Ladies and gentlemen, welcome to the NIBE Q4 report. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions via the telephone lines. May I now hand you over to Eric Lindquist, CEO, and Hans Backman, CFO? Please go ahead.
Thank you. Good morning or good afternoon to all of you out there. Thank you for calling in.
Yeah. Hello. Hans here as well.
We're going to have the traditional setup here where we comment with a few slides to start with, and then you have a Q and A. Looking at the first slide here, we, of course, have, as it says, a very good year all in all about the clear decline in the fourth quarter. I'm sure that you're also going to have a number of questions regarding the restructuring program due to the start of 2024 that is weaker. If we just comment about the year itself, of course, there's been large fluctuations in demand, and we all know why. We tried to explain that the inventory adjustments in the whole distribution chain.
And now when that is more or less solved, then, of course, we see that there are too many heat pumps in the chain out there, which, of course, makes it very difficult to make any kind of a realistic forecast. And the higher interest rates, of course, they also make it difficult for families to buy new homes and invest. And also that dampens the whole consumption, we can say. Nevertheless, we've made five larger acquisitions, and they are strategic, of course. Turnover was some SEK 3 billion. So all in all, that's fairly decent. We're coming back to the restructuring program, of course, and we assure you're also going to have a number of questions. Looking at the group, the full year, of course, SEK 46.6 billion, that is the highest turnover revenue ever. And also coming out with the operating profit of very close to SEK 7 billion.
That is also the best result ever. The operating margin is also, as we recall it, the best margin ever if you look at the year as a whole. Looking at the fourth quarter, where we see that the expansion or the growth is coming to a standstill and the organic growth is not there anymore, we have acquired some 7%. The turnover, we can say, is about the same as last year. Of course, the operating profit is coming down and also coming down the operating margin significantly. That is, of course, now when we see the first part of this quarter, why we start to react. That is also a slide that describes that more in the graphic way where you see now that the Q3 and Q4, particularly Q4, that's always the strongest one. That is more flat compared to Q3.
That is, of course, affecting the profit. We can also see the curve up there that's getting a little bit of a downturn. We're also going to come back to that in comments, how we look at that. If we just look at the pie chart, as we typically do, pretty much the same Climate Solutions, about two-thirds Element, some 25%, and Stoves like 10%. That doesn't change much over the years. When we look at the distribution of the profit, of course, that is, again, pretty much pronounced a Climate Solutions, almost having some 80%, whereas Elements and Stoves have been hitting tougher times a little bit earlier. If we then continue with the next slide, you won't dwell too much because we know that we are anxious to put some questions here.
We also see that the North American pie is a bit over the 25% now, which is very good because Europe, particularly on the Climate Solutions side, is weaker. The Nordic countries, they represent just a little bit over the 21% or one-fifth, which is our home market, we've always said. If you just have a few comments about Climate Solutions, of course, it's a good overall performance. Fourth quarter, again, coming back to that, that is, of course, weaker or a decline. Then we start this restructuring program from a point where we feel that, okay, we don't like to have any uncertainties internally, neither do we like to have any uncertainties out there. We might as well start doing this, sending clear signals what we're going to do.
Of course, we have not deviated from our firm belief in the future. But sometimes things happen, and now there are a few things coinciding, and we just have to react. Otherwise, the investments, we have done them very orderly since 2020, and they are now soon to be completed. We mentioned that we've invested some SEK 8 billion over the last years, and the target was some SEK 10 billion, and they'll be completed, if not 100%, this year, but at least the coming six or seven quarters. And of course, we've been striving very hard to launch the new products, particularly on the stove side when I'm sorry, on the natural refrigerant side. And that's now in existence now.
The timelines have been moved forward, so it's not that urgent, which is a little bit of a disappointment to us that we came to the market in a very orderly time, but they now postpone 1st of January 2025 and delay that with a couple of years. Nevertheless, the operating margin for the year as a whole, already mentioned that that is the best ever. And yeah, again, operating profit for the Climate Solutions is, of course, on the healthy side with the operating margin of 17.8%, which is considerably higher than the previous year. And if we just continue on the Stove side, there we've seen a clear, should I say, good demand and growth in wood burning, where it's been much softer for pellet stove and gas fire. But also there, particularly for gas fire products.
