Welcome to the Beijer Ref Q3 presentation for 2023. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the CEO, Christopher Norbye, and CFO, Ulf Berghult. Please go ahead.
Hi, everyone. Christopher Norbye here, sitting with Ulf and also Joel Davidsson, who will be taking over as CFO going forward. So we're all three here in the room in Malmö. So then we'll get started. First slide is the Beijer Ref at a glance. As you can see, our rolling twelve continues to increase. I think more interesting here is that we joined a new market here in South Korea as an acquisition during the quarter, so now in 45 countries around the world. And then, of course, we'll come back to also we made another add-on acquisition in the quarter in the US, as we have been discussing that earlier. Moving over to the next slide, a little bit highlights of the quarter.
Sales of almost SEK 8.5 billion. So we continue our strong growth, +42%. Of course, the majority in this quarter are supported by our acquisition in the US, but also other acquisitions that we've done during the year. So continues to have a good growth path in total. The organic sales was -4% in the quarter. We'll come back a little bit what that relates to. I would say the majority is in HVAC and one day less. And then the acquisition, I would say, performed very well, and we'll continue to have a good tailwind on the currency.
The EBITDA continues to be very strong, with margins of 11.3%, so continue to be good development in our business, driven by a continued strong gross margin. So we grow EBITDA 54%. And then also, as we have been fairly clear about, the cash flow is now turning in a good way. Record cash flow for Beijer Ref in a quarter in Q3 as we are reducing our inventories, flushing out accounts receivable, but also we'll come back to quite a negative effect, that we're not buying anything or very little from our suppliers, and we expect cash flow to continue to be strong here in Q4. The result, an increase of 32%, and EPS continues to grow by 8%.
So, I would say a good quarter, good margins, and a strong cash flow in Q3. Moving on to the next slide. If you look at our different product groups, as we split up our business, on the organic side, commercial industrial refrigeration continues to be in a stable level and good activity, +3% in the quarter. OEM continues to grow. A little bit of a mixed picture, but very positive in Europe, where our main company, SCM Frigo, continues to have a very good development, double-digit growth, and some more challenges in APAC, driven by China, but we expect China to improve as we move into Q4.
So I would say, very happy with the OEM development in, in Europe, stable on the commercial industrial refrigeration. Then we have HVAC, - 11%. And I think it's important just to have a little bit of reference point. We still see good activities in the, in the HVAC segment on the, on the underlying business, but, having some respect from, last year in, Q4, Q4 and Q1, where 25%-30% organic growth, a lot driven by a, a chaotic situation on energy prices, gas and oil, and, and a lot of people, moving into, these type of products. So underlying, still good, but compared to those type of comps, it'll be, a challenge over the next couple of quarters, until we normalize, our business.
But in general, I would say good activities in, in that area as well. So that drives our -4%. Inventory, we'll come back to a little bit more under Ulf. North America, we'll touch upon a little bit later. I think on the acquisition side, happy to announce moving into South Korea, buying one of the market leader there in refrigeration, and see a good growth path by introducing our natural refrigerant products and expanding the business with new products. So very happy about that entry. Then also think it's important to mention AMSCO Supply, a strategic add-on from us, and we expect more acquisitions as we continue to grow in the US. So a fairly active quarter also on the acquisition, and we'll come back to.
I would believe that the acquisition were financed by our cash flow we generated in the quarter. That's why net debt hasn't changed, but a very good addition to the company. Next slide. Looking at EMEA, I would say continues to operate at a very good level on the margin side, as we're, of course, also flushing out a lot of inventory. I would say gross margin continues to be strong in the segment, and we expect this to continue. And we also expect that the inventories continue to move down here in Q4. So we're getting in a good traction on the cash flow.
I would say in EMEA, good growth on the OEM side, refrigeration, and then HVAC, a little more challenged because m ost of this growth in HVAC came in Europe, the last year, Q3, Q4, and Q1 related to the energy situation, while APAC was more stable.
