Earnings Call: Q3 2018

Oct 19, 2018

Morning, everybody. Welcome to the quarter 3 announcement of Husqvarna Group results. Following the announcement September 18, I guess you can say this is pretty much in line with what we communicated at that time and in that respect, 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. But let us start in the ordinary procedure, summarizing the quarter 3. So 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 has thrived from the same element, of course, and you will see that in their P and L very clearly. So 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 in balance. Previous years, the efficiency program has really delivered quite a substantial improvement and which has balanced additions of cost we have taken for the profitable growth initiatives. This year, we have come into imbalance between them and get back to that as well, which has burdened the P and 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. And the aggregated committees, it's really a lot that's working according to plan. So we are pleased with that. And I'll use that as the bridge to get into the restructuring before talking a bit about the top line of the group. So what we're 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. So we dissolved the consumer brands division. It's moving into Husqvarna for North America, respectively, Catena for Europe. We are reducing about SEK 2,000,000,000 of sales into next year, and there will be another one into 2021,000,000,000 to SEK 2,000,000,000 dollars 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. So what we have said and we have to repeat, these restructuring activities, they will be accretive to the financial performance for 2019, and we expect in 2020 that the full effect of them are going to be exceeding SEK 250,000,000. So all in all, a lot of different activities, may that be related to Charlotte, headcount adjustments, may that be central, where we're not doing some adjustments, may that be divisions, may that be in the planning related to the foot prints of a fairly broad array of activities going on at this stage to make this happen. But 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, and this is currency adjusted, it's about 6% for those 3 aggregated. And you will see, of course, Husqvarna then at the end dropping somewhat. And on the other hand, the Gardena reaching towards the skies here somewhere in the neighborhood of 15% on the rolling 12%. So all in all, good. You will maybe recall, we have talked about the 3% to 5% as a span based on a market that would be 2% to 3%, so growing quickly than the market. But we so I think we've proven that the profitable growth initiatives are paying off, and you will see in this plan from beginning of 'seventeen until today that we've gone from a little bit less than 4% and to the 6% for those divisions. So development, that is good and according to plan, I would say, and aggregated, I think we're pleased with it. But we can't be pleased about the result development. So 2018 is going to be a bit in the curve for sure. That's after 3 quarters, it's pretty clear to everybody that, that's the case. So we have a pretty proud, I would say, progress since 2013 of year to year improvements. And we are going to do, of course, our utmost now to make sure that it actually just remains a bit on that curve of year on year improvements. But it is. And I have to be also clear at this stage that quarter 4, there will, for Husqvarna division, be some knock on effects as a consequence of dealer and trade having Oblarevic inventories and after this season, being a bit cautious in the purchasing behavior, potentially also pushing preseason orders into quarter 1 rather than Q4. So it could very well end up being another quarter per house quarter with negative sales development, whereas the rest are not affected by that phenomena at all. So it's a housequana division topic. Looking at the financial highlights for the group. 1% kind of adjusted change of top line sales plus 1%. We see SEK 225,000,000 we guided somewhere give and take in that neighborhood. Half of last year was the statement 18th September. So I think that relates fairly well with that magnitude. If you have 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. But also there are elements here of productivity and logistic costs, which have not gone the way we expected. So 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 5 from a volume perspective, top line, currency adjusted. And you will see then the operating income to be €47,000,000 versus €388,000,000 so a fairly heavy production. Of course, the volume as such is one explanation. But we also have a negative mix of products. But as you can imagine also, if nobody is using their own equipment, they don't need any spare parts as well. So you have that effect on a very profitable category. And then you have the geography dimension here, where these categories of products are replaced by wheeled product in North America, and North America has been absolutely okay in the quarter from a demand perspective. So a lot more wheeled products, petrol wheel products, with somewhat lower margins versus the categories we have seen here in Europe. And then back to the imbalance between the cost additions and the efficiency program, which doesn't make up. Altogether, for the period of, let's say, date 9 months, 14.1 percent operating margin versus 16.3% than last year. Jumping on to something which is a lot more what that was it earlier than I thought. I expected Gardena to come here. No, it isn't. It's actually it is. Sorry, I'm off here. We have something fun to talk about related to Husqvarna before we get to Gardena. And that is a new lawnmover, robot lawnmover, which is for the professional