Systemair AB (publ) (SYSR) Earnings Call Transcript & Summary

Okay. Just a quick question on your sort of margin bridge, I'm not sure if you're going to talk about this later on. But could you elaborate a bit more on -- you mentioned that manufacturing footprint optimization is one of the key measures in terms of lifting the margin. Is it possible -- is it predominantly the Menerga move from Germany to Maribor or do you have a?

That's a big part of it. All right. But I think Roland will come back more with the margin bridge in his presentation. So if it's okay, we can come back and see if it's explained by the end of the day then on the Q&A session. But -- all right. So yes, we take 15 minutes with coffee breaks served out there, and then we're back in here again to hear more. It's you 100% Janika, about growth initiatives. So it would be interesting to hear. Thank you. [Break]

Okay. Ladies and gentlemen, I think we continue. Operational excellence and of course, its underlying main purpose, the focus on the profitability. We talk about operational excellence in our manufacturing entities. Of course, we need to talk about our tax risks. Today, we operate our own factories in quite a lot of places, as you know. And actually, we are quite proud of that we own our properties with a total service area of 320,000 square meters and a book value of around about SEK 1.4 billion. As you heard in the sustainability part, that is something that is really close to us. So one of the main purpose why we also have them and also in the terms of that under touching when it comes to investments, when it comes to expansion, but also to be able to increase capacity for new products, but of course, also for existing markets where we see that the growth makes us or puts us in a position where it's possible. It's good to have a factory that is well optimized. There's kief and we actually have under control and have well invested. And that is something, I think, that you can see in every factory that you visit from Systemair that we have a well invested factory, highly optimized and fit for purpose, where we, of course, also can influence the systems that we install in terms of ventilation, in working ambitions here and also influence the energy consumption. All our building plans are designed and optimized to have a low energy use. But for example, also in India, for example, we have rain water harvesting, with water and energy efficient installations, and we have on multiple facilities solar panels for energy installations. This you can only do and be prepared for if you own these properties. And of course, also, it is a -- I would not say low-hanging fruit, but more attempting, of course, having a strategic thought when looking at M&A candidates, is it worth investing in M&A or to expand on capacities and take it from there? So that is something that is dear to us and that we're always looking into and that's why we need these highly invested factories. So looking at our operations and our strategy. We have 5 main areas and that we are running and that we are looking for and we are setting our programs for. Starting with what has been discussed here several times already today is the continued to optimize our factory and logistical footprint in order to increase both competence and of course, economy of scale. Secondly, to keep regional factory setups, where, of course, the justified by market demands. For example, when you talk about air handling units, the sheer size of the product makes it necessary to be rather close to your main markets. Otherwise, logistic costs will have a huge impact on your total market price. Then implement lean manufacturing principles, and we have our own principles, SPM, system and production model. In that, I will come back to that a little bit. We have defined our internal processes and KPIs, how to run factories and how to constantly look into them and to make the better step by step. Then that we have a strategy where we're looking more into it to produce key components in-house. Why? Because of competitive needs, but also to, of course, hear be control of what is really important for the key areas of our offering. And then increase -- constantly increasing of the level of automization and digitalization in our production processes. So these are the 5 main areas that we are running. And in the presentation following here, I would like to give you some example of what that means actually in the different areas here. If you look at the first part, where we talk about continuously optimize the factories, for us, the operational efficiency, and there was also a question earlier today, we have an internal efficiency projects here with ongoing logistical review for Europe. What does it mean? Looking at the increase of cost and competitiveness when it comes to logistics setups, grades, et cetera. We, of course, need to look into that. We -- as you know, we have our setup we have in logistic centers in Sweden and Germany, for example, for Europe, but we need to review and reassess how much and what to be your stock, what should be directly shipped, what is the, I'll say, cutoff size for direct shipments, orders, et cetera. That is something that we are evaluating constantly. Looking at our manufacturing footprint, where to produce what and here, of course, review multiple locations for optimized outcome. I think you had an earlier question here today, if it's only Menerga. No. It's a constant thing that is ongoing depending on volumes, products but also closeness to main markets. very important. And of course, if we -- is it possible or should we allow that similar or the same products to be produced at several sites? A good question, but should normally not be the case. Then of course, when it comes here, Menerga is in focus for operational efficiency projects. And here is the main project ongoing, as communicated earlier in a quarterly report also the Menerga main products is for pool. It's for commercial with highest efficiency on energy efficiency and it's private pools. The private pool part has already been moved out to our existing factory in Maribor, Slovenia and there are other efficiency projects ongoing, where it will be follow-up by the rest of the volumes also be transferred out or kept in a reshaped model. That is the main ongoing activity for this part on operational efficiency. Covered here is, of course, also looking for common platforms, and I'll come back to that because it's a quite important one. It's footprint, where to be, what to do and the economy of scale. We are supporting geographical growth by presence, but also the setup and the way we support products, organizations and sales and of course, always have a look and invest in technology for future and, of course, on the life of sustainability. But looking at common platforms. I think it has been already touched upon several times before, but looking as an example, our Geniox platform for our AHU units. It's actually the same platform as you see the casing of that at the wall. It's called the Geniox. When we did the Geniox project, we started with some European factories and we made it to the first rollout to 3 factories. Meanwhile, this is a project 5 years old, the platform thinking has been expanded to what you have heard earlier today about all the controls, the Access platform. And also, all the selection tools are now on the same platform. Before that, I can say that we had 16 