Earnings Call: Q3 2021

Oct 20, 2021

Hello, everyone, and welcome to the presentation of Husqvarna Group's report for the Q3 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 Henrik Andersson, our President and CEO and Glenn Instone, our CFO. Henrik and Glenn will present the report, and then afterwards, we will open up for questions. Let me also remind you that this session is recorded and will be later published on our website. So with that, I hand over to you, Henrik. Thanks, Johan, and also a warm welcome from my side. We have delivered yet another strong quarter, strong growth of 6%, fairly evenly distributed across the 3 different divisions. It's clear that the demand of lawn and garden products remains high. That's partially supported by the sales home trend, partially by a prolonged season. But I think it's also important to say that it also shows that we have brands that are strongly connected with our customers and we We also have a strategy that is really effective in the marketplace. We can also see that the construction market is rebounding and that our construction division is doing well in that new environment. Reassuring is to see The growth is really driven by our key categories. I mean robotics and battery grew by 25% in the quarter, But we can also see strong growth in professional products and in particular, professional chainsaws, which is very good to see, of course. It's also a quarter like quite a few quarters before this one that is a bit marked by Supply and transportation issues, those things are constraining our ability to meet customer demand. And we are working hard on mitigating this. And I must say, I'm very proud of the team and how we have been able to manage this. A lot of small disturbances all the time, and we are managing to take care of that in a fairly good way. At the same time, we are preparing for next season, making sure that we are Building inventory in advance, making sure that the sales piece stock is coming up on key components and in certain cases, also on certain products. If we then reflect a little bit on the quarter and we put it a little bit into Context. It's important to also zoom out a little bit sometimes, putting it into context of the last 12 months we're owning or put it into an even larger context the last 10 years or so. We can see that We are continuously improving the profitability of the Husqvarna Group. And this is actually the result of our working strategy, where we are decisively investing into attractive segments. I mean, as one example, we spend 40% of revenue into R and D each year. And of Of course, in some of these attractive segments, we spend much more than that, of course. In other segments, we are holding back investments and in the unattractive segments, we actually just we have exited during this time frame. Then of course, there is naturally a boost from stay at home in this. But Let's also keep in mind that we are taking on increased cost and pressure when it comes to raw material, when it comes to transportation. And also, we have an unfavorable currency here this year and in the quarter. So all in all, I think the story this slide is telling is ultimately that the strategy of the group is working. I'm going to add a little bit more into details here, starting with revenue, SEK10.2 billion in the quarter, which is equals to a growth of 6% organically or actually as reported as well. And here we can see that so first of all, that is good that we see this kind of growth in all three divisions, make sure that we have a broad growth in the company. And also, it's important to see that it is really driven by the key regions and the key segments. I mentioned here in the beginning robotics and battery, professional products, including chainsaws as some of the ones that really stand out in the quarter. Well, it's also a quarter where we have been tackling a lot of supply constraints, A lot of small ones. And of course, we have going forward a potentially bigger one when it comes to the Brixion's revenue, but this is something that Jan will come back to later on here. In terms of operating income, euros 926,000,000 slightly below last year, But still a very, very good performance, having in mind how what kind of a record quarter it was last year. And this year, we have these headwinds when it comes to raw material, logistic costs, currency, etcetera. But we have managed to offset this to a large degree with the growth that we have enjoyed and with the price increases. Just as a reference, I mean, this result is more than twice the EBIT we had in 2019 as a comparison in the quarter. From a direct operating cash flow perspective, after 9 months, we had SEK4.8 billion. As you probably have noted already, we are increasing inventories, particularly when it comes to components, the secured deliveries going into the 2022 season. Our net debt is down more than 40% year over year, which of course then gives us a very strong financial position. Then I mentioned robotics and battery Grew by 25% in the quarter. Still, however, 18% of group revenue on the rolling twelve almost rounded up to 19 this quarter. Good to see that we have strong growth in both Consumer and Pro segments. In robotics, Pro is now a meaningful contributor to the robotics business. And also what is good here is, of course, that we have a solid product lineup and we have a very, very interesting lineup for the years to come. And with that, as an introduction here and a little bit of a summary, I hand it over to you, Glenn, to share some more details here. Thank you, Henrik, and good morning to all. So before I go into a little bit more detail on the divisions and then we'll look at the I'll have some