Earnings Call: Q1 2014

Apr 24, 2014

Good morning. Welcome to the quarterly results presentation. Pleased to see you here. And as you might have noticed already this morning, it's a positive start of the day for us. I will talk a bit about that naturally. But let me get into the very first overview of this quarter. And if we try to summarize the quarter, we have had a good demand overall. And if I try to qualify that a bit, we have had a good stocking in the North American space, and I'm emphasizing sell in stocking because really we haven't sold out anything to customers. So the point of sales has not yet really started. So the 9% increase you've seen in North America is more an expression of that they have stocked up. And I'll come back to that a bit more when I talk about North America specifically. In Europe, we have had a favorable weather start, as you have noticed. So we are a lot better off this year compared to last year. Last year was characterized by a late spring, and this situation is a lot more favorable. Throughout March and also the beginning of April looks a lot better, as you have noticed, which is, you can say, a general observation for Europe. So that's all nice. I think you might have the weather with or against you, so to say. For me, it's important that the structural improvements are continuing to materialize, and they have, in fact, done that. So we are pleased to see that the Accelerated Improvement Program has contributed significantly to the result improvement of the quarter. And behind that are particularly some various aspects, namely material price reductions, Profit pools, we emphasize a lot the focus on the main brands Husqvarna and Gardena, the leading product position and which represent then our profit pools. So selective growth, I think, is a theme for us. In addition to that, we are working with a turnaround in the U. S, and I'll say some more comments to that soon, which are also coming in as expected and in a positive way. Worth to note is also that the construction area is delivering very well. They are not as seasonal as the forest and garden area, but they are seasonal in some respects. So January, February normally are slower months for them, and they had a very strong March. They really delivered well all the way through geography. All in all, we had a 7% net sales increase and we had a leverage then, as you can see, in terms of the operating income, which was up 31% then. So that's nice. And the continued working capital focus support, of course, then, for example, net debt equity ratios. So we do continue with that focus. And you will see us continuing doing that going ahead. So I think this is a bit the summary of it. And let me then, from that overview get into the geographies and the business areas. But first of all, the numbers for the group. The 7% currency adjusted increase of net sales, up to SEK 9 point 7,000,000,000 a little bit shy of SEK 9,700,000,000 Gross margin increase with a little bit more than a percentage point EBIT improvement here of from 7.6% to 9.3%. If you look at the 7%, we had support from all the business areas, so in terms of sales. And the EBIT then, of course, supported by the volume, obviously. The mix also was behind that. I mentioned the material costs. But I think it's worth to notice also that we had the FX against us. And Ulf will come back and comment a bit specifically what's behind the €45,000,000 So in that sense, yes, it was a strong quarter for us with a headwind of the FX and still that improvement of the result. Solvency ratios improved as a consequence then of the operating working capital focus and improved result as such. Europe, Asia, Pacific, 5%, up in net sales. The dealer channel is delivering according to expectations. We are working with a strategic focus on that very clearly. From a geography point of view, we had a fairly broad positive view of the development. However, as always, there are certain emphasis, particularly Germany, Austria, Switzerland has been increasing the most in this quarter. Russia is a bit of a decline, but not in any drastic way. I could mention also that we have worked with price increases to compensate for the decreasing value, the depreciation of the ruble. But beyond that, there is nothing dramatic about our position in Russia, if anybody sits wondering about that for the moment being. Coming back to the selective growth. Is 5% good in terms of net sales or not for us? I would say it is good because we have emphasized and I have emphasized a lot since I came in selective growth. And that means growth in areas where we do have leading positions and an over average profitability. Typically, robotics movers, pro handheld equipment and mobile watering, these areas are key for us to enhance the positions in, and we have, in fact, succeeded with that, I'd like to say. And again, the early spring, of course, has given us support for the to the net sales improvement. From a results point of view, the volumes, of course, support us. The product mix that I talked about and the channel mix with the dealer sales. So all those are with us. And the reduced material costs are important. So if you look at the EBIT margin, 13.5% to 15.4% is a good step forward. Currency effects in Europe are slightly positive, though. We had about SEK 5,000,000 or