Lindab International AB

STO:LIAB

Earnings Call Transcript

[Operator]

Hello, and welcome to Lindab Q4 and Year-End Report for 2020. [Operator Instructions] Today, I am pleased to present Ola Ringdahl, President and CEO; and Madeleine Hjelmberg, acting CFO. Please go ahead with your meeting.

[Ola Ringdahl, President & CEO]

Hello, everybody, and welcome to this call. My name is Ola Ringdahl, and I'm the President and CEO of the Lindab Group. I'm sitting here together with our acting CFO, Madeleine Hjelmberg. We go to Slide 2, and we look at the key highlights for the fourth quarter. We finished the year strongly. EBIT increased by 17%, and operating margin increased from 8.4% to 10.7%, which is a record high for a fourth quarter within Lindab. The revenue continued to be impacted by the effects of the pandemic, but to a lesser extent than previous quarter. Business Ventilation Systems returned to organic growth in the fourth quarter, mainly due to positive development in Western Europe. And operating cash flow was strong, and we have a strong balance sheet. We move to Slide 3 and the full year results. So in summary, 2020 was the first year that Lindab reached the long-term target of 10% operating margin. And achieving this margin target during the year marked by COVID-19 and the resulting sales decline is a sign of strength that we are proud of. In 2020, we generated a strong operating cash flow, and this has enabled us to continue our strategic investment program where we are upgrading many of our production facilities to increase both capacity and efficiency. During the year, we have made 4 acquisitions of high-quality ventilation companies and 1 investment in a technology company. We have also divested the IMP Klima Group as they did not live up to our profitability requirements. We move to Slide 4 and look at the geographical development. In Q4, sales was in line with previous year in the Nordics and in Western Europe, if we adjust for currency effects. We are pleased with this performance given the market conditions. In Eastern Europe, the sales has continued to show lower numbers, primarily due to less activity in project sales, and that region is still a bit more affected than the rest of Europe.We move to the full year numbers on the next slide. And we can see here that our largest region, the Nordics, has shown a good sales development throughout the whole period and the whole year despite COVID-19. Our 2 largest markets, Sweden and Denmark, continued to report good organic growth, driven by the Profile business. Western Europe had severe challenges in the spring due to COVID-19 lockdowns, but has recovered since August. And Eastern Europe has been affected strongly by COVID-19 from the second quarter and has not yet recovered its full momentum. Now I hand over to Madeleine, who will take you through the financials, starting on Slide 7.

[Madeleine Hjelmberg, Acting CFO & Group Financial Controller]

