Good morning everyone, and welcome to this presentation of Husqvarna's second quarter results. The presentation today will be conducted by our new President and CEO, Mr. Kai Wärn, who will take us through the highlights of the quarter, and our CFO, Mr. Ulf Liljedahl, will take us through the financial details before we open up for all your questions. With that, please go ahead, Kai.
Good morning, everybody. Kai Wärn. You know that I have been taking over as President and CEO as of 1st of July, this is my third week in office. I thought it could be useful to mention some previous experiences that are relevant for Husqvarna that I made throughout the years. I think it's fair to say that I have a reasonably broad experience from various general management and CEO roles since 1998 of international character, involving restructuring programs, change management programs, in the vast areas of functional disciplines, ranging from development programs, global manufacturing footprints, distributions, sales efficiency programs, geographical expansion, brand development, value-based sales, all the way to M&A. I think that from an experience point of view, I have reasonable conditions to put myself into this position within a reasonable period of time.
I just like to mention starting out as well, that I asked Hans Linnarsson to join in, and to be able to support any possible tricky question you might have related to the quarter two, which he obviously knows a lot more about in depth than I would do at this point in time. Let me with those introductory comments, move over to the quarter two. As was mentioned already during the quarter one results presentation, there was a slow momentum entering the second quarter. The spring was later than normal, both in Europe as well as in North America, delaying the start of the gardening season. You know that the month of April normally is a very busy month for us, but it showed a weak demand.
On the other hand, we saw a pickup in the month of May and June when normally the garden season starts to wind down somewhat in June. We did not see that impact this year. There were several trends from quarter one that continued into quarter two. On the positive note, you can see that two business areas are continuing to move in the right direction, Americas and Construction. They improved operating income as well as margins. We'll come back to comment on that in a few slides. For business area Europe and Asia/Pacific, in addition to the late spring, we continued to face substantial currency headwind, and no real improvement of the macro situation was visual. Adding it all together, group sales for quarter two was about equal for last year, adjusted for currency translation.
Operating income was down 11%, where Americas and Construction delivered good performance with improvements in several areas. They were still not sufficient to compensate for the decline in Europe & Asia/Pacific. On another note, looking at the working capital, we saw some encouraging results in quarter two. That was related to the fact that in addition to already planned inventory reductions, we carried out further reductions through decreased production in response to the slow start of the quarter. The inventory reduction supports an improved cash flow, obviously. On the other hand, it naturally has an impact over earnings negatively by lower absorptions of fixed costs. With that, we turn to next page, financial highlights. On a group level, you see that the sales for the second quarter, adjusted for currency impact, was on the same level as the previous year.
Sales, however, improved for Europe & Asia/Pacific and Construction while Americas was slightly lower. I'll give some comments to that somewhat later. EBIT and margin for the group declined, mainly explained by reasons just mentioned, unfavorable currency impact and lower absorption due to the reduced production levels. Ulf will give some more color on this in his presentation. As I just mentioned, the inventories have successfully been reduced, supporting an underlying improvement in cash flow, even though there will be some impact into quarter three here. Because if you look at the reported operating cash flow, it is lower than last year, quarter two, but as I mentioned, we had a lot of sales in the latter part of the quarter, which is now tied to trade receivables.
These will be converted into cash quarter three, which means that the whole cash conversion cycle is somewhat delayed compared to previous year. I'll move to page Europe & Asia/Pacific. Currency-adjusted sales were up 2%, pretty much in what we believe is a rather flat market overall, even though it's too early to say with any certainty for the quarter as such, but overall, we expect it to be around flat. As already mentioned, the start of the selling season was delayed by the late spring, which then translates into conservative inventory management by retailers and dealers. Operating income for the business had declined from SEK 1,018 million to SEK 806 million, which is a decline of SEK 212 million. Of that decline, SEK 153 million relates to currency impact, and the other part is principally the lower factory utilization, as I've mentioned, as a consequence of taking down inventory levels.
