Annual Report 2019 Husqvarna Group (PDF)

Fairway cutting area HUSQVARNA GROUP ANNUAL REPORT 2019

Fairway cutting area

Stay-out zone

Stay-out ANNUAL REPORT 2019 zone Shaping great

Head offi ce Husqvarna AB (publ) / Mailing address: Box 7454, SE-103 92 Stockholm, Sweden experiences Visiting address: Regeringsgatan 28 / Telephone: +46 8 738 90 00 / www.husqvarnagroup.com Registered offi ce Husqvarna AB (publ) Jönköping / Mailing address: SE-561 82 Huskvarna, Sweden Visiting address: Drottninggatan 2 / Telephone: +46 36 14 65 00 Contact CHAPTER 01 / 08

Johan Andersson Investor Relations [email protected] Shaping great +46 8 738 90 00 Åsa Larsson Media Relations experiences [email protected] +46 8 738 90 80

Market data, statistics and market shares are estimates We make a great difference to people who shape green spaces made by Husqvarna Group. and urban environments through our leadership in sustainable, user-centered solutions. With a passion for innovation, we create performance, pride and improved results for customers around the world.

Factors affecting forward-looking statements This report contains forward-looking statements in the sense referred to in the American Private Securities Litigation Reform Act of 1995. Such statements comprice, among other things, fi nancial goals, goals of future business and fi nancial plans. These statements are based on present expectations and are subject to risks and uncertainties that may give rise to major deviations of the result due to several aspects. These aspects include, The formal Annual Report, among other things: consumer demand and market conditions in the geographical areas including the Directors’ Report and lines of business in which Husqvarna Group operates, the effects of currency and the fi nancial statements for fl uctuations, downward pressure on prices due to competition, a material reduction of Cover image: the Group and the Parent Company, sales by important distributors, any success in developing new products and in market- is provided on pages 41–110. ing, outcome of any product responsibility litigation, progress when it comes to reach the PRODUCTION: Husqvarna AB (publ) In 2019, the Husqvarna EPOS™ goals set for productivity and effi cient use of capital, successful identifi cation of growth and Hallvarsson & Halvarsson. technology was launched, To learn more about Husqvarna opportunities and acquistion objects, and to integrate these into the existing business PRINT: Larsson Offsettryck AB, a satellite-based solution for Group’s sustainability initiatives, and successful achievement of goals to make the supply chain more effi cient. Linköping 2020. professional robotic mowing see the Sustainovate Progress with virtual boundaries. report 2019. Contact CHAPTER 01 / 08

Johan Andersson Investor Relations [email protected] Shaping great +46 8 738 90 00 Åsa Larsson Media Relations experiences [email protected] +46 8 738 90 80

CONTENTS

INTRODUCTIONFactors affecting forward-looking statementsSUSTAINOVATE 98 Financial statements – Parent Company 02 ThisHusqvarna report contains Group at forward-looking a glance statements34 Integrating in the sense sustainability referred to in the American 102 Notes – Parent Company 04 PrivateCEO Securitiesstatement Litigation Reform Act of36 1995.Strategic Such statements milestones comprice, among other 38 Sustainovate 2025 110 Declaration by the Board of Directors MARKETthings, AND fi nancial TRENDS goals, goals of future business and fi nancial plans. These statements are and the President & CEO 08 basedMegatrends on present expectations and are subject to risks and uncertainties that may give112 Auditor’s report BOARD OF DIRECTORS’ REPORT 10 riseMarket to major overview deviations of the result due to several aspects. These aspects include, 41 Board of Directors’ Report The formal Annual Report, among other things: consumer demand and market conditions in the geographical areasOTHER INFORMATION STRATEGY 50 Risk management and lines of business in which Husqvarna Group operates, the effects of currency 115 Allocation of the Consumer including the Directors’ Report 14 Next phase 55 Corporate Governance Report fl uctuations, downward pressure on prices due to competition, a material reduction of Brands Division and the fi nancial statements for 18 Targets 61 Internal control over financial sales by important distributors, any success in developing new products and in market-117 Definitions Cover image: the Group and the Parent Company, 20 Business model reporting is provided on pages 41–110. ing, outcome of any product responsibility62 litigation,Board ofprogress Directors when and auditors it comes to reach118 the Five-yearPRODUCTION: review Husqvarna AB (publ) In 2019, the Husqvarna EPOS™ DIVISIONSgoals set for productivity and effi cient use64 of capital,Group Managementsuccessful identifi cation of growth119 Quarterlyand data Hallvarsson & Halvarsson. technology was launched, To learn more about Husqvarna 24 opportunitiesOverview and acquistion objects, and to integrate these into the existing business120 The sharePRINT: Larsson Offsettryck AB, a satellite-based solution for Group’s sustainability initiatives, 26 andHusqvarna successful Division achievement of goals to makeFINANCIAL the supply STATEMENTS chain more effi cient. 122 HeritageLinköping 2020. professional robotic mowing see the Sustainovate Progress 28 Gardena Division 66 Financial statements – Group 124 2020 Annual General Meeting with virtual boundaries. report 2019. 30 Construction Divison 70 Notes – Group 125 Contact Passion for innovation Husqvarna Group is a leading global producer of outdoor power products for forest, park and garden care, watering products and cutting and surface preparation equipment for the construction business. With a passion for innovation, we create performance, pride and improved results for customers.

Important events in 2019 New President & CEO

• Introduced Husqvarna EPOS™ (Exact Henric Andersson has been appointed President & Positioning Operating System) satellite- CEO effective as of April 2, 2020. Henric is currently Introduction — Husqvarna Group at a glance based technology that enables robotic President of the Construction Division and has mowing with virtual boundaries. been a member of Group Management since 2012 and worked in the Group for the last 22 years. He • Presented updated strategy and financial was born in 1973 and has a Master of Science targets at a Capital Markets Day. degree in Industrial Engineering & Management • Strong growth in digital applications from Linköping Institute of Technology. Gardena Smart System, Automower® Connect and Husqvarna Fleet Services™. In total, over 300,000 connected devices are now being managed on the digital services platforms.

• Strengthened the customer offering in surface preparation by acquiring a concrete power trowel business.

Sales distribution Global presence in attractive markets with steady underlying growth.

51% 36% 13%

Europe North America Rest of the world Share of Group Share of Group Share of Group net sales net sales net sales

2019 IN FIGURES (2018 IN BRACKETS) 42.3 3.9 9.3

Net sales, SEKbn Operating income Operating margin (41.1) excluding items affecting excluding items affecting comparability, SEKbn comparability, % (3.2) ( 7.9)

2 / Annual Report 2019 / Husqvarna Group The divisions Husqvarna Group has three divisions that focus on premium products and services with leading brands.

Husqvarna 65%

A leader in forest and garden Introduction — Husqvarna Group at a glance products. The undisputed market leader in robotic lawn mowers. Share of Group net sales

Gardena 20% A leader in watering products, garden hand tools and smart garden systems. Share of Group net sales

Construction 15% A leader in light construction solutions for professionals. Share of Group net sales

12.7 –45 –24

Average number CO2 emission Absolute CO2 emission of employees, thousands intensity reduction, % reduction from product use, % (13.2) (–21) (–8)

3 / Annual Report 2019 / Husqvarna Group Ready for the next phase of our growth journey

Over the past few years, we have successfully developed and strengthened the company’s competitiveness by making substantial changes to our business focusing on profitability and growth. I can say that Husqvarna Group is now well-positioned, focused and ready to take the next step in our journey toward industry-leading growth and profitability.

Our transformation journey in recent years has involved further measures to reduce our cost base, mainly in the

Introduction — CEO statement major investments in new technologies, customer focus Husqvarna Division. and sustainability, which in combination with efficiency Operating income, excluding items affecting compa- improvements across the organization, have created rability, rose 21% to SEK 3,915m. Direct operating cash the conditions for us to become a market and technology flow improved to SEK 3,849m (1,336) driven by strong leader in our industry. We have clearly strengthened cash flow from operations as well as from activities to our technological capacity and capability in such areas improve working capital. The operating margin was 9.3% as robotics, the Internet of Things (IoT) and software (7.9). In light of the temporary market headwinds through development. In total, we have added approximately out some parts of the year and the fact that we continued 300 employees in these fields of expertise alone. In to invest in key growth areas, the margin improvement recent years, we have successfully balanced investments clearly demonstrates that our efforts to improve profita- in strategic growth areas with efficiency programs in our bility were successful, even though we didn’t reach our existing operations. financial target of a 10% operating margin. Equally important was the decision to concentrate our efforts on clearly defined end-customer segments Higher ambitions for Sustainability and our core brands, Husqvarna and Gardena. A direct We are convinced that credible market leadership also consequence of this decision was the dissolvement and requires sustainability leadership. We integrate sus- discontinuation of business in our financially underper- tainability in our operations through our Sustainovate forming Consumer Brands Division in 2018. This allowed program. This has been an integral part of the transfor- us to shift our focus to growth opportunities in the mation journey that has led us to where we are today. Husqvarna, Gardena and Construction divisions. This Investments in battery technologies, robotics and restructuring led us to exit unprofitable product seg- smart connected solutions are just a few examples. ments in 2019 and other low margin business will be Over the past three years, we have shown that we exited in 2020. We have accordingly adapted our man- can decouple CO2 emissions from our own sales ufacturing capacity to the lower volumes. I can confirm growth. I can proudly say that our results have outper- that these measures were successful and that they con- formed our commitments and thereby reduced abso- tributed to our improved results during the year. lute CO2 emissions by 25% 2. Thanks to the success of these efforts, we have now refined our target to even Positive earnings trend in 2019 faster emission reductions to support the new, higher Group net sales increased 3% 1 to SEK 42,277m during the year. The vast majority of the Group’s offerings are Profitability improvement directed to the forest and garden market, which presented a few challenges during the year. Following strong sales growth in the first quarter, the second quar- SEKm % ter – which is the seasonally most important – started on 4,000 10 a cautious note in Europe. During the second half-year, we experienced weaker demand in the US. We man- 3,000 8 aged the temporary market challenges effectively and sales increased during the year. This also confirms the importance of strong brands, a customer-focused offer- 2,000 6 ing and investments in growth segments. During the year, we improved the Group’s profit- 1,000 4 ability. All divisions delivered earnings growth, with the Gardena Division showing particularly strong performance. Combined with growth, efforts in both price 0 2 2013 2014 2015 2016 2017 2018 2019 adjustments and efficiencies in the divisions were the Operating income*, SEKm main reasons for the Group’s improvement as well as Operating margin*, % currency effects. In the fourth quarter, we announced * Excluding items affecting comparability

1 Growth in reported currency, SEK 2 Absolute CO2 reduction across value chain was 25% with baseline year 2015. Corresponding reduction for product use was 24%.

4 / Annual Report 2019 / Husqvarna Group ambitions of the Science-based targets Initiative to A strong core offering limit the global temperature increase to 1.5°C. Husqvarna Group has a strong and profitable core The Group’s sustainability ambitions extend beyond offering in the Husqvarna, Gardena and Construction reducing greenhouse gas emissions. In connection with divisions. Some examples are our leading market posi- the review of our Sustainovate strategy in the autumn, tion in chainsaws, watering solutions and concrete cut- we also set ambitious targets in areas related to a circular ting equipment. We will continue developing our brands economy and for how we can make it easier for people through go-to market concepts, continue with innova- to make sustainable choices – for our users as well as tion and a focus on aftermarket services to create an internally within the Group. even better user experience. Success in our core business creates conditions for increased profitability, and Shaping great experiences – the next phase for financing strategic growth initiatives in new areas. The world is changing faster than ever. The strategy for the next phase of Husqvarna Group’s development clearly reflects that we are ready to embrace the megatrends that are shaping our world – from technology development and climate change to changing customer Introduction — CEO statement values. The key elements of our strategy are a focus on customer experience, services and solutions, robotics and battery technologies, and the continuous development of our core offering. Dedicated efforts in these areas will provide the conditions for delivering growth corresponding to 2 percentage points above the market in general, which is the Group’s new growth target. At the same time, we will build on our culture of continuous cost optimization and strategic growth initiatives, alongside improved profitability in line with our new operating margin target of at least 10%.

New services to enhance customer experience We have established a clear end-customer focus where we develop offerings and services based on prioritized customer segments. Passion for innovation is a key element of Husqvarna Group’s culture and we see it as a basic requirement for market leadership. Innovation is not just isolated to software, hardware and connected Positioned for profitable growth products. The combined development of new business Husqvarna Group’s transformation journey over the models and services is just as important. The aim is to past years would not have been possible without our strengthen the customer experience throughout the professional and dedicated employees. I would like to entire lifecycle of a product while also moving closer to thank everyone for their invaluable contributions along our end-users. In this respect, we can benefit from the the way. As the next phase now begins, I can say that fact that we already have more than 300,000 connected Husqvarna Group is well positioned to achieve industry- products and users. leading growth and profitability. The new strategies and targets provide a clear roadmap and it will surely be an Leading in robotics and battery technologies exciting journey ahead delivering winning customer Our ambition is to continue leading the development of experiences and solid financial results. In January, we robotic lawn mowers and battery-powered products and announced that Henric Andersson will take over as ecosystems. We are focused on leveraging the potential President and CEO, starting in April, 2020. I am very in the fast-growing consumer market for robotic lawn pleased to hand over to Henric. He brings a strong cus- mowers, in both established markets such as Europe and tomer driven business development based on a deep in newer markets such as North America, which is the competence and experience in the Group. largest lawn and garden market in the world. We are the market leader with a strong and differentiated offering of robotic lawn mowers and software. During the year, we had a highly successful launch of the world’s first all- wheel-drive (AWD) robotic lawn mower, which provides superior cutting results for even the most complex lawns. We are also making a strategically important invest- Kai Wärn ment in the professional customer market segment. Our President & CEO latest innovation, EPOS™, enables robotic lawn mowers to work within virtual, and therefore flexible, boundaries. EPOS™ offers significant value for professional customers managing commercial lawns and gardens, urban parks, sports fields and other green spaces.

5 / Annual Report 2019 / Husqvarna Group CHAPTER 02 / 08 Market and trends

6 / Annual Report 2019 / Husqvarna Group CHAPTER 02 / 08 Market and trends

As a leading global supplier of forest, lawn and garden care as well as construction products, the Group is impacted by several megatrends that present both opportunities and challenges. The market has a steady growth rate and includes several attractive high-growth segments.

7 / Annual Report 2019 / Husqvarna Group Global trends are shaping the market A globalized and technology-driven world, demographic shifts and humankind’s impact on the environment and resources. These megatrends set the direction of how society and markets are evolving. Adopting an outside-in perspective helps ensure that the Group’s strategy remains relevant and sustainable. Market and trends — Megatrends

Speed of technology Climate change and resource scarcity Digitalization and rapid development of new technolo- Raised awareness levels of the urgency of addressing gies are impacting all parts of the society and companies climate change is influencing society at all levels—from in all industries. Digitalization opens opportunities for more stringent regulation on energy consumption, to new solutions and business models. At the same time, raised priorities in investment and purchasing it requires the Group to adjust to rapidly evolving con- decisions. sumer expectations. Increasingly, investors seek investment opportunities Digitalization and new technology are transforming that contribute to solving the climate challenge and the way products and services are developed, produced, expect their investment universe to address both their distributed, supported and shared. For example, new short and long-term climate risks. Companies are prior- battery technologies are making batteries a viable alter- itizing equipment investments that support the transi- native for energy storage in a wide range of industries. tion to renewable energy sources, or that have a lower climate impact. Consumers, in turn, are demanding HUSQVARNA GROUP’S APPROACH more sustainable products. In 2019, Husqvarna Group invested SEK 1.7bn in research and development, a large part of which related HUSQVARNA GROUP’S APPROACH to prioritized technology fields, such as software devel- Husqvarna Group has a responsibility to address its opment, battery and robotic technology and energy climate risks and has an opportunity to take a leading efficiency. The purpose is to strengthen the company’s role by supporting the transition to a low-carbon leading position, not the least within robotic lawn energy mix. mowers, battery-powered products and smart garden- The Group has demonstrated that it can reduce CO2 ing systems. This also allows for opportunities to create and build its business at the same time, thereby decou- unique user experiences through connectivity, reduce pling CO2 emissions from the Group’s growth strategy. the Group’s impact on the environment and use of With Sustainovate 2025 – the updated sustainability resources and to develop new functionality and services. approach – the level of ambition has been raised fur- Digitalization is an important tool for achieving effi- ther. The Group’s CO2 target is to decrease absolute ciency gains in the Group’s supply chain. One example emissions 35 percent by 2025 across the value chain, is the use of automation and artificial intelligence in compared to 2015 emissions levels. production, which improves quality, resource use and The Group is addressing other sustainability issues productivity. through innovative solutions as well. Gardena Division, for example, has launched products to help consumers reduce water consumption.

8 / Annual Report 2019 / Husqvarna Group Market and trends — Megatrends

Urbanization and new customer groups Shifting consumer values and purchasing behavior Some 70 percent of the world’s population is expected to Consumers’ purchasing decisions are increasingly live in cities by 2050, compared with 55 percent in 20181. guided by sustainability, ethics, individualism and The rapid economic growth of the past 25 years has expression as well as whether a product or service is meant that an increasing share of the world population is smart and connected or easy and affordable. Their curi- experiencing better economic prosperity. By 2030, global osity about sharing rather than owning products could middle-class spending is projected to triple. In Europe potentially grow the market for new business models. and North America, people over 55 years will account for Digitalization has also entailed a shift in power a larger share of the population than those under 18. toward consumers. People are better informed and can easily obtain information about product functionality HUSQVARNA GROUP’S APPROACH online. The structure of the retail trade is undergoing Husqvarna Group is continuously developing its prod- rapid change and global e-commerce is forecast to uct offering to make it more specialized, quiet and report strong growth in the future. energy efficient, which makes it well suited to an urban lifestyle. The Gardena City Gardening product line is HUSQVARNA GROUP’S APPROACH one example of a range of products that specifically The Group currently has more than 300,000 connected addresses the needs of urban customers. products. The Group aims to strengthen the user expe- A growing middle class with increased purchasing rience and develop closer ties between end-users and power offers greater market potential in emerging the company for instance by developing new services markets. The Group is meeting these changing market and utilizing connectivity. The Group is also exploring demands by expanding in those markets. These are new business models linked to the sharing economy. important growth markets, for instance for the Con- Husqvarna Tools For You is one example where consum- struction Division, which aims to benefit from the ers use a smart phone app to lease battery powered potential increase in construction investments in the garden tools and pay for the time they use them. ever-more urbanized regions of Asia. Husqvarna Group is also striving to increase its The Group has a continued strong focus on robotic online presence. The purpose is to strengthen commu- lawn mowers, which are well suited to meet the needs nication and interaction with end-users and to increase of an aging population, given the robots’ ability to the sale of products, spare parts, accessories and facilitate and carry out tasks that can be a burden for value-added services. older users.

1 (UN) World Urbanization Prospects: The 2018 revision.

9 / Annual Report 2019 / Husqvarna Group Attractive markets with favorable growth opportunities Husqvarna Group is active in attractive markets that historically have shown a steady growth rate of around 2 to 3 percent annually. The Group sees good growth opportunities in areas where new technologies enjoy increasing acceptance, including robotic lawn mowers, battery-powered and connected products.

Market for the Husqvarna and Gardena divisions which explains why these consumer segments remain Market and trends — Market overview The global forest and garden markets are characterized relatively small. Demand is instead mainly driven by as mature with stable growth rates in line with GDP. The commercial end-users and these markets are growing market also offers attractive growth opportunities for steadily. products based on new technology, such as robotic lawn mowers, smart garden systems and battery-powered MARKET SEGMENTS products. The addressable market for forest, lawn and The largest segment in terms of market value is the garden products in regions and segments in which wheeled segment including walk-behind and ride-on Husqvarna Group is represented is estimated at around lawn mowers followed by the handheld segment, of SEK 200bn. which the largest categories are chainsaws and trimmers. Demand is mainly driven by general economic Traditionally, the forest and garden market has been growth factors. Consumer purchasing power and con- dominated by petrol-powered products. The proportion sumer confidence, employment levels and housing starts of battery-powered products is increasing as new battery are examples of economic indicators. There is strong technology and innovations are introduced. These now acceptance of new technology and product innovation represent almost 10 percent of the total market. The fast- in the market, which also supports the growing demand. est growing product categories comprise robotic lawn In addition, weather conditions in a given year can mowers and battery-powered products, such as hand- impact the gardening season and thus affect demand held trimmers, hedge cutters and chainsaws. both positively and negatively. The market for robotic lawn mowers is largely con- centrated in the consumer segment in western Europe. GEOGRAPHIC MARKETS Awareness of and demand for robotic lawn mowers in Europe and North America are the largest markets and other markets such as North America is rising and is together account for around 80 percent of the global considered to have major future growth potential. market in terms of value. Consumers in many of the Another segment that today is relatively small but has larger markets outside of Europe and North America significant growth potential is robotic lawn mowers for do not have the same conditions to garden due to commercial use, such as for sports fields and golf higher population density, different gardening tradi- courses, lawns in commercial areas, hotels and parks. tions and their purchasing power is generally lower,

Seasonality Net sales Operating income Forest and garden products, which represent around 85 percent of the Group’s total sales, are 60 60 55 highly seasonal due to end-user buying patterns. 50 50 The majority of volumes are sold during the spring 39 and summer when most lawn care and gardening 40 31 33 40 activities take place. Because the main markets are 30 30 located in the Northern hemisphere, sales are 20 16 highest toward the end of the first quarter and in 20 20 11 the second quarter. The third quarter generally 10 10 marks the end of the gardening season, given aver- –5 age weather patterns. Demand for forest products 0 0 Q1 Q2 Q3 Q4 tends to be somewhat higher during the second Q1 Q2 Q3 Q4 half of the year. For construction products, demand Average distribution per quarter Average distribution per quarter is fairly evenly distributed over the year. 2015–2019, % 2015–2019, %

10 / Annual Report 2019 / Husqvarna Group Market value by geography Market value by division

160 160 135 140 125 140

120 120

100 80 100 80 80 65

45 60 40 60 40 40

20 20 Market and trends — Market overview

0 0 Americas Europe, Rest of Husqvarna Gardena Construction Middle East the world & Africa

Estimated value of the market Estimated value of the market by geography, SEKbn by division, SEKbn

Market for the Construction Division The online channel, which in addition to pure online The Construction Division’s offering targets profes- resellers is also used by dealers and retailers and directly sionals in the global construction (primarily rebuilding/ by manufacturing companies, is becoming increasingly refurbishment) and stone industries. Underlying market significant and now accounts for 10 to 15 percent of the growth is normally slightly above GDP (historically at total market. approximately 3 percent). Demand correlates with the Construction and stone industry products are sold development of the construction industry, which is tradi- directly to end-users such as sawing and drilling con- tionally characterized by cyclical fluctuations. The main tractors and quarry operators, to rental companies that geographical markets are North America and Europe, lease the equipment to end-users and to dealers who both of which are well developed and established sell to professional construction end-users. markets. Demand in emerging markets is growing faster and is driven by an expanding building and construction market, which is also becoming increasingly mecha- nized over time. A large share of the market consists of consumables and aftermarket services. Demand for these is steadily growing and is impacted to a lesser degree by economic fluctuations. The market for the Construction Division’s offering is estimated at about SEK 45bn.

Customers and distribution The Group sells forest, park and garden products to more than 25,000 dealers and leading retailers worldwide. Of the total market, dealers represent around 35 percent. They primarily sell products in the high- performance segments to professional users and pro- grade experts (demanding consumers) and offer product service while retailers, who represent just over half of the market, sell products in the low to medium price ranges, mainly targeting consumer segments.

11 / Annual Report 2019 / Husqvarna Group CHAPTER 03 / 08 Strategy

12 / Annual Report 2019 / Husqvarna Group In 2019, Husqvarna Group presented an updated strategy aimed at reaching industry-leading growth and profitability. The main elements of the strategy are a focus on the customer experience, services and solutions, robotics and battery technology as well as continually developing the core offering.

13 / Annual Report 2019 / Husqvarna Group Shaping great experiences – the next phase Shaping great experiences is Husqvarna Group’s vision – to make a real difference for its customers through leadership in sustainable user-centered solutions. This vision is an important driver behind the next phase of the Group’s strategy for profitable growth.

Ready for profitable growth Husqvarna Group is well positioned in attractive markets

Strategy — Next phase with steady underlying growth. This is supplemented by a strong presence in a number of high-growth market segments, such as robotic lawn mowers, battery-powered products, smart connected solutions for garden care and growing segments in the light construction industry. Since 2013, Husqvarna Group’s strategy has focused on measures to improve profitability and drive Megatrends growth. This has been combined with restructuring activities and major investments to strengthen the · Speed of technology Group’s market and technical leadership. The key · components have been: ·· Climate change and resource scarcity FOCUSING ON STRONG BRANDS · Urbanization and new • In 2019, the main brands Husqvarna and Gardena · customer groups accounted for approximately 85 percent of sales compared with approximately 65 percent in 2013. ·· Shifting consumer values and purchasing behaviors FOCUSING ON CORE PRODUCTS & HIGH-GROWTH PRODUCT SEGMENTS • Core products and product segments, also including robotic and battery-powered products along with services and spare parts, accounted for 82 percent of sales in 2019 compared with 67 percent in 2013.

FINANCING STRATEGIC GROWTH INITIATIVES THROUGH STRONG EFFICIENCY PROGRAMS • Since 2016, strategic growth initiatives totaling around SEK 1.5bn have been fully financed through efficiency programs in Husqvarna Group’s operations.

SIGNIFICANT STRENGTHENING OF CAPABILITIES IN NEW AREAS • To achieve its ambition of technology leadership in the industry, Husqvarna Group has, over the past years, recruited about 300 new team members in areas such as software development, electronics and the Internet of Things (IoT).

The work carried out has provided Husqvarna Group with a stable foundation and the right conditions for the next phase in its efforts to generate industry-leading growth and profitability.

14 / Annual Report 2019 / Husqvarna Group Sustainovate

– integrating sustainability in operations Strategy — Next phase

Growth 1 Target: Net sales growth +2 percentage Customer points above market growth* experience

4 2 Robotics & Services & Profitability Target: EBIT margin >10% battery solutions

3 A winning Capital efficiency core Target: Average net working capital /net sales ≤25%

Operational & commercial * Market growth historically at 2–3% excellence

Husqvarna Group’s strategy – the next phase Husqvarna Group wants to make a real difference for growth and profitability by leveraging the strengths in people who shape green spaces and create great out- the business and by combining industry-changing inno- door environments and help them achieve excellent vation and new services with the Group’s market-leading results. Creating an outstanding customer experience is position in high-growth segments. The strategy has four a prerequisite for reaching the target of industry-leading main components and is supported by a strong focus on growth and profitability. The Group is striving to enhance operational and commercial excellence.

15 / Annual Report 2019 / Husqvarna Group 1. Customer experience offering, higher margins and increased investment in Husqvarna Group’s vision – shaping great experiences new product development. One key component of

Strategy — Next phase – clearly signals the Group’s focus on creating an out- Husqvarna Group’s strategy looking ahead is to con- standing customer experience. Customer experience tinue to develop and strengthen market positions in is a crucial factor in creating a premium product experi- the core offering, for instance, in chainsaws, watering ence and in driving customer loyalty. Customer experi- solutions and power cutters, through both product ence encompasses more than just the products. It is innovation and marketing. This creates opportunities about creating value throughout the entire product to enhance growth and profitability. A strong and prof- lifecycle – from before a purchase decision, through itable product portfolio in the core offering is also a the use phase and to the future purchase of a new prerequisite for financing investments in new areas. product. Each division has identified its key customer groups. 4. Robotics & battery By creating a close relationship with these groups, Robotic and battery-powered products are important Husqvarna Group can continuously improve its insight components in Husqvarna Group’s growth strategy. into what is important to users in everyday situations The market growth for these products and smart gar- and develop solutions that match these needs. This den services is significantly higher than for the market creates a distinct customer-driven development of as a whole and the future potential is substantial. products and services and opportunities for revenue Husqvarna Group is the undisputed global market creation through new business models. leader in the fast-growing consumer segment for robotic lawn mowers. The Group will expand based on 2. Services & solutions its leading position through a high pace of innovation Services and solutions provide new opportunities for and continued geographical expansion. Another cen- Husqvarna Group to drive growth and profitability. It is tral part of the strategy is to broaden the offering and also a logical consequence of the strategy to create an develop the market segment for professional users, a outstanding customer experience throughout a prod- segment with large potential. Products and software ucts lifecycle. By expanding its offering with business systems developed for professional use and a dedi- models in services and solutions, Husqvarna Group cated go-to-market organization are important ele- aims to move closer to end-users and their experiences, ments in this work. One example of innovation leader- and simultaneously grow the aftermarket business. ship that creates opportunities in the professional seg- Part of this involves expanding in an already-estab- ment is EPOS™, Husqvarna’s new technology for lished base of aftermarket business including spare robotic lawn mowers with virtual, and therefore flexible, parts and accessories. Another area is establishing boundaries. completely new business models. Here, Husqvarna Husqvarna Group is also expanding its leading posi- Group can benefit from its large and growing base of tion in battery-powered products for the Group’s appli- connected products and users. Access to data on the cation areas, both for consumers and professional cus- use and status of products can help to create new tomers. Husqvarna Group has a clear ecosystem smart service offerings. One example is Husqvarna approach with its smart gardening systems and bat- Fleet Services™, which offers professional customers tery-powered products. Most of the Group’s products an overview of where machines are located, how much are driven by the same battery family and controlled in they have been used, when they need servicing and the same applications. This creates benefits and tracking CO2 emissions. By using this information, cus- greater flexibility for Husqvarna Group and for its customers can optimize their operations for enhanced tomers. To ensure a continued high pace of innovation, growth and profitability and extend the product life cycle. Husqvarna Group has a function dedicated to battery technology as well as strategic partnerships with 3. A winning core selected key players in the field. Husqvarna Group is powered by strong brands, which is a success factor for the Group. The strong brand Operational & commercial excellence equity and focus on high-performance products under Husqvarna Group’s ambition is to achieve higher the Husqvarna and Gardena brands enable a premium growth and profitability than the industry as a whole.

16 / Annual Report 2019 / Husqvarna Group Navigation satellites

Satellite signals

Reference station Strategy — Next phase

Satellite signals

Correction data Stay-out zone

Charging station

Virtual boundary Mobile app

EPOS™ – Virtual boundaries. Endless opportunities. Husqvarna EPOS™ (Exact Positioning Operating System) is a pioneering technology for a new series of professional Automower® robotic mowers. The satellite-based technology means you can use the mowers within virtual boundaries. This simple and flexible solution is perfect for commercial areas, golf courses, city parks and other spaces where needs and conditions change.

One prerequisite for this is a continued focus on effi- SUSTAINOVATE – SUSTAINABILITY A PREREQUISITE ciency throughout the value chain – from purchasing FOR MARKET LEADERSHIP and production to distribution, marketing and cus- Being credible as market leader, requires a forward think- tomer care. This is important as a large share of the ing, outside-in approach. Addressing the impact the Group’s operations is in the global and seasonal mar- Group has on people and the environment will strongly ket for forest and garden products, which places high influence the position as market leader. Being part of the demands on a flexible supply chain. shift to a low-carbon economy is also a responsibility to Operational efficiency and continuous cost reduc- future generations that the Group takes seriously. tions are also tools to finance growth investments in Sustainovate – the Group’s approach to integrating new areas. Husqvarna Group is working methodically sustainability into the business – therefore plays a vital and purposefully with this to succeed. role in the strategy. The Group is now launching the The Group operates with strong, focused and second phase of Sustainovate to 2025. While Sustaino- empowered divisions with the resources needed to vate to 2020 focused on integrating sustainability drive business toward their desired goals. Each division deeper into the business across five areas, Sustaino- targets its unique group of end-users and builds on the vate 2025 addresses three opportunities for change: factors needed to succeed in their market segment. As transformation to low-carbon economy, pioneering a result, Group functions are small and tasked with sup- ways to deliver great value to customers through circu- porting the divisions to ensure synergies, for example, lar economy solutions, and inspiring and engaging cus- in e-commerce, business architecture and tools and tomers and employees in these efforts. Read more methods to strengthen efficiency and productivity. about Sustainovate on page 32.

17 / Annual Report 2019 / Husqvarna Group Husqvarna Group’s targets The financial goal of Husqvarna Group’s strategy is to deliver industry-leading growth and profitability. In terms of sustainability, the most important target is to reduce environmental impacts by lowering CO2 emissions.

Financial targets Husqvarna Group presented updated financial targets in 2019. These targets apply from

Strategy — Targets 2020 and cover sales growth, operating margin and capital efficiency.

DEFINITIONS TARGET ACHIEVEMENT 2019

Sales growth The target is to achieve annual net sales growth of 2 per- Market 1.3 %* centage points above market growth. Historically, the Compared with the 1 market has grown by 2-3 percent, resulting in a target of +2 ppts previous target of net 4–5 percent. The target is measured on a currency adjusted sales growth of 3–5 basis and excludes any impacts from acquisitions. percent

Operating margin The target is to achieve an operating margin >10% 9.3 % exceeding 10 percent. Compared with the 2 previous target of an operating margin of 10 percent or above.

