Husqvarna AB (publ) (OTCPK:HUSQF) Q1 2022 Earnings Conference Call April 21, 2022 4:00 AM ET
Company Participants
Henric Andersson – President and Chief Executive Officer
Terry Burke – Chief Financial Officer
Johan Andersson – Vice President Investor Relations
Conference Call Participants
Johan Eliason – Kepler Cheuvreux
Gustav Hageus – SEB Group
Bjorn Enarson – Danske Bank
Karri Rinta – Handelsbanken
Henrik Christiansson – Carnegie
Fredrik Ivarsson – ABG Sundal Collier
Carl-Oscar Green Bredengen – Berenberg
Johan Andersson
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 the Q&A session and either you can ask your question over this telephone conference, or you can use the web interface and post the question there. And I will read it up here in Stockholm. So with that, a warm welcome and let’s start. I’ll give over the board to Henric.
Henric Andersson
Thank you and also a warm welcome from my side. We’re delivering a strong first quarter, a quarter characterized by strong demand of our products, 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 two.
Still a strong performance from a sales perspective if we compare — especially when we seem to 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 — we’re living in a world now and operating in a world of great uncertainty. Whether that has to do with inflation or 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 trading 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 such, it’s important to zoom out a little bit.
And looking at the ten years or so, it’s clear that we have been building a stronger who’s group consistently over time, where we are changing the focus towards — really focusing on who’s going to get the inner brands towards premium positions and propositions, on one hand. And on the other, how we are pivoting the product offering towards smarter, more sustainable, more electrical, more intelligent products. And that really position 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’re holding back in some other segments and we have even exited some. If then look at the quarter from a net sales perspective, it came in at $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 most affected by the supply constraints. So we were down 7% there. However, Gardena was up 5% and construction was up 10%. 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 $2.2 billion compared to $2.3 last year. The main difference is really related to unfavorable mix and lower volumes. Something very good in the quarter is that we have managed, without price increases, to offset the higher raw materials and logistic costs. We’ve 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’re at $1.5 billion negative versus a $143 million positive. The main driver here is increased inventory. And the net debt to EBITDA decreased to 0.8 times versus 0.9 last year. Important part of our business, in terms of robotics and battery, you can see that from a rolling 12 perspective, we’re 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 is 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 highlights of the quarter, it’s up to you, Terry, to get into some of the details.
Terry Burke
Thank you, Henric. So if we take the Husqvarna Forest & Garden Division first, this was the most effected by the supply challenges that we’ve had. And the organic sales were a negative 7% in the quarter. Operating margin lower at 14.7%. We do how strong customer demand. The demand and 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 electronic components and the ride-on mowers with the engines. And those are the two specific categories that impacted the Forest & Garden Division. Price increases almost offset the higher raw material and logistics costs.
So overall, a challenge in 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 the higher raw material and logistics costs through price. And that’s a very good thing that we’ve 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 done the acquisition of a diamond’s tools company in Central Europe at Heger, and that carries annual sales of around €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 €19 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 $100 million in those investments and we will continue those investments throughout the year. We had a positive currency effect of $115 million in the quarter, and our outlook for the year is to be roughly $200 million positive currency effect for the quarter — that 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. 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 one thing that really stands out in the balance sheet is our high inventory levels. We came into the season with — into the year with high inventory levels, and that has remained. Couple of things to call out there with the $15 billion of inventory.
First of all, we now have Orbit and Orbit accounts for roughly $1.2 billion over that $15 billion, and we have a positive currency effect of some $400 million SEC. So once you adjust for those two, then the remaining $3.5 billion increase, that’s really driven through component — higher component inventory. We referenced it as the golden screw, where we have a lot of products where we continue to build the product, but [Indiscernible] maybe one or two components is missing.
