NIBE Industrier AB (publ)

Welcome to the NEVI Q4 presentation for 2025. During the questions and answers session, participants are able to ask questions by dialing star 5 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 or good afternoon to all of you out there. Hello, also from my side. We appreciate you calling in. And just for the sake of order, We would like to present the report now in 20, 25 minutes at most, and then allow for questions, of course. And then we have as a target to stop the whole interview here around 12 o'clock. And just another sake of order, we could possibly allow two questions per analyst or per person, and then you have to queue up again to allow as many as possible to put questions to us. All right. With that said, once again, welcome. And we're going to go through a number of slides. And I think that the headline as such gives a pretty good picture of what we're going to talk about. And we hope that you've read the report. And, of course, it's been a very transparent year to you regarding our recovery, if we call it. and we saw the signs already at the end of 24 and then gradually quarter after quarter we've seen the improvement and then with the fourth quarter which is typically a good quarter for us when we return to seasonality it's a very robust development of course there have been hindrances out there political and tariffs and what have you and swedish currency which is very good to note on one on one foot that is strengthened, but it's been, of course, also quite dramatic when you invoice in other currencies. Nevertheless, that's our task to solve or work with these issues and there are no excuses, but rather saying, okay, we have arrived where we are, giving all the conditions in the world. And if we just have a quick look at the figures themselves, there you see, of course, the quarter and you see the year as such. And the summary is, when we look at the figures, that the growth is fairly modest. It is even minus in the fourth quarter. But taking into account the currency effects, it's the full year. A bit better than 5% growth and in the quarter it's even more than so. It's like just under 7 I think. Which means that we are truly recovering and the margin is with us. The operating margin has come from just north of 10 in the quarter to 13.1 which we think is fairly solid. and also for the year as such we are back on track with ten and a half versus the eight that we weren't so pleased with a year ago but again solid demonstration of strength and we're going to go through respective business area and we look at these bars here in the graphs that you have ahead of you of course they are a little bit diminished by the fact that the currency has been so strong The last years I think cut down with 1.8 billion crowns. So that graph would have been different had we had a fixed currency ratio. And it's here when we look at the profit off the financial items. they of course they are not directly influenced or of course they are influenced but to a lesser degree now we see that the curve is going in the right direction again which is very pleasing and we see also that the seasonality is really stalled and we've been talking about that quite a bit because unless you've been following us for several years the years 21, 22, 23 weren't really, if you call it normal, because the seasonality was not pronounced at all, but prior to that we had a curve just like, we more or less have had 25. On climate solution, which is the business area that you look at the most perhaps, and sometimes we even call the heat pump company, which would rather be called like something else, like a heating technology company, because that is, again, diminishing the other two business areas, and even climate solution is not 100% heat pumps. Nevertheless, it's been a good year for us, and of course we have fulfilled all the investments in product research and product development, and our factories and our equipment is up in the speaking span, which means that we are very ready to take on the challenges coming in the future. So that's a very positive attitude within the whole group, what we have achieved together. And I mentioned that earlier this morning when I had a short interview, saying, well, this is really a very good demonstration of strength. Hans and I can only do so much, but we have a phenomenal organization behind us that fully understands or understands the task, and we have been working together now for many years together, of course, and we had a slowdown 24, which is like, let's analyze that, make a program, and then charge ahead again. And that's pretty much what you see during the year and during the quarter for climate solution and also the other business areas which we're going to come to. And if we just have a quick look at the figures for the year for climate solution, we see that, of course, again, the modest might look not so phenomenal, but it's actually a growth of 7.6%. And for the quarter, it's just under nine, which, of course, is contributing to the margin of 13%, which we have been working so hard to achieve, and which we're also going to show you on the next slide, that, of course, it was not very pleasing to be under even 10, which is the immediate target for all business areas. But to be under, that was a bit painful, we have to admit. And now we're back on 13, and it's a very clear signal in the report that we don't aim to stand there, but rather move into this broad span in the future and also already this year where we're standing. Looking at Element, same thing. It's been a challenging year for them, but some sectors are good. The heat pump sector, the semiconductor sector has really improved during the last months. We had a weak period and the third quarter, and that was one of the main reasons why we couldn't really catch up to the targeted 8% operating margin, and we indicated that already in November. Other than that, they are working very determinedly and with all the challenges that we've all had, so I won't dwell on each bullet point here. But of course, there again, we like to be back within the span of 8 to 11%. So growth and margin recovery, I mean, those are the headlines for the year to come. And here again, it's a very narrow expansion if you look, or growth, but if we look at it from a At a fixed currency point of view, then we have a growth of 6% for the year. And also for the full year, or for the full quarter, is well above 5. So it's catching up. Here, of course, there you have the icicle sticking down 2005. where we had a very difficult year, but there was some money set aside, but now we've had two years below eight, and we are very determined to bring it back within that span, as I just mentioned a few minutes