Earnings call transcript: Nilfisk’s Q2 2025 revenue misses forecast, stock surges

Nilfisk Holding A/S reported its Q2 2025 earnings, revealing a revenue of $269 million, which fell short of the forecasted $273.57 million. Despite this miss, the company’s stock surged by 9.53% to a price of $104.6 in pre-market trading, reflecting investor optimism driven by strategic initiatives and future guidance. According to InvestingPro analysis, Nilfisk appears undervalued based on its Fair Value calculations, with the company maintaining strong liquidity positions and profitable operations over the last twelve months.

Key Takeaways

• Nilfisk’s Q2 revenue of $269 million missed the forecast by $4.57 million.
• The stock price increased by 9.53% following strategic updates.
• Organic growth was negative at -1.1%, with varied performance across business segments.
• The company has set a net zero emissions target for 2040.
• Divestment plans and production consolidation aim to improve profitability.

Company Performance

Nilfisk’s overall performance in Q2 2025 showed mixed results, with a decline in organic growth by 1.1%. The company experienced varied growth across its business segments, with the Specialty Business growing by 10.8%, while the Consumer Business contracted by 5.1%. The company continues to operate in over 100 countries, maintaining a strong presence in the EMEA region where it gained market share in Germany and France. InvestingPro data shows the company maintains a healthy gross profit margin of 42.4% and an attractive EV/EBITDA ratio of 7.6x, suggesting efficient operations despite growth challenges.

Financial Highlights

• Revenue: $269 million, below the forecast of $273.57 million.
• Organic Growth: -1.1%.
• EBITDA: €36.4 million, representing a 13.5% margin.
• Gross Margin: 42.2%.

Earnings vs. Forecast

Nilfisk’s Q2 revenue of $269 million was below the forecast of $273.57 million, marking a shortfall of $4.57 million. The earnings per share (EPS) forecast was $0.20, but the actual EPS was not disclosed. This slight revenue miss contrasts with the company’s historical trend of meeting or exceeding expectations, suggesting potential challenges in market conditions or operational execution.

Market Reaction

Despite the revenue miss, Nilfisk’s stock price surged by 9.53% to $104.6 in pre-market trading. This positive market reaction can be attributed to investor confidence in the company’s strategic initiatives, such as cost reduction programs and production consolidation. The stock is now closer to its 52-week high of $150, demonstrating renewed investor interest.

Outlook & Guidance

Nilfisk projects organic growth of 1-3% and aims for an EBITDA margin target of 13.4%. The company plans to offset tariffs through pricing and supply chain initiatives. Future guidance includes launching new products, such as the SW3000 mid-sized sweeper, and achieving net zero emissions by 2040. With an Altman Z-Score of 7.51 indicating strong financial health and analysts projecting continued profitability, InvestingPro subscribers can access detailed analysis of the company’s growth potential and comprehensive financial health metrics in the exclusive Pro Research Report.

Executive Commentary

CEO Jorn Sinton emphasized the company’s commitment to sustainability, stating, "We are now committed to achieving net zero across our entire value chain by 2040." CFO Karl Benholt added, "We expect to be able to offset the current level of tariffs with pricing and supply chain initiatives."

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production and delivery.
• Tariff Impacts: Ongoing tariff challenges may affect profitability.
• Market Saturation: Intense competition in key markets could limit growth.
• Macroeconomic Pressures: Economic downturns may reduce demand for products.
• Operational Restructuring: Changes in production and workforce could pose execution risks.

Q&A

During the earnings call, analysts inquired about the potential divestment of the U.S. high pressure washer business and the impact of tariffs. Executives highlighted plans to neutralize tariff impacts by year-end and mentioned the possibility of moving production to Mexico if tariffs increase.

