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

Welcome to the Beijer Ref Q1 presentation for 2025. [Operator Instructions]. Now I will hand the conference over to the CEO, Christopher Norbye; and CFO, Joel Davidsson. Please go ahead.

Hi, everyone, Christopher and Joel here. Welcome to Q1 2025 report. So we'll get straight into some of our slides and then we'll finish off, as usual, with a Q&A. So summarizing Q1, from our point of view, a good quarter across the globe, and part of the heading, of course, was a very, very good EPS growth, and we'll come back to that. But a total sales growth of 16% while the organic growth was 4% and pretty stable or good across the globe, U.S., we'll come back to that and EMEA and APAC. We continue to have good growth from acquisition, which, of course, is part of the business model, which we will continue going forward with. So all in all, we would say a stable, good first quarter, especially with some uncertain times here, I would say, it shows the model continues to be very good even in these times. And then on the EBITA, a growth of 13% with stable margins compared to last year. We'll come back a little bit more on the different regions, but 9.4%, so happy with the margin development in Q1. Also cash flow positive. Of course, the people who knows Beijer Ref in details, usually Q1 and Q2 is an inventory and accounts receivable buildup and then we usually flush through cash flow in Q3 and Q4. So I would say, still a good and stable cash flow being Q1, so happy with that as well. And then an EPS growth of 20%, which is -- very happy about on there. And then, as you know, we closed the Cool4U acquisition beginning of the year, the leading HVAC distributor in Hungary. So all in all, on the total, good growth, good margins, and especially good profit growth in the quarter. Okay. Moving on to the different segments. Coming back to the word good and stable in all segments of positive growth in there, HVAC, 6% growth, which is also across the globe, I would say. Stable in commercial refrigeration, plus 2%, which is a decent level in that product category. And then OEM, 3%, which is a little bit lower than what we usually have in that segment. So I'm sure I'll get a question or 2, but we'll have the same answer. We see the order book coming up very good here, so we expect that growth to accelerate as we go through the year. So should be nice growth there as we move into the next couple quarters. Okay. Moving on to EMEA. Growth of 14%, driven by the HVAC, of course, related to the acquisition we've done over the last 12 months on GIA Group and Cool4U. Other than that, continues to be a stable market with good growth in Eastern Europe. Africa has been developing very well for the first time in a couple of years. That's nice. And then stable market in the Nordics and Central Europe, and continue to be weaker in Southern Europe, especially France. And also worth mentioning, of course, when you talk about EMEA and North America, it is preseason time, especially in the HVAC segment. So of course, it's more bigger quarters ahead as we move into Q2 and Q3. The OEM segment, we talked about, but we see that ramping up fairly nicely. And I know I've been talking in the last couple quarter about good quoting levels. We see the orders now building in the backlog, so it should be improving as we go through the year. And if you look at the different margins -- stable margins in the region at a good level for being Q1. So all in all, I mean, we'll come back to that, another stable quarter with solid margins in EMEA, and we look forward to moving into the high season here as things start heating up for Beijer Ref. Then moving over to APAC. APAC continues to do very well, both on sales and the margin evolution. I think you've seen it now for some quarters. So we are in a good position for sure in APAC and good markets in especially Australia and taking market share for sure in this region and been doing for quite some time and also driving the margin in there. So we did have, in March, a cyclone that did limit sales for 3 to 4 days. We expect to pick that up, not in Q2, but over the rest of the year as things needs to get prepared. So we're very happy with the development in there. And we also, maybe worth mentioning on this slide, we did a small acquisition related to securing some more quotas for refrigerants going forward. So very strategic for us, no major impact on the business, but puts us in a good position to continue to drive the market share evolution in especially Australia. Then moving on to the U.S. A solid 6% organic growth and a very good plus 31% growth together with especially our acquisitions there, Young Supply. Solid margins if you adjust for the dilution. Of course, a lot of things happening in the U.S., and I'm sure we'll come back to that on question on tariffs, supply chain, et cetera. But we continue to do well in our segments. As you know, our U.S. business is mainly built on aftermarket service replacement. And we see that market continue to be stable. And of course, the U.S. is the same that Q1 is a smaller quarter as we move into Q2 and Q3 and waiting for the first heat wave to hit Alabama, Tennessee or Georgia. So all in all, I would say, a very solid quarter, again, from the U.S. platform. So if you look at the growth per quarter here over the last couple of years, of course, continue to be very good. And we can also see now we had organic growth for the last 4 quarters. So we're happy about that in today's market. I would say it's not a booming market, but I think we continue to do well and it also shows how the business model works in a little bit more uncertain times in the aftermarket and service replacement. So we look forward to see the trajectory here going forward, but very happy with this slide, of course. And same moving on to the margin. I mean it's a stable margin under our Q4 and Q1 are our smallest quarters. So of course, we expect that to pick up. But all in all, in all regions, stable, good in the U.S., stable in EMEA, and we continue to make progress in the APAC region on there. So happy about the margin evolution in Q1. It is where it should be in today's market. And then wrapping up my part of the presentation, I believe, we're just summarizing 16% growth, stable 4%, nice EBITA drop-through, of course, and then an EPS growth of 20%. So all in all, I would say, a very good quarter from Beijer Ref.

