Good morning and welcome to this conference call. This call will cover three parts. First, we will start with the presentation on the fourth quarter results as usual. We will follow on by a presentation on our new and updated strategy. After that, we will have a joint Q&A session, which will be live, where you can put your questions either through the phone or by using the chat function in the channel. As usual, Rickard will start the presentation and Niclas will follow on afterwards. With that very brief introduction, I leave the word and the control to Rickard. Please.
Thank you very much, Patrik. Good morning, everyone. Starting by looking at the full year of 2021. It was a very strong year for SKF, with solid growth and improved margins. The performance in the first half of the year was especially strong, while the second half saw challenges in the form of supply chain constraints and cost inflation. In this very dynamic environment, SKF managed to deliver a strong set of numbers, 13% organic growth, SEK 10.8 billion in adjusted operating profit, and an operating margin of 13.3%. None of this would, of course, been possible without an enormous contribution from all the people of SKF. I would like to express my sincere appreciation to all my colleagues around the world for a job well done.
The board of directors is proposing to increase the dividend to seven Swedish krona per share, of course, subject to AGM approval. Now, let's move on and take a look at the fourth quarter. Net sales for the quarter came in at SEK 21 billion compared to SEK 19.6 billion in the same quarter last year, representing an organic growth rate of approximately 4%. Our industrial business saw very strong demand across most industries with organic growth of 9%. As expected, our automotive business continued to experience volatile demand environments with organic sales down by 8%. The adjusted operating profit was SEK 2.3 billion compared to SEK 2.6 billion in the fourth quarter last year, and the adjusted operating margin was 10.8% versus 13.2% last year.
Our results continued to be impacted by significant cost inflation, which totaled roughly SEK 1.7 billion in the quarter, of which approximately SEK 700 million was compensated for. Naturally, we are not satisfied with the negative margin development, and we have initiated additional broad-based pricing initiatives to protect our earnings and future investments. It goes without saying that we're also continuing to drive cost efficiency measures across all parts of our business. Cash flow generation in the quarter was just north of SEK 800 million compared to SEK 1.9 billion in the same quarter last year. The low cash flow level is due to the increased inventories caused by logistic constraints, a volatile demand in automotive, and the general cost inflation. Nevertheless, the Q4 cash flow generation is significantly below what we have historically generated, and mitigating actions have been initiated.
All in all, continued strong sales momentum with industrial and a relatively strong automotive performance given the rough circumstances. When breaking down our revenue growth by region, you can see on this chart that EMEA is still our largest market, representing some 41% of sales, followed by Asia Pacific, about 32%, Americas, about 19%, and Latin America at approximately 8%. Industrial demand was strong across all regions with double-digit growth in Europe and Latin America, followed by high single-digit growth in Asia and North America. As I mentioned before, the automotive business continued to experience some challenges, especially driven by the OEM business, where we saw a negative growth rate across all regions. However, the gradual improvement during the quarter, so the automotive business coming out of the fourth quarter with a somewhat positive trajectory.
It's also worth noting that the vehicle aftermarket has remained strong and growing well in all our geographies. Starting with our Industrial segment, which you're aware represents some 70% of our sales and 90% of our profits. As I already stated, the industrial demand is currently very 9% in the fourth quarter and net sales were just north of SEK 15 billion. Sales in almost all industrial segments saw strong growth rates like industrial drives, off-highway, railway, food and beverage, marine, and industrial distribution, while only aerospace and energy experienced a sales level at a lower rate than last year.
From a results point of view, the industrial business delivered an operating profit of SEK 2 billion and a margin of 13.5% compared to 14.6% last year. The result was affected by increased cost inflation in materials, logistics, and also at the end of the quarter from energy. Naturally, we are not satisfied with the margin development, and we'll continue to use all possible levers to mitigate the cost inflation as we move into 2022. On a more positive note, though, we also noted several customer wins in the quarter, including a bearing maintenance contract with a large rail operator in Latin America. From a sustainable point of view, it's encouraging to see the growing demand for our remanufacturing capabilities and services. As more and more customers strive to re-reduce their CO2 emissions, our remanufacturing offer is also growing in attractiveness.
It not only helps to reduce emissions by approximately 90% compared to buying new bearings, but it also provides additional value in form of reduced lead times, especially for larger bearings. As an illustration, the maintenance contract that I just mentioned with this large rail operator in Latin America includes remanufacturing, new products, technical support and knowledge transfer, all of this enabling SKF to provide value across all these dimensions. Another important enabler to capture growth in this segment is being close to our customers. Therefore, we continue to invest in developing our manufacturing capabilities across all regions. As part of our SEK 5 billion World-Class Manufacturing Program, we have inaugurated the second phase of the Xinxiang factory ahead of schedule in the quarter. The Xinxiang factory produces bearing variants for electric vehicles, industrial high-speed applications.
Within the Xinxiang extension is up and running, we're not only enhancing delivery capabilities to our Asian market, but also improved availability for many customers globally. Furthermore, we have also installed our RecondOil solution in this factory and thereby improving the overall quality of our products. Speaking about RecondOil, we are continuing the high pace RecondOil rollout in our own factories as planned. The external launch is in early stage phase still, but the first contracts are signed with customers within industries such as paper, mining, and steel industries. Turning to the Automotive business, representing some 30% of our sales and 10% of our profits. As expected, our Automotive business continued to experience a volatile demand driven by logistic bottlenecks and component shortages among OEM customers globally. On the other hand, our vehicle aftermarket business saw continued demand across all regions.
All in all, and despite significant challenges and organic sales down by 8%, the automotive business delivered an adjusted operating margin of almost 4%, in part due to the mitigating actions that we announced and initiated the previous quarter. Also within automotive, we had some good and new customer wins in the quarter, a new SUV platform contract with a major OEM in North America being a prime example. It's also very satisfying to note the sharp increase in demand for components to electric vehicles, especially in Asia, up some 180% versus Q4 last year. In general, our electric vehicle-related sales to traditional OEMs tripled in the quarter, demonstrating our strong footprint and value add in this growing part of the automotive industry. Let me now hand over to Niclas to provide you with some more details into our numbers. Niclas, over to you.
Thank you, Rickard. If we then move on to some further details about the financials in the quarter. As Rickard mentioned, we had a very solid demand for our products and services in Q4. Our sales grew both sequentially and compared to last year. Compared to last year, the net sales increased by 7.2%, and the organic sales increased by 3.8%. The currency effect was positive. The currency effect on sales specifically was positive, with the largest effect coming from the dollar, the euro, and the Brazilian real. All in all, strong demand, and we could likely actually have had even more sales if it wasn't for the supply chain squeeze and bottlenecks in production.
