Good morning, everyone, and welcome to the presentation of Assa Abloy's 2024 year-end report. My name is Björn Tibell, I'm heading Investor Relations, and joining me here in the studio are our CEO, Nico Delvaux, and our CFO, Erik Pieder. We'll start this conference, as usual, with a summary now of the report, and then we'll open up for your questions. We have set aside about one hour for this conference. So, with that, over to you, Nico.
Thank you, Björn, and also good morning from my side. Q4 results, I would say, very much in line with previous quarters. For Q4, we had a stable organic sales development, to be precise: minus 0.3% organic growth. We have strong sales growth in Global Tech, good sales growth in Americas, a stable sales growth in EMEA, but then sales decline in Entrance Systems and significant sales decline in APAC, reflecting a little bit market conditions. We continue to see good momentum on the commercial side, but continue challenging market conditions on the residential side and also for the logistics vertical in Entrance Systems. Then also this quarter, a flat organic sales that is compensated by very strong growth through acquisitions of net plus 6%, also helped by currency 1%, so top line up 7%, 40 billion SEK. And then I think very strong execution.
We have a strong operating margin of 16.5% and a record operating income of around SEK 6.5 billion. Also, very good job, well done on the balance sheet side, working capital. We have an excellent cash conversion of 141% in the quarter, 110% for the full year, and a record cash of SEK 8 billion in the quarter. And we also continue our high acquisition pace: eight acquisitions completed in the quarter, 26 for the full year. 26 is a new record. It's now the third year in a row that we break the record when it comes to number of acquisitions, so very happy with that.
If you look in the numbers, like I mentioned, sales close to SEK 40 billion, 7% up, EBITDA margin of 17.4% on a record level, and even above the 16 to 17.0% bandwidth, an EBIT margin of 16.5%, and now also on a 12-month moving trend at 16.2%. So, in that 16 to 17.0% bandwidth we aim for, EBIT up 14%, above SEK 6.5 billion, and then earnings per share up 7%. If we then comment a little bit on the different regions, starting with North America, plus one organic growth in the quarter, very similar story as previous quarters. We continue to see good momentum on the commercial side, perhaps not as hot as two years ago, but still very good momentum. Also good there to see that our specification business came back in a strong way in Q4.
We had a high double-digit growth for specification activity, and especially the healthcare vertical that the previous quarters was a little bit of a concern came back strongly and overcompensated in the quarter, I would say, for the previous two quarters where we had negative development. The other end, residential, still challenging with interest rates not going down fast enough, and then also the logistic vertical still on a lower level, affecting our industrial segment business for loading docks in entrance systems. Strong South America, plus 8%, still good momentum in, I would say, most, if not all, markets in Latam. Africa plus 2%, Europe minus 2%, Europe perhaps the minus 2%, reflecting what we see in Europe. Also here, similar story as in the U.S. or in North America, very strong commercial activity, but still lower activity on the residential side.
Australia, New Zealand -6%, that's partly linked to also the other residential segment, but it's also more negative down than you would expect due to a difficult comparison for some project orders for HID in Australia last year. Then Asia -6%, mixed picture. India is still growing strong, double-digit, but then very challenging market conditions in Greater China, where we have seen a double-digit negative growth and also a bit of spillover to some of the Southeast Asian markets of that negative market condition in Greater China. Minus six in that part of the world. If we look at some market highlights and start with some project wins, I will just take a couple of them. We upgrade 100,000, a little bit more than 100,000 mechanical cylinders to eCLIQ for a German high-voltage grid operator, a very nice big project.
We had a restart, I would say, of the loading dock business with some orders, big orders for distribution centers in Mexico and Belgium. That's good news because that means that that loading or that logistics vertical is bottoming out. You know that the lead times there are a little bit longer, so we will only realize sales there in the second half of this year. And then perhaps also fraud prevention fingerprint readers for bank terminals in major South American for major South American bank. That's an important business for our fingerprint products in HID, and that's continued strong momentum. Product launches, you've also 2024 was clearly a good year for new product launches. We have a record number of more than 550 new products launched in the year. If I just take one there, new smart lock launches, a lot of new smart lock launches.