So that’s really created part of the component increase. In addition to that, we’ve had our logistics congestion on some goods-in-transit. Finally, just to mention, we signed off a $5 billion five-year sustainability linked credit — rolling credit facility. And that’s linked to our sustainability carbon reduction target for 2025 minus 35%. 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 will actually land just above 23% versus the 22.5% last year. And again, really driven by the high inventory levels that we’re carrying up this moment in time. And finally, the net debt, we already touched upon it in a summary, at 0.8 against 0.9 this time last year, Quarter 1 last year. So with that, Henric, I pass it back to you.
Henric Andersson
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 were rain products and construction products goes into that category and it’s super important that we continue to win in this category since it’s also helping to fund the investments into the three 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. 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 left 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’re 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 one benefit of that is, for instance, that you’re on your app, then can [Indiscernible] -off and — actually put in a virtual boundary wire and [Indiscernible] 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 three 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. This is a big thing for us. We are now addressing 100 billion SEK 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 going to next year. At the center of the strategy, we have sustainability, and as you know we have three 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 four that we have launched and validated their commercial success. We have 12 in the immediate pipeline, and we feel very comfortable that we will reach the target of 15. And then the third target is about people, how we empower five 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 as a sustainable product, and then we counted in this category. Then in terms of forwardly — forward-leaning activities, we made acquisition on here, get here, as Terry has 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 within Continental Europe or Southern Europe, since our main factory is in [Indiscernible] Sweden here. But here, getting it in the southern part of Germany, we’re 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, is 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 two very exciting opportunities here going forward. So if we’re going to summarize the first quarter, let’s go back to the first quarter and I’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’re 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 one 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 is a speed bump here right now of when it comes to robotic mowers. But that doesn’t change anything in the mid and long-term. The value creation opportunity is still there and the credit score is still there. So that’s a little bit about the first quarter and I think that’s enough for the presentation. And you want to maybe should open up for Q&A?
Johan Andersson
Thank you very much Henric and Terry for the presentation. And with that, we’re at the point of starting the Q&A. And just to remind you, you can either post your questions in the web interface and I’ll read them here or you can use the telephone conference to ask your questions. 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 I received over the web interface. So let’s start with the telephone conference, please, Operator.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. And that first question comes from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open.
Johan Eliason
Yes. Good morning. Thank you for taking my questions. I was quite impressed by the Gardena performance, who show a positive organic growth despite robots missing and extremely tough comps. I guess it’s all about 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’s, I think, eight years ago. So have you done anything and more this see some in terms of broadening the distribution channels similar to what we are seeing over the last few years? And there is some further acceleration to expect during this year or into next year.
Henric Andersson
I wouldn’t say that we have opened up new channels. We’re really — 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 one of the big things that is a difference is that Gardena is less dependent on the ready home market and we’re 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.
A – Terry Burke
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.
Johan Eliason
And just on hand tools, how big a share of Gardena is that today?
Henric Andersson
I don’t think we have ever disclosed how big the different areas are.
A – Terry Burke
No, not specifically.
Henric Andersson
So let’s not go there today. But the good news is that we see this is 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.
Johan Eliason
And then, I noticed your balance sheet. Did you do any or cash flow generation, obviously [Indiscernible]? Did you do anything particular to the factoring or any other extra financing during the quarter?
Henric Andersson
I wouldn’t say it fundamentally changed. It was pretty consistent with previous quarters.
Johan Eliason
Okay. Good. And then just looking into the sale through [Indiscernible] and we’re into [Indiscernible] obviously already. You talked about lower retail inventories, still I think in the report, but what about weather? I heard cold March in the U.S. from a bit cold hearing in Europe as well. How do you see the seasons paying out from what you can see so far in terms of them on and then maybe weather patterns that might impact you?
Henric Andersson
I would say that up to this point we have launched, we’re seeing demand from our channel partners, dealers and retailers. And as the season starts, you get the demand from them 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 supplies issues that we have had here in the beginning of the season.
Johan Eliason
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 rather Q3 impact or how did that look like?
Henric Andersson
No. The way I recall it is that we generally speaking had a very strong second quarter last year with exception of Gardena watering in the core markets, Germany, Belgium, Holland, and a few others because of the flooding and all of that. So it was more Gardena watering topic in the core markets last year.
