Earnings Call: Q3 2020

Oct 20, 2020

Hello, everyone, and welcome to the presentation of Husqvarna Group's report for the Q3 of 2020. My name is Johan Andersson, responsible for Investor Relations at Husqvarna, and I will be the moderator here today. On the call, we have Henrik Andersson, our President and CEO and our CFO, Glen Instone. Henrik and Glen will present the report, and afterwards, we will open up for questions. And let me also remind you that this session is recorded and will be later published on our website. So with that, welcome, and I will hand over now to Henrik. Thank you, Johan, and good morning, everyone, and also warm welcome from my side. All in all, we delivered a record Q3 as we continue to win in our core categories. Net sales are up 22% in the quarter, and the growth is really strong across the border here, but particularly strong in robotics, battery and in the watering categories. In the quarter, the Husqvarna and Gardena divisions benefited from an extended season created by favorable weather conditions. And of course, there was, to some extent, also a COVID related stay at home trend that benefited, so to speak. But it's also important to note that we are taking shares in this very strong quarter. And when we talk about the COVID impact or potential COVID impact, I think it's also important to look at the 1st three quarters of the year combined. And then our sales up 5%, indicating that COVID, to a large degree, has meant a shift of volumes in between months and quarters this year. I'm also very proud as to how the team has managed to deliver on this strong demand and actually being able to take market share in this kind of strong market. And I can assure you that it has been a big effort. All in all, we also delivered a record high EBIT in the 3rd quarter, SEK 997,000,000, which is more than twice as much as last year. And we now have a margin of 10.4% in the quarter. This profitability improvement is largely driven by the leverage we get on the top line growth, but also by improved product mix and good cost control. Another strength is our improved direct operating cash flow. As we can see here for the 1st 9 months or after 9 months, we had SEK 6,300,000,000 compared to SEK 3,800,000,000 last year. And this is, of course, a result of the improved profitability, but also good inventory management. And all in all, we have been able to strengthen our financial position and reduce our net debt by over 60%. And this, of course, puts us in a very strong position. And as you know, later this week, the Board has proposed to an extra meeting here to reinstate the SEK 2.25 per share dividend. So that's one of the benefits from this, of course. Another benefit is that we can step up in our strategic investments and accelerate our strategy, but that's something I will come back to later on here. And finally, on this slide, it's also good to see that we continue to develop well in Robotics and Battery, 16% of group sales. And here for the full year, we have a double digit growth in this very important segment. If you zoom out a little bit and look at our performance on a rolling 12 months basis, we can also see that we due to this very strong Q3 is reaching our financial target of being above 10%, which is of course a milestone and something we are very, very pleased about. With that, I will hand over to Glenn that will give us some more details as to our performance here in the Q3. Thank you, Henrik, and good morning all. So if we start with the Husqvarna division, net sales in the quarter are sequentially by 27%. That's adjusting for FX and a minor amount of consumer brand exits in the quarter, really driven by a strong growth in all regions and particularly strong in the segments of robotic and battery solutions. A couple of products to call out, I would say that have been extremely successful this year are the new robotic Ultomower, our AUTOMO 305, and that's sort of €12.99 level product and also a pro battery solution that we launched this year, our 40cc equivalent in battery, both being extremely positive and well received in the market. Of course, as Henrik mentioned, we've had some positive effects this year from the prolonged season, particularly, favorable weather conditions that has supported the Husqvarna division in most of the categories there. And to some extent the stay at home trend, which also supported the Q3 situation. All in all, that brings up Husqvarna division in the quarter to an operating margin of 8.9 percent, some SEK 543 million versus 1.6% in Q3 last year. For the 1st 9 months then on a year to date basis, we're actually up 3% in the Husqvarna division. And I think this really represents how things have moved between the quarters this year. So it's very notable that we should look at the year to date position given how volumes have moved between Q1, Q2 and Q3. So we would say it is somewhat normalized 9 months when you look at it in totality. So for the 1st 9 months for the division, therefore, we have an operating margin of 11.7%, really driven from a positive growth, positive mix and also some temporary cost avoidance measures that we took in light of COVID-nineteen. Moving over to Gardena division. And very nice to speak about this and other yet again another fantastic quarter. Net sales attribute 26%. This was really driven by an outstanding performance in all of the regions and the product categories where Gardena operates. The largest product category in the division is watering. It's been an amazing season and we've really made a significant effort to grow other categories such as hand tools and they've been extremely successful during Q3. So the results for the Gardena division moving up to 14.1% in the quarter, operating margin from 7.4% really driven from that