Earnings Call: Q1 2016

Apr 21, 2016

Good morning. Welcome to Husqvarna's Quarter 1 Quarterly Report Announcement. We are pleased with the Q1 of the year, and I think that we have pretty much concentrated on the margin improvement the last couple years, as you will recall. We are in the corner taking the new direction of moving increasingly into profitable growth expansion, and we're also starting to invest in activities supporting that. Short term, that's a burden to some extent to building the growth engine that we intend to form. But I think we are very pleased that we have managed to balance the cost of the currencies, the currency headwinds and the cost of the investments and still show a little improvement in the quarter. And I'll talk you through how we see that happening and why that happened. But it is, as you will realize, a continued trend of improvements. And the underlying pace of improvements is equal to previous years. Net sales, very satisfactory to see that all divisions show a plus, including Consumer, be more specific about that as we continue. I mentioned the headwinds of the currency somewhat lower than what we guided. We guided SEK 250,000,000. We'll come back more to what we now see for the full year. We are actually on plan with the Consumer Brands division. I don't think the message is we are ahead of it, but we are according to the plan. And you will recall that the plan is we're aiming for a breakeven this year. We still believe in a +5 percent operating margin for 2018. We increased operating margin the income then with SEK 54,000,000 all in all. And cash flow positive in the sense less bad, where it's seasonally, always negative for us, but it's improved as well as the net debt. Looking at the development of the EBIT in absolute numbers, you can see then that we have now doubled principally from the €1,500,000,000 level of 2013, with the rolling €12,000,000,000 being now above 3 €1,000,000,000 which is pleasing margin fairly flattish. And we have also been clear that the 10% original target is not in the cards given the huge headwind of the currency this year. So that shouldn't be any surprise for you. But I think margin is one thing. We also need to balance that with absolute developments. And at the end of the day, that's what brings the dividend capability. And I think that's a fairly good curve at this point in time. Looking at the financial numbers. We are now with a 5% sales increase up to SEK11.36 billion of net sales. We had a slight increase of the operating margin from 10.2% to 10.3%. You will see that little improvement from 8.2% to 8.3 on the rolling 12 month as well. And you will see the 12 month rolling sales being €366,000,000,000 euros Operational improvements delivering according to plan. And with that, we have talked about the activities we are running on cost outs, direct material, which we are pressing on doing just like we have done in the accelerated improvement program. We added indirect material to that, and we added also focus on higher focus on productivity and logistics. So altogether, we have a vital piece of the improvement engine right here. But of course, we are also helped by the volume increase, by the product mix and by price increases altogether. So these two buckets are, so to say, bringing the result improvement despite the currency headwind and despite the investment we also take in the growth initiatives as cost additions. Looking at the divisions 1 by 1. We will see Husqvarna being up 4% currency adjusted and very much pulled actually in this time related to the EMEA region. Maybe I should back out and say that the season, by and large, it's no major change '16 versus 'fifteen in Europe. We have had a couple of, I would say, reasonably favorable spring season starts in Europe, and you need probably to go back to 'thirteen to have some difficult ones and then 'twelve was equally difficult with a long winter, whereas North America has had a couple of later spring season starts. This year, North America, by and now I'm talking generically, had a strong positive February. So we were very optimistic going into March. Then March turned worse. So all in all, I would say the quarter 1 seasonal start in North America wasn't anything particular in any direction. So what looked very promising turned a little bit less favorable and the result, it was nothing particular to talk about. I don't think we have any reason, as a super summary comment to the season, to expect anything extraordinary out of Q1 or Q2 for that sake. So there is nothing there that you should put into your possible Excel sheets. But returning back then to Husqvarna. So EMEA pulled the train a bit on the Husqvarna side and so did from a product category point of view, the robotics, which continue expanding in a favorable way, the robot movers. And of course, we are expanding the offering, and we do have very positive press in terms of test results. So whereas there is an audience now and a crowd of maybe magnitude of 20 actors, test shows very clearly that Husqvarna comes out in a very strong and mostly leading position. So we have those positives here. We have the volume. We have the product mix. There is an element of price as well, but we do have SEK 135,000,000 of FX headwind, and we do have the costs related to the investments in growth. All in all, a little decline to CHF 844,000,000 operating income versus CHF 897,000,000 previous year. But we think this is a strong result given what we are battling here. I move on to Gardena. Looks exceptionally