Husqvarna AB
STO:HUSQ B
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Husqvarna AB
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Good morning, everybody, welcome to the quarter 3 announcement of Husqvarna Group results. Following the announcement September 18th, I guess you can say this is pretty much in line with what we communicated at that time, and in that respect, a no-news quarter. We will also talk a bit about, after the normal procedure here of the quarter and the divisions in 2019, which I think is becoming more and more important for us, and we are putting a lot of energy into making '19 a good year for us. But let us start in the ordinary procedure in summarizing the quarter 3. Well, you have all seen, you have all heard about the long, warm and dry summer which, of course, affected the demand, particularly for the Husqvarna Division, which has affected us quite a bit. On the other hand, divisions like Gardena have thrived from the same element, of course, and you will see that in the P&L very clearly. So we have a weather impact, which is, of course, important and sizable, but I also want to be clear about that we have also another effect that is where we are imbalanced. In previous years, the efficiency program has really delivered quite a substantial improvement and which has balanced the additions of costs we are taking for the profitable growth initiatives. This year, we have come into an imbalance between them, and I'll get back to that as well, which has broadened the P&L. The last commentary on the summary is relating to the restructuring of the Consumer Brands Division. You know that we are dissolving it and there's quite a few activities ongoing to deal with that. And then the aggregated comment is it's really a lot that's really working according to plan, so we are pleased with that. And I'll use that as the bridge to get into the restructuring before talking a bit about the top line of the group. So what we are looking for here, and this is really important, we are looking to create a group in which we're building on the strength, a group which is more focused, and in that sense, will create a lot of more value going forward. So we dissolved the Consumer Brands Division. It's moving into Husqvarna for North America, respectively, Gardena for Europe. We are reducing about SEK 2 billion of sales into next year and there will be another one into '20, SEK 1 billion to SEK 2 billion into 2020. We're a little bit more unclear in the communication about that. We want to see the season of '19 taking shape before becoming firmer on that stand at this stage. So what we have said, and we have to repeat, these restructuring activities, they will be accretive to the financial performance for 2019, and we expect in 2020 that the full effect of them are going to be exceeding SEK 250 million. So all in all, a lot of different activities, may that be related to Charlotte, headcount adjustments; may that be central, where we're doing some adjustments; may that be divisions; may that be in the planning related to the footprint. So a fairly broad array of activities going on at this stage to make this happen. But it's -- everything according to plan, I think, is the big message. If you look at the profitable growth divisions of Husqvarna, Gardena and Construction, we see that the rolling 12 months, and this is currency adjusted, is about 6% for those 3 aggregated. And you will see, of course, Husqvarna then at the end -- dropping somewhat. On the other hand, the Gardena reaching towards the skies here, being somewhere in the neighborhood of 15% on the rolling 12. Well, all in all, good. As you will maybe recall, we have talked about the 3 to 5 as they stand; based on the market, that would be 2 to 3, so we're growing quicker than the market. But we -- so I think we've proven that the profitable growth initiatives are paying off. And you will see, in this span, from beginning of '17 until today, that we've gone from a little bit less than 4% into the 6% for those divisions. So a development that is good and according to plan, I would say. And aggregated, I think we're pleased with it. But we can't be pleased about the result development, so '18 is going to be a blip in the curve for sure, that's -- after 3 quarters, it's pretty clear to everybody that that's the case. So we have a pretty proud, I would say, progress since '13 of year-to-year improvements. And we are going to do, of course, our utmost now to make sure that it actually just remains a blip on that curve of year-on-year improvements. But it is. And I have to be also clear at this