Earnings Call: Q3 2012

Oct 26, 2012

Once again, good morning, everyone here. And as Tobias said, it's the first time we have this quarterly report for Husqvarna Group. It's our headquarters here. And I think you on the telephone you missed all these nice products we have around us here today. When judging the Q3, I think it's important to keep in mind that the current business environment around us is a bit different this year than it has been previous years here. So I think that's important to see what's happened in the economic situation in the markets here. We see in Europe a lot of discussion in the Latin countries, but we see that we're going actually north as well here. And then of course, the lawn and garden business have been heavily impacted this drought situation we've had in our biggest market in USA of course. And then, of course, we have currency exchange a little bit against us, the SEK versus the euro. Given this, I have to say I'm quite pleased with the results for the Q3. The operating income and the operating margin have increased in spite of actually loss of 8% in net sales. When we look into what I said here after the half year result here that we have been able to deliver and fulfill what we said when it comes to our supply and the problems we've had in our factories here. I have to say, we have continued and have seen more improvements in our supply chains, not only in U. S, not only in the stainless factory, all over the places. We have been very flexible and able to deliver the products on time with the right quality. And as you know another focus area for us have been cash flow. And when we see here, we continue to develop the cash flow in a very positive way. If we then go further and look upon the financial then of course as usual we will go through this in details here. Sales as you've seen down currency adjusted 8% Americas due to what I said 14% EuropeAsia Pacific, minus 6%. And we have had a good development in our small business units construction, plus 3%. Then of course the downturn for Forsey Garden Province was broad. It caused basically all product categories and all markets and all channels. So, there haven't been there's been down in some channels, some markets. They've been a little bit over the place across the globe. And of course, as I said, heavily affected the economic situation, mainly here in southern part of Europe as well as the northern part lately. And then we have the weather impact. The weather impact, it said here, we had a lot of rain in the quarter 2. Of course that continued in quarter 3 as well in July August. Then of course it recovered a little bit here in September and of course, when it comes to Europe, the weather situation here. Have we lost market share? No, we haven't done that. We even kept our market share for the market as well as increased market share. Then as you know, some of you may have realized it was snowing yesterday evening, so that the on course this morning as well here. Snow shows last year there was a lot of discussions. We planned already from the beginning. This year the snow sales will be less than it was 10% and 11% here. So we have planned for that here. The reason for that is that the trade have inventor since last year. And all consumers who want the snowshoes have a snowshoe today. So that's planned that the snow throughs are down vis a vis last year and as well as 10. If you take the group EBIT up, I will not comment that more. Ulf will do that in detail here. But I have to say, I'm very pleased with this result. We'll be able to do when it comes to efficiency and cost under control in this turbulent market situation we've had. If we then look into Europe, Asia Pacific, minus 6% adjusted here. And of course, many markets here. And the effect of this euro crisis and all this discussion, in the beginning, we don't really saw any effect of that in our main markets in Central and North of Europe. But then the last part of the quarter, we see no uncertainty when it comes to our customers how they behave here. If we take then some other products, the snow throwers, we don't have any snow throwers here. But if you look at another product, we have performed very well here. Our robotic mobiles have performed excellent this year. We have taken more marks, increased the volume, both under the Husqvarna brand as well as we launched robotic lawnmower under the Gallena brand as well here in the mass price here. We were a little bit doubtful. Is that what we call a carryaway product or not? Does that fit into that channel? And now we've seen it does. Of course, the Gardena version in that channel are a little bit different than the Husqvarna one here, a little bit easy to use and maneuver. But you see there during the quarter there have been a good development on that product category as well here. Given the sales decline here and the impact of currency, I think the margin was fine for the Q3 here. And we see here a little bit that we have been able what we said here working with efficiency in this company here and looking on the SG and A cost. Of course SG and A then we have transportation cost. By definition, transportation cost go down a little bit when the volume goes down as well. But even if it is excluded transportation cost, we have seen a good improvement in the activities we have done when it comes to lower or be more efficient with how we use our marketing money and the spends we're doing for brand advertising as well here. We even been able to look at be more efficient when it comes to how we use our IT spend in the company. So Americas, yes, Americas started up extremely well, extremely well in the beginning of the year here. Good selling. And then we know that we have a drop when it comes to growth situation. I have never been such weather the last 50 years in U. S. Of course, there's no need for main products, wheel products, both ride on and walk behind products here. In the U. S, we've been able to keep up our market share even increase market share. When it comes to garden practice and the zero turn to big machines, we have increased our market share. I'm very pleased to see that we have been able to increase our market on practice where we had 