Good morning, everyone, and welcome to Husqvarna Group's presentation of the first quarter of 2019. My name is Johan Andersson, responsible for investor relations, and will be the moderator here today. In Stockholm, we have Kai Wärn, our president and CEO, and Glen Instone, CFO. We will start with the presentation by Kai and Glen, and then afterwards have a Q&A session. With that, I'll welcome you, everyone, and leave the word to Kai.
Also, from my side, welcome to the Q1 report. We're quite pleased with the start of the year. Let me be clear, it's a start of the year. The Q1 is a selling quarter. It's not really saying that much about the sell-through. So far so good, I think is a very clear message from our side. We were particularly clear, I think, end of last year, that we are looking for a margin improvement in this year, and we can say that we are actually on plan in this quarter on that margin improvement trajectory as we have set out to reach. The highlights as we see it, let's start with sales. Actually, we have a better sell in to the trade partners than one could potentially have expected. We have plus 4% net sales currency adjusted.
Please bear in mind that you need to deduct then 3% on the group level from exited businesses, which affects actually then two of the three divisions, Husqvarna and Gardena, but not Construction. That's positive. All core categories in the divisions are in plus, which is also important. That's really satisfactory to see. A very good leverage, 23% operating income on those 4% of net sales increase. If you try to read what that is constituted by, of course, volume, it's price, it's mix. It is efficiency program savings, and it's also a delivery from the restructuring program that we took one-off cost for during last year, and actually some few bits and pieces also in Q1, and Glen will revert back to that.
We have had a fair bit of raw material headwinds in this quarter, and actually they were higher than expected currency positive gains that we got. All in all, a net negative from the two. I think it's not the currency that helped us make this quarter in that sense, despite being better. It's worth mentioning that we continue to invest in the strategic initiatives. We are determined to maintain the technology leadership we have built up, and there is no compromising around that, actually, in these numbers. We're building on our strengths. All in all, I think this is a sign of strength the quarter. Remember, it's a start of the year.
Looking at the growth, we now split that up a bit because this is the old structure, and the division as they were reported rolling 12 months, and now we just looked at the Q1 in the new structures. We don't want to combine them because that would have been confusing for you. In the new, you have the Group at 4, as I mentioned, you have Husqvarna on 5, Construction on 5, and Gardena on 2. Then you should be aware of that Husqvarna and Gardena respectively are burdened with 4% of exited business in those numbers. 2 for Gardena actually is a 6 in the old structure, to be clear about it, and Husqvarna plus 5 then equivalent would be plus 9. Good start.
We see now in this curve that we have reverted back to throughout quite some few quarters back that we are taking a little bit of a rebound up, a jump up, and that is, of course, all in line with how we have communicated. The way we talked about the expectation for this year is that at least 9.6%. We were a bit cautious to say that we were going to reach the 10% target we have set out given the point of departure at 7.9% for 2018, which were a little bit lower than actually what we would have thought by beginning of last year. It's a bit tough for a starting point for the recovery, but we are somewhere in that interval of the 9.6%-10%. Of course, we are aiming to get to 10%.
I think you just need to bear with me in respect that I don't have the visibility of how that will play out eventually. Be sure that we are aiming at the 10, but it's not at all any promise from my side. Definitely an ambition. What we are clear about is we want to be seeing 2019 as the best year that we have had in absolute terms and hopefully then also from a margin perspective, and 2017 was 9.6%, just to put that back in about a bit higher than SEK 3.7 billion in operating income. Looking at the divisions, Husqvarna, SEK 9.5 billion, 5% currency adjusted. You heard me mention that, 12.9% EBIT margin.
Particularly noteworthy, I would say the sell-in to North America, where some of the trade partners chose to load in the season a bit earlier than they did last year. All regions in growth, but particularly I like to call out North America, who chose to go a bit heavier early than they did last year, which is a common. You heard me mention the 4% of exited consumer business, and the operating income then increasing by 18% for the Husqvarna division volume. Of course, supporting that price and savings from the efficiency program as well as restructuring. Just like we talked about the restructuring program, it is delivering according to what we have set out to do, and Glen will make some comments more specifically in his part coming.
