Earnings Call: Q2 2017

Aug 18, 2017

Quarterly report

Ladies and gentlemen, welcome to the NEB Results Presentation. Today, I am pleased to present Erik Lindqvist, CEO and Hans Bachmann, CFO. Mr. Lindqvist and Mr. Bachmann, please begin. Thank you. Good morning. This is Erik here. Good morning. It's Hans here. Well, I think we're going to continue with the order that we had in the previous presentation that I give a more overall picture, and then Hans is going to continue with the more specific details of the reports. And after that, we will, of course, allow all sorts of questions. And 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, and I think that dampens, of course, everyone's picture. Nevertheless, it has been an overall fairly decent demand, both in Europe, particularly in the Asia and North America and Asia. So, so far, I think that we've been able as a world to fight off all the threats in a positive way. And of course, there are several issues that are positive despite the all the negative things on the political side and the violent side. The interest rates continue to be low, and the unemployment rate is also low, continuing to allow people to consume more. And we also see that the sustainability idea is really a trend anymore. But I think that the automotive business is really leading that trend right now. And that's, of course, very positive from our point of view. If you just look at the growth situation for us, of course, it's been a very hefty growth the 1st 6 months and both driven naturally by the acquisitions, but also a fairly decent organic growth, again, helped with the weaker Swedish share crown during this period. And 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 Solution, not by any means to criticize those operations because we willingly acquired the Enertec Group in Britain and also the Climate Control Group. But it's just a matter of time to bring them up to a the site level. On the residential side and heat pumps in America, of course, it's a political idea that you shouldn't have subsidies anymore. So that has taken away some of the saves naturally. So that is those are the main reasons for the margin deterioration, if you call it. And we continue to acquire companies. Of course, Enertec came in. Enertec Group came in early this year, and we acquired a smaller heat pump company in Canada, CGC, and then HP in Italy and lately also another ventilation company in Canada in June. So 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. And also that the discontinued subsidies have now taken place. That's also something that is, of course, addressed very much internally that we have to compensate that by cutting costs in any 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. So overall, of course, Glenda solution is pumping on, but the margin in hands is coming back to is a little bit lower. But 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%. And we admit that, of course, it's taken a long, long time to arrive at the 10% margin. But I think that's a good illustration of how we are working. We never surrender. They always charge ahead. And now we have a very decent geographical spread, and we have also organized the product range around those territories or areas product areas where we see growth. And of course, that is also reflected in a better operating margin. And we all know that we have some large competitors in the world and one being based in Italy, and 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. So 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, and that is, of course, something that Nicklas and his team is concentrated around. That is a very solid performance. Naturally, it's not so easy with Stobax and Bretton being very, in itself, very solid. But now with the power pound is weakening, that is, of course, also dampening a little bit. If we just look at the figures as such, we see that the growth for the 1st 9 months, it's considerable 42%. And here, I think it's worth mentioning again, the Q1 we talked about that quarter having like considerable number of days or more days than the Q1 2016. And we wanted to address that because we knew that the Q2 would have fewer days. Whether that came across, we don't know. But we also mentioned that it would be fair more fair to compare the 1st 6 months this year with the 1st 6 months last year since then we are comparing apples with apples. And we see that the acquired growth, of course, is like 31% or the 42%, so still allowing a fairly healthy organic growth albeit helped with 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. And Hans, coming back to the financial nets, so I won't comment too much on that. And if you just had a quick look at the quarter such 'seventeen, and there we see that the growth is, of course, considerable, but again, a little bit less than this consolidated period, and the operating profit is up 30% versus the whole period. And the margin there is slipping with some 0.9%. Again, it's a reflection of the climate solution 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. And if we look at that, the sales or the revenue is continuing to grow. And naturally, we've had the acquisitions coming in now for a number of months. As we progress into the year, it will be primarily slightly smaller entities, but we are approaching, as you see, the $18,000,000,000 there. And also on the profit after financial items, if we look at the next slide, we see that that's also a healthy line. And before hands come in, we typically have a look at the pie charts, and 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. And 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 you compare it to pie charts like 2 years ago, 18 months ago, which is very healthy. And Stoves, again, having its peak season in the second half. So seasonality, of course, kicks in here. And my final initial slide here on the distribution of SAID geographically. And as we said so many times, we feel that we have a decent spread now, a