NIBE Industrier AB (publ) (NIBEB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the NIBE Q2 2020 Results Presentation. [Operator Instructions] Today, I'm pleased to present Eric Lindquist, CEO; and Hans Backman, CFO. Please begin your meeting.

Good morning, everyone. Eric speaking here.

Good morning, it's Hans Backman.

And we're going to have the usual structure where we try to present the report in a fairly short manner, and then we have the Q&A session. And as before, we believe that we should finish around noon at latest because we have a few other arrangements after 12:00 today. So once again, thank you for calling in. And as we mentioned in the headline, we believe that we've had a fairly strong first 6 months, although it could have been stronger, of course, it hadn't been for shortages of components and that's become sort of a very usual saying. But at the same time, we also feel that there are some improvements. So it isn't totally dark. But of course, our subsuppliers, they have to get it out to a totally different demand. It tells a different picture compared to what we've seen in the past. And when it comes to our 3 divisions or business areas, we can say that they are driven fairly much by the same factors. Of course, the sustainability trends, they are there. They need here for a long time. but they've been more underlying with the SEC now, and it's being broadcasted all the time and EU is very certain of their means when it comes to legislation and so forth. And during the pandemic, we had home refurbishment, and that has continued, perhaps its modernization, we can call it. And we see that, that is continuing. And sadly enough, as we say, of course, the dependence on Russian gas has also made us all aware of how vulnerable we are in our society, particularly in Europe. And there's another driving factor. And of course, as a consequence of this, the energy prices are already soared, which means that everyone's in Europe, I'd have to say it, is trying to minimize their energy bills. And adding to this, that we haven't written here is, of course, a very positive sign also in North America. I'm sure you all noticed just a few days ago when Mr. Biden signed a new deal that is now legislation regarding the climate and energy, so to say, support in the bill as such as a little bit of a challenging abbreviation to IRA. And I think it's called inflation Reduction Act, but that's, of course, something that is very, very positive for our North American operations, particularly on the Climate Solutions side, we are now the head of a 12-year program of subsidies, the first 10 years of 10% -- or 30% tax reduction, both on residential and commercial, then another 2 years with slightly lower percentages. And that gives a very, very solid signal, of course, to consumers and also to the industry such that now America is also moving in the direction that's been the trend in Europe for many years. And as a consequence of these demands within all 3 areas, of course, but particularly within the Climate Solution, we also announced that we're going to increase our capacity fairly dramatic. I'm sure that you've all seen more or less the figures that are predicted, where we're going to leave gas and oil as soon as possible. Realistically, of course, it won't happen overnight. But the desire is there, and that means that the capacity that we have now, of course, we can sustain a year or 2, but we have to increase not only in Sweden, but also in Germany, particularly. But also on the top Stove side and the Element side, naturally. And one thing that is sort of diluting in the first quarter and then adding to the results in the second quarter are these one-off effects, where we decided to get out of Russia, of course, we'd hit by SEK 114 million one-off effect. And now when we sold an additional 26% of the shares in Schulthess, it was the other way around, and we had a gain of some SEK 232 million. And we are very cautious to mention that. So no one believes that the result is there just on a neutral level. But it's actually affected even the first -- this 6 months with SEK 118 million. And just a few other comments. I mean the growth has been there could have been an invoicing. The order intake is just phenomenal, but the invoicing is also up fairly substantially. And in the old days, I dare to say that, of course, the growth of true organic growth with double digits would have been very good. Now we could have been much tougher had we had the -- all the components necessary. But nevertheless, it is a fairly good growth. And the operating margin is also up there for the operating results, slightly below last year. And that is, of course, the effect of our own price increases lagging a little bit, but also, to some degree, that when we have that stop and go production like we have in many factories, it is difficult to maintain productivity increases anyway, like we're always trying to do. So that's a combination of the 2. On the acquisition side, we have the Argoclima in Italy as the heat pump company, and we believe it's very important to have a better presence in Southern Europe because that is the market that has also, if not exploding, it's gaining volume very rapidly. And so it's a good company that we know since many, many years. It's a solid family that we're going to work with for the coming years. And also on the Stove side, we, of course, acquired 10% of the Pacific Energy fire-based product shares already a little bit better than a year ago. And now we acquired the remaining order 41%, meaning that now we consolidate the company and the remaining or 49% will of course eventually also be bought. And we can also notice now that even if COVID is not gone, the negotiations and companies up there per se, they are, of course, greater numbers now than just 12 or 24 months ago. So that's also a growing trend. If we just look at the figures themselves, I'm sure you've been through them very cautiously. And saying that we've had a growth of close to 26% is, of course, quite substantial, particularly when we see that the acquired part is only 2%. But that is important, as we mentioned also that we have, of course, had currency gains and also price increases. But nevertheless, we had a healthy growth of pure organically. The gross margin, and I'm sure Hans going to come back to that. It's slightly lower than a year ago, and that is, of course, due to the fact that I mentioned previously here. The operating margin is like 13.6%. And there, again, it's important to know that the SEK 118 million one-off items, they affect the operating margin of 0.6% in units. Otherwise, it would have been like 13.0%. Yes, I think that's pretty much what we can say about that slide. The quarter, as such, had a growth of some 24%. So slightly lower growth because the compared to the first quarter. But then as we also mentioned in the report, it is important to remember that the second quarter last year was very, very strong. And so to see that we now have been able to increase another 24% is substantial, of course. The