ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Assa Abloy's 2024 year-end report. My name is Björn Tebell. I'm heading Investor Relations and joining me here in the studio are our CEO, Nico Delvaux, and our CFO, Erik Pieder. We'll start this conference as usual with a summary now of the report. And then we'll open up for your questions. And we've set aside about one hour for this conference. So with that, over to you, Nico.

Thank you, Bjorn. And also good morning from my side. Q4 results, I would say, very much in line with previous quarters. For Q4, we had a stable organic sales development, to be precise, minus 0.3% organic growth, with strong sales growth in global tech, good sales growth in Americas, a stable sales growth in EMEA, but then sales decline in entrance systems and significant sales decline in APAC, reflecting a little bit market conditions. where we continue to see good momentum on the commercial side, but continue challenging market conditions on the residential side and also for the logistics vertical in entrance systems. But then also this quarter, a flat organic sales that is compensated by very strong growth through acquisitions of net plus 6%. Also held by currency 1%, so top line up 7%, 40 billion SEC. And then I think very strong execution with a strong operating margin of 16.5% and a record operating income of around 6.5 billion SEC. Also very good job well done on the balance sheet side, working capital with an excellent cash conversion of 141% in the quarter, 110% for the full year, and a record cash of 8 billion SEC in the quarter. and we also continue our acquisition pace eight acquisitions completed in the quarter 26 for the full year 26 is a new record it's now the third year in a row that we break the record when it comes to number of acquisitions so very happy with that if you look in the numbers like i mentioned sales close to 40 billion sex seven percent up EBITDA margin of 17.4% on a record level and even above the 16% to 17% bandwidth. An EBIT margin of 16.5% and now also on a 12-month moving trend at 16.2%. So in that 16% to 17% bandwidth we aim for. EBITDA up 14% above 6.5 billion SEC and then earnings per share up 7%. If we then comment a little bit on the different regions, starting with North America, plus one organic road in the quarter, very similar story as previous quarters. We continue to see good momentum on the commercial Perhaps not as hot as two years ago, but still very good momentum. Also good there to see that our specification business came back in a strong way in Q4. We had a high double digit growth for specification activity. and especially the healthcare vertical that the previous quarters was a bit of a concern came back strongly and overcompensated in the quarter, I would say, for the previous two quarters where we had negative development. The other end, residential, still challenging with interest rates not going down fast enough. And then also the logistic vertical still on a lower level affecting our industrial segment business for loading docks in entrance systems. Strong South America, plus 8, still good momentum in, I would say, most, if not all, markets in Latam. Africa, plus 2. Europe, minus 2. Europe, perhaps the minus 2 reflecting what we see in Europe. Also here, similar story as in the U.S. or in North America. Very strong commercial activity, but still lower activity on the residential side. Australia, New Zealand minus six. That's partly linked to also there the residential segment, but it's also more negative down than you would expect due to a difficult comparison for some project orders for HID in Australia last year. And then Asia, minus six, mixed picture. India still growing strong, double digit, but then very challenging market conditions in Greater China, where we have seen a double digit negative growth and also a bit of spillover to some of the Southeast Asian markets of that negative market condition in Greater China. So minus six in that part of the world. If you look at some market highlights and start with some project wins, I will just take a couple of them. We upgrade 100,000, a little bit more than 100,000 mechanical cylinders to E-Click for a German high voltage grid operator. Very nice, big project. We had a restart, I would say, of the loading dock business with some orders, bigger orders for distribution centers in Mexico and Belgium. That's good news because that means that that loading or that logistic vertical is bottoming out. You know that the lead times there are a bit longer. So we will only realize sales there in the second half of this year. And then perhaps also file prevention fingerprint readers for bank terminals in a major South American for major South American bank. That's an important feature. business for our fingerprint products in in hid and that's a continued strong momentum product launches also 2024 was clearly a good year for new product launches with a record number of more than 550 new products launched in the year If I just take one there, new smart lock launches, a lot of new smart lock launches. If I pick one there, Kwikset, Hello Select, our first product range that we launched now for HHI after the acquisition in a combined effort. Very excited about that product launch and there's much more in the pipeline to come for Kwikset this year. So now you see several quarters now with challenging organic growth numbers but then very strong growth through acquisitions. Our sales 48% up if you compare with 2019. Our EBIT margin, like I mentioned, back into the 16% to 17% bandwidth on a 12-month moving trend at 16.2%, and an EBIT margin on a run rate of 17.1%, even slightly above that