Good morning, and welcome to Nilfisk conference call for the fourth quarter and full year of 2024. Thank you to everyone for joining us today and for your continued interest in Nilfisk. My name is Tracy Fowler, Head of Investor Relations, and with me today are Jon Sintorn, CEO, and Reinhard Mayer, CFO. Before passing the word over to Jon, I would like to turn your attention to slide two regarding forward-looking statements. Please note that this presentation, including remarks from management, may contain forward-looking statements that should not be relied upon as predictions of actual results. For more details, please read the content on this slide. And with that, I would like to pass the word over to Jon.
Thank you, Tracy, and good morning to everyone joining us on the call. Today, I will present the highlights for 2024. I will also speak to our strategic direction for 2025 and conclude with new product launches. Afterwards, I will pass over the word to Reinhard, who will speak and walk you through our financial performance in 2024 and our outlook for 2025. I will start with our financial highlights for 2024 on slide four. In 2024, we continued to improve the underlying business while navigating market headwinds and broader industrial slowdown in the U.S. We introduced new innovation, maintained our leadership position in EMEA, and continued to expand both our gross margin and EBITDA margin before special items. At the same time, we faced challenges in North America and market headwinds in APAC, both of which impacted results in our Professional and Service businesses.
Overall, we delivered revenue of EUR 1,028,000,000, corresponding to organic growth of 1.2%. This was converted into EBITDA before special items of EUR 136 million equal to a margin of 13.2%. The improvement compared to 2023 was driven by strong gross margin expansion, efficiency improvements across our production sites, and continued diligent price and discount management. While we made progress across numerous priorities throughout 2024, our financial performance was below our initial expectations for the year. In some areas of the business, I'm pleased with both our financial and operational performance and our strong competitive position heading into 2025. In other areas, we are making considerable efforts and will continue to take actions to improve results. Our strategic roadmap for 2025 is as follows. First, we are focused on improving our competitive position in North America.
Here, performance was below our expectations in 2024, driven by both internal and external factors. Externally, a broader industrial slowdown saw particularly weak spending in education and manufacturing during the year. This resulted in lower demand within our Professional and service businesses. We see these dynamics continuing into 2025, as well as increased uncertainty from potential trade barriers. Furthermore, we have seen a changing market landscape from some dealer consolidation. Internally, our sales density has declined in the U.S. in recent years. Additionally, we have not equipped our sales organization with enough relevant new products to position ourselves for success. We are addressing both areas in 2025: more salespeople with additional new products that will be launched throughout the year. Furthermore, our ability to consistently deliver products and parts has been affected in recent years by extreme weather and supply chain challenges.
Improving in this area is crucial and will be supported by the relocation of our distribution center, which will be completed in the first half of the year. The changes that we have begun to implement are expected to improve our competitive position in the U.S. As conveyed previously, this will not be a quick fix. However, we do see areas where we can improve, and turning around performance is a key priority for this year. To drive business performance, we are also enhancing our operating model in 2025. In some key areas, responsibilities that should sit closer to our customers currently reside in centralized functions. At times, this has led to suboptimal support for a commercial organization. As a result, we are making some changes to our organizational structure to better support customer-facing functions.
This means less centralized decision-making and more business accountability for leaders that are closer to our customers. Structural efficiency improvements will support this transformation. We have acted to reduce costs associated with our headquarters and support functions. This was a necessary step to support margins while we invest into increasing commercial activities in key markets, including the U.S., Germany, and France. As a result, we expect to realize overhead cost savings of EUR 8 million by the fourth quarter of 2025, which will be reallocated to drive sales and to support new product launches in 2025 and 2026. Furthermore, we are optimizing our global production and distribution footprint. Production in Hungary will be concentrated out of our factory in Nagykanizsa, and our Sziget factory will be closed in the first half of the year.
We have also initiated a strategic review of our U.S. high-pressure washer business and are optimizing our sales entities in APAC. These actions have been taken to mitigate revenue growth that was below our expectations for 2024. With moderate growth expected in 2025, our production and distribution footprint will continue to be assessed throughout the year. Before turning the floor over to Reinhard, I will speak to a key driver of future performance leading with innovation and sustainable products. In 2024, we launched several new products, including the SC25, SC550, Nilfisk Dryft Micro Scrubber , IVS products, and the VP300. Early momentum has been positive, and we have seen this especially reflected in our performance in EMEA. During the second half of 2024, in the Americas, the SC25 and SC550 were launched at the ISSA industry event in November, with sales and shipments beginning in Q1 2025.
