Good morning, welcome to quarter 2 presentation. We are quite pleased, in fact, with the development and the progress of the year. I'll jump straight to the summary overview. We have improved results, we have improved margins, actually that is despite a situation where there are some difficulties with the weather and the season in North America, particularly the eastern side, North America. You will have noticed that we are absorbing some currency headwinds, we are also catering and supporting profitable growth initiatives. Despite all those things coming out in a good way with a result improvement. All in all, we are quite pleased with the quarter. I would like to emphasize that the Consumer Brands Division's turnaround activity is going according plan.
You will not necessarily see that with the sales that is going down in a considerable and significant way, that is weather-related to two-thirds, maybe in the magnitude of one-third related to our value before volume strategy. Of course, at the back of this, we have quite some strength in the operational improvements, may that be product mix, may that be cost reductions, efficiency improvements that we are doing and running on a program basis internally, that gives the support to all this. Operating income rose to SEK 1.729 billion, versus SEK 1.675 billion last year, having absorbed SEK 170 million currency headwinds. Cash flow and net debt improved as well, Jan will talk a bit about that later. If we look at the EBIT result development, we normally show this curve, that's a rolling 12 month, absolute number of it, the margin in blue.
You will see that it is progressing. We're now up to 8.6% on a rolling 12-month basis, margin-wise. We are pleased with that development. Moving on to the financial highlights. All in all, we had on the top line -4% in comparable currencies for the quarter, we are still +1 though for the year, having had a good first quarter. The reason for the decline, the -4 in the quarter relates very much to the Consumer Brands Division. All the other three are in growth territorial. You will see the details soon. Operational improvements are strong, I would also like to emphasize that they are according to plan. There's nothing that has changed. Are we pacing quicker? Actually, no, we aren't. We are just pacing according to what we have set out to do.
That is the strength we need in order to cater for these improvements of the EBIT results. You see the gross margin improvement, 31%-34% on the quarter. You see 29%-31% for the half year. That's what it is actually, you will see the impact there naturally of the mix improvements, the material reductions, and some other effects. There are price effects as well that are positive all in all, even though we are naturally under pressure. You can imagine in the season, which is weak then in North America, that puts pressure on prices and discounts and campaigns. All in all, we have stable pricing. We're quite pleased with that, you see then compared to last year's margin of 8.2%, we have taken the uptick to 8.6% margin.
Moving over to Husqvarna Division, 3% sales increase comparable currencies driven by a strong European activity. North America also being in quite negative numbers, but the strength of Europe then out balancing that negative impact. At the forefront of the strength is robotics season, which is pressing on quite successfully, in fact. That's the top line numbers. We also cruise around the 3% for the half year, as you can see in terms of sales increase. If you look at then the operational improvement, we have the volume advantage, of course. We have the mix that is supporting us. We have the strength to support profitable growth investments, and we have absorbed about SEK 100 million of currency headwinds, and still we are improving the margin from 17.5% to 18% in the quarter. SEK 1 billion becoming SEK 1.031 billion absolute numbers quarter wise.
You will also see, whether you look at improvement versus last year or last 12 months, that it's holding up quite well here with the difficulty of the currency that has been burdening us a lot, and Jon will talk a bit more about that later. Gardena has been selling in very positively I wouldn't say that the point of sales has been that impressive because the weather down in continental Europe has not been that fantastic either. These numbers more reflect the strength of the product introductions, of the channel expansions, and channel expansion in the sense of penetration in the core markets, but also adding to that geographic expansion to some extent. You will see that, for example, up in Scandinavia, how we have increased the penetration in this market, just to give one example.
On the product introduction side, yes, we have extended the novelties within the original Gardena mobile watering systems as well as the smart systems. They also had quite some success with a new range of robotic mowers called the SILENO range. They also see very strong numbers of increase on that side. I emphasize again, it's not driven by a strong season. It's these other things that have supported it. Now, of course, as we start to look into quarter three, we had an outstanding quarter three last year. The good weather in continental Europe started actually mid-June and went on throughout most of quarter three. Quarter three for Gardena will look a lot different. Let me be clear on that.
There will be negative numbers because of the reference being so fantastic and the sell-out of the season so far being at the best average, probably lower than average, actually. This is a sign of strength. I think that's how you should read it, of the efforts we are taking into to market penetration and product introductions. Margin-wise, a little uptick, 22.1% becoming 22.5%. We have very much the same pattern with some support from price, material cost reductions, but also higher R&D costs related to developments like, for example, the Smart Garden. Smart Garden, by the way, has had a good reception, and we have now quite some penetration in retail outlet shops, rather 1,000 of them today, where you could find this down in the core markets in Europe.
