Afry AB

Good morning and warm welcome to AFRI's earnings call for the fourth quarter 2024. My name is Linda Pålsson and I am the new CEO here at AFRI. And while I assumed this position only a few weeks ago, I have a long background within AFRI, most recently from heading our energy division. With me today, we will have Bo Sandström, our CFO, and we will present both the fourth quarter and full year results of 2024. I will also take the opportunity to share some insight about this next chapter on the A3 history, which we are now entering, and I will come back to that later in the presentation. And of course, we will have a Q&A session in the end and you will have the opportunity to ask your questions. With that said then, I would like to begin by shortly summarizing the full year 2024, where we delivered stable performance despite facing a market that was overall less favorable. I'm happy to see the strong global position that we have in our key segments, as we have continued to win and deliver on important clients throughout the year. Our leading position has also been confirmed by the new ENR global ranking, which I will come back to later in this presentation. Looking at the market, it has been very strong in the energy sector during the year. This is driven by the large industrial investments in the energy transition. In other areas, the market has been more challenging, and that has been most evident to us in the real estate market, in the pulp and paper segments, as well in the market for IT consultants. In this market, we have delivered improved profitability and net sales that was in line with last year. The margin improvement was mainly driven by infrastructure that has consistently delivered on its improvement program. This has balanced against the declining margin in process industry, and we have throughout the year adjusted capacity to meet the lower demand in the pulp and paper segment. Cash flow was at a solid level for the full year. We have strengthened our financial position, which provide a good foundation going forward. We also increased our profit, which reflects in the earnings per share. Given these conditions, the board of directors has proposed an increase of the dividend to six SEK per share for 2024, which is in line with our dividend policy.

Going to the Q4 highlights then.

Our financial performance in the fourth quarter was in line with the trend that we have seen during the year with flat growth and steady improvement of the profitability. Net sales declined slightly compared to the same quarter last year. The strong growth that we saw in the energy division was offset by the lower volumes in process industry. Our order backlog increased 4% year over year. This was mainly driven by the energy division. We have won important projects throughout the year in all our sub-segments within energy production, transmission and storage. In the quarter, we saw a negative calendar effect of four hours, which corresponds to approximately minus 42 million SEK on the EBITDA level. When we adjust for the calendar, our margin improved from 7.8 to 8.3%. Improvement again was driven by infrastructure as well as the strong growth and performance in energy. We also ended the year with a strong operating cash flow of 1.3 billion SEK in the fourth quarter. So all in all, this was a stable quarter for us. If we then look into the market, we don't see any major changes compared to the update we gave in Q3. The market in the industrial sectors continues to be mixed, a challenging market in the pulp and paper segment. although we are starting to see some signs of increased market activity in Latin America. The energy sector is strong across the board with a lot of client activity and new projects in all our markets. And finally, we see a stable demand in industrial related infrastructure and transportation, while real estate market remains weak. If we then go from the market and looking into our division, we see that they reflect the mixed market we are experiencing in the different segments. Starting with process industry, sales and profitability declined as a result of the low demand in the pulp and paper segment. We are working continuously with capacity adjustments and tight cost control to meet the lower market and protect the margins in these conditions. The energy division continues to grow and improve the margin from high levels. The strong demand in the energy sector is also viable in management consulting, but the growth there was impacted by weaker demand in the bio-based industry. And I have to mention infrastructure continue to improve the margins driven by successful activities in the ongoing improvement program. Industrial and Digital Solutions was impacted by the mixed market in the industry sector and had a low utilization rate in the quarter. The utilization rate was also impacted by the new Agency Work Act that took effect in October 2024. While these effects are expected to phase out, the division will continue to adapt the business in close collaboration with our clients. We have won a lot of cool projects in the quarter, but I would like to highlight a few of them here. In the pulp and paper segment, we have been awarded an EPCM contract from the global forest industry company Arauco. They are building now a new pulp mill in Brazil, which will be the largest pulp mill in the world. And AFRI is responsible for detail engineering, procurement and construction management for the balance of plant. This is, of course, a very important project for us as the global leader in pulp and paper and with Latin America being one of our key markets. On the energy side, we were awarded a design project within the lifetime extension program of the Pax Nuclear Power Plant in Hungary. This project will ensure continued safe and reliable operation of one of Hungary's most critical energy facilities. The project aligns well with AFRI's commitment to drive secure and efficient energy transition. We have extensive experience in power plant designs and modernization, and we also see a strong potential in this area going forward. And finally, in Finland, we have received a design contract for the new tramway route in Tampere. We have previously been involved in the planning phase of this project, and now we've been trusted to continue the assignments also on the implementation phase. And this is a project that promotes green mobility and sustainable urban development. And I am happy that we can contribute with deep expertise in this project.

