Earnings Call: Q4 2012

Feb 13, 2013

Good morning, everyone, and welcome to Husqvarna's 4th quarter results presentation. We will follow the usual procedure over here. Mr. Hans Lina Schon, our President and CEO, will take us through operations in the quarter. And then Mr. Ulf Lille Gedal, our Chief Financial Officer, will provide us with some more details on the financials. So please go ahead, Anders. Thank you, Tobias. Once again, welcome to all of you here. And I want to start with a brief sum up for the full year. It was off to a good start. EuropeAsia Pacific had a good trend early in the year with fairly good sell in for the coming season. As the year progressed, headwind for macro as well as unfavorable weather become more and more apparent. Demand in Europe weakened gradually in the beginning of the year. Weakness was mainly related to Southern Europe. But towards the end, we felt a significantly lower demand also in the center and Northern Europe. Also Americas was off to a very good start. Spring broke early, and we are able to deliver on the strong demand, thanks to a strong recovery and mitigation of the production disturbances we had in 2011. You might remember Orangeburg, the factory down there, which has been up several times. And I come back to that later on. Americas sales for the full year up 7% compared with 2011. The margin did not quite live up to our expectations. But as you know, that is something we have addressed earlier. And then over to Construction, had a good year, driven primarily by positive development in North America. Also for Construction, the macroeconomic challenges in Europe gradually spread from the Southern to Central and Northern Europe, but still constructing it, we delivered a solid full year. A priority area using the year has been to restore the cash flow. And I'm pleased to see the substantial improvements in 2012, which mainly was driven by working capital improvements as well as lower CapEx. A couple of comments on recent announcements. Today, we announced a significant investment in manufacturing of the soul chain and further in sourcing of cylinder manufacturing, which will give us stronger platform to cement our leadership in the chainsaw market. I will come back to this in a few slides here. And in November, as you remember, we announced a staff reduction program to take out cost and increase flexibility. We will have benefits from that only this year. Dividend. The proposal from the Board is that we distribute SEK 1.50 per share as dividend to the shareholders, which is unchanged to 2011. And then over to the 4th quarter. For the group, we are down 8% in sales adjusted for currency, which is primarily driven by a very weak market in Europe. Adding to the weakness, sales were also negatively impacted by product launch delays of the handle products. For the 2 business areas Americas and Construction, sales were a touch lower than previous year. I will come back to that in a few slides. The EBIT for the quarter, of course, impacted by SEK 256,000,000 cost for the staff reduction program, but also significant product and sales channel mix impact related to Europe and Asia Pacific. And then we go over to Slide 3 when it comes to this €1,000,000,000 investment in Core Technologies. As I said this morning, we announced a significant investment in core technologies, which will enable us to further strengthen our position as a world leader in chainsaws. Over the next 3 years, we will invest around SEK 1,000,000,000 in a new factory in the city of Husqvarna or the village outside Johan shipping community to start manufacturing of our own salt chains and expand in sourcing of cylinder manufacturing in 1 of our existing sites in U. S. That's in the Nashville factory in U. S. These components are key for the performance of chainsaw, which, as you know, is one of our core product areas. By gaining control of also the chain, which currently is sourced component, we will leverage our technical expertise to develop, design and manufacture chains. This gives us influence to optimize the full influence of the chainsaw. The first change from the new factory will be reached to the market 2015. The investment will also create an opportunity for us to grow in the aftermarket. The chain represents the largest category in that of the market segment. And then we go over to Slide number 4, cost structure improvements. This is just to remind you of and summarize what we announced during the Q4. We are currently implementing a cost improvement program to reduce fixed costs and further increase our flexibilities. The benefits in 2013 will be savings of SEK 160,000,000 before we get the full annual effect of around SEK 220,000,000 for 20.14. The cost SEK 256,000,000 was charged to the Q4 of 2012. And then over to slide number 5, financial highlights. Here, I will focus on the Q4, which as I said earlier was impacted by a weak macroeconomic environment and demand all over Europe as well a huge impact, especially at the second half of the year when it comes to weather related both in Europe as well as America. For Americas and Construction, the development was stable. Group EBIT for the quarter substantially lower than previous year, mainly impacted by