Ladies and gentlemen, welcome to the NIBE results presentation. Today I am pleased to present Gerteric Lindquist, CEO, and Hans Backman, CFO. Mr. Lindquist and Mr. Backman, please begin.
Thank you. Good morning. This is Gerteric here. Good morning, it's Hans here. I think we're going to continue with the order that we had in the previous presentation, that I give a more overall picture, then Hans is going to continue with the more specific details of the report. After that, we will of course allow all sorts of questions. When we wrote this environment headline, I mean, it couldn't have been more correct in a way, noting today, it's very sad that Europe is again a victim of violence. I think that dampens, of course, everyone's picture. Nevertheless, it has been an overall fairly decent demand, both in Europe, particularly that of Europe and North America and Asia. So far, I think that we've been able, as a world, to fight off all the threats in a positive way.
Of course, there are several issues that are positive, despite all the negative things on a political work side and violence side. The interest rates continue to be low, the unemployment rate is also low, continuing to allow people to consume more. We also see that the sustainability idea is really a trend anymore. I think that the automotive business is really leading that trend right now, that's of course, very positive from our point of view. If we just look at the growth situation for us, of course, it's been a very hefty growth the first six months, both driven naturally by the acquisitions, but also a fairly decent organic growth, again, helped with the weak SEK during this period.
The result, of course, is also a reflection of the acquisitions and our continued strict cost control awareness and our idea of always putting a priority on productivity development. Nevertheless, it's been dampened somewhat by the newly acquired entities, particularly the larger ones within Climate Solutions. Not by any means to criticize those operations, because we willingly acquired the Enertech Group in Britain and also the Climate Control Group. It's just a matter of time to bring them up to the side level. On the residential side, on heat pumps in America, of course, it's a political idea that you shouldn't have subsidies anymore, that has taken away some of the saves, naturally. Those are the main reasons for the margin deterioration, if you call it.
We continue to acquire companies, of course, Enertech came in, Enertech Group came in early this year, we acquired a smaller heat pump company in Canada, CGC, then HT in Italy, and lately also another ventilation company in Canada in June. It's pretty much along the lines that we have been working with before. If we just have a quick look at the Climate Solutions side, it's, of course, major focus on integration of acquired companies. That's very important, naturally. Also that the discontinued subsidies have now taken place. That's also something that is, of course, addressed very much internally, that we had to compensate that by cutting costs in a shorter time and also broaden the assortment.
At the same time, continuing to discuss with the authorities that this is something also in the U.S. that should be regarded as something important for the future. Overall, of course, Climate Solutions is pumping on, but the margin, as Hans is coming back to, is a little bit lower. That hasn't changed at all our ambition when it comes to charging ahead and growing the business. On the Element side, if we look at that, of course, we've been working very hard for many, many years, and there was almost a joke that we never would arrive at the 10%. We admit that of course it's taken a long, long time to arrive at the 10% margin. I think that's a good illustration of how we are working. We never surrender. We always charge ahead.
Now we have a very decent geographical spread, and we have also organized the product range around those territories or areas, product areas where you see growth. Of course, that is also reflected in a better operating margin. We all know that we have some large competitors in the world, one being based in Italy. I think that the acquisition in May in Italy was very important for us, because now we feel that we also have a good platform. We had a platform previously, but considerably smaller, and now we have a solid platform there as well. I think that is boding good for the future. On the stove side, we naturally had a large acquisition there as well in November last year. That is, of course, something that Niklas and his team is concentrated around. It's a very solid performance.
Naturally, it's not so easy with Stovax and Britain being, in itself, very solid. Now with the GBP weakening, that is, of course, also dampening it a little bit. If we just look at the figures as such, we see that the growth for the first six months is a considerable 42%. Here, I think it's worth mentioning again, the first quarter, we talked about that quarter having considerable number of days or more days than the first quarter 2016. We wanted to address that because we knew that the second quarter would have fewer days. Whether that came across, we don't know, but we also mentioned that it would be more fair to compare the first six months this year with the first six months last year, since then we are comparing apples with apples.
