Husqvarna Group Interim Report January - March 2013

Stockholm April 24, 2013

Hans Linnarson, President and CEO:

“Husqvarna’s first quarter results were impacted by unfavorable weather conditions and continued macroeconomic slowdown in Europe. Earnings were also negatively affected by the strong Swedish Krona which accounted for more than half of the decline in operating income, and reduced manufacturing utilization to meet the lower demand. Improvements in Americas and Construction were not enough to offset the downturn in Europe.

We are pleased with the results coming from operational improvements in our business area Americas. The effects of mix, channel management, price and manufacturing efficiencies all contributed to an improved development of operating income and margin in the first quarter.

The positive development for Construction continued, although it was mixed between the different regions. Operating income and margin improved over prior year, primarily due to a positive product mix impact.

We have a continued cautious outlook for demand in Europe, while the outlook for North America remains more positive. Late last year we announced actions to reduce cost and improve flexibility. The initiatives are on track and will gradually deliver savings.”

·         Net sales amounted to SEK 9,024m (9,811). Adjusted for exchange rate effects, net sales decreased -4%.

·         Operating income decreased to SEK 688m (930), which entirely relates to Europe & Asia/Pacific.

·         Changes in exchange rates negatively impacted operating income by SEK 135m year over year.

·         Operating cash flow improved to SEK -1,786m (-2,443).

·         Earnings per share decreased to SEK 0.81 (1.10).

·         Announcement of SEK 1bn investment in manufacturing of chainsaw chains and cylinders.

·         Kai Wärn was appointed new President and CEO as of July 1, 2013.

FIRST QUARTER

Net Sales

Net sales for the first quarter decreased by -8% to SEK 9,024m (9,811). Adjusted for exchange rate effects, net sales for the Group declined by -4%, for Europe & Asia/Pacific by -7%, for Americas by -2%, while sales for Construction were unchanged.

Operating Income

Operating income for the first quarter amounted to SEK 688m (930) and the corresponding operating margin amounted to 7.6% (9.5). Operating income increased for Americas and Construction, while it decreased for  Europe & Asia/Pacific.

Operating income, excluding changes in exchange rates, was negatively affected mainly by the lower sales volume, product mix and lower factory utilization levels. Price and material impacted operating income positively.

Changes in exchange rates had a total negative impact on operating income of SEK 135m compared to the first quarter 2012.

FINANCIAL ITEMS NET

Net financial items amounted to SEK -86m (-134) for the first quarter. The lower financial cost is explained mainly by lower interest rates. The average interest rate on borrowings at the end of the quarter was 3.6%

INCOME AFTER FINANCIAL ITEMS

Income after financial items decreased to SEK 602m (796) corresponding to a margin of 6.7% (8.1).

TAXES

Taxes amounted to SEK -135m (-163), corresponding to a tax rate of 22% (20) of income after financial items.

EARNINGS PER SHARE

Income for the quarter amounted to SEK 467m (633), corresponding to SEK 0.81 (1.10) per share.

OPERATING CASH FLOW

Operating cash flow for the quarter amounted to SEK -1,786m (-2,443). The improved operating cash flow was mainly related to changes in inventories and trade receivables.

Due to the seasonality of the Group’s operations, operating cash flow is normally negative in the first quarter.

FINANCIAL POSITION

Group equity as of March 31, 2013, excluding non-controlling interests, amounted to SEK 11,093m (11,261), corresponding to SEK 19.4 (19.7) per share. Group equity was negatively affected by exchange differences on translating foreign operations to SEK amounting to SEK -389m.

Net debt amounted to SEK 10,053m (10,733) as of March 31, 2013, of which liquid funds amounted to SEK 1,412m (1,434) and interest bearing debt amounted to SEK 11,465m (12,167), including pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -25m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.90 (0.95) and the equity/assets ratio to 35% (34).

In addition to the amendment of IAS 19 “Employee benefits” which is shown on pages 12 and 13, Husqvarna Group has reclassified the net defined pension liability to interest-bearing financial liability and included the liabilities in the calculation of net debt.

