Hello everyone and welcome to the presentation of Husqvarna Group's report for the Q4 and year-end 2021. My name is Johan Andersson, responsible for investor relations at Husqvarna Group, and I will be the moderator here today. Joining us on today's call will be Henric Andersson, our President and CEO, and our CFO, Glen Instone. At the end of the presentation, we will welcome our next CFO, Terry Burke, for a quick introduction. Henric and Glen will present the report, and afterwards, we will open up for questions. Let me also remind you that this session is recorded, and we will later publish this on our website. I would also like to announce that we have changed the names of two of our divisions. Now we have Husqvarna Forest & Garden Division and Husqvarna Construction Division.
This is of course, in order to clarify the brand towards our customers. With that, I hand over to you, Henric.
Thank you, Johan, and also a warm welcome from my side, everyone. We are delivering a strong Q4 , ultimately concluding a record year. It was a record year in many different aspects. I mean, financially, we grew sales by 15% and operating income by 27%, ultimately delivering an operating margin of 12.1%. At the same time, we also reinforced our leading positions in key growth areas like robotics, battery-powered products, and smart watering solutions. These areas, of course, differentiators to us and very imperative for our ambition to accelerate the transformation of our industry. Thanks to a very good collaboration with our trade partners, our suppliers, and a very dedicated Husqvarna Group team, we have managed to navigate the pandemic effects on global supply chains in a fairly good way.
However, we see that these supply chain challenges, of course, will continue into 2022. We are taking precautions. We have built up more inventory going into the season, et cetera, to make sure we are as prepared as we can be. Although it's still very difficult to predict what the impact is actually gonna be. What we do know is that we will remain 100% focused on serving our customers also in 2022. Given our performance and our future opportunities, we announced new financial targets at the recent Capital Markets Day. This is to further demonstrate our commitment to sustainable value creation. Before we dive into the quarter as such, let's zoom out a little bit and look at our performance over time.
I think it's evident that we have been building a stronger Husqvarna Group consistently with a very clear purpose for many years. We are transforming our offering into more sustainable, electrical, autonomous, smart solutions. We have really put the emphasis, the focus, the investments behind those segments with most future promise. We have been holding back in some other areas, and we even exited some businesses that we didn't see being part of our future. Another example of this building a stronger Husqvarna Group thing is that in 2016, 65% of our revenue was under the Husqvarna and Gardena brands, whereas that is now over 90% in 2021. All in all, a very strong performance over the years here.
Shifting to the Q4 . From net sales perspective, it was a strong quarter, SEK 8.2 billion, which represented an organic growth of 17%. This growth is strong across all divisions and all main regions and all main product segments. This is despite that we have been constrained by some parts of our supply chain during this time as well. From an operating income perspective, we ended up at SEK -180 million. Main reason really for not getting more leverage on the growth was that we continued to accelerate our investments into our strategic growth areas in the Q4. There were also some other minor things like high raw materials and logistics costs and currency, etc.
From a direct operating cash flow perspective, we ended up at SEK -1.1 billion. Clearly lower than last year. This was on purpose. As I said in the beginning here, we have taken on much more component inventory to prepare ourselves for the upcoming season, knowing that there are always risks in the supply chain these days. That's of course also an element of now in getting Orbit into the business. From a net debt to EBITDA perspective, it has decreased to 0.6 times. Given the strong financial performance, the board will propose an increase of the dividend by 25% to 3 SEK a share.
A very important area, robotics and battery, remains actually at 18% of the Group total revenue. Despite growing at a much faster rate in the Q4 , up 26% in the quarter. We see that we have strong growth both in the consumer and in the professional segments. We, of course, also have a solid range with some new introductions for the season to come. With that, I hand over to you, Glen, to take us through some more of the details here.
Thank you, Henric, and good morning to you all. Going into the divisions in a little bit more detail, starting with the Husqvarna Forest & Garden Division. Net sales were up in Q4 by 14%. If you look organically, very strong growth, as Henric talks about in robotics. We had a growth actually in the wheel products. That latter item being a move effect from Q3 when we had some supply issues and actually we satisfied the demand in Q4. Higher growth for wheel products in the Q4 . All geographies were growing in the Q4 , so we're pleased with that. It is the seasonally smallest quarter for the division. Operating income decreased to 70 million SEK versus 89 million SEK in the prior year, representing some 1.3% EBIT versus 2% prior year.
