Earnings Call: Q4 2016

Feb 9, 2017

Good morning and welcome to the Quarterly 4 announcement as well as the full year report. You will all be well aware of that quarter 4 is the seasonally smallest quarter and in that respect not necessarily spectacular, but we think we have some good things to talk about in the next time to come here. And I'll jump right into what we think is a relevant summary of the situation. First of all, we have managed to reduce the seasonal loss to half, reduced it with 50% from about from $212,000,000 to $108,000,000 That's a good achievement in itself, but I think more than that, 2016 has been a little bit eye of the needle for us. We had huge currency headwinds as you're well aware of and we wanted to take a step change in respect of adding cost to drive growth initiatives. At the same time, we were making the statement we will go at least sideways from a result point of view. So we were quite challenged, I think it's fair to say, throughout 2016 with it, but we actually did that quite well as you will have noticed. And we managed to consecutively improve the margins year on year as well as in absolute terms as you will see. Also milestone for us is the fact that the Consumer Brands division ended up on a plus for the full year. Well done. We've been battling with this turnaround now for some few years. So this has been quite important to us. And this allows us now to change a little bit the tone and the attitude going forward being a bit more forward leaning. And you will get the chance within short to listen to a video recording with Jeff Holler, who's the President of the Consumer Brands division. Just to give you more direct flavor than I might be able to radiate to you. Another interesting profitable growth mode Husqvarna, Gardena and Construction actually ended up on plus 3.3% for the total year. So we are in the range that we have defined, which is 3% to 5% for those divisions. And the Board actually Ing suggests to the Annual General Meeting to increase the dividend to SEK1.95 per share from the SEK1.65 which is of course a signal that they recognized the good profitability and earnings development. And looking at that, this is the rolling forward development since '13. You will see the margins having gone from about 5% to 8.9% in this period of time. You will see that the absolute levels of the Rolling 12% is improving. And you will be aware that these 4 quarters then are burdened with more than SEK 400 $1,000,000 of currency headwinds. So we are quite pleased with this progress in this period of time. Looking at the financials altogether. We have on the top line for the quarter minus 3%, not necessarily impressive in any way. You will hear some comments about the winter season kicking in a bit late in North America as well as sell in for Husqvarna brand division. But again, I wouldn't really spend too much energy on that minus 3 for the quarter. Much more important is how we see this going ahead. But staying within 16, you can then see the excluding the items affecting comparability, the minus 112,000,000 becoming minus 108,000,000, which we think is a good step to the large extent driven by cost and efficiency improvements as such. And the full year came out on the top line flattish, of course, then with the big mix then between the consumer brands being in a negative territory due to a couple of different aspects that we come back and other divisions being in plus 3. Altogether then, again excluding items affecting comparability from last year quarter 4 that close to SEK3 1,000,000,000 became SEK3.2 billion EBIT. So good step ahead, which we are very pleased with given the reasons I mentioned with the FX and the step change in cost additions to drive growth activities. Husqvarna Brand Division had a good stable quarter in Europe offset by a decrease in North America. Again, I would say the winters kicked in late, but also the sell in for the season of 'seventeen was a bit delayed. So minus 5% for the quarter. But we let me be very clear, we have no reason to extrapolate that beyond the quarter 4. We are in good faith that for all three divisions here Husqvarna, Gardena and Construction that we will be in the span of 3% to 5% that we were communicating at the Capital Market Days in September. Still the earnings was okay and again driven by efficiency improvements. Actually the FX turned positive. Jan can come back to that a bit, but it turned positive in quarter 4. And still we had some burden of course from the growth initiatives as such. I would like to draw your attention to the fact that on the year basis plus 2 on the line result was pretty much awash, but then having absorbed €250,000,000 of currency headwinds. So from that perspective and the growth activities, we are quite pleased with the development. We talk a lot about robotics normally during the springtime, but I think it's worth mentioning also that we are reinforcing our cordless range, the battery based product. And there has been a lot of launches done actually throughout the year. For the whole group, if I look at it, we have increased amounts of SKUs being at the shelf of our customers and dealers with about 50%. So it's quite