If I pick one there, Kwikset Halo Select, our first product range that we launched now for HHI after the acquisition in a combined effort. Very excited about that product launch, and there's much more in the pipeline to come for Kwikset this year. So now, yeah, you see several quarters now with challenging organic growth numbers, but then very strong growth through acquisitions. Our sales 48% up if you compare with 2019. Our EBIT margin, like I mentioned, back into the 16%-17% bandwidth on a 12-month moving trend at 16.2%, and an EBIT margin on a run rate of 17.1%, even slightly above that bandwidth. So better top line, better margins, therefore accelerated operating profit, record operating profit in the quarter, and the run rate EBIT up 63% if you compare with 2019.
Acquisitions, like I mentioned, active quarter again with eight acquisitions closed in the quarter, 26 for the full year. Those 26 acquisitions represent an annualized sales of close to SEK 8 billion. And then we also now in January divested almost everything of the citizen ID business. There's still a very small part remaining linked to the U.S. green card business where administration documents with U.S. government takes a little bit longer. That divestment represents an annualized sales of around SEK 1.4 billion. Some highlights on the acquisition side, Lawrence Doors, an acquisition for entrance systems, a U.S. manufacturer of coiling steel doors and shutters, adding complementary products to our core business, and they had a sales of SEK 310 million in 2024. Premier Steel Doors and Frames, an acquisition for the Americas, a U.S. manufacturer, Hollow Metal Doors, complementing our current product portfolio on the Americas side.
They had a sales of 380 million SEK in 2024. If we then zoom in into the different divisions, starting with EMEA, EMEA had a stable organic sales development, I think a good result giving the market conditions. They had good sales growth in the Middle East, in Africa, and in Central Europe. Stable sales growth in Nordics, where definitely in Sweden we have seen market bottoming out, and we should from here onwards start to see a recovery in Sweden, which is obviously an important market for us as well, top line as bottom line wise, and then a sales decline in South Europe and in UK Ireland.
Very strong execution with an operating margin of 14.8%, 40 basis points better than last year thanks to a strong operating leverage, 80 basis points accretion, good price cost realization, slightly positive mix, but a lot of good actions on the cost side. Good margin improvement despite a dilution on effects of 40 basis points . That's because of the weaker SEK, and then M&A was stable, so overall, I think good quarter for EMEA, good quarter for Americas with an organic sales growth of 2%, with strong sales growth in Latam and North America, non-residential segment, a slight single-digit sales decline for the North America residential segment. An operating margin of 17.7%, also here good operating leverage, FX dilutive 30 basis points , and then the M&A shows 40 basis points accretive.
So perhaps a little bit misleading because the 40 basis points accretive comes mainly from the bridge on HHI, where we have a positive year-on-year effect. But on the acquisition side, we had a strong dilution of the Level Lock acquisition of 100 basis points, linked to integration costs, but mainly also linked to investments on the R&D side. They are working on several new product developments, and obviously we want to bring those products as soon as possible to the market. Therefore, that dilution will remain more important also now in, I would say, the first half of the year, and then the second half of the year that should more stabilize to normal levels.
If we take the third geographical division, Asia Pacific, a strong organic sales decline of 11%, strong sales growth in South Korea, sales decline in Pacific, and then a significant sales decline in China and in Southeast Asia, where I mentioned earlier that we don't see an improvement of the market conditions in Greater China. We've already something we believe the market conditions are further going down, and where there is also some challenging market conditions in some markets in Southeast Asia, like for instance Vietnam. Operating margin of 5.4%, so a good improvement compared to last year despite a strong decline in top line, so very good execution. Then by the team over there with strong operating leverage of 140 basis points. Also here, FX dilutive 30 basis points, and they didn't do any acquisitions in the quarter, so a stable M&A.
Going to global tech, global tech organic sales of +5%, with good performance in HID, very strong sales growth in Global Solutions in the different segments, and then I think an excellent operating margin of 19.3%. We've here extremely good, I would say, operating leverage of 400 basis points. Of course, good price cost realization, good cost measures, operational efficiency measures, but also helped by a positive mix in the sense we had more PACs for HID, and we had more hospitality for Global Solutions, and they have higher margins. Also helped a little bit by FX 20 basis points, and then M&A dilutive 40 basis points. So very happy with that result. Entrance systems, last but not least, an organic sales decline of 2%, strong sales growth in pedestrian, stable sales in perimeter security, but then a sales decline in residential and industrial.
