Good morning. Welcome to quarter four announcement of the results. I will actually jump straight into it and like to start with the comments of that quarter four is seasonally the smallest quarter for us. Really, as you will know, the music for Husqvarna plays in Q1 and Q2. Nevertheless, there are good and encouraging signs also in quarter four. We had a solid development in the quarter, that goes for sales and Husqvarna, Gardena, Construction made good progress. 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 Q3 in 13 consecutive improvements. I also invited Henric Andersson, who is the President of the Construction Division, to join in and make some specific comments as to the last acquisition he has done.
It is three altogether within the duration of about one year. We just closed a deal with Atlas Copco yesterday, which was signed shortly before Christmas. He will make some specific comments to that. If we back out and look at the big picture, I'd like to really talk about the full year of 2017, because I think that sets the perspective in our seasonal business. You will see that we have actually been quite successful in our ambitions with the profitable growth. We are 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.
You know that the forest and garden market, for example, has over time grown with 2%-3%. 2017 was probably a good year, so it could be even a percentage point or so above that, but it is probably not in the magnitude of seven. Even though there are pockets of much higher growth, may that be battery-based products or robotics. Sales, great operating margin. We took another step, as you have noticed, and we went from 8.9% in 2016 to 9.6% in 2017. You will all also remember our 10% operating margin target, which we have said that we would reach latest in 2018. We stick to that, by the way. Also on the capital side, we have had a percentage point of efficiency improvements, looking at the working capital as percentage of sales.
Consequently, the board has proposed then to the annual general meeting to increase the dividend to SEK 2.25 versus previous year, SEK 1.95. All in all, quite a good year for us, actually. Just to dwell on that a bit, our feel-good slide here, looking at the operating income development since 2013 and the margin, you will see that it is a pretty solid development. Of course, it kind of flattens out for the second half, then hopefully it will continue to make progress for the first half of 2018. It is nevertheless to almost SEK 3.8 billion. We were at SEK 3.2 billion in 2016. That is an 18% increase of the result. That is 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?
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&D, may that be go-to-market activities, penetration, or other things. We really see now a step change in Husqvarna from 2% to 8%, maybe a little bit supported by a weak quarter four in the reference year. Nevertheless, the step change is there. Gardena even improving on the 8% growth level to 9, Construction going from 4 to 6 organic. Henric will talk about his acquisitions and what that means later. All in all, 7.7%, that was then in 2016, 3.3% for these three divisions. If you look at the financial highlights, you will see the quarter four top line, 11% altogether in comparable currencies.
I only refer to comparable currencies, which is good. That means we reduced the seasonal loss from SEK 108 to SEK 70, which is another step in the right direction. We see the earnings per share actually increased a bit more than that. Jan will talk about also some one-time effects that impacted positively. EPS increased with 26%, and we kept a net debt fairly flattish, despite the fact that we have financed a couple of acquisitions for more than SEK 1.5 billion altogether throughout the year. The working capital to sales ratio, which improved 1 percentage point. You see the step I talked about from SEK 3.2 billion to SEK 3.8 billion, give and take, and the margin improvement I referred to earlier as well. From that perspective, we have all reason to be pleased.
Looking at Husqvarna Division, it was a 14% increase comparable currencies for the quarter, be mindful then of that actually the reference was a bit weak. It was a weak quarter four in 2016, so maybe 14 is a bit overstated, given that reference, that's where we ended up. 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. I've previously talked about well above 20%. That is also true for the full year of 2017. That is also true, to maybe preempt a question here, that's also probably true for what we expect for this year. We don't see a change in the rate of growth for those product categories also for 2018.
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 effects in there. We are also quite confident, if you look at the amount of product releases for 2018, that we will have a strong offering to bring to the market. 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 robot products and software to help professional landscape and be more efficient, in that space. We have further battery-based products. We have further petrol chainsaws. 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 zero turns, which are hugely important for the U.S. market, North American market. We have the top band zero-turn model, which we call the Z500 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 application. Important products across the range, of course, more functionalities brought into connected products and apps. There are also expansion throughout the year in the digital part of the offering. That's looking strong. If we move over to Gardena. If I said the quarter for a seasonally small for the group, look at Gardena, it's 10% of the yearly sales. You need to be very mindful here about that.
