ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of ASSA ABLOY's Q3 report in 2025. My name is Björn Tibell, I'm heading Investor Relations.

And joining me here in the studio are ASSA ABLOY's CEO, Nico Delvaux and our CFO, Erik Pieder. As usual, we will now kick off this conference with a summary of the report and then we will open up for your questions.

So Nico, that means it's over to you.

Thanks, Björn, also good morning from my side. Q3 results, we can show strong numbers for Q3 with good growth and strong margins.

We had a good organic sales development with a strong 3% organic growth with good sales growth in EMEIA Entrance Systems, Global Tech in Americas, and the sales decline in Asia Pacific, mainly because of the continued challenging situation in Greater China. Good operational execution with record operating margin, highest operating margin since Q3 2015, 16.8% EBIT with excellent operating leverage offsetting our M&A and currency dilution.

Also very strong cash flow, 10% up and a cash conversion of 125% and then we completed 5 acquisitions in the quarter. If you look at the numbers, sales of SEK 38 billion.

Like I mentioned, 3% organic sales, a strong 2% price and 1% volume and 5% net acquired growth and then minus 6% from currency, mainly SEK dollar related. So top line, up 2%.

Very strong EBITA, record margin of 17.9% and also a record margin of EBIT of 16.8% and then EBIT and EPS up 3%, EBIT in absolute value SEK 6.4 billion. If you look a little bit on the world, I can perhaps summarize because the picture is very similar as in Q1 and in Q2, wherein our 3 main regions as well in North America, as in Europe, as in Oceania, we see -- we continue to see very good momentum on the nonresidential side, but also in all 3 regions, we continue to see more challenging market conditions on the residential side.

We have seen also a slight recovery, I would say, on the logistics vertical, which is important for Entrance Systems, not a V recovery, but a smaller but a positive recovery. We have seen a plus 5% organic growth in North America, a very mixed picture for our Americas division, where we have seen high single-digit organic growth for the nonresidential part and low single-digit negative growth for the residential part.

And then strong performance also for the other divisions with good momentum in all the different verticals. Also our spec business up double digit in the quarter.

South America or Latin America, plus 1%, where for the Americas division, we have seen a small single-digit negative decline, but then good performance for the other divisions. In Europe, plus 2%, same picture, like I mentioned earlier, on residential, commercial, where we see in Sweden, at least some recovery on the residential side on the R&R side, but no real recovery yet on the new build.

And then obviously, the rest of Europe, which is more ECB-related, is later in the cycle on the residential side. But continued good momentum on the commercial side, also in Europe, double-digit growth of our spec business.

Africa minus 8%, it's a small continent -- small part of our business is mainly related to higher project business for HID last year, so more difficult comparison. Oceania plus 3% with good performance as well in Australia as in New Zealand.

And New Zealand is a bit in the same picture as Sweden. They also started to cut interest rates much earlier.

And there, we see good recovery as well on the new build as on the R&R side. And the last but not least, APAC, minus 4%, a very mixed picture between on one side, Greater China, where we continue to see double-digit negative growth where market conditions remain very challenging on the residential side where all indicators are down double digits.

And then the rest of Asia where we have seen good momentum, good positive growth as well in Southeast Asia as in markets like India. If we then look at some of the products we launched in the quarter, some digital products.

We extended our Centrios product portfolio offering with a new mortise lock range. Centrios is our access solution for small and medium enterprises.

We also launched in LatAm, a new range of digital door lock residential applications with facial recognition. And InVue launched a new high security retail display system for phones, tablets and wearables giving much more hands-free, smooth testing environment for new tablet, phones in those high-end stores.

Also interesting to see that our electromechanical products grew 13% in the quarter. So we continue to see that shift from mechanical to electromechanical and digital, and that obviously also gives us an opportunity to get more recurring revenue.

Our recurring remains our strongest growth product or service offering and today is close to 6% of top line so continue also growing in relative weight. So now 3 consecutive quarters with good organic growth and that organic growth continues to be complemented with very good growth through acquisitions.

Our sales, 62% up versus 2020. And then our margins well within the 16% to 17% bandwidth we aim for, a run rate of EBIT margin of 16.1% and our EBITA margin even above the 16% to 17% bandwidth at 17.1%.

So good margins, increased top line, they are also good -- therefore, also good bottom line, a record operating profit for Q3 and our run rate EBIT up 108% versus 2020. Acquisitions, we continue to be very active on the acquisition side, 5 acquisitions completed in the quarter, 16 acquisitions completed year-to-date as of end of September and those acquisitions represent an annualized sales of close to SEK 5 billion.