And there we've had a very ambitious investment program, both for the production as such, but also for R&D. And now we have launched one generation of new products and the one to come this year. So those programs are also to be completed or soon completed. And then, of course, we have had to adjust our organization due to the variations in demand, and that is affecting our operating profit and the operating margin, as we're going to see in the next slide, where we take a dive from the 551 to 533, although we have pretty healthy growth. Hans is going to come back to that, but it's mainly driven by acquisitions, and your operating margin is down a bit more than 2 percentage units there. And on the Element side, of course, there we are following the whole economy.
We can say, as we said so many times, we are pretty much in every individual business sector. There we also have seen a slowdown in the second part of the year. That is, of course, one of the reasons HVAC industry is weaker than before. The consumer goods segment continues to be weak, but that started a little bit earlier. That's typically the first segment that takes a dive when interest rates are going up. Then the semiconductor industry, that's a different story because there we talk about trade restrictions in this particular, particular between China and the U.S. So that is delaying the expansion there. But now we see new factors being erected all over in Europe and in North America. That is just about to start going in the positive direction again. Industrial segment continues to be good.
One particular segment is electrification of vehicles. That is very interesting to us in a large market. And there again, we are ready for the expansion. We have invested, and that is also soon to be completed. But we've had to take some adjustment costs. That's why the operating margin and the operating profit is slightly lower than last year, as you see on the following slide. And there we take a dive from 10% to just south of 8% when it comes to the operating margin. And I think that's very quickly what I wanted to say according to the slide deck we had here. Hans, it's your time to shoot.
All right. Thank you, Eric. I'll continue with the same speed to open up for the questions in a little while. If we can continue with Climate Solutions slightly more on a detailed level, I mean, as Eric said, we phrased it in the press release as a good performance, but actually Climate Solutions has had a great performance. It's the best ever in terms of the highest sales, highest profit, and also margins. Sales for the full year were up by some 20.3%, of which just below 6% were acquired. But what we haven't specified in that table is that we also had -2.5% coming from divestments, the portion from the last portion of the Schulthess Group.
While sales grew by some 20+% , profit was up by 29% , very much due to a strong increase in the gross margin thanks to the volume that came in, so to speak. But of course, in Q4, things slow down and very much as a result of the market, which has continued to decline due to the inventories that we see are out there. So in the quarter itself, the growth was -1.4% , meaning that the organic growth, including a slightly positive currency effect, actually were down by roughly 9% . And although gross margin improved, the decline in volume overall has a negative impact. And we came in there on 15.9% in the quarter, which, of course, was down from the 19.3% of last year, but in a way, a strong quarter.
If we look at the geographical split of sales, there haven't been very much changes to that picture. North America has picked up slightly, slightly. And overall, we've seen in North America that has been a little bit stronger in general than Europe now during the latter part of the year. If we quickly move on to NIBE Stoves, that business area grew with some almost 19% in 2023. But of course, a large portion of that came from acquisitions. And as stated before, I mean, wood burning stoves in Europe has been fairly strong and performed well, whereas North America with gas and then pellets in general have been weaker. So we came in there at an operating margin of 11.2% down from 13.7%.
In Q4, sales in total went up by 7%, but all of it and much more, so to speak, came from acquisitions, meaning that the organic sales, including a slight positive currency effect, were down by close to 7%. With a weaker volume and the continued ambitions we have in R&D and so forth, the margin came in at 12.7% there. In terms of geographical split of sales, the North American pie piece there or piece of the pie has increased due to the acquisitions we've made, now representing almost a third up from basically a fourth of last year. NIBE Element has basically shown the same pattern as in the business area. Mainly, it comes from the slowdown in semiconductors and lately then also the heat pump-related HVAC business.
With these being reasonably high-margin business for the business area, that has an impact on the result. In addition to that, the consumer goods segment has seen some weaknesses. But as E ric pointed out, there are also very interesting opportunities within, for example, electric vehicles and other segments as well. As Eric pointed out, it's the segment where we are represented basically all over the world. Full year, we were up by some 9%. Organic, including currency, was up by 6.3%. But then due to this rapid change in product mix, the operating margin came down, and we dropped down below 10% and came in just south of 8% even. Q4 was rather flat. With this continued unfavorable product mix, so to speak, operating margin came down there to just about 6%.
