Orangeburg Husqvarna Production Problems Cost $55 Million

October 21 -- Outdoor power equipment OEM Husqvarna AB reported that third quarter 2011 net sales, adjusted for exchange rate effects, were down 2%. Net sales were SEK 6,410 million (approx. US$965 million), down from SEK 6,907 million, and operating income for the quarter was SEK 113 million, down from SEK 411 million in 3Q 2010. Income for the 3Q period was SEK 55 million, down from SEK 402 in 3Q 2010.

Third quarter operating income was negatively affected by SEK -83 million. SEK 38 million (approx. $5.7 million) was directly related to production disturbances, SEK 21 million related to the termination of the former CEO’s contract, and SEK 24 million came from items affecting comparability. Changes in exchange rates had a positive effect of SEK 8 million.

Net sales for the group in the first nine months of 2011, adjusted for exchange rate effects, increased by 1%. Net sales for the Group amounted to SEK 25,363 million in the first nine months, compared to SEK 27,446 million in the first nine months of 2010.

Operating income was SEK 1,787 million in the first nine months of 2011, compared to SEK 2,508 million in the first nine months of 2010. Income was SEK 1,220 million in the first nine months of 2011, compared to SEK 1,873 million in the first nine months of 2010.

In the first nine months of 2011 operating income was negatively affected by SEK -453 million, most of it the result of production problems Orangeburg, SC. Production problems accounted for SEK 368 million (approx. $55.4 million), SEK 21 million related to the termination of the former CEO’s contract and SEK 64 million referred to items affecting comparability. In addition, changes in exchange rates had a negative effect of SEK -335 million.

Early in the year Husqvarna said the Orangeburg riding mower manufacturing campus was having significant problems - described as an "increase in material complexity" – as it assimilated production from a recently closed Beatrice, NE plant and accommodated an ambitious number of new product launches.

Husqvarna is one of the world's biggest makers of outdoor power equipment and the Orangeburg plant primarily produces riding lawn mowers for the North American market; some exports go to Europe and other global markets.

”Husqvarna’s consumer business has been affected by the slowdown in the global consumer demand, the uncertain economic environment, and the unfavorable weather," said Acting CEO and President Hans Linnarson. "Operating income for the third quarter declined, mainly as a result of lower sales, unfavorable mix, and higher costs. We have maintained our market positions for forest and garden products both in Europe and North America, despite the supply chain challenges in North America. In some categories, like ride-on and robotic mowers in Europe, we have significantly increased our market shares."

Linnarson said that, in the first nine months of the year, sales in Europe and Asia/Pacific and Construction segments increased and sales in the Americas decreased, adjusted for exchange rate effects.

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Husqvarna Company Update

PRESS RELEASE

Stockholm, September 26, 2011

COMPANY UPDATE

Continued economic uncertainty

Husqvarna is a consumer oriented company in the discretionary capital goods industry, and has been negatively affected by the slowdown in the global consumer demand and the uncertain economic environment in combination with unfavorable weather.

Due to the demand situation, a hiring freeze has been implemented for the entire Group until further notice. The fourth quarter which normally represents a small volume for the company is expected to continue to suffer from poor economic conditions.

Confirming the outlook in the Q2 report

Confirming the outlook in the second quarter report 2011, the total Group net sales have declined. Sales for the third quarter are estimated to around SEK 6,200m (6,907), which is approximately 5% lower compared with the corresponding quarter 2010 adjusted for exchange rate effects.

Operating income for the third quarter, which due to normal seasonality represents only a small share of full-year earnings, is estimated in the range of SEK 100m (411).

Costs related to the production disturbances in Orangeburg amounts to approximately SEK 45m and costs related to the termination of the former CEO’s contract amounts to SEK 21m and are included in the estimated third quarter results.

As commented in the second quarter report, market demand weakened towards the end of the quarter. The weakness has continued. Operating income for the third quarter has also been impacted mainly by an unfavorable mix and higher costs.

Prepared for the 2012 season in North America

Extensive efforts to eliminate the supply chain disturbances in the Orangeburg production facility have progressed successfully. In order to ensure successful delivery of committed volumes, the ramp up of pre-season production has started earlier than previous year.

The Group’s product range listings with major retailers in the North American market for 2012, although not yet finalized, are projected to be unchanged versus 2011, however with a somewhat new balance among the different retailers.

Husqvarna Results Still Hurting From Orangeburg Production Problems

July 20 --  Outdoor power equipment maker Husqvarna (Stockholm) reported net sales for the second quarter of 2011 were SEK 10,179 million (approx. US$1576 million), compared to SEK 11,457 million in the second quarter of 2010 – although adjusted for currency exchange rates, sales decreased by SEK 64 million or about 1%.

