Alfa Laval Stock

Good morning, and welcome to Alfa Laval's Earnings Call for the Second Quarter 2026. Fredrik and I will give you a rundown on the quarter. And then as always, we open up for Q&As. Let me start with a few introductory comments. First, obviously, it was a quarter with solid demand across almost all of the part of the business with a new all-time high of just above SEK 22 billion. It was another step forward in our SEK 100 billion growth plan for 2030. In addition, we had some very important project wins in all 3 divisions, strengthening the growth plan further. I will come back to those wins shortly.

Finally, the investments into our product offering and our capacity increases continued and will continue for the coming quarters as our main challenge remains to scale together with our leading customers. And with that, let me go to the -- sorry, to the key figures. As indicated, a very strong order intake quarter with solid growth across almost all of the businesses, Service included. Note that despite the large SEK 1 billion biofuel order, large orders were as a whole on a normal level and was not the main growth driver in the quarter. Sales grew on a steady pace and a record order book of SEK 53.5 billion and good momentum in the transactional business indicates a healthy outlook for continued invoicing growth.

The profit margin was overall stable at 17%, but some headwinds in the Energy division impacting the quarter somewhat. So let's go to the Energy division. The 70% growth was, I have to say, even a bit above our own expectations. All parts of the division grew with data centers leading the way. The growth contribution from Cryo this quarter recorded as inorganic growth was substantial with a total order at about SEK 1.5 billion totally in the second quarter. Of special importance was a large cryo order for LNG in the U.S., a breakthrough order for large-scale coal boxes in this market where we previously have been relatively small.

The demands on Alfa Laval to scale in the data center market are high. Current CapEx levels within Alfa Laval will be kept in place in the medium term to support customer agreements past 2027. Currently, for your information, the 12-month order pace in data centers in the Energy division is approximately at around SEK 5 billion. The margin was negatively affected by a slight negative mix and uneven load in some manufacturing units. The low utilization in parts of welded and cryo was impacting the results somewhat. The situation with cryo, however, is quickly resolved with the order book from the second quarter.

Moving on to the Food & Pharma division. It was another all-time high quarter with solid growth across almost all of the businesses in the division. We have indicated several times that the biofuel project pipeline was getting stronger and the large Brazilian project amounting to SEK 1.1 billion was booked in the second quarter. It is an exciting project with a clear path towards a competitive pricing versus fossil-based fuels. We are honored and excited to be selected for this milestone project.

Earnings were stable at just below 15% as we continue to invest in the future growth and positioning on the division. Then on to the Ocean division. It was another strong quarter with demand growth driven by ship contracting, including the Tanker segment. Cargo pumping again had a strong quarter with orders now being booked well into 2028. It was also a breakthrough quarter with orders for the LR-Tanker segment, a segment of similar size to MR where we typically are strong.

Although the competitive dynamics are very different for the 2 applications, it is a very meaningful step towards a larger addressable market long term. The conditions for a strong CapEx cycle in the offshore business are in place. And while the project pipeline is getting stronger, it is not yet visible in the order book in the second quarter. The margin developed well in the quarter, just below 25%. It was a clean quarter with some tailwinds and a positive mix driven by -- partly by service. The order stock remains strong for the second half of 2026.

On to Service. After a period of slowing demand, the growth returned with a solid 10% organic growth in the quarter. With a growing installed base and a stronger service capability, we expect to continue on a stable growth path in all 3 divisions. And I'd just like to highlight to you that with the exceptional growth of capital sales, especially in the Energy division, the share of service in the mix gets smaller, while staying very healthy at 40% plus in the Ocean division. A few comments on our key markets. U.S. and China continue to make up for 40% plus of total orders on a 12-month rolling basis.

In addition, in top 10 markets, some important Asian and European regions account for the rest. Specifically in the regions, North America is the clear growth driver in the quarter and the main growth clearly in the U.S. supported by the data center growth. Northeast Asia and especially China had a solid growth quarter as well with the Marine applications as the main contributor. India and Middle East recovered well in the second quarter, but still the year-to-date is affected by a weak start in 2026. Southeast Asia is clearly affected by the fuel shortage and energy crisis. So the first half '26 is flat and larger projects are barely compensated for by the growing transactional business. Europe remains rather stable with a good growth in Eastern Europe. Lat Am is good, obviously, partly driven by the large biofuel order.

And with that, I hand over for some further details to Fredrik.

And thank you for that, Tom, and good morning, everyone. Adding some additional dimensions to a record high quarter of order bookings with a total growth of 35.2%, of which 28.5% is organic, 8.6% through structure, mainly from BU Cryogenics and an adverse currency effect of almost 2%. In the quarter, beyond the already highlighted growth in data centers and biofuels, we also have some good growth in fossil gas applications and conventional power, dairy and prepared foods and marine digital solutions. .

Order intake for the first half of the year amounted to SEK 39.8 billion, a growth of 16.4%, where 17.1% is generated from existing businesses where data center and all fuels, fossil, sustainable and biofuels outpace other end markets. 5.5% positive impact from acquired businesses and a negative currency impact of 6.2%. The record high order intake in the quarter yields a book-to-bill for the quarter of 1.23, which increases the backlog to a record SEK 53.5 billion, of which SEK 29.1 billion is currently planned to be delivered in 2026. The current order book supports a continued good invoicing level and the order book is assessed to be in line with current input cost levels. SEK 24.5 billion is already booked and planned for deliveries in 2027.

Sales development in the quarter and year-to-date are far more linear in growth than order intake as it mirrors the manufacturing capacity planning and delivery. SEK 18.1 billion in products and services were delivered to our customers in quarter 2, representing a growth of 7.7%, of which 5.9% organic, almost 4% from acquired businesses and a negative currency impact of 2.1%, ending the first half of the year with a growth of 2.3%, indicating an increased trend of delivery in the quarter that we expect to sustain into quarter 3 and quarter 4 and supported by the order book.

Organic and structural growth both contributed with 3.8% growth, respectively, and currently impacted by a negative 5.4% from currency. And now to some commentary on the results. Quarter 2 gross profit is well supported by a continued good -- manufacturing utilization rate by cautionary provisions and guideline reserve. R&D costs increased with almost 19% in the quarter, which is in line with the continued high innovation pace of our products. Operating income improves to yield SEK 2.9 billion in the quarter with an EPS of SEK 4.91, which also represents a marginal improvement.

Year-to-date operating income is impacted by the lower invoicing we carried from quarter 1 and accumulates to SEK 5.6 billion with an EPS of SEK 9.5. The adjusted EBITA margin, which in the quarter is equivalent to the EBITA margin of 17% is in line with the target level of the group and communicated external targets. Some negative impacts in the quarter could not be offset by the good transactional and service business development. Currency impacted positively with SEK 209 million, one of the costs, one-off costs of SEK 75 million related to the change of organizational structure implemented in quarter 1 and the structural impact cost of acquired businesses.

In total terms, SEK 3.1 billion in adjusted EBITA in quarter 2 ranks as the third highest quarter. Debt compared to quarter 2 2025 has increased and it did not include the financing of the cryogenics acquisition at that time. However, when compared to the closing level of 2025, SEK 17.2 billion, the increase is marginal and to a substantial part driven by currency. Cash and cash equivalents have decreased and the cash flow analysis on the next slide provides further detail.

Lease liabilities remain on a similar level, yielding a net debt, including leases to EBITDA of the last 12 months ratio of 1.1 to be compared to a level of 0.92. The average funding rate remains competitive and headroom remains to allow for continued inorganic growth ambitions. On to cash flow. Cash flow from operating activities trended sequentially up in the quarter to SEK 2.4 billion with a year-to-date SEK 3.6 billion, impacted by lower invoicing in quarter 1. Investment programs continued on a planned pace, however, with a phasing uptick in quarter 2, reaching SEK 1 billion. No acquisitions in the quarter and year-to-date, reflecting the acquisition of a heat exchanger company in China.

Financing activities in the quarter reflect the net of newly issued commercial papers and a record high dividend to shareholders of SEK 3.7 billion. For the first half of this year, the net finance activities shows the net position of debt close to 0 after repayment and refinancing, the paid dividend and higher financing costs. We expect to be cash flow positive for the year. And finally, some customary financial guidance. In quarter 3, CapEx up to SEK 1 billion, amortizations of SEK 170 million and a tax range of 24% to 26%. For the whole year, CapEx within the range of SEK 2.5 billion to SEK 3 billion, amortizations of SEK 680 million and a tax rate between 24% and 26%.

And with that, I hand over back to Tom for an outlook on quarter 3.

Thank you, Fredrik. And then -- to sum up how we look at the business situation and context right now. Overall, we believe we are in a time of strong growth across several of Alfa Laval's end markets. We do expect quarterly variations on order intake, as always, but business conditions are expected to remain positive in the short to medium term. Specifically, the third quarter in '26 is expected to be somewhat lower sequentially compared to the strong second quarter this year.

And specifically on the divisional level, Ocean is expected to remain on about the same level, whereas the Energy division and Food & Pharma division are expected to be lower. Finally then, please note that we are comparing ourselves to a record second quarter, which came in significantly stronger than we expected. So all in all, the outlook is not reflecting deteriorating market conditions.

And with that, we open for Q&A.

[Operator Instructions] And the first question comes from Meihan Yang from GS.

I have 2 questions. First of all, can you give us a bit more color on data center orders margin? Are these dilutive to your Energy division? And second of all, what's the level of fixed cost headwinds you're expecting from the investments into pharma into 2027?

We're not giving margin comments specifically on all parts of the business, but we don't believe that we will have a general margin deterioration per se in moving into the data center business. On the Pharma side, I'm not sure I picked your question exactly. So complement to me if needed. But the investment into pharma is a long-term growth strategy. My experience is it takes a couple of years to go through. So I think in terms of sales and revenue growth, other than what we're already doing, of course, in the pharma business, which should be somewhere close to maybe SEK 500 million or something like that. I think the turbo or additional growth that we may get out of that segment going forward, I think we have to expect it's going to take some time and possibly beyond '27.

And the next question comes from Magnus Kruber from Nordea.

Johan Magnus here from Nordea. A couple of questions from me. Can I first start where you left off around the guidance level. Obviously, very reasonable to expect Q3 to be slightly lower, marginally lower compared to the very solid Q2 number. But I mean, we have a very broad-based activity level across end market, it seems to me. And is it fair to say that the underlying activity in the market is now perhaps a bit higher than you anticipated before over the coming quarters and years.

Yes, I confirm that. .

Perfect. That's great. Then a couple of questions on the margin side. On the Energy business first, could you please help us unpack a little bit the margin dynamics that we saw in the quarter and what we should expect going forward there on those headwinds that we saw you alluded to, for example, cryo potentially easing a little bit of those headwinds in the coming quarters. A little bit more color on that would be very helpful.

Yes. And there's a couple of things that happen. It's, of course, a lot of variables moving at the same time. It's not a singular item that's creating the margin levels that we see in quarter 2. But some -- to give you a few of them, of course, we have a bit of a shift in mix. There's a little bit of less service content, a lot more capital sales content in the invoicing that we saw in quarter 2. Therefore, the mix effect, we have an impact of provisions and reserves that we do according to guidelines and according to how we see projects develop, and those come out a little bit heavier in quarter 2 than what we had expected.

And then finally, of course, there is an element of costs that have to do with the reorganization. Those are marginal, but there's still some small effect of that. We should also add that there's some inflationary impact. And then -- and last but not least, there is also an impact of currency.

Got it. That's helpful. And then just finally, on the group costs, I think we had SEK 250 million negative from the 2 of the underperforming businesses that we have there at the moment. How should we think about those businesses in the coming quarters and maybe strategically down the line, how are you treating those businesses going forward.

Well, those businesses are in the other category because we are looking at them to see if we develop them further or if they should have an exit. But that's a conclusion that we haven't reached yet. First, we want to see where these businesses operate on a stand-alone basis. Yes, they are part of the SEK 250 million. They are not really the full impact that you see on the SEK 250 million. There's other things that are cropping up those SEK 250 million.

Whilst during the previous peak cycle, we had a fairly strong investment cycle into biofuels in general and the blending directives and so internationally didn't quite meet the expectations. And so there was an oversupply and the supply side just sort of cut a number of projects out of the CapEx plans that were quite advanced at the time that happened in several markets. And the only biofuel market that held up reasonably over the last 2 years was the ethanol market where both the U.S. and India particularly maintained on blending directives, and there were further capacity investments there, and that's a segment that matters to us, but not to the same degree as vegetable oil-based processes. .

So as markets -- underlying markets were continuing to grow and the CapEx didn't go into full-blown projects for a period of time, the pipeline was sort of building. And we believe there are quite a number of companies that were sitting on the side line and to a degree, still are waiting for the right moment. And so that's why we've been talking for at least 6 months of the fact that a number of projects are starting to move again. And this -- let me say that, I don't expect a lot of SEK 1 billion orders from our point of view going forward, but there are sizeable projects that are still under discussion, under quotation.

And I believe we are moving into a cycle that's going to be certainly stronger than the last 2 years. How far and how long it will go remains to be seen, but there are ample opportunities for projects over the next couple of years in several parts of the world. So I think that's sort of a general reading. I think the Middle East crisis and the energy crisis as such is probably going to be a co-driver of the energy transition together with the climate impacts. So I find that energy security and what will be required in terms of electrification, biofuels and fossil independence will play part of the future energy agenda somewhat stronger than in the past. I don't want to overestimate the impacts from the Middle East crisis per se. But obviously, the belief of -- in terms of the energy prices as a result of these problems and the security issues are likely favoring a somewhat more accelerated energy transition than what we were looking at a year or 2 ago.

Very helpful. Second question is on shipping, especially the shipyard ramping speed. Clarksons always says, okay, volumes going up to 12% to 15% this year and also above 10% in the next years. So value has to go up even faster. Are these numbers that you can confirm when you look into the shipyard activity in China, can they ramp as fast as Clarksons implies? And what would that mean for growth of 10% to 20% in order intake outside of the pumping business.

I would say right now that if we look at the current speed and what we're experiencing at the moment, of course, there is a quite big share of contracted vessels at the yards where we still have not booked orders in businesses outside of cargo pumping. As you know, the cargo pumping tends to go very, very early, sometimes ahead of Clarksons data, whereas the other parts of the marine business normally is coming into play somewhat later. So I think we have, as is a reasonable pipeline on that level. If we look at the ramping on the yard side, we have been a little bit surprised about the agility in China, and we see that specifically with yards that previously have not built complicated and advanced vessels who are now entering into that market.

And we have commented on that earlier also from the point of view that when it comes to commissioning, we have significantly ramped our commissioning capabilities in order to support yards with less experience of our equipment than some of the well-established known yards in Korea, Japan and China. So we do see this development. Our hope has been that we are not ramping too aggressively the shipyard capacity. We have said during at least a year or 2 that if we look towards 2030, we see a pretty stable demand cycle, not least because the scrapping will need to go up, and we need a lot of replacement ships coming in over the next few years.

So we have estimated that the demand cycle could be relatively stable. But of course, that is also dependent that we are not seeing a race to extremely high delivery numbers in this year or next year based on ramping, but that we are rather containing global capacity somewhere north of 2,000 ships a year, but certainly not at the 3,000. So I would hope that we see going forward, I'm leaving quarter aside right now, but my hope and expectation is that we will see some of a less cyclical business side is probably more than anything on the Energy division. And we have in parts of the group, not only in the Energy division, but maybe the effect is biggest there.

We did do some price adjustments as of 1st of July, and that was mainly driven by the cost inflation driven by energy costs and fossil fuel costs. And so we had some significant cost escalation in those supply chains, and we did a modest compensation for that in July 1. So that's sort of on the pricing side, I would say, the one action that we have been taking during this year.

And the next question comes from Andreas Koski from BNP Paribas.

I want to come back to something you touched on earlier. Can you maybe share a bit more information about your expansion in the long-range tanker segment. What have you done? What kind of products? And how is the value opportunity increasing for you here?

Well, again, maybe we come back with a bit of a review on this when it comes to the Capital Markets Day. Just shortly, I would like to say that from a product point of view, an LR-Tanker is from an engineering standpoint and product standpoint, very similar. So we are not developing a completely new system that is totally different from the MR side. But it's a large installation. It has some implications for product design and engineering solutions and all of that.

I think what is different partly, if you look at the tanker situation, the value of our offering in MR is a very speedy time in harbor in changing cargo. And in MR specifically, with small tanks, there is a lot of variations of what products they are carrying. And consequently, our pumping solutions are providing a very clean tank and a very short time at harbor in order to pump out and pump in the new products. And so the value proposition is very, very high in a hydraulic pumping solution to our customers compared to a lot of other applications compared to the electrical pump solutions, which will leave a lot of contamination in the tanks as they are evacuated.

So the business model for MR is completely developed on our hydraulic pumping solution value proposition. Now if you go to the other extreme and go to crude oil, obviously, the value of cleaning out the crude oil tanks is relatively limited because the contamination will be 0. There will always be a new crude oil coming in and the crude oil variations are not that important when it comes to the decimal. So all in all, we don't expect that hydraulic pumping solutions will have any particular impact on large crude oil tankers now or in the future.

And then you have the LR side, which, in my mind, comes somewhere in between. It is larger tanks, larger ships, more continuity in the load they are carrying and the cargo that they have. And consequently, the value proposition there on our solution historically has been a bit less. And for that reason, a lot of shipowners have stayed with the solutions they are used to. Now that we are in and we have provided a number of cargo pumping shipsets, I think our hope is that a number of shipowners will reconsider the technical solutions they have. And although the value proposition and dynamics may be a little bit different in LR, the validity of the hydraulic pumping solution is certainly there. So we will see how the market dynamics plays out here. But we're hopeful this is beginning to change in our market position long term for LR.

Understood. And then jumping to data centers. You mentioned that your order run rate LTM is now SEK 5 billion or so. I think that must mean that you had an order intake of more than SEK 2 billion now in the second quarter. Maybe if you want to confirm that? And does all of that sit in light industry and tech.

Well, it does essentially sit in light industry and tech, at least the orders that are coded as data center orders. There may be some product creeping in from other areas from channel partners and others, but the lion's share is certainly in -- so the light tech gives you a good feeling. We are not at SEK 2 billion in the quarter. We are below that. But maybe it's more correctly to say that in the pace we're at, look at this year in the SEK 5 billion sort of level. We don't see it going dramatically up from -- as you know, we've been guiding you a little bit the last couple of quarters on running rates of 2, 2.5.

I think this is kind of where we are right now. And what will determine the order intake numbers right now when we look at the data center is essentially how far out in the future we book the orders. And right now, it's not in our interest to do a full order booking late into '27 and '28. So you could say we are managing the order intake level from our point of view quite closely. And so what you will see in the coming quarter is a managed number from that point of view in that we are not necessarily extending the time period where we book orders right now. And that's why I think it's relevant for you to think about it a little bit in terms of running rate and not so much about the order intake. So we try to give you a reasonable clarity on approximately the size of that business in terms of the underlying dynamics right now.

Yes. And this SEK 5 billion that you -- it sounds like you expect to stabilize at that level, that does not include the capacity expansion that you're working on? Or does it include that? If it doesn't include it, where will it go.

No, it certainly does. There are a number of capacity increases that are coming online, not least in the beginning of 2027. And so when we booked the orders now into 2027, we are already pretty much fully booking up the capacity increases that short term will come on stream, partly in this year and an important part in the beginning of '27. So the invoicing rate right now is not on that level, and we could not reach the full 5 at this point in time. However, we will in 2027. Then we are making additional capacity investment decisions more or less as we speak. And right now, those capacity investment decisions, they are looking at what we believe is the underlying demand situation in 2028 and going forward. .

Understood. And then just quickly on your outlook, do you want to confirm that somewhat lower demand should still imply an order level above SEK 20 billion.

Well, you saw how exceptionally incorrect we were in the guidance last quarter. And so I will not give you a good indication of what it's actually going to be. But the way we express ourselves in terms of somewhat lower would historically indicate that we would end up above 20%, yes.

And the next question comes from Anders Idborg from ABG Sundal Collier.

Just another one on data center and a bit on your market share and how you think about your position there. I get the sense that you have become gradually more confident about keeping a very high share, and I see that you have good growth not only in North America. Do you think you are growing or outgrowing the market at this point or growing with the market? And do you feel more confident about basically technology evolving in the sense that you can keep this high share?

We are very confident that our market share has increased during this year. And it's not only about technology. I think the industry struggles in many areas, including thermal to scale with the demand growth that we are looking at. And so it is a tough situation for the hyperscalers and the people who are working with systems installation in this area.

I think our ability to scale being the world leader in this area, sitting on an already very strong global footprint and ability to time-wise and balance sheet-wise go all in to support the CapEx plans required in order to deliver into this makes us somewhat unique. So I think it's fair to say that we are the go-to partner and the anchor partner for most of the data center expansion plans when it comes to the data center side. And you may look at this as a fantastic thing and all of that. And of course, it is. But it is also a place of huge responsibility that we carry in making sure that we are not the place where the bottleneck appears when it comes to the biggest industrial investment program that we have ever seen in history. And so we are very committed to go with this and play our role in the supply chain.

Okay. That's good to hear. And as a follow-up, perhaps, I mean, do you see the opportunity to increase your scope here? I think -- I mean, you are working with products that would fit into more parts of the entire water loop, I suppose. Could you do that organically and if not inorganically, perhaps?

Well, I don't think we will have very high on the agenda to do M&A work in order to increase our exposure into data centers. I think part of our -- the beauty of our business and our company is that we have many legs to stand on. And we don't want to be -- we're not seeking a position where we become a one-legged animal. And so I think our growth opportunities in data centers is good enough in the product assortment that we have.

I indicated earlier that the data center is starting to creep into the flow side as well. So we do have a product assortment for clean water applications in flow that are relevant. It starts to become a meaningful volume. And so I think it's fair to say that there is an opportunity of SEK 1 billion here or so in terms of long term, what we can do on complementary products other than the thermal control. And in the thermal control, there may be some further expansion opportunities when it comes to thermal technologies that we are working with in parallel.

So I think we haven't reached the plateau on Five. We are where we are. There are some reasonable growth opportunities above and beyond going forward. Of course, the big question is where is the underlying demand going to be not this year, next year, 2 years from now, but 5 years from now, where are we plateauing? How do we need to long-term strategically plan our capacity in the various areas. And that's a little bit a challenge we will have in the coming years. But for now, we are all in with the key customers to make sure that we meet our commitment.

And the next question comes from Gustaf Schwerin from Handelsbanken.

I have a follow-up on the long-range tanker comment, Tom. Can you help us on how much that drove pumping systems order growth in Q2? And perhaps how much of that do you think is driven by a shift in contracting to more LRs and what is actual market share gains?

I'm a bit cautious to go too much into details. We would have had a very good quarter without the LR side. So let's not overdo it. We can follow up with you separately to give you an order of magnitude. I'm not sure in percentage terms when it comes to the cargo pumping side exactly how it fell in there, but it's not -- it's certainly not the lion's share. It's obviously MR tankers that is driving our underlying demand growth overall. But we can give you a comment on that.

But I think the numbers that you should have in your head is that if you consider the LR Tanker segment in general being approximately the same size as MR and we are -- have historically been close to 0 in that area, and we've been on a very high number on the MR side, it gives you the order of magnitude of where is the market opportunity. As I said, the dynamics, the margins, a whole host of things are different between the 2 segments. So I wouldn't equate them, but it gives you a sense of an order of magnitude opportunity for us.

And I think we'll take the last question here.

And today's last question comes from John Kim from Deutsche Bank.

I was wondering if we could go to invoicing for a second. If we think about the Q2 results, would you argue that late invoicing featured at all? Or is kind of the cadence of invoicing really more driven by the client side at this point or in this quarter?