time to look at the EBIT bridges and also the balance sheet effects. As Henrik mentioned, on a group level, net sales increased by 6% in like for like currency. So we're particularly pleased with that with all three divisions developing in a positive way. However, starting with the Husqvarna division, net sales were up 6%, 4% as reported, but 6% in like for like currency. Strong growth in robotics as well as hand held products, both petrol driven and battery driven, Particularly strong development in the professional hand held products where we had a double digit growth. Very strong from a regional perspective in our so called EPAC and Emerging Markets, where we had double digit growth in both of those regions during the Q3. We also had the successful launch of the Siora product that was previously mentioned. During the Q3, we've actually been marketing this at our various dealer events globally, where we've been receiving extremely positive feedback, And we start to have initial orders coming into the system for the Siora platform ready for the Q1 launch. If we then move on to operating income, it's actually increased to SEK558 1,000,000 from SEK 543,000,000 representing an 8.8 percent EBIT margin from 8.9% last year. The division has managed to offset headwinds from FX, which was some SEK35 million raw materials, roughly SEK130 million and further increased logistics costs. Plus, we actually accelerated on the strategic investments, just over SEK60 1,000,000 in the Husqvarna division. So the division has managed to offset them with the continued price development and also continued product mix. Notable items during the quarter, the work that we were doing during the summer to replace a defective component In a limited batch robotic lawnmowers, that was completed at the beginning of the quarter and production was then restarted to normal levels. And as such, we see a normalized production levels in our robotics facilities. All the costs associated with that issue were isolated to Q2, and we firmly believe that is behind us. However, it is important to understand that as we continue to grow our offering of high-tech Factory Powered Solutions and Products, ourselves, just like other industries, we will engage in field measures more and more frequently, as a result of this. And a latest one and a positive one is that only this week we've managed to reach out to some 2,500 of our consumers globally to resolve an issue with a battery degradation problem. And that, however, we've been able to do in a smart Automated way, I. E, over the air connected via connected device. So very much in line with what some of the automotive industries are doing. The other main item in the quarter that we should talk about, of course, is Brixton Stratton. We previously announced we have initiated legal proceedings against Brixton Stratton, through our supply of petrol engines for us, particularly in the for the U. S. And North America markets for a breach of our supply contract. In a worst case scenario, the lack of engine supply could result in a loss of top line sales of approximately SEK2 billion. That said, that is a worst case scenario where we would receive no engines from Briggs and Stratton. However, it is our firm belief that we have a strong case. We have a supply contract that we have placed orders against. We should have preferential treatment against that supplier contract. As such, we remain optimistic that we will be able to achieve a satisfactory outcome in relation to this And of course, as we hear more, we will give you update. On a year to date basis, organic growth has actually grown by 16% in the division. So extremely strong following the very strong H1 Growth in all regions, particularly strong in Europe, where we had a 22% growth and emerging markets with a 32% growth year to date. Operating income has increased by over 40% with the margin increasing to 15.1% from 11 0.7% last year, with the clear leverage from the sales growth, price increases and product mix. And as such, on a rolling 12 month basis, The division has grown by 16% from a top line perspective and remains with an operating margin above 13%. Moving over to Gardena. The division continues with a positive growth journey that we've seen for several years. Sales actually increased to 5% even when comparing to an extremely strong Q3 last year where we had a 24% growth over the prior year. There was actually a growth in the core markets despite the relatively wet weather in Central Europe, which impacted watering sales in the quarter. But still, despite watering sales being lower, we got a growth in our core markets, which shows the growth of the broader assortment through the Gardena division. Notable growth in robotics as well as hand tools, where the division continues to strengthen its market positions. As mentioned, a decline in watering, given the much wetter season that we saw particularly in Central Europe. The solid mix and price increases were offset by increase in raw materials, some SEK60 1,000,000. We also continue to invest more in brand and marketing, e commerce activities in the quarter, roughly SEK30 1,000,000, ultimately culminating in an operating margin of 9.6%. Year to date growth is 13% From a top line perspective, the earnings for the division have now increased to over SEK1.8 billion, representing a 19.4 percent EBIT margin. Again, solid growth, solid mix, partially offset with the headwinds of FX, raw materials and logistics. Moving over to construction, really pleasing to see the continued recovery for the Construction division. Of course, this is the division where we are most negatively impacted by COVID. A strong Q3 sales, organic growth plus 5%. And then