Husqvarna AB (publ)

My name is Emelie Alm and I'm joined here today by the group's CEO Glenn Inston and also by our new CFO Patrik Jonsson. We will go through the presentation and after that we will have a Q&A session. You can ask your questions on the call on the conference call and also on the webcast interface. So with that I would like to leave over to you Glenn.

Thank you, Emily. First of all, a warm welcome to you, Patrick. Great to have you alongside. And a warm welcome to everyone who's listening in. So let's jump into our Q3. Of course, Q3 is a seasonally smaller quarter for the Husqvarna Group. Our two key quarters being Q1 and Q2. Really starting off that we continue to execute on our strategy. We've had successful product launches during the course of 2026, and we continue to broaden those product launches in the presence in the various channels that we're operating in. So really broadening our channel exposure as well. We talked previously about a large cost savings program that I'll come back to, but that is very much on track. We've also talked about becoming more asset light in our setup, our footprint, and again, we'll come back to that later in the presentation, but some really good examples how we're really initiating a more asset light approach for the Husqvarna Group. That said, we are operating in a very challenging market environment. Particularly, Europe has been affected. Weak consumer sentiment and also some very dry, I would say drought-like weather conditions. However, very pleased to see good growth in North America across all three divisions. The lower demand in Europe has really affected the business by having lower volumes and lower volumes into our business has meant that we've had, of course, lower production volumes. We've also actively driven down our inventory and therefore had a net further volume reduction into our manufacturing facilities. During the third quarter, and we mentioned this in Q2, we have seen cost headwinds, particularly as a result of the Middle East crisis that we see a cost inflation impacting the business. But our cost out program is going to be even more imperative to offset those cost headwinds. despite all of those headwinds I'm very very pleased with our cash generation third quarter we're actually on par with Q3 last year with some 2.4 positive cash in the third quarter so I'm very pleased with that and we continue to reduce our net debt now down to some 9.4 billion So some of the more strategic highlights of the quarter. I mentioned in the intro there that we continue to work with our footprint and our asset-light activities. This we will continue to do, but I thought it'd be very good to bring some flavor of some of the examples that we've actually executed on or decided upon during the course of Q3. We mentioned already in Q2 that we were looking at the Gardena manufacturing footprint in Europe. And by that, we are moving certain activities from Germany into Czech. This will have full effect in season 2029. And this is a large effort and that is ongoing as per plan. During Q4 2025, we talked about closing our Brasta facility here in Sweden. That again continues according to plan and that will be finalized during Q1 2027. This quarter, and as recently as this week, we've announced actually the outsourcing of certain battery products under the Husqvarna brand from our facilities in Europe, and we're going to outsource them to facilities in Asia, both our own facilities as well as third-party facilities. We continue to drive a very clear asset-light plan, but also to improve our competitiveness. A key part of our strategic development now is how we're going to really refine and strengthen our portfolio going forward. During the course of the quarter, we announced the discontinuation of the stone diamond tools business within our construction division. That actually is part of our concrete sawing and drilling business portfolio unit and that will actually improve the profitability of that business portfolio unit. That goes very much in accordance with our previous announcement and is going according to plan. We also talked last time we met about a strategic review of our powered garden business portfolio unit within the Gardena division. This again, we either want to improve the profitability or find alternative options. We will come back to you during the course very, very early in 2027 with our final direction on that. We've also been investing very, very heavily, of course, in our professional robotic lawnmower range. I give a little bit of flavor of this. During the course of Q3, we've done some fairly heavy marketing investments to really boost The awareness of the professional robotics range and particularly the Husqvarna brand and how we're bringing this to life. We were actually the title sponsors of the British Masters, Husqvarna British Masters, which is a key event on the DP World Tour, a large golf event. It is really, really, really bringing Husqvarna and golf into the same sentence. We're very, very pleased with the awareness that created and will continue driving such activities. What it really does is bring a proof point that our products can work in the most precision grass cutting areas. And that is what works. So in that event, it was Husqvarna products, our Siora units, as well as our 500 series products that cut the entire fairways of the belfry in the UK. So that is really proof in action that our products are working in the toughest and the most technically shortest grass growing conditions that we would have. So a real proof point. We're very, very pleased. What is also very encouraging in golf is, of course, the awareness increases, but we're still in a fairly limited number of golf courses today. Some 2,000, just over 2,000, and around 38,000 globally. So there's a huge penetration ahead of us. I'm going to continue driving towards that penetration. When people use our products, the retention rate is very, very