Ladies and gentlemen, welcome to the NIBE Q4 results presentation. Today, I'm pleased to present Gerteric Lindquist, CEO, and Hans Backman, CFO. Mr. Lindquist and Mr. Backman, please begin.
Thank you. Good morning.
Good morning.
This is Erik. I think that we start with the usual procedure, like I present a few general comments. Then Hans is going to present more detailed figures. As we mentioned in the report, the business environment for the year has been, to say the least, quite challenging. Despite that, customers have been fairly demanding. They've been out there buying our product, which is very pleasing. It's not always coinciding, the buying mood with the political situation. Just in general terms, we can say that the growth, of course, more than 20% in one year is primarily driven by the acquisitions, but we've also had a stable organic growth. The results, of course, have improved and are mainly coming from the acquisitions. There's also been a strict control of the fixed cost and naturally and always, focus on productivity.
As we had said for almost four quarters now, of course, it has influenced the result of the larger acquisition, primarily Enertech Group in Britain and also the CCG Group in America. That has reduced our operating margins somewhat, and also the discontinued subsidies in the U.S. for residential heat pumps. I'm going to come back to that, which looks a bit more promising as of a few days back. Acquisition-wise, of course, we have acquired some larger ones and some smaller ones. I think it's all in all nine acquisitions the last 12 or 13 months. They're coming in in a steady stream, we can say. There are several companies for sale out there. It's more a matter of screening it correctly so we find the right ones, both product-wise, chemistry-wise, and also naturally, outlook-wise when it comes to outlooks in the future.
Very quickly into the figures. When you say the SEK 19 billion, we are pleased that we just passed. Of course, it's always an internal challenge and the competition that we're going to arrive at a certain target, and the SEK 19 billion was, of course, need to arrive at, which is considerably higher than SEK 16 billion. Also the operating profit being like SEK 350 million more than the previous year. We are quite pleased with that. There we all see that the operating margin has taken a hit for the reasons that I just mentioned, being like 0.6 percentage units down from the previous year. Hans is going to come back to the tax and the financial items later on. Margin there is also the profit margin is slightly lower, which Hans is going to cover.
If we just dig into the Climate Solutions again, of course, there have been some four strategic acquisitions that we mentioned. Enertech has already been mentioned. That's more on the residential side. Of course, it's a neighboring in Sweden, only 45 kilometers away. We see a good potential for them to primarily increase their sales abroad. The CCG Group in Canada came in the beginning of the year, adding some commercial heat pumps to the business unit. Tempeff out in Winnipeg, they're adding to the ventilation competence that we have in North America, adding to the CCG Group. We also acquired 45% of Rhoss in Italy, adding more on the air conditioning side of our knowledge.
We mentioned so many times in report that we are really aiming for the climatization also in larger buildings, and we are gradually building up a knowledge within that sector, and that's where the Rhoss acquisition should be seen. Of course, acquiring companies like Enertech Group and CCG Group with somewhat lower margin that we are used to, that takes quite a bit of an effort to bring it up to the desired level. Now CCG Group has been on board for some five quarters, and Enertech has been on board for some four quarters. That means that we've given an internal target of 18 to 24 months. During the year, they should be up and running at the desired levels.
I won't dwell too much more on the operating margin because it is very obvious that it is slightly lower due to the reasons that I just mentioned. We were positively surprised, we must say, that last Friday when the U.S. budget was taken by their Congress, that the tax credits were reinstalled on another four-year basis, working retroactively, actually, as of January 1st, 2017. I think that's very nice that the customers that still bought during last year, they also will be remunerated. We hope that gave us another bridge into the future, which we believe very firmly going to come also in North America and the U.S. It's slightly delayed compared to European standards. We can also mention that also in Ontario and Canada, it's been installed tax credits quite recently. It looks more promising from that side.
In the long run, of course, we have to stand on our own. As a hint to the customer, it's important to have that. We've mainly been arguing that since the PV sales have had the same tax credit and also the wind, we thought it was fair that also the heat pumps would have a chance to compete on the same level. Just very quickly then on the figures, of course, there again, passing SEK 12 billion was a landmark for the business unit. And the margin more than 1% percentage unit down. We are not very pleased with that, but we also see that gradually the margin is now coming up again, and Hans is going to take more of a comment on that. Looking into heating elements, of course, that's the business area that's come back from a lower operating margin.
