Beijer Ref AB (publ) (BEIJB) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Beijer Ref's very first Capital Markets Day. We are thrilled that so many has decided to join us here today, and we would like to acknowledge the people that have been traveling from far to take part of this very special event. And of course, we would also like to acknowledge the people that are following us online. We have a packed day with a lot of presentations. And after approximately 70 to 80 minutes, we will have a short break for 15 minutes, after which we will continue. There will be no Q&A after each presentation. Instead, we will have a Q&A at the end of the presentation at the summary. And as some of you already noticed, we released a press release this morning regarding new financial targets which we will talk about today later in the presentation. So without further ado, it gives me a great pleasure to welcome the CEO of Beijer Ref, Christopher Norbye, Welcome.

Thank you. Thanks Nicholas, and I'm sure we'll talk, but thank you for setting everything up. It's been like herding cats to try and get this together. But I think -- thank you very much all for coming. I think we have a fantastic number of people that are very interested in Beijer Ref, which we, of course, are very happy. I think we almost have 100 people streaming as well today. So our ambition today, except for showing you a lot of PowerPoint slides. One day, maybe we can, in 20 years, not have PowerPoints, but that's how we communicate right now. But also part of this today is to try and educate you on Beijer Ref. So I'm really happy to have a lot of the management team here talking about our different regions, also talking about our products and you get a chance to see the rest of the team. I think my presentation today will be the most boring one compared to all the other presentations that you'll see today. So we'll drive through this today and have a little bit of a break. And then after the break, we'll have a lot of product presentation from Kim, from Nicola and I think it will be a very good mix. And hopefully, by the end of the day, you are even more convinced about Beijer Ref, or as convinced as we are as a management team. So starting off a little bit, you'll see going through in the presentation is that pretty much entire Beijer Ref's DNA is driven and related to different type of drivers in the industry, and we'll come back to that. There's a lot of regulation on changing all the products that we have in industrial and commercial refrigeration, also on the industrial heating side, heat pumps, you have refrigeration components. There's a lot of things that's happening that's driving this business, and we expect to drive it for the next 10, 20 years or 30 years depending on your on your time line. So we feel a little bit how we're building Beijer Ref now, it's becoming in the best position ever. I know I have the former CEO of Per and Joen, and I'm sure maybe they said the same thing. But actually, it is in the best position it's ever been and I have them in my board. So I think we're all in a good position. So Beijer Ref today, rolling 12 months, SEK 30 billion in sales, and we'll keep on growing, and we will keep on having a good pace. We'll come back a little bit on that on our financial targets. Over 6,000 people around the world. We are now in 45 countries. So we're really truly becoming global. And we'll talk a little bit how that affects the business model going forward. We have over 500 branches. I think we're getting close to 600. It's not easy to keep count. So don't ask the exact number here, but we'll keep growing with our branch network. That's absolutely critical. And I would say, very unique in our business model. And of course, we would say impossible to replicate in the world. I think the value we say we have over 200 customers is more related to that we are the partner to most small and midsized installers. We work very much in the aftermarket service maintenance replacement market, which relates to a very stable and loyal customer base. Then of course, we will use some numbers today. I think some in the crowd really like numbers as well. I do as well. In some way it's the result of everything you do. And we had the last 10 years, 14% CAGR on growth, which I think is a fantastic development. I think also looking at Beijer Ref, this is how it's been in the last 10, 20, 30 years. It's been a very growth-focused company in a good industry. Also on the profit side, there's no point in growing if you don't grow profitable so even faster we have grown our profits of 23%. And we'll come back on this a little bit later in the presentation. I won't go through everything here. Just want to tell you a little bit the time line over the last 5 years of Beijer Ref, starting from 2018, and you'll get pictures of this in all the presentations. But making big moves has always been part of Beijer Ref's history as well. And I think in 2008 joining in a big acquisition in Australia, really putting us on the map as a market leader. And now Australia is one of the biggest countries we have in the world. Jonas will talk about that. And also in that strategy, consolidating the industry when we have a presence, a little bit we're going to talk about the U.S. that we just entered beginning of this year. Also another milestone is the EQT 2020 a principal shareholder. They've been very supportive of our growth journey, and we'll continue to drive that. So we're very happy with the ownership structure we have in Beijer Ref. And also, I think worth mentioning in 2020, we started our journey with private label. That's been a big growth driver for us on the HVAC side. We're just in the beginning on the refrigeration side. And Simon, from EMEA, I will talk a little bit more about that market. You've seen also organic growth 13% per year for the last 5 years. And here is also how we work with exclusive brands. We have our private label. We drive market share when we expand these products into our own network and branches around in the world. And we also, now in the U.S. are expanding our private label into the U.S. platform. So there's a lot of future potential for us in these segments. And it's also now how we combine all the knowledge that we do in the U.S. with Australia that have a similar business model, where we have been a little further ahead on parts and supplies in the U.S. that we can use now in APAC et cetera. So it's also a very good business and we'll talk a little bit also on the heat pump side, electrification on the heating that affects this business going forward. So moving a little bit away from the business, the history, the trends that we'll get more into details and talk a little bit more on some of how does Beijer Ref work and what's our DNA. And I think we have a very strong business model that stands the test of time. I mean from the beginning, I think it's 1866 we started. But it's a business and people that are very adaptable and I would say it would be very good to work on growing trends and we'll continue to do that in the future. So I'll talk about a couple of things here, acquisitions of course a big part of our DNA. The utilization journey that we are on that we don't talk a lot about but I'm saying it's very, very important and will create a lot of value for us and then I'll just touch on sustainability a little bit. So when we talk about acquisition I would say Beijer Ref is extremely disciplined. We work in the HVAC segment and Refrigeration segment. And what we really like about our acquisition is that we strengthen our market position as we do acquisition where we are. That gives us the advantage of being the market leader. We have a better product portfolio than everybody else. We have better pricing than everybody else. We have a better network than everybody else, and we can also implement new products into our acquisitions. So it's a very value-accretive business for us, both driving organic growth, driving margin. I would say most of the companies we buy, we work on improving the margin, and we get margin improvement both on buying things, but we can also add a product portfolio. And we'll talk a little bit across the board how we work with that in the different regions. So I just want to try and explain some themes in our acquisition where we -- on the top left corner, we started and consolidate the HVAC industry in Europe consolidating the best independent distributors. So we're now the market leader in Croatia. We're the market leader in Greece, we're the market leader in Czech, we're the market leader in Bulgaria, et cetera, et cetera. And what's common for all this is, of course, we leverage our position with all the suppliers in these industries. Some of these are missing the critical products that we have access to, so we can further drive the business. We have an e-commerce we have master data. We have brick tools that we put this company on and we start working together to expand the business. So I would say it's -- we're getting stronger and stronger in the market as we do this. And I think exciting here, too, Simon will talk about that private label strategy that came out of the acquisition journey that we did on the HVAC side. Turning to Australia, New Zealand, I talked a little bit about it, and Jonas will talk about it, is how do you build the market-leading position, and that's just what we've done. We're now the market leader in Ref, we're moving into the HVAC. We're combining the portfolio, and we're now becoming a solution provider in Australia and New Zealand that will really drive the market over the next 5, 10 years, and we'll come back to that. Also excited about refrigeration side. We continue now to expand especially also in Southeast Asia, where this market will grow double digits for the next 10, 20 years as the cold chain continues to grow in that part of the world. We'll talk a little bit about India, we just entered South Korea with a fantastic opportunity. So we also continue and use that through an acquisition model. And then finally, the U.S. platform acquisition we talked about -- Alex will talk a little bit more on that, also made our first add-on acquisition, and we have synergies and we're building a stronger platform on there. So here, what we want to show with this slide is that we do still have a good runway. This is our pipeline. We work in the pipeline for the next 10 years, this is just how we are. So a lot of these companies we talk to, and we have a timing when we think the best is to acquire consolidate, of course, we prioritize, but we have a big runway in the next 10 years as well. And I think maybe take the notion here. Now we also have North America together in our pipeline. So it's a fantastic opportunity for us over the next 10 years. Now moving on, just touch digitization a little bit. We're growing this 20%, 30% per year. We're up to 12%, 13% of e-commerce. It creates a lot of value for our installers. We see more and more of their business moving into the ordering at night, in the evenings. And also remembering with our 500, 600 branches, if you order something, you can get it the same day. Order at 2:00, we can deliver at 4:00 because of the infrastructure we have. So I mean we have a unique position when we combine our branches in the e-commerce side. And of course, also for us, it creates a lot of efficiency. A lot of your orders are handled at night. They get ordered through the inventory, straight through the inventory system, and we have out to store places that package the whole thing. So it drives a lot of efficiency going forward. So we really believe that this will continue and grow for us and also create an even stronger business model going forward. Finally, sustainability. We have science-based targets, Thousands of companies do. I don't think that's that unique to have that. I think for us, Scope 3 is the most important one, and that's why we talk about the natural refrigerants. I do think, for us, it's even more important, the right side of this slide is that more and more of our natural refrigerants that we put out in the market, we take away really bad products for the environment, and we'll come back a little bit of that later on. Then finally, what's a presentation without numbers. I will wrap this up with a couple of slides of numbers. Here, you can see the development of Beijer Ref over the last 10 years. And I think the way we see it is it's a combination of very good organic growth, together with acquisition. And we also see for every year, we consolidate the industry, our market position gets stronger and stronger. And we see also now being a global player. And I think this would, of course, also play into our financial targets, how we see the future to continue this type of growth trend going forward. On the profit side, I would say, if you grow, you need also to make more money. In the end, that's what makes the world go around for us as well. And we have been focusing a lot over the last 2, 3 years also to drive up our margin. We talked about private label. We talked about profitable organic growth, also working with our acquisition to really drive up the margin through our business model. And we feel very good about the development we had over the last 2, 3 years, and that's also you can see on the financial targets, that's the ambition going forward. The final slide, cash flow. I mean, in the end, you need cash, right? That's how we pay for everything to do it. And the way we see beijer ref also analyzing it a lot since I came in and also Joel, our new CFO that we'll be presenting. This is the pre and post pandemic level. And if you try and make sense of this slide, it's Beijer Ref historically, it's a very cash-generated company. And then during the pandemic, we mainly built a lot of inventory to manage all the disruption. And of course, you can see already here in 2013, we're starting to release the cash. Q4 will be very strong. I think it might even go off the graph here for Q4, and then we'll also in 2024, generate the cash flow to go back to pre-pandemic levels. So it will be a very strong cash generation over the next 18 months to move back to the historical levels. And I would say also on top of that, just our cash conversion going forward after '24 at least for us, it's going to be at least 80% in the market. So we'll have a very good 18 months and generate some excess cash flow that we have used in the last couple of years. So with that, I am actually finished, and I will hand over to Simon, who runs our EMEA division and has the nice title of where demand meets opportunity.