Residential, of course, linked to the residential market, mainly in the U.S., and industrial, like I mentioned earlier, linked to loading dock business for the logistic vertical. Despite an organic sales decline of 2%, good operating margin of 17.5%. We've also here strong operating leverage, 50 basis points, helped by FX 20 basis points, and then M&A dilutive 60 basis points. That's mainly SKIDATA. That's a little bit lower perhaps than expected because we have always said SKIDATA is around 100 basis points, slightly higher than 100 basis points dilutive for entrance systems. That has to do with the fact that SKIDATA is seasonal. Q4 is their best season, therefore lower dilution. So we should expect a higher dilution now in Q1 and Q2. And with that, I give the word to Erik for some more details on the financial numbers.
Thank you, Nico, and a very good morning from my side as well. I think, I mean, Nico has mentioned a lot of the numbers that you see, but sales was up in the quarter with 7%. That's the same as what we had for the full year. And if you look on the quarter, I mean, the difference between, I would say, the year and the quarter is that you can see that acquisitions were slightly lower, 6% in the quarter was 8% on the full year. If you look on the operating income, it's up with 14%, with sort of on the full year, it's up with 10. And the margin, we have 100 basis points improvement in the margin in the quarter, so we ended at 16.5%.
And then, yeah, we are very happy that we for the full year are actually within the bandwidth with a 16.2% achievement during the full year. In the quarter, we had a slightly less impact on finance cost. So there you see that it's 16% net income plus 6 and earnings per share. In the quarter, it was up with 7%, and for the full year, it's up with 4. And as mentioned before by Nico, we had a record strong operating cash flow above SEK 8 billion for the quarter. It's up with 10%. And finally, then the return on capital employed improved sequentially quarter by quarter with 20 basis points and ended at 14.4%.
If we then look on the bridge, the organic part, price versus volume price is a high one, I should say, so probably a little bit closer than to one and a half, which then leaves that the volume is about 1% negative. You see a very good flow through of 120 basis points or in value, almost SEK 450 million. This comes from price. It comes from lower material cost. We had cost reductions coming out of the MFP of about SEK 170 million, and then we have, of course, other kind of cost control and operational efficiency measures. Currency didn't sort of really have an impact in the quarter. If you look on the acquisitions, I mean, I think Nico mentioned it before, that sort of what makes it a bit strange is the year-on-year effect from the HHI transaction. This is, let's say, it's a bridge phenomenon.
But then it's also, if you look then on Skidata, it is slightly lower in the quarter, so you can expect because the first half of the year is, let's say, it's sort of there. They have, if I call it the lower seasons, so you can expect sort of a higher impact in the first quarters of next year. And then you can also expect roughly a similar pattern then from the Levelock also for the first half of the year. Cost breakdown, positive evolution on the direct material in total 230 basis points. Of that, roughly 100 basis points comes from mix where we had a stronger Global Technologies. We had a weaker APAC, but then we have also some interdivisional mix that explains it.
So if you look at the true, if I call it price versus cost, we had a positive impact of 130 basis points in the quarter. Conversion cost is impacted by, I would say, inflation and higher wage costs, so had a negative impact of 90 basis points. On the SG&A, you start to see that it's less negative. Now it was 30 basis points in the quarter. Sort of, yes, it's impacted by inflation and higher wage costs, but we also continue to do a lot of investments in R&D. You saw before that had a record number of product launches in 2024, as well as investments in our sales organization. Cash flow, a record cash flow, cash conversion of more than 140% in the quarter. Yes, normally the fourth quarter is our best quarter, but this was exceptionally strong.
On the full year basis, we had a cash conversion of 110%. In the quarter, the reason why it is so strong is, I mean, we had a record earnings. We still had good improvement on the working capital, especially in inventory, but then we also have a minor impact, I would say, of sales of a couple of buildings, which also sort of impacts it. If you look on the gearing, net debt to EBITDA is the same as what it was a year ago. It's 2.3 If you look in actual numbers, our debt is now slightly above SEK 70 billion. It's up with roughly SEK 3 billion versus end of September. But then you should keep in mind that during the quarter, we had sort of impact of roughly 3 billion of currencies, negative impact.
We paid a dividend, which is also roughly 3 billion SEK, as well as we had acquisition payments of roughly 3 billion. But that was then compensated by the strong cash flow that we have. So I would still say that we have a very strong financial position on the balance sheet, so we can continue our acquisition strategy. Last slide from my side. I mentioned the numbers before on earnings per share. It went up in the quarter with 7%, and for the full year, we had an increase of 4%. And with that, I give back to Nico for some concluding remarks.