In the last two years, we've been very pleased to see that they are solidly above the 10, now around the 11 mark rather. There we have also acquired some strategic partners during the year. HT in Italy was, of course, a very important acquisition for us, since our coverage in Italy was not really satisfying. Gaumer in America in December, was another very important acquisition, more in the process and energy petrochemical side of the heating element. Just recently, actually in the beginning of this year, BriskHeat, that is more concentrated on the heat pads or heat jackets, as we call them, primarily in the semiconductor industry. Which is very interesting for us to also participate in industries that are growing, just like the automotive industry, going electric, like the rail traffic on trains, that's growing more and more.
Semiconductor, of course, everything is going digital, and we are now participating even more actively. We also have some add-on acquisitions that we not necessarily present in the press releases, but we have a small acquisition in Netherlands and Switch Point on the railroad, and we have Ekwon Heat in Thailand to be able to meet demands locally. Of course, the organic growth is very impressive. Perhaps we shouldn't judge ourselves, but internally, we are very pleased with the organic growth, and that again, is a demonstration of that we are participating in sectors that have organic growth far exceeding the GDP that we have in the past viewed as the typical growth ratio for this business unit.
Since we have a good spread geographically, and we have a good spread product-wise, and we work very determinedly when it comes to productivity, we've been able to keep the margin at a healthy level. I think as a sub-supplier exceeding 10% and not being facetious or not being brutal to our suppliers, I think it's a decent level to be. I think that gives respect both among customers and suppliers. The figures, of course, here again, passing SEK 5 billion is another landmark for this business unit, and remaining on the 11% EBIT level. That is also very pleasing internally, at least. Then coming to stoves. Here we haven't acquired any companies. We acquired a major body for the size of the business area at the end of 2016, and that has taken us some, of course, efforts to coordinate and to bring that on board.
It's moving ahead fine. We are always pleased with the performance that the stoves is producing. It's between 12% and 13% margin, and that's the same this year. We also mention in the report that we are focusing now also on the combustion to further improve combustion and also to further reduce the particles. We are already at a level where we have passed the levels for the EU 2022, but we think or believe that as a market leader, we should really lead the industry into even better performances when it comes to combustion and reduction of particles. Then we come to a few perhaps braggish pictures or slides. When we look at the turnover since 1993, of course, now we are approaching the SEK 20 billion mark, as we mentioned in the report.
Had we said 1993 that we were going to approach the SEK 20 billion, it would not have been realistic, naturally. As we've taken it in steps, four or five years at a time, sometimes three years at a time, we've been doubling sales. With that, we have instilled a mechanism, a thinking among our employees that growth is absolutely fundamental. Of course, it can't be driven just by Hans and myself. It's driven very much by each individual company in the group, and also the mentality is growth driven. Not only the growth, but naturally also to make money or to have a decent margin. Anyone can grow, but the trick is to be able to grow and to generate money.
I think that also on that diagram, we can say that we've had one year where we slackened a little bit, and I think it was 2009 there, and then where we came out, or possibly 2008. I think that is also something that's an illustration of where we are coming from. Even if times are tougher, we never surrender, as Dr. Churchill said, or Mr. Churchill said. We're always charging ahead. If something will go a little sour in the market, then we just have to counteract. We are never fearful of something. We dare to counteract. We dare to act as a market leader. I think this illustration might be a little braggadocios, but at the same time, I think that's showing the whole heart of NIBE.
It doesn't matter where you're located, as long as you have the right attitude and the right passion and the right ambition, you could do that. I'm very proud, I must say, of the organization and the people on board have been able to contribute to this. I notice, of course, that some articles are written about myself and the newspapers jokingly saying I've been on board for many years, but I'm just one little pin in this machinery. It's actually all the 15,000 people out there working so hard, being so proud, being so determined. That's the whole thing when it comes to NIBE. It's not a one-man show at all. Some further graphs just illustrating our seasonality. That has not changed. Perhaps I'm jumping too quickly here now.
