The full year results for Husqvarna. Good that I don't have my mobile. We will make it according standard procedure. I will give an overview presentation of the quarter effects of the full year, and Ulf will give you some more details and guiding, talking effects, CapEx, et cetera. I will come back after that, give you an update on the Accelerated Improvement Program, and also say some words related to the investment for chains to the chainsaw. That's about what we intend to do, and then, of course, Q&A. I'll kick off immediately. The summary of quarter four, we would do in the following way. We see that we have a good continued trend from quarter three. You remember we had a 12% year-on-year, quarter three top line comparable currencies.
Now we're up to 8%, that's a good increase across the business areas. Maybe it's worth mentioning, just to get the framing correct, quarter four is seasonally a weak quarter, that is important for us in the year. Hence, we're also talking about lower seasonal operating losses. We still have losses, but they are lower with an improvement. Very positive for us, particularly given the quarter three, where we had the problems and we were struggling in North America, is that the largest improvement comes from North America now in quarter four. But we also have improvements in Europe, Asia-Pacific, and we see a stable development in construction. We have continued the positive cash development in the quarter, and these might be the highlights of the quarter as such. Moving over to the full year directly.
You have seen that we have increased the pace of the sales during the second half. You might recall we had a late spring, a slow start of the year, but it picked up. We had a prolonged season, the sales for the second half of the year were, all in all, very favorable. Group operating income declined nevertheless. Why is that? There are maybe two big components impacting this. We're talking about the currencies and the under absorption, and particularly under absorption then as a consequence of production reductions in order to facilitate the inventory reduction. Those two together, the currency and the utilization, represent half a billion SEK, give and take. A little bit south of half a billion SEK. It's a significant impact on the year-on-year development.
We are very pleased to see that we have America now on a break even after a couple of difficult years, as you surely will remember. That's a big step, and it's a stepping stone, of course, for starting the new phase of the work in America, aiming at the 5% EBIT margin, operating margin now in 2016. I'll also make some comments later on as to some organizational changes which we in fact announced today in U.S. We have a strong cash flow for the full year. Again, driven by inventory reductions, very good cross-functional work in the company, but we also have improvements in respect of payables and receivables. Those are more, I would describe as continuous improvements, whereas the inventory improvement is a step change for 2013.
As a consequence of that, the net debt/equity ratio improved to 0.58 compared to 0.75 the previous year, and dividend remained at SEK 150, equal last year. These are the highlights that we want to draw your attention to. If I look more into the quarter, again, group figures, we have the 8% net sales adjusted currencies. You see the EBIT of SEK 308 million compared to minus SEK 348 million, excluding items that affect comparability. You remember 2012, there was extraordinary cost taken, one-off cost taken for the personnel reduction program. That makes up the difference here. If we try to understand the result improvement as such, we have the impact from the staff reductions. We have the impact from lower material costs, but we have increased sales costs, and I'll come back to that. It's a positive note related to that.
We had a continued negative FX impact as well. These factors impacted the result. Ulf will give you some more flavors to that a bit later. I will talk about the regions to start with. I will not venture into details about the inventory reductions. On the full year, though, we're talking about SEK 820 million comparable currencies of inventory reduction. The cash flow was SEK 1.8 billion compared to SEK 1.1 billion for the group. Moving over to Europe, Asia Pacific, you see again, 8% top line improvement comparable currencies. You see a slight improvement of the EBIT excluding the items affecting comparability. What drove the top line? Primarily handheld sales. Two aspects. Storms, of course, positive for us, increasing demand on chainsaws.
I would like to point to the fact that we have chosen to focus a lot on handheld products because it is one of the profit pools we have. There is also an expression of a higher degree of focus internally on that product category. Negative on the top line, the fact that we have had such mild weather in Europe, of course, is not beneficial for the snow thrower sales. We had a seasonally weaker sales, particularly of that product in Europe. That will look a bit different in North America, as you will see later. From a result point of view, positive impact, of course, of the sales volume as such. Also the product mix, the higher degree handheld products. Positive impact from the stock reduction program, but a negative from marketing, sales, and branding costs.
This is very much to be understood as something we proactively have chosen to do to position ourselves for the season 2014 on one hand, and on another hand, it also relates to Asia Pacific and larger efforts in Asia Pacific. These are very consciously taken costs from us, but of course, they do impact the result. There's also negative effects for Asia Pacific. Americas, 8%, just like Europe. You might recall the quarter three number of +20% because of the extended season. We have had benefits top line-wise from the cold weather in Northern Americas, where snow throwers have really been benefited in that sense. That has been driving the sales in North America. Seasonal operating loss decline, yes. Lower cost for materials, again, the stock reduction programs supports us. Somewhat higher logistic cost.
