SKF-A.ST(SKF-A.ST)
SKF-A.ST
Sophie Arnius: A warm welcome to this call focusing on SKF's performance in Q4 2025. We are ending the year with improved adjusted operating margins, both at the group level and in our large industrial business area. And this was mainly driven by strong cost management, but also solid commercial execution. I'm Sophie Arnius, heading up Investor Relations. With me, I have our CEO, Rickard Gustafson; and our CFO, Susanne Larsson. After their presentations, there will be opportunities for you to ask questions. And there are 2 ways to do that. [Operator Instructions] So without further ado, it's a great pleasure to hand over to you, Rickard.
Rickard Gustafson: Thank you very much, Sophie, and good morning, and thank you for joining us for this earnings call. I am pleased to once again report an improved adjusted operating margin year-over-year despite very challenging market conditions and headwind from currency. As you can see from the chart on the right-hand side, in the quarter, we do report flat organic growth, which is in line with our guidance. It's important to stress that this does not imply we compared to Q3 that we have deteriorated market activities in Q4 versus Q3, but rather a consequence of tougher comparisons. We do report organic growth in our Industrial business, while we still see some softer demand in our Automotive that are still in a declining organic growth territory. The Automotive separation, of course, continues at high pace and strong momentum. And I am very pleased to say that we have identified an opportunity to further accelerate the phaseout of the automotive contract manufacturing that will benefit both businesses. It will require some additional transfers of assets, which means that we now plan to list our Automotive business during Q4 2026. And clearly, I will come back to more details around this later in my presentation. I will also take this opportunity at this call to reiterate some of the key messages from our Capital Markets Day in November, really outlining the foundation for how we see long-term value creation in both our future businesses. So with that then, if we move in and start by taking a look at the full year 2025. Net sales came in just south of SEK 92 billion, representing a flattish organic growth or to be specific, negative 0.4%, where Industrial grew some 1% and Automotive negative organic growth at around 4%. The adjusted operating margin actually improved to 12.7% in the year despite very challenging market conditions, geopolitical tensions and significant headwind from currencies. The net cash flow from operations ended at north of SEK 8 billion at SEK 8.4 billion, which is somewhat lower or SEK 2.5 billion lower than the year before. And the reason for this is spelled items affecting comparability, which amounted to almost SEK 3 billion in the full year. And the main drivers there was our rightsizing initiative that we initiated in 2025, our ongoing footprint optimization activities and of course, our efforts to separate our Automotive business. When it comes to dividend, the Board will propose to the shareholders at the AGM a maintained dividend at SEK 7.75 per share, which actually represents or reflecting our strong financial performance. They will also recommend that this year, it will be paid out in 2 tranches, one in April and one in October. If we then turn to the fourth quarter and take a brief look at that, we have net sales at SEK 22 billion, which is a flat year-over-year organic growth, in line with our guidance. We do have organic growth in our Industrial business, as I will talk to more shortly, while we have still a negative demand environment or slow demand environment in Automotive. The adjusted operating margin moved up to 11.8%. And the main drivers for this improvement comes from a good price/mix activities to compensate for tariffs. The rightsizing program contributes with almost SEK 200 million in the quarter. We have finalized our world-class manufacturing program that is also contributing in the quarter. And we also have had generally a very efficient cost management, not at least within Automotive and also when it comes to material costs. Net cash flow in the quarter, SEK 2.7 billion. This is some SEK 0.5 billion roughly less than what we reported the same quarter last year. And again, items affecting comparability is part of this. The main cash drain though has been the auto separation, and that's ongoing. Costs related to our rightsizing is coming in here. And then we have also in the quarter, closed our manufacturing operations in Argentina. But you're going to hear from Susanne, who will give you some more color to this as well shortly. If we then move on to our sales by region. And let's start from the top with our largest region, EMEA, where you can see we have flattish organic growth. But if we then break it up by the different segments, we see positive organic growth in our Industrial business, primarily driven by aerospace, magnetics and also off-highway. In general, I would say that for Industrial in Europe, we see that the market has bottomed out, but we don't really see any significant signs of a significant bounce back or uptick in the market, but a sound and solid bottoming out is clearly there. When it comes to Automotive, it's more challenging, still rather soft market environment and is reflected in low demand for light vehicles and also commercial vehicles in Europe, while the aftermarket business is holding up a bit better. Turning to Americas, also flattish growth in general. Here as well, we have positive organic growth in our Industrial business, to a large extent driven by tariff-related price increases to compensate for tariffs. But if we break out some geographies -- or sorry, some Industrial verticals that actually seems good development is aerospace. It's also high-speed machinery and automation. When it comes to Automotive, it's also a challenging market with soft demand and particularly in commercial vehicles for us in this region. China, Northeast Asia, single-digit organic growth on the holistic view. Again, here, we have organic growth in our Industrial business, and that was primarily driven by