Husqvarna Interim Report January - June 2013

Stockholm July 19, 2013

Kai Wärn, President and CEO:

“Group sales improved over the course of the quarter, albeit from a slow start of the season due to unusually cold weather in both Europe and North America. Sales for Europe & Asia/Pacific increased 2%, Construction 7% while Americas’ sales decreased -3%, mainly as a result of the Group’s continued sales channel management to prioritize margin.

Group operating income for the quarter declined, impacted mainly by negative currency effects within Europe & Asia/Pacific. The operating income was also affected by under-absorption due to inventory reductions. The stable earnings improvement for Americas continued, benefiting from dealer channel growth and improved cost efficiency. The positive earnings trend for Construction was supported by higher sales volumes and improved mix. As a result of the inventory reductions, Group operating cash flow for the second quarter was strong.

We have a continued cautious demand outlook for Europe, while the outlook for North America remains more positive for lawn and garden as well as for construction products.

During the second half of the year we will review how we can further accelerate key improvement

programs in order to realize our financial goals.”

Second quarter

•        Net sales amounted to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales were unchanged.

•        Operating income amounted to SEK 1,022m (1,152). Adjusted for changes in exchange rates, operating income improved slightly.

•          Changes in exchange rates negatively impacted operating income by SEK -156m year over year.

•          Strong operating cash flow amounting to SEK 1,915m (2,535).

•          Earnings per share decreased to SEK 1.15 (1.36).

•          Kai Wärn new President and CEO as of July 1, 2013.

SECOND QUARTER

NET SALES

Net sales for the second quarter decreased by -4% to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales for the Group were unchanged, increased by 2% for Europe & Asia/Pacific and by 7% for Construction, while Americas adjusted net sales decreased by -3%.

OPERATING INCOME

Operating income for the second quarter amounted to SEK 1,022m (1,152) and the corresponding operating margin amounted to 10.0% (10.8). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

In addition to changes in exchange rates, operating income was negatively impacted mainly by unfavorable product mix and lower factory utilization levels due to inventory reductions.

Changes in exchange rates had a total negative impact on operating income of SEK -156m compared to the second quarter 2012.

JANUARY – JUNE

NET SALES

Net sales for January – June decreased by -6% to SEK 19,251m (20,517). Adjusted for exchange rate effects, net sales for the Group declined by -2%, for Europe & Asia/Pacific by -2%, for Americas by -2%, while sales for Construction increased by 4%.

OPERATING INCOME

Operating income for January – June amounted to SEK 1,710m (2,082) and the corresponding operating margin amounted to 8.9% (10.1). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

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

Changes in exchange rates had a total negative impact on operating income of SEK -291m compared to January - June 2012.

FINANCIAL ITEMS NET

Net financial items for the second quarter amounted to SEK -106m (-121). The lower financial cost is explained mainly by lower average interest rates. The average interest rate on borrowings at June 30, 2013, was 3.9% (3.9). For January – June, net financial items amounted to SEK -192m (-255).

INCOME AFTER FINANCIAL ITEMS

Income after financial items for the second quarter decreased to SEK 916m (1,031) corresponding to a margin of 9.0% (9.6). Income after financial items for January - June decreased to SEK 1,518m (1,827) corresponding to a margin of 7.9% (8.9).

TAXES

Taxes for January - June amounted to SEK -390m (-408), corresponding to a tax rate of 26% (22) of income after financial items.

EARNINGS PER SHARE

Income for the second quarter amounted to SEK 661m (786), corresponding to SEK 1.15 (1.36) per share. Income for January – June amounted to SEK 1,128m (1,419), corresponding to SEK 1.96 (2.46) per share.

OPERATING CASH FLOW

Operating cash flow for the second quarter amounted to SEK 1,915 (2,535). Inventory reductions contributed positively to cash flow. The lower operating cash flow was mainly due to stronger sales during the latter part of the quarter, resulting in lower cash flow from change in trade receivables during the second quarter compared with the previous year.

Operating cash flow for January – June amounted to SEK 129m (92).

FINANCIAL POSITION

Group equity as of June 30, 2013, excluding non-controlling interests, amounted to SEK 11,591m (12,149), corresponding to SEK 20.2 (21.2) per share.

