Stockholm
April 24, 2014
Kai Wärn, President and CEO:
“We are pleased to see that the first quarter performance is
benefiting from the Accelerated Improvement Program and a good market demand.
The program that was launched last year and which aims at substantially
strengthening the profitability of the Group is delivering encouraging results.
In particular, direct material costs have been reduced and the distinct focus on
our premium brands and product leadership areas is beginning to have a positive
impact.
From a market perspective, the year has started well in
Europe, affected favorably by an early spring. Demand in North America
developed positively, driven by retail inventory stock-up, despite another long
winter across much of the region. Total currency adjusted net sales for the
Group increased 7%, with higher sales in all business areas. Operating income
rose 31% to SEK 903m – despite a negative currency development – and the
operating margin increased to 9.3% (7.6).
Substantial profitability improvements were achieved in
Americas. Direct material costs were reduced and the channel mix developed
favorably, supporting a continued recovery of the operating income and margin
to SEK 218m (142) and 4.8% (3.3) respectively. First experiences of the new
organization, based on separate profit centers for retail and dealer
operations, is reinforcing our view that this structure will be an important
vehicle for further profitability improvements.
In Europe & Asia/Pacific, we are especially pleased with
the product mix. Sales developed well for the prioritized areas, including
robotic lawn mowers and watering products. Total sales for the business area
rose 5% adjusted for currency, and operating income increased 22% to SEK 669m
(550).
Construction reported another strong quarter with higher
sales in all regions. The margin rose to 9.8% (6.5), leveraging primarily on a
sales growth of 11%.
Going forward, we will continue the execution of the
Accelerated Improvement Program. In addition, we are cautiously optimistic
about the underlying demand.”
First quarter, January - March
- Net sales increased to SEK 9,685m (9,024). Adjusted for exchange rate effects, net sales increased 7%.
- Operating income rose 31% to SEK 903m (688), including negative foreign exchange impact of SEK -45m.
- Higher sales and operating income for all business areas.
- Operating income positively impacted by lower costs for materials, product mix and channel mix.
- Earnings per share increased to SEK 1.07 (0.81).
- The net debt/equity ratio improved to 0.73 (0.90).
FIRST QUARTER, JANUARY – MARCH 2014
Net sales
Net sales for the first quarter 2014 increased by 7% to SEK 9,685m (9,024). Adjusted for exchange rate effects, net sales for the Group increased 7%, by 5% for Europe & Asia/Pacific, by 9% for Americas
and by 11% for Construction.
Operating income
Operating income for the first quarter increased
31% to SEK 903m (688), corresponding to an operating margin of 9.3% (7.6). Operating income and margin rose for all business areas.
Operating income was positively impacted primarily by the higher sales volume and lower direct material costs. Costs for selling and administration as a percentage
of sales declined, although logistics costs increased due to the higher sales activity. Operating income also benefitted from savings of SEK 34m related to the staff reduction
program from 2012.
Changes in exchange rates had a total negative impact on operating income
of SEK -45m compared to the first quarter 2013.
Financial items net
Financial items net amounted to SEK -96m (-86), of which net interest amounted to SEK -82m (-91). The average interest rate on borrowings
at March 31, 2014, was 3.3% (3.6).
Income
after financial items
Income after financial items increased to SEK 807m (602) corresponding to a margin of 8.3% (6.7).
Taxes
Tax for the first quarter amounted
to SEK -191m (-135), corresponding to a tax rate of 24% (22) of income after financial
items.
Earnings
per
share
Income for the period increased
to SEK 616m (467),
corresponding to SEK 1.07 (0.81) per share.
OPERATING CASH FLOW
Operating cash flow for the first quarter amounted to SEK -1,892m (-1,786). Cash flow
from
operations, excluding
changes in operating
assets and liabilities, increased due to the higher result. Cash flow
from changes in receivables decreased as a result of the higher sales. The increase in capital expenditure was mainly related to the previously
communicated investments within the new manufacturing facility for chainsaw chains in Huskvarna.
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, 2014, excluding non-controlling interests, amounted to SEK 11,975m (11,093), corresponding to SEK 20.9 (19.4) per share.
Net debt decreased to SEK 8,698m (10,053) as of March 31,
2014, of which liquid funds amounted
to
SEK 1,755m (1,412) and interest-bearing debt amounted to SEK 9,096m (10,043), excluding pensions. The major currencies
used for debt financing are SEK and USD. Net debt decreased
by SEK 375m during the last twelve
months as a result of changes
in exchange rates.
The net debt/equity ratio improved to 0.73 (0.90) and the equity/assets ratio rose to 38% (35).
