Earnings Call: Q2 2016

Jul 15, 2016

Good morning, and welcome to quarter 2 presentation. We are quite pleased, in fact, with the development and the progress of the year. And I'll jump straight to the summary overview. We have improved results. We have improved margins. And 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. And we are also catering and supporting growth, profitable growth initiatives. And despite those things coming out in a good way with a result improvement. So 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 sales that is going down in a considerable and significant way, but that is weather related to twothree and maybe in the magnitude of onethree 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, and that gives the support to all this. Operating income rose to SEK1.729 billion versus SEK16.75 billion last year and then having absorbed SEK170,000,000 currency headwinds. Cash flow and net debt improved as well, and Jan will talk a bit about that later. If we look at EBIT result development, we normally show this curve. That's a rolling 12 month absolute number of it and 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. So we are pleased with that development. Moving on to the financial highlights. All in all, we had on the top line minus 4% in comparable currencies for the quarter, and we are still plus €1 for the year, having had a good Q1. And the reason for the decline, the minus 4 in the quarter relates very much to the Consumer Brands division. All the other 3 are in growth territory. You will see the details soon. Operational improvements are strong, but I would also like to emphasize that they are according to plan. There is 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. And that is the strength we need in order to cater for these improvements of the EBIT results. You see the gross margin improvement, 31% to 34% on the quarter. You see 29% to 31% for the half year. So it's that's what it is actually, and 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. And you can imagine in the season, which is weak than in North America, that puts pressure on prices and discounts and campaigns. But all in all, we are we have stable pricing. So we're quite pleased with that. And 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 increased comparable currencies, driven by a strong European activity. North America also being in quite negative numbers, but the strength of Europe then outbalancing that negative impact. And at the forefront of the strength is robotics season, which is pressing on quite successfully, in fact. So 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. And 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 EUR 100 €1,000,000 of currency headwinds. And still, we are improving the margin from 17.5% to 18% in the quarter, SEK1 1,000,000,000 becoming SEK1.31 billion absolute numbers quarter wise. And you will also see, if you whether you look at the improvement versus last year or last 12 months, that it's a good quite a good holding up quite well here with the difficulty of the currency that has been burdening us a lot. And John 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. But 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 watering mobile watering systems systems as well as the smart systems. They also had quite some success with a new range of robotics movers called the Seleno range. You also see very strong numbers of increase on that side. But it's not I emphasize again, it's not driven by a strong season. It's these other things that have supported it. And now, of course, as we start to look into quarter 3, we had an outstanding quarter 3 last year. The good weather in Continental Europe started actually mid June and went on throughout most of quarter 3. So quarter 3 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 sellout of the season so far being at the best average, probably lower than average actually. So this is a sign of strength. I think that's how you should read it, of the efforts we are taking into market penetration and product introductions. Margin wise, a little uptick, 22.1% becoming 22.5%. And we have very much the same pattern with some support from price, material cost reductions, but also higher R and 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 done in core markets in Europe. But 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 Guard for 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. But a very positive development for Gardena as well. Now coming then to Consumer Brands, repeating the sentence, the turnaround is progressing according to plan. That's important to remember. But of course, because of this weather situation, there has been a sharp decline in the demand in retail. I would say, give and take, twothree of this decline is attributable to the season and the weather. Onethree 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 1. So if you look at the numbers for year to date, you will see minus 11%, and maybe that's a more representative number than the minus 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 SEK65 1,000,000 of currency headwinds. And despite that, we deliver an improved margin and in absolute numbers SEK 147 1,000,000 versus a reference of €179,000,000 €178,000,000 last year. So 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. So we press ahead with the plan, which I have communicated previously and aims at 5% EBIT margin 2018, nothing has changed in that respect. So if we are back to average season for another year, things will look a lot better. But I want to say, of course, given this significant headwind, the aim to make a breakeven this year will be tough. I'm not excluding it, but it's not a given one anymore. Might struggle a bit there to get all the way. And we were minus 120 last year for the full year, and we're going to absorb for the full year currency, yes, €150,000,000 or something. So you realize