strong growth, strong product mix and geographical mix. We've also launched many great innovations in the division this year, such as Aqua Bloom, which is an automatic watering system that has been very well received by the markets. During the COVID crisis, we did accelerate our online availability and e commerce availability and that has also really supported the growth in the division with double digit growth numbers. We're also seeing a very good traffic to some of our applications that we have that we interact with our end users such as My Garden. We're seeing an excellent traffic going to such apps. Of course, the Gardena division has been supported by the stay at home trends. However, we are convinced that there is an increased interest in the Gardening segment and we see a continued upward trend, which is really attracting the passionate gardeners out there in our markets. On a year to date basis, therefore, the Gardena division moves up to 19.9 percent operating margin from 15.7 so an extremely strong performance. Moving over to Construction division, which of course is our most cyclical division and the most macro affected division. Q3 has certainly seen an improvement. After a strong end to Q2, we've seen the continued improvement into Q3. So we're really pleased with that. We've been capturing share in many areas and we've certainly strengthened our positions. North America was particularly strong as was Asia Pacific and we've also seen growth in parts of Europe, the weakness really coming in the Middle East in the quarter. All in all, net sales increased by 5% in the 3rd quarter, but a particular strong focus on cost control and therefore you see the improved operating margin coming up to 15.3% versus 14.6% in the corresponding period last year. Also worth to note is inventory management. We continue to drive down the inventories in the construction division from a relatively high position, but that has also supported the cash flow generation in the Q3. Just to close off on the construction division, we have fully integrated our most acquisition, which was the power trial segment for Wacken Usen. And these products have been rebranded now under the Husqvarna brand and that has been a huge success in the marketplace. So moving on to the total group income statements. The detailed slides of this pack. As already mentioned, net sales extremely strong. Reported level it was plus 14%, but adjusting for FX and a relatively small amount of exited business it was plus 22%. Just to conclude on the exited business we see for Consumer Brands, we guided on SEK 2,200,000,000 for the full year. We were already at SEK2.1 billion after the first half year. So we've had a further exit of some SEK77 1,000,000 in Q3 and roughly SEK 60,000,000 in the Husqvarna division and the remainder in Gardena. Gross margin, you see it moves up from 28 0.2 percent to 30.6 percent. FX was actually negative in the quarter, mainly coming from translation and transaction effects, partially offset by hedges, but still we had a minus SEK120 1,000,000 to roughly a 1.4% margin hit. We had a relatively small amount of strategic initiatives hitting the gross margin, roughly SEK10 1,000,000. Then on the plus side, which really brings it up to that SEK30.6 million, we've actually seen a tailwind from raw materials and tariffs, giving us approximately 0.8%. The price management continued very strong into Q3 on a similar level giving us a further 0.8%. And that leaves just over 2% positivity that we see coming through from efficiency savings as well as the extremely strong mix. Moving down to the SG and A. We have actually managed to reduce our SG and A in absolute terms from 1963 MSEK to 1937 or moving down from 23.3 to 20.2 whereas we talked about the negative effect from FX into the gross margin, we actually have a positive effect from translation into SG and A, just over SEK 100,000,000 and represents around 1.3 percent of SG and A improvement. So all in all, FX was a minor impact on the quarter, minus 15%. So further explanation to the SG and A move. We did see some further investments into the strategic initiatives, SEK 40,000,000 SEC in the quarter. As said, we had SEK 10,000,000 into the gross margin, so SEK 50,000,000 in totality. That's representing about 0.5% of gross of SG and A. And that then really leaves the leverage effect that we see from our cost savings, but also from the volume growth of about 3.3% improvement in the SG and A. What I would note that before it is asked as a Q and A, we do see a higher administration expenses and a lower selling expense. Selling expense largely through to leverage effect, admin expense that we did take some additional short term incentive provisions in the quarter. Moving down the P and L, of course, the operating margin coming up to some 10.4% in Q3 and 13.1% on a year to date basis. In the quarter, finance net was much lower. That's really due to the lower net debt levels and particularly in relation to the lower interest levels, largely U. S. Dollar related. Tax rate was a little higher in the quarter than we've been guiding on. That was actually 29% versus a much lower last year. We did have some one off items last year and we have some smaller one off items this year. The mid- to long term guidance remains the same at 23% to 24% on the tax rate. Summing it all up, bottom line earnings per share actually increased by 143% in Q3 moving up to SEK 14 and then moving up to SEK 561 on a year to date basis, so over 10% increase. So moving on to the cash flow. As Henrik mentioned, extremely positive cash flow has continued throughout the course of the year, now at $6,300,000,000 from a $3,800,000,000 in the same point last year. Of course, the later season when we have the latest sales in Q2 has supported this with the cash moving into Q3. The additional operating results supports this cash with roughly SEK 500,000,000 and as mentioned, the inventory reduction is actually SEK 900,000,000 an improvement year on year, so really supports this. And also seen an improvement in the payables receivables position. CapEx actually slightly lower than last year, dollars 1,300,000,000 versus $1,500,000,000 and that is really the result of a slowing down during the first half year. We would expect we would move back to a normal situation beyond 2020. Moving on to the capital efficiency. Of course, we had a pretty, sad situation at the end of Q2 when we started 28.5%. We're now 26% of net sales and that's really the result of that improved inventory management and receivables management. 