I'm jumping into the picture of our performance when it comes to the years that we have been listed, that's showing that we are steady about the 10% market. Of course, the equity ratio is somewhat lower than it was in the past, since we had that injection of capital in the end of 2016. It also means that we are very solid when it comes to further acquisitions and whatever are going to happen in the future. Now we have an equity ratio, of course, far above 40%, really above 45. That's not our aim to remain there. Our aim to utilize the capital that we have on board, this graph is just to show that when we went public 21 years ago, we promised the shareholders to really be about 10%, we've kept that pretty much over the years.
The equity ratio, as that's commented upon. Of course, the return on equity is a function of the equity as such. That's our legacy. Okay, Hans, should you possibly dig into the next pictures here, or should I comment a few things over Yeah. I think we've been driven more or less into the situation that we also comment Q4. You remember that we very seldom commented upon the one particular quarter. I guess that we have to adhere to the rules. The fourth quarter is slightly better than the previous quarter in the sense that our operating margin is now improving compared to what it was the previous quarters.
Again, an illustration there, slightly moving up when it comes to margin compared to where we were last year, not quite fulfilling the previous year, again, you have heard about the reasons. We can also say as a general comment that, not that we like to increase our prices more than necessary, we have been somewhat lagging in our price increases. They are in place, not necessarily have they had full momentum even during the fourth quarter. I think that most companies have been living in an environment that has not been sort of painted with the inflationary marks. Now I think it's more a situation where we see some increases or some dramatic increases in some areas, we'll have to compensate some of that with our own price increases.
We work very hard and determined to also increase productivity and try to absorb as much as possible internally. A few more graphs before Hans comes in. It's the quarterly sales, and we see that the seasonality remains. The fourth quarter is always the strongest quarter. We've been trying over the years to counteract, saying, "Well, couldn't you possibly buy stoves or heat pumps early in the year?" It seems like you buy barbecues in the springtime, and you buy stoves in the fall and so forth. We just have to live with that, and we just have to be able to counteract when it comes to the product delivery performance. We must say that during the fourth quarter, if you ask any market, there might have been some smaller disturbances.
We were just on the verge not being able to deliver everything because of a decent demand. Profit after financial items, they're pretty much showing the same pattern, and it's even more, perhaps, pronounced quarter to quarter. It's been the same practically the last 25, 30 years, which we're going to show you in a few graphs, possibly in a little while here. If we just look at the distribution of sales, that is just to rationalize all the figures earlier shown. Now, of course, Climate Solutions is well above the 62, and the 26 and 20 are the two other business areas. On the result level, it's slightly more pronounced, where Climate Solutions has 66, and now Element is up at 23, and NIBE Stoves is 11. Geographical distribution, we talked about that a lot in the past.
Of course, we were so dependent on Sweden and the Nordics in the past. Eventually, we grew into Europe, and now we also have a healthy portion outside. You can say it's like the Nordic, one third, well, a little bit than a third, and the rest of Europe, slightly more than a third, and then outside Europe as such is like another third. That gives us also a stability and a robust structure, both for expansion but also for sudden occurrences in the market to counteract. We are very pleased to have this distribution. Now it's more a matter of growing all these sectors, not necessarily changing the balance, but rather having, of course, this pie chart to grow. I promised this diagram. I think it's just phenomenal if you look at it.
The first quarter, at least now I said 30, 35 years, but since we were listed, we can say that typically we are between 20% to 21%, 22% when it comes to the first quarter, and then it goes up to some 45%, and then it's around 70%, and then the last quarter stands for some 30% of the total sales. Could be some deviations from year to year when we've had an acquisition earlier in the year, like last year when Enertech came aboard. We are very transparent when it comes to where we sell and how we sell per quarter, year after year. Then having a look at the result, it's the same again, that the first quarter is typically quite weak and then it adds on. The last quarter is always more than 30% of the total profitability for the year.
I think it's fairly easy to follow us. It doesn't change from year to year. We have no reason to hide anything. This is just a guidance more to those following us that it's very, not very perhaps, but it's transparent. It's relatively easy to follow our development. With that said, Hans, it's your turn.