So I mean if we look at the invoicing, it is very much driven by a transactional business. There Is, of course, an element of percentage of completion there for larger projects. But since larger projects, of course, have been on a lower level now for about at least the last 12 months, of course, the incidence or the share of project invoicing decreases. We have it still a little bit in the food and pharma side, and we have it a little bit on the welded side. But other than that, it is mainly transactional business.

I mean, our ability to invoice is very much dictated by capacity. And as you've heard, I mean, we have quite a few factories that are operating now on a very high level. That means, of course, that the invoicing that we have is on a higher level. It probably has a little bit more space to go, but it will require the capacity investments that we're doing towards the end of the year or that are coming online towards the end of the year to see a step change in the invoicing pace.

And any color on how that capacity add towards the end of the year expands volumes just in quantums or percentages?

No. It depends a little bit how it comes online. It doesn't ramp up from 0 to 100 either. So it is a little bit of a linear ramp-up over a period of time.

Great. And one last question. Can you just remind us on the payback period or how we should think about the restructuring costs versus OpEx savings on a go-forward basis?

Well, we haven't really spoken about the reorganization costs as a form of savings or as a form of something that's going to yield a calculable savings space there. We have spoken about the reorganization as an enabler to scaling for growth. So it's more about positioning ourselves where we can have a better drop-through from every euro of growth that we have on the top line.

Thank you very much. Thank you for the interest in taking your time. And if we don't speak before, I think the Q3 earnings call in October will be the next time we meet. So thank you very much, and have a good day. .

Hello, and welcome to Alfa Laval's first quarter report. Fredrik and I will share some time going through the details. Because of today, we also have an AGM starting relatively soon, we need to limit this call to 45 minutes. So our apologies if our Q&A session is slightly short.

With that, let me, as always, go to some first introductory comments before moving on to the presentation. So first, overall, we felt we had a stable quarter, well in line with our expectations. The pattern of a strong transactional business and a hesitant project business continued in the quarter. Second, the implementation of the new operating model continued in a high pace with adjustments to the financial reporting, management appointments and consolidation in various areas. The financial weight of the changes during this process was limited in the quarter.

And then finally, with the war in the Middle East, our main priority has been employee safety in the region and appropriate customer support in difficult times. The financial impact on Alfa Laval was limited in the first quarter and medium term, the energy crisis may provide both some downsides and some upsides across the world in terms of our customer base.

So with that, let me go to the key figures. We started '26 well with order intake growing sequentially and with a 6% organic growth compared to last year. Sales was on the low side, partly because of a very high invoicing towards the end of 2025. Despite the lower invoicing and big currency movements, the margin improved slightly to above 18%, mainly due to a positive mix.

Moving on to the Energy division. Demand was as expected on a very high level across many end segments, and with a continued recovery of volumes in HVAC, including the heat pump market. The data center business was as expected, strong and continued to grow in the quarter. Going forward, we are now starting to build the data center order book for 2027. We are, of course, concerned for our customers in the Middle East with the damage inflicted on critical infrastructure. The rebuilding process in the region is not clear to us at this point, but we are ready to put all available resources to support the regional needs in the years to come in this very critical situation.

Then to the Food & Pharma division. Demand was firm with a 9% organic growth in the quarter. While the transactional business was on a new record level, it was gratifying to finally book sizable oils and fats projects in Brazil, including biofuel components. The outlook for biofuel projects is improving gradually with a viable project pipeline going forward. The consolidation of the BU structure continued in the quarter and in addition to building the future growth platform for the Pharma business.

In the Ocean division, we remained as expected on a lower order intake pace compared to the record last year. But at the minus 12% organic decline, it was still a good quarter and better than expected. Ship contracting at the yards was very active due to high freight rates and longer shipping routes. It had a positive effect on orders in general and for cargo pumping specifically. In this application, we are now starting to build the order book for 2028. The energy crisis may trigger additional offshore projects outside of the Gulf to gradually compensate somewhat for the shortfall of volumes. It may impact our offshore business in a positive way going forward. The margin remained stable at around 22% based on the solid order book, which will continue during 2026.

Then on to Service. On group level, we remained at about 30% of orders in Service for the Ocean division higher due to the slightly lower capital sales and for the Energy division, the opposite at 25% of total orders due to significant growth in capital sales, especially on the data center side. Volumes were perhaps a little bit on the low side overall and flat compared to last year. We expect to regain the growth path in service going forward.

In the Ocean division, there is a negative effect though from sanctioned ships that we cannot serve amounting to about 5% of the global fleet at this point. In addition, there is significant stress on ships and crews in the current crisis, which may delay some service work further. In general, though, as I said, we expect to return to growth in the year.

A couple of comments on the top markets and regions. As you know, China and the U.S. are 2 top markets in some time, and both developed well in the quarter with the U.S. on a new all-time high. Our expansion plans in both markets continued with full speed with several site investments in both countries. We also added a smaller Chinese heat exchange companies to the group, supporting their growth plans as well as creating a better coverage of the Chinese market for Alfa Laval as a whole.

In terms of the regions, please note that the numbers includes currencies, so they're not the organic. They are the overall growth numbers. And as mentioned, North America and Latin America had a very strong quarter with significant growth, especially in the North America. Europe was flattish with the exception of Eastern Europe that grew well in the quarter. Middle East and India, both faced headwinds due to the ongoing crisis and the energy crisis, and that was reflected in the order intake at this point. And in fact, both India and Southeast Asia are the 2 regions with the biggest short-term exposure to the energy crisis at this moment. Finally, Northeast Asia had a good quarter overall. But of course, they are impacted by the very high marine orders from Q1 last year. Other than that, China and Northeast Asia developed well in the quarter.

So that's a summary where we are on that. And I'd like to hand over to Fredrik for some further details.

And thank you, Tom. So moving on then to some comments around orders received. But before I start I have some additional comments on order intake and a quick word on the change. We have adopted an order intake approach that reflects new orders in the quarter only, meaning revaluations of the order book are not deducted from the order intake. This is highlighted and explained in more detail in Note 1 referring to accounting policies in the quarter 1 report.

And now to some additional comments on order intake. A clear impact on the comparability of figures is currency rates, where the SEK has appreciated against both the euro and the U.S. dollar over the last 12 months. This impacts the comparability with almost 10%. The structural component is related to acquisitions and mainly due to volumes of the acquired Cryogenics business. Organic growth in the quarter exceeded 6% with the Energy division accounting for a good part of that increase with growing data center volumes and a recovery in the HVAC end markets. Food & Pharma also noted a strong organic growth intake in its 2 largest markets, oils and fats and dairy while the Ocean division remained stable with a normalized marine pumping systems order intake.

The order book closed in the quarter at SEK 48.7 billion compared to the SEK 48.3 billion at the year-end 2025. SEK 32.1 billion of this is scheduled for invoicing this year. The current order book supports a continued good invoicing level and the order book is assessed to be in line with current input cost levels and the book-to-bill in the quarter was 1.11.

On to sales. Currently, we are only experiencing minor disruptions to our supply chain related to the escalated geopolitical tensions, primarily the conflict in the Middle East. Once again, we are impacted by currency with almost 9% negative comparability. Organic growth at almost 2% with a structural contribution of 3.8%. The aggregate impact is negative with 3.3% with a quarter sales level of SEK 15.9 billion. This level, which is somewhat lower than expected, is affected by delaying -- delayed invoicing of projects to a minor extent, transportation disruptions, particularly related to the Middle East and normal seasonality from quarter 4 to quarter 1.

Our gross profit margin was on a high level of 39.9% compared to 37.5% in quarter 1 2025. The positive data can be traced to an accretive invoicing mix of transactional business and service, a strong factory in engineering result and good purchase price variances from cost levels set in our standard costing.

On the cost side, S&A increased with 1.9% in the quarter and R&D with 4.2%. Approximately SEK 75 million cost increase in the quarter was related to the new divisional structure. Amortization of step-up values increased to SEK 174 million, reflecting the acquisitions made during 2025 with majority related to the Cryogenics business. Taxes also landed within guidance range and operating income in the quarter landed at SEK 2.7 billion. And finally, an EPS of SEK 4.59 with the majority of the deviation stemming from lower invoicing and currency impact.

Adjusted EBITDA of almost SEK 2.9 million was, as previously mentioned, supported by a strong factor in engineering result, positive purchasing price variances and an accretive invoicing mix of transactional business and service, negatively impacted by currency with SEK 264 million and SEK 75 million related to the new divisional structures and strategy initiatives. 18.1% adjusted EBITDA margin in the quarter exceeded the 17.7% in quarter 1 of 2025 and is well above our target level of 17% over a business cycle.

On debt levels, they have increased from quarter 1 last year, reflecting the financing of the Cryogenic acquisition. In the quarter, we have an MTN bond of EUR 300 million that has matured and been repaid. SEK 1.2 billion in commercial papers was issued, and we expect to issue a further amount of commercial papers during the coming quarter to cover the upcoming proposed dividend of SEK 3.7 billion. Net debt in relation to the last 12 months EBITDA was just shy of 0.7. The increase in lease liabilities reflects the balance sheet impact of renewed long-time leases for some of our operating footprint.

Cash flow in the quarter saw a strong EBITDA contribution of SEK 3.7 billion. Working capital change had a negative impact of SEK 1.5 billion, where the majority comes from the building up of work-in-progress inventory and a strategic buildup of buffer inventories for some commodities that we believe are at risk of disturbance from the disruptions that are caused by the conflict in the Middle East. Capital expenditures were somewhat below guidance at SEK 529 million and yielded a free cash flow before acquisitions of SEK 708 million. Acquisitions in the quarter accounted for a cash flow impact of SEK 565 million, stemming from the majority share acquisition of the Chinese heat exchanger manufacturer and a SEK 50 million share in Industrikraft. Finally, the contribution of financing activities is related to the repayment of the EMTN bond of EUR 300 million and the issuance of commercial papers of SEK 1.2 billion.

Finally, some financial guidance going forward. We expect CapEx to remain high but stable within a range of SEK 0.6 billion to SEK 0.8 billion in the next quarter and a whole year level within the range of SEK 2.5 billion to SEK 3 billion. Amortization on about the same level of quarter 1 with SEK 175 million and in the next quarter and SEK 600 million for the entire year. And finally, a tax interval of 24% to 26% for both quarter 2 and the entire year.

And with that, I hand back to Tom for some forward-look commentary.

Thank you, Fredrik. And while history is clear, obviously, forecasting in today's environment is somewhat complicated. We don't consider that the looming energy crisis and the war in the Middle East is having any major impact on our outlook in this moment in time. In general, we are somewhat more optimistic about the year now than when the year started about a quarter ago. And demand specifically sequentially for this year in the second quarter is expected to be on a group level, somewhat higher than the first quarter.

And on a divisional level, we expect the Energy division to remain on the current all-time high level in the second quarter. We expect demand in the Ocean division to be higher than in the first quarter and we expect the Food & Pharma division to remain at approximately this level with both some upside and perhaps downside depending on how larger projects are materializing in the quarter. So that's where we are in terms of our forecasting in a crystal ball.

And with that, I'd like to open up for questions.

[Operator Instructions] The first question comes from the line of Daniela Costa from Goldman Sachs.

It's actually Meihan here. I just want to have 1 question on data center business. What is the percentage of the energy businesses is data center now? And do you see a difference on the order intake trend on liquid cooling versus air cooling? And what's the ASP difference on those 2 products for you?

If we move back 1 quarter, we then stated that the 12-month rolling order intake on the data center side amounted to approximately SEK 2 billion. If we move up to this quarter, now 1 quarter later, the ongoing rolling 12 months is at around SEK 2.5 billion. Obviously a bit higher in this quarter specifically, but over the last 12 months, that's what it is. So it's a clear growth trajectory as we have indicated earlier. We remain on that growth territory right now.

I don't have in my head the split between air and liquid cooling, but what we have in the plans, and it's pretty clear is that we will have fairly slow, but still a meaningful gradual shift towards water cooling in the incoming orders. But I believe we are still clearly in the majority of the air cooling if I take it from the hip. We can confirm to you later on. But I think that's where we are.

The next question comes from the line of Kim John from Deutsche Bank.

I'm wondering if you can help us kind of square the circle here. If you look at Clarksons data, I think you had some pretty good activity in tanker contracting. I'm trying to think about that and the cadence of your order intake, not just for Q1, but potentially through the rest of this year. Is that something that would have shown in your numbers at some point in time? Or is this still to come or am I misinterpreting here?

No, I think we came in a bit stronger on the order book for new contracting in this quarter than we had expected when we started. As you know, the outlook -- your outlook was a little bit gloomy when the year started. I think right now, we are at the -- the count is at around 500 ships this year so far, which is significantly higher than last year at the same date. And so it looks like we are coming into a decent year of contracting and we saw a little bit of those effects and a little bit higher product tanker contracting than expected in the beginning of the year. And in March, we had a bit of effect on that, and we may very well have something on that kind also in Q2.

The next question comes from the line of Gustaf Schwerin from Handelsbanken.

I have a few. Maybe starting with the invoicing level in Q1. Can you give us a sense of the magnitude of sales delay here? And also if this is an effect of customer decisions or something else? That's the first one.

I'd be a little bit careful in sort of using the delay. What you should be aware of is that after the SEK 19 billion in invoicing in Q4, obviously, sort of we went a bit all in on the invoicing side towards the end of the year, and that had some spillover effect into Q1. We are shipping products on normal delivery times a normal delivery commitments without any major disruptions on our side. I think the difficulty we sometimes have is to predict exactly the percentage of completion. And so those payment schedules, typically they don't get accelerated.

But for various reasons, in larger projects, the execution of those projects, they moved the time line a little bit here and there in terms of commissioning and final payments. And so I don't want to -- it's not an -- we're not looking at an operational problem. It's just a bit of seasonality between Q4, Q1, and perhaps not a perfect bridge to the timing of invoicing in the number of projects.

Okay. Secondly, on energy orders, clearly stronger than we had expected and also better than the comments you had back in Q4. I mean the main positive delta there is data center. Is there something else that's stacking out?

I think there was a lot of things sticking out actually. I think the transactional business in Food & Pharma went to a new all-time high after a fairly strong Q4. That was not exactly in our mind at the time. The slight improvement on the ship contracting side was not exactly in our mind at the time. And maybe even the HVAC side, although we saw a turn already in Q4 last year. We picked up a bit better on that as well. So I think that there have been a number of contributing factors.

So it sounds like I'm all super happy with all of the order intake. It's not -- that's exactly true. If we have 1 miss in the quarter, I think that is related to the service side, which is flattish compared to last year. There are some maybe small structural temporary reasons around that. So we feel fairly committed that we're going to return to a growth path for the rest of the year. But as an individual quarter, we didn't quite see the organic growth in service that we've been used to for the last 6, 7 years.

Perfect. Just lastly, the comment in the CEO letter around escalating cost inflation and you potentially considering price increases by midyear. I mean, how should we read that? As we stand now, do you foresee a material change in your cost base Q2 versus Q1?

It is a reflection that the energy crisis we are going into is clearly, macroeconomic-wise continuing to drive an inflationary environment that has been higher than we've been used to for a long period of time, and we haven't got the grips with it. And this process that we have of escalating energy prices is not helpful in the current inflationary environment. We see specifically issues in part of our bill of materials. We see a bit of challenge on the logistical cost, and we are just not prepared to passively watch that escalation go on. And we are, by the way, not sure that this problem is over. And we are now returning back to some sort of normality on the energy side.

So I think we created a bit of inflationary way ahead of us. And as we did last time when we had this problem, we will prefer to deal with it proactively rather than afterwards. But it's no -- it's nothing specific on Alfa Laval's sourcing mix or exposure that puts us in a different position than anybody else. I think you will see a number of companies doing the same thing.

The next question comes from the line of Andreas Koski from BNP Paribas.

Two questions. First on HVAC, where you're seeing the recovery continuing. Can you -- do you have a good feeling of how the distributors' inventory levels are today? Is there a possibility that we will see both end market demand improving at the same time as the distributors have to restock a lot after the destocking that we have seen over the many years?

I'm looking at Frederik. Listen, I think I think we are -- when we look at the...

I can ask it this way instead, if you want. I mean when we look at HVAC in the past, we were at a quite high level. And I think the heat pump business was at a total of around SEK 3 billion, and now we've been below SEK 1 billion when it comes to the heat pump business. So is there a possibility that we will reach the previous peak that we saw a few years ago in the...

I think -- all right, let's take it from there. I think we actually peaked at around SEK 2 billion, if I remember correctly. And we've been partly down in the pace that has been below SEK 500 million. So this has been a really significant destocking. And we've seen now for a couple of quarters that the volumes are picking slowly up, and they were picking up a little bit faster in Q1 than before. But I don't think there's a lot of inventory, certainly not excess inventory in the systems right now. I think we are looking at -- we're looking -- we are still on less than half of the peak. So I think we are balanced with the market.

I think the big question for us is how much? There's a number of questions as to the current energy crisis, how will it affect our business in offshore? How will it affect the electrification, the move to heat pump and a number of other areas. And so there are some upside coming from the current energy crisis in terms of energy resilience and diversification that may put some extra volume growth into the market. But otherwise, we expect a fairly slow growing heat pump market in Europe. And we expect to be maybe back towards the -- the then record levels early as 2030 or so.

So it is -- that's our main business case. But of course, we may see increased subsidies and increased push again, higher gas prices and so on, that is again favoring the heat pump market. So it is kind of an upside, but I would not look at that upside as more than maximum SEK 1 billion or so, if I were you.

Okay. Great. And then coming back to Gustaf's questions about potential price increases. And you mentioned that you're seeing inflation picking up. But can you just remind us how you are impacted by the tariffs? And if there will be an incremental impact for you because of the updated Section 232 tariffs?

Yes. So as Tom expressed, I mean, the inflation that we're seeing is probably ahead of us, and it comes in the form of being -- staying close to our suppliers, and there's a signaling that for a lot of the energy-intensive inputs that we have into our products that, of course, that's being driven up by the current energy prices. That's one part of your question.

And to the second part of your question, yes, there has been a shift in the so-called Section 232 or an update of it. I believe it was the second of April that the update went through. Our assessment when we look at it and we look at it from the different product groups and the different supply chains that we have is that it's fairly neutral for us. We don't see that we have a big impact neither negatively nor positively. There are some negatives and some positives, and they weigh out in the end.

But of course, we keep a close eye on this. And you have to remember that when I say different supply chains. We have everything from delivering finished units to delivering components for assembly in the U.S. to spare parts and then there's whole host of supply networks around there that come from Mexico, Europe, China and so forth, it's a little bit different, but our assessment as it stands today is that it doesn't imply any major changes to the cost of tariffs as we have it today. And to be clear, from the new level that was set after the previous round of tariffs was deemed illegal.

Understood. And then lastly, on the updated way of how you will present your order intake and that you will not include cancellations and revaluations. When you write about the order book in the text, in the report, will you there mention if you have had revaluations and cancellations? Or will we just see the order book development basically?

Yes. No, you will see the order book development for certain. And referring to that change, I will remind you that when we went into quarter 1 last year and we had the big movements of the NOK and the U.S. dollar, in particular, to pumping systems where we had a revaluation of backlog that was reflected in our order intake at that point in time of almost SEK 800 million. And so the critique or the feedback that we got from the market was you're not really reflecting the demand and the new orders as you get them on the market if you're actually netting out revaluation. So this was a little bit a response from our side to say, let's align ourselves with the way the market is getting this information from other peer companies. So it was a little bit in response to that.

So we don't see it as anything dramatic. I think the new number clearly reflects what the real demand is on the market and what the new orders in the quarter are. And I take on board your feedback on whether we should include it into the backlog in the report.

No, because there is -- when I look at it now, there is a possibility that you have had some cancellations, which would also be interesting to know about, actually, because the order intake was SEK 1.6 billion higher than sales, but your order book only increased by SEK 400 million in the quarter. And that's why I was wondering if you would have mentioned in the text if you had cancellations or revaluations, but I understand that you...

But I take it with me and just to answer the question, the lion part of that change is revaluation due to currency.

The next question comes from the line of Klas Bergelind from Citi.

Sorry, I joined a bit late, maybe you covered some of this. So first, on Ocean, the higher demand you see into the second quarter. I'm trying to understand the dynamics between cargo pumping versus offshore and then rest of Ocean. Is this a step-up you see in cargo pumping or in the other categories, i.e., ex Framo? The reason for asking is that it typically take some time from contracting improvement until you see improved orders outside Framo. So that dynamic would be interesting.

Yes. You're asking for a lot of granularity here. So I'm a little bit hesitant to meet your question too much. But as I indicated before, part of a slightly stronger order intake in the ocean than we perhaps expected for Q1 was related to higher product tanker contracting that had some effects at Framo. And it's possible that, that, to some degree, will continue. But don't keep me hostage for doing product-by-product prophesies. All in all, we see a slightly more favorable environment on it, and then you have to do a little bit of your own risk assessments there.

All right. Fair enough. My second was on the heat pump side. Did you say that there is a quarter-on-quarter improvement already in your orders now within HVAC? Or is this a sentiment improving? It feels a bit early that we would have a broad-based improvement in heat pump orders. I mean maybe in certain countries, but I'm just interested in what you said there. And sorry, I was late on the call, maybe you talked about this.

Yes, we did but no problem. But there has been, over the last couple of quarters, a clear improvement in the volumes. Now I would say that the big part of that has been the completion of the destocking process, which was getting completed towards the end of last year as far as we could judge. And if we were correct in the depletion of excess stock towards the end of this year, then the first quarter order intake on heat pumps were reflecting a better production plan and a stronger production plan at our customer site in terms of their expectations into Q2, Q3. So we had a pretty clear growth at that point in time.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Tom Erixon for any closing remarks.

Thank you very much. Thanks for being. It's a very busy day for all of you guys. So we appreciate taking the time and we're going to be off to AGM. And so hopefully meet some of our investors there. So thank you very much for your attention, and see you next quarter.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.

Good morning, and welcome to Alfa Laval's Fourth Quarter and Full Year Earnings Call for 2025. So Fredrik and I, we will give you a rundown presentation, a summary of the quarter and the year, and then we will go to the Q&A as always.

So let me start with some introductory comments to the quarter and the year. In all, we felt it was a strong year in 2025, resulting in record invoicing and record earnings with earnings per share for the first time climbing to SEK 20 per share.

So the supply chain was strong, especially in the quarter, and we delivered a record invoicing of SEK 19 billion in the fourth quarter. With that said, we still need capacity additions that are required to support our customer base in the data center applications. And yesterday, the Board of Directors approved a targeted CapEx program of SEK 1 billion for this purpose specifically.

Then finally, during 2025, Alfa Laval has prepared for further growth by simplifying the operating model and consolidating the business unit structure. It is a substantial reorganization of the company. And as of January 1, the new organization is operational after considerable efforts on many hands.

And with that, let's move on to key figures. Orders held up well with a 2% organic decline in Q4. We had good support from -- and strong demand from the U.S. and several important Asian markets. The margin was okay and as always, a bit affected by the seasonal high share of project invoicing. In addition, we carried approximately SEK 150 million of one-off costs, partly related to the ongoing reorganization program.

On a divisional level, first to the Energy division. Orders reached an all-time high in the quarter at SEK 6.1 billion with firm demand in both HVAC and CleanTech applications. Data center orders were increasing as anticipated and was accounting for approximately 15% of the divisional orders. Service has been slow during 2025 for the Energy division, partly due to internal constraints. In Q4, the service was again showing double-digit growth and the growth trend may well continue into 2026.

As indicated earlier, a new CapEx program of SEK 1 billion is launched to maintain a leading market share for the heat transfer applications in the data center business. The program is spread over our existing footprint in the U.S., in China and in Europe. We are with the existing infrastructure in a very good position to scale our volumes and capacities in this area specifically.

