Munters Group AB (publ)

to the presentation of our full year results for 2023. I'm Anse Fjernsson, and I'm head of investor relations and risk management at Munters. With me here today, I have our CEO, Claes Forsström, and our CFO, Katarina Fischer. For those of you who are viewing on the web, do feel free to enter your questions throughout the whole presentations, and we pick them up afterwards during the Q&A session. And for those of you who are listening in on the conference call, we will open up for questions after the presentation. So with that, I would like to hand over to you, Claes.

Thank you, Anne-Sophie, and once again, welcome and good morning to this Q4 and full year 2023 presentation. It has been a record year for Monters, the strongest year in our history. And we ended up the year with a solid finish, confirming that we are targeting the right growth and business drivers, such as battery, data center cooling, service, lean working principles and digitalization, just to highlight a few. We, as many others, have become avid navigators in a world of geopolitical stress and challenges. We have a strong team, and I'm very confident that we will continue to navigate well. Through our strategy execution, we have created a strong platform. We will now continue to invest ahead of the curve, both in current drivers, but also in the next ones, such as volatile organic compounds for clean rooms and semiconductor industries, carbon capture and software as a service. Just to mention three of those. As most of you are aware of, this quarter we released our preliminary result ahead of today due to a ransom attack at one of our hosting providers, C2 Every. The reason for this was that we couldn't guarantee that our preliminary result for the quarter was fully remaining confidential. Nothing indicates that it has leaked, but better to be safe than sorry. Going in more in detail to the quarter and the full year. A strengthened market position and a strong year result. Stable long-term growth trends, good development on order intake, plus 82% organically in the quarter, driven mainly by DCT, but also good development in food tech. When it comes to net sales, plus 16%, it is the eighth consecutive quarter where we grow about 10%. Also, this has mainly been driven by DCT, but all other regions and business areas have supported in a good way. Food tech, all regions contributed to the increase, air tech being more flattish. Book-to-bill at 1.5% for the quarter and for the full year, 1.4%. EBITDA margin 12.18, a 54% increase compared to the same quarter last year, driven by DCT, but also good efficiency improvements in all business areas. Also, what is pleasing to see contribution for net price adjustments still kicking in. America's the main driver and growth. Those of you that have followed us for many years now may remember where it was roughly one third, one third, one third. Now a much larger exposure, a positive exposure to North America. Order intake representing 74%, net sales around 60%. And the others then, Europe around the 20% level and APAC quite below that. All in all then, Airtec in Americas. A weaker development, very much driven by order pattern shift as order plays closer to delivery time. Components still showing good order intake growth. DCT, a very active market, a market that continues to drive forward. A combination here of larger orders and smaller orders received from both co-locators and hyperscalers. And food tech, a continued good underlying market with a slight growth in climate solution driven from swine and layer. Digital solutions, stable development. And here we have to remember that we had some very large orders on comparable quarters then. Moving to Europe. Summarize, a stable quarter, a stable market in Airtek, repeating the message that I started to send last quarter, orders being placed closer to the delivery time, but service continues to show good growth. DCT, I'm very pleased here. Good development, several small orders from co-locators and we continue the journey. First double and then double again. Foodtech then, recovery in all segments, which is pleasing to see that what we have done and started a few years ago is now paying off. APEC then, as I said, a couple of quarters. Normally, China, sometimes it expands and sometimes it contracts. At current, China is contracting in the battery segment. We have a solid order backlog, large orders supportive into 2025. As you know, order intake for months is to some extent fairly volatile. Some quarters very strong, others quarters a little bit weaker. All in all here, I think the most important thing that is, if you take a look upon the two at the bottom, here we have now when it comes to, in this case, data center, orders that brings us into 2025 and actually in some cases stretches into 2026. Going back more general to Airtec then, order intake decreased with some 31%. If I exclude the larger battery orders then that we received in quarter four, still a small decrease of 8%. Not to repeat myself, but it's weak in the APAC driven by China. I see a two-sided coin in Europe and China. It is the shorter lead times, the smaller orders at current. On the other side, if I look one, two years ahead of what is boiling in the market, a lot of activity is going on there. Components flat due to a weaker battery market in China, but also affected of some component replacement that is not kicking in at current. Service growth in EMEA somewhat offset in America's APAC. All in all then, I think it's a few highlights here. We see a lot of continued activity in the market. What is pleasing to see that is service and components from an order intake point is still at the fairly impressive 40% level. And here you have to remind yourself that in this quarter, we do not have any larger orders. When it comes to the margins, simply put, it is a change of business mix that is affecting margin, but still we are above 14% and keeping it up. What more to say about this? I think it is battery strong growth in America from net sales. It's very much a similar message as on order intake. America's fairly strong, Europe okay to good, and Asia, read China, weaker. What is interesting to see here now, we have balanced it out also with India, and that gives us support for the future. I think this picture is somewhat interesting. We have started to present this now since a couple of quarters and you can see then the very light yellow then at the top, the larger battery orders that we communicate. When I look upon this, I see two pictures. We are lacking some larger orders, but we have a very stable, slightly increasing ordinary