And of course, U.S. driven by other areas, and we'll come back to that. We also acquired the company Condex here, and they're sort of consolidating into that a strong HVAC distributor as well. So I would say in general good development on Ref and OEM in Europe, and then high comps on the HVAC side of that's affecting us. But in general, I would say still a good activity. Moving on to APAC. APAC is now moving into summer season. Mid-October is usually where we start seeing it in Australia and New Zealand, which are our biggest market.
So I would say a good start to the season there, while of course, EMEA and the US are moving more into off season. So continue to be an active market for us. We mentioned South Korea stable on the margin side, but as volume now starts to increase in Q4 and Q1, of course, we'll get a pickup here on the volume side and started promising in this region. So we look forward to follow this here for the high season for the business. Next slide. Then North America, happy to see that we're growing at a higher sales in Q3 versus Q2.
So I would say a stable market for us in our regions, a little bit warmer in Q3 versus Q2 compared to last year. That's driving some of the math also. Towards the end of the quarter, we start seeing better product supply from our key HVAC supplier that helped us drive sales. So we're now in Q4, getting more and more into a stable supply chain situation. So we believe that, of course, will help in 2024 as well from Q3 in 2023. So all in general, positive development in the US, stable side of the margins, more equipment sales in Q3 versus Q2, where there's more repair. But in general, a good and stable development in the US.
Of course, during the quarter, we added AMSCO, that we're already started to work together with. It's aligning with our existing territory as the same strategic supplier, good possibilities for us to put on and expand our platform. And then also just towards the end of the quarter, we start to launch private label things here, so we're very interesting to follow this, moving forward. So in general, very happy with the U.S. performance and the outlook, going forward. And we'll come back a little bit on how regulation is accelerating in the U.S. as well, but I think will have a good impact for us, on the long term. So moving on to the next slide. So to sum it up, 42% overall growth, organic 4%.
We'll come back a little bit more on that one, a good EBITDA growth, and then positive EPS growth as well. The next slide. Similar here on the sales side, more broken when you see the currency continues to be a tailwind for us, and the euro and the dollars continue to be strong versus the SEK. And then M&A, +39%. So I would say, we continue good development on, on the M&A side and their growth as well, which gives us SEK 8.5 billion in sales. Here you can see, of course, the historical sales that we continue to perform very, very well, +42% compared to +38% Q3 last year.
You can see the difference here is, of course, the organic growth coming into very strong comps, driven mainly on the HVAC side, as we said in Q3, Q4, and Q1 last year. But we'll continue to have a good acquisition growth, and we'll come back a little bit what we see on the HVAC side. But in general, I would say still good activity in most of our regions in the world. Moving on to the next slide, a little bit of, I guess, a new slide explaining on the HVAC to clarify a little bit what we see. Now, if you look at our HVAC business the last five to 10 years, it's more an organic CAGR of 8%-10% per year, which I believe is a very good organic CAGR.
But then you saw in Q3, Q4, and Q1, you had extremely high growth levels, a lot related to the situation on people buying air to air heat pumps to manage electricity, gas, oil, and other solutions in a lot of countries. And now we see a more normal pattern. But we still see long term, very good possibilities in the heat pump side, the electrification of the world, also banning of gas. So long term, the trend still looks very strong, but of course, the short term are a fairly strong comps to manage, and that's why also saying the underlying activities is still fairly good in the markets. Okay, moving on to next slide.
EBITDA growth, we went over that, 54%, driven by, of course, higher sales with our acquisition, but also continue very good margin development, 11.3% EBITDA margin in the quarter. Moving on to the next slide, here you see a longer trend on the margin development. As you can see here, now Q2, Q3, Q2 and Q3 will be our highest quarter on the margin because it's our two highest sales quarters, and then the US follows a more similar trend like Europe on having a Q2 and Q3, a high season when it's, of course, really hot. And then now it's moving into Q4 and Q1, it's more replacement of system with maintenance and service, but you're also moving more to heat pump.
