Earnings Call: Q4 2017

Feb 2, 2018

Good morning, and welcome to quarter 4 announcement of the results. I will actually jump straight into it and like to start with the comments of that quarter 4 is seasonal, it's more as quarter for us. So really, as you will know, the music for Husqvarna plays in Q1 and Q2. But nevertheless, there are good and encouraging signs also in quarter 4. And we had a solid development in the quarter. That goes for sales. Husqvarna, Gardena, Construction made good progress. And these are our divisions in profitable growth mode. We also had a consecutive 18th quarter of result improvements, which is, of course, pleasing for us to see that we continue since quarter 3 in 13 consecutive improvements. And I also invited Henrik Andersson, who's the President of the Construction Division, to join in and make some specific comments as to the last acquisition he has done. It's 3 altogether within the duration of about 1 year. And we just closed a deal with Atlas Copco yesterday, which was signed shortly before Christmas. So he will make some specific comments to that. But if we back out and look at the big picture, I'd like to really talk about the full year of 'seventeen because I think that sets the perspective in our seasonal business. And you will see that we have actually been quite successful in our ambitions with the profitable growth. We're really talking about having the ambition to grow above average of the market. We believe we have done so. We haven't seen the statistics. But with the 7% for the group and the 7.7% for the profitable growth divisions. We have good reason to believe that the forest and garden market, for example, has over time grown with 2% to 3%. 'seventeen was probably a good year, so it could be even a percentage point or so above that, but it's probably not in the magnitude of 7%. Even though there are pockets of much higher growth, may that be battery based products or robotics. But sales, great. Operating margin, we took another step, as you have noticed, and we went from 8.9% in 2016 to 9.6 percent in 'seventeen. And you will also remember our 10% operating margin target, which we have said that we would reach latest in 2018, and we stick to that, by the way. But also on the capital side, we have had a percentage point of efficiency improvements in looking at the working capital less percentage of sales. And consequently, the Board has proposed then to the Annual General Meeting to increase the dividend to SEK2.25 versus previous year, SEK1.95. So all in all, quite a good year for us actually. And just to dwell on that a bit, our feel good slide here, looking at the operating income development since 'thirteen and the margin. And you will see that it's a pretty solid development. And of course, it kind of flattens out for the second half and then hopefully it will continue to make progress then for the first half of twenty eighteen. But it's nevertheless to almost SEK3.8 billion. We were at SEK3.2 billion in 2016. That's an 18% increase of the result. That's a good number. If you look then at the proof of the pudding of the profitable growth is have we actually increased the pace of the top line of the profitable growth divisions. This is these are the divisions where we have actually invested quite a lot. We've taken the strength that has been released through efficiency programs, invested additional costs, brought additional costs into them for various initiatives, may that be R and D, may that be go to market activities, penetration or other things. And we really see now a step change in Husqvarna from 2% to 8%, maybe a little bit supported by a weak quarter 4 in the reference year. But nevertheless, the step change is there. Gardena even improving on the 8% growth level to 9% and construction going from 4% to 6%, organic. And then Henrik will talk about his acquisitions and what that means later. So all in all, 7.7%, and that was then in 163.3 percent for these 3 divisions. If you look at the financial highlights, you will see the quarter 4 top line 11% altogether in comparable currencies. I already referred to comparable currencies, which is good. That means we reduced the seasonal loss from 100 and 8 to 70, which is another step in the right direction. And we see the earnings per share actually increased a bit more than that, and Jan will talk about also some onetime effects that impacted positively. So EPS increased with 26%. And we kept net debt fairly flattish despite the fact that we have financed a couple of acquisitions for more than SEK 1,500,000,000 altogether throughout the year. And then their working capital to sales ratio, which improved 1 percentage point. You see the step I talked about from SEK3.2 billion to SEK3.8 billion give and take and the margin improvement I referred to earlier as well. So from that perspective, we have all reason to be pleased. Looking at Husqvarna division, it was a 14% increase comparable currencies for the quarter. But be mindful then of that actually the reference was a bit weak. It was a weak quarter 4 in 2016. So maybe 2014 is a bit overstated, but given that preference, that's where we ended up. But it was an increase across the product categories, across the geographies and in that respect a very good sign for us. Just like before, the robotics and the battery based products are the ones driving the highest rate of growth. And I've previously talked about well above 20%. That is also true for the full year of 'seventeen. That is also true, to maybe preempt the question here, that's also probably true for what we expect for this year. So we don't see a change in the rate of growth for those product categories also for 'eighteen. We remain with that view. 18% increase of operating income for Husqvarna division. Of course, that is a consequence of the sales volume as such, also efficiency improvements, even though we have added quite a bit of what we call strategic initiative costs. And there is a bit of favorable FX in there. We are also quite confident if we look at the amount of product releases for 'eighteen that we will have a strong offering to bring to the market. And that goes all the way from further launches within the area of robotics. We're starting to open the door into the commercial applications, combinations of rubber products and software to help professional landscape and be more efficient in that space. We have further battery based products. We have further petrol chain source. We have just launched selectively the new 70cc Professional 572 version. There are new chains added to that. There are new wheel products being brought to the market and particularly what we call 0 