ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Assa Abloy's Q4 report for 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 Pider. We will now, as usual, start this conference with a short summary of the report and then open up for your questions. And with that, I'd like to hand over to you, Nico.

Thanks Bjorn and also good morning from my side. We can report a strong end of a very good year for El Sabloy. We had a good organic sales development in Q4, an organic growth of 4% with strong growth in global tech and Americas, good sales growth in EMEA and in entrance systems. and a sales decline in APAC, mainly again related to the pressing market situation in Greater China. Good organic sales complemented with also good growth through acquisitions, net 3%, and then strong operational execution with a record EBIT margin of 16.8% in the quarter, and then operating leverage of 80 base points. Good work done on the working capital side, also giving us a strong cash flow and cash conversion of 137% in the quarter. Also this quarter again, the shift from mechanical to electromechanical continues. We have seen electromechanical organic sales growth of 8% in our regional divisions. We've been also active on the acquisition front in this quarter with seven acquisitions completed. If we look a little bit into the numbers, sales north of 38 billion SEC, 4% organic, like I mentioned, 3% net acquisition, and then unfortunately hit in a strong way by FX, mainly weak dollar versus strong SEC, so 10% negative effect on top line, therefore sales top line minus 3%. An EBITDA margin also at record level, of 17.9%, and we see the gap between EBIT and EBITDA further growing as we continue to buy quality technology companies. So it's important to look also at that 17.9 EBITDA margin. Then the EBIT margin, like I mentioned, 16.8%, 30 bps up, and EBIT at 6.5 billion SEK. In the world, I would say I can say the same as I said in previous quarters. We continue to see a good momentum on the non-residential side, on the commercial side in our three main areas in North America, in Europe and in Oceania. As well on the normal commercial side as on the institutional side. Whereas also in all three, we continue to see more weakness on the residential side. There is two markets we have seen a pick up on residential that is in Sweden and in New Zealand. In New Zealand we see good recovery as well on new build as on R&R. In Sweden we see that recovery mainly on the R&R side, not on the new build side. That's the two markets that start to cut interest rates first. So we will have to wait a bit longer for Europe on the ECB related countries to see that recovery. And the same thing is true in the U.S., where interest rates stay around that 6 percent, and you know that 72 percent of the households in the U.S. that have a loan on their houses have an interest rate below 5 percent. So there is still that gap. On a positive note, we see – and that's an interesting statistic – that 55 percent of the houses in North America are older than 40 years. So that R&R really should start to kick in in the near future. You see the numbers per region. Another important vertical for us is the logistic vertical, where we see a recovery in North America, not really a V recovery, more U kind of recovery, slower recovery, which in a way is also easier from an operational perspective. Unfortunately, we don't see that same recovery in Europe. In Europe, as a matter of fact, we believe that the logistic market in Europe is even further down. So numbers, plus 4 in North America, plus 12, very strong Latin, and plus 3 organic growth in Europe, minus 2 in Africa, strong Australia and New Zealand, plus 8, and then a very mixed picture in Asia where we have seen good growth in the rest of Asia and higher double-digit negative growth in greater China. Couple of highlights, this new product, it's a new range of garage door openers that we sell under different brands, also under the Kwikset brand, and integrating this garage door opener in the home automation ecosystem from Kwikset together with our digital door locks. Very good collaboration between the Americas Division and the Antwerp Systems Division. And also good to see that in a more mature market with mature products, our R&D team still found ways to really differentiate. We've announced a unique security feature, so quite excited about this new product range. A couple of project wins. Cycle K in Germany. Anton Systems won a service contract from around 2,000 industrial doors. Comcast US, our new recent acquisition in view in global solutions, equipped their stores with a total of 17,000 units for secure display of their electronic equipment. And then here in Stockholm, HID, public transport, access to metro, bus lines, trains, interesting project. And just to clarify, this is not the wrong picture, it's just a picture with a lot of eyes on our reader. That's one of the reasons why we were chosen for this project, our capability for our equipment to work in extreme weather conditions. So I'm also quite happy with that project. So you see now that since four quarters we have seen an acceleration of our organic growth, also an acceleration of our organic volume growth. And we continue to complement that organic growth with good growth through acquisitions. Our sales is up 65% over the last five years. And then our operating margin, well, within the 16% to 17% bracket, and the 12-month moving trend at 16.2%. And an EBITDA margin even above that bandwidth at 17.2%. Therefore also a good operating income, 107% up compared to five years ago. As mentioned, we continue to be active on the acquisition front with seven acquisitions completed in the quarter, 23 acquisitions over the full year. They represent an annualized sales of around six billion SEK. If we highlight two of them. Sargent and Greenleaf, an acquisition for the Americas division, a U.S. manufacturer of high-security mechanical and electronic locking solutions and safe hardware, really strengthening our access portfolio for the Americas. They had a sales of 430 million SEC last year. And then International Door Products, IDP. US manufacturer of standard and custom fire rated steel door frames and doors. Also for the Americas division complementing in a nice way our door offering. They had a sales of 220 million SEK last year. If we then zoom into the different divisions starting with EMEA. EMEA had a very strong Q4 with an organic sales growth of 4%. With strong sales growth in the Nordics and in Central Europe. Good sales growth in Middle East, India and Africa. Sales decline in UK, Ireland and South Europe. UK, Ireland mainly related to delay on the commercial project because some new government legislation. And then in South Europe, mainly because of France where the residential market remains challenging. Also very good EBIT margin at 15.3% with good operating leverage, helped by FX 90 base points accretion. It's the only division that profits from the stronger SEC. And then M&A diluted 50 base points. That's mainly related to transactions of acquisitions we did in EMEA. So more you could say one-offs. Americas, another very strong quarter for the Americas with an organic sales growth of 5%. We have a strong high single-digit sales growth for the North America non-residential segment. Good sales growth in Latam and then a stable sales development for the North America residential segment. Strong EBIT margin at 17.9%. We have an excellent operating leverage of 120 base points. And then dilution, 50 base points of X, dollar sec again. And M&A dilution, also 50 base points. Also here mainly related to the acquisition-related costs for the two acquisitions that I showed earlier. So also more one-offs, you could say. APAC, an organic sales decline of 2%, with a good sales growth in Pacific, Northeast Asia. and a sales decline in Greater China and Southeast Asia. Greater China, Southeast Asia is really a mixed, different picture. Greater China, high double-digit negative growth, and Southeast Asia, high double-digit positive growth. A good improvement of the EBIT margin at 7.6% versus 5.4% last year. Excellent operating leverage, and also here hit by currency 70 base points. And we go to global tech. I would say an extreme good quarter for global tech. We have an organic sales growth of 9%. with strong performance as well in HID as in global solutions, and then also a very strong EBIT margin at 18.9% with good operating leverage, despite a strong hit of FX, 90 base points, and a small accretion on M&A of 20 base points. That's mainly linked to InView. And last but not least, entrance systems, a bit lower organic sales of only 2%. where we've seen strong sales growth in pedestrian, good sales growth in doors and automation, but stable sales in industrial and perimeter security, and good but lower sales growth in service. And then still strong execution with an EBIT margin of 18%. and a very good operating leverage, I would say, despite only 2% organic sales of 90 BIPs. FX hit us with 40 base points, and M&A has been neutral. And with that, I give the word to Eric, our CFO, for some more details on the financial numbers.