11 this huge, huge problems when it comes to deliveries. So that's a confirmation that is trust among our customers in U. S. That we are a company which I can continue to work with and as I said, trust in our organization. EBIT for Business Area improved over last year in the quarter, mainly through a lot of activities here. I'm coming back to the supply issues. We have ticked off now the Orangeburg factory. We don't internally talk about that factory anymore. That's up and running in a very, very good way. We have the cost under control. And we even use now that factory as a rule model for the other factor what you can do when something goes wrong. And all other factors have done a lot of improvements in currency efficiency and flexibility. Then of course, we have an impact of lower costs such as steel in the quarter and even here a good cost control when it comes to SG and A spending. Then of course we had some headwinds as well here impact of lower sales of cost of income to EBIT and the currency effect even in U. S. The start of this quarter, as I said internally, is construction, good. Sales, 3% up and a good EBIT result as well here, mainly driven from U. S. In construction equipment here. Well, the rest of the world has been a little bit ups and down here. If you take Europe, of course, with the stone business, have an impact of the situation down in Spain, a main market as well as in France. Then we take Brazil, had a very good growth. And then we have the lower in China and Australia when it comes to the sales. EBIT margin continues to recover. So I think construction is on the way to come back to what I should be and what I've been in the past. So very good development for construction. And now I hand over to Jules to go through more in details the figures here we have performed. Thank you, Hans, and good morning, everyone. So we jump into the income statement as we normally do. And I think I'll leave the volumes because you have heard very much enhanced presentation, the explanation and the deviations related to that. So let us move down to the gross margin and the gross margin percentage. On this page, Page 8, you can see that we have if we adjust last year for items, we are flat in terms of gross margin percentage. But then and that is very much related to the construction and the restructuring we took in construction in the Q3 last year. But let us also, when making the assessment here correctly to come back to like for like also adjust for currencies as well as for the Orangeburg impact. Then we have last year actually a gross margin percent of 28%. Then we have a like for like, so I. E. A small deterioration versus the 27.7% that we ended up in the Q3 of 2012. Behind the delta, there are actually some quite big items here. We have then foreign exchange in terms of transactional. And there we have as you know I've told you before, we gradually move into more and more headwind as we go. And that is definitely seen in the Q3 as well. What we on the other side have some tailwind from is that we now see the effect of the lower material prices. So that we gained from in the Q3. The delta a small deterioration, but still I think it is good to see that also the efficiencies that we are working quite continuously with is giving some good impact also in the Q3. Of course, having in mind that there was a lower volume in Q3 versus last year taken into account as well. Moving back then to the P and L, moving down to the SG and A. And you have heard from Hans that all across I can say that we now see some good impact of what we both decided in Q4 last year in terms of restructuring and the savings are now coming into full swing in the Q3. But also the continuous I must say continuous improvement that we drive, we have been restrictive in hiring and replacing new employees. We have been quite restrictive in terms of spends on IT. We see that the level of IT cost now is going down and we get the benefit of the investments we have done previously. Saying that, we still have more to be done. But for 2012, we have been quite careful in terms of spending, very much triggered by the situation we are into for 2012. Of course, also when you look at the SG and A, although there is a lowering of EUR 200 plus 1,000,000, you should of course make certain adjustments for currencies as well as for Orangeburg here. There is still a delta of some €140,000,000 that is related then to other savings. There is, of course, a one off item related to the former CEO that I think you shall take into account as well SEK 21,000,000 when you make your assessment. But all in all, good momentum and good pacing of the savings that now kicks in into the Q3 that we are quite happy to acknowledge. What you can also of course have in mind is that there is a variable path. So we do get some of that. And I think that is also something we should take into consideration. We are better now in adjusting and back to Hans' point here, flexibility is key for us. We have to make sure that when volumes goes down, we also have to make sure that all variable costs are actually moving in the right direction. I think we see that as an example in the Q3 as well. So all in all, a good development of our SG and A in the Q3. Looking then into the EBIT, SEK 182,000,000 versus SEK 113,000,000 last so an improvement of €69,000,000 If we then summarize again as we do have in the majority three components that you should have in take into account in your That means you should add back some EUR 83,000,000 of Q3 That means you should add back some EUR 83,000,000 of Q3 last year in order to have a like for like. Then you should take the effect of the currency headwind that is roughly EUR 69,000,000 in the quarter. So if we take that into account, we have a decline in sales. We believe although Q3, as you know, for Husqvarna Group is a small quarter, but I think we also show that there is an underlying momentum that is quite good. Finance net minus €80,000,000 versus minus €89,000,000 not much to mention about here. We do capture some of the lower interest rates that we have And then we have the interest rate component in our FX derivatives that gives us still some tailwind here in the finance