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NIBE Industrier: The Swedish Heat Pump Empire That Built Wealth from Warming Homes
I. Introduction & Episode Roadmap
Picture a small factory town in the Swedish province of Småland, where forests meet farmland and winters arrive early and stay long. In this unlikely setting, a story of extraordinary wealth creation began more than seven decades ago—one that would eventually transform heating systems across Europe and North America while minting millionaires from factory workers and managers alike.
NIBE is probably one of the most impressive and consistent companies you've never heard of, and since its IPO in 1997, the company has grown from $70 million in revenue to $4.5 billion. This growth came while never sacrificing profitability—compounding its earnings per share at around a 19% CAGR. The company's share price tells an even more remarkable story: long-term shareholders of NIBE have been truly rewarded—enjoying an insane CAGR of 25% during the last 25 years.
If you invested $1,000 in the NIBE IPO of 1997, that investment would be worth $215,000 today—a total return of 215x.
The NIBE Group is an international Group that contributes to a reduced carbon footprint and better utilization of energy. In our three business areas—Climate Solutions, Element and Stoves—we develop, manufacture and market a wide range of environmentally friendly, energy-efficient solutions for indoor climate comfort in all types of properties, plus components and solutions for intelligent heating and control in industry and infrastructure.
What makes NIBE's story particularly compelling for today's investors is its position at the intersection of two powerful forces: the existential need for decarbonization and Europe's painful dependence on fossil fuels exposed by Russia's invasion of Ukraine. When gas prices spiked in 2022, demand for heat pumps surged, and manufacturers like NIBE scrambled to expand production. But the subsequent collapse in energy prices created a violent reversal—NIBE Group has announced it will lay off 340 employees in Sweden due to "much weaker demand" in the European heat pump market. Heat pump sales decreased 5% in 14 European countries in 2023, according to the European Heat Pump Association.
This article explores how a company built on heating plates for piglets became Europe's dominant force in heat pump technology, the management philosophy that created hundreds of millions in personal wealth for its employees, and whether NIBE's current challenges represent a temporary setback or a fundamental change in its growth trajectory.
II. Founding & The SmĂĄland DNA (1952-1980s)
The Origin Story
In 1952, in the small Swedish town of Markaryd, a visionary entrepreneur named Nils Bernerup looked at the agricultural equipment his company was producing and saw something more. The foundations of the company were laid in 1952 by Nils Bernerup, a visionary entrepreneur and estate owner from SkĂĄne in the furthest south of Sweden. Bernerup started out by manufacturing equipment for farms, an initiative that evolved into the establishment of NIBE AB. He named the company after the initials in his first and last name, looked for a factory, and invested 5,000 Swedish kronor to kickstart the business.
That 5,000 kronor—roughly equivalent to a few months' salary for an industrial worker at the time—would prove to be one of the most spectacular investments in Swedish industrial history. Within just three years, the company grew from 3 to 30 employees.
But what exactly was Bernerup making? The answer reveals both NIBE's humble origins and its pragmatic approach to innovation: Having gone from creating heating plates for piglets into a world leader in heat pump technology, innovation lies at the heart of NIBE. Those heating plates—electric elements designed to keep young pigs warm in cold Swedish barns—may seem an improbable foundation for a €8 billion company. Yet they embodied exactly the kind of practical problem-solving that would define NIBE for decades to come.
The Electric Water Heater Breakthrough
NIBE achieved a breakthrough with the introduction of the electric water heater in 1955, a response to new hygiene regulations in dairy farming. This innovation utilized the same technology as the heating plates for piglets and demanded not just invention but also mastery in production and craftsmanship.
The timing proved fortuitous. In 1952, the manufacture of NIBE's water heaters starts, in the same year as the Act requiring farmers to have hot water in milking parlours enters into force. Rather than viewing regulation as a burden, NIBE saw opportunity—a pattern that would repeat itself throughout the company's history.
In the 1970s, NIBE developed an extensive range of water heaters, which became the company's hallmark—a staple in most Swedish homes. The 1970s were marked by electricity-heated homes and inadequate ventilation. In response to this, NIBE combined electric boilers and water heaters and housed them in sleek white cabinets, a welcome addition to the modern laundry rooms of that era.
The SmĂĄland Factor
To understand NIBE, one must first understand Småland—a region that produced both NIBE and another Swedish industrial giant with a particular approach to business. NIBE, just like IKEA, was founded in a rural part of Sweden called Småland.
Behind IKEA's global empire and a cluster of highly successful industrial companies lies an unlikely origin story. These global giants weren't born in Stockholm's gleaming offices or Europe's industrial heartlands, but in SmĂĄland, one of Sweden's historically poorest regions. What transformed this rocky, barren landscape into a cradle of entrepreneurial success? The answer reveals a powerful lesson about how adversity, culture, and resourcefulness can forge business empires that span the globe.