The U.S. does have a large heat pump sales there now in Q4 and Q1, and as you know, in Europe, we're moving more and more into the heat pump segment as well. And then APAC is moving into summer season, so of course, that's a strong cooling segment of our business. So, moving on to the next slide. And here is the EBITDA growth that we can see Q3 2022 +70% and 54% above that this year. So we are pretty satisfied. Our margin, our business are developing in there well. Okay?
Okay. Then we have the next slide, which is then a P&L statement. And if you look then at the amount—Christopher went through the EBITDA, so if you go further down, you see the financial net, which is SEK -158 million, which is then impacted negatively by an exchange deviation of SEK 40 million. So the underlying financial net is then 100 down to 120 million. And then the tax in the quarter, that is a normal 25% versus last year 24%, but the 25% is then what we have been having for the last quarters. And then I move over to the next slide. Then we also talked about earnings per share, so there's an 8% increase. And then to the next slide, then operating cash flow.
So I have three slides on our cash flow, just to explain the delta. So this first slide here is then the movement from Q3 2022 to Q3 2023. As you can see then, we have increased the EBITDA, also have a very positive movement of working capital with SEK 481 million, slightly higher CapEx, so SEK 55 million, and leasing SEK 27 million, and then others, SEK 13 million. And as Christopher said, that the nice thing in quarter three, that was actually the operating cash flow, SEK 1.1 billion, financed the M&A activity in the quarter or closer to SEK 1 billion. So the net debt is the same in the quarter as we entered it. The next slide is then explaining the movement in the quarter.
So in the quarter, we had EBITDA of SEK 1.1 billion, and then we had a working capital movement of SEK 167 million, the CapEx - 90, and leasing 125, leaving then to the SEK 1.1 billion. But just to explain the SEK 167 million, the working capital movement, we have a next slide showing the specification of that. So we have then a release of inventory of SEK 525 million. We also released on accounts receivable of SEK 717 million, and then the negative side then on then the inventory reduction is that we have then, we are buying less, and then we're also getting less accounts payable. So we have a negative delta on or negative movement on, on accounts payable with SEK 848 million.
And then we have other working capital items, which is basically, accruals related to salaries, like vacations and et cetera. So that had a negative impact in the quarter. So that leave us with SEK 100 million plus SEK 167 million in the quarter. The next slide is then showing the quarterly development of cash flow, and as Christopher said earlier, this is the best quarter we have had in cash flow, so SEK 1.1 billion, and hopefully, we will then see a little more, or we will see a good development also in the Q4 2023. And then my final slide is then the net debt, which is then we have then the leverage of net debt, EBITDA of 2.3 reported.
But if I then exclude the leasing, which is mainly our rental contracts on our branches, and then the pension, we have a leverage of 1.94 versus last year of 2.31. So that's also improving. Then I hand over to Christopher on the last slide here.
Yeah. S o a little bit, a lot of summary points, but you heard most of it. The way we summarize the quarter with good profitability, strong cash flow, strong growth. Growth here continues to be high, driven by the acquisition agenda we have. EBITDA continues to follow that growth, and of course, continues to have improving margins, so that's driving that even further. Cash flow of almost SEK 1.1 billion, and I think we'll be very bullish on that, and we'll continue to be that in Q4. This is of course something that we are working actively with.
We're also happy in the U.S., supply chain is improving, stable market in Q3, good activities in most of the segments, in the U.S., and we continue to have good margins and good activities also on the integration from private label, a lot of activities on refrigeration that will grow in the future, and branches investing in. And then, of course, first add-on acquisition in the U.S., AMSCO Supply, happy to welcome them to our U.S. platform and more to come in that area. And then also entering a new market in South Korea, one of the market leaders in refrigeration, where we think there's a lot of value creation we can do over the years and also continue to grow in new markets.