Thank you, Christopher, for the nice introduction. Hello, everybody. I'm Simon Karlin, and I'm the Head of, as you heard, Europe and Africa. I've been working in this great company for more than 20 years. So I've been part of our journey from going from the Nordics up to where we are now. So I will make a 20-minute presentation of my region. High-level numbers, I will look there. We are doing about SEK 20 billion in sales per year. Profitability is a bit above 11%. The 3 segments is 40% is what we call refrigeration, 50%, about 50% is HVAC. And then the smaller part here but the fastest-growing is our OEM. And just to clarify, our OEM, it really is production of compressor racks and bigger heat pumps based on natural refrigerant. Looking at the map. In Europe, we are present in all countries, luckily, we are not except -- we're not in Russia, not in Ukraine, not in Belarus and a few countries in the Balkan area. In Africa don't cover the full continent. We are very big in South Africa plus 5 neighboring countries. And what's common from my region here is that we are very strong in this refrigeration wholesale part. We are #1, 2 or 3 in almost every market we are in. And as we heard before, this is a very stable business and is backed up by our technical people and our 400 branches we have in our region. The other segment here, I will talk about this HVAC. We concentrate only on -- well not only, mainly on 4 brands. It's 2 Japanese A brands, Toshiba with exclusivity in 11 countries in Europe. We have Mitsubishi Heavy Industries with exclusivity in 9 countries. Again, we also work, as you heard here from Christopher with our 2 private labels with huge growth currently. Then last thing here is the OEM, one factory, heat pump manufacturing, big industrial heat pump in Denmark, Fenagy. And then we have the manufacturing in Italy, SCM Frigo, plus 1 manufacturing unit in South Africa. So historical number, you can see we have had good growth, double growth in -- double the sales in the last 5 years, 16%, of which 8% is organic. Luckily for us and for all of us here, we are also having good profits. So we are increasing that almost triple in this period. We had a dip in 2020 because of the pandemic. But also here, we can show that we can make good profit in bad times. So some trends, Christopher discussed them, climate change is all affecting us, and we are doing -- we are in a position in Beijer in our industry that we can affect that in a positive way. We have the regulation, first of all, in Europe, it's called the F-Gas regulation, which is regulating the F gases, the greenhouse gases, which are consumed in Europe. The target here is, of course, to get rid of them and the replacement will be natural refrigerant, mainly, and good for us is that we are very strong in this part of the business. The other thing is the electrification. We have in Europe about, I don't know, 70 million gas boilers in residential homes, 50 million oil burners, and EU has a strong agenda to get rid of it, and the solution will be heat pumps, which we are selling. Good for us. Look at this F gas phaseout. It started in Europe 2015. And you can see that we are in the middle of that right now. There will be another cut from 1st of January. So it will be another strong impact on the phaseout of the HFCs. So there will be a lot of business in terms of rebuilding upgrades, new installments. And again, Beijer Ref, we have invested a lot in this segment, so we are ready for this, and we are taking part of it right now. I can also mention, in addition, there is another proposal in EU, with even sharper phase out on the F gases, which even will be a stronger impact on our business. And Europe is the leader in the world. We have other countries looking at Europe, more or less following it. Christopher mentioned, U.S., we have Australia, New Zealand, U.K. So everything is going towards this trend. Next slide is about supermarkets and stores. How many of those have been translated or transformed to natural refrigerants. In Europe, we think it's about 55,000 and the total market is about 300,000. And good for us here of the 55,000, we have delivered a nice part of this, and this business is just going on and accelerating now. And as you can see also, the rest of the world is following a bit slower, but this is coming everywhere. And Beijer Ref, we have delivered to all continents so far, except U.S. So we are also in production, as I mentioned, in South Africa, we can deliver to that part of the world. We have Australia, New Zealand so we are really taking part in this journey. And we expect to have our first order very soon. Alex, in the U.S. when it's coming. Soon. We are working on it. So yes, just a few words more. This is only on the stores. Then we have all the other business, which will be transformed to this natural refrigerant. It's the cold storages, logistics centers, a lot of production, medical things cafe, restaurants. All this is in the transition of changing. And also for us, it's a huge business opportunity because we knew this will come many years ago. So we invested a lot in this technology. We have world-class products and production, R&D. We also have trained our wholesalers, our companies to be good at this. And the best thing for us is when we sell the compressor rack through our wholesale business because we have strong consolidated margin, and we also add other products from our partners like heat exchangers, copper, installation material. And by this, we also create our own aftermarket. We have also invested in our own education, training centers, Beijer Ref academies. We have 5 in Europe, only focusing on natural refrigerant. So here, we train our own people, which is important. We need to be in the front. We train our customer, the contractors, we even train our end customer, the supermarkets. We train our -- the consultants we work with and sometimes even the suppliers. So it's very, very popular, and we have a very strong competitive edge here. Plus, we then have binding this together with our after sales. We are close to the customer, close to the market. We have all the spare parts, very close to the installations. So this part of the business is growing very fast. That was our refrigeration part. Then we have on the heat pump market, the electrification we spoke about. We have here a very unique opportunity to grow. There is a strong agenda in EU to phase out the gas boilers, as I mentioned. And Beijer Ref actually were quite small in this segment. So we can only grow double digit, I think, in the next future. We have strong partners with Toshiba, Mitsubishi, our private labels. We have people who can sell. We have customers -- so we expect very good development here. Yes, some focus on value creation. I will go through those. M&A, you heard from Christopher a bit. I will give you some examples of what we look at. When we find targets, we try to stay and we want to stay in our core, which is HVAC and refrigeration, as you heard. We also look if we can grow geographically or we can find new niches in the markets we already are in. And we also look if we could buy some technology, we don't own today. The other big thing is on the supplier side. We have -- we are a big player in this market. So normally, when we look at the target, we look at the brands they are having. If they have the same brands, we normally always gain some margin here. So this is probably the first synergy we have when we make an acquisition. And if they don't have the brand, we can add it. So it's always a good fit on this one. Then we also look at the target companies, the management style and so on, do they share our values. So it's very important for us that they have very dedicated motivated management, first layer, second layer so they fit into our culture. Some examples we have of the acquisitions we have made. We spoke about innovative technology. We have our best story, I think, on this, it's Fenagy. It was a start up 3 years ago, 4 people. They knew everything about green, how to produce a green heat pump and make the development on it. What they missed I think, Kim, they missed some money probably so we could finance. But they also missed the supplier. I mean the access to supplier and the good conditions we could contribute. So that was a very good gain day 1, plus we also gave or we could contribute with good sales channels through our wholesale. So this is a good story. Two other ones is our private label. We wanted to have a complement to our A brands, Toshiba and Mitsubishi Heavy in the HVAC.So we were looking for the best one we could find. So we found and targeted Sinclair in Czech. We acquired them. And just some weeks after, we also could acquire Inventor in Greece. And this is giving us a very good complement to our A brands. The last one I would mention is we also look at synergies on our existing partners. MHI is one of our biggest brands. We are strong in that. So we've targeted 2 of the companies, which are the sole distributors of MHI. It's Condex in Bulgaria and it's Lumelco in Spain. Those companies came into our portfolio some years ago and we could also here gain with better margin, better conditions, share knowledge, share stock and build up our MHI community in Beijer Ref. These are just example of acquisitions we have made. And you can see also development has been very good. The CAGR is showing 21%, but it's actually higher because we acquired it '21. Fenagy we are growing 150%, 200% per year now and... [Audio Gap] All right. Let's start again. Yes, the private label, I mentioned Sinclair, Inventor. We have these displays. You can see the products over there. It's products which are not very complex from a technical point of view, but it's our high runners. We sell them every day in our branches with big volumes, and we see these as a compliment, not a cannibalization of our current portfolio. And it's products like different type of line components, HVAC accessories, tools and things like that. And it's actually our fastest-growing brand right now. So this, we will continue to invest in, and we will implement it market by market. It started 2, 3 years ago. So our digital journey. We have here -- this is one of the areas where we are centralizing in Beijer. We have invested in our central PIM system, Product Information Management system and the central online -- central web shop. We are feeding more and more information here, more and more SKUs. I think Christian, you mentioned we have several hundred thousand SKUs already in place now. And this is what we centralize and this is used then by our subsidiaries. So they can use this very good database, a very good online platform and implement it locally in the local markets to support the local customers. So this is one part of digitalization. We also do a lot of work together with our suppliers now because now when they -- with the big one, when they update, change, bring in new products. It's automatically going into our PIM system. And then you can say they do the work for us, but we also present the products in our online shops [Audio Gap] Apartment or a smaller 1, 2 bedroom thing. So there's actually a better solution, which is -- which has a lot of benefits, both for the end user and also for Beijer Ref because gas is for sure going away. We see this year, we're not in that market, but we follow it, and it's 30% decline this year. And that's even before some legislation and regulations come in place to actually ban. Victoria in Australia is the first mover, I think, in the Australian states and New Zealand as well to actually ban this. So if you make a new dwelling, you can't connect it to the grid or use gas. So all of this will only increase the sort of pace. And I mean this is very sort of straightforward. It's a replacement business. It happens all the time, and we play in this, but we're even more interested to play in the ducted systems. This is something that is growing fast and to replace both the splits or multi splits or different solutions in that area, but also to replace any kind of gas appliances. It's -- this is not a new technology by any means. We actually share a lot with Alex in the U.S. because that's -- this is a legacy solution in the U.S. So we try to exchange as much ideas as possible. But the beauty of this for us is that it's -- you have the same outer unit and a similar indoor unit, but then you have a vastly more complicated solution. So you would have a planum, you would have flexible duct. You would have some fittings or branch takeoffs. You're going to have grills, diffusers. You're going to have a -- you're going to have a zoning system, so you're going to need controllers and sensors, and this is really a technical solution that we are able to sell. So it not only brings up the dollar value significantly, but the number of SKUs and the margin on all these individual SKUs is actually a big lift for us. We have been sort of approaching this for a number of years. We started our HVAC journey, as I said, 3 years ago. And then we acquired a good-sized business, which was based in Brisbane, Queensland, just regionally in one city more or less. But they were selling mostly the split units, which I mentioned. They sold some parts and accessories, but not in a big way. So to lift our margins and strategically lift them over a long time, we started to acquire more companies in parts and accessories, which was Complete Air Supply at the time, which complemented the range we could offer in Brisbane, Airstream. We did a greenfield opening in Perth, West Australia and complemented it by buying these parts and accessories, which is a small business, but something we can scale as well. One year ago, we entered Melbourne in Australia with the AAD acquisition, which varies -- they were more or less a solution provider already. So they put a lot of pieces in place as well in terms of the supply chain and complementing the range we already had. A couple of months ago, we bought the assets of a small business in New Zealand. And New Zealand is also similarly interesting for ducted market, and it's on a sustainable viewpoint, even better because they have a fantastic energy mix with mostly hydro in the mix. So that's another growth area. And much of this is only getting started as well. We -- it's very regional this or even local. So you need to have a stock local, you need to have capabilities to customize your product. So there are lots of white spots. The biggest market is probably in New South Wales, which is where Sydney is. We are not there yet, but obviously something we're going to look at in the future. So there's a lot of runway to grow this further. So let's talk a little bit about refrigeration as well. Some fantastic colleagues on this picture and some good customers as well. This is the Beijer Ref Academy, if you go from the left. So we set up the Beijer Ref Academy with a model on SCM Frigo, the European version. And we set this up to -- obviously to educate the market about especially CO2 and natural technologies. And we did that to train ourselves, to train our customers and also importantly, to train apprentices, to train the trade as well to sort of appeal to the new generation of installers that it comes natural to do natural refrigerants. What we didn't expect of the Beijer Ref Academy was that -- how much interest this has been generating across Asia. We thought we had something in Australia because they are a little bit further advanced, but it's creating a lot of interest. This is a team from, I think, Malaysia and Indian contingent as well. We train people from China, from Japan. We have again from South Korea week after next. So we're not -- maybe we're not on TripAdvisor, but it's -- in the industry, it's a big thing anyway. What we do as well is vertical integration. So compared to our competitors, we have our own factories. We have our own small R&D departments and own factories where we do light assembly. And this enables us to be a bit more agile than our wholesale competitors who more sell a standard solution. We can sell a bespoke or a more customer-friendly solution. Private label is something Simon touched on as well. It's -- we sell Freddox mainly as well as he mentioned, but what we also started to do in terms of the culture and refrigeration is we actually started to introduce Freddox into our own refrigeration equipment, which gives us a much better price point for the part and for the equipment, and it also creates an aftermarket for when that component is going to be replaced, you would naturally go and buy Freddox again. C2 technology, I mean, this is really our competitive edge here and something I will come back on the later slide. New markets. Right now, a lot of what we sell is actually in Australia and New Zealand, but there's a lot of new markets. For example, South Korea, you probably remember, we bought a company there in -- earlier this year, a couple of months ago. And South Korea is an interesting market. It's very developed, very moderate, ambient temperatures, and it should be perfect for CO2 technology. But no one has sort of gone there or this 0 penetration. No one has been interested so far. But having a base ourselves, we can -- I'm confident we can really sort of turn that market and get an acceptance of CO2 into the market. The real kicker on new markets is going to be China. We have done a couple of high-profile jobs in China for CO2. But realistically, we are still waiting on the government to put some regulation in place to make this really kick off because it's just testing the waters for now. But when that happens, we have our own factory in China already, and they are ready to ramp this up. Food safety, food security is important in any country, but there's a lot of countries where we can improve, reduce food loss and increase food security. So we have a very large range of products. And I think the perfect combination of -- we have on the far right there, we have European state-of-the-art best in the world, perhaps, probably the best in the world Nicola. So we sell a lot of those, but we also sell some of our own products as well. So we developed in the last year, 3 different series of evaporators. So we have an industrial evaporator. We have a commercial and a smaller commercial range as well with an angled evaporator, which didn't make the cut here for the image. But if you need one, you -- we also made our own PAC unit here in New Zealand, actually, -- so the thought here, we really tried it hard here. So what we tried to do with that one was that we build it on the same platform that the customers historically have used for synthetic refrigerants. But we make it same but with CO2. So it's very familiar and it's sometimes an easier transition for the installer to work with something that he's familiar with and makes him more encouraged to move away from synthetic into natural solutions. On the cold chain to summarize a little bit, we have our own vertical integrated factories where we do world-class products. We have a unique range. We have 100 branches, which are packed with a very knowledgeable staff and sales engineers. We have an academy, which I've already been going on about. We're very close to the customer. We have, like Christopher mentioned, we have 10,000 customers in Australia and Zealand that come to us regularly that we have a direct relationship with. And we have dedicated commissioning teams to make sure that when you make that first try for CO2 and natural refrigerants, you have a good experience for your first couple of jobs. Just a few words on India as well, which really is in the early stages of development. Unfortunately, we don't think India in the short period is going to be ready for CO2 on a big scale. Maybe they can try projects, but CO2 is not going to be the game changer in India now, but they still need massive investments in their cold chain, to -- and that's also something the government and the intranational agencies are sort of promoting and financing as well. So we are there to take part of this, and we've been growing very fast, so far. We spent a lot of time putting our building blocks sort of in place. But in saying that, in -- we made an acquisition in India earlier this year, down in Chennai. But before that, 85%, 90% of our sales was actually only in Delhi. And that's one city. Then you have another 40 Tier 1 cities, which are virtually untouched. So what we've done, we set up north, south, east, west and ready to capitalize on this, but we can expand even more and even faster in India. So in summary, it's looking pretty good for APAC. We have a good track record. We have a growing footprint and scale, so we can better utilize already existing factories and scale our supplier base as well. We have positive trends. There's always Kigali in the background that supports the overall business case. We feel pretty excited about the ducted air conditioning heat pumps, where we invested quite a lot in the last 1, 2 years. So looking to scale that as well. We have our unique positioning in the CO2 area, and there's a lot of areas that can be developed further as well. And I talked a little bit specifically about India. Thank you. here come Alex. New kid on the block.

