Husqvarna AB
STO:HUSQ B
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Husqvarna AB
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Hello and welcome to the presentation of Husqvarna Group's presentation of the first quarter 2022. My name is Johan Andersson, I'm responsible for Investor Relations. Here in Stockholm, we have our President and CEO, Henric Andersson; as well as our CFO, Terry Burke. So we will start with the presentation by Henric and Terry. And then afterwards, we will go ahead with a Q&A session. [Operator Instructions] So with that, a warm welcome, and let's start. So I'll give over the word to Henric.
Thank you, Johan, and also a warm welcome from my side. We are delivering a strong first quarter, a quarter characterized by strong demand of our products. I mean, really, all the products across the different segments and all the different regions and ultimately resulting in a record high order book. It was also a quarter that was characterized by increased supply issues when it comes to components and particularly affecting our robotic mowers and our ride-on mowers.
And although we delivered extremely well and performed extremely well in the vast majority of segments, we couldn't quite offset the impact on these 2. Still a strong performance from a sales perspective if we compare -- especially since we compare to our remarkably strong first quarter last year, that was up 24%.
We have strong mitigation activities in place, and we expect to see gradual improvements throughout the gardening season. As you know, we are living in a world now and operating in a world of great uncertainty, whether that has to do with inflation or if that has to do with supply or if that has to do with the macroeconomical situation or the geopolitical situation. But despite that, we remain fully focused and dedicated to our winning strategy of creating sustainable value over time.
An important part of that is, of course, our leadership in technology and how we are driving this industry forward. And I will come back with a few examples on that a little bit later on.
Before we dive into the quarter as such, it's important to zoom out a little bit. And looking at the 10 years or so, it's clear that we have been building a stronger Husqvarna group consistently over time, where we are changing the focus towards really focusing on the Husqvarna and Gardena brands towards premium positions and propositions on 1 hand, and on the other, how we are pivoting the product offering towards smarter, more sustainable, more electrical, more intelligent products. And that really positions us well for the future. Since these are the product segments that have the greatest prospects in terms of future growth and profitability. And as you know, we are holding back in some other segments, and we have even exited some.
If we then look at the quarter from a net sales perspective, it came in at SEK 15.7 billion, which is an organic growth of minus 2%. Very different in the different divisions. I mean, the Husqvarna Forest & Garden division was the most affected by the supply constraints. So we were down 7% there. However, Gardena was up 5% and Construction was up 10%. So generally, a fairly strong sales performance, especially comparing to this record quarter last year. We've also continued to implement the price increases throughout the year here.
From an operating income perspective, we ended up at SEK 2.2 billion compared to SEK 2.3 billion last year. The main difference is really related to an unfavorable mix and lower volumes. Something very good in the quarter is that we have managed with our price increases to offset the higher raw materials and logistics costs. We have also continued to invest into the strategic growth areas, although we have been a bit more modest than normal. And we also had a slight favorable currency effect in the quarter.
From a direct operating cash flow perspective, we are at SEK 1.5 billion negative versus SEK 143 million positive. The main driver here is increased inventory. And the net debt/EBITDA decreased to 0.8x versus 0.9x last year. So important part of our business in terms of robotics and battery. You can see that from a rolling 12 perspective, we now are 17% of total group sales versus 18% last report. And that is, of course, all attributed to the supply constraints when it comes to robotic mowers. And it's particularly in the consumer segment. We actually have significant growth in the Professional segment.
And of course, we have quite a few important launches for this season and also a strong pipeline for the next season, making sure that we maintain our technology leadership position and that we are well positioned for the future. And with that kind of the highlights of the quarter, I'll turn to you, Terry, to get into some of the details.
Thank you, Henric. So if we take the Husqvarna Forest & Garden division first, this was the most affected by the supply challenges that we've had. And the organic sales was a negative 7% in the quarter, operating margin lower at 14.7%. We do have strong customer demand. The demand in the order book is strong and we did perform very well in some of our segments in handheld, professional, and parts and accessories. The supply challenges were really contained into the robotic with the electronic components and the ride-on mowers with the engines. And those are the 2 specific categories that impacted the Forest & Garden division.
Price increases almost offset the higher raw material and logistics costs. So overall, a challenging first quarter for the Husqvarna Forest & Garden division, but again, a strong order book and record high back orders for the division.
With that, we will move over to Gardena. Gardena had a strong quarter with 5% organic sales growth, a solid performance, particularly in handheld hand tools and accessories. The Orbit integration, that accounted for about 33% of the additional sales growth. However, that did have a dilutive effect on the operating income of around 1.8%. Gardena did offset all of their higher raw material and logistics costs through price, and that's a very good thing that we have achieved through the Gardena division.
