Nilfisk Holding A/S

CSE:NLFSK

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Elisabeth Klintholm, executive]

Good morning, and welcome to Nilfisk Earnings Conference Call for the Third Quarter of 2023. My name is Elisabeth Klintholm, and I'm the Head of Investor Relations and Group Communication here at Nilfisk. And with me on the call today, I have Nilfisk CEO, Rene Svendsen-Tune and our CFO, Reinhard Mayer.

This morning, we will start out with Rene giving an update on the numbers and the key drivers for the quarter, followed by a business plan 2026 update. Then Reinhard will give a more detailed run-through of our financial performance in the quarter, and he will finish off with a few words on our -- on the narrowing of our outlook for 2023.

We really appreciate that you take the time to listen in on the call this morning, and we'll do a presentation for around 30 minutes. And then as usual, we really look forward to taking your questions at the end.

Moving on to Slide 2 for the usual practicalities. Before we begin today's presentation, please note that this presentation, including remarks from management, may contain forward-looking statements that should not be relied upon as predictions of actual results. For more details, I refer to this slide and to the disclaimer in the Q3 2023 report.

And with this, I pass the word over to you, Rene.

[Rene Svendsen-Tune, executive]

Thank you, Elisabeth, and good morning to every one of you. Thank you for joining us on this earnings call today. I will start out with some high-level comments on key highlights for the third quarter of 2023 and a short business plan 2026 update. So please go to Slide 5. Nilfisk Q3 results of 2023 were in line with our plans. We saw a satisfactory progress across many of our financial KPIs, but let's start from the top with the revenue development. Total revenue came to EUR 247.8 million compared to EUR 263 in the third quarter of last year.

This represents a reported growth of minus 5.8%. Most of the decline in revenue was driven by foreign exchange headwinds resulting in organic growth of minus 0.7%. Our services and consumer businesses contributed with growth, while revenue from Professional and Specialty declined. Looking at the regions, we saw negative organic growth in EMEA and Americas, where a market slowdown led to soft customer demand while APAC contributed with positive organic growth.

In the quarter, the ongoing easing of supply constraints continued, particularly in Americas. We do note that the order book remained elevated, primarily within the industrial range in Americas which is produced at our Brooklyn Park site. The margin recovery we have been seen over the last 5 quarters continued resulting in gross margin of 41.2%. EBITDA before special items increased to EUR 31.2 million, and the EBITDA margin before special items rose to 12.6%. And finally, free cash flow improved significantly in the quarter. And overall, the Q3 results were broadly in line with our expectations.

So let's move to Slide 6 for an update on business plan 2026. Back in August, when I joined Nilfisk as the interim CEO, I spoke to you about our unchanged commitment to the business plan 2026. Just for good measure, I reconfirm this today. We remain fully focused on our work with implementing and realizing the business plan 2026. Our work with the business plan is embedded in our daily life across Nilfisk. It stretches from markets and functions from leadership to customer-facing employees. We are almost 2 years into the implementation phase. This means that we are operationalizing our plans as part of the day-to-day cadence. As with any implementation, this results in ongoing adjustments to the plan from the continued feedback looks we have.

I'll highlight a few areas where our Q3 progress deserves a bit more attention. First, we continue our work with the large-scale US market. This quarter, our comparison figures from last year were strong, partly driven by COVID-19 subsidies, adding commercial demand. While order intake held up this quarter nicely, customer willingness to close deals were still below our expectations and which given the strong comparison, Americas saw negative organic growth.

Our strategic priority of developing services as a business continued its growth momentum and reached 30% of total revenue in the quarter. This is up from 28% in Q3 of last year. We also continue to make small progress with our contract attachment rate, which increased to 11.8% from the first 9 months of 2023, up from 9.3% for the same period in 2022. On the product side, our product launches in the second half of 2023 are worth highlighting. In Q3, we launched the SC351 lithium-ion for our commercial customers. This is a work behind design to wash and dry floors in one pass. And the machine is powered by onboard lithium batteries.

In Q4, we have already launched 2 new products: the SC650 for the commercial business and our new cordless Nilfisk S1 for the consumer business. So finally, let me follow up on the progress within building the regions and with our structural efficiency improvements. As a part of our focus to build a more customer-focused of [ great environment ], we have established 3 regions: Americas, EMEA and APAC. We now also have clear leadership in place for both our EMEA region and APAC region as we had it earlier for the Americas region.

