Earnings Call: Q1 2021

May 11, 2021

Quarterly report

Thank you. Good morning, everyone. It's Erik speaking here. Thank you. And Hans is here as well. Now we start with our ordinary way of presenting it. I start and then Hans continues and then we open up for some questions. And I'm sure all of you have read the report and the headline is as we believe it very correctly so strong start to the year. And of course, it's very important to be humble when we talk about strong start to the year. We all remember what kind of a Q1 we had last year, particularly in March. And that's why we'd like to remind the readers in the report that although everything looks peach and keen, it's important to remember how everything turned out last year. Nevertheless, our sustainability profile, of course, is very important for us and that's a line also to report that all three business areas benefit from that, which we are very pleased to note. After all these years of preaching, finally, the world is turning more sustainable, which is right up our alley. And we can also note of course like we all know that when you don't travel business wise or privately, you do other things instead and it's very obvious that people start to refurbish and renovate their homes and that's also a benefit to all our 3 business areas. And when we look at the growth, it's been a good underlying organic growth, but it's been a headwind this quarter naturally by the Swedish strong currency. Typically a few percentage up and down, but this particular quarter has been very strong headwind for us. So the underlying organic growth is substantial. That's the result or that's the message we like to send. And of course all three business areas and the group consequently have improved the operating results and the operating margin And that is due to the organic growth, but also through the prudent way of keeping our costs at a reasonable level. We do not travel. We do not exhibit as we did in the past that that's also naturally an important factor. Not saying that we all of a sudden would just start to spend enormous amount of money again. I think it's a time of reflection. Did we travel efficiently in the past? Did we have all those shows in the most efficient way? Of course we got to return to traveling and exhibiting our products in the future. But as bad as it is with the pandemic, it also gives you time to reflect on certain patterns and behaviors that do not necessarily have to be exactly the same as prior to the pandemic. Of course, acquisitions have not been totally hindered, but to get new acquaintances that is more difficult. We have several negotiations ongoing, but we only completed one so far this year and we we did that just a few days ago, which was relatively mid sized acquisition of Brickton on the element side, which is very much a technological acquisition where you instead of using like ordinary motion heater or thick film heater here, we talk about cables that you can regulate or use non regulated cables for heating purposes, which is a, I should say, a white spot. It's been in the past. We've been representing other manufacturers in that area, but that's now under our own wings. So just having a quick look at the figures, you've seen them. The growth, of course, is dampened here by the strong currency. Nevertheless, the gross margin is up compared to last year and it's a substantial growth in operating profit and the margin is also taking a decent jump from the 10, just about SEK 10,000,000 up to almost SEK 13,000,000. And if we just leave the figures and look at this our ordinary bar chart here. We see that 2019 had a very regular development. Quarter after quarter, we had a typical growth. Last year, that pattern was broken in the second quarter where it's almost a little bit lower than the Q1. We believe now, I'm going to come back to that, that pattern is back on track again as far as demand is concerned. Now we have other issues And also there to those. So we just have a look at the results. We've been able to cater for the shortcomings in the Q2 last year still produced a better operating profit and this year of course the Q1 is substantially over the Q1 last year. And if we just jump into Climate Solutions, that business there did not suffer so much in the first quarter last year. So there was riding through almost the whole 1st 6 months without any major issues. So we had a decent organic growth also Q1 last year And that continues now of course again hindered by the currency. And the underlying message is sustainability message and in Europe it's really pumping on. It's been a little bit more modest in North America. As we mentioned in the report, it seems like the new administration is really aiming at coming back. They are back on the Paris treaty and they're also acting now in favor of them continue the subsidies or tax advantages when you install more sustainable commoditization products. And naturally with that development organic growth, the operating margin as well as the operating result itself of course have been very successful. And again, we had a very good cost control. And you see the figures here, substantial jump in profitability and also with the margin taking more than 2 percentage units up. NIIB elements where we had