Beijer Ref AB (publ)

to this Q4 and full year call. I'm sitting here together with Joel Davidson, CFO. So we'll run through the normal presentation and then we'll open up for Q&As. So on the first slide that we usually go over is more a rolling 12, more the trend. We continue to grow. I keep saying this when I started Three years ago, our rolling 12 was 16 billion, so it's nice to see it's doubled now to 32 billion. We continue to add people across the world, and we're now active in 45 countries in the world. So we continue to grow, we continue to add businesses around the world, and of course, we'll cover some of that today. So just a little bit of recap. I think it's worth also mentioning the full year, 2023. I think the heading says a lot on it, and it's been a very eventful year, and also a year with good development, strong development that we're very proud of, as BRF has, I would say, developed extremely good during 2023, which is a little bit of a year with a lot of different phases. You know, growing the business over 40% in sales, EBITDA 50%, you know, driven, of course, by a strong acquisition year and entering the US to the heritage, but also good development, I would say, in all of our acquisitions and also in the underlying business across not only the US, but also Europe and the APAC region. also the cash flow being on the agenda for for some time going through the pandemic building up inventory to support that longer lead times issues with supply chain that i think the company has managed extremely well and then also as we have stated over the last quarter we started our inventory alignment during the end of q2 and of course we expected a good cash flow in Q3, which we delivered on, and also an even stronger in Q4, driven by inventory adjustment and also the seasonality. So in the end, I think it's a decent cash flow here, operational $2.5 billion for the year. We'll come back a little bit. We see opportunities in 2024 as well to continue the normalization of inventory in the business. Net profit, an increase of 44%. Close 15 acquisition, of course, the biggest one in heritage in the US. We did a rights issue, I'm sure you all know. And then also the first capital market stays. All in all, I would say a very good year. And then we'll come in here to a little bit more on Q4 in the next slide. So Q4 heading record cash flow, which is good. And this is also what we've been seeing all along. We follow Inventor on a daily basis, so we know what's happening in the different regions. So we continue to drive that down. And then, of course, you have seasonality, especially in your accounts receivable as your quarters are affected by seasonality. And I'm sure we'll come back to that when we talk about 2024. We had a total growth of 31%, mainly acquisitions, and organic was minus four. We'll come back to that in the next slide. EBITDA developed well, stable margins across the board in the US, even a little bit better in APAC and stable in EMEA. Of course, we had some effects. We had negative organic growth, and it's not like we're restructuring the business. We still believe it's good growth ahead. Good stable margin, which has also been key. As I stated before, that as we draw down inventory, we don't see any negative effects on our gross margin. And that's also what's happening as we expected. Tesla, good. 1.8 billion. Of course, a record, but it's been a record every quarter and also driven by how the business is growing. Good increase of the profit. We'll come back a little bit on the financial net. Earning for shares as we have a different amount of shares as we did average number of shares. We come back to that. And then also a proposed dividend of 130, which is an increase of 38%. So also a strong signal on the market for the future of aligning the inventory according to the growth of the company. So moving on to the next slide, a little bit focused on the sales side. If you look at this picture, I would say on commercial industrial refrigeration, a stable quarter, continue to be positive on the OM side, continue to be driven a lot on the transformation that we continue to see in Europe, both on the heating and cooling side, and Europe continues to grow double digits in the OM segment and a little bit weaker in APAC. And we'll come back to that a little bit later as well. But in general, good activity on the OM segment. Also, we started another 40% drop of refrigerants here in January 1st. So we expect long-term this segment to continue to accelerate as we as we draw down all these F-gases around in Europe and across the world. HVAC minus 8%, I would say very good, you know, comparing to plus 29% in Q4 last year. And I think most of you that have been close to Bayer have understood that we've been saying that Q3, Q4 last year in Q1, um was very very strong on hvac mainly driven in europe mainly driven by the energy crisis we had here and as we see that you know continuing to to q1 on very strong comps and then it tails off as we move into the summer season q2 q3 but i would say a good stable development in hvac especially if you compare it to plus 29 in q4 last year Then a little bit, we'll come back to the divisions, both EMEA, APAC in North America, I would say Stable Development. And then we also finished off with closing four acquisitions in the quarter. Another add-on in the US, a smaller one in Grönklima focused on HVAC accessories, Turner on HVAC in Australia, and then also another nice add-on in India, Chiller focused more on the HVAC segment. So it was a good stable development in Q4 on the acquisition side as well. So moving on to the next slide. If you talk a little bit about EMEA, I would say a stable quarter as they run down inventories quite a lot in the quarter as expected. And also HVAC here, EMEA would be the biggest affected by the strong HVAC growth last year in the energy situation