Good afternoon, this is the CAREL's call conference operator. Welcome, and thank you for joining the CAREL INDUSTRIES 2024 First Nine Months Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Francesco Nalini, CEO of CAREL INDUSTRIES. Please go ahead, sir.
Good afternoon, and thank you for joining our call for the presentation of the nine months 2024 results. I'm starting directly from page four, where we have the first main highlights of the period. Revenues, as well as EBITDA margin in Q3, have been substantially in line with Q2, confirming the same trends already seen in the first part of the year. Actually, in Q3, we saw an increase in volatility, with a particularly strong seasonal effect in August that slightly penalized sales, while in September, results have been better, and the very recent preliminary managerial figures for October signal further improvement. In the nine months, revenues have a decline of 12.9%, or 16.4% organic. This is, for the most part, due to the poor performance in the EMEA region, and in particular to the results of the heat pumps vertical that saw a further worsening in Q3.
The silver lining is that heat pump sales are now mid-single digits on total group revenues on a yearly basis, meaning that, basically, for next year, they don't present any significant downside risk, just the opposite. The scenario in refrigeration was also in line with the previous quarters, and we didn't see any significant improvements materializing, if not on a qualitative basis, at least in Europe, while, on the other hand, the performance is very good in America and also in China. We have to consider that these results are also affected by particularly high comparables last year due to the backlog recovery after the end of the shortage, and, in fact, Q3 last year was the second highest ever reported by the group, the first being Q2.
The results are also affected by the very sharp de-stocking taking place in the industry, especially in heat pumps, that is now in the process of normalization, and in many cases, it's basically normalized now. EBITDA margin in the nine months was 18.2%, in line with the first half. We have a decline compared to the 22.3% reported in the first nine months of 2023, which is entirely due to the negative operating leverage, which, in any case, was partly compensated by savings in operating expenses. In the nine months, they were lower than 2023, in spite of the perimeter change and increase in R&D investment that remained on target at over 5% of sales. We also had an improvement in gross profitability, mainly thanks to a positive trend in raw material costs.
Net financial position at the end of the period is EUR 84 million, including EUR 44 million for the acquisition of the residual 49% stake in CFM, net of which it would have been substantially in line with the full year 2023, easily covering net working capital, CapEx, and dividends. NFP remains below one times EBITDA, and netting the EUR 31.6 million related to the IFRS 16, it would be around 0.5. Now move to page five for additional figures. At EUR 432.9 million, revenues in the nine months were down 12.9% from the EUR 497.2 million of last year. We have EUR 81.9 million less due to the organic decline, then EUR 17.4 million of positive contribution from the perimeter, mainly thanks to Kiona, and a very small EUR 0.2 million of positive foreign exchange effect.
As I mentioned, Q3 was close to Q2 and was slightly impacted by strong seasonality in Europe in August, probably due to reduced summer activity in the market in order to save costs. Kiona reported a double-digit growth in line with the previous quarters. EBITDA at EUR 78.7 million was down 28.9% from the EUR 110.7 million of last year and was 18.2% of sales, down from the 22.3% of the same period last year, entirely due to the negative operating leverage, partly offset by better gross profitability, in turn mainly due to a good trend in raw material costs and by savings in operating expenses in spite of the perimeter change and higher R&D. Kiona maintains an accretive profitability with an EBITDA margin above 25%.
Net profit was EUR 39.7 million, down 32.8% from the EUR 59.1 million of last year due to the operating result, since financial charges and the tax rate were not far from 2023 figures. I'm particularly proud to emphasize that in spite of the challenging moment, we are investing at the record level for future growth. CapEx in the nine months is EUR 22 million, up 47.1% from the EUR 15 million of the same period last year. This is mainly due to R&D and to the expansion of the Klingenburg plant in Poland, where we are going to centralize some phases of the manufacturing processes of mechanical components realized in other plants in order to increase efficiency. As mentioned, the increased R&D expenses are at our target level above 5% of sales and at the record level in absolute terms, as we strengthen our innovation pipeline for the future.
