Stockholm February 13, 2013
Hans Linnarson,
President and CEO:
“Market
conditions in Europe weakened significantly in the fourth quarter. Due to the
macroeconomic uncertainty, trade partners were cautious about building
inventory for the coming season. Sales of seasonal products such as snow
throwers and chainsaws declined mainly as a result of the weak consumer demand.
Sales were also negatively impacted by delays in some recently launched
handheld products. Operating income was negatively affected by the lower sales
volume, as well as product and sales channel mix.
For
Americas, sales of forest and garden products were slightly lower in the quarter,
which mainly was a result of soft demand for snow throwers. Although the
operating loss for Americas decreased during the year, the work with measures
to further improve the result continues.
Construction
continued to benefit from a positive development in North America. Operating
income for the business area continued to improve, although sales in the
quarter declined due to falling demand in markets outside of North America.
The
Group enters the new season well prepared, as retail listings with our main
trade partners are on satisfactory levels.
Today
the Group announced a SEK 1bn investment in core technologies. The investment
in manufacturing of chainsaw chain and cylinders will further strengthen our
leading position in chainsaws. By expanding into saw chain, we are also
creating an opportunity to grow in the replacement part market, as chains
represent the biggest aftermarket category.
The
near-term demand outlook for North America is positive, while the European
markets are expected to remain challenging as the macroeconomic uncertainty
remains. The cost structure improvement initiative which was announced in
November is progressing according to plan and will support earnings in 2013.”
Fourth quarter
·
Net
sales amounted to SEK 4,476m (4,994). Adjusted for exchange rate effects, net
sales declined -8%.
·
Operating
income amounted to SEK -618m (-236). Excluding items affecting comparability,
referring to already announced costs for staff reductions, operating income
amounted to SEK -362m (-236).
·
Operating
cash flow amounted to SEK -451m (-144).
·
Earnings
per share amounted to SEK -0.87 (-0.39).
Full-year
·
Net
sales amounted to SEK 30,834m (30,357). Adjusted for exchange rate effects, net
sales were unchanged.
·
Operating
income increased to SEK 1,615m (1,551). Excluding items affecting
comparability, operating income increased to 1,871m (1,615).
·
Operating
cash flow improved to SEK 1,144m (-472).
·
Earnings
per share increased to SEK 1.78 (1.73).
·
The
Board proposes a dividend of SEK 1.50 (1.50) per share for 2012.
FOURTH QUARTER
Net sales
Net sales
for the fourth quarter decreased by -10% to SEK 4,476m (4,994). Adjusted for
exchange rate effects, net sales for the Group declined by -8%, for Europe
& Asia/Pacific by -12%, for Americas by -3% and for Construction by -2%.
Operating income
Operating
income for the fourth quarter amounted to SEK -618m (-236) and the
corresponding operating margin amounted to -13.8% (-4.7). Excluding items
affecting comparability, which refer to already announced costs for staff
reductions, operating income amounted to SEK -362m (-236). Construction’s
operating income, excluding items affecting comparability, increased, and the
operating loss for Americas decreased. Staff reduction measures and the
associated cost is shown on page 6.
Operating
income, excluding items affecting comparability, was negatively affected mainly
by the lower sales volume as well as product and sales channel mix.
Changes
in exchange rates had a total positive effect on operating income of
approximately SEK 11m, compared with the fourth quarter 2011, of which
transaction effects amounted to SEK -10m (-29), translation effects amounted to
SEK 0m (-12) and change in value of currency hedging contracts amounted to SEK
-5m (15).
In the
fourth quarter 2011, operating income was negatively impacted by in total SEK
-85m, referring to costs directly related to production disturbances amounting
to SEK -30m and other non-recurring items with a combined net negative effect
of SEK -55m.