The people of Småland, known as Smålänningar, or Smålandians, are known for their distinctive cultural traits. Smålandians are often described as resourceful, hardworking, and frugal. The frugality is one of the most notable characteristics attributed to Smålandians. They are often jokingly referred to as the "Scotsmen of Sweden" due to their reputation of being thrifty and careful with money.
Småland became known for its high level of entrepreneurship. Its people got the reputation for being thrifty and innovative with a straightforward approach to problem-solving—especially when it came to business challenges.
This cultural inheritance manifests directly in NIBE's operations today. He has succeeded in doing so without losing the company's entrepreneurial vein or being tempted to move the head office from Markaryd, Småland, where NIBE's journey once began. While other European industrial champions have relocated headquarters to major cities, NIBE remains in the same small town where it was founded—a decision that speaks volumes about its values.
The SmĂĄland spirit also created an industrial ecosystem. When a foundry or industry lacked a particular part or solution, it created opportunities for other entrepreneurs and innovators to start their own businesses. This fostered a thriving ecosystem of industrial development, characterized by resilience and creativity.
The Heat Pump Gambit
By the late 1970s, Sweden was experiencing a series of energy crises that would reshape the national approach to heating—and NIBE's strategic direction. A number of energy crises and increasing ventilation and energy consumption regulations, for example, the requirement to replace the entire amount of air in a house every two hours and recycle at least half of the energy from the exhaust air, made NIBE's launch of its first exhaust air heat pump in 1981 a success.
This wasn't just a product launch—it was a strategic bet on the future of home heating. At a time when most of Europe remained dependent on oil and gas, Sweden was pioneering a different path, one that would eventually make it the world leader in heat pump adoption. NIBE positioned itself to ride that wave.
For investors, the early NIBE story offers several enduring lessons: regulatory change creates opportunity for prepared companies; frugal, owner-operated businesses often compound value more effectively than professionally managed peers; and geographic "disadvantages" can become cultural advantages that shape resilient corporate cultures.
III. The Management Buyout & Transformation (1988-1997)
Enter Gerteric Lindquist
In 1988, a 37-year-old mechanical engineer returned to a company he had left seven years earlier—but this time, he came with a plan that would reshape its future entirely. Gerteric Lindquist was born in 1951 in the village of Eskilsryd outside Nybro in Småland, where his father worked as a blacksmith. He graduated as a Master of Science in Mechanical Engineering from Chalmers University of Technology in 1974. He also holds a degree in Business Administration from Uppsala University.
Lindquist's path to NIBE's helm was anything but linear. After his studies, he spent a few years at the Swedish Trade Office in Toronto. In Canada, he was recruited for his first position at NIBE, as export manager for seed drills. In 1981, Gerteric Lindquist left NIBE and worked for a few years at Scandinavian Trading Company and as export manager at Assa Abloy, before being recruited back to NIBE in 1988.
That stint at Assa Abloy—the Swedish lock manufacturer that would itself become a global industrial success story—provided Lindquist with exposure to aggressive acquisition-driven growth strategies. He would bring this playbook back to NIBE.
When Gerteric Lindquist took over the leadership of NIBE in 1988, it was a small SmĂĄland energy technology company that had been manufacturing electric heating elements, water heaters and stoves since the 1950s, but which had only recently taken the step of starting to develop and sell heat pumps. It was a technology that the company saw great potential in, as it had already predicted today's electrification and an accelerating need for energy solutions that are not based on fossil fuels.
The Pivotal 1989 MBO
What happened next would fundamentally alter NIBE's trajectory and create enormous personal wealth for its participants. The modern NIBE structure first took its form in 1989, when current CEO, Gerteric Lindquist, accompanied by 17 other employees and a co-financier, bought out the company. This wasn't his first encounter with the heat engineering company, as he—already as a 26 year-old—worked as an export manager in the company.
In 1989, he, along with several other employees and two co-financiers, acquired the company from its then-owner.
Management buyouts were relatively rare in Sweden at the time, and even rarer was one that created so much value. This incredible stock (and business) performance has made many employees multi-millionaires. Here are the current (as of December 2023) top-10 holdings in NIBE by current and former employees: Gerteric Lindquist, CEO: $554 million. Leif Gustafsson, Senior Advisor: $431 million. Bengt Hjelm, former Chairman of the Board: $287 million. Harry Andersson, former Head of Sales: $246 million. Stig Svensson, participated in the 1989 buyout: $178 million. Holger Svensson, former Head of Business Development: $124 million. Christer Fredriksson, Business Area Manager NIBE Element: $110 million.
The numbers are staggering: a group of 18 employees and their financial backers created over $2 billion in personal wealth from an investment in a small provincial heating company. The key to this wealth creation wasn't just backing the right company—it was the extreme alignment of interests that the MBO created.
Over the course of more than three decades, he has developed NIBE from a small company in SmĂĄland with 300 employees to a global group that is a world leader in the manufacture of heat pumps.