something of you will come back to that, I guess, later. Right. Americas, 9%, good, good level. Again, it doesn't say anything about how this season will develop really because as a consequence of the late spring, which has just started in Northern America and Canada, we do not really know how the sellout is going to look like. We don't have that transparency. But you can notice that the actors in the trade, the retailers, etcetera, they have the confidence obviously to stock up as if they are expecting a good season. But for sure, now they are sufficiently stocked, even though they might have been a little bit short than in terms of stock leaving last year coming into the season. So part of the 9%, I think you should read also as they are normalizing stock levels from a little bit lower levels as a consequence of the prolonged season last year because we did, in fact, have a good quarter 3 last year, an extended season, and that supported us. I think it's also quite important for us, as we have talked before, that we are continuing the growth in the dealer channel. Many of you know that this represents about onethree in North America for us, which is quite different than in Europe where it has a lot higher gravity and mass. We had, in fact, a growth of 12% in the dealer channel, which is pretty much in line with what we had last year. So we are continuing on that growth pace in the dealer channel. And that's very satisfactory to see. Getting over to the profitability improvements. Yes, in fact, quite a lot of the material price reductions have related to the retail offering as such. So we have really focused on improving the competitiveness of that. We see results of that. We see the sales channels mix, as you saw that I mentioned. And you also see the headwind of FX, the SEK 36,000,000 And despite that, you can see then that the result has improved substantially from 3.3 percentage point to 4.8 percent EBIT margin. So that's quite satisfactory. And I'd like to emphasize that the organizational change we undertook beginning of the year when we divided organization into 2 profit centers, 1 for retail, 1 for dealer, is showing very promising results. And we do see that it releases a lot of energy, and it brings the focus to the right point, which is the result improvement. So we are reinforced in our belief that this is the right way forward. So if anything, that's also very good for us. Let me move on to construction. I mentioned that we had a positive development in construction, 11% net sales. From a geography point of view, good improvements across the lines. Even the Southern European space, the so called pigs countries, showed a nice development. Southern America, very strong. Brazil, not the least. But in general, a very positive development. We have behind this increased I mean, as a cause for this, I mean, we have a strong product offering, and we have increased the market penetration during the last few years. So we see the effects of that combination of the increased market penetration and the strong product offering. A lot of R and D has gone into the products. We have a real nice competitive offering. And in many respects, I think Husqvarna is becoming the benchmark in That's not what we see in this picture, but we have also introduced a high frequency system called Prime, which is showing very promising results and is very well received. I think I mentioned that last time and that trend is continuing. We have emphasized the introduction so far and concentrated it into Europe, but we will expand that as we go ahead. Now from a result point of view, of course, we do have the advantage of the volume increase. We do have the advantage of the fixed cost leverage as such with additional volume. Despite the headwinds, we are then improving our EBIT margin from 6.5% to 9.8%. And again, January, February, somewhat slower. March, really strong. And normally, you would expect quarter 2, quarter 3 to be relatively stronger quarters for construction. And we're already now up to 9.8% EBIT margin. So that's really satisfactory. So we are a bit upbeat, as you can hear about the construction Okay. With that short market overview, I'll leave over to Ulf to talk you through the financials. Thank you, Kai, and good morning, everyone. Just a brief remark before we move into the numbers here. I just want to draw your attention to that we have made a minor restatement. We have sales from Sweden to distributors in or to certain distributors in Americas where we have actually moved the responsibility from Europe, Asia Pacific to Americas. And you will see that in the report that we made a slight restatement of the 13 numbers talked about on a full year basis some SEK216 1,000,000 and SEK 26 1,000,000 of operating income, and that is to make that comparable. And that is, of course, reflected in the report here. But you have that, I believe, on Page 13 in the report, so you can see more specifically what that is about, the minor adjustments, and that is due to mover responsibility. So if we then move into the P and L, and as you have heard Kai, a net sales development that definitely contributed to the operating income. If we look at the gross margin development improvements of 1.1 percentage points and quite satisfactory. And if we just look at the curve here and look at