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Husqvarna AB
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Good morning, everyone, and welcome to Husqvarna Group's presentation of the First Quarter of 2019. My name is Johan Andersson, responsible for Investor Relations and will be the moderator here today. In Stockholm, we have Kai Warn, our President, and CEO; and Glen Instone, CFO. So we will start with the presentation by Kai and Glen and then afterwards have a Q&A session. So with that, I'll welcome you everyone and leave the word to Kai.
Also, from my side, welcome to the Q1 report. We're quite pleased with the start of the year and let me be clear, it's a start of the year, the Q1 is a selling quarter, it's not really saying that much about the sell-through but so far so good I think it's a very clear message from our side, and we were particularly clear, I think end of last year that we're looking for a margin improvement in this year, and we can say that we are actually on plan in this quarter on that margin improvement trajectory as we have set out to reach. The highlights as we see it, let's start with sales. Actually, we have a better sell-in to the trade partners than I could potentially have expected. So we have plus 4% net sales currency adjusted. And then please bear in mind that you need to deduct then 3% on the group level from exited businesses, which affects actually than 2 of the 3 divisions Husqvarna and Gardena, and not Construction. So that's positive. All core categories in the divisions are in plus, which is also important. so that's really satisfactory to see. And the good -- very good leverage 23% operating income on those 4% of net sales increase and if you try to read what that is constituted by, of course, volume, it's price, it's mix and it is efficiency and program savings and it's also delivery from the restructuring program that we took one-off cost for during last year and actually little bit -- some few bits and pieces, obviously, in Q1 and Glen will revert back to that. We have had a bit of raw material headwinds in this quarter and actually, they were higher than expected currency positive gains that we got. So, all in all, a net negative from the 2 but so I think that's -- it's not the currency that helped us make this quarter in that sense despite being better. So -- and we and it's worth mentioning that we continue to invest in the strategic initiatives. We have determined to maintain the technology leadership we have built up and there is no compromising around that actually in these numbers. So we're building on our strengths. So all in all, I think this is a sign of strength in the quarter but remember, its a start of the year. So looking at the growth, we now split that up a bit because this is the old structure and the division as they were reported rolling 12 month and now we also look at the quarter while in the new structures. We don't want to combine them because that would have been confusing for you. So in the new, you have that Group at 4%, as I mentioned, you have Husqvarna on 5%, Construction on 5% and Gardena on 2% then you should be aware of that Husqvarna and Gardena respectively are burdened with 4% of exited business. In those numbers, the 2% for Gardena actually is the 6% in the old structure to be clear about it, and Husqvarna plus 5% then equivalent would be plus 9%. So good start, and we see now in this curve that we have reverted back to throughout quite some few quarters back that we are taking a little bit of a rebound up, jump up and that is, of course, all in line with how we have communicated, the way we talked about the expectation for this year is that at least 9.6%. We were a bit cautious to say that we were going to reach the 10% target we have set out, given that the point of departure at 7.9% for 2018, which were a little bit lower than actually what we would have thought by beginning of last year. So its a bit tougher starting point for the recovery, but we are somewhere in that interval of the 9.6% to 10%, of course, we are aiming to get to 10%. I think if you ask me to bear with me in respect that I don't have the visibility of how that will play out eventually but be sure that we are aiming at the 10% but it's not at all any promise from my side, but definitely, I'm ambitioned. What we are clear about is we want to be seeing 2019 as the best year that we have had in absolute terms, and hopefully then also from a margin perspective and '17 was 9.6% just to put that back and about a bit higher than SEK 3.7 billion in operating income. Looking at the divisions, Husqvarna SEK 9.5 billion, 5% currency adjusted, you heard me mentioned that 12.9% EBIT margin, particularly noteworthy, I would say, they sell in to North America, which where some of the trade partners choose to load in this season a bit earlier than they did last year. So all regions in growth but practically, I like to call out North America who choose to go a bit heavier early than they did last year, which is common. You heard me, as mentioned, the 4% of exited consumer business and the operating income than increasing by 18% for the Husqvarna Division. Volume, of course, supporting that price and savings from the efficiency program as well as restructuring. So just like we talked about the restructuring program, it is delivering according to what we have set out to do and Glen will make some comments more specifically in his part coming. Just like for