a tougher period last year, the Q1. And now almost all segments are coming back and more or less of course. We pronounce very much that we are back on the semiconductor side, which is very obvious to all of us that, that industry is really trying to combat the lack of semiconductors. So we supply of course the producers of the machines for those factories. So that's quite a bit of a lag when you start to plan the factory, I feel like we start to churn out the semiconductors, but nevertheless that's a big market forest now and the timing for the acquisition like 2 years ago, Fermax was idea and we can conclude now. Then of course sustainability again, HVAC industry is really having a good time, particularly in Europe that is and that's also contributing to NIVE element development. And the world is going electric and of course the automotive industry although the regular automotive industry with the like combustion engine costs. They don't show such a tremendous development, but the activity electrifying vehicles both on the passenger car as well as on the commercial vehicles. That is very, very obvious. So Element has really come back. They improved operating margin as well as naturally operating profit. And there again, as we mentioned so many times, we have such a good cost control and that is not dictated from our offices here in Markel Roof. That's something that's been instilled into these companies over the years. So we've sort of been practicing that. It's very pleasing to see now that we are working together so well and presenting such a good result. And you see that here when the operating margin is taking a jump over 10% again. We've been below for some quarters, which is not so pleasing. But we never sort of shivered in a way we always said we were coming back and that's clearly demonstrated again with an improved operating profit and the decent operating margin. And if we then take a quick jump to the stoves, perhaps that's the business area that's had the most dramatic growth. We had really a tough period last year when it came to Stoltz. There we had a contraction And this year is booming and that's including both Europe and North America. And of course we continue to spend considerable amounts on R and D to be able to match the expectations on the wood burning stove side when it comes to emissions, particular particles and hopefully eventually one day also being able to produce machines without any smoke without any smell. So that's a tremendous task we've undertaken. But nevertheless, we have the size now where it's natural for one of the market leaders to take on such a challenge. And again, margin has improved of course due to the organic growth and the good cost control, it's very pleasing and that's demonstrated here is almost unreal figures when we look at it here with the operating margin taking the lead from SEK 50,000,000 in 3 months and the margin in itself from SEK 5.5000000 to SEK 12000000 more than doubling. First, again, when you compare yourself to weaker quarters, say, we remember how it was a quarter a year ago. Then we were a little bit, you know, we were a bit pale, I should say. And now we had a totally different situation. But nevertheless, we can say that we were able to run through last year without any major issues. We came out with a decent result despite the pandemic and then now we've demonstrated that once the economy is changing, then we are ready to go in that direction. I promised to mention a few things about what was mentioned in the first page of the report and that's the different situation in the market right now when it comes to components, delivery times and also price increases. And I think that has taken many of us with surprise. But then again, that's a business condition that we just have to come back. During the Q1, we've been able to do that. Of course, we all know that there are delays in deliveries of components, not only to us, but to most manufacturers. And how you compensate for that? Well, it always comes as a surprise, but you just have to be very flexible in production and you have to produce when you got the components and again flexible workforce is one very important factor. When it comes to predicting what this is going to mean in the future as far as the shortage of the sale of containers and the shortage of components. Our belief is that everyone is working like crazy to get 2 position on the sub supply side to come to a normal situation, but we our estimates that will take some month still. And price increases, we've seen a number of manufacturers and sub suppliers taking the chance of increasing prices. I guess that's the game name of the game in the market economy. We of course also have to increase out prices accordingly. You also know that we have a fairly modest way of doing things when it comes to price increases. We don't like to burden our customers unnecessarily, but of course we have to compensate ourselves, but also absorb possibly some of it through our own productivity. So that is a very clear message that our prices will also increase, spot as we call it in a civilized fashion. And we just hope that the world eventually going to come back to a situation where the supply chains are working as they did prior to the Q1 last year. We've