Ola Ringdahl, CEO Lindab: Ventilation och energieffektivisering

Thanks Pontus, thanks.

We'll start by noting — so that Annika won't be disappointed — that we have good order and discipline, belt and suspenders, so we'll be fine and stand securely for at least another 65 years. Lindab is a very Scanian but also very international industrial company. We happen to be in a market niche that has become very attractive — ventilation, meaning fresh and clean air for people in all environments, and with a strong focus on energy savings. Today we're a group with approximately 5,000 employees, 14 billion in revenue, operating in 20 countries — 19 in Europe — and then a rather small but growing operation in the USA.

When you're sitting there about to release a quarterly report and realize it's the seventh consecutive quarter of negative organic growth — meaning shrinking sales in existing operations — then clearly after such a long time, margins come under pressure. You can't really avoid that. You try to cut costs, you try to restructure, but when you're approaching the third year of negative market conditions, it gets tough, and you need to find other ways to weather that period. I can only agree with what Annika says. Regarding interest rates, we've had incredibly tough times with the construction cycle. Lindab has half its sales in renovation and reconstruction, but the other half goes to new construction. We don't have huge exposure to housing, but there we've seen very sharp drops in production rates across Europe. And there's one country I must unfortunately say that we have the most sales in but which has also performed absolutely the worst in all of Europe — guess which? It's Sweden, followed by Finland, and now unfortunately Germany is starting to shake too. Brexit, from a construction sector perspective, isn't exactly a bright spot either. So in several of our major markets things are tough, but there are others doing well — Denmark has continued to push ahead. We have nearly 1,000 employees in Skåne but 700 in Denmark, with very close cooperation and a long tradition. I'm absolutely certain we'll come through this well. I believe the market will turn within the next year, but we're very dependent on interest rate cuts. And I also think it's strange that so few governments support the energy transition more than they do. There's so much money to be saved. We have a challenging energy situation in Europe, and the fact that no one tries to stimulate the best energy measure that exists — saving energy — is beyond my comprehension.

I believe the countries that came first into this construction cycle — like Sweden with the highest interest rate sensitivity — will also come first out of this downturn. And it's probably already underway. We're seeing early signs on the private market — people have been waiting to extend their house or build a new conservatory for nearly three years. It's starting to stir at home — should we get started soon while we can still find craftsmen? But the larger investments take longer. On the private side there's less in housing and offices, but the public sector is still building — military facilities, prisons, and other things we unfortunately need now. As Europe's leading ventilation company, ensuring fresh air is delivered into buildings in an energy-efficient way — will we ever stop needing that? No. The demands on these products and solutions will only increase. It's a favorable trend driving demand for Lindab's products.

You mentioned downpipes — that could be because some have seen the Lindab brand on rain gutters and downpipes, which were among our first products back in the 1960s. That's where Lindab and our skilled production technicians learned to shape sheet metal into round or semi-round forms, which then evolved into ventilation ducts. Lindab is the best in the world at ventilation ducts — transporting air through buildings and ensuring it comes out at the roof. There are countless Lindab installations here at the Malmö Opera, in office buildings, housing, hospitals — everything imaginable. Building that position over 65 years naturally leads to interesting market shares. Where we don't have a strong position, we might make add-on acquisitions or invest further. With the strong position Lindab has today, we can weather downturns quite well. We've been an incredibly strong and reliable supplier — during COVID, the raw materials crisis, and after Russia's invasion of Ukraine, we always delivered, always on time, across all of Europe. No one else managed that. So I believe we stand very strongly.

I acknowledge that I'm somewhat talking my own book here, but one data point is: buildings in Europe account for roughly 40% of total energy consumption. If you don't address energy consumption from buildings — heating, cooling, ventilation, lighting — then you won't tackle the important question of reducing energy consumption in Europe. It's great to produce clean energy, but there's still a lot of dirty energy around Europe. How do you address that? You add insulation, replace windows, do everything to make the house tight and well-insulated. But if you've sat in such a house for a few hours, you realize it needs air — lots of it. And that air needs to be heated, and before it's exhausted, the heat should be recovered. Very complex systems — kilometers of ducts, masses of sensors — for it all to work. So ventilation in a modern building today is hugely complex. That's why Lindab has a complete product universe and a complete digital universe to design these systems, measure everything happening in them, and track sustainability — sheet metal should ideally be environmentally friendly materials, reusable and recyclable. Very interesting, very complex, and we're at the absolute forefront globally. A small Scanian company that has grown large.

Yes, you could say that. Often when energy subsidies are discussed, it ends up being about households buying a heat pump. But I think we need to prepare for what's happening in Europe. I don't think we should wait for the EU — the EU is coming with heaps of directives. By 2030, all new commercial buildings should be net-zero emissions. By 2050, we should have renovated the entire European property stock to near-zero energy consumption. It's a gigantic challenge. We can't wait for the EU to spell out exactly how it should work — we need to prepare. There could be various incentives. I'm not a big fan of large subsidy packages, but incentives to speed up this development would help. Sweden and the Nordics are world leaders in energy efficiency across many sectors, so we have a huge export opportunity. In the absence of political focus, we'll manage anyway. There are also forces from banks with green loans and certification as a green supplier. We're not waiting — we're ahead with fossil-free steel, CO2-reduced steel, green loans and financing, ahead with everything. But I think the politicians are a bit passive on this.