25% remains our target at the end as a financial target and we'd expect we'll start making further positive developments towards that during 2021. Moving over to the balance sheet. Main items to call out. Inventory were actually improved by some 21% versus prior year. There is a positive FX component within that roughly SEK 600,000,000. Adjusting for that, we are still improving by some SEK 1,500,000,000 or 15% versus prior year. Worth calling out, this is actually our 5th consecutive quarter of positive year on year inventory improvement. So we're pretty pleased with that. Receivables actually at the same level as last year despite higher sales. So strong inventory management and receivables management coming through. And payables a little bit higher there in the quarter due to the higher production levels at the end of Q3 versus the same period last year. What is worth to note, of course, is the cash and short term investment position there at SEK9.1 billion. I think it's really worth showing that strength on the balance sheet on that line that we're seeing right now. And we also, of course, have our undrawn revolving credit facility of SEK 5,000,000,000. Okay. And then Henrik also mentioned the net debt position, which we're extremely proud about. That is actually a 62% improvement. Of course, a big constituent coming from the improved cash from our operations, some $6,800,000,000 We have a little bit of improvement from the cash flow from the financing operations, SEK 500,000,000 minor movements, actually in the total scheme of things in pensions, a little bit of positive currency effect and then of course the dividend we paid in Q4 last year. But now we actually bring our net debt to EBITDA ratio down to 1.4, which we are we should be pretty satisfied with at this point. It leaves us in an extremely strong position going into 2021. At that, I will hand back to Henrik, who will talk about the future. Thank you, Glenn. And let's now shift gears, as you said, towards the future and focusing on the group strategy. As you know, we deployed a revised group business strategy here last year, and that is the right strategy. We are addressing the right things, and it's also fully embraced throughout the organization. And here on Slide 12 to the right, you can see the main parts of that strategy. It's about accelerating in robotics and battery, complementing our products with services and solutions, securing the development of our winning core and the focus on the customer experience. And all of this in a way that is also sustainable over time and supports our sustainability ambitions. And what we have done over the last 3 to 6 months is to review this strategy as to what are truly the vital few things that are the most important to focus on and questioning ourselves as to can we dial this up? Can we increase our ambition level? Obviously, sufficiently clear as to how we should execute and so on. And that is very much about what this acceleration is about that I will cover here in a bit. At the same time, we also see there is a solid long term demand for our products and services. And we are well positioned to lead our industry through transformational trends such as digitization, sustainability, electrification or servitization. There are a lot of trends affecting us and we believe we are in a great position to lead our industry through this transformation. Then talking about the areas to step up and to dial up. First of all, we say here, we are going to add another SEK 250,000,000 in investments into the strategic areas. And that's an increase about, give or take, 50%. And this will also support the transition towards a lower carbon footprint for the company as such. And the main four value creation drivers, if you would like, are robotics, battery, pro and watering. And this is where we want to really step up these investments. Before going through them a little bit more in detail 1 on 1, maybe an overarching reflection of them is that construction represented here partially by Pro and Gardena represented by Watering are very important to the group. And we would like to see a larger construction division, a larger Gardena division as a relative size of the group, because that is good from a mix perspective, but it's also good from a risk diversification perspective. So that's one element of this dialogue, so to speak. But let's go through them 1 at a time here. Starting with robotics, of course, the most important area for us. And here, if we simplify it a little bit, we just need to step up our investments in the product development side, but particularly in the go to market dimension. And here we need to have 2 different strategies, so to speak. 