We see that the acquired growth, of course, is like 31% of the 42, so still allowing a fairly healthy organic growth. That helped naturally with some currency. Operating profit is up considerably, not quite as much as the growth, at 36%, and the operating margin is slightly below last year, like 0.5 units. Hans is coming back to the financial net, so I won't comment too much on that. If you just had a quick look at the quarter as such, 17, there we see that the growth is, of course, considerable, but again, a little bit less than this consolidated period, the operating profit is up 30% versus the whole period. The margin there is slipping with some 0.9%.
Again, it's a reflection of the Climate Solutions situation, as I explained initially, but naturally also on the number of working days in that particular quarter. We typically have some graphs illustrating where we are heading. If we look at that, the sales or the revenue is continuing to grow. Naturally, we've had the acquisitions coming in now for a number of months. As we progress into the year, it'll be primarily slightly smaller entities. We are approaching, as you see, the SEK 18 billion there. Also on the profit after financial items, if we look at the next slide, we see that that's also a healthy line.
Before Hans come in, we typically have a look at the pie charts, that's pretty much the same as it's been in the past, where Climate Solutions is around the 60%, 61%, and Element 28%, and Stoves is 11%. If we just move on to the operating profit, this time of the year, it's pretty much the same. Climate is like 62%. Element is, of course, coming up now if we compare it to pie charts like two years ago, 18 months ago, which is very healthy. Stoves, again, having its peak season in the second half. Seasonality, of course, kicks in here. My final initial slide here on the distribution of, say, geographically. As we said so many times, we feel that we have a decent spread now, a third, a third, a third, roughly.
Of course, that gives the group a much more robust structure than in the past when we were so dependent on the Nordic market and eventually on the European market. I should perhaps also mention before I hand over to Hans that Sweden has been a very positive development for not least Climate Solutions. New construction is, of course, important both for the overall demand, but also setting the trend for particularly heat pumps or climate providing machines that we should have perhaps mentioned. I think I stop there. Those were my initial comments, Hans. I'll hand over to you.
Okay. Thank you, Gerteric. I'll, just like the quarters before, jump into each individual business area and then also comment upon the balance sheet and some key figures. Before I do that, I'll just comment upon the financial net. As you can see in the report, it is SEK 48 million as opposed to SEK 28 a year ago. I think the average last year per quarter was around SEK 28. The reason for this increase in this specific quarter are twofold, you can say. As you've seen, we have been issuing bonds now for some quarters and months, and increasingly doing so. Shifting away from only borrowing cash from the banks, but rather due to our size and the geographical spread now being able to get good conditions on the capital market.
These are longer-term bonds, so of course, we pay slightly more than we've done for our shorter-term credit lines with the banks. That's one reason for the increase. The other one is that occasionally, and unfortunately so, there are exchange rate differences that hit this result. We've had such now during the first half year, which has been like a one-time effect. That's the comment on the financial net. I think it should be around SEK 30, SEK 30-plus going forward. Looking into the individual business areas. We have NIBE Climate Solutions. As Gerteric said, it's been a strong development. Europe and the Nordics have been growing quite nicely, driven by the new construction, as Gerteric mentioned, and also an increased interest in renewables. Of course, the U.S. market on the residential side specifically has been affected by the canceling of the subsidies.
Thanks to the acquisitions that we made, we've had an overall growth there of 48.6%, of which 39.1% comes from the acquired units, but which leaves a healthy organic growth below that, so to speak. Helped by currency so far to some extent as well. The operating margin landed there on 11%. We were able to increase the result there from SEK 487 to SEK 612, a growth of almost 26%. Of course, not as much as sales, and affected by these discontinued subsidies, integrating the units with slightly lower margins. Also an effect in last year, which you might recall, where we had a one-time effect of selling off a real estate in Switzerland of around SEK 10 million. The difference is not quite as big as it might show on the screen.
If we look at the individual quarter, we also grew sales there with 46.7%, close to 40% coming from acquisitions, but also with an underlying organic growth, although not quite as high as in Q1. Coming back to that, this is where really the effect of the working days come into the picture. There's a difference of almost 5% in working days, and given the relatively high contribution margin that we have, that has a strong effect on the result. Adjusted for that, the difference is not quite as big either as the operating margin might display. In terms of sales per geographical area, we have a nice split there between our home market, the Nordic countries, of 33%, mainland Europe, you can say 36%, and now North America, a third.
