Stockholm 20 July 2010
Magnus Yngen, President and CEO:
“The year had a slow start due to the late spring in several markets. However, during the second quarter
activities gradually improved with strong sales in June.
Sales adjusted for changes in exchange rates, acquisitions and divestments (adjusted sales) were up
5% during the quarter. Europe & Asia/Pacific increased by 10% and Americas was down 1%. In Americas we
were able to compensate most of the lost low-end listings with strong improvements in other accounts.
End-user demand has increased compared to the preceding season. Performance was strong in
several important markets, especially in Europe. Our estimate is that we have gained market shares in Europe
during the first half of the year.
Dealer sales were up significantly in all markets, demonstrating the strength of
our brand in the market for high-end products. In other important areas such as Eastern Europe, demand
continued to recover and sales picked up substantially.
Construction showed good improvement in sales; the sustained focus on innovation and market-leading products have resulted in increased market shares.
Operating income adjusted for items affecting comparability, changes in exchange rates, acquisitions
and divestments (adjusted operating income) increased by 34%. Increased sales and production volumes,
improved mix as well as continued cost efficiency gains contributed positively.
Although it seems our industry has passed the bottom of the recession and end-user demand is on the
rise, the trade still remains cautious regarding inventory management. Lead times are short and shipments
are unusually volatile. Our estimate is that Group shipments in the third quarter will be slightly higher
compared with the third quarter of 2009.”
SECOND QUARTER
Net sales
Net sales for the second quarter were unchanged and amounted to SEK 11,457m (11,481). Adjusted for
exchange-rate effects, sales increased by 5%. Prices were unchanged. Europe & Asia Pacific accounted for
5 percentage points of the adjusted increase and Construction for 1 percentage point while Americas
accounted for a decrease of 1 percentage point.
The reduced listings with a major retailer in North America for the 2010 season had a negative effect on
sales, which were nearly offset by sales to other accounts. Efforts to grow sales in the dealer channel
continued to be successful and increased double digit both in Europe & Asia/Pacific and in Americas.
The second quarter predominantly consists of sell-out and replenishment orders from the trade. The low
inventory levels of lawn and garden products in the trade at the end of the first quarter combined with the
late spring had a positive effect on sales in the second quarter.
Operating income
Operating income for the second quarter increased by 18% compared to the corresponding quarter 2009
and amounted to SEK 1,319m (1,116). Currency had a negative effect of approximately 4% and the net
effect from items affecting comparability was negative 12%. Adjusted operating income increased by 34%.
Operating income includes charges of SEK 157m for the previously announced closure of two factories in
North America and Greece. For further information see page 6. The second quarter 2009 included
restructuring charges of SEK 18m related to personnel cut-backs.
The increase in operating income was mainly due to higher sales and production volumes, a better mix
and favorable direct material costs. Selling and administrative costs increased, mainly due to higher
transportation costs and costs for implementation of IT systems. Operating margin, excluding items
affecting comparability, increased to 12.9% (9.9).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
negative effect on operating income of SEK -30m (-35). Hedging contracts had a positive effect of SEK 26m
(-92).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, while
decreasing somewhat for Americas.
FIRST HALF-YEAR
Net sales
Net sales for the first half-year declined by 9% to SEK 20,539m (22,633). Adjusted for exchange-rate effects,
sales decreased by 2%. Prices were unchanged. Europe & Asia/Pacific accounted for a positive 2
percentage points of the adjusted change and Americas for a negative 4 percentage points while
Construction’s contribution was limited. Efforts to grow sales in the dealer channel were successful and
sales to dealers increased in all major markets.
Operating income
Operating income for the first half-year increased by 10% compared to the first half-year of 2009 and
amounted to SEK 2,097m (1,902). Currency had a positive effect of approximately 7% and the net effect
from items affecting comparability was negative 8%. Adjusted operating income increased by 11%.
Operating income includes charges of SEK 207m for the previously announced closure of two factories in
North America and Greece and costs related to a legal case in North America. For further information see
page 6. The first half-year 2009 included restructuring charges of SEK 53m related to personnel cut-backs.
The increase in operating income was mainly a result of lower costs for direct material, improved mix and
lower selling and administrative costs. Operating margin, excluding items affecting comparability,
increased to 11.2% (8.6).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
positive effect on operating income of SEK 113m (58). Hedging contracts had a positive effect of SEK 52m
(-17).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, but
decreased for Americas.
OUTLOOK FOR THE THIRD QUARTER 2010
Inventories in the trade of the Group’s products at the end of the second quarter were estimated to be
slightly lower than a year ago in the dealer channel and approximately on the same level in the retail
channel. End-user demand increased in most markets compared to the preceding season, but the trade is
still reluctant to build inventory. The positive development in Europe & Asia/Pacific and for Construction is
expected to continue. For the Americas, shipments are not expected to exceed last year’s numbers. For
garden products, the season normally ends towards the end of the third quarter. In total, Group shipments
in the third quarter of 2010 are expected to be slightly higher than in the third quarter of 2009.
PERFORMANCE BY BUSINESS AREA
As of 1 January 2010, external reporting comprises three business areas:
• Europe & Asia/Pacific, comprising forestry and garden products sold in Europe, Asia and the
Pacific region
• Americas, comprising forestry and garden products sold in North America and Latin America
• Construction, comprising products for the global construction and stone industries.