That's primarily a consequence of the success with the sales to the dealer channel. We have increased the dealer channel sales with about 11%, as you can see here, for the full year, and there is an inherent high logistic cost related to that channel as such. We are quite pleased, as I mentioned, that we have a positive result now for Americas for the full year. I also like to draw your attention to the fact that we are now differentiating the organizational model in U.S. into a profit center for retail, respectively, another profit center for dealers. When we, in the Accelerated Improvement Program, talk about a higher degree of differentiation, you should see that as one step in that direction.
What we expect is a higher profitability focus. Stepwise also a better service to the clients in those respective channels, which, as I have talked quite extensively about, I think quarterly, have different inherent needs, and there are different characteristics related to that. That's an important step for us in U.S. Construction came out very good top line-wise, 10% comparable currencies. They were six in quarter three. Up in all regions, but Europe is very much a mixed bag, and particularly the Southern Europeans, where it's not really recovering in any sense in those numbers. Rather, I'd like to point at USA and Brazil, and Brazil particularly for the stone business and the multiwire sales, and U.S. more in general. Operating income-wise, you might ask why haven't we seen any leverage then from that plus 10% of the net sales? The explanation sits primarily in the FX.
They are hit quite negatively. Ulf, I guess you will make some comments in detail about that. We also had a bit of a negative product mix. We have less of the power cutters, which are highly profitable. That's nothing that gives any reason for concern moving forward. I also like to draw your attention to the picture here, which represents a high-frequency product range that has been launched under the headline of PRIME. It's hugely powerful, outstanding performance compared to weight. You get a lot more torque and power per kilo weight, and particularly if you stand working with these products, arms stretched out or even upwards, you realize what that means. We are very positive of what this will bring to us in the next few years to come.
Again, it's a complete range of products and frequency converters, and a modular concept as such. This will support continued growth in construction and In general, if we back out and look at the inventories in the trade, Europe, I would describe as maybe on par with last year, beginning of the year, whereas U.S. inventories in the trade are a bit lower than previous year, i.e., give some reason then for a little bit more optimism. We have said that we are cautiously optimistic about the outlook for the year. We see European, also for the Forest and Garden, being a mixed bag, but maybe we are more optimistic about Southern Europe having hopefully bottomed out, and maybe we can see improvement from very low levels that we have experienced during 2013.
We also see that the sell-in to the season, in general, is in good shape. There is no reason for any worries in Europe nor in the U.S.A. If anything, there's a small, slight piece here of optimism, I don't want to overstate it either because that might be misleading. If anything, a positive interpretation of the situation as such. Also vital category for us, like the robotic mower, is looking okay from a sell-in perspective. With that, I leave for Ulf to give you some more details as to the financials.
Thank you, Kai, and good morning, everyone. Let's move into the consolidated P&L. I think we leave the sales and move down to the gross operating profit income. Let us start with looking at the gross margin %. Improved in the fourth quarter, you should, of course, have in mind that last year we did take some SEK 256 million in restructuring charges, and SEK 140 of them were charged to the gross profit. Adjusting for that, we would have a comparable last year gross profit margin of some 25.2%. You should add back some 3.2 percentage points in order to come to comparison. Meaning that we then in the fourth quarter had a flattening out. We have been struggling in the Husqvarna for quite some time of a deteriorating gross profit margin.
We can see in the fourth quarter, at least we are having on par with last year. We shall have in mind that this quarter, behind the 25.1%, we have still some FX pressure, some half a percentage point. We do have some under absorption that is also putting pressure on us. We have increased R&D. We have some costs attached to the startup of the chain manufacturing facility down in Husqvarna. On the positive side, though, we have savings from the staff reduction program, and we have definitely some tailwind when it comes to also the operational excellence related to material costs. All in all, ending up being roughly on par with last year, if we adjust for the restructuring charges. We move further down and look into the SG&A, again, same thing here. You should adjust them for the restructuring charges.
That was the residual of the SEK 256, SEK 116 were charged to the SG&A last quarter, last year. If we then adjust for that, you can see a slight increase of SG&A, mainly related to increased selling costs. We can see that logistic costs went up, specifically in the U.S., driving the mix towards more dealer sales per se, drive also a higher logistic cost. However, if you look percentage-wise, we do have a better leverage for the group when it comes to SG&A over sales. We may also conclude that construction, we are emphasizing more on driving growth there. We have hired more staff in construction, they also have a slightly higher SG&A in the quarter year-over-year.