distribution, which actually had a good ending of the year. We also saw that the wind-related prebuys, they did end in Q3 as we expected. We actually have a negative organic growth in Automotive, but that is driven by a tough comparison, especially for light vehicles in the quarter. So if we break that apart a bit, I'm pleased to say that our EV business continues to grow at high pace in the region as well as solid development in commercial vehicles. And finally, India and Southeast Asia, flattish on a total level on the Industrial side, so also actually flattish growth. Here, we are facing tough comparisons, which is the main driver. In general terms, we see good demand development in India and Industrial verticals such as heavy industries, agriculture and automation contributes to growth. We are flattish in Automotive in the region, where we see good development in commercial vehicles, while actually it's been a bit soft in the aftermarket business in this particular region. If we then turn to our segments and start with the Industrial business, as you can see on the top hand of this chart, represents some 73% of our net sales in the quarter and 96% of the adjusted operating profit in the quarter. As I said, we are reporting organic growth here just north of 2%, driven by Europe or EMEA, Americas and China and Northeast Asia. The adjusted operating margin is strong, 15.6%, up versus 14.6% the year before, driven by the price/mix activities that I mentioned to compensate for tariffs. The rightsizing benefits of almost SEK 200 million hits here -- contributes here because it's targeted towards our Industrial segment, as you know. We also have the world-class manufacturing program that is helping and contributing in the quarter. And all of this enabled us to actually offset a rather significant currency headwind that is eating some 1 percentage points into our earnings in the quarter. Then on Automotive, representing 27% of net sales and 4% of the adjusted operating profit in the quarter. As I mentioned, more soft demand development, negative organic growth of close to 6%. Here, main drivers we find in EMEA and Americas. But as I mentioned, also in China, but it's more kind of a comparison to last year on the light vehicle side. Again, EVs are continuing to perform well for us in China. The adjusted operating margin is weak, only 1.7% in the quarter despite very strong development in cost takeout when it comes to material costs, but it struggles to fully compensate for a rather significant currency headwind, as you can see here of almost 3 percentage points in the quarter. I think it's important to zoom out a bit and reflect on the auto business for the full year. And for the full year, the adjusted operating margin is relatively unchanged, just north of 4% despite this turmoil, low-demand environment and significant currency headwind. It's also comforting to mention that throughout 2025, we have won a number of strategically and margin-accretive contracts that builds a strong foundation for our Automotive business as we move into the future. And some of those contracts are also related to the aftermarket business, which means that they will also start to contribute already in 2026. If we then leave the numbers and start to zoom in on some of the strategic initiatives, I want to focus today on the automotive separation, where the program as such continues at high pace with a very, very good momentum and we're delivering according to our plans. But we have recently identified an exciting opportunity to actually faster reduce the contract manufacturing between the entities by moving or releasing some additional assets to Automotive. This will be beneficial both for our future Industrial business and our Automotive business. It will drive further competitiveness. And what are those benefits then? Well, as I mentioned, it's clearly we can reduce the contract manufacturing faster. But it's also for Industrial, we can improve the capacity utilization. For Automotive, they will have a better control of a larger part of their value chain that will drive competitiveness for them. And longer term, this will also further reduce the CapEx need in our Automotive business. But these additional transfers will take us some additional efforts, and that means that we now plan to list our Automotive business during Q4 2026. But it's also important to stress that this additional asset transfer will be managed within the already announced cost and capital expenditure for the automotive separation as we presented it at the Capital Markets Day in November. And the contract manufacturing will, at point of separation, be roughly the same as we mentioned also in November, however, though, with a much steeper decline trajectory thereafter. So we're excited about this, and this will create an even stronger starting point for both businesses. Finally, before I hand over to Susanne, just to reiterate some of the key messages from our Capital Markets Day. How do we build -- laying the foundation for long-term value creation. As we have said, since we embarked on this journey, there are very different dynamics between Industrial and Automotive. And we laid out the plan for the value creation of Industrial that rests on 3 pillars and 7 levers, where the 3 pillars were reignite growth, innovation leadership and business-driven value chains. And for Automotive, their value creation plan rests on 2 pillars and 5 strategic levers, where the pillars are accelerate growth and then build lean and fit-for-purpose organizational and supply chain structures. For Industrial, we also named the long-term targets that you can see here on this chart, while we were a bit more vague on the Automotive side. And the Automotive team will come back during 2026 closer to the listing with their own Capital Markets Day and again then be more specific on their long-term targets. So more to come here during 2026. And for those of you that may have missed the information at the Capital Markets Day, are curious to learn more, please visit skf.com, where you find all the information. So with that, it's time to hand over to Susanne to take you through the more details in the numbers. Susanne?