in In Europe, you can see a plus 43% last year. So I'd say good stable still on the HVAC business. OEM continues to grow well, plus 16% and good double digit growth for the year. As we usually talk about the OEM segment, that's what we expect as the world continues to transition into other type of refrigerants. And of course, we're focused on the CO2 based segment. Good stable margins, good gross margin development. And then, of course, you have some dilution on the organic in the HVAC segment, but I would say we cover that very well in the business area. We'll continue to see the transition into the technology on the OEM side. We'll continue to expand on our private label, both in refrigeration, but also on the HVAC side, as we talked about before in the Sinclair segment. I will also add another acquisition, Condex, one of the leading HVAC distributors in Eastern Europe and also based with Mitsubishi Heavy, that's a strong strategic partner trust. So a good quarter in the EMEA segment. APAC moving into summer season here in Q4. So a very active season and good development. Q4, Q1 is for summer in in the main markets in APAC, and good growth here, both driven by acquisition and organic. HVAC here is not affected as much with the strong comps because it's mainly Euro. We'll continue to see the OM segment a little bit lower, compared to very strong, a lot of projects last year. But we're also seeing the trends now on orders within retail and other segments in Australia and New Zealand picking up. But of course, quite long lead times when it transitioned from orders into sales, as most of that is coming from our factories in Italy. So we see better activity in the OM segment as we close out Q4 and also starting in Q1. Margin good and improving. uh in the segment as part of our work here is to of course move apec into uh the margin target for the whole of the company south korea new market for us has been a very good entering with with acquisitions the good synergies both on the sales side product side and cost side so it supports the business and in the end we also continue our journey into india of course smaller add-on acquisition so a good quarter in apec finishing off the year North America, I would say a stable quarter. You see the volumes down a little bit. I think if you follow all the statistics, you have some weakness in the housing market. That for us is probably most likely building up pent-up demand, a little bit more repair and replacement that of course will also start breaking in the future. I think a very good quarter, very good margins for being a Q4, almost 10% EBITDA. Of course, the US is very seasonal with focus on Q2 and Q3, while Q4 and Q1 are lower season. So a stable quarter with good margin, stable gross margin development, two acquisitions, add-on pipeline continues to look good. We'll continue to build, you know, the platform and refrigeration is growing nicely, private label. we have already launched for mainly for the season new branches that we are evaluating and also working with our strategic suppliers here with more strategic agreements as we have in the rest of the world to support us and support them and drive growth to the business so very happy with the stable development in the us and of course interesting now talking to our key suppliers as in towards, I would say, Q3, Q4, transitioning into the A2L product side for the US. A new product portfolio being launched by the OEMs and good cooperation with our strategic partner in that product. And that should be coming in towards the end of 24 and be a very good driver also for 2025 and going forward for the US. Next slide. So wrapping that up for Q4, 31% growth driven by acquisition. Organic 4%, we went over that. EBITDA growth of 26%. Then the EPS change, we'll come back to that as we all go through the numbers a little bit. Change of number of shares because of the share issue we did. Moving on to the next slide. The next slide here, you see again a summary where The currency continues to decrease. I think you have that in all your models as well in there. And then organic minus four, and then M&A plus 33%. Next slide. I think we usually go over this slide just seeing a little bit on the sales side, how it's developed. And of course, if you look for quite some quarters here, very, very good development. But also if you look on the organic side, We're comparing the quarters here in Q3 of 19% last year, Q4 18% and Q1 15%. And those comps were mainly driven by the EMEA and Europe and the HVAC and the situation on energy last year. So we have another quarter to go to flush that out, and then we'll move into more normal comparables, but also moving into the high season for us in Q2 and Q3. Moving on to the next slide. Here we focus a little bit on the HVAC. You could see the organic growth levels here last year. Also, again, same driven by mainly EMEA, 29% up and only, I would say, 8% down. So you look at the more trend over the last couple of years, it's still a very, very good development. And then you see we have another quarter here in Q1 to flush out with the situation we had last year. Next slide. EBITDA growth continued to be good, 26%, and then for the full year, 53%. So a good year and a good quarter and continue to grow profit. And also we'll come back a little bit later on the cash flow with Yoav. As you see the margin development, we are a seasonal business. The main difference on percentage margin is sales is higher in Q2, Q3. at the main area we have is on cooling equipment of course also getting strong and strong in heating that that will help q1 and q4 going forward but good margin development uh in the business good gross margin stable uh as we continue to flush out inventory so i would say very good q4 on the margin side as well then i'll hand over to you all to go over the the peanut All right. Thank you, Christopher.