strong now with 17% increase in the sales year on year. I would say directly that part of that is due to the strong quarter 3 we had last year, which meant that the trade left the year with lower than average inventories. So if you would look at those 17 percentage points, about half you can probably allocate attribute to normalization of inventories in the trade. The other half relates more than to the expansion in terms of channels, customers and new product introductions. And we will soon look at the film showing the most interesting of those product introductions. So it's a strong situation. We could have maybe expected even more result wise if we wouldn't have had the currency and also those investments in growth. So talking about the major expansion here of the product offering is Smart Garden, which is really where we, as the first actor, connect automatic watering with automatic moving. And I think many people recognize the problem of coming back to your garden after being away for 1 or 2 weeks, and it doesn't look like when you left it. And that's what we start to deal with here and try to resolve. And it's very interesting case. It's being introduced down in Germany, Austria, Switzerland, Benelux. At this point in time for next season, we will go broader. And the headline is Smart Garden, and you will hear a lot more about that as we move ahead. But absolute numbers, euros 204,000,000 became 226,000,000 operating income. So we think that is okay, but maybe somebody would have expected more leverage, but the reasons were the ones I mentioned. So let us then shortly look at film. It's I think it's a minute, not much more. Now for the very first time, smart technology meets your passion for gardening. No matter where you go, the Gardena Smart App takes care of your lawn and plants. The Gardena Smart App lets you connect from anywhere at any time. You can control your entire garden intelligently with a single app. The smart sensor is garden intelligence at your fingertips. It measures light intensity, temperature, and soil moisture. And with the smart water control, you never underwater or overwater. It's a fully automated watering system. No matter how long you're awake, you can always come home to a perfect lawn too. The smart Seleno Plus robotic lawn mower gives you a carpet like lawn, and the freedom to do the things you really love. The Gardena Smart System is the only system that connects both intelligent watering and lawn care. Out now only from Gardena. I think you all realize the potential in connecting these type of things and automating your garden. I think what this represents now is just the start of a journey that will be quite exciting as we move ahead. So we are thrilled by it. But let's see where it ends up. You realize we are investing in this, and that's part of the answer to when I talked about cost for driving profitable growth. Moving over to Consumer Brands. This is quite satisfactory. We have had and I emphasize positive sell in to the trade partners. I don't want anybody to sit and extrapolate that we necessarily will be in positive territory for the sales for the full year. What I said after quarter 4 was we expect a flat to slightly negative year from a sales perspective. And that still holds water, that statement. But the sell in is positive. And the focus for us will, as you will recall, be the turnaround of the results. And we are aiming at the breakeven for the full year. And so far, I think we are doing great. Impact from operational improvements to large extent and also price increases for the European part of the business, remembering that 80% sits in North America here, but still important to compensate in the European area on price as well. So we have a good start. We have a good momentum. We are very clear on the improvement activities, but it we also have one account in North America, which we strategically are reducing, and that puts some burden on the sales development. It's not an insignificant. It's one of the larger accounts. So that puts some pressure on the sales throughout the year. And I think the 1st year where we expect sales increases truly for the full year is 2017. But of course, quite pleasing to see that despite the FX impact of SEK 55,000,000, we managed to turn the minus SEK 11,000,000 to SEK 64,000,000. Construction division, plus 6% sales wise comparable currency, driven very much just like before by the North American space. Very strong momentum, very strong momentum also in the product launches. And there was a huge German construction exhibition last week in Munich called Bauma. And I think we came up very clearly as a market leader in that environment. So we feel quite pleased with that observation. The one little negative here is the stone industry, marble and stone cutting, multi wire applications, predominantly Brazil, but also South of Europe, Middle East being a bit weak and then burdening the overall number, which could then have been even a bit more favorable. Increase of the operating income for SEK 74,000,000 to SEK89,000,000, 8% became SEK9.2 continuing the margin improvement journey. We are now at 12%, rolling 12 month, which is also a good result, we think. So I think with those divisional comments, I leave it to Jan to talk more about the financials and the details. Okay. Thank you, Kaj. 1st quarter, very much in line with expectations. We talked about a stable or slightly improved top line when we entered into this quarter. And when we closed the books here in March, we saw that we had an increase of 