Welcome to the HMS Networks' Q4 Presentation for 2025. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to CEO Staffan Dahlström and CFO Joakim Nideborn. Please go ahead.
Thank you. Good morning, everybody. We are sending here from a beautiful winter Stockholm with snow on the streets. It's a fantastic day, and we also have some good news to present, quarter four report. Myself, Staffan Dahlström, will start, and Joakim will take the following sessions about financial summary, and then we end up with a Q&A. So, just a quick highlight, quarter four, we are quite happy to see a very good development on net sales, organic growth, 23%. That's good, we think. On the order intake, we see organic growth, but it's, we see also that the market is still a little bit soft, a bit hesitant. We're happy to get 3% growth, but, we're also waiting for the pickup that we've been talking about, and we hope that this will come 2026 instead.
Very good development on all our profits. Depending which line you look at, it's either 50% or 100% up, so it's. We really see a good development. Good gross margin, good profits, and this lands in an adjusted EBIT margin of 28%, slightly higher than our target, in combination with a good cash flow. We are very happy to see this, and this Joakim will talk more about our net debt and things like that, but this really plays out with a good adjusted EPS of SEK 4.17 . So we closed 2025 as a quite good year. Net sales, we are growing after quite a lot of years of inventory reductions and things like that. We are back in good shape again.
We see the order intake has been growing organically by 10%, so the market is not great, but it's not that bad either compared to 2024. 9.11% as the adjusted EBIT, and we see also at the end that we are doing a good adjusted EPS, SEK 13.73, and this also means that the board propose the highest dividend so far, SEK 4.80 per share, for the meeting in April. If we look on the markets, we see in quarter four a small improvement in Europe. Also, in Germany, we are growing compared to last year, so even if the data isn't great for Central Europe, we're seeing that it goes in the right direction.
We had a fantastic year in North America, but a little bit of softer market in quarter four, especially for these larger project orders in infrastructure. We're also comparing ourselves with quarter four, where we got some really nice orders in North America. But we're quite sure that North America will pick up again, so we think this softer order intake is a temporary effect in North America. We also made a lot of changes in the Red Lion, and we got this new factory when we acquired this, where we keep on investing. We are seeing a much better delivery performance.
We're not fully yet completed there, but so far, we are seeing that quarter four, we're delivering a lot from the order book, and we're getting back into relevant lead times, and we hope to be fully in shape here in quarter one. So that's good. We also keep our flag high when it comes to sustainability. So our planet target's important for us, and we got approval from Science Based Targets, a significant milestone for the company in our reduction of both reducing our own CO2, but also being active partner with our customers to help them reduce their CO2 impact for the coming years. So now we are committing to the 2030 targets, and then we also have the long-term targets for 2050. We made a small acquisition.
We signed it last quarter, and we now, 2nd on January, closed the acquisition of Molex Industrial Communication, a business that we are integrating now in Industrial Network Technology, INT division. And I just would like to show two slides to describe this acquisition. Molex is a gigantic privately owned company by the Koch Industries family. They were saying that what we have in industrial communication, it's not bad, but we don't really have a, the ability to, in our, the size we have, to really focus on it.
They were asking us, "You know, maybe HMS can take this and revitalize the business." They also felt that the main business for them is cables, connectors, and these kind of things, and these active components with software and hardware was difficult for their sales big sales teams to sell because it's very complex products. So, we made a deal with them to take over this asset. So, we get two R&D teams, one in Canada, one in France, 31 R&D engineers. Very happy to get this. We are investing more in R&D, so getting more resources here is very good. But we also get complementing products and technology. We get large customers in mainly US and Japan. Some of them are already HMS customers, but with this offer, we also can make a more complete solution.
We paid $7 million, and we expect this to be north of $10 million in annual revenue. And what we do here is that the Molex products, compared to HMS products, HMS is really working with what is called adapters. These are all the thousands of devices inside a factory that is sitting into robots, or drives, or sensors, and these kind of things, and all these things are connected to the controllers of the network. So the high-volume products that HMS been focused on, that is more than 90% of all devices, that's relevant for our current offer. But the network controllers, where Molex is very good, they are less in volume, but higher in complexity, higher in price, and making both these things are very important.