Thank you, Ola. So first, the financial highlights of the group. Net sales in the fourth quarter amounted to SEK 2.314 billion. Organic growth decreased by 4%. Currency had a negative impact on growth by 5%, while structured changes contributed positively by 1%. Overall, sales have been continuously impacted by the uncertainty related to COVID-19, but it should also be noted that both Profile Systems and Building Systems had a strong fourth quarter previous year, a quarter which included deliveries to a couple of large projects. Despite the generally low sales, all 3 segments managed to improve their EBIT margin during the quarter, a sign of strength in these times. For the group, this resulted in an increased EBIT amounting to SEK 248 million and that the EBIT margin increased to 10.7%, which is the highest EBIT margin for a fourth quarter since 2008. The improvement is driven by continuously strengthened gross margin and good cost control, but also contribution from our acquisitions and divestments. Currency effects had a negative impact on both sales and EBIT since the Swedish krona has generally strengthened in the period. Only a smaller part of the cost reduction is related to received governmental grants. Lindab as a group received grants of SEK 5 million during the quarter. And to add, Sweden have had no employees on short-time leave during the fourth quarter or the full year of 2020. Net profit for the quarter amounted to SEK 186 million compared to SEK 143 million during the same period the previous year. Now we will take a look at our different segments, and we start by Ventilation Systems at the next slide. Net sales for Ventilation Systems amounted to SEK 1.442 billion, a decrease of 2% compared to the fourth quarter of the previous year. However, organically, sales increased by 1%, which is strong given the circumstances and the fact that several markets were continuously impacted by the uncertainty related to COVID-19. In relation to the second and third quarter of the year, there has been a continued sales recovery, especially for the Western Europe, with reported organic growth as a whole during the fourth quarter of the year, with good growth in markets like France, Ireland, Italy and Norway. In terms of CEE/CIS, some markets reported indicative recovery, but the region as a total had a negative sales trends versus the corresponding period last year. The Swedish market continued to report solid sales development. In terms of sales, it should be mentioned that structural changes contributed positively by 1% during the quarter, and this reflects the acquisition of Thor Duct, Crenna, Ekovent, Aer Faber and the divestment of IMP Klima Group. Despite all uncertainties related to COVID-19, Ventilation Systems managed to deliver an improved EBIT amounting to SEK 152 million and strengthened the adjusted EBIT margin corresponding to 10.5% versus 8.7% the previous year. The improvement in both adjusted EBIT and EBIT margin was mainly due to reduced cost, strength in gross margin, but also thanks to the completed acquisitions and divestments. Only a small part of the reduced costs were related to received governmental grants amounting to SEK 2 million during the quarter. Moving on to the next slide and Profile Systems. Profile Systems net sales decreased by 9% and equals SEK 640 million. Organically, sales decreased by 7%, and currency had a negative impact on growth by 2%. The lower sales in Profile Systems is mainly explained by the business in Sweden where significant deliveries were made to a large logistic terminal in the corresponding period last year. Also, Romania has significant project deliveries during the fourth quarter of 2019. In general, the sales development of Profile Systems can fluctuate between quarters as deliveries of major industrial projects can have a significant impact on the segment's turnover, and the weather condition also influenced the sales volume of the segment. Despite lower sales, EBIT was, from a monetary point of view, in line with the corresponding period last year. And the EBIT margin improved to 13.1%, mainly due to strength in gross margin. Recognized governmental grants for Profile Systems amounted to SEK 1 million during the quarter. We move on to the financial highlights of Building Systems on the next slide. For Building Systems, net sales amounted to SEK 232 million, a decrease by 23% organically. The decreased sales during the quarter was mainly explained by the general slowdown in the market related to COVID-19, and many scheduled construction progress has been postponed. In terms of sales, we should also be mentioning that the comparison period included particularly larger project deliveries, primarily to Luxembourg, Poland and Russia. During previous quarters of the year, different cost-saving measures have been implemented with the aim to adapt the business to a lower expected sales volume in the light of the ongoing pandemic. These measures have, together with activities to strengthen the segment's gross margin, a positive effect on the adjusted EBIT during the fourth quarter. And despite the lower sales, Building Systems managed to increase adjusted EBIT margin to 9.9%, which definitely is a result of improved gross margins, but also good cost control achieved within the business. Building Systems have been impacted by a significant negative currency effect on both sales and EBIT due to the weaker Russian ruble. It could also be mentioned that they received governmental grants of SEK 3 million during the quarter. The net order intake for Building Systems decreased in the period, and the total order backlog at the end of the fourth quarter was lower than a year ago. Now we move on to the next slide and the cash flow for the group. Lindab reported a continued strong cash flow from the operating activities, a cash flow in line with the corresponding quarter previous year. The free cash flow, adjusted for M&A activities, amounted to SEK 241 million. This was a lower outcome than last year, but an outcome reflecting the good momentum Lindab has in the ongoing strategic investment program to increase capacity and efficiency for the future, but also with the aim to create an even safer workplace for our employees. In terms of M&A and activities, the cash flow was impacted by 2 acquisitions in the period, Ekovent in Sweden and Aer Faber in Norway. Lindab also invested in an associated technology-linked company in Denmark. From a cash flow point of view, it should also be noted that the final part of the consideration related to the previous divestment of IMP Klima Group is settled. The strong cash flow from operating activities throughout the whole year has supported the continued high investment pace in Lindab, made acquisitions, but also enabled Lindab to decrease net debt by SEK 131 million. At year-end, the net debt of Lindab amounted to SEK 1.640 billion, and the net debt/EBITDA ratio for the group equaled to 1.4 compared to 1.6 by end of December last year.I think that concludes the financial highlights for the fourth quarter. And with that, I'm giving the word back to you, Ola.