Yes. You stole my only job -- all right. Well, thank you, by the way, all of you for being here. I'm excited to tell you about a North American platform recently acquired by Beijer Ref. And so I'll do that today by doing -- giving you a little bit of information about the company. And then we're going to move to talking about macro environment, so the macroeconomic trends associated with the U.S. And then we'll move on to what's more important to me, and that is the micro environment that we're in. And what that is, is our ability to create value in the company, in the businesses that we acquire and the ones that we already own. And so just a little bit of information about the company we're 600 -- or excuse me, DKK 6.5 billion. I've had to get a little better in my foreign currency exchange, DKK 950 million 2022 EBITDA, over 900 employees. And so we're doing business in 13 states. You'll see as we move along that that's in the central and southern part of the United States, where it's warmer and more humid, which means the drivers for HVAC parts, supplies and equipment are better. Our organic growth trend over the last 10 years has been 9%. And so we're proud of that because it outperforms the market. You'll find when we're -- when I talk about our M&A strategy, that's an important component of what we look for in companies to bring on the platform. The distribution of the branches, if you look, were heavier, it's a little hard to see the branch counts, you'll see that in a second on another map. But you can see the counts off to the side. The distribution is -- we're heavily concentrated in the South and Southeast. We've made a recent acquisition that's expanded our footprint further West. And so as we continue to think about how we want to grow, you want to make sure you're buying the right businesses in the right places. And for us, it's focusing on what's near to us as well as what other -- what companies are in areas with stronger macro trends. So if it's hotter, if it's more humid, if population is going to grow faster, we're going to prioritize growth in those areas, not to exclude anything else, but it definitely is a way to make the most accretive use of capital as we continue to grow the platform. Our business is split mainly relative to the rest of Beijer Ref, we're mostly HVAC. We have 5% refrigeration, and that refrigeration business is really concentrated in a handful of branches that have been doing refrigeration parts and supplies for a very long time. And so as the business has grown, it's -- what we've been able to do is bring on businesses that are more HVAC focused. And so what that leaves us with is a great opportunity. I'll talk a little bit more about it, how we leverage being part of Beijer Ref as a way of having the synergies created with the supply chain as well as opportunities to bring on products that we wouldn't otherwise have. Our business is focused. We are more heavy than the industry in the U.S. on parts and supplies. You typically will hear it's kind of a 70%, 30% equipment versus parts and supplies. We're heavier to parts and supplies. And the reason for that is we carry the parts, even though we carry our primary provider of OEM equipment is Rheem, we carry the parts and supplies to fix every piece of equipment that's sold in the United States. And so what we want, our value proposition to the customer is, if there's a residential HVAC system or light commercial HVAC system or refrigeration system in some of the markets, we can have the parts and supplies you need to get it fixed in minutes or hours, not days or weeks. The history of the company, if you go back the oldest of the companies is Wittichen, it's 109 years old. Obviously, that was before refrigeration or HVAC even existed. And so several -- a couple of the companies are older than the industries that we're currently in. They started as logistics companies and just demonstrated great resilience as the economics change, as you go through World War II, the business has transitioned, and as refrigeration became more prevalent in the U.S. and then eventually, HVAC, there was a focus on being the supply house where a contractor had somewhere to go to get everything they needed to get on and off the job quickly. And so that's a pretty common thread, and it's one of the things we're looking for is we're doing M&A is to make sure that we're looking for companies that fit well with the platform as it exists and provide opportunities for synergies to expand products that they don't currently carry. From a management team standpoint, there's a small handful of folks that work in Atlanta, which is where I'm based. The CHRO and CFO on the screen there, all 3 of us come from backgrounds in either manufacturing and distribution or distribution. And so you'll see that the names on the screen are some larger public companies. And so the intent there was to make sure that we've got a team put together, a small team at least at the top of the company that understands how to scale a decentralized business. Because there are some aspects of that, that can really create a lot of value as you continue to grow. And then below that, you see that the day-to-day running of each of the individual companies is by more folks that have actually been in the business for a very long time. In fact, 2 of them it's the only place they've ever worked. You'll notice Charles Herring on the screen, he celebrated his 50th year with the company on June 1. One of the -- probably the second time I've worked with someone that's worked one place for 50 years. And so he's a wealth of knowledge. And then you've got kind of on the far other end of the spectrum, you have Tucker, and Tucker is third generation. Tucker's grandfather bought Ed's Supply and then his father ran it. And then at the liquidity event, where we bought the company, his father retired and Tucker has -- he's very sharp, and he's done a great job taking that business and integrating another company that we acquired, Coastal Supply. Peter in the middle has a background of running a couple of former companies as well as working in some consolidation plays in other industries. So switching gears from information about the company to talking about the macro environment. It's important. I'm not going to -- I'll try not to repeat a lot of what's already been said as it relates to regulation, but I do believe it's an important understanding the backdrop that we're operating in. And that's one where regulation is driving the market to more efficient and more expensive solutions. And part of that regulation is also subsidizing the cost of those solutions, which is important as we think about maintaining demand for residential products. The other we'll talk about is energy efficiency, it's also part of -- being driven by regulation. And then climate change as -- what that looks like, how that will affect our platform, we believe, over the next 2 to 3 decades. So in the U.S., there's 2 very important pieces of legislation that impact our business. The first is the Inflation Reduction Act. And the -- one of the main reasons that's important is because there are subsidies for $8.5 billion that have been allocated to electrify the heating and cooling systems -- residential systems in the U.S. And so what does it look like? If you think about a system today for the average home is probably $8,000 to $10,000. And so if it's one of the more expensive systems, you can get up to $3,000 -- a little over $3,000 credit back from the government. So it's basically subsidizing the cost of the equipment by 30%. The reason -- primary reason that matters over the next 2 to 3 years is because equipment has gotten more expensive. And so this is one of the ways that the government has offset some of those increasing costs. I've been asked the question occasionally, well if equipment gets more and more expensive, will that drive down demand, wiil it hurt demand. And I answer that 2 ways. One, first is that there is actually subsidies going on to drive electrification, to stop burning fossil fuels. But the more important one is just come see me in Atlanta when it's 100 degrees outside and you tell me what you would rather do than fix your air conditioner. And so if you're -- if it's cold, it gets cold in most of the places in the wintertime, maybe not quite as cold as it's been in Stockholm for the last day or 2. But it's definitely hot. And when you're hot, it's miserable. And so when you have the experience of a breakdown in your air conditioning unit, you'll realize you'll cut where you go on vacation, you may not go out to eat, but you're going to make sure that your air is cool. On the AMAX or the American innovation and manufacturing, that's similar to what -- the same -- following the same really guidelines that have been followed in Europe. It's the reduction of harmful gases to use refrigerants that are better for the environment. And so that reduction is set to be 85% over a longer period of time. But more importantly, for 2024, there's a 1/3, 33% reduction in the F gases that will be available in the United States. And that's doing a couple of things. One, it's making refrigerant more expensive. We've seen refrigerant prices go up 30% or 40% over the last 4 or 5 months. We expect that to continue. The last time the gas was phased out. To put it in perspective, a 25-pound jug of old refrigerant would have cost $40. And that same jug today that's been banned or cut -- the usage has been cut significantly, cost about $1,800. And so once those gases get phased out, the only reason that they'll be used is to recharge an old system. And so that drives 2 things. One, the gas that we sell is more expensive. We make the margin on a more expensive product. That's actually not bad for us. But more importantly, it drives the conversion in the market from older systems to be replaced faster than they otherwise would with systems with refrigerants that are cheaper. And so one other piece of important -- that legislation is that in 2025, starting January 1, 2025, it will be against the law to sell a new system, a residential system that uses the most common gas that we have today, which is R-410A. And so the A2L, that abbreviation is just a way of designating how flammable something is and how to toxic it is. And so the regulations have said we have to be more friendly, less toxic basically. And so those old systems won't be able to be manufactured nor will they be able to be sold. One other component on the slide here, and this is very new. If you remember the slide that Simon showed earlier, it showed 55,000 CO2 installations in Europe and 1,600 in the United States. And so CO2 adoption is in its infancy in the U.S. It's almost unheard of for a couple of reasons. One is just that those systems are more expensive. And then the other is that it takes a lot of training and technical ability to be able to service a CO2-based system differently than the current refrigerants that are being used. And so we look at it, for the North American platform, as a great opportunity. It's going to take a little time to develop. But what we have with being part of Beijer Ref, we already have the expertise. We've got training academies all over the world, and we anticipate being able to lead in the conversion to CO2-based systems, which will be much better for the environment as well as long term create more energy efficiency. And the energy efficiency standards changed last year in the U.S. And so the map there of the United States, the light blue is where the CO rating -- the efficiency rating stepped up a certain amount. And then in the lower half of the U.S., it stepped up more significantly. And the main reason there's a difference in the color coding there is that similar to what we're going to experience in 2025, going into 2023, you can't sell a low-efficiency system anymore in the darker blue states. And so we've already experienced what happens when regulation makes it illegal to sell certain products. And what that did last year was drive up pricing about 12% to 15%. And then the next piece is the A2L conversion, and that's anticipated to do the exact same thing over -- going into '25 and into '26. And so we've had a -- we'll have a step-up in basis cost of residential HVAC systems again. As it relates to climate change and the more extreme heat and for that matter, even in cold temperatures at times, the markets that we're in today will continue to grow, but the core markets that we're in and where we're focused on growth faster are actually the areas -- I think this is a Washington Post article, is we're focused in the areas that are expected to have a larger impact from climate change over the next 2 to 3 decades. And so we feel like that positions us well to be able to, one, provide more energy-efficient solutions to the market, but also make sure that we're taking care of the customers where their equipment will likely -- the replacement cycle, we expect the replacement cycle on equipment to shorten. And so if it used to wear out in 8 to 10 years, maybe that goes to 7 to 9 years, which is a good backdrop for us, a silver lining in terms of something that's overall, we generally hear only negativity about. So with those macro -- the macro things, we don't control any of that. What we can control is how we prepare for those things and how we train and get our teams ready to respond well. The ones that are more important to me and near and dear to my heart are the ones that we do have control over. And so I'm going to talk a little bit about those and walk through each one of these in a little bit more detail. And there's a few of them that I want to make sure to highlight that are specifically better opportunities for us because of being a part of Beijer Ref. In fact, there's a few of them that we've been able to get started this year that we otherwise would, for sure, would not have been able to. So commercial refrigeration to -- with everything that's been talked about so far, it's probably intuitively understood that commercial refrigeration is an opportunity for us. It represents 5% of our sales, as I mentioned earlier, it's concentrated to a few branches. And so we've already seen -- we have a group of branches in one part of the country that weren't able -- they wanted to add refrigeration and they weren't able to pick up the premier equipment provider. And so we've not been able to get into the equipment business in that -- in those 5 branches in that part of the country. And so about -- I guess it was about 3.5 weeks ago, we had a meeting with that supplier. And because of Beijer Ref and the understanding of the supply chain and even -- it's actually an agreement that Beijer Ref has with a competitor to this company, -- they decided that they would open us up and then further wanted to have conversations about expanding territories. And so for us, the ability to leverage the supply chain that Beijer Ref has already established across the world gives us an opportunity to grow. It's only 5% of our business today. It is a staple in the U.S. refrigeration staple, just like it is in Europe. It doesn't grow really fast. But when you have a really small share, you can grow really fast even if the macro environment is only growing at 3% or 4%. Another area is light commercial HVAC equipment. And so if you think about that, it's a system that's kind of like a beefed-up residential system. And so we think of those as kind of the next size up from what you would use in your home. And it's generally the same customer that's selling -- that's servicing and installing those in most of our markets that do residential HVAC. And so we've had -- this is another product kind of like refrigeration. We've got a few branches that do -- that have done a good job with that historically. And so we actually look for, as we're doing M&A, recently, we acquired a company that's better at commercial HVAC. And we're already getting that team coordinated with the teams in an adjacent geography to help them not only know -- it's a little bit more of a technical sale, so there's training that has to go on with that, and it's a different equipment line. And then last, I won't spend a whole lot more time on that, but it's just the CO2. We look for those opportunities to start out with institutions, institutional customers. that have government funding. And as the world moves -- as the U.S. moves towards more sustainable and more environmentally friendly heating and cooling solutions, we look for the institutional customers to start that. We've seen that before with other HVAC solutions. And so in addition to that, we've already had -- actually his picture was up on the screen. One of the guys from APAC has a good relationship with a large customer in the U.S. on commercial refrigeration. And so we're trying to start just at the infancy of starting making those connections. But with our branch network, we believe we can provide the same type of solution to the U.S. that has been done in Europe. Another opportunity that we've had that's specific to being part of Beijer Ref is private label. You'll notice that it says Sinclair, and it's because it's the brand that Beijer Ref acquired several years ago. That product we have ducted HVAC on the ground right now. We started the process of getting the private label brand started as soon as possible and no different than what they've seen in other parts of the world. What we see there is that we have a better margin, and we have more control over the supply chain. And so it's actually filled a hole. We had a very specific hole. There was probably a dozen of our markets with a really -- it's actually a packaged heat pump, dedicated horizontal heat pump that we were struggling getting product on. And so we've been able to pick up that line and then also add on and fill in a hole in the product line. And so being able to leverage the experience that Beijer Ref already has accelerated that, and we look forward to that opportunity in the recent acquisition. We know there's opportunities there. And we look at that as a synergy that we can bring to the table with product expansion as we continue the M&A strategy. Another opportunity that we have to grow the business organically is greenfielding. And so I have the picture up on the map. And so -- but probably the best way to tell the story is it's part -- very analytical. There's a model, an analytical model that runs in the background that we've done a lot of research on to establish precisely within a radius of a point on the map, what the macroeconomic demand drivers are. So as an example, what's the population in that radius, what are the heating and cooling days in that radius, what are our existing home sales, what's the median income. And when you take those factors and you put them together and then you survey the competitive landscape, you can essentially come up with what's a sustainable share based on our experience when we've greenfielded and owned businesses in the past. And so it's very analytical. And so that's half of the equation. The other half is to talk to the local market leaders and to get into the field and understand where they feel like that there's an opportunity. And what we found is that by having the analytical approach, it allows us to prioritize where we want to open facilities first. It's also caused one of our primary partners to commit to co-investing in those greenfield operations. Those are dilutive to your operating margin when you first start them up because you spend the money as you're building the revenue. And so -- but it's a great way to grow business organically for our -- not only for us but also for our supplier partners. And so we've got good alignment there in terms of going through that. We've identified 9 markets already, and we're working through the planning process of how to stage that, so that we can line up the people, the property and the product and grow business organically. Functionally, if you think about it, like in layman's terms for me, it makes you faster and easier to do business with. When you're really close to a customer who -- a contractor who's trying to repair an HVAC system, being closer matters and having the parts on the shelf is what will win you the business. A few other things that we've got as strategic improvement levers is pricing, sourcing and e-commerce or digitalization as well as continuous improvement, and I think of that as operational excellence. And so pricing and sourcing. We're working on the platforms for being able to do that. I think the one that I would highlight here is another opportunity that we've taken advantage of being part of Beijer Ref is just using the e-commerce platform. So Beijer Ref, as mentioned earlier, has an e-commerce platform already has the PIM data. And so what we've been able to do is we will roll that out in Q1 in several test markets. And that's -- I will say it's at least a year as Christopher normally laughs at that, and he says, this is probably 2 or 3. He's probably right. There's a lot of work that goes in just selecting an e-commerce platform. So having that just sitting there ready to go out of the box has been an important investment that Beijer Ref has made that's going to pay off in North America. So I'll round out and finish up by talking about M&A. Our M&A strategy has -- it really fits just in line with Beijer Ref's and that's to be very intentional and be very careful about what we want to acquire. And so for us, the investment thesis generally has to include several things, one of which is a company that's strong, performs well, that outgrows the market organically. We want to know that what we're buying is stable and has a good historical trend. We also want to know that the leadership is going to -- it doesn't necessarily have to be the patriarch, but we want to know that they have leadership that's going to stay on with the company and roll over into the business to keep an investment specifically in the North American platform so that they've got skin in the game and they're invested in the growth. But it also makes sure that what we acquire, we're able to go in and sit down with a leadership team and show the opportunities whether it's batting refrigeration, light commercial, whether it's greenfielding opportunities. We've got a management team culturally that we're aligned with being decentralized and still executing well on local opportunities to grow organically and increase the operating margin of the business. And so when you put those things together as a -- and think about the market that we exist in, the U.S., if you saw the slides Christopher showed earlier, the pie chart, the green section of the pie chart for North America was the smallest as a percentage of the total. That represents about a $20 billion to $30 billion target opportunity. That's not the total market. The toll market is significantly bigger than that. Those are targeted opportunities. Those are smaller or regional players. There's over 1,000 companies represented in that population. Most of them are family owned. And so what we're looking for is a way of really getting to know and build relationships with multigenerational owners. We've done that well. That's where the acquisitions we've made in the last 18 months, that's exactly where they've come from. We're intentionally looking to be the acquirer of choice, which is when I'm sitting down in front of a family owner of a business that's maybe third generation, they think of their business like it's their baby, right? It has a soul. And they want to know how are you going to take care of this company? What are you going to do? And it's a great -- it's not just a story to tell that's just something to say. It's one we live up to, which is we're going to represent that heritage very well. And what we want to do is invest for -- to grow faster than what you've been doing in the past. And so in doing that, it also makes us someone that we get inbounds. So we have an active pipeline that we're working on. And constantly, we've got several members of the management team on an M&A committee that work proactively to cultivate those relationships and to work things through the funnel. An example -- a perfect example of that is the recent acquisition in AMSCO. And so the founding -- really the founding father of that -- his name is Vic Flegler and his son John. John was the CEO. He's been running the business for years. They needed for the family, wanted a liquidity event. John and -- actually the family rolled over into the business. John is still running the business, and he's the one that's already looking for opportunities to add refrigeration as well as increase the parts and supplies. They had a heavier equipment mix. And so we're able to quickly find opportunities to do that. Also the markets they're in are rich for greenfields. And so we're already working through prioritizing where those opportunities would be. And so it's not just -- as we think about M&A as a growth lever for the business. It's being specific about what we're looking for and who we're looking to partner with in a way that allows us to accelerate growth and increase the operating margin of the things that we buy. So summing that up, just to repeat, it would just be that from a macroeconomic environment, we've got tailwinds that will -- that really will support the business for years. And so the regulations, the incentives from the government, the conversions to more energy efficiency are driving up -- will drive demand for us over the next 2 decades. And then we've also got great internal capabilities and opportunities to continue to increase our organic growth as well as make sure we maintain a strong operating margin as we grow. So I think that will wrap us up for at least until the break. And so we'll have a 15-minute break and then come back and we'll continue. Thank you.