cost for the staff reduction program as well as the downtime in Europe. Then over to Slide 6 and go through EuropeAsia Pacific. As I already said, here is where you have the negative impact in the quarter. Sales decreased 12% adjusted currency effects. Over the quarter, we have seen an increasingly challenging macroeconomic environment. Dealers and retail across Europe have been very conservative, managing inventory tightly and anticipation of a continued soft consumer demand. Previously, it was mainly a weakness in the Southern Europe, but lately the weakness also have been very evident in the Central and the Northern part of Europe. Snowflowers, which mainly are sold the 3rd and 4th quarters, we knew was going to be weak because of remaining trade inventory from previous winter. But the demand also for handrail products such as chainsaws has been weak. Adding to the weakness, our sales were also negatively impacted by deliveries in product launches in the hander product category. The products in question are now shipping in normal manner, but we did miss some selling. Demand has also been weak in Australia, as Australia has season just now here, have been affected by very bad weather down there. And normally, that's the peak in the garden season in the Southern Hemisphere. EBIT, excluding the onetime staff cost reduction cost, the main negative impact is from the lower sales in Europe and product mix and sales channels mix impact, as sales were lower in high margin areas such as chains were sold in the dealer channel. Then we go over to Slide number 7, and that's Americas. Here we had stable development compared with the Q4 previous year. Currency adjusted sales down 3%, mainly related to snowflowers. Small decline also for handheld. Operating losses decreased compared with previous year's 4th quarter. Continued positive development with when it comes to efficiency and improvement in the supply chain. Then over to slide number 8, construction. Also here, a stable development in the 4th quarter. Like we have seen previously in the year, sales were driven by a positive trend in the construction market in North America, then mainly in U. S. But it was not enough to offset the decline in markets outside North America. Demand in Europe was weak, not just the Southern area, but also Middle and Northern Europe. EBIT for the quarter, excluding items affecting comparability, stock reduction costs improved. Negative volume impact was offset by efficiency improvements and also some onetime costs in the Q4 last year that were not repeated this year. With that, I hand over to Ulf Liljedahl here, who will take us through the financial details here. So please, Ulrik. Thank you, and good morning. Let us move to Slide 10, and then actually we will move back to Slide 9. But let us start with the gross margin. And if we look at the gross margin for the quarter, excluding the costs that we took in the Q4 related to staff reductions, we ended up on some 25.2% versus last year 27.8%. However, in order to make a like for like comparison, we shall adjust last year for Orangeburg and some non recurring items and then we are actually above 29% in 2011, I. E, we have a quite significant delta versus current quarter. And as you have heard from Hans, we have had quite a significant mix effect in the quarter that has very much related to the mix effect. Mix effect in terms of very much related to the mix effect. Mix effect in terms of channel mix, meaning that the dealer channel actually declined more than the retail channel. That was valid both for Europe as well as for Americas. We have in the product quite a decline when it comes to professional chainsaws, handheld equipment, both related to macro as well as weather and then we had some delays as mentioned by Hans as well. And then we have, of course, the snow throwers that we sold less of in the Q4 compared with last year. And last but not least, as you have seen, Europe did decline quite significantly in the And there you have the primary explanations to the deterioration of the gross margin in the 4th quarter. If we then go back to Slide 9 again and look at the SG and A. In the quarter, if we take out again the cost for the staff reduction and do similar exercise in 2011 and take, let's say, adjust for currencies as well as some of the nonrecurring items, Orangeburg as an example, we have an improvement in absolute terms of some SEK 50,000,000 in the quarter in terms of lower SG and A. If we look on the full year and make a same adjustment for staff reduction cost as well as nonrecurring items in 2011, we can see that 2012 full year, we actually improved the ratio from 22% 21.3% in 2012. So here we can actually see that we have an underlying momentum that we foresee going forward as well in terms of SG and A in relation to sales. Continuing further down in the P and L, we can then conclude that the EBIT for the Q4, excluding items, ended up on negative EUR362 versus last year EUR 236,000,000 and that gives a negative EBIT margin of some minus 8 0.1%. The total currency effect in the quarter had been SEK 11,000,000 positive year over year. Looking at the financial net, we ended up on minus SEK 139,000,000 versus last year negative €127,000,000 