ASSA ABLOY AB (publ)

Good morning everyone and welcome to the presentation of Assa Abloy's Q2 report in 2025. My name is Björn Tebell, I'm heading investor relations and joining me here in the studio are Assa Abloy's CEO Nico Delvaux and our CFO Erik Pieder. We'll start now as usual with a summary 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 the floor is yours Nico.

Thank you Björn and also good morning from my side. We can report good numbers for Q2. We had a strong overall performance with a good organic growth of 3%, a low 2% price, a high 1% volume. It's also good to see now that we have for the second quarter in a row, again, positive organic volume growth. We have seen good organic sales development or strong sales growth in global tech, good sales growth in Americas, and small sales growth in entrance systems, but then the sales decline in EMEA and in Asia Pacific. Also good to see that organic growth continues to be supported by strong growth through acquisitions, 5% net in the quarter. And then very strong operational execution with a volume leverage of 53% on the 3% organic growth, giving us an EBITDA margin of 17.2% and an EBIT margin of 16.2%. also good work on the balance sheet side with a strong cash flow of 5.5 billion sec and a cash conversion of 103 percent and we continue to be active on the acquisition front with five acquisitions completed in the quarter if you look at the numbers A sales of 38 billion SEC, so the 3% organic, the 5% net acquisition, and unfortunately a strong currency headwind of minus 8%. The EBITDA margin of 17.2%, even above the 16% to 17% bandwidth we aim for, EBITDA up 1%. If we now look a little bit into the different regions, I can repeat what I said in previous quarters. We continue to see strong momentum on the non-residential side, so the commercial side. We see that as well in North America as in Europe as in Oceania. we continue to see more challenging market conditions on the residential side where in north america interest rates remain too high and where the effect of ecb lowering the interest rates in in europe has not translated yet in a recovery of that residential market. Where we see some uptick on the residential side is in Sweden. You know that their interest rates were already cut more than a year ago. In May last year to be exact for the first time we had five rate cuts in Sweden. And we see in Sweden R&R slowly coming back. but no recovery yet on the new belt. Very similar situation in New Zealand that is very comparable to Sweden. It was also good to see that we continue to see more activity on the logistic vertical in Europe and definitely in North America. So North America plus four, where on the commercial side we had a very high single-digit organic growth, and where we had a flat development on the residential side. South America plus four, the American division was flat in South America, but we had a strong global tech development. So continue to be a good momentum in South America, although we are a bit concerned, obviously, with what's going to happen with mainly Brazil and Mexico now with the import tariffs towards the U.S. europe plus one where again on the residential side france especially is is more challenging because france is also very exposed to their essential side but very strong dac and then scandinavia nordics recovering africa plus four Oceania plus one and Asia minus two, where we should make a big distinction between Greater China, where all market indicators continue to be double digit down. You can look at new housing built on the residential side, new permits, finished houses, everything is down double digit. And we also have seen a double digit negative growth in our Greater China business, where the rest of Asia is really strongly positive. Some market highlights, you might have seen this also on social media, SkiData entered a strategic partnership with Samsung so that our SkiData access management solutions for stadiums, now people going to the stadiums can also experience the Samsung wallet experience, the smoothness experience when they use the SkiData access management solutions in those stadiums. Some bigger project wins in South Korea, one of the largest apartment complexes with more than 2500 apartment units using our door hardware. The Freedom of the Seas, one of the biggest cruise ships in the world, in our marine segment in Global Solutions, using our solutions and updating more than 2,700 logs to RFID. And then a stadium in Illinois, focusing also on sustainability, improving energy efficiency using the Americas hardware. So now, like I mentioned, the second quarter in a row with good, strong organic volume growth continue to be complemented with strong growth through acquisitions. Our sales up 59% if we compare with 2020 on a 12-month moving trend. Operating margin within the 16% to 17% bandwidth. A run rate of 16.1% on EBIT and 17.1% on EBITDA. And then a good operating profit for AQ2, an EBIT up with an on-run rate with 108% if we compare with 2020. Acquisitions, as mentioned earlier, five acquisitions completed in the quarter, 11 year to date. They represent an annualized sales of 4.4 billion SEC. And then we also concluded the divestment of the citizen ID business, where we agreed with all parties to keep the US part of that citizen ID business. It's a smaller part. It's around $25 million, depending on year to year. It fluctuates a little bit. It's mainly the green card business that is a project that normally will end somewhere beginning of 2027. And as it's close to the end of that project, all parties agreed that that was the best solution. Some highlights, TeleAlarm, a European, a German provider of remote care technology, reinforcing our product and solution offering within senior care. And they had a sales of 330 million sec last year. And then Kingspan, an acquisition in my country, a Belgian manufacturer of high-quality door panels for sectional doors, residential and commercial doors. They had a sales of 290 million SEC last year. If we then go a bit into the different divisions, EMEA, an organic sales decline of minus 1%, with good sales growth in Central Europe, a small sales growth in the Nordics, where we commented on the recovery of the residential site in Sweden. sales decline in uk ireland mainly related to some timing issues on some bigger projects we are and we remain more positive on uk but then sales decline in south europe mainly because of france residential and also sales decline middle east india and africa mainly because of the middle east an operating margin of 13.9%, where we had a negative operating leverage of 30 base points on the minus one organic sales, but were helped by currency 50 base points and M&A 10 base points. Very strong Americas, an organic sales of 4% with a very high single-digit sales growth for the North America non-residential segment, flat sales in North America residential segment, which I think is a very good achievement given the market conditions, and also flat sales in Latin America against a difficult comparison last year. an operating margin of 18.6% with strong operating leverage 60 base points on the 4% organic growth held by currency 20 base points but then a stronger dilution on the acquisition side 120 base points linked to level lock as we mentioned in Q1 this dilution would continue in Q2 and we foresee now that in the second half of the year that dilution will normalize to more normal M&A dilution levels. Asia Pacific, an organic sales decline of minus 1%, with a strong sales growth in Pacific Northeast Asia, and a significant sales decline in Greater China and Southeast Asia, where we should make a big distinction between Greater China, where we had high double-digit negative growth, and Southeast Asia, where we had double-digit positive growth. But despite the negative organic growth, very good operational execution with excellent operating leverage of 130 base points, giving us an operating margin of 9.6%, with FX dilutive 10 base points. Global technologies, another division with very strong performance in the quarter and organic sales growth of 8%. Very strong sales growth in HID, strong sales growth in global solutions, where I would say all business areas or business units contributed to that strong growth. Also, very good operating margin of 18.5% with an excellent operating leverage, 280 base points accretion. And then FX dilutive, a significant way, 100 base points because of the weaker US dollar. And M&A, a creative 19 basements, mainly because we don't have the citizen ID business outside of the US in our books anymore. And last but not least, entering systems and organic sales of plus 1%, with very strong sales growth in parameter security, good sales growth in doors automation and in pedestrian, but a sales decline still in industrial. Only a small sales growth in service, where we find it challenging to find enough service technicians to execute on all the work that we have in the pipeline. A good operating margin of 16.5% if you take the dilution of SCI data into account. A very strong operating leverage, plus 100 base points. FX dilute is 10 base points. And like we also mentioned, in Q1, SCI data is very seasonal. So Q1 and Q2 are lower quarters from a top line perspective for ski data. Q3 is better and then Q4 is much better. So that dilution will go significantly down now in Q3 and definitely in Q4. And with that, I give the word to Eric for some more details on the financial numbers.