different technical platforms and 23 different selection tools. Today, one platform, one selection tool. It's quite a difference. This has now been rolled out to all the factories that you can see on this chart that makes quite a difference, of course, it's industrial platform thinking. Scalable, and of course, you have here and there are some local dialects, but it's the same chasis, the same production model, the same process, the same machinery, the same setup in the background. That's a synergy. I got the question earlier today in some of the discussions about systems. For us, it's very clear that when a customer talks about an installation of a ventilation system, what you can get from us is a product. You can get multiple products, but he needs to have a solution for his problem, which is in almost all cases, a system that is built upon several products that we need to connect. That's where he needs his help from us. We need to be able to connect different components of a ventilation installation to a system. We deliver the products, and we deliver the help on the digital side to connect them together in the best possible way for an efficient solution. But at the end, for system, what does it mean? When we talk about basic product range, standard products, that is, to us, I would say, clear products that you have an article number like a fan, a damper and heater or a residential AHU unit. To them, we manufacture and produce into stock. That's the simplest product that you can have and it's around about 40%, 45% of our volume. Then when it comes to the platforms, the configured products, these are the ones that we are building on these platforms, our technical platforms. And they are configured to order, but built on a scalable platform that you design in an selection tool. And then we'll talk about the customized products like a car park ventilation or a Menerga or a marine unit or like this one is a data center unit. But a car park ventilation sounds very complicated. CFD simulations, it's a lot of fans, a lot of controls but consists only of standard products that you connect together via our tools. So these are then engineered to order because we have to make the CFD. But at the end, what it means for us is that we are producing products, we are selling products but to connect them on the control side and on the, I'd say, competence behind the offering. So we are a product company. So to be able to produce that, of course, we need constantly to look into our factories, our setups. And when we talk about our Systemair production model, we also talk about digitalization, but what it covers in the Systemair production model, of course, how we measure, how we build and how we achieve quality in our products and operations, and our processes. It is continuous improvements, reduction of lead times, standardized work and environmental care. It's one step of that, which might be simple and easy, but which is very crucial, we work a lot with digitalization in our own factories. The automization of our factories also allows us, of course, to follow up. So we have -- on top of that, we have a system internally like [ Maxo ] system, but actually, we can measure a lot of things, we can visualize a lot of things. So we see -- we can monitor bottlenecks. We can look at and understand downtime on machinery, we can increase the capacity, and we can track and trace stop times and measure the operational efficiency. Just as an example, an existing factory in Spain where we apply the system just by really looking into that and to look into the figures and the data we identified another 3 working hours per day that we can remove on that machine. So we freed 3 working hours per day on machine. That's quite a lot. So just to show you a little bit of the possibility of having this digitalization in the manufacturing processes on automated machines. These are the things that we're working on constantly in the background. As an example also of other investments when it comes to also investing in existing factories and be prepared for expansion or new technologies. And here is an example I want to mention Recutech in Czech, in Pardubice. We acquired that factory in 2017. They made -- at that time, they made the aluminum counterflow of course. And they had a production volume of around about 10,000, 11,000 pieces in a year. A little bit with our help, they introduced later on a plastic heat exchanger based on the production line of one machine. And then at 2019 already, the markets increased that much by legislation and by the need of counterflow technology to achieve heat recovery in residential applications up to 90% so we saw an increase here that we got actually in 2019, we went up to around about 80,000 pieces a year. And by that, we went to be the largest producer of aluminum counterflow heat exchanges in the world. 2022, we inaugurated the need. We grew out of our factory, and we built a new one that is 4x bigger than the old one. And here already in 2022, when we had the inauguration, we also added new product lines, new sizes. And today, we're operating 7 lines for these plastic exchanges because the volumes are increasing constantly. So we are today actually the first production measuring 100% of all products that we produced for leakage, which is a quality assurance. And we will also -- this year, we will also start the production of the incorporated [indiscernible] heat recovery [ wins ] that we transferred from Germany to Czech also. So we're closing one factory in Germany and put it in here also now from already in the end of the last year. So by that, we have full control of the most important component in the energy recovery applications, the heat recovery cores. And today, here in that factory, we're running a volume to about 120,000 pieces a year. So this is either acquiring or investing in existing. I think here was absolutely the right decision to investing and building that volume on our own brands. This factory here is fully automized. So we think what you measure and what you track is the things that you actually get done and get improved. So we have a set of KPIs and things that we are, of course, measuring in all our entities in the manufacturing part. And it's because we will have a strong focus on the margin development to support our 10% target. And also the production footprint is always under review. But if you don't measure and track, you don't know. So it's a continued action on low-performing parts of our business, but of course, also to develop the ones that are really good to be even better. So we're looking for a reduction of lead times, productivity improvements. We're looking at our product cost focus. And here, it's not only looking at value-added or materials, everyone would think, but at also cost out, that you have a plan for cost out on an annual base on every single product that you have. Then the inventory review, finished goods, but especially in these days, components, absolutely. Sales and operation planning process, be in tight connection with the sales and the marketing parts. The logistics route that I already mentioned and working with our internal project models where we have the product platforms and our plan-to-market processes. These are the things that we are tracking in our own operations on a daily basis and it's really necessary and good to do. Okay. If no questions, I'm handing over to Janni for the part of continued growth. Oh, sorry.