As you all know, we have a target there of staying at 10% or above over business cycle. In terms of the split of sales on a geographical point of view, so to speak, this is, again, the most global segment that we have, where we're represented not only in very many segments, but also in very many geographies, which is a strength, of course, when one area is possibly weaker than another. A quick glance then just at the balance sheet and then cash flows and key figures here. The balance sheet, what sticks out there, and it was the same in our last Q report, are the tangible assets. And that means very much inventory. As you know, we have been sourcing a lot of components post the COVID period.
During this year, when things became, so to speak, better for us, we've also been able to build finished goods inventory. But we're obviously working on bringing these down even more. They have come down slightly, but there is more to do. On the equity and liability side, it's possibly the long-term liabilities that stick out a bit, having come up from SEK 6.4 billion to SEK 16.9 billion, very much related to the acquisition of the very important Climate for Life company in the Netherlands for us. And if we then jump over to the cash flow analysis, we've actually generated one of our highest cash flows ever as well there with SEK 6.5 billion. But obviously, with the change in working capital, where we have been building inventory and then also continued our very ambitious investment program, the operating cash flow has been basically zero.
And then on top of that, we have the acquisitions made during the year with the CFL Group in the Netherlands sticking out as the biggest one. A very quick glance on the key financials. I mean, working capital has come down slightly, but not enough, especially if you ask me as the CFO. We're continuously striving for bringing that down. So, of course, a little bit easier said than done when the market within Climate Solutions currently has inventory in the system already. But overall, the key numbers are very fair, so to speak, interest-bearing liabilities being at 70%, net debt to EBITDA at 2x roughly, and an equity assets ratio of close to 45%. But obviously, we are affected as well.
Return on capital has come down slightly, as well as the return on equity when things develop a bit slower, so to speak, during the last part of the year. But summarizing our key financial figures and the ones we really follow and have as our targets in the annual report and for our companies, we see here our development ever since we went public back in 1997, where we see the equity assets ratio, return on equity, operating margin, and net margin, which have developed quite favorably over time, step by step by step. We've been through both one or the other challenges during these years, I believe. By that, I think we leave open for questions. Or would you like to add something?
No, that's perfect. You shoot out there. Please.
Thank you. We will now begin our question and answer session. If you do have a question for the speakers, please dial star one one on your telephone keypad to enter the queue. One moment for our first question, please.
Hello.
Our first question does come from the line. As Carl Ragnerstam from Nordea. Please go ahead. Your line is open.
Good morning. It's Carl from Nordea. A few questions. Firstly, looking into the volume drop in Climate Solutions in the quarter, what portion would you say is distributors and installers taking down inventory, and how much would you say is end-market demand? And secondly, on that as well, you mentioned in the report that you saw an acceleration during the quarter. Is it fair to assume that this was inventory-driven, or is it also a combination of end-market demand getting a little bit worse?
Yeah, Carl. We believe it's a combination. Of course, the higher interest rate, that has an effect on new construction and people's readiness to buy any merchandise, but of course, also heat pumps. But there's a clear, of course, signal also from the distribution chain that they are still overstocked. And that is, of course, damaging our output as well as all the other manufacturers. So that's a combination.
Okay. And that goes also with the acceleration, I guess, during the quarter?
Yeah.
Okay. I'm a bit also curious to know a bit more about your guidance for first half and full year 2024, where you stated it will be weaker. I mean, could you give some light on what magnitude of weakness we're talking about in first half, for instance? Would you say that it's a similar organic drop as what we saw during Q4, or that acceleration might continue a bit entering Q1? Yeah, how do you see that?
Well, I don't think that we can inform you so much more than is written in the report. But of course, as we try to say, as we've tried to have said so many times, our reports, they present, to our best ability, a story, a true story of where we are, where we are heading. And of course, when we talked about a weaker second half and possibly into 2024 like half a year ago, that is, of course, something that is now moving ahead as we see with a weak 2024 to start. We don't have the crystal ball, I apologize, for the remainder of the year. And we feel it's appropriate to not promise there's going to be any dramatic improvement in the second half. I guess you should read it like that. We like to be prudent in our guidance.
That's as far as I think that we can explain that.
If you look, I mean, we only have 1.5 months here during the start of the year. Would you say that the situation is even tougher during the start of the year, or that it might continue as you saw during December?