Capital efficiency The Group’s operating working capital, seasonally ≤25% 27. 3 % adjusted by taking the average of the closing balances for The previous target the previous five quarters, should be a maximum of was the same as the 3 25 percent in relation to annual net sales. target valid from 2020.

Credit rating The Group aims to have a long-term credit rating corre- BBB BBB sponding to at least BBB, which is the current rating from Standard & Poor’s.

Dividend According to the dividend policy, the annual cash dividend ≥40% 51% paid to shareholders should normally exceed 40 percent of net income for the previous year.

*Excluding exited Consumer Brands business and currency effects.

18 / Annual Report 2019 / Husqvarna Group Sustainovate targets Husqvarna Group’s approach to sustainability is built on five challenges where the Group can make the greatest difference and create economic, social and environmental value for key stakeholders. Strategy — Targets Sustainovate includes Group-wide targets to drive company performance to 2020 compared to 2015, unless otherwise indicated. Below is the Group’s progress.

DEFINITIONS 2020 TARGETS 2019 PROGRESS AGAINST TARGET

10% 33% 45% 24% CO2 emission absolute CO2 CO2 emission absolute CO2 Carbon Challenge intensity reduction emission reduc- intensity reduction emission reduction Decouple business growth across the value tion from product across the value from product use. from CO2 emissions. chain. use by 2035. chain.

+9 +8 A Team Survey Net Promoter Net Promoter Score Team Challenge Score (NPS) equal to or higher than In 2019 the peer group’s Be the best place to work. the peer group (+9). NPS was +9.

70% 51% of the purchasing spend from strategic of the purchasing spend derived from Supplier Challenge suppliers audited and approved on their audited and approved suppliers. Inspire and build a sustainability performance. sustainable supplier base.

35% 40% 77% 31% reduction in new reduction in injury reduction in new reduction in injury Safety Challenge product incidents rate in operations. product incidents. rate in operations. Lead the industry in safety (compared with across the value chain. 2016).

• Establish a Group-wide framework to align objectives and Community Challenge measure positive impact of emergency response and community work. Build a platform for teams to engage in local communities.

19 / Annual Report 2019 / Husqvarna Group Creating sustainable value

ASSETS

• Leading brands Husqvarna and Gardena A I N O U S T V A T S E

VISION, PURPOSE, • Around 13,000 employees

DNA & CULTURE

• 25,000 dealers and retailers Husqvarna

Division

• R&D of SEK 1.7bn

Strategy — Business model • Equity of SEK 17.3bn

Shaping

• Presence in 140 countries great

experiences

• 30 factories

Gardena Construction

Division Division

• 170 strategic suppliers

• More than 2,200 patents

SERVICE S &

NEW BUSINESS

S T

T A A V I MODELS O N

Accelerating growth by leveraging the combined strengths of the Group.

Assets: The building blocks for a The Group’s strengths • Leading brands and go-to-market exper- sustainable business Profitable growth, while reducing the Group’s tise: The divisions can benefit from the Strong brands, 13,000 employees and impacts on the environment is the Group’s Group’s extensive experience in creating expertise in user-focused product develop- approach to generating stakeholder value. It leading brands and successfully implement and patents are the Group’s most is founded on innovation and sustainability, menting market strategies. the Sustainovate program, leveraging the important assets. Long-term shareholders • Technology and innovation: Innovation Group’s strong brands, global distribution also provide the Group with the flexibility to and technology development are part of and efficiencies of scale to create differenti- focus on sustainable profitable growth and Husqvarna Group’s DNA. The Group’s ated products and solutions tailored to end- to invest in innovation and acquisitions. divisions can take advantage of Group- customer segments. As an integrated part of achieving oper- wide resources, including strategic partner This is achieved by investing in strategic ational efficiency, the Group optimizes the ships, in key areas such as robotics and growth areas, such as robotic lawn mowers, use of raw materials and components in battery technology, software development battery-powered products and smart garden production, which primarily comprise plastics, and artificial intelligence (AI). steel, aluminum and energy. This allows solutions as well as continuing to develop a effective management of fluctuations in winning core offering and piloting new busi- • Services and new business models: A key the price of and access to raw materials ness models. The Group also maintains com- element in Husqvarna Group’s strategy is and components. petitiveness through flexible, cost-efficient an enhanced focus on services and solu- Strong relationships play an important product manufacturing that can be easily tions. The Group’s growing share of con- role in the Group’s business model. Approxi- adjusted to fluctuating seasonal demand nected products and users is creating mately 170 of some 2,000 suppliers are while always meeting customer expectations opportunities for new business models. considered strategic to the business. More on quality and safety. Husqvarna Group The divisions can leverage the strength in than 25,000 dealers and retailers represent utilizes the joint strengths in the Group to the pool of knowledge and experience Husqvarna and Gardena brands across enable positive development: created within the Group. One such exam- 140 countries, delivering added value to ple is Husqvarna Fleet Services™, a system • Vision, purpose, DNA and culture: These professionals and consumers alike. and service offering that is shared across contribute to engage the teams. A founda- the Husqvarna and Construction divisions. tion of a shared vision and core purpose, shared behaviors and important policies • Sustainovate: Sustainability provides an such as the Code of Conduct underscore outside-in perspective and the Sustainovate how every employee can contribute to program is the way the Group integrates building a results-oriented and long-term sustainability across its business and successful company. engages the organization. It allows the Group to better address market dynamics and societal challenges and understand key stakeholders better.

20 / Annual Report 2019 / Husqvarna Group Creating sustainable value

OUTCOME VALUE CREATED

• Forest, garden, watering and light Customers, retailers & dealers construction products and services • Safe, efficient, durable and reliable STRONG products and services BRANDS & GO- • >300,000 connected products • Knowledge building TO-MARKET EXPERTISE • Channel of choice • SEK 42.3bn of net sales • Lasting partnerships

• SEK 3.9bn of operating income, Investors excluding items affecting compa- • Long-term financial performance Strategy — Business model rability • Dividend

• SEK 5.8bn in employee salaries Employees • Fair wages • 44,000 tonnes of waste, • Good working conditions 53 percent less than 2015 • Employment security • Attractive positions with development • 5 million tonnes of CO2 emissions, opportunities 25 percent less than 2015 TECHNOLOGY & Society INNOVATION • 77 percent reduction in product • Taxes paid safety incidents since 2016 • Jobs • Community involvement • Contributions to a low-carbon economy

Outcome: Sustainable Value created for key profitable growth stakeholder groups Through innovation, energy-efficient opera- The focus on profitable growth provides tions and engaged and dedicated teams, the opportunities for efficient and innovative Group is growing its business while reducing, products and services that generate eco- in relative terms, CO2 emissions and waste nomic, environmental and societal value. across the value chain. Products in a wide Key stakeholder groups such as customers, range of categories are tailored to customers’ investors, employees and society stand to demands for efficiency, quality, durability and benefit from this approach. It also generates safety across markets, resulting in great income that is reinvested in the company customer experiences. through research and development of new innovative products and services as well as other market leadership activities.

The Group’s business model is built on a strategy that aims to achieve industry-leading growth and profitability by focusing on customer experience, services and solutions, battery and robotic technology and a winning core offering. Husqvarna Group believes focused sustainability initiatives are crucial for long-term market leadership and value creation.

21 / Annual Report 2019 / Husqvarna Group CHAPTER 04 / 08 Husqvarna Group’s divisions

22 / Annual Report 2019 / Husqvarna Group CHAPTER 04 / 08 Husqvarna Group’s divisions

Husqvarna Group operates on the principle of having strong, focused and empowered divisions with all of the functions needed to achieve their goals.

23 / Annual Report 2019 / Husqvarna Group Three strong, focused and empowered divisions

Husqvarna Global leader in forest Divisions — Overview and garden products

65% 62%

Share of Group Share of Group net sales operating income*

Gardena The garden care segment leader

20% 22%

Share of Group Share of Group net sales operating income*

Construction The preferred construction industry choice

15% 21%

Share of Group Share of Group net sales operating income*

* Excluding items affecting comparability. The divisions’ share of Group operating income adds up to more than 100 percent due to Group Common Costs.

24 / Annual Report 2019 / Husqvarna Group END-CUSTOMERS MARKET POSITIONS/PRODUCTS DISTRIBUTION CHANNELS MAIN COMPETITORS

• Pro-grade experts • Global leader in robotic lawn • Dealers for professionals • STIHL Group • Tree professionals mowers for both consumers and and high-end consumers • John Deere • Green space professionals • Retail channels • Honda • Global no. 2 in handheld prod- professionals • Online • Toro Divisions — Overview ucts such as chainsaws, brush cut- • Stanley Black & ters, trimmers and leaf blowers Decker • Leading positions within wheeled • MTD products such as front riders and • Yamabiko zero-turn mowers Corporation • Professional fleet management services

END-CUSTOMERS MARKET POSITIONS/PRODUCTS DISTRIBUTION CHANNELS MAIN COMPETITORS

• The passionate • No. 1 in Europe for consumer • Retail-centric, • Bosch Group gardener watering management: multi-channel • Fiskars garden hoses, reels and sprayers; • Hozelock sprinklers, sprinkler systems and • Kärcher water pumps • Stiga • Leader in robotic lawn mowers • TTI sold through retail, trimmers, hedge cutters and shrub shears • Positec • Garden tools such as secateurs, loppers, axes, digging tools and winter tools • Leader in smart garden systems – Gardena Smart System

END-CUSTOMERS MARKET POSITIONS/PRODUCTS DISTRIBUTION CHANNELS MAIN COMPETITORS

Contractors and • Leading position in • Construction dealers • Hilti professionals in: power cutters and retailers • STIHL • Concrete sawing • Light compaction and concrete • Rental companies • Tyrolit and drilling placement equipment • Direct sales • Ehwa • Concrete surfaces • Floor grinding machines • Stone processing • Shinhan and floors • Dust and slurry solutions industry • Skystone • Light demolition • Diamond tools for construction • Stone and stone industries • Floor and masonry saws • Demolition robots

25 / Annual Report 2019 / Husqvarna Group Global leader in forest and garden products

Husqvarna Division offers products for forestry, tree care, landscaping and other commercial lawn and garden services as well as for consumer segments including home and landowners. Heritage products include professional chainsaws and robotic lawn mowers.

Brands Market and customer segments The division’s core brand is Husqvarna, which accounts In 2019, the division adjusted its organization around

Divisions — Husqvarna for the majority of sales. The Husqvarna brand is distin- three fundamentally different target groups with the guished by innovative products and solutions that pro- formation of three customer solution units – pro-grade mote productivity, safety and sustainability. Tree care experts, tree professionals and green space profes- and forestry are the DNA of the Husqvarna brand and sionals – and three market clusters – Europe & Pacific, robotic lawn mowers another core pillar of its market emerging markets and North America. This refined and technological leadership. The Husqvarna brand is setup will provide greater customer centricity and further primarily sold through more than 25,000 independent enhance the division’s relevant offering of solutions dealers worldwide, primarily in Europe and North and services as well as its go-to-market execution. America, but also in the faster growing emerging markets. Other brands include Zenoah (mainly Japan), Sustainability Klippo (Nordics) and RedMax (North America). The Husqvarna Division works to enhance energy effi- From 2019, the division also includes the North ciency and the shift to low-carbon alternatives through American operations of the former Consumer Brands research and development, service, innovation and Division that was dissolved in 2018. digitalization. This has generated growth of battery- powered products, which facilitate use of renewable Products and solutions energy. The division cooperates with cities and munici- The Husqvarna Division strives to be the preferred palities on a variety of projects to enhance parks and partner among its target groups, including the pro- accessibility to green spaces. For example, the grade experts, green space professionals and tree pro- Husqvarna Living City conference has become an fessionals segments, with innovative products and first- important annual event to promote green landscaping class customer service and technical support. and develop more sustainable solutions for professional Husqvarna is the undisputed global leader in robotic green space maintenance. The division also has lawn mowers. High-performance battery-powered ambitious objectives to shift to low-carbon energy in products are also an important part of the division’s its manufacturing operations, for example, by sourcing product offering along with digital services such as the 90 percent of its electricity from renewable sources Husqvarna Fleet Service™ system and Automower® by 2020. Connect. In addition, the division has strong market positions in handheld products, including chainsaws, Growth opportunities trimmers, blowers as well as lawn mowing equipment. Significant market opportunities remain in new segments for green space professionals, such as professional robotic applications, as well as in regional mar- Operating income Net sales by kets such as emerging markets and North America. and margin region Expanding Husqvarna’s leading position in residential and professional robotic lawn mowers and fully capital- SEKm % izing on this growing market is a cornerstone for the 3,000 10 division’s growth and success. Other product categories with good growth potential include battery-powered 2,400 8 products such as trimmers, blowers and chainsaws for

1,800 6 both professionals and consumers.

1,200 4

600 2

0 0 15 16 17 18 19 Europe, 42% Operating income* (SEKm) North America, 44% Operating margin* (%) Rest of the world, 14%

* Excluding items affecting comparability.

26 / Annual Report 2019 / Husqvarna Group Divisions — Husqvarna

INTERVIEW WITH Sascha Menges – President Husqvarna Division

How did Husqvarna Division What were the important 2019 Our Sustainovate targets in particular lift improve results in 2019? product launches? our product development ambitions to Growth in key areas such as robotic lawn We continued to prove our innovation help our customers reduce their impacts. mowers and battery powered solutions, leadership. With our new chainsaw, Examples include a new CO2 calculator for parts & accessories as well as exiting Husqvarna 550 XP® MKII, we launched a our digital Husqvarna Fleet Service™ sys- unprofitable product categories and closing new cutting system that offers superior tem that helps green space professionals one main production facility contributed to cutting capacity and was greatly received track their carbon footprint development. our improvements during the year. We still around the world. Our new Husqvarna have work ahead of us, but it is satisfying Automower® 435X, an AI-enabled robotic What are the key challenges and that achievements and initiatives like these mower with all wheel drive (AWD), also opportunities going forward? helped us to improve and put us back on redefined the category and successfully We are well positioned to continue our our profitable growth trajectory. reinforced our robotics leadership position. profitable growth trajectory, with strong brands, market positions and innovation. What key trends shaped the year? Tell us about some of the division’s Our refined strategy and organizational Consumer demand for battery-powered exciting innovations. setup will ensure we continue to deliver a and autonomous products continued to In 2019, we unveiled EPOS™, a break relevant offering of customer-centric solu- grow, which is reflected in our pro-battery through satellite-based technology that tions and services that deliver superior and robotics leadership. We doubled our allows the more flexible and robust instal- customer experience. North American robotic lawn mower busi- lation of robotic mowers with virtual boun- ness and we continue to lead the market, daries for professional green space mana- which still has huge growth potential. gement. General market demand however started We also showcased HUGSI – the slowly in Europe and we experienced softer Husqvarna Urban Green Space Index – a Priorities for growth demand in North America in the second new AI-powered solution to enable munici- · Customer centric solutions half of the year. palities to better monitor urban green and services space development. · Innovation in core segments

What progress was made with · Robotics leadership Sustainovate? · Pro battery leadership Sustainability is increasingly being integra- · Accessibility and go-to-market ted in our business model and operations.

27 / Annual Report 2019 / Husqvarna Group The garden care segment leader

Gardena is the number one watering brand and a leading brand of high-quality garden tools and solutions in Europe. All in all, it is represented in more than 80 countries around the world.

Brands Market and consumer segments Gardena enjoys strong brand awareness in the Euro- Gardena products and services are designed with the pean garden care segments and the brand is associ- passionate gardener in mind. These users take pride in ated with high-quality and market-leading innovation. creating green spaces and truly enjoy the different Divisions — Gardena Gardena is the preferred brand for millions of home activities gardening involves. They also like to have and garden owners thanks to its complete product some of the work automated so they can focus on the range that includes everything a passionate gardener more fun and creative parts of gardening. For this rea- requires – from watering and lawn care systems to gar- son, they demand user-friendly, high-quality and relia- dening tools. ble products as well as digital solutions to provide and From 2019, the division also includes the European share inspiration. operations of the former Consumer Brands Division The division offers comprehensive digital customer that was dissolved in 2018 – Flymo, an iconic brand for support that includes automated watering and mowing lawn care and electric products in the UK, Universal, as well as garden planning applications. Developing which offers accessories, and McCulloch, which offers high-quality services and leveraging them to further robotic lawn mowers and handheld forestry and gar- strengthen the consumer brand experience is impor- den equipment. tant to the division’s future success.

Products Sustainability Gardena offers the broadest range of gardening prod- Gardena’s consumers have strong connections to ucts in its markets and in several European countries. nature and want to enhance their environments. The It leads the market in watering, hand tools and electric division actively promotes the most sustainable options gardening tools. Much of its success has come from and help consumers see opportunities to reduce their systems such as the Original Gardena System in water- CO2 impact and use less water. The same commitment ing products (garden hoses, connectors, nozzles, sprin- to Sustainovate is reflected across the value chain – klers) and the Gardena Combisystem for hand tools from its aim to source 100 percent renewable energy in and high-quality cutting tools such as secateurs and its global operations to its product offering. Gardena loppers. currently sources all of its electricity for the manufacturing Recent additions include Gardena City Gardening sites in Europe from renewable sources. The Gardena for smaller gardens and balconies and the Gardena product range offers only electric and battery-powered Smart System, which includes leading solutions for gar- products, such as robotic mowers, lawn mowers, den automation – to extend the smart home outdoors. hedge- and grass trimmers. Since 2018 Gardena engages in a continued partnership with UNICEF to support water, sanitation and hygiene development projects worldwide.

Operating income Net sales by Growth opportunities and margin region Gardena is driving a growth strategy. There are signi ficant opportunities to expand within and beyond SEKm % 900 12 Gardena’s core markets in Central Europe, for example, in Southern Europe, the UK and Asia. Gardena is tapping 750 10 into new distribution channels such as e-commerce 600 8 and maintains a high proportion of investment in innovation to develop new products in adjacent product 450 6 categories. 300 4

150 2

0 0 15 16 17 18 19 Europe, 93% Operating income* (SEKm) North America, 2% Operating margin* (%) Rest of the world, 5%

* Excluding items affecting comparability.

28 / Annual Report 2019 / Husqvarna Group Divisions — Gardena

INTERVIEW WITH Pär Åström – President Gardena Division

Tell us about Gardena’s What were the most important market own distribution in Japan, which is a nation profitable growth in 2019. trends? of truly passionate gardeners with an advan- Following our excellent financial perfor- Digitalization and home automation are ced city gardening culture and mature digi- mance in 2018, it’s fantastic to report yet key trends that enable the smart garden as tal market. But importantly, I would say that another record year for Gardena as we con- an extension of the smart home, and digi- we achieved strong growth across all our tinue to execute our profitable growth stra- tal solutions and tools also help the passio- focus markets during the year. tegy. Growth was particularly strong in our nate gardener engage with their hobby core Gardena branded business, which off- online. City gardening and sustainability How important is Gardena’s focus set the exits we have made in unprofitable are also important trends, particularly in on the passionate gardener? segments under the McCulloch brand. terms of efficient watering systems. We see ourselves as a gardening business Importantly, we also managed to restructure rather than a garden tools company and our overall Consumer Brands business. What progress did the division make this mindset is essential in how we engage with Sustainovate? with the passionate gardener in our joint What were the key success Efficient new products for 2019 included passion for gardening. I believe our passio- factors during the year? the ecoPulse™ water spray gun that consu- nate gardener mindset remains a huge Another largely warm and dry summer in mes 40 percent less water. We also suc- opportunity for us – not only how we pro- Europe maintained high demand for our cessfully continued our Every Drop Counts vide gardening inspiration and ideas, but efficient and smart watering products, and water-awareness program in partnership even being able to tailor our products and we continued to grow in other segments with UNICEF. During the year, we launched services to the specific needs of our indivi- and in focus markets outside the DACH a cause-related-marketing campaign with dual consumers. (Germany, Austria and Switzerland) region. a co-branded product. The overall goal of Our newly installed supply chain capacity the partnership is to provide access to also enabled us to better meet the high clean drinking water to more than 160,000 Priorities for growth demand for Gardena products. There is, people by 2021. · Geographic and category however, still more opportunity to improve expansion our supply chain capacity and we are fur- Did Gardena continue its · Multichannel experience ther investing to overcome other bottle- market expansion? necks in our production. Our focus markets for expansion include · Innovation leadership Northern, Southern and Eastern Europe as · Passionate gardener well as Asia. A particularly exciting new engagement venture for Gardena in 2019 was starting its

29 / Annual Report 2019 / Husqvarna Group The preferred construction industry choice

The Construction Division is a global leader in machinery and diamond tools for the light construction and stone industries with a strong focus on innovation and customer support leadership.

Brands Market and customer segments Husqvarna is the division’s primary brand, with the The Construction Division has a strong market presence broadest range of light construction equipment, in most of its targeted product categories with leading diamond tools and services for concrete sawing and positions in power cutters, floor grinding machines, Divisions — Construction drilling, concrete surfaces and floors and light remote dust and slurry management solutions, floor, wall and demolition. The Husqvarna brand is complemented by wire saws and related diamond tools as well as multi- three industry leading specialist brands: wire diamond tools for the natural stone industry. • HTC is the global floor finishing innovator and expert The division’s global network of sales companies, that offers a complete range of floor grinding solutions. distributors, dealers, service centers and manufacturing • Pullman Ermator is the leading specialist in dust and plants is focused on customer need in the rapidly chang- slurry management solutions for construction ing construction industry. The Construction Division has applications. an excellent sales and service support network and products and solutions are distributed globally through • Diamant Boart is a world leader in diamond tools for the stone industry. innovative sales processes and tools.

Sustainability Products and solutions The Construction Division is working actively to contin- The Construction Division offers solutions used exclu- uously reduce its environmental impact and increase sively by construction professionals who demand high- the safe use of its products. The greatest CO and level performance, reliability and superior support. 2 safety impacts occur during product use. Reducing CO The division develops, manufactures and sells the most 2 impact involves product electrification and improved efficient and powerful solutions on the market for saw- energy efficiency. Solutions that promote worker safety ing, drilling and demolishing concrete, steel and other and enable better management of dust and slurry also hard materials, as well as compaction, concrete consol- deliver considerable benefits at construction sites. idation and floor finishing. Significant ongoing investments in innovation are being made to deliver maxi- Growth opportunities mum customer value through the widest, most innova- Following consecutive growth since 2010, the Construc- tive and powerful solution offering on the market. tion Division is continuing to grow organically with new customers, products, services and markets as well as through targeted complementary acquisitions. In recent years, the division has created a second core business area through the acquisitions of the Light Compaction and Concrete Equipment business from Atlas Copco (February 2018), HTC (May 2017), Pullman Ermator (January 2017) and DTS (May 2016). This was Operating income Net sales by further expanded during the year through the acquisition and margin region of Wacker Neuson’s concrete power trowel business (October 2019). SEKm % 900 18

750 15

600 12

450 9

300 6

150 3

0 0 15 16 17 18 19 Europe, 34% Operating income* (SEKm) North America, 45% Operating margin* (%) Rest of the world, 21%

* Excluding items affecting comparability.

30 / Annual Report 2019 / Husqvarna Group Divisions — Construction

INTERVIEW WITH Henric Andersson – President Construction Division

Did the division continue to grow growth platform. Our acquisition of Wacker a 2 MW wind turbine at our Belgian plant, during the year? Neuson’s power trowel business during the which will contribute to our operational I am pleased to report that 2019 was our year filled an important gap in our product energy needs with clean electricity as of 2020. ninth consecutive year of growth. In parti- range for ride-on concrete power trowels. cular, our construction business achieved Importantly, our recent acquisitions have What are the key challenges and good growth in Europe, Asia Pacific and in brought in top talent, contributing to our opportunities going forward? emerging markets, but with slower growth excellent team with remarkable capabilities. The fact that we continued to grow in 2019 in North America. Trade tariffs affected our despite tariffs and other headwinds is tes- business during the year, although we Tell us about how services are tament to our comprehensive market offe- managed to offset these by increasing enhancing the division’s offering. ring, engaged team members and the fact pricing and optimizing our supply chain. Crucially, I think our services help us gain that customers are increasingly using dia- better customer insight and greater custo- mond tools to grind and polish concrete What key products were mer loyalty, ultimately creating additional floors as a floor finish. Emerging markets launched in 2019? customer value and new profit streams. present growth opportunities for our busi- We launched our first fully battery powered During the year, we fully launched our Fleet ness and we intend to continue to position product – an energy efficient, low-noise Services™ system, which promotes more ourselves as the premium option as they power cutter that uses the proven Husqvarna efficient fleet use by installing sensors on mature. In addition, we have a proven pro- battery system for maximum customer flex- equipment to remotely monitor their utili- cess and track record to identify and suc- ibility. Our recent acquisitions are also ena- zation, plan maintenance and much more. cessfully integrate acquisitions. bling us to innovate integrated solutions, We also launched a downloadable diamond such as building on our competence from tool selector app to help our customers Pullman Ermator to launch a new power rapidly find the best process and diamond cutter with integrated dust collection. tools for any specific job. Priorities for growth · Enhance customer value How are your recent acquisitions being What progress did the division make through best-in-class services integrated into the division? with Sustainovate? and after market Our integration work is generally progres- Of course, the K 535i power cutter, our first · Customer experience excellence sing quicker than planned and is enabling fully battery-powered product, is significant. us to create something new – not just in We plan to accelerate our efforts to launch · No.1 in battery-powered terms of consolidating operations to deve- new battery products that can complement solutions lop economies of scale, but the creation of or replace corded or petrol-powered equip- · Accelerate growth in emerging our new concrete surfaces and floors ment. Another highlight is the installation of markets · Growth through acquisitions

31 / Annual Report 2019 / Husqvarna Group CHAPTER 05 / 08 Sustainable solutions fit for thefuture

32 / Annual Report 2019 / Husqvarna Group The need for sustainable solutions has never been greater or more pressing. Building on the creativity of its teams, the Group is pioneering pathways for step-change efficiency and smarter resource use. By placing Sustainovate at the heart of the company, the Group is shaping a company that is built to last.

33 / Annual Report 2019 / Husqvarna Group Integrating sustainability across the Group Husqvarna Group embraces innovation that brings people and nature closer together. Sustainovate 2020, the Group’s approach to integrating sustainability deeper into its business, is built on five key challenges. The purpose is to reduce impacts and enhance the Group’s ability to positively affect people’s lives and the environment.

Sustainovate includes Group-wide targets to drive sus- program to better capture insights on the scale of sup- Integrating sustainability Sustainovate — Integrating tainability performance over a five-year timeframe. This pliers’ CO2 emissions. A better understanding of these goal-based approach has focused attention on long- impacts remains an important challenge to tackle. term value creation and is critical for market leadership. With four years of the five-year window completed, the As the Group shifts to battery-driven solutions and benefits of this approach are showing and the Group is embraces new business models the Group is equip- positioned to achieve most of its targets. ping for business transformation. It has also acted to Sustainovate targets compare performance to 2015 improve its CO2 impacts in the supply chain and is unless otherwise stated. enlisting the systems thinking of the CDP Supply Chain

AMBITION TARGET PROGRESS HIGHLIGHTS NEXT STEPS

Husqvarna Group seeks to • In motorized products, 28 • Increase sales of low- Carbon deploy innovation, energy- % % percent of the business is carbon products efficiency and new products 10 45 represented by battery- • Explore possibilities challenge CO intensity on track to grow the business while 2 powered, robotic and to source or install reduction across Decouple business reducing emissions across electrical products— up renewable energy the value chain – from the value chain. from 11 percent in 2015 growth from CO2 • Engage suppliers to product design and devel- emissions • 58 percent of electricity measure and reduce opment to suppliers, Our science-based target used in operations derives CO2 emissions manufacturing, logistics from renewable sources • Launch revamped and smarter product use. • More than half of the R&D Science-based target to 33% 24% spend of SEK 1,720 m was align with 1.5°C. Absolute CO2 reduc- directed to battery and tion from product robotic technologies use by 2035. • Exited low-margin petrol- powered product segments in North America.

AMBITION TARGET PROGRESS* HIGHLIGHTS NEXT STEPS

Team Efforts to build an attractive, • 91 percent (approx. 12,000 • EVP roll-out Group-wide behavior-led workplace + employees) responded to • Diversity and Inclusion should never stop. By 9 8 the 2019 Team Survey strategy and action plan challenge Net Promoter Score additional providing a platform for • Since 2015 some 142 man- • Develop and execute (NPS) is equal to or effort needed Be the best place employees to make a differ- agers have taken part in Group Leadership Behavior exceeds the peer to work ence and offering opportu- leadership training, 56 of and Capability model. group. nities for people of all back- them in 2019 grounds to maximize their • Defined our Group talents, the Group aims to Employee Value be the employer of choice. Proposition (EVP).

34 / Annual Report 2019 / Husqvarna Group AMBITION TARGET PROGRESS HIGHLIGHTS NEXT STEPS

By evaluating strategic • Since 2015, 144 supplier • Complete current audit Supplier suppliers’ environmental, % % sustainability audits con- program and define action challenge human rights and safety 70 51 ducted in Asia, Europe plan for responsible sourc- performance and ethical Of purchasing on track and Americas ing to 2025 spend from strategic Inspire and build standards, the Group aims • 131 strategic suppliers • Define action plan to suppliers audited to motivate suppliers to audited and approved improve transparency a sustainable and approved based improve and to prioritize • No zero-tolerance issues on minerals of concern supplier base on their sustainability those with high sustainability were uncovered in • Train commodity performance. performance. supplier audits managers on Supplier • Updated the Supplier Code of Business Ethics. Code of Business Ethics.

AMBITION TARGET PROGRESS HIGHLIGHTS NEXT STEPS

Safety The Group’s strong focus on Workplace safety Workplace safety safety and ergonomics in % % • Implemented an ISO 45001- • Implement Group-wide OHS products and on occupa- 40 31 based OHS management incident management system challenge Reduction in the additional tional, health and safety system • Increase preventative Total Recordable effort needed Lead the industry (OHS) will improve safety • Launched new OHS policy action reporting and risk Incident Rate (TRIR) in safety across the across the value chain. observations in operations. • 135 OHS audits performed. value chain Product safety • Involve more people in internal audits to promote best • A decrease in volume of products historically involved practice. % % in incidents Product safety 35 77 • Sales of protective equipment • Launch products with new Less recordable inci- on track worldwide represented safety features dents related to the 1.3 percent of global sales • Accelerate innovation new products com- compared to 0.2 percent initiatives for improved pared to 2016. in 2015. product safety.

AMBITION HIGHLIGHTS NEXT STEPS

By connecting people with nature, the • Matched Ulm community donations, • Action plan for Group-wide emergency Community Group aims to protect biodiversity, pro- providing 200,000 Euros for helping relief program. challenge mote healthier lifestyles and create more 100,000 people gain access to clean water resilient communities. • In 2019, held the Living City global confer- Build a platform for ence in Gothenburg, Sweden and nine teams to engage in local events around the world to raise local communities awareness on the role of parks • Since 2015, convened 30 regional Husqvarna Loves parks meetings and four international conferences • Durban and Rio de Janiero listed as Husqvarna Group’s newly launched HUGSI 2019 Index of the world’s greenest cities.

35 / Annual Report 2019 / Husqvarna Group Strategic milestones

As its business expands, the Group is challenging itself to drive down CO2 emissions while expanding its brand and market footprint. As well, the Group’s support for the UN’s Sustainable Development Goals continued, an international climate impact reporting framework was adopted and the Group prepared for the launch of Sustainovate 2025. Sustainovate — Strategic milestones

In support of the SDGs The UN’s Sustainable Development Goals Where the Group (SDGs) are a 17-point plan for ending extreme can reduce negative poverty, fighting inequality and injustice and impacts of its operations protecting the planet up to 2030. Achieving the SDGs requires significant effort at all levels of society, not least in business, which has a Where the Group can positively impact critical role to play as a change agent. customers and Husqvarna Group’s biggest contributions to value chains the goals lie in reducing the negative impacts of its operations, contributing to positive Where the Group change along the value chain and engaging can positively impact in society at large. society at large

A powerful cutting edge Husqvarna Construction has a stated ambition to lead in battery technologies in its sector. Reflecting that ambition, Husqvarna Construction launched its K 535i battery power cutter for professional use, designed for low vibration and low weight, it is raising the bar on high performance and disc speed. The cutter also brings the freedom of being off-grid. Being battery-powered, users can cut away without worrying about emissions. Since its launch in early 2019, the power cutter has been a sales success.

36 / Annual Report 2019 / Husqvarna Group The Group is its people The Group’s operations employs some 13,000 people across Europe, North America, Australia and Asia.