However, I'm pleased to say that the division continued with the positive strategic investments magnitude SEK 90 million in the quarter. A positive cost that we're adding to the division there. The division, despite that, still managed to offset headwinds from FX, about SEK 40 million in the quarter, raw materials some SEK 220 million, and a further increased logistics cost. The main offset there being by way of positive price increases. If we look on a year-to-date basis, organic sales growth is 15%, so we kept a similar pace throughout the year. There was growth in all regions, and particularly strong in Europe with actually a 20% growth in emerging markets with over 30% growth. Operating income increased with 38%, the margin actually increasing by 260 basis points to 12.7%.
Significant leverage from the sales growth, strong price increases some SEK 600 million coming through, and product mix significantly offsetting the headwinds from FX, which was some SEK 180 million, strategic investments of some SEK 340 million, and the raw materials was approximately SEK 450 million of headwind. A positive net when we think about price versus RMI. That conclude an extremely strong year for the Husqvarna Forest and Garden Division. Moving over to Gardena, again, another successful quarter. We actually had an organic sales growth of some 24%, and that was also complemented with the acquisition of Orbit that contributed with a further 24%. Very strong growth across all categories, robotics, hand tools, and watering growing strongly in the Q4, and the division continued to strengthen its market positions.
Q4 is a loss-making quarter for Gardena. That's always been the case, and it was very much in line with the prior year, with a loss of 290 million SEK. Again, very much a similar story to the Husqvarna Forest & Garden Division, managed to offset the headwinds of raw materials. That was some 60 million SEK. And also we continued to invest in strategic initiatives of 30 million SEK. Managed to offset those headwinds by way of price increases and increased volume. There was also a minor integration cost that we took there in the Q4 relating to the Orbit acquisition. On a year-to-date basis, 14% organic sales growth.
Earnings for the division have actually increased over one and a half billion SEK now, representing a 14.5% EBIT margin, and that is benefiting from the solid growth, solid mix, and of course, then we have some headwinds to offset. FX was approximately SEK 25 million. RMI just over SEK 200 million as a headwind and a continued burden of logistics. Just to mention the Orbit, in particular, I'll come onto a slide now on Orbit. We concluded the Orbit acquisition in the Q4 , pretty much in line with the Capital Markets Day. We're very pleased with that. That's as indicated at the CMD, it will have a full year dilution effect on the margin of approximately 20-30 basis points. We did give some more data in the Q4 report there around Orbit.
It was a fairly small impact in the Q4 , SEK 184 million of additional sales and a marginal loss. The full year sales of the Orbit business were approximately SEK 3 billion, $324 million, contributing with some SEK 260 million of EBIT on a full year basis. Of course, that is not consolidated into our books, but to give you a good indication of the contribution that should be giving going forward. That's just less than a 9% EBIT margin, and we expect to bring that up to the group average over the coming 3-4 years. Worth noting as well, by way of that acquisition, we will have an amortization, a PPA effect of around SEK 100 million coming into the 2022 results.
Moving on to Husqvarna Construction Division, another solid, I would call it recovery in some respects because of course, it was the division that was most negatively impacted by the COVID situation, and we've continued to see a strong rebound. Organic sales growth in the quarter were 21%. We had a further positivity coming from Blastrac. That was about 100 million SEK of additional sales or 7% contribution. The market has improved for the construction industry, a continued growth, and we see we're actually improving our market position in all of the main markets. Earnings increased to 144 million SEK in the Q4 from 125, while the margin reduced slightly from 8.9% to 7.9%.
The upside from the sales growth and increased pricing was being more than offset by the headwinds of raw materials, some SEK 20 million in RMI, further logistics burdens, and we've continued to invest in strategic initiatives. It is worth noting, as I mentioned, with Orbit, Blastrac does dilute the margin for the Construction Division. We said this at the time of the acquisition some 12 months ago, that we plan to have this EBIT margin accretive for the group within 3 years, so at least up to the group average. On a year-to-date basis, organic growth now at 18%, generating an 11.7% EBIT margin. Earnings increased to SEK 840 million on a full year basis of some SEK 200 million versus prior year, actually increasing that margin by some 90 basis points there.
Moving on, I think it's always good to say what we have in the pipeline as well for the coming season, and we show you a snapshot of the product launches for the coming season here. Certainly not our full assortment of product launches. Innovation is a cornerstone of this group, and we continue to increase our investments in R&D to ensure our technology leadership going forward. The main areas, as we talked about at the Capital Markets Day, are gonna be into electrification, robotics and automation, and connectivity. That is a clear platform that's gonna support our growth ambitions going forward, particularly for battery power products, robotic mowers, digital connected solutions.