bandwidth. So better top line, better margins, therefore accelerated operating profit, record operating profit in the quarter, and the run rate EBIT up 63% if you compare with 2019. Acquisitions, like I mentioned, active quarter again with eight acquisitions closed in the quarter, 26 for the full year. Those 26 acquisitions represent an annual sales of close to 8 billion SEC. And then we also now in January divested almost everything of the citizen ID business. There's still a very small part remaining linked to the U.S. green card, a business where administration documents with U.S. government takes a little bit longer. That divestment represents an annualized sales of around 1.4 billion SEC. Some highlights on the acquisition side, Lawrence Doors, an acquisition for Entrance Systems, a US manufacturer of coiling steel doors and shutters, adding complementary products to our core business. And they had the sales of 310 million SEC in 2024. Premier Steel Doors and Frames, an acquisition for the Americas, a US manufacturer of hollow metal doors, complementing our current product portfolio on the Americas side. They had a sales of 380 million SEC in 2024. If we then zoom in into the different divisions, starting with EMEA, EMEA had a stable organic sales development, I think a good result, given the market conditions. They had good sales growth in the Middle East, in Africa, and in Central Europe. stable sales growth in nordics where definitely in sweden we have seen a market uh bottoming out and we should from here onwards start to see a recovery in sweden which is obviously an important market for for us as well top line as bottom line wise And then the sales decline in South Europe and in UK Ireland. Very strong execution with an operating margin of 14.8%. 40 base points better than last year thanks to a strong operating leverage. 80 base points accretion. Good price-cost realization, slightly positive mix, but a lot of good actions on the cost side. Good margin improvement despite a dilution on FX of 40 base points. That's because of the weaker SEC and then M&A was stable. Overall, I think good quarter for EMEA. Good quarter for Americas with an organic sales growth of 2%, with strong sales growth in LATAM and North America non-residential segment. A slight single-digit sales decline for the North America residential segment. An operating margin of 17.7%, also here good operating leverage. FX dilutive 30 base points. And then the M&A shows 40 base points accretive. So perhaps a little bit misleading because the 40 base points accretive comes mainly from the bridge on HHI, where we have a positive year-on-year effect. But on the acquisition side, we had a strong dilution of the Levelock acquisition of 100 base points linked to integration costs, but mainly also linked to investments on the R&D side. They are working on several new product developments, and obviously we want to bring those products as soon as possible to the market. Therefore, the dilution will remain more important also now in, let's say, the first half of the year, and then the second half of the year that should more stabilize to normal levels. If we take then the third geographical division, Asia Pacific, a strong organic sales decline of 11%, strong sales growth in South Korea, sales decline in Pacific, and then a significant sales decline in China, And in Southeast Asia, where I mentioned earlier that we don't see an improvement of the market conditions in greater China, we've already, something we believe the market conditions are further going down. And where there is also some challenging market conditions in some markets in Southeast Asia, like for instance, Vietnam. Operating margin of 5.4%, so a good improvement compared to last year despite a strong decline in top blinds, so very good execution done by the team over there with strong operating leverage of 140 base points. Also here have ex-dilutive 30 base points and they didn't do any acquisitions in the quarter, so a stable M&A. Going to global tech, global tech organic sales of plus 5 with good performance in HID, very strong sales growth in global solutions in the different segments. And then I think an excellent operating margin of 19.3%. With here extreme good, I would say, operating leverage of 400 base points. Of course, good price-cost realization, good cost measures, operational efficiency measures, but also helped by a positive mix in the sense we had more packs for HID, and we had more hospitality for global solutions, and they have higher margins. Also helped a little bit by FX, 20 base points, and then M&A dilutive, 40 base points. So very happy with that result. Entrance systems, last but not least, an organic sales decline of 2%. Strong sales growth in pedestrian, stable sales in perimeter security, but a sales decline in residential and industrial. Residential, of course, linked to the residential market, mainly in the US, and industrial, like I mentioned earlier, linked to loading dock business for the logistic vertical. Despite an organic sales decline of 2%, good operating margin of 17.5%. We've also here strong operating leverage, 50 base points. Halved by FX, 20 base points. And then M&A dilutive, 60 base points. That's mainly ski data. That's a bit lower perhaps than expected because we have already said ski data is around 100 base points, slightly higher than 100 base points dilutive for entrance systems. That has to do with the fact that ski data is seasonal. Q4 is their best season, therefore lower dilution. So we should expect a higher dilution now in Q1 and Q2. And with that, I give the word to Erik for some more details on the financial numbers.