turns, which are usually important for the U. S. Market, North American market. We have the top end zero turn model, which we call the 500 series. We have what we call a stand on version, where the operator is standing and operating, which is also very important in the commercial applications. So important products across the range, of course, more functionalities brought into connected products and apps. And there are also expansion throughout the year in the digital part of the offering. So that's looking strong. If we move over to Gardena, if I said the quarter 4 seasonally small for the group, look at Gardena, it's 10% of the yearly sales. So you need to be very mindful here about that. Don't over interpret any numbers or perspective of those numbers really too much. But the quarter was up 7%, but it's a high rate of investments actually going on, which is burdening that small number of sales, giving a fairly weak result actually. But we don't interpret that in other in any other way that it's a small quarter. Again, a lot of launches for this season, a lot of electric products, handheld. Last year, we introduced a lot of walk behind battery based products. Now it's handheld. We are expanding the smart range, in the combination of the automatic irrigation and robot cutting. And there are other components in that like pumps, etcetera, and batteries that are connected. We have hand tools. We have trolleys and other aspects of product extensions, which are quite important. On top of that, we press on with the channel expansion. The e channel is maybe the most developed for the Gardena division in our group. And there are new partners added to that side for this season. And we are also continuing with the geographical expansion. And you might recall potentially that we have set out to really move in, in a serious way, into the U. K. Market, which is one of the biggest in Europe from a gardening perspective. So those were some general comments just to not miss out. We increased the operating income for the year with 19%. Margin improved from 11.8% to 12.5%. So that looks really good. And we are, just like for Husqvarna, optimistic for yet another step forward here throughout the year to come. But let me also say and potentially preempt another question. January, beginning of February, that's just a load in into the trade and the partners. It doesn't say anything about the end customer demand. So my visibility into the season isn't overly great at this stage. We know that the confidence is out there in general terms, but we don't have the visibility to predict that. What I said after quarter 3 was that the profitable growth divisions could be that was as a response on the question, could be expected to for 2018 have a top line increase of give and take the 5.5% we had as an average for them rolling 12% at the time. And I still want to hold that as a good proxy for what you could expect for the 3 divisions as an average organically. Consumer brands. This is of course let me say it clearly is a bit disappointing for us that we are where we are that we also take proactively a stance of dealing with issues we have had. And we have, as we announced in relation to quarter 3, walked out of 1 of the big retail customers in the North American space given their outlook. We saw given the profitability and some credit aspects to weigh into it. And that €1,000,000,000 of sales that we will not see in the year of 2018. And of course, that leads to absorption issues. On top of that, we have also some raw material burdens to make up for. So yes, there are new product launches here coming for 2018. Yes, there are further efficiency improvements. But given those headwinds, I think the realistic expectation, just like I guided at the quarter 3, is from a result point of view, a rather sideways move. And we ended this year with minus SEK65 1,000,000. Remember, about SEK30 1,000,000 one off effects related to the footprint of the Nashville plant. So, operator, you can say you can deduct those. But give and take, it's going to be a tough one. I don't think we should set the expectation that we fully will come to the breakeven, but rather be in somewhat similar magnitude for the 'eighteen. And that's a disappointment that we are where we are. We are building a solid base. We are shifting the product base. But short term, it's a lot of headwinds to balance, as you can imagine. And Jan will be a bit more explicit about the raw materials for the group later on. But I think it's not to forget that coming here in a reverse order rounding off with quarter 4, still having a net sales of minus 16%, some impact then of this decision to leave the retailer. On the top line, still improving the result, reducing the loss for the quarter, I think, is a good indication. A lot of good work is being done here by the colleagues, not always in an easy environment. And you will also remember some of my comments earlier throughout last year relating to a very promotional season of 'seventeen. I'm not overly optimistic that, that will be a lot better for 'eighteen, but let's see. Let's be positively surprised. Now construction. If I ask to do the financial and then Henrik can talk about the acquisitions, you will see the quarter being 29% up comparable currencies. We're up 8% organic and then 21% related to those acquisitions, so a huge contribution to the top line. You will see that the operating income not doesn't look it doesn't look fantastic compared to last year. Remember that we had a CHF25 1,000,000 one off positive last year in the reference. So the CHF 145,000,000 should probably be rather CHF 120 ish to give a right perspective. And of course, the acquisitions give a lot of top line, not necessarily a lot of bottom line here. And for the full year, we have a €50,000,000 one off burden in the result for integration costs related to those. If you stay with the full year, 21% increase of sales. We're up 6% then organic. I think that's a good number again on the right side here and compare that to 2016 where it was 4%. So that's good. I'll let Henrik talk maybe more to some comments to the market. And I think I'll leave it there. And Henrik, please, why don't you start talking about the last acquisition you had completed? Sure. Good morning. So yesterday, we then finalized and completed the acquisition of the light compaction and concrete equipment business from Atlas Copco. So that's hot off the press, I guess. This business in 20 16 was €57,000,000 and it will offer us a full range into the light compaction and into the concrete equipment segments. I'll come back a little bit more about the process around that and how it fits later on