we have a strong acquisition effect from Blastrack, which actually that accounts for another 13% or 18% as reported sales growth. Market has continued to improve for the construction industry again in the 3rd quarter. We've seen an improved market positions in all of our main markets. The earnings stayed relatively flat to the prior year, whilst the margin reduced 12.9% from 15.3% prior year. The upside from the sales growth and the increased pricing is being offset by the headwinds we're seeing just like the other divisions in raw material logistics. And actually, this division from a relative perspective is affected with FX, somewhat more, some SEK30 1,000,000 negative FX in the quarter. Pointing note that Blastrack does dilute the margin for the construction division at this point in time. But as per the initial announcement on Blastrack, We plan to have this EBIT margin accretive for the group within 3 years, and we maintain that guidance. On a year to date basis, organic growth now at 16%, representing a 12.9% EBIT margin. If we actually throw in plus track, then we actually have a year to date growth of 29%. Rolling 12 months, clear recovery, sales were up 11% from a flat position at the end of Q1. And the operating margin recovering to 12.7% on a rolling 12 month basis. Good. So moving over to the bridges on a group level now, and maybe this is on some of the information you're waiting to see, mainly the impact of raw mats in the quarter. We've actually seen an impact in the quarter, some SEK200 million just over SEK200 million going through from raw materials. However, we're extremely pleased to show that we've had price increases, which have been some SEK 225,000,000 in the quarter, so more than offsetting the headwind. We've also continued to expand our strategic growth initiatives. That's approximately SEK110 million or just over 1% effect on the operating margin. FX was also negative in the quarter as guided. It was approximately SEK65 1,000,000. And our full year guidance is Pretty much in line with the previous expectations in €300,000,000 to €350,000,000 Moving on to The year to date bridge and also some more guidance there on the raw mats come in. An EBIT improvement actually year on year of 27%, coming from a 13.1% margin to a 15% or 15.1% operating margin. Notably, market driven improvements, volume, mix as well as the internal efficiency that we're driving, really contributing to that SEK1.9 billion you see there On the left hand side, SEK1.8 billion you see on the right hand side. Price is positive, close to SEK500 1,000,000 Year to date, more than offsetting the raw material headwinds, which has been 380,000,000 through the 1st 9 months. Strategic initiatives will continue to the same pace and we're under roughly 1% of sales of SEK370 1,000,000 in investments. On the raw maths on a full year guidance, I think we will increase the guidance marginally versus the previous one. We'd expect to be something like SEK 600,000,000 maybe marginally over SEK600 1,000,000 off full year basis, meaning approximately SEK200 1,000,000 to slightly more than SEK200 1,000,000 still to come in Q4. However, our clear guidance is we remain committed to having a full year offset Wrong tail headwinds by way of price increases. Moving over to the cash flow, if we can, Johan. We continue with a solid cash generation. Of course, it is somewhat lower than Q3 last year, where we had an Extremely large inventory release, coupled with a strong sales growth that really increased the cash flow from both dimensions in the Q3 last year. However, we're significantly above prior years, 2019 and prior, SEK4.8 billion, and And we actually have a negative effect of the GlassTrak acquisition in there of around SEK 270,000,000, so we're just over SEK 5,000,000,000 in like for like terms. Additional EBIT generating some SEK1.2 billion, changes in inventories year on year, actually a minus SEK2.5 billion effect, given that strong Q3 acceleration I mentioned last year. Accounts receivable also increased by just short of SEK500 1,000,000 and that's really the result of later sales in the quarter this year, thus the moving straight into the balance sheet, and we expect the cash to flow in through the Q4. However, payables also increased benefiting from the higher component levels that we're carrying. CapEx is at a somewhat similar level to last year, just short of SEK1.3 billion and the guidance going forward should be that we should be more in line with previous guidance, I. E, 5% to 5.5% of net sales. Moving on to capital efficiency. As previously mentioned, we expected an uptick during the remainder of the year, but not a big uptick. We're moved up by by 10 basis points there to 21.3%. However, we should compare that to where we were last year at the same time, which was 26 Percent as a ratio of the net sales of 24.4 percent at the year end. We expect that this will continue to go up slightly in the remainder of the year, We should continue to work well below our target levels of 25%. And in fact, we should be well below the 23% levels for the remainder of the year. A quick look at the balance sheet. As Henrik said, an extremely strong balance sheet, Maybe the main items to call out there is the inventory with some SEK 2,000,000,000 higher than prior year, which is largely a season preparation effect, As Henrik mentioned, we have around SEK 800,000,000 more in component inventory this year versus last year, really in preparation for the season. But also we have higher level of in transit inventory with more things being Sitting on boats right now than we normally have, and that is an effect of around SEK 600,000,000 on the inventory. I mentioned the receivables