Welcome everyone to Alfa Laval's Q3 2024 report. I will now hand over to Tom Erixon. Please go ahead. Good morning, and welcome to our earnings call for the third quarter. Let me start with a couple of introductory comments as always. We had another strong quarter with elevated demand in the marine sector and the book-to-bill of 1.17 for the group. The service growth continued on a high level of 11% in the quarter. The strategic focus on the service business since many years continues with investments in both infrastructure and people. And finally, the cash flow was strong in the quarter, at SEK 3.75 billion. The operational stability in the supply chain is on a good level after several years of work in restoring a normal level of operating working capital has given positive results with maintained customer service levels. And so with that, let me go to the key figures. Orders were a bit stronger than expected, with good demand in all three divisions and sequentially stable compared to the second quarter. Invoicing is on a stable growth track, supported by a record strong order book, but part of the project invoicing was on the low level side in Q3, specifically in the Energy Division. The project execution is stable and good, but the phasing in terms of forecasting and recording percentage of completion creates a little bit of volatility, perhaps between quarters. The margin strengthened in the quarter, both year-on-year and sequentially. A positive mix and strong margins in several business units compensated for the slightly lower invoicing level. Now, let's go to the division, starting with Energy Division. A strong quarter for the division, returning to order intake growth despite a weak HVAC market, as previously guided. Several end markets were growing in the quarter, including process industry and demand for data center applications. While demand for energy efficiency remained a strong structural driver of the growth, the key verticals in the energy transition does not develop in the speed needed to reach the climate goals. Still, the order intake for what we call clean energy applications continue to grow from a low level, with the most promising steps in the pipeline for carbon capture applications. The margin was solid in the quarter, with a limited negative effect from the low utilization levels in brazed heat exchangers related to the heat pump market. Significant efforts to ensure operational performance, together with growth in adjacent applications, had a positive impact. There will be no speedy recovery in the European heat pump market specifically, but as previously guided, the third quarter was likely the low point in the demand cycle for this time. Moving on Food and Water Division. as expected, the order intake declined compared to the last year, due to the elevated level of large project orders from Desmet in Q3 2023. The rest of the portfolio grew in the quarter on a solid level, supported by a continued recovery in the short cycle business, including service. The weaker market conditions in China reached the bottom of the cycle in Q3 last year, and returned to a slow growth path since then. The positive trend continued in the third quarter on a higher level, and the market sentiments are overall more, more positive in China at this moment. Most end markets had a good development in the quarter, but biofuels remained low compared to last year. The project pipeline is, however, getting stronger, and the investment level, both in ethanol and other fuels, is expected to recover in the medium term. The module was good in the quarter, with better utilization in the short cycle businesses and a strong project execution level above our financial targets, and with that, let's move to the Marine Division. The demand in the tanker market continued to drive the order intake to record levels, especially related to cargo pumping systems. All business units in the division grew, and the order book in the division now stands at 26 billion SEK, until recently, normal level for the entire group. While strong demand most likely will remain for service and new applications for decarbonization, it will not compensate fully for a more normalized demand level in cargo pumping moving into the fourth quarter. The margin recovery continued as expected. Compared to the earlier record levels in 2019, at about 21-22%, the existing portfolio is back on historic levels. The difference, compared to 2019, is related to the high-margin scrubber retrofit portfolio, which is no longer in the invoicing mix, and a slight reallocation of corporate cost, which is higher on divisional level, but neutral on group level. With that, let's go to service. Service continued to grow in all three divisions and most of the service scopes, including spare parts. We are comfortable that the service strategy works, and we'll continue to invest in the growth plan going forward. The service margin is stable for spare parts and other comparable service scopes, but the mix is gradually tilting somewhat towards service works and invoicing from our service centers. This has for some time had limited effect on service margins, although it remains a healthy and accretive business, obviously. Finally, a few comments on key markets. As you can note, China is currently developing well and strong and is on a roll, in twelve-month basis, the largest market in Alfa Laval by far. Although both energy and Food and Water has a cautiously optimistic view going forward, the shipbuilding market has been the main driver of the growth. As shipyard capacity is getting fully booked, the order levels from China will perhaps normalize somewhat, but to a slightly lower level. The US has been strong in recent times, but the order intake declined in Q2 2024, a bit unexpectedly, and the third quarter was also a little bit on the weak side. Given the strength of the US macro and the current order intake weakness is considered mainly as delayed final investment decision in part of the project pipeline, especially related Food and Water Division. otherwise, us looks solid. Some weaknesses in both India and Southeast Asia were present in the quarter, but prospects are looking positive going forward, especially in India, after the completion of the