segment, 4 wheel drive, and 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. And 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 in our slope in which you can maneuver and operate. So pretty much, there are very few limitations anymore. And this is directed towards the professional segment at this stage. I don't know what happened with this impressive sound here, it disappeared. But you yes, well, they reappeared. So that's something which we are quite proud of, and 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 doubling of the operating income and margin improvement as well. So solid execution of the growth strategy, and of course, they are supported by the favorable weather for the watering. So it's a lot of watering products, as you can imagine. So that's great. So we have the volume, we have the mix element, but we still have some burdens in the shape of the distribution costs and 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 and A and a good product mix kept it up, but of course, burdened by the raw materials. And this is the division in the product categories, which then predominantly absorbs those raw material increases. And then manufacturing volumes are, of course, a bit of a burden as well. So SEK 109,000,000 loss versus loss of SEK 97,000,000 for the quarter and margin wise, minus 7.2 versus the 6.5 negative last year for Consumer. Construction, at first sight, seemingly pretty good with a 34% increase of the operating income of the 7 percent top line of 7%. So but we should recall then that we had some one off costs last year for the integration of the division, so some $47,000,000 So if you look for that, it's more, I would say, ordinary partly due to that organic sales wasn't 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. But it's behind us. So still good. And 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. And I guess with those comments, I'll need to Jan to talk about more of the details of the financials. Then I will be talking 2019 a bit. Okay. As Thijs said, operating income of around half of last year's Q3 was already communicated 18th September and also the effects of the divisions and groups related them to the weather in Central and Northern Europe as well as the challenges we still have in Consumer Brands. And also pointing on what Kai said on the signal of Husqvarna the last year, so have balance between efficiency improvement and delivering cost savings and the investments in profitable growth initiatives and increasing our cost base that we are backing that balance in 2018. And then in the aftermath of the monetary cost increases, The Spain 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. And also, the volume loss, we have pointed out before, related to our lower mover factories and the scale back of sales to 1 of the major retailers in U. S. We were talking about at that time when we presented this around SEK 1,000,000,000 of sales for this season 18 being sort of not produced and not sold. And on top of that then, we had the weak season on the non mover side in general. And the imbalance, the 3rd quarter was no exception to that trend. As you recall from last year and 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 3rd and the 4th quarter. That was valid this Q3 as well in 'eighteen. But the unbalance was even more apparent as the sales for the group and especially Husqvarna division were down 5%. And 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, plus 1% currency adjusted. But 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 1st 3 quarter, currency adjusted increased by 2% to net sales or SEK 0.8 billion to SEK 34,600,000,000. Gross income for the group then decreased from SEK 100,000,000, mainly then negatively affected by the raw 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 lawn mover set to operate within consumer brands and Husqvarna division. And on top of that, higher logistic 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 Q3, increased warehousing costs reflecting the higher inventory. And R and D costs here in those margin, where R and D is placed, increased reflecting our investments in profitable growth initiatives. There are some positive sides, though. We were mentioning Gardena, of course, 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 Q3 last year. For the 1st three quarters, we actually had a small improvement of gross income. The same general explanation as I gave in the 3rd quarter. Sorry for that. For the 1st three quarters, gross income improved from SEK 65,000,000. Same general explanation as in the 3rd quarter, but where we actually had improved volume that's turning the deterioration into an improvement for the 1st 3 quarters. SG and A increased in the 3rd quarter with some SEK 100,000,000, which was fully then related to FX translation effects. Last year, we had this negative effect of SEK 50,000,000 in Construction Division, I mentioned. We also have then as a burden or as a cost increase, the additional cost for profitable growth initiatives, and we also have the acquired businesses. But 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 1st 9 months, SG and A increased to SEK 450,000,000 million, currency translation effects is around onethree of that, and the other twothree is related to the profitable growth initiatives and acquired businesses. All in all, coming down to operating income before items affecting comparability, minus SEK 200,000,000 more or less to SEK 225,000,000 in the quarter and operating margin of 2.8%. And for the 1st 3 quarters, operating income before items affecting comparability decreased some SEK 335,000,000 to slightly over SEK 3,500,000,000, giving an operating margin of 10 point 2%. Then we have the raw items affecting