gross margin pretty much the same as for the first 6 months is substantially lower or 2 percentage unit lower and we -- of course, we've tried to cure that as the months are coming now during the second part of the year because we believe that the price increases although it's very volatile. We don't expect the price increases to us to be as robust or as strong as have been in the past. And in some instances, we also see price decreases, whereas our own price increases, of course, will come into effect and hopefully cure this. And there, again, the operating profit, it's important that in this particular quarter, the operating profit is influenced by SEK 232 million when we sold the shares in Schulthess 26%. Other than that, it would have been like 13.8%. And I think it's also important to mention that during the COVID, we had a substantial growth in margin. We were just looking at where it was in the past. So there's no dramatic thing. Of course, we have also increased our costs somewhat because we are more active in the market. And we are, if not totally back to normal, but we are pretty much active as we were before in marketing. And of course, a lot of things affecting results when we increase production as we are just in the process of doing. And we have a typical regular graph indicating our growth pattern, and we see that pretty much tags along as it's been before when the second quarter comes out always better than the first. And of course, the fourth quarter always being the strongest one, but not so pronounced last year due to shortages and deliveries. And we are -- we hope now that we will improve our ability in the fall when it comes to deliveries, providing that our subsuppliers would help us. But it's a very complex situation. As you all know, with the semiconductor industry being lagging and all the supply chains and shortages of labor and so forth. So whereas we had a very sad development during the COVID as far as cash of these dead people, business-wise, we believe we see a lot of reactions that we can read out from that. And on top, of course, we have the Ukrainian situation. And on the profit side is pretty much the same. Of course, here, that graph is illustrating the one-off effect in the second quarter here. So that's a little bit unrealistic. And also in the first quarter is the other way around, was burdened remote SEK 114 million. So we try to be overcautious when it comes to illustrating those one-offs. So no one is sort of blindfolded or anything like that. Just a few comments about the business areas, Climate Solutions, of course, that's where tremendous interest is stirred among analysts and investors and they see very strong growth. The order intake is never seen anything like that before. Again, of course, we cannot deliver as we would have liked to. But we hope that, that will be something that's eventually going to fade away. And here, of course, when we announced the investments, the majority of the investment is going to be in capacity increases in this particular business area. Margin, again, pretty much the same for all 3, both the Element division, which we are going to come to, they've been able to cater for the same operating margin as last year. Here, we have a time lag on our price increases and also the productivity has not been developing as we would have liked to, not any dramatic things. But we have a steady program in all companies. And when you have that stop and go, well, it's not ideal for the productivity development. And Hans is going to come back, of course, in more detailed figures. But here, we've had a growth of some -- just south of 26%. And operating profit again is, of course, influenced by the one-offs. So in real terms, it should be like SEK 1,698 million if I calculate it correctly here, with an operating margin of 14.2%, very solid figures. On the Stove side, same thing. I mean, here, we usually have a seasonality. But the second quarter, again, has been very, very strong, illustrating that Stoves at the moment, it's almost like a heat source. We've been saying that something of interior design to figure up in the northern part of the -- in this part of the world. But it's totally different now. It's been one of the rescues from the high energy prices and particularly on the wood burning side, of course, whereas gas and electricity have all soared. And we spent quite a bit to solve the ore to come down on particles and on the wood burning side and -- we are very determined to solve that. Of course, we also -- eventually, we need investments a little bit above the depreciation rate, but not so dramatic as on the Climate Solutions side. Here again, some of weaker margins due to the reasons that we mentioned before. And it's a very interesting growth as we see with a -- having a growth of some 24% just under -- and there are no acquisitions here. It's truly organic, no first currents in price increases. And so it is almost able to keep their margin from last year. And we apologize for the -- where some, I guess, spelling mistake on the ambitious investment program. I guess we turn the intrigue term upside down rather than as it is now. So it's an ambitious investment program. Nevertheless, Element, of course, being influenced very much by the HVAC development and also by the -- particularly the semiconductor industry. But also other segments, most of them are growing. Of course, the white goods segment that is lagging due to the expected higher interest rates and so forth. But overall, it's a very strong growth with 26%, and there are no acquisitions or just little bit about 1 percentage unit. And yes. Well, what can we say, it's been a very, very good price discipline here. I'm not saying that we haven't been disciplined on the other 2 business areas. But here, we are presenting the same operating margin as last year at 10.7%. Yes, I think that's pretty much on that side and 3 more pie charts. And this distribution of sales is pretty much the same as before, 64% -- 65% on common solution and the other 2 making up the rest. And on the operating profit side, it's also a very solid. For Climate Solutions represents a little bit better than 70% and the other 2 making up to 29%. And due to the growth in Europe, particularly you are seeing churn, should I say, part of it this of course is relatively high. And we just hope now that North America also will get going with that new legislation is coming into effect both consumers and the trade as such start to realize what a tremendous opportunity we have there. We are very pleased to note that we've acquired all those 4 North American heat-pump companies prior to the expected growth now that we're going to see the coming 10, 12 years. And hopefully, there often, just like we've seen in Europe, we were also subsidized historically. But it isn't until you really get going politically. And also, of course, when other energy prices go up, then you're really motivated to invest. I don't know whether there was a short story about the result, Hans, but never the less, I'll leave it over to you now.