To give a testament to the R&D team, the engineers within our organization who are bringing these amazing products to life, we select just a couple here, and I'm not gonna talk about each and every one of them. Henrik mentioned CEORA is really a game-changing product. It's the bottom left unit there that we're gonna bring to the market. That is a game changer for green landscaping and sports facilities. It mows extremely large areas, up to 75,000 sq m, within virtual boundaries. I think maybe to select a battery product there at the top middle, that is the K 1 PACE product, a power cutter that we bring to the market, a 94-volt battery system. That actually is the same performance as the equivalent petrol-driven machine.
A truly innovative product that we bring to the marketplace. Also, some smart watering systems there, you see on the bottom, the Gardena EcoLine, which is basically we're making these tools with recycled plastics and metals. It's another example of our sustainability commitment going forward. If we can then just look at the Q4 EBIT bridge. I know this has served us pretty well and hopefully it gives a good transparency. We basically went from -129 million SEK to -180 million SEK. What I would say there is the -140 million SEK by way of strategic initiatives. A positive cost adder, as I sometimes allude to this. Also pleased to say that we more or less, and it is very much in line with our indications, offset the raw material pressure.
We had SEK 300 million of raw materials, and we offset that, predominantly with pricing to SEK 280 million. Marginal negative FX in the quarter, but I think it's a fairly simplistic bridge in the quarter, how we've been talking about, our expectations for Q4. Very much in line with the expectations, I would say. Maybe the full year basis is more where we should put the attention, how this has played out. An EBIT improvement actually of 27%, coming up, as I mentioned earlier, from 10.7% margin to 12.1% margin, 140 basis points. Significant market-driven improvements, volume mix, internal efficiencies actually contributing with SEK 1.9 billion.
As we've been indicating throughout the year, we did make significant price increases, SEK 775 million, to ensure we were offsetting the raw material headwinds, which was SEK 680 million full year. I would say it was very much in line with our previous estimations that we were giving at the Q3 report. We've continued with the strategic investments, just over SEK 500 million. That's the forward-leaning investments that we talked about, very much in the Capital Markets Day. FX was actually a negative effect during the year, SEK 300 million. Marginal in Q4, but SEK 300 million full year.
We'll probably come back to some guidance, but I expect that is gonna be much lower now coming into the 2022 season, probably about SEK 100 million of headwind on FX, and most of that will actually hit Q1 is our expectation. Cash flow, Henrik mentioned, we maybe came down a little bit there during the Q4 , but that was very much a conscious effort. We built inventories during the Q4 to really be prepared for the season. The change in inventories is the main item, so just short of SEK 3 billion from a cash flow perspective. Last year, of course, we really depleted the inventories, and this year we're building up the inventories. You've got a sort of a double effect year-on-year.
As said, we are preparing for the coming season and have built up sufficient inventories ahead of that. There was the obvious changes in accounts receivable and accounts payable to reflect the higher sales and higher inventory builds. CapEx was also higher during the Q4 in the full year by about SEK 500 million. That was actually due to acquiring a previously leased facility. We remain in line with our CapEx guidance at 5%-5.5%. We came at a 5.4% of net sales, and I think in the midterm, we should ramp this up a little bit to 5.5%-6% of net sales. That is, as we said at the Capital Markets Day. Capital efficiency, not too much to say here.
It's pretty much the same as last time. We landed on 21.8%, compared to some 24.4% prior year. We expected H2 to come up a little bit, and it has in line with the increased inventory. We need to continue to ensure that our capital efficiency runs at a low level, and we get towards that target level of 20% as a ratio to net sales in the midterm. The balance sheet, I think there's a couple of points to call out now. First, I would probably jump to inventory. Inventory has increased 9.7% up to SEK 14 billion. Quite a sizable increase. There's actually about SEK 600 million of FX in there. We had the season preparation around SEK 2.4 billion.
Of course, we've got more inventory due to the Orbit acquisition, and that's about SEK 1.1 billion. Inventory is higher, but the notable item is the season preparation component. Again, receivables increased, given the higher sales. Payables increased, given the higher inventory build. In the intangible line, we actually have the impact from the Orbit acquisition of SEK 3.9 billion in intangibles. Net debt to EBITDA. Henrik mentioned this. We've actually increased the net debt towards the end of the year from SEK 6.5 billion to SEK 9.6 billion, about SEK 0.7 billion negative coming from cash flow from operations, a marginal negative by hedging. We actually entered into an LTI swap, which is about SEK 0.3 billion.
Of course, we've paid the dividend for the year, which is roughly SEK 1.4 billion. They are the main items to call out, in terms of that net debt increase. Very much in line with our expectations for the year. At that, Henrik, I will pass back to you.