Just highlighting one of the acquisitions in the quarter, Calmell, a Spanish manufacturer of smart cards, smart paper tickets and magnetic tickets, acquisition in HID. They are based in Barcelona, they will reinforce our offering within smart cards, and we had a sales of around SEK 330 million in 2024.

If we then zoom into the different divisions, starting with EMEIA, very good quarter for EMEIA. We have a strong organic sales growth of 4%.

It has been many quarters for EMEIA since we have seen such a high organic growth rate. So very happy with that.

Strong sales growth in Central Europe and the Nordics, smaller sales growth in Middle East, India and Africa. And then sales decline in U.K., Ireland, that was mainly because some commercial projects are on hold because of some new government regulation, but we are confident that those projects will be released now in the coming quarters.

And then also sales decline in South Europe, that's mainly linked to a more challenging residential market in France. Strong operating margin of 15%.

You really see now through that organic sales through that volume growth that we also get very good volume leverage and therefore also better margins for EMEIA. Operating leverage, 40 basis points, driven by volume growth, positive mix and operational efficiencies.

FX also helped us with 40 basis points because of the stronger SEK. And then M&A was dilutive 30 basis points.

Americas, an organic sales of 3%. We have a strong high single-digit sales growth in the North America nonresidential segment, but small single-digit negative growth in the North America Residential segment and in Latin America, where the residential segment continues to be a little bit up and down, continues to be around that flat line and depending a little bit on quarter per quarter and the comparison with the quarter of the same year before we see a small growth or in this case, a small negative growth.

An operating margin of 18.5%, excellent operating leverage, 70 basis points. FX dilutive 20 basis points and then M&A continue to be strongly dilutive 120 basis points.

That's still linked to the Level Lock acquisition. We then go to Opening Solutions Asia Pacific, an organic sales decline of 4%.

We have good sales growth in Pacific North Asia -- Northeast Asia subdivision and a significant sales decline in the Greater China, Southeast Asia subdivision, where we have, like I mentioned before, that's a very mixed picture where Greater China is down double digit -- strong double digit and where we have seen good double-digit growth in Southeast Asia. So in the whole picture, it's really Greater China that brings that division down.

Nevertheless, a strong operating margin of 10.2%, a long time ago that we had a double-digit margin in this division, excellent operating leverage of 260 basis points, FX dilutive 30 basis points and no M&A activity in this division. Global Technologies, also a strong quarter with an organic sales of 3% with good growth in both HID and Global Solutions and a very strong operating margin, I would say, where all the stars are really aligned of 19.8%.

Good operating leverage, 20 basis points, dilutive FX, 70 basis points, strongly dilutive, I would say, because of the weaker U.S. dollar.

But then strong accretive on the M&A side, 140 basis points, a little bit because of the divestment of Citizen ID, but mainly also because of the acquisition of InVue, which has been a very successful acquisition with very good accretion also bottom line-wise. And then last but not least, Entrance Systems, also a very strong quarter again for Entrance Systems with an organic sales of 4%.

Strong sales growth in Perimeter Security and Pedestrian, good sales growth in Doors & Automation and Industrial. So in all 4 segments, good growth.

And also good to see that our growth in service has come back to a strong higher single-digit level. Also strong operating margin of 17.4% with excellent operating leverage, 130 basis points.

Dilutive FX, 20 basis points and then still an important dilution from SKIDATA on the M&A side with 80 basis points. As you know, SKIDATA is still very seasonal with very low sales in Q1 and Q2, a bit better sales in Q3 and then much better sales in Q4.

And with that, I give the word to Erik for some more details on the financial numbers.

Thank you, Nico, and good morning also from my side. I will just repeat a couple of numbers when it comes to the sales.

We were up 2%. Organic growth was up with 3%.

Acquisition acquired growth was plus 5%. And then you see a strong dilutive effect of the currency or the FX of minus 6%.

If we look on what it looks like today on the period end versus last year, then if you look for Q4, we expect an even higher negative impact of minus 9%. And since it's mainly related to the SEK versus dollar, we will also have a clear dilutive impact on our margin.

Operating income as well as income before tax, net income and EPS, they were all up with 3% versus the same period last year. As mentioned by Nico before, we had a strong cash flow.

We were up in the quarter, 10% versus the same period last year. And if you look on year-to-date, we're almost at the same level as we were a year ago.