Moving to page six, we can see the revenue breakdowns by region and market. In EMEA, sales declined by 18.4% net of the foreign exchange. We have the continuation of the same trends of the previous quarters with the de-stocking and very high comparables last year for the backlog recovery. The sharp decline in heat pump sales is concentrated in this region, and we now believe that stock levels in general are pretty close to normalization. In APAC, sales are down by 8.6% net of the foreign exchange. Q3 was better than Q2, however, the comparable Q3 last year was very challenging. Good performance across the region in data centers, including China. In China, also very good results in refrigeration, while HVAC commercial is impacted by the weak real estate sector. In general, very positive prospects in India and Korea.
North America reported a growth of 6.1% net of the foreign exchange. Q3 was another strong quarter with over EUR 25 million in sales, in spite of a very challenging comparison since Q3 last year was the strongest for North America, as the backlog recovery happened with a few months' delay compared to Europe. By far, the fastest growing vertical is data centers, and we also see very promising trends in refrigeration. Latin America grew by 17.7% net of the foreign exchange, with good performance in Brazil, but also in the rest of the region, even if not everywhere due to macroeconomic conditions. To the right, we see the result by sector, with HVAC declining by 15.2% net of the foreign exchange, with most of the decline related to heat pumps that further worsened in Q3, but now we're convinced they have bottomed out.
Q3 was quite volatile, with a seasonal slowdown in August as several players in the industry, especially in Europe, took the opportunity to reduce activities to save costs, and we believe that heat pumps have bottomed out also because we are starting to see again some small signs of tangible recovery in the market of heat pumps from customers. Small signs again, but tangible ones. Refrigeration sales were down by 5.3% in the nine months, with a still stagnating market in EMEA, but on the other hand, an acceleration in America, which is expected to continue in the coming quarters, and now leave it to Nicola to comment the items below EBITDA on page seven.
Thank you, Francesco. Slide number seven details the group result from the EBITDA to the net profit. The increase in D&A cost is related to the purchase price allocation of Kiona for EUR 3.5 million, and the residual part to the relevant CapEx activities of the last few years. The increase of financial charges is mainly related to figurative interest in accounting effect, such as put and call options, earn-out liabilities, and IFRS 16 liabilities. The net financial charges paid to banks and other financial institutions decreased from EUR 2.8 million of September 2023 to EUR 2.3 million of the present year. The forex gain is mainly linked to the effect of the Kiona put and call option expressed in NOK. The capital gain refers to the difference between the estimated fair value of the actual amount of the put and call option of CFM.
The tax rate of the period was 23.2%, lower than the same period of last year. The group net profit at the end of September 2024 was equal to EUR 39.7 million, compared to EUR 59.1 million of the same period of 2023. Slide number eight shows the net financial position evolution of the first nine months of 2024. The period was impacted by M&A activities for EUR 44.2 million. The group paid dividends for EUR 21.3 million. The CapEx of the period was equal to EUR 22 million. The first nine months of 2024 net working capital increased mainly due to the typical seasonal effect. Taking out the effect of IFRS 16, the net financial position is equal to EUR 52.4 million. I leave Francesco to go on with the presentation.
Thank you, Nicola. I'm now on page nine with an update on the Kiona integration. On the technology side, as expected, we realized the compatibility of the Kiona system for refrigeration with the CAREL Local Supervisory System, the Boss. This new solution has been presented at a very important Chillventa exhibition in Germany a few weeks ago, and it's the first step for the cross-selling of the Kiona system. One example of cross-selling will be the 24/7 alarm management center of Kiona, and on this front, we are developing very innovative applications using AI to automate the alarm management itself. On the commercial front, we're speeding up the Kiona internationalization process, targeting in particular Southern Europe and the U.K. In particular, in Italy, we started the process of qualification of system integrators.