[Ola Ringdahl, President & CEO]

Thank you very much, Madeleine. We go to Slide #13 and have a quick look at some of the investment program details. So Lindab is currently implementing a strategic investment program. It started in late 2018. And our increased profitability has given us the financial muscles to implement this rather large program, which is very well needed in our company. We are aiming to invest in increased automation, production capacity and optimized logistics, while all the time taking the work environment and creating a safe work environment into account. In 2020, we invested SEK 425 million in dozens of important projects. We are expanding our production facilities for ventilation in strategic locations throughout Europe. We install highly automated production lines in our manufacturing sites, both regionally and in Lindab's central ventilation factories in Sweden and in the Czech Republic. The payback period for these projects is short, and the first investments have already had a positive impact on our business and our profitability. The current investment plan extends 3 years into the future. And then we move over to Slide 14 and talk a bit about the acquisitions and structural changes. Acquisitions are an important part of Lindab's strategy, and we want to acquire well-managed and profitable companies in our main markets in Europe. The acquisitions can contribute with products that fit well into our range or cover a geographic market where we want to become stronger. In the fourth quarter, we closed 2 acquisitions, as Madeleine mentioned, and we also made 1 technology investment. And on Slide 15, we quickly list the acquisitions made, namely Ekovent and Aer Faber and the 37% stake in Leapcraft. We have a very good M&A team that is devoting their time to acquisitions. And we have and we are developing a very interesting pipeline for the future. Enough about that, we now move to Slide 17. As you are aware, we have some long-term financial targets. And in 2020, we reached 2 out of the 3 long-term financial targets. The growth target was not possible to achieve this year due to the pandemic. But the operating margin, there, we actually reached the 10% level, and we have proven that we can reach this level also in very challenging market conditions. The net debt-to-EBITDA ratio is well below 3x, and we are now at 1.4, as Madeleine mentioned. And we are quite pleased that we have been able to reduce the debt slightly despite running the large investment program, making acquisitions, and we also paid dividend last year. Talking about dividend, we have a dividend policy and a dividend target. So let's move to the next slide, #18, and look at the proposal from the Board of Directors. The dividend during 2020 was maintained at previous year's level, SEK 1.75 per share, despite the challenges posed by COVID-19. For 2021, the Board has proposed a total dividend of SEK 3.4 per share, and this is in accordance with Lindab's goal of distributing at least 40% of the net profits to shareholders. For us, it is important to safeguard the interest of our shareholders also in challenging times. The dividend is proposed to be split into 2 equal payments, 1 in May and 1 in November. Now let me say a few words about the expected market development on Slide 19. As we -- as you are all aware, it is, of course, very difficult to make predictions about the market developments when we are still in the COVID-19 pandemic. If we look at official statistics from Euroconstruct, we can see that it is estimated that the European construction market declined by approximately 9% in 2020. For 2021, Euroconstruct, they predict that the market will recover and grow by 4%. However, that doesn't make up for the significant drop in 2020. So it will take some time before we are back at previous construction activity levels. On top of these challenging market conditions, we also see that the price of raw materials is going up, and particularly important for Lindab is the steel prices. We have seen in the past few months that the prices are increasing quite significantly, and we expect further price increases on steel in the coming months. So we continue to watch this very closely during the first and second quarter, and we are very determined to compensate for these higher raw material costs when putting the right price on our products. Now let's go to the next slide and make a quick summary. If we summarize 2020, we can see that Lindab has taken important steps forward and is well equipped for the future. In the short term, the market outlook is impacted by the pandemic and its consequences, and the increase in cost of raw materials is adding to this challenge. In the long term, Lindab benefits from strong underlying macro trends, such as energy efficiency, green buildings and the desire to create a good indoor climate for people. We are satisfied with the fourth quarter, and we are happy that we have achieved the results we did in 2020. With that, this is the end of the presentation, and we open up for questions.

[Operator]

[Operator Instructions] We have a question from the line of Douglas Lindahl from Kepler Cheuvreux.

