Earnings Call: Q4 2018

Feb 5, 2019

Welcome to Husqvarna Group's Presentations for our Full Year Result 2018. My name is Johan Andersson, responsible for Communication and Investor Relations, and I will be the moderator here today. Today, here in Stockholm, we have our CEO, Kai Warn and our CFO, Glenn Instone, that will present the results. And afterwards, we will have a Q and A session, both here live in Stockholm and also over the telephone conference. So with that, I'll leave the word over to Kai. Also from my side, good morning. Welcome. Thanks for coming in, in this weather. We'll talk about quarter 4, which I would say summarize a bit along expectation. What you will know or should know is that quarter 4 is very much a preparatory quarter for the season of 2019. Seasonally small, less significant, but I think the important things about 2018 I want to recap it to late, so we're perfectly clear. And then of course spend energy looking into also 'nineteen and where we are a bit more upbeat about the developments. But starting then summarizing the situation, yes, there is a temporary disappointment in the financials of 2018 and particularly quarter 3 was disappointing. I would still describe quarter 4 very much in line with our expectations. But we have taken some strategic important decisions. We have this on the consumer brands division, which has been a bit of a distraction, a problem child. And you know how it is eventually you end up spending an over proportional share of your time on fixing problems rather than dealing with the most important things, which is the value creation. So that's important. I would describe that we have the main restructuring actually behind us in respect to this and we have also taken quite some hardship with reducing resources, may that be centrally, may that be on a divisional level, such that we are in shape for somewhat lower business volume as a consequence of this. There are still some shuttering of plans to be done in front of us, but all of that all the decisions, all the planning, all the communication actually to everybody who's going to be involved is behind us. If we look at, for example, Macrae being the huge site affected of this. I also can be very clear about that restructuring measures that we have taken are going to be EBIT accretive as of now pretty much with the start of 'nineteen simply because it very much relates to the headcount reductions that are executed during second half of twenty eighteen. So now for twenty nineteen, the top priority is to get back to the improvement of the result trajectory, which we deviated from as you will be aware of during 2019. So building on the strength, I think that's the most important takeaway strategically from 2018. We'll talk a bit about disappointments and I think the group financials exemplifies that. Talking about quarter 4 currency adjusted flat, all in all minus SEK282 and we had knock on effects from the season quarter 3 that we talked extensively about after the Q3 report. Yes, we have continued impact from raw materials tariffs. And I would also be clear about logistics, freight costs is one item, which is has been high. I don't think it will leave us necessarily at this point either. We will need to calculate for that for 2019, but I think we have taken care of that in our preparations. But I also want to emphasize that goes for quarter 4 as well as for the full year, we have maintained the strategic initiatives and the cost additions related to those throughout the year. So I mean, there is a question there, should we have been harsher to reduce them more forcefully? Actually, we decided not to because we want to keep the momentum that we have on the top line side. So we did that. So I think that's a sign of strength and confidence on our side that we did that. So for the full year, 2% currency adjusted sales, 7.9 percent EBIT margin, miles away from where we want to be, as you know, and 'seventeen has a comp, 9.6%. On the other hand, 9.6% is the best year since this company was listed. Yes. I think it is worth noting on the disappointment side, given the high raw material tariffs and logistics, we did not manage and the difficulty with the season, we did not manage to get efficiency program to balance the strategic initiative costs, which we have so successful being or doing during the preceding 4 years. So that is a disappointment, I think, on the group management point of view, but that's something, of course, we are working very hard with to restore for 2019. Dividend is suggested by the Board to the Annual General Meeting to remain unchanged. So that's the group overview. If you look at the top line and remember this is the profitable growth division, so it's not consumer. It's not including the items affecting comparability of the acquisitions of construction. So that's 4 average for the group for those 3 divisions, sorry, where, of course, Gardena then is doing a lot better. On the flip side of the tough season for Husqvarna, the long and dry summer, of course, was a great thing for Gardena, obviously. Husqvarna then stepwise lowering down to plus 1 for the rolling 12 month here and construction 3.4 for organic. So but 12%, I think including the acquisitions. So but I think the 4% is still a healthy number. We normally talk about the ambition being to gain 1 to 2 percentage points to other market and you will maybe recall that we have the growth target being 3% to 5% based on the Nordic, the GDP 2% to 3% and then plus 1% to 2%, and that leaves us with 3% to 5%. So we are in the middle of that span. That's still coming down from what we have seen. So it is what it is. I think given the season that unfolded in 2018, I think we are pleased with it. In general terms, it's not fantastic, but it's okay. So if we look at the curve that we used to be so proud of, we have to accept that temporary dip, but we will do our utmost now to prove that that is actually a temporary dip, nothing else, the 7.9% and move back. So if we then jump into the divisional summaries, I mentioned the knock on