Highlights - the fourth quarter
Net sales remained at the same level as in the fourth quarter of 2007 and amounted to EUR 492.0 (491.3) million. In local currencies, growth was 4%.
Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 42.4 (39.1) million, representing an operating margin of 8.6% (8.0).
Operating profit, including one-off items of EUR 18.8 million, amounted to EUR 23.6 (-63.8) million.
Profit after taxes was EUR 1.8 (-71.3) million.
EPS amounted to EUR 0.02 (-1.00).
Net cash flow from operations amounted to EUR 78.2 (61.1) million.
The company launched a new corporate brand: Tieto.
Highlights - January-December
Net sales totalled EUR 1 865.7 (1 772.4) million, up 5%.
Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, totalled EUR149.9 (107.6) million, representing an operating margin of 8.0% (6.1).
Operating profit including one-off items amounted to EUR 111.6 (1.3) million.
Profit after taxes was EUR 60.5 (-31.2) million.
EPS amounted to EUR 0.83 (-0.44).
Net cash flow from operations amounted to EUR 191.0 (119.0) million.
Dividend proposal: EUR 0.50 (0.50) per share.
Hannu Syrjälä, President and CEO:
Tieto's Turnaround programme progressed well in 2008. Our sales grew in line with our expectations and our profitability improved substantially from the previous year thanks to the Performance Improvement Programme, which has advanced ahead of schedule. We achieved all this in rather turbulent circumstances starting from the public tender offer during late spring followed by major changes in the financial markets and the overall global economy later in the year.
The macroeconomic environment has continued to deteriorate, and visibility is poor in all business sectors including IT. Therefore we anticipate the IT markets to be challenging in 2009. Customers are cautious about IT investments and new projectprojects are being postponed. On the other hand, customers are rationalizing their businesses, and we expect that their outsourcing will provide growth opportunities.
During 2009, we will continue to focus on implementing our new business structure and operating model, supporting our customers through this economic downturn with high value-adding services, and maintaining our profitability. Actions to keep our costs in control will be taken as needed. At the same time, we will continue to invest in our competence development and the implementation of the global delivery model to ensure our future competitiveness.
Market development
In the fourth quarter, demand for IT services slackened due to the rapid weakening of the world economy. The effects of the economic slowdown on IT investments varied by customer segment. Demand for IT services was at a good level especially in the public sector, i.e. government, healthcare and welfare as well as the utilities segment whereas the finance sector was hit hard. Prices were fairly stable in most areas, although price pressure increased during the quarter, especially in new agreements. The labour market has settled down and the attrition rate is decreasing, easing pressure for higher salaries. In the full year, the Nordic IT services market is estimated to have grown by around 6%.
Going forward, cautiousness regarding future IT investments in new solutions will increase and customers are expected to shift their focus in IT expenditure. New large-scale investments will be postponed, unless they offer clear short-term productivity benefits. However, companies' investments designed to lengthen the life cycles of their current IT systems and their efforts to achieve cost savings by rationalizing their operations might open up new business opportunities and, as a result, balance the changes in demand.
Banking and insurance
The overall market situation has changed rapidly in the finance sector. Due to the credit crisis, customers have adopted a cautious attitude towards IT investments and it is expected that they will delay some of their investment decisions. Especially in the UK, IT spending has been cut significantly and today, banks concentrate on very few selected projects, mainly regulatory ones.
Telecom and media
As anticipated, overall IT demand in the telecom and media sectors remained weak in the fourth quarter, especially in network R&D. During the long and strong growth cycle in the sector, the industry has made big investments in new technologies, such as 3G and wireless IP access. Investments by operators and telecom equipment manufacturers will thus be lower for some time. Due to cost-saving initiatives launched by customers, price pressure increased and average prices were at a slightly lower level.
Telecom manufacturers continue to consolidate their supplier base in the hands of a few key vendors. The upshot is that the volumes of each of the selected vendors will most likely grow. As the leading R&D service provider, Tieto has been a key partner to many of its customers. The company expects this trend to favour Tieto in the future as well and hence to offset the weakness of the market.
Government, manufacturing and retail
Overall demand has remained solid in all of these areas as customers are seeking to improve performance and productivity. For example, the Finnish government sector will reorganize its regional administration and this will open up new opportunities.