Just like for the group, Husqvarna bears the lion's share of the raw materials and tariffs, they were then higher than the positive currency contribution. We are stemming ahead with the strategic initiatives. Actually, what we have done since some few years back, starting actually in 2016, and then consecutively kept, is we are utilizing those efficiency improvements we are doing to actually invest into a more forward-leaning cost structure. It's a shift of the cost structure to become more growth-oriented. That's what's ongoing since 2016. Not only for Husqvarna, but for all three divisions, actually. Moving over to Gardena, we have yet again a good sell-in, and I would like to emphasize, in this case, the watering particularly, and that's not very surprising, I guess, for you.
You know that the last season was exceptionally favorable for Gardena, the inventories in the trade were under average, leaving the season. You should bear in mind that Q1 2018 for Gardena was actually up 15% versus 2017, the reference was really a tough comp, and there were some new channel filling, I should formulate, going on at the time. The plus 6 then, if we forget about the exit business of the integrated consumer parts, is actually a very strong sign in that respect. There is clear volume contribution price and mix. I would also emphasize the restructuring part, particularly here for Gardena. Moving to construction. Plus 5% currency adjusted. Good growth, particularly in Europe, actually. North America decreased somewhat. A little bit slow start on the quarter.
Some key accounts also adjusting inventories, the underlying market is actually solid, we haven't seen any real sign of weakness in North America, I don't think you should extrapolate that actually too much. The operating income grew 12%, again, volume price. Mind you, North America is an over average profitable region in the construction space for us, which is not the case in forest and garden, but it is here. That was a negative geography mix. In this case, actually, the currency is outbalancing the raw materials and tariffs. We're pressing ahead with the strategic initiatives and some further integration steps of the three acquisitions we made during the last three years. To talk about some of the technology introductions we have done in the quarter, it's hard to avoid this nice little piece, the all-wheel drive robotics.
We made a little bit of a different approach launching this product. Actually, we launched it in connection to the Mobile World Conference in Barcelona, which was a new approach from us, which really rendered some good and yielded some good results. Let's start by looking at a short video clip. It's a 30-second clip, it shouldn't be too long. From Barcelona. Just to give you an idea. Husqvarna need to be in Barcelona in the Mobile World Congress. Welcome to the collaborative and competitive new field of play for us. A test, of course, it's a reflection of our intention to move into even more technology leading edge in digitalization, various types of applications. I think we've done a lot. We will continue to deliver a lot more on that side. Actually, we had a fantastic reach.
We had more than 80 million people, subscribers to media that actually interviewed us, and there were 2.5 million type of people sharing content from that after this exhibition. It was an interesting experience for us, and a positive such. Construction also had a very important exhibition down at bauma in Munich, which is every third year, which is actually the largest exhibition, all kinds, in the construction space. We introduced the fleet services, which we also apply in the Husqvarna division for the commercial lawn and garden space. They introduced new battery-powered products, and there was a lot of traffic actually in the booth. Also a very good experience from that side. Just to jump over to the next little topic here, Gardena actually was elected to one of the top brands in Germany, all categories.
Not outdoor power equipment, but all categories together with the most famous ones. That was, of course, very prestigious, and I think we see that as a reflection of the strength that has built up over quite some few years, actually, of innovation. Gardena is very proactively also going ahead, and they are already in the discussion with their channel partners about next season and the innovations for next season. That's looking good. There are awards also from the Red Dot for design, which are prestigious. There are tests ongoing, what we call experimentation, where we're also going to sell flowers with a select retail partner to see whether the brand can be expanded and stretched into new categories. We also do have a cooperation with UNICEF about watering, and everybody is well aware about the scarcity of water.