[indiscernible]

I'll just repeat the question because it's also filmed here. What is the difference between the different factories in efficiency. It is a little bit different also about what we produce in the different entities. I would say today, if you really want to compare like-for-like, then let's look at our [ hang ] unit factories. At the beginning, when I started this platform thinking, it was rather different in the efficiencies. Today, as we are on the same platform, you can actually compare it, but we can also load balance between the factories. That's rather what we're looking for, and we're looking for our main factories and assembly plants. The main factories being those really manufacture everything from a to z and the other ones just making parts for assembly. So we're not really tracking the difference in between us, the process are set the same. When it comes to other components like, for example, fans, on the extract fans, for example, is not really comparable as the one factory would be in Malaysia and one in Germany. So it's a little bit on that. So we are -- how to say we're more selective where to put them. And if they should be comparable, we need to put them on the same process, to same products. But today, on the Air Handling units, we have achieved that part. And that's, of course, a [indiscernible] I agree with that. Okay. Yes?

[indiscernible]

So the question was how we deal with the hyperinflation and inflation [ session ] and the different customers, and the different factories. The real hyperinflation issue we only have in Turkey. And the Turkish business as such -- the main part of the business for us is export, but the main part is that we're selling in euro. So by that, we are going out of the problem. And it's the way of the local market in Turkey to how to say? Safeguard themselves from the issue of the hyperinflation. You make the deals in euro.

[indiscernible]

Yes, it would be theoretically, but you're right. But what we of course -- we also are tracking, of course, the man hour cost in the different factories that we have. We have in the past, we have here and there, we have shipped products, taking them from other factors, for example, to Lithuania, we're taking in to Czech, to Maribor, as I mentioned also with Menerga. But it's just when you see that there is a -- how to say? It needs to be a difference. It actually overcomes the issue that I had, that you need to be rather close to main markets with some of the key products that we have because of the sheer size of the projects. So it's a lot of different ingoing how to say, arguments in that kind of decision. But just to say that the hyperinflation as such for Turkey is not the biggest problem for us. It is more difficulty I have to say, for the employees, but sellers are another thing. Okay, Janni. Thank you.

