Stockholm July 19,
2013
Kai Wärn, President
and CEO:
“Group
sales improved over the course of the quarter, albeit from a slow start of the
season due to unusually cold weather in both Europe and North America. Sales
for Europe & Asia/Pacific increased 2%, Construction 7% while Americas’
sales decreased -3%, mainly as a result of the Group’s continued sales channel
management to prioritize margin.
Group
operating income for the quarter declined, impacted mainly by negative currency
effects within Europe & Asia/Pacific. The operating income was also
affected by under-absorption due to inventory reductions. The stable earnings
improvement for Americas continued, benefiting from dealer channel growth and
improved cost efficiency. The positive earnings trend for Construction was
supported by higher sales volumes and improved mix. As a result of the
inventory reductions, Group operating cash flow for the second quarter was
strong.
We
have a continued cautious demand outlook for Europe, while the outlook for
North America remains more positive for lawn and garden as well as for
construction products.
During
the second half of the year we will review how we can further accelerate key
improvement
programs
in order to realize our financial goals.”
Second quarter
• Net
sales amounted to SEK 10,227m (10,706). Adjusted for exchange rate effects, net
sales were unchanged.
• Operating
income amounted to SEK 1,022m (1,152). Adjusted for changes in exchange rates,
operating income improved slightly.
• Changes
in exchange rates negatively impacted operating income by SEK -156m year over
year.
• Strong
operating cash flow amounting to SEK 1,915m (2,535).
• Earnings
per share decreased to SEK 1.15 (1.36).
• Kai
Wärn new President and CEO as of July 1, 2013.
SECOND QUARTER
NET SALES
Net
sales for the second quarter decreased by -4% to SEK 10,227m (10,706). Adjusted
for exchange rate effects, net sales for the Group were unchanged, increased by
2% for Europe & Asia/Pacific and by 7% for Construction, while Americas
adjusted net sales decreased by -3%.
OPERATING INCOME
Operating
income for the second quarter amounted to SEK 1,022m (1,152) and the
corresponding operating margin amounted to 10.0% (10.8). Operating income
increased for Americas and Construction, while it decreased for Europe &
Asia/Pacific.
In
addition to changes in exchange rates, operating income was negatively impacted
mainly by unfavorable product mix and lower factory utilization levels due to
inventory reductions.
Changes
in exchange rates had a total negative impact on operating income of SEK -156m
compared to the second quarter 2012.
JANUARY – JUNE
NET SALES
Net
sales for January – June decreased by -6% to SEK 19,251m (20,517). Adjusted for
exchange rate effects, net sales for the Group declined by -2%, for Europe
& Asia/Pacific by -2%, for Americas by -2%, while sales for Construction
increased by 4%.
OPERATING INCOME
Operating
income for January – June amounted to SEK 1,710m (2,082) and the corresponding
operating margin amounted to 8.9% (10.1). Operating income increased for
Americas and Construction, while it decreased for Europe & Asia/Pacific.
Operating
income, excluding changes in exchange rates, was negatively impacted mainly by
lower factory utilization levels, the lower sales volume and product mix.
Changes
in exchange rates had a total negative impact on operating income of SEK -291m
compared to January - June 2012.
FINANCIAL ITEMS NET
Net
financial items for the second quarter amounted to SEK -106m (-121). The lower
financial cost is explained mainly by lower average interest rates. The average
interest rate on borrowings at June 30, 2013, was 3.9% (3.9). For January –
June, net financial items amounted to SEK -192m (-255).
INCOME AFTER
FINANCIAL ITEMS
Income
after financial items for the second quarter decreased to SEK 916m (1,031)
corresponding to a margin of 9.0% (9.6). Income after financial items for
January - June decreased to SEK 1,518m (1,827) corresponding to a margin of
7.9% (8.9).
TAXES
Taxes
for January - June amounted to SEK -390m (-408), corresponding to a tax rate of
26% (22) of income after financial items.
EARNINGS PER SHARE
Income
for the second quarter amounted to SEK 661m (786), corresponding to SEK 1.15
(1.36) per share. Income for January – June amounted to SEK 1,128m (1,419),
corresponding to SEK 1.96 (2.46) per share.
OPERATING CASH FLOW
Operating
cash flow for the second quarter amounted to SEK 1,915 (2,535). Inventory
reductions contributed positively to cash flow. The lower operating cash flow
was mainly due to stronger sales during the latter part of the quarter, resulting
in lower cash flow from change in trade receivables during the second quarter
compared with the previous year.
Operating
cash flow for January – June amounted to SEK 129m (92).
FINANCIAL POSITION
Group
equity as of June 30, 2013, excluding non-controlling interests, amounted to
SEK 11,591m (12,149), corresponding to SEK 20.2 (21.2) per share.