All right. Good morning, everyone. As usual, dive straight into EBIT of SEK 778 million in the quarter, which is up 14% compared to last year. Financial net in the quarter amounted to SEK 131 million, same level as in Q4 and SEK 10 million below Q1 last year, on the back of lower rates despite higher net debt levels. So the way it's been now, base rates are approximately 1.5% lower compared to a year ago. On the tax side, we report SEK 165 million in the quarter, which is 25%, in line with last year. All in all, resulting in a net profit of SEK 482 million compared to the SEK 408 million last year. And if you move over then to our EPS, we report SEK 0.94, which is 20% up compared to last year, which we think is a very nice number in combination of good growth and stable margins and good development on our financial expenses. On the cash flow side, we continue to deliver a solid operational cash flow of SEK 450 million approximately despite the seasonal buildup of SEK 340 million in net working capital, which is in line with our expectations. And as Christopher mentioned here in the beginning, I'd still like to point out that Q1 is a quarter that we are building up inventory for the high season as well as gradually building AR as we went -- going into this high season. On the next slide here, you see that we have now delivered positive cash flow for 7 consecutive quarters. And we are happy about the level in Q1, and this is where we should be now when we have a more stabilized supply situation compared to in '22 and '23. Finally, shortly on leverage, our leverage ratio measured as net debt to EBITDA, excluding leasing and pension was sequentially stable at 1.8, which is 0.2 above last year. And net debt is SEK 1.6 billion higher than a year ago and related to the acquisitions that we have closed over the last 12 months. All right. To wrap it up -- thank you all. To wrap things up, you heard most of it already, good quarter in interesting times, with stable organic growth, nice acquisition growth, good margins, stable cash flow in there. So I think we're very happy about the execution in all our regions during the quarter and of course, the last years as well. Long-term, no major changes for us. Continue to be nice tailwinds, of course, here in EMEA with regulation also, and we see that also in Australia moving into New Zealand. In the U.S., you're starting the transition into new refrigerants, the A2L R-454B solutions that will come more and more during the year. We continue to develop the U.S. platform, opening branches, have another one coming online here in May. Launching the Private Label Heroes in the U.S., April, May. So all in all, we continue to focus on driving the value creation for the long-term of Beijer Ref and it's working well. So with that -- and maybe worth mentioning also on the acquisition side, I'm sure we'll talk about it in the Q&A, continue to have a good pipeline there for 2025 and beyond. So with that, we're finished and opening up for Q&A.

[Operator Instructions] The next question comes from Gustaf Schwerin from Handelsbanken.

Two questions. Firstly, we heard about some pretty big price increases effective April from one U.S. OEM yesterday. They said acceptance was quite good as well, which I guess is with the final customer there given the distribution model. I mean, is this what you're seeing from all the OEMs right now? And if that is the case, I assume you have followed -- yes. And to add to that, actually, I mean, can you comment anything on what kind of response you have seen among your customers over the past month then? That's the first one.

Yes. So I guess you're alluding to that comment in the U.S. market specifically. And we see the same...

Yes.

