A warm welcome to SKF's Q2 2024 Earnings Call. I'm Sophie Arnius, and I'm heading up Investor Relations. Our CEO, Rickard Gustafson, and CFO, Niclas Rosenlew, will take us through the highlights of the quarter, where the performance marked another step towards a more resilient and competitive SKF. After their presentations, there will be opportunities to ask questions, and there are two ways to do that. So if you are joining via the telephone line, you press star and one to ask a question. If you are instead watching via the webcast, you can already now type in your questions in the tab, and you find that just above the slides. So without further ado, it's great to hand over to you, Rickard. Thank you, Sophie, and a warm welcome to all of you joining on this earnings call. As Sophie mentioned, the story continues. We are creating a more competitive company, capable of delivering consistent margins regardless of demand fluctuations. To support this statement, I'd like to draw your attention to the right-hand side of this chart. The solid line represents our adjusted operating margin on a rolling 12-month basis, and as you can see, it actually holds up pretty well, despite a rather volatile organic growth quarter -by -quarter. The reason for this is found on the left-hand side of this chart, our continued diligent execution of our strategy. We have talked about it before. We have a decentralized organizational model, getting us close to our customers and providing more agility in our operations. We are driving effective cost measures across our businesses, and we constantly drive an active portfolio management also across all parts of our business. At the same time, we are investing into our future. We are driving regionalization and building strong and competitive value chains in all of the geographies where we operate, and we continue to drive innovation. I will come back to innovation later in this presentation. But all in all, we believe that we're creating a company that is very well-positioned to take advantage of profitable growth while once demand turns back into growth again. But with that said then, let's take a look at the quarter in isolation. We report some SEK 25.6 billion in net sales. That equates to a rather stable operating margin, adjusted operating margin of 13%. This is a strong performance, given that we have had a rather negative organic growth of almost 7% in the quarter, to be compared with a positive growth of 8% the same quarter a year ago. The reason for this are the same reasons as described on the previous page. Clearly, we have been able to drive price mix effectively in the quarter. We continued to drive our portfolio management activities and dared to walk away from unprofitable business, so some of this decline in organic growth is actually self-inflicted, but for the right reasons. We're also been able to drive effective cost management. Later in this presentation, you will hear Niclas share some more insights to this, but we have been able to offset a rather significant wage inflation in the quarter through other cost measures. All in all, I think it's a decent and strong performance in the quarter. If we then move on and take a look at our demand across our geographies, and as you can see on this chart, it's a fairly soft situation across all our geographies where we operate. But it's also important to mention that, as you all know, we have exposure to so many different industrial verticals, and all of them are not in the same point in their cycle. There are some that have a rather strong development, globally and others that struggle a bit. If I start with the, on the struggling side, one industrial vertical that is rather soft demand across all geographies still is wind, but otherwise, it varies a bit by region. So if you take a look and start by EMEA, negative organic growth of some 6%, as you can see on this chart, a little bit worse than what we saw in the first quarter this year. So clearly, the EMEA demand situation has not improved in the quarter. But there are pockets of growth to be found also here, Aero and Rail being two prime example of strong growth in the quarter, while most other, industrial verticals are experiencing a softer situation when it comes to demand. Americas, a somewhat different story, - 5% organic growth in the quarter, a little bit less worse or, or a little bit better, regardless how you want to express yourself, versus the same quarter, or sorry, versus the first quarter this year. This is primarily driven by strong price mix in the quarter, but also here we find strong development in industrial verticals such as Aero and Marine, while agriculture continues to be in its low point in its cycle. Turning to China and Northeast Asia, clearly a significant negative organic growth of just above 12%. Here, Wind is the main driver behind this, and if we would exclude Wind from these numbers, we would have reported a flattish organic growth. So other industrial verticals are actually holding up pretty well in China and Northeast Asia. Rail and Off-Highway are being two prime examples of that. And finally, ISEA, on a total level, fairly flattish, as you can see. Here, you have heavy industries and light vehicles being strong performance, while agriculture also has a rather low point in its cycle also in this region. Turning to our segments, and I'd like to start with sharing some insights on our industrial segment. Here, we report some SEK 18 billion in net sales. That corresponds to more than 7% or around 7% negative organic growth. But despite this, we are actually able to slightly improve our operating margin to just about 16%, a clearly strong performance, and again, driven by strong price mix, effective cost management, and also active pruning in our portfolio. Turning to automotive, -5% organic growth and an adjusted operating margin of some just above 5%. This is somewhat lower than the same quarter last