here. And for us, it has been a logical expansion because we have been into the final steps in that big process of creating a floor, which is basically through the floor grinding where you grind and you polish the floor for the final finish. But our current customers, they are also active in the previous process steps. And so it was very logical for us to expand into to those adjacent process steps. And since we are already in that last step, there's a big overlap both in terms of end customers and when it comes to channel partners, the distribution channels. Another good benefit with this for us is that most of what we do in construction is really renovation or adaptations to existing structures. But the light compaction and the concrete equipment is to a larger degree also new construction. And that will give us a whole different position, particularly in the emerging markets because there it's predominantly new construction and very little renovation. So it will actually help us to quickly build a position in some of the very important emerging markets. And as I said, we finalized this here yesterday. So this is then a little bit around the process steps. So looking at it, some customers go all the way from you compact the soil, so to speak, and then you place the concrete on top of that and then at the end you create a floor finish. And some customers go through all those steps. Some of them depending on what they do they just do some portions of it depending on what the job is so to speak. And we were in the last step here with the floor grinding. We stepped into that about 10 years ago when we acquired King Concept when it comes to planetary flow grinders and we acquired Hargby for single disc flow grinders. So we have been into that segment and we have actually been growing that very nicely to become number 2 in the market when it comes to that segment. And then at the same time, we also acquired a soft cut, which is basically the second to last process step. When you have done the concrete floor, you cut the control joints to not get random cracks on the surface. And Soft Cut had a very had a patented solution where you could do that before the concrete actually cured. So you could finish the floor and leave the same day, not having to come back a few days later. So we've been into these two process steps for now 10 years. So what we have tried to do now is in the past, we looked at our construction business as having 2 epicenters, construction and stone. What we're now trying to do is to more define the construction business, not just in as construction, but sawing and drilling and surfaces and floors because our current core is really in the concrete sawing and drilling business. And the floor grinding was a little bit overlapped to that, but what's also tying into this whole different segment, which is concrete surfaces and floors. And now we're trying to take a much stronger position in that whole segment. So the first acquisition we then did into this segment was actually diamond tools supply back in 2016 in May. They were the they are the technology leader in polishing tools that you fit under floor grinders. So that was the first step that we made. And then during 2017, in the beginning of the year, we acquired Polman Ormeader, who was the market leader in high capacity dust and slurry systems. And that fits both our concrete sawing and drilling business and this concrete surface floor business because floor grinding is the most demanding application where you actually create the most dust. So they really need the best dust system. So it's a really nice fit into this. It was a SEK 300,000,000 business at the time and something that we have managed to grow nicely here during the 1st year already. The next acquisition that we made was acquiring HTC during the Q2, SEK 380,000,000 in revenue at the time. And that was basically to take an even stronger position in the Flow Grinding segment. HCC is the market leader in that segment. So the combination we think we can collectively increase the preference of using floor grinders to prep level floors or take off the current finish or to actually polish the floor for a final finish. There are alternative methods out there, but combined we think we have better abilities to increase the preference for this method as such. And then yesterday, we took the next step. And through this acquisition from Atlas Copco, we basically then take presence in all the other process steps. And then we can really we believe that we can really provide little bit how it all fits together. And So that's a little bit how it all fits together and what we are trying to accomplish here. If we then knowing now what the segment is and the different process steps are, if you look at this business as a business, first of all, it's a sizable market, all in all about SEK 13,000,000,000 addressable market. And it's a market that is growing nicely and that is very healthy from a profitability perspective. For us, it's a very good fit because as I said before, I mean, we have a great deal of overlap both on end user level and on the channel partner level on the distribution level. It's also a good segment in that sense because there's a lot of differentiation available, meaning that these customers have very high demands and expectations when it comes to productivity, performance, but also particularly on the vibration side on ergonomics. So there are a lot of differentiation opportunity, which is always a good thing. We also think it's a very good fit for us as a company. And the reason why I'm saying that is that this is all light construction equipment and that's really our core competency. And most of the other players in this market, they are not typically light construction players. They have the epicenter elsewhere and have this as a subset. So we think that this is something that fits us very well and also something that we can do well with going forward. And as I said already here in the beginning, I think the bigger play, so to speak, is if you zoom out a little bit is that instead of having just this sole focus really on sawing and drilling, when floor grinding is a little subset outside of that, we're now trying to create a second core to our construction business, which will both give us better growth, better growth platform going forward, but also diversify the business to a large extent, which we think is a good thing. And I believe that was my last slide. Thank you very much. Thank you, Henrik. Then we move over to the financials from a group perspective. As Kai mentioned, this is the seasonally smallest quarter we have in the 4th quarter, but it showed the same