Beijer Ref AB (publ)
STO:BEIJ B
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Beijer Ref AB (publ)
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Hello. And welcome to the Beijer audiocast with teleconference for Q4 2021. [Operator Instructions]Today, I am pleased to present CEO, Christopher Norbye; and CFO, Maria Ryden. Please go ahead.
Hi, everyone. Christopher Norbye here together with Maria. So we'll jump straight into it.So we can start with Slide 3. And no real news here as we are trending towards the SEK 17 billion based here on a strong Q4. We also added another country to our list here as the latest acquisition. And that will continue and trend these numbers on the customer and branches as well.So we can move on to the next page. Then trying to just summarize a little bit, and I'm sure we'll get into it in Q&A. We believe it was a very good end to the year. We're very happy with how Q4 developed, with a growing top line north of 25%, which we think is a very good number. And especially -- I mean, we're proud of both numbers, but almost 12% organic growth. Good double-digit plus in both HVAC and OEM, which is our faster-growing segment. And I think despite -- we'll come back to that, I'm sure, on the supply chain, especially on the OEM side, we achieved 15% growth in Q4, I think, testament to a fantastic job by the team with an even stronger backlog, but very good to get to those numbers with the situation as it is.And then also good on the ref component side and a stable development, and a good development in all our regions. Still some, I would say, more macro challenges in the African region, but I still think it's a good performance what they're doing there. And then acquisitions, plus 13%. It's been an active year. I will come back to that, but also a very good development in our acquisitions in Q4, which is, of course, fantastic that they continuing deliver and even have a ramp-up as we took over them, as we integrate them into our business. So in all, the 25% growth in Q4, I think is a very good number.Then moving into the profit growth. Here EBITA, 25% growth, segment margins at last year. We do have, of course, some challenges on the cost side with finding the right timing of the [ moving ] price increases. But I think we're in a good pace and we are passing on market at a rapid pace, which I think also proves here on the margin dilution. And I think we'll come back a little bit on the freight side that has a longer lead time for us on the HVAC side to get it into the market, but the price increases are done, and they're coming through here now in Q1 and then we expect to be through them in Q2.The other price increases, I believe, we're in a good position there. And I also think if you look at the market, it was more, I would call it, maybe the way we interpreted, desperate price increases last year. Now at least, it's more planned from our suppliers, which is [ obviously easy ] for us to handle the way it's structured. And then also, I'll finish off with good order book. We said that in Q3 as well. We will say that now at the end of Q4, good order book. Also, we have a good activity level, both in the markets, but also based on the orders that's coming in at a stronger rate than the sales.For the full year, adding up to mathematics, plus 14% growth, acquisition 8%, and EBITA of almost 30%, the pickup margin against, of course, a more challenging 2020. And then also the 10 acquisition, adding up almost EUR2 billion in sales with 4 strong acquisitions in Europe and then in APAC, more complementary acquisitions to our existing business model. So we're happy with this year as well on the acquisition side.And that maybe we'll give you a little bit of flavor on the external side. Starting with what's on everybody's report and I think no difference in Q3, the supply chain. I would say, we see no real difference yet, not a negative, but not on the positive side. It continues to change the parts. We are coping with it. Of course, it drives some costs of shipping things across the globe and flying things around to make sure we can do what we can for our customers. But if we talk from our suppliers, I think they are stabilizing or saying -- coming around end of Q2 that the supply chain should improve. But we can manage, as you can see, still growing at 12% despite this.And then maybe moving into the freight side. You can see here its results [ after ] the summer. And it caught us, especially on an HVAC side, where we take a lot of freight from Asia, both on Toshiba, but also on the Mitsubishi Heavy equipment. So it took some time. We negotiated contracts with a large customer. Those price increases are in place. So we expect them and they will come through in Q1. And in Q2, at this high level, we are covered on that part as well. So I think that's also moving in the right direction. And then the refrigerants, they are coming up slightly, but they are now positive. No major effects in Q1 for us, with no negative and not positive. I think it's only like 7% of our business. But it's positive that prices are turning upwards, and we see that now also in Q1 to continue.And then finally, we are moving more and more, especially in our Toshiba business on the air/water heat pumps. So we see a very strong demand here in Europe, driven by, of course, high prices, lot of old technology, oil and gas boilers. And the very good thing is that working through Toshiba, which is our strategic partner, they've now opened a factory in Poland in Q2, just focusing on air/water heat pumps. So now we have the product portfolio and also a very good supply chain to support the future growth there. I think that's a little bit summary on the external factors.We'll go to the next