Ependion AB (EPEN) Earnings Call Transcript & Summary

Hi, and welcome, everybody, to the Capital Markets Day of Ependion. My name is Markus Almerud. I'm an analyst for the company. And I think with [indiscernible], I will hand the word over to Jenny Sjodahl, who is the CEO of Ependion. A warm welcome to you, and then I'll let you introduce yourselves and the team and the agenda. And then we'll do an agenda, then Q&A.

Thank you very much for that, Markus. Good afternoon, everybody, and welcome to our second Capital Markets Day in modern history, I would say. The last one was in December of 2022. And welcome also to those of you who are following us online. My name is Jenny Sjodahl. I am the CEO of Ependion since 2022. And I'm also the CEO of Westermo, one of the business entities since 2017. So here we are, 5 March. We are well into the first quarter of the year, of course. We will release our quarterly report on April 24. And the fourth quarter of '23 is pretty much history now. So we will not talk obviously about how things are going right now, but we really want to give you a deeper insight into Ependion and its 2 business entities. What does our markets look like? What does our business model look like and also give an overview of the electronics new strategy. So that is the objective of the day. With me today, I have Joakim Lauren, CFO of Ependion; Kristine Lindberg, CEO of Beijer Electronics; Lena Westerholm, Head of sustainability; and Pierre Öberg, Market Director for Global Industries. And Pierre actually got to know about his participation yesterday morning because David, who was supposed to present the Energy segment actually is ill. He has a very bad flu. So luckily, Pierre, you could step in his place. All right. Let's have a look at the agenda. So first of all, myself and Joakim will give you an overview of the group. And after that, we will move into Beijer Electronics' strategy with Kristine. After that, a short break. And after the break, myself and Pierre will give an overview of -- we will deep dive a little bit into Westermo's key verticals and especially into the Energy segment. And last but not least, Lena will give an insight into how we are working with sustainability as a way to also drive our business. And at the end of the session, there will be a wrap-up and then a Q&A session. So we would prefer if you would save your questions for the Q&A so as to not ruin the time schedule, so to say. We have quite a few presentations. But if there's something really that you don't understand or something that you really want to ask, of course, feel free during the presentations. Very good. So let's move into the topics then, Ependion's journey. Most of you know us, but just for those of you who may not know us that well, we are a technology group. We are specialized in industrial data communication, visualization, connectivity and control for industrial applications. We are about 1,000 employees, a turnover of SEK 2.5 billion last year. And what is important to know about this group is that we develop our own product is really an important part of our strategy. And we also have an extensive domain expertise in the different areas where we work, working very closely with our customers so that we can really sell on value. That is an important cornerstone of the group. We are also present in 21 countries -- 20 countries, soon to be 21, I should mention. We are opening up an office in India this year for the Westermo business entity. So we have a pretty good coverage there. Looking at what we do, again, for those of you who are not familiar with us, we have the 2 business entities, Westermo on the one hand, being specialists in really robust industrial data communication products. So switches and routers that our customers use to build data networks that are used to transport data for really critical applications. And the offering here consists of a very robust hardware combined with our own developed software, WeOS, where a lot of the intelligence of these devices actually sit. And the same goes in a way for Beijer Electronics. Beijer Electronics have been specialists on human machine interfaces for many, many years. So what you see on the slide here are so-called HMI, human machine interfaces or operator panels, you can also call them. And they are used by our customers to visualize what's happening inside machine or some kind of industrial equipment. And they can also be used to connect different equipments together. So they also consist of a robust hardware that comes in different shapes and forms, different sizes combined with the IX software, which allows the customers to actually configure those panels to do whatever they are supposed to do, so to say. So that's in a nutshell what the 2 business entities are doing. I mentioned global coverage before. When I joined group, I was quite impressed by our relatively big presence in key markets. We are a relatively small company, but still, we have our own people in quite a few places in the world. Most of the dots that you see here on the map, our sales units. We like to be close to our customers in the different markets. But we also have production and R&D centers, the main ones being in Sweden, Investors in [ Malmö ] and also in Taiwan. So -- and you can see our geographical spread on the right-hand side here. Last year, around 15% of our turnover came from North America, 65% almost in Europe and some 20% in Asia. So a pretty well-balanced spread geographically, I would say. What happened last year, as you can see on the numbers here was that we grew in both North America and Europe, but we actually did shrink in Asia, mainly driven by the weak demand in China. Looking at what has happened over the last years, as those of you who have followed Ependion or previously Beijer Group for a while now that the group has had its share of challenges in the last years or 4 or 5 years, let's say, where we have had a profitability problem in the group, as you can see here. However, I would say that in the last couple of years, we have really managed to stabilize the business and we are now in a place where I feel that we have a much more stable situation. 2023 came out as a record year for us, both in terms of sales, profitability and also return on capital employed. The orders, as you can see here, went down a little bit, mainly driven by the Asian market, as I mentioned. But overall, I think that we have taken some important steps forward. There's still much more to do. Of course, we are not happy with this, but we are definitely on the right track. And if you look a little bit closer under the hood here, I mentioned we have the 2 business entities. Profitable growth is, of course, what every company is kind of looking for because at the end of the day, that's what creates value for everybody, so to say. And if you look at the 2 business entities, you can see that they are a little bit in different stages here. In Beijer Electronics, we come from a situation where we have struggled with profitability. And if you have problems with profitability, there's no point in really focusing heavily on growing the business unit. You need to fix your issues first in terms of whether if it's gross margins or cost or whatever it may be, the focus needs to be on fixing that. So you can say Beijer Electronics is very much in the phase where we want to stabilize the business. We have stabilized the business quite a lot over the last couple of years. And now the focus is on profitability as Kristine will be talking about in a bit. If you look at Westermo on the other hand, it's an entity that has been profitable for many, many years. It's had its ups and downs, of course, like all companies, but we have actually tripled the revenues in Westermo since 2017. And the EBIT level is actually fivefold what we had in 2017. So it's a healthy business that we really want to grow now. So you can say that the mode in Westermo, so to say, is really focused on growth, of course, maintaining/increasing the profitability level also in Westermo, of course. If we look at what happened in Ependion in 2023, I think the most important changes made in the group in 2023 were the changes in the management, with Kristine coming in as new CEO of Beijer Electronics and also with Lena joining us Head of Sustainability, 2 very good additions to the team. On top of that, we had a few nice orders that we actually publicly announced. One of them was for a frame agreement for the Swiss train manufacturer Stadler that we got in June. Some EUR 8 million was the size of that order for the new tram generations. We were very happy about that. And the second one was an order in the Energy segment for substation-automation connectivity for a large European distribution operator. which we are not allowed to name. And then in December, as you probably learned, we took the decision to establish ourselves in India. I will talk a little bit more about that later. And now in March, we are presenting the new Beijer Electronics strategy. So I would like to talk a little bit about the mega trends that are driving our growth. And I've chosen those 3 because I feel that they are very well connected to our business. The first one being digitalization, the second one having to do with sustainability and the green transition. And the last one has to do with demographic changes and urbanization. So let's look into how these actually tie into what we do in Ependion. Well, the first one, digitalization and now, of course, also the AI development. If you look at what -- you can talk a lot about digitization. It's a very wide word, so to say, but in essence, what digitalization means is that you want to have an increasing number of sensors and data points, you want to measure things, you connect all your assets, all your things, and it's really about collecting more data points so that you can then use those data points to do whatever you want to do with them to increase productivity, efficiency and so on. So it's really about collecting more data. And this has led to an explosion of data, of course, which is very positive for us because Westermo, what do we do? We make sure that data can be transported from one point to wherever it needs to be in a safe and secure way. So this is good for us. And in Beijer Electronics, we actually help customers visualize and make sense of data. So therefore, this development, I would say, is very, very positive for us. The second one is sustainability and the transition to green economy. I think we all know by now that there is a major transformation ongoing every day in the way we produce energy and in the way the energy mix is looking. And you can argue how fast this change is going and so on, but we can really see signs that this is really happening now. And what that means is that there is a lot of challenges in the energy grid, and Pierre will talk more about that in a bit. Meaning that also there, digitalization is happening, you need to measure more things in order to control your grid and that also means increased investments in modernization, extension and so on of the power grids globally. This is not just happening in Sweden, of course, it's happening on a global scale. And this is a huge market. We are still very small. So there is definitely massive opportunities for us connected to this trend. And I think also for Beijer Electronics, when it comes to sustainability, I mean, Kristine will talk more about it, there is a lot of connection between what we are doing in Beijer Electronics in terms of automation, digitalization that help increase efficiency, decrease waste, ships that use less fuel and so on. So there are a lot of connections between this mega trend and what we are actually doing. The third mega trend has to do with demography and urbanization. As you can see here on the left-hand side, in the next decades, 2.5 billion more people are going to live in cities on this planet. So that obviously means that there will be a constant need for public transport, for clean energy, clean water and so on and so forth and that, of course, ties into both Westermo and Beijer Electronics' businesses. The other thing is that most of the advanced economies in this world are facing quite a massive challenge in terms of demography because the share of people in working age, and you can debate what working age is. Here, it's between 15 and 64, it's declining quite sharply. And the countries are running out of cheap labor. So labor costs are going to go up and we will still want to produce more and more stuff, so to say. So this actually means that everything that can be automated will be automated, which is also good news for what we are doing. So with all these changes going on in the world and despite wars and inflation and what have you, this is what really makes me sleep well at night because if you look at our business and the different sectors that we are in, they are all driven by the trends that I just talked about. And we also have a very nice spread in terms of our exposure to different industrial segments, which is a really good thing for us. We like to talk about product development, and we spend a lot of money in product development, as you can see here, in the range of 12%. And that is, of course, a lot if you compare to many other industrial companies. And why do we do that? Well, we do it because our own product development really is the engine when it comes to our organic growth. This has been proven over and over again that this is the case. And what I think is important to understand about this spend is that we are developing a lot of stuff very closely together with our customers. So if you take the train business in Westermo, for example, oftentimes, the customer comes to us, they have a project with certain requirements. And they ask us, "Can you tick these boxes. Do you have this functionality and so on?" And sometimes, we don't. Sometimes we are missing functionality to be able to help the customer in a certain project. But what we often do at that point is that we say to the customer, "Okay, we don't have this now, but we can develop it." And the good thing is that train business is often long term. So the project is not going to happen until maybe 2 or 3 years down the line, which gives us enough time to actually develop this functionality for the customer and the customer trusts us to actually do that on time. And this has proven to be a very good way for us to develop a portfolio that we know the customer needs. And later on, we can use this functionality for other customers and other projects as well. So I would say that the money we spend in R&D is low risk in that perspective because we are doing it together with our customers. And it's actually very much the same situation also in Beijer Electronics. On the left-hand side here, you also see software, hardware and services. We have a rather traditional business model today where we are selling hardware with the software on it and shipping that to the customer. We are working quite a lot now to actually add services part of the business. Especially in Westermo, we have come quite a long way because we know that our customers are lacking competence in some cases. There are definitely space for us to offer more of a services portfolio. We just haven't really gotten to that previously, but we are starting really to develop and put that together now. All right. Coming then to our financial targets. I think most of you have seen those before. They were adopted in December of 2022. The first one is related to our organic growth, and we are saying that we should grow at least 10% organically year-over-year. Now that has been okay for us over the last years. Last year, we grew 16% in prevailing currencies and 13% in fixed currencies. And if you look at the last 3 years, we have had a growth rate of 18% in fixed currency. So at the moment, we are above our growth target there. But of course, the challenge going forward is to every year grow at least at that level. Then I will move to the last one, the dividend side. We have not set the target that we will have a dividend that is x percent of our earnings or so on or so. We have just said that we want to be a dividend-paying company. And of course, as our cash flows increase and improve, as Joakim will mention later, there will be room both for acquisitions, organic initiatives that we want to do, but also for dividends. And the Board's proposal for dividend 2023 is a doubling of the dividend the previous year, so SEK 1 per share, still not fantastic, but it's at least an improvement to where we compared to where we come from. And then the middle one, the profitability side of things, and I wanted to spend a little bit more time elaborating on that. We are at 13%, as you have noticed, in 2023. Our target is 15% on group level. So what are the levers that we can work on to reach those 15% and beyond? Well, first of all, we know that we have a strong operational leverage on volume. So growing in our key segments is really important and also both the business entities now are focusing on segments where we know that we can get a premium price because our values are really important to the customers. Second one has to do with operational efficiency. We have been talking about this quite a lot, but 2023 and 2023 -- 2022 and 2023 were a real nightmare for us, to be quite frank, when it comes to our operations and our factories because of the component crisis. We were struggling big time getting hold of material. We had to replan daily in our production facilities. We had to spend millions of kroner on extra spot purchases just to get hold of components. And we had to produce really small series because of all these replanning. So there's a lot of efficiency gains that we can actually see now that we come out of the component crisis and the effects of those spot purchases are fading out. Then when it comes to gross margin, product mix, price management really important. Kristine is going to talk about in a bit how we are focusing our portfolio on fewer products. And also the software and services offering that I mentioned is going to help in this direction as well. And last but not least, the Beijer Electronics' journey that we see in front of us now with an increased focus on profitability because, of course, if the group is going to reach 15%, the business entities need to be somewhat above that level for this to actually work. So with that, I will hand over to you, Joakim.

