Kai
Wärn, President and CEO:
“The
good sales momentum from the end of the second quarter held up well over the
third quarter. Demand
in
both Europe and North America was supported by favorable weather conditions and
a delayed garden
season.
Group sales for Europe and Asia/Pacific increased 8%, Americas 20% and
Construction 6%, adjusted for changes in exchange rates.
Group
operating income for the third quarter was largely on the same level as prior
year. A positive development for Europe and Asia/Pacific was offset by a
decline for Americas, as the majority of the strong sales growth in North America
referred to low margin consumer products in the retail channel. In addition, operating
income was impacted by inefficiencies in the supply chain, caused by inability
to benefit from scale.
Cash
flow for the quarter had a strong development, driven by continued working
capital initiatives related to right sized inventory levels.
Although
we see positive signs in our work towards our strategic goals, there is a need
to further accelerate and broaden the scope for ongoing programs to reduce
product cost and business complexity. From a topline perspective, we will focus
resources on our core premium brands Husqvarna and Gardena and product leadership
areas like professional handheld, robotic mowers and watering. Additionally, we
will review how to further differentiate the dealer and retail business models
which we see as a key measure to drive margin recovery, especially in the U.S.”
Third
quarter
·
Net
sales amounted to SEK 6,349m (5,841). Adjusted for exchange rate effects, net
sales increased 12%.
·
Operating
income amounted to SEK 206m (197).
·
Continued
strong operating cash flow amounting to SEK 2,001m (1,503).
·
Net
debt/equity ratio improved to 0.57 (0.68).
·
Earnings
per share decreased to SEK 0.16 (0.19).
THIRD
QUARTER
Net
Sales
Net
sales for the third quarter increased by 9% to SEK 6,349m (5,841). Adjusted for
exchange rate effects, net sales for the Group increased 12%, by 8% for Europe and
Asia/Pacific, by 20% for Americas and by 6% for Construction.
Operating
Income
Operating
income for the third quarter amounted to SEK 206m (197) and the corresponding
operating margin amounted to 3.2% (3.4). Operating income increased for Europe and
Asia/Pacific, while it decreased for Americas and Construction.
Operating
income was positively impacted by the higher sales volume and savings from
staff reductions, while unfavorable business area mix combined with
inefficiencies in the U.S. supply chain, caused by inability to benefit from
scale, impacted adversely.
Changes
in exchange rates had a total negative impact on operating income of SEK -27m
compared to the third quarter 2012.
JANUARY
– SEPTEMBER
Net
Sales
Net
sales for January – September decreased by -3% to SEK 25,600m (26,358).
Adjusted for exchange rate effects, net sales for the Group increased by 1%,
for Americas by 2% and for Construction by 4%, while net sales for Europe and
Asia/Pacific were unchanged.
Operating
income
Operating
income for January – September amounted to SEK 1,916m (2,279) and the
corresponding operating margin amounted to 7.5% (8.6). Operating income
increased for Americas and Construction, while it decreased for Europe and
Asia/Pacific.
Operating
income, excluding negative impact from changes in exchange rates, was
positively impacted by lower material costs, higher sales volume and savings
from staff reductions, while mainly lower factory utilization levels due to
inventory reductions had negative impact.
Changes
in exchange rates had a total negative impact on operating income of SEK -319m
compared to
January
- September 2012.
FINANCIAL
ITEMS NET
Net
financial items for the third quarter amounted to SEK -111m (-93). The higher
financial cost is explained mainly by exchange differences. The average
interest rate on borrowings at September 30, 2013, was 4.4% (4.0). For January
– September, net financial items amounted to SEK -303m (-348).
INCOME
AFTER FINANCIAL ITEMS
Income
after financial items for the third quarter decreased to SEK 95m (104)
corresponding to a margin of 1.5% (1.8). Income after financial items for
January - September decreased to SEK 1,613m (1,931) corresponding to a margin
of 6.3% (7.3).
TAXES
Taxes
for January - September amounted to SEK -393m (-406), corresponding to a tax
rate of 24% (21) of income after financial items.
EARNINGS
PER SHARE
Income
for the third quarter amounted to SEK 92m (106), corresponding to SEK 0.16
(0.19) per share. Income for January - September amounted to SEK 1,220m
(1,525), corresponding to SEK 2.12 (2.65) per share.
OPERATING
CASH FLOW
Operating
cash flow for the third quarter amounted to SEK 2,001 (1,503). The positive
development was mainly driven by inventory reductions.
Operating
cash flow for January – September amounted to SEK 2,130m (1,595).
FINANCIAL
POSITION
Group
equity as of September 30, 2013, excluding non-controlling interests, amounted
to SEK 11,361m (11,425), corresponding to SEK 19.84 (19.95) per share.
Net
debt decreased to SEK 6,511m (7,811) as of September 30, 2013, of which liquid
funds amounted to SEK 1,588m (1,285) and interest bearing debt amounted to SEK
6,834m (7,640), excluding pensions. The major currencies used for debt
financing are SEK and USD. Net debt decreased by SEK -300m as a result of changes
in exchange rates.
The
net debt/equity ratio improved to 0.57 (0.68) and the equity/assets ratio to
44% (42).