stage that quarter 4, there will, for Husqvarna Division, be some knock-on effects as a consequence of dealer and trade having over average inventories. And after this season, being a bit cautious in the purchasing behavior. Potentially, also, pushing preseason orders into quarter 1 rather than Q4. So it could very well end up being another quarter for Husqvarna, with a negative sales development; whereas, the rest are not affected by that phenomenon at all. So it's a Husqvarna Division topic. Looking at the financial highlights for the group, 1% currency adjusted change of top line sales, plus 1%. We see SEK 225 million. We guided somewhere, give-and-take, in that neighborhood. Half of last year was the statement 18th of September, so I think that relates fairly well with that magnitude. The last comment on the group and the EBIT margin, I'd like to get back to the imbalance between the cost additions and the efficiency measures, including the raw material, which we didn't have the opportunity to price for, for this season in the right way. But also there are elements here of productivity and logistic costs, which have not gone the way we expected. So jumping in then, from the group into Husqvarna, which is a major piece and maybe the biggest question mark for some of you. It's minus 5% from a volume perspective top line, currency adjusted, and you will see the operating income to be SEK 47 million versus SEK 388 million, so fairly heavy. Of course, the volume, as such, is one explanation, there's no question about that, but we also have negative mix of products. But as you can imagine, also, if nobody is using the lawn equipment, they don't need any spare parts as well, so you have that effect on a very profitable category. And then you have geography that I mentioned here, where these categories of products are replaced then by wheeled products in North America. And North America has been absolutely okay in the quarter from a demand perspective. So a lot more wheel products, petrol wheel products, with somewhat lower margins versus the categories we have seen here in Europe. And then back to the imbalance between the cost additions and the efficiency program, which doesn't make up. Altogether, for the period of year-to-date to 9 months, 14.1% operating margin versus 16.3% then last year. [Presentation]
Okay. Moving then over to Gardena Division. Of course, quite impressive numbers, 23% top line sales, currency adjusted growth. Great, almost a doubling of the operating income and margin improvement as well. So solid execution of the growth strategy. And of course, they are supported by the favorable weather for the watering, so it's a lot of watering products, as you can imagine. So that's great. So we have the volume, we have the mix element, but we still have some burdens in the shape of the distribution cost, even cost elements from the growth initiatives as such. We have talked before about the supply chain being a bit strained throughout this season, and given those growth numbers, I think you can see why that is the case. Not very surprising necessarily.Moving on to Consumer. I would say Consumer did actually pretty well, given the sales decline of 6% currency adjusted, a lower SG&A and a good product mix kept it up, but of course burdened by the raw materials. So this is the division and the product categories which then predominantly absorbs those raw material increases. And then manufacturing volumes are, of course, a bit of a burden as well. So SEK 109 million loss versus, last year, SEK 97 million for the quarter; and margin wise, minus 7.2% versus the 6.5% negative last year for Consumer. Construction, at first sight, seemingly pretty good, with a 34% increase of the operating income of the 7% top line of 7%. So -- but we should recall then that we had some one-off costs last year for the integration of the divisions. So some SEK 47 million. So if you look for that, it's more, I would say, ordinary, partly due that the organic sales wasn't really excelling in the quarter. Europe was doing fine; whereas, North America was a bit behind. And to some extent, that related also to the restructuring we were doing of a warehouse which is now finalized. But that created some back orders throughout the quarter. But it's behind us, so still good. And you recall that we also have Atlas Copco now part of these numbers and with a bit of a margin dilution as well. And Jan can come back to being more explicit about that. And I guess with those comments, I leave it to Jan to talk about more the details of the financials, then I will be back talking 2019 a bit.
