Beijer Ref AB (publ)
STO:BEIJ B
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Beijer Ref AB (publ)
Earnings Call Analysis
Q3-2024 Analysis
Beijer Ref AB (publ)
Beijer Ref reported a commendable 12% total growth in Q3 2024, with 3% coming from organic sales. This growth came despite facing a significant currency headwind that negatively impacted sales by 3%. The company's focus on acquisitions, exemplified by the recent purchase of the GIA Group, a leading player in Spain, contributed positively to its business model.
The company maintained stable profit margins, achieving an EBITA margin of 11.4%, slightly up from 11.3% the previous year. With EBITA increasing by 13% year-over-year, this indicates that operational efficiency continues to be a strong point for Beijer Ref, presenting a robust financial standing in a generally uncertain market environment.
Beijer Ref generated SEK 1.2 billion in cash flow during Q3, bolstered by the release of SEK 200 million in working capital due to seasonal factors. Year-to-date, operating cash flow reached SEK 2.2 billion, outperforming the previous year by SEK 1.5 billion. This strong cash flow is crucial for further investments and debt management as the company proceeds with several acquisition strategies.
Earnings per share (EPS) saw a sharp increase of 17%, reaching SEK 1.3 per share. This growth exemplifies the company's consistent efforts to enhance profitability, reflecting positively on shareholder value. Furthermore, on a year-to-date basis, adjusted EPS has risen 3% as compared to the previous year.
Within various segments, the OEM (Original Equipment Manufacturer) segment stood out with double-digit growth attributed to a growing demand for natural refrigerants. The interest in the commercial heat pump market was evidenced by the initiation of orders in both Germany and the U.S., with the latter expected to be a significant market opportunity in the coming years.
In terms of regional performance, the U.S. proved to be the highlight with a remarkable 26% growth driven by acquisitions. Despite some disruptions from hurricanes earlier in the quarter, October showed a promising start with continued volume growth. Meanwhile, the EMEA and APAC regions exhibited stable performance, though some challenges remain, particularly in Southern Europe and parts of Asia, notably influenced by high-temperature issues and ongoing market regulations.
Looking ahead, Beijer Ref remains optimistic about sustained growth driven by regulations around refrigerants in the EU and expanding market opportunities in the U.S. The company plans to leverage its strong acquisition pipeline across markets. However, they do not provide specific guidance on revenue growth rates for future quarters but indicate a stable outlook on margins and profitability, supported by a solid business model focused on aftermarket service and repair.
Beijer Ref continues to enhance its focus on environmentally friendly solutions with the development of CO2-based heat pumps and natural refrigerant products. The company underscores its commitment to innovate within the HVAC sector as part of a broader strategy to address both market demands and regulatory expectations moving forward.
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Welcome to the Beijer Ref Q3 presentation for 2024. [Operator Instructions] Now, I will hand the conference over to the CEO, Christopher Norbye and CFO, Joel Davidsson. Please go ahead.
Hi, everyone. Thanks for dialing in, Christopher and Joel here. So we'll start the presentation and then we'll finish off with some Q&A in the end as always.
So going straight into it, good quarter, I would say, in almost all territories, all segments of the business, total growth of 12%, even including a negative currency of 3%. Organic sales, increasing by 3%, pretty stable across the board. And also acquisition continued to be a nice tailwind, which is, of course, a strong part of the business model that we expect to continue going forward. So all-in-all, we'll come back a little bit to the segments and the regions later on in this presentation, but a good development here in Q3.
On the margin side, very solid, I would say, good margins also across the board in all our regions and also segments, 11.4% versus last year, 11.3%. So we continue to do very good on the margins and then a nice EBITA growth of 13%, which we're very happy with.
The cash flow comes in solid. We'll go a little bit more into detail on that later. We start, of course, our seasonality in Q3 to flush out accounts receivable and then, of course, in Q4, moving into the inventory and expect an even stronger cash flow in Q4. And of course, very proud of the EPS growth, 17%, which, of course, is very good. So we'll continue to work on the profit growth in the business. All-in-all, how I would describe it, a stable quarter with good profitability. So I would say, in the times we are, we continue to improve the business.
