Good morning. Welcome to the quarter two interim report announcement at Husqvarna. Altogether, we are quite pleased with the quarter two results. I'll explain a bit why I see that very positively. You may choose to look at the sales, you may choose to look at the absolute level of the EBIT, you may choose to look at the margin, EBIT margin development, or you may choose to look at the cash flow. Altogether, very strong performance from the group. If you look at it a bit more granularly, you will see that the three divisions in profitable growth mode, namely Husqvarna, Gardena, Construction, are doing very well. We will look into that a bit. A bit disappointing on the Consumer Brands side. I'll talk naturally a bit about what's behind that in this quarter.
We are continuing the execution of the profitable growth strategy. We are continuing to invest in the strategic initiatives along in parallel with further efficiency improvements. I think that's a super summary of the quarter. If we look at the traditional pictures, we will look at the results development, the EBIT. You will see now that we have actually some 16 quarters consecutively of improvements. You will see that the rolling 12-month operating margin is now 9.6%, which is actually one percentage point higher than it was last summer at this point in time. 9.6% rolling 12 months. We are approaching the 10% margin that we have been striving for quite some time. A good step forward in that respect, absolute level, as you will see, also constitutes a good step forward.
We're quite pleased with the results development for the group. We're also talking about the profitable growth strategy. You will have seen that last year, the three profitable growth divisions were at 3.3% net sales increase for the full year. Now, the 12-month rolling is actually a notch higher. It's at 5.2% with Husqvarna being at 5.2%, Gardena 5.8%, Construction 3.9%. This is all organic. The acquisitions at Construction are excluded from this number. I think you will see how we have moved from the 3% level, which could be maybe a proxy for the market development over time, up to another level. We take that as a positive support for the fact that a profitable growth strategy actually works and pays off. If you look at the financial highlights altogether, yes, we have 8%-- Well, you will not see this.
8% currency adjusted increase. You will see that we actually had SEK two billion in EBIT result, which is the best quarter ever in EBIT terms, 15.3%. I'm quite pleased with that 16% increase. Yes, there is some currency support in it's a good underlying result. There is leverage on the 8% of sales increase. You heard me talking about the 9.6% versus the full year. Now I talked about the rolling 12 one year ago, which was 8.6%. The full year last year was 8.9%. You see the movement in that respect. You see the gross margin improvement, may that be rolling 12 versus last year, or may that be for the half-year period, most visibly. There is a positive mix supporting this. We have a good momentum, I think.
It's also quite pleasing to see that the cash flow is following suit, Jan will say some more comments around how that is built up between the operating working capital improvement and the result improvement. Husqvarna Division, 5% currency-adjusted improvement year-over-year, primarily driven by Europe. Robotics, battery-based products continue to constitute the growth engine in this part of the season. Let me also just make one comment around the season and the weather. Yes, it was indeed a bit cold, a bit slow at the beginning of the quarter, but when we summarized the quarter two, there was no real weather impact at all, irrespective of whether we are looking at North America or Europe. It was true.
It was colder at the beginning, particularly in the north, there are, of course, specific markets that has been burdened by weather, like Russia, who had snow all the way into June, actually. If we aggregate it all together, Europe has been, I would say, average, that also means that the end of the quarter was more favorable. For example, for Gardena, Continental Europe, a bit drier, which supported the Gardena position. We'll talk more about that, I just wanted to take that off the table since there has been a little bit unproportional large attention paid to that lately. Good. We have the mix, we have a little bit of currency, we also have burdens from continued cost additions related to the strategic initiatives. Altogether, quite satisfactory. We are at rolling 12, 13.7% EBIT margin.
For the half year, 17.6% versus 16.8% last year. Moving over to Gardena Division, very strong, actually at the backdrop of the dry weather, particularly in June. In Continental Europe, 11% up, driven by primarily the Watering category, but also categories like Robotics, like the smart, the combination of Robotics and irrigation, also driven by Hand Tools. They have all performed quite well, actually. As you will have heard before, we pursue the strategy with the geographic expansions, sales channel expansion, there has been in the magnitude of 60 new SKUs this season. We see the leverage of the sales, not very surprisingly, 26% increase of the operating income, now being 24.3% EBIT margin versus 22.5%, for the half year, 20.2% versus 19.2%. Very pleasing to see the development. If you recall the last couple of years, strong development of Gardena.