The positive trend in the manufacturing industry continued in the fourth quarter. As uncertainty in the global markets has increased, manufacturing companies may tighten their IT budgets in future. Retail customers are in the market for IT systems to help them provide new ways to manage customer demand more accurately. The economic slowdown has not yet impacted on retail business.
Healthcare and welfare
Rationalization measures have been ongoing for a long time in some areas, such as the public sector, i.e. government, healthcare and welfare. Tieto anticipates that steady demand will continue, underpinned by national initiatives to connect and consolidate patient information systems.
Forest and energy
In the forest sector, restructuring in the industry, customers' cost-saving initiatives and the tight finance market may increase uncertainty in the short term, but on the other hand, restructuring opens up new opportunities. Nordic customers are closing down excess capacity in the Nordic countries, but are expanding business in Russia and Asia, especially China.
In the fourth quarter, the market situation remained good for the utilities sector. Both the rising demand for energy and the deregulation of the sector in Europe ensure IT investments in the coming years. In the oil & gas segment, the market is affected by declining price of oil and there are signs of increasing cautiousness regarding new IT projects. However, the worldwide long-term trend is that demand for energy is growing fast, especially in countries like China, India, Russia and Brazil. This is expected to maintain IT investments at a healthy level in the long run.
ICT infrastructure outsourcing
The market for ICT infrastructure outsourcing in the Nordic countries has remained at a fairly good level. The need to rationalize operations and achieve fast cost reductions may speed up customers' new outsourcing decisions going forward as well. On the other hand, customers' cost savings programmes create pressure on prices in new outsourcing contracts and contract renewals.
Tieto's business transactions and major agreements in January-December
Following the acquisition of Sampo Bank by Danske Bank, Tieto's business volumes to these customers have decreased. For this reason, Primasoft Oy's operations and ownership have been reorganized. In April, Tieto acquired the entire share capital of Primasoft Oy, a joint venture previously owned by Tieto (60%) and other parties (40%). In connection with the agreement, parts of Primasoft's application management business were sold. These transactions had a negative impact of EUR 9 million on the full-year net sales of Banking & Insurance and Processing & Network in 2008. Thanks to business generated by the related transfer projects, the impact was less negative than anticipated.
In January, Tieto opened a new office in Chengdu to expand its operations in China. The Chengdu centre serves Tieto's telecom customers and offers services for mobile devices and network manufacturers as well as for operators.
In March, Sjukvårdsrådgivningen SVR AB (the Swedish Healthcare Advisory Organization) chose Tieto as a supplier of a solution for a national patient overview (NPO). The agreement will run for five years and the total value of the agreement is at least EUR 12 million.
In May, Tieto, OP-Pohjola Group Central Cooperative (OPK) and Ilmarinen Mutual Pension Insurance Company concluded an agreement on the delivery of ICT operations management services for the OP Pohjola Group and Ilmarinen for the next seven years starting on 1 June 2008. The services are produced by the joint venture FD Finanssidata, of which Tieto owns 60%, OPK 36% and Ilmarinen 4%. This is one of the largest agreements Tieto has made in recent years. In June, Tieto concluded another major agreement when TeliaSonera renewed its IT and application operations agreement.
In September, the City of Stockholm and Tieto extended their agreement on the end-to-end provision of IT and telephony. The extended agreement comes into effect on 1 August 2010 and runs until 31 July 2012. The delivery to the City of Stockholm will be made in co-operation with SYSteam, SiriusIT, Aditro and TeliaSonera. The order is valued at approximately EUR 41 million, of which Tieto's share is approximately EUR 26 million.
Net sales
Net sales in the fourth quarter
Fourth-quarter net sales remained at the same level as in the fourth quarter of 2007 and amounted to EUR 492.0 (491.3) million. In local currencies, net sales grew by 4%. As 27% of Tieto's net sales are generated in Sweden, the weakened Swedish currency (SEK) had a negative impact on net sales in euros.
In Banking & Insurance, net sales fell by 7%. The finance sector is hit hard by the credit crisis, and therefore investment decisions are being postponed. Additionally, the transactions related to Primasoft described earlier in this report had a negative impact of approximately 4 percentage points on net sales. The trend in net sales remained positive in certain product areas, such as Cards and Capital Markets.