So summary Q3, I think we're a good performance in general, good activities on the acquisition side, improving balance sheet at a good level, and we think a good cash flow going forward. If you look at a couple of things that I think is fairly relevant, that happened under the quarter, is that with some decision under the updates on the F-gas regulation in EU, which further accelerates the phase out, which means that they will take down the quotas even further until 2030. And a couple of things that will happen long term with this acceleration is that, of course, it'll be tighter to get access to the refrigerants, and we expect them long-term prices will get positive in this journey.
But I think even more important, of course, is that you will have to accelerate your phase out of all your equipment running on old F-gases. Because we can already now see a tightening of the supply, which means that you know you have a risk of not getting a hold of enough quotas to supply the demand out there. So we're being very positive for the OEM business for us long term to drive the acceleration of phasing out all the old system. Of course, very good for the environment. So we believe it's a positive thing, and of course, also you get more regulation on how you're gonna move into natural refrigerants on your HVAC system, you know, your heat pumps.
That will also, when that comes in a couple of years time, have, of course, a different type of price picture with these type of products. So, good long-term trends, accelerating on the F-gas in EU. Then also in the US, relevant to mention is that by 2025, HVAC the regulation is moving into natural refrigerants. There was a lot of talk before regulation that was manufacturing date, now they're moving it to installation date, so it's also accelerating, and that's also gonna have, of course, a long-term positive effect on our platform in the US, as we expected. So continuously good trends in the changes and phase out of products that's beneficial for Beijer Ref.
We talked about the US getting better on the supply chain, which we expect then in 2024 to get a little bit of a pickup, so we're gonna have a better product. [audio distortion] of course, our main supplier is already prepared for the natural refrigerants in 2025, so it feels good to have a very good partner in the US. We also launched the Sinclair at the end of the quarter. It's gonna have a more effect on 2024, and it also allows us to be a little bit more aggressive in segments that we're not active today with the platform, so positive. And for that, our refrigeration continues to grow very nicely for us, but from a small base, as we disclosed before.
We do have respect for the next couple of quarters on the comps, especially on the HVAC side. As I said, we're growing 25%-30%, 26% in Q3, 29% in Q4, and 17% in Q1. So we'll continue to be a headwind on the comps, on the organic side, on the HVAC, until we get back to more normal comparables in especially in Europe. This is mainly in Europe, while APAC in the US, of course, is in a different situation. We expect cash flow to continue to do well, and we expect to be stronger in Q4 than Q3. And of course, that gives us opportunity on the acquisition side versus working on our balance sheet and debt.
So I think we're in a very good position on the balance sheet, and we can choose a little bit as we continue to generate cash flow. Because we do have a continue to have a good pipeline on acquisitions, and working with companies who have them, both in the U.S. but also in Europe and APAC. So we expect to continue to drive that strategic growth path there in the future as well. So that is the last comment, so we can open up for questions. Thank you for listening.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Carl Ragnerstam from Nordea. Please go ahead.
Good morning, it's Carl here from Nordea. A couple of questions. Firstly, could you say something about the pricing versus volume development for Heritage in the quarter? And also, I mean, of course, you said something about the supplier delivery issues slightly normalized, but would you say that it's back to 100%, the deliveries as of October? And why don't you think we should see a catch-up effect already in Q4? You're more talking about 2024. Is it primarily from a catch-up or also maybe from gaining the market share, so to speak, or how should we look at it?
Yeah. O n first one, we don't disclose the price volume. There is still a price component in the U.S., from price increases that were coming through. So you still have a positive price increase. What I would say in Europe and APAC, it's more stable, you have much less of a price, and it's more all volume. But if you look at the second question, I think it's more a conservative view, because as you move into Q4 and Q1, you're moving into more heating season. And, of course, you can have some kind of catch-up there, but for us, it's more as you move into the summer season next year, where you can have a real impact.