A little bit, the disappointing part, not necessarily in terms of sales. Moving on to consumer now, it's up 9%. How do you interpret the 9%? Actually, it says less about this quarter, more about last year's quarter two, which was under average. It was really difficult from a weather perspective in North America in 2016. This is what I would describe a normalized sales situation from a burdened quarter by weather last year. 9% in itself is nothing spectacular. Actually, we would almost have expected more. It has been a very competitive retail space. A lot of campaigns, it's also a combination where we have had, for us, a bit of an unfortunate product mix, as well as a geography mix, with Europe a bit declining, North America then over average growth.
If you look at the product mix, what I'm referring to there, it's really a higher share of products relating to lower price points that has been sold, so with less margin content. This is a mixture of campaigns, but more than that, it's a mix aspect of lower price point sales in high quantities and geography mix that you should interpret. It's a little bit unfortunate in that sense for us. Then, of course, we have burdened the quarter with SEK 30 million. If you look at the SEK 80, that should actually be SEK 110 if we would spell that out explicitly, a bit more clearly versus the SEK 147. Still a disappointment. There is no discussion about that. The long and short of that is that the margin improvement trajectory will be slower than anticipated.
Meaning with the quarter 2 being so important of a quarter in the full year and the season, this will be a sideways move this year. It also means that the old aspiration of a 5% margin in 2018 is not realistic, as you will see. If you're talking about margin improvement per year of up to maximum 2%, I think then you're probably in more realistic ballpark numbers. It's a disappointment in that perspective, but we are pressing ahead, and the SEK 30 million one-off burden we took is relating to further efficiency measures we are taking related to the Nashville site. We are making that a bit more lean and mean for the future. Really going forward, I would say the measures are solid, they are firm.
May that be cost efficiency improvements or may that be adding new product in the pipeline for listings in the future. We are still very confident about that we will see the improvement, but we have to accept that it will be slower. The target remains, the 5% target remains. There is no hesitation around that. I want to be perfectly clear about one more thing. The group target of 10% and our ability to reach the 10% is not burdened. Of course it's burdened, but it's as realistic as it was before. Just looking at last year, we had an improvement of rolling 12-month with 0.3 percentage point for the second half of the year. If we would have the same type of improvement this year, theoretically, hypothetically, we would be at 9.9%.
Whether we, for the end of this year, will be at 9.9% or 10%, I don't know. We are going to be very close about the 10% region, give and take something up or down. I don't have the visibility, to be quite honest about it, but the momentum is there to believe in that. There is no hesitation about the group target, about 10%. It stands. We will reach it this year, latest next year, as we have communicated before. It's going to be close irrespective this year. Moving over to Construction. Construction had a great quarter with 16% currency adjusted increase of sales. Margin-wise, also an improvement of 1.2 percentage points, 16.2% became 17.4%. 30% increase of the operating income's a good leverage. A huge part of that was actually attributable to the acquisitions of HTC and Pullman Ermator.
2% organic, a little bit lower than what we actually expected. North America has been a little bit in a wait and see mode. Everybody seem confident that they will need to materialize the projects quarter three going forward. We don't foresee that being more than very much of a temporary decline in the construction space in North America, which has also pulled their construction operations for quite some time, as you will probably recall. It's a broad geographical and product category sales increase, and it's also been favorable for the margin development. Good. I think I'll leave it for Jan to continue with some comments on the financials.
Okay. Thank you, Kai. As Kai mentioned, successful execution of profitable growth for our three divisions in profitable growth, together with an increased sale of Consumer Brands of 9% currency adjusted, made the group go up to 8% on top line for the quarter to close to SEK 13.1 billion, 8% was also the improvement currency adjusted for the first six months, bringing the group up to SEK 25.8 billion of top line or net sales. Looking at the gross income in the quarter, an improvement of slightly over SEK 500 million compared to second quarter last year. Part of that, of course, being the positive currency effect, part of that also, even though to a minor extent, being the acquisition of Pullman Ermator and HTC. Also then behind this is, of course, an operational improvement, and that is mainly then related to the volume, of course.