With that, we can move over to the Construction division. Construction had a very robust Q1, 10% up in sales, organic growth. So good to see how we've driven the construction sales really on the back of strong power cutter performance and sales. Again, price increases compensated for the higher raw material and logistics costs. And through that, we were able to actually improve our operating income slightly from 2.2% -- sorry, 12.2% to 12.4%.
During the quarter -- or just after the quarter, we also did the acquisition of a Diamond tools company in Central Europe at Heger and that carries annual sales of around EUR 9 million. We also are in the final phases of the Blastrac integration, and there were some items affecting comparability costs associated with that final phase of some SEK 90 million.
So I think this EBIT bridge is a very important bridge, and I think it's pretty clear from the EBIT bridge that we have successfully, and I think it's important to get that across, we have successfully managed to offset the raw material and logistics costs with our price increases. We continue our investments with transformational initiatives, slightly cautious, but more than SEK 100 million in those investments, and we will continue those investments throughout the year. We had a positive currency effect of SEK 115 million in the quarter. And our outlook for the year is to be roughly SEK 200 million positive currency effect for the quarter -- for the full year, sorry.
When we look at it from a margin perspective, of course, you can see the margin has reduced to 14%, and that's really driven by the mix and the volume impact that we've had in that first quarter. We remain with a very solid balance sheet. I think the 1 thing that really stands out in the balance sheet is our higher inventory levels. We came into the season with -- into the year with higher inventory levels and that has remained. A couple of things to call out there with the SEK 15 billion of inventory. First of all, we now have Orbit and Orbit accounts for roughly SEK 1.2 billion, of that SEK 15 billion, and we have a positive currency effect of some SEK 400 million. So once you adjust for those two, then the remaining SEK 3.5 billion increase, that's really driven through higher component inventory. And we reference it as the golden screw, where we have a lot of products where we continue to build the product, but we are maybe 1 or 2 components missing. So that's really creating part of the component increase.
In addition to that, we've had our logistics congestion and some goods in transit. Finally, just to mention, we signed off a SEK 5 billion 5-year sustainability-linked rolling credit facility. And that's linked to our sustainability carbon reduction target for 2025 of minus 35%.
If we move over to cash flow, I don't think there's too much to say on the cash flow. Obviously, inventory is impacting why our cash flow is worse than the last couple of years. But also if we keep the perspective that pre-COVID, our trend during Q1 normally was to be negative in the first quarter and we see that here as well. But we do expect to see a positive cash flow starting to kick in during quarter 2.
Capital ratio, 23.5%. If we adjust for Orbit, it would actually land just above 23% versus the 22.5% last year. And again, really driven by the higher inventory levels that we are carrying at this moment in time. And finally, the net debt, we already touched upon it in the summary at 0.8x against the 0.9x this time last year, quarter 1 last year.
So with that, Henric, I'll pass it back to you.
Thank you, Terry. And let's shift gears a little bit and be a little bit more forward leaning maybe here. Just a quick recap. I mean, you have seen our strategy many times before. We have sustainability in the middle. Important is this winning core, really the business that is defining us and has defined us over the years, a lot of the handheld products, watering products and construction products goes into that category. And it's super important that we continue to win in this category since it also is helping to fund the investments into the 3 other buckets here. I mean robotics and battery, the customer experience and how we expand our offering into services and solutions beyond our traditional products.
And I think the important message here is more that nothing has changed in the strategy. Yes, in robotics, we have a little bit of a speed bump here in the beginning of this year, and that is what it is. But that doesn't, in any shape or form, change the strategy or change the future value creation potential that we have here.
Just a few different perspectives. I said in the beginning, technology leadership is an important part of our strategy, particularly in robotics. And we are continuously launching new features to the customers or even entirely new products. One of the big things this year for consumers is this AIM or LONA technology we talk about, which is basically a navigation and mapping solution that even if you have the boundary wire, you map out the lawn inside of that. And 1 benefit of that is, for instance, that you're on your app, then you can zoom off and actually put in a virtual boundary wire and zoom off a part of your lawn for the time being.
Another big thing, of course, is us entering into the professional segment with robotics. We have talked about CEORA now for, I think, at least the last 3 quarters. And now production has started. We have started to sell. The first units are now installed with our customers. And so far, very good response. I mean this is a big thing for us. We are now addressing SEK 100 billion commercial mowing market that we didn't address before. And then we have hinted a little bit about next year that we will also bring the virtual boundary concept into the consumer space already next year. So that's something very exciting, of course, looking forward to when we go into next year.