Sales prices increased slightly. Europe and Asia/Pacific accounted for an adjusted sales increase of approximately 4% or SEK 246 million. The Americas’ adjusted sales decreased by approximately 9% or by SEK 375 million. Construction’s adjusted sales increased by approximately 10% or SEK 65 million.

The group reported a negative operating income of approximately SEK 170 million, in part due to changes in exchange rates.

Acting CEO and President Hans Linnarson said that North American industry demand decreased, which wasn't helped by continuing "supply chain challenges" at its factory in Orangeburg, SC, both of which hurt sales.

Linnarson said the European market started the second quarter strongly but then slowed near the end of the quarter.

Orangeburg problems also hurt North American results in the first quarter of 2011, when the company said the plant was dealing with an "increase in material complexity" as it assimilated the production from the recently closed Beatrice, NE plant and accommodate several number of new product launches.

"Production disturbances continued to hamper the output from Orangeburg as well as resulting in higher costs," Linnarson said. Measures have been taken to reduce the costs resulting from these problems. In 1Q the costs were about SEK 150 million, in 2Q the cost was SEK 180 million.

"Our highest priority going forward is to secure deliveries to our customers for the 2012 season in a timely manner. Further measures will be taken within the Orangeburg factory which is expected to result in SEK 100 – 150 million higher costs during the remainder of 2011," Linnarson said. "We are also planning to increase our pre-season production. As production capacity and flexibility to guarantee the highest delivery performance will be prioritized, we will also review the pace of our ongoing restructuring projects."

Linnarson said that savings from consolidating manufacturing in Orangeburg will be delayed.

"The Group's operating income declined in the second quarter. Higher selling prices and a favorable mix were not able to offset negative currency effects, costs related to the production disturbances, higher input costs and marketing expenses."

Sales for the first half of 2011 were SEK 18,953 million, down from SEK 20,539 million in the first half of 2010.

Husqvarna Looks to Improve Production Time in Orangeburg Plant

ORANGEBURG – May 25 -- Orangeburg's Husqvarna plant, a leader in the manufacture of mowing and trimming equipment, is seeking to trim production time at its plant to meet customer demand.

The plant has hired North Carolina-based Rucker & Associates consultants to help implement efficiency methodologies such as Lean Manufacturing and Six Sigma strategies to boost production, according to an article published in the Reliable Plant Magazine and Lean Manufacturing Journal last month.

R&A specializes in finding industrial and operational efficiencies.

Lean Manufacturing strategies aim to preserve the value of a product with less work and Six Sigma is a data-driven process aimed at eliminating defects in a process.

Attempts to reach R&A and Husqvarna officials for comment related to this matter were unsuccessful.

The Swedish company employs an average of 1,500 in Orangeburg making riding lawn tractors, tillers and snow throwers.

In the article, David Rucker, company founder and president, said R&A served as a consultant for Husqvarna at its Beatrice, Neb., plant in an effort to increase productivity.

But Rucker said the Orangeburg plant provides a greater challenge simply because of its size, at 1 million square feet.

"We have been thrilled to improve Husqvarna processes in Beatrice," Rucker told the journal. "We believe we can achieve similar results at the cornerstone of their U.S. presence in Orangeburg."

Last month, Husqvarna said the production disturbances due to the transition have resulted in an "increase in material complexity" and a higher number of new products being launched.

This has caused fewer shipments and increasing costs, the company said.

Rucker said the Beatrice production line featured multiple equipment models, each requiring unique assembly methods and different amounts of dedicated assembly time from the operators.

The strategies implemented created a more visual and flexible assembly line, delivering the next two hours' worth of raw materials.

"By changing the way operators worked on the line, we were able to make it easier for Husqvarna to accomplish more, increasing the overall efficiency," Rucker said. "These types of changes make a huge difference in all aspects of the business, from reduced labor costs to on-time delivery."

Last year, Husqvarna announced it would shut down its Beatrice, Neb., plant and move its production lines to Orangeburg.

And then in November, it said it would invest $105 million at its Old Elloree Road plant over the next decade and a half. In the first phase, it plans to invest $30 million in Orangeburg County by Dec. 31, 2013. The second phase will involve a $75 million investment to be completed by Dec. 31, 2024.

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Problems at Orangeburg Plant Hurt Husqvarna's 1st Quarter Results

Apr 11, 2011 -- Husqvarna's Orangeburg, SC riding mower manufacturing campus has had significant problems in recent months, and those problems had a direct impact on the company's bottom line in the first quarter of 2011.

Orangeburg is dealing with an "increase in material complexity" at the same time it is trying to assimilate the production from the recently closed Beatrice, NE plant and accommodate an ambitious number of new product launches.