business. The business that is the pulse of Munters. Super pleasing. New products brought to the market are getting a lot of attractions and winning a lot of orders. For me, this is really something to be extremely proud of. How many products that is brought to the market can say we are delivering a 30 to 45 energy savings compared to comparable products? How many products can state that they have a 40% smaller footprint versus industry standard? And also in combination with this, you can use different type of energy to drive it, so to speak. And on top of that, being modularized so you can expand it and increase it. And just to give you a little bit of comparison, take a look on the small door that you can see there. That is roughly a man height, around 180 meters then. So all in all, this is the size of a living room that is being delivered. DCT, the driving order intake and business star at current. Interesting here, if I move to the right, that is, you've heard me talk about we have three transactional segments. And what I mean with transactional, that is paying directly on the products we are selling. And here you can see the co-locator is still the very large sector that is both supporting hyperscalers and other type of customers. But in this case, in this quarter, also some good direct orders from hyperscalers, moving it up to 22%. And all in all, the two larger orders that we communicated represented a 2.2 billion order value. But beside that, very pleasing, also quite smaller to sub-large orders from different customer categories. And I would like to repeat something that I said earlier. I mean, it's also great to see that we are now starting really on the journey Double in Europe and then later on double again. Order backlog increased and that is very pleasing. I will not repeat this. I think most of you have seen it. But coming back to net sales increased with 81%. And we have a strong backlog kicking in for the coming years. EBITDA margin increased. continue to move ahead. Here I would like to say that, I mean, do not expect that this will never-ending upturning curve. We need to invest in this arena. We need to drive forward customer support, etc. But I'm very confident that we will continue to be in the range of 14-15% EBITDA. Also here, Very encouraging to see the continued nice traction from customers on our new products being brought to the market. SciCool, you have heard me talk about SciCool for many quarters now. I talked about this future proof. It will both be for air-chilled type of solutions and for liquid-chilled type of solutions. And now we have received the first order on liquid cooling using SciCool as the product. And this picture schematically just shows how it could be done on on the looking in on the right side. You can see air cooled, i.e. blowing air through the data center using the same type of. rooftop retractors and then on the left side you see a similar solution but in this case then liquid cool solution driving a liquid coolant into the data hall. Cycle works for both type of solutions. We are expanding. We are expanding our offer into data center. And I can confidently say that we are taking market share. This is just one example of what we are bringing to the market. In this case, for hyperscalers, a modular shield wall where we use water as a cooling and then This can be expanded in different versions, very much modulized and pleasing to see that our offer has widened over the last couple of years. Those units that I talk about here, they will be delivered during 2025. Super pleasing to see that food tech now, the market on the right side, has started to show improvements also in the climate solution arena. Those of you who have followed us, you are used to have more red arrows than green and gray arrows. I think it's a little bit too early to say that all of them will kick in to become green in the future, but they are slowly but surely starting to move upwards. Digital solutions continue to develop very, very good. And the order backlog in food tech increased. Pleasing to see all regions contributed to significant margin improvements. We have been now fighting against the headwind for quite a few quarters, but now our efforts and the market is starting to turn in our way. Another very, very exciting product brought to the market. You have all heard about the different flus that is moving around in bird population. Here, we have brought a product to the market that is both cleaning the air from potential dangerous and flu bacterias, but then also on top of that, also handle ammonia. I cleaning it out from that point of view as well. Something that we have developed together with a very important customer and has started to gain a lot of traction. Once again, innovation brought to the market and in this case, very much so, supporting our purpose for customer success and a healthier planet. Another area of great importance for us, that is our journey to increase the software as a service ARR deliveries. And as you can see now, once again during quarter, delivering an impressive growth in this case close to 70%. And not to over-repeat what I said about Europe and DCT. It is sort of the same mantra we have here. I mean, first we drive it to double, and after that we drive it to double it again. And if you would go into the mid of 2022, Q1, Q2, I mean, we have made the first doubling. Coming back to the purpose of Manters, for customer success in a healthy planet. Talking about sustainability. Sustainability, what we bring to the customer when it comes to energy efficiency. when it comes to animal health, when it comes to efficient cooling. But if I turn it inside instead, and how do we work inside then? Really pleasing to see that recycling rates are moving up step by step. Energy efficiency, i.e. how much energy are we then using per produced unit, is becoming lower and lower. And really encouraging when it comes to renewable electricity, now up at 80% of our energy being consumed. All this then supporting our net zero emission target for 2030. Health and safety. Safety is always at the top of our mind and I can proudly say that now we are one of the leaders in our industry when it comes to the zero accident journey forward and at 1.2 then when it comes to lost time in your frequency. Diversity. This is an area where we cannot say that we are super proud. Here we need to step by step improve. Our target is to have 30% of women in leading position by 2025. It is a stretch to reach there, but step by step we are moving in that direction. With that then, walkthrough on different aspects. I would like to hand it over to Katarina.