At the center of the strategy, we have sustainability. And as you know, we have 3 targets here. In terms of carbon, we have the target, as Terry mentioned before, to reduce our absolute emissions by 35% in 2025, and we are currently at 30%, which is a slight improvement from last quarter. We have circularity, where we have committed to launch 50 new circular innovations by 2025. And so far, we have 4 that we have launched and validated the commercial success. We have 12 in the immediate pipeline, and we feel very comfortable that we will reach the target of 50.
And then the third target is about people, how we empower 5 million people to make more sustainable choices. And this is the first time we actually start to show the measurement. And up to now, we have empowered 275,000 people, either through training or by selling and truly marketing a sustainable product as a sustainable product and then we count it in this category.
Then in terms of forward-leaning activities, we made the acquisition of Heger here, as Terry just mentioned. Very important, even though it's a fairly small acquisition, Heger is really a state-of-the-art manufacturing outfit, really good at making these true professional diamond tools in sawing and drilling for wall sawing, floor sawing or core drilling. And it's a business where you need to have a very high degree of service to the customer, which has been a challenge for us to really be successful with in Continental Europe or Southern Europe since our main factory is in Genshin in Sweden here. But here, getting it in the southern part of Germany, we are opening up for new opportunities for the Construction division.
Another thing we did that we came out with yesterday is that we invested in Moleaer. Moleaer is a global leader in advancing nanobubble technology. And what nanobubbles are? It's really very, very small bubbles that don't rise to the surface and then burst. They actually remain contained in water. And in other adjacencies like in agriculture, it has proven much higher yields and also much less need for water. You can become more efficient with your watering. So very interesting for us, both from how we can bring that into our business potentially, but also how excited we are to be part of Moleaer's journey here. And this is the seventh investment that we have done through our venture capital fund, where we invest in disruptive technologies and products that can further strengthen the group's business as such. So 2 very exciting opportunities here going forward.
So if we then summarize the first quarter, let's go back to the first quarter and it'll be a little bit more short term. As I said in the beginning, I believe that we had delivered a strong first quarter. We have strong demand. We have a record high order book. We are performing very, very well in the vast majority of the product segments, but we cannot quite offset the impact that we see in robotics and ride-on mowers due to the component supply. It's not a demand issue. It's a pure supply issue. But we almost can match a record strong first quarter last year that was up 24%. We have strong mitigation activities in place. We are working very close with our suppliers. And with the plans we have together, we expect to see gradual improvements throughout the gardening season.
And I think 1 of the main messages as well is that we remain 100% committed to our winning strategy. We will continue to build a stronger Husqvarna Group. We will continue to deliver sustainable value over time. And yes, there's a speed bump here right now when it comes to robotic mowers, but that doesn't change anything in the mid and the long term. The value creation opportunity is still there and the equity story is still there.
So that's a little bit about the first quarter, and I think that's enough as a presentation, and Johan, maybe we should open up for Q&A.
Thank you very much, Henric and Terry for the presentation. And with that, we're at the point of starting the Q&A. [Operator Instructions] And we see that we have a number of questions already now on the telephone conference. So I leave over to you, operator, to kick that off, and then I will come back with some questions here that we have received over the web interface. So let's start with the telephone conference. Please, operator.
[Operator Instructions] And our first question comes from the line of Johan Eliason from Kepler Cheuvreux.
I was quite impressed by the Gardena performance. You show a positive organic growth despite robots missing an extremely tough comps. I guess it's all about the price compensation though. But still, I mean, if you look at Gardena, it hasn't shown a single negative organic Q1 quarter since you started reporting it, I think, 8 years ago or so. Have you done anything more this season in terms of broadening the distribution channels similar to what we have seen over the last few years? And is there some further acceleration to expect during this year or into next year for Gardena?
I wouldn't say that we have opened up new channels. We are really -- I mean, Gardena is really executing a winning strategy that is really resonating very well with end customers and with the trade partners that we have today. I think 1 of the big things that is a difference here is that Gardena is less dependent on the original home market, and we have been much better at building out new markets, and that is what you can see in the numbers. We've also become much better at not just being the watering and potential robotic brand, but also built really strong positions in hand tools. So I would say that is more driving it than opening up new channels.
And if I may add, Henric. If I may add, we also launched the EcoLine on the hand tools, which has been a successful launch during quarter 1.
Okay. And just on hand tools, how big a share of Gardena is that today?
I don't think we have ever disclosed how big the different areas are, Johan.
No, not specifically.
Okay. So let's not go there today. But the good news is that we see this as an area that is growing disproportionately well versus the rest of Gardena, which is making Gardena more of a tripod, hopefully, in the future with watering, robotics and hand tools.
Excellent. And then I noticed your balance sheet, did you do any -- or cash flow generation is obviously a bit weak. Did you do anything particular to the factoring or any other extra financing during the quarter?
