Stockholm
February 6, 2014
Kai
Wärn, President and CEO of Husqvarna Group: “The year ended
with a continuation of the positive sales development from the third quarter.
Sales for the seasonally weak fourth quarter were up 8%, adjusted for changes
in exchange rates, with higher sales in all business areas. The operating loss
for the quarter decreased to SEK -308m (-348), excluding items affecting
comparability, where the Americas contributed with the largest improvement. In
line with the development earlier in the year, the fourth quarter showed an
improved cash flow development.
To
conclude 2013, the year was off to a slow start, but a stronger second half
resulted in a 2% net sales growth for the full year, adjusted for currencies. From
a market demand point of view, North America recovered in line with the
relatively positive macro economy, while Europe had a more mixed picture.
Efforts
to improve working capital were successful. Inventories were reduced, mainly by
reduced production levels, resulting in a cash release of SEK 820m and an
operating cash flow for the year of SEK 1,813m (1,144). The strong cash flow
also supported an improvement of the net debt/equity ratio, which declined to
0.58 (0.75).
Group
operating income for 2013 declined to SEK 1,608m (1,931) excluding items
affecting comparability, and earnings per share amounted to SEK 1.60 (1.78).
The decline in operating income refers to Europe & Asia/Pacific where
earnings were impacted by unfavorable changes in exchange rates and the lower
factory utilization levels due to the planned inventory reductions. For the
Group, changes in exchange rates and under-absorption had a total negative
impact on operating income of almost SEK 0.5bn compared to 2012.
For
Americas, prior year's large operating loss was turned into a slightly positive
result. Growth in the higher-margin dealer channel was double digit and
productivity improved. We are now moving into the next phase of the U.S.
turnaround and as an important step we have also implemented a new organization
for retail and dealer operations.
In
Construction, currency adjusted sales increased 6% and the margin rose to above
9%. Higher demand, investments in sales capacity and a strong product portfolio
contributed to the positive development.
In
2014-2015, our main priority is to execute and build momentum in our
accelerated improvement programs to support margin improvement. In terms of
demand, I am cautiously optimistic given the continued improvements in the U.S.
economy and by the European indications of stabilization.”
Fourth
quarter
·
Net
sales amounted to SEK 4,707m (4,476). Adjusted for exchange rate effects, net
sales increased 8%.
·
Operating
income improved to SEK -308m (-348), excluding items affecting comparability.
·
Earnings
per share amounted to SEK -0.53 (-0.87).
Full-year
·
Net
sales amounted to SEK 30,307m (30,834). Adjusted for exchange rate effects, net
sales increased 2%.
·
Operating
income amounted to SEK 1,608m (1,931), excluding items affecting comparability.
·
Earnings
per share amounted to SEK 1.60 (1.78).
·
Operating
cash flow improved to SEK 1,813m (1,144).
·
Net
debt/equity ratio improved to 0.58 (0.75).
·
The
Board proposes a dividend of SEK 1.50 (1.50) per share for 2013.
FOURTH
QUARTER
Net
Sales
Net
sales for the fourth quarter increased by 5% to SEK 4,707m (4,476). Adjusted
for exchange rate effects, net sales for the Group increased 8%, by 8% for
Europe & Asia/Pacific, by 8% for Americas and by 10% for Construction.
Operating
income
Operating
income for the fourth quarter excluding items affecting comparability amounted
to SEK -308m (-348). Including items affecting comparability, it amounted to
SEK -308m (-604) and the corresponding operating margin was -6.5% (-13.5).
Excluding
items affecting comparability and impact from changes in exchange rates, fourth
quarter operating income was positively impacted by the higher sales volume,
savings from staff reductions and lower costs for materials, while mainly
higher costs for logistics, sales and marketing impacted adversely.
Changes
in exchange rates had a total negative impact on operating income of SEK -31m
compared to the fourth quarter 2012. Savings from staff reductions amounted to
SEK 62m.
FULL
YEAR
Net
Sales
Net
sales for 2013 decreased by -2% to SEK 30,307m (30,834). Adjusted for exchange
rate effects, net sales for the Group increased 2%, by 1% for Europe &
Asia/Pacific, by 3% for Americas and by 6% for Construction.
Operating Income
Operating
income for 2013 excluding items affecting comparability amounted to SEK 1,608m
(1,931). Including items affecting comparability, it amounted to SEK 1,608m
(1,675) and the corresponding operating margin was 5.3% (5.4).
Excluding
items affecting comparability and impact from changes in exchange rates,
operating income was positively affected by the higher sales volume, lower
material costs 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 -349m
compared to 2012. Savings from staff reductions amounted to SEK 174m.
FINANCIAL
ITEMS NET
Net
financial items for the fourth quarter amounted to SEK -125m (-152). Net
financial items amounted to SEK -428m (-500) for the full year. The lower
financial cost is explained mainly by lower interest rates and lower net debt.
The average interest rate on borrowings at December 31, 2013, was 4.0% (4.2).
