Earnings Call: Q1 2015

Apr 21, 2015

Thank you for standing by and welcome to the Husqvarna Q1 2015 Report Conference Call. I must advise you this conference is being recorded today, Tuesday 21st April 2015. I would now like to hand the conference over to your first speaker today Mr. Kai Van. Please go ahead sir. Thank you. Good afternoon. Welcome to this quarter one announcement. Let me all start by saying that I'm sitting here together with the new CFO, Jan Utterberg as well as our IR responsible to the SNRB. And we will together do our best to go through the presentation fairly swiftly with the aim to give you a fair chance to ask some few questions within a 45 minute time limit that we are bound by today. But moving over to the topic of the announcement. We have had a good start of the year. I'm very pleased. We have delivered in several ways. We will talk about them as we now move over to Page 2. Let me start by commenting on the new organization. In fact, the reorganization, the new divisional structure at Husqvarna has been a huge change. And I'm pleased to see that we have good control over our processes, over our governance in the new structure and having empowered people in the organization. So given the magnitude of the change, we have all reason to be satisfied with that. Moving over to the financials. We can conclude that we have an operating income which is up 22% versus the reported last year. And that is really without any seasonal tailwind. In fact, the contrary, if you look at North America, we have had a season that is comparable in Europe. I would say Europe is pretty much on an average versus a statistical number of years, whereas U. S. Is definitely on the colder side late at the start of the season. And that has impacted particularly the Consumer Brands division. We see then a favorable divisional mix and I'll come back to more details of that as we proceed into the financials here and the divisions. And we have in fact had a short term positive currency impact that we will talk more about. Accelerated Improvement Program is another aspect which has delivered well and continue to deliver well which we are pleased with. But nevertheless related to the development of the currencies and particularly the depreciation of the dollar versus the SEK, we are in a situation where we need to identify further improvement activities to stick to our target of 10% operating margin 2016. I'll be a bit more specific about that at a later stage. Turning to Page 3. We have the financial highlights of the group. And you can see that the sales declined 3% currency adjusted for us And that the decline really relates to 1 division and that is the consumer brands and North America. Despite this, we have gross and EBIT margin improvement trends remaining and we have the EBIT improvement of 22% up to EUR 1,112,000,000. And the divisional mix has helped definitely. AIP continues to support and deliver positively. We have the positive currency effects from the quarter 1. However, there are some negative sales volume aspects related to the consumer brands as well as some higher SG and A. But I'd rather talk about them related now to the particular divisional slides. Thereby moving over to Husqvarna, up 9% in the quarter. Two major comments really related to in Europe. First one being the profit pools have continued to deliver well. We are talking about the selective growth in the leadership areas. And this is typically pro handhelds and robotics movers, parts and accessories that we are focusing on for the Husqvarna division. And the other component, Europe has been the earliest selling of the wheeled products. Last year, we were shipping many of those wheeled products rather end of the quarter into quarter 2. And this year, we are a bit early with the shipments and we see that as positive. However, of course, that could be an element of impact on that in quarter 2 when we come to talk about that. North America on the sales side was positive even though the of the division for the quarter still being positive. And compared to the consumer brands where we see a much cautious purchasing behavior, we are quite pleased with that. All in all, the EBIT rose some 35% and the major levers for that was the volume impact touch. We have also had some positive productivity developments. We have in fact some short term favorable currency impact, but we also have higher SG and A. As related to, I would say, sales efforts, product development efforts and also some logistic costs. If you look at the margin in the quarter, we increased EBIT margin from 15.3% to 16.8 percent and that's quite satisfactory we think. With those comments moving over to Gardena, page 5. Again 9% of growth in the quarter. Currency adjusted good sell in to the trade, particularly in the areas of the mobile water products and the robotics movers, both belonging to what represents the profit pools for the Gardena division. But also the sales is a reflection of the fact that they have acquired some new customers which have filled up their stock. So good start, good faith from the trade, but no replenishment so far. I think we should be very clear that this is sell in at this stage all the way through. So nothing else from what we can see quarter 1. EBIT wise, an improvement of 15% from EUR 177,000,000 to EUR 204,000,000,000, 15.4 percent. It's a marginal improvement of 15.5% then influenced by the sales volume, the mix that I commented upon, but also higher product R and D costs. We are investing and we were investing last year. We are continuing to invest to revitalize and I should say inject even more competitiveness into the product range of Gardena. And we will see that going forward as well. Moving over to the Consumer Brands division, Page 6, it's a quite different scenario than what we have talked about now with Gardena and Husqvarna being respectively 9% up sales wise. Here we have minus 21%. And this is really all and I can say without reservation, it's all related to the big box guys in North America. 