Earnings Call: Q4 2014

Feb 6, 2015

Welcome to Healthqvarna's announcement of quarter 4 respectively the full year of 2014. We have quite some material to cover including also the restatement, the new divisions. So I'll jump straight into the overview. And if you look at the quarterly result of quarter 4 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 4 is a seasonally less important quarter for us and it's normally carrying a loss for us and we had $308,000,000 last year. We reduced that loss to €230,000,000 despite the fact that we had a very heavy impact on the currency of €81,000,000 So all in all, the underlying improvement, we think is very satisfying and we're quite pleased with it. The pattern continues I. E. Its gross margin improvements that's driving the improvement of the result. And this particular quarter, America took a big step ahead. So that's the largest improvement from a business area perspective. If you look at the full year, we are up 47% EBIT wise. To €1,600,000,000 became a bit more than €2,300,000,000 And we improved the EBIT margin with 1.9 percent to 7.2 percent 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. So we went from €160,000,000 to €278,000,000 And that's quite strong. We are very pleased with 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 €767,000,000 And 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 Vienna meeting to increase the dividends to €1.65 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 1. So hence, we will look into the restatement a bit later here. Moving into the more details of the numbers. We can see then that the net sales increase has been 6% for the quarter 4, 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 2 percentage points. Taking the EBIT excluding the impairment then to minus 230 as we talked about. Sales volume is supporting the lower loss, but also that the rated improvement program. Material cost reductions productivity has been of good help for us. And again, we have euros FX disadvantage. So if you look at that, we principally have 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. So now 2 seasons in a row. And that hasn't helped as you can understand say some seasonal products like typically snow throwers, but to some extent also the handheld products. So that's a bit of a disadvantage. On the other hand, Asia Pacific has been doing well in this quarter and we have also some contribution from the small acquisition we did in the micro irrigation area in Australia, Nitta. But also I could emphasize both China and Japan doing fine in the quarter. Seasonal losses increased, but again a big shank of the €81,000,000 FX disadvantage for the quarter for the group resides in this region €57,000,000 in fact. So we need to remember that. You can see that for the full year, the EBIT margin has increased from 10.1% to 12%. So in line with the group results, not very surprising since this is such an significant contributor of the result obviously. 3% sales for the quarter on a yearly basis 5%. So 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 2 years in a row. In fact, they have had a late spring. But they had a good second half of the year. And of course, we benefited from that in quarter 4, meaning that the inventory in trades of snow related products were if anything a bit lower and has been selling through quite well in this quarter. And the further north you get, the more that has been pronounced. So it has been very clear. But 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. So 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. So despite the FX impact, you can see this is quite an impressive result improvement, I should say, lowering the losses, the seasonal losses from minus 146,000,000 to minus 43,000,000. But what I would like to draw your attention to is in fact the full year performance. So roughly from a breakeven EBIT margin point of view, we have managed to go halfway to the targets we have announced for 2016 of 5%. You remember that the mathematics is built up around 10%, but the group assumes 5% from Americas. So 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 EBIT from €45,000,000 to €49,000,000 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 of their from that region perspective and country perspective. Looking into the operating income. What's behind, of course, we have the advantage again of the sales and the mix, but we have also invested in both R and D and sales and a little bit of FX disadvantage. So the sum of that adds up to the plus 4 than EBIT 1,000,000, but somewhat lower margin. Now coming over to the restatement and I would expect some of you to be interested in particularly in this part. Now when we restate 14, we see that Husqvarna come out with about SEK 15,500,000,000, dollars 2,000,000,000 EBIT equivalent about 13%, so maybe a little bit more than some of you might have expected. We guided above 10. And of course, this is a result of strong brand, attractive product, very strong channel with about 25,000 dealers built up over a long period of time. Gardena, 13% of group sales, about SEK 4,200,000,000 of sales, SEK 382,000,000 corresponding to about a little bit more than 9%, a little bit lower than what we talked about at the Capital Market Days. On the other hand, the second half of the year was also a bit weaker from a business point of view. And during the course of the time from September to end of the year, we learned a bit more about the details of the numbers. So I wouldn't read into 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 TMD and that will continue to be the case. And the margin will move with it of course. And if you look at the distribution of the quarter, you will see that there is huge swing, maybe surprisingly huge swing for some of you. I think that's Page 16 in the report. Now Consumer Brands, we announced that it would be slightly negative. It came out about that level minus 1.6% on the little bit less than the €10,000,000,000 of business that it represents. And 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. But very pleasing to see of course that the margin wise have taken the step now up above 10% and reside around 10.7% of 14% from