Well, how should we answer that? If we walk into precise figures, I think we release more than we are able to. But we understand your question, Ragner, definitely. And I think that's just good guidance you can get from us because the picture is not totally clear to us either. It's very difficult to even ask distributors and installers where the inventories are. And I guess we're trying to give you the best guidance possible. But as far as percentages and stuff like that, we have to stay out of that, again, from a fairness point of view to all our shareholders because we don't like to release anything that's not written in the report. But we try to indicate to you now that the first two quarters will continue to be, as we said, even in the Q3 report.
I think that's a little bit clearer than we used to guide due to the difficulties that we have in the market. When I say we, I think it's the whole industry. To continue is a little bit of a surprise, I guess, to all of us that the demand out there has taken such a hit as it has due to the higher interest rates and due to the gas prices going down again. We also have a little bit of a sentence there or a sentence regarding the willingness to support our industry. Now we are not preaching for our own company, but it's sort of a sustainability issue. Are we really heading in the right direction, or are we returning more to a gas-driven society again when prices are down? That's a fundamental and very important issue.
But I won't dwell too much more on that. But other.
Okay. That's very good. And the final, very quick one is, of course, savings. If you could help us on the ramp-up of the cost savings, you said it will be full effect in 2025. Is it early 2025 you mean by that? And also if you could give the cost savings split by segment or perhaps geography as well.
Well, I mean, to start with, that's not something we're going to start doing in December. Of course, that will take a gradual grip of the organization as we negotiate and as we fulfill this. It's not something we can wait. We're going to do it as quickly as possible, but also as responsible as possible. That's what we say. And when we say that, when we hit 2025, of course, all costs should have been driven out of the organization, if I may use that word. So it'll be a gradual, did I say? Well, what do I call it? Introduction of the program that you're going to see. And 2025 will be now totally clean from this.
Okay. Very clear. Thank you so much.
Thank you.
Thank you. One moment, please, while we take our next question. Our next question comes from the line of Douglas Lindahl from DNB Markets. Please go ahead. Your line is open.
Hello, gentlemen. Thanks for taking my questions. I wanted to come back to the outlook comment here. My impression, at least, is that you're getting a bit more vocal about the difficulties you see in the industry. To what extent is this really a market that you're seeing that is becoming increasingly weak, or to what extent is this you becoming more vocal about these things, meaning you've changed your communication to a certain extent, would you say?
Well, I think that perhaps we've been too conservative in our communication. We have not really been so well-trained media-wise or communicating with you folks out there. Perhaps we've been too homegrown in a way, and we apologize for that. We try to give you as good as possible guidance. We are happy or pleased to know that you know that we are changing gradually a little bit. It's not so easy. We have our habits, and we've invested for so many years. We try to, despite, particularly at my age, we try to be a little bit more modern without being extremely modern.
No, thanks. I appreciate the difficulty and forward-looking commentary in general, so I can understand. So interesting to hear that. Just coming back to your expectations on the weaker market there in 2024, and given where inventory levels are, how should you or how do you expect this to sort of play out for Climate Solutions' margins for 2024?
Yeah. Well, I mean, isn't that fairly of course, if the market continues to be weak, of course, no one can maintain decent margins without taking actions. And as before, we are working all based on a relatively decent level of profitability. That makes you safe when it comes to or certain when it comes to analyzing things for a certain period. But when it now continues into the first part of this quarter, of course, then you say, "Well, realistically, this will not change. We have to do something about it." And we do it from a very solid platform. We don't like to wait until it's very obvious that we have to do things. I mean, the fourth quarter is not ideal, is not pleasing to us. But for many outsiders, it's not too bad if we shouldn't judge ourselves.
We feel that's the NIBE way of reacting. You analyze things, you work from a profitability platform, and then you act. That's exactly what we're going to do now.
Okay. So continue difficult margins, I guess, then.
Well, I mean, yeah, I understand your question, Douglas. Don't misinterpret this. But I mean, you also know that as you saw in quarter four, I mean, when the market or the revenue goes down, there's no company in the world that can really continue to maintain the margin.
No, no, obviously. Yeah, it's just the context of your inventory levels. But on the cost-cutting program, thanks for being vocal about that and explaining that. I'm just trying to understand. So 500 people are affected. And if the market sort of bounces back in 2025, will you rehire these 500 people, or are these structural costs that you're actually taking out?