increasing in line with higher sales and higher, let's say, end of quarter sales and payables very much going in hand hand in hand with the higher inventory levels. We paid a dividend in Q2, and of course, we expect to pay a dividend after the this report The remainder of this week of just over SEK900 1,000,000 would be the remainder of the dividend to pay this year. Looking at the net debt EBITDA ratio, really pleased that actually we are Now at 0.6. So really satisfied with this and it really shows the strength of the company that was built over many years. Significant improvement, net debt reducing to SEK 2,600,000,000 from SEK 4,500,000,000, same point last year. Of course, a very heavy Positive coming through from the cash flow from operations. Also, we see then some negative effects coming through cash flow from financing, which is roughly SEK100 1,000,000 impact from the pension discount effect about SEK700 1,000,000. And actually, As mentioned, the dividend paid, which was paid more in Q4 last year versus a normal pattern, and we'd expect then the dividend to be paid in the remainder of this year. At that, I will pass back to Henrik. Thank you, Glenn. Let's switch gears a little bit, talking about our strategy. And I will not spend as much I'm here this time around as in prior meetings, but rather just highlight a few things, mostly focusing on sustainability and a little bit on a couple of product launches that I think are Testaments to the strategy are very much in line with the strategy as such. Starting with Siora, you all know that we are launching this new professional robotics platform, really going after the commercial turf industry. We are setting out to disrupt this segment, just like we have been disrupting the consumer segments in the past. We see plenty of opportunity here Since labor is by far the biggest cost item for cutting grass professionally. And of course, you can with the robotic eliminate that to a large degree. Of course, With autonomous solutions, you get a lot of new opportunities in terms of when to operate them, etcetera. Being battery, you get very little noise, you get no emissions, etcetera, etcetera. So a lot of opportunity here. We have, during the fall here, been showing this, demonstrating this to customers either through different roadshows or special events. And I must say that the response has been quite Overwhelming. It seems like the interest is even bigger than what our initial our initial projections. So very interesting, of To see what that will translate into when we start shipping these products in the beginning of 2022. So this is a huge opportunity for us going forward. At the same time, we need to be a little bit patient here in the sense that it will take A few years to build this business. Just lucky it took us a few years to build the consumer business. Very interesting, good response on the product so far. Then shifting to Gardena and its Ecoline. I mean, all of our divisions are really committed to sustainability. And Gardena really across its entire value chain, One important thing is, of course, how to address water scarcity, etcetera. But Garena has also decided to showcase its capabilities with one specific line of products, the so called Ecoline. And here you can see the sample here. These are actually products with recycled materials. So the plastic is up to 90% recycled in these products and metal is up to 75% recycled in these products. You can see a standard cleaning nozzle. You can see a spray gun. There are connectors. There are Sprinklers, there are some hand tools, etcetera. So a very interesting launch We will showcase our capabilities in terms of capability for Gardena here going into 2020 Talking about sustainability, as you know, Sustainability 2025 is our program And our strategy, when it comes to how do we combine our passion for sustainability with our innovation capability, we have set 3 Ambitious targets. 1 is about carbon, 1 about circularity and 1 about people. In terms of carbon, our commitment is To reduce our CO2 emissions, the absolute ones, by 35% across our value chain. And I think that's the key. 98% of carbon in our industry is actually outside your own operations. So Rather than talking about commitments about the 2%, which we are committed to as well, by the way, we want to talk about the other 98% as well. So it's including products in use, which is very, very important to keep in mind here. And we have a size based target here. 35% will secure that we do our part when it comes to preventing a rise of temperature More than 1.5 degrees. And during the quarter, We signed a call on carbon, which is addressing Various governments and leaders to ensure that we get a fit for purpose, carbon pricing Instrument in place in Europe. And we do this through the Climate Leadership Coalition that we joined early in the year, which is a fairly large group of primarily Nordic companies that have gone together to drive this kind of transformation. Looking at Our performance, when it comes to these three targets, we can see in carbon that we are 27 Percent versus our target of 35%. The 27%, as you can see, is a lower number than what you have seen before. And that's because we actually enhanced our methodology of collecting data for product in use here. And therefore, we updated our numbers for the year with about 3 percentage points. So the Q1, the Q2 Numbers that we have showcased before are now 3% lower and the update after Three quarters is 27%. We are still committed to reach the 35% by 2025. In terms of circularity, super important aspect of sustainability. We have set a target of Launching 50 innovations by them. And to date, we have 10 innovation nominees