Earnings Call: Q2 2013

Jul 19, 2013

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 Van, who will take us through the highlights of the quarter and our CFO, Mr. Ulf Lille Gedal, who will take us through the financial details before we open up for all your questions. So with that, please go ahead, Kai. Good morning, everybody. Kai Van, as you know that I have been taking over as President and CEO as of 1st July. So this is my 3rd 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. And 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 and A. So 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'd just like to mention starting out as well that I asked Hans Linearson to join in and to be able to support any possible tricky question you might have related to the quarter 2, 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 2. As was mentioned already during the quarter 1 results presentation, there was a slow momentum entering the Q2. The spring was later than normal both in Europe as well as in North America, delaying the start of the gardening season. And 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 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 2. On the positive note, you can see that 2 business areas are moving continuing to move in the right direction, Americas and Construction. They improved operating income as well as margins. And 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 continue to face substantial currency headwinds and no real improvement of the macro situation was visual. Adding it all together, group sales for quarter 2 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 2. And 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. So the inventory reduction supports an improved cash flow obviously. On the other hand, it naturally has an impact of our earnings negatively by lower absorptions of fixed costs. With that, we turn to next page, financial highlights. On a group level, you see then that the sales for the 2nd quarter adjusted for currency impact was on the same level as the previous year. Sales, however, improved for Europe, Asia Pacific and Construction, while America 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 our absorption due to the reduced production levels. Ulf will give some more color on this in his presentation. And 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 3 here. Because if you look at the reported operating cash flow, it is lower than last year quarter 2. 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 3, which means that the whole cash conversion cycle is somewhat delayed compared to previous year. 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 10.18 million to SEK 806,000,000, which is a decline of SEK 212,000,000. And of that decline, SEK 153,000,000 relates to currency impact and other parties 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, but not big enough to compensate for the negative impact just mentioned. But the positives relate though to some increased sales volumes and impact from that and some lower costs of material. From a product perspective, robotics lawnmowers continue to do well, and we remain a clear market leader in this area. And whereas some other competitors are introducing the 1st generation of these type of products. We are in fact or have in fact launched a 3rd generation and which have got a very good receivable in the market, both by the trade and then customers. Working 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 had some higher sales of the walk behind products that those have lower margin content. With that comment, we leave moving over to Americas, which currently adjusted were down 3% in sales. Again, late start of the season across USA. But 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 out and emphasize the way we manage our channels in order to prioritize margin. And I'm particularly pleased to see that the strategically important dealer channel growth continues. And we see also improvement in operating income and margin. You've seen how we went from an EBIT margin of 1.9 percent to 3.6 percent. I want you to understand that improving the margins in this PA requires a broad range of sustained improvement efforts in many different areas. So it's not about taking We see contributions from improved pricing, cost reductions, mix product mix and channel mix, which supports this. And 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. And this season, we introduced the all wheel drive, walk behind lawn mover, which is the first of its kind and has gained a strong acceptance. And just to give another example, last year, we introduced what is called a fast tractor concept and that success continues this year. So we have a strong innovation pipeline. I'm turning then to Page 6, which shows the margin development for Americas. And you can see that there's a steady and stable margin improvement quarter by quarter, which is then relating to pricing, cost management, mix improvements, particularly by growing the dealer channel sales. Again, turning Page over to Construction, Page 7. We are pleased to see the continuation of the positive developments. Sales, adjusted currency was up 7 and North America continues to be the main driver for improvements. So I think we have a market growth in North America. And on top of that, we it seems we also have gained some market share. Whereas in Europe, demand remains hampered by tougher macro conditions and it's a very mixed picture between the different regions. Still, there were some positives and we managed to grow sales in Germany and UK to give a couple of good examples positive examples. If we leave North America and Europe, I'd like to draw your attention then to Brazil as another noteworthy market that is doing fine. EBIT and margins continue to recover and mainly as a result then of the higher sales and improved mix. And 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 Liljal here to give a more in-depth presentation. And good morning, everyone. And I suggest that we move to Page 9 directly and have a look at the gross margin and the gross profit development. We come back to the consolidated income statement later on. So looking at the Page 9 and the gross margin that of course demand some explanations and in order to elaborate some on that. I mean, we look at the Q2 that compared with 12% went down from a gross profit perspective. The gross margin percentage ending up in 28.3% versus 28.7% last year. And if we look at the delta in percentage points, you could say, I mean, we have, of course, 1 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. And that, of course, triggered some under absorption in our factories in the quarter. And there you should attach some 0.7 percentage points as well. We have an increased R and D. As you know, we're coming from a pretty modest R and 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 start up of chainsaw