high. It's actually 99%. so most people when they use our products in the golf setting retain those products so going forward it's very clear we need to drive a two-prong approach increase awareness and penetration and therefore more customers but also drive even more expansion with the customers we already have and we see that actually happening that most of the customers we have are actually doubling their product purchasing from us So more customers and expanding the product range with the customers we have. Also aftermarket is a key differentiator when it comes to our strategic direction. I'm extremely pleased to see actually within our construction division, of course 100% professional facing, that we've now seen 15 consecutive quarters of growth when it comes to aftermarket. Very clear actions and very clear direction ahead and clear path. So great job there. I'm going to continue driving that. And we see great high single-digit growth over the past two to three years within that area. Of course, we need to take it even further and make sure we get that growth into the rest of the division group, particularly the Husqvarna Forest and Garden Division, and continue driving initiatives like further customer support, enhanced service capabilities, and really expanding our offering, digital offering, lease offerings, and everything else that can really support our end customers to become even closer to the Husqvarna group and our offering. Cost-out program. Close to one year ago, we announced a 4 billion SEK cost-out program. This is a big initiative. Then we came back during the Q2 report and actually said, okay, of the 4 billion, we expect some 3 billion of that to be effective by the end of 2028. So roughly speaking, 1 billion SEK per year, 26, 27, 28. We reiterate that. We're actually at over 900 million SEC through the first three quarters of this year with a strong pipeline of initiatives. It's very much needed given the cost headwinds that we've seen, particularly in Q3, and will continue to execute on our cost-out program. It is really five key areas. It's sourcing in a smarter way. It's outsourcing when it comes to some of our manufacturing footprint as well as moving things around within the group. It is using third parties. It's using third parties when it comes to logistics. It's actually making ourselves more efficient from an organization perspective. And last but certainly not least, it's actually accelerating how we actually design our products and the real enhancing the design to value proposition that we have. We must go faster. We've got some great proof points already in 2026 of us bringing products to market much, much quicker than we have done in the past. And we'll continue to drive this as a normal part of our DNA in the Husqvarna group. Isolated Q3, we had some 300 million SEC of savings. So again, we see a good pipeline of savings. What I do want to say is during the first nine months of this year, we've had some 450 million SEC of items affecting comparability. I really want to call them out because that is a proof point that we're acting and taking out costs from this business. Thank you very much. So, if we look at the sales development in the third quarter, we actually had an organic sales decline of 5%. As reported, that was actually minus 2% and there was a currency positive or currency effect there of 3%. So minus 5% from an organic like-for-like perspective. The decline came in the Husqvarna Forest and Garden Division minus 10%. Largely the result of those negative consumer sentiment and the particularly weighing on demand also coupled with the adverse weather conditions for lawn care products. So minus 10% in Husqvarna Forest and Garden Division. However, within that, strong growth within North America. Gardena actually had a very good quarter. We had a plus 8% with a double-digit growth in watering. I'll come back with a little bit more flavor when we get to the divisions. Construction division was largely flat, but again with some very strong growth pockets. weak conditions in Europe across the board with some positive tailwinds, particularly on the watering segment, benefiting Gardena, but also a very, very positive development, all three divisions showing growth in North America. And that we start to see as a positive trend that we've seen now for a couple of quarters. So very, very good to see the positive continuation in North America, which is a key market for us. Patrick will come to much more detail on the earnings later in the presentation. Of course, Q3 has been a challenging quarter as I started with, some minus 246 million SEC of operating income. The main impacts here are lower volumes, lower demand, lower volumes into our supply chain system. That said, as I mentioned in the intro, we've also took a conscious decision to put even lower productions through our facilities to drive down the inventory. So really reducing the absorption benefit in the factories. And again, it's a conscious effort we took and we'll continue driving down inventory at the expense of the P&L if that's what we need to do. We have seen certainly pressures coming during the third quarter that started increasing as a result of the Middle East crisis, inflationary pressures, particularly impacting raw materials and logistics. So volumes and inflationary pressure have really been the headwinds that have impacted our Q3 earnings. If we look now onto the more granular division level, hosvarna forest and garden, I've mentioned this, of course, heavily impacted from the negative consumer sentiment in Europe. Also, of course, the unfavorable weather conditions in Europe, particularly in the first half of Q3, really dry conditions impacting grass care products, not just robotic lawnmowers, but also our front-mounted riders. So that's really impacted the sales of wheeled as well as robotic lawnmowers in Europe. However, as said, good growth in our North America part of the forest and