[Douglas Lindahl, Analyst]

Ola, Madeleine, congratulations to a strong report. A few questions from my side with some focus on margins, obviously, where we would appreciate more help. But first, on the demand situation, I appreciate the comments during your presentation here. But is it possible to give any sort of further insight into the current demand levels you are seeing now in the beginning of 2021 or rather maybe the last month of Q4? Any sort of comments on that would be highly appreciated. I'll start with that one.

[Ola Ringdahl, President & CEO]

Well, I think for the markets, like we mentioned, in Western Europe and in the Nordics, the fourth quarter saw a decent demand, including December. We actually had quite a good December, both sales-wise and in terms of results. It is, of course, more difficult to say what's going to happen now. We have some positive aspects. The vaccine rollout is building confidence out there in the market, and we see an increasing amount of inquiries. We make more and more offers on projects. So the activity level out there is increasing, but it will take a bit of time before we see the real results from that. But it's an encouraging sign that there is more activity among our customers and we get more inquiries. I think the...

[Douglas Lindahl, Analyst]

And for the Q1?

[Ola Ringdahl, President & CEO]

Just let me add that -- adding to that are, of course, several factors that make it complicated to make this kind of forecast. We have some -- in some countries, we have a weather effect. A winter with a lot of snow is not the best thing for some of our activities, especially in the Profile business. And we have the more volatile situation when it comes to the project business, which mainly affects our Building Systems business area. So difficult to answer your question, Douglas, but we remain conservative on the cost side to be prepared for several scenarios.

[Douglas Lindahl, Analyst]

Okay. I understand it's a difficult question, too. Appreciate your answer, Ola. So coming back on steel prices, you already commented that you've seen an increase. But going forward, how do you expect this to impact margins? I would assume that you can't really fully compensate for these price hikes. So how do you view the current steel prices in a margin context for, let's say, first half of '21?

[Ola Ringdahl, President & CEO]

It's always a fine balance. We need to be there for our customers, and we need to protect our margins. So we are, of course, trying to forward the increased costs to the next one in the value chain, but they also have their obligations. So we have to have a constructive dialogue with our partners out there so we are not destroying anything. But of course, steel is an important material for Lindab. We use quite a lot of it. So it is at the top of our agenda to try to have good forecasting and good intelligence when it comes to the projected price trajectory for steel prices and the availability of steel. The availability of steel is a bit challenging at the moment for some players in the market because of this price hike. There, I think that Lindab is in a good position. We have a very professional team working to secure our deliveries of steel. So in terms of being a very reliable supplier, I think there are very few companies out there who can be as reliable as Lindab in these challenging times.

[Douglas Lindahl, Analyst]

So you don't dare to say if margins will be negatively -- net-net negatively affected really the next 6 months?

[Ola Ringdahl, President & CEO]

Our aim is to protect the margins. We want to improve profitability and not to make it deteriorate. Then if -- the rest of it is probably a timing issue. Of course, when prices go up very suddenly, is there enough time to give notice and increase the prices in time? But seen over a few months, it should be okay. And I don't dare to see if we will have that kind of time lag or not. But we are doing our best to adjust pricing in time so that we will protect the margins.

[Douglas Lindahl, Analyst]

Yes. No, I understand. On the gross margin in the quarter specifically, which was up, has there been an underlying mix in terms of products? Is that sort of temporary? Or do you expect that to continue?

[Ola Ringdahl, President & CEO]

The mix effects are not -- well, I mean you can read in the report and analyze the mix effect between the different business areas. Within the business areas, there are not any really substantial mix effects that, I would say, explain any major portion of the margin improvement. It is a broad improvement of performance rather than any kind of specific mix between products or geographies.

[Douglas Lindahl, Analyst]

Okay. No, that's very clear. And just on CapEx, you already touched upon that. But do you want to be more transparent in terms of what CapEx levels you're looking for in 2021?

