Welcome to Alfa Laval's earnings call for the Q2. We're going to go through it, Fredrik and I, in a short presentation, and then, as always, we continue with questions. Let me start with a few introductory remarks then. First, the demand remained on a high level and sequentially stable, despite clear signs of a slowing global economy. Demand is expected to continue on about the same level in Q3, with some adjustment for normal seasonality effects. Regarding the supply chains, after years of challenges, the supply situation continued to improve, with increased invoicing and cash flow as a result. The positive trend is expected to continue, and the group's focus to improve customer service, lead times, and working capital remains. Finally, the earlier supply-demand imbalances in parts of our energy and marine division, that we talked about during 2022, are now removed based on the recent restructuring program and a strong order intake during the last three quarters. The earlier guidance of a gradually improved margin in the marine division, starting from Q3 and onwards, is confirmed, everything else being equal. With that, let's go to the key figures. The organic growth of 9% was strong, given the economic slowdown. Alfa Laval was negatively affected in the short cycle transactional business, but this was more than compensated for by strong growth in service and projects. Although customers face increasing difficulties in project financing, a reasonable share of a strong project pipeline converted to orders in Q2. The margin at 15% was a bit lower than we like, driven by a 1.5% margin decrease in Food & Water, mainly a mix effect from increased project share and partly currency effect. While the drop-through from high invoicing did not fully materialize on the EBITDA level, it did fully convert on the net profit and EPS level. Moving on to the energy division. The global energy transition continued in the quarter with strong order growth. The CapEx cycle for natural gas, specifically, also continued on a high level, with project orders more than compensating for a weaker transactional HVAC market. The margin continued on a high level, with good cost control and pricing discipline supporting the result. Please note that the expected OpEx cost related to the capacity expansion program did not fully materialize in key Q2 as forecasted, but is expected to do so from Q3 onwards. On to the marine division, demand remained firm across almost all applications, with elevated demand, especially in the offshore and cargo pumping sector. Service continued sequentially on a record high level. A consistent strategy of investing into service products and capability is clearly yielding positive results for the division. The rather large margin decrease that occurred from Q3 2022 was driven by a long order book in boilers exposed to inflationary effects and a depleted order book for cargo pumping systems. After another solid quarter of rebuilding the marine order book, the earlier guidance of gradually improving margins from Q3 remains in place. The demand remained. Sorry. Moving on to the food and water division. Order intake was at an all-time high for, at almost SEK 7 billion in the quarter. The growth was strongly supported by Desmet, the acquisition from last year, which continues to perform well above the acquisition plan in end markets with a positive momentum. The margin decreased in the quarter with 1.5% versus last year. In addition to the expected dilution from Desmet, both currency and the impact from a slower transactional market affected the margin. While the margin was not perfect, it is worth noting that the EBITA result increased to SEK 960 million, 40% above last year. The transactional demand is on a lower level than last year. We may see somewhat of a recovery towards the end of the year, but short-term actions will nevertheless be taken in order to address the demand-supply balances during the Q3. On to service. The exceptionally high growth in service, at 20% organically in the H1 of 2023, across all three divisions, continued. Earlier, we had some concerns that we saw some pent-up demand from the pandemic, but at this point, we feel our investments into digital capabilities, improved management of the install base, and a better service execution is driving a structural growth in the service business compared to earlier. Let me round off with a couple of geographical comments. Already in the H2 of 2022, we indicated a weaker food and water market in China, specifically. That trend has continued in the H1 of 2023, and to some degree, also spread to the transactional part of the energy division. At this point, the transactional short-cycle market is clearly softer in most regions. In that perspective, we are in the middle of a business downturn. A strong marine market, demand from the energy transition, and a strong project pipeline is compensating for the weaker macroeconomics. As a result, all regions are showing a positive growth number on an aggregate level across the division. With that tour around the world, let me hand over to Fredrik for some further financial comments. Thank you, Tom. Hello, everyone. Order intake reached yet another all-time high, SEK 18.4 billion in the quarter, representing a growth of 28%, whereof 9% was organic, 13% structural, and 6% on currency. Aftersales, energy division, project business, marine pumping systems, and Desmet orders are the main drivers in the quarter and compensate for a softer transactional business. Improving supply chains and investments on increased capacity made it possible to invoice a record SEK 15.9 billion worth of products and services, an increase of 34% compared to quarter two last year, of which 17% is organic, 10% through acquisitions. Nevertheless, backlog