Good morning, everyone, and release call. And, today here with me, is presenting, Roland Andersen, our Chief Financial Officer, and I'm FLSmidth, Toni Laaksonen. Briefly about my background, I have a 20-year industrial background, from different companies and most the mining industry. And, before joining the group, I was a CEO of a stock-listed company in Finland. I was with the service business line in FLS and spent, like, eight months over here leading the service team and now taking over the CEO position. To start working with the entire group across the world. Then, a few strategic highlights, from last year. 2025 was the big milestone in the FLS history. One big transformation, in the company was the divestment of the cement.
We became a pure-play mining supplier for technologies and services, which is a huge milestone for the whole company. On the other hand, in time, we were strengthening our offering, commercially, both with our service business line and products, cyclones and valves. With both businesses, we saw a solid, org- throughout the year, which was then strengthened in Q3 and Q4. On the other hand, with the products business, we saw an uptick four, but otherwise, the market was pretty soft during the year and subdued. We saw certain engineering activity was not a steady market as such, which we had with services and PCV.
Therefore, we continued to de-risk business, and now we are more focused on the product side, and we are not anymore as a project supplier as such. You-- we had a very solid EBITDA margin. We continued to improve that compared to last year's. We hit almost 16% as a total. From the very cash flow, cash flow point of view, excluding the M&A activities, we had a strong year, hitting 600 and- a solid, solid financial results as such. On the other hand, we introduced the share buyback program last, which is also a big milestone for the company. It was in total DKK 1.4 billion, which is a very big commitment from the company to suit their value.
So several strategic highlights throughout the year and milestones for the company. Then from the sustainability point of view, as in, in many fronts, and, to take a few highlights from the picture, I would say that, we still have improvement opportunities with our safety. For zero harm, that we still have 2.3 as an average injury rate, which is too high. We are making all the proactive actions, to take the number, continuously, and we have certain global programs which we are driving to get to the zero harm level. Then on the other hand, one improvement area is definitely the Scope 3, where we are doing a lot of... with our equipment and technology range to make improvements.
The other aspects, I would say that we were developing well throughout the year, and now for this year, we will have a new baseline when the cement business has been divested, and we are just fully focusing on the mining technologies. A few words on the market conditions. As mentioned about the products, the market has been subdued. We have been de-risking and focusing more on the product business instead of the full-blown big projects, and that's, of course, impacting us. On the other hand, with the services and PC&V, we see that development continues this year. The commodity prices have been increasing, especially gold prices being very high, but then still, that's not impacting on the customer decision-making in the short term.
Of course, the long term impacted, but that, that's not meaning that they would release any large-scale mining projects in the short run. The engineering activity has very high in some countries, but of course, that means that the engineering activity covers both brownfield and greenfield sites, and majority of the activities are with the brownfield operations at the moment. The customers are therefore they are not sanctioning the greenfield projects as fast as would like to see from the market point of view. And we believe that in Q4 or in 2027 we would see more action related project business.
On the gold side, we have been seeing certain smaller projects being activated due to the high gold price, and there we see certain potential, especially with the smaller equipment deliveries, although the gold sites do not consist of major projects as such. Then deep diving into the business lines and starting from the services, the Q4 results were very strong, with service order intake up +14% organically compared to last year, and then revenue up +15% compared to 2024. Last quarter and there with services, we were gaining back backlog, which was not delivered in Q3. So Q4 was catching up and then catching up with the backlog, which resulted in very healthy revenue level in Q4.
Then when looking at the total year, the organic 4%, which was the normal level, I would say, in that sense that that's something that we expect as a yearly development for the business. Revenue-wise, we were up +8%-9% as a total. So healthy results from an order intake point of view. Growth markets were specifically in South America and Africa. Then from the margin point of view, an excellent end for the year, driven by the high revenue results. We achieved more than 20% EBITDA adjusted, which is on the high end, I would say, for the service business line. So a clear uptick there, and the revenue level was supporting it.