third, a third, a third roughly. And of course, that gives the group a much more robust structure than it has when we were so dependent on the Nordic markets and eventually on the European markets. And I should perhaps also mention before I hand over to Hans that Sweden has been a very positive development for not least climate solutions. And 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. So I think I'll stop there. Those were my initial comments, Hans. I'll hand over to you. Okay. Thank you, Erik. Yes. I'll just like the quarters before jump into each individual business area and then also comment on the balance sheet and some key figures. But before I do that, I'll just comment upon the financial net. As you can see in the report, it is $48,000,000 as opposed to $28,000,000 a year ago. And I think the average last year per quarter was around $28,000,000 And the reason for this increase in this specific quarter are twofold, you can say. I mean, as you've seen, we have been issuing bonds now for some quarters to 10 months and increasingly doing so, shifting away from only borrowing cash from the banks, but rather due to our size and geographical spread now being able to get good conditions on the capital market. And 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. So that's one reason for the increase. And the other one is that occasionally and unfortunately so, that there are exchange rate differences that hit this result, and we've had such now during the first half years, which has been like a onetime effect. So that's the comment on the financial. I think it should be around 30%, 30% plus going forward. Then looking into the individual business areas, we have climate solutions. As Erik said, it's been a strong development. Europe and the Nordics have been growing quite nicely, driven by the new construction, as Eric 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. But 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, of course, 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 4.87% to 6.12%, a growth of almost 26%, but of course, not as much as sales and affected by these discontinued subsidies, integrating the units with slightly lower margins. But also an effect in last year, which you might recall, where we had a onetime effect of selling off real estate in Switzerland of around €10,000,000 So 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% come from acquisitions, but also with an underlying organic growth, although not quite as high as in Q1. But coming back to that, I mean, 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. So 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 whole market, the Nordic countries of 33%, Mainland Europe, you can say 36%, and now North America, onethree. So it's roughly onethree, onethree, onethree, which balances out differences there might be between the geographical areas. In NIVE 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. It's been growing with or 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 Q2 for the Element has continued just like the Q1, in other words, very strong. The underlying organic growth has been very, very good. We've also been helped by the currency, but not as much as the organic growth has taken us forward. And the result has increased by 28.4%, up from 124% to 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. And most other markets have also been stable or slightly increased. It's the gas fired Stove products in the U. K. That have shown the best performance actually. But as Eric mentioned, when converting that into kroner, we're, of course, affected by the weaker British pound. But 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 British pound, which means that the organic growth has been slightly better than you can, well, than 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 2, so to speak. I mean everything happens in the second half within the stoves business. And when looking at the first half year, the second quarter is really the smallest quarter of them all. And here, sales have been flat. FTI, taking that on board, has been the major focus, you can say. So with an operating margin of 6.9%, up from 5.4%, but it's in the second half that everything happens. But 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 Europe, Mainland Europe, out of the Nordics and now, of course, North America, thanks to FPI. So 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. I mean, the change is really in the intangibles. It's inevitable that we get more such onboard when we acquire companies. But 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. And then we've also had some shifts in the long term interest bearing liabilities and also the current interest bearing liabilities. But 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 DKK 300,000,000. We basically have 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. So the operating cash flow has reached $435,000,000 up more than $200,000,000 from last year. Then 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 point 6%. It's, of course, up slightly due to the acquisitions we took on board but have come down considerably from last year. But of course, we have the right to emission coming in, in the meantime as well. And following that, we have an equity assets ratio about 40% and the net debt there of around 2.4%. Percent. Working capital is basically the same as last year. It's around 18.7%. It's, of course, a target and the 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. So it needs to be looked upon on a rolling 12 month basis really. Some last key numbers. Yes, following the rights submission, you see that the return on equity is down 13.6 percent was at 17.3 percent, but that is a natural result of us bringing more doing that right submission. But apart from that, net profit per share has increased from 1.04 up to 1.29, developing Bexik as anticipated, and the equity per share has also increased. And yes, 