ASSA ABLOY AB (publ)

Hi, everyone, and welcome to the presentation of Assa Abloy's Q1 report in 2024. My name is Björnt Bell. I'm heading investor relations. And joining me here in the studio are Assa Abloy's CEO, Nico Delvaux, and our CFO, Erik Peder. Good morning. Good morning. We will start this conference as usual with a presentation of the report before we open up for your questions. And then we will round up in about one hour's time. So with that little introduction, I'd like to hand over to you, Nico.

Thank you, Bjorn, and also good morning from my side. Q1 result, I would say, very similar to our Q3 and Q4 results of last year, with a tough comparison compared to the same quarter a year ago, with continued challenging market conditions on the residential side, and definitely also with three fewer working days in March. We posted a negative organic growth of 2% for the quarter. But then also this quarter, good to see that lower, in this case, negative organic growth is overcompensated by very strong growth through acquisitions, 11% in the quarter. Neutral currency effect, so a top-line growth of 9%. And I would say a very good operational execution because despite an important volume drop, we have posted 15.4% EBIT for the quarter. That is including HHI and all related costs, 16.3%. EBITDA and a record EBIT margin for Q1 in absolute value. Thanks to good price realization, lower direct material cost, and then also good short and long-term cost accents, giving us a good volume leverage on that negative organic growth. Also, seasonally strong cash with a very good cash conversion of 67%, so around double of what we normally expect for Q1. And then we continue our acquisition pace with three acquisitions signed in the quarter. If you look at the numbers... A sales of 35 billion SEC, 9% up. Like I mentioned, 2% negative organic growth, 11% positive net acquired growth. An EBITDA margin of 16.3% and an EBIT margin of 15.4%. EBIT at 5.4 billion SEC, 5% up. If you look a little bit at the world map, unfortunately, we see a lot of negative numbers when it comes to organic growth for the reasons I mentioned earlier. And perhaps rather than commenting continent by continent, I can repeat what I said in previous quarters. We continue to see a weak residential market. as well for new build as for R&R. That is true in North America, that's true in Europe, it's true in Oceania, our main markets. Perhaps we see a bit faster recovery on the new build and on the R&R side, and where geographically definitely North America stays ahead in the curve. We still expect the residential market in the U.S. to turn first. We see more challenging continued residential market conditions in Europe definitely for the coming quarters. On the other side, we see still very good momentum on the non-residential side, perhaps not as hot anymore as 18 months ago, but still very good market conditions. Again, as well in North America, in Europe, as in Oceania, where our spec business is still up mid-single digit. If we then go a little bit to the different market highlights and project wins, also this quarter, several bigger project wins. Loading dock solutions delivered to three large distribution and logistic facilities in the U.S. and in Europe. A milestone when it comes to our Yale doorman, with one million Yale doormen sold in the Nordic countries since the launch back in 2011. And then a very nice win of a large U.S. public university, one of the biggest universities in the U.S., selecting our electronic access control package for their professors and their students. Different new product launches in the quarter, Yale Duras, a smart lock that you can fit on whatever door, adapting to the different door styles launched here in Sweden. TwinX, a keying system for high security environment in Australia. And then HID's identification system with facial recognition integrated with self-check in kiosks for using airports, hospitals, hotels, also integrated in the gate solution, speed gate solution from entrance systems. Then also this quarter, good to see that Our innovation efforts are recognized in the market. We won the design awards for our expression speed gate series and for our Yale Smart Video doorbell smart outdoor and indoor camera solutions. And then at IC West, the biggest security exhibition in the world, we also won two important awards. Control ID won the ID Phase, with their ID Phase product, won the biometrics category. And then Centrios, our access solution for small and medium enterprises, won the best access control software award. So very proud about those two awards as well. Unfortunately, 13 is for us an unlucky number. We had 12 consecutive quarters with positive organic growth. Now the 13th is negative organic growth. But then, like I mentioned, good to see that it's overcompensated with very strong growth through acquisitions. A good continued operating margin execution, 16.5% EBITDA margin run rate and 15.6 EBIT margin run rate on a 12-month moving trend. Operating profit strong, a record operating