There are some positives in the operating income bridges, not big enough to compensate for the negative impact just mentioned. The positives relate though to some increased sales volumes, an impact from that, and some lower costs of material. From a product perspective, robotic lawnmowers continue to do well, and we remain a clear market leader in this area. Whereas some other competitors are introducing their first generation of these type of products, we have in fact launched a third generation, which have got a very good receival in the market, both by the trade and end customers. Walking products, which suffered heavily from the heavy rain season 2012, is more or less on an unchanged level versus last year, partly due to trade inventory overhang from last season into this year.
I think it's worth to remember also the rainy start down in Europe beginning of this quarter. All in all, there is no positive product mix as a consequence of the fact that handheld products were down as well as riders, where we also have some higher sales of walk-behind products, but those have lower margin content. With that comment, we leave, moving over to Americas, which currency-adjusted were down 3% in sales. Again, late start of the season across U.S.A. As you know, our top priority has been to improve the margin in this business area. The sales decline in the quarter is partly a consequence of the late season, but also I'd like to point at and emphasize the way we manage our channels in order to prioritize margin. I'm particularly pleased to see that the strategically important dealer channel growth continues.
We see also improvement in operating income and margin. You see how we went from an EBIT margin of 1.9% to 3.6%. I want you to understand that improving the margins in this BA requires a broad range of sustained improvement efforts in many different areas. It's not about taking any giant steps in any specific area. It's rather about many small steps in different areas. We see contributions from improved pricing, cost reductions, product mix, and channel mix, which supports this. From a pure macro perspective, we see market conditions gradually improving in North America. On another note, we have some new innovative products which continue to support and drive sales. This season we introduced the all-wheel drive walk behind lawnmower, which is the first of its kind and has gained a strong acceptance.
Just to give another example, last year we introduced what is called a fast tractor concept, and that success continues this year. We have a strong innovation pipeline. I'm turning to page six, which shows the margin development for Americas. You can see that there's a steady and stable margin improvement quarter by quarter, which is relating to pricing, cost management, mix improvements, particularly by growing the dealer channel sales. Again, turning page over to Husqvarna Construction, page seven. We are pleased to see the continuation of the positive developments. Sales, adjusted currency was up 7%, North America continues to be the main driver for improvements. I think we have a market growth in North America, on top of that, it seems we also have gained some market share. Whereas in Europe, demand remains hampered by tougher macro conditions.
It's a very mixed picture between the different regions. Still, there were some positives, we managed to grow sales in Germany and U.K. to give a couple of good examples, positive examples. If we leave North America and Europe, I'd like to draw your attention to Brazil as another noteworthy market that is doing fine. EBIT margins continue to recover mainly as a result of the higher sales and improved mix. With mix, I'd like to emphasize the higher share of more new and modern products with a higher margin content. With those relative brief comments, I turn over to our CFO, Ulf Liljedahl, here to give a more in-depth presentation.
Good morning, everyone. I suggest that we move to page nine directly and have a look at the gross margin and the gross profit development. We come back to the consolidated income statement later on. Looking at the page nine and the gross margin, that of course demands some explanations and in order to elaborate some on that. We look at the Q2 that compare with 2012 went down from a gross profit perspective. A gross margin percentage ending up in 28.3% versus 28.7% last year. If we look at the delta in percentage points, you could say we have, of course, one bucket of negatives, and FX is hitting us with some 0.7 percentage points.
We have under-absorption that you heard from Kai, driven both by a lower activity but also the conscious decisions on that we are reducing our balance sheet, i.e., inventory reductions in the group here. That, of course, triggered some under-absorption in our factories in the quarter. There you should attach some 0.7 percentage points as well. We have an increased R&D. As you know, we're coming from a pretty modest R&D spend if we look back in time, and we have upped that slightly in this quarter. We also have project costs attached to the chainsaw manufacturing, the startup of chainsaw manufacturing in Husqvarna. Adding those two together, they roughly attract some 0.4 pressure in the quarter year-over-year. Those are the negatives if you look behind the number. If we look at some of the positives, there is a price mix effect.
You have heard from Kai, if we take the product mix specifically in Europe, starting with watering, we don't have any effect. I mean, the quarter two started off, as you know, last year, watering okay, and then we had a stop based on a pretty rainy summer. The reverse, you could say, have happened this season here. It has been a very weak start when it comes to watering, but ending up slightly better. Watering is not year-over-year in the quarter giving any effect. Robotics, you have also heard from Kai, we are very pleased with seeing that development, that is giving, of course, a positive boost in the quarter.