Susanne Larsson: Thank you, Rickard, and good morning, everyone. I'm pleased to be here with Rickard today and announce our quarter 4 results. So the financial summary. So as you have heard, net sales was down 11%. So while we finished the year with a flat organic growth, there was a significant and continued FX headwind. The gross margin was 25.7%, which is then slightly below last year. But if you then adjust for the one-off costs, the gross margin stands at 28.7% and slightly better than last year. The adjusted operating margin ended at 11.8%, again, a proof of our improved margin resilience. And I will further comment on that on the following page. The one-off costs in the quarter added up to approximately SEK 1 billion, where half was related to the ongoing automotive separation and the other half was related to our footprint optimization where the closure of our Argentinian manufacturing operation in October was the main one. Let me try to explain the result in quarter 4 year-over-year, elaborating on the organic cost currency and structural explanations. Starting off from left to right. So although we had a flat organic growth, we had a positive result impact of SEK 113 million and improved our margin with 0.5 percentage point. This positive margin effect was mainly generated by the positive price/mix actions within Industrial business, compensating for an overall weaker Automotive. Our cost management generated a strong contribution to the profit and a 1.7 percentage point improvement to the margin. And there are some main drivers of that. The first one to talk about is the rightsizing activities that are now starting to give a positive contribution year-over-year of some SEK 190 million. This impact falls positively through our results as the dissynergies of automotive separation will come from the start of next year, where Automotive will be operating more independent within the SKF Group. The main dissynergies will be derived from IT and their management structures and consequently offset the impact of the rightsizing activities. By that, I still reconfirm the positive impact of the rightsizing activities of some SEK 2 billion and the relatively linear effect until the end of 2027. Moving on, we also have a positive impact of the world-class manufacturing savings that now have come to an end, and we have finalized the program. And we have continued positive material cost effects, and this comes mainly from Automotive, but also from our product mix. And as you heard Rickard say, when it comes to tariff, we continue to largely compensate for those also in this quarter, and we do expect that this is the case also moving into quarter 1, given what we know today. Currency effects continue to be significantly negative and reduced our reported sales by 10.6% and impacted our operating margin by 1.4 percentage points of negative effect. And the main currencies are the same. They are dollars, CNY and Turkish lira. Structure is minor and referred to last year's acquisition of John Sample Group, net of the divestment of aerospace handover that we completed in the spring. Moving on to cash flow. In quarter 4, we delivered a solid cash flow, where one-off charges impacted cash flow by SEK 1 billion. In this picture, the starting point is the operating profit for the quarter, and that ended at SEK 1.6 billion, which is some SEK 0.8 billion lower than last year, and this is mainly explained by the higher amounts of one-off costs and the negative currency effects. The noncash items is higher than last year as a consequence of reducing the provisions related to the rightsizing program from now payouts. Taxes paid in the quarter was SEK 685 million, higher than last year, while in line with the full year last year, if we look at the full year values. Changes in working capital was good, and we ended at a positive SEK 1.4 billion, which is some SEK 300 million better than last year and explained by less buildup of AR and more AP at year-end than last year, but also with a minor improvement in inventory. This led us to a quarter 4 cash flow from operations of SEK 2.8 billion. From that, we deduct SEK 1 billion of CapEx and ended with a cash flow after investments of SEK 1.8 billion. For the full year, the operating cash flow amounted to SEK 8.4 billion compared to SEK 10.8 billion last year. And in 2025, we then have a cash outflow from IOCs amounting to SEK 3 billion. Balance sheet and return on capital employed. Our