Good morning, everybody. Welcome to the Quarter Three announcement of Husqvarna Group results. Following the announcement September 18th, I guess you can say this is pretty much in line with what we communicated at that time, and in that respect, a no-news quarter. We will also talk a bit about, after the normal procedure here of the quarter and the divisions, 2019, which I think is becoming more and more important for us. We are putting a lot of energy into making 2019 a good year for us. Let us start in the ordinary procedure, summarizing the Quarter Three. You have all seen, you have all heard about the long, warm, and dry summer, which of course affected the demand, particularly for the Husqvarna division, which has affected us quite a bit.
On the other hand, divisions like Gardena have thrived from the same element, of course, and you will see that in their P&L very clearly. We have a weather impact, which is, of course, important and sizable, but I also want to be clear about that we also have another effect. That is where we are imbalanced. Previous years, the efficiency program has really delivered quite a substantial improvement, and which has balanced additions of costs we have taken for the profitable growth initiatives. This year, we have come into imbalance between them, and I'll get back to that as well, which has burdened the P&L. The last commentary on the summary is relating to the restructuring of the Consumer Brands division. You know that we are dissolving it, and there's quite some few activities ongoing to deal with that.
The aggregated comment is it's really a lot that's working according to plan, so we are pleased with that. I'll use that as the bridge to get into the restructuring before talking a bit about the top line of the group. What we are looking for here, and this is really important, we are looking to create a group in which we're building on the strength, a group which is more focused, and in that sense, will create a lot of more value going forward. We dissolved the Consumer Brands division. It's moving into Husqvarna for North America, respectively Gardena for Europe. We are reducing about SEK 2 billion of sales into next year, and there will be another SEK 1 billion-SEK 2 billion into 2020. We're a little bit more unclear in communication about that.
We want to see the season of 2019 taking shape before becoming firmer on that span at this stage. What we have said, and we just repeat, these restructuring activities, they will be accretive to the financial performance for 2019, and we expect in 2020 that the full effects of them are going to be exceeding SEK 250 million. All in all, a lot of different activities, may that be related to Charlotte, headcount adjustments, may that be central where we are doing some adjustments, may that be divisions, may that be in the planning related to the footprints of a fairly broad array of activities going on at this stage to make this happen. It's everything according plan, I think is the big message.
If you look at the profitable growth divisions of Husqvarna, Gardena, and Construction, we see that the rolling 12 month, this is currency adjusted, is about 6% for those three aggregated. You will see, of course, Husqvarna at the end dropping somewhat, and on the other hand, Gardena reaching towards the skies here, being somewhere in the neighborhood of 15% on the rolling 12. All in all, good. You will maybe recall we have talked about the three to five as a span based on the market that will be two to three, growing quicker than the market. I think we've proven that the profitable growth initiatives are paying off, and you will see in this span from beginning of 2017 until today that we've gone from a little bit less than 4% into the 6 for those divisions.
A development that is good and according plan, I would say, and aggregated, I think we're pleased with it. We can't be pleased about the result development. 2018 is going to be a blip in the curve, for sure. After three quarters, it's pretty clear to everybody that that's the case. We have a pretty proud, I would say, progress since 2013 of year-to-year improvements. We are going to do, of course, our utmost now to make sure that it actually just remains a blip on that curve of year-on-year improvements. It is.
I have to be also clear at this stage that Quarter Four, there will, for Husqvarna Division, be some knock-on effects as a consequence of dealer and trade having over-average inventories, and after this season being a bit cautious in the purchasing behavior, potentially also pushing pre-season orders into Quarter One rather than in four. It could very well end up being another quarter for Husqvarna with negative sales development, where the rest are not affected by that phenomena at all. It's a Husqvarna Division topic. Looking at the financial highlights for the group, 1% currency-adjusted change of the top line sales plus one. We see SEK 225 million. We guided somewhere, give and take, in that neighborhood. Half of last year was the statement, 18th of September. I think that relates fairly well with that magnitude.