And the reason to the decrease is mainly due to the market to market valuation of the interest rate component in our FX derivatives. Tax ended up if we take the full year ended up on minus 140 6% versus last year minus 140%, and that corresponds to a tax rate for the full year of some 12%. Then I move to the next page and look some on the balance sheet, that means Slide 11. You can see that the inventories are on par with last year. If we then adjust for currencies, we have a slight increase of some SEK0.3 billion mainly related to, as you have heard here, that we did have a much lower demand than foreseen in the Q4. So the build up or the pre build we have here is the main explanation to the higher inventory, and that was not matched by the demand from our customers in the 4th quarter. Continuing on the trade receivables, there we though have seen a quite a significant decrease. And adjusting for exchange rates, the trade receivables are down some $400 plus 1,000,000 versus last year. And the days of sales outstanding for the group are better than last year. We are now ending up on 65 days versus 67 days last year. And if we then take the next slide. As you have heard from Hans, we are quite proud that we have seen a significant improvement when it comes to cash flow. Next slide, Slide 12. We ended up the year with some SEK 1,100,000,000 positive and a significant improvement versus last year close to SEK 500,000,000 negative. Although, of course, the buildup of inventory did take off some of the positive cash flow here in the Q4, it is still a major improvement and a delta of some €1,600,000,000 attributable to, of course, improved earnings and then improved and decreased working capital as well as lower investments. And you may then say that we are, from a cash flow perspective, at least back on track if we compare with prior year. Moving to the next slide, net debt equity. You can see that we ended up with a ratio of 0.59% this quarter versus 0.56% last year. There has been a quite a hefty effect of the exchange rates affecting the equity of some close to 800,000,000 dollars negative that has an impact on the net debt to equity ratio. Continuing with key figures, normally I do not comment all of them. I think one that should be at least mentioned is, as you may see, that the average number of employees in the 4th quarter have decreased with close to 800 people accounted for or defined as full time equivalents. And last year, we, of course, had a lot of related to Orangeburg as an example. If we then move to the guidance that I normally give to you, if we then look into 13 and start with the CapEx, as you have seen earlier today, we announced that the group will invest in a new production facility for manufacturing of saw chains as well as increase investments in order to expand the capacity for manufacturing cylinders. That means that the investments or the CapEx for 2013 will be close to SEK 1,700,000,000 whereof SEK 0.5 billion are related to today's announcement. So SEK 1,700,000,000 is the guidance for 2013. Depreciation and amortizations for SEK 13 will be in the range of SEK 1,000,000,000 to SEK 1,100,000,000. Tax guidance. Here, I will not give you any guidance for 2013, and that is due to the overall uncertainty that we face around the interpretation and development of tax regulations in the countries where we have operations. So I have to come back at a later stage should there be more, let's say, clarify or clarifications on this. There would be no tax guidance for 2013 as a result. And last but not least, foreign exchange as implied during 2020, as you know, we have had a positive development of our hedge contracts. Those will not be the case to the same extent in 2013. So here, we estimate now in 2013 year over year a negative currency effect of some SEK 200,000,000 compared with 2012. And with that, I hand over to Hans. Okay. Thank you. Then Page 15 to summing up the quarter and the year. For the full year, currency adjusted group sales were unchanged. We had a good start both in Europe as well as in North America. But as the year progressed, the European market value weakened. As a result of increasing macroeconomic uncertainty as well unfavorable weather for most of the season. The full year currency adjusted sales declined 6% for EuropeAsia Pacific was offset by 7% increase for Americas. Mitigation of the production disturbances enabled us to capture on the strong demand in U. S, especially in the first half of the year. I'd say very well done here. So we are back on track then. So we have ticked off this Orangeburg situation here. In construction, full year sales up 4%, also driven by a positive development in U. S. EBIT for the full year was down, mainly due to negative mix shift as sales decreased in our high year margin area EuropeAsia Pacific and sales increase in our lower margin area Americas when it comes to forest and garden segment. Substantially higher cash flow for the year, mainly attributable to working capital improvement, as Ulf just comment upon. As I already comment, cost structure improvements have been announced, and I will yield savings and that will yield savings in 2013 and beyond. And we announced a significant investment in saw