October 1, Christopher Riau was appointed General Manager for EMEA region. Christopher was previously ahead of sales in Europe South. And since March of this year, he was -- he served as a Co-Head of Commercial EMEA. Also on October 1, our COO, Petros Kapelles, was appointed General Manager for APAC. Petros will also continue in his role as COO. Finally, in second quarter 2023, we initiated several structural adjustments. Most of these initiatives were concluded in the second quarter and third quarter of this year and the rest are planned for now in Q4 of 2023. A good part of the results is already visible in our overhead cost development, and Reinhard will come back to this in more detail.

And with that, Reinhard over to you, to run through of the financials. Please go to Slide 7.

[Reinhard Mayer, executive]

Thank you, Rene, and good morning also from my side. Our revenue growth, let's move to Slide 7. Our revenue growth of EUR 247.8 million was EUR 15.2 million lower than in Q3 2022, leading to a negative revenue growth of 5.8%. Adjusting for currency effects, organic growth was a decline of 0.7%. Revenue was supported by organic growth in service and by solid organic growth in the consumer business which we will detail in a minute. Professional declined organically 1.9%, of which the branded part declined just 0.4%. Floorcare performed well, while we saw a stronger decline in our High Pressure Washer products segment.

Private label declined 20.8% organically as sentiment for this business remained soft in the quarter. Service revenue benefited from the initiatives laid out in business plan 2026 including positive effects from pricing and from growing revenue in field service. PAC business declined compared with Q3 2022. Last year, Q3 benefited from the increased shipments of parts after the tornado event at the end of March 2022 in our U.S. distribution center. Specialty business declined 12.2% organically due to lower demand from the industry segment in both EMEA and Americas. This was partly offset by pricing actions.

Revenue from the consumer business was strong with 6.6% organic growth as customer demand continued to pick up. As in the first half of 2023, continued price management benefited revenue across the business. We note that we finished Q3 2023 with an order book that remains elevated, but at a lower level than in Q3 '22.

Moving on to Slide 9 for commentary on revenue by region. Looking into the 3 regions, demand was soft in EMEA and Americas while APAC continued to grow. In EMEA, revenue declined 0.5% organically in the quarter. Demand remained somewhat soft and impacted revenue for the region. Price management supported the revenue development, resulting in flattish growth in most markets, U.K. and Denmark for growth, while Italy and Benelux declined.

In total, EMEA delivered a revenue of EUR 134.3 million. In Americas, revenue came to EUR 93.5 million in the quarter, which corresponds to negative organic growth of 1.7%. Revenue was supported by price management and from increased shipments from our Brooklyn park production facility in U.S. Revenue was negatively impacted by a softer demand in North America. Tough comparisons from a stronger prior year quarter that saw 15.7% organic growth which had been positively impacted by a large one-off order from a retail customer in the U.S. last year. LatAm performed well, driven by solid demand leading to higher invoiced volume. This was further supported by pricing actions.

Finally, APAC delivered revenue of EUR 20 million or 2.3% organic growth. This is an increase over a very strong prior year quarter where we saw 14.1% organic growth. Revenue was supported by strong demand in Australia and New Zealand and by growth in China after the COVID-19 lockdowns were lifted.

Turning to Page 10, where we look at the gross margin development. The gross margin continued to improve and reached 41.2%, showing progress over the last 5 quarters. The gross margin benefited from price management, lower freight costs for overseas shipments and product mix effects. Cost inflation, including on raw materials and lower volumes negatively impacted the gross margin.

Let's look at the 3 buckets of moving parts impacting the gross margin. Compared with Q3 2022, pricing and mix effects benefited the gross margin with 4.7 percentage points. In addition, tailwinds from lower freight and distribution costs benefited the gross margin was 1.5 percentage points. Headwinds from lower volume and price increases on raw materials impacted the gross margin negatively with 4.1 percentage points. Summing up, the gross margin increased year-on-year by 2.1 percentage points.

Moving now to Slide 11 and some comments on the overhead costs. In Q3 2023, overhead costs came to EUR 86.5 million, a decrease of EUR 2.6 million from Q3 2022. We also saw a decrease in overhead cost from Q2, 2023 of EUR 2.2 million following the implementation of our structural efficiency improvements, which are expected to be completed in Q4 this year.

However, as a result of lower revenue, the overhead cost ratio increased from 33.9% in prior year to 34.9% in this quarter.

Let's have a deeper look into the evolution of our major spend categories. Sales and distribution costs decreased by EUR 2.4 million from Q3 2022 driven by implementation of the structural efficiency improvements.

