Operator, good morning everybody. Good morning from wintry Halmstad, Sweden. I heard that the sound here might be a little bit not full quality, but let's try it out and continue. So welcome to this quarter four presentation. I'll start with a couple of updates, and then Joakim will go and talk more about the Red Lion acquisition and some more details about our financials. We just presented our quarter four and stable net sales and actually quite much stability when it comes to revenue, but also from a profit-wise, looks quite good. The big thing here is with the order intake. As we have communicated the previous quarters, we are in the cycle of this kind of destocking and adjustments from the previous years, so the boosted orders is catching up at the moment.
Joakim will spend quite much time to make sure you understand what we see and be as transparent as we can be. But -41% on organic order intake. From an EBIT perspective, we are, when we look on this, we see that we are flat. The reason why we say flat is because we have some cost for acquisition and this one-time cost and some restructuring. So when we do adjusted EBIT on this, it's quite much flat from same quarter last year, and we land in adjusted EBIT margin of 25%. And we see general stable development, I would say. We also concluded yesterday the board concluded that they proposed a dividend up 10% from last year to SEK 4.40. And let me just for you the newcomers on the call talk about our business very briefly.
We talk about hardware meets software, that is HMS, and we work with Industrial ICT, Information and Communication Technology. Well connected in this industry, been here for many years, and we are one established and well-known player in our, almost 10 million devices connected through our Anybus brand and soon 500,000 Ewon connected cloud cloud-connected machines. On one hand, we are a tech company working with new technology, but most of our customers are industrial end users in, automotive, pulp and paper, food and beverage. All these industries, like to talk about technology, but they even more like to have a stable supply of technology and products for a very long lifecycle. We are 800 employees. I talked about this acquisition that will add another 400, but Joakim will talk about this more in detail.
Headquartered here in beautiful Halmstad, Sweden, but Sweden is a very small market for us. The majority of our business would be in continental Europe, North America, and Japan. That's our three biggest markets. Revenue of SEK 3 billion, EBIT margin 25%, and we've been growing around 20% on average per year the last 10 years. The majority of that have been our organic growth, and then we made a couple of small acquisitions during the years here. We work with industrial automation in manufacturing, transportation infrastructure, power and energy, and then we have a smaller, it's like 5%, 6%, 7% of our revenue today in building automation where it's the communication that is used in HVAC systems in commercial buildings and industrial buildings. The common denominator is the communication. Communication technology is the same or similar in these industries. We work with two types of customers: the makers.
These are the Atlas Copco and ABBs of the world, but also the users that could be Volkswagen or Stora Enso, the companies that manufacture something that use automation technology. The majority of our business is in the makers where we have 44% of our revenue with our device manufacturers where we work with direct sales with indirect, it's a very sticky model we have. We also work with machine builders that we would like to be part of every machine's build material, either in the standard or at least be on their option list. Here we work with a combination of direct sales and distribution, and then we work more and more with end users. We've done some acquisitions here to be larger in this portion here, and it's now representing 31% of our revenue.
So as you see, we have a quite good mix of different types of customers. I think Joakim will also talk about the geographic mix we have a bit later. We are executing on our 2025 plan where we had four original targets with organic growth sorry, with organic growth, with M&A, with our people agenda: happy and high-performing employees, generating loyal customers, but also a very detailed sustainability agenda. We're executing these four, but for since last year we added two things. We added operational efficiency. Actually, there you see in quarter four some restructuring costs where we are taking some measures now to improve our efficiency, but also doing some organizational changes. We also work with a sales excellence program where we see an opportunity to be more even more efficient in our sales, around the world in our 18 countries where we have direct sales.
So the plan here 2025: keeping working with the planet, keeping working with the people, keeping working with the growth where we focus a lot now with Science-Based Targets, but also how we can help our customers so they can improve. I mean, we can't count on that in our data, but of course the nature doesn't care. We see, last year we saved 1 million tons of CO2 with our customers by using remote access of machine, by using smarter energy system and things like this. This is not on our books, it's on their books, but it's still a contribution that we would like to improve to triple this effect the coming years. We talk about a high number of Net Promoter Scores with customers, with employees. We also would like to increase our share with female managers. We are 22%-23% right now.