Johan Eliason
Excellent. Thank you.
Henric Andersson
Thank you.
A – Terry Burke
Thank you. Should we take the next question? Please, Operator.
Operator
Our next question comes from the line of Gustav Hageus from SEB. Please go ahead. Your line is open.
Gustav Hageus
Thank you, Operator. Good morning, guys. I’m a bit curious on your supply constraints. If you have a view whether or not your issues are greater than some of your peers or if there’s an industry-wide issue, and if that will potentially extend the season from what we usually see into Q3. That’d be helpful. Thanks.
Henric Andersson
What we do see, is that quite a few of our peers that are issuing statements or sending out letters to trade partners, alerting of — or apologizing for the supply issues that they have. So I will say it is a general thing, but it could have different timing and different product segments over time, where it is affecting. But I will say it’s a general thing that everybody is, to some degree, struggling here. And I think your point there as too. Hopefully, this can help to extend the season as something that we were 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.
Johan Eliason
On the record, you referenced a record high order book. Could you elaborate a bit on sort of the stickiness of that order book is? Do you think there are a lot of double bookings from your channel partners, booking inventory of 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?
Henric Andersson
I mean, in the end of the day, I think there’s an element of double booking because there have been challenges for all — 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 too large degree. What is the demand, the dealers, and the retail [Indiscernible]? And in the second quarter, when the season starts, I think we will get the much better feel for what is real and what is not real as the end customer starts to buy. But I think normal how you look at it, we have a record high order book even if you cleanse for potential double bookings.
Gustav Hageus
Okay. And you referenced also, that you think the supply issues are gradually going to fade a little bit June to [Indiscernible]. What — have you already seen that to some extent, or is this more of projection? And are there any tangible evidence that will happen? And what are the main drivers to that effect [Indiscernible]?
Henric Andersson
I mean, we have not seen it in reality to this point, and we expect to see the first material improvements, 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’re 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 the 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 there’s a credible plan here to see those improvements.
Gustav Hageus
Finally, from me, you say that you’re sort of in commercial phase for CEORA, have you already now discovered any sort of minor flawless or potential updates that you’re taking on or is the customers generally very happy with the results thus far?
Henric Andersson
Everything that I’ve heard is that the customers are very happy so far. At the same time, touch on wood, 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.
A – Terry Burke
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.
Gustav Hageus
And do you still expect to break the four-digit number of installations this year? Is that a reasonable assumption, so 1000 plus units?
Henric Andersson
I mean, I’m not sure how specific we’ve ever been, but I think we will be disappointed if we can’t be in four digits.
Gustav Hageus
Okay. That very helpful. Thank you, guys. Thanks for taking all those questions.
A – Johan Andersson
Thank you very much. And let us come in with a question here that we have got over the web interface. It’s — we have a couple of questions from Fredric [Indiscernible] and a little bit on the CEORA thing that you started with, Gustav. Henric, you mentioned that you have potentially over 100 billion Swedish krona in for, say, the potential market here. One, is that correct? And two, can you relate a little bit to where are you on that trajectory, and can you related also to the consumer market sizes there, and what are the activities to penetrate this 100 billion Swedish market?
Henric Andersson
A lot of small simple questions, Fredrik. Thank you. When we talk about 100 billion, that this is when say, okay, what is the cost of commercially cutting grass today in areas where robotic mower could do it? That’s $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 $70 billion. And then part of that, of course, going to be equipment. And if we do more of as a service then we get closer to the 70. I will say that, 70, if we sell everything as a service, slightly lower if you also sell equipment.
You have to clear. But that’s how we defined it. Indifferent, it is a big opportunity. And today it’s, of course, very difficult to talk about the trajectory. We’re 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 will they replace [Indiscernible]? And I think that’s what we need to get 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’re 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 around — talk about and to resonate with the customers.
So I think we just 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 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. There’s some similar to us with the consumer side, but also quite some differences here in what the value proposition is.