We did add a nice acquisition during the quarter, GIA Group, one of the market leaders in Spain. And we'll continue to develop well with Beijer Ref and is focused on the private label strategy that's well developed in Beijer. So we look forward to welcoming GIA Group in our business.
Okay, next slide. So looking into the different segments. We could start with our strongest segment that continues to be the OEM, which we are also very happy about. It's a natural refrigerant. It's environmental-friendly solution that we continue to see double-digit growth across the board. I think if you follow us, we continue to have very good success with our Fenagy natural refrigerant heat products. Now we're also highlighting we got our first order in Germany. And Germany is going to be a huge market over the next 5 to 10 years. So we're happy that we started to penetrate that market.
We're also launching now our CO2-based heat pumps, which is a lot of interest in the commercial segment. That will be a new segment for us. So we continue to be very positive and active in the OEM segment, also seeing a lot of interest that I said before, in the U.S. So we have our first orders there. We're investing in expanding in the U.S. and it will be a very big market over the next 5, 10 years in the U.S. as well. So happy to see the growth, happy to see the activities and also, of course, good for the environment as you transition into these type of solutions.
HVAC, plus 3% continue to be stable in the last couple of quarters, a little bit higher activity this year than last quarter, but in general, a good stable activity across the board. We'll come in a little bit later on the regions. On the refrigeration, in line with last year, there were some ups and downs in this segment. Underlying, I would say, it was a little bit stronger than the 0%, but a stable development in that segment as well. So a good solid quarter and also some good signals going forward and I'll talk about that a little bit later.
Then moving into EMEA, I would describe it as a stable quarter, but different pictures across the region. Of course, it is a big region for us, spanning from all over Europe down to Africa. But I think also it shows the strength of the business model where we are present in so many different regions. You have some that's up and some that's down.
I mean Southern Europe has not been strong this year. It is a big market for us, but we compensate that in different parts of Europe in there. So all-in-all, a solid performance on the HVAC side, stable on refrigeration and then OEM continues to grow double-digits if you adjust the currency effects. And there's a lot of things happening on the OEM side and good margin development continued to be stable in the region. So despite a weak Southern Europe market, we continue to grow in EMEA. And of course, we believe that market will come back and be better next year. So all-in-all, we are happy with the performance in EMEA this quarter as well.
If you look at APAC, I would say, a good quarter, growth across the board, supported by acquisition, but also good development in general, especially in our largest region, which is Australia. So looking at the market data there, we continue to take market share there on the HVAC side, driving good growth.
And you all know that we're working on margin improvement in that region and you can see that continued developing according to our plan. So we are doing very well in this region, have a good plan, good growth and good margin development, so very happy how it develops. And, of course, now a market, especially in Australia and part of Southeast Asia is moving into high season. So of course, growth there on October and in Q4 is their high season. So good development in APAC and we expect that to continue going forward.
Then, the U.S., I would say, probably one of the best performance, especially on the margin side and solid across the board, but also because we're doing so many things in the U.S. And you can see that we grew 26% in the quarter, of course, driven by acquisition. But that's a lot of part of our strategy in the U.S. on the acquisition side that will continue for us. Good margin development within Heritage original, but also in the acquisitions, so a lot of activities there that I'm extremely satisfied with.
And then a lot of activities, we're opening branches that will be good for the future and that will accelerate next year, good plan for that, also starting to have refrigeration into the branches across the U.S. and also the spare part business that we have a very strong foundation within. So a very solid quarter in the market, stable, good start to the quarter, a little bit tough in the end with the hurricanes. We did close down quite a lot of branches, more in precaution in Tennessee and Alabama for the hurricane. So all-in-all, I would say, a very solid quarter in the U.S. with a lot of activities.
Also, e-commerce being ramped up in the business and the acquisition pipeline continues to be very, very good. So summarizing different regions, we're very happy with the development on the margin side. We'll come back to the cash flow side a little bit later on and organic growth nudging up a little bit here in Q3 versus Q2. And the market in general is a stable market and some markets are stronger than others, but in general, it's a very good picture out there for us.