net. Tax, well, you know how I normally have guided you. We had approximately 29% as the blend And then we have the Belgium financing setup that is giving them on a yearly basis EUR 180,000,000 to EUR 200,000,000 split evenly by quarter and that gives us some tailwind here on the tax side as well. All in all, in income for the period SEK 105,000,000 versus SEK 55,000,000 last year. If we then move into the balance sheet and we can actually take it I mean, if you remember what we have said that we did start the year on a quite high level when it came to inventory. And I must say, we have successfully been working with this during the 1st 9 months here and continue that journey in the Q3 as well. That said, we are still not happy. We still believe there is room for improvement here. And that is the continuous work that do not stop here. But moving then to the next picture, I think we have some of you could say declaration of success that we have now a quite good momentum in our cash generation. This is normally the pace that we want to see in this company. And we had we draw cash in the beginning of the year. We break even by end of Q2, which we did. And now we're generating cash here in Q3. SEK 1,600,000,000 roughly versus actually negative of SEK 300 plus 1,000,000 last year. Quite a maneuver that has been achieved here over the 1st 9 months. That in turn has, of course had an impact that we have been able to amortize our net debt. And on this page you can see then that we have beginning of the year, I mean, we have gradually been amortizing down the debt. Net debt to equity ended up in EUR 0.53,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000, We don't get the full effect because we do have a translation part. You can see that in the comprehensive income statement that there is of course now the revaluation of our foreign subsidiaries gives us quite a negative impact on the equity, some EUR 900,000,000 and that is the reason why we don't get more leverage on the net debt to equity ratio. But still, good momentum of the cash flow has meant that we've been able to amortize some of our debt here. So that is according to the plan. That is what we have said here since last year that that is one of our main focus and we think the organization has really been attending this quite well. Again, it is a continuous work. This will continue. It is not that we stop here. Key figures. I think mainly the 2 last ones I want you to attract some attention. CapEx, we have also been fairly cautious here, I would say, the Q3 and we will continue being cautious the rest of the year, very much related to where we see the business is taking us here. So that is more or less a correlation to that the business is slowing down here by the end of the year. SEK 187,000,000 versus SEK262,000,000 Nothing dramatic, but still a lower pace than what we had in Q3 last year. Average number of employees. This is defined as you know as full time equivalents. And here you can see also both in terms of savings and that we are now also coming into a more proper level in terms of comparing with last year when we had a lot of as you know over time as well as a lot of extra people due to not least the Orangeburg debacle. 2,000 plus people less if we look at Q3 versus last year, which I think is quite a change and according to the plan that we have had here. Finally, before let me hand back some guidance then, 1 quarter left here. Starting with the CapEx, well, you can see on the pace that we will be closer to SEK 0.9 1,000,000,000 in terms of CapEx here. So I'm adjusting that one down somewhat. Depreciation's still on the level of SEK 1 point 1,000,000,000 but CapEx down then 2,900,000,000. Tax guidance remains 29%. And you have the financing setup that gives us the 180 to 200 in a kickback or you should add back and then split that evenly over the 4 quarters. FX, well, as you see, deterioration of the FX hedges is gradually moving away, but we still believe quarter 4 is such a small quarter. So I remain with the span that I gave you last time, EUR 30,000,000 to EUR 50,000,000 in the lower quartile. We are now roughly on EUR 35,000,000. I believe we can keep that level for the remainder of this year based on it is a small quarter. Of course, assuming the closing balances in terms of FX rates we have end of September. So then I leave over to you, Hans. Thank you. And of course, it's important for us to continue to deliver new products yet. And the product news under our 3 main brands in this company is here that we continue to expand robotic movers here with the 3rd generations here. And we continue as well when it comes to the rider products. We have the consumer riders here. There are customers who want to have more professional look on consumer riders as well. So there will be consumer rider with a lot of professional features for next season here. And then we are introducing a 4 wheel lower mower. You can question mark do we need a 4 wheel lower mower? Yes, we do in the more professional segment here when you have loops and ups and downs here. So we will be the first one to introduce the 4 wheel low mower. It's not a gimmick. That's a demand we have seen. Now we will enter into this more business to business segment Commercial Lawn and Garden here. So that we come with a complete new product, which have quite interest among our customers working in this segment here. And then we have a new cut steering solution for Tractor. That's a little bit that we take a little bit from this rider here. You can see that you listen to me I point to all these riders here that we use that concept that when you have a garden where you have some trees, it's a little bit easy to maneuver these tracks which are produced in United States. Then we, of course, continue to launch all these battery products under the Husqvarna brand here. And we have launched a handheld product and we have launched even air ride on products under the battery. And we continue to increase that focus on battery products. Then on the Galliena brand another of premium brand, we continue to expand the range of robotic mobiles. Now we have seen as I said there is a need for this kind of products even in mass market here what