Still remember, please, that this is a selective launch here, so it's not available, for example, up in Scandinavia, and we're going to go global with the Smart Garden from next season. As always, when you do these large steps of introduction, you have some things you also need to wash out in terms of functionalities, and we have done that throughout the early summer season. A very positive development for Gardena as well. Coming to Consumer Brands, repeating the sentence, the turnaround is progressing according plan. That's important to remember. Of course, because of this weather situation, there has been a sharp decline in the demand in retail. I would say, give and take, two-thirds of this decline is attributable to the season and the weather. One-third is driven by the value before volume strategy that we are pursuing.
You will also recall that the sell-in to retail was actually positive for quarter one. If you look at the numbers for year to date, you will see -11%, and maybe that's a more representative number than the -24% we are experiencing right now. Of course, we are being hit by the under-absorption in the volume. That's inevitable, and we're also absorbing some SEK 65 million of currency headwinds. Despite that, we deliver an improved margin and an absolute number is SEK 147 million versus a reference of SEK 178 million last year. We're quite pleased with that. In fact, and you will also see for the half year that we have, despite this, let's say, situation, managed to improve the margin. We press ahead with the plan, which I have communicated previously and aims at 5% EBIT margin 2018. Nothing has changed in that respect.
If we are back to average season for another year, things will look a lot better. I want to say, of course, given this significant headwind, the aim to make a break even this year will be tough. I'm not excluding it, but it's not a given one anymore. Might struggle a bit to get all the way. We were -SEK 120 million last year for the full year, and we're going to absorb for the full year.
150.
SEK 150 million or something. You realize the starting point, so to say, with -SEK 270 million or something then altogether that we're trying to bring up to break even. It will be difficult, we are still working with that target nevertheless. Construction Products, up 4% comparable currencies. This is also despite a weakness in the Stone Industry, and the Stone Industry then particularly relating to geographies like Latin America and the Middle East. Demand has weakened during the spring. That has had an impact. There's some couple of percentage points that has impacted the total number. Nevertheless, we are pressing ahead with positive developments driven very much by North America, which is the locomotive also for quarter two, like the previous quarters and like last year, for that sake. Operating income has improved, of course, as a consequence of the volume.
In this division, we have some positive currency effects. Despite the weakness in the stone industry, we're coming out a bit better here with 16.2% margin for the quarter versus 14.6%, and then for the half year, 12.9% versus 11.6%. It's looking fairly good. You will also see the improvements on the rolling 12-month numbers. It's up to 10.7% here, and excluding the items affecting comparability, 12.5% versus 11.8%. With that, I'll leave it to Jan to make some comments to the financial details.
Thank you, Kai. As we stated already in the beginning of the year, and we repeated here in the interim report for the second quarter, the priority for the group this year is actually to offset the currency headwind and the cost for the profitable growth initiatives that we have with operational improvements. To be able to achieve this, we really have to be where we are right now with an improved result for the first half year, because we are going to be compared to a very strong third quarter for being Gardena and also for being the group in a seasonal, normally weak quarter. As you remember, Gardena had a terrific improvement, result, and sales in the third quarter last year. Of course, that will be difficult. We are where we actually should be after these first two quarters.
Net sales continued to grow here in the second quarter in the three divisions that are profitable growth divisions. As you heard Kai saying, with unfavorable weather in U.S. affecting the mainly Consumer Brands, we were actually down on net sales 6% as reported. If we adjust them for the strongest Swedish krona, we are actually down 4% in the quarter. For the first half year, 1% down in nominal terms, but once again, adjusting for the strongest Swedish krona, in local currencies, we're actually up 1%. Gross income, around SEK 120 million better than last year. Of course, also there battling a negative currency effect. It improved due to a strong mix. When we're talking about strong mix, it's both products, i.e., strong robotic sales and also a good second quarter and also first half year for Gardena and Watering Products. That's important for us.