election process and the return of the investment levels in the ethanol business, among others. Market conditions in other geographical markets were generally stable to positive, and with that, I hand over to Fredrik for some further detailing on the financial performance. Thank you, Tom. So let's start with a quick recap on orders received. Quarter three closed well above expectations, mainly driven by marine ship contracting. However, we have also recorded good order intake in many of our transactional businesses, and in particular, Food and Water Division. energy efficiency continues to drive good demand in the Energy Division, with a good order intake development in data centers, but a continued lackluster demand in HVAC. Currency has a negative impact on order bookings with 3.9%, while organic growth is almost 15% in the quarter, yielding a quarter order intake of SEK 18.9 billion and a year-to-date order intake of SEK 556.1 billion. Book-to-bill in the quarter was 1.17, adding to the order book, which now equals SEK 52 billion, of which SEK 15 billion is expected to be invoiced this year and the remainder in 2025 and 2026. The order book is judged to be on a good level with current and expected input costs. In a calendar year, quarter three is typically the lowest quarter for revenues, as holidays disrupt and shorten invoicing routines. Having said that, we continue to see a growth trend in comparison to quarter three last year, with 2.8%, which, after eliminating currency impact, actually is a healthy organic increase of 6%. Total for the quarter is SEK 16.2 billion in revenues, and year to date, it's a growth of 6.3%, equaling SEK 48.6 billion. Sales in the quarter generated a gross profit of SEK 5.8 billion, a gross profit margin of 36%, which is 2.8% better than the corresponding quarter last year. The latter, as a result of a good service revenue mix of 31%, a higher factory and engineering result that entirely offset the lower capacity utilization rates of our brazed heat exchanger factories. SG&A cost of SEK 2.5 billion marked an increase of 11%, of which more than half is related to increased number of employees. R&D costs increased in line with our ambitions to and innovation programs. Operating income at SEK 2.7 billion, which after the financial net and taxes, yields an EPS of 4.77 SEK, an increase of 11% to round off a strong financial quarter. Adjusted EBITDA margin is above 17% for the first time since quarter one, 2022, at 17.3%, which is 0.6% higher than the same period last year, where currency has only a marginal negative impact. Instead, we have a substantial positive contribution from service mix, a good factory and engineering result, and good project execution outcomes on our projects. Good cash flow from operating activities at SEK 3.7 billion continues to build on a strong EBITDA contribution. In quarter three, a cash positive change in working capital stemming primarily from accounts receivable. CapEx was slightly above guidance levels in the quarter at SEK 0.7 billion, bringing the free cash flow to a level of SEK 3 billion. No acquisitions or disposals of notes in the quarter, while financial activities mainly reflecting the continuing servicing of debt. Debt has decreased further in quarter three, with another SEK 1.3 billion since quarter two, 2024, and almost SEK 5 billion since quarter three last year. Excluding leases, now at 0.39 of LTM EBITDA, and including leases, 0.61. The current debt position continues to build our ability for future acquisitions without exceeding our debt target thresholds. Finally, some guidance. Quarter four investments are expected to remain on similar levels as we have seen in the previous three quarters, with an indicative range between SEK 0.4 billion to SEK 0.6 billion. Currency impact in quarter four is expected to be low as major currency pairs stay within current ranges. And with that final bit of financial guidance, I hand over back to Tom for a view on quarter four. Thank you, Fredrik, and then let me come to a couple of comments on the outlook for Q4. In general, as you may have noticed, we feel that most end markets and geographies remain stable to positive for us. Also, the marine sector is in a very strong demand period, which is not expected to stop in the short term. But after record level in the tanker segments with substantial order books in the shipyards and in Alfa Laval, this is expected to moderate the order intake looking into Q4 and slow total demand in the next quarter for the group. So on a divisional level, Food and Water Division, we expect a somewhat higher demand in the quarter. For the Energy Division, we expect demand to be on approximately the same level as in Q3, and for the Marine Division, for the comments from earlier, we expect demand to be on a lower level in Q4. And with that, we are happy to take any questions. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who wishes to ask a question may press star and one at this time. And the first question comes from the line of Magnus Kruber from Nordea. Please go ahead. Hi, Tom, Fredrik, Magnus here with Nordea. A couple of questions from me. So first, congratulations on the good set of numbers. I just wanted to continue with the marine segment. You call out sustained high vessel contracting in the tanker segment in particular. Is that Q3 specific? And is it all tanker segments? And the orders you gathered in the marine pumping business in the quarter, is that related also to orders or contracting at this one in Q2? Well, let me answer the question a bit generically first. We have been in a situation for a number of years where we've been feeling that the pent-up demand for increased scrapping and increased ordering of new ships should at some point in time come, and of course, the timing of that has always been uncertain. Now we are in that period. We still don't see scrapping to increase because the freight rates are positive almost across all of the end segments. So all the ships that are available are keeping running, but obviously the order books at the yards are now filling up, and we are, you know, now, last year, this year, on the order level of about two thousand ships per year, with a fairly strong tilt towards the Alfa Laval sweet