Q3 results

presentation

Kai Wärn, CEO

Glen Instone, CFO

October 22, 2019

Husqvarna Group – third quarter in summary

2

• Net sales grew by 2%, adjusted for exited Consumer Brands business (flat if included)

- Good growth in Europe, strong growth for robotic lawn mowers and battery products

- Weaker North American demand, particularly for the wheeled segment

• Rolling 12M operating margin* at 9.3% vs. 7.9% for 2018

- Operating income grew by 84%* in Q3 with all divisions delivering an improvement

• Direct operating cash flow improved to SEK 3.8bn (2.1) for the first nine months

• Increased focus on cost efficiencies to support the continued strategic transformation and profitability improvement trajectory

*Excluding items affecting comparability

0%

4%

8%

12%

16%

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Divisional sales growth development

(%)

3Note: Currency adjusted. New divisional structure from 1 Jan 2019. Exit of Consumer Brands business impacted growth for the Group by 3 percentage points

0%

2%

4%

6%

+4%

+2%

(%)Old structure, profitable growth divisions,(rolling 12 months)

New structure, first nine months 2019,adjusting for Consumer Brands exit

Total Husqvarna Gardena Construction

+3%

+1%

Our profitability improvement trajectory

4

5,0%

5,5%

6,0%

6,5%

7,0%

7,5%

8,0%

8,5%

9,0%

9,5%

10,0%

1 000

1 500

2 000

2 500

3 000

3 500

4 000Q

3 2

01

3

Q4

201

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Q1

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Q2

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Q3

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Q4

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Q1

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Q4 2

015

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6

Q2

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6

Q3

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6

Q4

201

6

Q1

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7

Q2

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7

Q3

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7

Q4

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7

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8

Q2

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8

Q3

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8

Q4

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8

Q1

201

9

Q2

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9

Q3

201

9

Operating incomerolling 12 months*

Operating marginrolling 12 months*

SEKm

*Excluding items affecting comparability

Group operating income and margin development

Group financials

Third quarter

• Net sales increased 2%, if adjusted for exited Consumer Brands business

• Improved gross and operating margins

January - September

• Net sales increased by 2%, adjusted for exited Consumer Brands business

• Operating income grew by 20%*

– Price increases, product mix effects, restructuring and efficiency savings

– Partly offset by higher costs for raw materials, tariffs and continued investments in strategic

growth initiatives

SEKm

Q3

2019

Q3

2018

Change,

%

Jan–Sept

2019

Jan–Sept

2018

Change,

%

Net sales 8,429 8,042 5 35,869 34,615 4

Currency adjusted change, % 0 1 – -1 2 –

Gross margin*, % 28.2 25.6 – 31.1 28.6 –

Operating income* 414 225 84 4,225 3,523 20

Operating margin*, % 4.9 2.8 – 11.8 10.2 –

5

*Excluding items affecting comparability

Husqvarna Division

6

SEKm

Q3

2019

Q3

2018

Change,

%

Jan–Sept

2019

Jan–Sept

2018

Change,

%

Net sales 5,204 5,015 4 23,398 22,846 2

Currency adjusted change, % -2 -5 – -3 -1 –

Operating income* 82 -15 n.a 2,527 2,183 16

Operating margin*, % 1.6 -0.3 – 10.8 9.6 –

Third quarter:

• Net sales increased 2%, adjusted for exited Consumer Brands business

– Good growth in Europe for robotic lawn mowers and battery products.

– Weak market demand for the wheeled segment in North America

January – September:

• Net sales grew by 1% adjusted for exited Consumer Brands business

• Operating income increased 16%

− Price increases, restructuring & efficiency savings, and FX effects

− Partly offset by higher costs for tariffs/RM and strategic growth initiatives

*Excluding items affecting comparability

Gardena Division

7

SEKm

Q3

2019

Q3

2018

Change,

%

Jan–Sept

2019

Jan–Sept

2018

Change,

%

Net sales 1,630 1,564 4 7,633 7,372 4

Currency adjusted change, % 1 15 – 1 9 –

Operating income* 120 66 80 1,195 925 29

Operating margin*, % 7.4% 4.2% – 15.7 12.5 –

Third quarter:

• Net sales increased 3% when adjusting for exited Consumer Brands business

• Operating income increased by 80%*

− Favorable product mix, restructuring and operational cost efficiency savings

January – September:

• Net sales increased by 3%, excluding exited Consumer Brands business

• Strong increase in operating income by 29% given the high reference of last year

− Price and mix improvements as well as restructuring and efficiency savings

*Excluding items affecting comparability

Construction Division

8

SEKm

Q3

2019

Q3

2018

Change,

%

Jan–Sept

2019

Jan–Sept

2018

Change,

%

Net sales 1,575 1,446 9 4,789 4,364 10

Currency adjusted change, % 4 7 – 4 13 –

Operating income 229 192 19 673 601 12

Operating margin, % 14.6 13.3 – 14.1 13.8 –

Third quarter:

• Net sales increased 4% - good growth in Europe, Asia Pacific and

Emerging Markets

• Acquisition of power trowel business from Wacker Neuson

− Net sales of SEK ~150m in 2018

January – September:

• Net sales increased by 4%

• Operating income grew by 12%

− Volume/price increases, efficiencies and currency effects

− Successful integration of acquisitions

Innovation leadership – examples

9

EPOS positioning systemwith virtual boundaries

Autonomous Rider

Consolidated income statement

10

Q3:

• Gross margin +2.6 ppts (exc

IAC)

– Price and mix

– Efficiency program and

restructuring

– Positive FX offset tariffs

– Strategic investments

(mainly R&D)

• SG&A– Logistics increase

– Negative FX

• Operating income*

increased by 84%

• Tax rate of 7%; YTD 22%– One off item, SEK 50m

SEKm

Q3

2019

Q3

2018

Jan-Sept

2019

Jan-Sept

2018

Rolling 12

months

Net sales 8 429 8 042 35 869 34 615 42 339

Cost of goods sold -6 048 -5 982 -24 730 -24 719 -29 517

Gross income* 2 381 2 060 11 139 9 896 12 822

Gross margin*, % 28,2 25,6 31,1 28,6 30,3

Selling expenses -1 542 -1 464 -5 403 -4 954 -6 874

Administrative expenses -420 -411 -1 512 -1 462 -2 018

Other operating income/expense -5 0 1 43 13

Operating income* 414 225 4 225 3 523 3 943

Operating margin*, % 4,9 2,8 11,8 10,2 9,3

Items affecting comparability 0 -349 -42 -349 -864

Financial items, net -124 -118 -437 -385 -561

Income tax -21 57 -831 -654 -525

Income for the period 269 -185 2 915 2 135 1 993

Earnings per share, after dilution, SEK 0,47 -0,32 5,09 3,73 3,48

*Excluding items affecting comparability

Direct operating cash flow (accumulated)

11

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

5 000

Q1 Q2 Q3 Q4

SEKm

2019 2018 2017

Note: excluding items affecting comparability

Further potential for capital efficiencyOperating working capital / net sales

25.8%

27.2%

20%

22%

24%

26%

28%

30%

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Target level <= 25%

12

26.0%26.6%

Consolidated balance sheet

13

• Higher inventory levels

compared to last year

– Currency effects

– Slower lawn and garden season

than planned

– Improvement since Q2

• Receivables decreased

compared to last year

• Net debt of SEK 11,6bn (8,0)

– Cash from operations +1.7bn

– IFRS 16 effect of SEK -1.8bn

– Dividend payable -1.3bn

– Currency effects -1.6bn

– Pension Liability -0.7bn

SEKm

September 30

2019

September 30

2018

December 31

2018

Non-current assets 23 691 20 747 21 000

Inventories 10 108 9 022 11 067

Trade receivables 4 605 4 709 3 613

Other current assets 2 082 1 777 1 581

Liquid funds 1 623 1 957 1 346

Total assets 42 109 38 212 38 607

Total equity 17 769 17 045 16 009

Interest-bearing liabilities 8 840 7 988 9 806

Lease liabilities 1 668 204 207

Provisions for pensions 2 723 1 947 2 101

Other provisions 2 874 3 001 3 160

Trade payables 3 475 3 624 4 622

Other current liabilities 4 760 4 403 2 702

Total equity and liabilities 42 109 38 212 38 607

Net debt / EBITDA (based on average net debt)

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

Q22013

Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4  Q2  Q4  Q2

Times

Average net debt / rolling 12 months EBITDA, excl. items affecting comparability

14

1.9x

2014 2015 2016 2017 2018 2019

Our profitability improvement trajectory

15

5,0%

5,5%

6,0%

6,5%

7,0%

7,5%

8,0%

8,5%

9,0%

9,5%

10,0%

1 000

1 500

2 000

2 500

3 000

3 500

4 000Q

3 2

01

3

Q4

201

3

Q1

201

4

Q2

201

4

Q3

201

4

Q4

201

4

Q1

201

5

Q2

201

5

Q3

201

5

Q4 2

015

Q1

201

6

Q2

201

6

Q3

201

6

Q4

201

6

Q1

201

7

Q2

201

7

Q3

201

7

Q4

201

7

Q1

201

8

Q2

201

8

Q3

201

8

Q4

201

8

Q1

201

9

Q2

201

9

Q3

201

9

Operating incomerolling 12 months*

Operating marginrolling 12 months*

SEKm

*Excluding items affecting comparability

Group operating income and margin development

16