Earnings Call: Q4 2018

Feb 13, 2019

Welcome to the Thule Group Year End Report Fourth Quarter October to December 2018. My name is Laura and I will be coordinating your call today. I would now like to hand over to your host, Magnus Welander, CEO, to begin. Magnus, please go ahead. Thank you very much. Good morning, everybody, and welcome to this Q4 call on what has been a very exciting 2018 for the Thule Group. The quarter four was also an exciting quarter. If we turn to slide two, where we summarize the quarter, you can see that another strong sales quarter in the year. We grew for the group with 8%, excluding the currency effect. Once again, it was the region Europe and rest of world that was the growth engine, but it was also nice to see that excluding the OE contracts that we have communicated that we are phasing ourselves out from in the region Americas, the growth was 4.4%, and including that negative effect, we still had a marginal growth in the quarter of 0.2%. In terms of our performance of EBIT, it was in line with our expectations. As we have talked a lot about, we are in a phase of a very ambitious growth focus for the coming years with a lot of work done, both in the product development side, as well as the sales and marketing side for those new categories, especially strollers and luggage, where we still have relatively low turnover. That was therefore expected outcome in the quarter. What also was the case, and we will talk more about it, was that the cash flow was lower in the quarter, significantly lower than last year. A third of that difference was due to that in 2017, in the fourth quarter, we had a large payment from the German tax authorities as we won the case against the German tax authorities. That was about a third of the difference. The remainder is mostly then made up of a planned and purposeful inventory build-up of the products ahead of the important 2019 season, and Lennart will come back a bit more on that. Furthermore, we are also, the company is recommending and the board is proposing an increased ordinary dividend of SEK 7 per share versus the SEK 6 per share we had the previous year. With that, if we go to the next page, you can see the summary in the graph that show that over the year as a whole, we have then grown 6%, which is nice to see above our 5% organic constant currency growth. We continue to be running the business at a high margin with 18% EBIT, despite the fact that we spend 6% of our sales on product development building for our future. When we look at the overall performance, we can also say that we once again confirmed that it was for the year as a whole, the Europe and rest of world region, that was the big engine, but it's good to see that also the region Americas performed better in Q4. If we go to next slide, we'll summarize some of the key events in the period. On the image in that slide, you see one of the Tepui rooftop tents applied on a Thule roof rack on a car. The reason for why we're choosing that picture is, of course, the fact that in the quarter, in December, we announced the acquisition of Tepui Outdoors, Inc. It's one of the market leading players in what is a small niche category, and the category is called overlanding. If you've been lucky like I have, living three years of my life in Australia, you would definitely know what overlanding is because the concept started some 50 years ago in Australia, in the Outback, has since then moved into North America, South Africa, some of the Latin American countries, and a little bit around Europe as well. The concept is simply this: that overlanding is the journey is more important than the destination. You do not set out to end up at a specific camping ground or a specific spot. You set out on an trip and you will stop where you feel you should stop and when you feel you should stop, and then you quickly unpack your rooftop tent and can sleep in it, or just stay and have a break and enjoy that. Tepui has done a fantastic job over the last few years with the best quality product, we see, although being a very small acquisition and will not have a major impact on our financial performance, it fits our brand and our skill set very nicely, both from a production perspective as well as a sales perspective. We feel it will be a nice addition in strengthening our Sport & Cargo Carriers part of the business. In the quarter, we also continued what we have been doing over a number of years, which is a continuous improvement of our major plans, but specifically. In the fourth quarter, we did a major layout project in our German roof box plant, which is the biggest plant in the world for making roof boxes. What we have done there is simplify the flow in the factory and moved almost all the equipment around. I'm very impressed of how the team has managed to do that without any supply chain issues whatsoever. It will enable us, as we now move forward in 2019, to have a better efficiency as we have a rollout of our refreshed roof box program. As you might remember from the quarter three call, we presented to the market in quarter three, two new roof box models, complementing the world's best-selling roof box, the Thule Motion XT, which we already have in the market, with a lower priced, more simple, but still fantastic roof box called the Thule Force XT, which we started selling in stores as of quarter four. An upcoming top of line, really defining the premium roof box segment called the Thule Vector, which will be coming in quarter 3 now in 2019. To enable the more efficient production of these units, this was a key change of the German plant. We also in the quarter finalized an expansion of our Eastern European distribution center in Huta, in Poland, next to our assembly factory there. We enlarged it with 6,000 sq m or 60% of what we had before. That has been opened very successfully as well, enabling us to even better serve the quickly growing Eastern European countries as well as some overseas markets. In terms of the brand, it is crucial, of course, that a company like ours with the type of premium products we have and the fantastic brand recognition we have in those 140 countries we sell our products in, that we continue to build on that strength, especially so in the new categories where we are not the defined market leader as we are in Sport & Cargo Carriers. Therefore, we were very happy that just before Christmas, another additional two of the world's most premier department stores, Le Bon Marché in Paris and KaDeWe in Berlin, decided to list Thule luggage in their luggage department. Together with the Italian la Rinascente and the Japanese Takashimaya, we are now starting to have all those key premium department stores showing and selling Thule luggage, which of course is good for the brand also in other stores in other locations. We were also very happy and proud that when our Thule VeloSlide bike carrier won the very prestigious European Innovation Award for vehicle equipment for RVs. It is truly a fantastic bike carrier that allows you to bring your e-bikes or other bikes with you in the garage, as it's called in the RV. Finally, more on a local basis for us Swedes, I would have to say, but it's still very nice to see that the Swedish Nationalmuseum chose to show a Thule Urban Glide 2 stroller as defining great Swedish design when they reopened the museum now in the autumn. Some nice things happening. If we go to the next page and summarize sales by region. As we have seen throughout 2018, as also mentioned earlier here on the call, region Europe and Rest of World had another fantastic quarter with 13% currency adjusted growth. It was driven once again of, I would say, across the countries, all sub-country sets were doing really well in the region. It was in all categories except Packs, Bags & Luggage, a very strong quarter. I'm going to come back to the category presentations on later slides. We'll walk you through a little bit our view on Packs, Bags & Luggage more in detail then. If you look at the year, as I said, and the quarter also ending strongly, we are with the year ending above 10%, very happy with the performance in region Europe and Rest of World. If we look at region Americas, which had a 0.2% currency-adjusted growth in the quarter, it is important to note, as we have done repeatedly, that a strategic choice to phase ourselves out of some specific low-margin OE contracts, specifically some pickup truck accessories in the subcategory Sport & Cargo Carriers, and a number of smaller bags and cases for things like medical devices and other matters in Packs, Bags & Luggage. If we would take away those, it was nice to see that the growth in the, let's say, healthy part of the business that we will continue and maintain was 4.4%. U.S. is still a challenge market, mostly because actually these OE contracts are all associated with the U.S. We see very strong performance, especially in Brazil and Canada in the quarter. If you look at the full year, we had a decline of 3%, while if you would exclude the OE contracts, we had a flat year in the region. Here really is the