Thank you, Glen. We had the Capital Markets Day back on December 1st, and there we talked quite a lot about a handful or so transformative trends that are affecting society as a whole, us as individuals, but of course, also our industry and our company. We also talked about the importance of leaning further forward in such times. Because only by being part of shaping the future, you will also be the first ones to explore the new business opportunities that will arise when changes occur. This is something that we have proven to be very good at Husqvarna Group.
I mean, if you look through our 300-some-year history, the company has been able to transform itself over and over again to always make sure it's fit for the future. To guide that and support that, we have our strategy, the strategy we deployed late 2019. We are firm believers that we are executing on the right strategy. It's not a matter of changing strategy, it's about giving our performance, it's about accelerating it, and it's about becoming even more bold in some areas. One outcome of that was, of course, that we took on new financial targets. From a growth perspective, we are increasing to 5% organically per year.
We know that 2021 was a remarkable year from a demand perspective, but we believe that going forward, our industry will start to normalize again back to the 2-3%. We have our ambition set above that. From an operating margin perspective, we set a target of 13%. I remember from Capital Markets Day, we had quite a few discussions about whether that was sufficiently bold.
Part of the discussion back then and which I think is important to remember is that if we look at our fantastic 2021 and try to cleanse it a little bit from the extraordinary, let's call it, COVID-19 effects with a stay at home trend on the demand side and some of the cost saving measures that we took, et cetera, we are more operating at around 11%, as an underlying business. Then setting a target of 13% a few years out in time, also knowing that you need to take on more investments to really drive this transformation of the company, we believe is a sufficiently ambitious goal to set.
In terms of capital efficiency, this is an area that we can continue to work on. We set the target to 20% as to net working capital of sales. We also reconfirmed our targets when it comes to our Sustainovate 2025 program, in terms of carbon to reduce this by in absolute terms by 35% versus the baseline, and we're currently at 27%. Some of you remember that this number has been a little bit higher before, and there was a timing effect here with the pro business were more that has more share of petrol than our consumer business was more affected negatively in 2020, and then really were bouncing back in 2021.
Over time, this can change a little bit, but the target is of course still to get to 35% at the end of 2025. In terms of circular innovations, we have now launched two of those, and we have a pipeline of nine nominees, and we have a pipeline of even further ideas that are even earlier in this process. Good progress towards the 50% target there. One important target is of course the people target to empower 5 million people to make more sustainable choices. This is important for many different reasons. Just to give one example, it's even tied to our carbon target because what we really can do from a carbon perspective is to electrify.
We need to ensure that our customers actually are willing to also electrify at the rate that we would like to see. It's also to influence society to ensure that the grid is improving at the rate that we need to see as well. Yeah, just a few examples there why this 2030 target is very important, and we will start to measure that here now going forward. At the Capital Markets Day, we also introduced three operational ambitions. These are not sharp targets. These are more ambitions, aspirations.
The reason why we believe it's important to share them is that we are on this transformation and by putting some numbers to it's much more easy to understand the order of magnitude and the pace of change here. In terms of robotic mowers, we have the ambition to double that in a 5-year period by increasing penetration in existing markets, by expanding into new markets, and of course, to create the professional markets. In terms of electrified solutions, we are 37%, with the ambition to reach 67% in 5 years. Absolutely imperative to reach our carbon target. We also looked at doubling the number of connected devices.
The reason why we picked connected devices is that we believe it's such a great enabler to create much more intimate customer relationships by creating a direct line of communication to our customers. But it's also a way to really develop value-adding services to our customers. That's why we picked that as one of these important ambitions that we have going forward. If we summarize this a little bit, I mean, we have concluded a strong quarter and a record year for the Husqvarna Group. Strong performance and strong operational execution in a year that truly was impacted by the pandemic. We have not just performed financially, but we have also managed to reinforce our positions in the high growth areas.
We have done this while fighting through or battling through numerous supply disruptions and constraints. I'm extremely proud of how the team has handled this very difficult situation. Unfortunately, the risks and the constraints will follow with us into 2022, and we will continue to battle through these different kinds of challenges also in this year. All in all, we believe that we are well-positioned for 2022. We have a great momentum. We have a lot of good, interesting product introductions this year, and we are really looking forward to yet another good year for the Husqvarna Group.
Before we turn to the Q&A, I would like to acknowledge that this is actually your last quarterly report, Glen, at least as a CFO. Personally, I would like to take the opportunity to thank you for an absolutely fantastic collaboration here. You have truly been an excellent CFO of the group. I wish you, of course, all the best in your new, very important role.