1 is for the developed markets where the robotic mower is already an accepted concept, where it's about taking shares and developing those markets. That requires one set of strategies and investments. And then we have the other big piece, which is developing new markets. And it's about how can we more quickly get to the tipping point of the market where the concept gets accepted and it start to snowball on its own, so to speak. And that requires a different kind of strategy and a different kind of investment. So that's a little bit what this robotics effort is all about. In terms of battery, same thing here, we need to step up our ambitions and our investments. And also here, we can simplify it. We're talking about 2 different approaches. In the let's call it the lower end specifications or the true homeowner specifications, It's more optimizing on convenience for the user. It's more optimizing on the total cost of a system. So here we will have a strategy of more partnership to make sure that the consumer can get a battery system that works for more than the out products that we can provide, but also for more things that they use around the house. And here, one example of this is, of course, Gardena that together with Bock founded a battery alliance, the powerful alliance. And already for 2021, all the Gardena products battery products will be on that battery platform, which is a significant step forward in this aspect. The other part of this is in the let's call it the higher end for the really demanding consumers and for the professional users, where it's all about best in class product absolutely tailored for the application. And this is clearly an in house strategy, where we will continue to refine and use our wealth of know how about applications and our users. So 2 very different strategies, but equally important that we need to step up here. Pro, one is, of course, to grow the Construction division. And here we have there is an opportunity to take our capabilities in construction and expand it into adjacent segments. That is one opportunity that we have been pursuing here for quite a few years. And that's something we can continue with. The other part to this pro effort is to try to get a more balanced Husqvarna division, where today the pro side is smaller than the consumer side, where we ideally would like to see them more similar in size, not by becoming smaller in consumer, but becoming bigger in the pro space. And that requires one set of strategies and investments. And then finally, we have Watering. I mean, we have all seen the remarkable success of Gardena over the last few years and particularly this year, and it has been very much driven by the Watering category as well, even though the success has been across the Gethiina segments. And we need to continue to invest into this segment. And one dimension that we want to explore more is how we quicker can expand Gardena's position into more geographies and more markets. So that's a little bit about the vital few to step change our investments up another 50%. And it's, capabilities, how we invest in our brands and in our commercial activities. At the same time, just like we use our strong position here now and our strong financial position to step change our investments into the strategy and to accelerate it, we also see an opportunity to do the same to increase our competitiveness. And in a few different dimensions, let's start with the handheld side, where we see an opportunity to really become more competitive in our supply chain. And it's about investing into increased automation in our facilities, investing into assemble more products close to our customers. It's also about investing in additional capacity as we continue to win in battery products. We need to also increase the capacity there. But it's also about streamlining and reducing fixed cost in some parts of our component manufacturing. So that's one activity here. There's also an opportunity for us after the 5 larger acquisitions we made the last 5 years in construction, particularly in that concrete surfaces and floors area to consolidate that footprint. So that's one activity. And then finally, there's also an opportunity for us to tune our organization a little bit for increased speed and execution. And fundamentally, we have been on a journey for the last 5 years of further decentralization, empowering the divisions, the business units to really run the business, making sure we make the decisions as far out in the organization as possible, as close to the customers as possible. And we now want to take one further step in this regard. Part of this is also to become even sharper in the focus in our group functions and our staff functions because they are, of course, super important. And one activity here is that we are merging some of the activities in the group functions into a new strategy and innovation function to really drive the strategic agenda in the group and together with the divisions. And one of the key rationales for this is that it's increasingly difficult for a tech company like ours to distinguish as to where does strategy end and technology begin because they're really intertwined. And that's why we believe that this is a good step going forward. If we then bring these pieces together, I will say that given our strong financial position, we can lean further forward. We can accelerate our strategy and we can invest both in the strategy as such and in our own competitiveness. But we want to do that in a smart way here where we, on one hand, realize cost savings, SEK 500,000,000 annually when we get the full benefit, which will be in 2023. And we will reinvest NOK 250,000,000 per year extra into the strategic initiatives to secure the future growth of the company. And that will then give us a net effect of SEK 250,000,000 per year in 2023. Of course, there will be some kind of a phase in here. So I would say that from a profitability perspective, it will be a net negative in 2021, net positive in 2022 and a full benefit in 2023. Glen can give us more detail here later on. One effect of this is