Thank you, Nico. And a very good morning from my side as well. I think Nico has mentioned a lot of the numbers that you see, but sales was up in the quarter with 7%. That's the same as what we had for the full year. And if you look on the quarter, I mean, the difference between, I would say, the year and the quarter is that you can see that acquisitions were slightly lower, 6%. In the quarter, it was 8% on the full year. If you look on the operating income, it's up with 14%. With sort of on the full year, it's up with 10. And the margin, we have 100 base points improvement in the margin in the quarter, so we ended at 16.5. And then, yeah, we are very happy that we, for the full year, are actually within the bandwidth with a 16.2% achievement during the full year. In the quarter, we had a slightly less impact on finance cost. So there you see that it's 16% net income plus six and earnings per share. In the quarter, it was up with 7%, and for the full year, it's up with four. And as mentioned before by Nico, we had a record strong Operating cash flow above 8 billion for the quarter. It's up with 10%. And finally, then the return on capital employed improved sequentially quarter by quarter with 20 base points and ended at 14.4%. If we then look on the bridge, the organic part price versus volume price is a high one, I should say. So probably a little bit closer then to one and a half, which then leaves that the volume is about 1% negative. You see a very good flow through of 120 base points or in value almost 450 million SEC. This comes from price. It comes from lower material cost. We had cost reductions coming out of the MFP of about 170 million SEC. And then we have, of course, other kind of cost control and operational efficiency measures. Currency didn't sort of really have an impact in the quarter. If you look on the acquisitions, I mean, I think Nico mentioned it before, that sort of what makes it a bit strange is the year-on-year effect from the HHI transaction. This is, let's say, it's a bridge phenomena. But then it's also, if you look then on SKI data, it is... slightly lower in the quarter so you can expect because the first half of the year is let's say it's sort of there they have if I call it the lower seasons so you can expect sort of a higher impact in the first quarters of next year and then you can also expect roughly a similar pattern then from the level lock also for the first half of the year. Cost breakdown, positive evolution on the direct material in total 230 base points. Of that roughly 100 base points comes from mix where we had a stronger global tech, we had a weaker APAC, but then we have also some interdivisional mix that explains it. So if you look on the true, if I call it price versus cost, we had a positive impact of 130 base points in the quarter. Conversion cost is impacted by, I would say, inflation and higher wage costs with a negative impact of 90 base points. On the SG&A, you start to see that it's less negative. Now it was 30 base points in the quarter. And sort of, yes, it's impacted by inflation and higher wage costs, but we also continue to do a lot of investments in R&D. You saw before that at a record number of product launches in 2024, as well as investments in our sales organization. Cash flow, a record cash flow, a cash conversion of more than 140% in the quarter. Yes, normally the fourth quarter is our best quarter, but this was exceptionally strong. On the full year basis, we had a cash conversion of 110%. in the quarter the reason why it is so strong is i mean we had a record earning we still had good improvement on the working capital especially an inventory but then we also have a minor impact i would say of sales of a couple of buildings which also sort of impacts it If you look on the gearing, net debt to EBITDA is the same as what it was a year ago. It's 2.3. If you look in actual numbers, our debt is now slightly above 70 billion SEC. It's up with roughly 3 billion SEC versus end of September. But then you should keep in mind that during the quarter, we had sort of impact of roughly 1%. 3 million of currencies, negative impact, 3 million of currencies. We paid a dividend, which is also roughly 3 billion SEC, as well as we had acquisition payments of roughly 3 billion. But that was then compensated by the strong cash flow that we have. So I would still say that we have a very strong financial position on the balance sheet, so we can continue our acquisition strategy. Last slide from my side. I mentioned the numbers before on earnings per share. It went up in the quarter with 7%, and for the full year, we had an increase of 4%. And with that, I give back to Nico for some concluding remarks.