Thank you, Nico, and a very good morning from my side as well. I think you've heard a lot about the quarterly numbers from Nico, so if I focus a bit on the full year on sales, we were up with 1%, if we then dissect that, 3% organic growth for the full year. We reached our target when it comes to acquired net growth of 5%, but then we were hit by the currencies for the full year 2025 with minus 7%. You see here the FX calculation that we did end of December, where we then for Q1 thought that, I mean, when we did the calculation, it was minus 11. Now, end of January, we are for the first quarter in our calculation minus 13, and for the full year, we are at minus 8. EBIT full year we are up with 2%, EBITDA margin for the full year up with 10 base points and on EBIT we are at the same level. Income before tax net income and EPS we are up with 2% for the full year. We had, as mentioned before by Nico, we had a strong cash flow. Okay, we're a bit also there hit by the currency, so we're minus two in actual value. But of course, if you look on our cash conversion, it was 137% in the quarter. And for the full year, we were at 106%. Return on capital employed minus 20 base points year on year. We have now added, as we have talked a lot like on the capital market days about the operational value added or over. For me, I think it's a very good measurement because you combine the income statement with the balance sheet. So what you do is that you take your EBIT. And then you deduct the interest rate on your capital employed. We also include goodwill there. And our weighted average cost of capital or our interest rate there that we use are 8%. And as you can see, we are at the same level at the end of 2025 as what we were end of 2024. If we look on the bridge, dissect first the 4% organic growth, we had a weak three on price and consequentially then you get a strong one that you have on volume. The flow-through, very good, at almost 40% or an accretion of 80 base points. This comes from, let's say, the difference between price-cost, which I will show you on the next slide. We had MFP savings in the quarter of roughly 180 million, and then you have other operational efficiencies as well. The currencies you've seen on the top line, minus 10, but you also see that it has a negative impact because of the dollar versus the SEC, also on the bottom line. This quarter it was 30 base point, and this is something that will continue at least on the same level, I believe, in the quarters to come. But if you take acquisitions aside, we reached actually an EBIT margin in the quarter of 17%. The acquisitions are slightly dilutive. It comes mainly from acquisition costs of acquisitions that were closed during the quarter. If we then move to the next slide, direct material continues to sort of, we continue there to have a tailwind versus last year. So we were 70 base points better than a year ago. The mixed impact of that is roughly 20 base points. So if I call it the true impact is 50 base points. It's positive to see that the conversion cost is also this quarter better than what it was a year ago with 30 base points. You can see for the full year we are actually 20 base points better than the year before. This, of course, comes with when we can have Volume growth, you see it immediately that we can sort of have a positive conversion. SG&A negative with 50 base points, but this comes from investment in R&D as well as investments in our sales organization. Cash flow, we are now for the third year in a row, we have a cash conversion above 100%. This year it ended at 106%. We sort of continue to do a good network and capital management. If you look Between the years you would see at CapEx that it looks at it slightly higher this year than what it was a year ago. But that is due to that last year we had some divestments or we sold some buildings in EMEA as well as in APAC. But all in all, I mean, the cash conversion of 137% in the quarter is strong. If you look on the gearing, continue to sort of have a positive trend here. If you compare versus last year, we are down on the net debt to equity from 65% to 63%, and on net debt versus EBITDA from 2.3% to 2.2%. So we still have a very strong financial position, and we can continue with our acquisition strategy going forward. If you look on the earnings per share, as mentioned before, it's up versus last year. We will propose a dividend. The board has proposed a dividend that, of course, needs to be approved by the AGM of 6.4. And if you look on the dividend percentage of EPS, it's over a period since 2020. It's at 43%. And EPS yearly growth is 14%. And with that, I hand it back to Nico for some concluding remarks.

