Welcome to Husqvarna's announcement of quarter four, respectively, the full year of 2014. We have quite some material to cover, including also the restatement, the new divisions. I'll jump straight into the overview. If you look at the quarter four result, we have a continued trend of improvement, and we're quite pleased to see that. We'll talk, of course, more about the details. You're well aware of the fact that quarter four is a seasonally less important quarter for us, and it's normally carrying a loss for us, and we had SEK 308 million last year. We reduced that loss to SEK 230 million, despite the fact that we had a very heavy impact of the currency of SEK 81 million. All in all, the underlying improvement, we think, is very satisfying, and we're quite pleased with it.
The pattern continues, i.e., it's gross margin improvements that's driving the improvement of the result. This particular quarter, America took a big step ahead. That's the largest improvement from a business area perspective. If you look at the full year, we are up 47% EBIT-wise. The SEK 1.6 billion became a bit more than SEK 2.3 billion. We improved the EBIT margin with 1.9% to 7.2%. I should have said 1.9 percentage unit to 7.2%. EPS up 74%, excluding the one-off impairment that we will comment on later. We went from SEK 160 to SEK 278, and that's quite strong. We are very pleased to see the improvements coming through so strongly here. Ulf will talk a bit later about the non-recurring item here, the goodwill write-down related to Gardena of SEK 767 million.
We are also pleased, and I think you should see that as a sign of confidence, in fact, that the board has suggested to the annual general meeting to increase the dividends to SEK 165, an increase of 10%. I think you're all aware of the fact that we have a new organizational structure in place, and it's now fully effective as from January 1st. Hence, we will look into the restatement a bit later here. Moving into the more details of the numbers, we can see that the net sales increase has been 6% for the quarter four, which actually correlates very well with the pace of increase for the whole year, ending up at 6%. Staying in the quarter, you can see the gross margin improving with a little bit shy of two percentage points.
Taking the EBIT, excluding the impairment, to minus SEK 230 million, as we talked about. Sales volume is supporting the lower loss, but also that accelerated improvement program. Material cost reduction, productivity has been of good help for us. Again, we have fought an SEK 81 million FX disadvantage. If you look at that, we principally halved the underlying loss altogether. Quite pleasing, and again, excluding impairment for the full year, 5.3% became 7.2% EBIT margin. Moving over to Europe, Asia Pacific, a little bit less advantageous season. In fact, we had a mild weather in Western Europe, just like, by the way, the previous year of 2013. Now two seasons in a row, and that hasn't helped, as you can understand, sales of seasonal products like typically snow throwers, but to some extent, also the handheld products. That's a bit of a disadvantage.
Asia Pacific has been doing well in this quarter, and we have also some contribution from the small acquisition we did in the Microirrigation area in Australia, Neta. Also, I could emphasize both China and Japan doing fine in the quarter. Seasonal losses increased, but again, a big chunk of the SEK 81 million FX disadvantage for the quarter for the group resides in this region, SEK 57 million, in fact. We need to remember that. You can see that for the full year, the EBIT margin has increased from 10.1%-12%, so in line with the group results. Not very surprising since this is such a significant contributor of the result, obviously. 3% saved for the quarter, on a yearly basis, 5%. All in all, a very good year here for Europe, Asia Pacific. Americas, a lot stronger.
Americas did not have a very early spring, on the contrary, two years in a row. In fact, they've had a late spring. They had a good second half of the year, and of course, we benefited from that in quarter four, meaning that the inventory and trades of snow-related products were, if anything, a bit lower, and have been selling through quite well. In this quarter, and the further north you get, the more that has been pronounced. It has been very clear. I'd like to emphasize that we have seen positive sales in all regions, meaning Latin America, North America, U.S. respectively Canada, and in both channels, retail and dealer. It's a quite consistent and strong pattern we've seen here. 9% in percentage units of sales increase. Well done.