manufacturing in Husqvarna. And adding those 2 together, they roughly attract some 0.4 pressure in the quarter year over year. So those are the negatives if you look behind the number. If we then look at some of the positives, specifically in Europe, starting with watering, we don't have any effect. I mean, the quarter 2 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 stop when it comes to watering, but ending up slightly better. So but watering is not year over year in the quarter giving any effect. Robotics, you have also heard from Kai. We are very pleased we're seeing that development and that is giving, of course, a positive boost in the quarter. However, on handheld and riders, we don't have a positive development mix wise. And that means if we add all of those together here, we have pluses and minuses. And in essence, it is 0 or slightly negative. If we look at the regional level, you have seen we have growth from a EuropeAsia Pacific. So that of course contributes slightly. But 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. Then 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 that we have some of the savings attached to the cost of goods sold. I will come back later on and summarize some on that. But in essence, they contribute with some 0.7 percentage points. So there we have in essence the background here to the deterioration. Points. So 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 mean, I think that is the main conclusion here. If we then turn back to the P and L, so back to Page 8 again and then move down to the SG and A, you can see that we have if we adjust for currencies, we had a slight increase here moving to 18.3% of sales versus 18.0 percent increase. 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. But 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. And then we have increased also some branding and selling expenses in the quarter here. What we do have in the SG and A is also savings offsetting some of that when it comes to the restructuring program. And let me summarize then where are we with the program. As you know, we have said that we shall on 20 13 have some savings of SEK 160,000,000. We may conclude that after 6 months, we have reached SEK56 1,000,000 and that's SEK33 1,000,000 should be attached to the Q2. The residual of the plus SEK 100 1,000,000 we are expecting to deliver in the second half, I. E, we see that we are on plan when it or a operating income reported of 1,000,000,000 or an operating income reported of $1,022,000,000 compared with the $1,100,000 roughly last year and that's a decrease of $130,000,000 resulting in an EBIT margin of some 10% versus last year 10.8 percent. And as mentioned here before, we have 2 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. And then the total currency effect that's mentioned here, it was in the quarter SEK156 1,000,000 year over year. And I mean it is the continued strong Swedish kroner that has, of course, put pressure in the quarter per se. Moving down to the finance net, we ended up on net minus 106 versus minus 121, and the reason for the decrease is mainly due to the lower interest rates, but also due to the lower debt. And then we take some on the tax. You may see that we have in the Q2 a tax of 2.56 negative versus 2.45 last year. We are roughly corresponding to a tax rate then of some 28 percent. And you know the background here, we do attract a higher tax rate. I will come back to the guidance later on here. And that's mainly related to less, let's say, impact of positive impact of the Bergen finance activities. But this is according to plan. If we then take a page turn to Slide number 10 and have a look at the balance sheet, you can then see what also mentioned here by Kai that we are quite pleased to confirm here that the activity is taken in terms of reducing inventory has paid off quite well. And we have if we adjust for currency here, we have an inventory decrease of some SEK 500,000,000, 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. But 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. So 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. And the activity is taken when it comes to inventory. Yes, we do take some penalty in the gross profit, but at the same token, this is important for the long term capital structure that we want to achieve, a more slim balance sheet. And the trade receivables, as you know, I mean, that is, of course, something we will gain cash wise in the Q3. Moving forward then and by default coming into the cash flow on Slide 11, you can also see that we also enjoy to see that the curve that you normally or I normally show you here is that that smooths out, we can see we move up the peak or the downward peak in the first half year, which is positive. And we do breakeven in the Q2 as planned. We are even slightly better than last year, plus 129 versus last year, plus 90 2,000,000. That is even though we have an income after financial items that is lower, €1,500,000,000 this year versus $1,800,000,000 last year. And again related a lot to the change in working capital. CapEx slightly higher than last year, roughly $435,000,000 percent. And then 65 percent of those is related to the change of 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 to equity, the ratio was 0.75% in the Q2 compared with 0.76 last year. And 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 dollars And net debt amounted to some $8,700,000,000 including the $1,500,000,000 in pensions versus last year 9 €9,300,000,000 Finally, we have some key figures and those, as you know, I normally do comment more than the ones that I think is worthwhile giving some elaboration behind that. And 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. But we also have the activities, as you know, in terms of the efficiency improvements in U. S. Not least. And we have under absorption, which means we have taken out people and we work more and more with higher personnel. And those are not accounted for in this number here. So we have a number of activities that support 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 Cap Markets Day announced that the $1,700,000,000 including $500,000,000 related to the production facility for chainsaws. I revised that one down slightly. Last time, I take an additional $100,000,000 down. So the new revised figure is $1,300,000,000 And the rationale behind is that we do foresee lower activities as well as we have some carryover of the chainsaw manufacturing moving into the 1st or Q2 of 2014. So 1.3 is the guidance when it comes to CapEx. Depreciations remain on the level $1,000,000,000 to $1,100,000,000 Tax guidance remain, I said last time, a range 20% to 24%, and that one remains for the full year of 2013. And then finally, we have some on the FX. And I see that we have continued pressure also in the second half here. I said to you €300,000,000 last time for the full year year over year effect. That's when I up or now to $350,000,000 to $370,000,000 negative year over year effect for the full year. Do get some benefit from the strengthening of the euro versus the SEK. But 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 yen together with a weaker Australian dollar as well as ruble is mainly impacted negative and that is explaining why I am offering that level from the Q1 to the $350,000,000 and the $370,000,000 span. And with that, I leave over to Kai for some summary. 