slide, Slide 6. And then on the acquisitions, as you know, it's been a busy year for us. Moving into some of things that are the bigger ones in Europe from Sinclair and Inventor, acquiring 2 leading companies with a very strong market position and also a strong brand. We're now also launching the Sinclair brand in 8 countries in Europe as we started last year and are going to continue this year. And then a lot of complementary acquisitions around our Australian business that's also growing very nicely.And then mainly highlighting Fenagy, which was more of a startup than a development company coming to a breakthrough as we acquired the majority there. And they've had a fantastic development, where we expect them to actually triple this year and also moving into sectors that we were not present in the past. So a very nice add-on to our business.And then, of course, in Q1, we closed the acquisition of Deltron in Croatia, also the market leader there on the distribution of HVAC, which is also, I think, a good start to this year. And then we continue to see these trends. I think you heard about them a lot of times. I think worth mentioning is that the phase-out scheme continues. We're also expecting actually new updated directives from EU here in end of April, with an expectation they might even accelerate this journey. So we will -- let's see.And we also see a much more aggressive view for [ many of you ] to take care of the systems, where you are not following the procedures here in Europe. So we can also see that as part of the development going forward. The environment, we see a longer drive type of products on the air/water heat pumps and other energy-efficient solution also on the HVAC side. And the digitalization we talked about, we continue to drive. Almost 10% of our sales now is coming through e-commerce, and we expect that to continue and develop in a good way. So I think we still are positive to the megatrends that supports our business going forward.Next slide.
So then we kick off with Page #9. As Christopher mentioned, we show nice growth for the quarter and also for the year. We had about 25% in growth and 12% in organic, 13% in acquisitions and a positive impact from the FX. And last year, we had a slightly negative growth. Nice drop-through in EBIT. So EBIT increases with 27% and goes from SEK 256 million to SEK 326 million.We have increased net debt. And that is due to the acquisitions and that we also had built some inventory during the fourth quarter to meet the increased demand and the order book. I can also say that last year, the net debt of 2 was very low. So this is a snapshot. And of course, the acquisitions contribute and then the net debt is expected to go down as long as they contribute in profit.EPS growth about 39%, thanks to a lower tax rate and some minority interests. We have been able to grow the EPS, and the Board also proposes a higher dividend. So Christopher will talk about that later. So all in all, a very strong fourth quarter for us. Normally, the fourth quarter is a little bit lighter, but this quarter showed something differently. And we can see that also when we compare with other fourth quarters.Going into the full year, we see that the growth is 20%, a little bit lower than on the fourth quarter. And that the acquisitions have contributed a lot, 8% during the year. And they will continue, of course, to contribute during next -- during 2022 as well. Organic growth for the year was above 14%, and a negative FX in the beginning of the year, adding up to minus 1.9%.Nice EBIT growth for the full year, 31%. Last year, we had a negative, and also a nice EPS growth of 35%, SEK 2.58 for the full year. Going into the sales mix and also the organic growth. You can see for the fourth quarter, it was 12%, and it goes for all of our product segments. They showed nice organic growth. And you can also see that the HVAC, they have a lighter quarter in the fourth quarter. But -- so the growth for HVAC is higher on the yearly sales. And HVAC is about 45% of our business, and OEM, 11%, and the rest is the commercial refrigeration.So looking to the same chart on Page 12. You can see that the organic growth is 14%, and you can see also that for the full year, HVAC grow is 18%, which is, as Christopher mentioned, OEM and HVAC are our high-digit growers within the group. And for the full year, HVAC is now 47%. So HVAC is more -- is higher in Q2 and Q3. But of course, that could vary between regions as well. So we saw that in Asia, for example, they have their summer season now, and they have shown a very strong result in the fourth quarter.On Page 13, you can see the fourth quarter and the compares with the last 4 years. And you can see it higher. It's a good trend, and also that the ROS margin is at a decent level. And of course, we work to increase that over time.On Page 14, you can see also the sales and the EBIT, and you have that in the report as well. So all our regions are growing, apart from Africa, which has not recovered in full from the pandemic. And -- otherwise, we have nice growth in all regions. And of course, South Europe, that includes Inventor, which was a bigger acquisition for us last year. And also Eastern Europe with Sinclair has contributed well in this -- during the quarter.Cash flow, as I said, we have, normally, I think the pandemic has shown a slightly different seasonality here. But normally, we [ pay out ] capital in the first half and release it in the second. But this year, it showed a little bit different. So we build up inventory also to meet the increased demand and the order book. So that's why the cash flow from the working capital is negative here. But on general terms, our cash flow from operation is, of course, positive.