4% in Swedish krona, but also a slight negative effect on our top line and that's mainly related to the dollar, meaning that in local currencies, we were actually up 5%. Gross income, some SEK 200,000,000 better than Q1 last year despite the negative currency headwind and that is related to the sales, of course, the higher sales in all divisions and also all divisions experienced general price increases. We also had a positive as a group, a positive mix, both coming from the product mix as such where we saw profit pools like auto movers and watering products increase substantially. And also, we get a divisional positive effect, I. E, we have more increases on the top line in Husqvarna, Gardena and Construction and lower increases in consumer brand with a lower profitability than the rest of the group. But we should also remember that consumer brand as such made an impressive journey during the Q1 compared to last year. Even though the AIP program has been closed, we are continuing in the same way of focusing on cost out activities, which meant that we had a clearly positive effect on direct material compared to last year. And on the negative side, if we should say something negative about the gross income, is the strategic initiative for profitable growth. We are talking about higher R and D costs in that sense, and that impacted negatively on gross income. If we move over to the selling expenses and the administrative expenses, they were some SEK130 1,000,000 higher than last year. Two main effects. 1 is once again then affecting the SG and A expenses, the strategic initiatives for supporting the profitable growth, which is one part and then also a negative currency effect. So all in all, operating income, SEK 1,166,000,000, that is an improvement of close to SEK 55,000,000 in the quarter. And as we had mentioned before, negative currency effects of around SEK 215,000,000 compared to Q1 last year. And that is last year, we had over €200,000,000 plus on hedges. This quarter, we have no effect on hedges at all. So we are taking the currency effect directly without any, so to say, support this quarter. Kai mentioned about the full year. 1st quarter turned out a little more positive than we had expected. We were talking about NOK 500,000,000 for the full year. We're off half more or less in this Q1. Now it was less, meaning that we are now expecting less on the full year. We are talking more in the terms of an expectation of minus SEK450,000,000 for the full year. Operating margin, slightly improvement to 10.3%. And then we had financial items that were negatively affected by the increased or higher cost for interest rates mainly then for interest mainly then related to rates in U. S. Dollar since we have a substantial footprint and thereby borrowing in U. S. Dollar, that affecting both the borrowing costs as well as financial instruments relating to the interest rates. And furthermore, we had some periodization effects that impacted positively last year, slightly positively and slightly negatively this year. But comparing the quarters, then we get an effect of that as well. All in all, net income, SEK761 million for the quarter, some SEK25 million lower than last year, giving a net margin of 6.7 percent and earnings per share of SEK1.32. Talking about our U. S. Footprint and also about the dollar, we see in the balance sheet the effects of that since this is translated to spot rates. And we had a decrease of the U. S. Dollar during the Q1, which means that in Swedish krona, we get an effect of the weaker dollar against the krona compared to March last year. All in all, as you can see, non current assets down despite then the fact that we have higher CapEx than depreciation, but that is related to that we had a sell off of a factory in China in the 2nd part of last year. We see a quite substantial decrease of inventory, SEK 1,000,000,000 between March last year March this year. Half of that is currency. The other half is real improvement in local currencies and it's related to consumer brand division, whereas the higher volume impacted the receivables in local currencies. So in local currencies, receivables are actually up with some SEK 300,000,000 even though they are down here in Swedish krona, but that's due to the currency once again. And accounts payable lower than last year in local currencies minus SEK 250,000,000, meaning that the net operating working capital, I. E, the inventory plus the trade receivables minus the accounts payables, were more or less in local currencies, the same level despite then the higher sales and the higher volume and in Swedish krona lower. But that meant also that we had a better capital efficiency in all in the quarter compared to last year. So our cash conversion cycle for the net operating working capital, I. E, how many days we need to turn the net operating working capital around onetime, decreased with one day here in the Q1 from year end to 95 days. As a consequence of an improved capital efficiency, we also see that the net debt is going down, SEK1.9 billion compared to March last year, but half of that is real improvements. That is our cash flow minus the dividend. The other half is once again related to currency and to lower pension liability, which in its turn is related to higher discount rates. SEK 8,400,000,000 was the net debt at the end of March this year. We have a seasonal pattern and clearly seen in the cash flow and also how we fund ourselves, of course. And that is related to the buildup of working capital in the first and