And good morning, everyone. As Chris already covered the sales and EBITDA, I will focus here on the rest of the P&L. As communicated in the press release in connection with our capital markets, our Q4 net profit is impacted by items affecting comparability in both our operational results as well as on the tax line, which are related. The non-recurring cost in operational results amounts to 60 million SEK in Q4 and is primarily related to consultancy and advisory costs connected to this tax restructuring in the US. And those 60 million is what is making up the difference between EBIT excluding items affecting comparability and EBIT. Moving on to net financial expenses, which amounted to 117 million SEK in the quarter, And it's worth noting here that it was impacted by positive FX effects of approximately 10 million SEK in the financial net. Taxes in the quarter was positive of 274 million SEK and was impacted by the tax restructuring in the US and the tax impact of items affecting comparability in the operating results. In total, the tax effects associated with these items affecting comparability amounted to 434 million SEK. Taxes in the quarter excluding items affecting comparability amounted to 160 million, corresponding to an effective tax rate of 28.9%. The tax rate was impacted by high non-tax deductible transaction expenses and an adjusted assessment of the local tax loss carry-forwards. Net profit excluding items affecting comparability amounted to 393 million SEK, which is an increase of 6% compared to Q4 in 2022. So moving over to the next slide. Despite the increase in net profit, our EPS, as already mentioned by Chris, decreased by 14% to 0.76 krona in the quarter. And that is, of course, related to a different number of shares as well, following the rights issue in March 2023. EPS for the full year amounted to 4.33 krona, which corresponds to an increase of 23%. Next slide. As communicated, we continue to deliver a strong cash flow in Q4 amounting to 1.8 billion, out of which 1.1 billion was driven by the release of working capital, which was essentially split 50-50 between lower inventory and seasonally lower AR. Moving over to the next slide. Overall, the last two quarters have represented a significant pickup in our operational cash flow generation and the operational cash flow for the year amounts to 2.5 billion SEK. I will go over to the next slide. Thanks to this strong cash flow, net debt was reduced by approximately 500 million in the quarter, despite our continued high M&A activity. And as a result, net debt to EBITDA, excluding leasing and pensions, decreased to 1.7 times from 1.9 in last quarter. And with that, I hand back over to Christopher.

Thank you all. So trying to wrap up the presentation with first a summary of 2023. We started off here, but we're very happy with not just the financial development, but also the business development during the year, entering the US, entering new markets, strong margin development, good growth, catching up on the cash flow that we've been talking about. for a while. Also, you know, looking at what you all just mentioned on the net debt, strong balance sheet here to continue to support our growth journey going forward. Good acquisition activity and all good, I would say, development in these acquisition plus, of course, entering North America that will have a huge potential plus over the long-term future and a lot of things happening there that supports our business. We did, of course, do a rights issue, but also positive. Our shareholders oversubscribed by 44%, so very appreciative of our shareholders believing in us and the strategy that we're doing. And then, of course, also some of you were at our capital market stand, streamed it, where we talked a little bit more about our new financial targets, the vision, and the strategy going forward. So we close out 23, very... strong, I would say, and a good platform for the future. Then moving on to the final slide, we'll try and talk, you know, summing up Q4 and also talk a little bit on the business here going forward as we see it. So a good finishing off stable on the year, I would say a quarter as expected, at least from our side. Acquisition continued to perform well. uh a track uh negative compared to a very very strong uh few for last year uh cash flow coming in uh at our expectation and also then wrapping up the year with a with a good cash flow and we expect that to continue good activities on the acquisition side four in the quarter and of course 16 on the year and then also uh with the dividend uh increasing that to our shareholders uh by 38 so all in all i would say stable quarter to finish off a a very good year for for bay ref so a little bit you know looking forward we we you know we focus more on the long term and we see the trends that we've been talking about all along continue to to support we have a lot of activities on on phasing out the f gases Here on 40% cut on the quota levels in EU, 30% in the US to continue to see in Australia and New Zealand. Of course, this is very positive for our whole business model and the OEM side as we move into in the next five to 10 years in that segment that will accelerate the pace on that business. And that continues to be very active. The U.S. air more and more, of course, short term will, through regulation, move into a new type of HVAC equipment based on more natural refrigerants, A2L. So we see that, you know, starting to talk into OEMs being active already in Q3 and Q4 of this year. And that will also have an impact on our business. The U.S. platform continues to build up well. And we have a lot of good initiatives together with the team there and our expertise at Bayer on the refrigerant side, private label branches, and also more active with our partners to have strategic agreements. And then the pipeline continues to look positive. Worth mentioning this short term for Q1 next year, I think I've been fairly clear on this. This is the quarter we continue to, you know, have very strong comps, especially in the MAEA, plus 17% organic in 2023. And again, we saw that ebbing out in March of last year, this very, very high demand due to the energy prices. So we still have one quarter left of that. Another thing worth mentioning, being a trading business like us, a number of working days matters quite a lot. we do have two last days in uh as easter is moving from uh march to april uh but of course this will be picked up in q2 and q3 so there's no effect on the year but i think it's worth mentioning that it will affect q1 but of course on the year uh he will be neutral so that would be our last slide so now we're open for for questions from from the audience so thank you very much for listening and um and we're ready for the for the questions thank you