the starting point, so to say, with minus 200,000,000 or something then altogether that we're trying to bring up to breakeven. It will be difficult, but we are still working with that target nevertheless. Construction products, up 4% comparable currencies. And this is also despite a weakness in the stone industry. And the stone industry then particularly being relating to geographies like Latin America and the Middle East, demand has weakened during the spring. So that has had an impact. There's some couple of percentage points that has impacted the total number. But nevertheless, we are pressing ahead with positive developments, driven very much by North America, which is the locomotive also for quarter 2 like the previous quarters and like last year for that sake. Income, operating income has improved, of course, as a consequence of the volume. But in this division, we have some positive currency effects. So 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%. So 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 exclude sorry, 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. Okay. Thank you, Kai. And as we stated already in the beginning of the year and we repeated here in the interim report for the Q2 that 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. And 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 Q3 for being Gardena and also for being the group in a seasonal normally weak quarter. As you remember, Gardena had a terrific improvement, the result and sales in the Q3 last year. So of course, that will be difficult. So we are where we actually should be after these first two quarters. Net sales continue to grow here in the second quarter in the 3 divisions that are profitable growth divisions. But as you heard Kai saying, with unfavorable weather in U. S. Affecting them 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 on in nominal terms, but once again adjusting for the strongest Swedish kroner in local currencies, we're actually up 1%. Gross income, around CHF120 1,000,000 better than last year. Of course, also there battling negative currency effect, but it improved due to a strong mix. And when we are talking about strong mix, it's both products, I. E, strong robotic sales and also a good first second quarter and also first half year for Gardena and Watering Products, that's important for us and also a divisional mix As we have the 3 divisions in profitable growth growing and we have then consumer brand 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. And 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. And in this quarter mainly then related to direct material lower direct material costs. On the negative side, this quarter, the substantial volume drop is, of course, impacting negatively. And also, we have some effects in cost of goods sold related to profitable growth initiatives, mainly then R and D costs, which is part of that. For the 1st two quarters, we have an improvement of gross income of SEK300 1,000,000, same explanations but, of course, different numbers, But volume is more or less awash in the first half year. Selling and administrative expenses, SG and A, they're also $65,000,000 higher than last year. Two explanations: currency once again but also the strategic order initiatives we have, the growth initiatives we have. And the CHF 200,000,000 increase which we are seeing for the 1st 6 months, same explanation there, currency and profitable growth initiatives. So all in all, operating income, some CHF54,000,000 better than last year, CHF1729 1,000,000. We go from 13.7% 2nd quarter last year up to 15%. And for the 1st 6 months, we are up some CHF 110,000,000 on operating income to close to SEK 2,900,000,000. Something about currency. We were battling SEK 170,000,000 here in the second quarter. We have now minus SEK 380,000,000. We have talked about SEK 500,000,000 when we started the year. We were down and talking about SEK 450,000,000 after the Q1. Now it's around 475 for the full year. So as you can hear, it's going a little back and forth, but it's around 450 to 500, so we think we are in the middle. And 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 Q2 this year, it was positively affected by currency effects, meaning that we are on a full year. On the 1st 6 months, we are more or less on the same level as last year as regard financial items. And 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. So net income coming down to or coming up to CHF1.259 billion. That is an improvement of CHF150 1,000,000 compared to last year. We have an impressive net margin of 10.9%. So here we are, double digits but in the quarter. And an earnings per share of SEK2.19. And for the full year, a net income or a full year, the 1st 6 months, a net income of slightly over SEK2 1,000,000,000, an improvement of SEK90 million. Moving over to the balance sheet. We had actually, we had very little currency impact in the balance sheet, but something happened here after the Brexit. So it moved around a little with currency rates, which we affected, to some extent, the balance sheet. So taking a look on the different items here, we can start with noncurrent assets. In local currencies, they are more or less exactly the same as they are right now. So what we have seen is higher CapEx, lower depreciation, but we have been selling 1 of our Chinese factories, and that has impacted these numbers. So 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 SEK150 1,000,000 compared to last year. And of course, that is mainly related to consumer brand and what we have heard about, the weather situation in 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 or the Swedish kroner impact. Trade payables, some €275,000,000 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. And of course, due to the recent and rather sharp drop we saw in U. S. In the Q2, it has not been possible for us to mitigate the loss of volume with inventory reductions. Net