Earnings Call: Q1 2013

Apr 24, 2013

Good morning, everyone, and welcome to Husqvarna's First Quarter Results Presentation 2013. The presentation will be conducted by our President and CEO, Mr. Hans Lina Schon and our CFO, Mr. Ulf Liljedahl. So with that, please go ahead Hans. Tobias, and once again welcome and good morning. And to focus on the Q1 here. And to summarize the Q1 here, I want to start with that. When it comes to Europe, it's very easy. Cold weather, the macro situation as well as currency, very negative. 3 bullet points, which have a heavy impact of the European business here. So I started up with a negative part here. Then two positive areas. Americas, especially U. S, actually where we see a huge improvement, We see that the EBIT margin are up and the margin are up. Thanks to that we are focused a lot when it comes to get America up again here. I'll come back to another picture later on when it comes to Americas here. As well as for construction, continuing recovery, high EBIT and margin for construction, thanks to a lot of investments in new products. And then as you know, in I think it was the first week in March or maybe before Easter, it was announced that Kaiv Hern will take over as the CEO and President of the company here from 1st July. That means that I need to stand up here and defend even half year report here. Then I will support and then leave the company here, retire beginning of 2014. So a tough start here. And just on the article here when I saw this graph here, change to the headline channel European weather conditions here. And if you take London, Berlin and Paris, that covers the main and center of Europe. And the average temperature, March this year vis a vis last year. Why is this so important? You see that if you see this cold weather especially in March have had a heavy effect on us in the garden area. The grass can't start to grow. The temperature has to be in the ground plus 6 degrees. Otherwise nothing happens. A lot of people have said to me, yes, don't complain Hans. The sunshine is up to 15, 20 degrees here in the afternoons in Central Europe or in U. K. But the most important for us is that actually that every temperature, you know, the nights has to be above 0 degrees. That's key for us here. Been very cold, it will be nice here. You take London U. K. Is a very important garden haven't had any sell out here that have stopped, of course, our sell in during March. If you look upon the financial highlights and over to that here, the sales declined 4%. Sales developed actually really good in American Construction and a huge downturn in Europe, Asia Pacific mainly Europe. Of course, low EBIT margin due to lower sales and then the currency effect for us as well. The Swedish krona vis a vis both the euro as well as the U. S. Dollar. And of course, we have we're forced to take some action to slow down the production due to the drop in sales here especially for the European market here. So lower factory utilization here due to that. What's positive is that we continue to focus on cash flow as well here. So not only to recover in U. S. High focus on cash flow. That's mainly due to low inventory and receivables. Inventories, of course, due to that we stopped to produce in Europe, a little bit higher in Americas. Then over to Europe, Asia Pacific here. As I said, the downtime was more in EuropeAsia Pacific, 7% down. Late spring and then we see especially the drop in sales was in the retailer channel here, especially in March. And then of course, we have seen effect of the economic situation. It continue even this year. When it comes to retail channel, why are the retail channel in Europe down more than the dealer channel? Due to that in the beginning of the year, we sell a lot of watering products into the retailer channel. The main channel for watering product is retailer less in dealer. And then of course the main market is in Central Europe and back to the cold weather. So they have more or less stopped all deliveries when it comes to watering products. Lower EBIT due to sales of course and half of the decline in EBIT relates to currency effects. And then of course, utilization in the factories, lower factory utilization and then product as well as little bit channel mix here as well have affected the result in Europe here. When it comes to product mix, we have seen here our robotic movers continue in Europe to sell very good even this year, less weather effective than the rest of our products. Don't ask me why, but it's just a factor we have seen here. But of course, product mix relates to watering products with very high margin have affected Europe, especially in the last part of the quarter. Over to the Americas, down 2% in sales. Americas, especially U. S. Started up extremely well in January February, even if we need to be aware that last year U. S. Was a high quarter when it comes to demand in the marketplace. Then in March, the sales dropped there as well here. Even in the mid part of U. S, it was extreme cold weather suddenly. It was even snowing down in South Carolina and as well as North Carolina. Higher sales in Canada and Latin America. And we continue to grow and focus on the dealer channel visavis retailer channel, yes. So we continue to focus and have effect of that of course. EBIT and margin improved a lot. We said that we want now to increase the prices for this year. We have done that and you've seen even if you have done that, the volume drop is not related to that. So it was possible to increase the prices more than we thought here in America, especially in U. S. Then our 3 main factories