Thank you, Jenny. I'm Joakim Lauren, and I'm CFO for Ependion. I would now like to continue some words around the Ependion journey with a more number perspective on things. I will start with looking into 3 areas of our financial development that is worth analyzing. One is the order and the backlog situation, one is the profitability and the third one is cash flow. So if we look at orders and sales quarter-by-quarter, the light line -- light colored line is the orders and the darker line is actually sales. And you have also a book-to-bill on the orange dotted line. If you look at the orders, by end of 2020, it really took off, and we saw some really good growth numbers. And you can also notice that the sales was lagging behind somewhat related to what Jenny pointed out. We have a shortage of component -- electronic components in the world. So we were not really able to step up in line with the order intake. During 10 quarters, we added about SEK 900 million of extra backlog in that period. And that is, of course, driven by the growth, but there's also an effect of changed customer behaviors. We had customers prolonging their order horizons. We had customers increasing their safety stocks in various steps in the supply chain. Then if we look at the last 2 quarters, we have seen an order intake lower than the sales level. And of course, there is an element of that we have a somewhat softer market, especially in Beijer Electronics and the Asian market driven by China. But it's also amplified by customers changing back. What we see now is customers shortening their order horizons, lower their safety stock levels and that is then amplifying the order intake decline, you could say, compared to where we are coming from. It's also obvious if we look at also in this perspective. If we see now the backlog in the curve, you can also notice the backlog in relation to sales. And historically, it's been very steady on a certain level. During this period, it has peaked, but still we are on a high level when it comes to the backlog in relation to the sales. Then I want to talk about profitability. Here, we have the last 6 years, sales levels and profitability. And we have basically 3 stages that we want to point out. We have the stage of transformation, which is in 2018 and '19, where we had quite a lot of changes happening in Beijer Electronics. We had a period of '20 and '21 pandemic where we were severely impacted, especially within Beijer Electronics. And then we have the last 2 years where we are seeing a good growth, we're seeing profitability increase towards the targets. To understand what's behind this, I want to dig somewhat deeper and talk about the business entities, talk about Westermo and Beijer specifically because they differ -- they are in different stages as Jenny pointed out earlier. If we start with Westermo, there is a nice continuous growth development, very nice curve, you could say. And if we look at the period '18, '19, '20, quite stable profitability level of 11%, 12%. Then in 2022, we were really hurt badly with the effects of the shortage of electronic components. We were not really able to increase our delivery pace as we wanted to as our customers pushed us for. And as Jenny pointed out, we really struggled to handle the situation and the way we were operating was definitely not efficient. And basically, the profitability for 2022 maintained on the same level as we have seen before. Then for 2023, it really took off. We were able to work to lower the delays that we had to some customers and really step up in the way we are delivering as the component situation became much more normal. And you can also see the development on the profitability. We really took a step up to nice and healthy levels. Then we have Beijer Electronics. 2018 and '19 were the years where we phased out quite a lot of the historical legacy products within Beijer Electronics. And then when the pandemic hit us, you saw the develop -- you see the development here. We took a quite severe hit on the top line. We did some cost adjustments, but the focus was really to be able to capture the growth once the pandemic would ease off. And then 2022, we took a step forward in Beijer Electronics. We were not as hit as Westermo when it comes to the component shortage. And we were able to go from SEK 800 million in turnover to SEK 1.1 billion in 1 year. And you see also the development of the profitability. The leverage effect in Beijer Electronics that we talked a lot about was there. And we came up to healthy levels, not where we want to be, but at least healthy levels. And then 2023, we have seen then a decline in volume in Beijer Electronics as an effect of a softer market, especially in Asia and China impacting the top line. We've had quite a lot of focus on profitability, and we've been able to maintain the level that we saw then from 2022. So 2 business entities in various stages in their development. Cash flow. As we have taken steps forward in terms of profitability, of course, as the CFO, you want to see also a nice cash flow coming from it. The situation with component shortages has impacted us. And you see the graph on working capital in relation to sales. It increased quite heavily. And that -- and the main driver for that has been higher inventory levels. It was only the last quarter basically of 2023 where we saw a decent cash flow coming through. But if you look at the working capital levels, you still see that we are on a really high level. So there's definitely potential for more. So to summarize the reflections. Yes, when it comes to the orders, we should be aware that these changes of customer behaviors in the first phase where we had a lot of prolongments and then what we've seen now lately where we have the shortening of order horizons, that has amplified the development of the ordered orders. When it comes to the profitability, we have seen 2 years with a steady development, but we have 2 business entities in various stages. We have not had 2 entities going in the same direction, you could say. And when it comes to cash flow, well, there is more to come. We have still high level of working capital. Some words on M&A. We are working actively on mergers and acquisitions. During the last 4 years, we have done 4 complementary acquisitions to our business entities. We did the last one April last year for Beijer Electronics. And we have a constant process of evaluating targets. We are doing it carefully. We really want to make sure that when we do acquisitions, we need to have a fit of the culture, we need to be convinced that the acquisition target will actually contribute to our financial targets. It should be stated that there's not a lot of targets out there that will fit exactly into our business, but we are working with it on a continuous basis. I want to point out that it's not only -- we are not only working with 100% acquisitions. We do also work with other setups that would contribute to our business entities like strategic partnerships where you can have an element of equity investments. But as I said, we are focusing on acquisitions. We are working actively with it, and we have the financial muscles to act when we believe it's the right target. That concludes the journey on -- for Ependion. And now I want to hand over to Kristine.

