong sales period just before the summer, where we invoiced a lot to our customers. And that came in fairly late. That's also a little bit of a pattern that we have that in the latter part of the month, that's when products really leave our doors. So we've not yet been paid for those, but they are coming in. So it's all a matter of or a consequence of the higher sales that we see this negative change in working capital.

Then if we look at the investments in current operations, they are at SEK 1.1 billion. It's very much related to this program that we announced some years back where we're finishing off the last bits and pieces. It's come down from the SEK 1.2 billion will continuously come down. So we believe the cash flow after all is very much or rather much under control.

If we move on to some key financial figures, we once again have the investments there. They're all in current operations. We have the unappropriated liquid assets, which, of course, is the cash and undrawn but already existing credit facilities. So they're at SEK 6 billion, which leaves room for both acquisitions and what have you, so to speak. Interest-bearing liabilities continuing to come down. And net debt that hasn't moved much. It's up a little bit of a tick. But as many of you know, we have bonds on the -- outstanding on the market, and we refinanced some of those before the summer because we thought it was a good time, although the maturity doesn't come until after the summer. And then an equity/assets ratio, which we believe is quite decent here with 44%.

And then coming back to working capital, I mean, obviously, that is something that we continuously are working with. And you can say, especially on the inventory side, and as I mentioned, we've actually been able to bring that down despite a period where we typically increase it. So again, here, it's very much related to these receivables that I mentioned. But of course, we're looking into inventory turns, receivable and payables. I mean, the days there, the terms so that we optimize this. But we're not either brutal to our suppliers because we need them in both good and bad times. And if you haven't treated them well when things are -- well, when it's in your favor, they might not be there for you when things are tough. So it's always a balance, you can say.

And then last but not least, the key financial figures. Of course, return on capital employed, return on equity, they still need to come up, you can say. They will do so with an increased level of sales and profit coming. We're a fairly equity asset-rich company in a way with a 44% equity/assets ratio, as I mentioned. So you have these communicating vessels there, how they will develop. But they will step-by-step come up. Net profit per share has, of course, taken a good jump upwards and also the equity per share has improved slightly. And as always, we never comment upon the share price. That's up to you guys out there to sort of control. And by that, I think we're through with the presentation. I don't know if you would like to complement with something, Eric?

No, no. I think we are ready for the questions.

[Operator Instructions] The next question comes from Uma Samlin from Bank of America.

So my first question is on the organic growth on Climate Solutions. So it seems like this quarter has picked up fairly well for you. And my FX estimate is around 5%, 6%, if that's correct, which would then indicate around 10% growth in Climate Solutions. How sustainable do you think this organic growth is in Q2 for Climate into the second half of the year? How should we think about the sort of demand dynamics in the second half?

Well, I think we sent a fairly clear signal that we believe it will continue, but not with the gigantic leaps that we had 2 or 3 years ago. But we think we are back to a fairly steady pace. And the market is fairly healthy in Sweden. Germany is a source of pleasure not only for ourselves, but also as a leading nation in Europe, we believe that when Germany sets a target and they return very much to heat pumps, that's a very good sign for the rest of Europe. We also believe that Netherlands is also showing very good signs of continued growth.

And then we have the commercial side of it. Like in Italy, we have a particularly company down there, Rhoss, that's really prospering. And that's again an illustration how the balance between residential and commercial should perhaps be a little bit more towards the commercial, which seems to be more stable. Same thing in North America. Our commercial products there also show a healthy development.

So in summary, yes, we believe that the growth will continue. To give you a percentage on the growth, I think I have to refrain from that because we have not written anything about it. But verbally, we have given you a sign that we believe in continued growth that we are -- and as again, the headline saying that we look at the future in a more positive way. But saying that, you always have to be cautious, of course. But that's the best I can answer the question.

That's really helpful. My second question is on the -- on your market share and what's against competition. So can you give us a bit of more insight on the market share changes in the quarter? Have you lost or gained market share in the key markets such as Nordics, Benelux and Germany?

I think that the market shares are very stable. With the market as it is, of course, we can always say that we have gained somewhat. But I think that you can be very certain that we have not lost any market share. We have followed the market growth and with the rationalizations that we've done, with the investments in place and so forth, we've been able to benefit from that. But I think that in summary, our main markets is positive, but the markets have also developed positively. All right?