Thank you, Henric. I have to say it's been an honor to serve as the CFO. Really enjoyed it and really enjoyed working with the capital markets. Thank you to all you guys listening as well. Of course, I'm not leaving. I'm moving on to a new challenge as President of the Husqvarna Forest & Garden Division. I hope I still get the chance to interact with you from time to time.
I'm extremely pleased to pass the baton actually to Terry Burke as the new Group CFO, and we'll have some four weeks of handover now before Terry takes the reins on March 1. Terry, welcome.
Hello, everybody, and good morning. Let me start by saying I'm really proud and honored to take this exciting position as the Group CFO. Husqvarna is on a very interesting growth journey, and personally, I find it very inspiring that I'm gonna play a big part in that. Personally, I've been with the company for 12 years. I have extensive experience in various senior finance positions. The last 5 years, I've headed up finance for the Husqvarna Forest and Garden Division. I very much look forward to connecting with you all from the beginning of March and to continue our dialogue.
Very good, Terry. I'm also very pleased that we could manage to actually recruit a very strong internal candidate here to ensure a seamless transition as we are transforming as a group. Very happy to have you on board in this role, Terry. With that, Johan, over to you, and I guess we are ready for some questions.
Absolutely. So many thanks for that, Henric, Glen, and Terry. Please, operator, let's kick off with the Q&A session. Thank you.
Thank you. We will now begin the question and answer session. If you have a question for our speakers, please press zero and one on your touchtone telephone. If you wish to be removed from the queue, please press zero and then two. If you're using a speakerphone, you may need to pick up the headset first before pressing the numbers. Once again, if you have a question, please press zero and then one on your touchtone phone. We've received the first question. It is from Fredrik Ivarsson, ABG Sundal Collier. Your line is now open. Please go ahead.
Thank you, operator, and good morning, everyone. Good morning, Henrik, Glen, and Terry. First of all, I was just hoping you could help us with the comments you made about Gardena. The division clearly has very strong growth momentum in the Q4 , but you say that there's been some pre-buying effect. Is it possible for you to quantify that impact in the Q4 ?
It's actually quite small, Fredrik, but we're not concerned about that. It's very much the retailers coming from a low level of inventory and having some level of seasonal preparation themselves. It's a small element to the growth in the Q4 that we would attribute to that.
All right, perfect. Then when it comes to the inventory position, glad to see that you're able to build inventories ahead of the peak season, but maybe you can tell us a little bit about where that inventory is sitting. Is it a lot of goods in transit, or have you been able to build a lot of component inventories in your plant?
It's actually a bit of a mix of things. We have a little bit more in transit. We have more component inventory, and we have also managed to build a bit more finished goods inventory. So it's a little bit of all those three.
How happy would you say that you are with the current position? Is it according to plan, or would you like to build an even bit more inventories here at the end of the year?
I mean, you can always do more, but I think compared to our historical performance, we have a much higher inventory position now in relation to the upcoming season. From that perspective, we feel like we are well prepared for the season. At the same time, let's just be transparent. I mean, there are ongoing small disturbances, constraints, disruptions all the time, and that's something that we need to continue to battle through, just like we have done throughout the entire pandemic.
Sure. I appreciate that. Just a final question on channel inventories. Could you care to comment on what you're seeing on the other channel inventories across various regions? Are there any in the regions or product categories that stand out in terms of either being close to or actually being rebalanced or being sort of low from a historical perspective as we go into the selling season here?
I mean, I would say generally speaking that inventory in all regions and product segments are lower than normal. There might be a few small exceptions, but I would say generally speaking, it's still on a low level in the trade.
All right. Thank you very much.
The next question is from Gustav Hagéus, SEB. Your line is now open. Please go ahead.
Thanks. Good morning, guys. I have a question on your comments on the margin target and where you're at, sort of, adjusting for the pandemic, if that's even possible. If you could just repeat what you were saying regarding sort of where you thought sort of normalized margin was, and sort of, adding to that, where you think how one should model into 2022 with the price increases and strategic investments and so forth.
Yeah. I think, Gustav, we could probably go back to the CMD messaging and reiterate that.
You know, we do feel having a 15% sales growth that there's some underlying increased demand in the stay-at-home demand. If we normalize it and we look at some of the cost saving measures we took, and we slowed down some investments around about 100 basis points on the margin that we could probably attribute to a boosted baseline. That's what makes us then feel that the new margin targets at least have some ambitions in them. That was the messaging at CMD. When it comes to the headwinds to your second question, pricing and raw materials for the year.