Thank you, Joakim. So moving into Beijer Electronics. My name is Kristine Lindberg, and I am the CEO of Beijer Electronics since almost a year now. And I will take you through, among other things, the strategy. I mean we've been through a strategic review over the last, let's say, 4 months, which is now being implemented in the organization. So a lot of what I will talk about is centered in that strategic review. I will talk a bit about also our customers and how we add value to customers and how we are building a foundation for profitable growth. And maybe just a couple of words. I mean I'm coming from 2 other Swedish company, both actually are customers of Beijer electronics. And one in particular is one of our largest customers, Alfa Laval, and I was part of Alfa Laval when Alfa Laval started using the HMIs from Beijer Electronics. I was part of the customer journey. So I've seen that journey from the side of the customers, and that is how I got to know Beijer Electronics. So it's been an exciting journey. And I've been now, as I mentioned, in the company for almost a year, and I think we are in a position where we are doing many things right. We have some very strong areas where we have highly competent employees, and we are really good at supporting customers. But I think the challenge is a little bit that we want to be everything for everyone. And that is diluting the approach. And that is something that I will come back to when I talk about the strategy, how we are changing that. As I think both Jenny and Joakim mentioned, we are on a journey here towards profitable growth. We've created a stability over the last couple of years and we are now building the foundation for profitable growth. So before we really put all the efforts into growing the business, we are creating a good foundation where we are adding value and focusing on those customers and customer segments where we add most value to our customers and get the most leverage. Joakim talked a bit about the journey that we've been through coming from 2022, which was a record year driven. I mean order booking was a lot driven by fear of not getting product. So we have very long time horizons when customers were placing orders. That is stabilizing now over 2023. And we do see also, of course, that the overall economic -- global economic situation is, of course, impacting us in demand, especially in APAC. Not so much that we are not -- we're not losing customers, but those customers that we are working with have a shorter time horizon for the order bookings, and we are also delivering from the backlog still. So our strategy is really about building the foundation for growth. So I will talk a bit more about that. As I mentioned, we've gone through a strategic review. And it is not -- someone asked before, will there be any bombshells in this presentation? And no, there will not be. It's really about very sound business decisions, focusing on those businesses that bring you most value to customers and also in terms of where we can charge for what we deliver to our customers. When we did the strategic review, we had help from a consultant company, and that helped us in creating a good structure where we were focusing -- I mean, it's a structure that I think many companies have been using. It's well tried and proven process, but it has really aimed at defining a winning aspiration, where to play, how to win, what capabilities do we need to have in place and then the management systems. We have also focused very much on an outside-in approach on the strategy, meaning there has been an extensive analysis of our markets, looking at the global trends, but also interviews with customers. We had in-depth interviews with more than 30 customers where we've been asking them around 3 areas. One is, of course, around our own strength and development areas, what do they think we are good at and where do we need to improve. We've also asked them about what will you require in the future from us, how do we need to adapt to your future requirements. And thirdly, we have presented them with 15 buying criteria and asked them to rank them, prioritize them, which one is most important and also then rank our achievement on each of those business criteria to give us a good picture of where do we stand in that. Then we've been working also with our internal team. We have a lot of competent employees on our team. So we've had a bigger group. We've involved roughly 50 of our employees in the strategic review and that has created a really good and sound process. And of course, we've made a very thorough financial analysis. Before we go into the details of the strategy and what that has given us in terms of direction, just a couple of words on the trends that are shaping the business that we are active in. Jenny and Joakim have touched upon these as well. And those are, of course, the same that are applicable for all of Ependion businesses. Specifically mentioning digitalization. Here, we see a trend. I mean industry 4.0 is not new. It's been around for more than 10 years. But it is really shaping the industry that we are in. Specifically also now around AI that is coming in, cybersecurity becoming more of a hygiene factor. And we also see a trend in -- previously, you've had data at the machine. You've had an HMI at the machine, and it was very panel focused. You're at the machine, and you can see the data and you can make some commands and you can control the machine. But now we see there is much more mobility. The data needs to be available wherever it is needed. So we see now that it's more centric to the people that need to see the data. So the data needs to be where the person is. So much more mobility. And it's also about visualizing the right data. It's not been in the mass of data. Bringing masses of data to the cloud is just costly. It is creating valuable insights through presenting the right data where it needs to be. That is where we need to excel. Sustainability is important, of course. And we see that in our customers where they ask us to help them become more effective. Their solutions need to be efficient. And that is a common theme in the discussions that we have with our customers. It is also about durability, lifetime, reducing waste, et cetera, et cetera, but it's important for us. Throughout the strategic review that we did, we made a lot of analysis, of course. And this is a picture of the global HMI market. It is worth around USD 5 billion. And it has an annual -- compounded annual growth rate of almost 8%. What you see here is, I mean, the numbers with the percentages is the share of the total market. And you can see that the highest share is in the U.S. with about 1/4 of the market being in -- of HMIs being in U.S. The color of the different boxes is how big is the projected growth rate. So the darker, the higher is the growth rate. So the conclusions that we take here, U.S. is the largest market followed by China. And in China, we have the highest growth rates. And we see that the Americas and APAC has a very good potential for us to grow. But we also do have a very good business in EMEA. So where we are based today is actually quite well reflecting where we see the market is. Another takeaway is that from the analysis is that software is actually growing at a higher pace than hardware. So software is becoming increasingly important. We know that already. We are already spending the majority of our investments in R&D on software development. But we see that this is key. We see also that the hardware is becoming more of a commodity and software is the differentiator. So we do believe that software is going to grow at a faster pace. What we see from our customers when we ask them is that they still want to buy the combined solution. They don't particularly ask to buy software alone and hardware alone because it has a value when you get it together as a combination. But software will be the differentiator. We can also see that cloud-based solutions are growing faster than on-premise HMI. And it's in line with what I said also about the mobility. Nobody wants to be tied to that machine. It needs to be -- the data needs to be available wherever it is needed. If that is in the factory or in the management rooms, on-site, off-site, so there can be no limitation basically in that. And this, of course, works really well for us then because we do have cloud-based solutions and we have WebIQ, which was acquired actually on the same day that I started. And I'm so happy to see that it goes so well with a strategy that we are embarking on, and it is the WebIQ solution is really opening up new business opportunities for us. So as I mentioned, we talked to more than 30 customers. And of course, we asked them, why do you work with Beijer Electronics? And we see 3 areas where we stand out. And it is around the customer relationship and the technical support. We have very competent employees, and we are good at supporting our customers, both presales with finding a good solution and post sales along the lifetime of the installation. And that is something I actually saw quite firsthand when I was part of Alfa Laval was that constant engagement from Beijer Electronics throughout the whole process. And we also have a portfolio of open solutions, and that is the only way we can go. We are a small player. So we need to be open, and we need to be close to our customers and flexible in terms of how we develop a solution that can be flexible over time as well. And that is something that our customers appreciate. And the third one is, especially in the marine industry and in the rugged. Rugged is basically outdoors. Environments that are exposed to weather, temperatures, vibrations, dust, et cetera, requiring certain specifications. We are really good at that, and customers appreciate the solutions from Beijer Electronics. And the good thing is, of course, that where we see the customers appreciate us the most is where we are actually getting the most value add to our customers. And those are our high-margin businesses. So there is a good correlation there. But they also put some requirements towards us. What do they see that they require from us going forward. For example, cybersecurity, I mentioned before. It is not something -- it's a hygiene factor. You have to have it and you have to have the right certifications for it. And of course, in any business we want to play, we need to have the right specification. So that is an ongoing work for us. Also when it comes to software functionality, that is also a requirement we are getting from our customers that they put a requirement towards us that we need to be able to develop and deliver functionality over time. As their requirements are changing, we need to be able to deliver functionality over time. And with our X3 portfolio that we will be launching by end of this year, this will be made so much easier for us because it's built in a containerized approach, meaning you can build and you can unlock new functionality over time. It fits also very well with the cybersecurity requirements because the X3 that we will be also, as I mentioned, launching at the end of this year, it is also very well developed just with the cybersecurity in mind. The last 1 where we -- where I have visited many of our customers. And what I've heard also from some of them, since we are selling to machine builders primarily, they say to us, if, for example, they are selling our solution on their machines to customers. If it is a Beijer solution, they need to sort of explain to their customers what is Beijer, how does it work? But if it's Siemens, they don't have to explain. So for us, it is really about becoming much more known in those segments that we want to focus on. In those segments, we will be and we are striving to be a very well-known brand. And that will then smoothen the way to our customers. So creating growth through focus. I mentioned before that we have been -- and that is something that I've seen since I came in trying to be a little bit of everything to everyone. And that goes a bit in our DNA. I think we want to serve our customers, and we want to develop solutions to our customers. And this whole strategy work has been about focusing our efforts, aligning our efforts towards those customer segments where we add most value and spend less or no time on those segments where we struggle and where it's a price fight and where there are many other options. We want to spend less or no time on that and more time on those value-adding segments. And those are primarily 3 areas. And as I mentioned before, the marine industry is an industry where we've been for a long time. Customers know us. We are well known. We don't have to explain who we are in this to the marine customers. And typically, the machine builders within Marine are either smaller, only focusing on marine or they are bigger cooperations with the Marine division like Alfa Laval. They have 1 division only focusing on Marine business. Then we have manufacturing. Manufacturing is where we have our largest installed base today. So we have a lot of customers within manufacturing. And manufacturing is a wide area. But what we have found is when we focus on machine builders, it doesn't really matter what the machine actually does. The solutions we provide to the customer are very similar. They do the same things. So here, it's more a matter of focusing on the machine builders where we see we can add value. And here, we say we focus on one type of customers. It's more the midsized machine builder. They manufacture quite a complex machine, not so many every year, but our solution is adding a lot of value to their machine. And I will go through one of the examples shortly on that. The other example is -- for example, Alfa Laval, which is a very large machine builder they have a global coverage. They typically have their own automation department, which the smaller ones don't. They will work with many suppliers and maybe one supplier for HMI, another supplier for control, a third supplier for something else. So with a global large machine builder like Alfa Laval, we sell typically one product like the HMI, but in very large volumes. And when we are in on 1 of those solutions, then we are in for the long run. So basically, they will buy those HMI on a continuous basis as long as that product line exists. For the smaller machine builders, it's typically a solution which entails many different products and where we add a much larger value, but the number of machines is probably smaller. Then we work with system integrate -- integrators. And they typically come into play with the smaller ones because they don't have their own automation department. They are too small for that. So they take the help of a system integrator and we partner up with the system integrator or we sell through the system integrator. But our target group is the machine builder. And the third one rugged environments. We talked -- I talked a little bit about it. It's really -- you can say it's outdoor applications, and we see this especially within the energy segment. We see it in port applications, we see it in mining, wastewater treatment plants, et cetera, where you have an installation outdoors, high-temperature, low-temperature, wind and weather, vibrations and we have an excellent product for this. That is very appreciated by our customers and where we differentiate from our competitors, the best on the market. So we want to sell more of those to those customers. So it's a product play, you can say. A common theme you can say, amongst these 3 focus areas, it's really a green transition. If you take marine as an example, you may think marine is cyclic. But if you consider that there is a net-zero emission target for shipping by 2050. That is requiring a lot of investments actually in areas where Beijer Electronics has solutions to provide. It could be alternative fuels, clean fuels, energy efficiency alternative propulsion, we see now we have companies going to win sales and other ways of finding more sustainable propulsion for the ship. Digitalization is a common theme and regulatory compliance. So we already have quite a good brand within this industry, and it is something we want to build further on. Industry 4.0, digitalization and sustainability for the machine builders within manufacturing industry. It is a common theme. And with our solution for WebIQ, we now open up new doors for new customers that we could not approach before. Those innovative early customers that are -- have moved quite far on their digitalization journey and want to have a web-based solution are now customers to us. And we see the traction is just getting bigger and bigger for WebIQ. Here, we have a large installed base of our X2 product that will be transitioned into X3. X3 will be launched end of this year and we will then transition the existing installed base into X3. And we have a lot of customers that we are working with already now to prepare for this. So -- and then, of course, what we also see in, for example, the marine industry, we see now imports. So when Marine is going through a green transition, the same is happening for the port applications where you have electrification, digitalization, also in the port application. And more and more, we are getting requirements for solutions, for cranes, for all the equipments and forklift trucks, et cetera, that are operating within the port area that now also need to be going through a green transition. So that is an area, but it is very exposed and requires rugged portfolio, which fortunately we do have today. So that is also an area that we see is growing. It is more of an explorative strategy, but we do see our extreme portfolio is growing