Good improvement from previous years, but we need to keep on working with this diversity. We have new growth ambitions and profitability ambitions. We would like to be 25% EBIT. That's the base, and we keep on working with our SEK 1 billion for 2025. We see that organic growth will make us land more than SEK 1 billion 2025, but the plus stands for acquisitions, and as Joakim will talk, the big acquisition of Red Lion coming up here in spring will, of course, change our total revenue.
Short business update, since it's a full year we talk about the yearly design wins. These are customers that we acquire and work with through our design win process, especially I would say device manufacturers and some machine builders. Very sticky. They integrate our solution deeply into their brains, their electronics, and their software. We start with design wins. This means that it takes maybe 12-18 months for them to be convinced and then integrate our technology. Then they go into active base, and we have 1,843 customers in active base. The active base in our industry could be like 7-8 years, up to 15 years. This means that they manufacture this robot series and keep on selling it for maybe 7-8 years, or in the process industry the life cycle is even longer. When this product is discontinued, not available for sale anymore, we terminate this as a design win. So this is the balance you can see here. So we see that we keep attracting new design wins, 139 new ones. We have keeping having an attractive product offer winning customers, and this accumulates to a base of a good chunk of customers that keep on ordering, of course based on their needs.
So in good times they order a lot. In bad times they don't order a lot, but it's a steady flow of orders. And we also see quite a few terminated design wins. This means that the feeling we have on the market is that people keep on rolling what they have. During COVID there was a lot of issues with component supplies and not too many developments were made. New developments. The maintenance of existing products to be able to shift them was the key thing here. So this works well. We think that the CAGR of 6% year -by -year here is a solid pace, and we are happy with this. We see that the discussion of order intake normalization it continues as expected. In Europe and Japan we see this continuing, but the interesting news here is that we are increasing our orders in North America.
North America was early into this adjustment, and now they're also early out. So we see this as an indicator that we think that these inventory adjustments are in the right, getting to the end, also in the next quarters probably in Europe and Japan as well. We spend a lot of time in R&D, especially on Ewon now when we focus on the next generation products, both on the hardware but also the cloud access here. We talked about the Red Lion acquisition. We signed 11 of December. Joakim will talk more about this, but we are really excited about the opportunity to become bigger in North America, but also do more cross-selling where we see a lot of synergies in sales between the two companies. If we look at the full year, we talk about the story about order normalization. We see stable design wins.
We see that previous years' challenge in supply has eased. We still have quite long, quite high inventory, but we see that our lead times are better. We don't spend a lot of money on buying components on spot market anymore, so things are normalizing here. We also spend a lot of time in changing ERP system during the year. After some hiccups, it's working really well now. We integrate the acquisition of PROCENTEC we made some years ago into Anybus, and we updated our financial targets. Many of you joined our Capital Markets Day in September. We are trying to build a company platform that is ready for growth the coming years. 2023 has also been an investment year to build a new base in the company. All right. Joakim, we're both sitting here with a bit of cold, but I hope you can, your voice is still loud and clear.
I hope so. Thank you, Staffan. It helps when I get the chance to speak about my two favorite topics, the Red Lion acquisition and our numbers. So let's start with the Red Lion acquisition. And we think when we make an acquisition this large, more than 40% of sales in HMS, we want to spend some time to explain what it is we're doing. I know some of you already seen this, but let's take it one more time. Just a quick overview of the company. So, U.S. company, 84% of sales in the U.S. Quite similar to HMS in many ways, to a large extent complementing offers, maybe 90%-95% complementing and 5%-10% overlap.
So the offer is divided in three different parts. One that's called Access, which is Industrial Gateways, Protocol Converters, Remote Access, and so on, which is quite similar to the Anybus and Ewon offering that HMS is carrying. Then we have the second part, which is what's called Connect, which is basically Ethernet switches. Something that we've been after for a couple of years trying to complement our offer with that. And I think an Ethernet switch is something you'll find in all installations, and we see big opportunities for cross-selling in this area and also to bring this offer to Europe. We hope we can be successful with that. And then the last part is the visualization part, which to the largest extent is human-machine interface products.