Husqvarna said it has made fixes and production did increase gradually during the first quarter - but so did the costs associated with this fixes. Production output should increase into the second quarter but higher manufacturing costs will be higher throughout the season.

Husqvarna is one of the world's biggest makers of outdoor power equipment and the Orangeburg plant primarily produces riding lawn mowers for the North American market; some exports go to Europe and other global markets.

Husqvarna said first quarter 2011 sales and operating income for the Americas were lower than had been expected as a result of the Orangeburg problems.

For the Husqvarna Group as a whole, adjusted sales were up 6% and adjusted operating income was up 7% when compared to 1Q 2010. Net sales for the group in 1Q 2011 were SEK 8,774 million (approx. US$1400 million) compared to SEK 9,082 million in 1Q 2010. Adjusted for exchange rates sales increased by 6% or by approximately SEK 490 million. Operating income for the group amounts to SEK 662 million, compared to 778 million in 1Q 2010. Adjusted for exchange rates income increased by 7% or approximately SEK50 million.

Net sales for Europe and Asia/Pacific amounted to SEK 4,541 million in 1Q 2011, compared to SEK 4,459 million in 1Q 2010. Adjusted sales increased 10% or by approximately SEK 400 million. Operating income for Europe and Asia/Pacific was SEK 815 million, compared to last year's SEK 732 million. Adjusted operating income increased 32% or by approximately SEK 200 million.

Net sales for the Americas were SEK 3,588 million in 1Q 2011, down from SEK 4,028 million in 1Q 2010. Adjusted for exchange rate effects sales were flat. Operating income for Americas amounts to SEK -94 million in 1Q 2011, compared to SEK 81 million in 1Q 2010. Adjusted for exchange rates, income declined by approximately SEK -175 million.

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Husqvarna Reports Mixed Yearly Results

February 28 -- Husqvarna, a leading producer of outdoor lawn equipment with a plant in Orangeburg, reported 2010 net sales and operating income for the Americas decreased while sales and income increased for Europe and Asia.

 

Net sales for the Americas fell about 13 percent with effects from adjusted exchange rates resulting in a 7 percent decrease, the company reported in its year-end report. Sales prices were relatively stable during the year, the report stated.

"Demand recovered during the year and we strengthened our market positions for outdoor products in Europe and for construction," Magnus Yngen, Husqvarna president and CEO, said. "After several years of decline, demand recovered also in the U.S. For the group, full-year operating income and margin were significantly above last year's levels. Innovative new products and a strong focus on our dealer network were important contributors to the positive development."

Operating income in the Americas was negatively impacted by lower volumes and costs for distribution and information technology increased as well as costs for merchandising and marketing in an effort to grow sales to dealers.

Operating income was also impacted by the closure of Husqvarna's Beatrice, Neb., plant. The Beatrice facility had about 390 employees. The company consolidated its operations to Orangeburg.

In November, Husqvarna announced it would invest $105 million at its Old Elloree Road plant (Orangeburg) over the next decade and a half.

The first phase will involve a $30 million investment to be completed by Dec. 31, 2013, and the second phase will involve a $75 million investment to be completed by Dec. 31, 2024.

The total market demand in North America increased after four years of decline. Industry shipments increased for most product categories but chainsaws, the report said.

Reduced listing with a major retailer for 2010 had a negative effect on sales throughout the year. Efforts to grow sales in the dealer channel and with other retail accounts were successful but could not compensate for the reduced listings, the report said.

Americas sales in the fourth quarter decreased 5 percent.

In the meantime, sales in Europe and Asia increased by about 6 percent for the year while sales prices were stable during the year.

For 2010, Europe and Asia saw operating income and operating margin increase substantially. The increase was due to higher volumes.

Company-wide, there was a strengthened market share for park and garden products in Europe & Asia/Pacific and for construction products in North America.

There was a strong growth for dealer sales and overall operating income increased by 57 percent.

In the fourth quarter, net sales and operating income improved and operating margin improved to a negative 1.3 percent, up from a negative 10.9 percent margin. The growth for Europe & Asia/Pacific and construction offset lower sales for Americas and all operating income and operating margin improved for all business areas.

Yngen said due to the seasonality of the business, fourth-quarter results account for a relatively small share of annual sales and operating income and is mainly devoted to start-up production for the next season.

He said although market conditions are improving, retailers were still cautious to build inventory in the fourth quarter.

"We expect higher shipments to the trade in the first quarter of 2011, compared with the first quarter of 2010, due to improved listings and a continued focus on dealer sales," Yngen said. "We also expect a continued recovery of end-user demand for forest, park and garden products as well as for construction products."