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 Wärn, and our CFO, Glen Instone, that will present the results, and afterwards we will have a Q&A session, both here live in Stockholm and also over the telephone conference. With that, I 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 four, which I would say summarize a bit along expectation. What you will know or should know is that quarter four 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 recapitulate so we're perfectly clear. Then, of course, spend the energy looking into also 2019 and where we are a bit more upbeat about the developments. Starting then summarizing the situation. Yes, there is a temporary disappointment in the financials of 2018, and particularly quarter three was disappointing. I would still describe quarter four very much in line with our expectations. But we have taken some strategic important decisions.
We have dissolved 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 plants to be done in front of us, 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, McRae being the huge site affected of this. I also can be very clear about that the restructuring measures that we have taken are going to be EBIT accretive as of now pretty much as with the start of 2019. Simply because it very much relates to the headcount reduction that are executed during second half of 2018. Now for 2019, 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 finances exemplifies that.
Talking about quarter four currency adjusted flat, all in all SEK -282. We had knock-on effects from the season quarter three that we talked extensively about after the Q3 report. We have continued impact from raw materials tariffs. I would also be clear about logistics. Freight costs is one item which 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. I think we have taken care of that in our preparations. I also want to emphasize that goes for quarter four as well as for the full-year. We have maintained the strategic initiatives. The cost additions related to those throughout the year. There is a question there. Should we have been harsher to reduce them more forcefully?
We decided not to because we want to keep the momentum that we have on the top-line side. We did that. I think that's a sign of strength and confidence on our side that we did that. For the full-year, 2% currency adjusted sales, 7.9% EBIT margin, miles away from where we want to be, as you know. 2017 as a comp, 9.6%. On the other hand, 9.6% is the best year since this company was listed. I think it is worth noting on the disappointment side, given the high raw material tariffs and logistics, we did not manage. The difficulty with the season, we did not manage to get the efficiency program to balance the strategic initiative cost, which we have so successful being or doing the preceding four years.
That is the disappointment, I think, on the group management point of view. 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. That's the group overview. If you look at the top line. Remember this is the profitable growth division. It's not Consumer. It's not including the items affecting comparability of the acquisitions of Construction. That's 4% average for the group-- for those three 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 months there. Construction, 3.4% for organic. 12%, I think, including the acquisitions.
I think the 4% is still a healthy number. We normally talk about the ambition being to gain 1-2 percentage points to the market. You will maybe recall that we have the growth target being 3%-5% based on the logic that GDP 2%-3%. Plus 1%-2% on that leaves us with 3%-5%. We are in the middle of that span. Still coming down from what we have seen. 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.
If we look at the curve that we used to be so proud of, we have to accept that temporary dip, we will do our utmost now to prove that that is actually a temporary dip, if nothing else, the 7.9%, and move back. We 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 -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. That played into it, the regional side. 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, Consumer Brands less, of course, exited business. I think this is important. When I talk about the restructuring being behind ourselves, that is one item. The chain of command, so to say, is installed since last summer. The whole preparation for the 2019 season has been done in this new setup and structure. There are some good evidence of that we see as we move into 2019. All restructuring, planning, and decisions are behind us. 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.
I think you bear that in mind. If you see that combined with, of course, the strategic initiative cost that we are taking. You have a relatively high-cost structure for a too low sales, but that's the nature of the Gardena business. Don't look too much into the quarter, I would say, actually, but rather look at the full-year, the +14% currency adjusted of the sales and the 11.6% EBIT margin versus the 12.5%. Yes, 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. We had to accept some extra costs to actually execute in the midst of the season there.
A very solid execution of the strategy, talking about the geographic expansion, maybe even more so the channel expansion in those geographies, as well as product launches. Quite pleased with that actually. It's a very nice year, and you will recall that the three preceding years have also been quite strong. 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 -6% currency adjusted sales. We made a smaller loss, somewhat smaller, I should say. I don't want to overemphasize that. For the full-year, that's SEK -300 million, which is not great. Of course, this is obvious. There's a lot of raw material tariffs and logistics, lower sales.
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. 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. Come back to that. The EBIT is impacted by a negative mix there, to some extent, product, but also geography, because North America is an overproportional profitability for us at these exchange rates that we see today. 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.
If you look at the full-year, you have 12% sales increase, currency adjusted, and 12.4% margin, which we think is okay-ish. In the quarter was +8%, 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. 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 chainsaws, the 550, and which is actually very promising in terms of cutting capacity. Significantly higher than what's out there in the market of any type of brand. Let's look very shortly at a video describing that launch event.