If we ask comments on the group and the EBIT margin, I'd like to get back to the imbalance between the cost additions and the efficiency measures, including the raw material, which we didn't have opportunity to price for this season in the right way. Also there are elements here of productivity and logistic costs which have not gone the way we expected. Jumping in then from the group into Husqvarna, which is a major piece, and maybe the biggest question mark for some of you. It's minus five from a volume perspective, top line currency adjusted. You will see then the operating income to be SEK 47 million versus SEK 388 million, a fairly heavy action. Of course, the volume as such is one explanation.
We also have a negative mix of products that, as you can imagine, also, if nobody is using their lawn equipment, they don't need any spare parts as well. You have that effect on a very profitable category. Then you have the geography dimension here, where these categories of products are replaced by wheeled product in North America. North America has been absolutely okay in the quarter from a demand perspective. A lot more wheel products, petrol wheel products, with somewhat lower margins versus the categories we have seen here in Europe. Then back to the imbalance between the cost additions and the efficiency program, which doesn't make up altogether for the period of year to date, 9 months, 14.1% operating margin versus 16.3% then last year. Jumping on to something which is a lot What?
That was a bit early than I thought. I expected Gardena to come here. No, it isn't. It is. Sorry. I'm off here. We have something fun to talk about related to Husqvarna before we get to Gardena. That is a new lawnmower, robot lawnmower, which is for the professional segment, four-wheel drive. Husqvarna has been setting the innovation pace and the standards in this category. As you know, we innovated it 20 years ago, more than 20 years ago. Now we're taking the next step and really providing the market with a product that can handle uneven surfaces and very steep slopes. As an illustration of the steepness, you can think about ski jumping slope in which you can maneuver and operate. Pretty much there are very few limitations anymore. This is directed towards the professional segment at this stage.
I don't know what happened with this impressive sound here. It disappeared. You Well, there it reappeared. That's something which we are quite proud of. It's a next step, and we talked before about how we want to enter into the professional space increasingly, and this is yet another step in that direction. There will be more. Okay. Moving then over to Gardena Division. Of course, quite impressive numbers, 23% top-line sales currency adjusted growth. Great. Almost a doubling of the operating income, and margin improvement as well. It's a solid execution of the growth strategy, and of course, they are supported by the favorable weather for the watering. It's a lot of watering products, as you can imagine. That's great.
We have the volume, we have the mix element, we still have some burdens in the shape of the distribution cost, even cost elements from the growth initiatives as such. We have talked before about the supply chain being a bit strained throughout this season, and given those growth numbers, I think you can see why that is the case. Not very surprising, necessarily. Moving on to Consumer. I would say Consumer did actually pretty well given the sales decline of 6% currency adjusted, a lower SG&A, and a good product mix kept it up, of course, burdened by the raw materials. This is the division and the product categories which then predominantly absorbs those raw material increases. Manufacturing volumes are of course, a bit of a burden as well.
SEK 109 million loss versus loss of SEK 97 for the quarter, and margin-wise, -7.2% versus the negative 6.5% last year for Consumer Brands. Husqvarna Construction, at first sight, seemingly pretty good, with a 34% increase of the operating income of the 7% top line of 7. We should recall then that we had some one-off cost last year for the integration of the divisions, SEK 47 million. If you look for that, it is more, I would say, ordinary, and partly due to that organic sales was not really excelling in the quarter. Europe was doing fine, whereas North America was a bit behind, and to some extent that related also to a restructuring we were doing of a warehouse, which is now finalized, but that created some back orders throughout the quarter. It is behind us, still good.
You recall that we also have Atlas Copco now part of these numbers, and with a bit of a margin dilution as well, and Jan can come back to being more explicit about that. I guess with those comments, I leave to Jan to talk about more of the details of the financials. I will be back talking 2019 a bit.
As Kai said, operating income of around half of last year's third quarter was already communicated 18th of September, and also the effects of the divisions and groups relate to them to the weather in Central and Northern Europe, as well as the challenges we still have in Consumer Brands.
