ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Azab Loy's first interim report in 2026. My name is Björn Tobel. I'm heading Investor Relations. And joining me here in the studio are Azab Loy's CEO, Nico Delvaux, and our CFO, Erik Tider. We'll start this conference now with a short summary of the report, and then we will open up for your questions, as usual. And we have set aside about one hour for these events. So with that, I'd like to hand over to you, Nico.

Thanks, Bjorn. Also good morning from my side. We can report a good start of the year with a continued strong execution in the quarter. Very good organic sales development of plus 2%. Good sales growth in Americas, Global Technologies and EMEA. Very stable sales in Antron Systems and APAC. Then organic sales complemented with growth through acquisitions of net 2%. And then a strong execution with a strong EBIT margin improvement, 40 base points better than last year, and EBIT at 15.3%, with an excellent operating leverage of 51%. And then again, cash flow also highlights this quarter, a very strong cash flow, 30% up compared to last year. Electromechanical organic sales continues to outgrow the rest of the business. We had a 6% organic growth for electromechanical products in the regional divisions. And then we complemented three acquisitions, or we completed three acquisitions in the quarter. So if we look in numbers, sales of almost 36 billion SEC, 2% organic growth, 2% net acquired growth, but then hit in an important way by FX, minus 10%, so top line minus six in total. I'm very happy with the EBITDA margin evolution, 50 base points better than last year at a strong 16.4%. Then we have the EBIT margin, like I mentioned, at 15.3, 40 base points better than last year. And EBIT in absolute value of close to 5.5 billion SEC. If we look a little bit in the market conditions, And perhaps I start to comment for the opening solutions geographical divisions in the three main markets, where I would say there is no difference compared to previous quarters. As well in North America, as in Europe, as in Oceania, we continue to see very good, strong momentum on the non-residential side, on the commercial side. And we continue to see a more challenging situation on the residential market. If I comment for those three markets, for the other divisions for global tech, mobility is important and we still continue to see very good mobility in all three regions, so it's good market conditions for global tech. The deviation is perhaps in entrance systems, where we see in North America, Europe and Oceania, good momentum for everything that is retail related. We see good momentum for our perimeter security business in North America. But we see more challenging market conditions for the residential garage doors. They are linked to residential market conditions. And then we have seen also a slower recovery of the logistics vertical in North America than anticipated. And we don't see that recovery yet in Europe. As a matter of fact, we see the logistic vertical further going down in Europe. We see in Europe also a bit slowness, I would say, on let's call it industrial CAPEX-related decisions for project business. Main environmental systems also did in HID. So that gives us then the plus 5% organic growth for North America, the flat development in Europe, and the plus 3% in Oceania. Very good market dynamics in Latam, where we have seen a very good growth in all our markets, a plus 2% organic growth. Africa is a very small part of our total business, minus 8. That's mainly related to a difficult comparison with projects that we took last year for HID and Global Solutions. And then a plus 2 in Asia, a very mixed picture between Greater China, where the market continues to be double digit down, And then the rest of Asia where we see good momentum and where we also ourselves see a very good high single and double digit organic growth. We then go to some highlights for the quarter. Some project wins. HID was able to secure a solution offering mobile first access via Apple and Google Wallet with kind of hybrid support for physical credentials. for Bureau Properties, a big, important customer for us in Latam. Kwikset continues to launch new products on the digital side. The Kwikset Aura Reach smart door lock, a connected Deadpool, enabling hands-free intelligent home access with Bluetooth and Matter connectivity. So another, I would say, product launch in that field. Very happy with that. And then on DoorBud introducing the world's first IP video intercom system with integrated 5G, enabling flexible and cable-free access to residential and commercial buildings. Very excited about that new product launch as well. Going to look a little bit at the sales growth, 2% organic, 2% acquisition, a bit lower than the previous four quarters. You see that our 12 month growth trend continues. Operating margin at a good level but hit because of the currency on the top line. And then, sorry, operating margin, sorry, at a good 16.3% and then operating income on a good level but hit by the currency on the top line. Nevertheless, 73% up compared to 2021. We continue to be very active on the acquisition side with three acquisitions completed in the quarter. They represent an annualized sales of around 550 million SEK. And now in beginning of April we announced another acquisition that's our 400th acquisition since we were born 32 years ago. Very happy also about that acquisition. It's a residential garage door company. in Portugal serving south of Europe, so complementing also our residential offering in Europe. If we zoom in on one of the acquisitions of Q1, Senco is a US provider of asset protection technology and solutions for retail security, so really complementing our in-view offering in that vertical, very nice complement to an exciting vertical. They had a sales of around 330 million SEC last year. If we then go into the different divisions, starting with EMEA, a very good start of the year for EMEA with an organic sales growth of 3%, strong sales growth in Central Europe, the Nordics and the Middle East, India, Africa region, but then a sales decline in UK, Ireland and in South Europe. Also very good improvement of the margin, 14.8% and the base points better than last year. You see that organic volume growth continues to boost the bottom line. Strong operating leverage of 40 base points and then also helped by FX, the only division actually that is bottom line helped by FX 80 base points, M&A dilutive 20 base points. Also Americas, very good start for the year. We have an organic sales of plus 4%, with strong sales growth in North America, non-residential segment, and in Latin America, and then a sales decline in North America residential segment. Also here, very good EBIT margin, an EBIT margin improvement at 17.9%, 80 base points, better than last year. We've also here excellent operating leverage and hits by currency and acquisition, 2 times 30 base points. APAC, a flat organic sales development, with good sales growth in Pacific, North East Asia, and a sales decline in Greater China and South East Asia, where we see really a big difference between Greater China, double digit down, and South East Asia, double digit up. Nevertheless, despite a flat organic sales development also here, nice EBIT margin improvement, 100 base points better than last year at 5.1%, also here excellent operating leverage, and then hit by currency 30 base points. Global technologies and organic sales of growth of plus 4% with strong sales growth in global solutions and a good sales growth in HID and a strong EBIT margin for Q1 at 15.3% with also here excellent operating leverage hit in a very important way by FX and base points dilution and helped by M&A 40 basepoints that mainly the divestment of citizen ID business last year. And the last but not least, entrance systems, a flat organic sales development with strong sales growth in parameter security and in pedestrian, but a sales decline in doors and automation and in the industrial segment, and a good sales growth in service. Despite a flat top line development and therefore negative volume, we managed to still post a very good EBIT margin at 15.1% with a stable operating leverage. And then ABEX and M&A dilute if respectively 40 base points and 20 base points. And with that, I give the word to Erik for some more details on the financial numbers.

