Earnings Call: Q1 2021

Apr 22, 2021

Hello, everyone, and welcome to the presentation of Husqvarna Group's report for the Q1 of 2021. My name is Jan Andersson, responsible for Investor Relations at then CEO and our CFO, Glen Instone. Henrik and Glen will present the report, and afterwards, we will open up for questions. Let me also remind you that this session is recorded, and we will later publish it on our website. So with that, I hand over to Henrik. Thank you, Johan, and also a warm welcome from my side. We are pleased to present A record Q1 here today and a very strong start of the year. Before we dive in To all the details here, let us first highlight a few of the main themes here. We anticipated a strong first half of the year and a slightly more challenging second half from a growth perspective given How COVID-nineteen reallocated volumes between quarters last year, so to speak. But we can also say that the strong momentum that we have developed over the last few years really followed with us into the season and It was further supported by expanded listings and new product introductions, and we are now very well positioned Going into the gardening season. Also very happy to see, of course, that the Q1 also is a record 1st quarter, both in terms of a top line perspective and from a bottom line perspective. Ultimately, we are executing on our strategy, And that is paying dividends. We can see strong growth in all the key categories. So all in all, A good start of the year. There's, of course, always some uncertainty and some unpredictability given the global Pandemic, but overall, we feel very well positioned and off to a good start here. If you sum out a little bit, We can also see the kind of transformation that we are on as a group. Looking at the last 8, 9 years here, you can see a gradual improvement of our performance. And we have and that's based upon An inherent transformation of the company, of course, with slightly different focus during the years. In the early years, it was mostly around Product cost out, focusing on less but more powerful brands. It was about creating a divisional Structure so we could execute well, etcetera, etcetera. And over the last few years, the main focus has been on really driving A favorable mix where we have down prioritized or even exited less attractive segments, and we have really Increased the prioritization and the focus on the truly attractive segments. And this has inherently led to an improved Mix in the company. Of course, if you look at 2020 in That's also an element of a stay at home effect and also temporarily cost control and things like that. But as you can see on the graph, the underlying business is shifting, is improving and And it's because of the transformation beyond. If we don't dig into a little bit more details And looking at the Q1 from a sales perspective, very strong, up 24% organically. As you know, The Construction Division acquired last track, which would add another percent here if we include that. So Totally, 25 percent in terms of growth. And as you know, when it comes to particularly the Gardena And the Husqvarna divisions, the Q1 is, to a large degree, about preparation for the season. And what we can see is, of course, That through expanded listings, etcetera, that our channel partners are, to a larger degree, partnering up with us in preparation for this season. But we can also see, which we also anticipated and talked about during our prior calls, that the inventory levels were lower than normal In the trade, and of course, there has been a fill up during the Q1 here. From an operating Income perspective, we reached SEK 2,300,000,000 versus SEK 1,400,000,000 in prior year. This is largely driven by getting leverage on our top line growth, the improved mix, but also cost control and And good price management. So we have been able to increase the profitability by 61% despite The headwinds that we are facing here with raw materials and logistics. From a direct operating cash flow perspective, We were positive SEK 143,000,000 versus SEK 132,000,000 negative last year. And that, of course, then further strengthens our financial position. And as one consequence of that, I mean, the AGM approved a dividend of SEK 2.4 SEC, with onethree being paid in April and twothree in October as usual. Then the key metrics that we normally follow, which is how we're developing when it comes to robotics and battery, And here we can again see that we have grown these segments faster than the group in general. We are now at 17% of group sales on rolling 12. And really reassuring is to see how now the Pro segment is stepping up, Not just from a growth perspective, the growth are high, but it's now starting to amount to a bigger portion of the business. So It's now something that you actually can see also from an absolute terms perspective. So So that's a little bit as an introduction, and I'll now hand over to you, Glenn, to put some more colors on this. Thank you, Henrik, and good morning to all. So let's dig a little deeper onto the divisional performance if we can. Starting with the Husqvarna division. Net sales were up 21% compared to last year, actually 10% as reported, but 21% FX adjusted. Very strong growth in all categories, as Henrik alluded to, notably robotic and hand held products, both gas powered and battery powered hand held products. And of course, with those product growth areas an increase in the associated accessories. Also from a geographic perspective, all regions have shown a solid growth in the period. Pleased to say that we launched a further 2 robotic models in the quarter in the Husqvarna segment, particularly in residential. Models are called the 405X and the 415X and they have been extremely well received by the market. Q1 is, of course, by and large, a sell in quarter