quite rapidly. And that is, as I mentioned before, a very profitable business for us. Geographically, we are quite well positioned, as I mentioned before. This strategy is not about geographical expansion. If you take the U.S., we have so much more to do. That is the biggest HMI market in the world, and we have so much more to do there. So in our strategy, we are really focusing where we are present either by our own offices, where we have salespeople or where we have established distributors that we call the value-added distributors. So we will grow from there. That is the focus. Now to the portfolio. HMI is 65% roughly of our invoice sales. But we have 3 areas that we are working with. The HMI is under visualizing. So we visualize data. The other leg that we have is digitalizing. And that is an area where we see we'll be growing. We have data communication, but we also have remote access and especially remote access like what I said before, it is a growing area. So that is an area where we see we will grow. And the third leg is automate. And today, I mean, visualize is by far the largest, and it will continue to be. That is core to what we do. But we do also see that we can combine all 3 areas into solutions to customers that establishes a very sticky business with customers when we have those value-added solutions that the customers stay with over time. Throughout the whole process and especially when engaging with our customers, we've identified gaps that we would like to fill. Here and now, we're pretty well positioned. But over time, after the launch of the X3, there are, of course, gaps that we want to fill in our portfolio. But here and now, the focus is really on scaling up our WebIQ sales as well as getting the X3 to market and transition our installed base of X2 HMI. And in the middle, you see Leading with Software and with WebIQ, with our remote access solution and with X3 coming to the market, we will have a fantastic solution also with regards to software functionality. And that will really pave the way for us as well to be able to meet requirements over time. And then, of course, you may wonder what will we then not do? Well, we've identified one area which is display solutions. And that is a fairly -- it's a fairly big chunk of business for us, but very low margin. We've identified it's the small display screens that have very little software functionality, which is very price pressured where there are many other players. And we can see that we have spent time to try and sell these and it takes time and effort to a very low margin. So we've taken the decision to exit that business. That means, of course, there will be top line going out. We will still deliver throughout 2024, but we are not accepting new orders. That is a business we will not focus on. That one will be replaced then with higher-margin business. And that is how we drive profitability and create the foundation for more profitable growth. Then we have some legacy products that we also will move away from and focus on those core businesses. Just to reiterate, we provide software and hardware meeting our customers' requirements in 3 different areas: Visualizing, Digitalizing and Automating and it's all about turning data to valuable insights. And within Visualizing, that's really the HMI, that is visualizing data and monitoring what's happening within the machine. Within Digitalization, we have connectivity and remote access. And the remote access is really for someone to be able to access data from a distance, both to view it, but also take action on it. It goes both ways. And then control is a typical PLC control. That is the heart of the process. Now I would like to go through 3 cases. where they each represent one of those focus areas, which is winning within marine, winning within manufacturing and within rugged environment. So we have now 3 different cases. So we start with manufacturing. So what you see here is a machine from a customer of ours called PulPac. And they are pioneers within sustainable packing. They basically make cutlery and mugs and different packaging material within fiber-based material. And it's all about reducing the CO2 footprint. We've been with them since they started more or less. And here, we provide a complete solution. This is a typical example of that midsized machine builder, where we have a complete solution where we have both the HMI, but we also have the control and the digitalization. So we have everything that we offer from those 3 areas in this one solution. The only thing you see here is the HMI. The HMI in this case is actually only 7% of the order value. And the order value for a machine like this is SEK 0.5 million roughly. So it's a very good business. And once we are in this customer, they don't have their own automation department. They are very reliant on our solution. So every new machine they manufacture, they buy our solution. And we work really closely with them. And we won this business actually against a couple of those really large ones, like Siemens and Rockwell that were also involved in this. But we did win this because we were close to the customer and we could offer the whole solution to them, and we worked with them to create the solution. We also have a global support team and this company, they work with in their churn partners all over the world. So for example, in Taiwan, they have a machine builder that builds the machine, and we also have support for them in Taiwan with our organization there. And also for the PulPac one, we have a domain knowledge within packaging. That is a stronghold for us, and we could help them as well and advise them. And that is typically what we hear from customers as well. They choose us when we help them become better with something they are not so good at but we have the competence. So we work together with them to create a value-added solution. The other area is Marine. This is Hyundai Heavy Industries. I think everyone knows them. They are the world's largest builder of marine engines. And they have a focus on alternative fuels, in this case, hydrogen. So they want to have 100% hydrogen-powered tri-fuel engine by 2025. This is using our HMI solution, and you can see the guy looking at it there. And this particular one is running on 35% hydrogen. But we've been part of the journey together with them also to develop our solutions to fit their needs. The key criteria why they chose Beijer for this is our knowledge within the marine industry. The user interface that they are using for the HMI, it is really coming from the gathered experience that we have within the company, within marine, so we can help them become better with their solution with the domain knowledge that we have. And additionally, it's the DNV level cybersecurity that we have for this solution. So we are working very closely with them on this. And then we have one case, which is then the rugged area. This is the outdoor applications. In this particular one, it's Aggreko. It's a manufacturer of compressors and generator systems, and they lease them and they are typically placed outdoors on site. And then, of course, they are exposed to UV light, wind, temperature, vibration, dust. And we have a very robust solution in the HMI, which is used here, which made them choose Beijer. And we could see actually in the customer interviews, how customers have tried different rugged alternatives. But when they come to Beijer, that is really the one that is making a difference. So this is a stronghold for us, and this is something we want to do more of. And there are many companies like this. So it's something we can just copy paste try other companies like this. I've mentioned WebIQ, and I've mentioned X3, which is the new generation for HMIs. And those 2 products will pave the way for the future for us. I will talk a little bit more about those. As I mentioned before, WebIQ or Smart HMI as the company's called was acquired the same day I joined. And I've had the pleasure of getting to know the product and the business throughout this year. And it's been great to see how, first of all, it engages both our own employees but also customers. It opens up doors to come with something new to talk about. And it's very much in line with the requirements of our customers. They want to be more web-based. A lot of our customers are going down that route. And if we did not have WebIQ, we may not be on that journey together with them. So it's imperative for our future. It's a web-based HMI solution. It's very independent, platform independent. It works on any device. You can have it on a phone or an iPad, a computer. The good thing about this, and that is something that our customer wants to say programming time engineering hours. It takes time if they need to develop programs or do programming, it takes a lot of time. They want to reduce that. And here, it is readily made you drag and drop what kind of widgets you need into your solution. And the good thing also because within -- if you take a factory, you have operators, you have maintenance personnel, you have a plant manager and other decision makers that need to see the data, but they don't need the same data. They need different kind of data. It's all about that turning data into valuable insights. So the last point here, several applications can run at the same time. So you can have an operator looking at it at the same time as the factory manager is looking at the same data, but from a different perspective. So this is something that we see is growing very fast. This is a customer case for WebIQ. So basically, here, you have -- it's a factory. This factory has been there for 40 years, and they extended and built on this factory over time. And they've used different control systems over the years, and they needed a way to get the data from those. They have 25 different machines in their factory, and they needed to get the data up to the IT system and into ERP system, connecting the OT to IT. But they had all these different control systems that they were working with, and they asked us, "Can you help us? We need all that data to IT. And since I mentioned before, we have an open solution that can communicate with 60, 70 different type of systems. So then we have now provided a solution which takes the data from those 25 machines up to IT. So you can either look at the data at every individual machine, you can interact with the machine. You can walk away, look at it on your phone or you can sit in your office depending on where you're at. And the ability to transfer all that data into the IT layer is really why they chose us. So this was a web-based solution for this customer. And then we have the next-generation HMI, which is launching at the end of this year. So it's a new and improved platform of HMIs. It's open, and that is something -- that is a requirement, I would say, in the market today. It needs to be open. Customers do not accept close solutions that lock them in. We still have a sticky business, but it's for other reasons. It's because we are implementing solutions that matches with the customer requirements. It's a cybersecurity focus. So this means that we can -- and cybersecurity is delivered over time. It's not delivered once. It's delivered over the lifetime of our products through new releases of software. And the way that X3 is developed, facilitates those regular launches of new releases to remain cybersecure. It is also made for an easy transition going from X2 to X3 should not require a lot of investment. And we've been working early on with our customers to ensure that this is now happening. It's a high quality that goes without saying an ease of use. And we see there is a lot of interest in this now. And I got the question before. So how about the range? It will be a slightly more focused range than what we had before. It's really targeting our customer requirements in a bit fewer different models, but very much targeted towards the requirements of the customers. We have a second site production facility that is going to be opened up later this month. We will start production. It's all there. It's all ready. We have all the equipment there, and we are now getting -- we've just gotten the last certificate out of 9 certificates that we have for the facility. So that will now start manufacturing very soon. And it really is a way for us to mitigate risk. We have one facility, the main facility in Taipei. Now this will be the second facility in Malmö. And it is also a way for us to come closer to the customers in the Nordics and EMEA region, where we have many of our customer base. So that means we bring the supply chain closer to those customers. And this also means that we don't -- we can quickly scale up. We've prepared the site to be able to quickly scale up. We have the equipment there. We have all the certification. So if need be, it can be quickly scaled up in terms of capacity, meaning it is also -- we are all set for growth. We don't have capacity limitations. And it's co-located. It's very nearby the head office in Malmö, only a few kilometers away and is co-located with our distribution center. The good thing also is that our R&D is now very close to our production facility, which has a lot of added value in terms of cooperation. And to wrap it up. So basically, with the strategy, I mean, to summarize it up. We want to focus our efforts on those customer segments where we add most value and we've identified those segments. It is mainly within the Marine customers. It is within manufacturing, and it is within those rugged applications. And those are actually also where we add most value. So in line with what Jenny and Joakim mentioned before, so we get more return on those investments in those customer segments. We want to do less of those activity, which is going towards more price competitive businesses where we don't have so much value. The business that we are exiting one is the display solution. That is primarily within the APAC region, where the business has been dominant. And you know that previously, we have announced that we've reduced also our cost base, specifically in APAC, and that is in line with that activity as well. So what we do see that the existing organizations that we have in EMEA and Americas, it's more fine-tuning what they do. It's a bigger shift on the APAC business that we are doing. And that is where I have seen we've needed the biggest shift in terms of adjusting our businesses is in APAC. So we're going from today being a Swedish HMI provider which is present in our global key markets to a preferred global partner. We want to like what I said for the PulPac case, work very closely with our customers, not have just transactional business. It's a partnership. We work in 3 areas: visualization, digitalization and automation. We can sell only from one of each or we sell in a combined solution. Visualization will, without a doubt, continue to be the biggest of those 3, so where the Web IQ comes in. But we focus on our core offering with the HMI and the web-based HMI in the center, and we build around that solutions to our customers. We want to be chosen for our software. We invest a lot in developing a state-of-the-art software that is coming now with WebIQ, with the X3 launch and our remote access solution that we already have. So we go -- we have -- we utilize our highly dedicated and competent organization but we move away from the regionalized strategies that we've had before, very much every region focusing more on serving their type of customers being a bit ad hoc in terms of how we support customers to a more joint efforts with common goals and direction where we collaborate across. We build on those strong customer relations we have. I mentioned before, we focus on both the midsize and the large size customers. And the large-sized customers that we have, we've also identified that we are typically very strong in one region or in one division, and now we are leveraging on that. So it's not so much about, yes, of course, we want to find new large customers, but it is also and maybe easier to build on those very large ones. We already have, but to increase our share of wallet with those customers. We have 65% of invoice sales comes from HMI. It will continue to be a big part of what we do. It is also a very profitable part of our business. So that is still core to what we do. But we built a streamlined and future fit portfolio around the HMI offer as well to support that offer because, of course, we see hardware becoming more and more commodities. We need to build value in software functionality as well. We have a long product tail with some legacy products that we are moving away from. The display solutions being one, quite big chunk that is flowing out with low-margin business being replaced then with higher margin business. We have very strong hardware quality. And we continue to build on that. We developed a very strong functionality in our software, and that is going to be the edge for us going forward. We are now -- we have created a stability. We are moving into building profitability and then by time we are going to add growth. But here and now, we are building the foundation for profitable growth. So it's not so much about adding growth, but it's more about getting away with those low-margin business and building new business with higher margin, creating a very profitable foundation for our company. And maybe to conclude also, I mean, it's not -- we've just now embarked on this journey. And naturally, there's a lot more to come. But the foundation in this is really the focus on our core focus on our value-adding business going forward to really create that profitable growth and the foundation. Thank you. I think we are on time.