chain and cylinder manufacturing, which will strengthen our leading position in chainsaws and also create a growth opportunity in the aftermarket for saw chains, a very high margin segment for us. The Board proposed that the annual dividend to the shareholders remain at CHF 1.50 per share. Then the 4th quarter continued macroeconomic uncertainty and soft consumer demand in Europe. Sharp downturn in sales for Europe Asia Pacific. The decrease was mainly in higher margin dealer channel, products such as chainsaws and snow throwers according to the major negative impact on EBIT for this business area. As well as for the whole group in the quarter. In other part of the group, American Construction, the 4th quarter development was stable. To run off this year, the few were looking forward. We expect a positive demand development in North America for Force and Garden Products as well as construction, while Europe is expected to remain challenging through the continued macroeconomic uncertainty. I stop there, and then we open up for questions here. Questions from the audience, please. And your first question comes from the line of Arun Ibbotson from Goldman Sachs. Please go ahead. Yes. Hi there. I'm not sure if this was planned or if you wanted to ask questions from the audience first. But are you ready? Can you hear me? Yes. Perfect. I've got a few questions, if I may. 3, to be precise. Firstly, two questions on cash. So I've noticed that your taxes paid in the cash flow statement EUR 1,900,000,000 versus EUR 1,300,000,000 over the EUR 1,900,000 versus EUR 1,300,000 over the last 3 or so years. So I was just wondering, is this driven by the losses in the U. S? And when do you expect this to sort of change actually over the last 5 years? That was my first question. Secondly, just in light of the sort of increased CapEx guidance, I was wondering if you feel confident that the current dividend will be able to be maintained. As far as I can see, you haven't quite sort of covered your dividend in free cash flow over the last 3 years, and it doesn't sound like you're going to do it over the next couple of years either. So I was just wondering if you were happy to run with the dividend above free cash flow or if you were considering maybe if you think of that maybe reduced. And finally, I was just hoping to get a clarification on your I believe it was November 7 announcement on the remaining savings. I know I asked this in the Q3 and you said you'd get back to us. But I believe there was a EUR 3,000,000,000, EUR 350,000,000 or so outstanding, of which you have now announced that you're going to save EUR 50,000,000 this year. Should we sort of expect the other EUR 250,000,000 to EUR 300,000,000 to EUR 300,000,000 to come in EUR 14, EUR 15,000,000? Or should we sort of see that as water under the bridge? Thank you. Well, if we start with the cash position, I mean, there you have a phasing when you compare the paid out tax as well as the tax that you take over the P and L. But you're right. I mean it has a relationship with U. S. Of course. And I mean when are we let's say back to a normalized situation that is of course very much related to when we have a profitable setup in the U. S. When it comes to the dividend, I mean, that is a Board of Directors decision. So I mean, we don't have more comments to talk about and tell you and confirm from that perspective. I mean, we have the ambition from a management perspective. We have the ambition, of course, to secure a good development from a cash flow perspective. And I think we have proven ourselves during 2012. And I mean, we don't see any reason why we should not be able to generate good cash going forward as well. Remaining savings, I believe we were quite clear that the $50,000,000 that we foresaw to come during 2013 are the ones that we have confirmed now. I mean, the residual will not come through in 2013. So I mean, that was confirmed at the same time as we went out with the restructuring program. But sorry, just to clarify. So I get to around EUR 200,000,000 of cash above the dividend for 2012. And if you're guiding up CapEx to EUR 1,700,000,000 I can't really see how that's going to be positive for EUR 13,000,000. So I mean, are you recommending the dividend to the board? Or is the board deciding dividends without your recommendation? And then my just to clarify the restructuring. Is it then clear that we're not going to see any further savings of 2014 and 2015, so this is the sort of final savings from this move from Sweden to Poland? When it comes to dividends, I mean, we can just confirm. I mean, this is the Board of Directors' decision. And as you know, the governance is that they suggest that to the AGM, and then it's for decision at the AGM. Savings, yes, $50,000,000 is to be seen in 2013 and then we have in addition $14,000,000 $20,000,000 to $30,000,000 and that is what's left from that oil program. Okay. Thank you. Your next question from the phone lines comes from Johan Eliason from Chevreux. Please go ahead. Hi. This is Johan at Chevreux. Two questions. First on the chain source, can you give us some sort of numbers here to understand what's the sales value today of your train turnover or input costs or so? And what sort