in the company is located in U. S. And we have seen this effect and the focus we've had in the factories giving us good results here. So all these factories are up and running very efficiently. And now we start to focus in Orangeburg to reduce the power cost as well here. It was less priority last year, but it's a high priority this year. As I said, the channel mix as well here have given us this good result in Americas. So I'm rather pleased to see the development in Americas and that all these focus and effects are giving us good results. Here you see a graph. I'm going up over to another slide here now where we see the EBIT margin the last 6 years. We are back to 2010, 3.3%. And I can't really see why this journey should continue to come back where we should be here, 2.8 figures here above 5% EBIT margin. So there's no reason to see that that shouldn't continue this very good development in Americas and then coming back especially in U. S. So here we are very pleased to see this curve. Over to construction, sales more or less unchanged. Very big mix, probably flat in North America and down in Europe, mainly in southern part of Europe and up in the rest of the world. And continued recovery when it comes to EBIT and margin in construction. We have seen a positive mix. We have seen the effect as I said in the beginning of all these new products. We even see in here a main market in Europe France have started to recover. We've seen actually in the quarter that France is coming back again here from a very low demand in construction business here last year. So then over to Ulf here to take us through the figures. Good morning, everyone. And as Hans have elaborated on the sales, I thought we dive into the gross profit and gross profit margin immediately. As you have seen, if we take the quarter 1 2013 versus quarter 1 2012, there is a dive in terms of 1.5 percentage points down. And to make it simplify, you could say it actually relates to 3 components. FX, of course, has an impact from a transaction perspective. I would account some 0.7 percentage points of the 1.5% related to FX. When it comes to under absorption due to the lower volumes, very much related to Europe, of course. As you heard from Hans here, I would attribute some 1 percentage point to that. Then what is positive here is that we can see the impact of the price increases. We have some tailwind from the material, not only based on a macro perspective, but also the initiatives that you heard us talking about at the Cat Market Day latest here. Together with some of the savings initiatives taken and announced already last year, we see that this is possible to offset definitely the mix negative mix impact that we have both from a product perspective, mainly Europe and Watering, as you heard from Hans here. We started last year, as you know, Watering was quite good in the Q1. It has definitely not started the same in 2013. So there we have a negative mix. And we have, of course, a heavy regional mix based on that the dive in volumes in Europe is or EMEA is much more significant than what we have in U. S. So in essence, you can say we have the FX of some $700,000,000 We have the under absorption of 1,000,000 percent and then we have an offset based on positive price material and savings taking care of the negative mix portion here. Moving then we go back then to the P and L again and moving down to the SG and A. We can see that adjusting for translation effects, we have an improvement here as well. Some of course related to the lower volumes, but also here I think we may declare that do see savings kicking in now from the restructuring as well as from other measures taken. Still, of course, not able to fully match the downturn in sales, meaning the ratios are, let's say, not following in full here, but still a pretty good development going forward here. Further down, EBIT then ending up on EUR 688,000,000 versus EUR 930 1,000,000 last year, a decrease of some EUR 240 plus 1,000,000 resulting in an EBIT margin of 7.6% versus 9.5 percent. Impacted, as we have said, of currency, some EUR 135,000,000 year on year, representing quite a significant part, lower sales volume and utilization. But then we do have some offsets when it comes to price, material and the savings from the restructuring program. I would allocate some SEK 25,000,000 of the SEK 160,000,000 that we had promised for 2013, some SEK 25,000,000 we have identified in the Q1, meaning that a lot of the program that we have identified is, of course, back end heavy of 2013 as we have disclosed previously. Finance net improved minus EUR 86,000,000 versus some minus EUR 134,000,000 Main reason decrease in lower interest rates or lower interest rates, but also a lower net debt versus last year. Tax for the quarter ending up on 22%, some 135% versus 163% last year and a 20% in tax rate last year. Then we move over to the balance sheet and some of the highlights there. Of course, we see inventories are down or below last year SEK 8,300,000,000 versus SEK 8,500,000,000 However, adjusting them for translation effects, we are roughly flat year over year. Trade receivables though are down and that we are quite proud of. Yes, some related the volumes of course, but also that we have some good momentum in the initiatives taken here. So in essence, we do see an improvement in the working capital and I come back soon to that in the cash flow statement. Also a lot has happened related to the IAS 19, and we have some information here. I will not go in-depth with the effects. You can see that quite comprehensively in the report and there is also