spots, including the tanker side. And in principle, we don't think this demand situation will change a lot. And if you look at the bookings at the yards, the orders that comes to us early at the time of the contracting, even if the delivery dates are a couple of years out, they come to our cargo pumping unit very early. And so, we are signing up the tanker orders earlier than the rest of our product offering. And so what we see in the order books in Q2, in Q3, is an effect of that. It doesn't mean that the entire contracting is in our order books at this point in time, but on the important cargo pumping segment, it is. And if you look at the numbers for product tankers, we are in this year, specifically, so far this year, already about three times the order volume of product tankers than we have been on average over the last sort of five, six years. So, we think this is a bit of an elevated level, but market demand in... So that will need to be adjusted in at least the next quarter, maybe in the next few quarters. But overall, we see a very healthy demand situation for tankers and product tankers over the years to come. So we are not particularly concerned about volatility. We're certainly not concerned about volatility on invoicing over the next couple of years, but you will see fluctuations between quarters in the years to come based on this. Got it. Thank you so much. And that was a good segue to my next one. How should we think about the sort of the order delivery time within marine business now in the context of the tighter yard capacity? Does that diverge dramatically from the past, or anything you can do to help us on the invoicing would be helpful. I will hesitate to be too detailed on long-term invoicing, but my general comments that also from the previous question is that we're provided now for pretty solid order book for deliveries in 2025, and to some degree into 2026. So we don't expect a lot of volatility on the invoicing line as such. So as you know, without guiding you on what everything is gonna be in 2025, we are moving in with a nice level of short-cycle business on the service side. And we expect that you know, the high level of orders on early cargo pumping orders is to some degree gonna translate into other product segments as we move forward. We feel we have a reasonable stability in the growth trajectory for the Marine Division's business as we look into 2025. Fantastic. That's, that's good to hear. And then just finally, if I can squeeze one in, the audio broke up a little bit. Did you talk about an adverse mix in service ahead to some degree? Was that right? Well, yes and no. I think I just wanted. I didn't indicate it as a major issue for how we think about the margin development in the group. The overall growth, what I thought was prudence to say was that we have been growing, you know, well above our historic averages for a number of years, and to some degree, I flagged even moving into this year, after a very strong growth last year, that we may see a temporary moderation on the service side. We were a little bit unsure whether we saw some pent-up demand, service demands from past the COVID period or any abnormality in terms of the demand. But in effect, the growth has continued on a very solid level. One of the reasons why it does that is that our service scope has been broadening as we are building capabilities and people. And of course, the main driver of the margin strength of a service business for everybody in industry is the spare parts side. So as the mix in the service side is tilting a little bit towards services, you know, that margin doesn't hold completely, but I thought it's. I just felt it was a fair statement to make. Absolutely. No, thank you so much. Thanks for taking- We now have the next question coming from the line of Klas Bergelind from Citi. Please go ahead. Thank you. Hi, Tom and Fredrik, Clas at Citi. As you described, Tom, the lower guide in marine is obviously driven here by short cycle pumping. There's obviously much more than tankers, where the lag from shipyard contracting typically is nine to twelve months, and that's obviously yet to come through. If you take out tankers, do you think the orders outside can increase sequentially here going forward, in the coming quarters? I'll start there. I'm not gonna guide you too clearly, but the momentum in the marine business in Q3 was positive on everything. On StormGeo, on Alfa Laval classic separators, on new fuel systems, on decarbonization and sustainability solutions. And what's maybe is not obvious to everybody is that, you know, we have taken the whole decrease of the retrofit period of PureBallast and scrubbers over the last few years, and that period is now out. So when we compare year-on-year numbers, we have a quite significant PureBallast planned negative delta that we are compensating for in other parts of the business. So I feel the momentum is very good, and I completely understand your questions. I hesitate to be too detailed, but the momentum is- in the third quarter was strong, even leaving the- Okay pumping aside. All right. That's good to hear, Tom. My second one is on the, on this lower revenue recognition. I was late on the call, there's a lot of companies reporting this morning. I think, Fredrik, you said third quarter is always the lower revenue quarter. I agree, but did we also see any customer pushouts, i.e., customers being a bit hesitant, perhaps around the upcoming U.S. election, et cetera? Thank you. So, no, we don't see any extraordinary pushout from customers. There's always some element of pushout by customers in any year, but nothing extraordinary, nothing that stands out in quarter three or any quarter this year. And my comment was actually more a sequential comment to quarter two, that quarter three is traditionally a lower revenue recognition month, simply because vacations and there's disruptions to the routines. But in the end, it was a growth organically between quarter three last year and quarter three this year, as we would expect from the backlog that we're carrying. Yeah. Very clear. Then my, my third and final one is on the Energy Division of Alfa Laval. I think, Tom, last quarter, you said that third quarter could be a low point, and you