Husqvarna AB to Acquire Orbit Irrigation Products LLC Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Johan Eliason - Kepler Cheuvreux, Research Division - Analyst : Hi, Johan at Kepler Cheuvreux. Congratulations to an interesting acquisition. Now I remember when Gardena was acquired back in 2007, it was already, at that point in time, sort of discussed bringing that business into the U.S. market, but nothing has happened. And I think the sort of comment was later on that the U.S. watering market is completely different technology and it's just cheap stuff with very low margins. And now, obviously, see that Orbit does have a significantly lower margin than Gardena. Are there any synergies you think that you can generate? Or is it just sort of growing the top line and hopefully getting the Gardena brand into the U.S. with a higher margin mix? Or has the U.S. watering market changed in any way that could allow you to have better margins in the future over there? Unidentified Company Representative Yes. That was a little where I also tried to say on the last question is that we see some new dynamics in the watering market with smart technology and water-saving technologies in general, both on wholesale products and also on -- like Micro Dripper is a good example when it comes to system installations. And we believe that being an innovative provider of water saving solutions, we and Orbit, have a good opportunity to mix up our margin positions in segments which are fundamentally faster growing than the traditional watering segments. And I think it's important to remember also that Gardena is a quite different business today compared to 15 years ago with a very different technology position in terms of garden technology, whether that is balcony watering automation or robotic lawn mowing. So I think it's not only right to look at it as a watering play, Gardena is a gardening play.

Question: Johan Eliason - Kepler Cheuvreux, Research Division - Analyst : Okay. And then just on the margin, you say slightly below growth margin. Is that the most recent 12.6%? Or is it sort of the historic 8% to 9% you are comparing with? Unidentified Company Representative We're comparing to the latest 12-month data. So it would be dilutive, as we said, to the Gardena division [all styled] into the group but of course, less so to the group, given that Gardena is above the group average. Maybe just 1 comment there on the different U.S. ordering markets, et cetera. I think one of the key strengths here is that we're acquiring the market leader in North America, meaning what the market is today, and it provides us an opportunity to position Gardena above that with a more premium differentiated watering solution. And I think we should look at them as complementing one another rather than one or the other. So I think there's an opportunity here really to build something. And this is a way in with the premium Gardena offering.

Question: Carl-Oscar Green Bredengen - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Carl-Oscar from Berenberg here. Just in terms of the market strategy, are you -- there's been a lot of talk, obviously, about the expansion for robotic lawnmowers and you've been saying that it's been progressing slower than previously anticipated in various quarters. So is there a strategic push to rebrand and sell robotic lawnmowers under the Orbit brand going forward? Or will there solely be a geographical expansion of the Gardena market into the U.S. through the various same channels as you're doing with Orbit? Unidentified Company Representative I think that one way of looking at it is that I think that primary push from the group is with the Husqvarna brand, that's where we see the biggest opportunity. At the same time, we have proven in Europe that this is also a very important and attractive segment for Gardena. So I would say that this would be more of a Husqvarna and Gardena play in North America. We believe, actually, it's a good benefit to provide an option for the consumer, especially when you're establishing a market. It gives this perception of the segment is more established and it's becoming more mainstream where you have options out there. It's kind of difficult to drive it with only the Husqvarna brand. It will not be the focus for the Orbit brand.