Husqvarna AB
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Good morning, everyone, and welcome to Husqvarna's group presentation of the second quarter of 2019.My name is Johan Andersson, responsible for investor relations here at Husqvarna, and I will be the moderator here today. In Stockholm, here we have Kai Wärn, our President and CEO; and also Glen Instone, CFO. And as usual, we will start with a presentation by Kai and Glen and then have a Q&A session afterwards.So with that, I warmly welcome everyone and leave the word over to Kai.
Also from my side warmly welcome to this results presentation.Let's jump straight into then the action here and conclude that we are quite pleased actually with the performance of the quarter and -- but there is always a little but, and the but here was the start of the season which was a bit disappointing. It was a weak sell-out start. So maybe if I back out so we get the right perspective, quarter 1, as you will recall, was very good, but that's about sell-in, sell-in to the trade partners. Quarter 2, actually the sell-out to then customer starts, and that was delayed due to primarily cold weather and grass not growing. And this is actually true for both Europe and North America. So we were a bit burdened by that at the start of the quarter, but the good news is the rates picked up. It normalized. There was nothing really that was negative at the end of the quarter which is also -- and I know some of you is thinking about that, which is also true for the start of July. So we have a normalized type of pace of sales at the end of the quarter, which is actually what we see also right now as we speak, and that's good news. But the bad news was the start of the quarter, of the sell-out was not up to standard. And that caused a problem, of course, with the sales overall, but despite that, we delivered a good performance, as I said, and all divisions contributed to improved operating income, very much by and large relating to price improvements. We're talking about efficiency improvements. We're also talking about successful restructuring. And you will recall we have said we want to improve SEK 250 million of the 2 seasons of '19 and '20 from -- as a consequence of the restructuring program that we initiated last year. And we are well on plan -- if anything, ahead of plan, on that side. So that's also good.Margin and then really important topic for us, needless to say. You will recall we ended last year at 7.9% operating margin, and we are now rolling 12, first half of the year, up to 8.9%, so a good step ahead towards the levels where we want to be. We also had a good step ahead on the cash flow. And Glen will talk through the details of that a bit more, but it's a SEK 1.8 billion improvement here for the first half year. And if we look at the big picture, we continued to execute on the improvement trajectory of the operating margin and result while also have continued to invest in strategic initiatives for positioning the company for the future. So it's a balance, while we also continue on this path that we have been on since 2016, and it's quite nice actually to see how that helps us move to the front and lead in this industry.So looking at then the sales, well, you see 2 pictures here. You see at the left the old structure just as a reference. And you will see in that left picture that we ended as a total of these 3 divisions on 4% net sales increase. Then we also talked about that as a proxy for expectations for this year excluding the exited business. Now what you see here on the right is that actually for the first half we are at 2%, so we are behind that expectations. There are some variations here and Husqvarna burdened the most by the loan situation that I talked about beginning of quarter 2, Gardena having some benefits from the extended season last year. I'll come back to talk more about that. So the 2% is not in line totally with what we expect, but I do hope that we will see an improvement of that, and we do expect an improvement of that number for the H2. Let me be clear about that, whether we fully will get to 4% is maybe a question, but maybe a better expectation given where we are right now is 3% to 4% for the full year.Good. And this is then our curve showing the operating income in absolute terms as well as margin-wise. And you will see that we on a rolling 12-month basis are back to the previous peak levels around 7 -- SEK 3.75 billion, give and take at that level, and that's good. And we have stated that we expect to make this year the best year from an absolute level point of view, and that still holds true, that's the aspiration. Margin-wise, we have talked about getting into the range of 9.6% to 10%. Given the development in Q2, I think it's more reasonable to expect the lower part of that range, but we still aspire to get there. And you realize that, that assumes a better development in H2, but at this stage, there's nothing that indicates that, that wouldn't be reasonable to expect. So just a little bit of headwind April-ish, beginning of May, but still within the larger scheme of things we are according to what we have set out and described earlier to you.If we look at the group financials. Q2, yes, we improved the operating income with 10% despite the 7% decline. And if you adjust then for Consumer Brands, that's minus 3% on the top line. A very good improvement of the margin, as you will see, and Glen will get back to that. I don't need to dwell around too much about it here, but it's a good improvement surely. So if we try to