I wouldn't say it fundamentally changed. It was pretty consistent with previous quarters.
Okay. Good. And then just looking into the sell-through season, we are into April, obviously, already. You talked about lower retail inventory still, I think, in the report. But what about weather? I sort of heard a cold March in the U.S., probably a bit cold here in Europe as well. How do you see the seasons playing out from what you can see so far in terms of demand and then maybe weather patterns that might impact you?
I will say that up to this point, we have largely seen demand from our channel partners, dealers and retailers. And as the season starts, you get the demand from the end customers. And to your point, I would say that the season is starting a little bit later this year, generally speaking, than it did last year, which is not only a bad thing, given some of the supplier issues that we have had here in the beginning of the season.
And remind us how is the comps for the sell-through quarter Q2? I think we had flooding in Germany, obviously impacting Gardena negatively. Was that sort of rather a Q3 impact? Or how did that look like last year?
No. The way I recall it is that we, generally speaking, had a very strong second quarter last year with the exception of Gardena watering in the core markets, Germany, Belgium, Holland, and a few others, because of the floodings and all of that. So it was more a Gardena watering topic in the core markets last year.
Our next question comes from the line of Gustav Hagéus from SEB.
I'm a bit curious on -- so your supply constraints, if you have a view whether or not your issues are greater than some of your peers, or if there's sort of an industry-wide issue? And if that will potentially extend the season from what we usually see into Q3? That would be helpful.
What we do see is that there are quite a few of our peers that are issuing statements or sending out letters to trade partners, alerting or apologizing for the supply issues that they have. So I would say it is a general thing, but it can have different timing and different product segments over time where it is affecting. But I would say it's a general thing that everybody is, to some degree, struggling here.
And I think your point there as to, hopefully, this can help to extend the season is something that we are hoping for, too. But of course, everything is -- there's a lot of uncertainty. It's always uncertainty, but I think this year, there's more uncertainty than normal.
And on the record -- you referenced a record high order book. Could you elaborate a bit on sort of the stickiness of that order book? Do you think there are a lot of double bookings from your channel partners sort of booking inventory sales from you, but also from some of your peers? Or to what extent have they committed to actually take on that volume they put in order?
I mean, in the end of the day, I think there is an element of double booking, because there have been challenges for everyone in the industry to supply the demand. So I think there's an element of that. I think that even if you cleanse for that, we still have a very, very strong order book.
At the same time, first quarter is, to a large degree, what is the demand the dealers and the retail partners see. And in the second quarter, when the season starts, I think we will get a much better feel for what is real and what is not real, as the end customer starts to buy. But I think normally how you look at it, we have a record high order book even if you cleanse for potential double bookings.
Okay. And you referenced also that you think the supply issues are gradually going to fade a little bit during the season. Have you already seen that to some extent? Or is this more of a projection? And are there any tangible evidences that, that will happen, and what are the main drivers to that effect? That'll be helpful.
I mean, we have not seen it in reality to this point. And we expect to see the first material improvement, I would say, in the middle of the quarter. And what we base it upon is, of course, our close collaboration with our suppliers, where we are prioritizing things together. But also, many times we are redesigning to fit a slightly different version that they can have more readily available. And looking at those plans, we believe it's credible to expect a gradual improvement here starting in the middle of the quarter. But at the same time, there's a lot of uncertainty in all of this. But to the best of our knowledge, we feel that there's a credible plan here to see those improvements.
Okay. And finally, for me, you say now that you're sort of in a commercial phase for CEORA. Have you already now discovered any sort of minor flaws or potential updates that you're taking on? Or is there -- are customers generally very happy with the results thus far?
Everything that I've heard is that the customers are very happy so far. At the same time, touch on woods, when you launch something that new and radically innovative, there's always an inherent risk of something. But there's nothing that we have any indications of today.
And if I may add to that, Henric, when we bring the CEORA installations into place, we automatically move into a 30-day hypercare period. So we really make sure that this is a successful integration, and we iron out any of those installation challenges that we have.
And do you still expect to break the 4-digit number of installations this year? Is that a reasonable assumption? So 1,000-plus units?
I mean I'm not sure how specific we've ever been, but I think we would be disappointed if we can't be in 4 digits.
Okay. That's very helpful.
Thank you very much. And let us come in with a question here that we have got over the web interface. We have a couple of questions from Fredrik Skoglund and a little bit on the CEORA thing that you started with Gustav. Henric, you mentioned that you have a potential of SEK 100 billion for, let's say, the potential market; one, is that correct? And two, can you relate a little bit to where are you on that trajectory? And can you relate it also to the consumer market, to the sizes there? And what are the activities to penetrate this SEK 100 billion market?