Maybe the main difference between Red Lion and HMS is the main customer groups where HMS in general are quite strong on the manufacturing floors, and Red Lion has been a bit better in finding more, what can we say, remote applications like different energy sources, water and wastewater, oil and gas, and those types of applications. I think we'll have a good chance of cross-selling to some of those areas as well. The company's been around since 1972. About 400 employees, out of which 300 is in the U.S. Four development centers, two in the U.S., one in Germany, one in India. So also a pretty good mix there. And what we're really keen on is to try to utilize this strong distributed network that they have in North America.
They will allow us a better access to the local market there. From a financial perspective, about SEK 1.4 billion in the last 12 months ending in Q3 2023, 55% gross margins, so strong gross margins. The reason why it's a little bit lower than HMS, we feel is that they go through distribution to a very large extent, and of course there is a middleman that needs to make some money as well. Otherwise we see a strong and very popular product offering. This comes down to solid EBIT margins of 21%, and obviously this is something we want to work with to try to push it towards our 25% target. The rationales for the acquisitions, I think I touched upon it already, mainly two things. One is the geographic presence to get a stronger footprint in the U.S. and to create a platform to build from also with American-made products, but also to get this wider product offering and potentially move slightly upwards in the value chain with that. We also see a surprisingly strong culture fit, we must say. We're really happy to see this when we've been talking to management and visiting the sites, that we think quite alike in how we treat each other, treat people, and want to make people to grow and so on. So that's very nice to see. Yes, some financial aspects as well. So we signed a binding agreement on December 11th. We paid $345 million, so about SEK 3.6 billion. And, of course, on enterprise value basis.
We think when we look at the numbers, this will be accretive to the EPS basically from day one. We think we'll close in early Q2 most likely at this point in time. We're through the antitrust filing, so that went well, and we have this foreign investment approval that is pending that we think we'll get in a few months' time. I think Staffan touched upon it already. We'll take up $225 million worth of new debt, and actually today we're going to hold an extra AGM to mandate the board to issue some new shares to cover that $120 million US financing that we're going to have replaced by equity.
So this will end up in terms of leverage; this will end up somewhere around 2x net -debt -EBITDA when the share issue has been done, and that will be done after closing. All right. So that was Red Lion. Let's have a look at the financials, and I'll start maybe on the most interesting topic this time, the order intake. And maybe as the first comment is, it's not as bad as it looks when you see this. You look at this graph to the upper left that used to be really good looking; is now starting to look not so nice anymore. I think we expected this to happen. We're a little bit surprised that it happened so quickly after second quarter 2023, this order normalization. And we see organic decline now by 34%, giving a total order intake of SEK 426 million.
And then we also need to keep in mind that the Swedish krona has actually strengthened, which is impacting this negatively for us, having a lot of the order book in euros and dollars. For the full year, SEK 2.3 billion in order intake, and you'll see in a second now we had SEK 3 billion in sales. So obviously a big difference there, and that's really this normalization of the order book that we're seeing. I'll try to talk through this on the next slide to give you some more clarity in what we feel is happening. But before that, maybe just to highlight, I think Staffan touched upon it already. It's a little bit of a different picture looking in different geographies where we see maybe in Europe it's as worse as we believe it's going to get in Q4.
It's been escalating a little bit since Q3 on this order normalization. Japan is also in similar levels as we saw in Q3, whereas in the U.S., we see a bit of a trend shift where we are significantly up versus Q2 and also slightly up versus Q3. So we think that most of this destocking has been done in the U.S., and we see when we look at the point of sale, so what our distributors actually push to the market, we see a growth in those numbers. So that's quite positive, and we think we're going to see a much better development during 2024 in the U.S.
And then it's not too bad that we get a big acquisition coming in to support also in times when maybe the European market, which is our biggest market, will be a bit weaker, at least in the start of the year. But to try to explain to you what we believe we're seeing, we've been talking to probably 100+ of our largest customers to see what they are actually doing, how do they see upon the future. And it's pretty clear that they are a bit hesitant, and they are, as we write the report, in the wait-and-see mode, what's going to happen on their demand. Some have destocking that they need to go to get done. I mean, we're in the same position ourselves.
We carry a little bit too much inventory at the time, and maybe the reason for that is that we've been so keen on being able to deliver, so we've maybe been taking on a bit too much. Not a huge problem, not great for the cash flow short term, but we'll get that sorted. For the underlying demand, if I now get to that, we see that you've been seeing this graph now with us for many quarters, and the reported SEK 426 million we see is maybe some SEK 618 million in underlying demand. Then we adjust SEK 42 million, which is a revaluation of the order book where the Swedish krona is now getting stronger. So that's not really any new orders that is impacting. That's just existing order book that is revalued.