I think the way we best look at this is if we look at the second half of 2021, and the reason I look at the second half, we were pretty well hedged in the first half, you remember. We had about SEK 500 million of raw material headwinds. If we just think about our production build across the year, you can take roughly a third of the business in the second half of the year and two-thirds in the first. The quick math says there's a headwind of just over SEK 1 billion on raw mats, which is largely gonna be a H1 headwind. That's how we're seeing it right now with the current rates. We've also had logistics headwinds as we were saying.
Just like we did in 2021, we need to utilize pricing to make sure we offset those headwinds. You know, we're confident of doing that. I don't quantify the exact price figure that we're gonna have here other than saying we're confident offsetting and committed to offsetting the headwinds of raw materials and logistics.
When you say you're gonna offset it, is that the message is that you're gonna offset it through price increases or a combination of price and mix? If it's the latter, if you could give us a rough indication of the split between the two, that'd be helpful.
No, we'll say it's the former. We intend to offset it with price increases.
The mix effect should be a positive one given that you're growing in areas of higher margins. Is that a fair assumption?
We would hope we continue. That's the, you know, the intent of the strategic initiatives as well that we continue to grow the mix, but we will also continue with strategic investments as well. You know, that is a good cost as I often call it, that we'll continue with.
Sort of the drop-through then, how should one model the top line in a combination of price and mix? What do you think is a fair assumption of the drop-through?
Yeah. I'm not gonna take exact percentages here, Gustav, but I, you know, we expect the normalization of the volume and the demands versus where we've been. That's what we're planning. You know, therefore we feel that the market will be growing with some 2-3 percentage points. There's no reason to think that shouldn't be in, you know, the case for the coming year. That's where we expect. We expect, of course, we're gonna get more by way of price, but I think that's the best guidance we can give, a normalized volume year, and then we get some price increase.
Lastly on CEORA, I think you mentioned on the CMD that you were hoping for a four-digit number in terms of units sold this year. Is there any way to give us a little bit color on the progression there and number of units sold or active discussions and so forth?
I mean, the reception so far has been extremely good and the interest is really high out there in the marketplace. It's still too early to predict with any kind of precision how quick the actual adoption rate will be. Because these professional customers sometimes have a fairly long purchase process. So it's very difficult to estimate that now. I think we will know so much more when we have a year under our belt here how quick they actually go from, you know, interest to actually buying.`
In terms of sort of orders and/or hard leads, is there any sub-segment that you feel that you're more successful in at the moment? Does it go for parks or whatnot?
I would say that we have a pretty equal response in the different categories. It's hard to say that one stands out.
Okay. That's promising. I appreciate that.
Mm-hmm.
Thank you, guys.
Thank you, sir.
The next question is from Christer Magnergård, DNB Markets. Please go ahead, your line is open.
Good morning. Firstly, just some clarity on what you actually think about the markets for 2022. You talk about an increased margin by 100 basis points on the back of a boosted baseline. You also talk about that the market should normalize. At the same time, you also talk about that you see the market growing by 2%-3% in 2022, if I understand your last comment correctly, Glen. So what are you actually expecting for 2022 in terms of market growth?
I think it's fair, Christer, to come back to the organic sales target. That's what we planned for. That's what we're heading towards, and that's what the plan and the target should be. That's probably the best guidance we can give. As said, when we talk about normalization, we expect that the markets would be growing post-pandemic, you know, back to the pre-pandemic rates of some 2-3 percentage points. Assuming we're starting to come out and normalize, then that's what we expect. At the same time, you know, some people will be probably shifting some of their purchasing to services versus products, you know, maybe taking some more vacation and travel versus the past. We know there could be a change in behavior.
At the same time, as we've said throughout the whole of 2020 and 2021, we feel there's a much higher interest in the lawn and garden space from, particularly from residential customers.
Okay, thanks. Another question. Second question on strategic initiatives. You have a pretty good understanding of raw materials and currency for 2022, and strategic initiatives was around a negative SEK 40 million in Q4. Anything you can say when it comes to that for next year?
I mean, generally how we have been guiding on that and what our plans are is about 1% of revenue plus the SEK 250 that we funded through the program that we ran here starting last year. That will give you some SEK 750, or I don't know where you end up, SEK 650-SEK 750.
I think SEK 650-SEK 750 would be a reasonable guidance.
Yes. Thanks. Coming back to construction for Q4, if we can give a bit more clarity on why it has been more difficult to pass through costs, the cost increase for that division and for the other divisions, given the very strong markets.