In spite of the very challenging scenario in Europe, Kiona maintained a good growth rate in the first nine months, around 15% if we consider recurring revenues, which are by far the most strategic, something less, but in any case, double-digit if we consider total revenues, including one-offs. Profitability is very good and accretive to the group at more than 25%, and these results still don't include some very big projects we have in the pipeline with public administrations in the Nordics. Now on page 10, I'd like to share some organizational developments. Giandomenico Lombello, currently managing director of the group, is going to retire at the end of the year after more than 30 years of very successful tenure with CAREL.
At the same time, in the last few months, we've been working to design a new organizational and operating model which will take effect starting from January 1st, 2025. The new model will be a greatly simplified matrix compared to the current one, with a strengthening of the regional dimension in order to be closer to customers and to regional commercial and technical opportunities. There will be a streamlined C-suite line directly reporting to me to reduce complexity and speed up the decision-making process, and a few new dedicated roles are being added to the organization to accelerate the development of new capabilities, in particular with a greater emphasis on long-term innovation. We already had two great additions to our executive team in the last few weeks, which are the new Chief Technology Officer and the new Regional CEO for Western Europe, both roles not present before.
Finally, I take this opportunity to express my personal gratitude and the gratitude of the entire board of directors to Giandomenico for the outstanding and fundamental contribution he gave to the growth and development of the group during his more than 30-year tenure at CAREL. I now move to page 11 for the closing remarks. The third quarter saw the continuation of the same trends as the previous ones. There was a significant volatility in the period due to a particularly strong seasonal effect in August, while September improved, and the still preliminary managerial figures for October show a further very positive improvement. The visibility is very low, though, with just a couple of weeks of regular lead time for orders. Q3 also remained quite difficult in terms of comparison since Q3 last year was still very high, actually the second highest after Q2 due to the backlog recovery.
The de-stocking trend continued, and fortunately, it should be close to normalization. EBITDA margin at 18.2% was also in line with the previous quarters, and the decline from the 22.3% of the first nine months of 2023 is entirely due to the negative operating leverage, partly offset by better gross profitability and reduced overhead costs. In fact, we've been successful in keeping overhead expenses lower compared to 2023, in spite of the change in consolidation perimeter and in spite of higher R&D expenses. The macroeconomic scenario continues to present significant elements of uncertainty, even if the path to lower interest rates has finally started in Europe. We have very positive expectations for North America thanks to data centers and to new opportunities related to inverterization and refrigeration. In Europe, stock levels are close to normalization, even if the recovery in refrigeration is lower than expected.
We have positive expectations for the most part of the APAC region. To conclude, taking this into account and considering that the very recent preliminary managerial results for October, even if very positive, do not signal a substantial deviation from the trends already present in the last quarters, the group expects Q4 consolidated revenues substantially in line with those of the previous quarters, and therefore expects to close the year with consolidated revenues close to EUR 580 million. Thank you very much for your attention. We're now more than happy to answer all of your questions.
This is the CAREL conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Niccolò Storer, Kepler. Please go ahead.
Thank you. Thank you for taking my questions, and good afternoon, everyone. I have two plus clarifications. The first one is, Francesco, if you can give us an overview of the trend, the most recent trend in the HVAC business, excluding heat pumps and data centers. So industrial and commercial excluding the other two activities that I mentioned. The second one is on expectation for profitability 2024. Do you think you will be able to defend the 18% EBITDA margin level even in a context of lower than expected revenues? And the clarification regards the Q3 performance of North America. If I understood well from your speech, basically the reason of the Q3 drop is just a matter of tough comparison compared to last year. Is this right, or am I missing something? Thank you.
Okay. Thank you, Niccolò, for the questions. So talking about HVAC, okay, as far as commercial and industrial excluding data centers are concerned, let's say that we don't see any particular changes in the trend compared to the previous quarters. For sure, especially excluding heat pumps, we believe we are pretty close to a normalization in the stock levels. And also, of course, the comparable is becoming easier in the near future. So we do expect we have reasons to expect, let's say, improvements down the road. And let's say, as I mentioned, the very preliminary managerial figures for October point to, in general, some improvement.