Thanks, Erik. So, like we said, a very strong end of a very good 2025 with very strong execution in, you will agree with me, challenging market conditions. So, good organic sales growth of 4%, complemented with good growth through acquisitions of 3%. A record EBITDA and EBIT margin in the quarter, an EBIT margin of 16.8%, with excellent operating leverage, and also very good working capital management, giving us a strong operating cash flow and a very strong cash conversion. Like Eric mentioned, the board proposes a dividend of 6.4%. SEC per share that we propose to again pay out in two equal trenches like we've done in recent years. And then last but not least, Bjorn has asked me to remind you that there is a, for those that are interested, a sustainability seminar on March the 20th where you can also find the registration link on So as a conclusion, I think 2025 was a good year. And again, what we always say is that whatever the market conditions come to us, our decentralized model, our proven strategy, we are convinced that we will also continue to deliver good results going forward, whatever market conditions come to us. And with that, I give the word back to Bjorn for Q&A.

Thank you, Nico. Well, yes, that means it's time to open up for your questions. And as usual, could we ask you to limit yourself to one question and one follow-up? And when we've been through the list, then we can start over again with you can register yourself to ask a question again. So with that operate, it means that we're ready to kick off the Q&A. Please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you are entering the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioner on the phone, I request 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 Daniel Acosta from Goldman Sachs. Please go ahead.

hi good morning thank you for taking my question as a follow-up i'll ask them one at a time but mainly starting um out in terms of sort of where see we've seen some some strong still moves especially in in the us we have also seen ppi of locks going up there's effects can you talk a little bit about how you see the cadence of these potential headwinds or tailwinds from raw materials and effects heading out throughout the year and and also you mentioned u.s resi stable maybe also comment on that