net debt, excluding pension, declined from SEK 7.5 billion in the end of quarter 3 to SEK 5.7 billion this quarter end and the full year-end. And this is due to positive cash flow, but also a stronger Swedish krona. Net debt in relation to equity, excluding pension, reduced from 13% to 10%. Net debt in relation to EBITDA, excluding pension, reduced further to 0.5. Including pension, we ended at 1. The adjusted return on capital employed remained stable at 14.3%. So as Rickard said, SKF ended the year with a good cash flow, with a strong liquidity and a low net leverage. Hence, the Board has decided to propose to the AGM a dividend of SEK 7.75 per share to be paid in 2 installments, one in April and the other in October. And this corresponds to 45% of the adjusted net profit. Now I come to my last slide related to the outlook. So we expect the market demand in quarter 1 to remain at a similar level of quarter 4. Consequently, we expect an organic sales to strengthen somewhat in quarter 1 year-over-year, supported by also more favorable comparisons. The guidance for quarter 1 with respect to FX, we anticipate a further negative impact of earnings sequentially in quarter 1. This is driven by a continued weakness of dollar against Swedish krona alongside with mainly Turkish lira. So we now estimate the impact to be minus SEK 800 million year-over-year for quarter 1, given the rates we had by the end of the year last year. When it comes to guidance for the year, the tax rate is expected to be 28%. And there, we exclude both automotive separation implication as well as divestments. CapEx, we estimate to end next year at some SEK 5 billion, where the industrial part is in line with what we communicated at the Capital Market Day of 5% in relation to sales, while we, for Automotive, have some further separation-related investments that are also included. We have also decided to guide for one-off items related to the automotive separation and footprint optimization as we also communicated those at the Capital Markets Day. So we anticipate this to be in the range of minus SEK 2.5 billion to SEK 3 billion for this year, and this is fully in line with the SEK 6.5 billion guidance for the period of quarter 4 2025 up until 2028. Finally then, the guidance for the full year NIAC does not include capital gains from the divestment of [ LTM ] and that we expect to soon close. So by that, over to you again, Rickard.
Rickard Gustafson: Thank you, Susanne. And before we move into the Q&A session, let me just take a few minutes to summarize the quarter and the full year. We have navigated throughout 2025 and also, of course, end the fourth quarter in a rather challenging waters in terms of geopolitical uncertainty, a lot of volatility and a lot of tension in the world. Unfortunately, I do not think that 2025 will be in the history books a unique year, but rather a new norm. So we need to continue to navigate in a volatile environment. Therefore, I'm very pleased that we can report an improved adjusted operating margin improvement, both in the fourth quarter and for the full year, demonstrating the margin resilience that we have dragged so hard in the last few years. Strategically, we are excited about the future. There will be a lot of activities in 2026 to finalize the separation that is planned now, as you heard, for Q4 2026 and that we have found a way to strengthen the starting point even further for both the Industrial and Automotive business that we are very excited about. But then we'll not just focus on the separation in 2026. We will also -- and the organization is fully charged to work on delivering on those strategic pillars that I mentioned that will be the foundation to unlock the full potential of both our Industrial and Automotive business. So these 2 things will be the main focus in 2026 to finalize the separation and gear up for profitable growth in both our businesses. So with that, I thank you so far for your attention and turn over to the Q&A session.
Sophie Arnius: Yes. Thank you. And we will now open up for questions. And there are 2 ways to do that. [Operator Instructions] And we will start with a question here from the telephone line. And before we do that, I can see that there are quite many of you that want to ask questions. So please, if you can ask one question and then if there is time, you can happily join the Q&A queue again. So -- but we will start with a question from Klas Bergelind at Citi.
