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Hello, everyone, and welcome to the presentation of Husqvarna Group's report for the Second Quarter of 2023. My name is Johan Andersson, and I am responsible for Investor Relations here at Husqvarna Group, and I will be the moderator here today. Here in Stockholm, we have our CEO, Pavel Hajman; and our CFO, Terry Burke. Pavel and Terry will present the report first, and then afterwards, we will open up for a Q&A session. I would like to remind you that you can ask your questions over the phone and also enter your question in the web interface, and then I will read it here in Stockholm.
So with that, thank you very much, and I will leave the word over to you, Pavel.
Thank you, Johan, and welcome, everyone. Warm welcome from my side also here for our Q2 result that I would like to describe as a strong performance in the quarter as the season actually have unfolded. We have seen strong growth for our robotic mowers and battery-powered products. This continued throughout the quarter 1 and into quarter 2. And I'm also very glad to say that we have seen watering also returned to growth in the end of the quarter, which is, of course, very good.
From a profitability perspective, we have increased our EBIT across all 3 divisions and, of course, then also across the group with 11%. And we have improved, of course, also our operating margin. We have managed to improve our cash flow also in the quarter, ending up on a SEK 4.4 billion in the quarter now. This is mainly then driven by the operating income, but also improvements in inventories and trade receivables as well.
We do continue to deliver on our strategy, and we are transforming the group fully following the petrol to electric transformation. This has provided good value for the group as well as for our shareholders, but also, it actually gives us a way also to drive our sustainability improvements where we have improved and overstretched our target of CO2 reduction in this quarter.
As we said, also, in parallel, we're focusing on the strategic value growth areas that we have. We are also transforming our legacy business, and we have done certain consolidation of our operations in North America, which we will be talking a little bit more also there.
As we have said earlier, and as all of you are aware, during the first half year as well as then in the quarter -- in the second quarter, there is a continued macroeconomic uncertainty. We see that there is a bit more of cautiousness in the market despite the fact that there is an underlying demand. And with that, we continue to focus on managing our costs, on improving our cash flow and also having an operational flexibility that will enable our readiness should the demand turn either up or down going forward.
With that said, let's take a look a little bit more on the details of the quarter. As mentioned, our growth led us to sales of close to SEK 17 billion. This is a sales growth of 7%. Organic, it's just slightly above the 0. The key drivers, as I mentioned, was the strong growth for robotic mowers. Here, we see equal strong growth more for consumer mowers as well as actually for the professional mowers and also battery-powered products, given our ability also to deliver on these product groups, which is good.
We have also seen that we have been taking market share through independent research for robotic mowers during this quarter. And of course, we're very glad to see that our products are appreciated by the market. The demand for the watering products that grew gradually during the quarter, and it ended on a strong note so we had a positive growth on watering here in the end of the quarter, and in total also the Gardena division really managed to deliver slightly lower, so to say, organic -- a slightly improved organic decline compared with both quarter 1 as well as compared with quarter 2 in the last year, we ended up on minus 2% organic decline.
But it was a significant improvement in the EBIT up to a very high margin that we will present later on also. So in total, also for construction, they had a positive sales development in the North America part and especially also for concrete surfaces and floors segment and also parts of the sowing and drilling equipment, and also paired then with a good cost control, the division managed also to do a significant margin uplift in the same way as also Gardena have done that.
So in total, we delivered a higher EBIT, just above SEK 2.3 billion organically. And the margin ended up at 13.6% compared with a 13.1% margin. We will come into details around that, but the main drivers, of course, for the margin uplift was the price increases, the carryover from last year. We had also a favorable mix, and we also saw lowering of the raw material and logistics costs as such. However, given the impact of the price increase, we do have lower volumes in most of our product assortment.
The currency effect from the weaker krona was very small, minus SEK 30 million actually on the result in the quarter as such. Cash flow improved, as I mentioned earlier, SEK 4.4 billion in the quarter. Main improvements in the cash flow came, of course, from the result of the -- from the operating result. But we also managed to decrease our inventory and also to collect our accounts receivable in a better way. And we actually also managed to reduce our net debt compared with the year-end.
We have, of course, continued focus on our direct operating cash flow, mainly through inventory reductions that will continue here throughout the second half of the year. Overall, electrification is progressing well, and that can be seen in our numbers and in our growth. Today, after the quarter 2, robotics and battery is 20% of the total sales. And what I would like just to say here also is the fact that this includes also the second half of last year, which was, to a certain degree, a little bit about -- above the normal sales of robotic in the second half, which normally is rather low. But as we had an improved delivery ability in the second half, that impacts this number for the quarter as such.