profit for Q1. And then on the acquisition side, we continue to be very active. We had three acquisitions signed in the quarter. They represent together an annualized sales of $2 billion. SEC, the highlight in the quarter, definitely integrated warehouse solutions. A U.S. manufacturer of loading dock equipment, really complementing our product offering and also bringing us several new strong brands here. into the North America market, helping us further strengthen our position for loading docks and loading dock solutions. They had a sales of 1.9 billion SEC last year. If we then zoom in a little bit into the different divisions, starting with EMEA, an organic sales decline of 3%, where, like I mentioned earlier, we continue to see challenging residential market conditions that has mainly a negative effect on our Nordics sales and our UK sales. Of course, we continue to see strong growth in Middle East, India, and Africa. We saw stable sales in South Europe, but then sales declined in the other regions. Despite a more important negative volume growth, I would say strong operating margin of 13.7%, with limited operating dilution of only 50 base points. Very good actions done in EMEA on the cost side as well, short as long-term cost actions, price versus raw material kicking in, helped by FX and M&A, both 20 base points accretive. America's organic sales decline of 1% with a stable commercial. North America's sales are slightly negative, sales in Latin America. Significant sales decline on the organic side of U.S. residential, but that is a very small part of what has remained on the residential side in the Americas. More important to look at HHI. where HHI had sales down mid-single digit, what I think is a good result, taking into account residential market conditions in North America. A good operating margin of 18.1% now, including HHI and all related. costs where also on the hhi side we we see a continuous ebit margin improvement as well as compared to last year as well as compared to q4 which i think is is very good if we take into account the fact that q1 is always seasonally top line wise a weaker quarter diluted with X20 base points. And okay, you see the dilution of M&A, which is mainly HHI related. Opening solutions, Asia-Pacific, an organic sales decline of 3%, where we had good sales growth in Southeast Asia, but sales decline in the other regions. Again, same story linked to the residential market conditions. And of course, like I mentioned earlier, for all divisions, also the fact of the three working days less in March. Very good operating margin improvement, 5.1%. Very strong operating leverage, 40 base points accretive. Hub by AVEX, 60 base points due to the weaker Vietnamese currency. And then a dilution of M&A of 50 base points that's linked to the advisement of the smart residential factory in Vietnam to Fortune Brand linked to the HHI acquisition. If we then go to the global divisions, starting with global technologies, an organic sales decline of 9%, where in HID we had strong sales growth for citizen ID and identity and access solutions, but then sales decline in the others and a significant sales decline in PACs. You will remember that we have had a very tough comparison with the same quarter last year where we built up 18 months, two years ago, a big backlog because we had challenges with semiconductor shortages. We were then finally able to invoice that backlog last year. and therefore the difficult comparison Q1, which will continue to be a tough comparison also now in Q2 by the way, affecting top line in a negative way, affecting also bottom line because Pax is a very profitable business area in HID. Strong sales growth in global solutions for the different verticals we focus on. And an operating margin of 15.4%, what I believe is a good result if we take the negative mix into account, the PEX story I explained, and a strong sales growth in Citizen ID where we make lower margins. An operating dilution of 110 base points dilution from FX and 20 base points dilution from M&A. And then last but not least, entrance systems, flat organic sales development, where we see very strong sales growth in perimeter security. Perimeter security is traditionally the first one in the cycle, and we see perimeter security really coming back now. Strong sales or continued strong sales growth in pedestrian. And then a sales decline in industrial, which is perhaps later in the cycle. And residential, where we also are convinced that residential has bottomed out and we should start to see gradual improvement from here onwards. Good growth in service, so a positive mix, service versus equipment, leading also to a very good operating margin, again, I would say, of 17%, with very strong operating leverage, 17 base points. held by currency 20 base points and then dilution from M&A, 10 base points that's mainly linked to the IWS acquisition I mentioned earlier and related integration cost to that acquisition. And with that, I give the word to Eric for some more details on the financial numbers.