It's roughly a third, a third, a third, which balances out differences there might be between the geographical areas. In NIBE Element, the overall strong demand has continued. It's been in all geographies and basically all sectors. Even the oil and gas sector has stabilized, although the other ones have grown considerably more. We have increased sales there with 28.9%, of which 11.8 were acquired, so the organic growth has been some 17%, where the pure organic growth has been a healthy double-digit growth, but also our currency has played a role in that increase, of course. We've been able to grow the margin even more in this respect. The result, it's been growing with 33.8%, getting us up to a margin of 11.5% versus 11.1% last year.
Not to forget, though, is that we still have a piece of a one-off effect there from a project deal, you can say. That has helped the margin slightly. The second quarter for the NIBE Element has continued just like the first quarter. In other words, very strong. The underlying organic growth has been very good. We've also been helped by the currency, but not as much as the organic growth has taken us forward. The result has increased by 28.4%, up from SEK 124 to SEK 159, leaving us there with a margin of 12% in the quarter. Looking at the distribution of sales, it's also a good geographical spread, we think, with the Nordics representing some 19%, the rest of Europe or the mainland Europe part, 32%, North America, close to 40%, and then with others, mainly being Asia, of around 10%. Last but not least, stoves.
It's been a very stable development, you can say. It's been stable in the Nordics, being our home market there. Most other markets have also been stable or slightly increased. It's the gas-fired stoves products in the U.K. that have shown the best performance, actually. As Gerteric mentioned, when converting that into SEK, we're of course affected by the weaker GBP. It's a good development of that product range, you can say. Overall, for the first half year, the stoves business has been basically flat. We've had some negative currency effect there due to the exchange rate of the GBP, which means that the organic growth has been slightly better than you can, well, compared to what the picture there displays.
The major thing here has, of course, been taking FPI in Canada on board, which has given us this platform in North America for further growth. Operating profit from a percentage point has, of course, developed quite strongly, but the numbers are not so big in a way. The operating margin has increased from 7.2% to 7.9%, but still the first half year is the weaker one of the two, so to speak. Everything happens in the second half within the stoves business. When looking at the first half year, the second quarter is really the smallest quarter of them all, and here sales have been flat. FPI, taking that on board, has been the major focus, you can say. With an operating margin of 6.9% up from 5.4%, but it's in the second half that everything happens.
Very nice to see is, of course, the split of sales within the stoves business area. Whereas we've come from being a very Nordic-oriented business, we have taken the step first into mainland Europe, out of the Nordics, and now, of course, North America, thanks to FPI. It's become a much more balanced sales picture there. If we just quickly look at the balance sheet, there is not so much to say on the asset side. The change is really in the intangibles. It's inevitable that we get more such on board when we acquire companies. When we compare the total assets from the start of the year, it's not been much of a change. On the liability side, there have been slightly more movements. The equity has gone down slightly, but that is, of course, due to the dividends that we paid out since.
We've also had some shifts in the long-term interest-bearing liabilities and also the current interest-bearing liabilities. That is a result of the financing that I mentioned, where we have been looking into longer term financing, shifting it from current to long term. Cash flow has been very strong during the period. It's increased with more than 300 million SEK. We basically had the same change of working capital as before, and continued investing in our operations slightly up from the same period of last year, but reflecting what we need and typically staying close to the depreciation rate that we have. The operating cash flow has reached 435 million SEK, up more than 200 million SEK from last year. Quickly, some comments upon the financial numbers. I don't think we need to go through all of them.
Could be worth mentioning now that the interest-bearing liabilities in relation to equity, they are around 70%. It's 73.6%. It's of course up slightly due to the acquisitions we took on board, but have come down considerably from last year. Of course, we had the rights issue coming in the meantime as well. Following that, we have an equity assets ratio about 40%, and the net debt there of around 2.4. Working capital is basically the same as last year. It's around 18.7%. It's of course a target and a number that we work with internally all the time to try to optimize and get the most out of the factories that we have and all the related items, of course.
Not to forget is that these are, of course, numbers where we have a full balance sheet on board, but only parts of the income statement from the acquisitions. It needs to be looked upon on a rolling 12-month basis, really. Some last key numbers. Following the rights issue, you see that the return on equity is down 13.6%. It was at 17.3%, but that is a natural result of us doing that rights issue. Apart from that, net profit per share has increased from 1.04 SEK up to 1.29 SEK, developing basically as anticipated, and the equity per share has also increased. Talking about share, the last slide is about share development, share price, but I'm not going to comment upon that. I don't know if you want to add something, Gerteric, before we jump into the Q&A session?