And then maybe just to clarify that, the 2 areas where we are building as much inventory as possible, especially on the HVAC side and copper and here, we're placing yearly demand that's securing the capacity in the supply chain for us. So I think it's also giving us an advantage for 2022 because we believe there is a risk for other players to run out of stock in this market. So we're very comfortable. This is an active choice to build up the pipeline for the growing segment we have, securing the capacity in the supply chain.
Yes. And here on Page 16, you can see the net debt, which is about 2.5% for -- at the end of December. And of course, we believe that it will go down a bit. So this is just the time for the acquisitions and we are continuously, of course, working with the net debt and also on the funding side to manage this. And these include all lease liabilities as reported per IFRS. And if one [ ought ] to do a pro forma for inventory mainly, then effect would have been about 2.1.Okay. Christopher?
Yes. Just to wrap it up. As you saw, we were proposing to increase our dividend by 10%. We believe that we're in a very good position on the future as well. So we think it's a good way and continue sharing this with our shareholders, and also having a sustainable growth rate over the years going forward. So this is our proposal here to our shareholders on the EPS.And then finishing with our organic growth. You've seen this. We believe a good year on ramping up. Of course, the Q2 was extremely strong, good, and we then all see Q4 coming up at the 12% versus a more normal Q4 last year. So all in all, a good quarter, and I would say a good year as well in total for that organic growth [ side ].And then finally, just -- what we believe a nice slide on the development of Beijer. We're now touching upon SEK 17 million, closing out 2021 and also a growth rate, including the corona issues, about 13% for the last 5 years and EBITA of 18%. And of course, this is the journey. We have an ambition to continue going forward. I think we're in a good position to execute on that as well.And then concluding a little bit the year and the quarter is that the megatrends. We can see that on our OEM side, exchanging into CO2-based solutions, both in the retail, restaurants and commercial side continues to be strong. And there we grew 15% despite challenges, and we could have grown more. And we see that, of course, in the backlog, and we believe that we're in a good position here for 2022. And also the trend here on penetration on HVAC, but also air/water heat pumps. That's part of our product portfolio now. We believe also will continue to be good in the future. So we're positive through that -- in the segments that we are present.Of course, all product groups growing, which is positive and then double digits in the OEM and HVAC that are our faster growing segments. Acquisition stands at about [ SEK 1.8 billion ]. And also, I believe closing Deltron here, beginning of the year, consolidated January 1, and also have continued good discussion with our -- identify targets here, makes us positive for 2022 as well.Order book, we touched upon, and of course, also the -- growing organically in acquisitions and also continuing to get over and past, we would say, some of the cost issues related to supply chain and pricing that we believe we will get better during at least 2022. And we'll come back to that shortly [ doing some ] questions on that, but we're positive for the future development here as well.I think that wraps up our presentation. And now we open up for questions and comments.
[Operator Instructions] Our first question comes from Carl Ragnerstam with Nordea.
