Earnings Call: Q2 2020

Jul 16, 2020

Hello, everyone. Welcome to the presentation of Husqvarna Group's report for the Q2 of 2020. My name is Johan Andersson, responsible for Investor Relations here at Susquehanna Group, 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 open up for questions. Let me also remind you that this session is recorded and will later be published on our website. So with that, I hand over to Henrik. Thank you, Johan, and good morning to everyone. All in all, I must say that we delivered a strong Q2. We grew our net sales by 3% if adjusted for consumer brands exits and FX, and we ultimately delivered a record high operating profit. Q2 was due to COVID-nineteen, as you could imagine, extremely volatile, where April resembled late March with dramatically declining sales. And as markets gradually reopened, demand also picked up. And in June, we achieved strong double digit growth. This was also driven by a high interest from consumers staying more at home and spending more time in the gardens. The COVID-nineteen effect on our business is actually very heterogeneous, but we can see a few patterns. One is that we can see that our pro business is generally more affected than the consumer business, and that was also the case during the global financial crisis. We can also see that dealers have been more affected than our retail channel partners. And that's largely because the dealers were, to a larger extent, in lockdown, whereas the retailers could continue to operate in some kind of capacity or at some kind of capacity. And of course, it varies a lot between different countries and different regions. Early on, we outlined a COVID-nineteen strategy, and I must say it has proven to be effective. 1st and foremost, of course, we focus on the health and safety of our employees, but we also took decisive steps when it comes to cost avoidance measures. And we also decided to keep all our operations running, which I think was an important piece to later on be able to respond to the surge in demand late in the quarter. Ultimately, I think this really indicates that we have an ability to quickly adapt to changes in our business reality. All in all, we then delivered a record high SEK 2,200,000,000 EBIT for the quarter, and that corresponded to a 16.3% margin. Another positive is that we improved our direct operating cash flow where we generated SEK 2,300,000,000. Our financial position is strong with the net debt decreasing with SEK 3 point billion compared to last year, and Glenn will elaborate further on this in a minute here. Then if you look to the bottom right on the slide, as you know, we also track our business strategy progress. And one of the important KPIs is how our robotics and battery are developing as a share of our total group sales over the rolling 12 months. And as you can see, that is now 16% compared to the 15% that we showed last time. So if we then move to the next slide here, we can see that we also have a lot of product introductions during the year. And being an innovation leader in our industry, we also this season, of course, had many great product launches, both in the key growth categories, but also in our winning core. And just to give a couple of examples or maybe 3 different examples on this slide. We have the Aqua Bloom, which is a solar powered watering for balconies and terraces. And as you might know, city gardening is a quickly growing segment and the Aqua Bloom here can help you in that sense that you don't need electricity and it always makes sure that your plants are watered. We also launched a new automower, the 305, which is a Husqvarna branded mower, hitting that €1100 to €1200 price point, which has been a great success this year. We've also started to pilot our EPOS system and also some different new business models in the Professional segment, but I will come back to that a little bit later on. We're also accelerating our innovation efforts pertaining to digital solutions. And the 2 most prominent ones are the Automower Connect and the Gardena Smart System. And here we now have 600,000 connected devices and 400,000 active customers on our platforms, which is quite a big improvement over the 300,000 last year. So all in all, we had a good line of products this season, and we also have a good exciting pipeline for next year, but let's come back to that at a later point. Let's now shift gears and review the different divisions and then starting with Husqvarna. As you know, Husqvarna is largely depending on the dealer channel and it also have a sizable pro business. So here, we were quite affected by the COVID-nineteen situation. Net sales are down about 2% compared to last year, if it adjusts for about SEK 550,000,000 in exits. And who's going to very much experience that volatile quarter I mentioned earlier with a steep decline in sales early in the quarter and a steep incline towards the end of the quarter. The operating profit is down slightly in the quarter. We have been driving a favorable mix. We have been decisive when it comes to temporary cost avoidance activities, but those could not fully offset the negative impact coming from lower revenue, lower production volumes as well as higher costs to accommodate social distancing, etcetera. In total, the margin in Q2 was now then 13.4% compared to 14% last year, but clearly better than what we feared yesterday a couple of months ago. And to be honest, I believe that we have been able to protect our profit extremely well here. And also very encouraging is that the Husqvarna division generated positive cash flow in the quarter as well. Another good thing is that we, during this difficult time, actually also managed down our inventories, and we reduced by 16% in the Husqvarna division. On a rolling 12%, our margin now is 8% compared to 8.6% last year, largely for the reasons I just mentioned for the quarter. Shifting to Gardena. At Gileana had an absolutely splendid quarter, fantastic performance. I mean, Gardena is executing on diligently on a very good strategy and they really manage to resonate with the passionate gardeners and is a little bit on a roll and has been for quite a few years. At the same time, Gardena is a little bit more consumer and retail centric and is largely dependent on the DACH markets. So here, there has also been a more favorable demand situation stemming from customers staying at home and spending