Strong growth and margin improvement
Third quarter 2020
· Net sales increased by 14% to SEK 9,570m (8,429), or by 22% when adjusted for exit of Consumer Brands business and changes in exchange rates.
· Operating income increased by 141% to SEK 997m (414), representing a margin of 10.4% (4.9).
· Earnings per share after dilution amounted to SEK 1.14 (0.47).
· The Board of Directors proposed a reinstated dividend of SEK 2.25 per share.
January - September 2020
· Net sales decreased by 2% to SEK 35,260m (35,869), or increased by 5% when adjusted for exit of Consumer Brands business and changes in exchange rates.
· Operating income increased by 9% to SEK 4,613m (4,225), excluding items affecting comparability, representing a margin of 13.1% (11.8).
· Earnings per share after dilution amounted to SEK 5.61 (5.09).
· Direct operating cash flow* amounted to SEK 6,255m (3,772).
Significant events after the quarter
· Husqvarna Group accelerates strategic growth initiatives within robotics, battery and watering categories including an increased focus on solutions for the professional segments. At the same time the overall competitiveness in the supply chain for petrol solutions will be increased, targeting annual savings of SEK 500m whereof SEK 250m will be reinvested in the strategic growth initiatives.
· The associated one-off costs are estimated to SEK 880m (of which SEK 500m are cash items) and the majority will be charged in the fourth quarter of 2020 (read more on page 9).
· A further step in optimizing and decentralizing the organization is taken. A new function, Strategy & Innovation, will be formed. Accordingly, the Group Management team will change, where Anders Johanson, Senior Vice President, Innovation & Technology and CTO, has decided to leave the Group.
Reaching our margin target of >10%
"We delivered a very strong third quarter as we continue to win in our core categories and strengthen our positions in many markets. The performance was supported by a favorable stay-at-home trend and good weather conditions that prolonged the gardening season. Net sales increased by 22%* in the quarter with a solid development in all divisions and key regions. Our growth was particularly strong in the robotics, battery and watering categories driving Husqvarna and Gardena Division's growth to 27%* and 26%* respectively. Construction Division's net sales increased by 5%* in the quarter. In the first nine months Group net sales increased by 5%* with volumes shifting between quarters due to the Covid-19 situation.
We achieved an operating margin of 10.3% on a rolling 12-month basis (excluding items affecting comparability). The direct operating cash flow increased to SEK 6.3 billion (3.8) for the first nine months. This leaves us well-positioned to further accelerate the strategic growth initiatives which we presented last year. We are increasing our focus on sustainable solutions with strong customer demand supporting the transition to a lower carbon footprint. This includes increased investments in R&D, production and go-to-market capabilities for key categories such as robotics, battery and watering solutions including an increased focus on solutions for the professional segments.
At the same time we will further improve the overall competitiveness in our petrol supply chain by streamlining and reducing fixed costs within our component manufacturing, increasing the level of automation in our factories and by reallocating production volumes among our factories bringing final assembly closer to our customers.
These steps will reduce the global workforce by approximately 350 positions and result in annual savings of around SEK 500m, fully effective in 2023, whereof SEK 250m will be reinvested annually into accelerated growth initiatives. This results in net savings of SEK 250m on a yearly basis. These efficiency measures entail one-off costs estimated to SEK 880m (of which SEK 500m are cash items) where the majority will be charged in the fourth quarter of 2020.
In conclusion, we have strengthened our market leadership positions and reached our profitability target. We have a clear strategy and are now taking further steps to build on our strengths and focus on execution. I would like to sincerely thank our team around the world for tremendous work showing decisiveness, agility and extraordinary commitment during this period."
* Net sales is adjusted for changes in exchange rates and the exit of Consumer Brands.
Henric Andersson, President & CEO
A conference call, hosted by Henric Andersson, President & CEO, and Glen Instone, CFO, will be held at 10:00 CET on October 20, 2020.
To participate, please dial +46 (0) 8 505 583 59 (Sweden) or +44 333 300 9031 (UK) ten minutes prior to the start of the conference. Conference ID: Husqvarna.
The conference call is also available through https://husqvarna-group.creo.se/201020. A replay will be available later the same day.
Glen Instone, CFO, Senior Vice President, Finance, IR & Communication, +46 8 738 90 00
Johan Andersson, Director, Group Corporate Communications and Investor Relations, +46 702 100 451
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 07.30 CET on October 20, 2020.
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