Telecom & Media held on to its market position in the fourth quarter. There were several reasons behind the decline in net sales. The weakened Swedish currency (SEK) had a negative impact of 4 percentage points on net sales. Additionally, weak market development in the telecom sector, especially in network R&D, affected both the volumes and the prices.
Processing & Network's net sales grew by a modest 4%. The weakened Swedish currency (SEK) had a negative impact of close to 4 percentage points on the growth.
In Government, Manufacturing & Retail, strong demand has continued in all sectors, especially in the government sector. In the manufacturing sector, net sales growth was strong during the quarter, but there are some signs that demand is weakening. In Healthcare & Welfare, the positive trend continued. All units posted good growth and the business area improved its position in all market areas. The business area concluded several new agreements during 2008. In the fourth quarter, growth was also driven by strong licence sales.
In Forest & Energy, net sales growth was mainly attributable to good performance in the forest sector. Despite the challenging market, the business segment grew its net sales. On the other hand, growth was curbed by lower sales to one major customer in the utilities sector.
Net sales in January-December
Tieto's full-year net sales grew by 5% to EUR 1 865.7 (1 772.4) million. In local currencies, growth was 7%. Organic growth totalled 6%, well in line with market growth.
Demand for IT services slowed down towards the year-end due to the sharp downturn in the world economy. However, the effects varied largely by business area. Banking & Insurance and Telecom & Media were affected the most. In line with the market, Telecom & Media's net sales growth slowed down in 2008 after a long period of strong growth. On the other hand, business areas serving the public sector - that is, Government, Manufacturing & Retail and Healthcare & Welfare - held on.
In Healthcare & Welfare, growth has been excellent throughout the year, underpinned by good demand for IT solutions and actions to turn the business around. The business area concluded several mid-sized and large new agreements during the second half of 2007 and 2008. All units posted good growth and the business area improved its position an all market areas. Sweden was the strongest growing market for Healthcare & Welfare.
Processing & Network saw robust growth, clearly outpacing the relevant market. The business area concluded several major agreements in 2008. The most significant of these agreements were made with TeliaSonera, OP-Pohjola Group and Ilmarinen. The transactions related to Primasoft had a negative impact of around EUR 5 million on the full-year net sales of Processing & Network in 2008, as described earlier in this report.
In Banking & Insurance, the transactions related to Primasoft had a negative impact of around EUR 4 million on the full-year net sales of the business area in 2008. Additionally, the closure of Banking & Insurance's German operations in October 2007 had a negative impact on net sales growth, close to 3 percentage points. The trend in net sales was positive in certain product areas, such as Cards and Capital Markets.
Government, Manufacturing & Retail saw strong demand in all sectors. In Forest & Energy, sales growth remained modest. Both the utilities market and the oil & gas market remained active up until the year-end, but the sales declined somewhat, mainly due to lower sales to one major customer in the utilities sector. Despite the weak market conditions in the forest sector, the business segment grew its net sales.
Net sales were up 6% in Finland and 2% in Sweden. In Finland, all business areas saw growth. In Sweden, the modest growth was mainly attributable to weak development in Telecom & Media and of the Swedish krona. In Denmark, all business areas powered ahead and net sales grew by 85%. In Norway, net sales grew by 5%, supported by Healthcare & Welfare's strong performance. In Germany, net sales declined by 4%, mainly due to the closure of Banking & Insurance's operations in 2007.
The telecom and media sector's share of consolidated net sales amounted to 35% (37). The banking and insurance sector generated 22% (22) of net sales, whereas the public sector's contribution was 16% (15).
The order backlog, which only comprises services ordered with binding contracts, amounted to EUR 1 124.1 (1 058.1) million at the end of the period. Processing & Network's share of the order backlog is 39%. In total, 54% (61) of the backlog is expected to be invoiced in 2009.
Performance Improvement Programme
The Performance Improvement Programme is expected to generate annual cost savings of EUR 130 million as from the end of 2009. A major part of the actions related to this programme were implemented in 2008. The programme has resulted for example in a higher utilization rate, accelerated transfer of production to the global delivery centres, better procurement conditions and enhanced management of deliveries.