Increased sales in all divisions, all regions, if you take a look at it on consolidated level and more or less all categories where watering battery-powered products, including robotics, increased over average, which then also brought a positive product mix into the figures. Also we can start to see now the effects of a persistent work with product quality the last years, impacting the results positively in the second quarter and for the first six months as well. If we talk about something negative on gross income, we were into that before. Additional costs related then to Profitable Growth Initiatives that is then accounted for in the COGS, and that is then mainly related to R&D.
For the first two quarters, looking at the gross income, we have an improvement of close to SEK 1.2 billion with the same explanation as I gave into the quarter of major positive effects being currency, being volume, and also to some extent, the acquisitions of Pullman Ermator and HTC in Husqvarna Construction division. Besides then product mix, which is also impacting positively for the full year and product quality, we should also mention the divisional mix effect where we see Husqvarna, Gardena, and Husqvarna Construction growing more substantially, whereas then we have Consumer Brands for the full year with a lower growth, and they also have a lower than average profitability. We get the positive mix from that as well. Also cost out activities or efficiency measures, as we call it, mainly then impacting direct material positively, despite then some headwind from raw materials.
If we move over to the indirect costs, the SG&A costs, they increased in the second quarter with some SEK 250 million. Close to half of that is related to currency. The main part of the other half is then related to our profitable growth initiatives that is registered in selling mainly then. Also, of course, we get an impact, even though not that big, but from HTC and Pullman. Of course, with the high volume, we have the logistics cost there that are somewhat higher than last year.
If we take a look on the first six months as regard SG&A, around SEK 600 million higher than last year, with the same explanation as in the quarter, bringing then the quarterly operating income to slightly over SEK 2 billion, an improvement of SEK 275 million, where we have currency effects of some SEK 120 million, and then, of course, the operational improvements. After purchase price allocation amortization, the impact on operating income from the acquisitions are limited. Operating margin improved to 15.3%, an improvement of 0.3% compared to last year. For the first six months, we have an improvement of close to or over SEK 500 million, bringing the operating income slightly over SEK 3.4 billion. Financial net, minus SEK 123 million. Last year we had positive FX effects. This year we have no FX effects in the financial net. That's the reason behind the deviation.
We also see higher interest costs, and that was related to higher average net debt during the quarter, and also some interest rate differences on financial instruments. For the first six months, financial net is close to SEK 50 million more negative than last year. No currency effects in the comparison. It's all related to interest costs related to the higher average net debt and interest rate differences on financial instruments. That meant that we had a net income of SEK 1.4 billion for the quarter, some SEK 140 million better than last year. Net margin 10.7%, earnings per share 2.43 Swedish krona. Net income for the full year, then some SEK 370 million better than last year, bringing the net income close to SEK 2.4 billion. Moving over to balance sheet.
We have seen a strength in Swedish krona towards the end of the quarter, which meant that when we compare June last year with this June, there are few effects of currency actually in the balance sheet. Non-current assets increased mainly as a consequence of the acquisition made in Construction division, but partly also impacted by the high or higher CapEx we have experienced the last 12 months. Adjusted for currency and acquisition, inventory a little higher than last year. We have increases in Husqvarna division, Gardena, and decreases in Construction and Consumer. Trade receivables, somewhat higher than last year in local currencies, reflecting then of course the higher sales in the second quarter. Trade payables, they were some SEK 600 million higher in local currency and adjusting for acquired businesses, reflecting then also the higher volume in the quarter for all divisions.
All in all, that meant that operating working capital, i.e., inventory plus receivables minus payables, were more or less on the same level as last year. Adjusting for the acquired businesses, it was somewhat lower when we ended June this year. The net debt increased some SEK 0.1 billion compared to June last year to SEK 7.8 billion, mainly of course then affected by the acquisition of net some SEK 1.6 billion, which was more or less than offset by the improved cash flow during the second quarter mainly this year. All in all, net debt increased with some SEK 800 million from year-end, that's of course related to the seasonality. One of our three financial targets for the coming years is to have an operating working capital that is under 25% of the net sales when we end each year.