more time in the gardens and has not been as effective when it comes to lockdowns, so it's somewhat as the other two divisions. Sales are up 24%. If you adjust SEK 140,000,000 in exits. And in the second quarter, we grew the EBIT by 50%, so quite some leverage. The result was largely generated by the top line growth and favorable product and geo mix. Of course, there's also an element of improving the result here with some temporary cost avoidance measures just like for the other divisions. For the rolling 12 months, our EBIT is now up over 40%, and we now have an operating margin then at 13.5%. Shifting to construction. As you know, this is our most cyclical business overall and is strictly targeting the professional market. So it had a very tough start to the quarter with sales being down 18%. And we could see this trend also in the global financial crisis where construction was affected to a much larger degree than the forest and garden business. Good news though is that the demand started to come back also for construction and was actually flat in June. Also, the Construction division, similar to the Husqvarna division, has been very good at protecting its profit. Comparing to the financial crisis, if we look at the relationship between top line reduction, so to speak, and the EBIT percentage, I will say that we have we're a couple of percentage points higher this time in relation to the sales drop than we were in the crisis. So I think we have done a good job here. And also in construction, we generated a positive cash flow in the quarter. So with that, I hand over to you, Glenn, to run through the numbers a little bit more in detail. Thank you, Henrik, and good morning, everyone. Let's start off with the profitability trajectory slide that's served us pretty well for some years now. You'll see now on a rolling basis, rolling 12% were at 9.2 percent. EBIT margin looks pretty flat there to last year where we ended at 9.3%. It's just worth noting that at the end of Q1, our rolling EBIT was at 8.9%. So quite a notable uptick in the second quarter on a rolling basis. So we're pretty satisfied with where we've brought the margin up there during the quarter. Moving on. I'm putting a little bit more detail onto the income statements and what Henrik has been describing now to the respective divisions. Of course, net sales as reported were some 2% down. When adjusting for FX, it was actually also 2%, very little impact on the top line from an FX perspective. I'll come back to that. We had roughly SEK 700,000,000 of exits in the quarter, which meant adjusted net sales were plus 3. And just to clarify the exit situation, we guided full year SEK2.2 billion. Q1, we had some SEK1.4 billion, SEK700 1,000,000 in Q2. So that does leave approximately SEK100 1,000,000 that we expect will be reduced in the remainder of the year, and we stick with our guidance. Moving on to the gross income in absolute terms. It was flat, dollars 4,600,000,000 but the margin actually increasing from $33,500,000,000 to $34,300,000,000 so 80 basis points. Main drivers are an improvement from the positive mix. That was giving us about 0.8%. Of course, a large element of that coming from the watering growth in Gardena, which is margin accretive. We had a continued benefit from the exited business. We had a continued positive price in the quarter. It was actually generating roughly SEK100 1,000,000 of positivity in the quarter. We did have a downside on the FX, and that's all coming from transaction effects, and that was roughly $70,000,000 all hitting the gross margin. And as Henrik alluded to, we also had lower factory production levels in the quarter, partially conscious because we want to continue reducing the inventory and partially because we added additional social distancing measures. And that was about SEK130 1,000,000 burden on the quarter, which was about 0.9%. Strategic investments were actually very limited on the gross margin in the quarter, roughly SEK15 1,000,000. Moving down to the SG and A. Reduced slightly in absolute terms from SEK2,500,000,000 to 2,400,000,000 dollars from a percentage perspective moving from 18.1% to 18%. The main drivers are reduced absolute figure due to the exits of costs. We have a lower cost to serve, but we take some SG and A out as a result of that. We see no FX impact in the quarter on SG and A. That's all hitting the gross margin. And the rest, the savings really are coming out of the savings initiatives that we've been taking during Q2. Just to clarify the FX. I said SEK 70,000,000 negative on GP. All transaction effect offset with some hedging impact there and no impact on the SG and A. From an SI perspective, in the quarter, it's been at a much lower rate. It's roughly SEK 45,000,000 of which SEK 30,000,000 is hitting SG and A and SEK 15,000,000 into the gross profit. So like for like operating income increasing from SEK 2,125,000,000 up to SEK 2.19 so 15.4% moving up to $16,300,000,000 Moving down the income statement. We have no items affecting comparability, so we can move past there. Finance net was a little bit lower than we've been previous quarters, and that is really coming from a lower U. S. Funding rate, basically, a lower debt in U. S. Dollars and a lower interest rate attributable to that. I would actually expect that our H2 finance net is probably going to be at a similar rate to the H1, I. E, roughly SEK 190,000,000 would be credible to use. The tax rate there is a little bit higher in the quarter, 26 percent versus 24% last year, and that's basically due to the higher earnings that we have sitting in Germany, particularly, of course, in relation to Gardiner Watering Business. Still, from a full year guidance perspective, we remain with the 23% plusminus%, more percent on that. Okay. Turning the slide on to the cash flow, which I think we should spend some time on and something which we are pretty satisfied with going into this COVID situation at the beginning of the quarter and certainly where we see ourselves ending the quarter. The cash flow, we came up to $2,300,000,000 versus $2,100,000,000 last year. It is worth saying that the main drivers in that actually is a lower inventory build of SEK 800,000,000 delta on the inventory during the quarter. Accounts receivable have increased. That is really the change in the sales in June that added down into the accounts receivable. And of course, they will