in the pipeline. And soon, we will actually consider them successfully launched, and then we will start to track that instead. But the Gevgena Ecoline is one example, for instance, that's already launched in the market, but we want to make sure that We have enough time in the market to see that it is responding well with the customers before we say that it's actually a successful launch here. More to come on that. And then in terms of people, we are still committed to making sure that we encourage And we empower 5,000,000 people, either customers or colleagues, to make sustainable choices. This is something that we will start to measure here at the end of the year. So that's a little bit about sustainability and our Strategy, if I'm very quick here today. If we don't summarize the quarter, A strong performance, 6% growth compared to a record quarter last year, clearly supported by a stay at home trend and a prolonged season, but also a testament to that our strategy is working, focusing on the attractive segments with higher growth and higher profitability. We can also see that the construction market is rebounding, and we can also see that our construction division is performing well in that environment. Zooming out a little bit on a rolling 12 month basis, our organic sales are up 14% and the operating margin is 12.6%. Main focus for 5 B is to secure deliveries, I mean, for the remainder of the year, of course, but also to prepare for the 2022 season, given that the supply constraints that we and so many others are facing. And as you can see here that the inventory, particularly the component inventory, is growing here, which is according to plan and to to ensure that we can meet the demand going into next year. Finally, we have invited to a Capital Markets Day on December 1 at Fotografiska here in Stockholm, where we will focus on providing more detail as to our strategy execution, but also to focus on our value creation journey ahead. Looking forward to see all of you there in person, But of course, we will also offer the opportunity to participate remote digitally as well. With that, thank you for your attention and handing back to you, Johan, and for some Q and A. Many thanks for that. And we will now start the Q and A session. So please, operator, start the Q and A session. Thank you. And we will now begin the question and answer session. The first question we've received is from Frederic Iversen, ABG. Please go ahead. Your line is now open. Thank you very much. Good morning, guys. A few questions from my side. First one on orders. So obviously, you had some supply chain issues during the year, and I suspect that the sort of level of backorders is quite significant. Can you give us any feeling for the back quarter catalog and whether you expect to deliver most of that during the end of this year and maybe moving into next year as well? The back order situation is, of course, It's larger at this point in time than it normally would be. At the same time, we're coming towards the close at the end of the season. So we think that many of these back orders will, so to speak, go away here at the end of the season as well. But it will and it has provided a good momentum for us into Q4. But I think we also need to be humble here and realize that a lot of the lawn and garden equipment will The demand of that will disappear pretty abruptly. Sure. That's understandable. Maybe a follow-up on new orders then. What do you see in terms of those From the retailers, I assume that the inventory levels remain quite low given the current demand? No, that's Absolutely so. I mean, the inventories are low, generally speaking. And of course, that's I mean, I guess it's no secret That's all the good indications for us from Q1 next year as a result from this. But I think if you look at the growth in general next year, we don't expect this at home trend to continue into 2022. We still plan for growth, but it's probably going to be more of a normalized growth rather than these very high Levels we have been at late 2020 and through 2021. Yes, probably a good guess. Last question from my side on the Bricks and Stratton. You mentioned a SEK 2,000,000,000 Loss on top line in a worst case scenario. So if we assume a worst case scenario, what would that impact the margin rather than top line? That is actually much more difficult To estimate because there are so many moving pieces here, and we're not quite there yet in our planning. I mean, Our main plan now is, of course, how to secure how can we close this gap. So that's why I don't really to speculate on that at this point in time. The only thing we can say, of course, is that The products in question, they have lower margin than the group average. But also, of course, there is some contribution to fixed Cost on top of that as well. And when you refer to margins, I assume that's gross margin, right? You can say gross margin or EBIT either way. Okay, excellent. Thanks. That's all my questions. The next question is from Gustaf Hargreis, SEB. Please go ahead. Your line is Thanks, operator. Good morning, guys. To follow-up on Fredrik's question on the Brissen Stratton issue, Just to get some sense of the fixed cost potential, do you can you produce products that are not using their motors on the same lines? Or are they sort of In one part effective, which cannot be utilized for other tasks? I mean, generally speaking, both the Production lines and the products themselves are designed to be able to accommodate Different engine alternatives. And of course, our entire lineup is not Briggs engines today. So that opportunity is there. The challenge is more that with in an industry where there's Capacity constraint on petrol