trends as we have been seeing earlier quarter this year, namely that we have higher volumes in the profitable growth divisions and positive effects from the improvements measure, the efficiency measures that we are implementing, more than compensating them the higher cost reflecting the profitable growth investments and initiatives we are doing, giving them in the end a positive impact on operating income and margin for the quarter in this case and also for the full year. So all in all, operating income in the quarter minus SEK70 1,000,000, that is an improvement with SEK40 1,000,000, whereas full year 2017 then we had an improvement of SEK 570 1,000,000 up to SEK 3,790,000,000 giving then an operating margin of 9.6%, up from the SEK 8.9 billion we had last year. Besides a solid operational performance, the quarter was also positively impacted by some one off income tax effects, compensating for the revaluation of our U. S. Net tax assets that impacted the negatively with some €75,000,000 I will come back to those, but all in all, it was positive. But I think more importantly that going forward with the lower U. S. Tax rate, we see that we will have a positive impact on group tax going down then with our guidance from 24% of income after financial items to 23% going forward in 'eighteen and onwards. Looking at the net sales of the group, in the Q4, it improved with 6% in nominal terms, 11% currency adjusted. All divisions in profitable growth delivering good organic growth, acquired business in construction also, of course, helping and that was partly offset then by consumer brands that went down on sales mainly then related to U. S. For the full year, we are up 11% or we are up 7% currency adjusted for the group. Same explanations, but we had also then consumer brands more or less in line with last year for the full year then. Gross income in the quarter, some SEK100 1,000,000 better than last year in the Q4. A positive volume, of course, is affecting here very positively. And then, of course, the efficiency measures mainly then related to value added cost in production and direct material is also impacting here. And a third effect is that we have been seeing all through the years and also in this Q4 that our long term work with product quality has given a positive effect of lower product costs. That was the positives. If we have some negatives, there are then the negative country and product mix. We have increased R and D costs related under the profitable growth investments we are doing impacting the gross profit and a competitive environment and some clearance activities affected price negatively in the quarter as well. FX and raw material in this quarter had a negative effect on gross income. For the full year, dollars 1,300,000,000 of improved gross profit, volume once again being the so to say big contributor to the improvement, but also we got when we take a look on the full year, a substantial positive currency effect affecting gross profit. Furthermore, as I mentioned, product quality in the Q4 and for the full year impacting positively and the efficiency improvements is also impacting positively on gross profit for full year. On the negative side, we see the increased R and D and purchasing costs once again related to the profitable growth investments and also for the full year, we see a more competitive environment affecting prices negatively and also a headwind. And when we talk about the full year on gross profit from raw materials of some SEK75 1,000,000. Moving over to the indirect side, the SG and A selling and admin in the 4th quarter increased with some SEK 125,000,000 and half of this is related to acquired businesses. The rest is then the organic side and that was affected by cost for profitable growth initiatives. We are talking about them mainly on the selling side. And last year, as Kai mentioned, we had a positive effect in the SG and A of this release of a pension reserve in construction division of some SEK25 1,000,000. We don't have it this year. For the full year, SG and A is up SEK850 1,000,000 where additional cost for these growth initiatives is the biggest negative impact. We have also negative FX impact in SG and A and also then the acquired businesses, in this case for the full year also including the restructuring cost of some SEK50 1,000,000 that was attributable to the acquired businesses. Logistic cost, which we account for in SG and A, was higher, of course, reflecting the higher volume and the somewhat higher inventory level. For the full year, moving over to other income and expenses first, not financial net. We had a positive effect of SEK 55,000,000 in the quarter and for full year related to legal restructuring. As you heard, Kai did not mention anything about that in the division. So it's not in the division. It is in what we call group common costs. And that was a positive effect of SEK 55,000,000 relating to legal restructuring. That meant then operating income minus SEK70 1,000,000, as I mentioned, full year then close to SEK3.8 billion and for the full year we have raw material impacting negatively with SEK75 1,000,000 and we have currency positively impacted with SEK250 1,000,000. If we make an outlook of FX and raw material, the raw material will be then a headwind of around minus SEK 200,000,000 coming into 'eighteen and we will have a positive effect from FX of around SEK100 1,000,000. So net of these 2 going forward, as we see it today, around minus €100,000,000 for 20.18. Then moving over to financial net, where we actually last year had a positive effect from currencies. We don't have any effect at all this quarter from currencies and the interest cost then was a little higher this year compared to last year in Q4. So the deviation is related to currencies and the low financial net last year. For the full year, we have a financial net that deteriorated with some minus SEK80 1,000,000 and that is related to higher net debt situation all through the year and also some interest rate differences on financial interest instruments. There was no effect from currencies if we compare 2016 to 20 17, the full year. Income tax, as I mentioned, we had some one offs positive impacting income tax for the quarter and that combined then affected the all in all tax both for the quarter positively, which meant that we had a plus $265,000,000 more or less of income tax. There are 3 items which I would like to mention here in the quarter. That is a onetime tax deduction with an effect of approximately SEK175,000,000 a positive tax effect related to the legal restructuring, which I talked about as the EBIT effect of SEK 55,000,000 also have a positive effect on