ago here. And looking at stoves, of course, they've been dragging, and there we misinterpreted the market comeback, we can say. Stoves hit the tougher situation a little bit later, than the other two and even the first quarter 25 was not so bad really but then of course consumers were certainly influenced by all the worries in the world and we've taken away costs of course and we have fully determined also here to return to a margin that we are more used to and if we look at that the precise figures, we can say that the growth, of course, was very, very modest. It was even minus, and we are not really used to that. It was five percentage units drop if we discount the currency. But still, even the fourth quarter was just on the verge being equal, taking the currency effect away. We feel that we are scraping the bottom and we hope now that it'll be a big leap jumping into that span. But that's certainly our target. together with, of course, a volume increase, organic growth. And before Hans comes in, I'd like to just look at or show you the bars that we typically show. And, of course, we had a phenomenal growth there, 22, 23, even 21. And then we dropped down, painfully so. And now we are even including the real currency effects just passing the previous year. But, of course, had we add another 18.8 billion there, we would have been at a different situation. Profit after financial items, we have a bit to go there. They're determined to come back as far as the margin improvements we've said already. And of course that's a combination of being very frugal with cost, utilizing our investments that we've had now so, you know, determinedly fulfilled. and of course being very aggressive in the markets. So that's the good old usual tools. And we hope to be able to show you better bars as the years are coming by. When it comes to sales distribution, it's fairly much the same as in the past, where two-thirds roughly come from Climate Solution, an element one-third and stoves a bit less than ten. And of course with Climate Solution coming out with a fairly good margin, The result of such is of course dominated by that and with stoves fairly marginalized because of the relatively weak performance during the year. Geographically, if I last slide before Hans steps in here, it's North America, 31. The Nordic country, which we consider being our home market, is like less than 20. And then 45% in Europe, outside the Nordic countries. So that's fairly stable, we'd say. So I think I hand over the reins to you, Hans. Thank you very much, Erik.

Yeah, I'll continue as usual so to speak and then we'll of course leave room for the questions. Just one comment on the group before I head into the divisions again and then the balance sheet and so forth. As you saw we have adjusted numbers. That's something we very seldom have really. We like to present exactly what we have performed. In reality, we've only made adjustments twice, and that was back in 2005, as you mentioned, when we had a savings program back then, and therefore 24 for that savings program. This year, we did, however, decide to mention that these acquisition-related revaluations of contingent liabilities were would need to be mentioned separately because they have very little to do with the underlying operations, so to speak, the 178, 179 million. That's what we do every fourth quarter every year for all of our future payments for remaining shares in companies that we owned. And they are, of course, based on future projections. And this year we had A very fortunate situation in a way where a couple of companies and owners wanted to remain on board as owners for a number of more years and not step out soon, so to speak. And we always welcome that because we want the people to be involved with flesh and blood. So that was the reason for that adjustment. Now heading into climate solutions again. I mean, as Eric mentioned, we had a good and strong finish to the year by performing quite well in the fourth quarter. Almost a little bit better than I had expected since December was the last December now for many years, which was employer friendly, so to speak. You could take a few days off and get a long vacation. But that did not hinder our companies from continuing to deliver and perform, which was very pleasing to see. So it was a good finish to the year where we had good sales in the Nordic, especially Sweden, Denmark kicking in and then Germany and the Netherlands and to some extent the UK as well. And then in North America, with the commercial sector being very strong, so to speak, or relatively seen strong, that's our bigger area over there. But also US being a very stable country in terms of business. So that contributed to this good performance. And thanks to the volume coming in then, which you don't see due to the currency, but Eric went through it quite in detail. I mean, we've had an underlying good organic growth And that in combination with the savings program that we launched and where we've been really focusing on holding on to costs. have generated both a better gross margin up by some three, three and a half more percentage units from Q4 of last year. And then holding on to the SG&A costs as well, making it possible for us to deliver a growth in operating profit of some 34 plus percent, coming in at this margin of 15.7%. So quite an achievement coming up from the 12 of last year and then landing in the full year for climate solutions at 13, up from the 9.3. So we're back on track and as Eric mentioned, we of course want to continue to develop from this level. In terms of split of sales per geography, there have not been many movements. We're very stable. in this situation the nordics always represent just below the fourth the rest of europe is basically half and then north america is about the same as as the nordics or slightly slightly bigger moving on into element also had a relatively strong finish to the year almost coming in at the eight percent which is the the bottom range of the interval where we want to be um and this was not not a given in the census this is the as we typically say our most global business area where we are exposed both to many geographies and also many segments where the majority have been stable, some have been growing nicely or kicked in again. HVAC with heat pumps being one of them, of course. Semiconductors coming back in the quarter. They were up in the first part of the year, but then had a decline in Q3 and came back. Whereas white goods, automotive in Europe and industrial still are in a slightly more challenging situation. But all in all, we were able to increase cross margin here as well in the quarter by some two percentage units. The operating profit coming in almost 17% above