debt decreased some SEK0.6 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've got some currency effects also affecting the net debt. So we are down to SEK7.5 billion now on net debt. It increased from start of the year. We did close to SEK1.1 billion, and of course, that's a seasonal pattern. And talking about seasonal pattern, this cash flow is, of course, also impacted by the seasonal pattern of building up the working capital in the 4th and especially in the Q1 and then unwinding working capital starting from the Q2, as you can see it very clearly seen here. So it meant that our operating cash flow adjusted for acquired and divested assets was slightly over SEK 700,000,000 for the 1st 6 months. That was an improvement of around SEK0.6 billion compared to where we were last year. And 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 1st two quarters. Coming back to net debt, net debt to equity ratio. We can see the trend of gradually reduced net debt in this graph. And 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 percent here and June this year. And of course, since we have an effect of improved earnings and a 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 1 percentage units compared to end of June last year. And also the trend of a reduction or decrease in average number of full time employees continued here in the first half year. We are some 1100 less full time employees this year compared to last year. Of course, also that affecting the lower demand in U. S. And also partly due to the structure measures we were taking during the second half of last year. So by that, Kai, I think we're in for the summary. Yes. Okay. So again, all in all, a very good quarter for us. We're 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. And 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. We the recent communication we had about it was we should be in a position to fulfill it during the '17 or 2018, any of those 2 years. And that still holds water. What we have announced is we have a Capital Market Day 8 September, correct? And by then, we hope to be a little bit more specific about some of the profitable growth initiatives and the direction going ahead. So I think I'll leave it there. And we can, with that, move over to questions. And operator, we will start with questions from the floor here in Stockholm. Yes. Anders Trapp from SBB. I have a couple of questions. First, you continue to have a negative impact on sales in consumer brands on the sort of value over volume strategy. How long is that going to continue to have a significant impact on sales? First question. 2nd question, take it 1 by 1, I should take that first. Okay. So the response to that is the major part of that value or volume strategy impact is relating to what has been characterized as a risk account. So that's the major share of that decline, in fact. But 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 of a volume type of strategy. We could have been more aggressive potentially on discounting. We refrain from that by and large. So 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 'sixteen, 'seventeen. So 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. And then we should actually start to see growth turning into 'eighteen onwards from new product introductions. And I think I mentioned last time also that we are introducing, for example, a robotics mover for the Consumer Brands division for next season in Europe. So there are start we're starting to fill in things into the pipeline that hasn't been there before. So they all will all those things will start to give support, of course, for having bottomed out and hopefully start to see some increase definitely with 'eighteen season. If we're a bit lucky, we'll see it for the 'seventeen season. Right. Very good. I want to talk a little bit about robotic mowers as well. I mean, it's becoming an increasingly important product for you every quarter that goes by, I think. Could you say anything about how large segment that is now for you in Husqvarna or in Gardena or as combined or and 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% to 10%. I'm a bit vague in this statement that 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. So and 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 it's this year has been the year when it's actually become became a category of its own really, which also means that you really need to have products in all the category 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. I mean, we Husqvarna is a premium positioned 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, it's also very high level. There is space for adding new brands into this, competing in other segments on different arguments and characteristics. So and that's what we start up next season. But 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 alluded to, also have relevant offerings for all the larger segments in that market. Finally, about Edon, maybe you said that, but in that case, I didn't hear it about the inventory levels in the May I just add another comment to it? I just wanted 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. So it's not such that we're going to hit the wall here in 1 or 2 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. Yes. Sorry. Inventory levels in the U. S. Trade, where are we now going into the 3rd quarter, high or lower average? They are probably a bit disappointed, of course, with the sell out, the point of sale. And hence, we shouldn't be overoptimistic about the demand for quarter 3 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. So this looks like a fairly dull and disappointing season. I think we dare to say that by now. Bjorn Enarson, Danske Bank. A question on the measures that you've talked about to deal with the unfavorable FX, and you have announced a few of them, and you're most likely working on other items as well to offset those. But you have talked