Of course, Gardena offers solutions for optimizing the use of water for passionate gardeners, may that be the Gardena smart system, Micro-Drip-System, or new nozzle technology to do this in the right way. Eventually, this is about biodiversity, which we think is an important piece, so really need to make sure that that area is optimized in the right way. This co-op then, of course, also supports important projects that UNICEF is providing in some of the emerging countries relating to water, which is important for us. Just some topics to quickly mention here before I leave to Glen now to talk more about the details of the P&L. Glen, please.
Thank you. Okay. Good morning. A little bit more detail to the P&L or the income statement. As Kai said, the revenue increased by some 11% as reported, or 4% currency adjusted, and that included a 3% burden from the exited sales. 7% in like for like terms. The acquisition effect in Q1 was very small, i.e., what we acquired last year in the construction space. That's roughly SEK 50 million. Still 4% currency or organic growth, as we would call it. Moving down into the gross income line, a nice improvement from 28.8 to 30.1. It actually also includes the SEK 42 million of items affecting comparability in that line. If you take that out, the items, it's actually 30.4. Moving from 28.8 to 30.4.
Of course, sitting in the gross margin, we have the burden that Kai talked about of the continued tariffs and raw materials. As we went into this year, we guided on roughly SEK 500 million burden there. In Q1, it's been a SEK 200 million burden of that magnitude hitting the GP, negative effect. It does appear it is somewhat easing, I would say particularly on the commodity side, and also the impact of a lower List 3 tariffs in the U.S. We'd guide more like the SEK 400 million level as opposed to the previous SEK 500 million guidance.
I think if you then look at that and say we've had an increase in the margin of SEK 550, including the items, more like SEK 600, and then you can see we have a burden in there of some SEK 200, it shows that the true gross margin is coming up magnitude SEK 800 million. Within that, of course, we have a positive FX effect. FX is really sitting in two places in the gross margin, a positive and a negative effect into the SG&A. We have a positive effect into the gross margin, and along with that comes the positive price, volume, mix, and the efficiency programs that Kai mentioned earlier. So far on track when it comes to the gross margin. Moving through to the SG&A, that moved up slightly, magnitude SEK 280 million.
Again, if you look at that, a negative FX effect, roughly 40% would be FX into that. The rest I would call strategic initiatives or the volume impact of shipping more products. Very much in line with our expectations on the SG&A. As said, items affecting comparability. We took the lion share of the restructuring last year, and we said we had roughly SEK 50 million still to take in this year. There's SEK 42 million already taken into Q1, leaving roughly SEK 5 million-SEK 10 million left to take. Very small. We're pretty much through with the restructuring. Moving further down the P&L, finance net. That moved up from SEK 137 million to SEK 160 million. The real constituents into the change, a slight cost for IFRS 16, roughly SEK 6 million, and the remaining SEK 17 million would be higher interest charges actually hitting the finance net.
Again, pretty much comparable to prior year. On the tax line, again, the full year guidance is 23%. We're sitting at 23% during Q1, and that's comping to a prior year of 24% on the tax rate. Again, we'd stay at that guidance for the full year, 23%. Moving over to how the cash flow looks. This is actually pretty flat to prior year. We see an upside from the operations, some SEK 400 million improvement on the EBITDA line. Of course, the higher sales brings higher receivables, so we have a higher build upon the receivables of roughly SEK 600 million. A slight improvement on the inventory buildup and a slight improvement on the accounts payable. Pretty much flat at minus SEK 1.8 billion. This chart is one we've had for some time now, and it's really how efficient we've been with our working capital.
We said in the last quarterly report that we expected actually a buildup during Q1. As we said, this is very much a preparation quarter. We are selling into the trade, and we are preparing for the season. We are higher than we would like to be, no doubt about it. We are still planning for 25. That is still the target we have. And we expect now during Q2 that this starts to take the curve back down. But very much burdened by the higher inventory levels, which I will come onto on the next slide, and as I said, slightly higher receivables, of course, driven from higher sales. On the balance sheet, there is a few lines stand out in here, I believe. If we start off at the top and look at the non-current assets.