So to summarize, we have a lot of exciting projects across the business.

I mentioned in the beginning the AFRI's strong global market position as a key element in our journey going forward. Therefore, I'm glad to see that the 2024 global E&R ranking confirms AFRI's leading position in our core sectors. We consistently rank in the top 10 engineering companies and have top positions, for example, like number one in pulp and paper and number two in cogeneration. This year, we have also been recognized in the wind category, which is a proof point for the growing confidence in our expertise in advanced wind power solution, which is an area that we have worked to strengthen in recent years, both organically and by acquisitions. And with that, I would like to hand over to Bo to go over our financials in more depth.

Thank you, Linda. I will, as usual, cover the main financials, this time for Q4 2024. Q4 showed net sales of 7.1 billion and EBITDA of 586 million. On rolling 12 months, we closed 2024 at 27 billion on net sales while ending above 2.1 billion on EBITDA, approximately 100 million above last year. In this quarter, the comparison to last year was affected by small negative calendar effects. And from a calendar perspective, in the rolling 12 comparison to full year 23, we have a negative calendar corresponding to circa 0.1% on the EBITDA margin. In the quarter, with the net sales of 7.1 billion, total growth remained at negative 1%, as in Q3, and adjusted organic growth close to 0%. Negative calendar of 55 million is the largest growth adjustment item in the quarter. Adjusted organic growth is reported at negative 0.2%, supported by continued positive pricing of approximately 5%, in line with what we have seen throughout 2024. We continue to report negative volume in several divisions and on a free total, given the mixed market and the capacity adjustments that have been done following that during the last five quarters. In Q4, we again report organic growth close to zero, a level that we have carried since the beginning of 2024. Growth is largely driven by the energy division stable at high single-digit organic growth, offset by process industries that report negative 9.6% adjusted organic growth, sequentially down from last quarter. Order backlog increased to 20.1 billion, 4% higher than last year and 2% higher sequentially. FX impact on the order backlog contribute positively, approximately 1% on the year-over-year comparison. The energy division continued to report the largest increase to last year and remain well above 5 billion. Process industries increased the order backlog sequentially with 650 million being the main driver of the sequential increase for the group. However, process industries still entered 2025 with a lower order backlog than a year ago. EBITDA came in at 586 million, and the EBITDA margin was at 8.3%. Calendar effects affect the EBITDA margin with approximately negative 0.6% to last year, and calendar adjusted margin remained on the positive side of last year, as in the last four quarters. This quarter, 0.5% higher. We keep our ambition to step by step improving the EBITDA margin also in a partly challenging market. In general, the calendar adjusted EBITDA margin trends for the divisions seen throughout 2024 continue in Q4. Divisions infrastructure and energy continue to support the margin improvement of the group, while process industries is again reporting a higher than group average margin, but with a clear decline to last year. Utilization remained lower than last year and year-over-year decline was somewhat higher in Q4. The decline in process industries continue, but in Q4 we saw a decline also in industrial and digital solutions related primarily to the Agency Work Act that in practice came into effect during Q4. We estimate those effects will fade out over the next quarters. We again report no items affecting comparability, and we have no material project write-downs or redundancy costs in the quarter, although smaller effects are carried in the divisional results. In Q1, we will record salary provisions for the outgoing CEO as IAC. These will be in line with our remuneration guidelines and will not be material for the group. In the report, we release our expected weighted available hours for 2025. We expect a negative calendar for 2025 corresponding to close to 0.6 percentage points negative on EBITDA margin for the full year. The calendar is particularly negative in the first two quarters. For the third quarter, we expect a small positive calendar effect despite no change in available hours. 2025 show a historically low number of available hours for AFRI, and in 2026 we estimate to be back at least on the 2024 levels. Cash flow from operating activities is strong in a seasonally strong quarter. The quarterly operating cash flow of 1.3 billion confirms our ability to on cash conversion, although with a high level of seasonality during the year. The strong operating cash flow decrease our net debt by 1 billion to 4.6 billion and net debt to EBTA to 2.1 times, well below our financial target of 2.5 times. With that, we enter 2025 and AFRI's next chapter with clearly improved financial strength. And with that, I leave back to you, Linda.