Thank you, Nico, and also a very good morning from my side. You've heard a lot of the numbers before, but sales were in total down with minus 6, with plus 2 in both organic as well as acquired net growth, but were hit in an important way by the currency, minus 10%. Of course, I mean, as you probably are aware of, there is quite a lot of movements in the currency, so if you look into Q2, Right now, we sort of foresee that it's going to be a minus 2% impact for the second quarter. EBIT was in value, was 3% down. If you look on EBITDA, up with 50 base points. EBIT was up with 40 base points. And then we were a little bit helped by the interest rates, so both income before tax, net income, as well as EPS. is at a similar level as what we had a year ago. Cash flow, as mentioned before, was very strong at 3.1 billion, 30% up versus the same period last year. We also saw an improvement in return on capital employed, up with 20 base points. And then, as we introduced in the last quarter, operational value added, which is EBIT minus the interest cost that we have for our capital employed, there we also were able to improve that with one percent in absolute value if you look on the bridge and dissect the organic part uh on price was a strong two which means that volumes were for flat you see an excellent flow through uh 52 percent where you can see that okay there is a bit of positive mix but also we have positive tailwind that comes from price cost MFP savings of about 120 million SEC, as well as other operational efficiencies. The currency hits us both on top line as well as on bottom line, 10% on top line, and then dilution of 30 base points on the bottom line, and then there is a small dilution this quarter of 10 base points that comes from acquisitions and divestments. Cost breakdown, direct material. positive with 90 base points, out of which about 40 base points comes from mix, which is predominantly mix within the divisions. So, let's say the true impact is 50 base points from price versus cost. We see, of course, now that raw material are increasing, but we're mitigating that with price actions. Conversion costs due to the lack of volume was down with 40 base points. SG&A was flat despite that we continued to do investment in R&D as well as in sales, but we were able to offset that with efficiencies within our administrative expenses. Operating cash flow, as mentioned before, 30% better than the same period last year. Cash conversion was about 60%. And if you look on the last 12 months, our cash conversion is at a very high 110%, and we have had an operating cash flow positive of about 23 billion SEK. And that, of course, has an impact on our gearing and on net debt. If you look on net debt to equity, it's going down, so now it's about 60% net debt to EBTA. is at 2.1, and if you look on the lower bar there, we have reduced our net debt with more than 6 billion SEC, where if you remember in Q4, it was a lot related to currency. Now the currency has a much smaller impact, and you can see that our cash flow is really paying off in reducing our debt, so we continue to have a very strong banner sheet so we can continue the acquisitions that we want to do in line with our strategy. Last but not least, from my side, EPS, as mentioned before, was at the same level as previous years. If you look on dividend, we have since 2021 paid out 27 billion SEC. And if now the AGM approves this afternoon, we're going to pay out another 7 billion SEC. With that, I hand the word back to Nico for some concluding remarks.