Yes. So we don't see any difference in the U.S. We saw most of price increases from not only OEM, but also across the board from small and midsized suppliers in the U.S. coming through here in Q1, and we're passing it on as we move into Q2. There's no -- it's from everyone, right? So there's no -- it's getting passed through. I don't have any other comments. We can see it starting to come through here in April and will continue in May and June as we go through the cycle. So nothing strange, and also remembering in the business model with aftermarket service replacement, we always pass on the price increases. So the general comment for us in that type of market, it's positive for us. So we expect that to come through here in Q2.

But just to be very clear because, I mean, most of the OEMs announced price increases during Q1. From what I understand, what we heard yesterday from one of the OEMs was another 2 rounds of price increases early April. So I'm just wondering if all the OEMs have done multiple increases now...

No, the way I would answer it is that, we're talking about OEM here, we're talking about HVAC manufacturers, and in my view, you have -- major ones are -- and I won't get into who's who, but you have, of course, Carrier, Lennox, Trane and Rheem and Daikin in certain extent. And a couple of them has done 2, a couple has done 1. And I won't go into who's who and if the other 2 are waiting to do their second one or not. But we're in this -- the comment you heard because I listened into last night, we're in a similar position for Beijer Ref, like one of our other distributors in the U.S.

Then just secondly, I mean, you mentioned the M&A pipeline. What's your general thinking on further acquisitions in the U.S. in the short-term? Are you putting those a bit on hold given uncertainties, or is it business as usual?

No, it's probably somewhere in between. Nothing is on hold. It's more of aligning together with the sellers and seeing how the market develops. So we continue and do our due diligence and alignment and probably also, in a prudent way, decide when and how we solve this together in these uncertain times. But in general, in the U.S., as you saw, it was a stable growth in Q1. Right now, there's nothing -- the waters are not super choppy for us in the U.S. So it's more -- and you put a caveat, you never know what happens when you wake up tomorrow, right? We have a U.S. guy here, and he checks through social every morning to see what's happening. So in general, I would say that we're more aligning on together with the companies we're talking to what the effects are and could be and how they're positioned. But at this moment, it's a lot of things happening, but it's not very choppy for us in the U.S. in our model. So we'll continue to focus. And as it looks today, also have a good year on the acquisition side in the U.S. as we move through 2025.

The next question comes from Vivek Midha from Citi.

I have 2 questions, if I may. The first is a follow-up really on the previous question, talking about tariff, of course, the direct impact and you've elaborated on that as well that you're not seeing a very choppy environment. But if we just think as we go into the second half in 2026, I appreciate there is a lot of uncertainty here, but how are you thinking about how this could impact the growth trajectory, particularly for maybe more discretionary renovation as well as the minority of your sales which come from new construction?

Yes. I think you're absolutely right. I mean it's a lot of things and unknowns out there. But if I just start to talk to what we've seen so far, and then the rest becomes more a high-level analysis or hypothesis depending on what happens in the next 3 to 6 to 9 months, right? So far, it's been a fairly -- our suppliers mainly in the U.S., if we talk price increases of 3% to 5% in the market flushing through here, that's not a revolution. Supply chain continues to be very stable. We have nice products and good inventory position for the season. The activity level is still for us good and continue to be good here in April. So the factual things, what's happening in our business is good in the U.S. Of course, there's an enormous amount of discussion on the tariff side and what's happening or not, which are going up and down. But so far, our business has not been major affected by that. And we do keep in touch all the time with our main suppliers, right, especially on the HVAC side and have very partnership discussion, how we manage this together. So on that side, so far, it's been good. If you look in the future, as you alluded to in your question, how will this affect the end demand and the consumer and et cetera. And there you need to break down different components, right? 95% of our business is aftermarket service replacement, right? So we're not super active in new construction. We're not super active on the commercial side, even if that's been pretty good over the last years in the U.S. So for us, the main business is still replacing, servicing, fixing system that break or are old, et cetera. So let's see how that market is -- will react to these changes of the consumer, but also in the back of our heads, remembering 70%, 80% of our customer finance what they do, it's mostly related to that type of question. I would say interest rate will have a bigger impact on this than the discussion. There's still a decent market in the U.S. on the job side. So trying to summarize that. So far, we haven't seen any effects of everything that's happening in the U.S. on our business.