2 things, the season which is late as I already commented upon, but also in combination with a very cautious purchasing behavior on their behalf, where they have in fact managed down their inventories in the period of time, which then on the other hand gives us good faith to believe that we will see quite some of these volumes return during the quarter too when they normalize the inventories. If you look at Europe, we have had experienced larger higher sales. And if these were the major effects impacting the quarter, I also need to mention even though subordinated the previous comments, we still have an influence from our direction here being value, being prioritized before volume. But the real major piece here sits with the cautious buying behavior in North America due to the cold weather. Result wise, I'm pleased to see that we have what I would describe as a red 0, minus €11,000,000 here in the quarter versus the €44,000,000 last year. Given the magnitude of the sales decline, the volume decline, I think this is an achievement. And the reasons why we came out so positively despite that huge volume drop relate to, on one hand, the material cost out and productivity enhancements on AIP, I should say, those two components, I should say, within the operation of excellence framework here of AIP. So material cost and productivity has saved us despite the huge drop in the volume. There has been a negative currency impact and that relates very much to the sales from the division into Europe, which is then almost fully then manufactured in the North American space. So that's a bit unfortunate from the current exchange point of view. Moving over to Page 7 and the last of our 4 divisions, construction, 2% being under what I would expect your expectations and what would have been my expectations start to the quarter. We had a slow start in Europe in the beginning. And we had the strike in North America, which was lasting only 2 weeks. But the knock on effects from that strike has really caused problems and turbulence throughout the whole quarter. So we have a backlog even going into quarter 2 as a consequence from that. However, we saw the run rate improving as we progress into March. And I think it is fair to say that our expectations growth rates will be similar to those that we saw last year. So the 2% is beneath expectation going forward. And you will also see on the results side that we have been more optimistic about adding costs and of course building on the profitable growth momentum we have managed to see materialize the last years. We have added further sales penetration, cost for sales, but as well as higher product development costs. And to that comes some one off costs as well. So all in all, from a result point of view, a temporary disappointment, but with good faith that we will see that come back already quarter 2 and no real expectation on the total year that it should be anything different than what we have indicated before. Construction though has in these numbers also had a favorable currency impact because of their larger manufacturing base in Europe relatively high states than in North America. With those divisional comments, I'll leave it to Jan to make some comments on the income statement. Okay. Thank you then, Kari. And I will try to summarize this on the performance of the divisions. In the consolidated income statement, slide 8 then, as Kari mentioned, quite substantial effect on the net sales, currency adjusted minus 3%, but €1,600,000,000 of positive currency effects in the Q1. Gross income for the group improved some €420,000,000 and that is mainly related to the positive effect of the divisional mix. We were talking about the higher than average profitability in Juice Corner and Gardena increasing sales, whereas we had the consumer brands with lower than average profitability, currently adjusted sales down 21%. That's one effect. And of course also the cost out project in the AIP program continues to deliver related to the cost both of direct material, but also manufacturing costs. And as Kai mentioned, main contributor there being actually a consumer brand despite the low sales volume. But production was somewhat higher than the sales and also we had a rather stable situation, which made it possible to take out costs. Also Husqvarna had a good manufacturing cost improvement in the quarter. Gross profit and third effect impacted by positive currency effects. And then we have smaller effects of price increases that