Alexander Virgo

Alexander Virgo asked why the Prolec GE integration hasn't led to more accretion on the original margin guidance for the Electrification segment, inquiring about integration costs and investment needs.

Answer

CEO Scott Strazik clarified that there was no change from the original Prolec GE expectations discussed in October, suggesting the current guidance provides even more opportunity to outperform in 2026, and expressed excitement for the acquisition to be part of the company.

Alexander Virgo inquired about the Electrification segment, specifically why the integration of Prolec GE had not led to more accretion on the original margin guidance and asked about integration costs and the margin profile looking out to 2028.

Answer

CEO Scott Strazik stated there was no change from the original expectations for Prolec GE's financial contribution, suggesting the current guidance provides an opportunity for outperformance in 2026. He emphasized productive integration meetings and excitement for Prolec to become part of the company, without implying any negative shift in financial expectations.

Alexander Virgo from Bank of America Merrill Lynch questioned the drivers behind the strong Q2 growth guidance for the Electrification segment and asked for an update on the margin gap between its North American business and the rest of the world.

Answer

CEO Morten Wierod explained the confident Q2 outlook is due to some revenue shifting from Q1 and a record-high order book. He confirmed the North American margin remains dilutive but stated the gap is narrowing. CFO Timo Ihamuotila added that all business areas are expected to show operational improvement for the full year.

Inquired about the situation in the Machine Automation (MA) division, noting that the timeline for normalization keeps extending and asking for insights into current trends and the outlook for exit rates into 2025.

Answer

Management attributed the prolonged downturn in MA to a post-COVID inventory glut at machine builders, now expecting normalization in Q2 2025. The current focus is on reducing the business's breakeven level. They also noted that order intake in Germany is stabilizing at a lower level.

Questioned the underlying performance of the Motion division, noting that orders appeared weak when excluding a large rail contract, and asked about margin development. He also had a follow-up on China, asking if the positive sentiment was based more on macro data or direct customer conversations.

Answer

Executives explained that Motion's performance was affected by a softening short-cycle business and some revenue timing issues on projects. The business mix is shifting towards large motors and service, which impacts margins. They expect Q2 margins to be up sequentially but below last year's level. Regarding China, they confirmed their optimism is based on direct conversations with their local operations, which is now being confirmed by improving macro data.

Alexander Virgo of Bank of America Merrill Lynch asked for details on the drivers behind the strong Q2 growth guidance for the Electrification segment and whether the historical margin gap between North America and the rest of the world is closing.

Answer

CEO Morten Wierod attributed the strong Q2 outlook to some revenue shifting from Q1 and a record-high order book. He confirmed that while the North American margin is still dilutive, the gap is narrowing, and all business areas are expected to improve margins for the full year. CFO Timo Ihamuotila also provided context on corporate cost impacts.

Alexander Virgo of Bank of America Merrill Lynch questioned the drivers behind the strong Q2 growth guidance for the Electrification segment. He also asked about margin expansion and whether the profitability gap between the North American business and the rest of the world is closing.

Answer

CEO Morten Wierod explained that the strong Q2 outlook is supported by some revenue shifting from Q1 and a record-high order book in Electrification. He confirmed that while the North American margin is still dilutive, the gap is narrowing. CFO Timo Ihamuotila added that all business areas are expected to improve operational performance for the full year.

Alexander Virgo from Bank of America Merrill Lynch sought clarification on the 2025 margin improvement guidance, questioning what headwinds were offsetting positive drivers like gross margin gains, pricing, and a recovery in Robotics.

Answer

Executive Ann-Sofie Nordh identified a 40 basis point headwind from normalizing corporate costs and a negative mix effect from the Robotics & Discrete Automation division's revenue share. Executive Morten Wierod affirmed the company is targeting a new record performance in 2025, aiming to improve upon the 18.1% operational EBITA margin achieved in 2024.

Alexander Virgo from Bank of America Merrill Lynch sought clarification on the 2025 margin improvement guidance, questioning the potential headwinds that might temper the outlook given strong gross margins and a recovery in Robotics.

Answer

Executive Ann-Sofie Nordh explained that a 40 basis point benefit from lower corporate costs in 2024 will reverse into a 40 bps headwind in 2025. She also cited a negative mix from the recovering Robotics & Discrete Automation business as a factor. Executive Morten Wierod affirmed the goal is to achieve a new record performance in 2025, improving upon the 18.1% margin from 2024.

Alexander Virgo from BofA Securities sought clarification on the 2025 margin improvement guidance, questioning the headwinds that temper expectations despite strong gross margins and a recovery in Robotics.

Answer

Executive Ann-Sofie Nordh explained that a 40 bps headwind exists for 2025 due to the normalization of corporate costs from a lower 2024 base. She also cited a negative mix from the recovering, but still lower-margin, Robotics & Discrete Automation business. CEO Morten Wierod affirmed the goal is to set a new record margin in 2025, improving upon the 18.1% achieved in 2024.