Share of female Employee employees in sr. Employee (per geographic region) management positions turnover (voluntary)

30 12 Sustainovate — Strategic milestones 9 20

10 3

Europe, Middle East and Africa, 60 % 0 0 North America 29 % 2016 2017 2018 2019 2016 2017 2018 2019 Asia Pacific 9 % Latin America 2 % 25 % 9.5 %

CASE / Decoupling CO2 from business Task Force on Climate-related growth 2015–2019 Financial Disclosures

The Group aims to cut its CO2 emissions, while the All companies have a duty to communicate trans- company continues to grow. Through Sustainovate, the parently on how their business activities impact the Group is proving that it is possible to decouple business climate and how they address greenhouse gas emis- growth from emissions. Measuring progress against sions. In 2019, Husqvarna Group endorsed the Task sales growth is one way to keep track. Year on year, Force on Climate-related Financial Disclosures performance shows that the Group’s CO2 target – which (TCFD). It also took its first steps towards disclosing includes emissions from suppliers, manufacturing, climate impacts under the TCFD framework, thus transport and product use—is deeply connected to aligning climate-change reporting with financial business goals. It also shows it is possible to aim for market needs to measure and assess climate risks. market leadership and be a sustainability leader, too. The Group will continue to develop its approach to TCFD disclosure to ensure maximum value for investors. As a next step, the Group will quantify climate risks and improve its scenario process. See page 50 for more information. Sales CO2 absolute SEKbn reduction 45 10% Net sales

Absolute CO2 reduction 0% 40

–10%

35 –20%

30 30% 2015 2016 2017 2018 2019

Over the last four years, the Group has reduced CO2 emissions by 25 percent while increasing sales by 17 percent.

37 / Annual Report 2019 / Husqvarna Group SUSTAINOVATE 2025 / Solutions fit for thefuture

Husqvarna Group aims to challenge itself and inspire others to transform its

Sustainovate — 2025 industry. Through the creativity of its teams, the Group is pioneering solutions for step-change efficiency and smarter use of resources. By placing Sustainovate at the heart of its business, Husqvarna Group is shaping a company that is built to last.

In 2019, the Group set the course for its Sustainovate brings and have strongly influenced the 2025 business journey beyond 2020. It began with an inclusive materi- strategy. This further underlines how the sustainability ality mapping and analysis of how the Group sees soci- agenda is business-critical for the Group. ety evolving to 2030. In-depth research was done in key areas relating to climate change, resource scarcity and Ambitious targets for 2025 sustainability risks. The outcome was three Opportuni- Sustainovate’s three aspirations explain the difference ties to deliver value in an era of transformation. the Group intends to make within Carbon, Circular and Approved by the Board this year, rollout of Sustaino- People. The three targets show if and when these aspi- vate 2025 will begin in 2020. rations have been achieved. While targets to 2020 focused on integrating sustaina- The new target of a 35 percent CO2 reduction across bility deeper into the business across five areas, Sustain- the value chain is an absolute reduction target rather ovate 2025 addresses three opportunities for change. than a carbon-intensity reduction, which was how the These include transformation to a low-carbon economy, 2020 target was defined. The baseline year continues pioneering ways to deliver great value to customers to be 2015. It is in line with the latest science and through circular economy solutions, and inspiring and reflects what needs to be done to limit a global engaging customers and employees in Group efforts. temperature increase to 1.5°C. 2020 is the starting Sustainovate’s overall ambition is to trigger creativ- point for Circular and People goals. ity, energy and pride across the company. Its aims highlight opportunities that leadership in sustainability

2025

38 / Annual Report 2019 / Husqvarna Group Reduce CO2 Carbon emissions by Drive the transition to low-carbon solutions. In every aspect of the product life cycle, the Group is transitioning to low-carbon solutions in ways that benefit customers and deliver value to the bottom line. But the transition the world needs is to a zero-carbon economy. Battery technology and robotics have a –35% significant role in delivering this. Through cooperation with supp- Sustainovate — 2025 across the liers, leaner manufacturing and smarter product design, the value chain Group is preventing hundreds of thousands of tons of CO2 from entering our atmosphere and is doing its part to tackle the greatest challenge of our time.

Circular Rethink and redesign for a resource-smart Launch customer experience. The Group is rethinking business models and the way it enhances the customer experience. It is reevaluating how customers get their jobs done more effectively through solutions and services, like sharing. The Group is making smarter use of the materials that 50 comprise its products and is finding ways to reduce the use of circular natural materials and plastic. It is also extending product life innovations cycles through reuse, resale, repair, and easy recycling for less waste. In short, a circular approach is looping the customer’s ‘end- to-end’ journey and bringing resource-lean innovation to the heart of how the Group delivers value.

Empower People Inspire actions that make a lasting difference. Husqvarna Group wants to be a company that others look to for leadership and there is no better way to build trust than to make a 5M difference together. This rests on bringing out the passion, drive customers and and curiosity of both customers and teams. The Group is scaling colleagues to make up impact by inspiring customers to opt for the most sustainable sustainable choices choice, and triggering their imagination on the difference that they can make. The Group will inspire its teams by partnering with others and giving them the tools to be agents of change.

39 / Annual Report 2019 / Husqvarna Group Content

BOARD OF DIRECTORS’ REPORT FINANCIAL STATEMENTS – PARENT COMPANY 41 Board of Directors’ Report 98 Parent Company income statement 50 Risk management 98 Parent Company comprehensive income statement 55 Corporate Governance Report 99 Parent Company balance sheet 61 Internal Control over Financial Reporting 100 Parent Company cash flow statement 62 Board of Directors and auditors 101 Parent Company statement of changes in equity 64 Group Management NOTES – PARENT COMPANY FINANCIAL STATEMENTS – GROUP 102 Note 1 Parent Company’s accounting principles 66 Consolidated income statement 102 Note 2 Financial risk management 66 Consolidated comprehensive income statement 102 Note 3 Net sales distribution

Content 67 Consolidated balance sheet 102 Note 4 Employees and employee benefits 68 Consolidated cash flow statement 103 Note 5 Expenses by nature 69 Consolidated statement of changes in equity 103 Note 6 Exchange rate gains and losses in operating income NOTES – GROUP 103 Note 7 Other operating income and operating 70 Note 1 Accounting principles expenses 75 Note 2 Important accounting estimates and assess- 103 Note 8 Fees to auditors ments 103 Note 9 Operating leases 76 Note 3 Segment information 103 Note 10 Income from participation in Group companies 78 Note 4 Employees and employee benefits 103 Note 11 Financial income and expense 81 Note 5 Expenses by nature 104 Note 12 Appropriations and untaxed reserves 81 Note 6 Exchange rate gains and losses in cost of goods 104 Note 13 Tax sold 105 Note 14 Intangible assets 81 Note 7 Other operating income and operating expenses 105 Note 15 Property, plant and equipment 81 Note 8 Fees to auditors 106 Note 16 Shares in subsidiaries 82 Note 9 Financial income and expenses 106 Note 17 Other non-current assets 82 Note 10 Tax 106 Note 18 Inventories 83 Note 11 Earnings per share 107 Note 19 Financial assets and liabilities 84 Note 12 Property, plant and equipment 108 Note 20 Other current assets 85 Note 13 Right of use assets 108 Note 21 Other liabilities 86 Note 14 Intangible assets 108 Note 22 Provisions for pensions 87 Note 15 Investments in associated companies 108 Note 23 Other provisions 87 Note 16 Other non-current assets 109 Note 24 Pledged assets and contingent liabilities 87 Note 17 Inventories 109 Note 25 Related party transactions 87 Note 18 Other current assets 109 Note 26 Subsequent events 87 Note 19 Equity 109 Note 27 Changes in financial liabilities 88 Note 20 Financial risk management and financial 109 Note 28 Proposed distribution of earnings instruments OTHER INFORMATION 93 Note 21 Provisions for pensions and other 110 Declaration by the Board of Directors and the President post-employment benefits and CEO 95 Note 22 Other provisions 112 Auditor’s report 95 Note 23 Other liabilities 115 Allocation of the Consumer Brands Division 95 Note 24 Pledged assets and contingent liabilities 117 Definitions 95 Note 25 Related party transactions 118 Five-Year Rewiew 96 Note 26 Changes in financial liabilities 119 Quarterly Data 96 Note 27 Acquisitions 120 The Share 97 Note 28 Changes in accounting policies and 122 Heritage reclassifications 124 2020 Annual General Meeting 97 Note 29 Subsequent events 125 Contact

40 / Annual Report 2019 / Husqvarna Group Board of Directors’ Report

The Board of Directors (Board) and the President and CEO (the CEO) of Husqvarna AB (publ), corporate registration number 556000-5331, with its registered office in Jönköping, Sweden, hereby submit the Annual Report and consolidated financial statements for the 2019 financial year.

• Net sales increased by 3% to SEK 42,277m (41,085). Adjusted Net sales and operating margin for changes in exchange rates* net sales decreased by 2%. Net sales increased by 1%, adjusted for the exited Consumer SEKm % Brands business and changes in exchange rates*. 50,000 15 • Net sales, adjusted for changes in exchange rates* decreased by 4% in the Husqvarna Division, was flat in the Gardena Divi- 40,000 12 sion and increased by 5% in the Construction Division.

• Operating income amounted to SEK 3,690m (2,070), and to 30,000 9 Board Report — Board of Directors' Report SEK 3,915m (3,241), excluding items affecting comparability*.

• The higher operating income was primarily a result of price 20,000 6 increases, restructuring and efficiency savings and was partly

offset by continued investments in strategic growth initiatives 10,000 3 as well as higher costs related to trade tariffs and raw materials.

• Operating margin, excluding items affecting comparability*, 0 0 amounted to 9.3% (7.9). 2015 2016 2017 2018 2019 • Net income amounted to SEK 2,528m (1,213). Net sales, SEKm • Earnings per share amounted to SEK 4.42 (2.12) after dilution. Operating margin, excluding items affecting comparability*, % • Operating cash flow* amounted to SEK 2,676m (–248). • Net working capital to sales amounted to 27.3% (25.9). • The net debt/equity ratio was 0.65 (0.62). • The Board proposes a dividend for 2019 of SEK 2.25 (2.25) per share to the AGM.

Key figures

SEKm 2019 2018 2017 1 2016 2015 Net sales 42,277 41,085 39,394 35,982 36,170 Gross margin, % 29.6 25.6 29.1 30.8 28.1 EBITDA* 5,779 4,000 5,105 4,382 3,980 EBITDA margin, % 13.7 9.7 13.0 12.2 11.0 Items affecting comparability * 2 –225 –1,171 – – –153 Operating income 3,690 2,070 3,790 3,218 2,827 Operating income, excl. items affecting comparability * 3,915 3,241 3,790 3,218 2,980 Operating margin, % 8.7 5.0 9.6 8.9 7.8 Operating margin, excl. items affecting comparability *, % 9.3 7.9 9.6 8.9 8.2 Income after financial items 3,122 1,561 3,290 2,796 2,483 Net income 2,528 1,213 2,660 2,104 1,888 Earnings per share after dilution, SEK 4.42 2.12 4.62 3.66 3.28 Dividend per share, SEK 3 2.25 2.25 2.25 1.95 1.65 Return on capital employed, % 12.9 7.6 14.7 13.7 12.4 Return on equity, % 14.7 7.3 17.4 15.2 14.6 Net debt/equity ratio 0.65 0.62 0.46 0.48 0.49 Operating cash flow * 4 2,676 –248 1,847 1,666 1,732 Average number of employees 12,708 13,206 13,252 12,704 13,572

1 Restatement of 2017 due to IFRS 15 transition, reclassification of certain exchange rate effects, and reclassification of certain sales between segments. 2 Items affecting comparability* are provided on page 43. 3 2019 as proposed by the Board. 4 Cash flows related hedging of financing have been moved from operations to financing activities (SEK – 64m for 2015). The equivalent amount has affected the operating cash flow. * Alternative Performance Measure, refer to “Definitions”.

41 / Annual Report 2019 / Husqvarna Group Net sales and income Net sales by quarter Net sales SEKm Net sales in 2019 increased by 3% to SEK 42,277m (41,085) and decreased by 2%, if adjusted for changes in exchange rates *. Net 15,000 sales increased by 1%, adjusted for the exited Consumer Brands business and changes in exchange rates. Net sales decreased by 12,000 4% in the Husqvarna Division, was flat in the Gardena Division and increased by 5% in the Construction Division, if adjusted for 9,000 changes in exchange rates*. 6,000 Operating income

Operating income amounted to SEK 3,690m (2,070), including 3,000 SEK –225m (–1,171) of items affecting comparability*. Operating income excluding items affecting comparability* increased to 0 Board Report — Board of Directors' Report SEK 3,915m (3,241). The higher result was primarily related to Q1 Q2 Q3 Q4 price increases, restructuring and efficiency savings and was partly 2017 2018 2019 offset by continued investments in strategic growth initiatives as well as higher costs related to trade tariffs and raw materials. There was a net positive impact, resulting from the sale of an asset as well as some asset write downs, amounting to approximately SEK 60m Operating income per quarter 1 (55). Changes in exchange rates had a positive effect of approximately SEK 350m compared to last year, excluding items affecting SEKm

comparability *. 2,500

Financial items net 2,000 Financial items net amounted to SEK –568m (–509). 1,500 Income after financial items 1,000 Income after financial items amounted to SEK 3,122m (1,561).

500 Taxes

Income tax amounted to SEK –594m (–348) corresponding to 0 a tax rate of 19% (22). –500 Earnings per share Q1 Q2 Q3 Q4 Income for the period attributable to equity holders of the Parent Company was SEK 2,527m (1,212), corresponding to 2017 2018 2019

SEK 4.42 (2.12) per share after dilution. 1 Excluding items affecting comparability *.

Net sales by region % 2019 2018 Germany 14.0 13.5 Earnings per share and return on equity France 5.8 5.5 Sweden 4.2 4.1 SEK % Austria 3.1 3.0 5 20 Rest of Europe 24.5 25.2 Europe 51.6 51.3 4 16 Asia/Pacific 8.5 7.8 Canada 3.0 3.3 3 12 US 32.8 33.8 Latin America 3.2 3.1 2 8 Rest of the world 0.9 0.7 1 4 Total 100.0 100.0

0 0 EBITDA* 2015 2016 2017 2018 2019 SEKm 2019 2018 Operating income 3,690 2,070 Earnings per share after dilution, SEK Return on equity, % Reversal of depreciation, amortization and impairment 2,089 1,930 EBITDA* 5,779 4,000 Excl. items affecting comparability * 5,996 4,710 EBITDA margin, % 13.7 9.7 Excl. items affecting comparability * 14.2 11.5

* Alternative Performance Measure, refer to “Definitions”.

42 / Annual Report 2019 / Husqvarna Group Items affecting comparability * Operating cash flow*

SEKm % SEKm 2019 2018 2017 2016 2015 Restructuring related 2,800 7 expenses –225 –1,171 – – –153 2,400 6 Total –225 –1,171 – – –153 2,000 5

4 Restructuring related expenses 1,600 1,200 3 SEKm 2019 2018 800 2 Restructuring provisions –213 –382 400 1 Impairment of non-current assets –8 –461 Write down of inventory –4 –328 0 0 Total items affecting comparability * –225 –1,171 –400 –1 2015 2016 2017 2018 2019 Board Report — Board of Directors' Report

Classification in the income statement Operating cash flow, SEKm Operating cash flow/net sales, %

SEKm 2019 2018 Cost of goods sold –117 –1,077 Selling expenses –57 –48 Capital expenditure

Administrative expenses –51 –46 SEKm % Total items affecting comparability* –225 –1,171 2,400 6

Operating cash flow* 2,000 5 Operating cash flow* increased to SEK 2,676m (–248). The increase was related to higher operating income and positive 1,600 4 effects from changes in inventories and trade receivables and was 1,200 3 partly offset by changes in payables

800 2 SEKm 2019 2018 Cash flow from operations, excluding changes in 400 1 operating assets and liabilities 4,476 3,196 Cash flow from operating assets and liabilities 432 –1,209 0 0 2015 2016 2017 2018 2019 Cash flow from operations 4,908 1,987 Cash flow from investments in property, plant and Capital expenditure, SEKm equipment and intangible assets –2,232 –2,235 Capital expenditure/net sales, % Operating cash flow* 2,676 –248

Capital expenditure and Research & Development (R&D) Capital expenditure in 2019 amounted to SEK 2,232m (2,235), corresponding to 5.3% (5.4) of net sales. Investments in property, plant and equipment amounted to SEK 1,577m (1,542) and investments in intangible assets, exclusive goodwill, totalled SEK 655m (693), of which SEK 521m (493) was related to product development and SEK 133m (199) to IT and software. R&D expenses, which are included in cost of goods sold, amounted to SEK 1,720m (1,581), of which SEK 351m (265) was amortization of capitalized product development (intangible assets). The total R&D expenses thus corresponded to 4.1% (3.8) of net sales.

* Alternative Performance Measure, refer to “Definitions”.

43 / Annual Report 2019 / Husqvarna Group Financial position Equity Operating working capital* Group equity as of December 31, 2019, excluding non-controlling Operating working capital* at year-end amounted to SEK interests, increased to SEK 17,281m (16,007), corresponding to 10,379m (10,058). Inventories decreased to SEK 10,858m (11,067), SEK 30.2 (28.0) per share after dilution. trade receivables amounted to SEK 3,620m (3,613) and trade payables amounted to SEK 4,099m (4,622). Net debt* Net debt* amounted to SEK 11,315m (9,875). The net pension Change in operating working capital* liability increased to SEK 2,427m (1,943), other interest-bearing liabilities increased to SEK 11,786m (10,013) and liquid funds and SEKm other interest-bearing assets increased to SEK 2,898m (2,081). December 31, 2018 10,058 The net debt/equity ratio rose to 0.65 (0.62) and the equity/ Changes in exchange rates 377 assets ratio was 41% (41). For more information about the Group’s Changes in working capital –56 funding, see note 20. December 31, 2019 10,379 Board Report — Board of Directors' Report SEKm 2019 2018 Net pension liability 2,427 1,943 Other interest-bearing liabilities 11,786 10,013 Less: Liquid funds and other interest-bearing assets –2,898 –2,081 Net debt * 11,315 9,875 Net debt/equity ratio 0.65 0.62 Equity/assets ratio, % 41 41 Net debt/EBITDA 1.9 1.8

Net Debt/Equity and Equity/Assets ratio Net debt/EBITDA 1

Times % Times %

1.0 50 2,5

0.8 40 2,0

0.6 30 1,5

0.4 20 1,0

0.2 10 0,5

0.0 0 0,0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Net debt/equity ratio Net debt/EBITDA 1 ,SEKm Equity/assets ratio, %

1 Excluding items affecting comparability *.

* Alternative Performance Measure, refer to “Definitions”.

44 / Annual Report 2019 / Husqvarna Group Performance by business segment Gardena Division Husqvarna Division Net sales in the Gardena Division increased by 3% or was Net sales in the Husqvarna Division increased by 1% or decreased unchanged if adjusted for changes in exchange rates*. Net sales by 4% adjusted for changes in exchange rates*. Net sales was flat increased by 3% when adjusted for exited Consumer Brands when adjusted for exited Consumer Brands business. business. Operating income increased to SEK 2,260m (1,228). Operating Operating income increased to SEK 847m (425). Operating income, excluding items affecting comparability*, increased to income, excluding items affecting comparability*, increased 30% SEK 2,427m (2,106) and the operating margin was 8.8% (7.8). Price to SEK 847m (651) and the operating margin was 10.2% (8.0), increases, restructuring and efficiency savings contributed posi- excluding items affecting comparability*. Price increases, mix tively and was partly offset by higher costs for tariffs and raw improvements as well as restructuring and efficiency savings had materials as well as strategic growth initiatives. Items affecting a positive impact. Items affecting comparability* amounted to comparability* amounted to SEK –167m (–878). Changes in SEK 0m (–226). Changes in exchange rates had a positive effect of exchange rates had a positive effect of approximately approximately SEK 25m compared with last year, excluding items SEK 210m compared with last year, excluding items affecting affecting comparability*. comparability *. Board Report — Board of Directors' Report Gardena Husqvarna Change, Change, SEKm 2019 2018 % SEKm 2019 2018 % Net sales 8,343 8,118 3 Net sales 27,506 27,156 1 Currency adjusted change *, % 0 8 – Currency adjusted change *, % –4 –2 – Operating income 847 425 99 Operating income 2,260 1,228 84 Excl. items affecting comparability * 847 651 30 Excl. items affecting comparability * 2,427 2,106 15 Operating margin, % 10.2 5.2 – Operating margin, % 8.2 4.5 – Excl. items affecting comparability * 10.2 8.0 – Excl. items affecting comparability * 8.8 7.8 –

Net sales, Husqvarna Net sales, Gardena

SEKm SEKm

30,000 10,000

25,000 8,000

20,000 6,000 15,000 4,000 10,000

2,000 5,000

0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Net sales, SEKm Net sales, SEKm

Operating income and margin, Husqvarna Operating income and margin, Gardena

SEKm % SEKm %

3,000 20 850 20

2,400 16 680 16

1,800 12 510 12

1,200 8 340 8

600 4 170 4

0 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Operating income 1, SEKm Operating income 1, SEKm Operating margin 1, % Operating margin 1, %

1 Excluding items affecting comparability *. 1 Excluding items affecting comparability *. * Alternative Performance Measure, refer to “Definitions”. * Alternative Performance Measure, refer to “Definitions”.

45 / Annual Report 2019 / Husqvarna Group Construction Division Restructuring of the Consumer Brands Division Net sales in the Construction Division increased by 10% or by 5% As communicated in press releases in 2018, Husqvarna Group is if adjusted for changes in exchange rates*. exiting certain low-margin petrol-powered product segments in Operating income increased to SEK 779m (672). Operating the underperforming former Consumer Brands Division and income, excluding items affecting comparability*, increased to instead focusing on its strengths in premium offerings under the SEK 836m (716) and the operating margin was 13.2% (12.4), core brands of Husqvarna and Gardena. excluding items affecting comparability*. Higher sales volumes Restructuring measures were implemented 2018–2019 with and price increases contributed positively. Items affecting compa- a total cost of some SEK 1.2 billion before tax, of which some rability* amounted to SEK –57m (–44). Changes in exchange rates SEK 400m refers to cash items. In 2018, and in the first quarter had a positive effect of approximately SEK 115m compared with of 2019 a total of SEK 1,171m and SEK 42m respectively was last year, excluding items affecting comparability*. reported as restructuring related expenses and charged to the Group’s income statement. The restructuring measures has Construction resulted in annual savings of around SEK 250m with full effect from Change, 2020. The lower business volume will also reduce the net working Board Report — Board of Directors' Report SEKm 2019 2018 % capital need in the Group by up to SEK 1 billion over the coming Net sales 6,340 5,762 10 years. In 2019 the Group exited net sales of SEK 1.4 billion. Currency adjusted change*, % 5 12 – Operating income 779 672 16 Additional restructuring initiatives Excl. items affecting comparability* 836 716 17 In November 2019 additional restructuring initiatives were Operating margin, % 12.3 11.7 – launched. The initiatives are expected to deliver annual cost sav- Excl. items affecting comparability* 13.2 12.4 – ings of SEK 150m, of which the majority will be realized in 2020 and the remainder in 2021. Restructuring costs for the initiatives are expected to amount to about SEK 200m, whereof SEK 183m Net sales, Construction were charged to the result in the fourth quarter of 2019. In 2020, SEKm the group plan to exit about SEK 2.2 billion of low gross margin business that previously was within the Consumer Brands Divi- 8,000 sion.

6,000 Financial targets presented at the Capital Markets Day A Capital Markets Day was held on September 17, 2019. Financial targets was presented and as from 2020 the Group’s three financial 4,000 targets are: • Annual net sales growth of 4–5%, defined as 2 percentage points above market growth (historically 2–3%). 2,000 • An operating margin above 10%. • Operating working capital in relation to net sales of a maximum 0 2015 2016 2017 2018 2019 of 25%.

Net sales, SEKm Group management changes Pavel Hajman, Senior Vice President Operations Development, assumed the additional role as CIO (Chief Information Officer) Operating income and margin, Construction effective October 11, 2019. Pavel replaces Hillevi Agranius, who SEKm % left Husqvarna Group on October 11, 2019 for an external oppor-

1,000 15 tunity.

Acquisition of power trowel business 800 12 In 2019, Husqvarna Group’s Construction Division has acquired the Concrete Power Trowel business from Wacker Neuson Group. 600 9 The acquisition included all the product, R&D and manufacturing assets relating to walk-behind and ride-on concrete power trowels. 400 6 Sales in the power trowel segment (acquired assets) in 2018 amounted to about SEK 150m. 200 3 Subsequent events 0 0 Appointment of new President and CEO 2015 2016 2017 2018 2019 The Board of Husqvarna AB has appointed Henric Andersson to Operating income 1, SEKm succeed Kai Wärn as the President and CEO of the Husqvarna Operating margin 1, % Group effective as of April 2, 2020, following the closing of the 2020 AGM. Henric Andersson is currently President of the Con- struction Division of Husqvarna Group and has been a member of 1 Excluding items affecting comparability*. Group Management team since 2012. He was born in 1973 and * Alternative Performance Measure, refer to “Definitions”. has a Master of Science degree in Industrial Engineering & Man- agement from Linköping Institute of Technology, Sweden.

46 / Annual Report 2019 / Husqvarna Group Parent Company Legal matters and compliance Net sales for 2019 for the Parent Company, Husqvarna AB, Companies within Husqvarna Group are involved in commercial, amounted to SEK 17,838m (17,185), of which SEK 13,983m product liability, regulatory and other disputes in the ordinary (13,612) referred to sales to Group companies and SEK 3,855m course of business. Such disputes can involve claims for compen- (3,573) to external customers. satory damages, fines and penalties, property damage or personal Income after financial items increased to SEK 8,512m (–415), injury compensation and occasionally also punitive damages. For mainly due to Group internal transactions. Income for the period certain types of claims (primarily product liability litigation), the increased to SEK 8,530m (55). For more information, refer to note Group has self-insurance, up to certain limits, as well as external 10 in the Parent Company. Investments in property, plant and “excess” coverage. The Group continuously monitors and evalu- equipment and intangible assets amounted to SEK 1,215m ates pending claims and disputes, and acts when deemed neces- (1,303). Cash and cash equivalents amounted to SEK 650m (165) sary. The Company believes that these activities help to minimize at the end of the year. Undistributed earnings in the Parent Com- such risks. It is difficult to predict the outcome of each dispute, but pany amounted to SEK 27,351m (20,334). based on its present knowledge, the Group estimates that none of the disputes in which it is currently involved will have a material The Husqvarna share adverse effect on the consolidated financial position or result. Board Report — Board of Directors' Report At year-end 2019, the share capital in Husqvarna AB amounted to Husqvarna Group is committed to a culture of compliance. SEK 1,153m (1,153), comprising of 112,015,629 A-shares Honesty and fairness have always characterized the Group´s way (112,437,551) and 464,328,149 B-shares (463,906,227). of doing business and the highest standards of integrity are For further information on the change in the number of shares expected of every employee in every country where the Group during the year, see note 19. Each A-share carries one vote and does business. Such commitment is reflected in the Code of Con- each B-share carries 1/10th of a vote. All shares enjoy equal rights duct that was adopted in 2008 and substantially revised in 2018. in terms of the Company’s assets and earnings. There are no In 2019 over 3,600 Group employees participated in either restrictions on the transfer of shares, voting rights or the right to online or live Code of Conduct training which was also offered to participate in the Annual General Meeting (AGM). all new hires. Additionally, employees who become aware of any The Company is not aware of any agreements between share- non-compliance or other unethical conduct are expected to holders that may limit the right to transfer shares. In addition, report such matters to the internal compliance function. Such there are no stipulations in the Articles of Association regarding reports may be made directly to a manager, via a dedicated com- appointment or dismissal of Board members or agreements pliance email or anonymously via a 24-hour toll-free call-in center between the Company and Board members or employees that or online at husqvarnagroup.ethicspoint.com. require remuneration if such persons leave their posts, or if Husqvarna Group requires that all of its suppliers, agents, employment is terminated, as a result of a public bid to acquire distributors and other business partners (“Third-Parties”) comply shares in the Company. with the business and workplace standards as defined in the As of December 31, 2019, the largest shareholders were Code of Conduct. In 2019, the Group further strengthened its Investor AB, with 33.1% (33.0) of the votes, and L E Lundberg compliance focus through several new policies and programs, företagen, with 25.1% (25.1) of the votes. No other shareholder including a new Third-Party Due Diligence Policy, further safe- held more than 10% of the votes. Market capitalization amounted guarding that the Group is only doing business with reputable to SEK 43bn (38) at the end of 2019. For more information on and compliant Third-Parties. Husqvarna AB also become a mem- major shareholders, see section “The share”. ber of Transparency International Sweden’s Corporate Supporters Forum in 2019 which is committed to the education, awareness Authorization for new share issue and equity swaps and prevention of corruption among its corporate members. of B-Shares The 2019 AGM resolved to authorize the Board to decide on one Sustainability or more occasions, until the next AGM, to have the Company In accordance with the Swedish Annual Accounts Act chapter 6, enter into one or more share swap agreements with third parties §11, Husqvarna Group has chosen to establish the statutory sus- on terms consistent with market practice. The purpose is to secure tainability report as a report separated from the Annual Report. the Company’s obligations due to adopted incentive programs. The sustainability report (Sustainovate Progress report 2019) has The participants in the Group’s long-term incentive programs been submitted to the auditor at the same time as the Annual have been granted share awards and when the conditions of the Report and is available on www.husqvarnagroup.com. performance period for each program ends, shares are trans- The sustainability report presents “Sustainovate”, which is ferred to them in accordance with the conditions of the programs Husqvarna Group’s approach to integrate sustainability into and made without consideration. the business. The report is framed around five challenges that are The participants in the Husqvarna LTI 2016 program were most relevant to the Group’s ability to create economic, social granted matching and performance share awards in 2016 and and environmental value for its stakeholders. According to the 529,252 B-shares were transferred to the participants in May 2019 Swedish Annual Accounts Act chapter 6, §12, Husqvarna Group is when the vesting period ended. required to report on certain sustainability and corporate respon- At year-end 2019, Husqvarna AB had equity-swap agreements sibility related issues which are presented in the Sustainovate whereby a third-party bank had acquired 4,141,164 B-shares to Progress report 2019. A table describing policies and procedures, cover obligations under Husqvarna long-term incentive programs. sustainability risks, management systems and monitoring pro- The Company did not own any own shares at the end of 2019. cesses of material issues relating to the environment, human In addition, the 2019 AGM authorized the Board to resolve to rights, social and personnel and anti-corruption is available on issue not more than 57.6 million B-shares, representing 10% of the page 43 in the report. total number of shares in issue, to facilitate acquisitions where the consideration will be paid with own shares. No such issuance was Task Force on Climate-Related Financial Disclosures (TCFD) made in 2019. The Husqvarna Group supports the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), which are

47 / Annual Report 2019 / Husqvarna Group intended to ensure that investors and other stakeholders are ade- The Board is of the opinion that the dividend proposed above is quately informed about the risks posed to companies by climate justifiable on both the Company and the Group level with regard change. In line with the TCFD recommendations, the Group has to the demands on the Company and Group equity imposed by included in this 2019 Annual Report certain information regarding the type, scope and risks of the business and with regard to the the Governance and Risk Management of such topics. See Risk Company and the Group’s financial strength, liquidity and overall Management section on page 50. position.