as our dealers prepare for the upcoming gardening season. And of course, this started from a relatively low inventory level, so we've seen an increased level of selling. Operating income increased by 58% to 17.4 percent EBIT margin from 12.2 percent, so an impressive leverage on the sales growth as well as a very The division has managed to offset headwinds from FX, that's roughly SEK 55,000,000 in the quarter and raw materials, roughly SEK 20,000,000 As well as increased logistics costs. On a rolling 12 month basis, the division then grows has grown by 12% organically from a top line perspective and some 50% in operating income terms, so notably above our 10% operating margin. Moving over to the Gardena division. The division continues with an extremely positive growth journey that we've seen for several years now. Sales were actually up 37% in the quarter. Growth was strong in all product categories, but particularly strong for watering solutions, Robotic lawnmowers and hand tools, where the division has continued to strengthen its market positions. We also had a product launch within the Gardena division in the robotics area, and that is our Salina CT MiniMO product. Worth noting, apart from our core markets, The DACH markets that are very strong where Gardena plays, we also seen actually an over even stronger Percentage growth in our focus markets. So the investments in those markets are certainly paying dividends now. Strong sell in, again, pretty much like the Husqvarna division. The retailers are preparing for the season I'm coming from a relatively low inventory position. So we continue to increase the inventory in the trade. The earnings for the division actually increased with 64% in the quarter to a pretty impressive 18.7% EBIT margin, Of course, benefiting from the solid growth, improved mix, and actually managing to offset negative FX of some 45 And raw materials of 2020. On a rolling 12 month basis, then an impressive 26% sales growth, I would say, And more or less doubling the operating income, that growing with 94%. Moving over to construction, really pleased to see the continued recovery for the construction division. That was the division which was most negatively impacted by the COVID situation. Q1 organic sales growth was 14% And then we had a further benefit from the Blastrack acquisition that would add a 9% into the comp year on year. The market situation has improved for the construction industry in the Q1, and we firmly believe the division is improving its market positions. All regions are showing a solid growth, North America, Europe and APAC. The margin did improve Significantly on that organic sales growth by 55% to some 12.2 percent EBIT margin. Sales growth and improved mix, offsetting the headwinds from FX and Logistics. On a rolling 12 month basis, then sales are more or less Slats at minus 1%, so a clear recovery from the figures we saw back in Q2 last year where we were trending at minus 18. And I think more importantly, the operating margin is back 11.7% from 10.8% at year end. A new chart we thought that would be helpful to bring into the equation for the quarterly calls is the EBIT bridge To depict the various drivers that we usually talk to each quarter, an EBIT improvement of 61%, Coming up from 11.7 percent EBIT margin to 16.3 percent. Of course, notably market driven improvements, which is the big bar there on the left hand side, depicting the volume mix and also the internal efficiency program. So generating over SEK 1,000,000,000. However, price continues very much in line with what we guided on previously. It's SEK115,000,000 in the quarter or roughly 0.5 percent on margin. Worth to note that we do actually plan on taking further price increases during the remainder of the year given the headwinds that we're Seeing in raw materials and logistics that I'll talk to you in a second. We continue to expand in our strategic initiative area, And this was approximately SEK 100,000,000 in the quarter or a negative 0.4% on the margin. Raw materials, relatively low so far this year. The impact at SEK 40,000,000, that's pretty much split between Husqvarna and Gardena divisions. We do revise our full year forecast on raw materials now to be SEK 350,000,000 to SEK 400,000,000. Point to note that that is largely going to be a H2 headwind for us. FX in the quarter was 135,000,000 negative. Our full year guidance is pretty much in line with the previous expectation. We say SEK 300,000,000 to SEK 350,000,000 in negative FX. Worth noting that around 75% of that will come in H1 and 25% in H2. Moving over to the seasonality, and this is actually a coffee taste of what we showed in the Q4 report. It's more just to really I'll reiterate the slide that we showed there last quarter, showing our seasonality profile for sales and earnings. Of course, the periodization Was significantly different in 2020. And I want to really point that out. So Q3 is the quarter that stands out last year, where we really benefited from that Extended weather season, extended demand season due to COVID, largely catching up from Q1 and Q2. So please have this in mind as you think about the profile for this year. Moving over to the cash generation, I'm pleased to say we continue with a positive development. We're actually plus 143 this year versus minus 132 last year. Worth pointing out actually, we actually have a slightly negative impact In working capital from the Blast Track acquisition so far, it's approximately SEK 240,000,000. So if I looked at true like for like versus last year, We're closer to SEK 400,000,000 on cash flow. Of course, the big drivers here are the improved EBITDA, SEK 850,000,000 Inventories more or less in line with prior year in terms of the buildup SEK 100,000,000 improvement. The increased sales do drive a higher AR number of SEK 