No, they are structurally taken out. But of course, if the market would bounce back another 30%-40%, of course, I mean, we can't live with the same staff. But they are to be taken out assuming that we'll have no dramatic jump. But of course, as we see it now, the heat pump market will continue to grow. But now we feel that we have to adjust because we were equipped, if I may call it, to a larger volume. We all thought that the industry thought that now we will rebuild Europe, particularly, and eventually also North America with heat pumps. And of course, you take on board people that are not—I mean, this is a very, very sensitive and difficult situation that we are—I mean, that's the last thing for me.
I mean, I spent my whole life here and to even suggest that we're going to reduce people. So emotional. But the professional part of the job is to do justice.
Yeah. I understand. It's not easy. I clearly understand that. Just to move forward in the questions on pricing, we haven't touched upon that topic yet. Are you seeing any changes there in the markets? Are you adjusting your prices, or are you seeing competitors doing anything on pricing, obviously, for heat pumps specifically?
Yeah. Well, I'm sure that there are movements out in the market in a limited way. But our frank assessment so far isn't that we haven't seen any major downturn in pricing. But having said that, we all know that in some markets and some segments of the market, there are always going to be attempts.
How are you acting in this market, or are you planning to act?
Well, we try to maintain our product or our message to the market where we are producing products of a premium kind. And of course, if you like to buy products of a lesser sophistication, we also have an assortment of that kind. But we don't participate in the very low range of products. I guess that's your answer to that.
That's fine. Thanks. And then maybe a question for Hans on the, I noticed that eliminations here in Q4 was positive on the EBIT. What's the reason behind that?
That's the same thing we do every year when we run through the contingent liabilities for additional purchase prices because that's when we get the three-year plan, and we need to adjust the liability that we've set aside. And sometimes we have to set more aside. Sometimes we have to release a little. And the net effect this year, following the market development, you can say, was a net effect of a release.
Okay. That's it for me. Thank you so much.
Thank you.
Thank you. One moment while we take our next question. Our next question comes from the line of Karl Bokvist from ABG Sundal Collier. Please go ahead. Your line is open.
Thank you. And good morning. Most questions have already been asked. But if I may, at the start of 2023, you did provide some details on the organic growth of your heat pump business. What was the organic figure now in the fourth quarter?
The organic trigger for the,
I think, are you asking for the organic growth of heat pumps in Q4?
Yes. Yeah. Sorry. Exactly.
Okay. Well, I mean, I won't have to return to that picture that you had there, Hans.
Maybe. Well, I mean, in Q4, we had an organic growth in total for Climate Solutions, including.
It was a contraction of the organic side.
Currently of -9.3%. I think I mentioned that.
Yeah. No, it was more about both in Q1 and Q2, you explicitly said that the heat pump part grew organically by, I think it was 40% in Q1 and then a bit above 30% in Q2. And then I was just curious if it would be possible to say what the heat pump business, how that developed organically now in Q4?
I don't think we recall giving that number explicitly, but maybe you're right if you've taken notes on that. But that's not typically we talk about the specific segments.
Okay. All right. Understood. Then just on the one-off cost there that you will book in Q1, I was just curious if you could give some details on which costs you called alignment costs and so on in Q4 now that we are worth highlighting or if any magnitude would be possible to give.
Well, no. Okay. Please, Hans.
I mean, we didn't have any one-offs in that sense in Q4. The one thing that might stick out is the one that Douglas just asked the question about. And that is on group level where we do the yearly adjustment for the contingent liabilities for the additional purchase prices. Apart from that, there have not been any specific one-offs in either of the business areas or on group level for that matter either. It's just these yearly adjustments that we make.
Yeah. Okay. Understood. Yeah. So no, it was more about the commentary when you aligned capacity and so on, if there was any particular cost that we might not see in Q1 or Q2. But to me, so if I understand you correctly, it's more about an ongoing business decisions that you're taking.
Within Stoves, I think Eric mentioned that we have, within our North American businesses, made adjustments to meet the new demand there following the gas prices having come up and demand has declined. But that's more in the ordinary course of business adjusting.
Also on the Element side.
An Element. Absolutely.
Okay. Understood. My final one is just a bit touching on Douglas' question there. But have you also seen any kind of campaign efforts or, by extension, lower prices in the premium segment among your competitors or within the industry?
Not to our knowledge, no. But I mean, I have to say to our knowledge that otherwise, I mean, they will bring that about if that would be a major thing, if something would happen in the market. Well, of course, we can't be, although we try to be a little bit more transparent and guiding, we are not at a point now where we're going to try to explain everything every quarter, but a little bit more open, we hope.