Finally, my turn, and I will try to speed up a bit because we are a bit behind the agenda. But my focus will be on pretty much explaining why we believe that we will continue on the same nice growth curve as you saw 100% from the past 25 years. And I will start with a quite high level and I believe you have seen much of this in other Capital Markets Days and presentations, so I won't spend too much time. Especially not on the megatrends, but these are really important for us as they truly shape the future of our industry. So based on the megatrends we have identified 5 industry trends, we believe, will be especially important for us going forward and where we also feel that we are well positioned to capture those trends. We have a circular economy that we touched upon and also [ thought ] on a bit in the operations presentation, which for us is a lot about taking a wider responsibility for the products we sell throughout its life cycle. So short term, for example, looking at the service business that I will come back to. We have the supply chain transparency trend where we essentially believe and see that -- it's about doing the right things and also being able to be scrutinized for it. And that this will not only be needed from a legislation perspective but also demanded from customers going forward. And of course, this will also help us to deliver value in terms of adding transparency and traceability to the supply chain, which is something especially causing [ and lasts ] to a 1.5, 1 year with challenges in the supply chain is something really important to address. We have the HVAC industry consolidation, which, of course, is close to my heart to working with M&As. This is, however, not a pure financial driver or trend, which is about consolidating a fragmented market. We also see what Roland has touched upon numerous times to, let's say, reach the maximum energy efficiency, you need to work with the wider landscape and not only ventilation stand-alone. You need to understand how the ventilation system works, but also how the ventilation system works in connection to heating and cooling. And of course, that's also value for us to be successful in the future. Then automation, I think, is valid for any industry in terms of driving productivity. Humans are not super good at repetitive tasks. And of course, that can be automated. In our industry, we see a lot of this related to control systems and what Ralf presented earlier, that you can get a lot of efficiency gains from the software. And of course, then the software needs to operate with more softwares in a wider landscape, like the BMS system or the air control system and so on. So that's, again, a part of what Ralf presented in how we approach control systems from our perspective, having an open API and being able to operate in a wider system landscape. Then last one, regionalization. We have touched upon it in some of the questions. This is, of course, close to our heart with our setup where we are close to the customers, partly for logistic reasons and not shipping things across the world which are bulky and expensive but also to meet regionally or regional customer demands. More and more, I think, is valid for more industries than ours that a customer wants something specific for them and the needs will vary depending on which part of the world you are in. So for us, it's very important to be close to the customer and make most of the decisions close to where the customers are at, and that's also added for our supply footprint. So trends are important. But at the end, they are also creating very strong drivers for our business. And what we see now very favorable for us, and I will come to a bit more of this going further. But we have, for example, governments' climate actions which is a lot of government funding into programs to upgrade existing buildings, we -- and Anders touched upon like the Green Deal. 35 million buildings needs to be renovated. And of course, the HVAC system is part of that. Creates a strong demand for the products we offer. We have the indoor air quality focus, which thanks to COVID, you could say, has really increased in awareness and importance at customers and also governments to improve this and the impact it has on our health and productivity. Digitalization is increasing the demand for data storage, which in turn is driving the global expansions of data centers. And all of those data centers need reliable and energy-efficient HVAC systems to control the time that they allow them to operate in a safe way. Lately over the last year, this has been a real acceleration in converting fossil fuel-powered heating sources into alternative options. You saw examples from Tobias in how we address that in the residential segment with combining ventilation with heat pump solutions, also creating a really strong drive for the type of products we offer to the market. In terms of health care, as the economic prosperity rises, also the demand for modern health care increases. We have a very good position in the Healthcare segment. And here, of course, as the facilities needs to be modernized, they also demand modern and fit-for-purpose HVAC solutions, both in renovation projects and new build projects of [ business ]. And then finally, we have touched upon it a couple of times, the smart buildings. It's increasing even more, the complexity of buildings and not only building stand-alone but complete cities in terms of how to talk to each other. And this is a bit back to the control system short term, how do we are sure that we can deliver units out of the factory with the fit for purpose and optimized control system. So really good and strong drivers for our business going forward as we see it, a lot of them supported by funding from governments here. And I won't spend too much time on it, but this is something that you have heard us talk about indoor air quality. And this is -- has really been accelerated because of COVID and the importance of it. Partly what we see now is that the focus on improving the indoor air quality in schools is really taking off. And also here, we see dedicated programs from governments like in Belgium, Netherlands, Germany to start to renovate old schools and also in the new schools that are being built to put in efficient and reliable HVAC system. And here, we're also very well positioned to capture this growth too, among others, our recently launched Sense units, which is specifically good for renovation projects, so you have a unit in each classroom. So you don't have to rebuild the complete HVAC system and also a strong position in Canada. And of course, this is no different from work. Good ventilation allows us to be more productive at work in the same way as children will learn better and stay attentive longer in schools if the ventilation is good. So strong drivers for the market and what do we then see for the actual underlying market. So we believe it's, of course, ups and downs. And you saw the 25-year growth curve. It's also ups and downs in system as growth curve. Even though I must say the downs have been quite few and not so much. But we see that there will be a solid underlying market growth also the coming years for the ventilation industry and for us. And it starts off with the construction market, which is essentially the market driving the HVAC market albeit we have a delay from new builds to HVAC installation