year, but we also have a very different demand situation this quarter than what was the case a year ago. I'm still confident that our automotive team, they have line of sight of the 8% operating margin target by 2025, and they continue at a high pace with the strategic transformation on this portfolio. And we continue to have a very strong progress in the important EV segment, and especially in China. Looking into the second half, as you will hear Niclas share shortly when we come into the outlook, we don't really see a significant change in the demand situation going forward. And we will continue to drive and leverage the momentum we have in our regionalization to create a stronger and more competitive company. These two together may potentially put some additional pressure on our cost competitiveness, but it's the right thing to do. By continuing to driving this, we will create a stronger company that is geared for profitable growth once demand turns again. Taking a look into our strategic priorities, they have not changed, and we continue to deliver on these and execute on these priorities with diligence and rigor. I have talked quite a bit on the competitive intelligent value chain. We have built up a strong momentum, and when it comes to driving that in our business, and it's also visible in this quarter in terms of items affecting comparability, which is rather high in this quarter, and Niclas will share more details on that shortly. But we also continue to manage and drive our portfolio and continue to innovate, to build for intelligent and clean leadership. And it's important to reinforce that portfolio management is more than just pruning unprofitable accounts. It's really how do we transform our our portfolio to be geared for profitable growth, growth long term? And here, innovation and product development plays a vital role. So let me share some more insights on what's happening on innovation. Firstly, all our innovation clearly and naturally starts with our customers. How do we create customer value, and how do we eliminate pain points for our customers? That's comes always in the forefront on what we do. We have paid a lot of attention and worked very hard to transform our innovation portfolio so that it fully fits with our strategic intent. And as you can see from the numbers on this chart, the vast majority of all ongoing innovation projects and product development projects, they are now supporting our high-growth segments. But maybe even more importantly, they all need to contribute to our long-term profitability target of 14% operating margin. All projects that now it's in the pipeline and being worked on, all of them have operating margin targets significantly above the 14%. But we have also felt that we wanted to share more insights on what we do with innovation and create more kind of an engagement, excitement around our portfolio. Therefore, we have decided to host something that we call Tech and Innovation Summits, and we plan to host them twice a year, and we actually had the first one in the beginning of June. It was a true joy to participate in that summit and listen to some of these customer testimonials on the value that our innovative capabilities provide to their businesses. At this summit, we also introduced some new products to the market or showcased a few products that we're, you know, introducing into the market. I'd like to give you some a short flavor of a few of them. As you can see here, we have introduced a new seals for heavy industries. This seal will really improve uptime in very tough conditions. We showcased a new split bearing, also designed for heavy industries, that significantly reduces downtime, but even more importantly, enhances safety in hard-to-reach locations. We introduced a new super precision bearing platform, and this platform has a unique solution to meet the performance requirements in the machine tool industry. And finally, we also introduced a new monitoring and lubrication solution that will improve reliability and reduce noise within the railway industry. And this is just a few examples. We do have a very strong pipeline of new innovation that we're working on. All of them will continue to help to build a stronger, more competitive, and resilient SKF as we move forward on our strategic journey. So with this short introduction, I'd like to hand over to Niclas to take you through the numbers in more detail. Thank you. Niclas, over to you. Thank you, Rickard, and hello, everyone. So as we just heard from Rickard, the quarter can be characterized as, you know, relatively low volumes, but excellent in holding up margins and profitability. So if we start off with the volumes or the sales, SEK 25.6 billion was the sales in Q2. This is down from SEK 27 billion a year ago. But on the other hand, it's roughly at the level that we've had the last few quarters since the downturn for SKF started in Q3 last year. What comes to the bridge, sales bridge? We had a positive effect, a slight positive effect from currency. When it comes to the organic component, we had an organic decline of 6.6%. And here, within the organic, we have a negative volume, but we have a clearly positive price mix. So good job, continued job by the team, managing both price and mix. On that note, if we move on to profit and adjusted operating profit, it was SEK 3.3 billion in the quarter, slightly down from SEK 3.6 billion last year. If you look at this difference, this delta between SEK 3.3 billion and SEK 3.6 billion, as you can see in the bridge, half of that actually comes from currency. When it comes to organic, of course, the lower volumes, slightly lower volumes or lower volumes affected negatively, but there was a very good offset in terms of price mix, so the organic component in the bridge being -SEK 244 million. What comes to cost? I would say that was well managed by the team. We had materials slightly better than last year, so slightly