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Adela Dashian from Jefferies. Please go ahead. Adela Dashie and Jeffries, your line is now unmuted. Please go ahead.

I hope you can hear me now. Yes, if we just start on current trading, it seems like you are experiencing less of an impact from the challenging macroeconomics than many of your industry peers are reporting or expecting to report. Could you give us some additional insights in what's driving this and if there's any specific market or region where you're expecting maybe a worsening effect going into the high season this year.

Thanks. Thanks, Adela. It's a very good question and a very hard question to answer, of course. Not paying enough attention to what other companies are experiencing, but I think You know that, of course, we are also affected by a general climate in the business. I think we are a type of company that's more active in segments like replacement, repair, aftermarket service in our business model, being a wholesaler distributor. And of course, also most of our customers Not all of them, but most of them are smaller midsize installers who doesn't build up inventory. They work in a segment where we work on a daily business. So those trends might be different in other type of industries and companies that we are not affected by. Then I think in general, we continue to see a stable business in our markets. And then, of course, on top of that, you have long term trends that you know, independent on economy or the outlook will continue to drive on the OEM side. You have to transition into natural refrigerants. You have the US now moving in during the end of the year in phase 12 based HVAC and you cannot buy the old product. So you have a mix of these long term and of course, the business model that I would say is pretty resilient even in these times we haven't seen a big difference uh um in in in the market it's been as we said here in q3 and q4 fairly stable and then of course we have the comps here coming into also in q1 but but in general it it continues to be pretty stable in in our markets got it

And my next two questions actually relate to the the US market and the first one specifically to The underlying sustainability trends and let's say there is a change in presidency in the US Do you feel like this could potentially affect your your performance there?

No, so I keep I've asked my US partners on that and and I think the answer which is pretty I straightforward is that the legislation that we see is already legislated. And whoever is the president, nobody believes that they will agree on changing existing legislation, because that means that both the Democrats and the public needs to agree on doing it. So I think we feel pretty good about the sustainability of the trends we see because it's already legislated. So we don't expect anything affecting our business on the transition that's happening in this area because it's already passed and it's already legislated.

Yeah, let's see about that. And then finally, on the U.S. as well, would it be possible for you to provide any kind of year-over-year performance in the business there? I understand that's difficult to do, but any type of year-over-year performance would be greatly appreciated. Thanks.

Yeah, so we don't disclose that on our acquisition, right? We have now the U.S., started in January 21st, being part of the non-acquisition business of Bayref as we closed the transaction on January 20th, if I have the right date in front of me. But I think what we stated is that the way we saw the business developing was... The way we saw the year was a stable Q1, a little bit weaker in Q2, a stable Q3, and a little bit weaker in Q4. But overall, know if you look at the market data out there we have uh you know by far performed better than what we see on on shipments and etc but it's also related to that of course we have uh aligned our inventory situation in there we see more repair than replacement uh in the market but i would still see it as a fairly stable year and good margins uh in the business And then I think, you know, looking into 2024, I don't think we see any big changes over Q1 or Q2. But of course, there will be a pent up demand in the U.S. as sales of housing and the new technology transition in towards the end of the year, which would be positive for our business. But in general, that's how I would describe the U.S. businesses.

