Earnings Call: Q2 2015

Jul 17, 2015

Ladies and gentlemen, welcome to Assalborg and the 2nd quarter reporting. Yet another report full of sunshine where I feel very proud over. Let's turn over to the highlights on the profitability side. We saw strong development in the quarter with strong growth in Global Tech. Americas and Entrance and EMEA had also good growth in the quarter as such. APAC continued negative mainly due or only due to China, which is still negative for us when it comes to development. Sales improved to by 22 percent to SEK17.1 billion with 4% organic, 3% acquired growth and 15% currency effect. And the EBIT improved in the same way, 24 percent up to SEK 2,700,000,000 with a currency effect of SEK 300,000,000. And earnings per share improved also by 23 percent to NOK 1.70. Turning now to the first half year. It looks pretty much the same, very nice evolution, I must say. Strong growth in Americas and Global Tech. Here, America has grown 6 percent since the beginning of the year and Global Tech more than 10% since the beginning. And good growth in EMEA and Entrance. And really in this quarter, I think EMEA is really the positive point in the sense that we saw an acceleration of growth in the quarter. And APAC was also a little bit weak for the first half year, a little bit less negative in China in the Q2 to the Q1, but not a big difference. China, unfortunately, continues in a weak direction. Sales improved by 23% on the back of 4% organic, 3% acquired growth and 16% currency and attained SEK 32,300,000,000 in total turnover. EBIT improved even better, 24% to SEK 5,000,000,000 SEK5.1 billion with currency effect of SEK550 1,000,000. Then earnings per share improved by 25% to SEK3.15 billion. In the marketplace, it's difficult for me to choose really what is really I should talk about, but because we have so many good things happening around in the world. But one thing we haven't discussed before is the entrance systems development, which has been growing for 5% at 5 percent pace, which is rather high in a difficult market, considering also that the large portion are industrial doors here. But we see more and more large projects that we win, where we go in and specify a full building with all moving doors included. So it's a very positive evolution. And we can see clearly that their total door solutions is also interesting not only inside the building, but also on the exterior of the building. So a very positive evolution. On Identity Assurance, we bought that company a few years back. It has been a difficult time for us in the sense to get that growing. We decided a few years back to invest much more in R and D. So we are investing about $4,000,000 extra in R and D for this company. And we saw now in this quarter how we start to get high acceptance with the customers by introducing cloud services, threat detection and also together with Microsoft that you can use your mobile for authentication onto your computer. So a number of things that are driving demand in a positive sense. On hospitality side, we have discussed this before, but couldn't leave it out. It's simply good. Many hotels are standardizing our mobile key locks, and they see a good chance to improve their revenues, and that is the main driver for them, meaning that they don't pay commissions to their partners, but rather take the money in their own pockets. Apart from that, the administration to check-in and check out simplifies quite a bit. On the DDL side, we have taken global leadership on the digital door locks, and we see a very positive evolution here as well. Especially home automation companies are rather excited about the opportunity to let the lock arm and disarm their alarm systems a on a more higher frequency. So we see clearly that we that there's a strong demand in this feed and also in Europe and in Asia. So far, we have mainly broken through in the U. S. Market where we've seen high acceptance for these solutions. But now also Europe and Asia is integrating into this direction. And you see the little gray thing there, which is a round thing in the corner right corner, that is our new knob lock electronic lock that we have launched in Europe because half of the European doors have knob locks and not handles. And this has been became very popular in only a few months' time. So a promising development. Turning to group sales. Difficult markets, when I look to the numbers, it doesn't look so difficult. Yes, they're quite good. We have emerging markets improved by 2 percentage points or 25% despite the decline in China. That means that other markets are developing in a very positive way. Looking to then the growth in the different regions, organically, America grew 8% since the beginning of the year, very, very solid growth. So that means that other divisions in Americas are growing faster in North America. And it's mainly then the industrial side, but also Global Tech that is growing very fast in North America. Europe grew 3% organically and Pacific 8%. So if you add those 3, those are the mature markets. So the mature markets have behaved very well in the beginning of the year or the first half of the year. Looking to Latin America, 6% organic growth Africa, only 3% growth, but there we have a rather large relation with Angola and they run out of money in the first half. We expect to see money in the second half. That means we can start to deliver again. Taking that away, it's growing more than 10% organically. And looking to Asia, we had 1% organic growth. But there, of course, if you take out China, we are up into 6%. So it's a reasonable good situation where all part of Asia is growing except China itself. This curve looks a little bit flat, but it isn't. If you look to 2010, our turnover was there back then in €35,000,000,000 and now it's €66,000,000,000 or €66,000,000,000 So we've grown 87% since then. And this is, of course, without currency. So out of currency and a portion of that is organic growth, which I feel very good about. We have been growing 2% to 4% organically year after year after year after the crisis despite an anemic market. But acquisitions have done given us more than 5% per annum. So altogether, it's 87% growth. And in the quarter, this quarter was no exception. We grew 7% nominally. Looking