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. And 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. And from what I've seen so far, I feel comfortable with the initiatives communicated at the Capital Market Day in February. However, still given the fact that we continue to show no absolute improvement in operating margin and the continued difficult environment it faced 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. So that is something I will get back to during the course of the fall here and the second half. But I'd like you to also be clear, I don't want to be misunderstood. Husqvarna business is strongly seasonal and cyclical in that sense, which means that whatever we do to accelerate will not impact quarter 3 or 4 this year. We will see the first impacts then in the next season and then more likely fully into 2015. I also like to add to your 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. So with those comments, I'd like to leave this open for questions that you might have. Thank Your first question comes from Bjorn Einarson from Danske Bank. Please ask your question. Your line is now open. Please ask your question. The next question comes from Anders Trapp from SEB. Please ask your question. Yes. Hi. Can you hear me? Yes. Very good. I have two questions really. First, you mentioned improvement in the in North America due to channel management. I wonder if you could elaborate a little bit on that what it means in more detail? And secondly, also if you could comment upon the inventory situation in well, for you, you have commented, I guess, but for the trade, 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, I mean 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. So 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. So that's really what we refer to when saying that primarily. As to the second question, 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. Yes. Well, basically, yes, both really. I mean, 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 but also what are the trade inventories? I see 2 questions. Let me start at least with how we look upon internally. I mean, 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. I mean, this company should be able to run on a much lower level when it comes to inventory. And of course, if you look upon our seasonality, we now move out of season and then it is the question how we're going to plan for the coming season 2014. So I mean gradually you will see inventory going slightly down in Q3. And then I mean depending on how we want to play with the preproduction for the coming season, which you know is also depending on how we're going to deal with the listings etcetera. And that's premature to talk about that today. But you could say that what we have achieved in Q2, we are pretty proud of and we think that moves in the right direction. And there is still more to do. I mean, this is part of the program that we presented at the CAF Market Day and this is a continuous improvement. All right. And that trade inventories? Well, we can see that. I mean, if we look at what's happening in Europe, it's slightly upper in terms of what has happened. But we still see that quite a few are holding back. I mean, there is a cautiousness when it comes both to dealers as well as to retail, slightly better in U. S. I mean we see that they have sold through pretty good based on I mean the upturn in the business cycle as well as that we have had a better ending of the Q2. So we shouldn't be expect the well, of course, your sales to be suffering from too high inventories going into the Q3 basically? Well, they are still if we look at Europe, they are still on high levels here. But I mean depending on how things are developing here in the beginning of Q3, we still have to see. Yes. All right. Thank you. Your next question comes from Rasmus Engeberg from Handelsbanken. Yes. Hi. Good morning. Can hear me? Yes. 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 Q1, either people are choosing significantly cheaper products within each segment? Well, you could say, Rasmus, that I mean, if we look at watering, I mean, that one has not contributed. And as you know, I mean, that was weak in Q1. It was a very weak Q2, but it has not been contributing in the Q2 based on the weather that started I mean 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. So here you could say it is more or less plus minus 0. Robotics have given a positive contribution, but 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 behinds that attract a lower margin margin than the rest of the products here. Okay. So people are sort of mixing down from riders to walk behind rather than buying cheaper products within each segment. Is that how things are playing out at the moment or Could you repeat that one, Les? 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 that is in essence. I mean, we see I mean, in general, you have a business time about there that is, of course, putting pressure on it. So I would rather see that this is the explanation than any trend here. Okay. And back to that, I mean, Europe, when did you see significant when did you start to see any sort of real cyclical impact in Europe during last year? Or is that difficult to out? Maybe this is a question for Hans to support you. Can you repeat the question once again? Yes. I was just wondering last year, I seem to recall that Northern Europe turned quite bad sometime during the Q3 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. But we can see some improvements actually in Germany when it comes to the improvement when it comes to financial situation. We can see that especially in the dealer channel in Germany. But when it comes to the southern part, it will remain. It will remain. And 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. And that has been quite bad this year, I presume? Yes. And to my experience, it will continue for the rest of the year, especially when it comes to France. Okay. And then I have 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, that 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. But I think we need to do a bit of homework here on the operating margin side, short term, medium term. That's the priority. I mean, that comes before growth at the moment. Okay. Thank you. Your next question comes from Johan Dahl from Penfares Bank. Please ask a question. Hi there. 