Europe, Asia Pacific, you know that we have set up an office in Kuala Lumpur, with the expansion when it comes to APAC, it is also driving some further SG&A costs, but conscious activities that we have talked about before. Then last but not least, I think Kai will talk more about it at the end here, how do we now manage the Accelerated Improvement programs? Driving more brand, driving more marketing when it comes to the core brands in terms of Husqvarna and Gardena has also attributed higher brand and marketing costs in the fourth quarter. Not gigantically, not huge amounts, but still, year-over-year, slightly higher. Important, though, is that we can see a leverage when it comes over sales. SG&A over sales is improving, though. This is at least to give you some guidance on how the SG&A has developed here.
That explains some of why we don't get the full leverage in a quarter four for specifically Europe, Asia Pacific. Because you have the emphasis when it comes to APAC, you have some of the costs related to the brand and marketing, of course, that attributes a higher level than quarter four 2012. We are quite pleased to confirm that the savings program that we launched in 2012 have been completed, which means that we have achieved. We promised you SEK 160 million, we have achieved some SEK 174. Slightly higher pace, which is quite good, meaning that we don't see any, let's say, issues to achieve the full year effect of 2014, reaching some SEK 220-plus million. That means we have some incremental savings left that we will see in the Q1 and Q2 and Q3 during 2014.
This is to be seen over 2012 pace, just to be clear on that. Moving further down, concluding the operating income and operating margin, we may see then that we have a loss in the quarter of some SEK 308 million. Adjusting for the restructuring cost last year, it is comparable then with the SEK 348. That leaves us with an EBIT margin for the quarter of some -6.5%. To conclude, we can see that mainly then negatively impacted in the quarter, higher cost for logistics and sales and marketing, higher sales, and the savings from the program is offsetting as well as the low material cost impacted the operating income positively. Total currency effect in the quarter year-over-year, -SEK 31 million. Ending up then, we guided you on the full year effect of a span of SEK 350 to -SEK 375.
We ended up some SEK 349 year-over-year. Quite significant pressure on our results for sure during 2013. Last quarter, mainly trigger for the negative effects is currencies like the AUD, RUB, ZAR, and the CAD. We did get a stronger tailwind from the EUR, but not enough to offset the effect in the fourth quarter. I will come back how we looked upon 2014 in a minute. Moving further down, the finance net ending up some -SEK 125 versus last year, SEK 152. Of course, a lower interest rate as well as a lower net debt did contribute to a lower finance net per se. Tax. Looking at the full year, which I think is the meaningful amount, we ended up in some -SEK 264. We had a corresponding tax rate of some 22% in tax rate for the year 2013.
With that, I leave the income statement, move over to the balance sheet. Of course, as you have heard from Kai, main attraction here is, of course, the working capital improvement with the inventory reduction, which we are very pleased with. I think the organization has been very efficient in driving the inventory reductions here, and you may see then that we are on a SEK 7.1 billion roughly versus a SEK 1 billion higher stock levels last year, which is quite an effort taken on here. Trade receivables have also been taken down. Specifically, if we look at the days sales outstanding, we are now pacing on some 59 days. If we compare with last year, we were on some 63 days, so quite an effort there as well.
Moving further down, looking into the liabilities, the net debt as a result has been able to reduce down to SEK 6.7 billion compared to SEK 8.3 billion a year ago. Of course, this curve you have seen before, not only that we have generated a good cash flow for the year, it is also how we have been able to smooth out here in the first and the second quarter, which has been the ambition when we moved into the 2013. Again, we generate now a cash flow some SEK 1.8 billion than last year of SEK 1.1 billion. Gradually improvement and definitely a significant improvement if we look at the year 2011, where we were actually in a negative cash position. Quite pleased to confirm that this is definitely on track, and the conscious moves we have taken when it comes to inventory reduction has really paid off.
Investment maybe to be mentioned here. I guided you last time we met on some SEK 1.2 billion, if we go even further back, I was up on the level of SEK 1.7 billion at the Capital Market Day. We took it down gradually. The main reason for this, some carryover, I will come to that later on when it comes to the chain manufacturing, also that we have a lower activity level in 2013, that has reduced the CapEx quite a lot since the beginning of the year. We ended up in SEK 1.1 billion for the year, roughly. SEK 200+ million of that is related to this new chain manufacturing investment. Net debt equity, you have heard that before. We ended up in 0.58, an improvement versus then last year of 0.75.