taxes. And we also on the negative side had the revaluation of the deferred net tax assets due to the U. S. Tax reform that impacted with minus €75,000,000 dollars And of course, these three items were valid for the full year and that's the reason the main reason why we have 19% tax in relation to income of the financial items compared to the 24% or close to 25% we had in 2016. And as I said, as we assess it right now, the long term effect is positive of the U. S. Tax reform for Husqvarna, meaning that we decreased our guidance with 1 percentage units. So we believe now going forward that we will have around 23% of tax related into or in comparison to the income of the financial items. That meant that we actually ended up with a positive net income for the period for the quarter of slightly over SEK60 1,000,000 and that we together then, of course, with the main effect being the improved earnings that we actually improved. The net income is DKK550 1,000,000 compared to 2016 to DKK260 1,000,000,000 giving a net margin of 6.8 percent and an earnings per share at SEK4.62. Moving over to balance sheet. Here we can have we have some currency impact and that's of course related to the dollar. The dollar has weakened. We have much assets and liabilities in U. S. So that is of course affecting more or less all items in a way that they are decreasing the balance sheet. Non current assets increased mainly as a consequence of the acquisition made acquisitions made in the construction and also we have, as I mentioned, a positive FX effect of around SEK350 1,000,000 decreasing the non current assets this year. Adjusted for currencies and acquired businesses, we have an inventory that is actually in local currencies up SEK8.7 billion reflecting then the general demand situation and the improved sales in our profitable growth divisions Husqvarna, GARDIA and Construction. Trade receivables were some SEK200 1,000,000 higher than last year in local currencies and negatively affected then by the improved sales in the quarter and also an effect of the acquired businesses. Trade payables were some SEK475 1,000,000 higher than last year. Local currencies reflecting once again higher volumes in the profitable growth divisions. If we move over to the from the operating working capital items into the net debt, it was SEK7.2 billion at the end of December this year. That was close to SEK4 billion higher than last year. The 2 acquisition, of course, once again in construction, more or less SEK1.6 billion together impacted the negatively and that was compensated by somewhat improved cash flow and the weaker dollar that also have an effect on the net debt that are of course decreasing net debt for us. In the Q4, net debt increased with some SEK750 1,000,000 reflecting the seasonality of our business. Kai mentioned this, the development of one of our 3 financial targets, the operating working capital related to net sale. Our target is 25%. We were ending the year with a slight improvement also in the Q4 at 25 point 5%, reflecting then the higher sales in combination with an operating working capital in line with or just above last year. And talking about seasonality pattern and cash flow here, we can see the seasonality pattern in our cash flow with the buildup of working capital in the 4th and the first quarter and unwinding it during the second and third quarter, valued, of course, also this year. Adjusted for acquired businesses and investments in financial assets, we were SEK 200,000,000 higher or better on operating cash flow this year. We ended at SEK 1,847,000,000 for the full year. The higher earnings is impacting, of course, positively, partly offset by an increased need of working capital reflecting in the higher volumes. CapEx more or less at the same level as last year for the full year with the difference that in last year we had a lot of investment especially towards the end of the year in buildings. We have now more investments in what we can call profitable growth initiatives and investments and also then included in that intangibles. Operating cash flow in the 4th quarter minus or close to minus -0.8 billion. To be able to address our ambition to have financials reflecting an investment grade rated company, one important parameter is, of course, to have strong earnings and cash flow from the operations in relation to the net debt of the group. It was rewarding to see that we were able actually to fund internally the 2 acquisition of SEK1.6 billion in construction. But despite then, somewhat high net debt as we ended the year with, the earnings improvement during 'seventeen compensated for this and we were able to decrease this and improve this key ratio from 1.6 end of 2016 to 1.5 times end of 2017. So in the light of the strong earnings improvement in 2017 and solid financials and also, of course, the robust plans we have for the coming years. The Board of Directors then proposes a dividend of SEK2.25, which is an increase of SEK30 or 15% compared to last year to the annual general meeting in April, representing close to a little less than half of the net income and earnings per share for 2017. And ending with the key figures from my side, the effect we see from the improved earnings continue also to impact the profitability. Positively, both return on capital employed and return on equity improved 1 percentage and 1.5 percentage units, positively compared to respectively compared to last year. All financial key performance indicators are having positive trends except then for working capital. But as we said, that's a reflection of the volume and actually we were able to improve our internal capital efficiency measure, the CCC days, the cash conversion days down to slightly over 95 days. That was an improvement of 4 days during 2017. So with acquisitions, the higher volumes and ambitions, we can also see that we have stopped a period of reduction of full time employees and that we are up now with sub-five fifty more full time employees compared to end of 'sixteen when we end 'seventeen here. By that, Kai, let you continue. Thank you, Jan. I'd just like to take the opportunity to also briefly touch upon the reorganization we made, which effective as of February 1. We have created 1 entity department in the group here, which we call digital operations and technology support, where we have combined the group operation support, the technology office, group information systems in order to be able to better respond to the digital changes, which are quite profound around us and of course in our organization as well. So it's look upon it as a way to support our divisions to reap the benefits and the synergies in the