Thank you, Klaus. So, as Claes mentioned, 2023 was a year of strong growth and improved results. I have now been with Manters for about five months, and I'm very impressed by the growth we have achieved and how we have positioned ourselves for the future. If I reflect on the good earnings in the quarter, I am even more impressed by the focus we have had on continuous improvements and also how we are able to manage the daily challenges at the same time as we are really pressing on to deliver on our long-term agenda. I truly believe that Mantras has a very agile operations with a strong business focus. In the year DCT, they grew significantly then on order intake and net sales, and they managed to have a very high production utilization. And this is also, of course, due to that they delivered very well on the large orders. Airtek had a strong year with a mixed development in Q4, as Claes mentioned. Very encouraging to see that food tech continued to strengthen both digital solutions and climate solutions in the quarter. Our net income was lower in the fourth quarter. This was mainly due to an impairment of deferred tax assets of 80 million on losses carried forward. Our full year net income increased 37%. Cash flow was managed well in all business areas and we managed to decrease the leverage. So all in all, we really had a record 2023. Looking at the margin development here we improved the margin as you can see in the quarter and the main factors affecting this was the strong volume increasing which was mainly driven by data center then we also had net price increases and here we saw continued positive improvement and also food tech contributed well to this. All business areas delivered very well on the operational excellence. And even though we managed to increase the margin this much, we also continue to invest for the future in our manufacturing footprint, digitalization and innovation. The cash flow improved from operating activities, and we also managed to reduce the working capital. So if you look to the right in the table, you see the different components of the operating working capital. And here you can see that we had a decrease in the advances from customers. And this is due to that we have not yet received the advances from the large orders that we took in Q4. And we have worked on the advances then on other orders. And as we talked about last time, our cash flow... will be a little bit volatile due to the higher share of the large orders. The investing activities was negative then, of course. And as you know, we in the quarter closed acquisition of Seco. And that was partly financed by debt. And that is why the finance activities is contributing positively. In recent years, our investments in property, plant and equipment and intangibles has increased, but we have a flat development as a percentage of sales. During 2024, we will continue to invest in upgrading our manufacturing footprint. And the one project that we started in 2023 was to build a new facility in Ainsbury, US for Airtek. And this project will continue into 2024 then, and we aim to be up and running then in the beginning of 2025. We will also upgrade our manufacturing facility in China. And for data center, we will expand in Europe to support the European market where we will introduce more products. I also want to point to the development of the operating working capital. As you can see, it has increased as a percentage of sales. And this is, of course, driven by our strong growth. And we will continue to work on reducing operating working capital and improve the cash flow. One of our areas that we have prioritized for growth is M&A. And as you know, we have done several M&As during the past two years. This is one of my focus areas where I really work to ensure that we have both an efficient and good process for managing acquisitions and making acquisition, but then also have a strong way of ensuring the value creation from our acquisitions. And key in this is, of course, the integration process. And here we have a very well structured process in the company where we plan ahead even before we close the transaction. So we put together a strong integration plan. And once we close, we start to implement and follow up against that plan. And we also work in three dimensions then. So one is, of course, to really deliver on the business case, the value creation, but we also work on people and culture and operational processes. We decreased the leverage ratio in the quarter, and that was mainly due to the improved earnings. Our net debt increased then due to the acquisitions we have made during the year, which was partly financed by debt. And then we had a slight increase in lease liabilities as well. And then we can also mention that the financial net is more negative in 2023 than due to higher interest rates and increased debts. So with that, I would like to hand it over to you, Claes.