about most of these measures having an impact in 2018, if I'm correct. But are you still seeing a good improvement in momentum on the cost side or productivity side also in 'seventeen? How should we look upon that here? Okay. You will all recall that we have talked a lot about the accelerated improvement program that we actually launched October 'thirteen. We were running it activity wise until end of 'fifteen. There are some spillovers into 'sixteen that are positive of like full year nature. What we are doing is we are running internally a program for the year 'sixteen 'seventeen with a program name just like AIP. However, 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. So we have refrained from communicating about the program that we are now pursuing for the year 'sixteen and 'seventeen. But it is also a significant program. But then to a much larger extent, supporting the profitable growth activities, whereas AIP was a pure profitability improvement. So that was easy to communicate, so to say. So we are a little bit feeling that our hands are tight to be too specific in the communication about what the current program delivers. So we rather talk about the net of it. So if you say that we are offsetting the current headwinds, the profitable growth investments. Sure. But 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 they're taking during these 2 years in terms of operational improvements. There's no question about that. But Bjorn, maybe you were referring to the structure measures we took end of 'fifteen. 'fifteen, yes. And that will, as you are in on to have not big effect 'sixteen, will have more effect 'seventeen and full effect 'eighteen. And that plan is continuing. We said at the time that, that was just a small piece of the total. And if we can just repeat it, that was a piece of the whole thing, but it's not more or less than that. And on Konnected Gardens, 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? I mean, 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 hear and now comment it. I'll be glad to bring it back and see whether we are going to be more specific at the Capital Market Days in September because then we'll be a bit more forward oriented in the communication. But you're on to something, of course, which is interesting. And we do make big expectations into this area over time. But I'm not going to quantify it right here. Perfect. Thank you. Hi. I'm Erik Karlsson, UBS. I would like to talk a little bit about the aftermarket. How have you taken any steps recently towards increasing your share of sales towards the aftermarket? And what is the next steps that you're going to do? And also, 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 and L? Let me first be clear. We have, to some 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 bundling, etcetera, as well as into the back ends of systems and support and all those things. So these are ongoing activities by good reasons. That's the first comment. The second comment then relates more to the chain and manufacturing. And actually, we are starting to produce right now chains as we speak. And we will launch during the fall into the market selective regions just like we did with the Smart Garden. And 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 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. So 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. But already during the fall, we will expand geography. During the latter part of the fall, we will expand geography into other parts of Europe as well. So we are sticking to the plans we have communicated the last, I would say, year. But 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 process 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. So we're taking a learning curve. We're working through our learning curve, but it's looking okay, absolutely. Are you ready to give any like and 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 direction that I hope to be more specific about at the Capital Market Day. Matthew Faldner 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, I guess, the background of a serious sales drop. What has changed? Do you see that in H2 to have a larger drop through due to negative volume or what's, in your view, changed? I mean the thing that has changed, it's not the plan, the execution of the turnaround activity. It's actually the demand decline and softening that's a problem. And I'm not sure how clear I was when I talked when I tried to answer the question of what we can expect for Q3, 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 And 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. So we'll probably see something that is a decline on us, give and take 10% for the second half of the year. And the volume negative volume effect on EBIT is expected to be slightly higher compared to the What we expected would have been a more average type of within the span of what you can characterize as a more normal season. Then the question on Husqvarna Divisions' organic growth initiatives. Are they more or less centered around robotics? Or do you compare it to Gardena, for example, where you also invest robot penetration? Is it something that you also do for Husqvarna? Because for Gardena, it has been a quite dramatic positive impact. So just to understand better what you do in Husqvarna division on organic growth initiatives. And that is something we will talk a lot about in September. But the quick answer is, now robotics is 1 out of some 5, 6 activities that Husqvarna Division is pursuing. Of course, in this season, we are right now quarter 2. The robotics is very pronounced. So it is the quarter of the robotics, so to say. And then during the fall, there will be completely other products, which are in the focus of what we are doing. But it's not only a matter about product, it's also a matter about how we actually work with our channel. And so that is something that is very high on our agenda as well. So dealer business development programs, just to mention one of them, urban positions to reinforce those, etcetera. So there are many aspects and facets of what they are doing that goes beyond the products and particularly beyond robotics. So there's no penetration change in market share penetration goal? Not sorry, rather the footprint is approximately To start with, the major impact is, of course, to enhance the capabilities of the footprint we have. And then we want to add specific positions in urban areas that are strategic, where we have, let's say, a larger opportunity relatively soon. If I can 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, just that you will Is that the result? Is that the result? Do you want to start, Raj? 