On March 31, 2014, long-term loans including financial
leases amounted to SEK 6,852m (6,574) and short- term loans including financial leases to SEK 2,041m (3,104). Long-term
loans consist of SEK 4,946m (4,061) in issued bonds, and bank loans and financial
leases of SEK 1,906m (2,513). The bonds and bank loans mature in 2015 - 2018. During the
first quarter the Group has
entered into a new long term loan amounting
to SEK 425m with a five year maturity.
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 increased by 6% in the first quarter.
Adjusted for exchange
rate effects, net sales increased
by 5%.
Efforts to grow sales of premium
brands, in the prioritized product areas and sales channels, developed well. Robotic
lawn mowers, watering products and professional chainsaws showed the best development. By sales channel,
the sales growth was mainly related to the dealer channel. Market demand was positively impacted by favorable
weather conditions due to an early spring.
Operating income increased 22% to SEK 669m (550) and the operating margin improved to 15.4% (13.5), mainly as a result of the higher sales volume, lower direct material costs and favorable product and channel mix.
Changes in exchange rates had a positive year-on-year impact of SEK 5m on operating income.
Americas
Net sales for Americas increased by 8% in
the first quarter 2014. Adjusted for exchange
rate effects, net sales increased by 9%.
The market continued to gain support from an improving U.S. economy, but was also negatively impacted by the severe winter conditions across much of North America.
Sales increased in the U.S. and Latin America, with the majority of the growth in the wheeled product category. Dealer channel sales continued
to develop strongly, increasing 12% in the quarter.
Operating income improved to SEK 218m (142) and the corresponding margin rose to 4.8% (3.3), mainly due to lower direct material
costs and the higher sales volume,
which partly was offset by higher logistics costs.
Changes in exchange rates had a negative year-on-year effect of SEK -36m on operating income.
Construction
Net sales for Construction increased by 11% in the first quarter 2014. Adjusted for exchange rate effects, the increase in sales was also 11%.
Market demand for construction products developed positively in all regions. Sales increased in all regions, with the best development in the rest of the world, primarily
driven by continued strong growth in Brazil.
Operating income increased to SEK 77m (46), mainly as a result of the higher sales volume. The corresponding operating margin improved to 9.8% (6.5).
Changes in exchange rates had a negative year-on-year effect of SEK -13m on operating income.
PARENT COMPANY
Net sales in
the first quarter 2014 for the Parent Company,
Husqvarna AB, amounted to SEK 3,398m (3,217), of which SEK 2,835 (2,660) referred to sales to Group companies
and SEK 563m (557) to external
customers.
Income after financial items amounted to SEK 113m (-60). Income for the period was SEK 15m (-111). Investments in tangible and intangible assets amounted to SEK 129m (92). Cash and cash equivalents amounted to SEK 93m (90) at the end of the quarter. Undistributed earnings in the Parent Company
amounted to SEK 17,479m (17,308).
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 January 2014, 3,110,239 A-shares were converted to B-shares at the request of shareholders. In April 2014, another 66,454 A-shares were converted to B-shares
at the request
of shareholders. The total number of votes thereafter
amounts to 168,709,835.3.
The total number of registered shares
in the company at March 31, 2014 amounted to 576,343,778 shares of which 123,483,629 were A-shares and 452,860,149 were B-shares.
ONE OF THE WORLD'S 100 MOST SUSTAINABLE COMPANIES
Husqvarna Group has been recognized as one of the 100 most sustainable companies by the 2014 Global 100 list. Since 2005, Canadian Corporate Knights Inc. have been compiling The Global 100, which is an extensive data-driven corporate sustainability assessment, where inclusion is limited to a select group of
the top 100 large-cap
companies in the world. It
is based on 12 key indicators, including energy, carbon, water and waste productivity, innovation capacity, safety performance and leadership diversity.
ANNUAL GENERAL MEETING 2014
The Annual
General Meeting of Husqvarna AB (publ) was held on April 10, 2014, in Jönköping, Sweden. A dividend of SEK
1.50
(1.50) per share was resolved.
Lars Westerberg, Magdalena Gerger, Tom Johnstone, Ulla Litzén, Katarina Martinson and Daniel Nodhäll were re-elected as Board members. David Lumley, Lars Pettersson and Kai Wärn were elected as new
members while Ulf Lundahl and Anders Moberg declined
re-election. Lars Westerberg was elected Chairman of the Board.
The AGM approved the Nomination
Committee's proposal
to elect Ernst & Young AB as auditor for the period from the
AGM
2014 up until the end of the
AGM
2018.
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