I think one piece has been that the very competitive diamond tools, the consumables part, it has a lot of local and regional players. We have been a little bit more cautious in that segment. But I will say generally speaking that we have also in the construction division bumped the prices fairly significant, and we see that they are accelerating towards the end of the year here. They were a little bit slower out of the gate, but I don't see that they will not succeed here in 2022 by any means.
Okay. There have been timing differences between cost and price then?
Yes.
Okay. The final thing, Orbit has now been in the books for two months, roughly. I was just curious about if there are any new learnings from the acquisition and now that you have started to work with the company.
Not in the big ones, but what is very encouraging to see is how the two teams, I mean, two very passionate teams about watering are coming together, sharing ideas and opportunities, and together starting to identify new opportunities. That is very encouraging. Of course, in our initial context, it was very much about aligning on the ambitions for 2022. I mean, since we took it over just before the year started. Aligning on the plans for 2022, getting the teams together to start to jointly identify the biggest opportunities going forward. Of course, very much in the areas that we were talking about at the CM Day. Other than that, I wouldn't say there has been any big learnings.
The good news is that there has not been any big surprises.
Okay. Thank you.
The next question is from Johan Eliason, Kepler Cheuvreux. Eliason, if you please go ahead.
Hi, this is Johan Eliason. Just a question coming back to the strategic initiatives. You obviously pointed to price being the most important factor to offset the raw material of SEK 1 billion or so. Will price also be able to compensate for the additional strategic investments above this sort of cost savings that is also coming through?
The way we try and look at that a little bit simplistically, we would like to think that the mix and the market-driven improvements are gonna come through sufficiently and then justify the strategic initiatives, Johan. That's probably the best way to look at this. Price is not there to offset the strategic investments.
Okay, good. I was wondering a little bit, Gardena, you talked about this pre-buying. We should still expect the Q1 to be a strong quarter, if I understand your general comments on low dealer inventories, et cetera, or is there any sort of things that we should take with us on that comment?
No, I think it's a fair assumption you make, Johan Eliason. It's Q1 is really that the particularly for Gardena, where it's retail-centric, the retailers are, of course, filling their shelves as per the listings and getting ready for the season. We'd expect the same for Q1 this year.
Will we see any Gardena sort of through the channels of Orbit already this year, or is it too early?
We are in those discussions right now, and we will try to see if we can get Gardena robotics, for instance, into the U.S. already in 2022. But any major shifts will have to come in 2023 and 2024. The important thing for Gardena is that we don't just take this premium offering, this premium brand and too quickly put them into the traditional channels of Orbit, because then you will likely not be able to command that premium position. It's very important to be smart here and work a lot with online, work a lot with social media to build that premium position. Slowly, as you build the premium position, you can also open the, let's call it the more traditional channels.
We have a long-term plan for Gardena, but we want to start to see some action already this year.
Okay, good. Then sort of a general question about this electrification. You mentioned the targets and where you are today, et cetera. I think on the wheel side, considering what you have closed down and the growth of the robotics, I guess you're sort of ahead of the overall lawn mower market in terms of electrification. If you look at the handheld side, obviously you have a significantly smaller share of handheld battery products out there. The big chunk is still petrol powered. We are obviously seeing, you know, a lot of competitors going all in on battery-powered products, maybe more on the consumer side, obviously still like Techtronic Industries.
Do you think you are well ahead to protect your position on sort of the handheld business in this transition to electrification there? Or is there more you need to do and accelerate the investments there?
I think. First of all, we can always do more. We need to have a high ambition and we need to make sure we really drive this. That's what you can also see in the ambition of getting to 67%. I think we have slightly different positions with battery, depending on segment and geography. I would say generally speaking, in the pro and the premium segments, we have pretty strong position, particularly in Europe. The U.S. market is still a little bit behind, I would say, Europe in development and maturity when it comes to battery power, when it comes to the more premium positions.
It's correct, that's what you say, in the lower end, it's more competitive and there are more players coming in. That's why we also decided for Gardena, for instance, that we cannot build our own battery system there and get that scale that we need and to be able to offer the customer one battery system that you can use for many different applications around your home. That's why we started this Power for All Alliance together with Bosch. There we try to mitigate it from that position. If you ask me, generally speaking, yes, we can do more. We can do more in robotics, we can do more in battery, we can do more in professional products overall, and we can do more in watering.
that's what the whole strategy is all about. As you can see on the percentage and ambition, we say that there's an acceleration coming here.
You don't feel worried about what you're seeing on the sort of consumer side of handheld, that might have an implication for your professional business in a few years when I guess the whole market is turning electrical?