In this volatile environment with constrained supply chain and bottlenecks in production, we are pleased to say that we managed to serve most of our customers very well as we continue to strengthen our position in the market. In Q4, we continued to experience a significant cost inflation coming from, for instance, raw materials, components, transports, and lately also energy. The cost inflation affected our adjusted operating profit, which was SEK 2.3 billion or a margin of 10.8%. We do expect the cost inflation to continue, and we are taking further actions to mitigate it, including further price increases. Let's take a closer look at the profit drivers. Overall, the profits were affected by high cost inflation and supply chain bottlenecks, partially offset by our actions with driving price and mix.
If we go through it step by step in the bridge. Firstly, currency impact was negative at SEK 26 million compared to last year. Our organic sales and manufacturing volumes contributed on the other hand with a positive roughly SEK 1 billion, and approximately SEK 700 million of this SEK 1 billion was driven by price mix, positive price mix. We continue to increase prices, and we remain confident that we can mitigate current cost inflation during 2022. What comes to cost inflation, we saw continued headwinds from increased prices and materials, components and logistics, and this amounted to roughly SEK 1.7 billion compared to last year. Cost development continued to be good and costs were SEK 361 million lower than last year.
To sum up, our operating profit was SEK 2.3 billion with a 10.8% margin affected by significant headwinds from increased inflation. Moving on to cash flow. We generated a cash flow of SEK 823 million in the fourth quarter compared to SEK 1.9 billion last year. The cash flow in the quarter includes approximately SEK 700 million in proceeds from a sale of real estate. If I summarize the decrease in cash flow compared to last year, it is primarily driven by higher inventories. Compared to Q4 last year, our inventories increased by a net of approximately SEK 2 billion. Last year in Q4, it went down by approximately SEK 800 million, and this year it went up by approximately SEK 1.3 billion in Q4.
If I comment on the inventory increase and give you some further details. Firstly, as some automotive customers have adjusted their productions or production levels at very short notice, this has led us to have a higher than normal inventory in automotive. Secondly, we've been impacted by logistics disruption across the value chain. This is for instance, longer lead times or component mismatch. Net working capital in percentage of annual sales was 30.7%, but this was compared to last year's 26.1%. This was driven by the temporary increase in inventories. Return on capital employed was 14.9 for the last 12 months. This is a slight decrease again due to temporary increase in inventories.
We do expect the elevated inventory levels to reverse when supply chain squeeze improves and we take further actions. Our balance sheet and liquidity position is very, very strong. Our net financial debt amounted to SEK 2.9 billion, and the net debt to equity ratio excluding pensions was 12.5% at the end of the quarter. This strong balance sheet will support our clean and intelligent growth strategy as announced earlier today, and as we will hear more about soon. With that, handing back to you, Rickard.
Thank you, Niclas. To summarize, the fourth quarter saw continued strong growth within the industrial business. However, profitability was affected by significant headwinds from cost inflation. The automotive business was continuously challenged by customer close downs. As a group, we report an adjusted operating profit of SEK 2.3 billion compared to SEK 2.6 billion last year, and a margin at 10.8%. In a full year perspective, 2021 was a strong year for SKF, with solid growth and strong operating margins. Performance in the first half of the year was especially satisfying, while the second half of the year brought increased challenges in the form of supply chain constraints and cost inflation. In this light, we are pleased to report the continued good progress in our SEK 5 billion World-Class Manufacturing Program.
As promised last quarter, we can now confirm that we have closed 12 sites since 2019 according to our plan. As I mentioned in the beginning of this presentation, the board of directors propose a dividend of SEK 7 per share. Turning to the outlook. Looking into the first quarter, we expect continued solid demand across our industrial business and continued supply chain challenges among our automotive customers. Furthermore, we also expect the inflationary environment to continue to be challenging and require broad actions. We estimate a low single-digit organic sales growth for the first quarter, 2022 compared with the same quarter last year. Industrial is expected to grow while automotive is expected to decline. This time, we will also provide you with a full year guidance.
For the full year 2022, we expect organic growth in the range of 5%-10% versus last year. That concludes the formal quarter presentation, and it's now time to turn our efforts toward more forward-looking, and I'm delighted to start to share with you our views on the strategic framework that we just have published as well. Well, as you know, we have worked hard within the last five, six months to really do a holistic view of our business, assessing growth opportunities and also their full potential in our business. A wide range of skilled and dedicated colleagues of mine have been involved in this work, providing input and insights to how we see our future. I'm actually delighted to stand here today to share the outcome of this rather comprehensive review that we have conducted within SKF.
As a starting point, I like to stress that we identified that we have a very, very strong starting position. We have something unique, something that very few other industrial players have, and that is a unique insight and knowledge in almost all industrial applications. Why is that? Well, you can see this on this chart and this quote there, that everywhere there is rotation, there is a good chance that SKF products, capabilities, and skilled colleagues are providing value in form of improved operational performance and reduced emissions. Our ability to navigate and provide customer value across a number of dimensions, geographical, industrial, technological, that's our core strength and our key asset. This is something that I want to build upon as we move forward.
Also, we see that the key mega trends that are sweeping across the globe are really impacting our customers, providing new opportunities for our customers that we can leverage and grow hand in hand with our customers. To illustrate that, I like to share a few quotes and examples from some of our customers. Starting with the whole thing about sustainability, which is of course something that all industrial companies are working hard to find solutions around. Not only to do what's right for the planet, but also to really identify additional growth opportunities and business opportunities. In this context, our products, our services, our knowledge is really a key enabler for them to unlock their future sustainable achievements. As you can see, this is something that we have a quote from ABB really reinforcing that message.
When it comes to digitalization, when we have the chance to really combine our hardware and software capabilities, we can provide tangible and real value to our customers in a broad range of industries. Here you have one quote supporting that statement from Suzano. Finally, when it comes to electrification, of course, this is really changing the dynamics of many industries and automotive in particular. Here we have a fantastic strong position and key capabilities and skills to help the OEMs to make their transition towards more electrification of their production and their products. Of course, we're gonna support our customers here, as you can see and expected from many of our OEMs, and this is a quote from BYD supporting that statement. I'm gonna sum it all up and reflect on our starting point in 2022. We are fairly forward-leaning and optimistic.
We believe that we are trusted. We have deep knowledge and experience around the rotating shaft. We have a broad installed customer base and knowledge base, and we are a leader in many different applications. We are well-tuned in to the key mega trends that are sweeping across the globe, as I just explained. We are used to collaborate with our customers to identify technologies, solutions, and value add that could help our customers to grow and also further enhance their sustainability footprint. We are competitive. We are the leading player in the bearing industry, and we have demonstrated our ability in the last two years to constantly take market share in a highly competitive market. All of this makes a great starting point to further accelerate and be more ambitious on our future growth agenda.