the group, Husqvarna bears the main -- the lion share of the raw materials and tariffs and they were then higher than the positive currency contribution. And we are stemming ahead with the strategic initiatives and actually what we have done since some few years back starting actually in 2016 and then consecutively kept is this, we are utilizing those efficiency improvements, we are doing to actually invest into a more forward-leaning cost structure. So it's a shift of the cost structure to become more growth-oriented, that's what's ongoing since 2016 and not only for Husqvarna but for all 3 divisions section. So moving over to Gardena. We have yet again a good sell-in, and I would like to emphasize in this case the watering particularly and that's not very surprising, I guess, for you, you know that the last season was exceptionally favorable for Gardena. So the inventories and the trade were under average leaving this season and we -- you should bear in mind that quarter 1 '18 for Gardena was actually up 15% versus 17%. So the reference was really tough comp then and there were some channel filling -- new channel filling I should formulate, going on at that time. So the plus 6% then if we forget about exited business on the integrated consumer parts is actually a very strong sign in that respect. And there is clear volume contribution price and mix, and I would also emphasize the restructuring part particularly here for Gardena. Moving to Construction. Plus 5% currency adjusted, good growth, particularly in Europe actually and North America decreased somewhat, a little bit slow start of the quarter, some key accounts also adjusting inventories but the underlying market is actually solid, and we haven't seen any real sign of weakness in North America. So I don't think you should extrapolate that actually too much. And operating income grew 12% and again volume price, but mind you, North America is an over average profitable region in the construction space for us, which is not the case in forest and garden but it is here. So that was a negative geography mix. In this case actually, the currency is outbalancing the raw materials and tariffs, but we're pressing ahead with the strategic initiatives and some further integration steps of the 3 acquisitions we made during the last 3 years. To talk about some of the technology introductions we have done in the quarter, it's hard to avoid this nice little piece, the all-wheel drive robotics, and we made a little bit of a different approach launching this product, actually we launched in connection to the mobile world conference in Barcelona, and which was a new approach from us, and which really rendered some good -- and yielded some good results and let's talk by looking at a short video clip. It's a 30-second clip, it shouldn't be too long from Barcelona, he has to give an idea. [ Presentation ]A test. And of course, it's a reflection of our intention to move into even more technology leading edge in digitalization various types of applications. And I think we've done a lot, we will continue to deliver a lot more on that side but actually, we had a fantastic reach. We have more than 80 million people and subscribers to media that actually interviewed us and there were 2, 2.5 million type of people sharing content from that after this exhibition. So it was an interesting experience for us and a positive such. Construction also had a very important exhibition down at Dallmayr in Munich, which is every third year, it's -- which is actually the largest exhibition all kinds in the construction space, and we introduce the fleet services, which we also apply in the Husqvarna Division for the commercial lawn and garden space. They introduce new battery-powered products and there was a lot of traffic actually in the booth. So also a very good experience from that side. Just to jump over to the next little topic here, Gardena actually was elected to one of the top brands in Germany all categories, not outdoor power equipment but all categories together with the most famous ones. And that was, of course, very prestigious and I think we see that as an reflection of the strength that has built up over some -- quite some few years actually of innovation and Gardena is very proactively also going ahead and they are already in the discussion with their channel partners about next season and the innovations for next season. So that's looking good. There are awards also from the Red Dotfor design, which are prestigious and there are tests ongoing, what we call experimentation, where we also going to sell flowers with a select retail partner and to see whether the brand can be expanded and stretched into new categories. And we also do have a cooperation with UNICEF about water and watering. And everybody is well aware about the scarcity of water and of course, Gardena offer solutions for optimizing the use of water for passionate gardeners may that be the smart garden system, Micro-Drip or new nozzle technology to do this in the right way. And eventually, this is about biodiversity, which we think is an important piece. So really need to make sure that, that it is optimized in the right way. This co-op then, of course, also supports important projects that UNICEF is providing in some of the emerging countries relating to water, which is important for us. Just on topics to quickly mention here before I'll leave to Glen, now to talk more about the details of the P&L. Glen, please.
