NIBE Industrier AB (publ)

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.

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.

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.

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.

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.

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.

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.

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.

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.