Husqvarna Group last week announced net sales for the third quarter of 2008 of SEK 6.83 billion (about U.S. $875.1 million), up 1 percent from SEK 6.82 billion (U.S. $874.6 million) in the year-ago quarter. Net sales for the first nine months amounted to SEK 27.2 billion (U.S. $3.5 billion), a 3-percent decline from 28.1 billion (U.S. $3.6 billion) in the first nine months of 2007.
"Sales in the third quarter were largely unchanged,” said Magnus Yngen, president and CEO. “The decline in operating income resulted mainly from higher material costs and a less favorable product mix within Consumer Products in the U.S., as well as lower sales of Professional Products for the construction industry. Other operations have generally performed in line with the previous year. Income was also negatively affected by lower production levels in most of our operations in order to reduce inventories, which means lower absorption of costs."
Income for the third quarter declined by 48 percent to SEK 143 million (U.S. $18.3 million) from SEK 273 million (U.S. $35.0 million) a year ago, corresponding to earnings per share of SEK 0.37 (U.S. $0.05) dilution from SEK 0.70 (U.S. $0.09) in 3Q07.
Income for the first nine months period declined by 13 percent to SEK 1.7 billion (U.S. $218.6 million) from SEK 1.9 billion (U.S. $250.6 million) a year ago, corresponding to earnings per share of SEK 4.43 (U.S. $0.57) per share after dilution from SEK 5.06 (U.S. $0.65) in the 2007 period.
The gardening season ends during the third quarter, and production for next year’s season starts in the fourth quarter. The major share of group sales during the fourth quarter comprises chain saws and other forestry equipment as well as products for the construction industry, the company said. In light of weaker consumer confidence and greater caution on the part of retailers, Husqvarna said it is not planning to build up inventories for the next season to the same extent as in 2007.
Operating income in the fourth quarter is expected to be charged with costs of approximately SEK 200 million (U.S. $25.6 million) related to the previously announced cost-cutting measures.
The board of directors last month decided to implement cost-cutting measures to reduce fixed costs within the group. The measures are estimated to involve a total reduction of approximately 850 employees, as was previously announced, of whom approximately 300 are in in Huskvarna, Sweden. The cuts are expected to generate annual savings of approximately SEK 300m (U.S. $38.4 million).
The measures will be implemented during the autumn of 2008 and the first quarter of 2009, following negotiations with the relevant labor unions. The savings will be achieved gradually during 2009 and will take full effect as of the third quarter of 2009.
During the third quarter, operating income was charged with costs related to these measures in the amount of SEK 15 million (U.S. $1.9 million). Operating income for the fourth quarter is expected to be charged with approximately SEK 200 million (U.S. $25.6 million).