then flow back into the cash flow during Q3. And payables have actually extended slightly as well some SEK300 1,000,000. I would like to say and just reiterate what Henrik said, from a cash flow perspective, all 3 divisions generated a positive cash flow in the quarter. Husqvarna and Gardena, roughly $1,200,000,000 of positive cash flow each in the quarter and construction, roughly $100,000,000 extra in the quarter. So $2,500,000,000 positive cash flow in Q2 isolated. Okay. Moving on to the capital efficiency, which is still disappointing from our perspective. We're not going to shy away from that. However, we have made, I would say, a step change and turned the curve. Moving that curve on the capital efficiency is not always the easiest. So on Slide 10 now, of course, COVID doesn't always hasn't supported this given that we've had some volatile sales. But still, I think the fact we've turned the curve now on the capital efficiency is a big step for us. From a guidance perspective, and of course, the financial target remains that we want to have our capital efficiency below 25% of net sales. This is unlikely to happen in 2020, of course, But we need to get on the positive trajectory as we are and make 25% a credible 2021 target. So we need to bring this down into the 26%, 27% by the year end. And I believe with the inventory measures that we're taking and the strong cash receivable management, that is very much achievable. Okay. Moving on to the balance sheet and adding a little bit of commentary around the balance sheet, I would say. A couple of figures stand out, of course. The first one is the inventories. We reduced with SEK 1,500,000,000 second absolute Swedish krona in the quarter versus Q2 last year. That's something we're really pleased with. Within that, there's a very small FX component, roughly SEK 100,000,000. But still, it's SEK 1,400,000,000 of absolute production, which represents around 14% inventory reduction. It's worth finding out as well that it's the 4th consecutive quarter that would have taken inventory down versus the corresponding quarter in the prior year. Receivables, as mentioned on the cash flow commentary is up and that is very much the sales delta from June. So nothing alarming there. We've got a very strong receivables management program going on and serving as well during the COVID times. Just to comment on the net debt, That's something else I feel we should be extremely proud of in the quarter. We actually improved net debt with GBP 3,600,000,000. Most of that, of course, coming from the improved cash flow from operations of roughly $4,400,000,000 A little bit of negative impact coming in from financing activities onto the cash flow, a little bit of positive currency effect into the net debt. And of course, we have paid a reduced dividend versus last year, but still paid roughly 2 thirds of the dividend versus prior year. So that's something we're particularly proud of. Okay. And then I think just moving on to the final slide before I pass back to Henrik, then a slide we use each and every quarter is the net debt to EBITDA, which has been a ratio that we've been following since our inception, I suppose, as a company. And that has taken a turn down for the positive in this case, now at 1.8 net debt to EBITDA ratio, which, of course, is represented about SEK3.6 billion reduction in our net debt. So with that, I will hand back to Henrik to give some more forward leaning remarks for the group. Thank you, Glenn. Just wrapping up, let's call it the past then. I think when it comes to the COVID-nineteen and our strategy for that, I must say that we have managed this situation in a very good way. And we have effectively protected our employees, which was our main priority, but we've also been able to run our business. And I think one of the important things that we decided upon was to keep all our factories running, although at a low rate was very important to be able to quickly respond to the surge in demand that's experienced in June. And I think that we have also proven that we have a capability to quickly adapt to changes. And this is something that we need to be very good at and that we have quite some experience from since we largely act in a seasonal and weather dependent business. And finally, I think it's appropriate also to really give recognition to my colleagues around the world that managed this very difficult time. And on one hand, dealing with COVID on the other hand, to actually delivering a record quarter at the same time, which I think was a fantastic performance. Moving on to strategy. Even though in the midst of a pandemic, you have to become a little bit more here and now, but you can, at the same time, not lose sight of the long term. And we have a group business strategy that we developed together in the management team last fall and is ultimately focusing on the customer experience, on expanding into services and solutions in accelerating robotics and battery products while we're developing our core business. And that strategy stands and that is absolutely our foundation. Yes, we had to quickly adapt and scale a few things back in the Q2. And yes, of course, we are working in management continuously to see how we can fine tune it and how we can dial certain things up or and maybe dial a few things down. But the direction as such, it doesn't change. And now I will over the next couple of slides give you a few examples on some of the progress that we have made in executing our strategy. They do now skip no, okay. So if we start with robotic lawn mowering and maybe focus a little bit more on the professional side. Here we are I mean, 1st of all, we believe there's a huge opportunity here, first, because it's an untapped market, of course, but also the labor is a large piece of the total cost for the green space professionals. And there's often also a shortage of skilled labor in peak season. And we have now been testing a couple of different things to really enter into that market. And we have really advanced in both the go to market dimension and in the technology dimension. Starting with the more go to market dimension, we are now testing what we call robot as a service because we think that could be a very interesting concept since you are basically eliminating some of the perceived risks with the switching to the concept as such, particularly when you're introducing something