to profitability, it's even better. We had SEK 5,500,000,000 back then or a little bit more than SEK 5,000,000,000 back then. And this is the Q1 we shut through the SEK10 billion mark, SEK10.2 billion or SEK10.3 billion almost, an increase over last year by 23%. And you can see the inclination of the curve. And here, of course, it's doped a little bit by the currency, like for everybody else reporting in Swedish kronor. But this one, I think, is doesn't look much, but it is very important at least to us that is what we see here is a rather flat curve where we are between 2016 2017 profitability, which we said many years ago that's where we're going to be. And this is due to dilution, dilution, dilution that we get from acquisitions that continues to pull the curve down. And then we have leverage in this quarter, we had leverage of 0.4%. And we have dilution and we have currency in this quarter of 0.2%, which took us down to or improved our profitability by 0.2%. Looking to the 12 months, which you see there in the run rate, we are 63%, up oneten from last year, which was then 62%. And here is one of the secrets how we have achieved this. We have continuous programs of savings. Carolina will tell you more what savings there are, but we feel rather good about it. We saw in the quarter continued savings, 139 people left. We have closed 71 factories since we started these programs, and we have still quite some provision to provide for the remainder of the closures, euros 770,000,000 in the balance sheet. So this side, it looks pretty good when it comes to continued programs and savings. On the EBIT side, a good evolution also. I mentioned that 2.1% improvement in the quarter, a leverage of 0.4%, past. This is not because it's easy to increase price, but it's because many currencies have devaluated. So we have taken several rounds of price increases in Europe and in the emerging markets where we have seen quite heavy drops of the currencies. So this is a reflection of that we are compensating for declines of value of various currencies across the globe. The margin increased by 0.2% with organic growth driving and manufacturing footprint as we already saw, but currency acquisition took out 0.2%. So as I mentioned, then the leverage was 0.4%. Acquisitions, a lot of activity. Unfortunately, you guys are driving the share values very high. So the expectations from the sellers are rather high as well, which is no wonder. And that means that we are a little bit careful to move in right now simply because the multiples are moving up in number quite a bit. So it's fully active. We have many dialogues going, but we have refrained from doing a few acquisitions in the quarter that we could have done simply due to price. So I'm very positive about our ability. Short term, however, with the pricing and we see we are a little bit careful. In despite that, we have added 3% turnover from acquisitions. So we are well in the target of 5% per annum. So there is no real problem in itself. It's just that we like to keep the money if we can. Looking then to the acquisitions with Didi in the quarter. Eldor, a typical bolt on for Entrance, 175 employees, busy in Belgium with sales and service in industrial doors and docking stations and residential doors, very strong coverage in a specific region. So beautiful bolt on acquisition, where the margin due to that they are have a small body mass is rather low, where we can go in and lift it and improve the situation. So very nice to the group and accretive from start. Flexim in Finland. This is an exciting acquisition, €340,000,000 turnover, so rather big for Finland. So it's a leading company or the leading company on access control in Finland. They have some 200, a little bit more than half of their turnover is access control, and the other half is locksmiths. So and we already bought Turbacoye set in the first quarter no, last year, last year, which means that we have now a rather large locksmith chain just like we have in the rest of Scandinavia. So we cover especially specification market in Finland in a very good way, just like we do in the Scandinavian markets. So this gives us good domestic cover, but also an important access control market, which is a growing segment in the total market segments, accretive to earnings per share as well. Then, pro metal in Dubai, Middle East, even though the oil price is low and it's likely that we will see some dampening of demand in the Middle East. We believe that Middle East is an interesting sector long term. Turnover, euros 225,000,000 leading in high security doors of various kind and gives us really access to total specification in that region. So we can go in and specify a complete building, which is really a strong ability, which we are alone in that market to be able to do. So this is really a positive addition to us, also accretive to earnings per share. Turning now to the divisions. Europe then very positive when it comes to growth. We see that Europe, especially the southern part of Europe, is now coming up, at least not negative anymore. We have had a drag for years from Southern Europe, but also a very good evolution in the northern part. Scandinavia is doing very well. Finland is doing very well. But also to Arjoi, Eastern Europe is growing double digit and the same is in Africa. So very positive evolution also from the emerging side of the business. Good growth in Germany and Iberia. So you see here Spain is coming higher and higher and starts to grow in a good way. And in this quarter, U. K. Was flat. Italy and Israel was also flat. But Italy used to be very negative. So we see clearly an improvement in the Italian market as such, however, small to us as a whole. And then Holland or Benelux, it says here that its Belgium is growing, but Holland is negative for us still in France. But also in France, we see a leveling on the situation. What we have, however, is we have quite some dilution from currency. We make high profits in the Scandinavian region and we have lower profits in the southern part. With the currency now, we get the positive currency effect from the southern part, which, of course, has an effect on our the currency the dilution on the from currency. Then we have another thing. We have increased our prices now a third