Okay. As Kai said, operating income, of around half of last year's third quarter was already communicated 18th of September, and also the effects of the divisions and groups related then to the weather in Central and Northern Europe, as well as the challenges we still have in Consumer Brands. And also pointing on what Kai said on the signal of Husqvarna the last year, so have balance between efficiency improvement and delivering cost savings and the investments in profitable growth initiatives and increasing our cost base, that we are backing that balance in 2018. And then in the aftermath of the raw material cost increases, a strained supply chain, where we had both shortages on supplier transport and bottlenecks at suppliers, and also other operational challenges. That, in the end, resulted in cost increases for us. And also the volume loss we have pointed out before related to our lawnmower factories and the scale back of sales to one of the major retailers in the U.S. We were talking about, at that time when we presented, it's around SEK 1 billion of sales for this season '18 being sort of -- not produced and not sold. And on top of that then, we have the weak season on the lawnmower side in general. And the imbalance, the third quarter was no exception to that trend. As you'll recall from last year in the second half, where we are increasing cost base, where we have low volumes, we have low savings and we have more on the pressure on the cost side for the third and the fourth quarter. That was valid this third quarter as well in '18. But the imbalance was even more apparent as the sales for the group, and especially in Husqvarna Division, were down 5%. And furthermore, the pressure from raw material increased comparably more in this quarter as hedges taken in '17 were ended towards the end of the season. All in all, as Kai pointed out, net sales more or less in line with last year, plus 1% currency adjusted. But actually, if we take out acquired businesses Light Compaction, we were actually down organically in the group, and that was mainly, of course, related to Husqvarna Division and the 5% there. For the first 3 quarter, currency adjusted, increased by 2% in net sales or SEK 0.8 billion to SEK 34.6 billion. Gross income for the group then decreased some SEK 100 million, mainly then negatively affected by the raw -- higher raw material costs. The strange and, obviously, something we must actually highlight once again, resulting in high cost to serve in the Gardena side of the business and difficulties to decrease cost with the same speed and magnitude as the modern lawnmowers deteriorated in Consumer Brands and Husqvarna divisions. And on top of that, higher logistics cost, we talked already about that already in the beginning of the year. Transport capacity constraints were reflected into increased freight prices. And also, here in the third quarter, increased warehousing costs reflecting the higher inventory. And R&D costs here in gross margin, where R&D is placed, increased reflecting our investments in profitable growth initiatives. There were some positive sides, though. We were mentioning Gardena. Now, of course, very strong watering quarter as season was prolonged, and also positive FX effect is impacting positively there on the gross income. All in all, gross income deteriorated 3.5 percentage units, down to 25.6% compared to the third quarter last year. For the first 3 quarters, we actually have a small improvement of gross income. The same general explanation as I gave in the third quarter. For the first 3 quarters, gross income improved some SEK 65 million. Same general explanations in the third quarter, but where we actually have improved volume turning that deterioration into an improvement for first 3 quarters. SG&A increased in the third quarter with some SEK 100 million, which was fully then related to FX translation effects. Last year, we had this negative effect of SEK 50 million in Construction Division, Kai mentioned. We also have then as a burden or as a cost increase the additional costs for profitable growth initiatives, and we also have the acquired businesses. But we also had a positive effect of lower lawn and garden, lawn-mowing season and also a dampening effect on costs due to the weak financial performance in the quarter. For the first 9 months, SG&A increased some 450 -- SEK 440 million. Currency translation effect is around 1/3 of that and the other 2/3 is related to the profitable growth initiatives and the acquired businesses. So all in all, coming down to operating income before items affecting comparability, minus SEK 200 million more or less to SEK 225 million in the quarter, and operating margin of 2.8%. And for the first 3 quarters, operating income before items affecting comparability decreased some SEK 335 million to slightly over SEK 3.5 billion, giving an operating margin of 10.2%. Then we have the row items affecting comparability here. It's SEK 349 million. It's related to restructuring and mainly done in the U.S. footprint, and a minor part is also related to restructuring cost of Central staff. Around SEK 50 million will be sort of cash items and the rest is more of written -- writing down or writing off assets. As we announced in mid-September, further costs will be incurred in the coming 2 quarters. The full effect of the restructuring is forecasted to be some SEK 1.2 billion, and that was also announced the 18th of September. Financial items were in line both in the third quarter and year-to-date, and taxes were at some 23% of the income before taxes, both in the quarter and year-to-date. Somewhat lower than last year, positively impacted by the lower tax rate in the U.S. Net income was minus SEK 185 million in the third quarter, bringing down the net income for the first 2 -- 3 quarters down to SEK 2,135,000,000, some SEK 465 million lower than last year, giving a net margin of 6.2% and an earnings per share of SEK 3.73. Moving over then to the balance sheet, and as in earlier quarters, this year, we have an effect of currencies due to the fact that we have a substantial part of our operations outside Sweden, mainly then in U.S. and in Europe. And with a generally weakening Swedish kronor against these 2 currencies, the euro and the dollar, we get quite substantial currency effects in our balance sheet. So noncurrent assets increasing here year-on-year by SEK 2.1 billion, SEK 0.9 billion in fewer currency translation effects, SEK 0.3 billion related to acquired businesses, Light Compaction then, and SEK 0.9 billion