a significant increase of that product range throughout 2016 and that will continue that pace of increasing adding new products to the cordless area. Very strategic. The most significant one I think short term that's going to come is a consumer based series, the 1 series that will be launched at Lowe's later this spring. Gardena minus 1% which and again this is a very small quarter, it's 10% of the yearly sales. So don't get too distracted. Our sales have washed the quarter as such. A bit burdened again by a lot of the ambitions we have connected to the graphicschannel expansion and the huge R and D efforts that we are putting in there in the quarter as such. But if you look at the full year, I think that's a relevant number to look at is plus 8% top line. So it's a very good year. And I would say also considering it's an average weather in the peak season, you will recall that 'fifteen was a fantastic year weather wise with an extended season. We didn't see that in 'sixteen. Actually the end of this season was fairly weak, which meant that the inventories in the trade were pretty high going out. And that will also have a knock on effect into quarter 1 for Gardena. But again, we are upbeat and optimistic about the full year again for 'seventeen for Gardena, but quarter 1 might look a bit flattish because of the fact that the end of the season was weak. But there's a lot of expansion going on both in terms of products as well as channel penetration and geography for that sake. So we feel comfortable about that as well. Gardena absorbs some SEK70 1,000,000 of FX headwinds in that number. So don't forget that when it looks pretty much flattish, that's a good achievement given all the rest that they have done. So a lot of I think there are some 60 new products being launched for this season, so high pace of product innovation and new products to the market. Now moving I'm Jeff Fuller, President of Consumer Brands Division of the Husqvarna Group. I will spend just a couple of minutes talking to you about both 2016 results as well as 2017 updated projection. In 2016, I'm proud to announce that the division found its way into the black relative to EBIT profitability on the heels really of 3 things. One of those was our continued emphasis and profitability gain out of cost out initiatives and operational excellence. The second one was better than expected profit improvement out of our European business unit on the heels of many broad based profit improvement efforts. And the third one is a bit of an extended season in the second half of twenty sixteen, which helped us get better than expected profit improvement in the second half as well. So this puts us in a good position relative to how we jump into 2017. We continue to emphasize as a division the concept of value over volume, but the business now becomes a bit more forward leaning relative to at least an expectation that we will start to see some profitable growth come back to the business in 2017. We believe that we can generate low single digit net sales growth in 2017 and then accelerate that top line growth in 2018. In 2017, we've got a few initiatives underway that we believe will start to contribute to our return to growth. One of those is the launch of the McCulloch ROB, which is the division's 1st robotic mower launch in Europe. We have several cordless battery initiatives underway, ready for launch in 2017 in the spring season, as well as an emphasis on regaining share in the 0 turn mower market, especially in North America. So we think these things will lead us to that return to growth and beginning to kind of lean in on the business again in 2017. So what that brings us to is a better overall EBIT profit projection for 2017. So starting from a better than expected jumping off point than what we were projecting in the fall of 2016, we feel like the business is still on track to achieve its 5% stretch EBIT goal by the end of 2018 and now has to lean in to that pivot towards profitable growth. Thank you. Just some flavor how Jeff talks about the situation looking at the standardized slide here. The quarter as such, minus 5%. Top line wise, still a very healthy reduction This is an important milestone for us because it allows us now to put the turnaround behind us. And even though value of a volume, of course, in some way remains and Parete, it is in a different way. We are not shrinking to the profitable core anymore. So that phase is behind us. And you heard Jeff talking about low single digits of growth as his expectation for the year. We expect we will continue the good pace of the operational improvements and still I want to emphasize that the 5% target is there. It is a stretch target for 2018, but we still find it relevant to maintain just like we communicated at the Capital Markets Day. So minus 10% for the full year top line, still having improved the result with that much considering SEK160 1,000,000 of FX headwind to it is quite an achievement we think. So I would say very well done. And this allows, as Jef emphasized, for us to become more forward leaning than going forward. Not that much of product introductions in the broader sense for 'seventeen. Some good ones, may