Thank you, Nico. And a very good morning from my side as well. As mentioned before, if you look on the sales, it ended up flat due to the headwind that we have from the currency with minus 8%. Organic growth was strong at 3%. Our EBIT operating income in value is up with 1%. Despite also there, we would have a headwind from the currency. The EBITDA margin And the EBIT margin, 17.2 EBITDA margins, 16.2 on EBIT, stronger than what it was a year ago. Income before tax is up with 2%, net income and EPS is up with 1%. Cash flow, as mentioned before by Nico, was strong at almost 5.5 billion SEK. It's slightly lower than what it was a year ago, but still we had a very good cash conversion of 103%. And finally, then we continue to improve our return on capital employed. It went up with 20 base points and ended at 14.2. If we dissect a bit and look into the bridge, the sales price is... is let's say a low two and volume is a strong one and that combines gives us about three percent we had a very good uh operating leverage of almost 53 this is driven by the tailwind from price cost is driven by operational efficiencies we had savings from the mfp program of above 200 million but we also had other operational savings in there currency had a slight negative impact of 10 base points and then you heard nico talk before about the dilution on the mna of the 60 base points that comes from the ski data as well as the level of acquisition Cost breakdown, direct material, 60 base points better than a year ago. In this 60 base point, there is no mix. So this is pure, let's say, the price versus cost. And as those ones have seen, it starts to go down every quarter, and we expect that to continue, that we'd have a less positive impact in the quarters to come. It's positive to see that the conversion cost is favorable versus the same period last year it's 50 base points better i mentioned before the mfp savings but we also have mfp savings pricing efforts and also other operational efficiencies that we have done we also see less of a dilution on the sgna it was minus 30 base points there our efficiency measures couldn't cover for the inflation, as well as continued investment that we have within our sales organization. Operating cash flow, as mentioned before, it was strong. We still continue to do very well, I would say, on the work in capital management. We had a slight uptick in receivables, but it's not, let's say, it's still sort of very much under control. um and as mentioned before the cash conversion was 103 percent and if you look on the 12-month rolling versus ebt it's 105 percent uh the gearing and net debt went down slightly to 2.3 um net debt to equity is 71 percent in value our debt versus the last quarter went down with roughly half a billion and that is of course on the negative side we have continued acquisitions we have paid half of the dividend on the positive side we had a good cash flow as well as we are helped of the stronger Swedish krona But all in all, I think that we can continue to do our acquisition strategy because our balance sheet still remains strong. And last but not least, you were sort of trying to speed me up there, Nico. Earnings per share, as I said before, is up with 1%. And with that, now you can sort of take your concluding remarks.