We have, to this, beyond the sales advantage, had a good productivity improvement as well as material cost improvements, which has supported. Despite the FX impact, you can see this is quite an impressive result improvement. I should say, lowering the losses, the seasonal losses, from -SEK 146 to -SEK 43. What I would like to draw your attention to is, in fact, the full-year performance. Roughly from a break-even EBIT margin point of view, we have managed to go halfway to the target we have announced for 2016 of 5%. You remember that the mathematics is built up around 10% for the group assumes 5% from Americas. Now you can see, with some support of the season, but equally from the improvement program, we have taken half of that distance, and that's very satisfying. We're very pleased with that result. Moving on to construction.
7% up in the quarter, respectively, about the same pace for the year, 8% for the full year. EBIT-wise, maybe a little bit disappointing, but not significantly. We are increasing the EBIT from SEK 45 million to SEK 49 million, but percentage-wise, a little decline. From a geography point of view, we have been strong in the U.S. U.S. is pulling the train here very clearly whereas Brazil and France are the weaker spots from that region perspective and country perspective. Looking into the operating income, what's behind, of course, we had the advantage again of the sales and the mix, but we have also invested in both R&D and sales, and a little bit of FX disadvantage. The sum of that adds up to the plus SEK 4 million than EBIT millions, but somewhat lower margin.
Now, coming over to the restatement. I would expect some of you to be interested, particularly in this part. When we restate 2014, we see that Husqvarna come out with about SEK 15.5 billion, SEK 2 billion EBIT equivalent to about 13%, so maybe a little bit more than some of you might have expected. We guided above 10%. Of course, this is a result of strong brands, attractive products, very strong channel with about 25,000 dealers built up over a long period of time. Gardena, 30% of group sales, about SEK 4.2 billion of sales, SEK 382 million corresponding to about a little bit more than 9%, a little bit lower than what we talked about at the Capital Markets Day. On the other hand, the second half of the year was also a bit weaker from a business point of view.
During the course of the time from September to end of the year, we learned a bit more about the details of the numbers. I wouldn't read too much into that. Gardena is the business within the portfolio that has the highest volatility, very clearly so. I think we gave a glimpse of that at the CMD. That will continue to be the case, and the margin will move with it, of course. If you look at the distribution of the quarter, you will see that there is a huge swing, maybe a surprisingly huge swing for some of you. I think that's page 16 in the report. Consumer Brands, we announced that it would be slightly negative. It came out about that level, -1.6% on the little bit less than the SEK 10 billion of business that it represents.
Of course, we have a turnaround situation here to do. That's pretty clear. Construction unaffected by the change of the brand organization in Forest and Garden. Very pleasing to see, of course, that the margins have taken the step now up above 10% and reside around 10.7% for 2014 from the 9.2% in the preceding year. This is the way we will look at the business going forward. This is the way we will report it going forward. Of course, one of the obvious questions I would expect from you is, how is this going to look like then in a 10% scenario for 2016? To give some indication, without being too specific about it, we expect three of the four divisions to improve with 1 to 2 percentage points, Husqvarna, Gardena, respectively Construction. To get the mathematics to work out.
Whereas Consumer Brands would need to improve, let's say, 3 to 4 percentage points to make this fit altogether. That's what you can expect. We see improvement areas in all divisions, in fact, as you can hear, but I don't want to be more specific about divisional targets at this point in time. I would like to ask Ulf then to go through some of the more detailed financials.
Thank you, Kai. I think we actually do it like this. Based on that we have now been talking about the new organization, I jump to page 10 instead for you who are on the telco, to continue where Kai ended, and that is related to the impairment of goodwill that you have seen we have charged the fourth quarter with. Based on the new organization that is now a brand-driven setup, it is a brand-driven divisional split, effective from 1st of January 2015. This has also meant that we, from an accounting perspective, had to change and apply a new type of cash-generating unit setup. This was already announced in connection with the new organization announcement in June that it may be subject to an impairment, and that is the case now.
As you have seen, it is related to the Gardena division, where we have made the analysis and the tests based on the new setup and the new cash-generating unit. That has been reflected in an impairment related to SEK 767 million charged to the fourth quarter 2014. Reporting-wise, this has been booked within group common costs, so it will not distort the old organization, it will also mean that when the opening balances now go into 2015, that is, let's say, cleaned out from any goodwill write-downs. I think it is pretty clearly stated in the report, and you may also see now the closing balances of the goodwill that now reside within the different divisions. A reallocation has been made in order to also now reflect the new setup as of January 1, 2015.