been looking at the pie chart here now, distributional sales. It's pretty much the same as before, when it comes to distribution of sales and when it comes to the operating profit, there you see the Climate Solution is still having like 2 thirds, but Niebellemen and Stow's have been stepping up a little bit, which is pleasing to see. When it comes to the distribution of the group sales, here we see a change and that is that the dollar should I say, weakness is more apparent here. The dollar has weakened more double digit compared to last year. And of course, that also in the illustration whereas the excuse me, the euro has weakened perhaps some 4%, 5%. So that means that the North American part of the pie is a little bit lesser due to the weakening U. S. Dollar compared to a year ago. But still we believe it's a healthy distribution of sales Nordic countries, our home market is almost a quarter of our sales. And there we have a relatively strong demand and customers with a relatively high income as an average. And we think that's very important that the Nordic countries going to service as our home market since our own country is fairly small, but together we form a continent up here in the north with some 25,000,000 people. So I think that's very quickly my message. And Hans, you continue please. All right. Thank you, Erik. I will quickly take you through the business areas a little bit more in detail and then some balance sheet comments as well before we leave room for Q and A. So if we start with Climate Solutions being our biggest business area. The picture from Q4 remains in a way and continues, meaning that where we have the sustainability theme where that has come across that drives sales, which means that the Nordics hasn't been stable in this area for a long time and continues to be so and grow nicely. We're in this phase of replacing heat pumps with heat pumps you can say to a large extent and then Europe, Mainland Europe is growing where the sustainability theme is taking off more and more. But whereas North America still is a little bit weaker, although measures are taken, which we think will benefit us going forward. Of course the oil and gas prices are low there still. In terms of sales, we came in at SEK 4,300,000,000 and that's as you can see, a growth of 6.8% and seemingly all of it comes from acquisitions, but the underlying organic growth, as Eric mentioned, was quite healthy actually. It's the headwind when we translate everything into Swedish currency that hits us in a way. Gross margin has been improved up from 33.4% to 35% and also what's not really displayed here is that the SG and A side has also improved, leading us to a very healthy profit improvement there of some 29% on this growth there of the 6.8% coming in at a margin of 13.4%, which during my time here, which is close to 10 years now is an all time high. In terms of distribution of sales and Erik touched upon it. And since Climate Solutions is so large, it of course has an impact on the whole group. Here the North American business has declined in relation to a year ago. It was 26% at the time and Europe was 45. So that's the major shift here. The Nordics is basically the same. And this is of course a result of currency, but also the fact that Europe has picked up and has grown stronger than North America over the last year. Shifting into Element then. Also here you can say that the picture from Q4 continues, which means that the growth in HVAC and semiconductor has been strong, but also rail has improved as well as white goods with people spending a lot of time at home and both wearing out their equipment, but also probably wanting to install new equipment. The automotive industry is very interesting in the sense that just as Erik mentioned, there are numerous projects ongoing here to the business as such, although there is still a large portion of traditional cars where this is not as evident. Sales came in just above SEK 2,000,000,000, a growth of 5.6% of which is rather small portion was acquired. Also here the organic underlying organic growth has been quite healthy in a way, but also with a strong headwind from currency. But again due to the fact that the comparisons to last year have been a little bit weaker. The growth here has commenced stronger than the climate, which never was hit as much. Gross margin up slightly and also here SG and A has been kept at a very good level leading to this improvement there of some 20.8 percentage up to 10.8%. And also this is an all time high during my time yen at NIIB for our Q1. In terms of distribution of sales, as you know, NIIB element is our most global business area. And here the picture has remained fairly much same, although the North Europe or the European part has also grown, but which is more a little bit more of a consequence of the exchange rates. And then as we said, I mean, last but not least, Stoves has had a tremendously good development in Q1. Typically, it's Q3 and Q4 where everything happens and Q1 and Q2 are considerably slower you can say. But here clearly the effect of people working at home and wanting to renovate their homes has had a strong impact. But not only that, actually we had slightly longer and later winter also this year. And when it is cold outside