So like I said at the beginning, a continuous strong execution in the quarter. There's a good organic sales development of plus 2%, 2.3% to be exact. And good complementary growth through acquisitions, net 2%. A strong EBIT margin improvement. 40 base points better than last year, a bit at 15.3%, with excellent operating leverage of 51%, and then a very strong cash flow improvement, 30% better than last year. I can only repeat what I said in previous quarters. We live in a very uncertain world where things are also changing day by day, and we are still convinced that our decentralized model, where we really empower people in the local market, close to the customer, really gives us a competitive advantage. And so that we are also prepared for whatever operating environment, economic environment comes to us. Thank you.

And with that, I give the word back to Bjorn for Q&A. Thanks. Thank you. Well, that means it's time for us to open up for your questions. I think you know the rules, so please limit yourself to one question each and follow up. And then if you can put in your interest again for another question. Operator, this means that you can 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 one on their telephone. If you wish to move yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable loudspeaker mode while asking a question. The first question comes from Ines Lefranc, Goldman Sachs. Please go ahead. Hi there.

Thanks very much for the presentation. I just wanted to ask, could you give us some color on the impact from weather and the impact from the Middle East in the quarter, please? Thank you.

So yes, we mentioned after the Q4 call that January started a bit slower because of bad weather mainly in the US and for sure construction customers have lost some days in some parts of the world through that. And that also is an explanation why our year starts a little bit slower. I would say if you look at the total quarter, that is not really something that moves the needle. So I think it's not really an explanation for the results we have. If we then go to the Middle East, the direct impact is rather small in the quarter because, as a matter of fact, January and February were very good in the Middle East. We only start to see a decline for the Middle East in March. And also Middle East is a relatively small part of our business. It's only around 1.5% of total sales. And of course there will be and there is some indirect effects of the Middle East situation when we talk about oil and gas prices, about logistics which drives inflation. And like Eric said, we of course will compensate that inflation through further price increases in the market.

Thanks very much. The next question comes from the line of Andre Cockney, UBS. Please go ahead.

Yes, good morning. Thanks for taking my question. I just wanted to ask about how the Q2 progressed so far versus that sort of relatively slower start of the year with a few things that you highlighted, and then I've got to follow up on that on Global Tech, please.

So like I mentioned, in Q4, January started a bit slower because of weather and perhaps other things, but also February continued to be rather slow, so we were a bit concerned, but then we had a very good March, giving us the result that you have seen for Q1. We can say now that April has continued on a similar level as March.

That's very helpful. Thank you. And just on global tech, Luca, can you help us with thinking about sort of the quarterly cadence of growth there? I know in the past you said the stars were aligned and you printed 9% growth in 2025 Q4. Before that, we had only three in Q3, again, high single digits in H1. Is 2027 going to look different? like that in your viewpoint what you can see right now from the order book from customer indications and we just had one of those kind of slower quarters that we need to kind of rethink global tech seven percent growth potential for the year we did q q3 was plus three q q4 was on the line with all stars aligned and now we have again plus three so it goes a bit up

We have always said that global tech is a division that should grow faster than our 5% ambition. We should have an ambition for global tech to grow higher in single digits and we are still convinced that that is the case over a business cycle but we will continue to see these ups and downs quarter by quarter. This quarter all the stars were not aligned. We have also seen a little bit of agitation I would say on the project side, a bit similar like I mentioned for anchor systems in Europe where I would say non-critical industrial CAPEX related decisions are perhaps taking a little bit longer because people want to understand a little bit better what is going to happen with the world around us. But again I am confident the long term drivers continue to be strong for global tech. We stay with our statement that this is a division that should grow higher single-digit as our business cycle.