So perhaps if we start with market conditions, if I understood the question correctly, Daniela. So we, like I mentioned earlier, we continue to see good momentum on the non-residential side, especially on the institutional side. But our spec business, for instance, was again double-digit up in Q4 with most, if not all, verticals showing positive growth. And again, our more important verticals, education, K12 universities and healthcare, driving that growth. So, on the commercial side, we remain positive. It was also translated in high single digit growth in Q4. The residential side, like I mentioned earlier, remains more challenging. We definitely believe that the residential market has bottomed out and that from here on hopefully, confidently, we will start to see some recovery. We don't believe that we will see the recovery on the short term on new builds because of the gap on the interest rates mainly, but that fact that, you know, the housing installed base, so to speak, starts to age, should lead sooner than later to some recovery on the R&R side. And if you can believe the economists that forecast the future, they at least start to see some recovery on the R&R side already this year. And then the other thing on the logistic vertical in the US, as we mentioned, we have seen a not a V-recovery but a slower U-recovery. In a way we are happy with a slower U-recovery because that helps us on the operational side to ramp up in a more easy way. When it comes to Some headwinds, of course, yes, some natural things that we can't change. We had quite some bad weather, as you know, also in January that affected temporary, I think, to a certain extent, the business. That, of course, should just be a temporary thing, and I'm quite confident that if you look over the quarter, it will appear that that will not be significant. the us dollar sec we can only look back at the past and see where where currencies stand today we don't know how they will evolve in the future but like eric mentioned they will continue to have a very important effect on the top line he mentioned the number in in in the call it will also have a more important negative effect on the on the bottom line definitely now in q1 We've seen it was 30 base points in Q4, we believe it might and it will be even a bit higher now in Q1. Then going forward we will see what happens with the currencies.

And then on the steel side?

Yes, right. If you look at material indexes in general, I think they are going up in a significant way, copper, zinc, nickel. Steel has been more stable and you know that we are most exposed to steel. But we will do like we have done in the past. I mean if material indexes go up we will try to compensate them through price increases. We have already announced price increases end of last year, beginning of this year. And we will see if the market follows, we obviously will continue to do price increases and we are confident that we will be able, like we did in the past, compensate for material increases through price increases and defend the margin.

Perfect. Thank you. My follow-up is just on your comment now. You write on the 16 to 17 that you want to be on the long-run margin at the top end of that. What would have to happen to see you above that? Is that something that you definitely don't want to go above because M&A will always dilute you back, or would you have to see it for a number of years? above it and then you would consider changing the target. Is there a possibility that at some point you would consider increasing the target or you rule that out given the structure of the business model?

I would say let's not answer hypothetical questions. I think let's work hard first to get more higher up into that bandwidth. That's also what we have said in the capital market today. We are today at 16.2%. We have the ambition to get more comfortable in that bandwidth, perhaps also more to the higher end. And of course, there is a couple of main drivers there. Clearly, if you take the Americas, we have our residential business where we have said that within the first five years after the acquisition of HHI, we will realize $100 million bottom line synergies. If that happens, we can bring HSI to that 16% EBIT margin, including PPA and so on. So that is definitely something that over time will move the needle for the Americas division. Of course, we will need some help of the recovery of the market for achieving that. I think a second important driver is Ski Data, where we know that we bought Ski Data at a very low single digit margin, and where we have the ambition to bring it to, let's say, around 14% over the first five years. If that also happens, that of course also, because it's a 300 million euro business, that also has a more important effect on the margin. And the third one, as we mentioned at several occasions, we still believe that we have upside on the EMEA margin, where over time that should come closer to that 16%. So I would say that are the three main drivers that should help us to further improve EBIT margin.

Got it. Thank you very much.

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

Good morning, thank you very much for taking my questions. Can I just start with a follow-up? So on the pricing intentions for 2026, can you tell us at this stage what we should be thinking about with current raw materials and effects for pricing for 2026?

So, like Gerhardi said, it will depend a bit on where material indexes go going forward. And under the assumption that tariffs stay where they are today, because also that seems to be a moving target, I think you should calculate with a price somewhere, I would say, between 1.5% and 2%. Because we live in a slightly higher inflationary world than, let's say, prior to COVID-19. Prior to COVID, our price component was perhaps a low 1%. This obviously should be a little bit higher with higher inflation. And then we have, of course, some price carryover from last year still mainly on the tariff side.

Thank you very much. And can I just ask about the demand trends as you started the year compared to kind of the exit run rate of Q4? I think you've covered the US, but if we could just go around maybe me and Asia on kind of which way we're trending as we go into the year. And maybe as part of that, could you comment on the specified activity in the year as well, please?

Yeah. I mentioned already for North America that we have seen double digit growth over spec quotations. The same is true in EMEA and we have seen high single digit spec growth for Oceania. So on the spec side we continue to see good momentum. I would say the answer is the same as we gave the last three, four quarters, so a good healthy commercial activity level. I think also translated in good organic growth in all three regions. And a comment on the residential side would be also similar still. Yeah, definitely bottomed out, but no real recovery yet for the residential market, with the exception, like I mentioned earlier, for New Zealand, a smaller country, and then Sweden, where we have seen the recovery on the R&R side, but don't see the real recovery yet on the new-build side.

Thank you.

The next question comes from the line of Gael de Bruy from Deutsche Bank, please go ahead.