second quarter when we start to release it, especially in the 3rd Q4. Operating cash flow adjusted for divested assets, slightly over minus SEK1.7 billion. That was an improvement of close to or some SEK500 1,000,000 compared to the same period last year, mainly then related to working capital, which show a lower increase from year end than we experienced last year. And also, of course, impacting positively the improved earnings. And on the other side, negatively, we are having an impact from capital expenditures that we expected for the full year and that is related to our initiatives for profitable growth. And we saw that started to impact here in the Q1. This slide then, net debt to equity, these are rolling 12 numbers. And as you can see, we see the trend of gradually reduced net debt in this graph. And with that, together with stable or increased equity, we get a net debt to equity ratio that actually decreased quite substantially here. In the Q1, some 20 percentage units or 0.2% down to 0.60%. And if we take the stance from this slide and looking at the rolling 12 month number, it's a little under 60% from on a rolling 12 month basis. Key ratios, well, we get and we see the positive impact from the improved earnings and improved capital efficiency in the quarter and capital efficiency here expressed as capital turnover rate increased slightly then. The target of 10% as an operating margin, that is still valid. But since we're putting efforts also on the capital efficiency, it's gratifying to see that it is starting to get give effects. So that meant also that the return on capital employed improved since last year with close to 1 0.5 percentage units in this quarter since year end, 0.3%, which is good. And this path is something we have to follow if we should get real profitable growth. The trend of decreasing average number of employees continued also here in the Q1. We were some 250 less employees than March last year, mainly as a consequence of a lower footprint in U. S. And also some structural measures that we took towards the end or the second half of last year. So Kaj, for you to sum up then. With that, we wrap up before the Q and A. Summarizing, all in all, again, a good quarter for us, continued trend of improved performance. And I'd like to emphasize the bottom right of this page where we say the priority for the group remains being to offset both further currency headwinds expected and to finance profitable growth initiatives. And you will recall, we talked after quarter 4 that this year will be a bit of a bit undramatic from the external point of view, going mostly sideways. And the commitment we have given is to be able to balance these two aspects or something better. But I don't want to leave you with the impression it will be significantly better because that would probably be to run be ahead of realities. But the previous statement is still valid. So a bit cautious on that because I saw some comments already this morning, which was extrapolating this a little bit quicker than what we have stated. But we stand firm to what we have said before, which is at least compensating for the currency headwinds and the investments in profitable growth activities or slightly upwards. So I think that's the long and short of our message before the Q and A starts. Tobias, please. So then let's open up for questions, please. And we'll start with questions from the floor here in Stockholm. Hi, Anders Trapp, SEB. I have a couple of questions. I can start with the growth initiatives. If you could say anything, something about you only spoke about Gardena here and now and growth initiatives under the smart card. And what else are you doing in terms of growth initiatives outside that? And is it other divisions than Gardena? And also, could you say anything about how much it has weighed on numbers so far? The second part, I'm a bit unwilling to enter into, Andres. Sorry for that. We don't want to be specific about it. But another way to look at it is to say that the improvement pace we talked about being something underlying improvement pace we talked about previously, somewhere between SEK 500,000,000 to SEK 700,000,000 for the full year. I think that still is a reasonable assumption. I know it's a bit wide. It's not very specific, but that's as specific as I'm prepared to get. The first part of your question, then what other initiatives do we see? Well, there's an array of them, of course. And if you look into the Husqvarna division, of course, we are expanding the robotics category very quickly. We are expanding battery based products quickly. And we are working to with business development measures in the dealer channel, we are working with expanding our positions in the commercial lawn and garden. Just mentioned some examples of areas that we support in the Husqvarna division. Gardena, as we looked at with the Smart Garden, that it's also, I think, important to remember its geographical expansion. That's a theme for Gardena. And even more multichannel positions. And we have seen how we have increased penetration and maybe visibly for some people being up in Sweden, not the least, you will now see us in new outlets versus previous years. So you have that type of expansion. Construction has been very much in the profitable growth mode, very much focusing their activities on increasing the sales penetration in key markets and further press ahead with the product offering expansion. So that would be some examples. And then consumers brands being then more in the turnaround mode, as