that be cordless, may that be the robot that was mentioned, but there is going to be a lot more for 'eighteen coming. So stepwise, we will become more aggressive in the market. Construction had a good quarter, plus 5%, driven very much by North America. And this is despite the stone industry being still double digit negative, which is probably in the magnitude of 1 percentage point at least for the division. Maybe artificially high improvement of the result and I want to emphasize we had a good guy, as you can formulate it, in this one off non recurring item of pension. I don't know if you're coming back to that or not, but I think you should not put that in the comparison really, but rather take that off. But still, a very, very healthy quarter driven by that sales volume, of course. And still, we are adding resources for the market and sales penetration. Full year, plus 4 percent top line and of course a very strong improvement altogether being close to 14% now. So if you look at excluding the items affecting comparability 2 percentage points of improvement for the full year, quite a satisfactory level as such. And I'd like to draw your attention to the acquisition that we now closed during the course of January of Pulmonary Martyrs sales of $300,000,000 magnitude. We said profitability wise over the Construction division average. We will come back with more details in connection to the Q1. But this is a strategic acquisition for us. I think that's how you should look upon it because we are producing a lot of dust and slurry with our products, may that be the grinding equipment, may that be the power cutters or other things. And with this capability of Pulman, we can develop solutions for the whole thing here, including the dust and the slurry part and regulations for working environments are getting a lot stricter. So there is a good macro support here for us going ahead. And it's a bit of match in heaven in the sense that this is a market leader, a product leader in this area in the high performance part of the market just like we are in the high performance. And if you look at the whole construction space, it's fairly fragmented still and it really favors high technology, high performance actors like us. So we think we can grow the construction business and really give it over time now higher share in the group as such and where we can utilize the strengths we have. Obvious synergies, of course, in terms of product range, as I mentioned, but also equally the opportunity to utilize the reach we have in our sales network. And remember, this is a small organization, so they can expand the reach quite significantly within the construction space here for concrete. Within the construction space here for concrete that was held in Las Vegas beginning of the year and demonstrated some new 5 Husqvarna products that we have developed in a short period of time together with So we're going with dual product lines to expand that the quickest way we can. Usually important for the surface preparation area where you actually grind and polish concrete floors that previously have been painted with epoxy and other things. So more efficient consuming a lot of diamond tools by the way, which we also provide. So it actually adds up very nicely and that's an over average growth area of the construction product space as such. So we can we think there are going to be very tangible synergies in this area. With that, I'll leave to Jan to make some comments on the financials more in detail. Okay. Thank you, Kai. Yet another quarter, as Kai said, that was better than the corresponding quarter last year. From a currency perspective, quite a turbulent quarter with U. S. Presidential elections and the aftermath of that actually putting pressure on the Swedish krona and depreciating in general the Swedish krona and an appreciation of the dollar. And as a result then and a consequence of the weaker Swedish krona, the forecasted negative currency impact for this Q4 was actually turned to a positive one, a small positive one of some SEK 15,000,000 and of course, supported the underlying improvement of some SEK 100,000,000 going from minus SEK 212,000,000 excluding items affecting comparability to minus €108,000,000 of loss for this quarter. Net sales, minus 2%, but currency adjusted local currency was actually minus 3% in the quarter and flattish in net sales for the full year. Gross income in the quarter continued its path of improvement and increased some €275,000,000 compared to last year and this time then positively impacted by the currency on gross income and a continued focus on efficiency improvement and cost out activities that affected both direct material and value added in manufacturing production in this Q4. And that was partly offset in gross income of our ambitions, our high ambitions that impacted R and D costs negatively. For the full year, we are talking about a gross income improvement of some 800,000,000 dollars Once again, the big contributor there being the efficiency improvements. And for the full year, it's more related to direct material. The mix was positive as we see the profitable growth divisions, the 3 divisions in profitable growth