Thank you, Katarina. And let me then summarize the quarter and the year before we move into Q&As then. Our financial targets, net sales about 10% organically as a CAGR to reach on and above 14% of adjusted EBITDA margin and step by step establish ourselves then in between 12 to 10% operating working capital divided with net sales. And how are we doing here? I mean, the eighth quarter in a row where we are on or above the 10% growth organically. And on top of that, as Katarina mentioned here, a couple of percent also boosting it with M&A then. Adjusted EBITDA margin. Last quarter, we showed that we can reach and we have that in reach. But here, my view is very much, I mean, we take this step by step and then it is about reaching it for a long term and make it sustainable. Operating working capital. We are in a growth mode now, but we are putting a lot of focus to move that gradually down to where we aim to have it done. If I look ahead, from my perspective, our achievements in last year has positioned us for a continued successful journey. And if I try to summarize the recipe that we have worked with for several years now, we have identified the right growth areas, the right actions and driving forces to achieve growth, profitable growth moving forward. They've invested ahead of the curve and, as I said, thereby then being able to capture the growth and drive profitability upwards. We are aiming to repeat this formula of success, continue to invest. both in current growth drivers, but then also in future growth drivers, in order to drive innovation to the market, customer success to the market, and continuous improvements when we operate moving forward. So with that, I would like to welcome Anne-Sophie back on stage, and we will open up for Q&As.

So we will open up for Q&A on the conference call, but I would like to ask for those who are on the call and want to place questions to limit yourself to two questions. And if you still have questions after that, please do queue up again. So with that, please.

If you wish to ask a question, please dial £5. on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial £6 on your telephone keypad. The next question comes from Adela Dashian from Jefferies. Please go ahead.

Good morning. Two questions from me. The first one relates to the price increases and the positive contribution that you saw from that during the quarter. Should we expect additional price increases to be made in 2024? And how are your customers in the current environment of those if so?

Thank you. As we said, we saw a continued good development on the price development. On average, around 5% plus in the quarter. That is very much in balance on how we saw the full year. So with that then in mind, without giving any sort of future projections, I don't at current see much large resistance when it comes to price as such. With the exception, such I think I've said earlier, in the area of equipment in food tech, we increased the prices very substantial a year, a year and a half ago. So there you can say we are seeing more resistance. On the positive notes in food tech then, when it comes to software, we see very much that there the market is willing to accept continued significant price increases.

Great. And then just a second question. I noticed that the order intake from hyperscalers increased during the quarter. Is there any margin variation between hyperscalers and collocators? I think you previously mentioned that collocators are typically more, they tend to agree more with the sustainability angle. So, yeah, any price or margin variation there would be great to know of. Thanks.

I mean, our ambition, independent of the area, is always to do a pre-calc that will position ourselves in the range or above the 14% that we have as a target. Then, I mean, you can drive that in two ways. I mean, you can drive it with... high well accepted prices in the marketplace or efficiency within your factories and let's say like this if i take a look upon the product that we now have released to some hyperscalers with a lot of praise from them we have worked significantly in how we produce and how we manufacture those okay no

We shouldn't expect margin variation.

I mean, it's very, very small.

Thanks.

Okay, thank you. We take the next question.

The next question comes from Julia Utbolt from SEB. Please go ahead.