you will recall. Even though, of course, we are also looking into not only defensive measures for them, but also adding product categories. And I think for next season, you will most likely see robotics products being entered through the consumer division as well. To explore on the technology edge that we're sitting on here. So we will add things naturally also to the consumer brands going ahead. So these are some of the examples, Anders, that I can give you of the bet. One question also on the you said that you're doing continue to do strategic reductions with a key U. S. Customer. How long are you going to do that? And where are you growing or with whom are you growing if you're reducing on maybe the biggest one? And how big is the one that you want to reduce your exposure to now? Let me elaborate a bit. I mean, we are growing with 2 out of the 4 big box retailers. We are flat with 1 and we are reducing 1, in fact. And the one we are reducing with is still 2nd largest in absolute numbers. So that gives a feel for the proportions. But it has shifted a lot during the last couple of years. We took a big step last year. There are more steps probably to be taken to find the right balance here. And that's what burdens the situation, as I mentioned. The rest is actually, by and large for the year, fairly flattish, maybe slightly positive. Thank you. Rasmus Enberg with Handelsbanken. On the matter of geographic expansion, don't you think that the U. S. Is becoming ready for robotics? Yes. The answer is yes. And we are actually, for the first time, seriously going about it this season. So we have, I think, brought it to 600 point of sales areas. And we have educated certain dealers, certified them and for them to be able to support it. So I think you see 'sixteen being the 1st year where we actually go about it in some serious way, but the results will rather be 'seventeen, 'eighteen. But it's time, yes. And so far, the little we see now this season, there is definitely interest in it. Do you sell it as a retail product or how do you sort of position? No, it will be a dealer product in the U. S. To start with, to give the service to I mean, I think we need to be realistic. You need to this is market development at this point in time. You need to make the consumer aware of how do they go about this concept, what does it really offer in terms of benefits and values versus what they got. And that takes time. It's simply airtime with customers here. And second question, the chains or chains, can you give us an indication on where we stand in that and if there are any potential impacts in 2016 or 2017 that we should think about? First answer is we are introducing chain for the second half of this year to the market. So I think we mentioned that already at the previous announcement, and that still holds water. It is, for us, hugely important that the quality is the priority one. We can never compromise around that. So if we introduce this change, it better be good and it will be good. But that sets the pace. And so we have the performance in place. We have had sufficient of tests out there. So we feel very relaxed with that part. And now we just need to trim in the ramp up of the production and then start to add further chain versions because this is not like it is one version of chains. It's actually a whole set of different chains and with a specific characteristics. And that will take some time. I wouldn't overemphasize any impact on the result in 'sixteen nor 'seventeen, actually realistically rather 'eighteen, 'nineteen to see the positive contribution from it. So versus 2 years ago, this is a delay. But I would say versus the communication from half a year ago, it's probably pretty much the same. But you don't expect that it will be as you ramp it, that it takes additional costs or those are not Shouldn't be any further costs on a year to year basis. But unfortunately, you don't have the big contribution yet either, but it will come. And then just a final question on Consumer Brands. I would guess that the gross margins are fairly low. So the impact the big improvement we see there is not really to any significant extent the sell in. It's more on the cost and price side or It's a combination of account management and as a consequence also the value before volume and the cost outs on the products. That's what you see. That's correct. Thank you. Nathalie Falkmann from Carnegie. A couple of questions. You mentioned that your investments in organic growth are somewhere between €500,000,000 €700,000,000 Do you call it do you see it as a normalized level? Or is it kind of pushed higher this year due to Gardena, Juric Husqvarna? Maybe I was unclear. When I talked about the CHF 500,000,000 to CHF 700,000,000 that is the underlying result improvement ability we have shown the last couple of years and which my comment was to say, yes, you can count on that being also the case for 2016. A part of that is consumed by the increased cost, additional cost for the strategic growth initiatives. That's how you should read it. And the investments in growth, do you see them as a normalized right now that you will continue to invest in the coming 3 to 5 years? Or do you see them as extra high right now? I don't think there's actually an extra high right now. I think what we're trying to do is to build a bit of what could be characterized as a growth engine. So we need to fund those activities. And there's an increment to be taken this year. There will be another increment next year, but hopefully, financed