the 12 month rolling, you can see that, that one is then lifting here compared to where we were 12 months ago. 26.3% versus 25.2%, 1.1 percentage points improvement and a lot related to the material cost where we are, as you know, consciously working with lowering the cost with different projects. And that has contributed with close to 2 percentage points. As you have seen, we have had some headwind when it comes to FX, and that is attributing some 0.6 percent negative. And then we have, based on the accelerated improvement program and a lot related to the profit pools, we have improvements when it comes to mix and, to some extent, price, and that is attributing some 0.9 percentage points improvement. The residual is roughly related to that. We increased slightly the R and D expenses as we go forward, but net 1.1 percentage points improvement. Going back then and looking at the SG and A, a slight increase of some 0.6%. But if we look in relation to sales, as you know, we have a lot of variable costs related, not least when it comes to transport and warehousing. If we take the SG and A in relation to sales, we are lowering that ratio from 17.5 percent last year to 17.0 percent this year. And of course, a good development when it comes to saving programs that is now close to the level of full year saving. If we take 2012 as the comparison, we achieved some SEK 34,000,000 incremental savings in the Q1 of 'fourteen. And we assume that the full year saving of some SEK 220,000,000 will be obtained in in the Q2. Again, important to know, we shall put that in relation with 2012 as a benchmark. And that was also the year when we took the cost related to that saving program. But that is following plan. Moving down then and looking at the EBIT generating some CHF 903,000,000 versus CHF 688,000,000 last year, and that generates then a margin improvement up to 9.3 percent versus last year, 6.7 percent and quite an achievement. And of course, related to the increased volumes, the lower material costs and the improvements of the pricemix. If we look at the currency effect, as you saw previously, that had an effect in the quarter of some negative SEK 45,000,000 year on year. We still have an impact when it comes to the Australian dollar, the ruble, the Canadian dollar as well as the rand. But we did get some positive impact of the stronger euro, and I will come back to the guidance for the full year later on here, but SEK45 1,000,000 year over year in the Q1. Finance net, moving further down, minus SEK96 1,000,000 versus minus 86%. And we can see that, of course, we have the lower interest rates and we have a lower net debt, but that is offset by the revaluation effects on interest rate differential in the hedge contracts. So slightly higher level compared to last year same time. Tax, we amounted to some SEK 191 1,000,000 negative compared to SEK 135,000,000 last year. And that corresponds to a tax rate of some 24% in the quarter. If we then move into the balance sheet, we are quite satisfied, as you have seen from Kaj's presentation as well, that we are able to continue the conscious work with the working capital and not least that the inventory is below last year's SEK 8,300,000,000 and we generated some SEK 7,500,000,000 in the quarter. So adjusted for currency, it is a decrease of SEK 0 point billion. That, we believe, is quite an achievement based on that. We actually had a growth. Accounts receivable up, but that is as a result of the increased sales. So that is quite natural. And to mention here that the days of sales outstanding are improving, and that is now versus last year, 62 is now on a level of 59 days. So we have a good momentum also there. Moving then over to the cash flow, and this is the curve that I normally show you. And the blue one is then 2014. And as you may see then that we are close to SEK 2,000,000,000 negative, slightly worse than last year, but still following quite well the 13% curve. And then we shall have in mind that CapEx increased with some CHF 88,000,000 to CHF 292 and a major part of that is related to the manufacturing facility for chains in Husqvarna that represented some CHF 56,000,000 percent of the increased 88 percent. That also have, of course, a good impact when it comes to the net debt equity ratio. That is also improved versus last year. We are now on a level, including pension liabilities of SEK 0.73 versus last year's SEK 0.90. If we would exclude the net pension liabilities, we have now net debt equity of some SEK0.61. Key figures, I believe I have mentioned a majority of it. I mean, you can see now that the CapEx is increasing as we go, and that will also increase for the residual of the year, and I will soon come back to that later on here. But we also can see that some of the capital ratios are improving as a result of better EBIT as well as a good management of the operating capital. Some guidance then for 2014. CapEx, I said last time we met, should be in the range for the full year of SEK 1,500,000,000. It remains on that level. Whereof some SEK 460,000,000 approximately is related then to the investment in the new production facility of chains in Husqvarna. 