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Quite important product, actually. You will probably be aware that the battery saws are great if you are in an urban environment. If you're an arborist in an urban environment, you can still use battery. If you're out in the woods, you're still left, so to say, to deal with the petrol, and hence we developed this new generation. You might also recall we had a launch of a 70cc product last year. 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. Go another one. Another important launch is the world's first four-wheel drive robotic lawnmower, and I think we have a short video on that as well. That's coming. That's a short version.
That was really short. I thought it was a bit longer, but anyway, you get an idea. It's not only the steep 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 a 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. 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. That is what we call the high-cut version. 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. 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.
That's a vital component of the go-to-market strategy for this year. 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 two more comments just to give you a feel. We were present at the Consumer Electronics Show in Las Vegas earlier this year with the Gardena smart 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. 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, lighting, pumps, et cetera.
We have now a full integration with Apple HomeKit, and quite many, actually, of the passionate gardeners do operate from that platform. That's a full integration with the Gardena smart app. There are some IFTTT integrations with, for example, Alexa or Google. Now you can talk also to your smart system as one thing. I think this is becoming quite an interesting strategic position where Gardena then is building this domain leadership in the gardening. It's actually quite a strategic move from the historic strength of the hose couplings moving into the garden domain leadership, which we have spent now three years actively to build up. But actually, I could even say five, if you include from the very start of the acquisition of Koubachi that brought us the competence with the plant care.
That plant care database is, of course, one piece and element of this gardening domain leadership. Garden planning is another piece, which is interesting. A lot of end customer interaction touchpoints, 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. That's an interesting development. 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. That's another, let's say, optimization done based also on the acquisition of Pullman Ermator as one component. Those are just some few examples of product developments ongoing. Before I leave to Glen, I'd like to just make some comments then about 2019.
These points, I think some of you will have picked up from the Q3 because it's pretty much very similar. If you look into 2019, we talk about quite a high ambition. The group financial targets you know is 10%. Of course, we have the ambition to get there this year. The point of departure, looking at 2018's result with the 7.9%, is a disappointment, as I mentioned. 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. That's against us, but what we're saying now is that we are pricing to compensate for those. 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 restore a positive balance between the efficiency programs and the strategic initiatives and the cost of those. That's going to be a plus. You heard my statement as to the restructuring. Full saving is SEK 250 million for 2020, and Glen will make some comments on that. We feel very confident. That's what we expect and need to happen. On the top item here about the growth, yeah, we are leaving 2018 with a +4% growth currency adjusted. Mind you, the pieces that we maintained from the Consumer division, we don't make any different growth targets for. They are also being folded under the same type of growth ambition because we say they are strategically justified. 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 SEK 1 billion-SEK 1.5 billion, we don't want to make that a big thing at this stage. That's there. Beyond that little piece, all the remainder is supposed to grow. We don't give any forecasts, as you're aware, I think still, the +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. If you want some type of direction, I think that's not a bad one. That's what we're working with. That's the top priority. 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'd like to beat. Just zooming into something here of a range, we'll see where this season will leave us. I think with that comment, I'm glad to leave over to Glen Instone, the new CFO after Jan Ytterberg. Glen, 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. Look forward to meeting those who I haven't met so far on my travels. I will talk a little bit more detail on the numbers that Kai mentioned. Q4, of course, is our seasonally small quarter and is very much the preparation quarter, as Kai says. FX-adjusted was flat, adjusting for acquisitions, it was -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 are starting to take effect certainly in the fourth quarter. I'll come back to that for the full-year and also the guidance for this year.
Also we had the continued investment on the strategic initiatives, notably in R&D. That's really what's causing the margin decline at the gross margin level. Moving down into the SG&A, quite a sizable increase, 27.9% up to 30.4%. It's around about SEK 200 million. 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. I will group the volume and the logistics piece together. That is a headwind to us. That sums up, as Kai said, is SEK -282, which was pretty much in line with our expectations, actually, as we went through the quarter. No surprises there.