Packs, Bags & Luggage category that has been underperforming, with also some negative effects than in Sport & Cargo Carriers if you look at the OE pickup truck accessory part, which is dragging those numbers down. Again, over the year as a whole, it was Canada and Brazil that were the star performers in the region, while the U.S. market was tougher. As we noted and commented on in quarter three, we did have some challenges in countries like Argentina and Colombia with their currencies. It was nice to see that they picked up again a bit in quarter four, but it couldn't compensate for the tough numbers they had in the third quarter. If we then go to the next page, we'll look at the product category performance for the year. It's interesting to note, as we've commented a few times, that despite very rapid growth in some of the smaller categories, it is of course, the fact that our Sport & Cargo Carriers business continues to be a very significant share of what we do. In 2018, the product category of Sport & Cargo Carriers still stood for 64% of our sales, which is 1 percent less than the previous year, but is still almost two-thirds of our business. If you look at the regions, the exposure in the regions is greater in Americas to Sport & Cargo Carriers at 71%, while it was at 62% in region Europe and Rest of World. Once again, for the 14th year in a row since I've been in the company, we grew more than 5% in Sport & Cargo Carriers. That was despite the fact that we had a business in the U.S., the pickup truck accessories with those OE contracts that we purposely are phasing ourselves out from, which was the whole reason for the decline in region Americas. As you can see, we grew in Europe and rest of world 9% in this category. another strong performance above 5% growth in that category. We might as well attack head-on our disappointment for the year, because clearly Packs, Bags & Luggage was our disappointment for the full year. If you look at what we performed with a 7% decline, where 11% decline in region Americas and 3% decline in region Europe and the rest of world is clearly a disappointment. We had some conscious decisions knowing strategically that we were going to see revenues drop from phasing ourselves out of low-margin contracts. We were also aware that our legacy product categories, so things like camera bags, tablet folios, CD wallets, et cetera, would continue to decline because we see that in the market as a trend. If you look at it in total, that decline was more rapid than we had thought, we can clearly see that we had underestimated when sometimes the tipping point comes for certain categories, it will go more rapidly downhill than we thought. If you look at that, it has meant that the legacy categories and OE business, not the areas we want to focus on for the future, so to speak, is now making up 34% of the Packs, Bags & Luggage category. A year ago, it was 42%. We clearly have a better exposure of positive categories going into 2019. We have a much fresher focus in terms of launching several luggage collections and other sport and hiking backpacks and bike hydration packs, et cetera. Yes, I have a clear disappointment. Did not meet what we wanted. We wanted this category to grow in 2018. I feel very calm that it will grow in 2019. We look at the star-performing category in the year. It was what we call Active with Kids, where we had a growth of 22% in the year in constant currency, with Europe and rest of world growing 24% and region Americas growing 13%. Here we are, of course, launching a lot of great products. It was expected to grow, but it's still very promising to see considering how important this category is. If you look at it's a category where we're almost singularly exposed to Europe and rest of world, so we mostly focus on the European market. If you look at that market, we estimate that the RV industry as such grew 9% for the year, which means that with us growing 14% in the region, we still continue as we've done 13 years in a row, beating the market, and that's always very promising to do. If we move on and talk a little bit more about the specific categories to the next slide and look at Sport & Cargo Carriers, and also talk a little bit about what's going to happen going forward. As we said, a growth of 5%, and actually a growth of 6% if we would exclude those OE contracts we purposely phased ourselves out of, is another solid year. More importantly, it was also a year where we lived up to those mantras that we have in how we will continue to be the undisputed market leader, which is by doing great products that we launch to the market. By ensuring we have a strong delivery performance and making sure that we support retailers online as well as in brick and mortar in selling the product out. I think we did a fantastic job on all three, actually, in 2018. In fact, if you look at the key product launches, you might remember that I said after quarter 3 that it was the most exciting quarter I've ever had in the company. I agree still with that statement. That makes, of course, 2019 now the most exciting sales year if you look at what we aim to achieve with the new roof rack generation, which we started launching as we commented on its 3 phases. The first phase started hitting stores in quarter 4 in 2018. Phase 2 happens now as we speak, during the first part of 2019, and phase 3 is at the very beginning of 2020. With a fantastically well-developed roof rack category with more than 14 patents, we're really defining the future in roof racks. I already previously on this call quickly mentioned the fact that we are also really broadening our roof box category. In quarter 4, Q4, we launched the Thule Force XT roof box in stores. A fantastically designed, nice roof box for a more medium price point if you look generally in the market. Lower price point if you would look at Thule's price points, and it has been well-received in the market. In 2018, we also have had a fantastic success with our Thule EasyFold XT, which is the world's best tow bar-mounted bike carrier. It is constantly winning awards left and right, and it has been a huge sales success for us in 2018. Overall, strong performance in both regions in 2018, slightly then obscured in region Americas by the fact of the phasing out of the pickup truck accessory OE contract. If we look at 2019, it is really to do more of the same, and it is quite a good approach if you're the best in something in the world. We continue to do more of the same. We're rolling out now, as I said, the phase 2 of the new roof rack generation. We will continue to take market share, I am convinced, by the refreshed and broader assortment of our roof boxes. We will continue to do well with the world's best portfolio for bike carriers. We will continue to have a strong delivery performance. We will continue to tweak our tools to support retail. Feel very good about this category for 2019. If we go to next page, then attack Packs, Bags & Luggage, which clearly as having been a disappointment, it's the one where we really need to prove to ourselves and the market that we can perform better in 2019. If you look at the decline of the category, excluding those low-margin OE contracts, we had still a decline of 4%, fully made up and more thereto of those legacy categories. What we need to make sure in this category is, of course, we will see continued double-digit decline in our expectation. We are not going to make the same mistake twice in being optimistic that we can turn something around. We will therefore manage that business in the smart, cost-efficient way in trying to milk it as well as you can as the last man standing in some of these categories. Where it has to happen, therefore, and where we are much more exposed in a positive sense than in 2019 in terms of share of sales within the category is in what we call the everyday backpacks and luggage. Where we absolutely did see growth with all the new listings we had, but where we need to see much more growth now, broadening our assortment, adding more luggage collections. We saw some very nice performance in our sport and outdoor packs in 2018, and some of the key launches were actually within that category. The image shows the highly praised Thule Vital hydration backpacks with our innovative and patented ReTrack hose system. We launched the Thule AllTrail hiking backpacks, which was very successful in the year, and we did a number of Thule smaller backpacks for the everyday use that have been well received in the market. Those type of products and combining that with the rollout of several new luggage collections will be the key drivers for why we will deliver growth in this category in 2019. In quarter one, we're seeing the second luggage collection after the Thule Subterra soft bags. We're rolling out our Thule Revolve hard case luggage collection, which is manufactured in our own facility in Piła in Poland. That's coming into the market now in quarter one, and later in the year, we're adding further two luggage collections. We are feeling very positive that with a stronger portfolio