the 9.2% in the preceding year. So this is the way we will look at the business going forward. This is the way we will report it going forward. And of course, one of the obvious questions I would expect from you is, so how are we going to how is this going to look like then in a 10% scenario for 2016? And to give some indication without being too specific about this, we expect 3 of the 4 division 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. So that's what you can expect. So 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. And I think we actually do like this. Based on that we have now been talking about the new organization, I jump to the 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 Q4 with. Based on the new organization that is now a brand driven setup and it is a brand driven divisional split effective from 1st January 2015, this has also meant that we, from an accounting perspective, have 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. And as you have seen, it is related to the Gardena division, where we have made the analysis and the tests based on then the new setup and the new cash generating unit. And that has been reflected in an impairment related to SEK 767,000,000 charged to the Q4 2014. Reporting wise, this has been booked within group common costs. So it will not distort the old organization, and it will also mean that when the opening balance is now going to 15, that is, let's say, cleaned out from any goodwill write downs. But I think it is pretty clearly stated in the report. And you may also see now the closing balances of the goodwill that now resides within the different divisions. And a reallocation had been made in order to also now reflect the new setup as of January 1, 2015. Then let's go back then to the normal setup that I normally show you. So let's have a look at the consolidated income statement on Page 8. And let's jump to the gross margin percentage. And 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 4. You can see that we keep now the 2 percentage points improvement also in Q4, which is on par what we have done prior year. And if you split up the improvement here over the 2 percentage points despite a headwind of FX, and 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% 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 a quarter 4. So quite pleasing to see. And as you may see then that we end the year with the 2 percentage points improvements. And I mean the good thing is that that is flushed down all the way down to EBIT as well. If we continue and look at the SG and 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. And that is actually also what is happening if we look at brand marketing, but we also have a higher transport and warehousing costs and that is very much related to the increase in sales. So 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 then, in the quarter, we excluding the impairment of goodwill, we end up with a loss of SEK230,000,000. It is an improvement compared to last year where we ended up in SEK 308,000,000. EBIT margin detects then that we are on negative 4.3% versus last year's 6.5%. To be mentioned is and you have seen that is that we had quite a severe headwind when it comes to FX in the quarter, SEK 81,000,000 on a full year SEK 140,000,000 plus. Compared to the guidance I gave you in the end of the Q3 based on the rates we had at the time, we are approximately some SEK60 1,000,000 worse and everything is charged to the Q4. Very much, as you can imagine, related to the ruble as well as to the U. S. Dollar. The U. S. Dollar has gone quite strong as you all know in the Q4 and based on that we have a lot of the purchases in dollar in the Q4 as well as slightly higher purchasing volumes that had quite a severe impact in the Q4. So SEK 80 plus 1,000,000 in the result of 4th quarter should be taken into account when you assess it. Continue down, we can see that the finance net ended up in negative EUR 49,000,000, percent, quite an improvement versus last year minus 125%. 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 contracts. So that is the main explanation to the improved finance net in the quarter. Last item here on tax expense. And let me rather look at the full year where you can see that we amounted to some SEK435,000,000 versus SEK264,000,000 last year. This should be seen from the perspective that goodwill is not triggering any tax deductions here. So I mean you should exclude the impairment piece to get the ratio correct. And then you may see that the tax rate that we have for the full year of 2014 is in the range of 22% and in accordance with the guidance I have given you during the year. And it is more or less on par with where we were 2013. With that, let's move over to the balance sheet and maybe some words at least on the inventory level. This slide on slide 11, you see the reporting numbers. So if we adjust for currencies, the inventory is actually more or less on par with last year. So I. E. The group have been able to keep the same levels despite a 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. And 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 €100,000,000 plus And if we look at then a ratio relating to the days of sales outstanding, we have lowered that coming from 58 days down to 55. So here we are doing continuous improvement as we go. Let us move over to the cash flow, and this is normally the curve that I am showing you. And 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 800,000,000 plus, last year SEK 1,800,000,000. And the main reason for the lower level in 2014 is that in 20 13, 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. But 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 plus 1,000,000 very much related to the new chain manufacturing down in Husqvarna. That is also, of course, a piece of the delta. And 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 Q4 with a cash out of some SEK 400,000,000. So that explains, if we just take it in perspective with SEK 13,000,000. But again, a quite decent cash flow for the group of some SEK 800 plus 1,000,000 for the year. And of course, we can see that we have had now EUR 12,000,000, EUR 13,000,000 and EUR 