Thank you, Eric. So we believe a good quarter, a good end of the year. We have a strong sales growth of 7%, and then strong execution, giving us a strong operating margin of 16.5%, and a record operating income, and then also a record operating cash flow with very good cash conversion. It is clear that we continue to live in an uncertain economic climate, I mentioned the residential market. I mentioned the logistic vertical. I would say we also continue to live in an uncertain political climate where potential tariffs come and go. But that's the reality. That's something we have to live with. And therefore, we are still convinced that our decentralized organization It helps us to really take decisions on a local level, as things will be very different on a local level. Us being able to take decisions with local people, I believe gives us a competitive advantage, and we are ready to continue to invest there where we see opportunities, and we are ready to cut costs there where we don't see the market recovering. The board also proposes to the AGM a dividend of 5.9 SEC per share, also to be paid in two equal tranches this year as last year. And then Bjorn asked me to remind you that we have a sustainability seminar tomorrow and that we have our Capital Markets Day in the US on November the 19th. And with that, I give the word back to Bjorn for Q&A.

Thank you very much, Nico. Well, that means it's time to open up for questions. Could I please remind you to limit yourself to one question each with a follow up so we can allow everyone hopefully to ask their questions. Operator, this means that we are ready to kick off the Q&A, so please go ahead.

Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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 and two. Questions on the phone are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead. Hi, good morning.

Thank you for taking the question. I'll take the opportunity of the question and the follow-up. But starting with the first question, I wonder if you could comment a little bit on sort of how you're planning around potential tariffs in the U.S. in terms of have you seen any pre-buy? What do you expect to do on pricing? And then I'll ask the follow-up.

Yeah. Morning, Daniela. Yes, we have seen the story on the tariffs for the US changes every day. As you know, we have the strategy to produce as much as we can locally for the local markets. And if you look in the US, I would say more than 70% of what we sell in the US is produced in the US. We previously also said that around 80% to 85% of what we sell in North America is produced in North America. So indeed, Mexico, and to a lesser extent, Canada are important import markets for the US, together with China, obviously. If you summarize a little bit on group level, I would say that most of our colleagues, competitors in the market are in a similar situation. If you take, for instance, China, we import on the lower end products and solutions from China because China is still, for those type of products, the best place to produce in the world. And then it's clear if import tariffs would come on the different markets, we will compensate or try to compensate that through price increase. As a matter of fact, Mexico tariffs were initially announced we were ready with our letters to go out to increase prices now of course we have hold back as the tariffs on Mexico were also hold back but in short you know most of what we sell in the US is produced in the US and for the rest we will compensate through price increases we are the market leader for most of the things we do. Therefore, also, we have the task to increase prices as first, and then we are confident that the market will follow.

Thank you. And then just in terms of like your view in regarding U.S., I think over the last couple of quarters, you have talked about some, I don't know if confidence is the right word, but some optimism regarding Rezi potentially troughing, given all what is happening in rates.

and and the quarter being slightly down is your view changed in any sense or how how do you think about the us resi outlook now so perhaps i try to answer in more in general on on the us if you take commercial like i mentioned earlier we are still very positive on commercial or non-residential development for the us that's also translated in in our own internal and only internal indicator long term that we have our spec business where we see a good momentum we're also a bit more optimistic now on the logistic vertical because we have seen the first orders coming in from let's say the big guys and then normally the market follows but like i said there when we get orders today lead times are between six and nine months so it's more recovery towards the second half of the year On the residential side, it's clear that we are less optimistic today than three months ago in the sense that it's clear that interest rates will go down slower and that interest rates will go down less than we thought three months ago. And obviously, interest rates are important for a recovery of the residential market. That being said, I think the comparison definitely becomes easier compared to last year and then I think interest rates is not the only story on the residential side. I think there's also the need to invest in new houses and I think a lot of people also perhaps take the decision not to stay in their house and they will do anyhow bigger refurbishments in their houses. We are still confident that the residential market is going to recover, but we are less optimistic on the timing than we were three months ago.

Thank you very much. The next question comes from Gaël Debray from Deutsche Bank. Please go ahead.