that is novel to the market. And it will enable the customer to exactly know the operating cost and to monthly be able to match that towards the revenue and the contracts that they have. So that's why we think there's a big opportunity. We're testing this with 150 different units at this point in time, mainly in Sweden and Germany with very good feedback. The other piece, and we have talked about that before, is EPOS, which is basically that we can change the way you operate since you do not need to permanently install boundary wires. We instead use virtual boundary wires or boundaries ultimately. And this is something that we are piloting with 100 different products out there in the U. S, in Germany, in Sweden and France. And the feedback you also hear is very good. And for those of you that are in Stockholm, you can, for instance, see this at the Vasa Museum or at the Dottingholm Castle if you have some time during the summer here. If we then move on, talking about battery. And 2 days ago, we took a big step where we announced that we are cofounder of an 18 volt consumer battery alliance. And we did that through Gardena, and we have this alliance together with Bock. And the whole point here is that we see that for consumers, there is a huge advantage of being able to use the same battery across all the applications that you have around your house. And the alliance we are forming will be one of the largest cross brand alliances in the world. And at the moment, there are already 20,000,000 compatible batteries out in the marketplace here. We call this Power for All and it's based upon VOX 18 volts green battery system. And of course, we can also here tap into their capabilities and into their scale. Already for next season, 2021, Gardena will convert its entire range towards to this powerful battery system. And ultimately, this amplifies our electrification ambitions, but specifically in the 18 volt consumer segment where we see this benefit. Whereas when you move up the specification ladder, we still see that the merits of optimizing the product for the application and to get the most performance out of the different products. Okay. And now important part of our strategy is sustainability, and it has always been a vital part of our strategy. And this year, yet again, I will say, we made a strong commitment in this area by the introduction of Sustainnovate 2025. As you might know, Sustainovate is our long term approach to drive sustainability transformation in our industry, and we do that by applying our innovation capability to this segment. And what is new with Sustainability 2025 is that we, to a larger degree, also want to inspire others to do the right thing. And we will be mainly focusing on 3 different opportunities. It's about carbon, it's about circular and it's about people. And in each area, we have very distinct aspirations on the difference that we want to make. Over the last 5 years, we have reduced our absolute CO2 emissions by 25% while increasing sales by 17%, percent, and this is largely driven by the shift towards battery and robotics products. Our new carbon target is recently approved as a science based target, and it's in line with the ambition to limit the global warming to 1.5 degrees. So it's a very passive step that we're taking. It's a bold ambition that we have. And we have also signed up as a certified NASDAQ ESG transparency partner going forward here. Then I would say that we have some important management changes that we have made during the quarter. One is that we have hired Karin Falk to head up the construction division as of September 1 or September 1, and she will also be a member of the group management. Tom brings over 30 years of experience and expertise from B2B and from customer solutions and services, which, of course, are central to the construction division but also to the group as such. Prior to joining Husqvarna, I was the Senior Vice President for Service and Customer Quality at Volvo Trucks. Another important recruitment is Robert McCutcheon, who has been appointed the President of North America for Husqvarna Division as of June 1. Prior to joining Husqvarna, Robert served as the President and Managing Director of the Americas for Britax Child Safety. And Robert brings over 20 years of experience and expertise in consumer products. So 2 very important recruitments for us, and I wanted to just take a brief moment to also bring that to your attention here. So to conclude, in closing, let me summarize the main messages this morning before we open up for the questions here. All in all, we have delivered a very strong second quarter, actually a record quarter despite the COVID-nineteen, and it is largely driven by the strong growth in June that we could accommodate. And it's also due to the decisive cost avoidance measures that we took. We have an effective COVID-nineteen approach that has proven successful. And personally, I'm very proud of how the organization responded to this challenge. We also delivered a strong cash flow and now have a very strong position over not just here and now. We also have a full focus on our strategy and how we're executing our strategy. And now the main discussions are how do we best dial up on the wider few items that really makes a difference going forward. I guess with that, thank you for your time. We're now happy to answer any questions. So I'll leave it back to you, Johan. Thank you very much, Henrik and Glenn. So we are now ready to start the Q and A session. And please, before you ask your questions, state your name and company, and please limit yourself to 2 questions per participant. So with that, please, operator, start the Q and A session. Thank Our first question comes from the line of Christian Magna from DNB Markets. Please go ahead. Yes, hi. We will start with Gardena. You will most likely have a very strong 2020 even if there are 2 quarters left of the year. Looking at 2021 2022, do you think you will be able to grow sales from the exceptional 2020 levels we're seeing now? And what will, in that case, drive that growth? And second on the same thing, profitability has also made an impressive jump from 2018 2019 levels. Given the favorable mix and the temporary cost savings, is it fair to assume a slightly normalized lower normalized margin for the division going forward? Okay. Christel, let's start with the first question first, so to