since that's not the first thing you do in a building. And we pick here the European construction market, partly because that's around 75%, 80% of our sales is in Europe, but also because it's the latest updated numbers we have gotten our hands on, and it has been revised downwards lately, of course. But what we see now is that the European construction market will grow around 4% per year CAGR in the coming years. Of course, that doesn't mean 4% every year. Adding then the positive -- for example, the positive drivers and the legislations on climate change, all these government-funded programs, as an example. We forecasted the global HVAC market will grow slightly above the construction market and the companies. And for us then what does that mean in our estimated addressable market have a 5% market share, and we believe that there is still a solid underlying market growth in the coming years. Again, there will be ups and downs. And I would be probably naive to say that there won't be any downs talking today with the pricing inflation and interest rates is putting construction and work on hold. But the good thing -- and why we also believe we are able -- have been able and will continue to be able to mitigate some of these ups and downs. It's partly what Anders mentioned with having a very diverse customer base and also a diverse market presence. We also see that we have a well-balanced position between new build and renovation in our business. We have a very strong position in the renovation market, which has allowed us to historically at least been able to mitigate some of the downturn in new build with increasing in renovation instead. We have our standard products in the range that -- or in stock that Roland mentioned, which allows for quick access, if you need to replace a fan or something, we can get it quickly. We also have dedicated products for renovation, our Geniox air handling units where you can note it down, get it in through the door and then assemble it instead of tearing down the whole wall in existing unit. Also footprint wise to take a different footprint as possible. And as mentioned, we have a diversified customer base since many years, which has helped us to deliver a quite stable growth even in downturns. Stable development even in downturns. And we make it easy for the customer to deal with us throughout this through our web shop and on site support, for example, innovation projects. So all in all, very favorable trends for our industry, very strong drivers for our business, not only the trends but also the same money behind the trends to really incentivize landlords, building owners, new construction to focus on improving the energy efficiency in the buildings. And based on that, a solid underlying market growth is what we see going forward with ups and downs, of course. Then we are, of course, not satisfied with growing in line with the markets. We haven't in the past, and we intend to grow faster and we have outgrown the market in the past, and we intend to do the same going forward. And to support that, we have identified 5 selected growth opportunities. And we have talked a lot about these throughout the day, some of them at least. So I won't spend too much time on going through each and every one of them, and I will be deeper into 3 of them, just in a bit. But we have the residential markets, where, again, we see very good growth potential for us. We are well positioned, have a strong product offering in place to capture that market and the increased focus on both the ventilation as such and having a balanced ventilation, but also the combination of ventilation and heat pumps so that you have the heating and cooling source and ventilation working together in house. We have the public buildings and especially schools. As mentioned, we have a very strong offer and also a strong position in this segment. And this is quite close to our core business of comfort ventilation. We have both the sort of single classroom units in Sense, but we also have more centralized ventilation for new projects in this space. In the Healthcare segment, also an area we believe we'll grow stronger or more in the future. And here, we also have the addition of SagiCofim recently, which has allowed us to complement our offer in a good way. So we have the airflow part, the air distribution part for air-handling units and so on, and SagiCofim adds the filtration part to get really clean air. And then data centers, I don't think anyone has missed out on that, and it's a rapidly growing segment. We have been in that segment for quite some years now and established a good presence and also a good model where we base our offer on our standardized platforms of air handling units so we can produce it with efficiency in our existing air handling unit factories. We also target, say, small to midsize projects to minimize the risk of these larger projects where you have both -- quite a long time from order to delivery, which puts a risk on how you manage prices versus cost and so on. So we have found our niche or found our positioning in that in a good way. We recently inaugurated the state-of-the-art test facility in Turkey to allow or to provide further support to our customers. So here we also foresee that we will grow significantly above group average in this segment in the underlying market. And then the final part, tying back a bit to circulate and renovation for that matter, but essentially the aftermarket sales or aftermarket service part of the business. This is also an area where we don't want to compete with our customers, installers. So it's a selective area how we approach it, it is, of course, an area where we see potential for further growth and also a necessity to have this in our offer going forward. So residential, we have talked a lot about that. But as you can understand, it is a very important segment for us, growth-wise if nothing else. Today, it's about SEK 1 billion of annual sales estimated in that segment, but we expect to be able to grow this significantly above group average in the coming years. And part of that is our focus that we are going from, say, more of a ventilation product sales, we sell just the product to more of a solution sales where you have the surrounding part as well, where the heat recovery system is, the core of -- the heart of our offer. And then we sell the complete package with everything around. And also, as Roland mentioned, how it -- how everything fits together and the knowledge behind that. We have vast experience and a really strong position. Norway is one example where we are very strong in residential. North Europe, North America, we are strong. And we think we can use this to increase our focus on the combined ventilation heat pump solutions that we also saw from Tobias, to leverage that and grow even further. And then this is also one of the areas where we have a dedicated acquisition strategy or approach. So this is one of the areas where we actually are looking for acquisitions to strengthen our offer and mainly then to add the capability to penetrate more subsegment or niches of this market could be, for example, a more dedicated approach to multi-dwellings, where today we are stronger in single-family houses rather than the multidwellings. It could be a product offer for entry level to balance ventilation without the heat recovery, as an example, but just to widen