Stockholm
July 16, 2014
Kai Wärn, President and CEO:
“Husqvarna Group has delivered a strong first half of the
year. Operating income for the second quarter increased by 35% to SEK 1,384m
(1,022) and the margin rose to 12.5% (10.0). As in the first quarter, the
positive development was driven by a combination of strong demand and impact
from the Accelerated Improvement Program.
From a market demand perspective, Europe benefitted from
positive weather conditions in the second quarter, while North America was
challenged by a late spring and high trade inventory situation entering the
quarter. Still, operating profit for Americas increased 41% to SEK 220m and the
operating margin rose to 5.0% (3.7), mainly driven by cost reductions,
productivity and mix improvements.
For Europe and Asia/Pacific the operating
income rose 38% to SEK 1,101m and the operating margin recovered to 19.1%
(15.5), primarily as a result of higher sales volume and a good development
within the core brands Husqvarna and Gardena and in prioritized product areas
such as robotic lawn mowers and watering equipment. Construction had yet
another strong quarter with operating income increasing 21%, driven by
continued profitable growth across most markets.
A large share of the result improvement is attributable to
activities in our Accelerated Improvement Program. The positive signs in the
first quarter have all trended into the second quarter; the reduction of direct
material costs is sustained and we are driving favorable mix by prioritizing
our premium brands and product leadership areas, as well as growth in the
dealer channel, especially in the U.S.
In June we announced a new organization which gradually will
be implemented and fully effective by January 1, 2015. The new organization
will follow the brand dimension for three forest and garden divisions with
global profit and loss responsibility: Husqvarna, Gardena and Consumer Brands.
The Construction division will continue in its current form. Group functions
will also be established in order to secure Group wide synergies and scale
benefits, such as in sourcing, logistics and technology. In addition to
providing better accountability and increased speed in decision making, the new
organization will facilitate increased focus on key differences essential for
market leadership in the different customer segments targeted by each division.
Keeping the momentum in the Accelerated Improvement Program
remains key. From a demand perspective the third quarter may be more
challenging in terms of comparison with prior year, as 2013 benefitted from a
favorable garden season.”
Second quarter
·
Net
sales increased to SEK 11,045m (10,227). Adjusted for exchange rate effects,
net sales increased 7%.
·
Operating
income increased 35% to SEK 1,384m (1,022), including total negative impact
from changes in exchange rates of SEK -3m, compared to the second quarter 2013.
·
Sales
and operating income were higher for all business areas.
·
Earnings
per share increased to SEK 1.70 (1.15).
·
Operating
cash flow increased to SEK 2,282 (1,915).
·
The
net debt/equity ratio improved to 0.60 (0.75).
SECOND
QUARTER
Net sales
Net
sales for the second quarter 2014 increased by 8% to SEK 11,045m (10,227).
Adjusted for exchange rate effects, net sales for the Group increased 7%, by
10% for Europe and Asia/Pacific, by 4% for Americas and by 8% for Construction.
Operating income
Operating
income for the second quarter increased 35% to SEK 1,384m (1,022),
corresponding to an operating margin of 12.5% (10.0). Operating income and
margin rose for all business areas.
Operating
income was positively impacted primarily by the higher sales volume, reduction
of direct material costs and improved productivity. Costs for selling and
administration as a percentage of sales declined, although logistics and marketing
costs increased as a result of the higher sales activity.
Changes
in exchange rates had a total negative impact on operating income of SEK -3m
compared to the second quarter 2013.
Financial items net
Financial
items net amounted to SEK -110m (-106), of which net interest amounted to SEK
-96m (-105). The average interest rate on borrowings at June 30, 2014, was 3.5%
(3.9).
Income after financial items
Income
after financial items increased to SEK 1,274m (916) corresponding to a margin
of 11.5% (9.0).
Taxes
Tax
amounted to SEK -299m (-255), corresponding to a tax rate of 23% (28) of income
after financial items.
Earnings per share
Income
for the period increased 48% to SEK 975m (661), corresponding to SEK 1.70
(1.15) per share.
JANUARY
– JUNE
Net sales
Net
sales for January – June increased by 8% to SEK 20,730m (19,251). Adjusted for
exchange rate effects, net sales for the Group increased by 7%, for Europe and
Asia/Pacific by 8%, for Americas by 6%, while sales for Construction increased
by 9%.
Operating income
Operating
income for January – June increased 34% to SEK 2,287m (1,710) and the
corresponding operating margin rose to 11.0% (8.9). Operating income and margin
rose for all business areas.
Operating
income for the first half year was positively impacted primarily by the higher
sales volume, reduction of direct material costs, improved productivity and
favorable mix. Logistics and marketing costs rose as a result of the higher
sales activity.
Changes
in exchange rates had a total negative impact on operating income of SEK -48m
compared to January - June 2013.
Financial items net
Financial
items net amounted to SEK -206m (-192), of which net interest amounted to SEK
-178m (-195).
Income
after financial items
Income
after financial items increased to SEK 2,081m (1,518) corresponding to a margin
of 10.0% (7.9).
Taxes
Tax
amounted to SEK -490m (-390), corresponding to a tax rate of 24% (26) of income
after financial items.
Earnings per share
Income
for the period increased 41% to SEK 1,591m (1,128), corresponding to SEK 2.77
(1.96) per share.
OPERATING
CASH FLOW
Operating
cash flow for January - June increased to SEK 2,282m (1,915). Cash flow from
operations, excluding changes in operating assets and liabilities, increased
due to the higher result. Cash flow from changes in operating assets and
liabilities decreased, mainly as a result of inventory changes. The increase in
capital expenditure was mainly related to the new manufacturing facility for
chainsaw chains in Huskvarna.