Okay, thank you. Thank you. When it comes to following us, I would just like to state that the company Rhoss is not part of the consolidation. I think that has been the case in one or the other analysis that has been made. We neither have the majority nor the chairmanship of that company, even though we have an option going forward. At this current state, we don't have the controlling stake, so to speak, to consolidate. Just to be clear on that. Before we jump into Climate Solutions, I would just also like to comment upon the group's results here, following on what Erik said on the U.S. tax reform. As you can see in the report, we have come down to a tax rate for the group for this year of 21.95%, roughly, as opposed to 26.5% of last year.
That is unfortunately not the level where we will be going forward, because that is, of course, an effect, first a one-time effect of the U.S. tax reform, where we have revalued the net of the deferred tax assets and liabilities, given these 58.7 million SEK in a positive effect on tax. That's all taken in Q4. Even Q4 was very low from a tax point of view. It was below 18%. Going forward, it will rather be a couple of percentage units below where we've been before. As opposed to 26.5%, we should roughly end up at 24%, 24.5%.
It, of course, also depends on how well the U.S. market for us develops, because if that geography, so to speak, continues to generate good profits. The tax rate over there is still higher than it is here, so that will have an effect. That's just a comment on the tax. I hope I was clear there. Coming back then to Climate Solutions, if we just quickly look at the fourth quarter, we came in at SEK 3.4 billion sales. What might look a bit strange there is that we grew with 10.5%, which is not strange, but that the acquired part was even bigger than that. That means there was something deducting the growth rate, and that was currency. We had a positive currency effect up until mid-year, you can say, and then it went the other way following the weakness or the weakening Swedish krona.
We had a weak or a negative effect of the weak Swedish krona there. Of course, another portion of that is organic growth, but there was a slight positive organic growth also in Q4. What has affected us continuously throughout the year, and Q4 is no exception, is the slightly lower gross margin though, and for the reasons that Erik mentioned before, mainly integrating the new companies, but also seeing some effects of raw material increases where we did not compensate ourselves fully. Nevertheless, we managed to increase our result there from SEK 465 million to SEK 523 million, ending up at an operating margin slightly better actually than last year.
For the full year, you see the effect of these reasons that I mentioned, the newly acquired companies and to some extent the raw material prices there, leading us to an operating margin of 13.3% as opposed to 14.6%. It was indeed a landmark to come up with sales above SEK 12 billion. In terms of organic growth, we had a very good organic growth in Europe for sure, and the Nordics specifically, compensating well for the fallback, you can say, in North America following the ceasing there of the tax credit, but which now has come back, so that should be a positive thing for the future. In terms of the sales split for geography, we have a very good balance now also within Climate Solutions.
It used to be the Element division having this, but with basically having one third, one third, one third in our major markets, the Nordics, mainland Europe, and North America, which gives us a good balance if something goes sour, so to speak. This year, clearly Europe has compensated for the slightly weaker development in North America, or more than slightly you can say. Whereas not too long ago, the U.S. was doing tremendously well, helping up some of the European markets. We are very pleased with this split, if we dare to put these words in our own mouth. Jumping over to the Element division. As Erik said, we have continued this trip here of being able to deliver operating margins above 10%, which has taken quite some time to achieve. The whole year landed there at basically the same operating margin as last year.
Also here, a landmark change coming through SEK 5 billion of sales. We had a growth there of 20% on sales and 19.1% on profit. As Erik also mentioned, the organic growth here was clearly above the GDPs in the various regions where we are active. It was a very good combination of organic and acquired growth generating a good profitability level. The currency effect at the end of the year came out at plus/minus zero. The fourth quarter was really no exception. It also showed a very good organic growth. The acquired part was higher, but it was a good organic growth, whereas here the currency did pull us down. As I mentioned before, it was the latter part of the year where we had this negative effect.
Also here, furthermore, we saw some effects of the increased purchase prices, where we now have come back or are coming back more and more with the price increases. It was pleasing to see also in the fourth quarter that we did come in lower than last year, but we have been able to hold up the business fairly well despite the one-off project that we have mentioned before, which now definitely is gone. In terms of the geographies, this is the business area, as we've mentioned a couple of times before, which is the most global of the ones we have, with a good spread of both products and countries throughout the world, giving us a balance to compensate if something is not developing as good as before, so to speak. We're also able to follow our customers where they are out in the world.