Also pointing on what Kai said on the signal of Husqvarna the last year, have balance between efficiency improvement and delivering cost savings and the investments in profitable growth initiatives and increasing our cost base that we are lacking that balance in 2018, and in the aftermath of the raw material cost increases, a strained supply chain where we had both shortages of supply of transports and bottlenecks at suppliers, and also other operational challenges that in the end resulted in cost increases for us. Also the volume loss we have pointed out before related to our lawnmower factories and the scale back of sales to one of the major retailers in the U.S. We were talking about at that time when we presented this around SEK 1 billion of sales for this season 2018 being not produced and not sold.
On top of that, we had the weak season on the lawnmower side in general. The imbalance, the third quarter was no exception to that trend. As you recall from last year in the second half, where we are increasing cost base, where we have low volumes, we have low savings, and we have more of a pressure on the cost side for the third and the fourth quarter. That was valid this third quarter as well in 2018, but the imbalance was even more apparent as the sales for the group, and especially in Husqvarna division, were down 5%. Furthermore, the pressure from raw material increased comparatively more in this quarter as hedges taken in 2017 were ended towards the end of the season. All in all, as Kai pointed out, net sales more or less in line with last year, +1% currency adjusted.
Actually, if we take out the acquired businesses like Compaction, we were actually down organically in the group, and that was mainly, of course, related to Husqvarna Division and the 5% there. For the first three quarters, currency-adjusted increased by 2% in net sales or SEK 0.8 billion to SEK 34.6 billion. Gross Income for the group decreased some SEK 100 million, mainly negatively affected by the higher raw material costs. The strange end of the season, we must actually highlight once again, Kai, resulting in a high cost to serve in the Gardena side of the business, and difficulties to decrease cost with the same speed and magnitude as demand of lawnmowers deteriorated in Consumer Brands and Husqvarna Division. On top of that, higher logistics costs, we talked about that already in the beginning of the year.
Transport capacity constraints were reflected into increased freight prices, and also here in the third quarter, increased warehousing costs reflecting the higher inventory. R&D costs here in gross margin, where R&D is placed, increased reflecting our investments in profitable growth initiatives. There are some positive sides, though. We were mentioning Gardena, of course, a very strong watering quarter as season was prolonged, and also positive FX effect is impacting positively there on the Gross Income. All in all, Gross Income deteriorated 3.5 percentage units, down to 25.6% compared to the third quarter last year. For the first three quarters, we actually had a small improvement of Gross Income. The same general explanation as I gave in the third quarter.
Sorry for that. For the first three quarters, Gross Income improved some SEK 65 million. Same general explanations as in the third quarter, but where we actually had improved volume at turning the deterioration into an improvement for the first three quarters. SG&A increased in the third quarter with some SEK 100 million, which was fully then related to FX translation effects. Last year, we had this negative effect of SEK 50 million in Construction Division, Kai mentioned. We also had then as a burden or as a cost increase, the additional cost for profitable growth initiatives, and we also have the acquired businesses. We also had a positive effect of the lower lawn and garden lawn moving season, and also a dampening effect on cost due to the weak financial performance in the quarter. For the first nine months, SG&A increase is some SEK 440 million.
Currency translation effects is around one third of that, and the other two third is related to the profitable growth initiatives and the acquired businesses. All in all, coming down to Operating Income before Items Affecting Comparability, minus SEK 200 million more or less to SEK 225 million in the quarter, an Operating Margin of 2.8%. For the first three quarters, Operating Income before Items Affecting Comparability decreased some SEK 335 million to slightly over SEK 3.5 billion, giving an Operating Margin of 10.2%. We have the raw Items Affecting Comparability here. It's SEK 349 million. It's related to restructuring and mainly then in the U.S. footprint. A minor part is also related to restructuring cost of central staff. Around SEK 50 million will be sort of cash items, and the rest is more of writing down or writing off assets.
As we announced in mid-September, further costs will be incurred the coming two quarters. The full effect of the restructuring is forecasted to be some SEK 1.2 billion, and that was also announced at 18th of September. Financial items were in line both in the third quarter and year-to-date. Taxes were at some 23% of the income before taxes, both in the quarter and year-to-date. Somewhat lower than last year, positively impacted by the lower tax rate in U.S. Net income was minus SEK 185 million in the third quarter, bringing down the net income for the first three quarters down to SEK 2.135 billion, some SEK 465 million lower than last year, giving a net margin of 6.2% and an earnings per share of SEK 3.73. Moving over to the balance sheet.