14,000,000 in a quite good shape here, and we definitely feel that EUR 11,000,000 is behind us. That in turn leaves us also with a net debt 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 equity of some 0.44% versus last year of 0.47%. So the net pension liabilities and the revaluation of those have had quite an impact on the debt here. But again, important to have in mind, if we exclude them, it's down to 0.44, so quite decent level. And that we can see on the next page as well when we look at the net debt to EBITDA. That is one of our financial targets that we have said should be below 2.5. Percent. Last year, we ended the year of 2.6 percent roughly. And you can see this year, we are around 2.2 percent. So 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. And fair enough, maybe the one that I at least want to mention here and 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. We actually if we exclude the impairment of goodwill, we actually have now a return on capital employed that is double digit margin. So I mean 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. So if we then leave the 14 and allow me to give some guidance for 2015. CapEx for 2015, and I'll talk about the group here, we aim for some SEK 1,300,000,000. We expect to have SEK 300,000,000 of that related to the chain manufacturing in Husqvarna. There is some carryover, as you can imagine, from CHF 13,000,000,000 sorry, from CHF 14,000,000 over to CHF 15,000,000,000. But we also have some upper adjustments of the investment per se. So CHF SEK 1,300,000,000 for the group in CapEx for 2015. Depreciation and amortization for SEK 15, we aim for some SEK 1,000,000,000 or roughly in the same level as we have seen at least the last 2 years. Tax guidance for SEK 15, we remain in the range 20% to 24% calculated on the income after financial items. And last but not least, FX. I mean, there is a huge volatility in the market, no doubt. And of course, a strong 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 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. So right now based on end of January, it is a wash, I. E. 0 impact as the way we foresee it for 15 year on year. With that, I believe I leave to you Kai to summarize 2014. Thank you, Ulf. So summarizing 2014, continued trend of performance improvement. We are quite pleased. Whatever area you look here, you can see it's the EBIT result at 47%. The margin the earnings per share, which is up 74 percent excluding the impairment. And that's very satisfactory obviously. The increase of the dividend, which is of course a sign of confidence moving forward, the new organization. But 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's the vehicle for driving the next level of improvements. And being at 7.2% in 2014% and aiming at 10%, we need to take another significant step obviously in 2015%. I don't want to be specific about the details, but you can imagine it wouldn't be good to be too back end heavy in that. I understood by some discussions I had that we talked about being back end heavy, which is absolutely true in some of the aspects like complexity reduction. And that is the case and that will still remain obviously. But 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. So a significant step ahead is what we expect. I think that 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 with that question. What do we expect generally from the market? Well, we see a stable demand situation in Europe, Asia Pacific for that overall region that we have talked about before. Some of the polls 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 4 it was flat. It was a little bit down for the full year, but quarter 4 was flat. But 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. But now we see that general and I think that's what we expect going forward. Germany on the other hand is probably one of the strengths in this region. And of course, some of 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. So from a market demand point of view, we are quite optimistic about that. Now the question is, how do we capitalize on that? And then I would say Husqvarna division is maybe better positioned to take reap the benefits of that than for example the Consumer Brands division where we obviously are in a turnaround mode. So 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 4. It will most likely continue to do so for 2015. So with that comment, I'll leave it to questions. Start with questions from the floor here in Stockholm please. Hi, Anders Chep from SEB. I have three questions regarding FX all of them. First, as you have a very distinct pattern seasonal pattern also purchasing and your flows, it would be helpful to sort of try and get some kind of indication on the different effect 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? And 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. So do you need to change the target? If I take the third one first and then I'll let Ulf answer other 2 ones. You're right. There is a kind of margin dilution by an inflated top line and then EBITDA is not really benefiting from the FX. But that doesn't bring us about to change the target setting. We there will be more changes coming up material prices FX and 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. But this is for sure not helping us. That's true. FX per quarter, I can't I will not disclose exact figures. But if I say like this, the Q1, I mean, it is with a negative sign. And then we see some positive in the Q2. And then as a result, you will see slight negatives in the 3rd and the 4th quarter. I mean, that is how it stands as of now ending up in a flat situation. So I. E. You will see then the benefit in the second quarter, but negative in 3 quarters Q1, Q3 and Q4. And I will not go in, in detail tell you about the FX contracts per se, but I can say this much that the U. S. Dollar is of course the negative from a transaction perspective. And then you have transaction wise a positive impact of the euro together with the FX contracts that help us then offsetting mainly then the U. S. Dollar negative impact of that. And again based on January closing rates that is where we stand today. The reason