700,000,000 negative. And then the payables is very similar to the prior year. And CapEx is also in line with prior year. Just on CapEx, we will remain with the full year guidance that we previously give, which was very much in line actually with the original 2020 plan, which would be around about SEK 2,400,000,000 for the full year. Capital efficiency, we're extremely pleased that this continues, pretty nice line downwards there to 22.5%. And of course, we're coming from a tough position, what, 12 months ago, but certainly at the end of Q4 Last year, we were at 24.4%. At the end of Q1 2020, we were at 29.4%. Significantly supported by the increased sales, of course, But also improvements to the working capital as we've mentioned in recent quarters. Q2, we'd expect Should continue to show good development here. And then of course, we have to maneuver some headwinds in H2 as we have a pretty tough comparison to the prior year, particularly sales wise. Moving on to the balance sheet. The main items to call out, inventory being some SEK 1,200,000,000 lower than prior year or 11%. Actually, FX is around 8% to that 11% improvement, so a 3% year on year comparison in true terms. It's our 6th consecutive quarter of inventory improvement versus the same quarter in the prior year. As mentioned, receivables do increase in line with the sales development and trade payables in line with the production levels going up in the quarter. Worth to note that we have paid down some additional debt since the quarter end, approximately SEK 1,500,000,000 And we intend to further pay down about SEK 1,200,000,000 in the remainder of the quarter. And as Henrik said, a dividend was approved And we paid the first third of that dividend, which is around about SEK 450,000,000. That happened during April. Before I pass back to Henrik, just a snapshot on our net debt to EBITDA. We're now at NOK900,000,000, so we're extremely satisfied with this. Of course, significant improvement in the net debt, as Henrik mentioned, now reducing to SEK 5,300,000,000 versus 11,600,000 in the prior year, mainly coming from an improvement in the cash from operations, A slight positive coming from the cash flow from financing. Pension discount effect, slightly negative SEK 400,000,000 Positive currency effect in the net debt of SEK0.6 billion. And at that, I will pass back to you Henrik. Thank you, Glenn. And let's then shift gears a little bit and also discuss The longer term, a little bit. We are delivering on our strategy. We are on the transformation. We have seen this Pictured quite a few times, of course. But let me still Repeat a little bit of it. I mean, ultimately, it's all about customer experience and getting closer to your customer and create more intimate relationships, While we at the same time are transforming the company towards more on robotics and battery on one hand And also where we are expanding our offering beyond traditional products into services and solutions. And then, of course, All this rests upon a winning core. And sometimes I get the question, what is a winning core? But You can say that. I mean, you have the whole Construction division, the whole Gardena division. You have the professional Part of the Husqvarna division that we think of here to a large degree. And then of course, this in the epicenter of this is sustainability and our sustainability work, not just Because it's the right thing to do, but it's ultimately about securing market leadership over time. And the reason why we call this Sustainnovator is really that we're combining our passion for sustainability with our innovation capability, And that's how we are framing it and how we're focusing on it internally. And We in the last report, we closed the books on Sustainability 2020, which was a program that we set out, a 5 year program set out with very, very ambitious targets. And we really moved the company in this dimension during those 5 years. And then we kicked off Sustainably 2025, where we set 3 very distinct and bold targets for us. It's about carbon, it's about circular, it's about people. In terms of carbon, we are committed to the Paris Agreement And the 1.5 degree maximum increase of temperature. And to Contribute to that, we need to reduce our absolute CO2 emissions by 35% across our entire value chain. And that's our commitment for 2025. In terms of circular, here we want to channel our innovation capability To creating more of a circular economy. And here we have set the target of launching 50 circular innovations by 2025. And then the 3rd target is about people. How can we empower customers and colleagues To make sustainable choices. And here we have set the target that we will empower at least 5,000,000 people To make a better choice, so to speak. And going forward, in these calls, we will Give an update on how we are doing on these different targets, how we're progressing. And if we look at the rest of the Q1, We have reduced the carbon by 31%. Let's remember that the baseline is 2015. And want to think that we're almost there already, but let's then keep in mind that we did exit quite a sizable petrol business And that during 2020, from a mix perspective, we had more of Gardena products and electrical products than what We have had during, let's call it, a non COVID year. And therefore, there's still a challenge to get to the 35% Reduction by 2025. In terms of circular, we have already Made 2 innovations. Just to mention one of them, so you get the flavor of it. It's called Geran Boxen. It's a Swedish name, but it's basically a box or a small shed where a community or neighborhood can share battery products In a very easy way. And then in terms of people, here, we have not Made tangible concrete progress yet, but we are now launching big training programs for our employees, And we are reviewing