continues to increase with a high book-to-bill in the period. Reiterating, invoicing in the quarter has remained strong and on a high level, with a gross profit margin of 32%, which is burdened by a heavier share of project business invoicing. Sales and administration costs are in line with expectations, given acquisitions, expected inflationary increases, and increased activity levels. Cost to sales ratio reflected a positive development, going from 16.4- 14.7. R&D increases are mainly related to inflation and increased activity levels aimed at product development, both in existing and new applications. Operating income is up 22% compared to quarter two last year, which increases the earnings per share from SEK 2.75 to SEK 3.63. Adjusted EBITDA in the quarter reached 2.4 billion SEK, which is an improvement with 21% on the same quarter last year, of which only 4% is driven by acquisitions. On a total basis, the 15% adjusted EBITDA margin for the quarter was diluted with 0.6% by acquisitions, 0.3% by currency, and 0.6% by an unfavorable revenue mix, largely coming from the marine division. As indicated in previous reviews, we expect that trend to be broken in quarter three. Commodity prices and inflationary prices are well offset. Finally, restructuring programs to address capacity imbalances are well underway and will start to have a meaningful impact in quarter three, as we have previously stated. A bit of a deep dive. Food and water had a rather large adjusted EBITDA movement in the quarter. Therefore, we have chosen to highlight the margin bridge for the division. It becomes evident that the bulk of the dilutive effect comes from Desmet. Having said that, this was both expected and communicated. Desmet is performing strongly with an order intake of SEK 2.9 billion that exceeds our forecasts at the time of the acquisition, and with a strong project portfolio going forward. Finally, although we worked to smooth out the impact of percentage of completion in invoicing, the margin in the first three quarters is lower than the final yield in quarter four. Less visible is the impact of utilization rates in our high transaction product manufacturing units. Here, we have taken action to rebalance capacity. Moving on to cash flow. Quarter two generated an EBITDA of SEK 2.8 billion. Cash flow from operating activities yielded SEK 1.3 billion, a substantial increase in the quarter. However, working capital continues to burden cash flow, where inventory levels are the main contributors. We have initiated multiple activities to address purchasing volumes and optimizing inventory levels to reflect the current remaining supply chain disturbances and uncertainties. Acquisitions so far this year include Marine Performance Systems, which delivers a system that reduces the water drag on the hull of a vessel, and we executed an option to purchase further stake in Climatempo, a geographic addition to marine digital strategy. We expect capital expenditure to accelerate in the coming quarters, bringing 2023 close to the guidance of 3 billion SEK, and we expect a strong cash flow development during the year. Order backlog is now at 45 billion SEK, of which 20 billion SEK is for delivery in 2023, 25 billion SEK in 2024, a 53% increase year-on-year, and a current backlog that corresponds to four months of current invoicing level and pace. Q2 book-to-bill was 1.16. Finally, we reiterate some of our guidances, and we reiterate a guidance on the CapEx level for the next 2-3 years of SEK 3 billion. With that, I hand over back to Tom. Thank you, Fredrik. Let me then repeat and restate our outlook statement and how we look at the short-term development. As we expressed in the Q report, despite the slowing economic activity, we believe that the demand in Alfa Laval's markets will remain relatively unchanged in the third quarter sequentially. In the energy division, specifically, we think that situation is going to be relatively unchanged sequentially, whereas in the food and water and the marine divisions, we may see some seasonal effects as to how the order intake develop in the quarter. All in all, a fairly stable market outlook for Q3. With that, we are ready for questions. Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. I don't hear anything. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making a selection. Anyone who has a question may press star followed by one at this time. The first question comes from Daniela Costa from Goldman Sachs. Please go ahead. Hi, good morning. I wanted to ask on two things, if possible. Maybe if you could give us a little bit of commentary regarding pricing and how you're seeing that evolving going forward across your segments, especially given some of the transactional weakness commentary in some of the segments. The second thing just related to your Marine commentary. I think you've mentioned the way that you've written the sentence mentions you expect Marine margins to improve from Q3. Just wanted to understand sort of, well, between now and Q3, or I guess for Q3, do you not see an improvement already? Just to clarify that also, because I guess consensus does expect already Q3 to have a sequential significant improvement versus Q2, just to understand the way you written it, what it means for timing, and why. Thank you. All right. Thank you, Daniela. First on pricing, we have been able to pass on a substantial amount of pricing to the market to account and to cover the inflationary pressures that we have seen, and the increase in commodity prices, although commodity prices now have stabilized over the last quarter. I think we're in a very good position when it comes to pricing. That is not the weakness we see on the transactional business or a reaction to the pricing that we see