The Heat Pump Vision
Lindquist's bet on heat pumps was premised on a simple insight: Sweden's approach to home heating would eventually spread to the rest of Europe. At the time, this was a contrarian view. Gas was cheap, climate change was a distant concern, and heat pumps were seen as a niche technology suitable mainly for the cold Nordic countries.
Sweden tops international statistics on heat pump capacity per capita. There are over a million installed heat pump units in Sweden and more than half of all residential houses in Sweden have an installed heat pump.
Sweden's embrace of heat pumps had specific causes. In the 1970s, Sweden experienced an oil crisis which meant the cost of using fossil fuel heating systems rapidly increased. The Swedish government used the crisis as a catalyst for change, implementing a range of reforms to invest in new technologies and consumer subsidies to create a home heating transition across the country. Crises and price shocks like this can give governments the political space to approach a policy area differently, in a way that isn't always possible during normal times.
Underlying the success of Sweden's heat pump adoption was a set of financial carrots and sticks that made heat pumps a sensible economic choice for consumers. In 1991, Sweden became one of the first countries to implement a carbon tax, which increased the running costs for fossil fuel heating systems.
Today new single-family houses are built with the expectation that heat pumps will be the primary heat source, and the transition to district-style heat pump systems for multi-family homes continues.
This Swedish experience gave NIBE a huge advantage: it could perfect its products and manufacturing processes in a domestic market that was decades ahead of the rest of Europe in heat pump adoption. When European climate policy eventually caught up, NIBE was ready.
For investors, the 1989 MBO illustrates the power of aligned incentives. When managers have significant personal stakes in outcomes, they tend to make decisions that compound value over decades rather than optimizing for quarterly results. The NIBE example is extreme, but the principle applies broadly.
IV. The IPO & Building the Acquisition Machine (1997-2010)
Going Public
NIBE has been listed under the name NIBE Industrier AB on the Nasdaq Nordic Large Cap list since 1997, with a secondary listing on the SIX Swiss Exchange since 2011.
The 1997 IPO marked a pivotal transition: NIBE now had access to public market capital to fuel its acquisition strategy, while the original MBO participants retained significant stakes that kept them deeply invested in long-term outcomes.
The share structure tells this story of retained control clearly. Gerteric Lindquist holds 27,511,952 class A shares and 65,160,044 class B shares. Not independent due to his position, his shareholding and the length of time during which he has been a member of the Board. The dual-class structure, common in Swedish companies, gave the original owners voting control even as they diluted their economic ownership through acquisitions.
The stock's performance since the IPO has been extraordinary, with four separate 4:1 stock splits reflecting the appreciation. This means early investors in the IPO have seen their original shares multiply 256-fold just from splits alone—before even accounting for price appreciation.
The Three Business Areas Model
NIBE organized itself around three distinct business areas, each with its own dynamics and strategic logic:
Net sales (including intragroup) break down by family of products as follows: heating and air-conditioning systems (63%): heat pumps, air conditioning systems, solar heating systems, household boilers, water heaters, cooling equipment, ventilation systems, solar panels, etc.; components and solutions for heating control and metering (27.2%); wood stoves (9.8%). Net sales are distributed geographically as follows: Nordic countries (18.5%), Europe (44%), North America (31.1%) and other (6.4%).
NIBE Climate Solutions represents the core growth engine—heat pumps and related HVAC products. This is where the company's strategic focus lies and where the bulk of investment is directed.
NIBE Element is the heritage business, producing heating elements for industrial and consumer applications. It's steady, profitable, and provides diversification across industries including automotive, energy, and appliances.
NIBE Stoves is the smallest segment, focused on wood-burning stoves. While it might seem anachronistic, the segment serves a stable market in Nordic countries where supplemental wood heating remains popular.
This diversification creates natural hedges: when housing markets slow (hurting heat pump sales), industrial demand may remain strong. The Element business in particular provides exposure to electrification trends beyond heating—everything from electric vehicles to industrial process heating.
The NIBE Acquisition Philosophy
What distinguishes NIBE from many serial acquirers is its operational philosophy: acquired companies maintain their independence while benefiting from group-level synergies.
The company explicitly describes this approach as preserving entrepreneurial cultures: acquired companies keep their management teams, brands, and operational autonomy. NIBE provides purchasing power, manufacturing expertise, and capital—but stays out of day-to-day operations.
This philosophy creates several advantages. First, it makes NIBE an attractive buyer for family-owned businesses whose founders want liquidity but also want their companies to survive intact. Second, it avoids the integration challenges that plague many acquisitive companies. Third, it maintains the entrepreneurial energy that made acquired companies successful in the first place.
The disadvantage, of course, is that NIBE foregoes some synergies that more aggressive integration might capture. But management has consistently argued that the benefits of preserved entrepreneurship outweigh these costs.
By 2010, NIBE had established a proven playbook: identify strong regional players with good management, acquire them at reasonable prices, provide capital and group support, and let them continue doing what they do well. This playbook would soon be deployed on a much larger scale.