Thank you. Good morning, everybody. So I have two questions as well. The first one is on the organic growth dynamic. Volume growth has actually been negative for nearly two years now. And you said that accelerating organic growth remains a key priority. So specifically for 2025, I mean, do you see some kind of inflection point now? And what should be the drivers of this potential inflection point?

I'll answer this question first because you said you had two questions, but okay, I will answer this question first. I don't agree that it's more than two years that we have seen negative volume growth, but it's true that since several quarters we have seen a negative volume growth. And I would say that is really the only challenge we have because if you see top line we have good pricing we have good growth acquisitions i think we have good execution good habit habit margin excellent cash conversion and cash flow so the the point we really have to work on is is get this organic volume growth back then of course we live in a market we we experience every day and i think it's important to make sure that at least we are performing in line with the market and preferably do a little bit better than the market. And it's clear that in those markets where you are a clear market leader, it's very difficult to do better than the market. But I would argue if you look over a longer period, over the period perhaps that you mentioned, that we definitely have overall improved our relative position in the market. So in other words, have done better. than the market. I think that's the only thing we can do because we live in a given market condition. For this year, again, I think that the commercial side of our business, two-thirds of our business will remain on a good healthy level and I think we should be able to realize good growth on that part. I mentioned earlier the logistic vertical where we are confident that it has bottomed out and it's coming back and we should see there good momentum on the sales side in the second half of the year. The question mark remains the residential side because there the only positive is that the comparison becomes easier with last year. And then at least that in some markets in Europe we should start to see momentum from the interest rate cuts. For us an important market, like I mentioned earlier, Sweden. Sweden has now done five interest cuts. The first one, I think, almost a year ago. And we know that it takes around nine months, perhaps two years, before we start to see that in our numbers. Those five rate cuts together in Sweden are important. So we are confident that in Sweden we will start to see the recovery of our residential business now soon. And again, Sweden is an important market for us. EMEA is a big market and also a profitable market.

Thanks a lot. And the second question I have is on the margin side. There is now only 39 million left for provisions for restructuring on the balance sheet. So I was a bit surprised not to hear you commenting on the next MFP program. So any comment on that, please? And specifically, I was wondering if the size of the potential next MFP program could be dependent on the magnitude and the timing of the tariffs.

So on MFP, we have said that we would announce MFP 10 in the Q1 call. As a matter of fact, we are finalizing the scope of MFP 10 and sneak preview perhaps, we can say that MFP10 is very similar, it's going to be very similar as to MFP9, as well in size, in dynamics, with all divisions contributing. And we will come with the details then in the Q1 call. And obviously that MFP10 program is important on protecting the bottom line. like you mentioned. Then, of course, we continue to do day-to-day operation efficiency, again, through lean, through VA, VA automation, robotization. And we have also continued to increase prices. We have increased prices end of last year, beginning of this year. Those price increases are now kicking in to the market. And then, On the tariffs, no. Tariffs has no effect on our MFP plans because that's much more long term. But tariffs obviously can have an effect on our pricing component. If tariffs would go up significantly, obviously, we will do more price increases and the price component would be higher. Thank you very much.

The next question comes from Andre Kuknin from UBS. Please go ahead.

Good morning. Thank you very much for taking my questions. I'll actually start with a follow-up. Just on pricing for 2025, if we put the tariffs issue aside, how would you expect pricing to develop? You were quite clear a year ago to say that 2024 would be a year of still clearly above normal pricing. Can we say that about 2025 too, or is it we're now normalizing?

So if you look prior to COVID, we were living in a low inflation world and prices were around 1%, slightly lower than 1% perhaps. Then, of course, we have had a couple of years of hyperinflation. And then last year was still an important year from an inflation perspective. Last year, our price component was slightly above 2%. I think there is consensus that in the future and definitely also this year, we will live in a world with higher inflation as you compare to prior of COVID. So I would say the price component should be higher than prior to COVID, so higher than 1%, but lower than last year, slightly above 2% because it's a bit more. normalized so it will be somewhere between one and two i think one and a half percent as a as a ambition level would be a good level for the price component this year then again it all everything will depend how tariffs might impact that number thank you uh and um my broader question is on the acquired growth and the acquisition and acceleration that you've seen uh

over the last two, arguably three years. Could you maybe talk about what enabled it? Was that more kind of better hunting grounds and willingness to sell by vendors? Or did you change anything? Or did you add acquisition capacity in any way at the group? I'm just trying to think if this is obviously three years, we can extrapolate that as a trend, but wanting to understand that a bit better before we do that.