Thank you, Erik. So we believe a good quarter, a good end of the year.
We have a strong sales growth of 7%, and then strong execution giving us a strong operating margin of 16.5% and a record operating income, and then also a record operating cash flow with very good cash conversion. It's clear that we continue to live in an uncertain economic climate. I mentioned the residential market. I mentioned the logistic vertical. I would say we also continue to live in an uncertain political climate where potential tariffs come and go. But that's the reality. That's something we have to live with, and therefore we are still convinced that our decentralized organization helps us to really take decisions on a local level as things will be very different on a local level.
Our being able to take those decisions with local people, we believe gives us a competitive advantage, and we are ready to continue to invest there where we see opportunities, and we are ready to cut costs there where we don't see the market recovering. The board also proposes to the AGM a dividend of 5.9 SEK per share, also to be paid in two equal tranches this year as last year. And then Björn asked me to remind you that we have a sustainability seminar tomorrow and that we have our Capital Markets Day in the U.S. on November the 19th. And with that, I give the word back to Björn for Q&A.
Thank you very much, Nico. Well, that means it's time to open up for questions.
Could I please remind you to limit yourself to one question each with a follow-up so we can allow everyone hopefully to ask their questions? Operator, this means that we are ready to kick off the Q&A, so please go ahead.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Questions 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. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead.
Hi, good morning. Thank you for taking the question.
I'll take the opportunity of the question and the follow-up, but starting with the first question, I wonder if you could comment a little bit on sort of how you're planning around potential tariffs in the US in terms of have you seen any pre-buy? What do you expect to do on pricing? And then I'll ask the follow-up.
Yeah, morning, Daniela. As we have seen, the story on the tariffs for the US changes every day. As you know, we have the strategy to produce as much as we can locally for the local markets. And if you look in the US, I would say more than 70% of what we sell in the US is produced in the US. We previously also said that around 80%-85% of what we sell in North America is produced in North America.
So indeed, Mexico and to a lesser extent, Canada are important import markets for the U.S., together with China, obviously. If you summarize a little bit on group level, I would say that most of our colleagues, competitors in the market are in a similar situation. If you take, for instance, China, we import on the lower end products and solutions from China because China is still, for those types of products, the best place to produce in the world. And then it's clear if import tariffs would come on the different markets, we will compensate or try to compensate that through price increases. As a matter of fact, when Mexico tariffs were initially announced, we were ready with our letters to go out to increase prices. Now, of course, we have held back as the tariffs on Mexico were also held back.
But in short, most of what we sell in the U.S. is produced in the U.S., and for the rest, we will compensate through price increases. We are the market leader for most of the things we do. Therefore, also we have the task to increase prices as first, and then we are confident that the market will follow.
Thank you, and then just in terms of your view regarding the U.S., I think over the last couple of quarters, you have talked about some confidence, I don't know if confidence is the right word, but some optimism regarding Resi potentially troughing. Given all what is happening in rates and the quarter being slightly down, has your view changed in any sense, or how do you think about the U.S. Resi outlook now?
So, perhaps I try to answer in more general on the U.S.
If you take commercial, like I mentioned earlier, we are still very positive on commercial, on non-residential development for the U.S. That's also translated in our own internal and only internal indicator long term that we have our spec business where we see good momentum. We are also a bit more optimistic now on the logistic vertical because we have seen the first orders coming in from, let's say, the big guys, and then normally the market follows. But like I said there, when we get orders today, lead times are between six and nine months, so it's more recovery towards the second half of the year. On the residential side, it's clear that we are less optimistic today than three months ago in the sense that it's clear that interest rates will go down slower and that interest rates will go down less than we thought three months ago.
Obviously, interest rates are important for a recovery of the residential market. That being said, I think the comparison definitely becomes easier compared to last year. Then I think interest rates is not the only story on the residential side. I think there's also the need to invest in new houses, and I think a lot of people also perhaps take the decision now to stay in their house, and they will do any of our bigger refurbishments in their houses. We are still confident that the residential market is going to recover, but we are less optimistic on the timing than we were three months ago.
Thank you very much.
The next question comes from Gael de-Bray from Deutsche Bank. Please go ahead.