Klas Bergelind: Klas Bergelind at Citi. So I just want to zoom in a bit on the dissynergies versus the rightsizing here into the first quarter. First, on the savings, you did SEK 190 million already in the fourth quarter. And Susanne, you're still saying the savings would be linear and that will reach the SEK 2 billion run rate end of '27. But if it's linear, I get this to a SEK 2 billion level earlier than end of '27? Or do you expect the pace to slow here into the first quarter, i.e., do we have an abnormally high savings quarter. And then obviously, the other side of it is the cost side, out of the around SEK 1.5 billion of total dissynergies that we can read from your Capital Markets Day slides, how much of those dissynergies do you expect here in the first quarter? And that was, I realize now, a very long way of asking what is the likely net effect that we should look at here from dissynergies to savings into the first quarter?
Sophie Arnius: And Susanne, do you want to shed some light?
Susanne Larsson: I will do my best. So you're right. Starting off with the savings then. So we have had a good pace in settling with employees, as we have said, and we have come to more than 80% of agreements before the end of the year. So we had slightly more positive impacts in this quarter falling through our P&L, while we now, from now onwards, anticipate it to be a linear path up until the SEK 2 billion by the end of 2027. So that's the benefit part of it then. And when it comes to the cost and the dissynergies then, so as from 2026, by design, you could say, we will operate Automotive as an independent organization within SKF, allowing them to have a fully dedicated management that is now being onboarded and also having own IT structures, et cetera. So that will start to come in play already from next quarter. And we believe that the positive implications will be offset by these negative dissynergies that we will take on. So that's what we will say about that.
Klas Bergelind: So just to clarify, Susanne, you say from the second quarter, this will [indiscernible] turn and then...
Rickard Gustafson: Next quarter.
Susanne Larsson: From the next quarter, I mean, sorry.
Rickard Gustafson: Next quarter is actually in Q1. So starting from Q1, sorry.
Susanne Larsson: Next quarter is quarter 1. Sorry for confusing. First quarter.
Klas Bergelind: Okay. But -- yes. But the dissynergies in the first quarter will still be greater than the savings from the rightsizing because that is, I think, what you write in the report, right, in the first quarter.
Susanne Larsson: That's correct. That's correct.
Sophie Arnius: It will be somewhat larger. And of course, then the pace of the rightsizing savings will, of course, increase in the coming quarters, Q2 and onwards.
Klas Bergelind: Can I squeeze in just a very, very quick final question on the outlook just very quickly. When you say somewhat higher sales growth, is it 1%, 2%, 3%? Because consensus is around 3%. And the reason why I ask that is, if you look at Automotive, it's down 5.8% year-over-year. But if you look at light vehicle production forecast into the first quarter, it can get much worse than that. So it would imply to reach expectations that Industrial is growing mid- to high single, and that looks quite high. So I'm just curious, Rickard, sort of between Industrial and Automotive, how we should think about the growth within the guide?
Rickard Gustafson: Right. Somewhat, we will not quantify what that means in numbers. But you should think about it that, as we said, that the activity levels will remain roughly the same as we have had in Q4. That will mean that from a comparison point of view, Q1 over Q1, we will report a somewhat organic growth in Q1. And as we had in Q4, you're right, we have seen an organic growth in our Industrial business, while Automotive has still been in a softer market environment. And that's what we imply also when we say that the market activities will roughly remain the same.
Sophie Arnius: We will now move on to the next question, and that comes from Daniela Costa at Goldman Sachs.
Daniela Costa: I wanted to ask on 2 upcoming regulations, I guess, that are coming and then how do you see them impacting the business and how you deal with that. First, I guess, sort of the steel import quotas into Europe, maybe if you can give us a little bit of an idea how you source into Europe and if that means something or nothing for you and then CBAM and how you would reflect that going forward?
Sophie Arnius: Rickard, it's a question for you here.
Rickard Gustafson: Right. When it comes to steel in Europe, we primarily source our steel that we consume in Europe within Europe. So that is not a major headache for us. CBAM can have some implications, and there are -- lobbying still ongoing on how to fully implement this because it may impact -- I'm not talking about SKF in Pacific, but European companies rather, that there might be some disadvantages versus other companies that originate in other parts of the world than Europe. So I think the -- we watch that one closely, and we are engaged in with those channels that we can to find a good implementation of that legislation.
Sophie Arnius: We move on to John Kim at Deutsche Bank.