Environmental permits Principles for remuneration to Group Management and In 2019, Husqvarna Group operated 30 production facilities, of remuneration to the Board which 20 were in Europe, four in the US, three in China, one in For the CEO and other members of Group Management, the Brazil, Japan and Australia. All facilities have the environmental principles for remuneration approved by the 2019 AGM currently permits required for current operations. apply. The principles are subject for review and the Board will propose that the updated principles set out below should be Husqvarna Group included in CSR indexes approved by the 2020 AGM for the period up to and including Board Report — Board of Directors' Report Husqvarna Group is a member of the FTSE4Good Index Series the 2021 AGM. and a member of the STOXX Global ESG Leaders index. These The Board proposes that the following remuneration guide- indexes are designed to facilitate investments in companies that lines, for the CEO and other members of Group Management, meet globally recognized corporate responsibility standards in should be approved by the 2020 AGM. environmental care, social care and corporate governance. These guidelines do not apply to any remuneration otherwise decided or directly approved by the AGM or other general meeting. Employees The overarching ambition of the Group’s strategy is market The average number of employees in 2019 was 12,708 (13,206), leadership, of which long-term profitable growth and being the of which 2,117 (2,069) were employed in Sweden. At year-end, the innovation leader are important aspects. Built on a strategy for total number of employees was 13,083 (14,076). Of the total aver- market leadership, the Group’s business model is designed for age number of employees in 2019, 8,582 (8,693) were men and profitable growth, bringing the best forestry, lawn and garden and 4,126 (4,513) were women. construction solutions to the market by maximizing assets and Salaries and remuneration in 2019 amounted to SEK 5,833m minimizing waste and carbon dioxide from operations. Further (5,712), of which SEK 1,311m (1,263) refers to Sweden. For more information on the Group’s strategy and financial targets can be information on employees, see note 4. found on the Group’s website, www.husqvarnagroup.com. A prerequisite for the successful implementation of the Com- Annual General Meeting 2020 pany’s business strategy and safeguarding of its long-term inter- The AGM of Husqvarna AB (publ) will be held in Jönköping, ests, including its sustainability, is that the Company is able to Sweden on April 2, 2020. recruit and retain qualified personnel. To this end, it is necessary that the Company offers competitive remuneration. Notification and proposals to the AGM The guidelines set forth in this section shall apply to remuner- The notification to attend the 2020 AGM has been available on ation and other employment conditions of Group Management. the Group’s website, www.husqvarnagroup.com, since February The guidelines shall apply to contracts of employment entered 28, 2020. The full proposal to the AGM will be available on the into after the 2020 AGM and also to amendments made thereaf- Group’s website at the latest by March 12, 2020. ter to contracts of employment which are in force. Remuneration to members of Group Management shall be on Proposed distribution of earnings market terms and based on the position held, individual perfor- The Board proposes a dividend for 2019 of SEK 2.25 per share mance and Group performance, and shall be on a competitive (2.25) corresponding to a total dividend payment of SEK 1,287m basis in the country of employment. The overall remuneration (1,286) based on the number of outstanding shares at the end of package for Group Management is comprised of fixed cash sal- 2019. It is also proposed that the dividend be paid in two install- ary, variable cash remuneration in the form of short-term incen- ments to better match the Group’s cash flow profile, with one pay- tives based on annual performance targets, long-term incentives, ment of SEK 0.75 per share in April and the remaining SEK 1.50 per pension and other benefits. In addition, there are conditions on share in October. The proposed record dates are April 6, 2020, for notice of termination and severance pay. the first payment and October 6, 2020, for the second payment. Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-related or SEKt share price-related remuneration. The following profits are at the disposal of the AGM: Husqvarna Group shall aim to offer a competitive total remu- Share premium reserve 2,605,747 neration level with a primary focus on “pay for performance”. For Retained earnings 16,215,401 more information on principles for remuneration to Group Man- Net income 8,530,250 agement and remuneration to the Board, refer to note 4. Total 27,351,398 Fixed cash salary Fixed salary shall constitute the basis for total remuneration and SEKt may amount to not more than 70% of the total remuneration. The The Board proposes the following allocation of available salary shall be related to the relevant market and shall reflect the profits: degree of impact, contribution and knowledge involved in the Dividend to the shareholders of SEK 2.25 per share 1 1,287,456 position. The salary levels shall be reviewed regularly (normally To be carried forward 26,063,942 annually) in order to ensure continued competitiveness and Total 27,351,398 reward performance.

1 Calculated on the number of outstanding shares as of December 31, 2019.

48 / Annual Report 2019 / Husqvarna Group Variable cash remuneration (Short-term Incentive, ”STI”) tinued severance pay may be applied also after the end of the The satisfaction of criteria for awarding variable cash remunera- notice period. Non-compete obligation shall not apply for more tion shall be measured over a period of one year. The variable than 24 months from the end of the notice period and the sever- cash remuneration may amount to not more than 150% of the ance pay during such non-compete period may not exceed an fixed salary and not more than 50% of the total remuneration. amount equivalent to the fixed salary. The Board decides whether the maximum levels shall be utilized Additionally remuneration may be paid for non-compete or if a lower level shall be used. The level of STI is set by the Board undertakings to compensate for loss of income and shall only be based on size of position, taking into account degree of impact, paid in so far as the previously employed Group Management contribution and knowledge involved in the position but also member is not entitled to severance pay. The remuneration shall country of employment. amount to not more than 60% of the fixed salary at the time of ter- The STI shall be based on the financial result for the Group and/ mination of employment, unless otherwise provided by manda- or for the business unit for which the member of Group Manage- tory collective agreement provisions, and be paid during the time ment is responsible. The variable remuneration shall be based on the non-compete undertaking applies, however not for more than predetermined and measurable criterias, such as operating income, 24 months following termination of employment. net sales growth, operating working capital and cost efficiency pro- Board Report — Board of Directors' Report grams. Each criteria/target has a defined minimum/entry level, Salary and employment conditions for employees which must be exceeded for variable remuneration to be paid, and In the preparation of the Board’s proposal for these remuneration a maximum/stretch level. The criteria are designed so as to contrib- guidelines, salary and employment conditions for employees of ute to the Company’s business strategy and long-term interests, the Company have been taken into account by including informa- including its sustainability. To which extent the criteria for awarding tion on the employees’ total income, the components of the variable remuneration has been satisfied shall be evaluated/deter- remuneration and increase and growth rate over time, in the People mined when the measurement period has ended. The People & & Sustainability Committee’s and the Board’s basis of decision Sustainability Committee (formerly the “remuneration committee”, when evaluating whether the guidelines and the limitations set see page 58) is responsible for the evaluation and it shall be based out herein are reasonable. The development of the gap between on the latest financial information made public by the Company. the remuneration to executives and remuneration to other employees will be disclosed in the remuneration report. Long-term incentive The Board will annually evaluate if a long-term incentive program The decision-making process to determine, review and should be offered and be proposed to the AGM. The award level implement the guidelines of such long-term incentive program may amount to not more The Board has established a People & Sustainability Committee. than 120% of the fixed salary when the program is launched and The Committee’s tasks include preparing the Board’s decision to not more than 50% of the total remuneration. propose guidelines for Group Management remuneration. The Board shall prepare a proposal for new guidelines at least every Pension and other benefits fourth year and submit it to the general meeting. The guidelines Pension and disability benefits shall be designed to reflect regula- shall be in force until new guidelines are adopted by the general tions and practice in the country of employment. Pension plans meeting. The People & Sustainability Committee shall also moni- shall be defined contribution plans and the employer contribu- tor and evaluate programs for variable remuneration for Group tion, including contributions for disability pension/insurance, may Management, the application of the guidelines for Group Man- amount to not more than 40% of the fixed cash salary and not agement remuneration as well as the current remuneration struc- more than 30% of the total remuneration. tures and compensation levels in the Company. Other benefits may include, for example, life and health care The members of the People & Sustainability Committee are inde- insurance, housing allowance and company cars. Costs relating to pendent of the Company and its Group Management. The CEO and such benefits may amount to not more than 20% of the fixed cash other members of Group Management do not participate in the salary and not more than 15% of the total remuneration. For Board’s processing of and resolutions regarding remuneration employments governed by mandatory rules, pension and other related matters in so far as they are affected by such matters. benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the Derogation from the guidelines extent possible, the overall purpose of these guidelines. The Board may temporarily resolve to derogate from the guide- Group Management members who are expatriates may lines, in whole or in part, if in a specific case there isspecial cause receive additional remuneration and benefits to the extent rea- for the derogation and a derogation is necessary to serve the Com- sonable in light of the special circumstances associated with the pany’s long-term interests, including its sustainability, or to ensure expatriate arrangement, taking into account, to the extent possi- the Company’s financial viability. As set out above, the People & ble, the overall purpose of these guidelines. Such remuneration Sustainability Committee’s tasks include preparing the Board’s res- and benefits may not in total exceed 80% of the fixed cash salary. olutions in remuneration-related matters. This includes any resolutions to derogate from the guidelines. Any derogation from the Termination of employment guidelines must not cause any of the remuneration elements to The notice period may not exceed twelve months if notice of ter- exceed two times the maximum level specified in these guidelines. mination of employment is made by the Company. Fixed cash salary during the period of notice and severance pay may together Remuneration to the Board 2019 not exceed an amount equivalent to fixed salary for two years. Remuneration to AGM-elected Board members is resolved by the The period of notice may not exceed six months without any right AGM based on proposals from the Nomination Committee. The to severance pay when termination is made by the executive. 2019 AGM resolved on fees of SEK 6,290t. No consulting fees Members of Group Management shall be obliged not to com- were paid to Board members and no Board fees are paid to Board pete with the Company during the notice period. Based on the members who are also employed by the Group. For more infor- circumstances in each case, a non-compete obligation with con- mation concerning remuneration, see note 4.

49 / Annual Report 2019 / Husqvarna Group Risk management

All business operations involve risk. Therefore, the goal of risk management is not to eliminate risk, but rather to optimize an organization’s risk portfolio to best secure its business goals. The Husqvarna Group has therefore implemented controls and governance processes to identify and prioritize all material risks that may affect its operations, and to limit, control and proactively manage these risks.

Task Force on Climate-Related Financial Disclosures (TCFD) cumstances with potential for material financial impact. This In 2016, the Task Force on Climate-Related Financial Disclosures means integrating these risks into annual financial targets, raising Board Report — Risk management (TCFD) issued a set of recommendations on how companies attention to management and contributing to a proactive response. should improve disclosures relating to risks and opportunities Risk management conducted as part of periodic strategy updates posed by climate change, including disclosures relating to gover- (both Group and divisional) helps capture events and circum- nance, strategy, risk management, metrics and targets. In 2019, stances that could significantly hinder longer term strategic priori- the Husqvarna Group formally endorsed the recommendations ties and goals. Risk Management in more day-to-day work is of TCFD and began work to implement those recommendations guided by a comprehensive set of Group Policies and related pro- in its annual reporting process. As part of this, the Group cedures. The Group has several specialist functions, i.e., Internal engaged senior management and subject-matter experts to Audit, Compliance & Integrity, Security, Internal Control, Quality ensure that these risks are identified and managed as an inte- and Sustainability that oversee effectiveness of risks management grated part of the overall risk management efforts. The Group activities within their respective competency areas. has also formalized oversight responsibilities for climate-related risks including at the Board and Group Management levels. Changing market strategic risks Beyond improving transparency via public disclosures, these For more information on mega trends with related opportunities efforts have also spurred further efforts by Group Management and risks affecting strategy execution in the mid-term, see page 8. to develop plans for addressing risks related to climate change (Financial and operational risks are addressed separately below.) and, where possible, to take advantage of potential business opportunities. Business operational risks In order to ensure an integrated approach, the Group has The following sections highlight certain operational risks the Group decided to make TCFD disclosures part of the overall Risk Man- face across the entire value chain that are deemed material for the agement section and, where applicable, elsewhere in this Group within the next one to five year period unless otherwise Annual Report. To facilitate ease of reference, the Group has indi- indicated. cated below those specific disclosures which are particularly relevant to TCFD with the symbol “>”. A. Product and Service Development: At present, the majority of TCFD related disclosures are Time to Market – Husqvarna Group, as any company, is subject to “qualitative” in nature. As work on these topics matures, the the risk that its competitors can develop and offer alternative Group aims to provide more “quantitative” disclosures, including products at a better cost-to-performance ratio. Product life cycles potential financial impacts based on various future scenarios are becoming shorter, requiring more efficient product develop- and, possibly, more specific targets and metrics. ment processes. Certain Group products require longer development lead times, thus requiring a deep understanding of the end-customers’ needs. Responsibilities and accountability The Board is ultimately responsible for ensuring effective risk man- Product compliance – Husqvarna Group is subject to a vast array agement. The Board has delegated this responsibility, in part, to of laws, regulations and industry standards where the Group has a the CEO, who must act in accordance with the Board´s guidelines presence. These are applicable to Group products in terms of and instructions. Presidents of divisions and Senior Vice Presidents design, operation, chemical content, noise, safety and (in the of the Group functions, in turn, are responsible for risk manage- case of petrol products) exhaust emissions. Any failure to comply ment implementation within their respective divisions and areas of with such product standards could harm end-customers and responsibility. The Group also has a dedicated risk management result in significant costs, e.g., as a result of “stop sale” orders, function that: product recalls, fines, and damage the Group’s reputation. Prod- • oversees the Group’s overall Enterprise Risk Management uct standards are often subject to interpretation and frequently program, change, typically becoming stricter. When appropriate, the • secures appropriate insurance coverage for insurable risks, and Group supplements its existing governance structures with dedi- • assesses and facilitates the prioritization of the Group’s risks. cated cross-divisional project teams to pro-actively mitigate risks Management of financial risks, including currency exchange rate associated with major regulatory challenges and/or legislative exposure, is primarily the responsibility of Group Treasury. changes, with regular reporting to Group Management.

Integration in core business processes – The process for identifying, Servitization – Many industries are experiencing a shift in customer assessing and managing risk is an integral part of the core business preference from buying of physical products to purchasing services processes, including periodic strategy updates, the annual budget (e.g., in the form of monthly fees, leases or uptime). This shift is process and project management. Risk management is integrated sometimes referred to as “Servitization.” The Group strives to in the annual budget process in order to capture events and cir- keep pace with this shift by offering more “service” oriented solu-

50 / Annual Report 2019 / Husqvarna Group tions such as rental and financing options. However, the Group still Prices for raw materials and components – The Group’s opera- is heavily reliant on traditional business models of selling products tions and its performance are affected by fluctuations in the prices to generate revenue and there is a risk that competitors may be of raw materials and components. The most important raw mate- able to develop service offerings more quickly or more effectively. rials are steel, aluminum and various types of plastic. These prices can fluctuate considerably in the course of a year, as a result of > Future CO2 emissions regulation – The Group anticipates more changes in world prices for raw materials or the ability of suppliers stringent emissions regulations. The Group has increased its per- to deliver them. Total consumption is linked to production vol- centage of low-emission products with “robotics and bat- ume and production mix. The Group does not use financial instru- tery-powered products” as one of four stated strategic priorities. ments to hedge prices of raw materials, but endeavors to manage Steps taken include a significant expansion of internal resources risks through bilateral agreements with suppliers. dedicated to robotics and battery products and a significant In 2019, the Husqvarna Group purchased materials, components increase in related R&D spend. This focus reduces the Group’s and finished products amounting to SEK 19,419m (19,194). vulnerability to stricter emissions legislation. An analysis was conducted in 2019 to better understand required CO2 reductions Cost structure, Group from the Group’s product portfolio, using a 2035 horizon. This 2019 2018 Board Report — Risk management analysis confirmed that the Group is on the right path to transition % of net % of net to a low-carbon economy in line with the latest climate science to sales SEKm sales SEKm meet the goals of the Paris Agreement. Cost of goods sold: Raw materials, components > Shift from Petrol to Battery Products – Many traditional market and finished products 45.9 19,419 46.7 19,194 segments are affected by the “petrol-to-battery” shift, meaning Factory overhead, R&D, tools 14.5 6,121 14.5 5,983 that products historically powered by petrol engines are now being Direct wages 3.7 1,561 4.0 1,631 offered with battery driven motors instead. This trend has acceler- Restructuring 0.3 117 2.6 1,077 ated over recent years as batteries have become more powerful, Other 6.0 2,530 6.6 2,698 more reliable and less expensive. Accordingly, it has been a strate- Total cost of goods sold 70.4 29,748 74.4 30,583 gic priority of the Group for many years to heavily invest in battery Gross operating income 29.6 12,529 25.6 10,502 technology and new battery products. While the Group has, for the Selling expense 16.4 6,928 15.6 6,425 most part, achieved a leading position in battery products within Administrative expense 4.7 2,000 4.8 1,968 relevant market segments there is increased competition in these Restructuring 0.3 108 0.2 94 segments by new entrants, e.g., power-hand tool players, many of Other –0.5 –197 0.0 –55 which have significant scale in designing, manufacturing or sourcing battery-powered indoor products such as cordless drills, which Operating margin/income 8.7 3,690 5.0 2,070 can then be applied to outdoor products as well. C. Manufacturing: B. Sourcing: Footprint – The Group maintains a relatively large manufacturing Component supply and quality – A shortfall in deliveries or quali- base with corresponding fixed costs, and is subject to risks from ty-related issues from a supplier may have negative conse- fluctuations in demand resulting from economical, seasonal and quences for production and for deliveries of finished products. weather variations, as well as the availability and applicable lead This risk is exacerbated where the Group relies on a few (or even times of key components. Handheld products such as chainsaws single) suppliers to deliver key materials or components. The and trimmers, for which the Group also manufactures engines, as Group’s purchasing organization works closely with suppliers in well as watering products, feature a higher proportion of special- order to manage deliveries, and monitors the suppliers’ financial ized components that are produced in-house. Any material stability, quality-assurance systems and flexibility of production. decline in overall sales volumes can therefore have a significant negative impact on factory absorption and in turn the profitability. >Electronic Components – Electronic components, including batteries and related parts, are becoming increasingly common and > Natural Disasters – The Group’s and suppliers’ facilities are sub- important for the Group’s products and services. At the same ject to disruption for a variety of reasons, including, but not lim- time, worldwide demand for such components – especially bat- ited to, work stoppages, water scarcity, fire, earthquake, flooding, tery cells – is increasing dramatically. As for all direct material or other natural disasters. Such disruption may interrupt Husqvarna supply, availability is dependent on suppliers and if they have sup- Group’s ability to manufacture certain products. Any significant dis- ply interruptions or lack of capacity, it may have an adverse effect ruption could negatively impact the Group’s sales and earnings. on the Group’s production and deliveries. To address these risks, The Group works proactively to reduce these exposures by avoid- the Group has begun to shift resources (including, e.g., site visits ing operations in flood zones, proactive maintenance, installation for risk evaluation) from its own production sites, which are often of sprinklers and establishing business continuity plans. deemed highly-protected, to those of major suppliers. Saw chain manufacturing ramp up – The Group continues to ramp Compliance Issues – A broad supplier base, especially in less up production capacity of its own saw chain facility, located in developed countries, potentially increases the risk that products Huskvarna, Sweden. This is a significant industrial undertaking, and or components are not produced sustainably. The Group and its may require additional unplanned investments, or finetuning of suppliers must share the same high standards for the environment, manufacturing equipment parameters that could take longer than labor and human-rights as in Group policies and procedures and planned to achieve the desired volumes, quality and product cost. as stated in the Supplier Code of Conduct. The Group is mitigat- ing these risks through an increased number of supplier audits. Fluctuations in Staffing Demands – In light of seasonal variations in the Group’s operations, the number of temporary employees increases in preparation for the peak production season, and

51 / Annual Report 2019 / Husqvarna Group decreases at the end of the production season. The production own brands. This provides Husqvarna Group with an opportunity season for most lawn-care products is during the first and second to display its products in more retail outlets in a wider geographi- quarters, whereas chainsaws and other handheld products have a cal area. However, it also entails risks. Most obviously, the failure production peak in the third quarter. The Husqvarna Group relies to build or maintain strong supply relationships with DIY retailers on temporary labor for seasonal production, which poses risks in can have significant negative effects on volumes and in turn prof- terms of awareness of safety and production routines and avail- itability. Conversely, successfully maintaining such customer rela- ability of such temporary labor. Sick leave and issues related to tionships can lead to a greater dependence on fewer customers, wellness can also negatively impact the productivity of the Group. with higher levels of trade receivables and credit risks related to these customers. Moreover, any decline in the relative market suc- D. Transportation: cess of a retailer with whom the Group has a strong relationship Tariffs and Trade Disputes – Group operations involve the move- can have a disproportionately negative effect on the Group. The ment of products, components and raw materials across national Group is taking a number of measures to reduce sales channels boundaries. Such goods may be subject to import and export risks, including setting annual credit limits for customers. duties or similar tariffs. Normally, the costs of such tariffs are taken Board Report — Risk management into account in product pricing. However, abrupt changes to – or Dealer channel – Professional products are sold mainly through unclarity regarding – such tariffs expose the Group to risks. In local independent dealers or in some cases directly to end-cus- some cases, it may be difficult to pass on such higher product tomers, which means that these customers purchase smaller vol- costs, or may take a significant period of time to do so. Likewise, umes and generally are not as significant for the Group on an indi- competitors may have a different supply-chain structure, and be vidual basis. Cost to serve the dealers are relatively higher than able to produce similar goods that are free from such tariffs. In that to retail accounts but the level of risk related to receivables either case, the Group may be forced to absorb such extra tariff and credit is lower. costs, thereby lowering the gross margin on products sold. The risk for disruptive changes in the tariff landscape have been exac- Online – Internet commerce is increasing and becoming of increas- erbated by recent geopolitical factors, such as the decision by the ing importance to the Group, partly as the result of increased United Kingdom to exit the European Union, as well as recent tar- online sales activities of trade partners in both the dealer and retail iffs imposed by the United States against China and other coun- channel but also from growing direct sales with major online tries, and associated risks of “trade wars”. Such trade wars could resellers. This brings new risks and uncertainties, including new not only result in significant increases in Husqvarna Group’s over- buying patterns and challenges to ensuring adequate pre- and all tariff rates, with the associated consequences noted above, post-sales support for products sold online. The challenge is to but could also have larger macro-economic effects on the overall ensure that relevant products are offered to all customer segments global economy and the markets where the Group produces and in all relevant purchasing channels. The failure to build or maintain sells products. Whenever and wherever possible the Group strong supply relationships with key online resellers can have sig- strives to adjust its supply chain and manufacturing footprint to nificant negative effects on volumes and profitability. minimize the impact from such tariffs. F. Customer Use:

>CO2 impact of logistics suppliers – The Group relies on air, road, Product Safety – The Group is exposed to product liability in the rail and ship transport, some of which are carbon intensive. The event that products are alleged to have caused damage to per- Group forsees higher costs and levies for fossil-fuel based trans- sons or property. The Group is insured to a large degree against port, especially air freight. Increased local production in North such claims, partly through insurance in its own captive subsidiar- America and Europe helps to reduce transport dependency. ies, and partly through external insurers. However, there is no guarantee that such insurance coverage is in force or sufficient in E. Customer Interaction: a specific case, or that claims regarding product liability may not Customer Preferences – The Group’s strategy is based on product have an adverse effect on the company’s earnings and financial innovation, utilization of strong brands and global distribution to position. In addition, such insurances do not cover the costs for create differentiated product and solution offerings for the differ- warranty repair, recall exposure or any adverse effect on brand ent end-customer segments. Long-term profitability depends on value. External insurance is subject to availability and pricing, the ability to successfully develop, manufacture and market new which may vary over time. The Group has established a commit- products and solutions that meet customers’ performance needs tee on product safety (COPS), the tasks of which include monitor- and price requirements. Digitalization has opened up significant ing product safety issues. opportunities to improve customer interaction and to customize advice and support. The Group work with the major digital solu- >Weather/climate – Demand for the Group’s products is depen- tion providers to ensure the products are integrated with digital dent on weather. Unexpected or unusual weather conditions in platforms preferred by our customers. core markets can affect sales either adversely or positively. Dry Digitalization also increases the risk that traditional business weather can reduce demand for products such as lawn mowers models are disrupted by new market entrants, who may have new and tractors, but can also stimulate demand for watering prod- product (or service) offerings and/or more effective go-to-market ucts. However, excessive dry weather or droughts may result in strategies. regulatory actions, such as water-bans, that have a negative effect on the sale of watering products. Demand for chainsaws normally Retail Channel – Consumer products are sold mainly through increases after storms and during cold winters. Husqvarna Group large retail chains. This market is highly consolidated in North strives for flexible production and supplier structure that can be America and the UK, while in the rest of Europe, market consoli- adjusted at short notice to meet actual demand without the bur- dation is by and large still ongoing. The Group’s retail customers, den of excess safety stock within inventory. Reducing lead times such as large Do it Yourself (DIY) chains, are becoming larger and and improving responsiveness heightens the Group’s agility and fewer in number, which gives them greater bargaining power. helps get the right products to the market by matching not only Several also source products that are then marketed under their the season but current weather conditions.

52 / Annual Report 2019 / Husqvarna Group G. End of Life/Product Recycling: The Group maintains several reporting channels for concerns >Future regulation on product takeback – The Group participates of misconduct, including an “AlertLine” managed by an indepen- in recycling schemes for electrical equipment and batteries in dent third-party. All such reports are investigated and reported markets in North America and Europe. Regulation on recycling under the direction of the Group’s Chief Compliance Officer. A will likely expand to other markets, as the focus on waste and comprehensive Code of Conduct, revised Group policies, guide- resource efficiency grows. Future regulation on product takeback lines and a strong corporate culture provide a foundation for a may increase costs for premiums for disposal and product rede- sound business environment. The Group also provides employee sign for recyclability. With the circular economy as a growing training on the Code of Conduct and related Policies both imperative, the Group is exploring opportunities to contribute through online and live training courses. further by increasing use of recycled plastics in products and increasing recyclability of the products. Environmental, health, safety risks and human rights >Risks related to human rights, health, safety and the environment Other risk areas across the value chain can arise in the entire supply chain, both at suppliers and at the Group’s production facilities. These risks can be followed by repu- Risks related to information systems, personal data tational impact for well-known brands owned by the Group. The Board Report — Risk management and cyber-crime Group applies the precautionary principle and takes action to pre- The Group heavily relies on its IT systems to operate its business. vent or mitigate injury or harm to human health or the environment. Disruptions or faults in critical IT systems may have a direct impact on operations such as production and logistics. Cyber security Risks related to acquisitions, restructurings risks are increasing in society in general, especially due to and organizational changes cyber-criminals who can use a variety of means, ranging from The Group may undertake acquisitions, divestitures or organiza- sophisticated virus attacks to simple email fraud. Any of these tional changes from time to time, all of which involve risks. For criminal activities, if successful, could have an adverse impact on example, restructuring and organizational changes involve the the Group’s operations, financial condition or reputation. The risk of creating higher costs or lower revenues than anticipated Group works continuously to keep systems protected and in addi- and losing key personnel, or that estimated savings are below tion, is also investing in enhanced disaster recovery, confidential announced targets. In the case of acquisitions, sales may be or data storage capabilities and cyber-security expertise as well as adversely affected, the costs of integration may be higher than information security awareness and training. In parallel with such anticipated, and synergy effects may be lower than expected. In efforts and in connection with the EU’s General Data Protection case of acquisitions or cessation of operations, environmental risk Regulation, the Group continuously works to protect individual’s assessments are always conducted by qualified experts. The Group rights in connection with any personal data processed by the Group. aims to mitigate these risks by, among other things, thorough pre-transaction due diligence as well as having clear post Integrity and compliance risks transaction planning, whereby clear roles and responsibilities are In 2019, the Group’s Chief Compliance Officer conducted a established for post-closing hand-over and integration matters. Global Risk Assessment which identified several potential compliance risks, including the following: Certain risks in the Construction Division The construction market is less weather sensitive than the forest Anti-Corruption/Bribery – Husqvarna’s Code of Conduct has a and garden market. On the other hand, it is more subject to finan- strict prohibition on corruption and bribery, and the Group’s cial cycles and changes in the political environment. Such cyclicality employees are trained on how to ensure that this does not hap- can have a significant impact on the capital intense equipment pen. However, there is always a risk that third-parties (agents, dis- and the rental channel overall, as exemplified by developments tributors and suppliers) might engage in misconduct without the during the 2008–2009 financial crisis. However, the specific sub Group’s knowledge. To combat this, the Group has recently markets addressed by the Construction Division tend to have adopted a Third-Party Due Diligence Policy, which requires a smaller cyclical amplitudes than the overall construction industry. pro-actively confirmation of the good standing of certain catego- This is largely because of the high relative share of consumables ries of third-party vendors and partners before engaging in busi- (diamond tools) and the fact that the Division’s products are often ness with them. This policy also guards against other forms of used in renovation projects, which are relatively more stable com- non-compliance (e.g. labor policies, and trade compliance). pared to new construction work.

Competition Law/Anti-trust – Husqvarna is committed to continued Financial risks and focused employee training on Competition law standards. The following sections highlight financial risk areas that are relevant to Husqvarna Group. International Trade Compliance/Sanctions – A Group Export Controls and Trade Sanctions Policy has been adopted to further General support the existing Trade Sanctions Process. An additional Sanc- The Group’s financial risks are managed on the basis of the tions review protocol will also be incorporated into the Third- Group’s financial and credit policies, which are annually updated Party Due Diligence program described above. and approved by the Board. Management of financial risks is based largely on the use of financial instruments and is mainly centralized in Group Treasury, which operates in accordance with specified risk mandates and limits. For more information on accounting principles and financial risk management and risk exposure, see notes 1 and 20.

53 / Annual Report 2019 / Husqvarna Group Sensitivity analysis ±10% ±10% ±1% Currency Raw materials Interest rates

– SEK | USD + – SEK | EUR + – SEK | ALL + STEEL ALUMINUM PLASTICS INTEREST

SEKm SEKm SEKm SEKm SEKm SEKm SEKm –190¹ +500² +765³ ±160 ±45 ±150 ±25

Board Report — Risk management Effect on operating income Effect on operating income Effect on income for the period

1 Excluding hedge effects. SEK –225m refer to effect of transactions and SEK 35m to translation effects. 2 Excluding hedge effects. SEK 400m refer to effect of transactions and SEK 100m to translation effects. 3 Excluding hedge effects. SEK 590m refer to effect of transactions and SEK 175m to translation effects. All other refer to the other currencies including USD and EUR.

Financing risks The Group´s financial assets are used primarily for the repay- Financing risks refer to possible delays, increased costs or cancel- ment of loans. Liquid funds are placed in highly liquid interest- lations related to financing of the Group’s capital requirements bearing instruments issued by institutions with a credit rating of and refinancing of outstanding debt. Risks are reduced by main- at least A–, according to Standard & Poor’s or similar agencies. taining an evenly distributed maturity profile of loans, access to credit facilities and ensuring that short-term borrowings do not Tax risks exceed current liquidity. The Husqvarna Group operates in many countries and undertakes a great number of cross-border transactions. The operations are Interest rate risk subject to complex national and international tax rules that Interest rate risk refers to the adverse effects of changes in market change over time. interest rates on the Group’s net income. The main factor deter- The Husqvarna Group, like many multinational companies, mining this risk is the interest fixing period. The interest rate risk is employs a centralized transfer pricing model based on the managed by changing the interest from fixed to floating or vice Group’s operating model with central Group functions and global versa by using derivatives such as interest rate swaps. divisions. The Group is seeing a change in the regulatory environment in which there is a higher risk that Taxing authorities may Foreign exchange risk challenge such models, which could result in an increase in tax As Husqvarna Group sells its products in more than 100 countries, exposure both historically and going forward. has production in approximately 10 countries and likewise Restrictions on tax deductibility of interest expenses on intra- sources raw materials and components from various countries group loans apply in Sweden. Interest is only deductible provided across the globe, the Group is exposed to exchange rate fluctua- that the interest beneficiary is resident within the EES, or within a tions. These fluctuations affect the Group’s earnings in terms of country with which Sweden has concluded a tax treaty, or the ben- translation of income statements in foreign subsidiaries, i.e. trans- eficiary is taxed at an income tax rate of at least 10%. However, if lation exposure, as well as in the sale of products on the export the debt is entirely, or almost entirely, created with the purpose to market and purchases of materials in foreign currencies, i.e. trans- obtain a substantial tax benefit the deduction is denied. At the action exposure, and also in terms of the translation of balance moment it is not clear how these exceptions will apply. For this sheet items such as trade receivables and trade payables. reason, Husqvarna Group has made provisions to reflect potential Changes in exchange rates also affect Group equity. Assets and exposure related to these restrictions. liabilities of foreign subsidiaries are affected by changes in exchange rates, generating translation differences that impact Pension commitments equity. In order to limit negative effects on Group results and equity Husqvarna Group’s commitment for pensions and other post- resulting from transaction exposure and translation differences, employment benefits amounted to SEK 2,427m (1,943) at year- part of the Group’s transaction exposure and net investments in for- end 2019. The Group manages pension funds amounting to eign operations is hedged using foreign exchange derivatives. SEK 3,013m (2,543). At year-end 2019, 39% (37) of these funds were placed in shares, 52% (51) in interest-bearing securities and Credit risks 9% (12) in other investments. Credit risk refers to the risk that a counterparty will default on its Changes in value of the assets and liabilities depend primarily contractual obligations resulting in financial loss to the Group. on trends for share prices and interest rates. Factors affecting the The Group’s credit risks are managed on the basis of standard- pension obligation include changes in the assumptions, such as ized credit ratings, credit limits, active monitoring of credits and discount rate, life expectancy and expected salary increases. In routines for follow-up of trade receivables. The need for reserves the interest of effective control and cost-efficient management of for doubtful trade receivables is monitored continuously. Major the Group’s pension assets, management is centralized in Group credit limits are approved annually by the Board. The Group also Treasury and conducted in accordance with the pension fund utilizes credit insurance to reduce credit risk in trade receivables. policy adopted by the Board. For more information on pension commitments, see note 21.

54 / Annual Report 2019 / Husqvarna Group Corporate Governance Report

As required by the Swedish Annual Accounts Act and the Swedish Code of Corporate Governance (the “Swedish Code”), this Corporate Governance Report describes the organizational bodies, rules, and other governance structures by which Husqvarna Group is controlled and operated. The Group’s external auditors have reviewed this report and their opinion has been included in the Auditor’s Report.