Thank you. Good morning. So a little bit more detail to the P&L or the income statement. So, as Kai said, the revenue increased by some 11% as reported or 4% currency adjusted and that include the 3% burden from the exited sales. So 7% in like-for-like terms. The acquisition effect in Q1 was very small, i.e. what we acquired last year for -- in the construction space that's roughly SEK 50 million. So still 4% currency or organic growth as we would call it. Moving down into the gross income line. Nice improvement from 28.8% to 30.1%, it actually also includes the SEK 42 million of items affecting comparability not lined. So we take that out the items it's actually 30.4% so we moved from 28.8% to 30.4%. Of course setting in the gross margin, we have the burden that Kai talked about of the continued tariffs and raw materials. As we went into this year, we guided on roughly SEK 500 million burden there. In Q1, it's been a SEK 200 million burden of the magnitude hitting the GP negative effect. It does appear, it is somewhat easing, I would say, particularly, on the commodity side and also the impact of a lower List 3 tariffs in the US. So we'd guide more like the SEK 400 million level as opposed to the previous SEK 500 million guidance. I think if you then look at that from save -- we've had an increase in the margin of SEK 550 million, including the items more like SEK 600 million. And then you can see we have a burden in there of some SEK 200 million , it shows that the true gross margin is coming up magnitude SEK 800 million. Within that, of course, we have a positive FX effect. So FX is really sitting in 2 places in the gross margin, a positive and a negative effect into the SG&A, but we have a positive effect into the gross margin and along with that comes the positive price, volume, mix and the efficiency programs that Kai mentioned earlier. So, so far on track when it comes to the gross margin. Moving through to the SG&A that moved up slightly, magnitude SEK 280 million. Again if you look at that a negative FX effect, roughly 40% will be FX into that and the rest I would call strategic initiatives or the volume impact of shipping more products. So very much in line with our expectations on the SG&A. As said, items affecting comparability, we took the lion share of the restructuring last year, and we said we had roughly SEK 50 million still to take in this year. So this SEK 42 million already taken into Q1 leaving roughly SEK 5 million to SEK 10 million left to take. So very small, we're pretty much through with the restructuring. Moving further down the P&L finance net that moved up from SEK 137 million to SEK 160 million. The real constituents into the change. A slight cost for IFRS 16, roughly SEK 6 million and the remaining SEK 17 million would be higher interest charges actually hitting the finance net. So again pretty much comparable to prior year. On the tax line, again the full year guidance is 23%, we're sitting at 23% during Q1 and that's comping to a prior year of 24% on the tax rate. Again we stay at that guidance for the full year of 23%. Moving over to the -- how the cash flow looks. This is actually pretty flat to prior year. We see an upside from the operations some SEK 400 million improvement on EBITDA line. Of course, the higher sales brings higher receivables, so we have a high build upon the receivables of roughly SEK 600 million. A slight improvement on the inventory buildup and a slight improvement on the accounts payable. So pretty much flat at minus SEK 1.8 billion. This chart is one we've had for some time now and it's really how efficient we're being with our working capital. We said in the last quarterly report that we expected actually a buildup during Q1. As we said, this is very much a preparation quarter, we're selling into the trade and we're preparing for the season. So we are higher than what we would like to be, no doubt about it. We're still planning for 25%, that is still the target we have. And we expect now during Q2 that this starts to take the curve back down but very much burdened by the higher inventory levels, which I'll come on to on the next slide, and I said slightly higher receivables, of course, driven from higher sales. So on the balance sheet. That sounds a few line standout in here, I believe. If we start off with the top and look at the noncurrent assets, somewhat higher and that is where we're seeing now the burden of the new IFRS 16 lease liabilities, roughly SEK 1.5 billion on the asset side, and we see the same on the liability side. So if you consider both we have SEK 1.5 billion sitting in here and SEK 1.5 billion in the noncurrent assets, which is the again the lease, the change in the lease accounting that we see. Inventory asset. We are significantly higher than prior year, and we saw that coming out of the year as well. So all the buildup of roughly SEK 1.4 billion there, I would say, SEK 0.5 billion would be FX. So if you just translate last year into this year, it would be more like SEK 10.8 billion and then SEK 10.8 billion up to SEK 11.7 billion is really the result of our season preparation. We talked about the Brexit preparation that we have continued during Q1, preparing for the worst case scenario of a hard Brexit. And of course, we've also been preparing for the watering season that hopefully is starting right now, looking outside. On the net debt side that also increase significantly SEK 13.5 billion from SEK 9.2 billion again you need to factor in the IFRS impact into that, roughly SEK 1.5 billion. We had the higher dividend payment or the dividend payout of a few SEK 1.3 billion as well. Then the rest would be the higher interest and FX rates flowing through there into the net debt. Which takes me on to the next slide and this, of course, is a ratio we're using and keeping a close eye on net debt to EBITDA. It is slightly up at 1.9. We have a guidance of below 2.5, we're still well within that, and I was really -- I would guide that, we're still well within that as well. Of course, IFRS in itself will have a slight impact on this ratio, probably 0.3 on the calculation, if we look at it. But this is still, again, rolling EBITDA roughly 5.2% and the average net debt giving us a 1.9 ratio here. And at that, I will hand over to Kai to close before we open up for questions.