increasing with some 3% currency adjusted with higher margins than average and consumer brand then unfortunately losing 10% of their demand, doing an excellent job. But due to the fact that we get this mix effect, this is then contributing positively on gross income. Product mix impacted positively as well for full year related then to the robot sales and the improvement we've seen there. Price also impacting positively on gross income. And these improvements were partly offset by the currency headwind when we talk about the full year. SG and A for the quarter, up some €175,000,000 to FX currency and additional costs for growth activities that we have loaded into the income statement here during the whole 2016. And if we take a look on the full year, we are talking about an increase of SG and A cost of some SEK 500,000,000, the same explanation, more or less half of it to currency and the other half of these additional costs that we are putting in for growth activities. Operating loss, minus SEK108 million, but looking at the operating income, it's a plus of slightly over €3,200,000,000 an increase of close to €240,000,000 compared to last year if we take the line excluding items affecting comparability, which was $2,980,000,000 dollars giving then an operating margin of 8.9%, 0.7 percentage units better than last year. And currency, as Kari mentioned, impacted here in the full year of some minus €130,000,000 Financial net continued its path of deteriorating. It was minus €15,000,000 higher this Q4 than last year with the same explanations we have been talking about the whole year, I. E, that it's a higher interest cost reflecting than the higher interest rates mainly then related to the dollar. And that is the same explanation if we take a look on the full year, where it's €80,000,000 higher than last year to minus €422,000,000 That is both related to interest cost on our borrowings, but also on the interest rate differences on financial instruments. This leaves us with a net loss for the quarter of minus SEK121 1,000,000 but plus of €2,100,000,000 for the full year and a net margin of 5.8%, and that is 0.6 percentage units better than last year. Moving over to the balance sheet. Of course, what's happened in the Q4 with the depreciation of the Swedish krona. By that, we got an inflated balance sheet in Swedish krona. Noncurrent assets, I. E, fixed asset and immaterial assets increased as a consequence of real estate investments in the supply chain. We're talking about Kawagoe in Japan, Millech in Poland and as was seen also on this slide from Consumer, Orangeburg. In total, we're talking about investments of 500,000,000 in those three countries where of substantial part happened here in the Q4, which then affected both balance sheet and cash flow in the quarter. Investments of for profitable growth initiatives added also to these numbers and currency impacted on noncurrent assets with SEK 600,000,000. And if we take a look on inventory, adjusted then for currency, we see an increase of some SEK 850,000,000 compared to December last year, partly then related to our new production concept in U. S. And you saw it in the slide in consumer as well. It's talking about earlier start of season preseason production. We have then increased the number of fixed employees and decreased the number of temporary employees to have an earlier, longer and slower ramp up for the season and thereby also a lower volume at production peak. And that is to get more stable situation around the factories and the workforce and thereby an improved quality and productivity. But of course, that impacted the inventory here in the end of the year, but also impacted accounts payables, of course. We also saw a somewhat high prebuild for the season 'seventeen outside of U. S. And the inventory was also, to some extent, affected by the sluggish snow sales in Husqvarna and Consumer. Construction division decreased there inventory of some 5% after a very successful and very focused year on stock reductions, which was good. Trade receivables ended the year slightly below last year, currency impacting here with €225,000,000 and that was a reflection of the lower demand in U. S. And accounts payables, I was mentioning that they are, of course, also affected by then this new concept new production concept in U. S. Currency impacted here with €150,000,000 So net debt for us increased by €450,000,000 to €6,800,000,000 being also a consequence of higher provision for pensions, up some €325,000,000 related then to the lower discount rates. And also, of course, net debt were affected by the weaker Swedish krona. Relating to this of positive impact in their EBIT in this quarter, it was related to IFRS calculation, and I will spare you the details and technicalities around that. But it was related to an operation that was sold during 'sixteen where we then when we calculated the persons involved in the scheme for pension. According to IFRS, we got a positive effect when they left the company. Moving over to cash flow. Normal seasonal pattern as we see every year, so to say, where we have a start of a buildup in Q4 and a strong buildup in Q1 and then binding of the working capital during 