I would say it's in the first place because of the active work we have done on acquisitions in the different divisions. We have five year strategy plans for every division that we also review on a yearly base and as part of that strategy for the division we have obviously also an acquisition strategy. Every division says this is the type of companies we would like to acquire and then we build a funnel and then we start to talk to people. Some people we have to talk to for 10 or 15 years. Some people are immediately ready to sell. That's the work we have been doing since many years. As you know from our Capital Markets Day, we have said that we have identified more than 900 potential acquisition targets. We are not talking to all of them, but we are definitely talking to many of them. Therefore, it's a continuous job, I think, well done by our different divisions. Through that work over the recent years, we have seen now more activity of people that were willing to engage with us and sell their business to us. Thank you.

The next question comes from George Featherstone from Barclays. Please go ahead.

Morning, everyone. Thanks for taking the questions. First one, just wondered what kind of environment that you're setting the business up for in 2025. Is it a more defensive posture given the uncertainties you expect on growth? Then when we think about 2025 more generally, will it be more of a M&A driven top luck? top-line growth environment like it has been for the last 18 months or so. Yeah.

Obviously, like I mentioned earlier, our challenge is really how to get back to positive organic volume growth, and that's an ambition we have for this year, and that's what we are working hard on every day. You have seen that we have invested a lot in new product development, trying to create that additional demand in the market and trying through new product development to also do better than the market. So that is a priority for this year. When it comes to acquisitions, the spillover of the acquisitions we did so far is around 3% for this year. And then we are confident we will do more acquisitions this year. So also acquisitions will continue to be an important contributor to the top line this year. Then how much? I don't know. It depends. We are talking to a lot of companies, but I don't know if we will come to an agreement to buy or sell for those companies. So we take that as it comes. And there our ambition to grow 5% through acquisitions over a business cycle remains intact. And I would say also the 5% ambition on the organic side remains intact. It's clear that to see a strong recovery on the organic volume side, we need also help from the residential market. Us being a strong leader on the residential market and in some divisions being very exposed to residential markets, obviously it's difficult if the market is not coming back.

Okay, thanks for that. Really helpful. Just to follow up then on something else in the report, your return on capital employed dropped quite significantly in 2024, which I guess is mostly at the impact of HHI. But I just wondered, what's the level you're looking to target from here and maybe the key drivers that you have to improve from the level you're at today?

I mean, as you rightfully said, the main impact on the return on capital employed is HHI. Then, of course, we have other acquisitions also which impact. But I think for us, I mean, we don't like set a specific target number that we have, but we want to see a continuous improvement like now we had between the Q3 and the Q4. where the 20 base point improvement and that is something like we want to continue to sort of to see a positive evolution then on on the return on capital employed thank you the next question comes from vivek mida from city please go ahead thank you very much everyone and good morning um i have one question and one follow-up please my first question is on

The entrance systems margin, please. So on the quarter, you had the 60 base points dilution from M&A, but that does imply that on an underlying basis, you're still seeing very good momentum on the profitability side. So could you just walk us through where you see sustainable margins for that division in the midterm? Thank you.

We have always said that we would be happy if entrance systems would be within the band width. We should not remember where entrance systems come from not longer than two years ago. They were below 14%, so I think they have done a very good journey over the recent couple of years. So we still want to remain with that statement that we would be happy if they are above the 16%. For, I think, two main reasons. One is SCI data dilution. As we mentioned, SCI data will dilute more than 100 base points over a year. It's true that there was only 60 base points in Q4, but like we explained, ski data is very seasonal, so the dilution in Q1 and Q2 will be significantly higher than the 60 base points that we saw in Q4. And the second thing, of course, we have now good tailwind from a positive mix, service versus equipment. We make better margins on service than on equipment. I'd be happy with that, but obviously we want to see the equipment growth coming back, also when the logistics vertical will recover, and then we will see that mix shifting more towards equipment where we make lower margin than on the service side.

Understood. Thank you. My follow-up. is just on the exit rate. Can you give us any color on how the first few weeks of the first quarter have trended in terms of growth? Thank you.