then by the volume increase. So that's how we look upon it. So you will see further growth initiatives being funded next year's P and L that compensated by the volume increase. Thank you. And the question on Gardena and your new offering there. Could you just explain a bit more what will be the pricing point? Will it be additional cost for promotions? What are your targets for maybe 1 year, 3 year, 5 year in time? We are not very specific about that yet. I think, I mean, it's a little bit like when you have digitization initiatives, the business case is it becomes a bit more like what you believe in versus what you need to believe in, so to say. And we are a bit cautious to go out there with a number because it is extremely difficult to predict. Intuitively, we are very convinced about this, but we need to see the sell through. It's a new concept, and we're going out with a fairly, you could say, complex product in predominantly retail channel, and that we need to see how that will work out. So I'll refrain from making specific comments as to it. Price point wise, it is, from a system point of view, maybe rather like €2,000 level than anything else. And are there many retailers that are actually taking that offering to the consumer? Or would you start with a smaller proportion of your distributors? We're taking a fair share of the retailers in that region, but not the complete lot, but the fair share. I don't have the exact number of point of sales, but give and take, a fairly high number, probably 3 digits. There's a last question on FX. It was a bit higher, SEK 142,000,000,000 I think. Should we expect it to stay there above SEK 100,000,000 for the coming quarters? Well, as we said, it was $215,000,000 compared to the Q1 last year. And as I said, it was then related to the fact that we had hedges last year. If you remember, we had a positive effect actually Q1 all in all on currencies. Now we don't have any effect at all of hedges. Of course, we are now taking the full burden of the FX. We said that we are now a little more positive for the full year, talking more of €450,000,000 than €500,000,000 And if €450,000,000 is the case and we have taken €215,000,000 then we have more or less half of that coming through also here in the remainder of the year. And of course, just by taking the activity in the quarters, main part will that fall in the Q2, of course, when we have the high activity. Yes. Should we take? My question was maybe not very clear. So it was on financial net. Okay. On financial net. Sorry. I thought it was yes. When I talk financial instruments, of course, and it's you can see it in our year end annual report, we have equity hedges. And of course the interest rate effect on the equity hedges are into the financial net as well. So it's not only the borrowing that is affected, it's also the financial instruments that we use for equity hedges that impacts financial net. And as I also mentioned, there are some effects of more of a prioritization character, which is then going in from the other comprehensive income into financial net. Sometimes that is slightly positive, which it was in the Q1 last year. We had only NOK 55,000,000 of negative financial net, which was rather low. This year it's a slight negative effect this year. So the difference then becomes bigger than the, so say, the effect each year, but they go in 2 different ways. So that is part of the effect on the financial net. But I mean all in all, it's also the higher interest rates mainly than related to the dollar that is affecting borrowing and those equity hedges. Okay? Stefan Klein, Nordea. Is there a timing impact between the 1st and second quarter this year due to the early Easter? I would play that down. In fact, I would play that down. It's not we don't foresee that to be any significant impact. Bjorn Danske Bank. Question on depreciation. Looking ahead, should we expect any material changes there in second half or looking ahead into next year? And then on if you can say something about what you believe working capital to sales should be what we should be expecting long term. We see some changes there. And again, on financial net, if you can quantify the borrowing part or the other part, then I can calculate the other one. Okay. Start with the depreciation. Of course, depreciations are also affected by how we translate foreign currencies into Swedish krona. And of course, stronger dollars means higher depreciation, not because the depreciation has increased, but that's also a currency effect. But we are moving up on CapEx and of course that will gradually come in as depreciation. So but we are also in a situation now when we are focusing more on profitable growth and that will fuel, so say, CapEx going forward. Then there was a question on working capital. And we are focusing now on working capital, especially then what I call the net operating working capital, inventories, receivables and accounts payables to bring the net down despite having this journey of profitable growth or growth because that's a necessity for us. Otherwise, we will have a problem of funding ourselves when we expand. And we have put up targets on that we will be able to decrease this with 5% to 10% the days the coming years and that is what we are pursuing. Then of course, it will how much in money it will be will also be dependent on how much we grow. That is the guidance I can give. On the financial net, no, I will not give an exact figures. But of course, as I said, a big part of that is related to the borrowings. And just as an example, I think you should go back and take a look on quarter by quarter. You will understand that there is some volatility. Last year, we had minus €55,000,000 in the Q1. 