2nd Q3, and that was valid for this year as well. It was for full year close to SEK1.7 billion of operating cash flow or cash flow despite then the higher CapEx. We were into that with some SEK500 1,000,000 more than last year. Some €200,000,000 was then related to our Orangeburg footprint project. And those were actually forecasted to impact the beginning of 'seventeen, but impacted now in the end of 'sixteen instead. And that's why we're deviating a little from the forecast we have said earlier, SEK1.6 billion is more like SEK1.8 billion of CapEx this year. But it was good because it meant we were earlier on and we could actually start to use the facilities and the logistics center earlier. Higher CapEx was then compensated by somewhat lower increase in working capital despite the negative impact then of the new production concept in U. S. And that was due to also the better earnings. Higher financial net and taxes impacted negatively as well. Our ambition is to have financials reflecting for the group. And we have, since 2014, targets for the group. And we have, since 2014, a target stating that we should be below 2.5x and that we have achieved the last years. And as the earnings then have improved and the net debt been decreasing, of course, the ratio has been better, and we are right now just below 1.7. And of course, for us to have this margin to in-depth ourselves is important now when we are entering into a phase of growth in 3 out of our 4 division. And talking about rating and ambition of investment grade, After running a rating process, we have now got an official rating with S and P, which have also been made public yesterday. By that, our ambition to have an investment grade rating gets an immediate benchmark also with an outlook, and that creates a higher transparency around the company and also higher certainty around the company. And we have been assigned a BBB flat rating with stable outlook by S and P, where the stable outlook then reflects the expectations of at least maintain current level of profitability and continued generation of positive free operating cash flow over the cycle, all according to S and P. Key ratios. You can we can generally say that all financial key ratios related to earnings are showing positive trends, such as return on capital employed or return on equity. But our challenges are more related to the capital efficiency and especially to our operating working capital efficiency. With stable net sales, the capital efficiency of operating working capital expressed as we use it internally as CCC, cash conversion days, have actually increased 2 days during 'sixteen to around 100 days, which is, of course, a deviation from our ambitions and definitely an improvement area that we are addressing, and we'll be even more focused on that in 'seventeen and onwards as this is one of the 3 financial targets we have for 'seventeen and the coming years. The decreasing trend of average less average number of employees continued. We were close to 900 less full time employees at this year end compared to year end 'fifteen, and that was mainly a consequence of structure measures that we were taking during the second half of 'fifteen and also the lower demand in U. S. By that, Kai, talking about targets and ambitions. Right. So let us then shortly move over to another area of ambitions for us. We have then committed to scientific based targets. This is an initiative by UN Global Compact, IMSA demonstrating company's ambitions to share in the green path to maintain the temperature increase below 2 degrees of humankind impact. So you can say it's our share of that. And the two targets we have actually set up is minus 10% versus 2015 in terms of intensity of CO2. And in absolute terms, 33% reduction of CO2 equivalents by 2,035. So these are the 2 targets we have committed to, and we are talking about reductions throughout including the use of the products also means we are actually living with the product ranges we have. So that's also why we have an intensity target in the shorter period of time and an absolute target for the longer range here. But this is going to impact of course throughout the company and it's a change that is not necessarily new, but it's really important that we make bring this to consistency throughout the the battery the battery ranges. We are expanding and actually I want to emphasize we are accelerating that a lot and that will help, but also the petrol based products are undergoing new technology to reduce emissions in various ways. Transportation, of course, an important area. And just to stay with the example, which is very relevant right now, the Orangeburg warehouse, we are actually reducing 7 warehouses in the region to 1 adjacent to the plant and we're taking out to give you a figure some 330 and We are making also more regional production in order to support it to reduce transportation and the packaging as such can also be more volume efficient and optimized. Manufacturing, increase of renewable energy sources and solar being introduced at some sites. Sourcing, including and embedding our suppliers into this. We're starting to audit their efforts because they need to share in