Then to the Food & Water division. Orders remained flattish organically, both sequentially and year-on-year. We continue to see considerable growth opportunities in many end markets going forward, and the new growth strategy launched in 2025 is supported by targeted investments into application specialists and the global sales force to cover areas like pharma and protein. The margin in Q4 was impacted by some one-offs, both in weak project execution and the reorganization as discussed earlier, and it amounted to approximately SEK 80 million in the division. In 2026, we will take some cost for driving the growth strategy forward in the areas described with some margin impact in 2026 and possibly into 2027.

Then on to the Marine division. Orders were stable sequentially and the lower cargo pumping orders were as before, partly offset by growth in the other application areas. In all, the market is and is expected to remain stable to positive for ship contracting. Invoicing continues on a good level based on a solid order book with a positive mix. The order book mix remains unchanged in 2026.

Then on to Service. After many years of growth, the Service business now accounts for about SEK 20 billion of invoicing. The growth trend slowed a bit in 2025 compared to before, but the structural demand trends remain positive and the troubleshooting in the Energy division specifically is now completed and resolved. As a consequence, in the quarter, we had unusually large mix differences between the divisions, with the Marine division at almost 40% share of service orders, partly related to lower project order intake on the Marine division. And the Energy on the other side, with just above 20% of service order intake after a very strong capital sales quarter in Q4. The spread between the divisions is expected to decrease going forward.

All right. And then a couple of regional comments to round up. In many aspects, it was a positive quarter with good progress in important growth markets like Southeast Asia and India. China was positive in Energy and Food & Water, but not fully compensating for the slower cargo pumping volumes that we expected in the quarter. U.S. grew in many end markets with special focus, obviously, on the data center market, and we had an all-time high in the quarter for the U.S. market as such.

And with that, let me hand over to Fredrik for some further financial details.

Right. So let us dive straight into it and take the order intake in quarter 4 amounted to SEK 17.1 billion with a negative currency impact of 8.7%, a structural growth of 3.3% and an organic contraction of 2.2%. What's notable in the quarter is the continued slow conversion of large project business from project pipelines that are both extensive and with quality projects. The Energy division reflected demand strength in HVAC with a 7% growth, and on data centers, more than doubled.

On a whole year basis, order intake accumulated to SEK 66.7 billion with a negative currency impact of 6.1%, growth from acquisitions of 1.6% and an organic contraction of 6%. Of the negative organic growth, the majority of the contraction is slow conversion of large projects, which lagged behind with some 20%, of which the majority stems from the normalization of our marine pumping systems and large project orders in Food & Water. Transactional business, on the other hand, increased with 2% during the year to compensate.

The order book stood at SEK 48.3 billion at the end of the year, of which some SEK 7.5 billion is invoicing for 2027. During the year, SEK 1.9 billion of negative revaluation due primarily to currency impacted the backlog and order intake. Quarter 4 book-to-bill was 0.89 with a good invoicing and project execution in Q4.

Now moving on to sales. Revenues in quarter 4 reached an all-time high of SEK 19.1 billion with a growth compared to last year of 4.6%, of which 10.9% was organic, 3.1% coming from acquisitions and the negative impact of currency with a whole 9.4%. The higher revenue stems from good project execution in the quarter and a good mix of growing transactional sales.

Revenue in all 3 divisions grew in the quarter, Energy division with 12%, Food & Water with 1%, and Marine division with 3%. On a year basis, revenues grew with 4.1%, driven by 7.9% growth of organic business, 1.8% structural and a negative currency impact of 5.6%. Revenues from the Marine Pumping Systems increased with 23% on an annual basis and project execution in the Food & Water division contributed with 10%. The large order book we carry into 2026 supports a continued good development in revenues.

Now to some key figures. The adjusted gross profit (sic) [ adjusted gross margin ] of 34.7% was in line with quarter 4 in 2024, but sequentially lower than quarter 3 at 37.8%, reflecting the heavier project execution mix in quarter 4. The adjusted gross profit margin as in previous quarters, continues to be supported by strong manufacturing results. S&A grew with 2%, while R&D grew with 11.6% as expected in the quarter. Operating income grew with 8.3%, yielding an adjusted EBITA margin of 16.9%.

To be noted further is that the adjusted margin is affected by the last tranche of the acquisition costs incurred in the cryogenics transaction, lower yield from a project execution in Food & Water division and costs arising from the new organizational structure with some SEK 150 million in the quarter. The increase of financial costs in quarter 4 is driven by higher interest costs and more substantially by the net of exchange rate differences.

Profit before tax is on a similar level as last year and finally, an EPS of SEK 4.79 for the quarter. On an annual basis, adjusted gross profit margin increases to 37%, reflecting the revenue mix, a strong factory and engineering result and positive purchasing price variances. S&A grew with 4.5% and R&D with 4.9%. However, both remained stable in relation to revenues at 15% and 2.5%, respectively. Operating income increases with 12.6% to yield SEK 11.7 billion and EPS for the year just above SEK 20, an increase of 12%.

Now on to some profitability comments. The adjusted EBITA margin for the quarter ended at 16.9%, an increase of 1% compared to quarter 4 2024. In absolute terms, the adjusted EBITA in quarter 4 increases with SEK 437 million despite the negative currency impact and the additional burdening of the result with SEK 150 million in the quarter as previously detailed. On an annual level, the adjusted EBITA margin was 17.7%, an increase of 1% compared to 2024. Adjusted EBITA increases with 12% to yield SEK 12.3 billion.

Now some comments on debt position. Debt has increased with SEK 7 billion, reflecting the financing of acquisitions during the year of SEK 9.4 billion, with a resulting leverage to EBITDA of 1.21. Net debt after subtracting a healthy liquidity position of SEK 7.8 billion is SEK 9.4 billion, which corresponds to 0.66 in relation to EBITDA. Finally, net debt, including lease liabilities, lands at 0.92 in relation to EBITDA.

Cash flow from operating activities in the quarter was on a good level given the increase in revenues. Release of working capital was positive, but on a lower level than quarter 4 last year. CapEx in the quarter was in line with guidance, bringing the free cash flow for the quarter to SEK 2.6 billion. On an annual level, cash flow from operating activities was SEK 9.2 billion, capital expenditures in line with yearly guidance at SEK 2.7 billion. 3 acquisitions during the year totaled SEK 9.4 billion. And after financing activities, the final cash flow for the year was positive with SEK 168 million.

And finally, for some guidance on Q1 2026 and whole year 2026. CapEx in quarter 1 is expected around SEK 0.7 billion and a whole year guidance of SEK 2.5 billion to SEK 3 billion. Amortizations at SEK 175 million in quarter 1 and SEK 670 million for the year, and that includes all recent acquisitions. Tax rate guidance remains in the range of 24% to 26%.

With that, I conclude my financial overview, and I hand it back to Tom for some closing remarks.

Thank you, Fredrik. So let me give you our forward-looking comments before we go to the Q&A. As we're all aware, the synchronized global business cycles are not so synchronized anymore. So in reality, geographies and different end markets tend to move in different directions.

So all in all, we remain in a situation where we don't have extremely clear trend lines. With that said, the general feeling we have in the market is that it is overall, everything said and done, somewhat positive momentum in the market. And we also perceive that the slowdown we've been having in large CapEx projects from customers is maybe easing somewhat as we move into 2026.

So with that said, we expect after a strong Q4, sequential demand in the first quarter to be on about the same level as we had in Q4 with the Energy division being somewhat lower compared to an all-time high record level, as you remember in Q4. The Food & water, we expect to be somewhat higher and the Marine division somewhat lower. And all in all, it takes us to market conditions that are relatively unchanged in Q1 compared to Q4.

And so with that, we round off the presentation, and we are open for questions. Thank you.

[Operator Instructions] Our first question comes from Magnus Kruber with Nordea.

Magnus here from Nordea. A couple of questions. First, light industry and tech obviously posted very solid growth in the quarter and a distinct step-up from prior levels. How should we think about sort of the trends going forward here? I think it's been perceived that it's been a little bit underwhelming here in the prior quarters, and now we see a very big step-up. So just some comments on how to look at the outlook here would be helpful.

Well, we don't really guide more than the quarter, and the quarter is somewhat lower. So I think that's all we really have to say on the matter. But it is true that we've been a little bit low for a number of quarters previously. We were not surprised exactly by the amount of orders that came in, in Q4. It was partly to be expected. And as we've guided you before, when it comes to the data center question specifically, we are a little bit on a shorter cycle than many of the project orders that you otherwise see in the market. So the pickup of that played a reasonable role in the development.

But on top of that, I would like to add that despite concerns on the energy transition and what's going on, we did have a good quarter on CleanTech applications. And we see both in the Food & Water division when it comes to biofuel applications and in the Energy division when it comes to carbon capture, hydrogen and other related issues, that there is still some momentum in the market on that level. So we are sticking to our energy transition strategy. I think it's going to be a bit slower, obviously, than people thought 3, 4, 5 years ago. And it may gradually become more market-driven and policy driven, but there is still a growing momentum in those areas.

Excellent detail. Super helpful. You also talked a little bit about SEK 150 million headwinds here in the quarter from various one-off effects and alluded to that could continue somewhat into the first half. Is the SEK 150 million run rate a reasonable level? Or should it be more sort of benign than that?

Well, it's going to depend a little bit. The SEK 150 million, you can kind of split 50-50 between reorganization aspects and project execution write-offs. So I hope the project execution issues are not repeating itself. The question on what running cost we will have on the reorganization part, which is now -- so we are sort of on the top level, all managers are appointed on a high level and the financial reporting is going in the new organization, but there's still a fair amount of implementation work to be done, both in sales regions and in business unit structures.

And so if we see a higher reorg cost than in Q4, it's because we have so far non-communicated savings opportunities on it. So it's going to be on a business case basis, let's put it at that way. But at this point in time, we would estimate that the one-off cost level will decrease in Q1, Q2, unless we identify substantial opportunities going forward.

Perfect. And just one final one. The investments you make in data center additional capacity now, how does that compare with your current capacity? Some way of framing that would be helpful.

Well, I think we are in a unique position to scale. We can work off our existing footprint. As you know, we have done considerable investment that earlier was related to heat pump and part of the supply chain and part of the infrastructure needs and equipment needs do overlap between the 2 applications. So we get a lot of leverage in the brazed heat exchanger technology specifically.

So what I would say to put some framework around it is that we are delivering substantial volumes of both gasketed heat exchangers and brazed heat exchangers into this application and a few other things, by the way. And on the gasket side, we are still very well set with the ongoing investment program that we already have committed and partly executed.

So there is nothing that of the SEK 1 billion that goes there. So it's going to be entirely related to expanding the press and to some degree, furnace capacity on the brazed side. And so we get a substantial leverage for the applications on that. We expect with all the production plans from integrated into our production planning, we're going to -- this will take us a couple of years forward. That's as much as I feel I can say.

Our next question comes from Meihan Yang with Goldman Sachs.

I have one question relating to the China Marine. So was the weakness in the Marine side in China more related to the underlying end market weakness? Or are you seeing any signs of market share erosion to domestic players? And if this continues, do you plan to do any capacity adjustments there?

No, I think the -- in all, we feel the market is -- so as we speak, our main challenge in China is the amount of commissioning and invoicing that we need to do in 2026. We have a substantial order book and a substantial overhang. And we are expanding our technical capacities in China substantially is to cope with it. So if we have any capacity issues, it is that we need to scale up, not scale down.

The market conditions in China, they were stable and normalized in 2025, and we believe they will remain stable and normalized on the order intake side in 2026 as well. The somewhat elevated invoicing levels that we have right now in end last year and partly through 2026 may come down a bit depending on where the market goes. But in general, we feel that the contracting level currently at the running rate that we are at is supporting perfectly well the infrastructure we have. So we're happy with that.

On market share, Marine is the only market where we know on the decimal what our market share is for every single product category because we know every hull that is registered and we know every hull where we are in and where we're not. And so we are monitoring this extremely carefully. And we are making sure that there is no market share slips in this market, and it hasn't happened for the last 5 years.

Our next question comes from Akash Gupta with JPMorgan.

I got 2 questions. My first question is for you, Tom. In your comments in the report, you say that the group functions are adjusting to meet new regulatory demand and alignment with the business unit. I was wondering if you can elaborate about what do you mean by these new regulatory demand? That's the first one.

You can say what we've been going through in order to adjust the group in terms of speed of decision-making and flexibility to manage towards the SEK 100 billion goals that we have in 2030 and to cope with the doubling of the business volume that we've been having over the last 6 years or so. We needed to take some actions to adjust to that. And you can say, well, first part is, to a degree, a consolidated business unit structure. So we will move with fewer global larger business units than we did in the previous structure.

The second part is that we will go from cluster organizations in our sales companies to more regional setups with a slightly more operational twist to how the regions will operate compared to the previous clusters. And the third part is that the supporting group functions need to be adjusted in various ways. In some areas, we need to increase our resources somewhat to cope with the compliance demands and the regulatory demands and the reporting demands we have related to sustainability, but also related to ensuring that the ever more complicated sanctions environment between EU and U.S. is being adequately implemented and with an adequate control. So there are certain areas where we certainly will continue to build professionalism and capacities.

In other areas, we are trying to make sure that we don't end up too centralized in part of our group support functions. So we also decentralizing out in a clear way to our sales regions and to our business units so that we have a responsibility for a number of these staff areas that is being carried by our operating units, and we are not too centralized in how we operate those functions. So it's a gradual -- you will not see any impact of it. But for us, it's a very important part of how we operate the company.

And my second question is on capital allocation. So I mean when we look at your leverage, you have gone below 1x at the end of the year. So can you talk about prospects of M&A, particularly in 2026, given you will be quite busy with implementing the new operating model. So would it be reasonable to think something might happen? Or is it now probably a lower priority with internal heavy lifting?

No. We believe we can do both things in parallel. We believe that the M&A strategy that we presented in the Capital Markets Day remains quite relevant and remains a priority. We continue to look at acquisition targets that fit the criteria that we defined at that point in time. We have a pretty good list of prospects that we're looking at.

But as always, it's a long process when it's M&A, and we set very high standards. But we have in our capital structure created the firepower to continue to do acquisitions and presented with the right opportunity and the right price level, we will do so. So we don't see that the reorganization in any way compromises our ambition when it comes to acquisitions.

Tom, would you like to add anything?

Yes. We might add that we already closed the first one, a small but still meaningful acquisition in China in the energy sector. So we will -- as the beginning of this year. So we will give some further comments to that in the Q1 report.

Our next question comes from Sebastian Kuenne with RBC.

I have 2. The first relates to the Energy business and specifically data center products, the brazed heat exchangers. I was wondering if you can tell us a little bit about the margin profile. I mean this is a product business. It's not a service business. it will probably change the blend, the mix and that might have implications on margin. Can you give us a little bit of an idea of where you see the profitability of these products going forward? That would be my first.

It is obviously difficult for me to comment on application product profitability levels. I think you are -- listen, the -- if you divide it into the brazed heat exchangers and the gasket heat exchangers, the brazed is a non-service product. It's brazed together, so you can't take it apart. What happens is that when lifetime is over, it will be scrapped. And that is the cycle of that business. It may grow a bit compared to the entire product area may grow its share somewhat in -- as a share of the Energy division. But I don't think it's going to be a huge mix change on that because we're also growing the gasketed.

And as for the gasketed, the data center applications are not extremely service demanding. It's kind of similar to a HVAC application, where we're dealing with clean water applications. So -- but that will have its normal HVAC-related service program. So I don't see a lot of challenges when it comes to -- I think overall, your observation is probably correct that it may dilute the share of service invoicing a little bit as a whole. But I'm not -- I don't see any meaningful -- there are other things that are -- I'm thinking a lot more about when it comes to the margin development than this one.

Okay. I will try to interpret this information. My second question is actually also data center again. Can you tell us a little bit again about who the clients are? Because it would help the investors now that the business becomes so big, would help investors to track a little bit the CapEx or the client's revenue. Is it the nVent and Vetiv of this world? Are there other major clients that we should be aware of when it comes to especially the brazed heat exchanger business?

Well, listen, I think when you're looking at a market leader in this area, it is not possible to be there unless you are pretty much covering the market. And so the customers that are out there are, by and large, our customers. There are -- in terms of the procurement process, and that's why I've been saying that we are probably lagging a little bit in terms of bringing the orders into our order book because we are supplying components and not systems, we are coming a little bit later than many others into the process because we are selling to the system builders. And they are the companies we're invoicing.

With that said, there are a number of frame agreements with the final owners who may want to specify suppliers and standardize the way they build their data centers in various areas. So this is business, which is not just a clear, straightforward answer. There are frame agreements in place. There are frame agreements negotiated as we speak. And there are supplier relationships with system builders. And you can safely assume that most of them that you are well aware of are most likely on our customer list.

Understood. Last question, just for clarification. You talked about project costs affecting Energy. Just for me to understand, does this relate to pricing of longer projects where you book at cost or you invoice at cost early on and then you invoice for the profit at completion? Or are we just talking about projects overrunning?

No. The specific project execution problem was in the Food & Water Division. So that was weighing on that margin. What happens in the Energy division is that we are invoicing and we do in all companies doing a percentage of completion, invoicing process for our projects. But normally, sort of it adds up towards the Q4 and it did also in Energy division, so on Welded. But the project pipeline and the execution side on the Energy division has been spotless on the Q4. So we are good with it, but it does sort of as a mix effect, weigh down a little bit.

I may add that we had a very good integration of Fives Cryo, which is also a project business. They are right in line with our expectations. They are well on track with Energy average margin. And the only thing that is weighing on that side is that we are taking a number of million euros as integration costs, and that has more or less now been finalized. So it's been a very short, concise and excellent integration process of getting the Fives Cryo team into the group. It's been a good process.

Our next question comes from Max Yates with Morgan Stanley.

I just had 2 questions. The first one was just around the Pumping Systems business and order intake. I guess when I look at the kind of Pumping Systems orders, it looks like maybe up SEK 100 million quarter-on-quarter. And I guess when we look at some of the tanker ordering data in Clarksons, it was very strong, up 60% in Q4. I think we've had a good start to January.

So I was just wondering kind of what are we missing? Because I'm fairly used to kind of this business. When we see the tanker orders pick up, it filters through within kind of 1 or 2 months to your business relatively quickly, yet that doesn't seem to be happening when I look at Q4 orders or when I look at your kind of outlook for Marine for Q1. So is there anything kind of we're missing or we should understand that's happening in the market? I'm just trying to better understand that dynamic.

No, I don't think so. And I think in our books after -- and so I remind you that in 2024, the Pumping System business, including offshore and aquaculture and another of other applications, we were at about SEK 15 billion in order intake for an operating unit, which historically has been on around SEK 5 billion. So we guided carefully that, a, we are not a SEK 15 billion unit in Bergen. So that's not the running rate that is possible in any case; b, we built the order book for 2 years going forward. And essentially, yards and ourselves are fully booked and running at 110% capacity anyway, so we didn't want to see and didn't expect a repeat.

And in 2025, we didn't see a repeat. We ended up approximately at SEK 6 billion, which is SEK 9 billion down from the year before, a good number. SEK 6 billion was a normalized plus level compared to where we have historically has been and well in line with expectations. That -- right now in the statistics, that converts to about -- if you look at the cargo pumping specifically, it converts to about 250 contracted product and chemical tankers that we've seen in 2025, which is on about a normalized level.

So the worry that after high contracting levels, we will go flat down on that market. It did not materialize, and we didn't think so. We think the age of the current fleet on the product chemical tanker side is still not all that young. So we think a normalized contracting level is to be expected. And that's what we've seen all in all for 2025.

I think we ended the year a little bit higher than we started on it. So the trend curve was positive. And so let's see where we go in Q1. But putting everything together, 2025 was not a weak year for order intake all in all. And so we are not overstating our expectations into 2026.

Okay. And maybe just a quick follow-up on currency. So you've had -- in the quarter, it looks like about -- you have had a SEK 271 million impact on your EBIT on a kind of revenue number that's about SEK 520 million headwind. So I was wondering, would you be able to help us at all with kind of any views for 2026? Because I know historically, you've always hedged. So I wonder whether there is any kind of lagging impact from last year?

And just any kind of view on -- is that sort of drop-through from sales to EBIT impact for FX, the kind of 50% plus. Should we expect that going forward? Were there some currency revaluations? So just any framing of how to think about the FX impact on EBIT as we go into 2026 would be helpful.

Right. And so let me try to take that. There's several components to this. You're quite correct. We have a hedging strategy for committed orders. And what we mean with those is usually the large orders, those get hedged as they come in. And then we have, of course, the uncommitted volume or rather the transactional volume that comes in sequentially over the year and that we hedge as separate volumes. So we do have a hedging that covers a substantial part of our revenues and turnover.

The differences that you are seeing trickling down to the EBIT is, of course, the net of all of those effects. It's the net of the movement of invoicing. It's a net of the hedging contracts that we take. It is also the impact that we see from a translational point of view between 2 quarters in 2 different years. When it comes to forward-looking, when it comes to FX right now, your crystal ball is as good as mine, but I would assume that the strengthening of the Swedish krona that we have seen over the last quarter is probably going to stabilize or to some degree, return to a weakening, maybe not a strong weakening, but it's speculation at this point. What we can do is that we secure as much of our turnover as possible through hedging contracts.

Then to refer to another part, which you had in your question embedded there is a revaluation of backlog. And the revaluation of backlog in relation to currency only happens when we take in an order in a foreign currency into our backlog, and that's primarily in the Pumping Systems where everything is booked into U.S. dollars. And there is, of course, the movement of the NOK to the U.S. dollar. And there, we also have seen a strengthening of the NOK, and we don't see that there is too much more headroom for the NOK to continue to strengthen. But again, it is a volatile FX market out there right now. And any quick movements that we see that happen over a quarter like we've seen in Q4 will create, of course, a currency impact on the results.

The next question comes from Sven Weier with UBS.

The first one is on Marine. And just reminding us of the packing order on content per vessel. Is it not true that your content per crude tankers is actually much lower than product tankers? And that's why maybe the crude tanker orders we had in Clarksons were quite strong, were not really affecting you disproportionately? Or am I getting the packing order wrong here on content? That's the first one.

You're getting it right.

Crude is more like an average. Is that fair to say in terms of content?

Well, yes, to the degree that there is a meaningful average in this, crude tankers, they are large. They are energy consuming, efficiency matters. And so it is a meaningful part of the fleet for us, but it is -- compared to a product tanker, it doesn't provide quite the same mix. It's absolutely true. And so you need to shave off -- maybe I shouldn't speculate too much, but shave off EUR 1 million or so and then you are there.

Okay. Understood. And then to follow up on Marine because in the report, you mentioned the impact of sanctioned vessels on Services, right, and that it has a negative impact. Can you drill a little bit deeper into that comment, how it impacts you specifically?

Well, there's been lots of dialogues about how big is the shallow fleet, which is sanctioned and which we do everything we can to definitely not serve and not ship spare parts. And so probably that the number of ships, including that fleet is in the order of magnitude of at least 400. And so 400 large vessels is -- does impact. With that said, I think Q4 service volume for Marine was not primarily the numbers that you're looking at there was more impacted by a very large service order, non-repeat service order in Q4 2024. So we had a bit of a challenging -- reach for us. It's not a favorable situation.

When the U.S. now enforces these sanctions more forcefully, for you, it doesn't make a difference because the shadow fleet was a shadow fleet before and you didn't service it anyhow. So that doesn't make an incremental difference.

Absolutely not. No. It's -- on the contrary, we find it helpful that there is a strong action taken because with all the efforts we are doing to make sure that not a single spare parts one way or another reach a sanctioned ship is a big challenge. So we're working exceptionally hard in protecting that we are doing everything we can to follow the sanctions, but it's helpful for us if the ships are removed. It makes our life easier, and it has no impact on our financials at all.

Final question is on the new Food & Pharma division because I was wondering on those projects where you had cost overruns. I mean, did I understand you correctly that this is now done at the end of Q4, and this should no longer have an effect? Is that fair?