Thanks, Glen. So summing up. 2 areas, the first area being our continued focus on the levers, which are important for the margin improvement trajectory. And then talk particularly about the price discipline, about the efficiency program and the restructuring. And to do that -- and so that's one thing. The other one is, of course, to continue to build on the technology positions and the innovations we're working on to bring to market. Build on the strength of our core brands Husqvarna and Gardena and then to -- so to say safeguard our position we're pushing this industry forward in terms of technology and applications in various respects. So I think these are the 2 major comments I'd like to make, and we feel good at this stage about both of them. Right, with that I think we -- Johan, please.
Yes, thank you so much, guys. And with that, we are ready for the questions, and we will start here in the floor in Stockholm. So do we have any questions? Yes, here. [Operator Instructions]
My name is Klara Jonsson, I'm from SEB. I've got a question about pricing. You previously guided for that you would raise prices this year by about 1.4% for the whole portfolio if I'm not wrong. Could you tell us about how price increases have progressed in Q1? And if you feel comfortable with this guidance of around 1.4% for the full year, especially, since we've heard talks about competitors raising price a bit more.
The reference you're making to 1.4%, I don't particularly recall but what I recall is that with the price increases we'll well cover the raw material and tariffs increases. So we're going to be on the right side of that, which is, I can imagine even a bit more that and -- it is an important parameter for us, and we are still executing it with discipline and I would say the previous statements hold nothing has changed actually and nothing that also reflects the expectations for the remainder of the year. So not only what we see so far but also what we expect.
I interpret this that thus -- that the business started good for pricing.
Good, good I think we were very clear about the need to compensate. You had to remember, we absorbed a lot of increases of costs last year that we didn't compensate for in the right place. So we needed to rebalance at to some degree this I think it was very clear. So it was not that optional, it was just a necessity to make that happen and then remember it's not equal on all product categories. This is a huge variation between categories and geographies. So behind that aggregated statement, there's a lot of variation, of course, that's going on so.
The next question is about the inventory and you had a little bit of build up as you talked about in Q1. You talked about this being partly due to Brexit and then watering buildup. Could you give us an idea of how much is actually Gardena and watering and how much is Brexit? And I mean the Gardena part should we interpret that as a trend going forward as well that you will have to increase inventory if -- end markets are becoming a bit more volatile.
Maybe we start with the Gardena part. You know last season we were clearly caught, let me call it that but when the season started and we had a lot of supply costs added to our supply chain. So we got a dissynergy or a disleverage. So we purposely build up ahead of the season and that's what we will intend to do going forward on the Gardena side for sure. I won't guide on exact figures for Brexit, I want it built up other than say, it's very much in line with our plan and most of those it's actually sitting now in our European market warehouses ready for shipment and trade partners.
The only little thing I can add to that is that over time -- Gardena has had several consecutive years of very strong growth in the watering category, and of course, what it used to be a good margin on excess production capacity diminishes and then you need to take another step, et cetera, and before you've taken that step, you need to deal with it and the way we dealt with it going into this season that -- you hear what I'm saying. I mean, it's in a constant adjustment and if that excess capacity is smaller, you need to pre-produce and that's one comment. The other comment is, of course, the great season last year, which really led us to expect that there was going to be a lot of early demand so.
Okay. I think we have one question there in the back, to you sir.
So Christer Magnergård from DNB. Couple of questions to start with the on consumer brands -- well, sorry the old consumers brands. You exited according with calculations about SEK 370 million of sales in the quarter.
More actually, but not a difference between...
Annualized, I mean, this given that Q1 is a seasonally quite big quarter for that division. Are we on track with a SEK 1.5 billion to SEK 2 billion cutting contracts for this year?
Yes, that still holds, and I think I said already at Q4 that we're rather closer to the lower interval, so SEK 1.5-ish billion is probably, which leads, of course, to the conclusion that there will be a little bit higher rates most likely than in Q2.
And then the second question on Husqvarna Division in North America, where you said you had a quite strong growth due to the good sell-in. Is it good sell-in of traditional Husqvarna products or is it robotic lawnmowers that actually started to sell-in now in Q1?
We wish most robotics that made a difference for us, we're not there yet. I will rather say in the big numbers, looking at the big numbers is more the traditional categories that make up that sell-in, but of course, resell component of robotics in that supporting, yes, you're right, but the big number is really more traditional categories.
And those traditional categories have historically been negative for margins when North America is strong for Husqvarna. Was that the case also this time?