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 SEK500 1,000,000. And 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. But of course, as we are we have talked about it before, when you do this, you take the low hanging fruit first and it becomes more and more difficult. So 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 materials side actually to bring those cost elements down as well. Stefan Pfannen, 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. Just raw material impact on EBIT? I mean, we have had the season. So of course, a big part of the savings or the lower raw materials are already into the income statement. But yes, I mean, we don't see an uptick. We see we maybe see an uptick, but since we don't have production to a large extent right now, we cannot affect it. So let's see what the how we will play it out, but we expect a continued rather good situation at least from the start of next year. And the impact so far for the first half of this year, so around 100 plus? It's a positive impact. Operator, we can take questions from the telephone audience, please. And our first question today is from Olof Sederholm from ABG. It's Olof Sederholm 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. And the reason is that North America was also a significant decline for the Husqvarna brand division, not in the same magnitude as for consumer brands, but still give and take, double digit. So the answer is yes, there was growth beyond robotics for Europe. Okay. And are you you're focused on mix and growing profit pools, etcetera. 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 2, we emphasize robotics. But I think if you take a yearly view on it, there are other elements that are significant as well. All right. And then lastly, Construction, very impressive margin. Was there anything there that is more of a onetime 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 a couple of years ago at the Capital Market Day, so I think we were hinting at the time almost in the direction of 14% EBIT margin as something that should be within reach from 3, 4 years down the road. And I don't think that has changed actually. I think that is 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. So they are going up and down with the business cycle to much more traditional patterns and behavior. So if with that disclaimer, I think it's definitely in the cards to expect that. And your next question on the phone line comes from Ramesses Enberg from Handelsbanken. I had two questions relating to the 3rd quarter. In 2014, Adena made a loss in the 3rd quarter and then you had a magnificent season last year. Is the Q3 kind of a breakeven quarter? Or do you actually generate money there since we don't have a lot of history in that? That's the first question. And then the second question is, I seem to recall that Susquehanna division in the Q3 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 +3 last year, quarter 3 for Husqvarna division. So I don't think that's necessarily correct. I'm sorry, I caught maybe you have Yes. There was, of course, an effect related to our U. S. Footprint and the absorption in our factories there. There. Of course, that is also affecting risk on a division since they are also part of that structure. But other than that, I don't have anything to add actually. And then second And then on the Gardena. Then the first question you asked about in quarter 3. I think quarter 3 for Gardena is a little bit actually a consequence of whether they have had a sell through, the point of sales or not. When 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. So that's why you will see a big volatility in quarter 3. So I think it's hard to talk about a very clear expectation of quarter 3. You heard us mentioning that we will see a negative quarter 3 for Gardena this year. Whether that means that we cannot balance the profitability, I don't want to speculate about right now. But 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 'fourteen, I've understood the second quarter was exceptional. And last year, the Q3 was exceptional. So let's see what is normal for Gardena. Yes. Yes. Just But 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, I mean, with 15% after the first half, it will be a great year. Whether that ends up being +8 or 110, who knows? We will see. But it will be in that magnitude. Yes. I just on that sort of related to that matter at least. And obviously, the inventory situation is pretty troublesome in the U. S. Market. That's I can clearly understand. But what does it look like in Europe? Has it been sort of good sell through or not for Gideon and Husqvarna and so on? Or is I mean, 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 glass grows pretty nicely when it's a bit wetter in the soil. In that respect, I think you have the answer right there. Okay. So before we close, just a short reminder, if you want to come to our Capital Markets Day, please sign up for that on our website. Otherwise, the next opportunity to see us will be October 'twenty for the Q3 results. So thank you, everyone, for calling, and have a nice vacation, hopefully. Thanks for your attention. Thank you.