time in Europe, and this is because a big portion of the Europe is buying in Europe, and we buy a lot of stuff from China. So I think in the second half of the year, we will also see here that we start to compensate for the increased sourcing cost that we have in Europe. Margin declined by to 15.1%, down from 15.4% last year with a rather heavy dilution of 0.6%, while leverage was 3.0 percent positive. Americas continued very positive evolution, also growing at the 5% pace, little bit less than we saw in the Q1. Strong growth in Architectural Hardware, which is our locking side, and there both electromechanical and mechanical locks are growing. Residential, any gain, the emerging market part, Mexican, South America, even Brazil grew in the quarter, so we were pretty happy with that as such. Elmec is growing. Doors growing. And Canada is in I saw in the paper this morning is in recession apparently, but we are still growing even though not all that much as such. And high security is a little bit more dependent on here and there that we get some rather larger project orders. Here, we had flat situation in this quarter. Profitability, 22%, with a dilution here of 0.4%. Here, we have 0.2% dilution from acquisitions. In South America, we then it's mainly that we have acquisition costs that came in this quarter. Asia Pacific, a good picture despite China. We see continued decline in China. And of course, what we do, we have already more than 40% of our employees that we have reduced our staffing with. In the last year, now we have minus 9% altogether. While we see strong growth in Australia, South Asia and North Asia and also New Zealand is doing quite well for us. So in a way, it's only China in this part that is not doing well. This gives us some positive mix because Chinese margins are a little bit lower. So that was came in in the quarter, 0.4% leverage and also then currency and dilution in the same direction negative, 0.4%, so it was flat. In total, we had 14.4 percent EBIT and 14.4% last year as well, which I feel very proud over because I can tell you, it's not easy when you have a market of the size of China going down as a Dutch and still keep the margins intact. But so far, so good, even though it's a battle a constant battle. Looking to Global Tech, another quarter of very strong growth. The HID did grow strongly in access control and identity. And Jens already mentioned, with the promising development of ID Assurance, where we launched a number of new products. We saw on IDT, on the inlay business and also project sales did well in the quarter. On the R and D side, we had quite some cost increases. We continue to invest. We see here an increasing need to continue to invest simply because the market on I mean, it comes to technological development is moving very fast and we are moving with it. And in a way, in our industry, we are leading that development. We think there's a great opportunity to really be ahead of the of competition on the R and D side, on the technical side, since we see that the market is more and more converting it into electronics. So this has a big value for us. Hospitality continued to grow strongly and also the profitability continued to improve. We had a profit altogether of 18 point 1 percent, down from 18.41 percent year back. And here you see a rather heavy dilution as well. This is QuantaSecure that we bought last quarter, where we took the acquisition cost in this quarter, which gave us a rather heavy dilution. So but altogether, a very pleasing evolution. Entrance Systems, here also very pleasing evolution, 12.9% profit, up 3 tenths of a percent. Also here, the currency, remember, they are like Europe, very much in European currency. So they have a negative currency development. The same thing there, we compensate by price. But still, leverage 0.6%, very strong. So we see big savings coming out of what we have done in restructuring in Entrance Systems. We saw strong growth in the quarter in high speed doors, FlexiForce, Amar and Forefront. Good growth in door automatics in the quarter, but flat in Europe Industrial, and we have seen many industrial companies not having too good numbers. D Tech and decline in residential. However, we see that those 2, the European part of the business, which is not growing, is improving. So it looks good, better for the second half of the year. But altogether, very pleasing picture with improved margin despite then the rather heavy dilution from currency. That concludes my overview. I would like now to hand over to Carolina for a few highlights on earnings. Thank you, Johan. 2nd quarter of 2015. Financial highlights. It's been a very strong quarter, continued in the same way from the Q1. So as the financial highlights show, we have a strong half year. Starting with the part on the top line and probably the part which I feel is most proud about is the organic growth. In the quarter, we saw a 4% organic growth. And it's the same number of working days in the quarter. And we estimate, as Johan mentioned, that the price components is slightly higher in the quarter, 1.5%, while the volume is 2.5% from that. And we basically saw a good growth in most parts of the world except in China. Moving on then to the acquisitions, 3% acquired growth in the quarter, actually coming most from emerging markets. And for the full year, we now have around 4% acquired growth in the books so far. And then the big one continued from the Q1, currency, a full 15% from currencies on the top line. And that is similar to the Q1, slightly lower. And it's mainly a translation effect, but also transaction. And I will talk more about that a little later. But the top line overall up a full 22%. And if we then add the good drop throughs that we talked about, a lot thanks to the restructuring projects but also other efficiency savings, We saw a very good evolution on the EBIT, up a full 24%, but also the margin increased from 15.9% to 16.1%, although we saw dilution both from currency and from acquisitions. Cash flow, flat year over year, similar to 1st quarter. Here, it is so that we are growing. So we do need more working capital to fund that growth. But we also continue to see tough times in China with the collection. And you've seen more on the cash flow graphs, how