2nd quarter, we had minus €139,000,000 That was not purely funding. It was also this volatility between other comprehensive income and financial net that impacted there as well. If it will be positive in the next quarter, I can't promise because that will depend on interest rate, currencies, etcetera. Okay. Thanks. Well, it doesn't sound like you are we shouldn't expect a material headwind from depreciation on EBIT margins. Not a substantial headwind, not from that, no. We have other headwinds. Maybe you should say something to CapEx for the year? Maybe when we are talking about CapEx, I've said before that we have last year SEK 1,400,000,000 of CapEx. We are expecting some SEK100 1,000,000 more, could be then SEK1.6 billion something around that. It will also depend on when we are paying things. So I'm a little weak on that, but more. Anders Zap, SEB again. I have a couple of other questions. First, I wonder on the robotic mowers, how much really you sell in Sweden? I guess there's some question now about Ilsakirt Sverdrup and their view on one of your models, if that spreads to others, what that could mean. So it would be good to know roughly how much you sell the robotic mowers in Sweden. Let me start by talking a bit about a claim that it didn't fulfill a certain standard. We have tested this with Forskniks Institute that was previously started. And they have applied a certain standard throughout the years when they looked at robotics equipment. Now we have a different standard being applied to by IRSAK Lessverket without motivation. So we don't have we haven't had the chance to understand why they have introduced another standard and claim that there is a problem. We have made an appeal towards that. It doesn't prohibit anybody from sell out to the market, but it prohibits us to sell to the trade partners. I don't think there will be any material impact of this at all in the numbers, which is important. And it's only, as you point out, unless related to the Swedish market. Then the magnitude of the Swedish market, the size of it, it's not the largest market at all anymore. That you will go down to Germany to find from a market perspective. But of course, it's still a significant market, but not at all the largest. I don't think you have reason to be nervous in your estimates or assessments. I would today play this down, in fact. And let's see where we end up with appeal. All right. Thank you. Operator, let us open up for questions from the telephone audience, please. The first question is from the line of Michael Busch. Just a brief question. When looking at the sales performance and focusing on Husqvarna, looking back over the last 5 quarters, well, obviously, this quarter that was provoked at 2%. It's been gradually slipping down from obviously slightly inflated 23%, just about a year ago, but then it's been slipping. Do you expect some sort of flattening on the future growth of Husqvarna being the core division? You're talking about Husqvarna brand division. And no, I wouldn't draw that conclusion actually that you have reason to expect that. We are fairly confident that on a shorter term, we continue with the type of pace we have. Thank you very much. Thank you. The next question is from Johan Eliason. Please go ahead. Yes. Hi, this is Johan Eliason, Kepler Cheuvreux. Just a question about your private label strategy. Could you update us on that one? And is that related to the reason for you still scaling down with 1 of the major U. S. Big box retailers? Thank you. Private label is not part of the core of the consumer brand strategy. It is part of what we actually do. It's part of the legacy of what we have been doing throughout the years, but it's not part of building brand assets. Of course, we try to build our own brand assets. And there are good brands here with McCullough, Poland Pro. We have Weed Eater. We have Flymo and other brands here in the portfolio of the consumer brands, and these are the ones we give priority to. However, that is not the primary reason why we are scaling down with what we call the risk account. I think the risk account terminology says more about what this is about. And I refrain from commenting financial status, but it's an element of the equation, of course. Excellent. And I understood that you are sort of not willing to give too much guidance on the financial net because of these hedges. Will it be mainly currency related to this fluctuation going forward? Or is there anything else we should take into consideration when sort of trying to pencil in the development on the financial net? The financial net, as I said, can from time to time have pluses and minuses. Over the year, it becomes quite insignificant. But in a separate quarter compared with the quarter before, that could be swings there. So I think you should use more of the last year and then take a look on the interest rates and the net debt development, which is then clearly positive. So that is more or less how I can guide you. But we should remember that, of course, our funding and thereby our financial net is reflecting our footprint, which is then to a big part related to dollar and dollar rates and euro on euro rates. Okay. Excellent. Thank you. Thank you. The next is from the line of Erik Gunnarsson. Please go ahead. Hello. This is Erik Gunnarsson, UBS. I guess I have just two clarification