Good morning. Thank you for taking my questions. The first one is on the M&A side, and I think that's based on the already announced acquisitions, the M&A contribution. that's backed in for 2026 is just around 1%, which is lower than it was at this point in the previous two or three years, I think. So I'm wondering if you could provide any, you know, a bit more color on the M&A pipeline and perhaps a range of the potential M&A contribution for 2026.

So it's true that the carryover on the M&A side is 1% for the full year. It's around 3% for Q1. We have an active M&A pipeline. As you know, we have identified more than 900 potential targets. We are not talking to all of them, but we are talking to many of them. We are confident we will continue to close some of the acquisitions we are talking to in the coming months and quarter, so that growth through acquisition for the year will go up. And as you know, we have the ambition to grow through acquisitions 5% per year over a business cycle. We realized that 5% last year. We will do our best to come as close as possible to the 5% also this year. Like I mentioned, if we have high activity, then to close the deals you depend on two parties. Both parties have to agree. But we are happy, never satisfied, but happy with what we have in pipeline for the time being.

Okay, thank you. And the second question is on the organic growth dynamics, or more specifically on the volume. I think it was around 1%-ish this quarter, so roughly the same as in the previous three quarters really. So I guess my question is whether you kind of see any signs of acceleration going into 2026 or whether that's too early. And if basically you're comfortable with the consensus expectations for volume growth of 3 to 4% in 2026?

It was not really the same over the last three quarters. If you look three quarters back, it was very low, 1%. In Q2 it was closer to 1%, and now in Q3 it was above 3%, so you see an acceleration of the volume crouch. It's true that you don't see an acceleration to 2, 3, 4%, but at least you see an acceleration over the last three quarters. Then, of course, going forward, if you now look in Q1, the comparison is more difficult than in Q4, because I think last year in Q1 we grew 2%, where in Q4 we had a flat, slight negative growth. So that is one difference, and I think market conditions, like I mentioned earlier, are still very similar. So that's two things to take into consideration if you look now for organic growth in Q1.

Okay, thanks very much.

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

Yeah, good morning, everyone, and thanks for the time. I don't know if you mentioned it earlier, but I'm not there for the moment. Is it possible to talk about the organic growth speed in the quarter the global and the regional picture, and then add a follow-up I'll come back to.

Yeah, the organic growth for the geographical divisions in the quarter was 8%, with good contribution from all three regions, and the growth for global tech was higher, around double digit.

Thanks, and I wondered if you could talk about the opportunities and the threats of the Alero smart lock digital key wireless ultra-wideband near-field standards that are coming. I mean, I see pluses and minuses, and I wondered if you could help us navigate it in the sense that it enables digital smartphones key wallets, and maybe that helps with L-MEC adoption, but is there a risk, and how should we think about the loss of proprietary ecosystem lock-ins with cross-band interoperability? Does it commoditize the software layers? Do you worry about Apple and Google becoming gatekeepers? Just trying to think about what this means.

I think you should, if you look at our LMAIC business, which is around, what is it, 32% of sales. If you look at that part, more than 90% is on the non-residential side, on the commercial side. And, of course, all the things you talk about have an effect in the first place on the residential side. And on the residential side, the standards, we see it as an opportunity because, like I said, it will – accelerate adaptation and I mean we as one of the strong players in this field if you see an acceleration of that market we will obviously profit from us together with the other players in the market and if we can do a good job and come with more innovative products and wider product ranges and hopefully confidently we will also take a bigger part of that market.

And lastly, I wondered if you could just talk a little bit about software and recurring. It's obviously been a great growth engine. Does that continue in the quarter, and do you feel happy with the pace going forward?

Yeah, you know that I can be happy but never satisfied, and that is the same, James, with recurring revenue. I think we see recurring software and services as the fastest-growing, you could say, product or solution that continues. When I started back in 2018, recurring revenue was around 2% of top line. Today it's close to 6% of top line. So very strong acceleration and relatively becoming more and more important. And you know that you also make very good margins on that type of business. You see that as well in the geographical divisions and then also mainly in global tech as well on the HID side as on the global solution side. And as we move more and more from mechanical to electromechanical, I would say the non-residential commercial side, we get more and more opportunities for that software as a service. So we are confident that we will be able to continue that trend also for the foreseeable future.

Thank you very much.

The next question comes from the line of Lash Mahendra Raja from J.P. Morgan. Please go ahead.

Morning, guys. Thanks for taking my question. It's on entrance systems and just the commentary around perimeter security and sort of the stable development there. And I think that's sort of a slight change of tone versus sort of Q3. And I guess particularly given sort of data center growth, I thought that was an area that benefited. But just to kind of understand, I guess, what you're seeing there in the core

So I didn't understand the question.