a reduction of our global workforce with about 350 positions. And today, we can't be overly specific as to what countries and what sites because we must, out of respect of our employees, ensure that we have a proper process here with our employees and the unions in this and we're not quite there yet with all of that. However, we have made we are given some information about construction today and a small change in Sweden. Already now construction is a little bit further along in the process. So some other consequences of this. I mean, during this very special 2020 and from a COVID perspective, we quickly reduced our CapEx from the normal levels to, let's say, SEK 2,000,000,000. And we foresee now going forward that we will be back to the more normal level, SEK 2,200,000,000, SEK 2,400,000,000. At the same time, this also comes with a one off cost, SEK880,000,000, where SEK 500,000,000 is cash, SEK 380,000,000 is mostly asset write downs and mainly related to production assets. And the vast majority of this will be charged in the Q4 and the remaining bit in the beginning of next year. If we then continue here to the last and final slide, we are soon about to wrap up. Before we do that and before we open up for questions, let me summarize some of the main messages this morning. First of all, I mean, very strong demand in the 3rd quarter, very much boosted by favorable weather extended lawn and garden season. There is a stay at home trend that, of course, is benefiting us as well, particularly the Gardena. However, looking at the full year, that probably has a little bit smaller impact given that we are up 5% year to date. It's more a shift between quarters. We have managed in this strong market actually to take market shares in actually all the key categories. And we have reached this milestone of being above 10% margin on a rolling 12%, which is a clear achievement. And we have a very strong cash flow. And with this cash flow, the board is proposing a reinstated dividend, and we see an opportunity to really accelerate our strategy. Dialing up the strategy for 2019 is the right strategy. Let's just increase our ambition in some of the key areas and our investment and put the investments behind those, while at the same time making sure that we are increasing our competitiveness primarily in the supply chain. And all in all, this will give a net saving being a net positive as of already 2022, but the full impact in 2023. And of course, goes without saying, it's all about execution and that is now our focus. And with that, thank you for your time. We're now happy to answer any questions you might have. So I hand it over to you, Johan. Many thanks, Henrik. And once again, very sorry for the technical issue that we had. And as we understand it, it was with the webcast. So everyone that listening over the phone, you didn't experience, so to say, the sound issues that we had in some of the slides, especially in the middle here. But we will make sure that we do our best to provide a transcript after this call on the website. You can see what we said there. So but then, gladly, it was fixed. And now we can start with the Q and A session. So please, operator, let's see if we have any questions over the phone. Thank you. We will now begin our question. And answer session. And our first question comes from the line of Christer Magna Gor of DNB Markets. Please go ahead. Thank you. To start with congratulations for the above 10% margin. I've been covering this company for so long, so I'm almost a tear in my eyes to see it. The first question relates to the market, what you see for 2021. It's been a very strange season, of course, with a favorable weather and the stay at home effect. But what kind of market do you expect for next year? Hey, Christer, by the way, and thank you for your kind words. We're also, of course, very proud of the 10% here. Looking at the market for next year, of course, it's hard to predict. But I think from a COVID perspective, as I alluded to earlier, that it has been mostly a shift between quarters this year and we're up 5%. So ultimately, I think we feel really good about 2021. We are strong. We are taking market share. We have a lot of innovation in the pipeline. And we think that the market will grow slightly next year. And our ambition is to grow faster than the market next year. And the second question is related to the new increased ambition on the strategic initiatives. The SEK 250,000,000 extra, is that to support your strategy of growing 1% to 2% more than the market? Or is it expectations of stronger growth than that and accelerate growth even further? I mean, the financial target is still to remain on that 1% to 2%. We just want to make sure that we also prepare to what's beyond the near term, so to speak. This is really the strategic investments. And the final question relates to the inventory situation for retailers and dealers and also if you can comment on pricing and listings for 2021? I'll take that. Yes, the inventory situation as we see it is actually slightly lower than prior year in both geographies and both channels, I would say. Given the prolonged season into Q3, we have seen inventories continue to reduce in the trade. So that is our expectation and our understanding in both North America and Europe. In terms of the second question on pricing and listings for next year, this is very much the time of the year where we're doing that work and making agreements with our trade partners and they go very much to plan and very much in line with our expectations. And we would expect a continued positive price development into 2021 as we've proved in 2020. And that is very much our expectation both from list prices as well as the way we do promotional activity during the course of the year. Thank