I'm always careful in prognosticating a future where there are no problems. But we have been dealing with specifically in the quarter where one specific project, and I think we're taking all the measures needed now financially to make sure that, that is completed. It is financially not a good project for us, but we are extremely committed to our customers that we are delivering a well-functioning process at the end of the day. And so we should be clear of that now.

So -- and I remind you that during -- when we started the journey 10 years ago, we continuously had a number of project execution problems. We cleaned that up very well. So we've been going on a good level for many years now in the project execution. And in the acquisition of Desmet, it's been the same, and it remains the same with Desmet. So this was the first time for a period of time where we actually got into executional challenges. And I think we've been handling it now. So in terms of what we know in our books now, we don't have a recurring item on this coming back.

And if I may, what was -- I mean at the end of '25, what was the share of biofuels within the division in terms of orders or sales?

Good question. I don't have that number in my head. Maybe you can check a little bit as we speak. But it's been 5%. And so it's been very little. It's been depressed. We see a more interesting market in biofuels coming into 2026. They are typically large orders, so they are a little bit -- either they come or they don't. But when I'm commenting on the sentiment in the market when it comes to larger projects, that includes the biofuel segment where we may see some movements in 2026. We are hopeful.

And that 5% was of the order intake, right?

Correct.

The next question comes from Uma Samlin with Bank of America.

So first one is a follow-up on Marine. So I guess you're guiding somewhat lower in Q1. How should we think about the mix of Pumping Systems orders versus other marine categories in Q1? So from your answer to the questions previously, it seems to me that you're thinking like a relatively -- still relatively strong Pumping Systems orders. Do I understand you correctly that it's the other Marine categories that drives your somewhat lower guide? Some clarification would be really helpful.

We are hesitant. Here is the thing without the crystal ball, the more granular we are in our forecasting, the more off we're going to be. So on a group level, we feel fairly confident. And as you will notice, if you compare backwards on divisional levels, we have a slightly larger variation of outcome versus forecasting. And it gets even worse if we break it down into business units and individual product categories.

So I'm a little bit hesitant to meet your question. But in terms of our earlier discussion on this call, the activity level and contracting level as forecasted and as what we've seen in Q4 looks relatively stable. So it may not be a bad guess that we are reasonably close in Q1 to Q4.

That's very helpful. My second one is on Food & Water. If I heard you correctly, it seems like you expect some sort of margin impact from your growth strategy in '26. Can you perhaps elaborate a bit more? And what do you think is the long-term margin good for Food & Water? Because I remember this division used to be at 17%, 18%. And after the acquisition of Desmet, it was lower to like 14%, 15%. What is your long-term sort of ambition for the margin profile of Food & Water?

Well, we typically don't want to run businesses below 15%. So our change in our corporate profitability target to 17% anticipated that part of our business most likely is going to be above the 17% and part of the business may be somewhat below. So we are not running a business strategy in Food & Water aiming to go below 15%.

What we have done, and I remind you of this, we are building this company for the future. We are running at compared to historically exceptionally high CapEx volume, which in part is complemented with higher OpEx cost running in parallel to that CapEx program. And we are building both product technologies and capacities in the market additionally. So we have been doing that for a long period of time. And I don't see -- I guess what we are indicating with the increased investment program in the data center applications and the increased focus on growth strategy in certain newer areas in Food & Pharma should give you sort of the feel that what we've been doing historically is what we will continue to do.

So if we stop doing that, I said it before, any monkey could get the margins up with 1% or 2% on the Alfa Laval margin. But we think building us towards the SEK 100 billion is the primary target, and we're going to do so with acceptable margins and healthy business conditions. And for Food & Water, that means that we are definitely aiming in the short to medium term to be somewhat north of the 15% target.

The next question comes from Carl Deijenberg with DNB.

So 2 questions from my side. First of all, I wanted to come back on the Energy division and maybe specifically on the HVAC side. Obviously, that was a drag for you on the order side in '25, but with some improvement here towards the latter part of the year. But I do want to understand a little bit. Is that -- do you see that more as a result of this inventory drawdowns on the OEM side being behind you and production rates being more sort of indicative of end consumer demand? Or do you still see some elevated inventories there among your customers?

I think the -- maybe you want to take that, Fredrik. You used to run that business.

Well, I think in relation to inventories, I would say that the inventory at our customers' distributor network is depleted. That I think we can reasonably see in the call-off for the frame agreements that we have with the larger OEMs. So that would confirm that we are past the destocking and that we start to return to growth or we start to return to normal production.

When it comes to heat pumps specifically, I think we see the beginning of a resumption of a normal business and a normal trajectory of business growth in relation to defossilizing heating, particularly then in Europe. And I think that's a strong indication. There is a shift in players in the market. There is going to be consolidation in the market most likely. But we see definitely that also on the air conditioning side that we are starting to have larger call-offs on frame agreements. So I would assume that, that confirms the case that destocking is complete.

Okay. Very well. Then secondly, I wanted to ask also on sort of recent raw material movements. I mean we've obviously seen some quite dramatic price movements on certain raw materials. I guess, one quite important component for you is, for example, copper on the brazed side or on the heat exchanger side. And I just wanted to hear a little bit if you expect any sort of tangible price impact on that entering '26 now given where prices are.

Right. And so without getting too much into detail here, we set the standard cost during the year that is based on the frame agreements that we have with our metal suppliers, and we have more than one metal supplier, and they have a little bit of different sort of timing and phasing of when we renew those frame agreements with our metal suppliers. So we have a little bit of stability, and we have a little bit of visibility going forward to what our material prices will be. We also have some metal hedgings that are in place.

So all in all, we don't have -- you can say in the short term, it doesn't impact us. But in the long term, it means we need to consider how we plan our productions and how we plan our pricing structure, but we allow ourselves a little bit of breathing space to make those decisions in a foundational way in line with our strategy.

Tom, would you add anything? I could add one thing on the copper, by the way. I would say that if you look at the other metals, we probably have a little bit of speculation creeping into the pricing. When it comes to copper, there is actually a foundational demand or supply problem that needs to be sorted out. So there is probably a more sustained higher price level for copper going forward.

Our last question comes from Klas Bergelind with Citi.

Klas from Citi. So I just had a -- sorry, a follow-up question on Marine again, a lot of questions on Marine. But I want to zoom in on product tankers. Obviously, crude is strong, but product is still pretty volatile where your value is higher. We saw a pretty strong first read in December at 19 contracts, but slowed down again in January as we could see yesterday. The product tanker market is still pretty soft with mid-single-digit supply growth against around 1% demand growth and scrapping doesn't seem to increase that much at the moment.

I'm just trying to understand, Tom, how you look at demand here in the product tanker category in 2026. If you share this view or if your discussions out there are showing a more positive picture because it seems like product tanker, given the short-cycle nature of that business, is something that maybe can surprise positively, but I just want to hear your view there.

It's a good question. The difficulty on what's going to happen on the contracting side. So I remind you that in terms of deliveries from our side, commissioning from our side and delivering from the yards to the shipowners, the 2026 pipeline is very strong. So what we're discussing is not affecting invoicing in 2026. And to a degree, we also cover 2027 already, although not fully.

So if you're going to see any meaningful impact in a 2-year perspective on this, it means that existing slots need to be converted, that containers are being swapped into product tankers. And that type of switches is happening in the market. People are selling options and production slots. So I don't know. I would refer to Clarksons as the most solid foundation for this forecast. We don't have, I think, a better view on the market than they do. But as I said, we came out 2025 on a pretty normalized level. I remind you that the monthly numbers and the yearly numbers are updated afterwards.

So all of the bookings are not registered at Clarksons at this point in time, not for 2025 and certainly not for January. So we will see some movement there. And we don't expect tremendous volatility short term. But you've seen the volatility down over a period of time when we were a bit unpleasantly surprised. And then you saw the enormous spike in -- starting in 2023 and into 2024. So we haven't exactly nailed the prognosis historically. I'm afraid we're not be able to do it now either. But we're good for a period of time.

We typically do the 6 months revisions to the date as well, but it doesn't look very strong. So that is why I asked the question, but I appreciate your comments.

All right. So thank you very much. Thanks for the call. And if we don't run into each other before at some of the investor conferences that are happening in London, Miami and a couple of other places where we will be, then we will meet up at the earnings call for the first quarter in April. So thanks a lot.

So I don't know about you guys, but when we gather by annually our 200 most senior leaders. We do presentations like this. I will do a strategy update, and people will talk and we will have slides. And then we have products. And in my team, that's where the excitement is. A lot can be said, showed, but it's the product that get people going, right? That's the buzz. So I don't know what you feel. Did you like the products? If I ask that question with my team of 200, the sound is a little bit different, but I understand the answer might be similar. So in that sense, I don't want to bother you too long with. So that was what we had to show. So thank you for your attention.

But I would like to remind you, a couple of things. The first one is this was an example of what we're doing. We can't calculate exactly the number of product technology centers that we have, but I would say you've seen today, one of five, right?

You have one serious one in Lund. You have a very serious one in Kolding, in Denmark. There are other places. And then on top of that, we have a host of small technology start-up things and stuff like that. So I just want to remind you that this was not the broad Alfa Laval technology platform at display. This was specifically, specifically related to the separation technology part. And as such, I hope you liked it. And if you, in your mind, think about this times 5 or 6 or something like that, you get the feel for what we are doing on technology.

Talented group management member once called us a cool tech company, and she was right. That's how we feel about it. So I hope you got -- the idea was to show you a little bit the pace and feel for that. Now so I will take you a little bit on a read on a couple of things that I think matters to you when you look at us and how you interpret the world. And let me start on the topic of the global volatility of everything that goes on.

And most of you have been with us and with other companies in COVID times, in geopolitical turmoils, in hyperinflation and if it's not one thing, it's the other, right? You would have thought that the world is in a spin. And most of the time from the question that I've been getting through the years, it seems like you think we are in the spin. Now the spin is not as dramatic as you think. So let me just take you through a couple of aspects of that.

If we start with the U.S., you can debate U.S. from many point of views, but I wouldn't say volatility is the big name of the game if you look at industrial production in the U.S. It is -- I don't think the current administration will, in a major way, change the trajectory of U.S. industrial production. The opportunities to expand that significantly is a bit overstated, I believe. But with that said, it hasn't been too many years of turmoil. In fact, the last 2 years of the Biden administration was really kind of hot when it came to CapEx decision in our customer base in the U.S. And basically, the issue was not about available capital, it was about the labor force more than anything else. So all the channels were flooded and growth was limited by access to labor more than anything else.

I think I've said repeatedly that tariff implementation is not particularly changing the dynamics of competitiveness of most European firms, but it does potentially affect the amount of CapEx decisions that will be taken in U.S. industrial boards. And I think the jury is out. This year has been quite stable. And we'll see where we go next year. I think people have started to interpret U.S. as we -- like abbreviations. So the K has become famous. But after having been in the U.S. a couple of weeks ago, I kind of agreed to the K denomination of the U.S. economy that is I spent time meeting people in data centers, pharmaceuticals and wastewater. And I can tell you, there was not a lot of concerns about CapEx or inflation or tariffs. It's just all hands on deck. But of course, there's a different U.S. economy as well outside of these things. So I think reading the U.S. today is not enough. You need to be sector specific. I think that would hold for the future.

Now I'll remind you, U.S. is about 20% of our business. Let's go to 20-plus percent of our business, China. And there's a lot of discussion about China and volatility and COVID and lockdowns and, and, and. But as you can see, China has been throttling along. And all of group management was there just a couple of weeks ago. The dynamics in China is enormous. The development over the last 5 years is enormous. And I think it will have a huge implication for the industrial sector if we look 10 years forward.

And the issue is this. Historically, we developed products and solutions with leading customers in U.S. and Europe. And where we are today when it comes to government policy, 5-year plan, predictability of demand, flagship projects, new technologies developing in China. And if you missed it, it happened in batteries, it happened in solar cells, it's kind of happening in EVs. It's kind of happened -- well, if they were not happening first in windmills, at least there were fast followers, and it goes on.

So when we look at areas that are important to us, carbon capture, biofuels, sustainable energy solutions, list can go on. That's probably -- and hydrogen. That's probably where the pioneering projects and the scaling up of supply chain is going to happen. And if that's going to happen, it's kind of difficult to be have committed on the Chinese issue. We have since years, the most employees in China, it's about 4,000 out of 23,000. We have more than 20% of our turnover there. It's more than any other market. We have a bigger supply chain in China than in any other market. So we are fully engaged. But if we look at the way we have been distributed in product development, technology development and stuff like that, I think we are starting to make those transition moves now.

Are there risks related to Chinese policy down the road? Yes. Is it an almost predetermined failure of market leadership not to engage? I believe so. So we will continue the path in China for years to come. And I think the point of the chart is with all the volatility we've been going through kind of -- as you can see, the numbers are quite stable, right?

What about the energy transition as a whole then? Well, as you well know, since 5 years back, we banked our strategy on leading that transition based on our technology base. And we also set ourselves some internal targets on that matter. The net zero for us, Scope 1, Scope 2, original 2030 was advanced to 2027. We stay firm by that. We're going to get there. We have no -- we are reading the tealeaves just as well as you are, but we are staying firm on the direction that we have started. And that direction, I remind you, we made with one condition. We're not betting the firm, right? We're not missing the train. We're not betting the firm. So within that, we are robust. We will hold the course.

And if you look at the investments, the title says renewables, it's a bit more than that. But if you take the numbers in terms of what capital is going into supporting the energy transition on any one and single dimension that plays a role in this, that number is growing. And you would see a similar picture if you would see our order book in clean energy and clean energy-related areas.

And so I think there are two thoughts you need to consider when thinking about the energy transition. The first one was the Paris Agreement was on thin ice from day 1. Anybody who did the backwards calculation from 2030 on any dimension of equipment, of metals, of installers, said this is just a politically made-up number that has no relevance for what's going to happen in the industry. If I would have believed in the Paris Agreement, I would have constructed 20 new factories, right? That was betting the firm, and we wouldn't have been able to hold out.

We see a lot of the start-ups failing because the demand is not coming as expected. It's to a degree, a shame, but it also ends up that the responsibility for these solutions is being carried by large industrials at the end of the day. The people with the balance sheet has to hold this together, and we do.

If you would take the Paris Agreement and put that chart on, we would be out of scale, right? And so what we are really seeing happening is the reality is confronting the political ambitions into something that is doable for society, for the labor force, for the taxpayer. And so we see a slower transition. So we expect that this trend will continue. That's what we are basing our strategy, our forecast, our 2030 targets on, but we are not expecting that this is going to go through the roof over the next 5 years.

The only problem I see with energy transition is we started 20 years too early -- too late, right? Had we started 20 years earlier, we would have a nice gradual. And so we can't redo that with the democratically elected policymakers that we have. And the only ones who can stay the course a little bit more aggressively is China, and they are. And that's their 5-year plan. Read it if you haven't done it. It gives you a little bit the textbook of what we have to follow as a company.

So my point with this is it's been an awful lot of turbulence. It's hard to imagine that the next 5 years is going to be more turbulent than the last 5 years. But still, when you look at it, in fact, in reality, the stability in macroeconomics and underlying industrial demand has not been that weak -- has not been that turbulent, right? So I say sometimes you guys are hyperventilating on everything, scrubbers, heat pumps, so continue to do so. I'm also worried. I'm much more worried than I'll let you know. But yes. And to take a hyperventilation issue, I'm sure you're going to bog me with IMO regulatory things. And I will leave to Martijn later on to deep dive into that.

But even on the dual fuel or multi-fuel issue, you see a stable trend line. Will that -- this is mainly before the delay of the IMO implementation schedule. But nevertheless, we don't have 50 customers shouting, we made the wrong decision. We'll see a slow and steady increase of multi-fuel solutions for between -- depending on fuels, you're looking at 10%, 20% of the global fleet. I cannot give you the trend line for the next 5 years, let's see. But our sense is that the market did not completely change as a result of the IMO delay. So we see. Maybe Martijn has some further details on that.

All right. So what did it mean for us? And I will take you back on a 20-year journey on how the capital sales side order intake developed over these 20 years in a couple of dimensions and what we've done. And what you find is that in the time of the biggest turbulence we have experienced in our careers, we have grown the fastest, right? And most likely, we have outgrown industrial production in general. And I will come back to this. We probably have been a bit lucky in our end market exposures just for historic reasons. But we also made some conscious efforts to get there.

But as you can see, we had a rather long time of stagnating organic growth. And for those of you who were with us in 2016, that was the time when the strategy shifted from something to growth. And we felt it was somewhat of a risky decision at the time because you want growth and then the world has its own course and cycles come and go. And so if we were meeting some headwinds in the market, it could have been a nasty journey for all of us. We got some tailwinds instead and things start to take off. So the journey became a bit more comfortable. But as you can see also, and I think we said this when we started the investments in 2016 for future growth, it will take some years before new product comes, before the sales force is trained, before some impact on what we spend our efforts on. So I think the period 2016 to 2020 was energy and hard work and '20 to 2025 was a period when we read the results of our investments.

And of course, what we actually did 2025 -- 2020 to 2025 was to build the growth story for 2025 to '30, right? So we will talk a little bit about that. Today, the path to the SEK 100 billion. But this is where we are. I remind you that '23, '24, '25, we have a complete collapse in the heat pump market out the window went a couple of billions. And then we had a fantastic acquisition year of Desmet at SEK 6 billion order intake. We calculated on SEK 3 billion. And of course, that normalized. And so then -- so we had a lot of normalization. So the numbers that looks a bit flattish are anything but it. There are some huge negative deviations in order intake, not invoicing, in order intake that has been largely compensated by pretty good growth in most other areas. So the order intake numbers, as I mentioned on the earnings call, is an all-time high in a whole range of areas.

All right. So that was the capital side. On the service side, we have a similar situation. And that was by design. We made service one of our three strategic pillars back in 2016. We -- if I want to be a little bit provocative with ourselves, historically, if you didn't succeed in the capital sales business, you might be promoted into service manager, right? Was that right, Nish? And you were not one of them, that's what I meant. But today, we have a very different atmosphere around service. And as you well understand, if you sell equipment like what you've seen downstairs, you may have a deal 1 year and the next capital sales is 10 years from now. And in between that, the only way our company is present, the way we interact with customers, the reputation we have, all of that is our service group.

So it's a hyper strategic part of what we've done, and we invested. I'm not going to go into details on the 20 things that are happening in the meantime. But of course, the service side has taken off in a way that -- in a stronger way than we anticipated.

So that's sort of what happened on the market side. My point is growth is not just a matter of end markets. They come by design. And I'm not going to go through the entire activities, but you like numbers. So I take those activities that we can actually put into numbers. So we leave talent, dedication, teamwork, all of that. We pretend like that doesn't mean anything, and we look at just numbers.

And if you look at the numbers, starting with CapEx, this may be a good or bad number for you. Some people like to have low CapEx. We actually had prior to 2016 financial metrics, which was CapEx in line with depreciation. I had a real hard time to get that to square with a growth strategy, right? And so I actually think it was quite a big item for us to take some of the early CapEx decisions because they broke with the tradition that, well, eventually, we will have a downturn, right? But we had a growth plan. And if we didn't back that up with real capacity, how would we have credibility in an organization to go and hunt, right? Better to stay put.

So the early CapEx decisions, they were a little bit risky. We were breaking with tradition. And since then, it has gone on, and we are probably at the record high level as we speak. We've been going through a period that initially was a bit of footprint sorting things out in terms of structure and regions and all of that, to more of a direct capacity-related CapEx thing.

And with this facility and a number of other things, I went through the bricks and mortar in San Bonifacio last year, if you remember, so I'm not going to bother with you again. But now we are starting to come to some sort of end of a fairly large coordinated investment plan. And now it's more on an individual basis, what we need to do. And the biggest decision that we made public was the Framo decision in Bergen, and Martijn will speak a little bit about that as well.

The other thing that you can put into metrics is the R&D investment. And they've been growing. They've been growing somewhat as a percentage of sales. And of course, it has grown on top of that together with the sales in a ratio so that we are now about 3x R&D spend than we were 10, 15 years ago. And you see part of what we're doing down here. We are a fairly R&D application close to customer type of business.

And what you've seen today and what I wanted you to see was that you may think about us as a component supplier, right? We do components that people put, but we are actually system builders. And being system builders or -- builders or whatever you want to call it, means that you need to be close to customers. We become a plug-and-play solution. We need to understand the customers. We are responsible for input and output of those small process steps. So a lot of our development is happening there. I think the multi-fuel example was a good one, but it's by far not the only one. And so this is very important to us. I see -- here, I see no end in sight. As we continue to grow, I think we will continue to reinvest. There's lots of opportunities for us there.

Capital allocation. I think you agree with me, if I guess that you would say perhaps our biggest development opportunity is the Energy division because of the transition of all that. And consequently, you would like to see a slightly higher capital allocation towards the Energy side than towards the siblings. And that's, in fact, what you see.

So in terms of growth, not so big difference. So in terms of SG&A and people, feet on the street, it's quite balanced because all three divisions have gone through a similar growth journey. So that's not a capital allocation thing. It's just growing up. But if you look at the CapEx side and if you look at the R&D investments, they tend to be somewhat higher. So we are leaving nobody behind. And we are taking everything on its merit. And we are not saying that if you happen to be a non-energy person, you're not going to get any capital allocation, then in that case, we should get out, right? If we're not a good parent to our businesses, we have no role in it. And so we are doing everything. But the demand on the Energy side is higher from many points of views. And I think it will look similar in the years to come. So that's approximately.

So history, where is that going to take us? Well, we've said some -- I think it was 2 years ago. I think. We want to get to the SEK 100 billion. And we still do. And it's still our objective. And I think I'm not going to give you the full story because the divisional presidents are coming after me, so don't make me the salesperson for this one.

But just to frame it a little bit, so you see where we are and where we are coming from, the current running rate is about SEK 70 billion, right? If you just assume some sort of normal cycle, normal inflation, a 1% industrial growth per year, a little bit percent of price and you plug in a 3% basic growth per year, it takes you from SEK 70 billion to SEK 80 billion by 2030, right? So the delta for the SEK 100 billion is about SEK 20 billion.

Now if you think about M&A, and let's just say that the capacity, including earnings up to 2030 for M&A is probably somewhere if we push it up towards the SEK 30 billion or so, certainly SEK 20 billion without pushing the envelope. And let's just say that typically to buy profitable, well-run business, right now, we're looking at a multiple of about 3x sales, perhaps something like that. That's where we are as Alfa Laval, it means we would acquire SEK 10 billion potentially. So let's call that SEK 5 billion to SEK 10 billion, so it takes us to SEK 85-ish billion.

And then we have the three divisional strategies. And you will see them in just a little while. And as you notice from these pictures, there is something that you don't quite recognize. The Marine division has become the Ocean division as of January 1 and the Food & Water division, as you've seen today, for good reason, is being renamed to the Food & Pharma, reflecting the strategic priorities in that division. So -- and Energy division remains the same.

So if you look at -- without being exhaustive about the areas of special growth that goes above and beyond the normal sort of industrial growth paradigm, in the Energy division, we are in an early stage on data centers, obviously, for us. As I said before, we are a bit later in the contracting cycle than many others. So we are still ramping according to the frame agreements that are coming into place. We've been going through an awful period of HVAC, including heat pumps, but also other applications. So that coming back to some sense of normality, a couple of billions. And we are doing our largest, as you know, R&D project in our history for hydrogen. And I think invoicing rate right now is about SEK 100,000, which is test orders to customers, right? So we see where that goes. But we believe that will be a hydrogen market in Europe and the rest of the world. So those are three sort of outside the normal growth areas that we are banking on.

In the Food & Pharma division, obviously, the Pharma side, you will see some further details on that later. It is going to be important. We have some opportunities in industrial flow with existing product ranges that we believe we can do something with. And then we have the whole protein sector that is going to be special in terms of new sources of protein and so forth. So a number of areas there of interest.