You see the examples here with our robot customers, where we, we've been connecting the robot to the network, but also around Molex, we can also do sub-networking around the robots, and we think this is a very good step for the division INT. We are quite excited about how we can develop this together with the teams in Canada and France here.
A lot of things is happening, and Joakim, let's move into some numbers.
Yes, let's do that. And we will start with having a look at the order intake. And as Staffan already said, we do see a small organic growth of 3% in orders. And if you see on the graph to the upper left, you see that we had a really strong Q4 in 2024, where we had some good project orders in the IDS business. And therefore, we think that 3% is not so bad, actually, even if we strive for more than that. Given the comparable, that's a fair number.
You also see that there is a massive currency effect, with a 10%, negative effect from currency movement, where we see that, especially the US dollar, but also the euro versus the SEK is continuing to be weaker and weaker, and we've been seeing that also after the period ended. If we look on the different markets, we do see Europe continuing slowly but safely in the right direction. It's been improving throughout the year, and up front, we thought this would be a little bit of a quicker recovery, but we still see it's going in the right direction. So we think that is a little bit positive after all. And Staffan also mentioned that we had a bit of a weaker market in North America in the fourth quarter.
Looking at the pipeline and so on, we believe that this is a temporary decline that we're facing, so we think that there is potential to improve a little bit from those levels going forward. If we look in Asia, we've been having a bit of a slow market in Japan for us, where China's been going well the whole year. And now we do see a bit of a recovery in Japan. It's related a lot to INT business and some of the bigger customers coming back and placing some orders. This inventory buildup situation with our customers have been the largest in Japan, and that's why that's been taking a bit of more time.
And overall, if we lift the view to a higher, to a high altitude, we see that for the full year, we've--w e see organic growth now on the orders of 10%. So it is moving in the right direction, and I think 10% is a, a decent pace for us to to move forward here. Going over to sales, a little bit of a different situation. We have a very good deliveries in Q4, so we reached SEK 951 million in sales, organically +23%. And the reason, the story behind this is basically what you saw in the order intake in Q4 2024 and Q1 2025, when we had a lot of good project orders, where the bulk is delivered now in Q4. So we managed to deliver out on that nice backlog, and we've been fighting a lot in our delivery on our delivery sites, especially in North America, to get all the goods out.
I think we managed to catch up fairly well in Q4 to what we were supposed to deliver and try to keep our customers as happy as possible here with the lead times. Looking for the whole year, we've been struggling a little bit in the first quarters, also due to pretty strong comparables in 2024, and now we actually turn the whole year positive in growth, organic growth of 3%, yeah, with the strong ending of the year. Of course, we would like to show more than 3% growth for the full year, but it's good that we can turn this around and show a positive development.
It's been a bit of a bumpy road for the last years for us, and we've been having maybe a little bit more than the industry average, having the industry inventory build up during 2022, 2021 and 2022, and then the reduction in 2024, and maybe partly in 2025 as well. So all in all, showing growth is good to see. The drivers of the growth is a lot the IDS division and the North America market. We've been doing those good deliveries in the fourth quarter. We also see on the sales side, continued recovery in Europe, same as with the order side. Slowly but safely better, that's not the main driver in the quarter, but it's going in the right direction.
Of course, also here you see overall that the currency is playing a big role, so it's pretty big difference on the reported and the organic numbers. For the full year, you also see that we have a pretty big acquisition effect with 18% growth from the Red Lion and the PEAK acquisition. A few words about the divisions. You have first, IDS, Industrial Data Solutions, where I think you see in the graphs, you see this story that I was talking about, with really good order intake in Q4 and Q1, Q4 2024 and Q1 2025. And then you see the sales graph is improving in Q3 and especially in Q4.