If we would then take out the regulations related to how we treat the net pension liabilities and look at the old way of defining the net debt, we are on 0.47 to be compared with 0.59. Quite an achievement here, of course, related to the good cash generation in the company. Key figures. Normally, I do not dwell too much about that. Maybe to reflect upon, I talked about the CapEx. You can see that the average number of employees have gone down, of course, as a result of the staff reduction program. We talked about some 500, 600 people that have left, by that, we have been driving down the staff number to a level of some 14,000 people, if we look at the whole year figure. If we move into some guidance here.
Looking into the CapEx for 2014, we are aiming for a CapEx of some SEK 1.5 billion. SEK 500 million of that is related to the new saw chain manufacturing. I think Kai will come back to dwelling and elaborating a little bit more about that per se. SEK 1.5 billion, where SEK 500 million was related to that production facility in Husqvarna. It should also be noted that SEK 100 million, we expect to charge the P&L of project costs and startup costs during 2014. We have had charges of this character also during 2013, attracted in the gross profit, and some SEK 60 to SEK 60-plus million have been the number. That I have guided you when we have went through the margin bridges during 2013. That number will now be some SEK 100 million charged to the gross profits.
Continuing with the 2014 guidance, depreciations, we believe will be in the range of some SEK 1 billion to SEK 1.1 billion. i.e., the additional CapEx, we don't see that that will start depreciating until we move into 2015, 2016. Tax guidance for 2014, I leave a span between 20%-24% calculated on income after financial items. We ended up, as I said, 2013 on 22%, so 20%-24% is the guidance for 2014. Finally, the FX for 2014, whole year, full-year effect based on current rates. I would guide you to be in the level of year-over-year negative SEK 120 million to negative SEK 150 million compared than with 2013. We do see the strengthening of the euro.
That will help us for sure, but the weaker sales currencies and coming back to what we saw already in the fourth quarter when it comes to the Aussie dollar, the ruble, the rand, and to some extent the Canadian dollar are having a negative impact on Husqvarna 2014. As well as a stronger US dollar, as you know, based on that we import more than we export, is also having some negative impact here. The range negative SEK 120 million to negative SEK 150 million you shall bring with you for 2014. With that, I believe I leave it with you, Kai, to summarize.
Okay. Just repeating briefly again what you've heard. Quarter four, continued good top line growth, 8%, lower seasonal operating loss, and you heard the specifics about it, and you heard about the continued improvement in cash flow full year. The pickup of the sales in the second half, and despite that, the decline of the operating income, the big burden you heard from FX and under absorption. You heard about Americas break even for the full year. You heard about the cash and the impact on net debt and the remained dividend proposal. With those comments, I take the liberty to go over to talk about the Accelerated Improvement Program. Just to set the stage again. We launched this after quarter three in October. It is aiming at delivering a 10% EBIT margin. We run the program until end of 2015, i.e., full impact of P&L is 2016.
You remember that we have our earnings in the first half of the year. There is a certain delay, of course, into that year. There is nothing between October and today that has changed anything in respect of the program, the focus, or expectation on deliveries from the program. We are completely online according those discussion. I mentioned in October that this will be a bit back-ended, back-heavy result-wise. It's not a linear interpolation, and I'll elaborate a bit around it. I will not go into detail, but just to give you a flavor of it, the biggest impacts for 2014 I expect from the focus on the premium brands and the leadership positions. We have, of course, now talked quite a bit about this internally.
We have formed plans, targets, we have aligned incentives so there is an even higher focus on these areas, they will contribute throughout 2014, for sure. I think the second item that will have the largest contribution is material price reductions. We have an array of activities ongoing since the fall. Combined R&D people, purchasing people, in some instances, it's pure negotiations, for the major part, it's combined efforts. We will see that materialize in 2014. We will see that materialize maybe even more in 2015, but we will see a fair bit in 2014, a step change versus 2013. There will be a little bit of spillover into 2016 then because of the reasons I mentioned before, material-wise. These will have the biggest impact.
I don't think we should underestimate the profitability focus as such that we have in the U.S. by the organizational focus. It will really support it. The incentives are, of course, reflecting the profitability focus even more than ever before. If we talk further measures to turn around U.S., we are talking about improving the sales and operations planning. This was a big topic after quarter three, which was a disappointment as a micro call for us as well as for the external community. We are doing a lot of work to improve that and enhance that ability. We are also very consciously continuing to invest in the dealer channel to grow that. You saw the 11. You remember the 11% we had for the full year 2013, year-over-year, now representing 36% of the sales in North America.