Sorry for that, Erik. Yeah, of course, up to you to judge, but we are convinced it was a strong Q2, strong overall performance, with a good organic sales growth of 3%, complemented with strong growth of acquisitions of 5%, then very strong operational execution with an excellent operating leverage of 53%, giving us an EBITDA margin of 17.2% and an EBIT margin of 16.2%. Strong cash flow, 5.5 billion SEC, strong cash conversion of 103%. And, okay, it's not a surprise if I tell you that we live in an uncertain market condition. But there again, like we say every quarter, we are convinced that our decentralized organization, being able to make decisions very close to the local customer in the local market, gives us a competitive advantage in those uncertain market conditions. And last but not least, Bjorn asked me to remind you of our Capital Markets Day that will take place on November the 19th in the US, and registrations are open on the link that you can see on this slide. With that, I give back the word to Bjorn for Q&A.

Excellent. Thank you, Nico. Well, it means it's time to open up for questions now. And could I please ask you, as usual, to limit yourself to one question and one follow-up. We don't have as many people indicating that they would like to ask questions at the moment, so if you have more questions, please press then star one, I think, and then you'll come at the end of the queue again, and you will have the opportunity to ask a question again, maybe. So with that operated, it means that we are ready to kick off the Q&A session. Please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Mida Vivek from Citi. Please go ahead.

Thank you very much everyone and good morning. Hope you can hear me well. My main question is on the Americas growth, slightly better sequentially than Q1. You highlighted high rates pressuring the residential segment, but then compared to Q1, resi appears to have improved from the mid single digit negative growth you highlighted then. So could you please comment on how you expect America's organic growth to develop over the coming quarters Also, specifically, how much of the improvements in America have been driven specifically by price? Thank you.

I would say that we don't see too much of market changes in America's division. We continue to see good momentum in Latam. With that side remark, like I mentioned earlier, that we are a bit concerned going forward with Brazil and Mexico in particular, linked to the tariffs in the US. But for the time being, we see still good momentum in Latam. If you take North America, commercial side continues to be good momentum, perhaps not as hot as three years ago, but very good momentum. Our specification business in the quarter was again up double digits in all verticals and definitely in the two verticals that matter for us the most, healthcare and education. Again, all verticals were positive with the exception of offices it should not be a surprise and and hospitality which we believe is might be just a timing issue but so double digit up on the specification side which is first the only real leading indicator on on commercial new build and then residential like i mentioned earlier we don't really see an improvement if you look at interest rates, the gap between where the house owners have their interest rates sitting for their existing loans and at what interest rate they can get a new loan is still too big for things really to start moving. And, of course, you most probably will see a little bit of recovery on the R&R side because at a certain moment people just decide to refurbish their house because they don't want to wait any longer. And if they refurbish their house, it will be good anyhow if one day they want to sell the house because it will increase their price. So that might be something we see in the numbers. But I would not be too enthusiastic that residential is recovering in the U.S. We don't see that happening. When it comes to price, the Americas had price components similar to the group. Of course, they had already some help on price from the tariffs, but that only started to kick in in the latter part of Q2 because obviously we built up a lot of stock locally in the U.S. before all the tariffs came in. And I might be surprised that the price component is not higher. A big explanation is that the Americas also has an important steel door business. And as we mentioned in previous quarters, on the steel side, we were done with price increases because steel was going down over the last several quarters. And that is still the case. We are confident now that going forward, also there with all the tariff situations still will go up again, and that that will also give us then the possibility to again increase prices on everything that is steel.