So, I think those product orders that were received in the end of 2024 and beginning of 2025, you should maybe see that more of the sales graph, that it's evening out a little bit over the period. And with that strong comparable, obviously, the order intake is down now 15% organic. We would love to see a little bit more than SEK 374, and we think that we have a good chance to improve going forward here. And on sales, of course, a very nice number, SEK 481, and as I said, deliveries of these big projects.
So I think we're very happy about the delivery in IDS. We do almost 29% margin in Q4, which is extremely high and not something that we probably will show going forward. For the full year, we are now at 24% in this business, and then with two-thirds, roughly, coming from the Red Lion acquisition, we're very happy with that development that we've had over this period within the HMS family. And this, of course, is a big contributor to the overall strong profitability in Q4.
Then over to INT, and here we see pretty clearly this gradual improvement that we were talking about. You see on the order side, now we have 17% growth that we present. Organic, this is 27%. So in that pretty big currency headwind, we're still managing to grow this in a good way. The main thing we see here is that some of the bigger customers are coming back, filling up their inventories, and also the European market, part also the Japanese market, are now coming back and placing orders. So this is very positive, we think.
And you see not maybe the full thing converting to sales, but also sales is moving in the right direction and showing a 13% organic growth. As you know, this is our cash cow, delivering really solid margins. We do 31% margin in the quarter, and almost at that level for the full year, so this is a very solid business. And the team now will have their hands full with integrating this Molex acquisition, and also delivering on the strategy for 2030. So it will be an eventful year, 2026, in INT.
And then we have New Industries. Also solid development, both on the orders and on sales. Organic orders 18% up, organic sales 12% up, and an okay quarter. We would maybe like to see a little bit higher margin, but 22.7% is an okay level. We had, in Q3, a very good development in building automation. Now it's a little bit softer in building automation and a little bit better in vehicle communication, so it's good that those part are complementing each other and smoothing out the curve for us.
Over to the profitability, and obviously, record profitability in the quarter, SEK 268 million in the adjusted EBIT. A 28% margin, which is, of course, strong for us, and for Q4, it's, it sticks out maybe even more, where we normally have a bit of a higher cost structure in Q4. We don't see the same increase on the cost side in Q4. We are starting some of those development projects that we presented earlier this year on the Capital Markets Day. We will see those projects coming, rolling into 2026 and onwards with us trying to deliver those 2030 strategic plans. So all in all, over SEK 900 million, SEK 911 million for the year 2025 and 25.5% in adjusted EBIT margin. I think that was good to see that we managed to beat the long-term goal of 25%. This puts us in a good position for the future as well.
Good profitability comes from primarily the volume increase. The gross margin is stable at 63%, in line with our own expectations, and we think that's fairly where we should be with this constellation that we have in the group. Maybe the other thing that sticks out a little bit is the lower OpEx, where I think we've been still being a bit careful on the cost side, and as I mentioned before, we will start doing a bit more investment going forward.
Maybe to mention also on the FX side, we've been having a--y ou've been seeing the FX effects a lot on the top line, not to the same extent on the bottom line, due to some good hedges throughout the year. We're starting to see that effect wearing off a little bit now. The hedges are not as good as they were before, not the same high rates. And we do see an EBIT impact of SEK -15 due to currency, which is a bit more than what we've seen earlier this year. And yeah, well, with the recent development of currencies, I think this is something that we need to keep an eye out for in 2026. So there will be a bit of an impact from this going forward, obviously.
And then to our EPS, and I'm showing in the graph here an adjusted EPS of SEK 4.17 , which is in itself very nice. The reported EPS is a lot lower, SEK 1.44 , compared to SEK 1.49 . And then, obviously, we have the net financials and all that, there's nothing strange. But we also have a non-recurring tax effect of SEK 104 million , which is related to the Red Lion acquisition, and we elected to do a so-called 338(h)(10) election. And that basically means that we're treating for tax purposes in the U.S., we're treating this acquisition as an asset deal.
So we have an amortization of all those assets that we got in the deal, which will lower our tax in the U.S. for the coming 15 years. That is giving us now a positive effect. To make this election, we need to pay this one-time tax, but we will have a pretty big upside for the coming years. So the net present value of the tax saving is a lot bigger than this cost that we take in Q4. This is really complicated and complicated material and very special U.S. tax laws that we're working with here. So this is the situation, and we're going to look into this forward if it's really right, that it should be $104 million.
