NIBE Industrier AB (publ)

Welcome to the NIBI Q3 presentation for 2025. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the CEO Eric Lindquist and CFO Hans Backman. Please go ahead.

Thank you very much. Good morning everyone out there. Good morning from me as well. Just a few things when it comes to the order we are going to introduce, of course, ourselves and some figures towards we have the Q&A sessions. And we would be pleased if there would only be two questions per individual and also try to end this Q&A session around 12, because we have other commitments shortly after noon there. So with that said, once again, welcome to this conference call. And I think that the headline is that we are very proud to be able to present these figures as we are today. We've said several times that the organization that we represent, Hans and I, is very, very strong, very, very proud to have, you know, the ability and possibility to lead this organization. So that's the headline. Of course, it's a gradual recovery that we... if you go through for the group. And of course, when comparing the situation in the world today, compare what it was when we started. It's quite a bit of a turbulence, but that's of course that. And also the increased strength of the Swedish crown from many perspectives is very nice, of course, but when you compare figures, it's a little bit shadowing. the real organic growth, which we therefore have explained very explicitly when separating it from the currency effects. And we gave a very bold promise from the very beginning of the year that we were going to be back at the intervals of the historic levels for each respective business area. And we are, of course, very proud that far as we've come, And we are very transparent where we are, as we are with the targets. And those disturbances that I just described, of course, they are causing some hindrances. But we are trying our best to give you some kind of a guidance where we possibly could land at the end of the year. You've seen them. We don't have to dwell so much about it. It's very pleasing, of course, that there's growth there. well beyond the 1.2, it's like 4.6% organic growth. And what's also very pleasing is that we see that the gross margin is going up and the operating margin is moving in the right direction. And of course, moving into the quarter as such, the third quarter, then we see that the gross margin to be improving and the operating margin is now up to 11.3 which is of course what we like when the margin is double digit that corresponds well to where we like to be and if we just continue a little bit about the graphs that we typically look at I mean we see now that the The income is gradually coming back, and that's even more described perhaps in the next graph, where we see the curve is going in the right direction. And when we look at again, it's an improvement quarter after quarter. And of course, it's a recovery all over, you can say, but in smaller Portions, of course, where is Germany and Sweden and Netherlands, particularly on the residential side, the US remaining stable, and also Italy very much on the commercial side, which is very pleasing to see. We also see that there is a more traditional seasonal pattern, particularly with stoves and with climate solution. And it is also pleasing to note that all the efforts that we've done during the year, despite the action program, if it took, you know, R&D remained at the same level and also the sales forces. And that is paying off now, of course. You can't look at things short-sighted. You have to be very determined long-term to be successful. And here we, of course, have now come up to the third quarter. when it comes to the margin that is, you know, just in the right, can I say, level and the right span. And of course, we are giving a little bit of an indication here on this slide saying that, well, And within margin of error, we should be close to the 13. And that's, of course, again, a very bold statement. But you've been following us. We've been giving you very clearly the intervals. And now with six weeks remaining, it's very important. We are into a quarter that is typically decent when it comes to invoicing and order intake. the best thing we can state is exactly what you read there. And that's also stated in the report. We are very cautious not to do anything or mention anything or do any saying here that wouldn't correspond to the report as such. So Hans, of course, is going to dwell a little bit more on the quarter such on climate solution. It's a good growth organically, and we've seen that, of course, and the margin here so far just south of 12, whereas the quarter is coming in above the 13. So it's a balancing act, a very delicate balancing act for the rest of the year. And coming into elements, there, of course, when the whole industry of heat pumps went down all over Europe. And of course, being a main supplier there of components, they also took a dive. They're a little bit behind. But we also see now that that is coming along. And electrification in general, of course, and also the rail segment, which is very pleasing to see. industrial segment is more reflection of this somewhat cautious or subdued market, particularly in Europe. As a comparison, we can say that in general, Europe seems to be a little bit more cautious or subdued compared to the US or the North American market. And if we just look at the same sort of forecast again if we dare to say or what we could offer as