Full transcript - Nilfisk Holding A/S (NLFSK) Q2 2025:

Nune Jesperson Lee, Head of Group Communications, Nilfisk: Good morning, and welcome to NILFEST Conference Call for the 2025. My name is Nune Jesperson Lee, Head of Group Communications, and with me today are Jorn Sinton, CEO and Karl Benholt, CFO. Before passing the word over to Jorn, I would like to turn your attention to Slide two regarding forward looking statements. Please note that this presentation, including remarks from management, may contain forward looking statements that should not be relied upon as predictions of actual results. For more details, please read the content on this slide.

And with that, I would like to pass the word over to Jung.

Jorn Sinton, CEO, Nilfisk: Thank you, Nene, and good morning to everyone joining us on the call. Before we dive into the second quarter results, let me take this opportunity to briefly reintroduce Fisk for you. Niels Fisk was founded in 1906 and has grown into one of the world’s leading providers of professional cleaning equipment and services. Today, our solutions are sold in over 100 countries through more than 40 sales companies. We have a broad range of industries from manufacturing to health care to retail and hospitality with a portfolio that spans from advanced industrial vacuum solutions to high pressure washers and floor care equipment.

We have a full range of floor care, vacuum cleaners and high pressure washers contributing to our ability to meet evolving customer needs. Looking at the regional footprint based on full year 2024 figures, EMEA continues to be our largest market, accounting for 60% of revenue, followed by The Americas at 33% and APAC at 7%. We operate across four business verticals: contract cleaners institutions, including education, offices, retail, health care and hospitality industry, such as manufacturing, warehousing, food and beverage and pharma and for these segments, cleaning, support, safety and compliance. Agriculture, construction and automotive sectors that need robust equipment for demanding environments and consumer households using our vacuum cleaners and pressure washers for everyday cleaning tax. With that context, let’s turn to our second quarter key highlights.

A key milestone this quarter was the completion of our production consolidation in Hungary, which strengthened our supply chain resilience and supporting gross margin. As we said we would, we reallocated resources from back office functions to frontline commercial positions To protect margins and free up resources for future growth, we launched a cost reduction program in the second quarter. The program is designed to align our cost base more closely with our business volumes and address the rise in overhead costs we saw since Q3 twenty twenty four. We have another new product introduced. We launched the SW3000, a midsized sweeper designed for contract cleaners, retail, education and light industry.

The product improves maintenance and efficiency and is made of 25% recycled plastic. This product address a more premium niche to complement existing products in this category. An other important milestone we reached this quarter was that our net zero emissions targets were officially validated by the science based targets initiative, confirming the strength of our climate road map. We are now committed to achieving net zero across our entire value chain by 02/1940. U.

S. Tariffs have continued to influence how we operate. In the second quarter, we were also hit by a one off incident where we had an extraordinary short lived tariff level come into effect. Even with these temporary headwinds, we kept a healthy gross margin, which shows the strength and flexibility of our operations. On the back of recent U.

S. Tariffs agreements, we expect higher tariff level, which we will, with a little lag, mitigate with price increases and supply chain resourcing. Now let’s move to some of the key numbers for the second quarter. We reported revenue of $269,000,000, corresponding to a negative organic growth of 1.1%. And we had an EBITDA before special items of EUR 36,400,000.0, corresponding to an EBITDA margin, BSI, of 13.5%, down from 14.1% last year due to lower revenue combined with increased investments in sales organization and product development.

The Specialty business delivered very strong organic growth of 10.8%, supported by solid sales momentum in The U. S. And robust demand for new products. The Consumer business saw a good decline of 5.1% due to muted demand in predominantly the high pressure washer category as well as vacuum cleaners. The service business grew slightly by 0.3%, driven by strong field service growth in EMEA.

The Professional business saw a negative organic growth of 2.4%. By region, we continue to grow in EMEA and APAC. Americas sequentially improved compared to the previous quarter, but is still showing negative organic growth year on year. Turning now to an update per region. We continue to see growth in the EMEA region, which was driven by moderate growth in the service business, strong growth in the specialty business and slight growth within the professional business.