I personally attended the ISSA event, and I'm encouraged by the energy and enthusiasm from customers and fellow colleagues around these new products. Throughout 2025, we will continue to launch new products. We expect to launch more products than we did in 2024, supported by higher R&D spend since 2022. Innovation will be focused on refreshing our core product portfolio and will also address new market segments where we see opportunity. On February 1st, we welcomed Eerikki Mäkinen, Executive Vice President of Innovation and Product Development. Eerikki brings extensive experience within the area of product development and running efficient R&D organizations. Together with Eerikki, our ambition is to improve the efficiency of our R&D spend and the speed with which we bring new products to market going forward. Within sustainability in 2024, we continue to reduce our Scope 1, 2, and 3 emissions.
Both are on track to reach our 2030 targets of a 35% and 48% reduction, respectively. Women in top management increased to 31% versus 26% in our base year of 2022 and is progressing well towards our target of 34% in equal representation by 2030. Lastly, we were awarded an EcoVadis Gold Medal for the third consecutive year, placing Nilfisk at the top 5% of companies globally. We also maintained a CDP Climate Change Score of A minus for a fifth consecutive year. This is an increasingly important value proposition for our customers and continues to be a competitive advantage in select tenders where sustainability is a priority. And with that, I will now pass the word over to Reinhard for a financial update.
Thank you, Jon, and good morning to everyone joining us today. I will now provide a financial update and speak to our outlook for 2025 before opening up for questions. Starting with the fourth quarter on page nine. During the quarter, we saw continued strong organic growth in EMEA, supported by new product launches. This was offset by low demand in the Americas and market headwinds in APAC. Our performance in the U.S. remained challenged and included EUR 7 million in lost revenue from our high-pressure washer business because of Hurricane Milton. By segment, Consumer continued to deliver very strong organic growth of 24.2%, while Specialty delivered solid growth of 4.1%. This was offset by negative organic growth in Professional and Service of 2.8% and 1.2%, respectively. Overall, revenue for the quarter was EUR 249.9 million. Organic growth was negative 0.6%.
Adjusted for effects from Hurricane Milton, organic growth would have been around 2%. EBITDA before special items was EUR 32 million, equal to an EBITDA margin before special items of 12.8%. Turning now to our highlights for the full year. In 2024, Nilfisk delivered organic growth of 1.2% with varying business performance. Supported by new product launched, the Consumer business posted strong organic growth of 19.7%. The Specialty business delivered solid organic growth of 4.9%, driven by strong demand for specialized cleaning equipment in the industrial and food segments in Europe and the U.S. Our Professional business declined slightly, where strong growth in EMEA was fully offset by a slowdown in the Americas and market headwinds in APAC. This regional dynamic also influenced our Service business, which saw limited growth of 0.6%.
Here, we increased capacity in field Service, delivered growth that was partially offset by a decline in parts, accessories, and consumables. After currency impacts of minus 1.8%, reported revenue declined slightly versus 2023. The negative currency impact was driven primarily by the Turkish lira and Argentinian peso. Moving on to the next slide. By region, EMEA increased by EUR 26.8 million to EUR 612.4 million in 2024, corresponding to organic growth of 5.9%. This was driven by Consumer and Specialty alongside moderate growth in Professional and Service. New products that were introduced in the second half of 2024 supported this result. Growth in EMEA was offset by a EUR 24.7 million revenue decline in the Americas. Negative organic growth of 4.3% was the result of a slowdown in the U.S. and lost revenue in our high-pressure washer business that was impacted by Hurricane Milton in Q4.
Operations have been since restored, however, not yet to full capacity. As Jon previously mentioned, these results were below our expectations, and we have identified key improvement initiatives that will strengthen our competitive position in the years to come. Lastly, APAC saw market headwinds in 2024 across several key markets. As a result, revenue decreased EUR 7.8 million, equal to negative organic growth of 8%. Moving to the next slide, which highlights a continued improvement of our gross profit margin. In 2024, the gross margin saw a significant step up to 42.2% from 40.9% in 2023. This was the highest level since 2017 and marked the second consecutive year of gross profit margin expansion. The main drivers were improved efficiency across production sites and a favorable product mix, combined with diligent price and discount management. Structural efficiency improvement will see further optimization of our production and distribution footprint in 2025.
