Annual Report 2009 - Husqvarna Group

Report by the President Husqvarna Annual Report 2009 5
The balance sheet was strengthened through a rights issue
of approximately SEK 3 billion, which was completed early in
April 2009. Net debt as of 31 December 2009 amounted to
SEK 6.3 billion, compared to SEK 13.6 billion at year-end 2008.
The net debt/equity ratio improved to 0.52 from 1.54.
Continued high margin for Professional Products
Operating income and margin for Professional Products
remained at a high level, despite lower sales. This was achieved
primarily on the basis of a good performance for forestry products.
Operating margin for Forestry improved as a result of
previously implemented rationalization of chainsaw production,
a large share of new products, and a positive impact from
a weaker Swedish krona. Demand for construction products
showed a dramatic downturn. Sales for this product area
declined by approximately 25%, adjusted for changes in
exchange rates, and operating income was negative.
Decisions on restructuring
In October we decided that a number of structural changes
would be implemented in 2009–2011. The measures are aimed
at elimination of overlapping and duplication in production
and administration, and comprise mainly consolidation of production
in Sweden and the US, and of the sales organizations
in Europe and Asia/Pacific.
The changes will involve a net reduction in the number of
employees of approximately 400. The total cost amounts to
approximately SEK 400m, which was charged against operating
income for 2009. Annual savings are estimated at approximately
SEK 400m, and will be achieved gradually from the
second half of 2010, taking full effect as of the first quarter
of 2012.
In order to increase the share of production in low-cost
countries, which is currently less than 10%, we also decided to
invest approximately SEK 250m in a new plant for wheeled
products in Poland. This facility is expected to go on-stream
early in 2011.
It is regrettable that we are forced to take steps which affect
so many employees. However, these changes are required in
order to integrate acquisitions and create a production structure
that is competitive in the long term. We will probably have
to make additional changes over the next few years.
Strategic review
The strategic review of our operations that began in November
2008 was completed in the first quarter of 2009. The conclusions
are that Husqvarna has a very competitive base, comprising
strong market positions, a broad product offering, a high
level of technical expertise, strong brands and a comprehensive
global distribution network.
The Group has a good potential for growth within existing
product categories and distribution channels. However, operations
are too fragmented, with many small units in for example
production, logistics and product development. Over the next
2–3 years we will implement a number of changes aimed
at increasing internal efficiency and freeing resources for
investment in product development and marketing. These
changes are described in more detail in the section on strategy
on pages 6–15.
New organization
The introduction of a new global organization as of 1 January
2010 was one of the most important measures for improving
internal efficiency and building an efficient global company,
which we call “ONE Husqvarna”.
The goal is to eliminate overlapping and duplication, and to
establish integrated global processes with clearly defined
areas of responsibility. Instead of the previously product-based
business sectors, we have coordinated everything related to
the supply chain, i.e. purchasing, production and logistics, in a
single business unit, and everything related to products, product
development, product ranges and brands, in another business
unit. Sales are divided between two business units, one
comprising Europe and Asia/Pacific, the other comprising
North America and Latin America. Construction products
which are sold through other distribution channels than those
for forestry and garden products, were already managed on a
global basis, and will continue as a separate business unit.
Expectations for 2010
Market conditions in 2010 remain uncertain. We estimate that
inventories in the trade for the coming gardening season are
lower than in 2008. However, we expect retailers to continue to
be cautious about building up inventories.
As in 2009, we intend to maintain working capital at a low
level and prioritize cash flow. Our focus is on driving the internal
changes and implementing our decisions for restructuring.
Savings from restructuring will start to take effect during the
second half of the year. In addition operating income should
benefit from somewhat lower costs for raw materials and components.
A number of new products will also be launched during
the year.
We will continue to work on strengthening and developing
the Group’s product offering, building fewer and stronger
brands, and reinforcing our positions in distribution channels.
We will also implement a wide range of measures to increase
internal efficiency. Our overall goal is to further strengthen
Husqvarna’s position as the world’s leading producer of outdoor
products.
Magnus Yngen
President and CEO