FULL-YEAR
Net sales
Net sales
for 2012 increased by 2% to SEK 30,834m (30,357). Adjusted for exchange rate
effects, sales for the Group were unchanged, Americas increased by 7%,
Construction increased by 4%, while Europe & Asia/Pacific adjusted sales
decreased by -6%.
Operating income
Operating
income for 2012 amounted to SEK 1,615m (1,551). Excluding items affecting
comparability, which refer to costs for staff reductions, operating income
amounted to SEK 1,871m (1,615).
Changes
in exchange rates had a total positive effect on operating income of
approximately SEK 46m, compared with 2011, of which transaction effects
amounted to SEK -205m (8), translation effects amounted to SEK 0m (-11) and
change in value of currency hedging contracts amounted to SEK 129m (-119).
Operating
income, adjusted for changes in exchange rates and items affecting
comparability, was positively affected by higher selling prices, lower material
and production costs, while mainly mix effects had a negative impact.
In 2011,
operating income was negatively impacted by SEK -398m directly related to
production disturbances in North America and other non-recurring items with a
total net negative effect of SEK -76m.
The Group
operating margin amounted to 5.2% (5.1). Excluding items affecting
comparability, Group operating margin amounted to 6.1% (5.3).
Operating
income, adjusted for items affecting comparability and changes in exchange
rates, increased for Construction, declined for Europe & Asia/Pacific,
while the operating loss for Americas was lower than in the previous year.
FINANCIAL ITEMS NET
Net
financial items amounted to SEK -446m (-404) for the full year. The higher
financial cost is explained mainly by higher borrowings and negative impact
from revaluation of the interest rate component in foreign exchange agreements.
The average interest rate on borrowings at the end of the year was 4.2% (4.7).
INCOME AFTER
FINANCIAL ITEMS
Income after
financial items for the fourth quarter decreased to SEK -757m (-363)
corresponding to a margin of -16.9% (-7.3). For the full-year, income after
financial items amounted to SEK 1,169 (1,147) corresponding to a margin of 3.8%
(3.8).
TAXES
Taxes for the full
year amounted to SEK -146m (-150), corresponding to a tax rate of 12% (13) of
income after
financial items.
The lowering of the
company tax rate in Sweden from 26.3% to 22.0% had no material impact on the
Group’s income tax in 2012.
EARNINGS PER SHARE
Income for the year
amounted to SEK 1,023m (997), corresponding to SEK 1.78 (1.73) per share.
OPERATING CASH FLOW
Operating cash flow
for the full year amounted to SEK 1,144m (-472). The improved operating cash
flow was mainly related to a reduction of working capital and lower
investments. Operating Cash-flow for the fourth quarter was impacted by higher
pre-season production.
Due to the
seasonality of the Group’s operations, operating cash flow is normally negative
in the first quarter followed by positive cash flow in the second and third
quarters, while the operating cash-flow in the fourth quarter is dependent on
the level of pre-season production.
FINANCIAL POSITION
Group equity as of
December 31, 2012, excluding non-controlling interests, amounted to SEK 11,564m
(12,332), corresponding to SEK 20.2 (21.5) per share. Group equity was negatively
affected by exchange differences on translating foreign operations to SEK
amounting to SEK -784m.
Net debt at year-end
amounted to SEK 6,793m (6,921) of which liquid funds amounted to SEK 1,573m
(1,340) and interest bearing debt amounted to SEK 8,366m (8,261). The major
currencies used for debt financing are SEK and USD. For the full-year, net debt
decreased by SEK -75m as a result of changes in exchange rates.
The net debt/equity
ratio amounted to 0.59 (0.56) and the equity/assets ratio to 41% (43).
On December 31, 2012,
long-term loans including financial leases amounted to SEK 6,611m (6,941) and short-term
loans including financial leases to SEK 1,470m (968). Long-term loans consist
of SEK 4,075m (3,135) in issued bonds, and bank loans and financial leases of
SEK 2,536m (3,556). Long term bonds and long term bank loans mature in 2014 and
onwards. In November 2012, the Group issued bonds totaling SEK 1.5bn with 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 in the
fourth quarter decreased by -15%. Adjusted for exchange rate effects, net sales
decreased by -12%. For the full-year, sales decreased by -6%. Adjusted for
exchange rate effects, the decline was also -6%.
