shaping great...q2 2020 results presentation july 16, 2020 henric andersson, ceo glen instone, cfo...
TRANSCRIPT
Q2 2020 results presentationJuly 16, 2020
Henric Andersson, CEO
Glen Instone, CFO
Shaping
GREATexperiences
Q2 2020 results presentationJuly 16, 2020
Henric Andersson, CEO
Glen Instone, CFO
• Demand accelerated quickly as markets gradually reopened
• High customer interest in lawn and garden care equipment
• Good inventory management
• Strong financial position, net debt decreased by SEK 3.6bn
• Improved product mix
• Temporary cost avoidance and cost efficiencies
• Strong offering with new models for the season
NET SALES
13,482m (13,789)
GROWTH*
+3%
DIRECT OPERATING
CASH FLOW (H1)
2,330m (2,084)
ROBOTICS AND BATTERY
16% of group sales
EBIT
2,191M (2,125)
MARGIN
16.3% (15.4)
Record operating profit in Q2
SEK
*Adjusted for exit of Consumer Brands business and changes in exchange rates.Roundings - all items are stated in SEKm and, accordingly, rounding differences can occur.
2
Strong portfolio with high performers
and new introductions
EPOSAutomower® 305Watering solutions Watering Controls Hoses / reels
Pro battery Husqvarna AMCHand tools SmartGuardAquaBloom
3
Net sales decreased 2% in Q2,
adjusted for exits and FX
• Demand accelerated as markets
gradually reopened – strong growth
in June
• Good performance in key categories
• Consumer Brands exits of SEK 550m
Operating margin at 13.4% in Q2
and 8.0% for R12*
• Decreased volumes and production
rates – lower cost absorption in
factories
• Temporary cost avoidance activities
• Currency impact of SEK -25m in Q2
Husqvarna Division
8,6888,042
Q2 2019 Q2 2020
Net Sales
1,2171,078
Q2 2019 Q2 2020
EBIT
Q2 2020 (SEKm)
27,519 25,355
R12 Q2 2019 R12 Q2 2020
Net Sales
Rolling 12-months (SEKm)
2,353
2,032
R12 Q2 2019 R12 Q2 2020
EBIT*
13.4%
8.0%
14.0%
8.6%
-2%**
* Excluding items affecting comparability** Net sales growth adjusted for exits and FX
4
Net sales increased by 24% in Q2,
adjusted for exits and FX
• Strong growth as markets reopened
• Positive effect on consumers buying
patterns related to impact of Covid-19
• Particularly strong growth in watering
products and watering systems
Operating margin at 26.3% in Q2
and 13.5% R12
• Good leverage on volume growth
• Temporary cost avoidance activities
• Currency effect of SEK -40m in Q2
Record quarter for the Gardena Division – to some
extent driven by Covid-19 stay at home trend
3,373
4,011
Q2 2019 Q2 2020
Net Sales
703
1,054
Q2 2019 Q2 2020
EBIT
8,3139,058
R12 Q2 2019 R12 Q2 2020
Net Sales
867
1,224
R12 Q2 2019 R12 Q2 2020
EBIT*
Q2 2020 (SEKm)
Rolling 12-months (SEKm)
26.3%
13.5%
20.8%
10.4%
+24%**
* Excluding items affecting comparability** Net sales growth adjusted for exits and FX
5
Net sales decreased by 18% in Q2
adjusted for FX
• Clearly improved market situation in
May and June compared to the start
of the quarter
• Positive trend in all regions in line
with reopening of markets
Operating margin at 9.9% in Q2
and 11.0% R12
• Lowered volumes and
manufacturing levels
• Solid execution of temporary cost
reduction activities and lowered
inventory levels
• Good product mix
• Currency effects of SEK -5m in Q2
Construction Division
1,720
1,413
Q2 2019 Q2 2020
Net Sales
267
140
Q2 2019 Q2 2020
EBIT
6,058 6,026
R12 Q2 2019 R12 Q2 2020
Net Sales
751664
R12 Q2 2019 R12 Q2 2020
EBIT*
Q2 2020 (SEKm)
Rolling 12-months (SEKm)
9.9%
11.0%
15.5%
12.4%
-18%**
* Excluding items affecting comparability** Net sales growth adjusted for FX
6
2%
4%
6%
8%
10%
12%
1,000
2,000
3,000
4,000
2013 2014 2015 2016 2017 2018 2019 Rolling12M
Operating income* Operating margin*
Our profitability improvement trajectory
*Excluding items affecting comparability
SEKm Margin, %
9.2%
7
Consolidated income statement
• Gross margin +0.8 ppts* in Q2
– Improved product mix notably
Watering growth and Consumer
Brands exits
– Lower manufacturing volumes
– Negative FX
• SG&A
– Temporary cost avoidance
– Efficiencies
• Operating margin at 16.3% (15.4)
• Reduced net financial items -
lower interest rates and lower
debt levels in USD
• EPS up 4% in Q2
8
SEKm
Q2
2020
Q2
2019
Jan-June
2020
Jan-June
2019
Rolling 12
months
Net sales 13,482 13,789 25,690 27,440 40,526
Cost of goods sold -8,863 -9,176 -17,264 -18,724 -28,288
Gross income 4,619 4,613 8,426 8,716 12,238
Gross margin, % 34.3 33.5 32.8 31.8 30.2
Selling expenses -1,789 -1,952 -3,657 -3,861 -6,781
Administrative expenses -640 -550 -1,167 -1,092 -2,126
Other operating income/expense 2 14 14 6 205
Operating income* 2,191 2,125 3,616 3,811 3,719
Operating margin*, % 16.3 15.4 14.1 13.9 9.2
Items affecting comparability 0 0 0 -42 -183
Financial items, net -78 -153 -187 -313 -442
Income tax -547 -466 -870 -810 -654
Income for the period 1,567 1,506 2,559 2,646 2,441
EPS, after dilution, SEK 2.74 2.63 4.47 4.62 4.27
*Excluding items affecting comparability, note gross income is including items affecting comparability
Strong direct operating cash flow
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
Q1 Q2 Q3 Q4
SEKm
2020 2019 2018
9
27.8%
28.5%
20%
22%
24%
26%
28%
30%
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Q42019
Q12020
Q22020
Target level <= 25%
26.5%26.8%
Slowdown impacting our capital efficiency
– but positive development in quarter
10
Consolidated balance sheet
• Lower inventory levels compared
to last year. SEK ~1.5bn
improvement.