comparability here. It's SEK 349,000,000. It's related to restructuring and mainly then in the U. S. Footprint. And a minor part is also related to restructuring cost of central staff. Around SEK 50,000,000 will be sort of cash items and the rest is more of written writing down or writing off assets. As we announced in mid September, further costs will be incurred in the coming two quarters. The full effect of the restructuring is forecasted to be for SEK 1,200,000,000, and that was also announced at 18th September. Financial items were in line both in the 3rd quarter and year to date, and 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 185,000,000 in the 3rd quarter, bringing down the net income for the first 2 three quarters down to SEK 2,135,000,000, some SEK 465,000,000 lower than last year, giving a net margin of 6.2 percent and an earnings per share of SEK 3.73. Moving over then to the balance sheet. And 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 then in U. S. And in Europe. And with the general weakening Swedish krona against these two currencies, the euro and the dollar, we get quite substantial currency effects in our balance sheet. So noncurrent assets increasing here year on year by SEK 2,100,000,000, SEK 0,900,000,000 pure currency translation effects, SEK 3,300,000,000 related to acquired businesses, while compaction then and SEK 900,000,000 mainly related to the high CapEx level we have had the last 12 months. And inventory, adjusted for currency increased some SEK 600,000,000 due to a weak demand of lawn mowing equipment decisions and also acquired businesses. Accounts receivable, taking out the currency that 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 Q3. Accounts payables increased on SEK 300,000,000 in local currencies, reflecting higher inventory and acquired light compression business. All in all, we have operating working capital that is increasing with SEK 0.9 billion, half of that is FX, the other half once again, 1 overseas 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 after working capital. And the higher working capital is, of course, also reflected in the net debt, but due to but the really main effect of the increase of net debt is related then to direct or indirect currency effects compared September last year. The net debt increased close to SEK 850,000,000 to SEK 8,000,000,000. The acquisition of Light Compaction from Atlas impacted net debt in the Q1 with SEK 0.3 billion. This is one of our 3 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 1st three quarters and higher operating working capital was actually a small improvement. When you take a look at the 3rd quarter, 0.2%, bringing it up to 25.8%. And this is actually, of course, not where we want to be. We want to be under 25%. Further measures need to be taken and especially around our mindset in these capital efficiency questions and our behavior. But 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, all the buildup of working capital reflected in the demand. You can clearly see here in the operating cash flow after a very good start actually in the Q1 in 'eighteen, being then affected from the scale back of this major retailer in U. S. We have experienced then 2 quarters now, the 2nd and the 3rd quarters that have resulted in a deterioration compared to last year with combined some SEK 2,100,000,000 compared to the 2nd and the 3rd quarter last year. And that is, of course, a consequence of the weak season, putting pressure both on earnings and on working capital. For the 1st three quarters, operating cash flow adjusted for required businesses was close to SEK 1,400,000,000, 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 working capital and higher capital expenditures, 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 then 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 high net debt. Still rather stable, but annoying that we are unable to continue with our improvement trajectory we have experienced in the last years. And before handing over to Kai again, something about our key data, key figures and taking a look on the profitability side with the lower earnings, return on capital employed and return on equity have decreased some 3 percentage units, not adjusting for items compared to the Q3 last year year end. If we adjust for the items affecting comparability, the increase is more in the magnitude of 1.5% to 2.5 percentage units. The slightly lower average number of employees was related to the decrease in the U. S. And their footprint affecting the scale back of sales to the major retail customers and some structure changes the last year's giving full effect here in '18, partly offset them by increases in Europe and in Sweden, reflecting higher activity and ambitions in the group. By that, Kai, I'll 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. And I'd like to talk 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 determined to do. So first of all, continued organic sales, excluding the exited sales of the SEK 2,000,000,000 that we are talking about. So we are at the 6% for the combined 3 divisions and the Spanish 3% to 5%, but at least we expect to be in the upper part of that for next year, excluding that component. So just to be clear, we don't have any misunderstandings on this. And second bullet is pricing. This year, we were not in shape to price for the raw material increases. Next year, actually, it's much less about raw material. It's much more about the tariffs. But the total of those 2 is going to be similar, 'nineteen, compared to what we had to, so to say, absorb this year. But we will price, and we have started to price for that. We have the pricing power, we believe, to do that. So we will compensate for that. The 3rd 