saw some solid demand ahead, obviously in data center, oil and gas, and segments outside of the heat pump segment. You're guiding for flat demand here into the fourth quarter in Energy. I'm keen to understand the moving parts, please. Thank you. Yeah, I mean, we came out stronger than we expected on the energy margin side, based on how we compensated in the Brazed Heat Exchanger side. We also had a reasonable mix invoicing in the quarter. So if we were a bit slow on invoicing in some part, it was probably some project execution in the energy side that was a bit lower. And it didn't affect. If anything, it affected our margins almost positive. So, you know, the quarter came out strong. We had a lot of project order bookings in Q3 in the Energy Division. We had a record pipeline of projects for welded units, partly driven by the investment boom in gas, and partly the fact that we are converting some green energy projects into that unit. So that gave a good basis for the fact that we came out with organic growth year-on-year in the Energy Division, in what we thought would be our most troublesome quarter. And so that outcome was quite good. We expect the project ordering to be less in the Energy Division in Q4, and we expect the other transactional parts of the business related to some of the underlying trends that we have been talking about, and you referred to, to grow. And so that puts us on a net-net. But I would say from a business cycle point of view, we feel we are moving into a stronger quarter Q4 than Q3, and it's entirely related to project bookings in welded that you see a flat guidance. Thank you. The next question comes from the line of Max Yates from Morgan Stanley. Please go ahead. Thank you. Good morning. Could I just ask on the marine business, could you just remind us, in your pumping systems business, where revenue capacity sits today? I remember from when you acquired Frank Mohn, it was, I think, around four billion. I'm just wondering kind of how much capacity you've added here, and what is the maximum this unit can actually physically do in revenues? It's a very good question. You're quite right when you refer to the historic number. Let me talk a little bit around that business, because I think there is an important context. We thought about the business when we acquired it back in 2014, as a high margin business, maybe a little bit volatile in the demand cycle. We didn't see a large structural growth. That wasn't the predominant reason for the acquisition. It was in our books for many years, a 4-5 billion SEK business. We have been in a very elevated demand situation for a period of time now, and it started in offshore. Offshore has you know doubled since we acquired it. It was a low-margin business when we acquired it. We are getting it into well into Alfa Laval normal margin territory at this point in time. We have a strong order book. We have a broad service business linked to offshore in the North Atlantic. And so you know at this point in time it's a business kind of twice the size than it was in the past. We don't consider it at this point in time super cyclical. We have a good pipeline going forward, and the investment projections in the North Atlantic look stable. So that's that part of the business. The cargo pumping part of the business, as you well know, went a little bit dry for us when it came to our order book. And it came back very strongly. And we see now a number of years going forward when demand is gonna be significantly higher in terms of booking, but also in terms of deliveries. We haven't lost a single order because we don't feel we can support the timeline. We are taking exceptional steps, not only in the supply chain, but also in the commissioning of new systems, in preparation of what needs to happen in a number of Chinese shipyards right now. So we will be able to follow the market for every single order. You know, where will it take us revenue-wise, compared to historic level? It's clear that for a number of years now, we're gonna be on a significantly higher invoicing level than we were used to in the four to five. That will most likely also lead that we will guide you on some future investment decisions for our facilities in Norway that we are preparing at this moment. Okay. That's helpful. Just the second question would be on the Energy Division. It looks like you'll do kind of around 20 billion SEK of orders this year. Could you give us a rough feel of how much of that will be data centers? And also just a feel for maybe not quarterly data center growth rates, but maybe trailing twelve months or year to date, just on how those orders are growing. I think, I mean, data centers is becoming gradually a more important part of the Energy Division mix. I think, as a component supplier or subsystem supplier, the data center orders are coming into our books a bit later than for some others in the sector. So we've seen, for us, the data center growth, while discussions with end customers have been ongoing for a long period of time, the actual frame orders and order recognitions has accelerated the last two quarters, and maybe especially the last quarter. So we feel we are early in that phase. At this point in time, we're looking at data center applications that are directly booked under that code, specifically in those projects, is probably around 10% of our Energy Division order intake. I would not exclude that we have some equipment that ends up on data center applications, and we are just through the supply chain not recognizing the order code correctly. So I would say it could be slightly higher, but that's about where we are. Okay, and just, that's helpful. And just final quick one. I thought your comments last quarter on the US were quite interesting. You were kind of maybe, not putting words in your mouth, but a bit sort of puzzled on... It wasn't exactly clear what was happening in the US. Yeah. There was maybe a little bit of uncertainty. Could you just give us a sense of kind of how you feel and how things have developed in the U.S., and whether, kind of, that uncertainty has continued? And is it specific to any product types or end markets that you would particularly call out? Yeah, no, your memory is correct. And I was a little bit