Mitsubishi Partnership
In 2009, the company signed an agreement with Mitsubishi Heavy Industries to produce heat pumps.
This partnership marked NIBE's first significant engagement with Asian manufacturing expertise. While NIBE remained primarily a European manufacturer, the Mitsubishi relationship provided access to compressor technology and manufacturing know-how that would prove valuable as the company scaled.
V. The North American Expansion (2011-2016)
Strategic Push into the US
The period from 2011 to 2016 marked NIBE's decisive push into North America—a market that would eventually represent over 30% of company revenues. This expansion came through a series of increasingly ambitious acquisitions.
The acquisition of CCG represents another major step in NIBE's history following the additions of the Schulthess Group (CH) and Emerson Heating Products (USA) both in 2011.
The 2011 acquisitions established NIBE's initial foothold. Then came the deal that would truly transform the company's North American position.
The WaterFurnace Acquisition (2014)
Reinforcing NIBE's position as a global leader in sustainable heating and cooling solutions. Swedish based NIBE, one of the leading heat pump manufacturers in Europe, is teaming up with US-based WaterFurnace, one of the market leaders in the North American geothermal heat pump heating and cooling solutions market. WaterFurnace shareholders will receive C$30.60 per share in cash. The total equity value of the transaction is approximately C$378 million (SEK 2.4 billion).
Founded in 1983, WaterFurnace has a longstanding track record as a premier brand and manufacturer of geothermal heat pump heating and cooling solutions in North America. The company's product offering includes a range of geothermal heat pumps, smart control systems, hot water storage tanks and indoor air quality solutions. Products are marketed under the WaterFurnace and GeoStar brands in North America, and the WFI brand via a joint venture in China.
The WaterFurnace deal revealed NIBE's acquisition strategy in action. WaterFurnace will continue to operate as a separate entity under the leadership of its CEO Tom Huntington and his management team, forming part of NIBE's business area NIBE Energy Systems. NIBE intends to develop the business as a growth platform in North America.
CEO Lindquist described the strategic rationale: "This transaction is NIBE's largest to date in North America and further elevates our position as one of the global market leaders in sustainable energy solutions. Following our successful expansion of our Elements Division in the United States, the teaming up with WaterFurnace represents a strategic match and bridgehead into North America also for our largest business area Energy Systems. We are pleased to see that both groups share the same entrepreneurial tradition and technological vision, being one of the first companies to market geothermal heat pump solutions on respective sides of the Atlantic."
The emphasis on "entrepreneurial tradition" is not accidental. NIBE explicitly sought acquisition targets whose culture matched its own—companies whose founders would be comfortable with NIBE's hands-off operational approach.
The Climate Control Group Deal (2016)
Just two years after WaterFurnace, NIBE made an even larger North American bet. Sweden-based NIBE, one of the leading European climate solutions providers, buys The Climate Control Group ("CCG"), a leading manufacturer of HVAC solutions for commercial and residential applications in the North American market. CCG is well-known for its subsidiaries and respective brands ClimateMaster, IEC, ClimateCraft and ClimaCool and dovetails well with NIBE's existing US operations. At year-end 2015, CCG had 1,259 employees and net sales of USD 274 million (SEK 2,312 million). For the acquisition of all of the shares of CCG, Nasdaq Stockholm listed NIBE agreed to pay NYSE listed LSB Industries, the US manufacturing group and owner of CCG, a total purchase price of USD 364 million (SEK 2,964 million), on a debt-free/cash-free basis, in cash at completion.
CCG will provide NIBE with complementary know-how and technologies, new HVAC products and access to the commercial customer segments.
The CCG acquisition was particularly significant because it brought NIBE into the commercial HVAC market—a segment with different dynamics than residential heating. Commercial customers are less price-sensitive, more focused on total cost of ownership, and often require complex system integration. NIBE was diversifying not just geographically but also by end-market.
While funding the acquisition with fully committed credit facilities at completion, NIBE announces herewith its plans for a rights issue relating to NIBE shares worth SEK 3,000 million within due course following completion. It will allow NIBE further to pursue its growth targets. After carve-out from LSB Industries, CCG will operate as a separate entity under the leadership of Rick Aldridge of CCG and his team, forming part of NIBE's business area NIBE Climate Solutions. NIBE intends to back up management in accelerating current growth and profitability initiatives and to develop CCG as a separate growth platform for NIBE in North America.
The rights issue demonstrated NIBE's disciplined approach to financing acquisitions: use debt initially, then equity when market conditions allow, maintaining a conservative balance sheet that provides firepower for future deals.
For the financial year 2017, CCG is expected to reach an EBIT margin exceeding NIBE's group target of 10%. In the long run, the expanded group will be better positioned a) to successfully compete with the much larger global HVAC peers of the US and Asia and b) to develop its offering of heat pump, cooling and ventilation products into climate solution sales targeting larger commercial customers.