So then moving on, you can see the sales development on there, comparing here a 12% growth compared to Q3 last year with 42% growth. So we continue to develop well, sequentially a little bit higher, a little bit headwind, of course, on the currency right now, but in general, a solid development. And we look forward to moving in here now in Q4, but also in 2025 with the business model we have, so, in general, we have a very good development.
You can follow that, of course, also on the margin side, a good quarter for us, 11.4%. And we can see now, of course, that the higher level of margins that we've been running in the last couple of years stabilizing at a good level but that's across the board. APAC is improving. U.S. is solid despite dilutive acquisition. EMEA is holding a very good position on the profitability. So a nice development there over the years and we can see that now being at a good level and we expect that to continue as we move forward.
And here, you can see, of course, 13% EBITA growth in the quarter, 11% year-to-date, so solid numbers, I would say. And then, finishing off my slides for the quarter, 12% total growth, 3% organic, EBITA growing by 13% and then also a very solid EPS growth of 17%. So all-in-all, I would say, a good quarter in questionable times maybe out there. But of course, a business model focused on aftermarket service repair and good growth drivers. Everything from environmental to electrification, we feel very good about the market position.
All right, Joel. So I'll hand it over for some more details on the financials.
All right. Thank you, Christopher, and good morning, everyone. I will jump straight to our reported EBIT of SEK 1.033 billion, which is 13% up versus last year. As seen in our report, we had some quite significant FX headwind on our sales that is obviously also translating to our EBITA and the FX effect on EBITA versus last year was SEK 26 million negative.
Below EBIT, it's a pretty clean quarter, again, in line with expectations. We have a financial net of SEK 153 million. And we had tax expense in the quarter of SEK 250 million, which is representing an effective tax rate of 24%, slightly lower than last year. All-in-all, resulting in a net profit of SEK 666 million, which is 17% up compared to last year.
Moving over to EPS. EPS in the quarter amounted to SEK 1.3 per share, which then again translates to a 17% increase compared to last year. And on a year-to-date basis and adjusted for the same number of share, EPS has now turned positive and we have a growth of 3% year-to-date.
Cash flow, continued strong cash flow in Q3, SEK 1.2 billion, supported by seasonality-driven release of working capital of SEK 200 million. And if you look on our year-to-date operating cash flow now amounts to SEK 2.2 billion, which is SEK 1.5 billion ahead of last year, then supported by higher EBITA and SEK 1.1 billion lower additional capital tied up compared to last year. On an LTM basis, we have now generated an operating cash flow of very close to SEK 4 billion, which is very good.
Finally, moving over to our net debt, which is SEK 1.1 billion higher compared to Q3 last year and driven by acquisition-related activities. And our net debt in relation to EBITA of 2.01x is stable year-over-year and sequentially on the back of our strong operating cash flow.
And by that, I hand back over to Christopher.
All right. I'll try and wrap this up. No big news in my summary slide, a solid quarter. As I said organic growth across all regions and segments, nice EBITA growth with solid margins, cash flow in line with seasonality and as I said, should continue to increase in Q4. EPS, I think, is standing out very, very strong, plus 17%.
And then we're happy to have the GIA Group joining us here in Q3 as a very nice acquisition. And if you look at the long-term growth drivers, they're still there. As present and always, we see, of course, the regulation in EU that will continue to drive the growth in the OEM segment, of course, also very happy with the possibilities on the heating side with Fenagy, a lot of things happening. And as I mentioned, also moving into Germany that will be a very, very big market as we continue this journey.
In the U.S., a lot of activities while transitioning into A2L for next year. And I'm sure we'll have some question discussion around that plan, but also CO2 activity across the board from pretty much all big contractors and food retail chains in the U.S., a lot of discussions happening there. And also, as I said, very, maybe happy is not the word, proud, but strong with the U.S. platform coming together in a very, very good way, both on the plant, but also all the platform building that we're building this plane and is flying very well as we continue to develop it, so another solid quarter from the U.S. team. And we'll continue with our activities in the U.S. as I went over.