that affects us. If we then add to the EBIT slightly higher financial net due to the higher debt, but the same ratio of interest and then the tax rate of 26%. You will then see the same as almost the same improvement of EPS that we see on the EBIT with a full 23% improvement in the quarter. The first half year is actually up 25% earnings per share. Moving on then to the P and L and taking a deep dive into that and looking at the bridge and the drop through. The first one, the very important organic growth. The 4% organic growth translated into a full 40 basis points improvement on the margin. And here, we actually see good drop through from all the divisions. We had EMEA and Americas on roughly 30 basis points improvement. And then as Johan mentioned, Entrance, the star here is up to 60 basis points improvement on the margin from organic drop through. And I should also mention here that Asia Pacific, because they also had a positive drop through here, That's not easy considering that they are actually negative when it comes to the organic with minus 2% in the quarter. Next one, currency, continued in a strong way from the Q1, 15% improvement on the top line. And a lot of this is, of course, the Swedish krona significantly weakening towards most currencies, I would say, and the biggest impact coming from the U. S. Dollar and U. S. Dollar related currencies also like the renminbi. Overall, for the group, the margin from currency is 15.1%, so not that big difference from our average margin, and the dilution is only 10 basis points from currency. But we saw big differences in the divisions depending on which currency they are working in. Acquisitions then, 3% acquired growth in the quarter. I would say, little bit different Looking at the P and L then from a little bit different perspective as components of sales, we get this picture. I'm trying to compare it like for like, so excluding acquisitions. And overall, the direct material part increased with 30 basis points. But underlying, the raw material was actually the effect from the raw material was actually slightly down. So really, overall, the direct material part increase comes from a mix effect, both from currencies, but also from where we are growing organically. The opposite of that effect you see on conversion costs, which is going down significantly, and it's actually going down much more than the direct material is going up. And that part, we can really relate to the good efficiency savings that we see, both from the manufacturing footprint as well as the other programs that we work on continued improved efficiencies. So the margin overall actually improved on the gross margin side with 50 basis points in the quarter. If we then look at the SG and A, SG and A, we had a good improvement last year already. So we're sort of comparing to good numbers year over year. SG and A is up 20 basis points. I would say it's a mix of the increased investments in the front end and salespeople as well as R and D projects and on the other hand, cutting on the support functions. So overall, 20 basis points increase on the SG and A side. And if we then add the acquisitions, you can see it's not a dramatic change because we were not that much acquired growth in the quarter. But as typical, especially for emerging markets, they are higher on direct material and then lower on the other components. And overall, they are lower on margin than we are. And therefore, you see the dilution of 10 basis points when including the acquisitions. From the P and L then to the cash flow, we get this picture. As you can see, we have a strong seasonality in cash flow with the first half of the year significantly weaker than the second half, and this year is no exception. Overall, though, we are flat when it comes to cash flow. And I would say here, part of that is because we are growing. So we need more working capital to fund that growth. But we also see when we look at the efficiency KPIs looking at the DSO, the DSO has increased with 3 days year over year, And the biggest part of that is China. We have increased our credit policy there, and we continue to be very tough on collection in China, but that still doesn't make it easy. And we are 3 days up year over year on this. So DPO, on the other hand, has improved a couple of days and inventories are basically flat down one day actually in the quarter. So good development on those. So what does the cash do then to the debt? Well, good things. Can see from this picture, we started the quarter with a little bit more than SEK 25,000,000,000 in debt. And we had SEK 2,000,000,000 of operating cash flow releasing sort of or lowering the debt side. Then we had the dividend of SEK 2,400,000,000 in the quarter. We had an acquisition spend of about SEK 1,500,000,000. But we also saw, due to currency, we actually had relief on the debt side of roughly SEK 1,000,000,000. And therefore, we end with SEK 26,600,000,000 by the end of the quarter. And as you can see here, we are growing as a company as well because even if the debt goes up, the KPIs are still moving in the right direction. The gearing is down to 70% compared to 76% a year ago. And maybe more importantly, the net debt EBITDA part is actually at 2.3% compared to 2.4% a year ago. So continues in a good way. This, my favorite slide, very beautiful slide. The only difference compared to last quarter is that we have done the stock splits. So please note that the numbers here are a third of what they used to be, but you do have 3x as much shares. So the overall is the same. And as you can see, we still have a very strong development here. And if you start with the EBIT, up on the 24%, we then add a financial net that was about SEK 45,000,000 higher. Half of that really only coming from financing and the interest rates on the debt and the other half on currency. Then we add the tax rate, which is same estimate as before. And therefore, we have a very strong development of the overall earnings per share up, both for the quarter and the half year. And with this nice graph, I'll give back to you, Johan, for conclusions. Thank you, Carolina. Conclusions for the quarter are rather easy to give. It's a good quarter altogether. We grew by 22%, 4% organic. And the highlight here is that Europe did better