Data centers, how that's impacting entrance, I think.

So as we also mentioned, the capital markets day, data centers today represents around 1% of our top line sales. And if you consider that data centers are growing 50%, you pick the number, that means that data centers can give us an extra half percent organic growth. That half percent organic road comes in the geographical divisions, because they sell doors and door hardware to data centers, but the one most exposed, which will profit the most, is indeed parameter security, because they do all the fencing around the data centers, and they have done also a very good job in coming with a vertical specific solution around fencing for data centers. The quarter had been a little bit weaker from an organic growth perspective. It's more a timing issue and a more difficult comparison with last year. If you look to parameter security, they have been growing close to double digit for the last two, three years, and we are confident now, not only with data centers, but also with need for fencing around high security applications, and also with warehouses coming back, that parameter security growth will also continue now this year.

And just as a follow-up on the entrance systems margin as well, obviously strong performance there. I mean, is there something going on there with the steel component and maybe some of your competitors importing more of their steel? Have you been able to sort of price it better and take from that margin?

So yes, entrance systems is exposed in an important way to steel and I would say aluminium. And they are the same answer as before. If material indexes go up for steel and aluminium, we will increase prices and try to compensate for those cost increases through price increases with the ambition to maintain margins.

Thanks very much.

The next question comes from the line of Vekmida from Citi. Please go ahead.

Thank you very much, everyone, and good morning. My main question is on EMEA. Nice to see that the growth recovery is continuing, led by the Nordics. You mentioned that Southern Europe remains relatively weak within EMEA. Can you maybe talk about, you know, whether you see any visibility on a recovery there, the sort of expectations on the shape of any recovery? Thank you.

So, if you take EMEA, I think we have two important growth drivers. North Europe, Finland and Sweden in particular, and then we have the DACH region with Germany in particular. I think both are also profiting from the NISTU legislation, cybersecurity legislation where you also have to improve your physical security. And we see this is a European legislation that then has to be translated into a local law in the different countries. But you see that Germany and the Nordics are perhaps a little bit ahead of the other countries, and you see more activity there. So that is an important driver in those two markets. And like I mentioned, in Sweden, of course, you have to a certain extent the recovery on the residential side. What is also a good driver in EMEA is emerging markets, so India and Middle East, Africa, and some markets in East Europe. Two challenging markets are the UK, where we have said at a couple of occasions that we were confident that they had bottomed out and that we would see a recovery. We still believe that is the case. On the commercial side there is a challenge with some of the legislation, government legislation that has changed and therefore some of the bigger projects are on hold. Once those are released we are confident we will see that growth on the commercial side for UK and therefore that recovery that we mentioned already a couple of quarters ago. If you take South Europe, it's a bit of a mixed picture where Spain, Portugal, and Italy to a certain extent show good results. It's mainly France that is down. France is also in Europe one of the countries where we are most exposed to the residential business, and it's still the residential business that is challenging in France. There again, we believe, we are confident that we see light at the end of the tunnel and that in the foreseeable future we should start to see recovery of that business in France.

Thank you very much. And my follow-up is just a quick one on one of the small divisions, but in APAC, actually quite a good margin print. I think it might be the best margin for the full year since 2019. Do you see a path to recovery to a 10% margin over the mid-term here? Thank you.

Yes, I think because if you look at APAC, again, you should make a difference between Greater China and the rest of APEC. I would say the rest of APEC has margins similar to EMEA, whereas in Greater China also last year we had a small loss. And as in the mix, greater China becomes also less important and the rest becomes more important. And as in the rest, we also continue to see good operational efficiency gains. Yes, we aim to further increase that margin for APAC. Over time, I think it should be possible to go to double-digitals in APAC.

Thank you very much.

The next question comes from the line of Aaron Ciccarelli from Bank of America. Please go ahead.

Hello, hi, good morning. Thanks for taking my question. My first one is on U.S. residential. You talked about the market bottoming out. I was wondering if you can provide a little bit of an idea of how pricing within different parts of the market, if you can talk a little bit about perhaps the Kwikset brand versus Baldwin would be great, and also talk a little bit how the pipeline is shaping up as we enter the first part of the year. Thank you.