Very helpful. Thank you. One quick follow-up. You mentioned spec growth in the U.S. there. Could you give us an indication of how it trended in EMEA and Oceania? Thank you.

So overall, for the world, we had low double-digit growth of the spec business, and in EMEA, it was high or very high single-digit growth. Thank you.

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

Yes, good morning. Thank you very much for taking my question. I just wanted to dig into the global tech, actually margin performance, please. I wonder if you could comment a bit more on sustainability of that, or should we think about kind of moderating back to the trend levels that we thought about before for this business?

So if you look on the margin, of course, the fact that we had high top line growth as well in global solutions as in HID helped in an important way to get the volume leverage. And we have seen good growth, like I mentioned, on all business units or business areas, as well in Global Solutions, as in HID. But we had a positive mix in the sense that we had stronger growth in PACS in HID, which is the more profitable subsegment in HID. And we had also very good growth on the hospitality side in Global Solutions, which also has better margins than the other verticals in Global Solutions. So there was a... The mix, there was definitely very strong operational execution and good pricing leading to that very good margin for global tech. You know that we had all those disturbances in the numbers because of the electronic shortages, I would say almost three years ago. related to the Pax business that is completely behind us. And as of now, we foresee Pax to grow again like they were growing before COVID on that somewhere mid single digit growth level. And that's, of course, important from a margin stability perspective for global tech.

Great, thank you. And just a quick follow-up on something you mentioned on the cost side when we talked about MFP, but also other operational savings. Erik, could you just comment on what those kind of other operational savings are and how should we think about them? Is that kind of a specific push in the quarter to maybe mitigate M&A dilution or is it something kind of more sustainable?

So we... We continue to do VA, VE activities in our factories. We do lean activities. That's an ongoing process that gives us cost savings every quarter. We do automation, robotization. And then in the quarter in particular, we also did some extra cost measures in several divisions, but mainly in the Americas, where in the residential segment, we adapted our personnel you could say, to the new lower reality. We unfortunately had to cut, I think, around 400 people on the residential side. We did something similar on the commercial side and also in Latam. And that obviously then also helped on the leverage. And we did smaller, similar activities in some other divisions.

Got it. Thank you very much.

We now have a question from the line of George Featherstone from Barclays. Please go ahead.

Hi, morning, everyone. Thanks for the questions. I just want to start on entrance systems. You've talked before about some maybe positive orders momentum building now, I think probably related to the industrial segment. Can you just talk a little bit about what you're seeing in underlying activity now from an orders perspective? I appreciate things haven't sort of translated yet from a revenues standpoint. And then just to follow up on the Americas conversation, that non-resilient business, it's going quite strongly against the underlying market data. So I just wondered what you think might be driving your performance relative to the broader market backdrop. Thank you.

So we start with entrance systems. As we mentioned at previous quarters, we had seen activity on the loading dock side, on the logistic vertical side, coming back somewhere end of last year. We started seeing orders coming in again, and we said that loading docks have a longer lead time, six to nine months. so that effect of of these loading stocks being translated in sales we did not see yet now in q2 that's something that will come in in q3 and definitely in in q4 so we should see an uptick from this in the second half of the year and we can say that we continue to see good activity on the loading dock side so there's more orders coming in and we see a good recovery from obviously a very low level, but definitely positive on the logistic vertical side for the industrial segment in entrance systems. When we go to Americas, the question on commercial side. of course one one quarter doesn't you know you should not conclude too much on one quarter yes we had a very good quarter with high or very high single digit growth for the commercial side i think if you look at relative performance in in in the market i think you should look over a much longer period And if you look over a longer period, what we definitely have done in the US or in North America is invested heavily in new product development, coming with a lot of new products, extending our product range, and also further verticalizing our sales organization with dedicated sales teams for the different verticals. And we are convinced that those two actions definitely have helped us in our relative position in the market.