Hi, everyone, and welcome back. I hope you feel energized after your coffee break. I will take this opportunity to introduce myself shortly. My name is [ Isa Hood ], and I will be moderating the Q&A session later on today. I will also take the opportunity to thank you all for coming, and thank you for all the amazing presentations so far. We'll start again and kick off the afternoon with sustainability movie. And this is, ladies and gentlemen, the world premiere for it. Enjoy. [Presentation]

So welcome back. I hope you enjoyed the spectacular premiere. I'm [ Jan Talwitt ]. I'm the Head of Toshiba distribution, yes, for HVAC products in Beijer Ref. I have been 20 years in this industry. And today, I will briefly present what we do at Toshiba. And then I will make a deep dive on the heat pump market. Okay. We have -- it's a very dynamic market segment, and I would like to share more insights with you about that. So first of all, 2011, Beijer Ref acquired distribution rights, exclusive rights for Toshiba HVAC products for 11 countries in Western Europe. Basically, we take care of the products when they go out of the factory. We import them in Europe, and then we take care of them until the end of life of the product; marketing them, selling them, supplying them to customers and doing all the after sales. What do we sell? So we are selling heating and cooling systems for buildings and also a system that produce wholesaling water. We are in thermodynamics. So no boiler, not direct electrical heating, only heat pumps or AC units. And we basically sell these products into different shape and forms to adapt to the different buildings. So we can sell products for residential buildings like the split that you have behind; air to the heat pumps, also for residential; then we equip shop, small office buildings, bank chains. And we have also larger systems for hotels or large office buildings with more sophisticated control systems and larger systems. So that's what we do. We produce -- these units are produced in 4 factories. So the mother factory is based in Japan, in Fujiyama, at the footsteps of the Mount Fuji. This is where it started. Toshiba is a very well-known company for electronics, and you all know about it. But it has a long legacy also on the cooling industry. It started back in the '30s. And Toshiba has a very high technology and they make several breakthroughs in the industry, adopting the inverter, for example, of the electronic embarked control system in the unit. So Toshiba has been part of total development of this industry over the past almost 100 years. Over the decades, the AC has been developing and new factories have been opening up in China or Thailand, and more recently in Europe to address the European market and especially the air to the heat pump development in the European market. Toshiba opened up a new factory in Poland. So those are the factories where we supply the material today. What do we do? So we are in a technical industry. So there's a lot of market intelligence. We talked about regulation or industry is becoming more and more heavily regulated, so we need a lot of market intelligence to make sure we deliver to the factories and R&D teams the right specifications for next products for the duration of products. On the other hand, we need to give lots of indications to our customers, and so what product to choose and how to install them. For that, we have technical teams as well that support the products of our customers. And we have a quotation team that provide all the technical specifications so that the products are done properly. Then we have logistics, commissioning and aftersales teams to make sure the execution and the follow-up of the units, the systems when installed, is done. And basically, we follow the units until the end of life. We have been growing over the past decade at 2 digits per year. So we have had a nice growth. And this growth has been fueled by, first, the higher penetration of AC in the European market. So we have more and more heatwave, and the AC has been growing over the past years. And also the heat pumps. The heat pumps has been expanding over the past years. And I'm going now to make a dive on this market, on the heat pumps to give you more insight about what are the drivers behind this market and what we expect out of it in the coming years. So first of all, I wanted to show you the market evolution. You see that over the past decade, this market has been growing. This chart gives you 2 interesting information: first, that most of the technologies of heat pump -- can break down basically a heat pump in different technologies; so two, a majority. One is the air to the heat pump. So the units behind are AC units that are doing cooling and heating and are considered a heat pump. This is air to the heat pump. And that's air to the heat pump. Air to the heat pumps are units that are producing hot water to replace boilers, gas or boilers that are very common in Europe. These are the majority. There is also ground set pump, very popular in Sweden, a bit less popular in the rest of Europe. So it's a more niche segment, if you look at this chart covering all Europe. And the second information that this chart delivers as well is the rapid acceleration over the past 4 years of this market. Two main reasons for that. You probably all heard about the plans of Europe to decarbonize with an acceleration. So back in the early '20s, basically, we -- Europe has made a buildup plan, a package called Fit for 55. The idea is to accelerate on decarbonization. There's plenty of things in this plan, from green energy, hydrogen cars, and heat pumps is a significant part of this plan as well. So Europe has shown the willingness to push on that. And the countries now are executing these plans and putting measures in place. Typically, the incentives for the existing buildings or bans for new buildings to make sure boilers are doing -- I mean boilers are being replaced, basically fossil fuel-based heating systems are being replaced by heat pumps. So this explains the accelerations starting in the 2020s. And then there is a second acceleration in 2022, especially, and this is due to the price of energy. Ukraine war. You remember last summer, prices of gas went over the roof, and that has accelerated the penetration rate also of heat pumps in the market. If we dig that a bit further on the drivers of this market, you have 2 charts on the upper part of this slide. The one on the left is showing the ratio between what does it cost in a country to buy a kilowatt of electricity versus a kilowatt of gas. And this is the most natural driver to understand if it's worth for you, as for example, in your house to go for a heat pump over a gas boiler. So I would say, naturally, the green countries is very interested for -- to go for a heat pump. In the red countries, where still the gas is a bit cheaper than electricity, the payback is a bit longer. And this is -- this explains basically the penetration rate that you have on the right side, so the countries that have like Netherlands, for example, that have the best ratio is on the upper part of this chart with higher penetration rate. So this is a natural way of -- for consumers to select a heat pump or not. You can compare a heat pump with an electrical car. It's 2 to 4x more expensive than a boiler, but then the running costs are much cheaper. So the payback, depending on what you have on this chart, can go from 3, 4 years to 7, 8 years payback depending on how cheap is electricity versus gas, okay? So that's the natural point of decision to adopt heat pumps. And then -- so the key game of the government here is to provide subsidies to help jumping the gap of acquisition and compensate for the difference of price versus boilers or to work on electricity or taxing the fossil fuels or playing on electricity price as so to try to get this ratio the greener as they can. So these are key drivers behind this and governments in Europe are trying to find the right way to go, and we can expect this to become greener and greener over the next years. On the bottom part, so I wanted to show you a bit plainly basically how this, in quantities, how this market is working. So you see 2022, 2.7 million heat pumps were sold, including around 1 million of air-to-air heat pumps. So that's a bit more than 1.5 million heat pumps, air to the heat pumps. But more than 6 million heat boilers was still sold in Europe in 2022. And this is the reservoir of the market expansion for heat pumps. Like for the cars, you basically is envisioning that by 2030 -- in the 2030s, the heat -- the border is basically to distinguish and heat pumps to take over. And this is where the market is going to go for heat pumps. And so we know that this market is going to multiply at least by 3 in the coming decade. Another way of putting that is an estimate that the International Energy Agency have made. So they have taken all the pledges of European countries have been done in the past years about CO2 reduction. And they came to a similar conclusion between the beginning of the decade and end of the decade, the heat pump market needs to be multiplied at least by 3 to meet this places. So this is the magnitude of the market development we are calibrating in the coming years for this market. According to these statistics, the market will jump from 15 million sets, I mean, the install base, to over 45 million sets by the end of the decade. Another point that was mentioned several times during this day is regulation. So I wanted also to give you a bit more insight about regulation because our industry is more and more heavily regulated. So there are 2 families of regulation. On the left, you have regulations that are related to the product themselves. So the EU is pushing the industry to have products with a greener footprint, so that's F-gas; to have products also that are every time more efficient. So every 4, 5 years, the Ecodesign is pushing the bar upper. So you have minimum efficiency. You cannot sell products in Europe below a certain efficiency. And this ABC, basically guidelines for users, are changing. So what is A+++ today, in a couple of years, is going to be C, D max. And the manufacturers will have to work hard basically to get back to the A level. So it's pushing the industry to get every time a more efficient unit. Another leg is safety. Okay, making sure that the units are safe to be installed in the buildings. On the right side, there are other types of regulations that are related to the buildings. So EU also is pushing buildings to be greener. So new buildings to avoid us banning fossil fuel, so to avoid fossil fuel generators in the buildings. And for renovation, trying to find a good compromise. So there are discussions in some countries to ban renovation, but it's always a bit difficult to be socially acceptable. So these discussions are going on. As heat pumps are moving on, those bans will come. But today is more managed by incentives, basically. So there are a lot of incentive systems virtually in all Europe. In every country, there are incentive systems to help basically homeowner, for example, to decide to replace his boiler. Boiler is breaking. Surely, put on the boiler or go for heat pumps. So those incentives are here to help in making a decision. Those legislations will have an impact you understood. It's helping naturally the market to develop, but there are other side impacts of this legislation. So first is, of course, the manufacturers need to invest a lot in R&D to keep the pace with all these demands from Europe. But there are 2 other effects. One is that the life cycle of product is shorter because Europe is demanding some technological breakthrough. For example, when refrigeration -- some refrigerants are banned, for example, new refrigerant came over. The service of the old machines is stopping shortly. And new machines need to be sold. So it's accelerating the pace basically of renewal of the machines. And second, as well, some refrigerants require more sophisticated machines. And today, for example, we know that without any inflation in 3, 4 years, the new units that will come to the market will be at least 20% more expensive than the current ones just because of the technological evolution that is required for these machines. So we have more volume and more value coming out of this legislation, and that will be used in the market in the coming years. So we talked about 2 powerful drivers. One is legislation and the willingness of Europe to go for green heating. The second one is the price of energy that is driving this. I wanted to highlight also 2 other drivers. One is the electrification. So there's a lot of talks in Europe to electrify more and provide green electricity. The nice thing about heat pumps, if you combine green electricity with a heat pump, you have a green heating, which is something impossible to do with other kind of heating systems. And the second thing also is the technology efficiency. Any other heating device is limited. Marginally, it cannot improve its energy efficiency. Okay? I mean, with stoves boilers, electrical heaters cannot improve. While on the heat pumps on a year, new heat pumps come to the market, and they marginally improve. Heat exchangers are improved, compressors are improved, electronics are improved, refrigerants. So there is room in 5 years, new units will come that will be better than now. And in 10 years, there will be units that will come that will be better than the ones that will be launched in the next 5 years. So this is an improving -- very improving industry and that it's helping basically the CO2 reduction agenda. Second also is the smart grid. You all heard about smart grid. Or production electricity in Europe is becoming a worldwide more and more valuable, solar wind. And we need to have variable consumption in front to try to keep the balance right. Heat pumps is a perfect product for that because it's very easy, for example, in typically winter time, 7 to 8, everybody is coming back home cooking, showing. And there's always a big pick of consumption during this period. Utility companies are always struggling to keep the balance of the system. And it's very easy to give an impulse to houses, for example, and cut during 1 hour or half an hour, 10%, 20%, 25% or 30% of the heating and to pass the cut. So this is also what -- where Europe wants to go to have the smart grid systems and the heat pumps will be key also in helping balancing the grid. So we are quite excited, as you understand about this market and this segment and what are we doing as a company, Beijer, in this. So we have been, over the years, having brands integrating Beijer group. And we can -- we have 2 set up of brands. So we have on the left part, brands that are focused on the residential and commercial market. And on the right side, you have brands that are on the commercial and industrial market. Nicola and Kim will talk more about SCM Frigo and Fenagy later on. And Beijer Ref today is positioned with a unique portfolio solution where we can equip a one bedroom studio -- I mean apartment with one heat pump up to a full district heating or providing a full neighborhood of -- with heating. So we have a very stretched and depth -- and deep breadth of solutions to offer to the market. And that's quite of a unique position in the European market. I've been talking a lot about Europe, okay? And Jonas and Alex have been pointing that, but Europe is on the forehead of these regulations, okay, and have been very ambitious in the CO2 agenda. Oceania and U.S., where we are present, also following and closing quickly the gap, okay? And the same opportunities we see in Europe, we see also in those markets. The heating system legacy is a bit different in these countries. So in Europe, we are going to change our boiler, our gas boiler by a heat pump, air to the heat pump. In the U.S., they are going to change the gas furnace by a heat pump, unitary heat pump. It's a bit different. So the machine is different, but the principle is the same. It's getting rid of our fossil fuel-based heating system and put a heat pump to replace it. So it's just a machine that changes, the principle is the same. And Beijer is sitting on this side. Basically, we sell no heat pumps, not direct electrical heating systems. We just sell [ thermal ] systems. This is our DNA, this is what we do. So to summarize, we are quite excited about this market. We -- Beijer have a footprint already in this market with a structure with different brands, specialized by market area. We keep -- we're going to keep focusing on this in the coming years and going to invest both organically and M&A to keep capturing the opportunities at this market segment, I mean, offers to us in the coming decade. So we are pretty excited about it. And so that's the end of my presentation. I wanted to thank you for your attention, and I recommend you to put your jacket on because I'm going to hand over to [ Nicola ], that is going to take you to the chilly word of refrigeration. Thank you.