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? And also if you could possibly add some information with regards to inventory levers 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 When it comes to the retail channel here, especially in Europe, we see now a sign that actually they have some financial problems here. We have seen now Praktica in Germany. We even see here in Nordic here when it comes to Carrot that they have actually closed down some of the stores here. So 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 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. But 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 the activity TVs 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. And the focus we have on the Husqvarna brand, both in Europe as well as in Asia Pacific and Americas. Is that to say that we will 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 price increases even backwards here even in the quarter 2 here and the half year. We have price increases here both in North America as well as in Europe. That depends as we said in the Capital Market Day here, if we go with this in a little bit different way, that depends on the product categories here and the different channels here. Then of course, it's much tougher in the retail channel as when it comes to price increases than we have seen in the dealer channel here. But you see exactly the trend as we said at the Capital Markets Day when it comes to price situation. 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 Q2? 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. But that's still to be seen when facts are on the table. But the minus 3 should be read also of course in the light of that we are not as eager to take a low profitability jobs and orders. So there are examples where we have walked away from actual opportunities at opening price points, etcetera. So 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 again, we prioritized the profitability ahead of the volume. Thank you. Your next question comes from Johan Eliason from Kepler. Please ask your question. Yes. 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? And then 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 the dealer business here, we will not comment how many new dealers we have net. We normally don't do that here. We usually don'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. Norman don't comment that. I think you previously commented on the Dyna channel that you've seen sort of double digit growth in the Northern North. Yes. When it comes to that part, in that magnitude, yes, I can 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 Christian Magna Gold from DNB. Please ask your question. Good morning. Firstly, two questions. If you can talk about the trends in demand in the second quarter in Europe. How much was how much demand fell in April and how much it was up in June basically? So I just want to get an understanding for how strong June was. And secondly, if you can talk more about the positive contribution we can expect from chainsaw factory when that is up and running, if you have any more thoughts on that now? Okay. Let's see. I start and I will see if some other colleagues here fill in. The demand trend in Europe, it's we are not that eager to be detailed in response to that much more than what we have written, which you have seen and heard about this slow start and then the pickup in May June ending on the same result as previous year. So obviously, we had a satisfactory May, respectively, June. As to the other question of the chains for the chain source and the impact of that, that's early as 2015. And I think more reasonably in any quantities, we are probably yet another year later. We have to remember there are many, many versions of chains here to be produced and quality will always need to be prioritized. And this is a completely new category for us to produce with a lot of traps in metallurgical and quantity aspects to be overpassing. So I think we should be reasonable in the expectation and see 15 as the start and then more realistically in any significance 2016. And you've earlier also talked about that you might source lawn mover engines from elsewhere from then Honda and Kawasaki and Briggs and 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 eyes? Let Franz comment this one. I think there's no change when it comes to engines for a ride on and walk behind product. We will continue to work with Bricks, with Honda, Kawasaki and all these guys here and Kola as before. There's no change when it comes to that strategy at all. Okay. The last time actually Chinese suppliers as well. Okay. Then just finally, your sister company Electrolux, they reported time. I mean, it's a different kind of time. I mean, it's a different kind of products, of course, but it's still in the retail channel. It's still in the consumer that buys the products. It's still consumer durables. So why are they in that segment able to raise prices so much and you and your segments have had so many challenges over the last 2 years? I'd like to hear your thoughts on that. I guess Hans has to give a price to this. 1st of all, it's 2 different businesses here. I can say that these are coming from the both businesses here. And so I will not comment Electrolux more than that. It's not our sister company here. But all businesses are complete different here. The only 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 we have new house development in North America here. We might come later on into that season here. And we focus more and more on the dealer channel here. So when it comes to Electrolux and White Rose business, they are more into retail channel here than we are in this business here. So 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. But I can't compare these 2 business here at all, yes, completely different here. Here. And learning here after 6 years in those two businesses. Okay. Well, thanks, anyway. Thanks. Your next question comes from Arceloris Truss from UBS. Please ask your question. Hi, good morning. I was just wondering about the cash flow and the dividend. I mean, what are your thoughts at this stage of the year given the slightly lower profits? And I mean, did you kind of are you revising down the CapEx with the kind of in mind to protect last guidance, that is due to the lower activities and then it is to carry over to 2014 for investments in the new chain manufacturing facility. Okay. So for the dividend, we should expect something flat year on year then? Well, dividend I don't comment because that is subject to a Board decision. And then as you know, it is something that is managed by the Annual General Meeting. Okay. Thank you. There are no further questions at this time. Please continue. Okay. Thank you very much for your attendance. We appreciate that and looking forward to meet you maybe physically after the quarter 3. Thank you. Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may now disconnect.