engines very short before the season preparation starts to change from 1 supplier to the other is challenging. And that's why we are a bit we are concerned here about 2022. However, In the years to come, you have much more freedom to look at different options. Right. Thanks. And then So another topic. I appreciate that you will host your CMD soon, so I might be running ahead here. But it just seems to me that you're not really coming through with your story. At least judging from discussions I'm having with clients, a lot of focus is always on comps, inflation, weather rather than the structural story for robotics. So with that in mind, does it really make sense to still group robotics And battery together as one and not provide more detail on category margins and robotics growth and so forth. I'm just Another way to look at it perhaps is your evaluation today compared to say iRobot at P30 this year or some EV bit 21 or Thule Consumer goods peer at similar levels. You're trading at half of that. I wouldn't perhaps this be a part of unlocking sort of that The discrepancy in valuation, you think? Point duly noted, Gustaf, I would say. It is duly noted. And Of course, there is an underlying expectation that we give more information on robotics. So we'll take that with us. Okay. And in terms of Siora, you said that you've been a bit overwhelmed by interest. Do you internally, do you hope to be the market leader in terms of unit sales for large robots already next year, the way you can see it, Since you haven't really been offering this type of product before? I would say yes. I mean, there are not many robotic solutions out there. And we actually have a meaningful position already before we launch SIORA on pro robotics. So Yes, we clearly have a market leading ambition already 1st year. But it's from a small base in a fairly small market. Yes, I appreciate it. Would you think in that scenario, your main scenario, would you sort of build out the market? Or would you cannibalize on your existing competitors reach that number one position, you think? I think in the end of the day, It will be a little bit of both because I think today there are grass areas that should be maintained better that are not being maintained because It's deemed too expensive and robotics might actually expand the market in that way. That's just a hypothesis. But of course, the big shift would be to there's a certain amount of grass being mowed, Would be to replace the conventional mowers with this way of mowing. I guess what I'm circling around is that if I estimate correctly, So the 2 largest competitors perhaps sell combined volume of, say, 2,500 units per year or something. So I'm trying to see if My estimate for around 3,000 units for Europork next year for Siora seems correct. Would you comment on that? I wouldn't comment on the specific numbers. I think what we can say though is that the commercial turf industry is a big market and it's a big growing market. And today, we are really not in that space, But with Siora and some of the other robotic products, we can now start to address that market, which presents for us a huge opportunity. However, we need to be a little bit humble in terms of how quick we can build this out because ultimately, we have to disrupt the markets. Yeah. Lastly, I was actually visiting Tottenham White Hart Lane the other weekend For a game, and if I'm not mistaken, they already use your 500 series for mowing the grass. So I was just thinking, looking at the pipeline, do you think that there's potential for sort of a blockbuster Deal where you get some very renowned club or course that will bring perhaps a little bit more focus on this, both from, I guess, Prospective customers, but also perhaps from investors and so forth. Yes. I'm glad you spotted that, Christophe, that's good. And it's particularly is on their trading facilities, by the way, at White Hart Lane. But you're right, there's some larger Soccer clubs were showing a large interest and it's quite a connected network when we look at the greenkeepers for The large football clubs, etcetera. So we feel it can gather momentum as the different clubs start to use it. We don't market it necessarily strongly. That's really the request of some of the clubs don't like us to use their names. So we don't choose to market it like that. But Given the strong community that they have, then I would expect it to start to gather some momentum. And the other piece is that The smaller clubs, the smaller teams normally follow the big ones. They're kind of influencers. So that's an important element of the strategy here to address the top tier Because the others, even though we can't advertise, they know what they are using and what they are doing. Right. Okay. Well, those were all my questions. Thank you. Thank you. The next question is from Johan Eliason, Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Hi there. Congratulations to a good quarter. I just thought we could return to the other part of your business, the handheld business. You mentioned double digit growth here for the professional handheld in the quarter. Is there a specific reason? Is there a new product being launched? Or is it the market that have done well? What's sort of the reason for that growth in what I understand is sort of a more of a stable business over the years? I mean, the market has been growing here during the year, but we're also taking shares in this segment. And part of that is that we have a much more bigger focus on this these days to build that out and to really be the supplier of choice, a preferred supplier into that segment, where we might for a few years been a bit too distracted internally by robotics. So