Husqvarna AB (publ)

Good morning everyone and welcome to the presentation of the second quarter results of 2026 for Husqvarna Group. My name is Emily Alm and I am Head of Investor Relations. I'm joined here today by our CEO Glenn Inston and also our CFO Terry Burke. So Terry and Glenn will go through the presentation and we will then have a Q&A session. So with that, I would like to hand over to you.

Thank you, Emily. Good morning, all, and a warm welcome from my side. And welcome to our Q2 report. So let's jump straight in. So following a very strong start to the year with a strong sell-in to our trade partners and very successful product launches, Q2 has been somewhat difficult. That's been really geopolitical uncertainties and a weaker consumer sentiment has certainly weighed on consumer demand. And we also had a somewhat unfavorable weather conditions really impacting the first half of the quarter, the first six weeks of the quarter. And that certainly had an impact particularly in Europe. Despite that, we managed to see a good growth in North America, and that is a good build on where we were actually after the first quarter. So we're very pleased with the continued growth in North America. Of course, the lower volumes overall and higher cost inflation is impacting our margins. However, very, very pleased to see our cash flow develop strongly into the second quarter, and we'll come back in more detail on that later in the presentation. From a real strategic execution perspective, I'm actually very pleased with where we're heading. We've managed to actually achieve and implement strong savings, and we've triggered some strong savings programs. And we've also accelerated our strategic portfolio work in terms of making some firm decisions during the second quarter. And again, I'll come back to them in more detail as we go through the presentation. So all in all, second quarter, our activities have been very, very good. What I'm very pleased to see is actually we've managed to finalize our recruitments of four new group management members. All will join us during the remainder of the year. Actually, Anders, Lilly and Patrick will come in during Q3. And Anders Kandel will join us during the fourth quarter. The one addition to the group management team is actually the CPO, the Chief Procurement Officer with Lilly. That is a new position we've created. Because we really feel sourcing and procurement is a strategic value creation lever for this group. It's where we feel we can add more value and it is much more than just a cost area. So having this really put together under one leader at the executive table who's really going to drive our strategic sourcing agenda as well as a common agenda around supplier strategy. Thank you very much. So, just to look at some of those strategic highlights that I mentioned on the first page that I'm really happy with during the second quarter, I'll give some examples. These are just a few examples. Within the area of logistics, we started to look at this much more holistically as a group. We've actually managed in the logistics network to reduce the number of suppliers by two-thirds. That is quite a big number. Thank you very much. We've also managed to do some good warehouse consolidations already during the second quarter and this will continue now going forward in the remainder of the year and into 2027. So reducing the number of warehouses we have and therefore also over time reducing the inventory as well that we have. Again, driving savings, lower inventory but also benefiting from the better service level agreements from the logistics providers. In the manufacturing footprint area, an example we can also bring is what we've been doing in the Gardena division. We've been very much looking strategically at manufacturing in terms of where the core skill set sits, and we're going to move some operations from Germany into Czech Republic. And the main rationale there is where we have high volume, highly automated processes, they will stay in Germany. Where we have more labor intensive, more manual processes, they will be moved into the Czech Republic. Again, very strategically set strategic manufacturing footprint. This will, in essence, impact the hand tools and watering business portfolio units within the Gardena division. As part of the strategy, we talked a lot about strategic portfolio management. And by that means we're going to address our underperforming parts of the portfolio to spend more time on the high performing business portfolio units. And some of the measures we've taken during the second quarter. One is our intention to discontinue our stone diamond tool business in the construction division. This will be done during the remainder of 2027 and have an impact on sales of some 250 million SEC, but the EBIT margin accretive both to the construction division as well as the total group. Today, we also announced that we will move from a turnaround case to a strategic review of our powered garden business portfolio unit within the Gardena division. This continues to be pressured as a segment, and therefore we're going to really move this into a more formal strategic review. And we will come back to you with the results of that and our firm decision during the first couple of months of 2027. So very, very pleased with what we're doing and the decisions we've made during the second quarter. From a total cost out perspective, we're actually ahead of plan. We previously indicated a cost savings program of some 4 billion SEK effective by 2030. And given the second quarter, we've actually managed to add some 385 million SEK in savings on the back of a 245 million SEK benefit in Q1. So 630 million SEK run rate savings already effective now. This actually gives us the confidence that we need to increase the timing effect of our savings. So as such, we now target achieving some 3 billion SEC effective by the end of 2028. We remain with the 4 billion SEC, but want to really increase the benefit and the timing of that benefit. So 3 billion SEC in the timeframe 2028. And the reason we're also doing this, of course, headwinds continue to come. The Middle East crisis does impact raw materials and logistics, and we need to continue with our savings initiative to make sure we more than offset those headwinds that we see going forward. I'm extremely proud and pleased to announce that our science-based targets have been validated during the second quarter as well. Our targets of reducing our carbon emissions by 60% versus the 2015 baseline have been validated during the second quarter. This is a further support to what we're doing. And we're very happy that the science-based targets have been validated in this way. And we'll continue driving this by way of electrification as the portfolio electrifies, really driving further carbon reductions through our total supply chain and our operational excellence programs, and also really looking at how we engage with our supply chain partners to make sure they're also reducing their carbon emissions and really walking the talk in terms of our commitments when it comes to our carbon reductions. over to the P&L, and we'll start with sales. Sales in the second quarter organically declined by 4%. I just want to put that in context. We had a strong sell-in in Q1 with a positive 3%. We also had a very strong quarter 2 in 2025, actually had a positive 5% sales. So 4% decline, given the macro uncertainty and given the weak consumer sentiment, is actually reasonable, especially looking at that in conjunction with the prior year and the strong sell-in in Q1. We saw a decline in the forest and garden division of some 3%, a decline in garden of 11%, but a growth in the construction division of 5%. As mentioned on the opening slide, we certainly saw, let me say, more of an impact in Europe. We consume a sentiment globally, but the weather impact in Europe certainly weighed on demand in terms of that replenishment cycle that we normally see, particularly early in Q2, which are our main selling months. However, very pleased with the performance in North America, a continued increase And actually, that improvement was across the board, all three divisions growing in the second quarter and across most of our product categories. So very, very pleased that North America takes a further step forward.