20 costs that will have an impact on the P and L as we go in 2014. Roughly, SEK19 have been assumed in the Q1 of 2014. Depreciation and amortizations for 2014 will be in the range of SEK1 1,000,000,000 to SEK1.1 billion. Tax, I estimate to be in the range of 20% to 24% calculated on the income after financial items. And then finally, the FX. We have based on the closing rates as of March this year, we have seen some strengthening of the euros. So previously, I guided you from negative minus €120,000,000 to €150,000,000 I put a range now of some minus 100 to minus 120 compared with 2013. Still, we have a pressure when it comes to the Australian dollar, Canadian dollar rand as well as the ruble. But we have seen the strengthening of the euro that makes me lowering slightly the negative impact for 2014. And with that, I'll leave it to you, Kai, for the summary. Right. So again, a good quarter for us based on the demand situation I described, but also in my mind, even more important, the fact that we structurally the improvements from the accelerated improvement program because the weather will be with us or sometimes against us. But these structural improvements, they will continue to persist. So that's important. Also, again, emphasis on construction with a very positive development, our continuous focus on the operating working capital in parallel to these things are difficult to say something about quarter 2 more than being cautiously optimistic about the demand. And the reason for that fundamentally being that we don't have the transparency, as I pointed out previously. So stocking, good. Sellout, we haven't seen really taking off in North America yet. So that makes it extremely difficult for us to make any predictions in that direction. I guess some of you might sit with exactly that question on your mind. But we will not be able to answer it in any further utilization or detailed way. However, from a macro point of view, of course, we are, as we then point out, cautiously optimistic and somewhat more optimistic about North America than Europe in general. And the good thing then in Europe is what I emphasize that we see that selective growth in the areas where we do want to see it and that we would expect to continue. However, as we move into the season, there will be more wheeled products, and wheeled products has a little bit lower margin content. So there will be some influence on that in the quarter, too. So that's the summary of the quarter. Again, wrapped up. Accelerated improvement program, we will elaborate more on this at the Capital Market Day that I will come back to on the next page. But just to repeat again, what is it that we are referring to when we talk about this accelerated improvement from way up. Number 1, we are aiming for 16% operating margin for EBIT margin for 20 16 and finalized the program by 2015, but the full year impact in 2016. Point number 1, you heard me talking about that quite a lot, the focus on the core brands and the leading positions. We have, in fact, done one small alteration since we launched the program externally October. We started internally even earlier than that. And that is the addition of parts and accessories, which is a part of our profit pools and which is underexplored. So I think we have come to the conclusion we have an opportunity to do more in this area, and we will do more in this area to get our fair share. But the base of the profit pools is related to the leading product positions that I mentioned, the robotics, the mobile watering and the pro hand held equipment. And of course, the focus on Husqvarna and Gardena, remembering that we have about 13 brands in the portfolio. I talk about 2 here, but we have 13, in fact, just so we have the full picture here at hand. But you need to be clear about what is the important thing amongst those 13 brands and how do we allocate resources, investments, and that's pretty clear, I think. And bullet 2, the dealer and the retail business model differentiation. Yes, these are fundamentally different worlds business model wise strategically. And we'll touch a bit more on that again at the Capital Market Day, how we see that developing. You remember the reorganization we did in U. S. February that has started to pay off well. There will be further steps to take throughout the year in this differentiation of the business models. The further measures to turn around U. S. Is working fine. There's a lot of contractual aspects, of course, related to the big retailers. How do we continuously improve those contracts is one aspect. How do we optimize logistics to a better degree? How do we have an even more efficient cost to serve. There is more to get out in terms of productivity for the North American side as well. So these are all aspects related to bullet 3. As you saw, good delivery quarter 1. The plan is to be at 5 percent EBIT margin by 2016. And in general, related to the Accelerated Improvement Program, there is nothing that has happened in between the last quarterly announcement and today that makes us believe this is going to be a lot more, a lot less, a lot quicker or slower. So fundamentally, the message is we are on plan. It might look a bit better temporarily, but I don't want to oversell that. And we are on plan. That's the message. It's a significant part of the improvement of the result in quarter 1, yes, but it's on plan, no more, no less. Operational excellence, we talked a lot now about the direct material cost