We have good opportunities to grow in respect of amounts of dealers, also the share of wallet with our existing dealer base. That is another important aspect of this. The second vital aspect under operational excellence, besides the material cost reduction, is complexity reduction. This is the one that is the most back-ended, the reality of the matter is we start by deleting products from the catalogs or listings. It needs to run dry in the warehouses, we start to get the full effect of it. It's a very slow process, the team was pretty much set according to old ambitions for the season of 2014. We have only a fraction of the complexity reduction supporting us for the season of 2014.
The real improvements of the complexity reduction, we will see throughout the second half of 2015 and really into 2016. I think even into 2017, in fact, we will see impacts of the complexity reduction. That part is back end loaded. I just want to make that very clear. Emerging markets, yes, we are focusing a lot more on that. As I pointed out in October, this is a year where we are enabling a higher ambition in terms of growth. We are improving distribution, setting up distribution centers later in the year. We will also look at the whole responsiveness question in R&D for product development. Again, the ambition will be increased. It is being increased, but we are enabling it to be done for the moment being.
The full impact of that will rather be 2015, 2016 than something you will see to the bottom line this year. You will notice definitely number 1 and 4, as I pointed out, during 2014. Okay, last slide before the Q&A that relates to the chains and the chain investment in Husqvarna. Just recapping a bit, why are we doing this? Well, you can imagine if you do the best chainsaw in the world, you like to do the best chain to it as well, because really with the chain, you can optimize the complete product. We have a good chain with a supplier from Blount. We have an agreement with Blount that goes to the end of 2017. I don't see necessarily that we will terminate the cooperation and the supplier relation with Blount.
I see that can continue, particularly for consumer chains, but for the professional chains, that's our focus. On one hand, and on the other hand, we want to increase the share of chains that we sell in the aftermarket. We are underrepresented quite significantly today with our chains, and that's not really acceptable as the whole aftermarket as such becomes a higher focus of us. We haven't discussed that in the setting of the Accelerated Improvement Program, but for sure, parts and accessories is becoming more important, and you will realize that's a good profit pool as well. This is about us being a market leader in chainsaws. We want to optimize the complete product system as such for even better performance, and we want to increase the focus on the aftermarket.
To some extent, you can say for a critical component like this, we want to decrease the dependency of a single source. It's not a general procurement strategy necessarily, but given the strategic importance of this type of component, it is a conclusion. [Locations] Husqvarna, really, I would like to emphasize the fact that we have the R&D resources there. We have the manufacturing there for the chainsaw, and with closeness physically, we can of course optimize the product quicker. We also have the infrastructure and support for such a complex undertaking to move it up to running. Then it happened to be the fact that we had a surface that we could utilize, but that's not the decisive factor. The decisive factor was really the R&D connection, manufacturing connections with the chainsaws.
We assessed other options at the time, this is prior my arrival, but we looked at Asia, we looked at Poland, et cetera, but this was at the end of the day, the most feasible choice, remembering that this is going to be highly automated. There is one more slide I recall. We will have a Capital Market Day in June, and you will have the chance to look at it at that point, I would expect. Coming back to what Ulf gave you a hint of, what can you then expect in terms of P&L impact?
First of all, recapping the comments Ulf made, a little bit more than SEK 200 million, part of CapEx 2013, expectedly moving up to something close to SEK 500 million, could be rather maybe something a little bit less. That could be up in the magnitude of SEK 500 million, a little bit residual for the year of 2015. Project costs SEK 62 million, we have carried and burdened the P&L with SEK 13 million. There will be SEK 100 million all in all for the full year, so year-on-year plus SEK 38 million. There is no sales in 2014 because what we're going to do in 2014 is to stabilize the manufacturing processes. We're going to do the quality assurance, and that is what's going to happen in 2014. Then 2015, particularly second half, we're going to start to produce, but that will not hit the consumers really to any extent before end of the year.
The real impact of sales and EBIT will be for 2016. With this, we want to avoid confusions about what this short term will be. There is no short-term leverage from this, but it's strategically important. You have to give you a feel for what this is about. The aftermarket, all in all, is probably around SEK 700 million. Let's say that we are, give and take, around 10% of that today market share, but the installed base represents something like 30%. You can see the reasons why we think this is interesting. Of course, there is no reason why we should accept, over time, anything less than a fair market share, which i.e., 30% something range. Let me be very clear, that's not going to happen in the first year.
I don't think you interpreted it that way either, let me be explicit on it. It will take some years to build it. We're not talking about that as an ambition for 2016, but in some coming years. I think with those information, you should have an opportunity to see where this is heading, but you also realize it's not a short-term return, but it's a very strategic investment for us. The last bullet slide. Capital Market Day, 10th of June. We like to invite you to Husqvarna. It's more or less a full day event. We will also, of course, talk chains, just like we did. We will also give the opportunity to look and feel some of the products. For those who will have the opportunity, we will be glad to offer a dinner as well.