No, I think it's well done. Now we allow questions, try to answer them in orderly fashion. Please go ahead.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad now. Please hold until we have the first question. Our first question comes from the line of Max Freeden from Danske Bank. Please go ahead. Your line is now open.
Please.
Thank you. Hi, Gerteric and Hans. I have a question on the margins on NIBE Climate Solutions.
You gave some explanation to the margin decline. When I plug in sort of the margins I have estimated for the Climate Control Group
Inotec and the organic development.
Even if I have very cautious estimates for those two acquired units, I still get a negative incremental margin on the sales for the organic Climate Solutions.
Are you confident then in your answer that it's solely related to the mix from U.S. residential related sales declining, which I presume are higher margins if I look at WaterFurnace?
The negative leverage from the working day effect. Do you believe?
Yes
That is all or is there any changes in pricing?
No, those are the factors. Those are definitely the factors.
Okay.
We could have possibly, if we had lagged a little bit on price increases that we've been hit by, if I should add something. The underlying margin is still healthy, that's even mentioned there.
Yeah. Okay. Since you mentioned it on the price increases, because you talk about it in the Element division that you had some spikes in raw materials.
Is that the same for the Climate Solution as well?
Yeah. We could have been quicker. Perhaps we should have mentioned it. We could have been quicker.
Yeah.
That's all in place now, but we should have reacted slightly quicker.
That could be slightly more optimistic than in the current quarter.
Just one more question from me, that's in general in M&A in U.S. If I look at the residential and if I look at ClimateMaster, WaterFurnace, Inotec, et cetera, some of them are more essential than others, but I presume you already acquired, I guess, three of the top five players in the U.S.
Growing in the commercial market, just help me understand or maybe educate me a little bit on the competition, because a lot of it comes from larger players such as Lennox and Carrier, to my understanding.
Will it be more difficult to grow the M&A here on commercial compared to residential? Or am I missing something?
Well, I think that when we talk about commercial, it is climatization in a larger extent, with the HVAC, that is like heating, cooling, and ventilation. I think when you strictly talk about heat pumps or residential, then it is one thing in one area. Here you talk about the ventilation and, of course, chillers and commercial heat pumps. There is a slightly broader assortment we talk about. We feel that we can continue to grow here as well. When you talk about commercial applications, the margins are, of course, slightly lower, but at the same time, the overhead is also lower, so they are communicating vessels.
Okay. Yeah. That is clear. Sorry, just one more that I had here.
Okay.
Just looking for the heat pumps on commercial, and I know when you talk about growing in commercial, you mentioned HVAC as well, but is ClimateMaster a good indication for industry margins on the commercial heat pump side in the U.S.?
Well, I think that when, just reverting to margin, since we have very explicitly said that, when we acquired Climate Control Group, I think they were at just north of 7%, and Inotec group being just south of 5%. Of course, those margins are not very complementary. We are not very satisfied with that. It is more like there we are really charging ahead now to improve those margins. I think that that is not a representative figure. If you look at our competitors, the larger ones, they are certainly not hovering around the 7%, but rather in double digit.
Yeah.
Without criticizing the previous owners, I think that this sector had been neglected, I am not going to comment more about that. On the Inotec side, the group, I think also without, again, criticizing the previous owner, I think it had not been enough focus on that. Of course, we are in there now, but it takes some time, I think we have indicated to bring it up to a decent level, acceptable level, going to be 18-24 months. I think we also mentioned that when we took them on board.
You did. It's very clear. Thank you for answering my questions.
Thank you. Our next question comes from the line of Douglas Lindahl from Kepler Cheuvreux. Please go ahead. Your line is now open.
Hello, Gerteric. Hi, Hans. Douglas Lindahl here. My first question is on currency. I wanted to see if you can give some sort of flavor on how much this has helped you on the top line. Has it been the net effect then, is it plus minus zero if we include the negative effect on the Easter, or is the currency effect larger than the negative Easter effect?
Yeah. Hans, should be such a difficult question, I think I would hand over to Hans. Well, as we said before, we typically talk about the organic growth with the currency effect, because when it helps us, sometimes it helps us, sometimes it goes against us, of course. So far this year, we have been helped by the currency, you can say, on the group. It's, yeah, it's been-
I understand.