Then we have this destocking effect that we expect to be or estimate to be about SEK 150 million after these discussions with our top 100 customers. Of course, that's not a precise science, but it's the best estimate we can do and what we've been trying to do through this whole period just to give you the best feeling for what the underlying market is like. So if you believe in this, you see that it's for sure the market is down a little bit, but it's not like, when you see the numbers in the report and you think, "Jesus, what's going on?" It's a small decline that we're seeing, and we think that we might see that for another quarter or two as well before we see a big jump up.
Just to put it in a different perspective, comparing, making a bridge from Q4 2022 to Q4 2023, we're starting to normalize the 2022 number, going from the SEK 718 million to the left, adjusting for the boost effect that we saw in Q4 2022, to a normalized level of SEK 633 million. And then if I go to the very right in the graph, from the reported SEK 426 million in Q4 this year, adding back the revaluation of backlog, adding back the destocking to get to the SEK 618 million, if you buy this concept, you'd see that we're down some 2% in underlying market demand. Of course, everybody can have their own view on this, but this is our best estimate of what we feel is going on in the market at the moment.
Going over to the sales, slightly different curve, quite stable, as we say. I think stable is the exact word that we use. Quite happy with SEK 760 million in sales in Q4. The reason for this number is, of course, that we have this built-up order book that's been, with our means, quite big and that we can use to deliver out. So we use another SEK 300 million, roughly, from the order book on top of the order intake to get to this number. We need to keep in mind when you do the year-on-year comparison that Q4 2022, as you also see in the graph, was extremely strong, by far the best quarter in 2022. So, some people might be a bit surprised that we have organic decline in sales -3% from quarter-to-quarter.
I think for the full year we're still up 15% in sales. So I think when we summarize the year, I think we will put a good year to the books, and with over SEK 3 billion in sales for the first time. So quite happy with that, actually. I think we've had also on the sales, the America is doing well, Japan has been doing well with a big order book, small slowdown in Europe, and, I mean, we're going to have we're talking about that when we look at the outlook. We'll have a bit more challenging on the sales from the next quarter or two, given that the order book is now getting a bit smaller. So I'll talk a bit more about that on this slide.
So to the left, looking at the order book, if we take maybe the first step to look at is the closing level for 2022. That was about SEK 1.4 billion. And now we've been seeing this pretty dramatic reduction throughout the year in the second quarter of 2023 primarily. And Q4, you also see the SEK 300 million reduction from previous quarter. And we see now that the order book is coming back to more normal levels. And if you look on the right side to the graph, we've been looking at this metric, backlog divided by rolling 12 months net sales. You also see that we started before the component shortage, we were about, yeah, 0.18, 0.17, something like that. And now we're down to 0.26, having been on 0.65 in mid-2022.
So it's been a, again, a pretty rapid reduction here, and not necessarily bad. It is going quickly. It means that we can come back to growth faster. But just to show that now I think we're starting to get to the level where we should be at, so there's not too much extra to take from. Now we need to see the order intake coming back to support the sales. Looking at the sales split per region, the U.S. had a better quarter, as we touched upon, a little bit weaker than we normally see in Europe, 59% of sales, normally 60%, 62%, something like that. And then, APAC about 18% of sales. Talking about the profitability, I think all in all we get to a pretty good number. There are some adjustment items to comment on.
So we do adjusted margins of 25.3% in the quarter, with an adjusted EBITDA of SEK 193 million, for the full year adjusted EBITDA of SEK 777 million, like the airplane, easy to remember, and 25.7%. So we happen to see that we meet actually financial targets of 25% in EBIT for both the quarter and the year. And the one main driver to that has been the continued strengthening of the gross margin, where we reached 65.3% in Q4 and 65% for the year, compared to 63.6% in Q4 last year. So we've been seeing an improvement throughout the year, and, yeah, I think we've been doing a decent job to navigate through this price situation that's been going up and down for the last two years. And good to see that we can come out on top.