Let's go back to the normal setup that I normally show you. Let's have a look at the consolidated income statement on page eight, and let's jump to the gross margin percentage. As you heard from Kai, we are quite pleased to see that the accelerated improvement program continues to deliver also in a quite weak quarter from a result perspective, quarter four. You can see that we keep now the two percentage points improvement also in Q4, which is on par what we have done prior year. If you split up the improvement here of the two percentage points, despite a headwind of FX, I will come back a little bit more to that later on here. That gives us a headwind of 0.7 percentage points in the quarter. We are able to offset that and actually improve in the gross margin percentage.
We do have some price and mix representing 0.3 positive, but the residual of some 2.5-2.6 percentage points is all related to the accelerated improvement program. Very much related to the productivity efficiencies as well as the material cost release that gives effect also in quarter four. Quite pleasing to see. As you may see then that we end the year with the two percentage points improvements. The good thing is that is flushed down all the way down to EBIT as well. If we continue and look at the SG&A, there is an increase if we look in absolute terms in the quarter, but if we take the ratio in relation to sales, it is just a slight increase, 0.2 percentage points. That is actually also what is happening if we look at a year to date.
Increases of SG&A mainly related to that we are spending more on brand marketing, but we also have a higher transport and warehousing cost. That is very much related to the increase in sales. That is pretty good in correlation with the 6% growth we have had in the quarter as well as for the full year. EBIT-wise, in the quarter, excluding the impairment of goodwill, we end up with a loss of SEK 230 million. It is an improvement compared to last year, where we ended up in SEK 308 million. EBIT margin detects that we are on -4.3% versus last year's 6.5%. To be mentioned is, you have seen that, we had quite a severe headwind when it comes to FX in the quarter, SEK 81 million, on a full year, SEK 140 million plus.
Compared to the guidance I gave you at the end of Q3 based on the rates we had at the time, we are approximately SEK 60 million worse. Everything is charged to the fourth quarter. Very much, as you can imagine, related to the ruble as well as to the US dollar. The US dollar has gone quite strong, as you all know, in the fourth quarter, and based on that, we have a lot of the purchases in USD in the fourth quarter, as well as slightly higher purchasing volumes that had quite a severe impact in the fourth quarter. SEK 80 million plus in the result of the fourth quarter should be taken into account when you assess it. Continuing down, we can see that the finance net ended up in -SEK 49 million, quite an improvement versus last year, -SEK 125 million.
We are, of course, benefiting from the lower interest rates, no doubt, but we also have some positive revaluation effects on the interest rate differentials in our hedge contract. That is the main explanation to the improved finance net in the quarter. Last item here, tax expense. Let me rather look at the full year, where you can see that we amounted to some SEK 435 million, versus SEK 264 million last year. This should be seen from the perspective that goodwill is not triggering any tax deductions here. You should exclude the impairment piece to get the ratio correct. You may see that the tax rate that we have for the full year of 2014 is in the range of 22%, in accordance with the guidance I have given you during the year.
It is more or less on par with where we were in 2013. With that, let's move over to the balance sheet, maybe some words at least on the inventory level. This slide, on slide 11, you see the reporting numbers. If we adjust for currencies, the inventory is actually more or less on par with last year. I.e., the group has been able to keep the same levels despite the growth of some 6%, which we think is quite good based on, as I said, a growth of 6%. That said, we still think that there is more to be done here when it comes to working capital management. Of course, that journey continues into 2015 as we go. Looking at trade receivables, same here. If we adjust for the currency, there are heavy valuation effects in the balance sheet.
We have trade receivables that are slightly lower than last year, some SEK 100+ million. If we look at then a ratio relating to the Days Sales Outstanding, we have lowered that coming from 58 days down to 55. Here we are doing continuous improvement as we go. Let us move over to the cash flow. This is normally the curve that I am showing you. As you can see, if we look at the 2014 curve and just put it in perspective with 2013, you can see that we ended the year with a positive cash flow of SEK 800+ million. Last year, SEK 1.8 billion. The main reason for the lower level in 2014 is that in 2013, as you know, we were quite successful to make a step change, quite a solid one when it related to reducing inventory.