Going to the profitability of 2024, so in Q4, basically, this is not easy to say because, as you know, normally Q4 has a lower profitability compared to the rest of the year, also because we have higher costs that incur at the end of the year. Let's say that, of course, this year we're taking some specific actions to contain costs. Also, probably the seasonality of Q4 this year could be slightly different in sales compared to the normal usual seasonality. On the other end, the profitability, of course, depends on the top-line result, which is difficult to forecast precisely due to the very low visibility. So this is basically to say that it's not easy to provide an indication for Q4 profitability because there could be, let's say, positive developments.
But on the other end, as usual, Q4 sees a lower profitability compared to the rest of the year. Going to North America, Q3, you're right. Basically the decline in growth is related to the comp last year because, again, the backlog recovery in America was a little bit delayed compared to Europe. So Q3 last year was very, very strong. If you look sequentially at Q3 versus Q2, Q3 is not as high as Q2, but that is due to some logistic reasons, very, very temporary, that led to some postponement from Q3 to Q4. So basically nothing related to the commercial development. So Q3 was very, very positive. In North America, it's the comp of Q3 last year, which saw a very important backlog recovery there.
The fact that we maintain a good growth even in spite of the backlog recovery is definitely a sign that North America is developing very, very well.
Perfect. Thank you.
The next question is from Christian Hinderaker, Goldman Sachs. Please go ahead.
Good afternoon, Francesco, Nicola, (of CAREL). Just want to start with the heat pump business. You talked about small but tangible signs of recovery there. I'm just curious if you can specify what data points you're pointing to and whether that's more a function of lower customer de-stocking, perhaps distinct from an improvement in end demand at the customers?
Yes. Yes. Yes, Christian, thanks for the question. So in heat pumps, first of all, let's clarify that, of course, the end demand remains very, very, very soft. So this has to be specified. We're seeing tangible signs, meaning that we started to see customers, even significant customers, starting again to order, even in the short term, something that wasn't there in the last few quarters. And that's basically for two reasons. One is that, yes, stock are now basically normalized in some cases or very close to normalization. And the second reason is also related to technology because there is the transition to propane, which is very well underway. And some customers are, let's say, starting to move their product ranges to propane, and they need different components because the components for propane are different from the traditional ones.
So they're starting to order the new components for propane for starting the production of new models of heat pumps for propane because, of course, the demand for older heat pumps, not with natural refrigerant, is probably going to be not as sustained as for the natural refrigerant ones. So again, we're starting to see some tangible signs, meaning some orders, real orders, even in the short term, something not present before. We're not talking about huge volumes, but I mean, again, this is definitely a good signal.
Thank you. Maybe just secondly, I want to talk through the refrigeration dynamics in Europe, obviously seeing that improvement come through in America, but we're yet to see a pickup. What do you think is needed to see that? Is it more a function of the rate improvement? Do you think customers have just drawn a line under CapEx for this year? Just curious as to what you think we need to see for that market to improve in Europe.
Yeah. I think, Christian, a lot of it is related to inflation and interest rates. So I believe that the clear trend in interest rates and inflation in Europe, which is at the moment positive, should definitely help to go to a recovery. We continue to see, let's say, increasing optimism in the outlook, but that's still qualitative. So we're not seeing, let's say, so far clear tangible signs. I believe that the main driver will be interest rates, as you say, plus inflation. And both are going in the right direction at this moment.
Thank you. And if I can just give you a short one, the seasonality and the cost mix in terms of Q4 usually being higher, can you just talk through what drives that?
Okay. It's a more seasonal effect on some purchasing that we are doing in many projects. And then many projects, even physiologically, arrive at the end of the year, so arrive in the profit and loss in the last quarter.
So we're talking about R&D projects, for example.
R&D projects and other consulting projects for the commercial side or even financial and staff activities that are performing in the last part of the year.
Yeah. Thank you.
The next question is from Alessandro Tortora, Mediobanca. Please go ahead.