lower than last year. No big change, but still. Same actually goes for energy. Logistics, on the other hand, were slightly higher than last year, so more cost. But then, a large component, of course, is our wages and salaries. And here, despite a 5%-6% wage inflation, the wages and salaries total cost was reasonably flat in the quarter. One thing to note in the quarter was our relatively high IAC, so one-off costs. And the main part of the one-off costs of roughly SEK 800 million came from all the good activities that we are doing in Germany. And this is very much part of regionalization. So, long-term thing that we wanna do, need to do in order to further improve competitiveness of SKF. We are taking down some of the activities and focusing Germany. We are moving some of the volumes to other geographies closer to customers, and thereby improving our competitiveness, lower costs, and also shorter lead times being closer to the customers. Moving on to cash flow, it was solid in the quarter, SEK 2.2 billion. Yes, it's a bit down, or it is down compared to last year, but on the other hand, it's up compared to 2022. And for being a Q2, this is actually quite normal. In Q2, we typically build inventories ahead of holiday seasons, which we then deplete in Q3 and in Q4. That's exactly what you can see here in the bridge with net working capital being -SEK 700 million. This is when we were building up in Q2 inventories. And again, expect to deplete that in the second half. When it comes to our balance sheet, it remains strong. We had a net debt of SEK 10.7 billion and this is excluding pensions. If you would include the pensions, it's roughly SEK 19 billion. We have a return on capital employed, which is moving in the right direction, somewhat up from last year, and very much towards our target of 16%. On net debt, a couple of specifics to note in the quarter. We paid our dividend, roughly SEK 3 billion, which of course then increases net debt somewhat, so that's the reason for the increase, essentially. And we also repaid a SEK 3 billion bond in the quarter. Of course, that doesn't have an impact on net debt, but it does on cash. So all in all, strong and solid balance sheet. Then, if we move on to the future and the outlook, we do expect markets to be volatile and the geopolitical tensions to continue also in the near term. For Q3, we expect organic sales to be relatively unchanged year-over-year, and for the full year, we reconfirm our guidance, our previous guidance of low single-digit organic sales decline year-over-year. One thing to note here, on the guidance part, is that we have decreased the CapEx or additions to property, plant, and equipment from the previous SEK 5.5 billion to SEK 5 billion now. This is actually very much in line with the strategy, where we have said that we are gonna peak around 2023, and then gradually start to come down in CapEx. With that, hand back to you, Rickard. Excellent. Thank you very much, Niclas. Before I sum up the quarter, I'd like to share a few comments to the background on this slide. As we speak now, the world's largest youth tournament in football or soccer, if you prefer, called the Gothia Cup, is ongoing. This tournament attracts some 2,000 teams from across 75 countries, all gathering here in Gothenburg during a very intense football week. SKF has, for many years, been the main sponsor of this event, and we're a proud sponsor of it. It's not just this week that makes it unique for us. We use this as a platform to connect with the different markets and communities where we operate. In many of our countries where we operate, SKF hosts locally, you know, tournaments, qualifying tournaments to travel to the Gothia Cup. This enables a number of unfortunate teams that may never have the, you know, financial means to make such a trip, to provide for the young an opportunity and a memory of a lifetime to come and visit the Gothenburg and be part of the Gothia Cup experience. So it's clearly one way for us to give something back to communities where we operate. But back to kind of reality and back to Q2. As I said in my opening remarks, I think we again prove that the journey continues. We are creating a more competitive and resilient company. In this quarter, despite a rather significant negative organic growth of around 7%, we are holding the margin at 13%, and for our important industrial business, we're even able to actually improve it somewhat to over 16%. This comes from rigorous delivery on our strategic intent. We continue to be effective when it comes to price mix. We drive effective cost management activities across our operations, and we dare to prune and walk away from unprofitable business, even though that may actually further enhance the negative organic growth development, but it's the right thing to do. And we're not walking away from continuing our long-term strategy execution, investing in strong local supply chains, a regionalization of our manufacturing footprint, and driving innovation forward. All of this will provide for a stronger company that is geared for growth once demand turns again. So with this, I'd like to thank you for your attention and hand back to Sophie and the Q&A session. Thank you. Thank you, Rickard, and thank you, Niclas. So we are now ready to take your questions. Before we open up for questions, let me just remind you on the practicalities here. And for those of you joining via the telephone line, you press star and one to ask a question. If you wish to withdraw it, you press star and two. For our webcast audience, you can type in your questions in the tab just above the slides. So let's start with a question from the telephone line, and it's from Daniela Costa at Goldman Sachs. Daniela, please go ahead. Hi, good morning. Thank you for taking my questions. I have two. I'll ask them one at a time, if possible. So first one, just on the actions that will impact the margin in the second