On handheld and riders, we don't have a positive development mix-wise, that means if we add all of those together here, we have pluses and minuses, in essence, it is zero or slightly negative. If we look at the regional level, you have seen we have growth from a Europe & Asia/Pacific, that, of course, contributes slightly. Adding price and mix together, I would say that we have some 0.4 in positive related to that. We primarily see in U.S. good development when it comes to the pricing management. We have a portion of savings. We both have the initiatives related to the COGS initiative savings in material, not least, and we also have the saving program, the restructuring program, there we have some of the savings attached to the cost of goods sold.
I will come back later on and summarize some on that. In essence, they contribute with some 0.7 percentage points. There we have, in essence, the background here to the deterioration. We have some positives that we are quite pleased with, but they are not enough to offset the FX and the under-absorption, in essence. I think that is the main conclusion here. If we then turn back to the P&L, back to page eight again, and then move down to the SG&A, you can see that we have, if we adjust for currencies, we have a slight increase here, moving to 18.3% of sales versus 18.0%. We also do have some elements of FX here in terms of hedge contracts, negative year-over-year, as well as some revaluation that is, of course, giving some positive effects.
The hedge contracts, as you know I've talked about before, is not giving us any tailwind at all. On the contrary, it's giving us headwind. We have increased also some branding and selling expenses in the quarter here. What we do have in the SG&A is also savings offsetting some of that when it comes to the restructuring program. Let me summarize then, where are we with the program? As you know, we have said that we shall on 2013 have some savings of SEK 160 million. We may conclude that after six months, we have reached SEK 56 million, and that's 33 should be attached to the second quarter. The residual of the SEK 100 million, we are expecting to deliver in the second half, i.e., we see that we are on plan when it comes to those promised savings.
Moving further into the P&L, we can then conclude that we have an EBIT or an operating income reported of SEK 1,022 million compared with SEK 1.1 billion roughly last year, and that's a decrease of SEK 130 million, resulting in an EBIT margin of some 10% versus last year, 10.8%. As mentioned here before, we have two major, let's say, negative components, FX, as well as the lower factory utilization, mainly then due to the group's effort to lower inventory levels. Price savings from the restructuring program are impacting the operating positively, though. The total currency effect, as mentioned here, it was in the quarter SEK 156 million year-over-year. It is the continued strong Swedish krona that has, of course, put pressure in the quarter per se.
Moving down to the finance net, we ended up on minus SEK 106 versus minus SEK 121, the reason for the decrease is mainly due to the lower interest rates, but also due to the lower debt. We take some on the tax. You may see that we have in the Q2 a tax of SEK 256 negative versus SEK 245 last year. We are roughly corresponding to a tax rate then of some 28%. You know the background here, we do attract a higher tax rate. I will come back to the guidance later on here. That's mainly related to less, let's say, positive impact of the Belgian finance activities. This is according to plan. If we then take a page turn to Slide 10, and have a look at the balance sheet.
You can then see what's also mentioned here by Kai, that we are quite pleased to confirm here that the activities taken in terms of reducing inventory has paid off quite well. If we adjust for currency here, we have an inventory decrease of some half a billion SEK, which we are quite pleased with. Trade receivables reported, you may see that those are going down. If we adjust again for currency, there is a slight upward turn here. That is also related to that we had a lot of sales at the end of the period. Looking at the days of sales outstanding, we are improving. We are now 61 days versus last year's roughly 65.
That is something positive, and that I think is something you have to bring with you, that we enjoy now to see that the composition of the balance sheet is, of course, moving in the right direction. The activities taken when it comes to inventory, yes, we do take some penalty in the gross profit, at the same token, this is important for the long-term capital structure that we want to achieve, a more slim balance sheet. The trade receivables, as you know, that is, of course, something we will gain cash-wise in the third quarter.
Moving forward then, by default, coming into the cash flow on slide 11, you can also see that we also enjoy to see that the curve that I normally show you here, is that the smooth out, we can see we move up the peak or the downward peak in the first half year, which is positive, and we do break even in the second quarter as planned. We are even slightly better than last year, plus SEK 129 versus last year, plus SEK 92. That is even though we have a income as the financial item that is lower, SEK 1.5 billion this year versus SEK 1.8 last year. Again, related a lot to the change in working capital.