Looking for the full year, we do SEK 13.73 in the adjusted EBIT. It's +42% compared to a year ago. And the board, as Staffan mentioned, also proposes a dividend of SEK 4.8. And the reason it was zero last year was not that we didn't make any profits, it was that we made two really big acquisitions. And to not having to take in more new shares, we elected to cancel the dividend for a one-time thing in 2024. And then over to the cash flow. So here we have continued improvements on working capital and inventory reductions. So we've been now reducing our inventory for the full year of SEK 207 million, and that is, of course, helping the cash flow a lot.
We do SEK 231 million in the quarter and SEK 877 million for the full year, which we are very happy with. The cash conversion is still quite good, 82% for the full year. Obviously, this one-time effect in tax is holding back the cash flow with the SEK 104 million. So without that, you would have seen a record cash flow for the group. For the future, we still believe that we are in a pretty good situation here. Even if we grow in 2026, we believe that we would, we should be able to keep working capital neutral and maybe even reduce a little bit of inventory further. So we should be able to show a good cash conversion also for the coming year.
And then to-- I just love this graph to the left, the net debt graph. It's continuing to be reduced, and we were in a situation a year ago where we took on a lot of debt to make these two acquisitions in 2024. And of course, in my role, it's really nice to see that we're following the plan and managing to close the year in net debt to EBITDA, pre our IFRS 16 of 2.13x. And we said here before that we should be in line with our long-term target to be below 2.5x, and that we can also deliver that. This is very good to see, and of course, has a lot to do with the good performance and the strong cash conversion throughout the year.
In Q4, when we have now a new strategic plan in place, we also signed a new financing agreement in December here with two Swedish banks for the coming years to be able to finance our expansion plans in the 2030 strategy plan. Finally, too, before we let open up a question, some takeaways for the full year, if we look what's been happening. From an internal perspective, we've been making a big change from the first of January 2025, with a completely new organization, a pretty big change, actually, going into three divisions. We now have full accountability of strategy, resources, finances, and all that comes with that. And the reason for that was to get the full customer focus throughout the whole organization, from sales, from R&D, from product development, and all this.
I think with the performance in the year, we are quite happy how this has been actually playing out in real life as well, taking it from the plan to to reality. As a step in the new divisions, we also worked with the 2030 strategy. All divisions have set their own strategy for 2030 here, that we presented in September. Performance-wise, we still managed to deliver some organic growth in what we say is a bit of a challenging or a bit uncertain market with a lot of macro challenges being, that's been playing out throughout the year.
We've grown now the orders by 10% and sales 3% for the year, and we managed to also lift the profitability and show a really good cash flow with an adjusted EBIT that is up 37% in the whole year, delivering 25.5% margin. And solid cost control is, of course, a good part of delivering that good results. And also, as I mentioned before, the cash flow, that we managed to convert those profits into cash, is, of course, very key for us.
So all in all, a solid year, and with that, we are sure that there are a lot of questions from the group, so feel free.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Simon Granath from ABG. Please go ahead.
Hi, Staffan and Joakim. Congrats on the very impressive margins here. I'd like to start on the supply chain and see if you could help us understand the, the impact, if so, from rising memory prices. How much is memory prices of the bill of materials? Can you pass this through, to, to customers, similar as you have done in 2022, but also in 2025 after Liberation Day? Or should we assume any margin headwind or help? Thanks.
Hello, Simon. Actually, in our more embedded electronics, the portion of our material cost for memories is not that significant. So, our product, not memory intensive, so this is not something we worry about. Maybe the only benefit with a weaker U.S. dollar for us is that many of the electronics components are based in U.S. dollar, so maybe get a little bit of tailwind there. But all in all, this is not something we worry about for our products.