of growth do you forecast assuming that this will help you improve the aftermarket business for you as well, which I think, if I remember it correctly, it's sort of 10% of your turnover right now. Any numbers sort of to know what you're aiming at would be interesting to know? And then secondly, you don't give a tax guidance. Do you see a risk that you will lose the whole €180,000,000 to €200,000,000 tax benefit that you have currently from your setup in Belgium on the back of the Swedish tax regulations? Or what's the sort of risks we should see there? Thanks. Okay. If I should start with a question related to this investment fund, the chains for the chainsaw here. When it comes to chainsaws under the Husqvarna brand as well as McCulloch brand, that's a high profitable area already today here. And it's roughly onethree or twothree net sales in the group when it comes to chainsaws here. And then we as I said, we were high margin already. Of course, we will strengthen the margin when we have now this under full control and in house. That's the reason why we are doing this. And that's when it comes to the full chainsaw margins as well what I said, the very important aftermarket what we call replacement segment here, where it's very high margin as well, yes. More than so, I will not comment due to I will not give any guidance to our competitors. So you have to be satisfied with that answer. On the tax side, as you rightfully comment, I mean, the interpretation of the proposed regulation is very uncertain. And therefore, I need to come back with further input as soon as we understand more and more clarity has been obtained. I don't see that the full effect or let's say the full amount will be affected here. So I have to come back when more clarity has been obtained. Okay. Thank you. Thank you. Your next question comes from the line of Kenneth Tolya Hansen from Carnegie. Please go ahead. Yes. Hi, it's Kenneth here. A question on this new plant that you're building. I guess that from a global market for chains saw chains that you're adding quite a lot of capacity into that market by building this huge plant, right? And I was thinking that the suppliers that you have had of those chainsaws, how do you think they will react? Do you think that they will close factories in order to take out capacity? Or will do you believe that they will respond in cutting their prices in order to protect their sales to aftermarket and so on. I mean often when you add a lot of capacity to a market, that affects pricing significantly. What are your thoughts on that one? First, the reason why we do this investment in Sweden down in Husqvarna, there we have all this technology and all the labs and all the people who have the expertise when it comes to cutting equipments here. So that's one of the reasons why we do this to have a complete control over the development and production of a chainsaw going forward here. And then when it comes to how the reaction will be from yes, in this market, mainly 2 have 90% of the production of this chainsawcer worldwide. And today, there is not enough capacity. That's the reason why we want a full control of this very important component for chainsaws by ourselves in house here. And of course, we're able to increase our margin here. Will there be some reaction from other supplies when it comes to this. I doubt that, most likely not, but that's something I can't comment which reaction that will be. Of course, we have informed yesterday the CEO of the supplier of the chainsaws here. And we have good relations ship with them, and we'll have that even in the future here. We saw some other components from them as well. Okay. But in the calculations that you have made in order to do this very large investment, you have calculated with some pricing pressure and some tougher competitor behavior in the market, right? No. And I will not comment that even more. Of course, we have done a proper calculation when it comes to this huge investment here. Okay. Very very good payback, of course. Otherwise, the Board should never approve this huge Thank you. Your next question comes from the line of Stefan Siedeburg of SEB. Please go ahead. Thank you. Good morning. Can you quantify the sales decline of the chainsaws in Q4 in 2012? No, I will not comment that it was a minor when it comes to that part. Okay. And what was the reason for the delayed launch of Handel products in Q4? That was I thought was the question here. I will not comment that. It was just more technical problems. And we want to be sure that we always, under Husqvarna brand, deliver the right quality. That's the reason why we go for quality and then maybe take some hits to be a little bit related to new products going forward. That's the new structure of the company. German capital changes all over was due to weather related here. You see there has been a lot of rain in the Northern Europe mainly. Well, you have the season here. All these big harvesting machines have not been able to go out in the forest. Okay. And what's the impact from the beginning of 2013 then? Nothing. We have restored everything when it comes to this year for this delayed when it comes to the change. And I have to mention, this is what all our