understand then what was hurt the most during quarter 2, at the beginning, we're talking about the lawn products and also including robotics. So robotics was flattish comparable to last year, which is not according to the base expectations we have. And I want to point out nothing has changed fundamentally on the case. We are still optimistic about the case, but the quarter 2 here is a negative. So all in all, wheeled products, the wheel category was quite negative beyond the consumer restructuring that has been done. I mentioned the efficiency program, the restructuring, all doing fine. And also, as a reference here, the increased costs for tariffs, raw materials were balanced by currency positive tailwinds.So if we look at then January to June, yes, we are up 2% for the group here excluding then the exited business, and the operating margin has increased 16%. So we think that's a pretty good leverage, we're pleased with that part.And looking then into the divisions. Husqvarna, minus 6%, excluding the exited business. If we look at the first half, it's actually plus 1%, which is a bit better. And we have very pronounced then these dynamics that I explained with the sell-in quarter 1 being strong and the sell-out start of quarter 2 being weak but then normalizing throughout the quarter, pretty much the improvement items like how I described it for the group. But I would like to emphasize, though, is the North American turnaround and also refocus of the business which is working very well. So we're quite pleased to see how that turnaround has worked with the restructuring on one hand, and also how the refocus is helping us get to much stronger business position moving forward.And Husqvarna Division is continuing with the strategic initiatives, primarily meaning increased R&D. There is a bit of marketing as well, but predominantly we are talking about R&D costs.We can leave that. Moving over to Gardena. It was yet another good quarter. Remember, there was a very strong reference here last year. Last year was pretty much the perfect year for Gardena and from a watering category point of view, a very warm summer, as you will recall, dry. And it wasn't obvious to actually beat that reference, but we actually did. So plus 1% top line and result-wise plus 18%. And then you wonder then how is it possible to get that type of leverage. Well, it was pretty much a perfect mix of products here supporting us. And the watering category carries quite some good profitability, and that's what we see coming through, of course supported by efficiency improvements and restructuring.Now there is one comment to the top line I want to draw your attention to, and that is we haven't had that type of heatwave in Europe this year, but still they have stocked up quite significant. And I think that was on the backflip of last season, the extended season we saw last year. People have been cautious to have a good, so to say, shelf availability. So they have benefited from that. That's quite clear.3% in top line increase for the first half year, excluding Consumer Brands. And let me also say that we actually closed 1 plant in Europe here which belongs to the Gardena space in Italy. Some 100 people were, unfortunately, affected by that. So it's a smaller plant, but that was also part of the initial restructuring that we announced last year. So now all vital elements of the restructuring are carried through and behind us also from a plant termination point of view. So 3% top line, 25% operating income increase for the first half year. That's quite proud. And this is actually the fifth consecutive year of improvements for Gardena, a very solid top line growth, it's really a fantastic case in many respects.Construction, good, not fantastic but good. We see a 3% increase in the second quarter. And I always refer to comparable currencies, by the way, if somebody gets confused here why I don't relate to the reported but comparable currencies. And improvement of 7% of the operating income. And volume and price supported, as well as efficiencies, so pretty much the same story you can see across all 3 divisions. And we continued pressing on with strategic initiatives here, which is in this case maybe more related to services and emerging markets. And it's also nice to see now that we have the last of the concrete floor and surfaces acquisitions, Light Compaction being fully integrated. So that means we have an unit here, an entity which is really focusing now on the market and then customers in the right way, having all the hard work behind us, sorting out details that you need to have your house in order, so to say, going forward.Europe from the top line point of view was pulling the train a little bit, I should say, disappointing, but some single percentage points of a decline North America, whereas we are more optimistic about the North American side coming back into growth for the second half. We have made quite some changes in North America in the organization during the course of this first half, and we expect to see results of that now in the second half. And you will remember also that North America has pulled the train for a long period of time for us and done that very successfully. So we have this train phase. So a little bit of regrouping and then come back, that's what we expect for the second half and going forward. And in the Construction case, the margins in North America are actually over average, so important, of course.With that, I think I'll leave it to Glen to talk about the more details about the P&L and the balance sheet.