As the first on the market, to repeat what I said before, we don't believe that we will see in a short time a recovery on the new build because of the gap on interest mortgage rates. Where perhaps we are a bit more positive on the R&R side because of different facts. And the main fact what I said earlier is that 55% of the houses in the US are more than 40 years old. So sooner or later that R&R has to come back. And therefore, as a strong market leader in that field, it's very difficult to do better than the market. What we try to do is come with a lot of new product development. If you take, for instance, the Kwikset brand on the digital side, I think we launched over the last six months more products that Kwikset had launched over the last five years. So really a very strong market. acceleration of new product development. And I would say the most extreme example is the digital side for Kwikset, but we are doing the same thing for Baldwin and for all the other verticals on the residential side. And that's also an indirect way, obviously, to get price increases into the market, because if you can come with a new product that you then also can develop at a lower cost, you can create a new price positioning for that in the market. That's not directly calculated in our price, but it's obviously an indirect way to increase prices. And that is also translated in our bottom line where We continue our trajectory to the ambition that we have set over time of 16%. Again, there it would – that would not be possible if we don't see the recovery also of the market and get a little bit help of the market. Because only the synergies, the 100 million bottom line synergies that we have identified We will not do it because, if you look at the top line today, we are 60-70% below the peak from some years ago. That's also why we have taken extra measures in the residential segment in North America. Last year we took out, and we had to take out, unfortunately, more than 1,500 people to adapt our cost to the local reality and defending and further improving. our margin and that's things that we will continue to do now also this year we will adapt our cost structure to whatever top line we will see.

Thank you. And my follow-up is on global tech. The kind of growth was very strong in Q4, despite the two-year stack was relatively easy. But can you unpack perhaps the main drivers behind the performance? I would like to understand if you're seeing a tangible market share gains or the performance is mainly coming from wide space opportunities created by new technology adoption. Thank you.

If you look at the two main businesses in global tech on the HID side, we have PECS. PECS after all the turbulence with semiconductor shortages, recovery and so on, I would say is back on that – I call it diesel growth path, so mid-single digit growth, steady growth with good profitability, and we believe that is going to continue. But what was good in HID is that we have seen very good growth for the other verticals, the smaller verticals where we invest a lot in feet on the street, a lot in R&D to make them significantly bigger than also helping on the margin side. And so we have seen good development of those verticals in the quarter. And the same is true for global solutions where obviously hospitality is the biggest vertical, but we have also seen a good continued higher single digit growth momentum, but where also the other verticals delivered on a high level in – the other business areas segments delivered on a high level in the quarter, contributing even more to the overall organic growth. In that sense, it was all stars aligned from an organic growth perspective for the different business areas, as well in HID as in Global Solutions.

Thank you very much.

The next question comes from the line of from Jefferies. Please go ahead.

Yes, good morning. I'm just going to start with a follow-up on the hospitality side. I think some of your peers have flagged that US hotel occupancies have dropped, and this is affecting the appetite of hotels to invest into their own assets. I'm just wondering whether it's something you've seen or not. Thank you. I'll start there.

We have seen good momentum of our hospitality business around the world and also in the U.S. So we have seen good growth of our business in the U.S. in the quarter.

Perfect. And then second one is just if we could elaborate on your pricing commentary. How much did you achieve in the U.S. out of I think the 3% to 4% sort of targeted? And if you could just give us a split. of that one and a half to 2% for full year 26, how much of that is carry over versus incremental price increases? Thank you.

Like Eric mentioned, our price component in Q4 was a low 3% for the group and obviously A good part of that has been related to tariff compensation and tariff compensation is only in the U.S. So the two or the three divisions that had a higher price component than the group average are obviously Americas, entrance systems and HID because they have relative important part of their business in the U.S. So the price increase for Americas was a bit higher than the average for the group. We've always said that on the tariff side price in the U.S. should be around let's say 3%. We first had a bit higher than 3%. I've seen that it's a little bit lower than 3% because we were able to further move parts, sub-assemblies and products to more very favorable destinations. So if you calculate with, let's say, 1.5% tariff impact for the full year 2025 on group level, and if you take into account that most of that has come in Q2, Q3, then you can also see what that gives us now in 2026. And then the rest of the 1.5% to 2% I mentioned for the full year 2025, is then the normal price increases that we do at the beginning of the year to compensate for general inflation, material inflation, labor inflation, you name it. And then depending on where material indexes go, we will continue to try to increase prices as we go.

Okay. Thank you very much.

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next question comes from the line of Andreas Gorski from BNB Paribas please go ahead thank you very much and good morning I just want to follow up on the price discussion here because when I look at your price development through 2025 and now your comments about new price increases at the end of last year and the beginning of this year I get to a price component in the beginning of 2026 of around or even above 3% again, which means the price component at the end of the year must be around 1% to get to 1.5 to 2 for the full year. Is that the right thinking or what am I missing? Thank you.