That's very helpful. My second question is again on the tariff theme. Just following up on your comment that you're still expecting to launch private label in the U.S. in April and May. Your production and sorry, the sourcing, it tends to be quite regional. But my understanding is that you do source the private label product from or rather manufactured in Asia. So could you just elaborate on is there any impact to that launch from the tariffs?

No, because the product is already on the ground. So we're good to go.

The next question comes from Carl Ragnerstam from Nordea.

It's obviously good to see that you feel comfortable around current trading in the U.S. You grew obviously 6% organically in the quarter. Could you give us some flavor if you're seeing some dynamic shifts between the sort of component replacement sales and equipment sales? It would be super helpful.

The short answer is no. And it's also a little bit, when you look those questions, seasonality on Q4 and Q1 where you might have some more replacement, repair and now you move into more equipment heavy part of the season. So I think it's -- for us, there's no big changes in the mix or our business running. We have -- over the last 6 months, we have had a pretty good activity on projects and also the commercial side, but it's also because it's a small segment for us. So we're going to grow in that segment, but from a smaller base. So in general, not any big changes in our business as we see it based on the last couple of quarters.

And if we would see a more muted market at some point in the U.S., it would be the equipment side, I guess, that is more cyclical, right? And if that would be the case, do you think that it would be gross margin enhancing that we see sort of the spare parts side gaining shares?

Yes. I think it's -- of course, we have a higher gross margin percentage on the parts and services and if you change a fan motor or compressor or parts. So -- but in my view, it's still -- that's the way the market has been over the last 2 years. So if you look at statistics, housing sales in U.S. has been a 30-year low in the last 2, 3 years, right? So that continues to be on a stable low level. So right now, we don't have any parameters. We're waiting for the housing market to start wakening up and that will be a nice tailwind when it does. I think what's happened now is that it's probably going to take longer than expected because of all the turbulence in the U.S. But in the meantime, the business continues to tick on at a decent pace.

If we look at the refrigerant mix in the U.S. during Q1, could you shed some light on what portion is 410? What do you expect for Q2? And also, you tend -- I mean, you took the bet sort of seemingly at least on R-410 holding quite substantial inventory of that. Do you think that it will lead to sort of gained market shares compared to competitors taking the A2L bet or more A2L bet? And also on that note, how sticky if you gain market shares do you think that they are?

Yes. I think it's a hard question to answer. And we know less, of course, what our competitors have done. And I know it's a phrased question. I wouldn't use the word we took a bet on our side. We believe that the market transition into the new more A2L-driven solutions that you would still have a lot of interest in this year on the standard solution on there. So for us, we built up inventory to support that because talking to our customers and remembering that most of our customers are small installers, right, as we don't do big new construction and big commercial projects that extent in the market. So for us, it was more a strategy driven by servicing our customers in the best way we can, but still be enough conservative that we don't sit with excess inventory as the year goes through. So I'm not sure if we're going to take market share with this position, but we continue to service our customers in a good way. And I would say, in Q1, probably 85%, 90% of what we sold was the 410A solution, and in Q2, I don't know at this day, but of course, the A2L will continue to grow into Q2 and be a bigger part for every month we move in there. And we can tell you more as we go through Q2 what the trend is. But I would more say that we sit with a very competitive solution. We're also now putting in the Sinclair Solutions ducted solution based on A2Ls. So we have a nice price position on that product as well to service our customers. And we continue to expand on our branch network. So all in all, I think we're happy with our strategy at least for now.

And the final one, if I may, is on Europe, which is obviously your biggest exposure and gradually moving into the high season now. Because I guess it's a tricky market, Eastern Europe better, less good in -- I guess, in southern parts. From an inventory point of view, how do you think that you'll position yourself to the high season? What are your -- what is the strategy given that it is a tricky market to read, I guess, currently?