best possible way here. Pavel Heymann, who has been heading Husqvarna division, is going to lead that department. And Sasha Menges, who's been leading Gardena, is moving up to take on the Husqvarna division. And then Per Ostrom, who's been in business development, will go to Ulm to lead the Gardena division. And Per Ericsson will take over Per Ostrom's business development responsibility. Herlivi Agranios, who is the CIO, will become part of the group management team. And we have recruited Mona Abbasi, who will start 19th February for sales, brand and marketing. And she's coming most recently from Electrolux. So these are the changes. I just want to draw your attention to it. I don't think we need to dwell too much on it, but I think it's a sign of strength that we have the major changes here from within. I think we have not built up sufficient talent pool to start to rotate people like you should expect in a company that is has the ambition to be well managed. Maybe summing up then, the one comment I guess that you expect me to do is about the margin. And I previously talked about the ambition to be reaching the 10% margin latest in 2018. And I just want to reiterate, we still stick to that statement. So that's the expectation we have. So with that, I leave over for Q and A. And we will start with questions from the floor here in Stockholm. Hi, Christian Meinegard from DNB. Thanks for the presentation, Henrik. A couple of questions to you, firstly. Firstly, on the recent M and A you've done, not all of them, but some of them have been a bit dilutive. When it comes to margins, when do you think you will get margins for construction back to where it was 2016 and get other synergies from those acquisitions? I think there are 2 dimensions in that. I mean I don't think the acquisitions inherently are dilutive. I think we are burdening them with a lot of integration cost in 2017. I mean, it's €50,000,000 on a fairly small base. So of course, that has a major impact. If you look at the acquisitions as such, I would say that they're all very profitable. Some of them are above the Construction division average and some are slightly below. But it's not the major deviation. The main reason is really that we have burdened them with onetime cost during this year. You also done 3 acquisitions in Sweden. Is it that Swedish companies in this sector is particularly good? Or do you see opportunities to find other suitable cabinets also in other parts of the world? Yes. I mean we haven't had any preference for region in that regard. I mean in dust and slurry, the technology leader and a market leader was Perlman Ermader and they happen to be here. The market leader and technology leader in floor grinding is HCC and they were also here. So I think in those specific segments, I think the Nordic market has been a bit leading the way in those segments. So it was a natural thing. When it comes to the concrete equipment and the light compaction, that is truly a global market and are players all over. It just happened to be a good fit that percent with this opportunity that came up with Atlas Copgaard. So that one was more this is something we want to get into and this was something that Atlas Copco after they did a split they wanted to get out of. So that's the answer to what why we have done what we have done. But looking forward, of course, the further opportunity we can look into in the future and they are not necessarily Sweden centric by any means. And Henrik, maybe you can add that the gravity center of the Atlas business is not necessarily Sweden. No, no, no, no. I mean it's truly a global business and yes, correct. And before I move to Kai, yes, final question on the breakup of splits between the different 3 different subdivisions in construction now? What is that roughly between drilling and floor and We haven't necessarily disclosed that before, but we can say that. I mean, now if you just look at the acquisitions, I think we say we're adding 30% of revenue, yes, with the acquisitions. I mean, that's an indication on a full year basis. So that then would at least indicate that it's going to be a fair share of the total division. Okay. And then my final question is regarding the exciting push for robotics in the U. S. For 2018. Can you talk a bit more about how you're going to do this push? How big dealership channel you have in the U. S. To really make this push? And what we can expect in 2018? And what kind of market potential you have long term? I mean, let's start with the last one first. I mean, the market potential is tremendous. That's the largest lawn moving market in the world. So I mean, the potential is fantastic. Starting point is minimal, as you know. So we have a lot to do. But I think the point here is we are, for the first time, taking some serious marketing money and putting it into action here for the 2018 season. Yes, we have worked preparing dealerships, retailers. I should say 1 retailer rather than dealers. And it's all been preparatory work. And now we're actually starting to be much more proactive, taking on the role of wanting to develop this market in a more serious way. Still, I will say, from a revenue point of view, it will be noticeable, but it will not turn anything upside down in 2018. But if you give this 2, 3 years, it will be quite significant, I dare to say. So rather look at it as a 3 year, just like we on the Gardena side have taken on the task to roll up the U. K. Market. This is an extremely important strategic positioning for us, just like we start to open up the commercial segments on the robotics side. And I think that's the way you should look at it. And it's going to take some investment actually for 2018, but the benefit is going to be as obvious within a couple of years. So it's the right thing to do. And then as to your more numeric question, if you want to get a feel for it, maybe 1,000 dealers and 1 huge retail chain is involved. But the retail chain is rather than more geographically select outlets into the Southeast. And so Husqvarna brand for the retail chain as well? Yes, that's correct. That's correct. Operator, can we open for questions from the telephone audience, please? Thank you. Your first question comes from the line of Johan Eliason. Thank you, Bill. Please ask your question. Yes, hi. Staying on these topics of robotics, could you just remind us now how big share it was on the battery handhelds of total turnover 2017? Yes. I think we have talked about on the group revenues, this has been about 10%. And then I think that's reasonable. Then we talk about the 20% increase of growing well above the average, as you know then. So that, of course, impacts