far as margin you know predictions we say well it's going to be some close to the the eight of course but we also give a little bit of a buffer for ourselves depending on how the last weeks will look like and particularly on the element side being a supplier or sub-supplier we know that although the order intake could be good But for obvious reasons, no customer wants to sit on two large inventories. It's always delicate to do the forecasting for the element side. But looking at the figures there again, it's good growth. Operating margin is back at 6.8. And when we look at the quarter as such, it's going to come back to that. It's again, of course, on the higher level. It's up to 7.4 for the quarter. Quickly into stoves. And there, of course, we noticed that, and already indicated in the second quarter, that that would be difficult to arrive at the old, or the interval that we have been, where we've been, or where we used to be. So there we need a few more quarters. And I think that is, or we think that is more referred to be referred to the overall cautiousness, particularly in the European market. In North America, the markets are fairly buoyant, but there we have difficulties with the manufacturing of stoves that's taking place in Canada and then being shipped into the US. So there we take a hit when it comes to the margins. And there we very consequently say that they're going to take us a few more quarters to come back to the span that we typically talk about between 10 and 13%. And there we see, of course, it's a thin margin and the quarter as such, that is around 3%. So it's not getting any worse. If we were bold enough, we could say that we've seen the bottom of Also, the stove market with the figures that we've seen during quarter three with a margin of 3%, which, of course, is not satisfying, but still is slightly higher than the previous quarter, 24. And just a few small steps in here. I mean, climate is a typical graph, really, on the pie chart here, with climate being like two-thirds, roughly, and then element and then stoves. And on the distribution side, profitability, then we see that, of course, climate solution coming out quite dominating here. And then geographically, not that much has happened. North America remains slightly above 30%. The Nordics slightly below 20%. And then Europe, of course, around the 45%. So no dramatic changes really there. So I think with those quick comments, I hand over to Hans. A lot of eager people out there, you know, that would like to put questions to us. All right. All right.

Thank you, Eric. Yeah, I'll try to be quick, but not rushing it. But to allow for questions, of course. Before we jump into climate solutions here, I would just like to mention from the main report, so to speak, and for the group, the tax rate. Some of you might have seen that the tax rate in the quarter is about 30 percent. And that is not a new normal. as we see it it's it's rather a matter of timing differences now very much related to the introduction of the so-called big beautiful bill in the us where the rules and regulations around capitalization of r d expenses has changed and that has led to a couple of one-off effects but that doesn't change anything in the long run really that's the major reason for that tax rate going up we then move into climate solutions i mean climate solutions definitely shows a very robust performance in what still is a challenging world in a way it's a very strong comeback from the challenges we faced last year and the profitability level at the time we've been able now to grow sales with some seven percent organically but then of course current But due to increased sales and also our cost efficiency programs that we have undertaken, profit has improved by close to 50%, coming up from the 1.5 to more than 2.3 billion, landing in this operating margin at 11.9%. And on a 12-month rolling basis, we are up to roughly that level, 11.8%. In the quarter, sales grew by some 8%, and gross margin improved even further, coming up to 35.4, up from 32.5. So that's a good achievement as well, coming from the better volume that we get. And profit grew by another close to 29%. almost 30%, more than 29%, landing in the operating margin there at 14%. So it's a very robust performance and a robust and strong comeback from last year, showing our ability to adapt the cost levels when market conditions change and also to reap the benefits of a good volume that comes in. In terms of a split of sales per geography, there is virtually no change at all from last year. It's very stable with Europe, mainland Europe being 50%, our home turf here up in the Nordics being slightly north of 22, and North America with a solid quarter of total sales. NibElement has also shown a very robust In a challenging world. And here we are really exposed, as you know, to many segments in many parts of the world. Organic growth here was above 6%, but then again, the Swedish currency took away a large portion of that, landing it in then at 2.9%. Gross margin took a jump up here from 19.8 to 21.1. So that's a nice improvement. And then the profitability itself coming up with more than 30%, landing in on the 6.8, which leads then to a 12-month rolling that is around that level as well. In Q3, sales actually grew even more organically, that is, close to 9%, but again with a headwind from the Swedish currency. Cross-margin continued to improve and profitability again, and we came very close to at least the lower range in the