Yes. We are on time.

Good. Handing over to...

Actually to nobody because we're taking a break now. So we will take a break, and we should be back by -- is it 22?

22.

22:03. So 20 minutes break, and let's be back 22:03 here. Thank you. [Break]

All right, time to start the second part of this afternoon then. So it's me again, but now I'm here in a different role as the CEO of the business entity Westermo. And now we are going to dig a little bit deeper into the key verticals that Westermo has chosen to focus on and give you a little bit more meat to the bone as to how we are working in those segments. So Westermo did the same exercise as Beijer Electronics has now done back in 2018, spring of 2018. And there, we decided finally to focus on 3 key verticals. And those are the ones that you see here on the screen. It's train networks, trackside, energy. Those are the 3 key verticals. And then in 2019, we added also the software and services focus area. And when we started off this work, the position of Westermo was quite different in these 3 segments. In train networks, we have been working for 15-plus years, building our competence, building our experience and a very nice product portfolio for that segment together with Bombardier at that time, which was our key customer. But in trackside and energy, we were quite small. We didn't have the product portfolio that was needed in order to really play to win in these segments. And so it's been a journey really that we have been working on ever since to execute this strategy. Talking about software and services, by the way, we are not mentioning a lot about that today. We are still in an early stage when it comes to building a more service-related portfolio. But without promising anything, I would assume that at our next Capital Markets Day, we should be able to talk more about our services business in Westermo. So I would like to, first of all, give you an overview of Westermo's key verticals and also our key technologies. Now this is a quite busy slide, I'm aware of that, but I think it gives you quite a lot of interesting information about our key segments. You can see that in total, if you look at Westermo sales, the key verticals represent some 60%, 65% of our sales overall. And you can argue, is that good, shouldn't it be 100% in our key verticals. Well, I would argue that maybe we would like to have a little bit higher share of our total sales in our key verticals, but this strategy really means that when it comes to our investments in R&D, in sales resources and so on, we are 100% focusing on these key verticals. But we do also have strategic customers outside of these verticals like, for example, ABB or Epiroc. So we work in industries like mining, water and wastewater, marine and ports and so on. And that is fine as long as the products are the ones that we already have, so to say, and we don't need to develop a lot of new functionality for these customers. You can also wonder why are we separating Train and Trackside, you could argue, couldn't you just call it rail and then put it together as one segment. Well, the reason why we do that is simply because the definition of a customer segment really is a bunch of customers with similar requirements, similar behavior and so on. And there is actually quite a big difference between those 2 industries in terms of what the customers look like. And especially if you look at train networks, it's a very concentrated customer market here because here, we are selling to the rolling stock manufacturers, the players in the world that are actually building trains, locomotives, wagons and so on. And there are only like 20 players, roughly like that globally. And not every market even has a trade manufacturer. Whereas when it comes to Trackside, we are selling to operators, to transport authorities, to system integrators, there are many more players in that industry and also the customer or the product requirements are different as well. So that is why we have chosen to keep those segments separate. The Energy side of things, you can see is by far the largest when it comes to market size. And we believe that over time, Energy is probably going to be the biggest customer segment for Westermo, but it's going to take us a few years to actually get there. And Pierre will talk more about the Energy segment in just a minute. You can see our market share here. Over the years, we have become #1 in Train networks. That is a really good thing. We have been working for many years to get there. Now we feel that we have a very strong position, whereas as you can see, in Trackside and Energy, we are estimating a 5% or less market share overall. So the market is big. We are small, lots of potential for growth. If you look at the technologies on the right-hand side, I will not go very much into that. But what we call Ethernet here is actually products that where you -- where customers build networks using cables, you put cables between your switches and routers to build the network. And that is kind of the traditional way of building networks, especially for mission-critical applications that we are dealing with. But over the last 5, 10 years, the wireless side of the industrial data communication area has become more important. Why do you want to use wireless technologies instead of wired? Well, simply because it's cheaper, you don't need to put Ethernet wires in order to get your network to work. On the other hand, it's still considered a little bit less reliable than a cabled solution. And as you can see here, the Ethernet market is bigger than the wireless, but wireless is growing, growing faster than Ethernet. So for us, it was very important back in 2018 where we didn't even have a wireless portfolio to actually make sure that we could strengthen our footprint in the wireless area. And that is where we have made all the 3 acquisitions that Joakim was talking about earlier, were made to fill product gaps in the wireless area. All right. So moving into Train Networks. When we say train networks, it's actually products sitting onboard different types of trains or trams. Sitting on a train for 15 years or more is very tough for any electronic device. So what really sets us apart here is the reliability and the robustness of our products. And this is an example. I brought it with me. You can also use it to work out, if you like. But this is one of the products that are actually sitting on board the trains. And you can argue, well, it doesn't look very sophisticated. But in fact, there's a lot of design work going into this product. It's extremely compact because you don't have a lot of space onboard trains. I could throw this on the floor here, and it would still be perfectly healthy. The floor on the other hand, would probably not be so healthy, so I will not do that. But it's really about building a product that can withstand the very tough conditions that you have on board a train. And on top of that, the cybersecurity requirements, and the requirements for very long life cycle of these products is also very difficult to achieve because you have to make sure that this product that is installed on the train can be maintained, can be upgraded when it comes to cybersecurity, for example, for 15-plus years, and that is not an easy task to achieve. As you can see here, there are a lot of different applications on board the train. I don't expect you to be experts on trains after this. But you can see here lots of different applications. The most important one being the train control and management system. Without that, if that is not working, the train is grounded. And traditionally, Westermo has been focusing on the really critical systems on a train. And typically, there are more than one network also onboard a train because you don't want to run your mission-critical applications on the same network as, for example, passenger information or infotainment. So typically, you have at least 2, sometimes more networks on the train. And we have a complete portfolio basically now to cover all these different applications, which is also why we are today #1 when it comes to these products onboard trains. Looking at our customers, there are, as I mentioned, maybe 20 larger rolling stock manufacturers in the world, making wagons, locomotives and so on. And here, you can see the top 10, the first 1 being the Chinese players, CRRC, Alstom, France being #2 and so on. And those arrows there represent the customers that Westermo is actually working with today. So out of the 10 top manufacturers, we have 8 of them on our customer list today. Does this mean that we are ready, so to say that we don't need to do much more in this area. No, not at all, because as I mentioned, there are lots of different applications on trains, and we are not present in all these players in all different applications. Some of them, we are working with as an OEM partnership where we are specified into their platform and then we are supplying our products as they are building their trains around the world. But with some of these players, we are more working on a project-by-project basis. So -- so definitely, the share of wallet with all these customers is not yet where we want it to be. So definitely, there is much more potential to grow also on train networks, even though we are today #1 there. Okay. Moving into trackside then. Trackside is maybe the segment that we are talking the least about. It's a little bit less exciting maybe than trains and a little bit harder to grasp perhaps than energy. But it is actually an area where we see a lot of potential for growth because what is happening in the rail industry? I mean if you take the train in Sweden or somewhere else, you realize that there is a lot of room for potential. And I am very happy for one that I am not the CEO of a rail operator because trying to run trains or whole traffic system with punctuality with a cost level that is competitive and so on is a really, really big challenge. So the operators like Deutsche Bahn or if you take SJ here in Sweden, they want to achieve all the things that you see here on the left-hand side. They want their trains to run on time, they want them to run in a safe way, they need more capacity on the tracks. And most of all, they want to bring down the operational cost because it's extremely costly to run a rail traffic system. But the reality is actually quite different. The operators need to deal with legacy signaling system that are not up to any standards when it comes to cybersecurity and so on, unsafe level crossings, cybersecurity requirements that are not being fulfilled, lack of interoperability between countries. That's a huge issue in Europe. If you want to run a train, say, from Sweden down to Italy, you need to have like 6 different signaling systems on board that train because there's no standardization today. So that is really the landscape that these players are facing. And what is the solution to all this then what is happening now in this area? Well, there's a lot of standardization actually going on, believe it or not. And the EU has been realizing for quite some time now that we need to do something about this. We need to increase the attractiveness of taking the train in Europe. And therefore, they have since long started several initiatives that are addressing some of these issues. And I don't expect you to learn all these acronyms. But I just want to point out that there are some really important standardization work going on here, the ERTMS being one of the most important ones, which is a standardization work for signaling systems so that the signaling systems within Europe will look the same in all countries. This requires, of course, a lot of investment in new infrastructure, new systems, new networks in order to make this happen. The second one is also very important for us, the Future Railway Mobile Communication System, and that is a global standard actually that is being rolled out on a global scale, which is replacing an old system that is called GSM-R, and you can kind of hear from the name that, that is a very old system. And FRMCS is really going to be the key in order to digitalize the railways, both in Europe but also globally. And that actually adds a lot of potential for Westermo with all the technology that we can help customers provide in order to achieve this change. EULYNX is also something that is driving our business very clearly now, a consortium on European railway operators that want to reduce the life cycle costs of running trains also through standardization and they are driving a lot of cybersecurity requirements. We are partnering with a company called Eviden now that is specialists on cryptography. So together with them, with our switches that are certified for trackside applications, we can provide encrypted communication solutions to the likes of Deutsche Bank, for example, allowing them to actually comply with those requirements that are now being rolled out in Europe and elsewhere. And the good -- and the Cyber Resilience Act that you see here is also an EU initiative that is driving a lot of investment in this area because every player here needs to comply with that regulation and that causes a lot of headache with all these players, and that's also where Westermo can help in solving these issues. So all this drives digitalization, and it drives the demand for robust network infrastructure that Westermo can provide. And this is just an example, schematically, how it can look like on a train and on the trackside. Some of the products, as I mentioned, sitting on the train itself, for different type of networks needed for all these different systems and some of the products sitting on the trackside, not necessarily on a station like on this picture. But 2 different segments with partly different customers. So to summarize, well, first of all, as you mentioned, Westermo India, I think you might have heard that Westermo has decided to establish ourselves in India, in Bangalore. We are in the process right now of doing that. And the reason for that is really that India is the fourth largest railway system in the world, and all the players in the railway segment are all agree that India is where everything is going to happen in the next decades. Massive investments in rail infrastructure is going to happen and all the big players, which are also our customers are really fighting to win business in India. Indian government has also placed a lot of requirements on local content. If you want to win a bid for rail or trains in India, you need to show that you have at least 50% local content in that bid, which requires players like Westermo but also others to actually establish not only a sales office, but also production in India in order to help customers comply with these requirements. So this is really an initiative that we believe is going to help us grow further both in the Rail segment, but also in the energy sector because there's a lot of things going on in India, obviously, also in that area. Okay. So in summary, Westermo, we are #1 in train networks. There is massive opportunity in trackside, as I just mentioned. And what I think is important to understand is that we have built such a strong name now, Kristine was talking about brand recognition. We have built such a strong name now in the rail industry that we are always invited to the table, so to say, whenever somebody has a project related to data communication on the train or on the trackside application, we will definitely be part of and we can bid on those projects. And then we have India. So I would say, to summarize our activities in train and truckside, we definitely are to make a little [ joke ] on track for further growth driven by digitalization and modernization of this whole infrastructure. All right. So with that, Pierre, we will dig into the energy side of things.