Administration costs rose EUR 0.5 million from Q3 '22, impacted by cost inflation and the change in CEO. R&D spend increased slightly by EUR 0.2 million from Q3, 2022 and stood at 3.3% of revenue in Q3 2023, an increase from 3% in prior year quarter. The increase was driven by investments in modular platforms and software development. Stronger focus towards developing new sustainable products is increasing the level of capitalization after R&D spend.

As a result, total R&D costs decreased by EUR 1.9 million compared with Q3 2022. For a more detailed overview of the dynamics, we provided a split in overhead increases into 4 categories. 2 categories saw increases. The largest part of the increase stems from the increased merit, which is the annual salary adjustments and general inflationary pressures. Other operating expenses was a negative compared with Q3 2022 as last year was positively impacted by income from government brand. Cost towards last mile freight and distribution expenses decreased in the quarter.

Finally, cost savings resulting from our structural efficiency improvements benefited overhead costs. EBITDA before special items amounted to EUR 31.2 million in Q3 2023 compared to EUR 29.2 million in Q3 '22. The EBITDA margin before special items increased to 12.6% compared to 11.1% in the same quarter last year. Right management in combination with lower freight and distribution costs benefited EBITDA margin, offsetting the margin pressure from increased costs on raw materials and from declining volumes.

Despite the decline in overhead costs, the overhead ratio negatively impacted EBITDA margin. We expect to see our overhead cost declining into the fourth quarter of 2023 as the structural efficiency measures continue to take effect.

Moving on to the positive development in cash flow in Q3 on Slide 13. Free cash flow improved significantly in the quarter and amounted to an inflow of EUR 29.8 million. This was an increase of EUR 12.1 million compared to Q3 2022. Let's look at the key drivers of this development. The inflow increase of EUR 12.1 million was positively impacted by the non-recourse factoring program that we initiated in Autumn '22. Factoring reached EUR 25.6 million at the end of Q3 2023.

Cash flow from working capital was also positively affected by our lower inventory levels. Higher net outflow from the financial items and tax impacted the cash flow negatively. As a result, cash flow operating activities for Q3 2023 improved by EUR 11.2 million with a net inflow of EUR 36 million compared to a net inflow of EUR 24.8 million in Q3 2022. Cash flow from investing activities for Q3 '23 was a net outflow of EUR 6.2 million compared to an outflow of EUR 7.1 million in Q3 2022.

CapEx negatively impacted the cash outflow by EUR 0.9 million. So in a challenging environment, we managed to achieve a very strong free cash flow of EUR 29.8 million. Total net interest-bearing debt declined by EUR 94 million compared to the end of Q3 2022 and came to EUR 271.1 million. The gearing was reduced to 2x compared to 2.7x in the same period last year.

Next page, please. This concludes the financial section. Let's move on to Slide 15 for the outlook for 2023. With 1 quarter left of 2023, we narrow our outlook for the full year '23. We have factored in that the current macroeconomic uncertainty will continue for the remainder of 2023. This is expected to have a negative impact on our volumes. Consequently, our outlook for organic revenue growth has been adjusted to be around 0%.

Previously, we expected organic growth between minus 2% to plus 2%. The EBITDA margin before special items is expected around 13% before we expect the EBITDA margin before special items between 12% to 14%. And with this, we have concluded our presentation. We are ready now to take your questions. Thank you. Operator, over to you.

[Operator]

[Operator Instructions] And the first question comes from Mads from Carnegie.

[Mads Quistgaard, analyst]

Yes. I have two first in the guidance. So I see that your implicit guide for negative organic growth in the fourth quarter. I calculate minus 1.7% organic growth to this quarter. Can you talk more about the expected development between EMEA, Americas and APAC? That would be my first question. The other one is on the adjusted EBITDA margin for quarter 4. I calculate implicit guidance -- margin guidance of 14.4% in the quarter. Can you just remind me on the seasonality between the quarters on a margin level and also what will be driving the margin in the quarter? It will be my two first questions on the guidance.

[Reinhard Mayer, executive]

Thank you, Mads, for your questions. basically, I mean, our guidance, as we say, around 0%. Theoretically, you are right that we -- when we land exactly on, let's say, a momentum of zero. This would entail a negative decline of 1.7%. We cannot really rule this out, and it's part of the possibilities but there's also, let's say, optionalities that we are doing better. So as the uncertainty in the market is still there, we have landed our guidance right in the middle of our previous guidance.