more to be seen on the web page. Major difference is, of course, that the net debt has been affected with some SEK 1,400,000,000 in terms of both the revised IAS 19, but also that we have moved some of the debt, previous pension liabilities from an operational liability up to a financial liability. All in all, some SEK 1,400,000,000. And again, I refer to there is more to be seen on the web page as well as in the report. Liabilities, in essence then, the net debt amounted to some SEK 10,100,000,000 at the end of the Q1 compared with some SEK 10,700,000,000 1 year ago. If we then look at the operating cash flow, you can see this is a curve that we have normally shown to you. And you can see now comparing them with 11 as well as with 12, we can see that we are and that is better versus last year that we were trailing on some negative SEK 2,400,000,000. And of course, the majority is related to that we have a lower buildup in operating working capital. Inventory, to a less extent, a lot related to accounts receivable. Some improvement of some SEK 650 plus million, which I think is a good indication that although volumes have gone down, we have been able to balance some of it and there are also the additional initiatives taken that actually are shown in the cash flow generation here. Net debt versus equity, you can see the ratio is 0.9% after the Q1 compared to 0.95% last year. And again, here the reference is also to that we have now the revised figures. So this includes the effect of the IAS 2019. Should we exclude those net pension liabilities, we would have had comparable numbers being end of the Q1, 0.78 versus last year, 0.8. Some key figures. And here, as you know, normally I don't go through all of them. Worthwhile mentioning is the higher pace of the CapEx. You can see that we are on EUR 203,000,000 after Q1 versus last year some EUR 164,000,000. Average employees, as you can see, go down quite heavily here. And major effects here is, of course, the manning reduction that we announced. We also see improved efficiency. You heard from the CAP Market Day the importance of now being more able to run the factories in a flexible manner. We can see some result of that. And we are also changing some of the temporary employees we have had before working more with hired employees, which is also the benefit of being more flexible. That said, we don't have the full flexibility we want to achieve yet, but at least we see momentum in the right direction here, lots coming of course from U. S. Not least. Then some guidance. CapEx for 2013 with reference to last guidance, I said we should end up in SEK 13 with some SEK 1,700,000,000 in CapEx. Based on the lower activities, we adjust this one now down to some SEK 1,400,000,000. Still as you know a quite significant part of that is coming from the previously announced facility for manufacturing of chains as well as the expanded capacity for manufacturing of cylinders. That still is some €400,000,000 of that EUR 1,400,000,000 in total. So downward adjustment from EUR 1,700,000,000 to EUR 1,400,000,000. When it comes to depreciation and amortization for SEK 13,000,000,000, it will be in the range of SEK 1,000,000,000 to SEK 1,100,000,000. Then we have the tax guidance. And as you recall from the Q4, I said I was not prepared to give you any guidance for this year. I will now give you a range saying that it is between 20% to 24% calculated on the income after financial items here. And here you can also see that this mirrors some of the still I would say the interpretation of the proposed regulations are still somewhat uncertain. But the range given now should be seen somewhere between 20% to 24%. Recalling that Q1 ended up in 21 sorry, 22%. We believe the range is applicable. FX, yes, major impact Q1. And of course, the krona has when we look at till end of March strengthened further ending up in the EUR 135,000,000 in the Q1 year over year. I said last time €200,000,000 on an annual basis year over year. This I will upper now to some negative EUR 300,000,000 compared with 2012. So there is an upper adjustment of the FX impact for the whole year of 2013, EUR 300,000,000 negative year over year. And with that, I hand over to you Hans for the summary. Thank you. And short summary before we open up for questions here. As I said here, huge downturn both in terms of sales and EBIT margins when it comes to Europe. When it comes to Asia Pacific, I want to mention that we have seen good development in China in that region here, very good and positive development here both when it comes to top line as well as margin improvement in China. Then when it comes to Americas, as I said, especially U. S, a good improvement. Hard work has given us the results. And both when it comes to EBIT and margin improvements, So we've seen a good development there. And we continue to focus on the dealer channel. Of course, that doesn't mean that we will not look into the retailer channel, but there is more focus nowadays in the dealer channel. In the past, it was the opposite. Very good to see that construction continue to develop high EBIT margin and very good mix when it comes to margin on the product as well here. Thanks to hard work during the years here to look and focus on new product development. Improved cash flow. We continue to focus on cash flow. That's key for us to improve the cash flow in the company here. And of course, when it comes to the manufacturing part here, we need to adapt to the sales here and act that have given us a good improvement when it comes to inventory levels in Europe. On the other hand, negative when