Together with new products launched, consolidation of our production sites in Hungary will support a healthy gross margin level in 2025. Moving to slide 13 and some comments on overhead cost. In 2024, overhead costs were EUR 362 million and an increase of EUR 11 million from 2023. This was primarily driven by merit and investments in product launches, which caused sales and distribution costs to increase by EUR 7.7 million. Furthermore, we continued to invest in new product innovation, which led to a EUR 1.2 million increase in R&D. Total R&D spend corresponds to 3.7% of revenue in 2024 versus 3.2% in 2023. Driven by higher costs and a slight decrease in reported revenue, the overhead cost ratio increased to 35.2% from 34% in 2023. Structural efficiency improvements will deliver overhead cost savings of EUR 8 million from support functions that will be fully realized by Q4 2025.
These savings will be reallocated to sales and distribution, increasing commercial activities in key markets where we see opportunities for growth. We do expect minor cost inflation and merit increases affecting overhead costs in 2025. Turning now to EBITDA margin development, the next slide. In 2024, EBITDA before special items increased to EUR 135.8 million, equal to a margin of 13.2%. This was an increase of 0.4 percentage points or EUR 3.4 million and was mainly driven by strong gross margin management that fully offset lower revenue and higher overhead costs. Moving on to the next slide, and cash flow. Cash flow from operating activities was EUR 51.9 million in 2024. The decrease compared to 2023 was primarily due to higher working capital as well as increased investments into R&D and digitalization.
Higher inventory levels are required for new product launches that are ongoing, and we therefore expect working capital to remain elevated in the first part of the new financial year. As we work through the innovation cycle, we expect working capital to remain neutral or improve slightly towards the end of 2025. Cash flow from investing activities increased EUR 16.4 million- EUR 44.2 million in 2024. As a result, free cash flow was EUR 7.7 million. Driven by an increase in working capital, higher capital expenditures, and lease liabilities, net interest-bearing debt increased to EUR 270.1 million at the end of 2024. Consequently, financial gearing increased to 2.0 from 1.9 at the end of 2023. This concludes the financial update, and I will now turn to our outlook for 2025. The financial outlook for 2025 is as follows.
We expect organic revenue growth in the range of 1%- 3%, an EBITDA margin before special items between 13% and 14%. The financial outlook is based on several assumptions, including stable market conditions in EMEA, a neutral development in North America, the APAC region returning to moderate growth, and limited impacts from tariff. We expect continued positive momentum in EMEA, supported by the launch of new products in the second half of 2024. A normalized order book in the Americas is expected to influence the Professional and Service business, while the outlook for Consumer and Specialty remains strong. Potential trade barriers present uncertainty for Nilfisk. This year, we are not guiding on special items or CapEx as a percentage of revenue. Directionally, we expect, though, special items from structural efficiency improvements to be in the high single-digit million EUR range in 2025.
With this, we conclude our presentation of the annual report for 2024, and we are now ready to take your questions. Operator, please.
Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please. And the first question comes from Claus Almer from Nordea. Please go ahead.
Thank you. Yeah, I want to ask a few questions. The first one is about this new strategy that was briefly touched upon in the presentation. How is it actually possible to save EUR 8 million in the overhead cost? We have been through more than a decade-long restructuring initiatives, and you still have EUR 8 million left to be harvested. Can you put a little bit more color to this? That will be the first one.
Thank you, Claus, and I will answer that. By and large, the cost improvement stemmed from digitalization efforts, process improvements within the support functions, finance, and IT, as we have done significant investments in the last year, specifically in 2024, and that has led to structural improvements, which we are now able to harvest.
Okay, let's hope so. Then one of the issues in the past when these new strategies have been launched, I guess execution has been part of the reason why they have not really played out. So what are you doing differently this time to make sure that these initiatives will actually work?