All right, and then just the final one from me. Should we expect any additional one-offs related to the tax restructuring in Q1?

No.

Okay, great. Thanks. Thank you.

The next question comes from Carl Ragnestam from Nordea. Please go ahead.

Good morning, it's Carl here from Rodea. A couple of questions as well. Firstly on pricing, now that you see that demand is soft, it's been a bit soft here for a couple of quarters. What do you hear from the OEMs in terms of the pricing environment? Are they starting to consider lowering prices in order to potentially regain some volumes in maybe both AC as well as their to water subsegments?

Yeah, I think across the board, it's a little bit different if you look at segments and regions, right? You're in the middle of the summer season in the APAC region, and there we haven't seen any changes on the pricing side. In the May, of course, you're now into Q4 and Q1. It's a little bit of off-season. And as we are talking now to our customers and suppliers, it looks pretty stable. as well on the heat pump side you know i keep saying that as it's not a core or a big big segment for us so we're still doing okay in in that segment so um it's not really affecting us uh so much on the pricing side anyway so we wouldn't be a good uh you know information on that size in general i would say uh it continues to look also stable in in the maya region and then the us There are announced price increases from all the OEMs for kicking in here towards, I think, the end of Q1. How they're going to stick or how they will develop, I don't know. But all OEMs are increasing prices on the HVAC side in the US as we move into the end of Q1.

And what magnitude do you see for your business, Reem, in this case? Yeah, I wouldn't disclose that. But it's low single-digit, I guess.

Mid-single-digit, maybe, give or take.

Okay, very good. And also, I mean, you sound a little bit more confident in that your biggest customer is ready to launch your products already, perhaps, in Q3. Did I understand you correctly there? And also, would you say that it would be a full product offering right away or do you expect a gradual launch throughout the second half? And the final point, a lot of questions, I guess, on this is in terms of the pricing ambition. What do you hear from your OEM there as well? Because we have heard several different pricing strategies from competitors on the A12 regulation.

Maybe you know more than me on the last part of the question. But I'm not talking to Reem. I met them last week. And they feel very confident on their product setup. And it's not everybody knows here on the call, but in the US, by the end of this year, you're not allowed to manufacture the old products, HVAC products anymore. So all the OEM needs to fully transition into these new type of solution based on more natural refrigerants. And it's a big product change. for them. Of course, our comfort with Rheem is that they did most of the product upgrades started at last year, and they feel very confident on their product manufacturing and development with the A2L. So we expect them to be fairly good in that. I can't talk for that OEMs, of course, but on our main supplier Rheem, they feel stable. And it'll be a gradual launch as you move into Q3. Over there, of course, you need to start launching it then because by the end of the year, all product lines will be transitioning to the A2L-based products. So on the pricing side, I don't have factual. It's anything from 10% to 20% uplift on price on these new A2L-based products. And I would hope and assume that you're hearing similar when you have more discussions with different type of OEMs.

Okay very clear and also a little bit on capital allocation now that we see working capital come out nicely here. How should we look at it over the I guess it will continue as well over the come next 12 months here we'll work after releases I guess and And leverage is, what is it, 1.5, perhaps, ex-leasing, pro forma. Will you keep the leverage here, or will you deliver a bit here to lower net financials? Or use exceed cash, keeping it as a stable leverage ratio, and use exceed cash to M&A? Or should we look at the capital allocation?

Yeah, I would say that... we will not change our strategy it will continue to be like it's been over the last three years we see of course we'll have or expect in 2024 a good cash generation uh you know seasonality so in q3 q4 will be very good again the way we see the business uh and we'll continue to be active uh here on the acquisition side we have a good pipeline Very good track record and we see good opportunities, of course, in the US as we're building the platform. We still see good opportunities in Europe and APEX. I wouldn't expect any changes in the capital allocation. I mean, you'll have some changes depending on timing, but our focus will be on continue to improve the networking capital and release inventory. Of course, more on Q3 and Q4. and then continue to be active on the acquisition side as we see it as a continued good opportunity for us here going forward.