it comes to absorption in our factories here. Then the non STOF reduction program is on track, but the full effect come the 2nd part of the year here, but actually are running as planned a little bit better than planned. And then give you a little bit short outlook for the quarter, which has started up here. When it comes to how April started up, a little bit the same path as we've seen in March. All of us are living here mainly in Europe. We know the weather haven't improved a lot. What you see now of course it starts to take off. But there of course always sale in is delayed due to our customers need to start that sell out. But we see now an improvement in sell out. So now actually we can see hopefully here coming in late and beginning of May that the sales takes off here. But of course, a lot weather related when it comes to this year. And then once again, Kai Van will start it up and he starts 1st July here. So that means that we see each other even after half year reports here. And then Kai, of course, will join us as well here. You have already started up here. Then you have possibilities asking questions as well here later on. With that, we start up for questions. And we would like to start with questions from the floor here in Stockholm. Anders Rapp, SEB Equities. I have 3 short questions. Just one about sort of about 10% fewer people employed in the quarter as a year ago, where those really were in terms of geography and function? Second question is on the weak sell in of the watering products. Is there any reason to believe that the weak start or the weak sell in will have any kind of ramification on the sales level going forward in this year? And thirdly, about being a bit more aggressive on raising prices, have that led to any type of market share losses? Okay. When it comes to people reduction here, it's mainly in U. S. In the orange port factory. As you know, we focus a lot to be able to deliver last year, started up here in quarter 4, 2011 here. So it's mainly related to our big facts in U. S, but it's a little bit all over the places here, but mainly in U. S. And Orangeburg here. When it comes to the watering business here, of course, will that take off and we are able to recover? Yes, I hope when it comes to that for extremely hot May June, dry and hot for at least 4 weeks even 5 weeks. That will have a huge effect on the result bottom line due to the high margin we have that, especially in the Central German speaking countries here that we have our main markets here. Price increase, yes, we have done price increases here. Of course, when you increase prices, especially what we have done in U. S, you are a little bit we will lose market share with the volume be affected here? You've always done that calculation here. But I have to say when it comes to U. S, we haven't seen that. No reactions here when it comes to that we should have lost market share at all here. So what we see here market share is already stable. In some ways we even have been able to increase market share. As we said during the Capital Market Day here, we will focus on selective growth here. So that means that we will even step out of some areas here. There of course in some subcategories we will lose market share, but that's we who decide that we do that here to focus on other areas. But I'm surprised to see that still we were able to increase the prices a little bit more than we thought. That's good looking into 2014 as well. May I just actually follow-up also? You actually mentioned China doing well growing sales etcetera. How big is China for you? China, of course, is a big company. It's a very small market for us. But we see the market is going more than we thought when we dig into that here. So when it comes to the chainsaw, for example, we have underestimated the size of the market in China. So we see that as huge possibilities for us here. So we've seen a good development in that area. But they are of course, inclusive small market. Karl Johan Bohn, GRS Securities. What's your take on, say, the inventory levels at the consumer at your consumer level out in Europe for the moment? Is it normal for this part of the cycle? Or are we at lower levels for the moment? Within the trade, especially when it comes to the retail channel is higher than normal, much higher in the retail. Normal in the dealer channel, but of course due to the weather it's very high. And that of course goes back to that we have a lot good sell in in the beginning of the year and more or less stopped in March. And when you look at the dealer channel in the U. S, as you point out, that's one of the strong points. Do you see growth both on the number of dealers and the sell in amount to each dealer still? Yes. We will of course continue to develop the deal channel. But there we know maybe we have less new dealers here. We need to be focused on the good ones here, selective growth even in the dealer channel here. But we will see that the number of dealers will grow and we see even the development will when it comes to sales within these different product categories will increase as well in the digital channel here. We are prepared with both the new products here. And actually there was lowmower here on the Americas here, we are the first one now to introduce a 4 wheel all wheel drive lowmower and that's mainly for the American market. So a lot of new products to boost for the sales in the dealer channels here. So we are prepared for that product wise. And one final question. Looking at seasonally obviously your balance sheet is the weakest at the end of Q1. And looking at what happened