Husqvarna AB (publ)

Hello, everyone, and welcome to Husqvarna Group's report for the first quarter of 2024. My name is Johan Andersson, responsible for investor relations, and will be the moderator today. With me here in Stockholm is our CEO, Pavel Heimann, and our CFO, Terry Burke. Pavel and Terry will present the report and afterwards we will start a Q&A session. And you're welcome to ask your questions over the telephone conference or you can also use the web interface to put your questions in there and we will read them out here in Stockholm. So with that, thank you once again for joining and I will hand over now to Pavel.

Thank you, Johan, and welcome everybody to this session. So, let me begin by highlighting the takeaways here for the quarter. We delivered the first quarter overall in line with our expectations, and this despite the uncertain macroeconomic context that we still operate in. As the first quarter progressed, which is a selling quarter for us, sales gradually improved, initially cautious among our trade partners, but to a more favourable trend as the gardening season now begins. And I'm very pleased that the Gardena division delivered growth and improved margin. We also continue to execute and deliver on our cost savings and efficiency program with good results. And our product offering is strong with many new products launched, which makes us well positioned as the season now commence. It is also encouraging that we continue to execute on our Sustainovate program and deliver in terms of CO2 reduction and our reduced climate footprint. And I will come back, of course, to these milestones further in the presentation. So with that, let's take a closer look at the numbers for the quarter. Organic sales decreased by 11%. We should remember that we're comparing to a record quarter one last year. Net sales grew in segments such as robotic mowers for the professional market, battery-powered products and also parts and accessories. We also achieved growth in the Gardena division, with watering, hand tools and electric products being the drivers. Sales of petrol-powered wheeled products continued on a low level during the quarter. Planned exits were close to 700 million or impacted by 4%, corresponding to approximately half of the decline in the wheeled petrol products. And in our Husqvarna construction division, we had good progress in emerging markets, but lower sales in Europe and North America. We should also note that we had an Easter effect in quarter one with less invoicing days representing around minus 2%. This is not included in the organic growth number. Group operating income amounted to 1.9 billion in the quarter, and Terry will discuss this in further detail. But some of the important points related to the result is that we improved our gross margin. This was driven by exits, by lower logistics costs and currency. On the negative side, we have an overall lower volume with lower factory utilization. And this was partly offset by our cost savings. And here we realized some 185 million in the quarter. Our direct operating cash flow was minus 1.6 billion. Importantly, we continue to decrease our inventory levels down 800 million when currency adjusted since the year end. And the main driver for the lower cash flow is higher trade receivables due to planned reduction of trade receivables financing. Robotics and battery as a share of group sales is now 20% in Q1. This is up from 17% last year same period. We grew strongly in pro robotics and battery power products and sales of the robotic mowers for the residential market were lower though during the quarter compared to the same quarter last year, which was positively impacted by the improved supply situation and also the backlog delivers. However, sales of robotics this quarter is equal or above quarter one in 22 and 21. As the season now begins, we really have a solid lineup of great products in this segment with several new boundary wire free robotics launch, both for the consumer segment as well as for the professional segment. Let us zoom out and take a longer perspective on our profitability. We are executing on our strategy and our long-term transformation to really build a stronger Husqvarna Group. We continue to focus on value, growing in the segments with higher profitability and higher future growth potential. And as mentioned, the lower volumes this quarter and the factory under absorption, as well as high results in Q1 last year, is driving down the margin when we analyze it based on the rolling 12-month period. Our ambition is clearly to maintain our long-term journey by executing our strategy and improving our margins. The fact that Gardena delivered growth and increased the margin in Q1 is a good proof to this ambition. So with this summary, I leave it over to you now, Terry, to go through some of the numbers more in detail.