then mainly related to the high CapEx level that we have had the last 12 months. And inventory, adjusting for currency, increased some SEK 600 million due to a weak demand of lawn-mowing equipment this season and also acquired businesses. Accounts receivable, taking out the currency effect, is actually in line with last year. And then adjusting also for acquired businesses, we are in line and that is reflected in the flat net sales we experienced here in the third quarter. Accounts payables increased some SEK 300 million in local currencies, reflecting higher inventory and acquired Light Compaction business. All in all, we had an operating working capital that is increasing with SEK 0.9 billion, half of that is FX; the other half, once again, low mower season and acquired businesses. We also had a positive effect of the scale back of sales of a certain U.S. retailer customer in this year compared to last year as we got working capital. And the higher working capital is, of course, also reflected in the net debt, but due to -- but really, the main effect of the increase of net debt is related then to direct or indirect currency effects compared to September last year. The net debt increased close to SEK 850 million to SEK 8 billion. The acquisition of Light Compaction from Atlas impacted net debt in the first quarter, with [ SEK 0.3 billion ].This is 1 of our 3 financial targets, operating working capital in relation to net sales should be under 25%, that is the target at year-end. The net effect of increasing net sales for the first 3 quarters and higher operating working capital was actually a small improvement. When we take a look at the third quarter, 0.2%, bringing it down to 25.8%. And this is actually, of course, not where we want to be. We want to be under 25%. Further measures need to be taken, and especially around our mindset in this capital efficiency questions and our behavior. But when the season comes out, as it actually did this year, much worse than expected, it is difficult to compensate with mitigating activities. Seasonal pattern -- all the build up of working capital reflecting them all, you can clearly see here in the operating cash flow. After a very good start, actually, in the first quarter in '18, being then affected from the scale back of this major retailer in the U.S., we have experienced them 2 quarters now, the second and the third quarters, that have resulted in a deterioration compared to last year with, combined, some SEK 2.1 billion compared then to the second and the third quarter last year. And that is, of course, a consequence of the weak season, putting pressure both on earnings and on working capital. For the first 3 quarters, operating cash flow adjusted for acquired businesses was close to SEK 1.4 billion, and that is slightly above half of where we were last year in the end of September. The deterioration is evenly spread between lower earnings, higher working capital and higher capital expenditures, reflecting the ambitions we have in the group. Our objective is to have an investment-grade rating and one important key ratio to follow is then the net debt-to-EBITDA. It reflects how our earnings and net debt is related. And adjusted for items affecting comparability, the ratio increased somewhat compared to last year, following then the deterioration of earnings and the somewhat higher net debt. Still rather stable, but annoying that we are unable to continue with our improvement trajectory we have experienced the last years. And before handing over to Kai again, something about our key -- data key figures. And taking a look on the profitability side, with the lower earnings, return on capital employed, the return on equity have decreased some 3 percentage units, not adjusting for items, compared to the third quarter last year and year-end. If we adjust for the items affecting comparability, the decrease is more in the magnitude of 1.5 to 2.5 percentage units. The slightly lower average number of employees was related to the decrease in U.S. and their footprint reflecting the scale back of sales to a major retail customer and some structure changes the last years, giving full effect here in '18, partly offset then by increases in Europe and in Sweden, reflecting higher activity and ambitions in the group. By that, Kai, I give the word to you to round off.
Okay. I think many of you are, of course, curious to listen to how we think about 2019, and I'd like to talk a bit about what we think the key deliverables are for making '18 a blip in the curve and nothing else, and then revert back to a trajectory of result improvements, which we are determined to do. So first of all, continued organic sales, excluding the exited sales of the SEK 2 billion that we are talking about. So we are at the 6% for the combined 3 divisions. And that the span is 3% to 5%, but at least we expect to be an upper part of that for next year excluding that component. So just to be clear, so we don't have misunderstandings on this. Second bullet is pricing. This year, we were not in the shape to price for the raw material increases. Next year, actually, it's much less about raw material, it's much more about the tariffs. But the total of those 2 is going to be similar in '19 compared to what we had to, so to say, absorb this year. But we will price, and we have started to price for that. We have the pricing power, we believe, to do that. So we will compensate for that. Now the third element here is to restore the balance of what you heard us talk quite a bit about but did not work out this year, which we have done pretty well actually if we're talking about the preceding years, which is to have the balance between the efficiency improvements and the additional costs. So we will reduce the cost additions somewhat, but we will try to ramp up so that balance is on the right side. And the fourth one is the execution of the restructuring measures. And there, the message is pretty clear. We have started quite well and swiftly with those activities, so I don't see any change in that respect. Doing those things, they should support getting to the 10%. Of course, is that a promise of 10%? No, it can't be, because there are too many other external factors that may affect it. But I think, reasonably, what's in our control, we should have a fair chance to do that. And that's my message. I said it before, I'll say it again, we are convinced about that. So I think -- actually, I think I'd rather leave the presentation right there and open for the questions at that state.