effects, particularly for Husqvarna division that shouldn't come as a big surprise. You have minus 2 in the quarter for them. You have a negative EBIT. Again, the same reasons pretty much as for group shines through. What I could say in addition to that is that the mix was a bit negative as well. So that played into it, the regional side. So lower in Europe, which is pretty much also the knock on effect consequence from Q3. What is important is that we have an operative leadership structure in place. I'm talking about the new combined entity of the Consumer Brands and Husqvarna and Consumer Brands less, of course, exited business. But I think this is important. So when I talk about the restructuring being behind ourselves, that is one item. So we the chain of command, so to say, is installed since last summer. So the whole preparation for the 2019 season has been done in this new setup and structure. And there are some good evidence of that that we see as we move into 2019. So all restructuring planning and decisions are behind us. And as I mentioned, some of the executional parts are still ahead of us, but I think that's less of energy and time consumption that's in front of us than what was behind us. Gardena, seasonally small, almost completely insignificant, less than 10% of yearly sales in the quarter. So I think you bear that in mind. And if you see that combined with, of course, the strategic initiative cost that we had taken, so you have a relatively high cost structure for a too low sales, but that's the nature of the Gardena business. So don't look too much into the quarter, I would say. Actually, but rather look at the full year, the plus 14% currency adjusted of the sales and the 11.6% EBIT margin versus the 12.5%. So yes, we had we don't have the full leverage as we would like. And to some extent, there are also logistics burdens because the season unfolded in a very intense way. So we had to accept some extra costs to actually execute in the midst of the season there. But a very solid execution of the strategy talking about the geographic expansion, maybe even more so the channel expansion in those geographies and as well as product launches. So quite pleased with that actually. So it's a very nice year and you will recall that the 3 preceding years have also been quite strong. So it's developing in a very interesting way actually. Consumer Brands, Q4 improvements versus the preceding year, of course, a bit of savings on the minus 6 currency adjusted sales, we made a smaller loss, somewhat smaller, I should say. I don't want to overemphasize that. But for the full year, that's minus SEK300 1,000,000, which is not great. And of course, this is obvious. There's a lot of raw material tariffs and logistics, lower sales. So on the year, it's 9%, which is I think what many of you, I guess, would have expected from the year in a total. So lower sales, lower manufacturing volumes, which is, of course, a burden as well. I will not spend much more time on it at this stage. I don't think that's the focus for us. Construction, Q4, good development in Europe, a little bit disappointing in North America actually. I'll come back to that. So the EBIT is impacted by a negative mix there to some extent product but also geography because North America is an over proportional profitability for us at these exchange rates that we see today. So that's good. Normally, good. We have, of course, also absorbed some costs for continuing the integration of the Atlas Copco entity and we have continued with the strategic initiatives also on the construction side. So if you look at the full year, you had 12% sales increase currency adjusted and 12.4 percent margin, which we think is okay ish. And in the quarter, it was +8 percent where the organic was flat. EBIT margin, a bit burdened then by the comments I made about the mix, the raw materials and some of the integration costs. So that's construction. If I then move a bit just to make some comments on the product side, we have quite some important launches ahead of us, one of them being a new generation of professional chain saws, the 550, which is actually very promising in terms of cutting capacity, significantly higher than what's out there in the market of any type of brands. So let's look very shortly at a video describing that launch event. Welcome to an historical event. The new generation 550XP Mark II and 545 Mark II. So It's quite amazing to to feel this endless forward. Comparing it to the older model, straight away I could feel the difference. You should do basically anything with these chainsaws now, and that's really good for a user like me who finds and do ground fell. I think they will sell a lot of this product for people who work on the forest. They will do more job with this. This is Stu Prasad. Quite important product actually. And you will probably be aware that it's I mean the battery source are great if you are in an urban environment. If you're an arborist in an urban environment, you can still use battery. But if you're out in the woods, you're still left to deal with the petrol. And hence, we developed this new generation. You might also recall, we had a launch of 70 cc product last year and combined with the chains and for that sake also improved bars, there's a lot of enhancement overall product system that we believe will play into our hands in a nice way coming or going ahead. So go another one. Another important launch is the world's first 4 wheel drive robotic lawnmover and I think we have a short video on that as well. That's coming. So that's a short version. That was really short. I thought it was a bit longer, but anyway, you get an idea. So it's not only these deep slopes that this is going to be good for, it's also better at managing uneven surfaces. It's a very nice development and I think it's fairly unique. We don't think anybody has anything resembling this product. We foresee great interest of this, of course, not the least in countries such as Southern Germany, Switzerland, Austria, which are quite interesting also from a purchasing