We have identified a strategic framework for 2030 that we call Intelligent and Clean Growth. By executing on this framework, we will be a different company by 2030 than what we are today. Before I go into the details there, let me share some insights, what I mean when I say Intelligent and Clean Growth. Intelligent. It's really to use insight and data and engage with our customers to define and develop new products and services and capabilities. It's using analytics and rigor in our portfolio management activities, making sure that we, through digitalization of our entire value chain, create transparency, so we can manage our own processes and manufacturing capabilities even more effectively. Of course, it will require rigor and analysis in terms of resource allocation, both in terms of capital and also our people. Clean.
It's all about our ability to develop solutions that can unlock sustainable solutions for our customers and also enter into new industries. It's also to make sure that we use our current technology stack and our know-how and capabilities to help our customers across numerous industries to minimize friction and waste. It's about digitizing our value chain and really drive towards a net zero emission and clear transparency on our journey to get there. Of course, it goes without saying that we always conduct our business with the highest ethics and great business practices. Successful execution on this Intelligent and Clean Growth framework will lead to different SKF by 2030. By 2030, we strive to double our business at improved margins. By 2030, we'll be more focused and efficient.
By 2030, we will be the technical partner of choice among our customers, and we will lead development towards sustainable solutions. Do we believe this is an exciting future for the company and a clear framework on how to move this forward? It's clear this growth and this high ambition of ours will also require investments. We are prepared to continue to invest in our supply chain, in our manufacturing footprint, and also further increase our efforts in R&D to really focus our efforts on highly interesting growth opportunities, supporting our customers in this drive towards a more sustainable future and the other mega trends. In this work that we have conducted, we have also identified opportunities to actually fund these additional investments through improved net working capital capabilities and also continued cost reduction.
Let me now give you some more flavor to what do we really mean and what are the components of this strategic framework. The framework is actually illustrated by this, by this slide here, this picture here, where you see the cube that I referred to in the beginning, where we will see that we're gonna really explore growth opportunities in high interesting segments, where we can add true value to our customers and grow hand-in-hand with them. It's about really deploying our R&D capabilities and deploy new technology to help customers grow and unlock new industries. It's about putting further emphasis on our services and aftermarket capabilities, and it's also to constantly manage this wide range of opportunities in this broad portfolio of ours in the best possible way.
To grow and to deliver on these high growth objectives in these four quadrants, it will also require some key enablers, and that we are flawless in our execution on those enablers. It relates to what I already touched upon, R&D capabilities and technological development. It's about really digitizing our full value chain end-to-end. It's about continuing our strive towards a more balanced regional footprint and strong supply chains in all of our regions. It would require a different operating structure internally, taking us working closer to our customers. Let me now take you through all of these blocks of our strategic framework at a high level to give you some flavor of what we really mean by this. I start by the growth areas.
In our efforts and our analysis, we identified a number of highly interesting growth areas, such as high-speed machinery, electrical drives, clean tech, automation and robotics, agriculture, food and beverage, to mention a few. All of these are defined by the fact that they represent significant growth opportunities for their industries, and that they require a partner that can provide high-value add and technology edge in their strive to grow. As we have identified and looked into this and our capabilities, we realize that we are well-positioned to support customers in all of these areas by having the know-how, the relationships, the technology, and the capabilities to really help them grow, and thereby we can grow hand-in-hand with them.
When it comes to new technologies, it's all about focusing on areas where we believe that can make a big impact to really help customers in their drive, and also, as I mentioned, unlock some new industries. Connectivity is key and will continue to be key where we can combine our hardware and software capabilities to provide data and transparency on machine performance and uptime capabilities. That is important for our customers, something we continue to develop. Ceramic bearings is another very, very interesting area. It's required to really cope with high speed solutions that becomes more and more in need from our customers. Also, when we move into electrification and the high voltages, there will be problems with straight currents. Ceramic bearings is a key answer to solve that problem.
Here we have a leading competence and edge already, and we want to further investigate that, further invest there to help customers grow. Another exciting area is our magnetic bearings, a unique competence to SKF, where this technology can really help to unlock some some future industries, such as hydrogen and carbon capture. We wanna leverage our leading position here and really move forward together with a number of our customers. Finally, I'd like to touch on RecondOil. Our customers, they all strive towards more sustainable future. If we can provide them with a solution to reuse their oils and lubrication, and at the same time improve uptime and performance and quality in their operations, we believe that that's a winning concept that can really scale, generate further growth. Moving over to service and aftermarket.
In this broad definition, it's already a sizable part of our business, some 40% of our sales. Here we have seen that, you know, by really focusing some of it and align it with the customer needs, there are room for further growth opportunities. We'll put some further emphasis on more traditional transactional services, which quite honestly has been maybe in less focus in SKF in the last two years. We're gonna continue to scale up our capabilities to capture data and create transparency around data and provide that information to our customers. We're gonna do that by also working closely with new and additional partners to make this whole more scalable as we move forward.
As I mentioned, customers, they really strive toward a more sustainable future, and if we can combine our capabilities related to condition monitoring, remanufacturing, and engineering and design, of course, we can make an impact and help customers there to take advantage of that. Finally, for certain industries, it's really important for our customers to ensure reliability and uptime in their production capabilities. Here we will continue to discuss performance-based contracts to support customers in their strive to make their operations as efficient as possible. The final dimension on growth is portfolio management.
This is something that, you know, we're gonna apply across all parts of our business, of course, to really assess and dare to make the bold decisions, prioritize those parts of our portfolio that truly provides the best opportunities and also the best margins, and dare to make decisions on those that are not really contributing or are they dragging the overall performance of the portfolio down. Those we either need to fix or trim out of the portfolio. As part of this, we will also create a more autonomous and independent automotive business to enable also future strategic flexibility for the group, and I will come back to that shortly. This focus on portfolio management really applies to automotive, and that's an area where we're really gonna start.
Because we have identified that there are ways how we can reshape the portfolio within our automotive business to ensure that we capture growth in exciting areas and also that we dare to make some bold decisions on parts of the portfolio that does not really deliver the value that we're looking for or where we have a clear value add to our customers. We have five levers that we're gonna work on. Three of them are related to growth capabilities, and two are more related to refocus and rebuild. Starting with the first one related to electrification. Of course, this is a massive shift within our OEM customers, where they're putting most of their emphasis and investment money towards electrification of their vehicles. Here we have a unique position and a clear opportunity to further accelerate growth, and that's what we're gonna go after.
In commercial vehicles, we are already today a clear number one in the market with unique competence and capabilities to support our customers globally. Here we see additional growth opportunities, especially in the Asian market. When it comes to the aftermarket, here we are at number two. We have seen in the past that it's really a growing area. We have developed our distribution capabilities and also added more components to our portfolio that has had a good impact in the market, and we've seen solid growth. We believe there are opportunities to further accelerate this growth. If we grew the aftermarket business, that also enable us to somewhat compensate for a more volatile OEM business. As I mentioned, we also need to refocus, and when it comes to services, capabilities, and products, especially related to combustion engine vehicles, we need to rethink.