And we will start with questions from the floor here in Stockholm.
Johan Dahl here at SEB. This balance that you've referred to in a couple of quarters now between growth initiatives and efficiency programs. As this imbalance became obvious to you earlier this year, could you talk about what tangible decisions you've taken so far to improve that balance for next year? And also help us understand, as we look into '19, what further measures have been taken?
Okay. So I mean, first of all, I think we talked some few times about the magnitude of the strategic initiatives, the profitable growth initiatives. They are, give take and take, 1% of the net sales of the group. In '16, it's mostly the same in '17, actually will be somewhat similar in '18. And that one will be slightly reduced. We think we can leverage on the total amount. I'm not talking about remaining at level, it's actually walking in a stair. So you read me right here on this item. So quite a level difference here in this period of time. What we are doing then is, again, putting a little bit more resources of R&D, for example, into redesign to take out cost. That's one very tangible effect. We do have a belief in that the productivity for next season can be improved, particularly maybe in the U.S. factories. And we also see that we are in pretty good shape with the preseason preparation for the largest of those 2 plants, where we have done a bit of repurposing of the plant, Orangeburg in South Carolina. So that -- there, we are optimistic. There's a couple of examples of what to do. And we also think we are in better shape on the logistic area. On the internal side, freight costs probably we will have to accept being reasonably high. But from a warehouse footprint and efficiency point of view, we do have reason to believe we can do better, a lot better, than what we saw this season. And remembering this season has been maybe the perfect storm from the logistic perspective, with the late spring pretty much nothing in terms of demand all the way to the end of April, then everything in May and then kind of tapering off. So it has been a stop-and-go type of year from the logistic perspective. But also, including some structural changes that we have underwent. You heard about, for example, our construction in quarter 3 in North America. So there has been a fair bit of those also impacting it, so.
But do you expect these activities to restore operating leverage and also recover what was lost this year? Or is it -- what's the total magnitude of everything that's been done?
Well, the total magnitude of what you see here on the left of this -- and you can, I guess, reengineer it because the restructuring of -- the total SEK 250 million in 2020, let's give and take that's half, you realize that there is a fair bit to be done both on pricing as well as in restoring the balance. So will we then recuperate the increases of this year from the price component on itself? Maybe not fully. But in combination with this other -- the third bullet you can see on this page, I would say the answer is yes. But not pricing components as such to cover the 2 years. No, that's not in the cards. But it's well in the cards to be above what the '19 season is expected to bring from a material tariff impact point of view.
Got you. Just quickly, can you explain where you are currently in terms of your -- in terms of setting prices for next year? Is that almost done or are you still in the beginning?
No, it's done. It's behind us.
Rasmus Engberg with Handelsbanken. I was wondering if you could explain a little bit about this factory closure, the McRae factory, when is that being wound down.
So that is going to work in the way that we are actually going to produce for the next season and deliver according to the commitments, and then we will shut it down towards end of quarter 1, right, give and take end of quarter 1. But let's also be clear, we are still also trying to find external takers for that. So whether we eventually shut it down or find a taker for it, it still remains to be seen. But in the absence of any taker, we will shut it down end of quarter 1.
And then just -- I know this is kind of speculative, but given that this is a 2-year phase of exiting sales and shutting factories, do you think it's sort of -- everything else equal, we would expect margins to continue up in 2020? Or is that sort of...
I would use the expression of continuous improvement year-on-year. Absolutely. Absolutely. So I don't see why we shouldn't be able to do that. On the contrary, I mean, we are -- we have a lot to come in 2020, which is going to support that. So no, I'm optimistic about it.
And then one more question. Did you say that they were going to be restructuring in Q1 as well? Or...