power point of view, but also new geographies like North America, I would speculate in addition to Scandinavia, maybe not that many in Holland or Belgium, but that's it. So that's an important launch and there are many others here. I just want to also draw your attention to that. We have made some adjustments to the current portfolio of products product range, allowing then a higher cut of the grass because in North America, they normally don't cut it that much as we do in Europe. So that is what we call the high cut version. So we have adjusted them to better suit the North American market. I think coming back to one of the points I made, the reorganization combining now the remainder of the consumer brands with the old Husqvarna division has allowed us to do something which is quite interesting and that is to sell through retail solutions including installation. So we have combined, so to say, the strength of the dealer network, the servicing dealers with the retail point of sales, which is then an attractive piece. So that's a vital component of the go to market strategy for this year. But of course, the dealer base is a core element, but this will for sure make the retail space a lot more attractive in this situation. We'll come back and report the progress of that as the season unfolds. Maybe 2 more comments just to give you a feel. We were present at the Consumer Electronics Show in Las Vegas early this year with the Gardena Smart Garden System and it's quite interesting to see the recognition we get now from the big boys and girls working at Apple and Amazon and Google. So you see these people really recognizing the Gardena Smart System as the outdoor system with the most extensive hardware components and really then covering, of course, cutting, watering, lightning, pumps, etcetera. So we have now a full integration with Apple HomeKit and quite many actually of the passionate partners do operate from that platform. So that's a full integration with the Gardena Smart app. And then there are some IFTTT integrations with, for example, Alexa or Google. So now you can talk also to your smart system as one thing. So I think this is becoming quite an interesting strategic position where Gardena Eden is building this domain leadership in the gardening. So it's actually quite a strategic move from the historic strength of the host couplings moving into the garden domain leadership, which we have spent now 3 years actively to build up, but actually I could even say 5, if you include from the very start of the acquisition of Cobacci that brought us the competence with the plant care. And that plant care database is, of course, one piece and element of this Gardening Duma leadership. Garden planning is another piece, which is interesting. So a lot of end customer interaction touch points, which is then an important piece when you start to deal with big channels like the e tailers as well here. On the construction side, we have high performance power cutter, lightweight, battery based. So that's an interesting development. And then, of course, the dry cutting system, which is then a lot cleaner for everybody and the working environment and the people involved in that. So that's another, let's say, optimization done based also on the acquisition of Pulmonary as one component. So those are just some few examples of product developments ongoing. Now before I leave to Glenn, I'd like to just make some comments then about 2019. And these points I think some of you will have picked up from the Q3 because it's pretty much very similar. So if we look into 2019, we talk about quite a high ambition. I mean, the group financial targets is 10%. Of course, we have the ambition to get there this year. That's the point of departure looking at 2018's result with the SEK7.9 billion is a disappointment, as I mentioned. So it makes the challenge a bit bigger. Let's be clear about that. We also have quite some tough headwinds in further tariffs, particularly tariffs year on year, but there is also some raw material. Glen will give you some idea of that in more specific detail. So that's against us. But what we're saying now is that we are pricing to compensate for those. So that's no question at this stage. That's all behind us, so to say. We are also, of course, spending a lot of energy to re We are also, of course, spending a lot of energy to restore a positive balance between the efficiency programs and the strategic initiatives and the cost of those. So that's going to be a plus. And then you heard my statement as to the restructuring, full saving is €250,000,000 for 2020 and Glenn will make some comments on that, but we feel very confident. And that's what we expect and need to happen. And then on the top item here about the growth, yes, we are leaving 2018 with a +4 percent growth currency adjusted. And mind you, the pieces that we maintain from the Consumer division, We don't make any different growth targets for us. So they are also being folded under the same type of growth ambition because we say they are strategically justified. So we don't complicate anything going forward. We could have complicated with the piece we're going to take out for 2020, but that's SEK1000000000 to SEK1.5 billion. We don't want to make that a big thing at this stage, but that's there. But beyond that little piece, all the remainder is supposed to grow. And we don't give any forecast, as you're aware. But I think still the plus 4 is a proxy for what could be expected at this stage, remembering that our visibility into how the season eventually is going to unfold is very limited, you know that. But if you want some type direction, I think that's not a bad one. So that's what we're working with. That's the top priority. And what we have said is whether we get all the way to the 10% or not is still fully to be seen. What we're firmly determined is to make this the best year compared to the previous years, meaning the 9.6% at least we like to beat. So just zooming into something here of a range and then we'll see where this season will leave