I ask is of course that if you have a sort of significant profit from your hedges, it means basically that you're postponing the negative impact into 2016. Well that that will be adjustments you had to make. But I mean everything else the same. That is of course something. And again based on that the currencies remain on those levels. But I would say 16, I would refrain definitely from talking about at least today. All right. Thank you. Kristian Meinngold from DNB. A follow-up question on the 10% margin targets. You talk about lower raw material prices or component costs, but 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 and from the raw materials. But the raw materials as such, it's not really giving that much of change at all for 15, unfortunately. I mean, you would expect them to be positive for us. But the fact of the matter is we locked in steel prices and then most of the consumption of the steel is in U. S. And the steel prices in U. S. Are higher than in Europe. So it's not as advantageous for us. Everything else is the same. It would be an advantage 2016 though, but they're coming down. But what we are benefiting from in terms of raw materials is rather than plastics, which are type of shorter term contracts, etcetera. But all in all, a wash for 2015. But 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. But that's something we will need to deal with. And I don't see that the magnitude of that is such that it kind of changes the perspectives altogether. No. And then since you have to do these adjustments now, it doesn't mean that even if the program is not back end loaded as we mentioned earlier, but I guess it will take some time before these new measures will give results. So the question is basically the EBIT margin progression should that not that should not be linear I guess because 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. But obviously, we need to take a big step in 2015 to be credible to reach the 10% in 2016. But that's clear. So if the season isn't against us at least half of that needs to be absorbed in 2016. But then we will always have the season with or against us as you know. But that's the basic standing. And then let me ask the question on the new business areas. The consumer brand division is, of course, loss making and you target 3%, 4% margin improvement taking margins to maybe what 2.5%, 3% roughly or so. Does that cover cost of capital? And is that something you're into for the long term? Or could when you reach that kind of margin, is that our sales? Mike, do you want to talk about the returns? Well, say like this. I mean, we measure internally on that specific division. I think we mentioned it at the CAP Market Day as well that of course the justification for that division will be a return on capital employed target. I don't think we are prepared to reveal something here and now today. But I mean, again, that is what that division will work with for sure. Based on that, it will attract a lower EBIT margin going forward here. And of course, they are as you also can see, I mean, they are benefiting from what we are doing when it comes to SKU reduction and platform reduction. And that in essence has not only impact in the P and L, it does have an impact in the balance sheet as well. So there will be let's say improvements when it comes from return on capital employed. And that is how that division will be assessed going forward. And of course 16 is not the reference for what we aim with the Consumer Brands division. I mean, it's a realistic hopefully ambitious, but realistic ambition what we can do with it without taking a too big hit on the revenues. But for sure that continuous improvement for consumer brands will be very clearly into 2017 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. And 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. And it's we're a little bit behind obviously naturally, but we are really working hard with it. And 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 only for chainsaws and we want to hang in there. So 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 up which is not in the cards for us. So operator, can we take the questions from the telephone audience please? Your first question comes from the line of Bjorn Enersen. Please ask your question. Yes. Thank you. Bjorn, Danske Bank. A question on the investments in R and 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? And then you talked about the profile of the reaching the 10% EBIT margin. I didn't really catch you there. So if you could please give me some more color on how you looked upon that more than it was 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. And we have plenty of room to still take action. Then as to how the construction business and the investments in sales respectively R and D, yes, 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 etcetera. So I think all in all Husqvarna is moving into a position with an outstanding product range and we're trying to continue to reinforce that. And 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. So 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. And you heard me talking about for 16, 1 percentage points to 2 percentage points for those 3 divisions including construction. So if there is anything a slight margin improvement obviously throughout the quarters. On the theme obviously throughout the quarters. Thank you. Perfect. Thank you. Next question comes from the line of Rasmus Engho. 