As I said before, we are now at least on par with where we were opening 2014. There was a big chunk in 2013 that I also addressed will not be repeated to the same extent, at least not in 2014. We have also had higher CapEx for 2014, SEK 300+ million, very much related to the new chain manufacturing down in Husqvarna. That is also, of course, a piece of the delta. Then there is one piece then when you look in the cash flow statement that is booked on the net financial items, and that is related to hedges that we have had on equities related to the treasury entities. There we have had some cash out on the realized part for 2014, and that hit us in the fourth quarter with a cash out of some SEK 400 million.
That explains if we just take it in perspective with 2013. Again, a quite decent cash flow for the group of some SEK 800+ million for the year. Of course, we can see that we have had now 2012, 2013, and 2014 in a quite good shape here, and we definitely feel that 2011 is behind us. That in turn leaves us also with a Net Debt to Equity that ends up on par with last year, 0.59. We had 0.58 last year. Should we exclude the net pension liabilities that also based on lower discount rates have been valued significantly higher? Should we exclude the net pension liabilities, we are now on a Net Debt to Equity of some 0.44 versus last year 0.47. The net pension liabilities and the revaluation of those have had quite an impact on the debt here.
Again, important to have in mind, if we exclude them, it's down to 0.44, quite decent level. That we can see on the next page as well when we look at the Net Debt to EBITDA. You know that is one of our financial targets that we have said should be below 2.5. Last year, we ended the year at 2.6 roughly, and you can see this year we are around 2.2. Quite pleasant to see that we have a quite nice development when it comes to the net debt in relation to EBITDA. Some words on the key ratios. Fair enough, maybe the one that I at least want to mention here, not shown, but if we should exclude the impairment of goodwill and look at the return on capital employed, that starts now to pick up as well.
If we exclude the impairment of goodwill, we actually have now a return on capital employed that is double-digit margins. We are about 10% when it comes here, and of course, this is also a journey that will continue into 2015. Quite good development, though. If we then leave the 2014 and allow me to give some guidance for 2015. CapEx for 2015, and now I talk about the group here, we aim for some SEK 1.3 billion. We expect to have SEK 300 million of that related to the chain manufacturing in Husqvarna. There is some carryover, as you can imagine, from 2014 over to 2015. We also have some upper adjustments of the investment process. SEK 1.3 billion for the group in CapEx for 2015.
Depreciation and amortization for 2015, we aim for some SEK 1 billion, so roughly in the same level as we have seen at least the last two years. Tax guidance for 2015, we remain in the range 20%-24%, calculated on the income after financial items. Last but not least, FX. There is a huge volatility in the market, no doubt. Of course, a strong US dollar, as you know, is quite tough for this company. However, we see that the euro, and this is now based on the ending rates of January, that the strong US dollar will, of course, have a negative impact into 2015, but we see that this is offset based on the euro and the FX contracts we have.
Right now, based on end of January, it is a wash, i.e., zero impact as the way we foresee it for 2015 year-on-year. With that, I believe I leave to you, Kai, to summarize 2014.
Thank you, Ulf. Summarizing 2014, continued trend of performance improvement. We are quite pleased. Whatever area you look here, you can see it, the EBIT result, the 47%, the margin, the earnings per share, which is up 74%, excluding the impairment. That is very satisfactory, obviously. The increase of dividend, which is, of course, a sign of confidence moving forward. The new organization, important to emphasize here that we foresee the priority, not foresee, the priority is and will be for 2015, the accelerated improvement program, and that is the vehicle for driving the next level of improvements. Being at 7.2% in 2014 and aiming at 10%, we need to take another significant step, obviously, in 2015. I do not want to be specific about the details, but you can imagine it would not be good to be too back and heavy in that.