us. So I think with that comment, I am glad to leave over to Glenn in the storm who is the new CFO after Jan Itterberg. And Glenn, why don't you start a little bit with some words about yourself? Okay. Thanks, Kai. Good morning. I am relatively new to this stage, but I'm not so new to the company. I'm some 17 years in the group in various capacities. So look forward to meeting those who I haven't met so far on my travels. So I will talk a little bit more detail on the numbers, like I mentioned. Q4, of course, is our seasonally small quarter and is very much the preparation quarter, as Kai says. FX adjusted was flat and then adjusting for acquisitions, it was minus 1%. Moving down into the gross margin, you will see a decline from 26.8% to 26%. If we quantify that, of course, we have the headwinds of the raw materials. Tariffs starting to take effect certainly in the Q4. I'll come back to that for the full year and also the guidance for this year. And also we had the continued investment on the strategic initiatives notably in R and D. So that's really what's causing the margin decline at the gross margin level. Moving down into the SG and A, quite a sizable increase, 27.9 percent up to SEK 30.4. Percent. It's around about SEK 200,000,000. And in big terms, you can say a third of that is FX, a third is strategic investments in people, in brand and marketing. And the other third would be partially volume component, but actually the headwind that Kai mentioned earlier on logistics in particular. So I will group the volume and the logistics piece together. That is a headwind to us. That sums up, as Kai said, is minus €282,000,000 which was pretty much in line with our expectations actually as we went through the quarter, so no surprises there. Of course, we made a very large booking in Q4 in relation to the restructuring, €822,000,000 on the back of €349,000,000 in Q3. So we have $11.71 on a full year basis booked for the restructuring. We guided at $1,200,000,000 That is still the guidance. A little bit will move across into 2019. So I will now jump to the full year where the of course, the items below operating profit are more appropriate to talk about. So starting at the top line again. We had a full year of plus 2 percent currency adjusted sales. Backing out the acquisitions, it is plus 1%. Moving down into the gross margin. We did decline from 29.1 to 28.2. Percent. Again, we have raw materials, tariffs and the continued strategic investments in R and D. If I quantify the magnitude of that raw material headwind, flavored with a little bit of tariffs coming into Q4, I would say there's around about SEK300 1,000,000 of raw material burden that hurt us into 2018, hitting that gross margin. But as said, we continued investing in the R and D side, which also burdens the gross margin. Moving into SG and A, a sizable increase, 19.5% up to 20.3%, but in sec terms, some SEK640 1,000,000 increase. Again, I will group it into the three levels, the 3 groups. A third would be FX into that, given the weak Swedish krone. Then we would have the continued strategic investments, roughly a third as well of the €600,000,000 and then the headwinds from logistics and also, of course, the cost increase from the volume element of growing by 2%. So all said, the operating margin 7.9% versus 9.6% prior year, so a disappointment as Kai has described. We then booked full year effect as already mentioned, 11.71% for the restructuring, a little bit more to come in 2019, less than 50%, I will guide there. Finance net, pretty much in line with prior year. And then income tax, we came in at 22% full year versus 19% in the prior year. We guided to 23%, so I would call it within the range. Why was it higher than prior year? We actually had a deduction that we took in the prior year in Q4 of €175,000,000 that we called out last year. Summing all that up, then we have earnings per share of only €212,000,000 versus a prior year of €462,000,000 Moving over to the cash side. We have a direct operating cash flow moving from €2,900,000,000 down to 1,300,000,000 so another disappointment. If we look at the constituents within that, then of course we have a lower operating result, adding back depreciation of about SEK0.4 billion. We have a higher operating working capital of roughly SEK1 1,000,000,000 and we have higher CapEx of about SEK300 1,000,000. Full year CapEx came in at SEK2.2 billion and that was in line with the guidance we previously issued. Jumping into 2019, I would guide CapEx at a very similar rate, 2,200,000 maybe slightly higher up to possibly 2.4, but that is going to be the range on the CapEx side. One of our financial measures, of course, is to have operating working capital below 25% of net sales. And we landed to 25.9 percent. So we're not quite there yet. And unfortunately, it started to trend in the wrong direction. If you look at this, it's really the result of increased inventory. We increased our inventory significantly, which I'll come on to on the next slide when talking the balance sheet. So inventories where we've slipped. Partially, it is prebuilt. We were preparing for Brexit, so preparing more robotic lawnmowers. And also, as Kai said, when the season hit for watering in 2018, it was a huge spike. So we actually have also prepared more of the Gardena watering products ahead of season 2019. We have made some good developments on both the receivable side and the payable side. So I would say 2 of the 3 operating working capital measures are working pretty well, but we have to get much more focus and execution in improving our inventory. So how does it look for the total balance sheet? It is inflated, no doubt about it. Of course, there's a large FX effect coming into this given the weak Swedish krone. As you see on the inventory side, inflated by some SEK1.5 billion, not a proud number. Within that, roughly SEK450 1,000,000 would be FX and the remaining SEK1.1 billion would be operating inefficiency for the reasons we said. Very late start to the season, very big spike, and then it more or less shut down very