we normally call do it yourself channels here. So we add another product there. We go up to 1500 square meters. That one is 400. We add another one can be used in gardens up to 1400 square meters. Then of course, we have a lot of new products like electric hedge streamers and we continue with this old sprinkler system and this automatic sprinkler system as well. We see a good combination. The robotic mover take care of the lawn. And then when you have these weather conditions then if you want to have a nice lawn when it's warm outside then you use this Ozometrics Sprinkler system. So it's a combination here which can be used here for people who want to use this in a perfect way here and have a nice garden. Then of course, we continue with the McCulloch range. As you have heard before, McCulloch is our premium brand should be mainly used in the retail channel. Yes, that will continue to expand the range as well that for tractors, movers and accessories here. So we continue of course to focus on new products here. But there is a limit. We might have launched too many new products. So we need to of course see that the customers can absorb all these new products. That's the reason why we take a little bit through a pace when it comes to new products here. But of course it's important to continue with this here. And then we continue even with our professional chainsaws. We launched this what we call 560 chainsaws here early with quite a good success here. Then summing up quarter 3 here. As you said higher operating income, but sales declined 8%. We normally talk about weather. You might think we talk a little too much when the weather is against us. But we try to have a balance even when the weather is with us here. And then of course, as you know, the currency situation is something we have to live with as well here. We improved the margin. We have a very, very good cost control in everything we're doing here. Question mark things more. It was mentioned here that we go through a higher freezing situation. If we want to recruit people then we actually every Friday afternoon go through a list. All people who sit in group management, so we don't run-in the wrong direction. So we recruit the right people here in the future. We have had that now for a while and there's very good control over that we recruit the right people. And then of course, cash flow that was of course a nightmare when we saw the cash flow last year that we have done a lot of good things here, a lot of involvement from all people in the company here. Then of course, if you look into next year, it's important for us to continue to work with efficiency. So we of course we have to have the cost under control and even to be more flexible in our factories. That's something we will communicate later on what we mean by that statement here during quarter 4. Then looking ahead, yes, I think it's more tricky than ever to look into this crystal ball with what's happening in the market here. So we know that every of our customers really look into the inventory levels as well. They, of course, are waiting a little bit. We have the election just now in U. S. There's always little ups and downs when it comes to elections here. Normally, when every 4th year, I've seen a trend, sales going down a little bit and discussions and order as well here. So I think we'll see what's happened after that election here. And of course, as I said, what's happened in Europe when it comes to the economic crisis we have seen in the Southern part here. So predict, we're not going to do that here. And with that, Ulf and I open up for questions. And I think we will start with questions from the floor here in Stockholm. Yes. So it's Ken Atoll from Carnegie. A question on you say that customers are a little bit hesitant due to the or to add inventories and the weaker outlook and you have very, very many product launches. Do you feel that the retailers are and dealers are less willing to bring on newer type of products now when the outlook is poor? Or is it the opposite that they feel that they really need to have something new to offer? I think you answered your question by yourself the last part. They really want to have new products, but not at that magnitude we had before. So that's the reason why we of course need to adjust that a little bit to the demand when it comes to our customers well how much new products we are able to launch. And then of course we really want to be sure that we can launch the product with the right performance and the right quality and so on. Yes. So that's another way that we have reduced this year. But of course, they want always new products and we need always under these 3 main brands we have for this group come with new parts every year, every year. We are not where the car industry that we need a new track to 2,030 model. We're not there yet. I've seen that happen in the white goods business here. But that might happen as well here in our business later on, but not today. But can you put some numbers on it that maybe new product launches this year is about 20% lower than last year or I think if I should take a number maybe maybe 5 maximum 10%. Still a lot of new products here. I'll just mention some. Some of course or some features we call facelifts as well into this. And then on the upcoming sort of cost cutting efficiency efforts that you have. After the Orangeburg debacle a couple of years ago, do you dare to push such a big program that the former CEO did? Yes. Some of you know my background coming from Electrolux that I was heavily involved in all these huge big effects in Orangeburg and Beatrice. So I have no problem with that. But you need to plan. And the most important when you do such an operation that the receiving parts are ready. That's the key when you do activities like that. That's the same if you want to merge sales companies together. To close down, that's one thing. But to take care of all these things, that's completely different. There you need to be much more careful how you plan that part for the receiving factory or sales company whatever it is. No problem with that. Okay. Thank you very much. Stefan Seidl, Espierenqvarna. Can you comment on your ongoing