Don't over-interpret any numbers or perspective of those numbers really too much. 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. We don't interpret that in any other way than 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. There are other components in that, like pumps, et cetera, 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. We are also continuing with the geographical expansion, and you might recall potentially that we have set out to really move in a serious way into the U.K. market, which is one of the biggest in Europe from a gardening perspective. 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%. That looks really good. We are, just like for Husqvarna, optimistic for yet another step forward here throughout the year to come. Let me also say, and potentially preempt another question, January, beginning of February, that's just load in into the trade and the partners.
It doesn't say anything about the end customer demand. 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 three was that the profitable growth divisions could be, that was as a response on a 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. I still want to hold that as a good proxy for what you could expect for the three divisions as an average organically. Consumer Brands.
Let me say it clearly, it is a bit disappointing for us that we are where we are. We also take proactively a stance of dealing with issues we have had. We have, as we announced in relation to quarter three, walked out on one of the big retail customers in the North American space, given the outlook we saw, given the profitability and some credit aspects to weigh into it. That is SEK 1 billion of sales that we will not see in the year of 2018. Of course, that leads to absorption issues. On top of that, we have also some raw material burdens to make up for. Yes, there are new product launches here coming for 2018. Yes, there are further efficiency improvements.
Given those headwinds, I think the realistic expectation, just like I guided after quarter three, is from a result point of view, a rather a sideways move. We ended this year with -SEK 65 million. Remember, about SEK 30 million, one-off effects related to the footprint of the Nashville plant. Operatively, you can deduct those. Give and take, it is going to be a tough one. I do not think we should set the expectation that we fully will come to the breakeven, but rather be in a somewhat similar magnitude for the 2018. That is a disappointment that we are where we are. We are building a solid base. We are shifting the product base. Short-term, it is a lot of headwinds to balance, as you can imagine. Jan will be a bit more explicit about the raw materials for the group later on.
I think it is not to forget that, coming here in a reverse order, rounding off with quarter four, still having a net sales of -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. You will also remember some of my comments earlier throughout last year relating to a very promotional season of 2017. I am not overly optimistic that that will be a lot better for 2018, but let us see. Let us be positively surprised. Now, Construction.
If I just do the financial, then Henric can talk about the acquisitions. You will see the quarter being 29% up comparable currencies, whereof 8% organic, then 21% related to those acquisitions. A huge contribution to the top line. You will see that the operating income, it does not look fantastic compared to last year. Remember that we had a SEK 25 million one-off positive last year in the reference, so the SEK 145 million should probably be rather SEK 120 million-ish, to give a right perspective. Of course, the acquisitions give a lot of top line, not necessarily a lot of bottom line here. For the full year, we have a SEK 50 million one-off burden in the result for integration costs related to those. If you stay with the full year, 21% increase of sales, whereof 6% then organic.
I think that's a good number, again, on the right side here. Compare that to 2016, where it was four. That's good. I'll let Henric talk maybe more to some comments to the market. I think I'll leave it there. Henric, please, why don't you start talking about the last acquisition you have completed?
Sure. Good morning. Yesterday, we then finalized and completed the acquisition of the light compaction and concrete equipment business from Atlas Copco. That's hot off the press, I guess. This business in 2016 was EUR 57 million, 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. 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. Our current customers, they are also active in the previous process steps, it was very logical for us to expand into those adjacent process steps.
Since we are already in that last step, there's a big overlap, both in terms of end customers and when it comes to the 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. The light compaction and the concrete equipment is to a larger degree also new construction. That will give us a whole different position, particularly in the emerging markets, because there it's predominantly new construction and very little renovation. It will actually help us to quickly build a position in some of the very important emerging markets. As I said, we finalized this here yesterday. This is then a little bit around the process steps.