And if you look at the Ocean division, you see in the multi-fuel side today. That was, by the way, for a small module. The large modules are substantially larger than that. So these are big beasts. We have the whole Cryo implementation. Certainly, you will see that on the Energy division, too, which hosts the Cryo acquisition, but the Cryo fuel pumps and the whole applications is a clear opportunity for the Ocean division. The offshoring in terms of the offshore business, offshore service business looks very strong going forward in the next few years. And the aquaculture, we worked with for a number of years, as you know, is running in the hundreds of millions right now, but potentially, we have a bigger number coming there.

So these are just a way to portray there's a couple of structural pillars that we will see how we evolve over the next 5 years, but they give us confidence that we can continue to have a growth pace that is somewhat higher than perhaps the industrial growth in general will be. Our end market exposure and the positions that we have put ourselves in looks viable to us. That will take us -- you may feel that it doesn't take us to the SEK 100 billion, but that wasn't a typical Alfa Laval conservative issue. It -- we actually does it. It takes us all the way up.

All right. So now four slides that we don't have to talk so much about. But we have talked about the three buckets of growth earlier and we to update you at every Capital Markets Day. This may be the last time we do this, but I didn't just want to take it off the table and pretend like it didn't exist. I'll show you these numbers possibly for the last time because I think we will talk about the SEK 100 billion target more than the buckets going forward.

So -- but just so you remember, we had the Evolve thing, which was Alfa Laval classic. We had the bucket of Expand, which was supported by an energy transition and structural drivers. And then we had the whole bucket of crazy ideas that we thought could get us to SEK 10 billion, right? So you remember that we did it in Søborg the first time, I think. And so this will be the third and possibly the last update.

Here we go. So what does the number look like for Evolve, which is a stable, steady business. Since 2022, we are almost 30% up in order intake, and we are 31% up in terms of growth. So for -- so this is our traditional bread and butter business, quite good.

The Expand is supposed to go faster, and we were until last year. And this year, we are, but only on the invoicing. We have -- the heat pump business was in there and the biofuel, which also crashed, by the way, is also in there. So we are flattish on order intake. Looking forward, those things remain in my book as expand areas. So when you look at our numbers overall, remember, we are not running at full speed on some of the very important applications for us. We've actually been taking that hit last year, partly this year, and we see the end of the -- the light in the end of the tunnel on those ones. So -- but in terms of the invoicing and a solid order book, it's still reasonable numbers.

Okay. And then we have the Explore bucket. It's still very early times. But of course, the growth numbers are higher, especially on the order intake side, where we're up about 250%. So we are at 1/4 of the way where we want to get to the SEK 10 billion. In that bucket, I'm not going to go through all 10 projects, but to just take 3, the single-use CultureOne that you've seen downstairs is now in -- still in a fairly early launch phase. So it's up and running. We are putting out the systems. And I think we are -- we have a clear path to where we want to be on that application specifically.

Oceanbird, which we put in there is mounting its first rig on car carrier ship right now as we speak. It will actually sail for the first time in Q1, aided by wind propulsion. So we'll see where that one goes, but it's commercializing according to plan.

And then lastly, the hydrogen project, which is one of the big bets for us really is currently and should be currently at pretty much 0 revenue. We are now running sort of test orders to customers. So we are in line with starting ramping next year. I have no hesitation that we will -- I don't often say this, but I have no hesitation that our solution is going to be absolutely the best in the world. And so my question is not whether we're going to get customers. My question is how much orders will our customers get for electrolyzers. And so I'm sure we will have reason to return to that question.

So that's where we are. We are still hopeful for the SEK 10 billion, 5, 6 years from now. So let's see. So that's the buckets. And if you don't insist ahead of next Capital Markets Day, I will skip these not because the numbers change, but we will talk about other things.

All right. Another thing we talked about last year was if you think about the SEK 100 billion, it means pretty much that the group size 2016 is going to be mirrored by each division 2030. And we already started to feel with acquisitions and with new start-ups and with technology that we were getting back some of the slow decision pace and complexities and all of that, that we got rid of in 2016. Nine years had passed was time to take a step back, look at what we were doing, see how we could optimize. And we are modifying a lot of things. I will not go into a lot of the details on the internal clock work of the company. I just want you to know that sort of we've been through that process in some details, and I will share a few things about it.

And let's just start with the team. Now not that the previous team was a blocker for growth by any means, but each has its path, and we are partly a new team now. So you will meet Julien as Head of the Global Sales Organization for the first time. Thomas Møller, you know Sammy is almost new in this context in running the Food & Pharma division. And Martijn is recently promoted into succeeding Sammy in the Ocean division. And so you will -- that changes a little bit what goes on in the company. And there are some updates on the divisional level in terms of strategy and direction. So certainly, we will look forward to that. And this is what we look like when we try to look really nice. All right. Okay. Okay. I'll let that on too long. I know. Okay. Let's move on.

Then we have, for a number of years, worked through a little bit the guiding documents and principle of how we operate as a company. And I can assure you that just keeping a company, we take everything for granted. It works, right? Everybody knows what they're doing. We are compliant. We do everything work. It's not like that in reality. It's keeping a ship steady is a constant work of a lot of people and functional specialists to actually handle this thing. And we needed to rework that structure a little bit. And you see a lot of the pioneer and the positive impact, which sort of states our purpose for us in a good way. And to some degree, you get exposed to the transition leader strategy, right? That's a little bit what you see when you meet us.

The rest you don't meet. But internally, we meet it a lot. That is how do we deal with our values, especially in these times and our business principle for our conduct and all of these things that are hyper important for us, not least in a period where sanctions and other things makes it extremely expensive to potentially make a mistake. And so we are quite on our toes in order to deal with some of that. So that pyramid for us is rather real, updated, adjusted to the current situation. It's a non-bureaucratic way of working, but it is a diligent work -- way of working. So we are happy with that.

We have in our operating model weighed back and forth how do we deal with the geographical dimension versus our business unit dimension. And it has been 360 degrees full year sort of weighing pros and cons and what we're going to do. You can say the summary of that is we think the balance between a global sales organization, a global service organization covering all difficult and easy markets around the world in a very global business portfolio and the interplay with the business unit as the main strategic drivers and P&L consolidation unit, that balance wasn't that all off. But it certainly offered us some consolidation opportunities.

And so we have compared to the cluster organization we had before, which was rather formal, Julien is forming somewhat stronger sales regions with the opportunity to, within those regions, be a bit more hands-on operationally in consolidation and whatnot. And so we are going in that direction. And on the divisional side, and I just want to give you a strawman view on it because the divisional presidents will talk about this in just a minute. But in principle, you could say, if you want to run a global technology business, you need to be somewhere with a local presence of actually guiding your business in 20, 30 markets around the world, you need a turnover of about SEK 10 billion, or you take SEK 100 billion and you divide it into 10 and you get 10 units. And in reality, we have smaller units, too.

So we are on a path to consolidate the business unit structure, the basic pillar of our operating model into 9, right? And they are not all 10 at the moment. They are a little bit less or a little bit more, but we are at around on the path towards that number as we consolidate our structure. So it's -- so if you look at my cockpit, it's 9 P&Ls that mainly are deciding capital allocation, profitability, development investments, all of that. And that's doable, very much so, I think.

There are some -- and the implication of being a business unit is that you are basically operating within our global sales company operating model, right? So from the future landscape of systems of legal structures and whatnot are gradually being shaped by this operating model, if you like. So that's how we will do it. Not all businesses fit into that. Now I have absolutely no intention of bringing Oceanbird into an operating model with hands checks with 20 sales company managers and why should I do that? We just sold one rig, right? Now if you think it's a good idea to take the hydrogen business into the operating model. Well, right now, we are sending test orders to about 8 very, very important potential large customers. There may be a day when we feel it's right to bring it into an operating model and have sales companies involved. But right now, customers want to talk to the technology center, not to a sales guy out in the U.S., right?

So we are calling them PUs. That's why you have a PU here. We will have a number of PUs, including some multi-brands and others that are not integrated into our operating model, but will be kept as either a multi-brand, competing brand type of activity or as a development activity that eventually 5 years from now, 10 years from now, we will move into the operating model. That way, we have a much better clarity as to how we operate in the company, what's what, what we are calling what and all that.

That was as much as -- so what I want you to take away with this is, okay, we clarified what you may look as a somewhat of a complex company. We get it, and we figured it out, and we made it super easy and don't worry about it. That's -- that's my point. And if you're still not convinced, I think maybe it's better that instead of me talking about it, we invite the divisional presidents on stage, and they will take you through each of their stories.

And I think we will start with the host in a way for this event because this is largely a Food & Pharma unit. And Sammy is, in that sense, the host, and I will shortly ask him on stage. So thank you.

Good afternoon, ladies and gentlemen. The Food & Pharma division. We have been, if you look at over the last 9 months, did a detailed strategy review on about our business, where is our markets heading to, what are the transformations that are happening in the food and pharma industries, looking at what kind of position we can and should take going forward, and look at what kind of growth potential do we have in the division by 2030. So my intention for today is to give you an overview of our strategy review, some of the key points that you can take with you to better understand the direction we are taking.

But if we start with our market, the market, what is our market? Well, it's you, and 8 billion more people, right? So it's the 8 billion people on our planet. And that is our market, what we are acting in. And our market is structurally growing for the next 35 years. According to the UN statistics, by 2060, we will be 2 billion people more on our planet. And that will be a peak at that point of time, the expectation is it will flatten out. So the next 35 years, we will need more food production without a doubt, growing.

So -- and that is, of course, one aspect, but what the statistics also show that in that same time frame of 35 years, the elderly people will more than double. And if you question yourself, if you belong to that category, is 65, above 65 is the elderly people. Most of you will be there in 35 years from now. So what this will mean for our society is that the demand for medicine will substantially grow.

And another aspect of our world is that the people will live more in cities. And that is a trend that has been going on for many years. And as you can see on the slide, by 2050, 70% of the population will live in cities. And what does that do? Well, that does two things. It's more convenience food. Prepared food demand will grow quite a lot, so more food production again. But at the same time, also much more water treatment systems needed to deal with the wastewater from cities. So this is clearly -- we are operating in that way in a structurally growing market for the next 35 years.

And if you look a little bit more in detail on the three segments we are in, first, food. You could say food, of course, is -- if you look at our food business, we have what we call the hygienic food and the industrial foods. Industrial foods is things like fats and oils, sugar, starch, food sources. And when you look at the hygienic food, it's more like dairy, it's beverages, brewery belongs to that category and so on. And we have a quite broad spectrum of applications in the food sector. And you could say that maybe some markets could maybe like brewery is not growing because you see a clear shift in consumer preferences from shifting away from alcoholic drinks. But on the other hand, we see the beverages growing much faster.

So all in all, if you look at the mix of the different food markets, we see a clear structural growth, not very high growth every year, but somewhere between 2% to 3% growth going forward. And what you can see also that for us, with the portfolio of products that we have in our company, we have an addressable market of SEK 152 billion, and we hold a market share of about 12%. Within our product categories, we belong to the top 3 in the market. So this is a market structurally growing, but it also -- we have an opportunity to take market share on the way forward.

If you look at the next market we are in is the water sector. And here, of course, the water market is growing somewhat faster than the food market and at a rate of somewhere between 3% to 4% every year. And of course, the population growth and urbanization is driving it, but it's also pushed up by the climate change. Water security becomes a bigger agenda topic for many countries with the droughts, with the storms that is causing a lot of damage. So a lot of investments are happening extra in securing water availability, water security for cities and for countries.

If you look at our addressable market with our portfolio, we have a portfolio that is rather limited. You could say we have separation technology dealing with sludge handling, sludge dewatering of wastewater, both for municipal but also for industrial wastewater. What is still an attractive market, as you can see, is SEK 21 billion, and we hold a market share of around 7%. Also here within the technology of dewatering, we are clearly in the top 3 worldwide.

Then last but certainly not least is our pharma market. And this is a market that is growing the fastest of the three subsegments in our division. This market is growing at a rate of 5% to 6% every year. And of course, the population growth and the elderly population are the main drivers making this happen. And with our current portfolio of products, we have an addressable market share of SEK 37 billion, but we have a very low market share. And that I will come back later to because this is a fantastic opportunity for us to grow because we have a great portfolio, but we don't have a great market share position. And here, we are definitely not in the top 3 if you look at the total.

So this has been, of course, the basis for developing our strategy, our growth strategy. And the division will, of course, contribute to the journey Alfa Laval is on to the SEK 100 billion. Today, we are SEK 25 billion. We aim to grow by 2030 at a rate of about 7% organically. So as you see, above the market trends. And we have some clear profitable growth drivers defined for that to make that happen. As we already mentioned, pharma and protein will be two industries where we are going to put very specific attention to. And then last but not least, industrial flow. I will come back to these three buckets in a few minutes.

But before I go there, I want to say a few words about our innovation capabilities. And I think today, you have seen here, one of our areas, which is the high-speed separation center. And you have seen quite some innovations today. And if you look at our budget that we are being made available up till now was around 2.4% of our net invoicing. And during this strategy period, we plan to push it up to 3%. And that will allow us to continue the great work we have been doing on product innovations. And I think we can be really proud if I look back over the last years in our division, we have really developed a lot of very interesting technologies. We have really taken some technology leaps, not only in high speeds, but in many of our product portfolios that we have. And we will continue to do that.

But the extra R&D spending will allow us also to focus a bit more on other areas. One is service innovation. We want to put more focus on innovating service offerings. This is about making sure customers can expand or extend the lifetime of their equipment, but they also will support them with certain upgrades that they can have a better performance in their current processes with less energy, less water consumption and with the higher yields. So that's one bucket.

Then the other bucket is around application innovation. This is around the process, the products sitting in the process and how we can look at opportunities to optimize the performance of our customers' processes. And that is why we're building these application innovation centers. Here in Flemingsberg will be the application innovation center for pharma. And maybe you have seen in January, we have announced an application center in Copenhagen, Søborg for our food applications. So we're really going to invest quite a lot in that area as well of developing application technology leaps.

And then last but not least is around the digital solutions. And you have seen one today. The intelligent separator is one of those areas that we are working on. This is about bringing new things, digital solutions, which is basically collecting data, software solutions around it to optimize and provide new services to our customers and optimize the performance. I think the intelligent separator will be a groundbreaking technology. It's not on the market yet, but it's getting very close to it. So this is one of those examples. And also in this strategy period, we will put more focus on that type of innovations, not only within high speed, but they're across our complete portfolio in the Food & Pharma division. So something to continue on about creating technology leaps going forward.

So let me now come back to the growth area, which are the profitable growth drivers. And during this strategy review, we have looked at all possible opportunities to say, which are the best areas to grow in a way to grow profitable, but also in a sustainable way. And we have, on top of our organic growth, identified 16 different growth initiatives across all our BUs. And you see three examples here of those out of the 16.

And the first one is coming back to what I just mentioned, digital innovation, digital service innovations. Digital tanks is what's something we're working on. It's not on the market yet. It will -- the plan is to be in 1.5 years from now to have it ready. But this is about our -- helping our customers to design process tanks. Process tanks in the food and the pharma industry is a very crucial piece of equipment. It's a very complex thing because in a tank, you mix, you blend, you bring ingredients together. Basically, many times, you make the end products in that.

And so there is a lot of know-how needed. There is about the process, but there's also a lot of know-how needed around how do you equip a tank. The tank is not just a tank. There's a lot of equipment inside, things like cleaning, sensors, it's mixing, agitation and you have to fill it and empty it in a good way. So it's a lot of complexity that comes with it. And what you in average see that a system builder and a customer, it takes sometimes weeks to design a tank for a given application. With this digital tool, we will try to bring this down to a matter of hours or maximum a day.

But it will also come with a digital twin, meaning that you can simulate. You can simulate behavior of the process also when you change the ingredients for your end product. So this is going to be a quite interesting element where we continue to sell the stainless steel infrastructure because we have a complete portfolio of tank equipment, but we'll also start to sell data and process know-how with it. That will be the new currency.

So digital tank is one example. In the middle part is a palm oil extraction solution. This is what we could say under the innovations of application innovation. Here, we have worked together with a spin-off of a German university on a technology, which we call Pulsed Electric Fields. And we're sending small electrical signals through to palm oil fruits. And by doing that, we break the cell membrane, we punch small holes in it. And by doing so, we can extract the oil much better with much higher yields. And we are, as we speak, doing tests in industrial fields, and I can say that the customers are really excited about it. And not only they see a bigger yield or higher extraction of oil, they also see a better oil quality on top of it. So this is a very interesting area, and I'm expecting orders already in next year on this technology. This is an example of application innovation.

And then last but not least is a product that has been now put on the market now a couple of years. You have seen it here today in Flemingsberg, the single-use separator. This is, of course, stepping into one of the transformations that the pharma industry is undergoing. Traditionally, pharma was produced in fully stainless steel infrastructures, but the industry is moving into single-use based production facilities. You have heard the team talk about. It has a lot of benefits. And this was an innovation that the industry was really waiting for. And the good thing about this is not the sales of the separator itself, it's the inserts, because whenever you run a batch of pharma products, you need a new insert. So this has become a consumable market, a recurrent, very attractive consumable market for us.

So these are just three examples of out of the 16 carefully selected profitable growth drivers that we will drive in the years to come towards 2030, within our business unit structure. These are initiatives and owned by the business units.

Then, of course, what you -- and the strength of being a business unit is that you focus. You focus on the technology, you focus on a market and you are very strong in being close to that market around that technology. But what this also does is that you don't always see the full picture. Sometimes you don't see the full process when you're focused on one product. And that is one other dimension of our new strategy is that we are going to develop cross-BU industry strategies. And when you take an industry strategies, you see the market in its totality. You see where you have gaps from coverage, but you also see where you have gaps -- on product portfolio gaps.

And we have decided to start with these two prioritized industry strategies for two reasons. First of all, it's a fantastic growth opportunity. But secondly, there's also quite some transformations happening in these industries. And to give you a bit of a feeling around protein, when we talk about protein, you can see we are planning to double our current business towards 2030. And then we are not -- we are talking basically two types of proteins. The traditional protein production, meaning proteins you produce from meat and fish sources. Here, we have a fantastic portfolio of products and systems for this industry, and we want to make sure that we grow our market share in that.

But it also has what we call the new proteins or the next-generation proteins. It's a trend that has started already a couple of years ago, where we are looking at producing protein first and foremost, from plants, plant-based proteins. That market is already in full swing. We are very well positioned on that one. We are just, as we speak, commissioning one of the largest plant-based factories here in Sweden for yellow pea production, producing proteins from yellow peas. Fantastic sustainability agenda that is behind it.

But it's not only plant-based proteins. The next thing what is happening right now is fermentation-based proteins, where you ferment in a reactor proteins. This is accelerating rather quickly, and we have a perfect portfolio to support that industry, both in the process, but also the special technologies you need like separators is one of the fundamental elements to separate fermented proteins.

Then also a third one is what we call cultured meat. And that's a bit of a, I would say, a bit more futuristic. That's where you basically grow meat in a laboratory. It's happening in lab scale. We are there. We have the technology to support. When and how this will come, it's a bit early to say. But for sure, we are in there in the innovation of the process together with a lot of innovative companies that are working on it daily. So this is a protein plan that we have with our industry strategy.

And then when I look at the pharma, here, we plan to add SEK 2 billion -- more than SEK 2 billion on our current level of pharma. And how are we going to do that? Well, it's I would say -- I wouldn't say it's simple, but the good thing is that we have a very good portfolio already today. So it is about driving our current portfolio in the market. But Alfa Laval as our division, we have had very limited focus on the pharma industry. And to be successful in the pharma industry, you need salespeople, feet on the street that truly understand the language of the pharma customer. And this is not just about stainless steel. This is a lot about validation, quality control, all the aspects that is crucial for producing safe medicine.

So one of the things that we have decided is that we're going to invest in people to make sure we push our portfolio out into the market in all its dimensions. So this is -- and you can see, we have already a quite broad portfolio. It's not only the separators. We have a wide range of flow equipment. We have a wide range of heat exchangers. We have membrane solutions and so on. So we are not starting from scratch. It's right here. It's about making it happen going forward.

Then in addition, we will also take a bigger position in single-use. You have seen the single-use separator. We are working now on a single-use pump. Same principle. It's a recurrent consumable business where you have a base in structure. And every time you run a batch, you need a new pump head. And we will continue to build a full complete portfolio of single-use flow equipment in addition to our separators. So this is one other area where we will support the growth.

Then water. Also water in pharma is quite crucial, not only to treat the effluence, but there is a big demand in pharma with pharma customers to reuse the water. Water is quite crucial in the pharma. It has to be what we call water for injection. Water has to be as pure that you can use it for injecting at your body. That is a very expensive water. And when we can reuse that after the fermenters, pharma customers are saving a lot, not only in money but also in time. And we have a solution. We have now a solution developed based on our membrane solutions, and we are having already two orders in and with leading pharma customers who really see this as a fantastic step forward in helping them to reuse process water.

And then last but not least, this is a little bit more fetched out that we also want to take a broader position in what we call process solutions in the pharma. Today, we are mainly selling single-unit operations, separators, pumps, valves and so on, membrane systems. You can see this as a unit operation. But we're also looking at taking a broader position in the pharma and especially around the bioreactor. So we are looking at what we can do with the bioreactor both upstream, downstream and supply total solutions to the customers. And this is going to be part of our engineering process business unit.

So this is a few of the key things that we are working on in pharma. And then the last topic that we mentioned was industrial flow. And this is a new business for us. Today, we are not in industrial flow, not at all. but it has a fantastic potential. And when we talk about industrial flow, we look at products that are used in industrial food segments, but also products that are used in the wastewater applications.

And you can see here some of the growth patterns and the market size. On the left side, you see the market size of pumps only in the industrial food market, where we are today, every day selling our heat exchangers, selling our separators. And if you would have an industrial pump or flow equipment, we could just sell it with it.

The same for the wastewater industry. Here, you see this is a huge market when you look at the pumps and valves market, the industrial flow in wastewater, it's as close as SEK 70 billion market. We are there with our separation technology, both decanters and Ashbrook portfolio. If you have a flow portfolio, you can just sell it with it because it's in the same vicinity of the process.

So how do we get there? This is, of course, a journey, as I said, this is new business we are starting. And the way to get there is to start building on our existing hygienic flow handling portfolio. We have a fantastic portfolio in this. This is a business today of close to EUR 700 million in our division on hygienic flow products, pumps, valves, mixers, tank equipment. A lot of that product can be converted into industrial flow. A lot of the fundamentals are the same. If you compare industrial and hygienic, it's about basically the hygienic is higher in demand from surface -- rough surfaceness or cleanability, while the industrial flow has less demand on that side, but a bit more higher demands on durability because it's a rougher materials, you kind of push through the flow equipment. But the product -- the base product is the same. And we have a fantastic R&D organization for this. We have a manufacturing setup to produce this.

So we are going to now work on converting our hygienic flow into an industrial flow line. That's the first bullet.

Then, of course, we also need people that drive this, and we -- and this is a new team we are creating, and we have decided to cluster it with the water business and with our industrial heat transfer business and create one new business unit driving those 3 technologies, which goes very well hand-in-hand with developing an industrial flow business going forward.

Then, of course, service is crucial here. And this business, as I said, is even more wear-intense than the hygienic flow. So this is also a very attractive part from a service perspective. And the great thing is that we are already there. We are serving our industrial heat exchangers. We are servicing in our separation water technology. So we already have the infrastructure, the people on site to do this service today. So it would be very complementary also from a service perspective, not only from a capital sales perspective.

And then last, but not least, this is definitely an area for acquisitions. There are quite a lot of interesting companies out there that we would like to have part of our family. So let's say like that. And also this is going to be one of our focus areas to see how we can put some interesting flow companies in the group.