Of course, we made a very large booking in Q4 in relation to the restructuring, SEK 822 on the back of SEK 349 in Q3. We have SEK 1,171 on a full-year basis booked for the restructuring. We guided at SEK 1.2 billion. That is still the guidance. A little bit will move across into 2019. I will now jump to the full-year where the, of course, the items below operating profit are more appropriate to talk about. Starting at the top line again, we had a full-year of +2% currency-adjusted sales. Backing out the acquisitions, it is +1%. Moving down into the gross margin, we did decline from 29.1% to 28.2%. Again, we have raw materials, tariffs, and the continued strategic investments in R&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 SEK 300 million of raw material burden that hurt us into 2018, hitting our gross margin. As I said, we continued investing in the R&D side, which also burdens the gross margin. Moving into SG&A, a sizable increase, 19.5% up to 20.3%, but in SEK terms, some SEK 640 million increase. Again, I will group it into the three levels, the three groups. A third would be FX into that, given the weak Swedish crown. We would have the continued strategic investments, roughly a third as well of the SEK 600 million, and then the headwinds from logistics and also, of course, the cost increase from the volume element of growing by 2%. All said, the operating margin 7.9% versus 9.6% prior year.
A disappointment, as Kai has described. We then booked full-year effect, as already mentioned, SEK 1,171 for the restructuring. A little bit more to come in 2019, less than SEK 50 million our guide there. Finance net pretty much in line with prior year. Income tax, we came in at 22% full-year versus 19% in the prior year. We guided at 23%, 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 SEK 175 million that we called out last year. Summing all that up, we have earnings per share of only SEK 2.12 versus a prior year of SEK 4.62. Moving over to the cash side, we have a direct operating cash flow moving from SEK 2.9 billion down to SEK 1.3 billion, another disappointment.
If we look at the constituents within that, of course we have a lower operating result, adding back depreciation of about SEK 0.4 billion. We have a higher operating working capital of roughly SEK 1 billion, we have higher CapEx of about SEK 300 million. Full-year CapEx came in at SEK 2.2 billion, that was in line with the guidance we previously issued. Jumping into 2019, I would guide CapEx at a very similar rate, SEK 2.2 billion, maybe slightly higher, up to possibly SEK 2.4 billion, 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, we landed at 25.9% we're not quite there yet, 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 onto on the next slide when talking the balance sheet. Inventory is where we've slipped. Partially it is pre-built. We were preparing for Brexit, preparing more robotic lawnmowers. Also, as Kai said, when the season hit for watering in 2018, it was a huge spike. 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. I would say two of the three operating working capital measures are working pretty well. We have to get much more focus and execution in improving our inventory. 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 crown. As you see on the inventory side, inflated by some SEK 1.5 billion. Not a proud number. Within that, roughly SEK 450 million would be FX, the remaining SEK 1.1 billion would be operating inefficiency for the reasons we said. Very late start to the season, very big spike, then it more or less shut down very quickly. We must get much more agility into our supply chain. On the net debt side, we've also increased the net debt from some SEK 7.2 billion to SEK 9.9 billion. If I look at the constituents within that, again, FX, which is the FX impact of the equity hedges, some SEK 0.7 billion. The working capital buildup, as I've described, give or take SEK 1 billion. Higher tax cash out.
We did have a brought forward tax loss that we utilized in 2017, that we didn't get the benefit of on the cash side in 2018, a higher tax out of roughly SEK 500 million . As mentioned, higher CapEx, also, of course, we had the acquisition of Atlas Copco during the year. Putting that together, how does the net debt to EBITDA ratio work on the rolling basis now? We're now at 1.8x. Starting to trend up from the 1.6x level that we left 2017 at. As we get the operations back into where we expect them to be, we should see this also starting to come back down. 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 SEK 1.5 billion-SEK 2 billion of sales in 2019. Consumer Brands sales. Low margin. We will exit a further SEK 1 billion-SEK 1.5 billion in season 2020. As Kai 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 1.17 billion to the P&L in 2018, and we will charge less than SEK 50 million of the remaining restructuring that has still got to feed through in H1. From a cash perspective, it's been relatively low in relation to the restructuring, only SEK 30 million. We guided on SEK 400 million of cash effect.
We stick to that guidance, the rest of the SEK 400 million, i.e., the SEK 370 million, will come through in 2019. Annual savings from restructuring expected to be SEK 250 million. We remain on that level with a very large proportion coming through in season 2019. Full-year effect coming, of course, in 2020. 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 Brands business and put it into the Husqvarna division and the Gardena division? Let's start with Husqvarna, which then takes on the remaining Consumer Brands 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 Consumer Brands division North America perspective.
