Husqvarna Interim Report January - June 2012

Stockholm July 19, 2012

Hans Linnarson, President and CEO:

“Growth in the North American market continued, but the demand for forestry and garden products slowed down towards the end of the quarter. In the European markets, demand was hampered by unfavorable weather as well as weaker market conditions.

Group net sales for the second quarter were on the same level as the corresponding quarter in the previous year, adjusted for currency effects. Sales for Americas grew double digit, supported by improved factory delivery performance and a more favorable business environment, while sales for Europe & Asia/Pacific decreased.

Sales of professional products in the dealer channel in Europe & Asia/Pacific increased in spite of the weak market conditions. In the retail channel, sales of watering products declined. Robotic mowers continued to perform well in both channels.

For Construction, the trend from the first quarter with growth in the North American market continued and the European markets remained challenging.

Group operating income for the second quarter increased by 12%. Operating income was affected positively by the volume growth in the dealer channel and lower production costs. The operating margin for Europe & Asia/Pacific remained on a high level, in spite of the negative impact from unfavorable weather. Additionally, our ongoing focus on working capital has resulted in a positive development of cash flow.

Customer service, delivery reliability and cash flow are some of the Group’s top priorities for 2012, and I am pleased to note the significant improvement achieved in the first half year.

Looking ahead, the immediate market development in Europe as well as in North America is difficult to assess.

Second quarter

• Net sales amounted to SEK 10,706m (10,179). Adjusted for exchange rate effects, net sales were unchanged.
• Operating cash flow improved to SEK 2,535m (1,587).
•  Positive sales development and market share gains for Americas and Construction, weather related downturn for Europe & Asia/Pacific.
•  Operating income increased 12% to SEK 1,136m (1,012). Higher operating income for Americas and construction, lower for Europe & Asia/Pacific.
•  Earnings per share increased to SEK 1.36 (1.18).

SECOND QUARTER

Net Sales

Net sales for the second quarter increased by 5% to SEK 10,706m (10,179). Adjusted for exchange rate effects, net sales for the Group were unchanged, Americas increased by 11%, Construction increased by 3% while sales for Europe & Asia/Pacific decreased by -8%.

Operating Income

Operating income for the second quarter increased by 12% and amounted to SEK 1,136m (1,012) and the corresponding operating margin rose to 10.6% (9.9). Operating income increased for Americas and Construction.

Operating income was positively affected mainly by lower production costs, improved pricing, higher sales in North America and in the dealer channel in Europe & Asia/Pacific, while product mix had a negative impact mainly due to weather related lower sales of consumer watering products.

Changes in exchange rates had a total positive effect on operating income of approximately SEK 37m, compared with the second quarter 2011, of which transaction effects amounted to SEK -62m (62), translation effects amounted to SEK 0m (-5) and change in value of currency hedging contracts amounted to SEK 67m (-89).

In the second quarter 2011, operating income was negatively impacted by SEK -180m referring to costs

directly related to production disturbances, of which SEK -158m affected Americas and SEK -22m affected

Europe & Asia/Pacific.

FIRST HALF YEAR

Net sales

Net sales for the first half year January – June increased by 8% to SEK 20,517m (18,953). Adjusted for exchange rate effects, net sales for the Group increased by 4%, for Americas by 15%, for Construction by 7%, while sales for Europe & Asia/Pacific decreased by -4%.

Operating income

Operating income for the first half year increased by 23% to SEK 2,051m (1,674) and the corresponding operating margin rose to 10,0% (8,8). Operating income increased for Americas and Construction.

Operating income was positively affected mainly by lower production costs and improved pricing, while product mix had a negative impact mainly due to weather related lower sales of consumer watering products.

Changes in exchange rates had a total positive effect on operating income of approximately SEK 104m, compared with the first half year 2011, of which transaction effects amounted to SEK -65m (82), translation effects amounted to SEK 0m (-8) and change in value of currency hedging contracts amounted to SEK 92m (-151).

In the first half year 2011, operating income was negatively impacted by SEK -330m referring to costs directly related to production disturbances, of which SEK -290m affected Americas and SEK -40m affected Europe & Asia/Pacific.

FINANCIAL ITEMS NET

Net financial items for the second quarter amounted to SEK -106m (-115) and for the first half year to SEK -227m (-188). The average interest rate on borrowings at the end of the second quarter was 3.9% (4.1).

INCOME AFTER FINANCIAL ITEMS

Income after financial items for the second quarter increased to SEK 1,030m (897) corresponding to a margin of 9.6% (8.8). For the first half year, income after financial items increased to SEK 1,824m (1,486) corresponding to a margin of 8.9% (7.8).

TAXES

Taxes for the first half year amounted to SEK -407m (-321), corresponding to a tax rate of 22% (22) of income after financial items.

EARNINGS PER SHARE

Income for the second quarter increased to SEK 785m (681), corresponding to SEK 1.36 (1.18) per share. Income for the first half year increased to SEK 1,417m (1,165), corresponding to SEK 2.46 (2.02) per share.