It's a full day event in any case. I think with that, we leave open for Q&A.
Operator, with that-
Yes
We can open up for questions, please. We will start with some questions from the floor here in Stockholm.
Thank you. Johan Eliason, here. I was wondering, the lower raw material costs, which you referred to during 2013, to what extent does that improve processes and to what extent is it nominal changes in raw material prices? What were the expectations for lower raw material costs in the beginning of the year, and what was the eventual outcome in fairly round numbers? That's my first question.
If I start, then if you'd like to add something after that. I think, give and take, maybe SEK 100 million in the magnitude for the full year. Not driven by real, to any larger extent, to my memory, of raw material price variances, but rather from improvements done internally. Not impacted necessarily from the Accelerated Improvement Program as such. You can see this level being more a reflection of the previous, let's say, improvement pace that we like to increase, and that you will see increase for 2014 and 2015. That would be my first. I don't know if you'd like to add something to that.
No, I think that's a fair assessment. I think as you say, Kai, this is you entering the arena, meaning we are accelerating this now going forward. What we see in 2013 is really what work started already at the back end of 2012, and then what we launched to you at the Capital Market Day. A majority of that definitely related to initiatives, working with suppliers, working with streamlining, to some extent, our assortment as well.
If I could just follow up on that, because on the other points on the Accelerated Improvement Program, to what extent have you already engaged your major trade partners in those discussions, looking at what's going to happen 2015 and 2016, both on the supplier side and on the major concentrated customer side? What are the initial response you get from that then? If you could just help us understand how this communication process is evolving.
If you looked at the whole supplier arena, we have a program which we call EXCITE, and that comprises 75% of the external purchases we are doing. We have a specific communication with that group of, let's say, more strategic suppliers. What we are looking for here is not just to put the thumb in the eye of these people, because they have probably had that for quite some few years before. We are looking for a more dialogue-based program where we also put in view for the future higher volumes and scale advantages, longer-term relations, but also higher expectations of what they should contribute in terms of supporting cost reductions also by redesign and utilizing their knowledge in that process.
My impression is that in general terms, that's well-received, very positively received, because it's moving in something that very often is called partnership, that always still remains a little bit like customer-supplier relation inevitably, but definitely more of a partnership relation than potentially historically. I would say positively received. There's nothing in that dialogue that gives us reason to believe that it's not achievable to reach the target. Again, through the complexity reduction, we will also offer these people scale advantages. We need a complexity reduction to give them scale. It's not only for making our own life simpler, it's also to make their life more attractive, working with us as a customer. I don't know if that was the full It's okay?
Yes. Hi, good morning. It's Rasmus Engberg with Handelsbanken. I had first a question on your reduction of working capital in 2014. How do you see this developing in this year? Do you plan to take out further? Obviously, this complexity reduction will have significant impacts on your working capital eventually. Given that you will probably have an increase if you increase your dealer channel business, where should we be looking at this panning out eventually?
As I hinted, the complexity reduction will not really support any inventory reductions in 2014. That will come later. It will surely come. Of course, complexity reduction is really two pieces. It's taking out platforms, but within each and every platform, you always have a tail of products, which is selling to a lower extent, and we can work with cutting the tails. That can support us. The real importance is to take out the platforms. It will not help us any significance. We made a step change 2013 in inventory reductions. For 2014, we see it moving over to a more continuous improvement kind of perspective and context, driven by improvement in the sales and operations planning, not only in U.S., but also in Europe. We are working on that process in general.
It will help us have the right delivery capability to a lower inventory level. It's a process improvement that needs to take. Now, we took out some inefficiencies in the start. Given the current complexity, we need to work the process way to start with, get support for 2015 and 2016 from the complexity reduction as such. You can expect an improvement for this year. That's what we planned for, it's not going to be in the magnitude what you saw 2013.
Can you sort of help us give some sort of feeling for what we can expect in 2016 or 2017 in terms of % of sales, maybe?
We haven't done the exercise to any larger detail. No, I should do the homework first and talk later. I'll be glad to come back to you next occasion.
I had a question on, you talked a bit about the aftermarket. Can you update us on how your profitability is in aftermarket, or the general profitability in the aftermarket compared to the rest of the business?