The growth in EMEA was negatively impacted by a decline in the consumer business. Although the more fluctuating consumer market softened due to weaker demand for high pressure washers, we gained market share in Germany and France. Excluding consumer, growth in EMEA was 1.8. Americas improved sequentially, but is still showing negative organic growth. This was driven by a high backlog in the same quarter last year, a soft demand and lower production capacity in the hurricane affected U.

S. High pressure washer business, which is held for sale. Excluding the high pressure washer business, growth in America was showing sequential improvement. In APAC, we continued to make good progress and delivered another quarter of growth driven by a sharpened commercial focus and improved execution under since one point five years new leadership. This quarter’s performance was supported by major contract wins, particularly in India, South Korea and Australia.

Speaking of the wins of India, we would like to highlight an example. We in Nilfisk delivered 24 autonomous scrubbers to Ahmedabad Airport. That is our largest robotic deployment in APAC. In just sixty days, the fleet cleaned over stunning 5,000,000 square meters, boosting efficiency and sustainability in a high traffic water stressed environment. This has really sparked a significant regional interest positioning us strongly for future smart cleaning initiatives in India.

I will now then hand over to Karl, which will give you more of a financial update.

Karl Benholt, CFO, Nilfisk: Thank you, Joon, and good morning, everyone. I look forward to taking you through our financials for Q2 as well as our outlook for the rest of the year. So let’s start with the P and L. As Jorn just mentioned, we had an EBITA, BSI of 13.5%, in line with our targets for the year. Gross margin was a solid 42.2%, slightly down from Q1 driven primarily by tariffs, but I’ll get back to that.

Also, can see OpEx starting to decrease slightly, which enabled us, as mentioned, to reach our target level on EBITDA. But let’s go through the P and L a little bit more line by line. So let’s start with the first, revenue. Overall, negative organic growth of 1.1%. Breaking things down a little bit, I guess on the positive note, we are continuing to grow in EMEA, in APAC as well as in Latin America.

And if you look at our businesses, as Jorn mentioned, the specialty business is really doing well, while the consumer business is a little bit more challenged. Looking at the details perhaps a bit more by region then. So overall organic growth of 0.7% in EMEA including consumer taking consumer out, a positive growth of 1.8%. And year to date, so first six months, a very healthy organic growth of 4.2%. Turning to APAC.

As Jorn mentioned, we have made the leadership changes there over the last eighteen months. And in the last few quarters, we’re really starting to see results. So another quarter of organic growth. Q2 this year, 2.7% compared to negative organic growth of 8.7% last year. And for the first six months, very much in the same direction, 2.8% organic growth.

So we are at a different momentum in APAC than we were a year ago, clearly. Turning then to our more challenging parts, Americas. As I just mentioned, we have a very nice business in Latin America and that continues to grow, while The U. S. Is challenging for us.

As Jung mentioned, probably the biggest challenge there is The U. S. High pressure washer business, which is suffering from limited production capacity following the hurricane as we have discussed in before. Looking at the rest of the business then, excluding U. S.

High pressure washer growth in the second quarter was a negative 1.4%, which is significantly better than a negative 7.7% in the first quarter. So clear sequential improvement, which we are very happy about. So that was growth and revenue. Let’s continue down in the P and L and go to gross margin. So as I just mentioned, solid gross margin of 42%, very much in line with where we were a year ago, slightly down from Q1 where we were above 43%.

And the key drivers here, if we compare it to last year is we had materially higher tariffs in the quarter. A little over half of that though was kind of onetime things that we don’t expect to see going forward. Even so, we were able to offset both high tariffs and some under absorption in our production facilities with the price increases we implemented at the beginning of the year more broadly and more specifically for Chinese goods coming into The U. S. In April.

Moving on to operating expenses. At the beginning of the year, we talked about reshaping our cost structure, reducing cost in back office functions and increasing sales and service density. We have done this also in the second quarter. But as we discussed after the first quarter, we also have an ambition now to reduce our cost base on a run rate basis and we started the cost program in the second quarter to address this. We have made significant progress and we implemented a reduction in force in May.