Last but not least, NIBE Stoves. Also as Erik mentioned, it's a stable business, constantly delivering good profits. We came in at the 12.3% mark there, operating margin down from 12.7% last year. Of course, we're not in a way pleased with that, but the overall performance of the business area is still very good, and a lot of focus has been put on the major and very strategic acquisition that we made by bringing FPI on board. That has, of course, contributed very much to the growth there of 26.6% versus last year. Also here, we've had some negative currency effect for the full year, mainly coming from the British pound following the business we have through Stovax.
The quarter as such came in at close to SEK 750 million, up from SEK 680 million last year, with a combination of mostly acquired growth but also organic growth, and a slightly negative currency effect. Gross margin down a little also here. Again, the raw material prices had an influence, but overall, a profit margin there of 17.4% as opposed to 17.9% last year. Here, through the acquisition of FPI more than a year ago, we have a very broader split of sales now between the geographies. Of course, there's room for more improvement. As we've said, FPI is really the basis for our North American focus now. Just jumping over to an income statement for the group looking back over five years. I think the headline there is a very good description. It's a very robust performance.
Since 2013 up until 2017, we have more than doubled sales from SEK 9.8 billion up to SEK 19 billion, and been able to maintain the profitability levels there, both on net profit and operating margin profit. Although I've been around now for six years, I'm still newly employed compared to many people here, but this gives me, as a CFO, a very good confidence in the business and that we're able to take steps going forward to grow from here as well. Of course, an important part of this being able to grow is that we have a stable balance sheet. If we look at this, if we just compare the last two years, 2016 and 2017, they are very stable.
There was a slightly larger change taking place in 2015, both following the acquisitions we made around that time, but of course, also as a result of the rights issue. The balance sheet very much reflects our growth, both organically and through acquisitions. On the equity and liability side, you see the effect of the rights issue of SEK 3 billion that were made in 2016. You see the equity takes a jump from SEK 7.4 billion up to SEK 12.1 billion. But over this five-year period, we have more than doubled the equity there from SEK 5.6 billion up to SEK 12.8 billion. I think the relations of the key financial figures, which we will see in a moment, are quite good. An important part of this, as we also typically mention, is our cash flow.
Generating a healthy cash flow is key for us to keep the balance sheet in order and the interest-bearing liabilities, especially. We were able to generate some SEK 2.3 billion of operating cash flow. Then we had a change in working capital of SEK 184 million, landing then at SEK 2.1 billion, which you see on the picture. That was a considerable improvement from last year where we generated SEK 2 billion and had a negative working cash flow effect of SEK 274 million. Then we have invested some more this year with SEK 536 million as opposed to SEK 412 million. We are expanding and investing in both factories and machinery. But still we're keeping the investment levels below the depreciation level. Typically, we are around 75%-85% of depreciation in investments. So the operating cash flow landed at close to SEK 1.6 billion, up from SEK 1.35 billion last year.
Looking then just at a few key financial numbers. You see the depreciations that I mentioned from the previous picture, but really the three last ones are some that we follow closer. The interest-bearing liabilities in relation to equity. They have come down here from 120% almost in 2014 down to 70%, despite the acquisitions that we've made. Of course, the rights issue had a good effect on this, but also the cash flow that I mentioned before. The net debt to EBITDA is now at 1.9, and if you include one more decimal, it would be 1.86, I think. So that's also below the relation or the ratio that the bond takers, so to speak, would like to have. Also the equity assets ratio is very solid in a way, 45.8%, 46% roughly.
As Gerteric mentioned, it's not so that we have an ambition to increase this for the sake of increasing it. It's rather a matter of having a sound balance sheet which gives room for further acquisitions. Then over the years, looking at the last pieces of key financial figures here, net profit per share has constantly increased here. It was at SEK 1.86 in 2013, moving up a step every year. This year, for 2017, as we're concluding upon, came in at SEK 3.38. Of course, also the equity per share has increased. What we typically follow as well is, of course, the working capital.
The picture you see here is a little hard to analyze in the sense that it includes a snapshot picture of what it looked like at year-end at each time, and that includes part acquisitions, full balance sheets, only half an income statement, and so forth. The trend is still that we're moving down here. The working capital, excluding cash, came in at SEK 16.3. On a like-for-like basis, when we make our internal comparisons without effect of currency, without effect of acquisitions, we have been able to bring it down. Only this year, we were able to release some SEK 150 million-SEK 180 million thanks to a tighter or smaller working capital. I think overall, the balance sheet looks fair and gives us the fundamental for further growth.