So this is how we're going to drive the flow. So we have discussed the growth drivers. We have discussed that we are running through business units. Then we have discussed the industry dimension, how we're going to, on top of the BU product-focused approach, adding an industry approach. And then last, but not least, the stepping into a new market like industrial flow.

And as was mentioned also by Tom, we have looked at the new structure, both the scaling for future, exercise that we have been running, together with our new strategy, and when we revisit our strategy, also look at what are now the best ways to grow our business in the best possible way in a sustainable way.

We have decided to have a new structure where we reduced from 6 business units to 4. And the first one is the one that is focusing on the hygienic food, we call hygienic food handling, and heat transfer. And they are specialists also in channel management. This is a market where we approach the market through channels a lot. Distributors and integrated management is a crucial skill set that you need. And with now, the well-aligned structure of BUs and sales companies having a similar setup, we can very well align our modus operandi going forward. And you can see here some of the key growth markets for this business unit is definitely dairy, beverages for sure, and of course, also pharma is quite important for them.

Then we have now created a business unit we call separation technology. Today, you have seen the high-speed separation that's here. We have also the temper-centric features, which is another type of separation technology. And we have also membrane technologies. Before they were in different business units, now we have combined it into one business unit, making sure that we can offer our customers, whenever we can contact our company, the best possible separation solution, both as an individual or as a package.

So this is really going to help us a lot. And they are active in both hygienic and industrial food markets and also in the pharma, as you have seen today.

Then the third one is, which I already mentioned, this is going to be the unit that is taking care of the industrial flow development, but they are also responsible for further developing the water technologies and our industrial food-heat exchanger solutions.

And last but not least, we have created a business unit Process Engineering Solutions. This is a business unit that is specialized in what we call engineered-to-order solutions with a lot of process know-how, and where you have -- we need to have people that are excellent in selling large project sales. Of course, it's a lot about contract management, negotiation skills, but also, of course, a lot of knowledge about the process solutions that you're offering. This is also a unit that has the expertise to execute large projects in a very efficient way.

So -- and you can see their growth market is oils and fats, beverages, proteins for sure, but also prepared food. So this is the new business unit structure. And on top of that, you will -- we have the 2 industries, the pharma and the protein, where we will have dedicated industry managers and then dedicated industry people within the BUs. So they will be still docked into the BUs, but we will drive it as an industry approach.

So that comes to our last -- my last slide for today and that you have seen and that has been announced, of course, that we have changed our name from Food & Water to Food & Pharma to reflect our commitment to the pharma industry, to reflect towards the market that we will be a very trusted pharma player to our -- to the industry.

At the same time, we don't lose the focus on water because it remains part of our DNA, but it's now also a business unit responsible for water development. So it even gets a stronger identity by creating our business unit, Water and Industrial Flow and Heat Exchangers.

So with that, I hope I have given you a little bit of a feeling on what our new strategic direction is for the division and how we plan to contribute to Alfa Laval as a group to become a SEK 100 billion company by 2030 or earlier. And with that, I have the pleasure to hand over to my dear colleague, Thomas Moller.

Sammy. And as you have all noticed, I have 2 new divisional peers around me. And they are very creative and suddenly, new names are flying left and right. But we also need some stability in this company, right? So Energy is not changing the name. But maybe it's going overboard to call Energy Stable because it's everything else. It's, as you all can follow in the news, in the business, in industrial peers, to Alfa Laval, it is very dynamic. And it is very much as a roller coaster in a number of areas. And if we just look at the last couple of years, we have had the heat pump market where people were picking up the brazed heat exchangers where there was still warmth coming out of the furnace to that we don't have to run the furnaces at all for a while.

We have had the CleanTech business that with the European Green Deal, the Inflation Reduction Act, et cetera, quickly went from nothing to 6%, 7% of our business and now with a lot of headwinds. We have had the tariffs kicking in beginning of this year, where large projects have suddenly another FID process. So we have seen a number of delays in cost overruns in especially the mega projects. So a number of areas where there has been a lot of turbulence that has hit us.

Then you could say, why have we not then seen a decline in our business? Because there's also been roller coasters the other way. So we have data centers, which is actually one of the fastest-growing industries that has driven our business to a very high degree. We have also the service business that has grown very nicely. And we have also the whole fossil fuel where there has been a lot of activities, especially on the gas side. And if you look at coal, oil and gas, gas is where we have most technology fit, where there are a lot -- most positions in this entire up and downstream.

And then we also start to see HVAC coming back, including the heat pump during the last months. So this is the nature of the Energy business, and that is our reality, and that is what we are living in. We are, as Tom mentioned, heavily investing in R&D in the division, and we are running a massive CapEx program. And we are doing these 2 things to be ready for the energy transition when it really starts to kick in. And still, even though we are doing those longer-term investments, we are still running a bottom line that is at or just above the group level.

So then what I will do now, I will start with the market and say what are the market drivers for our business. We'll come into that. And then I got a lot of questions during the morning here, which was highlighted around a number of our growth opportunities, and I've selected 3. And according to the questions this morning, they fit quite well with that. And then I will also come into the structural change for the division.

If we look at the Energy division, we have 2 main drivers for our business. It's the energy demand and it's the energy transition. And the energy demand is going up. As we speak, it has been going up the recent years, and it will continue to do so. Over the next 20 years, this will be a 50% increase or potentially even more. That's the development you have from the left to the 2050 scenario. And then if we don't change the mix at all, then the planet will simply not be able to cope with this. So that's why the energy transition starts to kick in.

How quickly that will happen is, of course, a question mark. Tom was clear with the 2050, but these 3 areas will kick in, and they are also starting to kick in, but very different from region to region, which I will also come back to.

The first thing we need to drive is energy efficiency. If Europe -- let's take Europe as an example, if Europe would not have worked with energy efficiency, we would consume 27% more energy today than 20 years ago. And then we have the double or the double-down scenario that was signed by 115 countries 2 years ago. We doubled down on energy efficiency going from 2% to 4%.

And how much is 1%? 1% is equal for Europe import of gas of 2.6%. So if we do the 4%, then Europe alone can reduce the gas import with 10%. And that is why we say energy efficiency is not only to drive competitiveness, it's also a way to drive energy security. And that we need to work much more on so we get the energy demand down. Then we need to electrify everything we can. We are living more and more in an electrified society, and it is taking place. It's happening. And that whole electrification needs to be powered with renewable power or clean power like nuclear also.

And then finally, there are areas that we cannot electrify. This is the so-called hard-to-abate sector. And that is steel, cement, plastic industry, where we need clean molecules and clean fuels. And this is also kicking in, and that is where hydrogen plays a role as one example.

Exactly how these 3 plays out, still difficult to say. And one year is different than another one, but we are very active in all 3. So that is energy demand going up and the energy transition happening, then we have a growth journey ahead of us going forward as well.

Then if we start to look at the -- if we start with the energy demand and we talk about electricity demand, instead of energy in total, that's what you have on the left side. So the electricity consumption will go up with 28%. That's the latest projection from '25 to 2030. What is driving this electrification? We all talk about and can read about data centers. Data centers is actually only 10% of this total electricity consumption increase over the next 5 years.

For some regions, if you take some states in the U.S., some areas in China, it's all about data centers. They will drive 100% of the electricity demand in that region, but globally, it's 10%; EVs, 15%. We have heating and cooling, living standards, temperature rises that is driving a lot of heating and cooling. And then the biggest chunk is the industrial sector. This is where we have industrial growth. We have also electrification of processes in the industry, for example, industrial heat pumps replacing oil and gas-fired boilers. So it's not standing or falling with data centers. There's a lot of areas driving the electrification over the next 5 years.

Then on the right side, that's where we see enormous shifts in the regional mix. Tom was talking a bit about this. If we don't have to go that many years back where fossil fuel, the investments every year was higher than the clean energy side, $1.2 trillion, and that's still the investments in the fossil fuel side. What is really kicking in and where all the growth is happening is in the clean energy. That is 2/3 of the investments projected for this year. So a total of $3.3 trillion, where some years ago, it was $2.2-something trillion. So massive investments, especially in the clean energy.

And what is happening in the regions, you will clearly see China is taking a massive lead in the clean energy side. China is driving the energy transition at the moment. We have Europe. There was big expectations, big plans on the European Green Deal. Now there are a lot of other agenda points that also needs to be driven in Europe, challenging the green deal. We have the Inflation Reduction Act changing with the new administration in the U.S. That is leaving space for someone to take the energy transition lead, and right now, China is stepping up on that.

And that is also why we need to step up our activities. We have a very good footprint in China, but we also need to be further developing our presence and activity level in China. So we have seen China on solar panels, batteries, now EVs, what will happen with hydrogen, carbon capture, bioplastics. At least now the demonstrations plants, the full-scale plants is being built in China. China is putting the finance into it, and they are doing the demand activation, and we want to be part of that learning journey for this year and the coming years. So massive changes in the different regions, but it's not like we can say the energy transition is not happening. It's just happening with very different speeds in the different regions.

Then I've selected 3 areas -- 3 growth areas. And I would like to start with the most important one for us, that is energy efficiency. This is about 80% of our business today is about energy efficiency. This is where our heat transfer technologies comes in, securing lower emissions, but they are also business cases from a pure cost perspective. And here, the challenge is the awareness. Many talk about the importance of energy efficiency, but people are not aware of the solutions and technologies we have, and a lot of companies have these technologies that is needed to drive down energy or improve the energy efficiency. We just have to deploy them at bigger scale and lift the awareness.

That is why we now, 1.5 a year ago, we created the Energy Efficiency Movement and Association that came live April in 2024. We have now 600 industrial companies who have signed up for this. They are driving their own energy efficiency agenda, but also creating a much stronger industrial voice around energy efficiency. This is 600 companies where 1/3 is in Asia, 1/3 in Europe and 1/3 in the U.S. So it's really a global association, and it makes a much stronger voice around this and also means like, for example, International Energy Agency, they finally have easy access to the industries and driving that dialogue with what is needed to collect the industry together with policymakers.

So we hosted the IEA conference around energy efficiency. That was the 10th year anniversary. It was in Brussels, and we co-hosted that with the European Union or the European Commission. And now through the energy efficiency movement, we are, together with a lot of policymakers, now making energy efficiency policies that can really drive the implementation of the energy efficiency and of course, also drive our business and the technologies we already have for this.

Then we have -- internally to drive our business, we have an energy hunter program. We announced this a couple of years ago. This is where we go out and with our process customers, do audits, do lifting awareness, share best practices, best cases, and then turn energy efficiency opportunities into business cases for them. The same we do on the equipment side, data center, HVAC business, tons of opportunities. And it's also a great opportunity for service. 2.5% of the world's CO2 emissions could be reduced if the heat exchangers in the world were operating under the ideal conditions. It has a massive impact, and we need to turn those cases into business cases for customers, and then the choice is so obvious.

So let's just hear what one customer is saying about this. And this is Ms. Lao Liao that we have been working with for a very long time, that now feels she has met a new company.

[Presentation]

I have seen this more than once. I loved it. But we have many customers saying like this. And Dao, we are working with Dao globally on this now. And every site, we find opportunities. Every place we turn energy efficiency into business cases, both from a return on investment, but also from a carbon emission perspective.

Just in Belgium, we have one absorption stripping system where we are replacing a couple of old heat exchangers with our newest range. And then suddenly, they save EUR 1.4 million per year. We have service agreements where we do audits, and they say EUR 150,000, EUR 200,000 per year just in a medium-sized plant. So these things really matters, and more and more customers are realizing this. So that is good.

Then data centers. I got 1, maybe 2 or maybe 10 questions about this, this morning. So data centers, we talked about this for the ones who are here in San Bonifacio last year. Data centers is a massive opportunity for us, and it's also materializing. We have our offerings where we have the traditional heat rejection. This is where we have data centers that is air cooled.

Then for most of them, you still have outside the data centers, gasket heat exchangers that then reject the heat away from the system. What is kicking in with the AI or the liquid cooling, more demanding chips where the energy intensity is much higher, then we start to have liquid cooling. And that's when we start to have a lot of heat exchangers, brazed heat exchangers inside the white space. So our potential per data center at least double up.

The third opportunity, which still has not really started yet. There are some great examples here and there, but not on a structural way, is the heat reuse. And we say a lot of the data center -- in general, we say they consume so much electricity, but the only thing they do is they take 100% of the electricity they consume and turn 99% of it into heat. So they are energy centers. And if we can utilize that heat and put it into district heating systems, for example, so obvious in Europe, then we have a triple opportunity. And of course, the data centers becomes much more sustainable. But that is still to come.

Then the outlook. I mean, you all have tons of outlook statements on this, I know. This is from Andrea, where you can see massive growth, but you can also see a tremendous shift in the ratio between AI or liquid cooling and air cooled. So almost 50% of the data centers are supposed to be liquid cooled in 4, 5 years from now. And that is why we can say that if you look at the graph for the last 2 years, the investments in data centers has doubled, our business has tripled.

Will we triple again? Yes, I'm pretty convinced we are. Will we do it in 2 years? That is the question mark. Of course, now this becomes a much bigger part of the division already today. We are now a double-digit percentage of the Energy division is data center business, and this will definitely grow faster than the rest of the Energy division. So that share, I can only see going up.

Will this just explode and there are no limits? Well, there are definitely some good things talking for it. We have the magnificent 7s or the hyperscalers that are having the cash flow. They can pull through the investments, and they have a race at the moment. So of course, that is -- they don't need any subsidies or public funding. And you have also many countries. Right now, 50% of the total IT load in the world sits in the U.S., 30% in Asia, 20% in EMEA. How will that picture look like? Asia or especially China is not happy to be #2 in the world. So we see a lot of -- we talk a lot about U.S., but China is also having massive investment lined up, but they also need power. They need grid connections. They need other stuff than heat exchangers. You can just look at the lead time on turbines at the moment, diesel generators. There are a number of constraints in the entire supply chain to just say this will be 5, 10x higher within record time. There will be constraints.

And then, of course, it's also -- how does the return on investment look like for AI? That is still to be proven. So some pros and cons, but definitely, data center is a massive opportunity for us. Exactly how it will play out, don't give me questions about what percentages we believe in and so on because it's plus and minuses, and exactly how this play out, yes. But we are ready for it, and we have contacts with all the hyperscalers because this is also about capacity planning and being early involved in the dialogues, and we are.

Then third area, business unit Cryogenic. Isn't this a beauty? I'm thinking about the -- starting on the left side. So we are so happy with this acquisition. And just to put it into some perspective, where we have a very strong portfolio is on the liquid to liquid or gas to liquids. So ambient or down to refrigerant temperatures and upwards. And we are putting a lot of our own R&D spendings into higher pressures, higher temperatures, newer material, because that is what the energy transition needs.

But the energy transition also needs cryo area because we talk about liquefaction of a number of gases, and that we have now that portfolio makes us really as the very full range of heat exchangers or heat transfer technologies that the energy transition needs short term and long term as well.

Brazed aluminum heat exchangers, that is what is used in the cryo area. These units can be 8x -- 8 meters long, a couple of meters high, 1 meter wide, 20 tonnes. Then they can be put into a cold box. As I say, on the left side, we produce around roughly 700 units per year. In the cold box, that's where you have a couple of these or 4, 5 in that box with all the piping, all necessary needed, so it's just plug and play. This can be up to 1,000 tonnes. So this is not small stuff. And on the cold boxes 30, 40 projects per year.

And then we're also making a first, a small step, but still a step into industrial flow with the cryogenic pumps. That is roughly 20% of that business unit turnover and some 400 pumps per year. And this is engineered-to-order business, both on heat exchangers and on the pump side.

And where Cryogenic is selling, they are in air and industrial gases. So they take ambient air and then they can pull out the oxygen, the nitrogen, the CO2 from that by working with cryo temperatures and then condensate these gases. They're also into the natural gas. So they are right after the weld, taking the natural gas, breaking that into butane, methane, ethane, et cetera, and also in the whole LNG stream.

And then they are also in CleanTech. So carbon capture, energy storage with liquid air, hydrogen, liquefaction of hydrogen, which is so close to the minimum or the lowest freezing temperature, they have technologies for this. Of course, the first 2 ones are like 98% of their business today, but very much like the rest of our portfolio, enormous potential when the energy transition starts to kick in.

So very, very happy with this. And then we have mainly heat exchangers upstream and pumps are more downstream. And this is around SEK 2 billion turnover for us today, but definitely a growth area as well. So we are on a growth journey. We have added around SEK 6 billion, and we have a growth looking forward as well. And we have 4 pillars in our strategy. We have innovation. We are doubling up our innovation levels, activities within 3 years. We are 2 years into that, and we will continue doing so.

Presence is both physical presence, like Sammy spoke about, but also the whole digital presence to give customers easy access to us, find the relevant information, and have an end-to-end business experience digitally.

Service, I spoke about that last year, massive investments in Service. Last 5 years, 10% CAGR, and we have seen no reason why that should not be possible going forward as well. And then we have CleanTech, which is today 6%, 7% of our turnover, but have probably the highest growth potential over the next 5 years.

So we have the strategy in place, and then also from a business unit perspective, the structure to set this to the 2030 perspective. We have now a change. So BU brazed and fusion bonded, no change there. That is our standard business, millions of units. Then we have BU gasket plate heat exchangers, no change either. That is where we counted in 10,000s or hundred thousands of units, configured business. And then we are combining BU welded heat exchangers with the circular separation technologies into one, and that is more engineered-to-order business. So all these 3 goes through sales companies mainly, and they have a starting point of SEK 5 billion or more, and each of them have the potential to double up, exactly how that will play out, but they all have -- they can see the SEK 10 billion that Tom also highlighted.

Then we have the new BU Cryogenic Technologies that today do business direct, and we are only, what is it, 5 months into the integration project. And then we have BU Electrolyzer and Fuel Cell Technologies, which is more -- which will be from 1st of January, a portfolio unit because that's where we are developing a portfolio where there's no turnover today, but we certainly see that, that will come.

So with this, we have the strategy, we have the market, we have the structure to become above SEK 3 billion division by 2030. With that, I'm handing over to Martijn.

Good afternoon. My name is Martijn Bergink. Today, I'm excited to then announce the new name for our division. Although it was mentioned now many times, but I'm still very excited. We are going now with the Ocean division. So did we change the name just for changing the name of it? No, we didn't. We want to expand our horizon. We want to look forward into 2030, 2035. The Ocean is not just seawater. It's enormous amount of opportunities that are in the ocean: decarbonization, shipping, powering the energy through offshore, and, of course, our aquaculture opportunities. So we think the Ocean is the future, and there's a lot of opportunities for us to gain there. So welcome to the Ocean division.

It is common and a small tradition to introduce myself in this -- I'm the new guy on the block. So I've been with the company for more than 27 years. I started in Alfa Laval The Netherlands. It was a long time ago. Actually, I was working together with Sammy, who was an MD at that time when it became to the Benelux. My first job after graduating as a chemist was to develop the heat exchanger portfolio, the plate heat exchangers.

At that time, we were very good at liquid-to-liquid and wanted to sell these heat exchangers into condensers, evaporators, into the chemical, petrochemical and offshore industry. So that was my first exciting job. And since then, I've moved into 2012, '11 into the scrubber business, did that. That was a very exciting journey going up before I took my first BU President job in 2017, Boilers and Gas Systems. And since 2019, I was very proud to take the lead into the Framo business, BU pumping systems until I landed in this job.

And I must say, I'm very proud and very humbled to have this job. And when I walked throughout today and you saw all our colleagues presenting, I mean, there's going to be a lot of new talents coming up flowing into this because I can just remember the first day when I started in Lund, my first course and the CEO at that time stood there and you think maybe one day I stand there, it's unbelievable. So I'm ready for this journey.

Let's start with the business. This is important. For the ones that have been last year here, you have seen this graph before, this is the outlook of Clarkson over the next 5 years. Clarkson looks at all the ships above 2,000 deadweight, and now we're talking about all the large merchant vessels that are in Korea, China and Japan. What you see is the orange dotted line, which is the contracted long-term average. So what Clarkson is predicting is that they see that we're going into this long-term average. And that is a good and decent level, we're happy with that.

For the ones that have noticed compared to last year, there have something I've added, and that is the number of tankers contracted. The ratio of number of contracted tankers is important to us, because our potential of orders in that particular segment is much higher with the Framo pumping systems and the big boilers. So this percentage is also going up compared to the past. So we're happy with the level of contracting that we foresee, and we're also happy with the percentage of tankers in that split.

Then there's the question, of course, will this ever happen? The only thing we know, Clarkson is always wrong, but we cannot do it much better than they do. But overall, if you look backwards, they're quite okay when you look at a 3-, 4-year average. There will be bad quarters, there will be good quarters, there will be geopolitical decisions making so that suddenly contracting stops and then starts again. Suddenly, there will be a good year in tankers and a bad year in containers. I don't know, but we're agile. We have dealt with this. We have dealt with the highs, we dealt with the lows, so we can deal with that.

You already asked me. Some of you asked me the question about IMO. This is important. So what is our perspective on the delay of IMO when you look at these pictures? We think the IMO effect is absolutely there when you talk about efficiency of ships. So when a ship is efficient, and it runs on less fuel, and you can have an opportunity of selling an equipment that helps with that efficiency, a delay on IMO would be a delay for that particular product, but most of our products go now into the transition of the new fuels.

Most of our owners have been looking for this for the last 5 years, and most of the OEMs had got ready with either a methanol engine, an ammonia engine or a fuel treatment system. And that will not stop. It will continue because, today, an owner has to decide on the transition. He has to decide in 2035 or 2040, will he be allowed to run on a fuel. Can he take the risk of saying, no, I don't think this is going to be delayed. I'm going to go for MGO. Oh, no, I'm sure it's going to be methanol. I'm just going to go on methanol. No, they will not. This is about the transition. And in this transition of the next 10, 15 years, most people will go multi-fuel. They will go dual fuel. They will choose 2 fuels.

Why is that important? You've seen today the methanol treatment kit that was down there. And a lot of people, of course, try to fiddle what's the value of it and how does that compare? That's the story. So if the market in the next coming 5 to 10 years will go from single fuel to multi-fuel, what does that mean for us as a group? I took in this slide a crude tanker, a gas carrier and a bulk carrier on average. I took the 4 core components: heat exchangers, high-speed, fuel treatment systems, and boilers. If you put these 4 together on a ship and you compare a multi-fuel against a single fuel, you will see that for a crude tanker and gas carrier, the order value doubles. For a boiler, it's a little bit less. For ammonia fuel treatment system, it's more. So what is very, very important is to think about this slide. Will this now happen? Will this journey start? Will the delay of IMO hinder this graph?

Again, these are the projections of Clarkson. Will LNG go to 20% or 25%, but the direction is clear. This is going to go up, and this is going to go forward year after year after year.

Methanol, small little dip, but it's definitely going up. The big container liners are making a mix between LNG and methanol. And then, of course, ammonia will be right behind it. So we see these 3 fuels, including biodiesel as the opportunities for the 4 fuels that we see in the shipping industry. And again, then we have debates, will there be enough methanol? Will there be enough green methanol or blue methanol? But that's not really important for us. It is important for us that the customer decides on a ship, he goes for dual fuel, he needs all the equipment and he needs it now. And he will just see how he sails, and he will try to optimize with these fuels as much as he can going forward, but he will go into a transition.

And what is very important in a market where customers are very unsure because these are difficult and big decisions for our customers, and we really respect that this is difficult for them, but in times when it's difficult, they will rely on us because we are a reliable partner, not only with developing the right equipment when it's ready, but also taking them forward into the service journey because when they decide on the ship, they're going to run it 20, 25 years. And they need to know for sure that, that methanol skid that you saw with all these components that somebody will be out there when they sit in the Panama Canal with a problem that we will come out there and fix it for them.