It's Carl here from Nordea. A couple of questions. Firstly, in terms of the margin uplift in the quarter, could you sort of help us bridge how much that comes from a positive margin mix perhaps with the nicely growing OEM side? You've done margin accretive M&A and also a bit on the drop-through as well organically.
Yes. I think we won't get into specifics. But I think if I try and break those things down on a general comment, I think, on the positive side, on the OEM, it has been more muted because of the supply chain issues in that segment. And also just to explain a little bit what we're doing to manage the situation is there are a lot in the OEM, and also has been sort of factoring in all the machines is that we are installing a lot of these machines with our customers and then we fly out the missing parts. So we can make sure they're up and running as soon as possible instead of waiting. And then also on catching up the price changes from the supply chain has a little bit longer lead time in this area.So I think it's not at the level that it would be in a normal instances. But I think we've managed it in a good level to secure the customer. And also as this comes through and stabilizes, of course, we see a nice upside as that business grows, I would say, more towards Q2 and Q3 next year. So I wouldn't hear it in Q4 having as a margin driver, but managing very well on the supply chain, growing 15% despite all these challenges.And also maybe to finish off that, we're also flying over parts from Italy to Australia to make sure we can secure the lead times with the customers. So we are investing our own money to make sure that we continue to make our customers happy despite the supply chain. We also think this will even out here coming towards closer to Q2 and going forward. So -- and then on the acquisitions, I would say that the bigger ones have had a good development.But if I take in a company like Sinclair, just to put how it's -- it's already so integrated in our business in the sense of that, the high growth that they've been having this year is that we've been launching their products in our different countries and then, of course, replacing it with other products that we see are less profitable. So it's a good mix for us, but it means that the whole model is more integrated now and especially, on the HVAC side, as we're using our commercial leverage as a wholesaler in Europe, leveraging their product. So we're not really going into that.And then Inventor, of course, we just closed at the end of -- we started trading into October and Inventor, of course, being an HVAC company, their strong season is Q2, Q3, but they still had a positive Q4 for us. And then on the organic side, we did touch upon some of the issues around distribution or logistics costs. And I'm sure you have a follow-up question on that and then the one-offs.I'm not sure if that answers all your questions. So you want to have -- you have some more questions around it?
No, I think it was a good answer. And just on the non-recurring items, is it related to purely M&A? Or is it -- what's included?
Yes. I would say, referring to myself, the M&A costs right now, we're taking as part of our normal day-to-day business. So the main component to that is the CEO of signing bonus that we took in Q4. And I hope we don't have to take that again next year. I mean, of course, I wouldn't mind, but that would seem that somebody else is on the helm. And so we classify that as a non-recurring item.
Yes. Okay. Perfect. And also, I think you mentioned that you had a strong order backlog or a strong end in Q1 or Q4 and that you entered 2020 with a good backlog. Could you perhaps give some flavor on the order intake development during the quarter? I guess it sounds like you had a positive book-to-bill, obviously. Yes, little bit on that as well as by segment, perhaps.
Yes. So I mean, we have a different type of -- you see some of these that come from that type of business. Again, if you compare to, a lot of focus on the bigger industrial companies like a Sandvik and Atlas and how they work along with the order intake and the book-to-bill. Of course, we have in our ref components business, it's more a daily business and it runs every day, and you don't build a lot of big backlogs.So the way I would describe it is that the businesses where we see very strong backlog is on the OEM side and HVAC side because you have larger projects, you have larger orders in the pipeline. And there, I would say that, that pipeline that we said was strong in Q3, and it's even stronger now as we're moving out of Q4. So the lead times between us being able to deliver products with OEMs, of course, continue to go up. And we see a good -- so I would say that if I try and summarize it, on the OEM side, the backlog is up still around 50% compared to last year. And then on HVAC, it's around 20% up, and then we have a daily business of the ref components. So we're starting this year with a stronger backlog. But then having the caveat made on the OEM side, it will take some quarters to deliver that, because it also depends on when we get the parts, so we can deliver it as well out to the market. So it's not just one-to-one, where everything will come out in Q1.