Okay, thank you. So just to follow up on the last point, you think that this is just the cumulative effect of the positioning in the business in the U.S. rather than anything specific to the quarter related to early buyout tariffs?

No, I don't think that early buyout tariffs has something to do with it. That's not something that would move the needle significantly. I think it's just a very good, strong execution by our very strong Americas team.

Thank you very much.

The next question comes from the line of Gael de Bry from Deutsche Bank. Please go ahead.

Well, thanks very much. Good morning, everybody. Could you elaborate on the pricing dynamics, please? I mean, it was only one person this quarter, despite the impact of the tariff. So can you perhaps help us frame the magnitude of the pricing effects that we could expect to see maybe in the third quarter. That's question number one.

I don't know how you come and say that it was only 1%. We said in the call, Eric and myself, that it was a low 2% price component in the quarter compared to a high 1% in Q1. So we have started to see pricing to compensate for tariffs kicking in, I would say mainly towards the end of Q2, because like I mentioned earlier, we still had and have stock in the US from prior of the tariffs. So there was not that very urgent need to increase prices for the tariffs, but we were able to fully compensate, as you have seen on the volume leverage, as you have seen on the EBIT margins we were able to fully compensate for the tariff cost and keep the margins through the price increases. And therefore you see that uptick from a high 1% to a low 2% in Q2. But you don't forget that the tariffs is only on the US, so it's only on less than 50% of our top line.

Okay, understood. But then the pricing contribution is expected to move up, I guess, sequentially in the third quarter. But the tariff headwinds will probably also accelerate in that same quarter. So all in all, I mean, how do you feel about the price versus cost looking at the third quarter in the U.S.? On a sequential basis.

We made a calculation and... Things, of course, change every day, but we made the calculation two days ago with the tariffs as they stood two days ago. If you want to fully compensate for the tariffs and protect the margins and do that only with price increases, we would need a price increase between 4% and 5% in the US. Obviously, that 4% or 5% is on half a year. and it's on half of our top line so you could say that the tariff price component for the second half of the year should be around somewhere around one percent then obviously we will not only do and compensate through price increases we are also working hard on renegotiating with our suppliers to get better deals we see that suppliers are receptive to the idea of keeping business for trading in some of their their margin and we also continue to to relocate some of our products from let's say higher tariff countries to lower tariff countries so all that together and it's clear that pricing is the main component we are confident that we will be able to compensate for the tariffs and keep the margins from a tariff cost perspective And like Eric mentioned, you have seen over the last quarter the accretion price versus cost going down. It was 60 base points this quarter. We expect that to be still positive but lower now in Q3 and further fading out as the big effect of hyperinflation and therefore strong price increase in previous years starts to fade out.

Very, very clear. Thanks very much.

We now have a question from the line of Marianne Bulot from Bank of America. Please go ahead.

Thank you very much for taking my question and good morning. I wanted to focus a little bit more on the residential segments, especially in EMA and APAC. Just wondering in Europe, you know, do we need to wait a full year to see the recovery as we have seen for for sweden just wondering if you've seen any kind of signs of bottoming or if you see continuous softness for h2 of course we also don't have the glass glass ball to look into the into the future um

Let's say that we are a bit more confident on Europe than on the US, because in the US you have that gap, like I mentioned earlier, between where people have their loan and the interest rate at which they have the loan today versus where the interest rates stand. It's true that in Europe, if you take EU, the ECB has lowered interest rates now four or five times, but it's too early to see that already being translated in more activity for us because we are also more towards the end of a construction cycle. So we believe that that recovery On the residential side, it's more something for next year, not for the second half of the year. Then it's true that in Europe the comparison obviously becomes easier because it's now already two years that residential went down. The positive side, like I mentioned earlier, is Sweden. They were the first in lowering interest rates, and it's also a country with 100% variable interest rates, so for reactions, time is much faster. And in Sweden, we see that recovery from a low level on the R&R side. We don't see that recovery yet on new build, but we are confident that that will be the next stage for Sweden obviously Sweden is a very important market for us it's a big bigger part of our EMEA sales and it's also quite importantly exposed to residential and if you take APAC, China, no recovery at all. Again, market down double digit on the residential side this year. So definitely no recovery this year. The other markets, Australia or South Korea, I would say are very similar to EU markets. And New Zealand is very similar to Sweden. Also in New Zealand, we had several interest rate cuts earlier a year ago. And there we also see the recovery on the R&R side, and where the new build also will start to recover as of from now.