Return on capital employed remained on the same level at 14.2%. If we look into the bridge and dissect it a bit, the organic sales, it was a strong 2% when it comes to price, which leaves, I would say, plus/minus a bit, 1% in organic volume growth.

The flow-through, as seen was at 41%. So it continued to be strong.

Of course, it's related to the price versus cost, but we also have strong operational efficiencies. We have -- like this quarter, we have savings from the MFP projects of roughly SEK 240 million, but we also have done other operational efficiencies in order then to be able to perform such a good flow-through that we have.

Currency was negative with 20 basis points. And then you see the dilutive impact on the M&A.

That comes predominantly then from SKIDATA and Level Lock. However, remember that we bought those 2 companies last year in September.

So they are in for 2 months in the acquisition column and then they're in for 1 month in the organic column. And then as mentioned before by Nico, we had a strong performance of InVue in the quarter.

If we look on the cost breakdown, direct material was 80 basis points better than the same period last year. Of that, roughly 1/3 comes from positive interdivisional mix, which leaves, let's say, if I call it the true price versus cost is about 2/3 so let's say, almost at 60 basis points.

It is starting to go down, and we expect it to continue to be slightly lower in the quarters to come. Conversion cost was also positive versus the same period last year.

You have the higher volumes and then the operational efficiencies, as I talked about on the last slide. And then SG&A, slightly worse than a year ago, minus 40 basis points.

There, we have sort of -- you have the inflation is impacting as well as we continue to invest in R&D as well as in sales. So that's the reason why it's slightly negative.

Operating cash flow, as mentioned before, it's up 10% versus the same period last year. As mentioned before by Nico, the cash conversion was a strong 125% for the quarter.

It's driven by the strong earnings as well as reduction in our working capital, predominantly within receivables as well as within inventory. That sort of leaves, if you flip the slide that you can see that the net debt to EBITDA went from 2.3 in the same period last year down to 2.2.

If you look sequentially on the gearing, we went from 70% in Q2 down to 65% in this quarter. So we have actually reduced the actual debt with about SEK 4 billion in the quarter.

That comes from, I would say, the strong cash flow, as mentioned before. So all in all, we have a very strong financial position, and we can continue with our acquisition strategy.

Last but not least, from my side, the earnings per share, as mentioned before, they were up with 3% versus the same period last year. And with that, I hand it back to Nico for some concluding remarks.

Thanks, Erik. So concluding, it was a good Q3 for ASSA ABLOY.

Good organic sales growth of strong 3%, a strong record operating margin of 16.8% with excellent operating leverage of 41%, the best operating margins over the last 10 years. A very strong cash flow, 10% up and a cash conversion of 125%.

And then it's clear that we continue to live in uncertain market conditions where things change very fast day after day, night after night, tweet after tweet. But it's clear that our decentralized organization really helps us to make local decisions in a fast and agile way.

And we will continue to invest there where we see opportunities to grow fast, and we will continue to adapt our cost in those markets or in those verticals where we see that the market is challenging. And then Björn asked me to remind you that we have our Capital Markets Day on November 19 in the U.S., and you see also the link where you can register yourself, if you didn't do so yet.

And with that, I give back the word to Björn for Q&A.

Thank you, Nico. Well, excellent.

That means it's time to open up for the Q&A session. And as usual, can I ask that you limit yourself to one question and then a follow-up.

And if we get around the whole queue of questions, then you can obviously line up again. The operator will tell you how to do that.

So that means, operator, we are ready to kick off the Q&A session. Please go ahead.

I wanted to ask really about the Global Tech margins now that we had a couple of quarters of strong delivery. Do you think it's time that they challenge your view, Nico, that this is a 17% to 18% margin business?

And as we kind of look forward and see continuation of gradual recovery and operational gearing that this business can generate with this kind of cleaner form with a couple of disposals. Do you think we should be thinking about maybe at least the high end of that or maybe even going through it?

You continue to challenge me, Andre, like a lot of other people continue to challenge me on the margin for Global Tech. And my answer remains the same.

We still believe this is a business that should perform somewhere between 17% and 18%. Then you can debate if it has to be on the higher end of that bandwidth or not.

I can only say that in the quarter, all stars were aligned in the sense that we had good growth, good cost savings, good price realization, and we also had a strong PACS and a strong hospitality, and that's the 2 best margin contributors in the mix of Global Tech. You should not forget that all the other verticals in Global Solutions next to hospitality and all the other business units next to PACS in HID still have lower margins are also smaller, and we continue to invest heavily in those verticals to get them on a higher volume level and therefore, ultimately, over time also will give better margins, but we are not there yet.