So we're always positive, and our guys out in the market are always even more positive. So we're always well-positioned when it comes to inventory. That heat wave can always come and then we need to be sorted out. No, but of course, we treat the model the way we built up, won't get into super details here is that we have regional structures, right? So we have an Eastern Europe market and a regional leader for that. We have a Southern Europe, we have the Nordics, we have Central in that. So we divide the market in different components. And of course, Eastern Europe has been seeing this trend for now a couple of years to build up accordingly. You're a little bit more conservative in the southern part because of how the market has been and et cetera. So it's treated very regional how you build it up. And usually with those regions, you can exchange inventory between each other as well depending on how the market plays out. So I think the model works well there. And if the market continues to be okay -- and the biggest weakness we had for the last 12 months have been France. If you look at Southern Europe, actually, Italy is okay, Spain is okay. So it's mostly France. And one day, that market will turn as well, and there will be a nice upside for us when it does. But I think also that's a little bit the business model we have. Being in 46 countries around the world, you have ups and downs also in the U.S., in different regions, will be -- but when you put them together, you get a pretty nice combination. And of course, if we get a booming market in France later on this year, it will be a nice upside. But I'm not betting on that right now. We need to see how the season transpires.

The next question comes from Viktor Trollsten from Danske.

So firstly, on pricing, I guess, in the U.S., if you could help us just understand sort of [ bills ] that we're coming from now. So how much of the 6% organic growth in the U.S. now in Q1 was pricing? And if you could help us with any comments on the expected price impact coming in Q2. I thought you said 3% to 5% coming. But if you could confirm that please.

Yes. So Q1 was limited price effects, and it usually is. If you take normal times in the U.S., and it's not normal times now, on the HVAC side, you usually get the updated pricing in March and you execute it in April. That's more normal pricing pattern. And of course, that's as a season starts moving in. You have a lot -- I mean, I'm trying not to make it too long, but you have a lot of components in the U.S. this year because you also have the A2L transition. And you have the old 410A that you bought in on. And of course, there's no price increases from the OEMs on the 410A because it's not being made anymore, right? So the price increases you're getting from the OEM side is on the A2L product. So I would say in the majority -- the vast majority in Q1 was volume, not -- I mean, maybe it's 1%, I don't know, but it's vast majority. And as you move through the quarter, we see price increases on most of our products flushing through in Q2 of 3% to 5%. But that's, of course, a timing effect as well how they flush through. So it's not a huge difference. I think the component that makes it more different. But for us, it's probably going to be more Q3, Q4 next year is also the transition into the A2Ls because those products are, I don't know, 8% to 10% more expensive as you move into that product portfolio. So did you get all that?

Yes. No, that was super helpful. I'm writing fast here, but so -- no that's super helpful. But I guess -- so we should not expect, and you mentioned this previously, I know, but no additional impact from the A2L transition, call it now, in Q2 -- Q3, Q4, that's more 2026. So I guess the clear question is 3% to 5% is including the A2L if you want.

Yes, because I think it's a fair assumption. And also remembering our business model where 55%, 60% is parts and supply and 40% is equipment. In the Q2, Q3, you get a little bit higher weight on the equipment side because you're in season, of course. So you would expect some impact in there. But for making it simple, maybe you assume 20%, 25% A2L transition in Q2, it's a guess. It might be more, but that could be an assumption to work on. And then you'll get, I assume, 40%, 50%, 60%, 70% in Q3 and so on. But -- so there will be some impact from it for sure, probably even more in June than in April. So month by month, that portfolio will take bigger and bigger place in the sales.

And I guess that comes on top of the other price hikes we are [indiscernible] and -- but let us work on those assumptions. But I guess, if you could add any flavor on the impact on gross margins and sort of the drop-through to profitability then on the price hikes, should we expect, I guess, a positive impact on profitability as well? Or what would you say?

I would always say, just think about it as stable. No, but in general, right, the A2Ls, of course, we should have a better drop-through, but the same margin, right, percentage margin, because it's more -- it's not going to be an increased percentage margin. But of course, we're going to sell the same product 10% more expensive with the same type of fixed cost base. So right now, I would just assume -- I think we're in a good pattern. We assume the margin should continue to be stable as we go forward, and hopefully, these things -- and if the market continues to be okay, it will help on the growth side of the business.

Fair enough. And sorry for pushing a bit. But the 3% to 5% price hikes on top [indiscernible] if you want to adjust to mid-tier tariffs, I guess, that should impact margins percentage-wise or not?