Yes. Maybe you?
Well, we said, and it's still valid, that the restructuring costs will happen mainly in Q3 and Q4, which means that there is something in Q1 as well.
But the overall figure is the same on all that?
I mean, the big part is happening this year, so then you can calculate what Q4 might look like.
Björn, Danske Bank. On your growth assumptions or forecasts, can you give us some color on that, why you're so optimistic?
Of course, let us revert back to slide of the rolling 12 on the 3 divisions. So if you look at this, you have seen Husqvarna then below the average, of course, but still the average is around 6%. And you can argue, they will have a fairly poor low reference for '19, so they should be in the cards to do something pretty good. Gardena, on the other hand, of course, will have the opposite situation for '19. They might be more challenged to consolidate on that level from a perfect season, from a watering position point of view. So the expectation shouldn't be too high on them. But if you say Husqvarna, for sure should be on the upper side of that average for '19 season reasonably arithmetically. And Construction, there is no reason not to expect them to press on having everything in order from the integration of the acquisitions, et cetera. So I don't see why -- and actually, I'm not saying that we are more optimistic about '19 than we have been, I think we're actually saying something similar to what you see, but with a different split between the divisions.
And 2 follow-ups there. And I was little bit late into the call, so maybe you talked about it. But for Husqvarna and -- I guess there is an inventory situation among retailers.
Yes. We -- well, not so much retailers, but the dealer channel. And I talked about that a bit. But just repeating, yes, as a consequence of that long period of dry and hot weather, they are overstocked in that channel, and that overstock leads to a cautious purchasing pattern for quarter 4 foreseeably, and some of the preseason orders likely will be pushed into quarter 1. Meaning, for Husqvarna Division, quarter 4 is not going to -- we don't have reason to be overly optimistic. So it could, again, end up being a negative quarter. But also remembering that Husqvarna quarter 4 last year was a very good quarter, so it's a fairly high reference to beat as well. So it's...
Okay. And on Construction, where are you in terms of integration costs? And where are you about margin kind of recovery for acquired units?
We took the big instruction -- restructuring or integration costs in Q3 last year. We have had some minor cost, but I mean, they are not being worth to mention, more or less. So we are more or less through with the integration of the acquisitions.
So we should expect to see a margin recovery in Construction looking into next year.
Well, if you -- well, you can also say -- when you say margin, I mean, Light Compaction, for instance, it's not having the EBIT margin as Construction and the acquisitions made earlier. And of course, that will have a diluting factor. It had that already here in the third quarter and for the full year. But if we compare it like-for-like, yes.
Johan Eliason, Kepler Cheuvreux. Just a detail then on these raw material tariffs, could you sort of quantify the amount you had as a hit this year and then how much you expect sort of for next year? And then on this Gardena exposure, obviously, part is weather driven, but part is also your channel expansion. How do you see the channel expansion going into next season? Is there more on top of what you did already this year? Or are we just relying on the organic growth sort of in the existing channels? And then talking about this closure of the McRae plant, do you still want to produce some lawnmowers for the Husqvarna brands and then Klippo, et cetera? Have you come up with a solution how you will be able to manage that going forward as this plant will be closed?