now with the pensions, is there any risk that you fall outside your financial covenants? Do you see any scenario where say that might be a risk for new issue? No. What we have done, I mean, we say like this. The covenants and the IAS revision is taken care of from a covenants perspective. So I don't see any risk from that perspective. Yes. Hi, this is Johan and Trevor. Just one question about this CapEx cut. So you previously said SEK 1,400,000,000 now €1,000,000,000 roughly. What impacted you in this quarter seems to be weather and currencies. And how does that where are you cutting your CapEx on the back of that? Well, based on the initiatives we put up was based on, of course, a different Q1 development. So starting with replacement assets are less. And also we do hold back and being in more, let's say, reprioritize some of our projects. And that goes all across the line here. But very much it's related to our manufacturing entities for sure based on the lower volumes. For this year already. For this year. Okay. Hi. This is Rasmus Engberg with Handelsbanken. I wanted to ask you, you had €25,000,000 in savings in this quarter. I just wanted to know how much was in the Americas and how much was in Europe, if you can give us a I would say that it is split pretty evenly from this perspective. And as you understand, it is still low figures. And I mean those we gradually are expecting to grow. And as Hans mentioned and as I said, it is back end heavy. So more is supposed to come here from the European perspective going forward in Q2, Q3 and Q4. And on the back of that, can you walk us through the earnings improvement in North America? There is €65,000,000 of EBIT improvement of which €8,000,000 is FX. And then you say on positive price and positive mix, doesn't seem to add up unless these are very, very small figures. Well, you have no, I mean, still small figures, but we still see a significant improvement year over year. And I would say you have 3 components. We drive the mix, we drive the price and then of course we have better utilization efficiency wise. That said, we still have more to do. But if you look at year over year, we see improvements in all three areas, which is what we have declared in previous statements here. I mean more like if I take 1% price that then there's nothing left to explain. So the price increase would have to be smaller than 1%, is that correct? Well, I don't give you exactly what is what. And we have said the blend or giving out the blend of prices. We say in some areas, we raise prices. In some areas, we are not raising prices. And that is the differentiation that we now are driving much harder than what we have done in the past year. I'm not missing something negative on that. Yes. You had the volume of course. Okay. Thanks. Bjorn, Nachsandra of the Bank. A couple of questions. On production cost in the U. S. Then mainly, how do you see those developing? Are they continue to come down going through 2013? Or are we at a quite good level right now, so we should expect the same kind of efficiency also in the next couple of quarters? So I'm You can take. Well, with I mean we have continuous improvements here. So I mean what I think was shown here by the chart is that we have seen the turn in the first quarter and the expectation is that this shall of course continue because otherwise at the end of the day if we are going to reach what we have declared previously the 5% 2 to 4 years from now, I mean then we have to continue that journey. Then no doubt there are volume piece as well. But I think we proved with the downturn in volumes, we are still able to offset what we came out from last year. And as you recall from last year, we did not we were not able to push the price or work as hard as we wanted from a cost perspective. That I think we have been much, much better in 2013. And that journey will continue. And your target of at least 5% is that predominantly based on production cost? Or is it mix or say I guess mix definitely, but also a volume component in that estimate? Well, of course, tailwind from volume is important. But as I said here, based on this, we will be tougher on price. We can also see that we will sacrifice some volumes. And then that needs to be offset by both being better in how we purchase and how we drive cost in our product as well as how we drive the mix from retail over more dealer as well as within the retail channel per se. A comment here to the efficiency in U. S. Here. We've seen with all this focus here that we will continue. And we also seen actually the motivation coming back among the people in U. S. Here even in the whole Husqvarna group here. So all these positive signals that all these hard work have given us results, give of course a lot of opportunity to continue to work with this hard work to reduce product costs and efficiency, not only in the factories, it's also in all places in admin as well, in the sales organization as well. So we are focused to look at productivity improvements also than all which we are focused on in factories. So there's a lot of spin off effects of this debacle we had in U. S. Which is very positive for the entire group. And you also said that watering was quite a good market last year and you I also recall that the U. S. Market was quite good also last year to say the least. You had a significant growth. Looking into Q2, I recall that the European market was quite weak due to an unfavorable weather situation. Is that what you see? Or are there any markets last year that were or in the product segments that hold up that we should expect tougher comps