impacted somewhat positively, but a small increase of lower volume as net sales actually were down 3% currency adjusted. If we take a look on the SG and A selling expenses and administrative expenses, there is an increase of EUR 250,000,000 mainly related then to an increased activity in ambition level as well as improvement of matching of costs. But also here we have an impact partly then related to negative currency effects net of hedges. Logistical costs, which is part of this SG and A, somewhat higher in the quarter mainly related to the high volume outside North America in the consumer division and also generally a higher logistical cost compared to the corresponding quarter last year impacted also transport costs in North America. The high volume of wheeled products that was addressed compared to the corresponding quarter last year impacted also transport costs negatively. And we see, as I said, a general increase in SG and A costs related to both personnel project cost ISIT etcetera. And also we have a small effect of acquisition of an importer in Australia in the Cardiana division compared to last year. Operating income then €200,000,000 where half was related to currency and half of net of operational improvements and the divisional mix effects. Operating margin 10.2 percent from 9.4 percent Q1 last year. Financial net, somewhat better than last year related to lower interest rates and some new non some positive non recurring recurring items. Net income SEK 170,000,000 better than last year and that gives a net margin of 7.2% compared to the 6.4% we had last year and the net income was SEK 788,000,000 If we move to the next slide, slide number 9 and take a look on the gross margin development. Here we can see what I just addressed on the positive effects on the gross margin. Positive divisional mix, improved cost situation, somewhat price increases and positive effects of the currencies, of course, to some extent diluted by the currency on the sales. Next slide then, number 10, balance sheet. And of course, weaker Swedish krona is also impacting the balance sheet quite substantially mainly then related to the dollar, but also to some extent to the euro, especially then compared to the Q1 2014, but also compared to year end. For example, if we take a look on the non current assets, they are compared to last year year end entirely related the increase there is entirely related to the weakest Swedish krona as CapEx was actually lower this year in line with this appreciation of some €250,000,000 per quarter. CapEx is expected to be some €100,000,000 to €115,000,000 lower in 2015 than last year's close to €1,400,000,000 Currency effects excluded the normal seasonality of increased activities in the Q1 can clearly be seen in the working capital items. This year somewhat stronger though as volumes has increased in the Husqvarna division and Gardena division whereas the spring sales to the big retailers in U. S. Were somewhat delayed in 2015 due to general cautiousness after big box retailer filling up the pipelines a little too early maybe last year after a similar tough winter that we had this year. Subsequently, working capital, inventory trade receivables and payables was higher this year compared to the end of March 2014 even then if we take out the currency. And as a consequence, we have higher interest bearing liabilities to finance this and there also an increased net debt, which has increased from SEK 1,900,000,000 to SEK 10,200,000,000 at the end of March compared to March 2014. Moving over to slide 11, operating cash flow. Normal seasonality, which we experienced, but as I addressed earlier, maybe somewhat bigger, bigger magnitude this year. And that is then not being totally offset by an improved earnings. So we have a working capital increase and that impacted cash flow with minus SEK 3,700,000,000 in the Q1 2015, mainly then related to the receivables and inventory. The increase was mainly relating to the Husqvarna division and consumer brands, of course, then due to the size of these two respective businesses. As I mentioned before, impact on operating cash flow from investments close to $250,000,000 in the quarter and that is some $50,000,000 lower than in the Q1 last year. So all in all, operating cash flow some minus SEK 2,400,000,000 were of around SEK 1,000,000,000 each came from Husqvarna and Consumer Brands. Moving over to key ratios and net debt to equity slide number 12. And as a consequence then of the increasing net debt due to the negative cash flow, the impairment of goodwill at the end of 2014 of some SEK 800 million and the weaker Swedish krona, the net debt to equity ratio has increased to SEK 0.79 at the end of the quarter compared to SEK 0.73 in March 2014. And last slide not last slide, last slide for me, slide number 13. Key ratios. We can say see that we have positive effect from improved earnings, but that was if we take a look on profitability key ratios more than offset by the duration of capital efficiency as working capital increased and of course the weakest Swedish krona impact the balance sheet items here and thereby the ratios as well. So we have as I said somewhat lower key ratios related to profitability. And on the last row there you can see also that the