Husqvarna last week announced that its operating income for the fourth quarter 2008 will be substantially lower than in the previous year. The decline is due to lower sales and production volumes, as well as costs related to the previously announced personnel cutbacks, which will be implemented faster than expected. The total remaining cost related to the cutbacks will be charged against operating income in the fourth quarter.
Demand has gradually weakened during the quarter in all of the group’s product areas. Retailers have become increasingly cautious about building up inventories for the 2009 season, which has in turn increased uncertainty regarding remaining deliveries in December.
Operating income for the fourth quarter of 2008 has been negatively affected by lower sales and production volumes and will be negative, also excluding the cost of approximately SEK 325 million (about U.S. $42.5 million) related to the personnel cutbacks.
Because of seasonal variations in group operations, the fourth quarter accounts for a small share of sales and operating income for the full year. The quarter is normally characterized to a great extent by production and deliveries for the next garden season. Variations in production volumes can therefore have a considerable effect on income for the quarter.
The announced personnel cutbacks are now estimated to involve a total reduction of approximately 960 employees, as against the previously stated 850. The total cost is estimated at approximately SEK 340 million (U.S. $44.5 million), of which SEK 15 million (U.S. $1.9 million) were charged against operating income in the third quarter of 2008 and the remaining SEK 325 million (about U.S. $42.5 million) will be taken in the fourth quarter of 2008. Annual savings are estimated at approximately SEK 350 million (U.S. $45.8 million) and are expected to take full effect as of the third quarter of 2009.
Husqvarna is an international producer of lawn mowers, chainsaws and portable petrol-powered garden equipment such as trimmers and blowers. The group is also a leader in diamond tools and cutting equipment for the construction and stone industries.