Okay, that's good. The final one from my side is that you said that order intake is improving in Europe, partly related to OEM. Is it some way driven by sort of a quarterly volatility, or do you see, I think that you said that retail is picking up a bit, But have you seen the real effect from the tightening quotas yet, or does it come with a lag, or how does it work, do you think?

No, I think it comes with a lag, right? I think I always have some time in, and now we're talking about the OEM segment and mainly Europe, where you have this very active transition. Of course, you went through a period with inflation and the retail side being more cautious and trying to postpone it. Now also that you don't really see big effects because we're so strong in a lot of industrial segments and other segments that continue to grow nicely. So I think the common relates that retail is picking up their heads again. They need to do the transitions. You can't wait for too long. I was hearing here actually on a side note that Even ICA in Sweden, you only have 50% of the stores transition. The rest of us, they're running 404. Now we're talking Sweden. So there's a huge tail ahead of us to transition. And now we haven't seen the effects yet because Dakota's force was cut here, but it's getting tight out there to get that type of gases to run your system. So I expect more to start seeing that as we transition throughout the year. on the OEM side, but in general it continues to be positive.

Okay, very good. That's all for me. Thank you. Thank you.

The next question comes from Carl Bockvist from ABG Sundal Collier. Please go ahead.

Thank you. Good morning. My first question is partly related to one you were just asked, but just to clarify, the order intake comments and retail activity, can you say anything about those kinds of indications for HVAC in general and in regions outside of Europe?

To be clear, when we talk order intake, it's pretty much just the OEM segment. And it's not the full OEM segment. On the HVAC side, it's not an order intake business. The majority of our business is repair, replacement, and service. So it's a daily business, and you don't really do orders there in our business model. So just on order intake, we do follow it on our OEM business, and it's also related to the project business on there. So it's a limited part of the business that we're referring to. we don't have really order intake. It's more a daily business as it's a service aftermarket business.

Understood. And then on working capital and inventory, you see a continued normalization or improvement throughout this year. But what can you say about the inventory levels throughout the value chain? Is it mainly in the distribution part of it now where you see things need to normalize further or do you still see higher inventory levels among OEMs?

I can't speak for the OEMs. The inventory situation we talk about is in the distribution side. It's sitting on our side of the fence. Of course, we are, since Q3, selling more than we're buying because we're flushing out inventory. We will start buying here from OEMs in Q1. to set up for the season in Q2, Q3. But we'll buy less than we did last year because we're still flashing out inventory. So we'll still have a normal seasonality. Inventory will go up in Q1 and Q2. And then it will go up less, if that makes sense. And then we'll flash it out even more in Q3 and Q4. So we still have some destocking to do towards the OEM. But we are picking up or purchasing with them from being very low in Q3 and Q4.

Understood. And then just my final one is outside of heritage, what can you say overall in terms of performance among your acquired units? Has integration progressed well and the strategic initiatives you're taking, do you see that companies continue to perform after you've acquired the most recent ones?

Yeah, so they're doing... Very well, I would state it more. And of course, that's part of the business model on the companies that we buy. There is a very firm pathway on how they will develop over the three years, independent of the market. There is, you know, entering South Korea, just as an example, we have We could expand their exclusive product portfolio. They get access to 30, 40% more products they couldn't even talk to in the past. We have better pricing. We're also moving into CO2-based products in that. The same on the HVAC side. Now in the US, when we're accessing the two acquisitions, they'll get access to spare parts they couldn't get before. So with the business model we have, it would take a lot for them to not do well, if that doesn't sound too... Confident, so they are developing well, margin expansion. And then, of course, you need in the end also the market on the HVAC side to flush out these homes. But in general, they are moving towards our target because, of course, a lot of the acquisition we do on the margin side is lower than Bayer Ref. And the plan is, of course, to get them up there. So they are developing well and they fit very nicely into our strategic

Platform so yes Ork, okay. Thank you. That's all for me.

Thanks Paul The next question comes from Douglas Lindahl from DNB markets, please go ahead Yes, hello gentlemen, thanks for taking my questions I don't know if you want on the margins in the quarter. I was curious to hear if that's a obviously seasonality in there, but the weakness is even including the seasonality a bit on the weak side, I think. Would you explain that mainly through volumes or anything in the mix that's impacting that? Yeah, comment on that would be useful.