The next question comes from Carl Ragnerstam from Nordea.

It's Carl here from Nordea. Two questions from my side as well. Firstly, on your margin sort of guidance in Climate Solutions. It is the same, but when I read it, it sounds a bit more prudent compared to the one you at least wrote in Q1. Is it any difference at all? Is it anything trend-wise you see that is holding you back? Or is it just sort of you being a bit more prudent with the -- I guess, with the things happening, especially in the U.S., I guess?

Well, I think that we have a continuous story where we are, as I've said so many times. Quarter-by-quarter, you should be able to follow our history, what we've said and where we are heading. And I think it's appropriate to tell the market and you folks out there that things have not become easier when it comes to the political turbulence and so forth that we didn't foresee. But on the other hand, I think that the market development in a number of countries might have slightly better -- might have been slightly better than we anticipated. So of course, we don't like to neglect the fact with all the tariffs and all the political unrest that we have. Of course, if we didn't mention that, that would be strange.

So I don't think that you should read too much into that. It's -- we try to be balanced. If anything, we don't like to send a message now [indiscernible], no problems. But at the same time, we have been able to conquer so far those issues in the market, which we think is a strength. We have had the turbulence. We've had the strengthen of the crown, but still, we came out with a report like this. And that's what you expect out of the shareholders internally. That's what you rightfully should expect about to maneuver, not only being crybabies.

No, that's very good. And -- yes. And the second question I have is a little bit about your feeling around the consumer installer/distributor behavior, whether you've seen any kind of down trading during the quarter that you sell more of, I wouldn't say, entry-level product, but more simpler products, which might come back and fuel the gross margin once the consumer sentiment might return if it's second half or early '26?

Well, of course, perhaps I'm too repetitious here now repeating what I've said in the past or what we've said in the past. Excuse me, if I say I, Hans, I mean we are duo here, a team.

No problem.

But -- there are certain categories of heat pumps, and we've been trying to keep a good price discipline not to enter a slightly lower specified segment with a higher specified product. And the margins on the different categories, that is pretty much the same. It is to make -- I'd like to make another comparison. If we sell an insert on the stove side, we have the same margin as we have selling a complete stove. That's how we try to organize ourselves. So we don't would run into difficulties would the mix all of a sudden change. Of course, the invoice value would be lower, but it shouldn't affect the margin. That's how we reason and that's not only within Climate Solutions. That's also within water heaters. You can have very strict water heaters, no electric -- electronic control whatsoever. Of course, that's a different kind. But if you would like to have some kind of a control on even a water heater, then you walk up in a different price category. I hope I answered your question at least.

The next question comes from Karl Bokvist from ABG Sundal Collier.

Just wanted to follow up a little bit on the comments there you talked about market share, but just to perhaps understand possible regional differences or technology differences or category differences. Just for reference, I mean, if we look since 2019 until '24, the entire European market grew by 9% and your Climate Solutions organic growth was around 5%, 6%. So when we look ahead, it would just be interesting to hear how you think about if the market grows by X, how do you feel about your current geographic position and product position in terms of growth versus the market?

When you mention those figures, you talk about turnover or you're talking about numbers?

I talk about the European market volumes compared to the organic growth for Climate, which then includes price/mix, of course, for you.

Okay. Yes. I think that we are very determined, and we can also prove that, that we at least grow with the market. We are not geared for losing any market share. Having said that, we also understand and fully appreciate that, of course, the competition out there is -- which it should be, it's very serious and fierce, but it's not to the point where it's butchering, but a lot of alternatives presented. And we feel that we have very good alternatives from our side, but we are not alone.

It's the same thing on the other 2 business areas. So we are confident when the market, as we estimate, continues to grow, we're certainly going to follow the growth for the market at least. Then, of course, we are -- there are some markets where we are not so strong on the residential side. There's no secret that we are not strong in France. We are not particularly strong in some other fairly densely populated countries. So I think that has to be taken into consideration, just mentioning France. Of course, there, we haven't been so successful in the past. And that market is dominated by other groups and there we, of course, can always do so much better.

Understood. And then just a follow-up is more a numbers one related to Stoves. Is it -- early days perhaps, but is it possible to give some kind of indication just how much of an impact the tariffs had on the profits?