Perfect. Very helpful. And then the final one from my side. I guess, in terms of net debt to EBITDA, you have 2.5x increases. I guess, pro forma, as you said, it's 2x or just above 2x. Do you think that you have the financial means to do all the M&A you wish in 2022? Or is your balance sheet something that could hamper your M&A pace, especially partly in the light of, I mean, the increased dividend for the year? Yes, could you help us on the capital allocation discussion?
Yes. I think we can have a more detailed discussion offline how we see it. But the short answer is no. We don't see it hamper our acquisition pace in 2022. And then we can also describe as we see on the pro forma and as we see the acquisitions we made, start moving into their development profit and sales. When we see on the Q4 and the timing of it and the way our pipeline looks to acquisition, we are comfortable that we're in a position to execute on the ones that we feel are adding value for the company.
For our next question, we have Karl-Johan Bonnevier with DNB Markets.
Yes. First, Maria, you mentioned in Q4 that you had an extra impact from taxes and minority affecting the EPS. What happened there? And particularly on the tax rate, is that something we could expect to be lower going into the future?
No. Actually, it was some incentives in various countries, leading to a lower current tax rate in the light of the pandemic. So we had 25% at a group tax rate. And I think that is what you can expect moving forward, even though we had 23% this year.And then you have another question?
Yes. On the minority, yes, it was strangely positive in the quarter. What's behind that?
Yes. So we have done acquisitions, and we have a put-and-call option to acquire them 100%. So we have accrued for the additional liability in that. In conjunction with that, you don't record a minority share recorded for liability.
Excellent. And just on the ongoing cost inflation, as you highlighted out, freight costs, logistic costs and all these things. Do you feel that the price increases you are now implementing is covering that going into 2022, so you can say you are caught up with that challenge?
We'd like to answer it in this way. What we're seeing right now, as we go through and moving into 2022, is a more structured price discussion with our suppliers. Maybe in '21, it was more of our suppliers caught off-guard and being more desperate in the way they handle it. And of course, we can manage that as well as you saw in 2021. But now we have more structural process when we're rolling out the price increases based on longer lead times and in a structured way, which is the normal way we do it. It might be in higher percentage, but that's not the challenge for us. It's more getting the timing right and communication with our customers.So I would say that, that's moving on now as expected going forward, and we don't see, at this moment, a big disruption to that way of working. And the only one we're commenting on here is on the freight changes that happened this summer, in effect, especially, our HVAC business in Toshiba, where we do a lot of freight from Asia and we have longer contracts with our big wholesalers. So I would answer to this, where those price increases to compensate the freight at these high levels, they are now -- are in place. So we expect -- I think we guided that we had SEK 25 million in Q4. We didn't compensate for, when we expect 50% of that to be sorted out in Q1. And then after Q1, we, at this moment, don't have any other pricing issues as we see it. And then we are at that inflated levels at least on the freight that we think one day will turn, but we at least have, I think, covered that for the foreseeable future in that level as well.
Excellent. And one final for me. Looking at the pricing trend for refrigerants for the moment, what do you see driving that for the moment? Is it a normalization going on in the market? Or what is happening?
I think it's hard to answer that exactly because you might get 5 different answers if you ask 5 different people. But what we're seeing is that, of course, on that, it's been moving slightly upward and we see that in Q1. It is 2 things. But how much one of them? I cannot answer. It's also, of course, that quota is becoming tighter and tighter in the market. And we expect also -- see what happens at the end of April as there's going to be new directives in this area where they want to further accelerate. Then there's also been a supply chain shortage in these areas and that's also driving pricing. So I would say maybe 50-50 of these 2 components, and we see that now also coming to slightly in Q1. But it doesn't, at this moment, have a material effect on our business, but it's not leaking either. So we see that as a positive sign.
Our next question comes from Karl Bokvist with ABG.
My first one is just one on -- a little bit of curiosity, what you mentioned there in terms of building inventory and the potential market share dynamics in your industry. Were you referring to your ability to deliver compared to other distributors? That's the first one.And then the second one. Do you notice any shift or change in dynamics between customers such as your main partner, Toshiba, i.e., Asian customers compared to ones with a more local footprint here in Europe in terms of deliveries, supply chain impacts and so on?