Thank you for the question, Claus. So, we're doing multiple things in order to get it. Obviously, setting clear targets on expectations being one of them, but we're also, as I said, enhancing our operating model, putting more decision-making and empowerment closer to the customer, and that will enable us to be swifter and more agile and faster come to better business decisions and hence better execution. That's one area, and then also clear focuses on what is really important in terms of when we drive our processes in product development or in supply chain or whatever it is, so it's a lot of small things.
Okay, so it sounds like the big difference is that you're giving the power back to the regions. Do you think this is the biggest difference from what we have seen in the past?
I think that is one key component, but we are also working diligently on setting, clarifying both expectations and direction where we're heading in a very pragmatic way, which is, let's call it a program and infrastructure I am building.
Okay. And then just as the final question, as I understand, you expect U.S. or Americas to stay kind of flattish in 2025 as part of your guidance. But given the impact from new product being introduced to the U.S., shouldn't we see some sort of the same impact as we've seen in EMEA? So it should be a decent revenue growth, not least based on a weak 2024 performance.
Thank you, Claus. And well, yes, we do see an impact, but at the same time, we need to recognize that 2024, we have been normalizing our order book, means depleting that. And against that, we work with product innovation, and that as such is expected to be a neutral development.
Okay. That was all for me from my side. Thanks.
The next question comes from Kristian Tornøe from SEB. Please go ahead.
Yes, thank you. Also, a couple of questions from my side. First of all, on the strategy, in the former strategy, Service as a business seemed to be the center of attention. It's not really mentioned here. Should we read anything into that? Are you scaling down a bit on that part?
Thank you for your question. No, you should not read anything into that. Service remains a very important component in our offering and proposition, and it's also valued by our customers. So it's an important part of our strategy.
Understood. Then in terms of a potential or strategic review of your U.S. high-pressure washer business, can you quantify how big a portion of your Americas revenue is this U.S. high-pressure washer business?
Yes, Kristian, I can quantify that. Obviously, that is, let's say, before revenue impact through Hurricane Milton. So it's north of EUR 40 million traditionally, between EUR 40 million and EUR 50 million.
Understood. And then just also a clarification on your cost reduction. So the EUR 8 million I interpret as the expected run rate going out of 2025. So what is the full year P&L impact in 2025 of this program?
Kristian, we have basically said we are taking support cost out, and we are reallocating those to front line, net net. This is the expected effect that we take support cost out and reallocate. We're not guiding an overhead as such, and we don't give you a net number of it. But as such, you should assume in a low inflationary environment, low merits, that we are improving our overhead cost slightly, but I don't give you a number because we don't guide on overhead as such.
All right. Understood. And then just lastly, on the optimization of your production and distribution footprint, and I guess primarily the consolidation of factories in Hungary, what is the financial impact of that?
We have, on one side, done this to support a continued healthy gross profit margin environment where we have actually reached now very healthy levels, and that is the core topic to reduce our, let's say, overall footprint cost and support this ongoingly. We have not stipulated what it will mean to margin expansion as we are not guiding to our gross profit margin. We are guiding to top line and EBITDA before Special items.
But are you not taking any SG&A cost out as a consequence?
We have basically SG&A in the factories together is not a key driver. That's basically a part of locating it from Sziget to Nagykanizsa, which is more a production optimization activity, and hence the core focus is on, let's say, staying on a healthy gross profit margin environment. Yes, yes, some slight impact on overhead, but that's immaterial compared to the others.
Okay, that's fair enough. And is there any potential asset divestments of any significance as a consequence?
No.
Very clear. Great. All for me. Thank you so much.
As a reminder, anyone who wishes to ask a question may press star and one at this time. The next question comes from Casper Blom from Danske Bank. Please go ahead.
Thanks a lot. A couple of questions from my side as well. I'll also take them one by one so you don't have to write stuff down. Also on the U.S., after Q3, Jon, you talked in some detail about your U.S. go-to-market setup and the fact that you had seen several of your distributors over there consolidating. Are you doing anything to try and sort of mitigate that or counter that in any way? If you could elaborate.
Yes. A part of our distribution or dealer network is consolidating, and we're working across, but also for this segment, tailoring, let's call it the more of even better at tailoring our delivery model versus those specific needs that they have.
Okay, but you are not considering a change towards more direct sales channels in the U.S., for example?