surprised, because I was in the US in the beginning of the year with a whole pile of our customers, and everything was booming, and everybody was sold out, so didn't expect any big changes. The Q2 was clearly weaker than we expected. Q3 was a step forward. I think the remaining uncertainties that we have was is the closing of larger projects Food and Water Division. and i think a little bit of that is related to energy transition and the speed of investment decision into biofuels and the like, which we are booking in the Food and Water Division. But, you know, there still in general has been, we feel, a slower decision-making on large project in that sector. On the energy side, it's okay. Our marine business is okay. It's relatively small on equipment, it's a bit bigger on service. So, we're just monitoring where we are going on the Food and Water large, projects. That's the remaining uncertainty we have, but overall, we feel reasonably, okay with the situation in the US. Okay, great stuff. Thanks, Tom. The next question comes from the line of James Moore from Redburn Atlantic. Please go ahead. Yeah, morning, everyone. I've got three questions, if I could. One of them is on the brazed heat exchanger business. Could you say what capacity utilization is today versus the peak? Should we go one at a time? For us, the question hasn't been what the peak was, it was what our business plan was. So we kind of were running, if you remember, about a year and a half ago, I think it was, we were going 24/7. We were booked for Christmas Eve. We did everything we could to support our customers best we could, and we still fell short. So basically, we went into a investment program where we, for this size of equipment, I think we more or less doubled our capacity. And with that investment program more or less coming to completion, we completely fell from the all-time high level to in heat pumps to, you know, well below half. And so we are completely, I mean, we are completely off from the capacity. It's... And we obviously have taken steps to, you know, delay the program as much we can, and sort of, you know. But in principle, we are, you know, for the heat pump side, probably off about 80% compared to, you know, the capacity that we planned for, to throw a number. This has partly then been compensated by working with adjacency. The air conditioning market is pretty good. Our channel partners, we had to limit supply in that channel for a number of years when demand was high. And then we see growth in completely other applications, data centers being one of them. So although it doesn't go on exactly the same product specs, for the unit as such, we've been able to manage what could have been a really problematic situation. You know, at the margin drop, that has been significantly smaller than we calculated with, when we went into this problem. That's great. And if I could switch to pumping systems, Tom, I mean, just thinking about Framo, you talked about offshore versus marine. I have some understanding of the great marine margins of old, and how much they fell. Just versus the sort of the past peak, if you like, and how far we got to a year or so ago, how far back are we currently? And I'm just trying to gauge how this plays out, really going back to Max's question, as revenue comes back up to the past high water mark and presumably goes above it. When do you think we meet the old peak marine pumping system margin? Is it now, or is that a year or two years' time, and then maybe we can go beyond that? Just trying to think about the shape. No, I think, you know, we are kind of operating. That was my what I tried to say earlier. We are operating essentially all of our existing businesses, including Framo, at the level of the peak at this moment. I think what if, you know, can things change? Absolutely, and it probably will. There are a few areas where we have productivity improvement programs in place and working to drive it to a better place. But I think what will be the driver of the marine margin, if you wanna sort of think about how you work with it, I think is mix changes in the invoicing. There are various profitabilities in different areas, so depending on how they grow in the invoicing mix, it will affect the margins one way or another. Right now, it's clear that, you know, pumping system is well loaded going forward, but it is also a long order book, so we will not completely go super growth quarter after quarter on the cargo pumping side. But I hope we will sort of keep a similar level of growth in the rest of the portfolio. But I think it's the mix side that's gonna decide whether we can move the marine margin up a notch or two. That's the message I have. I'm sorry, just to clarify, if I could, 'cause I'm a bit confused. I got the sense that you were saying earlier that the offshore pumping had improved its margins over time. Are you saying that the cargo pumping is now back to... Margin is now back to where it was, or just the whole pumping? 'Cause if you've had an increase in offshore, you could still be behind where you were in cargo, if you get the gist. Yeah, that question is almost too insightful for me to wanting to give you an answer. But, I mean, you are kind of correct. Okay. I see. But I would add to this, that from a mix point of view, in the Framo business specifically, in, you know, the invoicing on offshore as a share of the invoicing is probably somewhat higher. Mm. But in and of itself, it is a well-functioning, you know, supportive, kind of around the average margin of the Marine Division at this point in time. I think on the cargo pumping, we are back on the old level. It could be that, you know, the ramping still has a little bit of a step to go looking into Q4. But I'm just hesitant to guide you too optimistic on the question on the leverage we're gonna get out of that. But if you wanna be very positive, there may be a little bit of truth to your analysis that it possibly could go slightly higher. But let's see where we go in this ramping and how the phasing of the completion of these projects will happen. Very helpful. Thanks very much. The next question comes from the line of Sebastian Kuenne from RBC. Please go ahead. Yeah. Hi, gentlemen. Thanks, thank you for taking my