half. I guess margins normally are seasonally like lower in Q3, Q4, compared to normal seasonality. Can you talk us a little bit through the magnitude of those actions that will impact and what those actions exactly are? Yes, we have Rickard here. Right. Here to answer. Yeah. Good morning, Daniela. Thank you for bringing the seasonality to the attention. That is absolutely correct. We do have seasonality, and I think you're all aware of that, and as far as I know, you have baked that into your spreadsheets, and you should maintain it like that. To answer your question, as I said, there is no drama in this. We have also in Q2 experienced this, a low-demand environment, and we have driven our regionalization, and we've been able to manage and maintain the margins. As we look into the future, we foresee that this situation will continue, but we will not walk away and reduce the momentum that we have built up for regionalization. We will maintain it, even if it may have a small or somewhat impact on our cost efficiency. So there's no drama. It's not a number that I'd like to give. It's just I want to share with you that that's how we see things, because we believe it's the right thing to do, even if it may have a short-term negative impact on us, potentially. Daniela, you have- Thank you, and- Another question. Yes. Yeah. Thank you, thank you. It was just regarding sort of how, and it relates to this topic of regionalization, and if you could remind us the current imbalances, particularly in the U.S., given the debate around tariffs that we are hearing and tariffs to the world, how much do you bring into the U.S. from outside and specifically from China versus from the rest of your operations? And what could be the tariffs impact for you? Right. Yes. It's an important question. I can't give you an exact number, but if you may recall, a year, a year and a half ago, we announced a significant investment in Mexico, where we're building up a new capacity to serve the North American market, and this is exactly for the reason that you mentioned. Today, we source quite a few of those components from China. All of that is in transition now to Mexico from China. So that's just one example of the regionalization efforts that is ongoing. Niclas mentioned on the Items Affecting Comparability in the quarter. We are, you know, working hard on downsizing our capacity in, in Germany, in Schweinfurt. Some of that capacity is actually moving to Asia, because it's actually geared for customers there, and we get closer to customers. Some of that capacity is moving eastbound to Eastern Europe to drive long-term cost effectiveness and competitiveness in our organization. So it varies by country, and there are different means that we are undertaking in order to deliver on this regionalization effort, but North America is not forgotten in this. Mexico will be the key platform as we move forward there. Yes, please. Maybe just to add, Daniela, to be specific, we are getting to a point where what we sell and how we serve our customers in Americas, actually, but specifically the U.S., very little is from China. So this has been, as you know, a journey for the past couple of years, and we've got. We are at the point where we are not that dependent, actually. So let's see, but not particularly concerned about what comes. Sorry, if I may follow up on this, because also the debate on the tariffs is that the 10% tariff would apply to coming from anywhere, not just from China, but those you can pass through, for example, to pricing or other things. I guess Mexico would still be subjected to tariffs. Yes. The plan is that, and when we looked into this, that we feel confident that we can gonna be able to manage this and, you know, the regionalization will help. And if we need to take other measure, including you know, pricing activities, we're going to go after that as well. Got it. Thank you very much. Thank you, Daniela. We have the next question from Max Yates at Morgan Stanley. Max, please go ahead. Thank you. Could I just ask my first question on pricing? I think you've talked about kind of positive trends around price mix in the quarter. Could you just give us a feel of what pricing did in the quarter? Thank you. That's a question for Niclas. Sure, sure. We are actually quite pleased with how you know price mix has continued to hold up quite well. There's no drama to it. It's exactly as we talked about before. Of course, you know, a year and a half ago, it was a different pricing environment. We increased prices a lot, and now that has faded, and we are shifting more towards, as Rickard mentioned, new product launches, innovation, value-based pricing, but it's still on a positive, in a positive territory. And then actually, the mix component has remained relatively strong, where we managed the portfolio, again, partially through pruning other actions, more towards higher margin, higher, well, yeah, products affecting mix positively. So, won't give you an exact number, but continues to hold up quite well. Okay, just my follow-up would be on the growth guidance. So you're obviously kind of implying that growth goes from sort of -7% in Q2 to flattish in Q3. I kind of understand there's a lot of moving parts with easier comps, kind of China wind dropping out, but could you just give us a feel for kind of conceptually, what are you kind of assuming? Is it that end markets are broadly unchanged? Do you worry at all that kind of U.S. customers, and are you getting any indications from your U.S. customers in ag -equipment, construction equipment, that they're ramping their production down? Just give us a feel for kind of what you're assuming on a sort of sequential basis, for your business. Thank you. Rickard, do you want to share here? I'd be happy to. In general, I would say that we foresee not that the overall demand it's going to improve in the second half of the year. It's actually going to, you know, stay