Husqvarna last week reported that net sales for the first nine months of 2009 rose by 8 percent to SEK 29.34 billion (about US $4.28 billion) from SEK 27.22 (US $3.97 billion) in the first nine months of 2008. Adjusted for acquisitions and changes in exchange rates, net sales declined by 9 percent. Operating income decreased by 27 percent to SEK 2.08 billion (US $302.3 million) from SEK 2.8 billion (US $412.8 million) in the year-ago period. Income for the period was SEK 1.36 billion (US $197.4 million) a 21-percent decline from 1.71 billion (US $248.6 million) a year ago, corresponding to SEK 2.50 (US $0.36) per share, compared with SEK 3.74 (US $0.54) in 2008.
Net sales for the third quarter declined by 2 percent to SEK 6.71 billion (US $977.5 million) from 6.83 billion (US $995.1 million) in the year-ago period. Adjusted for acquisitions and changes in exchange rates, net sales declined by 11 percent.
“Market demand in the quarter was substantially weaker than in the previous year in all product areas,” said Magnus Yngen, Husqvarna president and CEO. “Despite a difficult market environment, income for Professional Products remained at a high level. Forestry reported largely unchanged income with a higher margin, while Construction showed a decline.”
Husqvarna last week also announced plans to implement a number of structural changes in order to reduce costs and improve the Group’s competitiveness. The measures are aimed at eliminating overlap and duplication within production and administration, and involve consolidation of production in Sweden and the U.S., and of the sales organization in Europe and Asia/Pacific.
The changes are scheduled to be implemented in 2009-2010 and will affect approximately 1,200 employees. As a result of an increase in the number of employees in other production facilities in Poland and China, the net reduction in the number of employees is estimated at 400.
The total cost for the restructuring measures is estimated at approximately SEK 400m (US $), of which SEK 59m (US $) was charged against operating income in the third quarter of 2009. The charge in the third quarter refers to relocation of production of chainsaws and other handheld products from the plant in Valmadrera, Italy, to the plant in Shanghai, China.
The remaining part of the restructuring cost, i.e. approximately SEK 340 million (US $49.5 million), is expected to be charged against operating income in the fourth quarter of 2009.
Capital expenditure related to the restructuring is expected to amount to approximately SEK 400 million (US $58.3 million), of which a new plant in Poland will account for approximately SEK 250 million (US $36.4 million).
Annual savings from all the above mentioned activities are expected to amount to approximately SEK 400m (US $58.3 million), and will be generated gradually from the second half of 2010 with full effect as of the start of 2012.
The planned restructuring activities mainly include:
• Relocation of production of riders to a new plant in Poland, and closure of the Rider plant in Huskvarna, Sweden.
• Relocation of production in Tandsbyn, Sweden, to Huskvarna, and closure of the plant in Tandsbyn.
• Relocation of lawn mower production in Höör, Sweden, to the new plant in Poland and intention to divest the remaining operation in Höör.
• Relocation of Construction’s operation in Jönköping, Sweden, to Huskvarna, and personnel cutbacks within Construction in Spain.
• Intention to divest the plant in Ödeshög, Sweden, which produces components for chainsaws, riders and other products.
• Relocation of production of chainsaws and other handheld products in the USA from DeQueen, Ark., to the plant in Nashville, Ark., and intention to use the facility as a warehouse.
• Closure of the office in Augusta, Ga., and transfer to Charlotte, N.C., which will be the regional head office.
• Consolidation of sales organization in Europe and Asia/Pacific, including establishment of a single sales office for the Nordic region in Huskvarna, Sweden.
“I regret that we have to implement measures which will affect so many employees,” Yngen said. “Husqvarna’s production is too fragmented with a number of small plants, which means inefficient utilization of capital and resources. We also need to finalize the integration of acquired units and realize anticipated synergies. These changes are necessary in order to secure the Group’s long-term competitiveness.”
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.