When we look to Americas, and I think that is also what we mentioned here, there. On one side, we have also faced, let's say, a negative momentum in the market and especially in the demand for the commercial Floorcare area, which has impacted the Q3. But we have also seen, and that's so to say, the other side of the, let's say, perspective, a flattening out of a negative momentum in Europe. And we see clearly, let's say, some signs of positive development in some key markets, whilst others still have a little bit of a negative development.

How this exactly plays out, difficult to say. But what I would call stabilization in Europe is facing more or less, let's say, a declining situation on the demand side for commercial floor care in United States and in the Americas.

APAC, I think we need to expect a continuum of growth in the numbers we originally have reported in this year. To your question around EBITDA margin, I would agree that we see an increase of EBITDA margins in Q4 to come, and that's why we guide in the middle of our guidance range. What is driving that? As there 2 elements to it.

Clearly, we have a momentum on gross profit margin increase, 5 quarters of consecutive increase behind us, we expect the margin increase to continue, firstly.

Secondly, we expect, and that's what we also just mentioned to have a continuous focus on cost and effect from our structural efficiency improvements supporting the margin development in Q4. Hope this answers your question.

[Mads Quistgaard, analyst]

It was a very clear answer, Reinhard. Then I have a question on special items because I was a bit surprised about the low amount of special items in the quarter. Is that the run rate for quarter 4 as well? Or can you put some comments around that?

[Reinhard Mayer, executive]

Yes. And I think, let's say, one of it is, well, it is a little bit of a lower run rate, but we are not yet fully concluded. We gave you in the earlier of the year guidance EUR 10 million to EUR 12 million. So let's say I expect that we get into that area, but maybe at the lower end of it.

[Mads Quistgaard, analyst]

All right. Then my final question is on your headquarter costs, which came up in the quarter. Is that the run rate for the coming quarter? Or do you expect it to trend down in the fourth quarter?

[Reinhard Mayer, executive]

Headquarter cost was also impacted, as we said, part of the admin cost is the one-off cost in association with the CEO change, which is an operational cost and not a special item.

[Operator]

And the next question comes from Claus Almer from Nordea.

[Claus Almer, analyst]

Yes. Also a few questions from my side. The first question goes to the volume development. Could you please give some more color to how volume has trended in the 3 regions? That will be the first one.

[Reinhard Mayer, executive]

Claus, thank you for the question. Well, let's be, let's say, covering that by the regions. I would say the -- in the quarter, the biggest volume decline we saw in the Americas which also led to -- say to the large decline in organic terms, driven by the softer development in the commercial Floorcare where we also saw last year in Q3, a rather large order, let's say, coming towards us from one of the retail chains. And that we had reported last year, and this we could not repeat this year as actually, overall, the market sentiment is somewhat muted in that area. So Europe, we saw, let's say, the volume declines clearly diminishing, and that's the positive sign.

Still, I mean, we had a negative volume decline, so that is in the middle piece between Americas and APAC and APAC overall. So also a small volume decline, but is more or less flattish to last year.

[Claus Almer, analyst]

Okay. That makes sense. Maybe you could look at -- if you look at Americas and EMEA, when do you think volumes will be stabilizing especially EMEA, are we now getting to a, let's call it, low level where you should be able to just stay a flattish volume.

[Reinhard Mayer, executive]

EMEA, as I said, we have clear signs that things are improving. Can I, so to say, by that already give sort of a green light to the Q4 and the next quarters. Difficult to say at the moment. But we see overall in a number of key markets for us, that demand comes back to previous levels, which is positive. But still, there are some markets, and I spoke to that during my presentation, are still so to say seeing muted markets. And one can also say there is in the industrial segment, still, let's say, lower demand overall in the market, predominantly in Europe.

[Claus Almer, analyst]

Okay. And then on pricing in Q4, do we still see a positive pricing impact?

[Reinhard Mayer, executive]

We'll see a good rising impact. I mean, the overall price situation, as we also alluded in the gross profit margin bridge is one of the key drivers also for us to increase. And that is expected to continue for the outgoing quarter.

[Claus Almer, analyst]

Okay. So just to be sure, Reinhard. So in Q4 versus Q4 last year, there will be a positive pricing impact. Should we expect 3% or 5%? Or what's the magnitude of that?

[Reinhard Mayer, executive]

Claus, as you know, from our previous calls, we will not be precise on guiding there because we don't guide on price effects, but you can assume that we still have a good momentum on pricing similar to the previous quarters.