Thanks, Kai.So I think Kai referenced the sales pretty well, so I won't dwell on that. As reported, we had a development there of minus 3% in the quarter or plus 3% year-to-date; currency adjusted, minus 7% and minus 2%, respectively.If we look at the gross margin. As said, developed very well. In the quarter, we come up some 3.4 percentage points. Of course, we're seeing the positive impact of FX coming into this of roughly SEK 200 million of positive FX hitting the gross margin in the quarter, which I think is important to call out. And then we have the positive impact of price. Our pricing program is working very well. The impact of the pricing program is to offset the headwinds that we see from the raw materials and tariffs, and by and large, that is coming through. And of course, that is a negative impact to the gross margin in the quarter of roughly minus SEK 120 million.And then of course, we have the positive impact of the efficiency program which is there to support our strategic initiative investments but also the restructuring. And just to say a word on the restructuring, Kai mentioned a further closure of the Valmadrera plant, on top of the closure of the McRae plant earlier in the year, as well of course as we have taken out some other FTEs that was historically supporting the consumer brand business.So restructuring, we've previously said we would have savings of SEK 250 million full year effective 2020, and we said the lion's share would come already in 2019. We can say roughly 80% of that SEK 250 million will come in 2019, and we're very much on track with that, if anything, slightly ahead actually, on the restructuring side, all impacting the margin here.Moving down in the quarter into the SG&A, roughly SEK 90 million higher than prior year. 80% of that relates to a negative impact translation effect FX impacting that. Then of course, we have further strategic investments which is the remainder of that, give or take, SEK 20 million. It's in the SG&A line, culminating in an operating margin in the quarter of 15.4%, up from 13.5% in the prior year, a figure which we are pretty proud about despite the relatively soft top line that we started off the presentation with.Finance net increased marginally. That's really impact of FX rates, a little bit on the interest rates impacting but relatively low, small impact from IFRS hitting the quarter of about SEK 7 million into the financial items. Income tax, the rate in the quarter, I think, is better to look of year-to-date. However, the quarter was 24% versus 23% in the prior year. Year-to-date is still 23%, as guided in previous announcements.Quickly then going through the year-to-date. A similar margin improvement actually, magnitude SEK 880 million in gross margin improvement. Positive FX, you can say, is -- roughly 50%, 55% of that improvement on the gross margin is positive FX. Then a positive impact from the price and negative impact from the tariffs and raw materials. That is magnitude SEK 300 million in H1 from tariffs and raw materials. And then we have the continued efficiency and restructuring measures that I referred to. So that is really explaining the improvement on the gross margin. Same on the SG&A, we had an increase there magnitude SEK 370 million, of which you could say roughly half of that is negative FX translation effect. We have an impact from the increased volume, of course, and roughly SEK 70 million hitting the SG&A from strategic investments during the first half year, culminating in an improvement to 13.9% operating margin or an absolute improvement of over SEK 500 million in the first half year. And I think my comments to the finance net in the quarter and the tax items are pretty much reflective for the first half year as well.Moving on, a figure which we are also pleased with, particularly in the quarter but of course on a year-to-date basis, is the improvement in our operating cash flow. We've managed to increase our direct operating cash flow by SEK 1.5 billion, our operating cash flow by some SEK 1.8 billion. And if we just look at what the drivers are behind that: We have roughly SEK 800 million coming from an improvement in EBITDA and then the relative improvement in working capital compared to prior year. We've managed to improve by SEK 900 million through the first 6 months. So this is a figure we are pretty pleased with and generating over SEK 2 billion of direct operating cash flow.That said, we are still not happy. Maybe it sounds a little bit contradictory what I say now. We show a positive cash flow, but we're still not satisfied with our position when it comes to our working capital. We firmly believe the 25% as a percentage of net sales is in the cards and is achievable. We were very close to that at the end of 2017. We had a bad year in 2018 from a working capital perspective. And unfortunately because of the slow start to the season that Kai refers to, particularly in the lawn and