Yes. Hi. Good afternoon to everybody. I have some questions, okay, let's say also curiosities in case. Okay. The first one relates, Francesco, you mentioned, let's say, some positive trend, but also some signs of order intake in the heat pump. Considering that you mentioned that the transition to propane is a driver behind this small improvement, is it related to, let's say, new clients basically entering Europe with so many announcements, okay, of Asian producers targeting the European market, the heat pump market. Or in this case, we are talking about, let's say, the current European manufacturers. Just to understand, okay, if you are able to intercept also these newcomers, okay? So that's the first question, Francesco.
Okay. Okay, Alessandro, so thanks for the question. No, let's say the small improvements we are seeing are mainly related to existing customers. Having said that, we have in the pipeline very, very interesting developments in terms of projects for heat pumps, let's say, for both existing and new customers because we discussed already we are launching basically a new architecture of controls both on the hardware and the software side as well as the inverter side for heat pumps, which is proving very successful on the market, so we have several new projects in the pipeline, which, of course, are not being translated into volumes now because of the market demand, but they're in the pipeline for the future for sure. The small increases we are seeing now are related to existing customers.
Okay. Okay, Francesco, and also related to this, do you see an overall, let's say, price pressure, okay, on your components from basically the heat pump manufacturers?
Okay. No, at the moment, no, Alessandro. We're not seeing big price pressures. On the other end, we're seeing, as I mentioned, improvements in raw material costs, definitely higher than price reductions. However, we do expect the pressure on prices for the future in heat pumps for sure. So it's not something happening now also because the volumes aren't there, but for the future, we do expect them. And that is one of the drivers behind the new generation of controls that we have been developing for heat pumps, which is definitely more cost-effective in order to prepare for these pricing pressures, which, of course, we expect for the future.
Okay. Okay. Thanks, Francesco. Then I know it's very difficult and visibility is very low, but the question relates to, let's say, the refrigeration, but also to data center. You always mentioned data center as an outperformer. Everything basically we see into the sector is talking about an acceleration, okay, in terms of investments. Can you help us, let's say, to understand a little bit on data center, what's going on, and also, let's say, on a qualitative basis, if you can also give us some color on which kind of growth, okay, this application is having for you?
Sorry, on refrigeration, I know it's difficult today, but do you still have, let's say, a sort of feeling or at least expectation that next year, considering the normalizing interest rates environment, this is basically a segment where we may see, I don't want to say a crazy number, but at least, let's say, a mid-single-digit improvement, organically speaking, for refrigeration? Thanks.
Okay. Okay. Thanks. So concerning data centers, this is performing very, very well, especially in America, also in Asia, also in China. But let's say that in America, it's really performing very, very well, including liquid cooling. We're seeing very, very big projects coming in liquid cooling in the U.S., but not only liquid cooling. It's basically everything. And that's for the foreseeable future. I mean, the pipeline is full. So this is happening mainly in the U.S. Secondly, we have China and Asia, a little bit less in Europe because, yes, they're investing in data centers, but not as much. Plus, in general, in Europe, there is a generalized de-stocking, which is not helping even the data center business. But the business is positive also in Europe.
So data centers are growing overall double digits for us, which is to say a lot if we consider the, let's say, the comparison with last year. So double digits is double digit over not demand on demand, but demand plus backlog recovery. So there's a very big growth, which is expected to continue and to accelerate, especially as stock levels normalize and comparison improves, becomes easier. So that's, let's say, definitely the best performer now. Considering refrigeration, yeah, unfortunately, it's not very easy to forecast. And everybody was expecting a faster recovery, honestly, in refrigeration. It didn't happen so far. I'm very convinced, I remain very convinced that, I mean, there are very strong reasons why the market should restart in Europe, not least for the F-gas, not least for technical reasons. And of course, the normalization of interest rates and inflation should help in that sense.
I'm quite optimistic for next year across the board, but in particular, let's say, also for refrigeration in Europe.