speak. I mean, the growth in Gardena stems from a couple of different things. I mean, part of it is that they're executing on a very good strategy and they do that in a diligent way. And they have also managed to resonate well with the passion of gardeners. So I think that we, of course, will carry with us also into next year and in the years to come. So from that perspective, I think we can be optimistic by Gardena. At the same time, I think this year, we had an a little bit extra boost stemming from people spending more time at home, spending more time in the gardens, which likely increased interest. And the question is how much of that increased interest will remain over time. And I think that is a little bit more difficult to judge. And the 3rd dimension is that we have had a pretty good weather condition this year for the business overall, I would say. So it's been a good season from that perspective. Mixed bag, I think part of it is might be a little bit artificial for this year, people being at home, but there's also some underlying reasons to believe that Gardena will be strong also in the future. When it comes to the profitability piece, I think that you have a couple of dimensions of that one as well. Of course, with this kind of growth that Gardena has experienced, we have leverage, but we also have an exceptional good product mix. It's a lot of ordering and there's also a lot around the DACH region where we have very good profitability. So there is a product and geo mixed dimension. And of course, there is an element of the temporary cost mitigation activities that will not sustain over time. So I think that the reasonable way of looking at this is that with the growing Gardena business, we should also be able to grow our profitability. However, it might be a little I mean, we can probably not expect the same kind of development going forward. I don't know if you want to chime in the game. I think it's reasonable, Henrik, what you said. Nothing more to add there. Okay. My second question, if we can say that the first question is just one question, is on working capital. You said that you're going to release about SEK 1,000,000,000 from the exited in working capital from the exited consumer brands. Has that all materialized now? Or is it still something that we should see going forward? There's probably a minor amount still to come through, Chris. But by and large, we released some last year and we're releasing more this year. And I would roughly take 25% of the exits that we transition into released working capital. So it's probably of the magnitude SEK 500,000,000 of released working capital there. Thanks. And the next question comes from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead. Yes. Staying on the subject on Gardena, did you see a significant shift into the online channel? Can you give any light on that? And do you think that could actually have a more sustainable improvement for you going forward? We could say that for Gardena and actually for the Husqvarna division, we could see that the online channel did grow this year, which I guess is natural to expect. And there's no reason to believe that we'll start going the other way going forward. So I think that is one of the things with COVID-nineteen that I think it pushed the business a little bit more into the online channel. So I think that will I think that will just continue. And I think Gardena being such a strong brand, of course, benefits in this sense as well. However, I think it's important to remember that Gardena has not been as affected by the lockdowns as the other divisions. So also the more customary retail channel has been doing very well for Gardena this quarter as well. Okay. And then on robotics, you mentioned it's 16% of sales now. How was the growth there? Was this 16% from 15%, as you pointed out, mainly in the effect of you're closing this consumer brands business? Or was there actually an excessive growth for robotics as well, explaining this like Normally, we always talk about combined robotic and battery. But if you zoom out a little bit, you can see that say that this segment had the same development as the rest of our business in the sense that the beginning of the quarter was really depressed and then it's a very, very strong development towards the end of the quarter. So that looked the same for this segment. And we can say that for robotics and battery combined, that grew faster than the group on average. And just to add a third dimension to the whole thing, since we don't specifically talk about robotics normally, was that from a market share perspective, all indications that we have the latest information is from end of May, by the way. But with that information, it indicates that we took some share. And just U. S. Robotics, it was a big topic last year. How does it look today? It's not a normal year, obviously, but do you see any positive movements? I think we need to look at that from a little bit bigger perspective, which is the commitments we are making, the investments we are making, the dealers that we are onboarding and the Husqvarna service cooperation we have developed to help service but also help with installation. And I must say that we are really making headways over there even though sales have been fairly erratic depending on the lockdown measures and particularly affected the installation part of the business. But I will say that it's nothing out of the ordinary, but we are continuing to push. We are continuing to develop that market, and we have made some headways and position as well also going into next year. Okay. Thank you very much. Thank you. And the next question comes from the line of Frederic Morgeau from Pareto Securities. Please go ahead. Hello, everybody. First of all, related to the very strong consumer demand that you are seeing or were seeing in June particularly, should we interpret that as the growth rates having continued to increase all the way throughout June? Or did you see some sort of moderation towards the end of the month? I think that it was largely increasing, but the last few days, it started to level out a little bit. Or moderate is probably the word you used, which I think is a good way of describing it. And that's also what we saw going into the Q3. But early on in June, it was a dramatic shift upwards. And then towards the end, it started to be more balanced but at a