As in earlier quarters this year, we have an effect of currencies due to the fact that we have a substantial part of our operations outside Sweden, mainly in U.S. and in Europe. With the general weakening Swedish krona against these two currencies, the euro and the dollar, we get quite substantial currency effect in our balance sheet. Non-current assets increasing here year-on-year by SEK 2.1 billion, SEK 0.9 billion is pure currency translation effects, SEK 0.3 billion related to acquired businesses, Light compaction, and SEK 0.9 billion mainly related to the high CapEx level we have had the last 12 months. Inventory, adjusting for currency increased some SEK 600 million, due to a weak demand of lawn mowing equipment this season, and also acquired businesses.
Accounts receivable, taking out the currency debt is actually in line with last year, and then adjusting also for acquired businesses, we are in line, and that is reflecting the flat net sales we experienced here in the third quarter. Accounts payable increased some SEK 300 million in local currencies, reflecting higher inventory and acquired Light compaction business. All in all, we have operating working capital deficit that is increasing with SEK 0.9 million. Half of that is FX, the other half, once again, lawnmower season and acquired businesses. We also had a positive effect of the scale back of sales of a certain U.S. retailer customer in this year compared to last year as regards working capital.
The higher working capital is, of course, also reflected in the net debt, but really the main effect of the increase of net debt is related to direct or indirect currency effects compared to September last year. The net debt increased close to SEK 850 million to SEK 8 billion. The acquisition of Light compaction from Atlas impacted net debt in the first quarter with SEK 0.3 billion. This is one of our three financial targets. Operating working capital in relation to net sales should be under 25%. That is the target at year-end. The net effect of increasing net sales for the first three quarters and higher operating working capital was actually a small improvement. When you take a look at the third quarter, 0.2%, bringing it up to 25.8%. This is actually, of course, not where we want to be. We want to be under 25%.
Further measures need to be taken, especially around our mindset in these capital efficiency questions and our behavior. When the season comes out, as it actually did this year, much worse than expected, it is difficult to compensate with mitigating activities. Seasonal pattern over built-up operating working capital reflected in the mall. You can clearly see here in the operating cash flow, after a very good start, actually, in the first quarter in 2018. Being affected from the scale back of this major retailer in U.S. We have experienced two quarters now, the second and the third quarters, that have resulted in a deterioration compared to last year with combined some SEK 2.1 billion compared to the second and the third quarter last year. That is, of course, a consequence of the weak season, putting pressure both on earnings and on operating working capital.
For the first three quarters, operating cash flow, adjusted for acquired businesses, was close to SEK 1.4 billion, and that is slightly above half of where we were last year in the end of September. The deterioration is even spread between lower earnings, higher operating working capital, and higher CapEx reflecting the ambitions we have in the group. Our objective is to have an investment-grade rating, and one important key ratio to follow is the net debt to EBITDA. It reflects how our earnings and net debt is related, and adjusted for items affecting comparability, the ratio increased somewhat compared to last year following the deterioration of earnings and the somewhat higher net debt. Still rather stable, but annoying that we are unable to continue with our improvement trajectory we have experienced the last years. Before handing over to Kai again, something about our key data, key figures.
Taking a look on the profitability side with the lower earnings, return on capital employed and return on equity have decreased some three percentage units, not adjusting for items, compared to the third quarter last year and year-end. If we adjust for the items affecting comparability, the increase is more in the magnitude of 1.5-2.5 percentage units. The slightly lower average number of employees was related to the decrease in U.S. and their footprint, reflecting the scale back of sales to a major retail customer and some structure changes the last years giving full effect here in 2018, partly offset then by increases in Europe and in Sweden, reflecting higher activity and ambitions in the group. By that, Kai, I give the word to you to round off.