Very clear. Thanks. And on orders, you mentioned that you think the weakness in North America is temporary. Could you shed some more light on what indicators you see that makes you anticipate that? Is it perhaps connected to customer dialogues or similar?
I think many of these larger projects we had last year in quarter four, they are large and also, difficult to predict when they land. So we are seeing still good activity, but we haven't really seen that we are had closed any larger of these orders, as we expected. So I think this is just delays, and, we expect this to be temporary. And, since it's a few larger orders, it's also difficult to predict, the effects. So we think activity is still good in U.S. And, if we here in Europe are, concerned about the uncertainty, we don't feel the same kind of uncertainty in the U.S. market. They keep on, investing in infrastructure and automation over there. So, it will come back in the U.S.
Sounds very encouraging. Yeah, and just a final, final question from me. I know that Joachim mentioned, or did make one comment around the cost, given your comments at the CMD of a gradually increasing investments ahead, how should we think about this? It's, it's fair to, to assume that this will be more back heavy in 2026, or can you give us any more light on timing consideration about these, growth initiatives?
Absolutely. So I think you will be seeing a gradual increase in the OpEx throughout 2026, starting wrapping up, yeah, pretty much now. And then it will probably increase throughout the year with us adding some extra resources to carry out those plans. So it's maybe that's good enough for you. I don't know what you're after, but it's you'll see gradual improvement and exactly what percentage is up, I think we keep for the time being.
Very good. Congrats again on the strong results. Thanks.
Thanks, Simon.
Thank you.
The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Yes, good morning. It's Gustav here from Nordea. Maybe just to build on Simon's question on the costs and the OpEx there. I mean, looking at your administrative expenses, I mean, if we look at a sequential delta from Q3 to Q4 last year, these costs were up SEK 18 million. Looking at the delta this year, it's down SEK 20 million from Q3 to Q4. So can you just help us understand this effect, and is this the new base, or is there something extraordinary here impacting this quarter?
Maybe just first comment, I think what is comparing 2024 to 2025 is very difficult to do on a line, line item base. Since when we made a new organization change, we completely changed the classification of the cost, so it's very clear now everything that has to do with something around admin is in admin, even if it's a sales admin person. So maybe that's a clarification, first of all. And then the reason for being a bit lighter in Q4 is that we've been doing some of the investments on the ERP side throughout Q2 and Q3. That is now done in Q4. So that is taking down the admin burden a little bit on the ERP development in or the rollout in the U.S.
And also, the integration project is more or less done when it comes to fully when it comes to Red Lion, and to the largest extent when it comes to also to PEAK . That's maybe the two main things that is taking down this cost level.
Yeah, okay, got it. But I mean, the first part there, I mean, that would likely increase the admin expenses because you have moved the cost from selling expenses to admin, right? So that would be sort of contradictory or--
So in admin now, it's a larger, larger share than what it was before. And then, of course, there is a reduction compared to 2024 in the overall cost base. I mean, we, we growing, what do we say? 3% organically in Q4 on the cost side. So we've only been adding 3% organically, and then you have the FX effect on that. So it, in reported figures, it becomes less than it was a year ago.
Yeah. Okay, perfect.
That makes sense?
Yeah . Thanks. Maybe then, is it possible to say anything how demand has continued here in the early start of January?
So, just to clarify your last question as well. If you're talking about the development from 2024 to 2025, the main reason for the decline is, of course, the currency. But I think your question was about why it's lower than in Q3, right? In this year. So I think the ERP is the answer for why it's lower compared to Q3 this year, and otherwise, it's the currency.
Yeah, okay, perfect. Thanks.
Yeah.
Joachim. On the start here in early January, is it possible to say anything there?
It's, I mean, very early. We keep on tracking. That's pretty much same pace as you see in the quarter.
Yeah, okay. Perfect. And then just the final one here on the order backlog. I mean, it has been reduced as we've seen here in Q2, Q3, and Q4. So do you still see that you have excess orders to deliver on here short term, would you say, or is it sort of stabilized at lower levels now?