that drives sales within VEBA Stokes. So here we have seen this growth here of some 23% including a currency headwind and just a little portion coming in from acquisitions. So it's in a very, very strong Q1. Gross margin has been slightly hit. We of course continue to spend considerable amounts on R and D for the stove that Erik mentioned to bring down particle emissions. But also it's a juggling of course to meet demand when it kicks up like this, which has an impact. Nevertheless results up to SEK 85,000,000 from SEK 32,000,000 extremely strong for our Stoves business area coming in then at 12% in Q1. And then Stov's distribution of sales is fairly much similar as before with a quarter each in North America and Nordics and the rest and Mainland Europe. Leaving then the business areas and looking at the balance sheet for the Group, there is not so much to comment upon. I mean the changes there are just a consequence or a logical consequence natural result of our growth. If we look at the liability side and equity specifically. That has come up from 17.7% to 19.1% since year end. If you look, you can ask why hasn't it increased more given where we stood a year ago. But that is to a large extent consequence of the exchange rate differences of transactions from our foreign subsidiaries, which doesn't go over the results, but on the equity. There was some comments in Q4, I think it was where it was said that that had a big negative impact on us. But that is just a simple math exercise when you recalculate or translate it into Swedish currency. And where that hit us by someone slightly less than SEK 1,500,000,000. We're almost up to SEK 0.9 billion now as a result of that. Otherwise the balance sheet is very stable you can say. From a cash flow point of view, we have of course generated a lot more cash from last year, it's close to SEK1.1 billion from operations, up from the SEK0.8 billion, a slightly more negative change in working capital, although the working capital as such is lower than it was at the corresponding time a year ago. But it is a phase of the year where we are trying to build inventory. We're actually very low now due to the high demand. And yes, so that's the result of that. Then we continue to invest in our operations here. It's slightly lower this quarter, but we are in a phase where we are expanding and have stepped up slightly compared to just a few years ago. So overall we've generated an operating cash flow of some SEK408,000,000 up from SEK 360,000,000 last year. And consequently the key financial figures our developing well as well. Unappropriated liquid assets is of course our cash and cash equivalents, which is at 5.6. So there's definitely room for further acquisitions. The interest bearing liabilities in relation to equity is coming down consistently you can say as is the net debt to EBITDA, of course, when there is no large acquisition coming on board. Equity asset ratio is also very strong, catering for a good position to acquire. And then just a few more comments here on the key financials. The working capital it's at 14% as you can see, a fairly low number compared to where we have been before and really in a situation where we need to build some more inventory here to meet the demand. And last but not least, we can just comment upon return on equity. As you know, we have a goal there to reach 20% and that's I think the only key parameter that has not developed as nicely, if you put it like that, as the operating profit, sales growth and so forth. View to the fact that we have a very strong balance sheet. We've made the right submission some years back. But now given the situation we're in, it's step up considerably. And yes, it leaves us in a good position for the future, I think. The closing share price we typically don't comment upon. But we do leave room for a lot of questions. Yes. Thank you, Hans. I think it's time for you guys out there to shoot at us now. We've had the advantage of keeping you listening for 30 minutes. And we just out of courtesy, please, we have also a Board meeting going on. So we thought that it would be appropriate if we could return to that around noon at latest. It's also sad today to note that we also have our Annual Shareholders Meeting and there will be no presence as we all know. And typically there are a lot of festivities here. And it's like examination day typically with some 1100, 1200 people coming. And it's a decent weather today outside. It's not totally sunny, but it's pleasantly warm and it's abandoned. We are going to be like 8 of us at the shareholders meeting. So we're really looking forward to next year when we can have people here again. But that shouldn't overshadow the figures. But the whole village of Markaried. We look forward typically to this particular day and now it's just an ordinary day without any spectacular views and visitors. So thank you for that. We are ready for the questions. Is anyone there? Our first question comes Karl Regenstein from Nordea. Please go ahead. Your line is open. Hi, it's Karl A couple of questions from my side. First of all, you mentioned of course both pricing as well as the component discussion On your session here. So just so I got you correctly, do you expect increase in shortages when entering