No, I think, good question. And if you start off with the first one, we haven't, because, of course, Toshiba is a big part of our HVAC development. And I would say we haven't had any major delivery issues with them in that component. They have managed the situation well through their supply chain. In Asia, of course, there has been longer lead time, but no significant issue for our supply chain in that.And then just touching on that, of course, the freight charges because part of the business is more or less our responsibility. That's the issue we had to get through on price increases in the market. So what I'm alluding to is that more, I would say, not so much on the distribution side, I think the supply chain has been okay. There has been pockets where we've seen some competitors also on the bigger brands run out of products in -- especially on the Nordic market. We've been growing market share quite a lot because some of the distributors has not had a product, but maybe they don't prioritize smaller markets. But we don't work that way because we have one central way of distributing our products around in Europe.So there we see a big increase for us in these markets. And then also, as the combination some -- most of them still have their supply chain sitting out of Asia on the distribution side. What we have seen is on the wholesale side, where we're now selling, as I said, we're launching -- we're selling the Carrier brand, we're launching the Sinclair and all that. There's a lot of smaller wholesalers that completely are out of stocking product and that we see as an advantage for us, both now and going forward, if that answers your question.
All right. Understood. And then just -- I just saw that, unfortunately, you no longer disclose the earnings contribution from acquisitions. I was just a bit curious why you chose to not do that any longer. And then the follow-up is just, if it were possible for you to provide some insights here on the call on EBITA impact from M&A?
Yes. I think it's a little bit misleading to make it black and white as we've done in the past. We can come back maybe and clarify more offline the structure there. But the bigger acquisition we have are already so integrated in our rest of our business that I would say that most, as we said on Sinclair and also as we integrate Inventor, a lot of their business is integrated into the wholesale chain, which is a major growth driver.So all of this here, 50%, 60% of growth and in some companies, it comes from us replacing, I would say, other type of products with our own brand in Sinclair and similar with [indiscernible] in Australia. This add-on acquisition is completely integrated into our business. So it becomes a very complicated way of communicating it. But I think maybe we should have -- we can do a little bit more in detail offline to explain that type of setup.
All right. No, understood. And then my final one is just on inventory and the way you reported. It would just be interesting to understand the growth rates and the sales contribution within Southern Europe. Is it entirely booked as OEM sales or HVAC? Or how do you choose to include it?
The inventory is completely HVAC.
All right.
Sorry. Just to finish off, if you look at the Sinclair, that becomes more -- it's moving quite a lot into the rest of Europe for us. While Inventor right now is booked, as we just closed the acquisition in October, it's in Southern Europe and it's HVAC.
Our next question comes from Robert Redin with Carnegie.
This is a follow-up. So those non-recurring cost, SEK 35 million, where they SEK 35 million in isolation? Or was that including the higher cost of freight? I thought the wording was a bit unclear there.
Yes. So let me help put color on it. So the way we broke it up is the SEK 25 million is the freight charges and then SEK 10 million is related to one-off with the big components, as I said, is the CEO sign-on that we booked during Q4. And of course, that will be part of our annual report as disclosure. So the SEK 25 million relates to the freight that we didn't compensate in Q4 mainly related to Toshiba, where I said, now the prices are in place at the high level and we negotiated with our customers. And coming through here now in Q1, where we expect that to be around 50% less. And then in Q2, we should be good to go on higher price levels. And here, we're now -- so we don't see major risk after Q1 on the freight because we covered on the high freight charges that's in place and also covered until the summer. And then we'll see where that component moves. There's a lot of different stories on that. But I think from a timing point of view, it should be in a good position for us to move out to Q1.
All right. Perfect. So 25%. Perfect. And then you said something about the -- there's been an update to the European phase-out scheme. Was it something about compliance and legal input in April? Did I hear right? Or what's happening there?
Yes. So it's coming out at the end of April. An indication, are they looking over both the legislation around it, the speed of the phase out. And so of course, we have our information and staying close to it. So we will know when can that report should be posted by the end of April. So let's see when it comes out right now. So that's all. There's no report now, but it's supposed to come out at the end of April.