Yeah, I think you actually, that's not how we see it. And the reason I think sometimes, and I think it's good you're asking the question because it'd be good to clarify it. And of course, as Bayref now, based on having a big new platform in the US, our seasonality and the margins are changing. So if you look at it and compare it, that our US business has even higher seasonality maybe than the rest of it, the Europe, because it's very much focused on HVAC, right? So their Q2 and Q3 If you look at the margins they had, I might be wrong in my head, but in Q2, they were 15% and 13.5%. And then they're running around 10% in Q4 and Q1. So you'll have more seasonality in the numbers. So when we adjust to this, we didn't see any weakness in Q4 at all. So the U.S. will drive bigger swings between Q2, Q3, and Q4 related to the U.S.

Okay, I understand. So that was, I guess, underestimated then externally.

But that's useful for you to point that out. That's a good question because as BRF is changing, the Q2 and Q3 would be on the margin side affected more possibly on Q2 and Q3. And then Q4 and Q1 is more, you won't get that boost from the US. It's more in line with the rest.

Okay, interesting. And just you already touched upon M&A, and I believe I can sort of sense your answer to this question, but it would just be interesting to hear about your pipeline, how you're thinking with regards to that geographically, product categories, etc.

Yeah, so, you know, now we're playing in, you know, three parts of the world of the way we define our business in Africa, APAC in the US. We do have a pipeline in all those three parts. It is within U.S., just try and explain U.S. a bit. Of course, HVAC, but we're also focusing in the U.S. on refrigeration. So we also would expect, as we continue to acquisition in the U.S., we'll build up also a stronger position on the refrigeration side. So in the U.S., it's refrigeration HVAC. In Europe, it's more focused on the HVAC side. As you know, in the refrigeration, we are already extremely strong. And then in APAC, it's both refrigeration and HVAC. So it's in those areas that... So if you've seen, you know, if you take out heritage from 2023, it will be that type of acquisition through 2024 as well. So no big changes in the acquisition pipeline versus what you see in the last couple of years.

Okay. Yeah, clear. That's very useful. Thanks so much. Thanks.

The next question comes from Daniel Johansen from Pantechnikon Advisors LLP. Please go ahead.

Hello. Thank you very much for taking my question. I was wondering a little bit about the working capital. The benefit that you saw in the quarter of 1159, how much of that came from heritage?

We won't disclose that.

Okay, but was that a significant part?

No, it was across the board.

Okay.

In general, there's nothing sticking out. I think a good assumption If you want to do a mathematical exercise, it's just looking at the size of the business and seasonality and it follows, you know, it's going to be similar, you know, and if you look at it, it's of course mainly EMEA and the US as APAC is more into their high season and they'll flush out inventory in, you know, in Q2, Q3 and the opposite. So size of the business is usually, you know, a good indication on how it plays out.

Okay. And then, you know, given the comments you made on seasonality and heritage being a little bit different relative to the rest of Bayer, so to say, how should we think about seasonality for 24 as a whole now? Because I guess last year was pretty evenly distributed profit-wise between the first half and the second half. Is that something that's not going to be the case in this year?

No, I think, you know, we talk seasonality. Of course, mainly Q2 and Q3. And in general, we talk when it's getting hot. So, I mean, Q2 is back-end loaded and Q3 is front-end loaded, if you understand what I say. But in Q4 and Q1, I mean, most of what we sell is heating and maintenance service and repair and other things. But I think if you look at If you want to cut the year in Q1, Q2 and Q3 and Q4, I would assume that, you know, I think 2023 as heritage came in, of course, January 20th. If you just adjust to that, the seasonality should be similar in 2024 as you had in 2023. Then you can always, if you really want to get into the weeds, you know, Q2 and Q3 can always switch which is the highest quarter. And that's mostly related to related on weather and heat waves. If it comes early, Q2 is higher. If it comes later, Q3 is higher. So you have some seasonality between Q2 and Q3, depending on how the heating waves play out.

Okay. And lastly, I happen to notice that if I look at page 18 in the quarterly report, there was a little bit change in the acquisition of... you distribute the acquisition value so to say on heritage where goodwill went up a little bit relative to the previous quarter what is this relating to?

Hi this is Joel yes we did some revision of the PPA related to adjusting inventory values according to to guidelines within the Bayer F group, so final adjustments to the obsolescence on inventory and so on.

Okay. Thank you very much. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you all. Thanks for good questions and also wrapping up. I think an interesting year and look forward to the journey in 2024 together with you. So have a great day and thanks for calling in. Thank you very much.