Q2? And would Say that it will have a material impact on the components side firstly? Yes. Well, I mean, of course, we expect price increases, but we can't really judge whether there are going to be any shortages. We've seen, should I say, delivery performance. It hasn't been as regular as in the past. But so far we've been able to produce as before, but with some hindrances. So if you are delayed with 2 days, well, then you have to compensate that overtime or working on Saturday. So that's how we are trying to combat that. We can't really predict what's going to happen in June July. We just hope that everyone is struggling and doing their best to come to their feet again because obviously we've been sort of pulling down on our resources too much and left people go obviously and didn't expect the demand to come back that fast. But we do not send the warnings and now we get it. The whole world going to collapse. But we think it's appropriate to inform you as analysts and shareholders that it's a little bit cumbersome to get things to work. Okay, perfect. And on the raw material side and the pricing side, have you so far implemented price increases During Q1 and do you plan to implement price increases during Q2 as well Given maybe the raw material side or the never ending raw material price increases. And also, would you say that the vast majority of the price increases will be done through internal efficiency? Or What's the split between internal efficiency and the price increases, would you say? Well, I mean, we don't hand that out. It's just out of courtesy. We believe that if you just push on what you get, there's no room for efficiency. And of course, we also question price increases from our suppliers. They can't just say we're never going to increase price, it will be 4.5 sense of what's the reason for that. Just like our customers say, why would you increase prices with so and so many percentage units? So that's what we are saying. As a manufacturer, you also have a responsibility to improve productivity and do things better, not just because of the price increase, but that's why we preach all the time in our report as it continues work that we improve our productivity to be able to counteract the price increases. But of course, we are not a bank and everyone has to understand that, both our suppliers as well as our customers. We have to mitigate naturally what's coming to us and what we put forward to our customers. So of course, the price increase, that's the easy way out. But there also could be consequences. You can't you have to reason around that. That's what we are saying. And in the very short term, would you say that we should expect the lag effect between when you Implement to some extent price increases and when you have implemented internal efficiency measures, which could of course negatively impact gross margins in short term? I think those questions are impossible to answer. Of course, I mean, we have the sum of the pause all the time. I mean, every day and every week, we monitor, of course, the prices coming in, changes stuff like that. Well, how should we counteract? So I mean, we don't check prices once a quarter. We do that continuously. So I think that we have a pretty good way or rational way of following price increases and monitoring those accordingly, eventually also increasing our loan prices. And of course, there's no lag in that sense of course you can't see increased prices every month from a practical point of view. But I think that we have a pretty good hand on that. Yes. And the final one from my side is regarding Climate And organic growth. You mentioned Netherlands, you mentioned Germany, Sweden are performing well. Could you give some flavor on the current market development in Germany, what kind of growth pace we are currently seeing there? And also Could you perhaps try to compare your performance with what competitors working with alternative solutions are performing including hybrid pumps And gas solutions and so on. No, there is a good healthy growth in Germany and we follow that as a business area. And of course, that's been the whole idea that we have established ourselves very solidly over a number of years. We got started in Germany in 'ninety two and heat pounds was hardly known. And eventually, we that was still an importing company. And then of course since 2002, we had our own subsidiary for Niede, the brand name and that's outside Hanover. And then of course, we acquired Alfvenotec through a strange maneuver in a way, some people might asset by acquiring Schultes in Switzerland and then getting a position in Germany also production wise and Alfvenetech was acquired like 10 years ago. And then knowing that it would be very important also for our Enetech group in Sweden to have a platform, we also acquired Batikofte, which is one of the leading oldest companies on the key comps in Germany. So we believe that we are very solidly established in Germany with 2 entities producing in Germany and ourselves producing here. So of course, we follow the market very closely. We are very pleased to note the growth and we follow that one. We like to be even bigger, but it's a pretty good struggle out there by everyone now. Perfect. And how do you perform compared to other alternative