All right. So what's driving the idea that it needs updating?
The intentions are to make sure that you have better rules and regulation and compliance, where you are using non-quota and illegal HFCs. They want to [ align ] harsher penalties and how you follow up and how you drive. That's the main driver. And then, of course, there are rumors that they want to also maybe speed up the exit of these HFCs, but let's see if that happens. So they stick to the plan. But I think the main driver is also to make sure they take off and make it harsher to work with non-quota.
All right. All right. So compliance primarily and then, yes, HFCs? Okay. But sounds good because this legal importance is maybe…
Yes. I think it's very good.
All right. Final question from me. I mean, the pace of acquisitions, it picked up really nicely, with the 10 acquisitions, SEK 1.8 billion of sales. I know you started the year well with this acquisition of Deltron. And so when you look into your M&A pipeline, is it still strong, the pipeline? And is this pace seen in 2021, can you keep it in '22, '23, either the 10 acquisitions a year or a sales positioning at SEK 1.8 billion?
Yes. I think I would answer it this way, when most people answer it, there's still a good pipeline and good discussion, of course, some further along, some in the middle and some in the beginning. So we are positive on having a good pace this year as well. But then with also the caveat that we don't control the timing. It might be some ones coming up now and might move into Q2, Q3, Q4 next year. But all in all, we expect it to be -- continue to be at a good pace based on the indication of where we sit right now.
[Operator Instructions] Our next question comes from Viktor Trollsten with Danske Bank.
Christopher, Maria, I hope all is well with you. Just a final -- sorry, first question on organic growth that was solid in the quarter. Is it possible to break that down? Just sort of how much was price increases and how much was volume?
Not in a mathematical structured way, I would say. I think where we see the major price increases, it's more on the component side, with the replacement parts coming through in our wholesale market. While on the HVAC side and the OEM side, it's still more balanced. So if you look at our mix, that's about 40% of our business. So I think if you would have to make an estimate through there, 3% to 4%, I think is a good indication and higher in some areas and lower in some areas.
On price.
On price.
On price. Okay. That's fantastic. And just a follow-up on the M&A contribution to the EBIT line. I understand the difficulties in getting or sorting that out. But could you just make a comment on the organic drop-through then in the quarter? I understand it's complicated, but it seems like it's -- are still significantly lower than the 20%, 25% that could be expected from your distribution model? Could you just comment around that?
Yes, no, I can. I mean, if you adjust, so we said that the freight and the one-offs, that's around SEK 35 million. Today, I would say the drop on organic side would be okay. And also the way we see the business is a little bit, on average, are our strongest drop-throughs in Q2, Q3, where we have the highest season, especially driven on the HVAC side. It's becoming a bigger, bigger part of our business. While in Q4 and Q1, we do have a lower drop-through because the activity is lower and the cost base is still similar. So I think adjusting for that, the drop-through is coming in at our expected level on the organic side as well. So those are the areas that we need to move away from on the freight side that we said it's going to reduce in Q1 and [ mature ] in Q2. But our strongest drop-through quarters are by far Q2 and Q3.
And what produces a normalized organic drop-through for you guys over time? I think we've talked about 20%, 25% previously. Just a comment on that.
I would say 25% would be at a high pace because we're also investing quite a lot to defend this growth. So I would say our ambition is to have a drop-through between 15% and 20%. And of course, my ambition is to move closer to this 20% on the organic side as we also work with our mix and our product portfolio. As -- I mean, we mentioned before, as we're launching into product volume, Sinclair and other brands that's also running at higher margins, then we can discuss somewhere the future drop-through. But I would aim to get it to the 20% drop-through.
At this time, there are no further questions. I hand back over to our speakers.
Thank you. Thank you, everyone, for calling in. And I can't remember how we wrap this up. Of course, if you have any other questions, things to get deeper into, we will try and help and support you. And I look forward to talk to you here going forward.
Thank you. Bye-bye.
Thank you.