at this level, so it's kind of flattening out, I guess, is the best way to describe it, when it comes to kind of the general total view. Clearly, as I said in the presentation, there are exceptions. There are some industrial verticals that, you know, maintain and will maintain strong growth also in the second half, where, you know, Aerospace being one prime example. You're right that when it comes to the kind of flattish forecast of organic growth in third quarter, relates also to the fact that it's easy comparison versus last year. The net number won't change that much. So we basically believe that we're going to stay at this demand situation that we have at the moment. I can't really comment specifically in every geography and every industry, but you mentioned agriculture, and we don't really see a significant change there. I think they are in a low point in their cycle, and I think that's going to be retained at least throughout this year. That's helpful. Thank you very much. Thank you, Max. The next question comes from Ben Heelan, at Bank of America. Ben, please go ahead. Yeah, morning. Thank you for taking the question. The first question I wanted to ask was around aerospace. Obviously, we've seen a couple of production challenges at the OEMs, so obviously, it's obviously been a tailwind for you in the first half of the year. I was just wondering if there have been any changes that you've seen in terms of scheduling around production and potential destocking, et cetera. So that was the first question. And then secondly, on inventory levels, I mean, you talked in the past about a willingness to get inventories down. Could you talk a little bit about where you are on that journey, how we should think about the pace of that inventory unwind from here? Thank you. Niclas, I think let's start with both Aerospace and Automotive. Yes. So on Aerospace, I would say continuous, very good momentum, very happy with how that business is evolving, and the team is doing a great job. I mean, you are right that, I mean, if there's one thing holding us back, it's on the supply side. So, it's not really about demand, it's really a supply side there. But again, that's nothing new specifically for Q2 as such. It's something that we've been working on for some time already. So I would say no major change, good traction. Team is doing a fantastic job there. Demand is there. Then on the inventories and, specifically on our inventories, we are at a too high level, that's pretty clear. There's better to be blunt about it, and we have significant potential to take it down further. We have said that we have a long-term target of net working capital to sales of 25%. Yes, that's far out. It's not, you know, this year or maybe not even next year or not next year either, but it is something that we are determined to go towards. And, of course, inventories is the main component there. And, we are very aware of this, and the teams are working diligently on this. So, we should expect inventories to come down, and what we look at is primarily inventories to sales ratio, which now in Q2 was somewhere around 24%, just south of 24%, and 20, roughly 20%, should be the kind of norm for SKF. So that 4% point delta is what we are shooting for and addressing. Okay, great. Very helpful. Thank you. Thank you. The next question comes from John Kim at Deutsche Bank. Please go ahead. Hi, good morning, everybody. Wanted to ask two questions, if I may. Could you comment about the sequential development on price mix as we think about Q1 and Q2 this year? I know that, both price and mix are still positive, but I'm trying to get a sense of perhaps magnitudes or tailwinds from that aspect of the business model. Secondly, on the restructuring, was that done fairly early in the quarter or towards the end? How should we think about the employee base as we think about the go-forward cost base? Thank you. So Niclas, should you start with the first question, and then Rickard, perhaps… Sure ... take the next one? I'd be happy to. Yeah. Yeah, the first? It was price mix. Price mix. Yes, price mix. Well, again, won't give a specific number, but you can see it as, you know, a gradual shift down in price mix over time. It's not a straight line necessarily, but a gradual, you know, shrinking of the price mix component. Saying that, holding up quite, quite well. Right, and on the restructuring, no, it's not been a one-time event in the second quarter. This has been an ongoing journey for quite some time, and it's been further accelerated by the softness in demand that we have experienced since Q3 last year. And if you have followed our headcount numbers, you will see that they have actually come down primarily on the blue collars. But we also, a year ago, we had a kind of a cost efficiency program that targeted to reduce staff by 1,000 net or a net number of 1,000 employees, and we did execute on that one. And since then, that has been some further headcount reductions, given the softness of demand. It's a continuous journey, and you should expect us to continue to take down costs to compensate for a lower demand environment, just as we have done in the last few quarters. If I just may add, specifically this IAC that we took in Q2 related to Germany, Yeah As said, and it was late in the quarter. In that sense, you are right. Great. Thanks so much. And let's continue with questions from our telephone line. It's from Andy Wilson at JP Morgan. Andy, please go ahead. Hi. Good morning. Thanks for taking my questions. I've got two, which I'll take separately because they're different. Just on the comment on near-term demand, which is helpful in terms of trying to calibrate that. When you talk about demand staying on the current level, I'm assuming we should build in the typical seasonality, Q3 versus Q2, as we think about that. Is that the right way to think about it? Yes. Andy, yeah. Thank you. Yes, that's the- What's that? That's the