discussion with about floor space and prices for next season? When it comes to prices and these what you call listings here, we have seen a little bit shift here this year. It takes a little bit longer time. In U. S, of course, they wait a little bit for what's happened in the next coming 2, 3 weeks here. So but there are all these are ongoing both in Americas, in Europe and Asia Pacific here in all areas. It's the same way as before here. But we see they really want to discuss, but they are a little bit hesitant when to discuss the volumes more this year than they've ever seen in previous years here. And of course, they are careful when it comes to inventory levels as well here. And we see that even the small dealers have learned something from 2008, 2009 when it comes to inventory reduction. So they have that in mind what's happened there. So they are looking a little bit how they should handle their inventories. That's the reason why we have worked hard with our flexibilities that we can be more flexible if it takes off or slowdown that we can adjust that in our own factories as well as back to our suppliers here. When it comes to prices here, we are just now discussing the prices. First, we take the listings and then it's not 100% finalized and then the pricing comes here normally in November December. But there we see the same trend as previous year. Pricing takes longer time. So there's nothing new vis a vis 2012, 2011 going into 2013 when it comes to price discussions. That's always the toughest part. Is there someone change in your industry about competition? Is there anyone exiting the industry or Yes. I think that was maybe a couple of months ago even you in quarter 2 announcement for Bricks in Skradsson that they have realized that they shouldn't compete with our main customers. So they have decided to step out of walk behind Larmos. They learned a lesson there of course that should keep to the core business to be an engine supply. That's the main change when it comes to our competitors here when it comes to that. There have been hose lock competitors to us in the watering area, U. K.-based company have been bought up by a friend's company here was announced 2 weeks ago. That's mainly the changes here when it comes to our customer base here. Nothing especially when it comes to different activities among them. And then a question on your production rate in Q3. How much did you reduce production by? The only we have a real plan for was already beginning of the year when we were sitting and discussed will be a good snow market. So the only we have discussed here, but that was done already this time last year that we will reduce the production and the forecast of snow throughs, which have of course had an impact of quarter 3 and will have in quarter 4. But that's the same as I guess all our colleagues have done working with snowstorms here. Everyone is a little bit afraid if there will be what we call a green winter that you sit with these snowstorms maybe for 2, 3 years. So that's the reason. That's literally only we have done it. Then of course, we all look upon what's happened here. Of course, we are looking out to ramp up some volume to be able to deliver here. We need to do that in Q4. Then of course, we are a little more careful how much should we do that. There are more discussions out with the different companies sales companies we have and the salespeople. And they, of course, listen more than they did maybe a year ago, how they or customers look upon the futures as well here. So we have worked more to use our front end people to listen what's going on there when it comes to what's happening, Marc. Of course, all have learned a little bit in 2009, so we are a little bit careful. But overall your production is in line with the sales decline? Yes. No. Yes. And I have said the production in the factories have improved a lot. It comes with the flexibility. And we even now see in effect what we started up 1 half year ago that we have dedicated people in the sales regions, dedicated people in the supply chain to work more or less daily to interact with each other here to change the forecast more frequently, sometimes even weekly to be more flexible to follow this year. That's a plan to reduce of course the inventories for the future as well. Thank you. Johan Eliass from Chuvreux. Just coming back to this manufacturing, normally ramp a little bit in Q4. And I think you said last year that you probably ramp a little bit more just to make sure that you were able to deliver in 2012 season. Will this would I guess there's an inventory overhang on the Bouygues products in the U. S. For example. Will this imply we should expect cash flow to be positive in the Q4 this year? When it comes to ramping up free inventories and we're prepared to deliver here, we are more back to a normal situation in this company. But of course, we need to do that. If you take the garden season, it's very short. So of course, we need to do it. If you take this kind of products here, but we need inventory. So a couple of 1,000 even more. Of course, that means that we start up the production a little bit earlier when it comes to that. That depends on the demand. And then we are planning if we do that and if that will have an effect on cash flow, we will not comment that until we have the quarter 4 results. But as we said earlier, cash flow is a really focused area for us in this company. And then another issue, construction seems to be on a quite a good trend. Is it time to put it up for sale now? Construction is not for sale. I can talk for the 2 main ops. They are not on the board. It's not for sale and not for the management team either. It's not for sale. Okay. Thank you. Andreas Lundberg ABG. Could you or what's your take on the composition on the inventory level right now and the mix there? And my second question relates to raw material costs into next year. Thank you. If we take the raw material, we see of course the trend now in the downward direction here. And now it is a matter of we are as we are dealing now as much with pricing as well as the load of next year. I mean this is also part of the discussions we have with our suppliers. Mix of inventory