Thank you very much, [ Jan ]. I'm Nicola Pignatelli. I'm the Managing Director of SCM Frigo. And I'm a mechanical engineer, and I have been working for 30 years in refrigeration. And yes, I'm the guy in the picture, which you probably don't recognize. So what we do in SCM Frigo? You have heard this name today in the video and so on. We are -- since -- more than 40 years designing and producing equipment for a refrigeration system in commercial and industrial refrigeration. In the last 20 years, we focus very much on natural refrigerants. We are based in a very strategic location. I will tell you why in a few seconds. On a total area of 35,000 square meters, we have built 15,000 square meters of facilities where 13,000 square meters are production warehouse and another 2,000 are for offices and academy. Very soon, we are going to have another building because we are growing fast, which is good, but we need the space. The location. We are in Italy, we are in Northeast. The region is called Veneto. Veneto is a region probably well-known because of Venice, because of the Alps, because of the wine sometimes, but also it's very important to know that it's a kind of a district of the cooling due to the University of Padua and due to many companies that established their production there, companies in refrigeration and chillers. So in HVAC and refrigeration. Many of them big -- very big companies are there. This makes very efficient the supply chain, the logistics. And this is very good because we can be very efficient in all this, and we can be competitive, very much competitive. I'm pleased to tell you something about our journey. It's quite a long journey because SCM Frigo was founded in 1979. What is very interesting is that in 2005, we were already working with the Scandinavian country. The attention for the environment at that time was already higher than the other countries. So this has pushed SCM Frigo to start designing and producing CO2 racks. So natural refrigeration. And due to that, we became very important in the retail business at that time they were starting with CO2. So we entered the most ambitious tender in the retail in Europe. In 2011, we became part of this fantastic company, Beijer Ref. 2014, with the 1,000 racks produced with CO2, we were already a leader for production capacity on this kind of technology. The F-gas, we have listened very much this today, but F-gas gave really a push to the sales starting from 2015. And the start was in 2016 with the quotas reduction. Then in 2018, we founded our Beijer Academy in Padua, so where we are. In 2021, we inaugurated our very nice big new facility. And in 2023, now, we are going to have another warehouse close to that. So something about our values. I will tell you something about what we think about -- how we act in sustainability in the next slide. But let me tell you that we have to be very flexible because we export 90% of our production abroad. So we are not a domestic company, which means we have to work with Norway, Sweden, but also with Australia, which means we have to adapt our system to all solutions, to all the climate, to all the rest of customers in refrigeration. This makes very important that we have on board at all levels, very technical competent people, not only in the technical offices but also on the sales. So this is quite important, together with the fact that we have built in these years a great reputation in the market and not only with the customer but also towards suppliers. So this makes possible that the supplier today, the most important suppliers choose SCM Frigo to test their latest innovation. This matched very much well -- very well with our aim to be innovation-oriented. So we are really in front in all the newest technology. You probably heard on the video, what we think is sustainability in SCM Frigo. We design and manufacture system without a refrigerant, but in facility that use renewable energy and limiting all the possible waste. So it should be a kind of entire chain in our production. We also feel this responsibility because the HVAC and our refrigeration industry is responsible for the 4% of the emissions. So we really feel this responsibility to produce equipment that helps the industry to reduce these emissions. And just to give you an example how we can help in that. Today, the traditional refrigerant, they have a very large impact to the greenhouse effect. So just 1 kilogram of the traditional refrigerant have the same effect of 1,500 kilogram of CO2. That's why we go for natural refrigerant, so to reduce this impact. And this is a very practical example that you probably saw also in Christopher's presentation. So with the sales of our equipment in 2022 with the number of units we put in the market, we have avoided the emission of 650,000 cars of the street or, let's say, equal to 370,000 homes energy used per year. So it's quite a big effect. Now something about our growth. SCM Frigo in the last 10 years had a very nice growth, with a plus 18% compound annual growth. But in the future, we think -- so we went from a good growth to a great growth. We think we will arrive to super in the next years because after the F-gas started to push this quotas reduction, we see clearly that the trend would be even more important in the next years. So I tell that because if you see now on the right, we can clearly see how in Europe, the trend of the growth, transcritical installation, this is what we do, is really wonderful. But also you see on the bottom, you see that U.S. is starting, Japan is starting, but also U.S., where the ban will arrive very soon, they already started to do this limitation. On the other side of this slide, you can see what is the trend in the market we are selling to, which is more or less the retail, the cold storage. There is a lot huge revenue expectations in the next year. So we are there in these markets where the CO2 will be vital as a solution. This is the resolution. We're not going to read it, but this is the latest resolution of the European Parliament, which pushed not only in refrigeration, but also in the heating and in the HVAC more and more to reduce this impact of the traditional F-gases. So there is no other way that producing equipment with natural refrigerants. This is clear today. Okay. How we can face this big growth in the market and in the future, also a bigger growth? We are going to face that because we have a strong presence in the market today. Together with Beijer, we are present everywhere, not only in Europe, where, of course, there is a mature market today, very well -- they know very well this technology, but also in the future in the U.S., where Beijer now is a big company. We are already present in South America. We are a large exporter in Australia and New Zealand. So we are almost everywhere not only with commercial stuff, but also with technical services. And since 20 years, we are doing that, we are pretty well known. And some of the biggest names, there are only a few here, biggest name in the retail, but also in the industrial sector of refrigeration, they have chosen our equipment. They have tried for many years, and they buy regularly our equipment. Another very important point we touch today with my colleagues here is the training activity. So we have academies. Why we do that? We want the customer feel comfortable with this technology. So we want to accompany the customers not only selling products, but also training him on our products. So we have academies all around the world. And we explain our technology, we explain our products. And the Beijer Ref wholesale network give us direct access to a huge part of the refrigeration installers in the world. This is quite important at this moment. Just as an example, in Padua, where we are. In our academy, in 2023, we have trained 250 engineers on CO2 products. And then another very important factor is to have a wide range because the customer can ask for a very small installation, but they can have a need for a big installation. So we have our condensing unit for petrol stations, small shops. We have a condensing unit for cold rooms, medium, large size. And then we have compressor racks for other applications from the typical net -- or whatever, convenience stores, up to the medium big supermarket size or hypermarket. And last but not least, we have industrial products for processing food, logistics and also pharmaceutical process. This is the latest product we are going to launch in the market. And it's very important to tell that the European strategy is going to phase out fossil fuel heating systems in the future. This is a clear statement. The new F-gas regulation is pushing out the F-gas as well in the HVAC industry, I told you. So there is a huge market potential also in residential, multifamily residential buildings, hypermarkets, logistics centers. So we are now approaching in SCM Frigo with the CO2 as a vision, also some heat pumps. So we will launch in 2024, a range of heat pump. We have designed together with Fenagy, so in cooperation with Fenagy, which is the company in the group with the highest knowledge about heat pumps we are going to produce in SCM Frigo. And these pumps will have innovative technology, reduce the carbon footprint and very much, very high performance. So best-in-class in performances. So we think now we cover all the 360 degrees of the possibilities of these markets. Looking back and especially looking higher, we have a time advantage. I told you we were pioneers in this technology 20 years ago. We have quite a large presence everywhere together with Beijer Ref. We have academies to train people to use our products. And we are, for the future, looking for this challenge and to this growth because regulation will continue to push definitely more and more. We have now a great new facility. And if needed, we will have even a bigger one, we will build another one. We have a strong product development and partners. Supply chain is very much in partnership with Beijer. We can develop faster with tested innovation. Innovations are very important in this sector because we have to look every day for more efficiency. So -- and now just to recap. We drive sustainability in our company. So we are an important part of the green transition for what concern our products. We will face this acceleration of the growth due to trends and market trends and regulations. We are growing fast, and we can grow even more because we have now new facilities that we can use for that. We are well known after 20 years in CO2 developing. We have quite a large product range to support the customer for all applications. And now we are entering also in the smart heat pump business with CO2. So I think there is everything to say that the future is bright for SCM Frigo and for Beijer. Thank you very much. I give now the speech and the stage to my friend and colleague Kim Christensen.