garden space, then of course the inventory reduction has not been to the pace we would have expected during Q2. However, we have taken a firm action during Q2. We did slow down the factory production rates. That did have a negative impact on the absorption to some extent, but it's the right thing to do. So we have taken actions during Q2 to slow down the inventory build. And we will continue that through the remainder of the year, with the expectation that we, of course, turn this curve back towards the 25% level, which remains our target.Looking at the balance sheet, I think the main one to call out is inventory. That's roughly SEK 840 million higher than prior year. SEK 200 million of that would be attributable to currency rates changing, a relatively weak Swedish krona. And roughly SEK 640 million would be higher like-for-like inventory rates, and that is roughly 6% or 7% higher than prior year. And that is roughly as a result of what Kai mentioned, the slower start to the season and also the relatively softer position in North America when it comes to the Construction division. So slightly higher inventory in North America in the Construction space.Of course, a couple of other positions that changed. We have the lease liabilities and the noncurrent assets, which are both affected by IFRS 16, and that's a magnitude SEK 1.5 billion affecting both of those lines. If we move down, of course, receivables improved really as a result of the lower sales in the quarter and also slightly better management of our receivables process, I would say.And then moving on to the net debt. Net debt actually increased to SEK 11.3 billion, which shouldn't be so surprising, coming up from SEK 8.8 billion. The main drivers, of course, we have an improvement coming from the operating activities, the improved operating result, et cetera. Then we have a negative impact from financing and a negative impact from IFRS and then a slight negative impact from an adjustment in the discount rate which affects the pension liabilities. It's actually a lowering of discount rate, by the way. But still worth 1.9x, and we still feel this is at a reasonable level given where we're coming from and where we are at this point in the season.At that, I will hand back to Kai to summarize.
Yes. So very briefly, we are pleased with how we have performed given the context we have operated in. What I could say is that -- in addition to what was already mentioned is that we have held our positions. So I think the whole industry as such has been burdened at that period of the quarter, so it's not an Husqvarna impact but rather a general industry impact. I think that's our understanding. And when we look at data from sell-out, that's what we see actually. So I think we have performed quite well given the context, and there's nothing that doesn't give us hope for the second half of the year to be in line with previous statements.And I think I'll keep it that brief and leave to Johan here.
Okay. Good. Thank you very much, Kai and Glen.So let's open up for the Q&A session. And let's start here in -- at the floor in Stockholm. And we have one question here at the front. Please state your company name and -- your name and company and please ask your question.
Yes. Björn Enarson, Danske Bank. Can you give us some flavor on robotics that you're a little bit disappointed with during the quarter, both European development and also perhaps some word on the U.S. expansion?
Yes. Robotic has been -- the category has been also impacted by that slow start, so -- and as I mentioned, it has been -- altogether been flattish, which is well behind what we would expect to see. Of course, on the other hand, the rest of the lawn mowing equipment was quite negative, so you still have that delta in-between. North America, second part of your question, Björn, I will say is, on one hand, a good development and, on another, still a disappointing -- disappointment. I think maybe we are moving, give and take, with a factor of 2, doubling rate, but the expectation was to be way above that. So what we see at this stage is that market development takes more time than we expected. I want to be clear. It's us leading the North American establishment of the category, so it's not such that somebody else is, so to say, eating our lion's share. That's not the case at all but that the total market development, because the category still is so new for this market, is -- it's lower than we would have liked. But from absolute terms rate point of view, it's okay, but we want to see more. Let me be clear about that.
And in North America, is it retailers or your dealers that are behind?
It's actually true for both channels, so it's more a generic conclusion, aggregated conclusion, for the market.
And can you say something about what we should expect from Gardena in Q3, which is pretty odd comps top line wise very difficult and perhaps some of the [indiscernible] quite easy...