More importantly around the electrification is that we have a good product portfolio. We are continuously launching new innovations and the interesting products to the market, and I will say a couple of words on that a little bit later also.
So looking on this slide, I think it is important to take a perspective that is long term. This slide actually characterizes that we have been executing on a winning strategy, focusing on the value-creation areas, which is robotics, which is battery, which is watering and also our professional solutions. And over time, we see that, that pays off in an improved profitability for the company. With the good results in the second quarter, we see that we raised the absolute operating profit level to be the second highest over a rolling 12-month period here, over a longer period. And we also have a margin, rolling 12-month margin increase here from 9% full year 2022 to 9.4%. And of course, our ambition is to continue the improvement of the operating result and the margin towards our financial targets.
Having said that, I leave it over now to you, Terry, to show us some more details.
Thank you, Pavel. Hello, everybody. Let me start with just repeating one of the bullet points that Pavel mentioned on the first slide. All 3 divisions improved their operating income and margin during Q2. So I think that's something we can be quite satisfied about. And it's really good to see how all 3 divisions have performed. If we start with the Forest & Garden division, Organic sales in Q2 was some 3%, and an operating margin of 13%. That's an improvement on 12.6% last year.
We have got strong growth in robotic and battery power products, and that's great to see that, that continuation from Q1 has also carried over into Q2 as well. We've had some quite significant product launches during Q2 and the first half of the year, which we believe has been very successful. If we talk about our NERA, it's the boundary wire free residential robotic. MAX is our battery range in the U.S. and North America, and ASPIRE is our battery range, including robotic in Europe, all successful product launches.
We have improved our margin, and that's really driven by price mix, lower raw material costs and lower logistics costs. There was also a small positive currency effect of some SEK 30 million in Q2.
First half year, we have organic sales growth of 9% and an operating margin of 14.5%, which is an improvement versus the 13.7% from first half last year.
Moving over to Gardena. A good recovery in Gardena is how I would describe Q2, particularly from a watering category perspective. Sales overall declined 2% organically. However, there was a significant operating margin improvement to 17% from 16.3% last year. As I said, watering returned to growth in the quarter, which was really encouraging to see, and of course, helped by the, let's call it, the favorable weather conditions during the latter part of Q2.
Very good performance in Orbit irrigation as well and actually something to call out that Orbit was margin accretive to the Gardena division during Q2. The higher margin was also driven by price, lower costs -- and lower cost in raw materials and logistics. There was a significant currency negative effect of some SEK 115 million in the quarter.
First half year, we are -- sales decline organically of negative 11%. And an operating margin of 15.4% versus 15.7% last year. But as I said earlier, good to see that Q2 is more of a recovery in getting back on track after a very challenging Q1 in the Gardena division.
Construction, I would describe Construction as another solid quarter, building on a solid quarter 1 in the Construction division. Organic sales declined by 5%. However, operating margin improved and that went to 14.1% versus 13.9% Q2 2022. There was good growth in North America, which helped the result and also strong performance in concrete surface and floor segment. Price increases and cost efficiency supported the favorable margin development.
There was also a positive currency effect of some SEK 60 million in the quarter. Putting that into the first half year perspective, organic sales declined 3%. However, operating margin improved, and we are now at 13.7% first half year for Construction.
If I just move over to the Q2 EBIT bridge and just to visualize how we see the performance in Q2 and how we've improved our margin from 13.6% -- from 13.1% to 13.6%. Starting from left to right, there has been a continued positive price carryover from 2022 into '23. We got the majority of the positive price increase during Q1, but there was also some positive price increase in Q2. If you adjust for price, volume is actually down. So that has a negative effect on the result. And in the quarter, there was some favorable mix really driven by the robotic.
Cost savings, good to see. We are on track with our cost savings, cost operational efficiencies program, and we delivered some SEK 100 million cost efficiency in Q2. And that's really good because that is critical to help fund the transformational initiatives. And as you see, towards the right-hand side, a SEK 90 million investment in our transformational initiatives and driving our strategy.
In the middle, you see a favorable raw materials and logistics. But let me be clear here, this is really heavily driven by logistics rather than raw materials. It was really the positive logistics effect that accounted for the number here rather than the materials. Small negative currency of negative SEK 30 million gets us to just above SEK 2.3 billion for the quarter.