do you refer to our inventory or do you refer to our Your own inventory. Okay. Well, you could say that we have I mean, we have been driven down the inventory quite substantially related to Americas, of course for good reasons. I mean we built it up last year in order to supply customers which they have been quite satisfied with. And now we have been able I would say both in second and third quarter driving down the inventory quite significantly as well as on finished goods as well as on raw material. The latter is very much based on also that we now improve the flexibility here. So now it is to balance off how do we now want to match this for the next coming season here. And I can say we sit now in a much better position for that than we did 1 year ago. So we have started that discussion much earlier. And as you hear from Hans, I mean, we have weekly reconciliations of the sales forecast versus our production forecast. Thanks. Operator, do we have any questions from the telephone audience, please? First question comes from Aron Ibertson. Please announce your company name and go ahead with your question. Yes. Hi, there. Good morning. It's Arnd Ibertson from Goldman Sachs. I've got three questions, if I may. First of all, if I understand your release and your comments correctly, you're sort of intending to embark on a new restructuring program. So I was just hoping to get an update on the current one. If I'm not mistaken, there is some EUR 350,000,000 left of communicated cost savings from the shift from Sweden to Poland. And I believe you took all the restructuring charges for that. So I was just hoping to get an update on when you're planning those savings to come ahead or come in. Secondly, just a comment on the U. S. I was wondering if the Board is considering or you are considering recommending to the Board to sort of exit the U. S. Or shut it down. As far as I can tell, you've been sort of a cumulative loss making for the last 4 years. And I guess you said that the year had started extremely well and that Orangeburg was something you don't talk about anymore. And unless you have an amazing Q4, you will be sort of breakeven at best this year as well. And finally, maybe to you, Hans, just a general question of what do you see as the earning power over the next earnings power of Husqvarna over the next 3 to 4 years or so. I guess you've been hovering around €1,000,000,000 to €1,500,000,000 for the last 5 years or so versus quite a bit more historically. I was just wondering if you see it as possible to get back over the €2,000,000,000 level or if this is what we should sort of expect? Thank you. First question when it comes to the previously announced restructuring plan and you mentioned the Swedish production down to Poland. As we have announced earlier that we take that in 2 steps here. And just now we have finalized the second step here when it comes to moving down the production to Poland and in fact we're down there. But having said that, there are niche products in this commercial, the loan and garden, which we always say, that product stay for time being in Sweden. But there we're talking very, very small volume. It's extreme that you more or less build that product on orders here. Otherwise that will follow the plan here. And when it comes to the savings, we will come back to that later on here. And in the end of this, I will tell you when. And then when it comes to U. S, exit now, fix it. That's what we internally as well the Board said. We had to fix U. S. And we are on the way to do that. But having said that, U. S. In all business I've been involved in. U. S. Is always a unique market and very tough market to be in with a lot of competitors, but we are on our way to fix the U. S. When it comes to the last comments here, I say I have no comments at all when it comes to the future when it comes to that part here. And I refer to the upcoming Capital Markets Day as well here. I'll come back to that in then. If I just follow-up on your comment on the U. S. So how should we understand your comment about the year having started extremely well and Orangeburg not being an issue anymore and yet being breakeven? So how are you planning to cover your cost of capital in the U. S? Of course, when it comes to U. S, it's important that we continue to increase the volume in normal market conditions with the weather with us of course and then price increases and focus on costs. Okay. So you think you can push through price increases then in the U. S? Yes. Okay. Okay. Thank you. Thanks. Next question comes from Johan Dahl. Please announce your company name and go ahead with your question. This is Johan Dahl of Pansil Bank. I was wondering if you could elaborate a bit on the U. S. Performance in the Q3. I mean, you've talked a lot about savings on SG and A, Brand, IT. If you focus a bit more on gross margins in the U. S, what sort of savings are visible there in the Q3? And what is the impact on EBIT in the U. S. From the lower volumes? If we can start off there. Well, the majority, Johan, is of course that we have been working a lot with the overhead costs. What is and what we have said is that gradually we are also now improving continuously on the cost of goods sold. But the majority that we have seen in savings in the quarter related to U. S. Is very much related to SG and A. Now the work captures here that you could say that this year has been very much an asset test for delivering. And as we have said from the very beginning, delivery as well as delivering at a good quality has been key. Then we started during Q2 to work with efficiency and we see now gradually that we are improving efficiency from a cost of goods sold as well. But the 2 major components, if you look at Americas, it is very much SG and A reductions as well as we have some tailwind of the material. And then the trust is that we are, as Hans said here, working with pricing and working with efficiency, gradually we should capture and improve result in U. S. As we go forward here. I mean we touched on the absorption problem or production levels in the U. S. In the Q3. But where is the effect from the lower number of employees? Is that only Orangeburg related? I'm mainly interested