INCOME
AFTER FINANCIAL ITEMS
Income
after financial items for the fourth quarter decreased to SEK -433m (-756)
corresponding to a margin of -9.2% (-16.9%). Income after financial items for
the full year 2013 amounted to SEK 1,180m (1,175) corresponding to a margin of
3.9% (3.8).
TAXES
Tax
for the fourth quarter amounted to SEK 129m (258). Tax cost for the full-year
2013 amounted to SEK -264m (-148), corresponding to a tax rate of 22% (12) of
income after financial items.
EARNINGS
PER SHARE
Income
for the full year 2013 amounted to SEK 916m (1,027), corresponding to SEK 1.60
(1.78) per share.
OPERATING
CASH FLOW
Operating
cash flow for the full year improved substantially to SEK 1,813 (1,144). The
improvement relates
mainly
to changes in working capital which largely was driven by activities to reduce
inventory levels. Cash flow
from
operations, excluding changes in operating assets and liabilities, decreased
due to the lower result.
The
higher capital expenditure was mainly related to the previously communicated
investments within the new
manufacturing
facility for chainsaw chains in Husqvarna.
Cash
flow is normally negative in the fourth quarter, reflecting the seasonally low
result and build-up of
inventories
for the seasonally stronger first quarter.
FINANCIAL
POSITION
Group
equity as of December 31, 2013, excluding non-controlling interests, amounted
to SEK 11,372m
(10,987),
corresponding to SEK 19.9 (19.2) per share.
Net
debt decreased to SEK 6,659m (8,271) as of December 31, 2013, of which liquid
funds amounted to SEK 1,884m (1,573) and interest bearing debt amounted to SEK
7,290m (8,366), excluding pensions. The major currencies used for debt
financing are SEK and USD. Net debt decreased by SEK -337m during the year as a
result of changes in exchange rates.
The
net debt/equity ratio improved to 0.58 (0.75) and the equity/assets ratio to
42.6% (39.4).
In
connection with 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
December 31, 2013, long-term loans including financial leases amounted to SEK
6,408m (6,611) and short-term loans including financial leases to SEK 643m
(1,470). Long-term loans consist of SEK 4,943m (4,075) in issued bonds, and
bank loans and financial leases of SEK 1,465m (2,536). 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
Q4
Net
sales for Europe & Asia/Pacific increased by 5% in the fourth quarter 2013. Adjusted for exchange rate effects, net sales
increased by 8%. For the full year, net sales declined by -3%. Adjusted for exchange rate effects, net sales
for the full year increased by 1%.
Demand
was weak at the beginning of the year, and the selling season started later
than usual due to a late start of spring. Demand gradually improved as
favorable weather lead to a prolonged selling season in Europe, although the
preseason demand for snow products was soft late in the year.
In
terms of product categories, handheld products increased while snow thrower
sales declined in the fourth quarter. Over the full year, electric products
including robotic lawn mowers, showed the highest growth rate.
Operating
income for the fourth quarter amounted to SEK -136m (-155) and the operating
margin amounted to -5.8% (-6.8), excluding items affecting comparability of SEK
-187m in the fourth quarter 2012. For the full year, operating income amounted
to SEK 1,514m (1,947) and the operating margin amounted to 10.1% (12.7), excluding
the items affecting comparability of SEK -187m.
Excluding
currency impact and items affecting comparability, the improved operating
income in the fourth quarter was mainly attributable to the higher sales volume
and a more favorable mix, which partly was offset by higher costs for selling
and branding. For the full year, operating income was positively impacted by
the higher sales volume and lower material costs, while mainly under-absorption
in factories due to inventory reductions affected negatively.
Changes
in exchange rates had a negative year-on-year effect of SEK -17m on operating
income for the fourth
quarter
and SEK -328m for the full year 2013.
AMERICAS
Q4
Net
sales for Americas increased by 5% in the fourth quarter 2013. Adjusted for
exchange rate effects, net sales increased by 8%. For the full year, net sales
declined by -1%. Adjusted for exchange rate effects, net sales for the full
year increased by 3%.
Total
market demand in North America increased over the full year, supported by an
improving U.S. economy.
Strong
demand driven by favorable weather in the second half of the year compensated
for a weaker first half.
U.S.,
Canada and Brazil contributed evenly to the 8% currency adjusted sales increase
in the fourth quarter. Over the full
year, Canada and Brazil had the most favorable development. Dealer sales
represented 36% of Americas‟ sales in 2013, up
from 33% in 2012.
Operating
income for the fourth quarter improved to SEK -157m (-197) and the
corresponding margin amounted to -9.5% (-12.5), excluding items affecting
comparability of SEK -36m in the fourth quarter 2012. The improved operating
income, excluding currency impact and the items affecting comparability, was
mainly a result of lower material costs and savings from staff reductions.
For
the full year, operating income rose to SEK 4m (-124) and the operating margin
amounted to 0.0% (-1.0), excluding items affecting comparability of SEK -36m.