VI. The Green Wave & European Dominance (2016-2022)
Riding the Climate Transition
By the mid-2010s, European climate policy was finally catching up to Sweden's three-decade head start on decarbonizing home heating. The European Commission's Green Deal, national net-zero commitments, and increasingly visible climate impacts combined to create a policy environment strongly favorable to heat pump adoption.
Europe heat pump market size surpassed USD 14.2 billion in 2024 and is estimated to grow at a CAGR of over 19.3% from 2025 to 2034, driven by clean energy adoption and sustainability initiatives.
The European heat pump market is significantly driven by the EU's decarbonization goals and supportive regulatory frameworks. Under the European Green Deal, the EU aims to achieve net-zero carbon emissions by 2050, with a focus on reducing dependency on fossil fuels for heating and cooling. The European Commission reported that heating accounts for nearly 50% of the EU's total energy consumption, making heat pumps a critical solution for lowering emissions.
NIBE had positioned itself perfectly for this moment. Years of investment in manufacturing capacity, product development, and distribution networks meant the company could capture growing demand rather than scrambling to respond.
The Investment Program
As demand accelerated, NIBE made its boldest capital commitment yet. The highly ambitious investment program that has been underway since 2020, and which has now been largely completed, has enabled us to create good opportunities for future rational expansion.
This SEK 10 billion investment program expanded manufacturing capacity across Europe and North America, betting that the surge in heat pump demand was structural rather than cyclical. The timing seemed perfect: Russia's invasion of Ukraine in February 2022 sent European gas prices to unprecedented levels, making heat pumps not just environmentally attractive but economically compelling.
The trends for the past few years show that the market grew for a decade, hit a peak in 2022, and since then has come back down to previous levels. The record year of 2022 can be put down to Russia's invasion of Ukraine which sent gas prices skyrocketing. The falling sales since then is attributed to changes and reductions in government support schemes, rocking consumer confidence; a sluggish economy with a cost of living crisis, and the price of subsidised gas coming back down, as well as considerable misinformation.
Continued Acquisitions
Even as NIBE invested heavily in organic capacity, it continued its acquisition program.
The company's approach to acquisitions maintained consistent principles: acquire strong regional players, preserve their management teams and cultures, and integrate selectively. By 2023, NIBE had grown into a sprawling organization spanning dozens of brands and manufacturing facilities.
Since its beginnings in the town of Markaryd in the province of SmĂĄland 70 years ago, NIBE has grown into an international company with an average of 23100 (21300) employees and a global presence. From the very start, the company has been driven by a strong culture of entrepreneurship and a passion for responsible business operation. Its success factors are long-term investments in sustainable product development and strategic acquisitions.
Performance Track Record
NIBE's track record through this period was exceptional. Its success factors are long-term investments in sustainable product development and strategic acquisitions. Combined, these factors have brought about strong, targeted growth, which generated sales of just under SEK 47 (40) billion in 2023.
The company had built what Warren Buffett might call a "snowball"—a self-reinforcing system where strong competitive positions generated cash flows that funded acquisitions that strengthened competitive positions further. By 2022, NIBE appeared unstoppable.
Then the cycle turned.
VII. The 2023-2024 Crash & Recovery
The Market Downturn
The speed of the reversal caught the industry off guard. Latest figures from the European Heat Pump Association reveal that 2.31 million heat pumps were sold in 19 European countries in 2024, a drop of 22% on 2023.
Sales of heat pumps fell by an average of 21% in 14 European countries in 2024 compared to 2023, preliminary figures from the European Heat Pump Association (EHPA) reveal. 2.2 million heat pumps were sold in 2024 in those 14 countries, which make up around 90% of the European market, compared to 2.8 million in 2023. This brings the total stock to around 26 million, slowing the heating market shift from fossil fuels to heat pumps. The sector is slashing jobs and reducing production in Europe after investing billions in additional capacity in 2022 and 2023 to bolster Europe's energy security and cut the use of Russian gas, much of which now lies idle. This is harming the competitiveness that policy makers are so keen to bolster.
Germany, Europe's largest heat pump market, was hit particularly hard. The change in heat pump sales from 2023 to 2024 shows that most countries experienced a decline. Germany and France saw the largest decline, with Germany dropping by 209,000 units (48%) and France by 173,000 units (39%).
The causes of the collapse were multiple and interconnected. Energy prices fell back from their 2022 peaks, making the economic case for heat pumps less compelling. Interest rates rose sharply, crushing housing construction and renovation activity. Political uncertainty around subsidy programs—particularly in Germany—caused consumers to delay purchases. And a distribution channel that had over-ordered during the 2022 boom needed to work through excess inventory.
For NIBE, the financial impact was severe. NIBE Industrier AB - Financial Statement Release: SALES amounted to SEK 40,521 (46,649) million. OPERATING PROFIT amounted to SEK 2,671 (6,973) million.