If we look at that from an earnings perspective...

We generated earnings in the second quarter of 1.95 billion SEK. And that is an operating margin of 13.6, corresponding to 13.4% in the same period last year. However, worth calling out that we did have a tariff refund Thank you very much. However, having a lower 4% top line, of course, impacts our volumes, has an impact onto the P&L, and that's the main drag that we see actually impacting our earnings. Terry will cover this in much more detail in the EBIT bridge, but we also add, of course, some headwinds from raw materials, some logistics costs, as well as a negative impact from FX. If we look at this on a division level, we start with the forest and garden division. The second quarter, we saw a decline of 3%. That was following a strong Q1. So actually, through the first half year, we see a flat sales development, despite the macroeconomic headwinds and despite the uncertainty we're seeing out there. So all in all, still positive. In isolation in the second quarter, that weak consumer sentiment particularly impacted the wheeled business portfolio unit, and that was actually mainly in Europe. We actually had a growth in North America there. North America, despite growing on wheeled products, also had a growth in handheld products, so good growth across the core categories in the North America space. In particular, the tariff refunds of 240 million SEC on the group, some 112 million was attributable to the Forest and Garden Division. Lower volumes also, of course, impacting the division, and cost inflation is a headwind in terms of raw materials and logistics, and a significant FX effect there of some 45 million SEK. For all in all, operating income, excluding items affecting comparability, moving from 13.3 to 14.3 in the quarter. moving over to the Gardena division and of course the headline number there is minus 11% in sales but again I want to put this in context this is comping to a plus 7% in the same quarter last year so we had a very very strong quarter too last year and we now see a We also had a very, very strong sell-in in Q1, particularly in watering in the Gardena division, and we indicated that during the Q1 report that the channel partner inventory was slightly elevated as a result of that strong sell-in. So, of course, colder weather, weaker consumer sentiment has impacted the replenishment and the sell-through. But all in all, we have extremely strong positions through the first half year, particularly in the watering segment, strong market-leading positions. And I do want to leave you with that. Tariff refunds for the Guardian of Vision, relatively small, only 29 million SEC of the 240. Of course, the negative effect from volumes does weigh on the margin. And we also see, actually, one of the turnaround cases we've been talking about that we now move to a strategic review. is the Powered Garden Business Portfolio Unit. And that also, of course, dilutes the margins. We see a continued double-digit decline in the Powered Garden Business Portfolio Unit, really weighing on the Gardena division during the second quarter. Moving over to construction. A positive 5% sales growth attributable to all business portfolio units and attributable to all geographies. So growth across the board in construction. So very, very pleased to see that and very pleased to see the rebound in the construction division. particularly happy in that that the most profitable BPU is sawing and drilling where we saw good improvements particularly in power cutters strong growth in Q2 also very clear strategic area for this group is our aftermarket development and in the construction division we actually had a record aftermarket quarter in construction So the initiatives we implemented and we talked about during the strategy launch are really starting to come through. And I'm very, very pleased to see the development in the sawing and drilling business portfolio unit as well as aftermarket in the construction division. Tariff refunds, relatively speaking, very, very high into the construction division. That was some 99 million SEC. And the construction division is somewhat more heavily impacted by the inflationary pressures that are impacting raw materials and logistics. The timing of that is impacting construction much earlier than the other two divisions. At the same time, from a relative perspective, a much higher exposure to the U.S. and therefore a higher impact from FX hitting the construction division. One final point to call out, of course, we announced the intention to exit the stone diamond tool business during the remainder of 2027. That continues to have a dilutive effect onto the margins of the construction division. That is our 80 basis points that we see hitting the Q2 result. As we expect to continue and finalize this exit during the remainder of 2027, and then it will become EBIT margin accretive to this division. At that, I would like to pass across to Terry.