In certain technologies, Sweden has been a bit ahead, particularly regarding houses and heat pumps. But so much more is happening. The heat pump technology we've championed in Sweden is becoming quite passé. There are other technologies that are considerably more promising. So we need to hurry and stay at the forefront, because things move fast. The Americans, Asians, and Germans are moving quickly. I'd like us to become more aware of where technology shifts are happening.

I should start by saying my primary engagement in these issues — infrastructure, energy — is through the board of the Southern Sweden Chamber of Commerce, which does a very good job. So I'm not just talking my own book. But I felt such frustration a few years ago. I feared there would be a total power shortage in southern Sweden. I've previously lived in South Africa and seen what happened when the power system collapsed, and I don't want the same thing in Skåne. We don't have new capacity for new industries wanting to establish. The risk of blackouts and electricity price volatility is devastating. You want to run serious industry, and I'm very proud we have a lot of manufacturing in Sweden — I have 600 industrial workers in our factories because we want to be close and produce locally. Many other business leaders want the same. In a country with so much hydropower and nuclear power, Sweden should be a net electricity exporter 365 days a year, every hour. It's a fantastic export product. Why should we only export part of the year? That we can't get the transmission system and base-load power production right in southern Sweden — I find that simply pathetic. We had it, and then we lost it.

If I comment on that, it becomes very risky for a business leader to venture into politics, and one should be very careful. But I think it was wise and good when the engineers got to decide how a perfect power system should be built.

It could have mattered if we were a very electricity-intensive or gas-dependent industry. But Lindab isn't highly energy-consuming — we're more of a mechanical industry than a process industry. I've maintained close dialogue with our electricity suppliers in the regions where we manufacture in Sweden, and ensured we have sufficient grid capacity to handle 10% annual growth in coming years. I've received guarantees for that, with one small caveat: you shouldn't have too many electric cars, because then it won't work.

No, no. So the industry will manage as long as our employees don't buy electric cars. But I'm sure some intelligent programmer will solve this so we get some kind of collective charging solution, and that just then there's a total electricity crisis in a country — it feels strange.

It's also because I live in Malmö and commute to Grevie on the Bjäre Peninsula along the infamous E6 — you never really know where you'll end up or when you'll arrive. We have terrible roads, primarily the E6 between Malmö and Helsingborg. Major challenges with train connections — there are still single tracks in parts of Skåne, which is very strange. And then there will be an incredible traffic increase when the Fehmarnbelt tunnel opens between Germany and Denmark around 2029, and Sweden doesn't seem to be preparing for it at all. The increase in trucks and trains wanting to go through Skåne up to Gothenburg, Oslo, or Stockholm — I don't know how that's going to work.

I wish I could be hopeful. The Chamber of Commerce has made some important decisions — for example regarding how the surplus from the Öresund Bridge should be reinvested in infrastructure. That's a big victory. But I think it's going far too slowly. It shouldn't take 30 years to expand the E22 to Blekinge. We need to pick up the pace. I think we should look at how the Danes do it — they have better tempo. Besides, they seem to buy a type of asphalt that doesn't have a bunch of holes in it, which I'm curious about.

My four children think it's moderately exciting, I should say. No, but I came to Lindab six years ago. I think there had been a sort of colonialist idea that you should colonize more and more countries every year with Lindab flags, and the more countries, the more successful. But I was forced to conclude that with tiny operations in many faraway countries, you don't get market share, you don't get pricing power, you don't get the network density important in our industry, and you don't get any strength. So I chose a different strategy — to consolidate and focus. We went from 32 countries to 19. We divested one of our three business areas. And I withdrew from all non-democratic countries — we should only operate in free democracies with rule of law and right values. For example, Russia — if I ever get a memorial plaque at Lindab, it will say he at least had luck with divesting the Russian operation, which I managed on New Year's Eve 2021 after several years of hard work. I strongly believe in operating in free countries and building a number-one position everywhere. You can afford modern, safe factories and nice offices. A Lindab sign should reflect that we're a quality company that takes care of employees and appreciates customers. To do all that, you need high profitability. Better to do fewer things really well, consolidate product portfolio and geography, and grow inward for maximum strength.

I've worked with acquisitions in my previous jobs too. It's difficult and a lot can go wrong, but it's a way to buy time. We could develop many of these new technologies ourselves, but it would take an extremely long time. By acquiring someone who's been doing it for 30-40 years, you get proven expertise. It can also be about establishing in new locations — if we have operations in Munich and Frankfurt but nothing in Stuttgart, should we build from scratch or buy the leading ventilation player there? We've chosen to acquire, but we retain the local management and often the brand, giving them better conditions for growth. All 27 companies have developed well. Sustainability issues have actually triggered several sales too — small companies can't handle the reporting, engineering expertise, and traceability requirements. They need a strong parent in this green transition, and that has triggered several to approach us saying they want to partner with a serious, strong company.