The programme has progressed ahead of schedule. The actions taken by the end of December amount to annualized savings of EUR 120 million, of which close to EUR 43 million has impacted 2008 performance. The savings reached to date will come into full effect as from the end of 2009. About two thirds of this improvement is employee related.
The costs related to these actions have impacted Tieto's profitability during 2008 and will continue to impact profitability during 2009. The restructuring costs, provisions and impairments related to the programme are expected to amount to approximately EUR 160 million of which one-off costs of EUR 104.7 million materialized in 2007 and EUR 39.6 million in 2008.
Profitability in the fourth quarter
Profitability continued to improve in all business areas in the fourth quarter. Operating profit, excluding one-off items related to the Performance Improvement Programme, amounted to EUR 42.4 (39.1) million, representing a margin of 8.6% (8.0). The actions related to the Performance Improvement Programme were the main contributor to the rise in margin.
In the fourth quarter of 2008, Tieto booked EUR 18.8 million in one-off costs related to the programme. There were no capital gains (capital gain of EUR 1.5 million in 2007) in the quarter. Fourth-quarter operating profit, including one-off items, amounted to EUR 23.6 (-63.8) million.
In Banking & Insurance, the operating margin of the underlying business improved to 12.6% (3.9). In the fourth quarter of 2007, the business area suffered from a few loss-making projects. In the fourth quarter of 2008, the profitability of the product business improved materially. The margin improvement is also attributable to decreased use of subcontractors and lower personnel and other costs.
In Telecom & Media, the operating margin improved to 11.0% (10.0). The margin improvement is mainly attributable to the actions related to the Performance Improvement Programme.
In Processing & Network, the operating margin totalled 8.1% (10.2). The decline in margin is mainly attributable to timing of start-up and transition costs related to major agreements. In Government, Manufacturing & Retail, strong performance was achieved thanks to a higher utilization rate and cost savings related to the Performance Improvement Programme.
In Healthcare & Welfare, the positive trend continued, driven primarily by strong licence sales in the fourth quarter, a higher utilization rate and better management of deliveries in the solution-based business. Improvement in profitability was somewhat curbed by unsatisfactory profitability in the Scandinavian and Central European healthcare business. In the Forest & Energy business area, profitability was at a good level, especially in the oil & gas and forest segments. In the utilities sector, there are still challenges but profitability is improving.
Net financial expenses stood at EUR 17.0 (3.9) million in the fourth quarter. Net interest expenses were EUR 2.5 (1.5) million and net losses from foreign exchange transactions EUR 16.7 (0.8) million, out of which EUR 14.9 million were unrealized. Other financial income and expenses amounted to EUR positive 2.2 (negative 1.6) million.
Fourth-quarter earnings per share (EPS) totalled EUR 0.02 (-1.00).
Operating profit (EBIT) includes EUR 2.4 (2.5) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 1.4 (0.9 positive impact due to reversed expenses) million are included in employee benefit expenses.
Profitability in January-December
Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 149.9 (107.6) million, representing a margin of 8.0% (6.1). All business areas improved their profitability. The actions related to the Performance Improvement Programme were the main contributor to the rise in margin.
In the full year, Tieto booked EUR 39.6 million in one-off items related to the programme. Out of these items, costs from personnel restructuring totalled EUR 24.8 million. Full-year operating profit, including one-off items, amounted to EUR 111.6 (1.3) million. The total costs related to the public tender offer amounted to EUR 12.2 million in 2008.
In Banking & Insurance, the operating margin of the underlying business improved to 10.2% (0.6). In 2007, the business area suffered from a few loss-making projects. The margin improvement is also attributable to decreased use of subcontractors and lower personnel and other costs.
In Telecom & Media, the operating margin improved to 9.1% (8.9). The margin improvement is mainly attributable to the actions related to the Performance Improvement Programme. In order to offset the negative impact of price pressures, the business area has moved its capacity to the company's global delivery centres during the past couple of years.
In Processing & Network, the operating margin totalled 11.0% (9.5). The margin improvement is mainly attributable to a higher utilization rate. In Government, Manufacturing & Retail, strong performance was achieved thanks to a higher utilization rate and cost savings related to the Performance Improvement Programme.