We need to make sure that we're focused on those customers, those opportunities where we have a clear leading edge and clear value add to our customers, and there maybe to think differently about some other parts of that part of our component of portfolio. Finally, the smallest piece of this automotive portfolio is related to Drive controls. Within this framework, there's a subset where we call suspension bearings, where we are the clear leader in the market. Suspension bearings are highly interesting in the long-term trend towards more autonomous driving. Therefore, we believe that also deserves some further investments and focus as we move forward. I hope that gives you a flavor on how we see where the growth is gonna be coming from, and how we will start to focus our efforts to really capture the most interesting growth opportunities.
As I mentioned in the beginning, to make this happen, to really execute on this, we need to be flawless on some of these growth enablers. I like to also share some insights on each one of these four with you today, and starting with technology. Again, when we look into our business and referring back to this, artificial tube of ours, we realize that the growth that we're after, to some 75% will actually come from existing products delivered to existing customers and new customers. A significant chunk, some 25% of the future growth needs to come from new products to existing customers and new customers. Here we need to align our efforts to really ensure that we prioritize that, we, those initiatives that we believe have the highest possible growth rate and potential.
We're gonna focus on high speed applications. We will focus on clean tech. We will focus on sustainability solutions, but we will also focus in areas how to enhance our own manufacturing capabilities to constantly drive our productivity and effectiveness within our own footprint. All in all, we believe that we need to step up investments in this area and over time, increase our R&D spend with some 50%. To bring this to life a little bit, I'd like to share with you a few examples of some real and tangible projects and products that we're working on that is about to hit the market. Starting with the new high speed bearing, something that we have developed to meet the extreme needs for electricity of speed within electrical drives and some compressors and pumps applications.
When it comes to connected products, we have started to embed sensors into the bearings, and thereby really combining our hardware and software capabilities to ensure instant feedback on and control over the application. Of course, this is of high value to a number of our customers across numerous industries. Within food and beverage, they have extreme requirements on hygiene, of course. Here we have developed a new solution that is really tailored to support this industry to enable them to further enhance and improve their operations and providing thereby growth opportunities for us. When it comes to our own manufacturing, we are right now exploring some new exciting technology related to heat treatment or induction heat treatment, and also something called laser cladding. Laser cladding, for example, really helps to increase our capabilities in remanufacturing of bearings.
Here we have recently acquired a specialist company with some unique skills in this field that we acquired just a few weeks back. This is just a few examples of some of the tangible things that we're working on that will truly support our focus and efforts as we move forward. Talking about digitalization and the value chain, this is absolutely vital. We need to connect our entire value chain end to end through digital technology. This, of course, to support our customers, but also to make it easier to do business with us. It's also important from an internal point of view that it creates transparency and overview of our own capabilities throughout the entire manufacturing footprint and supply chain to ensure that we can take the right decisions and informed decisions on how to further improve our capabilities.
A lot of work has already got into this within SKF, but still a lot of work still remains to be done, and this is gonna be key focus areas for us in the next few years. When it comes to our regional footprint and supply chain, here we're gonna continue the journey that we already started. It fits well into our strategic framework, and we need to continue to put big emphasis and focus on this. To give you a flavor of what we're aiming for here is that by 2025, we wanna make sure that we invest in our localization rate and building up supply chain in the Americas, so that we can move our localization rate from 40% today to around 60% by 2025.
For EMEA, it's not so much about adding more capacity, but rather how do we automate and increase further efficiencies and, i.e., call it some consolidation within our European or EMEA footprint. For Asia, if we see significant growth going forward, we need to build out our capacity in Asia to support that growth, and we need to continue to enhance our localization rate. There we have big ambitions to lift it from roughly 6% today to north of 85% by 2025. These are important, and as I mentioned, will require investments as we move forward.
Finally, on a more internal view on how we organize ourselves and how we see our evolution of our organizational structure. Today, if we look into our value chain, actually ownership and accountability for the value chain is divided among regional, some regional capabilities and also central functions. We want to move away from that and to a situation where we have clearly defined business areas with a full end-to-end ownership of the full value chain. That's a shift that we wanna try to do in the next two years and starting already today. This will mean that we will gonna create a number of business areas within SKF, starting with four main industrial geographical regions with Americas, EMEA, and then we're splitting Asia into two, India and Southeast Asia, and China and Northeast Asia.
The reason for this is that we want to put enough emphasis and focus on those highly attractive growth markets, both in India and Southeast Asia, as well as in China and Northeast Asia. We're gonna continue to have six independent business areas that will be managed under one umbrella. The difference is that they will all have full responsibility for their supply chain for each and every one of these six business units. Finally, we're also creating a more autonomous automotive business to ensure that they have what it's needed to drive their business forward, really focus on this portfolio shift that I just described, and create the, over time, some additional strategic flexibility for the group. I'm delighted today to also share with you the team that I have that will deliver on this exciting journey that we're about to embark upon.
On this chart, you see my team. You see the faces of the people that's gonna join the group management of SKF. There are some familiar faces, and there are some new faces. Let me quickly share with you, just, you know, introduce them very, very briefly. Starting with John. John is leading our Americas business today. He will continue in that capacity, albeit he will have a broad responsibility for entire value chain. Kent, he's running our operations today, and he will move into a new position, take full accountability for the business area, EMEA. Manish is running our Indian business today. He will step up into group management and take on a somewhat broader responsibility and head the business area, India and Southeast Asia. Patrik is running Asia today.
He will remain in a large part of that capacity with a main focus on the business area, China and Northeast Asia. David is an internal recruit. He is now elevated up into group management, and he's gonna lead the exciting transformation of the automotive business area. Thomas, he's today controlling and managing the portfolio of independent business units and business areas. He will continue in that capacity, albeit again, with broad responsibility for the entire value chain. Joakim is an external hire that I'm delighted to announce that gonna join us in just a few days, by mid-February. He's gonna take lead of this very, very important part that we call operation and digital transformation that I hope explains how that fits into our strategic framework. Victoria will remain as our CTO and continue to drive our R&D capabilities as we move forward.
We have some important and lean enabling functions, where Niclas will continue in his capacity as CFO, Mathias as our legal counsel, and Ann-Sofie to lead our people agenda globally. We are excited about this intelligent and clean growth framework. We believe that we have clear opportunities to really accelerate our impact to our customers and thereby also grow our business as we move forward. To end and to summarize, I like to end where I started, to say by a successful execution on this strategic framework, SKF will be a different company by 2030. We're gonna strive to double the business at improved margins. We will be more focused and efficient. We will be the technical partner of choice among our customers, and we will lead the development of sustainable solutions.
I find this highly exciting, and I'm really, really pleased and honored that I have a chance to be part of this exciting journey that SKF is now about to embark upon. With that, I thank you for taking part in this, and I think it's time to pause and then also open up for Q&A.