We don't think so. The reason is that in the entry level in the consumer space, it's more important for the customer with a low price and to have one battery platform that you can share across different applications. Whereas if you talk about the professional space, it's all about having the right solution for the specific application. If you're an arborist, for instance, it's all about how have you tailored that whole product, including the battery, where the battery is just a power source to the right work tool for this specialist. Arborists won't care whether the battery works also for a power drill, you know, at home. There are quite big differences between the entry level and the premium pro level.
In the premium pro level, it's all about the application. Of course, we possess the application know-how that these new entrants do not. Whereas in the consumer space, where it's more about price and one common battery platform, it's much more competitive, if you see what I'm saying.
Okay, understood. Thank you very much.
Thank you.
The next question is from Karri Rinta, Handelsbanken. Your line is now open. Please go ahead.
Yes, thank you very much. Two questions from me. Firstly, about pricing. I just wanted to understand better how you work with pricing and how should we think about these upcoming price increases? Is it list price increases from January first? Or is there some sort of a lag that we should take into account? That's my first question.
If I take a first stab and then Glenn can probably make sense out of it at the end. It's actually fairly complex. As you can imagine, the big retailers operate in one way that's very different than the dealers, very different from some of the construction channels. For that, we have different dates that we do it. We have also been increasing more times than normal as well. That is one thing that's kind of accelerating as we have seen. The other piece is that we have had more back orders than what we have had historically, and they of course then sit with the old pricing. When you take these two in combination, actually it becomes fairly complex.
Maybe Glen can make it less complex than that, but that's a little bit what it looks like.
No, I think you described it well, Henrik. But I think there should be a strong confidence now looking at the pricing in the Q4 , which is just over 4%. We have a strong tailwind on pricing that we initiated through the course of last year that we take into the coming year. And then of course we're gonna be comparing the different price intervals as we go through the year versus the prior year. Also we, as Henrik says, we have pricing negotiated for list prices for the coming year, and then a lot by way of promotional activity, et cetera. It's a little complicated, but again, we remain committed to what we said.
All right. That's helpful. Regarding Gardena, this strategic growth market that you mentioned in the presentation, can you give us a number on what kind of growth did you see in those markets? And maybe how much of your total sales in 2021 came from these strategic growth markets in Gardena?
Glen, you want to share some more details again. I think holistically, if you talk about Gardena, if you would ask me what I'm the most happy with, it is actually that despite that the core market actually had a pretty bad watering season. You remember all the floodings and things like that in the core markets of Gardena. That despite that, Gardena could grow to the extent it did was due to the strategic focus markets. That is what I'm the most happy with when it comes to Gardena in 2021. It really showed that those strategic focus markets now are picking up in speed. I don't know, Glen, if we're normally sharing details here.
I think maybe to give at least some reasonable guidance, it's over a third of the business now is in the focus markets. Over a third. They grew with the full division, of course, with a 14% organic growth. It actually grew with over 20%. Over 20% is a figure we'll quote in the focus, in the strategic focus markets.
Great. That's very helpful. Thank you.
The next question is from Björn Enarson, Danske Bank. The line is now open. Please go ahead.
Thank you. Maybe I missed it, but can you conclude what you said about growth in 2022, including the Orbit acquisition?
I think, Björn, that it's very difficult to predict given all the uncertainties, as you can imagine. We think that sometime during 2022, the industry will start to normalize, you know, after COVID, so to speak. The question is when does that start? When do we start to see that as societies are starting to really open up now? It's difficult to give you-
Sure. Yeah
a very specific number there. We think that it will start to normalize and that eventually it will end up at least 2%-3%. Whether that is, you know, during this late part of this season, in the fall or going into next year, we don't really know.
No
... what we are planning for is to make sure that we at least grow with the 5%, which is our financial target. I don't know, Glen, if you want to add more color to it.
I think that clarifies it.
Yeah. When you're talking about, then you of course exclude the Orbit effect.
Yes.
The effect.
Yes.
And also-
Yes
... when you're talking about growing 5%, I guess you also include pricing?
Yes.
Yes, we do. That's our total net sales. It's the 5% is the organic growth indeed.
Yeah. This is so basically sometime during the year, the market should normalize to 2%-3%. You should or hope to outgrow that in line with your targets.
That's how we look at it, but it's impossible to predict when or if that happens.
Sure.
That's how we plan.
Great. Thank you.
There are no further questions at this time. I hand back to you.
Many thanks for that. I think with that, we conclude this session. Of course, looking forward to continue to talk to you. If not before then, when we report the Q1 report in April. Thank you very much for participating today.