Somewhat higher, and that is where we are seeing now the burden of the new IFRS 16 lease liabilities. Roughly SEK 1.5 billion on the asset side, and we see the same on the liability side. If you consider both, we have SEK 1.5 sitting in here and SEK 1.5 in the non-current assets, which is, again, the change in the lease accounting that we see. Inventory, as I said, we are significantly higher than prior year. We saw that coming out of the year as well. Of the buildup of roughly SEK 1.4 billion there, I would say half a billion SEK would be FX. If we just translate last year into this year, it would be more like SEK 10.8. Then SEK 10.8 up to SEK 11.7 is really the result of our season preparation.
We talked about the Brexit preparation that we have continued during Q1, preparing for the worst case scenario of a hard Brexit. Of course, we have also been preparing for the watering season, that hopefully is starting right now, looking outside. On the net debt side, that also increased significantly, SEK 13.5 billion from SEK 9.2 billion. You need to factor in the IFRS 16 impact into that, roughly SEK 1.5 billion. We had the higher dividend payment or the dividend payout of roughly SEK 1.3 billion as well. The rest would be the higher interest and FX rates that are flowing through there into the net debt. Which takes me onto the next slide, and this, of course, is a ratio we are using and keeping a close eye on, net debt to EBITDA. It is slightly up, it is at 1.9. We have a guidance of below 2.5. We are still well within that.
I would guide that we are still well within that as well. Of course, IFRS 16 in itself will have a slight impact on this ratio, probably 0.3 on the calculation if we look at it. This is still, again, rolling EBITDA roughly SEK 5.2, and the average net debt giving us a 1.9 ratio here. At that, I will hand over to Kai to close before we open up for questions.
Thanks, Glen. Summing up two areas. The first area being our continued focus on the levers, which are important for the margin improvement trajectory. We talk particularly about the price discipline, about the efficiency program and the restructuring to do that. That's one thing. The other one is, of course, to continue build on the technology positions and the innovations we're working on to bring to market. Build on the strength of our core brands, Husqvarna and Gardena, and to, so to say, safeguard our position, really pushing this industry forward in terms of technology and applications in various respects. I think these are the two major comments I'd like to make, and we feel good at this stage about both of them. Right. With that, I think we Johan?
Yes.
Please.
Thank you very much, Kai and Glen. With that, we are ready for the questions. We will start here in the floor in Stockholm. Do we have any questions? Yes, here. Please say your name and your company and wait a second for the microphone and then ask your question. Thank you.
Hi. My name is Clara Johnson. I'm from SEB. I have a question about pricing. You previously guided for that you would raise prices this year by about 1.4% for the whole portfolio, if I'm not wrong. Could you tell us about how price increases have progressed in Q1, and if you feel comfortable with this guidance of around 1.4% for the full year? Especially since we've heard talks about competitors raising prices a bit more.
The reference you make to 1.4%, I don't particularly recall. What I recall is that we said the price increases will well cover the raw material and tariff increases. We're going to be on the right side of that, which is, I can imagine, even a bit more. It is an important parameter for us, and we are still executing it with discipline, and I would say the previous statements hold. Nothing has changed, actually, and I think that also reflects the expectations for the remainder of the year. Not only what we see so far, but also what we expect.
I interpret that as that the season has started good for pricing.
Good. I think we were very clear about the need to compensate. You have to remember, we absorbed a lot of increases of cost last year that we didn't compensate for in the right way. We needed to rebalance to some degree this year. I think it was very clear. It was not that optional. It was just a necessity to make that happen. Remember, it's not equal on all product categories. This is a huge variation between categories and geographies. Behind that aggregated statement, there's a lot of variation, of course, that's going on also.