Of course, I should say also that we have some help from currency here, and we have some help from the fact that we're getting some economy of scale. Also good that we can utilize that. But that is also drivers to these improved margins. Looking at the OPEX, you might have noted that the growth rate has come down quite a bit in Q4 compared to previous quarters in the year, where we've been 20%-25% up. We only have a 3% organic increase in OPEX if we adjust for a small restructuring program that we ran, with restructuring cost of SEK 7 million, where we primarily we're taking out some synergies on the integration of PROCENTEC that we've been working on throughout the year, especially on the sales organization in Europe, where we see we can do this a bit more efficiently. and then we have SEK 17 million of acquisition costs related to the Red Lion acquisition that we also adjust for. So 3% organic increase in OPEX, and you've seen 20%+ throughout the year. For the full year, we're still 20% up, sorry, 20% up in organic OPEX increase. And of course, for 2024, we'll be a lot more careful. We'll still see a small increase in OPEX for 2024, but it will be, yeah, maybe mid-single digits or something like that, when we have been a bit more cost-cautious going forward. And I think we've also been through some of the investments to large extents in 2023 with ERP system that we've been rolling out, taking also a lot of cost over the P&L, and with some investments in the sales organization around the world.
Earnings per share SEK 2.36 , earnings per share SEK 2.86 adjusted in Q4. For the full year, we had SEK 12.23 and SEK 12.73 adjusted. Based on this, the board came to the proposal of SEK 4.4 for dividend for 2023. I think Staffan commented on this already, 10% up versus last year. Maybe I should also briefly mention that we have a pretty big net financial item in Q4, where we have the Swedish krona. The strengthening of the Swedish krona is making some impact on revaluation of internal balances. So that's pretty much the main thing on the net financials. Cash flow SEK 119 million . The cash conversion, that is a bit lower than what we would have hoped for.
I think the main reason is the same as it was the last two or three quarters, that we still see a bit of a buildup on inventory. So we've placed a lot of orders during 2022 when that we can't cancel, we can't reschedule, so we need to take all the volumes. And I think we'll have a bit of a challenge with this going forward. So we would like to take the inventory down from these levels. I think we will have a difficult time doing that for the coming quarter, maybe even two quarters will be challenging. But then we should see a bit of a working capital release towards the end of 2024. And again, I think the driver of this is that we've really been keen on getting delivered performance up.
So I think that's positive that we've managed to do that and get the sales going in the right direction. But maybe we've been a bit too optimistic in some of those forecasts. We'll work on that. Not a big problem, a bit of a cash constraint on the short term. That's all. For the full year, cash flow of SEK 519 million. And also here you see a pretty big inventory buildup of SEK 227 million. That is, of course, impacting. Where a big part of that can be released, we believe, in next year. Or sorry, in this year, of course. We're already in January. So on going to the balance sheet, not a lot of happened here since last time. We have interest-bearing net cash, if we can call it that, with SEK 99 million.
And then we have the leasing debt of SEK 261 million and that's related to our option for Ewon, 20%, that we do not own, SEK 127 million. So I think this is all good. And this will be looking a lot differently in a quarter or two when we get the acquisition in. Then we can talk more about this. And then just to wrap this up before we hand over to questions, a quick summary of 2023, the main items that you should take away. What we have been seeing now, especially in the second half, is this big order intake normalization, also been reducing our backlog drastically with some SEK 630 million. I think we must say that the execution has been solid on the net sales. The 15% organic growth did more than SEK 3 billion in sales. The gross margin improvements of two percentage points to 65%, quite happy with that. Adjusted EBIT of SEK 777 million, reaching the target of 25%. Dividend increase by 10%. We have the nice acquisition of Red Lion that we signed in December 11th. So I think those were maybe the main takeaways for 2023. And now I think we hand over to operator and see if we have any questions from the call.
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 Sundal Collier. Please go ahead.
Thank you. Hi Staffan and Joakim, and congrats on the solid ending to 2023, particularly in terms of orders earnings. Firstly, on the U.S., you say that orders have started to recover. Does this mean underlying as well, or is it mainly from lower destockings? I'm trying to grasp the situation around underlying demand in the U.S. at market that seems to be much healthier than Europe currently. And perhaps a follow-up to that is around change in demand in China. Thank you.