In Healthcare & Welfare, the positive trend continued throughout the year, driven primarily by better management of deliveries in the solution-based business, enhanced quality and a higher utilization rate. Improvement in profitability was somewhat curbed by unsatisfactory profitability in the Scandinavian and Central European healthcare business. In the Forest & Energy business area, profitability was at a good level, especially in the oil & gas and forest segments. However, a decline in sales to one major customer in the utilities sector curbed the margin.
The full-year operating margin was 14% (14) in Finland. In Sweden, all business areas improved their profitability and operating margin totalled 8% (3). Compared to 2007, the operating margin also rose in all other main markets due to fewer project losses and the actions related to the Performance Improvement Programme.
Net financial expenses stood at EUR 29.2 (9.9) million. Net interest expenses were EUR 9.3 (7.1) million and net losses from foreign exchange transactions EUR 21.2 (0.7) million, of which unrealized net losses EUR 23.4 million. Other financial income and expenses amounted to EUR positive 1.3 (negative 2.1) million.
Full-year earnings per share totalled EUR 0.83 (-0.44).
Operating profit (EBIT) for the full year includes EUR 10.0 (9.8) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 5.3 (2.9) million are included in employee benefit expenses.
The 12-month rolling return on capital employed (ROCE) was 25.2% and the return on shareholders' equity (ROE) 12.6%.
Financing
Fourth-quarter net cash flow from operations amounted to EUR 78.2 million (61.0). Operating profit contributed EUR 41.3 million (2.5) and the decrease in net working capital contributed EUR 35.6 million (56.3).
In the full year, net cash flow from operations amounted to EUR 191.0 (119.0) million. Operating profit contributed EUR 180.7 (121.8) million and the decrease in net working capital contributed EUR 30.3 (8.4) million.
Tax payments amounted to EUR 14.0 (9.9) million.
Dividends of EUR 35.8 million were paid in April.
Acquisitions totalled EUR 8.0 (28.3) million in the full year.
The equity ratio was 41.1% (40.2). Gearing decreased to 21.0% (34.4). Net debt totalled EUR 101.4 (164.5) million, including EUR 216.7 million in interest-bearing debt, EUR 14.5 million in finance lease liabilities, EUR 9.6 million in finance lease receivables and EUR 120.2 million in cash and cash equivalents.
The interest-bearing debt consists of one seven-year bond at EUR 100 million (maturing in December 2013) and one seven-year private placement at EUR 50 million (maturing in July 2012) and usage of EUR 3.0 million from the short-term EUR 250 million commercial paper programme and EUR 57.5 million from the five-year 250 million committed syndicated loan facility (maturing in December 2011).
Investments
Accrual-based investments totalled EUR 97.9 (87.7) million for the period. Capital expenditure, including financial leasing, accounted for EUR 83.2 (52.9) million and investments in subsidiary and associated company shares for EUR 14.5 (34.8) million.
Personnel
The number of full-time employees totalled 16 618 (16 324) at the end of December. A total of 2 841 (3 066) employees were hired in 2008. Due to the exceptionally high attrition rate, recruitment activity was brisk both in high-cost counties, 1 220, and offshore locations, 1 621. However, as the number of persons who resigned was high, the net number of new hires did not grow accordingly. The net number increased by 1 094 in offshore sites, and decreased by 443 in onshore countries.
At the end of December, the number of employees in global delivery centres had increased by almost 30% from last year and totalled about 4 280 (3 270), or 25% (19) of the total headcount. In line with the company's strategy, global operations grew fast, especially in India and China.
The 12-month rolling employee turnover stood at 12.8% (11.2) at the end of December. Turnover, however, decreased substantially towards the end of 2008. The average number of full-time employees was 16 397 (15 588) in the full year.
New corporate brand launched
In December, the company launched a new corporate brand: Tieto. The official registered name of the company, TietoEnator Corporation, will remain unchanged for the time being, as the change of the registered company name is subject to a decision by the Annual General Meeting.
Transactions with related parties
The related parties of Tieto are its Board of Directors, President and CEO, the Leadership Team (LT) and the Group's associated companies. The Corporate Management Team (CMT), now replaced by the Leadership Team, was regarded as a related party in 2008.