John-B Kim: I'm wondering if we could focus a bit on the separation time line. You did cite the changing nature of the contract manufacturing relationship. Can you confirm for us that the time line is not being impacted by external parties, whether it be tax authorities, unions, regulatory bodies?
Rickard Gustafson: I can answer that one. Yes, I can confirm that. It has nothing to do with that. The program as such is actually running extremely efficient. I dare to stick out my neck and say where we're really holding the timetable we set up from the beginning with a lot of the heavy lifting in terms of IT cutovers and legal restructuring and all of that. I'm rather impressed how well the organization has stepped up to this challenge and the efficiency in how we drive this program. But as we have -- as market has evolved and so forth, we have identified this opportunity to actually faster reduce the contract manufacturing by reallocating some of the assets in a different way than we originally planned. And when we saw that and we saw the benefits and we realized that this will actually create an even stronger starting point for both businesses, we were very eager to go after that opportunity. And therefore, we feel confident with the planned listing timing now for Q4 2026. So it's not driven by any conflicts internally, not at all.
Sophie Arnius: And we will continue with a question from Seb Kuenne at RBC.
Sebastian Kuenne: Again, on the separation, I mean, you talk now about value creation for both businesses. But the way I understand it, you simply shift some production lines into Automotive to deepen the value chain and to buff up the margin for Automotive. But at the same time, you take business away from Industrial. So how does that create value for both businesses? I still don't understand the logic behind it. To me, it's just helping Automotive to float in the market, but at the detriment to Industrial. Where am I going wrong here?
Sophie Arnius: Rickard, could you please respond to this?
Rickard Gustafson: Sure. I think maybe where you might struggle a bit is that at the moment and given the low demand environment that we experienced for quite some time, we have said before that we are far from maximizing our utilization. So we have found a way to shuffle some of the assets around a bit and free up more capacity. So we're not taking any business away from Industrial, but we are avoiding to having a lot of undercapacity -- unnecessary capacity. So that's kind of the main benefit for the Industrial side and also reducing -- thereby reducing contract manufacturing will also be a positive contributor in long term also for Industrial. So there are a number of good things for Industrial here as well. So we truly believe that this is a good thing. And if I may, I don't want to be criticized here in any shape or form, but just saying more likely just shuffling around some assets. It is a little bit more complicated than that, I must say. So to just say so -- tell you about the reality that we face as well.
Sebastian Kuenne: But you can't create business out of thin air. So the business is what the business is -- demand is what demand is. And by moving assets from right to left, how does that increase capacity utilization? I can only explain it by you basically taking out some more capacities and just make the business a bit more streamlined, right?
Rickard Gustafson: That is true. That is true that we do get a stronger, better asset utilization. And also, we are then believing that longer term, we will continue to also increase growth and improve growth in our Industrial business that will further utilize assets. But as a starting point, you're right. It's really to set the utilization at a better rate from starting point.
Sophie Arnius: And we will continue with a question from Rory Smith at Oxcap.
Rory Smith: It's Rory from Oxcap. I was going to ask on the Q1 guidance, but I guess I'll stay on the topic of this contract manufacturing piece. Maybe coming at it from a different angle here. If the separation is going to take a little bit longer and the jumping off point is the same at 5% of Industrial sales, but the phasing down is going to be more aggressive. A, can you give any kind of indication or comment on how quickly you do expect that 5% to go to 0%? And then thinking that through, does that put some upside risk to the medium-term margin target for Industrial if we're going to get there quicker? That would be my question.
Rickard Gustafson: Right. I can't give you -- quantify any of this, but you're right. We do see, as I said, that this will be a steeper reduction of contract manufacturing than we planned originally. You mentioned that it will go to 0. I hope that we've been very clear. The plan is not to take it to 0, but it's going to be a rather low final amount. There's a tail assortment that will make no sense to shift around. So there will be some trading also longer term, but that will not have any material impact. So the vast majority will disappear. And you're right, we did say at the Capital Markets Day that we needed this midterm -- in the midterm -- at that time, we said for the next 2 to 3 years to finalize this, to reach our midterm target. That has not changed. We're now saying that there are 2 years left on that, and that's kind of where we're aiming to. And exactly the difference and how much faster, we will not go into any details, but it will not have a negative risk in terms of delivering on our midterm target, no.