Well, we haven't mentioned that in the report. I don't think it will be fair to indicate that. But it's not -- you can -- if you give any indication, I mean, we are not talking about SEK 4 million. We are talking about substantial amounts, but I think we don't go any further than that. But as I said, we absorbed that in our say. We don't like to lose anything down there. And then we're just going to see how the market is reacting to those tariffs. It could also be so that when the quarters go by, just a theory here now that the domestic manufacturers might see a chance also to increase prices on their own. And of course, that means that they're going to make it a little bit easy being an importer brand even if it's imported from Canada, but there's speculation. So that has had an impact, double digit, of course, in crowns. But I don't think we should dwell any further on that in all fairness for the rest of our shareholder crowd and those people following us.

The next question comes from Carl Deijenberg from DNB Carnegie.

So 2 questions from my side. Maybe firstly, on -- I wanted to ask a little bit on the CapEx development. I mean, obviously, you've been in a quite substantial expansion program now for quite some time. And I just wanted to ask when do you expect CapEx levels coming down more to, let's say, maintenance levels versus expansion, which I guess you're still in. Is that already now for the second half of the year? Or is that going to be more of a theme going into next year?

We're going to see, as Hans mentioned, I think you mentioned that we're going to see a gradual decrease already this year and not to give any promises that we can't fulfill. Definitely, next year, of course, we don't see our -- the premises are there, and then we're going to return to more maintenance. And of course, if a new robot or something has to be installed, but those are not the phenomenal costs. So it's correct to assume that we will return more to the ordinary way of CapEx already lesser this fall or this second half, but definitely '26 and onwards.

Yes. Okay. Very well. And then my second question was regarding the sort of heat waves we've been reading about in media, I guess, both in Europe and in the U.S., I guess that comes into demand more of air conditioning equipment and so forth. But would you say that -- have you seen more pronounced demand effects from the weather this year? And would you say the industry has seen a more pronounced effect from that as well?

Well, I think that if you just take North America, all our heat pumps are, of course, also in cooling mood in the summer, both residential and commercial. In Europe, it's coming more and more. I mean we are a little bit behind. And for natural reasons, it's warmer, but not as warm as it is in North America. But I think it makes people realize and discuss and reason among themselves, boy, we have to have cooling in our homes. So to a certain degree, I believe that, that is also something that people are considering. And they also dwell upon the economy. The cooling is relatively expensive if you do it in an old-fashioned way, but you can also do it very economically with, as we call it, the heat pump. I hope I was fairly clear in my answer. Or was that a hide and seek answer?

Yes, yes, yes. No, that's -- it's all right. Maybe just a quick follow-up on that one. And then given what you talked about, I mean, I guess this is more pronounced on the air conditioning side, where I guess your exposure is a little bit more limited. But given the long-term trends, and I guess everything is pointing to a warmer climate over time, I guess, in all your geographies basically, is that product categories that you would, let's say, considering entering now given the development that we're seeing? Or is that not of interest for you given lower price points and different margin profiles and so forth?

Well, I don't think that we should give any promises here that we haven't said in the report as such. But of course, it would be very strange if we wouldn't follow the market trends, whether it is in any category of products. And when the climate is getting warmer, of course, we have to follow that pattern. All right?

The next question comes from Christian Hinderaker from Goldman Sachs.

I've got 2 questions. Firstly, you've called out commercial as a future development area in the report. I believe this is a double-digit percent of your Climate Solutions business, but it's 2/3 of the U.S. Climate Solutions sales. I guess, firstly, is that correct? And then secondly, are there specific customer areas in commercial that you sell more to than others like commercial, data centers, industrials? Just eager to understand the mix here a bit better.

Well, if we talk about your assumption about the shares within the group, they are fairly correct, you can say. So I can confirm those. But maybe, Eric, you would like to mention the different areas that we're focusing upon.

Well, I think that we have not specifically focused on a single segment of the market that we have ventilation, we have chillers, we have larger heat pumps, not to be too dependent on one category of products. We are perhaps, should I say, conservative when it comes to that, but we know that if one category of product really escalate very quickly and then you lose out on something else. So we are selling to commercial buildings. We're also selling to data centers. But that's not been a major, major, so far, should I say, market effort -- marketing effort from our side because we are -- but we are there, but with a broad assortment, not to be dependent on one particular segment.