number of employees are rather stable since the beginning of the year, but some 1300 lower than compared to March last year. By that Kai, I think you're to Ramon. Thank you, Jan. So as you have heard us talking, we have AIP continuing to deliver according we will need to take some actions because AIP will not fully be able to bring us to the 10% target 2016 of operating margin. So we will need to take further actions. Now as to the FX currency exchange impact, we had a small plus as you heard quarter 1. We expect the rest of the year to be relative flattish even though quarter 2 rather a little bit positive and then the second half a bit negative and the real drop will come in then quarter 1, 2016. And we will need to offset that with further activities since we are not giving up the target of 10%. That target stands firm. There is no hesitation about it. We have for some time been starting the planning for execution of what we think are well placed long term activities, which include indirect material spend, which we like to give another go at as well as logistic costs. These are both group activities. In parallel to those, there are divisional aspects related to capacity adjustments and efficiency enhancements. I'm not really in a position today to be specific about these and their impact. I think the core message here is the 10% target stands firm. There is no hesitation about it. But we do need to define further activities to get there. And we are not compromising in any short term fashion about that, but rather taking a long term competitiveness approach to the whole thing. With that, I turn to the last page, 15. Just wrapping through what we think are the highlights of this little information brief. The brand division structure working well. Quite pleased with the Q1 operating income being up 22% given the sales decline we talked about. Accelerated Improvement Program continues to deliver. The information about the recent currency exchange rate will have a negative impact on margins as we go into 2016 and even second half of this year. And that we are about identifying and planning for improvement activities to still support the 10% margin 2016. Final comment then related to quarter 2. All in all, I would say, yes, we do expect a stable demand with some variations as always. You heard me commenting upon that Husqvarna had more wheel products in quarter 1 that we would have last year. Means that there is an element of invoicing from the wheel products that everything else being the same will not see quarter 2. Still we are still optimistic about it, but there is an of course if someone sits and looks at the quarter one rates of plus 9%, there is something to deduct from that. That's the message. Gardena had a very strong quarter 2 last year from a seasonal perspective. That may happen again. It's statistically, I wouldn't say that's likely, but it could happen. However, on the upside for Gardena, I would rather describe quarter 3, which is a much lower reference from a seasonal perspective. Consumer brands, you are commenting upon the situation with them where we lost in quarter 1 due to the cautious purchasing behavior in connection to the late spring. And we do expect that to be picked up to quite some extent in quarter 2. And the last comment as to quarter 2 construction, I think you also have heard, which is we expect them to be back at rates which we have seen previous years. So all in all, stable demand expected for quarter 2. And with that, I leave open for questions. Thank Yes, first on the consumer brands decline in Q1 and also we saw a change in the management team here. You just to have the numbers. Was that related to the performance in the quarter? And secondly, do you still have the ambition to get to even for this division for the full year after the weak Q1? Christ, let me be very clear on that. Alan Schorr's departure has been foreseeable for quite some time and it has nothing to do with performance or us being unsatisfied with Adnan's performance. Adnan has done a great job. However, he was recruited to head the Americas geography. And now this is a global a little bit deeper and thinner piece of the group, so to say, with the consumer brands globally. That's a different job altogether And in big, big changes like we have undertaken in the group, these situations arise. And we agreed that Alan would lead and it's his initiative. I'm very pleased that we have this overlap such that he stays until Jeff Hollenow can come aboard by pretty much May 1. So that's the first comment. The second comment would be then related to the expectation of the result. And whereas I would in general terms of course acknowledge that any change of management implicitly means some loss of pace. We still do press ahead with ambition and the belief that we can make the breakeven. That has not in any way been simplified by the currency exchange development, particularly related to their sales into Europe Asia Pacific, which is then manufactured to the vast extent in North America. But still we have that as our ambition. So the breakeven remains as a target for this year, yes. Secondly, just thinking about your inventory buildup in Q1, which was so big and noble. Did that have any P and L effects on the back