Thank you. If you would like to ask a question, please press star one on your telephone keypad now. If you change your mind and wish to withdraw your question, please press star two. Our first question today comes from Daniela Costa from GS. Please go ahead.
Hi. Good morning. I have put a few questions on the webcast, but I'll answer just three for now. The first thing regarding sort of your doubling the size by 2030, and you talk a lot about the organic levers, but can you tell us a little bit about how much M&A is part of that journey, given, I guess, the CAGR to a doubling in eight years is quite high in terms of top line? The second thing also on the strategic review regarding sort of moving more of the business to Asia. Is that sort of more mapping what you think the revenue mix will be in the longer run? Or there's more like serving the rest of the world also with Asia?
Because I guess the question comes on the back of a lot of companies this year saw a lot of disruption because of having moved maybe a bit too much to Asia, so wondering the thinking there. Then on the shorter-term things, in terms of cash, and obviously the weak Q1, in terms of all the goods in transit, how fast do you think the reversal? Is that a reversal already into Q2? How can you mitigate basically also going forward what has been a pretty volatile cash flow profile over the last few quarters? Is that sort of something you're looking into? Thank you very much.
Thank you, Daniela. I'll try to answer your two first questions then, Niclas will address the third one of your questions. Starting about, you know, the how much M&A is bought do we have in mind when we talk about double the size for our business. I like to again draw your attention that this is a long-term target for 2030, that we believe it's what we're gonna strive for. First here now, it's primarily a significant focus on organic growth. We really need to get our act together. We really need to accelerate growth. We need to start to implement these key enablers to get the traction going. As we mature, we will not roll out M&A, but it's something that will come later on.
For now, it's primarily focused on organic growth, and then as we have seen us do in the last few, in the last year or so, some selective small additions to capture some key knowledge or technology. Any massive M&A activities in the near future is not part of this agenda. When it comes to your question on localization in Asia and how we perceive that's gonna support global customers, we believe that the growth rate in Asia is massive, and we need to build up capacity to primarily support customers in that region.
At the same time, make sure that we build out capacity in North America to capture, you know, the need there, in India to ensure that we have the relevant capacity there, and as I mentioned, also in EMEA invest to improve output and throughput, and efficiency in our existing footprint. It's not that we're building a lot of capacity that we plan to ship around the world going forward, but rather trying to be as close to our customers as possible. On the cash question, Niclas.
Hi, Daniela. In terms of the elevated inventory levels, as I mentioned, it's really two parts to this. One is automotive, where it's a bit more finished goods due to you know the nature of the business and call off by customers. On the other hand, it's as you said driven by goods in transit, which again the background to that is really the logistics situation out in the world, where you know finding transport is not always easy, takes long time, ports are congested and so on and so on.
Onto the question of when will this, you know, normalize. Quite confident that it will normalize but of course it's very difficult to say. We do see maybe some not necessarily normalization, but it's not getting worse or it hasn't been getting worse, that already is maybe a sign of things turning. Of course, in the meantime, we continue to work hard. We continue to mitigate and over time, we are confident that this will normalize.
Thank you.
Our next question comes from Andre Kukhnin from Credit Suisse. Please go ahead.
Good morning. Thank you very much for taking my questions. I'll stick to one on strategy, one on the quarter. On strategy, you appear to be pointing to portfolio action coming when you talked about especially with automotive business and mentioned bold decisions to be made several times. Could you give us an idea on the timeline of that, and why not already at this stage having, as you said, taken five months of a lot of hard work to do the strategic review? And also just related to that, how does that chime with the doubling target? Should we think about kind of doubling off a base adjusted for any potential disposals? So that's the question on strategy, and I'll just put out the second one on quarter.
If you could quantify, please, the manufacturing benefit from overproduction that potentially happened during Q4 for us, that would be great. Thank you.
Right. I'll take the first one then, and then Niclas, you take the second one then. No, you're right. Of course, we're not sitting on our hands and doing nothing today. What I'm trying to express here is that we need to have more rigor broadly in our business to really scrutinize our portfolio. Those things happen today, but not to the extent that we really need and with the rigor that's gonna be required, and also that we dare to take some decisions and prioritize some opportunities over others. And this is already ongoing within Automotive, and I spent some time really explaining that.
I think that it's a need for us to further accelerate those activities and really identify the areas where we have some key capabilities, a leading position, and where we believe that we can truly add significant value to our customers. Let's focus there and maybe de-emphasize efforts on some areas where we are more of a commodity. So that's the idea. On the growth rate, you know, I'm not gonna be too specific there, but it's basically we say that including the portfolio trimming and all the activities, we strive towards doubling the size of our business by 2030.
If I just add purely from a modeling perspective, I mean, 2021 is the base year. Of course, should there be events, splits, whatever, we need to adjust for those. Just purely from a modeling perspective. As Rickard had said, it's the ambition that really counts and the growth opportunities that we have identified and see out there in the market. Patrik, do you wanna take the manufacturing?
Yes, of course. As Niclas mentioned, we did build some finished goods inventory throughout the quarter to an extent of about SEK 160 million. While last year we actually had a reduction of finished goods inventories of almost the same amount. In terms of the bridge effect on EBIT, it's a net positive of about SEK 50 million or so in the quarter, year-over-year.
Thank you.
Our next question is from Mattias Holmberg, from DNB. Please go ahead.
Hi. Thank you. I have to get back to your doubling by 2030. This implies you must grow by roughly 8% on average per year, which is quite considerably higher compared to what you've grown in the past. I just want to understand the different drivers better. You had this slide where you walked through it quite nicely, roughly half from existing products and customers, 25% market share, I assume, and then 25% from new products. Am I right in translating this then that you expect roughly 4% underlying market growth, 2% growth from increased market share, and roughly 2% from new products in order to double by 2030, or where am I off somewhere?
Well, Mathias, I understand why you ask those questions. At this stage, I actually gonna stay to my statement, not break it down in those details for you. We have identified clear areas we believe where we can really step up our growth pace. That's what we're gonna go after. When we sum it all up and we will look into those opportunities and our position that we have today and where we wanna take the company, by also delivering on those enablers, we have identified an opportunity to double the size of our business. Exactly how that breaks down into, you know, core growth, you know, new products, new customers, all of that, we'll have to come back to that as we get going. For now, you have to trust us that this is a rather ambitious and forward-leaning agenda that we put out there today.
Okay, thank you.
Our next question is from James Moore at Redburn. Please go ahead.
Yeah. Hi, everyone. I've got a couple of questions. Thanks for the time. You talk about improved margins. Could you talk about what is sensible by 2030? Maybe we go one at a time.