Understood. That's all from me. Thank you.
Thank you.
Thank you. And one moment while we open the line for our next question, please. And our next question comes from Viktor Trollsten from Danske Bank. Please go ahead. Your line is open.
Yes. Thank you, operator. Hi to Eric and Hans. Thank you for taking my questions. So basically, I would like to delve a bit into your comments. I do fully understand that it's difficult to make any forecasts in this market. But you do say that your assessment is that the performance in the first half will be weaker, of course, and then possibly for the full year also. I'm just trying to understand what that really means because I guess just for the sake of proving my point, if we say that organic growth in the first half year is -10%, and then you say that it's possible for the full year that it's weaker than 2023, I guess that suggests that we turn to growth in the second half. Is that how we should read that comment, if you do understand my question?
Yeah. I'll tell you. When you try to write such a sentence as I'm sure you fully understand, you know that if you don't write anything, you're going to say, "Okay. What's going to happen in the second half of the year? Why don't you comment that?" And now when we say possibly, that is a way of guiding again. We don't have the miracle tool or miraculous tool to say that as of July 1st, now when we assume that the two first quarters are going to be very, to a point, quite weak, and then everything's going to jump to the better. I mean, that's also unrealistic to say. So I guess it's a cautious comment. We're all waiting for improvements. I mean, we are ready. That's what the whole statement is. We are ready for the growth.
But now we see this, and we just say, "Well, something's going to happen. Help us out there, politicians, when it comes to reducing interest rates and also when it comes to the willingness to assist this industry, not only us, but the industry, the heat pump industry. We need some help against the lower energy prices that continues to pollute the world with the CO2." That's the whole issue.
Yeah. But I'm sorry if I'm a bit slow here. But do you understand how I interpret the comment that you make? And I fully see that it's difficult to make any forecast, and you don't have a crystal ball, etc. But it does implicitly mean that you're rather saying that the second half perhaps not has not fully compensated for the first half rather than you're saying that the second half will be as weak as the first half. I'm just trying to understand what you're clearly saying.
Yeah. You're elegant in your questions, Victor, but I think that I like the arm-wrestling with you. But I think that's all for the answers, right, regarding the second half, if I don't hurt anyone by saying that.
No. Okay. Okay. No, I see. And then secondly, and perhaps difficult to judge from just one quarter, but if I read it correctly, it seems that your European volumes in Climate Solutions is down 25% organically in Q4, which actually is much better performance than if we compare with the overall industry at, let's say, -50%. So I guess the philosophical question is, are you feeling that you can gain back market share in this sort of market that you perhaps lost during the component shortage period? Is that a trend that you're seeing?
Yeah. Well, I think that question is recurring. I think we should come back to the slide where we present the fourth quarter so we don't have any disadvantages there, if you just have patience to wait a second there.
Yeah. Of course. Of course.
I think that might be clarifying to all of you out there. There we have.
That's the one.
There we have the fourth quarter. We say that the growth has been -4%. As Hans suggested, it's acquired as 8%. So that takes us to, yeah, we're all mathematically just south of 10%. And now I don't understand why you say there's been like.
25%?
This is the situation that the growth has helped us, of course, or the acquired company, particularly Climate for Life, has helped us. But the gross margin remains at a healthy level, which is very important. And that's why we say, "Well, it's not the gross margin that causes this. It's the overhead that's too big because we were planning for another turnover." And I don't know why you isn't that picture clarifying your previous question as well?
No. But in the report, you also give sales per geography. So in Europe, for example, you did SEK 3.8 billion in sales in Climate in Q4. And then, of course, you have some acquisitions, and you have some currency in that. So year-over-year effect in Europe in Climate Solutions implies 25% down. U.S., for example, is growing 10%, the way I see it. So I'm more curious of the geographical development.
Okay. So that's how you fact-calculate somehow. Well, I see the graphs. Okay.
Yeah. Yeah. And I don't mean to push in any way. I'm just curious about North America, obviously, continues to grow in Climate Solutions, not perhaps surprisingly given the trends there. But in Europe, you perform quite well, at least versus my expectations on what the industry is saying overall in Q4. So I guess that's where I'm coming from, so to speak.
Yeah. I think it's a fair statement to make that we have regained some market share now when we've been able to deliver again. We were in a squeeze there not being able to get products out the door for a while.