That is really the topic for the next slide, because we're very close to the current intermediate target, which stated that we should be able to reach SEK 20 billion of sales at the latest by 2020. With having landed this year, or 2017, on SEK 19 billion, we're not too far away. As I've said, that's an intermediate target, which was a very ambitious one when it was set. I think we have ambition beyond that, Erik.
Well, thank you for allowing me to comment upon that. I think it's very important to be transparent when it comes to targets. We've been transparent every day, every quarter, since we went public, approaching the SEK 20 billion. It's very important internally, perhaps the foremost, since we are not supposed to calm down or anything, we see the potential, of course, or the possibility of arriving at SEK 20 billion prior to 2020. It's important to say, okay, what's the next target? That is SEK 40 billion. Again, coming back to what I said previously, it would have been impossible 1993 to say, now we're going to arrive at SEK 40 billion, having had this voyage of a continuous growth, the whole DNA setup is built around continuous growth, both organically and of course, through acquisitions.
Nothing has changed, and that's why we are saying to investors, to internal people, to potential companies out there potentially joining us, we are very much charging ahead with a solid aim of arriving at SEK 40 billion no later than seven years after the arrival at SEK 20 billion. I guess I should explain why we mentioned that. Typically, of course, if you double sales solidly or you add 20% every year, then you double sales in four years. Now we had the experience with Lehman Brothers coming across, they delayed the process. That took us seven years. Typically, the voyage has taken us to, let's say, 3-5 years with that exception. That's why we mention now 4-7.
There's a little bit of it to stick out your neck, but at the same time, it's not something we just have been dreaming about. The market is there, the companies are there. We have a different setup. We are more experienced, but still humble when it comes to our company personality, and we just put up a few words here. Hans has mentioned, I've mentioned before, financially very strong. The chances for us or the opportunities out there are, if not unlimited, they are very big. We have to remain, we have to keep our company personality because that's the whole thing.
It's built on us working as a team, going to work every day, having fun, and not saying, "Oh, boy, now I have to go to work again." Of course, we can have a headache a day or two during the year, but it's joyful, tremendous joy to participate in this voyage. Perhaps this is the one that we just explaining in figures what I just mentioned. Of course, now we are at the brown or reddish level there at SEK 19 billion and three months to go. Of course, you can have a forecast, you can never foresee what going to happen, but it seems realistic to arrive there prior to 2020, and then the target is SEK 40 billion.
I think we have all chances to arrive there, as said before, if we just stick together, stick our values and continue to love NIBE. With that said, please add some questions to this, if there could be any questions after this.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad now. Our first question comes from the line of Olaf Larsime from DNB Markets. Please go ahead. The line is now open.
Yes, good morning, Hans and Gerteric. A couple of questions from my side. Firstly, if you could please elaborate a little bit about the development on the U.S. residential heat pump market. How much was the market down in 2017? The tax incentive, how large will they be in 2018, and would it also be possible if you could quantify the group sales exposure towards this market?
Well, okay. It was, of course, down considerably, as you know. I don't know whether any figures have really been released regarding this, so we don't like to have a hide and seek. Of course, it was a substantial decrease during '17. Whether it is going to bounce back so quickly now with the tax credits are installed, we don't know. Of course, the market was perhaps a little bit exhausted. That's why I'm a little bit hesitant to say it was down or up. I think that when we look at the markets '16 and '17, I think they should be viewed together rather than looking at '16 individually and '17 individually. The reason is, of course, that some people were speculating, dealers and private consumers. Well, we better utilize now. You never know whether that going to be discontinued or not.
'16, there we had an overconsumption, and '17 was, of course, again, exhausted of that fact. I'd say if you compare the two years in a fair way, perhaps it took it down to some 20%. That's as much as I think I can comment on that. Now, with the coming back, of course, our strategy from the very beginning has been to not only rely on geothermal, but rather to have the whole assortment of heat pumps. Not only to rely on residential, but also rely on the commercial. That's why CCG came on board.