in the transactional business, rather a reflection of the macroeconomic environment we're in right now. These are, of course, the first transactions or businesses that get affected by the macroeconomic level. We expect to rebalance some of the utilization consequences of that in quarter three. When it comes to marine and the recovery of the margin, yes, correctly, we restate, as we've said previously, that we should see a material improvement of the margin in marine in the Q3 Tom, I don't know if you want to add some more commentary to that? No. Maybe just one quick follow-up, because on the capacity adjustments, you also have significant capacity increases. I think maybe they are in different areas, but do you expect out of your capacity increases, that you've increased, that you will be fully utilized on those still? Well, we have done investments in capacity we expect to be fully utilized. So that has not changed, and that the continued investments that we do going forward for capacity are also in areas where we see clear growth and where we have clear indications from our customers about a continued, strong, positive, trend. When it comes to the rebalancing, just to put that into more context, it's short-term rebalancing for what we believe is also a short-term downturn in the transactional business. Understood. Thank you. The next question comes from Klas Berglund, from Citi. Please go ahead. Thank you. Hi, Tom and Fredrik, Claes at Citi. My first question I had was on the margin in energy. Obviously, some timing issues on not having the OpEx in there, which drove margin above expectations this quarter, I guess. Was there anything else, anything linked to reval or mix, which you think is temporary? I'll start here. Well, no, there are many moving parts in a bottom-line result. There has been, and there will be. We tend to point out the issues that we think, that we know, that are material. There will be things changing in the coming quarter, I'm sure, on a number of levels. We thought it was prudent, since we gave you a fairly clear number of about SEK 100 million per quarter, if I remember correctly. Correct ... in OpEx spend. Since that didn't fully materialize, we felt in that sense, that maybe we were somewhat overstating the energy division. With that said, clearly, the positive book-to-bill may indicate that we see a bit of a stronger invoicing and so forth. There will be many things moving, but, nevertheless, we thought it was prudent just to highlight it. That's great. Thank you. My second one is on the growth in energy. I want to just zoom in a bit on liquid cooling and data centers, Tom, which have been very topical recently for obvious reasons. I think you said that this is an opportunity that potentially can be bigger than the heat pump exposures for you going forward. It will obviously take some time, but keen to hear what you see out there, Tom, at the moment. I think that would be overstating it, somewhat. There are a number of positive trends we see across. I would phrase it in a different way. We tend not to build our business based on a single vertical in a single division. You know, when you break it down, you know, we can live and be without the data center business, and you will not notice so much of a difference on top line and results. It is one of several factors driving the growth, but I think for us, the central part is the energy transition and the rebuilding of the global energy system. That's where the Holy Grail sits, and how we find our way into carbon capture, hydrogen, biofuels, and energy efficiency more than anything in a whole range of application, including heat pumps. That is the big item for us going forward. With that said, we have a positive tailwind on the data centers business, not least in the U.S., and so it is an important aspect for us, but I would not like to overstate it. Okay. Fine. My final one is on food and water, and obviously, a softer transactional business. I think you, Fredrik, before, have talked about sort of, you know, potential destocking out there. We've also heard from others in the industry of higher financing costs, pushing some project decisions to the right. Are you seeing that as well, or is it mainly sort of transactional? Yeah, and quite correctly, Claus. I mean, there are delays in the conversion of orders from project lists to orders booked to Alfa Laval. A lot of it is based on financing or the final financing of the projects. We haven't seen any projects come off our project list because of it, rather a delay of it. As you see now in Q2, we've had a very good conversion of projects from the project list, that today sort of compensate for the weakness in the transactional business. That's what we see clearly in Q2. Thank you. The next question comes from Andrew Wilson, from JPMorgan. Please go ahead. Hi, good morning. Thanks for taking my questions. I just wanted to ask, on the short cycle transactional demand, which you've referenced a couple of times, was there a particular region or even particularly particular verticals that you'd point to? I know you sort of made some comments around the businesses, but just if it was particularly region, I'd be interested in any detail around that. Yeah, let me scope that for you a little bit. In a sense, the service business is a transactional short cycle. We have obviously no effect there. On the contrary, that runs very strong. The marine business, apart from service, is essentially a project business, so that is untouched by the question. We have that situation in the Food & Water and Energy Division. In the Food & Water Division, we describe that downturn starting in China, starting Q3 last year, and consequently, we are now about a year into the business cycle downturn on transactional in