I understood by some discussions I had that we talked about being back and heavy, which is absolutely true in some of the aspects, like Complexity Reduction. That is the case, and that will still remain, obviously. All in all, talking about the Profit Pools and talking about the material cost reductions, they will, of course, progress with full speed in 2015. A significant step ahead is what we expect. I think that's pretty much. Maybe one more forward-oriented comment before we open up for the question then. What do we expect? Because it's obvious you will come to that question. What do we expect generally from the market? We see a stable demand situation in Europe, Asia-Pacific, for that overall region that we have talked about before. Some of the poles of good and bad, not very surprising.
Obviously Russia, Ukraine, maybe into Finland will be difficult for us. On that note of Russia, still throughout 2014, it was flat, particularly quarter four it was flat. It was a little bit down for the full year, but quarter four was flat. We have seen some signs of quite a decline, and that is according to expectations. It's rather the opposite, that we were surprised that it took so long for the decline to really hit us. Now we see that in January, and I think that's what we expect going forward. Germany, on the other hand, is probably one of the strengths in this region. Of course, still in Asia-Pacific, we expect to also see strength. Moving over to North America, it's not surprising either that the macro is looking a lot better.
From a market demand point of view, we are quite optimistic about that. Now, the question is, how do we capitalize on that? I would say Husqvarna division is maybe better positioned to reap the benefits of that than, for example, the Consumer Brands division, where we obviously are in a turnaround mode. From a sales point of view, I think you should rather expect that to be an upside for Husqvarna. You might be aware of that. Gardena is not very well represented in North America at all. Construction will definitely benefit from the strength in the North American market. It was pulling the train in quarter four. It will most likely continue to do so for 2015. With that comment, I'll leave it to questions.
Operator, can we open up for questions also from the telephone audience, please?
Certainly. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to withdraw your question, please press the hash key.
Can we start with questions from the floor here in Stockholm, please?
Hi, I'm [Anders Hägerstrand] from SEB. I have three questions regarding FX, all of them. First, you have a very distinct seasonal pattern also on your purchasing and your flows, it would be helpful to try and get some kind of indication on the different effects in the different quarters. Secondly, you mentioned that the impact full year would be nil, including, I think you said, your hedges. Could you tell us something about how much they are contributing, roughly? Thirdly, also, the sales is going up a lot due to the FX, and you don't get any boost from that in terms of EBIT, at least. At best it's nil, I guess. Does that impact how difficult it is to reach the targets? I guess it does. Do you need to change the target?
If I take the third one first, then I'll let Ulf answer the other two ones. You're right, there is a kind of margin dilution by an inflated top line and an EBIT that is not really benefiting from the FX. That doesn't bring us about to change the target setting. There will be more changes coming up, material prices, FX. This is the current situation. We are shooting for the 10% in 2016. We are not deviating from that. We are still confident that we can do that. This is for sure not helping us, that's true.
FX per quarter, I will not disclose exact figures, but if I say it like this, the first quarter, it is with a negative sign, then we see some positive in the second quarter, then as a result, you will see slight negatives in the third and the fourth quarter. That is how it stands as of now, ending up in a flat situation. I.e., you will see then the benefit in the second quarter, but negative in three quarters, Q1, Q3, and Q4. I will not go in detail to tell you about the FX contracts per se, but I can say this much, that the US dollar is, of course, the negative from a transaction perspective.
Then you have, transaction-wise, a positive impact of the euro, together with the FX contracts that help us in offsetting mainly the US dollar negative impact at that. Again, based on January closing rates, that is where we stand today.
The reason I ask is, of course, that if you have a significant profit from your hedges, it means basically that you're postponing the negative impact into 2016.
Well-
All else being equal.
That will be adjustment you have to make. Everything else the same, that is, of course, something. Again, based on that the currencies remain on those levels. I would say 2016, I would refrain definitely from talking about, at least today. All right. Thank you.
Yes. Christer Magnergård from DNB. A follow-up question on the 10% margin targets. You talk about lower raw material prices or component costs, I guess you have to do something extra, something additional to what you planned earlier to reach the 10% margin targets, assuming the dilution you have on margin from the currency. I guess you cannot rely only on that raw material prices will come down, for instance.