of this inventory build? And secondly, currency, the hedge gain in Q1, can you quantify how big that was? Should we start with the inventory? Yes. Okay. I can take it. Well, we don't expect any cost besides of an increased net debt as you have seen in our balance sheet. No sort of more scrappage or anything like that. Of course, there was some logistical costs connected to that, but we have the ambition of course to take down the inventory here in the second quarter as normal seasonality provides. Hedge and currency effect, we have we can say that we were pretty well covered from the transaction exposure perspective with the hedges in the Q1. And of course, these effects being quite significant since they are covering the situation we had in the Q1 2014, where we had a pretty strong krona compared to where we are now both against the euro, but especially against the dollar. So we're pretty good hedged meaning that we have a translation positive translation effect here in the Q1. We expect that to be positive here in the Q2 as well, whereas we will turn negative towards the end of the year and end the year with a slightly positive impact. And I will not quantify exact numbers of the transactions and exposures. More than coming back to what Kai said, this means of course that we since we have been buying time now with the hedges have to take actions to secure this investment. Okay. And then finally, as you mentioned some one off related cost carry for construction, for instance, the L. A. Port. Is there anything you can quantify? I don't think we intend to do that. We would be glad not to. But I mean it's not drastic by any means. Okay. Thanks. The next question comes from the line of joham Eliason. Please go ahead. Yeah. Hi. This is Johan Eliason at Kepler Cheuvreux. I was wondering about this mix issue and the margin impact. I think a year ago you talked about that you would walk away from some low margin type of products. The theoretical impact on the top line could be minus 8%, but you hoped it would be around minus 3%. Now we see the consumer brands business dropping quite dramatically and then you actually reached minus 3% organic in the quarter. Obviously, there's a bit of weather impact here as we understand in the U. S. But how do you see this playing out? How significant is the impact on the top line from businesses that you are walking away from? Let me just be clear on when we talked about the minus 8% respectively minus 3% That was very much related to the complexity reduction and ambitions to take up 30% of the SKUs respectively platforms. Now we are well underway to maybe even surpass that on the SKU side and we may be falling a little bit short potentially on the platform side. But give and take, we are balancing around the number of 30% for end of this year. So that's one potential loss of revenue area. The other related potential loss would be then that we have really low contributing businesses at some accounts. But there are long lead times on these things and we have listings which normally cover a season. And we have seen in quarter 1 examples and impact from those type of conscious decisions where we have left business more from a poor business type of perspective than having anything to do with complexity at all. But it's subordinated the impact of the late season and the cautious buying behavior. But there is an element of we will not see the full extent of the loss of the 21% to come back quarter 2, so to say, on top of what would be an ordinary quarter 2 number here. So it's not one to 1, so to say, what we lost quarter 1 and what we have reason to expect quarter 2. And the reason is exactly what you're after in your question. I don't want to be specific about it beyond these comments. And we have had these situations this year. We will continue probably to see some of this impact even I guess into next year. Okay. And then is there any way you can quantify the gap you need to close to reach the 10% for next year? Can you be a bit more helpful in what way you mean now? Well, how much in terms of costs do you need to cut? Or what sort of actions are we talking about here in order to rectify the currency situation? Or is it just moving manufacturing out of the U. S. And into Europe or Sweden? Or AIP and that's a gross margin improvement. Now as you heard me talking about some of these other aspects, we start to move into the SG and A to some extent as well beyond the COGS side of it. But I'm not really willing to share any quantifications related to those at this point in time. We will come back and become more specific about it as the year progresses. But it's a bit premature today to be specific about it. And I'm sorry Johan to disappoint you on that one. No worries. Then finally, maybe you could talk about some positives. You talked about gaining some new clients in Gardena. Are there any significant accounts that you could mention there? I don't want to talk accounts, but it's partly relating to e commerce and taking a bit more bold position in that area in parallel to the traditional retail outlets. So as you can say, it's an example of what we strategically talked about more as becoming a more multichannel alike. Okay. Great. Many thanks. Thank you. The next question comes