how we can change our marketing to also empower customers to a larger degree. So more to come here going forward. Before we Sum up, maybe when it comes to strategy, I can also give the update that the program that we launched in in in in in in in in in in in in in in in Q3 report Well, we, on one hand, are stepping up our strategic investments by SEK 250,000,000 a year, and we are improving our Handheld value chain and realizing some savings of SEK 500,000,000 a year. That whole program is Progressing according to plan. So before then, we open up for questions here, Maybe going back to the main messages for this call. I think that It's safe to say that we have had a very strong start of the year, not just Because of lower comps and lower inventory, but also that we are continuing to win and that we have this good momentum with us. And therefore, we are well positioned for the gardening season. Of course, there's a lot of uncertainties out there, but we are really in a good position Going into the season here. We have delivered a record Q1 And further strengthened our financial position. And ultimately, we are successfully executing our strategy, And we can see the dividend through the growth in the key categories and how that is improving the mix of the company. Okay. With that, I hand over to you, Johan, and let's open for Q and A. Thank you very much, Henrik for Englern for the presentations. And with that, we're ready to open up the Q and A session. So please, operator, go ahead. Thank you. We will now begin the question and answer session. Our first question Comes from the line of Christus Magnaguard from DNB Markets. Please go ahead. Your line is open. Hello. Well, to start with, congratulations on a strong Q1, of course. When you look at Q1 demand, Organic growth of 24%. Is it possible for you to quantify how much of that was driven by the mass Restocking, more than normal restocking from retailers and dealers and also how we should think about the normal seasonality going into the 2nd quarter, which is normally stronger than Q1. I think you're on mute, Glenn. Inference mute, sorry. Yes, Christa, I will take that one. It is I would say, of course, it is a largely a sell in quarter. So a lot of the increased demand, particularly in Husqvarna and Gardena divisions has been replenishing that lower inventory situation. And the season is more or less breaking, so it's hard Talk about sell through at this point in time, in relation to Q1. So I think a large element of that actually is Bringing the retailer inventory levels of the trade partner inventory levels back up to a normalized level. And therefore, we'd expect now going Q2 a normalized hunt and hunt situation, but the season is breaking. I think the challenge, Chris, there is that Most of the what Jan is saying, I mean, here in terms of most of the sales for Gideon and Husqvarna is filling up inventory for the season. And then the question is what is Bringing that back to normal level versus that we are actually taking share with our channel partners, I think that is the challenge. But our general feeling is that We are taking floor space that we have expanded our listings and so on, but it's very hard for us to give a good number on it. And in terms of the normal seasonality, you mentioned that 2020, how that was different compared to historical years. Now 2021 seems to be different as well given the strong Q1, but is it still fair to assume what normal seasonally stronger Q2, then Q1. I think it's a fair assumption. And the reason we can Say that is, of course, April is our largest month of Q2, where it was relatively soft last year. So we're going to comp to a fairly soft April. May, we would expect to be normalized and June will be a tough comp. But putting the three together, then we should have a relatively easy comp to Prior year. Then on the EBIT bridge, which you provided on Page 8 in the presentation. Thanks, Mats. The one question I have is that you break out strategic initiatives, but you don't break out cost savings. So is it possible to give like a net number on cost savings versus SI? Well, I can give a couple of numbers. I think we talked about the SEK 500,000,000 savings, and We have roughly SEK 30,000,000 coming through already on from those H2 savings. So there's a SEK 30,000,000 figure in there on cost savings Related to what we call the H2 restructuring activities, activities we mentioned there. And then the rest of the saving activities, Christ, we are running internally. I would say it is sufficiently offsetting the strategic initiative spend. And that is something which we committed to, I think back when we started 2019 that we want to have an internal efficiency program that at least pays if Actually, it creates a net positive number versus our SIs, and that continues to be the case. So we do have a net positive That's good. And then the final question is on robotics. We Start to talk about the professional robotics segment now having meaningful growth, of course, from a low base. But is it possible to quantify roughly how big of your robotics Business that goes into the professional space now and also if you can comment on the U. S, if the development in the U. S. Have changed now Given the COVID. Okay. So two questions. Let's start with the Pro 1. I mean, We are quite excited about how well it is developing. And it's Clearly, outgrowing from a percentage perspective, the residential robotics with a big margin. And also, of course, we know what the number is, but we are not in a position of sharing it today, Christa. But What we can say is that now it is a number that you see. It's not just something small that is hidden. It's actually starting to Become a real number in the professional space. Maybe in the future, We can be more explicit around it, but we're not there