Because even for the full month of January, because we have looked now at the full month of January, we can say that it was slightly better from an organic road perspective than Q4. Then, of course, we have to say that January is a small month. On top of that, we have Chinese New Year affecting a little bit. Asia, business, you could say that Q1 is really made or broken in March. March is really the heaviest month. But definitely for January, organic growth rate has been slightly better than Q4.

Thank you very much.

The next question comes to Alexander Virgo from Bank of America. Please go ahead. Mr. Virgo, your line is open. You may proceed with your question.

Thank you very much. Morning, Nico. Morning, Eric. I wonder if you could talk a little bit about global tech. You've obviously got some fairly easy comps as we move into 2025. It's good to see the growth returning there. So could you just talk a little bit about what we need to think about as we model 2025 numbers and perhaps a comment there on the operating leverage as well, given how strong it was what's driving the mix there to, again, help us think about how we model 2025. Thank you.

Perhaps we should split a little bit between global solutions and HID. HID is around 65% to 70% of global tech, and the rest is global solutions. If you see global solutions in almost all verticals, they have seen very high single-digit growth throughout last year. We continue to see good momentum, so we should continue to see good organic growth for those different verticals in global solutions. From the different ones, like we mentioned earlier, hospitality is the better margin. So if hospitality grows faster than the others, it has a positive mix. If the others grow faster, it has a negative mix. Obviously, the others are still smaller than hospitality, In a way, we want the others to grow faster than hospitality because we want to grow the other verticals to a similar level as hospitality. Therefore, if that happens, it should have a negative mixed effect on profitability. That being said, we then also acquired InView in Global Solutions. They have a good margin, double-digit margin, so they should also help from a profitability perspective for Global Solutions. If we take HID, PEX is now back to normal, you could say, and if you look prior to all the disturbances in supply chain, PEX was a business which was growing somewhere mid-single digits, like diesel. We are confident that that will now be the case also going forward, and then everything will depend how successful we are on the other verticals, how fast we can grow the other verticals. And there will be the same picture. Pax is the best profitable business in HID. The others are smaller and lower profitability. We have the ambition to grow the others faster, and if we succeed, then that would also have a negative mix effect. We remain with statements that we have made earlier in the sense that we said global tech should be able to grow faster than the other divisions and should have growth numbers more high single digit and should have an EBIT margin slightly above the 16 to 17% bandwidth we aim for as a group. So, I don't know, above 17 but not 19, 20 like some of you perhaps have dreamed about in the past.

That's very helpful. Thanks very much.

The next question comes from ID Risk from Jeffries. Please go ahead.

Good morning, gentlemen. I'll stick to two. Maybe if we can start with the Nordics. I mean, five consecutive interest rate cuts in Sweden. But I do remember that your business has been quite resilient in the face of the decline that we've had in the Nordics over the last few years. Can you just remind us how a big of a drop you've seen there from the peak? And also, how do you think about the sort of shape of the recovery? Do you already see it in your order book? Because I remember you, Nico, always said like Europe is second after the U.S. sort of rebound. Just perhaps any thoughts there? And I'll start here. The second one, basically, just quickly on the price-cost component, 130 basis points positive contribution. Just how should we think about that in Europe? sort of Q1, Q2, and even potentially the rest of the year. Thank you.

We start on Nordics and U.S. Europe. Yes, we have always said that we were convinced that U.S. would recover faster on the residential side than Europe. We still believe that might be the case if you take the full market, although, again, we are less optimistic on the U.S. recovery today than we were three months ago because you have seen that the decisions of the Fed And if you look at interest rates and where rates of the loans of people that own a house in the U.S. stands, there is still an important gap. And those interest rates have to go down in the U.S. to really see that strong recovery of the residential market in the U.S. Same is true in Europe. If you exclude Sweden, I think the ECB is also late, perhaps very late in cutting interest rates, and so it will also take that a little bit longer if you look in most markets in Europe. We are more optimistic on Nordics, Sweden in particular, for the exact reason, like I mentioned, that we have already had five cuts and the first cuts are since a year or so ago. So we are confident that Sweden has bottomed out and that from here on we should start to see good recovery. Then it's true that we went much less down than the numbers on new build or the numbers that you read on construction market in Sweden. In the worst periods, we were down mid to higher single digit. Therefore, also the recovery will be more moderate as we went less down, but it should definitely help us from a growth perspective for EMEA. When it comes to the 130 base point accretion from price versus cost, we had also had 100 base points on the mix. We are confident that we will continue to see good accretion price versus cost also now in Q1 and in Q2 because material indexes have stabilized on what we believe is a good level. and then of course we like i mentioned earlier have continued to increase prices end of year and beginning of this year then depending on how much of those price increases we will realize in in practice and depending on what the material indexes will do now in the coming months we will see what it then means for the second half of the year But definitely for the first half of the year, we are confident Q1, Q2, we should continue to see good accretion price versus cost. Not on the same level as Q3 and Q4. You've seen that Q4 went slightly down to Q3. We should expect a further going down, but still a good accretion.