from last year. Leading us then to landing a full year at 7% operating margin, with a slightly better gross margin, keeping the SG stable. But still a little bit of road to go to get back into the 8, but clearly on the right track. In terms of split of geographies per sale, as I said, this is the most global business area. Not so much of movements within this area. It's the others portion that has grown or changed a little, you can say, being the Asian part, which declined slightly since the other ones have grown or come back, you can say. But no major changes here. Stoves then is, as you all know, the business area still struggling a little bit due to a difficult market. I mean, on the one hand, the low new build rates, people being a little bit uncertain due to the geopolitical situation and so forth, have been holding on to these types of products. But one should not either forget that we come from a very special situation in the sense that during the pandemic and the homeowner trend that followed, We had a very strong demand in the business area, which then was continued. Once again, you can say when Russia invaded Ukraine and people were really looking for a heating device, which was not dependent on anything else than wood, so to speak. So with that in mind, we think that the business definitely will come back, but that it still is lagging a little bit behind before it will kick up. But also here we've obviously been working on cost control and focusing on trying to grow the business and keeping up the profits. And gross margin improved by two percentage units almost, or one and a half at least in Q4. And we were able to basically maintain the profit and coming in at an operating margin just north of 10%. And for the full year, the 4% that Eric mentioned before. In terms of geography or sales per geography, no big movements. Since quite some years back now, as you know, we have a big operation in North America based in Canada, in the Vancouver area, and that has developed quite well in terms of sales. But, of course, the tariffs have hit us in that respect. If we then move on to the balance sheet and eventually cash flow statements and so forth, you see that the total assets have actually declined from 70 billion to 65. A lot of this has to do with currency. If you see the intangible assets there, they have come down from 32 to 29 billion. There's a good portion of currency in there, but of course also a result of depreciation and that goes also for tangible assets. Although we have continued to look at acquisition opportunities and always do, We have not brought so many companies on board, so we have not had any add-ons here in the same way as before, where the balance sheet always has expanded. And you basically see the same effects on the equity and liability side, where equity is lower than before, but that is very much a result of these currency translation effects that I just mentioned. But also the fact that we have handed out dividends and you have the bridge on this in the report on page 12, I believe it is. Pleasing to see is that both the Long and short-term interest-bearing liabilities have come down. We've amortized on our loans, so we've reduced those by some roughly 2.2 billion SEC, which has improved our financial strength, you can say, for future acquisitions. And very pleasing to see is that the cash flow has from the underlying operations generated some 400 million more than compared to last year, which is pleasing in itself. But we've also now had a release in working capital that we have been talking about. And in previous quarters, we've had a good development on Inventories, we've step by step reduced those. We've slightly increased our payables, which also has had a good effect. But we didn't in Q2 and Q3 get the immediate effect of our increased sales. Typically, we invoice a lot at the end of the month, and then it takes a little while before the effect of that kicks in. But a good portion of that did kick in now in Q4. So we released some $700 million, then leading us up to having good cash flow from operations after changing working capital of close to $4.9 billion. The investment in current operations has come down and will come down even further following the big investment program that we have gone through and are just you know about to finish and then a small portion there on acquisitions and then the financing activities that's of course repaying debt and also paying out dividends so the fact that the change in liquid assets is slightly negative there that that's fully planned so i think a very good and strong cash flow behind us And just a few key financial numbers here. We still have a good portion of cash on hand. It's at 5.9, basically, slightly down, but just for the reasons that I mentioned, that we have used part of the cash to amortize on our loans. And as you see, the interest-bearing liabilities in relation to equity has further come down. And very pleasing to see is that the net debt of the DA is now – come down even further from the 2.9 in the previous quarter to 2.7. And regardless of us having adjusted that number or not, the number is basically the same. It's either, you know, 2.72 or 2.67. So it's a very small difference coming from that effect. And then an improved equity assets ratio making us a solid company. And the working capital, we're continuously looking into that and working on that. It's given a good effect during the year. We have as an intermediate target to land in at 20%. We came close here with the 21.2, but having taken it down, you know, about, well, from the 22.8, as you see there in the picture. So that's also heading in the right direction. And just the very last key financial numbers. Obviously, return on capital employed and return on equity still have some ways to go to meet our targets. But they have definitely taken a step, both of them, in the right direction. So that's what we are continuing to focus upon. And with this year behind us, we're well positioned for that improvement. And the very last page here is a little bit of a summary of what I just talked about in terms of these financial numbers, where you can see the development of these key financials over the years. And up until the very special year 2024, we've gradually improved both the operating margin and the net margin, and also the equity assets ratio. Return on equity has been suffering a little bit, but that is of course due to the strong equity in a way, it's communicating vessels in a way. But following now the recovery here in 2025, we think we are heading in the right direction again to continuously improve these numbers. And by that I think we are basically ready for questions, unless you would like to add something, Erik?