garden division. So very much, as I said for the group, impact of lower volumes and cost inflation and an unfavorable mix actually impacting the forest and garden division, driving down into a lower operating result than we had in the prior year. I mentioned a lot about golf earlier, of course, and that is where we're really executing on golf in the Husqvarna Forest and Garden Division, some clear proof points going forward that we can really succeed. As part of the golf announcement and as part of the accelerated marketing activities in Q3, we also had some very good product launches in Q3 supporting that offering. It's not just grass cutting that we're doing. We're also looking at further application know-how going forward. One of the big launches in Q3 that will enhance the offering is products like dew removal. So we're taking the dew away from the greens. So now we start to have applications beyond only mowing in the professional robotics area. Gardena Division, definitely the standout success of the quarter, plus 8%, and that is actually driven from a double-digit growth in watering, positive in Europe and positive in North America. Of course, the drought conditions I mentioned that have impacted the group, and particularly impacted the Forest and Garden Division, it's been positive when it comes to watering, so the dry conditions have supported our watering demand. What I'm really pleased to see is not just a demand-driven, but actually a market share improvement. We've seen a market share increase in France in particular, in watering, and where we have a very strong market position in Germany, we've actually maintained our strong market positions across all of our core Gardena categories. That's really, really good to see. We've got a clear turnaround case that we've talked about in Gardena, which is our powered garden BPU. We continue to see a decline there. It's a double-digit decline. And again, we will come back to you very early in 2027 with our path forward with the powered garden business portfolio unit. So it's very much under a clear strategic review process as we speak. So the earnings within Gardena division, positive volumes and a positive product mix from the strong watering that really enhanced the earnings. We see some dilution effect from the weak powered garden business portfolio unit and actually this division had a slightly positive effect from FX. Construction division was actually flat in Q3, but within the flat overall, we actually see a positive North America and a decline in Europe. And then within the product setting, we actually see a good improvement when it comes to power cutters. That's part of our sawing and drilling portfolio. So we see a good improvement there. But as I mentioned in the strategic priorities, a very, very strong improvement or a continued strong improvement, I should say, when it comes to aftermarket. So a strong professional offering really connecting with our end customers and driving a much more strong aftermarket offering. Earnings, however, were affected twofold. Lower volumes, because we've had strong price increases in the construction division, so therefore lower volumes in the system. That's had an impact onto the earnings and our, I would say, factory throughput rates. but also a negative impact from FX. And also, this is a division that is relatively more impacted by the tariffs because of the exposure geographically. So more of a negative impact from tariffs impacting construction vis-a-vis the whole group. But all in all, a good development from a demand perspective within the construction division. And at that, Patrick, I pass across to you, once again, a warm welcome.

Thank you, Glenn. Really, really positive to be here, and it feels great. I'm excited and honored to be here presenting the first report for Husqvarna for me. I started mid-September, so still early days, but it has been a really good first month, I would say. Very good reception from all colleagues around the world. And that feels really great. We're also a relatively new management team, I would say. And I think Glenn has done a good job mixing in different kinds of personalities and competencies. So that feels really good. So we're all eager to continue to push on with all our activities and deliver profitable growth and value creation going forward. But for now then let's dig into the numbers and I start directly with a Q3 EBIT bridge and all in all then we profit or EBIT declined with almost 400 million so it's not a strong quarter. And if we start with the negative components in the bridge, the biggest one, the largest one is volume and mix. And Glenn already talked a lot about that. But sales volume, including if you include price is around minus five. But then if you exclude price, we are actually volume wise on around minus six. And on top of that, we have the inventory changes where we deliberately took down inventory this year with around 300 million. And last year we actually increased inventory. So that's a swing or delta of around 900 million, of course, impacting production volumes a lot. And also included in this big component, we have also negative mix effects. We are, of course, glad that we increase sales in North America, but from a short-term margin perspective, it's actually a slight disadvantage. slight headwind and also looking at the product dimension where we have a larger than average decline on the robotic side that also affects margin negatively. So all in all, this has a huge impact of all your mix component in the quarter. The second biggest we have labeled then cost inflation and other and 75% of this component relates to really high price increases on logistical costs, raw material, plastic, steel, on the back of the Middle East crisis. And then you have also general inflation, increasing the cost levels. So all in all, that's 75% of that component. And the remaining 25, I would say, relate more to positive one-offs actually last year.