Okay, very clear. Thank you very much.

The next question comes from the line of James Moore from Rothschild & Co. Please go ahead.

Morning, everyone. Nico, thank you. A couple, if I could. On the Americas, the good commercial result, is that more on the private side or on the institutional side? And with the one big, beautiful bill, do you have any clarity on that? what that means for the next few years of institutional spend. I just get the sense that education and healthcare has been pretty good for a while now. And I wonder whether that's ever going to peter out or whether it's going to keep on being very strong because of US fiscal action. That's really the first question. And the second one would be on HHI. I understand that the market's dead, but in terms of your Endogenous internal developments. Could you just expand a bit about what's going on and what's keeping you busy?

So on the America's commercial or non-residential growth, obviously if you have five single digits, it has to come from both. It has to come from institutional and non-institutional. But it's clear that institutional is a bigger driver than non-institutional. And you're right, two important vehicles for us, education and healthcare, are performing strongly. Now looking to the future, it's very difficult to predict. The only internal indicator we have is our spec business. And like I mentioned, our spec business was up double digit in the quarter and was, again, strong contribution from healthcare and from So we don't see any slowdown in those two important verticals for us. So we are still very confident that the non-residential size will continue on a good level going forward. When it comes to HHI, so like I said, a flat top line development. And I think very good operational execution in the residential North America segment, as we call HSI today. To that aspect, remember that we said we have the ambition to improve our bottom line quarter after quarter compared to the previous quarter and compared to the quarter a year ago. Q1 was the first quarter where we did not deliver on that ambition. I can say that now in Q2 we strongly delivered on that ambition. We have seen a strong improvement of our bottom line to that extent that we definitely overcompensated for the negative development in Q1 and we are back on track towards that ultimate goal of 16% EBIT for HHI once the 100 million dollar bottom line synergies kick in. We have put a new organization structure in place for North America residential segment in June, July last year, where we created you could say sub-segments. For instance, we have a Kwikset mechanical, a Kwikset electromechanical digital, We have a hardware sub-segment, we have a private label sub-segment, we have the faucet segment, and then we have the luxury hardware segment. And we run those now as separate P&Ls to, I would say, to implement proven as a blood concept, giving responsibilities lower down in the organization and fine-tuning actions more on a lower micro level. And those actions also start to bring fruit, I would say, as well on the top line, where the new products that we launched on the digital side definitely helped in an important way to keep top line flat. And they also help on the bottom line, on our ambition to increase bottom line quarter after quarter.

Very helpful. Thanks, Link.

We now have a question from the line of Andres Itborg, from ABG Sandal Collier. Please go ahead.

Yeah, morning. Thanks. I just wonder if you could say a bit more about the drivers in entrance systems, you say strong sales growth in perimeter. I know it's not the biggest area, but it's a highly profitable one. So is it data centers mostly, or is it broader based across logistics? And the other part is just, did anything turn for the better there in residential, which has been pretty slow before?

Thanks. On the parameter security side, I would say it's a result of a lot of very good actions that we have done over many years. Also, on the parameter security side, we have segmented the market and have now tailored solutions for the different verticals, be it the data centers, be it logistic warehouses, be it embassies. And that focused approach with also dedicated solutions and sales teams definitely has boost our sales. We believe that definitely we are doing better than the market in in parameter security and like you mentioned it's indeed the best margin we have in entrance systems so from a mixed perspective that also helps bottom line wise we don't see any slowdown we are confident that we can continue and keep up that good work also going forward obviously the boom in data centers helps because they also do fencing for data centers I would say the fact that in general we don't live in a more secure world and people want to secure their places better also helps. And there were perhaps the tariffs also on steel in particular help us is that it also gives us a competitive advantage over some of our colleagues, competitors in the market that import products from overseas as producing everything locally in the US, made in the US for the US gives us that competitive advantage. On the residential side, we had indeed positive growth. It was mainly because of an easier comparison because, again, we don't see the residential market recovering yet at a significant rate in the U.S. And then, I mean, it's difficult, again, to say that you do better than the market in one quarter. I think you should look over a longer period to judge if you gain market share or not.