We certainly will. My name is Pierre Öberg. I am replacing my energy market driver, David Akman, who should have been here, but he's home sick. I'll do my best to fill his shoes. Like Jenny said, I'm responsible for these 3 main vertical segments. And on top of that, I'm also responsible for what we call the key accounts, customers like Alstom and ABB and the likes are actually brand labeling our customers. And by doing that, they actually become a market channel on their own and a very good market channel, actually, there's very few competitors in that market channel as we are their prime partner for communications. I've been with Westermo quite a long time now. I've been with ABB before that, some less than 15 years. Now I've been with Westermo a bit more than 15 years. The balance is now swimming in favor of Westermo. Being a product guy, I've been with R&D and product management, but now on the sales side. It was very good that Jenny suggested we should bring products to the -- to this event. Very happy to do that. I will guide you a little bit into the energy market and give you some facts and also some of our opinions and views on the market and how we can succeed in that marketplace. We'll start with a couple of slides on sort of just the basics. Some of this you will already know. I mean, there are lots and lots of these reports and scenarios. This particular one is from McKinsey. And of course, it's very, very difficult to make a scenario to 2050 that's going to be accurate, but there are a couple of things that are very, very clear and that everybody really agrees upon. That's going to be a doubling from like whatever, 30 terawatts to like 60 or something like that. And also, there's going to be doubling in the amount of renewables if it's going to be these exact percentages between solar or wind, doesn't really matter. It's a market that is undergoing some fundamental need for investment, for growth, for modernization and of course, it makes it very, very attractive for us. And there's a lot of different players in the market. So again, it opens up a lot of possibility for Westermo. If we take it just one step below that, of course, there are a lot of different market drivers, some of the megatrends, Jenny already mentioned. We talk about the 3 Ds. I don't think we need to mention too much about decarbonization. You know that; decentralization, I'll leave that for now. I'll come back to that in a minute. And then the word you've heard so many times over the past 10 years, digitalization. Aren't we done in industry digitizing everything? And the answer is no, we're not. And I think the energy market, in particular, is actually lagging. I mean industry in general was lagging and energy market has been very, very slow, very careful, very conservative, and this is now -- I mean we're forced to do it. If you do that, of course, paranoid as you are, you really want to be sure you will not be hacked. So cybersecurity is not only -- what is it -- a commodity -- This is a way to differentiate. This is ever-critical for our customers, and it's a way for us to really help them to feel confident, and we can really build a good trust with them. And we just brought one keyword like the supply chain is now also becoming more and more important. It's not only about how many firewalls or how many packets you can inspect in the switch. It's actually now demanded that you are in control of the whole supply chain, which is again playing in favor for Westermo as we actually manufacture and can take a bigger responsibility than many other competitors in this marketplace. IT/OT convergence is probably also a buzzword you've heard before. These 2 has been very 2 separate domains. The IT guys in the office doing their thing and the OT on the factory floor doing their thing and God forbid if you sort of mix the two. But this is now also again, a necessity, it must happen. And again, it poses some risks, but it certainly also poses more opportunities for a customer -- for a company like Westermo where we can really have the domain expertise from OT. And we understand enough about the IT to really be a trusted partner when this happens, much more difficult for the IT guys to claim they have some domain knowledge on the OT side. So also giving us some really good and interesting things happening going forward. Sustainability, Lena will talk much more about that. But also here, there are some small aspects with Westermo and how we do it that are actually key to our customers. One thing, like Jenny pointed out, we made very compact units. Therefore, we also have to be pretty power efficient, which of course, then also helps in the sort of the sustainability aspects. And also the fact that we built products that last forever, another very important aspect when you talk about sustainability. The grid itself, and I won't bore you with too many details, but the grid is going, of course, from somewhere, you generate power and somewhere over here, you start to consume power, whether it's private people or industries or something like that. For Westermo, it's really not about the consumer side. We're not going to go into smart meters or anything like that. But pretty much all of the others is areas -- are areas where we can really, really be strong, whether it's the distribution part, transmission part or wind and solar generation power plants like that. The thing that's going to really complicate life for the utility and the grid owners are the decentralization that's now happening. There are people who want to have solar panels on their roof. There are small companies that want to install it to wind farms. That will make life quite interesting for the grid. Because of these renewables being a little bit on and off, you never know when they can generate power, the whole need for energy storage systems like massive battery packs have also come up quite lately, and there's a lot of investments going on in this one also to have balance between demand and supply in the grid. And not only that, maybe we as consumers would also like to help in this process with our electrical vehicles, sometimes being consumers and sometimes being part of the balancing in the grid. So I think you've all heard about the prosumers a buzzword. So it may not sound much, but for a very, very traditional, a very, very slow moving industry. This is big. This is very, very difficult and very, very complex. And at the same time, you should double the capacity in the grid. So it calls for very interesting times. Just to complete the picture of sort of this introduction, I think you also are aware of in the traditional world, in the Grid 1.0, energy could only go one way. Money can only go the other way. And of course, now in Grid 2.0, there will be these flows constantly over the time, which of course, makes it very interesting for us, and I'm sure we can help. Giving you a flavor of what we can offer and value, we'd like to do that by showing you a short video. It's about 2 minutes and 30 seconds and I will help you in the end with some highlights. Let's see if I need to click. [Presentation]