It's really helpful. Thank you very much.

The next question comes from the line of George Fiederszton. Mark, please, please go ahead.

Hi. Morning, everyone. I just want to start with a question on emission systems, if possible. I just wondered, it's basically a division that has been lagging, I guess, a bit, the group, for some time now, and I just wondered, in your assessment, how much of this is just purely cyclical effects, and how much of it might be structural, and whether or not you're reviewing any parts of the portfolio in terms of whether they're suitable for the long-term ambitions of Acer Avalon. That's the first question.

I think you're asking a bit per segment. If you start with a smaller segment parameter security, the fencing business, which is for us only a North American business, I would say it's a very strong business that has performed on a very high level for the last... years with very strong positioning in the market. If you then take pedestrian perhaps to some of your surprise we really like retail business and the retail business like it is going today because yes it is perhaps true that there is less shops being built, that the shops are upgraded to more nicer shops. And so all the manual doors disappear and you get more sliding doors. That's good business for us. And pedestrian also has performed very good in Q1 and continues the same trend that we have seen for several years. Then we have our residential segment, which is today mainly a North America segment. And that's very linked to residential market conditions on which I commented quite a lot this quarter and also previous quarters. where we don't see that recovery on the new build side and where the R&R recovery is also rather small. And then last but not least the industrial segment. The industrial segment depends very much on the logistic vertical where we start to see a small recovery in North America where people start to invest again in new warehouses perhaps a smaller recovery than we had hoped and anticipated for. And that recovery we don't see yet in Europe, that logistic vertical market is further down in Europe, and that hits our results in Europe. That together with what I mentioned earlier, that in Europe we see a little bit of hesitation on non-critical industrial CapEx related decisions. So I think what we are in today with rental systems is really market related. We don't have any ambition to change our portfolio. We believe the four segments are very good segments to be in from an equipment perspective and also from an aftermarket perspective. We continue to see relative good growth on the service side. It's just a matter of time for the logistic market in Europe to recover to see again stronger organic roads for entrance systems.

Okay, thank you for that. And then just to follow up on your writing comments, you've obviously made references to inflation pressure, so can you let us know a little bit about whether you've already taken some proactive action on price, what kind of levels are we talking about, and whether or not you see incremental headwinds from any Section 232 changes as well, please?

Thank you. Okay. There you see Merrick also commented on the accretion price versus cost, the 90 base points where 50 base points is pure price versus cost. So we are doing well in compensating through price increase but also through operational efficiencies, negotiating with suppliers to compensate for that higher inflation. And it is true that recently we have seen material prices rather going up, you can name whatever, steel, copper, zinc, aluminium, everything is up. On top of that we have the logistic cost inflation, labour inflation, general inflation. So yes, we continue to increase prices, we have increased prices at the end of last year, beginning of this year, and at the end of Q1 and now also in April we have further increased prices. that we could reckon with a price between 1.5% and 2%. For this year, we can inflate that number a bit, depending on how successful we will be with the price realisation of the recent price increases that we announced. But I think we should calculate now with a price increase north of 2% for this year. With that side remark now, of course, in Q2, that you should not forget that the price carryover from the tariffs of last year is gone. We had very nice price carryover in Q1 because last year there was no tariffs yet. And then in Q2, obviously, the price for tariffs started to kick in.

Okay, thanks very much.

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

Well, thanks very much. Good morning, everybody. Can I just follow up on the pricing side and especially regarding the residential segment for you? Obviously, it's been fairly weak for a number of quarters now, but I was wondering if there is a need to adjust the pricing perhaps based on the lower demand or likely the need to absorb internally a bigger part of the inflationary pressures.

So I suppose you talk specifically about residential North America or residential in general?

Yes, North America.