Thank you. Hello, Julia Utbolt with SEB. So two questions from my side as well. Firstly, it was discussed that the mix effect was driving the air tech margin lower. Are you seeing any changes here in the service and component demand, or should we consider this effect as temporal?

I mean, what is driving then, what is very, very pleasing to see, that is, I mean, as you saw, we had in order intake around 40% if I combine then the service and the component sales in the quarter. Last quarter, if I take it out of memory, it was 55% or something in that range then. So from that perspective, a slightly lower mix in regards to order intake. But a larger mix is actually in between the different regions. And here, I shouldn't say it's unpredictable, but it's more. I mean, sometimes one region is up and another region is down. But I don't foresee a large shift in the mix moving forward. The only area that I continue to highlight that is, I mean, in China, we are in a more consolidating type of market when it comes to battery production. So there, I think we for at least a year without giving a forecast, we will continue to see a fairly weak demand and in China from that perspective.

Okay, thank you very much. And you continue to take large data center orders here in the quarter to be delivered during the next two years. Could you give us an update on where you are and expect to be in your capacity utilization?

Very good question, Julia. And I can start and then I will also give the word to Katarina, because I mean, now Katarina has been with us and she has been in some factories and also with her experience then from the North American market within Electrolux. But if I start like that, we have really been building our capacity ahead of the curve. If I take a look upon our largest facility in North America, in Virginia, The concept is that we have balanced that up on a one plus, I call it a one plus shift, a little bit more than one shift. And then we have the opportunity, if we would like to increase or if we have a higher demand, to move that up in an even better quality output through shift. On top of that, what is really pleasing to see, that is we have worked with Lean during the year. So the pre-calc of that factory and the result of what they are delivering is much better. So from that perspective, I have no doubt that we can handle more orders, if so, coming. But Katarina, any reflections from your side?

No, I can just compliment by saying that we are also ramping up in the factory in Texas as well. And then, as I mentioned, we are then also expanding in Europe to further increase capacity for the European market.

OK, thank you very much.

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

Thank you, and good morning. You partly answered my first question very close, but the kind of indications about normalized order patterns, not just China, do you have a sense of when you think this will be kind of, well, when you kind of compare yourself against apples to apples, so to say?

Well, Here I have to give a little bit of a complex answer, perhaps. In data center, we are moving step by step upwards. I see that the market is still very attractive for the coming years. With that said, don't be worried that if we won, a quarter would have, I call it zero in order intake. That will not happen. But anyhow, in another quarter, we will have three, four billion then. That is just the pattern. But there I'm very confident that we will fill and load our factories in a good way. When it comes to air tech, I mean, we are at current in this what I call a shift. To some, we had larger orders. We are now moving into shorter lead times. And it could be one quarter or something like that where we need to balance the different regions then. Simply put, in China... We have a weaker market in Europe. We have a quite okay market. And in North America, I mean, we just pump on, so to speak. Then when it comes to food tech, pleasing to see that we are now getting more orders both in China and in Europe, in equipment or in climate solutions. And it continues to be a good market in North America. But all in all, I think we need to balance some of the factories for a few quarters. Nothing more than that.

Understood. And then just a more technical one, but items affecting comparability and air tech, quite a step up. Maybe you wrote that down in the report, but What do these relate to? And do you expect this to be part of a larger program with higher IACs also in coming quarters?

I can say like this than the first. It is not part of a larger program when it comes to that in air tech then. And then with the warm hand, I hand it over to Katarina.

No, the charge we took relate to clean tech in Germany, basically.

Something that we announced, I think it was half a year ago. It is around 20, 21 million Swedish kronor. So, yeah, an adjustment, basically, if I call it like that.

Understood. That's all for me. Thank you.

OK, so we have a new question from the conference. The next question comes from Gustav Bernablad from Nordia. Please go ahead.

Hi, it's Gustav here from Nordea. Just a quick one here on Airtek. I mean, you comment on a decent demand in Europe for the segment, but I mean, is it fair to assume that the utilization rate within your new facility in Airtek in Czechia is currently lower and therefore this way on the margin, or is it just the service, would you say? And then, I mean, to sort of reach the margins we have seen during the year, Do you need a more broad-based, strong delivery?

