Briggs & Stratton LLC (B&S) has informed Husqvarna Group that B&S will only deliver a very small portion of the engines for ride-on mowers that Husqvarna Group had ordered in advance of the 2022 season, mainly for North America. At this late stage, Husqvarna Group’s ability to secure an alternative supply of engines for the 2022 season is extremely limited. Therefore, to protect its customers and operations, Husqvarna Group yesterday filed a lawsuit in South Carolina to compel B&S to deliver all engines covered by its orders.
In a worst case scenario, the lack of engine supply could result in a loss of top line sales of up to approximately SEK 2 bn, mainly in 2022 with limited impact in Q4 2021. Husqvarna Group is optimistic, however, that the legal proceedings will have a satisfactory outcome, in which case there could be limited (or no) impact on operations, suppliers, customers and financial position. Given the early stage of these proceedings, and range of possible outcomes, it is too early to estimate the likely net EBIT impact of this supply dispute. It is, however, noteworthy that the affected product category has a lower profitability than the Group average.
Husqvarna Group will provide an update on the issue in conjunction with the Q3 interim report, which will be published on October 20th 2021.
In a letter to its dealers Husqvarna said:
We must make you aware of a challenging situation related to our mutual business. Recently, Briggs & Stratton (“B&S”) informed Husqvarna Group, without any prior notice, that they will deliver only a very small portion of the engines that Husqvarna ordered in advance of the 2022 season. Despite attempts to resolve this situation amicably, B&S has been unwilling to substantially change its position. To protect our dealers and operations, Husqvarna Group filed a lawsuit on Monday, September 20, in South Carolina to compel B&S to comply with their contractual commitments to deliver all engines covered by open purchase orders. The sudden and unexpected action by B&S has required us to adopt this extreme measure. We are pleased with the initial decision by the court to enter a 10-day temporary restraining order against B&S, which may be subject to extension or modification, to perform its obligations to deliver engines in accordance with the purchase orders. We will continue to vigorously pursue this legal action. Our goal is to reach a satisfactory outcome that will have limited (or no) impact on our mutual operations for the 2022 season.
Please know that Husqvarna is committed to the ride-on category for 2022 and beyond. We currently have four other suppliers of petrol engines (Kohler, Loncin, Honda and Kawasaki). In addition to the legal action, we are investigating procurement alternatives, but we do not believe we can fulfill the total volume for 2022 if we do not receive the engines that we had originally ordered from B&S. This does not affect any of our products in professional ride or any of our handheld products. Furthermore, Husqvarna has a strong brand position and extensive portfolio of professional ride products, tree care products, robotic lawnmowers, and accessories utilized by the millions of professionals and consumers who seek out our brand.