I hope that gave you a little bit of a flavor on the different use cases and applications that there are. A couple of key words. I mean, resilient is the word that our customers and we also like to use -- the fact that the hardware is resilient, is of course, one thing, but also the software itself needs to be resilient. I mean this -- these applications are mission critical for sure. You saw cybersecurity, you saw wired and wireless. You saw indoor and outdoor installations. And of course, these are very important aspects for us, which brings me to something we talked about quite a lot, both from Jenny and Kristine. I mean the fact that we need to understand the domain, we need to understand what our customers are facing, we need to understand where these devices will operate. And it's not a very nice environment. That's for sure like Kristine said it could be indoor, it could be outdoor. It could be dirty. It could be some very extreme electric discharges or things like that. To be trusted in the industry -- the energy industry, you really need to have like evidence that the product will fulfill these standards. They don't just take it because it's on a data sheet, so we have to spend a lot of time and a lot of money getting these independent test labs to actually give us the evidence that we fulfill these certifications. And that pretty much only opens the first door, then they will themselves, of course, test and try to kill the device themselves. So it only gives you the sort of the credibility and the trust to sort of to be evaluated. So these customers are very thorough and very much by the book. And this, I guess, is one of the things that are common between the 3 segments that we operate in. I mean they are different train, trackside and energy. There are different products. But this thing they all have in common, they are very, very by the book. They very much want to see the evidence that these units actually fulfill the promises that we are making and they want them to last every day, every minute for a long, long time. And that's sort of one of the most important values that we bring to the customers. We move into a little bit more about the actual landscape, the energy market, how uniform is it? And the short answer is it's not uniform at all. Jenny has showed it before, there are just lots and lots of customers that are really big customers and that are really small customers. We're going to use Europe and also the Americas as an example. And these colors are trying to show you a little bit on like a very high concentration of like the utility company in countries like Ireland, France, Italy, it's pretty much only 1 major player, which is good if you happen to win those projects. But of course, it's not good if you're being left out in this 5 years without any project. So of course, countries where there's very low concentration, but there's hundreds and hundreds of smaller utility companies are, of course, also attractive for a company like Westermo. So we don't only have to bet on the big horses, we can actually find business also in other areas. Sweden, we have some big ones. We have E.ON and Fortum, et cetera, et cetera. We have Mälarenergi and [indiscernible], a little bit smaller. We have Borås Energi [indiscernible]. There's about 200 different utility companies or like grid owners just in a country like Sweden. The same -- the same figure in Germany is 900. It's just very, very regionalized, very decentralized. And of course, that opens up a lot of possibility for a company like Westermo to grow. Similar picture actually in the U.S., also very fragmented. And of course, should you really talk about the U.S.A. as a country? Or should we talk about it as 50 dependent or independent states. Here, the terms they use is like an investor-owned utility. They would be the quite big ones. They actually, funny enough, have a history of cooperatives in the U.S. In the more rural areas, you have very small grids that also, of course, need to modernize and do something. And then big cities or small cities, the municipalities, of course, there's a lot of those that also opens up for some interesting business opportunities for Westermo. Having said that, how do we then go to market. And here is a busy slide, and I'll do my best to explain it. I mean, over here, on the left-hand side are the Westermo product units, our facilities where we actually develop and manufacture the products. And now here, there should be something that is actually then installed out in the field. One very important way to market is our own sales units. We strongly believe in being close to the customer, that's the only way we can build the trust. And that trust is the only way to win business. So big, big, important part in our sales channel strategy is to have sales and technical people in key markets. And they can then go either direct to customer or go via partners or via local distributors doesn't really matter. The second -- probably second biggest or second most important is a more direct approach. When we work together with customers like Alstom or ABB, we actually treat them as a global account, and therefore, we can have them as an account from the headquarters, and they actually serve as a market channel for us. So for example, with a company like ABB they sell it to 1,000 projects out there, a company like Alstom, they just sell it to their projects, and we can only have one interface into that market channel, which makes it good. And like I said, when a customer has put their own brand on our product, they are pretty -- they're in for the long term. They won't make that change very quickly. And then we use the term distributor still, but they should really be sales partners. They do far. They add far more value than just distribute the products. Some of these partners are as good as a Westermo sales unit itself. So those would be sort of the 3 main ways to go to market. Anything different with the Energy segment? Not really. I think it's really about the application that determines how we sort of go to the customer. Sometimes, there's a very, very big more of a frame agreement where a utility company goes out almost like a public tender. Then we would pretty much go more of a direct approach, working together straight to that utility. Sometimes companies like Vattenfall or something like that, give a system integrator, a more of a turnkey like more of a project-based. We would like to have these 20 substation modernized over the past -- over the next 3 years and the system integrator are themselves responsible for that turnkey commitment. And there for, of course, Westermo need to find a number of these system integrators and have a really good relationship with them. So it really is a mix of these various channel strategies to find the various customers in the energy market. So that's not just -- there's not just one approach, and there's not just one approach per country. It's quite a wide range of methods we have to use to find this business. So how do we do this then? It's a lot of work, of course. We have a good base where we are, but of course, now we want to really accelerate like Jenny showed, we only have a few percent market share, and this is sort of the new area where we really want to accelerate our growth. Of course, it's all about prospecting and finding those leads, getting partnerships to get into the door. And probably the most important for a company like Westermo is the whole domain knowledge, the value-based selling being there as the partner and not just trying to send them a couple of units. It's almost like you sort of build the network together with the customer. You may think it's all standardized, but it's absolutely not. It's very, very customer unique. There are so many legacy systems. There's so many specials they want to still maintain and bring with them when they take this step into the new technology. So it really needs to be some careful consideration in these -- the network design to make it really work. And like I said before, that's only step one. Then you need to get specified. You need to get approved, they will test the systems, they will evaluate it, and they really make sure that they will trust you as a supplier and the system you have put together. Two minutes, right. So full speed ahead. Of course, it is. And this just illustrates -- I mean, we are where we are, and we can grow a lot just by having sort of more of the base business where we are already present. If we want to accelerate further, we can look more into sort of untapped applications. I mean we are strong in certain areas. There are many, many areas that we can sort of start to, what do we say, land and expand. Jenny mentioned the whole software and service offering. Actually, these are customers that are quite receptive to having a really good service level agreement for us as a supplier to take more of a long-term commitment together with them. So this is a very interesting segment where they are willing to actually pay for these kind of services. And to even accelerate further, of course, I mean we are very Europe-centric. Now we're going to India. So of course, that's one way of sort of finding another unaddressed markets, meaning geographies, meaning new partnerships, et cetera, et cetera. So there are many ways to grow, and I'm sure we will. To -- try to summarize, I mean I think you all understand it's a huge market, and it's growing, and it needs modernization. I mean there are -- it's very, very attractive for us. There's a lot of the market trends that really work in favor of Westermo and actually work in favor because there are strengths for us. We think it's a very good fit for us. I mean, these customers really value a premium product and the quality we can deliver. And also, we're starting to see some really good wins with new products we have just released. And with that, I will leave the last 15 minutes to you, Lena.

Thank you very much. I hope you still have some energy unless you have enjoyed the [indiscernible] so far. Me being quite new in the company. I still learn a lot every day. So my name is Lena Westerholm, and I joined Ependion in May last year, so almost 9 months in the company. Before that, I worked 23 years, can't believe myself, but 23 years for ABB, working with sustainability all the time, both for ABB, Sweden and also for ABB Global. And you heard ABB has been mentioned here some times today. It's sort of a big customer for us, of course. So very nice. I think my colleagues have already talked about sustainability a lot. But despite that, I will still give you an update also from my side on what we see. I need to take up this also a very nice picture to rest your eyes on for a moment. So I will just say some words about what we see from trends to some concrete actions in a Ependion unit. And after that, there will be a Q&A session, so we'll get the opportunities also to ask questions to all of us, of course. We have talked a lot about trends today. I think in the beginning, you heard Jenny talking about megatrends. If we look at sustainability, there are 3 major trends that are all very important for our business. The transition to renewable energy. We just heard about that. I will not say more about that today. You heard about the opportunities we have and our strategy towards that segment. The second trend, the shift towards a circular economy. I mean, even if it does send or receive like that, the natural resources and the raw material are limited, and we are all part of 1 global ecosystem. Therefore, circular economy is a cornerstone in the EU Green deal. And the regulations within this area is just developing in a very, very broad scale. So I will come back because this is a material area for us in Ependion. So I will come back and say some more words about what we do when we talk about circular economy. If there's anyone who is not familiar with the EU Green deal, it's the EU ambition that Europe should be the world's first climate-neutral continent by 2050. And this is, in turn, triggering this broad development of regulation. And even it's called the green deal, also social and governance aspects are integrated into this. The last trend there, transition to sustainable transportation, decarbonizing the transport sector. 25% of EU's greenhouse gas emissions comes from the transport sector. So therefore, EU has set an ambitious target to reduce the transport-related greenhouse gas emissions by 90% until 2050. A lot of things is needed here, but it's been concluded by EU that rail, freight traffic needs to increase by 50% until 2030 and double by 2050 with 2015 as a baseline. And you heard Jenny talking about train and trackside being core segments for us. We are very well positioned when it comes to that. And then you heard Kristine talking about our strategy for the marine sector and the motivation behind that. And the marine sector is also -- I mean, many, many global companies have set net zero targets. Just look at IKEA and HMM. It will be crucial for the shipping companies to provide logistics that match those goals. And digital technology plays a vital role in analyzing and calibrating the operations on marine vessel to ensure greatest possible emission reductions. So again, our company is very well positioned. I think you can conclude that looking at all these trends and our focus areas with energy and electrification with manufacturing and sustainable industries and with transportation, where we have train and trackside and marine as core focus areas. It gives a good stomach feeling when you work as a head of sustainability. Looking at that, our strategy and how we can really contribute in this area. Then what do this trend? What do they mean for us in our daily business? Well, in addition to our customers' own sustainability ambitions, this broad development of regulations is triggering our customers to approach us with very, very detailed questions related to sustainability, both the green dimension and the more social dimension of sustainability. And if you just look at this regulatory landscape, which I have mentioned a couple of times now, I mean many of you are very familiar with sustainable finance package from EU with the taxonomy with CSRD, the now very debated due diligence directive. But in addition to that, EU has this broad package when it comes to sustainable products. It's about designing for energy efficiency, eco-design that term has broadened a lot. It's now also about circular aspects. It's about transparency about the information. I mean, in the end, I think we will need to put a QR code on our product and then our customers will be able to see everything related to the production and other core product or all information related to the full value chain. EU has initiated something called digital product passports. And then if you look at the number of substances that will be prohibited in the coming years, I think we can expect a double in the number of substances that will be prohibited. It's not always easy for a company to understand all these product-related regulations that you need to live up to in the markets where you sell your products. And it is not just in EU, even if we talk a lot about EU. This is also happening in Asia and in U.S. So what do we then do to make sure that we are addressing all these risks and opportunities that are triggered by the megatrends that are triggered by this increase in regulations well, and of course, the customer expectations as well. When you talk about sustainability, sustainability is very much about smart resource management. And there is not one CEO who don't want to be good and smart with resource management. And that is also the core of circular economy. And it says that this is a material area. And this is definitely an area where our company can contribute and demonstrate leadership. And to be trustworthy when you talk about circular economy, you need to work with all these aspects from R&D to business model, and we do that in Ependion. Our processes and our colleagues in R&D are making sure that we decide for a long technical lifetime that we design for energy efficiency, which we also heard Pierre talk about that we design, so it's easy to conduct service and upgrade that we design, so it's easy to dismantle, to recycle and to reduce all these things. And there are research showing that about 80% of our products total environmental impact is related to decisions taken in the design phase. So R&D plays a crucial role when it comes to the environmental impact of our product. But that's not enough. Our colleagues in supply chain management, in our purchase departments are now driving towards low-carbon and recycled metals and materials. They are now cascading their requirements triggered by CSRD towards our suppliers to make sure that we have our suppliers on board. A lot is happening in our supply chain management department. And then we have our production. We cannot count to our customers and say, we have embedded circularity in our offering and then we are producing these products in a factory that use fossil-based energy. So of course, in our production, we need to work with the reduction of energy use. We need to make sure that we transfer to green electricity, that we transfer our electrical vehicle -- car fleet to electric vehicles and so on. And we do all those things and of course, many, many more. And then we have transport and logistics. And here, we have digital tools that enable us to make smart decisions also considering the climate impact. When we plan, how we transport. And logistics and how we pack the product is also important. I mean if we -- our customer receives this in like single-use plastics and then we say we have a circular offering, it doesn't match. And I think tomorrow, we have a meeting with our key supplier in Westermo just to see how can we pack our projects in a more sustainable way. And then we have the use phase, maybe the most important phase for our customers because they want the product to be energy efficient. And here, we have a broad -- now we are broadening our portfolio of service offerings to make sure that we can help our customers to prolong the technical lifestyle and to upgrade and we are also now looking into how can we provide a more circular solution for our customers at the end of life of our products. And we are working with all these things. We still have a lot to do, but we truly believe that this will give us a competitive advantage, good for profit and good for environment. So if you summarize, it feels really good looking at these trends. We are very well positioned. Our company can really, really contribute in the transition to renewable energy when it comes to the shift to a circular economy and also when it comes to the shift to more sustainable transportation and decarbonizing the transportation chains. We also see that we can contribute strongly in the shift to circular economy. You see everything that we do here. We do have -- we do see an increase in request and expectation from our customers, but we feel that we are working with all these areas is also making our customers very comfortable in what we do. Before I close on my side, I think someone asked me here in the break, how we're doing when it comes to CSRD, now with possible postpone of the implementation date for us. And I can just say that we are continuing with our plans, and we are working with our materiality assessment at the moment, and we will finalize that later in this spring and I'd be happy to take any questions if you want to know more, what we do when it comes the CSRD. So many thanks. And I think over to Jenny for a summary and also some Q&A session, yes.