than what my expectations are please. If we go back to last year, product segments who hold up very good last year was the robotic movers here. And we don't see any indication that should actually slow down for this year at all here. And that's a little bit surprising for me that this product doesn't seem to be very related here. But we can't really see that there are any areas where we can see a drop vis a vis last year when it comes to products here. Then of course coming back watering is important for us especially let's say in the month of March April May June. And then the watering season is over. So a short season when it comes to watering product and very important for us. And that segment was quite weak in Q2 last year? Yes. Correct. And the start of Q3 as well. Yes. Thank you. So operator, we can have questions from the telephone audience, please. Thank you. Your first question comes from Johan Dahl from Pemstra Bank. Please ask your question. Yes. Hi there. Johan Dahl here at Pemster Bank. I had a question on pricing. You clearly elaborated on the price performance in the U. S. Where you seem to have been successful and also at least defended market shares. And you're also clear on your ambitions in the U. In 2014. But you talked on the capital markets about European pricing. And clearly, given the FX effects here, there's a clear need to raise prices. Could you talk a little bit about what you're doing there and why you have been unsuccessful at least to my judgment in the Q1 in raising prices? Yes, you're correct. When it comes to the price increase here, we have been able to do that more in used than in Europe here. And what we see here in Europe, we need to harmonize the prices here within the European marketplace here more than focus on country by country here. So of course, we have not been able to increase the prices in Europe for this year as we have done in U. S. Here and a little lower level than in previous years as well here. And of course, all this new media open up that our customers can measure our prices more than they ever have done here and look upon this year. So it's more complex in Europe today here to have selective price increases here than we've had in the past. So that will be more harmonizing price within the different product categories over the time here going forward. So of course, more tricky in Europe than in U. S. For us. But is it I mean, but it's a bit of a strange situation when you raise prices in the U. S. And still you seem to gain market share. If you look on Europe, what's your appreciation of market shares and listings in the Q1 and 2013 in Europe? When it comes to listings here then we need to go back to the 3rd Q4 last year when we do all these activities with customers here when that is selected which supplies they will have here. Then we have seen here what I have seen here with the new products we have the listings have been very, very good for this year here both over and coming from preorders and comes from dealers here due to all these new products and how we are working within the companies and the focus areas we have here. So that part is still remaining here, the good listings here for Europe. And then of course, we also discussed this price increase here. So we have done price increases even Europe, but it's more selective within different product categories. Under different brands as well within different countries as well here. It sounds a bit like you're are you unhappy with the performance on prices in Europe? No. When it comes to the market condition, actually the competition we have here and how they act, of course, we need to, of course, be in balance with what main competitors are doing when it comes to price increase and campaigns and other discussions here. I have to say, I'd be pleased when it comes to this here. And what we have done here, we reduced our payment terms here. That's another way how to increase prices here go from 90 days down to 60 or 60 days to 30 days. We worked hard with that part as well. So that's of course a kind of indirect price increases as well here. So that compensate a little bit that we haven't been so successful in direct price increase in Europe as we have done in the past. Okay. Final detail. Would you be able to say give any numbers with regards to the under absorption effects in Husqvarna in the Q1 compared to a sort of normal situation? No. Well, Johan, I gave you in the bridge, I don't know if you heard that, but in the gross profit margin bridge, I gave you that 1 percentage point I would allocate if you look year over year that is due to the under absorption in factories all across here. Of course, a lot related to what is happening in Europe for sure. Great. Thanks. Thank you. Your next question comes from Christian Magmouchard from DNB. Please ask your question. Yeah. Hi, it's Christian Brinegott from DNB. A follow-up on that question on the under absorption effect. You also said that April has started slow in Europe and that retailers have quite high inventories. Does that mean that you will have more production cuts also in the beginning of Q2 in Europe? Do you think that will affect earnings as well? For time being, we haven't said that we will further slow down the production level here, but we follow that every week. Every Friday, we go through what the week have been and how we look upon the next week. So every Friday we follow-up which action we need to take. But so far no planned actions to reduce production. And secondly, the new currency guidance FX guidance on 13, is that based on the currency the FX rates we saw by