quickly. So we must get much more agility into our supply chain. On the net debt side, we also increased the net debt from some €7,200,000,000 to €9,900,000,000 If I look at the constituents within that, again FX, which is the FX impact of the equity hedges, some €0 €700,000,000 The working capital buildup, as I've described, give or take €1,000,000,000 Higher tax cash out. We did have a broad forward tax loss that we utilized in 2017 that we didn't get the benefit of on the cash side in 2018, so a higher tax out of roughly €500,000,000 And then as mentioned, higher CapEx and also, of course, we had the acquisition of Atlas Copco during the year. So putting that together and how does then the net debt to EBITDA ratio work on a rolling basis now, we're now at 1.8, so starting to trend up from the 1.6 level that we left 2017 at. Again, as we get the operations back into where we expect them to be, then we should see this also starting to come back down. So a little bit more, I would say, forward looking in terms of the restructuring and how does it actually look towards the new divisions, I'm just really going to reiterate some of the messages we give at the end of Q2, again in Q3 and here again in Q4. We will exit roughly SEK1.5 billion to SEK2 1,000,000,000 of sales in 2019, consumer branded sales. Low margin and we will exit a further SEK 1,000,000,000 to SEK 1,500,000,000 in season 2020. As Kaj said, all decisions relating to restructuring are behind us, and the benefit should start to come through now and be EBIT accretive for 2019. We have charged roughly SEK 1,170,000,000 to the P and L in 2018. We will charge less than SEK50 1,000,000 of the remaining restructuring that has still got to feed through in H1 actually. From a cash perspective, it's been relatively low in relation to the restructuring, only SEK30 1,000,000. We guided on SEK400 1,000,000 of cash effect. We stick to that guidance and the rest of the SEK400 1,000,000, I. E. The SEK370 1,000,000,000 will come through in 2019. Annual savings from restructuring expected to be €250,000,000 We remain on that level with a very large proportion coming through in season 2019. Full year effect coming, of course, in 2020. So the next slide, I believe, is something very new for all of you, and it's basically how the divisions then look. How did we divide up the consumer brand business and put it into the Husqvarna division and the Gardena division. So let's start with Husqvarna, which then takes on the remaining Consumer Brand North America business. On the left hand side is 2018, the right hand side 2017. You will see what we then add in from a Husqvarna Consumer Brand Division North America perspective, we add in some SEK7.4 billion of sales with a loss, excluding items affecting comparability, of roughly SEK 170,000,000. That's a minus 2 percent EBIT business. Put together, the new Husqvarna division then becomes SEK 27,000,000,000 just north of that, generating some SEK 2,100,000,000 of operating income and a 7.8 percent margin. And that, as you will see, is a significant decline from actually the comparable in 2017, which of course we've had the headwinds from raw materials and logistics and tariffs as we've described previously. Looking at then Gardena division, new, taking on the consumer brand Europe element, much smaller, some €1,300,000,000 however, with a higher loss, actually a 10% operating loss you will see in there that it takes on. What I would say is like the Husqvarna division in 2018, the business in Europe, of course, for Consumer Brands was equally affected. In Northern Europe, long dry summer was really, of course, detrimental to the consumer brand Europe business. So we take on a bigger loss in that respect into the Gardena division, putting the 2 together SEK8.1 billion or 8% division it becomes. You can say from a weighting perspective what's going to be exited. It's roughly 85% of the business is North America, 15% Europe. If I'm going to guide on that SEK1.5 billion to SEK2 billion of exited business, it'd be slightly more weighted towards Europe, but you can take those proportions as well. 85, 15, maybe more like 80, 20 as a proportion level for the exited business. At that, I will hand back to Kai to summarize and then we'll take some questions. Thanks, Kai. Thank you, Glenn. So just putting it back on the screen. The key items to succeed with now in 'nineteen to achieve what we want to, starting with organic growth. And you will realize that Gardena has a much tougher comp in 2018 than Husqvarna will have. So that, of course, has something of what you should expect for 2019. And construction then pressing on. Prices, well prepared for compensating that increase, well prepared to restore the balance between the strategic initiative, cost additions versus the efficiency program and I would say well prepared also to make sure that we materialize that the restructuring measures are EBIT accretive from start of this year. So I think from that perspective, we have reason to be more optimistic after this 2018 season. Now just before we get to the question, I just want to take some other type of data point here and to share with you and that is actually sustainability and sustainnovate, which is the terminology we use when we talk about integrating sustainability into our way of being. We have set a target of reducing the intensity of CO2 with minus 10% until 2020. That was done based on the reference of 15%, if I remember correctly. Actually, we are at minus 24%. So we are way ahead. And of course, there are some good reasons. But by and large, it is more decisive move from petrol based lower added value platforms, walk behinds, tractors, the consumer brand situation. You will recall that we also left one of the larger retailers, etcetera, for more of the battery based products, the robot based products, more of software adding value oriented. So I think that's a great result, which shows that we take this seriously and I want to be very clear about that. Just to give you another data point, if you look at the energy and the share