[Claus Almer, analyst]

Okay. And then just the final question regarding the backlog. And in report, you just stated there was a positive impact on the backlog. We have asked this question before. Could we give some color to what is the impact or maybe even more important, what is the possible impact going forward if backlog are going to normalize?

[Reinhard Mayer, executive]

I mean we spoke about backlog and our, let's say, order book in prior years. This predominantly resides in our U.S. market for large industrial equipment, which comes out of our Brooklyn Park factory. We do see here, let's say, our output increase, but not at the same pace as we see actually our commercial floor care slowing down demand, which is supported by other factories around, let's say, our Nilfisk supply chain footprint.

So here, we continue to see. We have still a nice order book which is elevated to prior years. But we have also seen, so to say, that we have been reducing some of the order book for the large industrial equipment, and that will continue also in '24. And that's my answer to your question. So we are not guiding precisely what the momentum will be, but there will be tailwind on this segment, how this plays out with the headwind from some market momentum in the United States, I don't really know.

[Claus Almer, analyst]

Okay. Maybe just try -- when you look at your outlook for Q4, should we expect a meaningful positive impact from reduction in the backlog in Americas?

[Reinhard Mayer, executive]

I mean we expect the continuum of output increase. And we spoke many quarters now about this. This is a steady progress but it's not leapfrogging progress. Hence, we see expected, let's say, volume growth in the large industrial. This goes, of course, against a potential risk of market weakening on the commercial Floorcare side and how these 2 factors exactly tie out difficult to judge at this moment because uncertainty is still high. And when you hear about the market sentiment. This is very much similar to all the players in the American markets.

[Operator]

And the next question comes from Kristian Tornøe from SEB.

[Kristian Tornøe Johansen, analyst]

Yes. Also a couple of questions from me. I will continue around orders in our order book. And just second, Claus here saying that it would be such -- so much an easy discussion if you put some numbers on this like your peers. But anyhow, just firstly, a clarification to what you said in the beginning because I think you mentioned that orders were strong, but customers hesitant to sign which, to me, is a bit opposite indication. So maybe just clarify what exactly you meant by that statement.

[Rene Svendsen-Tune, executive]

Tornøe. I think it was me I think what we tried to say is that the order intake is still relatively solid. But given the comparison of last year, of course, it's not enough to drive the growth that we are looking for.

[Kristian Tornøe Johansen, analyst]

Okay. So order intake in Q3 sort of compared to Q2 and Q1, is that at a similar level or it's trending over all?

[Rene Svendsen-Tune, executive]

I think if you look at the whole, it's probably trending a little bit flat to down. But if you look at the impact versus sort of the comparison, the expect is very good.

[Kristian Tornøe Johansen, analyst]

Okay. I think I understand that. And then just a second question on the Americas. So you mentioned this tough comparison due to a large one-off quarter last year. First of all, it's a bit interesting that last year, you didn't mention this one-off, given your boost. But just for clarity, how much revenue impact was this 1 or quarter last year?

[Reinhard Mayer, executive]

Well, we have basically informed about the larger one-off deal in 2022 in our annual report, but not specifically in the Q3 report. That's true. But in the annual report, but we have not been specific on the number last year. So we cannot be specific in this quarter either because here, we have, let's say, somewhat, let's say, non-disclosure agreements in place with our client, but it's a large retail customer, which we specified as well in the annual report but we cannot disclose.

Let's say, volume details, but it was a significant order, which basically we collected in Q2 2022, and invoiced during Q3 and partly also in Q4, helping and supporting this very strong 15.4% growth in Americas last year.

[Kristian Tornøe Johansen, analyst]

Okay. So there's a bit of headwind in Q4 as well from this?

[Reinhard Mayer, executive]

Yes.

[Kristian Tornøe Johansen, analyst]

Understood. My last question on pricing. So have you communicated further price increases as of the beginning of next year already to your clients? And if so, how much are you aiming for?

[Reinhard Mayer, executive]

Yes. I think the -- for competitive reasons, I don't think we are at a point where we can give you the number. And I guess for as a whole, we will see what the market tells us before we have further moves.

[Kristian Tornøe Johansen, analyst]

All right. That's fair enough. But can you then -- I mean, at least just confirm whether you have announced price increases at this stage or not?

[Reinhard Mayer, executive]

I mean at this point of time, you mean exactly now whether there are price increases, new price increases in the market has not.

[Kristian Tornøe Johansen, analyst]

But don't you typically sort of flag price increases as of January 1 around this time of year.

[Reinhard Mayer, executive]

We do.