than we have seen in the past, which I think gives hope also for the future, very encouraging. Emerging markets also continues to expand, which I think considering the 85% of the world population lives in those countries, gives also a very good signal for the future for the company. Strong EBIT improvement of 24% and earnings per share improved by 23%. So altogether, a very, very pleasing quarter. With those words, I open up then the floor for Q and A. Thank you. And we'll, as normal, do one question and one follow-up. And Johan, I will start with the normal question. We have this in the beginning of this quarter, what are the trends and what is in the current trading? It looks as if we are continuing at the same trend around 4% growth. So I don't personally, I don't expect any spectacular things to markets that have difficult times. But at least this July looks like a 4% growth Okay. And currently? Currencies had a big impact this quarter as well. What do you expect for the full year? Yes. Well, assuming the currencies stay the way they are, we expect continued big impact because the full year top line would probably lift around 12% from currencies for the full year. And if we look at the mix that we have and the flows, we will also expect to see around up to 30 basis points dilution on the margin from currency. Thank you, Carolina. And we have the first question from the floor here, Andreas. Thank you. Andreas Prah from Kuwait Asset Management. A question on France. Any signs of improvement in either the rest sector or the non rest sector? It's a big market for you. And there are some PMI indications that actually things are bottoming out in France. But what are you seeing? I can confirm that we see leveling of the the decline has stopped and it looks as if we are going more flat. I cannot say I wish I could say I see a nice increase, but it's more flattish. But still important for us since we've had quite a drag from France in recent years. Erik? Erik Vansel from Bodenholm Capital. I just had a question on Entrance Systems on the long term. It's almost 5 years ago since you bought Cardo now. And of course, you had a vision back then, what you could do in this market. How would you say you have performed over those 5 years versus that vision? What has been better than you expect and what has been worse? Well, first, we've had a rather sad market. So that has performed worse than we had hoped for. We thought 2010, 2011, it rebounds of the market and then it sort of disappeared. But I'm very happy about evolution we've seen. I mean, this has become a very important part of the group. There's a big market, a €200,000,000,000 sized market, Swedish, waiting for it to be conquered in a way. And Entrance is doing very well. And considering that we have bought from some SEK 2,500,000,000 when I joined the company up to almost SEK 20,000,000,000 today without losing control, I think it's a strong achievement. And I look forward to something where we can continue to develop sales and service. And the next thing to do there is direct sales and service also in the U. S. Side. And I believe very much that aftermarket also is an important element for the future, and entrance is very good in this part. And that is still to be developed. So if anything, I would have wished that is that we already have done that, but it takes some time to put that in place. As a follow-up, on the U. S. Specifically where you are a little bit less strong than in Europe where you have really taken the lead here, is there anything you see in the market structure that we would think that it's not possible to sort of replicate the European success in the U. S. Over time? Not really, but we have a longer road to cover there because we started by the indirect channel. We needed to build a sort of infrastructure. So what we have ahead of us now is to build a direct channel. So that will take a few years more. But I don't see any real reason why we could not be able over time to come higher up in the U. S. Also on the profitability side. So Europe is already at the target level of the 15%. Thank you. And with that, we move to the telephone conference. Operator, please? Thank you. The first question comes from Andriy Kukhnin from Credit Suisse. Please go ahead. Yes, good morning. Thanks for taking my questions. Just on the acquisitions, obviously appreciate that Allegion buying some of those 4 times sales is not helpful for valuations. But what about China? Isn't there isn't this the opportunity to step up there? And also on Entrance Systems, coming back to that, this has been quiet for a while and there's been a period of consolidation. When do you think that will be on the back on acquisition trail? Well, if you take Entrance, we just made Eldor, which is, of course, a small company. But Entrance has now go ahead again to do acquisitions. It was in Entrance where we stepped down from a rather large acquisition recently due to valuation. So and we've done it 2 of the same kind last year as well also due to valuation. But there's a lot of prospects out there. So there's no crisis in it from that point of view. So Entrance is back trying to make acquisitions. On when it comes to China, yes, there are many, many companies for sale, and we are looking to many of those. Still, they haven't felt the sort of heat or the downturn in full yet. That means that they expect to get sort of paid with the rule going in the wrong direction. They are normal they're flat or they're declining all of them and they're losing their profitability rather quickly, but they all sort of project that they're going to increase their profitability heavily, which is, of course, makes it difficult to meet when it comes to pricing. But there are many, many companies for Got it. Thank you. I didn't appreciate that was actually in Entrance where you stepped down. Can I just ask a follow-up on your comment on Entrance Systems outlook? I think you said that the demand environment in the market should get better in the second half. Can I just confirm that? And could you give some color on why that's expected? I believe Europe is going to improve over what we have seen in the past because Europe has not grown for entrance at all or for has been very difficult for the whole of the group. And