And then also last but not least, the acquisition pipeline continues to be active, especially in the U.S. but also across the board with add-on acquisition in APAC and also some nice opportunities continued in EMEA. So all-in-all, a solid quarter and good expectation going forward.
So with that, we'll hand over for Q&A. Thank you very much for listening.
[Operator Instructions] The next question comes from Adela Dashian from Jefferies.
The first one relates more to the development in the U.S. market, especially on organic growth. Would you be able to tell us if the regional closures towards the end of the quarter due to Hurricane Elaine. Did that have a meaningful impact to sales? Or should we not read too much into it? And if it did, what do you think about the continuous extreme weather conditions in the U.S. markets in more recent weeks and the potential impact that could have on Q4 development?
Yes. So thanks, Adela. I think, of course, some of you listening in today also listen in on one of our competitors in the U.S., Watsco, of course, a very similar model in the U.S. And I listen to them as well to see how they're doing in the market. So I think it's fair to say we lost, give or take, about 1 day sales in the U.S. by closing down branches, especially, as I said, in Tennessee and Alabama.
So for the overall Beijer Ref, it shouldn't be as significant. Of course, it had a negative effect in the U.S. for the quarter. The U.S. sales were still organically slightly positive. And so I haven't seen anything in Q4 that is affecting us negatively. And we do see similar, if you listened in, a good start in the U.S. in October with a solid volume growth.
For me, it's still just 2, 3 weeks into October. But the start to October has been very good in the U.S. So let's see how it continues to develop in the U.S. But nothing for Q4 on the weather pattern that's been negative at least.
And then maybe just generally on development in the HVAC segment. We're now heading into 2025. Obviously, the tailwinds that you're facing from a regulatory perspective in the U.S. are favorable with the phase down of those potent refrigerants. How should we really view the more near-term organic development for this segment coming off the very high peaks during and right after the pandemic and then weaker last year due to the tougher comps? Is mid-single-digit organic range? Is that something that you view as the level we should expect? Or do you see potential for it to go higher than that with more price increases also? Yes, any color on that would be great.
Yes. I mean it's a hard question. And number one, as we don't guide that specifically, I won't go into that type of detail, but I'll try and paint a picture. And then, of course, you're all free to interpret that in the way.
But I think we've seen in the U.S. market, of course, since we entered it, you had some pandemic effects, et cetera. But it's been underlying very stable for us. And it comes back a little bit that we are 90%, 95% replacement aftermarket service. We are in the residential segment and have a very stable underlying model with good margins as we described what we like and we'll continue to do that of course.
If you look at the transition into A2L, I don't have a crystal ball. Part of our cash flow in Q3 is that we've been pre-buying 410Ks because we believe that especially in Q1 and Q2 will be -- the majority would absolutely be the current solution. And then we'll start transitioning into the A2Ls in Q3 and Q4. And then, of course, that will start giving you a more price effect as you transition to these products. But I would see that as more on the second half of the year versus the first half of the year.
So underlying, it's a stable market we see. And then I think also, of course, as indicators for us, that's a good indicator on the market. I would expect is as interest rates start coming down in the U.S., a key indicator for us is the sales of homes, not new construction, but normal homes because the renovation starts.
And if you live down in Alabama, Tennessee, Georgia, Florida, believe it or not, but the first thing you check is HVAC because you don't want to be there with a broken system. So those will be a nice tailwind. So if we see interest rate continues to come down, I expect that KPIs start coming up and then, of course, we'll have a positive impact.
But in the meantime, we drive our own faith on opening branches. We're adding refrigeration and spare parts to the other branches. So we're pretty positive for the growth going forward. But I can't be specific how the market will develop in 2025 as we sit today.
And then maybe lastly, just on APAC. I mean, margins are continuing to trend in the right direction here. But yet you also cite some continued weakness on the larger projects in Asia specifically. What -- yes, any color on the current trading in the APAC market, especially now given that they're moving into their high season would be great. Conversations you're having with customers, et cetera.