Yes. Gardena is, of course, meeting a fantastic reference in quarter 3. There's no question. So we need to be modest with the expectations there, but I think what they have proven is -- here is that they're keeping up better than one could have expected, just looking at last year as such. So I think the strategy pays off quite well. And then what we should be aware of is that this season, what they normally say is that there will be a warm spell at some period of time during the summer break in Continental Europe. In Scandinavia, that's not always necessarily true, as we are aware of, but Continental Europe, that's we haven't seen that yet. So it could come, and it should come, given historical empirical data. And if that comes, of course, that can pep up the quarter, but still I don't think you should be concerned about a really weak quarter. I wouldn't expect that, but of course it's a very tough comp than we think. But so far, they've been up to it surprisingly well actually.
We have a next question. Christer?
Right. Christer Magnergård from DNB. Question on the EBIT margin you're talking about for the full year, the 9.6% to 10%. And you say that you probably would be in the lower end of that range. Given the strong performance in the first half, and if I look at the second half and I will just assume as a kind of average between 2016 and '17, which was more normal years, then I end up with 10%. And in comparing H1 '19 with H1 '16, '17, you actually delivered 1 percentage point above those years in terms of profitability, so I just want to understand what is turning worse in the second half of 2019 compared to those years?
Are you looking at them now?
I can maybe jump in. I think the main point, Christer, to consider is we will see a continued headwind from the tariffs in particular of roughly SEK 100 million to SEK 200 million. We've been fortunate in H1 that FX has countered the impact of that headwind, give or take the same figure. In the second half of the year, we're not seeing any positive FX affecting our forecast whilst we're seeing the continued headwind from tariffs. That would be a point to at least consider in your Q3, Q4 forecasts.
Okay. And then secondly, on the cost savings up there as well. How much will you achieve this year given your comments earlier? And can you over-deliver on your targets?
I wouldn't like to promise over-delivering right now. The restructuring program, again just to recap, was planned to be SEK 250 million. And that's the result really of taking out the positions on petrol walk-behind in Europe and in U.S. Two factory closures are behind us. People are exiting. We are at least on track for some SEK 200 million of restructuring savings this year. That's what I'd say. And we're very much on track at the half year.
Maybe adding to that in the general efficiency program, doing well from an activity point of view, a bit of headwinds in logistics. And as you heard Glen mentioning before, we are taking down the pace in some of the plants now to deal with the inventory in the right way, meaning there is a bit of under-absorption. But all in all, it's delivering well according to activities, so both those components should be okay even though, as we hear, a little bit burdened by logistics and potential under-absorption in second half.
I think we had another question here in the middle.
Yes. Henrik Christiansson from Carnegie. A question on the EBIT margin improvement that is seen year-over-year, 190 basis points. You called out FX a small positive contributor. And what part of that is structural? So what part of that has to do with you exiting Consumer Brands? How much of that do you see in the margins now? That's the first one.
It's a good question. So I would say, Kai can, of course, jump in, it's roughly SEK 1 billion of sales we've exited through the first half year, which is 4 percentage points impact. Of that, we've previously guided that the previous Consumer Brand business was a minus 3% EBIT business. The segments we exit are at the lower end of that scale, so you could probably work on minus 5. So you could say, based on those metrics, roughly SEK 50 million of positivity is coming in from the exited business and impacting the EBIT year-to-date.
And then on the cost savings, I mean, as you said, SEK 200 million in cost savings this year are on track for that. What's the phasing of that? How much do you actually see in the numbers in the first half? And what is there to come in the second half?
Give or take, we are -- you can take that pretty much, divide it by 4 per quarter. That's it is. And that's why I'm, we're fairly confident, because we're already just above the SEK 100 million in the first half year, yes.
And I think we have another question with Klara.
Yes. Klara Jonsson from SEB. So you said that you expect that underlying organic growth for H2 will be some 3%, 4% maybe. Did I understand correctly?
Actually the comment was what would be the full year number. The start -- the first half is 2%. And then it's going to be -- need to be higher, of course, for H2 then to get to something between 3% and 4% for the full year, remembering that close to 2/3 sits in the first half of the year. So it's a bigger number arithmetically to get to the 3% to 4% for H2.
Yes, okay. So what products -- product groups will drive that improvement, do you think?