So what is the contribution of the Ocean division to the journey of Alfa Laval going into SEK 100 billion? Our starting point is around SEK 23 billion LTM Q3 2025. And of course, as we take the Clarkson numbers, we take the expectation of the amount of share of tankers in it, and we take some inflationary numbers, we see that this will bring us another 30%, 40% up.

Then we have this portfolio transformation, the transition of fuel, the transition of all our products that today run on oil into LNG, LPG, methanol or ammonia. Then on top of that, we have the energy saving like Oceanbird and OceanGlide. These are technologies that you choose on the business case depending on how expensive your fuel is. So the more expensive the fuel, the higher the adoption of ammonia and methanol will be, the more likely customers will buy this type of equipment. And finally, they have the new fuel equipment.

Then there is, in the Ocean, there's more than just shipping, there's more than just marine, there's also the offshore side and the aquaculture side. And we've seen over the last few years that it's more and more important that you are independent on your oil and your gas. So there's a lot of FPSOs that are being built, and we see not a growth, but we see a steady building of FPSO year after year after year. This is very important for us. We have good market shares. This is a good business to have. And most important, these platforms, FPSOs, they stand out 20, 30, 40 years. There's still platforms that are 50 years old. So there's a great opportunity for us to do what we call life extensions on these. So we've been growing our offshore business a lot.

These customers, they rely on us. They rely on our quality, they rely on our availability, our availability of parts. And they know what quickly to go to some other pilots. They will stay with us if we do our job right. So we see a lot of growth in the offshore service side.

And finally, we have sustainable aquaculture, sustainable fishing. Today, we focus a lot on the salmon business. We see this is also a market that has been in transition, accepting that the way they were doing farming is not accepted anymore by the customers, and that you need to transfer into a complete sustainable market. For that, a lot of pumps are needed, and we think we're quite in the right position to go into that market as well.

So all in all, that is our contribution to the journey of Alfa Laval into the SEK 100 billion.

In the last quarterly report and presentation that you did, Tom, you mentioned an investment of about SEK 4 billion into the Framo footprint. And there were a lot of questions about that. So we thought it was a good opportunity for me to explain that a little bit.

With the high contracting in '23 and '24 into the cargo tanks in Framo, it was logical for us to start investing inside the factory Fusa, where we make the marine cargo pumping systems. This facility, which is quite big, has about 500, 600 people working there, was built around 2004, '05, '06, '07. This was just before the boom. We had the capacity. That was not the issue. But most of the machinery was outdated. Today, if you're competing in the global market, you need to be automated, you need to have the highest quality, you need to have the agility to meet this maritime market, which is kind of special with this high roller coaster going up and down.

So we're doing a lot of changes of taking old equipment out and putting completely new automated systems in that can run 24/7, 365 days, and meeting that agile profile that we need and that we have, which makes us competitive.

Then the other investment that we have decided on is to build at a site called Halsnøy, where we have 220,000 square meters of land that we own. We built 2 new halls, each of them 10,000 square meter. One hall will be filled with a dedicated production line for our aquacultural pumps, and the other factory will be filled with a dedicated production line for pipe stacks for seawater lift pumps and cargo pumps. Again, automation, automation, automation. You need to increase your productivity, and bring your hour rate down and make sure that you deliver on time.

These customers in a product tanker space or in an FPSO space, they cannot take quality problems at all. It needs to be perfect delivery. And that's what these factories will ensure.

Then on 220,000 square meters, there's a lot of other space that we can use. Our Flatra site, which is our offshore factory will develop by taking out the products that we now build in these factories. This factory will also start to optimize its footprint much better, but in '28, we can then take a decision on the rest of the investment and where it will go.

I take one example out, which is then the liquefied gas pump. We decided to design our first liquefied gas pump. Now we're talking about LNG, LPG, ammonia, even CO2 pumps, which are dedicated for the same markets that we focus on, and we have decided to make our first LNG fuel pump. We're already making the methanol fuel pump, but that's not a liquefied gas pump, but the ammonia and the LNG fuel pumps are. So the LNG fuel pump is now up with a customer. It's going. We're very satisfied with it. So the next expansion at the sites will be going into products like these. So this will be the next generation into the 2028, 2032 period.

And then finally, my last slide is the new setup, not only a new name, also a new setup. We created one large new BU Marine Solutions. What is in that business unit? That's all the core products of Alfa Laval going into this business. We have about 20-plus different product groups that we deliver to the Marine business. And we have, over the past years, made it ourselves quite difficult by adding all kinds of joint ventures and other products and noncore start-ups into these units that we were trying to manage.

So the solution is we take out the complexity and we focus on the core. And why do we do that? The shipping industry, the yards, they need agility. They need people to react on it when they. This is project business. It goes quick, it goes fast. And on the spare parts on the service business, we're going to make one large service unit because service is crucial for us. This is the differentiator between any new start-up that has a new idea is that we can deliver service of our equipment across the world in the next 20 years. So the service business is about parts, it's about speed, it's about digital infrastructure. So all these things can be arranged in one big BU.

BU pumping system, so-called Framo, no changes to that. Then we have the StormGeo part, the digital part, which is still a very high focus inside the division and also in the group. This is where we can connect our hardware into our digital space. StormGeo is developing very well, and we still haven't cracked the nut to crack the solution here, but we think we're going to get very close, and this is a very high attention area to expand our digital solutions.

And then finally, all the complexity that I talked about are very exciting new journeys, exciting new opportunities that we see, and we put them into a portfolio unit. These portfolio units will develop a little bit independent from the heavy sort of P&L-related big business units. So the market goes up and down, you have to act on that, but of course, when you're a start-up, you cannot wait for these things. You have to make decisions. Am I go? Am I going to do a new pilot? Am I going to take it? Yes or no. So we're going to take that into the portfolio unit.

And with that, I conclude my presentation.

So good afternoon. I get the pleasure of wrapping up at least the presentation part of this. And what -- at least for me, I've been 27 years with the company. If you don't know who I am, I'm Fredrik Ekstrom, I'm the CFO. And I'm going to give you a little bit of a wrap-up of the day with some numbers, and you're ready for numbers, right? Everybody loves numbers, good.

When you visit a site like this one today, and you see what we have done with the building, what we have done with how our colleagues come to work every day, and how we see the innovation center, and you see the innovations, you really get a sense about how we are investing our hard-earned cash flow. We will talk about that, too. But I think any number that I will show you today won't make justice for what you saw out there. So take the 2 things and put them into context with each other, and I think you'll get much more meaning out of this presentation. We've spoken a lot about growth. And I think that's a good departure point. And I'd like to take a little bit of a small retrospective on growth.

We started triggering organic growth when we reorganized back in 2017, and we did that by putting the product front and center, making it a BU structure that was organized under divisions with a singular purpose of increasing our depth around the product with our customers.

It also meant that when we started having that dialogue, we also started developing products that our customers were actually asking for. That triggered the first wave of organic growth that you see there between 2017 and 2019. And I think we all know what happened in 2019. I think it's pretty fresh in everybody's memory, COVID hit. And of course, that was accompanied with a period of some contraction until we came to quarter 1 of 2021.

At SEK 38 billion, at that point in time, we have now grown to SEK 68 billion in a very short period of time, 5 years from SEK 38 billion to SEK 68 billion. That represented a total growth per year of 10%. And to frame that, 8% of that was organic.

To manage that organic growth, of course, we had a large capital allocation towards capacity, in other words, investment, towards automation and towards product development. And it's been a fairly profitable growth, and I'll come to that in a second.

Just to stay one more second on the inorganic growth, which is also part of our growth target. We have acquired 9 companies during the last 5 years, the last one in July of this year, and that was the Cryogenics business. So we're investing equally much or not equally much, we're investing in our organic growth, and we're investing in our inorganic growth. We have also been profitable in that investment.

Our return on capital employed for the last 10 years has been spot on our target. It's basically 20.4% if you take the average over the last 10 years, not bad. Right now, we are at 24.2%. And part of that is inflated because we have rather low amortizations of step-up values from acquisitions at this moment in time. That's also part of the reason why we've left that target intact moving forward so that we have that freedom to have those amortizations, but 24.2% represents, I think, and I hope you agree, a confirmation that we have made the right decisions when it comes to investments. We'll come back to investments.

We've also set a new target for our profitability. We have set a target of 17% adjusted EBITDA. And as you've seen, that 17% represents a pretty good representation of the median that we have been on for the last 10 years. In quarter 3, on an LTM basis, we hit 17.5%, not bad. We're happy with that. That represents a good mix of service business around 30%, a good mix of transactional business and a good mix of project business. This is a good mix. 17.5% is a good level. What I think is more impressive and also worth of note is that the EBITDA, not the adjusted EBITDA, the EBITDA has almost doubled since 2015, going from SEK 6.8 billion to SEK 12 million -- SEK 12 billion. Net income has more than doubled from SEK 3.9 billion to SEK 8.4 billion.

If we look at our shareholders, what have our shareholders experienced from this profitability from this growth? Well, the EPS has gone from SEK 9.15 to SEK 20.18, and more than a doubling in the same period of time. And last year or this year, last year's results dividend in this year was a record high of SEK 3.5 billion distributed back to our shareholders. So I think we have earned somewhat of the trust to continue to invest. And that's a little bit more of what I'm going to talk about now.

Before I do that, I'll talk about how we're going to finance some of our growth. And of course, that's through cash flow. And we have a strong cash flow. In fact, over the last period -- 10 years, we have averaged 84% cash flow conversion. That has allowed us to invest in our business without having to take on new debt, and I think that's rather important. Particularly in the last 5 years, we have conducted our biggest CapEx program in our history, and we haven't had to borrow money to execute that.

We have had some peaks and troughs when it comes to our cash flow. I think one that's worth noting is the trough that we have after the pandemic where supply chains were severely disrupted. And we took the conscious decision to say, we'll let our balance sheet carry some more capital so we can deliver to the commitment to our customers. And I think that speaks a little bit to the Alfa Laval mindset, which I think is so important.

Last year, when we closed out 2024, we had 115% cash flow conversion, and that was very much dependent on the advanced payments that we received from our customers, particularly then on the cargo pumping system side.

Cash flow in money terms. We can talk about percentages all we like, but at the end of the day, percentages don't finance things, money does. And we have gone from SEK 6 billion to SEK 10 billion in this period of time. And operating working capital in relation to revenue, that's normalized to just above 16%, and then net debt to adjusted EBITDA at 1.11. That 1.11 allows us quite a bit of freedom to continue to make acquisitions and further our inorganic growth. We have set a threshold of times 2 EBITDA, and that also supports that we keep our credit rating from S&P at BBB+, which is also important from a financing point of view. So we have the firepower to continue with our inorganic growth, and we have the cash flow conversion to continue to finance our organic growth.

So let's talk a little bit about inorganic growth. And when it comes to inorganic growth, the opportunities or the strategies for the 3 divisions are different. The Energy division with its organic growth opportunities is looking very much at technology acquisitions and an increase in their service scope.

Cryogenics that we finalized in July is a great example of a technology addition to the Energy division. For the Food and Pharma division, I said it correctly, I didn't say Water. The focus is more on a broader end markets, increasing applications, increasing exposure to certain application areas. There, the acquisition that we did in 2022 of Desmet is a really good example of that with biofuels. And then finally, we have the Ocean division where expanding the product portfolio to existing customers is really the main focus, but equally much to convert and increase service.

And there, of course, when we look at service, and we look at alternative services, then weather and sale routing as StormGeo brought in a few years ago is a great example of that kind of focus. So it is a different focus for all 3 of the divisions. What is clear is that for Alfa Laval, inorganic growth remains a focus. However, it means we're going to continue to be equally selective as we have always been, and we want to make sure that we bring quality assets that combine well with our strategy and combine well with our profitability profile.

The other side of the coin is, of course, investing in organic growth. And investing in organic growth is not just brick-and-mortar. Actually, it's more about machinery and equipment. And it's not only about investing in additional capacity, it's investing in automation and new manufacturing processes. And that's important to make sure that we keep a competitive product portfolio to our customers.

So we will continue to remain on the same CapEx level that we've had over the last couple of years, somewhere between SEK 2.5 billion and SEK 3 billion per year.

It will be fully financed through cash flow. So this part of the growth will not require additional debt.

Then I'd like to end with summarizing a little bit of some of the things that have been said today, and also put it in context of our new financial targets. We have raised our growth target from 5% to 7%. I think you would agree with me after listening to the divisions that the opportunities to generate those 7% growth is certainly there. There are disruptions, and there are things that happen on a yearly basis. Therefore, 7% over a business cycle seems reasonable. We also have an inorganic growth opportunity. That's part of the 7%. And that's something that we will continue to pursue. But we will not continue -- we will not pursue inorganic growth just for the sake of top line growth. There needs to be a wider fit into the group.

I think it's also fair to say that we should include -- sorry, we should raise our growth ambitions considering the amount of investments that we have done over the last couple of years. That also holds true when we look then at the adjusted EBITDA margin that was raised from 15% to 17%. Part of that is to recognize the competitiveness from the new capacity and automation that we've added. Some of it is based more on the mix profile that we have and have been sustaining over the last 3 years. And it is also about looking at what we have been performing well historically, and we have been around the 17%.

So if we look at the last 3 years when it comes to growth, 11.9%, a lot of that is the elevated cycle that we had for chemical and product tankers. If we look at adjusted EBITDA, it was a level of 16.7% on average over the last 3 years. And the return on capital employed over the last 3 years has been 22.8% on average. And here, we have retained the target of 20%.

Hopefully, you'll agree with me with the track record that we have, with the ambitions that we have going forward, that we have earned the trust of you and the market to continue to invest, both on inorganic and organic opportunities to get us well on our way to the $100 billion that we expect to hit in 2030 with a very similar financial profile to the one we have today.

And with that, I thank you for my part of the presentation, and I ask Tom to come up for a Q&A.

Ladies and gentlemen, welcome to the Alfa Laval Q3 '25 Report Conference Call. I'm Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Tom Erixon, CEO. You will now be joined into the conference room.

Good morning, and welcome to Alfa Laval's Third Quarter Earnings Call. And Fredrik and I, we're going to take you through the quarter. So let me, as always, start with a couple of introductory comments.

Now with a solid order book and good demand in service and short-cycle businesses, sales grew 8% organically in the quarter. It was a stable and clean quarter operationally and earnings increased to a new record level of SEK 3.2 billion in the quarter on the EBITA level. And then finally, as you noticed, we have adjusted our financial targets to better reflect our financial performance levels. And I will comment on the financial targets a bit later.

So let me go to the key figures. Order intake was good in the quarter with a 10% organic decline as expected due to the normalization of demand in cargo pumping applications. In the short-cycle business, both order intake and factory utilization are is at high or record high levels in several end markets and product groups. Sales developed well, supported by all 3 divisions and generated a margin of 18.4%. In all, it was a well-executed quarter with mix effects contributing to the margin improvement.

Moving on to the Energy division. The market dynamics are shifting towards a stronger HVAC, heat pump data center growth and moderate expectations on CapEx projects in the fossil fuel business. Cleantech remains on a positive growth track across a wide range of applications despite growing concerns regarding the political support for the decarbonization journey in Europe and in the U.S. Strong momentum in energy efficiency, growing demand for nuclear and an expected scaling, making new technologies financially sustainable are the foundation for future growth in the cleantech sector. The margin was sequentially stable, but note that transaction costs related to the Fives Cryo acquisition was charged to the P&L in Q3 on the Energy division.

So moving on to Food & Water. Order intake was firm in most end markets. Large order bookings were relatively slow, although the project pipeline still remains healthy in terms of outstanding quotations. Short-cycle demand drove a positive mix change with a healthy margin. The project business generated a positive margin improvement in the quarter, but we are still working through some project execution issues in the quarters to come.

Then coming to Marine. Profitability remained sequentially stable on a high and good level with good order execution in the quarter. While the record ship contracting year in 2024 will not repeat, contracting at the yards is expected to remain at about 2,000 vessels per year pace, approximately matching the global yard capacity. As expected, the 2024 contracted ships are now converted into our order books with record level orders in several product groups within the Marine division. The order intake decline compared to last year was entirely related to the expected normalized order level in cargo pumping with new orders at a normal rate for the business.

So on to service. Service has grown substantially over many years and now accounts for 31% to 32% of orders, structurally somewhat higher than historically. Still, this year, we have worked through a lot of operational challenges, both related to physical distribution centers and the digital systems supporting the spare parts flow in the Energy division. It is and was a needed scaling project to cope with the larger volumes. And with the troubleshooting behind us, we expect the Energy division to return to service growth in line with other divisions.

In the Marine division, service accounted for 40% of order intake, supported by a larger installed base and an aging global merchant fleet. If the aging fleet provides some tailwinds, the constant transfer of older tankers to the Russian dark fleet is a headwind and obviously outside our business scope.

Then finally, a few comments on key markets. China and the U.S. accounting for approximately 40% of our business had a strong quarter with good demand in many areas. Note that the cargo pumping affecting an otherwise growing business in both China and Korea. Most markets are stable to positive at this point in time in the quarter, but looking forward, Middle East CapEx projects may be negatively affected by the lower oil price.

And with that, I hand over to Fredrik for some further comments.

Thank you, Tom. So hello, everyone. Let us get started by recapping the order intake in quarter 3 at SEK 16.6 billion. Organic growth contracted with 10% in the quarter. A substantial part of this contraction stems from the lack of large project orders. In the Energy division, both the welded heat exchangers and Circular Separation Technologies noted the absence of large orders. Desmet and food systems in the Food & Water division denoted the same pattern.

And finally, in the Marine division, the continued normalization of tanker vessel contracting impacted the numbers. Important to mention in this context is that the project list remained strong, both in quantity and quality. It is the conversion to orders that is occurring at a lower pace, reflecting uncertainty in the market driven by external factors.

Transactional business has a different development, up 8% in the quarter comparatively, excluding currency movements. Both gasketed and brazed heat exchangers booked orders above the same period last year in the Energy division. Fluid handling equipment, separators and decanters also booked higher order intake levels than in quarter 3 last year in the Food & Water division. And finally, our traditional marine products are also continuing to outperform quarter 3 last year. Service was up 8% in the quarter, excluding currency movements.

Currency has an overall negative impact of almost 6% and, our acquisitions so far this year have a positive impact of 3% on the total. The same pattern repeats on a year-to-date basis and is an important input to any trend analysis. Book-to-bill in the quarter was 0.96 with a remaining strong backlog of SEK 51 billion, of which SEK 16 billion is slated to be invoiced in quarter 4. The backlog price levels are well in line with current input prices and in line with current tariff levels.

Now on to sales. SEK 17 billion in sales in quarter 3 represents a strong historical level for quarter 3. Our manufacturing entities are delivering to our customers on commitment and on high utilization levels, which is clearly visible in the gross profit boosted by a strong factory and engineering result. Currency once again impacts negatively on a comparative basis, but prominently organic growth is up 8% in the quarter. Worth mentioning here is that the proportion of large project business in the invoicing mix is high. Transactional volumes are up, but not to the same extent.

Net sales for service grew 3.1% compared to the same quarter last year, accounting for a mix of 30%. We expect this mix pattern to continue into quarter 4. Gross profit improved to 36.8%, boosted by better factory and engineering results and positive purchase price variances compared to the same quarter last year.

Operating income increased with 12.6%, to SEK 3 billion. Sales and administration expenses were SEK 2.6 billion during the third quarter, corresponding to 15.4% of net sales. Research and development expenses were SEK 427 million during the third quarter, corresponding to 2.5% of net sales. Earnings per share in the quarter amounted to SEK 5.53 and SEK 15.22 for the first 9 months. The corresponding figure, excluding amortization of step-up values and corresponding tax was SEK 15.97 for the first 9 months.

Now on to profitability. The Energy division posted an EBITA margin of 16.6%, which is lower than previous quarters due to a shift in mix towards large orders and costs related to the acquisition of Fives Cryogenics.

Continued strong sales in the transactional business portfolio and service compensated for a large project mix invoicing in the quarter, yielding an EBITA of 16.1% for the Food & Water division. The Marine division continued with a positive mix of invoicing from cargo pumping systems and service, which yielded a 23.5% margin. On a group level, the adjusted EBITA margin of 18.4% is a record with a -- sorry, is high with a record SEK 3.2 billion in money terms with a negative currency impact of SEK 178 million.

Now on to the debt position. Post 3 acquisitions so far this year, most notably the Fives Cryogenics business, debt stands at SEK 18.6 billion or 1.3x last 12 months EBITDA. Net debt, excluding leases at 0.86 and including leases at 1.1 last 12 months EBITDA. Given our stated thresholds, the group retains sufficient debt power to complete further quality acquisitions as those opportunities arise.

Cash flow from operating activities was SEK 2.2 billion in the third quarter and SEK 5.8 billion for the first 9 months. The lower cash flow is mainly due to an increased working capital compared to the same period last year, driven by inventory and predominantly [ WIP ] and decreasing advance payment as large projects are invoiced.

Acquisition of businesses in the first 9 months was SEK 9.3 billion, whereof SEK 8.8 billion for the Cryogenics acquisition, and SEK 529 million was due to two minor acquisitions. Financing activities amounted to SEK 3.9 billion in the quarter and SEK 4.5 billion in the first 9 months. These numbers primarily composed of the additional debt added for the acquisitions of SEK 8.7 billion and a shareholders' dividend of SEK 3.5 billion.

Before concluding, some guidance for the quarter ahead and looking into 2026. CapEx guidance for the fourth quarter is SEK 700 million, and reiterated guidance of SEK 2.5 billion to SEK 3 billion in 2026. PPA amortization of SEK 175 million in quarter 4 and SEK 580 million in 2026. These numbers include the preliminary purchase price allocations for the three acquisitions in 2025. Tax rate is guided to stay in the interval of 24% to 26%.

And with that, I hand back over to Tom for some words on quarter 4.

Thank you, Fredrik. Some forward-looking comments then as a summary. Let me start with the financial targets. The change in financial targets should not be seen as a change in guidance. We are making the adjustment because of two main reasons. First, we tend to overshoot the targets and consider them a floor level for performance. Now we are moving the targets into the present performance range, and it's important for us, including for internal reasons that we have similar objectives externally and internally.

Second, we want to recognize that the investments during the last 5 years into technology and capacity were made for good reasons. We believe we have invested our shareholders' money responsibly and profitably, and we expect to continue to convert those investments into profitable growth in the next 5-year period.

So finally, our crystal ball is no better than yours. If global macro deteriorates, if the energy transition stumble, if AI and data centers run into difficulty, we and others would find financial targets challenging. But with that said, we have changed the targets in terms of growth to 7% sales growth. And the EBITA margin moved up to 17% over the cycle. And we kept the ROCE target at the current 20% just to allow for the effects of future potential acquisitions.

Regarding the next quarter, we believe demand in the fourth quarter is sequentially stable and on about the same level as in the third quarter. And on a divisional level, we expect the Energy demand to be higher, the Marine to be somewhat lower and the Food & Water to be stable compared to the third quarter.

So with that, let's get over to the Q&A session.

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

Can I ask on the Energy division orders? If we look at this organically, they are largely unchanged versus Q2, so a bit lower than what you guided back during the summer. You, of course, mentioned the decision-making here. So given that you're now saying this should increase in Q4, has anything underlying really changed? Or is this just a matter of slower commercial rates on the orders? Yes, that's the first one.

It's a good question. I think our perspective is that it is a fairly stable growth curve and sometimes projects end up in one quarter or another. So we are relatively positive to the demand trend in Energy. And given that we see improvement on the HVAC side and in a number of areas, the outlook for Q4 is reasonably positive.

So I think it's more a question on when bookings are taking place than any change. We had a reasonable positive view 3 months ago in terms of the growth perspective, and we remain committed to that.

Okay. Then secondly, on the margin in Energy, can you give us a rough sense of the M&A costs here, and if we should expect this going forward as well?

You should expect that the margin was essentially unchanged compared to Q2, excluding the cost related to the transaction. There will be some costs also in Q4, but I believe on a lower level. And we are not dealing with them as adjusted earnings. We're just [ charging ] them straight off.