and an exposure to growing categories, we will definitely grow in this category in 2019. If we turn to the next page, we will talk about a category where there's even less doubt that we will be able to grow because we've grown very well for a number of years, and we're coming into the 2019 season extremely strong when it comes to Active with Kids. Our performance was great actually in all the three subcategories, where I would be remiss to say that we were even positively surprised ourselves how very well our Thule Chariot bike trailer, multi-sport trailer collection is doing in the market. It's been a fantastic year once again. We refreshed all those products in 2017, and they keep on having a great success. Part of this is, of course, the global trend, you would say, but mostly Central European and Nordic trend. More and more people bike commuting and dropping their kids off at kindergarten. It's also, of course, due to the fact that these products are simply phenomenal for the active family. We continue to do well with a very broad and strong portfolio in child bike seats and both our stroller models. Both the Thule Urban Glide 2, which was launched in a second generation as of January last year, has done very well. Our all-terrain jogging stroller. Of course, we launched our first four-wheel stroller, Thule Sleek, in the autumn. Also doing well, getting placements in the key juvenile stores. All of that means that when we look forward to 2019, it is a lot about more of the same. We will launch in the spring a black-on-black edition of the Thule Sleek. We're doing some tweaks and upgrades on some of the other products. It's mostly using all of those great, recently launched products and the more broader juvenile listings to continue to generate growth in this category. Finally, if we look at RV Products as a category, we can say that it was a hot market in 2019 in Europe in the RV industry. As I said, we estimate that the growth of the industry was 9%. It was very positive to note that the team based out of Belgium continues to do a fantastic job, both in terms of being capable of delivering the type of volumes we do from the plant, and also being close to all those major key accounts around the European markets, so that they choose the Thule products first and foremost. A strong performance of 14% growth in a solid market, strong market of 9% growth. We also here continue to do the same. The image you see is the Thule VeloSlide bike carrier, very smart solution, award-winning in really defining how you should transport bikes in the garage in an RV. Generally, it's about those new great products. It's about this close key account management and taking care of the strong delivery performance in a booming, growing market, which has been very well done by our RV team. If you look at what it means going forward, we have no doubt in our niches by far the best-in-class products. Our challenge now is then making sure that we continue to drive above market growth by broadening that assortment and further working closely with the key accounts. I feel very calm about that, which then leads to the question: what will the market do? In our expectation, it will continue to be a positive market in 2019 as a whole, but maybe not as hot as it's been the last two, three years, which therefore means some growth, but maybe not a lot of growth for the market. Considering that we intend to continue to take market share in that RV market, we feel also very good about this category. Which leaves us to talk a little bit more about the financial numbers. I leave it to you, Lennart, to walk through that. Thank you very much, Magnus. Looking at slide 11, which is the income statement, I will comment on some of the items Magnus hasn't already touched base on. Gross margins were for the full year down with 0.7 percentage points, including an unfavorable currency effect of 0.3 percentage points. A decrease of 0.4 percentage points. Driven by the negative material price development we have had for the full year, and we have talked about that, and the startup costs in the supply chain for all these various product launches to start up the new factories in Poland and all the projects within the roof rack and the box factories. Our selling expenses, higher than prior year in absolute numbers, yes, but in percentage of sales, we ended the year at 17.8% versus 17.9% prior year due to the product development push and commercial launch cost. Especially product development, where you know that we take everything direct in our P&L as expenses as they occur. We ended the year, as earlier communicated, at 6% of sales. If we look at financial net in the quarter, it was minus SEK 8 million versus prior year minus SEK 16 million. A big difference between this year and last year is that this year we have no unfavorable currency effect, which we had last year for evaluations with minus SEK 4 million. I think more importantly, we had our external borrowing cost, which was effective mid this year. We ended the year with SEK 7 million cost in interest expenses versus SEK 11 million last year's quarter four. The tax rate for the full year of 2018 was 24.9%, versus prior year of 24.4%, if you exclude extraordinary events we had in 2017, which primarily was the U.S. tax reform and the tax case in Germany we discussed earlier as well. Going to slide number 12, where we have the operating working capital and operational cash flow. This quarter, we ended up with approximately SEK 1.2 billion in operating working capital, which is 18% of sales versus 15% of sales last year. Increase in absolute number of SEK 290 million, and if we adjust that for currency, it's around SEK 250 million. Majority of that is increase in inventory and accounts payable, which stands for SEK 200 million. We have continued, as we had mentioned, Magnus mentioned, increase in inventory from ending of Q3, a conscious choice, and majority of increase is due to our recent launches in Q3 and Q4, as well as coming launches in Q1 this year, for example, the Thule Revolve. We also have an effect that we actually managed to bring in products in advance from China due to the announced tariffs. We were able to get in some inventory for that to avoid the incremental tariffs that should have come 1st of January. Now, if it will come or when, we don't know. Also since we are entering the peak season, at the same time, we now will make a major change at the moment in our Seymour assembly factory in U.S. We have decided, for example, to increase the prebuild, more than we normally do for the spring and for the Q2 high season. Therefore, to say here that we do not expect the inventory levels to go back to more normal levels until after summer this year. If we summarize it in operational cash flow, where this year generated SEK 802 million versus prior year, SEK 989 million, the decrease is related to the change in working capital I just mentioned, which we are convinced is the right thing to do for the company since we want to continue with high on-time in full and deliver high delivery performance. Also now partly going into the new categories, and we do not want to risk to starve any customers as well as rollout of it. Our investment for the year was SEK 178 million, which is 2.7% of sales. The biggest projects I mentioned, that is the roof rack factory in Hillerstorp and the expansion of the Eastern European distribution center in Poland. With that, I leave over to Magnus. Thank you, Lennart. If we summarize on the next page, slide 13, the full year performance versus our financial targets. As you know, we have an organic growth target of minimum 5% every year in constant currency, excluding acquisitions. It is nice to see that once again, we deliver that with 6% growth. We feel that we are on a good track according to our plans to reach the midterm target of 20% EBIT, delivering an 18% EBIT for the year. At a net debt at EBITDA level, we are at 1.6 times leverage, we're within the range. You know that we are having a dividend policy of minimum 5% net income, and the board of directors is recommending a dividend of SEK 7 per share versus the SEK 6 we had last year, which would be an 86% of the net income. It should be seen as a sign that management and the board feels very confident that this company will continue to be a great cash generator also for the future. Finally, if we conclude before the questions on the last page, slide 14, on what is then our focus rolling into this very exciting season of 2019. There are some key messages. What is always great to feel is that our strategy has worked, and therefore it remains unchanged. Our main focus is to drive profitable organic sales growth via the launch and continued development of great products. We are successfully strengthening the Thule brand in a global basis, also in new categories and new channels, building on the motto of the brand, Bring Your Life. We are starting, it's early days, but we are starting to become a serious contender in strollers and luggage, which you can see by the type of listings we are winning