our penetration of the residential segment. So selective acquisitions in this area is something we are looking for. And now we have talked a lot about heat pumps. We have also talked a lot about Panasonic and the intended divestment of our AC business, and one might wonder, well, if you have the AC business, you probably have knowledge about refrigerants and very simplified regards to AC and you have a heat pump more or less but the positioning of our AC business is more towards commercial or heavy commercial applications with quite big units. And by divesting this, we will be able to increase our focus on the smaller units needed for the residential segment as an example. And as already explained, we have the long-term supply agreement in place, which means that we will have access to these products also going forward without necessarily producing them or developing them. And it could be good to add here in terms of revenues that -- I mean, the majority of what we intend to divest is sold through the units we are divesting. So that sales goes to Panasonic. Then a portion of the sales goes through other Systemair companies, and that's what we are keeping, so to say. So the 7% that Anders showed is taking that into account. It's not like we are selling all the revenues, but continue to be generated for Panasonic. It's a portion of that we will continue to generate going forward. So we see this as a really good move in terms of focusing a bit more on our core business ventilation and also strengthening our position in the residential to free up focus and efforts into that segment. Health care, is also one of the areas to highlight a bit more. And also one of areas we have touched upon. There is a growing demand for modern health care around the world. it gives reason for building new hospitals, but also renovating existing hospitals. And we have already before the SagiCofim acquisition, we had a very strong position in this part of the business. Partly here, it's important to have a strong brand to build trust because these type of customers don't want to take any risks, of course. So we have a vast experience in supplying to both new build hospital projects as well as renovation with dedicated offers. And then as mentioned as with the addition of SagiCofim, we are really complementing our offer into the Healthcare segment by adding the high-tech filtration part as an example, and also some specific air distribution products that I will show you in one slide. So this is today a relatively small segment for us, around SEK 350 million in sales year-over-year, but this is also one of the segments where we see that we can go significantly above the group average or our underlying market growth. And then just briefly touching upon SagiCofim and why that's a very good addition to the health care part of our business. So health care is not all of the business of SagiCofim but it's a part of it. They mainly have 2 parts that are really interesting to us here. It's the upper left part, which is a ceiling filtration solution, which allows the patient to not be contaminated by still allowing the surgeons to work in a comfortable way. It's pressing down there, filtrated air and pushing all the materials away around the floor. Second part -- and it's both filters and air distribution products for that. The second part is specialist wards, and that's for patients with a lower immune system where you have a horizontal airflow filtrated and then the doctor or the surgeon is standing downstream of the patient, ensuring that none of the bacteria or particles from the [ doctor ] hits the patient which allows them to work in a safe way, but also the comfort of standing in like a [ graph ] in its sense. So this is really complementing what we already have, and we strengthening our position in the Healthcare segment, and we expect to be able to leverage SagiCofim and grow the sales of SagiCofim products through the Systemair units around the world in a very good way. And then finally, service business is also one of the areas where we expect to generate significant growth in the coming year. And this is not really a new business to Systemair. It has been done in selected group companies in the past. So what we're doing now is essentially that we are scaling what has been done successfully to more Systemair companies. But again, in a selective way because we don't want to compete with the installation companies, which in the end are our customers. And our main business is to sell products. But more and more, there are demands from customers and wishes and also from installation companies that we offer aftermarket support and service for our products, which in the long run, means that we also capture for other products. So here, we have had an approach of, first, assuring we know what we are doing and that we can measure it. So we have created transparency in terms of creating a separate profit and loss statement for the service business, both consolidated but also for each legal entity, the service business we have within the entity. Then we stabilized the local service organizations, assigning clear accountability. So that someone owns the service business and also increasing the visibility of the service organization in that region. Luckily, we are a group with a lot of common infrastructure that we can leverage in these type of situations. So we have, for example, ERP and CRM in common that we are -- have adapted to fit the service business so that we use the same thing everywhere, not paying double for things. And it could be, I mean, simple CRM management in the service business or the recent launched spare parts portal making it easy to find the correct spare part for your unit. And so we're trying to leverage strength of being a group. The common framework for the offering and infrastructure. At the same time, as this is done selectively on the market where we see that there's potential for service. And this is also one of the areas where we have a selective acquisition agenda. And it doesn't mean that we want to consolidate and become a new Bravida or in [indiscernible] or something like that. Here, we are looking for companies that really add something to our existing business in that country. So it could be competence, customer presence or similar. So it's an active approach to acquisitions in the service segment is what we are looking at here. And today, it's representing or generating approximately SEK 400 million of annual sales. And our ambition is to grow that by double digits, quite clear double digits until '25, '26 year-over-year and go from a slightly dilutive EBIT margin to a slightly even more than that positively accretive contribution to the group EBIT. So one of the sector growth areas. So I think I managed to speed up now, and it means we are heading into a break. But before that, just to summarize why we believe we will be able to continue to generate this nice 25% growth curve also in the future year-over-year. First of all, we have very beneficial trends that are value for all, of course. But in our case, we also create very strong drivers funded by governments and organizations in a good way. So we do believe we have a solid underlying market growth, and we are confident we can outperform that market, among others, by focusing on these selective growth opportunities going forward. Good. Then it's a 5-minute break.