the end of March? Or is it today since we have had a quite depreciation of the Swedish krona? No. I have to Chris, I have to take the stance here by end of March. That is a valid observation. So it's end of March. I have not taken into consideration the slight, let's say, changes we have seen beginning of April here. Great. Thank you. Thank you. Your next question comes from Aaron Ibbitson from Goldman Sachs. Please ask your question. Yes. Hi there. Good morning and good luck on your new ventures. I've got three questions. I guess 2 of them have partly been answered. But firstly, if I look at free cash flow generation over the last 3 years, you have spent 100% of that on dividends. So I was just asking in light of your sort of expected ramp up in CapEx, if your creditors are at all asking you to maybe consider reducing your dividend? And also if that has influenced your decision to sort of slow down the ramp up? Secondly, just on this underproduction or under absorption for the Q2. I hear what you say that you're looking at numbers every Friday, but I was just looking at the inventory days, which at least according to my calculation hit an all time high and FX adjusted probably even higher of over 100 days. So I was just thinking if you were going to try to work more aggressively bringing that down. And finally, just a follow-up on the FX guidance. Again, I am a little bit confused just as the previous question here. The dollars Swedish dollar crosses flat since if you do year end quarter end to quarter end. But in all other instances, it's weak And the euro Swedish cross, which I assume you're exposed to as well implicitly by eurodollar cross. As if you take quarter end to quarter end, the krona has strengthened a little bit, but not much in all from now versus when you reported or now versus year end, it's clearly weakened. So should we basically ignore that guidance if we assume FX flat from here? Or what is driving this increased expectations of FX headwinds? Thank you. I can start with a little bit with inventory levels here. Coming back to what we do here to explain it more, we look upon this year. Every Friday we look upon the order income and the order stock here. And then of course we look upon the inventory situation we have and try to estimate a little bit even in the trade here. And then we base the production capacity out of that. So of course we have a lot of different parameters which we need to look into as well. Our ambition is to lower the inventories. No question about that. If we then take your first question regarding the decision to down guide the CapEx, I mean that has no bearing on how much we shall pay in dividend. And as you know and I think I said that last time this is a Board decision and it's subject to an AGM. And I mean that is some time still left for that. So the rationale for guiding down the CapEx is purely related from an operational perspective and based on what we have seen in the first quarter. FX guidance, well, I don't know how you look upon it. But I mean, if we take year over year, there is definitely, I mean, further downward trend if we take March 12 versus March 13. And I refer primarily to the Eurosek development. And then as said, when it comes to the guidance of the EUR 300,000,000 that is to be seen standing end of March this year. So yes, you have to make your judgments based on what the impact can be based on the slight changes we have seen in April. So what we should compare is December end to March end and that sort of 3% move causes an extra €100,000,000 of headwind. And the sort of 3%, 4% move in the other direction since then presumably then should if we assume that it remains around €860,000,000 you should actually have then €50,000,000 benefit versus previous guidance? I mean is that how sensitive you are? So 3% move in euro SEK on 9 months gives you a SEK 100,000,000 swing? It sounds very sensitive versus my model. Well, you can more of the sensitivity if you look in the annual report. Then it is, of course, the bearing I have on the hedge contracts that I cannot tell in detail what they are related to. But you have to take the guidance based on what has happened since end of December until end of March. And from what is happening from March until today, that is some judgment you have to make on the sensitivity. Okay. And just to clarify on the first question. My questions was primarily related to creditors have suggested to you or somebody else that you should consider lowering your dividends? There has been no such discussions, no. Okay. Thank you. Thank you. Your next question comes from Johan Dahl from Panjerg Bank. Please ask your question. Yes. Hi, could you give any details with regards to the quarterly split of those remaining minus €150,000,000 or so on the FX? I mean, it clearly had an impact on the Q1. It would help us a bit I think. Sorry, could you repeat that one? Yes. Just the quarterly effect of the FX, I mean, it had an impact clearly here in the Q1. We know your product flows are different from each and every quarter. But is Q2 expected to be positive and the remaining negative effects in the second half forwards? No, no. You will have significant negative effects in the second quarter as well. That's great. I mean that is the trend. Okay. Thanks. Thank you. Our next question comes from Veronika Ek from Reuters. Please ask your question. Veronika, your line is now open. We appear to have no further questions. Okay. We there seems to be no more questions. So with that, we would like to wrap up and welcome you all back on July 19 when we report second quarter results.