Thank you, Bo.

Yes, so going into 2025 with the financial stability as well as an improved cash position gives us a solid foundation as we now are opening the next chapter of AFRI. The world around us is changing and so is the global economy and the geopolitical landscape But at AFRI, we have a strong starting point. We are uniquely positioned to partner with our clients to solve complex needs within the green transition and in the energy, industrial and infrastructure sectors. While our history is impressive and we are extremely proud of our leading market position and our strong growth to date, our strong growth to date has also resulted in a broad portfolio with operational complexities. It's clear to say that our margin is not where we would like it to be, and we are focusing on closing the gap to our financial targets. We now have a great opportunity to focus and streamline our business, reduce complexities and increase efficiency, all to ensure the most value for our clients and improve our profitability. I am confident that AFRI has a strong foundation to build upon. And together with my management team, we will take actions to evolve AFRI for the future. In essence, we will focus and strengthen our core business and ensure a fit for purpose operational structure. We believe that our efforts will allow for profitable growth, which ultimately will yield long-term value for all of our stakeholders.

Then looking into how we will go about this opportunity.

Our actions are centered around three areas. And to summarize them, we will one, focus on our core business. Two, we will strengthen our offering and by doing so enhancing client value. And lastly, we will secure a fit for purpose operational structure. To give some more details then starting off with the first area. We now have a good opportunity to focus AFRI's core business. With our historical growth, both organically as well as through acquisitions, we have gained a broad footprint. On one hand, this serves us well, giving us a strong position and several market opportunities, but it also adds complexity and spread. To ensure we are competitive in our core business, we will focus our efforts to support the long-term position of AFRI. As an immediate action, we are performing a portfolio review and defining options based on the strategic direction. Secondly, then, we will take actions to enhance client value by furthering strengthening our capabilities to deliver complex and large scale projects, as well as develop our value propositions and client offerings even further. We will build on our project oriented engineering and advisor offering, and by that ensuring structural capabilities built within AFRI. What we see is that our clients are to a larger extent demanding projects that combine expertise across disciplines, sectors and geographies. And this is a key opportunity for us to lead and provide highly competitive and complete offerings to our clients. And lastly, in order to improve profitability and support our core business, we will ensure a fit for purpose operational structure. We will take actions to streamline our operational structure, optimize supporting processes and harmonize our systems. By focusing on our core business and client offering, we will be able to simplify our operational structure. Reducing complexity in our operational structure will also result in a stronger and more holistic AFRI for the future. I have a strong confidence in this direction and the work together with my team has already started. We will present an updated strategy in the second half of 2025. At the same time, we will also implement strategic operational measures that will be announced throughout the year. And with that said, we will end this part of the presentation. We delivered a stable result in the fourth quarter, and we have entered 2025 with clearly improved financial strength. We are ready for the next chapter.

We will now open up for questions, and I'm handing over to you, Johanna.

So join us in the Teams meeting and raise your hand if you would like to ask a question. And for the sake of time, please keep your questions to two at a time so that everyone gets the chance to ask their questions. We will now start with the first question from Adela Dacian from Jefferies. Please go ahead.

Thank you. My first question is for you, Linda. As the new CEO, we're all very excited to hear about the new strategy. And I saw the comment in the release about it being updated and disclosed in the second half of the year. But maybe already now some initial thoughts. I mean, your background in energy division, which has had a quite good execution or very good relative to other segments within the group. What should we expect you to bring to the table? This is essentially my question here.

Thank you. Good question. Well, of course, again, coming back to the three areas, I can say that we can pick on a couple of those from the energy division, because what we have done there is actually to build a very strong and resilient backlog with a good mix of projects, both CAPEX projects, so to say new build projects, but also rehabilitation, modernization, upgrading projects. that makes us more resilient if we have a stop on the capex side so that way of thinking when increasing AFRI's backlog going forward will be one of the things that we will implement immediately.