Also a divisional mix, as we have the three divisions in profitable growth growing, and we have then Consumer Brands with less or lower profitability, profit level than the rest of the divisions decreasing net sales. We get the mix due to that, which is then on this positive, but also it's positive that Consumer Brands are improving their margins and results as such. As Kai mentioned, we also have a minor effect on improved pricing all through the divisions. On the positive side, on gross income, we can also talk about the continued focus on operational efficiency and cost out activities, in this quarter, mainly then related to lower direct material costs. On the negative side, this quarter, the substantial volume drop is, of course, impacting negatively.
Also we have some effects in cost of goods sold related to profitable growth initiatives, mainly then R&D cost, which is part of that. For the first two quarters, we have an improvement of gross income of SEK 300 million. Same explanations, but of course, different numbers. Volume is more or less a wash in the first half year. Selling and administrative expenses, SG&A, they are also SEK 65 million higher than last year. Two explanations, currency once again, also the strategic order initiatives we have, the growth initiatives we have. The SEK 200 million increase, which we are seeing for the first six months, same explanation there, currency and profitable growth initiatives. All in all, operating income some SEK 54 million better than last year, SEK 1.729 billion. We go from 13.7% second quarter last year up to 15%.
For the first six months, we are up some SEK 110 million on operating income to close to SEK 2.9 billion. Something about currency. We were battling SEK 170 million here in the second quarter. We have now minus SEK 380 million. We have talked about SEK 500 million when we started the year. We were down and talking about SEK 450 million after the first quarter. Now it is around SEK 475 million for the full year. As you can hear, it is going a little back and forth, but it is around SEK 450 million to SEK 500 million. We think we are in the middle.
If you would like to have some kind of forecast or assessment for the full year, you can take a look on the first half year and take the rest of the year more or less with the same How you divide it between the divisions, and you get a good assessment of the full year as regards currency. Financial net in the second quarter, we had a high financial net in the second quarter last year. Subsequently, financial net was lower in the second quarter this year. It was positively affected by currency effects, meaning that we are on a full year. On the first six months, we are more or less on the same level as last year as regard financial items.
The little increase we have is related then to higher interest costs and related to our U.S. footprint, the higher interest cost is related to U.S. dollar, both borrowing costs and also net or interest rate differences on financial instruments. Net income coming up to SEK 1.259 billion. That is an improvement of SEK 150 million compared to last year. We have an impressive net margin of 10.9%. Here we are double digits, but in a quarter. An earnings per share of SEK 2.19. For the full year, a net income, or a full year, the first six months, a net income of slightly over SEK 2 billion, an improvement of SEK 90 million. Moving over to the balance sheet.
We had very little currency impact in the balance sheet, but something happened here after the Brexit, it moved around a little with currency rates, which affected, to some extent, the balance sheet. Taking a look on the different items, here we can start with non-current assets. In local currencies, they are more or less exactly the same as they are right now. What we have seen is higher CapEx, lower depreciation, but we have been selling one of our Chinese factories, and that has impacted these numbers. We are more or less on the same level as last year in June. When we take a look on inventory, it decreased in local currencies with some SEK 150 million compared to last year. Of course, that is mainly related to Consumer Brands and what we have heard about the weather situation in the U.S.
Trade receivables, more or less on the same level as last year, meaning that the difference you see here is related to the currency effects, the weaker for the Swedish krona impact. Trade payables, some SEK 275 million lower in local currencies than last year, meaning that we are, when we talk about net operating working capital, i.e. inventory, trade receivables minus the accounts or trade payables, we are slightly higher end of June than we were last year. Of course, due to the recent and rather sharp drop we saw in the U.S. in the second quarter, it has not been possible for us to mitigate the loss of volume with inventory reductions.
Net debt decreased some SEK 0.6 billion compared to June last year, mainly due to improved cash flow, but we had an increase of the provision for pensions, and also, as I said, after Brexit, we got some currency effects also affecting the net debt, we are down to SEK 7.5 billion now on net debt. It increased from start of the year with close to SEK 1.1 billion, of course that's a seasonal pattern. Talking about seasonal pattern, this cash flow is of course also impacted by the seasonal pattern of building up the working capital in the fourth and especially in the first quarter, then unwinding working capital, starting from the second quarter, as you can see it very clearly seen here. It meant that our operating cash flow, adjusted for acquired and divested assets, was slightly over SEK 0.7 billion for the first six months.