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 the efficiency improvements and the additional costs. So we will reduce the cost additions somewhat, but we will try to ramp up. So that balance is on the right side. And the 4th 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 don't 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 can't be because there are too many other external factors that may affect it. But I think reasonably, what's in our control, we should have a fair chance to do that. And that's my message. I said before I say it again, we are convinced about that. So I think actually, I think I'd rather leave the presentation right there and open for the questions at that stage. Good morning. Johan Drall here at SVB. This balance that you referred to in a couple 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've taken so far to improve that balance for next year? And also help us understand as we look into 2019 what further measures have been taken? So I mean, 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'm not talking about remaining at that, but it's actually walking in a stair. So you're really right here on this item. So quite a level difference here in this period of time. What we are doing then is, again, putting a little bit more resources of R and D, for example, into redesign to take out cost. That's one very tangible effect. We do have a belief in that the productivity for next season can be improved, particularly maybe in the U. S. Factories. And we also see that we are in pretty good shape with the preseason preparation for the largest of those two plants, where we have done a bit of repurposing of the plant Orangeburg in South Carolina. So that there we are optimistic. There's 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. And what 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. So 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, NAC Construction in Corporate 3 in North America. But there has been a target of those also impacting it. So You expect these activities to restore operating leverage and also recover what was lost this year? Or is it what's the total magnitude of everything that's being done? The total magnitude of what you see here on the left of this, and you can, I guess, reengineer it because the restructuring of the totally 2 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? So will we then recuperate the increases of this year from the price component on itself, maybe not fully, but in combination with this other the 3rd bullet you can see on this page, I would say the answer is yes, but not pricing components as such to cover the 2 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 your in terms of setting prices for next year? Is that almost done? Or are you still in the beginning? It's some. It's behind us. Sebastian Zengberg with Handelsbanken. I was wondering if you could explain a little bit about this factory closure, the Macrae factory. When is that being wound down? So that is going to work in the way that we're actually going to produce for the next season and deliver according to commitments. And then we will shut it down towards end of quarter 1, give and take end of quarter 1. But let's also be clear, we are still also trying to find external takers for that. So whether we eventually shut it down or find a taker, it still remains to be seen. But in the absence of any taker, we will shut it down end of quarter 1. And yes, I know this is kind of speculative, but given that this is a 2 year phase of exiting sales and parts and factories, I think it's 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, absolutely. So I don't see why we shouldn't be able to do that. On the contrary, I mean, we are we just we have a lot to come in 2020, which is going to support that. So now I'm optimistic about And then one more question. Did you say that there were going to be restructuring in Q1 as well? Or Yes, maybe you Well, we said and it's still valid that the restructuring costs will happen mainly in Q3 and Q4, which means that there is something in Q1 as well. But the overall figure is the same. I mean, the big part is happening this year. So then you can calculate what Q4 might look like. Dan Skibank. On your growth assumptions or forecast, can you give us some color on that, why you're so optimistic? Let us revert back to the slide of the rolling 12 of the 3 divisions. If you look at this, you have seen Husqvarna then below the average, of course, but still the average is around 6%. And you can argue they will have a fairly poor low reference for 'nineteen. So they should be in the cards to do something pretty good. Gaben, on the other hand, of course, will have the opposite situation for 2019. There might be more challenge to consolidate on that level from a perfect season from a working position point of view. So the expectation shouldn't be high on them. But if you say Husqvarna, for sure, should be on the upper side of that average for 'nineteen season reasonably, arithmetically. And construction, there's no reason not to expect them to press on having everything in order from the integration of the acquisitions, etcetera. So I don't see why and actually, I'm not saying that we are more optimistic about 2019 than we have been. I think we're actually saying something simpler to what you see, but with a different split between the divisions. Two follow ups there. And I was a little bit late in the call, maybe you thought about it. But for Husqvarna, I guess, it's an inventory oil situation among retailers. Yes. We are not so much retailers, but the dealer channel. And I talked about that a bit, but just repeating, yes, as a consequence of that long period of dry and hot weather, they are overstocked in that channel. And