China for the Food & Water Division, specifically. Since then, I would say, beginning of this year, we've seen similar effects in the short cycle business for HVAC applications. We're looking at refrigeration and a number of other applications, and there we also have an impact on the Energy Division. That goes in the same supply chains as a project business, so in fact, we don't have any capacity problems or utilization problems as a result. It's just a mix change within the Energy Division. That's why we don't have any negative effects on the Energy Division related to that. On the contrary, we are, as you know, short on capacity, if anything, in that division, whereas in the Food & Water Division, we are not compensating for the full value add that we have in those supply units related to among other things, pumps and valves in the Food & Water Division. We see, we see the downturn, still in China. We see it since end of year in Europe. India remains very firm, South America remains good, and North America, there are some variations on the theme, but in principle, it's a very favorable market conditions there, too. I think that's scoping it a bit for you, I think. Yeah, that's super helpful. Thank you, Tom. Then maybe just 2, and then possibly a little bit of housekeeping. In terms of the OpEx spend, on the energy side, I'm assuming we're still assuming the same total spend, it's just the phasing of it. Yeah. And I guess- Yeah. Second question. Yeah. Great. It was not a saving, it's just that, you know, when you do, when you move into these large projects and construction projects, you know, there is, it's a lot of pre-work, tendering processes and things like that. While you see construction sites that, where we've started earth-moving activities in Italy and Sweden, among other things, that doesn't fully materialize into the OpEx spending fully. I think it was more a periodization of the expected OpEx we will have, that comes in a little bit later than we perhaps indicated in our guidance. There is, you know, back to the question that Fredrik talked about before, if anything, we wish we were earlier in our investment cycle here. We are, despite any macroeconomic concerns, capacity constraints in a couple of areas. We're going full speed. It's just that the OpEx side didn't quite materialize in Q2. I think, I hope that it does in Q3. I believe it will. That's very clear. Then finally, and it's just a little comment on the demand side, demand guide, rather. When you sort of reference the seasonality, when I kind of look historically, I sort of see a low single-digit decline over time between the Q3 versus the Q2, but conscious that large orders and FX and acquisitions and all kind of throw that around. Is that a decent starting point in terms of those seasonality aspects that you've mentioned? I, you know, it's a good question. You sort of hint to a little bit of the difficulty. I think at this moment, and also after acquisitions, our guidance is a little bit more depending on the timing of projects. As you know, we convert the pipeline into orders at the time of down payments. So, we are perhaps a little bit more in third quarter now, dependent on exactly how projects will materialize, and that is affecting a little bit more on the Marine side and the Food & Water side than for the Energy side. I don't want to guide you too much on the percentage term. We don't see an abnormal, seasonal, effects for Q3, but, somewhat on the caution that, we may not be on the repeat level, without necessarily seeing a change in the market sentiment. Very clear as always, Tom. Thank you. The next question comes from Max Yates from Morgan Stanley. Please go ahead. Thank you. Good morning. Just the first question I wanted to ask was just on the energy division and some of the sort of end market commentary. I mean, you've talked about kind of HVAC or HVAC and refrigeration being more stable, kind of gas and refinery, and clean energy and fossil fuel being much stronger, and particularly, you call out kind of gas and refinery. I mean, when we think about this gas and refinery business and where you're seeing strength, is this sort of traditional refinery capacity being added? Are we talking kind of more about things like LNG infrastructure, LNG terminals? I'd just be curious to know kind of where that strength is coming from, and to what extent do you see that as sort of structural energy additions around LNG, or whether this is more perhaps kind of cyclical refinery. Any thoughts there would be appreciated. Right. I, good question. The build-out of the global gas and LNG infrastructure is ongoing. We see it on the marine side, in the order bookings there, and we certainly see it on both terminals and pipeline transportation, liquification of LNG. That whole gas trend is, at the moment, at the high cycle. It affects us positively now, and we believe that will continue for a while. That's one aspect of it. On the refinery side, we are looking at the traditional value chain on the oil side, and I think our comment is making clear we are not so much driven, participating on the upper part of the supply chain. When we come down to refinery, and petrochemical, that's where our main exposure on the oil side is. If we take a step back and look at this situation, I think you could say that to some degree, the order book of a couple of SEK billions that we canceled in Russia before, and in relation to the war, is now happening in other geographies. The energy independence and compensation for the geopolitical situation is leading to an accelerated investment pace in partly Asia, partly Middle East, and related to gas, partly in Europe and U.S. Okay, that's helpful. Then just a quick follow-up on the Food & Water Division, and obviously, kind