That was an improvement of around SEK 0.6 billion compared to where we were last year. That is mainly related to working capital, which show a lower increase this year than the increase we had last year. Also, of course, the improved earnings are impacting positively, and we have a slightly increase of capital expenditures. That is expected for the full year due to the profitable growth initiatives we have, and that started to impact negatively here in the first two quarters. Coming back to net debt to equity ratio, we can see the trend of gradually reduced net debt, in this graph. Of course, since we have somewhat higher equity, the net debt to equity ratio has improved with around 10 percentage units since June last year, down to slightly over 50% here in June this year.
Of course, since we have an effect of improved earnings and pretty stable capital turnover rates, we also start to see some improvements of our profitability measures. Key ratios like the return on capital employed or return on equity, where we are up close to one percentage units compared to end of June last year. The trend of a reduction or decreasing average number of full-time employees continued here in the first half year. We are 1,100 less full-time employees this year compared to last year. Also that affecting the lower demand in U.S. and also partly due to the structural measures we were taking during the second half of last year. By that, Kai, I think we're in for the summary.
Yes. Oops.
Again, all in all, a very good quarter for us. We are quite pleased with the development and the fact that we have improved the result and the margins despite the seasonal headwinds, the currency headwinds, and having increased profitable growth activities. That is actually the priority for the rest of the year. We are pressing ahead along the same direction. Nothing is actually changing. Nothing has changed either as to our ambition of our 10% margin goal. The recent communication we had about it was we should be in a position to fulfill it during 2017 or 2018, and over those two years, and that still holds water. What we have announced is we have a Capital Markets Day, 8th of September, correct?
By then we hope to be a little bit more specific about some of the profitable growth initiatives and the direction going ahead. I think I'll leave it there and we can with that, move over to questions.
Operator, we will start with questions from the floor here in Stockholm.
Yes. Hi, Anders Ström from SEB. I have a couple of questions. First, you continue to have a negative impact on sales in Consumer Brands on the value over volume strategy. How long is that going to continue to have a significant impact on sales? First question. Let me take it one by one, actually. Take that first.
Okay. The response to that is the major part of that value over volume strategy impact is relating to what has been characterized as a risk account. That's the major share of that decline, in fact. There are also other aspects that are a bit softer than what we expected. To some extent in this quarter, it has also been a tendency as a consequence of the weak season that there has been more discounts. We have been a bit more cautious with that, and you can say that's another expression of the value over volume type of strategy. We could have been more aggressive potentially on discounting. We refrained from that by and large. Maybe that element is larger in this quarter than you would have expected. I think the communication in general terms is we should have bottomed out by 2016, 2017.
There shouldn't be much more of decline to expect beyond the potential of the risk account as such. That is the unknown factor here. Then we should actually start to see growth turning into 2018 onwards from new product introductions. I think I mentioned last time also that we are introducing, for example, a robotic mower for the Consumer Brands Division for next season in Europe. We're starting to fill in things into the pipeline that hasn't been there before. All those things will start to give support, of course, for having bottomed out and hopefully start to see some increase definitely with the 2018 season. If we're a bit lucky, we'll see it for the 2017 season.
All right. Very good. I want to talk a little bit about the robotic mowers as well. It's becoming an increasingly important product for you every quarter that goes by, I think. Could you say anything about how large a segment that is now for you in Husqvarna or in Gardena, or as combined? Also what you see in terms of total market potential for this product category long term?
Let's say that the growth is at least 20%. At least that's a number we can state. If you look at the absolute share that's talked about for the group, then related to the group, because there's more divisions involved, somewhere between 5%-10%. I'm a bit vague in this statement, but if you relate it to the group, it's in that region in between those numbers. That is becoming increasingly important, and we also see that the acceptance within retail has increased this season. Hence it seems well timed to also start to bring it into not only through the Gardena brand into the retail space, but also through the Consumer Brands Division for next season.
To me, it looks like this year has been the year when it's actually became a category of its own, really, which also means that you really need to have products in all the price categories. Are you there now or do you need to come out with more products?
No, the answer is we are not there yet. Husqvarna is a premium position brand. It's the best product you will find in the market. I don't think anybody doubts about that. Gardena is based on very much the same technology, hence is also very high level. There is space for adding new brands into this, competing in other segments on different arguments and characteristics. That's what we start up next season. I emphasize again, it's a start of that. Of course, we have had a leading position in the robotics. We are determined to maintain in a leading position, means we need to, as you allude to, also have relevant offerings for all the larger segments in that market.
Finally, I don't know, maybe you said that, but in that case, I didn't hear it, about the inventory levels.