OPERATING CASH FLOW

Due to the seasonality of the Group’s operations operating cash flow is normally positive in the second quarter, following a negative cash flow in the first quarter. Operating cash flow for the first half year improved to SEK 92m (-1,222). The higher operating cash flow was mainly due to higher income after financial items and a reduction of operating working capital, which was positively impacted by lower inventory and trade receivables.

FINANCIAL POSITION

Group equity as of June 30, 2012, excluding non-controlling interests, amounted to SEK 12,716m (12,174), corresponding to SEK 22.2 (21.6) per share.

Net debt as of June 30 amounted to SEK 7,811m (7,632) of which liquid funds amounted to SEK 1,658m (1,615) and interest bearing debt amounted to SEK 9,469m (9,247). The major currencies used for debt financing are SEK and USD. In the first half year, net debt increased by SEK 75m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.61 (0.62) and the equity/assets ratio to 40.4% (39.1).

On June 30, 2012, long-term loans including financial leases amounted to SEK 5,211m (5,398) and short-term loans including financial leases to SEK 3,850m (3,593). Long-term loans consist of SEK 2,526m (2,713) in issued bonds, and bank loans of SEK 2,685m (2,685). The issued bonds and the bank loans mature in 2013 and onwards. The Group also has an unutilized SEK 6 bn syndicated revolving credit, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

Europe & Asia/Pacific

Net sales for Europe & Asia/Pacific in the second quarter decreased by -7%. Adjusted for exchange rate effects, net sales decreased by -8%, compared to a strong second quarter of 2011. For the first half year, sales decreased by -3%. Adjusted for exchange rate effects, the decline was -4%.

The decline in the second quarter was mainly a result of a weather related drop in sales of watering products in the retail channel. Sales of Husqvarna branded products, including robotic mowers, in the dealer channel increased. In terms of markets, sales declined in most countries in Europe, whereas sales in the Asia/Pacific region were flat.

Operating income for the second quarter amounted to SEK 1,004m (1,079) and the operating margin remained at a high level, 18.8% (18.8). Operating income for the second quarter was positively impacted by the growth in dealer channel sales, while product mix due to the lower watering sales had a negative effect. Operating income for the first half year amounted to SEK 1,837m (1,894) and the operating margin remained at a high level, 18.4% (18.4).

Changes in exchange rates had a positive year-on-year effect on operating income of SEK 40m in the second quarter and SEK 112m in the first half year.

Americas

Net sales for Americas in the second quarter increased by 23%. Adjusted for exchange rate effects, net sales increased by 11%. For the first half year, sales increased by 23%. Adjusted for exchange rate effects, the increase was 15%.

Sales continued to grow double digit in the U.S. also in the second quarter, resulting in market share gains in some areas. Demand for forest and garden products increased and sales were also supported by better production output. In terms of products, ride-on and walk-behind mowers had the best development. Sales in Canada and Latin America were also higher.

Operating income for the second quarter amounted to SEK 85m (-98) and the corresponding operating margin was 1.9% (-2.7). For the first half year, operating income amounted to SEK 166m (-192) and the corresponding operating margin was 1.9% (-2.6). Operating income for the second quarter as well as for the first half year was positively affected by the higher sales volumes and lower production costs.

Changes in exchange rates had a negative year-on-year effect on operating income of SEK -3m in the second quarter and a neutral effect in the first half year.

Construction

Net sales for Construction in the second quarter increased by 10%. Adjusted for exchange rate effects, net sales increased by 3%. For the first half year, sales increased by 12%. Adjusted for exchange rate effects, the increase was 7%.

Market demand in the US rose compared with the second quarter in the previous year, as a result of higher construction activity and a continued product replacement need. Market conditions in Europe were difficult, with southern Europe as the weakest area. Demand increased in the rest of the world, but at a slower pace.

The business area’s sales in the U.S. market developed positively in all product categories during the second quarter, and market shares are estimated to have increased. In Europe, sales were slightly lower than in the second quarter of the previous year, which was in line with the market trend.

Operating income for the second quarter increased to SEK 85m (75) and the operating margin improved to 10.5% (10.3), mainly as a result of higher sales volumes. Operating income for the first half year increased to SEK 124m (59) and the operating margin increased to 8.0% (4.3), mainly as a result of higher sales volumes.

Operating income in Q1 2011 was charged with restructuring costs of SEK -40m.

Changes in exchange rates had a neutral year-on-year impact on operating income in the second quarter and a negative effect of SEK -10 in the first half year.

PARENT COMPANY

Net sales in the first half year 2012 for the Parent Company, Husqvarna AB, amounted to SEK 6,886m (6,538), of which SEK 5,365m (4,931) referred to sales to Group companies and SEK 1,521m (1,607) to external customers.

Income after financial items amounted to SEK 588m (671). Income for the period was SEK 461m (582).

Investments in tangible and intangible assets amounted to SEK 164m (165). Cash and cash equivalents amounted to SEK 25m (280) as of June 30, 2012. Dividends amounting to SEK 17m (283) are included in net financial items for the first half year. Undistributed earnings in the Parent Company amounted to SEK 16,991m (17,179).