Yes. So it's not -- the color we tried to give in the quarterly report is that what we see in APAC is on -- as we move in now to high season, it especially drives HVAC and the market as it's getting summer in our big markets. And that market is good, continues. We continue to grow above the market rate. So there's, no changes in that as we expect. What we relate to on these bigger orders when we work on the OEM segment, the market that hasn't been super strong for quite a while is Asia and it's mostly driven by China. So that market continues to be a little bit sluggish in general. But it doesn't have a major, major impact on us.
But of course, as that market starts coming back, but because it's been like that for the last 24 months in that region, there will be a nice tailwind for us. But in the meantime, I don't see any big changes as we move in now to Q4 summer season because it's mostly the HVAC segment. And the HVAC segment, we work is mostly replacement. So that should continue to be solid.
The next question comes from Carl Ragnerstam from Nordea.
It's Carl here from Nordea, a few questions from my side. Just a follow-up on the hurricane there. I mean, as you said as well, Watsco reported yesterday. They talked a little bit about perhaps a catch-up in the short term here from repair projects related to the hurricane. Do you see the same? Or how do you view that potential catch-up from it?
Yes. I'm more laughing in the sense that for us, it would be more catch-up because we closed branches down, but it wasn't a big effect in the area. So we did it more for precaution because we didn't know at the time where -- how it's going to move. So I guess our catch-up would be that our installers didn't get the parts they needed in the last week of September in general for us.
But to be open and honest, I would assume it's been a bigger effect on Watsco than us because they're in the middle of Florida, right? Don't know that from the inside out, just from the outside in, the same as you. So in general, I mean, if you talk -- October, as I said, because they stated as well, we state as well as started in a good level. I don't think it's so much related to the hurricane for us. It's been a good activity level here in October, but also it's 2, 3 weeks into the quarter. So it's early days, right?
And looking into the A2L again here. Do you expect or have you seen the pre-buying from the installers on the 410 products already now? Or is it a Q4, Q1 thing? Or how do you view the installers' behavior into this transition and also, of course, on your working capital, whether you, to some extent, will be driving dual products over a period of time, elevating it a bit or?
No, I think I don't know if you asked the question in the right way for us. But just to explain in the way, our installers, which is, our customers don't do pre-buys, right? 95% of their work is aftermarket service replacement. So our customers will not do pre-buys at all.
So in our business model, the way we see it is that we are stocking up on the 410Ks, because we expect them to continue to install that for at least the next 2 quarters in Q1 and Q2. And as we can't buy that equipment next year, we're buying it now instead of in the beginning of the year as we would do normally.
So right now, the focus and the extra build of inventories related. It's a timing effect of us stocking up on 410K to be able to support at least the first half of the year with 410K products. And then step-by-step, it will transition into the A2Ls because the OEMs are not making the 410K products.
And you mentioned that you saw sort of a softer sluggish market in Southern Europe, better in Eastern parts. I mean, to what extent is that, I mean, weather-driven? Or what underlying trends do you see in Europe currently divided maybe by Southern and Eastern because they're quite an important part of your business? Or is it -- have you seen positive impact from the rate cuts? Or is it too early in Europe or?
I mean, getting to the point where you don't want to make too many explanation or excuses or whatever. I mean we do have a global business model, so you'll have up and down. But I mean, to be very frank, one of our largest countries in Europe is France and the weather was s***. You can ask any French person you want about that. But -- so it wasn't a good year there and et cetera. And then, but if you turn that around, it was a very strong summer in Eastern Europe with very hot weather.
So I think it more plays out partly of that. And then I think you have a lot of uncertainty in France with the elections and the market, in general. So it hasn't been a very strong year there. But we have other countries compensating for that and that's the way we work. So hopefully, you'll have the weather support in Southern Europe next year and you'll have a nice tailwind. But you also need the interest rates are coming down and some more underlying growth in the markets as a tailwind.
So it's too early to see a catch-up in Europe. I mean, obviously, we're entering low season, but no real changes underlying, right.