right way to think about it. Maybe just on that, just conscious of sort of where PMIs and some of the top-down data has been as we've kind of gone through the Q2. Has that view on a sequentially flat development changed? You know, I think we were sort of maybe more hopeful of a stronger second half earlier in the year. Is that a fair reflection of sort of how you're seeing it, just that we haven't maybe seen some of the pick of the momentum we might have expected to? Yes. Well, yeah, I would echo what you just said there. I think when we started this year, and we were pretty vocal about it as well, we said that we were, we did expect a rather soft or weak first half of the year in terms of demand, and then we're hoping for a somewhat stronger second half. Now, I think, you know, we have maybe moderated that view a bit, not much, but a bit. We haven't really seen any real signs of an uptick, but rather, I believe that the best way to describe it right now is that we think it's maybe have bottomed out, but we're yet waiting for it to start to turn up again. Thank you. That's very helpful. And then secondly, it's more specific, and it's probably for Niclas. Just on the comment on wages in terms of the 5%-6% inflation, which I think is the number you talked to previously. But was I right in understanding that in the bridge, kind of Q2 on Q2, there wasn't much of an effect of that? I mean, I assume that's gonna be something that we start to see coming through in the coming quarters, or have I misunderstood that dynamic? Niclas? Well, yeah. So exactly as you said, I mean, we have a give or take 5%-6% underlying salary inflation. And what we have in the bridge as a cost effect from the bucket of salaries is relatively unchanged. So essentially, we have year-on-year basis, we have mitigated the impact, the 5%-6% underlying impact. And it's a number of actions that we've taken. You're well aware of what we did last year with our productivity efficiency program, addressing especially kind of the white collar side of things. But as you have seen, Q1, also in Q2, we have continued that work. We are quite happy with where we are, where we were, Q2, and we'll continue the work also going forward. Okay. So sorry, just so I understand, that was really helpful. In terms of the year-on-year effect, included within that is the efficiency measures in terms of headcount, and therefore, actually. Correct It’s potentially that you can kind of sustain not much of a headwind, at least as we kind of go through the next few quarters. Correct. Correct. That's really helpful. Thank you very much. Thank you, Andy. The next question or questions will come from James Moore at Redburn Atlantic. James, please go ahead. Sure, sure. Good morning, everyone. Yeah, thanks for taking the questions. I wondered if I could get back to the zero percent guidance for organic sales growth next quarter. If we play around with working days and price, it's not that easy because you're not saying much on price. It does look like volumes, working day adjusted, need to jump 3%-4% Q -on -Q to achieve that, and yet you're talking about stable. Do you think the volumes do need to increase Q -on -Q on a daily basis to achieve 0%? That's the first question. I'll come back on the second, if I could. Yeah, let's start with the first question here. Niclas, will you share some light here? . Yeah, I think, James, I'll reiterate the guidance, so relatively unchanged. Exactly how the different components will land with volumes and price and mix, let's see, but relatively unchanged is how we see Q3. So I'll leave it with that. Okay. Could I try. You have a second question. Yeah. Yeah. Yeah, very good. Could I try to unpack the -SEK 244 million organic impact on the bridge, which is obviously volume, price, mix, absorption. But when I look at inventories, they're SEK 245,557, SEK 245,552, so they've barely moved Q-on-Q on a nominal basis. But have they changed on a local currency finished goods basis? And was there any absorption impact in the bridge in the quarter? And maybe you can help me, as you don't want to give the exact numbers, I would have thought you might be SEK 500 million of price mix. I just don't understand that -SEK 244 million number. It does look to me as if you've got a much higher decremental margin on pure volume top line to pure volume bottom line. Is there anything going on behind that -SEK 244 million that you're seeing that would help us on the outside understand it? Niclas, do you want to address this one? Well, what, Those many numbers. Quite, quite a lot of details there, James. But in terms of absorption, no major impact as such. And maybe we need to go through the bridge and understand it then a bit more in detail, separately. But the 244 is of course lower volumes, lower sales, and then a clearly positive price mix, like you said. Okay. All right. Thank you very much. Thank you, James. And let's go to Erik Golrang at SEB. Erik, please go ahead. Thank you. I have two questions, and first one is coming back to your commentary there about potentially lower cost efficiency in the second half. And just so we understand the nature of it, is this simply a matter of one facility ramping while the other is still online, so we get double cost at a certain period? And if so, I would assume that you don't really need demand recovering for that to improve at some point. And then the second question is on CapEx, which you now see coming down after a period of record spending. I wonder what we can read into this in terms of capital allocation and capital priorities as we move into 2025. Thank you. So Rickard, do you want to start with the first one, and then Niclas, the second one? Yeah. And Erik, as I said, there is no drama in this. Clearly, also in this quarter, in the second quarter, and also in the first quarter, we have experienced the same thing, a low-demand environment while we are building a strong momentum