Thank you. Just a quick update from me. I'm informed that there's just one in the queue, so we'll probably have time for another one if there's another follow-up question. Operator, please go ahead.

As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Jonathan Day from HSBC. Please go ahead.

Hi. Good morning. Thanks for taking my question. I was just wondering if you could talk a little bit more about the Americas again and just go into what you're seeing by channels, the big box, the sort of new build and building channel. And in terms of the margins, I know you've decentralized these of HHI, P&L. Just wondering if you can sort of shed any light on any sort of variations that you're seeing in terms of performance, profitability across that business now. Thank you.

And the question on the Americas is specifically for the Americas division or more in general for the America market or the US market?

I guess a bit of both. I mean, market color would definitely be useful, but then obviously margin is more specific.

So if you take US or North America markets and we split it up a little bit, we start with commercial. Like I said, we are still seeing good momentum on the commercial, non-residential side. Perhaps not as hot as two years ago, but very good momentum still. despite some market indicators like ABI index pointing in the wrong direction, then the DOGE index is perhaps a little bit more positive. But if we look at our own internal long-time indicator, our spec business and the values we spec, we still see also there good momentum. Like I mentioned earlier, we have seen good strong double-digit growth of our spec activity in Q4. You might remember that we were all a bit concerned on the healthcare vertical where our spec business went down in Q2 and Q3. That has now seen a very important pickup in Q4 to that extent that Q4 more than compensated for the decline in Q2 and Q3. So very happy about the healthcare spec activity that came back on a strong level. If you look at a bit of different verticals, obviously, Institutionally, it's better than pure commercial. K12, universities, strong. Healthcare, strong. Government, strong. Data centers, very strong. And then a bit weaker, offices. Should not be a surprise. Multifamily, this type of things. If you look on the residential side, I would say it's very bumpy and it varies a little bit, I would say almost week to week. Some weeks people are very optimistic that it has bottomed out and that we see recovery, as well on new builders on R&R. And then the next week when FED comes with new needs, people are perhaps again more uncertain. I believe that on the residential side it will remain bumpy for several quarters to come. Again, on the residential side, the advantage is that the comparison now becomes easier. Like I mentioned, our residential business was in Q4 down small, low, single digit. On a yearly level, it was more or less flat. We will see what happens in the next quarter. Then on the industrial side, for entrance systems, in general, industrial activity, we see good momentum. The logistic vertical, like I mentioned earlier, is very important for us for the industrial segment in entrance systems. There, we are definitely convinced that it has bottomed out, that from here on we see recovery, only that it takes a little bit longer to translate those orders into sales. On the pedestrian side, so also retail and other verticals for the pedestrian activities, we still see good momentum. We are confident that that will continue, and then obviously our service business is more our own efforts, and there also we are confident that the service business will continue to grow. when it comes to to margins as you know we don't give margins for the different segments what i can say is that we are happy with the margin development for the residential segment north america that we are delivering on our ambition of realizing that 100 million dollar synergies within the first five years that we continue to make good progress there understand it is also in in Q4 and that we are confident that we will be able to continue also that journey now in 2025. Great, thank you.

Ladies and gentlemen, that was the last question. I will now look to turn the conference back over to Thierry and Thibault for any closing remarks.

Thank you very much and thank you for the interest. It means that it's time to round up. If you have any follow-up questions that you come up after this, please feel welcome to reach out to Isabel or myself at Investor Relations. And I guess it remains only for us to thank you for your interest and participation and we look forward to speaking and meeting with you in the coming weeks. Thank you.

Thank you.