CapEx slightly higher than last year, roughly SEK 435, and then SEK 65 of those is related to the chainsaw production that we are starting to scale up now, starting in the second quarter. Moving then over to page 12, looking some on the net debt equity, the ratio was 0.75 in the Q2 compared with 0.76 last year. Those figures you should have understood as those are the revised one in accordance to IAS 19. If we would exclude the net pension liabilities, we would have had a net debt equity of some 0.63 versus last year, 0.64. Net debt amounted to some SEK 8.7 billion, including the SEK 1.5 billion in pensions versus last year, SEK 9.3. Finally, we have some key figures, and those, as you know, I normally do not comment more than the ones that I think is worthwhile giving some elaboration behind that.
That is if you look at the average number of employees, that one is going down, also in accordance with plan. Of course, the personnel reduction program is contributing. We have some 209 or slightly 300 people that has been left that is contributing to the figure. We also have the activities, as you know, in terms of the efficiency improvements in U.S., not least. We have under absorption, which means we have taken out people, and we work more and more with hired personnel, and those are not accounted for in this number here. We have a number of activities that supports the downward trend when it comes to number of employees. Bearing in mind, this is a number we calculate based on average, i.e., full-time equivalents on an average calculation basis. With that, we move into finally some guidance.
Starting with CapEx, as you know, we at the Capital Markets Day announced that the SEK 1.7 billion, including a half a billion SEK related to the production facility for chainsaws. I revised that one downward slightly last time. I take an additional SEK 100 million down. The new revised figure is SEK 1.3 billion. The rationale behind is that we do foresee lower activities as well as we have some carryover of the chainsaw manufacturing moving into the first or second quarter of 2014. SEK 1.3 billion is the guidance when it comes to CapEx. Depreciations, we remain on the level SEK 1 billion-SEK 1.1 billion. Tax guidance remain, I said last time, a range 20%-24%, and that one remains for the full year of 2013. Finally, we have some on the FX.
I see that we have a continued pressure also in the second half here. I said to you SEK 300 million last time for the full year-over-year effect. That one I upper now to SEK 350-SEK 370 negative year-over-year effect for the full year. We do get some benefit from the strengthening of the EUR versus the SEK. As you know, we now move out to season, and that means I get less of that benefit in the second half. However, the stronger U.S. dollar and the Chinese yuan together with a weaker AUD as well as the RUB is mainly impacting us negative, and that is explaining why I'm upping the level from the first quarter to the SEK 350-SEK 370 span. With that, I leave over to Kai for some summaries.
Okay. I don't think it's necessary that I repeat the bullets at the summary page 14. I think I'll jump directly to the outlook, which remains. That means we have a cautious outlook for demand in Europe, while the outlook for North America remains more positive. On a more personal note, I just want you to know that I have so far concentrated to get to know key employees, some customers, products, and to learn more about our situation and challenges, respectively, opportunities. From what I've seen so far, I feel comfortable with the initiatives communicated at the Capital Markets Day in February.
Still, given the fact that we continue to show no absolute improvement in operating margin and the continued difficult environment we face in Europe, meaning the macro uncertainty and the currency, we will need to review how we can accelerate improvement programs with priority on turning the operating margin trend towards a 10% target as an average for the year. That is something I will get back to during the course of the fall here and the second half. I'd like you to also be clear, I don't want to be misunderstood. The Husqvarna business is strongly seasonal and cyclical in that sense, which means that whatever we do to accelerate will not impact quarter three or four this year. We will see the first impacts then in the next season, and then more likely fully into 2015.
I also like to have the understanding that I, at this point in time, cannot be more specific about this, and I need to get back to you during the fall here about details. With those comments, I'd like to leave this open for questions that you might have.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad and wait for name to be announced. If you wish to cancel that request, please press the hash key. Your first question comes from Björn Enarson from Danske Bank. Please ask your question. Björn Enarson, your line is now open. Please ask a question. The next question comes from Anders Trapp from SEB. Please ask a question.