Okay. I think many of you are, of course, curious to listen to how we think about 2019. I'd like to talk here a bit about what we think the key deliverables are for making 2018 a blip in the curve and nothing else, and then revert back to a factor of result improvements, which we are determined to do. First of all, continued organic sales, excluding the exited sales of the SEK 2 billion that we are talking about. We are at the 6% for the combined three divisions, and the plan is 3%-5%, but at least we expect to be in the upper part of that for next year, excluding that component. Just to be clear so we don't have any misunderstandings on this. Second bullet is pricing. This year, we were not in shape to price for the raw material increases.
Next year, actually, it is much less about raw material, it is much more about the tariffs. The total of those two is going to be similar, 2019 compared to what we had to, so to say, absorb this year. We will price, and we have started to price for that. We have the pricing power, we believe, to do that, as we will compensate for that. The third element here is to restore the balance of what you heard us talk quite a bit about what did not work out this year, which we have done pretty well, actually, if we talk about the preceding years, which is to have the balance between efficiency improvements and the additional costs. We will reduce the cost addition somewhat, but we will try to ramp up so that balance is on the right side.
The fourth one is the execution of the restructuring measures, and there the message is pretty clear. We have started quite well swiftly with those activities, so I do not see any change in that respect. Doing those things, they should support getting to the 10%. Of course, is that a promise of 10%? No, it cannot be because there are too many other external factors that may affect it. I think reasonably what is in our control, we should have a fair chance to do that, and that is my message. I said it before, I say it again, we are convinced about that. I think actually I think I would rather leave the presentation right there and open for the questions at that stage for here in Stockholm.
Yeah. Good morning. Johan Dahl here at SEB. This balance that you referred to in a couple of quarters now between growth initiatives and efficiency programs. As this imbalance became obvious to you earlier this year, could you talk about what tangible decisions you have taken so far to improve that balance for next year? Also help us understand as we look into 2019, what further measures have been taken.
First of all, I think we talked some few times about the magnitude of the strategic initiatives, the profitable growth initiatives. They are give and take 1% of the net sales of the group. In 2016, it was the same, in 2017, actually will be somewhat similar in 2018. That one will be slightly reduced. We think we can leverage on the total amount. I am not talking about remaining at level. It is actually walking in a stair, so you read me right here on this item. Quite a level difference here in this period of time. What we are doing then is again, putting little bit more resources of R&D, for example, into redesign to take out cost. That is one very tangible effect. We do have belief in that the productivity for next season can be improved, particularly maybe in the U.S. factories.
We also see that we are in pretty good shape with the pre-season preparation for the largest of those two plants, where we have done a bit of repurposing of the plant, Orangeburg in South Carolina. There we are optimistic. There are a couple of examples of what we do, and we also think we are in better shape on the logistic area. On the internal side, freight costs probably we will have to accept being reasonably high, but from a warehouse footprint and efficiency point of view, we do have reason to believe we can do that a lot better. We saw this season. Remembering this season has been maybe the perfect storm from the logistic perspective with the late spring, pretty much nothing in terms of demand all the way up to end of April, then everything in May, and then kind of tapering off.
It has been stop-and-go type of year from the logistic perspective, but also including some structural changes that we have underwent. You heard about, for example, now construction in Q3 North America. There has been a fair bit of those also impacting it.
You expect these activities to restore operating leverage and also recover what's lost this year, or what's the total magnitude of everything that's been done?
The total magnitude of what you see here on the left of this, and you can guess, re-engineer it, because the restructuring of the totally 250 in 2020, let's give and take, that's half. You realize that there is a fair bit there to be done both on pricing as well as in the restoring the balance. Will we then recuperate the increases of this year from the price component on itself? Maybe not fully, but in combination with the third bullet you can see on this page, I would say the answer is yes. Not pricing components as such to cover the two years. No. That's not in the cards, but it's well in the cards to be above what the 2019 season is expected to bring from a material tariff impact point of view.
Got you. Just quickly, can you explain where you are currently in terms of setting prices for next year? Is that almost done or you're still in the beginning?
No, it's done.
It's done.
It's behind us.
Okay.
Caspar Engberg with Handelsbanken. I was wondering if you could explain a little bit about this factory closure, the McRae factory. When is that being wound down?