Of course, with the tax credit now being installed, that gives us, as I said before, a bridge into the future where we have time also to broaden the assortment and to widen the knowledge of this technology, which isn't so well known in North America as it is in Europe. That was a political answer, but I think that's as far as I can go now.
Regarding NIBE's exposure to U.S. residential market, would it be fair to assume 8% of group sales, or is that too much?
Well, I think that when we acquired WaterFurnace, I think that turnover was some SEK 120 million, if I recall it.
Yes.
Right. They, of course, the majority was by far the residential. CCG, it has a minor part where they are SEK 280 million. I think that the equation is fairly clear.
Yes. Thank you on that question. Secondly, if I remember correctly, you had a quite positive impact from calendar in Q1 2017. Given that some part of this is now in Q2 this year, have you made some calculations on that and how that will affect your sales in Q1?
The number of working days, if they deviate like three or whatever it was during last year from the previous year 2016, I think perhaps one or two, one day up or down, that's one thing. When we talk about a growth of 4% and then you have 60 days versus 63 days, then you talk about 5% deviation. Of course, that is influencing a quarter.
Yes.
It's one thing when we had a growth of organic year 10%-12% in the good old days, as we could say, then it didn't play that much of a role, it should be considered.
Yep. Finally from my side, you elaborate a bit on this, with your target of SEK 40 billion in sales. Would you say that NIBE apart from being bigger, twice the size compared to now, how do you expect the business to evolve in terms of new product areas, et cetera? If you could please elaborate a bit on that.
Well, I think that we're going to grow all our segments, that is saying that when you look at the SEK 40 billion, I don't think that we're going to change much of the structure itself. We don't going to bring any change or any automotive. It's not that. Of course, going into more of the commercial side of Climate Solutions, that's no secret. On the Element side, I think it's also important to know and to recognize, as we broaden the assortment, the market is also growing. Like those heat jackets that we just entered on with a textile base. There we hadn't been in that sector, all of a sudden, we are large player there's more to be done. It's a moving target at the same time.
We identify perhaps the market as SEK 50 billion-SEK 55 billion, that could well be SEK 70 billion as we grow into that with a wider range. Our competence is, of course, within the Stoves and the Element and the Climate Solutions. When we took a step in Britain on the stove side, it was gas was added, and of course, that broadened the assortment. I think that's how we should view it.
Thank you very much, Hans and Gotthard, and have a nice weekend.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Max Fridhen from Danske Bank. Please go ahead. Your line is now open.
Yes. Hi, good day Gotthard and Hans. This is Max Fridhen from Danske. I just want to follow up on the previous questions in the U.S., but rather focus on the margin development. It seems to have been developing slightly weak in their expectations throughout the year, and now it looks to be substantially better here in Q4. Was there anything special that you want to highlight? I am focusing here on the U.S. primarily.
On the margin in the U.S., I don't know whether we see that. I think it is like, on the margin as such, of course, when we entered 2017, the CCG group had been on board only four months, and it took us, it's taken us gradually some time to improve things there. Enertech came aboard January or February 1st last year. Of course, that took down the margin. Then, as I said, there was an overhang slightly in 2017 from the heat pumps situation in North America. It weakened during the second quarter, primarily. Of course, now we've been restructuring, or should I say, we've been taking away costs in the residential side of heat pump in organizations in North America. We've gradually been working with the two larger entities very intensively, and that is starting to show.
We've taken some hits on the raw material prices. We have not been so quick as we possibly should have been. I think that we are going into a situation at the fourth quarter where we see that our work is crowned with some success, if not complete success.
Okay. That's very clear. Secondly, on that topic again, just to get this right, the margins in the WaterFurnace are still above the Climate Control Group and the Enertech in U.S., despite the substantial fall we have seen in the residential market.
Yeah. Too much into detail. WaterFurnace has a phenomenal endurance when it comes to margin. Of course, sales has taken a tremendous hit or a hard hit, but they have also very quick pattern of the reacting.
Okay. I'll take with me, phenomenal. Just a question for Hans, because I lost you there on the line and you mentioned the U.S. tax reform, just a clarification. The effective tax rate in 2016 was 26.5%, and now it was 22% here. Is this representative going forward, or was there a one-time item there as well?