Okay, thanks. Could I ask if you could be a bit more specific? What kind of growth rates ballpark are we talking about over the past few quarters in perimeter, just to have a sense?

I think if you take the last three years, you talk about, on average, high single-digit organic growth per quarter. Then obviously it fluctuates very much by quarter because it depends if you get a big project or you don't get a big project and the comparison with last year. But if you take the last three years, it's high single-digit CAGR. Fair enough. Okay, thanks.

The next question comes from the line of Ritzk Maidi from Jeff Rice. Please go ahead.

Yes, good morning. Thanks for taking the time. I just have a couple. Maybe I'll take them one at a time. Nico, maybe just on the demand throughout the quarter, have you seen any major differences between sort of April versus May and June? And if you could just comment on how Q3 started so far. I'll start there.

Yes, so April-May was, I would say, very much in line with Q1, if you're correct, for the working days. And, of course, you have also the holiday periods in April and May. But then June was better than April and May, again, if you're correct, for the working days. And June obviously is the biggest month in Q2 because there's less holidays in June than in April and May. And we have seen that higher growth rate of June continuing now in the first week or the first weeks of July.

Yeah, perfect. And then maybe can you comment on your pricing outlook? I think you mentioned on the call that you need four to five percent price increases in the U.S. to offset the current environment of tariffs. And obviously, you're going to do some efficiencies, et cetera. Just maybe how do you see the pricing component now for the full year if current tariffs environment don't change?

I think your last comment is very important. It looks like tariffs change every day. But like I mentioned, if we have that ambition and we are confident we will be able to do so to compensate fully for tariffs and keep the bottom line, that should give us... an extra 1% price component on group level for the second half of the year. So before we said that a good price number was 1.5%, so you should add another percent to that, so it should be somewhere around 2.5%. Then we will see how things play out with the tariffs, but the 2.5% should be a good indicative number to go forward.

Perfect. Thank you. And then just to understand the margin development now in Q2, just to be clear, so mix was neutral and then price-cost contributed 60 basis points, basically. Correct.

If you talk on direct material, yes. Of course, it depends on where you look on mix. If you look mix on bottom line, obviously the fact that we grew very good in global tech and in America helps because it's the two divisions with the better margins.

Yeah, yeah. Because, for example, if I take entrance systems, I mean, the drop-through was quite massive with just a weak, I mean, low volumes, right? It's just how sustainable that is.

Well, I think if you look at the margins for entrance systems and you exclude ski data, you will see that margins have been very stable for the last two years on a high level. Like we mentioned, or like Eric mentioned, we should expect price versus material to be less accretive going forward on the other hand we should have less dilution from ski data going forward then everything will depend on on the mix how much can we grow service versus equipment how much can we grow parameter security versus the others

Perfect. And the last one, and I promise, you've talked about project delays in the UK. Maybe if you could just quantify those, and I guess these should come back now in H2.

Yeah, I think we had expected... a small positive organic growth in the UK. In reality, we had a small negative organic growth in the UK and the difference between the two was some project delays on the commercial side and also an unfavorable comparison with last year where we got a big project on the commercial side. So we are confident that we should see growth in the UK now going forward.

Thank you, Rizk.

We now have a question from the line of Nick Green from Bernstein. Please go ahead.

Good morning. I hope you can hear me. Thanks for taking the question. The question is on HHI. Can you just give us an update on your planned disposal? processes. You mentioned there the faucets business had been put into a separate subdivision, but just remind us again, please, on what your intentions are for some of the businesses that you hadn't originally intended to keep and if there's any status update there. Thank you.

It's interesting that you talk about the divestment of the faucet business because I think we never have said that we will divest the faucet business. We have said always that we will at the right moment in time look at the faucet business and to see if that is something that fits in our portfolio or not. Up till I would say yesterday this was not really something we were looking into it for the simple reason that we had our DSAs, our service agreements still with Spectrum brands and they were for the complete um hhi um organization and if we would already decide to divest the faucet business that would have been very complicated with the tss we are now since mid of may out of the the tsh so that is not an argument anymore but we have you know decided and we had to decide also to focus our activity on other things one is on realizing the synergies because we we see still a lot of synergies that we can grasp and we prioritize that and then you will appreciate that we have been very busy with all the tariffs and the tariff movements over recent months. But it's definitely a strategic question that we will take up now and see what we will do with the faucet business going forward. I would say that's the only strategic question that we have on HHI. All the rest is very obvious that it's core to what we do, and there's no discussion of eventual divestment of anything else in HHI.