I think we will see. And I think the statement here has been it's a normalized pace of sales. And if we go back to some of the things that has been really nice to see in -- for example, in North America, is that it also sell more handheld equipment. It's more parts and accessories coming in. So it's a little bit of shift to less wheeled and more of these categories, but of course, the traditional quicker-growing categories like robotics and battery-based products should deliver. That's the expectation. We don't see why they shouldn't. So we see that normalization returning to us actually end of quarter 2 and then, as I mentioned, being the case at this point in time. And we don't see why that shouldn't remain for the quarter. And then quarter 4, of course, is more a forestry and sell-in quarter.
Yes. But it sounds like those are the kind of categories that you have quite nice margins on or higher than on a group case.
It's okay, yes. It's okay.
Okay. And then a question on inventory. You mentioned you weren't pleased with development of those. And you wanted to take working capital to sales down to 25%. You have taken some measures. When will we see the effects? And we will see -- will we see them all in Q3, or will it take longer?
It will take longer is the first answer. I don't expect we get this curve suddenly down to 25% by the end of Q3 or even by the end of the year, if we're being very clear. We've already taken the measures during Q2, slowing down the factories, impacting the absorption rates a little bit. And we'll continue driving that down in Q3 and Q4.
So the target of 25%, maybe you will hope to reach in 2020 then?
It's a must that we reach that in 2020.
Olof Cederholm, ABG. Just to follow up on the robotics business. And historically, at least the way I understood it, you didn't sell much robotic lawnmowers during the second half of the year and not even -- and maybe a little bit in July but not much more after that. Is that dynamic changing now with North America onboard? And on the back -- going back to the inventory situation, if it's still the case that you're not selling that much robotics during the second half, is there a risk that we will enter full retail inventories going into the 2020 season on robotics?
Maybe I'll start and then -- yes. I don't think North America will change the scheme of things. And of course, a major part of the sales normally comes in the first half. There is no question about that. So from that perspective, of course, it's difficult. I don't know if I fully understood your twist on the retail.
No. Since you were flat in Q2, I think everyone would have thought it would be plus 15 or something like that. I'm sure the retailers thought that, too. So when they -- if they stop selling robotic lawnmowers today, they'll probably have more inventory than they had planned for. And therefore, could that be a risk going into the next season [indiscernible] much Stockholm?
Okay. I'm really -- I think it's too early to be concerned over that at this stage. But if we look at September outgoing from quarter 3, it's definitely a big topic. So end of August, September, that's a topic to relate. It's a bit too early to draw that conclusion at this stage. I wouldn't extrapolate it that far actually, but it's also worth noting that, of course, the retail offering of robotics, you will find Gardena being at the premium price points on the retail side. So the reference for good quality and good performance in retail, whereas you will find some Chinese, of course, at much lower price points. There is no question about that. And we are holding up, as far as we can read and interpret data, holding up the value of market shares pretty well in retail with Gardena. However, from a volume perspective, of course, the quickest-growing part are the lowest price points, but from a value perspective that's not a pain point.
And I think, Olof, what's important to note is the pace coming out of the quarter on robotics was normalized in our expectations. The pace in the first half of the quarter was disappointing, so we've seen an improvement. So that gives us confidence going into Q3.
Yes. Karri Rinta, Handelsbanken. Maybe the last question on robotics, can you give us a more clear number on what your growth rate was in the first half in that category? And then secondly, the optimism about Construction business in the U.S. for the second half, is that based on your own order books or something similar? Or is it a further macro indicator into that expectation?
Yes. So robot, for the first half, a single-digit growth, robot and battery-based products, which is the way we normally frame it, just to repeat that so we don't misunderstand each other. So single-digit growth first half. Construction North America, the market is actually still pretty healthy and strong, and we also see that from how other competitors in light construction report. And that expectation is actually shared with them about the market development. And then we believe we have our act together really in a good way with some changes we recently have undertaken, which should yield results from a share perspective. So we have formed the troops, lined it up and feel strong about that. So fundamentally, there is still growth. And we should, hopefully, be able to capture a bit better than the average on that side. That's the expectation for H2.
Thank you very much. Do we have any further questions here in Stockholm? Shall we check if we have anything on the telephone conference...