I guess that's more our view, just like we have so many categories of corrosion protection when it comes to water heaters. We have different refrigerants. We have different categories of heat pumps. And if one is really rushing, of course, we like to be present there, but we haven't made any fantastic effort just being bigger at the data centers. So we are a player there, but perhaps not the most recognized player. All right?

That's very clear. Maybe secondly then on Stoves. I think if I look back, the SEK 51 million loss was the lowest margin quarter since the second quarter of 2007. You had lower segment sales in Q2 of 2018, Q2 of 2019 and Q2 of 2020 for that business. I know there's been some acquisitions since, but in those periods, you still turned a profit. I guess the tariff effects are a challenge. But I guess just trying to understand the other margin drivers. Has there been a change in mix? I don't know if the recent acquisitions have driven the lower margin or maybe you've transferred some sales or product development or marketing costs here from some of the other segments. I'm just trying to understand if you've got a higher revenue base, the sort of core driver of that margin softness.

Well, one example is, of course, that we entered the pellet market with an acquisition in Portugal. And of course, that was -- the timing wasn't perfect, we can say. So there, we, of course, have cut down costs, but we still sit with a new production hall and sales organization. Administrative people have been reduced naturally, but that is one example of a burden to the margin. We believe they're going to come back, but it will be a longer haul. So we see signs of recovery, but that's an example where you have too much of a cost structure in relation to sales. All right?

The next question comes from Viktor Trollsten from Danske.

Perhaps firstly, to you, Hans, just if you could expand a little bit on the comment on working capital in Q2. I just noticed that, I mean, historically, you tend to always build working capital in Q2. And to me, it sounds like the buildup in working capital this time around was only driven by receivables, basically SEK 600 million increase in receivables. So what does that mean then for the second half where you typically release working capital? Do you think that you can have a release already in Q3, given that you will sell those receivables? Or what's specific in that?

Well, I mean -- thank you, Viktor. I mean, we don't sell the receivables, obviously. I mean, we collect them. We don't work like that on the working capital side. But historically, and I mean, I can't give you any forecast here and say more than what's in the report. But historically, we've had this pattern where we build up inventory, especially during the first half and then sell it out because we need to, as I said before, be equipped when we get back from vacation and not wait for the production to pick up, so to speak. This year around, we did the same to a smaller extent on the finished goods side, whereas we continued to reduce the component inventory. So that had a positive effect.

And the reason again for the increase was late sales, so to speak, in the period. They came in just before the summer. So we have not collected them yet. Traditionally, also if we look back, we've had very few losses on our receivables. We have very stable customers in that sense. So obviously, they should kick in and come in here during the second half of the year. We're also following the seasonal pattern, so to speak, we should generate more sales and have our factories up and running for the second half. So if we follow that pattern, which we have reason to believe we should do, we should see an improvement here.

So I guess it's reasonable to think that if you released basically SEK 500 million last year in a quite tough market, right, in the second half of 2024, you should be able to release more than that this time around, if not anything else pops up?

If not anything else pops up.

Okay. That sounds good. And then secondly, just on acquisitions. And obviously, perhaps I'm a bit too early here. Balance sheet is still a bit too stressed, I guess, in my test at least, but will probably look better at year-end, given that you're aiming for higher earnings and some cash flows coming through. So the question being, at what level of gearing would you be -- feel comfortable of starting to acquire again? And a follow-up on that, since you have not made an acquisition since 2023, I think, just curious to hear your thoughts whether you have missed out on opportunities or if the pipeline has rather been piled up from that context?

Well, I don't think we have really missed out on so many opportunities. I mean we obviously made a big acquisition in terms of Climate for Life in mid-'23, which is an excellent fit to the group. But the reason why not so many acquisitions have kicked in after that is simply that a lot of the sellers have based their projections on the phenomenal development that many experienced '22 and '23 and drawn out the line based on that, whereas the buyers have seen what really has happened in the market where the -- it's very unlikely that, that development will continue at that level. So it's been difficult to meet, I think. I would say that's probably the main reason. As a matter of fact, we have made a couple of acquisitions or some, but they've been so small that we've not needed to communicate them to the market.

And then in terms of the net debt or the gearing here, I mean, we have deliberately not set out a finance policy saying that it should never be below or above a certain level, above rather than below because we do want to have the opportunity to go after an acquisition when it comes around. And we've been up to above -- far above the levels where we are today when something interesting has come along. And then we have amortized it fairly quickly. So -- but I think Eric would like to add something here if I read his body language.