First half year, again, if we start from the left to the right, we moved from a 13.5% margin to a 13.8% margin. We've improved our EBIT by some 11% in the first half year. I alluded to it a little bit earlier, price has played a part here in driving our profitability. And that is really a big part of it is the carryover from 2022 into '23, again, if you adjust for price volume as a negative in the first half year, but we have some positive SEK 330 million in total.
Cost savings. First half year, SEK 175 million. And again, just to repeat, it's very important that we drive our cost saving programs because that is really used to fund our transformational initiatives, which, again, you can see is some SEK 165 million of investment. So a good balance there between cost savings and transformational initiative investments.
From the first half year perspective, raw materials and logistics is now a small positive of SEK 110 million.
Currency is more or less flat now for the first half year, and that gets us to the just above SEK 4.7 billion first half in EBIT.
Balance sheet. Let me start, and I think I say this quite often when I have these presentations. We have a solid financial position. We have a very solid balance sheet, and we are in a good shape overall with the balance sheet. We have reduced our net debt since the year-end by some SEK 2 billion, which is great to see. And that, of course, is driven by our cash flow improvements, which I'll come on to a little bit later.
Inventory, we have also reduced our inventory. If you adjust for currency translation, we've adjusted -- we've reduced our inventory by more than SEK 2 billion as well since the beginning of the year, which is really good to see. The other thing maybe perhaps to call out here is trade receivables, slightly higher, but that is really driven by the higher sales and also a time that we had a strong second half of Q2, particularly within the Gardena division.
Net debt EBITDA has reached 2.0. I think this -- because we measure this on a rolling 12 then, of course, this will take some time to start to level out and hopefully start to come back down again. We have reduced our net debt recently. And also, we are improving our EBITDA. So with that in mind, we would expect to see this leveling out and then starting to reduce in the quarters ahead.
Finally, this was one of the most important financial targets that I had sat personally for the group during 2023 is we needed to get back into a much more positive cash flow situation. And it's great to see that at the end of Q2, we are at some SEK 4.2 billion of positive direct operating cash flow. We will continue to drive and focus our cash flow situation. We will continue to drive inventory down and manage our working capital in a good way. And we plan for a further improved cash flow to the rest of the year. With that, Pavel, I pass it back to you.
Thank you, Terry. So with looking back at the quarter, we also have some highlights, of course, we want to mention regarding products. And we stand strong on the market with a market-leading brand, or market-leading brands, and we also stand strong as an innovator and a premium supplier of various solutions. We have launched a new improved Gardena micro-drip system during the period here. This is, of course, very important given the fact that we see droughts coming, and that we see that this also leads in some cases to watering limitations. And, in some cases, we also see actually that there are subsidies given for water-efficient products being sold out in the market.
So this is something that has been appreciated by our customers and will, of course, help to also conserve water despite the fact that you would like to water your plants so that they can continue to grow. We have also launched another product that is strengthening our transition from petrol to battery. This is a new professional chainsaw mainly for arborists and for tree professionals. This is the first electric chainsaw that actually has a clutch also, and the functionality of the clutch is to give a stronger power when you release the clutch or you actually consolidate the power and then you release it when you release the clutch. So this is a good addition to our already large professional assortment of electric products and especially of chainsaws.
With the integration of Blastrac that we have been doing in the last period of time into the Construction division, and the refinement and integration of the product assortment, we are now a complete partner in surface preparations. We have the most complete assortment for this kind of applications on the market, and we really cover the whole application area from compacting all the way to polishing the floor also.
And then last, but not least, you have heard Terry mention the Husqvarna NERA, which is our first consumer boundary wire-free robotics that was launched in this year, and we see a very large acceptance and demand for this product. We have been in the market with boundary wire products since earlier among our full professional assortment. So this is a very reliable and tested solution. And also in addition into our Automower Connect remote application, we have added the so-called rewilding mode, which enables the owners and the users to simply block a certain area in their garden from mowing in order actually to enhance the biodiversity within the garden, which we think also is a very good feature that gives, so to say, selectability for the customers on how they want to actually manage their garden and how they want to grow and develop their garden.
So we stand strong on the product side, clearly. We have since earlier informed about our focus on the 4 value creation areas. We have the ambition to continue investing more into robotics, battery-powered products and professional solutions and also the watering products. We mentioned that we would like from 2025 to add another SEK 400 million on a yearly, so to say, investment into this for various kinds of development, may be R&D, go-to-market, et cetera. And of course, at the same time, we also announced that we will be shifting and acting on the shift from petrol to battery. We will continue then to adapt our legacy organization and legacy footprint that we have and make that more efficient as such, of course.