Thank you very much, Nicola. It's time to take the jackets off because now Nicola explained a lot about refrigeration. I will talk about heat pumps. And I think [ Jan ] talked about small heat pumps, residential heat pumps, a little bit about the commercial heat pumps. What I'm going to talk about is the really big stuff. When [ Jan ] is heating a house, I'm heating a city, just to give you an impression of where we are going. So Nicola, when I have to make a joke with you, I don't understand the business you're in because it's eventually 15x smaller than the heating business. And it's in terms of energy consumption. If you look at the energy consumption for refrigeration and for heating, it's 15x higher for heating. So I'm in the big industry, but I'm running a very, very small company. It's a company in Denmark. It is Fenagy. We positioned ourselves in the north of Aarhus, just north of Aarhus, second largest city in Denmark. And there, we have our production. We are so fortunate because when you do a start-up, you have no money, and you have to find the money. And Per, thank you very much inviting us on board. Beijer Ref actually came on board very soon after we started the company. So we are 3 years old and with Beijer Ref on board, it's for the last 2 years. I mean Beijer Ref came on board very, very fast in the beginning. And you can ask yourself, what does a start-up company, what do we need? Why could we benefit from Beijer Ref? Of course, money. That's a nice thing. But when you start -- when you have a start-up, you -- and you want to do an OEM, you have to be able to buy components cheap because it's basically 85% of your cost pie. And if I cannot buy cheap, I'm out of the market immediately. So I thought Beijer Ref is probably buying a lot of components and they could help me on that point. So purchase is one point. Then I would say expansion, because now we are big in Denmark, we are now -- these -- exactly these days are going abroad and being part of Beijer Ref Group, with a lot of offices where you can imagine that makes my life extremely much easier. I'm a mechanical engineer. I have been working in refrigeration and heat pumps for the last 30 years, but I've basically been working in my own companies for the last 20 years. So I'm kind of self-employed, but with Beijer Ref, I do have a boss now in the Beijer Ref organization. And it's a pleasure. So where are we and who are we? This is our factory in Denmark. It is smaller than Nicola's, but we think it's a great factory. It's 3,000 square meters, and we produce these nice, large heat pumps. And for you to understand what we actually is doing is you can see there on the truck there's a rack with -- it's the heat pump there. But an average value of a one order is EUR 2 billion. And if you find me a little bit overexcited today, it's because just 2 hours ago, I received the largest order in our life, EUR 5 million. Sorry, not billion. Did I say billion? You should stop me because then I'm exaggerating. But you know when you get one order in one project, EUR 5 million, it's different from when you're a wholesaler. Also different from what Nicola is doing actually because I'm not selling a product, I'm selling a project. And you will see later on my slides that it's a little bit different. But the good news is that we are stating on the same stepping stone as Nicola. We are using CO2 as refrigerant. So we're using this very nice natural refrigerant inside our piping. So we are doing sustainable heat pumps. So this is very important to mention, but large capacities. I think that's enough for that slide. What is the driver? And I think [ Jan ] did a very -- that's a problem being last in the speed chain here that a lot of the things I would like to say is already said. But anyway, the tray driver, if it's a small heat pump or a big heat pump, it's the same driver. We want to decarbonize our heating sector. Decarbonizing, meaning we are not burning anything in the future. So no fossil fuels like gas and oil. No biomass will be burned and no waste either like this because we will buy better clothes, better quality, and we will reuse it. So end of the day, we have a smoke-free society. We would not burn anything. And where should the heat come from? We used to burn things to get heat. That is electrification. We have to electrify with electrical heat pumps. If it's bigger or medium-sized or large ones, all of them have relevance here in this market. But that is where it's going. It's evident. Another driver is that pushes us a lot with a higher pace than it would normally is that we have to get rid of Russian gas. So right now, we have to be independent on our energy system, and of course, we do not want to import oil and gas any longer. And that's what we call REPowerEUrope. That's the strategy there. So there's a lot of tailwinds in our business. And a little bit curiosity here just lately in the newspaper because all of you understand that we have to electrify now, hopefully, you do after this afternoon. But think about it in the Guardian newspaper. It was actually in many different newspapers also in Denmark that Oxford University did a research study and with a conclusion that a heat pump would be tried as efficient as a gas boiler. It's no news but it's relevant to communicate, of course, so we all understand that agenda. So we are going for electrical heat pumps. And as [ Jan ] told you, there are different sizes. There is kind of cannibalization between these sizes because I'm doing big heat pumps for district heating and for big industries. The small residential heat pumps are maybe going into your houses, but it's all a matter of energy density or how close our houses are together. If we are living with high people density, we will probably go for a digital heating system where we have hot water in the pipes between the houses. But if the houses are a little bit more remote, then it will be individual residential heat pumps. So there is space for these different heat pumps. What we decided to do is that we feel in the mid-range there that there's still need for -- it's a growing market. We have to substitute 18 million gas boilers in that mid-range market from 20 to 300 kilowatts. So Nicola and I said we will do that CO2 heat pump together. And we will put that into the market through the Beijer Ref network. It seems obvious, but it takes a little bit of research time to do it, but we are soon there. Going back to the big heat pumps. What are we doing with the big heat pumps? And this is a very schematic drawing. But of course, all the electricity is coming from renewable. So the renewable electricity means it comes from wind turbines. It could be from hydro or it could be solar. So electricity are decarbonized in this perspective. That electricity is drawn into the heat pump, and then we need a heat source for the heat pump. And the heat source is where we're taking the heat from, typically a low temperature source. We take that heat, it could be wasted. It could be cooling, but it could also be a natural source like air or groundwater, seawater, lake water. We take that low-temperature heat, so into the heat pump, and then we pump it up to 70 degrees or 80 degrees, the temperature we need in the heat network. The trick here is that, of course, the heat pumps should not operate while the electrical prices are high. So you see the energy storage there. That's for the hot water. So we operate the heat pump when the electricity prices are low, and we stop the heat pump when the electricity prices are high. And we store the hot water in a storage. And eventually, of course, all that hot water goes into the heat network and heat your houses or the industry or whatever needs to be heated. So a little bit about the market size here. The application that we are busy working with right now is digital heating. And we think that, that market in the northern part of Europe is around 400 terawatt hours per year. Imagine the heat pumps we have done until now, it's around 100 megawatts. It's actually a lot. It corresponds to 25,000 households. It's already there. Fenagy did it, it's operating every day. But it only corresponds to 0.1% of the market that we are looking into. So we are at a very early stage with these industrial heat pumps. Jumping to another application. That is the industry. And if we look at the industry, that is where I put the joke to Nicola, why are you in refrigeration. Because you can see here on this chart, only 4% of the energy used in the industry is going into cooling systems, whereas the 76% is actually going into heat. So -- and we have to -- I mean we have to translate that heat into heat pumps. So it's a huge task we have in front of us. Unfortunately, right now, some of that heat, if you look at the pie to the right, you can see that a lot of these processes in the industry is at a very high temperature. We cannot do that with heat pump technologies as it is. The Fenagy technologies, we can go to 100 degrees. So we only have 1/4 of that pie, but it still correspond to 520 terawatt hours per year. So there's a huge potential there, even though we cannot do the whole temperature range. So the market is there, but we also have a very nice green impact. And the impact is coming from, of course, that we use a natural refrigerant. There are no impact from that point of view. And then, of course, there's a huge impact that we mitigate the use of fossil fuels and use renewable energy instead. We did not substitute right now more than like that, if you calculated around 100,000 cars, but we're also only 3 years old. So that's the calculation that you have. Why is it an advantage for Fenagy to be in Denmark? Denmark is known for being front runner on district heating, so the piping is already there. It's already in the ground. And today, all the heat in the district heating system in Denmark is actually coming from fossil fuels, oil and gas or biomass, and that is what we are going to substitute in the coming years. We're in the process of doing that. So the pipes are not -- the same hot water, 80 degrees, but it's just coming from a heat pump instead of a biomass boiler or a gas boiler. That makes it extremely easy for us to move fast and grow in Denmark. We do have other countries in Europe where we also have district heating networks already in the ground. Sweden is actually a nice area, and we are moving into Sweden right now. Norway have a possibility and Finland have possibilities. But actually, we think that U.K. only -- imagine that there are only 3% of the heat used in the U.K. is distributed via district heating grids, but if they're going to make district heating grids. It's a political decision. So we are following the, I would say, the trends of political decisions there. So in U.K. with a very small red column, as you can see on this chart, but the green dot is where we expect to be in 2050 and is a huge country. So we are on our own with the help of Beijer Ref of course, have our own office now in U.K., and we are following the first projects in the U.K. So there's a lot of opportunities here. But we are at a very early stage. In Denmark, we are probably at the peak in 3 years from now. That is where we expect most industrial electrical heat pumps would be installed. There is a further delay for Scandinavia and the Nordics. And maybe in Europe, if you look at heat pumps, electrical heat pumps and district heating systems, it's only going to peak in 12 or 15 years from now. But it gives us a chance to be the forerunner and establish ourselves in a very good position in Europe. So the applications of the market that we are looking into as an industrial manufacturer of heat pumps, it is, of course, district heating, as I mentioned. And then we have a sector that I didn't mention so far, but if you can imagine that power to exit, this is power to exit the hydrogen business. It could also be a biogas business, geothermal, carbon capture. You wouldn't know until I told you, but they need heat pumps. All of these different processes need heat pumps. So it was new to me 3 years ago, but now it's -- after 3 years we sold our first 10-megawatt biogas project in Denmark. So there's a huge potential there. And then the two last application groups in the bottom, it's well known from [indiscernible]. It is the Industry and it's the HVAC, they are also going to use very big heat pumps in the future. We think our total market in Europe, Europe only, northern part is around between EUR 4 billion to EUR 5 billion, yearly. So that's a nice market to be a start-up in I can tell you, I'm pretty happy. So what are we doing? We're doing projects. And to give you a feel of a project, this is a 4-megawatt heat pump. It is heating 800 houses in a very common Danish city. What do we deliver? We deliver the white heat exchanger that's the white piece with the black dots. It's the Heat Exchanger, we call it the Energy Collector. It collects the energy from air, because this is an air source heat pump. We collect the energy from air. And inside the building, you -- we have two of our bigger racks, 2-megawatt each, they converge the low-temperature heat to high temperature heat. And that is either stored in the big vessel there. We do not deliver that vessel, somebody else is delivering that. All that heat goes directly into the heat network of the city. So you can see it's not a small supermarket system or things like this, it's really big. Another project is more an industrial project, but it's actually linked to district heating is together with IKEA, it's in Aalborg, the northern part of Denmark. What IKEA wanted to do is that they have worn out chillers, but they need to cool during summertime. What we delivered was a combined solution for combined heating and cooling. So in this example, we are refrigerating IKEA during summertime, and we are heating IKEA during winter time, but the surplus energy available we distribute into the district heating network, heating all the houses around IKEA. So you see this is a circular economy. It is utilizing every -- all the waste heat that we have in the system on the heating and cooling side. So it's a really nice project. We do projects, but of course, we sell products also. So this is our product range on the upper row, you see our CO2-based heat pumps. It's a natural refrigerant. At the lower row, you see our new product range on the hydrocarbon. It's also natural refrigerants, but we believe that we need to expand our product portfolio a little bit, is still very big heat pumps, but with these two new natural refrigerants, I don't want to go into these curves very much. But if you can imagine that on the X-axis you have, the source temperature, that's where you collect the heat from and on the Y-axis, you have the heat sink, that is where you're putting the energy into and depending on the temperatures there, different refrigerants would do the job worse or better. And we thought that the isobutane heat pump, the yellow square there. It's a nice supplement to our CO2 heat pump because it's working at much higher temperatures. And you can see at the lower range, it's propane that the green area is doing very well at the lower temperature range. Just to give you a feel that we try to expand our product portfolio, so we can, I can see some laughter there. They will be part of the quiz afterwards, these things. But the point is that we're expanding our heat pump range so we can cover all different kind of temperatures. So wrapping up a little bit. I cannot look in the mirror and cannot look back because it's extremely immature, large-scale industrial heat pumps in district heating and in the industry, it's new to everyone. So it's very mature. It's not something that is just happening. So there is no mirror to look back in. I have to look in the crystal ball and then I have to understand what do I think the market need in the future. So that's what I'm spending a lot of time on. Also, there will be geographical differences just in Europe, but also when we get out of Europe, definitely, there will be new challenges. But I hope what you should grab from my presentation is we have tailwinds here, like Jan explained. We have political decisions. We have legislation and we have subsidiaries, helping us to sell our products into the market. It's for good because it helps our planet as well. We make green heat. We are a very fast-growing company, and it gives me some headache. You can imagine because the factory will be moved in through this year is already too small, but that's how it is. It's a good challenge, I would say. We are at a very early stage, but we're also in a blue ocean with very limited competition, very limited. If I should say, on the European base, there will only be three competition, I wouldn't even consider them as competitive, just to say that we are in a very good position. But it's also because it's still early, it's very immature. It needs a lot of innovation, a lot of technical development, good that we are in a group that we have a lot of knowledge together, we can do that. And then because we are not selling products, but we are selling projects, we are building a lot of services around our products. You can imagine 24 hours, 7 days a week surveillance. A lot of data we bring in, digital [indiscernible] machine learning on data from our heat pump to improve the performance of the heat pumps. All these services of course, also spare parts, but we are Beijer Ref, that's not a big problem with spare parts. But there's a lot of services around our products because our end users, who are they? It's a button file. It's [indiscernible], it's a big utility companies, and they know what they're paying for and they want to get it. Otherwise, they will kill me. So we have to build a pretty, I would say, strong platform to make these customers happy, and we are doing that. So I have 8 seconds left or something like that. Footprint expanding facilities would be a big task for us in the future because there are many people who want our products. Electrification, decarbonization of the heat system. That's a key word, huge market potential. We are a solution provider rather than a product provider. We work with natural refrigerants, and I must say that for us, I can only see that the future is bright. Thank you very much. So now to the very boring stuff. I'm an engineer, and Joel is here to present some financial stuff, I don't know much about, but.

Famous last time's quote as well. So everything is picked up for success here. So, good afternoon, everyone. My name is Joel Davidsson, and I'm CFO of the group. And needless to say, I'm very happy to be here today. And in addition to presenting our new financial targets, I will take the opportunity to introduce myself to those of you I have not met before. So I joined Beijer Ref here a month ago, a very exciting time to join the company. Plenty of time to prepare for the Capital Markets Day, obviously. Jokes aside, I mean, you have seen the financial targets, we have an ambition to continue to grow with a very high pace, capitalizing on the strong underlying market fundamentals that the team has presented here today. And that in combination with M&A growth with the ambition to double the size of the company in the next 5 to 7 years. So who wouldn't want to be part of that. Going back to myself, just briefly, my career before joining Beijer Ref can essentially be split in two halves. I spent the first half of my career in the financial industry, working with M&A and Corporate Finance Advisory in London and Stockholm. And the most recent half, I've had financial leadership roles at Assa Abloy and Alfa Laval. And most recently, as CFO of Rosti Group, which is a global contract manufacturing company. But let's move to our financial targets. So as an overarching comment, our financial targets are set to demonstrate our commitment for the next 5 years. I will just briefly go over the old and new targets before we jump into each of the new targets and look at the historical performance against that. So on growth, our historic target was to grow more quickly than the market. And the new target, as I said, is now to grow by 10% to 15% annually. And the profitability, historically, there has been no external target and the new target is to achieve an EBITDA margin in the range of 10% to 12%. Capital efficiency. The target is unchanged essentially, and it is to generate a return on operating capital of at least 12%. It should, however, be noted that we have changed the numerator from EBIT to EBITA, to better reflect the operating performance in the business following the U.S. acquisition. On capital structure, we have historically had a target to have an equity-to-asset ratio of at least 30%. And that has now been changed to a more commonly used leverage target. And the target is that net debt should not exceed EBITDA by more than 3x over time. And net debt is then defined excluding the impact of IFRS 16, i.e., leasing and exclusion of pension debt. Dividend policy is the same, and it is to distribute 30% of net profit after tax as dividend to our shareholders. All right. Going back to growth. I mean, we all know that Beijer Ref has grown significantly over many years. But just looking at the time period from 2013, Beijer Ref has grown from a company of SEK 6.6 billion to a sales of more than SEK 30 billion on an LTM basis, corresponding to a CAGR of 14% on an FX-neutral basis. And we are committed to continue to grow and continue to invest in both organic growth and M&A growth. And the target is, as said, to grow 10% to 15% annually. Moving over to another very good development in the company have been very successful in expanding margins and margins have expanded from 6.6% in 2013 to 10.7% on an LTM basis. And the ambition is clear, and it is to generate an EBITA margin in the range of 10% to 12% going forward, capitalizing both on the underlying strong market fundamentals, as well as supply and product synergies as we continue to scale our business and of course, the growth of private label and OEM. Moving over to return on operating capital. Looking at the last 10 years, Beijer Ref has generated a return on operating capital of 14.7% on average compared to the target of above 12%. In 2023, we are below the target of 12% following the transformative platform acquisition that we did in the U.S., which essentially doubled the operating capital employed in the business. Going forward, however, we are still committed to deliver a return on operating capital above 12% as we continue to drive synergies across our platforms and continue to grow organically. As I mentioned in the beginning, we have changed the capital structure target to a more commonly used leverage target. And if we look at the leverage development over the last 10 years, we have averaged 2.1x EBITDA, somewhat north of where we are right now. And we feel that we have a strong balance sheet, but more importantly that we operate with a very good business model, generating enough cash to feel comfortable to have a leverage below 3x. And the target is therefore not to exceed net debt-to-EBITDA by 3x for any longer period of time. Yes. He's waited for this all day. Dividend. I mean you can see on the graph here, we have -- Beijer Ref has grown dividend over time. And over the last 10 years, we have grown with a CAGR of 10%. And we have distributed somewhat north of 50% of net profit on average. We will continue to aim to grow the nominal dividend and the target is to distribute at least 30% of net profit as a dividend to our shareholders. So summarizing, obviously, continued focus on growth. We will invest in both organic and M&A growth and the target is to grow by 10% to 15% per year. We will aim to deliver an EBITA margin in the range of 10% to 12% by capitalizing both on the strong underlying market fundamentals, growth of OEM and private label as well as product and supply chain synergies as we continue to scale our business. We will continue to focus and increase the focus on cash flow generation and inventory optimization to support both growth and also to return to operating capital return of above 12%. We will continue to utilize our balance sheet to support our M&A strategy and managing leverage below 3x. And dividend, we will continue to aim to grow our nominal dividend and the target is to distribute at least 30% of net profit to our shareholders. And that was a short update from my side. So I will hand over. Thank you for your attention. I will hand over for summarizing by Christopher.