Yes. And I'll try to make it not too long anyway. I mean there will be some repetition, but let me just quickly go through the business areas again and then some balance sheet numbers, and we'll open up for the questions. So taking a look again at Climate Solutions. I mean, what Eric said here, a continuously very strong order intake, especially in Europe, but also with North America beginning to move. And that was really before the announcement came of this tax credit being reinstalled, although there have been talks about that, of course. But there's a general need, of course, to decrease utilization of oil and gas, and that's also reached the U.S., so to speak. So a very strong order intake and a strong order or growth in sales as well, although it could have been higher had we not had the challenges on the supply chain side. The acquired portion of that growth of some -- or close to 26% is only 2.7 units, meaning that the organic part, including price increases, was a substantial part around 2/3. And then we had a portion of currency in there around 1/5. So we came up from SEK 9.5 billion to almost SEK 12 billion in sales. But with the gross margin that is still lagging behind for the reasons that we've mentioned here with supply chain issues and, of course, substantial cost increases on that. The official operating profit being SEK 1.8 billion, adjusted for the one-offs rather SEK 1,698 million with a margin of 14.2%. So where the price increases have not kicked in fully but also where we have not been able to fill our factories to the extent needed or wanted, you can say. And below this, of course, this very ambitious investment program to meet the future demands. If we just quickly look at the quarter as such, we were able to grow with some 22% there, 22.5%, up from SEK 5.2 billion to almost SEK 6.4 billion with about the same split between organic growth and currency, as I just mentioned. But with the gross margin, that is substantially lower than last year. But then as Eric mentioned, we shouldn't forget that the second quarter of last year was a very strong quarter. So it's tough to compare to that as well. The underlying operating profit landing in at SEK 972 million in with an operating margin of 15.3% adjusted then for the sale of Schulthess. In terms of distribution of sales per geography, no major movements, but North America has gained a couple of percentage units, up from 18% to 20%. That's been the major change you can say. The Nordics have come down a little. And then Europe has also gained. So a strong momentum in Europe continuously, but also North America coming more and more. If we move into Stoves, it's also been a very, very strong, almost extreme order intake for the business area, especially for Q2, which typically is a softer quarter. There's been a very good demand for the wood burning Stoves, especially in Europe and not the least in Germany. And this is, of course, driven by a continuous home renovation trend that started during COVID, but also the sad war that is going on where people are looking for both, ways to save cost in terms of heating, but also for a safe product that works also if there would be an electricity shortage. Sales up from SEK 1.4 billion to slightly more than SEK 1.7 billion, a growth of more than 23%, where the organic portion was around 75% of that. Also with price increases, of course, but where more price increases should kick in as we move along because we have not been able to raise them as quickly as we did in some other areas. So the gross margin is also here affected by this. It's at 35.8% as opposed to 36.9%, but the operating profit coming in fairly well despite of this 11.4% as opposed to 11.9%, thanks to a good cost control. The individual quarter is, of course, a very tough comparison. We had a tremendous growth increase last year of 71.4%. This year, we've been able to increase by 19%, 2/3 of that being organic roughly and the rest currency. But as I mentioned before, an unusually strong second quarter and no acquisitions contributing to the growth. And for the quarter as such, the gross margin has come back. And we've been able to increase the operating profit in absolute terms by some SEK 13 million landing in a margin there of 11.3%. In terms of geographical or sales per geography, Europe and the Nordics have gained a little bit on behalf of North America, where the portion of wood is slightly less because the strong demand has been in the wood area as opposed to electric