you. Our next question comes from the line of Johan Eliason of Kepler Cheuvreux. Please go ahead. Yes, hi. It's Johan here at Kepler Cheuvreux. Congratulations as well from my side. The 10% margin has been elusive for many years. Good to see it. Now I thought it was interesting, the program you announced this morning about your petrol supply chain and investments into robotics and battery handheld. Now if my numbers are right, I mean, still some half of your sales is related to petrol powered equipment, either chainsaws or wheel products. And we do learned that the battery and robotics is only 16%. I guess this shift will continue. Will this mean that you need to take continuous charges related to your petrol chain going forward? There's nothing we foresee right now. What we do now is to a larger degree to repurpose what we have to be able to grow faster in the battery segment. And if you look at your CapEx profile, we understand that robotics and battery are driving more R and D investments, which you partly capitalized. But for fixed investments, how does the CapEx profile look like for the robotics battery products versus the traditional petrol powered products? Of course, we do have a higher rate of CapEx on those units, given that it's a relatively new segment to us or a growing segment to us, but we haven't guided specifically on the CapEx rate per category. What I would say is, of course, that we expect to go back to a normalized CapEx rate and that's more to the SEK 2,200,000,000 to SEK 2,400,000,000 level for next year from the artificially low CapEx rate this year. So let's guide on the higher end of that range for 2021 as we further invest in our core categories. Good. Then on this, you want to grow the share of professional business in the Husqvarna division. Is it specifically to, for example, robotics that you want to roll out this in a bigger way in professional? Or is it just related to the traditional business? Or can you give any sort of insights what you're thinking on how to achieve that? Ultimately, it's both. But robotics is a big piece of it. We still see that there's a huge opportunity in the Pro segment, both when it comes to robotics and when it comes to our handheld products. So it's actually both. And when it comes to the robotics, we are also there then piloting new ways of going to market and like selling robot as a service or similar solutions. So there are quite an array of efforts into this, some more traditional in terms of building out our network, acquiring customer relationships and things like that. But others are to be more disruptive when it comes to the robotics and really transform that segment just like we are transforming the residential or the consumer segment today. So quite an array of different activities here. Okay, good. And then just finally, nitty gritty detail. I understand one of the U. S. Presidential candidates are in favor of hiking corporate taxes. And they obviously saw lowering a few years ago. But looking at your group tax, I couldn't really figure out the net impact. How do you see it? Because you have this set up with a lot of manufacturing still in the U. S. Will a hike to U. S. Tax have sort of any significant impact for you? I wouldn't expect so, Johan. I think we're pretty well covered in that respect. Of course, we operate a transfer price model, principal model. So we do have a profit sitting in the manufacturing facilities as well as the sales units, but the residual profit sits in our parent company in that respect. So I wouldn't expect this would be a significant change for us if we saw a tax hike in the U. S. Okay. Excellent. Thank you very much. Our next question comes from the line of Gustaf Hagaius of SEB. Go ahead. Thank you, operator. Good morning, guys. An additional question on the restructuring program announced this morning. Do you feel now with the restructuring of your petrol product division or business that you are ahead of the curve in term of your cost structure versus pursuing volume development going forward? I guess what I'm asking is given that the direction we're heading now with robotics and battery growing at the expense of legacy products, which you tend to point out, do you forecast that those $500,000,000 gross savings will be enough to actually improve the profitability in absolute terms in 2023 for Petro Products? It's an interesting question. I think 1st and foremost Gustaf, this is really about optimizing our existing footprint. So we do expect that we see further improvements in that. It's really about repurposing getting closer to the end users, but we are increasing the automation levels within our handheld facilities. I know some of you on the call will have seen that automation in the Husqvarna facility in recent years and we'll continue that journey. So to your point, we'll increase the automation and hopefully increase the effectiveness and hopefully the profitability as well. Okay, great. Could you just give us an indication of what is the run rate volume development right now for this business thus far this year? It's been very tricky. We've actually seen an increase on the handheld business this year after some years of fairly flat development. But we're still actually seeing even if we look at isolated petrol handheld for us, for the Husqvarna Group, we're seeing a positive increase during 2020. And with our launches in recent years on the 50cc, the 70cc chainsaw and more to come, we do expect to continue to improvement in the Dunantrafolks. Okay, great. And then these SEK 250,000,000 which will be reinvested, does this mainly relate to hiring of engineers or product development personnel? Or are there other pockets where you will deploy these costs? And in addition to that, my guess is that it's Husqvarna and to