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Husqvarna to Cut More Jobs as Q3 Profit Lags

STOCKHOLM, Sweden (Oct. 23, 2009) — Garden and construction tool maker Husqvarna posted a smaller-than expected third-quarter profit Oct. 23 and said it would cut more jobs in the face of the market downturn, sending its shares lower.

Global recession has hit demand for gardening products and retailers remain reluctant to increase inventories ahead of next year's season in light of uncertainty about consumer spending.

"We cannot say that we see any strong recovery in the market," Chief Executive Magnus Yngen told Reuters.

"We don't think it (the market) will sink deeper either, rather that it has bottomed out. But to talk of a... quick recovery, we don't see that."

Husqvarna has already cut about 1,275 jobs since late last year. The new programme, which will see the firm move production from the United States and its home country Sweden to China and Poland, will affect around 1,200 employees, although the net job loss will total about 400.

"We have relatively small share of our production in low cost countries today, about ten percent, and need to raise that share to be competitive", Yngen said. "We also have a recession with low demand and are therefore pressured to take action."

Husqvarna said the restructuring measures would cost around 400 million Swedish crowns ($59 million), most of which related to the new plant in Poland.

"Annual savings from all these activities ... will be generated gradually from the second half of 2010 with full effect as of the start of 2012," Husqvarna said.

The Swedish firm, which makes lawn mowers, chainsaws and other garden equipment, reported operating income of 232 million crowns excluding restructuring charges of 59 million crowns.

This compared with a year-earlier 325 million and a mean forecast for a 347 million profit in a Reuters poll of eleven analysts.

Shares in Husqvarna were 4.9 percent down at 48 crowns at 0925 GMT.

"It was rather weak. I don't think there is a lot to be enthusiastic about in this report. Profits were low, their guidance is for a lower sales year-on-year and cash flow was rather bad," said one analyst who declined to be named.

"And on top of that is the restructuring. One should ask oneself whether everything really is going well when they announce a new programme just a year after the last one."

Sales in July to September — the final months of the gardening season — fell 11 percent, adjusted for changes in exchange rates and acquisitions, to 6.71 billion crowns, versus a forecast for 6.95 billion.

Husqvarna said it expects shipments in the fourth quarter -- normally its weakest quarter in terms of sales -- to be slightly lower than in the fourth quarter of 2008.

"We see that the retailers are not yet ready to build inventory and expect our customers to be very focused on cash flow and keeping inventories down," Yngen said.

There is a risk production will be even lower in the fourth quarter — the period when the firm nomally builds stock for the coming gardening season — than it was in 2008, he said. ($1=6.830 Swedish crowns)

Source: Reuters

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