we have built over the last few years a stronger focus in that area again, and we have launched a lot of Really good products into that segment as well. So I think it's a combination of the market growing, us having a greater focus on it And that we are launching good important products into the segment. And these products, Are they in any meaningful way battery driven products these days? It's a little bit of both. If you talk about if you take chainsaws as an example, you can say that chainsaws goes into 2 segments. Let's call it harvesting, where you really work out in the forest. And then you have what we call urban tree care with a lot of arborists, etcetera. And when you talk about arborists, I mean, they are converting very quickly towards battery, and we have launched several important products there that are actually tailored for that end to end for that application. Whereas in harvesting, its battery technology still doesn't lend itself To making a good change, a big chainsaw that you use out in the woods. But that will come, but technology is not there yet. And then the size of those two segments, how would you compare them? I mean, If I would be rough, I would say that harvesting is about 2 thirds and Urban Tree Care is 1 third roughly. Good. Then I go back to your robotics and battery handle, which you claim is now 18% of Rolling 12 months turnover. I get that to be around SEK 8,000,000,000. Now I think you have sort of indicated historically that the consumer robotics mark It is somewhere SEK 7,000,000,000, SEK 8,000,000,000 or so. And I suppose you don't have 100% of the consumer robotics market. So that leaves It's either a very big chunk of professional robots in that number or a big chunk of battery handles. Is that correct? Or where am I going wrong? I mean, we are not in a position today To share a lot of specifics, but I think it's not far fetched to believe that our battery handheld is also a meaningful business. Okay, good. Then I was Just wondering on the placings and the price discussions You're having with the big retailers right now on the sort of retail distribution channel. Are you happy with it? Are you getting through what you need also for The upcoming season where I guess the raw material headwinds will be even more significant. I mean, as you can imagine, it's never easy to pass on price to any customer. And we don't like doing it either because obviously, We want to be as cost effective as possible with our customers, but they're simply forced to do it. And I would say that generally speaking, there's a greater understanding these days for the general situation in the world. So that's more of an acceptance for it. We are committed to That for 2021, we will offset any raw material impact through price increase, and we are committed in 2022 to offset any raw material and logistic cost increase. And Where we are in these different negotiations, etcetera, builds strong confidence that we will be successful here. And you're satisfied with your placings in general ahead of the season as well? Yes. I would say, generally speaking, we are rather Increasing listings than anything else. Okay, excellent. Thanks. The next question is from Bjorn Anderson, Danske Bank. Please go ahead. Your line is now open. Yes. Thank you. I have a question on Briggs and Stratton. And if you can say something, what would be a positive outcome for you? Would that be That you received engines or that you have a financial compensation? Or what would that mean? I mean, our main priority is, of course, to secure supply so we can support our customers and our channel partners. So that is the main priority for us and that we can get enough engines from Briggs To be able to do that. And that is what you are a little bit optimistic about? That is clearly the ambition that we have. Okay. And If we would assume a worst case scenario, I would assume that the SEK 2,000,000,000 would be, I mean, normally distributed according to your Shinality, I mean, mainly impacting Q2 and Q1. So that's fair to say, Bjorn, yes. Yes. These are, of course, long care products are more H1 affected, so absolutely Q1 and Q2. And do you have any Feeling for when you will have a better visibility on how the outcome will play out? Well, we don't. I think at this stage, it's It's still too early to say. And as we know more, of course, we will start to share more. But it's still very much going through the legal proceedings. But this 2021 or I guess? We would like to start seeing supplies flowing into our facility at the end of this year. So we can start producing ahead of next year. Okay. Thank you. Then I mean, as addressed previously, you don't Give us too much intel on segment profitability, etcetera. But I believe through the years, you have at least indicated that at CMDs, etcetera, And that profitability for certain segments like robotics, ordering and battery handheld has a Pretty good profitability versus group average. And these are segments also that are growing better than the group average. And given that group margins are where they are today and given that There you have a little bit more cautious margin target. Wouldn't it be I mean, if you believe in your Story to grow the best segments and the best channels, wouldn't it be fair to have a little bit more of an ambitious long term margin Ambition? Let's see, Bjorn. Of course, we're in a significant transformation phase, But your rationale seems reasonable. We do have higher margins from our robotics products. Is EBIT margin accretive as is watering. Battery products is on par with petrol equivalent on the professional end Slightly lower on the consumer related battery products, just to clarify that one. But