reductions, which is significant, which has a very immediate impact. There are other aspects relating to this. We are talking about the sales and operations planning to improve our ability to respond to variations in the market demand. We are talking about the complexity reduction. And we are on plan with the complexity reduction during 'fourteen. And I haven't said that before either, so there's nothing new in that respect. I just want you to bear with us that these are things that do take time before they materialize. But they will come into 2015, they will come in 2016 and all the way into 2017, in fact, when talk as a consequence of the complexity reduction. Because first, you need to take them out of the catalog, so to say, and then they need to get out of the stock and then you start to see the savings. That's a fairly lengthy process. But we are talking about 30% complexity reduction in terms of platforms and at least the same value in terms of SKUs, stockkeeping units, what actually we keep in stock. So those are some of the most important parts of operational excellence. Number 5, I emphasized that before, emerging markets, strategically important emphasis for us is Brazil, Russia, China, of course, also Southeast Asia will not help us reach the 10%, but it is fundamentally important for the future positioning. So that's what the program is about. We will elaborate at the Capital Market Day, June 10. And you're all, of course, warmly welcome to participate. It will be in Husqvarna physically. I don't know, Tobias, you might want to add some comments. But if I start and you feel free to add something if you think it's important. We will elaborate around the accelerated improvement programs, become a little bit more clear, maybe not as much as you would all the details, but at least we will be more clear about what you can expect and when and why. We will also lift our glance a bit and look towards the 2020 horizon a bit. And we will do some product events, and there will be some type of manufacturing visit as well. So there will be a full day. We think it will be quite interesting. At least we like to believe so. Tobias, any comments from your side beyond that? No, you're fine. So I think with that comment, I'll leave the floor open for questions. Yes. And we will start with questions from the audience here in Stockholm. Hi. Anders Thad from SEB. I have a couple of questions. First, a housekeeping question. Group costs of SEK61 million, is that the level to expect going forward? It used to be like SEK40 million, but it was been SEK60 million out twice in a row. You will see a slightly higher pace, but we have had some extra costs in the Q1 that brings it up to the $60,000,000 You should account for the range of $50,000,000 $55,000,000 going forward here. All right. Thank you. The direct material costs were down, but the complexity, of course, hasn't happened yet or the reduction of complexity. So how have you been able to cut your direct material costs? It has been a very, let's say, focused activity between the purchasing and R and D people. I would say for the quarter 1, probably 2 thirds relate to purchasing activities and a third relate to redesign and engineering involvement. So it's still it's more commercial activity. But as we move throughout this phase, you will see the pendulum swing over to the higher degree of engineering driven material cost reductions. So purchasing activities means pressuring the suppliers, basically swapping to fewer and longer series for them, etcetera? All those things. Yes. Also actually on the construction business, basically very quick calculation showed like 50% operating leverage on the sales increase or on the operating profit increase, I guess. And you referred to volumes and fixed cost leverage as reasons for the increase. But so I don't think I guess we shouldn't expect 50% operating leverage every for every volume going forward. So was there anything more there? Maybe you I mean, we have had a very favorable product mix as well and also how the regions are split here. I mean, although we can see some positive effects in Southern Europe, I mean, that has not really generated. I mean, France is a very important country for us. We haven't got the full leverage there, but a very positive product mix and a favorable country mix based on leveraging in U. S. As well as in Brazil. And maybe additional to that, a very good utilization of the production units. We have had a high efficiency in those. Of course, the marginal effect becomes quite strong in that situation. One final question. You mentioned that you had some positive experiences in the split up of dealer retail organization. So what type of positive experiences are you referring to? I think this type of clear organization and alignment with the business model fits the North American space very well. So clear accountabilities, clear alignment with the business model and the strategy, so to say. And we can see that it releases energy. It brings the right focus. And we see real good self confidence of the organization when they do act in this position. So And I also like Tempest's, the new leadership we brought in, Alan Shaw, August last year. And he has a lot of retail experience, which I think is hugely valuable for us to succeed since this is the major share of