That's good to hear and then maybe if we could dive a bit deeper into pulp and paper you mentioned this this bigger project that you received and it's been a while since We've seen something along those lines. So should we view this as maybe a stabilization in that market or an early sign of a recovery? Or do you still see persistent weakness?

Yeah, we see persistent weakness in the European market. When it comes to Latin America, we see slowly, slowly recovering. And that is, of course, evident by the project we showed here from the Arauco pulp mill. But unfortunately, no signs on the European market yet.

Okay, I'll head back into the queue. Thanks. Thank you, Adela. Then we will go with Stefan Knutsson from ABG.

Morning Linda and Bo, thank you for taking my questions. First on profitability, it seems that the underlying improvements were driven by good cost control rather than utilization rate improvements. Can you share some more details on cost structure and what you are doing to improve the utilization rate going forward?

Yes, to start off, you're right. Clearly, we had another dip on utilization in the quarter, primarily related to new challenges related to industrial and digital solutions that had a new dip on utilization, specifically in this quarter. And we do expect that one particularly to fade out. Besides that, utilization is an important lever for us. Over the last few years, we've been able to compensate for that with other efficiency measures and solid pricing development. But of course, we will grab the opportunity to increase utilization further. I think that having market stability will be a good platform for us. We've now been through a year where we clearly had challenges on remaining utilization on high levels for process industries. But now we have closed that year, so having some signs of market development will be beneficial also going forward on the utilization side. But except for that, I think that when Linda is talking about the fit for purpose operational structure, that clearly as an AFRI holistic perspective, that will also be containing activities that will support our utilization going forward.

Thank you for those answers. I have one additional question on the process industries. You mentioned, or we saw over the book growth again. Was it entirely driven by Arauco? And how do you view the general market development excluding this large order?

Sorry, can you repeat the first part?

Yeah, we saw the book growth in process industries again, which was good to see. Was it entirely driven by Arauco? And how do you view the general market development excluding this large order?

Now, it was the two main drivers for the order backlog for a process industry in Q4. It was the Iraqi case, but it was also the SSAB case in northern Sweden with their fossil free steel production there. So two big drivers. I think we talked about the pulp and paper market as such. On the metal mining side of the process industry business, we see quite a stable market across.

Okay, thank you. That was all for me.

Thank you, Stefan. Then we welcome Dan Johansson from SEB.

Perfect. Hi, Linda and Bo. Thanks for taking my questions. I'll also stick to two here. Maybe talking a bit more on the strategic review. I know it's early days, but are you looking into your footprint as well in terms of what market segments, geographies you're addressing? Or is it more about this backlog effect with a better mix of large scale projects where you can get up utilization and then mix it up with the bread and butter business? Thank you.

It's about focusing AFRI's core business. So again, we are strong in the sectors, energy, industry and infrastructure. And this is what we will build on. We will build on our strength. As you also saw in the E&R ranking, we have a strong global position. So it will be about that to not sort of spread too thin back to the core. We have a geographical strategy and of course that will be the base also going forward. We are in Nordic European countries and we have bases also in Southeast Asia and in Americas.

Perfect, thank you. And maybe on industrial and digital solutions, we had a new agency work act coming into effect now, I guess in Q4, at least you saw this first impact from it. Have you lost some staff due to this? Perhaps what's the magnitude and can it also impact growth rates going forward in the coming quarter? As I guess this is the first quarter where you see the full effect of it, if I understand the law correctly.

Yeah, I mean, you understand it correctly. We started seeing some effects in Q3, but they did not materialize into financial effects. But we see that clearly in Q4. Of course, The answer is yes, we lost some staff, but it's not big numbers. From our perspective, it has an effect, but it's not a massive effect. Therefore, we also expect that to be quite limited in terms of time period. We expect those effects to fade out. But to give you a view, it has an effect that we calculate approximately two percentage points on the IDS utilization in the quarter. So that type of effect is new for the quarter, and we see that it's practically related to the Agency Work Act in the quarter. But we do expect that to fade out in the next few quarters.

I understand. Thank you for this. I'll jump back into the line. Thank you.

Thank you, Dan. Then we will let Raymond Ke from Nordea in.

Hi, good morning. Two questions for me also. First one, Linda, given your long experience in energy, just a bit curious to know sort of which end markets within AFRI's energy exposure do you expect to grow faster over time when you look across it?