yet. But it's developing very good. And also the good thing in that professional space is that In reality, EPOS was launched with a full industrial product here in April. So that performance is really without EPOS and it's without Ciora. So it's the other models that were basically, Let's say, enhanced residential products rather than developed specifically for the professional segment that we see that kind of development. So We are very excited about the prospects here about the Professional segment going forward. When it comes to the U. S, it's a bit the Same story, but different. And it's by far the largest lawn and garden market in the world. So the Potentially, it's enormous. And for this year, we talked about this already on an earlier call, we are changing our approach a little bit Because what we learned in Sweden, for instance, it took well over 10 years until this novel concept became accepted By people to such a degree that it starts to snowball, where you don't need to fight for every sale, so to speak. And then we could do it a little bit quicker in Europe, and we hope again we can do it a little bit quicker in the U. S. But to put all take all those learnings, And we have realized that U. S. Is so big. So instead of just relying on our traditional channel partners And with a nationwide approach, we think that we will be quicker by On a local, I mean, a city or a region overload with resources and marketing to get to the tipping point sooner, so it starts to snowball. And then we can move on to the next one and also see how we can complement our channel partners with different ways of reaching the consumer. So The work with changing that strategy is going according to plan. But again, from a Absolute value perspective, the numbers are still too small to be for us to get excited about the U. S. In the current numbers, so to speak. Okay. Thanks. Our next question comes from the line of Frederic Morigord from Pareto Securities. Please go ahead. Your line is open. Thank you very much. First off, a follow-up question on the inventory situation. So clearly, Q1 has benefited from Heavy sell in for Garena and the Husqvarna division. But could you just tell us something about if your customers have been able to Refill inventories the way that they want it to? Or will that continue into the beginning of the second quarter as well? We certainly feel, Frederic, that they are normalizing somewhat. Probably I certainly don't think they're any higher than last year's levels. They're probably getting somewhere towards, so I would say either on par or slightly below last year's levels at the same point. All right. And when it comes to your own inventories as well as perhaps your supplier situation, obviously, we're hearing a lot of things With regards to the global supply chains on shortage of electronic components and so on, and your inventories have been coming down quite significantly, How comfortable are you with your inventory situation? And do you see any risks in the supply chain on your side? I think the pandemic has really put a finger on the sensitivity of the global Supply chain is not just for us, but for any industry and the company. And we, of course, been Challenged by disruptions in terms of component supply throughout this entire pandemic, and we still are dealing with these kinds of things. And we will be dealing with it for many months to come, I think. At the same time, I think we have been very successful in mitigating most of this. I mean, just the Q1 sales, I mean, To actually take a 24% sales growth, it's also a testament to That we have managed the situation pretty well from a component perspective. But every day there is something and we are fairly quick In mitigating the situation. So I can't say that there are any particular areas that we are more or less nervous It's more that we have a lot of small disruptions all the time that we have so far been successful dealing with and we believe we can continue To be dealing with them. And from an inventory perspective, you can say that the most important thing for us at this point in time is, of course, That we have shifted the inventory out to our channel partners because that's where it needs to be for that first sale when the season starts. And then a little bit later, they will put place replenishment orders to us. And then we need to be ready for that wave. So We feel like we're in pretty good shape here and well positioned for Q2. Sure. That sounds good. And on the longer term, do you have any thoughts when it comes to the supply chain on perhaps starting to look For more local suppliers or making any other sort of shifts to your supply chain and your production base The decrease is for the risks going forward, any thoughts on that? Yes. I think after, if you call it, a crisis Like this, it's natural that you assess and you evaluate your supply chain and And you see what kind of enhancements you want to make. And we are making those kinds of assessments. We already did that actually To a large degree before this season started and a big reason why we could entertain 24% growth Was that we were much better prepared going into the season than we had we had, for instance, stocked up On quite some inventory of critical components before the season because we didn't want to have a COVID impact in peak season again. So we did some of those tactical things already from this season. But going forward, I think we need to look at more of Having more than one supplier on sort of of course, we have more than 1 on certain things, but to have Maybe one further away and one more local, so you can a little bit be more resilient in these situations. I think That will be one of the things that we will be looking at. All right. Thank you very much, Henrikhil. Thank you. Our next question comes from