Good corporate governance is a fundamental prerequisite not only Nomination Committee to meet our obligations as a public company, but also to create In accordance with the Swedish Code, Husqvarna AB is required value for shareholders in an efficient, responsible and sustainable to have a Nomination Committee, the primary responsibilities of Board Report — Corporate Governance Report manner. The Husqvarna Group’s corporate governance structures which are to consider and submit to the AGM proposals and rec- are defined in part by external laws (e.g., the Swedish Companies ommendations regarding: Act), in part by self-regulatory standards (e.g., the Swedish Code • The Chair of the AGM; and the Nasdaq Stockholm Rulebook for Issuers) and in part by • The number of Board members; internal rules (e.g., the Company’s Articles of Association, Code • The nominees for election to the Board; of Conduct, and Group policies). While not mandatory, Husq- • The Chair of the Board; varna Group has elected to comply with all aspects of the Swed- ish Code, without exception. • Remuneration to Board members, including the Chair, and Husqvarna has no deviations from the Swedish Code to report remuneration for Board members’ work on Board committees; for the 2019 financial year. Nor has Husqvarna been subject to any • Selection of external auditors (when applicable); rulings by Nasdaq Stockholm’s Disciplinary Committee or deci- • Remuneration to external auditors; and sions on breaches of sound practices in the stock market by the • Changes to the process regarding the composition and tasks of Swedish Securities Council. For more information, go to: the Nomination Committee (if applicable). husqvarnagroup.com/en/corporate-governance/. The highest corporate decision-making body in the Company The AGM determines the process for establishing the Nomination is the Shareholders’ General Meeting, which is normally held Committee and its members. At Husqvarna AB’s 2013 AGM it was once per year in the form of the Annual General Meeting decided that the following process would apply until a subsequent (“AGM”), but can also be in the form of an Extraordinary General AGM resolves otherwise: Meeting under certain circumstances. The 2020 AGM will take • The Company shall have a Nomination Committee consisting place at 4 p.m. on Thursday, April 2, 2020 at the Elmia Congress of five members. Center, Elmiavägen 15 in Jönköping, Sweden. The Company pre - • The members shall consist of one representative of each of the pares the AGM agenda with input from its shareholders, who four largest shareholders in the Company in terms of voting have the right to propose matters for consideration at the AGM. rights held as of the last banking day of August, with the fifth member being the Chair of the Board. Shareholders • In the event that any of the four largest shareholders elect not Husqvarna AB’s shares have been traded on Nasdaq Stockholm to nominate a representative to the Nomination Committee, since June 2006. At year-end 2019, the share capital amounted to the right to appoint such a representative passes to the fifth SEK 1,153m, represented by 112,015,629 A-shares and largest shareholder and so on. 464,328,149 B-shares, each with a par value of SEK 2. A-shares carry one vote and B-shares carry one tenth of a vote. As per the • The Company’s Board Secretary shall serve as secretary of the Articles of Association, holders of A-shares are entitled to request Nomination Committee. conversion of A-shares into B-shares on a 1:1 basis. During 2019, 421,922 A-shares were converted to an equivalent number of These rules established at the 2013 AGM have not been changed B-shares. by any subsequent AGM and therefore continue to apply. As of December 31, 2019, the number of shareholders was The formation of the Nomination Committee for the 2020 63,897, whereof foreign shareholders held approximately 29.7% AGM was announced on September 11, 2019. The members of of the outstanding share capital. Investor AB was the single largest the Nomination Committee (and corresponding appointing shareholder with a holding of 16.8% of the share capital and 33.1% shareholders) for the 2020 AGM are: of the votes. L E Lundbergföretagen was the second largest share- Member Appointing shareholder holder with a holding of 7.6% of the capital and 25.1% of the votes. For further information on the Husqvarna AB shares and Petra Hedengran (Chair) Investor AB shareholders, see section “The share”. Claes Boustedt L E Lundbergföretagen AB Ricard Wennerklint If Skadeförsäkring AB Henrik Didner Didner & Gerge Fonder AB Tom Johnstone 1 –

1 Board Chair of Husqvarna AB

55 / Annual Report 2019 / Husqvarna Group The determination of the four largest shareholders for purposes Shareholders who are listed in the share registry on the record of nominating representatives to the Nomination Committee was day (i.e., Friday, March 27, 2020) and wish to be represented at the based on known holdings of voting rights as of August 30, 2019. AGM must register to do so with the Company by no later than Nomination Committee members do not receive compensation Friday, March 27, 2020. Shareholders who are individuals may from Husqvarna AB for their work on the Nomination Committee. attend the AGM in person or by proxy. Shareholders attending As noted above, one of the chief duties of the Nomination the meeting by proxy, including all corporate shareholders, must Committee is to make recommendations regarding the size and submit a valid power of attorney as well as other required docu- composition of the Board. Normally, the starting point for such mentation in due time before the AGM. This, together with infor- recommendations is a survey conducted each year by the Chair of mation provided by Euroclear Sweden AB, allows the Company the Board to assess the Board’s work, composition, qualifications, to compile a book of shareholders eligible to vote at the AGM. experience and efficiency. The results of this survey are shared Following this compilation, voting certificates are sent to all and discussed with the Nomination Committee. shareholders attending the meeting or their designated repre- Based on survey results and, if deemed appropriate, subse- sentatives. Voting certificates are proof of voting rights and also quent discussions and interviews, the Nomination Committee serve as an entrance card to the AGM. Board Report — Corporate Governance Report determines whether the existing Board should be strengthened with additional expertise or if there are any other reasons to make AGM agenda items & written documentation changes to the composition of the Board. In making such deter- The agenda for the AGM is reviewed and approved by the Board minations and (if applicable) evaluating potential new candidates and consists of matters that are statutorily required, as well as for the Board, the Nomination Committee takes into consider- other matters. ation the objective to achieve a gender balance in the Board. Matters typically include: The Nomination Committee has applied rule 4.1 of the Swed- • Election of Chair of the AGM 1; ish Code as its diversity policy. In addition, the Nomination Com- • Adoption of statutory financial documentation; mittee takes into consideration the need to ensure that the inde- • Discharge of liability for the Board members and CEO; pendence requirements of the Swedish Code are met. These • Disposition of the Company’s profit; requirements stipulate that at least the majority of Board mem- • Number of elected Board members 1; bers must be independent from the Company’s management, and that at least two (from such majority) are also independent of • Remuneration to Board members, committee members and 1 the Company’s largest shareholders. The Nomination Committee external auditors ; also takes into account any proposals made to the Nomination • Election of external auditor 1; Committee about the composition of the Board that may have • Election of Chair of the Board 1; been suggested by other shareholders. Shareholders who wish to • Election of Board members 1; submit proposals to the Nomination Committee may do so by • Principles of remuneration for Group Management; sending an email to [email protected]. • Adoption of long-term incentive programs (if applicable); While there is no formal cut-off date for proposals, it was recom- • Repurchase and transfer of the Company’s own shares mended in the September 11, 2019 notice of the formation of the (if applicable); Nomination Committee that such proposals from shareholders be received by the Company no later than February 6, 2020. • Authorization to resolve on the issuance of new shares For the 2020 AGM, the Nomination Committee announced its (if applicable); and required proposals along with the notice of the AGM, which was • Such other matters as may be deemed necessary and published on the Company’s website on February 28, 2020. The appropriate by the Board. Nomination Committee will present and explain its work and pro- 1 Indicates agenda items for which the Nomination Committee makes a proposal. posals at the AGM. Shareholders may also, prior to the publication of the notice to The Annual General Meeting attend the AGM, propose matters to be put on the AGM agenda. General At the AGM, the Chair of the Board presents a report on the The AGM is the highest decision-making body of the Company. In Board’s work during the preceding year, the CEO gives an over- accordance with the Swedish Companies Act, the AGM of Husq- view of the Company’s business and current priorities, and the varna AB must be convened annually on a date not later than six auditors present their report and review of the Company’s months after the close of the preceding financial year, and is nor- finances. If required, the Chair of the People & Sustainability mally held in March or April. Committee (formerly the “Remuneration Committee”) 2 reports According to Husqvarna AB’s Articles of Association, the AGM on remuneration to Group’s executive management (herein, must be held in Jönköping or Stockholm, Sweden, although it has “Group Management”) and, if it is to be decided by the AGM, the traditionally been held in Jönköping. The notice of the AGM Company’s long-term incentive programs. Shareholders may also (specifying its date, location, agenda, etc.) shall be made public direct questions to the Chair of the Board, the CEO, the Nomina- at least four weeks and not more than six weeks prior to the AGM. tion Committee, the Chair of the People & Sustainability Commit- The notice is published in the Swedish daily newspaper, Svenska tee, the external auditors or any other Board member. Written Dagbladet and the Swedish Official Gazette (Post- och Inrikes documentation is presented at the AGM, normally both in English Tidningar). It is also announced in a press release and on the and Swedish. This documentation may be downloaded from the Company’s website at www.husqvarnagroup.com. For the 2020 Company’s website and is also sent to shareholders upon request. AGM, the notice was published by press release on February 28, 2 This Committee is intended to be a “remuneration committee”, within the meaning of Section 9 of the Swedish Code, see also “People & Sustainability Committee”, 2020 and in Svenska Dagbladet and the Swedish Official Gazette on page 58. (Post- och Inrikes Tidningar) on March 3, 2020.

56 / Annual Report 2019 / Husqvarna Group Such documentation includes: and any previously resolved programs. • The agenda for the AGM; • To authorize the Board to approve the issue of not more than • Proposals from the Board and the Nomination Committee; 57,634,377 new B-shares against payment in kind on one or • The Board´s report on the People & Sustainability Committee’s more occasions during the period up to the 2020 AGM. evaluation of programs of variable remuneration for Group Management, the application of the principles of remuneration The 2020 AGM for Group Management and applicable remuneration structures The 2020 AGM of Husqvarna AB will be held at 4 p.m. on Thursday, and levels in the Company; April 2, 2020 at the Elmia Congress Center, Elmiavägen 15 in • The Nomination Committee’s explanatory statement regarding Jönköping, Sweden. For more information regarding the 2020 the proposal for appointment of Board members; and AGM, see section “Annual General Meeting 2020”. • The Board’s report in relation to the proposed dividend and the The Board of Directors proposal on the acquisition of the Company’s own shares (if According to Husqvarna AB’s Articles of Association, the Board applicable). shall be comprised of no less than five and no more than ten Board members. The Articles of Association do not contain any Board Report — Corporate Governance Report The AGM is held in Swedish, but simultaneous translation into specific provisions concerning the appointment and dismissal of English is available. The minutes recorded at the AGM are nor- directors (or the method by which the Articles of Association mally published within a few days of the AGM. A press release themselves may be amended), meaning that the rules otherwise including the decisions made by the AGM is published immedi- stated in the Swedish Companies Act apply. There are currently ately after the AGM. eight Board members elected by the AGM (see section “Board of The 2019 AGM Directors and auditors”). In addition to the Board members elected by the AGM, Swedish trade unions have the statutory The 2019 AGM was held on April 9, 2019 in Jönköping, Sweden right to appoint two ordinary Board members with voting rights, with 736 shareholders attending in person or by proxy, represent- as well as two non-voting deputies. ing 58% of the total number of shares and 78% of the total num- In accordance with the Swedish Code, the principle tasks of ber of votes. Also attending were the Board, the external auditors the Board include: and members of Group Management. The AGM approved the • Establishing the overall goals and strategy of the Company; following resolutions: • Appointing, evaluating and, if necessary, dismissing the CEO; • To adopt the income statements and balance sheets for 2018. • Defining appropriate guidelines to govern the Company’s con- • To declare a dividend of SEK 2.25 per share in total, to be paid in two separate payments of SEK 0.75 per share to be paid on duct in society, with the aim of ensuring its long-term value cre- April 16, 2019, and SEK 1.50 per share to be paid on ation capability; October 16, 2019. • Ensuring that there is an appropriate system for follow-up and control of the Company’s operations and the risks to the Com- • To discharge the Board and the CEO from liability for the financial year 2018. pany that are associated with its operations; • Ensuring that there is a satisfactory process for monitoring the • To establish the size of the Board at eight (8) elected members (including the CEO). Company’s compliance with laws and other regulations relevant to the Company’s operations, as well as the application of • To elect Tom Johnstone, Ulla Litzén, Katarina Martinson, internal guidelines; and Bertrand Neuschwander, Daniel Nodhäll, Lars Pettersson, Christine Robins and Kai Wärn as Directors of the Board. • Ensuring that the Company’s external communications are characterized by openness and that they are accurate, reliable • To appoint Tom Johnstone as Chair of the Board. and relevant. • To set Board remuneration at SEK 6,290t in total, of which SEK 2,000t to the Chair of the Board and SEK 580t to each of the The Board has adopted Rules of Procedure for its internal activities, Board members elected by the AGM and not employed by the which include rules regarding the number of Board meetings, Company. Furthermore, to pay additional remuneration of SEK matters to be handled at regular Board meetings and the duties 240t to the Chair of the Audit Committee and SEK 135t to each of the Chair of the Board. These Rules of Procedure are updated of the other two members of the Audit Committee, as well as and adopted by the Board each year at the “Statutory Board SEK 140t to the Chair of the People & Sustainability Committee Meeting” which is normally held immediately after the AGM. The and SEK 80t to each of the other two members. Chair shall also ensure that the Board evaluates the CEO on a reg- • To approve the Nomination Committee’s proposal of election ular basis, at least once a year. of auditors and to pay auditor’s fees on the basis of approved The Board has also issued written instructions specifying when invoices. and how information required to enable the Board to evaluate the • To set principles of remuneration to Husqvarna Group Manage- Company and the Group’s financial position shall be reported to ment, based on fixed salary, variable salary, long-term incen- the Board, as well as the distribution of duties between the Board tives, pensions and other benefits. and the CEO. The Board has established an Audit Committee • To establish a performance-based long-term incentive program and a People & Sustainability Committee, which discharge certain for 2019, LTI 2019, to be offered to 100 senior managers, monitoring and oversight responsibilities on behalf of the Board, whereby, subject to the fulfilment of certain performance targets as more fully described below. and other conditions during a three-year vesting period, the par- The Chair of the Board ensures that the Board’s work and proce- ticipants would have the right to receive certain B-shares. dures are evaluated and discussed with Board members annually, • To authorize the Board, during the period up until the next and are brought to the attention of the Nomination Committee AGM, to direct the Company to enter one or more equity swap with the aim of developing the Board’s working methods and effi- agreements with a third party (e.g., a bank) for purposes of ciency. In 2019, such evaluation was conducted principally hedging the obligations of the Company, under the LTI 2019 through a combination of individual interviews and a detailed

57 / Annual Report 2019 / Husqvarna Group Board questionnaire. The results of such evaluation were pre- the General Counsel, who keeps the minutes of the meetings, the sented to, and discussed with, the Nomination Committee as well Company’s CFO, and the external auditors. Other members of as to the full Board. The Board members elected by the 2019 Group Management are present to report on matters as relevant. AGM fulfil the independence criteria set out by the Swedish The Audit Committee regularly reports on its findings and recom- Code, which requires that a majority be independent of the Com- mendations to the full Board. Minutes of all Audit Committee pany’s management, and that at least two of those be indepen- meetings are also distributed to the full Board. dent as to the Company’s largest shareholders. In 2019, the Audit Committee held seven meetings, which fulfils its own charter rule that it shall meet at least four times per Fees to Board Members year. The Audit Committee meetings follow an adopted agenda Fees to Board members, including fees for committee work, are plan, which includes a review of open issues, a treasury and tax set by the shareholders at the AGM. For information on fees to update, and an internal audit update. The Audit Committee also the Board in 2019, see note 4. reviews the Company’s Interim Reports and Boards’ Report before they are submitted to the Board. The Committee meets Board Meetings frequently with the Company’s external auditors who deliver Board Report — Corporate Governance Report According to the Board’s Rules of Procedure, the Board shall hold reports on the audit. It also reviews the Company’s compliance at least four ordinary meetings and one statutory meeting per cal- work and litigation activities quarterly. endar year. In 2019, the Board held ten meetings, of which three were by telephone, three were held in Stockholm, Sweden, two The People & Sustainability Committee (formerly the were held in Huskvarna, Sweden, one was per capsulam (i.e., by Remuneration Committee) unanimous written consent) and one was held in Aycliffe, UK. The responsibilities of the Committee are to oversee: At Board meetings, the Company’s CFO and General Counsel A. management remuneration and talent management, and are also present. The General Counsel serves as the Board’s sec- B. the Company’s Sustainability efforts. retary and records the minutes of the Board meetings. Other This Committee is intended to be and act as the Company’s members of Group Management or other senior managers of the “remuneration committee”, within the meaning of the Swedish Company may also be asked to attend and report on significant Code. The Committee shall consist of as many members as the matters. Board shall determine, but in no event less than three members. When relevant and at least quarterly, Group Management The Board shall appoint the Committee members annually, at the presents forecasts and key performance indicators, providing the Statutory Board Meeting, or when a Committee member needs to Board with an overview of the financial development and expec- be replaced. Each Committee member shall satisfy applicable tations of the Company. The Company’s budget is reviewed and independence and other requirements of law and other regulations approved once a year, generally in the fall. The Board also reviews applicable to the Company from time to time. The Board shall the Company’s significant litigation matters, follows up on the appoint the Committee’s Chair. The Committee’s Secretary shall be Company’s compliance and risk management work, and monitors the Company’s Senior Vice President People & Organization. the Company’s progress regarding its sustainability agenda. The The Committee’s Chair, in consultation with the Committee Board maintains an active oversight role in the Group’s Enterprise members, shall determine the schedule and frequency of the Risk Management program, as more fully described in the “Risk Committee meetings, provided that, the Committee shall meet at Management” section of this Annual Report. In addition, the least twice per calendar year. The Committee may, at its discre- Company’s external auditors meet with the Board once a year, tion, include in its meetings members of the Company’s manage- without participation of any member of Group Management. ment (normally the CEO), the Company’s external or internal auditors, any other personnel employed or retained by the Company The Audit Committee or any other person whose presence the Committee believes to In accordance with the Swedish Companies Act, the Board annu- be necessary or appropriate. Notwithstanding the foregoing, the ally appoints an Audit Committee whose primary responsibilities CEO or any other member of Group Management may not be are to (a) monitor the Company’s financial reporting, (b) oversee present during voting or deliberations concerning his or her com- the effectiveness of the Company’s internal control, internal audit pensation or assessment.The Committee shall report to the entire function and risk management as they relate to financial report- Board of the Company after each of its meetings and as otherwise ing, (c) review and supervise the Company’s external auditors’ requested by the Chair of the Board and shall make available to impartiality and independence, and (d) when applicable, assist in the Board the minutes of its meetings by the Secretary. the preparation of proposals for the AGM’s election of auditors. With respect to Management Compensation & Talent Man- The Audit Committee may also exercise any other powers and agement, the Committee is assigned to perform the following carry out any other responsibilities delegated to it by the Board general tasks: from time to time. The Board has adopted a charter for the Audit • to prepare the Board’s decisions on principles for remuneration Committee, which is periodically updated and approved by the and other terms of employment for the CEO and for other Board. members of Group Management, including such Remuneration The Board determines the composition of the Audit Commit- Guidelines and Remuneration Reports, as are required by appli- tee, which shall have at least two members, none of whom may be cable law (including the EU’s Shareholders Rights Directive); employed by the Company. At least one of the members of the • to monitor and evaluate programs for variable remuneration, Audit Committee must have auditing or accounting competence. both ongoing and those that have ended during the year, for The Board appoints the Committee members annually at the Group Management; Statutory Board Meeting or when a Committee member needs to • to monitor and evaluate the application of the principles for remu- be replaced. neration that the AGM is legally obliged to establish, as well as the The Audit Committee members appointed in April 2019 were current remuneration structures and levels in the Company; and Ulla Litzén (Chair), Daniel Nodhäll and Katarina Martinson, who • to evaluate future talents for Group Management positions were the same members as the previous year. Audit Committee and monitor succession planning. meetings are also attended by the Company’s internal auditor, by

58 / Annual Report 2019 / Husqvarna Group With respect to Sustainability, the Committee is assigned to shall normally report to the Committee (or the full Board) at least perform the following general tasks: twice per year. The Committee members appointed in April 2019 • To periodically review the Group’s overall efforts within the field were Lars Pettersson (Chair), Tom Johnstone and Bertrand of Sustainability, including without limitation, approving (or rec- Neuschwander. For more information on remuneration to Group ommending to the full Board for approval) any Sustainability Management, see note 4. related targets or changes to existing targets. In 2019, the Committee held three meetings, which fulfils the • To actively track progress towards the Group’s previously estab- charter criteria that it shall meet at least twice a year. lished Sustainability targets. External Auditors • To review and comment on the Group’s annual “Sustainovate Progress Report”, prior to submission to the full Board for At the 2019 AGM, in accordance with the proposal of the Nomi- approval. nation Committee, Ernst & Young AB was elected as auditor for the period from the 2019 AGM up until the end of the 2020 AGM. • To otherwise monitor the Group’s overall Sustainability work, The auditor-in-charge is Hamish Mabon. including a review of any material information in the press that As per the decision taken at the 2019 AGM, the auditor’s fee may reflect either positively or negatively on the public percep- Board Report — Corporate Governance Report until the 2020 AGM shall be paid on the basis of approved tion of the Group’s commitment to sustainability. invoices. For more information, see note 8. The above tasks shall be supported by the Group’s Head of Sustainability (currently within Operations Development), who

Group Management Structure

Kai Wärn, President and CEO*

Innovation & Technology Anders Johanson Husqvarna Division Gardena Division Construction Division Sascha Menges Pär Åström Henric Andersson* Business Development Per Ericson

Operations Development Pavel Hajman

Global Information Services Pavel Hajman

Finance, IR & Communication Glen Instone

Legal Affairs Brian Belanger

People & Organization * Henric Andersson will replace Kai Wärn as President and CEO as from April 2, 2020. Leigh Dagberg

Group Management & Divisional Structure • external affairs, Husqvarna Group has a brand-driven organizational structure, • Board reporting, with three separate reporting divisions: The Husqvarna Division, • progress on Sustainability efforts, the Gardena Division, and the Construction Division. Group Man- • risk management and mitigation (see “Risk Management” agement is now a 10 member team comprised of (a) the CEO, (b) section of this Annual Report), and the three divisional presidents, and (c) the heads of seven Group • Group policies and guidelines. Functions, in each case, as shown above (two of which functions are currently headed by the same individual). Group Management meets in person on a quarterly basis, with a telephone meeting in each month in which there is no physical Group Management, together, makes decisions on: meeting. • the Group’s strategic and business development, Clear roles and responsibilities apply for each of the Group • allocations of responsibilities as between the Group functions functions as well as for the divisions. A Group governance struc- and the respective divisions, ture has been implemented to ensure that decisions are made as • enhancing Group synergies, close to operations as possible. Clear guidance has been pro- • internal financial and business follow-up, vided to identify the level on which different types of decisions • external financial reporting for Board approval, should be made. Changes to the governance structure (including • Group governance, applicable roles and responsibilities) can only be made by the • Group staffing plans, decision of Group Management. • issue resolution, • budgets,

59 / Annual Report 2019 / Husqvarna Group The CEO three divisions, and three governing groups, each with a desig- The CEO is appointed by the Board and is responsible for the nated focus area, in Enterprise Architecture, Infrastructure & ongoing management of the Company in accordance with the Security and Common Systems & PMO, respectively. Board’s guidelines and instructions. These instructions include 5. Finance, IR & Communication. This function, which is headed responsibility for financial reporting, preparation of information by the Group’s CFO, Glen Instone, has primary responsibility for decisions and ensuring that commitments, agreements and for the Group’s financial controlling and reporting. It also coor- other legal documents are in compliance with applicable laws dinates and collaborates with finance personnel housed within and the Group Code of Conduct. The CEO also ensures compli- the divisions. The function’s organization is comprised of a ance with the goals, policies and strategic plans approved by the number of sub-groups including (a) Treasury, (b) Internal Con- Board, and updates the Board on the same when necessary. The trol, (c) Tax, (d) Business Control, (e) Group Accounting, (f) Inter- CEO appoints all members of Group Management, with input nal Audit and (g) Real Estate. It also houses the Group’s Investor from the Board Chair. Relations and Communication (internal and external) function. 6. Legal Affairs. This function, which is headed by the Group’s Gen- The Divisional Presidents eral Counsel, Brian Belanger, is responsible for providing all rele- Board Report — Corporate Governance Report Each of the three divisions has its own President, who in turn vant legal support to the Group and the divisions. It also houses reports to the Group CEO. Each of such division Presidents is the Group’s Risk Management function, the Data Privacy Office, responsible for the income statement and balance sheet for his/ and the Compliance & Integrity function. In order to secure inde- her respective division. However, all decisions made by a division pendence, all members of the Legal Affairs team, including those are subject to the Group’s overall strategic goals and policies. For sitting with the divisions, report to the Group’s General Counsel. more information about Husqvarna Group’s divisions, please see 7. People & Organization (HR). This function, which is headed by section “Divisions”. Leigh Dagberg, has primary responsible for overseeing the Group’s HR initiatives, including the recruitment, advancement The Group Function Heads and retention of personnel. It also takes the lead on the Group’s Group Management includes the heads of the seven “Group compensation & benefits and talent management, and coordi- Functions” as described below. These functions are designed to nates on a dotted-line basis with HR personnel located within support the divisions with forward-looking initiatives and/or to the divisions. continue to capture certain Group synergies where appropriate following the recent shift to increased divisional autonomy. Note regarding Governance of Climate-Related Risks (TCFD) Please refer to the “Risk Management” section of this Annual 1. Innovation and Technology. This function, which is headed by Report, for a description of (a) the Board’s oversight of climate- Anders Johanson, is leading the Group’s Innovation Strategy, related risks and opportunities, and (b) Group Management role in with focus on the future of Robotics and Data Driven Services. assessing and managing risks and opportunities, as contem- This function scouts new opportunities and innovates early plated by the recommendations of the Task Force on Climate- concepts in close cooperation with the start-up community and Related Financial Disclosures (TCFD). leading academic centers. It also drives applied research in selected digital areas with leading universities. The function’s External information organization is comprised of three sub-groups focusing on (a) Husqvarna Group employs a series of procedures, controls, and Accelerated Innovation and Venturing, (b) Applied Digital Inno- systems to ensure the Group is able to provide the market with vation, and (c) Technology and IP Intelligence, respectively. It timely and accurate information, to the extent required by appli- also houses the Group’s Artificial Intelligence Lab. cable law and good corporate practice, including the disclosure 2. Business Development. This function, which is headed by Per requirements of the EU’s Market Abuse Regulation (MAR) and Ericson, is primarily responsible for leading the work on the Nasdaq Stockholm’s Rule Book for Issuers. The Board has dele- Group’s long-term strategy, as well as M&A activities. The func- gated to the CEO, and an internal disclosure committee, com- tion’s organization is comprised of five sub-groups focusing on prised of the Group’s CFO, General Counsel and head of Busi- (a) Business Intelligence, (b) Strategy Planning & Projects, (c) ness Development, the day-to-day responsibility for assessing Mergers & Acquisitions, (d) Venture Capital investments, and whether insider information exists (within the meaning of the (e) Licensing, respectively. MAR), and for ensuring that such information is promptly dis- 3. Operations Development. This function, which is headed by closed or, in exceptional circumstances, to delay such disclosure Pavel Hajman, is primarily responsible for securing Group wide where necessary to protect the interests of the Company, and synergies where appropriate, accelerating certain key priority permitted by applicable law. areas, and securing business assurance. The function’s organization includes sub-groups focusing on (a) Business Assurance Financial information is regularly issued in the form of: (Sustainability, EHS, Product Compliance and Quality), (b) Digital • Interim reports, published as press releases; Commerce acceleration and Customer Experience, (c) Robot- • Annual Reports; ics & Battery Acceleration, and (d) a Program Office, which • Press releases concerning news and important issues; includes Sourcing coordination, Efficiency programs and • Presentations and telephone conferences for financial analysts, Change management. investors and media on the day of publication of the interim 4. Global Information Services (IT). This function, which is also and year-end reports, and in connection with the publication of headed by Pavel Hajman, is primarily responsible for oversee- other important information; and ing the Group’s IT strategy, systems & infrastructure and opera- • Presentations for financial analysts and investors in connection tional support. It provides IT services and solutions including IT with capital market days and road shows, etc. security, and also supports and collaborates with the IT personnel housed within the divisions. The function’s organization is All reports, presentations and press releases are published on the comprised of three delivery focused groups, aligned to the Group’s website at www.husqvarnagroup.com.

60 / Annual Report 2019 / Husqvarna Group Internal Control over Financial Reporting

The Board is responsible for the Company’s internal controls Control Requirements (MICR) for its reporting units to enhance according to the Swedish Companies Act, Swedish Annual Husqvarna’s internal control environment. Husqvarna Group has a Accounts Act and the Swedish Code. The purpose of this report is dedicated internal control function. The objective of Group Inter- to provide shareholders and other interested parties with an under- nal Control is to provide support for Group Management and the standing of how internal control is organized within Husqvarna management of the divisions, enabling them to continuously Group. It is limited to internal control over financial reporting. improve internal control relating to financial reporting. This description of the Group’s internal control activities is based on the COSO framework (The Committee of Sponsoring Information and communication Organizations of the Treadway Commission). The COSO framework The Husqvarna Group has a central document management sys- comprises five key components that jointly facilitate achieving the tem, which contains the governing documents, and is open to all objective of reliable financial reporting. employees. The governing documents relating to financial reporting such as the Husqvarna Accounting Manual are subject Control environment to regular reviews and updates. Changes in accounting proce- Board Control Report — Internal The foundation to establish good internal control is a framework dures are communicated and explained in newsletters from the of governing documents such as policies, instructions, guidelines Group’s accounting function. Furthermore, to ensure the correct and manuals that are embedded in the organizations vision and implementation of such changes, the Group has established strategy. The Husqvarna Group Code of Conduct sets the impor- internal forums with participation from key stakeholders in the tance of integrity and ethical values governing interactions with area of financial reporting. employees, business partners and other stakeholders. The Group’s governance policies provide the framework that defines Monitoring activities the organizational structure, responsibilities and authorities. The Ongoing responsibility for monitoring and follow-up of financial Board is ultimately responsible for establishing an effective inter- reporting is performed by the Group Finance function. Country nal control system, including that the Company has procedures to Officers are appointed by the Husqvarna Group in each country ensure that (i) approved policies for financial reporting and inter- where the Group has at least one active subsidiary. The duties of nal controls are applied, (ii) the Company’s financial reports are such Country Officers include safeguarding the interests of share- produced in accordance with applicable legislation, accounting holders as well as to ensure compliance with laws and regulations. standards and other requirements for listed companies, and (iii) Country Officers’ responsibilities also include ensuring that the there is an appropriate system for follow-up and control of the entities’ internal controls and financial reporting comply with Company’s financial reporting. The Board has established Rules Group policies, instructions and guidelines. of Procedure and clear instructions for its work, which also cover Group Management performs monthly reviews of the results the activities of the Audit Committee. The overall duty of the for the Group and the divisions, as well as updated forecasts, stra- Audit Committee is to support the Board’s supervision of the tegic plans and ongoing business activities. Identified internal audit and reporting processes, and to ensure the quality of such control deficiencies are communicated in a timely manner to processes. The activities of the Audit Committee during the year operational management responsible for taking corrective action, are described on page 58. and to the Board, as appropriate. Considerations made in the Responsibility for maintaining an effective control environment quarterly closings are reported to the Audit Committee before as well as the ongoing work on risk management and internal the financial reports are presented to the financial market. control over financial reporting is delegated to the CEO by the The Group Internal Audit function supports the development Board. This responsibility, in turn, is further delegated to managers and improvement of internal control over financial reporting. within their specific areas at various levels in the Company. Group Internal Audit was established by the Audit Committee as Responsibility and authority are defined in instructions to the part of their monitoring role and as such the function has a solid CEO, regarding the right to sign for the Company, as well as reporting line to the Audit Committee. An annual internal audit within various internal policies, instructions and guidelines. plan based on an independent risk assessment is approved by the Audit Committee. Based on this audit plan, Group Internal Audit Risk assessment performs independent and objective audits to evaluate and Risks relating to financial reporting are evaluated and monitored improve the effectiveness of Husqvarna Group’s governance, risk by the Board through the Audit Committee. A risk assessment is management and internal control processes. The results of these performed by management once a year and presented to the audits are presented to the respective stakeholders including the Audit Committee covering profit and loss and balance sheet Group CFO, the CEO, and the Audit Committee. The findings of items in the financial reporting and related areas and processes. the internal audits are reported to the Audit Committee together The purpose of the risk assessment is to identify, which risks could with the status of the progress to improve the internal control result in a material misstatement in financial reporting, and to activities. direct internal control activities to manage those risks in a proactive manner.

Control activities Control activities are integrated in processes for accounting and financial reporting. The prerequisite to ensure reliable financial reporting from all entities are uniform accounting principles which are stipulated in the Husqvarna Accounting Manual. For key financial processes, the Group has established Minimum Internal

61 / Annual Report 2019 / Husqvarna Group Board of Directors and auditors

Name Tom Johnstone, CBE Ulla Litzén Katarina Martinson Bertrand Neuschwander Daniel Nodhäll Lars Pettersson Christine Robins Kai Wärn Function Chair of the Board Board member Board member Board member Board member Board member Board member Board member (and President & CEO)

Board Report — Board of Directors and auditors Born 1955 1956 1981 1962 1978 1954 1966 1959

CV M. A., University of Glasgow, B. Sc., Stockholm School of M. Sc., Stockholm School of Graduate engineer, Institut M. Sc., Stockholm School of M. Sc. in Applied Physics, BBA in Marketing and Finance, M. Sc. in Mechanical Scotland, Hon. Doc. in B.A., Economics, Sweden and an Economics, Sweden. Portfolio National Agronomique de Economics, Sweden. Managing Material Sciences, Uppsala University of Wisconsin, Engineering, KTH Royal University of South Carolina, MBA, Massachusetts Institute management for the Lundberg Paris-Grignon, France, with an Director, Head of Listed Core University, Sweden. Hon. Doc. Madison, US and an MBA at Institute of Technology, US. Hon. Doc. in Science, of Technology, US. Chair of the Family. Member of the Audit MBA from INSEAD. Member of Investments at Investor AB. at Uppsala University. Chair of Marquette University, Stockholm, Sweden. Cranfield University, UK. Member Audit Committee. Committee. the People & Sustainability Member of the Audit Committee. the People & Sustainability Milwaukee, WI, US. President & CEO of of the People & Sustainability Committee. Committee. Husqvarna AB. Committee.