Okay, thank you. Then maybe just a quick follow-up on the same topic. Should we understand the faucet business to be margin dilutive to HHI? In other words, to get HHI up to your target of 16%, can you do that whilst keeping the perimeter as you currently have it, or would you need to make a decision on the faucet to do so? Thank you.

I can say that the faucet business today is a profitable business. It's definitely not a burning platform. That's also why we did not prioritize a possible decision on faucet business earlier in the stage. We didn't know faucet business before we bought HHI. I think it's an interesting business, very similar to what we do in our core. Obviously, it has nothing to do with access solutions. Then going forward, that will, of course, be part of the analysis that will lead to a possible decision is how much can we improve margin on faucet business and how can we eventually have a sustainable position there or not. So we'll take that with us in the strategic review and that will lead up to a decision, yes or no.

Thank you.

We have a follow-up question from the line of Mida Vivek from Citi. Please go ahead.

Thank you very much, everyone, for the opportunity for a follow-up. My follow-up is on the EMEA margin, 13.9%, even though you benefited 50 basis points from the strongest SEC. And we are now gradually seeing a recovery in the Nordics, which is margin-accretive. So could you maybe talk about your expectations for the past towards the historical margin level of around 16%. Are there any other actions that you're taking in order to drive that improvement? Thank you.

Well, it's clear that we are not happy with the margin of EMEA where it stands today. The lower margin in Q2 has, of course, everything to do with the minus 1% organic growth. I think we have today a very good cost structure in EMEA that if we can get a little bit of positive organic volume growth that we should start to see very good volume leverage and very good margin accretion. But obviously, we need that organic volume growth to come back. EMEA, as you know, is very exposed to residential. Around 45% of what we do in EMEA is residential. And therefore, to have really true, strong organic volume growth, we need the residential market to turn, not only in Sweden, but definitely also in Europe. That being said, I think we are confident that things will improve in EMEA now in the second half of the year, and we still have that ambition to over time go to the 16 percent target level for EMEA. For that, two things have to happen. The SEC has to be strong or remain strong because the SEC diluted our results two years ago in a significant way. It has halved now in the last six months. But that trend should continue. And the residential market has to turn. If those two things happen, I'm very confident that we will come close to that ambition of 16% from here. Thank you very much.

Operator, I think this means we have time for one more question.

We now have a question from the line of Andrei Kuknin from UBS. Please go ahead.

Thank you very much for taking the follow-up. I just wanted to come back to LATAM. You mentioned a couple of times quite insistently that you're concerned about what's happening there vis-à-vis tariffs. Have you seen your kind of order book deteriorating there already or any other... tangible signs of that happening, or is it just a broader kind of cautioning, given what we're seeing in the news?

Sorry, the question was specifically when I made the comment on Brazil's tariffs, but tariffs in general?

Yeah, Brazil. No, I just meant, I think there's a couple of times in the call and Q&A where you specifically commented on concerns over I think outlook for Brazil and Mexico, given the tariffs announcements. And I just wanted to check if that's something that you're seeing evidence of demand deteriorating there, or is that just a concern given the footprint?

It's more a concern giving the footprint. If you look at the last three, four years, we have had very strong positive development in Mexico and even better in Brazil. So the only negative thing is perhaps the strong comparison with a year ago for Brazil and to a certain extent also Mexico. But it's not something we see in in the numbers is more concerned because also the announcement of mr trump was just from a couple of days ago right it would be too fast to see those those results already on brazil very helpful i'll stop there thank you i actually think we can take one more question operator

The next question comes from the line of Tommaso Nocchi from Goldman Sachs. Please go ahead.

The North America commercial performance they talked about is related to pre-biling to tariff, if any of that is related to that.

I think that question came earlier. We don't see that the growth in the Americas is linked to pre-buying of the tariffs. It's nothing significant, no.

Thank you.

Excellent. Well, that means it's time to round up the conference now. And if there are any follow-up questions, as always, feel welcome to reach out to Isabel or myself at Investor Relations. So then it only remains for us to wish you a wonderful summer and a wonderful break, hopefully soon. And we will speak to many of you after the summer break. Thank you for today. Thank you.

Thank you.