That is going to work in the way that we are actually going to produce for the next season, and deliver according the commitments. Then we will shut it down towards end of quarter one. It's give and take end of quarter one. Let's also be clear, we are still also trying to find external takers for that. Whether we eventually shut it down or find a taker for it still remains to be seen. In the absence of any taker, we will shut it down end of quarter one.
I know this is kind of speculative, given that this is a two-year phase of exiting sales and closing factories, I mean, sort of everything else equal, we would expect margins to continue up in 2020.
I would use the expression of continuous improvement year-on-year. Absolutely. I don't see why we shouldn't be able to do that. On the contrary, we have a lot to come in 2020, which is going to support that. No, I'm optimistic about it.
One more question. Did you say that there were going to be restructuring in Q1 as well, or?
Yes, maybe you.
We said, and it's still valid, that the restructuring cost will happen mainly in Q3 and Q4, which means that there is something in Q1 as well.
The overall figure is the same?
The big part is happening this year, you can calculate what Q4 might look like.
Danske Bank. On your growth assumptions or forecast, can you give us some color on that? Why you are so optimistic?
Let us revert back to the slide of the rolling 12 on the three divisions. If you look at this, you have seen Husqvarna then below the average, of course, but still the average is around 6%. You can argue they will have a fairly poor low reference for 2019, it should be in the cards to do something pretty good. Gardena, on the other hand, of course, will have the opposite situation for 2019. They might be more challenged to consolidate on that level from a perfect season from a watching position point of view, the expectation shouldn't be high on them.
If you say Husqvarna for sure should be on the upper side on that average for 2019 season, reasonably, arithmetically, Construction, there is no reason not to expect them to press on having everything in order from the integration of acquisitions, et cetera. Actually, I'm not saying that we are more optimistic about 2019 than we have been. I think we are actually saying something similar to what you see, but with a different split between the divisions.
Two follow-ups there. I was a little bit late into the call, so maybe you thought about it, for Husqvarna, I guess it's an inventory situation among retailers.
Yeah. Not so much retailers, but the dealer channel. I talked about that a bit, but just repeating. As a consequence of that long period of dry and hot weather, they are overstocked in that channel, that overstock leads to, of course, this purchasing pattern for quarter four, foreseeably, some of the pre-season orders likely will be pushed into quarter one, meaning for Husqvarna division, quarter four, we don't have reason to be overly optimistic. It could again end up being a negative quarter. Also remembering that Husqvarna quarter four last year was a very good quarter, it's a fairly high reference to beat as well.
On construction, where are you in terms of integration costs, where are you about the margin recovery for acquired?
We took the big restructuring or integration costs in Q3 last year. We have had some minor costs, they are not worth to mention, more or less. We are more or less through with the integration of the acquisitions. You could also say when you say margin, Light compaction, for instance, it's not having the EBIT margin as construction and the acquisitions made earlier. Of course, that will have a diluting factor. We have that already here in the third quarter and then for the full year. If we compare it like for like-
Hi. Sorry.
Yes.
Johan Eliason, Kepler Cheuvreux. Just a detail on all these raw material tariffs. Could you quantify the amount you had as a hit this year, how much you expect for next year? On this Gardena exposure, obviously part is weather driven, but part is also channel expansion. How do you see the channel expansion going into next season? Is there more on top of what you did already this year, or are we just relying on the organic growth in the existing channels? Talking about this closure of the McRae plant, do you still want to produce some lawnmowers for the Husqvarna brands and then et cetera? Have you come up with a solution how you will be able to manage that going forward as this-
If I kick off and talk to your questions. Raw material. If you say that it's in the magnitude of close to SEK 300 million, a little bit less this year, tariffs being a very small element of that predominantly than Q4, not so much in the year to date. The differences are going to be on opposite sides than say it's all going to be pretty much tariffs next year from a magnitude point of view. The total is going to be similar, maybe a bit higher actually in 2019, I think it's fair to say. It could be between SEK 300 million to SEK 400 million actually in the total next year. We are initiating some mitigating activities. The question is always how quick they will get through, so to say, the inventory into the P&L.