A lot of small, simple questions, Fredrik. Thank you. When we talk about the SEK 100 billion, that is when we say, okay, what is the cost of commercially cutting grass today in areas where robotic mower could do it, that's SEK 100 billion. At the same time, we say that we should at least be able to offer a 30% cost reduction of doing it. So in that reality, you can say that we are more looking into SEK 70 billion. And then part of that, of course, is going to be equipment. And if we do more of as a service, then we get closer to the SEK 70 billion.
So I would say that SEK 70 billion if we sell everything as a service, slightly lower if we also sell the equipment, just to be clear. But that's how we define it. In different, it is a big, big opportunity. And today it's, of course, very difficult to talk about the trajectory. We are just installing the first ones with our customers. And I think after this first season, we would have a much better feel for how -- I wouldn't say how well accepted it is, because I'm 100% convinced this will be well accepted. The question is what is the time to conversion, that the customer goes from this is interesting, this makes sense, to actually making the purchases and how quickly would they replace their fleets. And I think that's what we need to get our arms around a little bit better here over the next year or so.
And then there was a third part that was related to consumer. I think some of the things are similar, meaning that here we come with something that is inherently different from how it has always been done in the past, and that's something we need to overcome. To consumers, we are basically selling convenience and saving some time. In the Pro space, we're actually selling a better P&L. And I think that is a big difference that is probably something that's going to be easier to talk about and to get to resonate with the customer.
So I think we also need to overcome this thing that they know exactly what the cost is per square meter with what they have today, what would actually be when everything is said and done on with CEORA. And that's why I think different solutions as a service or maybe invoicing by the square foot or square meter or something like that could potentially speed up that piece. So there are some similarities with the consumer side, but also quite some differences here in what the value proposition is.
Great. Just the other one, maybe quickly from Fredrik as well, and maybe this is a little bit more to you, Terry, is that the inventory is up SEK 3.5 billion, if you take away currency and Orbit. What is that kind of for sales value when that is eventually being sold to the customers, and even if you don't turn it around this year, so say what can we expect to come out from that inventory?
I mean, obviously, I don't think we would go too much into the detail on margins and such like. I think the way I would look at it is, it puts us in a good position to fulfill the strong demand that we have at this moment and the high order book. So we need to continue working with those supply challenges, but then, of course, turn that into a finished product and get that out of the warehouse to the customer. That's probably how I would look at it, Johan.
And also to tie into 1 of the questions we got earlier, how credible is the plan in terms of gradual improvements? I think this is part of it that we have many of the parts and we are missing a few. And if we just can get the plan and commitment on those few, we obviously can complete finished products really quick. So I think this that we have high inventory at this time in the season, I do not see as a problem. I see that, yes, like you Terry, as an opportunity that makes us better prepared to execute well.
Great. Just another follow-up from the earlier presentation. It's 1 question around price. So what are you doing in terms of price now to offset further potential higher raw material and logistics costs going forward? And when do we start to see that kicking in, was the question coming in here.
I mean, first of all, I think we have already seen price increases kick in. We are offsetting all the raw material pressures and the logistic pressures with price already in the first quarter. So we have taken decisive price increases going into this season. But to answer the specific question, we have another round of price increases that are being implemented or have been implemented here in April, primarily in the Husqvarna Forest & Garden division, and also in the Construction division, whereas Gardena has a little bit more of a challenge to change price in the middle of the season.
Great. So let's get back to the telephone conference and see if we have any further questions there. I think we have a number of analysts listed in the queue there. Please operator.
Our next question comes from the line of Björn Enarson from Danske Bank.
Would you say that Q2 would be more of a selling quarter than normal? I mean, I guess you are lagging a lot towards dealers and retailers? That's the first question.
I don't think you can look at Q2 as a selling quarter. I think now when the season is starting, whatever we ship to -- in these constrained areas, whatever we ship to the dealers or retailers, they will turn around into end customer sales quickly. So I think Q2 will largely be about selling through to end customers.
So basically, you're not then lagging beefing up the dealer inventories?
Not really. I mean, of course, we are lacking in robotics and ride-on mowers, and that's a situation we have. But anything we will ship, they will turn around to sales to end customers straight away. And that's why it's hard to talk about it as a sell-in quarter.
Yes. Yes. I understand, just compared to normal. Then on the inventory, is there a risk that you are leaving '22 with a too high inventory? I mean, we can only speculate about dealer inventories at the end of the season. But I mean, your own inventory? Or are you ever dependent already now that sell-through will be okay in Q2 and Q3?