high rate. Okay. Is that comment valid for both the Husqvarna Consumer Business as well as Gerdela? Yes. Okay, perfect. And a question on expenses, very good cost control in SG and A, particularly related to selling expenses. Just wondering, admin expenses looks to be up some 16% or so. Any temporary effects here that you could highlight? No, not necessarily. I think that, of course, we've had to change some of the incentive commissions, etcetera. But it's pretty much in line with our expectation for the quarter. I wouldn't say there's anything unusual in the quarter that we've reported. Okay. That's helpful. Thank you. And the next question comes from the line of Olof Siderholm from ABG. Please go ahead. Hi, gentlemen. It's Ulf from ABG. I just had a very quick question or well, a question at least around EPOS and the professional robotics pilots. I mean this it's very exciting, of course. You have lots of pilots. Do you think this could be commercialized fairly quick if you're getting positive feedback already now from these products? I think we can answer that question from 2 different angles. I think from a product perspective, absolutely, yes. That's something that we can commercialize already for 2021. I think the other dimension is when we tie it in to potentially sell it as a robot as a service, then it is a little bit more difficult to commercialize quickly, but something that we will start doing in 2021 as well. But I think it takes a bit longer to get that off the ground. Thank you. And what's your initial thoughts on this? Is this about the size of having this product or offering in 2021, 2022? Will we note this for will it be notable for Husqvarna division? Or is it something that sort of you'll talk about, but we won't really see it in the numbers? I think that the magnitude in the 1st year will be moderate. Of course, our ambition is that the Pro segment as such should be clearly noticeable in a few years' time. So I think we should more look at it as a decisive step from our side to really build a new leg to stand on in robotics and not just be in the robotic space. But it's not flicking a switch where it looks different, I mean, immediately. No, of course. But your The only thing just to ask you about the Are you basing your legs sort of growth leg for Kfana, I guess, on top of the robotics that you have today? Glen, you were trying to say something? No. I was just going to add to that, Olof. I think what's important with the more we do it as a service, that it becomes a good recurring revenue stream and not only a sort of onetime sale. So it might be a slower burn, but over a longer period as well, which is healthy. Yes. And just maybe we're going into too much detail how that service when you think about robots as a service, is it for in areas where we have 12 months of cutting grass? Or could this be applied to Sweden? I mean, what's your thinking here? No, it could be applied anywhere. It just need to look a little bit different depending on usage and things like that. But we can, of course, include storage over the winter, preventive maintenance for next season and things like that into our program. And then we put them back out again when the season starts. So that's how we look at it. Perfect. Thank you very much. And the next question comes from the line of Harry Winter from Handelsbanken. Please go ahead. Yes. Thank you very much. Firstly, about the sell in versus sell out because there's some hardware retailers that have been reporting even higher sales growth numbers that you reported for Gardena and definitely for higher than you reported for Husqvarna. So what's your best sense of the channel inventories in the retail channel and in the dealer channel? And would you expect sort of those if they are low, would you expect those sales to materialize already in Q3? Or is this more than about what kind of a sell in season you will have in the Q1? That's my first question. Yes. So if I also answered that one in 2 different from 2 different angles. I think, 1st of all, looking at some of these channels, they generally report on bigger larger categories than ours. And when we review point of sale and things like that, We have clearly been holding our own in the Q2. That's the indication we have. So that's a first comment. But then to your ultimate question, we deem that the inventory levels are somewhere between normal to normal low, so to speak, in the trade at this point in time. So I would say slightly below the low normal. And any difference between different categories? Or does that apply to most of that? I would say that it applies generally speaking. But of course, if you pick a few Gardena categories, for instance, where we have seen a tremendous growth and we have not been able to take all orders even, than there's likely very low inventory in some of them. All right. Good. And then the new President for the North American Husqvarna divisions, what would be his, I don't know, top three priorities going forward? I mean, we are fully committed to continue on the journey that we're in the North America, making sure that we bring the profitability up on that business to a level where we want it to be. So I think that is the number one priority. And right now, he's spending his time to assess the business. And to be quite honest, I'm looking forward to his perspectives on how he would like to see to further improve and enhance and develop that business going forward. So I would say that is the main priority. All right. Fair enough. And since that was such a short answer, I'll venture a third question. You mentioned that robotics and battery are 16% of your sales. And I guess most of that will is in the Husqvarna unit. Just assuming that all of it is in the Husqvarna unit means that 28% of that unit sales come from robotics and battery. Can you give us any sense of the split between the 2 and maybe more specifically robotics Husqvarna in Europe. So just to get a some ballpark sense of these different important categories? Yes. I mean, we're normally not going into those details, but there is a meaningful Gardena business, both in the robotic space and in the battery space. So it's not just who's going to play. But what we can say is that it is clearly has its center of gravity in Europe from a geographical perspective. And the next question comes from the line of Johan Eynshen from Danske Bank. Please go