the line of Johan Andersson from Danko Bank. Please go ahead. Your line is open. Thank you. Your comments on or guidance on raw math, EUR 35,000,000, EUR 400,000,000 and also your comments On the FX in terms of what is this week in this quarter And also based on your seasonality, do you still think it's possible to be profitable in the second half Fine. Yes, I think, 1st and foremost, H2 last year, I said the seasonality was very different. So Q3 is a very tough one to follow. And Raw materials wise, we expect most of the headwind to come in H2. We're actually pretty well hedged on raw materials through H1, Which gives us our confidence for the second half as those hedges are not in place, then we start to feel some of the headwinds on plastics, So H2 will be a tough comparison without a doubt. We're going to continue. We're going to push for additional price. Continue internal efficiencies, but I think it's fair to say Bjorn H2 is going to be a tough comparison versus prior year. Yes. But FX wise, most of that FX burden will come in the first half year. We think some 75% of the FX burden Will be with us through H1, H2 Q1, Q2, sorry. And what did you say on FX? FX, we said SEK 300,000,000 to SEK 350,000,000. Yes. Okay. Thank you. Our next question comes from the line of Frut Stav Hegias from SEB. Please go ahead. Your line is open. Thank you. Good morning, guys. I'm interested in the comments regarding robotics in the professional side As it relates to sort of the legacy products, could you first of all discuss a little bit what type of clients could you see a pickup in this But this is golf courses or parks or whatever. And then secondly, on that topic regarding Siora, Could you give us an update if it's actually ready now? Or are there actual production still sort of Do you have a finished product there that you can roll out and trial in H2, you think? And if you've come any closer to sort of What type of partners you'll find there to roll out products once it's actually ready? That would be helpful. Thanks. Okay. If we start with the first question in terms of what customer segments or application stages that we see. Actually, so far, We see a big interest across, I would say. We have an interest in all those different segments. It's more likely going to be a matter for us to decide where do we want to prioritize the most, but There seems to be an interest across all those different segments. In terms of Siora, you can say that we will have Little to no impact of Ciora during 2021. What we have done here in the professional space It's that we have used a different launch method to make sure that we get the message out sooner and that we also can then Test concepts, business models and IDs with key professional customers Before we go for the full industrial launch, so if you take EPOS to start with, which is this A version where you have virtual boundary wires, we launched that one last year, and we had a test sale of some 100 units To really validate the concept and also the business model around it, that we started full blown production for and the sales start was And the sales start was during Q1, and we have sales start over here in the beginning of April. And Siora will follow a similar time line, meaning that we will have the big event where Well, we really unveiled the product, I think it's in June 22, if I remember, doing a big event where we will actually show the And then we will during the fall do the sell in activities and then we will hit the ground running for 2022. So I think for Ciora, we need to have realistic expectations in 2021. It's going to have very little impact this year, but it's very important For the future, but it's also showing an ambition for those professional users, and it's easier to step in on the current products or the EPOS Knowing that there are more in the pipeline and that we are fully committed to this segment. Yes. No, I don't think anyone is modeling any material income from CRO. But I'm still interested, are you producing sort of to inventory of CRO or is it still At a conceptual stage, if you're launching it on June 22, I guess you're sort of completed with the product term. I I mean, we are still in those final phases, and we will build a what we call it a pilot batch That will be out for testing and evaluation and sell in here during summer in the call. And then the action will be for next year? Yes. And I guess more so than sort of your regular robust since The price tag, yes, of Siora will be like, I don't know, SEK 200,000 maybe. You're going to have sort of as a service or lease agreements To a greater extent for Ciora than your other, Robert. Do you know already now if that's going to have an impact on your how you account sales for Ciora? Is that going to be Sort of the product sales or are you going to have more as a service, so it's going to be a longer time before it's recognized in the P and L? Yes, it will be the latter, Gustaf, where we see we will likely have more as a service selling. And I think this will be a profile Switch over time. We do have lease agreements and subscription type deals with other services today. But it's hard to say how that profile is going to change. And as Henrik said, it's going to be a slow ramp up in that respect on the total group's Profile. So it's hard to say how that will impact us. But for sure, we plan to have this in an as a service solution. All right. And lastly, on inventory, short term, I think you've been quite explicit about it. But I'm curious about the long term implications. There's been a little bit of a trend for retailers trying to optimize their own balance sheet by pushing sort of product companies like yourself to take Set up logistics hubs and sort of facilitate drop shipment and just in time delivery to push down for retailers to push down