Whereas the first quarter brought us further away from that target, we can see now in the second quarter that the combination of strong sales and substantial reduction of operating working capital during the quarter made the target more achievable when we ended the second quarter here. Talking about operating working capital, the seasonality pattern of building up working capital in the first quarter and releasing it during the second was valid of course also this year. Operating cash flow adjusted for acquired businesses was then SEK 1.5 billion for the first six months, which was an improvement of some SEK 800 million compared to last year. The improvement was related then to the second quarter where we actually had an increase of some SEK 1.2 billion of cash flow compared to the second quarter last year, which brought the cash flow in the quarter up to SEK 3.6 billion.
Both for the quarter and for the first six months, this was both related to working capital due to the higher sales through the first six months being converted into cash, but partly also to the effect that we had more of net inventory coming into the year due to the extended season concept that we have in U.S., whereby we increased the number of fixed-term employees and decreased the number of temporary employees to have an earlier, slower, and a longer ramp-up for the season. By that, of course, we carried higher inventory net coming into this year compared to 2016. Of course, the other big thing with the cash flow is the improved earnings. We have improved earnings of some SEK 500 million contributing to the cash flow.
This was to some extent offset by the higher CapEx compared to last year, reflecting the profitable growth initiatives that we have. Of course, the mirror of cash flow is partly the net debt. To fulfill our ambition to have an investment-grade-rated company, we need to have strong earnings and strong cash flow from the operations in relation to the net debt we have. It was rewarding to see that we were able to generate internally the source of funds we needed to make the two acquisitions in Construction divisions of some SEK 1.6 billion. With the net debt more or less on the same level as last year and the improved earnings, of course the net debt to EBITDA went down to 1.5 times from the 1.8 times we had end of June last year.
The effect, of course, of improved earnings and cash generation contributed to the improved profitability key ratios. Both return on capital employed and return on equity continued to improve around one and a half percentage to two percentage units respectively if we look to June last year or year-end last year. As regard the average number of employees, we can see now that the volumes, the ambitions, and acquisitions are contributing to the fact that we are moving away from a deduction of average number of employees to increasing the average number of employees for the first half of the year. By that, Kai, I leave to you to summarize the quarter.
I'll keep the summary short and sweet. All in all, a very good quarter, as you heard us talk about in respect of sales, absolute EBIT margin, and cash flow for the group. Three divisions doing really well, and a bit of a disappointment in terms of consumer. The message is clear. We feel we have a proven concept for the strategy. We are pressing ahead with the strategic initiatives, fueling the growth and financing them through these internal efficiency programs that we are executing on. Actually, I can also say that we are just about formulating also yet another third program for the years of 2018 and 2019 with the same purpose. Okay. With that, I'll leave over for Q&A.
We will start with questions from the floor here in Stockholm first.
It's Christer Meinecke from DNB. I would like to talk about the disappointment first. Sorry. All other three divisions very well, but Consumer Brands, you talked about the mix effects, and that consumers are basically trading down. That seems like a temporary thing, it could come back, but when you say that the margin recovery will take longer time than previously expected, it feels like you think that this is a structural thing, that the new mix you see in Q1, Q2 will continue to be there for the next years or so. Is that correct, or do you think the mix will revert?
The mix could very well revert, the big question mark is really if the amount of campaign price levels that we have seen this season is going to, so to say, disappear or be reduced for the next year to come. We saw quite some campaigning last year about this period of time due to the poor seasons. I think there was certain amount of desperation to get the quantities and volume out, and the sell-through. Now we saw that campaigning actually being, if anything, reinforced, and in combination with then the reinforced purchaser lower price points. Exactly where that's going to end up is very hard to say, but I think we need to prepare to live on these levels. I think that's the response to your question. I wouldn't exclude the possibility that we will see a return to the higher price points.
It's also a matter about new product developments and how well we actually manage to sell the values of those. That's a task for us there, also to review the level of innovation in the new product developments.
Talk about the 5% margin targets. We have talked about that target and the similar target for the U.S. business a couple of years ago. It seems like a holy grail almost. Given that you had a strategy to get to 5% by 2018, now you see basically flat-ish for 2017 on 0%, what is the new strategy to take you to 5%? I guess you have already implemented quite big strategy to get there to 5% by 2018, which will not succeed.