of Desmet is kind of one part of the discussion on margins, but the organic drop through that you've seen in that division is very, very different to what we saw in the Q1. Is this purely an effect of you're delivering more kind of projects outside of Desmet and less transactional, but is profitable? I guess when you talk about the actions that you're taking in this division, could you just outline kind of a little bit more what exactly you're doing there? Would you expect that to translate to sort of better incremental margins on growth as we go into the second half? Yeah. First, I just want to say that, you know, we were very clear on the margin effect when we acquired Desmet. We believe that over the full year, with some quarterly variations, Desmet is a business at about 10% margin. We think it's an excellent business. We took that consciously, and the more successful Desmet is in terms of volume, the more the dilution effect will come into play. I don't want to, you know, for us and for you, create that as a problem. I think they are performing well in line and above all our expectations on all parameters, including the margin. We are very happy with that dilution, if I may put it that way. At the same time, you know, there are variations on the theme here. We end up with a mix change in. It's not a margin bridge per se, but when we're growing very fast in certain parts of our business, and at SEK 7 billion, we really had a fantastic order intake in the food and water division. When the short cycle transactional equipment business with a higher than average margin is decreasing as a share, and some effects of underutilization, then obviously we get a bit of an effect. That's not so visible in the year-on-year bridge, where essentially, projects and currency is making up on the difference. Compared to where we would have been with the food ambition in a more normalized state, that impacts the margins somewhat. You know, that's where we are with the division. We will, as Fredrik indicated, do some adjustments in terms of the supply and demand, capacity adjustment. It will not be any major restructuring program, but nevertheless, we will do some appropriate adjustments there. We sort of feel that we are at the bottom line of the short cycle business after four quarters of weaker performance, especially from China. We are not too concerned on this, but obviously, we have an ambition to be somewhat better. Okay, just one very quick follow. Just on Desmet, obviously, there was those kind of very good orders you've been receiving there. When you look at the pipeline for Desmet, is anything kind of changing in quotation activity, or do you see kind of a very healthy order pipeline ahead, that we should continue booking kind of very strong orders in that business? I mean, you should expect, without being alarmed, that Desmet, over the quarters, over the years, will have variations. With that said, we have been looking at the very healthy pipeline in their sector specifically, and we see that in part of the traditional Alfa Laval Food Systems project business as well, that order pipeline was not at all depleted by order intake in Q2. We have a fairly healthy outlook short term on Desmet side as well. Clearly they are adding to positive numbers in this quarter, which is a bit above what we average expect. With that said, we are in that cycle right now, and we believe, including the Desmet numbers in Q3, that we will see a relatively stable situation also for them. Great. Thank you very much. The next question comes from Lars Brorson from Barclays. Please go ahead. Hi. Good morning. Tom, maybe I could just follow up briefly on that in Food & Water, and then come back to Marine. Just curious as to what gives you confidence that these pressures in the transactional business are somewhat transitory? I think you'd mentioned you expect a recovery towards the end of the year. Same time, you are taking some capacity adjustments. Maybe you could help us elaborate a little bit, if possible, on what those adjustments are, how meaningful they are, and also what gives you confidence of a turn as we get towards the back end of the year? That will be my first question, please. Well, doing long-term forecasting is normally not a very good exercise, especially not for me. We, you know, we thought it was important for you to see that although the top line in order intake and invoicing is going exceptionally strong, I thought it was important to highlight that within that overall performance, we actually are in a typical normal business cycle downturn. We're in the middle of it, and we've been in it for a while. I think what's different with the cycle so far is that it's very sector specific, and we have for a long time struggled with how do we plan our long-term growth curve based on positive momentum in energy transition and other sectors that need significant CapEx investments over the next decade or two, versus the short-term impact of a downturn? I think this is what we are seeing in our portfolio right now, and that's why we wanted to highlight the question. Perhaps a bit overstated, but nevertheless. The reason I'm, I'm somewhat optimistic, or haven't taken the conclusion that we are head over heels, heading downwards and need to go into major adjustment of our capacity in certain sectors, is that we've been there for four quarters already. We have absorbed volume decreases and weaker markets in China and now in Europe for some time, and the food and water market is typically not you know, hyper cyclical for us. When we look at the volume curves that we have at the moment, and where we've been over the last 4 quarters, looking 2, 3 quarters ahead, it seems to us reasonable that we may start to see a little bit of a recovery