We add in some SEK 7.4 billion of sales with a loss, excluding items affecting comparability, of roughly SEK 170 million. That's a -2% EBIT business. Put together, the new Husqvarna division then becomes SEK 27 billion, just north of that, generating some SEK 2.1 billion of operating income and a 7.8% margin. That, as you will see, has a significant decline from 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 Brands Europe element, much smaller, some SEK 1.3 billion, however, with a higher loss. A 10% operating loss you will see in there that it then 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 Brands Europe business. We take on a bigger loss in that respect into the Gardena division, putting the two together, SEK 8.1 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 SEK 1.5 billion-SEK 2 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, Glen. Just putting it back on the screen the key items to succeed with now in 2019 to achieve what we want to start with organic growth, and you will realize that Gardena has a much tougher comp in 2018 than Husqvarna will have. That, of course, says something of what you should expect for 2019. 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, I would say well prepared also to make sure that we materialize the restructuring measures are EBIT accretive from start of this year. I think from that perspective, we have reason to be more optimistic after this 2018 season.
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 Sustainovate, 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 -10% until 2020. That was done based on the reference of 2015, if I remember correctly. Actually, we are at -24%, we are way ahead. Of course, there are some good reasons. By and large, it is more decisive move from petrol-based lower added value platforms, walk-behinds, tractors, the Consumer Brands situation. You will recall that we also left one of the larger retailers, et cetera, for more of the battery-based products, the robot-based products, more of software adding value oriented.
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. 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. Some of you will recall that we committed very clearly to the scientific base targets and the green path some few years back.
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 one and a half to two degrees versus pre-industrial levels. I think that's an important statement. 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. Last slide before Johan runs the show with Q&A here, is just to inform you that we will have a capital market date. Actually, we intended to have it already last autumn, but we felt the important thing was to get the Consumer Brands restructuring done.
We said, let's deal with that, we take the capital market day when we can be more forward-looking and have your mental focus also on the forward-looking pieces. 17th of 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. We thought it would be good actually to go to Husqvarna. It's a bit of more effort for you in respect of transportation, but I think it will be rewarding at the end. With that, Johan, please.
Thank you very much, Kai and Glen, we will start the Q&A session with the questions here in the floor in Stockholm. Please wait for the microphone and also say your name and company before you ask the question. Let us start with Kenneth.
Kenneth Toll 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. Now when you look ahead into the sell-in season for 2019, for the first quarter, 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 piece, preempted it, let me deal with it. No, 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 Gardena. I would say there is no knock-on effect from Husqvarna in this season. I think you can see it as a depletion of the excess inventories during Q4. I think we're walking in with fairly. There are some smaller geography variations as always in that. As I say, by and large, that's the view for Husqvarna. 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. It's reasonably going to be on the positive side on that side as well.
Good. Next question. Go on.
Yeah. Hi, Johan Eliason, Kepler Cheuvreux. It's interesting that you put the remaining consumer businesses into this new division. They also get the same 3%-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 North America, which is the big piece, that now we have eliminated certain brands. 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 old structure. Channel synergies like the one I described with the 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. It's a bit smarter set up 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.
That goes for the longer term three to five, not only for-
Correct. There is no reason to make an exception beyond the one that I mentioned, which is the business still to be exited. That is not in the greater scheme of things huge, the SEK 1 billion-SEK 1.5 billion in 2020.
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, I normally talk about this as a combined electric type of growth number, the statement has been well above 20% during the last few years. That was not necessarily true for the 2018 season, particularly the robotics suffered from that. It is still growth, positive, but not really impressive. On the other hand, we do not think we really have lost share either. I think we have by and large kept our shares, but a fairly small number compared to what we are used to. On the other hand, battery continued to be well above. On that side, it is moved on in a good way. You also asked for absolute levels, if you look at the share of revenues, I think we talked about 10% in 2016.
You applied and the more than 20%, still you can say by and large we're 14%, 15%, the rough numbers here.
Okay, I think we had a question here in the back. Christer?
Christer Magnergård from DNB. A couple questions. First one on the business that you're exiting. In Q3, you said that you're targeting about SEK 2 billion in sales that you're exiting in Consumer Brands, and then SEK 1 billion-SEK 2 billion for 2020. You low that target a bit. Why is that?
I think it's just a consequence of a better visibility into the details. I wouldn't over-dramatize this piece. It's somewhat lower, it's not miles away. It's nothing fundamental that has changed. It's rather the visibility that has become a lot better.
Okay. The second one is actually on a competitor. iRobot launched the 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. I don't think they were very specific about when it will be sold. 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. 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 how well they will have that being reliable over time. 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. 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 wire for the residential setting. 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. That's an opportunity, I think, to do as well. 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 for since quite some time.
I think I leave it there.