Therefore, we remain with that ambition between 17% and 18%.

Very clear. And if I may just ask a quick follow-up to Erik on the price cost, just to make sure I got that right.

Did you say the pure price cost was 60 bps in Q3 and you expect that to get smaller from here? Could you just confirm that?

And then also kind of what would drive that becoming smaller in coming quarters?

No. What I said was that -- and you're right about the number because I said 1/3 was related -- out of the 80 bps, 1/3 is related to mix and 2/3 is related to the true price versus cost.

And then you come to around the 60 bps when you look at that. I think that, of course, what you see is that for us, the comps there is getting tougher and tougher.

So -- and I think that is sort of why it's more from a comps perspective that I'm saying it. And then -- yes, so I would say that will be the main reason.

I just wanted to touch a little bit on Entrance Systems because it seems as though in the Industrial segment, you've been pretty constructive on the momentum in that business throughout the year. And you talked a little bit about orders before.

I don't know whether you could give us a little bit more color on how orders have evolved so far in the second half of the year to sort of paint a picture for how things might evolve into the first half of next year.

Yes. So we -- what we said is that we had seen a good recovery on the loading dock side on logistics vertical end of last year -- November, December last year, where we got good order intake.

And we have also said that typical delivery times are 6 to 9 months. So the Q3 and the good organic growth for Industrial segment that you see in Entrance Systems in Q3 is thanks to those orders that we got later last year.

I would say it has been a little bit up and down. We were then very excited November, December, then we saw things a little bit calmer again at the beginning of the year, then we got another uptick and then we saw it's calmer again.

So we definitely don't see that V-shape recovery on the logistics vertical side. It's more a steady, slower recovery.

But nevertheless, it's a good recovery from a lower level. And therefore, we should continue to see improvement on our Industrial segment for the coming quarters.

I've got a couple of questions, if I could. One on the U.S.

residential environment where it's obviously stayed soft. But when you look forward in terms of pipeline or specification, do you see any signs of improvement?

I noticed that some mortgage application data is starting to tick up. I don't know if you're seeing that yourselves.

That's the first question. And then the second question, great to see electromechanical growing 13%.

I noticed it's been a similar share of group sales for the last 4, 5 years. Do you have a sense or could you give us a sense for the shape of organic sales growth in the last 2 or 3 years?

Has that maintained itself or slowed down? Is there something behind that other than acquisition effects?

Any color on that would be great, Nico, and how you see it really going forward?

I think first on the residential side in the U.S., yes, I agree with you that there is some positive indicators -- market indicators on the residential side, but there is also -- if you want to see the glass half empty, there's also negative indicators on the residential side. I think that's a little bit what we see also in our results on the residential side over the last quarters.

It has been a little bit up and down around that 0 level. And depending also where we were same quarter a year ago, you have this small single digit up or small single digit down in -- which is the case now in Q3.

We don't see really a strong pickup on the residential side yet. And internally, as a matter of fact, we don't have too much long-term indicators because when you refer to spec business, we don't spec on the residential side.

So our spec activities on the nonresidential side. So that is not an indicator for residential business.

So we look at similar indicators as you do, James. I can only say that we don't see that strong uptick yet.

We know that there is a significant deficit in housing in the U.S. So sooner or later, that has to come and hopefully, confidently, it will come sooner than later.

When it comes to the electromechanical part of our total sales, it's around 31%. True that percent-wise, it's not so much up, but it has all to do like, you also alluded, to the acquisitions we do as we do a lot of acquisitions recently also on the non-electromechanical side that brings that percentage down.

I think it's more important to look at the pure organic growth and the growth of the electromechanical side. And there, we have definitely seen an acceleration, I would say, after COVID, and you see that acceleration to continue.

After COVID, there's much more people that are looking for electromechanical solution for a simple reason, you can do so much more operational efficiency-wise, management-wise, you can do it also touch-free as compared to a mechanical solution where prior to COVID, we still often had specifications written pure in a mechanical way. Today, there's much more electromechanical.

And if you already asked for a mechanical spec, then often there also as an option, an electromechanical alternative. I don't know the exact number for the last 3 years, but it's around double-digit organic growth that we had on the electromechanical side, if you take the last 3 years.

Yes. I have 2 questions, please.

The first one is on the pricing side. I mean, looking at the U.S.