Okay. Thanks, Francesco. Then, let's say, the third question relates to the incoming Trump administration. Considering, let's say, the possibility, okay, of an incremental tariff risk, is there any plan, let's say, also to start to produce locally in the U.S. new components, or maybe you can accelerate this plan considering clearly this incremental tariff risk?
Yeah. So in terms of the possible duties, let's say, we are, first of all, we already manufacture a lot of our lineup in the U.S. So we're already well positioned. For the other products that we're not currently manufacturing there, we are mapping them all, but we have been doing this for months now. So we're mapping all the components that we don't manufacture in the U.S. We're mapping all the intercompany flows, and we are prepared to act quickly to deploy any new production if needed in the U.S. One notable example is inverters that we don't currently manufacture in the U.S., but as volumes as we expect will increase, we are prepared to deploy the manufacturing of inverters in the U.S. That should not be a big deal for us. So from this respect, we're not concerned about the possible duties.
On the other hand, they could even represent an opportunity because of the reshoring in the U.S. That could, let's say, help us to increase our market share in the U.S. because our customers would move to the U.S., especially, for example, European customers that maybe are not currently manufacturing in the U.S. or manufacturing not so much in the U.S. They would be forced to move there, and we would follow them, of course, with our products in the U.S., so this could help us to increase our presence there, so we're not concerned about the duties. We are, on the other hand, convinced that could even represent an opportunity. Now, if you look at the possible impact of this administration on the energy transition, for example, let's say that, again, we're not too concerned because something could slow down.
Yes, for example, there is the risk that the heat pump market that was expected to grow fast in the U.S. could be delayed. Yes, this could happen, but this is a market which is not present now, so it's not too worrying. On the other hand, data centers, of course, are not impacted by this, and they are the fastest growing vertical. Other trends like inverterization are related to technology in general and not to the energy transition. So, for example, inverterization is a superior technology under any respect. And there is a generational change in technology happening among our customers in the U.S., which goes well beyond, let's say, the energy transition or regulation. It's just a superior technology, full stop. And so we believe that will definitely continue the same in refrigeration.
There is, let's say, a new generation of technology which is now starting to be deployed in the U.S., something that has been happening in the rest of the world for several years. Now, it started there, and there is no reason to believe it should stop regardless of regulation. So probably the only meaningful impact of regulation could be maybe on heat pumps, which, again, is not a market present now. Having said that, though, as you know, many regulations are implemented at state level and not federal level, so they could, let's say, continue without any big impact.
Okay. Okay. (Foreign language), Francesco. Thanks for the detailed answer. The last one is for Nicola. If you can just remind us, Nicola, your expectation for trade working capital, okay, so excluding, let's say, the other, let's say, not core items, but also the tax rate by year-end. Thanks.
Yes, Alessandro. And so the working capital that we are expecting, the trade working capital that we are expecting at the end of the year will be 2% more than what was last year, so something like 23%-24%. And this is due mainly to a temporary effect of inventory that is for something higher than expected, but it's just a temporary effect. With reference to the tax rate, we expect something around 22%-22.5% for the year-end of this year.
Thanks, guys.
The next question is from Alessandro Cecchini with Equita. Please go ahead.
Hello everybody, and thank you for taking my questions. The first one, actually, it's, I mean, your previous assumption was close to EUR 600 million, and now you are working to close to EUR 580 million with probably October, that I don't know, but seems from your speech more in line with the previous guidance. So I was just wondering the reasons why you see now a level that is below the previous one. So just to understand, it was a third quarter that was below your expectations, internal expectations. So just to clarify a little bit on these. My second question is instead you talk about North America some shift in orders due to the decline -5% in the third quarter. So if you could, I mean, if you can, of course, quantify how much was the impact of this shift in orders that probably we can see in the last quarter.
Finally, my question is about, of course, M&A. You did a capital increase to do that. Probably we were expecting something already this year. So if you could add something on the pipeline that you have at the moment? Thank you.