Well, I think you're absolutely correct. I think that if anything, it's more level headed now, 2 years ago, everything was the sky was the limit. And now everyone realizes particularly '24, boy, it's not so good forever. And now I think we all are more realistic in all 3 business areas, okay? It was a phenomenal increase and a phenomenal decrease. And now we are back perhaps to a more -- on our way to a more normal level of growth. And of course, we are very much set on continue to acquire. We have not changed our targets. The target is like before, 10 plus 10 growth. So of course, we can't just wait and wait and wait. But obviously, the '24 perhaps didn't take the window out of our sales, but it would have been strange if we would have acquired companies at the same time we were cutting down costs and reducing people.

Psychologically, we believe that would have been wrong. And price expectations had not come down because a lot of companies or several didn't think they would affect them. I dare to say that in our business, all 3 businesses, all manufacturers were affected. So I think it's a more realistic world. And of course, no one is getting younger, including the fellow who's talking. But family companies that are set to eventually divest, they are coming back, and they are looking for, in many cases, industrial buyers. And there, we have a good fit. So it's correct to say that the -- there will be an increased activity in acquisitions and also hopefully coming back to signing on the dotted line.

The next question comes from Vivek Midha from Citi.

Hello? Vivek? Okay, we move forward.

Hello, can you hear me?

Sorry.

The next question comes from Cedar Ekblom from Morgan Stanley.

Sorry Vivek, if you can queue up again. We take Cedar first.

I just wanted to come back to the comment that you made around potential growth in air conditioning. I know that you're not being explicit around it, but to the extent you wanted to grow in that market segment, how should we think about how you would step into that product category? Would it be something that you would look to get into from an M&A perspective? Or would you look to try and adjust some of your production footprint, appreciating that there's quite a lot of overlap between a heat pump product and an air con product. I just think that's quite an interesting sort of shift in some of the strategic messaging. So I'd like to dig into that a little bit more.

Okay. Well, it will be both. You can say, of course, if you like to really make a heavy entry, then we would most likely have to acquire something or a few for that matter, but also adaptations, and we can just talk about the exhaust air heat pumps that we launched with cooling 1.5 years ago. That's not something that we necessarily thought of or felt that was necessary 5 years back. But then coming back to the climate and coming back to the comfort needs even in our own country, the northern part of Europe, that became very obvious that we had to do something. So that is on the market. So I think that answers the question. We will modify our products if they aren't modified already, but also go for acquisitions. It will be a combination.

Okay. And if I could just get a follow-up. When you look at the air conditioning market, it does tend to be a little bit more competitive, at least lower margin than heat pumps. How do you think about that from a mix perspective? Would it be a case of you're attracted to the potential top line growth and that the competitive landscape is not something that would steer you away from that? Or do you think that there are specific regions maybe where the competition is less acute? I'm just -- it's a very -- I think there's an interesting growth story there. I just wonder how we think about the mix between margins should you grow in that business over time?

I don't think that we're going to abandon our philosophy being in different segments of the market. And neither do we expect air conditioning to take over everything. But of course, you have to adapt, but we are known for being more premium and perhaps also mid-segment-oriented, not being in the lower segment if we categorize them in 3 levels. So I think that the example we made here on exhaust air heat pumps, that's definitely in the premium range.

But we believe that our customers, loyal installers all around Europe and all around North America, they would like to see us supplying them with products that they could sell under our brand names, respectively. So it's pretty much something without diluting our profitability, but giving the installer there a broad range of products that they can offer to the customers, selling their confidence to them and need standing as a guarantor behind those products. I think that's how you should look at it, not getting into a dog fight, if I may call it, price-wise. We missed something -- someone there.

Vivek is coming back.

Your next question comes from Anders Roslund from Pareto Securities.

Yes. Do you hear me? Do you hear me?

Yes, yes, absolutely.

We hear you, Anders.

Yes. I had just one question regarding Germany. It seems that other competitors, Daikin and Carrier have also reported very strong German sales. So my question is simply, what are the main drivers there relative to other parts of Europe? Is it the subsidy program? Is it that destocking is coming to an end and you see a sort of a onetime up to a certain level and then it's leveling out. What are the trends in Germany in explaining the strong outcome there?