Thank you, Pavel. Starting with the Husqvarna Forest and Garden Division, I would describe this quarter as in line with expectation, following a record quarter one 2023. Also be mindful, we came into this quarter with high inventory in the trade for the Forest and Garden Division. Organic sales declined some 17%, and we delivered an operating margin of 14.4%. There was good continued growth in professional robotics. We're very pleased that this growth continues in the professional robotics. In addition to that, battery-powered products continue to grow as well. Sales did sequentially improve throughout the quarter and that included the residential robotic volumes increased and improved during the quarter as well. There was lower sales in petrol powered products and that included the wheeled petrol exits. And the operating margin was impacted by the lower volumes, the factory under utilization. However, that was partly offset by cost savings. Also worth to note, there was some 190 million positive currency effect for the forest and garden division during quarter one. When we look at it from a rolling 12 perspective, organic sales declined 13% and we have an operating margin of 9.3. Moving on to Gardena. Gardena had a strong quarter one and after a couple of challenging years, I think we can describe with Gardena, it's nice to see a positive turnaround and improved result for the Gardena division. Organic sales grew some 2%. However, the operating income improved by some 15 percentage points, up to 15.3%. We had strong sales in watering, electric products, and hand tools within Europe. North America was slightly negative from a sales perspective. However, all regions delivered an improved operating income and margin. There was also positive effects from our cost efficiency program and lower sales logistics. We also, during the quarter, we acquired ET Water in North America, which is expanding our commercial irrigation in North America. Last 12 months, organic sales has declined by 2%. However, we have an improved operating margin up to 9.4%. So a very good quarter for Gardena, and we're very pleased to see that development. Construction. I think we can say construction had a challenging quarter one with an organic sales decline of 8% and an operating margin of 10.1%. There was good growth in emerging markets. However, there was a decline in Europe and North America. Maybe we should also point out here the impact on the less working days, if you want to call it that, in quarter one. And that, of course, has had an impact to the organic sales for the construction division. Solid performance in the newly launched demolition robots and battery power cutters. And the operation margin was impacted by the lower volumes, the factory underutilization, which was partly offset by cost savings as well. Roland 12, we have a net sales, organic sales decline of some 5% and an operating margin which has improved during the Roland 12 to 11.1%. So if we move to the quarter one EBIT bridge and just see how that is developed, moving from a 14% operating margin to a 13.1%. Of course, you can see clearly in the bridge, this was really heavily impacted by the organic sales decline. And that volume reduction, in addition to us continuing to drive our inventory levels down, and we managed to reduce our inventory levels some $800 million. in the quarter currency adjusted so that factory under utilization the volume reduction with the organic sales has really impacted here and you can see this in the 825 million negative on price i would say describe prices flat so nothing really positive or negative there it's it's relatively flat We're very pleased with our cost savings programme, how that is delivering, and we've continued to deliver another £185 million in quarter one. Raw materials and logistics, quite different dynamics between the two. We have had a positive logistics cost development. However, that has been offset by a raw materials cost increase. So we've more or less come to a break even between the two. Transformational initiatives, quite a small number for Q1. I think the way to look at it is we've been a little bit cautious over the second half of last year and coming into quarter one, given the uncertainty in the market. So only a 20 million transformational initiative investment in addition to, this is incremental in addition to our normal investments. We did have a 200 million currency positive effect and that got us to the 13.1% margin. Moving on to the balance sheet. I think we've already covered some of the main points here. Maybe one thing to point out is the trade receivable financing. We took a decision around July, August last year to stop doing trade receivable financing. Now, that has had an impact on our cash flow, which I'll come on to in a second, and of course, the higher trade receivables as it looks here. So that was an intentional decision to exit. The higher finance charges that were coming through, we made a decision to stop doing that. If we look at inventory, we have an 800 million reduction currency adjusted for the quarter. So we're quite pleased about the inventory reduction. Still more to do, but at least it is trending in a positive direction. And actually, if you look at a true year over year currency adjusted, it's a 2 billion reduction from this time last year. So again, we feel pleased about that, but more to do. We have lower trade payables and that is really driven as we continue to reduce our inventory levels. Net debt EBITDA is slightly increased during the quarter, driven by a lower rolling 12 EBITDA and a slightly higher net debt to 2.2. Operating cash flow. And this, I think, is where it's important to highlight the trade receivable financing. So if we were to adjust for the trade receivable financing during Q1, if we wanted to have a true comparable, then last year would have been some negative 2 billion. So I think it's important to stress that. We will have this negative comparable during quarter two as well. However, once we go to quarter three and quarter four year end, then that comparable has disappeared and then it's a normal true comparable. We remain on track for another strong year of positive cash flow development. I think that's important to get that message across. With that, Pavel, I pass it back to you.