May I just add another comment. I just want to have everybody perfectly clear about that we are still, by and large, in the market on a very low penetration level of robotics. I think that should be mentioned. It's not such that we're going to hit the wall here in one or two years. No, that's not going to be the case. This is going to have a positive outlook for quite some time to come. Sorry, Anders.
Yeah, sorry. Inventory levels in the U.S. trade, where are we now going into the third quarter? Higher or lower average?
They are probably a bit disappointed, of course, with the sell out, the point of sale. Hence, we shouldn't be over-optimistic about the demand for quarter three either. We should rather expect the retailers, the big box actors, to reduce their inventories from now on rather than replenish from their supplier base. This looks like a fairly dull and disappointing season. I think we dare to say that by now.
Right. Thank you.
Thank you. Björn Enarson, Danske Bank. A question on the measures that you've talked about to deal with the unfavorable effects, and you have announced a few of them, and you're most likely working on other items as well to offset those. You have talked about most of these measures having an impact in 2018, if I'm correct. Are you still seeing a good improvement in momentum on the cost side or productivity side also in 2017? How should we look upon that year?
Okay. You will all recall that we have talked a lot about the Accelerated Improvement Program that we actually launched October 13. We were running it activity-wise until end of 2015. There are some spillovers into 2016 that are positive or full-year natured. What we are doing is we are running internally a program for the year 2016 and 2017 with a program name just like AIP. We have chosen not to communicate that externally as a program because of the simple reason that if we do, and you see the magnitude of that, you will also start to ask details about the profitable growth initiatives, and we will end up leaving too much information to our competitors. We have refrained from communicating about the program that we are now pursuing for the year 2016 and 2017. It's also a significant program.
To a much larger extent, supporting the profitable growth activities, whereas AIP was a pure profitability improvement. That was easy to communicate, so to say.
Yeah.
We are a little bit feeling that our hands are tied to be too specific in the communication about what the current program delivers. We'd rather talk about the net of it, so to say that we are offsetting the currency headwinds, the profitable growth investment.
Should we see it more as a gradual or a big step?
It's a step. It's a significant step for the group that we're taking during these two years in terms of-
Yeah
operational improvements. There's no question about that.
Cool. Thank you.
Björn, maybe you were referring to the structure measures we took end of 2015.
2015, yes.
That will, as you're in on to, have no big effect 2016, will have more effect 2017, and full effect 2018.
Yeah.
That plan is continuing.
We said at the time that that was just a small piece of the total.
Yes.
We can just repeat it. That was a piece of the whole thing, but it's not more or less than that.
On Husqvarna Connect, could you give some indications on what it means to launch it more full next year versus this year's more selected launch? Is this the big step for Gardena next year?
The whole category of smart garden has an enormous potential, obviously, as we continue to develop and bring products to the market. I'm not in a position to here now comment it. I'd be glad to bring it back and see whether we are going to be more specific at the Capital Market Days in September, because I will be a bit more forward-oriented in the communication.
You're onto something, of course, which is interesting, and we do make big expectations into this area over time. I'm not going to quantify it right here now.
Perfect. Thank you.
Hi, I'm Erik Aronsson, UBS. I would like to talk a little bit about the aftermarket. Have you taken any steps recently towards increasing your share of sales towards aftermarket? What is the next steps that you're going to do? Maybe you can give a little bit update on the new factory in Husqvarna with chainsaws and the progress and when you expect that to kick into P&L.
Let me first be clear. We have, to some extent, underserved the aftermarket. We haven't explored fully the opportunity. We're trying to catch up. It's one of the areas we're working hard to catch up, and that goes all the way, how we penetrate and work with the front end, with more dedicated people, with programs, with bonding, et cetera, as well as into the back ends of systems and support and all those things. These are ongoing activities by good reasons. That's the first comment. The second comment then relates more to the chain manufacturing, actually, we are starting to produce right now, chains, as we speak. We will launch during the fall into the market. Selective regions, just like we did with the Gardena Smart System. We will start with the Nordic countries, and that will be right after the summer.
A lot of testing obviously has been pursued and executed, and we think we have a very good product. The trick of the whole thing sits in the consistency of the quality during the ramp-up of the production. This will be a ramp-up that will take a couple of years, and we will extend it to various geographies. We will extend it into more versions of chains as that progresses. Already during the fall, we will expand the geography. During the latter part of the fall, we will expand geography into other parts of Europe as well. We are sticking to the plans we have communicated the last, I would say, year. We are, of course, I have to be honest about that, a bit late versus what we hoped to be when that project was launched.