So our North America residential segment had a small single-digit negative growth in the quarter. But if you then, you know, take price into account, of course, volume was negative. So only price will not help us or will not do the trick to further improve margins. So we also have taken more cost measures in the residential segment. We unfortunately had to let go quite a lot of people. I think we have, to take the last 18 months, we unfortunately had to let go more than 1,700, close to 1,800 people in that segment to adapt the cost to the new top line reality. But that led, together with the further realisation of the synergies in residential, that led to a continuous margin improvement for Q1 compared to Q1 a year ago. And yes, we also increased prices on the residential side. Yes, it's true that it's more challenging in a DIY segment than for, let's say, a relatively smaller end customer. But we realize also prices for residential direct and also through the introduction of new products where we have really accelerated the new product development for residential in North America.

Thank you. The next question comes from the line of Luis Maidi. Jeff, please go ahead.

Yes, good morning. Thank you for taking the questions. Nico, your commentary around March being stronger than January and February, do you think there's an element of free buy because you've been obviously implementing few price hikes, but also seeing lending rates creep up? Does this change your view on the sort of recovery in U.S. resi and the Nordics?

So one on pre-buy, no, I don't think it's something that has moved the needle in the sense that we have increased prices also in November, December, January, February, March, April. So it's an ongoing exercise and we did the same year before. So that is not something that moves the needle. The second part, interest rates, yes. Yes, I think we see interest rates going up again a little bit in North America. So that's obviously not helping a faster recovery on the residential side. Like I mentioned earlier, I think R&R has bottomed out and is recovering again from a low level. at a low speed, but we don't see that recovery on the new-build side yet. If you look at 12-month moving trends for new single-family houses in the U.S., I think it's 14% down. So the new-build recovery will not happen on the shorter term. The interest rates are important, disposable income of course for the average American is also important and then on one side you have of course the inflation and the higher inflation and the higher gasoline prices on that place on the other side also perhaps lower taxes so we'll have to see how that plays out going forward.

Thank you. And then just price cost, 50 basis cost, now the carryover is lower in Q2. How should we think about price cost over coming quarters, please?

Again, it depends a little bit on how much of the price we will realize now in Q2, but we are confident that we will get good price realization. Therefore, I think you should calculate with another good accretion price versus cost in Q2. That's a bit slightly lower than in Q1, but still a good significant occasion. And then Q3, Q4, we will see where material prices go and what we start to do with prices.

Thank you.

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

Hello, hi, good morning. Thanks for taking my question. The first one is on your P&L. Gross margin was up 60 at this point and strongly up, and SG&A was flat. I believe in the past you mentioned that you were expecting for the full year SG&A as prepared as your sales to be up. Can you maybe help me understand if you change your view today, what should we expect on SG&A? Do you think that you can, in fact, offset some increase in R&D through efficiency for the rest of the year, please?

I don't remember us saying that we expect SNA to go up. It's true that if you look over the last couple of years, most of the accretion has come from price versus cost on the material side, because we have continued to invest in sales and in R&D to boost that organic growth. In this quarter, the SNA has been neutral and that is despite the fact that we have continued to invest in R&D and that higher sales cost for the people that we invest on the sales side is in the books. Explanation is on the operational efficiency gains that we realised especially on the admin side. We are working a lot on lean not only in our operations, physical operations but also lean And then, of course, we start to see the first results in our finance from the AI activities and other automation activities that we are carrying out on the admin side.

Thank you. Before you mention customer hesitating a bit, could you help me understand what type of visibility you have in terms of backlog, please?

It depends very much on visibility. It depends for the different businesses we have in the group. If you take residential aftermarket in Europe or in the US, you could say that our visibility is a couple of weeks because we have delivery times over a couple of days. Then, of course, if you go to a new project on the commercial side, you have a little bit longer visibility. The longest visibility we have is for loading dogs, because normally if you get an order today, you deliver in six to nine months. HID is a bit in between. They have a lot of day-to-day business for the aftermarket. I would say it's a major part of HID. But then they have a project business in identification technologies and in IAMS, where we have obviously a bit longer visibility. And I would say the same is true on global solutions, right? There is a lot of day-to-day aftermarket. And then the projects, like for hospitality or for marine and the other verticals, we have three to six months, sometimes nine months visibility. Perfect.

Thank you. I can maybe just signal to those of you who are in the queue, we just have two people in the queue, so if you have more questions, there might be a possibility to ask questions.