It's pretty much stabilized. We do have a couple of tens of millions left, but it's been, it's been really important for us to reduce this backlog because the customer wants the goods. So that's why we've been struggling or fighting in Q4 to be able to actually reduce the backlog and get the deliveries out to our customers. But from now on, you-- I think you can expect that, I've said it a couple of times before, and I think now is another of those situations where we need to get in what we're going to deliver out, pretty much. So book-to-bill should be around 1x or maybe increase higher than 1x in 2026.
I think in addition to this, we are, during quarter one here, completing all the investments we done to making sure that our new factory in York, Pennsylvania, becomes state-of-the-art high-tech manufacturing. We've done a lot of things there, so the capacity will increase. We see it already in Q4. We see another expansion in Q1. So from Q2 and onwards, we will have better delivery capacity. So of course, we are open for more orders because we can't ship. So it's a big focus also to make sure we fill up the order pipeline as well.
That's perfect. Thank you very much.
Thank you. Thanks, Gustav.
The next question comes from Erik Larsson from SEB. Please go ahead.
Thank you and good morning. A follow-up on North America and the project orders. So is it a fair observation that in 2025, you really only had project orders in Q1, whereas Q2, Q3, Q4 was a bit slower? And just another question on that topic. You know, how would you look at project orders in 2025 versus previous years? Is it lower or higher than usual, et cetera? Any flavor there?
I think many of these project orders, if I start, Joakim, is related to Red Lion. So it's quite new for us with this kind of larger project orders. And we see that, since it's large, not so, so many, it's a bit bumpy. And I think Q4 2024 and Q1 2025, we got, better than expected orders. Since then, it's been, I'll guess, lower than expected.
I think maybe the main difference is the size of the orders. We do get a lot of product orders, but the size that we had in Q4 and Q1, that's kind of unusual, and that size we haven't seen since then.
All right. And then, second and final question: I just noted your peer, I guess, Ependion, established a business unit within defense, with pretty high ambitions. So I'm just curious if you have any defense exposure, if you've thought about this, any opportunities or so?
We get a lot of questions from investors about this. We have quite little. I mean, could it be less than 1% of revenue would end up in defense applications. And mainly, it's not really in, I would say, more in application where you have automation of these things. Most, if you look on Swedish factories, for example, as one big factory up in Örnsköldsvik, making tanks for BAE. I mean, this is not high volume manufacturing. We are looking into some customers where there is more ammunition and there's more automation. It's a new field for us. We have very little business. Maybe it's potential there, but yeah, for us, it's a small market today.
Okay, fair enough. Thank you.
All right. Thanks, Erik.
The next question comes from Fredrik Lithell, from Handelsbanken. Please go ahead.
Thank you very much. Thank you for taking my questions as well. I would like to have a little bit of discussion, hearing your views on the very strong margin progress you have in IDS. I understand it's probably driven a little bit by Red Lion. So if you could sort of explain a little bit what you have done in Red Lion and what that brings to the table would be very interesting. Thank you.
Of course, we'll try to cover that. It's a couple of things. Now, of course, if you look in the quarter in itself, it's obviously a lot driven from volume, but over the year, as I said, we've pretty much taken the business from, like, a 20% business to now maybe 24% for the full IDS, where 2/3 of IDS is now Red Lion. There are a couple of things we've done on the gross margin side. We've been doing. We're now through all the investments in the manufacturing, so that's been helping a lot. We've been looking into the distributor and reseller structure and changed the discount programs a lot. So the ones that actually promote our products will have high discounts, and the ones that do not, they will have a reduced discount.
So doing some cleaning on pretty simple things, I think that's maybe the main thing. And then we've also been looking into the cost structure a little bit, taking out more or less a layer of management, and now been making also the European investments to be more efficient and be able to use the back office functions of the whole group around the world. So it's a couple of different things that we're doing to get to these improvements.
Joakim, when we acquired Red Lion, we, one thing we identified when we start meeting them was that they didn't really have the ambition to improve their margins, and we saw some really low-hanging fruits, but there were no push for picking it. So I think also we just been executing on some of the things we saw when we acquired them, so it's not really complicated. The discount, changing, implementing our manufacturing system, where we'd have some things in-house, something out, outsourced to partners. So I think all this is falling into the right, right places at the moment.