solutions Would you say the hybrid solutions and so on? Well, we mean hybrid when you compare when you combine a gas burner to yes, we don't have that. We work strictly with heat pumps. Okay. Perfect. Thank you. I mean, if you're going to convey a sustainable message, it's difficult to combine it with a gas burning boiler. Yes. It's more like how you compare to competitors working with the hybrid solutions If they are gaining market shares. Well, of course. We never produced any gas burning boilers. So that's why we have no answer there. We are not positioned there. Okay, perfect. Thank you. Thank you. Our next question comes from the line of Douglas Lenkow from Kepler Cheuvreux. Please go ahead. Your line is open. Hello, J. K. And Hans. Congratulations on strong report today. Two questions from my side. Erik you began this call by mentioning that you had a few M and A discussions ongoing. Is it possible to add some more color to that potentially geographies and then more importantly within with business areas And Nishu, would you say any comments on that would be very interesting. I'll start with that one. Well, I think that as we said so many times we don't put priority on any specific business area because we just talked to thinking about the smallest business area. I mean, we still lack wood pellets. So that's a very obvious chunk that we would like to add. And still we are relatively small in North America. So that's another thing we are looking at. On the element side, of course now we've seen how important it is to broaden your scope coming from an immersion heater situation like 25 years ago. We moved. We just were sensing our way the market here, okay? Perhaps we need thick film. Perhaps we need thin film. Perhaps we need resistors. And now we are into cables. And those components supply the semiconductor industry that opens up new avenues, I mean, into medical industry into the space industry specific components, both in Europe and in North America. So having not having left, but understanding that the element market as we see it today is much broader than is just heating putting an element on a cooker or putting a drying element in a washing machine. This is much broader and particularly now when the world is getting even more electrical, there are so many possible acquisitions all over, naturally Europe and in North America, but also in Asia. It's overwhelming. We've been it's fantastic. And when it comes to Climate Solutions naturally, I mean, there we also believe that the Growth is interesting, but still we are relatively small and just in the Mediterranean area. In the southern part of Europe, of course, there's a very important area for us to grow. Commercial side in Europe. We still could be much, much larger. That's a very obvious area to grow and also the commercial side in North America. So in all three sectors, we have very interesting avenues, but There is a hindrance, we must say that a new company, I mean, it's fine to sit in front of a screen and try to present yourself, but nothing supersedes meeting a person in person and discussing eye to eye, having a meal together and just detecting those very important signals, what kind of individuals we have in front of you. And that is particularly important for us that run a business that is so autonomous. So we just pray and hope that we're going to get out of this deadlock sitting in front of computers so we can meet people again. We have a number of names, very interesting such. But when it comes to large acquisitions, we would rather have chances to meet people just rather than buying people online buying companies online. Like the heat dries in Britain now. It's €100,000,000 or €10,000,000 or €10,000,000 or quid. So this SEK112 1,000,000, okay, that's done totally online. Then of course, we know the people there because we've been selling their equipment for years. So that again facilitates that particular acquisition, but it's awkward. So that's the only I mean Hans is showing a balance sheet that pump up with both cash and we have a tremendous line of credit. So we're just ready to go. Just like to that vaccination to come to perfection so people can get out the need us again. Yes. So on the Climate Solutions side. I got a little emotional there. No, sorry. That's a very Good answer, Elan. But on the Climate Solutions side, it's Mediterranean and also commercial in North America North American general you would say on Climate Solutions. Yes. Okay. And coming back to North America, You're right here in the report comment about the U. S. Clean Energy Act proposal that was recently put forward. Just so I understand that, is this considered to be materially more positive than the previous tax credit, would you say? And would this sort of make heat pumps really competitive relative to gas in the U. S? Any comments on that would be helpful. Thanks. Well, I mean, here you touched upon 2 very important issues. If we just continue to say that if you go for the most inexpensive one, then I think that we're never going to leave gas because if they lower the price of gas, it's a well, it's still a bit more it's less expensive than a heat pump. We believe that the subsidies that were put in place prior to this suggested program. We're sufficient. But