The next question comes from James Moore, Rothschild. Please go ahead.

Yeah, good morning, everyone. Nico, Eric, thank you for the time. I wonder if I could, Nico, ask some growth rates on specification globally, regionally, and LMEK and software, just understanding how all of that lot's growing in the quarter.

So still continued good momentum on the specification side. We had a high single-digit growth of specification in Oceania, Australia, New Zealand. We had double-digit specification growth in EMEA, and we had low single-digit in Americas. And before you start to read something negative in that, it was mainly in the education and healthcare verticals, the two main verticals for us, and that was mainly because of a very difficult comparison with a year ago. So, as a matter of fact, also in North America, we don't see any slowdown on the specification business for our commercial segment. So that continues to be strong. We continue to see a shift from mechanical to electromechanical on the specification side. And in Europe, we also continue to see a shift to more requests for sustainable offerings.

Would it be possible to talk about the speed of LMEK versus NEC growth in the quarter, at the group level, and also how your software business is developing over here?

So if you take the LMAIC growth for the geographical divisions, that grew with 6% in the quarter. If you include global tax, if you take the global or the total group, we grew LMAIC with 7%. And the deviation is also partly explained by the higher growth of software as a service, revenue part which sits for the main part in global tech, in HID and in global solutions. Today our current revenue part is more than 6% of top line, so our fast growing product or solution.

Thank you. And I wondered if I could just come back on your comments on HHI or U.S. residential. You talked a bit about some new product launches, and I wondered if you could put any kind of numbers to that in terms of innovation ratio or number of products that you did in the past. And has that impacted sales in the first quarter? Is that a benefit that's yet to come? And did you see it shifting market share and shifting growth relative to the markets?

I think if you look at market share, you should look over a longer period. Everybody can say that they grow market share in one quarter. But we definitely believe one of the ways to improve our relative position in the market is through new product development. That's why we accelerated new product development as well on the mechanical side, where we also extended our product offering with some new exciting families. But definitely also on the digital offering for Kwikset where we came maybe four or five new platforms of digital door locks. As a matter of fact, I think we launched over the last nine months more products for Kwikset that they launched over the last three years before we bought them. acceleration of new product development. Same is true on the Baldwin side where we extended our offering in a very nice way and as well for national hardware. So if you look a little bit under the hood, I think we see definitely in those sub-segments, on the digital side for instance, those new product developments helping on boosting the sales, yes.

Thank you. That's very helpful.

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

Thank you very much for taking the call out. Can I just take off the M&A? How much do you have now for the year from the acquisitions that you've announced, and how is the pipeline looking for the rest of the year at the moment, please?

If you look today, it's about 2% that we have already acquired, and we have a healthy pipeline. You heard from Nico before that we already have closed acquisitions in April, so I think it's pretty healthy.

Great. Thank you. And yes, sorry for another technical, but just on effects, you mentioned 2% for Q2. Just wanted to make sure I've got that right. And what are we calculating for the full year at the current rates?

Just to make sure that I remember that. I mean, we sort of calculated with 2% for Q2, and it is, I think, 3% then for the full year. But remember, I mean, this is period end I mean, there is some fluctuation in this, but that was sort of, as I said, 2% for Q2 and 3% minus 10% for the full year.

The end of March rates or current rates? End of March rates. That's great. Can I just follow up on pricing? That's a little more interesting question. You mentioned that you continue to push price increases, but the U.S. tariffs carryover is kind of done as of end of Q1. But from what I recall last year, the tariffs related price increases were kind of prolonged through kind of from obviously the Liberation Day. It took a while to get that going from beginning of April, and then there were kind of variations in tariffs that were kind of also reflected subsequently. So it sounds a little bit strange to see that the carrier was done already in Q1, and there's nothing for Q2 or the rest of the year, given how gradual it looked during 2025. So I guess the bottom line question is you've indicated more than two percent price for 2026. It sounds like we can get quite close to three, or am I miscalculating something there?

Well, we want to stay to our statement that it's going to be more than two. It's true that we will still get some carryover in Q2 from the tariffs. explain that in Q1 we had zero carryover. Sorry, we had zero in Q1 and therefore we had full carryover. That in Q2 will be significantly less, but yes, there will be still some carryover in Q2 and even in Q3. Yeah, you're correct.