Maybe one final thing to get also our same sales team some credit. We have been seeing now some cross-selling as well. That is helping this couple of million dollars, so that, that's also been good.
Would you say that you now are on the right level, or do you still have, maybe not low-hanging fruits, but do you still have structural improvements that will continue to push the margins higher over time from the work on Red Lion?
I think we don't want to get inflated expectations, but of course, we also have ambition internally to drive this, so we're a little bit careful about how we answer this, but there are more things we can do. But the fruits are higher up in the tree now.
Okay, thank you. My second question is, the 338 tax sort of application that you did send in, and that gave you a charge of SEK 104 million in the quarter. Is it possible to somehow gauge sort of the benefits you see over time, sort of a net between the two? Is it very big compared to the SEK 104 million you had as a charge in the quarter, or is it closer to?
So it's a super relevant question, and if I would have been 100% certain of the full impact, I would give a very clear answer. I'm not 100% certain. I can give you some direction. So what it will mean, you will not see anything in the P&L, so the tax cost will still be there, but cash flow-wise, there will be a part that is not payable. So it's. Overall, I think that the potential will be around 2% of the group tax cost for the full year. That's around the upside that we will see yearly. But you will not see it in the email.
Okay.
This is e verybody loves IFRS, right? And this is a rather technical thing.
Yeah. All right, understood. Final question. You talked a little bit about your ERP implementation. Could you describe a bit wider where you are in that process on a group basis, and what you have in front of you in terms of the various parts of ERP project? It would be interesting also. Thank you.
Yeah. So we, we started this project in 2023, and since then we rolled out the same ERP in more or less the full group. And during 2025 and up until Q3, we also implemented this in Red Lion. So we have now one common ERP, one common CRM, which we think is great for enabling all the cross-selling and see all the customer activities in one system. What is left is the sales entity in Australia, and also now the new acquisition with PEAK. And the Molex acquisition, since that was an asset deal, we kinda get that implementation for free. So that is already done. It's already working in the new system.
So it's not a lot left for us to be in this structure. And it is, of course, a big project that's been going on for now some years in with different intensity throughout the different quarters. But it's an investment we've been taking, and I mean, we've been seeing--y ou see also in the admin costs this year that we do see a payoff from that investment. So soon we'll be there with the full implementation, and then I'm sure we'll have acquired something else to keep it going for the future as well.
All right. Very clear. Thank you very much.
Thanks. Thank you.
Thank you.
The next question comes from Joachim Gunnell , from DNB Carnegie. Please go ahead.
Thank you, and good morning. So we can perhaps start with where we left off. In light of the stellar deleveraging progress here and the financing agreements in place, can you just talk a bit about your appetite when it comes to go back into more an active acquisition mode? I mean, Molex aside.
I think we are feeling that we have a good financing. We have a debt level that is on good for us, even after this dividend we do. So I think we are positive, and we see continued strong cash flow going forward. So we have an appetite. We work mainly now in each division, and in each division, they have their own pipeline looking for this. But of course, it's not easy to find this. It's always long processes. Most of the companies we look at have been private or privately held. That's a very long process. So we have the appetite. The challenge is to really identify and take these processes forward. So I think that's where we-- It's difficult to find, and it's long processes.
So, but appetite is there.
Understood. Perfect. You talked a bit about an update on the new York facility investment here, but can you mention just a bit where you are in terms of capacity utilization in your U.S. operations?
Yeah, you can- if you- maybe we for quarter four, we felt that there's some general things in ERP and stuff like that. If you look more on the things we love here with machines and stuff like that, I think quarter four, we were halfway, and quarter one will be the full way, in equipment and the software and all these things we do. And actually, what we have done is that we did not move to a new factory. We refurbished what we had. So it's been a bit of. We're talking about a factory that have not been getting a lot of love the last 15 years, I think. So there's been a lot of it's from changing lighting in the facility, to change new concrete floor.
