As a result of lower sales and a substantially reduced production rate, the Husqvarna's operating income for the third quarter will be substantially lower than in the previous year.
The decline of sales and production rate of this year refers primarily to consumer products for the mass market channels in North America and Europe, as well as to products for the construction industry within Professional products.
Due to seasonal effects in Husqvarna’s operations, the third quarter accounts for a small share of sales and operating income for the full year. Seasonal variations can therefore have a considerable effect on income for this quarter.
Operating income for the third quarter of 2008 is expected to amount to approximately SEK 300m (553).
Cost-cutting measures
As a result of efficiency gains, synergy effects of acquisitions, and expectations of continued weak market conditions, personnel cutbacks will be implemented. The cutbacks are aimed at reducing the fix-cost structure, and refer mainly to white-collar workers and other staff. The cutbacks will also include adjustment of capacity at the plant in Huskvarna as a result of rationalization and the relocation of some production to other units within the Group. This is in addition to the normal seasonal adjustment of the blue-collar workforce.
The measures are estimated to involve a total reduction of approximately 850 in the number of employees, of which approximately 300 in Huskvarna, and will generate annual savings of approximately SEK 300m. The cost of these measures is estimated at approximately SEK 300m.
The measures will be implemented during the autumn of 2008 and the first quarter of 2009, following negotiations with the relevant labor unions. The savings will be achieved gradually during 2009 and take full effect as of the third quarter of 2009.
"The third quarter marks the end of the gardening season, and the effect of a weak season has a strong impact on this quarter. The Group's performance should always be considered over the full season. But we have also noted greater caution on the part of our professional customers, especially in the construction industry", says Bengt Andersson, President and CEO.
"I regret that we have to implement personnel cutbacks. But we have to realize the effects of rationalization, and also adjust to prevailing market conditions. We will not build-up inventories in anticipation of the coming season to the same extent aslast year. However, our listings with the major retailers for 2009 look very good so far, as do opportunities to achieve margin improvements through price increases", continues Andersson.
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