in the drop through there from the lower volumes. Well, if you take employees, of course, measured as you know as full time equivalent, if we work with less overtime and less shifts, of course, that pays off in terms of the way we measure full time equivalents. And that is what we have seen in the Q3. And that pays off both in the cost of goods sold, but we also do have, as you have heard, restrictions when hiring, replacing and hiring new employees. So there is, of course, a component related to SG and A as well. Great. Finally, what's your looking at the profitability in the U. S. As a whole, also looking at some of your competitors, what's your view there of the current profitability? And secondly, in the lineup for next year in the U. S, the offering you're putting into retail in the 2013 season, can you see any sort of improvements there with regards to cost and any sort of gross margin improvements disregarding prices just based where it's currently? And also disregarding raw material costs mainly design? Well, as you have seen Hans have talked about some launching new products. Of course, that will come to the benefit of U. S. As well. But I think the price vehicle is something that is very important here. And that might be that we also will take then some lower volumes as a result of that. But important is to come back to what we have said here in the strategy. We are moving across. We, of course, have to change the mix in the right direction, getting more dealer sales as well as moving the right mix within retail as well. And then, of course, work internally with improving the efficiency. And I think we play with all 3 cards going forward here. Thanks. Next question comes from Anders Trapp. Please announce your company name and go ahead with your question. Yes. Hi. Anders Trapp, SEB. Two questions. First, on the inventory levels in the trade, I don't know if you actually said anything about that. If you did, I missed it. So what can you say about the inventory levels in the trade right now? Secondly, also your robotic mowers, if that becoming a sort of important product? Could you tell us a bit more about how much sales you have on that one? And also if you have anything on market shares and this competition is increasing? 1st, when it comes to inventories in the trade, the inventories in the trade are normal. But what we try to do now to look at the 2 still inventories, but we try to look into the inventories in trade and what we have as well here. So the inventory in trade is normal except for snowstorms. Snowstorms is a little bit higher. Otherwise, it's a normal inventory level both in the dealer channel as well as in the retail channel. When it comes to the robotic moguls here, of course, we have had a huge success during the years as well this season as well increased the volume a lot. And have we lost market share during the years? Yes, we have. We have lost market share. We started up with 100%. Yes. So then by definition we are down. Yes. But are we losing market share now today when it comes to a lot of new competitors here when it comes to this season here? You maybe have read some of you here in Sweden a couple of things and articles about some Chinese coming in here and you that Bosch coming in, steel is coming with robotic movers. Of course, there will be more players on that market here going forward. How do we look upon that in a positive way? Because there we will get some help from our competitors to make an interest of this market product in the markets we have out in the European areas. So of course, we have been alone to take all these marketing activities to inform both this product here. Of course, that is costly. So now we will have some help from our competitors. So we see that in a positive way, especially when it comes to people who understand how to do this and keep the quality under control, so that it don't destroy that kind of product as we have today here. So when it comes to this major player, well known player, not at all or rather opposite here. But of course, it will be a little bit tougher when it comes to that. But we have the original one and that's the reason why we were first in the retail channel as well due to that will be some others coming into the retail channel. That's the reason why we were so fast to have the Gadiana robot in the retail channel. You said Bosch, of course, will be there. But it's always best to be number 1 and have that position here. And you are still by far number 1, is that correct? We are by far number 1, yes, correct. And this is mainly or almost entirely European business. Is that also correct? And if so, when will you go for the U. S. Market? I think you didn't OPE speculate about the huge market potential for robotic movers in the U. S. Recently? Correct. It's mainly European product here. We haven't looked into U. S. A couple of times and stopped that. What we need to do, normally we see U. S. As one country, one market. But when you discuss Europe, you don't look upon Europe as one market. It varies between the southern part, northern part, central and east here. What we are doing now, we look upon U. S. In the same way. We divide U. S. Now in regions. There are some regions where there might be possibilities to use these robotic movers here. Normally, because people this is not a cheap product today. Normally, people buy these products and want to have that kind of product and can afford to have that. In U. S, they don't take care of their garments by themselves as you know. So that's a little bit different market over there. But there are some states where we see possibilities. That's the same. There have been discussion if we should have watering irrigation progress in U. S. It could have been a fantastic business this year, of course. Then we look at the same way. There might be some states where we can see that we can sell this European, what they're making, say, plastic product in United States. So we have started to look into that as well here, see what's happened there. But when it comes to this kind of product, U. S. Is a complete different market. Would that be Northeast U. S. Then I guess that could fit better? When it comes to robotic, yes. But