in both those categories with key retailers around the world. We will continue to utilize our strong back-end organization to drive cost-efficient growth. If you look at the product portfolio push and the general push within that portfolio, it will be the key and is the key for driving long-term future growth. We are currently running several parallel projects for new stroller models to come and new luggage models to come in the coming years. We are ramping up significantly for the new key Sport & Cargo Carriers launches, and of course, doing new developments there as well. We are keeping on launching great new products within RV Products as well. If you look at all of that, we have spent around 6% of sales on product development in 2018, and it will be at similar levels in 2019. In terms of the supply chain, clearly we have, as Lennart also mentioned, and I commented on as well, done a lot of good things in our plans in 2018. Investing in more automation, investing in new layouts and other things to create efficiencies. We will start to see the major impacts of these more towards the second half of the year, because that's when we are really coming into all the three launch phases of the new roof rack generation. That's when we are really doing all the three roof box models, and that's also when we will see the U.S. plans, where we are building a small fabrication facility outside the current assembly hall, where we will start to see the major impacts of those efficiency gains. That will be a key focus during the year as well. Very important, especially now in the new categories, of course, is continuously supporting all of those partners we have in the world, selling our products with great marketing tools, great in-store, online or physical store material, and being close with them in further rolling out our retail partner programs. We did one small acquisition in 2018. We definitely feel we have both the bandwidth and the financial means to do additional acquisitions. That is something that we will continue to look at. Once again, as we have reiterated a number of times, that should be more seen as a potential cream on top and an extra. It's clearly the case that we see a number of small interesting things out there. As always, we will only do it if it's both strategically right and financially right. With that, I open the floor for questions and leave it to you, operator. Thank you, Magnus. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question today comes from Daniel Schmidt from Danske Bank. Please go ahead. Yes, thank you. Good morning, Magnus and Lennart. Could I just start off with asking about the gross margin? You're right that you had a significant impact from raw material headwind, and also you took up the investment that you mentioned a couple of times when it comes to the plants and DC. Could you in any way quantify the raw material headwind that you had in the quarter? I think I'll start there. Yeah, you can say that a less of an impact than previously in quarter three, but still the majority of the hit on the margin is from the raw materials. All right. If you look into 2019 and also consider the fact that raw materials seem to have turned since five months back, is it fair to assume that you will be in a situation where you have a raw material tailwind in a couple of months? If you are better than me in speculating what might be happening with raw materials. If we assume our assumptions that we did when we set our pricing, which is based on the same logic like you were saying, where what we've seen. If raw materials develop in the way we expect, we should see an improvement on our gross margin because as we've noted a few times, we admit that we underestimated, especially aluminum, clearly in what happened this year. When we're entering now into 2019, we have adjusted for what we expect the market to be, and that should mean that we should bring some of that margin back to us. Okay, good. Is that happening already now, or is that sort of a bit more delayed? There is always a lag. Good lag some years, bad lag some years. It's clearly the price increases are already happening, right? If you look at it from a material cost impact, it always moves slower because we do hedge, especially aluminum, you can hedge. There's the good with the hedge, but there's some ways the bad with the hedge, you bought with a slightly higher price to flatten things out to not have as much of this. The positive on the price increase is starting to happen as of the beginning of the year. Yeah. Is it fair to assume also that you had any sort of marginal negative impact from tariffs in the quarter that you're now neutralizing with price hikes? If you look at the, it's a relatively small amount in, or even very small in the quarter because what we brought in were very small amounts of product extra. If you look at that whole, I think in reality will play out as we speak over the year more. We have communicated that we chose the approach of absolutely passing through only the exact amount. Which if we're honest in practice means your gross margin will be hurt from it. That was very minor in quarter four. Yeah. Okay. When you talk about underutilization of production capacity, and you mentioned these things that you've changed and invested in and so on. At the same time, inventories are up 32%. You've been building inventory quite a lot in the quarter, and you explained why, but at the same time, should we see that build-up as more third-party build-up then, which has not been produced in your plants absorbing cost? It's a combination. Yes, you're right. Actually, a lot of it is components that we don't want to sit short on as we are now ramping up. If you take, for example, the Thule Revolve hard case luggage, which we're up and producing, shipping around the world, will be in stores in a few weeks' time. We are up and producing at high quantities now. To do that, we needed a lot of components and plastic sheets and other things for our assembly. We, therefore, have brought some of that in to be able to pump out as we now are ramping up our production. The additional inefficiency costs that we have had, therefore, in our plant is that if you do a hard case luggage, where we're now fully up and ramping in production as we came into the new year, but late last year, we were already doing zero series. We had all the staff, we had all the equipment in there, but really more doing first production runs and job ones with all those costs associated with before you really ramp up fully. All right. You're right, it's a combination of both those factors at play. Yeah. That will gradually fade and improve. Exactly Basically what you said. Yeah. Okay, good. Finally jumping on to Americas then, given your outlook that you had on Packs, Bags and luggage and a couple of more models coming out in 2019, quite sort of confident that Americas is now finally turning a corner. Having said that, could you give us just some brief guidance on the pruning? You did SEK 16 million in the quarter, and you said SEK 60 million in connection with the Q3. Will the rest be in Q1? The majority is in Q1, there is also in Q2. What we've said is that it's all going to be done in the first half. By the first half, all of those old businesses are out. The reason we can't say it's always just one quarter, you never know if you get some orders in April still is slipping in. We did have some of those sales in Q2 last year, it will be in Q1 and Q2, we will see it. All right. Finally, could you say anything about the sales numbers that you've been generating on the Sleek or the stroller segment for that matter, for entire year 2018? We won't communicate on any specific stroller because we don't communicate on any specific product of any type. Clearly, if you look at the 22% growth of the Active with Kids category, the fastest-growing component in percentage in that one was strollers. Is it fair to believe that it's a bit north of SEK 100 million? I don't know what you think is fair to believe, but we will communicate more about our stroller category at a later date. All right. Thank you, Magnus. Thank you. The next question on the line today from Peter Reilly from Jefferies. Please go ahead. Well, good morning, gentlemen. If I can start please, on product launches for 2019. You've talked about more products coming in, like two more luggage ranges, there's some more stroller products coming as well. Is this evolutionary or revolutionary? Last year you also had a lot of very important launches. I just don't understand what the momentum is, whether this year it's more filling out gaps in the portfolio or whether you've actually got some major launches coming, particularly in luggage, where two ranges in one year, I think, is the most you've ever done. That's my first question, please. Morning, Peter. Yeah, you're right, actually. I mean revolutionary is maybe calling it too much, but significant in the sense that we are not just tweaking existing products is clearly the case in those two luggage collections. We are coming with a hard case