It's really been starting from the beginning. But what we see now is something that looks really great, and we hope that this can also be a, like, a way, a showroom for customers to see that for this is how we should do manufacturing. And it's not so common in U.S. to have this kind of modern manufacturing. So we hope that this can also be a, a showroom to customers to show that automation is the way forward, also in U.S. So we are, yeah, halfway there.
I think you can say maybe in Q4, SMT was a capacity constraint in the U.S., and now with the new investments in place, it will not be capacity constraint going forward.
That's clear. Thank you. And the INT EBIT margins were strong here again, despite volume, call it, perhaps being slightly low and also the FX headwinds. So what's your confidence on maintaining this high level of profitability in this division as volumes potentially recover?
For INT, I think we have some small customers and some large customers. What we are waiting for is the bounce back at some of the large customers that we-- In Japan, we see still some inventory at some INT customers. But what's different here is that the product mix per customer generate different gross margins. So here we see a little bit of disappointment on the revenue, but very good gross margins. B ut if revenue had been increasing on these large customers, we would see slightly lower gross margins as well. So that's it's not easy--
I think there are two, maybe two things. One is what Staffan said, that we might have a bit of a gross margin pressure in INT with the larger volumes coming back. And then we should also keep in mind that this Molex acquisition is fully integrated in INT, and will have a little bit of a dilution effect to the margins. We will still expect it to be good, but it might be a little bit down from what you see in 2025.
Lovely. Just to end, just on this, the customers' conversations and how they are evolving, in particular, the U.S., you mentioned the broadening and the deepening here. Can you just talk a bit about what that means for you?
Yeah, I think what we say here, we feel good activity. We have not seen so many of this larger project, but in general, it's a solid market. We think we have good access to customers and doing the right thing. We have a very motivated and well-integrated sales teams now. We have good relationship with our distributors, highly motivated, so I think we are in a good situation. The market is not great, but it's good in U.S. There are investments, people are quite optimistic, and we also see many companies who want to have more manufacturing in at least North America, which drives the investments in Mexico and other places, but also domestically in U.S.
So, we think it's good market, and it will, it will bounce back for us after quarter four here.
Great. That's all from me. Thank you very much.
Bye.
Thank you, Joachim.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Hi, it's Gustav again from Nordea. Just one follow-up story. Because in Q3, you guided or commented on a potential negative impact here in Q4 from production upgrades. I guess that's related to IDS here, but just a clarification, is there any negative impact here on IDS that you're not discussing?
You mean in the gross margin?
No, just on the EBIT margin, that's your report here on 28.9%.
I think what we probably were talking about in Q3 is, since we went into this upgrade our facilities, we would maybe have a bit extra challenges to deliver. I think that's what we've been talking about, that we've been really-- I think the team has been doing a great job to get all the volumes out. And there is maybe a little bit on the OpEx, but it's minor. I mean, the most part is CapEx in that upgrade our facilities. So maybe SEK 1 million or SEK 2 million in OpEx, but the vast majority, CapEx.
I would say rather the opposite. I think, how Q4 was in IDS was better than expected.
Yeah.
We are quite impressed about the team here, and we saw some risks in going to Q4, and they've really been managing this well. So, it's been better than expected.
Oh, that's perfect. Thank you very much.
Okay. Thanks, Gustav.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you. All right, everybody. Thanks for joining this call and helping us to close a good year, 2025. We're very happy to see the good development of our organic growth coming back again, and of course, also the integrations of Red Lion, PEAK. That's been instrumental for our growth going forward. I'm also very happy to see that we have the new acquisition, INT, coming in, and we are quite excited about 2026. Of course, we live in a world that is quite uncertain, but we think we are at that good place in our market and where we see continued future for investments in automation and this re-regionalization. So we remain fairly optimistic about 2026, I think.
Of course, it's good to also close the year with good cash flow and solid net debt and stuff like that. So we feel that we are in a good place for the coming quarters. We hope you join us for the coming quarters and look forward to talk more about this after quarter one. Right, have a good day. Thanks, everybody.