Thank you, Nico, and also a very good morning from my side. The sales, as we mentioned before, was in total up with 9%. If you look on the acquired growth, the 11%, that's predominantly related to HHI as well as the new acquisition that Nico talked about, the IWS. You see very little impact of the currencies. Operating income was at a record high level for a Q1. It was up with 5%. EBIT margin for being a Q1 and also including HHI ended at 15.4%, which is considered, I think, to be strong in a Q1. The operating income was up with, as I said, with 5%. You see the income before tax has a minus in front of it. That's minus 5%. That's related to the higher interest rates cost that we have. If you look in the quarter, it was slightly above 800 million SEK compared to around 340 a year ago. If you look for the full year, we expect the interest rate cost to be roughly around 3.5 billion SEK, providing, of course, that the interest rates remain on this level. This, of course, also has an impact on EPS, which was down with 6%. Operating cash flow is in value, is down with roughly 1 billion SEK, but we compare it to an exceptionally strong Q1 of last year. If you look from a historical perspective, as Nico mentioned before, It is very strong and we have a cash conversion rate of 67%, which is also a strong number. Finally, on this slide, not surprising, our return on capital employed goes down with 2.8 points and that 14.6, which is of course related to the acquisition of HHI. If we dissect a bit and look on the bridge, the minus 2, there we have a positive 2% of price, which means that we have a negative 4% in volume. The flow-through is still at 23%, where we can sort of see a strong operational execution where... We have a good price versus cost when it comes to the direct material. We have done a lot of MFP. The total impact of MFP in Q1 on the positive savings side is $210 million. And then also we have impact from the short-term cost measures that were implemented last year that we can also see in Q1. If you look on the currencies, as I mentioned on the top line before, it's negative. It's positive on the bottom line. That's due to positive transaction effects on different currencies. And finally, you see on the M&A a negative dilution, which... predominantly come from HHI as well as the divestments of Emtek and SmartRES. If we then go even further and look on the cost breakdown, direct material is positive of 2.6 points. Out of that, roughly 110 base points comes from the mix where we have stronger Americas and we have a weaker APAC but then also we have a mix within divisions like for instance if you look into entrance systems where they had a stronger service versus equipment. Both conversion costs as well as SG&A are negative. They are impacted by, let's say, the lower sales as well as the higher wage cost. We have been able to offset that partially with the MFP and the short-term cost savings, but it's still negative for the quarter as well as we have continued our investments in R&D. Operating cash flow, as mentioned before, a little bit more than 3 billion SEK for the quarter. We see that it's seasonally strong with the exception of the even stronger that we have a year ago. We, of course, see here that we have the impact of increased net working capital, predominantly with inventory, as well as we're impacted by the higher interest rate, interest costs that we have had. Cash conversion, as I mentioned before, is at 67%. And if you look on the 12-month rolling, we are at 125%. The gearing net debt to EBITDA went up from 2.3% end of last year to 2.4% in this quarter. The debt as such went up with 3.4 billion SEK. Out of that, roughly 3 billion is related to GDP. currencies. But then also in the quarter, we have also been active on the acquisition side with IWS and the other two that you saw before, which meant that our debt went up then, as I mentioned before, with 3.4. Still, I think that we have a very strong balance sheet and can continue our acquisition strategy also going forward. Last slide for me, the earnings per share. I mentioned it before. It's down with 6% versus the same period last year. The main impact on this is coming from the higher interest cost. And with that, I hand back to Nico for some concluding remarks.