We cannot really see a lot of the impact of that in Q2, but we expect to see that in the coming quarters. And we will continue to take cost reduction measures to achieve our targets here. Moving on then to the balance sheet and cash flow. I guess here is an area where we can see some of the effects of the cost reduction program as we had special items of close to SEK 8,000,000 in the quarter. And we had negative cash flow again.

And when I look at it, I think in terms of cash conversion, so where we’re able to convert our EBITDA profit into cash flow. And the things that stand out here to me is an increase of $21,600,000 in working capital in the quarter as well as the special items of just under $8,000,000 in the quarter. We also had capital expenditure of about SEK 7,500,000.0, but that’s more in line with plan and actually quite a significant reduction over last year. So that was the results for the second quarter. So let’s move on to the outlook for the rest of the year.

So at the beginning of the year, our expectations was to grow between 13% organically and have an EBITDA margin of 13.4%. We reiterate this guidance. And the key assumptions here is that we have stable market conditions in EMEA, so we can continue to perform well there. We expect to have a neutral development in The U. S.

Compared to last year. And we expect the APAC region to continue on its current pace. Furthermore, those are the things supporting the growth outlook. Looking at profitability then, we expect to be able to offset the current level of tariffs with pricing and supply chain initiatives, as Eun mentioned. Furthermore, we have taken action to reduce our cost base.

We’ve already executed on a significant part of that in Q2, and we expect to see results of that in the second half of the year. So based on that, as I mentioned, we reiterate our guidance. Then looking at our priorities for the year and progress on that. So also at the beginning of the year, we talked about three main focus areas, improvement in our competitive position in North America, enhancement of our operating model as well as executing structural efficiency improvements. So I will talk about structural efficiency improvements and then let Jung discuss the other two.

So in the first half of the year, we were able to consolidate our production facilities in Hungary, reducing our operations overhead significantly. In addition, as I just mentioned, we have made workforce reduction to reduce our operating expenses. And we are in the process of divesting our U. S. High pressure washer business.

And during the second quarter, we also closed a couple of sales entities in APAC to achieve higher profitability there. Looking into the second half of the year, I look forward to realizing our cost savings targets based on our cost savings initiatives that will continue throughout the year. We are also very much looking forward to finalizing the divestment of The U. S. High pressure washer business.

And with the two consecutive quarters of negative cash flow, we are looking at addressing working capital to return to change the trend here. With that, I hand over to you. Thank you.

Jorn Sinton, CEO, Nilfisk: Thank you, Karl. And then moving on in the strategic roadmap for 2025, looking at enhancing the operating model. As has already, we are reshaping our cost structure with ambition to relatively see more of our resource going into the commercial activities and products and services and less into back office administrative. We have started really to implement the new decentralized operating model and one key activity in this is obviously to reorganize to reflect this new operating model where they have the commercial regions being close to the customers and driving our P and Ls. Going forward, we will continue to even more tailor our value proposition more effectively across customer verticals that will really take the customer need approach or customer demand approach to our propositions.

We will continue to reshape our cost structure and also adapt the financial performance management to align the reporting to the more the centralized operating model for even better and even more effective decision making. Looking at improving the competitive position in North America, we have reduced backlog and improved delivery performance. We have delayed the commercial organization and we have continued to work on increasing sales activities and starting to address sales density in this region. And going forward for as a priority for the second half is obviously to continue to increase sales density to drive sales of the new products and to continue to improve product and parts delivery performance to enable us to be doing even better in this region. And with that, thank you very much everybody for listening, and we move over to the Q and A.

Conference Moderator: We will now begin the question and answer session. The first question comes from the line of Christian Torni, SEB. Please go ahead.

Christian Torni, Analyst, SEB: Thank you and good morning from my side. A couple of questions. So first one goes to your organic growth guidance to 1% to 3%, which obviously requires a substantially better second half than your first half. So to the assumptions you say neutral development in The U. S.