customers really want to see a professional company to do here. And of course, we inform them so that we appreciate it from them as well that we take our response with delivered new products with good quarter and high performance. Yes. Has there been any production problem in the quarter in Europe overall? No, not at all. Okay. And then on prices, can you make any comment on what kind of listings and the price level in 2013? When it comes to listings and what we call the preorders to the dealer channel are good. When it comes to the list things, it varies from region to region and customer to customers, but all over in line with previous year. When it comes to price increases, I will not go into that. All right. And also on the cost side in 2013, do you see additional cost improvement also outside if you exclude the restructuring? Do you see cost improvement continuous in 2013 overall? [SPEAKER SEBASTIEN DE MONTESSUS:] Yes. Of course, that's always a high priority to work on the cost reduction both when it comes to productivity in our factories as well when it comes to dyed material. That's what we worked hard on here. But we see some improvements going forward when it comes to reduced costs on our products. Okay. And you said it's a very good payback on the investment. What's your expected return on investment? Do you have any target in the group? No comments at all to that. All right. Okay. Thank you. Your next question comes from the line of Johan Dahl of Pensacola Bank. Please go ahead. Thank you. A couple of questions. If you start on the inventory situation, we had a quite elaborate discussion last year about excess inventory. And this year, you're finishing the year with slightly higher FX adjusted. I was just wondering, could you talk a little bit about the composition of that excess inventory, potential absorption effects looking ahead, if I could start there? Well, as you have seen, a lot is related to that we had a drop in the 4th quarter, meaning that the trade has not taken charge of the inventory to the extent that we expected, I. E. There are, let's say, postponements. That said, and as you have heard from Hans, it is still that we see that the listings are good in terms of preorders, but they are, let's say, postponing the final order. And that has meant that we have a, let's say, a built up inventory at the end of the quarter 4 related to this and then that the sales went down to a higher extent than expected. And very much related to finished goods, of course, and this is also related to Europe. Okay. But also you're quite cautious in your outlook for Europe. And I presume that you're not concerned or I interpret it as you're not concerned over any under absorption effects in the coming Q1? No. I would say, I mean, what we work very hard with now, and that is not only the Americas plants, but also for the whole group is, I mean, the key work to us now is to achieve a higher flexibility. So I mean, it is a matter for us to secure now depending on weather or depending on macro to secure that we can balance off should we see a decline in demand. Okay. On the U. S. Listings, it was a bit difficult to interpret. It was satisfactory as you mentioned in your statement. What is that really? Is it flat? Is it unchanged? Is it slightly down? And also if you could please give us some flavor with regards to pricing in the U. S. For 2,030? When it comes to U. S, when it comes to listings and preorders here, it varies between the two channels here. Of course, we will continue to focus on the high margin channel, the dealer channel, yes, and that will be our priority, of course. Then when it comes to U. S, we look into the channel mix as well as the customer mix here. And when it comes to going forward, when it comes to U. S, what's important there is not volume. It's more going for margin. So we will look more into profitable growth in U. S. Here than actually go for market share. So that's the main focus in U. S. Going forward. I appreciate that. The question is whether that's reflected in the listings going into next year, whether you can give any sort of comments regarding pricing? Yes, of course, it is when it comes to U. S. Okay. From Europe, if I could just quickly ask you with the weak dealer channel, what's your feeling currently? I know it's difficult to get a sense of the dealer inventories in Europe, but what's your feel with regards to those levels? Is it sell through corresponding to the deliveries that you've seen in the quarter? Yes. When it comes to the deal on average in Europe, I think it's normal towards a little bit lower. They have focused now by themselves to reduce their inventories a lot here. So I think normal towards a little bit lower than normal. But given your extensive experience, Hans, is that something you expect to snap back in the coming quarters? Or is it sort of an investment cycle that you expect to take some time? I don't know here. As you know, we will see here in end of February, beginning of March, then we see how the season will take off. That's the first indications here. If we then like we had last year, a very good season for the sorry, for garment products, yes, if that will be repeated, then we see immediately that all sell