I think it actually is more related to that we get that golden screw Terry talked about. That to a large degree, we sit with all the components except 1 or 2. And as soon as they show up, we can complete a product. And the other piece is that we have quite some finished goods, but also components stuck in transit, and that's something that we can turn around fairly quick as well. But there's always a risk when you're in this seasonal weather-dependent business that you either have no inventory or you're exiting the season with high inventory. Of course, our plan is to start to normalize the inventory here as we progress throughout the year.
Then a final 1 on Moleaer, the nanobubble tech company. What kind of customer solutions could this end up with?
I mean, what we know so far is that these nanobubbles, they have proven to be very good in terms of increasing yield to reduce the water needed to effectively irrigate. And it's also making it much easier for nutrients to actually reach the grass or the plants or the crop that you have. So it's then, of course, easy to speculate what could that mean in, for instance, a Gardena or Orbit context. But we are a little bit early there yet, but we think that this technology is very promising. And we also believe that Moleaer as a company is very promising, and that's why we wanted to invest and take a stake in Moleaer.
Interesting.
Great. Operator, do we have another question over the telephone conference?
Yes. Our next question comes from the line of Karri Rinta from Handelsbanken.
I wanted to get back to the robotic mowers and the order backlog. So maybe adjusting for those double bookings that you alluded to. Can you give us sort of a ballpark estimate of how much larger is your robotic mower backlog this year compared to last year? And maybe as a follow-up, in a typical year, how long is this sort of a seasonal window for you to ship robotic lawn mowers to your customers? I know that it has started, but when does it typically end?
So I mean, normally, we don't share the specifics here, but it's materially higher than it has ever been. So the back orders here are record high, which is partially because of increased demand, but partially also because of less supply. So it's easy to come to the conclusion that we have very high back orders when it comes to robotics.
As to the second question, it's a difficult question, but 2 different perspectives on it. First of all, how long the season is, is largely weather dependent. And the mowing season needs some precipitation and it cannot get too hot and everything turns yellow, then you normally have a fairly short season, or if it gets cold very early in the fall. What we can see in the last 3, 4 years is that there has been very favorable weather conditions. And 1 can speculate if that has anything to do with climate change or not. But we clearly see a difference there, that the season has become longer in the last few years.
I think the other perspective on this is that we have also seen that robotic mowers have a slightly less seasonal pattern than some of our other lawn and garden products, that there are more customers available a little bit later in the season. However, you can never compare outside season and being in season. But generally speaking, it is normally a little bit less sensitive.
All right. That's helpful. And then just a clarification. So would you say that demand for robotic lawn mowers is not that different from what we have seen in recent years with the exception of maybe some pandemic-related adjustments. Would you say that demand is going at double-digit rates?
Yes. I think demand has continued to increase. I mean demand is higher this year than it was last year. So I mean, the demand is still increasing when it comes to robotic mowers.
All right. Good. And then just finally, these golden screws that you're referring to, are they specific to, a, for example, more towards Automowers and less towards Gardena's robotic lawn mowers? Or are there sort of -- do you have problems in every broad category?
I mean, yes and no. There are some similarities and there are some differences. Generally speaking, so far, we have a significant growth in professional robotic mowers. So that segment is doing well. It is in consumer versions that we have this shortage to date. And Gardena has been a little bit better off so far than the Husqvarna division.
All right. Very helpful.
Great. Let's kick on with a few questions that's coming in from the web interface. Maybe a little bit tagging along to the supply chain here. Two pieces. One is from Stephen Walker. One is, maybe you already answered it, but do you see the robotic -- is it coming from 1, 2, 3 suppliers, or is it more widespread? And is it a few components, or more widespread in terms of what you need to complete the volumes here?
We're only talking about less than a handful of suppliers. Of course, we have more than 1 part with each supplier. But the challenge, so to speak, is fairly well contained.
Great. The second part of the question is, if you then -- as you plan to resolve this during the season and see, say, a better situation, do you see any impact as of now going into next year? Or you should say, starting from a fresh page next year according to your estimates right now?
No, I think these gradual improvements is something that we're going to see throughout the year, and we should be in a better position going into 2023 than we are right now. That's clearly the view we have today. But again, I always need to put the disclaimer in there that supply has been erratic and the situation is very uncertain. But the plans we have right now and the visibility we have now, '23 should be better than '22.
Great. Another question coming in from Ole Henrik Bang-Andreasen at Tower House Partners. He's asking about -- you talked a lot about robotics and so forth. But on the battery side, general battery side, how do you view the supply there, and maybe also in the longer run, what's your plan for securing your volumes on the battery side?