On the other hand, I think it's quite unusual that you start producing something completely new with that many steps of discrete manufacturing processes that you haven't had experience of, and you're going to succeed according to plan and quality. That's rare, and we were not in that fortunate corner. We're taking a learning curve. We're working through a learning curve. It's looking okay, absolutely.
Are you ready to quantify that, where you are now in terms of sales towards aftermarkets now, versus that you expect to be in, let's say, 2018, when that is ramped up to-
That's another, I think, more forward-looking prediction that I hope to be more specific about at the Capital Markets Day.
Thank you.
Natalie Falkman from Carnegie. A question on Consumer Brands first. It felt like you, compared to last quarter, was a bit muted on delivering breakeven this year, and that is despite a very good margin, again the background of a serious sales drop. What has changed? Do you see that in H2 you will have a larger drop through due to negative volume? What in your view has changed?
The thing that has changed, it's not the plan, the execution of the turnaround activities. It's actually the demand decline and softening. That's a problem. I'm not sure how clear I was when I tried to answer the question of what we can expect for quarter three, but the answer is continued weak demand because they will not replenish that much, and they will actually reduce. That's our expectation at this point in time. They will reduce their inventories, in order to leave the season standing on the right foot, so to say. From the big box point of view, that means we do not expect that we will be in positive sales numbers territory for the H2. We'll probably see something that is a decline, who knows, give and take 10% for the second half of the year.
The negative volume effect on EBIT is expected to be slightly higher compared to Q-
What we expected would have been a more average. Within the span of what you can characterize as a more normal season.
Thank you so much. A question on Husqvarna Division's organic growth initiatives. Are they more or less centered around robotics? Or do you compare it to Gardena, for example, where you also invest a lot in penetration? Is it something that you also do for Husqvarna? Because for Gardena, it has been a quite dramatic positive impact. Just to understand better what you do in Husqvarna Division on organic growth initiatives.
That is something we will talk a lot about in September. The quick answer is no. Robotics is one out of some five, six activities that Husqvarna Division is pursuing. Of course, in this season we are right now, quarter two, the robotics is very pronounced. It is the quarter of the robotics, so to say. During the fall, there will be completely other products, which are in the focus of what we are doing. It's not only a matter about product, it's also a matter about how we actually work with our channel. That is something that is very high on our agenda as well. Dealer business development programs, just to mention one of them. Urban positions, to reinforce those, et cetera.
There are many aspects and facets of what they are doing that goes beyond the products and particularly beyond robotics.
there's no penetration change in the market share penetration goal? Sorry, rather the footprint is approximately
To start with, the major impact is, of course, to enhance the capabilities of the footprint we have. Then we want to add specific positions in urban areas that are strategic, where we have, let's say, a larger opportunity relatively seen.
Okay, just last question on the additional cost-saving program that you just mentioned. Not digging into the detail, but rather maybe the result of it. Do you see that the result of it is just that you will continue to have the similar gross savings per year as you expect to have this year and next year, but have it for a more number of years? Is that the result?
Do you want to start?
No, I think we have talked about more in general terms of the journey we're on to of continuing the improvement on EBIT operating income of plus SEK 500 million. Of course, if we are doing profitable growth initiatives, we have to have even more savings to be able to continue that journey, and that is what we are trying to achieve also for next year. Of course, as we have talked about it before, when you do this, you take the low-hanging fruit first and it becomes more and more difficult. Of course, it's a challenge, but we were talking about new areas we are going into as well with the same thinking and same methodology as we have done on the material side, actually to bring those cost elements down as well.
Thank you.
Stefan Stjernholm, Nordea. A question on raw material. If I remember right, you said that it will be flat to slightly positive for the full year. Is that still valid?
Sorry, I missed the question.
Raw material impact-
Okay
on EBIT. Yeah.
We have had the season. Of course, a big part of the savings or the lower raw materials are already into the income statement. Yes, we don't see an uptick. We maybe see an uptick, but since we don't have production to a large extent right now, we cannot affect it. Let's see how we will play it out, but we expect a continued, really good situation, at least from the start of next year.
The impact so far for the first half of this year is around SEK 100+?
It's a positive impact.
Operator, we can take questions from the telephone audience, please.