Sophie Arnius: And we will continue with a question from Alex Jones at Bank of America.
Alexander Jones: Maybe continuing on the auto spin. Is there a critical mass of profitability in terms of margins or absolute profits that you think you need before the spin in order to ensure sufficient liquidity and size in the new company? And therefore, do the low margins this quarter influence in your mind, the spin time line going forward at all?
Rickard Gustafson: Right. Of course, we have very sound plans for our Automotive business that will take it to a certain profitability level and cash generation level. We cannot really disclose any details of those. But as I said during my comments -- during my presentation part, in Q4 -- sorry, for the full year, the margin is relatively unchanged and that we have throughout the year, won a number of strategically important contracts that are margin accretive. The business that we want to win, we normally win. That indicates a strong respect and trust among our customers and that we have a very competitive offer, both technology-wise and price-wise. So that is building a strong foundation. So we have very positive views on the long-term buildup of Automotive. And the Q4 in isolation, that we had a tough quarter also with a lot of impact from FX, as I mentioned, has not made any influence on our decision to plan for the spin in Q4 2026.
Sophie Arnius: We will continue to Andre Kukhnin at UBS.
Andre Kukhnin: Yes. Can I just start with the clarification on the dissynergies versus savings and to make sure we kind of have the right math. So if you said we're going to go from SEK 750 million run rate to SEK 2 billion during 2026 and '27, that's SEK 1,250 million over 2 years and hence, SEK 625 million per annum, so round down to SEK 600 million. Are we right to think that during 2026, you were expecting dissynergies to be around that SEK 600 million equivalent to the savings, but the run rate will be higher in Q1 and Q2. And then in Q3 and Q4, you'd expect the savings to start exceeding dissynergies. Is that the right way to think about it?
Sophie Arnius: Susanne, do you want to comment on this?
Susanne Larsson: I'm sure we will be able to disclose this by quarter because I realize the importance of both the rightsizing and the dissynergies. So we are prepared to do that. But as we said, then you're right, with a run rate of this year of SEK 750 million, we will end 2027 with a run rate of the SEK 2 billion we are committed to save. And we will now have relatively linear throughout these 2 years, and we are taking on dissynergies that will more than offset now already in quarter 1. And I think that means that we will have dissynergies in line with the savings throughout this year until we spin the business. And then we will have, of course, the leverage of the rightsizing program that will more than compensate for dissynergies and contract manufacturing as we stated at the Capital Markets Day.
Andre Kukhnin: Great. That's really helpful. And if I may, just a much broader question on pricing and your ability to price up and to pass through headwinds. In 2025, you're clearly surprised positively on that. Do you think from that experience, are we -- should we be more confident on your ability to do that in 2026 as well? Or should we worry about kind of price exhaustion and customer tolerance to that, that's starting to fade and hence, it becomes a bigger challenge as I'm sure there will be other headwinds to pass through as we go through 2026.
Sophie Arnius: Rickard, could you answer this one?
Rickard Gustafson: I'd be happy to. Given the tariffs that we know today, we are confident that we will be able to largely compensate for that also in 2026, where the net negative impact will be found in Automotive, but we will largely compensate. And I do believe -- if I leave tariffs aside for a second, I do believe that 2026 will not be a year of large general price increases. I don't think there is room for that in the market. However, though, we will always do specific or targeted price increases where possible. And clearly, when we deliver new solutions or engage with new customers, we also focus on the value that we provide rather than just the cost of manufacturing the bearing. So that will continue clearly throughout the year. If tariff landscape will change materially during 2026, we will have to take that on and find a way to mitigate that as well. It's hard to second guess because there might be a limit at some point how much you're able to push through. But no one really knows -- and really, no one really knows what might come. So I feel confident that we have demonstrated that when things happen, we are fast, reacting fast. Our organization takes the right measures, and we're able to compensate. And we're going to do everything in our power to maintain that regardless what they throw at us.
Sophie Arnius: We will continue with a question from Andreas Koski at BNP Paribas.