I think the rest of what you said, We follow your thinking, and let's come back on that. Perfect. And last question would be on Traction. And if you can give some comment on the M and A impact on profitability last quarters For this quarter? Yes. Is that possible? Yes. Is that possible? And the dilution effect from integration cost or just mix? It's both actually. So as with most of the construction acquisitions, we've had some integration effects. We don't normally call out, but we say it's an affecting both the gross margin as well as the EBIT. But also the product mix at the moment is a little bit Dilutive as well. But we remain committed that within a 3 year, I. E, within 2 more years, this should be EBIT margin accretive to the group. And everything is going towards that plan, for sure, on plan. Great. Perfect. That's it. Thank you. The next question is from Frederic Malgaard, Pareto Securities. Please go ahead. Your line is now open. Thank you, operator. Good morning, everyone. So there's a question on Gardena on my side. I mean, 5% organic growth this year On top of a very strong Q3 last year, could you shed some light on the on what is driving that growth? Is it You guys adding more channels, expanding to additional markets? Or are you actually growing year over year on sort of the same customer base you had last year? It's generally yes to the question, but let's be a bit more specific. Gardena is taking shares in most markets and segments. So that's one part of it. The Other piece is the strategy of geographical expansion. We should remember here that during this year, Particularly in Q1, Q2, there was a very soft watering season for Gerdene in its core markets. Yes. We also on the news, all the waterfall and the floodings, etcetera, in Germany, Holland, Belgium, etcetera. Of course, this was not the ideal year for ordering products. But Gardena has still been able to hold up revenue and profitability by growing outside those core markets to a large degree. Over the last few years when it comes to hand tools, that was not quite in focus historically. So that's another reason. So it's actually a lot of different things at the same time here. I would say that Kariana is strong, has a very good strategy that is really Working well in the marketplace, and that's what's behind the numbers. All right. Is there any chance to size these buckets up against each other? Which one is the main contributor As opposed to the other ones being perhaps a bit smaller? It would Be the geo expansion aspect beyond the core markets, where we're getting the main growth in the division. All right. Thank you very much. The next question is from Kari Rinter, Hamburg Sudhakhen. Please go ahead. Your line is now open. Yes. Thank you very much. A 2 part question on Siora. Firstly, about this sort of Early feedback that seems to be outpacing your expectations. Is there a typical customer type that is responding in most positive way to the value proposition that Sierra offers. Any early insights on that? I wouldn't say that there's one in particular standing out. But if I would mention 3, I would say that sports, Turf, golf courses and let's call it general properties, A company that has a large area that is need to be taken care of, etcetera. So I would say those 3 are probably the ones standing out. All right. That makes sense. And then a follow-up on that. Given that, do you feel that you have the what it takes to sort of build this business in across the most important markets? And here, I may be thinking About both in Europe and in the U. S? Or do you feel that you maybe are lacking in some of these potential customer groups in any geography? I think this, to a large degree, needs to be a disruptive play and that we need to come at this in a new way from how this has been done historically. I think we need to be much more of a direct model and build that together with some specific dealers that are real experts into this. So that's a little bit different. And to drive this in a good way, that will require some investments on our side. So that is something that we are in the midst of taking the first steps now going into next year. So There's some investment needs here going forward to not because what we learned with in the residential case is The normal channels are a little bit slow to act and to disrupt the market. So to try to speed that up, we want to have more of a direct role in that, particularly since the number of customers are much more limited Then on the consumer side. Okay. So about the U. S. Specifically, would you say that the sort of the learnings So far from consumer robotics have sort of maybe pushed you towards having this more proactive direct approach to entering this market? That's one of the reasons. I mean, what we have done in the U. S. During this year, basically resetting from only trusting dealers and retailers to make this conversion of the market to more and more go either direct online or with our own people on the ground has proven successful. And it's something that we want to scale and that's part of the reason. But we have also done a lot of research and we have a lot of experience in the Pro segment as such with other products that we sell today. So there are multiple reasons for us to lean in that way. All right. Thank you. Very helpful. Okay. The clock has turned to 11. So I think if there are any Any questions or any other things, just please contact us on the Investor Relations team. But I think from that, we will thank you very much for participating in today's call, And we are looking forward to meet you at the Capital Markets Day in 1st December. So thank you very much. And with that, we end the call as of today.