Absolutely. If anybody on today's call would like to ask a question, there is star and one on your telephone keypad, and wait for your name to be announced. Star and one to ask a question, the hash key to cancel the request. Our first question today is from Olof Cederholm from ABG. Please go ahead.
Hi, it's Olof Cederholm from ABG. Just a couple of questions. Looking at Husqvarna and Gardena, or maybe if we focus on Husqvarna, how are the volumes developing outside of robotics in Europe? Are you growing the rest of the business as well, or is growth only from robotics?
Actually, the answer to that, it is growth beyond robotics as well. The reason is that North America was also a significant decline for the Husqvarna Division. Not in the same magnitude as for Consumer Brands Division, but still, give and take, double-digit. The answer is yes, there was growth beyond robotics for Europe.
Okay. Your focus on mix and growing profit pools, et cetera, are you able to do that all in Husqvarna outside of robotics as well, or is robotics the pronounced mix improver here?
For the quarter two, we emphasize robotics. I think if you take a yearly view on it, there are other elements that are significant as well.
All right. Lastly, Construction Division. Very impressive margin. Was there anything there that is more of a one-time event, or should we simply expect the margin to be higher going forward than we thought before Q2, so to speak?
I can't really relate to your expectations, but for those who were around couple of years ago at the Capital Markets Day, I think we were hinting at the time almost in the direction of 14% EBIT margin as something that should be within reach from three, four years down the road. I don't think that has changed, actually. I think that for rolling 12, that's in the cards if we don't have a business cycle against us. The comment I would like to make is that whereas for the Forest and Garden divisions, Husqvarna, Gardena, and Consumer, the season is more important than the business cycle. Construction is a more traditional business cycle case. They are going up and down with the business cycle to much more traditional patterns and behavior. With that disclaimer, I think it's definitely in the cards to expect that.
All right. Very good. Thank you.
Thank you very much. Your next question on the phone lines comes from Ramsin Engholm from Handelsbanken. Please go ahead.
Yes, hi. I had two questions relating to the third quarter. In 2014, Gardena made a loss in the third quarter. You had a magnificent season last year. Is the third quarter a kind of a break-even quarter, or do you actually generate money there, since we don't have a lot of history in that? That's the first question. The second question is, I seem to recall that Husqvarna Division in the third quarter of last year suffered quite a bit from negative mix and under absorption. Is that correct?
Starting with the second question, I can't really say that's in top of my mind. I think we had a plus three last year, quarter three for Husqvarna Division, so I don't think that's necessarily correct. I'm sorry, I can't. Maybe you have something to
Yeah, there was, of course, an effect related to our U.S. footprint and the absorption in our factories there. Of course, that is also affecting Husqvarna Division since they are also part of that structure. Other than that, I don't have anything to add, actually.
No. The second
On to Gardena.
The first question you asked about Gardena in quarter three, I think quarter three for Gardena is a little bit actually the consequence of whether they have had a sell-through the point of sales or not. Will they have had a good point of sales? They will replenish, reorder, and it will become a good quarter. If they haven't, they will just reduce their inventories. That's why you will see a big volatility in quarter three. I think it's hard to talk about a very clear expectation of quarter three. You heard us mentioning that we will see a negative quarter three for Gardena this year. Whether that means that we cannot balance the profitability, I don't want to speculate about right now. From a top-line point of view, it's going to be negative.
One reflection for being sort of newcomer, I have not actually seen a normal Gardena because 2014, I've understood the second quarter was exceptional, and last year the third quarter was exceptional. Let's see what is normal for Gardena.
Yeah.
One thing we can say about Gardena, which is going to be showed through, that is it's going to be a very strong year all in all. With 15% after the first half, it will be a great year. Whether that ends up being +8 or +10, who knows? We will see. It will be in that magnitude.
Just on that, sort of related to that matter at least, obviously the inventory situation is pretty troublesome in the U.S. market. That I can clearly understand. What does it look like in Europe? Has it been sort of good sell-through or not for Gardena and Husqvarna and so on? I don't know, had the weather been good or bad here?
I think what we try to verbalize is that for Gardena, it hasn't been beneficial, but on the other hand, for Husqvarna, if it's a bit wetter, that's not necessarily a problem. The grass grows pretty nicely when it's a bit wetter in the soil. In that respect, I think you have the answer right there.
Okay, thanks.
Thank you very much. There's currently no further questions on the telephone lines.
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