From the products point of view, the year was subdued, as mentioned previously. So order intake organically declined for the full year percent. Certain uptick was visible in Q4, there we were gaining a few orders more than in a normal quarter, but then when balancing out the quarters, the organic growth was negative. From the revenue point of view, we were declining -28%, which also demonstrates is not the highest at the moment. From the profitability point of view, good development in Q4, as we were with our deliveries and increasing our revenue, that resulted in a healthy result compared to the previous quarters, and we were on the black numbers. Positive quarter in that sense, but then when balancing out the full year, we were still in negative figures.
So there is still room to develop on the with pumps, cyclones, and valves, an excellent year from the growth point of view, +12% order intake growth organically and the same with revenue. So we were driving consistently the business up, and that was also helping us with the results. And continuous growth with the PCV business throughout the quarters. So very healthy activity over here, and of course, the deliveries are smaller, focused on the mine improvements and replacements, and therefore, this business has been more active during last year and this year. Profitability remained at a very good level with PCV, so 25% was the end result in Q4 level, which was then a bit above compared to the previous quarters.
So on average, very good development with our margins. And then I hand over to Roland.
Thank you for that, Tony. Let's just have a quick glance of the consolidated financials. Bit, bit more than DKK 4 billion, gross profit at 34.6, and with a significant reduction in SG&A, we, for the group, of 18%. Below the line, we decided to take an impairment charge on our deferred tax assets in Denmark. This is pre- being a non-cash impairment charge to our P&L. The tax losses live indefinitely and are in no shape or form. When also finalizing discontinued activities in connection with the handover of our cement business, profit for that period was minus DKK million. Our gross margin remained high through 2025, predominantly as a result of mix, service and business was a relatively high part of our revenue throughout the year.
So, a healthy end to the year of 34.6%. SG&A costs for Q4 is 19% down on the same period last year. Both a drop in Danish kroner, but also a reduction SG&A as a percentage of revenue. And that indicates that we are moving forward on right-sizing our organization and moving into our new operating model. Most of the last savings have been taken in the support functions, and then we have ramped up and invested a little bit in the commercial front and both in our, but also bits and pieces in the service business...
And adding all that up, a relatively high revenue quarter in Q4, healthy gross margin, SG&A at a lower level, means an 18% adjusted EBITDA margin for that quarter. This is by no means a run rate number. It's a exceptionally good quarter for us and, of course, a home run in terms of. The higher revenue in towards the end of the year in Q4 also means that, invoicing and had a relatively higher trade receivables level, New Year's Eve. Product business line with a higher revenue, we're finalizing a few, and that means that we reduced our prepayments from customers, and also a bit on work in progress.
All in all, means that our working capital for Q4 compared to Q3 went up by DKK 573 million. Despite a relatively high EBITDA, that offset by the uptick in net working capital, leaving us with a modest cash flow from operating activities of plus DKK 3 million, and the free cash flow adjusted for M&A activities was plus DKK 70 million. Just a quick recap of the P&L. Fourteen point six billion revenue, adjusted EBITDA margin for the year, 15.9%, and a modest profit for the year of DKK 8 million, which we have lost a bit more than DKK 700 million on discontinued activities. The cement business that is now finally out of FLSmidth.
A tax impairment charge of DKK 600 million. Cash flow from operating activities for the year ended just shy of DKK 1 billion, in line with what we had expected. Our share buyback program that we launched last year is about to come to an end. By the end of Q4, we had a leverage ratio of 0.8x, and just last night, we announced an intention to launch a new share buyback program. Given we get the authorization from the AGM by end of March, then we intend to launch it after we have printed our Q1 result in May. That also means that we are returning quite a bit to shareholders in 2026.
In 2025, dividends, ordinary dividends were DKK 461 million, and a share buyback of DKK 1.4 billion. This year, we will propose ordinary dividend of DKK 231 million, and a share buyback program of DKK 1 billion. This year, we have a new way of guiding. We are done with the transformation and no longer see the need for directly guiding on our, so we will convert to guiding on organic revenue growth. Organic means fixed currencies. For the group, we're guiding 6 at -1% to +4% organic revenue growth, and we expect to post an adjusted EBITDA margin of between 15.5% and 16.5%. A little bit of underlying flavor or assumptions on to that guidance. Underlying, we expect to grow 2%-5% organically.