Great. Just another one maybe quickly from Fredrik, as well. And maybe this is a little bit more to you, Terry, that the inventory is up €3.5 billion. If you takeaway 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 to say what can we expect to come out from that inventory?
A – Terry Burke
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.
Henric Andersson
And also, to tie into one 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 ports and we’re 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, like you Terry, as an opportunity that makes us better prepared to execute well.
A – Terry Burke
Great. Just another follow-up from the earlier presentation. It’s one 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 a question coming in here?
Henric Andersson
First of all, I think we have already seen price increases kick in. We’re 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 the 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.
A – Johan Andersson
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.
Operator
Our next question comes from the line of Bjorn Enarson from Danske Bank. Please go ahead. Your line is open question.
Bjorn Enarson
Hi. I’m Bjorn. I’ll ask a question. Would you say that Q2 would be more of a selling quarter than normal? I guess you are lagging a lot towards dealers and retailers. That’s the first question.
Henric Andersson
I don’t think you can look at Q2 as a selling quarter. I think now when the season is starting, whatever we shipped to — in this constraint there, whatever we shipped to the dealers or retailers, they will turnaround into end customer sales quickly. So I think Q2 will largely be about selling through to end customers.
Bjorn Enarson
So basically, you’re not then lagging, beefing up the dealer inventories?
Henric Andersson
Not really. I mean, of course we’re 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 customer straight away. And that’s why it’s hard to talk about it as a sell-in quarter.
Bjorn Enarson
Yeah. 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 very dependent already now that sell-through will be okay in Q2 and Q3?
Henric Andersson
I think it’s actually is more related to that we get that golden screw Terry talked about, that too a large degree, we sit with all the components except one or two. And as soon as they show up, we can complete a product and the other pieces 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.
Bjorn Enarson
Then a final one on MOLEAER, the nanobubble tech company, what kind of customer solutions could this end up with?
Henric Andersson
What we know so far is that these nanobubbles 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 new trends 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, our Orbit context. But we’re 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.
Bjorn Enarson
Interesting. Thank you a lot. Thank you.
A -Johan Andersson
Great. Operator, do we have another question over the telephone conference?
Operator
Yes. Our next question comes from the line of Karri Rinta from Handelsbanken. Please go ahead. Your line is open.
Karri Rinta
Yes. Thanks. Karri, 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 a ballpark estimate of how much larger is your robotic lawn mower backlog this year compared to last year? And maybe as a follow up, in a typical year, how long is this seasonal window for you to ship robotic lawn mowers to your customers? I know that it has started, but when does it typically end?
Henric Andersson
Normally, we don’t share the specifics here, but it’s materially higher than it has ever been. 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 are very high backwards when it comes to robotics. As to the second question, it’s a difficult question, but two different perspectives on it.
First of all, how long the season is, is largely weather dependent. And the mowing season needs some precipitation and they 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 the last three, four years is that there have been very favorable weather conditions. And one 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 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 some — there are more customers available little bit later in the season. However, you can never compare outside season and the in-season, but generally speaking, it is normally a little bit less sensitive.
Karri Rinta
That’s helpful. Then just a clarification. So you — 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? And demand is still growing at double-digit trend.
Henric Andersson
I think demand is — continue to increase. Demand is higher this year than it was last year. The demand is still increasing when it comes to robotic mowers.
Karri Rinta
Good. And then just finally, these golden screws that you’re referring to, are they specific to a, for example, more towards auto mowers and less towards Gardena’s robotic lawn mowers or are they sort of — do you have problems in every category?
Henric Andersson
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 up to day — to date. And Gardena has been a little bit better off so far than the Husqvarna Division.
Karri Rinta
Thank you. Very helpful.
A – Johan Andersson
Great. Let’s kick on with a few questions here from — that’s coming in from the web interface, maybe little bit tagging along to the supply chain here, two pieces. One is probably Steven Walker; one is maybe you already [Indiscernible]. But do you say, the robotic is coming from one to three suppliers or is it more widespread? And is it a few components are more widespread in terms of what you need to complete the volumes here?