here with our endeavors and ambitions. So it's a couple of tough targets. We don't hesitate. We think it's important as a company with a lot of petrol legacy. We need to take our share of this and stay to the green path. So it's a journey. It's very aspirational. We have good activities, but we would need to define a lot more going ahead. Okay. And with that, I think it's time to sum up the highlights again. The reduction of the seasonal loss to half the success of 2016 given the headwinds of the currency and the step change of the cost divisions the Consumer Brands division being in breakeven and plus the 3 divisions in profitable growth. And let me just remind you of what we mean by profitable growth. We're talking about growing 1 to 2 percentage points ahead of the market. That's the aspiration when we talk about profitable growth. And they were at 3%. So they I would say they weren't fully there. I haven't seen the consolidated market data for 2016 yet. That's too early. But I wouldn't expect 3% to be fully there. I think it would be on the lower side. So it's not fully there, but it's on the way into that range. And you have heard me talk about the expectation that we are moving into that range for 'seventeen, 3% to 5 percent. The Board supporting the increase of the dividends up to €195,000,000 and in general, we are confident to take yet another step during 'seventeen in terms of earnings improvement. I think that's the short version. So I guess with that, we open up for Q and A. Yes. And we will start with questions from the floor here in Stockholm. Thank you. Question on currencies. I guess you as normal have locked in a lot of your exposure for 'seventeen and you should have a slight positive on 'seventeen. Is that correct, is first question? And if you can say anything of the recent weakening currency movements for your perspective for 2018, if we would have the same kind of FX situation in a couple of months' time. Slight positive on currency, yes. But and I think it's important to understand the 2 effects here. We're talking about the still stronger dollar, even though the dollar has depreciated somewhat the last weeks. Still a stronger dollar than we have experienced in 'sixteen. And then we have a weaker Swedish kronor. So we are saved by the general weak Swedish krona, so I'd say that is affecting a lot of transaction exposure, but also a lot of translation exposure since we are translating results and flows in different currencies into Swedish krona. So all in all, you're right, slightly positive. That is where we are right now. And of course, weakening dollar is good, but the strengthening Swedish kroner is bad. And we have seen sort of the mix of the both from end of year. And we can include material. Yes. And of course, then the next question will come about raw material. And we can say that's negative, slight negative. So we're saying slight negative on raw material, slight positive on currency. And what is the net slight positive? So it's a little more on currency than it's down on raw material. And 'eighteen is too early to if Well, we have not locked in 'eighteen. We're just starting with that. So I would be stupid to say anything about it. Let's see how this play out because I think we will have a lot of turbulence around currency in this year. Questions. First on we can start with consumer brands. You said that you started the production a bit earlier than expected. Did that have any effect on the earnings in Q4? And also what how will this affect the profitability in 2017 in terms of seasonality? Well, we started to produce earlier and that was not sort of direct connection with the Orangeburg footprint. It's the new concept we have for working. We would like to have more stability around the workforce. That means that we will have a longer and slower ramp and not a peak as big as we have had to improve quality, to improve productivity. But as you know, we are producing a lot and putting it in stock and you cannot realize any of those gains until you sell. And that we are doing this Q1. But of course, we expect this to be a good business case. We expect this to be good on cost and good on quality as well. But on the negative side, we will have, in certain occasions, higher working capital as we have at year end. But no capacity fixed cost absorption effect in Q4? No, because we are putting those in stock, so we are not selling them. And then on cost savings. You made a very good job in 2016 offsetting the FX headwinds and also the investment for growth. What are you seeing for 2017? It's Dirk Kieckhoff. We made a great job actually of improving the efficiency and the cost reductions throughout 'sixteen. That was the base for being capable to balance the cost additions for the growth initiatives and FX. We will we expect to maintain a good momentum, not fully as strong as we saw in 'sixteen, but still being very strong. So I'm not very specific in that statement, but it gives you a flavor. Nevertheless, we have some few years now since the start of the AIP program, when the first full year of 'fourteen, 'fifteen and then into 'sixteen, maybe 'sixteen being the highest impact on a single year. So somewhat lower, but