From the energy point of view, I would say that if you look at the global investments that go into the energy side, you can see it's... From today's level, we're expecting actually triple the investments over the coming 20 years. That will be both in new production, but also in the modernisation and rehabilitation of existing power plants. But we will see even higher investments level on the transmission and distribution side in new grids connecting with energy production, but also the upgrading and the modernization of the grids around the world, especially in Europe. So we actually see four to four and a half times today's level on a global scale. And then energy storage is actually the enabler then for connecting more renewable power. Here we see actually six times today's levels. So it's quite, of course, from a lower starting point than we can say as well then. But it's quite across, I would say, the subsegments within energy, both in the production side, maybe even more than on the transmission distribution side and on the energy storage side of the equation. So it's a good overall market.

And from a geographical perspective, it's fair to say that we have our base in Europe, and that's where we will experience the most growth. But since it's a global trend, and we also have a solid presence on a global scale, particularly down in Southeast Asia, and now also taking our first orders in Australia, those are also markets where you could expect us to take the opportunity to grow further.

Thanks for that color. And the second question, going from a colleague to being a boss. So some of your colleagues, of course, can change the group dynamics quite a bit. So I'm curious about your leadership style and how would you describe it? Do you have a strong view on other segments, for example, or do you prefer a more hands-off approach?

Absolutely. No, I mean, it's a fantastic team. It's a really strong team. And going into, I feel the support from my colleagues all the way into this. I think we have a common view in the management team on what we need to do. And I also think that we have a common view that we need to do this together. This is a team sport. So we are willing to put in the hours and get the job done. So I think we are tight as a team.

Okay, perfect. Thank you very much. I'll get back in line.

Thank you, Raymond. Then we will invite Johan Sundén from Carnegie. Please go ahead.

Thank you and good morning, Linda and Bo. Thank you for taking my questions. I actually want to hear an answer of Raymond's question, a little bit more on your leadership style, Linda. I don't think you actually answered the question. Maybe Bo, otherwise Bo can finish. Maybe it's easier for both.

No, but I think I have a pretty straightforward leadership style. It's result driven. It's client centric. We really take this from the client perspective. So result driven, client centric, empowering. This is, again, a team sport as we need empowerment and also accountability. And that happens to be the AFRE leadership principles. So I'm very much in line with that.

And I think to Raymond's question, since you think it wasn't answered, I would say not empowering, but not hands off.

Perfect. So then I go to my questions. Another also a little bit of reflection from you, Linda, because you've been with A3 for some time also back when it was named AF. And interesting to hear your kind of reflection of potential kind of style drifts and cultural drifts from where the company are today compared to where it was say 15, 20 years ago.

Hmm. Very good question. I think today we are something different. We are truly a global company today with a really strong position within the energy industry and parts of the infrastructure. So I think what's different today is that we are more project-driven, more global large-scale projects. And I think this is the base going forward also when developing AFRI's offer even further. It's building on the strength that we have within that. So we have the opportunity at least now to focus AFRI's business a bit better than it has been in the past. Because back then we was something for everybody. So I think this is the starting point for our

future director as well.

Great. And my final question is on the complexity side, which you highlight as maybe a potential or an issue as of today. What would you say are the biggest kind of complexity that you want to change? It's hard to see that from the outside, at least.

I'll start and you can follow. By what Linda is talking about when describing AFRI, we have grown over a number of years, as you related to in the last question, both organically and inorganically. We've had a perspective to continue and develop and grow all the different parts of AFRI in that sense. That leads to a bit of unfocus that we will change towards focus in that sense. And that also goes for the supporting part of the company. If you try to support everything, different geographies, different business models, different structures that we have organizationally as well, then on the flip side of that, you have opportunities to make things more efficient. But it is one, two and three. It is related to actually focusing the business as well. But that is also the intention going forward.

I think it's safe to say you will hear us say simplification and harmonization a couple of times going forward.

And some things are more easily addressed and can be more quicker addressed. And some will require other parts. But that is also something that will be, I think, much more clear when we get to an updated strategy in the second half of the year.

I understand. And just a very quick follow up here. talk about maybe more decentralization? I know that you've been working with some offshoring for a couple of years. Is that something that adds complexity? Just to put your answer in perspective.