that overstock leads to cautious purchasing pattern for quarter 4 foreseeably. And some of the preseason orders likely will be pushed into quarter 1, meaning for Husqvarna division, quarter 4 is not going to we don't have reason to be overly optimistic. They could again end up being a negative quarter. But also remembering that Husqvarna, quarter 4 last year was a very good quarter. So it's a fairly high reference to be as well. So it's On construction, where are you in terms of integration costs? And where are you about the margin kind of recovery for acquired? We took the big construction restructuring or integration costs in Q3 last year. We have had some minor costs, but I mean, they are not being worth to mention more or less. So we are more or less through with integration of the acquisitions. Well, if you well, you could also say when you say margin, I mean, light compaction, for instance, it's not having the EBIT margin as construction and the acquisitions made earlier. And of course, that will have a diluting factory. We have that already here in the Q3 and then for the full year. But if we compare it like for like, Hi, sorry. Johan Elias on Kepler Cheuvreux. Just a detail then on this raw material tariffs. Could you sort of quantify the amount you had as a hit this year? And then how much you expect sort of for next year? And then on this Gardena exposure, obviously, part of this 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 sort of in the existing channels? And then talking about this closure of the Macrae plant, you still want to produce some lawn mowers for the Husqvarna brands and etcetera? Have you come up with a solution how you will be able to manage that going forward as If I kick off and talk to your questions, raw material, If you say that it's in the magnitude of close to EUR 300,000,000, a little bit less this year, tariffs being a very small element of that predominantly than quarter 4, not so much in year to date. The differences are going to be opposite size and say it's all going to be pretty much tariffs next year from a magnitude point of view. But the total is going to be similar, maybe a bit higher actually in 'nineteen, I think it's fair to say. So it could be between 300 to 400 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 and L. So maybe the mitigating activities is more for 2020 in practice than for the 2019 season. But still, the comment I made before holds water, meaning price increases are going to be covering the combination of raw material and tariffs. So 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, and we see everything from garden centers to food chains and to online becoming more and more important and not very surprising. Some actors in the online area, which have success in other regions, also becoming important for us. So that multichannel landscape, Gardena is at the forefront of our group to experience that, exploit, utilize that. And we see that continuing. There is less 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. And UK 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, whereas Gardena has reinforced its position in the center of European space around the DACH region, Benelux, Scandinavia. But Scandinavia can also, actually from a penetration level increase. And I think some of you might have observed shortage on the shelves of watering products at certain times in Scandinavia. So there is more to do for sure. That was the second one. The third one was Macrae on your question and how we have sorted that supply. And the question to I said I shouldn't put it this way, the answer to your question here is that we will safeguard and maintain supply of premium price points, walk behind movers, whereas we have left them all the, let's call it, the mass volume bits and pieces, just like on the tractor side. And that we are securing so that there will be supply also for the 2020, 2021 season. That's and there are several ways to solve that, and they are still being assessed depending on how we actually will exit the Macrae plant, there are different alternatives that are going to come into play. But it's not a question of whether we remain there with, for example, 4 wheel drive, petrol walk behinds, that's going to remain usually important in North America and still reasonably okay category as such. If we could please open up for questions from the telephone audience. Certainly. Thank you. We will now take our first question. Please go ahead. Your line is now open. Yes. Hi. Christian Eingaard from DNB. Can you hear me? So just two follow-up questions from the Q and A. On pricing, you said that you have locked in prices for next season. How big variation to these kind of these prices do you historically have seen when you actually realize the prices? So are there a lot of discounts historically that could offset the positive price increase you're doing now? Yes. I think it's fair to say that historically, there has been a bit of campaigning and discounting throughout this season. I think in general, what we are aiming to do is to become more disciplined. But when I talk about price increases, I'm talking net of those. So it's not I mean, 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's the difference, if that is your question, Christian. Okay. Perfect. And then the second thing was on the construction, which I couldn't really answer. You talked about margin for next year basically. Given that this year has been affected by step up amortization for the acquisitions they've done, I guess. And next year, you will see some synergies coming in. So can you comment a bit on the margin progression for this division for next year? Well, it's right, of course. We will get the positive effects of the integration we have been doing on