The products business line will decline by -5% to -15%. Really, it's ±150 DKK or so, and that can easily happen when you execute larger product bundles, projects, either because of delays on our side or changes in scope and timeline and so on, on the customer side. So hence why that span. And then we expect our pumps business to post an organic growth rate of 4%-7%, and that gives us the full guidance of -1 to 4. For those of you that like to do the reported revenue growth in Danish kroner, we can say that with the FX effects as per February, our DKK revenue growth would be about -2% to +3% growth.
Inside, we came out of this year at 15.9%. We'll guide next year, 15.5%-16.5% EBITDA margin. We'll adjust for about around 1%, rounded. One-off items predominantly related to our ERP implementation and principal company model. And on the other hand, as some of you, our corporate, former corporate headquarters in Denmark, and that cash comes in as extraordinary, other operating income in Q1, and that means an extra +5% that we will also adjust for. And that means when we do that, the expected reported EBITDA margin will be around 19%-20% margin. And with that, I'll give it back for a few comments to Toni.
All right. Thanks, Roland. Excellent results, I would say, last year, and to use this opportunity to thank our employees for their efforts, great contribution for the results, and then also our customers, I want to thank with us. So a good year indeed for FLS. Then a few words on this year and the way forward. So now in a good position from the company point of view, we have cash, credit limits available. Financially, we are in a strong position, which then means that we can start investing in the growth journey. So we are looking for organic expansion opportunities actively, but on top of that, there are selective M&A cases which we would like to explore this year, and we have been actively developing our pipeline.
Through this, we want to be closer to the customers, and help them to improve their operations. Then at the same time, we continue improving our customer offering, so we are looking into the portfolio we can drive that forward, so that the miners can improve their productivity, reliability, and sustainability by utilizing our technologies and services. Very important that our supply chain and delivery experience is great for the customers, and therefore, we are continuously driving forward with our supply chain improvements, accountability within the organization, but at the same time securing that we are cost conscious when doing the exercise and securing the cost level remains competitive throughout the organization.
Through that, we want to ensure that the margin stays at the same level or even higher on our forecasts. And then, of course, we want to ensure that the growth journey continues from here. Then, we, of course, want to balance so that we are utilizing a certain amount of money into our internal and external growth opportunities, but at the same time, we want to have secured so that we have the combined financial flexibility for both company and the shareholder purposes. It seems when moving forward. And then, of course, we are continuing to do the strategic planning for the company so that a plan available also for the external markets.
Based on our current expectations, we will host the Capital Markets Day when we would then release the full strategy for the coming years. Now it would be time for the questions.
Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then one on your... If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please... At this time, we will pause momentarily to assemble our roster. Your first question comes from Chitrita Sinha with J.P. Morgan. Please go ahead.
Good morning, all, and congratulations on your new role, Toni. My questions, I have three, please. Maybe firstly, if I could just start on the products margin, clearly a very strong result in the quarter. I know there have been initiatives that have been implemented to reduce the break-even point in the business to DKK 3 billion. I guess, how much of this benefit came through in the quarter, and how much is left to do? I'm just trying to understand what we can expect for next... volumes will be down. Thank you.
Yeah, thank you for the question, and thank you for the congratulations. When looking at, of course, the product volume was high in Q4, and that was higher than maybe the normal quarter, and that was a big moment. We still have work to do to improve the profitability level. We have taken many actions last year to improve the mar- but still work remains to be done this year to get to the overall black figures. The volume in impact in Q4 with the products, and that was driving up the profitability level.
Understood. Thank you. My second question is just on, I guess, the outlook in products. Two large orders were booked in the quarter, but then you've obviously mentioned there's hesitancy in customers allocating capital to these larger projects. What is the catalyst for these customers to make this decision? And then is it possible to increase the small, medium-sized orders, given where we are at with commodity prices? Or should we continue to expect that DKK 400 million-DKK 700 million run rate?