from the line of Anders Trapp. Mr. Trapp, your line is now open. Please go ahead. Thank you. Anders Trapp, SEB. I have a couple of questions. First, you mentioned that the hedge will sort of really go away in the Q1 or the impact from currency will be really seen in the Q1 next year. Is it your intention then to try and time the renewed actions or additional improvements that you need? If you're intended to time that with the release of the hedge, if you like, if you understand what I mean? Yes. If I answer, I would say ideally, yes. Whether we fully will be able to do that, I don't dare to claim right here and now. But on for the full year, we will try to do and bring impact such that it offsets the negatives here from the currency. If we manage to do that from the very first quarter, that's a hard one to make a firm statement about. Of course, we will aim at doing that. But whether we will eventually succeed, I don't dare to be firm about. Okay. I wonder also on the you did touch upon it a bit. You said that the 21% drop in organic sales drop in CB was mainly driven by market and to a lesser extent by well your own decisions so to speak. Could you give any kind of is it 2 thirds or 3 quarters or 4 fifths? Any kind of ballpark to understand to try and understand how much the market rate is down in the quarter? Let me say that your level of guesses of ratios there is not completely off. And more than that, I don't want to guide and I don't want to do that. Sorry, I understood the part you're too aware. But you're not completely off in those ballparks. Finally also on the group organic decline or group organic development on top line, what is the can you say anything about pricemix component of the minus 3? I think we have started a structured work with price increases. I think that goes for all divisions. And that is, I would say, independent from the currency development. Now given the currency development we have experienced, we will according to what the contracts allows us take action and of course in a varying degree depending on how those probabilities of the channelsaccounts partnerships looks like, but fairly firm stance. And if you ask the question related to consumer brands, we will take a very firm stance as to price increases due to currency exchange rates. And we intend to compensate ourselves to the extent which is possible. And that means well above something like 5 percentage points. Okay. Thank you very much. We do have some more questions. And the next one comes from the line of Bjorn Enarson. Please go ahead. Thank you, Bjorn Danske. Most questions have been asked and also answered actually. But if you're looking into construction, you're you're citing the issues in North America as the main reason and you are looking towards a more of a normalized growth looking ahead. Did I get you correct there? And also if you can talk a little bit about Latin America and Europe how that is developing for construction? Yes. Bjorn, you're right. I was in fact indeed jumping over one of the explanations here when I made my little introductory speech and that is the fact that we have experienced customer inventory reductions in Brazil. Those end customers because this is related to Diamond Stone, the business unit Diamond Stone which is highly profitable and they have taken down some inventory levels in quarter 1. Now we expected that to continue all the way through first half of the year. I would say today I'm more optimistic about these inventory levels to have leveled off such that we will also during the quarter see an uptick from that side, which is good news. And as I mentioned, we have seen an increasing pace in Europe through the quarter, but there is no secret that France has been beneath expectation. And that's true. And that's nothing we short term expect to see a change with. But there are many other countries then doing a lot better, so balancing that off. So all in all, with a normalized supply situation in North America and with a Europe that is by and large doing fine, we feel reassured that we will see growth rates from previous years return already in quarter 2. Perfect. Thank you. The next question comes from the line of Johan Dau. Please go ahead. Hi, it's Johan at Danfel. In your remarks on the individual business areas, you talked about some raised SG and A costs, logistics, R and D. I was just wondering when you evaluate the Q1, has that surprised you in any way? And also when you look at the Q1 on the group level, given the if you clean it from FX and also the increased production in the quarter, what's your view on the underlying improvement rates in the Q1? Is it similar to last year? Or do you see a slowdown there? Okay. I think as to the SG and A part, R and D costs, I think, were predictable. There's nothing that really surprised us. We are running with high ambitions in some areas. I think there were some in all frankness and honesty here, there were some surprises to the logistics cost. And we have reason to improve those. And you heard me talking about that being part of the additional focus area now to do further actions. As to the underlying improvements, I think we I think quarter 1 is maybe somewhat lower than the average from last year, but not in any significant