Looking at it, some customers go all the way from you compact the soil, so to speak, then you place the concrete on top of that, then at the end you create a floor finish. Some customers go through all those steps, some of them, depending on what they do, they just do portions of it, depending on what the job is, so to speak. We were in the last step here with the floor grinding. We stepped into that about 10 years ago, when we acquired King Concepts, when it comes to planetary floor grinders, and we acquired Hagby for single-disc floor grinders. 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.
At the same time, we also acquired Soff-Cut, which is basically the second to last process step. When you have done the concrete floor, you cut control joints, to not get random cracks on the surface. Soff-Cut had a patented solution where you could do that before the concrete actually cured. You could finish the floor and leave the same day, you're not having to come back a few days later. We've been into these two process steps for now 10 years. What we have tried to do now is, in the past, we looked at our Construction business as having two epicenters, Construction and stone. What we're now trying to do is to more define the Construction business, not just as Construction, but sawing and drilling, and surfaces and floors.
Our current core is really in the concrete sawing and drilling business, and the floor grinding was a little bit overlap to that, but was also tying into this whole different segment, which is concrete surfaces and floors. We're trying to take a much stronger position in that whole segment. The first acquisition we then did into this segment was actually Diamond Tool Supply back in 2016, in May. They are the technology leader in polishing tools that you fit on the floor grinders. That was the first step that we made. During 2017, in the beginning of the year, we acquired Pullman Ermator, who was the market leader in high-capacity dust and slurry systems. That fits both our concrete sawing and drilling business, and this concrete surface floor business.
Floor grinding is the most demanding application, where you actually create the most dust. They really need the best dust system. It's a really nice fit into this. It was a SEK 300 million business at the time, and something that we have managed to grow nicely here during the first year already. The next acquisition that we made was acquiring HTC during the second quarter, SEK 380 million in revenue at the time. That was basically to take an even stronger position in the floor grinding segment. HTC is the market leader in that segment. 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, combined, we think we have better abilities to increase the preference for this method as such. Yesterday, we took the next step, and through this acquisition from Atlas Copco, we basically then take presence in all the other process steps. We believe that we can really provide additional customer value over time by offering the whole process, and hopefully we can also offer integrated solutions over time here. That's a little bit how it all fits together and what we're trying to accomplish here. If we then knowing now what the segment is and the different process steps are, if we look at this business as a business, first of all, it's a sizable market, all in all about a SEK 13 billion addressable market.
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, 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. 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.
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. We think that this is something that fits us very well and also something that we can do well with going forward. As I said already here in the beginning, I think the bigger place, 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, and 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 a better growth platform going forward, but also diversify the business to a larger extent, which we think is a good thing. I believe that was my last slide. Thank you very much.
Thank you, Henric. We move over to the financials from a group perspective. As Kai mentioned, this is the seasonally smallest quarter we have, the fourth 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 then 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. All in all, operating income in the quarter, SEK -70 million. That is an improvement with SEK 40 million.
Whereas full year 2017, then, we had an improvement of SEK 570 million up to SEK 3,790 million, giving them an operating margin of 9.6%, up from the 8.9% we had last year. Besides a solid operation 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 them negatively with some SEK 75 million. I will come back to those, but all in all, that was positive. 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 2018 and onwards. Looking at the net sales of the group, in the fourth quarter 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, that was partly offset by Consumer Brands that went down on sales, mainly 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 Consumer Brands more or less in line with last year for the full year. Gross income in the quarter, some SEK 100 million better than last year, in the fourth quarter. A positive volume, of course, is affecting here very positively. Of course, the efficiency measures mainly related to value-added cost in production and direct material is also impacting here.
A third effect is that we have been seen all through the years, also in this fourth quarter, 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 the negative country and product mix. We have increased R&D costs related to the profitable growth investments we are doing, impacting the gross profit, 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, SEK 1.3 billion of improved gross profit. Volume, once again, being the, so to say, big contributor to the improvement. 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 fourth quarter and for the full year impacting positively, the efficiency improvements is also impacting positively on gross profit for full year. On the negative side, we see the increased R&D and purchasing costs, once again related to the profitable growth investments. Also for the full year, we see a more competitive environment affecting prices negatively. Also a headwind. When we talk about the full year on gross profit from raw materials of some SEK 75 million. Moving over to the indirect side, the SG&A, selling and admin, in the fourth quarter increased with some SEK 125 million, and half of this is related to acquired businesses. The rest is the organic side, and that was affected by cost for profitable growth initiatives. We are talking about them mainly on the selling side.