Yeah. So, with the projects, I would say that the engineering activities have active, but then, of course, the customers are thinking about their risk level when doing the investments. The Greenfield cases, the bigger cases in more risks, and that's one factor which has been, like, delaying those cases and delaying the sanctioning of the projects. Many of the customers seeking for improvement opportunities with their current operations, that we have been also seeing M&A activity within the miners. They have been improving their performance within selected sites, and they have such plans in place for the future. So we believe that the engineering activities, we would see more maybe sanctioning next year and probably in the end of the year.
But, in the short term, I would—there is too much, like, big projects being sanctioned. Then, as mentioned in the pro presentation, with the gold projects, we have been seeing more activities as more customers are actively seeking for improvement opportunities with their current operations and possibly some smaller mines. And of course, we are in those discussions actively, and we are participating in them through all the business lines. Some of the impacts are then visible with our PCV business line, some with services, where we have upgrades and modernizations. And then, of course, this will, to a certain extent, help products from the order intake point of view.
But then when looking at the revenue, normally it takes a bit longer for the products to come through the profit and loss statement.
Thank you very much. Final question, just on capital allocation. So obviously, you've spoken about this as one of the priorities for next year, but just trying to understand maybe, you know, in order in terms of what your priorities will be, given you've announced a share buyback this year, but, you know, maybe last year. Thank you.
Yeah, thank you for that one. So, obviously, our dividend policies say that we will distribute in dividend 30-50 our net profits, and net profits were close to zero. So, we chose a number of dividend that was slightly outside that range, and then a share buyback of one. And then, we have an M&A pipeline that we are currently developing, and I think we expect maybe one or two of the targets in that pipeline to... That's never certain, but that's what we expect.
We have balanced sort of what we may need in what we could return to shareholders, and then, at the same time, thinking about that our leverage ratio can be slightly higher than the 0.8x we came out of 2025 with.
Very good. Thank you so much.
Thank you. Your next question comes from the line of Christian Hinderaker with Goldman Sachs. Please go ahead.
Morning, Roland, and welcome, Toni. I want to start, and apologies for the reiteration of the last question, but if we think about the X large order numbers, in organic terms, quite considerable, DKK 515 million of underlying orders. I guess if we map the comments in your release, and also from peers that are reported in terms of decision making on large projects being subdued, investments continuing, you know, that narrative, frankly, is just at odds with the Q4 numbers, which are obviously driven by large order growth. You've also seen the investment, I guess that was yesterday or earlier this week. I guess, what are we missing here in terms of that dislocation? Because the numbers tell a different story to the narrative.
Yeah, maybe some clarification on that one. So if you look into our numbers last year, there was also maybe certain shift between the quarters. So, Q2, Q3 were not that strong with the products, and then since some of the customers wanted to just sign the deals just before the year end. So some of the signings were postponed throughout the year, and we were seeing pretty low quarters, and then the order intake went up in Q4 because of the fact that then the customer signing those delayed cases. They just wanted to finish the year so that they have a clear way forward.
If you then balance out the order intake between the quarters, that gives maybe a more stable and clear impression on the situation.
Thank you, Toni. Maybe secondly, on the exit margin in products in the fourth quarter, you'd said at the three-quarter results, that the segment would like until we were exiting 2026. Clearly, you're running well ahead of that. I guess, curious about the phasing of profitability through the quarter. I appreciate you had a good delivery period, 2025. Should we think about there being an implied volume threshold for being break even within products? How do we think about the phasing in 2020?
Yeah, thank you for that question. I think we are not really running ahead of ourselves. I think I understand that Q4 is—it looks like a significant home run, but it's—we always said it's volatile, both the order intake, but really also the execution of the backlog. And a few things were finalized in Q4, and that meant a higher revenue, and the contribution margin, the gross profit, was flowing through to the bottom line. So our Q3 was not particularly great as we can all remember.