ahead. Yes. Jan Anershen from Danske. I have two questions. And first one is on the pro business within Husqvarna. Have you seen any more positive trends towards the end of the quarter or towards the early part of this quarter? And if you also can give an indication of how big the pro business is within the Husqvarna division? That's the first question. Okay. So I would say that all our businesses kind of show the same curve, meaning that a steep decline early in the quarter and a steep increase in the second kind of a deal, but very different absolute levels. So the Pro business went down further and is a little bit slower in picking up, but clearly showing the same kind of trajectory. And then for construction, it goes even deeper and only came up to flat in June, so to speak. So the Pro business is absolutely also recovering. That's the first question. And I think the Pro for the Husqvarna division, I know total company, Glenn, if you take that if you take the specific Yes. Isolated Husqvarna division, it's roughly onethree would be deemed as pro. Roughly onethree, 30%, 35%, yes. Okay. Thank you. And before on the Husqvarna division again, before we had or back when we had the consumer brand reported as a standalone business, the Husqvarna division had a pretty decent profitability in Q3. Now with the consumer brand is exited, is kind of coming back to more of the traditional profitability than we have seen in the last few years? Or what's your comment on the consumer brand impact on the last quarters for Husqvarna division during the Q3? Good question, Bjorn. I think, of course, we still have some overhead that we need to carry through from the traditional consumer brand business into Q3 and Q4 with the larger facilities that went from consumer brands to Husqvarna. So there's an additional overhead burden in the second half. But it's fair to say that we have a fairly weak comp when looking at the last couple of Q3s for the Husqvarna division. So we have some optimism there. But as Henrik said earlier in the call, we're really coming into professional season now from a sales perspective towards the end of this quarter, where it's much heavier from the chainsaw demand. And that's where we expect the cost of Spana division to come into its own, so to speak. So I was probably a bit elusive there with answering the question. But yes, we feel there's some positivity upside there, but disregard the fixed overhead burden that the division carries still. Yes. Okay. Thank you both. And the next question comes from the line of Henrik Kristiansen from Carnegie. Please go ahead. Yes. Henrik here from Carnegie. Just one question on the cost avoidance. If you could say anything about any government support you received in the form of grants and use of furlough schemes, etcetera, and if you can quantify that, how much that has benefited in the quarter? Yes. Absolutely, Henrik. We as we went into this quarter, of course, we didn't know how bad it was going to be. And therefore, we put the brakes on in many areas, which led to some pretty heavy cost avoidance. And that did mean that we at least apply for some government funding. What we've decided in recent days, given the strong quarter, is that we're going to repay the short time working allowance support that was possible in Sweden. So we've actually backed out of that. So we haven't actually taken any benefit of the Swedish part. Outside of Sweden, it's actually been very small. It's immaterial in the scheme of things. So hopefully, that answers your question. So that the figures we're quoting on the short. Time work allowance and furlough schemes is not reflected in the savings initiatives we talked about. So basically, CERI impact EBIT in the quarter and for the first half of the year? Very little, yes. And we actually reversed it out in Q2 there so that we paid it back this week. Perfect. Thank you. And the next question comes from the line of Karl Oskar Priedenstern from Berenberg. Please go ahead. Hi, good morning. If we were to just talk about sort of the black swan here now with construction being down some 18% and bit different dynamics there. How should we think about Q2 now? Is it are we experiencing more flat recovery towards the end of the year and that we should see sort of a flat year over year development in the coming quarters? Or are we still supposed to expect material decline with further negative operating leverage on earnings for the Construction division? I think if you look at the Construction division, it was a very, very steep decline in late March and in April. But the market started to recover also in construction. So June was actually at the same level as last year. So the difficult thing now is then what do we think about the rest of the year because there's of course like for all our business a COVID element, but particularly in construction, there's also more the how does the different economies develop because the construction business is more affected by uncertainty and especially in the economic dynamics. So I think that is the issue. But basically, we were back to same level as last year in June. And then for the rest of the year, it will be about how the economies develop, I would say. Okay. And just my last question. It was originally guided that the exited sales now was going to be some SEK 3,000,000,000 SEK 3,500,000,000 in cost avoidance related to the group restructuring. As we're now more towards SEK 3,600,000,000 in guided exited sales, what is the I was just going to say, what's the actual cost that's been taken out on the group level so we can look at the profitability development? Yes. I think we were quite broad on the exits. We talked we thought it'd be slightly more last year, Carlos. We thought it'd be $2,000,000,000 and it was more $1,400,000,000 This year, original guidance a year ago was to be $1,500,000 And we're saying it's going to be $2,200,000,000 So yes, we're there or thereabouts, I would say, slightly more this year versus last year. The cost that we said we would take out in relation to that, of course, we took a restructuring reserve, but then should have had roughly SEK250,000,000 of cost savings on the back of the exited business. And by and large, that came through last year, and we have a little bit of carryover into this year, but it's minor this year. And then just to note, of course, we took an additional restriction