Henric Andersson
We’re only talking about less than a handful of suppliers. Of course, we have more than one part with each supplier, but the challenge, so to speak, is fairly well-contained.
A – Johan Andersson
Great. The second part of the question is, if you then, as you plan to resolve this during the season, [Indiscernible] let’s say, a better situation, do you see any impact as of now going into next year or you would say starting from a fresh page next year according to your estimates right now?
Henric Andersson
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. The plans we have right now in the visibility, we have now ’23 should be better than ’22. Great. Thanks.
A – Johan Andersson
Another question coming in from Ole Henrik Bang – Andreasen at Tower House Partners. He is asking about — you talked a lot about the robotic s 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?
Henric Andersson
I mean, generally speak — 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 is 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 getting us in battery products as well. It’s just not as severe or the same magnitude as on robotic mowers and therefore we’re not calling it out. So I think that’s one way of looking at it. And in terms of securing supply, we’re working with a lot of different approaches to make sure that we secure supply and are 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 one 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 dealing with the components coming in,
Henric Andersson
and we are now to a large degree involved in the component supply into the integrators. That is one of the big changes, to really make sure that we are involved and we’re driving the behaviors and we are driving the demand versus the supply in the right way. So that’s one of the things we have changed. But then this is to look at different kinds of partners. And one thing in battery that we did, which has a big input here — impact here of course, is that we said for the low-end, we’re partnering with Bosch in this powerful alliance. And that’s one way to secure supply. That has proven successful this year as well.
Johan Andersson
Great. Another question coming in from, I think it’s France, [Indiscernible] Koumas at AlphaValue on Orbit. Clearly, they’re trading on a margin below Gardena standard. What do we see there? How — do you believe that we can improve that one and can they reach the Gardena standard over time? What’s your view there?
Henric Andersson
That’s ambition. The first target they’ve set is to reach, at least group average margin by — within three years. And we have visibility to that and we have a credible plan to get there. Then there is, of course, yet another step to get up to Gardena, but that will come in in the years to come [Indiscernible]. It’s all about how we 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, and 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.
A – Johan Andersson
Excellent. So let’s turn back to the telephone conference. I think we have one or two more questions from analysts there. So please, Operator, go ahead with the next question from the telephone conference.
Operator
Thank you. Our next question comes from the line of Henrik Christiansson from Carnegie. Please go ahead. Your line is open.
Henrik Christiansson
Thank you. Henry from Carnegie here. Question on the EBIT [Indiscernible] for the full-year. I mean, helpfully provided an [Indiscernible] and FX number that’s 200 million positives. What about raw material and logistics, if our quarterly talked about [Indiscernible] previously. If that’s — do you have enough better number for the full-year impact as it stands today on that?
A – Terry Burke
Absolutely. We did originally have a plan for — or an expectation that the raw material and logistics would land around €1 billion and quite rightly as you say, Henric, that is going to increase now. We expect it to be, and of course it’s very difficult and a very volatile situation, but we expect that to be somewhere around €2 billion for the full-year now. However, let me be clear and say we will offset that with price.
Henrik Christiansson
Great to hear. And then similarly on the strategic investment, or transformation initiatives, perhaps €100 million here in the quarter. You mentioned that that will continue throughout the year. Is that number 400 or something different?
A – Terry Burke
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 given a concrete number as to what we expect it to be, but we will continue this in a positive way.
Henric Andersson
I guess just to add a bit to it, generally, we have been speaking about 1% of revenue plus this 250 from this restructuring program that we made. That’s the framework. This year, we will likely not get all the way there because we are more cautious. We still want to continue to invest in the future because we see what happened this spring more as a speed bump than a change in direction or a change in the outlook or the equity store here.
Henrik Christiansson
Got you. Then a second question on the supply chain Gardena improving. You talked about the three defining [Indiscernible] [Indiscernible] and you expect that to gradually improve starting mid Q2. I’m just wondering, what does that mean in practice and when can we have products rolling out to the factory if that scenario plays out? Because I assume there are some forms of lead time in production too from when the component situation improved.