It's definitely over average, as you might guess. Maybe this is a thing we could choose to come back to at another time after the Q1 and make some more specific comments to, rather than doing them too much ad hoc. The business case is very appealing, and again, it's an opportunity. We haven't fully reaped the opportunities that are there for sure. The chain is just one example of it. We can do a lot more.
here, Remium. The 11% growth in the U.S. dealer channel is obviously a very interesting KPI. Could you give some more details about what's driven by larger number of the dealers, or was it driven by mainly, say, higher volumes with existing ones?
I would tend to say the dominant factor is higher sales from the existing dealers. There is also a net increase of the amount of dealers, for sure. For 2013, I rather emphasize the higher sales of the dealers.
When you look
You could talk about the total sales. I'm not sure whether it's fair to say that the share of wallet has increased that much, but rather that they have had a good year.
When you look at your offering into the dealer segment now going into 2014, is there any major enhancement in that offer going into 2014, and how does the in sale into that segment look?
You're talking U.S. specific or general?
U.S. specific is interesting.
I think we have improved the delivery capability in season for some of the critical products, for example, handhelds. I think that will support as one example, and we also have very competitive offering in general. Again, back to the favorite example of the chainsaws. We're standing very strong now with the product offering. We have new introductions also on the trimmer side with the 525. We have all-wheel drive products, which are very appreciated on the walk behind. Attractive offering and in general, a very strong product offering as such. The product offering is there. We have an enhanced supply capability in season that we expect, and we should have all the conditions to support a further growth on their behalf. We will also consciously, we have added sales resources. We will also consciously try to add new dealers to the base.
Excellent. On another subject, you have been setting the agenda for the company now, being in charge of the company for six months. There's an interesting article in one of the business locals this morning here in Sweden, looking at one of your major shareholders saying that there would be value to be had by breaking the company up in the consumer part and the professional part. What was your view on that now, being with the company for six months? Is there really any logic in it or?
I think, referring to, I guess, Dagens Industri this morning. I guess what he describes, it's a bit ambiguous. You can interpret it in several ways, but I choose to interpret it in the way that he really emphasizes exactly what we do ourselves in the Accelerated Improvement Program. Meaning that there are two distinct business models, we need to a larger degree, separate the way we do business with it. However, this is my opinion, it has nothing to do with the article today. I elaborated around it at the quarterly. There are synergies between these two businesses. I don't think necessarily interpreting this in a different way would be advantageous, leaving the consumer side. Huge scale advantages. A lot of technology that is in common. A lot of suppliers, a lot of manufacturing, et cetera.
If that would be a part of your question, I would be less enthusiastic about it. For sure, we have reason to, from an operational point of view, work through what this means. The example you heard me talking about where we separate the organization in U.S. as of today, in fact, is a good example of that. It's one step. It's not the last. There will be more steps coming, but it's one step in that direction. I think there is a logic to that part of it.
Excellent. Thank you very much.
Stefan Kjellsson, Nordea. You have higher cost of marketing and branding in Q4. Can you please specify the amount? Also, is this a new level? Will you increase your marketing spending going forward?
No, I will not specify exactly the amount, it is a higher pace, if you look upon it year-over-year. We shall have in mind that we were pretty cautious when we looked into 2012. 2012 is not even a good benchmark if we look going back in the old days. What is important, it is tied back to the Accelerated Initiatives that you see here to prepare for a higher sales 2014. That means that we have these start from in Q4, specifically in Europe, Asia Pacific, where we have, of course, the majority of Husqvarna and the Gardena brands from a selling perspective.
Operator, can we take the questions from the telephone audience, please?
Thank you. As a reminder for those participants on the phones, if you wish to ask a question, please press star followed by one on your telephone keypad and wait for your name to be announced. If you wish to cancel a request, please press the hash key. Once again, it's star one for any questions or comments. Your first request come from the line of Aaron Davidson of Goldman Sachs. Your line is open.
Yes. Hi there. Good morning. Hope you're well. I had three quick detailed questions, if that's okay. First of all, I was just wondering if you already now knew roughly what your depreciation would be in relation to the chainsaw or saw chain factory in 2015 and 2016. Secondly, maybe I got it wrong, but I got your group common costs around SEK 60 million or so, which is higher than it's been for a while. Just wondering if there's anything in particular there or sometimes you have bigger in Q4. I'm just wondering what was the driver behind that. Finally, just one question on sort of your growth strategy out of your core markets or into emerging markets, as you mentioned. How should we think about that when it comes to margin dilution or accretion?
Your current sales outside of, say, the Americas and Europe and Australia, are they in line with your target margins around 10%, or should we sort of expect additional logistics and marketing costs to more establish yourself in emerging markets? Thank you.
Thank you, Aaron. I'll let Ulf answer the two first, and I'll try to answer the third.