Yeah, no, it's not representative going forward. That's what I was trying to say, because the whole net effect that we have to make as a result of the tax reform, coming from the balance sheet on the deferred tax assets and liabilities, that was all taken in Q4. I mean, that's where we had the positive effect of SEK 58.7 million bringing down the tax rate to 22%. We would rather be at 24%, maybe 25%.
24, 25. That's very clear.
Yes.
Okay.
It depends, the U.S. portion of the business will be for the group.
We don't have any substantial tax deductions or anything currently in the U.S.?
No, it was this change of 59.
Yeah. Okay, perfect. Thank you.
Thank you. Our next question comes from the line of Marcella Klein from Handelsbanken. Please go ahead. Your line is now open.
Thank you. A couple of questions from me. The newly restated geo tax credit in the U.S., is it exactly the same extent of this compared to the previous year's subsidies, looking at your products? What kind of discount do customers actually get in the U.S. using this?
It's exactly the same. It's a 30% tax reduction for residential installations. It's actually also a 10% tax reduction on commercial installation. Just as before, just as it was until December 31st, 2016.
Thank you. If I may, a curious question, Gotthard. Obviously, you have impressive 30 years behind you as NIBE's CEO. Do you see yourself as leading NIBE towards the SEK 40 billion sales target?
If I didn't have that thinking, I wouldn't announce it. Health permits, of course, that is always the question. The other folks around me, the board and my colleagues, of course, they have to tell me, and my wife, "Erik, you have to always get out of it." As much as I love this company, I would never be a hindrance for the growth or the success.
But the-
As long as I can judge myself. That's how it is. When you start to think about things, you're worn down. You're going to get worn down. If I start to think perhaps I should leave, I think that I should leave that very moment or a week later, because then you start, it's just like so many other things, that you start to think negatively.
Crystal clear. Thank you.
All right. Thank you. Our next question comes from Anthony Belaranga from Liberum. Please go ahead. Your line is now open.
Good morning. Thank you for taking questions. I had a couple of questions you could help with. First, perhaps if you could just help me understand some of the movements in depreciation and your selling costs in the fourth quarter. Depreciation dropped 50 basis points relative to sales, and selling dropped by 160 basis points relative to sales. Secondly, on the outlook into the first quarter, you'll be cycling against some fairly strong comparatives into the first quarter versus last year. You're getting some of the sort of US geo tax credit benefits as well. I'm just trying to sort of get a feel of whether or not the comparative issue weighed down what we should be expecting in terms of organic revenue growth in the first quarter, and how much that'll be offset by the tailwind from the tax credits. Thank you.
Okay. Well, the second question, that'll take me a long time to answer that. I can't really give you, for natural reasons, any forecast for the first quarter. As I said a while ago, quarter-wise, we never give any forecast for the quarter. I think you have to view us as a long-term growth mechanism or organism, very determinedly going forward. If some quarters or any quarter would be a little bit sour, that doesn't mean that we're going to change our attitude. When we say now that we are cautiously optimistic, that is, of course, for the full year, not necessarily counting one or two quarters to come. Perhaps I'm playing hide and seek, you think, but that, I think is how, that's as precise as I can be when it comes to the second question.
The first question, I'd be very happy to hand over to Hans, if you understood fully that.
I didn't quite catch it. If you could repeat that, please.
Sure. The fourth quarter, if you look at your depreciation and your selling costs, you essentially clawed back over 200 basis points of margins from the reduction or the non-movement in those in the period. Perhaps you could just explain what happened in that fourth quarter to lead to those movements, and to what extent that provides an indication of those items moving forward into the current year.
Okay. Well, I apologize for not being able to answer that myself. I just have to run because I got to catch a plane. I have to leave this conference. I apologize for that. Hans, if you weren't prepared for that question, we just send you an email and respond to that issue, if that's all right.
We can do that.
I apologize that I just had to leave. Thank you very much. All the best.
Yeah. I think we will come back to that question to you instead, because Erik had to leave now, as he said. We will be happy to answer questions on the next telco. If there is anything, we're also able to reach here. Thank you, everyone.
Thank you. That now concludes today's presentation. Thank you all for attending. You may now disconnect your lines.