luggage, which we've never had, which is of course significant, the Thule Revolve as of quarter one. We're coming with a full luggage collection, additional one in Q3, which will actually be out of all the luggage collection, the one where we have the most models and versions of it. I would definitely say that those are significant launches, clearly much more than just tweaking something. If you look at the strollers for 2019, it's more of a tweaking we have the Thule Urban Glide 2, which was launched the second generation in January, and the Thule Sleek that came in the autumn. On the Thule Sleek, we're doing a more expensive model, a fully dipped in black, which is very trendy, it's a black-on-black edition, which will cost EUR 100 more. That is just more of a tweaking of the existing Thule Sleek to keep that interesting momentum going in it. If you look at the Sport & Cargo Carriers, I still would consider that the premium and roof box, the Thule Vector coming in Q3 is definitely a significant one. We're raising the prices with almost EUR 500 in average, and it's a completely new technology in it, and it's really redefining the roof box space. If you look at the other parts there, we have started the rollout of the roof racks. It's still revolutionary because we're doing phase two and three, but it is more models of a conceptually thing that we started rolling out in Q4. If you look at bike carriers, I would say bike carriers this year, we're doing a lot of smart little stuff on our bike carriers, but I wouldn't say there is a significant new product within the bike carrier that's more additions, tweaks, models, versions, so to speak. If that gives you an idea. Yeah, that helps. If you look at Active with Kids in particular, you grew 22% last year, which is obviously a very rapid pace of growth, but much slower than the 40% in 2017. I guess you're a victim of the base effect. As the business gets bigger, the percentage numbers get harder to achieve. In 2019, you've got the Sleek for a full year. Obviously, you had, I would guess, fairly limited sales in 2018, plus you've obviously built quite a lot of inventory going into 2019. Can Active with Kids grow at a similar rate in 2019 than it grew in 2018? Does the law of large numbers mean that sequentially the growth rate goes down? Yeah, I think there's always a law of great numbers, but at the same time, you are right. We are comparing what would be four months of one product, now 12 months of the same product in strollers. We clearly expect that the Thule Urban Glide will continue to grow very nicely as it did all throughout 2018. We actually will see continued growth in our multi-sport trailers and child bike seats. Those two, we do not expect to see nearly the same potential growth. Strollers in itself, due to the broadening of both the number of retailers selling our strollers and having a full year of the Thule Sleek, means that ambition levels are very high. I'm not committing to a number, though. Clearly, we have high ambition levels for growth numbers in Active with Kids also in 2019. If I can move on to the mix for fiscal 2019, you'll have completed the legacy fade-out by, well, certainly early in the second quarter. The new products you're launching, you said previously you've got higher gross margins. I think there's a slight change in tone here because you had said previously that product development costs would fall as a percentage of sales, and now I think you're saying they're going to be stable, I guess, because you see lots of growth opportunities. Am I right in thinking that now you should have a positive mix issue in 2019, so it should be possible to make a step towards your 20% margin target? Yeah. Once again, yes, you're right. There is some positive product mix exposure that we clearly are hoping and expecting to get if we get the growth in those categories we're targeting. You're right, I am holding a slightly higher product development. We're looking at some exciting other new things that we might be talking about in the future that we're spending some money on as well, aside from all the things we're doing. We are keeping that momentum because we see some long-term growth opportunities. If you look at it in a total mix setup, I still hold true to what I said back in 2017 at the Capital Market Day in the autumn, that 2018 and 2019 are not the years where the major steps should happen because we are spending a lot of money. We're running three parallel stroller development projects and three parallel luggage development projects. All those strollers is growing fast, and luggage is growing. They're still quite small in our total share of sales. Totally, it's not just the product development, it's also the staff we take in the sales and marketing aspects, the type of fairs we go to. There is some positive expectation, but generally, the bigger lift is still, as we said already before, 2020 and beyond, when we start to see bigger volumes of high-margin strollers and luggage. Lastly, on merchandising costs. You've indicated previously that you were taking some expenses because you're helping some of these new stores build Thule sort of stores in stores. Was that ongoing in the fourth quarter and into next year? How's that whole process going? Because it sounds like you're being a bit more successful than you had anticipated in terms of converting some or winning new accounts with some of these large department stores. I don't imagine it's inexpensive kitting out a mini store in Le Bon Marché. No, you're right. What we're doing there is, we had a specifically high for the stroller category in Q3, as we noted, because we got a lot of stroller, especially in Central Europe, some very major stroller retailers committing to large shop-in-shops. That was slightly lower than in the quarter four because it was smaller stores and more of a continuous level. At the same time, you're absolutely right. We have been successful, which we think is crucial when we now broaden our luggage assortment, knowing that we will then get the hard cases and a third collection into these places as well. We are clearly approaching the business from, we want to win in the long term and not run our business on a quarterly basis. If we see the right opportunities, trust me when I say it's not all of them that are right. We say no to a lot of our proposals from our local sales management. If we see them as the right ones for a longer period, we will prefer to make sure that we get in those right listings at the right place and support. There will be a continuous, it was specifically high in Q3 for strollers, but there is a continuous support for retail going on. Okay. I've got some more questions, but I'll stop there rather than take up the whole call. Thank you very much. Thank you. Our next question today comes from Gustav Hagéus from SEB. Please go ahead. Thanks, operator. Good morning, guys. Good morning. I have a few follow-ups on the stroller segment, if I may. First, is it fair to assume that you might launch, let's say, additional conventional strollers 2019, aside from Sleek and aside from those alternations and improvements to Sleek you mentioned earlier? We will not start selling in stores, but we will present to retail, at the big fairs, a new model that will come in stores in 2020 in the beginning of the year. No additional completely new strollers hitting the market in 2019, but definitely in 2020. That additional stroller, is that targeting similar size of the market as Sleek, or is that more of a niche product, would you say? I think if you look at it from a global business, the next model will actually be attacking one of the biggest categories on a global basis. Exciting. Looking at your ambitions and budgets for Sleek 2019, I would assume it targets a bigger market than the multisport channel, although you are quite dominant in that category. Is that an internal ambition of yours to sort of reach or even go beyond the number of units sold for multisport for Sleek this year? No, it's not. I can tell you we have a fantastic position in child bike trailers as by far the biggest and best in the world, it is actually a very rapidly growing category as such, which we are taking share in. The category is growing, we're taking share in it, and we're the biggest player. I think there is from that perspective where we start, we will continue to be doing several more bike trailers than strollers even in 2019. Looking at Urban Glide or the Glide series, I would assume you're selling somewhere around 30,000 or 40,000 units per year on my estimate. Is that a better proxy of where you're looking to land Thule Sleek this year? You are doing some good guesses on what the Thule Urban Glide 2 is, I'm not committing to any number on the Thule Sleek. In terms of what it is clearly a case that I've mentioned a few times. The most successful stroller brands in the world historically, over the last 10 years, have started to sell significant volumes of new models, not even in year one or two, but mostly year three and four. We are realistic in saying, I