Other major Board Chair of Combient AB Board member of Board Chair of Indutrade AB. Board member of Serge Ferrari Board member of SAAB AB. Board Chair of KP-Komponenter Board member of assignments and of the British-Swedish AB Electrolux, Epiroc AB, Board member of L E Lundberg- Group SA. A/S. Board member of Festo AB Electrolux. Chamber of Commerce. Vice NCC AB and Ratos AB. företagen AB, Fastighets AB AG, AB Industrivärden, Board Chair of Wärtsilä L E Lundberg, Förvaltnings AB Indutrade AB and L E Corporation. Board member of Lunden, L E Lundberg Kapital Lundbergföretagen AB. Investor AB, Northvolt AB and förvaltning AB, Fidelio AB and Volvo Cars. AniCura AB.

Previous President & CEO of AB SKF President of W Capital Analyst at Handelsbanken Chief Operating Officer, Analyst focused on the President & CEO of AB Sandvik President & CEO of Char-Broil Operations partner at IK positions 2003–2014. Executive Vice Management AB 2001–2005. Capital Markets 2008, Vice Groupe SEB, France 2014-2019, engineering sector at Investor 2002–2011 and various LLC, Columbus, GA, US 2014– Investment Partners Norden AB President of AB SKF 1999–2003. Senior management positions President at Strategas Research Senior Executive Vice President AB since 2002. positions within AB Sandvik 2019. President & CEO of 2011–2013. President & CEO of President Automotive Division, and member of the Management Partners LLC, New York, US for Business Units, Brands, 1978–2002. BodyMedia, Pittsburgh, PA, Seco Tools AB 2004–2010. AB SKF 1995–2003. Senior Group, Investor AB 1996–2001. 2006–2008, investment Innovation & Strategy, Groupe US 2009–2014. President & CEO Various positions within ABB management positions within Managing Director, responsible research at ISI, International SEB 2012–2014, Senior Executive of Philips Oral Healthcare, 1985–2004. AB SKF since 1987. for Core Holdings 1999–2000. Strategy & Investment Group, Vice President for Business Seattle, WA, US 2005–2009. President of Investor New York, US 2005– 2006. Units Brands & Innovation, Marketing and Finance positions Scandinavia AB 1996–1998. Groupe SEB 2010–2012, CEO, within S.C. Johnson company Devanlay/Lacoste 2004–2009, 1988– 2005. Chair and Chief Executive Officer, Aubert Group 2001– 2004.

Holdings in Husqvarna 990 A-shares, 14,800 B-shares, 10,000 B-shares 113,478 A-shares 7,500 B-shares 10,000 B-shares 5,000 B-shares American Depositary Receipts 385,149 B-shares (Own) December 31, 2019 and 384,024 call options 1. 378,737 B-shares (ADR) B 1,866 100,000 B-shares (Legal person)

Nationality / Elected UK / 2006 SE / 2010 SE / 2012 FR / 2016 SE / 2013 SE / 2014 US / 2017 SE / 2014

Total fees 2019, KSEK 2,080 820 715 660 715 720 580 –

Board meeting 10/10 10/10 10/10 10/10 9/10 10/10 9/10 10/10 attendance

People & Sustainability 3/3 – – 1/3 – 3/3 – – Committee attendance

Audit Committee – 7/7 6/7 – 7/7 – – – attendance

Independence to Yes Yes Yes Yes Yes Yes Yes No Husqvarna Group

Independence to No Yes No Yes No No Yes Yes major shareholders

1 Consisting of (a) 192,012 call options issued by Investor AB entitling to purchase Husqvarna B-shares, and (b) 192,012 call options issued by L E Lundbergföretagen AB entitling to purchase Husqvarna B-shares.

Auditors Soili Johansson Ernst & Young AB, Hamish Mabon, Employee representative Authorized Public Accountant. Born 1962. Representative of Carita Svärd Born 1965. Other audit assignments the Federation of Salaried Employee representative include: Skanska AB, Svenska Cellu- Employees in Industry and Born 1968. Representative of losa Aktiebolaget SCA, Essity AB Services. Holdings in the Swedish Confederation and SEB. Holdings in Husqvarna: 0 Husqvarna: 225 A-shares, of Trade Unions. Holdings in shares. 750 B-shares. Husqvarna: 0 shares.

62 / Annual Report 2019 / Husqvarna Group Name Tom Johnstone, CBE Ulla Litzén Katarina Martinson Bertrand Neuschwander Daniel Nodhäll Lars Pettersson Christine Robins Kai Wärn Function Chair of the Board Board member Board member Board member Board member Board member Board member Board member (and President & CEO)

Born 1955 1956 1981 1962 1978 1954 1966 1959 Board Report — Board of Directors and auditors

Nationality / Elected UK / 2006 SE / 2010 SE / 2012 FR / 2016 SE / 2013 SE / 2014 US / 2017 SE / 2014

Total fees 2019, KSEK 2,080 820 715 660 715 720 580 –

Board meeting 10/10 10/10 10/10 10/10 9/10 10/10 9/10 10/10 attendance

People & Sustainability 3/3 – – 1/3 – 3/3 – – Committee attendance

Audit Committee – 7/7 6/7 – 7/7 – – – attendance

Independence to Yes Yes Yes Yes Yes Yes Yes No Husqvarna Group

Independence to No Yes No Yes No No Yes Yes major shareholders

Dan Byström Anders Köhler Deputy employee Deputy employee representative representative Born 1973. Representative of the Born 1971. Representative Federation of Salaried Employees of the Swedish Confederation in Industry and Services. Holdings of Trade Unions. Holdings in in Husqvarna: 30 A-shares, Husqvarna: 20 B-shares. 1,050 B-shares.

63 / Annual Report 2019 / Husqvarna Group Group Management

Name Kai Wärn 1 Glen Instone Henric Andersson 1 Brian Belanger Leigh Dagberg Per Ericson Pavel Hajman Anders Johanson Sascha Menges Pär Åström Function President & CEO Senior Vice President, President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, President, President, Finance, IR & Commu- Construction Division Legal Affairs, General People & Organization Business Development Operations Develop- Innovation and Husqvarna Division Gardena Division nication and Chief Counsel and Secretary ment, Global Informa- Technology and CTO

Board Report — Group Management Financial Officer to the Board tion Services and CIO

Born 1959 1977 1973 1969 1970 1963 1965 1969 1971 1972

CV M. Sc. in Mechanical B.A. (Hons) in M. Sc. in Industrial J.D./LLM, Duke M. Sc. in Organizational Forest Engineer, M. Sc. in Industrial M. Sc. Chemical M. Sc. in Ind. M. Sc. in Industrial Engineering, KTH Royal Accounting & Finance, Engineering & University School of Behaviour, University of Swedish University of Engineering and Engineering and an Engineering & Engineering & Institute of Technology, University of Teesside, Management, Law. Employed 2006. London, UK. B.A. in Agricultural Sciences, Management, MBA, Chalmers Management, Swiss Management, KTH Stockholm, Sweden. UK. Chartered Institute Linköping Institute of Member of Group History, University of Sweden. Studies in Linköping Institute of University of Technol- Federal Institute of Royal Institute of Employed 2013. Board of Management Technology, Sweden. Management since California, Berkeley, Change Management Technology, Sweden. ogy, Gothenburg, Technology, Zurich, Technology, member of AB Accountants (CIMA). Employed 1997. 2015. US. Employed 2013. in Organization and Employed 2014. Sweden. Employed Switzerland. MBA, Stockholm, Sweden. Electrolux. Member of Employed 2002. Member of Group Member of Group Social Systems, Interna- Member of Group 2015. Part time adjunct INSEAD, France. Employed 2013. Group Management Member of Group Man- Management since Management since tional Association for Management since professor, industrial Employed 2004. Member of Group since 2013. agement since 2018. 2012. 2018. Organisational and 2014. product development, Member of Group Management since Social Development KTH Royal Institute of Management since 2015. (IOD), Belgium. Technology, Stockholm, 2011. Employed 2011. Sweden. Board member Member of Group Etac Group. Member of Management since Group Management 2011. since 2015.

Previous Operations partner at Various positions in Various positions in Vice President Legal Vice President and Various positions in President, Husqvarna Partner and Global President Gardena Senior Vice President positions IK Investment Partners Husqvarna Group; Vice Husqvarna Group; Affairs Husqvarna Asia/ Head of People & Husqvarna Group; SVP Division 2014–2018. Practice Leader Division 2014–2018. Business Development, Norden AB 2011–2013. President Global Sales Senior Vice President, Pacific Region, Organization, Group People & Executive Vice Technology and Executive Vice Husqvarna Group President & CEO of & Service, Husqvarna Technology Office, Husqvarna Group Husqvarna Group 2018. Organization 2011– President, Head of Innovation Manage- President, Head of 2013–2018. Principal, Seco Tools AB 2004– Division 2016–2018, VP 2014–2015. Executive 2009–2012, with Vice President Talent 2018, acting SVP Group Asia/Pacific, Husqvarna ment, Arthur D. Little Manufacturing & A.T. Kearney 2010. Various positions & CFO Husqvarna Vice President, Head of temporary additional Management, Communications, Group 2014. President 2000–2006; 2008–2015. Logistics, Husqvarna Management at ABB 1985–2004. Division 2014–2017, VP Product Management assignments as Acting Husqvarna Group Brand & Marketing Assa Abloy AHG Director Strategic Group 2011–2014. Vari- Consultants 2007–2013. & CFO EMEA, 2013– & Development 2012– General Counsel 2013–2018. Manager, 2017–2018. Executive Greater China 2013– Product and Technology ous positions in Supply A.T. Kearney and 2014, VP & CFO 2015. Vice President Husqvarna Americas, PwC Consulting 2012– Vice President Human 2014. Various positions Planning, Gambro Chain Management Occam Associates Manufacturing, Logistics Construction Equipment Husqvarna Group 2013 2013. Partner and Resources, Haldex in Seco Tools, President 2008. Director Business and Operations, Management and Sourcing 2011– 2008–2011. Vice and acting Head of Consultant, MindShift 2006–2011. Various Asia/Pacific, Senior office and head of Husqvarna Group Consulting 1998–2007. 2013, VP & CFO Global President Commercial Asia/Pacific Sales 2002–2012. Head of positions with increasing Vice President Group Business Consulting, 2007–2011. Vice Supply Chain 2009–2011. Lawn & Garden and Region 2014. Associate Research & Consulting, responsibility, Stora Business Development, Volvo IT 2006–2007. President Supply Chain President, Husqvarna General Counsel, Manager, Universum Enso 1987–2006, most Regional Director CEE, Various positions within Management, Gardena Turf Care 2004–2008. Husqvarna Americas, 1997–2000. Research recently as Executive 1990–2013. Nobel Biocare 1996– AG 2004–2007. Various positions in Husqvarna Group Specialist and Product Vice President 2000. Associate Principal product and business 2006–2009, Partner, Developer, Information Corporate Human Management management, Cohen & Grigsby, P.C. Express 1992–1996. Resources & Business Consulting, McKinsey & Husqvarna 1997–2004. 2000–2006. Excellence. Company, Inc 1996– 2004.

Holdings in 385,149 B-shares (Own) 25,599 B-shares 56,065 B-shares 43,370 B-shares 12,992 B-shares 92,635 B-shares 101,343 B-shares 17,761 B-shares 111,026 B-shares 61,838 B-shares Husqvarna and 100,000 B-shares December 31, (Legal person) 2019

1 Henric Andersson will replace Kai Wärn as President and CEO as from April 2, 2020.

64 / Annual Report 2019 / Husqvarna Group Name Kai Wärn 1 Glen Instone Henric Andersson 1 Brian Belanger Leigh Dagberg Per Ericson Pavel Hajman Anders Johanson Sascha Menges Pär Åström Function President & CEO Senior Vice President, President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, President, President, Finance, IR & Commu- Construction Division Legal Affairs, General People & Organization Business Development Operations Develop- Innovation and Husqvarna Division Gardena Division nication and Chief Counsel and Secretary ment, Global Informa- Technology and CTO

Financial Officer to the Board tion Services and CIO Board Report — Group Management

Born 1959 1977 1973 1969 1970 1963 1965 1969 1971 1972

65 / Annual Report 2019 / Husqvarna Group 1 1 –8 63 72 66 79 –95 –95 525 430 2.12 2.12 –581 –348 –826 –509 2018 2018 571.5 1,212 572.3 1,206 1,642 1,213 2,070 1,561 1,213 1,213 1,643 1,643 –6,473 –2,014 41,085 10,502 –30,583 1 1 –6 18 10 10 –89 203 916 312 4.42 4.42 –586 –594 –302 –525 –568 –302 2019 2019 572.0 2,527 572.2 2,537 2,528 3,690 2,528 3,122 2,528 2,538 2,538 –6,985 –2,051 42,277 12,529 –29,748 Note 5, 6 5 3 5 11 11 11 7 3, 4, 8 11 7 9 9 10 Note 19 19 19 19 66 / Annual Report 2019 / Husqvarna Group Before dilution, SEK Before After dilution, SEK dilution, millions Before After dilution, millions Equity holders of the Parent Company Equity holders of the Parent Non-controlling interests Non-controlling Currency translation differences Currency Net investment hedge, net of tax Result arising during the period, net of tax tax of net statement, income the to adjustments Reclassification Company Equity holders of the Parent Non-controlling interests Non-controlling Cost of goods sold income Gross Selling expenses SEKm Consolidated income statement income Consolidated Net sales Administrative expenses Earnings per share: outstanding: number of shares Average Other operating income Operating income Net income Other operating expenses Financial income Financial expenses Financial items, net Income tax Net income Net income attributable to: Income after financial items financial after Income Consolidated comprehensive income statement income comprehensive Consolidated SEKm Net income income Other comprehensive statement: income the to reclassified be not will that Items tax of net plans, pension benefit defined on Remeasurements tax of net statement, income the to reclassified be not will that items Total statement: income the to reclassified be may that Items operations on translating foreign Exchange rate differences income comprehensive Total Cash flow hedges flow Cash tax of net statement, income the to reclassified be may that items Total income attributable to: comprehensive Total Other comprehensive income, net of tax of net income, comprehensive Other income comprehensive Total

Financial Statements – Group Financial Statements – Group – 0 2 16 34 218 670 191 696 145 120 592 357 218 451 1,794 2,101 4,622 2,557 3,516 6,064 7,105 5,534 1,585 3,613 1,006 1,346 1,153 2,605 6,038 11,067 11,798 11,744 38,607 10,854 21,000 17,607 38,607 16,007 16,009 Dec 31, 2018

1 2 55 33 457 229 585 610 269 669 592 250 763 1,304 1,732 2,622 4,099 2,995 2,694 6,794 1,585 7,338 5,629 1,690 3,620 1,011 1,911 1,153 2,605 7,047 10,858 12,760 41,981 11,328 13,370 23,739 18,242 41,981 17,281 17,283 Dec 31, 2019 20, 26 20, 26 22 20, 26 20, 26 10 21 22 20 23 20, 26 12 13 14 14 15 20, 26 16 10 17 20 20, 26 18 20 19 19 19 19 20, 26 19 Note 1 67 / Annual Report 2019 / Husqvarna Group 1 1 1 Most of the previous operating leases have been recognised from January 1, 2019 as right of use assets and lease liabilities, because of the adoption of IFRS 16. Previous financial 28. and leases have been included as comparative information for right of use assets and lease liabilities. For further information on the translation to IFRS 16 refer to note 1 Total equity and liabilities Total Derivatives Other provisions liabilities current Total Derivatives tax liabilities Deferred Provisions for pensions and other post-employment benefits post-employment other and pensions for Provisions Other provisions liabilities Current payables Trade Total non-current liabilities non-current Total Tax liabilities Tax Other liabilities Borrowings Lease liabilities Goodwill Right of use assets Other assets intangible Investments in associated companies Investments in associated Derivatives assets Other non-current Deferred tax assets Deferred Total non-current assets non-current Total assets Current Inventories receivables Trade Derivatives Tax receivables Tax assets Other current Cash and cash equivalents Total current assets current Total assets Total Equity and liabilities Company Equity attributable of the to equity holders Parent capital Share Other paid-in capital Other reserves Company equity holders of the Parent equity attributable to Total interests Non-controlling equity Total liabilities Non-current Borrowings Retained earnings Lease liabilities 1 SEKm Consolidated balance sheetConsolidated balance Assets assets Non-current plant and equipment Property, – 0 –6 47 –62 –69 –70 332 676 296 –88 –237 –693 –573 –448 –970 –485 2018 4,875 1,872 2,070 1,930 1,346 3,196 1,987 –1,542 –2,950 –1,053 –1,286 –1,366 –2,472 –1,209 –1 43 –56 349 194 522 270 627 114 347 432 –655 –447 –272 –490 –811 –656 2019 3,577 1,346 3,690 2,089 2,969 1,911 4,476 4,908 –1,577 –3,466 –1,017 –1,287 –1,939 –2,447 27 12 14 26 26 26 26 26 Note 5, 12, 13, 14 1 68 / Annual Report 2019 / Husqvarna Group Depreciation/amortization and impairment Depreciation/amortization Other non cash items Paid restructuring costs Paid restructuring received/paid items, financial Net paid Taxes Whereof net cash flow from investments in subsidiaries and operations SEKm – 41 (–294). Investments in property, plant and equipment Investments in property, investments and operations from flow Cash Investments in intangible assets investments from flow Cash Financing borrowings from Proceeds Investments and divestments of financial assets financial of divestments and Investments Repayment of borrowings Repayment of lease liabilities Net investment hedge Change in other interest-bearing net debt excluding liquid funds Change in other interest-bearing financing from flow Cash Dividend paid to shareholders flow cash Total Cash and cash equivalents at the beginning of the year Dividend paid to non-controlling interests Dividend paid to non-controlling to cash and cash equivalents referring Exchange rate differences Cash and cash equivalents at year-end SEKm Consolidated cash flow statement flow cash Consolidated Cash flow from operations from flow Cash Operating income Non cash items

Cash items liabilities and assets operating in change excluding operations, from flow Cash Change in operating assets and liabilities Change in inventories Change in trade receivables Change in trade payables Change in other operating assets/liabilities liabilities and assets operating from flow Cash operations from flow Cash Investments plant and equipment Acquisitions and divestments of subsidiaries/operations and divestments of property, 1

Financial Statements – Group Financial Statements – Group –2 –1 –1 10 24 430 1,213 2,528 1,643 2,538 –1,286 –1,287 15,655 16,009 17,283 Total equity Total – – – – – – 1 1 2 1 2 1 2 –1 –1 interests interests (Note 19) Non-controlling Non-controlling – – –2 10 24 430 Total 1,212 2,527 1,642 2,537 –1,286 –1,287 15,653 16,007 17,281 – – –2 24 –95 –302 1,212 2,527 1,117 2,225 –1,286 –1,287 11,969 11,798 12,760 earnings Retained (Note 19) – – – – – – – – 525 312 –74 525 451 312 763 Other reserves reserves (Note 19) – – – – – – – – – – – – 2,605 2,605 2,605 capital (Note 19) Other paid-in – – – – – – – – – – – – Attributable to equity holders of the Parent Company Attributable of the to equity holders Parent 1,153 1,153 1,153 (Note 19) Share capital Share 69 / Annual Report 2019 / Husqvarna Group Opening balance January 1, 2018 Opening balance January Net income Consolidated statement of changes in equity SEKm Other comprehensive income Other comprehensive Total comprehensive income comprehensive Total Transactions with owners Transactions payment Share-based Dividend to non-controlling interests Dividend to non-controlling Dividend SEK 2.25 per share Closing balance December 31, 2018 Net income Other comprehensive income Other comprehensive Total comprehensive income comprehensive Total Transactions with owners Transactions payment Share-based Dividend to non-controlling interests Dividend to non-controlling Dividend SEK 2.25 per share Closing balance December 31, 2019 ------ gent liabili Husqvarna Group applies the acquisition method to account for busi Exchange rate gains and losses that relate to borrowing costs or companies Group all sheets for balance statements and income The Exchange rate gains or losses that occur from transactions in other legal entities. legal elimination of intercompany transactions, balances and unrealized unrealized transactions, and balances intercompany of elimination and stock, in profits intercompany values surplus acquired amortization of and depreciation ACCOUNTING AND VALUATION PRINCIPLES VALUATION AND ACCOUNTING consolidation for applied Principles Subsidiaries (sub companies all and AB Husqvarna include statements financial The sidiaries) which the Parent Company controls. Husqvarna Group con trols an entity when the Group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. The Group generally controls a company by a shareholding of more than 50% of the voting rights referring to all shares and participations. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date control ceases. liabili contingent and assets, the liabilities whereby ness combinations, ties in a subsidiary on the date of acquisition are valued at fair value to determine the acquisition value to the Group. The valuation includes evaluation of any contingent consideration which is recognized at fair value at the acquisition date. All subsequent changes in the contingent Transaction statement. income the in recognized are consideration costs related to the business combination are expensed as they are exceeds combination business the for paid consideration the If incurred. the fair value of the identifiable assets, liabilities and contin ments of which the unrealized exchange gains or losses are recognized income. comprehensive other in liquid assets are accounted foraccounted in the income are differences statement rate exchange within theforeign Other net. finance income. operating the in for currency of presentation the than functional currency other with tions. The financial whichstatements is the Parent Company’s functional currency andare the presentation presented currency of Husqvarna in Group. Swedish kronor, SEK, monetary of translation functional in currency the currency and than assets or liabilities to the exchange rate at closing date are reported if is in treatment accounting this to exception An statement. income the the transaction qualifies as cash flow hedges or hedge of net invest ties, the difference is recognized as goodwill. If the fair value of the acquired net assets exceeds the consideration paid for the business recognized is difference the purchase, bargain a in as combination, statement income consolidated The statement. income the directly in Company Parent the statements for income the includes Group the for and its directly and indirectly owned subsidiaries after: • • At year-end the Group 2019, comprised of 140 operating units, and 96 interests non-controlling with Transactions Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions, thatis, as transactionswith the equity holders. Acquisitions from non-controlling interestsresult in an adjustment to equity, corresponding to the difference non- the carrying of the value and paid consideration between the non-controlling disposals losses on to or Gains interest. controlling interests non-controlling to Disposals equity. in reported are interests which result in loss of control are recorded as gains and losses in the statement. income translations currency Foreign Foreign currency transactions are translated into the functional cur rency using the exchange rates prevailing at the dates of the transac ------70 / Annual Report 2019 / Husqvarna Group Accounting principles Accounting 1 Husqvarna Group adopts IFRS 16 “Leases” retrospectively from Jan The preparation of financial statements in conformity with IFRS IFRS 16 “Leases” replaces IAS 17 “Leases” and is effective for annual IFRIC 23 “Uncertainty over income tax treatments” clarifies how to There are no other IFRS or IFRIC interpretations that are not yet cial liability (the obligation to make lease payments) is recognized, with exceptions for short-term leases and low-value assets which is expensed on a straight line basis. The standard affects the accounting for the Group’s operating leases (mainly buildings, cars and forklifts). ciples. The policies set out below have beenconsistently applied to all years presented, unless otherwise stated. In addition, Swedish Annual Accounts Act and Supplementary RFR 1, prepared been Rules for Groups,have statements have beenfinancial consolidated The applied. under the historicalbilities cost income convention comprehensive carriedother through value fair at assets except atfinancial fairand for value financial through assets profit(trade receivables orand not soldloss but partlia of factoring (derivative programmes). instruments) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity,in or areas disclosed whereare assumptions statements financial and consolidated estimates the to significant are note 2. DISCLOSURES AND PRINCIPLES ACCOUNTING IN CHANGES New standards adopted by Husqvarna Group 2019 The following new standards are adopted by Husqvarna Groupas of January2019: 1, periodsstandardnewbeginningThe after or haveJanuaryon2019. 1, resulted in most leases being recognized Under removed. in the balance is sheet,leases asfinance the and operating between distinction the new standard, an asset (the right to use the leased asset) and a finan BASIS OF PREPARATION have (publ) AB Husqvarna of statements financial consolidated The Reporting Financial International with accordance in prepared been Standards (IFRS) and IFRIC interpretations as adopted by the European Union. Entities within Husqvarna Group apply uniform accounting prin Note uary with 2019 1, the cumulative effect of initially applying the new stan tion to leases which haveunder For further IAS 17. previously information on the transition to and IFRS 16 been classifiedrestatement, refer to note 28. as operating leases tax assets lia income and current and deferred measure and recognize dard recognized on January 1, 2019. Comparativesdardrecognized January2019. financialon 2018the for1, year have not beenrestated as according to the transition requirements. On adoption of IFRS the 16 Group has recognized lease liabilities in rela bilities where there is uncertainty over a tax treatment. An uncertain taxtreatment is any tax treatment applied by an entity where there is uncer sented as deferred taxrent liability. are Husqvarna reclassified Group adopts IFRIC 23 “Uncertainty over toincome taxtreatments”current retrospectively withthefromJanuary 2019 1, tax, normallycumulative effectas a of initiallycur applying the new standard recognized onComparatives January2019. financial 2018the beenfor1, not have year further For requirements. transition the to according as restated information on transition to IFRIC 23 and restatement, refer to note 28. effective and are expected to have a material impact on the Group. tainty over whether that treatment will be accepted by the tax authority. after or on beginning periods effective annual is for interpretation The Uncertain January2019. taxliabilities1, previouslythathave beenpre

Notes – Group Notes – Group ------Consumer Financial assets are derecognized when the right to receive cash Financial assets and liabilities at fair value through profit or loss are Product development expenses development Product Husqvarna Group capitalizes development expensesfor new products provided that the levelanduseful of lives are certainty high. An intangible asset is only recognized to the as todegree their that the product future is sellable on existing markets economic and that resources benefits exist to complete the development. Only expenditure, which is directly attributable to the new product’s development, is recog nized. Capitalized development costs are amortized over their useful lives, ranging between 3–5 years. The assets are tested for impairment annually or when there is an indication that the intangible asset may be impaired. assets intangible Other Other intangible assets include computer software, patents, licensesand customer relations. Computer software, patents and licenses are recognized at acquisition cost and are amortized on straight-line a basis over their estimated useful lives. Computer software has an esti mated useful life of 3–6 years and patents and licenses have a useful life of 10–13 years. Customer relations are capitalized at fair value in customer these of values The businessconnection combinations. with relationships are amortized over their useful lives of 5–12 years. Associates Associates are all companiescant influence over which but not Husqvarnaence overcontrol. a company by a shareholding between 20% GroupThe and 50% of theGroup has signifigenerallyvoting rights. Husqvarna Group applies has the equity methodsignificant to account for investments in associates. influ Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Group’sof the share investee of the post-acquisition in profit comprehensive other in investee the of income comprehensive other or loss, and profits the recog are associates from receivable Group’s or received Dividends income. or losses share of movementsnized as a reduction in in the carrying amount of the investment. assets non-financial of Impairment Assetsindefiniteanthathave useful life (goodwill brandthe and Gardena) orintangible assets not ready for use are not subject to amortization but tested annually for impairment, or more often if there is an indication of impairment. Assets that are subject to amortization are reviewed for that circumstances indicate in changes or events whenever impairment the carrying amount may not be recoverable. If there is an indication of asset. the of amount recoverable the estimates Group the impairment The recoverable amount is the higher of an asset’s fair value less costto sell and value in use. An impairment loss is recognized by the amount by which the net book value of an assetexceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped in cash generating units, whichgenerating are the smallest cash inflowsinflows identifiable that fromare othersubstantially group assets unitsof are theassets four segments or (divisions); independentgroup Husqvarna, Gardena,of assets.Brands of and Construction. theThe cash ReferGroup’s to note 2 and note regarding 14 impair cash mentgenerating of intangible assets with indefiniteinstruments Financial usefulinstruments life.financial of measurement and Recognition Regular purchases anddate, the date sales on which Husqvarna of Group commits financial to purchase or sell assetsthe asset. are recognized At initialits recognition, on fairtrade value plus, the Group inprofit the measures case assets orfinancial loss,of of costs Transaction a a financial asset. financial transactionfinancial the of acquisition assetasset costs notat at fairthat valuearecarried directly through at fair attributable value through to profitthe or lossflows are expensedfrom the investments in profitwhen the Group hasor transferred loss.has substantially expired all of the risks and rewards or of ownership.has Financialbeen liabilities transferred are derecognized when the obligation is and satisfied, cancelled or has expired. carried to fair value. All changes to fair value are reported in the income arise. they when statement ------3–15 years 3–10 years 3–10 10–50 years 71 / Annual Report 2019 / Husqvarna Group All currency translation differences that occur from the translation translation the from occur currency differences that translation All Goodwill and fair value adjustments arising on the acquisition of a The value of goodwill is continuously monitored, and is tested annu For the purpose of impairment testing, goodwill acquired in a busi uating the performance and for decisions on how to allocate resources resources allocate to how on decisions for performance and the uating to the segments. Husqvarna Groupcomprises three segments (divisions): Husqvarna, Gardena and Construction. For a more detailed description of the segments, see note 3. equipment and plant Property, Property, plant and equipment are reported at historical cost less charges. impairment any for adjusted depreciation, accumulated Historical cost includes expenditure that is directly attributableacquisition to the of the assets. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic bene Husqvarna Group is translated to the Group’s currency. Assets and lia bilities for each balance sheet presented aretranslated at the closing at translated are statement income each expenses for and Income rate. average rates for each month respectively. foreign a When income. comprehensive other in for accounted are were differences that currency translation divested, is operation recorded in equity are recognized in the income statementas part of the gain or loss on sale. foreign entity are treated as assets and liabilities of the foreign entity rate. closing the at translated and reportingSegment Husqvarna Group’s operating segments are reported in a manner con sistent with the internal reporting provided to the President and CEO (Husqvarna Group’s Chief operating decision maker) as a basis for eval fits associated Group the of cost the to the and with flow item will the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All state income the to charged costs are maintenance and repairs other ment during the period in which they are incurred. Land is not depre ally for impairment or more regularly if there is an indication that the asset might be impaired. Any impairment is recognized immediately as reversed. subsequently not is and expense an Brands cost. historical at shown are separately acquired been have that Brands Brands that have been acquired through business combination are recognized at fair valueuseful lives are amortized at the on a straight-line acquisition basis during the useful accumulated less life, cost carried at are Brands years. 10 at estimated date. All brands is with Gardena brand The impairment. accumulated amortization and finite reported as an intangiblebrands asset are identified with indefinite as having useful indefinite life. No otheruseful lives. ciated as it is considered to have an unlimited useful life. Depreciation is based on the following estimated useful lives: improvements land and Buildings Machinery and technical installations equipment Other The Group assesses the estimated useful lives as well as whether there is any indication that any of the Company’s property, plant and equip nized as an expense in the period in which they are incurred. assets Intangible Goodwill Goodwill arises from the acquisition of subsidiaries and represents the excess between the purchase price and the net fair value of the identifi ment are impaired at the end of each reporting period. costs Borrowing Borrowing costs directly attributable to the acquisition, constructionproduction or of qualifying assets are added to the costs of those assets. Qualifying assets are assets that take a substantial period of time to get ready for their intended use or sale. All other borrowing costs are recog able assets, liabilities and contingent liabilities of the acquiree. Goodwill is reported as an intangible asset with indefinite useful lifeness combinationand ismea allocatedcombination. the to eachof of the cash synergies generating the from unitsbenefit that to expected is sured at cost less accumulated impairment losses. impairment accumulated less cost at sured ------Husqvarna Group documents at the inception of the transaction the The full fair value of a hedging derivative is classified as non-current state income the to reclassified are equity in accumulated Amounts The gain or loss relating to the effective portion of interest rate swaps When a hedging instrument expires or is sold, or when a hedge no ment, and if so, the nature of the item being hedged. Husqvarna Group designates certain derivatives as either hedges of highly probable fore Financial liabilities liabilities Financial measurement subsequent and Classification Allof the Groups financialaddressed liabilities in separate amortized cost(excluding at measured amortized Liabilities cost. at measured section derivatives below) areinclude classified which borrowings,are as subsequentlyliabilities. financial lease Financial liabilities,short-term liabilities trade liabilities, duepayableslong-term within liabilities. whileand 12 months other those are due classified after 12 months activities ashedging and instruments financial are derivative of classified Accounting as Derivatives are initially recognized at fair value on the date on which the at re-measured subsequently are and into entered contract is derivative their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instru cast transactions investments in net hedging When hedge). investment (net operation eign (cash purchases, flowand sales hedges) from flows cash forecasted and operations or foreign hedges of net investmentsthe hedged in a for risk is defined as the risk of as changes items, hedged instruments and hedging between the relationship in the spot rate. well as risk-management objectives and strategy for undertaking vari ous hedgingtransactions. The Group also documents its assessment,both at the hedging inception and on an ongoing basis, ofwhether the derivatives that are used in hedging transactions are highly effective inoffsetting changes in fair values or cashasset or flows liability when the remainingof hedgedhedged item is more than months 12 items.and as current asset or liability if the maturity is shorter than months. 12 hedge flow Cash The effective portion of change in the fair value of derivatives that are designated and qualifyprehensive income. as The gain cash or loss relating to the flow ineffective hedges portion income. operating as statement income is the in immediately recognized is recognized in other (for loss or comprofit affect will item hedged the when periods the in ment instance when the forecast sale which is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial itemviously deferred (for in equity are transferredexample, from equity and included inventory), in the initial measurement of the value of the asset orthe liability. Thegains deferredand amounts losses are ultimately recognized in costpre of goods sold in the case of inventory. comprehensive other in recognized is borrowings rate variable hedging income. The gain or loss relating to the ineffective items. financial portion within isstatement recognized income the in longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at the time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income occur, expected to longer no transaction forecast is a When statement. the cumulative gain or loss that was reported in equity is immediately statement. income the transferred to hedge investment Net Hedges of net investments in foreign operations are accounted for simi larly to cash flow hedges.relating to the effective Any portion gain of the hedge is recognizedor loss in other oncomprehensive the income. hedging The gain or loss relating to the ineffective instrument losses accumu por and Gains statement. income the in recognized is tion lated in equity areincluded in the income statement when the foreign sold. or of disposed partially is operation funds Liquid Liquid funds consist of cash on hand, bank deposits, other short-term highly liquid investments and fair value derivative assets. ------72 / Annual Report 2019 / Husqvarna Group Classification and subsequent measurement of debt instruments debt of measurement subsequent and Classification For trade receivables, the Group applies the simplified approach in Husqvarna Group reclassifies debt investments only when its busi Fair value through (FVOCI) income profit comprehensive other through value Fair or loss (FVPL) Amortized cost gories into which the income. comprehensive other through value Fair and cost Group classifies its debt instruments; costAmortized Amortized Financial assets thatwhere are held those for cash collection flows allowance loss expected credit Any cost. amortized at measured are est represent of will contractualbelow) loss” expected solelyand “Impairment section (see paymentsrecognized cash flows of principaland adjust and the carrying effective inter amount the of these using assets.statement income Interest the in incomeincluded from is these assets financial finan include cost amortized at recorded Assets method. rate interest short-term receivables, other non-current assets, receivables, trade cial investments and cash and cash equivalents. Fair value through other comprehensive income (FVOCI) Financial assets thatsellingforassets,the where areassets’the cashflows represent held solely pay for collection of contractual cash flows and Offsetting financial instruments financial Offsetting reported in amount net offset the and are assets liabilities and Financial the balance sheet when there islegally a enforceable right to offset the recognized amounts and there is an intentionto settle on a net basis or Husqvarna simultaneously. liability settle the asset and the realize Group has entered intoderivatives. master netting When arrangements sheet. the balance the netted in criteria for for certain offsetting financial are fulfilled assets Financial the derivativesmeasurement subsequent and areClassification Husqvarna Group classifies measurement categories: its financial• assets in the following• • Financial assets are included in current assets with the exception of maturities greater than months 12 after the end of the reporting period. These are classified as non-current assets. instrumentsDebt defini the meet that instruments financial those are instruments Debt tion of a financial liability receivables. trade example from the issuer’s perspective, dependsuch on the Group’s businessas modelfor for managing the asset and the cash flow characteristics of the asset. There are two measurement cate ments of principal and interest, are measured at fair value through other carrying are the amount in Movements (FVOCI). income comprehensive of recognition the expect for income, comprehensive other in reported impairment gains or losses, interest revenue and foreign exchange gains and losses whichcial asset are is derecognized, recognized the cumulative gain or loss previously recog in profit or loss. When the finan nized in other comprehensive income is reclassified from equity to to equity from reclassified is income comprehensive other in nized comprehen other through value fair at recorded Assets loss. or profit ness model managing those for assets changes. Impairment and expected loss Husqvarna Group assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instrument assets carriedamortized at cost and FVOCI. The Group recognizes a loss allowance for such losses at each reportingunbiased and probability-weighted date. amount that is determined The by eval measurementuating a range of possible outcomes, the time value of of money; ECL and rea reflectssonable and supportable an forward looking information that is available without undue cost or effort at the reporting date about past events, conditions. economic future forecasts of and condition current whichIFRS 9, requires expected lifetime losses to be recognized from initial recognition of the receivables. Expected credit losses are esti sive income include trade receivables, where part of the portfolio is sold agreements. factoring off in mated by grouping trade receivables based on shared credit risk characteristics, days past due.