Versus 2024. I’m just curious on the assumption and the technical treatment of the high pressure washer business. So assume you sell the high pressure washer business during the second half of the year, do you then restate previous quarters? So if I calculate right, the high pressure washer business diluted organic growth for the group in the first half by more than one percentage point. Would you then exclude that?

Or would you only exclude it on a sort of a forward going basis?

Karl Benholt, CFO, Nilfisk: Christian, thanks for the question. Regarding the treatment of The U. S. High pressure washer business, I expect that we would take it out for the comparison if we are able to divest it during the year, yes.

Christian Torni, Analyst, SEB: Okay. So for the first half, if you exclude the high pressure washer business, your organic growth, as I calculated, would be 0%. So that’s essentially what we should look at when benchmarking against your 1% to 3% guidance.

Karl Benholt, CFO, Nilfisk: I think that will be appropriate.

Christian Torni, Analyst, SEB: You assume to yes. Okay. So you do expect to close the sale of the high pressure washer. I mean, can you maybe elaborate on that process? Do you have concrete dialogue with buyers at this point?

Karl Benholt, CFO, Nilfisk: Yes. We have concrete dialogue with buyers. These processes are always uncertain, but we have significant interest. So we hope and expect to close this. We don’t obviously, we don’t know now, but we hope to close this before year end, yes.

Christian Torni, Analyst, SEB: Okay. That makes sense. And then just staying on The U. S. Because regardless of that transaction, it still requires an improvement in The U.

S. Sort of had some tailwind from backlog conversion acceleration, which I guess you would not necessarily have to the same extent in the second half of the year. What makes you confident in the underlying improvement? And what have you seen in the third quarter so far?

Jorn Sinton, CEO, Nilfisk: Thank you for the question. Now as you mentioned, then the backlog effect obviously decreases for the significantly the second half compared to the first half. So in some due to some reasons, we have improved comps, easier comps, so to speak, for the second half than the first half, backlog being one driver. We also have introduced some new products, which we expect will have better effect as we communicated before, more effect the second half than it had in the first half. And then we are working on commercial activities, and we will increase density and those other things and improve our overall performance delivering performance as we have worked on that will have an effect.

Christian Torni, Analyst, SEB: But can you see this improvement in your July figures?

Jorn Sinton, CEO, Nilfisk: Well, this is a call about the second quarter. So but as we said, we are seeing not a gigantic by any means, but we are seeing a sequential improvement.

Christian Torni, Analyst, SEB: Fair enough. Then my other question goes to the net working capital, because as you point out, it’s a pretty steep increase and a significant drag on cash flow. So what can you do to actually reduce this? And where do you expect net working capital to be at year end?

Karl Benholt, CFO, Nilfisk: Yes. As I mentioned, we were also disappointed with cash flow development and net working capital increase in the quarter. What can we do? I think some of the things that increased in the quarter were kind of more natural course of business. So we invoiced quite a lot in the towards the end of the quarter in Americas, for instance, which meant that receivables went up and will naturally come down.

So that was kind of a more temporary effect. In addition, we are starting initiatives to reduce working capital more structurally.

Christian Torni, Analyst, SEB: And where do you expect it to be year end? I mean

Karl Benholt, CFO, Nilfisk: Yes. So I think, let’s say, the first focus is to get back to kind of more of a normal level. I think we were at kind of a normal level ending last year. So I think we should be able to get back to that within the next few quarters.

Christian Torni, Analyst, SEB: Okay. So Q4 this year should end roughly where you ended Q4 last year. That’s the ambition?

Karl Benholt, CFO, Nilfisk: Within a few quarters, I said. A few can be two, three, four. But yes, that’s kind of what we’re shooting for.

Christian Torni, Analyst, SEB: Fair enough. Great. Thank you. That’s all for me.

Karl Benholt, CFO, Nilfisk: Thank you.

Conference Moderator: The next question comes from the line of Casper Blom, Danske Bank. Please go ahead.