that comes from renewable energy sources, we are almost at 60%. I think we're at 58% now. That was 0% in 2015. So we are taking some big steps to really put this on the agenda. I don't talk maybe as much as I should given all the good things we're doing, but I just want to draw your attention to that. This is an important piece of Husqvarna going forward. And some of you will recall that we committed very clearly to the scientific base targets and the green path some few years back. So we are on the right side because those targets were approved by the scientific based organization related to UN as what we need to do and take our fair share, so to say, for the global warming to be less than 1.5 to 2 degrees versus pre industrial levels. So I think that's an important statement. And we see market leadership when we talk about that. Of course, it's technology innovation, but it's also increasingly this aspect that becoming important. So last slide before Johan runs the show with Q and A here is just to inform you that we will have a Capital Market Day. Actually, we intended to have it already last autumn, but we felt the important thing was to get the consumer brands restructuring done. So we said, let's deal with that. And then we take the Capital Market Day when we can be more forward looking and have your mental focus also on the forward looking pieces. So 17th September, some interesting product innovations talking about the next financial period and strategy, which is going to be quite exciting and there's a lot of work progressing on that as we speak. So and we thought it would be good actually to go to Asquana. It's a bit of more effort for you in respect of transportation, but I think it will be rewarding at the end. So with that, Johan, please. Thank you very much, Kai and Glenn, and we will start the Q and A session with questions here in the floor in Stockholm. So let us start with Kennen. So Kennet Oll at Carnegie. A question on the knock on effects. You said there were knock on effects from the weak season in Q4, the last season. But now when you look ahead into the sell in season for 2019 for the Q1, do you still see that dealers and retailers have excess inventories compared to a normal year, that your sell in, in Q1 will also be affected of last year's dry weather, so to speak? That's a very valid question. I should actually have answered it in this speech, preempted it, but let me deal with it. Now we had knock on effects with a bit of higher versus average inventories going into Q4 and during the course of Q4 for Husqvarna, whereas we had a bit opposite with Cardena. I would say there is no knock on effect from Husqvarna in this season. I think you can see that's a depletion of the excess inventories during Q4. So I think we're walking in with fairly there are some smaller geography variations as always in that, but I say by and large, that's the view for Husqvarna. And for Gardena, it's still, of course, a little bit less than average, which means the fill in reasonably should be higher. On the other hand, there were some fairly large e channel fill up early on last year quarter. So but it's going to be on the reasonably going to be on the positive side on that side as well. Good. So next question. Johan Lijas from Kepler Cheuvreux. It's interesting that you put the remaining consumer businesses into this new division, and they also get the same 3% to 5% growth target as I understood it. Can you say something about the growth profile of the businesses you are keeping from the consumer brands? Has that part been able to show historically these growth rates? Or is this a step up now for them? I think what we for example, now looking at Nautemberger, which is the big piece, that's now we have eliminated certain brands and we are then focusing on Husqvarna branded bits and pieces, which means we can also put a bit higher pressure on those items going ahead. There are also channel expansion opportunities, which might have been underserved in the whole structure. And channel synergies like the one I described with robot where we combine actually retail and dealer structures to create more customer value solution orientation that enables us overall to actually have same targets for those bits and pieces. So it's a bit smarter setup to synergistically deal with it And that's why we feel comfortable to actually state that those bits and pieces staying they can be folded under the same growth targets. And that goes for the longer term 3% to 5%, not only for Correct. There's no reason to make an exception beyond the one I mentioned, which is the business still to be exited. But that's not in the greater scheme of things huge, the SEK 1,000,000,000 to SEK 1,500,000,000 in 2020. And then just an update on robotics and battery handheld. It was a difficult year for them as well, I guess, last year, but share of turnover and growth rates roughly? Growth rates of robotics then, I normally talk about this as a combined electric type of growth number and the statement has been well above 20% during the last few years. That was not necessarily true for the AT and Cs and in particular the robotics suffered from that. It's still growth positive, but not really impressive. On the other hand, we don't think we really have lost share either. So I think we have, by and large, kept our shares, but a fairly small number compared to what we're used to. On the other hand, battery continued to be well above. So on that side, it's moved on in a good way. You also asked for absolute levels and if you look at the share of revenues, I think we talked about 10% in 2016. And if you apply then that more than 20%, still you can say by and large way 14%, 15%, the rough numbers here. Okay. I think we had a question here in the back, Christian? Christian Meingold from DNB. A couple of questions. First one on your the business that you're exiting. In Q3, you said that you're targeting about SEK 2,000,000,000 in sales that you exit in consumer brands and then SEK 1,000,000,000 to SEK 2,000,000,000 for 2020. Now you lower that