Thank you. If we summarize, I would say strong execution in a challenging market. Again, a difficult comparison with a strong quarter last year. A challenging residential market. And then three working days less in March gave us a negative organic sales of 2%. But then overcompensated with growth requisitions of net 11%. Very good execution with a record high underlying Q1 margin and a record high EBIT in absolute value. It's clear that we continue to operate in an uncertain economic climate. And I can only say the same thing as I said in previous quarters. We will continue to take advantage of those opportunities we see in the market. There is still regions where we see very good momentum. There is segments where we see opportunities to further significantly grow. And on the other side, then, there is markets and segments that are more challenging. And there we will, through our agile and decentralized organization, make sure that we adapt costs to the new reality, realize efficiency, and protect bottom line and cash flow. And then Bjorn has asked me to remind you that we have our capital markets days on 14th and 15th of May. On the 14th of May in a hotel in Prague and on the 15th of May in our factory in Ryshnov. And it's not too late to register. You can still register if you are interested to Jane. As you can see, last registration date is the end of this month. And with that, I give the word back to Bjorn.

Thank you, Nico. Thanks for that reminder as well. It's time to open up for questions now. There are not as many people in the queue as we usually have, but could I please ask you to restrict yourself to one question and follow up? Once we have been through every one, you can obviously register yourself again to ask a question and you get that opportunity. So with that operate, it means that we are ready to kick off the Q&A session. Can you please go ahead and organize that?

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star then 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. First question from Vivek Mehta, CT. Please go ahead.

Thank you very much, everyone, and good morning. Can I please ask on the U.S. residential business? So we've seen HHI sales down mid-single digit in Q1 versus down 1% in Q4. And you also commented that you're more positive on new build than R&R. So how do you think about the trajectory of the improvements in HHI? Is it still reasonable to think you can go back to growth by the end of this year? And also on HHI, you commented that there's been an improvement in the margin. I didn't catch if you commented what that margin was. So could you give us more color on that, please? Thank you.

Yes, so I think it's perhaps two separate questions. One is more on the residential market in general. Like I mentioned earlier, if you look at the residential market geographically, we still are convinced that the U.S. market is further down in the cycle. So U.S. residential market has bottomed out and we should start to see gradual improvement going forward. Everything depends, of course, on the interest rates and news on interest rates changes every day. I think the news we had over the last couple of weeks, of course, is not good news. That will definitely not accelerate the recovery. But still, we are confident. And like I mentioned, we see definitely on the new build housing starts positive numbers. We see that also if we talk to our OEM window hardware operators. OEM window producers, for instance. I was with several of them last week in the US. They are positive on the new build site. R&R takes a little bit longer because people have to move houses to see the big R&R coming back because you do R&R when you want to sell your house or when you move into a new house, that's when you do the big R&R. But I would say even with... negative top line evolution for HHI we continue to see quarter after quarter a bit improvement and that irrespective of the seasonality because HHI is seasonal in the sense that Q3 is the highest quarter top line wise Q4 it goes down and then Q1 is the lowest quarter So this Q1, which is seasonal, will be the lowest. We were still able to improve our EBIT margin compared to Q4 last year, and we were able to improve our EBIT margin significantly compared to the same quarter a year ago. We are confident that we will be able, like I mentioned also earlier, to continue to do that also in the coming quarters, I would say irrespective of where... where the top line goes because we see more and more synergies kicking in and we see also good results of some of the actions that HHI did even before we acquired them mid last year. So we are confident on the further margin improvement for HHI.

Thank you very much.

The next question from Guy Debray, Deutsche Bank. Please go ahead.

Well, thanks very much. Good morning, everybody. Can I ask firstly on global technologies? I think the negative impact of the tougher comps and reduction of the backlog versus last year was probably around 5%. So why are GT revenues down so much, you know, 9% in total? Do you see that as – a temporary setback, maybe due to timing effect this year, or is specifically the physical access control business perhaps seeing some greater competitive pressures now? That's question number one. And then maybe the second one, quick one, would be around the cash flows. I appreciate the commentary on the usual seasonality, but the 2 billion negative swing in working capital still looks pretty high to me, given the drop in volumes. So any comment on this, please? Thanks very much.