stoves or gas stoves. Then moving on to Element. The order intake remains at a very high level, also very much driven by these trends that we've been talking about, home renovation, sustainability trend, the war as such, a need to shift away from oil and gas and electrifying the society. Of course, the strong holds here have been and continuously are the HVAC and the semiconductor businesses. White goods and also some Asian markets have been a little bit weaker. But sales have grown with 26%, up from about SEK 4.1 billion to SEK 5.1 billion good organic growth, a little bit more help of currency here than in the other areas due to the geographical mix, but about 2/3 of the growth still being organic, including price increases, of course, a small portion of help through acquisitions. And with the gross margin here, not being affected as much as within Climate, But still down slightly. But thanks to a very good cost control, we've been able to maintain the margin at above 10%, landing in at 10.7%. And if we look at the individual quarter, sales were actually up by 28%, and the gross margin being at the same level as before, but where we've been able to land in the operating margin slightly above from last year, coming in at even above 11%, 11.2%. So a very nice development for NIBE Elements. In terms of sales per geography, the Nordics have, in this case, gained a couple of units, but the picture as such is very much as it has been before, with Europe being about 1/3 North America being the biggest portion. And this is also the area where we are most present in Asia with some 12%, 13%. If we then leave the business areas and quickly look at the balance sheet and some key figures, our total assets have -- from the beginning of the year, increased from SEK 43 billion to SEK 48 billion. which is a natural development of our growth. There are 2 items you can say, sticking out here on the asset side, and that is that the nonfinancial current assets, meaning inventory to a large extent, have increased and the financial current assets being the cash, you can say, have decreased. So we have been trying to source components for our production to cater for the challenges on the supply chain side. and of course, building inventory costs. So that's where we have the shift. If we look at the equity and liabilities side, I mean, given that we are continuously profitable and have generated some good profits. The equity has increased, and it's an overall very solid balance sheet. But coming back again to the changes in inventory we see that on the cash flow side, the operating cash from the business has been roughly the same as last year despite this increase in sales and where then the change in working capital, which now is some SEK 2 billion as opposed to slightly below SEK 1 billion last year, of course, as costs or had a negative effect on the cash flow. And then we've continued to invest twice as much as last year to meet future demands. So the operating cash flow after these changes have been a negative SEK 750 million as opposed to a positive SEK 850 million roughly of last year. But of course, it's an unthankful task to drive working capital reduction projects in these times. We need to get products on board to be able to deliver as soon as we have everything we need. And just a quick glance on the key financials -- key financial figures. I'm not going to go through all of them. I mean we still have a very solid or good portion of cash in there, slightly more than SEK 4 billion. And that, together with a very decent net debt-to-EBITDA level of 1.1%, an equity asset ratio of 50%. We still have very good room to maneuver, both for our growth and investment program, but also growth through acquisitions. But of course, it hurts a little bit to see that working capital, excluding the cash portion has gone up here from some 15% up to 23%. But we know where it comes from and what it's related to. So, I think we have it fairly much under control. Then the last slide, of course, building inventory being as solid as we are in terms of equity asset ratio and so forth, the return on both capital employed and equity, do take a hit, landing in at roughly 15% and 16%, respectively. It's not quite where we want to be. But overall, we've been able to increase the net profit per share -- equity per share. So it's a solid balance sheet after all. But I'm sure you will have some questions related to the business. And unless you have something to add, Eric, we open up, I guess.