questions. My first is, yeah, again, on, on marine. So we hear the strong order intake for cargo pumping. I was wondering, when is the delivery expected for these ships, for the orders that you get, that you got in Q3? You must have the timelines already. I was wondering how far out we have to look here. And then, is Alfa Laval still accepting all the tenders for pumping, even if the lead times are extremely long? Because it, to me, it feels like it increases the risk that you have to hedge costs, hedge steel prices, hedge labor costs, and so on. I was wondering how far out you are now planning and whether you keep accepting these orders? Would be my first question. Yeah. We are accepting all orders. To my knowledge, we haven't let go of a single one that we had the opportunity to win on conditions that we think are reasonable. It's difficult to give you a precise timeline, but 2025 is, but there is almost no capacity at yards nor at our place to take rush orders at this point in time. But we have squeezed in the odd rush order from Q3 into deliveries next year. But I think that door is pretty much closed. 2025 is done, 2026. We're looking at 2026 and maybe some flow into 2027 on that. That's where the order book is. Your question on the risks on the order book is relevant and good. If we look at our overall order book of SEK 52 billion, the one that is longer than typically is the marine one. So we, you know, the for the rest of our business in Food and Water and energy, that looks normal, so it's the normal volatility. And what I would say on that was that, you know, we had some problems across the board when we had the hyperinflation period, and we were not fully managed to compensate for that in the contracts. And we are getting a little bit of the opposite effects now. We have better commodity prices and some positive deviations on project and product execution. And that was clearly visible Food and Water Division, for example, in this quarter. So there is some elements of risk and opportunity in the cycle for the way the order book looks. We have done a review in the Marine Division on all of the long contracts in terms of our exposures and what degree we are able to negotiate some variability or renegotiation opportunities. So we think we got it under good control. We are hedging on material costs and the long order book on the cargo pumping. It is a solid margin business. So even if we have some exposures on a couple of percentage points, it doesn't really change the underlying attractiveness on the order book. So we feel, we feel good about it. We're increasingly monitoring contractual risks in long-term contracts, but I think we have an okay balance on it. That's very clear. Thank you very much. My second question is on energy. If I run rough numbers, it seems that the product business is down 8-9% year-on-year. I assume this is mainly the brazed heat exchanger business, so you already indicated the low utilization for, you know, for the Italian plants. At the same time, you seem still reluctant to do anything on the capacity there. Does that- is it fair to say that you are hopeful that heat pump business is coming back in the next twelve months? Because otherwise, you would probably at least consider capacity cuts there, or maybe you do capacity cuts, but it's only temporary. Maybe you can elaborate a little bit on your expectations there. Thank you. Yeah, on the capacity side, we struggle in Jiangyin in China, in Ronneby in Sweden, in San Bonifacio in Italy, and in Richmond, in the US. So this is a broad-based problem in the supply chain. We have done two things when it comes to limiting the financial impact on the capacity problem. One is that we simply, as much as possible, have slowed the full implementation and commissioning of the new capacity. And so we are not carrying the full depreciation and the full cost of those investments in the P&L as of yet, although obviously we carry some. And then we used all the variable opportunities for limiting direct costs, especially in Italy, where we use the Cassa Integrazione solutions. I think the team has done globally a fantastic job in trying to modify the short-term financial impact. It has been not as big as we thought, which means that in terms of revenue growth, we will see an impact in the years to come. The margin effect positive consequently is not gonna be that big as the downturn was softened. You know, when we took the investment decisions, we... Let me first comment on the heat pump. Our view is that starting slowly in Q4, we will see a gradual ramp up into some sort of normal levels coming into Q2 next year. That, that's sort of when the whole inventory reduction program is over, and we get some stabilized market on some sort of level. I don't expect that that level necessarily will be higher than the peak, but of course, the peak included a lot of inventory building. So I think we will have a, probably a normality level restoring somewhat below where we were at the last peak. And from there on, we will see the growth trajectory. When we made the investment decision, we were aware that we took a risk on the heat pump market. But one reason that we felt comfortable is that the same size and technology will be used in, for example, in hydrogen applications. And we are, at the moment, investing more into hydrogen technology than we ever done before, as you know. We will showcase what we're doing in that area at the Capital Markets Day in San Bonifacio, just a month from now. I really encourage all of you to come there. We will try to give you a good view on what we see happening on the heat pump side, but also in the energy transition side, and that's the basis for why we feel that, of course, the timing of the capacity investments put it at around EUR 250-300 million. The timing wasn't perfect, looking back, but you know, we are still comfortable that we will move into the new plant gradually over the next couple of years. Understood. Thank you so much for your help. Much appreciated. The next question comes from the line of John Kim, from Deutsche Bank. Please go ahead. Hi, good morning. Congrats on the numbers. I'm wondering if we could talk about Food and Water for a second. Understand that dozen and large projects has