Consumer demand and
confidence remained weak as the macroeconomic uncertainty continued in the
fourth quarter. The decline in sales was mainly related to handheld products
and snow-throwers in Europe, and a broad downturn in Australia. Sales were also
negatively impacted by delays in some recently launched products.
Market demand was
weak also for the full-year, as a result of a combination of unfavorable
weather and macroeconomic uncertainty. Trade inventory levels were
conservatively managed and the Group’s sales declined in Europe as well as in
the Asia/Pacific region. The decline in full-year sales is estimated to be in
line with the drop in the total market. In terms of product categories, robotic
lawn mowers had the best development while watering and handheld products, such
as chainsaws, had the weakest development.
Operating income for
the full year amounted to SEK 1,709m (2,277) and the operating margin amounted
to 11.1% (13.9). Operating income in the fourth quarter was charged with items
affecting comparability amounting to SEK -187m, referring to costs related to
staff reductions. Changes in exchange rates had a negative year-on-year effect
of SEK -5m on operating income in the fourth quarter and a positive impact of
SEK 67m for the full year.
For the full-year,
operating income excluding items affecting comparability and changes in
exchange rates declined, mainly as a result of the lower sales volume and
negative product mix, referring mainly to lower sales of watering products and
chainsaws. For the fourth quarter, the lower operating income was mainly
related to the lowers sales, and negative product and channel mix.
Operating income for
2011 includes costs related to the production disturbances in North America
amounting to SEK -50m and a positive effect from the closure of a pension
scheme of SEK 53m.
Of the 2011 impact,
the fourth quarter 2011 was affected by costs directly related to production
disturbances
amounting to SEK -5m
and the positive effect from the closure of a pension scheme of SEK 53m.
Americas
Net sales for
Americas in the fourth quarter decreased by -6%. Adjusted for exchange rate effects,
net sales decreased by -3%. For the full-year, sales increased by 12%. Adjusted
for exchange rate effects, the increase was 7%.
The decline in sales
in the fourth quarter was mainly related to snow throwers.
Total market demand
in North America over the full-year increased. The garden season started with
an early spring, which positively impacted demand for lawn and garden products.
The positive development in the first half of the year was partially offset by
a sharp downturn in the third quarter, following serious drought weather conditions
in large areas of the U.S.
The Group’s market
shares for forest and garden products in North America are estimated to have
increased for consumer garden tractors and commercial ride-on mowers. Full-year
sales increased in the U.S. and in Canada, while sales in Latin America were
slightly lower. In terms of product categories, consumer garden tractors and
ride-on mowers for commercial use had the best development. The number of
dealers selling Husqvarna Group products increased and the total dealer channel
sales also grew.
Operating income for
2012 amounted to SEK -169m (-654) and the corresponding operating margin was -1.3%
(-5.8). Operating income was charged with items affecting comparability
amounting to SEK -36m, referring to a staff reduction program. Changes in
exchange rates had a positive year-on-year effect of SEK 19m on operating
income in the fourth quarter and a negative impact of SEK -11m for the full
year.
Operating income for
2011 was negatively impacted by SEK -431m referring to costs directly related
to production disturbances amounting to SEK -348m and other non-recurring items
with a total net negative effect of SEK -83m.
Of the full-year 2011
impact, the fourth quarter 2011 was affected by costs directly related to
production disturbances amounting to SEK -25m other nonrecurring items with a
total net negative effect of SEK -83m.
CONSTRUCTION
Net
sales for Construction in the fourth quarter decreased by -5%. Adjusted for
exchange rate effects, the decrease was -2%. For the full-year, sales increased
by 5%. Adjusted for exchange rate effects, the increase was 4%.