Net
debt amounted to SEK 8,733m (9,319) as of June 30, 2013, of which liquid funds
amounted to
SEK
1,940m (1,658) and interest bearing debt amounted to SEK 10,673m (10,977),
including pensions. The major currencies used for debt financing are SEK and
USD. Net debt decreased by SEK -320m as a result of changes in exchange rates.
The
net debt/equity ratio amounted to 0.75 (0.76) and the equity/assets ratio to 38%
(39).
In
addition to the amendment of IAS 19 “Employee benefits,” 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
June 30, 2013, long-term loans including financial leases amounted to SEK
7,515m (5,211) and short-term loans including financial leases to SEK 1,487m
(3,850). Long-term loans consist of SEK 4,939m (2,526) in issued bonds, and
bank loans and financial leases of SEK 2,576m (2,685). 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
Net
sales for Europe & Asia/Pacific decreased by -3% in the second quarter
2013. Adjusted for exchange rate effects, net sales increased by 2%.
Demand
for lawn and garden products was negatively impacted by a late start of spring
due to unusually cold weather, which lasted well into the quarter in many
European markets. Consumer demand remained weaker than in the previous year and
retailers continued to manage inventory conservatively as the macroeconomic
uncertainty remained.
The
Group’s sales were off to a slow start, but picked up in May and had a strong
finish in June. In terms of products categories, electric products such as
robotic mowers had the best development, while handheld products and riders
declined. Watering products were in line with prior year.
Operating
income amounted to SEK 806m (1,018) and the operating margin amounted to 15.5%
(19.0).
In
addition to impact from changes in exchange rates, the lower operating income
was mainly related to lower utilization levels in factories as a result of
inventory reductions, and less favorable product mix.
Changes
in exchange rates had a negative year-on-year effect of SEK -153m on operating
income.
Americas
Net
sales for Americas decreased by -8% in the second quarter 2013. Adjusted for
exchange rate effects, net sales decreased by -3%.
Although
supported by an improving U.S. economy, demand for lawn and garden equipment in
North America was off to a slow start due to unfavorable weather.
The
Group’s sales recovered in the second half of the quarter, but not enough to exceed
prior year’s level. Sales were lower in the U.S. and in Latin America, while
sales in Canada were higher. Sales to the dealer channel rose.
Operating
income increased to SEK 150m (87) and the corresponding margin improved to 3.6%
(1.9). The effects of channel management and manufacturing efficiencies
continued to contribute to the positive development.
Changes
in exchange rates had a positive year-on-year effect of SEK 11m on operating
income.
Construction
Net
sales for Construction increased by 1% in the second quarter 2013. Adjusted for
exchange rate effects, the increase in sales was 7%.
The
positive development in North America continued. Market demand was on a higher
level than in the previous year, and the Group achieved additional growth as a
result of market share gains. Despite continued weak demand in Europe, the
Group’s sales were slightly higher. In the rest of the world, sales also
increased, with a particularly good development in Brazil.
Operating
income increased to SEK 100m (85) and the operating margin improved to 12.3%
(10.5). Operating income was positively impacted mainly by the higher sales
volume and mix.
Changes
in exchange rates had a negative year-on-year effect of SEK -13m on operating
income.
PARENT COMPANY
Net
sales for January – June 2013 for the Parent Company, Husqvarna AB, amounted to
SEK 6,430m (6,886), of which SEK 4,981m (5,365) referred to sales to Group
companies and SEK 1,449m (1,521) to external customers.
Income
after financial items amounted to SEK 1,012m (743). Income for the period was
SEK 907m (461). Investments in tangible and intangible assets amounted to SEK
227m (164). Cash and cash equivalents amounted to SEK 432m (25) at the end of
the quarter. Undistributed earnings in the Parent Company amounted to SEK
17,466m (16,991).
KAI WÄRN NEW
PRESIDENT AND CEO AS OF JULY 1
Kai
Wärn took office as new President and CEO of Husqvarna as of July 1, 2013. He
replaced Hans Linnarson, who will continue to work for the Group until he
retires early 2014.
Kai
Wärn was born in 1959 and is a graduate from the Royal Institute of Technology
in Stockholm, Sweden. Previous positions include President and CEO at Seco
Tools AB, a leading global metal cutting tools company, at that time listed at
NASDAQ OMX Nordic stock exchange and President of the Business Unit ABB
Robotics Products within ABB Group. Most recently Kai has held the position as
Operations Partner at the private equity firm IK Investment Partners.
ALAN SHAW APPOINTED
NEW HEAD OF AMERICAS
Effective
August 15, 2013, Alan Shaw has been appointed Executive Vice President, Head of
business area Americas and will become member of Husqvarna Group Management.
Alan Shaw has more than 25 years of global experience from consumer durables
including barbeque grills and accessories, lawn and garden equipment and major
home appliances. Most recently, Alan was President and CEO of Char-Broil LLC.