I mean it's a little bit the way I work. I believe it when I see it. And I have no concern just to make clear. Whatever price increase we get is pass through. I mean that's how the business model works and will continue to work. And remember, in replacement aftermarket service, that's how you work. It's not a project-based business. It's a day-to-day run business. How then the margin will evaluate -- let's see when we run through Q2, and we can probably have more details on it depending how it develops. But in general, I would say stable good margins. And remembering also in the U.S., we continue to open branches and invest in fixed costs. So we're more in a growth pattern than a margin pattern, if I may say so.

Fair enough. And just finally, on that topic because I guess the poor U.S. consumer has been through a lot in the [ tariff ] market in the last couple of years, for sure. So just given the replacement characteristic of your business, is there no risk of downtrading? I think Watsco talked a bit about it yesterday that they're actually [ feeling ] that -- enough is enough to some extent for the customer. And how is your portfolio then positioned if the customer would down trade?

If they would down trade, I now have a fantastic product view. It's called an A2L Sinclair, fantastic quality, a nice brand, and we'll stand behind it. So I'm ready. No, but it is, it gives us a very nice tool in running the business. But our assumptions are still mostly related to what we see in our business and the installers and installed base on our premium brand that we carry. We don't see any of those effects. So our main strategy -- and you might -- you know what, we have the option right, now, but the main strategy with bringing in our private label is to go after some new construction markets, some family housing markets that we haven't played in before because it's more a transactional brand. And now with the product portfolio we have there, we can go after that and make decent margins. So the strategy is not to play the game or whatever you said first, but we have the option if the consumer or our customer wants to.

The next question comes from Adela Dashian from Jefferies.

A lot of good questions already asked and answered. I'm going to actually stick on the U.S. topic a bit here as well. I mean we've talked about the positive contribution from price increases. But at the same time, we're still seeing the offsetting effect, I guess, from -- currently from the margin dilution from the recent acquisitions. Could you maybe help us or guide us in a good direction of what this specific constitutes? I mean is 1 percentage point, is that what we should anticipate that effect will be even going forward? Or what's the -- yes, how should we think about that?

Yes, I'll let Joel answer in detail. I think you should think about it like this. It's 1% dilution, right? And you should -- as we move into April, we're back -- it's going to be apples-to-apples because that's when we did the acquisition, I believe, of Young Supply. And I would assume the stable margins going forward in the U.S. because, of course, we are reinvesting and we'll continue to reinvest quite a lot in branches and fixed business. So even if we drive improvement in the underlying margin, our ambition is, as I think I said it before, to continue good stable margins and focus on taking market share and driving growth in the U.S., launching Sinclair, opening branches, investing in e-commerce. So we're trying to navigate both in the U.S. to build the platform out. And of course, we'll make more acquisitions in the U.S. as we go through this year and next year. So I think the underlying assumption is to assume the stable levels with that dilution that's been through the acquisition so far.

Yes. I think there is relatively little left for me to add on that. But I mean, it's exactly that, right? We -- the latest acquisition we did in the U.S. was done, I would say, it was in the end of April. So there is a slight effect, I would say, in Q2 from that, but then the comparison is in the numbers. So that together with the investments we are doing. And so I think the answer from Christopher was complete.

But surely launching private label is going to result in additional investment needs that you didn't have last year, correct, I mean -- so yes, the way to reach a stable margin development then for this year is to -- the positive impact from price increases?

Yes. And then, of course, we always work with -- we're getting -- I mean, we have, in our business model, driving synergies and improvement. And it's not only that. It's pricing tools. It's on the purchasing side. It's rebates discount and models. And of course, as you found our own launch private label, that should also be positive for the margin. But we're trying to balance those things to, as I said, having -- we have good margins in the U.S., continue to have those good margins and grow faster than the market in the U.S.

And then could you please remind us of what's your U.S. exposure or what percentage of your U.S. exposure that is impacted by the A2L transition today? I think you previously said 20%, if I'm not mistaken.

I think in Q1, it's 10% to 15% of our sales of equipment that's been A2L. And that's going to ramp up month by month in Q2. So I think it's be -- we'll get back to you as we run through Q2, what we're trending at in, but I'm sure as you move into June, I would expect to be trending about 50% on the A2L. I'm guessing now, but that would make sense.