on that market. I say that especially because the biggest drop is related to China, and in China, there is normally an awareness of how the macroeconomics go. There is a significant interest on behalf of the Chinese government to make sure that the economy is developing in a reasonable way. Normally, we do see some positive momentum in weak market conditions. I think it's based on that we are, you know, guessing as well as you in terms of the future, but that's the basis for why we are not at this point in time, too alarmed about the cyclical downturn, looking forward a couple of quarters. Don't take me hostage on it. It's my best estimate and guess for how we are reasoning, but time will tell. Thank you, Tom. Maybe just briefly, if I can, on Marine margins. Fredrik says the restructuring measures will have a meaningful impact already in Q3. The near-term recovery Marine margins, less to do maybe with some of those transitory headwinds in price cost effects, much more to do with your internal measures. I wonder whether you can help us scope, Fredrik, some of that sort of sequential margin recovery we should expect to see. I mean, you're very clearly confident about your 15% target, at least in the medium term. How much can we gain back already in the second half? Maybe slightly longer term, if I can, clearly encouraging to see Marine pumping systems come back. Your backlog is building. Recovery, I think, in ship contracting for tanker is pretty evident. When do you think, Tom, we might get back to, should we say, more normalized load levels and margins in Framo? 2025, perhaps? Should I take the first part? Why don't you take the first part? All right. I mean, we generally don't give you an exact guidance of where the margins are going to land from quarter to quarter, and I won't do that here either, except to say that we should expect a good jump from where we are today towards the 15% in Q3. Part of that is related to, as you quite correctly into, the fact that we are covering some of the underutilization that we've had on the pumping systems with the newly booked orders. A very substantial part also comes from the restructuring and addressing the imbalances that we've had with the, then the normalization of the PureSOx and PureBallast business to a normal contracting level, rather than the retrofit levels that we've had in the past. All of those together will drive a better profitability in quarter three, or margin development for Marine in Q3. We're quite confident. Yes, we remain confident. Tom. Yeah. The second part? I don't want to move into 2025, but in terms of business activity, I think we will ramp that a lot quicker. I don't think we are moving into normal capacity utilization relatively quick. That means that by year end, we should be at good utilization levels. Exactly how the infra out and the deliveries and the results effect are coming, let's see, but as Fredrik say, we are very comfortable that we see a change in Q3, we see a change in Q4, and based on the order backlog we have now, we believe we have a good start in 2024 already in the books. I remind you also that we did face, as you, yourself pointed out, that the capital markets, some erosion in the boiler business margin, long term. That was down on a low during last year, this year, and we are rebuilding a somewhat more healthy boiler backlog that also will start to kick in during this year, and certainly into 2024. I think those structural things are already in our books, and that's where we are relatively comfortable and want to indicate that the slump that we had, since a year ago is structurally changing strategically, market share-wise, and gross margin-wise in the product portfolio. We are not structurally very different from what we were before in those areas. How far it will take us, let's see, and there are other things that are affecting us as well. On those things, everything else being equal, we will see a clear improvement throughout this year and into 2024. That's helpful. Thank you. The next question comes from the line of Layla, from UBS. Please go ahead. Yeah, morning, it's Sven from UBS. First one is on the pipeline conversion, because on the one hand we discussed higher rate sensitivity of clients, on the other hand, you had a great conversion of the pipeline. Is it that clients are increasingly realizing that rates are going to stay higher for longer, so it's not really worth by waiting for a rate cut, or what's driving that, you know, acceleration and the conversion of the pipeline? That's the first one. You almost have to ask them. There are good projects out in the market. You know, the downturn is in the global economy is not across the board even, consequently, there are still a lot of capital being moved into, to capital. That holds true for the traditional fossil side. Which is very profitable at the moment. It's holds for the marine sector, where a lot of shipowners and sectors are making strong margin. It holds for the energy transition, which almost is a given that we have to move forward one way or another. I think the interest rates hike and the way to cool the economy is not exactly a typical cycle situation. This is why I've been a little bit concerned as to what effects will the interest rates have on the underlying inflationary environment in part of the industrial sectors, where we see shortage of labor, shortage of, or at least reasonably high commodity prices in many areas until recently. It is a bit of a split picture, but all in all, compared to normal down cycle, the project side has stayed unusually strong, and we haven't seen that change. The rate sensitivity isn't that high to start with among your clients because they're making the structural investments anyhow. That's what it seems to be