in our regionalization. And you're right, as we move things, you know, a factory that is receiving a new assortment will take some time to ramp up to get full effectiveness. So that's kind of the dynamics here. We have been able to manage that and cope with it in the number of quarters to sustain our margins, and we're gonna aim for the same, all seeing Q3. We are saying that now we have lived with, you know, significant low volumes for quite a few quarters, and at the same time, we are seeing a good trajectory and pace in our regionalization, and we don't want to stop that. We believe it's absolutely the right thing to do, even though it may put some additional pressure on cost efficiency that we may or may not fully be able to compensate for. We're going to strive for it. We have demonstrated that we have done it in the past, and we're going to do everything we can in the future. We just want to be transparent and open about it. These two things is something that we, we're going to wrestle with, but it's the right thing to do, and it's going to build a stronger company as we move forward. Sure. And then, Erik, on CapEx. You might, or some of you might or might not recall that, in the last CMD, we also talked about CapEx long term, and we said that from 2025, roughly, onwards, CapEx will start to come down. Actually, we have done that. We are there at that point, one year ahead, you can say, now in 2024, when it starts to come down. And why is that? Well, we have done the big regionalization investments, putting the foundation in place, in for instance, China. Rickard mentioned Mexico also. So now it's more about ramping up, and that's where the inefficiency comes. They are not fully up and running. So now it's more about shifting the volume there, ramping up the production. But the big, big investments are done, or we are done with. Then, what the consequences on capital allocation as such, of course, we continue to pay dividend as planned, 50% of net profit. We continue to invest back, and it's not a dramatic decrease in CapEx, as you foresee. And then we'll gradually, over time, probably look a bit more at M&A on the acquisition side also. Very good. Thank you. Thank you. Thank you, Erik. There are many of you that wants to ask questions, so we only have around 10 minutes left, so let's limit it to one question per person. So with that, let's see Tim Lee here from Barclays. Please go ahead. Hi, thanks for taking my questions. I just want to follow up a little bit more on the margin pressure or cost pressure in the second half. As you just mentioned that there was no major impact from cost absorption in the quarter. Does this mean that in the second half of the year, when you see lower production volume to continue to have shortened cost pressure, does it mean that there will be probably some more cost absorption in the coming quarter? And in terms of the impact from the regionalization, is it still something. I mean, the cost is mainly in the items affecting comparability or the low efficiency of the new production plants will have like an impact on the adjusted EBIT margin in the coming quarter. Niclas, do you want to answer that shortly? Sure. Yeah. Sure. So, as we discussed here earlier, we do have a seasonality where we essentially produce a bit more in first half, and then we produce a bit less in the second half. So, like you mentioned, production volumes, typically in Q3, as well as in Q4, are lower in second half. And therefore, we also have this margin seasonality. So, the cost coverage is a bit lower in second half compared to first half, and that's quite natural. And we foresee that to be the case also this year, no drama, no big differences to kind of long-term SKF averages there. When it comes to this shift, which we're actually quite proud of, how well we are running that now. So regionalization comes with many different words, but, as just mentioned, we are ramping up some production facilities, for instance, in China and in Mexico, while we, at the same time, then ramp down focus a bit more some other existing facilities, like we did now announce, when it comes to Germany in Q2. And that means that there's a can I say, a slight inefficiency, for the moment, as we are ramping up and down. Things are not, you know, fully loaded perfect. And that has a margin impact, slight margin impact. We shouldn't over-dramatize it. It was the case in Q2. It will be a case, the case in Q3 and Q4 as well. Yeah. Thank you, Tim. Let's move on to the next question from Andre Kukhnin at UBS. Andre, please go ahead. I just wanted to take a step back and ask about the Automotive margin target of 8% for 2025. Could you walk us through kind of the key building blocks for that from the current, current run rate? Is it any more significant rationalization of footprint there? Is, is there something that's already been done that maybe not yielding the result, because we're seeing quite a gap there, obviously. Niclas, can you elaborate on this one? Yeah. Yes, so it's clear. You asked about the automotive operating margin, right? Yes. The 8%. Yes. Yes, indeed. All right, thank you. Just to clarify. Now, the journey there continues. To simplify it, the strategic transformation that is ongoing with our automotive business is really to focus on three particular segments. First, it's really about making sure that we continue to develop our strong footprint and foothold in the EV personal vehicle market, where we are a clear market leader, and we have some unique offerings that enables both for the powertrain and super low friction that extends range. Clearly, something that OEMs values, and we sell, we have a very, very good, you know, progress there. We are keen, in that regard, to walk away from some of the ICE business, especially for smaller personal vehicles, and that's ongoing. So the shift in personal vehicle is one part of the equation. Mm-hmm. The second is we have a strong