PPI for locks and door hardware products, I mean, it's been up double digit in the past couple of months roughly. So I was wondering, I mean, the pricing contribution to the group's top line is still more or less unchanged at about 2% plus this quarter, which looks a bit surprising in light of the PPI dynamics.

So specifically, I mean, could you talk a bit about your pricing development there in the U.S.? That's question number one.

Yes. So I think price is up as you compare to Q2 because we have said that price was a strong 2% whereas compared to Q2, it was a low 2% and in Q1, it was 1%.

So it's incredibly definitely up. We had said earlier that also in order to compensate for the tariffs in the U.S., we needed a price increase somewhere between 4% and 5%.

That has come down. It's today more between 3% and 4%.

And that has to do with -- 3% to 4% on the U.S. business.

That has all to do with the fact that we also found other ways to compensate for the tariffs. Obviously, we have been negotiating with our suppliers and got very good results there.

We have also been able to relocate some components, some subassemblies and assemblies to countries that are less tariff impacted. And therefore, the price component that we need came a little bit down.

So if you take between 3% and 4%, if you say whatever, 3.5% that means -- 3.5% on the U.S. means between 1.5% and 2% on a group level.

If you take on top of that the normal 1% inflationary price, you look somewhere at 3%. And at least we are going in that direction with a high 2% in Q3.

Another reason why it's still lower in Q3 is the fact that we still, at the beginning of the quarter, had some inventory at lower cost prior to the tariffs, which we were able then to continue to invoice at the beginning of Q3. Obviously, that is now done in the end of Q3 and going into Q4.

So you should see a further higher price component now going into Q4.

Super helpful. And the second question is I mean a few days ago, you announced the acquisition of Kentix, which is obviously a very small transaction, but in a key market, data centers, which have obviously become an increasingly important vertical for many other industrial companies.

So maybe could you elaborate a bit on the addressable market size on the growth potential in the field of monitoring and access control products for data centers?

I would say very excited about that Kentix acquisition because it was really the missing link for us to really offer a complete access solution for data centers. They have particularly a very good solution for those shared data centers where you have to control indirects different customers on the same rec, and they combine that access control with a lot of other information on the performance of the service.

They measure temperature, they measure current consumption and so on. So you get also a very good diagnostic data on how that part of the data center is working.

So very excited about that. I can only say that data centers, if you look a year, 1.5 years back, it didn't even make it to our dashboard when we are looking at specification.

Today, it's by far the fastest-growing vertical when we do specifications. And we don't specify all data centers.

There's still a lot of data centers that are not specified and go straight into the sales funnel. But today, it's not in the top 3 of our verticals yet, but it's growing very fast and making its way up.

So it's definitely something that will move the needle for us even on group level going forward. I think we have a really complete solution from our fencing around the data center with Perimeter Security to the entrance in the data center with our security doors in the geographical divisions and our Industrial and Pedestrian doors in Entrance Systems and then a full suite of access solution with our mechanical -- electromechanical offering in the geographical divisions and now nicely complemented also with that additional acquisition we did last week.

So very excited about that, yes.

I just wanted to ask on the government shutdown that we currently have in the U.S. And I mean, in your Institutional business, obviously, some of these verticals, sort of government buildings, some of the education are probably quite important.

Do you think this will have any effects on demand in your business? And are you seeing anything already in terms of some of those projects kind of being delayed or pushed out?

So the pure central government business of the U.S. is a smaller part of our business.

Then some of the businesses are also continue to run. I think everything depends on how long that shutdown would last.

If it's, let's call it, a normal shutdown, it should not have any negative effect on our business. It's just a small stop and go on a very small part of our business.

And as there is a big pipeline, I think, there is no effect on our business. Of course, if it would hang on and be much, much, much longer, then ultimately, it could have some consequences.

But let's take that challenge if that would be the case.

So the first one is really whether you've seen any changes when it comes to the demand environment between the months of the summer and then September? And whether you could just give us an indication of how Q4 started for you so far?

Yes. Of course, Q3 is very, very difficult to answer that question because July and August, as you know, are holiday months and it can fluctuate very much on smaller months.

Obviously, September was much better than July and August because we had also one working day more and it was not a holiday month. But if you try to compare and compare like-for-like, so correcting for the working days, September was slightly better than July and August.

And then we have seen the same momentum now in October as -- or the beginning of October as we have seen in September.

Perfect. And then finally, just on the M&A impact on margins guidance for Q4.

I think you're guiding for it to be accretive. Can you just walk us through sort of the divisional impact here and what we should be aware of?