Overall, that should also give us a savings of approximately SEK 800 million from 2025 and onwards. This so-called acceleration program is progressing very well as planned throughout all 3 divisions in the various kinds of activities. We have been already since -- in earlier quarters, optimizing our manufacturing footprint that has mainly been in our Japanese plant where there has been a large shift into other plants. We have also earlier said that we are exiting approximately SEK 2 billion of low-margin petrol-powered consumer business. This is primarily wheeled business. And due to that, we are also then further consolidating and adapting our operations in North America that is related to this exiting of the SEK 2 billion business. This means that we are rightsizing the Orangeburg factory, which is our wheeled factory in the United States and taking that down to the appropriate volume that will be now going forward. And we're also completely closing down the production facility in Nashville, Arkansas, which has been -- or still is our handheld production for the North American market.
The majority of the production in Nashville will be moved into Sao Carlos in Brazil, where we have an operational unit since earlier. We have been doing some operational investments in Sao Carlos. We will continue to do that, and that is not only to accommodate for the volume coming from Nashville, but that is also actually for supporting and enhancing our focus within light agriculture, which is a part of the Professional Solutions' ambition that we have.
Overall, in North America, there is approximately some 900 positions that are impacted by these changes in Orangeburg and in Nashville.
Sustainability is a very important part for us, a strategic ambition for the long term, and we have been doing good progress in our development in the Sustainovate 2025 target setting, which we have had. We are focusing on 3 targets to reduce the carbon footprint to enhance circular innovation and also to enable customers and employees to actually make a sustainable choice. All 3 targets have developed well in the quarter. We have reached a CO2 reduction of 38% compared with our base year of 2015. We are very proud of that. At the time when we were setting the target for 2025 of minus 35%, we have felt that, that is very ambitious. And we still think it is ambitious, but the drive and the transition into electrification has, of course, improved the result of this. However, we should be aware that we still have 2 more years to go, and there is a certain volatility also in the market and in the demand. Of course, our ambition is to meet the minus 35% or even supersede it also in 2 years from now.
As to circular, we have launched another 5 new innovations into this area of sustainability, may this be around refurbished PCBs that will be for sales for robotics, may it be for energy efficient systematic mowing, may it be for related to post-consumer reusable plastics in areas like that. And we have a further actually pipeline of another 15 innovations. So we feel that we are well on track to reach our target of 50 in 2025.
As to people and the empowerment, we have improved there with some 400,000 estimated, so to say, persons that we have enabled and empowered to make a sustainable choice. And of course, this is very much driven by our increased assortment, which becomes more sustainable, but also by the fact that we are reaching out with information and education to everybody around our products and what this means. So we feel very content and also proud about supporting society in improving the sustainability aspects of how we go forward.
So to summarize, we are reporting a very good performance in quarter 2, where all the divisions have improved their EBIT results, both from an absolute number as well as the margins. We do deliver a stronger cash flow than earlier. We have a good pace in our strategic execution of focus areas, the 4 focus areas, but also our acceleration program in transitioning our organization and footprint. And finally, as stated also, the macroeconomic uncertainty continues. We stand strong on the market. There is a demand, an underlying demand in general for our products from all 3 divisions. But at the same time, we do see some, so to say, signs of uncertainty also in the second half of the year. And we actually also have a couple of comparables in the second half of the year that are important to be aware of, which we can develop a little bit more during the question-and-answer session, of course.
So having said that, thank you, and back to you, Johan.
Thank you very much, Pavel and Terry. So we have now come to the point to start the Q&A session, and let's start with the questions over the phone. So please operator if you can start the Q&A session over the phone.
[Operator Instructions] The first question comes from the line of Johan Eliason with Kepler Cheuvreux.
This is Johan Eliason. Starting off with the Forest & Garden development there. Obviously, weak volumes impacted your margins in the quarter with some underabsorption. Now you're closing down another SEK 2 billion of sales for petrol-powered ride-on mowers mainly. What sort of impact on absorption will that have in the second half of this year?
And then on that topic, just philosophically a little bit. It's obviously a petrol-powered product that you are closing down and then leaving the revenue opportunity. But -- and then part of the rethink is obviously we want to go to an electric world. But why -- I haven't read much about your ride-on mower business with the battery powers or electrical power. So is that not something you are focusing on at all? Is the robotic solution, your preferred sort of electric lawn mower product rather because your gross margins will always be better on the robotic product than sort of an electric ride-on mover? Or how is your thinking regarding this strategy?