Let me be more specific, first of all. The raw materials is not what we're working on the material costs, which is a separate bucket then from the raw materials. The raw materials, as such, it's not really giving that much of change at all for 2015, unfortunately. You would expect them to be positive for us, the fact of the matter is we locked in steel prices, then most of the consumption of the steel is in the U.S., and the steel prices in the U.S. are higher than in Europe, so it's not as advantageous for us. Everything else the same, it would be an advantage 2016, though, for the coming down. What we are benefiting from in terms of raw materials is rather than plastics, which are type of shorter-term contracts, et cetera. All in all, a wash for 2015.
You're right in your observation. This calls upon even more activities then to compensate from the, let's say, inflation on the sales side and the sales numbers. That's true, that's something we will need to deal with. I don't see that the magnitude of that is such that it kind of changes the perspective altogether, no.
Since you have to do these adjustments now, it doesn't mean that even if the program is not back and loaded, as you mentioned earlier, but I guess it will take some time before these new measures will give a result. The question is basically, the EBIT margin progression, that should not be linear, I guess? We need to see more effects in 2016 from the new programs, in that case.
That could be, I guess, yes. I don't want to be as specific about it, as I mentioned before. Obviously, we need to take a big step in 2015 to be credible to reach the 10% in 2016. That's clear. If the season isn't against us, at least half of that needs to be absorbed in 2015. We will always have the season with or against us, as you know. That's the basic standing.
Let me ask the question on the new business areas. The Consumer Brands division is, of course, loss-making, and you target 3% or 4% margin improvement, taking margins to maybe what, 2.5%, 3%, roughly, or so. Does that cover cost of capital? Is that something you're into for the long term, or could When you reach that kind of margin, is that up for sale?
If you want to talk about the returns.
Well, say it like this. We measure internally on that specific division, I think we mentioned it at the Capital Markets Day as well, that of course the justification for that division will be a return on capital employed target. I do not think we are prepared to reveal something here and now today, but again, that is what that division will work with for sure. Based on that, it will attract a lower EBIT margin going forward here. Of course, as you also can see, they are benefiting from what we are doing when it comes to SKU reduction and platform reduction. That in essence has not only impact in the P&L, it does have an impact in the balance sheet as well.
There will be, let's say, improvements when it comes from return on capital employed, that is how that division will be assessed going forward.
Of course, 2016 is not the reference for what we aim with the Consumer Brands division. It is a realistic, hopefully ambitious, but realistic ambition what we can do with it without taking a too big hit on the revenues. For sure that continuous improvement for Consumer Brands will be very clearly into 2017 and 2018 as well. It will need to be. Beyond the capital intensity or efficiency, I should say that needs to look a little bit different than the Husqvarna and Gardena divisions or construction for that sake.
The final short question on Russia. You mentioned that demand should probably weaken now in Q1, Q2, but have you done anything on pricing because you export everything to Russia and offsetting the ruble?
We are trying to catch up with the development of the decline of the currency, and we have had several price increases. We are a little bit behind, obviously, naturally, but we are really working hard with it. Of course, we are doing whatever we can also on the cost side to safeguard that we balance it to the level that is possible. Still remembering that Russia is a very important market for us, not least for chainsaws, and we want to hang in there. We want to sustain, we want to remain with a good position, but we are taking actions on the cost side as well to adjust to the levels we think we can without so to say, pulling out, which is not in the cards for us.
Operator, can we take the questions from the telephone audience, please?
Sure. Your first question comes to the line with Björn Enarson. Please ask your question.
Yes. Thank you. Björn for Danske Bank. A question on the investments in R&D and sales within construction. How material are they and are they likely to continue these investments or are they done or how should we look upon that looking into 2015? You talked about the profile of the reaching the 10% EBIT margin. I didn't really catch you there. If you could please give me some more color on how you looked upon that more than it was a back end loaded. Thank you.
I think the short message on the 10% is the target is there. We are committed to reach it. The latest currency development will not help us, but we will deal with that activity-wise. I think that's the short answer of the question. It's much too early to have any other thoughts about it. We have plenty of room to still take action. As to how the construction business and the investments in sales respectively, R&D, yeah, there will be some quarterly swings, but we are gaining market share. We have a very strong product range. We are launching new products. We actually did launch new product the last week at the World of Concrete exhibition in U.S., which is a monumentally important exhibition for us for floor grinding, and we have new applications for the demolition robot range, et cetera.