Thank you, Glenn. Good morning, everybody, from my side as well. The Q2 EBIT margin improved by some 20 basis points to 13.6%, delivering an EBIT of 1,950. There's a couple of big items in there which we should walk through just to get a better understanding of how we've landed at the 1,950. Thank you very much. Thank you very much. We have lower sales in the quarter and we have underabsorption in the manufacturing sites. So there's a volume impact approximately half of the 660. In addition to that, we have unfavorable mix from a product perspective, but also from a geographical perspective. As Glenn referred to earlier, North America has grown and Europe has declined. And from a profit perspective, that's an unfavorable mix. We are more profitable in Europe than we are in North America. And then finally, we have some inflationary pressures, the cost inflationary pressures, particularly around raw materials, logistics, and of course, some other costs as well. Kost Savings Programme Thank you very much. A modest price increase of some 45 million in the quarter two and some limited transformational investments. We remain quite cautious. It's highly uncertain times and we were quite limited on some of our investments in that area. POTENTIAL TARIFF REFUND Thank you very much. So, moving on to the year to date, a little bit of a mirror image on the left-hand side. We've improved our operating margin by some 90 basis points to 12.9%, 3.7 billion of EBIT, just shy of 3.7 billion. So taking it from the left to the right, as I've just talked about previously, negative volume impact in quarter two is really what has carried into the year-to-date perspective. We didn't have so much of a negative in quarter one. So those themes that I talked around in the quarter two bridge really are the ones that are applying here. Thank you very much. Thank you very much. cost savings year to date very well progressing 630 million year to date again just to give you a feel of how we see this for the year with our ambition to accelerate our cost out program to 3 billion over the next three years we believe we will directionally land at 1 billion of cost savings during 2026 Modest price increases. It's a very challenging market out there. There will perhaps be some smaller price increases to reflect the Middle East inflationary pressures. But at the moment, we have a modest price of 95 million. Continue to limit our transformational initiatives, some 80 million year to date. And that will remain on that kind of run rate for the rest of the year. Currency. We have 90 million negative currency headwind so far in the year to date. Again, just to give you a little bit of an outlook for the rest of the year. We expect relatively flat currency during Q3 and a small positive in Q4. But overall for the year, we will still have a negative currency impact in the business. Tariffs. We have, as I said earlier, received the 240 million tariff refund. We have incurred additional tariffs of 95 million year over year. So we have a net effect of positive of 145. As Glenn said earlier, we incurred those tariff costs during quarter one of this year and also last year as they started to kick in. So those tariff refunds are recognized in our COGS. again just to give you a little bit of an outlook our tariff refund claim is slightly higher than the 240 million we have received however the majority has been received now so with regards to tariffs we don't expect significant changes for the rest of the year we may get some further refund but it's highly uncertain and we have to wait and see So that brings us to the 12.9% margin year-to-date. Cash flow. I was particularly pleased about cash flow in the quarter. Cash is extremely important to this business. We continue to stay focused in this area, and we delivered a positive free operating cash flow of some 3.9 billion in the quarter and 2.8 billion year-to-date. And really the main factors driving the positive development into quarter two was the reduced capex levels and the improvement and the change in the networking capital from Q1 to Q2. So very good development there. Thank you very much. Thank you very much. Thank you very much. Thank you very much. Thank you very much. So we continue to work on our net debt and we continue to do the right thing here on our balance sheet. Maturity profile is healthy. I think you can see in the chart there that's in good shape. We did renew a 2 billion bilateral RCF by a further five years recently. And we were able to amortize a 500 million bond just last month in June. So again, all good activities helping with our debt position and debt profile. And finally, just to mention, our S&P credit rating remains at BBB-, with a stable outlook. So we feel in a good position there. With that, Glenn, I pass it back to you.