[Kristian Tornøe Johansen, analyst]

And you haven't done so yet? Is that what you're saying? Or do I need to understand?

[Reinhard Mayer, executive]

What I'm saying is that we have not flagged in the market or in the market, there is not a new price increase, as we speak.

[Operator]

And the next question comes from Casper Blom from Danske Bank.

[Casper Blom, analyst]

A couple from my side as well, obviously. The first one goes to your service business and the profitability here. I note that you post an EBITDA margin within service of 22% in the quarter, down rather significantly, both sequentially from Q2 and compared to Q3 last year. I have been hoping that, that service would show some stability in the profitability. Can you explain what drives down the EBITDA margin within service, please?

[Reinhard Mayer, executive]

Casper, yes, I'll take this question. Basically, there are 2 elements. First of all, compared to prior year, you might remember that Q3, we had a catch-up effect of a lot of PAC material out of the tornado event, which basically wiped out supply in the Americas for quite a while. We caught up in Q3. But that gave a higher share of PAC revenue into this quarter then, which comes typically with a significantly higher gross profit margin. So there was an uplift there.

And then on the other side, and we spoke about that also in different calls and investor meetings. A lot of our PAC business is realized when we make an initial shipment with a commercial Floorcare machine as the volumes of these commercial Floorcare machines are declined at the moment in Q3, there's also a declining impact or an impact on our PAC business. So it's a mix. Overall, the service continues to grow, mainly on the field service and not so much and actually showing a volume decline on the PAC side, driven by a volume decline from the machine side. So it's a mix effect and a comp effect to very high tax share in last year out of the tornado event getting a recap rebound there.

[Casper Blom, analyst]

Okay. Understood. Then -- I mean, you just mentioned the tornado effect yourself. Can you give an indication on update on when do you expect that the U.S. distribution setup will be as it should be, as you would like it to be.

[Reinhard Mayer, executive]

Casper. Well, the distribution center set up, as we have today are still today in our spring day location with 2 activities. We are concluding, let's say, our plans on the new setup during Q4. I think that is what we also spoke about. The decision is not yet taken. Hence, we cannot really speak about when and what we are going to do, but we have plans really to consolidate to one distribution center. Is that taking effect for 2024. I cannot say at the moment because the decision is not taken. So please bear with us a bit on this point, but we are working intensely on this question.

[Casper Blom, analyst]

Then my final question goes to your cash flow. Strong indeed, as you also mentioned in your presentation. And I note that there is some tailwind from working capital from effects. Is there anything, how could you say extraordinary in this? Or should we expect that you can continue to delever in Q4?

[Reinhard Mayer, executive]

You should expect that we continue to delever in Q4.

[Operator]

We do have a follow-up question from Claus Almer from Nordea.

[Claus Almer, analyst]

Yes. I know you don't guide yet for 2024, obviously, but maybe you could give some color to inflation next year. Should we be concerned that so far, you have not introduced any price increases, but I guess we're still living in an inflation world. So how do you see this play out?

[Reinhard Mayer, executive]

I don't have a strong perspective on I would give any sort of direction on the next year's guidance or the inflationary impact. What I tried to say is that there is, at this point of time, not a new price increase in the market. For competitive reasons, I mean, whether we can drive that in next year, we have to see when we come a bit closer. But right now, to your point, on the inflationary pressures as such, I think we have a machine that is covered for input cost changes that we've seen so far in both directions.

[Claus Almer, analyst]

Right. But normally, as I recall, the many years I've covered in Nilfisk, every year, there is a disprice increase and then sometimes it doesn't happen, but that's at least how you start out. And it sounds like -- yes, at this point, you haven't done it, which probably also goes for your competitors. Is that because you think the market can't absorb higher prices given the volume declines? Or more what are you thinking? And I know it's a little bit delicate on a conference call, but what are you thinking about the pricing environment in these days?

[Reinhard Mayer, executive]

Think I have a lot of comments to that, Almer. This is a competitive matter, of course, has been, but you can say the rationale for price increases has been stronger for a while. So right now, I think it's a competitive matter, and I don't have a lot to add to what we already saying.

[Operator]

So there are no further questions at this time, and I hand back to Rene Svendsen-Tune CEO.

[Rene Svendsen-Tune, executive]

Thank you all for your questions. And if there's any follow-up, you know the names and the telephone numbers here. So you are, of course, very welcome to reach out a little bit during the day and the days to come here. So -- and then we will be back all of us for the annual report on February 15 next year. So thank you all. Have a nice day. Speak to you soon.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Good bye.