You point out two different quality buckets then. I mean, one, to some extent, it's the mix, quality and service versus different products. I say like this, we don't have a weak, have had a weak demand in the factory or a low utilization grade. But we have not had a high utilization level either. And that is, I'm very confident that we gradually will start to fill it up more step by step. But it has been one of the weaker quarters in that facility, yes.

Okay, great. And then just regarding battery, I mean, Northvolt now having received sort of Europe's largest green loan ever, I mean, are you noticing any change in the dialogue at all with the customer, or is it fairly unchanged?

This, I think, is one of the most fascinating subjects there is. I mean, I can greatly say I'm super confident if I look upon what will the future bring. I take Northvolt as an example. More and more investments are put into that market. And we continue to hold our 50 percent or above share when it comes to. But as we talked about a few quarters, it has been a more hesitancy to place orders. Some orders I talk about battery factories in conjunction with some automotive makers. They have split their orders in two chunks, et cetera, et cetera. But so short term, a little bit more reluctancy. Long term, two years ahead, I see an even larger demand. So this is the sort of two buckets then. So I am very optimistic for the coming years.

All right, perfect. Thanks for having my questions.

Thank you.

Can you question from the call? The next question comes from Mats Liss from Kepler Chuvriaks. Please go ahead.

Yeah, hi. Two questions from me. First, you mentioned that in cycle you have, well, you're able to both offer liquid and air-cooled facilities, and I just wondered if you see any change in competition there, and also regarding the European footprint there, if you sort of have received any Any more particular interests in Europe as well?

If I start with the first one, Mats, in regards to I do feel, as I said earlier, I can perhaps not sort of prove it on each and every decimal, but that we are taking market share in the data center cooling arena. That is not only Sidecool, it is the broad portfolio that we have. With that said, coming back to Sidecool, it is a large interest and now we have not only theoretically proven that, we have also physically proven that by taking orders when it comes to both liquid and air-cooled solutions. So it's a continued strong interest there from both, especially from co-locators, but also from hyperscalers. Then if I move to Europe, then the interest for Cycool as such is high. Then it takes some time to work through all the quality questions that a customer has. But I think I said like this a year ago, I would have been very surprised if it took an order during 2023 and I would be very disappointed if we don't take an order during 2024 when it comes to cycle in Europe then. And then beside that in Europe I'm super pleased to see that we step by step are improving then the presence in the market and we are looking into how can we continue to support that even more.

Okay great and then just about food tech I mean you see an improvement there and I guess previously we have talked about the strategic review going on and If there are any changes there, will it be sort of finalized during the first half of 2024?

Yes, and I mean, Katarina and myself are very closely working with the food tech team. We have not changed our view on that, and we will carry it through during the first half of this year. Yes.

Okay, great. Thanks.

Thank you.

So before we take another question on the call, I would like to... The next question comes from Carl Dagenberg from Carnegie. Please go ahead.

So two questions from my side. First on the DCT orders here. Obviously quite a superior order development here in Q4. And I guess, you know, stripping out these two large orders, you are at... If you want to call it base orders, I don't know, but just about 1 billion. And I think we talked previously about, you know, a quarterly assumptions, 3 to 600 million, obviously with quarterly variations. just wanted to you know double check with you now given what we hear in the end markets etc etc is that the reason for you know assuming what you're delivering here being a sort of new structurally higher base going into 24 or is it something specific that we should keep in mind here when we look at the q4 figures that's the first question

I think the wording, and I smile when I say this, I mean, call it the base, the underlying, the more call it normal, always sort of boiling type of market. We can call it in many different names. But if I come back to your question then, I think two observations. One is the data center market as such is a strong market. And we are very competitive in the data center market. Then, for me, it is extremely difficult to say is sort of the order pattern has that changed. So I put it like this. I mean, the larger orders, they will come and go. And now we had a very strong quarter. The more, let's say, smaller to mid-sized order that comes in bundles or comes one by one, I mean, they could also vary. But at least I took it as a very, very good evidence of our attractiveness in the market and the offer that we have. I mean, Katarina, you're following this and I mean, have you any comments on order patterns in data center in particular?

Yeah, I would just add that I think it's important to look at the development of net sales for data center. I think that helps as well.