Last year, as Kai mentioned, we had a positive effect in the SG&A of this release of a pension reserve in Construction Division of some SEK 25 million. We don't have it this year. For the full year, SG&A is up SEK 850 million, where additional cost for these growth initiatives is the biggest negative impact. We have also a negative FX impact in SG&A. The acquired businesses, in this case for the full year, also including the restructuring cost of some SEK 50 million that was attributable to the acquired businesses. Logistic cost, which we account for in SG&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 million in the quarter and for the full year related to legal restructuring.
As you heard, Kai did not mention anything about that in the division, so it is not in the division. It is in what we call group common costs, and that was a positive effect of SEK 55 relating to legal restructuring. That meant an operating income minus SEK 70 million, as I mentioned, full year close to SEK 3.8 billion. For the full year, we have raw material impacting negatively with SEK 75 million, and we have currency positively impacting with SEK 250 million. If we make an outlook of FX and raw material, the raw material will be a headwind of around minus SEK 200 million coming into 2018, and we will have a positive effect from FX of around SEK 100. Net of these two going forward, as we see today, around minus SEK 100 for 2018.
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 the fourth quarter. The deviation is related to currencies and a low financial net last year. For the full year, we have a financial net that deteriorated with some minus SEK 80 million, and that is related to higher net debt situation all through the year and also some interest rate differences on financial instruments. There was no effect from currencies if we compare 2016 to 2017, 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 SEK 265 million more or less of income tax. There are three items which I would like to mention here in the quarter. That is a one-time tax deduction with an effect of approximately SEK 175 million, a positive tax effect related to the legal restructuring, which I talked about as the EBIT effect of SEK 55 also have a positive effect on taxes. We also, on the negative side, had the reevaluation of the deferred net tax assets due to the U.S. tax reform that impacted with minus SEK 75 million.
Of course, these three items were valid for the full year, and that's the main reason why we have a 19% tax in relation to income of the financial items compared to the 24% or close to 25% we had in 2016. 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 decrease our guidance with one percentage unit. We believe now going forward that we will have around 23% of tax related then to 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 SEK 60 million, and that we together then, of course, with the main effect being the improved earnings, that we actually improved the net income with SEK 550 million compared to 2016 to SEK 2,660 million, giving a net margin of 6.8% and an earnings per share at SEK 4.62. Moving over to balance sheet. Here we have some currency impact, and that's, of course, related to the U.S. dollar. The U.S. dollar has weakened. We have many assets and liabilities in the 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 acquisitions made in the Construction.
And also we have, as I mentioned, a positive FX effect of around SEK 350 million, decreasing the non-current assets this year. Adjusted for currencies and acquired businesses, we have an inventory that is actually in local currencies up SEK 8.7 billion, reflecting then the general demand situation and the improved sales in our profitable growth divisions, Husqvarna, Gardena, and Construction. Trade receivables were some SEK 200 million 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 SEK 475 million higher than last year in local currencies, reflecting once again higher volumes in the profitable growth divisions. If we move over from the operating working capital items into the net debt, it was SEK 7.2 billion at the end of December this year. That was close to SEK 0.4 billion higher than last year.
The two acquisitions, of course, once again, in Construction, more or less SEK 1.6 billion together impacted then negatively, and that was compensated by a somewhat improved cash flow and the weaker U.S. dollar that also have an effect on the net debts that are, of course, decreasing net debts for us. In the fourth quarter, net debt increased with some SEK 750 million, reflecting then the seasonality of our business. Kai mentioned this, the development of one of our three financial targets, the operating working capital related to net sales. Our target is 25%. We were ending the year with a slight improvement also in the fourth quarter at 25.5%, reflecting then the higher sales in combination with an operating working capital in line with or just above last year.