I think all in all, Husqvarna is moving into a position with an outstanding product range. We're trying to continue reinforce that. Hence, we are also targeting specific application-oriented sales competencies that we put out in the market to really back up the sales resources on one hand, and on the other hand, also to some level and degree, reinforcing with sales resources. You will see us continue investing in the construction in this manner, but it shouldn't be to the detriment of the margin for the year as such. You heard me talking about for 2016, 1-2 percentage points for those three divisions, including construction. If there's anything, a slight margin improvement over that period of time or two years, but we will see some variations on the theme, obviously, throughout the quarters.
Thank you. Perfect.
Thank you. Next question comes from the line of Rasmus Engberg. Please ask your question.
Yes. Hi, I had a couple of questions. Firstly, coming back to Russia, you said your development for the year had been sort of slightly down. I assume that that reference is in rubles, right?
That reference is also in SEK.
How can it be flat in both when the-
No. Sorry, repeat the question, Rasmus.
I was just wondering when your development in Russia was flat, that is in local currency or is it in SEK, meaning that it grew a lot or?
In SEK, it is relatively flat.
The RUB has depreciated.
Are we talking Q4 now? Or are you talking yearly?
No, for the year.
For the year. There's a decline in the SEK of some handful of percentage points in SEK.
Okay.
It was flat in the Q4 in SEK.
Okay, that's impressive.
My point was, now we see a deterioration, which is fairly rapid.
Sure
January. Which we expected to come earlier.
Yeah, sure. The second question on a more philosophical basis. With regards to the gardening season of 2015, given where we stand today, we are in February. One would assume that your visibility on your savings is fairly good, though you can't really know much about how you will sell. Is that a fair assumption?
Yeah. I think we refrain from making any comments on parts of the P&L here. I'm bailing out on that question, I guess.
Okay, cool. Finally, I was just wondering, when will you start producing chains in Husqvarna?
We are doing production runs at that. We will be in a production ramp-up scenario throughout the year. For 2016, we will, on a larger scale, sell chains. We will start to load up definitely through the second half of this year, which is pretty much in line with what we have said before. We might be a little bit later, but not significantly later. We are a little bit later, yes. Remember that what we try to do is to bring the best chains in the market.
Yeah.
There are many complex manufacturing process steps. Many of them are new for us. It is quite an undertaking that we have embarked on and are working with. There might still be surprises. That's how it looks right now, the second half of the year, filling up inventories for a larger launch, which will, revenue-wise then rather impact 2016.
Great. Thank you.
Thank you. Next question comes from the line of Johan Dahl. Please ask your question.
Thank you. I was wondering, if you look on 2014, there clearly seems to be pretty good demand and some market shares to gain with strong volume for your group. As you look into next year, I guess there must be some difficult decisions with regards to profitability versus betting on growth. You've been very clear on the net number with margin improvements. Gross, looking at investing in the dealer channel in the U.S., brand investment and so forth, what are the gross cost increases and what bets are you making into the upcoming season?
We are, as I think I emphasized before, investing in the Husqvarna brand. We are investing in the Gardena brand, and that's where the focus is. From a sales perspective, really, it's not a general sales increase that is the target. It is a very much selected sales increase that is the emphasis, and that remains, i.e., we're talking about the professional handheld, we're talking about the robotics, we are talking about the mobile watering, and then the parts and accessories. That's really the emphasis that we are setting, and the rest may be eventually what it turns out to be. These areas are supporting the profitability improvements the most, and that's where we put the energy.
Have you revised up your plans for growth investments in 2015, given the very strong performance on growth in last year?
You're right, of course. If you look at R&D, if you look at marketing, if you look at allocation of sales resources, they are shifted towards these areas, and incentives are shifted and reinforced in these areas, of course. I don't want to be really that much more specific about it. I hope I don't disappoint you too much on that, but that's how we work with it, so to say.
Okay, thanks.
Thank you. There are no further questions at this time. Please continue.
We have a few more questions from the floor here in Stockholm.