the problem is when you have a situation that is 1 or 2 or 3 or 4 years, the advantage of this suggested act is that they're going to run for 10 years, which means that you also have the time to build up an infrastructure around it. We know when we started to sell heat pumps in Germany, drilling rigs. Just to establish those takes quite a while. And if you only have a window open during 1 or 2 or 3 years, well, should we really invest in that? So the advantage is, of course, the certainty. The level puts it in the same category as the PV panels, which is very good. And the subsidy also puts it in the same category as we would cost to install a complete HVAC unit with water heat and everything on a regular installation. And then of course comes the savings and comes the sustainability outlook. And we believe that we're going to have the same attitude in North America as we've had in Europe recently when gas is more and more questioned, so it's not only price matter. And that's what we always mention. If price would be the issue. Then we would never be able to curb the carbon dioxide emissions. There has to be other reasons around that and we have to all assist ourselves in that movement. I'm not a fundamentalist, don't take me wrong there. But it's not only a price issue. And if this program passes the Senate, we believe it would be a tremendous assistance for a longer term program and infrastructure improvement around heat pumps in North America. I guess the U. S. Is clearly lagging Europe in on the theme that you're highlighting that it's not only about price. The U. S. Seems to be clearly quite a lot about price still, but that might change. Thanks. That's very helpful. Would the longer timeframe now So sort of indicate that it would make more sense to do investments in the U. S. As well, I mean organic investments in your business? Well, I mean, we rather would not rather, but we are fairly well established when it comes to heat pumps with our 3 brands in North America or in the U. S. And one brand in Canada. So we actually have 4 manufacturers. So not necessarily believe we that we need a 5th one, but rather stable market conditions. Okay. That's it for me. Thank you very much. Thank you. Our next question comes from the line of Panu from Morgan Stanley. Please go ahead. Your line is open. Hi, hello. Thank you very much. I have two questions please. Number 1, in Climate Solutions, it seems that the organic growth in North America is behind the other regions. So could you please tell us a bit more about the reasons here? And this is because we have seen peers operating in the North America Residential HVAC space reporting stronger demand. So is there anything specific that you are facing in particular in that market? My second question would be that I understand that you're in the process of to migrating your Refrigerant used in the heat pumps to R290 with a lower global warming potential. I'm just wondering whether there's any future margin impact. So are these refrigerant more expensive than the ones you have before? And how do we think about margin going forward? Thank you. Okay. Well, the North American growth, the uncertainty of the present program continuing, of there is a hindrance to the North American heat pump market. And there's no sort of secret that the present administration is more aligned with the European way of thinking when it comes to curbing carbon dioxide emissions. I'm not criticizing anyone in the past. We are just observing and we believe and we see that the present administration has a totally different attitude also demonstrated by joining the Paris treaty again. And they also understand that it takes more than 1 or 2 or 3 years programs. It takes a longer period to really again allow the infrastructure to prosper. And that's why the North American or the U. S. Market has been sort of, say, a little bit lagging. And of course during the pandemic situation here hasn't been any help either because you don't change a market under those conditions. And we felt that it was underway, but then of course the American Society and for that matter the Canadian, they've been suffering tremendously by being lockdown. So we see a positive trend. Of course, the bill is going to pass the Senate now. That's very important. We believe that since with a vague or slim majority, I mean, it's fifty-fifty, but the Vice President having the ultimate vote. We believe that they can get that passed. And although several Republicans also being positive because we managed to get a shorter program in place by negotiating with both parties in Washington some years ago. When it comes to refrigerants, we thought that going to the now everyone knows the 2.90 what's going to be a little bit of a market gimmick for us, demonstrating that we are mastering that now. So we weren't really typically we don't release our product releases through our annual report, through our quarterly reports. Been such a tremendous pressure that you have to do it now. We think that's overreacting. Nevertheless, we do not believe that that's I mean, propane is relatively seen less expensive than old other refrigerants because they are chemical blends that require naturally chemical company to come out with that with those margins. So propane