Well, the first one is, no, I will not go into the detail. It's premature to look into 2015 and 2016 when it comes to the depreciation. As you know, we talk about investments in the range up to SEK 1 billion. You can do some calculations yourself, of course, and we talk about machinery and equipment, but I will not guide you on a specific figure here. We will come back later on for sure on that, but not now. Group common cost, correct observation. We have been carrying two CEOs in the latter part of 2013. There is a higher cost when it comes to group common cost in the fourth quarter, to some extent in the third quarter as well. That explains the higher level that you see specifically in the fourth quarter.
Okay, thank you.
If I try to elaborate on the third question then, the margin from the emerging markets. In general, the emerging markets are very much characterized by dealer sales. The dealer channel is strong. In general, it's handheld products, but maybe not to the same extent high-performance products in that channel. Rather, lower price point, mid price point, but still a channel and a product category that is advantageous for us. I would say we expect contribution from the emerging markets not to be dilutive, but rather supportive, be in line with group average today. If anything, staying around that region or potentially even a small positive contribution. Definitely on group average.
Sorry, just to clarify on the last question, I was just thinking, since you're targeting 10% within a relatively short timeframe in your core business, I assume that you obviously have sort of lower scale, et cetera, when you're venturing into these sort of newer markets. I was just wondering, do you have a path to sort of 10% there as well? Because generally speaking, when you expand into new areas, you would not expect to have sort of significantly higher margins than group, which obviously your target represents.
You have a point, in that respect, that there could be an element of that. I think in quarter three, when I talked about the Accelerated Improvement Program, I was very clear about that the contribution from emerging market is not vital for the success of the complete program as such. It's more a positioning for the future. We will reach the 10% EBIT margin, I was almost about to say, with or without the emerging markets. It is more the positioning and the strategic importance of the positioning that I'm after, putting it into the program, because we haven't explored opportunities to the extent we reasonably can and want to do. Yes, there could even be a burden from the efforts and the expansion of the organizational part, I agree.
There might be some aspects related to new product developments that we haven't seen yet, that on a temporary basis could burden the whole case somewhat, yes. I give you a point there.
Thank you very much.
Yes, obviously.
Thank you.
Your next question comes the line of Andreas Lundberg of ABG. Please ask your question.
Yeah, good morning, gentlemen. Just to start with a clarification here. Did you say that of your running cost-saving programs, that it's about SEK 50 million left to be realized in 2014?
Yes. That is the incremental piece that you will see here specifically in the first, second, and third quarter.
Okay. Got it. Also, given that you have had a relatively low factory utilization here in 2013, I guess it's early now, but what's your outlook for the current year, for coming quarters here?
We should reasonably expect that it's not going to be of the same size. That's correct. I guess that's where you're heading with the question. Because of the production rate reductions in order to facilitate the inventory reductions 2013, which is not going to be of the same magnitude 2014. You could also, given the outlook that I talked about, expect it to be lower or more neutral, so to say. No negative under absorption of any magnitude from that position.
There can always be disturbances appearing in the future.
Sure.
Of course, that's a different rationale and background.
Okay. I don't know if you mentioned that, can you say something about your own pricing here for the 2014 season? Thank you.
I don't want to be specific on the pricing, I'd like to, in general terms, talk confidently about no erosion for the season of 2014. We have ambitions, of course, as you realize. I don't want to put that into your modeling here, in any great expectation fashion, no. It's stable pricing, I think definitely. It's a statement.
Okay. Thanks a lot. That's for me.
Your final question comes the line of Anders Trapp of SEB. Your line is open.
Yes. Hi there. I just have one question really. I know you've been trying to be very clear on saying that the Improvement Program is back-end loaded, et cetera. Maybe you need to be even more clear. I'm asking basically if you could give some kind of more definite indication of how much of the improvement that we actually could expect to see in 2014. I'm saying this basically against the backdrop that looking at consensus forecast, it seems that the market average is expecting about a third of the improvement between 2013 and 2016 is to come in 2014, That doesn't seem to comply with what you are indicating.
Sorry to disappoint you, Anders. I will not venture into any details of that today. Let us bring that with us back and see what we reasonably can do then, after quarter one. We can be more specific about it. I'd like to push it into quarter one, and we have said that definitely for the Capital Market Day. We also want to be a bit forward-looking in terms of the Accelerated Improvement Program. We should be able to give you some more details as to that after quarter one. I think that's fair. Yes.
Okay. Very good. Thank you.
Okay, it appears we have no more questions. With that, we conclude, and thank you for calling, and see you again on April 24 when we report the first quarter results.