[Ola Ringdahl, President & CEO]

I mean as you saw in the graph and if you look at the history of Lindab, I mean we are today at -- I think in 2020, we were about 3x the normal level of CapEx. Now if we exclude acquisitions, if I just talk about investments in equipment, and we -- I mean we are not planning to stay on that level forever. We are not. And we are probably around the peak right now. I think the investment level will still be high in 2021 and '22, but I don't expect it to be higher than it was in 2020. As long as we have extremely attractive investment opportunities, I dare to pursue them at great speed. But over time, the payback calculations will look less fantastic and then it is, of course, trying to slow down a bit. But I would say high CapEx for the next 2 to 3 years, but we have probably seen the highest level now in 2020.

[Douglas Lindahl, Analyst]

Okay. And I guess maybe a final one for me, then I'll let someone else in. On the M&A, I guess now you've done a few, but I would assume that 2020 was a difficult year to go through with any real deals given the lack of traveling. Do you expect M&A to pick up as we enter 2021, assuming COVID sort of gives you the opportunity to travel? Or what's your...

[Ola Ringdahl, President & CEO]

Well, I, of course, hope that we will be able to travel. We have very capable local managing directors in the countries where we are active. So we can do a lot even during these times. But for the slightly more complicated or larger potential deals, it is necessary to travel from Sweden to those destinations, and that is difficult today. There are many opportunities in the acquisitions area because the ventilation industry is still rather fragmented. There are also some interesting possibilities within Profile Systems I would like to add because they have really shown now in the past 2 years that they can deliver significantly higher margins than they did a few years ago. So it can be an area also worth investing in.But we aim to have a continuous flow of acquisitions. They don't need to be large, but they should be within our scope of finding high-quality companies with a good management and in a good niche that fits very well with Lindab's existing business. And I'm hoping that we will see more coming out of that even if we are slightly slowed down by the pandemic and those restrictions.

[Operator]

Our next question comes from the line of Carl Ragnerstam from Nordea.

[Carl Ragnerstam, Analyst]

It's Carl here from Nordea. I called in a bit late. You might already have answered this, but could you please give more color on the margin drivers for Ventilation Systems? I mean how much is, would you say, is temporary cost savings? And how much is driven by the divestiture of IMP Klima? And how much is sort of driven by the overall efficiency program that you're running?

[Ola Ringdahl, President & CEO]

To start with, there is a positive effect from divesting IMP Klima and replacing it with some newly acquired companies. So we're talking about a few decimal points explained by that. More things -- more onetime nature. We are not an organization with a lot of expensive travel habits in normal times. So I wouldn't say that, that is behind -- any savings on traveling is not behind the margin improvement or the cost improvement. On the contrary, we have continued to keep our spending level on R&D and on important development projects, and the acquisitions have also added some transaction costs associated with those. So I would say that the savings and the efficiency improvements achieved, they are sustainable, and they will not end once the pandemic ends. It is more we have taken more of a structural grip. As an example, we have gone from -- and it's probably covered somewhere in the footnote somewhere in our press release, but we used to say that we are active in 32 countries. In this report and this press release, we said that we are active in 24 countries. So we have focused our efforts on the countries and markets where we think that we can have a strong position, where we can make money. And we have actually exited quite a number of markets where we have not really performed in the past. So I think that's more behind the improvement than anything else.

[Carl Ragnerstam, Analyst]

Okay. Perfect. And also in terms of your financial target of 10% EBIT margin, I mean, given what you say with running the efficiency program until, I think, 2023, which should, as you hope, I guess, yield some results, continue with the margin-accretive M&A, I mean, is it fair to assume that your EBIT margin target of 10% is somewhat prudent? Or how should we look at that?

[Ola Ringdahl, President & CEO]

When I joined Lindab in 2018, and we have for a number of years delivered around 6% EBIT, I didn't think that the EBIT target of 10% was very prudent. I still don't. We have just now reached it one time. And we say that this target should be valid over, as an average, over a business cycle. So we are not done there yet. But we have shown that we can perform on a level of higher profitability, which I find very pleasing, not least because it gives us an underlying cash flow that can really help to upgrade and modernize the company and fulfill its potential. So the EBIT target and those other long-term targets, they are set by the Board. It's not for me to set those. And perhaps once we have established ourselves as a consistent -- consistently delivering on that kind of level, then it is time to aim even higher. But as I said, that's for the Board to decide.