the market, 2 thirds. So all those things, they come together. And of course, the backbone of Husqvarna is more the teal channel, particularly in Europe. That's where the DNA is gravitating around that area. And if you look at the relative competence, it's higher in the premium area in Europe than it is in the retail. And hence, the importance of the local competence to deal with these big retailers is hugely important. And we feel we have that type of competence and we have the support in the organization to deal with it. So I think that's what I'm referring to. Yes. Bjorn in Assurant Danske Bank. You are talking a lot about the impact from the cost savings in these results, but you also have a very good volume development and mix development. It's possible to shed some light on what is the main driver for the earnings improvement? Yes. I don't like to be too specific, but let me give you an indication. If you look at the result improvement, it is a little bit more to more than 50% driven by the accelerated improvement program, and the rest would be then the volume, so to say. But then again, we know there are many pluses and minuses behind that bridge. I've talked a bit about it. But you can at least say it's 50% and maybe a bit more. And it's, I guess, then more in the U. S. And less so in Europe. If you're looking into that aspect of direct material, that's a true observation, yes. Mix comps in Europe was, I guess, very easy in Europe. Yes. We have mixes in various senses. We have the channel mix, which is favorable in U. S, yes. It is favorable in Europe, too. But we have the profit pool element, so to say, of the mix in Europe, which is, of course, also not delectable. So I think if you look at it that way, I wouldn't emphasize North America. Both are benefiting from that effect. If you distance yourself to the whole thing of Forest and Garden, then my comment is true, a little bit more than 50% related to the AIP program. And then on sell through activity. In Europe, I guess, I mean, early, early spring, you should have seen some sell through already now, at least very early April. Let me be transparent and say that April was a tough month last year. It is better this year. What we've seen so far of April is better. On the other hand, during the Q2 2013, we saw a very good May June development. So whether that will come this time, I don't know. And I won't speculate around it either because it doesn't bring anything to the table. But so far, so good in April. No weather forecast. No, not yet. Thank you. Operator, can we take some questions from the telephone audience, please? Thank you. You have a question from the line of Rasmus Enberg. Please ask your question. Yes. Hi. I wanted you to if you can help us shed some light on the complexity reduction, in particular, whether you see it mainly being a reduction in the number of brands or in the number of specifications in each brand that we should be looking at going forward? The complexity reduction will be a reduction of brands. I don't want to be specific because of commercial reasons, but it will encompass brand reduction. It will encompass reductions of products within principally most categories. So we are sitting with, you could say, a lot of products in each category. And we have opportunities in both tail cutting as well as maybe dealing with some overlap of higher quantity sales type of products and try to combine them to even higher volume and thereby get leverage and advantages in many ways. So you will see that really going for both those sides of the yard, so to say, the tail cutting and dealing with high volume products and in many product categories and including reduction of brands. So it's a fairly broad thing we're talking about. Yes. And my second question relates to the chains or chains project. I think last time you talked a little bit about the potential market size. And I was just wondering if you could elaborate a bit on what you include in that market and if it's still around $600,000,000 $700,000,000 And so if you could shed some more light on that geography category or which type of change you're actually targeting here? It's correct. The total aftermarket here we're talking about for change is in the magnitude of USD 700,000,000. The absolutely important part and vital part of it is related to pro chains. And that's where the value sits, the profitability sits. And that's where we have the target quite naturally, being in the premium and the high end of this chainsaw area. So there's no real new information. There is no new assessment. And the fundamental principle here is that we have maybe 10 So that's where the business case is actually located. Geographically, again, Europe, North America. Yes. And then this is the total market including a sort of nonprofessional chains as well or Yes, it is. But the value of that is not that interesting really. I mean the value of the aftermarket sits in the of Johan Dahl. On the topic of the raw material cost reductions, I was wondering, clearly, purchasing since they've done a great job in the Q1, are you able to say how much of that reduction is sort of price changes for raw material? And how much is sort of structural improvements in the group of that 2 percentage points improvement? Secondly, I also wonder, to what extent have you