The next question comes from Karl Bokvist from ABG Sundal Collier.

Question on APAC, a region where you said you had adverse weather effects affecting you and yet you still grew 7% organically. So the effects of weather and potential branch closures, et cetera, how much do you think that had an impact on the growth figures in Q1?

Yes. So from our side, I mean, we had a closure on 3 to 4 days and in quite large part of our Australian business. When we look at it, we are -- I think we saw the underlying pace in the business in the APAC region was at a similar level as in Q4. So I would say we are really, really happy with the pace in the quarter despite of the closures in the region. So generally, the gap between Q4 and Q1 in organic growth in APAC is caused by this closure period.

Understood. And then in EMEA, the margin pressure that you, in Q4, highlighted from heat pumps and now in Q1, you say it will gradually have a smaller effect. If you just look year-over-year, the margin was only down 0.1 compared to 0.7 in Q4. So how much of an effect should we actually factor in from this heat pump dynamics in Q2 and onwards?

I don't have the mathematics exactly because it's points here and points there. But I think the assumption that we have done is that it will be not visible as we run through in Q2 and Q3 because our mix completely changes, right? We're focused on the cooling side and it takes over and it's the main product that we sell. So I think the fair assumption is that we are mainly through this type of flush out of the inventory in Eastern Europe. And as we replenish it and move into Q4, we don't expect to have any real issues with that component.

And you need to look back a little bit on the margin gap in Q4 as well. I mean, there, you had an enhanced margin issue, so to speak, from the strengthening of the U.S. dollar, which added to the dilution from the heat pump side, which reversed now in Q1, where the euro strengthened against the dollar again. So that's why I have a smaller gap here in Q1. And as Christopher said, we don't expect the heat pumps to be any visible driver to any extent going forward in Q2 and Q3.

Understood. The final one is just in general, in these turbulent times, do you feel that you are still able to gain market share? I mean, you clearly talked about a lot of initiatives you've taken throughout the organization over the past 5 years, but it would be interesting to hear.

Yes. I think it's, of course, on the -- on 1 quarter it is 1 quarter. But what we've seen when we do analysis, we have main regions where -- I won't go into detail where we're taking market share for sure, but it's also part of the model is moving into new segments with the private label absolutely taking market share, but that whole market is taking market share in general. So it's also moving into those trends. So I think on the HVAC side, absolutely; on the OEM side, absolutely; and then refrigeration, I would say, is stable. And the focus on expanding the refrigeration side is more on maybe the U.S. and bringing into new branches and down, but at some small level. So I would say, on HVAC and OEM, you can put us up against anyone. I think we're in a very good position.

The next question comes from Douglas Lindahl from DNB Markets.

Coming back to APAC just briefly, I would call it pretty impressive margin execution here for the quarter. Is this as good as we can see the profitability in that region? Or are you trying to balance this more towards growth in the future? How should we think about profitability for that region specifically?

Yes, we're never happy, but you're not allowed to increase your expectations. So keep them stable. No, it's always more things to do. But of course, we said all along that we want to get it up to the 10% plus as a region and focus on growth. But of course, with this higher organic growth, you get a nicer drop-through, you get things happening when you're moving at 7%, 8% organic growth. That's also part of the success story. And you've seen a lot of good market and work on the synergies with the acquisitions we've done there with a much more better supply chain, also building up private label, et cetera. But I think it's getting, as you said, to a good level, and we also see more ducted sales and integrated solution in our mix versus just selling split system. But you're right, I think we're getting to a good level. It's not going to stop us to drive the margin. But if we can continue having a good growth trajectory with these margins, that would be a nice development. But there's still some work to do for sure in the APAC region. And also remembering it sounds like (a big market) for us is New Zealand, and that's been probably in recession the last 2 years. So that should also pick up maybe not this year, but next year. So yes, we feel good about the APAC region and the direction it's going.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thanks all for listening in. And let's all hope we have a fantastic summer. And we'll talk again in July. And if you have any more questions, feel free to reach out. So thank you very much for this hour.

Thank you.