Thank you. Good morning, everybody. I have two questions as well. The first one is on the organic growth dynamic.
Volume growth has actually been negative for nearly two years now, and you said that accelerating organic growth remains a key priority. So specifically for 2025, I mean, do you see some kind of inflection point now, and what should be the drivers of this potential inflection point?
I answer this question first because you said you had two questions, but okay, I will answer this question first. I don't agree that it's more than two years that we have seen negative volume growth, but it's true that since several quarters we have seen negative volume growth, and I would say that is really the only challenge we have because if you see top line, we have good pricing, we have good growth to acquisitions. I think we have good execution, good EBIT margin, excellent cash conversion and cash flow.
So the point we really have to work on is get this organic volume growth back. Then, of course, we live in a market we experience every day, and I think it's important to make sure that at least we are performing in line with the market and preferably do a little bit better than the market. And it's clear that in those markets where you are a clear market leader, it's very difficult to do better than the market. But I would argue if you look over a longer period, over the period perhaps that you mentioned that we definitely have overall improved our relative position in the market. So in other words, have done better than the market. I think that's the only thing we can do because we live in a given market condition.
For this year, again, I think that the commercial side of our business, two-thirds of our business will remain on a good, healthy level, and I think we should be able to realize good growth on that part. I mentioned earlier the logistics vertical where we are confident that it has bottomed out and it's coming back, and we should see there good momentum on the sales side in the second half of the year. The question mark remains the residential side because there the only positive is that the comparison becomes easier with last year. And then at least that in some markets in Europe, we should start to see momentum from the interest rate cuts. For us, an important market, like I mentioned earlier, Sweden. Sweden has now done five interest cuts. The first one, I think almost a year ago.
And we know that it takes around nine months, perhaps two years before we start to see that in our numbers. Those five rate cuts together in Sweden are important. So we are confident that in Sweden, we will start to see the recovery of our residential business now soon. And again, Sweden is an important market for us. It's a big market and also a profitable market.
Thanks a lot. And the second question I have is on the margin side. There's now only SEK 39 million left for provisions for restructuring on the balance sheet. So I was a bit surprised not to hear you commenting on the next MFP program. So any comment on that, please? And specifically, I was wondering if the size of the potential next MFP program could be dependent on the magnitude and the timing of the tariffs.
So on MFP, we have said that we would announce MFP 10 in the Q1 call. As a matter of fact, we are finalizing the scope of MFP 10. And a sneak preview, perhaps we can say that MFP 10 is very similar. It's going to be very similar as to MFP 9, as well in size as in dynamics with all divisions contributing. And we will come with the details then in the Q1 call. And obviously, that MFP 10 program is important on protecting the bottom line, like you mentioned. Then, of course, we continue to do day-to-day operation efficiency against through lean, through VA, VE automation, robotization. And we have also continued to increase prices. We have increased prices end of last year, beginning of this year. Those price increases are now kicking into the market.
And then on the tariffs, no, tariffs have no effect on our MFP plans because that's much more long term. But tariffs obviously can have an effect on our pricing component. If tariffs would go up significantly, obviously, we will do more price increases and then the price component would be higher.
Thank you very much.
The next question comes from Andre Kuchnin from UBS. Please go ahead.
Good morning. Thank you very much for taking my questions. I'll actually start with a follow-up. Just on pricing for 2025, if we put the tariffs issue aside, how would you expect pricing to develop? You were quite clear a year ago to say that 2024 would be a year of still clearly above normal pricing. Can we say that about 2025 too, or are we now normalizing?
So if you look prior to COVID, we were living in a low inflation world and prices were around 1%, slightly lower than 1% perhaps. Then, of course, we have had a couple of years of hyperinflation, and then last year was still an important year from an inflation perspective. Last year, our price component was slightly above 2%. I think there is consensus that in the future, and definitely also this year, we will live in a world with higher inflation as you compare to prior to COVID. So I would say the price component should be higher than prior to COVID, so higher than 1%, but lower than last year, slightly above 2% because it's a little bit more normalized. So it will be somewhere between 1% and 2%. I think 1.5% as an ambition level would be a good level for the price component this year.
Then, again, everything will depend on how tariffs might impact that number.