we see that the southern part of Europe gets into better health. On the U. S. Side, on the other, we've seen 4, 5 years now of a very good demand situation. I hope it will continue, but we saw that industrial companies in this quarter, many of them had a not so positive evolution. So I think we have to be a realistic U. S. Will probably not continue to grow at a very high pace. Got it. Thank you very much. Our next question comes from Andreas Willey from JPMorgan. Please go ahead. Yes, good morning. My first question is on the U. S, on where you had a bit of a slowdown in the growth. Could you comment what you see in the nonresidential and institutional markets in the U. S. In terms of growth trends underlying in the market and what you are seeing? And the follow-up question would be on the acquisition and mix impact acquisition and currency dilution impact. If I add up the divisional dilution from both of these, I get much more than I get on your group commentary. I just would like to better understand kind of the 20 bps you had on the group when most divisions were between 40, 60, 70 bps dilution. Thank you. Very difficult question to answer, but I'm sure that Camille has prepared that answer, so please. Okay. I will start with the on the margin. I mean, we have 2 different parts that are diluting. 1 is on the currency and one is on the acquisitions. I think on the acquisition side, it is basically as expected. So that's not really the big one. And no, if you do add it up, it will actually sum up for the group. But if you like the currency, they are a bit different for different divisions. So as I said, the overall list is only 10 points for us as the group, but the divisions are very different. Then you have EMEA, which has a very tough currency situation, sort of making the money a lot of the money in Swedish krona, but also nowadays having a transaction from China where the renminbi is going up. So negative for them. U. S. Basically doing pretty fine on the currency. Asia Pac, tougher on currency, with the renminbi being sort of dollar related and also strengthening. And a lot of the cost side in APAC East in Remedy, so tough from currency there. Global Tech, making a lot of money in the U. S. And U. S. Related, so good when it comes to sort of currency side. And Entrance Systems, that's quite a lot of that is both making a lot of money in sort of the Swedish or Swedish sector area, but also the fact that they have a mix effect of the U. S. Growing more where they are lower on margin. So basically, a mixed effect from the stronger dollar there. And overall, it only adds up to 10 basis points dilution for the group on currency. So basically, we have 3 divisions: APAC with the renminbi currency, Entrance and EMEA exposed to euro that are negative and then you have Americas and HID, which are dollar related, which are positive. So and the net is 0.1%. So we were surprised ourselves that it came out like that, but it is the situation. You also asked about the U. S. Slowdown as such. I don't know if I would rephrase it, slowdown with 5% growth. But it was slower than Q1. And what do we see? We saw that ABI index has been weakening for a while and now it's going back again. Looking to the different parameters there, institutions are now above the waterline. They have started to grow a little bit. We see it on quotes. Our quotes are quite good. And we expect it to continue. We see also the school season has this year seems to turn into a normal situation. When the schools close at after the spring period, then they renovate and improve. It's still not new build. It's mainly maintenance, but we see a good demand on the maintenance side. Then you have some regions like New York and a few other towns that are in southern part of U. S. Where we see strong demand also for new construction, mainly offices. But offices, unfortunately, is not our number one item. But altogether, we see a positive evolution, and hopefully, it will continue going forward. It's just I asked just because earlier you had like bidding activity up in the double digits in the U. S. Obviously that only applies to a part of the business. So I would have expected organic growth in the U. S. To kind of maintain the good level of Q1. Well, we grew 8% altogether if you add all divisions together. Our industry, remember, we dropped 12% when they have the biggest crisis we've seen. Our industry is not super cyclic. It's rather aftermarket related. So it has its ups and its positives and its negatives when it's high growth, which is not the case right now, then we're growing 8%. And when it's bad, really bad times, it will drop 12%. So I think that is those 2 are related as such. I feel very happy about the 8%. And if we can keep that going, I think you will see our margins will most likely start to expand in a nice way. Once the currency drops, it goes out. Our next question comes from Sebastian Kreutzer from Exane. First And my second question will be on Europe. It seems that the comps, the basis of comparison were a bit easier in Q2. So growth has accelerated. Is it just due to comps? Or have you seen a genuine demand recovery in Europe throughout the quarter? In Europe, we don't have the same drag as we used to have from Italy, Spain, France, Holland. It's simply so that they start to level or even increase to some extent. And then we have a northern region that is doing quite well. So that is why you see that our numbers are coming up altogether. I don't see any reason why this situation should disappear. I mean, we've seen 4, 5 or even more years in the southern part of decline. And hopefully, then if we can get France also on the wagon, then it might even look quite nice because France is a very large market to us. On the China side, we have a decline of 5% in APAC division, a little bit more for the group as a whole. Do we what do we expect going forward? I must say, I don't expect much. China, I think, and I said it before, I think China is up for a decline of I don't know what magnitude, but we have seen so far 10%, a little bit more than 10% in the last year. I think China will probably continue for a while longer to continue to decline because they have, in my opinion, overinvested in construction. They have a very high ratio in investment