I won't say restructuring, but the adjustments we do in the product business line continue, and we still expect to spend most of this year so that the product business line, around DKK 2.8 billion-DKK 3 billion in revenue, needs to be breakeven on a run rate basis in Q4. So that's still the thinking. There has been no change in that. And, yeah, so that's how it is.
Understood. Thank you, Roland. And maybe finally, as we think about the order intake, but maybe also the revenue delivery, how is pricing developing, and what are your expectations for the year ahead?
On product.
Yeah. So, thanks for that. So from the pricing point of view, I would say that the market remains at the stable level. So the stable development, which we are seeing, from the sales development perspective, are pumps, cyclones as well, and with services, similar development is visible in pricing. So we are not seeing any like major fluctuation, like material costs or so on. So pretty stable development there, due to the activity level.
Thank you, Toni.
Thank you. Your next question comes from Claus, Nordea . Please go ahead.
Thank you. Yeah, and also from my side, first and foremost, a very warm welcome to you, Toni. And the first one is also about the order intake in Q4. You said that, you know, we Q2, Q3, and then a lot of that came through. It's also a negative read into Q1 2026, so, you know, your pipeline has more or less been used, and you need to transit to build a new pipeline. That would be-
I would say that that's not the case in this situation. So in many industries, we are seeing similar development that the customers are utilizing their CapEx budget, which they have for the year, in Q4. And then that means in several cases, there's more activity, and that was also visible in our figures. Quite often there is some sort of an uptick with the Q4 figures, that's normal in many businesses. We didn't front load in this case, anything for Q4, so we should see pretty stable development in Q1.
Sounds great. And then a second question regarding the order intake, and compared to your internal, let's call KPIs, order intake, missed, expectations set out in the start of 2025. Is, was that broad-based, or was it products, or where, where did you see the,
Yeah, so I think, I think the board had, the board had high expectation to Mikko and myself, so, so that target was set, pretty high. And then it was set in Danish kroner. And, so we have had considerable, FX, headwind. And I understand, Klaus, you read the minutes page in the remuneration committee, which is, which is where you picked that up. So that's the reason.
Right. Okay. And then just a final question regarding your, your 2026 guidance. This, you know, you could call it broad revenue growth guidance of 5 percentage points, but the margin is only 1 percentage point. So is that really the difference between ending in an upper and the lower end of the revenue growth guidance?
Yeah, Klaus, so, there's only one answer to that, and that is, that is yes, right? But they're trying to explain that we need a little bit of a band in the product business line because execution can swing a bit month by month, Q by Q, due to our own, but also very much due to the customers' decisions to either change or delay or rescope or, you know, things, things, things will happen. Then, I think pumps the business, and also in our service business line, we have a number of initiatives coming up, and we are actually a little uncertain, you know, how fast can we make the rubber hit the ground, so to speak. Pumps have done a lot of good jobs and a very good job in 2025, and that can't continue.
So, you know, we are, we look and saying 4-7, I think that's, that's also, even by comparing to peers and so on, a good ambition. And then, let Tony maybe comment a little bit on the service business line, where we are closer to the same level as we saw in 2025.
Absolutely. So the 2%-5%, of course, with services, our baseline is a bit higher than with the pumps, and then it means that in percent, it gets more difficult to grow the business faster. But then in DKK, of course, the growth is high even if we reach like a 4% level as last year. But let's say level from last year is the full year figure for around 4%, and based on that, we see that similar development would happen this year within the range of 2%-5%. And we have a solid plan in place that how to make it happen by using our resources and investments.
Sounds great. Thank you so much for the answers.
Thank you. Your next question comes from [inaudible] Jones with Bank of America. Please go ahead.
Great, good morning. Thanks for taking my questions, 2, if I can. Maybe first, Toni, as you step into the CEO role, and based on your experience for the past 8 months, could you outline a little bit where you'd like to put a particular focus, as you step up on improvement or other efforts, and any changes of emphasis you'd already like to highlight for this early stage? Thank you.