some extent the construction division where these costs will be taken out. But is it also the case that, that is where you will add these incremental costs? Or will they be also affecting Gardena or other places? I mean, where we will increase is in those four areas robotic, battery, pro and watering. And part of that is in product development and R and D, more engineers, more spending in those categories. But part of it is also in the go to market dimension, where we want to spend more money behind our brands. And we want to up our commercial activities, because a lot of this is also to drive it in the market, not just to make the product, but to really drive the change and develop the market. So it's a mix between those two components, I would say. All right, great. Thanks. And finally from me, curious to hear a little bit about sort of the development for your robotic lawnmowers for professional use. Any comments from your customers where you're having trials? Is there ready to go on sort of a broader implementation of your products there. I guess airports are not the greatest end customers right now, but I guess golf courts and others have had a better year and perhaps would be looking to invest in something like this? Thanks. We are testing several different segments of the market and also through different business models. And so far, I would say it's a remarkably strong feedback and positive feedback. And in some of the areas, the challenge is more that the customer need to change their behavior, how they run their business to get the full impact, whereas in others, it's more straightforward. At the same time, they immediately see the benefits because labor is still the biggest portion of the total cost for the professional users. And in many markets, also difficult to get to hire and find skilled labor to do these activities. So the rationale is very clear. And in some applications, we can slot straight in. And others, they need to change a little bit how they operate to get the full benefit. And there we need to take a much more active role, of course, trying to help in that process. But generally speaking, very good feedback and we see a lot of opportunity Our next question comes from the line of Bjorn Ersund of Danske Bank. Yes, thank you. A few questions. You are highlighting in the Husqvarna division, the aftermarket and accessories. If you can give a short comment on whether this is a positive contribution from chains or chains or an update there, please? And then secondly, also if you can mention mention how the ongoing investments to drive robotics in the U. S. And the U. K. Have been developing during the season? Thank you. Maybe I start and you can chime in, Glenn. I think when it comes to the parts and accessory business, it is strong across, but it is actually particularly strong when it comes to our own saw chain. So there's a strong market acceptance of those and really a pull from the market there, which we are extremely excited about. So generally strong, particularly strong in our own sort of chain, so to speak. And then the second question in terms of robotic mowers in the new markets, particularly the U. S. And U. K. I would say that this is still progressing. We are still making headway. Unfortunately, if you say like that, it's still from small absolute levels. So it doesn't really stand out in the bigger scheme of things, but we are on it. And it's something that will be part of this acceleration we're talking about to try to speed that up further because it's all about reaching that tipping point when a concept gets accepted and it starts to snowball, so to speak. And we need to make sure we shorten the time to that tipping point, so to speak. And in the U. S, is that certain regions that you are addressing to get this move faster? Or are you quite broadly in your approach? I would say that initially we have been fairly broad. And I think going forward, we will probably put the additional investment to acceleration more focused to a certain area to really get to that tipping point. And when you reach that tipping point, we can move to the next area, so to speak. So I will say that in the base, it's a broad approach. But with additional investments, we will become much more sharp and try to accelerate it quicker market by market. Perfect. Thank you. Our next question comes from the line of Kari Renter of Handelsbanken. Please go ahead. Yes. Thank you very much. And starting on your cost saving initiatives, it would be very helpful if you can give us some numbers on some specifics like you talked about increasing the automation rate. So it would be helpful to have some sort of ballpark of where you are today in terms of automation rate and what kind of improvement can we expect by 2023? Then this reallocation of volumes, is there any sort of geographical split here? Is this more about Europe or more about North America? And then finally, if how many factories do you have today? And do you expect the number to be unchanged, lower, higher in 2023? That's my first three part question. Thanks, Kari. Let's start with the automation question. I'm just taking all your questions here. So the automation question, I think it's difficult to answer. We have our facilities are in quite different positions of the automation maturity. I know some of you have seen the automation in facilities like Husqvarna's plant and also the Ulm plant. So we're further along the road in some of them, also in our robotics facilities in Aitcliff and Czech Republic. So this additional measures that we're taking will increase the automation in our facilities, notably further automation in the Swedish Husqvarna facility. But to give an exact percentage, I think it would be I'd probably be guessing actually at this point in time. So