Net debt amounted to SEK 8,733m (9,319) as of June 30, 2013, of which liquid funds amounted to

SEK 1,940m (1,658) and interest bearing debt amounted to SEK 10,673m (10,977), including pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -320m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.75 (0.76) and the equity/assets ratio to 38% (39).

In addition to the amendment of IAS 19 “Employee benefits,” 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 June 30, 2013, long-term loans including financial leases amounted to SEK 7,515m (5,211) and short-term loans including financial leases to SEK 1,487m (3,850). Long-term loans consist of SEK 4,939m (2,526) in issued bonds, and bank loans and financial leases of SEK 2,576m (2,685). 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

Net sales for Europe & Asia/Pacific decreased by -3% in the second quarter 2013. Adjusted for exchange rate effects, net sales increased by 2%.

Demand for lawn and garden products was negatively impacted by a late start of spring due to unusually cold weather, which lasted well into the quarter in many European markets. Consumer demand remained weaker than in the previous year and retailers continued to manage inventory conservatively as the macroeconomic uncertainty remained.

The Group’s sales were off to a slow start, but picked up in May and had a strong finish in June. In terms of products categories, electric products such as robotic mowers had the best development, while handheld products and riders declined. Watering products were in line with prior year.

Operating income amounted to SEK 806m (1,018) and the operating margin amounted to 15.5% (19.0).

In addition to impact from changes in exchange rates, the lower operating income was mainly related to lower utilization levels in factories as a result of inventory reductions, and less favorable product mix.

Changes in exchange rates had a negative year-on-year effect of SEK -153m on operating income.

Americas

           

Net sales for Americas decreased by -8% in the second quarter 2013. Adjusted for exchange rate effects, net sales decreased by -3%.

Although supported by an improving U.S. economy, demand for lawn and garden equipment in North America was off to a slow start due to unfavorable weather.

The Group’s sales recovered in the second half of the quarter, but not enough to exceed prior year’s level. Sales were lower in the U.S. and in Latin America, while sales in Canada were higher. Sales to the dealer channel rose.

Operating income increased to SEK 150m (87) and the corresponding margin improved to 3.6% (1.9). The effects of channel management and manufacturing efficiencies continued to contribute to the positive development.

Changes in exchange rates had a positive year-on-year effect of SEK 11m on operating income.

Construction

Net sales for Construction increased by 1% in the second quarter 2013. Adjusted for exchange rate effects, the increase in sales was 7%.

The positive development in North America continued. Market demand was on a higher level than in the previous year, and the Group achieved additional growth as a result of market share gains. Despite continued weak demand in Europe, the Group’s sales were slightly higher. In the rest of the world, sales also increased, with a particularly good development in Brazil.

Operating income increased to SEK 100m (85) and the operating margin improved to 12.3% (10.5). Operating income was positively impacted mainly by the higher sales volume and mix.

Changes in exchange rates had a negative year-on-year effect of SEK -13m on operating income.

PARENT COMPANY

Net sales for January – June 2013 for the Parent Company, Husqvarna AB, amounted to SEK 6,430m (6,886), of which SEK 4,981m (5,365) referred to sales to Group companies and SEK 1,449m (1,521) to external customers.

Income after financial items amounted to SEK 1,012m (743). Income for the period was SEK 907m (461). Investments in tangible and intangible assets amounted to SEK 227m (164). Cash and cash equivalents amounted to SEK 432m (25) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,466m (16,991).

KAI WÄRN NEW PRESIDENT AND CEO AS OF JULY 1

Kai Wärn took office as new President and CEO of Husqvarna as of July 1, 2013. He replaced Hans Linnarson, who 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.

ALAN SHAW APPOINTED NEW HEAD OF AMERICAS

Effective August 15, 2013, Alan Shaw has been appointed Executive Vice President, Head of business area Americas and will become member of Husqvarna Group Management. Alan Shaw has more than 25 years of global experience from consumer durables including barbeque grills and accessories, lawn and garden equipment and major home appliances. Most recently, Alan was President and CEO of Char-Broil LLC.