Well, I'm not gonna give you a forecast or an outlook for our margin by 2030, but this whole strategic framework that we call Intelligent and Clean Growth is about profitable growth. We will not just grow for the sake of growing. We're gonna grow, but we also believe we can further improve our margins. Exactly how far that will take us, again, you know, I'm not a bit prepared to put some targets out there for 2030 at this stage, but it's profitable growth that we're going for.
Two more, if I could. One on the organic outlook. I have heard what you've already said, but as somebody else has pointed out, it does imply 8% revenue growth per annum for the balance of this decade. If it's predominantly organic, when your history has been closer to 1%-2%, and for years, SKF has hoped for more growth, and it's been the constant problem of the company, it is a massive acceleration. I guess my question is. If you can't break down the pieces, could you at least say what you think the market growth will be?
It's hard to predict what market growth will be until 2030. Again, you know, we have really scrutinized this. We have looked intensely into these opportunities. We identified areas within our portfolio and future areas that we believe we are well-positioned to capture. I'm not ruling out M&A activities. My point was that, you know, here and now, short term, we are more focused on get going and setting the direction of this strategic framework, and over time, we will also be more mature and be able to be more strategic in our M&A activities. I'm not at all ruling out that M&A will also be a part of the journey until 2030. Here now it's focused on get going and really capturing the growth opportunities more from an organic point of view.
Thanks. Finally, if I could, I think Suna, Tom, Alrik all looked at splitting out Automotive. You talk about a more independent and autonomous Automotive business, and you like the EV opportunity, and you're giving yourself optionality in the future if you wish to sell it, to split it out. I always felt in the past, the challenge was that in the majority of your factories. The production process is combined between Industrial and Automotive. How do you intend to disentangle that combined production footprint? Do you expect to get to a situation where they are separate sites and factories?
That will be an evolution as we move forward. You're right in what you say, that today our Automotive business is highly integrated into our existing manufacturing footprint. I like to reinforce that Automotive is an important part of our business. We do see a need to further strengthen its capabilities to further be more strict in how we apply capital and resources within the Automotive portfolio, as I described, to really focus on those areas where we have a key strength. By doing this, we're starting to create a more autonomous business unit, and that's why I'll say over time it will create strategic flexibility for the group. Because there are some part of our factory that is fully dedicated to Automotive that is fairly easy to shift and create ownership for.
Others will develop and evolve over time. This is not an intention saying that we are prepared to do anything drastic with automotive portfolio here and now, but it's good that we start the journey to create more flexibility in the future.
Thank you. Thank you, Rickard.
Our next question comes from Erik Golrang from SEB. Please go ahead.
Thank you. I have a few questions. First one, you all talk about where you think margins will end up in 2030, but could you say something about mid-term progression? There's quite a few investments attached to what you say here. Should we think of margin as potentially coming under pressure for some time before improving? Second question is on the balance sheet and also how you will fund investments. You talk of working capital as one source of funding for stepping up investments. That's also been an ambition for as long as I can remember to improve working capital, but it hasn't resulted in much.
Then also how you think about the balance sheet in a larger context, especially if there's no larger M&A in there, and given where it sits, you don't see yourself as overcapitalized. The final question, coming back to portfolio management, where you're saying very little, but you're implying quite a lot it seems. Could you say sort of how big a part of the auto portfolio you consider to be underperforming today? Thank you.
All right. Thank you, Erik. I'll try to answer your questions. I cannot give you an outlook for midterm here, but I like to remind you what we have said, that we give an outlook for 2022, where we set out to grow our top line by 5%-10% in 2022. We have ambitions to embark on this growth journey already this year. Of course, there are a lot of uncertainties in the world, and no one knows really what's gonna happen. But at least as with the knowledge that we have here now, that's what we're aiming for, and that's why we give you that outlook for 2022. It comes to the how to fund these additional investments.
You point to, you heard us talk about the improvement in net working capital for a number of years. I'd like again to reinforce that we are doing something that is rather different now than what maybe we have done in the past. This, you know, evolving organization that I described really puts the full emphasis on the business areas, meaning that they have full P&L and balance sheet responsibility. All of a sudden we have more clarity and accountability on driving improvements in our net working capital than maybe that we have had the capability to do before. That's one area.
It also requires that we have really while doing this rather intensive homework in the last five to six months, identified areas where we see that we can step up activities to further improve both net working capital, but also to drive additional cost efficiencies. Again, this new organizational structure of ours, I'm sure will also when we reset and when we build those teams that gonna be, you know, make up all these business units, there will be cost efficiency coming out of that as well. We've done a rather extensive homework there. We have done our math, and we believe that we see a path towards that we actually can fund this journey that we're about to embark upon. Maybe on the balance sheet question, you wanna take that, Niclas?
Sure, sure. Hi, Erik. Just to add to the midterm, I mean, you do know we have our kind of targets out there with 14% EBIT, 16% return on capital employed and so on and so on. We are by no means abandoning those. Those will stay firmly in our focus and that's what we wanna you know deliver on short term. Then the 2030 ambition is kind of a next step. In terms of the balance sheet and being overcapitalized, I think the way we view it is that the last two years it's actually been quite helpful to have a strong balance sheet. Of course, this is something that we need to monitor, and we need to make sure that we maximize the returns to shareholders. For now, and looking back two years, it's actually been quite helpful.
Thank you.
Our next question comes from Sebastian Kuenne from RBC Capital. Please go ahead.
Yeah. Hi, gentlemen. I was wondering why no one else has asked that question. In my model, when I look at consensus and what you delivered in Q4, there seems to be a very big discrepancy between the adjusted EBIT and the reported EBIT. If EBIT was a major miss, you know, reported EBIT 15% beat on consensus, and it looks like there's a SEK 500 million gain somewhere on the group level that I can't really explain. Do I look at something wrong here? Did I get something wrong, or did I overlook something? Could you maybe explain that discrepancy?
Hi, Sebastian. Niclas here. I'll answer that one. We had an adjusted EBIT of SEK 2.3 billion, and we had a reported EBIT of SEK 2.6 billion, so roughly SEK 300 million in delta there. This delta is the IAC, and within IAC, we had both positives and negatives. We had to continue our restructuring journey. So we had some restructuring costs there, primarily related to close downs in Europe. Then we also had the sale of real estate, and essentially the sale of our headquarters to a pension fund. That contributed with a positive, give or take SEK 350 million, to IAC. Again, SEK 300 million is the delta, so SEK 2.3 billion versus SEK 2.6 billion.
Usually the adjusted. Usually the discrepancy is, like, SEK 500 million. Okay, there's something missing, but I will find out. The other question would be on the guidance, growth guidance for 2022. How much of this is volume? How much of this is price? And do you already include the fact that the Swedish krona gives you a tailwind of about 3%-4% this year as of today, knowledge today? Thank you.
Yeah. It's really organic sales that we are accounting for here, and FX is out of the equation.