target a bit. Why is that? I think it's just a consequence of a better visibility into the details. I wouldn't overdramatize this piece. It's somewhat lower, but it's not miles away. It's nothing fundamental that has changed. It's rather the visibility that has become a lot better. Okay. And the second one is actually on a competitor. Irobot launched their first robot last week after years of development. This has a new technology compared to all other robots in the market. Can you comment a bit on that technology or that kind of technology compared to the technology you use? It's true. I'm not sure it's true that they actually launched something. I think they presented something, which was a prototype, to be more precise. And I don't think they were very specific about when it will be solved. That was my understanding. I might be wrong. I don't want to be quoted, but that's my understanding as for now. As to the technology piece, they have their legacy, of course, with the indoors and with the vacuum cleaners. And I think they've been hugely successful, particularly in North America with that side. So I don't think we should be surprised that they try to make a technology synergy and move outdoor. I think it's still to be seen what how well they will have that being reliable over time. But let me also say very clearly, they are for sure not the only one working with that technology. The benefit of that technology can be argued whether it's more suited for the residential garden or other types of focuses. So I wouldn't overstate the importance of that in true terms for the residential garden, but it might be a marketing argument, a perceived argument. I think the reality of it is there are very few more reliable and cost effective solutions than the boundary value for the residential setting. Then there might be a tech image where you would like to avoid that and rather work with beacons. You're putting beacons in the soil at a couple of locations, battery powered, which seem to be the way they have chosen. And that's an opportunity, I think, to do as well. So I wouldn't say that's by any standards strange or surprising to us. I think we have of course worked with and assessed similar systems since quite some time. So I think I'll leave it there. Last one, sorry, is the companies in the Investors Way has been doing a lot of spin offs. You have Atlas Copco and you have Elitrolux. I've asked this question for like 10 years now. What are you thinking about construction products? Yes, I had that question before. And I would say there are some obvious things, of course, brand that you can deal with, I guess, back end supplies, production, etcetera, that you can probably deal with. I would say, the way I see it, construction probably has more synergies within the group now than ever before if you look at the petrol to battery shift, if you look at the digitization and what they're doing. So both those areas, actually, there are huge synergies. And I think you saw I didn't comment upon that, but maybe I should just scroll back a bit and show you again the construction battery based power cutter. That battery system is the same ecosystem that we have on the forest and garden side. So we utilize the same ecosystem here. So there are many developments which can be true synergies. So to say and I particularly like to point at those two areas. So maybe it is the right question, but the wrong time, so to say. There might be a future in which that kind of tapers off and then that pressure might resurface with higher intensity. I don't see it being relevant right now. We had another question here at the front, Rasmus. Rasmus Engberg with Handelsbanken. I had a couple of questions. Firstly, can you explain when you sort of make this exit from certain segments in the U. S, you're going to pre produce for several for the season. So your inventories will be completely strange. Is that correct? Yes. Andre, do you want to jump in here, please? Obviously, the main segment there is petrol walk behind products, and we're going to still be producing through Q2. So the season is largely behind us then. It's really a March, April, May season, so it's largely behind us. So I don't see that will be a big effect on the balance sheet. I thought you said that you would close during Q1 in the last presentation. It will be finalized during Q2. That will be doors locked. Yes. Good. We don't have to worry about that so much. And the second thing is, can you sort of outline your presence in the U. S. In terms of Robo Movers or Automower in particular? If you were to sort of compare 2019 to 2018, where are you, so to speak, in that process? Mid 2019 versus 2018 or 2018 versus 2017. So if you look at the ambition of this year, it's probably a factor of 10% versus 2018%. So I think we start now to really expect more significant changes of our sales profile in the market. Maybe the 2018 to 2017 was a factor of 3 or something. But it's but the numbers are so small in that. So I think 2019 is the 1st season that really might become then more significant of a breakthrough. And we see that even though it is more of an early adopter market at this stage, We still see a lot of interest of the category from various directions. But I'd rather come back and talk about that when we have more facts than plans. The plans are quite extensive, I tell you, Rasmus, that reality is better. Can I just it's the final question? You're going to launch some new Robomover as well. I wouldn't use the terminology the Robomover because there is a competitor called Robomover. Automover, yes, please. What's in that, the new one that you're going to release and show off in Barcelona? Well, I think there's a lot happening, of course, on the software side and how we apply and start to use them, the connect apps in a more structured way. I mean, if you look at the total number of connected products, it's give and take a couple of 100,000 for sure. And how do we deal with the data that we are gathering through that? And how do we start to apply more machine learningAI into that space. I think that's an aspect of the whole thing. And then from the launch side, it's going to be very much around the 4 wheel base from the hardware platform. But I think you should see the whole system. And a little bit the way I talked also about Gardena, how Gardena has managed to become the outdoor gardening domain leader in the eyes of the big tech companies. And I think it's actually quite interesting that recognition that we are starting to receive from that side, huge interest to work with us on that side, which is, I think, very positive for the future. Okay. I think we had a question in the back, Olof. It's Olof with ABG. Two questions. First on product mix. 2019 was not a good auto mover year. 2018. 