Perhaps I'll take the first question, and then Eric can comment on the second one. So on global tech, there is just one extra, you could say extraordinary item in Q1. And that's the one item that I mentioned also in general is the fact that we had three working days less in March, which obviously also affected our global tech results. But then apart from that, I would say that it's mainly our PACS result and the comparison with last year. that makes up the more important negative organic growth in the quarter. Traditionally, PAX has been a business that grows somewhere mid-single digit in normalized market conditions. We are still confident that that is the case for PAX. I would say we will find out in the second half of the year because Q2 will still be an unusual quarter because also last year, Q2, we were... heating up in an important way that packs backlog. I think it was around 250 million sacks, something around that number last year that obviously we will not get this year. And as we have much shorter delivery times today than a year ago, of course, also the order pattern of our partners in the market has become worse. So yes, Q2 will still be challenging, but then as of the second half of the year, we should see a more normal pattern again for global tech and PACs in particular.

If you then take the cash flow, I'll also remember that we get currency effects in this, which is, I mean, I talked about the currency effect that we had on the debt. Of course, we also get that into our net working capital. So I would say the main reason for the working capital, and there it's actually the inventory, is related to currencies.

Okay. Thanks very much. Thanks.

Next question from Daniela Costa, Goldman Sachs. Please go ahead.

Hi. Good morning. So a question in terms of April. Sometimes you comment on the beginning of the quarter on the call, so I was wondering if you could comment now and then more sort of towards the rest of the year. Can you give us a little bit of color around how pricing is evolving and raw material mix so that we think about the margin bridge? Thank you.

So it's a bit difficult to comment on April with the three working days less in March. But if you correct for working days Q1 and you correct for working days April, because in April we have two working days more. By the way, in June we will have again the – or we have three working days more in April and we have two working days less in June. So you will have a little bit of – a similar phenomenon now in Q2. But if you compare for, if you correct for working day, sorry, and then compare with same period last year, we have seen a better April than Q1. In that sense, I think you should also look at March and April together to get a good view where we are going. And going forward, of course, our comparison will become easier. Last year, Q1, we had, I think, an organic growth of 8%. Q2 last year, the organic growth was only 3%, on a high level, but percent-wise an easier comparison. When you look at price versus material, as Eric mentioned, we had 150 base points net accretion price versus material cost in Q1. We have continued to increase prices in several markets and in several segments. The only place where it's today difficult to further increase prices is everything that is steel-related. We are happy that we can keep the existing price level, so that's true for steel. garage doors for fencing business and specialty doors. So we still should see a good accretion from price versus cost in Q2. At the lower level than Q1, at the lower level than second half last year, but still a good accretion. And then towards the second half of this year, we should then see that become more neutral. Of course, under the conditions that material indexes stay where they are and that the pricing hygiene in the market stays as it is today.

Very clear. Thank you.

The next question is from Alexander Virgo, Bank of America. Please go ahead.

Thanks very much. Good morning, everybody. I appreciate you taking the question. I wondered if you could just dig a little bit deeper into some of the trends in Europe. I guess the April comment was incredibly helpful. I was wondering how you've seen things move through the month and thinking particularly with respect to... Northern Europe? That would be my first question. And then the second question would be, just picking up on the pricing comment there, I think pricing would probably be a lot stronger than I'd expected it to be in the quarter. So I'm just wondering if you can give us a sense, even if not the numbers, about where we should be reflecting that in the divisions themselves. Thank you.