executed well, but how should we think about kind of margin and revenue mix normalization over the next few quarters? I'm trying to parse out the different factors in how your division's performing. Start there. Thanks. Yeah. Let me move back a year. A year ago, when Fredrik and I were sitting here, we were a bit worried for 2025 from the point of view that we knew that the high level of project orders would decrease a bit during this year, and it is. Especially on the fats and oils and the biofuel side. And so the large order book would probably decrease somewhat during this year. At the same time, we were unsure where we were gonna go on the short cyclical side. We saw early signs in China of maybe a bit of a recovery, but we were, in volume terms, compared to the peak in the short cyclical business, down approximately 20%. You know, then we had been going through a level of good growth on the service side for a period of time, and we were unsure whether we could sustain that level. When we looked, you know, to a year forward at that time, we were a bit concerned, you know, how will the invoicing base for '25 look like? We said, and I told you guys that the most important things for you to look at and that we are monitoring is where the short cyclical business is going on the Food and Water side? Because on the project side, you know, we are pretty much, we think we're gonna be okay. On the short cyclical, that's gonna be the basis for how we look at 2025. And we were sort of prepared that we may have to prepare ourselves cost-wise into a more troublesome 2025. As the year has played out, now three, four quarters later, the short cyclical side has continued to grow. The third quarter was, by far, the best one that we had for a long period of time. We see a return on the pharma business side that was sort of slowed after the accelerated level in, during the COVID period. Service has continued to grow, despite the fact that it's been very high, over a number of years. And our project execution looks very good at the moment, with high margins than we normally have been guided for in the project business. So, so we feel quite good. If we look at the quarter, as we indicate in the comments on the Q4, the Desmet orders are lower after the exceptional levels they had last year. All of the other units within the Food and Water Division group. and so we feel when we're looking forward into 2025, that normal... The unit that normally should be the stability in Alfa Food and Water Division, is maybe gonna play that role a little bit. Super helpful. One unrelated question. We're starting to see some sizable projects around industrial heat pumps, so BASF as an example. I'm just wondering if you could give us a bit of color on the role you play in these very large installations, and how big a market opportunity that is for you. Yeah. And for us, the opportunity with the large heat pumps is, of course, mainly on the gasketed heat exchangers. But for some of the really large ones, for example, you know the one for BASF now, there the media start also getting aggressive, and there we were starting to look a lot at our welded range as well. So now it's become a little bit of our welded range and our gasketed heat exchanger range. That's primarily what's going into the really large heat pump projects. Helpful. Thank you. The next question comes from the line of Andreas Koski from BNP Paribas Exane. Please go ahead. Thank you. Thank you very much, and good morning. Starting with a question on Food and Water. So we've seen weakness in Desmet. Would you say that the Desmet orders are now close to a trough? And is that the reason why you're guiding for somewhat higher demand Food and Water Division in the fourth quarter? No, it's not. The Desmet orders is actually not too far away from you know, the normal. I think we guided you when we bought the company that sort of the order level, a normal year would be somewhere north of 300 million EUR, and we were twice that last year. And so we said, you know, it's not. We don't expect that, you know, this level of invoicing, you know, the corresponding invoicing growth that suddenly the company is twice the size. It would be problematic, to say the least. But the order level is not that exceptionally low. It may be somewhat lower than on a normal year, but I think it's in my recollection that Desmet is coming in, you know, on an acceptable level. We don't think that's gonna change in Q4. It's not driven by product bookings when we are guiding. It's the continuous momentum on the short cycle thing, and in general, in several end markets, including dairy, including pharma, including a good product structure and product launch pace in the Food and Water. We feel good about that part. Our feeling, though, is as we look into 2025, the situation for biofuels, including ethanol, so Food and Water Division as a whole, both on the Desmet side and in our traditional food systems, we expect the investment activity on the biofuel side to increase. We are not calculating that into the order intake for Q4 at this point in time. That's great, thank you. Then, did you have any delays in deliveries during the third quarter? The reason why I'm asking this is because you have the backlog now of SEK 15 billion that will be delivered in the fourth quarter. If I look at inflow orders last year, we should be at a total revenue level of around SEK 20 billion in the fourth quarter, and I don't think you've ever done above SEK 18 billion in the past, so it would be a strong new record high if that plays out. And do you have capacity for that? Or is it because you have produced products that was delivered in Q3, and will they be delivered in Q4? Well, you know, when you say twenty billion, and we have also running the calculation, it's possible to arrive that. And, you know, do we get a bit nervous on that number? Yeah, we do. But, it's not. I, you know, I think the issue we have, we were maybe a little bit slow on the Energy Division side, but I think the main struggle for us is to get the phasing right. It's not super easy on percentage of completion projects to have the revenue recognition process exactly tuned in in hundreds of projects around the world. But we do expect a good invoicing