Yeah. Thanks for that. So one activity, of course, which is visible in the plans and which is also close to my background is M&A. So I have been doing a lot of M&A activities in the past, in my previous roles, and maybe that's one flavor. And that's, of course, then part of the journey this year, and will be then part of the plan, which we will then release as part of the Capital Markets Day. One focus area, and now the transition of the company into a pure play mining allows us to do that. We are in a financial healthy position, divestments, and now there is the timing.
The timing is right now to make the M&A activities active and start executing. Therefore, that will be one big part, and then, of course, I have certain products background from the past, and one part of our journey needs to be that we get the products business to the black figures, and, of course, with our products business line team to make that happen then and supporting them.
Excellent. And maybe second question to follow up. You talked about one to two targets potentially converting this year. Are there particular areas of the business where you're seeing opportunities or progress on those targets, or is it across the different areas you previously highlighted?
So at the moment, we are screening the targets. I would say across the business lines. So all business lines are active and evaluating opportunities from the marketplace. And then we have quite many opportunities in the pipeline, in different phases. The pipeline activity, we assume that a couple of cases could land this year. But as Roland mentioned previously, of course, there is uncertainty with the M&A cases, but the activity level is rather good, I would say. And based on that, we believe that some cases will take place.
Great. Thank you.
Thank you. Lars Topholm with DNB Carnegie. Please go ahead.
Thanks, and also from my side, welcome, Tony. Looking forward. A couple of questions from me also, so, Roland, you made some comments on the net working capital, and certain of them affected by the high revenue in Q4. I wonder if you can give some outlook on the expected net working capital development in Q4?
Yeah, thank you. Thank you for that, Lars. So, so how we see it play out is, of course, there will, Q1 will be an aggressive. So that's, that's one, one thing. And then, secondly, both the service business line, but also the pump business, have plans to, build the way inventories as we move forward. So that's two, opposite, moving parts in the networking capital. Work in progress and prepayment for customers are a little bit depending on when, how we get orders in, and how they are structured, and so on. But I think guidance-wise, expect that, that networking capital is in a new level now, around DKK 2.4 billion, as we move through, 2026.
Okay, and, then I had a question about CapEx guidance.
Yeah, it's a good one, Lars. So, you know, internally, we are trying to lower the level a little bit, but, you know, you should expect 2%-3% of revenue in CapEx.
That is very clear. Then I had a question to the service order intake in Q4, because just in eight quarters, and of course, I know there's also volatility here, but I wonder, is it new customers, is it increased scope on the existing service contracts? I know what you put into the order intake is revenue generated on a contract the next 12 months. So I wanted some color on that, and then maybe if you could also comment on whether this improvement is just a blip? Thanks.
Yeah. So, as discussed previously, in the call, the highlights still continue to highlight the fact that it was just an individual quarter where we saw the jump, and that there was transitioning of the for sure. And then we received a bit more bookings due to the year-end activities, which the customers were having. And then when the average level is calculated, that's then a balanced view and around DKK 2.2 billion.
So, again, we would highlight that it's good to compare the average level to our forecasts for this year, and not looking at the individual quarter, because especially the bigger project cases might go back and forth between the quarters, and there's uncertainty with them, and that the bookings are clear and stable as with the service business. Then on the other hand, we're looking at the service side of it with the... There, we might have some individual, like a bigger upgrade orders, modernization orders, which might also cause some fluctuation between the quarters. So the most stable business as such is definitely the PCV, the pumps business, where the order intake is at the stable level quarter by quarter.
But, all this fluctuation caused by the bigger cases, bigger modernizations, upgrades, that's then sometimes with, especially at the year-end.
That, that's good. Then, a final question, if I may. I don't know to what extent Cascabel made a revised feasibility study, of course, ahead of that asset being traded just at the end of... The original feasibility study, FLSmidth was listed as supplier of all the equipment for the concentrate. Is that also the case in the revised outcome?
I think we can't comment on that, Lars. We can't comment on that.
That's fair enough. I had to try to ask. Thanks a lot, guys.
Thank you. Question comes from the line of Christian Tornau with SEB. Please go ahead.