don't think we will change the world differently from how other people have been successful. This is still in the first year, from a calendar basis, we're in month five of Thule Sleek. Really Thule Sleek's bigger volume should be coming from month 24 and beyond. It's not 2019 that is the big volume pickup year. By default, in comparable basis with 2017, it will, because we didn't sell a single one in January 2017. We're selling a lot more in January 2018, and now we're going to sell them in January 2019. From a comparable basis like that. If you look at for the category perspective and when it should be really hitting its big volumes, we're actually more into 2020 mid-year. That's when the real volumes should be happening for Thule Sleek. Okay, thank you. A follow-up on Daniel's question regarding raw material costs. I noticed that you mentioned that you'll have a support to margins if raw material prices are where you would expect them to be. Would you confirm that those expectations are prices that are above current spot prices? Actually, it's a little bit different by category. If you would look at it, there are differences between various things. Some things move very quickly on spot prices. Some things you have to follow the spot prices. In aluminum, you do hedge, and we do hedge. We hedge actually in the good times and the bad times, which is a little bit like currency hedging. Either you hedge or you don't. You can't say, "Now it looks good, so I'm going to hedge, and now it looks bad, so I don't hedge," because then the whole concept of hedging goes away. Clearly we are going to sit with a slightly higher than maybe a spot price aluminum if the spot price has, as it's been for a while, going in the right direction because we hedged. Therefore, if you look at it, our market expectation isn't super positive of materials, but it's not very negative either in general. Okay, flat then. Between different products. That's what I'm saying, different between different materials. If you overall look at the bigger pictures, relatively flat. Okay. Lastly, I didn't find any, maybe I missed it, on capital expenditure 2019. Is it fair to assume that they're not going to be above 2018 levels, or did you write this in the report? We didn't comment on an exact CapEx expectation. We have previously indicated that every year we are roughly in percentage of sales around the 2.5%. We believe that if you look at it, we're going to be in around those type of numbers also in 2019. Great. Thank you for taking my questions. Thank you. Cheers. The next question today comes from Agnieszka Vilela from Nordea. Please go ahead. Hi. This is Sara Selin from Nordea. First I'd like to ask about these maintained spending on product development year-over-year. Is this only because you're sort of seeing new growth opportunities in the future or you're also maybe including other launch costs in this that might be continuing at a high level? There is nothing else than pure product development cost. There is no launching cost estimations in that. The logic is this, that if you look at it, we're tracking to our plans in terms of when we are delivering the projects and products. We have looked at our ambition levels of how many major projects we could take on, and our head of product development based out of Hillerstorp is doing a fantastic job in creating his structure of the team. We've been capable of finding some of those right people that we wanted a bit earlier than we thought, and that enables us to go more aggressive on some new ideas we have. With the success rate we've had, we've decided to keep that momentum going a little bit more aggressive than we thought we would. All right. With those costs constant relative to sales, I think you've highlighted a few other areas where you see potential for margin improvement, though. You mentioned mix, you mentioned raw material and price, and you mentioned the potential for improved efficiency. Which of those do you expect to contribute most in 2019? The most difficult one is, of course, raw material, because that's truly a little bit sometimes out of your hands, what happens in a marketplace. Very difficult to speculate in. I have high expectations on my own team's ability in our factories to really get the efficiency part right. We've taken some very correct decisions, changed layouts in factories, invested in optimization, done big investments in general. Now there's a lot resting on their shoulders to deliver all of those expectations of efficiency gains, therefore. That's a key part. In terms of the mix effect, it's going to be a contributor of us delivering to what we've expected. If the luggage growth is as we expect, if the stroller growth is as expected with high margins, that should definitely help versus a shrinking legacy OE business at low margins. That should definitely be a relatively straightforward, if you call it like that. In terms of price is always also a little bit in this price mix. It depends on where you're successful and who you are successful with. This is not something an analyst want to hear, but it's not as straightforward as you raising the prices with people automatically doesn't mean that you will get that full true average effect, because you might grow with a certain distributor in a country much more than in another direct market where your margins, therefore, from a pure customer mix, might not help you, and still the right thing for the business. For example, we had a very nice performance in the ending part of the year with our Asian Packs, Bags, and Luggage business. It is a distributor-based business, which versus selling Packs, Bags, and Luggage in some of the mature Western European countries where we go direct to retail, it will hurt our average margin. It's still fantastic because it shows that we can sell those type of bags in Asia, but it will actually hurt our average gross margin. A little bit of these things aren't as straightforward as just saying us doing price increases will naturally mean that the average margin goes up. All right. I wondered if you maybe can comment if you see repeat orders already coming in as expected in Sleek? Absolutely. We clearly have repeat orders from those countries where we rolled it out quickly. We have some very positive feedback on those markets where we've got it early and in the retail. We are still very positive about the expectations of a successful rollout of Thule Sleek both this year and, more importantly, for the coming years. The only reason I'm trying to sometimes calm Gustav down in his expectations and not telling him exactly how many strollers I will sell is that we truly have looked at the history. Stroller is one of those categories where it is a word-of-mouth. You need to have seen your friends at a cafe using it or your older sister having it before it becomes a mass product. Therefore, it is in countries now where we've started to see people seeing it on the streets. That's where we are getting the repeat orders, and that needs to build up. Very positive signals, but it takes longer than maybe you expect in that specific category to get the big volume. All right. Very well. Question on RV then. I don't know how your order books look, but is there something you see already for Q1? In general, when we did the Q3 report, we mentioned that we would thought we would see a clear cool down in quarter four and quarter one. Actually, we don't see as much cool down. We see some cool down, but not as much as we thought, which therefore, because we still believe there's a little bit too many vehicles out there, so there is still a pipeline adjustment needed, means that overall, we haven't changed our view for the overall 2019, but we think that maybe not cooling enough down in quarter one means that they will cool down a little bit more in the later quarters. Overall, for the year, a low positive expectation with actually a surprisingly strong Q1. Good. Finally, just wonder maybe if there was any effect of, you had a bit of weaker sales of roof racks, I remember in Q3 because of the new product launches. Is there, to any extent, a reversal of those effects in Q4, maybe a little bit of inventory building? What's happening is that in Q3 we launched it in Europe, in Q4 we saw, or we actually hit stores in quarter four in Europe. Which meant that retailers had reduced some of their purchases in quarter three. We saw that pick up in those countries in quarter four. At the same time, we're launching it now as of quarter one in region Americas, which meant we saw a little bit of their cooler orders in quarter four now will be coming in as better orders in quarter one. We're doing the same with the phase two, so in Europe where we see a little bit of cooling now. There is a little bit in and out, but generally on the products we saw a limited order intake in quarter three, roof racks for the European market, we saw a pickup in quarter four. All right, good. Thanks. Thank you. The next question today comes from Peter Tester from One Investment. Please go ahead. Yeah, just a couple of