still at a very satisfactory level. And part of the lower is, of course, that we have been helped to some extent with raw material this year and we will have a headwind next year, so of this year actually, 70%. The growth target for the 3 divisions of 3% to 5%, you seem quite confident that you will achieve this in 2017. Is that supported by listings or that you're optimistic about your development in the market? I mean, what we see fundamentally right now is fairly positive market situation in the shorter term. It's a bit paradox with the political uncertainty that's kind of characterizing the year, but still it seems to be a fairly good market for the season in general. If we are more specific, there's a lot of those growth initiatives that should support driving that top line, of course. And then on the other hand, as you heard, we are a bit more modest when we're talking about the consumer brands, flat to a couple of percentage points plus. That's the expectation. So yes, and we will continue to and let me be clear about this. We will continue to add costs to support growth initiatives on top of what we did last year. So we will probably be in the magnitude of the same increase this year so year on year effect as we took last year, all with a purpose to really be capable to outperform the market as an average. So 3% to 5%, as we talked about at the Capital Market Day seems to be a reasonable range. Maybe we have reason to be a bit more optimistic about the fundamentals in the construction space, which seems to be strong, not the least in North America. And I think we should have don't get the hiccup for the Q1 of Gardena. It was an extreme quarter when we start in 'seventeen here. It's a tough comparison quarter for them. I think that's a good comment to make. I mean in the shorter horizon of quarter 1, Gardena, that's a load in type of selling quarter. And given the over average inventory levels in trade, they will probably be fairly flattish in the quarter. And just a final question. The acquisitions you made, do you have more acquisitions in the pipeline of construction products? Or was this because you haven't done any acquisitions in quite some time. In the area of construction, we've made the acquisition of DTS a bit more than a ago. It's a resin bond diamond tool polishing manufacturer, which fits perfectly well together with Pulman Hermatol and the surface preparation area. So it adds to the focus we are putting on that and the momentum we are building for the surface average growth profitability. So that looks pretty good. Of course, we are trying to expand M and A activity. But again, we don't have the magnitude of the pipeline such that I want to stand there and talk about it. But of course, there are objects in that pipeline, but it's you need a fair bit to talk confidently about it in a position like this. And we don't have that magnitude. And just to add, CAGR, 3% to 5% is organic. It's currency adjusted. So it's this is not a growth plan via M and As. Yes. That's an important point. Year? Organic growth or acquisitions or something else? Actually, we are working a lot with geographic expansion for Gardena, but North America is not a priority. We are present through distributors, but not to any magnitude. And that will not there will be no step change in terms of their presence. And what's more important is actually that we are putting quite some energy into getting into the U. K. This year, which is a bit of a weak spot for Gardena historically, but we said we cannot stay out of that important passionate gardening market. So we need to make some focused efforts over some years to actually build a position there and parity to what we have around the Western Europe for the rest, the Continental European position. So more of the Latin countries, more penetration up in Scandinavia and the U. K. Is rather on the focus for us with than the U. S. Actually. And back to the story of different standards being prevailing and dominant there, so we can't really get the leverage fully with the core mobile watering strength of Gardena in North America as we can for the rest. Operator, can we open for questions from the telephone audience, please? There are no questions over the phone at the moment. We have one question from the line of Anders Roslund. Yes. Hello. Unfortunately, nobody was on the phone here anything from the Q and A. So I don't want you to you mentioned here, nobody has heard that. Okay. That was my question. So maybe you can put something out on the web page. Let's see if we can do that, yes. And there will be a transcript of everything published on our website later. Okay. Sorry for that mishap. Okay. No questions. No further questions on my part. Excuse me, sir. This is the operator. We are unable to hear you clearly. Can you hear me now? I was able to hear the last thing you said, sir. Okay. I was saying we will publish a transcript of this conference on our website later. My apologies, sir. Sorry for interrupting. And we are unable to understand you. Okay. Okay. I guess if that's the situation, if there are no further questions from the floor, say thanks for your attention. Thank you very much. Thank you.