Last one. Sorry. Other companies in the Investor sphere has been doing a lot of spinoffs. You have Atlas Copco, and you have Electrolux. I've asked this question for 10 years now. What do you think about construction products?
Yeah, I had that question before. I would say there are some obvious things, of course, brand, but that you can deal with, I guess. Backend suppliers, production, et cetera, 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. Both those areas, actually, there are huge synergies, and I think you saw I didn't comment upon that, but maybe I should have. Yes, 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. We utilize the same ecosystem here. There are many developments which can be true synergies.
I'd particularly like to point at those two areas. 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 question might resurface with higher intensity. I don't see it being relevant right now.
We had another question here at the front. Rasmus.
Yes. Hi. 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 the season, so your inventories will be completely strange. Is that correct? Or how is that going to work?
[audio distortion]
You take it?
You want to jump in here, please.
Obviously, the main segment there is petrol walk behind products. We're going to still be producing through Q2. The season's largely behind us then. It's really a March, April, May season, so it's largely behind us. 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. Yeah.
Good. We don't have to worry about that so much. The second thing is, can you outline your presence in the U.S. in terms of robo movers or Automower in particular? If you were to compare 2019 to 2018, where are you, so to speak, in that process?
You mean 2019 versus 2018 or 2018 versus 2017? If you look at ambition of this year, it's probably a factor of 10 versus 2018. 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 three or something. The numbers are so small in that. I think 2019 is the first season that really might become then more significant of a breakthrough. 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. 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's very real.
Reality is better.
It's the final question. You're going to launch some new robotic mower as well.
I wouldn't use the terminology robotic mower because there is a competitor called.
Automower.
Automower. 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 the Connect apps in a more structured way. If you look at the total number of connected products, it's give and take a couple of 100,000 for sure. How do we deal with the data that we are gathering through that, and how do we start to apply more machine learning/AI into that space? I think that's an aspect of the whole thing. Then from the launch side, it's going to be very much around the four-wheel base from the hardware platform. 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.
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?
Yes. Hi, it's Olof with ABG. Two questions. First, on product mix. 2019 was not a good Automower year.
2018.
2018, yes. Going into 2019, are you expecting that growth will again exceed 20% going into 2019 over 2018? 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 that was two questions.
No, 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. I interpret it as we had a high share of watering versus other pieces. Is that correct? Watering is a profitable category. There's no discussion about it. There is an element of lower, we'll say profitability improvement with Gardena. I think they have a tough reference. I think we communicated that before. With 2018 year, I think if they stay about 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. Then lastly, on the cost savings, the SEK 250 million. 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 SEK 250 million we talk about on the exit of business, the restructuring, that's purely cost out.
Okay. There is 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.
Will 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.
You say 2020, I think that has to be.
Good. I think we had another question here.
Yes. You're pretty explicit or very optimistic, at least, on EBIT margin development in 2019. Is this due to better visibility within certain of the elements of the EBIT bridge? Is it more cost related or demand related for you?
I think 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. That situation is what we're really dealing with now. When we do the pluses or 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. 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. We are optimistic because of these reasons. Of course, the other reasons mentioned, the strength of the product offering and of course, the support from the previous strategic initiative investments done.
As you also continue to drive investments, to drive growth for Gardena, as you highlighted now, could you give some color on what kind of activities that relates to in Gardena ahead of 2019?
Yep. 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 two, 18 V and 40 V. Then you have an updated watering system. You have hand tools being very much up to date. Then you have, of course, robotic mowers and a lower priced model in the market, as well as the whole smart system configuration. I think it's a very strong offering by and large. I don't think we really have any.
Broadening or offering?
Broadening, I should say. If you could take the terminology of breadth and level of being updated. It's actually both those dimensions. It looks very strong. There are always things to continue working on. City gardening, we are making new plans. Yeah.
On city gardening, is U.K. a market that we saw some evidence of a good 2018 from extremely low base in terms of robotics?
U.K. Gardena. Are we talking Gardena now or generally?
Generally.
Okay. Generally, I wouldn't overstate 2018 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 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. We had to change our strategy of go to market a bit. There was a temporary setback in the U.K. in the revenue growth versus what we expected. 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. 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 run a little bit short on time, but let's see if we have any questions over the phone, and let's take one or two of them. Do we have any questions over the telephone conference?
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Okay, very good. I think with that, we will thank you very much for coming here and also for the ones that listening over the web. We have the next report in April. See you then. Thank you very much for today.
Thank you.
Thank you.