questions here. When you say that Jan, when you said that you have an effect from the hedges hedging, just to clarify, you are continuing with the same strategy when it comes to hedging going forward? That was a yes. That was the answer. We are having the same Yes. All right. Thank you. Short and sweet. And hello, sorry? Yes, please. All right. The next one I have was that if you could elaborate a little bit on the chainsaw ramp up as Rasmus was asking about. Can you comment anything on the cost that you take today? How that affects the margins today? And in what divisions? I don't think we are too specific on the cost, the project costs for that. But the ramp up, as I said, will be over some few years here. We are talking into 'seventeen, 'eighteen, which we will expand the range of products and the quantities within each product category, so to say, each chain type, I should say. So I think that gives you an idea what I'm trying to say here. And of course, it is the Husqvarna division that carries this today. Yes. A follow-up on that. The chain saws, will they apply into the consumer brands as well? No. These chains that we are aiming to produce and introduce would start second half of the year relate to the professionals and see my professionals. And the reason is simple. This is the group that consume the biggest amounts of chains, and it's very profitable in the aftermarket. And that's what we're targeting. So whereas the big numbers of chains are in the consumer area, the profits are not going to be there because the specifications of those chain types is much lower. So that's hence, the focus on the PROS and the CMI PROS. Your next question is from the line of Daniel Johansen. Please go ahead. Hello. Thank you very much for taking my question. I was wondering, a couple of years ago, Russia used to be a pretty big market for you. Can you perhaps size the current run rate of Russian sales and give a little bit of an update on what you're seeing there? Russia has been a very significant market, not the least in chainsaws. Quite important, I think we used to say it was give and take about 3% of revenues. That has been reduced throughout the last couple of years. However, we see a stabilization now on the current level. So start of the year, if anything, is kind of promising. But we have lost probably I don't have the exact number now, but give and take, onethree, at least onethree of that market has evaporated in the meantime. But now looking a lot more stable, potentially an option for rebounds. Let's see. Because what I think you should read it in the way that many of the loggers and the pros, they have used spare parts to kind of survive with their old machines. But there is a limit to that. And maybe that is what we see now. And that third, is that in sheer volume terms? Or is that including any FX effect? No, I'm talking in value terms. Okay. Okay. Thank you very much. There are no further questions at this time. Thank you for taking some more questions. On capital allocation, your net debt is decreasing, your working capital targets achievable. How do you view that? Do you see the potential to become more interested in acquisitions? If I start, of course, as we have stabilized the situation, as we are gradually moving into the profitable growth as our core focus now, at least for 3 of the 4 divisions, acquisition is definitely an interesting aspect. The reason why I talk very little about it is that before you have filled up the pipeline, it takes time. And there's not that much reason to make big noise about it. I think behind the smart launch, there was a little tech acquisition of Kobachi in Switzerland that helped us with IoT technology to some extent. And they will be very helpful as we expand that offering as a kind of center of excellence to build on for that. So that's a small example. Micro irrigation Australia was another with Neta. That was end of 'fourteen. So we are doing small things. Construction, we've done some small things. But it's not significant. And you would need a pipeline to have reason to talk about. We don't have type of situation with the pipeline. So that's why I keep it a bit low. So there hasn't been really an internal focus to find the potential targets yet? There's always different things to actively procure and be out there, like some companies have been very successful doing, Swedish companies like Asas and Atlas Copco and other people. We are not there, and that's why I'm very cautious. We have focused to a large extent on the profitability improvement. Now we are in shape to deal with these questions. And of course, we are doing parts of the homework, but it's not so tangible yet, so I have reason to talk about it. Just the last question on FX and your strategy for now the currency and more moving into your direction. It will be less than €500,000,000 How do you view this extra money? Do you view that as something that will tickle down to the profits? Or do you see that as potential to maybe increase your investments in growth? I'll start with that one. I think no, we have been very specific in our business plans, which are the strategic growth areas we pinpoint, and we're very specific about the investments for those. The short term ease of the pressure on the FX does not change that at all. So in that sense, yes, it will trickle down, yes, it should. It appears we are out of questions. So it's time to conclude. So thank you for coming. Thank you for calling, and see you on July 15 for the half year report. Thank you. Thank you very much.