their own inventory. I'm curious if you feel that this pandemic has sort of put a change of mind in the retailer's set of mind that perhaps returning a little bit to the old idea of actually keeping stock themselves going forward. Is that something you're hearing or at all, very ambition? I'm not sure we have heard anything explicitly about it, but what we can see is clearly That many of our channel partners are taking on inventory sooner than normal. And it seems like They are all very eager to be in a well position for the season start. So we can see How they act during this year, but whether that has changed the way they operate for the years to come, I think it's too early to tell. I tend to think Gustaf, particularly in the retailers, to have a I say sometimes have a short memory I remember the behavior of the prior year and the demand of the prior year, and that can often guide their buying patterns for the next year, so to speak. So I think having strong brands is important and availability is important. And those 2 really support us for this season. Yes, okay, makes sense. Well, thank you guys for taking my questions. Our next question comes from the line of Karri Rinta From Handelsbanken. Please go ahead. Your line is open. Yes. Thank you. Kari from Handelsbanken. I wanted to start by asking Hendrik to repeat that question on winning core. So what did you Hendrik say was included In that and then what is then not? Let's start with that. Yes. And if you sum out just to start with, I think it's important to say, okay, what We can have different strategies for different parts of our assortment, meaning that there are certain things that are truly transformative and that is Really the future that we really want to invest in and transform to. We have done the things that Are very important, but they might not be in a transformative mode. And then we have segments that Absolutely fine for us to be in and they're important for our customers, they're important for our channel partners, but they are not That's critical to us and our profitability. So we segment it a little bit. And now you can say that in the transformative area, of course, you have a lot of robotics and battery. In the end, this area of what is very important to our profitability and for defining who we are It's what we then define as the winning core. And then you can say that, that is in the Husqvarna division very much around the professional space And it is the Gardena and the Construction divisions. And then you can say that if you then go into The next 3rd bucket, so to speak, where we said these are important products, but they are not the ones where we put The 100% focus of what we really want to make a difference, you have a lot of the, Let's call it the wheeled petrol products, if I simplify it a lot. But we try to segment it to really make sure that we Place our investments and our marketing activities in the areas where we drive the right mix for the future. Okay. No, that's very helpful. My early understanding was that it was maybe a bit more professional in his core and some of the More of the consumer stuff that you now mentioned would be less important, but no, that was a very helpful clarification. Then secondly, Klem showed the net debt to EBITDA graph of currently at NOK900,000,000 and you recently did the Blasdaq acquisition. And I guess Safe to assume that acquisitions will play a strong or key role going forward as well when it comes to construction. But has anything changed In terms of your thinking about M and A outside the Construction segment, given that you now have the financial resources and there's maybe I don't know if there are more opportunities, less opportunities, more attractive opportunities now after the pandemic. So How have you reassessed your M and A thinking outside the Construction segment? I mean, first of all, I believe that M and A is a really good tool to sometimes fast track Your strategy. And it's a tool that we have used a lot in construction historically. And it's Clearly, something that now it's also time for us to at least bring into the toolbox for the other two divisions. As you know, the other two divisions comes from it being established as divisions basically Taking over the what was left of consumer brands, etcetera. So they have really not had the opportunity to And the bandwidth to add things to the toolbox, but I think now we are getting into a next phase where that Tool also should be in the toolbox for Husqvarna and for GADENA. So that's something that we will be looking into, but Not because of M and A on its own, but because we think it could be a good opportunity to fast track the strategy that we do have. Then from a target perspective, I think that the construction industry and the segments that we are active in It's more fragmented, generally speaking, than the larger forest and garden business and the forest and garden industry. So there are probably not as many targets as in the construction space, but that doesn't mean that there are no targets. So it's something that we will look into going forward. All right. Thank you. And then finally, a follow-up on On the professional opportunity in Lawn Care, you mentioned that you are excited about the opportunities and More that you have to prioritize rather than you would have to select. But if we specifically look at the EPOS Product segment. And you mentioned that you are now starting really the commercial rollout of that. So when it comes specifically comes to EPOS, which Customer categories, do you feel that you should start with? Is it the Maybe I'll just stop there and let you take over. Yes. It's a little bit Different also market by market depending on where the opportunity sits and so on. But generally speaking, we see opportunity Around different kinds of sports