Thank you. And my broader question is on the acquired growth and the acquisition and acceleration that you've seen over the last two, arguably three years. Could you just maybe talk about what enabled it? Was that more kind of better hunting grounds and willingness to sell by vendors, or did you change anything, or kind of did you add acquisition capacity in any way at the group? I'm just trying to think if this is obviously three years. We can extrapolate that as a trend, but wanting to understand that a bit better before we do that.
I would say it's in the first place because of the active work we have done on acquisitions in the different divisions. We have five-year strategy plans for every division that we also review on a yearly basis.
As part of that strategy for the division, we have obviously also an acquisition strategy. Every division says, "This is the type of companies we would like to acquire." Then we build a funnel, and then we start to talk to people. Some people we have to talk to for 10 or 15 years. Some people are immediately ready to sell. That's a work we have been doing since many years. As you know, from our Capital Markets Day, we have said that we have identified more than 900 potential acquisition targets. We are not talking to all of them, but we are definitely talking to many of them. Therefore, it's a continuous job, I think, well done by our different divisions.
Through that work over the recent years, we have seen now more activity of people that were willing to engage with us and sell their business to us. Thank you. The next question comes from George Featherstone from Barclays. Please go ahead. Good morning, everyone. Thanks for taking the questions. First one, just wondered what kind of environment that you're setting the business up for in 2025. Is it a more defensive posture given the uncertainties you expect on growth? Then when we think about 2025 more generally, will it be more of an M&A-driven top-line growth environment like it has been for the last 18 months or so? Obviously, like I mentioned earlier, our challenge is really how to get back to positive organic volume growth. That's an ambition we have for this year, and that's what we are working hard on every day.
You have seen that we have invested a lot in new product development, trying to create that additional demand in the market and trying through new product development to also do better than the market. So that is a priority for this year. When it comes to acquisitions, the spillover of the acquisitions we did so far is around 3% for this year. And then we are confident we will do more acquisitions this year. So also acquisitions will continue to be an important contributor to the top line this year. Then how much? I don't know. It depends. We are talking to a lot of companies, but I don't know if we will come to an agreement to buy or sell for those companies. So we take that as it comes. And there our ambition to grow 5% through acquisitions over a business cycle remains intact.
I would say also the 5% ambition on the organic side remains intact. It's clear to see a strong recovery on the organic volume side, we need also help from the residential market. As being a strong leader on the residential market and in some divisions being very exposed to residential markets, obviously it's difficult if the market is not coming back.
Okay. Thanks for that. Really helpful. Just to follow up then on something else in the report, your return on capital employed had dropped quite significantly in 2024, which I guess is mostly at the impact of HHI. But just wondered what's the level you're looking to target from here and maybe the key drivers that you have to improve from the level you're at today?
I mean, as you rightfully said, the main impact on the return on capital employed is HHI. Then, of course, we have other acquisitions also with impacts. But I think for us, I mean, we don't set a specific target number that we have, but we want to see a continuous improvement like now we had between the Q3 and the Q4, where the 20 basis point improvement. And that is something like we want to continue to sort of see a positive evolution then on the return on capital employed.
Thank you.
The next question comes from Vivek Midha from Citi. Please go ahead.
Thank you very much, everyone. And good morning. I have one question and one follow-up, please. My first question is on the entrance systems margin, please.
So on the quarter, you had the 60 basis points dilution from M&A, but that does imply that on an underlying basis, you're still seeing very good momentum on the profitability side. So could you just walk us through where you see sustainable margins for that division in the midterm? Thank you.
We have always said that we would be happy if entrance systems would be within the bandwidth. We should not remember where entrance systems come from. Not longer than two years ago, they were below 14%. So I think they've done a very good journey over the recent couple of years. So we still want to remember that statement that we would be happy if they are above the 16% for, I think, two main reasons. One is SKIDATA dilution . As we mentioned, SKIDATA will dilute more than 100 basis points over a year.
It's true that it was only 60 basis points in Q4, but like we explained, SKIDATA is very seasonal. So the dilution in Q1 and Q2 will be significantly higher than the 60 basis points that we saw in Q4. And the second thing, of course, we have now good tailwind from a positive mix service versus equipment. We make better margins on service than on equipment. And we're happy with that, but obviously, we want to see the equipment growth coming back, also when the logistics vertical will recover. And then we will see that mix shifting more towards equipment where we make lower margin than on the service side.
Understood. Thank you. My follow-up is just on the exit rate. Can you give us any color on how the first few weeks of the first quarter have trended in terms of growth? Thank you.