No. No. We are a little bit behind schedule now. So I thought we will speed up and ours is going to be rather late and it's snowing. So it might be that you then want to hit the road later. So I keep the attention, I keep you sitting Okay. So coming to the last chapter, which is a little bit trying to tie it together but also, of course, following up what has happened since our last Capital Markets Day. So this is actually what was presented during our last Capital Market Day. It was our bridge from where we were at that stage in September 2019 at an EBIT level of 6.3%, looking at how to come to 10%. So the steps in this wonderful diagram was on IT and AHU casing platform. There was some pricing and margin focus. It was the manufacturing efficiency and Menerga AC factories. Looking on where we are on that. So following our technical platforms, I think you have -- meanwhile you all understand and I'm happy for what a Geniox unit is. So that platform is something that we rolled out, which is under constant of course, development but also that we do the same on the control side and other products to follow where we see that the platform thinking actually gives us synergies that are wishful just because we set them up in different factories to have is on the same level. So that we see is done on the process. Manufacturing efficiency, cost control and footprint as also explained in the presentation I had before. That is something that is really, really important we're driving with more focus as we also have changed organization to really keep that driving and developing all the time. Here, of course, we have been holding back a little bit. Now we have been held back. It was a big part of that to be optimized in your manufacturing is also to have the components to manufacture. So we have been suffering a little bit inefficiency here over the last 1, 1.5 years. But this is, of course, something that is a little bit out of our reach, but we're working with it constantly. And as Anders also explained in his financial review, we also see a trend changing here now, which is really good, which will be beneficial for that. The other part, pricing and margin focus. And here also, as you also understand from the change in management. Janni is heading up our pricing part, where we have not only put up a thorough system and a process but we also have people working only with that following up market pricing, cost out efficiency in the operations. So it's really something different than was said before, especially in very smaller entities really market pricing is something different than the cost-plus pricing. So that is something that we also see a clear good development, which has helped us a lot throughout the pandemic with the all ever ongoing increase of material costs and everything coming into our operations. Then we also had one part where we're moving from big projects to profited projects. That is something that we have been working on, which is -- it was a very simple and fast to change. It is more working with the sales units and sales entities and to reward rather midsized and smaller projects where you achieve good margin instead of having all the nice site, having a multiple million units order where you are happy that you won it against your competition just on price. That is not so good. We don't want that, but it's more about having a good profitability and a nice project. There is working here also the takeaway that why it's yellow is that due to the component shortage the development in the market for the last year, as also mentioned earlier today, delivery beats pricing. So as long as we had safety stock and we took some of the costs, we took some components, we could also charge more but of course, it has some impact. It's not the real development. We normally have a process in place where we review the normal market pricing up 3x a year. And in the last 1.5 years, it has been up to 5, I think, in 2 countries, even 6 times a year where we have adjusted market pricing. So it's a process that is just now due to how the market is reacting. But if it wouldn't have been in place, it would have been not so good for us. Then we had the 2 issues of Menerga and the AC companies. Menerga has explained a lot of things ongoing here, and we will see the movement and everything having its effect. And the AC factories, of course, with the divestment of the AC factories, there's a green one. But I also have to mention that in the first 2 quarters this year, we saw all the benefits of the restructuring that has been done so we have had quarters in the AC units that had an EBIT level of 10%. Just to say that, that was really turning out really nice. So this is what we wanted to achieve. And of course, on top of that, as Anders also pointed out, of course, here is than comparing to where we were one year ago. Russia is not included in that anymore. The Ukrainian war has put a lid on it. So a little bit of things that have, of course, also had its impact. But we believe in the 10% and even better than we believe to exceed the 10%. So to exceed that, what are we doing? What we're focusing from here on? So we maintain the technical platform thinking because we even think it's been proven internally and how it's developing over the last couple of years. That's the way that we need to go. We continue with that. manufacturing efficiency, of course, is an ongoing, never-ending project that you need to just be better and better every day. But on the right side, as also mentioned by Janni, for us, very, very important to, on top of the normal market development, to start up organic growth initiatives. And here, our focus for the going forward is these selected areas. And here, looking at residential, looking at the public buildings, health care, especially after the acquisition of SagiCofim where we have the operating theaters possibilities and all the health care and in intensive care units and of course, then also the data centers and service. That is one area. Then as you see throughout the change of our management and also the group management, there is more focus on global supply chain and M&A. So we have refocused our setup and our process and how we are organizing ourselves to move on from here and to really achieve this step by step, better and better every day in everything we do. And then, of course, also