How much is volume? Do you expect volume -10%, price +25% or +20%? What is the assumption there?
We don't really break down the outlook in those details. However, though, we do believe that when you see, you know, we see a strong demand, especially within our Industrial business, still somewhat volatile within Automotive, however though, maybe on a positive trajectory. All in all, we believe that we can deliver organic growth of somewhere around 5%-10% for the full year. We don't break that up, how much has come from price and how much is from underlying demand.
Understood. My final question is on pricing for this year. By how much will you or do you plan to increase prices in Automotive and in Industrials? And is there a difference in the way you can price, so longer contracts in Automotive, shorter contracts in Industrial? Are you more flexible on either side? Thank you very much.
Let me try to answer that and put this way. Of course, I will not disclose exactly the price ranges by customer here at this call.
Ballpark maybe.
We're looking into this in a very focused manner. We are on the large accounts, of course. We're going through them one by one and identifying, you know, how our margin has evolved and what actions we need to take. When it comes to aftermarket and the distribution business, we have already initiated general price increases. That will continue in 2022. Our sales reps, they have also been equipped with specific targets, how they should, you know, what we expect them to deliver in their respective portfolios. This goes across both automotive and our industrial business. It's a comprehensive work that is being undertaken at the moment.
Ballpark, are we talking 5% increase, 20% increase, given what steel has been doing in the last year?
Yeah.
What order of magnitude are we talking about the price increases?
I mean, Sebastian, overall, of course, we wanna drive improved margins in combination with sales growth. As you know, for the moment, the inflation is higher or putting pressure on the margins. Essentially, the target is to, you know, from a financial perspective, offset the inflation. There is a delay, the inflation has so far been running faster than our pricing actions. Why is that? A bit like back to your question. There's a number of different elements. I mean, we have with some customers, we have long-term contracts. On the distribution side, it's quicker. You have the whole range of types of discussions and negotiations going on. As Rickard said, actions have been taken, but it's clear that we are gonna take more action and increase prices. Exactly what percentage? It really depends. It really depends on the situation, and type of customer we have.
Okay, thank you very much.
The next question is from Lars Brorson at Barclays. Please go ahead.
Hi. Good morning, both. Maybe I could just stick to that question and follow up on that prior question, sorry, and then return back to a question around the strategy update. Niclas, if I can be clear on price mix, I take there to be about 350 basis points in the fourth quarter. That looks and feels quite similar to what we heard in Q3. Talk a little bit about, if you could, the like for like pricing momentum, and maybe some thoughts on the first quarter around the offset from pricing on some of these inflationary pressures. If there was a SEK 1 billion net price cost headwind in the fourth quarter, how should we think about the first? I'll start there. Thank you.
Yeah, I mean, you are correct. So SEK 700 million roughly in price mix, where both price and mix were positive. It's not an exact science. I mean, how you categorize what's price and what's mix, and that's we kind of bucket into one. It's I think a better view to look at the progress we are making. You are correct that the progress Q3 to Q4, I mean, it was positive, but if we had some SEK 600 million in Q3, it was SEK 700 million in Q4, rough numbers. So that's the area where we clearly need to step up, and really take quite significant, actually, additional actions. As Rickard said, those are in progress and will be initiated if they haven't already.
Are you able to help us with thoughts on the first quarter, if not at a net level, perhaps at a gross level, that SEK 1.7 billion? We don't know quite how that splits down, but how do you see the key components move in the first quarter versus fourth, please? Thank you.
Yeah, I mean, we don't provide as such guidance on the SEK 1.7. I think roughly speaking, you know, within the category of materials, two-thirds and logistics, maybe one-third roughly or 40-60, something like that, 60-40. As I said earlier, I mean, it's a very dynamic world out there, but we have seen some leveling off here, but leveling off at a high level. Of course, for comparison reasons, when we move into Q1, we already had some cost inflation, albeit much smaller in Q1 2021. The absolute number will be affected by that. We are aiming to and working on compensating the current cost inflation. We are quite confident that we'll do it, albeit at a delay, and it will be a gradual step towards that now in the coming quarters.
Thank you. Can I ask secondly, just Rickard, to your strategy view. There's a lot going on there. I think generally some sensible ideas, quite honorable ambitions. I would probably categorize it as more incremental rather than transformational. On the organizational structure, I think I'm still left a little bit confused on the industrial side. Maybe you can tell us how do you intend to report externally around the four industrial regions and the six BUs? I think it seems to me to be a slightly greater focus, maybe back to the five technology platforms we talked about, you know, prior to your predecessor. Some of the adjacencies to core bearings that I think were de-emphasized in the last few years seems to be re-emphasized, particularly seals and lubrication.
Curious as to what your thoughts are specifically on those two in terms of the current state of affairs in SKF and whether they provide meaningful platforms for growth, particularly M&A growth. Thank you.
Good question. Starting with our reporting going forward, we're now setting this organizational change. We are developing the, you know, these standalone or more internally standalone business units with full P&L and balance sheets. It's gonna take us some time to actually calibrate everything to get this all in shape and reshape our internal procedures and processes. In the short term, I think you should expect us to continue to report on Industrial and Automotive as it's done today. As we move forward, we might change that. That is what it is. It's not in the making in the short term. Definitely something that we will consider as we mature in this new model, how we're gonna report externally.
It's true what you say about lubrication and seals and those other units within independent business units that we have. Of course, they will continue to support and drive capabilities and opportunities within our bearing business of course, and with our existing customers. But I'm not at all rolling out that they also can seek growth opportunities that may not just are related to the rotating shaft. They need to seek their growth opportunities and build their businesses to add to the value of the portfolio.
Understood. Thank you both.
The next question comes from Christian Hinderaker from Liberum. Please go ahead.
Yes, good morning, everyone. Christian Hinderaker from Liberum. Thank you for taking my questions. First one is in follow-up to the inventories. You mentioned that extended lead times obviously a major driver, and apologies if I missed this, but perhaps you can give us an indication as to how much that build was strategic versus driven by market factors or perhaps in other words, distinguishing between your active decision to shore up stock given those lead times versus perhaps the bottlenecks in ports leading to more time spent on ships and so on. And then my second question relates to the new strategy. I think there's been a few questions on the milestones. I just wonder whether there's been strategic thinking behind setting that 2030 target versus, say, a three or five -year target.
Wonder whether that was the result of the review or whether 2030 was always the starting point. Thank you.
I take the inventory one. Sorry, you were breaking up a bit. Do correct me if I missed your question. But if I understood it correctly, it was about a strategic versus, you know, just a normal inventory build. Do we put stuff into our warehouses in anticipation of, you know, future demand? I think it's. I don't have an exact number here actually, but maybe just a more of a reflection here. I think a big part of the main chunk of the inventory build is really due to the logistics squeeze out in the world.