No. I mean it's very solid. Nothing to add really. So please go ahead and shoot.

[Operator Instructions] The first question comes from the line of Viktor Trollsten from Danske Bank.

Eric and Hans, I hope you can hear loud and clear?

Yes, absolutely.

Absolutely.

Fantastic. So firstly, on margin, you said that price hikes now compensate for input costs, which I suppose started to impact by end of Q2, given that gross margins in climate is still down. But how should we read that into the second half of this year. I guess it sort of sounds like margins than at lose should be flat year-over-year in the second half and while volumes in practice also should have a positive impact. So any comments regarding that please?

All right. Well, I think that we are not shocked, but it's a very, very uncomfortable situation where we've been hit very hard by price increases. And we don't see our cash really to increase our margin just because we could say we're on price increases from our suppliers have been so extraordinary. Now we have increased our prices and gain market that way. I think we have to be fair. So -- but of course, we don't like to lose either just because we will have some pricing increases. That's the first step we like to be at par with the margin, not necessarily saying now we're going to use this to squeeze additional out of itself. Then something else that we have to sell much more, then we have to be better on productivity, but not saying that the end consumer should help us improve the margins. That sounds like boy scoutish or girl scoutish, but I think that's -- we don't like the margin to be lower, but the first step is to bring it up where it used to be.

Okay. No I guess that's clear. I guess, historically, at least, you have had 20% leverage or economies of scale on additional volumes. So if you can compensate for input cost, I suppose a flat margin should be within range, but that's helpful. Then secondly, on the inventory buildup now in Q2 just out of curiosity, it sounds like the majority of that is component. I know no finished goods from that perspective. And I guess, what I'm after is whether you have had any over-absorption of fixed costs in Q2?

I think it's -- that hasn't helped the results. We -- I mean, that's a very delicate balance. And of course, if you were to dig into the figures even more in detail, we are also overstaffed. But we don't like to chisel every detail out, but to be able to perform as good as we possibly can, we here, of course, predominantly increase our inventories or components and raw materials. On top of that, we have overstaffed our factories because when you get something in, you have to be able to produce because if you just have the regular staff on board, you'll never get to any improvement. So that's a little bit painful to just present that, but that's exactly how it will happen. Had we had, of course, products ready made, it would have been sent out directly. So there is no buildup of inventory of that kind. And we haven't been able to do that since the first half of 2021. While the second quarter turned out to be so good last year was predominantly because we delivered what we had produced during the first 4, 5 months, that was sent out prior to the vacation period here in Sweden. And ever since then, I mean, it's been fairly in the air and our inventories are ready to make part sadly enough.