Okay, thank you. The next question is about the inventory. You had a little bit of build-up as you talked about in Q1. You talked about this being partly due to Brexit and then watering build-up. Could you give us an idea of how much is actually Gardena and watering and how much is Brexit? The Gardena part, should we interpret that as a trend going forward as well, that you will have to increase inventory as end markets are becoming a bit more volatile?
Maybe we start with the Gardena part.
Yeah.
Last season, we were clearly caught, let me call it that way, when the season started. We had a lot of supply costs added to our supply chain. We got a dis-synergy or a dis-leverage. We purposely built up ahead of season, and that's what we will intend to do going forward on the Gardena side for sure. I won't guide on exact figures for Brexit, how much we built up, other than say it's very much in line with our plan. Most of those units are actually sitting now in our European market warehouses ready for shipment to end trade partners.
The only little thing I can add to that is that over time, Gardena has had several consecutive years of very strong growth in the watering category. Of course, what used to be a good margin of excess production capacity diminishes, and then you need to take another step, et cetera. Before you've taken that step, you need to deal with it in the way we dealt with it going into this season. Do you hear what I'm saying?
Yes.
It's a constant adjustment, and if that excess capacity is smaller, you need to pre-produce, and that's one comment. The other comment is, of course, the great season last year, which really led us to expect that there was going to be a lot of early demand.
Thank you.
Okay, I think we had one question there in the back. Christer?
Hi there. Christer Mangård from DNB. A couple of questions to start with on Consumer Brands. Sorry, Consumer Brands. You exited according to my calculations, about SEK 370 million of sales in the quarter.
More, actually.
Okay. Yeah.
Not too different.
Annualized, given that Q1 is a seasonally quite big quarter for that division, are we on track with the SEK 1.5 billion-SEK 2 billion cut in contracts for this year?
Yeah. That still holds, and I think I said already at Q4 that we are rather closer to the lower interval. One and a half-ish. Which leads, of course, to the conclusion that there will be a little bit higher rates most likely than in Q2.
The second question on Husqvarna division in North America, where you said you had quite strong growth due to the good sell-in. Is it sell-in of traditional Husqvarna products, or is it robotic lawn mowers that actually start to sell in now in Q1?
We wish. It was robotics that made that difference, but we're not there yet. I would rather say in the big numbers, looking at the big numbers, it's more the traditional categories that make up that sell-in. Of course, there is a component of robotics in that supporting. Yes, you're right. The big number is really more traditional categories.
Those traditional categories have historically been negative for margins when North America is strong for Husqvarna. Was that the case also this time?
You're right in the respect that it's under average margins in those because this is particularly a lot of wheeled. Even though we have exited the least attractive parts of it's still wheeled categories, which is below average. There is an element of that, Christer. Yes, correct. It's higher. Remember, for example, on the tractor side, we exited lower price points. We just kept specifications which are more defendable and more strategically correct to have.
The final question on retail inventories. You said that sell-in has been good. I guess that some categories had quite high inventories after last year's season. Can you comment on the retail and the dealer inventories that we have today? Maybe also given the warm April this far, if you can comment anything on what you have seen in the sell-through?
You asked about robots. I guess that question is going to come sooner or later here. How are we doing now with robots, for example, with inventories? My statement the last few years has been, we have seen a growth rate of well above 20%. We are not well above. We are double digit. We are not well above 20% Q1 for the combination of robotic mowers and battery-powered products that we refer to. We still expect that for the year to be well above 20%. There is an effect to some extent, of that over average inventory in that category. In general, I don't want to emphasize inventory levels as an issue for the Husqvarna division. Gardena is rather coming from the other side with under average. I would say it's a non-issue as we move forward.
As to your comment about the Easter and the current state, I still see that as positive. So far, Easter is a very important break of the season for Husqvarna, traditionally. The weather has been nice during Easter. It soon wouldn't hurt to see some rain, for example, in the Nordics. So far, it's rather a plus than anything else, what's seen of April.