No, it's true. We are pressing ahead with the efficiency measures. We are making the manufacturing and logistics footprint even more lean and mean, SEK 30 million was the last example of that. We have went through two or three sites. Now we take a grip around the third site. There's no question about that. I think we also need to utilize some of the strengths, one of the strengths we have, which we haven't fully explored, is the robotics area, we will move in heavier with robotics into the next coming seasons than you have seen. We have prepared the market, we haven't made the step change. Now we are eventually looking at that, hopefully, step change for the next season. That's one thing in response to it. The answer is much broader.
It is the efficiency improvements, it is the new product developments, and the pipeline for that. It takes time. I think we were clear from the beginning that 2018 was the first year of filling in new products, and then 2019 is going to be an increased level, and that's the message we have had since one to two years back, and still holds. Nothing has changed in that respect. Definitely not. That's where we are.
You had a good teaser about the third program. Is it possible to give anything on that already now, or when should we expect any news?
I think we were very transparent about the Accelerated Improvement Program that we were running end of 2013 to end of 2015. That was simple, because it was all profitability improvement. Once we start, we were running a second program 2016 and 2017, which we have called Fit for Growth, which was to a major extent supporting the growth initiatives and to some extent, margin improvement. We're moving into a next phase with the third program for 2018 and 2019. Principally supporting the additional costs for the strategic initiatives of growth. We are not overly keen to talk about the numbers because it just reveals more than it actually gives any benefit to anybody. It's not in our interest to be too transparent about it, but it's going to be in the same magnitude that we have seen previously.
We think we can maintain the level of improvements for the years of 2018 and 2019, compared to, for example, 2016 and 2017. Again, we press ahead with the strategy. We add costs, and you also see that both in terms of people. That's not all blue-collar and related to the volume. It's also quite a lot related to sales penetration, R&D increases, et cetera. There are substantial shifts of employees behind those numbers that we see as a total.
A final question just on the raw mats effects for 2017 and 2018 maybe, also inventory levels we see in the beginning of this quarter.
Well, we will continue to see headwind from raw materials. As regard effects, normally with the seasonality and how we are hedging, et cetera, reflecting that, we have taken the positive effects this year for the currency. We will have somewhat more positive currency, we will continue to see the negative raw material more or less as we have seen it in the first half of the year. Net, we are saying raw material effects slightly over SEK 200 million plus, meaning, as you can calculate yourself, it's not that much left in the second half for us. 2018, as it looks today, will not be positive on raw materials. Presently, we see more of headwinds than anything else coming into 2018.
Inventories.
Inventories. Well, we'll follow the same pattern as we saw last year, i.e., as I was referring to, we have the extended season concept in U.S., whereby we start to build earlier but slower. That will also have an impact on inventory coming towards the end of this year. If you take a look on the cash flow curve, you can see what happened, actually compared to 2015 and 2016, that's mainly related to how we actually are handling our production system, then mainly in U.S. then.
Olof, just a question on Gardena. You had some incredible growth going on here. Is it possible to discuss that in more detail, where it's coming from, how much are you outperforming the market? What's the geographical expansion doing? Also to discuss the plans going forward. Is it just a one-step up in growth this year, then it'll level out? How should we think about it in coming years? Thank you.
I think first of all, Gardena is the division with the highest weather dependency. If you have that dry weather in continental Europe like we had in June, you will see the impact of it. The volatility of that business from the weather component is the largest, number one. We are actually increasing the geographical penetration, and I have talked about this year, we have taken on the U.K. market for the first time in a serious way. That's a start of at least a three-year, I will call it investment, to really become somebody in that market. We look upon that as an investment of a three-year cycle. It's also channel penetration, it's new product developments, and it's also a further expansion of the smart garden concept. We see a very rapid increase of the amount of customers using the smart irrigation.
Of course, we are building up a wealth of data. We are expanding the offering quite substantially, and I would like to come back to that maybe in connection to Q3 and give an idea of what's happening in terms of functionalities that's being brought into that system, because it's a very interesting space that we are the only actor in, if you look at it today. We want to maximize that growth. We are very upbeat about what we should be able to do with Gardena to continue. Of course, as you noted, you need that weather component to get these type of numbers improvements. Let's be clear on that. If you look at the last couple of years, I think we have been around 8% net sales increase comparable currencies.