involved your suppliers in this process? I'm basically after your visibility going forward with regards to this raw material cost reductions. I mean, for example, engine suppliers, this is a long term commitment for 3 years for further reductions, if you could say something there? First of all, what we are talking about is really component purchases. So it's not raw material. It's the component purchases that we're focusing on because the raw materials, they are pretty much set by LME, etcetera, London Metal Exchange, and they are what they are. So these are relating to negotiations for components and parts. And of course, with key suppliers like engine suppliers, we have already longer term agreements. What we're trying to do now is to move, to a larger extent, a bigger share of the supplier base to longer term agreements. Of course, giving them the opportunity of more security of future volumes, but also the 2 of us opportunity to work more structurally with the cost reductions. So I think that's an important aspect. We will have a huge gathering in 3 weeks in Charlotte in U. S. With global supply base. And I think there's going to be some 300s of them, around 200s, 300s. I don't know exactly, but that magnitude. And we will talk pretty much about this. And we have a specific program, which we call EXITE and which relates exactly to establishing these longer term relations and building continuous improvements together to a larger degree than what we maybe historically have managed to do. So this is a vital piece in the concept of getting them to share in and also be prepared to reduce their prices of the components. So is it a fair assumption that you're taking low hanging fruits, which we see this quarter? Or is your visibility good going forward on similar improvements in the coming quarters years? I tried to address that a bit previously, and I think we might have, early in this program relatively seen higher purchasing impacts, whereas as we move through this period of time of 2014 2015, we will see the pendulum swing towards more engineering driven redesign cost reductions. Okay. Just a quick follow-up. Can you please address your production rate in the Q1, how that compares start to the season last year? Johan, we can say that if we split it up, of course, we have had a tougher start in Americas based on that. That was a tougher start up with the season here. But it is more on a normalized level now. I think what you saw last year in terms of under absorption that we took consciously in order to reduce stock, that you will not see this year. But more specific than that, I'm not prepared to be. Can you say anything how much that is in the bridge compared to last year? No. That is baked in the residual there. So there is no specifics on that. All right. Thanks. There are no further questions from the phone lines at this time. This is Johan Eliason at Kepler Cheuvreux. Just a question on this focusing on profit pools and profitable products, etcetera. What's the impact in the competitive market situation for you? Are you seeing competitors moving in? Or are your stronger brands or better products taking share to compensate, etcetera? First of all, I don't have any statistics for the quarter, and I think you probably have some understanding for that. But if we look at the numbers, we are at least on par with the market, most likely ahead of the the market in these areas. At the same time, we see in areas like robotics very clearly that new actors are moving. And I think there are up to 18 brands now on the market available for robotics products in Europe. So it's getting a bit hotter in this area. Everybody sees the growth and wants to be take part of that. So for sure, that will play a role as we move ahead. But I don't think we should forget the fact that we are at our 3rd generation of products. They are at the first. And there's a lot learnings to be done by our competition. So if we continue to invest in a very decisive way, we have a fair chance to remain at the lead in this area. And it is very profitable still. How big is it for you? I don't think we have communicated that specifically before. But let me talk in terms of market share. We are at least around half of the market is with Husqvarna. So maybe some a little bit more than half of the market still. So we enjoy a very favorable position still. So the question for us is, of course, how can we secure to stay in the lead, given that we have all these sectors, whereas some are big technology companies moving in. So that's, of course, a nice challenge, you could say, to deal with. Robotics is obviously a European issue, but I guess you are focusing in the Americas as well on certain profit pools. And what are you seeing there? The one that we emphasize the most for North America is professional rate because that wouldn't be true. The major share of that growth is still within the wheeled area. But it's, as a percentage, increasing. So we are doing the job in the right way. But in absolute amounts, it's still a smaller share, so to say, of the overall increase as such. We could add the accessories as well, as you saw that I have added to the first slide here. That is also Andreas Lundberg with ABG. Follow-up on the competition in Europe. If you look today compared to maybe 3, 4, 5 years ago, how is