on the focused M&A activities. Also making it clear with bringing M&A as an own chapter, there's no one organization within our organization, supporting a profitable growth, looking for the right candidates, that are actually adding value directly from start to our company. So this is how we're moving from here. So looking at then the strategic focus and what are the areas in supporting these initiatives. So we call it our enablers, what is actually allowing us moving in the right direction. And for us, the strategic enablers is to develop people and strong relations, attractive offer built on standardization, it is efficient business setup with continuous improvement, sustainable and future-proof business and strong position benefiting from structural growth. I will move into that and explain a little bit what is behind it. But with those enablers -- that's how we fulfill our financial targets to achieve the profitability that will be above 10%. That's what we need to achieve. That's our target. And of course, never forget our core values of corporate culture because without having them on board and developing them further together with all our employees and all the organizations, it would not be possible. But looking at the enablers as they are the key to success for us to develop people and strong relations, we need and we want to be an attractive employer with an inclusive corporate culture. We have, for example, today here in Skinnskatteberg in excess of 30 different nationalities working in our company and not only taking into account, of course, for customer support and everything, but also in manufacturing. And this actually is enriching the competence, but also the behavior and the culture in the company every day. Believing in an entrepreneurial drive and developing strong capabilities. I mean this company is, of course, founded by an entrepreneur and we are having a lucky position as many of our acquired companies were actually acquired from entrepreneurs and further on driven on entrepreneurial style. So I think this is something that we have throughout the whole Systemair group which makes that you have underlying always a thrive for it to be better move on and move forward. It's a good spirit to have and to keep and building strong relations and partnerships based on expertise and trust, which is also, as I said before, a part of our corporate culture. Then, of course, that all the attractive offers should be built on standardization, and I explained the platforms and how we think, standardized product and product offering. So maintaining attractive offer with a broad range of quality products on standardized platforms, providing most energy-efficient product solutions, improving indoor air quality. We still talk about one of the most precious things that we have in life, the air that we breathe. That's what we're treating, that's what we're tempering, filtering. So we think we're in the right business to really make a difference and to move forward. And of course, enabling connected solutions and enhancing the user experience to smart solutions. And you heard the presentation from Ralf and also other points you throughout the presentations. We also believe in an efficient business setup with continuous improvement and, of course, profiting from economy of scale through efficient operations and supply chain and here, of course, our setup regional and over the world internationally, helps us a lot. Evolving through efficient product development with standardization as guiding principle, also mentioned before from me, especially when it comes to standardized products -- end products is really important for us. That's a possibility we have with our technical centers like this with a standardized and fully optimized production, that's where you can really develop that to fullest extent. Prioritizing strong local sales presence, common processes, agility and decentralized decision-making. Having these processes a standard together with the CRM, ERP tools, then you can actually also live with a decentralized decision-making and create a successful business. Sustainable and future-proof business. We think that the forward-looking improving the circularity in the carbon footprint of our products is something actually contributing, of course, to 2030, 2050 goals and is totally in line with the current development in the world. Growing the service business, we will also here ensure sustainability throughout the product's life cycle, also enabling not only that we can actually make upgrades. We can also make service. We can also replace or help our customers recycle and then we really have the circularity. And safeguarding responsible business through sustainable and first of all, long-term decisions. I think that is something that really where Systemair stands out, not thinking short term. We really believe in thinking mid and long term is what secures and builds the business on a stable base of future. And the last one, the lucky part is we really believe in that we have a strong position, benefiting from the structural growth that we see in the background. You have seen the slides on the right side, but leveraging our different brands that we have with Systemair as the main brand gives us a strength to not only be in the ventilation distribution and installation market, also attrition with the Frico brand and so on. We're really touching about different applications in different areas. Maintaining resilience and growth through the global and diversified customer base, as you heard also from Janni and others before. Today, selling into 135 countries all around the world, I see that as a strength. And profitable growth through organic investments and an active acquisition agenda. So looking into investing in our existing highly autonomous factories or an add-on acquisition that makes sense for strategic growth and development of the company. It's a good thing to be part of that. And we believe in these growth opportunities that we are looking into. So that all leads us to this picture. And on top of that, for us, then we take the takeaways and to create better air every day and worldwide. That was what Systemair can do and develop it from here. By that, I would say thank you. I've tried to speed it up a little bit at the end because I know you have been sitting for quite a long time.