Husqvarna Interim Report January - September 2014

Stockholm October 22, 2014

Kai Wärn, President and CEO:

“Husqvarna Group’s positive trend from the first half year continued into the seasonally smaller third quarter. Total Group sales increased by 3%, adjusted for changes in exchange rates.

Operating income for the third quarter increased by 46% to SEK 301m (206), and the margin rose to 4.4%, driven by improvements across all business areas. On Group level, the favorable development was supported by reduced material costs, higher sales volume and improved productivity. Cash flow was solid, and the net debt/equity ratio improved to 0.50 (0.57).

From a business area perspective, currency adjusted sales for Americas and Construction increased by 6% respectively, while Europe & Asia/Pacific was flat. In terms of earnings, Europe & Asia/Pacific reported higher results and improved margin, Americas’ turn-around showed steady progress reducing the operating loss in the quarter by more than half, and Construction sustained its profitable growth.

As previously communicated, the Group’s current focus is to increase the operating margin from approximately 5% in 2013 to 10% in 2016. On a year-to-date basis, the operating margin has improved by close to 2 percentage points. The positive development has largely been enabled by a successful execution of the Accelerated Improvement Program, which primarily aims to cut product cost by reducing material costs, and improve product mix by focusing on core brands and on products where the Group has leadership positions.

We are now taking the final steps of preparing for next season. Keeping the momentum in the execution of the Accelerated Improvement Program is the priority for 2015. In parallel, the new brand based organization will be fully operational as of January 1, 2015, and forms the base for taking steps towards expansion beyond 2015.

From a short term demand perspective, we expect the fourth quarter to show a stable development compared to the corresponding quarter prior year.”

Third quarter

Net sales increased to SEK 6,785m (6,349). Adjusted for exchange rate effects, net sales                  increased 3%.
Operating income increased 46% to SEK 301m (206). Sales, operating income and margin                improved for all business areas.
Earnings per share increased to SEK 0.31 (0.16).
Operating cash flow amounted to SEK 1,286 (2,001).
The net debt/equity ratio improved to 0.50 (0.57).

THIRD QUARTER

Net sales

Net sales for the third quarter 2014 increased by 7% to SEK 6,785m (6,349). Adjusted for exchange rate effects, net sales for the Group increased by 3%, 6% for Americas and Construction respectively, while Europe & Asia/Pacific was unchanged.

Operating income

Operating income for the third quarter increased by 46% to SEK 301m (206), corresponding to an operating margin of 4.4% (3.2). Operating income and margin improved for all business areas.

Operating income was positively impacted primarily by reduction of direct material costs, higher sales volume and improved productivity.

Changes in exchange rates had a total negative impact on operating income of SEK -12m compared to the third quarter 2013.

Financial items net

Financial items net amounted to SEK -70m (-111), of which net interest amounted to SEK -89m (-95). The average interest rate on borrowings as of September 30, 2014, was 3.5% (4.4).

Income after financial items

Income after financial items increased to SEK 231m (95) corresponding to a margin of 3.4% (1.5).

Taxes

Tax for the third quarter amounted to SEK -55m (-3).

Earnings per share

Income for the period increased to SEK 176m (92), corresponding to SEK 0.31 (0.16) per share.

JANUARY – SEPTEMBER

Net sales

Net sales for January - September increased by 7% to SEK 27,515m (25,600). Adjusted for exchange rate effects, net sales for the Group increased by 6%, for Europe & Asia/Pacific by 5%, for Americas by 6%, and sales for Construction increased by 8%.

Operating income

Operating income for January – September increased by 35% to SEK 2,588m (1,916) and the corresponding operating margin rose to 9.4% (7.5). Operating income and margin rose for all business areas.

Operating income for the first nine months was positively impacted by the higher sales volume, reduction of direct material costs, improved productivity and favorable mix.

Changes in exchange rates had a total negative impact on operating income of SEK -60m compared to January - September 2013.

Financial items net

Financial items net amounted to SEK -276m (-303), of which net interest amounted to SEK -267m (-290).

Income after financial items

Income after financial items increased to SEK 2,312m (1,613) corresponding to a margin of 8.4% (6.3).

Taxes

Tax amounted to SEK -545m (-393), corresponding to a tax rate of 24% (24) of income after financial items.

PERFORMANCE BY BUSINESS AREA

Europe & Asia/Pacific

Net sales for Europe & Asia/Pacific increased by 3% in the third quarter. Adjusted for exchange rate effects, net sales were unchanged.

Handheld products such as chainsaws, and electrical products including robotic lawn mowers, developed positively in the quarter, while sales of watering products declined, largely as a result of a late season for watering products prior year.

Sales of snow throwers were also down, mainly related to a decline in Russia.

Operating income for the third quarter increased 8% to SEK 309m (285) and the operating margin improved to 9.4% (8.9), mainly driven by reduction of direct material costs.

Changes in exchange rates had a negative year-on-year impact of SEK -14m on operating income in the third quarter and a positive impact of SEK 20m for January - September.

Americas

Net sales for Americas increased by 11% in the third quarter 2014. Adjusted for exchange rate effects, net sales increased by 6%.

Market demand developed favorably in the U.S. Sales increased in the U.S. and Latin America, with a continued positive development in the dealer channel.

The operating loss for the quarter decreased to SEK -55m (-122) and the corresponding margin recovered to -2.1% (-5.2), mainly due to lower direct material costs and the higher sales volume.

Changes in exchange rates had a negative year-on-year effect of SEK -2m on operating income in the third quarter and SEK -63m for January - September.

Construction

Net sales for Construction increased by 11% in the third quarter 2014. Adjusted for exchange rate effects, the increase in sales was 6%.

Sales growth in North America continued to be strong as a result of market share gains and favorable market demand. Sales in Europe also developed positively, while sales in the rest of the world were in line with the corresponding quarter prior year.

Operating income increased to SEK 109m (86), mainly as a result of the higher sales volume and a favorable product mix.

The corresponding operating margin improved to 12.6% (10.9).

Changes in exchange rates had a positive year-on-year effect of SEK 4m

Acquisition Of Assets In Neta Industries (Australia)

Husqvarna Group has acquired the assets of Neta Industries, Pty, Ltd. (“Neta”) for approximately SEK 25m.

Neta has approximately 50 employees and is one of Australia’s leading providers of mobile watering and specialty irrigation products, and will serve as the Group’s platform for the micro-drip irrigation market in Australia.

Financial impact in 2014 will be limited. Acquired sales amount to approximately SEK 100m on an annual basis. The purchase price allocation is preliminary.

Management Change

Ulf Liljedahl, CFO of Husqvarna Group since 2011, has decided to leave the Group as of end of February, 2015. Ulf Liljedahl has been appointed President and CEO of Volito Group. The search for a successor has been initiated.