Yeah, maybe if we start with the U.S. question. I think it's a little bit the million-dollar question that you asked. What is it really that's driving? I think what we see is that our distributors and some of the main customers are not destocking anymore. And I think I mentioned as well that the point of sale, so the volumes that our distributors actually sell into the market, that is increasing. So I think we see that the underlying market is starting to move in the right direction for the first time in a couple of quarters. And exactly what is driving everything, I think that's difficult to say. I think I don't think we know more than what I just said. And then what was the other question around China?
Yes, exactly. You did mention in conjunction with Q3 that demand had softened somewhat in China. So I'm also trying to understand any change in sentiment in China.
Yeah, Staffan here. I think we see the same thing, that China is weaker. I wouldn't say we see a change there. It's stable on this new lower level. It's a fairly small part of our; we have some 4% in China as well. What we try to understand also is that we have some Central European companies that have quite an activity in China as well. So in so we are having indirect exposure as well. We see a quite soft market, like in Germany at the moment. Part of that is probably that the Chinese market for the Germans are quite soft. But I wouldn't say it's a change in neither direction from quarter three. It's just the same as we saw then.
Yeah, agree. I think we maybe we can put it like this. I think 2023 in general has been quite weak in China. That's for sure. So I think we're in a good position to see growth in 2024, with the overoptimism that we saw from basically from 2022 going into 2023 in China, where the economy did not develop at all as expected.
Thank you so much. That's helpful. And on demand in terms of deliveries from your customers, currently your order book remains strong, but with the recent somewhat slowdown in some of your markets. Does this also mean that some customers are pushing deliveries on historically placed orders? It didn't seem to be the case in Q4, but perhaps something to expect for H1?
I would say not in general, that we most customers we normally don't allow this kind of cancellation. We don't allow. We are practical with some customers, so we see some maybe delays. But I wouldn't say it's a general theme.
Again, maybe some German customers are more negative than others, where we see some ask for postponed deliveries. Sometimes we say yes, sometimes we say no. So it's a mixed bag, but not a general theme.
Just a quick question from me to operator. Is the line good from our side? I got a line quality warning.
Yeah, it's really bad. We can't reach the operator. Yeah. From my end [audio distortion]
The next question comes from Joachim Gunell from DNB Markets. Please go ahead.
You can hear me at least.
Yes, we can hear you.
Yes, lovely here. Lovely, lovely. No, your line isn't that bad, to be frank. But can you talk about, I mean, in the light of the backlog dynamics you highlighted, how should we think about the net sales trajectory for, say, Q1, Q2 on the basis of what you described?
We, I think, we've given you a lot of data about what we think, and I think that's what we are thinking. And we are really transparent about this, but that conclusion, I think we will not comment that further, I think.
Okay. Are there any meaningful differences in terms of the expected market recovery or growth trends that you expect across your different brands into next year?
I think, well, I think if we look in 2023 from a brand point of view, the Anybus and these embedded things that represent a quite big part of the order book, that's been quite positive.
I think what we've been suffering is the Ewon revenue has been a disappointment through the years. That's a lot related to much more inventory buildup at our distributors than we expected. And I think also it's a double effect that some large customers and our distributors have both had high inventory. There was like a double effect there, and I think we underestimated that effect. So from a revenue point of view, 2023, Ewon was a disappointment, which means we see an opportunity for 2024, that revenue will probably pick up faster because the shelves at our distributors will be much more empty than before.
That's helpful. Thank you. And perhaps a question for you, Joakim. You've been very excited about Red Lion.
So can you just talk about how you envision Red Lion being accretive to the overall growth profile of HMS and ultimately earnings both over, say, call it a short-term timeframe, 2024, 2025? But I mean, based on the investments that you will take now, how this should basically impact group overall growth and profitability from a, call it, more mid-term timeframe?
I mean, I like the question, but I'm not sure if I will answer it. It's, I think we have a lot of opportunities to cross-sell some parts of this offering. And as I touched upon before, the switches in Europe, we see potential.
And then just to utilize the Red Lion channels for our products in the U.S. to get a completely different access to that market and also to have that platform to build from that we have in with Red Lion. For instance, as a potential of making more smaller acquisitions in the U.S. to have something to integrate that into, I think that's also a possibility. And then we get the manufacturing site, and we've already said it will do some investments in that site to have this made in the U.S., to be able to utilize on that. And I think that's also positive.