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, Erik, before we jump into the Q and A session. No, I think it's well done. Now we allow questions. I'll try to answer them in orderly fashion. So please go ahead. Thank you. And our first question comes from the line of Max Frieden from Danske Bank. Please go ahead. Your line is now open. Please. Thank you. Hi, Jaffirik and Hans. So I have a question on the margins on Climate Solutions. So I you gave some explanation to the margin decline. I just try when I plug in sort of the margins I have estimated for the Climate Control Group and Innotech and sort of the organic development, I and even if I have very, very cautious estimates for those 2 acquired units, I still get a sort of a negative incremental margin on the sales for sort of 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 have higher margins if I look at some of the furnace and the sort of negative leverage from the working day effect? You believe that is at all? Or is there any changes in price? No, those are the factors. Those are definitely the factors. Whereas we could have possibly if we have lagged a little bit on price increases that we've been hit by, if I should add something, but the underlying margin is still healthy. That's even mentioned there. Yes. Okay. And just to since you mentioned it on the price increases, because you talked about it in the Element division that you had some spikes in raw materials. Is that the same for the Climate Solutions as well? Yes. And we could have been quicker. Perhaps you should have mentioned it. We could have been quicker. And that's all in place now. But again, we should have reacted slightly quicker. So that could be slightly more optimistic than the current quarter? Yes. Okay. And then just one more question for me, and that's on in general, in M and A in U. S. If I look at the residential and if I look at the ClimateMaster Water Furners, anything, etcetera, and some of them are more essential than others. But I presume you already sort of acquired, I guess, 3 of the top 5 players in the U. S. And then 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. And will it be more difficult to grow the M and A here on commercial compared to residential? Or am I missing something? Well, I think that when we talk about commercial, it's climateization 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's one thing in one car. Here, you talk about the ventilation and, of course, chillers and commercial heat pumps. So it's a slightly broader assortment to talk about. So we feel that we can continue to grow here as well. I mean, 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're sort of communicating vessels. Okay. Yes. That's clear. I'm sorry, just going to one more that I had here. Let's see, just looking for the heat pumps on commercial. And I know when you talk about going in commercial, you mentioned HVAC as well. But is ClimateMaster a good indication for sort of industry margins on the commercial heat pump side in the U. S? Well, I think that when just reverting to margins, since we have very explicitly said that, when we acquired Climate Control Group, I think they were at some just north of 7% and Enertec Group being just south of side. Of course, those margins are not very complementary. We're not very satisfied with that. So it's more like there we are really charging ahead now to improve those margins. So I think that that is not a representative figure. If you look at our competitors, the larger ones, they're certainly not hovering around hovering around the 7%, but rather double digit. And without criticizing the previous owners, I think that this sector had been neglected, and I'm not going to comment more about that. But on the Enertec side, the group, I think also without again criticizing the previous owner, I think it hadn't been enough focus on that. And of course, we are in there now, but it takes some time. And I think we had indicated to bring it up to a decent level or acceptable level, going to be 18 to 24 months. And 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 Lindau from Kepler Cheuvreux. Please go ahead. Your line is now open. Hello, Erik. Hi, Hans. My first question is on currency. I want 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 been? Is it sort of plus minus 0 if we include the negative effect on the should you that's a difficult question. I think I would hand over to Hans. Hans, should you such a difficult question, I think I would hand over to Hans. Well, typically, I mean, we don't mention the as we said before, we typically talk about the organic growth with the currency effect because when it helps us, I mean, sometimes it helps us, sometimes it goes against us, of course. But I mean, so far this year, we have been helped by the currency, you can say, on the group. And it's been I understand. Couple of percent of the Q1, if you like. Okay. It's at least single digit positive? Yes, yes, yes. Low single digits. Okay. Secondly, on the Climate Solutions again, just can you maybe give us some sort of indication on the difference in the profitability and also maybe your expectations on growth between commercial your commercial exposure in the U. S, which comes with the CCG acquisition compared to your sort of 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. I mean, 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. But 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. But at the same time, they also have a lot of costs included. So I think just in general terms, residential will be slightly more profitable, but the commercial side that we have taken on board is not really representative at this particular moment because we are not satisfied with what we've bought. And that's why we also explained that. There, we are working very intensively to improve that. But I don't think that the commercial ever going to be prescribing or presenting that the gross margin that the residential will do. Okay, very clear. Thank you. That's it for me. Thank you. Our next question comes from the line of Johan Heltner from Handelsbanken. Please go ahead. Your line is now open. Open. Thank you. Can you hear me? I'm just open. 