in will take off. So that's the first indication how the season will go. And that's mainly related to the weather here. So if the weather are with us, then we will see a peak when it comes to this. That's the reason why we are prepared both to the how we have worked when it comes to flexibility. We're ready to deliver as well if it not take off to reduce. Thanks. We work very, very close towards our dealers, the main countries and the main dealers we have here in the what we call now the new classification here. They have more full control what's going on out in the market than before. Okay. Your next question comes from Andreas Lundberg from ABG. Please go ahead. Most of my questions have been asked. But did you say how the inventory channel looked like in North America at the moment? When it comes to North America, I'd say it's normal. It's normal, okay. And I couldn't hear about Europe. Could you repeat that or if you said it? Europe is normal, maybe totally little bit lower than normal, but let's say normal. Okay. Got you. And then lastly, could you give some comments on the outlook for raw material costs in 2013? Thank you. It's very little bit ups and downs, but I should say flat. Worse 2012? Yes. Okay. Thanks. Thank you. And your next question comes from the line of Rasmus Engeberg from Handelsbanken. Please go ahead. Yes, hi. I have three questions. Firstly, if you could reiterate the CapEx guidance for 2015. I didn't quite get that. SEK 1,700,000,000 and as you have seen historically, we have been on the level on meeting the planned depreciation if we go, let's say, prior to the last year and the year before. And the main explanation is that EUR 500,000,000 of the EUR 1,000,000,000 today announced is chipping up to the EUR 1,700,000,000 percent. Okay. And obviously, now you are investing quite a lot for the future here. When should we start to think about seeing the benefits of the cylinder and chains or investments you're doing? I think cylinders you will see during 2014. Then when it comes to the chain, you will see under 2015. Okay. And then finally, just a clarification on the outlook for the Q1, if that is what you mean here. You say that near term demand outlook, North America market positive. Should I interpret that as you think that your shipments in Q1 will increase even though you had a very, very large increase in Q1 last year? When it comes to U. S. Here and the shipments here, that's of course, once again, is related to the weather here. It maybe will be depending on the market situation. Then of course, we see of course that there are slightly better market. And we see in the building areas where housing is going in a better way. Of course, that might affect us in a positive way, but still very slow. But I guess you have a you had an extraordinary start last year, didn't you? I mean the weather wasn't really normal. You had extraordinary early start of spring. Isn't that right? When it comes to the weather here when it comes to the Q1, it was a good weather for us, both in Europe as well as Europe. But when it comes to here U. S, I repeat, we go more for margin than sales. Okay. All right. I understand. So increase our margins and come back to be above 5% EBIT. Okay. All right. I understand. Thank you. Thank you. You have a further question from the line of Arun Ibbotson from Goldman Sachs. Please go ahead. Yes. Hi, there. Sorry, just a quick follow-up and clarification on your CapEx guidance. So two questions and apologies if this is obvious. But the capitalization of R and D, I assume, is not included in the EUR 1.7 billion CapEx. And then I was just wondering if the sort of EUR 1,200,000,000 then if we exclude the EUR 500,000,000 extraordinary investment in this new facility, is that a run rate we should expect going forward? Because at least according to my notes here, you've been running quite a bit below that for the last few years. And then finally, if you can just let us know, should we expect another EUR 300,000,000 EUR 400,000,000 in 2014 for this? Or is it going to be phased the second half in 2014 2015? Thank you. Well, you actually get the answers that I plan to give you tomorrow. But to start with capitalization of R and D has always been included in the CapEx. So that one is included. The answer is yes. When it comes to the EUR 1,200,000,000 you're right. I mean, we have been quite squeezed if we look the 2 years back in time. And I mean, those are decisions that we take during the year as well, depending on how it looks like from a cash perspective and how it looks like from a business environment perspective. A normalized level is around €1,100,000,000 to €1,200,000,000 to meet our planned depreciation. So I mean that is what you should normally use. When it comes to the 2014, it will be some SEK 0.4 billion of the SEK 1,000,000,000 that will be attributed to 20 14. And then you have the residual in 2015. That's very clear. Thank you. Thank you. We have no further questions at this time. Okay. We have no more questions. Then we wrap up from this side. And for those of you coming to our Capital Markets Day tomorrow, we look forward to seeing you then. Thank you. Thank you very much. Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.