the numbers upwards step by step. Good. And it's still primarily in the Husqvarna division that revenues were seen? Now you actually see it equally on the Gardena side. And Gardena has had a very good success actually throughout the season of 'seventeen, including the Smart Systems. But Smart is the combination, as you know, of the irrigation and the robotics applications. So they have really actually grown even with higher growth numbers than the Husqvarna division. So but they are both well above 20%. So it's looking good on that side. And Gardena is also bringing new products to the market. I think I briefly mentioned that they have new product, which they call Sileno City, which is then targeting smaller plots like 250 to 500 square meters, perfect for the Central European type of markets where many houses are surrounded by fairly small gardens. So that will contribute as well. No, it's looking very encouraging actually. I guess the Silano City would fit well in the U. K. Gardens as well. Can you give any details on what U. K. Contributed to Gardena's growth already in '17? I don't want to be specific on that, but it's not going to be significant for 'seventeen. But it's a little bit equal story when I talk to robotics in North America. Give this 2, 3 years and it will be significant. But it takes a bit of time to build up the momentum. It was a net investment actually in 2017 for Gardena. If you look at all the efforts we put in there with marketing, etcetera. I think we're probably balancing better this year. And I'll be glad to come back to be more specific responding to your question in a year. Yes. Then just on this recent acquisition of SKOPKO, could you give any indications of price and whether the margin is in line with the divisional margins? Or where are we? I mean price, we generally do not comment on. So at least I won't. That's up to Jan if he wants to at some point, but I won't. And margin wise, I can just say it's clearly slightly below our average. Okay. And then finally, any view on the net financial costs for 2018? In line with this year. Of course, depending on what is happening with the interest rates, but in line with this year. And your next question comes from the line of Johan Dahl. Thank you. Please ask your question. Yes. Hi there. Yeah, Kai, there seem to be a fairly broad consensus among you and your peers, so sort of mid single digit market growth in the outdoor power products area next year. Still you seem fairly confident that you will continue to perform well in that environment and outperform. I was just wondering what gives you that confidence heading into the 2018 season? Is it the innovation that you're bringing to the market? If so, can you sort of put it into context how much innovation you're bringing in 'eighteen versus 'seventeen? Or is and what impact does the outcome in Q4 have on your sort of view for 2018? Let me start with the last one first. I don't think you should over interpret the rate of quarter 4 in any way. So don't extrapolate that necessarily too much. Yes, from what we can see now with the limited visibility we have, we have reason to be optimistic about the market of 2018. What gives me then the confidence to be upbeat versus the market is that we have during both 'sixteen and 'seventeen taking these cost additions and added them into the operations, partly bringing product innovation, partly working with market geographies. So I think we have built a momentum which should yield results. And I would be disappointed to be very direct, not outperforming the average market in 'eighteen of those three divisions. And then you will remember well my comment as to consumer. For sure. KC anything regarding sort of shelf space if you have a view on that? And finally also if you look on operating leverage in 2018 given all the growth Shelf space looks, in general, I would say, good. There's nothing that is any signs of worry. And of course, in parallel to that, we see an increase of the E channels still for the forest and garden, remember, not being a 4 rounder in any sense. On the contrary, actually, it's for the industry as a total less than 10%. But if you look at divisions like Gardena, we're going to take some big steps, we expect, this year. But I think fundamentally a good position on that type of thing. As to the leverage, I think you will recall Jan's comment with the material burden. But beyond that, I think there is no reason to expect any differences. We are pressing ahead actually in 2018 doing yet another year with what we call strategic investments in profitable growth, meaning we press on with efficiency programs, we add costs. So what we're doing here is we're shifting the cost structure quite significantly. If you would go back to the 2015, it will look quite different actually. So this starts to become significant what we are doing. You don't see much of that because you see the net of the good guy and so to say the addition of the costs. But it's actually quite a significant shift that's taking place. So we could squeeze more margin if we wanted, but we actually take the position of being more forward leaning. And for sure, for 2018, we will be still with a foot on the accelerator on that side. Thanks. Thank you. And your next question comes from the line of Bjorn Urnessen. Thank you. Please ask your question. Yes. Thank you. Go back to construction and profitability. If you could talk a little bit about how your margin progression would have looked like if you have not taken the cost or investments related to the M and As that you have done? And adding to that, if we can compare those onetime cost or investments that you have taken during the year and also look into 2018, if that would be an increase versus 'seventeen or similar or below that? Okay. If we look at it, I mean, I think Kai explained 'seventeen very well there. I mean, if we wouldn't have done the acquisitions, of course, the top line would have come down. And since they don't have any impact, material impact on EBIT this year, I mean, there's a dilution from a percentage perspective. Of course, those €50,000,000 will be put back into the business in 'eighteen. I mean, we won't have those restructuring costs. So then, of course, we will have an uptick in 'eighteen because of that. If you look at the new acquisition, there we have also said that we don't see that we'll have any material impact on the EBIT in 'eighteen. So the new acquisition will look very similar to the previous ones that in the 1st year, we will have to take a lot of integration costs because it's a carve out where we first need to carve it out from Atlas Copco and then we need to integrate it