Husqvarna

Strategy execution despite challenging market conditions

Third quarter 2023

• Net sales decreased by 14% to SEK 10,512m (12,206). Organic sales¹ declined by 15% and changes in exchange rates contributed with 3%.

• Planned exits of low-margin petrol-powered business impacted with -2%.

• Operating income was SEK 398m (555) and the operating margin was 3.8% (4.5).

• Excluding items affecting comparability, the operating income amounted to SEK 415m (601) and the operating margin was 3.9% (4.9).

• Earnings per share before dilution amounted to SEK 0.22 (0.47) and earnings per share after dilution amounted to SEK 0.22 (0.47).

• Cash flow from operations and investments amounted to SEK 137m (-645). Direct operating cash flow was SEK 1,814m (338).

• The Group’s cost saving initiatives are being expanded with additional savings of SEK 400m. Total targeted savings are now SEK 1.2bn with full effect in 2025.

January – September 2023

• Net sales increased by 2% to SEK 44,655m (43,683). Organic sales declined 3% and changes in exchange rates contributed with 6%. Planned exits impacted with -1%.

• Operating income was SEK 4,863m (4,779) and the operating margin was 10.9% (10.9).

• Excluding items affecting comparability, the operating income amounted to SEK 5,138m (4,866) and the operating margin was 11.5% (11.1).

• Items affecting comparability amounted to SEK -275m (-87), and was related to the acceleration of the strategic transformation, announced in October 2022.

• Earnings per share before dilution amounted to SEK 5.59 (5.83) and earnings per share after dilution amounted to SEK 5.56 (5.80).

• Cash flow from operations and investments was SEK 5,157m (-1,165). Direct operating cash flow was SEK 6,018m (689).

 
¹Organic sales growth definition has been changed to exclude planned exits. These are exits of low-margin petrol-powered business in Husqvarna Forest & Garden Division, announced in October 2022.

Strategy execution despite challenging market conditions

“This year’s gardening season had a solid start, but ended with challenging market conditions. During the first nine months, we have executed on our business strategy, expanded in strategic segments and strengthened important market positions.

Challenging market conditions in the third quarter

During the third quarter, we experienced a weaker market situation with lower end user demand. This development accelerated during the quarter and reported net sales decreased by 14% and organically with 15%.

Organic sales in the Husqvarna Forest & Garden Division declined by 21%. Sales of battery-powered products achieved a good growth, while sales of petrol-powered wheeled products decreased significantly due to lower demand. In addition, as previously communicated, we are proactively exiting parts of the segment. Sales of Robotic mowers were lower during the quarter compared to the same quarter last year, which was positively impacted by an improved supply situation and backlog deliveries in the second half of 2022. However, robotic mower sales in the third quarter this year was above average for the same quarter in recent past years.

Due to lower demand, sales of Gardena Division’s watering solutions decreased during the quarter, and organic sales declined by 8%. With good cost control an improved operating income was achieved.

Organic sales for the Husqvarna Construction Division decreased by 1% in the quarter. Growth was good in North America and in Emerging Markets, whereas sales declined in Europe. Operating income increased, supported by solid cost control and operational resilience.

Group operating income, excluding items affecting comparability, amounted to SEK 415m (601) in the quarter. The decrease was mainly related to lower volumes. Direct operating cash flow in the third quarter improved by SEK 1.5bn, as a result of reduced inventories and trade receivables.

We are delivering on our strategic transformation

For the first nine months, Group net sales increased by 2%, whereof organic sales declined 3%. Operating income, excluding items affecting comparability, grew by 6% and the operating margin increased to 11.5% (11.1). Our cost saving program delivered SEK 270m in savings for the period. Direct operating cash flow increased to SEK 6.0bn (0.7), mainly driven by reduced inventories.

We are on a transformational journey, executing on our strategy by focusing on the areas of robotic mowers, battery-powered products, watering and solutions for the professional market. As a result, we have reached robotic mower sales of approximately SEK 8bn and our share of electrified solutions has expanded to some 41% of our motorized products sales on a rolling 12-month basis. We have strengthened our market positions in these segments compared to last year. It is also an indicator of our ongoing transformation towards a larger share of segments with significant future growth potential.

Furthermore, our electrification ambition aims to consistently reduce our carbon footprint. To date, we have reduced CO₂ emissions (Scope 1, 2 and 3) by -40% compared with the base year of 2015. We have currently exceeded our target of a -35% reduction by 2025. We are continuing to focus on CO2 emission reduction both through the electrification of our products and through the development of products using alternative fuels, allowing us to conduct a balanced transition over time.

To support our strategy and continue to position us for long-term value creation, several measures are being implemented. We are proactively reducing business in petrol-powered, low-margin wheeled products. As previously communicated, adjustments have been made to our manufacturing operations in the U.S. Furthermore, our cost saving initiatives will be expanded with additional savings of SEK 400m including a reduction of approximately 300 positions. Combined with our existing programs, total targeted savings are now SEK 1.2bn with full effect in 2025 and a total reduction of 1,300 positions.

To summarize, our focus on strategy execution and building a stronger Group remains. We are facing a continued challenging macroeconomic context and market uncertainty with delayed ordering and stock reductions.  We have reduced our manufacturing to a lower level than normal for the remainder of the year. Our additional measures to adjust the cost structure are designed to position us for long-term value creation.”


Pavel Hajman, CEO
  

Webcast presentation and telephone conference
 
A webcast presentation of the Q3 report hosted by Pavel Hajman, CEO and Terry Burke, CFO will be held at 10:00 CET on October 20, 2023.
 
To view the presentation, please use the link:
husqvarnagroup.creo.se/0d2ea6f0-24a0-4eb8-8ac5-13f93bf140a3
 
The dial-in to the telephone conference (in order to ask questions):
+46 (0) 8 505 100 31 (Sweden) or +44 207 107 06 13 (UK).
 
  
Dates for Financial Reports 2024

 
Contacts
Terry Burke, CFO and Executive Vice President, Finance, IR & Communication
+46 8 738 90 00
  
Johan Andersson, Vice President, Investor Relations
+46 702 100 451
  
Husqvarna AB (publ), P.O. Box 7454, SE-103 92 Stockholm
Regeringsgatan 28, +46 8 738 90 00, www.husqvarnagroup.com
  
Reg. Nr: 556000-5331
NASDAQ OMX Stockholm: HUSQ A, HUSQ B
 
  
This report contains insider information that Husqvarna AB is required to disclose under the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact person set out above, at 07.00 CET on October 20, 2023.
 
 
 
Factors affecting forward-looking statements
This report contains forward-looking statements in the sense referred to in the American Private Securities Litigation Reform Act of 1995. Such statements comprise, among other things, financial goals, goals of future business and financial plans. These statements are based on present expectations and are subject to risks and uncertainties that may give rise to major deviations in the result due to several aspects. These aspects include, among other things: consumer demand and market conditions in the geographical areas and lines of business in which Husqvarna operates, the effects of currency fluctuations, downward pressure on prices due to competition, a material reduction in sales by important distributors, success in developing new products and in marketing, outcome of product responsibility litigation, progress in terms of reaching the goals set for productivity and efficient use of capital, successful identification of growth opportunities and acquisition objects, integration of these into the existing business and successful achievement of goals for making the supply chain more efficient.