On March 31, 2013, long-term loans including financial leases amounted to SEK 6,574m (6,883) and short term loans including financial leases to SEK 3,104m (3,708). Long-term loans consist of SEK 4,061m (3,158) in issued bonds, and bank loans and financial leases of SEK 2,513m (3,725). The bonds and bank loans mature in 2014 and onwards. The Group also has an unutilized SEK 6 bn syndicated revolving credit facility, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

EUROPE & ASIA/PACIFIC

Q1

Net sales for Europe & Asia/Pacific decreased by -11% in the first quarter 2013. Adjusted for exchange rate effects, net sales decreased by -7%.

Demand for lawn and garden products were negatively impacted by a late start of spring due to unusually cold weather in most European markets. Consumer demand remained weak as the macroeconomic uncertainty continued.

Due to the weak demand, the Group’s sales declined. The down-turn was related to all product categories, by sales channel it was mainly related to the retail channel.

Operating income amounted to SEK 555m (846) and the operating margin amounted to 13.4% (18.2).

Changes in exchange rates had a negative year-on-year effect of SEK 146m on operating income. Excluding impact from changes in exchange rates, the lower operating income was mainly related to the lower sales, negative product mix and lower utilization of factories.

AMERICAS

Q1

Net sales for Americas decreased by -5% in the first quarter 2013. Adjusted for exchange rate effects, net sales decreased by -2%.

Although supported by an improving economy, demand for lawn and garden equipment in North America slightly lagged 2012 levels in the first quarter, mainly because the early spring of prior year was not repeated.

The Group’s sales in Canada and Latin America increased, while sales in the U.S. were lower. Sales to the dealer channel increased in all regions.

Operating income amounted to SEK 137m (83) and the corresponding operating margin improved to 3.3% (1.9). The effects of channel management and mix, price and manufacturing efficiencies contributed to the positive result. Changes in exchange rates had a positive year-on-year effect of SEK 8m on operating income.

CONSTRUCTION

Net sales for Construction decreased by -4% in the first quarter 2013. Adjusted for exchange rate effects, sales were unchanged.

Total construction market activity during the first quarter 2013, compared with the first quarter prior year, was unchanged in North America, lower in Europe and higher in the rest of the world. The Group’s sales of construction products had a similar development.

Operating income increased to SEK 46m (39) and the operating margin improved to 6.5% (5.3). Changes in exchange rates had a positive year-on-year effect of SEK 3m on operating income. Operating income was also positively impacted mainly  by mix, as a result of new products with higher margins representing a larger share of total sales.

PARENT COMPANY

Net sales in Q1 2013 for the Parent Company, Husqvarna AB, amounted to SEK 3,217m (3,442), of which SEK 2,660m (2,836) referred to sales to Group companies and SEK 557m (606) to external customers.

Income after financial items amounted to SEK -60m (357). Income for the period was SEK -111m (222).

Investments in tangible and intangible assets amounted to SEK 92m (83). Cash and cash equivalents amounted to SEK 90m (87) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,308m (16,738).

ANNUAL GENERAL MEETING

The Annual General Meeting of Husqvarna AB (publ) was held on April 11, 2013, in Jönköping, Sweden. A dividend of SEK 1.50 (1.50) per share was resolved.

INVESTMENT IN CORE TECHNOLOGIES

Husqvarna Group has decided to invest around SEK 1bn during 2013 - 2015 in a new production facility for manufacturing of chainsaw chains in Huskvarna, Sweden, where the Group already manufactures professional chainsaws, brush cuttersand trimmers. The Group will also invest in expanded capacity for manufacturing of cylinders for two-stroke engines for chainsaws in the Group’s facilities in Nashville, U.S. and in Huskvarna, Sweden.

KAI WÄRN APPOINTED NEW PRESIDENT AND CEO AS OF JULY 1

The Board of Directors of Husqvarna AB has appointed Kai Wärn as President and CEO of Husqvarna Group effective as of July 1, 2013. Hans Linnarson, who was appointed President and CEO in 2011, will continue to work for the Group until he retires early 2014.

Kai Wärn was born in 1959 and is a graduate from the Royal Institute of Technology in Stockholm, Sweden.

Previous positions include President and CEO at Seco Tools AB, a leading global metal cutting tools company, at that time listed at NASDAQ OMX Nordic stock exchange and President of the Business Unit ABB Robotics Products within ABB Group. Most recently Kai has held the position as Operations Partner at the private equity firm IK Investment Partners.