let's come back on how far along the automation we are, but I don't think we have a good figure to give right now. From a regional perspective, this is really a truly global footprint that we've looked at in relation to our handheld. I think you're aware we have facilities literally from Japan, China, certainly across Europe and then into U. S. And even down into Latin America. So we're truly global in our handheld footprint. I really want to, as Henrik mentioned in his presentation, get even closer to our end users and have more agility flexibility in our facilities to support those our end users. So I would call it a truly global effort. I wouldn't say it's particularly related to region A or region B in the world. In terms of number of factories, I would say the same. This is not about reducing the number of factories we have. This is about optimizing the footprint we have. Of course, I think it would be extremely naive for Henrik or I to sit here and say we're not going to reduce factories. We'll continuously look at how we can ensure that we remain competitive. But these measures we take are very much optimizing out the facilities we have in the group. Fair enough. Very good. And then shifting gears to the growth investments or priorities that you have. I think it's very clear when it comes to battery and robotics that it's a combination of in house and partnering investments, but very much still organic growth. But what about in Watering and in the Pro business, especially in the construction, is there room, scope management time for M and A during this period from today until 2023? M and A should always be part of any strategy, but it's more to boost what we do organically. And I think construction has been one good example where we have really had a strategy like that and it has developed extremely well. And I don't see that we have exhausted all the opportunities in construction. I think it's something for the division to continue to look at. Now we're bidding off 5 fairly big ones in relation to the division over the last 5 years, come very far with how we have integrated them. And I think at some point, here, of course, management will start to look at for look at further opportunities. But I don't think that that's always inherently uncertain. So it's very hard to be precise about it. But that's clearly the ambition to continue that winning strategy in construction and see if we can find more opportunities. All right, fair enough. And then finally, a small detail, the selling expenses were down 9% year on year. You mentioned that the leverage helped you when it comes to SG and A. But the fact that they were actually down on absolute basis must be something beyond the leverage effect. You mentioned FX. But I guess the question is that how much sort of short term one off there was in terms of these low selling expenses. And yes, you have guided an increase in go to market activities next year. But I guess the question is that how much will the selling expenses then start to grow next year? Or is there something that is sustainably lower when it comes to SG and A also going forward? Certainly during Q2, Kari, we talked a lot about cost avoidance measures we took in light of COVID. And those cost avoidance measures, of course, sit in both the gross margin as well as the SG and A. And we've continued those cost avoidance measures into Q3, given that there was still uncertainty in the world. So there's probably roughly SEK100 1,000,000 of cost of volume sitting in our Q3 results. I would expect we would reverse part of that into next year. That does sit, I would say, between selling expenses and the gross margin lines. You can probably say fifty-fifty as a rough guidance. We do have some leverage in there. And as you said, we do have a positive FX. So there's roughly in that SEK140 1,000,000 reduction, we see just over SEK100 1,000,000 positive FX sitting in there. And then you could say roughly SEK50 1,000,000 is sitting from cost avoidance. And then we have had a lower marketing spend than maybe we would normally be running during the Q3 as well. So we would expect to reverse a large element to the cost of OIBDA probably some 2 thirds to 75%, something like that. Great. And FX, obviously, I can't guide on particular FX, how it will impact SG and A versus gross margin next year at this point. Good stuff. Thank you very much. Our next question comes from the line of Karl Oskar Bravingen of Berenberg. Hello, Karl here. Just On the €250,000,000 that you expect for strategic initiatives going forward, are you expecting to capitalize this or will this be fed through the P and A? No, that SEK 250,000,000 of increased spend is OpEx as we see it. Okay. Thank you. That's all for me. And we have no further questions at this time. Please go ahead. Perfect. Thank you very much. And let me also once again apologize for that. We had a bit of technical issues with the ones that listened in over the web interface during the call. And I think it worked much better for those who listened in over the telephone conference. But I think it was sold and at least the Q and A was and the last part of the Q and A was working smoothly. So very much a polish for that. And just to mention, then we have a roadshow here in Stockholm with DNB tomorrow. So there we have an open call. And also on Thursday, it's more targeted with Nordea. So there are opportunities to listen in once again on a conference call if you feel that you missed part of this today. So let me know, and we can help you with arranging that one. But otherwise, thank you very much for dialing in and listening in over the web today, and we appreciate that very much. And let's then connect the next time, if not earlier, when we report the Q4 numbers in 2021. Thank you very much.