But as we see today, and I was in the U.S. last week, and we were getting in, you know, the final filling up for the package heat pump for the season. So you still have some delays, but in general, today, it's not an issue. So, I mean, you might have a pickup, but I don't expect Q4 and Q1 to be too much affected by it. I'd rather see Q2, Q3 as we ramp up to the season; we'll be in a much better position than last year. And too, of course, with the regulation now moving into A2L already with installation date in January of 2025, we're gonna start seeing those products getting on the markets already in Q3, Q4 next year.
And that's of course a product that's priced very differently. So that's also positive, and I think it's positive for us that our partner is, I would say, on the technology-wise, already there on that technology for the A2L. So in general, I'll see more of that coming towards Q3, Q4 next year.
And speaking of the new product in the US, how will you handle the shift to the new product, inventory, and supply chain-wise? And also, do you have any views on sort of the pricing? We have heard what Carrier is talking about, et cetera. But is it low double digits you expect as well for you? And also, could you remind us of the equipment mix of Heritage so far, as well as with the new company entering here?
Yeah. S o there's a lot of questions in there. I'll try and answer all of them. You have to remind me if I miss something. But in general, this regulation or update, it just came out, you know, two weeks ago, so we're still going through it together with our partners on the equipment side. But I think what will happen is that you'll start, you know, already in Q3, Q4, phasing out the old products, and you know, reducing your inventory there, and getting the new product online. Because, you know, you need to phase it in the right way, because by January [audio distortion], 2025, you cannot sell the old product.
That's why you will start seeing the new products going through already in Q3, Q4, because that's the only way to do the phase out in a controlled manner. But we are discussing that together with our partner, our main partner in there, and they're, as I said before, fairly long on the product portfolio as they've been the one that converted first into the technology that's already ready for natural refrigerants. I think when you talk about pricing on this product portfolio, my guess is also based what I'm hearing from, you know, Watsco and Carrier that's listed. We're talking to our partner, of course, but you hear anything from 10%-20%, but let's have a conservative view and work with 10%.
That's what you're hearing in the market for these, these new products in there. If you look at the equipment side of Heritage, and I know you had a question there on AMSCO as well. Heritage is about 35%, 35-40% equipment, and AMSCO is a little bit more, running around 50% equipment.
Okay, very clear. Also entering Q4 in HVAC. I mean, you're talking about tough comps. We saw it in the quarter as well. But also, I guess you and your business, in looking at the organic growth, will have a different mix. I mean, Asia coming into high season, seemingly better momentum than Europe. Also in Europe, you're entering heating season versus a cooling season, where we're maybe talking more air-to-water products. So how should we look at that mix playing out then during Q4, what versus what we saw in Q3? It doesn't sound like at least an acceleration of the negative organic growth, but could it even be an improvement, or what do you think?
No, I don't see an improvement right now in there. You know, I think when you move into Q4, Q1 last year, you were just trying. And I think it's mainly in Europe, in APAC. Yes, but it's a smaller part of our business. It, you know, you're in cooling, you know, cooling activities now, and the US is of course moving into there, but that's not organic. So it's mainly in the US side of the business, but we don't see any acceleration. And also, remember, what drove this very good growth those quarters was a lot of people buying air-to-air heat pumps for heating to balance their, you know, their grid or the systems in the house.
So, no, I don't see an acceleration of the HVAC sales in Q4, Q1.
Hmm. And the final one to step back here is, I mean, on OEM, low single digits in the quarter. Also, here, of course, tough comps. But have you seen? I guess we also heard Carrier saying that customers becoming more so hesitant or cautious in terms of placing orders. Is that what you see? And have you also seen an increased demand recently, given the tightening quotas in Europe?
No, I would say that if you look at our Q3, and of course, I would say that we are doing better on the commercial side than a lot of competitors than the one you can look at. So, I mean, Europe was still double-digit growth for us in Q3. So on our end side, it was strong, and of course, we also have energy that's going extremely well supporting the whole OEM side. So you still had comps of flat 28% last year. So, we're happy. Of course, we feel that on the retail side, they're more hesitant on the quotes. But in general, it's, you know, Europe was still good activities and APAC was more challenging.