Also kind of a mismatch of components where, you know, you might have the ring, but you don't have, you know, some other components of a complete bearing exactly at that time when you need it. I would say that's the majority of the reason for the increase. Of course, we do kind of anticipate growth and, as we discussed earlier today, demand is actually very, very good and very, very strong. Of course, that's part of it. We do see the main driver for the elevated inventory levels being the demanding logistics situation and supply chain. To your question about, you know, the 2030 perspective, well, it's no. We looked upon it like this.
We wanted to set a strategic direction for the company that something to strive for over some period of time. We know that this shift is gonna be a rather significant one. It's gonna take time to really deliver on also those enabling capabilities that we described. Therefore, we felt that we need to put a rather long-term perspective on this. However, as we already started, we also break some of it down into maybe shorter sprints, like the investments and our regional footprint that I described today, where we give you some ideas on where we want to take this order by 2025. Internally, of course, we have more clarity and the breakdown how we see this gonna evolve over the years.
As we play this out, as we move forward into this, I'm sure we will have reason to come back and maybe provide some more details and insight. For now, this is, you know, the long-term direction that we're trying to articulate and describe to you and the rest of the market.
Understood. Thank you.
Our next question comes from Andreas Koski from BNP. Please go ahead. Hi, Andreas. Please, can you check if your line is not muted?
Sorry. Now, I hope you can hear me. Good morning. I have three questions, please. Firstly, on your growth target of doubling the size until 2030, and as many have pointed out, it corresponds to 8% CAGR. Can you explain why you are keeping your growth target of 5% unchanged if that is because they are not aligned with each other.
Fair question, Andreas. Here's my thinking on that one. We do have more higher ambitions than what's now reflected in those growth targets. However, though, we just started this journey, we just embarked upon this journey, and quite honestly, we haven't yet delivered on those targets that we set out. My personal way of managing things and how I want to react to things is I rather deliver on our promises before I alter my promises. Once we have delivered on our actual financial targets that's out there, we will come back and discuss revised targets. Let's deliver first before we alter them. I hope it's clear that we have higher ambitions longer term than what is reflected in those.
Oh, okay. Does that mean that we should not yet consider your comment about doubling in size until 2030 as a target for SKF?
Not a target. That's why I used the word we're gonna strive to. The target is-
Okay.
The financial target is out there. We are, you know, we're gonna deliver on those. Once we have delivered on those targets, we will alter our future targets.
I see.
Let's deliver first, and then we'll change.
Understood. On your CapEx guidance, you're now guiding for SEK 5 billion in CapEx for 2022. Do you think that's a level we should have in mind also for the coming years beyond 2022, say, until 2025 or?
Yeah. You are correct. I mean, we had SEK 3.8 billion in 2021 and now step up to SEK 5 billion when it comes to the guidance. We look back at our CapEx, and we have the SEK 5 billion, you know, efficiency release coming out of the CapEx. We see that being quite successful and quite good. We are on that journey. We still have a lot to deliver. We actually think we can probably do more and better.
Now in the next few years, I mean, as Rickard mentioned or described in the strategy presentation, we do see that it makes a lot of sense now to shift or build kind of capacity in those regions where customer growth is high. Then, of course, we continue to improve in those regions where we already have capacity. The increased CapEx really reflects that kind of regionalization ambition that Rickard described. Five billion, of course, if there's opportunities to get even more benefits, we'll look into those. Five billion is what we foresee for 2022.
Yeah, I understand that you foresee that for 2022, but do you think that's a level we should also have in mind for 2023, 2024, and 2025 or should be expected to come down after 2022?
No, I. You shouldn't expect it to necessarily come down a bit. We don't provide a kind of an outlook year on year on CapEx, but we do see that this sort of level makes sense, and it's not only a one-off 2022 thing.
Yeah, that's great. Thank you. Lastly, just coming back to cost inflation and the cost development, could you just help us to better understand how, as it looks right now, the cost development should be in Q1 2022? If we look further out for the full year of 2022, is it likely that the cost development will normalize and be at around run rate or maybe SEK 1 billion per year? That would be very helpful. Thank you.
Maybe if I start, and you can follow that. I wish we had a crystal ball to look into because what we have seen in 2021 is that there has been a constant evolvement. It started with raw material, followed then by logistics, and then at the end of 2021, it was energy prices. Looking into 2022, I think there will be also labor issues we need to wrestle with as we move forward. It's hard to give you know, any, you know, clarity on that. We foresee that it's gonna be a high cost inflation environment also as we now move into 2022, and that's why we are, you know, further stepping up our pricing and cost mitigating activities. Niclas, maybe you wanna provide some additional comments.
I think that captured it, but let us know if we didn't answer properly.
Yeah, I think a number would be good for Q1. If you look at it, i t looks right now.
No, I am. Yeah. No, I understand. It's as Rickard. I mean, formally, we don't provide an inflation number, and as Rickard said, in this environment, it's not particularly easy to, you know, double-guess what the inflation will be going forward. You know, inflation, we see that it will continue on high levels. As I said, we see, you know, some stabilization on the raw material side, some stabilization on the logistics side. Let's say we assume that that's not getting worse. When will it get better? Let's see, depending on the situation out there in the market with both viruses and geopolitics and so on. There's some other emerging themes related to inflation as Rickard mentioned, such as on the labor side and energy and so on. It's just very hard to give you a number. But
I understand.
What we assume is that the inflation will be at a high level also going into Q1, Q2 as we see it now. That's, as Rickard mentioned, why we are taking further actions as well.
Okay. Thank you. Thank you very much.
Thank you for all your questions over the phone. As we are coming towards the end of this event, I think we also need to cover some of the questions from the chat function. I think most of them have been covered so far, but I would like to just post one here at least. It's a question posted by Andy at JP Morgan, but also by Sten Jensen at Lundbeckfonden, and it relates to the savings that we communicated before on the SEK 5 billion that were communicated on the capital markets day last year. How do they fit into the new strategy? Are there any additional or changes to that coming on as well? And what is the current position on the SEK 5 billion savings so far?
Well, the SEK 5 billion savings target remains, and we have not at all said that we're not gonna deliver on that. We are just as committed as we was before to deliver on that, and there are a number of activities ongoing. As of the fourth quarter of 2021, we have delivered roughly SEK 1.3 billion out of the SEK 5 billion, and more work to be done.
Thank you. With that, we conclude the Q&A session, and we all thank you very much for attending this event. If we're on the closing remarks by Rickard, perhaps.
Yeah. Again, thank you so much for your attention today, this morning, following us. I appreciate all your insightful and energizing questions on our business. We are excited about the future of this company, and we look forward now to embark on this journey and the strategic framework that we have named Intelligent and Clean Growth. To be continued, and I'm sure we're gonna have a chance to speak to each other within a reasonable timeframe. Thank you so much for today, and have a good rest of the week.