That has been an underlying rate which we have managed to stay at. I don't think it's unrealistic to expect anything similar. Remember the variation then on that number during quarter two.
Björn Enarson, Danske Bank. A question on Consumer Brands again. Are there any delays on the strategic product launches that we have talked about or the robotics, or that the take rates was not as great as expected? Is it more of this unfortunate mix development that we've seen?
I would point at the product and the geo mix as the main component, and the third one being the price, campaigning element. I think that's how you should look at it. If you look at the single components of that's the right sequence.
The more pronounced impact from, for instance, robotics, that is a 2018 theme?
Yes, we have started this year, but it's a small, it's a rather insignificant number.
Yeah
In the overall total for this year. It has to be somehow, because you need to prepare the channels. You need to take your positions. I think 2018, and even more so 2019, we will see the true impact of that effort that we're going to do next year.
Okay. On Husqvarna Construction growth slowed a little bit. Is this just a quarterly volatility?
That's how we see it, actually. The expectation is that we will return to a higher organic growth rate in North America. There was an expectation that the Trump infrastructure efforts would materialize a bit early. That hasn't come through, and now everybody sits with a lot of other projects which they need to put into implementation. Among the customer base out there, on a broader scale, there are expectations about an organic increase for quarter three. Still to be seen, but that's what we hear from various channels in the market.
Lastly, maybe you said this, but just to wrap up on the third program, what you're saying is really that we should expect a similar cost level on SG&A level and a similar net cost efficiency that we have seen?
As we have a profitable growth strategy, of course, we want to see some leverage of the SG&A as we grow. There is a not insignificant component added from the strategic initiative. If you would have looked at the same type of operation SG&A.
It would have been a very good leverage.
Yeah.
There's no question about that.
The fourth-
It's both a gross margin aspect, but an SG&A improvement. We have the additions in both those dimension, particularly SG&A, related to brand marketing and sales expansion. Some of R&D, I guess, ends up in the COGS.
These are the three major single biggest elements of the strategic initiatives, the brand investments, and R&D, as well as the sales penetration.
That will look pretty similar in 2019 as we have seen or are seeing now?
I don't know if you want to add something to that.
Well, yes, more or less. I mean, it's actually why we're doing this is to get the leverage, meaning that we have to, as Kai said, be able to fuel the growth with the strategic initiatives, but also keep or make the core more efficient. That's part of this program. It's a little new touch, since we are addressing the full SG&A, also personnel costs. Before it was more pinpointed to certain areas.
Yeah.
Okay. Thank you.
The program has been very COGS-oriented historically.
Yes.
Now we include SG&A to a higher degree.
Thank you.
Stefan Arnold, Nordea. You're talking about year-over-year higher costs related to growth initiatives. Can you please quantify to understand the underlying margin improvement better?
We have not done that.
No. Sorry to disappoint you, Stefan, here, we have never done that. Actually, we haven't been that transparent. We took a step change last year, added costs for 2016 for the first time of any magnitude. We had a similar step increase this year, if anything, there's an increasing size of those steps. We haven't quantified it so far. We will need to think about how we're going to do that. Sorry to disappoint you on that.
The trend going into next year?
It's going to be even higher investments in cost additions in SG&A related to this, as well, R&D and COGS. Those we have had, and they have been outbalanced by the other improvements that we see in the COGS. The gross margins have improved, as you've seen, for quite some years, despite the additions.
Maybe we should add it, Kai, as well, that of course, this is not like we have a plan and it's rolling irrespectively of what is happening. Of course, this is gated and phased in such a way that if we have some disturbances, especially on the growth for our profitable growth divisions, that we have possibilities to mitigate some of that with the sort of less of profitable growth initiatives in a certain year. I mean, that's Kai is describing the plan in PowerPoint. Let's see if PowerPoint becomes reality.
Yeah. That's always-
It's always a reality.
Yeah. The plan is nothing. Planning is everything.
Operator, can we open for questions from the telephone audience, please?