No, that does not add complexity. That is more focusing on our ability to execute on larger projects and actually finding the resources on the global market to execute on these projects.

Okay, thank you, Johan.

Thank you, I get back in line. Thanks a lot.

Thank you. Then we have the next question from Johan Dahl from Danske Bank.

Yes, good morning, everyone. Just some clarification. I'm struggling a little bit to define what you talk about as core, Linda. It seems a bit, if I interpret it correctly, as if the dual strategy in AFRI today, the Nordic franchise, strong market positions, then you have the global big projects. It sounds more as if you define the core as being these global leading positions with larger, perhaps a bit more risky projects, but also higher profitability. Is that the right way of interpreting it? And also, if you could just... You didn't talk about buildings when you talked about energy, industry and infra. Should we read anything into that? If you could just clarify a little bit on that.

Again, if you look at the global trend, it's all driven from the investments in the green transition on the energy side, then also from the decarbonisation of industrial processes. And this is our strength around that. So yes, you're right, that is part of the core, but that's also building from our large footprint that we have in Nordics and Europe. When it comes to the real estate side, of course, the market has been challenging for us there. And our strength there, I think, lies more in supporting the buildings that are made on industrial sites. So again, back to supporting our core business can also mean that we do that by have complete offerings from all parts of energy, from A3 divisions going into that.

Not true. Just... I don't think you should read much into it, really, Johan. It will be a part, of course... The real estate segment is primarily served from our infrastructure division today, and the infrastructure is a part of our future. as it is today and then of course with everything then it will be a part of a review that that is now undergoing and then we will see what the effects of the of that is but you shouldn't read in and anything that we didn't mention real estate got you just also my second question that's on on m&a i mean balance sheet has improved quite significantly um now at year end and and when you say focus on core would you sort of

Would you envisage that you're back and sort of need that M&A driver to improve your positions, or is there still a lot under the hood to work with? So that's going to last probably a couple of years. What would you say there, Linda?

I think I'll start and see if Linda wants to continue. I think that if you look during the last year, we have been a bit more conservative on the M&A side, focusing on improving our margins and getting a shift on that area. With that said, M&A has been and remains an important lever for a company like AFRI. I don't foresee us on the shorthand side being dramatically aggressive, but that doesn't mean that we don't see M&A as an important part moving forward. And then, of course, naturally, when we look at how we will view M&A, of course, it will primarily be to support our core business going forward. However, we in detail define that. Got you. Thanks.

Thank you, Johan. Then we have next question from Daniel Jurberg from Handelsbanken.

If you would like to unmute, Daniel. Yeah, can you hear me now? Yes.

Thank you. Sorry for that. Yeah, congrats, Linda, to your promotion and also Bo and Linda for this solid quarter, I think. I was a little bit, comment a little bit on the order backlog. It was up, I think, 4%. Can you comment a bit on how much of this is estimated ballpark in 2025? And if you see growth also in that chunk of the order backlog, Do you understand my question?

You mean looking at the age distribution of the backlog?

Yes. Conversion in 2025.

I think it is as always from our perspective, a big part of the order backlog is over the next 12 months. And I think it's then looking at an increase sequentially from Q3 to Q4 order backlog will support our net sales going into 2025. It's of course a combination of different projects, but it's a fair assumption that it puts us in a better position going into 2025 otherwise. And of course, we have a bit of differences between the different divisions. and their respective backlog development. And that we also then, of course, have to consider when we set the capacity expectations going into the new year. But from a backlog perspective, it's good signals also for the upcoming year.

Really important. It starts with the backlog. Everything that we do starts out from the project that we win.

Yes. May I also ask you a little bit if you can comment on work in progress, if you have, you know, similar trends as last year in Q4 when you're on the part of work in progress, or if you have, you know, taken out a larger utilization of that or less. It's hard to see in the books, obviously, for you and your competitors.

No, I mean, we've had similar patterns in Q4 as we've had in many quarter fours before. And you can also see that on our operating cash flow in the quarter. So Q4 is a quarter where we close, you know, unproportionately a lot of projects. And they go through, you know, they kind of go through the balance sheet from work in progress to accounts receivable, and we also collect a significant portion of cash in the quarter. But it's nothing dramatically different from what we experience in most Q4s.