Yeah. That is true. But we don't like to pat ourselves too much on the shoulders because we are right in the starting gear now to improve results. And of course, it's always a race for better market shares. And it's been so painful during 2022, particularly when we couldn't deliver. And that's, of course, another reason why we were also trying to explain that Q4, as you compare it last year, was extraordinarily strong, as you see, with a 42% growth versus the previous quarter like 2021, which wasn't a bad quarter either. But the operating margin last year was like 19.3% in that quarter. And that is suggesting, of course, that there were coming out products to the market that had not been delivered previously. And so that's also the case Q1 and Q2 2023.
That's why it's a little bit difficult to compare the market this year. Okay. That's a long dwelling. There are many more people waiting. I hope we answer you, Viktor, and I hope we are still good friends.
Yeah. Absolutely. Absolutely. I'll step back. Thanks a lot.
Thank you.
Thank you.
Thank you. And one moment, please, while we take our next question. And our next question comes from the line of Axel Stasse from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good morning, everyone. I had a couple of questions, if I may. On pricing, you mentioned that some segments face pricing pressure. Could you maybe please elaborate on the specific markets? And in these specific markets where you see some competitors, for example, cutting their prices, how much NIBE has actually cut their prices? And then a follow-up question on this one is, do you expect some additional countries in the next coming months, for example, where you could see some distributors putting pressure on your pricing strategy?
Well, the first question, I think the answer from my side or from our side was that we haven't seen any major pricing issues. But what I said was that, of course, we don't know everything. And I'm sure that in certain market segments and certain countries, there could be price fighting. But what I also said was that we work in the premium segment. And of course, why do you have a premium product when that is to have a decent price or a good price for that one? But if a customer would be more interested in a product of a lower specification, of course, we also have that. But we do not participate in a very low range of heat pumps. That's what I said. And as far as the forecasting for what's going to happen in Q1 and Q2, that's impossible to forecast for us.
Okay. So you are not, I would say, afraid for now from all these players cutting their prices, right?
Well, afraid. You shouldn't be in business if you're afraid. Everyone has to be, of course, observant. We are very cautious whatever happens in the market. Until recently, it's been the shortage of components that's been hindering us. We firmly believe that we have a strong position in the market. When you say about fear, I mean, anxiety and fear doesn't take you anywhere. That's our standpoint.
Okay. Okay. Very clear. Thanks. My second question was about your flexibility in terms of costs and how you feel you can protect your margins. So you announced this cost-cutting plan. Would you be ready to cut more of your cost base if you think volumes are way weaker than expected going to 2024? I try basically to understand how much room you guys have here to protect your margins, basically.
Well, I don't think that we can dwell more on that. We all respect Axel. I think that the guidance we've given you and whatever shock absorbers we have, I think that's something that we have to keep to ourselves. Now we give a clear message to the market, "I'm going to take the cost down from what we judge in the market." And we have to take it from there. And I think that that's where we have to stop when it comes to answering your question. Okay?
Okay. Thank you very much. Can I ask a last question about your leverage? So leverage is now at 2x. And you announced you wanted to do some further acquisitions in 2024. So I want just to ask, what is your sound leverage level according to you? Is it 2.5x? Is it slightly more? What is your objective, your aim here?
Okay. I mean, Hans should answer that. During some heavier or larger acquisitions, we've been up to between 3.5x and 3.8x. And then we work it down very quickly. And I guess you are more appropriate to answer that question, Hans. But during the larger acquisitions during the last 10, 12 years, we typically take it down in six-eight quarters down to 11x. Of course, where we are now at 2x, we are fairly comfortable with that. And of course, when we are down to 1x, then you wonder, "Do we acquire enough?" So it's been a little bit of a standstill when the pandemic hit us. But of course, that's typically something we are looking for not every hour of the day, but all the time. Hans, have I got?
I suggest we may add just a little. I mean, we never want to jeopardize NIBE in any way, of course. But we have deliberately not set a target or a roof for that matter because we want to have the flexibility if something interesting comes about. And as Eric mentioned, we've been up to above 3.5x and just below 4x at some certain points. But if you look back at us over a 15-year period, we've been at an average of 2.2x, roughly, despite all the acquisitions made. And 2.5x, you can say, is, of course, a level given that we have bonds on the market, so. Yeah. That's roughly the answer.
Thank you very much.
Thank you. One moment, please, while we take our next question. Our next question comes from the line of Brijesh Siya from HSBC. Please go ahead. Your line is now open.