I mean, generally speaking, first of all, let's be clear. Throughout the whole COVID pandemic, we have had supply disruptions. And we have been very good at mitigating those. What happened this quarter was that we got bigger deviations with shorter notice, and therefore, we couldn't mitigate it. So we have issues a little bit everywhere, every day, but we manage to deal with it. And on the battery side, we also have challenges because you have a lot of electronic components there as well. So that is gating us in battery products as well. It's just not as severe -- of the same magnitude as on robotic mowers, and therefore, we are not calling it out. So I think that's 1 way of looking at it. And in terms of securing supply, we are working with a lot of different approaches to make sure that we secure supply, and there's slightly different components. I mean, in terms of battery cells, we need to have a few approaches around that; in terms of electronic components, an approach for that.
And 1 of the main things we have done is that historically, we have normally worked with an integrator, meaning that we get the whole PCB from someone. And they are the ones who are dealing with the components coming in. And we are now to a large degree involved in the component supply into the integrators. That is 1 of the big changes to really make sure that we're involved and we're driving the behaviors and driving the demand versus the supplies in the right way. So that's 1 of the things we have changed.
But then this is to look at different kinds of partners. And 1 thing in battery that we did, which has a big impact here, of course, is that we said for the low end, we are partnering with Bosch in this powerful all alliance. And that's 1 way to secure supply that has proven successful this year as well.
Great. Another question coming in from, I think, it's France, Hélène Coumes at AlphaValue. On Orbit, clearly, they are trading on the margin below Gardena standard. What do we see there? Do you believe that we can improve that one? And can they, so to say, reach the kind of Gardena standard over time? What's your view there?
I mean, that's the ambition. I mean, the first target we have set is to reach at least group average margin within 3 years. And we have visibility to that, and we have a credible plan to get there. Then there's, of course, yet another step to get up to Gardena, but that will come in the years to come. It's all about how we now find the opportunities to further develop and enhance Orbit and get this collaboration going between Gardena and Orbit and find synergies, find opportunities, and become even better at driving more of a -- even though Orbit is not true premium, at least becoming more premium, because the idea is, of course, to have Orbit, let's call it, in the middle and then position Gardena on top, where there's really no player today in the U.S. market.
Excellent. So let's turn back to the telephone conference. I think we have 1 or 2 more questions from analysts there. So please, operator, go ahead with the next question from the telephone conference.
Our next question comes from the line of Henrik Christiansson from Carnegie.
Henrik from Carnegie here. A question on the EBIT bridge for the full year. I mean, you helpfully provided an updated FX number that is SEK 200 million positive. What about raw material and logistics? If I recall, you talked about SEK 1 billion previously. Do you have an updated number for the full year impact as it stands today on that number?
Absolutely, we did originally have a plan for -- or an expectation that the raw material and logistics would land around SEK 1 billion. And quite rightly, as you say, Henrik, that is going to increase now. We expect it to be -- and of course, it's very difficult in a very volatile situation, but we expect that to be somewhere around SEK 2 billion for the full year now. However, let me be clear and say we will offset that with price.
Great. Very clear. And then similarly, on the strategic investment or transformational initiatives, perhaps you had SEK 100 million here in the quarter. You mentioned that it will now continue throughout the year. Is that number 400? Or is it something different?
My opinion on that would be, we have been a little bit cautious at the start of the quarter given the high volatility and the supply challenges we've had. However, we still stand by our strategy and our initiatives. So directionally, we will, of course, during these turbulent times, still be a little bit cautious, but we will still try to be pushing as hard as we can. I don't think we should be giving a concrete number as to what we expect it to be. But we will continue this in a positive way.
I guess, yes, just to add a little bit to it. I mean, generally, we have been speaking about 1% of revenue plus this SEK 250 million from this restructuring program that we made. That's kind of the framework. This year, we will likely not get all the way there, because we are more cautious. But we still want to continue to invest in the future, because we see what has happened this spring more as a speed bump than a change in direction or a change in the outlook or the equity story here.
Very clear. Then a second question on the supply chain gradually improving. I mean, you talked about redesigning to fit a slightly different version and you expect that to gradually improve starting mid Q2. I'm just wondering what does that mean in practice? When can you have products rolling out of the factory, if that scenario plays out, because I assume there's some form of lead time in production, too. So from when the component situation improves?
I mean, the lead time is not very long at this time of the year. And in many cases, we even have products already assembled just waiting for a part or 2. So there's a mixed bag. But the whole intent is, of course, to try and turn this as quickly as we can. And that we will start to see an improvement here in the second half. So I wouldn't say that we have a long lead time here.
Great. We just got 1 question in from the web interface. And it's a little bit tagged onto the Orbit discussion. Can we start to see Gardena products in the U.S. already next year on the season 2023? Could you elaborate a little bit more on the Gardena U.S. plans there?