Thank you.
Did we have another question here? Yep.
Good morning, Henrik Christiansson from Carnegie. I have a question on the restructuring program and the impact in the first quarter. I'm not sure I've seen that number anywhere, but could you quantify how much that had an impact in the first quarter?
Do you want to start?
Yeah. If we look at the restructuring, I would say it's on track. We guided across by 2020, it would be a full effect, 250 million SEK lion share to come this year. Of course, we've seen a sizable impact during Q1. I won't quantify it exactly, but it's sizable in Q1 of course.
Great. Then a follow-up on the pricing as well, which we had before. Previously you said you would increase prices, you would more than offset tariffs and raw materials. Now you're guiding for lower raw materials. Does that mean that the net effect will be bigger, or have you adjusted pricing down to take into account the tariffs are pushed forward?
I think that's a net improvement, of course, everything else same. It remains to be seen whether that holds true as we progress through the season. A lot of things will unfold, which we don't have visibility into at this stage. As per now, everything else is same. That's a positive, of course.
Great. Thank you.
Good. I think we had another question here at the front. Björn?
Thank you, Björn Enarson, Danske Bank. One more question on robotics and how that is supposed to play out, given your growth comments for the years. That is predominantly something that we will see also in a selling situation in Q2, or did I misunderstand?
No, what I said was that the growth rates will be higher reasonably from an expectation point of view in Q2 versus Q1. Yes, correct.
In terms of selling?
Sell-through.
Sell-through.
Yeah.
Okay. I got it.
In total sales numbers.
Yep. Correct. Good. Given the changes to the structures the last few years and where you have been growing, et cetera, can you update us a little bit on your FX flows now with production in North America and Europe?
Sure. Of course, our main flows are in USD and EUR, JPY to some extent as well, and CAD. That's where our main flows into SEK would be. We've had a positive effect from FX so far, particularly the weak Swedish krona, of course, translating back from USD in that respect. We had a much stronger FX impact during Q1 than I first anticipated. Actually, SEK 165 million of positive FX effects sitting in there. If we take the outlook, we previously said SEK 100 million-SEK 200 million. I'd probably say it's more like SEK 200 million-SEK 300 million looking ahead now for the year. Another positive effect from what we're looking at.
The USD flows or EUR flows into the U.S., has that decreased a lot?
No, the EUR and the U.S. has not decreased significantly. It'd be more the USD into EUR land or SEK land, which is decreasing on the back of some of our exited business. The products moving from Europe into U.S., that wouldn't be decreasing, no.
No? Okay. Clear. Thanks.
Thank you very much. Do we have any other question here on the floor in Stockholm? Let's see if we have any questions on the telephone conference.
We don't have any questions at the moment. Just a reminder, it is star and one if you wish to ask a telephone question. We now have a couple of questions.
Okay, let's go.
Your first question comes from the line from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. This is Johan Eliason at Kepler Cheuvreux. I was wondering, first of all, this Gardena buildup to have better delivery performance in Q2. Q2 last year was a difficult quarter for you being very cold late and then suddenly very warm, and then margins at the end didn't turn out to be very good, or at least below expectations. How do you see the margins panning out with the actions you have taken now? Obviously, you don't know how the season will exactly look like, but what type of magnitude should we think that this inventory buildup will help you in your delivery performance in terms of margin development? Any views on that?
Johan, if anything, of course, we try to learn from the rough experience of last year, Q2, which was, as you rightly point out, nothing, and then everything during May, and then scaling back fairly quick in general terms, with penalties among others in logistics and transportation as one consequence, and some other enforcement cost to expedite those volumes. There should be a positive element coming from that in Q2. No, you're right. Yes.