To touch on what growth numbers we will see for the future, I think we said when we made the acquisition that we will not be able to comment on recent growth for Red Lion until the deal is closed, out of respect for Spectris, the current owners. So I think we have to pass on that. I think for the EPS accretion, you have enough information in the press release to, I think, within 10, 15 minutes to get a fair idea of what the accretion will be. So I'll leave it to you with your calculator to get that number.
Joakim, could we maybe just share a little bit of view of how we see this now after meeting them? We still haven't got the keys yet, so we don't know all the details.
But I think it's quite clear for us that for the first phase here, let's say this is from closing and rest of 2024, we call this stabilize. It's important for us to make sure that we stabilize their customers, their staff, their supply. So I think we will not do a lot of transformative things with their business in 2024 when we destabilize this. After that stabilization phase, we go into what we call growth and profitability. Maybe this is 2025, where we see a lot of opportunities in cross-selling, operational efficiency, synchronizing purchasing of material and things like this. But I would say this is not for 2024. It will take a longer time to get that. So I think we just want to make sure that we don't have that we have no expectation this will be a quick quick win.
We see good opportunities, but the challenge is really to grow the common top line, I think, because their profitability is good, but they have been on the single-digit organic growth before. We need to help them to get faster growth for the next three, four years, I think. So that's how we see our the timeframes.
I think that's very helpful. And I mean, you're in it for the long run, so it makes sense. Thank you very much.
Thank you.
The next question comes from Christian Newman from Danske Bank. Please go ahead.
Hi, Christian here from Danske Bank, covering in for Victor. Can you hear me? Yes. Yes. So would you say that it's fair to assume that Red Lion P&L dynamics will mimic that of HMS, or will they like face another trajectory?
I'm not sure if I fully understood. I think in terms of what we see in the market right now, I think we've seen, at least looking at the last year, that what we've been seeing in the U.S. in HMS, in demand and so on, has been very similar to what Red Lion has been going through with order boost, order normalization, and so on. But maybe that's not what you were after.
Yeah, I was more thinking about like the yeah, the destocking that will affect the EBIT negatively in H1 and the easier comps in the second half of the year.
Right. So I think there we're commenting again on that for our U.S. business, we've been seeing some improvement now in Q4, and we hope that 2024 will also get to a better start in the U.S.
I think we see the same, expect similar situation for the Red Lion business. So that's helpful in a way.
Okay. Thank you. And then you have a small detail question on the acquisition. So is the equity component of the $120 million, is that fixed? And also, what is your best guess on the interest part of the debt part?
Yeah, I think the $120 million, it's yeah, it's pretty much fixed. Of course, we'll do the share issuing will be in Swedish krona. I mean, of course, it's pending on the exchange rate between dollars and krona, since the debt will be drawn in dollars in that sense for that $120 million. But it will be the equivalent to the $120 million. And then the exchange rate, we've decided to not go fully transparent with that.
But I think you can get a pretty fair understanding looking at we will take a part of the debt in US dollars and part of the debt will be in euros. And then you can look at the going rates and add some more into that. You get a feeling pretty good feeling, I think.
Well, that's all for me. Thank you so much.
Thank you.
The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Just a couple of questions here. And if we start with sort of the EBIT margin, do you expect this to normalize going forward, or should we expect a Q4 where we are seeing sort of these levels going forward? Because, I mean, looking in the past, it has been quite lower, but during these two last years, it has been around 25%.
So just if you can comment on that, please.
So I think we've been doing. It's a good question, I think. And we've been doing some work to get it to move north, for sure, and that we think. Obviously, we have a very solid year 2022 and 2023 in the bank now. And with what, I guess, we're flagging for is a bit of a tougher, at least tougher start to 2024. Of course, if the top line were to go down a little bit, it would be challenging to maintain the margins on the 25%. We'll do some smart things to try to cover it with a bit of a lower OPEX increase, but there will still be an increase. So that will, of course, put some pressure to it.
At the same time, we want to be. We think we're in a good space with the company. We think we have. We're doing some decent investments, and we don't want to stop that. So I think we'll be fine with seeing a bit of a drop from the 25% in the short run. And then that's still a target to get to the 25%. It's a target, not a guarantee that every year will be 25%. So we're still working towards that in the long run, but there might be a quarter or two where we'll have difficulties to meet that.
Yeah, okay. That's helpful. And then maybe if you can just comment on the SEK 9 million in other operating income that seems to not be treated as a non-recurring item.