So may I start and answering your second question. And then regarding the underabsorption, I will leave it over to you, Terry, a little bit. But we are indeed also focusing of course, on developing electrified ride-on products. This has been going on for a couple of years. We are, let's say, a little phased behind the development of the electric handheld products as a comparison. But already, in this year, actually in previous year and in this year and in the coming years, we are releasing electrified ride-ons. We are also actually releasing autonomous mowers as well. So we are not putting all our efforts only into the robotics as that is a low-energy way of cutting grass. And we need also to have different alternatives for different applications where larger power is needed, and therefore, we are also focusing the development on electrified ride-ons of larger sizes. Since earlier, we also have a hybrid rider for professional use since a couple of years back. So indeed, we are also focusing on this.
Thank you, Pavel. Yes, if I can say a couple of words around factory absorption. First of all, in the first half year, we have had a negative factory absorption. And I think that has come through in some of the numbers because, of course, we have been driving inventory reductions during the first half of the year. And I also want to be clear, we will continue to drive inventory reductions in the second half of the year, which would also have a negative effect on cost absorption. It's the right thing to do because we want to drive the right working capital and improve our cash flow.
Specifically to exiting the SEK 2 billion, we will rightsize Orangeburg. So what we are doing is we will adjust Orangeburg to the new volume productions that will be required going forward. So we don't see that volume absorption impact because we will deal with that through the rightsizing of Orangeburg. So I think that's important to take as well. And of course, one thing to be mindful of, with the closure of Nashville, that is really driving operational efficiencies as we exit Nashville and we move our production to Sao Carlos, and we look to drive operational efficiencies there.
Okay. And just on the SEK 2 billion sales you're leaving, when do you think you will catch up with the sort of electrified products to compensate for those SEK 2 billion?
Well, we have an ambition, of course, to increase both our robotics over the period. As you remember, we have said that until 2026, we want to come up to a level of approximately SEK 12 billion in the robotics. And we also, of course, want to increase our share of electrified motorized product that is up to 2/3 compared when we started when we had roughly 1/3. Here now after the quarter 2, we are approximately at a level of 40%. So we are moving in the right direction. And of course, our ambition is to, over time, transition into electric products, and it will be, of course, to a much substantial higher degree than only the SEK 2 billion that we are exiting right now.
Okay. And then finally, a question on inventory levels among your customers. Could you sort of talk about it in North America, Europe, Forest & Garden, Gardena, and Construction, et cetera?
Terry, would you like to say a word on that.
I would describe it as quite mixed actually. I think in some areas, we have relatively normalized inventory levels, particularly around Europe. I would actually say in North America, the market itself, North America is soft. And I think with that, there is perhaps some higher inventory levels that would sit in the trade because of the soft market in North America. And I think it's mixed also within the divisions. Watering and Gardena, of course, having a strong sellout at the moment, we went through the pain of retailer inventory corrections, let's call it, during 2022. And I think we've now come out of that. We're at a more normalized level. And then you see that when the season really starts for Gardena and watering, and that really comes through into the sales numbers in development. So it's a little bit of a mixed situation depending on where you are.
And maybe to add on what you're saying, Terry, is also that, of course, we will have a better insight into this when we are through quarter 3. And when we see how the remaining months of the season has developed and how the sellout has been to be able also to judge how we operate the business into quarter 4 and into 2024.
The next question comes from the line of Björn Enarson with Danske Bank.
Yes. A question on the demand situation for construction. And I mean, we are most likely -- yes, I mean, you reported quite soft volume numbers there, but very solid margin development. How much of cost efficiency is there? And how much can -- for how long can you deal with it through protecting margins through own actions? I mean, could you likely see a stable margins also in a likely weaker situation coming up?
Yes. I think if we first comment a little bit on the demand situation, as you know, the macroeconomical effects of the high interest rates are already now to a certain degree and will eventually going forward also impact the construction industry. There is no doubt about it. We mainly have our sales within the, may I call it, infrastructure segment, the commercial segment and not within private housing, which is firstly affected. During the quarter, we have seen, so to say, a differentiated demand throughout our regions. U.S. is standing strong still, whereas Europe and predominantly the northern part of Europe has been weaker. Also France have been a bit weaker. Right now, we still see a good pipeline in U.S. going forward.