Yes, thank you. A couple of questions from my side as well. So, first question on the SG&A cost. If we look at SG&A cost before transformation and separation cost, it's been fairly stable for the past three quarters. Should we run rate going forward as well, or is there potential for another leg down on the SG&A cost?
Yeah, so, so, thank you for that, Christian. I think we should expect a bit further cost, so it will come a bit slower. So towards the end of this year, then we're done.
Okay. Like, decline throughout the year, so what do you think?
Yeah. Slight one, yes.
Understood. The second question is just on your in the quarter you are writing down projects no longer in use. Can you elaborate on what these projects were?
That's a little bit of a cleanup, so we had different IT projects and so on. So in SG&A reductions we have done, there has been bits and pieces in the balance sheet also that we are writing down. So it's small stuff, cleanup type of thing.
Fair enough. And then just my last question. Previously, Roland, you've been kind to help us a bit from operations expectations. So where do you roughly expect that for 2026?
Yeah. So roughly the cash flow from operations, you know, we'd say, between DKK 700 million up to DKK 1 billion. That's a good starting point.
Very clear. Thank you. That was all for me.
Thank you. The next question comes from Kasper Blom with Danske Bank.
Thanks a lot, and also welcome, Toni, from my side. Most of my questions have been answered, but just one regarding the impairment on the tax asset, maybe one for you, Roland. Could these DKK 600 million that you impair on the tax asset, this is due to a lower expectation of earnings the next five years, or is it more due to a lower expectation of being able to transfer tax payment?
Thanks, Kasper. It's a number of things, right? First of all, of course, the macroeconomic and geopolitical uncertainty. Secondly, it's also so that the European stock market authority have actually this year sort of emphasized that we should—usability of our tax assets, so we have done that. Thirdly, we internally are moving a little bit because US is currently imposing tariffs on everything that comes into US. If we are selling it via Denmark and then over, the thing to do. For a few operational reasons, things are being slightly delayed, and in combination with the authority's sort of, what shall I say, indication that it will be a good, good opportunity to revisit this. We have taken the decision to take this impairment.
Our plans, otherwise, ERP, principal company model, and so on, are moving forward. Our ETR will continue to go down, and we still expect it to be below 30% in 2027 and onwards. So there's no change to that. And then, of course, this is an accounting impairment. The underlying tax assets or deficits live forever. They are eternal, and there's no cash impact to this one.
Understood. Just to be crystal clear, can you sort of confirm that the tax asset impairment is not related to your activity for the next five years?
Confirmed, yes.
Thank you.
Thank you. Your next question comes from William Mackie with Kepler Cheuvreux. Please go ahead.
To you all, welcome, Tony. Thank you for making the time. As per the last comment, I think you've pretty much ticked every box on my Q&A list. Mention of organic growth drivers. As you move the business to focus on growth and away from transformation, a little on inorganic and stepping up the M&A machine. But when you look across the business, I think, you know, when I look at your service growth target for this year, it incorporates some pricing assumption. So maybe more detail on how you build up the organic growth assumption there. Similar for pump site, and perhaps overall, how do you see your future prioritization of corporate resource to drive the organic growth? Thank you.
Well, so from the service point of view, I would comment that the major difference compared to PCV on some wells is that the service business line consists of a different mix of activities. Like I said, we have upgrades, modernizations over there, site services and spare parts, consumables, and so on. So it might be so that some of them are growing at a bit, let's say, faster rate than the others, and then the mix is around the forecast which we were providing. Like mentioned in the call, with the upgrades, we are seeing much more like fluctuation. They are more like a product business, and therefore, this impact, of course, needs to be.
As you have been seeing, we have been taking down and divesting certain businesses and descaling the products, so of course, that's to some extent impacting on certain site services, which we are not doing anymore. When takes into account, we see this stable growth continuing, in line with last year, and the average should be very much in line with last year's figure. More details, of course, about the growth plans we will provide in the CMD presentations later on. Of course, in general, I can say that this year we are doing resourcing, facility investments, and so on, which will then help the service business to be closer to the customer and to be faster with our service support.
Thank you. Your next question comes from David Farrell with Jefferies. Please go ahead.