Because even for the full month of January, because we have looked now at the full month of January, we can say that it was slightly better from an organic growth perspective than Q4. Then, of course, we have to say that January is a small month. On top of that, we have Chinese New Year affecting a bit the Asia business. We could say that Q1 is really made or broken in March. March is really the heaviest month. But definitely for January, organic growth rate has been slightly better than Q4.
Thank you very much.
The next question comes to Alexander Virgo from Bank of America. Please go ahead. Mr. Virgo, your file is open. You may proceed with your question.
Thank you very much. Morning, Nico.
Morning, Erik.
I wondered if you could talk a little bit about global tech.
You've obviously got some fairly easy comps as we move into 2025. It's good to see the growth returning there. So could you just talk a little bit about what we need to think about as we model 2025 numbers? And perhaps a comment there on the operating leverage as well, given how strong it was, what's driving the mix there to, again, help us think about how we model 2025? Thank you.
So perhaps we should split a bit between global solutions and HID. HID is around 65%-70% of global tech, and the rest is global solutions. If you see global solutions, in almost all verticals, they have seen very high single-digit growth throughout last year. We continue to see good momentum, so we should continue to see good organic growth for those different verticals in global solutions.
From the different ones, like we mentioned earlier, hospitality is the better margin. So if hospitality grows faster than the others, it has a positive mix. If the others grow faster, it has a negative mix. Obviously, the others are still smaller than hospitality. So in a way, we want the others to grow faster than hospitality because we want to grow the other verticals to a similar level as hospitality. And therefore, if that happens, it should have a negative mix effect on profitability. That being said, we then also acquired InVue in global solutions. They have a good margin, double-digit margin, so they should also help from a profitability perspective for global solutions. If we take HID, PACS is now back to normal, you could say.
And if you look prior to all the disturbances in supply chain, PEX was a business which was growing somewhere mid-single digit, like kind of a diesel. We are confident that that will now be the case also going forward. And then everything will depend how successful we are on the other verticals, how fast we can grow the other verticals. And there will be the same picture. PEX is the best profitable business in HID. The others are smaller and lower profitability. We have the ambition to grow the others faster. And if we succeed, then that would also have a negative mix effect.
We remain with statements that we have made earlier in the sense that we said global tech should be able to grow faster than the other divisions and should have growth numbers more high single digit and should have an EBIT margin slightly above the 16%-17% bandwidth we aim for as a group, so above 17%, but not 19%, 20%, like some of you perhaps have dreamed about in the past.
That's very helpful. Thanks very much.
The next question comes from Rizk Maidi from Jefferies. Please go ahead.
Good morning, gentlemen. I'll stick to two. Maybe if we can start with the Nordics. I mean, five consecutive interest rate cuts in Sweden, but I do remember that your business has been quite resilient in the face of the decline that we've had in the Nordics over the last few years.
Can you just remind us how big of a drop you've seen there from the peak? And also how do you think about the sort of shape of the recovery? Do you already see it in your order book? Because I remember you, Nico, always said Europe is second after the U.S. sort of rebound. Just perhaps any thoughts there? And I'll start here. The second one, basically just quickly on the price cost component, 130 basis points positive contribution. Just how should we think about that in sort of Q1, Q2, and even potentially the rest of the year? Thank you.
We start on Nordics and U.S. Europe. Yes, we have always said that we were convinced that the U.S. would recover faster on the residential side than Europe. We still believe that might be the case if you take the full market.
Although, again, we are less optimistic on the U.S. recovery today than we were three months ago because you have seen the decisions of the Fed, and if you look at interest rates and where rates of the loans of people that own a house in the U.S. stands, there is still an important gap. And those interest rates have to go down in the U.S. to really see that strong recovery of the residential market in the U.S. Same is true in Europe. If you exclude Sweden, I think the ECB is also late, or perhaps very late in cutting interest rates, and so it will also take there a bit longer if you look in most markets in Europe. We are more optimistic on Nordics, Sweden in particular, for the exact reason like you mentioned that we already have had five cuts.
The first cuts are since a year or so ago. We are confident that Sweden has bottomed out and that from here on we should start to see good recovery. It's true that we went much less down than the numbers on new build or the numbers that you read on construction market in Sweden. In the worst periods, we were down mid- to higher single-digit. Therefore, also the recovery will be more moderate as we went less down. It should definitely help us from a growth perspective for EMEA. When it comes to the 130 basis point accretion from price versus cost, we had also 100 basis points on the mix.