Yeah. Couple of % if you want it-
You don't have to answer the question.
if you like.
Okay.
Yeah.
It's at least single digit positive.
Yeah. Low single digit.
Okay. Yeah. Secondly, on the NIBE Climate Solutions, again, can you maybe give us some sort of indication on the difference in the profitability and also maybe your expectations on growth between your commercial exposure in the U.S., which comes with the CCG acquisition, compared to your historic residential exposure? Mainly on the profitability, do these clients differ a lot in terms of profitability?
Well, I think that there is a difference, of course. You saw that we took it on board. I think that on the residential side, also being enhanced in the past, possibly by the tax credits. Typically, when you sell one single unit, as you typically would do, when you sell to a family or a private individual home, that, of course, is more profitable. At the same time, they also have a lot of costs included. I think just in general terms, residential will be slightly more profitable. The commercial side that we've taken on board is not really representative at this particular moment, because we are not satisfied with what we bought. That's why we also explained that. That we are working very intensively to improve that.
I don't think that the commercial ever going to be describing or presenting the gross margins that the residential will do.
Okay. Very clear. Thank you. That's it from me.
Thank you. Our next question comes from the line of Johan Hildner from Handelsbanken. Please go ahead. Your line is now open.
Thank you. Can you hear me?
Absolutely.
Super. My question is on the integration work that you're doing with the acquired units. Has this led to significant restructuring type of costs that you book on the P&L and don't sort out as one-offs?
Not any major ones. Of course, some possible layers, but that's not really worth mentioning here.
Okay.
I think that we've been working in a different fashion here, if we would come to that point, of course, we would announce that. Yeah.
Okay. I guess you often have some restructuring costs that you typically don't split out in your P&L.
Yeah. Of course, we consider that as part of the ordinary course of business, typically. In some instances, as you remember, on the Element side, when we really restructured something, of course, it was a substantial amount some years ago. We mentioned that specifically. I think that integrating now these companies that we have on board, we are not talking about companies losing money, we're talking about companies that, or groups, that we have to really enhance, and that's why we are working very strictly with that. I guess that's all I can say right now. Mm-hmm.
Okay. That's clear. Then on the acquired units, have they performed better or worse year-over-year, if you look at them standing alone, in terms of profits?
Well, I think that the seasonality is, of course, more pronounced when you come in on the Enertech Group. Again, we are not criticizing any company that we have brought on board, because we brought them on board very willingly. I think that we ourselves, we've come to a structure and a profitability situation where you don't suffer so much, although, of course, it's softer in the first half of the year. The Enertech Group is weaker substantially in the first half and much stronger in the second half. That's also so on the Climate Control Group. That is, of course, a new experience for us, how much of seasonality they have. It's not that we are shocked or anything. It's just that that's how it is.
Okay. Thank you. Then my final question is on the Element business area.
If my numbers are right, you have double-digit organic sales growth in the quarter.
It is for the second quarter in a row.
After a fairly long period of rather stable organic growth in NIBE Element.
Yes.
Could you explain a bit about what's happening in NIBE Element and what's driving the stronger than normal growth in the business area? Maybe comment on if there's something structural that has happened now that you enter new segments that are growing faster than the segments you were present in before.
I think to receive such a question is wonderful. I really appreciate that. The first 80 years of our history here now being listed, we've been defending the NIBE Element. I think that the main reason, or there are a number of reasons. As I said, geographical spread is very good. We've taken us away from the regular tubular heating Element that we were just an OEM producer in the past. We've been talking about system deliveries rather than just providing a heating Element. That's one factor. Also, the world is going more electric, and that means that the demand is really increasing virtually in all industrial sectors. Hans mentioned that oil and gas being an exception, but at least being flat now.
When you look at the automotive industry without dwelling too much on this now, electric cars, they have to be heated, because they don't have anything generating heat. The batteries have to be heated. Regular cars, it's a substantial improvement. We talked about rearview mirrors before, they, of course, heated the windshield wipers. When you talk about diesel cars, as criticized as they are, when they add that AdBlue, the urea, then you have to heat that tank. That's one sector that favors us. When you go to the wind turbines, that's another sector that's very good. When you talk about trains, both long-distance trains and the regular subways, because there again, you talk about heating the compartment as such and the entrance where you step in, so you shouldn't slide on the floor.