Talking about seasonality pattern and cash flow here, you can see the seasonality pattern in our cash flow with the buildup of working capital in the fourth and the first quarter, and unwinding it during the second and third quarter. Valid, of course, also this year. Adjusted for acquired businesses and investments in financial assets, we were SEK 200 million 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 on the higher volumes. CapEx more or less at the same level as last year for the full year, with the difference that 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 fourth quarter, minus or close to minus SEK 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 two acquisitions of SEK 1.6 billion in Construction. Despite then a somewhat high net debt as we ended the year with, the earnings improvement during 2017 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.
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 SEK 2.25, which is an increase of SEK 0.30 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. 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% and 1.5 percentage units respectively compared to last year. All financial key performance indicators are having positive trends except then for working capital.
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 four days during 2017. 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 some 550 more full-time employees compared to end of 2016 when we end 2017 here. By that, Kai, I'll let you continue.
Thank you, Jan. Like to take the opportunity to also briefly touch upon the reorganization we made, which is effective as of February 1st. We have created one 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. Let'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 Hajman, who has been heading Husqvarna Division, is going to lead that department, and Sascha Menges, who's been leading Gardena, is moving up to take on the Husqvarna Division.
Pär Åström, who's been in business development, will go to Ulm to lead the Gardena Division. Per Ericson will take over Pär Åström's business development responsibility. Hillevi Agranius, who is the CIO, will also become part of the group management team. We have recruited Mona Abbasi, who will start 19th of February for sales, brand, and marketing. She's coming most recently from Electrolux. 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 now built up sufficient talent pool to start to rotate people like you should expect in a company that 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. I previously talked about the ambition to be reaching the 10% margin latest in 2018. I just want to reiterate, we still stick to that statement, so that's the expectation we have. With that, I'll leave over for Q&A.
We will start with questions from the floor here in Stockholm.
Hi. Christer Magnergård from DNB, thanks for the presentation, Henric. Couple of questions to you firstly. Firstly on the recent M&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 two dimensions in that. I don't think the acquisitions inherently are dilutive. I think we are burdening them with a lot of integration cost in 2017. It's SEK 50 million 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. It's not a major deviation. The main reason is really that we have burdened them with one-time cost during this year.
You've also done three acquisitions in Sweden. Is it that Swedish companies in this sector is particularly good, or do you see opportunities to find other suitable candidates also in other parts of the world?
Yeah, we haven't had any preference for region in that regard. In dust and slurry, the technology leader and a market leader was Pullman Ermator, and they happened to be here. The market leader and technology leader in floor grinding is HTC, and they're also here. I think in those specific segments, I think the Nordic market has been a little bit leading the way in those segments. It was a natural thing. When it comes to the concrete equipment and the light compaction, that is truly a global market, and there are players all over. It just happened to be a good fit with this opportunity that came up with Atlas Copco. 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.
That's the answer to why we have done what we have done. Looking forward, of course, there are further opportunity we can look into in the future, and they are not necessarily Sweden-centric by any means.
Henric, maybe you can add that the gravity center of the Atlas business is not necessarily Sweden.
No. It's truly a global business. Yes. Correct.
Before I move over to Kai, just a final question on the breakup. A split between the three different subdivisions in construction now. What is that roughly between drilling and the floor and
We haven't necessarily disclosed that before, but we can say that now if you just look at the acquisitions, I think we say we are adding 30% of revenue, yes, with the acquisitions. That's an indication on a full year basis. That then would at least indicate that it's going to be a fair share of the total division.
Okay. 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? What we can expect in 2018, and what kind of market potential you have long term?
Let's start with the last one first. The market potential is tremendous. That's the largest lawnmowing market in the world, the potential is fantastic. Starting point is minimal, as you know. 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 one retailer rather than dealers. 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.