There is, of course, a lead time around these larger infrastructure projects that is much longer than for individual housing. But so far for the year, we do forecast, let's say, some kind of a flat, let's say, demand going forward. If we have some regions that have a little bit better demand and other regions that have a slightly lower demand. And construction are very much oriented around their cost management. I think that they are doing a good job there. Of course, if eventually market would soften very much, it will have an impact on the margin, but not as we see right now going forward into the second half of the year. I don't know, Terry, if you would like to add something on that?
No, I think you summarized it well, Pavel. Yes, absolutely. I mean let's not forget, there is a good operating margin development. But yes, I take the point, organic sales is slightly down, yes.
Then on the exit of the SEK 2 billion, I mean, you will see cost decreasing SEK 800 million, and then you will invest some SEK 400 million, so net saving of SEK 400 million, and that will be visible during the first half next year? Or how should we look upon that by quarter? And then secondly, the mix impact on Forest & Garden, if you can elaborate on that one.
So just quoting the numbers, yes, we did talk about some SEK 800 million of operational cost efficiencies, and then we would reinvest roughly half of that, some SEK 400 million, back into accelerating our strategy. But those numbers take a full year effect by 2025. So it's not quite there in 2024. There will be savings in 2024, absolutely. We expect to be a full year effect of some SEK 500 million towards that SEK 800 million full year effect in 2024, and of course, investing will follow that as well. So that's -- we stick to our program. We are on track with our program. We are in a good way to deliver the full year effect, SEK 800 million by 2025. I hope that answers the question.
On the low margin, yes, we will exit low-margin wheeled product. And of course, that will support an EBIT margin improvement as, of course, exiting that business supports a margin accretive overall then.
And let's take 1 or 2 questions from the web interface. I think one here is for Pavel. It seems that you're gaining and winning on pro robotics in U.S. Can you elaborate a little bit on that? We are seeing quite some wins when you look at LinkedIn and under marketing material. Is it going in a good direction in your view?
Absolutely. Overall, in the Pro segment, we are going in the right direction. There is a very large interest for our whole robotics assortment, which is not just the CEORA that we very often talk about, but we also have 3 other 500 series products that also are very interesting for any kind of professional user. We are changing an industry that is, of course, used to cut lawns mainly by wheel products, and this takes time, but we see a continuous growth. We see a continuous interest. In the U.S., we are present at close to 30 of the top 100 golf courses with our solution, which I think shows the interest from the market, but also shows our dedication towards this.
Of course, the good thing is also that when they are being working on a golf course and displayed also the people who are playing golf find an interest in that and potentially will buy that to their homes. So we see a double effect there. And also, this gives us an opportunity also to have a discussion with golf courses or other kinds of sports, so to say, sports centers also around our battery products, of course, to have a complete also sustainable solution for their usage. So we are pressing on. The potential is large. We are developing well, but of course, this will take time to change a whole industry from manual mowing into robotics mowing.
Good. A follow-up there. Do you have any update on the big European win that you discussed in the Q1 call, I think it was a large win here in Sweden with multiple robots, anything on that one? And also, are you seeing -- robot seems to be very positive. Are you seeing any softness anywhere on robots? Or in all, is it going in, so say, in a good demand and good direction?
We have had a good growth also in this quarter, which also signals that the sellout has been good, and we have seen that. As I mentioned also, we have taken market share in Europe on consumer robotics, which we have clearly seen. And overall, we see that the demand is still there for these products. The interest for switching over to robotic mowers is there. So we don't see any downturn right now at this point of time.
Good. Another question, a little bit maybe special here, it's coming from Waverton. You get very good product reviews, especially on your battery-powered products, the robotic mowers and so forth. But in some niches, I don't see that, especially for snowblowers. There, we are seeing many reviews that are not that good. What's your strategy? And what's your view on your snowblower business?
Yes, that is, of course, a product that we have not yet fully addressed from an electrification and battery perspective. It's quite a difficult application to electrify with batteries, given the fact that there is a very high power needed for being able to throw the snow. And in parallel, you're doing this outdoor with minus temperatures that also drains the battery faster. It is on our radar. It is on our product road map, but it will still take some time before we come with such a product.
Good. Another question, just appeared from [indiscernible] in Germany. Can you please elaborate on the cooperation with Bosch on the battery side? Where do you use the batteries from that collaboration already? And what does it mean in terms of cost savings?