Those are all projects or new categories where we don't only deliver a heating Element, but we deliver a radiator, a floor application, for instance, or a toilet heating. It's gone in that direction with more system deliveries, plus the sectors where we have focused, they are growing in themselves. I shouldn't dwell too much on that, but that's trying to analyze, trying to answer your question.
That's a good answer. Thank you very much, and that's all for me.
Thank you. Our next question comes from the line of Henrik Nilsson from Nordea Markets. Please go ahead. Your line is now open.
Morning, everyone. Sorry, I didn't fully catch you on the comments on price increases in NIBE Climate Solutions. Did you say that they've been lagging but that they are now coming through?
Ever, because I guess we should have mentioned something about that. Someone said that the Element had been hit by price increases, and in many instances, we had a more automatic reaction there. I think we could have been slightly quicker when it comes to increasing prices. They are in place now, but if we are to criticize ourselves, slightly quicker. Yes, they are in place.
Okay. Sounds good. I appreciate the long-term drivers for Element seems highly attractive. Again, you mentioned large orders in the quarter. It's been like this now, I think for a number of quarters over the past few years. Do you have any visibility on how the large order side is looking in the near term there?
I think that when you get a contract, like in the past, I think larger contracts, they might be, what I'm saying now might be a little bit dangerous, but I think that when we were delivering OEM on just a regular heating Element, it might have been a little bit quicker from the customer's point of view to change if something did occur. When you're into these heavy-duty products, if you perform well, if you don't goof up, if we use a rough word, then I think that the customers of new sectors I've been talking about, they are less willing to leave after a quarter or two or three. It seems like so far we are in more for longer contracts and longer partnerships because we also participate in their R&D in a different fashion.
Okay. Do you have an approximate split on how much of the revenues or volumes in, or revenues rather, in Element is linked to systems Element rather than the OEM deliveries?
I think that without playing hide and seek, I think that's something that we would gladly deal or distribute to you and the people listening, but I think that's also from a competitive point of view, a little bit a secret, because we understand that all our competitors, and it's good to have competitors, I'll say that. Of course, in one way, you like to be alone, but at the same time, competitors, they make you stand on your toes. When we come out with reports, we are really scrutinized by our competitors. I think that has to remain as our, if you call it secret or business secret.
Okay. Fully understand. Moving on to Stoves, very solid improvement. Is it possible for you to comment on how much of this was related to FPI, and if possible, also refresh my memory on the seasonality in FPI?
I think that the seasonality is pretty much like the seasonality here. It's located in Vancouver. Of course, it came in in November, and then their season also is pretty much like the season here.
Now we are into the soft season, the second quarter and the beginning of the third, then it kicks in again. It's fairly much the same as the European business.
Okay, what drove the strong improvement in EBITDA? Because it's almost double, right? Organic, or is it FPI, or is it?
Well, I think that.
Can you take over?
I think, of course, FPI is coming in. From a percentage point of view, the changes are, of course, huge. In terms of SEK millions, yes, we should, of course, respect the individual SEK million here, it's not huge movements, you can say. Nordics have been stable. I would say the European markets have been stable, but slightly increasing, which has contributed well.
FPI then coming on board with a healthy result.
It's worth mentioning that it goes up and down within every business unit. I think that we've seen also some internal improvements on the regular business prior to FPI. They have been performing well, and I think that, again, it's a major acquisition, but it hasn't taken away Niklas' and his team's concentration on only the acquisition, but it has also allowed them to monitor their own operation prior to the acquisition. I think it's a good situation. Of course, we understand that the 82%-83%, it sounds remarkable, but then I think we also have to look at the absolute numbers, SEK 14 million or whatever, SEK 15 million, or is it SEK 14 million we increased? It's like
Of course.
We have to
Yeah.
I appreciate that, still the margin was up 1.5% in a quarter with relatively weak organic growth. That's why I was asking.
Yeah, no.
Two last questions from me, if possible here. You mentioned rapidly raising wages in low-cost countries-
specifically related to Elements, I think. Are you seeing a change in the wage inflation in these countries, or is this more of the same?