That's great. Thank you very much.

The next follow-up is from Rizk Maidi. Just wait. Please go ahead.

Yes, thank you for taking the question. Just maybe on the savings, I think MFP, Eric, you said it was 120. Can you just talk about what are the other initiatives? I continue to be surprised by how strong the organic is.

No, but if we first talk about MFP, as you know, I mean, we had 120 then for Q1. Right now, based on what we have today from MFP, We will be a little bit shy of 400, but we are also initiating an MFP 11, so I think we're also going to see projects coming in from that. The other part, which is, let's say, non-MFP related, is what Nico talks about, for instance, when we talk about HHI, because there, of course, they do, let's say, personnel reductions where you don't need to have restructuring money, like if you do in the U.S. and like you do in some places where they have the factories. So those are the other things that are then kicking in and helping us from an operational efficiency. And we also saw an admin as well where we talked about that. We also see efficiencies then in admin where, I mean, Nico talked about, let's say, efficiencies in the processes. Those kind of things also helps in order then to get a good, I would say, operational efficiency.

i would add that also i think our operations teams are doing very good job on day-to-day operational efficiency improvements through automation robotization and through good negotiations with our supply chain i think that's also an important part of the that explains the volume leverage together with mix and a lot of other things of course okay thank you thank you very much and then secondly maybe just i probably missed this on the call but

How should we think about sort of M&A dilutions from the second quarter, whether there is any seasonality in the businesses you're acquiring?

I mean, if you look on Q1, I think you see it more in Q1 where, let's say, the larger, I mean, you see InView has a seasonally weaker Q1, and you see that in global tech. Also, SkiData is also weaker in Q1, even though I must say that they have improved their results year on year, but it's still negative. So I would say those would be the two, let's say, larger acquisitions that we have done, which have a seasonal impact.

Thank you very much.

The next follow-up is from Gael de Bray, Deutsche Bank. Please go ahead.

Thanks very much. I wanted to ask about your exposure to Section 232 and specifically the proportion of your business that has a maple content that is greater than 15%. That's the first one. And the second one was, or is on the M&A side. I mean, how does the M&A pipeline look today and whether you're seeing any increasing in competition on the transactions?

Thanks. On the first one, Okay, we are still finalizing the calculation, as you understand, it's a rather complex matter. We believe it will not really move the needle for us. It most probably will be slightly higher cost. If it's a slightly higher cost, we will, of course, compensate through price increases in the market. But it's not really something that will move the needle. When it comes to acquisitions, we are very happy with the pipeline we have. Like we always say, happy but not satisfied, because we can always do more. But we are confident that there is several more acquisitions coming now in the coming months, and then we have a good-filled pipeline of people we are talking to. When it comes to competition, we don't really see any difference as compared to a year ago. As you know, very often the acquisitions we do are where we have been talking to the other side for a long time. And often these are one-on-one discussions with these acquisition targets. So no real difference as compared to previous quarters. Okay.

Thanks very much.

As a reminder for questions, star and one. The next follow-up question is from Aaron Ciccarelli, Bank of America. Please go ahead.

Hi, thanks for taking my follow-up. I have one on R&R demand in the U.S. I think you said that demand is welcoming out. I was wondering, firstly, if volumes have started to expand again. And secondly, as demand improves, do you see consumers leaning towards mechanical products or more sophisticated LMEK products? Thank you.

I didn't understand the beginning of the question.

The first one is demand in the U.S., volume demand, right?

Yes, the volume has actually started to expand again.

For residential you mean? Yes. No, like we said, we had smaller single-digit negative organic roads for the residential segment in North America. So that means if you take the positive price out that we had negative volume.

And second question, is it a mix between mechanical, LMEK and so forth?

And we see, like I explained before, we have invested as well new products on the mechanical side as on the digital side. We see a relative better performance on the digital side than on the mechanical side because of the product launches that we have done in that field. Thank you.

There are no more questions at this time.

Excellent. Well, that means it's time for us to round up this conference. If you have any follow-up questions later on, please feel welcome to reach out to us at Investor Relations as usual. In the meantime, we thank you for your interest and participation, and we'll meet many of you in the coming months. So we look forward to that, and have a good day now. Thank you. Thank you. Thank you.