the acquisition. But also, we expect the organic side, you saw the 3rd quarter, for instance, the organic side to continue and get momentum on the growth side as well. And we have had some issues, which we pointed out here in the quarter and for the 1st 3 quarters around logistics in general and our warehouse structure. So it's fair to say that we expect an improvement also of margin, but that's why 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 carve out. So the full impact is actually more on the 3rd quarter than in the earlier quarter. So there will be a diluting effect when we come into 2019 due to that as such. But 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. And then on the robotic lawn mowers, is it possible I know that you have had a tough year in the northern parts of Europe, which is the core markets. But can you talk about the development where you haven't had the weather issues for robotic loblers? And also what you see in North America this year and what you expect for North America next year in this category? Yes. Just to qualify the Husqvarna division a bit. I mean, Europe was they were minus 5. Average Europe was minus well, 3x almost 3x that, not fully. So Europe was a big hit for Ascona division. And of course, that has a big impact on the robotics space as well and fairly broadly because the major markets are not necessarily Italy or Spain, but rather north of those markets is where we have that. So there is an impact throughout all of Europe actually on the robotics, still, of course, being for the year to date positive, but being very clear negative in quarter 3. So 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. But if I look at what we now are talking about with different channels for next year, we see things starting to become more sizable. And I've been cautious before when I talked about North America, and I think that was correctly so. But it's 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. So I am optimistic that we will start to see more material improvements actually in 2019 and may that be a dealer channel or a retailer 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? Or should we see the Professional users actually start to buy these kind of robots in the larger scale over 2019? And secondly, this robot you presented, the 535, is that a robot that can work in groups? Or is it just a stand alone product? I think for now, it's a stand alone product. But that's not the big thing to fix actually. Is this coming into a broader application and deployment in the professional, yes, the answer is yes. And 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 2 weeks ago. And there's a lot of interest. And you 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. And those are kind of that's to some extent, I think, by different municipalities. It is tested from an acceptance point of view, and that seemed to be going very well. I mean, this new product then opens up to deal with much more rough terrain, much more slopey terrains, meaning that it's much more versatile in its application. So it's yet another step to make life easier for the professional space and to substitute the current manual methods. So yes, I mean, 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 1 and the same software. But 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 will we should make some improvements to that type of software as well. But we see increasing in our football fields, etcetera, also being cut by lawn mover's robotics character. So 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. Are you will you use the same concept on consumer products as well, consumer robotic lawn mover? And are we expect 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 farfetched to think in that direction. Thank you. And you currently have no further questions. A couple of questions from the floor here in Stockholm also. Yes. Hi, this is Johan again for 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 pioneer also in the U. S. Robotic market? There is nobody that is ahead of us in U. S. Actually. So 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. It's not at that stage. But 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, etcetera, to sort of box in what potential negative procurement synergies should experience? All the preseason preparations are finalized for next year. And that was partly also what I referred to when I talked about Honorsberg in the repurposing. That's done and behind us actually. So that's within the frame of what I talked about when I described 2019. Well, actually, there's a lot of work that has been put into, as I mentioned, to make 2019 a significant step ahead. And of course, from our point of view, building on the strengths going ahead, less complex group, really working with creating the value and not distracting also management is worth a lot. So 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. But I'd like to transmit on this, that's this element. The total and you quantify the total share of revenues now from robotics and battery handhelds for this season? And secondly, just on the CS bankruptcy process, is there any receivable risk or anything like that remaining for you in that case? Battery robotics, I'd like to get back to when we summarize the season. So and then I have also debate on how the market has done and I want to talk about our self-service. From what I've seen so far, we have been holding up market share on the robotic side and gaining on the battery side. That's what I've seen so far. And 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. So that's looking okay. And then the second one, as to CS, I don't know if you want to make any comments. There will be no impact on the income statement.