Thank you very much for that, Lena. People, planet and profit is what you always say, so it's time to wrap up this afternoon. So I will try to summarize what we have been talking about. I believe, I think I have tried to make that clear. I believe that we are well positioned in markets that are driven by very strong megatrends. So structural growth in our key markets. That's a very important thing for us going forward. 2023, a record year for us. We have taken several steps towards more stability and better profitability. However, that's in the history books now. So now it's really about performing going forward. As Joakim was mentioning, our order bookings in the last quarters has been affected by changing customer behaviors. And that's just how it is, a little bit weaker economy we have seen as well, especially in Asia. So let's see what 2024 brings. Beijer Electronics moving into the execution phase of the new strategy, which is, of course, very important for the whole group. Westermo keeps winning ground in the key segments. I mentioned that we have been working in these segments since basically 2018. We are not done yet because we say we want to be #1 in all these 3 key verticals, and we are only #1 in train network so far. So much more to be done there. And then the sustainability perspective, which we really feel is ingrained now in our strategies, in our everyday work and all our employees thanks to Lena and the work that you have been driving, we really have that mindset in the whole organization. And there's a lot more to do, but we are definitely on the right track there, and it's helping us drive the business as well. So with that, Markus, I think we are ready for the Q&A session. So I think all the presenters can actually come on stage here because we don't really know what kind of questions might pop up.

And maybe I'll start off with a bit of a broader question. Let's start with the cyclicality of the business because you've changed a lot over the past years and we talked a lot about ongoing business and more of a returning business. How cyclical are you now would you say?

Yes, that's an interesting question. We have seen from the past that Beijer Electronics traditionally have been quite a cyclical business related to the general industrial economy Westermo a little bit less so because we are more focused on segments like infrastructure-related segments. Going forward, let's see, it's a little bit hard to tell with the change that we are doing in Beijer Electronics. One of the objectives of that, of course, is to have less -- how do you say.

Cyclicality.

Cyclicality, thank you, in our business. But yes, overall, of course, there is an element of cyclicality, but it's not as big as we see in some other businesses, I would say.

But if we talk about recurring business because we talked a lot about through the years about recurring business and repeat customers coming back and buying more. When you break into new segments such as the energy business such as the train and trackside business, does this change or are the dynamics the same?

I think it changes slightly because as we try to explain here the customer structure is different. There is a lot more customers in energy and trackside. They are more spread geographically and so on. So I think as we grow our energy and trackside business, that will help us to reach more of a stability as well in our business.

If we move on to growth. So you have a 10% growth target. And we looked at the slide before where train is growing a little bit less than and then you have tracks and energy growing more than 10% and then you have Beijer Electronics on top of that. What are the keys for you to get to grow by 10% per year -- the key elements?

Yes. I think the key element is really what we have been talking about the focus that we have on these clear segments because it's a lot about gaining customer trust in our business and focusing on a few selected segments means that we can build our knowledge, we can really be a partner to the customer. So I think that is very important.

Any questions from the floor?

On the growth part, Beijer Electronics, we're focusing on the profitability first. [indiscernible] a decline in top line?

No, I wouldn't say a decline. But as I mentioned before, we're moving out from some of the business areas to be covered by others, but it's a bit of a gradual approach. So we are replacing that business over time. But the focus is more on getting a sustainable foundation for growth moving forward. But growth will come, of course, from that.

And just to repeat the question for the listeners online that the question was about Beijer Electronics. If you focus on profitability, if that will also mean lower top line. If we continue on Beijer for a bit, we talked a little bit about software and maybe the change of the business will you -- have you considered will you change the way that you pay when you go to software?

Yes, naturally, that has been considered. And I think over time, business model needs to be adjusted to what and how we are selling. We are to see that now also with WebIQ, whereby we actually have a software approach and the license approach, et cetera. But over time, yes, I mean that is something we will look into.

And would you also sell them differently, the packages? Or will you sell them the hardware with the software with it or bundled? Or how do you think about that?

I mean when we ask our customers, they typically still want to sell it bundled together. So it remains to be seen, but we also see within X3 platform that will be launched. We will have more of a containerized approach where functionality, theoretically, it could be split, so you could buy, let's say, a number of functions, but not all of them. And that, of course, would mean a different business model, but we are not there yet.

Okay. And maybe I'll continue on that track as well because there's a lot of subscription models being discussed both on the product side and also on the software side of the Product as a Service or Software as a Service. Is this something that you've considered in this as well to maybe have a bundled model like that?

I mean, we are looking into different options, of course. I mean right now, what we have is, of course, with the WebIQ, it's a license that we are selling. So we already, to some extent, have it. But yes, of course, we will look into different ways of doing this in different models, but it is not something that we are launching as of now.

And then maybe to continue a little bit more to drill in to electronics. You focus on marine manufacturers and other [ rugged ]. Is any of these areas where you feel that -- is it mainly a focus area? Or do you feel that any of these you have to make a stride to kind of get there? Do you see what I mean?

No. Maybe. I mean...

So are there any doubt here. I mean to bring up growth where you maybe have faster growth in these areas. Is it more of a focus in these 3 to kind of get to the growth? Or is it -- do you have more -- do you have you gotten further, do you see what I mean?

Yes. I mean, we've decided to focus on those areas where we see a big traction from our customers, where we already have a strong position, and we build on that position. Naturally, we've identified areas we need to build on and improve also in those areas. But we've truly really focused on those areas where we already have a good position today that we can build from.

More questions, okay. Then maybe moving on to Westermo. So you have both trackside and energy, which grows faster than train, but you also have lower shares in these segments. So talk a little bit about maybe the go-to-market, how do you plan to gain shares and to kind of gain ground in both track side and energy?

Well, we are actually thinking of pretty much copying the journey that we have done on the train network side, starting to build the main knowledge, starting to build a competitive portfolio, approaching customers because as Pierre was mentioning, the basic values of Westermo reliability, robustness and so on, those play really well in those industries as well. So I think that we are already seeing that customers, especially in the energy segment, they are very open to talk to Westermo they know about us. And as soon as we have a portfolio that fits their needs, they are really willing to consider Westermo and the same goes for trackside where we have a good name in the rail industry. So it's really about building that the main knowledge, building the portfolio, and building the trust of the customers in the same way, basically, that we have done to be successful in train networks.

And in energy, from what I understand, the larger -- I mean you're not in the entire value chain, and you're saying that you will not go out to -- to consumer side. But still, you have a number of products when you go out to the right is increasing quite a lot. How far will you go? And how do you plan to penetrate that side where you have higher volumes? And is that a key thing here?

I don't know, Pierre, do you want to answer that?

Of course, there's a lot of smart meters. Of course, that's where the millions and millions of devices are. But you have no -- absolutely no profitability in that market space. So we will not go there. We can only go where our values are appreciated and therefore, it will be the utility companies, and that's where it's something, we can't go into the consumer side at all. And there's plenty of opportunity just with just remote access and substations and these things. They're still probably millions or so devices to be had in that market space. So we will never go into that consumer fight for price area at all.

But if you take away the consumer, you kind of start by the local substations to speak, where you kind of send out to the consumers. If you take from there the power generation, is there any way where you weaken where you can see that you can target?

And I think with now the new product portfolio that we have got, we can really target that whole part of the infrastructure from the smallest substations. It is a very rugged environment. They need quality devices in those small substations, whatever [indiscernible] or transformers, little polls top mounted devices. It's an environment that really fits Westermo world. So down the further you come to, of course, the low voltage side, the numbers increase, and we are still very strong in that area. So I mean, there are plenty of devices to be sold even though we don't go into the consumer side.

And if you look at the very edge of the grid, I'd say, closer to the consumers, the acquisitions that we made in Ireland back in 2019, cellular routers. That is really the area where they are very strong because typically, you use wireless products at the very edge there because it's remote areas and so on. It makes no sense to draw -- put Ethernet cables and so on. And that is an area where they are -- have proven to be very successful.

Any questions from the floor?

So first, it's on the Beijer Electronics. So with the financial profile of the gross margin differ between X3 and X2, the different pricing more and more [indiscernible] cloud services into the core [indiscernible] there have been no major [indiscernible].

The question was on the gross margins of the new products of X3 versus X2.

No, there will not be any major changes, I would say. I mean, of course, we are adding value to the X3 portfolio. So as such, of course, we are expecting to get paid for the value that we deliver, but I don't foresee any major changes.

And can I make a follow-up on that particular issue. The when -- do you expect your customers to move from X2 to X3 or is it more a question of when you make a new sale that you will sell X3s instead of X2? So how will the kind of development be?