[Carl Ragnerstam, Analyst]

Yes. And also a long-term question here. I mean if you compare Ventilation Systems with Profile Systems, we can obviously see that, if you look at least year-to-date, you can see that Profile Systems is significantly more profitable at just about 12% versus 8.5% at Ventilation Systems. In the coming 2, 3, 4, 5 years, I don't know, how would you -- would you say that Ventilation Systems has the potential to be more profitable or in terms of margins than Profile Systems? And do you have much more to do in terms of margins in Profile Systems? I guess it's a lower -- yes, it's a more simple business or less -- yes. How do you view that?

[Ola Ringdahl, President & CEO]

I understand what you mean, Carl, and you could assume that. I have found that all businesses are rather complex once we get into the details, and Profile Systems is dependent on very, very advanced and qualified technologies as well. So it might -- those products might look low tech. But if you combine everything and how they are produced and how they are distributed and what kind of quality we are talking about, it is actually rather complex and high tech. That said, one reason why the EBIT margin for Profile Systems has increased so much and so rapidly is that we have prioritized profitability instead of maximizing volume growth. Now that's always a balance. We are getting into shape in our operations within Profile Systems more and more. And I think that the next step there is to also aim for a little bit more aggressive volume growth, not jeopardizing the margins, but to fine-tune that balance as we grow our -- as we improve our operational efficiency even further. So I think they are performing on a good profitability level now, and we should not aim to grow that area a bit more. For Ventilation Systems, I think the profitability potential is no less than that of Profile Systems. The technology is advanced. Our production methodology is super high tech. So there's no reason why they shouldn't be able to make the same kind of profitability levels as we see in Profile Systems.

[Operator]

Our next question comes from the line of Kenneth Toll from Carnegie.

[Kenneth Toll Johansson, Financial Analyst]

A lot of questions have been asked. But turning to the smallest business area, Building Systems. First, you said that orders were down year-over-year, and you also said that the order book was lower now. But previously, you have commented on how many large orders you have received in a quarter or so on. But now there is very little information. So can you give us a feeling of how much orders are down and what to expect for the next 6 months or so? I mean is the order book down like 20% or 40% or 5%? Or...

[Ola Ringdahl, President & CEO]

Thank you, Kenneth, for those questions. I'll try to remember the different ones. If we start with this question about how many large orders above EUR 1 million, we received 2 of those orders in the fourth quarter. They were both in Russia. And in some quarters in the past, I remember some quarterly reports when we've had up to 10 of those large orders in the quarter. And the situation looks a bit different now. In the pandemic situation, we have seen that trend that the really large projects, they are fewer and farther between. And it's more the, say, bread-and-butter business that is continuing to develop in a decent way. So we have actually a quite good stability in the smaller- and medium-sized buildings that Building Systems are selling. But the large ones, that segment is really down, which is reflected in the number of such big projects that we have taken. I'm glad to say that in the past 4 months, we have seen a steadily increasing order trend. So the order value has gone up every month now for the last 4 months. But the order level has been low, starting in March when the pandemic hit and up until the autumn. And the orders on hand, it's still a lower number than it was 1 year ago, but the gap since 4 months is starting to shrink. So I think we still have a few more difficult months volume-wise for Building Systems, but there's definitely light in the tunnel with increasing order book or order trend and the increasing number of inquiries received.

[Kenneth Toll Johansson, Financial Analyst]

Okay. Sounds great. Also, the -- I was surprised by the profitability in that division, especially since the sales were down quite a lot. Were there -- and you talked about cost savings and trimming the organization to lower volumes and so on. But were there any extraordinary things you did in the fourth quarter? Or could we expect this kind of profitability level to be sustainable also going forward?

[Ola Ringdahl, President & CEO]

I understand the question. It's a natural one because I do agree, they delivered a really strong operating margin. The short answer is no, there are no extraordinary explanations for that. The government grants for short-term labor was SEK 3 million. It's not explaining the large improvement in profitability. On the contrary, we had quite a significant negative currency effect on the results. So if anything, the result was actually probably better than it looks in the report.But one explanation is perhaps that now we, after some years of really good management and much better control, we see very few negative surprises. In some years, in some companies, you see negative surprises in November and December every year. And we -- I'm glad to say that, that is no longer the case for Building Systems. We are running a tight ship. We have a very good management team. And they have really adapted to a lower sales level, and they can still make a decent profitability. And we are avoiding the big scary surprises.That said, we are now at this invoicing level, probably at the limit of where we can show these kind of numbers. If we will go down another 30%, 40%, that would be troublesome. But we have shown that we can actually make a healthy profit even with on these sales levels, which I'm very pleased about.