If I may, on U.S. robotics again. I've been at Lowe's homepage, and they seem to be selling your Husqvarna robotic mowers at $1,599 and $1,799, including installation, which I understand is done by the local servicing dealer. How does this fairly impact your profit margins on those robotics, considering that it seems like the installation is included in this price point, which looks lower than with what we have seen for the Husqvarna brand in Europe?
First of all, it's a rather large engagement we have with Lowe's in the U.S., and this comprises some 800, 900 point of sales, where we actually do promote it and where there will be particular displays outside of those department stores. I think that's the first comment to be made. At this stage, I can't really say much about the season and the sell-through. It's simply too early. If we would have had this call one month later or one and a half months later, I could give you a fairly good indication. I can't give that. As to your question then about margins, we still have a pretty good margin consolidated in that offering for that particular product, so it's not a concern for us.
I think the important point to make is that we have a unique strength through the dealer structure that we have built up with some 5,000 dealers in North America, and how can we combine those strengths from the dealer being close to the customers with the mass consumer experience of a retailer like Lowe's. That's what we're trying to build, and the U.S. is much more of a service market than Europe generally is. It's a very natural step to take. It's a test, and of course, we like to transfer as much of opportunities over also to the dealer channel to utilize their closeness, intimacy with the customers as well. Building on that combination of strength is the natural thing to do. Those levels are not a concern at this stage, Johan.
Okay.
For those kinds of products.
Okay. Then, just on the IFRS 16, I saw depreciation go up in the quarter. Could you just quantify the impact what's on the depreciation line from the IFRS 16? Thank you.
Absolutely. That was roughly SEK 100 million in the quarter. Full year, I would guide at roughly SEK 400 million on the depreciation line from IFRS 16.
Excellent. Many thanks.
No problem.
Okay, I think we have.
Thank you
I think we have one more question from the telephone conference. Do we?
We do. We will now take the next question. Please go ahead. Your line is now open.
Hi, it's Olof with ABG. Can you hear me?
Yes.
Yes. Perfect. I wasn't sure if I was getting the question. Going back to Gardena, I think that was the best spot in my view, at least. Very strong margin and improvement. Is it possible to split up or give us an indication of an EBIT bridge here year-over-year? Was the product mix the main driver of the higher margin? What is sustainable, what is not sustainable, if anything?
Hi, Olof. If we look at Gardena, of course, it was a very solid quarter. The lion share coming from, it's called the market-driven improvements or mix improvements. What I would say is we need to really split that into two. Half of it coming from traditional Gardena, particularly the watering products, but then also the restructuring measures for Consumer Brands Europe, where we've seen also a strong margin improvement if we look at that in isolation. It's pretty much 50/50 between the two in the Gardena division. Does that answer your question?
That helps. Thank you. I have a follow-up on construction as well. Kai, you spoke about good market demand and so forth. Let's say the organic growth, excluding M&A, has been fairly flattish now for some time. Will we see this number go back to the 4% or 5% we were accustomed to a while back? Or have we reached a plateau for 2019?
I think if you ask me about the expectation, we should see a rebound upwards. We don't see any reason, talking about the market demand, for example, now North America, which was the issue in quarter one, why we should be pessimistic about that. As I commented upon, there was a bit of a weak start of the quarter due to actually cold weather, wet weather. The season for them was maybe more impacted by that situation. You may recall the northern part of U.S. being extremely cold, and then it was fairly wet. There was an element of that for sure, but I don't see that we need to extrapolate that, and I also commented upon the adjustment of the inventories by some of the key accounts that took place.
When that is all said and done, which we would expect it to be very soon, we should see growth rates revert to the levels that you indicated.
Perfect. Thank you very much.
Thank you. Let's see. I think we have a final question here in the floor in Stockholm. Do we have any more questions on the telephone conference?
No further questions at the moment.
Okay. I think with that, if we don't have any further questions here in Stockholm, we thank you all very much for joining us. Let's meet again when we report Q2 in July. Thank you.
Thank you.
Thank you.