FINANCIAL
POSITION
Group
equity as of June 30, 2014, excluding non-controlling interests, amounted to
SEK 12,556m (11,591), corresponding to SEK 21.9 (20.2) per share.
Net
debt decreased to SEK 7,603m (8,733) as of June 30, 2014, of which liquid funds
amounted to
SEK
2,330m (1,940) and interest-bearing debt amounted to SEK 8,525m (9,209),
excluding pensions. The major currencies used for debt financing are SEK and
USD. Net debt decreased by SEK 200m during the last twelve months as a result
of changes in exchange rates.
The
net debt/equity ratio improved to 0.60 (0.75) and the equity/assets ratio rose
to 40% (38).
On
June 30, 2014, long-term loans including financial leases amounted to SEK
5,421m (7,515) and short-term loans including financial leases to SEK 2,792m
(1,487). Long-term loans consist of SEK 3,463m (4,939) in issued bonds, and
bank loans and financial leases of SEK 1,958m (2,576).
The
major part of the bonds and bank loans mature in 2016 - 2018. During the second
quarter 2014 the Group amortized a loan amounting to SEK 500m with original
maturity in March 2015. 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 12% in the second quarter.
Adjusted for exchange rate effects, net sales increased by 10%.
Efforts
to grow sales of premium brands, in the prioritized product areas and sales
channels, continued to develop well. Watering products and robotic lawn mowers
were the products with the best development. Market demand in Europe was
positively impacted by favorable weather conditions in both the first and
second quarters.
Operating
income for the second quarter increased 38% to SEK 1,101m (800) and the
operating margin improved to 19.1% (15.5), mainly as a result of the higher
sales volume, favorable product and channel mix, reduction of direct material
costs and improved productivity.
Changes
in exchange rates had a positive year-on-year impact of SEK 30m on operating
income in the second quarter and SEK 35m in the first half year.
Americas
Net
sales for Americas increased by 3% in the second quarter 2014. Adjusted for
exchange rate effects, net sales increased by 4%.
Market
demand in the first half of the year was hampered by a late spring and
challenging early summer weather conditions in the U.S. Demand also suffered
from high trade inventory levels entering the second quarter, following the
strong sell-in to the trade in the first quarter.
Sales
increased in the U.S. and Latin America, with a slightly better development for
handheld products than for the wheeled products in the second quarter. Dealer
channel sales continued to develop strongly, accounting for the majority of the
total sales increase in the quarter as well as for the first six months.
Operating
income for the second quarter increased to SEK 220m (156) and the corresponding
margin rose to 5.0% (3.7), mainly due to lower direct material costs, improved
productivity and favorable mix, which partly was offset by higher logistics
costs.
Changes
in exchange rates had a negative year-on-year effect of SEK -26m on operating
income in the second quarter and SEK -62m in the first half year.
Construction
Net
sales for Construction increased by 8% in the second quarter 2014. Adjusted for
exchange rate effects, the increase in sales was also 8%.
Market
demand for construction products in most main markets continued to develop
positively also in the second quarter. Sales increased in all markets, with the
best development in region rest of the world, primarily driven by continued
strong growth in Brazil, and in Europe.
Operating
income increased to SEK 121m (100), mainly as a result of the higher sales
volume. The corresponding operating margin improved to 13.7% (12.3).
Changes
in exchange rates had a negative year-on-year effect of SEK -8m on operating
income in the second quarter and SEK -21m in the first half year.
NEW
ORGANIZATION AS OF JANUARY 1, 2015
Husqvarna
Group will establish a new organization for its forest and garden operations
which follows the brand dimension with a global profit and loss responsibility.
The Construction division will continue in its current form. The new
organization will be implemented gradually and fully effective as of January 1,
2015. Implementation costs and redundancies will be limited.
The
forest and garden operations will be organized in three global brand divisions
representing three different business models;
·
Husqvarna
(including Zenoah), which are dealer channel centric brands that enjoy strong
recognition across many different forest and garden product segments, primarily
for professionals and demanding consumers. Net sales for the division in 2013
represented approximately 52% of Group net sales.
·
Gardena, which is
a retail centric brand with strong “must have” recognition in the consumer
watering segment. Net sales for the division in 2013 represented approximately
13% of Group net sales.
·
Consumer Brands.
This division includes all other Group brands, such as PoulanPro, McCulloch and
Flymo. Net sales for the division in 2013 represented approximately 25% of
Group net sales.
The
divisions will have global profit and loss, cash flow and balance sheet responsibility.
Most operational activities will primarily be organized within the brand
divisions. To secure synergies and strategic alignment, a Group Operations
division and global staff functions such as Business Development and Technology
Office will be established.
The
Construction division, which represents around 10% of Group net sales, will not
be impacted by the organizational changes in the forest and garden operations.
In
the Group’s external financial reporting, the segment reporting will comprise
four divisions; the three forest and garden divisions Husqvarna, Gardena and
Consumer Brands, and the Construction division, as of January 1, 2015. The new
organization results in new cash generating units, which potentially creates a
need for impairment of intangible assets. Any such consequences will be
communicated when known.
PARENT
COMPANY
Net
sales January - June 2014 for the Parent Company, Husqvarna AB, amounted to SEK
7.107m (6,430), of which SEK 5,578 (4,981) referred to sales to Group companies
and SEK 1,529m (1,449) to external customers.
Income
after financial items amounted to SEK 829m (1,012). Income for the period was
SEK 505m (907). Investments in tangible and intangible assets amounted to SEK
263m (227). Cash and cash equivalents amounted to SEK 795m (432) at the end of
the quarter. Undistributed earnings in the Parent Company amounted to SEK
17,085m (17,466).
No comments:
Post a Comment