• Receivables increased related to
strong quarter end
• Net debt of SEK -7.7bn (-11.3)
– Cash from operations +4.4bn,
excl financial investments
– Cash flow from financing -0.2bn
– Currency effect +0.3bn
– Dividend paid -0.9bn
• Solid cash and short term
investments position of SEK
6,9bn. Undrawn RCF of SEK 5
bn.
11
SEKm
June 30
2020
June 30
2019
December 31
2019
Non-current assets 23,392 23,025 23,739
Inventories 8,766 10,275 10,858
Trade receivables 7,293 6,754 3,620
Other current assets 1,641 2,088 1,853
Cash and short term investments 6,926 2,116 1,911
Total assets 48,018 44,258 41,981
Total equity 19,353 17,395 17,283
Borrowings 11,418 9,411 10,025
Lease liabilities 1,535 1,690 1,761
Provisions for pensions 2,914 2,391 2,622
Other provisions 3,213 3,045 2,927
Trade payables 4,407 4,805 4,099
Other current liabilities 5,179 5,521 3,264
Total equity and liabilities 48,018 44,258 41,981
Net debt / EBITDA (based on average net debt)
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q22013
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
Times
1.8x
2014 2015 2016 2017 2018 2019
Average net debt / rolling 12 months EBITDA, excl. items affecting comparability
2020
12
Effective COVID-19 strategy
Care for
our
people Secure
business
continuity
Contribute
to society
• Health and safety of our employees and
securing business continuity are our top
priorities
• Temporary cost avoidance activities –
gradual increase in paused strategic
Initiatives for strong start in 2021
• Continuing to closely monitor and ready to
act in the unfolding Covid-19 situation
13
Strategy execution
• New business strategy is the base for
long-term execution – certain areas
will be sharpened
• Continuing of transformation activities
and strategic initiatives
“Above industry growth and margins” Sustainovate
Operational & Commercial
excellence
Customer
experience
Robotics &
battery
Services &
solutions
A winning
core
14
Professional robotic lawn mowing
• Exploring robot as a service
concepts for professional green
space segment
• >150 pilot units in
Sweden & Germany
• EPOS – our new satellite-based
solution allows for mowing with
virtual boundaries
• >100 pilot units in core markets –
SE, DE, FR & U.S.
15
Co-founder of 18V consumer battery alliance
• One of the largest cross-brand battery alliances of
leading manufacturers worldwide
• One battery across brands and devices all
around the home
• 20 million compatible batteries already out in the
market
• For season 2021, Gardena is converting its
entire 18V range to the “Power for All” Alliance
battery system
Important part of the Group’s strategy for 18V consumer battery solutions
16
New sustainability targets – Sustainovate 2025
• Joined the Business
Ambition for 1.5°C
• Updated Carbon target
approved by Science
Based Targets Initiative
• Sustainovate Open
CARBON CIRCULAR PEOPLE
Reduce CO2emissions by –35% across our
value chain
Empower5 million
customers and colleagues to
make sustainable choices
Launch 50new circular innovations
17
Key management changes
Robert
McCutcheon
President of
North American
Husqvarna Division
Karin
Falk
President Construction
Division, part of Group
Management Team
18
Husqvarna Group – summary
A record quarter
– Demand accelerated quickly when markets gradually reopened
– High customer interest in lawn and garden care equipment
– Good effects from temporary cost avoidance activities
– Demand continued to stay strong at the start of Q3, although
we have passed the peak in the lawn & garden season
Effective Covid-19 strategy– Health and safety of our employees is our priority
– Manufacturing and warehouse sites in operation
– Strong cash flow and financial position
Execution of strategy– Gradually increase of strategic initiatives in second half
– Updated business strategy from 2019 is the base forlong-term execution, with sharpened components
19
www.husqvarnagroup.com