The improved operating income was primarily attributable to improved pricing,
lower material costs and increased productivity.
Changes
in exchange rates had a negative year-on-year effect of SEK -1m on operating
income for the fourth
quarter
and a positive impact of SEK 16m for the full year.
CONSTRUCTION
Net
sales for Construction increased by 8% in the fourth quarter 2013. Adjusted for
exchange rate effects, the increase in sales was 10%. For the full year, net
sales increased by 2%. Adjusted for exchange rate effects, net sales for the
full year increased by 6%.
The
positive demand trend in North America continued, although somewhat slower than
earlier in the year.
Demand
for construction products in Europe showed a mixed picture, but was over-all
strengthened in the second half of the year. In Brazil demand continued to be
strong as a result of infrastructure investments.
All
regions showed higher sales in the fourth quarter, with the strongest
development in rest of the world, in particular Brazil. Also for the full year,
sales were up in all regions. The U.S. and Brazil were the top performing markets.
Operating
income for the fourth quarter amounted to SEK 45m (45) and the operating margin
amounted to 6.5% (6.9), excluding items affecting comparability of SEK -25m in
the fourth quarter 2012. Operating income for the full year amounted to SEK
277m (258) and the operating margin amounted to 9.2% (8.7), excluding the items
affecting comparability of SEK -25m in 2012.
Operating
income in the fourth quarter was positively impacted by the higher sales
volume, which was offset mainly by unfavorable mix and negative impact from
changes in exchange rates. For the full year, operating income was positively
impacted by the higher sales volume and mix, while changes in exchange rates
and lower factory utilization levels impacted adversely.
Changes
in exchange rates had a negative year-on-year effect of SEK -15m on operating
income for the fourth
quarter
and SEK -36m for the full year.
MANAGEMENT
CHANGE IN ASIA/PACIFIC
Pavel
Hajman has been appointed Executive Vice President, Head of business unit
Asia/Pacific and will become member of Husqvarna Group Management. Pavel
replaces Nicolas Lanus who left the Group December 31, 2013. Brian Belanger, VP
Legal Affairs Asia/Pacific, will be acting on the position until Pavel Hajman starts,
latest June 1, 2014.
STAFF
REDUCTION MEASURES
In
November 2012, Husqvarna Group announced measures to improve the Group‟s
cost structure. The measures include layoffs of in total approximately 600
employees in several countries, whereof almost half in Sweden. The measures aim
to improve efficiency, reduce the fixed cost base and further increase
flexibility. Total costs for implementing these measures were SEK –256m, which
were charged to the operating income for the fourth quarter of 2012.
Cost
savings of SEK 174m were achieved in 2013 as a result of the measures. The
measures will reach full effect of approximately SEK 220m in annual cost
savings during 2014.
PARENT
COMPANY
Net
sales for 2013 for the Parent Company, Husqvarna AB, amounted to SEK 10,442m
(10,564), of which SEK 8,032 (8,172) referred to sales to Group companies and
SEK 2,410m (2,392) to external customers.
Income
after financial items amounted to SEK 1,112m (564). Income for the period was
SEK 911m (908). Investments in tangible and intangible assets amounted to SEK
582m (1,517). Cash and cash equivalents amounted to SEK 89m (91) at the end of
the quarter. Undistributed earnings in the Parent Company amounted to SEK
17,461m (17,384).
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
October 2013, 847,885 A-shares were converted to B-shares at the request of
shareholders. In January 2014, another 3,110,239 A-shares were converted to
B-shares at the request of shareholders. The total number of votes thereafter
amounts to 168,769,643.9.
The
total number of registered shares in the company at December 31, 2013 amounted
to 576,343,778 shares of which 126,593,868 were A-shares and 449,749,910 were
B-shares.
ANNUAL
GENERAL MEETING 2014
The
Annual General Meeting (AGM) of Husqvarna AB (publ) will be held on April 10,
2014, at the Elmia Congress Center, the Hammarskjöld Hall, Elmiavägen 15 in
Jönköping, Sweden.
Shareholders
who wish to have matters dealt with by the AGM should submit their proposals to
the Board by email to board@husqvarnagroup.com, or by post to Husqvarna AB,
General Counsel, Box 7454, SE-103 92 Stockholm. Proposals must be received by
the company no later than February 20, 2014.
Proposals
to the Annual General Meeting in 2014
The
notification to the AGM 2014 will be available on the Group‟s
website www.husqvarnagroup.com/agm as of March 7, 2014. Then full proposal to
the AGM will be published on the Group's website no later than March 20, 2014.
Dividend
The
Board of Directors proposes a dividend for 2013 of SEK 1.50 (1.50) per share,
corresponding to a total dividend payment of SEK 859m (859) based on the number
of outstanding shares at the end of 2013. Tuesday, April 15, 2014 is proposed
as record date. The last day for trading in Husqvarna shares including the
right to dividend for 2013 is April 10, 2014.
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