questions, please. One is on Sport & Cargo with the new products coming through in the launch phase. I was wondering if you could give some sort of comment on how that may have helped you on building a distribution base, especially in North America. The second was on Packs & Bags. You said the legacy business would, you said decline double digits and you expect it grow overall. I was wondering if you could give some sort of sense as to how this is driven by the new luggage sell-through or sell-in primarily, I think you mentioned Q2 and beyond. Thank you. Yeah, thank you, Peter. The first question, we have a fantastic distribution in region Americas, historically in Sport & Cargo Carriers. New products really doesn't generate for that category any new additional listings. We are with any retailer that is anything in this category, we are there because we are the undisputed market leader everywhere in the world. When it comes to Sport & Cargo Carriers and new products, it's not generating generally anywhere, any significant new listings. It is more making sure that we take a greater share of the sales when people come to those stores, and potentially a little bit that we drive more total sales as the market leader. If you take the second question on Packs, Bags & Luggage, you're right. As I said, today if you have 34% in legacy and OE, which I unfortunately believe with the hindsight on having seen it also in 2018, that we will continue to have a double-digit decline. There is a few combinations within Packs, Bags & Luggage, which still makes me feel very confident that we will grow the category as a total. It's partly the fact of those luggage collections. One hitting stores in quarter one, our first hard case luggage collection made in our Polish factory, which we call Thule Revolve. That one will help throughout the year. Then we have the additional two luggage collections coming in the autumn, they will of course only help towards the end of the year. But there is also a very big category, actually currently, clearly much bigger than luggage, which is what we call these everyday backpacks. The backpack you have going back to campus or laptop attaché that you go and use for work. We are seeing a constant growth in those products, and that will be more across the full year where we have launched a number of new products and getting good listings. Thirdly, within what we then call sport and technical packs, we see a stronger and stronger listing. We had a fantastic success with our bike hydration packs last year. We've added two new models that are hitting in the spring. We've broadened our assortment of hiking backpacks with more models, and that's also more throughout the full year. There is a combination of things that are happening throughout the year, but within specifically luggage, a more of a boost, of course, then with those additional collections come in the second half. Right. Third question, please, just on if you could offer any particular comment on how you've seen retailer behavior changing, either North America or Europe, and willingness to take in product in the more traditional sectors, both the cargo and RV. Generally- I think generally if you look at it, I would call the RV sector is not a classical retailer. It's more about a dealership where you have a full vehicle, it's slightly different. If you take the sport and cargo carrier side, what is happening is that in the U.S. specifically, I think retailers are, despite having large physical stores and a lot of physical space to store things, they are realizing that that's not a wise use of their cash. I don't think it has ended, so to speak, the reduction of in-store products, because it's not warehouses, it's sitting in their stores. We are expecting for 2019 that they will continue, the most professional ones at least, to actually reduce their in-store inventory holdings a little bit. Selling out more than we sell in, necessarily, which has been the case in 2018. Which we think is only great because they will have a greater chance of surviving if they run their business a little bit smarter, a bit leaner. In Europe, that has, in many cases, already been done better. We see less of that shift in Europe. If you look at both regions, you see, of course, a continuous movement into online. In the online reality, it is very much a constant balancing also for those players on, do we as a brand do the drop ship for them? What do they keep in store? How do you do that total business model with them? That's, of course, something we work all the time with those retail partners as well. It's been evolving. I don't see any step changes. It's an evolving landscape, where clearly the U.S. retail sector is a few years behind still the European retail sector in getting more efficient in how much they have on stock and why. Okay. In your area of rolling out sales supporting tools and rolling retail partner programs, can you just talk a bit about how you on the other side are handling their therefore increased need for replenishment cycles and other services to be able to allow this behavior to also give you a chance to build market share? I think the most important thing we did was already 10 years ago. We decided that we sucked up to the reality, so to speak, and say, retailers will not want to get a full truckload of something when we want to send it from a factory anymore. They will want to get pick and pack, and they want to order it online the night before and have it the next morning because they don't want to deal with all of those planning, forecasting inventory. We started really 10 years ago working in a completely different way, changing all our distribution centers, changing all our forecasting and planning tools, and using the category where we were the undisputed market leaders, Sport & Cargo Carriers, as a category captaincy approach of teaching ourselves how to be a retailer. Not that we wanted to be one, really, to be honest, but we wanted to understand what they went through so we could service them better. I think we've proven that within Sport & Cargo Carriers, it's fantastic products that drive the growth, but it's also been a fantastic service to retailers, making their life easier that has helped it. What we're trying to do, and it's of course more difficult when you're a newcomer in various categories, but we're trying to use the same skill sets, the same type of distribution setup, and competencies to service the other categories in a similar way. Great. Okay. Thank you very much. Thank you. The next question on the line is from Charlie Mortimer from Citigroup. Please go ahead. Hi, good morning. Thanks for taking my question. I was just wondering on the recreational vehicles, you said that based on your analysis of too many vehicles out there, I was wondering what the extent of that oversupply and where that analysis comes from. You said it's surprisingly strong Q1, but maybe later in the year things will be a bit softer. I think if you look at it, there's a lot of statistics on RVs. It's actually out of all our categories, by far the most statistically analyzed category. There is a lot of data from the European Camping and Caravans associations. There's a lot of registration statistics. It's relatively easy to use publicly data available to see that if you look at number of vehicles made versus number of vehicles registered, there are some very clear trends over years that you can watch. Of course, since we are interested in how the market is doing, and we sell to all the various manufacturers, and we work with all the major dealerships, we do the simple thing. We look when we're visiting them and say, oh, geez, there's a lot of things standing on the lot. There's a combination of pure spot watching and a lot of statistics that is readily available in this category. If you look at that combination, it's no surprise we are not the only ones saying this. I think everybody in the industry is saying there is a little bit of a pipeline buildup. That's not debated. What is more debated is how big it is and what it potentially will entail for the manufacturers and how much they reduce. We were already two years ago, probably one of the more, let's say, outspoken about that there was too many vehicles out there. We have expected this for quite some time. We expected that Q4 and Q1 should be clearly lower. They are not as hot as it was in the beginning of 2018 and the whole of 2017, but still, it's very positive and more positive than we thought. With a slightly cynical approach from our side saying, "Yeah, but they still need to compensate." There is fantastic sales going on to consumers still. It's more about, yes, there is a pipeline adjustment. It is not coming as much as we thought in quarter one. Probably there will come a little bit of that slipping in in quarter two and three is our expectation. Okay, thanks. Yeah, understood. Just on the acquisition side, what are the sort of hurdles or criteria that you look for in these acquisitions? Is it niche products just that are complementary and bolt-on in size? Is that