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 Sorry repeat the question Russia. No. I was just wondering when your development in Russia was flat that is in local currency or is it in Swedish krona meaning that it grew a lot or No. In Swedish krona it is roughly flat. The ruble has depreciated. January. Are we talking quarter 4 now? Or are you talking January? No for the year. For the year. Then there's a decline in the SEK of some handful of percentage points in SEK. It was flat in the quarter 4 in SEK. Okay. That's impressive. But my point was now we see a deterioration which is fairly basis. With regards to the gardening season of 2015 given where we stand today, I mean we are in February, one would assume that your visibility on your savings is fairly good, so you can't really know much about how you will sell. Is that a fair assumption? Yes. I think we refrain from making any comments on parts of the P and L here. So I'm bailing out on that question, I guess. Okay. Cool. And then finally, I was just wondering when will you start producing chains or chains in Husqvarna? We are doing production runs at that. We will be in a production ramp up scenario throughout the year. And for 2016, we will on the largest scale sell chains. But 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. But we are a little bit later, yes. But remember that what we try to do is to bring the best change in the market. And there are many complex manufacturing process steps. Many of them are new for us. So it is quite an undertaking that we are have embarked on and are working with. So there might still be surprises, but that's how it looks right now, the second half of the year filling up inventories for a larger launch and 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 on some market shares to gain with strong volume for a group. As you look into next year, I guess there must be some difficult decisions with regards to profitability versus betting on growth. Can you just talk I mean, you've been very clear on the net number with margin improvements. But 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. And 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. And that's really the emphasis that we are setting and the rest may be eventually what it turns out to be. But these areas are supporting the profitability improvements the most and that's where we put the energy. But have you revised up your plans for growth investments in 2015 given the very strong performance in on growth in last year? That's of course you're right of course. I mean if you look at R and 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. But that I don't want to be really that much more specific about it. Hope I don't disappoint you too much on that. But that's how we work with it the same. 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 and you talked about cash flow and the effects from hedging on the cash flow in the Q4. If you look at current spot rates, what kind of implications, if any, will we see from them 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. I mean, you can see some 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. But again, that is just as a guidance. And the residual between what you see in that specification and what you see in the cash out in the cash flow spec, some €300,000,000 plus could be a guidance. But again, it is so dependent on where the currencies contain. I mean, this could be positive as well as negative going forward here. Okay. And then back to the margin question or questions. I guess you've taken some nice steps here in 2014. If you compare what you have in front of you from a challenge perspective for the organization, will you say that the easy gains have been taken? Or will it be more difficult to implement the future improvements? Thank you. Good question. Now I'd like to say it's about equal. I mean it's hard work. And at 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. And 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. And 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. So it is very much up to safeguarding the focus and the execution in this area and keeping it as a priority one rather than the opportunity as such to really have sufficient improvements to carry through so to say. So 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. But we will do it. We will do it. We are determined in that sense. And then of course there are as you saw there are different situations beyond 15 now with 3 divisions being around 10% or better. And the 4th one which really needs to carry through the turnaround and that will of course impact 2016 a bit as well. And from my perspective, I'm quite pleased with the fact that we now have the consumer brand transparent with about €10,000,000,000 and a loss because that allows us to deal with it in a more distinct way. So I mean it has been there all the time. Now we see it very visibly. And I think that's good, good for us. It up opportunities on that side as well in the other areas. And it's not the same medicine for any of those two cases. And lastly, I don't know if you already commented about the inventory, how the inventory channels look like at the moment at your retailers? Okay. If you look in the trade, if you look at U. S, we had a little bit of there was particularly I think one of the retail major retailers that had a little bit of excess inventory leading the season, but I think that has been worked down. So I don't expect any impact of that in 2015. And 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. And that goes I would expect also for the dealer channel in North America. Europe, again, the seasonal pattern has been a bit different. But 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. But in general terms, okay. No problems with inventory and trade. Yes. 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, so there's a pre buying behavior? I know that was a fact in the white goods business. They bought refrigerators like crazy basically before the price increases. Yes. There has been a strong element to that. But anyway now it's deteriorating very rapidly though. Also on the chains, can you say anything about how much you expect to sell externally? And where will you book it? Is it in under the Husqvarna business division, I mean? Yes. I mean the target for the sales is very clearly the pro segment, the real high performance part of the market. So it's all Husqvarna that would benefit from it. But I'm sorry to disappoint you Anders on it. I won't be able to I don't want to in fact to give any numbers today. But I realized at some point in time we should come back with it. But that's rather maybe half a 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. So from my side then, thanks for the attention on 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. So 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.