The next question comes from Magnus Kruber from Nordea.

Magnus from Nordea. Could you -- with respect to Cryogenics, does that business sit completely within the process industry end market?

Yes. I mean it depends. There are essentially three application areas for Cryo at present. One is normal industrial gases, and the other one is LNG. And gradually, we expect hydrogen and energy transition applications, including carbon capture, be growing as part of the segment. So those are the end markets that we are dealing with.

Largely, the applications are for larger projects in the industrial space. But I remind you that there's also Cryogenics pumping side that may fit well with our Marine business and some other applications as well. So I think the Cryo side may be a bit wider as we go along. But presently, essentially, you could consider it the process industry-related application.

Perfect. And secondly, light industry and tech saw a second quarter of declines year-over-year. Of course, FX is part of that. But could you comment a little bit about the momentum in data centers and other parts of the business, please?

Yes, I think it's a correct observation. We are very comfortable with the development on the data center side. And we are entering into the expected frame agreements. And -- but I think what happens is that in terms of the actual quarterly bookings of the order, there are some variations. So in terms of progress on the data center side, it was good in the quarter. We expect that to continue into Q4 and next year. So we're on track with our plans, but the actual order intake bookings in Q3 was not that strong.

The next question comes from Carl Deijenberg from DNB Carnegie.

So first, I want to come back to the acquired Fives Cryogenics. I know you've talked about in the past that the aftermarket exposure in this entity relative to the, let's say, core Alfa Energy division is lower. And I just wanted to understand is there any difference here in the seasonality on the earnings given the sort of differences in the operational character?

And also maybe going forward, I saw that you were adding roughly SEK 2 billion in the backlog. I guess this relates to the acquired entity. And given, let's say, the longer cycles you're addressing there relative to the transactional exposure in the Energy division, is there any significant quarter here going forward that you're set to finalize something or any large order that is going to come in that we should be aware of?

I will not comment on individual orders, of course, but we always monitor our pipeline of outstanding quotes. And if I look at that pipeline, both in the Food & Water division and in the Energy division, it is relatively positive. The conversion time and if it gets through the final CapEx decision, there's always some uncertainties. But in general, we have a positive feeling around the pipeline in the Energy division, specifically for Q4.

The Cryo, I don't -- it is, as you say, low on service. It will probably remain that way. The order intake will vary over the quarters. We had, I think, a normalized Q3. We expect a relatively strong Q4 on the Cryo applications. But in terms of earnings and how we execute those projects, it's percentage completion. I think we will -- Fredrik will work to have that as a stable and correct representation of progress every quarter. So I don't think -- if you want to add something?

No, there's no particular seasonality to the percentage of completion. It's when the projects come to fruition and commissioning starts. So there's no deviation from that point of view, and there's no seasonality from that point of view.

Okay. Very well. And then secondly, just very quickly on the pumping systems side. I see here in Q3 that orders seem to be stabilizing and actually being up slightly Q-on-Q, not by a huge amount, but a little bit. And could you just talk a little bit now on the sort of backlog or the timing on the orders you're taking in now on Framo and the lead times, just to understand the phasing of the backlog and so forth in Marine?

Yes. I will not give you the full timeline on everything, but we are clearly fully booked for Q4, and we are essentially fully booked for 2026. So what we expect to see now is the normalized level renewing normal order flows as the contracting in '26 is expected to remain at about the 2,000 ships. And we don't see huge fluctuations in tanker contracting either. We think sort of with some variations between quarter, we will see a reasonable amount of new orders being signed, new contracts being signed. And so we were at Q3, if you think about it historically, actually perhaps somewhat on the high side when it comes to sort of our average order intake level. So we were pleased with the quarter.

I think it substantiates that although we are not going to be at 2024 level in terms of order booking expected for a long time, we will continue to run that business on a good level. And that is also reflected in the investment decision we announced with our biggest CapEx decision in our history of SEK 4 billion. Although spread over a number of steps, a number of sequences and over 5 years plus, it is a big commitment to a business we believe in.

The next question comes from Uma Samlin, Bank of America.

My first one is on your guidance. So would you be able to help us to clarify how should we think about your growth guidance of 7%? What component of that is organic versus inorganic? And also on the margin guide, did I hear you clearly that the guidance is not a floor, but more of a through-cycle average margins? If that's so, where do you think we are in terms of the cycle?

Yes. The growth ambition includes the possibility of acquisitions. We will make those judgments as we go, partly on where we are on the organic side and the macroeconomics and partly what opportunities we have on the M&A side. But we feel we have built a stable foundation for organic growth in the coming years. So without that, we would not have stretched our growth targets above the 5% we were at historically. And obviously, as you see, current level is higher. And at some point in time, the spread between the target and the floor level versus where we were just becomes a little bit problematic. So we think this is a good reflection on the growth side.

On where we are in the cycle? If you asked me 10 years ago, I would give you a reasonable answer. After the last 5 years when we've been going through a COVID, shutdown, hyperinflation, a trade war, I have no clue where we are. The only thing I know is that with all of the turbulence that we've been living with in global markets, we come through that in a good way. And if we get some stability in the world regarding wars, regarding trade routes, regarding tariffs, I expect that we will have a couple of good years ahead. But to predict the macro events at this point in time seems to be a bit problematic. So we will deal with it as we go. But obviously, if we have a sharp downturn in the coming years, it will affect our financial performance just as everybody else.

That's super helpful. May I just have one more follow-up on Marine. So how should we think about your expectation for Marine orders into Q4 and into '26, given the contracting has been fairly weak year-to-date. We just heard from your competitors who's expecting sort of like for '26 and '27 marine contracting to be up 30%. What's your thinking on that? Where do you see is the normalized level for Marine orders?

Well, as I've said a couple of times, if we look at our invoicing path in Marine, it's a somewhat better way to track us financially than on the order intake and the contracting side. The global shipyard capacity in terms of deliveries is at about the 2,000 ship level, thereabouts. It may increase somewhat in the years to come, but we are not quite there yet. So that means that irrespective -- and basically, the yards are fully loaded for the years to come. So we see a lot of stability in terms of our delivery path in the coming years. In some areas, we are obviously tight on capacity now, but we are meeting our commitments and our obligations towards our customers. And there's a team who's doing a very, very good job on that. But sort of the downward risk in terms of volumes of invoicing for the foreseeable future is not -- does not look as a huge challenge at this point in time.

I remind you that last year, we had an order intake of SEK 30 billion, about 50% ahead of the normal numbers. And so I said then, and I repeat that we are not a SEK 30 billion division in terms of invoicing, but we are on the SEK 20 billion plus. And I think it's from that level that we work with the organic growth and potential acquisition growth going into '26.

The next question comes from Andreas Koski, BNP Paribas Exane.

So three questions. First, on Marine sales. Can you give an indication of your pumping systems sales in the quarter? Are we at a level around SEK 2.5 billion or even closer to SEK 3 billion? And did I understand it correctly that you are fully booked through 2026. So the sales level that we're seeing in Q3, we should also expect through 2026?

I will not give you detailed numbers to the million on individual path. But I want to remind you that the pumping systems include an offshore business. It does include a small aquaculture business. And so the whole thing is not and will not be on cargo pumping applications for tankers. So just for you to keep that in mind. But with that said, all of those businesses are in a good shape. And the demand situation looks -- despite some concerns on the oil and gas side, the demand situation for offshore looks reasonable going forward. The service business in that area remains strong. So that's sort of the backdrop of the business.

I think in terms of invoicing, we are more or less at capacity, and the big investment program that we are doing is partly going to cope with the existing demand pressure, modernization, efficiency, automation and site consolidation improvements. But that will not have any major impact on invoicing capability for next year. And in any case, I think at the end of the day, it's the yard capacity that is determining the invoicing level in 2026. And I think they are pretty much running at full pace as we see it.

Yes. The reason for asking is to try to understand if we should expect a margin of 23%, 24% also for the full year 2026 because the mix will remain as positive as it is today, but maybe you don't want to give any indications of that.

I have full confidence in your ability to make your own calculation on that.

Yes. Okay. And then on the order intake side in Q3, I understand Fredrik -- I think Fredrik mentioned that you lacked large project orders in Q3, but that the project business remains strong, both in quantity and quality. So I just wonder, in your outlook statement, have you assumed that the larger part of that project pipeline will convert into orders?

No. To say that a larger part of the project list that we have right now would convert into quarter 4, then we would be giving you a different guidance...

No. I mean a larger part than in Q3, I mean.

Well, the conversion rate is determined by a lot of factors, and some of them are clearly external and clearly are held back on uncertainty. And if we see the uncertainty decreases in the coming 20, 30 days and assuming that, that's sufficient for somebody to make the final decision on an investment, then we might see that we have orders that have slipped in from quarter 3 that we expect to come into quarter 4, and there will be orders in quarter 4 that may very well slip into 2026. So it's hard to give you an exact guidance more than the one we already provided for quarter 4.

Understood. And then lastly, if I may, on your new financial targets. If you want to elaborate and explain why you didn't go for a more ambitious margin target? And how much of your new growth target is expected to be organic?

Yes. I think on the organic, some people already observed it was quite in line with our 2030 target of SEK 100 billion. We stick to that one. And let's see how the mix is. Obviously, the reason we are increasing the growth target is for organic reasons. We may or may not have some M&A opportunities converting in 2026 and 2027. But we think we have a good growth platform installed, build up, invested into capacity-wise created space for. So the organic growth is, I think, for us, the most important part of the growth story for us. So I leave it at that. We see where it comes.

On the profitability target, I said this during many years, at the 15% level that our ambition is not at this moment in time to optimize our margin at all costs. We are a growth company. We are investing what we think is responsibly and profitably into technology and capacity. We continue to do so. And we think the long-term shareholder will benefit from long-term growth plan, stability in our execution. So we don't want to put ourselves into a type of a profit escape opportunity where we are acting everything that is not generating 17% plus. So this was a measured step reflecting approximately where we were and leaving the floor of 15% a little bit behind us and accepting that the current performance level is perhaps about the target range that makes sense for us.

So does that mean that we shouldn't expect 17% to be sort of the floor as the 15% was?

No. I think we did the 15% 20 years ago. I don't think it was, at that time, a floor. It was an ambition. We are not super guiding you on the margin. I mean, as you could notice this quarter, we were above. I think we will fluctuate.

I think my point is saying, and I've told you this before, that it would be a very simple trick to increase the margin in Alfa Laval from where we are today with a percentage point or 2 if we decided that the long-term future was less opportunistic. And so we are committed to our long-term growth plan. We are investing in that, and we don't want to cut and limit our opportunities for the long-term growth potential that we see.

So that will, in a sense, determine a little bit where the margin will be, and that's why we don't want to go too high on our ambitions because we think there are opportunities. But we also recognize that the 15% is not all that relevant as a financial target. And if you look at your own and everybody else's assumptions, I think the market estimates for the coming 3 years is pretty aligned with our targets. So that's why we're saying that don't think about this as a very strong guidance comment. It's more creating a relevance, not least internally for what we expect ourselves to work with.

The next question comes from James Moore from Rothschild & Co. Redburn.

Can I just go back to Fives and the charges and just confirm that the Fives integration costs were SEK 215 million in the quarter and that the charge is basically exactly in line with the 430 bps impact on the energy margin year-on-year. And would it be fair to say about SEK 100 million for the fourth quarter? And attached -- maybe we start there, and I could follow up.

Yes. No. So what we have indicated is that if you look at the sequential development and you look back a quarter, you probably get a better indication of what that charge was in relation to where we were -- finished in quarter 3 and that the same will probably hold true into quarter 4. Of course, some of this is also dependent on the invoicing mix that we have in quarter 4 with the invoicing mix that we had in quarter 3. decreased the margin. I think a good guidance is to look at quarter 2. So sequentially stable.

Sequentially, not year-on-year. My mistake. And the underlying performance of Fives, did -- it looks like you did SEK 620 million of revenue for, I don't know, [ 2.75 ] months, which to me looks like it's growing 20%. I don't know if that is the case. And if you strip out the charges, what was the underlying operating margin at Fives slightly accretive to Energy in the kind of low 20s margin range as you previously hoped? Or did it go up with growth? Or was it below due to seasonality? And how does the Fives seasonality play out over the coming few quarters, please?

Yes. And as we indicated before, there's no real seasonality to the Fives or to the Cryogenics business unit, as we call it. There's no real seasonality to that invoicing. It's more how it's delivered to the customer and the milestones that are agreed with the customers from a percentage of completion point of view.

Of course, the invoicing was good in quarter 3 for the Cryogenics business, and the margins were in line with expectations as we took on a business. There are some -- there is an element of onetime charges and integration charges, but we include those as part of the operating business.

I understand. And lastly, if I could. I understand the philosophy behind your new targets through cycle, internal benchmarking, et cetera. But obviously, behind that is a fair degree of confidence on long-term organic growth potential. I was just wondering to what degree is that underpinned by existing backlogs? And to what degree is it once you've got through those backlogs, you still see a high pace of growth continuing? And what is it that gives you renewed confidence on that apart from recent growth trends being better? Or is it just recent growth trends being better?

Yes. We think it's better to look at -- if you're a debt analyst, you will look at the last couple of years and make a prediction of the future. If we do that, and we look at all the investments we've done, and how we described the 2030 target last year, and we will go through that again in our Capital Markets Day in November, there is the basis for our belief. We have, I think, an end market exposure that couldn't be better. And so I think it's up to us to utilize those positions in Energy, in Marine and in Food & Water alike.

And are we convinced that we will reach the targets? We think this is the best indication we can give to ourselves, and we communicate the same to you guys that this is where we think we will be. But I would recommend you to come to the Capital Markets Day for a little bit of a review of the verticals and the business opportunities, the way we see the plan going forward rather than just a quick Q&A here.

The next question comes from John Kim from Deutsche Bank.

I was wondering if we could speak a little bit about Marine regulations. You may have seen the MEPC 84 session in October delayed the decision on, I guess, stronger emissions controls. I'm wondering if you're seeing any knock-on impact in terms of how your customers are ordering, not ordering, delaying orders?

Yes, it's a very good question. And it's, of course, a situation we monitor extremely closely. It does potentially impact the way a customer will decide. I think our best estimate at this moment in time is that one of the main drivers other than efficiency and fuel efficiency and such, for environmental technology and multi-fuels capabilities, is to create an insurance against having a stranded asset some years from now when and if a new regulatory environment is forcing a decrease in the emissions.

Now obviously, for many reasons, not only Alfa Laval's business, we are hoping that there will be a framework implemented in terms of emissions control on the Marine side as well as in other areas. And I think short term that the fair amount of ship owners will continue to hedge their bets as they order new ships.

And I remind you that if we look at the multi-fuel levels in the industry right now about -- if you take ammonia and LNG and a couple of other sort of main alternative fuels to heavy fuel oils, the current level of orders are representing about 15% or so of the global fleet, equipping themselves with multi-fuel capabilities. So even if it should go down somewhat, it's not going to be a major impact on us in the next quarters or so.

If we look at the current trend curves as they are, they are continuing to grow. But of course, those trend curves are back to time almost driven by decisions prior to the delay of the implementation side.

So it's a bit early to really make a call on what is the immediate effect. But I would be surprised if we will see a dramatic change in the trend curve over the next couple of quarters while the uncertainty remain.

Great. And if I may, I'm sorry if I missed this, but can you update us on your newer product offerings in energy? I'm speaking specifically about the liquid-to-chip offering?

Well, it's -- listen, it is our normal product ranges that are going into air and water cooling, and it's a question of capacities for certain sizes and formats and things like that. So the product mix in our supply chain is changing somewhat. But we are not in a technology development -- we do an awful lot of technology development, but for the data centers, it actually is in line with our current supply capabilities. And so our main challenge is to figure the volume demands in the coming years and matching sort of the supply chain capacities that we need in order to serve that market. So that's where we are on that one.

The next question comes from Klas Bergelind from Citi.

Klas at Citi. I had -- coming back to the Energy and Food & Water margins. In Energy, obviously, some costs are linked to the recent acquisition, but you still have the R&D ramp. I was under the impression that, that R&D ramp concluded already in the second quarter. So I'm interested in how you look at this into the fourth.

And then in Food & Water, you booked quite a lot of large orders in the second quarter. And obviously, this is a very good margin you're delivering right now. But I'm just trying to understand whether the mix from having then that backlog built up on the larger side will start to weigh on the margin here a bit in Food & Water. I'll start here.

Well, if I take Food & Water first, of course, the -- we have a large percentage of large orders invoicing out in quarter 3. But we also have a substantial resurgence of the transactional business, and that's been happening over the last 6 quarters that we have seen an increase in the transactional business, including service. And of course, the fundamental margin accretion that we get from that transactional business and the service mix into Food & Water, of course, lifts the margin overall. So it's not that we have drastically changed the margin profile of large project orders. It's rather the mix that we see in the current quarter. That mix may look different, of course, in coming quarters. But -- so it's a little bit based on that mix.

And if we then look at the Energy division. Well, the Energy division, we have spoken a little bit about the margin development before. And if we look at specifically the R&D as your question was, well, we have not put an end date to R&D. R&D is something we continue to do over indefinite period really. I mean, it's about product development. And if I take it one step further back to the question that Tom answered just a second ago around data centers, yes, we have a lot of products that are directly applicable and have a really good fit with the current demand for data centers, but we also have the ability to adapt those products further. And that's part of the R&D that we continually do, and that we do in dialogue with our customers.

So I don't think, Klas, you should see the investment into R&D as something that has an end date when it comes to the Energy division or any of our other divisions for that matter.

And I don't know if Tom wants to complete more on that.

I agree.

Agreed.

Okay. Okay. That's good to hear. Then looking at project orders in Energy, I mean, last quarter, and I'm zooming in now on clean energy. I mean, last quarter, i.e., second, you said that decisions were pushed to the right, reflecting increased uncertainty. It looks like orders are coming back here this quarter. So I'm interested in what happened here. And if you see this elsewhere, i.e., that decision-making on the larger side, Tom, is easing a bit or whether it's just normal lumpiness.

I think maybe a little bit of both. There is a normal lumpiness in that. We have been having and we continue to have, a rather diversified cleantech order book and order pipeline. And that holds both geographically and application-wise.

So the bookings were good in Q3. And although good means that the comparable quarter was maybe a bit weak side, so -- but anyhow, it was in line with what we were hoping for. And if we look at the pipeline, which obviously stretches more than a quarter forward, we see a number of projects and some of them, I would say, financially sustainable without being based on regulatory frameworks or such.

So there are -- we have obviously moderated our expectations in the 5-year period as to what the energy transition will do. But we are still following an interesting track on a steady growth area in related to carbon capture, in related to plastic and packaging replacement materials in relation to possibility of SAF, and biofuel coming back a bit after a very low investment period during the last few years. So we are cautiously hopeful that we will see the energy transition continuing in a good way.

Good. Finally, back to you, Fredrik, on the ROCE target. It's unchanged despite lifting the margin by 2 percentage points. I guess this is just incremental intangibles from recent M&A? Or how should we think about it? Obviously, you're going to invest now in Framo, quite over capacity, but also curious to hear about your further working capital ambition within that.

Yes. No. And the reason we have retained the return on capital employed target at 20% is because of exactly the dynamics that you bring up here. It is about a continued CapEx ambition going forward, we reiterate the SEK 2.5 billion to SEK 3 billion a few years going forward. We have announced the investment package in Framo, and we should expect that there will be other acquisitions, beyond the one -- acquisitions we've already made. We have the firepower in our balance sheet to make sure that we can also add on inorganic growth beyond the organic growth opportunities that we have. And a reflection of all of that ambition is why we have returned the return on capital employed target as it is. And it may temporarily -- should all of those things align very much in a short period of time, go below 20%, but with the ambition of going to 20% and above 20% in the long run, of course.

The next question comes from Johan Eliason from SB1 Markets.

I was just going to ask about the return target that you kept unchanged, but you sort of already replied to it. But I was wondering a little bit. I remember you did lower -- this was before you, but the Board lowered the target from 25% to 20% when you did the Frank Mohn acquisition. How has your major acquisition delivered versus the 20% return target? I guess Frank Mohn today is probably benefiting well above this 20% target. But what about the Norwegian weather forecasting service? Is that also performing well in line with these return targets?

Well, may I first say that it's so nice to meet an analyst who's been longer with us than ourselves almost. So I appreciate the question very much. And I was not present at the Frank Mohn acquisition, but I think you are completely right that although it was a highly profitable business at the time, but when you put -- I think it was around SEK 13 billion on the balance sheet, to get a 25% return on that number is very hard.

We have commented. And of course, as we go forward now, if we look at the Framo acquisition, in today's books, as you know, we are conservative on the goodwill side. So we put as much as we can into amortization, and that is almost completed for the Framo side now. So I think next year is the last year, if I remember correctly. And so we have a slightly smaller balance sheet post on it. We have a company that may be close to twice as big and at maintained margin, I think the return on capital on that investment, now, 12 years later, will start to look quite good. We haven't run those numbers, I think. But we may actually do this ahead of the Capital Markets Day. It's an interesting question.

When we have looked at the entire M&A portfolio in recent times, we have concluded that if you take out the acquisitions over the last 15 years or so, our return on capital for the traditional Alfa Laval business or Alfa Laval classic is about 50%. And with the current multiples in the M&A market, we struggle to get to 20% regardless of the profitability. The pricing on those assets allows us maybe to get to a double-digit return number, but definitely not to close to 20%.

So we don't see that our CapEx program into our existing businesses is affecting ROCE negatively. We were actually a little bit worried about that when we started the big investment programs years ago, but growth has compensated for that. So we -- the returns on our organic growth journey are excellent. And the question that's going to decide whether we are 25% or 20% or below 20% is the amount of capital we deploy on M&A.

We'll get back to that question, I think, at the Capital Markets Day. It's a good one.

It's well noted.

Yes, well noted.

Yes. No, but it will be interesting. I think the return target is important because it does give you some top price that you're willing to pay, that's obviously interesting for the investors. Looking forward to Capital Markets Day, as I said.

I think with that, we take the last question.

We have a follow-up question from Magnus Kruber from Nordea.

I just wanted to see if you could comment a bit about the development in the other end market category in Food & Water. You've seen a very good pickup there over the past few quarters, and you break out starch and sugars in this quarter specifically. Could you comment a little bit how sustainable this level is?

Yes. We are reasonably -- well, it tends to be the stability of Alfa Laval, right? It doesn't change that much. The normal dynamics of GDP growth and a happier middle class is taking demands forward. When you think of stability in the Food & Water side, the thing I want you to remember is that we actually dropped quite significantly on the biofuel side 2 years ago. And it's been a very low project activity on the biofuel side other than some exceptions on the ethanol side. And so I think that is still not quite in the books.

Pharma came down for us a bit after the COVID, where we had a lot of vaccine-related implementations on pharma. We expect that to come back. Dairy has remained quite good. Beer has been a bit up and down after years of consolidation. We see less of that now, but still the return of CapEx on the brewery side has been a bit better recently than before. So all in all, we see the coming years as reasonably interesting.

What I would add to that, if I round up your question with that and say thank you for that, I'll just do a little marketing campaign for the Capital Markets Day. So we will meet in Flemingsberg, which is the technology center for Food & Water and the high-speed separation centers. We are inaugurating that, and we are also displaying part of the technology that we are developing there. And in that context, we will do divisional reviews. And one of the things that is changing is that we are redoing the strategy in the Food & Water division under new leadership with new growth aspirations and new opportunities.

So we will review a number of interesting things, some things you will see visually and some things you will see on the slide. We hold those tools as realistic growth opportunities. So I hope you are excited about it. We are almost sold out. Ticket prices are rising. So I would recommend you to sign up quickly, and we look forward to welcome you in Flemingsberg in November.

We have no more questions.

Thank you.

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