But retail is lower, but that's not our only customer segment in the business. But retail is a bit slower at the moment. We expect that to pick up more next year. And as you said, this new quota level, I mean, has just hit the market, so I expect that to start moving. You know, you start seeing that towards, you know, maybe after the summer next year when it starts getting tighter and tighter, because that's usually when the installers and the customer will start reacting to it.
We do see, you know, we are, you know, one of the biggest importers in the world here in Europe with quotas, and we are fighting hard for our customers to find enough refrigerants to them, and that will only get tighter next year. So, but when we start seeing it on the OEM side, I think it's probably another 12 months before that starts seeing on the equipment side.
Very good. Thank you so much.
Thank you.
The next question comes from Adela Dashian from Jefferies. Please go ahead.
Yes. G ood morning, everyone. My first question relates to the HVAC development in this quarter. And if you could please give us some more color, how much, if any, the near-term uncertainties regarding heat pumps affect the developments in Q3, especially in Europe or primarily in Europe?
Yeah, that's part of it. Of course, I think that moves more into for us as being, especially from the cooling side, moving now to, of course, more heat pump weather type of market. And I think, we see, you know, also, you know, first of all, it's the same situation on HVAC, both on the cooling and heating. It's very tough comps compared to last year. And you also have some markets where you're waiting a little bit on incentive models in Poland, that's a big market. Germany is starting, France, I would say, is positive, and then you have Italy and other markets. I would say that we also need to start getting back to strong growth in that segment short term.
Long term, I think we all see the same trends, as we move into electrification, and the Green Deal, but you need some support of incentive models coming in place in Q4 or Q1 to support it. But I mean, the market is still there, but of course, not at all at the same level as it was last year. I also think you have on the heat pump side a lot of inventory in the market that needs to flush out for some of the other bigger OEMs in the market. If that answers your question.
Yeah, no, it does, for sure. And then maybe also just a clarification point on the earlier comment that you made about organic growth in Q4. Did you say that you do not expect an acceleration in growth in Q4, or was it an accelerated decline in Q4?
No, I think what I said, that with the question on the HVAC side, we didn't see any improvement or acceleration versus comps as we were sitting right now, because, you know, you have the HVAC very strong growth there in Q4 and Q1, and a lot of that was supported by the energy situation that we had in Europe last year. And as I said, the CAGR of our HVAC [over] the last five years more 8%-10%. So I don't see, you know, an improvement on the HVAC versus comps right now, where we sit.
Yeah, yeah, that's what I also thought. Okay.
Yeah. [crosstalk]
But then how should. Yeah, sorry.
No, go ahead.
Yep. How is that being offset by your developments in OEM? Like, as example, I mean, you mentioned that you entered North America with a push by the end of the quarter. Could that contribute at all into Q4, or is that more gonna be a 2024 event?
I believe it's more gonna be 2024. These trends, you know, and but it's gonna be a pretty fast race when you come into Q3, Q4 next year, to manage that transition, a little bit like we saw when we went into the new SEER requirements, in there. So that's more moving into towards Q3, Q4 next year for the U.S.
All right. And then also on, on North American Heritage, specifically, in Q3, I mean, we at least estimate that you experienced a decline in organic growth last quarter. Would you say that that has now moved into positive territory, or is there still declining organic growth in North America?
No, I would say it, it's moved from 9 to flat, stable development in Q3.
Excellent. And then maybe also, if I can touch on the margins that were rather robust, despite the volume development in the quarter. How would you say, how sustainable is this level as you're moving into next, next year? If we were to assume demand to get incrementally worse at this point, could you maybe also then speak more about if you're planning to implement any type of efficiency measures to keep up with the new base, as margins stand today, or, or how should we think about that for next year?
I think, as you remember, there, there were questions last time as we flush out inventory, if we saw a, a margin challenge, and I think as I said then, that no, I don't see that. I see stable margins, you know, strong growth margins across the board. And of course, those things will not only just happen, we're working with that, and we are improving it. So, and of course, if you continue and see, you know, we still see very positive, you know, on the long-term market. So we're still investing in sales resources, we're investing on the OEM side, and et cetera.