reserve last year in relation to the Husqvarna division for some additional, let me just call it, headcount alignment, where the savings are coming through this year as well. So we have some restructuring from launched in 2018 and some restructuring launched in 2019 that feeds through to the P and L. They're both very much on track. Again, 250 plus 100 was the two figures, and they're both very much on track. Okay. Can I just ask because you've also guided down CapEx for the full year now towards more €2,000,000,000 but still you're sort of accelerating the growth and for the Gardena division? Can you just talk a little bit about that, how you plan on doing that? Is that more coping with current demand because you're running low on stock in order to meet the strong demand? Or should we expect an increased growth driver for the Cadena division in the coming year. Yes. We can we still feel we can work within the $2,000,000,000 that we guided on, sir, the new forecast for 2020. That might look a little different when we divide it between the divisions. Of course, Gardena continues going from strength to strength, and therefore, we are going to release some capacity investments. But we still feel we can work within the $2,000,000,000 despite those additional investments we'd like to make for Gardena. Okay. Thank you very much. And we have a follow-up question from the line of Christian Magnakoff from DNB. Please go ahead. Yes. I'll start with a follow-up question on the admin cost side. I would like to have a bit more clarity in why that was up SEK 100,000,000 to a new all time high level. And admin cost is almost twice as high as it was 10 years ago, roughly. So can you give some more color on why you have that increase and why you expect to have that increase? Yes. Let's I think there's 2 sides to that, Christa. Of course, versus the €10 scenario, then we're comparing without IFRS 16 where we're putting leases into this. So there's quite a difference on the lease profile within the depreciation that goes in then to administration. So it's hard to compare versus 10 years ago. But if you look at purely into the quarter, then of course, we have had to take some additional incentive reserves. At the end of Q1, when the result was as bad as it was, of course, we had to release. And during the quarter, as the result has improved, then we've had to take some additional incentive reserves. That's by and large what it is. Okay. And then the second thing was coming back to Q3 and a follow-up on Bjorn's questions. More on the cost side, last year you had quite a negative effect from the destocking in the U. S. What was the impact from that last year? The second thing was that you had high strategic costs or SI costs last year. Are you expecting to have an increase in that or a decrease? Well, let's start with the second question, Christoph. On the SI side, then we really compare this year on year. So in the second half, we'd expect to have an increase versus the rate of last year. So it is year on year increases that we're talking about, and we would expect then to dial that up in H2 in preparation for next season in the various aspects, whether that's additional capacity investments, whether that's additional go to market preparation or additional marketing activity even in the second half of the year. So we would expect an increase. And just to clarify your first question again, Christa, on the releases. Yes. I mean, last year, you had quite high inventories coming into the second half of the year. And in Q3, you had destocking. Effects, if I remember right? That's right. I think it was the first time we're reaching it out that we had an absorption effect. And it's fair to say it should be better in H2 this year versus last year. That's a fair assumption. And we have one more follow-up question from the line of Johan Eliason. Please go ahead. Yes. Hi. It's Johan again with Kepler Cheuvreux. Just a follow-up on this battery alliance. If I understood you correctly, could you just confirm your aim to keep your own battery design for the high performance battery handheld products like chainsaws, if you could just confirm that. And then what's the logic? I mean, I understand it from your point of view that you want to be able to sell the Gardena brand with the battery sort of that fits many other products. But from Bosch point of view, which have a big hand powered tool business as well, What's the logic here? Are you sort of paying premium prices on the batteries you will buy from them going forward? And you simply think that it's worth a premium to be able to offer this ubiquity for the batteries you have in the Carina brands? I mean, the main purpose why we are doing this, of course, is that we think it makes sense for the consumer that having one battery is better than having many different ones. And as long as you have a fairly I shouldn't say simple, but a simpler application, that is fairly feasible. So that's why it makes sense in the consumer segment, but it doesn't make sense when we talk about Husqvarna's prosumer segment or in the professional space. So that's the rationale behind it. And for us, there are a lot of benefits, of course, also that we can now focus our efforts on developing new products instead of also developing batteries and chargers. And from a cost perspective, we, of course, also do this because we want to tap into box scale. So there's no such thing that we are talking about paying premium prices for some reason. I think this was more that Bock and Gardena together So it made sense that they're both so strong in the channel and in and towards that customer segments. It made sense to found this together and then trying to invite others to primarily more application areas with a purpose and the aim to try to give the customer a good solution with 1 battery. So you say it's basically not impacting your gross profit margin on the battery products and getting a negatively, potentially positive or Yes. I would say it's more on the positive side and particularly since we don't need to invest in batteries and chargers the same way as we would have had to do otherwise. Okay. Excellent. Thank you very much and have a nice summer as well. Thank you. Okay. I think that was the final question for today. So we thank you, everyone, very much for joining in today. And as we have said before, have a really nice summer. Thank you.