Yes. Hi, can you hear me?
Yep. Yep.
Very good. I have two questions really. First, you mentioned improvement in North America due to channel management. I wonder if you could elaborate a little bit on that, what it means more in detail. Secondly, also, if you could comment upon the inventory situation well, for you have commented, I guess, but for the trade and what you expect in terms of under absorption or over absorption going forward in the year.
Okay. I'll start with the first question relating to North America and the channel management, and then I'll let Ulf comment on the second. I think when we talk channel management, we need to remember that the retail segment is dominant in North America, whereas the profitability in that segment is not as good as we see in the dealer channel. When we talk channel management, we refer to the strategically important growth of the dealer channel, which then has a higher profitability, and which fits then the Husqvarna brand very well, you could say. That's really what we refer to when saying that primarily. As to the second question, Ulf, I don't know if you would like to give any comments to the absorption.
Well, it was, I think, Anders, you wanted to understand how it looks in the trade, less how it looks in Husqvarna.
Yeah. Well, basically, yes, both really. I know you talked about the inventory level for yourself, that at least that it declined a lot in the quarter. Are you happy with the level that you are at now? Meaning will you have a more normal production going forward? I know it's low production season, but still. Also, what are the trade inventories?
I see two questions. Let me start at least with how we look upon internally. For sure, this is, I would say, the effect of what we have talked about for some time, and that is also related to achieving a better flexibility. This company should be able to run on a much lower level when it comes to inventory. Of course, if you look upon our seasonality, we now move out of season, then it is the question how we're going to plan for the coming season 2014. Gradually you will see inventory going slightly down in the Q3. Then, depending on how we want to play with the pre-production for the coming season, which you know is also depending on how we're going to deal with the listings, et cetera. That's premature to talk about that today.
You could say that what we have achieved in second quarter, we are pretty proud of, and we think that moves in the right direction. There is still more to do. This is part of the program that we presented at the Capital Markets Day, and this is a continuous improvement.
All right. The trade inventories?
We can see that if we look at what's happening in Europe, it's slightly upper in terms of what has happened. We still see that quite a few are holding back. There is a cautiousness when it comes both to dealers as well as to retail. Slightly better in U.S. We see that they have sold through pretty good based on the upturn in the business cycle as well as that we have had a better ending of the Q2.
We shouldn't expect your sales to be suffering from too high inventories going into the third quarter, basically?
If we look at Europe, they are still on high levels here. Depending on how things are developing here in the beginning of the Q3, we still have to see.
Yep. All right. Thank you.
Once again, if you wish to ask a question, please press star on your telephone keypad. Your next question comes from Rasmus Engberg from Handelsbanken.
Yes. Hi, good morning. Can you hear me?
Yep.
Good. I wanted to ask, I'm trying to come to terms with the gross margin here. Within Europe, have you seen significant mixing down within the segments, in this quarter and perhaps also in the first quarter, that people are choosing significantly cheaper products within each segment?
Well, you could say, Rasmus, that if we look at watering, that one has not contributed. As you know, that was weak in Q1. It was a very weak Q2, it has not been contributing in the second quarter based on the weather that started off. The season started off quite late here. Slightly better at the end of the quarter, but it is more or less reverse what we saw in the last quarter last year, sorry, in Q2 last year. Here you could say it is more or less plus minus zero. Robotics have given a positive contribution, not enough to offset, let's say, the handheld as well as on the rider side. We have also had more, you could say, of walk behind that attract the lower margin than the rest of the product here.
Okay. People are sort of mixing down from riders to walk behinds rather than buying cheaper products within each segment. Is that how things are playing out at the moment or?
Could you repeat that one last time?
Is it so that people are trading down from riders to walk behinds rather than buying cheaper riders and cheaper walk behinds? Is that what you're saying?
No, I wouldn't say that is in essence. In general, you have a business climate out there that is of course putting pressure on it. I would rather see that is the explanation than any trend here.
Okay. Back to that. Europe, when did you start to see any sort of real cyclical impact in Europe, during last year? Is that difficult to sort out compared to weather?
Maybe this is a question for Hans to support here.
Can you repeat the question once again?