into our operations and that comes with some cost. And because of that, we don't see that we will have any material impact on the EBIT, but we will get top line. So it will be dilutive from that perspective. But on the other hand, the other previous two acquisitions will not have that kind of restructuring cost and will be then positive going into 'eighteen. And I think Bjorn, one important take on this as well is that we are normally positively as a group affected by a weak dollar since we have outflow in dollar with one exception and that is S. And of course, you will have pressure as you had in this Q4 from currencies, coming in now to 'eighteen, provided the currency rates coming in now to 'eighteen provided the currency rates that we have right now. So that's an effect that will, of course, impact group positively, but construction negatively. Thank you. Perfect. And then on your comments on pricing, is that only relating to consumer brands or mainly or is it across the board? I can say it's more of course, consumer is a chapter on its own. And we talked about a very tough environment in the retail space in general and then for consumer brands. But we also saw, as I mentioned, some clearance activities taking place in Husqvarna division, shifting out one of the brands, moving it to another division. That also impacted in the quarter and slightly for a full year. So it's a small downside there, but not much. But of course, when you add up, it becomes a significant number enough at least to talk about. And looking to 2018 on pricing for the growth division? If I jump in there, I would say you can count on stable forest and garden space and I think for Hendricks area as well. The one that is always the most uncertain is the consumer brand situation, which we I guess we should have reason to expect yet another promotional season. We might be positively surprised, but I think I'd rather set the expectation there. But for the rest, I expect stable pricing. When you say similar EBIT level for consumer brands in 'eighteen, you are including your beer of tough prices? Correct. Thank you. And your next question comes from the line of Rasmus Inberg. Thank you. Please ask your question. Yes. Hi. So coming back to an earlier question. In terms of the growth initiatives, the step up you see this year, is it comparable to 2017 roughly? Or how should we think about that? Rasmus, are you referring to 2018 versus 2017 now? Is that your question? Yes, yes. Yes. I think the answer is yes to your question, yes. Roughly the same, then. If you refer are you referring now to the type of cost additions we're taking or the top line effect of those? No, no. I was talking about the cost side. Yes. And that's it might even be a bit even higher this year. Let's see. Does that reflect then the launch of robotics in the U. S. And GADIANA in the U. K? Is that the big driver or is it Those are two examples, but they are by far not the only ones. There's a lot more. So that's a small share of the total, but still significant. And then I was just wondering if Jan could shed some light on what we should expect in terms of CapEx this year? Well, it's more or less the same question as you asked about the income effect and the cost side. Of course, the profitable growth initiative is also impacting the CapEx, and we have stepped up that from 1.4%, 1.3% up to 1.8% in 'sixteen and 1.8% in 'sixteen, 'seventeen. And you should expect All right. Good. And then finally, just can you remind us if should we expect some sort of effect from the Easter moving around there as we go into the reporting season of Q1 and Q2? Does that impact you in any way, you think? That's a good question. I should have the answer for I'm sorry, I wasn't prepared for that. I should have been a bit embarrassed for that. Maybe a small one between Q1 and Q2, but We haven't calculated the days yet. I think it's the straight answer. Let us come back. But as you can understand, no major effect because then we had been aware of it. All right. Thank you. Thanks. Thank you. And a follow-up question is from the line of Johan Eliason. Thank you. Please ask your question. Yes. Hi, again. I just had a question regarding your manufacturing pattern. Has it changed anything in this Q4, Q1 period? Or is it roughly the same as before? I think you have already indicated before that you want to start manufacturing a bit early to smoothen out the season. That's correct. We started doing that actually end of 'sixteen going into 'seventeen. We went along the same lines towards the end of 'seventeen. And it's simply a balanced question between excess of qualified labor, quality and productivity, which led us to this scheme. And we will stick to that. So there's no significant year on year effects actually into 'eighteen looking at 'nineteen, so to say. There shouldn't be anything here towards the end of the year, if that is what you were thinking about. Yes. I was wondering about the inventory levels towards the end of the year, if that was impacted by any specific, but then it shouldn't be basically, if I understand you correctly. Not as a consequence of the extended season. Was your question related to cash flow in the Q4 compared to last year? Was that sort of how you Well, that's also then one of the impacts on how you do with the inventory levels, yes. And I mentioned that we had big investments in buildings towards the end of 'sixteen. And there were, of course, big tickets. One of those big tickets was not paid in Q4 'sixteen, but was paid in '17. So that CapEx did not affect sort of end of cash flow. That was not the case in 'seventeen because it was total different types of investments we were doing. So that is an effect that makes part makes up part of the explanation between the sort of better Q4 'sixteen compared to this year's Q4. Okay. And then on this lost volume in the U. S, have you felt any sort of lack of purchasing power there? Or are you getting worse turns because your volumes are getting down? Or can you say anything about how these lost volumes impact your scale advantages in that part of the industry? I would say so far so good. But of course, there is a potential concern about that, that maybe rather than for the next year's negotiation could be a smaller headwind as those reductions in volumes have materialized could be a theme. We haven't seen any significant impact of that yet. There are some minor cases, but it's not in the overall scheme of things changing the numbers. Okay. Thank you. Thank you. And no more questions on the line, sir. Please continue. Okay. So with that, I would like to say thank you for your attention, and we round it off here. Thanks.