Maybe the mitigating activities is more for 2020 in practice than for the 2019 season. Still the comment I made before holds water, meaning price increases are going to be covering the combination of raw material and tariffs. That was the first part. Gardena channel expansion. We are proceeding with that work, and we see a lot of actually positive signs of how that has happened. If you go back some few years, we see a very clear trend of lower dependency of the retail space. We see everything from garden centers to food chains, and to online becoming more and more important. Not very surprising, some actors in the online area which have success in other regions, also becoming important for us. That multi-channel landscape, Gardena is at the forefront of our group to experience that, exploit, utilize that.
We see that continuing. There is not really that much of category expansion, but it's more penetration that we continue working on, and we still have a lot to do in many markets. U.K. still being on a good path, but a lot more to do for sure. As one example, back to the Latin part of Europe, still a lot more to do. Gardena has reinforced its position in the central European space around the DACH region, Benelux, Scandinavia. Scandinavia can also actually from a penetration level increase. I think some of you might have observed shortage on the shelves of watering products at certain periods of times in Scandinavia. There is more to do for sure. That was the second one. The third one was McRae of your question, and how we have sorted the supply.
I should put it this way, the answer to your question here is that we will safeguard and maintain supply of premium price points walk-behind mowers, whereas we have left them all the, let's call it the mass volume bits and pieces, just like on the tractor side. That we are securing so that there will be supply also for the 2020, 2021 season. There are several ways to solve that, and they are still being assessed depending on how we actually will exit the McRae plant. There are different alternatives that are going to come into play. It's not a question of whether we remain there with, for example, four-wheel drive, petrol walk-behinds. That's going to remain hugely important in North America and still a reasonably okay category as such.
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Yes. Hi, Christer Mångård from DNB. Do you hear me?
Yes, Christer.
Hi. All good. It was a bit strange, the system. Sorry for that. Just two follow-up questions from the Q&A. On pricing, you said that you have locked in prices for next season. How big variation to these prices do you historically have seen when you actually realize the prices? Are there a lot of discounts historically that could offset the positive price increase you are doing now?
Yes. I think it's fair to say that historically there has been a bit of campaigning and discounting throughout the season. I think in general, what we are aiming to do is to become more disciplined. When I talk about the price increases, I'm talking net of those. It's not necessarily the discipline that's going to save us, so to say. That is something that should improve the situation on top of rather than, so to say, save us. We're not banking on that. That is the difference, if that is your question, Christer.
Okay. The second thing was on the Husqvarna Construction, which I couldn't really hear the answer. You talked about margin for next year, basically. Given that this year has been affected by step-up optimization for the acquisitions that are done, I guess next year you would see some synergies coming in. Can you comment a bit on the margin progression for this division for next year?
Well, you are right, of course, we will get the positive effects of the integration we have been doing on the acquisition. We expect the organic side, you saw the third quarter, for instance, the organic side to continue and get momentum on the growth side as well. We have had some issues which we pointed out here in the quarter and for the first three quarters around logistics in general and our warehouse structure. It's fair to say that we expect an improvement also of margin, as I pointed out, Light compaction, even though it was acquired in the beginning of the year in February, we have gradually been taking over this business from Atlas Copco via a carve-out . The full impact is actually more on the third quarter than on the earlier quarter.
There will be a diluting effect when we come into 2019 due to that as such. The underlying business should continue to improve and go back to that trajectory we've seen in the past.
We will not give any percentage guidance or anything like that.
Of course. Then on the robotic lawnmowers. I know that you have had a tough year in the northern parts of Europe, which is a core market, can you talk about the development where you haven't had the weather issues for robotic lawnmowers? Also what you see in North America this year and what you expect from North America next year in this category.
Just to qualify the Husqvarna division a bit, Europe, they were minus 5%. Average Europe was almost three times that, not fully. Europe was a big hit for Husqvarna division, of course that has a big impact on the robotics phase as well. Fairly broadly because the major markets are not necessarily Italy or Spain, rather north of those markets, is where we have that. There is an impact throughout all of Europe actually on the robotics. Still, of course, being for the year to date positive, being very clear negative in quarter three. That's the situation. In U.S., I think we have moved forward. Am I happy about it this year?