Despite that, we saw a good growth in North America, and that is a continuation, so we're very happy with that. Putting it in the context of the quarter, of course, lower volumes do have an impact onto the margin. However, we continue to execute on our cost-out program at a higher pace than we actually initially envisaged, and we need to do that in order to offset the currency headwinds and particularly the raw material headwinds that we're seeing. Great to see the cash development as Terry just presented, really coming through from a little bit of a weaker Q1 as a result of higher receivables, but really coming through into Q2. So a very, very solid cash position that we're very, very happy with. But most importantly, our strategic execution, we're very, very much on track. I want to leave you with that message. We've took some very firm decisions on cost out during the second quarter. supply consolidation around logistics, closing down warehouses, moving manufacturing, and being very, very clear on our strategic portfolio management. We will continue to do this, and we'll continue reporting back as we take these decisions, but very much on track with what we said from our strategic plan and journey. At that, I pass over to Emily.

Thank you, Glenn, and thank you, Teri. So now it's time to start the Q&A session. And as always, you can ask your questions on the conference call and you can also write them in the web interface. So with that, operator, please go ahead.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question is from the line of Iverson Frederick with ABG. Please go ahead.

Thank you. Good morning. First, maybe on the gross margin, when we strip out the tariff refund from COGS, it seems like it's down three percentage points on the gross level. And then you're obviously quite helpful with all the pieces. But if you could give us some more granularity on the different pieces to the bridge, it will be helpful, I guess. With raw mats, logistics, you call out the geographical... mix and some FX, but yeah, if you could give us some more help with the building blocks.

Yeah, I mean, as I explained in the EBIT bridge, of course, we had a significant negative impact through volume mix and inflationary pressures. And all of those really impacted the COGS and the margin. So, as I said, approximately half of the 660 was impacted through the volume and under-absorption that we had. IMPACT OF THE INFLATIONARY PRESSURES THAT WE'VE INCURRED ARE MORE OR LESS INTO THE COG SIDE OF THINGS, THE RAW MATERIALS AND SOME OF THE LOGISTICS. SO THAT HAS REALLY ALSO DRIVEN IT DOWN. AND THEN FINALLY THE MIX. AS I SAID EARLIER, THERE IS A MIX IMPACT HERE AS WELL. EUROPE, As a region, it's a more profitable business to us than North America. Of course, it's great to see North America growing and we will continue to drive that growth. But from a group perspective, of course, it's different into divisions and different segments. But directionally, the mix of the geographical is unfavorable for us with North America growth, Europe down. And then, of course, the product mix as well. categories such like water and having a negative decline impacts the margin as well. So there's a lot of moving parts that sit within that. But hopefully that at least gives a little bit more transparency.

Yeah, absolutely. Thanks. Very clear. And then jumping to robotics and then more specifically maybe on the Husqvarna branded robotics. You grew double digit in Q1. Good contribution, I suppose, from the 300 and 400 series. And now it sounds like a small decline in Q2. First, maybe if you have a view on the sellout level, and second, if you have any sort of granularity to give us in terms of the inventory levels in the trade at the moment, if you have one.

Yeah, I can take that, Frederik. So firstly, we actually saw a growth in Q2 in Husqvarna-branded robotics. It wasn't at the level of Q1, but we did see a growth in Husqvarna-branded robotics. So I think that's important to see. And therefore, we see a good growth through the first, albeit single-digit growth, through the first half year. The sell-out is... is reasonable, very well received on the new product launches, particularly the 300 series is very well received by customers, and we see a good sell-out of that SKU in particular, really accounting for a big part of our sales now. When I look at the inventory in the trade, I would say there's a couple of standouts. It's much higher in Germany, it's higher in the US, and the rest of Europe, I would say, it is normalized. There's really a couple of markets that are standing out here. US in particular and Germany where it's higher. But the rest of the markets, I would say, are pretty much normalized image levels.