Yeah. I was just wondering, last year, I seem to recall that Northern Europe turned quite bad sometime during the third quarter, overall for the economies, and that we're sort of at some point approaching slightly easier comparisons or is that not correct?
When it comes to Northern Europe, I think it will remain as last year. We can see some improvements actually in Germany when it comes to the improvement, when it comes to the financial situation there. We can see that especially in the dealer channel in Germany. When it comes to the southern part, it will remain.
Yeah.
It will remain. The question, of course, what happened in France? France is actually a big market for us under the Husqvarna brand, as well as for the Gardena brand.
That has been quite bad this year, I presume.
Yes. To my experience, it will continue for the rest of the year, especially when it comes to France.
Okay. I have just a question to Kai, coming into this. How do you think about the financial strength of this company? Is there any way this will restrict what you can do or how fast you can do it, or do you think that there is no restriction for you?
I don't really see that the financial situation of the company will restrict any of the ambitions in the improvements I might have. Really, no, I cannot see that. Of course, if you would ask if we are in a position to make a larger acquisition, that might be a different answer. I think we need to do a bit of homework here on the operating margin side, short-term, medium-term. That's the priority. That comes before growth at the moment.
Okay. Thank you.
Your next question comes from Johan Dahl from Penser Bank . Please ask a question.
Hi there. I was wondering, in the second quarter, did you see any significant difference between the performance in the mass market versus dealer channel in terms of your deliveries? Also, if you could possibly add some information with regards to inventory levels in those two channels, whether that's an explanation to the slightly weak mix in the quarter. Secondly, I was wondering, have you developed your plans in any way with regards to pricing initiatives for the European market?
I think the detail of these questions make them suitable for Hans to respond to.
When it comes to the retail channel here, especially in EU, we see now a sign that actually they have some financial problems here. We have seen now Praktiker in Germany. We even see it here in Nordic when it comes to K-Rauta, that they have actually closed down some of the stores here. Of course, they have some financial situation which will affect us here. We even see now that they look more into a branded product, which actually give us a positive effect of the newly launched McCulloch brand here in the retail channel in Europe. We've seen a good improvement with that brand, especially in the German-speaking countries, as well in the northern part of Europe here. When it comes to the inventory level here in the retail channel, of course, they are struggling with their balance sheet as well as we are doing here.
We see here now that there are high inventories in the retail channel here. When it comes to the dealer channel here, we see a more positive sign here going forward here with all activities we have done here, especially with the new pricing model we have here, where we focus more and more on the dealer who are more selling Husqvarna products as before here, and looking into a new price model here. Which long-term will give us a good improvement when it comes to margin going forward here. The focus we have on the Husqvarna brand, both in Europe as well as in Asia-Pacific and Americas.
Is that to say that this pricing model you're referring to, we haven't seen any price increases so far in the current year, but is that something you expect in the coming years?
We see a price increase even backwards here, even in the quarter two here and the half year. We have price increases here, both in North America as well as in Europe. That depends. As we said at the Capital Markets Day here, we go with this in a little bit different way that depends on the product categories here and the different channels here. Of course, it's much tough in the retail channel when it comes to price increases than we have seen in the dealer channel here. We see exactly the trend as we said at the Capital Markets Day here when it comes to price situation here.
Okay. Can I just ask you quickly also, in the U.S., is it your understanding that you outperform or underperform the market in the second quarter?
I think I can respond to that. I think it's fair to say we are underperforming in value terms. The market is most likely positive. That's still to be seen when facts are on the table. The minus three should be read also, of course, in the light of that we are not as eager to take low profitability jobs and orders. There are examples where we have walked away from actual opportunities at opening price points, et cetera. The conclusion should reasonably be that the market is doing better than Husqvarna has done for the quarter from a revenue point of view, and where again, we prioritized the profitability ahead of the volume.
Thank you.
Your next question comes from Johan Eliason from Kepler. Please ask your question.
Hi, this is Johan at Kepler Cheuvreux. Just a question once again on North America. First, do you have any metrics on this dealer channel development? I.e., how many more new dealers do you have this year in percentage terms or in number of the total or something like that? Secondly, as you pointed out, you are walking away from some businesses. Who is taking the business in the U.S.? Is it low-cost Chinese guys, or is it the local, like MTD, for example, that picks up the lower price points?