So the Power For All Alliance, which is the ecosystem that we created together with Bosch a couple of years ago, initially for the Gardena brand and their electrified products based then on the Bosch 18-volt battery and that has also -- was very well received in the market. Of course, there's a sustainability aspect and also a cost saving for our end users, for our consumers to buy that kind of a product with a variable battery or a variable use of the battery. We have expanded that cooperation now also through introducing the ASPIRE battery range for the Husqvarna Forest & Garden division. And we are, of course, looking further in how we can potentially expand our cooperation within the electrification area there, of course.
Thank you very much. We don't have any further questions here over the web interface. Operator, do we have any further questions on the telephone conference?
[Operator Instructions] The next question comes from Adela Dashian with Jefferies.
I have a follow-up question on the underlying demand and especially when it relates to the more consumer-driven segments like Gardena. If we look at what some of the larger market participants in the segment say, we're looking at pretty tough demand when it comes to home improvement initiatives and so on with some of the largest players even saying that they expect the general industry to be in a decline this year. That does not resonate when looking at your comments about seeing growth in Gardena towards the latter half of the quarter. So if you could please just go into a bit of a detail, and what you are seeing in your end markets and how that's different from what other, say, larger retailers and distributors are experiencing?
Well, I think, first of all, it's important to say also that there's a difference -- we have seen a difference in the demand pattern already earlier between the European retailers and the American retailers where we are present predominantly with Orbit. And already during 2022, the European retailers were much more cautious in ordering in building stock. As Terry explained earlier, they were actually reducing their stocks, their inventories over quite a long period, I would say, 6 to 9 months. They returned to growth during the first half of this year, but not to a full demand growth. But as the season unfolded in Europe, we can see that the demand is there and the requests for further restocking, and due to sell-through the demand has been higher.
When it comes to the U.S. market, we did not really see that destocking among the American retailers during 2022. And we have seen, of course, still, though, a rather stronger demand during quarter 2 for the Orbit products. However, we are aware of the weaker, general, let's say, business situation within our segment, home improvement or retail that is being seen now, I would say, here also in parallel with our growth for Orbit, but we start to see that now in the U.S.
We do see that the sell-through is weakening, and we also see that the market for petrol, Forest & Garden Division products is weakening also here during the second half. So that is, of course, a risk that we acknowledge and that we are monitoring and that we are adapting to as it develops.
If you were to summarize your outlook now and also given the current trading in the first few weeks of Q3, is it a stable development or declining development or an improvement from here on out? Because there's a lot of mixed signals. So it would be good to just know what your outlook is for the second half of this year.
As you know, we don't really provide forecasts for future periods in our business. What we can say is that the season is still on. There's still another 2, 3 months of the season. And I think after that, we will have a much clearer picture of how it has continued to be and also whether the demand was stronger or lower, whether there will remain inventory in the trade that potentially then could impact us and that we have then to adapt to.
If I may add to that, Pavel, I think the reality is, it is a mixed situation at the moment. So if you're reading it as mixed, that's because that's our message to a certain degree. It is mixed. Because when we say watering, watering has been strong towards the end of, and of course, weather conditions have been favorable towards the Gardena division. And of course, when you're having very high temperatures across North America and Europe, that is driving the business. So there has been a positive effect for the Gardena division.
On the flip side, when we talk about the Forest & Garden Division, there is a softening, particularly in North American market around the Forest & Garden products. And then I would say Europe is a little bit more normalized. Construction, we talked about a little bit before. Construction is weak in Europe. And -- however, it seems to be holding up in North America a little bit stronger. So it is a mixed picture.
We have another question here from [ Stephen at The Methologist ]. Could you comment a bit on the Orbit profit margin improvement, the drivers behind it and you see that, that's sustainable? Maybe for you, Terry.
Yes. I think certainly, Pavel and I are very pleased to see the Orbit development in Q2. And there's really a couple of factors around that. During 2022, we were a little bit late in implementing significant price increases and those price increases were to offset the cost pressures. And we suffered a little bit as a consequence of that during 2022. However, that positive price has not -- that price effect has now had a positive effect as we carry that over into 2023. And at the same time, we've been very cost cautious and also raw material and logistics costs have started to come down. So really -- and also there's some favorable mix. So there's a combination of a few different things that have really developed the Orbit margin, and it's great to see that it's actually margin accretive.
Good. Thanks. Another question here, maybe for you, Pavel. If you take a golf club, then you, of course, to cover the whole area for the golf club, you need multiple robots. Do you see customers are there already today or are many customers trying buying 1 or 2 and trying how it's working and then increasing from that point? Where do you think the customers are in the buying cycle?