the competitive landscape in the European market? You would need to look at the market by category. You would need to talk about wheel. You would need to talk about handheld products. You would need to talk about robotics, etcetera. I talked about robotics. I would say it's a bit more static than robotics in these other categories because robotics is a huge expansion. Husqvarna is pretty much on its own 10 years ago. And now I mentioned there is something like 18 actors on the market. Of course, Handheld Products is very much dominated by a couple of large actors still. But you have in the retail space, of course, actors coming in from with Asian origin, for example. So you see a higher penetration, but it hasn't changed the landscape that drastically yet. It is stepwise changing it, but it's not in any dramatic way. Do you know the value of the European market today versus maybe 5, 6 years ago? I know it pretty well right now. I'm not sure whether we should get into this discussion here and now. I'd rather say that this is something that fits pretty nicely when we talk about the perspective at the Capital Market Day. So I'll move it there and keep your curiosity alive. So let's bring that into the Capital Market Day to give some perspective and shed some light on that question. Okay. Thanks. Operator, I believe we have 2 more questions from the telephone audience, please. Your next question comes from the line of Jonathan Hanks. Just a quick one. I'm just wondering whether you could shed any light on what you believe the weather impact was in Q1 in Americas. And then just more longer term, just wondering whether you could update us on how your CapEx investment in your chainsaw plant is progressing. So the weather had no real impact on the demand in U. S. Quarter 1 since it is a sell in stock up question quarter 1. But it means that they haven't started a sellout. That's what it means. So it doesn't say anything really about demand. The fact that they filled up to this degree showed that they have some confidence, and they were a little bit under stocked, as I emphasized before. And I wasn't fully sure. Can you repeat the second question a bit? I really get what you're after here. Yes, yes, of course. I'm just wondering whether you could shed any light on how the CapEx investment in the chainsaw plant is progressing. Is everything on plan? And can you just give us a general update there, please? Yeah. No. I mean, the brief answer to that is it is on plan. We have previously communicated it is supposed to be in the magnitude of SEK450 1,000,000 to SEK500 1,000,000 this year CapEx. And this is the major year then for the CapEx. Additional to that, we will have project costs in the magnitude of SEK100 1,000,000. Those were about SEK60 1,000,000 last year. And then this will then diminish and there aren't that much CapEx left then for €15,000,000 There will be some that it will not be that significant that it sticks out. But we can confirm that, I mean, installation of equipment production equipment is in full swing now. So I mean, we are peaking during 2015 when comes to CapEx as well as activities here. Your next question comes from the line of Johan Dahl. Yes. Kai, you mentioned briefly about complexity reductions having effect 15% to 17%. Could you also address or put it into context how we should think about the top line developing as those effects come in? You're entering discussions now with major retailers for the 'fifteen season. And if you could shed some light on how you approach that? I mean, if we do go ahead and execute this without managing to transfer to other products and to other brands, there would be an exposure in the magnitude of up to 8% net sales. I think we will be able to reduce that to something like a couple of percentage units. What is extremely difficult to assess, that is the value of focus. What does it mean that we can focus our resources to an even larger degree on less brands, less products? Organizations that do have carried through these type of programs, they are normally convinced about that, that is not insignificant. We haven't seen that yet. So I'm a bit cautious, and I say there might be some effect negatively here for us to absorb, but with a conviction that, that's not going to impact the bottom line, that there could be some net sales effect of this, but no bottom line or very limited. Potentially, there could be some one off costs related to brand reductions, yes. But did I understand you correctly that your at risk is 8% in net sales? Was that in U. S. Or a group or? That's a group figure and it's a theoretic value. That's it's not my message. My message is that my assessment of the risk will be in the magnitude of 2 to 3 percentage points of the sales. But I do believe we can even turn that around and make something neutral and potentially even positive with it in this time frame, given the ability to focus resources. So as you can hear, this is a very difficult matter to be extremely analytic about. Yes, but that's very valuable. We have no further questions from the phone lines. Okay. Thank you very much for your attention Tobias. With that, I think we're going to wrap up. And please turn to our website for further information on the Capital Markets Day. And also, 2nd quarter report will be released on 16th July.