Well, it's a mixture that we can judge. First of all, we believe that Germany or -- I mean, not Germany, but the German market for heat pumps was very much overstocked, perhaps more overstocked than any other market with the exception possibly of Poland. Those 2 markets stuck out. And we also warned for that when we came out a year ago and say now, it's slimming out. We said that Germany is going to take another couple of quarters after the year-end, and we believe we are pretty much there. So that's one thing. The other thing is that -- the sales of gas boilers, as we understand it and as we interpret it, is going down.

So that is signing or giving a clear sign of customers saying, well, I'd like to have a heat pump rather than a gas boiler. So that is another trend. So it's a combination of coming from a situation that was on a path to perhaps 300,000 or 400,000 heat pumps and then going down very quickly because of the dramatic increase in inventories. Now that has slimmed out. The market is coming back, perhaps not to the level that everyone anticipated in Germany either 3 or 4 years ago or 2 or 3 years ago, but it's certainly coming back. So a combination of the 2. I hope that gives you a little bit better of a feeling for it.

Yes. I have just one last question regarding Germany, and that is, it seems that the electricity taxes may come down. There is a package or law going to be introduced. But so far, nothing is mentioned about electricity for consumers or heat pumps. What do you think about that?

Well, we believe that we are not any forecasting giants or wizards in that. Of course, we have always argued that the electricity prices they seem to be extremely high. And we are a bit spoiled perhaps. Or it's more a realistic spread or the spark spread, as you call it, between electricity and gas and oil. And we believe that, that will come down. But to forecast any specific time, I think it's dangerous to give us out on that ice. But there is, of course, a steady discussion that you have to make it a little bit less cumbersome for a person to install a heat pump and using electricity than just continuing with gas.

And the pleasing thing is, I think I used the source of pleasure here earlier, which is a strong word. But the consumers, even if the prices are high, they seem to prefer heat pumps. And I think that's very good because that sets a standard, of course, for Germany, but also for Europe. Previously, we had a few countries, including our own, where everyone talked about heat pumps. When they start really to talk about that in Germany, that's also a signal to many other countries in Europe. That's a very important factor. But to give you a forecast on electricity prices, I think we refrain from answering that more specifically than that.

Thank you. Now we return to our friend, Vivek.

The next question comes from Vivek Midha from Citi.

Can you all hear me?

Yes. Yes, absolutely. We apologize that you were disconnected. That was not a planned disconnection.

Apologies for the technical issues. I'll just stick to one, and it's just a clarification on your comment earlier about making similar margins on, say, lower-specification and higher-specification products. Should we think of that as similar gross margins on those different product levels or on the EBIT margin level? Because presumably, a lower price point means that you have slightly less fixed cost coverage. So how should we think about that comment?

Yes. All right. That's -- how do we answer that in a very specific way? Well, as I said before, we believe that if we would go into other segments of the market, like we did now with the heat pump or the exhaust air heat pump cooling, we did not, of course, add any sales staff to that. And what we also said about installers, you don't necessarily need to increase sales staff when you start to sell another assortment because they already have a relationship. They're already handling a larger assortment.

So I think that we should reason along those lines before, but I mean, promise or promise, but that's how we think to couple new products to an already existing sales organization that has the power, the leverage to bring new products on board and not necessarily increasing costs for every million you add in sales. If you like to add something, Hans, it's fine.

Yes. No, it's just along the same lines that you're saying. It's not a matter of replacing existing assortment or having some cannibalism in there. It's more a matter of us for being a complete supplier where there is a demand for, let's say, air-to-air or a lower spec that we should be there.

Thank you for clarifying. Perhaps I misunderstood the question a little bit. But I hope you are satisfied with that answer, Vivek. Well, I think that...

There are no more questions. So I hand the word back to Eric and Hans for closing comments.

Okay. No, thank you very much for putting those intelligent questions to us, and we hope that we've been able to answer them, if not fully, but at least giving you some clarity on the different issues here. And with that, we exceeded the time line with some 10 minutes, but we felt it was appropriate to do that today with the questions coming up.

So thank you very much again. We wish you a nice weekend coming up. Personally, I have a little bit of fever today if you don't recognize my voice. And it's wonderful to have grandchildren, but they're also very contagious, I realize. So that's -- I'm not saying I don't like grandchildren, but they give you -- you get very sick very quickly.

They give you the flu sometimes.

Yes. So with that said, thank you very much.

Thank you. Bye-bye.