Okay. Okay, Alessandro. Thanks for the question. So concerning the EUR 580 million versus the EUR 600 million, so it's not really related to Q3 because Q3 was close to Q2. So okay, yes, there was a very strong seasonality in August, which was not expected, but that September went better. So it's not really Q3. And October, as I mentioned, the preliminary figures, managerial figures point at October being the highest month so far, so it's very positive. The order intake for November looks promising also. The point is that there is a very, very low visibility because the visibility is extremely short. It's one, two weeks. We still are not sure what our customers will do in December, meaning when they will close and so on. Of course, we're trying to figure that out with them, but it's not so easy to forecast.
Plus, as I mentioned, unfortunately, refrigeration still doesn't show signs of recovery as expected. So yes, October seems very good. November looks also good, but that's not enough to, let's say, be sure that we can, let's say, we can achieve a target which is much higher than EUR 580 million. Considering America Q3, let's say that Q3 was, I don't know, something like EUR 1 million less than Q2 sequentially. We had a couple of million EUR moved due to a logistic issue related to a provision that we have not been able to deliver in Q3, so it has been moved. So it's not something that concerns us. And the comparison has worsened because of the very strong Q3 of last year. We're talking in case about very strong quarters in the U.S. All of them this year are very strong quarters.
We have very good expectations for the future, by the way, with very good prospects. Considering about M&A, yes, it's not easy to forecast when they happen. We are active. We're active with our pipeline. We have several things going on. It's, of course, difficult to forecast the timing.
Okay. And lastly, if I may, so Kiona, so Kiona is, as you said correctly, running at double digit top-line growth, probably 12%-13%. The trend because double digit, but not 15%. I was just wondering just if you can quantify, I mean, the magnitude of the projects that you are, I mean, looking at, government projects in Nordics. So just to have in mind which could be the potential acceleration next year or in the coming quarters due to these projects.
Okay, Alessandro. So let's say about Kiona, what we can say is that these big projects we have in the pipeline, and I mentioned these ones on the public administration, but there are several others, let's say. We believe, we expect Kiona to accelerate its growth, and our expectation is that it will grow possibly in the future, in the near future, above 20% top-line. It will go above 20% top-line growth. Now, let me underline once again that the growth they're having this year is double digit, less than 20%, but we have to consider that Kiona is not a startup. It's a company with a significant size, and the environment in Europe is extremely challenging this year, as you know. So this growth rate for Kiona, we believe, is quite satisfactory in any case.
But having said that, we expect it to, for a number of reasons, including the pipeline of projects, to go back to beyond 20% where it should be.
Okay. My final question is about net working capital that, as you said, 22%, 23% this year, commercial working capital, already starting from a very high, I mean, very high level that was, I mean, last year. So just to understand, you are working for something. So what is your normal level that you could expect starting from, I mean, next year? Thank you.
I think that we can arrive below the 20% in general when everything will be cleared. There were two very challenging years. Due first to the shortage, then there was a lot of demand from the customer, and we placed a lot of orders to our suppliers in order to fulfill all these requests. Then there was unpredictability of the demand from the market. So these were two very special years, but we are working in order to reach the normal target below the 20%. I think it's worth mentioning that the quality of the sales business is improving, consistently improving. Yes, we applied this year a new credit policy all over the world. We are having excellent results in terms of collection.
We are working even with suppliers in order to have better conditions, but the main level of improvement will be on the inventory.
Okay. Lastly, I mean, the last time we spoke about the North America refrigeration market, so we read some articles about Walmart, etc., these kind of clients. And you stated that in August that was some projects, I mean, with, of course, no orders or etc., but just to understand how it's evolving, these opportunities with these kind of clients. So what is the step up that we had from August to now in November? Thank you.
It's evolving well, Alessandro. So these are projects in the pipeline, especially for next year, I would say, but they are developing well, I mean. So we are very optimistic about refrigeration, among other things, in North America for the coming quarters.
Okay. Thank you.
Mr. Nalini, gentlemen, there are no more questions registered at this time.
Thank you. Thank you for your attention. Thank you for your questions, and looking forward to speaking with you again for the presentation of the 2024 full year results. Goodbye.