Andreas Koski: I also have a question on cost savings, but not related to the rightsizing program, rather to the world-class manufacturing program that you've been running for, I think, 5 years now. And when it was launched, you said that you were going to save like SEK 5 billion on COGS, which implies that, that has generated cost savings of about SEK 1 billion a year. So I just want to check if that was sort of the savings number that you had in 2025 and if there will be any carryover effects in '26 or if the savings from the world-class manufacturing will be 0 now from now on and forward?
Susanne Larsson: I confirm your assumptions. So we have finalized the program. This autumn, we have the SEK 5 billion ambition level that we delivered on, and we will expect continued benefits of that as we move along into also '26. Yes.
Sophie Arnius: So there will -- yes, it will be a bridge effect, you can say, primarily the first half of this year. Good. Let's continue with a question from Rizk Maidi at Jefferies.
Rizk Maidi: Yes. It's just really a clarification and maybe it's something that I misunderstood. So on the rightsizing savings, we're talking about roughly SEK 600 million to be achieved in 2026. And I think at the Capital Markets Day, you talked about dissynergies to be roughly around SEK 1.5 billion. As you -- my understanding this morning is you're trying to scale the dissynergies closer to the savings number, but it's still a big number. It's SEK 1.5 billion. And I think Automotive needs to stand on its 2 feet by the end of this year because that's when the listing is going to happen. Can you just help us sort of bridge that gap between the SEK 600 million and the SEK 1.5 billion this year. I think this is really what the market is struggling with this moment.
Susanne Larsson: So when we have talked about the rightsizing program that we initiated last summer, we have said that we will have an annual benefit of that of SEK 2 billion, and that will more than compensate for the dissynergies and the contract manufacturing. So that's what we said as a general remark then. When it comes to the savings, that will now be linear as you imply. And if we talk about the dissynergies then, that will then -- and that is again why we actually launched the rightsizing program is to rightsize the industrial organization, and that work is ongoing, but it's also to cover up for the independence of Automotive that we are taking on now to be able to spin by the end of this year. So we are now trying to say how that benefit is offsetting the dissynergies and how we will then -- when we have left Automotive, be in a better place still with the contract manufacturing from the takeoff.
Rizk Maidi: Okay. Okay. And then just very quickly, does the CapEx plans for the Industrial business now changing given the transfer of assets that you're going from Industrial to autos?
Susanne Larsson: No, no, it will not. So we remain with the 5% of sales for Industrial in spite of this scope change of the transfer.
Sophie Arnius: Good. And that is at the point of departure and then it will decline faster as we talked about here. We have time for a final question, and that will come then from Daniela Costa at Goldman Sachs.
Daniela Costa: I wanted to follow up on the point on tariffs. You've been very clear you're going to compensate that, I guess, from a margin perspective and passing that through. Have you observed sort of any trends in terms of market share or everyone is doing the same price increase pretty much in the market? Just wondering when you talk about compensating fully, if you are willing to give up on market share as part of that or the industry is just all increasing by the same?
Rickard Gustafson: I would say that so far, it seems like the industry has gone down the same path. So it's a bit too early to tell, but we have no indication that we have lost market share in any general terms. But rather, as you say, that our competitors, they also safeguard their earnings and reacting and trying to compensate themselves for these tariffs. So maybe a bit premature to be too specific, but we have no indication that we are losing market share.
Sophie Arnius: Thank you. And that was our final question. And before we end, Rickard, do you want to give some concluding remarks here?
Rickard Gustafson: I'd be happy to. And thank you for joining us this morning. I am pleased that we are able to navigate in rather challenging environment and maintaining a resilience and even improved adjusted operating margin. That demonstrates a shift in behavior and capabilities in SKF over the years. And that to me, it's also a proof point that our strategy that we launched a few years back is delivering in line with what we anticipated. We are eager to gear up for growth. Clearly, we have been in a long period in a negative demand environment. We foresee that, as we said, that Q1 will be roughly in line with Q4, but we are preparing for an uptick. And given what we have done in the past, I'm again very convinced that we will have a very strong starting point and some good leverage once the market turns back up again. We are committed and confident about our plans for Automotive. We're excited about this small shift in the asset reallocation that would drive -- create an even better starting point. And as I mentioned, the organization is now really gearing up to deliver on those strategic pillars that will unlock the full potential of our business. So we're excited about the future. More to come, and I thank you so much for your attention today and wish you a lovely weekend once you get to that. Thank you.