Well, it is very difficult to predict anything. I think that, of course, in particular in Poland and the Czech Republic, and also in China, we know that. We have seen rapid growth. We try to monitor that by automating and robotizing our operations more and more, because we don't believe that in the long run we can be manual wherever we are. We are taking the examples from where we are in West Europe, if we may call it so, into those areas, and that's why you also see that we are slightly increasing our investment ambitions now, that we are going to come to a situation where we are going to be so heavily engaged in that's one response of higher salaries. You can't just transfer production from one place to another because that's also very cumbersome.
We have established ourselves in Mexico, in Poland, in Czech Republic, and in China, of course, we have to be very efficient there. I think it's a pipe dream to suggest or to even believe that you don't have to rationalize very intensively in those countries. It's very important that you keep production in the western part of the world, because then you take that pattern to the low-cost countries. Enough dwelling, I guess, on that.
Okay, thank you. A question directed to Hans. The acquisition expenses in the quarter, are they split between the segments or are they reported in the elimination of group transaction line?
In the latter.
In the latter one. Okay. Underlying then the elimination of group transactions seems to be on a very low level, right? If you adjust for acquisition costs.
Yeah. They've not changed dramatically in a way, that is.
But-
Yeah, sorry.
Yeah, on my numbers, it looks like you're down to SEK 1 million on that line now, which you normally average around 12% adjusted for those acquisitions, or SEK 12 million. It's a very low cost on that line. Do you know why, you think?
No, I don't have a clear. There's been no specific changes there in a way. We had slightly more acquisition costs last year. We always take them on the group level, and we don't split them up per individual business area. That we used to do, but.
The major thing last year was naturally Climate Control Group.
Of course.
Yeah. Because that.
Would you say that over time, SEK 1 million on that line is very much too low? You should be around 10, 11, or?
Probably. Yeah, it's rather around that level.
Okay. Very good. Thank you.
Thank you. As another reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. Our next question comes from the line of Anthony de Larenago from Whitest Limited. Please go ahead. Your line is now open.
Good morning. Thank you very much for taking the question. I had three questions relating to the acquisitions. First, just on what was the contribution of the EBIT level. You refer to some of the acquisitions coming in at 5%-7% of operating margins. Is that a fair reflection of their contribution in the period? Also, on those acquisitions, it's possible to give a little bit of more flavor in terms of their underlying performance on the like-for-like basis, because they won't be included, I imagine, in the organic numbers yet. Thirdly, and last, is there any sort of central guidance you can provide in terms of the likely revenue contributions into the third and fourth quarter? You'll be cycling against much higher comparatives as you get into those quarters, so I'd imagine those contributions will come down quite sharply.
Any sort of help and guidance on quantum would come in most appreciated. Thank you.
The first question, if I understood it correctly, Enertech and, as I said, Enertech and Climate Control Group, they had a pronounced seasonality. Although, Climate Control Group, of course, they are contributing, but Enertech Group, that isn't really worth mentioning. That is in the first week, six months. That's not just due to the fact that we are the owners. That's their structure. The third question, I don't think that we typically give more precise information that would read into my comments there at the bottom. Actually, correct is naturally the Climate Control Group now has been on board for a year as of July 1st. That growth will now continue to be organic growth.
The only larger acquisition that we have on board now is going to be, of course, Enertech Group that continue to come in, and also the acquisition that we done earlier this year. Of course, they won't compensate on an acquisition point aside the Climate Control Group. The second question, I didn't fully comprehend. Could you repeat that, please?
Yes. Well, the second related to the organic growth actually coming through, the underlying growth coming through on those acquisitions. On a like-for-like basis, to what extent they are actually delivering organic growth.
Okay. Well, I think that, again, I don't think that we can really release that. With all respect for the question, I think they're never getting more too specific into our report. Again, I think that we have to be a bit cautious what we say. We appreciate the question, but I think that we have to stop there.
Okay, fine. Thank you very much.
Thank you.
Thank you.
[inaudible].
Yeah, okay. As there are no questions, I'll return the conference to you.
All right. I think that once again, thank you for calling in. Thank you for showing such an interest, and we are going to charge ahead, as we said. We just hope that the world will continue to be prosperous despite all the political disarrays that we are seeing. We are working very hard as before, and we look at the future in a cautiously optimistic way as we always say. Thank you very much.
Thank you. Bye-bye.
Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect your line.