Husqvarna - interim report January - September 2015
Net sales, adjusted for changes in exchange rates, increased in the higher margin divisions Husqvarna, Gardena and Construction. For the Consumer Brands Division, the decline in sales as a consequence of our prioritization of margin before revenue continued, resulting in flat sales for the total Group.
The season for watering products was particularly strong, resulting in a 19% sales increase for the quarter, and a subsequent operating income and margin improvement for the Gardena Division. Consumer Brands reduced its seasonally driven loss and the margin recovered as material cost reductions managed to offset the negative impact from lower volume and currency developments. Construction continued on its path of profitable growth, while Husqvarna Division was negatively affected by lower production volumes, currency and an unfavorable product mix resulting in a lower income for the quarter.
The Accelerated Improvement Program was launched two years ago with the object of doubling the operating margin to 10% by 2016. The program will, from an activity viewpoint, be completed this year and is delivering results beyond the initial expectations. The rolling 12 month operating income has almost doubled, and excluding the currency impact by using exchange rates from the start of the program in 2013 the corresponding operating margin has improved to around 9.5% compared to the reported 8.2%.
The negative currency impact will continue into next year as the currency hedges will no longer offset the unfavorable transaction impact. This means that despite the improvements already seen due to AIP we will not be able to reach the operating margin target of 10% in 2016. Additional measures beyond AIP have already been defined, such as the recently announced consolidation in manufacturing and logistics, safeguarding a continued positive result improvement in 2016 and beyond. The additional measures aims to compensate the negative currency impact, further improve the operating margin and create the foundation for the next step in Husqvarna Group's development - investments in activities to drive profitable growth.
> Net sales increased 8% to SEK 7,307m (6,785). Adjusted for exchange rate effects, net sales were unchanged.
> Operating income increased 22% to SEK 405m (332), including around SEK -60m of negative currency impact.
> Operating margin rose to 5.5% (4.9).
> Earnings per share after dilution amounted to SEK 0.34 (0.35).
> Operating cash flow amounted to SEK 1,539m (1,330).
> Net debt/equity ratio amounted to 0.50 (0.50).
“Kai Wärn, President and CEO: The solid improvement trend continued into the seasonally weaker third quarter. Group operating income increased by 22% and the operating margin rose by 0.6 percentage points to 5.5%, despite adverse impact from changes in exchange rates. The Accelerated Improvement Program (AIP) continues to deliver earnings growth and margin recovery.”