happening, yes. Okay. The other question I had was just, and sorry to follow up on this short cycle topic, but I was just wondering inside the food division, how high a share the transactional business is outside service, and why we wouldn't see any destocking also outside of China, among your European and American clients in that business? I don't think we mainly have seen destocking as the big issue. We you know, as you, as you know, those of you who have followed us for a long time, we were almost surprised at how firm the volume growth remained in the food and water, you know, really since 2018 or so, and then through the pandemic and whatnot. We asked ourselves whether we saw some stocking behavior in this, because supply chain difficulties and other things, you know, forced installers and distributors to put things on the shelf. We never really identified a large stocking behavior among our customer base and channel partners. There of course, there may be some that happened at that point in time, but I just think that the underlying business activity at our channel partners in the food and water side has slowed, and as a consequence, you know, the water parts go down. I don't think we are too concerned about destocking effects, a bit more concerned with the underlying smaller projects related to retail, related to cooling, related to small capacity adjustment, and some general investments into the food cycle. You know, if you look at it, the closest we are to the consumer markets when it comes to what people go and buy in the supermarket or elsewhere, it is in the food and water division, and consequently, dairy products and all of that is potentially affected a bit more in our portfolio than, let's say, the energy transition type of customers. Very clear. Thanks, Tom. The next question comes from Johan Dahl from Deutsche Bank. Please go ahead. Hi, good morning. Conceptual question: when you think about your book of business, next 3-5 years, have we seen a sizable impact from the IRA yet in the U.S.? How do you think you're positioned on capacity and workforce versus the opportunities that you see now and what you might see in a couple of years? Thank you. I think if I read the situation, we've been a bit more conservative in our estimates for what the IRA means in terms of investments activities and business activities in the U.S. We've been a bit more conservative for two reasons. To begin with, there is such a labor shortage in the U.S. that we have a hard time to see sharply accelerating business activities in general. Something has to give in the U.S. If it moves towards IRA projects, something else has to give. That's one aspect. The other aspect, more importantly, is that IRA is not that crystal clear in terms of how it will play out for the investors. Consequently, we see a lot of pre-work at customers in terms of, you know, deciding on how to do and how to go forward. The material impact of IRA, I think in many areas will come perhaps a little bit slower than people think. From that point of view, it doesn't form a huge part of our short-term growth plan. Yeah When we look to 2023, 2024. Clearly, as part of the overall CapEx into the energy transition, IRA will play, over time, an important role. For us, I think, you know, we will participate in that as we do everywhere else. We do have a good presence in the U.S., and as you know, about 20% of our business is in the U.S. since late 1800s, so we are very well established and positioned there. If I look at our supply chain, global supply chain situation, overall, we are, at this point in time, if we assess the overall global geopolitical situation, we are a little bit heavy towards Asia, and we are a little bit weak towards U.S. In shades of gray, the balancing may require us to put some further efforts into the U.S. footprint. With that said, we are not in a bad position, but I think in terms of optimization, we have some further work to do there. Great. Thank you. The next question comes from Andreas Koski from BNP Paribas Exane. Please go ahead. Thank you. Thank you very much. Good morning. I have a question on input cost, because I read in the report that you are still explaining some of the margin weakness that we have seen in Marine, at least, by higher material costs. During this earnings season, we have seen a lot of companies talking about material costs being a tailwind. I guess the reason why you are still seeing this as a headwind is because you hedge larger part of your, of your purchasing. Can you please elaborate a bit on what you think will happen to your input cost in the coming quarters and going into 2024 based on today's prices? I think there's two parts to that question. One, which is the prices that we're purchasing in or doing call-offs for material today, and that is, of course, on a more stabilized, lower level than what we saw six months ago. That will have an impact, and will come through in the invoicing in the next coming quarters. What we have seen then, to your question, is that the margin impact that you see from the inputs is more related to the timing of the order intake in the marine business, which is somewhere between 9- 18 months lead time, and the price at which that order was taken and when it is being delivered, and consequently, of course, the input price versus what it was calculated to be at the beginning. All of those have an impact on the margin, that's what we refer to when it comes to the marine industry, that there is a lag between the order intake and when we deliver it and when we do the purchasing for it. Yeah. Do you think there is a risk that you will have to lower your selling prices because commodity prices have come down? Right now, we don't believe short term that we have to reposition our