No, it continues to be, if you look across the board, stable. I mean I have daily tracking of numbers and et cetera and it looks stable across the board. And then you have a good start to the U.S. in the quarter but still early days, right?
And also, if we talk about the OEM, you talked a little bit about [ SFE ] I mean Fenagy as well. Is it possible to sort of quantify the order intake growth or give more tangible flavor on the order development for either the whole OEM or SEM or Fenagy, if possible?
I can't do it top of mind. Let me come back and see how and if we want to do that. But -- so I need to come back on that question.
But would you say that orders are positive? Could you say that? I mean the order intake is growing organically or I mean?
Yes, it is.
The next question comes from Karl Bokvist from ABG Sundal Collier.
My question is on the refrigeration side. I hear what you say about the refrigeration trends in APAC. But what can you say about refrigeration in Europe and the ongoing adaptations to the increasingly tightened as gas regulations?
Yes. What I can say is that there's still a big gap, right, on the transition that needs to be made in there. And I think what I can say is that the market for us has been, as you can see in our OEM growth solid. Where you've seen a -- and I'm talking about EMEA. What you've seen in the last couple of months is the coating level coming up quite a lot in food retail because food retail has been, I mean, since the pandemic and inflation, everything, trying to push out a lot of investments.
So of course, you will start getting a pent-up demand on the OEM side from the food retail because they have to transition. But the reason we've been able to still manage a solid growth is that we're into so many other segments and that's growing a lot. So in general, what we see is still around 30%, 35% has converted. And we still have the entire tailwind of the rest that needs to convert.
And we also start seeing the availability of refrigerants getting tighter and tighter in EMEA. So I expect the next couple of years, you'll start having supply issue on the refrigerant side, driving also the conversion into this technology. So EMEA, I would say, on the food retail, especially has been less active, but now on the coating levels, it's coming up quite a lot.
So -- and I would expect that because, of course, they're starting to -- their business is picking up and stabilizing as well.
And my final question is on the working capital side. If I interpret you correctly, you built working capital ahead of these regulatory changes in the U.S., i.e., you targeted at the start of the year better than normal cash conversion. So am I right in interpreting that the release was partly offset by you building working capital ahead of the next impending year, so to say?
Yes, this is Joel here. Yes. So as Chris said, we are doing pre-buys in the U.S. primarily then in relation to the A2L transition. So that has to affect the cash flow with a couple of hundred million in the quarter.
And to ask that question on the older products, do you still not see any risk of impairments or similar things or products becoming obsolete?
Is that a general or any specific?
I think it's -- I believe you've talked about the kind of what you are allowed to sell if they have been manufactured this year, i.e., ahead of the upcoming transition.
No. So Karl, to be very open, open is the wrong word to say. But I think that we will -- it's been more a debate on how much do we buy ahead. And I think you can't you could probably buy even more. We've done an analysis of what we think we need and how we're going to build it up. But in my view, our most likely everybody else, the 410K they're buying now will be pretty much run out by middle of next year.
I would say that it's the opposite that you could probably buy even more. But I think that's our plan at least to be able to support the market through the first half of the year. And then we have to transition into the A2Ls and we should. So no, I don't see a risk at all.
The next question comes from Douglas Lindahl from DNB Markets.
I wanted to start off by asking you about the potential that you see for your data center business. Can you hear me, by the way?
Yes.
Yes. Just to repeat that, I wanted to ask about the potential you see for your data center business. If you could quantify that to an extent and the potential you see -- well, first off, maybe where you're at right now and where you see that business growing over the next few years?
Yes. I think I explained it in this way and it's still valid. But in general, our business model is not driven by new construction, which is also including, of course, data centers. And the way our model works that most of our products will be more part of parts, maintenance and service as we move forward for the next 5, 10, 15 years for these type of solutions.
So in general, it's not a driver. We have pockets in countries in Eastern Europe that we acquired that are very active in data centers because they have a full suite of solution and work in new construction. But that's more the anomaly than the rule for us because of our business model. And I think that we like -- we don't like super much the new construction business. It's -- of course, it's fantastic for the company who is doing data centers, but one day, there will be, of course, another situation there.