when it comes to watering, it can be some other areas. Yes. Yes. All right. Thank you. Next question comes from Kristofer Mandegaard. Please announce your company name and go ahead with question. Hi, Christa Banyngaard from DNB. Firstly, on the SG and A savings you made, you talked about that some of those savings were volume related. If you look on the year over year bridge, you talked about €140,000,000 in savings. How much of that was like for like savings if you exclude the volume effects? Say like this, Chris that less than 50% of the savings year over year are related to variable I. E. Related to the volumes. The rest of savings incremental in terms of this program that we put that we launched last year in Q4 as well as the initiatives mentioned here before being restricted with replacement and new employees being restricted in IT and to some extent in branding as well, continuous improvements. And the €140,000,000 was that including or excluding the €20,000,000 for the CEO? That was included. So take out that and then we talked about year over year €120,000,000 roughly. Perfect. And then also if you can talk about the currencies for 2013 or this is the first half of it because then it's I guess it's going to you're going to have the big effect from that? Well, you have seen and that is what I'm trying to guide you over the year. Of course, we have had effect positive effect of our hedge contract this year. But you also can see how we disclosed and that that becomes less and less of impact. And of course, if you make the calculations yourself and if you look at our sensitivity analysis in the annual statement, you can see that of course next year provided these rates remain there will be a hefty impact in 20 13. More precise guiding I will come back to in the Q4. Okay. And finally, you touched upon inventory levels in the retail chain. But you also say that they are trying to manage their inventories. Does that mean that we're going to see a lower sell in season this year and of course everyone is waiting for demand to come? Or should the sell in season be as normal? Do you think? I think when I look upon this that doesn't mean that there will be a lower sell in for this season. I think it will be normal. Great. Thank you very much. Next question comes from Rasmus Denberg. Please announce your company name and go update us on how much of savings from the previous program have not yet been accounted for broadly speaking? Well, in essence, what we have said is that we can't see that to be materialized in 2012. And we will come back during the course of Q4 to give you more explicitly how we look upon that going forward. I mean my question was how much of the promised savings have you delivered so far? You mean of the cost that we took in the Q4? [SPEAKER LARS CHRISTIAN BACHER:] No, on the previous program. On the previous. Well, that relates some of it has been postponed as you know and as we declared already last year. Yes. And that is still postponed into SEK 13,000,000. Exactly. And I was just wondering about what the level was. SEK 300,000,000. EUR 300,000,000 postponed. Correct. Thank you. And then just trying to understand the U. S. Business, given that you are sort of well, this year maybe breakeven or around there. Could you shed some light on whether you lose money in mass market or in trade? I think the toughest channel in U. S, that's the same actually worldwide is the retailer, what you call DIY channel. That's of course always much high price pressure when it comes to this account than if you take the normal dealers here. So of course that channel is much tougher to be in U. S. Vis a vis the dealers. But having said that, that's of course for the rest of the world as well. So you're saying that your losses are in the mass market channel? Once again, can you repeat your question? Are you saying that in the U. S. Or in Americas where you are breaking even, I assume the margin is not the same in both businesses. Is it in the is the problem in the mass market business or is it that you're subscale in the dealer channel? I didn't say that here. I said that it's much tougher to be in that channel here. But of course, it's much higher margin in the deal channel rest of the world as well here. And that's same in U. S. Of course. The dealer channel is much higher margin than in the retail channel. U. S. Well. That's across the whole world. Yes. Normally the same. So what you need to do is essentially to raise prices in and cut costs in the mass market business? Is that that is really my question. Yes. But we're of course looking to do that in both channels. Yes. Okay. Good. Thank you. It appears we have no more questions or one more. Maybe I can just ask about the dealer channel in the U. S. You said for quite a number of years you want to expand that. Can you kind of quantify it what has happened over the last year? Have you added 1,000 to your previous or in percentage terms or whatever? Yes. We have expanded the number of dealers in U. S. A lot and worked hard when it comes to that. When it comes to more details, I will come back to that within a second when we will present a little more facts about that. Are you more confident achieving a 5% EBIT margin in the Americas today than 3 months ago? Thanks for that question. No comments. I'll come back to that later on at the end of this presentation. Okay. So if not here, then we want to come back here to that we now will invite you to Capital Markets Day February 14th of next year. It will be here in Stockholm area. And then of course there we will go through more details what we have not answered in a quite good way today here. And then of course a little bit what we are doing now when we have updated our strategic plan. We still are now finalizing that part here. So we want then to invite you for this Capital Markets Day the 14th February next year in the Stockholm area. But it will not be at the airport. It will be somewhere else here. We don't know yet. But Tobias, we'll come back to that here. Then of course, we will be able to give you more facts in details. Okay. So thank you everyone and we welcome you back on February 13 when we report our full year results. Thank you.