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 and L and not sort out as one offs? Not any major ones. Of course, some possible layers, but not really that's not really worth mentioning here. I think that we've been working in a different fashion here. And if we would come to that point, of course, we would announce that. Okay. But I guess you often have some restructuring costs that you typically don't spit out in your P and L? Yes. I mean, of course. I mean, we consider that as part of the ordinary course of business typically. But 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. Then we mentioned that specifically. But I think that integrating now these companies that we have on board, we're not talking about companies losing money. We're talking about companies that for groups that we have to really enhance, and that's why we are working very strictly with that. So I guess that's all I can say right now. Okay. That's clear. And then on the acquired units, have they performed better or worse year over year if you look at that stand alone in terms of profits? Well, I think that the seasonality is, of course, more pronounced when you come in from the Enatec Group. Again, we are not criticizing any company that we have brought on board because we brought on board very willingly. But I think that we ourselves, we've come to a structure and a profitability situation where you don't settle so much, although, of course, it's softer in the first half of the year. But the Enertec group is weaker substantially in the first half and much stronger in the second half. And that's also so the climate control group. So that is, of course, a new experience for us, how much of seasonality they have. But it's not that we are shocked or anything. It's just that that's how it is. Okay. Thank you. And 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 for the 2nd quarter in a row after a fairly long period rather stable organic growth in Element. Could you explain a bit about what's happening in Element and what's driving the stronger than normal growth in the business area? And maybe comment on if there's something structural that has happened now that you enter new segments that are growing wonderful. I really appreciate that. The first 80 years of our history are now being listed. We've been defending the element. And I think that the main reason or there are a number of reasons, sorry. As I said, the geographical spread is very good. And we've taken us away from the regular tubular heating element that we were just an OEM produced in the past. We've been talking about system deliveries rather than just providing a heating element. That's one factor. And also, the world is going more electric. And that means that the demand is really increasing virtually in all industrial 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, it's I mean, electric cars, they have to be heated because they don't have anything generating heat. The batteries have to be heated. And on regular cars, it's a substantial improvement. We talked about rearview mirrors before, and they, course, heated the windshield wipers. And when you talk about diesel cars, as criticized as they are, when they add that add blue, the urea, then you have to heat that tank. So that's one sector that favors us. And 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 regular subways, of course, 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. So it's gone in that direction with more system deliveries plus the sectors where we have focused, they are growing in themselves. As a few I mean, I shouldn't dwell too much on that, but that's trying to analyze. So 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 Nielsen from Nordea Markets. Please go ahead. Your line is now open. Good morning, everyone. Sorry, I didn't fully catch you on the comments on price increases in Climate Solutions. Did you say that they've been lagging but that they are now coming through? Yes. 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 have 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 the if we are to criticize ourselves, slightly quicker, yes, but they are in place. Okay. Sounds good. I appreciate the long term drivers for Element seems highly attractive. And 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? Well, 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 you when we were delivering OEM on just the 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 do flap, if we use the rough word, Then I think that the customers of new sectors like we talked about, they are less willing to lead after quarter or 2 or 3. It seems like so far, we are in more for longer contracts and longer partnerships because we also participate in their R and 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 solutions rather than the OEM deliveries? Well, I think that's without playing hide and seek, I think that's something that I would gladly 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. So 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. So 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? Well, I think that the seasonality is pretty much like the seasonality here. It's located in Vancouver. So of course, it came in, in November, and then the air season also is pretty much like the season here. So now we are into the soft season, the 2nd quarter and the beginning of 3rd, and then it kicks in again. So it's fairly much the same as the European business. Okay. But what drove the strong improvement in EBITDA because it's almost double, right? Is that organic? Or is it FPI? Or is it Well, I think, of course, FPI is coming in. From a percentage point of view, the changes are, of course, huge. In terms of 1,000,000, yes. I mean, we should, of course, respect individual 1,000,000 crowns here, but it's not huge movements, you