Okay. If I kick off and talk to your questions. Raw material, if you say that it's in the magnitude or close to SEK 300 million, a little bit less this year, tariff is being a little small element of that predominantly then in quarter 4, not so much in the year-to-date. The differences are going to be on the opposite side, as you say, it's all going to be pretty much tariffs next year from a magnitude point of view. But the total is going to be similar, maybe a bit higher actually in '19. I think it's fair to say. So it could be between SEK 300 million to SEK 400 million actually in the total next year. We are initiating some mitigating activities. The question is always how quick they will get through, so to say, the inventory into the P&L. So maybe the mitigating activities is more for 2020 in practice than for the '19 season. But still, the comment I made before holds water, meaning price increases are going to be covering the combination of raw material and tariffs. So that was the first part. Gardena channel expansion, we are proceeding with that work and we see a lot of actually positive signs of how that has happened. If you go back some few years, we see a very clear trend on lower dependency on the retail space. And we see everything from garden centers to food chains to online becoming more and more important and not very surprising. Some actors in the online area, which have success in other regions also becoming important for us. So that multichannel landscape, Gardena is at the forefront of our group to experience that, exploit, utilize that and we see that continuing. There is less -- there is not really that much of category expansion, but it's more penetration that we continue working on, and we still have a lot to do in many markets and U.K. still being on a good path, but a lot more to do for sure. As one example, back to the Latin part of Europe, still a lot more to do, whereas Gardena has reinforced its position in the Central European space around the DACH region, Benelux, Scandinavia. But Scandinavia can also, actually from a penetration level, increase. And I think some of you might have observed shortage on the shelves of watering products at certain periods of times in Scandinavia. So there is more to do for sure. So that was the second one. The third one was McRae on your question, and how we have sorted the supply. And the question to -- I should put it this way, the answer to your question here is that we will safeguard and maintain supply of premium price points behind mowers, whereas we had left them, all the, let's call it, the mass volume bits and pieces, just like on the tractor side. And that we are securing so there will be supply also for the 2020, 2021 season. There's -- and there are several ways to solve that, and they are still being assessed depending on how we actually will exit the McRae plant. There are different alternatives that are going to come into play. But it's not a question of whether we remain there with, for example, 4-wheel drive, petrol walk-behinds, that's going to remain hugely important in North America and still a reasonably okay category as such.
Then, operator, we could please open up for questions from the telephone audience.
[Operator Instructions] We will now take our first question.
Christer Magnergård from DNB. So just 2 follow-up questions from the Q&A. On pricing, you said that you have locked in prices for next season. How big variation to these prices do you historically have seen when you actually realize the prices? So are there a lot of discounts historically that could offset the positive price increase you are doing now?
Yes. I think it's fair to say that, historically, there has been a bit of campaigning and discounting throughout the season. I think, in general, what we are aiming to do is to become more disciplined. But when I talk about the price increases, I'm talking net of those. So it's not -- I mean, it's not necessarily the discipline that's going to save us, so to say. That is something that should improve the situation on top of rather than, so to say, save us. We're not banking on that but that's the difference, if that is your question, Christer.
Okay. Got it. And then the second thing was on the Construction, where I couldn't really hear the answer, you talked about margin for, well, next year basically. Given that this year has been affected by step-up amortization for the acquisitions you've done, I guess, next year you will see some synergies coming in. So can you comment a bit on the margin progression for this division for next year?
Well -- and you read it right, of course, we will get the positive effects of the integration we have been doing on the acquisition, but also, we expect the organic side -- and you saw the third quarter, for instance, the organic side to continue and get momentum on the growth side as well. And we have had some issues, which we pointed out here in the quarter and for the first 3 quarters, around logistics in general and our warehouse structure. So it's fair to say that we expect an improvement also of margin. But as I pointed out, Light Compaction, even though it was acquired in the beginning of the year in February, we have gradually been taking over this business from Atlas Copco via a carve-out. So the full impact is actually more on the third quarter than in the earlier quarter. So there will be a diluting effect when we come into '19 due to that as such. But the underlying business should continue to improve and go back to that trend like you've seen in the past. I -- we will not give any percentage guidance or anything like that in this situation.
Of course. And then on the robotic lawnmowers, is it possible -- I know you have had a tough year in the northern parts of Europe, which is your core market. But can you talk about development where you haven't had the weather issues for robotic lawnmowers? And also what you see in North America this year and what you expect for North America next year in this category?
Yes. Just to qualify the Husqvarna Division a bit. I mean, Europe was -- they were minus 5, average Europe was minus -- well 3x -- almost 3x that, not fully, but -- so Europe was a big hit for Husqvarna Division, and of course that has a big impact on the Robotics sales as well. And fairly broadly because the major markets are not necessarily Italy or Spain, but rather north on those markets is where we have that. So there is an impact throughout all of Europe actually on the Robotics. Still, of course, being for the year-to-date positive, but being a very clear negative in quarter 3. So that's the situation. In U.S., I think we have moved forward. Am I happy about it this year? I don't think I can brag about it. But if I look at we now are talking about, the different channels for next year, we see things starting to become more sizable. And I've been cautious before when it talked about North America, and I think that was correctly so. But it's -- we are moving towards something where people actually will start to appreciate that to a larger degree. We have also commercially found some concepts which we think are going to be important to create that growth for next season in North America. So I am optimistic that we will start to see more material improvements actually in '19 and may that be a dealer channel or retail channel, so both actually.