I would say that the majority are trying this out, 1, 2, 3 holes, certain area, test practice, greens practice, fairways, et cetera. But we also see that we have larger installations, of course. But I mean, it is in its infancy, there's no doubt about it. It takes time to change the industry. We do have very good products, reliable products that work in those circumstances because it is quite complex, a golf course, not only from a curvature of the ground, but also from the reception of the signals from the satellites, et cetera.
Good. Another -- we have got a few questions here from Christer Magnergard from DNB, maybe to you, Terry. Can you talk a little bit about the mix and margin development in the Forest & Garden Division in Q2? From what he understands, battery products were growing and had a negative mix effect. Is it all battery products? And can you elaborate a little bit on that? And when do you see generally that you have the battery products will be accretive? And is there something else, Terry, that affects the margin in the Forest & Garden Division in Q2 that we should think about?
Sure. So yes, the robotic sales is margin accretive and, of course, helping the margins. Battery, as I talked about there and referred to, at this moment in time because we don't have the scale with battery just yet, and the cost of the battery itself is quite expensive still, is not margin accretive. So as we grow battery in that sense, it is a challenge and we need to scale that up. Other things to be mindful of, we have really driven down inventory during the first half of the year. And as a consequence of driving inventory down, of course, it means factory volumes are down, and therefore, absorption. So there is a cost absorption negative element to the Q2 result as well.
In addition to that, we continue to invest in our transformational initiatives. So that also comes into the numbers, and how we drive and invest as we accelerate our strategy. So there's a few different variables coming into that as well.
Great. Another question on the Gardena topic and here to the U.S., it's coming from Johan Eliason at Kepler Cheuvreux. Your ambition was to introduce the Gardena brand in the U.S. Have you started to take any steps on that this year?
Yes, we have. Of course, we have started now also to integrate the operation of Orbit together with the Gardena operation in U.S. as well as in Canada. We are launching products stepwise into the U.S. market. And we are also developing new products that will be more suited for the American markets, such as, for example, a robotic mowers that takes care of the different grass types that exist in the U.S. to a much higher degree than what they do in Europe. So indeed, we remain with our ambition to use Orbit as a, so to say, launch pad for the Gardena establishment in the American market.
Good. Follow-up there, I don't know if you answered it, but will we see any Gardena products in the U.S. next year, do you think?
Yes.
Good clarification. Another question around price, maybe then to Terry, will you see then the price increases now to -- the effects from the price increases now to level off? And is it too early to talk around price for 2024?
So first of all, yes, it is too early to talk about price for 2024. However, I think it's fairly obvious to many that the way the macroeconomic situation is, I wouldn't expect significant price increases for next year. But let's wait and see as we gear up and plan for the year ahead. With regards to the price positive effect that we have had so far this year, yes, a very large part of that has been the carryover effect from 2022 into 2023. And in 2023 itself, the price increases were very modest. So it's more of a carryover, which now flattens off in the second half of the year because it's really starting to come through now so yes.
Good. Maybe then a final one coming from Christer Magnergård as well. Second half is, of course, a smaller half than first half. But nevertheless, you had a pretty strong growth rate in robotics in the second half. Can you say how high they were, and how much should we should take that into the account when looking at the second half?
I'll take this one, Pavel. What I would say is, of course, Q3 and Q4 last year, we were in a supply recovery situation. And we did sell more robotics during the second half of last year than what would be considered normal. We don't go into specifics of what those numbers would be. But what I would say is, of course, this year, we will not have a repeat of the same level of robotics in the second half of this year compared to last year because of this recovery situation last year.
Good. Thank you very much and...
Maybe I can just comment further on what Terry just said, that is also, I think it concludes all the 3 areas, which I mentioned in my initial speech that we have some comparables, which are important to understand into the second half year, one of them being the robotics, let's say, recovery that we had in the second half of last year. The second one is the fact that we -- as we are exiting the SEK 2 billion of low profitable wheeled products for 2024, it also means that there will not be prebuilds in the end of this year, as we have done in last year. And then the third, so to say, comparable is, of course, the weaker U.S. market that we see in the Forest & Garden segment also. So I just want to be clear on that. Please, Johan, back to you.
Thank you very much. And we see that the clock has been over 11 now. And I think with that, we conclude this call for where we presented the results for the second quarter 2023, and we very much look forward to, if not before, meet you again on the 20th of October when we report the Q3 report. So with that, thank you very much here from Stockholm, and we wish you all a very nice summer. Thank you.