interval for our historical profitability ranges there at the same time. 7.5, so very close to the 8 and a nice step in the right direction. Neither here have we seen any large changes in terms of split of sales per geography. So that's here with North America being a very strong portion of that business. I would say when it comes to stoves, that despite these very challenging market conditions that they have experienced, first an overconsumption, you can say, during the COVID period, when everyone renovated their homes, and then when Putin invaded the Ukraine, leading to a lot of people wanting a freestanding and alone, you know, off the grid type of heating system. And after that period with low energy prices, higher interest rates, low new build. Despite all of those challenges, the business area has improved. defended its position quite well, despite an organic decline there of 8% and more than 11% when you include currency. They have been able to generate a profit here and continue to spend time and money on interesting products and market activities for the future. Here, the performance for the last past 12 months is just above 4%, and far from where we're used to being, but not that we see there is any in coming back to a stronger performance as soon as the market returns. And I think we see that a little bit in Q3. Here sales dropped organically by 1.6%, so much less than before. With currency again, it's obviously a drop there, which is much larger than that. But despite this drop then of 7%, we were able to defend the operating profit from last year. So it remained on the same level, generating a margin there of 3%, which shows the ability also here to take out costs. force keeping a portion of them on board or a good portion to be able to meet an expected better demand going forward. In this area, we see a small shift or a clear shift in a way in the distribution of sales in the sense that North America has increased up to 37% from 32% of last year. That's the major change. And that shows that North America has actually, from a sales point of view, been quite decent. What then has hampered the picture for us is, of course, that we have our manufacturing in Canada. And this is where the tariffs have hit us from a profitability point of view. Moving then into the balance sheet. There are no major changes here. We have a fairly stable balance sheet. We've been able to amortize both on intangible and or depreciate rather intangible and tangible assets. The investment level has come down a little as well, which we will see on a slide later. On the liability side, you can see that both the interest bearing, long-term interest bearing liabilities and the current interest bearing liabilities both have come down, which we also will see the effect of when we look at the net debt figure soon. The performance then and what we have on stock, so to speak, has an effect on the cash flow. We've had a good cash flow from the operating activities of slightly more than 2.9 billion up from just below 1.8 for the corresponding period of last year. Then you see a changing working capital, which is negative with one billion. That is solely related to an increase in receivables. It's the exact same situation we actually had in both in the been reduced and accounts payables have contributed in a positive way. So it's a result of us. invoicing more and we've not changed any payment terms really so this should come eventually and on the next line you see that the investment in the Current operations has decreased by some 500 million, then leading to an operating cash flow, which is plus 420 rather than minus 450 of last year. And then we've had some amortization of loans, some things affecting the change in liquid assets, the currency change we cannot do much about. A few comments here on the key financial figures. We have a fairly decent amount of cash on hand, the unappropriated liquid assets. The number there is actually correct. I mean, the 5119, which was the exact same a year ago. But if you look into the report on page 13, I think it is, you see that the composition is different. But it's a good portion of cash there. And then interest-bearing liabilities have come down. And the net debt is now, which is very pleasing to see. We typically amortize our loans and liabilities fairly quickly after acquisitions. And what took a little longer this time was, of course, the acquisition of Climate for Life, one of the largest acquisitions we've made, and then a market that took a very strong downturn after that. But we're definitely heading there in the right direction. And the equity assets ratio is solid as well, being above 45%. Just a quick comment there on the working capital. If we look upon it, excluding cash, it's also been improved from last year with more than a percentage unit. We are still targeting 20% as an intermediate target, so we still have some work to do moving in the right direction. And moving in the right direction are also these key figures, although they are, of course, not where we want them to be yet, but they are heading there. Return on capital employed, now 9%, up from 7.6%. Return on equity, also above 9%, there, up from just below 7%. And a profit per share that has increased, just like equity per share. So things are... Slowly but surely moving in the right direction. And I don't comment upon the share price, especially not today, I think. By that, I'm done, so to speak. If you want to add something before we open up.