Casper Blom, Analyst, Danske Bank: Thanks a lot. Our first question goes to tariffs and basically to your Slide number 13. And thanks for splitting out the impact from tariffs to 1.9 percentage points. As I understood you, you said that the temporarily high tariffs had an impact of a little more than half. So should we sort of from the back of that expect that tariffs have a little less than 1% impact in Q3 and then in Q4 that you can make it go away due to your mitigating initiatives.

Is that the way to think about tariffs for the next couple of quarters?

Karl Benholt, CFO, Nilfisk: Good morning, Casper. Yes, so let me be distinct there. So what we have on the slide is the incremental cost of tariffs. So tariffs paid, not the net effect. So that reflects the cost paid.

And as I mentioned, yes, a little bit more than half of that were onetime things. So in terms of cost, I think you’re right in the assumption. We are also offsetting this with prices. So the net impact is we had a net impact in the quarter specifically to that because we made a price increase in April and that has not completely offset because it takes some time to kind of roll into effect when you make a price increase. So yes, I think we will expect to see about 1% slightly lower than 1% impact on the cost side, but that we will be able to offset that with pricing and with supply chain.

Casper Blom, Analyst, Danske Bank: Yes. So already in Q3, the net impact would be neutral basically?

Karl Benholt, CFO, Nilfisk: No. It will probably take a little bit longer to get the neutral, so more towards the end of the year.

Christian Torni, Analyst, SEB: Okay.

Casper Blom, Analyst, Danske Bank: That’s fair enough. And you’ve previously also talked about moving production to Mexico in an effort to also sort of protect yourself against other initiatives in the future. Could you give an update on that move?

Jorn Sinton, CEO, Nilfisk: Yes, absolutely. So briefly, we have done a lot of preparations and gone through how would it work and we’ve done pilots and all of that. So we are prepared to go ahead if necessary. But at current tariff rates, the business case is not doesn’t suggest that we move on it. But we are ready to do it Okay.

If

Casper Blom, Analyst, Danske Bank: So you just have to plan in the draw, if it be, so to say?

Jorn Sinton, CEO, Nilfisk: Yes. Net one off incident that we had, if you take that out of the equation. As of now, it’s still better to go with current flows as we have. But we are very ready to move if things would change.

Casper Blom, Analyst, Danske Bank: Okay. That is very clear. And then a final question, maybe most of all to Karl. Now you’ve had a few months more in within Nilfisk, and I suppose you’ve had a better chance to go through numbers and books and so forth. Are you comfortable with your balance sheet as it is today in terms of what items you have?

Are there anything on the balance sheet where you see a need for adjustments or impairments or things in the future? Or are you sort of comfortable with what you have inherited now that you sort of have had a chance to go through it in more detail?

Karl Benholt, CFO, Nilfisk: Thank you. Very interesting question. So I mean there are some things on the balance sheet that you’re all aware of. So we have the Springdale case, where we expect a decision by the courts next year that could have a potentially negative effect. We also, of course, have the divestment of The U.

S. High pressure washer business. We don’t know where that will end up, but there is risk there, of course. I guess the other thing is we are working on updated strategy and business plan for the company. And one of the parts there is kind of reviewing our product and project portfolio within R and D.

So I mean that is an area where we made a lot of CapEx in the past. We have a lot of intangibles and inventory. So if that results in changes in our product portfolio, that could trigger some additional write down needs, I guess. I guess those are the kind of big things that I see. But that’s not anything we have concluded on.

Casper Blom, Analyst, Danske Bank: Fair enough. Do you know sort of when you expect to have your new business plan and product planning ready so that you can sort of decide to say, okay, this is the neophus that we want to continue working with?

Karl Benholt, CFO, Nilfisk: I think we expect to finalize that during this year.

Casper Blom, Analyst, Danske Bank: Okay. So that sounds like something we would hear more about in connection with full years?

Karl Benholt, CFO, Nilfisk: I think that could be appropriate, yes.

Conference Moderator: The next question comes from the line of Claus Almer, Nordea. Please go ahead.