It was a little bit difficult to understand because the line was not so clear, but I believe your first question was on if you could comment on the market conditions in EMEA. So, like I said, we still see good momentum on the non-residential side, commercial and institutional, where we still see our spec business up mid-2020. single digit, which is the only leading internal indicator we see. That is around 55% of our business in EMEA, 45% is residential, and it's clear that residential remains very challenging. I would not say that it's getting worse, but it's definitely not getting better neither. It's on a flat low level. And conditions are, you could say, the worst in North Europe and in the UK, where in the UK for several quarters now we have seen a depressed residential market. Same is true in the Nordics, where perhaps Sweden is a little bit earlier in the cycle than Finland, where we have seen also a more important decline in Finland than in Sweden, which are the two more important markets for us in Europe. in order europe and then you know situation also on the resistance not good in the rest of of europe but definitely better than uh than north europe and and the uk um i think the second question was around uh pricing um Like I mentioned earlier, we have continued to increase prices in December, January. We have also continued to increase prices now in March, April, and we will do so also in May in different markets, in different categories. Expect also a good solid effect from price for the full year this year. If you look traditionally prior to COVID times, you would have a price effect of perhaps 1%, around 1% on the yearly base. As we have higher inflation now after COVID-19 times and even in a normalized market, we still see Higher labor increases, we see higher energy costs, we see higher general inflation and material prices, even if they have stabilized, they have stabilized on a higher level. We need a higher price component to compensate for that inflation. And I think, like I mentioned at earlier calls, I would be disappointed if we would not have at least a 2% price component for the full year this year.

Great. Thanks very much, Nika.

Next question from Johan Serberg, Kepler. Please go ahead.

Good morning. A question maybe to Eric here. I would like to ask you about the entrance systems, also the margins here, looking at the 80 bits improvement year over year. I would like to sort of break down how much of that is raw material cost related and how much is sort of the service business growing and the impact from that. And I'm just going into sort of your trajectory when it comes to margins for entrance systems throughout 2024, also given your forecast. Thank you.

I can... You can start. I can answer. I think we are obviously very pleased with the 70% EBIT margin for entrance systems. Like we have said always, we aim to bring entrance systems within the 16% to 17% bandwidth. We have as a target north of 16%. We've said a couple of times to be above 17 or 17. All stars have to be aligned. We still believe, you know, somewhere slightly north of 16% is a more realistic number long-term for entrance systems. But I think it's a combination of a lot of good work that has been done, very good price realization in general in the four segments, and obviously helped by... because they have a big exposure to steel, and steel definitely went down compared to the peak of 18 months, 24 months ago. But I think they have also done a very good job in operational efficiency in their different factories, in their supply chain. I think they have also done a very good job in new product development, bringing new products to the market that we can sell at a better price and that we build at a lower price. So I think it's a combination of different things linked indeed also to the positive mix and the fact that we grow faster in service than equipment, which in the mix then gives us a positive effect on the margin. So I would say a combination of a lot of good things and I'm very happy with the execution of entry systems over the recent years.

Perfect. But then also going into the next three quarters this year, how do you see the margin progressing here? Typically Q1 and Q2 tends to be lower margin quarters and then it picks up in the Q3 and Q4. Should we expect that also this year?

We will see going forward because obviously a lot of things depends also on the mix. First of all, mix service versus equipment. I would love to have a negative mix because that would mean that our equipment business is going to grow much faster. But obviously we also have... important mix effect among the different segments. We know that perimeter security has by far the best margins in entrance systems. So it will depend also how we see the relative growth of the different segments. And it will also depend on maturity in the market, how how we'll be able to keep prices further, increase prices, what will happen to material indexes, and so on. What we have said at earlier occasions, we believe the north of 16% EBIT for entrance systems is an ambition and reachable target, and that's what we internally work with.

But also there, Johan, you know that this is exceptionally strong for entrance being a Q1. So don't sort of expect, let's say, that you would have the normal season effect within entrance system because this is very strong.

Yeah, I understand. So the more steel, the better margins right now.

Or the more service we can do is also pretty good.

Thank you very much.