is less expensive. The difficulty, the challenges of course at certain blending conditions, it is flammable and explosive. That's why you have to be very, very cautious both in production and during the actual running period at the consumers level. So that's why we are we've been cautious about launching those products, but they are coming in a long, long roll now. So we don't see any disadvantages. I mean, then again, the refrigerant part and the heat pump is not that phenomenal. So it won't be a, should I say, price hindrance or margin hindrance, but neither can we expect a tremendous improvement, but it will be a slight improvement, but particularly the message that we have provided the market with heat pumps with the GWP that's below 10%. That's a very, very strong market to be conveyed that's just to be conveyed. I'm sorry. Was it too lengthy of an answer? No, that's perfect. It's very clear. Thank you. Thank you. Our next question comes from the line of Frederic Mogal from Pareto Securities. Please go ahead. Your line is open. Thank you very much, operator. Good morning, Jeterik and Hans. So just thinking about the component shortages that you are experiencing and commenting about. I mean, clearly all manufacturing companies are facing similar issues as you are also I would assume that companies with more global supply chains are more vulnerable to these sort of issues. I was just hoping maybe you Could compare or give some comments on your sourcing structure, your supply chain versus some of your competitors in the Nordics and perhaps in the Central and Northern Europe areas, particularly within solutions, just how you compare with those. And if it could be perhaps an opportunity for you to gain some shares, they are even more exposed than you are. Well, that's a question. That's a high kind of a question. It is impossible really to answer it. But there I mean you can fill in Hans. But we of course, warship value added, meaning that we try to produce as much as possible in house, like immersion heaters, like heater changes, like all the steel cabinets and things like that. But nevertheless, even if you have value added, I mean, we don't have a mine. So and I mean, to really have value added, you need a mine and then you need a steel work and then you get this deal here. But of course, we can say that we shortened the supply chain by having our own production of practically all steel constructions or sheet metal constructions in heat pump, in the water heater and also on the element side, all the cabinets and stuff like that. So we don't have to rely on the sub supplier on the 3rd level. 1st comes to mine, then comes the steel work, then comes who is producing cabinets for you. We do that head to head that also to be bought outside of course. There would have been another insecurity added. The same thing with heat exchangers. Of course, again, mine, steelworks, stainless steel, we don't produce that, what we produce the heat exchanger, meaning that that takes away one level of uncertainty. But we are not invulnerable, whatever you like to call that or invincible. Of course, we're going to have difficulties. But our way of thinking, that is we believe an advantage. But then to put it very bluntly, I mean, we do not as for instance, as a heat pump manufacturers. We do not produce compressors. So there we have, of course, compared to other manufacturers that where they produce compressors. Of course, there we have a shortcoming and we have combated that and are combating that by having several suppliers. And Hans you can fill in. Yes, if I just fill in. I think we also believe very much in the business model that we have with our to a large extent independent companies managing a lot of these operations on their own. We're not dependent on one huge factory upon which everything stands and falls. It's rather a number of companies solving these solutions locally you can say. Then of course our people work together in the background in supply chain matters, purchasing and so forth. But if one company fails, so to speak, or has a problem, the other one might not. So I think that also brings a balance into the system in a way, although we're not invulnerable as Erik says. And anything can happen, of course. Okay. Thank you very much. That's just the answer I was looking for. Thanks. Thank you. We have no more questions from the line. I'll hand it back to our speakers. Well, you were so polite. It's just about noon. We're going to continue and we're going to look after the Annual Shareholders Meeting as well. Hopefully the dividend is going to arrive at some of your bank accounts accordingly. And around the 21st May or something like that, we might or 26, I hear some whispering here. We going to end up with some more shares. Today's number multiply with 4. So that's also a change. Pleasure always to present the report to you and also to receive the questions. I mean, we really hope that you don't think that we are naughty by not answering all the details. I mean, we could be more detailed, but we think it's fair for all shareholders and people out there to of course to get fair information, but we cannot totally, should I say, undress ourselves. Thank you very much again. You have a nice day now. Thank you. Bye bye.