If you give this two, three years, it will be quite significant, I dare to say. Rather look at it as a three-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. I think that's the way you should look at it. It's going to take some investment actually for 2018. The benefit is going to be as obvious within a couple of years, it's the right thing to do. Then as to your more numeric question, if you want to get a feel for it, maybe 1,000 dealers among huge retail chain is involved, but the retail chain is rather than more geographically select outlets into the Southeast.
It's a Husqvarna brand for the retail engine as well?
Yeah, 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. Please ask your question.
Yeah. Hi. Staying on these topics of robotics, could you just remind us now how big share it was on the back of handheld products of total turnover 2017?
Yeah. I think we have talked about on the group revenues, this has been about 10%. I think that's reasonable. We talk about the 20% increase, so growing well above the average, as you know then. That, of course, impacts the numbers upwards step by step here.
It's still primarily in the Husqvarna Division that revenues were seen?
Now you actually see it equally on the Gardena side. Gardena has had a very good success actually throughout the season of 2017 including the smart systems. Smart is the combination, as you know, of the irrigation and the robotics application. They have really actually grown even with higher growth numbers than the Husqvarna Division. They are both well above 20. It's looking good on that side. Gardena is also bringing new products to the market. I think I've briefly mentioned that they have new product, which they call SILENO city, which is then targeting smaller plots like 250-500 sq m, perfect for the central European type of markets where many houses are surrounded by fairly small gardens. That will contribute as well. Now it's looking very encouraging, actually.
I guess the SILENO 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 2017?
I don't want to be specific on that, it's not going to be significant for 2017. It's a little bit equal story when I talk to robotics in North America. Give this two, three years, and it will be significant. 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, et cetera. I think we're probably balancing better this year. I'll be glad to come back to be more specific responding to your question in a year.
Yeah. Just on this recent acquisition, Atlas Copco, could you give any indications of price and whether the margin is in line with the divisional margins, or where are we?
Price, we generally do not comment on, so at least I won't. It is up to Johan if he wants to at some point, but I won't. Margin-wise, I can just say it's clearly profitable, but it's slightly below our average.
Okay. Finally, any view on the net financial cost for 2018?
In line with this year. Of course, depending on what is happening with the interest rates, in line with this year.
Yep. Thank you very much.
Thank you. Your next question comes from the line of Johan Dahl. Thank you. Please ask your question.
Yes. Hi there. Kai, there seem to be a fairly broad consensus among you and your peers of sort of mid-single digit market growth in the outdoor power products area next year. 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 2018 versus 2017? What impact does the outcoming Q4 have on your sort of view for 2018?
Let me start with the last one first. I don't think you should overinterpret the rate of quarter four 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 2016 and 2017 taken these cost additions, and added them into the operations, partly bringing product innovation, partly working with market penetration, branding aspects, and opening up channels and geography. 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 2018 of those three divisions, and then you will remember well my comment as to Consumer.
Can you say anything regarding shelf space, if you have a view on that? And finally, also, if you look on operating leverage in 2018, given all the growth initiatives that you're doing, do you expect that to improve or deteriorate in 2018 versus 2017?
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 Division, not being a forerunner 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.
What we're doing here is we're shifting the cost structure quite significantly. If you would go back to 2015, it will look quite different actually. 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. We could squeeze more margin if we wanted, but we're actually taking the position of being more forward-leaning. And for sure for 2018, we will be still with the foot on the accelerator on that side.
Thanks.
Thank you. Your next question comes from the line of Björn Enarson. 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 volume progression would have looked like if you had not taken these costs or investments related to the M&As that you have done, adding to that, if we can compare those one-time costs or investments that you have taken during the year, and also look into 2018, if that would be an increase versus 2017 or similar or below that?
Okay. If we look at it, I think Kai explained 2017 very well there. If we wouldn't have done the acquisitions, of course, the top line would have come down, since they don't have any material impact on EBIT this year, there's a dilution from a percentage perspective. Of course, those SEK 50 million will be put back into the business in 2018. We won't have those restructuring costs. Of course, we will have an uptick in 2018 because of that. If you look at the new acquisition, there we have also said that we don't see that will have any material impact on the EBIT in 2018.