The main reason is that SKIDATA and Level Lock will not be longer in the acquisition column because we are now partly owner of both companies for more than 12 months. So they will move into the organic column.

And as you could see in Q3 and also in previous quarters, they have been the main reason for the dilution. Then I think one bigger acquisition on the acquisition column, which is still there in Q4 is the InVue acquisition, which has been accretive, and we will probably -- confidently will continue to be accretive also in Q4.

Nico, I think in the past, you've talked a little bit about your window hardware business in the U.S. as sort of potentially a leading indicator for the U.S.

residential side as I guess it's one of the few exposures you have to directly towards the homebuilders. Could you say anything about what you've seen and heard from this vertical, given that it seems like the sort of overall residential market is hovering around this no growth environment and has been doing so for quite some time?

I think we -- our business might not be directly representative for the market because I think we have done 2 good things in our window hardware business in the U.S. One, we were able to compensate in a good way also through pricing for the tariffs, which then helps obviously on the organic growth side.

But I think we have also been able to improve our relative position in the market through to some new wins. I think if you look at the underlying market, it's very similar as what I said before.

I think on the R&R side, it's a little bit more positive than on the new build side. On the new build side, we don't see any real recovery yet, and we also don't see any signs of a real recovery yet.

My question is also on the Global Tech M&A performance. It looks relative to Q2 that both in InVue on the absolute revenues and on the margin contribution, that looks to have improved.

I was just wondering if you could give us color on what growth -- organic growth InVue delivered in the quarter within that M&A line? And more broadly, what's been doing to drive performance within that business?

So InVue does asset management protection of assets in retail stores. So if you have a high-end store of iPhones or tablets, they protect those -- that equipment that people cannot steal it.

In the past, you remember there was always with a cable, and it was not very user-friendly. They came with different new innovative solutions.

One of the latest solutions is that you don't have this wire anymore. You just have something on the phone that permits you to really feel how the new phone feels in your hand.

And if you walk too far away from the station, then the alarm will go after making it much more user-friendly. And we have had several bigger global companies in the phone and tablet space that have adapted that technology from us.

So therefore, we have seen very good higher double-digit growth of that InVue business as compared to a year ago, and that with also good margins, and that's the reason why you see the good acquisition column for Global Tech. Next to that, of course, we have the divestment of the Citizen ID business.

Understood. And a very quick follow-up.

Just to understand on the price cost, even if we're looking at the true price cost, that looks to have been broadly stable. In the past, you were guiding for this to gradually fade from the 60 basis points you saw in Q2.

So just to understand what, if anything, has surprised you to the upside in the third quarter on that price cost?

I think we should run our business that we don't have surprises. So I would say that we had not a surprise on the price cost.

So if you look at the direct material percentage, what Erik explained in the presentation, you can clearly see that we were able to fully compensate for tariffs and other inflationary pressure, yes, partly through price and partly through other actions that I mentioned before, and we're able to maintain the margin, and that has been our ambition from the beginning. That is what we said that we would do from the beginning.

So in that aspect, that should not be a surprise, and we will continue to do so also in the coming quarters. But I think you can also see it in a positive way, despite all the inflationary pressure, despite all the tariffs and so on, we still had, let's say, 60 basis points pure price cost accretion in the quarter, 60 basis points of the 80 basis points in total that you see on the direct material line.

It's Magnus, a couple of questions from me. Good to see acceleration in growth in EMEIA in the quarter.

Could you help us a little bit to what degree that helped us on the mix, on the margins, how many bps that helps us?

On which division?

On EMEIA.

Yes. So I think on EMEIA, the main reasons for the improved margin is the volume.

I mean, you have seen the 4% growth, the other price in line with group. So they had good pure organic volume growth.

And we have always said that EMEIA today was on a cost structure that once you would start to see volume growth, you would also see very good margin improvement. And that is what we have seen in the quarter.

So if we are able to continue to see that volume growth in the coming quarters, we should continue to see also margin improvement for EMEIA. And that is thanks to a lot of operation efficiency measures they have done.

They also contributed to MFP. They did a lot of VA/VE actions.

And then, of course, you have the price effect. That is true that there is also a positive mix effect in the sense that we are growing better in the Nordics than in the South of Europe.

And you know that in EMEIA, if you look, the higher you go geographically, the better the margin; the lower you go, the lower the margins. So that was a positive mix effect.