You're right in the respect that it's under average margins in those because this is particularly a lot of wheeled. So even though we have exited the least attractive parts of it, it's still wheel categories, which is below average. So there is an element of that Chris, yes correct. But its higher, remember, for example, on the tractor side, we exited lower price points so we has kept specifications, which are more definement and more strategically correct to have.
And then final question on retail inventories. You said that sell-in has been good, I guess, that some categories had a quite high inventories of last year season. So can you comment on the retail and the dealer inventories that we have today? And maybe also given the warm April this far, if you can comment anything what you have seen in the sell-through?
If you look at -- you asked robot, and I guess that question is going to come sooner or later here. So how are we doing now with robot, for example, with inventories and my statement the last few years has been, we have been having -- we've seen a growth rate of well above 20%. We're not well above, we're double-digit, we're not well above 20% quarter 1 for the combination of robotics and battery products that we refer to, but we still expect that for the year to be well above 20%. So there is an effect to some extent of that other average inventory in that category. In general, I don't want to emphasize inventory levels as an issue for Husqvarna Division and Gardena is rather coming from the other side with -- on the average side, I would say it's a non-issue as we move forward. Then as to your comment about the Easter and the current state, I still see that as positive. So far Easter is a very important break of the season for Husqvarna traditionally and the weather has been nice during Easter. But then, if soon, it wouldn't hurt to see some rain, for example, in the Nordics but so far it's rather a plus than anything else of what's seen of April.
I think we've another question here, yes.
Henrik Christiansson from Carnegie. I've a question on the restructuring program and the impact in the first quarter, I'm not sure I've seen that number anywhere but could give a -- could you quantify how much that had an impact in the first quarter?
Yes, if we look at the restructuring, I would say, it's on track. We guided across by 2020 it would be of full effect SEK 250 million lion share to come this year. And of course, we've seen a sizeable impact during Q1. I won't quantify it exactly but it's sizable in Q1, of course.
Great, and then a follow up on the pricing as well, which were before, I mean, previously you said, you would -- you had increased prices you would more than offset tariffs and raw materials and now you're guiding for lower raw materials. Does that mean that the net effect will be bigger or have you adjusted pricing down to take into account the tariffs that push forward?
I will start. Now I think that's a net improvement, of course, everything else same. But then it remains to be seen whether that holds true as we progress through this season, a lot of things will unfold, which we don't have visibility into at this stage but as for now, everything else is same that's positive, of course.
Good. I think we have another question here at the front, yes.
Björn Enarson, Danske Bank. One more question on robotics and how do -- how that is supposed to play out given your growth comments for the -- so that is predominantly something that we will see also in a sell-in situation in Q2? Or did I misunderstand?
Yes, what I said was that the growth rates will be higher reasonably from an expectation point of view in Q2 versus Q1. Yes, correct.
In terms of selling?
Sell-through.
Sell through, yes, okay.
And in total sell -- sales numbers.
Yes, correct, good. Then giving the changes to restructures last few years and what do you have -- where you have been growing et cetera, can you update us a little bit on your FX flows now with production in North America and Europe?
Sure, of course, our main flows are in US dollars and Euro, Japanese Yen to some extent as well and Canadian Dollars, that's where our main flows into SEK would be. And we've had a positive effect from FX so far, particularly the weak Swedish krona, of course, translating back from USD in that respect. So we had a much stronger FX impact during Q1 and I first anticipated, actually SEK 165 million of positive FX effect sitting in there. If we look -- take the outlook, we previously said SEK 100 million to SEK 200 million, I probably say it's more like SEK 200 million to SEK 300 million looking ahead now for the year. So another positive effect from how we're looking at.
And the U.S. dollar flows or Euro flows into the U.S., has that decreased a lot or is...
No, the euro and U.S. has not decreased significantly. We move the U.S. dollar into euro and/or SEK, which is decreasing on the back of some of our exited business but the products we're moving from Europe into U.S. that wouldn't be decreasing, no.
Do we have any other question here on the floor in Stockholm? Let's see if we have any questions on the telephone conference.
We don't have any questions at the moment. [Operator Instructions] We now have a couple of questions.
Okay, so let's start.
Your first question comes from the line of Johan Eliason from Kepler Cheuvreux.
Yes, this is Johan Eliason from Kepler Cheuvreux. I was wondering, first of all, this Gardena build up to have better delivery performance in Q2, I mean, Q2 last year was a difficult quarter for you being very cold late and then suddenly very warm and then margins at the end didn't turn out to be very good or that is below expectations. How do you see the margins standing out with the actions you have taken now? Obviously, you don't know how the season will exactly look like but what type of magnitudes should we think that this inventory build up will help you in your delivery performance in terms of margins development? Any views on that?