So if you can just give some flavor on that one.
Now, this is also currency revaluations to some internal balances. So it's part of that comes in the net financials and part of that comes in the EBIT results. So it will not be recurring if the currency rate stays flat, but you never know what's going to happen with that. Earlier, we've been seeing some losses there, so I think it just evens out of it .
Okay. Perfect. And then just the last one here. I mean, in terms of the slower order intake, you have been giving a lot of details there. But given that you have a good dialogue with your customers, is it possible to sort of give anything on what end markets are more depressed right now or anything what you hear from your customers, so?
That's a really good question. And we would as Joakim said, we're talking to quite many of our customers, especially large ones. And that's why we say that it's a little bit of wait and see because, of course, they want to manage their inventory and their cash flow and these things. But they are also a little bit concerned about how strong is the market, especially, I would say, in Europe. I wouldn't say that when we look on this, I don't see that we are so negative on the market. The underlying market should be quite good for us. But as I said, customers are a little bit waiting because they also expect that our lead times and other vendors' lead times will be much lower. So they think if they see a pickup, they expect the suppliers to be keen on delivery.
So I think maybe, actually, this kind of recent events in Red Sea with longer transportation, maybe that will also change some of this thinking with customers, that they may not fully expect that everything will come when they want it later. So let's see how it goes. But the underlying market demand, we think, is pretty okay.
Perfect. That's all for me. Thank you very much.
Thank you.
The next question comes from Simon Granath from ABG Sundal Collier. Please go ahead.
Thank you. Hi again. I was cut off earlier before I was able to respond to your question. But nonetheless, on Red Lion—sorry, a question for Staffan who has been navigating this ship for quite some time. What made you take the decision to enhance your offering now with Ethernet switches?
Perhaps Red Lion is about the full product and also market suite, but I presume that Ethernet switches play a large role in it. So I'm trying to grasp whether anything has changed in the market or in your company over recent years that has made you take the decision to expand into this product area as you have historically not spoken too much about it? Thank you.
Exactly. Good question. I think when we look on this for maybe five years ago, we saw that, I mean, Ethernet switches, that's a crowded market. It's kind of there are so many other vendors, and there's price pressure.
I think what we see in the market, and this is also related to our acquisition of PROCENTEC, that the switch is a component where you also do a lot of potential diagnostics, potential even cybersecurity things to how to distribute traffic inside a factory. So I think we reevaluated our view of the strategic importance of the switch. So I think that is one thing. But we also see with many of our customers that this is an essential component in many of the installations. And not having that was leaving some kind of gap in our offer. So I think both that we are missing this key component, but also that we reevaluated our view of how that this may not only be a commodity or standard item, there's potential to develop the functionality in these products.
So I think these are the two combinations of our, yeah, a little bit updated view on this.
Very good. Thank you so much for that. That's much helpful. And then I also have a follow-up on costs, which were a little bit lower than I anticipated. Have you made any efforts to strengthen profitability here, perhaps around marketing activities, as I do not see your headcount coming down?
No. No, I wouldn't say that. I think we'll, as I said before, we'll still have an increase in 2024, but we will be cautious, and we'll really take any investments that we need to do that we really think have the best payoff. And the rest, we're waiting and see a little bit how everything develops, but nothing that we're trying to save cost in Q4.
Thank you so much. As a final question from me on net working capital, you also made some helpful color on the outlook ahead. But would you expect a net working capital release for the full year 2024 still?
Yes, I would.
Crystal clear. Thank you so much for having me.
Thank you. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you. Thank you very much for attending this Q4 call. Exciting times for us, especially now with the acquisition of Red Lion. I think also what's clear for us is that there are some ups and downs in the quarters, but we have a solid outlook when it comes to digitalization in manufacturing, new opportunities. And we are quite excited about the coming years, and we stick to our long-term vision for the company.
And we think we have a good access to a very interesting market for the coming years. So we remain positive and keep a little bit of extra carefulness on the cost side for the coming quarter, I think. We made a lot of investment in 2023. Now it's time to harvest some of these effects of these new investments. And we look forward to talk more about this the coming quarters, especially after we have closing on Red Lion. So have a good wintertime here and look forward to hearing more from you and communicate more in springtime. Thank you, and goodbye.