Claus Almer, Analyst, Nordea: Thank you. Yes, also a few questions from my side. So the first goes to The U. S. Market and the tariffs, not the impact on the P and L, but more on the competitive landscape.

So normally, in The U. S, you have been facing some Chinese brands. How are they acting given the tariffs that has not been imposed to their prices? That will be the first one.

Jorn Sinton, CEO, Nilfisk: So the question was how are the Chinese brands acting compared?

Claus Almer, Analyst, Nordea: Well,

Jorn Sinton, CEO, Nilfisk: that’s a broad question. All in all, we see I mean globally, it’s fair enough to see that we’ve seen we are seeing more Chinese brand pop up in the various markets. I think also on the back of it’s been more uncertain and more costly to drive it into The United States. We did see price increases from several, I can’t say everyone, but a lot of participants in the market in The U. S.

Did impose price increases during the second quarter. It has been a wait and see mode with regards to that since then. But I guess it’s not unrealistic to believe that people, including the Chinese brands, will move on price and sourcing and what have you in order to mitigate and manage the situation, which is at least a bit clearer now with the recent agreements.

Claus Almer, Analyst, Nordea: Okay. And then the second question, and this comes to you, Karl, but actually maybe to both of you. But one or two quarters into the cost saving program, have you made any new observations or got new ideas to further optimize the cost structure?

Karl Benholt, CFO, Nilfisk: Claus,

Christian Torni, Analyst, SEB: very

Karl Benholt, CFO, Nilfisk: good question. So I think the themes remain very much the same. We see opportunities to run our supporting functions more effectively. And part of that is just maybe stopping doing some activities that don’t that we don’t really have to do. We’re also looking at kind of the location of our people and our costs to see if we can have a higher share of those functions in low cost locations.

I think an area where that we have started work on in APAC specifically is kind of the what does the cost setup look like for being present in the market. So of course, we want to be present in as many markets as possible to serve our customers globally. And there are different kind of ways, everything from having an agent to a distributor to a sales company or local warehousing and local production. And I think we have sales companies in a lot of countries with quite a high cost structure. So we’re kind of reviewing how can we be in many places and serve our customers more cost effectively.

Claus Almer, Analyst, Nordea: Okay. And then just a final question regarding this production consolidation in Hungary. Should we expect this to unlock some cost savings? Is it more about improving the delivery times and security and so on? If there are some cost savings, when will we see that in the numbers?

Jorn Sinton, CEO, Nilfisk: There is a gross margin improvement to be had through the consolidation, clearly. And what was the next question you said? You said cost and

Claus Almer, Analyst, Nordea: Is there any do you also see an improved delivery certainty, always mostly about cost?

Jorn Sinton, CEO, Nilfisk: We will see an increased and positive effect on the gross margin. We will also be more efficient in serving now with the regions, driving the P and Ls and also the supply chain or distribution responsibility for the distribution activities. So it’s an easier collaboration through there. And also, we have had a temporary inventory increase effect because of the actual move into this factory. So we will see some inventory reduction as an effect as well.

Claus Almer, Analyst, Nordea: You did mention that when we talked about the net working capital increase in the quarter. But I guess that’s also part of this DKK 34,000,000 increase.

Jorn Sinton, CEO, Nilfisk: Yes, some safety stock, in lack of a better word, during for this transition was also part of it.

Claus Almer, Analyst, Nordea: And that will end of Q3, that will be gone, so to speak?

Jorn Sinton, CEO, Nilfisk: Will consume it as volumes go, whether that’s Q3 or Q4, I don’t know.

Conference Moderator: That was the last question. I would now like to turn the conference back over to the CEO for the final remarks.

Jorn Sinton, CEO, Nilfisk: Okay. Thank you all for participating in today’s call and for your continued interest in Nilfisk. We have a lot of exciting things going on. And we will return with our third quarter report in November and look forward to speaking to many of you over the coming weeks. Thank you very much.

Bye.

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