Okay. No, that's clear. And then on organic volumes, if I may ask quite a bit year-over-year despite component shortage and a rather tough comparables. Is it possible to sort of dwell that down into how much is your capacity up year-over-year? And how much is your capacity utilization down year-over-year?

Well, that was a -- I don't know whether we can answer, but I guess we could. Hans had we been given a bit more time. But I think now we are into the specifics. It's an equation every day or every week, at least, where you have to monitor your capacity, both on the shopping side and on the components that you have. So I don't think that we should dwell too much into that equation, if you don't mind.

Okay. no worries. And then just another sort of question on volumes. At least from my perspective, component shortage, let's say, impacted sales by 10% in Q1. I would expect something similar now in Q2. And I expect that you have an impact already in 2021. So how should we think about that now when component shortage could ease? Is that the figure that tells after a cumulative impact of more than 20%? Or is it a net effect of, let's say, around 10%, if you see my question?

Yes. We couldn't answer that ourselves because that depends on -- we don't believe that our subsidy -- we don't like to, should I say, black ball our suppliers because the industry, not only us, the industry has not been giving them the proper figures because there's been an explosion. And no one can say that we, 24 months ago, could have foreseen the dramatic growth in demand. So the industry, including ourselves, is also to be blamed. And now, of course, all supplies not only ours, but supplies to the heat pump industry and for that matter to our other sectors as well, they are gearing up. But we don't believe that they are going to be a gearing up process as of that particular date, everything is squeaky clean. We believe they're going to be a gradual improvement over the coming quarters. Very hopeful now we're going to see a positive sign or positive sign during the second half of this year.

Okay. And it's, by no means, my intention to push you. But if in theory say that component shortage eases tomorrow, how much would you be able to lift on, let's say, volumes and our capacity given the investments that you have been doing? Just if you could give us any figure.

Well, as far as capacity, we believe that we could cater for that when it comes to what we have: staff on board and potential staffing. And we don't believe that the components are going to run in that quickly, as you indicate. But of course, it's important for you to know that the capacity increase that we are going through now on building factories and so forth. It's not the case that now we are under the sea and not being able to increase where we offer now. Of course, a new factory, a new machinery that takes a 4 to 6 quarters to get onboard. So what we are saying is that the factory is being built now or the capacity increases above the regular level of investment. That's something that's going to come during next year. So the capacity is there.

Okay. No, that's clear. And -- but maybe just one final and a more broader question regarding the nature of the Element business, which at least historically have been rather cyclical with high correlation to industrial production, margins took quite a big hit in 2005, et cetera. So just curious to hear you. Would you say that the Element is less cyclical to build and with more resilient margins, could you in that case explain why?

Depends on what your business area talk about or sector. Of course, like 15 years ago, we were more dependent on the white goods sector, which is very cyclical. But now with a tremendous growth on the HVAC side and also on the semiconductor side, just to mention 2 examples and the electrification enhancement here. That happened is broken for now there. So it is -- so the seasonality, but we can't see that, just like with Stoves. The second quarter here, there's no comparison to demand that we've seen. And even if we have invoiced quite a bit, I mean, the demand has been phenomenal. So it's difficult for us to say the seasonality pattern is broken. Right now, the seasonality path and it is totally different. But they're going to prevail 3 years from now or 4 years on. We can't predict that, but it's totally different from the past.

The next question comes from the line of ...

Yes, please.

The next question comes from the line of Carl Ragnerstam from Nordea.

It's Carl here from Nordea. A few questions from my side as well. Firstly, you mentioned the inflation reduction act in the U.S. I guess it's early on, but I don't know if you have reviewed it. But could you -- what's your best guess on sort of the market growth in the U.S. over the coming 1 to 2 years, perhaps? Is it -- would you say it's maybe too optimistic to expect similar growth pace as in EU or?