I don't think I can brag about it, if I look at what we now are talking about with different channels for next year, we see things starting to become more sizable. I've been cautious before when I talked about North America, I think that was correctly so. We are moving towards something where people actually will start to appreciate that to a larger degree. We have also commercially found some concepts which we think are going to be important to create that growth for next season in North America. I am optimistic that we will start to see more material improvements actually in 2019, may that be a dealer channel or a retail channel. Both, actually.
On the professional side, the new robot is obviously quite interesting. Can you talk about what you see for the professional segment? Are you still testing the market, should we see the professional users actually start to buy these kind of robots in a larger scale over 2019? Secondly, this robot you presented, the 535, is that a robot that can work in groups, is it just a standalone product?
I think for now it's a standalone product. That's not a big thing to fix, actually. Is this coming into a broader application, and deployment in the professional area? Yes. The answer is yes. We see that we have different events with various cities. The last one was with Hamburg, actually, where this robot was launched a week or two weeks ago. There's a lot of interest. Some of you might actually have seen at some roundabouts in Stockholm and some public areas that there are robots which are being tested and evaluated, and that will expand. That's to some extent, I think, by different municipalities. It is tested from an acceptor's point of view, and that seemed to be going very well.
This new product opens up to deal with much more rough terrain, much more sloppy terrains, meaning that it's much more versatile in its application. It's yet another step to make life easier for the professional space and to substitute the current manual methods. Yes, this is a journey we are on, and I think you should see actually these products being applied together with the fleet services software, where actually you control a larger contingent of robots from one and the same software. I think what you referred to when we started the discussion was really can you put them on a field and put 10 of them and make them work perfectly together? I think practically you can, but we should make some improvements to that type of software as well.
We see increasing in our football fields, et cetera, also being cut by lawnmowers of robotics character. It's expanding, it's coming, and we will make sure we are one of the driving forces or maybe the strongest driving force behind that.
Great. Final thing. Will you use the same concept on consumer products as well, consumer robotic lawnmower? Should we expect any new big launches in that category as well, for next season?
I refrain from commenting on the residential part of it, but it's not maybe far-fetched to think in that direction.
Okay.
I leave that for now.
Thank you. If you currently have no further questions, maybe as a final reminder, please press star and one on your telephone keypad if you wish to ask a question via the telephone. That's star and one to ask a question via the phone.
Full of questions from the floor here in Stockholm also.
Hi, this is Johan again from Kepler Cheuvreux . Just a question about the robotics in the U.S. Are you a latecomer there? Are there other competitors already present in the market, or are you sort of the pioneer also in the U.S. robotics market?
There is nobody that is ahead of us in the U.S., actually. Whatever that says really, at this point, not very much. Everybody is small. We maybe have something, but it's still not of the magnitude, as I mentioned, that I want to brag about. We're not at that stage. There's nobody ahead of us, no.
Yes, just a follow-up. With regards to, since you're scaling back certain businesses, have you concluded discussion with key suppliers, et cetera, to sort of box in what potential negative procurement synergies you'll experience?
All the pre-season preparations are finalized for next year. That was partly also what I referred to when I talked about Orangeburg, buried in the repurposing. That's done and behind us, actually. That's within the frame of what I talked about when I described 2019. Got you. Well, actually, there's a lot of work that has been put into, as I mentioned, to make 2019 a significant step ahead. Of course, from our point of view, building on the strengths going ahead, less complex group, really working with creating the value, not distracting also management is worth a lot. There is something here which is a bit intangible at this stage for you, but which is becoming very tangible when we do actually the work. I like to transmit on this, that sales element.
Can you quantify the total share of revenues now from robotics and battery handhelds for this season? Secondly, just on the Sears bankruptcy process, is there any receivable risk or anything like that remaining for you in that case?
Battery robotics, I like to get back to when we summarize the season. When I have also the data of how the market has done, not only talk about ourselves, but from what I've seen so far, we have been holding up market share on the robotics side and gaining on the battery side. That's what I've seen so far, that's more select data. It's not the comprehensive market aggregation, but the main markets and the so-called GfK data that we can buy. That's looking okay. Then the second one as to CS, I don't know if you want to make any comments.
There will be no impact on income statement.