Management Response
In March 2024, NIBE announced what would become the first significant workforce reduction in the company's modern history. After the plan has been implemented, the Group's staffing in Sweden will be reduced by approx. 340 employees, of which approx. 264 from NIBE AB and 40 from CTC AB. In the rest of European operations, negotiations will be initiated for staffing reductions of a similar extent.
"We have long been convinced of the future growth potential to be found in the transition to a fossil-free society and reduced carbon dioxide emissions, and we are particularly well positioned in this market," comments Gerteric Lindquist, Chief Executive Officer and Managing Director of NIBE. "This certainly is of course an extremely difficult decision to downsize and terminate the employment of loyal employees. But it has become necessary due to the tough market conditions. And we are committed to navigating the downturn in the best possible way, so that we will be in an appropriately strong position once the market picks up again."
The layoffs represented roughly 1.5% of NIBE's global workforce—painful but not devastating. More significantly, management protected product development and marketing spending, betting that the downturn was cyclical and that the company needed to be ready when recovery came.
Looking back at the financial year all three business areas spent a lot of time and energy implementing the action plan. In line with NIBE's values, the action plan was carried out in a consistent but nonetheless humane manner. The cost-saving requirements were stringent but, at the same time, the employees who we had to let go were treated with respect and also offered fair compensation. Because product development and marketing initiatives have, in principle, been exempted from savings, we were able to launch a large number of new products during the year, as planned. Throughout, the aim has been that our customers should not have to suffer because our industry, including us, has been hit by lower demand for the reasons described earlier.
The US Bright Spot
While Europe struggled, North America provided some relief. The 2022 Inflation Reduction Act created a long-term, stable incentive structure for heat pump adoption in the United States—exactly the policy certainty that European markets lacked.
The US geothermal heat pump market, which is the market segment in which we operate, remained stable in the third quarter, having also reported stable performance in the first half of the year.
The geographic diversification that NIBE had built through its North American acquisitions proved its worth. While European operations contracted, US operations provided ballast.
Recovery Signs in 2025
By late 2024 and into 2025, signs of stabilization emerged. The improvement in the market that we have seen since the end of the previous year was once again confirmed in the third quarter. New and changing customs duties and tariffs have, of course, been difficult to deal with but the main thing holding back a clear rise in sales is concerns about what the consequences of the political turbulence will be both in the short and long term. The stronger Swedish krona is positive in many respects, but when sales and profit are compared with the corresponding period last year, part of the underlying organic improvement is offset.
The relative improvement in demand for heat pumps in Europe continued. Most European markets showed some degree of growth. Most qualitative industry assessments indicate that the European heat pump market will continue to show stable annual growth, which is in line with our own assessments.
Sales in 13 European countries increased by 9% on average in the first six months of 2025, compared to the same time period in 2024. In the first half of 2024, 898,000 heat pumps were sold.
NIBE Industrier AB's interim report for the third quarter of 2025 highlights a continued recovery in the market, with sales reaching SEK 29,841 million and operating profit significantly improving to SEK 2,865 million.
The recovery appears to be underway, though management maintains cautious optimism. Earnings performance in the third quarter once again confirms the assumption of a continued gradual recovery and a more traditional, seasonally oriented demand pattern, with a stronger second half of the year.
VIII. The Gerteric Lindquist Factor: 36 Years as CEO
Management Continuity as Competitive Advantage
During his 36 years as CEO, Gerteric Lindquist has managed that lead and developed NIBE into a global group with 22,000 employees and a turnover of almost SEK 50 billion. Through his drive and business acumen, he has taken the company to a world-leading position in heat pump technology. He has succeeded in doing so without losing the company's entrepreneurial vein or being tempted to move the head office from Markaryd, SmĂĄland. His performance has been characterized by determination and an unbending belief that anything is possible.
Lindquist's tenure is extraordinary by any standard. Gerteric Lindquist (born 1951) Chief Executive Officer. Employed by NIBE since 1988. In an era when average CEO tenure at large companies has shrunk to about five years, Lindquist has led NIBE for more than seven times that length.
He has over 35 years of experience in international industrial operations, including as Exports Director at ASSA Stenman AB, now Assa Abloy. He holds MS degree in Engineering and MS degree in Business and Economics.
This longevity creates both advantages and risks. The advantages are substantial: deep institutional knowledge, long-term relationships with acquisition targets, consistent strategic direction, and alignment between management and shareholder interests.
"There are only two limitations in life: health and thought. I believe that at NIBE, we are very much driven by the idea that it is indeed possible. I also believe that I personally have a great drive within me, but also a joy in being able to create something meaningful and to dare to show emotions."
Ownership & Alignment
The scale of Lindquist's personal stake in NIBE is remarkable. Gerteric Lindquist holds 27,511,952 A-shares and 65,160,044 B-shares. At current prices, this represents a stake worth several hundred million dollars—the vast majority of his net worth.
CEO Gerteric Lindquist is awarded IVA's Gold Medal for his unique contribution to developing the company NIBE over 40 years from a small company in SmĂĄland to become a world-leading company in the field of heat pumps. Gerteric Lindquist's contribution as a business leader and business developer is one of the unique business leadership efforts of the past 40 years. He has combined powerful leadership with great business acumen.