Well, we believe that it's a very, very solid sign from the authorities of the government, but now you have 12 years to invest here. And I think it's very important that this is particularly in the geo thermal side of it, where the 30% tax incentives are enforced. And of course, it's been a hindrance in the past. It started already after the Lehman Brothers prices where we got the incentives. But they were limited in time. They were 5 years. And the industry is such at the same time, you remember that the energy prices went down. So there was -- it's a bit contradictory. Gas and oil prices were down and subsidiaries were introduced, but that wasn't enough. And then, of course, they were taken away. They've extended a couple of years and they have taken away for a year. And then that we came back high years and now they are supposed to be taken away again. It's been stop and go for the industry, particularly for those companies really would like to concentrate on this. We like to go for the trenching of the cores and so forth. Now it's a very solid signal to the industry. Well, try to rebuild or try to build now a more sustainable society just like with electric vehicles. So of course, in Europe, it is a little bit different because here with the Ukrainian crisis that has further accelerated the situation. Whereas North America, exclude Canada and U.S., they are pretty much independent on wood, gas and oil. But here, it isn't that urge to stop something for the same reasons as we were doing in Europe now. It's more of a climate matter, a lesser of a political crisis with someone invading the U.S. or Canada or Mexico for that matter. All right?

Very good. And also, if you compare your organic growth in Climate Solutions in the quarter, would you say that you've been able to keep market shares in Europe or lose somewhat market shares? And also in the sort of longer perspective, we have seen other players as well, building capacity traditionally by manufacturers. We have seen gas players, Asian AC manufacturers entering the air-to-water space in Europe. Do you believe that you could keep your market shares in the coming few years? I know it's a sticky market, but what's your view on that?

Any entrepreneur in the market would go for, of course, at least keeping and possibly improving. The order intake doesn't suggest anything else. But of course, the truth is going to be in our view in the quarters to come. And of course, we might lose in some markets, and we might gain in some others because it depends on the particular product that's available right now. I think in general, amidst this shortage of components to all manufacturers. But it could have been that someone have been more bold to have like supplies or components and they've been able to deliver during a quarter, some months better than others. But the components we are talking about is not like some companies have gotten a large avenue, gotten everything. We all suffer.

And the final one from my side is on the component issue situation. You said that you see some light in the tunnel at least. Is it just semiconductors where you see a better sourcing situation or is it other components as well?

Yes. There are other components. But I mean the common denominator, you can call it is that when you look at our we reported electronics. Of course, there, they are very substantial part of that. But we also buy many components on many products that in themselves have also semiconductors, which means that, that also hindered our sub-suppliers. Yes, I think that's the answer to that. It's not like we're -- we gotten our semiconductor for our boards, then there was in every -- anything would have been PGT and that's not how it is because there are other components or other products that are just as sophisticated our suppliers believe because everything is driven or has been driven towards maximum efficiency. Motors, not like regular motor. They have to be integrated into our control board, which means that they have to be more sophisticated. They also include a number of semiconductors in their, should I say, specification.

The next question comes from the line of Gustav Österberg from Carnegie.

Just 2 questions from my side. Just a follow-up on the investment program. You announced the SEK 5 billion in growth CapEx in the coming years. And I was curious whether that includes any expansion plans to cover sort of higher demand in the U.S.?

That's predominantly for Europe.

Okay. And with sort of the Inflation Reduction Act and the long-term support to HVAC sector I mean, would it be reasonable to expect sort of further capacity expansions in the North American market?

Well, eventually. But as we said many times, I think during meetings like this, we've had capacity and the companies in North America, when we acquired them, they had quite a bit of capacity. And we haven't seen in the past that the demand increase as we see in Europe now. So whereas Europe has been gearing up and we all know the figures, roughly, of course, now, we've been -- we are coming towards a point where we are using up all our extra resources as far as productivity or production capacity. Whereas in North America, the 4 factories that we have there or manufacturers, they have not sort of been the areas when it comes to volume expansion. It's been more regular. Like we've been saying, okay, in some years, perhaps not even up to 10%, 8% or 6% and so forth. And -- but now we talk totally different figures in Europe. That's the reason. So that's why we are not I mean we are not going to slack in investment. What we say now it's going to be additional investments. The rates where we have been in the past, that's more a regular rate when we grow according to our normal organic target. But what we see now is something extraordinary, and we have to be prepared for that.