The new acquisition will look very similar to the previous ones, that in the first 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, then we need to integrate it into our operations, that comes with some cost. Because of that, we don't see that we will have any material impact on the EBIT, we will get top line. It will be dilutive from that perspective. On the other hand, the other previous two acquisitions will not have that kind of restructuring cost will be then positive going into 2018.
I think, Björn Enarson, one important take on this as well is that we are normally positively as a Group affected by a weak USD since we have outflow in USD. One exception, and that is you, Henric, in the Construction, where you have a big business in U.S., and of course you will have pressure as you had in this fourth quarter from currencies coming in now to 2018 provided the currency rates that we have right now. That's an effect that will, of course, impact Group positively, but Construction negatively.
Thank you. Perfect. On your comments on pricing, is that only relating to Consumer Brands, or mainly, or is it across the board?
You can say, of course, Consumer Brands 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. 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 the full year. It's a small downside there, but not much. Of course, when you add up, it becomes a significant number, enough at least to talk about.
Looking to 2018 on pricing for the growth divisions
If I jump in there, I would say you can count on stable pricing in general within the forest and garden space, and I think for Henric's area as well. The one that is always the most uncertain is the Consumer Brands situation, which 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. For the rest, I expect stable pricing.
When you say similar EBIT level for Consumer Brands in 2018, you are including your fear of tough prices?
Correct.
Thank you.
Thank you. Your next question comes from the line of Rasmus Engberg. Thank you. Please ask your question.
Yes. Hi. 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. I think the answer is yes to your question, yes.
Roughly the same then, yeah?
Are you referring now to the type of cost additions we're taking or the top line effect of those?
I was talking about the cost side.
Yeah. 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 Gardena in the U.K.? Is that the big driver?
Those are two examples, but they are by far not the only ones. There's a lot more.
Okay.
That's a small share of the total, but still significant.
All right, good. 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, we have stepped up that from 1.4, 1.3, up to 1.8 in 2016, 1.8, 1.9 in 2016, 2017. You should expect similar levels also coming into 2018. Around 1.8, 1.9. That's the best guidance we can give today.
All right, good. Finally, just can you remind us if, should we expect some sort of effect from the Easter moving around 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.
We haven't calculated the days yet. I think it's the straight answer. Let us come back.
Okay.
As you can understand, no major effect because then we had been aware of it.
All right. Thank you. Thanks.
Thank you. A follow-up question from the line of Johan Eliason. Thank you. Please ask your question.
Yeah. Hi again. I just had a question regarding your manufacturing pattern. Has it changed anything in this Q4, Q1 period? Is it roughly the same as before? I think you have already indicated before that you want to start manufacturing a bit earlier to smoothen out the season.
That's correct. We started doing that actually end of 2016, going into 2017. We went along the same lines towards the end of 2017. It's simply a balance question between excess of qualified labor, quality, and productivity which led us to this scheme. We will stick to that. There's no significant year-on-year effects actually into 2018. Looking at 2019, so to say, there shouldn't be anything here towards the end of the year, if that is what you were thinking about.
I was wondering about the inventory levels towards the end of the year, if that was impacted by any specific. It shouldn't be, basically, if I understand you correctly.
Not as a consequence of the extended season.
Was your question related to the cash flow in the fourth quarter compared to last year?
That's also one of the impacts on how you do with the inventory levels.
I mentioned that we had big investments in buildings towards the end of 2016. There were, of course, big tickets. One of those big tickets was not paid in fourth quarter 2016, but was paid in 2017. That CapEx did not affect end of cash flow. That was not the case in 2017 because it was totally different types of investments we were doing. That is an effect that makes up part of the explanation between the better Q4 2016 compared to this year's fourth quarter.
On this lost volume in the U.S., have you felt any sort of lack of purchasing power there, or you're getting worse terms because your volumes are getting down? 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. Of course there is a potential concern about 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. No more questions on the line, sir. Please continue.
Okay. With that, I would like to say thank you for your attention, and we round it off here. Thanks.