Europe & Asia/Pacific
Sales for Europe & Asia/Pacific in the second quarter increased 4%. Adjusted for exchange-rate effects the
sales increase was 10%. In the first half-year, sales decreased 3%. Adjusted for exchange-rate effects, sales
in the first half-year increased by 3%.
The year started slow as spring was unusually late and in addition retailers and dealers were cautious about
building up inventories ahead of the season. Activity picked up in March and accelerated in the latter part
of the second quarter. Sales in the dealer channel developed strongly while the retail channel experienced
minor growth. Prices were stable during the first two quarters.
Demand in Eastern Europe continued to recover and sales increased considerably both for the second
quarter and for the first half-year compared to the corresponding periods of 2009. The Nordic region was
also strong, while UK and France were weaker than last year. Over-all, it is estimated that the Group
gained market share in Europe during the first half-year.
Operating income and operating margin increased in the second quarter. Performance was strong for all
product categories. Operating income was positively affected by higher sales and production volumes as
well as an improved mix.
Americas
Sales for Americas in the second quarter decreased 5%. Adjusted for exchange-rate effects the decrease
was 1%. In the first half-year, sales decreased 16%. Adjusted for exchange-rate effects, sales in the first
half-year decreased by 8%.
The season started later than in the preceding year due to the late spring. Activity picked up in March and
held up well over the second quarter. The reduced listings with a major retailer in North America for the
2010 season had a negative effect on sales, especially for low-end lawn mowers. However, efforts to grow
sales in the dealer channel and with other retail accounts continued to pay off and almost compensated
the reduced listings. Prices were stable during the period.
Brand-building activities to promote the Husqvarna brand have been successful and the Husqvarna brand
is gaining market share on the North American market. Retailers continued their cautious approach to
building inventory.
Operating income for the second quarter of 2010 includes a charge of SEK 110m for the closure of the
factory in Beatrice and transfer of the production to the Group’s plant in Orangeburg. The first quarter
included a charge of SEK 50m for settlement of an engine-capacity lawsuit.
Operating income in the second quarter was positively affected by lower costs for direct material and
higher production volumes, while restructuring costs and merchandising and transportation costs had a negative effect. Operating margin for the second quarter, excluding items affecting comparability, amounted to 6.4% (6.5).
Construction
Sales for Construction in the second quarter increased 7%. Adjusted for exchange-rate effects the sales
increase was 12%. In the first half-year, sales were unchanged. Adjusted for exchange-rate effects, sales in
the first half-year increased by 6%. Demand for construction products improved in both North America
and Europe during the first half of the year. Stimulus packages for infrastructure projects in North America
had a positive effect on demand in the second quarter.
During the year a number of new products have been successfully launched and market shares are
estimated to have increased.
Operating income and margin in the second quarter improved, mainly due to higher sales and production
volumes. Operating income in the second quarter was charged with restructuring costs amounting to
SEK 47m. Operating margin for the second quarter, excluding items affecting comparability, increased to
7.8% (-2.0).
PARENT COMPANY
Net sales in the first half-year 2010 for the Parent Company, Husqvarna AB, amounted to SEK 6,201m
(5,372), of which SEK 4,716m (4,146) referred to sales to Group Companies and SEK 1,485m (1,226) to
external customers. Income after financial items amounted to SEK 1,518m (525). Income for the first halfyear
was SEK 1,266m (458).
The increase in income after financial items is mainly related to received dividend from subsidiaries of SEK
542m (249) and changes in market value of net investment hedges of SEK 336m (102). These hedges are
made in the Parent Company to limit the effects on the Group's consolidated equity resulting from
translation differences. In the Group's financial statements these effects are included in Other
comprehensive income.
Investments in tangible and intangible assets amounted to SEK 151m (119). Cash and cash equivalents
amounted to SEK 1,478m (1,297). Undistributed earnings in the Parent Company at the end of the period
amounted to SEK 17,308m (15,029). A dividend payment to shareholders in the amount of SEK 574m (0)
was made during the period.
RESTRUCTURING
In Q2 2010, the Group announced further restructuring in line with its strategy which includes increasing
efficiency by consolidating the manufacturing footprint. The factory in Beatrice, Nebraska, will be closed
and the production will be transferred to the factory in Orangeburg, South Carolina. The factory for
construction equipment in Athens, Greece will also be closed. Annual savings from the initiatives will
amount to SEK 60m and will be realized gradually with full effect from the first quarter of 2012. Secondquarter
operating income was charged with SEK 157m, of which the closure of the Beatrice factory
accounted for SEK 110m.
In October 2009, the Group announced the implementation of a number of structural changes in 2009-
2011. These measures are aimed at eliminating overlapping and increase efficiency within production and
administration, and involve consolidation of production in Sweden and the US, and of the sales
organization in Europe & Asia/Pacific.
The total cost of these measures amounts to SEK 399m and annual
savings from these activities are expected to amount to approximately SEK 400m, and will be realized
gradually from the second half of 2010 with full effect from the first quarter of 2012. Capital expenditure
related to the restructuring is expected to amount to approximately SEK 400m, of which a new plant in
Poland will account for approximately SEK 250m.
In September 2008, an initiative to reduce fixed costs through personnel cut-backs was announced. The
total costs for the cut-backs were SEK 369m and the annual savings are SEK 450m as of the third quarter
2009.
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