Then on the other side, we have also a negative mix effect in the sense that we were growing nicely also in Africa, Middle East, India and that has also lower margin. So yes, there is a small positive mix effect, but the main reason is the organic volume growth that we experienced in the quarter.

Got it. And my second question, could you elaborate a little bit on what we see in terms of margins across China and the other parts of APAC have helped us a bit with the margin levels there in the past?

There I would say also nothing has changed. We have always said that Southeast Asia, Pacific is in normal conditions, margins more or less in line with EMEIA.

Whereas Greater China, we still have an ambition that one day over time, we want to have that high single-digit EBIT. Today, we are far from that.

Today, in Greater China, we are very slightly negative. So you could say close to 0 EBIT.

So I think Greater China has done an excellent job in further cutting the cost to keep at least the margin close to 0 in a much lower top line today than, let's say, a year or 2 years ago.

I just have 2 follow-ups. On the pricing point, I think as of the 2Q call and what we had of tariffs at that point, you had said that you needed to put prices up in the U.S., 4% to 5%.

Since then, we had the extra or the up on the Section 232 of steel and derivatives in August. Can you comment to sort of what would be the equivalent figure now?

And I guess sort of what's inside your going forward pricing commentary? That's question number one.

I'll ask the second one afterwards.

Yes. So like I mentioned earlier, the 4%, 5% we mentioned earlier is more today between 3% and 4% because we were able to negotiate with suppliers better price, and we were able to move some of our components, some of our subassemblies and some of our final products to countries with less tariff impact.

When it comes then to the new tariffs on the direct material percentages in the different products, you will appreciate it's a very difficult calculation to be made because you really have to look product by product and then you have to see how much steel content there is in every individual product. So we are still fully -- you could say, very much into the calculation, but we believe it has no significant effect on the tariffs because you win and gain a little bit.

So -- and if there would be an increase of the tariff cost, again, we will just compensate that through price increases and other operational measures like we have done for all the other tariffs. So we remain very confident that we -- also going forward, we will be able to compensate tariff costs and keep margins.

Okay. So 3% to 4% regardless of the post development?

Okay. And then just in terms of the strength you've mentioned and been talking through in Europe, driven by Central Europe.

Can you give us a little bit more granular by vertical view? Is it resi?

Is it non-resi? Is there any restocking at distributors?

Sort of what are the main contributors there?

Well, definitely not restocking. That's not a significant argument.

I think we should also here make distinction between residential and nonresidential. So residential is around 45% of EMEIA.

And I would say on the residential side, it remains challenging. It's most probably bottomed out on a lower level if you take the bigger picture for EMEIA.

But for EMEIA, bigger picture, definitely not a recovery yet. The only recovery we really see is in Sweden, where Sweden continued -- started to cut interest rates already almost 2 years ago.

There have been 5 or 6 interest rate cuts in the meantime. And there, we have seen R&R coming back from a lower level.

But in a way, we are even a little bit disappointed to see that it takes longer for the new build to come back. We haven't seen that recovery on the new build yet.

We are confident it will come, and hopefully, it will come sooner than later. I think the rest of Europe, where it is more ECB related, is still later in the cycle.

And there the more challenging country is definitely France, where we have seen more pressure on our residential business. If you take the nonresidential, it's still on a very good strong level, very similar to what I mentioned earlier for the U.S.

Our spec business is up double digit, and we see a good higher single-digit growth overall for that business in EMEIA. And then, of course, we have good emerging market part also in EMEIA with Africa, Middle East and definitely also India.

That's still a smaller part of our business, but a fast-growing part.

I want to ask about Global Technologies and the organic growth of 3%, which you would say is a good organic growth in the quarter. But I think in the past, you've been talking about an organic growth rate of around 5% as a level that we should expect going forward.

I just want to get your thoughts on how to think about the organic growth in Global Tech going forward?

I think when we look at those numbers, obviously, we should not just look at one quarter because for the quarter, also the comparison with a year ago is important and also the way we came out of, you could say, more turbulent cycle on -- especially on the HID side with all the electronic component shortages we had 2 years ago, and therefore, disturbs a little bit the curve. And also on the Global Solutions side, the very high comparison we had with last year because you remember that we said at several occasions that Global Solutions for more than 2 years, for more than 8 quarters was growing double digits.

So it's difficult to continue to do that. But I think overall, we remain with our statement that Global Tech is a division that should grow higher than our 5% ambition that we have as a group.

Global Tech over business cycle should grow closer to that high single digit rather than the 5% we have as an ambition for the group. And we are confident that if you look over a longer period that you will see that acceleration again now after, you could say, the turbulences around electronic component shortages.