The Eight Principles
According to Gerteric Lindquist, the company's iconic CEO since 35 years back, NIBE's success can be attributed to eight core principles. These principles were first made public ahead of the company's IPO, and still functions as the company's internal operating system. Below are the principles accompanied by the internal motivation for each one: Strong Profitability: "the most important and basic condition for long-term success and continuous growth." High Productivity: "to continuously improve everything and what cannot be measured cannot be improved." Proactive Product Development: "a condition for continued good organic growth and breaking into new markets." Quality Throughout: "our customers must always have full confidence in our company, products and employees." Market-oriented Expansion: "breaking into new markets must be well prepared and consistently carried out."
These principles have remained essentially unchanged since the 1997 IPO—a remarkable consistency that speaks to the stability of NIBE's approach. They read like a distillation of Småland values: practical, frugal, focused on measurable improvement.
Succession Risk
The obvious question for investors is what happens when Lindquist eventually steps down. At 74 years old in 2025, he cannot lead forever—and the company's entire modern history has been shaped by his leadership.
The company has built institutional depth that should survive leadership transition. The decentralized structure means that individual business units operate with substantial autonomy. The management team includes long-tenured executives who have absorbed NIBE's culture. And the shareholder base includes many of the original MBO participants who remain deeply invested in the company's success.
Still, founder transitions are inherently risky, and NIBE's premium valuation reflects confidence in continued execution. Investors should weigh this succession risk carefully.
IX. Strategic Analysis: Bull Case, Bear Case, and Competitive Position
Hamilton Helmer's 7 Powers Framework
Scale Economies: NIBE benefits from significant scale advantages in purchasing, manufacturing, and R&D. With over 100 companies in the group, it can spread fixed costs across a large revenue base. However, competitors like Daikin, Bosch, and Carrier are also large, limiting the advantage.
Network Effects: Limited. Heat pumps are not network goods—one customer's choice doesn't affect another customer's utility.
Counter-Positioning: NIBE's decentralized acquisition model represents a form of counter-positioning. Larger HVAC competitors typically integrate acquisitions fully, extracting synergies but often losing entrepreneurial energy. NIBE's approach preserves acquired companies' cultures, making it a more attractive buyer for family-owned businesses. Competitors would have to change their entire integration philosophy to copy this approach.
Switching Costs: Moderate for installers (who become familiar with NIBE systems) but low for consumers (who typically buy heat pumps only once or twice in their lifetime).
Cornered Resource: NIBE has preferential access to the SmĂĄland manufacturing ecosystem and long-term relationships with skilled workers and suppliers in the region.
Process Power: NIBE's 70+ years of continuous improvement in heat pump technology represents embedded learning that competitors cannot easily replicate. Its Swedish heritage in a market where Sweden leads global adoption provides credibility.
Branding: NIBE's brand is strong in Nordic countries and growing elsewhere. However, heat pumps remain a relatively low-engagement purchase category for most consumers, limiting brand power.
Porter's Five Forces
Threat of New Entrants: MODERATE-LOW. High capital requirements for manufacturing at scale, technical expertise requirements, and the importance of installer relationships create meaningful barriers. However, Chinese manufacturers are increasingly capable competitors, and the policy-driven demand surge attracted new players.
Bargaining Power of Suppliers: LOW. NIBE's scale gives it leverage over component suppliers. Key inputs like compressors and refrigerants are available from multiple sources.
Bargaining Power of Buyers: MODERATE. Consumers (the end buyers) have limited power given the complexity of heating decisions. However, installers serve as influential intermediaries and can steer demand toward preferred brands.
Threat of Substitutes: MODERATE-LOW. Alternative heating technologies include gas boilers (declining due to climate policy), district heating (limited to urban areas), electric resistance heating (less efficient), and hydrogen (technologically immature). Heat pumps appear well-positioned for decades.
Industry Rivalry: HIGH. Major players including Daikin, Viessmann (now part of Carrier), Bosch, Mitsubishi, and Panasonic compete intensively. Company Profiles: Daikin Industries Limited, Viessmann Group, NIBE Group, Danfoss Group Global, Stiebel Eltron. Price competition has intensified during the recent downturn.
Bull Case
The fundamental case for heat pumps remains compelling. Heating accounts for roughly half of European energy consumption, and fossil fuel heating must eventually be replaced to meet climate targets. Heat pumps are the most efficient available technology for this transition. Current policy frameworks, while imperfect, support long-term adoption growth.
NIBE's market position is strong. The company has built manufacturing capacity, distribution networks, and brand recognition that will be difficult for competitors to replicate. Its North American exposure provides diversification from European policy volatility. The recent downturn has created a lower entry point and forced cost discipline that should improve margins when volumes recover.