I think in global terms, I think it's a good thinking. It's more or less in line with... how we see things then, again, everything will depend how costs evolve going forward and how successful we are or not in realizing the price increases that we have announced and are announcing and that should kick in later in the quarter.

Understood, thank you. And if mean in 2025 you've had a very strong drop through organic drop through of around 50 for the full year and it was close to 40 now in the fourth quarter which was also a very good number but if volumes will account for a larger share of organic growth in 2026 what do you think is the reasonable drop through for you do you think that should come down towards 30 or what is a good guess thank you i think

everything depends on organic volume growth, and there is most probably somewhere an ideal organic volume growth where you get the best volume leverage, and that's most probably somewhere around perhaps 2-3%, because if it's lower, it's more difficult to compensate for inflation. If it's much higher, you put too much pressure on your supply chain, on your factory, you have to work with overtime, you have to expedite deliveries and so on. So most probably that 2-3% organic volume growth is an ideal place to be. And if you are there in normal conditions, drop through around that 30% should be realistic, yes.

And if, okay Björn, to squeeze in one follow-up. Because you mentioned that comps will now become more difficult in Q1 and that market conditions are still very similar. Normally you get the question how the current quarter has started, but does your comment around the tougher comps mean that you're now seeing slower organic growth in Q1 26 compared to Q4 25, or what are you saying? Thank you.

Perhaps on how the quarter started, how January started, it's a bit difficult to compare. January had one working day less. If you compensate for that, January was a little bit lower than Q4. And it was mainly, we believe, linked to two things, the weather conditions in general and the weather conditions in the U.S. in particular. We believe this is a temporary thing and over the quarter. We don't think that is going to be a significant reason. And the second reason was that we have a more important factory in Berlin, and you know that there was a sabotage, electrical sabotage in Berlin, that they were without current. Our factory was without current for five days. We could not produce an invoice for five days, had a negative effect in January, but again there, this we will pick up, and we don't think that it's going to be a notable negative thing in the quarter. So that is on how the year... uh started on the comment on the comparisons as well is as well top line as bottom line like we mentioned we have a we had a stronger organic growth in in q1 last year than in q4 the year before therefore the comparison is more difficult but also bottom line the comment was always there because we have the normal seasonality but we also want to highlight that now with ski data Coming in, we have a much higher seasonality. Ski data will give an extra around 50 base point seasonality in Q1, negative seasonality in Q1. And then like we mentioned on the currency side, which will have an important negative effect in Q1, top line but also bottom line. That's perhaps the two deviations if you look at historical numbers.

Understood. Thank you very much. So I think we have time for one more question.

The next question is from the line of Andre Kuknin from UBS.

Please go ahead. Thank you. And I just also wanted to ask about the America's dilution to margin from NMA through the year. It looks like 90 basis points. And I think from discussions before, I understand this is mainly investment in the level log acquisition where you're running out of technology across bigger brands. Could you just comment on how that's going and what the outlook is for 2026? I noticed that dilution has kind of come down a bit. or quite a bit in Q4 versus the prior quarter's run rate. Does that mean you're kind of now at the run rate of investment and what kind of payback do we expect between some sticks?

Yes, so if you take Q4, the dilution of acquisitions in Q4 in the Americas has nothing to do with Levelog because we own it now more than a year and so therefore Levelog is in the organic part. The dilution in Q4 is mainly transactional related cost for the two acquisitions that we also mentioned in the presentation. So you could say it's a more one-off type of thing. Whereas it's true that Levelog has around 100 bps dilution for the Americas. It's fair to say that we are not entirely happy with the performance of Levelock after the acquisition. We are struggling a bit on getting the sales up in line with our expectations. We have been taking measures to do that because we should see more sales as well on the residential side as on the light commercial side. And we have put now the right resources in place and the right focus in place to to do that, but that was a bit later than anticipated. I think we have also been perhaps a bit too slow in adapting the cost to a lower top line because we, on one side, wanted to continue and finalize some of the R&D projects that they are working on because we have bought them in the first place R&D machine coming with very exciting new products. And on the other hand, we wanted to understand first a bit better the commercial momentum. So we have now taken actions also on the cost side. So that dilution should gradually reduce now over the coming quarters. But it will remain dilutive for the quarters to come.

It's time for us to round up. Thank you, André, and thanks, everyone, for your participation. If there are any follow-up questions, please feel welcome to reach out to us at Investor Relations. And we look forward to meeting and seeing many of you in the coming weeks. Thank you again, and have a good day.

Thank you. Thank you.