Husqvarna has reported a strong first half of the year. The positive performance was attributed to strong product demand and the success of the company’s Accelerated Improvement Program.
Continued profitable growth
"Husqvarna Group has delivered a strong first half of the year,” says Kai Wärn, president and CEO. “Operating income for the second quarter increased by 35% to SEK (Swedish krona, the currency of Sweden) 1,384m (1,022) and the margin rose to 12.5% (10.0). As in the first quarter, the positive development was driven by a combination of strong demand and impact from the Accelerated Improvement Program.”
North America was challenged by a late spring and high trade inventory situation entering the quarter, according to the manufacturer. The operating profit for Americas increased 41% and the operating margin rose to 5%. This was mainly driven by cost reductions, productivity and mix improvements.
The company reported that Europe benefitted from positive weather conditions in the second quarter. For Europe & Asia/Pacific the operating income rose 38% and the operating margin recovered to 19.1%. These increases were primarily a result of higher sales volume and a good development within the core brands Husqvarna and Gardena and in prioritized product areas such as robotic lawn mowers and watering equipment.
Construction had yet another strong quarter with operating income increasing 21%, driven by continued profitable growth across most markets.
“The positive signs in the first quarter have all trended into the second quarter; the reduction of direct material costs is sustained and we are driving favorable mix by prioritizing our premium brands and product leadership areas, as well as growth in the dealer channel, especially in the U.S.,” explains Wärn.
Accelerated Improvement Program
The company attributes a large share of the improvements to its Accelerated Improvement Program. The Accelerated Improvement Program was launched in October 2013. It includes five areas that aim to improve the Group’s operating margin to reach the target of 10%. The measures are expected to be fully implemented in 2015, with the full financial benefit realized in 2016. The five initiatives include:
- Focus on core brands and leadership positions
- Differentiate the dealer and retail business models
- Further measures to turnaround the U.S.
- Operational excellence
- Grow business in emerging markets
Keeping the momentum in the Accelerated Improvement Program remains key,” says Wärn. “From a demand perspective, the third quarter may be more challenging in terms of comparison with prior year, as 2013 benefited from a favorable garden season."
The new organization will follow the brand dimension for three forest and garden divisions with global profit and loss responsibility; Husqvarna, Gardena and Consumer Brands. The Construction division will continue in its current form.
Group functions will also be established in order to secure Group wide synergies and scale benefits, such as in sourcing, logistics and technology.
“In addition to providing better accountability and increased speed in decision making, the new organization will facilitate increased focus on key differences essential for market leadership in the different customer segments targeted by each division,” shares Wärn.
Second quarter results
Net sales in the second quarter increased 7%. The operating income increased 35%. Sales and operating income in the second quarter were higher for all business areas.