The current slowing of heat pump market growth means Europe is likely to miss its energy security and climate ambitions. On current trends (based on 2015-2021 average sales growth), Europe will fall short of its 60 million heat pump target for 2030 by 15 million heat pumps—a 25% gap.
If Europe is serious about its climate goals, policy support for heat pumps will need to strengthen—which could drive a significant reacceleration in demand.
Bear Case
The 2022-2024 experience revealed vulnerabilities in the bull thesis. Heat pump demand proved far more volatile than expected, driven by energy price fluctuations and policy uncertainty rather than steady structural growth. Manufacturers invested in capacity based on 2022 demand levels that proved unsustainable.
Competition is intensifying, particularly from Asian manufacturers who bring scale and cost advantages. The Chinese heat pump industry is capable of producing at significantly lower costs, and European manufacturers may face the same import pressure that affected solar panel producers.
NIBE's valuation, even after the recent decline, remains elevated relative to historical norms. The stock trades at a premium to broader industrials, reflecting growth expectations that may not materialize if the European heat pump market remains challenged.
Finally, succession risk is real. Lindquist's eventual departure will test whether NIBE's culture and strategy can survive the transition from founder to professional management.
X. Key Metrics and Investment Considerations
KPIs to Watch
For investors tracking NIBE's ongoing performance, two metrics deserve particular attention:
1. European Heat Pump Market Share Trends NIBE's ability to grow or maintain market share during industry downturns is a critical indicator of competitive strength. The company has historically gained share through acquisitions, but organic share gains or losses reveal the underlying health of the brand portfolio.
2. Climate Solutions Segment EBIT Margin Management has targeted historical margins of 13-15% for the Climate Solutions business. It remains our aim to return to an operating margin within the business area's historical range of 13–15% for the full year, but as previously communicated, we recognize that the uncertain global environment and the stronger Swedish krona will continue to pose challenges. This metric reveals both pricing power and cost discipline.
Myth vs. Reality
| Narrative | Reality |
|---|---|
| "Heat pump demand will only grow as climate policy tightens" | Demand proved highly volatile, falling 20%+ in 2023-2024 despite unchanged climate goals |
| "NIBE is insulated from Chinese competition" | True for now—complex installation and after-sales service create barriers—but Chinese manufacturers are increasingly capable |
| "The Småland culture guarantees conservative management" | Mixed—the company took aggressive capacity bets in 2020-2022 that required painful adjustment |
| "NIBE's acquisitions always work" | The Stoves segment has underperformed, and some acquisitions have struggled with integration |
Accounting and Regulatory Considerations
NIBE reports under IFRS, with standard accounting treatments for acquisitions (including goodwill). The large acquisition program has created substantial goodwill on the balance sheet, which investors should monitor for potential impairment if acquired businesses underperform.
Regulatory risk centers on European climate policy. Changes to subsidy programs, building codes, or carbon pricing directly affect heat pump demand. German policy uncertainty in 2023 contributed significantly to the market collapse.
Currency risk is substantial given NIBE's geographic diversification. A significant portion of costs are in Swedish kronor while revenues span multiple currencies—creating both opportunities and risks as exchange rates fluctuate.
Conclusion
NIBE Industrier's journey from heating plates for piglets to global heat pump leadership represents one of the great Swedish industrial success stories of the past half-century. The company's 25% annualized returns since its IPO created enormous wealth for early investors and made multi-millionaires of the employees who participated in the 1989 management buyout.
The current moment presents a more complex picture. The 2022-2024 cycle revealed that heat pump demand can be highly volatile, driven by energy prices and policy shifts rather than steady structural growth. The company's aggressive capacity investments in 2020-2022 required painful adjustment when demand collapsed. The stock has declined significantly from its 2021 peaks.
Yet the fundamental case for heat pumps in European decarbonization remains intact. Heating buildings accounts for a major share of energy consumption and carbon emissions. Heat pumps are the most efficient available technology for electrifying this demand. And NIBE has built competitive positions—manufacturing scale, distribution networks, brand recognition—that should endure.
While NIBE's Q3 report came in somewhat below our expectations, we believe the overall picture remains unchanged: a gradual recovery in sales volumes and margins continues moving in the right direction. Therefore, we view the market's reaction, driving the share price down 13%, as somewhat exaggerated and see it as creating an even more attractive entry point into the company's compelling long-term investment story.
The key uncertainties for investors center on the pace and magnitude of European market recovery, the intensity of competition from Asian manufacturers, and the succession risk as Lindquist's remarkable tenure eventually concludes. Those who believe that European climate policy will ultimately drive sustained heat pump adoption—and that NIBE's competitive position can be maintained through the transition to new leadership—may find current valuations attractive.
What remains beyond question is that NIBE's story is deeply Swedish: the SmĂĄland origins, the frugal culture, the patient capital allocation, the long-tenured management, and the willingness to remain rooted in small-town Markaryd even as the company became a global leader. These characteristics shaped what NIBE became. Whether they can sustain its success through the challenges ahead is the central question for the company's next chapter.
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