Okay, good. Thanks. Then maybe an integrated one. But on the 3 to 350 million headwind from the Middle East inflation, just to clarify, that's raw mats and logistics, right?

Yes. Predominantly, yes. Two-thirds raw mats, one-third logistics, roughly, Frederik.

Right. And I believe you guided after Q1 for 200 raw mats. So yeah, that didn't really change despite the recent fluctuations. Am I missing?

No, you're correct. We previously guided on 300, 200 raw mats, 100 logistics, and we're saying 300 to 350. So it's pretty much the same and pretty much the same split between the two areas.

Okay, good, thanks. And last one, maybe a quick one from me before I jump back. On the strength and balance sheet in terms of net financials on a sort of annualized basis, what's a good level for modeling going forward?

I would say where we are now is probably going to be appropriate. I don't see us fluctuating too much from where we are now. I would like to say this is pretty much about right. So I would model on the recent development.

Okay, good. Thanks. That's all.

Next question, please.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from the line of Tupac Igor with DNB. Please go ahead.

Yes, thank you. I just wonder in terms of the tariffs, given that they are split in different phases, if the tariffs that you recognize, is that for phase one and phase two, or what's included in that, so to say?

I think we've actually been quite transparent with what numbers we have already disclosed. I think the way to look at it is our overall tariff claim is larger than what we have received. However, it's very much uncertain. There's a lot of moving parts. There's a lot of backwards and forwards with the US government on these claims, etc., Thank you very much. PRACTICE PRACTICE PRACTICE Yesterday, there was talk around Section 301 for Brazil, 25% tariff starting. So again, it's highly uncertain. We navigate as we go.

Okay, thank you. And can I just ask you a little bit more? It's a broader question, of course, but what is your strategy in terms of pricing going forward? I mean, I assume that it is, of course, hard to increase prices. But yeah, can you relate anything to historically how it has developed and how long it usually takes for you to, you know, push forward prices, etc?

Yeah, you know, historically, we would put annual price increases through. But of course, in the recent years, that's changed given how many headwinds we've been facing. Thank you very much. as a result of some of those raw material headwinds. So we will aim to put price increases through. And I expect over time we still have a positive net improvement by way of price. At the same time, we've got to stay relevant and competitive. So that's always the balancing point here, that we stay relevant and competitive and how much premium we can take. But as a market leader, I do expect price increases.

Okay, fair enough. Thank you. That was all from me.

Thank you, Igor. So we have one question from the webcast. It's from Stefan Stjernholm, Handelsbanken. So how is profitability for Husqvarna auto mowers developing in H1, up, down or flat, year on year?

Yeah, I can take that. There is not a big movement. It is not up, Stefan, that is for sure. It's a very EBIT margin accretive segment for us, as you know. And, of course, we continue to look at this. It is slightly down as a result of some price adjustments we made for this year. We adjusted price on average 5% on some of the older SKUs, some of the newer SKUs not so much. Some of the new technology, of course, adds cost pressure into some of the units that we need to continue working with. But I would say slightly down, Stefan, overall through the first half of 2026.

Maybe just to add to that, Glenn, that's also where we can focus on driving some cost out as well with the raw materials and such like as well. So whilst the price comes down, we also look to address our cost structure of robotics.

Yeah, very valid. So we see more savings potential in that area maybe than the rest of the core range.

Thank you. So operator, do we have any further questions?

There are no further audio questions.

So with that, then I will hand over to you for some final, for the closing.

No, thank you. And first and foremost, the gentleman to my left, I want to say a big thank you to. This is Terry's last quarter. We've worked together for some 16 and a half years, so a big thank you to Terry, being a great support to this group and to me personally. So thank you. But just as a final closing comments, we continue to deliver and execute our strategy. Aftermarket is going to be fundamental. We've seen a good growth so far this year, particularly in the construction division. We're working aggressively on the cost out. And as such, we increase our ambitions around the timing of that. And we want 3 billion SEC fully effective 2028. And we continue to take bold decisions and clear decisions when it comes to our portfolio. So really executing on the strategy. At that, I want to wish you all a fantastic summer and look forward to seeing you in Q3. Thank you.

Thank you.