2018, yes. Going into 2019, are you expecting that growth will again exceed 20% going into 2019 over 2018? And also how do you think about the product mix in Gardena? Will that be a contributor or a negative year over year? That's the first. I guess there was 2 questions. Yes. The first question there about growth rates of robotics in 2019 versus 2018, yes, very clearly, we expect that to be about 20% again, yes. As to the mix for Gardena, I'm not fully sure how I should interpret it, but I interpret it as we had a higher share of watering versus other pieces. Is that correct? And watering is a profitable category. There's no discussion about it. So there is an element of lower, I will say, profitability improvement with the Garden. I think they have a tough reference. I think we communicated that before. So with 18 year, I think if they stay above give and take on that level, I think that's a realistic situation, sales profitability. I'm sure they would like to make something better than that, but I think that's a realistic one given all the lined up stars during the 2018 season for them. Yes. Okay. And then lastly, on the cost savings, the SEK 250,000,000, are you including underlying profitability improvement in the remaining part of that business in that? Or is this simply cost out? Because the remaining parts, I hope, will be more profitable than the stuff you leave. The €250,000,000 we talk about on the exited business, the restructuring, that's purely cost out. Okay. So then there's an element of underlying improvement in profitability just by keeping the better parts? You could say we exit the worst part of the business, yes. Would that be profitable, the remaining part in 2020? That has got to be the aim, got to be the aim. I will leave it at that. If you say 2020, I think that has to be. I think we had another question here. Yes. You're pretty explicit or very optimistic at least on EBIT margin development in 2019. And is this due to better visibility within certain of the elements of the EBIT bridge? Is more cost related or demand related? I think we asked we were taking a lot of beating in 2018. We were standing on the wrong foot with the whole price versus tariff for materials and the season unfolding and we still kept investing, so to say. So that situation is what we're really dealing with now. And when we do the pluses and minuses of that, we should, given a reasonable average season, be ending up somewhere around the region of the best previous year or something better. But that something better is where it starts to become more unclear. If that vision is there, no hesitation. Whether reality supports it, still to be seen. But we are optimistic, but because of these reasons. And of course, the other reasons mentioned, the strength of the product offering and of course, the support from the previous strategic initiative investments done. And on as you also continues to drive investments to drive growth for Gardena as you highlighted now, could you give some color on what your what kind of activities that relates to in Gardena ahead of 'nineteen? Yes. I think we are pressing on in a fairly broad sense. I think we have a pretty much up to date battery based system or actually 2, 18 volt and 40 volt. You have an updated watering system. You have hand tools being very much up to date. And then you have, of course, robotics movers and a lower priced model in the market as well as the whole smart system configuration. So I think it's a very strong offering by and large. I don't think we really have any Broadening or an offering? Broadening, I should say. And if you take the terminology of breadth and level of being updated, it's actually both those dimensions. So it looks very strong. There are always things to continue working on. City gardening, we are making new plans. But yes, I got And also, is U. K. A market that can that we saw some evidence of good 2018 from extremely low base in terms of robotics? U. K. Gardena, we're talking Gardena now or generally? Generally. Okay. Generally, I wouldn't overstate it in U. K. On the robotics side. Gardena, if there is one little disappointment on the Gardena side, that's probably U. K. But that's very much related to the entry point being a partner of ours on the retail side from another continent on the other side of the world getting into U. K, but then withdrawing. So we had to change our strategy of go to market a bit. So there was a temporary setback in the U. K. In the revenue growth versus what we expected. So you could say that's still to be materialized, but the trajectory of that is going to be a bit more time consuming, but we're very clear about how to do it. So we will get there on the Gardena side, but it will take some more time. Thank you. Okay. Thank you very much. Let us see if we have any question. We have we're running a little bit short on time, but let's see if we have any questions on over the phone and let's take 1 or 2 of them. Do we have any questions over the telephone No. Don't we have any questions? There are no further questions at this time. Please continue. Okay. Very good. So I think with that, we will thank you very much for coming here and also for the ones that are listening over the web. And then we have the next report in April. So see you then. Thank you very much for today. Thank you. Thank you.