Okay, Andreas Lundberg, ABG. Back to Ulf. You talked about cash flow and the effects from hedging on the cash flow in the fourth quarter. If you look at current spot rates, what kind of implications, if any, will we see from that going forward?
Well, what you saw there was, if you talk about the finance net related cash out, hard to judge because it's so dependent on what rates that we foresee. If you look in the comprehensive income, you can see that we have taken some of the unrealized hit in the comprehensive income as well. Again, that is just as a guidance. The residual between what you see in that specification and what you see in the cash out in the cash flow spec, some SEK 300-plus million could be a guidance. Again, it is so dependent on where the currencies. This could be positive as well as negative going forward here.
Okay, back to the margin question or questions. I guess you're taking some nice steps here in 2014. If you compare what you have in front of you, from a challenge perspective for the organization, would you say the easy gains have been taken, or will it be more difficult to implement the future improvements? Thank you.
A good question. No, I like to say it's about equal. It's hard work. As the CMD, we try to give and kind of express the significance of what's going on. It's a huge amount of activities involving many, many people in the organization. From that point of view, we need to have respect for keeping the focus and keeping also the executional power right there, at the same time as we are setting up the new divisions. Of course, that releases energy, and there is a certain pressure that I would expect throughout the year to come from the new divisions, doing a lot of other justified and good activities.
It is very much up to safeguarding the focus and the execution in this area, and keeping it as a priority 1 rather than the opportunity as such to really have sufficient improvements to carry through, so to say. I see the opportunity, but we need to keep the focus and execution on it. That's really, I think, the main item that we're working with. We will do it. We're determined in that sense. Then, of course, as you saw, there are different situations beyond 2015 now, with 3 divisions being around 10% or better, and a fourth one, which really needs to carry through the turnaround. That will, of course, impact 2016 a bit as well.
From my perspective, I'm quite pleased with the fact that we now have the Consumer Brands transparent with about SEK 10 billion annual loss, because that allows us to deal with it in a more distinct way. It has been there all the time. Now we see it very visibly, and I think that's good for us. It opens up opportunities on that side as well in the other areas, and it's not the same medicine for any of those 2 cases.
Lastly, I don't know if you already commented, but the inventory, how does the inventory channels look like at the moment at your retailers or customers?
If you look in the trade. If you look at U.S., there was particularly, I think, one of the major retailers that had a little bit of excess inventory leaving the season, but I think that has been worked down. I don't expect any impact of that in 2015. If you would judge by the general economic macro, the load in the inventory buildup at the retailers should be, if anything, positive than anything else, in general terms. That goes, I would expect also for the dealer channel in North America. Europe, again, the seasonal pattern has been a bit different. Now lately, as you have noticed, we have had the snow, which is good, and which should help out a bit. Otherwise, that could have been a concern for the beginning of the year. In general terms, okay, no problems with inventory and trade.
Yeah.
A follow-up question. Well, first of all, actually, on the Russian sales being in local currencies very strong, could that just be the fact that you said you're a bit late in adjusting prices, there's a pre-buying behavior? I know that was the fact in the white goods business. They bought refrigerators like crazy, basically before the price increases.
Yeah. There has been a strong element of that. Anyway, now it's deteriorating.
Yeah
Very rapidly, though.
Also on the chains, can you say anything about how much you expect to sell externally, where will you book it if it under the Husqvarna division?
Yes. The target for the chains is very clearly the pro segment, the real high-performance part of the market. It's all Husqvarna that would benefit from it. I'm sorry to disappoint you on this one, on it, I don't want to, in fact, give any numbers today. I realize that at some point in time, we should come back with it, but that's rather maybe half year from now than anything else. You need to bear with us that we are still in the final process validations in the productions, and there are many uncertainties that needs to be ironed out during the first half of this year before it's firm enough to make it relevant to go external with these type of numbers.
Okay. Operator, do we have any final question from the telephone audience, please?
There are no further questions at this time. Please continue.
From my side then, thanks for the attention of coming here, and also let me take the opportunity to say thanks to Ulf, who's been doing a very good job here at Husqvarna for some years and supported the progress. Thanks, Ulf, and good luck for the next step as well.
Thank you, and all the best to you.
Okay. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now all disconnect.