Once again, star one to ask a question. Your first question comes from the line of Johan Eliason from Kepler Cheuvreux. Please ask your question.
Yes. Hi, this is Johan at Kepler Cheuvreux. First, coming back to Gardena. You mentioned that obviously the 11% growth was partly weather related, but would you be able to separate out somehow the geographic expansion, for example, going into U.K.? Did that add one or two percentage points to the growth to the quarter? Is this just filling up the inventories at these new retailers this year, then for a step change. Next year, we will probably have more of a flattish development there, depending on the sell-through, obviously. How should I think about the geographic expansion impact on 2017 and 2018, basically? Thank you.
Johan, the major impact is coming from the weather. If you have a dry month, the Gardena products are going to sell through like nothing else before. If you look at the fairly modest May, the factor in June was probably something in the magnitude of five times what we had an increase in April and May. At least a factor of five, just to give you an idea. That's the impact you get, and the wisdom from Gardena is you normally have good weather sometime in the season. The question is when you will have it. This year it came in June. Back to your geography point, the core is of course in the DACH region, including Benelux, and adding Benelux to that. That's where we have the core of Gardena. That growth was double-digit.
A bit higher though in what we call the focus markets, talking about Scandinavia, Iberia, U.K. We had a higher growth rate in those other geographies to answer your question. The core was also doing fine. Back to DACH, Germany, Austria, Switzerland, and Benelux.
Okay. Regarding this geographic expansion, do you think there is a step up next year to come, or is this a gradual rollout over the coming three years?
I would say it's a gradual emphasis of those expansion markets which is going to come. Back to the other point there about the inventories. What happened last year was there was a disappointing end of the season, meaning that the inventory and the trade was a bit higher for Gardena. We flagged that very clearly. We said the demand in quarter one is going to be lower, and we saw that coming through. We have no visibility whether that's going to be the case this year or not. The only thing I can say is that the beginning of quarter three, beginning of July, was at least positive for Gardena. Back to continental Europe. That doesn't say anything about when the season ends. When it ends for Gardena, it normally ends very rapidly and abruptly.
I think that I need to be clear about that. That good start of that doesn't say where it's going to end. The start was good. Yes.
Just on Consumer Brands, you say you still target the 5%, but two-year per annum improvement is probably more realistic. I think you said something about flattish this year. You're expecting sort of around break even this year as well, and then we should have 2% per annum in the best case for 2018, 2019, or how should we think about that? Have you put another year as the target date for the 5%?
I think you have understood it quite correctly, Johan. With the remark that there is a huge variation with the years, let's not get too depressed by this quarter two performance, because if you look at the whole last year, we actually started that year with a -SEK 120 million EBIT. We were having a SEK 160 million FX headwind, and we balanced that up to a break even. There are big swings. I think you all need to have a little bit of caution in both directions, actually, with Consumer Brands. It's a volatile beast, so to say, we're dealing with. That's going to continue. It's kind of inherent in that business model a bit. It might be a quicker improvement, and there might come another setback.
I think if you're talking about the basic expectation, I think the way you summarized what I tried to say, I think it's a reasonable summary, yes.
With this trajectory, you're still sort of confident that Consumer Brands has a future inside Husqvarna?
I'm only working with this hypothesis, Johan. There's no other hypothesis here.
Good. Then finally, just a detailed question. Your depreciation and amortization was up quite significantly in the quarter year-over-year, SEK 73 million. How was this split between the increased CapEx and acquisitions?
There was of course an acquisition impact here, but that was the minor one. It's more related to the CapEx that we have seen increasing the last year and now being turned into depreciations. The CapEx is the big part.
Talking about the CapEx, are the chains up and running as you wanted it now, or how does it look like?
I would say yes. We are on a very, I would say, steady increase. Not spectacular, but it's steady. Again, the important thing for us has been to have the right quality of the chains, and we do. There are ideas about further launches second half of this year, new chain types. We are progressing, and it is going to contribute. Again, the important thing is that the user experience of those chains is going to be outstanding versus everything else in the market. Which is also then, of course, part of the depreciation.
Okay. Thank you very much.
Yeah.
Thank you. There are no further questions on the phones at this time.
With that, I'll say thanks for your attention. Thank you very much. Bye.