Notes – Group Notes – Group ------able is recognized when the goods are delivered as this is the The fair value of the instruments is the market valueat grant date, contributions social employer for provides Group the addition, In Past service costs are recognized immediately in the operating Provisions for warranties are recognized at the date of sale of the Restructuring provisions are recognized when the Group has ation for equity instruments (shares and options). The cost of the granted instruments’ fair value at grant date is recognized during the period. vesting adjusted for the discounted value of futuredividends which employees will not receive. At the end of each reporting period, the Group revises the estimates of the number of instruments that are expected to vest. Husqvarna Group recognizes the impact of the revision to original esti mates, if in any, the income statement, with a corresponding adjust ment to equity. compensation share-based the connection with in paid be expected to the over statement income the to charged costs The are programs. vesting period. The provision is periodically revalued on the basis of the fair value of the instruments at each closing date. Provisions Provisions are recognized when the Group has a present legal or con tractual obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reli obligation and in Sweden mortgage bonds. In countries without a deep market in such bonds, the market rate on government bonds is used. income. Interest on the Group’s net pension plans are reported net within the Group’s financecount items, rate as and when is calculatingcalculatedandlosses arising from experience adjustmentsapplying the net and changes comprehen other in defined equity actuar in to credited or charged the are assumptions ial dis liability. Actuarialsive income in the period in whichgains they arise. benefits Termination terminated is employment the when payable are benefits Termination by the Group before the normal retirementTermina date,benefits. or wheneverthese for they exchange in redundancy voluntary accept tionbenefits recognized are when Group the earlier a) nothe can at of longer withdraw theognizes offer costs for a restructuring of those and involves the payment benefits of termina benefits. tion and b) when the entity rec compensation Share-based pro equity compensation settled, share-based, has Group Husqvarna consider as employees services from receives Group the where grams able estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of each reporting material. when value, present at measured are Provisions period. products covered by the warranty and are calculated on the basis of his torical data for similar products. adopted a detailed formal plan for the restructuring and has either started the implementation of the plan or communicated its main fea tures to those affected by the restructuring. recognition Revenue Husqvarna Group mainlyproducts generates including spare parts and accessories, revenue but also from services agreements. license and from sales of finished Sale of finished productsHusqvarna including Group manufactures spareand accessories mainlyparts to dealers and retailers andand but also directly sellsaccessories to con sumers. finished In products, customer ser products shipping and two performance obligations, generally contractsspare parts with salevices. of Revenue finished recognition will occur at a point in time whenproducts control of the asset isthere transferred to the customer.are The point in time where control is transferred to the customer for goods depends on the terms of deliv ery (incoterms) used. Husqvarna Group is the principal for both the sale of the goods and the shippingby the customer for the shipping service, service is recognized as revenue and sold. goods hence of cost in recognized is expense corresponding the the “gross” amount paidA receiv point in time that the consideration is unconditional because only the passage of time is required before the payment is due. The normal credit terms is usually 30–90 days. ------73 / Annual Report 2019 / Husqvarna Group Taxes incurred by Husqvarna Group are affected by appropriations Deferred tax assets and deferred tax liabilities are shown net when a Under a defined contribution plan, the Group pays fixed contribu Current tax is calculated based on the taxable result for the year.This returns tax in taken positions the review periodically Management method. liability the with accordance in for accounted tax is Deferred invest on temporary differences arising on provided is tax Deferred are plans benefit post-employment other and pensions other All fit obligation benefit defined the of value present The ismethod. credit calculated unit projected annually by independentobligation is determined by discounting the estimated actuaries future cash out flows usingusing theinterest inrates the currencyof high quality in pension the which of duration the matching indexes AA-rated bond corporate corporate the benefits bonds will denominated be paid, in most countries mated costs of completion and the estimated costs estimated necessary exe the and to completion costs of mated rary differences arising between the tax basis for assets and liabilitiesand their net book value. Deferred tax is calculated based on the tax rates in the respective country. and other taxable (or tax-related) transactions in the individual Group companies. They are also affected by the utilization of tax losses carried forward referring to previous years or to acquired companies. Deferred tax assets on tax losses, temporary differences and tax credits are rec ments in subsidiaries except for deferred tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not be reversed in future. foreseeable the company or a group of companies, has a legally enforceable right to set off tax assets against tax liabilities, they refer to the same taxation authority and the intention is to settle the assets/liabilities with a net payment. benefits post-employment other and Pensions obligations Pension as classified are plans benefit post-employment other and Pensions plans. benefit defined or plans contribution defined either tions into a separate entity and will have no legal obligation to pay fur on depending retirement, on receive will employee an that benefit sion factors such pension as age, years benefit of servicedefined of andrespect compensation. in sheet Thebalance liability the in rec ognized plans is the present valuethe reporting of the defined period benefit less theobligation fair value at ofthe plan end assets.of The defined bene Inventories Inventories and work in progress are valued at the lower of cost and net realizable value. The value of inventories is determined by using the weighted average costestimated formula. selling price in the ordinary course Net of business realizable less the esti value is defined as the cute the sale at market value. Gains and losses previously deferred in equity on hedged forecast transactions are also included in the initial measurement cost of thein progress comprises inventory. raw material, direct labour, other direct The cost included not costs and cost are Borrowing production overheads. related other of finished goods obsolescence. for made been have provisions Appropriate inventory. andin work tax deferred and Current deferred and current both consists of period the for expense tax The tax. is recognized Tax in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In these cases tax is reported in other comprehensive income equity respectively. and can differ to the income before tax reported in the income statement non-deductible non-taxable and and adjustment for income to due calcu is tax income current temporary The differences. and expenses lated on the basis on the tax laws in the country of the Parent Company or the subsidiaries. with respect to situations in which applicable tax regulations the on are appropriate subject where establish provisions and interpretations to basis of amounts expected to be paid to thetax authorities. Current tax also includes adjustments to income tax related to prior years. This means that a deferred tax asset or liability is reported on all tempo ognized to the extent it is probable that they will be utilized in the fore future. seeable ther contributions due. are they when expensed are Contributions benefits. employee if the fund does not holdPrepaid contributions sufficient are recognized as an asset to the extent thatassets a cash refund to or a reduction pay in theall future payments is available. of pen amount an define plans benefit Defined plans. benefit defined - - - -

- The Groups lease contracts for buildings typically range from 3 –10 Leases are recognised as a right-of-use asset and a corresponding Assets and liabilities arising from a lease are initially measured on a Fixed payments, less lease incentives receivable payments, incentives less lease Fixed Variable lease payments based on an index or a rate Amounts expected to be payable by the Group under residual value guarantees The exercise price of a purchase option if the Group is reasonably cer tain to exercise that option, and Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that termination option. The amount of initial measurement of lease liability Any lease payments made at or before the commencement date received incentives lease any less Any initial direct costs, and cost. Restoration holders. flow Cash Thecash flow statementmethod. has been prepared according to the indirect nized as a liability inwhich the the dividends Group’s are approved by the Parent Company’s financial share statements in the period in Leasing (ApplicableHusqvarna Group from mainly lease assets January, within the categories: “Land and 1buildings” 2019) contain contracts lease The (warehouses,vehicles”. other and “Cars and machinery” office space anda wide rangefactories), of different terms and conditions. The lease agreements“Forklifts do not impose any covenants. and years non-cancellable lease term at inception, depending on the type of property. Forklifts leases within the Group usually have a non-cancel lable lease term of 5 years, and cars 3 years, at inception. Extension and termination options are included in a number of the lease contracts. These terms are used tomanaging contracts. maximise The majority extension of termination and options operationalheld are exercisable flexibility only by the Group and not by the respective lessor. in termsExtension and terminationof options are only included in the lease term if for options Extension/termination utilised. be certain to reasonably some of these assets might be used at a later date. lease liability at the date at which the leased asset is available for use by the Group. Lease liabilitiesterm liabilities, due within between amortisation allocated is payment lease while 12 Each liabilities. monthsterm those are due classified after 12of the months leaseas liability short- and interest. are The interest classified component is charged to the income statementas long- over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. The right-of-use asset is depreciated over the shorter period of the asset’s useful life and the lease term on a straight-line basis. present value basis. Lease liabilities include the net present value of the payments: lease following • • • • • The lease payments are discounted using the incremental borrowing rate as the interest rate implicit in the lease contracts cannot country be per readily calculated is rate borrowing incremental The determined. durations. different for and Right-of-use assets are measured at cost comprising the following: • • • • Payments associated with short-term leases and leases of low-value are recognized on a straight line basis as an expense in the income state ment. Shortterm leases are leases with a lease term months of 12 or less. Low-value assets are assets with a value of SEK 50t or less when in new condition. Service excluded paymentsand is includedvehicles”, asother part and of the lease“Cars liability and machinery” for and “Forklifts buildings”. and “Land for distributionDividend Dividend distribution to the Parent Company’s shareholders is recog - - - - year. 74 / Annual Report 2019 / Husqvarna Group The estimated volume discount is revised at each reporting date. Husqvarna Group sells some extended warranty that is separately The products are sometimes sold with volume related discounts based on the aggregated sales over a specific time period, normally 1 Revenue from these sales discounts. Accumulated volume estimated the contract, of the net is recognized basedexperience on is used to estimate the andprovide price for the discounts specified using either the expected in value method or an assessment of the most likely amount. Revenue is only recognized to the extent that its highly proba nized for expected volume discount payable to customers inrelation to sales made until the end of the reporting period. consumer and retail the in granted sometimes are return of right A industry. A right of return can follow from legislation, statutory require ments, business practice or be stated in the contract with a instead returned, the be expected goods to customer. for recognized not is Revenue refund liability (included in other current liabilities) and a right the for to the recognized are assets) current other in (included goods returned to used is experience Accumulated returned. products be expected to estimate such returns at the time of sale (expected value method). The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognized as a provision. Services Husqvarna Group provide services such as product repairs the when and recognized service/ are product repairs from Revenues maintenance. agreements service/maintenance from performed.service Revenues is are recognized on a linear basis over the contract period, unless there is towards progress better measures method other some that evidence satisfying performance the obligation. which warranty the period, during recognized is revenue The priced. recog is startsusually revenue warranty standard The after the period. ble that a significant reversal will not occur. A contract liability is recog nized on a linear basis over the contract period, unless there is evidence satisfying toward progress better measures method other some that warranty standard the during Warranty performancethe obligation. terms is recognized as a provision. agreements License The companies. other to names brand licenses Husqvarna Group property intellectual access to right a licensee the provides license types for license common most The period. license the throughout Husqvarna Group is sales- or usage-based royalties where the revenue is recognized when the underlying sales or usage occur. income Interest Interest income is recognized on a time-proportion basis using the effective method. interest income Dividend Dividends are recognized when it is determined that payments will be received. grants Government Government grants relateauthorities and similar to local, financial national, or international bodies. These aregrants recognized when there isfrom a reasonable assurancegovernments, that Husqvarna Group will comply with thepublic conditions attached to them and that the grants will be received. Government grants relating to assets are included the in the over income as recognized and income prepaid as sheet balance useful life of the assets. Government grants relating to expenses are recognized in the income statement as a deduction of such related expenses. Leasing (ApplicableThe accounting principles until for Leasing which December, are applicable until December 31 2018 are available 31, 2018) in the Annual Report of 2018, which can www.husqvarnagroup.com. at found be

Notes – Group Notes – Group ------filment of certain levelsdetermined of increase by the of Board the“Entry”“Stretch”.and constitutes Company´s ofminimuma levelwhich must Directors. be value and vest to These awards share performancecreation based the for order in exceeded levels as are “Entry”,give “Target” right to Class B-shares. At the end of each reporting period, the Group revises the estimates of the number of instruments that are are that shares performance based of number The vest. expected to further For estimate. best management´s on based is vest expected to information refer to note 4. provision Warranty or repairing for expenses potential warranty all comprises for Provision replacing products sold. Provisions are made when the products are sold and are normally limited to two years. The provision is estimated for each group of products and based on historical information and managements bestestimate. For further information refer to note 22. restructuring for Provision be to expected restructuring payments the for represents Provision incurred in the coming years as a consequence of Husqvarna Group’s reduce production and factories, rationalize some close to decision personnel. The amounts are based on the Group management’s best estimates and are adjusted when changes to these estimates are known. Provision for reduction of personnel is calculated on individ ual basis except for most Blue Collar workers where negotiations are made collectively and are based on management’s best estimate of the amount expected to be paid out. For further information refer to note 22. reserves Claims Husqvarna Group maintains third-party insurance coverage and is insured through wholly-ownedinsurance subsidiaries (captives) in regards to a variety of exposures and risks, such as property damage, business interruption and product liability claims. Claims reserves in thecaptives, mainly for product liability claims, are calculated on the basis of a combination of case reserves and reserves for claims incurred but not reported. Actuarial calculations are undertaken to assess experience, the development loss historical ade on reserves based the quacy of patterns. actuarial calcula These payment reporting and benchmark tions are based on several assumptions and changes in these assump after the grant date and to maintain the original investment. The number of performance based share awards that vest further depend on the ful tions may result in significantreserves. For further information referdifferences to note 22. in the valuation liabilities ofContingent the The Group is involved in various disputes arising from time to time in its ordinary course of business. Husqvarna Group estimates that none of the disputes in which the Group is presently involved in or that have been settled recently have had, or may have, a material effect on Group’s financial positioncomplicated or profitability. disputesout that the disadvantageous is However, also outcome difficult of a dispute maythe result in a sig outcome to foresee, of and it cannot be ruled nificantly adverse 24. note to refer further information For position. cial impact on the Group’s results of operations and finan ------

75 / Annual Report 2019 / Husqvarna Group Important estimates accounting assessmentsand 2 tions concerning the future. Management makes estimates and assess ably low level and focus on the inventory valuation to ensure that it is date. closing the circumstances on the with accordance in accurate Tax Husqvarna Group estimates income tax for each of the taxing jurisdic tions in which the Group operates as well as any deferred taxes based to relate primarily assets, tax which temporary Deferred differences. on if recognized carry loss tax temporary are differences, forwards and future taxable income is expected to allow for the recovery of those tax assets. Changes in assumptions in the projection of future taxable income as well as changesences in the valuation in of deferred tax taxes. rates For further information may regard result in significant differ In order to prepare thesemake estimates financial and assessments and thereforeuse certainstatements, assump management to believed are that assumptions and needs experience past on based ments to be reasonable and realistic under the circumstances. The use of such as statement income assessments the impact and on an estimates has well as the balance sheet and on the disclosures presented, such as con ment in making assumptions or estimates regarding the effects of mat uncertain. inherently are that ters life useful indefinite with assets intangible of test Impairment Intangible assets thatbrand Gardena) are tested have annually for an impairment, indefinite or more often if there is anuseful indication of impairment. life When testing for impairment,(goodwill the Group estimates and the recoverable the amount of the asset. An impairment loss is recognized by the amount by which the net book value of an asset cash a for amount recoverable The amount. its recoverable exceeds generating unit is determined on the basis of value in use estimated by using the discountedresults. cash Key assumptions flow for forecasting method are expected growth, based margin and discount on rates. expected For further information refer to note 14. future Inventory Husqvarna Group’s inventory is accounted for to the lowest of the acquisition value inaccordance with the weighted average cost for mula, and the net realizable value. The net realizable value is adjusted for the estimated write-down for older articles, physically damaged goods,excess inventory and sales costs. The Group’s large seasonality products weather-dependent with together sales and stockpiling in increase the difficultythese to difficulties, estimate the liningvalue theHusqvarna production chain,of keepinginventory. the inventory levelsGroup on a reason To is minimizeconstantly working with stream ing tax refer to note 10. Provisions for potential tax exposure are based management’son best estimate. benefits post-employment other and pensions for Provisions The present value of the Group’s net pension obligations depends on a number of factors that are determined on an actuarial basis using a pension net the calculating Assumptions used assumptions. of number liability comprisefuture of salary for increases example; etc. Any changes in these assumptions discount will impact the carrying rate, amount of the inflation, net pension liability. Sensitivity analysismortality, of the effect from a change in the main assumptions and poten tial risks affecting the liabilities are included in note 21. compensation Share-based pro equity compensation settled, share-based, has Group Husqvarna consider as employees services from receives Group the where grams includes equity compensation instruments. share-based for The ation matching shares awards and performance based share awards. In order to receive those, the employee is required to stay employed three years Note tingent liabilities. Actual resultscould differ from these estimates those are below under Summarized circumstances. or assumptions different accounting principles that requiresubjective judgement from manage - - - - - 18 –56 370 225 128 349 –586 –655 –490 –811 3,690 3,915 4,000 2,081 3,122 3,849 2,969 –1,577 41,907 24,698 17,283 42,277 41,981 41,981 The Group

– – – – – – – – – – – 2 18 –56 128 349 –586 –490 –811 –568 –880 5,068 16,409 17,283 items 33,692 Undistributed – – – – – – – – – 8 0 0 1 1 88 88 10 323 323 –196 –195 –192 –196 –184 –184 Group Group common – – – – – – – – 67 57 779 836 699 340 779 768 768 –156 –115 6,273 1,155 6,340 6,988 1,155 Construction – – – – – – – – – 76 847 847 980 417 847 926 926 –368 –103 8,267 2,102 8,343 9,835 2,102 Segment reporting is based on the same accounting principles as for divisions production, include All logistics, development, marketing Gardena tries. Group common includes royalty income from licensing of intellec one division and, if so, costs and net assets are allocated between the allocated assets net costs are and so, if and, division one relevant divisions. Operating costs, not included in the divisions, are shown under Group common costs, which mainly include costs for the Group’s corporate functions. divisions. between the No sale of finished products is themade Group. The divisions are responsible for the management of opera tional assets and their performance is measured at this level, while Group Treasury is liabilities, responsible and receivables interest-bearing funds, liquid Consequently, for financingequity andat tax itemsGroup are not allocated to the divisions.and Group country common Management. Risk and includes services Treasury Holding, as such level. and sales. The Husqvarna and Gardena divisions sell forest, park and garden products to retailers and dealers. Forest, park and garden prod handheld, robotics, wheeled, ucts product categories; six comprise watering, digital solutions and accessories. The Construction construction indus the stone for and Division tools diamond and machines sells tual property such as brands to customers. - – – – – – – – – - 139 167 –437 2,260 2,427 4,709 2,513 1,316 4,709 2,260 2,339 2,339 –1,053 27,367 27,506 20,080 Husqvarna 5 3 3 4 76 / Annual Report 2019 / Husqvarna Group Segment information Segment 3 3 The divisions are responsible for the operating income (excluding The divisions consist of both separate legal units and of units divided Whereof items affecting comparability items affecting Whereof Operating income adjusted for items affecting Operating income adjusted affecting for items comparability Husqvarna Group assess the performance of the segments based on operating income, excluding items affecting comparability. 2019 includes items affecting comparabilityCash refer flow from operationsexpenses, per netdivision financial is calculated items, taxes excluding paid and depreciation/amortizationchange in other operating assets/liabilities. and impairment, capital gains and losses, other non-cash items, paid restructuring ring to restructuring related expenses, amounting to SEK 225m.Husqvarna Impairment Division, in the Group, SEK 15m to Gardena, excluding SEK 2m to Construction items affecting and comparability, SEK 0m to Group common. amount to SEK 16m whereof refer SEK –1m to the Change in other operating assets/liabilities also include other non cash items, paid restructuring costs, and capital gains and losses. Group common include common Group services such as Holding, Undistributed Treasury and Risk Management, items consist and of income liquid funds from license and other agreements. interest-bearing assets, interest-bearing liabilities, equity and tax items. Net sales, services, license agreements and other Net sales, services, license agreements Operating income Net sales (external) sales Net Net sales, finished goods finished sales, Net SEKm sion maker) in order to assess performance and make decisions on on decisions assess make performance and to order in maker) sion allocation. resource items affecting comparability) and the net assets used in their opera Financial income Liabilities equity Total equity and liabilities Total operations from flow Cash As of January 1, 2019, Husqvarnathree divisions; Husqvarna, Gardena Group´s and Construction. segment The change is due to the restructuring reporting of the former Consumer Brands Division comprise that has been dissolved into the Husqvarna and Gardena divisions. The North American part of former Consumer Brands is included in the Husqvarna Division and the European part is included in the Gardena Division. A restatementof the segment reporting to the new structure is included in this report in section “ Allocation of the Consumer Brands Division”. The divisionsreviewed by the President form and CEO (the Group’s the chief operating basis deci for the Group’s internal reporting Note tions which are also theCEO makes his assessment financial of the performance undistributed are equity of the and segments.measures debt net Net tax, income/expense, financial used when the President division. per reported not items and between divisions. This means that one unit can be part of more than 2019 Financial expenses items financial after Income assets Total 4 5 1 2 3 Depreciation/amortization and impairment Depreciation/amortization plant and equipment Investments in property, Investments in intangible assets Change in other operating assets and liabilities Acquired and divested assets/subsidiaries Acquired assets financial in Investments received/paid items, financial Net paid Taxes investments and operations from flow Cash

Notes – Group Notes – Group 0 - 49 72 288 –581 –693 –166 –237 –448 –970 –485 2018 5,762 2,070 3,241 1,171 2,102 1,469 1,561 1,336 –1,542 35,274 40,797 22,598 16,009 41,085 41,085 38,607 38,607 The Group 88

– – – – – – – – – – – 0 3 2019 6,340 72 35,849 42,277 –581 –166 –237 –448 –970 –509 4,043 14,050 16,009 items –1,821 30,059 Undistributed – – – – – – – – – 2 –2 –9 49 23 11 49 14 381 381 –255 –232 –234 –255 –234 –234 Group Group common – – – – – – – – 83 44 –84 672 716 417 248 672 421 421 –160 5,679 1,085 5,762 6,451 1,085 Construction – – – – – – – – 1 32 425 651 226 630 297 425 484 484 –309 –134 8,086 1,762 8,118 9,398 1,762 Net sales per product category product per sales Net SEKm Total customers major on Information Husqvarna Group has no individual customer, which accounts for 10% or more of the Group’s total net sales. Forest, park and garden products park and garden Forest, Construction products Other Gardena 8 0 10 32 1 – – – – – – – – 1 137 2018 6,510 5,725 1,248 1,038 4,115 124 878 913 665 665 –466 18,823 1,228 5,320 2,106 1,289 5,320 1,228 –1,071 27,032 27,156 18,701 intangible Husqvarna 60 38 44 13 173 2019 7,015 6,320 1,602 1,396 4,685 21,346 Non-current assets Non-current 6 290 2018 5,563 2,254 1,670 1,224 3,207 1,373 1,263 10,355 13,886 4 41,085 4 366 2019 5,915 2,467 1,755 1,313 3,604 1,249 1,368 External sales 10,365 13,875 42,277 5 77 / Annual Report 2019 / Husqvarna Group 4 Whereof items affecting comparability items affecting Whereof Operating income adjusted for items affecting Operating adjusted income for items affecting comparability Non-current assets include property, plant and equipment,assets goodwill, and as of 2019 right other of use assets. Husqvarna Group assess the performance of the segments based on operating income, excluding items affecting comparability. 2018 includes items affecting comparabilityCash refer flow from operationsexpenses, per netdivision financial is calculated items, taxes excluding paid and depreciation/amortizationchange in other operating assets/liabilities. and impairment, capital gains and losses, other non-cash items, paid restructuring ring to restructuring related expenses, amounting Impairment to SEK 1,171m. Husqvarna in the Group, Division, excluding SEK to Gardena, 1m items affecting SEK 2m to Construction comparability, and SEK 0m to amount Group common. to SEK 14m whereof refer SEK 11m to the Change in other operating assets/liabilities also include other non cash items, paid restructuring costs, and capital gains and losses. Undistributed items consist of liquid funds and other interest-bearing assets, interest-bearing liabilities, equity and tax items. Restated figures due Group common to includealloctaion common group services such as Holding,of Treasurythe and RiskConsumer Management, and income from Brands license agreements. Division. 1 Net sales, services, license agreements and other Net sales, services, license agreements Operating income Net sales (external) sales Net Net sales, finished goods finished sales, Net SEKm Geographic information Geographic The table below shows sales per geographical market, regardless of where the goods are produced. Assets are reported where the asset is located. Liabilities equity Total equity and liabilities Total operations from flow Cash Total assets Total Financial income SEKm Financial expenses items financial after Income 6 3 4 5 1 2 Depreciation/amortization and impairment Depreciation/amortization Change in other operating assets and liabilities Investments in property, plant and equipment Investments in property, Investments in intangible assets Net financial items, received/paid items, financial Net Acquired and divested assets/subsidiaries Acquired assets financial in Investments paid Taxes investments and operations from flow Cash 2018 Germany France Sweden Austria Rest of Europe Asia/Pacific Canada US Latin America Rest of the World Total 68 43 46 48 909 378 241 789 366 278 144 183 251 Total 2,069 1,694 1,597 4,447 6,888 1,433 4,591 13,206 5 3 82 76 55 53 50 22 15 72 499 560 463 477 193 117 365 1,851 2,157 1,904 4,513 Women 2018 91 46 28 41 45 296 165 432 596 311 161 133 179 Men 1,570 1,134 1,134 2,596 4,731 1,068 2,687 8,693 74 45 49 54 409 259 874 801 336 294 144 190 264 Total 2,117 1,817 1,694 3,654 7,170 1,431 3,798 12,708 27 22 6 2 169 167 106 (27) 88 85 52 90 47 52 17 16 69 2018 528 612 422 504 195 5,712 1,000 337 7,048 1,418 2,239 1,465 4,126 Women 2019 85 35 19 97 57 29 43 52 962 174 178 (31) 452 321 174 606 284 204 138 195 2019 5,833 Men 7,147 1,589 1,205 1,190 2,236 4,931 1,094 2,333 8,582 1

78 / Annual Report 2019 / Husqvarna Group Employees and employeebenefitsEmployeesand 4 Refers to salary costs for all board members, presidents and other senior executives in the Parent Company and subsidiaries. Sweden Germany Czech republic UK Poland Rest of Europe Europe Total China Japan Asia/Pacific of Rest Asia/Pacific Total Canada North America Total US Brazil Rest of Latin America Total Latin America Total Other markets Total Whereof: members Board Presidents and other senior managers Presidents Social expenses obligations benefit defined – expenses Pension Salary expenses plans contribution defined – expenses Pension Total to Board, remuneration Whereof and other senior managers Presidents 1 Salary expenses Salary and remuneration Salary and SEKm (whereof variable salary expenses) (whereof Social expenses Pension expenses Average number of employees of number Average Note

Notes – Group Notes – Group ------Total Total 22,714 16,747 59,421 68,144 82,135 84,891

– – – – 1,770 1,770 pay etc. pay etc. Severance Severance

1 1 180 180 1,680 2,517 1,860 2,697 Other Other benefits benefits 824 3,390 6,108 2,925 9,498 3,749 incentive incentive 2019 2018 Long-term Long-term

costs costs 4,274 4,110 12,254 14,445 16,528 18,555 Pension Pension ary based on annual targets, of maximum long terma incentiveto amounts programs salary variable and pension The benefits. insurance and 80% of thefixed salary.the Group’s long termMembers incentive programs, for information of onGroupthese pro Management participate in Pension terms for the President the for terms Pension The retirement age for the President and CEO is 62. The President and CEO is covered by the collectively agreed ITP plan, the alternative rule of the plan, and the Husqvarna Executive Pension Plan. The Husqvarna Executive Pension Plancontribution is a defined contribution to the planalso is includes equivalent plan. The the employer contributions to 40%tive ITP and any supplementary of the disability fixed and survivor’s for salary pension. the benefits which of the ITP-plan,Termsof employment foralterna other members of Group Management As with the President sal and variable CEO, other members salary, fixed of Group Managementof comprised package remuneration a receive grams, see ”Long term incentive programmesPension terms (LTI)” for other members below. of Group Management The members of Group Management employed in Sweden (8 out of 9) are covered by the collectively agreed ITP plan, the alternative rule of the plan. These individuals are also covered by the Husqvarna Executive Pension Plan, which is a defined contribution plan. The employer contri bution to the plan is equivalent to 35% of the pensionable salary which also includes contributions for the ITP plan, alternative ITP and any sup plementary disability and survivor’s pension. The pensionable salary is salary is pensionable The pension. survivor’s plementary and disability calculated on the basissalary paid of is pensionable current for those who were covered by the fixed plan salary.before 2013. The pension age is 65 for theAlso members of Grouplast Manage year’sment who are employedvariable in Sweden. The member of Group Manage ment that are not employed in Sweden are covered by the Group’s com pany retirement plan in the country of employment (Germany). Fees to the Board of DirectorsThe Annual General Meeting authorized 2019 fees to the Board of Directors amounting to SEK 6,290t (5,820) in total, whereof SEK 2,000t (1,900) to the Chairman and SEK 580t (545) to each of the other Board members,not employed by the company, including additional total of SEK 810t (650) as fees for Board Committee work. Noconsulting fees were paid to Board members. No board fees are paid to Board mem bers who are also employed by the Group. - - - - -