I could have some thoughts around it, but I think Hans is the most appropriate person to.
When it comes to the improvement in terms of dealer business here, we'll not comment how many new dealers we have net here. We normally don't do that here. Husqvarna doesn't want to give that to our colleagues out there, competitors. That's the same when it comes to your next question as well here. We normally don't comment that.
I think you previously comment on the dealer channel that you've seen sort of double-digit growth in the north-
Yes. When it comes to that part in that magnitude, we continue to do that. We see still a very positive development when it comes to number of deals, not only in North America, that's for the entire group.
Okay. Thank you.
Your next question comes from Krister Magnushagen from DNB. Please ask your question.
Yes, good morning. Firstly, two questions. If you can talk about the trends in demand in the second quarter in Europe, how much demand fell in April and how much it was up in June, basically? I just want to get an understanding for how strong June was. Secondly, if you can talk more about the positive contribution we can expect from the chainsaw factory when that is up and running, if you have any more thoughts on that now.
Okay. Let's see. I start, we see if some other colleagues here fill in. The demand trend in Europe, we are not that eager to be detailed in responding to that at much more than what we have written, which you have seen and heard about this slow start and then the pickup in May and June, ending on the same result as previous year. Obviously we had a satisfactory May, respectively June. As to the other question of the chains for the chainsaws and the impact of that's early as 2015. I think more reasonably in any quantities, we are probably yet another year later.
We have to remember there are many versions of chains here to be produced, quality will always need to be prioritized, this is a completely new category for us to produce with a lot of traps, metallurgical, and quantity aspects to be overpassing. I think we should be reasonable in the expectation and see 2015 as the start, and then more realistically, in any significance, 2016.
You earlier also talked about that you might source lawnmower engines from elsewhere than Honda and Kawasaki and Briggs & Stratton. Is that anything you still look at or trying to find a solution on, or have you realized that you need to go with those big guys?
Let Hans comment this one.
I think there's no change when it comes to engines for ride-on and walk-behind product. We will continue to work with Briggs, with Honda, Kawasaki, and all these guys here, and Kohler, as before. There is no change when it comes to that strategy at all. Okay. Yeah.
Some actually Chinese suppliers as well.
Okay.
Well, yes. Finally, your sister company, Electrolux, they reported extremely strong profitability in North America. They did so also in Q1, and they have been able to raise prices over a quite long period of time. It's a different kind of product, of course, but it's still the retail channel. It's still the consumer that buys the products. It's still consumer durables. Why are they, in that segment, able to raise prices so much, and you, in your segment, have had so many challenges over the last two years? I'd like to hear thoughts on that.
I guess Hans has to give a reply to this.
First of all, it's two different businesses here. I can say that, coming from both businesses here. I will not comment Electrolux more than it is not our sister company here. Our businesses are completely different here. The only thing I can see here, that they might be earlier when it comes to the upside now in the building and the focus on new apartments as new house development in North America here. We might come later on into that season here. We focus more and more on the dealer channel here. When it comes to Electrolux and White goods business, they are more into retail channel here than we are in this business here.
If I compare that part here, when it comes to price increases, we are more or less equal when it comes to that here in North America, like the White goods business here. I can't compare these two businesses here at all. Completely different here. That's my learning here after six years in the outdoor business here.
Okay. Well, thanks anyway. Thanks.
The next question comes from Aracelys Trab from UBS. Please ask your question.
Hi. Good morning. I was just wondering about the cash flow and the dividends. What are your thoughts at this stage of the year, given the slightly lower profits? Are you revising down the CapEx with in mind to protect the dividend to some extent?
No. As I said, when it comes to the CapEx, that is explained why I move it down from last guidance. That is due to the lower activities. It is the carryover to 2014, for investments in the new chain manufacturing facility.
Okay. For the dividend, we should expect something flat year on year then?
Dividend, I don't comment because that is subject to a board decision, as you know, it is something that is managed by the annual general meeting.
Okay. Thank you.
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Okay. Thank you very much for your attendance. We appreciate that, and looking forward to meet you maybe physically after the quarter three. Thank you.
Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may now disconnect.