position in heavy commercial vehicles. We intend to further leverage that and continue to build on that. And third, we want to further enhance our vehicle aftermarket position, where I think we are a number 2 globally in the vehicle aftermarket, and we do see significant growth opportunities there. These three together is the kind of the cornerstone and foundation of the transformation towards the 8% operating margin. And it's not a straight line, and I understand your question, even though I think that, you know, the 5.4% operating margin, given this massive shift in volume over the last quarters, is a pretty strong performance. But we are confident that we are targeting and progressing towards the 8% target by 2025. Those are the key kind of building blocks to get there. Thank you, Rickard. Let's move on to the next, sorry, Andrea, if there are any follow-ups, let's take that offline. We would need to move to the next person in line here to ask a question, and that's Andreas Koski from BNP Paribas. Andre, please go ahead. Thank you, and good morning. First, Niclas, can you just clarify and confirm that you said that you do not expect any big deviations from the long-term margin seasonality between H1 and H2, despite those cost inefficiencies? Then my question really was about the demand situation. You expect demand to remain generally unchanged in Q3 compared to Q2, but could you say the daily sales rates during the second quarter compared to the first quarter and month by month, did you see any sequential weakness or strength in Europe, Asia, or North America during the second quarter? Thank you. Niclas, do you want to take both questions here? Well, so on the kind of, If we start with the second one, would refer back to what Rickard said here earlier, instead of going through kind of day by day, what happened in Q2. Things have stabilized and remained relatively stable. As you know, I mean, we have big differences between different industries, Aerospace doing fantastically, Wind doing less well. We also have big differences between the geographies. As you saw, India doing quite well. And China, driven by Wind, less so. So, yes, there are differences, of course, but by and large, we see that things have, sales have stabilized. And now I talk sequentially on these sort of levels. And Andreas, sorry, remind me of the first one. The seasonality? Yes. Thank you. Yeah. The, just it's been quite a lot of questions about the cost headwinds from the efficiency measures. No, no, fully understand. No, I mean, yeah, normal seasonality, whatever you, however you want to see that, but normal seasonality. On the cost pressure, let's not make it more dramatic than it is. As Rickard said, just want to be open in terms of what's happening, and it's actually quite interesting. We have excellent momentum, actually, shifting the volumes now. And of course, long term, slightly longer term, that should come with a very positive, good leverage. Short term, yes, it means that we are not fully loaded, and therefore not as efficient as we will be in the future, and that has some impact on our margins. Correct. If I may just add and draw your attention to what I said during my presentation. We have seen in EMEA a situation where organic growth have kind of worsened a little bit compared to Q1 this year, and we saw the opposite in Americas. I think that's also the information that we can share. Thank you. Our final question will come from Klas Bergelind from Citi. Klas, please go ahead. Thank you, Sophie. I'm sorry I was late on the call, so maybe you have touched on this. But, Niclas, I just want to ask a couple of questions on the bridge. Price mix looks to be higher than I thought, and I'm trying to understand how much of that was mix versus pure pricing, and why. And if you could tell us if the price mix, not giving a number, but if it was higher year-over-year in the second quarter versus year-over-year in the first quarter? And then on the logistics cost, given the higher freight rates because of the Red Sea, this looks to be a headwind now. Understand that the impact there is shorter lead time versus raw mats. Do you think you've seen most of the increase here already, or do you foresee any more increase sort of year-over-year into the third quarter? Thank you very much. Mm-hmm, Niklas. On price mix, both price and mix, positive. And what comes to kind of the sequential movement of year-on-year price mix, gradually it will shift down. What varies is of course mix by quarter, and but it's a gradual shift. But overall, holding up reasonably well, and again, just to give you an idea, similar levels Q1, Q2. But again, maybe we foresee that gradually, you know, going down. And then on the logistics and Red Sea, yes, there was a minimal effect in Q2, a bit bigger in Q2, sorry, in Q1. A bit bigger in Q2, no drama, but a bit bigger. Depending on where, you know, what happens in the world and where the cost levels stay, we expect logistics to be, you know, year on year, higher. Thank you. That ends the Q&A session. Before we end this call, Rickard, do you want to sum up this quarter? Yes, thank you. To reiterate what I've said, we are creating a more competitive company. Once again, we demonstrate an ability to hold our margins despite a rather soft demand environment. We continue to deliver on our strategic framework, and we're doing the tactical things related to price, related to mix, cost, and portfolio management. At the same time, investing in our future in terms of strong supply chains and investing in innovation. Clearly position us well for profitable growth once demand turns. I think that's the key message that I want to leave you with. I'm gonna wish you a wonderful summer, and I also want to thank you for your participation today. I know we're not the only company releasing numbers in this country today, so I appreciate that you took the time to be with us this morning. Thank you.