We are confident that we will continue to see good accretion, price versus cost, also now in Q1 and in Q2 because material indexes have stabilized on what we believe is a good level. And then, of course, we, like I mentioned earlier, have continued to increase prices end of year and beginning of this year. Then, depending on how much of those price increases we will realize in practice and depending on what the material indexes will do now in the coming months, we will see what it then means for the second half of the year. But definitely for the first half of the year, we are confident Q1, Q2, we should continue to see good accretion price versus cost, not on the same level as Q3 and Q4. You've seen that Q4 went slightly down to Q3.
We should expect a further going down, but still a good accretion.
Thank you. Just a quick update from me. I am informed that there's just one in the queue, so we'll probably have time for another one if there's another follow-up question. Operator, please go ahead.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Jonathan Day from HSBC. Please go ahead.
Hi, good morning. Thanks for taking my question. I was just wondering if you could talk a little bit more about the Americas again and just go into what you're seeing by channels, the big box, the sort of new build and building channel. And in terms of the margins, I know you sort of decentralized the HHI, P&L.
Just wondering if you can sort of shed any light on any sort of variations that you're seeing in terms of performance, profitability across that business now. Thank you. And the question on the Americas, is it specifically for the Americas division or more in general for the Americas market or the U.S. market? I guess a bit of both. I mean, market color would definitely be useful, but then obviously margin is more specific.
So if you take U.S. or North America markets and we split it up a little bit, we start with commercial. Like I said, we are still seeing good momentum on the commercial non-residential side. Perhaps not as hot as two years ago, but very good momentum still. Despite some market indicators like ABI index pointing in the wrong direction, then the Dodge index is perhaps a little bit more positive.
But if we look at our own internal long-term indicator, our SPAC business and the values we SPAC, we still see also there good momentum. Like I mentioned earlier, we have seen good strong double-digit growth of our SPAC activity in Q4. You might remember that we were a little bit concerned on the healthcare vertical that, where our SPAC business went down in Q2 and Q3. That has now seen a very important pickup in Q4 to that extent that Q4 more than compensated for the decline in Q2 and Q3. So very happy about the healthcare SPAC activity that came back on a strong level. If you look at a bit of different verticals, obviously institutional is better than pure commercial. So K-12 universities, strong healthcare, strong government, strong data centers, very strong.
And then a bit weaker offices should not be a surprise, multi-family, these type of things. If you look on the residential side, I would say it's very bumpy and it varies a little bit. I would say almost week to week. Some weeks people are very optimistic that it has bottomed out and that we see recovery as well on new build as on R&R. And then the next week when the Fed comes with new news, people are perhaps again more uncertain. I believe that on the residential side it will remain bumpy for several quarters to come. Again, on the residential side, the advantage is that the comparison now becomes easier. Like I mentioned, our residential business was in Q4 down small, low single digit. And on a yearly level, it was more or less flat. And then we will see what happens in the next quarters.
Then on the industrial side for entrance systems, in general, industrial activity, we see good momentum. The logistics vertical, like I mentioned earlier, is very important for us for the industrial segment in entrance systems. And there we are definitely convinced that it has bottomed out, that from here on we see recovery, only that it takes a little bit longer to translate those orders into sales. On the pedestrian side, so also retail and other verticals for the pedestrian activities, we still see good momentum. And we are confident that that will continue. And then obviously our service business is more our own efforts. And there also we are confident that the service business will continue to grow. When it comes to margins, as you know, we don't give margins for the different segments.
What I can say is that we are happy with the margin development for the residential segment, North America, that we are delivering on our ambition of realizing that $100 million synergies within the first five years, that we continue to make good progress there on the synergies also in Q4 and that we are confident that we will be able to continue also that journey now in 2025.
Great. Thank you.
Ladies and gentlemen, that was the last question. I will now look to turn the conference back over to Björn Tibell for any closing remarks.
Thank you very much, and thank you for the interest. It means that it's time to round up. If you have any follow-up questions that you come up after this, please feel welcome to reach out to Isabelle or myself at Investor Relations.
I guess it remains only for us to thank you for your interest and participation. We look forward to speaking and meeting with you in the coming weeks. Thank you. Thank you.