Next question from Gustaf Schwerin, Handelsbanken. Please go ahead.

Yes, morning. Thank you. On HHI and the topic of residential maybe bottoming out in the U.S., when you look at the volume development quarter of a quarter, would you say the drop is lower than the normal season, or is there any improvement yet to be seen? And then related to that, can you comment on the level of price increases for Q1 and HHI versus the group average of 2%? Thank you.

Like we said, the organic growth has been minus 5%. The organic decline has been a little bit higher than in Q4, if you compare Q4 with Q4 the year before. So you could say that it's slightly worse than... than Q4. But again, we have the more important change is the seasonal change where again Q3 is the highest and Q4 starts to go down and Q1 is the lowest. We will see now how top line evolves in the coming quarters. When it comes to pricing, we don't want to comment specifically on HHI. Let's say that pricing has been similar to what we mentioned on group level.

All right. Perfect. Thank you.

I understand that there's one person left in the queue. So if there are any more questions, then you can press star one, I think, and we will probably be able to go to you. Please continue, operator.

The next question from Liz Mighty. Jeffries, please go ahead.

Good morning, gentlemen. Two quick questions. Number one is, Nico, on your outlook on non-res construction in the U.S. We had another footprint from the ABI this morning. Just perhaps if you could kindly comment on what has been your specs business in the U.S. has done. I think you commented on Europe earlier on this call. How's the specs business done in the U.S.? Secondly, how do you explain the discrepancy between ABI and your specs? I think we've had ABI beans. for such a long period of time that if indeed it's a leading indicator for your business, then you would have already seen it in your numbers by now. Perhaps comment over here on how do you see the outlook?

So like I mentioned, in general, our spec business has been up mid-single digit, again, against a difficult comparison a year ago. Spec business was slightly better even in the Americas than in EMEA. So we continue to see good momentum, and we see that good momentum over the different markets. Verticals, K-12, universities, healthcare, you name it. Obviously, offices should not be a surprise that offices is a little bit more challenging, but that's a smaller vertical area. So, yes, we see a discrepancy, perhaps even a big discrepancy between our spec business and I would say also our result, our sales results and what ABI tells us. Now, if you look a bit deeper in ABI, you will see also that the ABI index is better. for the institutional part and from the pure commercial part and obviously we are more exposed to institutional than pure commercial so that might be part of the explanation the other part of the explanation is obviously that there is a very big long pipeline of construction work that is being being executed now and yeah clearly that that backlog of construction worth becomes smaller as ABI indexes remain on the lower level. But so far, we don't see that slowdown in our commercial business or non-residential business. a flat, slightly positive development in Q1, despite all the reasons I gave earlier in the call. And we are still positive on the commercial side in North America. So I guess my honest answer is that it's difficult for me to explain why. the reality and what we see versus what ABI tells us. We see also discrepancies between ABI and Doge index, which is another indicator you can look at.

Thank you. Then the second one, perhaps for Eric, the savings. I think you talked about MFP 210 million. If you just confirm that number is correct, if I heard it well. And also on the short-term actions, you know, is this just the carryover from last year? What have you achieved in Q1? And maybe for both, how should we think about the incremental savings for the rest of the year?

No, Rizku, you're absolutely right. I talked about MFP savings of 210 million SEK for Q1. What we believe then for the full year for MFP is about 600 million SEK. If you talk about the short-term cost savings, those ones we initiated most of that during, I would say, end of Q2. So if you look on Q1, I would say that the savings from that is slightly higher than the 210 million that I talked about on MFP. But it's also so that, I mean, we are continuously taking actions, I mean, Nico talked before that we have, let's say, an agile and decentralized organization. So if we need to do more, we will do more.

Thank you.

The next question from Andrew Wilson, JP Morgan. Please go ahead.

Hi, good morning. It's probably two relatively quick follow-ups, if that's okay. Just on the pricing commentary, do