level in Q4, and we don't feel that there are any structural capacity limits. That's not what's gonna hold us back, and as Fredrik was on to before, we don't feel that there is any particularly customer delay processes that is hindering. We think the execution of the order book is pretty much, you know, operationally, it is where it should be. We are trying to guesstimate the phasing of the order book on a, you know, what's there to invoice in the quarter, in the next year, and so forth. So, but that's not the science. We are trying to get it approximately right. I think, Fredrik, is that fair? I think that's quite fair. I mean, just to reiterate, I mean, I think our judgment is that the quality of the backlog in relation to cost is good. We don't see any structural reasons why we shouldn't be able to deliver on our backlog or order book in quarter four and going forward. There's no operational reasons why we shouldn't be able to deliver. It is a phasing question, and sometimes the percentage of completion delays and sometimes the invoicing lands on the you know, a week or two later than the quarter close, and that's just the way it goes. You know, we expect a strong quarter four, given the backlog. Whether it's twenty, I wouldn't put a number on it. Yeah, understood. And then just quickly, is it possible to give us an indication of how much of the order backlog is for delivery in 2025? You will get a clearer sense of that when we give our first report in quarter one, and you see it in the form of current and backlog links. I don't want to give indication that's going to be wrong. Understood. Thank you very much. Next question. All right. I think we are at the last question at this point in time. Okay, the last question comes from the line of Sven Weier from UBS. Please go ahead. Yeah, morning, guys. It's Sven from UBS. Thanks for squeezing me in. Just a quick one on the service business, which has been again, quite strong. I mean, could you just give us a sense, how much that is replacing maybe the pushout in new investment, right? And to what extent are, you know, customers sweating the assets, using them longer, obviously more service and pushing out the decision for OE, and would that, if that's the case, I mean, would that mean if, you know, the OE comes back more strongly, that it dents a little bit, the service? That's the first one. Thanks, Tom. We have been hesitant to draw clear conclusions for a long time, but I think at this point in time we feel comfortable that we have done a job on the service side that's giving us actually a different position in the service market than before. Investment in people, in leadership, in technology, in service centers, in spare parts inventory, distribution capabilities, we are penetrating our installed base better. In some areas, we have broadened our service scope to multi-brands, and in some areas where we thought the service opportunity was limited, we have actually driven a service strategy that taken us to a level of 20-25% of service content in areas where we were seeing the single digit before. I think there's a big part of what we are doing that is the right thing long term. We were underserving the market for a long period of time, and we are gaining our fair share, and hopefully over time, a bit more of where we should be compared to our installed base. So I think I would say that's probably the big part of the answer. If there is one area where we see an elevated service demand because of sweating the assets, as you're saying, it is in the marine industry, where we see a lot of older vessels being maintained because ship rates are very good and delivery times for new ones is quite long. So I think-... Maybe we have elements of over-investing in the service on the marine side at the moment. On the other hand, you know, we are increasing our installed base. We are gradually moving ballast and scrubbers and other new applications more and more into the service periods of normality. So there, you know, I'm not suggesting that we are super worried about the service level in marine, but I think the reason that the marine is, has been so high, as opposed to a more normalized growth rate, is maybe impacted to a degree of old ships being kept on the seas, and that probably will come to an end within the next couple of years. So that would be my five cents worth on it. Okay, thanks, Tom. And the second one, if I may, is just on, because you called out China, obviously, as the most important country. I do remember that in the past, you had quite some refinery orders, petrochemicals in China. I was just wondering how you see the refinery market specifically, given that obviously, we have this huge boom in e-mobility, we see lower gasoline demand. Do you see that in the pipeline already as an impact, or is it a bit more focused on petrochemicals in China? No, I think, I think we've seen a mixed change in China. China is by far the world's largest energy transition country, and that's visible also on the investment side. So we have energy efficiency solutions, and we have investment that goes into the renewable side in a different way than in the past. So I think all in all, and there still has been some elements of energy independence in China with investments on the petrochemical and refinery side, also now in recent time, and still ongoing. So I think our sense is that slow growth in energy and slow growth in Food and Water from the current level, that's where we are in Q3. We feel reasonably comfortable with the short-term development in China, outside of the marine as well. Okay. Very clear. Thank you, Tom. All right. With that, I thought that was great to end on an energy question. I have invited you a number of times already to come down to Verona. We will share with you on November twenty-first our best thinking on how we see the energy transition, not only related to Alfa Laval, but how we see and read the trends in most of the relevant sectors. We will show you a part of our laboratory initiatives in order to get the efficiency in electrolysis and fuel cells up to an acceptable level, and more. I think this will be a good one. I hope you have the opportunity to join us in Verona and San Bonifacio. Thank you very much for a good hour.