And looking into the quarters ahead, how do the comparables look like? Will the comparables still be tough and we should expect a more muted picture in the very near term?

I think Q4 will be still a bit more challenging. But then as of next year, we should see that acceleration.

That's great. And then on the -- on the EBIT side, if I look at the other line or overhead cost line, which was negative SEK 272 million, it's a very high cost number compared to previous quarters.

Is that step-up because of the acquisitions you have made or -- and that higher level will now be sustainable? Or did you have some, call it, extraordinary or something in there and that we should expect that to come down to the low 200s that we have seen in recent quarters?

I think there, Andreas, it sort of fluctuates between the quarters so you shouldn't read too much into now -- I mean now it's up above SEK 270 million. Last year, we had SEK 192 million, but it's more sort of fluctuates.

It has nothing to do with acquisitions at all. It's just sort of -- yes, that it fluctuates.

.

Just a very quick one. You talked about the U.K.

being weak, and I think that was also the case in Q2 where you had some missing projects that we thought would come back in Q3, but they didn't. Can you maybe just elaborate on that and just quantify the impact?

I think in Q2, you said it cost the division 1 percentage point of the organic growth?

So I think what we said at previous occasions is that if you look at the residential market, which is challenging, there's perhaps 2 places where we are a bit more optimistic that is Sweden. I commented on that.

And the other one, U.K. also because U.K.

has been on the lower side, residential since quite some time. And we continue to see that slight optimism on the residential side for the U.K.

The reason why it's lower in Q3 is more on the commercial side, where some of the commercial projects through new government legislation has been on hold. Those projects have not been released, and the government is working on adapting those standards and regulations.

And we are confident that now Q4 and definitely in the coming quarters, those projects will be released and then we will see that growth coming in also on the commercial side, and that will help then the U.K. picture.

Just a quick one, Nico. I see that the PPI in the U.S., the purchase price index is up 10%.

It's quite a big number. I just wondered if that is a good guide for what you're seeing in the market with the current tariff environment.

I understand about the inventory cycling, but maybe in the more recent months where we're now seeing a full flat tariff impact. Do you think that's a good guide for the U.S.?

We would like to have 10% price increase. I can tell you that is not the case for us.

think the Americas price component has been a little bit higher than the group average. And I want to come back to what I said before, we need that 3% to 4% for the tariffs.

And if you then take another, let's say, 1% or whatever normal inflation, that is more the number that I think is realistic for our business. Then, of course, if we can further increase prices, we'll always try to do so and perhaps the PPI is a good argument to see if we can further increase prices, but it looks a little bit too high for us at least.

Sorry, so my mistake. So the 3% to 5% comment is specifically for the U.S.A.

It's not the global impact. That's just the U.S.

business.

Exactly. Yes.

So 3% to 4%, the U.S. business, which means 1.5% to low 2% for the group, you could say.

I just wanted to come back to the specified activity at growing double digits in U.S. and Europe.

I think in U.S., we've been there, I think, for a quarter or 2 already. And in EMEIA, I think, too.

I'm just trying to understand when do we get the kind of growth acceleration in revenues from this step-up in specified activity. Could you just talk us through the cadence there?

Well, it's very difficult to say because we make specifications today and some of the projects are realized 6 to 9 months later. Some of the projects are realized 2 years later.

So when you look at spec, you should look more on a trend over a longer period, but I would argue that you see that acceleration already in EMEIA. I mean if you see the 4% organic growth in the quarter, that is clearly also linked to, like I mentioned earlier, the commercial side because it's not so much coming from the residential side.

And it's on the commercial side where we spec all these projects, and it's linked also to the shift from mechanical to electromechanical. It's also linked to more green specifications, something perhaps more specific for EMEIA.

And we are -- we continue to see that trend on the specification side.

But is it right that the actual revenues of your commercial businesses in U.S. and Europe are not growing double digit at this stage, they're in high single digit?

Yes. I've said during the presentation that our North America commercial business was growing high single digits in the quarter.

And it's a similar -- it's a little bit more difficult to calculate in EMEIA because, as you know, whether you put multifamily and some of the semi commercial projects, but it's a similar number in EMEIA.

Thank you. That means it's time for us to round up this conference.

If there are any follow-up questions, feel welcome to reach out to Isabelle or myself at Investor Relations. And that means we look forward to seeing you in the next coming weeks and many of you also at our CMD in Milwaukee.

Have a good day now, and stay safe.