can say. But Nordics have been stable. I would say the European markets have been stable, but slightly increasing, which has contributed well. And FPI then coming on board with a healthy result. And it's worth mentioning that, I mean, it goes up and down within every business unit. And I think that we've seen also some internal improvements on the regular business prior to FBI. So they have been performing well. And I think that, again, it's a major acquisition, but it hasn't taken away Nicholas' and his team's concentration on only the acquisition, but it's also allowed them to monitor their own operation prior to the acquisition. So I think it's a good situation. But of course, I mean, we understand that the 82%, 83%, it sounds remarkable. But then I think we also have to look at the absolute numbers, dollars 14,000,000 or whatever, dollars 15,000,000 or it's $14,000,000 we increased. So it's like, of course, we have to Yes. I appreciate that. But still the margin was up 1.5% in the quarter with relatively weak organic growth. That's what I was asking. Two last questions from me, if possible, here. You mentioned rapidly raising wages in low cost countries, particularly 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, I mean, it's very difficult to predict anything. I think that's, of course, in particularly in Poland and Czech Republic and also in China, we know that. We have seen rapid growth. And 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. And we're taking the examples from where we are in West Europe, like we may call it so, into those areas, and that's why we also see that we are slightly increasing our investment business or investment ambitions now that we're going to come to a situation where we're going to be so heavily engaged in that, but that's one response of higher salaries. You can't just transfer production from one place to another because that's also very cumbersome. If we have established ourselves in Mexico, in Poland and Czech Republic and in China, then of course, we have to be very efficient there. And I think it's a pipe dream to suggest that we even believe that you don't have to rationalize very intensively in those countries. But 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. And a question directed to Hans. The acquisition expenses in the quarter, are they split between segments? Or are they reported in the elimination and group transaction lines? In the latter. In the latter? Okay. So underlying on the elimination of group transaction seems to be on a very low level, right, if you adjust for acquisition costs? Yes. I mean, they have not changed dramatically in a way, but that is I mean yes, sorry? Yes. On my numbers, it looks like you're down to $1,000,000 on that line now, which has you normally average around 12 percent adjusted for those acquisitions, dollars 12,000,000. It's a very low cost on that line. Do you know why, I think? I don't have a clear I mean, there's no specific changes there in a way. I mean, we had slightly more acquisition costs last year. We always take them on the group level, and we don't split them out for individual business area That we used to do. But The major thing last year was naturally climate control. Of course. Would you say that over time, €1,000,000 on that line is very much too low? You should be around $10,000,000 $11,000,000 or Probably. Yes, it's rather around that level. Okay. Very good. Thank you. Thank you. And our next question comes from the line of Anthony de la Renato from Wit 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. I mean, you refer to some of the acquisitions coming in at sort of 5% to 7 percent sort of operating margins. Is that a sort of a fair sort of 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 the underlying performance on a like for like basis because they won't be included, I imagine, in the organic numbers yet? And thirdly and last, is there any sort of sense of guidance you can provide in terms of the likely revenue contributions into the 3rd and Q4, you'll be cycling against much higher comparatives as you get into those quarters. And so I'd imagine those contributions will come down quite sharpish. Any sort of help in guidance on quantum would come in most appreciated. Well, of course, the first question, if I understood it correctly, I mean, Enotec and as I said, Enotec and the Climate Control Group, they had a pronounced seasonality. So although I mean Climate Control Group, of course, now contributing, but the Enertec Group, that isn't really worth mentioning. So that is a the 1st week, 6 months. But that's not just due to the fact that we are the owners. That's their structure. And then the third question, I don't think that we typically give more precise information that when you read into my comments there at the bottom. But it's correct. This natural Climate Control Group now has been on board for the full year as of July 1. So that growth will now continue to be organic growth. And the only larger acquisition that we have on board now are going to be, of course, Enertec Group that continue to come in and also the acquisition that we've done early this year. But of course, they won't compensate on an acquisition point inside 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, so on a like for like basis, to what extent they are actually delivering organic growth? Okay. That's 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. And again, I think that we have to be a bit cautious what we say. But we appreciate the questions, but I think that we have to stop there. Okay, fine. Thank you very much. Thank you. Thank you. As there are no questions, I'll return the conference to you. All right. So I think that once again, thank you for calling in. Thank you for showing such an interest. And we got a charge ahead, as we said. And we just hope that the world will continue to be prosperous despite all the political disarray that we are seeing. But 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