In
addition to the amendment of IAS 19 “Employee benefits” which is shown on pages
13 and 14, 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
September 30, 2013, long-term loans including financial leases amounted to SEK
6,496m (5,089) and short-term loans including financial leases to SEK 185m
(2,306). Long-term loans consist of SEK 4,927m (2,571) in issued bonds, and
bank loans and financial leases of SEK 1,569m (2,518). 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 and Asia/Pacific
Net
sales for Europe and Asia/Pacific increased by 5% in the third quarter 2013.
Adjusted for exchange rate effects, net sales increased by 8%.
Demand
for lawn and garden products in the third quarter was positively impacted by a
prolonged selling season in Europe due to favorable weather conditions as well
as a consequence of the late start to the season earlier in the year.
Following
the slow start to the year in Europe, activity picked up in May and Group sales
were strong over the third quarter. Sales in Asia/Pacific also had a good
development, especially in Australia. In terms of product categories, watering
products and hand tools had the best development in the third quarter, while
electric products such as robotic lawn mowers had the best development for the
first nine months of the year.
Operating
income for the third quarter increased to SEK 289m (238) and the operating
margin increased to 8.9% (7.7).
Operating
income for the first nine months amounted to SEK 1,650m (2,102) and the
operating margin amounted to 13.1% (16.1).
The
improved operating income in the third quarter was mainly related to higher
sales volume and favorable product mix, which was partly offset by lower
utilization levels in factories as a result of inventory reductions.
For
January - September operating income was positively impacted by lower material
costs, while mainly changes in exchange rates and under-absorption in factories
affected negatively.
Changes
in exchange rates had a negative year-on-year effect of SEK -12m on operating
income for the third quarter and SEK -311m for January - September.
America’s
Net
sales for Americas increased by 16% in the third quarter 2013. Adjusted for
exchange rate effects, net sales increased by 20%.
In
the third quarter, demand was substantially higher as weather conditions were
favorable compared with the serious drought conditions that hampered demand in
the third quarter prior year. Demand was also positively impacted by an
improving U.S. economy.
Group
sales were substantially higher in North America as well as in Latin America in
the third quarter. For the first nine months, the higher sales were mainly
attributable to North America. Sales in the dealer channel rose for the nine
month period while the retail channel accounted for the majority of the growth
in the third quarter.
Operating
income for the third quarter decreased to SEK -126m (-97) and the corresponding
margin decreased to -5.4% (-4.9), mainly as a result of unfavorable channel and
product mix as low margin consumer products in the retail channel represented a
large share of sales. In addition, operating income was negatively affected by inefficiencies
in the supply chain caused by inability to benefit from scale. For January -
September, the effects of price, channel management and lower material costs
contributed to the positive development.
Changes
in exchange rates had a negative year-on-year effect of SEK -3m on operating
income for the third quarter and a positive impact of SEK 17m for January -
September.
Construction
Net
sales for Construction increased by 3% in the third quarter 2013. Adjusted for
exchange rate effects, the increase in sales was 6%.
The
positive demand trend in North America continued in the third quarter, although
somewhat slower than earlier in the year. In Europe demand for construction
products recovered for the second consecutive quarter and in the rest of the
world, markets also showed continued positive demand growth.
The
Group’s sales growth in the third quarter as well as for January - September
was primarily attributable to U.S. and Brazil. Sales in Europe were also higher
for both periods.
Operating
income for the third quarter amounted to SEK 86m (89) and the operating margin
amounted to 10.9% (11.7).
Operating
income in the third quarter was positively impacted by the higher sales volume,
which was offset mainly by lower factory utilization levels and changes in
exchange rates. For January – September, operating income benefitted from
higher sales and favorable mix.
Changes
in exchange rates had a negative year-on-year effect of SEK -10m on operating
income for the third
quarter
and SEK -21m for January - September.
MANAGEMENT
CHANGE IN ASIA/PACIFIC
Nicolas
Lanus, Group Management Member and Head of Asia/Pacific, has decided to leave
Husqvarna Group.
He
will hold his current position until December 31, 2013, when he leaves the
company for an external position.
PARENT
COMPANY
Net
sales for January – September 2013 for the Parent Company, Husqvarna AB,
amounted to SEK 8,603m (8,955), of which SEK 6,664 (6,962) referred to sales to
Group companies and SEK 1,939m (1,993) to external customers.
Income
after financial items amounted to SEK 1,570m (1,761). Income for the period was
SEK 1,311m (1,390).
Investments
in tangible and intangible assets amounted to SEK 355m (235). Cash and cash
equivalents amounted to SEK 171m (34) at the end of the quarter. Undistributed
earnings in the Parent Company amounted to SEK 17,466m (17,915).
CONVERSION
OF SHARES
According
to the company's articles of association, owners of A-shares have the right to
have such shares converted to B-shares. Conversion reduces the total number of
votes in the company.
In
July 2013, 128,051 A-shares were converted to B-shares at the request of
shareholders. In October 2013, another 847,885 A-shares were converted to
B-shares at the request of shareholders. The total number of votes thereafter
amounts to 171,568,859.
The
total number of registered shares in the company at September 30, 2013 amounted
to 576,343,778 shares of which 127,441,753 were A-shares and 448,902,025 were
B-shares.
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