fields, we see opportunity around bigger complexes. So I mean, it could be a Big museum, it could be a senior citizen home, I mean, those kinds of things, where you can have this. We also see opportunity with golf. The difference with golf is that golf is very, very particular and very, very specific. So we can probably take Certain tasks on a golf course that we could deliver on, whereas when it comes to some of the other applications, we can complete all the tasks. So it's a bit different from that perspective. I would say that the opportunity is really across, and we just need to Seth, a very clear focus market by market, what we want to go after based upon where we think we have the biggest opportunity. And is there any difference on whether the owner is operating themselves On the lawn care or if it's out forced to someone else? It can be different, but it doesn't have Big difference, and that's why we also look into a lot of the different business models. One is, of course, if you manage The area yourself, then normally you have your own staff that's doing this. And then there's a lot of discussion about How can you use the labor to do the value add things, taking care of the flower beds, taking care of The bushes, the trees and dosing instead of cutting the grass, so to speak. So then you need to have one kind of discussion. Many times they also have service on their own and then you need to set up your Not more than one way. Whereas when you work with a landscaper or a contractor, there's a tendency, first of all, that they move around more, of course. They might not want Have the equipment permanently on one location and the other. Then of course, EPOS becomes very important and things like that, even Siora, Because you can then use a bigger product that can make the lawn much quicker than a smaller product that might have to be installed for a long period of time. They don't as often have service themselves, so then we need to tie that more into our dealer network and how we can support reserves and so on. So It will be different, but the opportunity is still equally there. It's just that we need to craft the value proposition accordingly. I guess that's what I'm trying to say in a roundabout way. Perfect. Very helpful. Thank you. Our next question comes from the line of Fredrik Iversen from ABG. Please go ahead. Your line is open. Thank you. Two quick ones for me, if I may. First one, if we can come back to the raw material prices. But From another angle, I think we see quite hefty price inflation within the DIY market at the moment. I wonder Whether you maybe have been able to raise your list prices as well, that's my first question. Yes. So of course, a lot of our pricings happens in the fall as we go into the year. So it's absolutely we're in the process of Reviewing pricing, in some cases, we can't make in season price adjustments. And where we can, we will. I think that's the best way to put this, I was seeing it, but we fully expect actually stronger price increases than we previously committed to. Great. Thank you. And then second one, coming back to the market strategy within robotics in the U. S. You mentioned that you're focusing on specific markets. Just wonder if you would be open to share which market that might be? Yes. Of course, the grass type is very important to us and of course, Where maybe the robot is more appropriate and hence we make actually some additional models for the U. S. Market, which we call the high cut models, The same for petrol driven machines as well, by the way. But certainly, we're focusing on New York, New Jersey, the Carolinas, Alabama, Texas, Atlanta, Florida, States, if I can name a few. So it's more that Eastern seaboard to a large extent that we're focusing on initially in North America. What we're putting additional focus on is a better way to put it. Okay. I think we have time for a final question. We are starting to get close to 11, but I think, operator, do we have a final question over The queue. Yes. Our final question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open. Yes, good morning. Good morning, Johan. I think they did. Yes. Probably dropped off. Yes. It seems like Johan has disconnected. We have another one In the queue then, operator. Yes. We have a question from Christa Magnaurd from DNB Markets. Please go ahead. Your line is open. Okay. Two follow-up questions for me then. You mentioned that you've hedged the raw mats in Q1 sorry, H1 and that the bulk of And we'll come in the second half. Given if we assume that the raw material price will remain on the current levels, we will see A similar headwind in the first half of twenty twenty two as we do in the second half of twenty twenty one. As it stands, Christi, yes, that would be a fair assumption right now. Thank you. And the second one, in the Q1, given the strong demand And the value chain, etcetera. Have you been able to prioritize products with higher margin than you would normally do? I would say we have had a good mix period, both mainly because of a demand perspective. When we have been forced to prioritize, that has been mostly prioritized for us, meaning that we don't have we haven't had components For the time being, so I would say, generally speaking, we demand is coming through with a good mix. Okay. Thanks. Thank you very much for that, Henrik and Glenn. And I think we have reached now 11 o'clock. And with that, we will close the call for today. And please do not hesitate to reach out to us in the IR team if you have any other follow-up questions. And just noting that we have a roadshow presentation tomorrow arranged with SEB and then with the DNB on Monday, if you would like to have Further meetings or listening to the group calls. So with that, we close the call for today and thank you very much for listening in.