The bonus levels of the President and CEO and CMT (Corporate Management Team) members were reviewed with effect from the beginning of 2008. The President and CEO's bonus is a maximum of 100% of his annual base salary and is based on the Group's net sales and operating profit. The reward factors for the CMT members are based on the financial performance of the Group and their own units. In addition, the Board has implemented a retention plan for the President and CEO and CMT members connected to the public tender offer that was ongoing during the second quarter of 2008.
In December, the Board of Directors approved a new share-based incentive plan (Performance Share Plan 2009-2011) to be offered to the President and CEO and other members of the Leadership Team and share ownership guidelines for the President and CEO and other Leadership Team members. The Board also decided to continue preparations to launch an option plan for Tieto's key personnel.
The Performance Share Plan 2009-2011 includes one three-year earning period, which will begin on 1 January 2009 and end on 31 December 2011. The potential reward from the plan is based on Tieto's earnings per share (EPS) in 2011 and it will be paid in the form of shares in the company. According to the Board's decision, the rewards to be paid will correspond to a maximum of 540 000 shares, and the participants shall receive cash compensation for accumulated dividends on the shares during 2009-2011. No new shares will be issued in connection with the Performance Share Plan.
Transactions with associated companies are not considered to be material.
Shares and options
At the end of December, the total number of shares amounted to 72 023 173 and the share capital to EUR 75 841 523. The number of shares in the company's possession totalled 361 650, representing 0.5% of the total number of shares and voting rights. The outstanding number of shares, excluding the shares in the company's possession, was 71 661 523 at the end of December.
In 2008, there were altogether fifteen announcements of changes in the company's shareholding by the following companies: Goldman Sachs Group, Inc., JPMorgan Chase & Co., OP Pohjola Group and UBS AG. The latest announcements made in November are as follows: Goldman Sachs Group, Inc.4.67% on 21 November, JPMorgan Chase & Co 3.67% on 19 November and OP Pohjola Group 5.24% on 10 November.
More detailed information about the changes in ownership during 2008 is available on the company's website.
Dividend proposal
The distributable funds of the parent company amount to EUR 801 791 803.78 of which net profit for the current year amounts to EUR 19 541 399.60. The Board of Directors proposes a dividend of EUR 0.50 (0.50) per share for 2008.
The proposed dividend payout does not endanger the liquidity of the company.
Risks and uncertainties
The economic slowdown might have a negative impact on volume growth and increase price pressure in 2009. As 27% of Tieto's net sales are generated in Sweden, the weakened Swedish currency (SEK) and potential further weakening will also have a negative impact on net sales and operating profit translated into euros. Additionally, credit risks resulting from customer claims pose a growing risk.
Implementing the new strategy and company structure may create uncertainty within the company in the short term. The ability to control ever more complex multinational deliveries also poses a continuous risk.
On the other hand, the labour market has now settled down and the attrition rate is decreasing, easing pressure for higher salaries.
A comprehensive description of the major long-term risks is available on the company's website.
Some items affecting 2009
The remaining costs related to the Performance Improvement Programme, approximately EUR 20 million, will materialize in the first half of 2009.
The total costs related to the public tender offer are estimated to amount to approximately EUR 7 million in 2009. This estimate includes the retention compensation for a number of key managers and the President and CEO.
Outlook for 2009
Tieto anticipates the overall growth of the IT services market to remain flat in 2009 due to the economic slowdown. In the Nordic countries, the best prospects in 2009 are seen in outsourcing as fairly good demand for application and ICT infrastructure management as well as maintenance is expected to continue in most sectors. These services account for more than half of Tieto's net sales.
Visibility to the market is poor, as uncertainty prevails over the future development of the IT market. Tieto expects its service volumes to grow, supported by new outsourcing cases, but the lower price level and weak Swedish currency (SEK) are anticipated to have a negative impact on net sales. Price pressure is felt most in new contracts and contract renewals as well as sectors where overall demand is now declining.
A major part of the actions related to Tieto's Performance Improvement Programme were implemented in 2008 and the majority of the related costs materialized in 2007 and 2008. The remaining costs related to the Performance Improvement Programme, approximately EUR 20 million, will materialize in the first half of 2009. The savings reached to date have already favourably impacted Tieto's financial performance and this will continue in 2009.
Tieto expects the labour market to continue to settle down in 2009, easing pressure for higher salaries. In Finland and Sweden, wage inflation is expected to be about 2-3% in 2009.