way. So I wouldn't extrapolate that too far by any means. Also finally, if I could just follow-up. If you consider both the inflation in your entire P and L due to the dollar appreciation and also consider the potential expiry of your hedges. It seems as pretty substantial numbers to achieve the 10% margin target. Is a bit of a vague question, but do you share that view that it is substantial numbers to achieve that? The answer is yes. Yes. Okay. Thanks. I mean, it's fairly clear that we haven't at all been helped by the U. S. Dollar appreciation. I think you could argue that perhaps you steer the operations from an absolute earnings perspective rather than a fixed margin target. But clearly, you're aiming at the 10%? Yes. I would say, yes, we are there. But I mean, we're going to do what's right for the business at any given situation. Got you. Thanks. The next question comes from the line of Rasmus Engeberg. Please go ahead sir. Yes. Hi. I wanted to ask you this is Rasmus with Handelsbanken. I wanted to ask you what in your word, how much did you save achieving savings in Q1 net of the sort of negative absorption effects that you had in the U. S? And how does that sort of develop over the year do you think? I'm afraid Rasmus that I will disappoint you. I'm not too keen to be specific on that. I'm sorry. Yes. And on in general then if I come up with a number, should I have that on a flat level in relation to sales for the year? Or is it increasing or decreasing? But there is a seasonality to the number of course. Yes. We're talking absolute numbers. Yes. Yes. Of course. All right. And then on the potential, is it still feasible? I mean, coming back to firstly, if you could quantify again what you said about the price increases for consumer brands. Was that relating to sales in Europe from manufacturing in the U. S. Businesses? Or was it a general comment for the consumer brands division with 5%? No. You're correct, Rasmus. I talked in fact about 2 components. I talked about a more general price management increase that we have had and would have had irrespective of the currency development. And I talked specifically about price increases relating to compensate for the negative currency impact for manufactured goods in U. S. Being shipped into Europe, Asia Pacific. Absolutely. Of course, produce corn are not only consumer brands. Yes, of course. Of course. And then on the I mean, one would assume that the economics for manufacturing in the U. S. And shipping into Europe has clearly worsened here not all of it will be compensated for by price. Is it fair to assume that your plans today you have more of a willingness to sacrifice some of that sales than you had say 6 months ago. Are you referring to consumer brands now or? Yes. I think especially on the consumer brand side with the stuff it's I guess 20% that is not U. S, which is largely made in the U. S, but sold in Europe. Yes. I mean the pressure on the Consumer Brands division to get to the breakeven as we talked about earlier in the Q and A has increased quite a lot. So there is an element of maybe scrutinizing of those listings and contracts even yet to another degree yet. Yes. And then finally just a detail. What did you think that the negative the absorption effect was on the consumer brands given that sales was down so much? It's again, we are not too keen to cut it. I think Jan gave some hints. We produced more than this sold. And whatever we produced was more efficiently produced than last year given the situation we had at that time. So I think again, productivity helped us a limited fall of result that we would have seen else in the consumer transition. But sorry for not being more specific about it, but That's all right. Okay. Thank you for that. Operator, I'm afraid we only have time for one more question. Okay. So Mr. Anders Trapp wants to make a question again. So Mr. Trapp, your line is now open. Please go ahead. Yes. I just had one question actually I came to think about for when you talk about 2016 and that is, of course, the headwind from the currency. The question is, do you expect significant tailwind from raw materials given where we see prices are at the moment? 16 versus 15. Yes. Yes. That's a tough one to speculate around, I would say, because to some extent there will be speculations involved in that. I think we saw some relatively high steel prices as we took contracts in North America for the early part of the season. I think we should have a fair chance to come out better on those year on year. And we saw the plastics decline 1st part of this year, but then take a sharp rise in April lately. And those are on shorter contracts. It's very hard. I wouldn't speculate too much on any major net year on year effect. So I think we have height through the steel prices that were reasonably high for the season to absorb negative surprises or being optimistic could potentially go down to bottom line as year on year improvement. But I wouldn't dare to at this point in time put that into an equation. Okay. Very good. Thank you. Very good. Thank you everyone for calling. With that we have to conclude and we welcome you back on July 17 for the 2nd quarter report. Thank you and goodbye. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.