Okay, thank you very much. Secondly, also, I just wanted to follow up here on the CapEx development. Very helpful picture or graph there on slide 22. I just wanted to, yeah, follow up again if I understood you correctly in the run rate that you're here at in Q4 and are only 12 months capex basis. That's also a fair level to assume you're going into the full year of 24 given the end consumer demand or end market demand and also capacity ramp up. Is that a fair level in your view?

As I said, we will continue to invest during 2024 in these markets. So in the US and also in China and also to expand for data center in Europe.

And just to add on that, I mean, after that, we do feel that when it comes to capacity upgrades, we are pretty much done. Then, of course, if we expand into other venture, that future will tell. But when it comes to the markets, then we are pretty much done.

Okay. Thank you very much, Kerstin.

Oh, thank you. So now I will take a question from the web, from Philbert. And it's about the markets and the market demand. And the EV market seems to slow down with many OEMs delaying their expansion plans. And do you share this view? And have we seen any impact on our side?

I think it is a mix here. So the answer is yes and no then. And let me start with the yes. Yes, it is a delay in certain order patterns, what I referred to earlier as contemplation time or splitting it up into investments, not building the full factory, etc., That has happened then, let's say, since half a year, three months, and it's at current. On the other hand, the no then, that is that in Europe and in North America, more investment plans are released. And then I talk about... The investment programs coming from the Inflation Act. Someone referred to the support or the loan type of capital facilities that Northvolt was given here from Europe, etc. I the best prediction or view I can give you, that is, we are now we have gone from very strong to somewhat weaker. And I predict it will not next quarter, but in the future start to move up again. And this is very much related to politics, very much related consumer behavior. A lot of inflation has been sort of hitting many of us. And I think when consumer confidence comes back on this, then also investments will increase. But I'm, for a few years ahead, super confident that electrification will just carry on.

Thank you, Claes. Great. So now we take another question from the conference call.

The next question comes from Carl Oscar from Burenberg. Please go ahead.

Yes, hi there. Most of my questions have actually been asked. It's just one thing I'd like to clarify a bit, and it's the margin development in Airtek. So this discussion on mix versus capacity utilization, I mean, If I just look at the service revenues, for example, in Q2, Q3, you were at high teens, 18%, 19% service revenues, but still managed to squeeze out quite a significantly higher margin. So I'm just kind of thinking, actually, how much was the mix effect? Maybe you could comment a bit on that. Was it more components and so forth? What was the share of that? Or is it actually more a scenario where if the actual capacity utilization, that's sort of the culprit, that'd be helpful then?

If I started, then I also let Katarina in. And if I average out the answer, then I would say it is sort of both. There is a mix coming from service components and projects then, so to speak. And that has burdened us to some extent. And then it is the other side, and that I alluded to earlier. In some of our factories, we have not been up to the same capacity during the quarter as the quarter before. And I think that is the best blend, from my view, I can give. I don't know, Katarina.

No, I fully agree with that.

All right. And then, I guess, just a quick on the lead time changes in AirTag. Could you quantify a bit where you're coming from, what you're seeing, how short are these lead times now, what's your visibility, and how should we think about that going into this, let's say, slightly tougher outlook in early 2024 here?

Let me go back then to, and I go back a lot in time then, I go back to before COVID. Before COVID, the general lead time pattern with Airtek were around, let's say, six to nine months. And then it moved itself all the way up during COVID, supply chain crisis, you name it, up to sometimes 15 to 18 months. I would say now it is perhaps in the range of 12 months. But I mean, in some cases, and this I just give as an example, a couple of quarters ago, another competitor was winning a smaller battery project in the US due to whatever reasons that competitor could not deliver. The customer came back to us and said, I mean, you're in again. But then they had a very quick delivery time on that or demand. And we were able to handle that. So for me, this represents both a challenge and an opportunity. We have now the flexibility if needed to squeeze in smaller orders if there is so. But at the same time, we also have the challenge then that we cannot predict the load 12, 15 months ahead.

Yeah, that's fair. All right. Thank you.

Thank you very much. So with that, time is up and we would like to conclude this presentation of our Q4 and full year results. So thank you, Claes. Thank you, Katarina. Thank you. And we look forward to see you again. And do note that we have an investor webinar coming up on the 26th of March about data center technologies. So very exciting. So don't miss that. And so with that, I say thank you. Have a nice day.