Perfect, thanks. A little bit weaker capacity utilization. And can you say if this is... Obviously, we can see differences between the divisions, but is it low-hanging fruit somewhere that you can talk more on or that you have adjusted for already that we should expect better utilization already coming into the 2025? So a little bit elaboration on the capacity utilization in the segments would be great, or divisions, I should say. Thanks.

I mean, utilization, as a lot of you hear me say a lot, utilization is much easier to drive in a very stable market, rather positive. We like a positive and a strong market, but the stability is really important for us. So all the low hanging fruits on utilization, those we covered 10 or 20 years ago. So it's really getting the work done and optimize our processes and be at all times in power with the market dynamics. I don't think that, you know, there's no reason why we should dip, you know, in that sense further, you know, kind of given the market, you know, unless the market, you know, changes dramatically to the negative, then of course that will be challenging for us from utilization side. But stability in the market that we do experience now in the last few quarters, it provides a good opportunity for us to start building up in a sense of better utilization in most of the divisions that we have.

Perfect. Thank you so much. Back in the queue. Thanks.

Thank you, Daniel. Then I think we have another question from Raymond.

Hi, just two shorter follow-up questions from me. In IDS, you wrote in the report that the demand for IT and telecom remains weak. Do you see any signs of that market improving?

Not short term, no.

okay great and finally just on sick leave absence also in the quarter did you notice if it was sort of unusual in any direction for you either high or low no it was nothing nothing specific nothing specific i mean in q4 is always you know kind of get into the winter period but it was nothing dramatic compared to last year very good thank you very much

Thank you. And then we have a follow up from Johan Sundén as well.

Thank you. Just to follow up back to the process indices segment and a little bit just interesting to hear your thinking around the profitability expectation of 25. Given the order backlog as you see it now, will it be possible to maintain the model you've seen this year or is there downside risk or would you say it's upside risk?

I think it is, of course, a million-dollar question, as you know. Of course, we see different parts of it. We've been through a long phase with very low demand, particularly on the CapEx side, on the pulp and paper. And that, to a large extent, we have worn through. But it's always... Until the market really starts picking back up again, we will be exposed. We will be exposed on a bit further downside, I would say. And you can look at the order backlog, and it's, of course, a good improvement in Q4 compared to what we've seen before, but still not quite at the levels that we had going into this year, which is another aspect of it. And then we have reduced capacity. But I think it's touch and go on how do the market develop, how do we actually capture projects and get that into the backlog and get those into fair projects. If we can do that efficiently in a good way, then we can, in a sense, keep at this level. But if the market still doesn't provide any support for us, it will be, to some extent, it will be challenging also in at least the first part of the year.

Perfect. Good answer. I get back in line.

Thank you. And then we have Daniel from Handelsbanken.

Yeah, thank you for letting me in again. Again, on the word backlog, is it possible to say anything about how much that is price driven and how much is volume driven of this 4% growth? I guess a large part of it should be price increases or how to think.

I'll elaborate a bit. We don't have a firm price amount in the order backlog since it has such a long time spread as well. But over the last couple of years, we've been quite stable at price increases on average weighted between 4 and 5%. So with that, doing the year-over-year calculation, and then well knowing that it's different divisions, different starting points, and everything like that. But of course, then a 4% uptick year-over-year is to a large extent reasonably price-driven, as you indicate.

Perfect. And my last question, if I may, is a little bit on the infrastructure side. You had growth of 3.2%. And you have historically been, you know, super strong in road and railroads and so forth. But my question is, there is a lot of growth in, you know, the data center, prison, defense, perhaps healthcare. Do you consider, do you need to steer a little bit more to those segments or are you already present there? That's my question.

I think a starting point is always yes, when it comes to A3. We are present there in our home markets. And then it's a matter of how is our distribution between the different subsectors within. But I think those that you mentioned, particularly on the transport infrastructure side, we see good stability and we don't expect that to disappear in the next few years. Then it's up to us to capture the full opportunity of that market in that sense. But we don't expect that growth to disappear anytime soon.

Perfect. Good luck, Johan.

Thank you. And by that, we will end the Q&A session.

Thank you so much. And thank you all for listening in today. And we are looking forward to speak to you again after Q1. So thank you and have a great weekend.

Thank you.