Hi. Good morning, gents. I have a couple of questions. To start off with, Eric, you talked about in the guidance about first half and second half, sorry. I'm coming back again there. It was not clear whether you were talking about first half being weaker on an organic basis because you had quite a few acquisitions in the second half. So I just wanted to check that one if you could help us understand whether your comments were related to organic or it's all the overall business.
Yeah. Well, I apologize. But could you repeat the question? Or you want to have a guidance on which period?
Well, so you talk about 2024, first half being weaker and could be for the full year. When you make that comment, is it on an organic basis, or it's on a including scope effect? I'm asking this because second half of last year had a significant scope impact.
Yeah. Well, yeah, how should I answer that? I don't know whether I fully still comprehended the question. But as I said before, I think when it comes to guiding as good as you possibly can, we've been trying to guide like six months and sometimes a little bit more. And now when we are middle of February, we felt it was decent to suggest that there's no guarantee that the second half, or at least the first quarter of that half here, wouldn't be affected. But that's not, of course, a forecast. That's more a cautiousness. That's my answer to that. But there's correct answer. I don't know whether I understood the question correctly.
Okay. That's fine. And the second one is on the subsidies, which are all being announced. And we had the Germany one being sorted out. Do you see any signs of that subsidy scheme being kind of now giving you a higher volume or at least sequential volume improvement? Anything you see in the market which would suggest that things have changed?
Well, Germany is one of the countries we don't have to inform explicitly of that. I think Germany is holding up fairly decently. But of course, the program that we thought or the industry thought would have come about was more generous presented last summer. And it's more that the gas being banned as of already this year and was thought to be banned 2025, that is to be allowed, as it looks now, for another three years until 2027. I think that's the most it's a hindrance to all of us, to the industry, rather than the subsidies because that gives in tougher times, of course, people take, in many cases, the easy way out, and they continue to install a gas-burning boiler. Okay?
Understood. And probably last one on M&A. There are quite a few, possibly, family businesses running which are kind of both boiler as well as heat pumps. So given the market scenario, do you see enough opportunities out there? Given NIBE's size, you'd be probably interested to consolidate the market, which would help in the long run. Do you kind of see any interesting targets there?
Yeah. It'd be false to say that we don't see any good targets or decent targets. We really do that. But I think there, we have to stop the guidance because the answer to the question is yes, we do that.
And I've always done. Always look at that. That's part of the DNA setup.
Understood. Anyway, good luck with it. Thank you.
Thank you.
Thank you. One moment while we take our next question, please. Our next question comes from the line of Martin [Tjämell] from Sveriges Radio. Please go ahead. Your line is now open.
Okay.
Hello. It's [Pablo Leyes here from Sveriges Radio, not Martin. First of all, can I take two questions in Swedish?
Absolutely.
Yep. Do you have it there?
Yep.
[Foreign language]
Thank you. And one moment, please, while we take our next question. And our next question comes from the line of Carl Deijenberg from Carnegie. Please go ahead. Your line is open.
Thank you very much. Thank you, Eric, Hans, for taking the question. Just one from me, I want to follow up considering the time here. I wanted to ask you, Hans, with regard to the net financial development here in Q4, up a little bit here to SEK 214 million, and I think you were at SEK 181 million in Q3. So I just wanted to ask if this here in Q4, sort of pure financial costs, is it a justifiable level going forward? Because I think you had maybe a few one-offs in Q3 related to the bond issuance when we did the acquisition of Climate for Life? That's my question. Thank you.
Yeah. No. I mean, there's nothing special in this in a way. I mean, it's the result of the financing that we've done following the acquisition of the Climate for Life business and, of course, increasing interest rates that have come step by step over the year. Yeah. There could be, or there is a portion of currency in there as well, but that's not a major part.
Okay. Okay. Very well. Thank you.
Well, we have now been talking about 65 minutes, and we've come to the end here because we have other interviews to be taken care of. So we hope that we have now started an era with a little bit of a more open attitude to the future. But as said, it's a little bit of an old fox that is trying to change. And I'm not including Hans in this because he's a young guy. And we appreciate the questions, and we had all the best intentions to answer them. And now we're going to go out and work again. Thank you for calling.
Thank you, ladies and gentlemen. This now concludes our conference. Thank you all for attending. You may now disconnect your lines.