Johan, if anything, of course, we try to learn from the rough experience of last year Q2, which was as you rightly point out, nothing, nothing and then everything during May and then scaling back fairly quick, in general terms, with penalties amongst others in logistics and transportation as one consequence and some other enforcement cost to expedite those volumes so there should be a positive element coming from that in Q2. No, you're right, yes.
And then if I may on the U.S. Robotics, again, I've been at Lowe's home page and you seem to be baking to be selling your Husqvarna robotic mowers at $1,599 at $1,799, including installation, which I understand is done by the local servicing dealer. How does this sale impact your profit margins on those robotics, considering that it seems like the installation is including in this price points, which looks lower then, at least, what we've seen for the Husqvarna brand in Europe?
First of all, it's a rather large engagement we have with Lowe's in U.S. and this comprises rather some 800, 900 point of sales where we actually do promote it and where there will be particular displays outside of those department stores. So I think that's a first comment to be made. At this stage I can't really say much about the season and the sell-through, it's simply too early. If we would have had this call 1 month later or 1.5 month later, I could give you a fairly good indication. I can't give that and then as to your question and about margins, we still have a pretty good margin consolidated in that offering for that particular product. So it's not a concern for us, but I think the important point to make is that we have a unique strength through the dealer structure that we have built up with some 5,000 dealers in North America. And how can we combine those strength from the dealer, being close to the customers with the mass consumer experience of a retailer like Lowe's. So -- and that's what we're trying to build and U.S. is much more of a service market than Europe generally is. So it's a very natural step to take. It's a test and of course, we like to transfer as much of opportunities over also to the dealer channel to utilize their closeness intimacy with the customers as well. So billing on that combination of strength, it's a natural thing to do. Those levels are not a concern at this stage, Johan, for those interim products.
Okay. And then just on this IFRS 16, I saw depreciation go up in the quarter. Could you just quantify the impact what's on the depreciation line from the IFRS 16?
Absolutely, that was roughly SEK 100 million in the quarter. So full year, I would guide it roughly SEK 400 million on the depreciation line from IFRS 16.
Okay, I think we have one more -- I think we have one more question from the telephone conference, do we?
We do. We will now take the next question.
It's Olof with ABG. Can you hear me?
Yes.
Yes. Perfect, I wasn't sure if I was getting the question. And so going back to Gardena, I think that was the best to support in my view, at least, very strong margin and improvement. Is it possible to split up, sort of, or give us an indication of an EBIT bridge here year-over-year? Was the product mix the main driver of the higher margin? And what is sustainable, what is not sustainable if anything?
Olof. Yes, if we look at Gardena, of course, it was a very solid quarter. The lion share coming from, it's call a market-driven improvements or mix improvements. What I would say is we need to then really split that into 2, half of it coming from traditional Gardena, particularly the watering products. But then also the restructuring measures for consumer brands Europe, where we've seen also a strong margin improvement if we look at that, that in isolation. So it's pretty much 50/50 between the 2 in the Gardena division. Does that answer your question?
All right. That helps. And then I have a follow up on Construction as well. Kai, you spoke about good market demand and so forth, but the -- let's say the organic, organic growth excluding M&A has been fairly flattish now for some time. Will we see this number go back to the 4%, 5% we were accustomed to a while back or have we reached, sort of, a plateau for 2019?
I'll take that. If you ask me about the expectation we should see a rebound upwards. We don't see any reason talking about the market demand, for example, now North America, which was the issue in quarter 1. Why we should be a pessimistic about that. As I commented upon, there was a bit of a weak start of the quarter due to actually cold weather, wet weather. So the season for them was maybe more impacted by that situation. You may recall, the northern part of U.S. being extremely cold and then it was fairly wet. So there was an element of that, put for short, but I don't see that we need to extrapolate that, and I also commented upon the adjustment of the inventories by some of the key accounts that took place. So when that is all said and done, which we would expect it to be very soon, we should see growth rates revert to the levels that you indicated.
And let's see, I think we have a final question here in the floor in Stockholm. Do we have any more questions on the telephone conference?
No further questions at the moment.
Okay. I think with that if we don't have any further questions here in Stockholm we thank you all very much for joining us and let's meet again when we report Q2 in June -- July. Thank you.
Thank you.
Thank you.