in construction and they need to change the economy to go more into consumption. And that is something that has to take place. They can't sort of maintain this level of construction. But have you seen the demand weakening in Q2 versus Q1? Or it's stabilizing at a low level? Q1 is a low season in China, so it's not significant. Q2 is more important. We have not seen any decline. It is around the 5% I mentioned for APAC. However, I'm cautious. I think it will be very hard to have the same peak as we have in Q3 and Q4 as we had last year, even though Q4 was weak for us. So Q4 should look better. Q3 will probably be very tough. Our next question comes from Lars Brorson from Barclays. Please go ahead. Thanks very much. Good morning, Johan and Karolina. A couple of questions from my side. On the Global Tech, after a couple of quarters, a strong top line growth here but quite weak operating leverage. I wonder how we should think about the cost and earnings progression here for the next few quarters as you ramp up your R and D spending in HID? And maybe just within HID, I wonder whether the change of management means anything from an operational and execution standpoint in the near term. And then if I could just be allowed to follow-up on EMEA. You said you're happy with margins here. I make it a 30 basis point improvement if I exclude dilution and FX. Again, you're seeing 5% organic growth within that price increases. And of course, a lot of the good growth is coming in your higher margin regions in Scandinavia. You're getting cost savings come through from the MFP. Is that really a strong margin progression? Or is there anything underlying here that we should be perhaps slightly more concerned about? Thanks. Do you want to answer some thoughts on EMEA? Yes. If we start with EMEA, yes, you're right on the calculation. We saw from the 5%, we saw 30 basis points improvement on the organic side. And then we had the dilution both from currency and slightly also from acquisitions. I mean, it is a mixed picture with some of the regions sort of growing more and also the lower margin countries in Southern Europe also growing, which, of course, then sort of dilutes the mix a little bit. If you take we have good continue to see good savings, frozen restructuring and from the other parts. But on the other hand, some of the areas, it's tough to compensate for the Remedy cost increases and some other currencies that EMEA have. So I would say it's a good result in a tough market. Yes, we're happy with that, although we always want a little bit more. Yes. I think personally that EMEA, they're growing fast in Africa, they're growing fast in Eastern Europe, they're growing very nicely in Middle East, all regions with lower margins. So that has, of course, a dilution in itself. And then we happen to make a lot of money in the northern part, as Carolina said. And when you then reevaluate all the currencies, but the money is in Swedish krona, you don't get any effect from that. So you get a rather heavy dilution from currency for that reason. I think it was 0.5% I don't think it was 0.5% negative in the quarter. So very, very tough right now. So when that goes away, I think we will see a little bit better situation. Looking then to Global Tech going forward, I think we can count on that we don't see huge margin expansion. I think it's too valuable for us to continue to grow in these areas and continue to invest. You heard me before, I'm not striving to get this company to 20% EBIT, rather as a growing company. So for us, it's important that we keep ourselves in the span. And Globostech's mission is to grow the business. And that has not been the case for a few years. And it's very, very tough because also the access control side, and I mentioned before more than once, we lose on our patents that we used to have on the card side and a few other parts of the business. And there's nothing we can do about it. It's just part of life, and we have to find new revenue streams going forward. And therefore, we need to invest into new areas, and that costs money. So I'm not pessimistic, but I cannot stand here and promise we're going to see expansion. And that is also one of the reasons why we decided to or I decided to change management. We've had the same management quite a while, has done very well. But I think we need to have new perspectives with the cloud services and numerous other things that come into place. So we took our number one R and D head and put him in response to the Global Tech. So I think our HIDs, which I think is a good move for us. And that tells you also that we are looking forward to continue to expand when it comes to new innovations. Our next question comes from Andreas Koske from Deutsche Bank. On pricing, you mentioned you have raised prices 3 times in EMEA, and you also said that the price component was plus 1.5% in the quarter. So I just wonder what are your competitors doing? Are they following you? Or are they staying with stable prices? Have you talked to them? No. We have problems to get them. I suppose you talk to your distributors and hear about your competitors' behavior. Well, price increases are never popular for some strange reason. But first, we always do a healthy one in the beginning of the year. Then we saw the currency what happened to the currencies. So we did another one a few months into the year. And now we are into the 3rd round right now. And I think as a market leader, you should we should not be too worried about all the competitors are doing. I think we should give them the ability to increase their prices. Since we are the leaders, we have to show and be bold and show the way forward. So I think that is a very important thing for us as market leader. Of course, they have followed, but did they follow to the same extent? You always hear from your salesmen, no, no, no, they didn't do anything. But over time, I'm sure they will. So I'm not too worried on that part. And remember, this industry is full of small orders, not big ones. And that means that you can tune a little bit if it doesn't work for you if you go too hard on the price. And the +1.5 percent price component, is it possible for you to split that into price and into mix? No. Thank you very much. Okay. Our next question comes