Yes, we do. We will also add direct sales where that is appropriate. One, we are coming from a situation where the big portion of our distribution is with dealers, so that remains a very important channel for us, and we will work very hard to further improve and so on with those types of relationships. But in areas where we don't have good distribution with a dealer setup and specific areas or segments for customer needs, we will also have a direct go-to-market over time.
Okay, thank you, then on the comment in your strategy slide also about a strategic review of the U.S. high-pressure washer business, should we read that as basically making up your mind whether or not you should own this or not? And secondly, now that you highlight this part of your company as something that's undergoing a strategic review, is that because you've come to the conclusion that no other parts of Nilfisk needed a strategic review?
Let's start with question number one. The answer to your question is yes. We are evaluating what we shall do with this particular business and what is the best home for that. And the second part of your question, whether we do other evaluations, we are not conducting any specific strategic reviews in other areas. But we will continuously, obviously, look at, let's call it, product ranges and those sorts of things to make sure that we have a portfolio that is relevant for the customer segments that we address.
Okay, okay. Then a question to your guidance assumptions where you say that you are assuming limited impact from tariffs in 2025. Is that because you are basically assuming that there won't be any major tariffs, or is it because you're assuming that any tariffs that might show up is something you can mitigate? And as a follow-up to that, if you could sort of walk us through various scenarios. If, let's say, that there are import tariffs on goods from the EU into the U.S., how to mitigate that? If there are tariffs from imports from Mexico, how to mitigate that? Tariffs from China, how to mitigate that? What are your plans, B, C, D, and E in such cases?
Okay, I start with answering the first questions, and then I hand over to Reinhard. The comment is not that we expect limited effects. The assumptions for the guidance is based on the fact that these effects are limited, and they can be limited in several ways. One, that they don't materialize, that it doesn't happen because it's very uncertain. We get tariffs, and then from one day to the next, they may or may not be there. That's one. But obviously, our job is to try as much as we can to mitigate the effects of any tariff through pricing and efficiency and productivity and those sorts of things. So that's the basis of the comment. And whether these tariffs will be implemented or not, we don't know.
But we have really put efforts with the task force and tools and so on to understand the implications, and we also have an action list in what to do about it if it is materializing.
I follow up on the other questions. Yes, there are various scenarios which we have deep-dived. We have a pretty good understanding on our flows, the impacts from different levels. As Jon had said, we will strive to bring forward those tariff impacts into our customers where possible. That is what we are currently working on and have taken precautionary measures already. That's how far we can say because that's how far we see at the moment.
Okay, fair enough. Then my last question is just, Reinhard, you mentioned that in 2024, there's been some positive impact from an order book normalization in the U.S. Can you quantify what that impact has been on 2024 numbers?
I will not be able to quantify, but I do not, let's say, quantify that at this call. It is a double-digit million euro number, and it's, let's say, a substantial reduction in order book. And we have been speaking about it throughout 2024, that by end of 2024, we have a normalized order book situation. And that is, I guess, similar in other, let's say, competitive situations.
Yeah, absolutely. I completely agree that you have been flagging this. It's more sort of to understand the, I would say, underlying developments in the U.S. now that you are not seeing it here in 2025. Thank you.
Then the next question, we have a follow-up question coming from Claus Almer from Nordea. Please go ahead.
Thank you. Yeah, just a follow-up on the high-pressure washer business in the U.S. First of all, is this a standalone business, or I would assume there's some shared R&D cost with the EMEA, for instance?
No, the U.S. high-pressure washer is basically a standalone business.
So you do R&D individually for America and for Europe?
For the vast majority of the assortment that we have for the U.S. business has been developed for the U.S. business, and there's not significant synergies with the European R&D.
Okay. And then is it loss-making, or was it loss-making in 2024? So if you were able to divest or close it down, that would actually have a positive EBITDA impact?
I will not speak directly to the results of the business. Obviously, 2024 had a special situation around impact from Hurricane Milton that you certainly understand. As such, the business is profit-making, but I would call dilutive.
On the margin.
On the margin.
Right. Okay. That was all from my side. Thanks.
Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Jon Sintorn for any closing remarks.
Thank you all for participating in today's call and for your continued interest in Nilfisk. For 2025, I'm excited about tackling the challenges that lay ahead and capitalizing on the many opportunities that we continue to see. We will be back with our Q1 report in May and look forward to speaking to some of you over the coming weeks. Thank you very much.