Henric Andersson
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 our part too. So there are some [Indiscernible]. But the whole intent is, of course, we’re trying to 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.
Henrik Christiansson
Perfect. Thank you.
A – Johan Andersson
Great. We just got one question in from the web interface. It’s a little bit tagged onto that Orbit discussion. Can we start to see Gardena products in the U.S. over the next year? This is in 2023. Could you elaborate a little bit more on the Gardena U.S. plans there?
Henric Andersson
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. This will gradually increase. But it’s still a little bit early to be too concrete about what it means going forward since we 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 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, it will 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.
A – Johan Andersson
Good and maybe a follow-up on that one. So Gardena is relatively successful online already here in Europe, how much do they sell online, generally?
Henric Andersson
I believe it be 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.
A – Johan Andersson
Great, great achievement. Operator, did we have any final questions on the telephone conference?
Operator
We have another question registered from the line of Fredrik Ivarsson from ABG. Please go ahead. Your line is open.
Fredrik Ivarsson
Thank you very much. Actually, I [Indiscernible] out of calls. Sorry if you already touched upon it, but I’ve got two quick questions. First one on the margin in Fuze Klarna, which was down around [Indiscernible] assets endpoints, I believe in. And obviously, that’s part of the organic sales development, but I also assume that you saw negative mix effects from the supply issues within robotics as those are more high-margin products. Would you care to help us out with a bridge a little bit? What sort of negative mix effect you see from the robotics space?
Henric Andersson
I don’t think we should go specifically into the details 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.
Fredrik Ivarsson
Okay thanks. I’ll take one on the supply constraints also. I assume that quick solutions you talked about could come with some higher costs. So can you give us any feeling for this magnitude of those immediate cost increases?
Henric Andersson
Sorry, can you repeat the question?
Fredrik Ivarsson
Yeah. Regarding supply constraints, I assume that a quick solution you talked about is coming with higher costs as supposing [Indiscernible] more on [Indiscernible] [Indiscernible] and those kinds of things. And I’m just curious whether you could give us a feeling for the magnitude of those higher cost increases.
Henric Andersson
I think if we zoom out a little bit and put the context of — and we touched upon a little bit earlier on this raw material, logistics, cost increases, we expect that to land around $2 billion for the year. And of course, that includes the spot buys, the airfreight, and everything else that we talked 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 first of April in the Husqvarna Forest & Garden Division and also construction.
Fredrik Ivarsson
Okay. Perfect. Thank you. That’s my questions.
Henric Andersson
Great. I think we’re starting to run out of time here. Do we have — I think we have one more final question from the telephone conference Operator.
Operator
Yes, our last question comes from the line of Carl-Oscar Green Bredengen from Bayer and Back. Please go ahead. Your line is open.
Carl-Oscar Green Bredengen
Hi. Good morning, everyone. 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 mitigating that. But, it would just be interesting to hear your thoughts on if we could take the perspective of the 13% EBIT margin target and when that was set, the world looks quite different today. I just wanted to understand a bit what’s your assumption on cost of inflation related to raw materials, logistics, etc., were at the 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.
Henric Andersson
I think the high-level answer is that we had this expectation above €1 billion, which is now €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 billion. I think that’s the easiest way of looking at it.
Carl-Oscar Green Bredengen
Just a follow-up there. In terms of timing then of when you estimated you would reach these levels, has that changed at all?
Henric Andersson
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 bit artificially high due to COVID, etc., with above one percentage points. In reality, we were closer to 11, and then you have 0.3% dilution from Orbit. So that changed the baseline a 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 have a negative margin percentage impact, which is fairly significant. So in — I will say that is the main difference in terms of how we see that we now have an additional gap to close.
Carl-Oscar Green Bredengen
That’s perfect. Thank you.
Henric Andersson
Thank you very much. And I think with that, the clock has turned 11 and let us end this presentation on 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 thank you. 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.
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