Hi there. Hopefully you can hear me. My first question is around the ERP implementation that you've highlighted for this year, DKK 100 million cost. Is there any risk to your operational delivery of that ERP system being implemented this year? Clearly, we've seen it across a number of companies where ERP implementation has created a knock-on effect in terms of their capability to deliver.
I think that, so our approach is that we go very focused ahead and, you know, we built the pilot implementation, we test it out before we move on to the next one. So there may be a disruption. It will never impact the full business line. You know, then it'll be, we'll find out, and then we back off and use whatever we have until it's fixed. So it's not the intention to do a mess. We'll also be spending more than DKK 100 million per year if we rolled out an entire region in one big bang and so on. So we're moving forward exactly to avoid any operational disruptions.
Okay. Wonderful. And then a follow-up question, just in terms of your R&D. That looks to have fallen from DKK 273 million down to DKK 184 million. Are you just being more focused in terms of where you're spending R&D now?
Yeah. Of course, we continue developing our products. Some of the, and services, some of the work is happening actually, customer deliveries. That's not classified as R&D, which is, of course, impacting on the budget. On the other hand, as you have been seeing, we have been divesting quite many, many businesses. That's also impacting on our R&D budget when moving forward. What we have been useful is that, when we do this collaboration with the customers, in the customer interface, and then developing the service solution technologies in connection with them, not as a separate R&D project, that has been very powerful. So a lot of cost is then allocated also to the end service deliveries, which we are providing to our customer base.
So maybe that explains some of the differences. Well, one example is the major Indian project, which we are doing this way when developing the solution to the end customer.
Okay, that's very clear. Thank you.
Thank you. The next question comes from Klaus Kehl with Nykredit. Please go ahead.
Yeah, hello, gentlemen. Klaus Kehl from Nykredit, and yeah, first of all, also welcome to you, Tony, and welcome to FLS and Denmark. And then, a couple of, perhaps, questions to Roland. First of all, if we look at the discontinued operations, there's a big loss here in Q4, and also for the full year due to the cement. But just to be clear, is it reasonable to expect the deadline in 2006? Sorry, 2006 or-
Uh, so-
Related to...
Sorry to interrupt you.
I, I, I-
Klaus, I can hear you.
Can you hear me? Okay.
Uh-
Thank you for that, Klaus. I'll just... So you're asking whether the loss on discontinued business means that we are now done with that, and there won't be any noise in the numbers in 2026, is that the question?
That's the question, yes.
Yes. So that's the intention. That's the intention. So we have provided for what we think is gonna be the final, and we have also provided for the so-called transfer service agreement we have with the supplier, in terms of running the IT platform until they can take over, and so... And, that is expected to be roughly what we need. If there are small bits and pieces here, then most likely we'll take it in the continued business, and it won't be disruptive in any way, shape, or form. That's the intention.
Okay, perfect. And then you mentioned the tax rate, effective tax rate below 30% in 2027. Do you have any comments about the tax rate here in 2026?
No. No, I, I'll refrain from that, but last year was 34, and then we have 33, right? And then it's coming down to below 30 and 27. So let's see, let's see where we go in, in 2026.
Okay, great. Thank you very much.
Thanks. So one up question comes from the line of Lars Topholm with DNB Carnegie. Please go ahead.
Yes, very quick one. When you talked about cash flow from operations, this year of DKK 700 million-DKK 1 billion, just to make clear, does that include the gain from the sale?
No. No, it doesn't.
Okay. Very clear. Thank you.
Thank you. As there are no further questions, I would like to turn the conference back over for any closing remarks.
All right. Thanks for everyone for joining the call. It was a pleasure having you with us today. And a few closing remarks from our perspective. So as mentioned, we have a very solid year behind us. The company has been doing several strategic improvements, and based on them, we are now in a very good position to start the growth journey in the company's new phase of working. So now entering in this year, we have a chance to gain more business, especially with our PCV service business line, and then get to the black numbers with our products. All in all, a good situation for FLS, and we are looking for the growth journey. Thank you for joining us.