what we should expect in the next year or two? I think in general, we've said the same since we became stock listed. We repeated at the capital markets day. We've said we are first and foremost an organic growth company. That's what we focus on. If we find a company, small or big, by the way, that fits something we would otherwise wanted to have done ourselves organically, but where buying and acquiring that entity would mean that we can do it more successfully or faster, then we will definitely look at it. We've looked at bigger companies. We've looked at smaller companies. We are going to be very true to two things. It has to strategically fit what we're doing. We're not going to go out and buy companies just because we sit on cash. Secondly, we need to be convinced that we can run it more efficiently and get something out of it. There is a third threshold, as always. People have some quite weird expectations sometimes how much their companies are worth. We're not going to throw money after it just to do acquisitions. That's why we're not telling anybody what they should expect in M&A, because we don't know ourselves where we will end up in that. That's why M&A should be more seen as a cream on top than part of the basic case. Understood. Thanks. Just finally on the net debt to EBITDA, the 1.5 to 2.5, you're still comfortable with that range? Clearly, you're close to the bottom of it now, so there's no change or wanting to go below that number? Generally, you can say out of the financial targets, we've been very honest with that also from day one. It's the one we're least focused on in terms of saying, "Is it terrible if it's 1.4? Will it change strategically what we do?" No. I think we're comfortable with the range. It's clear that we're at the lower end of it. We understand that. It's nothing that dramatically changes what we do. Okay. Cool. Loud and clear. Thank you very much. Thanks. Next on the line, we have Fredrik Morgård from Pareto Securities. Please go ahead. Hello, Magnus and Lennart. I guess we're running a bit on borrowed time, I'll be very brief with just two short questions. You gave the 34% figure on the legacy portfolio for the group as a whole, I was wondering if you could tell us something about how that is split across the respective regions. You can say very clearly that you have a greater exposure to region Americas within Packs, Bags, and Luggage in general, as you see on the percentual numbers we give. It is also therefore, by default, a much more impactful part of Packs, Bags, and Luggage legacy part, which actually happens to be even slightly greater in region Americas as a share of the regional sales of Packs, Bags, and Luggage. Okay. Slightly larger in the Americas then. Yeah. The second one on the gross margin and the underused line thinking you talked about that had a negative effect. Should we expect that to continue going into Q1 here? Yes, you should. As I said, really you're going to see the positive gains if my team delivers as I'm expecting them to do in all these factories. The expectation is really as of the second half, you're seeing the majority of those effects coming on. Because if you take as a simple example, the roof rack factory in Sweden, which is very well run, but at the moment we're doing some old products, some new products, we're ramping up some things, we're facing down others. It's not as sufficiently set up as it will be by the end of the year when we're running all the products in all the modern lines only. It's a similar situation if you take the roof box plant in Germany where we're fully up and running with the new technology when we launch the third, the Thule Vector premium boxes in quarter three. If you look at the Americas plant, we are currently doing the new fabrication plant next door, which is going to be finalizing Q2, so you're going to see the positive effects mostly from Q3 and onwards. Okay. Thank you very much. That's all. Thank you. We now have a follow-up question from Daniel Schmidt from Danske Bank. Please go ahead. Yeah. Sorry for taking up the time here. Just wanted to ask you, Magnus, you said, of course, and you said before that you are investing in areas that you haven't disclosed. When do you think that you're ready to give more information on that? We will definitely invite into a capital markets day when it's time to talk about bigger things. The smaller things, which we do a lot of, we will let you know in various quarterly calls as we are telling the retail community out there. All right. Then just final one on the acquisition. Can you say anything about the start of that acquisition? I just saw that you downgraded the 2018 number versus what you said before Christmas. Yes. Correct. It was, as you know, and we mentioned that before, just before Christmas in the U.S., it can be very tricky to get large volume shipments. This year was more difficult than most years, considering everybody wanting to bring in things from China without tariffs or with lower tariffs. Strangely enough, Donald Trump changed it, so it became the same tariffs anyway. That made actually some of these orders that were shipped from the supplier to Thule slip into the first quarter, which of course has some slight positive impact on quarter one. We feel very good. The market has taken the acquisition very well. It's been seen, if you look in media, as a very natural fit and a very logical fit. All the retail customers are saying the same. The Thule fans out there are very positive as well. We feel very good, and the little bit of slippage will help us in Q1. Thank you. Thank you. We also have a follow-up question from Peter Reilly from Jefferies. Please go ahead. Thank you for taking my follow-up. I just want to come back to PBL a bit and in Americas. You've given us previously the size of the growth category, so luggage and outdoor packs and so forth. I'm assuming luggage is bigger now, but still pretty small part of the whole mix. Also, if I understood your comment correctly, it's not like the Sleek where it takes a sort of two years to get the peer reviews and referrals and so forth. Is it fair to say, luggage for you is still a pretty small category in 2018, but you should have a much, much better year in 2019? Related to that, where are we with Case Logic? Because you hardly mentioned it at all. Is that business now stabilized and on a better path, or do you still have some challenges there? If you take the first one, you're absolutely right, Peter Reilly. We expect big things from luggage this year, clearly. It was very small in 2018 because it was one collection only, but we expect big things this year, adding a hardside collection, continuing to grow with the previous collection and adding two more collections. Your statement is fully correct. Small in 2018, definitely. It is more everyday backpacks, everyday laptop bags, and our hiking packs and other things that were bigger. Now expectations are big for 2019 with a more immediate impact with those luggage collections coming in. If you take the second question about Case Logic, Case Logic is the brand that was exposed to legacy and LE. I wouldn't say it's the brand so much, if you look at the legacy products, but the fact is, where Case Logic is still doing well is in more everyday backpacks. If you take university students in Amsterdam, actually, Case Logic in Holland was the best-selling backpack for university students. There are growth subsets also for the Case Logic brand, which is at a lower price point than the brand. Because of the Case Logic brand's exposure to some dying categories, the overall share of sales for Case Logic dropped in 2018, one percentage point down versus what it was in 2017. The brand in itself is still doing well in backpacks and simpler laptop bags, but really struggling due to exposure to the legacy. It sounds like you're much happier with having that brand inside your portfolio today than you were maybe one or two years ago. I am, because it drains on you when you are rapidly declining in something. If that rapid decline is because the market is declining, it doesn't make it more fun, but it makes it more realistic what you can do with the brand. We've seen some very good successes in coming out with some back-to-campus packs and some other price point bags, which are clearly lower than the Thule backpacks with Case Logic. I think in that category, we feel that Case Logic can still be a very useful brand for us so that we can offer a broader price assortment, also at price points that we are not going to bring Thule to. Thank you very much. Thank you. We have no additional questions. I'll hand back to you now, Magnus. Thank you. Exciting time. I've never had so many questions. That feels very good. I will then leave you now and wish you a great few months here, and look forward to hearing you and talking to you and having many questions then after our quarter one call as well. Thank you very much. Ladies and gentlemen, thank you for joining Magnus and Lennart for the year-end report. You may now disconnect your lines and have a lovely day.