from Peter Reilly from Jefferies. I've got two questions, please. Firstly, you I presume you're getting towards the end of your current restructuring plan. You're still making lots of acquisitions on a regular basis. When does the next restructuring plan come? Is that later this year or more likely in the following year? And then secondly, also you talked about walking away from some acquisitions because multiples are going up. What happens when you walk away? Does someone else come in and do the deal? Or do you just walk away and hope you can actually get back in the negotiation at a later time at a more sensible price? So are you missing out on opportunities? Or are they just being deferred? So should you take the first, Carolina? Jeff, which one was the first, sorry. Current yes, could you repeat the first? It was so long. And so current position, I thought Karina, I'm listening. Yes, but I'm not sure about When is the next restructuring plan coming? You must be getting towards the end of your current one. Yes, that's why we're doing long thinking. I'll comment on the existing one. We see good results from the existing one. And it's actually sort of that we are feeling that it's possible to do more with the existing programs. So we are doing more. And we sort of delivered almost what we should already by half year from the existing restructuring program, what we were expecting for the full year. So we do more with the existing money. And when it comes to the future one, that one I give back to you, Johan. When it comes to well, I think I'll leave that one. I'll take the acquisitions then. What happens with acquisitions? Well, one of them was to a private equity company that apparently has different ideas about return with no synergies. I'm impressed that they can pay up to 15 multiples. But that means, of course, that the return is not going to be all that good looking forward unless there is growth for many, many years forward. So everything is built on that. The market has to expand to give them a good return. I think personally that the markets are not going to grow eternally. America has grown now 4, 5 years. I don't know for how much longer, but I prefer a cautious stance. Is it so that our competitors pick them up? I heard you mentioning Simon and Voss. Yes, to some extent, they some of the companies will be picked up. But on the other side, we can't acquire everything either. I mean, assignment of course for us was impossible. We tried 8 years ago, and we got a no go from the German authorities. And so we were not even in this league, and it's not something we could do. On the other side, Simon and Forster has not grown in many much in many years. So that multiple was reasonably hefty, but fine. It gave, for Allegion at least, a very good technology, which I think they're very need of. So did you get answer to your question? Yes, apart from the timing of the next restructuring plan. I can say that we don't think we need 1, probably not this year. We will see. And the reason for this, most of the acquisition we've done in recent years has been in emerging markets. So we do restructuring without restructuring reserves in those cases. And we do have some we have relaunched a number of other actions in recent time that is sufficient savings for us at least for the next 12, 15 months. So I don't feel uncomfortable about that. There's a limit to how many closures you can manage at the same time. Okay. Then I think we move to the floor. Andreas? Thank you. So for Karleen, on the risk side on the balance sheet when it comes to China, how big is I don't know how much data you can give, but how big is the accounts receivable outstanding? And how much of that Swedish CapEx companies who have off balance sheet items in China. Do you Swedish CapEx companies who have off balance sheet items in China. Do you have significant off balance sheet items in China? Okay. The first part then on the DSO. As a group, we're on 55. China, as it is now, is on 99, and that's around 30 days more than they have been about a year ago. Within that, it's not so that so much is overdue because you don't get paid everything sort of at the instant when you deliver. But with that said, when days go up, even if they're not that overdue, we take provisions for everything that is older. But I think only time can tell. I'm sure some of them will not will be needed. And over time, I think we'll have see. When it comes to the off balance, no. No, we don't have anything like that, not that type of business. Okay. Last question now, Erik, from the floor. Erik from Golden Horn again. 30% new products, one of the highest numbers I ever seen. Might be my bad memory, but how does the high percentage of new products impact ASPs and margins for the group as a whole? That possible to quantify this directionally? Generally, electronic products have a higher margin. It's not day 1, but after a few months they come out with a higher margin. This is not fully valid for residential products because generally but they are higher than the ordinary residential products. But if you take the group average, they are diluting in a way. An average selling price of electronics is, of course, much higher. And so it depends, of course, what type of solution you sell. But on the residential side, it's higher, about 20%, 25%. On the commercial side, it's more or less doubling the price per door, so even more sometimes. So it's very beneficial to us that it turns electronic. And also the lifetime of electronic door is, of course, are shorter. Electronics gets older quickly than mechanics. So that means that the recurring revenue, which is very important to the Assafloy Group, is going to grow in the future. Thank you. Thank you very much. And with that, I hand over to Johan again for some closing remarks. So as you can see, I have been smiling most part of the day, Carolina as well. I'm very pleased with this quarter, 22% growth and 24% profit. And I'm also very pleased about the first half year. Cash flow was a little bit weaker than we are used with, but as Karina also outlined here, we know where it is and we work very hard on China. It's difficult for us. But altogether, very, very pleasing picture with good sales and good pipeline as well of activities. Thank you.