Thanks, Joel. So everyone's still awake. This is actually the last slide. So I think you've done very well, looks like everybody is still awake. I hope you enjoyed the presentation. I've learned a lot as well doing this journey here together with the whole team here. So I'm happy you had a chance to meet them, we'll also have a Q&A and then we'll have some, I think, drinks for the ones who has half an hour left in their day, and you can get to talk to all of the team as well. So trying to wrap this up. I think it's pretty simple to wrap up because it all goes in the same theme, and I think it's a very connected team for Beijer Ref. And you start off with most of these presentations to be very proud of the historical performance. I think the history should tell you at least quite a lot of things about the future as well in a company. And it's a company that's been growing for many years. And we, of course, expect with our target to continue that growth journey even as we're getting bigger and bigger for every year, but we also get stronger and stronger for every year. And coming back to the global platform that we've been building over the last 10 years and accelerated over the last 5 years. So I think we're very happy with the product. You heard about the APAC and also Jonas driving the margin here going forward to next year, you heard about the EMEA I mean, a fantastic business turning over SEK 20 billion within an unbelievable market position across the board. You heard about Alex, fantastic plans and also having the highest expectation in the group. So we always look forward to that. But in general, building a fantastic platform. And also talking to getting a feeling for Nicola and Kim and also how it fits very well into Beijer Ref. And I think that's the heading here that I really believe where the business model that stands the test of time. So we think and believe this will continue in the future. And I think some of these areas will, of course, grow even faster as we accelerate over the next 5 years. I think the business model, we haven't changed a lot. I like to use, the expression, we like evolution, not revolution, do things a little bit better, make sure we're on the right trends and having the right people in a decentralized model that makes the decision. You can see it on Kim, of course, you can see on Nicola, you can see on the rest of the team, they are very close to the business. And they are the one making decisions from a customer point of view, product point of view, sales point of view, and I think the rest of the team, me and the Jonas and the Simon and the Alex of the world, we try and help them. We do everything we can to support their business, and that's how the model is built up. We touched quite a lot today on M&A. We try to educate a little bit more how we think about it. It is a strong part of our business, but I would say it's very value creative part of our business, and we'll continue to work in that in the future and also now, adding the U.S., I think we have an enormous platform for the future and also connecting there to Joel, balance sheet is good. Cash flow will come in well. So I think we're in a very good position in the future. We try to kind of frame sustainability for us. It's a word that's been used a lot across different organizations and places and I think sustainability for us mainly comes in our product. Yes, we have targets internally, but it mainly comes with driving the green transformation, the refrigerant side. It comes on the electrification side. Of course, it comes through regulation, but for us, combining business and also supporting the environmental journey is the perfect fit. And I think that's where Beijer Ref is today. And I think also trying to clarify a little bit on the financial targets. I think Joel makes it very clear. So it's a very good presentation. This is the way it is. No, but it is clarifying what we see in growth, how we see the margin development going forward. We also see how we're going to work with our capital that and continue to be very stable on the dividend policy. So I think all in all, this is the wrap up of today's all of the presentations. So, thank you very much for listening. Thank you for coming, both here and streaming. I think it's been, we are overwhelmed with the interest of everybody coming here. So I know everybody has a busy day and a busy agenda. So we also appreciate you spending time with us. And maybe I'll have an opportunity to thank the team that's put everything together here. And I think where's Nicolas, I think, hopefully, you can sleep tonight. You've done a very good job putting all this together. So we really appreciate it. So, thank you very much, and thank you for listening. And I will have a little Q&A, and then we'll wrap things out. Thank you.

Are we ready?

We are ready.

Thank you so much on my behalf as well. This is how this is going to play out. We will start by the questions in the room. And if you please -- if you have a question, please raise your hand, and you will be given a microphone. And then we will distribute the word further.

Yes. And I'll surely have some questions online as well. So...

Yes. And if you are listening online and have questions, please use the questioner box below the presentation to write in your questions, and we will start in this room.

It's Carl here from Nordea. First, you started off with working capital and cash flow. You said it was supposed to be pretty good in Q4. You mentioned the chart here, with the threshold, I guess, on SEK 2.4 billion. Could you elaborate a bit on what's the ambition for Q4? And also what is the working capital component of the operating cash flow? Which I think it was on the slide.

Yes. On the first one, I actually think I was more bullish than pretty good. No, I know it's a short-term question, but it's on the agenda right for a lot of people. Now it would be very good. I mean, we know that, we've been saying it and it's a normal seasonality pattern for us anyway. But of course, now we have an even heavier cash generation as we mainly are flushing out our inventory situation, which I also said will continue during 2024. And of course, we have our plans. We know what we're doing in this area. So that will continue with, in 2024 as well. And ambition, I think what I said is that we're moving back if you go into '25 and beyond with our pre-pandemic level on the balance sheet, especially on the net working capital and then also an ambition to at least have 80% cash conversion going forward as a stick in the ground for the business. What was the second question?

No, the working capital component of the operating cash?

It's, I mean, Joel, it's AP, AR, net working capital, and CApEx and then you have some lease or...

It was what portion of the, I mean, of the cash flow in Q4 that will be driven by working capital? I.e., what's the working capital release you think?

No, I mean, it's getting, of course, mainly is coming from inventory and accounts receivable, which is the normal flash out that we have in Q4 as our main season of the business is Q2, Q3. And of course, the Q4, inventory is reducing even more because we're not buying a lot because we're sitting in an inventory position for next year that's already at a good level.

Okay. Very good. And you talked a lot about own products. You mentioned, obviously, Sinclair, Freddox. Could you give sort of a sense of what the portion of these products? Or what's, I mean -- overall, in absolute numbers, what's the sales of these subsegments, you could say, and what's the ambition a couple of years ahead? And also finally, if you have seen the profitability level increase as you maybe have streamlined operation or getting more scale?

Yes. So like, Carl, when you have four questions in one because you're really testing my memory as well. So you have to remind me when I forget a couple of them. But -- but in general, if you look at our private label and as we started this journey in Simon's organization driving the EMEA business, I would say that we are getting close to 20% on the HVAC side with the inventory in Sinclair, and actually, and I think we have mentioned or talked about the past, if you go back 3, 4 years, 20% was our long-term ambition. We started from very low levels. So it has exceeded all our expectations. So at this moment, we don't have an ambition will it be 30%, will it be X. What we know is that we're going to continue to grow at a very high pace as we're launching in more and more countries also in Europe, and we're supporting it more and more. And of course, the first part of a private label like Sinclair in a lot of markets is building the brand, building the support function, building the spare parts around it, and that's what we're focusing on as we launch it in new markets. So I won't give you an answer on what the percentage of sales, but I would guide you in the way that it will continue and outpace the growth of the rest of the products we have on the HVAC side. So we'll continue to take market share if you want to use that product portfolio. And maybe a question on margin, we don't disclose margin in that way, but both these type of brands have a much higher gross margin than the rest of our portfolio. So it is part, I mean, look at our margin transition over the years, you saw Simon now at 11.4% EBITDA. I mean part of this journey is the Freddox or the Sinclair development and also the inventor around in the country. So we get a very strong margin on that product portfolio. I think the other question around, we have another brand that Simon talked about, Freddox. We have it now also launched in the APAC region. We're also looking long term, but we usually tell about Freddox. It's a very fast-moving product portfolio growing for us. But it's not big enough that I will tell you it's making a difference on the margin that you see on the screen. But of course, it has all the potential long term as we grow it to also drive the margin and being a margin driver for us long term as well.

Okay. Very good. And the final one from my side is, I mean, either to you or Alex is on the North American business and the regulation coming up here 1st January 2025. I mean it could, of course, be a risk, but it could also be a big opportunity, right, depending on how you play it. So what is the strategy for North America in order to not sit on obsolete products, right, when 1st January '25 hits? And also a bit if you, Alex, could elaborate on what you think about pricing and also whether you'll increase prices on other spare parts or components as well in conjunction when you raise prices on the equipment itself?

And we can turn off the microphone, just so you know.

Okay. If I start to say something I'm not supposed to. So first, I would, I think it's fair to describe it as an opportunity or risk. That's the way most opportunities present themselves. And for us, the risk there would just be that if you don't see it coming and you're not building your supply chain and putting the inventory on the shelves that you need, there is a sell-through regulation that we've just experienced. And so we've got experience dealing with this exact type of event. When the SEER efficiency ratings changed from 2022 to 2023, in the map that you saw on the screen, all of the southern states, it's illegal, and we can't sell those products today. And so we have kind of internal teams that are managing inventories to make sure that we don't end up with a product that we can't sell. But we actually look at it as more of an opportunity. What we see in that as we saw in 2022. That can be transient, but you can pick up some extra margin along the way to the extent that you have product and your competitors don't. What was the other question?

No, that's fine.

Maybe, Alex, when I have it up here, just to throw in some questions from the streaming as well that's relevant for the U.S. I'm just reading it now and then I'll test your answer. Is American Innovation and Manufacturing Act sustainable over a longer period even if you might get changes in the Congress or White House?

Yes, I believe so. If you think about, I mean, I don't know how many of you are here from the U.S., but if you think about what it takes to actually get legislation passed in the United States, it's very difficult. With the political environment. But there's general alignment to sustainability. And so I think the, I don't know that anyone would project that, that regulation would step backwards. It's possible that they could extend maybe the sell-through period on the 2025. That's happened before, but not -- I don't believe stepping back the legislation.

And then I'll keep testing you. I'm learning here as well. So you know that and I'm reading perfectly. It seems like exposure to Rheem is a significant risk for the business. How do you manage for the potential risk that reinforce behind its competition in terms of product development? How big of an impact -- how would you describe one of our big partners in the U.S. on Rheem and their product development and capabilities?

So I would say this. I don't actually view, holistically, I don't view the relationship with Rheem as a risk. I view it as a support and fundamentally a strength of the business. I think it's a fair question to ask if they fall behind on technology. If you know anything about Rheem, they have a -- their short-term thinking is 5 years out. They're already investing -- planning on investments to continue to not only innovate but also increase capacity for the newer equipment. So they haven't demonstrated a history of falling behind from a technological standpoint. In fact, if anything, as you think about the SEER changes, they were already implementing some changes to switch over to the new refrigerants and advance faster than most of the other OEMs. We all learned there in COVID that your supply chain is critically important. And for us, a big component of that being domestic manufacturing is important if there is disruption in like containers and the things that happen. And what I would say is, is our leveraging the Sinclair brand and building out capabilities with other lines are ways of mitigating if we have mentioned earlier that we had a gap in a small narrow product portfolio, and that was able to fill that. And at the same time, I would say, I would just add to that, that we're not exclusively looking at our business as being only partnered with Rheem. And so we do have a relationship with Carrier. We have relationship with another product manufactured by York. And so we don't think of it as exclusively with Rheem. But I see Rheem as a good partner to our business and really supportive of our long-term profitable growth plans.

I could add to that, that when myself, the expert myself and the expert David sitting in the corner who runs our M&A spend a lot of time learning the U.S., Rheem was actually our favorite OEM, if that's, if I can say that. We really like the longevity. We like the structure. We like the product portfolio, and we also did quite a lot of analysis on this. So at least we feel very good about that partner. I have a last question to you.

Gentlemen, I would also like to remind you that we have questions in the room.

Yes. So Alex, why are customers so loyal to you?

Yes, that's a good one.

Yes, that's a good question. Because we're fast and easy to do business with. I think for us, it really is that simple. If you go to a facility and you interact with the people at the sales counter, if you interact with a truck driver or a warehouse employee or a branch manager, they're going to be completely focused on how do I meet that customer's needs in minutes, not hours. And so by carrying as an example, carrying the parts to fix every piece of equipment that's manufactured and sold in the U.S. That's a way that we're fast and easy to do business with. And so I think you can overcomplicate that. But the businesses have decades of experience. You -- sometimes you have a grandson working in the business who's father and grandfather worked in the business. And so you do have strong relationships, but those relationships are predicated on being fast and easy.

So questions in the room? Microphone is moving.

Then we need there and there. I think they've been.

So I wanted to ask a follow-up question on the private label question earlier. So most distributors that I know of have the private label margin, high private label penetration peaking somewhere between 10% and 20%, and they are very cautious to expand it further. So can you help us understand again a little further why you don't feel there's pushback from your suppliers when selling your private label products?

Yes. I think it's a question we get a lot. So I think it's good that you ask it. I think on, let's leave Refrigeration. I mean it's such a small part right now, and the Refrigeration Freddox is more to maybe for us to consolidate our supplier C and D and E because we have hundreds and thousands of suppliers on that side. But if you take on the HVAC side, I think it's important to mention that when we look at the Sinclair an inventory product, it's not a competitor to Toshiba where Jan said Mitsubishi heavy. It's a mid-tier product. It's a segment where our A brands don't work in. It's a lower-priced product. It's usually the installer that comes to the branches that do refrigeration and they do HVAC. So it's more a standard type of product that they've been buying somewhere else. I mean I'll give you a perfect example. It's like being in the U.S., sitting down with -- in St. Louis talking to our team in Benoist. Their biggest customer, just to understand also in the business we're in, on HVAC, with Rheem is $1 million. That's a big customer for us. I mean we work in a smaller cost. He buys about $2 million on top of that of another brand that's a mid-tier product. So us introducing Sinclair in this channel is that then he can move that $2 million to us, but is still going to buy the $1 million of Rheem. So it's completely different customer segments. And we also work with some of these bigger suppliers on, if they want to develop mid-tier product, it's a different channel, but most of them, it's a very big differentiation between the product portfolio and the way Toshiba works on Mitsubishi Heavy versus the Sinclair inventor. So it's usually not a discussion. It's competing with other type of similar solution that's out there. It's not really competing with our A suppliers.