On the professional side, the new robot is obviously quite interesting. Can you talk about what you see for the professional segment? Are you still testing the market? Or we should -- should we see the professional users actually start to buy these kind of robots in a larger scale in 2019? Secondly, this robot you presented, the 535, is that a robot that can work in groups? Or is it just a standalone product?
I think, for now, it's a standalone product. But that's not the big thing to fix actually. Is it coming into a broader application and deployment in the professional? Yes, the answer is yes. We see that we have different events in various cities. The last one was with Hamburg, actually where this robot was launched a week or 2 weeks ago and there's a lot of interest. And you -- some of you might actually have seen at some roundabouts in Stockholm and some public areas our robots, which are being tested and evaluated, and that will expand. And those are kind of -- that's, to some extent, I think, by different municipalities, it is tested from an accepters point of view and that seems to be going very well. I mean, this new product then opens up to deal with much more rough terrain, much more slopy terrains, meaning that it's much more versatile in its application. So it's yet another step to make life easier for the professional space and to substitute the current manual methods. So yes, I mean, this is a journey we're on. And I think you should see actually these products being applied together with the fleet services software, where actually you control a larger contingent of robots from one and the same software. But I think what you referred to when we started the discussion was really can you put them on a field and put 10 of them and make them work perfectly together, I think practically you can. But we will -- we should make some improvements to that type of software as well. But we see increasingly in our football fields, et cetera, also being cut by lawnmowers of Robotics character. So it's expanding, it's coming and we will make sure we are one of the driving forces, or maybe the strongest driving force behind that.
Great. Final thing, are you -- will you use the same concept on consumer products as well, consumer robotic lawnmower? And are we expect -- should we expect any new big launches in that category as well for next season?
I'll refrain from commenting on the residential part yet, but it's not maybe far-fetched to think in that direction. But I leave that for now.
Thank you, and you currently have no further questions. [Operator Instructions]
We have a couple of questions from the floor here in Stockholm also.
This is Johan again from Kepler Cheuvreux. Just a question about the Robotics in the U.S. Are you a latecomer there? Are there other competitors already present in the market? Or are you sort of the pioneer also in the U.S. robotic market?
There is nobody that is ahead of us in the U.S. actually. So whatever that says, really, at this point, not very much. Everybody is small. We maybe have something, but it's still not of the magnitude. As I mentioned, I don't want to brag about it -- we're not at that stage. But there's nobody ahead of us, no.
Yes, just a follow-up. With regards to -- since we're scaling back certain businesses, have you concluded discussion with key suppliers, et cetera, to sort of box in both potential negative procurement synergies you'll experience?
All the preseason preparations are finalized for next year, and that was partly also what I referred to when I talked about Orangeburg and the repurposing, that's done and behind us actually. So that's within the frame of what I talked about when I described '19. So actually there's a lot of work that has been put into, as I mentioned, to make '19 a significant step ahead. And of course, from our point of view, building on the strength going ahead, less complex group, really working with creating the value and not distracting, also, management is worth a lot. So there is something here which is a bit intangible at the stage for you, but which is becoming very tangible when we do actually the work. But I like to transmit this element.
Another follow-up. Just can you quantify the total share of revenues now from Robotics and battery handhelds for this season? And secondly, just on this U.S. bankruptcy process, is there any receivable risk or anything like that remaining for you in that case?
Battery robotics, I like to get back to when we summarized this season, so -- and when I have also the date of how the market has done and not only talk about ourselves. From what I have seen so far, we have been holding up market share on the Robotics side and gaining on the battery side. That's what I've seen so far. And that's more select data, it's not a comprehensive market aggregation. But the main markets and the so-called GFK data that we can buy. So that's looking okay. And then the second one, Jan, I don't know if you want to make any comments.
There will be no impact on the income statement due to sales.
So do we have any more questions from the telephone audience?
No, we have no further questions.
All right. Thank you very much for your attention. Thank you.
Thank you.
Thank you very much. That concludes our conference for today. Thank you for participating. You may all disconnect.