I was just still thinking about your question. I mean please remember you can't make a one-to-one business cycle cyclicality with light construction products and the construction industry as a total because this is like renovations, refurbishments and all those type of things where we're acting. So it has a little bit of a different, so to say, melody of the business cycle. I just want to emphasize that so to be clear on that.
Great. So we'll -- thank you very much. So let's see if we have any questions on the telephone conference, please, operator.
[Operator Instructions] We will now take our first question.
This is Johan Eliason of Kepler Cheuvreux. There's a big echo. I hope you can hear me. On robotics, you have a key selling point in the U.S. that you sell it including installations. Are you seeing that this is something the U.S. consumers favor? And still on robotics, can you say something on how the average selling price is developing for you? That's my first question.
So the assumption we work with for the U.S. market was that we wanted the installation to be part of the transaction irrespective whether this is at a dealer or whether it's at a retailer, which is in our case Lowe's. And that, we firmly believe, is the right stance, as we draw on the benefits of the Husqvarna total strengths of channels, meaning that the dealer channel supports also transaction being done on the retail level with the installation. So that's a unique strength that the Husqvarna Group can offer that not everybody actually can offer. We still think that's the right way to go forward, particularly for North America where the category is less mature, as you heard me explain earlier. As to selling prices, I think there has been a fairly good price stability on the more premium products whereas there has been an erosion, particularly in retail lower price points. And I referred to that earlier. But if you look at us, I'm talking about us, we have fairly stable prices. There is some activation. There has been some cashback campaigns, for example, for Gardena, but beyond that it's stable price levels, by and large. Online is, of course, putting pressure on dealers. I should be clear about that. There is no question mark about that, but that dynamic, I don't think, is unique for Husqvarna. That's a fairly generic type of dynamic that many people operate with. I don't know, Johan, if that was a response to what you expected to hear.
Yes. No, that was good. And then on the lawnmower sales. You've closed the McRae plant. How will you source the premium lawnmowers you expect to sell going forward? Is that sold?
That's sold. If you refer specifically then to walk-behind products, that's sold, so there will be certain models that will be sourced. Certain models, I want to emphasize, have -- that we want to remain producing are being moved to another major manufacturing facility in South Carolina. So that's not -- it's not an issue, Johan, for next season at all. I -- that's all taken care of.
Excellent. Then on Gardena, they are doing very well, but I heard somewhere that they've lost the Bauhaus contract to [indiscernible]. Is that correct? Or is it just a small market?
It's always difficult for me to stand and talk about specific customer accounts and the gains and losses. We don't normally do that. And in general, I think what you should know is that this particular retailer that you referenced has a fairly large, as we interpret it, degree of autonomy in various countries, which means that what you might see in one country is not necessarily true in another country. And I think I'll leave it there, Johan. I don't want to be too explicit on that, but you could see a particular setup, for example, in Sweden that doesn't necessarily look at all the same in Germany.
Good. Could you just mention a few words on the Gardena channel expansion you have been doing and if there's more to do? What about the U.K., for example?
It's always, by definition, a lot more to do, but I think they have been doing really well and reinforcing position in the Scandinavia, Latin part of Europe, moving into U.K. If anything, U.K., as I have reported before, is a bit of a disappointment through the fact that Bunnings retreated out of their positions. And we regrouped and have decided to go through the garden centers as the entry point for Gardena, which is the value-selling channel in the U.K., but it's more fragmented. So it's a slower route, but it is the right route. So we are as determined to succeed in the U.K. market because of the importance of the gardening in that particular market, but it's a more -- we need some more endurance to get to that point where we thought that we could have a little bit of a short circuit and faster route to scale through partnerships that we have in other countries. But that changed, but we are absolutely okay with how this is moving ahead now.
And I don't think we have any further questions on the telephone conference, no, that I hear here. So if -- do we have any final questions here on the floor in Stockholm? No, so I think, with that, we thank you, everyone, very much for coming here. And I hope you have a continued nice summer.And then we have the next event at -- as our Capital Markets Day on the 17th of September and then the Q3 report on 22nd of October. So welcome there.Thank you very much.
Thank you.
Thank you.