And then I would have another question before passing on the mic, and that is on, when you do M&A, there's always the question of increasing density or increasing the geographic reach of the business. And after the acquisition in the U.S., I clearly thought, well, after this big chunk, you would be focusing more to increase density? And with the acquisition in the U.S. your increased geography? So maybe you could just help us not only with respect to the U.S., but more generally, how you think about this trade-off?

Yes. So we don't see it as a trade-off because we'll do both. We're the company, we will do this and that. So we have a plan on increasing our density, as Alex talked to, those plans, we're working also with our big suppliers, when we have the exclusive area, we'll open branches. We need to find the location, the people, et cetera. That will be ongoing. We have 9 locations, as I said, in the Heritage platform, that were going to be moved to increase density. You also have to remember that in a lot of the platform in Heritage, you have very good density already. It's a very good setup platform. It's also a reason for the success. And I think with AMSCO and some of the acquisition that we're looking at, we're looking at expanding our geographical reach where we are. So I mean, we're not really intending to go and buy a company in Nebraska or I mean something that's way off for us. So we'll continue to do both. And you will see us through next year opening branches step-by-step to improve the density and also in an AMSCO that we just bought. They also have an opportunity to connect the dots together with us and et cetera. So we will continue in the U.S. to do both in that area. And the rest, of course, as we improved density in the rest of the world. That's not something we communicate to you. I mean we open branches, Jonas opened branches in Australia and et cetera, but that's something that's part of our daily business. We are a little bit more transparent in the U.S. as it's a new part of our business, and we talk about it a little bit more. Otherwise, that's an ongoing part of our business and also how we drive organic growth and also take market share.

A little small reminder to everyone since this is being streamed, you could -- would be nice for the listeners or viewers to -- if you stated your name and company before asking the questions. Hello, go ahead.

Adela Dashian from Jefferies. We've spoken a lot about the opportunities that you have going forward, but maybe also turning the page to some of the risks or challenges and especially as it relates to, I mean, there's so many new technologies and products that are entering the market and the need for the installer base to be knowledgeable enough to both educate the end consumers, but also being able to install the products into different types of applications. Do you see this as an opportunity for you to maybe integrate forward in the value chain to facilitate demand? Or yes, how do you perceive this?

Yes. So I would answer it in this way, you're right. There's a lot of things happening in your industry. And as we see, that's positive. We also, of course, see that we are in our industries with the size where we are and the breadth of our knowledge, product, supplier knowledge, a little bit like both Nicola and Kim were talking about, most of our bigger supplier wants to test the product with us because we are on the forefront of pushing the technology and all the natural refrigerants. So they actually test the compressors. We push them, I talked to Kim last night and he said they should pay us, but we're not there yet because we're actually helping them with the flaws they have in their product to get better. And of course, we also want something for that. So I think in the breadth we have on the natural refrigerants, we are the leader to drive that technology. And that's also why the OEMs wants to work with us in that channel and then we do the spare parts for them as well. If you look at the HVAC side, I would say the reason we had these fantastic 8 partners like Toshiba, Mitsubishi Heavy, they have the front end of developing product, changing refrigerants. So, we are very aware on the product generation plan. I think it was a relevant question on Rheem. We think they are one of the best product developers out there in the U.S. And really, we go over the plans. And of course, when we work with these partners or suppliers, we're also their ear and eyes out in the market because we do a lot of this aftermarket service, and we get a lot of information from our installers because we manage 200,000 to 300,000 customers out there. So I think my conclusion of the question would be, it's, of course, getting tougher and tougher to be a small player in this industry, to keep up with all this, having the knowledge, having the journey that you need to do now with all the product side. But I think with our size and how we work, we see that change as something positive. But we also see it, of course, because we're I think so far made the right bets in how we drive and where the market is moving. But I think in general, some of the strong players will get stronger during the next 5 to 10 years. And of course, as being a wholesaler distributor as well, we can see, if you want to sit down and have dinner with Simon, he can probably tell you about 10, 20 large suppliers 10 years ago, who did the wrong technology bet. And they're out. So they're really struggling and the ones who did the right technology bets are doing well. But for us, we're not agnostic, but we will choose the ones that are going in the right direction and the other ones will have a tough time. So I think, for some of the OEMs, they will struggle. But if you look at, in my view, on the HVAC, the Japanese, they're very technology driven. And I would say even our partners for the mid-tier product very well invested in following this product plan that you have in Europe, maybe a long answer to your question.

And then another one from me. How do you -- how will you bridge the gap between the long-term growth journey and also the near-term challenges, especially the headwinds that we're seeing from a macro perspective?

Yes. I think we are pretty, I think people that follow us also on the quarterly basis that Carl so nicely started his question on my cash flow in Q4. You know that we've been saying that I think in general, the way we divide up our business is, as I talked about, the Commercial Industrial Refrigeration, the OEM business and then the HVAC side. And what we see still now, as we talk today, and I said, it's continued very stable and good development refrigeration components OEM. I think you heard a lot of things there, that's also short term, will be positive. And then on the HVAC side, it's more for us maybe flushing out what Jan described, when the energy prices spiked in Q3, Q4 and Q1 this year, it's more that we were growing 30% organic over those 3 quarters that as soon as that are behind us, we still feel a fairly good market or stable market out there. And also remembering, I think we've got a question here on it that can relate to is that the majority of our business is replacement aftermarket service. So I think there are -- there will be companies out there where it's much tougher in new construction. We see that in the U.S., it's less than 5% of our business and project related and probably will have a gap for some years, it will affect us less because it's not a core segment for us. So I think it's a little bit, as you said, it's balanced in the short term with the long term. We still think the short term is okay. Then you always have high expectations on there. So, but we'll continue to drive forward. And as we get those comps behind us, I think the main question or discussion point you have is a little bit. So how will the world or how will world look in 2024, '25? How will interest rate affect the economy and will it be soft landing or hard landing? All those, of course, have different scenarios even for us. Right now, we still see pretty good activity out there. But of course, we don't know how 2024 plays out in the end.

I think the clock is ticking, but we have some hands as well. But I would like to stress the fact that we're still having beverages and social gathering after this. So please don't leave, remembering all of you. Yes, go ahead.

Douglas Lindahl with DNB Markets. A few questions from my side. Starting on your, can you hear me? Yes.

I can turn it off here, you know that, right?

It seems like you're doing it now. On the financial targets and the sales growth target, I think I read an interview today where you said, Christopher, that half will be organic and half will be M&A roughly, if I got that right. And today, we heard a lot about regulation being obviously beneficial, but seemingly also beneficial for pricing, I picked that up a few times. Is that something you built into your expectations over the next 5 years, just to clarify that?

I would say, Yes and no, a fantastic answer, right? No, I mean some of the things that we talk about here is a little bit as we, I think I described it when we entered the U.S., we like the stable replacement market. We wanted something in the Southeast and all those things. And then we also realized in the journey all these transitional changes that you heard Alex talk about or you heard Jan talk about. And we like to call it if it's the right expression or a little bit icing on the cake. You'll always have some pros in mind, but we don't build it in, in general. We're building a certain price development that we've seen historically, and these type of changes is, will be I don't want to say on top of it and people start changing. I think 10% to 15% is a good ambition. But we don't build in these things until we, and then we reacted when we see it. it's still, you hear you listening to the U.S., it's 10%, it's 15%, it's 20%. It's not built into our models like that. No, it's not.

Okay. Another topic we discussed quite a lot today is obviously Heat Pumps. And maybe I missed that, but what portion of sales now these days is coming from heat pumps? The million dollar question.

You didn't miss it. And I know I'm promised for a while to say it. So I think the most relevant numbers for you is on our EMEA business. I think in the U.S., it's still early days. And in APAC, [indiscernible] and it's about 10% of our HVAC business in EMEA, that's heat pumps.

And one more, if I may, on the sort of going back to the growth target and M&A, obviously, you need to sort of step that up in order, as you grow in size, either the targets need to get bigger or you need to do more acquisitions? How are you thinking with regards to that?

Yes. So I think it's a little bit, on acquisitions, of course, it's one of those things that you usually get an answer from it. You can't really control the timing. Right? You get more at a certain time and you get less. But I think if you look at Beijer Ref the last 2, 3 years, I don't know, David, how many 24, 25 acquisitions. And it's a mix with small and midsize. And I would expect that to continue both in continuing in EMEA, continuing in APAC and then usually in the U.S., they're a little bit more midsized, so a little bit bigger than you have in Europe or in the APAC region. So clearly, the way we see it, our pipeline, right now, it's more a question on priority than it's a question of how much growth it will add to our business. But I mean the reason we put the target out there because even as we're now hitting SEK 30 billion, we think it's a feasible target to have also on the acquisition side. Thank you.

Karl Bokvist from ABG. One question first. I believe when you first started this position, Christopher, you talked about Beijer turning into a double-digit margin company and now you're there, so hats off. But then on the working capital side, where we want to get it back to 2019 levels or pre-pandemic. What main drivers are that you can utilize to get it back there? And is it the same kind of drivers in Europe and the U.S?

Yes. I think it's almost not, thanks for the margin comment, by the way. No, but I would say on the inventory level, of course, we have been, I think, delivering at least according to our plan when we said that, most of the inventory during the pandemic was driven by trying to manage a situation where your supplier has lead times of over a year. So of course, when you build all these safety stock to manage that, I know a lot of discussion with Jan when he wants to order 1 year ahead from the factory in Thailand. I was like, what, and now all that is back to normal. So I would see it more that when you look at the, as you transition through 2024, of course, you will have the same seasonality patterns, but we'll, of course, we'll buy less because we have more on the shelf. And then you'll continue to have a very strong cash flow in Q3, Q4 to get you back to the prepandemic levels in percentage of sales. I can't if it's 27%, 26%, but somewhere in those ranges that we used to run in the past. Then also a tendency to say as the U.S. is a new part of our business and a pretty significant business. We expect, and Alex is listening, mathematically, he'll be running at a better pace than the rest of Beijer, most of the suppliers, state side, much shorter lead times. So as this business normalizes as well, that will also be in a positive development for Beijer Ref. So I think those two together should bring us maybe a little bit better percentage ratio than we were before the pandemic.

And can you improve it further beyond that? And the second one is just more short term. How far along are we on the inventory normalization?

Yes, I'll start with the last, and I'll come back to your first question. We see it as our inventory on Q4 and 2024. So for us, it's an expectation more at the end of next year, we'll be back to normal level, which give us a strong cash flow generation 2024 clearly above the 80% type of cash conversion that we talked about. Of course, we can do more. And I think you said a little bit when we started the journey, we talked about how we're driving growth on the margin side for all our businesses. Inventory, we are running pilots, especially together with Simon on different type of structures. It's more, it's less related to carrying -- just carrying less. It's more related to, can we work with a different structure when we work with inventory? So I'm not standing here and committing anything on that it will change then from 27% to 25%, but we have an ambition in looking on it long term, as everything has normalized now and see structurally wise, is the more we can do to make it even more efficient than the past because that's, of course, also going to drive our return on capital plus with interest rates being much higher, the cost of capital is, of course, higher than it was 5 years ago. So it's in there, but it's nothing I'm committing to right now, maybe at a later stage when we're further along in this pilot projects and see if we feel comfortable and having a stronger target in the future.

Any more questions from the room? Yes.

[indiscernible] from MDL Capital Management. Just a clarity question, clarification related to the strong cash flow generation on Q4 and on 2024. One of the comments you made was to recover your free cash flow at prepandemic level in 2024. I was just wondering, is it in terms of cash conversion or in absolute terms?

Absolute terms.

And so as a result, I'm just asking because I was wondering, you will have, based on the target of higher top line and higher EBITDA. So what is the reason of lower cash conversion compared -- in 2024 compared to 2019, the fact that we have less?

No, no, the cash conversion in 2024 will be higher, right? Much higher. Okay. Because it's -- the reason I don't count with my targets in 2024 is, I mean, I have a number, my CFO refuses for me to tell that number, so I won't. But there will be a stronger cash flow because we're releasing the extra inventory that we had. So I would count, mathematically you can probably do the exercise, give or take, where the cash conversion will be in 2024. So it's more when we move into '25, I think 80% is a fair target to have on business as usual. Anything else. Going once. Twice. I don't think that.

Yes. I would think all the questions there always, but I would like to, it was a really nice day. I mean, I learned a lot. You also said you learned a lot. I think I would say that's a good sign.

I hope so.

Yes. I really -- I think so. I hope you enjoyed this day and very -- is there anything else you would like to summarize?

Yes. Maybe I think a fun comment and then maybe you have it as a question, but we had an article this morning from [indiscernible] industry.

That's a good one.

Yes. And one other question I got was, so if you don't reach these targets, do you then get fired?

I actually wanted to ask that one myself, but yes, go ahead and answer, yes.

And I can't even remember my funny answer to the question. I mean, I have some board members here. I think I have a lot of votes in this room. And of course, I mean, I mean, I thought it was a funny question and I mean the reason we put financial targets out there is to clarify a little bit our view of the business going forward. And I think we are, without trying to be humble, the best views on what we think the business will develop going forward. And we, of course, know that, you have cycles in this, you have timing of these things. But I think the main thing was this is what we believe we can generate over the next 5 years, and of course, I added in the answer because that's how I am. But of course, our internal targets are even higher, right, Simon?

Yes.

I would say we've covered most of the stuff as well. And your answer was just perfect.

Was it?

Yes, I would say so. Thank you so much for coming, and there will be beverages and coffee outside.

Thank you.