We're still in the beginning of launching these plans, and I know that the Gardena team has been talking about already launching some products this season to sell online and things like that. So I mean, this will gradually increase. But it's still a little bit early to be too concrete about what it means going forward since we have just got the teams together to try to craft this plan where we can position Gardena as the true premium brand, Orbit sitting below, and how can we go to market with this in the best possible way.
And we also know that to do this in a cost-effective way, to create a premium brand on the U.S. market, either cost a tremendous amount of marketing money and we're not willing to go down that route at this point in time. So we will work much more in the beginning with our own D2C, work with social media, digital marketing to try to create this premium position, and then later on when that is established, start to also move Gardena into other channels.
Good. And maybe a follow-up on that one. So Gardena is relatively successful on online already here in Europe. How much do they sell online generally?
I believe we are around 25% if you include the different types of e-com. It's not all our own D2C, of course, but in total, about 25% of revenue.
Yes. Great. Great achievement. Operator, do we have any final questions on the telephone conference?
We have another question registered from the line of Fredrik Ivarsson from ABG.
Actually, so sorry if you already touched upon it, but I've got 2 quick questions. And the first 1 on the margin in Husqvarna, which was down around 2.5 percentage points, I believe. And obviously, that's part of the organic sales development. But I also assume that you saw a negative mix effect from the supply issues within robotics, as those are more high-margin products. Would you care to help us out with the bridge there a little bit? What's the sort of negative mix effect you see from the robotics, please?
I don't think we should go specifically into the detail of the division. But I think your assumptions are correct. I mean, we do have a negative mix impact in the results for the Forest & Garden division. And of course, that is heavily linked to the robotic.
Okay. Correct. And second 1 on the supply constraints also. I assume that sort of quick solution you talked about could come with somewhat higher cost. So can you give us any feeling for the sort of magnitude of those immediate cost increases?
Sorry, can you repeat the question?
Yes. Regarding supply constraints, I assume that a quick solution you talk about is coming with higher costs. I suppose you need to buy more on spot rates and so those kind of things. And I'm just curious whether you could give us a feeling for the magnitude of those higher cost increases?
Yes, I think if we zoom out a little bit and put the context of -- and we touched upon it a little bit earlier on this raw material logistics cost increases, we expect that to land around SEK 2 billion for the year. And of course, that includes the spot buys, the airfreight and everything else that we talk about. But I think what is, of course, equally important is to get that message clear. We will offset these additional costs with price. And we've already talked about some of the price that we've already executed on and then further price from the 1st of April in the Husqvarna Forest & Garden division and also Construction.
Okay. Perfect. That's my questions.
Great. I think we're starting to run out of time here. I think we have 1 more final question from the telephone conference, operator.
Our last question comes from the line of Karl Oskar Vikström from Berenberg.
Just a quick final question from my end. I mean, obviously, we've been talking a lot about the supply issues. You seem to be doing a great job in kind of mitigating that. But I would just be interested to hear your thoughts on if we take the perspective of the 13% EBIT margin target, and when that was said, the world looks quite different today. I just wanted to understand a bit what's your kind of assumption on cost inflations related to raw materials, logistics, et cetera, were at the time when you set that? And maybe also what kind of price increases you were kind of expecting to push through at the time and how that has changed?
I think the high-level answer is that we had this expectation of about SEK 1 billion, which is now SEK 2 billion. I think that's the easiest way of relating to it, and that also means that we need to increase price with another SEK 1 billion. I think that's the easiest way of looking at it.
Okay. And just kind of follow-up there. I mean, in terms of timing then of when you kind of estimated you would reach these levels. Has that changed at all? Or does that still stand?
It has, of course, made it more difficult in the sense that when we set the 13% margin target, we also said that the 12% plus EBIT margin we had last year was a little bit artificially high due to COVID, et cetera, with about 1 percentage point. So in reality, we were closer to 11%. And then you have 0.3% dilution from Orbit. So that kind of changed the baseline a little bit, and that was part of the plan. And that's why we said it will take us a few years to get to 13%. What has happened now is that even if we offset the cost inflation with price, it actually has a negative margin percentage impact, which is fairly significant. So I would say that is the main difference in terms of how we see that we now have an additional gap to close.
Yes. Perfect. That's perfect.
Thank you very much. And I think with that, the clock has turned 11, and let us end this presentation of the first quarter results. And we're also happy to announce that we will start now traveling again. So we will be in Stockholm on the 5th of May; and then London, the 25th of May. And then we will also go to further cities in Europe as well during the spring here. So please, welcome to join these sessions when we are out on the road. So and with that, I would like to thank everyone for listening in over the telephone conference or participating over the web. And if we are not seeing before, we will then report the second quarter report on the 15th of July. So thank you very much for today.