price, based on input. If there's a substantial change in material prices or a substantial change in commodity prices, we will have to adjust in order to remain competitive on the market, but we have no such plans right now. Is it fair to say that your selling prices will sequentially be higher in the coming quarters based on what you have in your backlog, at the same time as your input costs will be lower in the coming quarters, based on what has happened to raw material prices? No, I would say that the pricing level that we have today is representative of the purchasing levels and the commodity prices that we have today. You know, from a backlog perspective, we may have a positive impact from the calculated margin that we had for those projects, not necessarily the price. Okay. Thank you very much. The next question comes from Sebastian Kuenne from RBC Capital. Please go ahead. Yeah, good morning, everyone. My first question is relating to the heat pump business or heat pump exposure. We now have in Germany a long discussion on the new heating laws. There was a 3-month delay on the ruling of the heat pump laws, and this kind of takes out momentum there. I was wondering, in your CapEx plans, in your expansion CapEx plans, how much would you say is earmarked for residential heat pump use? What portion of the heat exchangers are used for heat pumps there? That would be my first question. I think I will answer the question a bit more broadly. The capacity expansion plan per se, why we're doing it as fast as we're doing and as intensive as we're doing, is driven by the demand situation in heat pumps. In quickly growing that, and your question is, what's the risk that we sit with on utilized capacity? Mm. There are two important things to reflect on. The first one is, as we speak today, we are production scheduled, including Christmas Eve and New Year's Eve. We go 24/7, we go five shifts. It's not a good way to operate our kind of business, so in, you know, everything else being equal, we would be operating at a better level and at a better cost level, if we had another 20% global capacity in place already today. We would just adjust our shifts and our working procedures in a good way. Part of this adjustment is just a healthy way of injecting a predictable production planning process, customer service, and cost levels in operation. The second issue is that, of course, we are reflecting on whether there are some risks in the heat pump market related to the fact that at the end of the day, policymakers are hugely influencing the volume development in the sector in Europe for the coming 5-10 years. We think the direction is clear, regardless of what happens in Germany, so directionally speaking, we're okay. For us, the other aspect is that the type of products that we are building on the heat pump side, will have its applications also into the hydrogen economy and a number of other areas. Even if we looking forward 3-4 years and see that we are maybe not... We are over-delivering on the supply side, we have a number of good areas where we think we anyhow need to build our capacity in preparation for hydrogen economy and others. We feel really confident about the investment program. We're going full speed, and even if we see some weaknesses in Germany, we are firmly with our core customers to help them drive the business as good as we can, and so on. We're comfortable with it. Understood. Another question on the food and water. We discussed the, you know, transactional versus project business a little bit, but it's still not fully clear what really the margin difference is between those two. I mean, it's clear the project business is much lower because you have, you hope for more follow-up business afterwards, but are we talking twice the margin between transactional and projects, or is it just a 3% difference? Or is it 0% for project and 20% for transactional? How should we understand the margin difference? Uh- It's important because when you talk about a change in the mix, the two- Well, I, you know, we. Yeah. We're not gonna do the spreadsheet for you. I think if you do your homework, you will know very clearly that our performance level and ambition level on the project business is to run that at 10%. If you compare to any engineering projects type of business, I think you would agree that that is a reasonable and good target. That's where we are. We, you know, we've described the journey we had in our own Food Systems business over 7 years from a more or less break-even type of level to a healthy business at about 10%. That's where we are. If you take out the project business from Food Systems and the Desmet effect, you will see where we are, and calculate that based on about 10%, you will see where we are in the rest of the business. Understood. Thank you very much. I think we are at the last question, maybe. Next? Yes, the last question comes from Gustaf Schwerin, from Handelsbanken. Please go ahead. Yes, fine, thank you. Just to follow up on the energy margin, and, I'm sorry if I didn't pick this up, but the increased OpEx related to the investment, was that close to zero in the quarter? Just so we know how to think about the delta sequentially. Thank you. No, it was not zero. It was not to the SEK 100 million that we had indicated in our guidance. It was most likely at a half of that, I think it's fair to say. All right, very clear. Thank you. All right, and with that, thank you very much. We will meet again after the Q3. After the Q3, not too far later, we will have our capital markets day, which also will be done from the studio this year, whereas next year we probably, again, will show you some exciting products in real life. Thank you very much. Thank you. Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.