Total
construction market activity during 2012 increased in North America while other
markets had a negative development. The demand in the U.S. was also positively
affected by a replacement need of construction equipment following a period of
low investment levels.
Many
new products with innovative features, such as electric power cutters, wire
saws and drilling systems, have been successfully launched in recent years,
resulting in sales growth and increased market shares, especially in the U.S.
For
the full year as well as for the fourth quarter, sales increased in North America,
while most other markets had declines in line with the drop in over-all market
demand.
Operating
income for 2012 increased to SEK 233m (130) and the operating margin improved
to 7.9% (4.7).
Excluding
items affecting comparability, operating income increased to SEK 258m (194)
mainly due to the higher sales volume.
Operating
income 2012 was charged with items affecting comparability referring to costs
for staff reductions amounting to SEK -25m, while income in 2011 was charged
with costs referring to the closure of a production facility in Spain amounting
to SEK -64m. Changes in exchange rates had a positive year-on-year effect of SEK
3m on operating income in the fourth quarter and a negative impact of SEK -9m
for the full year.
PARENT COMPANY
Net
sales in 2012 for the Parent Company, Husqvarna AB, amounted to SEK 10,564m
(11,121), of which SEK 8,172m (8,486) referred to sales to Group companies and
SEK 2,392m (2,635) to external customers.
Income
after financial items amounted to SEK 564m (1,414). Income for the period was
SEK 908m (737).
Investments
in tangible and intangible assets amounted to SEK 1,517m (336). Cash and cash
equivalents amounted to SEK 91m (28) at the end of the year. Undistributed
earnings in the Parent Company amounted to SEK 17,384m (17,449).
ORGANIZATIONAL
CHANGES
Effective
January 1, 2013, the business unit ‘Sales and Service Europe & Asia/Pacific’
was divided into two new business units - ‘EMEA’ (Europe, Middle East, Africa),
and ‘Asia/Pacific’. The change will not imply any changes in the external
financial reporting.
Effective
January 1, 2013, the business unit ‘Sales and Service Europe &
Asia/Pacific’ was divided into two new business units - ‘EMEA’ (Europe, Middle
East, Africa), and ‘Asia/Pacific’. The change will currently not imply any
changes in the external financial reporting.
The
split of 'Sales and Service Europe & Asia/Pacific' is ongoing and no
financial information is available to assess if these units will exceed any of
the quantitative thresholds according to IFRS8. If the units will exceed any of
these thresholds, the Group will report these as external business areas.
In
conjunction, Frida Norrbom Sams, who most recently headed the Nordic and Baltic
regions within Sales and Service Europe & Asia/Pacific, was appointed
Executive Vice President and Head of EMEA and member of Group Management.
Furthermore,
Nicolas Lanus was appointed Executive Vice President and Head of business unit
Asia/Pacific and new member of Group Management.
As
of January 23, 2013, Michael Jones, Head of business unit Americas, left the
Group. Earl Bennett, Vice President and General Counsel for business unit
Americas, was appointed acting Head of Americas and member of Group Management
until a replacement has been recruited.
STAFF REDUCTION
MEASURES
In
November 2012, Husqvarna Group announced measures to improve the Group’s cost
structure. The measures include layoffs of in total approximately 600 employees
in several countries, whereof almost half in Sweden. The measures aim to
improve efficiency, reduce the fixed cost base and further increase
flexibility.
The
cut-backs will be implemented during the first six months of 2013. Cost savings
will be achieved gradually and full annual effect of around SEK 220m will be
reached during 2014. For 2013 cost savings are estimated at around SEK 160m.
Total costs for implementing the measures are SEK -256m, which were charged to
the operating income for the fourth quarter of 2012. SEK -187m was charged to
Europe & Asia/Pacific, SEK -36m to Americas, SEK -25m to Construction and
SEK -8m are Group Common Costs.