[Kenneth Toll Johansson, Financial Analyst]

So I remember when you took up the position as CEO, there had been talks about divesting this business. And at the time, you said then that the bids you got at that time were too low and didn't reflect the value of the business and the improvement potential that you saw at that time. Now you talk about that improvement potential having materialized, but also that -- yes, how should I say, you have, as of late, also got margins up at lower sales volumes and so on. So when you get the bids for the business now, do you feel that there is a further improvement potential that you want to show before considering maybe divesting this business?

[Ola Ringdahl, President & CEO]

It's a relevant question, definitely. I think like this, yes, we have proven that we have -- we can be profitable at lower sales levels than before, and I think it will be an attractive investment case if somebody would look at Building Systems. And perhaps what is lacking from the seller's point of view to make the timing ideal is the higher volume. Because if we return to a higher volume with these operational improvements achieved, we will get a very nice leverage in terms of increasing results. So we are not in a hurry. We want to do what is best for the shareholders. And we are very pleased with the performance of the team that in this most extreme of difficult times that they are delivering what they do in 2020 and particularly strong in the fourth quarter. And when volumes start to return, I think that Building Systems will show that they have fundamentally improved that company.

[Operator]

[Operator Instructions] We have a question from the line of Marcela Klang from Handelsbanken.

[Marcela Klang, Analyst]

Ola and Madeleine, I have a question. These EU directives for renovation and new construction and there is national support packages that you mentioned in your report, are you seeing these projects already in any particular market? Or is it just generally that we are talking about this market, the early subsidies?

[Ola Ringdahl, President & CEO]

Marcela, yes, there have been many programs announced on EU level and on national levels. I think those kind of government programs and EU programs, they take time to materialize. So I wouldn't say that we have seen the effects of those yet, but they are sending the signals to property owners, technical consultants, architects, that this is going to happen and you better get ready for it. So I think it's sending all the right signals for us, but we do have to have some patience before we actually see it materializing into increasing sales. We see it as a long-term driver of growth, but not a short-term impact in the next quarter.

[Marcela Klang, Analyst]

But do you expect some impact during 2021, if I understand you correctly?

[Ola Ringdahl, President & CEO]

I think it will start in 2021 to have impact, yes, and it will gradually grow. But there are so many millions of buildings in the -- in Europe that need to be upgraded, that this is a source of potential growth, too, but that will be with us for many, many years to come. And in the Scandinavian countries, it is still very -- it is already very high on the agenda, but it will now be more and more important in many more European countries. So for Lindab and for companies like Lindab, this is a great news and a great initiative, and it will also help to reduce greenhouse gas emissions and save energy costs. So I think it's great.

[Marcela Klang, Analyst]

And then you mentioned in the previous answers that in the past 4 months, the order situation has improved, even though we are still below last year. How does that relate to the comment last quarter when you were talking about the delays in Q3? Or is it different projects? These delays that you were talking about in Q3, are they gone now?

[Ola Ringdahl, President & CEO]

I was making that comment about the growing order trend, that was particularly for Building Systems where we have more of a, let's say, long order pipeline. And if projects are still delayed and taking longer time out there, yes, they are -- I still experience that the decision-making is slower still, and projects are being delayed, yes. And I think that will continue for some more months before people really feel that we are -- that we can put the pandemic behind us. So I expect this to have a dampening effect on the economy for another few months.

[Operator]

There are no further questions at this time. Please go ahead, speakers.

[Ola Ringdahl, President & CEO]

Thank you very much for listening in today, and we appreciate all your questions. From Madeleine and myself, we would like to say thank you.

[Madeleine Hjelmberg, Acting CFO & Group Financial Controller]

Thank you very much.