But, our ambition is, of course, to manage the margin, and we don't have any, you know, targets or goals or indications that margins should be coming down in the future, if the market not completely changes. But where we sit today, it still looks in a stable way.
Great! I think, I think that's all for me. Thank you.
Thank you.
The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you. Good morning. My first question is on Heritage. If it would be possible for you to give any comments on how Heritage performed compared to a year ago, on both sales and profitability?
Yeah, well, when we now go in organically as an acquisition, so I think the comment I would say that we saw an improvement in Q3 over Q2. That was driven by a couple of factors. One, you know, if you compare it to last year, and I know some of you following it, number of cooling degree days. So we had a stronger heat wave in Q3 than Q2 compared to last year, so that was, you know, a positive driver. We also started to get a better product supply, so we could work a little bit better with our customers. So, you know, it was an improvement over Q2, so, you know, it was a stable development over last year in Q3 that, you know, was a very, very strong quarter.
And on the margin side, continues to be stable. We had a little bit more equipment in Q3 versus Q2 that affect the gross margin and mix. But in general, on our product groups, we're running on similar gross margins as we did last year.
Understood. And then just going back to the comments you made during your initial part of a presentation. Did you say that the HVAC part of your business had had a 7%-8% annual organic growth rate for the last 10 years? Did I understand the year comment there?
No, I said the last five years.
Five years? Okay.
Yeah.
Understood. And then just on a bit on the prior question there regarding margins, but just do you see any changes in the pricing environment or either from customers pushing back on lower freight rates or revaluations, or inventory adjustments, or anything like that? Either if it affect you positively or negatively.
No, I think it, it's a mix of things, and then when that adds up together, it's very stable. Of course, you have some tougher situation in the markets on HVAC, but, we're holding our our situation well. We also, of course, getting some advantages on the products that we are buying, strategically, we're looking into it. So, not too much discussion on freight prices, and we didn't have surcharges or anything related to that anyway in our business. So right now, it continues across the board to be stable. And if I look into what I'm seeing next year from our suppliers, you're seeing stable on the HVAC side, and you're seeing price increases on the commercial refrigeration and refrigerants. How much? Let's see.
In general, it's, you know, it continues to be, you know, at a stable level where we sit right now.
Understood. Then more of a strategic one. Over the past couple of years, you, you have focused quite intensely on, in business improvements and the higher M&A pace, and you've seen the benefits of that within your P&L. Now, as supply constraints are easing, when do you think you can kind of go back to the more long-term strategic initiatives that you planned to implement on the working capital side?
We are working on that, and I think that's something we can come back to next year. Right now, you know, we're looking into the US, how we set that up with our new platform. So we're running through the, you know, the inventory terms in the US, that, of course, will be positive for Beijer because most of the suppliers there are 3-4 weeks. Now we, you know, we'll flush out our inventory and go back to, you know, the levels we've been at before the pandemic next year.
But also here in Europe and APAC, we are working with the inventory set up, also with our suppliers, because, of course, a lot of our suppliers on the HVAC side, we do have some constraints on lead times as it's manufactured in Southeast Asia. But we'll come back to a little bit more on details of that next year. As that will be a focus area for us over the next, you know, strategic on the next 3-5 years on the capital efficiency coming from, especially inventory.
Understood. That's all for me. Thank you.
Thanks, Karl.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
No, no, I mean, thank you for listening. Thanks for good discussion. Maybe the summary went over. I think there are no, no real surprises here, and then strategically and long term, I believe things looks very promising, and I think also generating the cash flow, you know, coming through here now on the inventory side also gives us a lot of leeway on, on the balance sheet and, and how we continue to grow. So thank you very much, and if you have any other specific question, you can reach out to me or Ulf going forward. So thanks for calling in.