So the other part is that the biggest active we will have in this type is that we have the solution through Fenagy that has won a large data center in Q2 and also is active in a lot of quotes on that type of solution. So I will keep you updated because we sold the data center. As I think I said before, you can connect with district heating. And we use all the excess heat for -- with natural refrigerants moving into heating houses that you create with data centers. So -- and we are active in a lot of those discussions. But until I see all those starts falling in, then we will have a major impact on Beijer Ref, but it's still a bit early days to make that conclusion.
Happy to hear more about that later then. Maybe then circling back to your U.S. peer and what they talked about yesterday. I got the impression that they're now talking about expectations of pricing from A2L being up in the range of 8% to 10%. Is that something that you also are hearing from OEMs?
Yes, it was a fun sentence, when they say double-digit, and then it was 8% to 10%. But anyway, no, it's also 8% to 10%. I think it's a fair assessment what we think.
So slightly below what we've heard previously then?
Yes. But I think we always thought there will be -- I think we were not guessing. But you all sit with different OEMs. And I think different OEMs have different strategy. And I think if you listened in on Lennox Carrier and all these different public, they will give you different numbers, because they do have different strategies on it.
But 8% to 10%, I think, is a fair assessment what we know from our partners, but they probably will be different. There might be somebody who wants to go higher for their solution, but they're not part of our team.
The next question comes from Adela Dashian from Jefferies.
Can I just quickly follow-up on the data center question just asked. I mean I know you've previously discussed the way your business model fits into this world. But maybe an update on the large order, the Fenagy order, in Q2 would be good. What's happening there? And also the potential pipeline of new opportunities more in the near term, but also in the midterm on the service side, I would assume, would be where you would fit in the most. Yes, that would be great.
Yes and I actually thought about this question last night and I haven't updated myself where we are in the process. So I need to come back to you on that with a specific order. I think and then other part of your question, the general service and aftermarket, that's probably more 5 years down the road. So I think it's not something that will change our numbers right away.
I think the more fair comment. And we're also looking at having a Capital Markets Day next year and we'll dig more into Fenagy and the models. But we'll keep you up to date on -- if we have -- as we get orders in this segment. I know the pipeline and know discussion and the quotes we have outstanding. But also, as I said last time, data-centers, is just one part of that solution. It's what we call in the industrial segment. There's a lot of heavy industry in pulp and paper and a lot that are looking into how they can use the excess heating. They do in an efficient environmental-friendly way and that's, of course, our solution.
And also the order in Germany is connecting application with district heating and using the excess heating and putting it back into district heating. So it is bigger, much bigger than the data center industry, but it's still early days. But I think we could clarify a little bit more in detail at the Capital Markets Day on this because there's, a lot of things happening. But as we get more orders, we'll keep you up-to-date on that.
What about the technology shift that is currently happening in that industry? I mean there's some ignited focus on the use of refrigerants. For example, do you think that your own production of refrigerants could potentially fit well into maybe a new pool of customers that you haven't considered previously or has that not really been in the talks?
No, there is. I mean, we moved -- in Fenagy, we started on CO2-based heat pumps and now we're into isobutane because if you want to manage this type of water heat that's 45, 50 degrees, you can't do it with CO2 anymore, it's isobutane and we're also developing ammonia, propane and other types. So we have a massive plan on expanding our refrigerants because there's different application areas depending on heat and how we can use those.
So that's a big, big focus for us because it will continue to open up the industry and finding -- these solutions in the industrial segment, they need to be also commercially viable, not just environmental and that's why we need to continue to push this forward. We have a big generation plan on the natural refrigerants and expanding into new ones to support the transition in the industry for sure.
But just to be clear, that would then also include the data center markets, your ability?
Absolutely. I mean the one we won, the big one is isobutane because that's the natural refrigerants you need to manage that type of solution as you connect with district heating, not CO2, so yes.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Yes. Closing comments are thank you very much for listening, good discussions. And I'm sure we'll be in touch here as we move further. But thank you very much and have a good rest of Thursday. Thank you.
Thank you.