- - - 4,184 1,358 salary salary 10,005 10,253 14,189 11,611 Variable Variable Variable

Fixed Fixed salary salary 10,686 10,275 29,374 36,234 40,060 46,509 2 2 79 / Annual Report 2019 / Husqvarna Group programs (LTI)” below. The President and CEO is entitled to Husqvarna Group aims to offer competitive and performance based The notice period for termination months is 12 on part of the Com Refers to housing, Other travel, members of Group Management car, comprise insurance eleven individuals. One individual and has relocation left Group Management during the year. service benefits. Refers to housing, Other travel, members of Group Management car, comprise insurance of nine individuals at year-end. and One individual relocation has left Group Management during benefits. the year. President and CEO President Management Otherof Group members and CEO President Management Other members of Group Remuneration principles to the Board and senior executives senior and Board the to principles Remuneration For the CEO and other members of Group Management, the principles for remuneration approved by the AGM apply. 2019 The principles shall apply to contracts of employment entered into after the AGM and also to amendments made thereafter to contracts of employment Board the by that determined is are Management in Group to Remuneration force. of Directors based on proposals from the Board of Directors’ People & Under Committee). Remuneration (formerly Sustainability Committee special circumstances, the Board of Directors may deviate from these guidelines. In the case of such deviation, the next AGM shall be informed of the reasons. Man Group to remuneration for principles overall remuneration.The agement should be based on the position held, on individual and employment. country the of in competitive be performance and Group comprises Management Group for package remuneration overall The fixed salary, benefits. insurance and pension as variable such benefits and incentives term salary based on remuner performanceannual based and competitive offer to aims Husqvarna performance targets, long- ation. Variable remuneration may constitute a significant proportion of of proportion significant a constitute may remuneration Variable ation. total remuneration, but could also be zero if the minimum level is not achieved or capped if the maximum level is attained. Variable salary to the President and Group Management is based on targets for the Group’s and/ or the respective divisions’ operating income, net sales, cash conversion cycle and cost savings program. The1. remuneration January by is annually reviewed pany and 6 months on the part of the employee and in the event of notice of termination from the employer, the CEO and other members of Group Management are entitled to severance pay corresponding to Shorter period income. other any deduction with for salaries monthly 12 of notice and no right to severance pay might apply depending on posi Remuneration to Group Management Group to Remuneration tion and country of employment for other members of Group Manage pete with the Company during the notice period. Based on the circum ment. Members of Group Management shall be obliged not to com stances in each case, a non-competition obligation with continued pay ment may also be applied during a maximum of months 24 from the end period. notice the of Terms of employment forthe President The remuneration to thevariable salary President based the onto annual salary targets, fixed long annual term incentiveThe andbenefits. insurance programs CEOand pension comprises and fixed salary,Presidentamounts10,686t,CEOand SEK to effective January2019. 1, The variable salary(50% amounts at Target level). The President and CEO participates to a maximum in the Group’s oflong term 100% incentive 2018 programs LTI 2018 and 2017, of (LTI 2019 for 2017, the fixed salaryand LTI 2019). For informationincentive on these programs, see ”Long term housing allowance. housing 2 1 1 2 Total Total SEKt SEKt - 1 – – - 8.9% Total 5.05% 26.2% 30.0% - Result 52,321 90,349 546,683 239,651 LTI 2016 LTI 382,321 1,839,311 –1,292,628 – – 10.6% 5.00% 24.6% Stretch 2018 LTI 2017 LTI –260,124 1,426,028 1,165,904 1 1 shares 35,432 63,986 – – 182,984 282,402 10.4% 3.75% 25.0% Target Performance LTI 2018 LTI –215,958 1,775,483

1,559,525 Target level Target 1 LTI 2018 and LTI 2019 2018 and LTI LTI price share salary / 10% of target 33% (CEO 40%) of target salary/ 33% (CEO 40%) of target price share salary/ 66% (CEO 80%) of target price share – – Share awards LTI 2017 LTI awards Share Entry 16,889 26,363 56,667 10.0% 2.50% 25.5% 99,919 shares LTI 2017 LTI –124,633 Matching 1,165,904 1 1 1,041,271 – – 40% 30% 30% 2019 Weight LTI 2018 LTI –110,421 1,559,525 1,449,104 – – 25% (CEO 30%) of target 25% (CEO 30%) of target price salary/ share 50% (CEO 60%) of target price salary/ share LTI 2017 LTI 0 shares –74,019 LTI 2019 LTI 2,099,569 2,025,550

Each program comprises a maximum of the following number of SEK 74.93 for LTI 2017, SEK 86.00 forSEK 74.93 2017, LTI for 2018 LTI and SEK 74.56 for 2019 LTI corresponds to the average closing price for Husqvarna B-shares on Nasdaqmonth Stockholm of February during 2017 (LTI 2017), the 2018 (LTI 2018) and 2019 (LTI 2019). Those participants in 2017 who LTI were located outside of Swedenof the at the share time awards of grant and whose salary was paid in a currency otherkrona than the Swedish will be coveredin shares. by This a means certain that if the value of the Swedish “currency krona (relativerency) to such increases other cur adjustment” or decreases by more than 10%during the 3 year vestingthe exchange to period their rate (i.e., at the date of grant personal of share awards compared withrate the investment on exchange the date the program is fully vested in May 2020), then the numbershares of to matching which such participant is entitled will be decreasedto account or increased, for such relative respectively, change. This currency adjustmenthave a marginal provision effect is expected on the total to cost of the 2017. LTI Share awards The following table shows the number of matching and performance based shares to be awarded to participants by 25 May 2020, based on the result reported above and provided that the participant is still employed at that time and has maintained the personal investment in shares. Target Stretch 1 The value of the programmes is calculated based on the fair value of the share on grant date, for 2018 as SEK 76.70 was LTI SEK 82.90 for 2017, LTI andSEK adjusted 80.70 for 2019, LTI for expected dividend. shares 2018 and in LTI 2,025,550 1,449,104 2019. in LTI result 2017 LTI fol The 2019. 31, December ended 2017 LTI for performance period The lowing table shows the targets determind by the Board of Directors and the actual result, the average of the three calendar years for 2017–2019 performance measure. each The programmes LTI are expensed during the three years vesting period in line with the expectedbeen charged to the income target statement, whereof SEK 10m fulfilment. (3) refers to employer for provision total The contributions. social employer for cost During 2019, SEK 32m social(5) contributions has in the balance sheet amounted (12). to SEK 11m 1 awards Outstanding share The table below outlines the number of granted share awards, for Performance Performance level awards: outstanding and share exercised feited, Entry President and CEO President Other members of Group Management Other participants Total Performance measure Participants At Jan 1 Jan At Operating margin Granted Net sales Forfeited Capital efficiency Capital Exercised Total result in percent in percent result Total at of number of shares maximum level Stretch At Dec 31 - – – – – – - - - 745 650 605 650 605 545 2,020 5,820 2018 Total fee Total – – – – – 820 715 660 715 720 580 6,290 2,080 Total fee Total – – – – – – 80 80 810 240 135 135 140 Fee for 2019 mitte work Board com- Board – – – – – Fee 580 580 580 580 580 580 5,480 2,000 80 / Annual Report 2019 / Husqvarna Group 1 1 The grant of performance based share awards is linked to the partici The number of performance based share awards that vest and give Deputy Fees to the Board of DirectorsBoardtheofto Fees agement had to buy sharessalary applies (15% corresponing for the CEO), in order to participate while 2017 in LTI to 10%the of purchase his/her of annual shares share each For members. Management non-Group for voluntary fixedwas (equivalent to 5–10%which the of employee its participates fixed with within the frameworkannual of the LTI program,salary)2017 the Company will grant one matching share award. target at salary variable plus salary (fixed salary target annual pant’s level). In order to receive matching shares and performance based shares, the employee must stay employed three years after grant date investment. original the maintain and right to Husqvarna Classcertain targets, B-shares determined by the Board of Directors, further for operating margin depend (weight on the 40%), fulfilment net(weight 30%) during sales the calendar of years (weight regarding 2017–2019 2017, LTI 30%)2018–2020for and 2018 and LTI capital 2019–2021 are three for 2019.There LTI per efficiencyformance levels set, with a linear progression of the number of perfor mance based share awards from Entry to Stretch/maximum level for each program. Final result shall be the average of the three calendar years for each performance measure. The Entry level must have been reached in order for the performance based share awards to vest. The B-shares: of number following the to corresponds performance levels 1 Board members are expected one approximately to corresponding Husqvarna shares, acquiring to engage themselvesyear’s board financially fee, within in placeby governing a period severance pay to Board member not of employed five by years. Company. the There are no agreements (LTI) programmes incentive term Long The purpose of the longreward performance term long incentive term, align shareholders’ and managements’ programmes interest, attract and retain key is employees to and to some influenceextent provide variable and remunerationannually evaluate instead if a long-term incentive program of (e.g. share-based fixed or salary.share-price based) shouldThe be proposed Board to the AGM. There are three of Directorson-going programes that are under 2018 and 2019. LTI LTI vest;will 2017, LTI and 2019 2018 LTI LTI 2017, LTI The Annual General Meetings 2018 and authorized 2019 2017, the implementation of the incentive programmes 2018 and LTI LTI 2017, LTI which2019, comprise a maximum of 80 2017)/ (LTI 100 2018 and (LTI LTI 2019) participants. The vesting period for the programs is three years and the programs comprise of performance shareawards. also 2017 LTI includes matching share awards. members 2017, For LTI of Group Man Tom Johnstone Tom SEKt Dan Byström Total Ulla Litzén Ulla Katarina Martinson Bertrand Neuschwander Daniel Nodhäll Lars Pettersson Christine Robins Kai Wärn Soili Johansson Soili Carita Svärd Anders Köhler

Notes – Group Notes – Group 2 2 0 1 –8 25 38 22 –8 63 26 27 2018 2018 – 2 1 1 1 –6 22 –6 26 27 203 203 2019 2019 Other operating income and operating and Other income operating expenses auditors to Fees 8 7 Property, plant and equipment Property, plant and equipment Property, Note SEKm Other operating income Gain on divestment/liquidation of: expenses operating Other Loss on divestment/liquidation of: Total Note SEKm EY Audit fees for the annual audit engagement Operations/subsidiaries Total Audit fees not included in the audit annual engagement Tax advice Tax Other services fees to EY Total Audit fees to other auditors fees to auditors Total – – – – - –245 - –245 2018 2018 2018 7,048 1,930 19,194 10,898 39,070 assets 96 53 298 447 Right of use 2019

–17 –17 – 2019 2019 7,147 2,089 9,933 91

19,419 38,588 449 540 2018 – assets 74 548 622 Intangible 2019 63 43 2018 1,284 1,390 63 42 915 2019 1,020 81 / Annual Report 2019 / Husqvarna Group Property, plant Property, and equipment Exchange rate gains and losses in cost of goods sold Expenses by nature 6 5 Information related to the accounting of cash flow hedges is pre Impairment for intangible assets is recognized within cost of goods Exchange rate gains and losses in cost of goods sold Cost of goods sold includes (83) of foreign SEK 11m exchange hedging income. comprehensive other in reported previously result Note SEKm Total Impairment for property, plant and equipment was recorded within cost within recorded was equipment and plant property, for Impairment of goods sold by SEK 10m (442) and within administrative expenses by SEK 2m (2). sold by (31). SEK 27m Costs for supplies and raw materials expenses benefit Employee Total ment. are year the for impairment and Amortization/depreciation reported on the following lines in the income statement: sented in note 1. Of the above costs, SEK 1,720m refers (1,581) to research and develop SEKm and impairment Amortization/depreciation Other Note SEKm Cost of goods sold Selling expenses Administrative expenses Total

0 5 –2 –6 59 95 82 83 287 227 –57 180 –17 543 –25 198 336 535 866 –42 –635 –329 –348 2018 –348 2018 1,561 1,483

Result –1,680 Closing balance, – 2018 Dec 31, 2019 5.3 0.3 –3.6 –1.1 –0.1 –1.6 –0.4 0 –21.1 –22.3 64 – – – – – – – – – Tax, % Tax, 287 653 –463 –131 –594 2019 2019 1,004 4 assets / –4 77 95 divested –50 –17 –18 –681 –594 3,122 subsidiaries Result Acquired and Acquired 8 4 0 6 – 10 10 2019 –25 –25 –12 2.5 3.0 0.1 rate –1.6 –0.1 –0.5 –0.6 –21.8 –19.0 Tax, % Tax, Exchange differences – – – – – – 86 166 252 Tax statement sive income - comprehen Recognized in 10

1 –4 95 57 77 –51 –60 –245 –130 in income statement Income before taxes Income before Theoretical and actual tax rates tax actual and Theoretical The theoretical tax rate for the Group is calculated on the basis of the weighted total income before tax per country, multiplied by the local rate. tax statutory carry-forwards loss Tax As of December the Group 2019, 31, has tax loss carry-forwards of SEK 1,004m (1,483), whereof SEK 146m (185) has not been included in computation of deferred tax assets. The tax loss carry-forwards willexpire as follows (gross amounts): SEKm Within a year 1–5 year > 5 year Without time limit Total Note SEKm Current tax on income for the period Current Deferred tax Deferred Total Theoretical tax rate Theoretical Non-taxable items Items not deductible for tax purposes Change in valuation tax of deferred Utilization of previously Utilization of previously tax losses unrecognized Effect of tax rate change of Effect Withholding tax Other Actual tax rate tax Actual Recognized - – – – – – – – – – – 8 20 72 –33 –31 –83 330 –110 –110 –286 –164 –270 –581 –509 2018 fication Reclassi

– – 1 17 18 50 63 –24 –49 –38 –57 132 223 358 252 269 153 –42 –119 –269 –162 –586 –568 2019 –1,410 balance, Opening Jan 1, 2019 82 / Annual Report 2019 / Husqvarna Group 1 Financial income and expenses and income Financial 1 9 Due to the adoption of “IFRS 16 Leases“ 1 January 2019, interest expense on lease liabil ities is recorded under financial expenses. The opening balance includes related SEK –167m to IFRIC 23 restatement, for further information refer to note 28. Other items Financial and operating liabilities Other provisions Provision for pensions and similar Provision commitments Current receivables Current Deferred tax assets and liabilities, net liabilities, and assets tax Deferred Inventories Tax losses carried forward Tax Non-current assets Non-current SEKm Changes in deferred taxes deferred in Changes Total financial income financial Total 1 Exchange rate differences – on borrowings – on derivatives held for trading income financial Other expenses Financial expenses Interest – on borrowings derivatives rate interest hedges, cashflow on – – on lease liabilities SEKm Note Financial income at income on deposits measured Interest amortized cost – on derivatives held for trading 1 – net on pension assets/liabilities – on derivatives held for trading expenses financial Other Exchange rate differences – on borrowings expenses financial Total net expenses, and income Financial

Notes – Group Notes – Group - – 63 50 59 50 0.8 –14 –10 252 223 269 358 252 358 223 269 2.12 –209 –209 –209 2018 2018 1,212 571.5 572.3 –1,410 –1,410 Dec 31, 2018 Net – 59 95 Closing balance, Closing balance, 198 543 180 227 336 –42 –42 0.2 2019 4.42 – – – – – – – – – 2019 2,527 572.0 572.2 –1,680 – 0 17 57 57 subsidiaries 143 171 Acquired and Acquired –281 2018 1,630 1,794 2,075 divested assets / 6 5 5 –2 –2 19 11

–62 –20 – 0 0 24 56 81 128 Liabilities –354 2019 1,797 1,732 2,086 differences Exchange rate Exchange rate – – – – – – 26 76 192 220 395 358 280 107 161 269 218 –281 2018 1,585 1,866 income statement Recognized in Recognized in comprehensive comprehensive Assets 83 117 326 543 236 227 176 336 –354 2019 1,690 2,044 Diluted Diluted earnings per share is calculated by adjusting the weighted aver age numbers of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group’s long term incentive plan contains share savings program which have a dilutive potential. Profit attributable to equity holders equity to attributable Profit Company (SEKm) of the Parent average numbers of Weighted outstanding (millions) shares ordinary Adjusted for: (millions) savings program – share Diluted weighted average numbers outstanding (millions) shares of ordinary after dilution (SEK) Earnings per share 90 90 –31 –34 –18 272 170 287 –252 income - statement 2.12 2018 1,212 571.5 Recognized in Recognized in

96 104 355 268 164 128 –291 –694 –1,518 4.42 balance, 2019 Opening 2,527 572.0 Jan 1, 2018 1

83 / Annual Report 2019 / Husqvarna Group Earnings per share per Earnings forward pensions and similar commitments operating liabilities 11 Deferred tax assets amounted to SEK 1,690m (1,585), whereof SEK (298) 187m whereof is expected SEK (20) 31m are due to be utilized within months. 12 within months. 12 Deferred tax liabilities amounted to SEK 1,732m (1,795), Current receivables Current Financial and operating liabilities net liabilities, and assets tax Deferred Provision for pensions and similar commit- for pensions and similar Provision ments Other items losses carried forward Tax Inventories Other provisions Non-current assets Non-current SEKm ber of ordinary shares in issue during the yearexcluding ordinary shares purchased by the Company and held in a third party swap agreement. Basic Basicearnings per shareto equity holders is of the calculated Parent Company by the weighted average num by dividing the profit attributable Note SEKm No deferred tax liability is recognised on temporary differences relatingto control to the distributable the timing of the reversal earnings of these of subsidiaries temporary as differences the parent company and is it able is probable that they will not reverse in the foreseeable future. 1 Tax items recognized in Other comprehensive income amounts to SEK 86m (26) for items related to remeasurements on defined benefit pension pension benefit defined on remeasurements to related items for (26) 86m SEK to amounts income comprehensive Other in recognized items Tax plans, SEK 23m (-41) for cash flow hedges and liabilities assets tax and Deferred SEK 143m (233) for net investment hedge. Profit attributable to equity holders equity to attributable Profit Company (SEKm) of the Parent Weighted average numbers of Weighted outstanding (millions) shares ordinary dilution (SEK) before Earnings per share Non-current assets Non-current Inventories Current receivables Current Provisions for Provisions Other provisions Financial and Other items Tax losses carried Tax Deferred tax assets and liabilities and assets tax Deferred Set-off of tax of Set-off net liabilities, and assets tax Deferred – – – – –4 38 12 669 459 992 946 444 740 –587 –427 –527 –307 –120 Total 1,577 1,009 1,542 6,794 6,184 6,064 –2,440 –2,404 14,133 20,197 18,643 12,837 20,003 13,209 20,624 20,197 14,440 14,133

– – – – – – – – – – – 2 2 1 2 –9 –8 35 29 29 28 29 29 –29 774 –918 –746 1,387 1,026 1,084 1,269 1,267 1,387 1,387 1,358 1,358 in progress in progress Construction and advances – – – – – 8 1 74 53 67 11 98 –68 –59 –66 223 144 122 109 151 348 359 359 –158 –706 –708 1,868 2,227 2,003 1,673 1,660 1,312 2,227 2,227 1,868 1,868 Other equipment – – – – 8 –1 12 68 860 412 514 722 650 279 630 299 647 289 514 –436 –418 9,963 8,932 9,778 3,311 9,963 9,963 2,628 2,628 –1,288 –1,286 12,591 11,460 13,089 12,591 12,591 technical installations Machinery and – – – 54 20 39 57 20 87 –68 –39 196 135 130 203 136 116 122 –426 –406 –427 –120 –307 2,154 3,589 3,765 2,126 3,548 1,985 1,563 4,016 3,589 2,461 2,154 1,555 1,435 leasehold Buildings and improvements – – – – – – – – – – 4 0 5 –7 –4 –4 20 13 12 13 21 12 –11 119 403 389 106 437 132 305 403 403 119 119 284 284 Land and land improvements 2 2 2 Property, plant and equipment and plant Property, 84 / Annual Report 2019 / Husqvarna Group 1 1 1 1 12 Previous finance leasestransition to IFRS refer 16 towhich note 28. were included in tangible fixed assets 2018 are in 2019 reported as comparative information for right of use assets. For further information on the For information of where in the income statement the depreciation and impairment is reported, see note 5. Reclassification Exchange rate differences value Closing accumulated acquisition Opening accumulated depreciation and impairment Depreciation 2019 Opening accumulated acquisition value companies Acquired Investments Sold, scrapped Impairment Acquired companies Acquired Sold, scrapped Reclassification 2018 Opening accumulated acquisition value Investments Exchange rate differences Reclassification Exchange rate differences Closing accumulated and impairment depreciation Closing balance, December 31, 2019 Closing accumulated acquisition value assets right-of-use to Reclassified Sold, scrapped Impairment Closing accumulated acquisition reclassification after value Opening accumulated depreciation and impairment Depreciation Sold, scrapped Reclassification Exchange rate differences Closing accumulated depreciation and impairment assets right-of-use to Reclassified Reclassified to right-of-use assets, net assets, right-of-use to Reclassified Closing accumulated depreciation after Closing accumulated depreciation reclassification Closing balance, December 31, 2018 reclassification after balance Closing SEKm Note 1 2

Notes – Group Notes – Group – – 72 58 281 –447 Total 1,622 1,585 – – – 1 2 –3 25 25 Other

– – 1 6 177 107 183 –108 Cars and other vehicles – – – 4 90 17 71 –40 machinery Forklifts and coming 3.75 years. years. 3.75 coming

– – During the year the Group have had a net gain arising from a sale and leaseback transactiontransaction is of SEK 282m and the SEK leaseback 195m. agreement extends The over totalthe cash flow effect from the 69 46 157 –296 1,330 1,306 buildings Land and 1 85 / Annual Report 2019 / Husqvarna Group Right of use assets 13 In the previous year,presented the group only in property, recognisednote 28. plant lease and equipment assets and and lease the liabilities liabilities in as relation part of the to leases Group’s that borrowings. were classified For adjustments as “finance recognised leases” under on adoptionIAS 17 Leases. of IFRS The 16 onassets 1 January were 2019, please refer to New leases Modifications Remeasurements Modifications Depreciation Reclassification Exchange rate difference Impairment Closing balance, December 31, 2019 The total cash outflow for leases in 2019 was SEK 447m. As totalThe cashper As outflow 447m. SEK was leases for 2019 in December the Group 2019, 31 had extension options amounting to approximately SEK 45m. SEKm Note 2019 Opening accumulated acquisition value 1 - - – 6 5 - 27 31 –10 –10 685 380 594 120 230 693 697 509 203 –104 –102 Total 2018 3,560 5,191 4,458 4,695 2,154 5,830 5,191 17,830 16,215 18,796 12,967 17,830 12,639 10,409 recognized.

– – – 6 5 2019 3,674 4,789 2,214 –9 –2 –2 25 15 31 42 50 10,677 –12 134 241 200 220 971 2,461 1,397 2,185 1,129 2,615 1,644 2,461 1,397 1,064 Other

– – 0 –8 –8 40 27 52 84 74 31 71 –88 –88 521 336 493 265 3,569 2,521 2,926 2,162 4,042 2,848 1,194 3,569 2,521 1,048 Product Product development – – – – – – – – – – – 0 7 72 17 13 24 376 151 345 406 376 3,798 3,647 3,870 3,464 3,798 3,422 Brands 1 Under the current business environment, management do not not do management environment, business current the Under 10% higher discount rate 10% decreased cash flow Whereof SEK 3,369m (3,304) relates to the net book value of the GardenaHusqvarna brand, which Group hasstrong assigned position among consumers and Husqvarna indefinite Group intends to maintain anduseful fur life. This is because the brand has a ther develop the brand. the develop ther – – – – – – – – – 0 During value 2019, in use has exceeded the net book value for all cash- been has impairment no accordingly, and units, generating cash per lives useful indefinite with assets Intangible (division): unit generating The following two sensitivity analysis have been made of the estimated value in use: • • None of these adjusted assumptions would result in an impairment loss of intangible assetsating units. with indefinite useful lives, in any of thebelieve thatcash any reasonably possiblegener change in discount rate or in any of the other key assumptions on which the cash generating units’ recover SEKm 1 Husqvarna Gardena Construction Group Total –5 –5 30 39 75 242 897 115 430 822 932 897 8,002 7,457 8,269 7,338 8,002 7,105 - - - Goodwill - - 86 / Annual Report 2019 / Husqvarna Group Intangible assetsIntangible 1 14 Forecasted margin is partly based on previous results and partly on that divisions three the performed on been have test impairment The Future discounted cash flows before tax are based on by Group Man Investments in Goodwill are included in the line “Acquisitions and divestments of subsidiaries/operations and divestments of property, plant and equipment” in the consolidated cash flow statement. 2019 Opening accumulated acquisition value companies Acquired Investments For information of where in the income statement the depreciation and impairment is reported, see note 5. Sold, scrapped Exchange rate differences Reclassifications value Closing accumulated acquisition Opening accumulated amortization and impairment Amortization Impairment Sold, scrapped Exchange rate differences Closing accumulated amortizations and impairment Closing balance, December 31, 2019 2018 Opening accumulated acquisition value companies Acquired Investments Sold, scrapped Reclassification Exchange rate differences Closing accumulated acquisition value Opening accumulated amortizations and impairment Depreciation Impairment Sold, scrapped Exchange rate differences Closing accumulated depreciation and impairment Closing accumulated depreciation Closing balance, December 31, 2018 1 sumer Brands Division, refer to the section ”Allocation of the Consumer Consumer the of ”Allocation section the to refer Division, Brands sumer Division”. Brands agement, approved five-year forecasts for each cash generating unit. Key unit. generating cash each for forecasts five-year approved agement, assumptions for forecasting are the expected growth, margins and dis count rates. Cash flowslated using anbeyond estimated growth rate of 2%the (2) for all cash five generating units.year forecast have been theextrapo expected market development. The pre-tax discount rate is based on the risk-free interest, market premium, beta value, capital structure and tax rate. External sources have been used as much as possible largely still is rate discount the but parameters, these determining when discount common A assumptions. own management’s on dependent rate is used for all cash generating units since Group Treasury is centrally responsible for the handlingdiscount has been used (11) rate for of 2019. 11% of financing and capital structure.will continueA pre-tax post Januarybecauseandbeenhavedisolved January 2019 impairmenttheof as 1, 1, 2020 becausetest the Consumer is based on Brands future Division discounted cash flows. For allocation of the Con ment annually, or more frequently if impairment indicators are identified. identified. are indicators impairment if frequently more or annually, ment An impairment loss is recognized with the amount by which the assets’ recoverable The amount. its recoverable carrying exceeds net amount amount of a cash generating unit is determined based on estimates of value in use. Value in use is measured as expected future discounted cash flow before tax. The values of intangible assets with indefinite life are tested for impair SEKm Note

Notes – Group Notes – Group - – – - 224 929 225 928 Total 1,153 1,153 421,922 –421,922 112,437,551 463,906,227 112,015,629 464,328,149 – shares 529,252 421,922 –421,922 112,437,551 459,235,811 112,015,629 460,186,985 Outstanding

– – – – – shares Treasury Treasury –529,252 4,670,416 4,141,164 Equity 19 proposed dividend for is 2019 SEK 2.25 (2.25). The hedging reserve includes the effective portion of the accumu SEKm capital comprised: On December 31, 2019, the share par value SEK 2 112,015,629 Class A-shares, par value SEK 2 464,328,149 Class B-shares, Total par value SEK 2 463,906,227 Class B-shares, Total Number of shares Note capital Share The share capital in Husqvarna AB consists of class A-shares and class B-shares. A class A-share entitles the holder to one vote and a class B-share to one-tenth of a vote. All shares entitle the holder to the same proportion of assets and earnings, and carry equal rights in termsof dividends. capital paid-in Other Other paid-in capital consists of share-premium reserve following therights issue in 2009. reserves Other arise differences that exchange-rate all reserve includes translation The operations foreign of statements financial the of translation the from that have compiled their reports transla The in a currency(SEK). other presented than are that statements in whichfinancial consolidated the tion reserve also include net investments hedges. comprised: capital On December 31, 2018, the share par value SEK 2 112,437,551 Class A-shares, December 31, 2018 Shares, Class A-shares lated net change in the fair value, related to the hedged risk, of cashflow hedging instruments occured. yet attributable to hedged items that earnings Retained have not Retained earnings of remeasurements attributable consist to liability pension in change not comprehensive other only”Total in of accrued recognized plans defined-benefit profits but alsoincome”. of the Regarding changesThe in actuarial assumptions, see alsointerests Non-controlling note 21. Non-controlling interests refer to the share of equity that belongs to external interestswithin without the Group. a controlling influence in certaincapital Share subsidiaries Class B-shares 2016 Long term incentive program Class A-shares Class B-shares Conversion of shares Class A-shares Class B-shares Shares, December 31, 2019 Shares, Class A-shares Class B-shares – – – – – – 18 20 68 53 372 206 322 381 158 364 592 2018 2018 2018 2018 8,111 2,592

1,006 11,067 – – – – 19 21 51 79 33 33 203 335 382 195 395 422 669 2019 2019 2019 2019 7,835 2,601 1,011 10,858 87 / Annual Report 2019 / Husqvarna Group Other current assetsOther current Inventories Other non-current assets Investments associated in companies 18 17 16 15 Inventories valued to net realizable value amounted to SEK 478m (421). Write down of inventories expensed during the year amount to During impairment 2019, of approximately was SEK 27m done Miscellaneous short-term receivables leases and rents Prepaid insurance premiums Prepaid supplies Prepaid expenses Other prepaid Total Value added tax Value Net pension assets Other long-term receivables Total SEKm Note Long-term holdings in securities Finished products SEK 102m (392), which is included in cost of goods sold. Write down reversed during the year amount to SEK 255m ( 55) The cost of inventories recognized as expense and included in cost of goods sold amounted m (25,050). to SEK 25,174 Note SEKm Pension assets refer to pensionplans with a net surplus of SEK 195m For(158). further information refer to note 21. Supplies including raw materials in progress Work Total SEKm Note Aggregate carrying amount of individually Aggregate immaterial associates income Other comprehensive Post-tax profit or loss from discontinued from loss or profit Post-tax operations SEKm Note Aggregate carrying amounts of Aggregate of: share the Group's operations continuing from Profit income comprehensive Total able amounts are based upon would result in the net book value amount. recoverable the exceeding amount dissolved the Consumer within Product Development and regarding Brand division as well as a Battery-project within Husqvarna and Gardena division. 19 95 –16 - 141 916 213 –74 451 763 451 2.16 41% –656 –108 –973 2018 1,943 9,875 7,932 4,000 1,206 –2,081 10,013 16,009 38,607 reserves reserves Total other Total other Total 2.00 41% – – – – – – 2019 2,427 8,888 5,779 32 –2,898 11,786 11,315 17,283 41,981 143 232 –668 –794 –794 –1,058 hedge hedge –1,319 Net investment Net investment – – – – – – – – 916 –30 1,206 1,176 2,092 1,176 1 reserve reserve Currency Currency Currency translation translation – – –2 12 19 85 95 69 69 –19 –16 –76 –10 –108 hedges hedges Cash flow Cash flow Cash In addition, seasonality in the cash flow is an important factor in the The average adjusted time to maturity for the Group’s financing was Lease liabilities is included of SEK 1,761m within other interest-bearinglease liabilities, liabilities the have increased with SEK 1,502m because of the adoptionfurther of IFRS information 16. For refer to note 1 and 28. normally allowed to mature in the next 12-month period. When Husqvarna Group assesses facilities. credit committed unutilized available for adjusted its refinancing risk, the maturityassessment profile is of the financingalways takes risk. into Consequently, accountfluctuations.seasonal future the factHusqvarna that financial Group planning must2.6 years (3.4)include at the end of 2019. structure Capital Husqvarna Group’s ambition is to have a capital structure where sea sonally adjusted net debt in proportion to earnings before interest, tax, depreciations and amortizations (EBITDA) is not to exceed 2.5 in the long-term. This ambition for the captial structure may be adjusted in the event of changes to the macroeconomic situation, or allowed to deviate for a shorter period of time due to for example acquisitions. Dividend shall normally exceed 40% of income for the year. 1 SEKm Net pension liabilities liabilities Other interest-bearing Less: liquid funds and other interest-bearing Less: liquid funds and other interest-bearing assets Net debt Net debt, excluding net pension liabilities EBITDA Net debt/EBITDA equity Total Total assets Total Equity/assets ratio - - - - 88 / Annual Report 2019 / Husqvarna Group Financial risk management and financial instruments financial and management risk Financial 20 Themanagement of financial risks has largely been centralized to Financing risks in relation to the Group’s capital requirements. Interest rate risks on liquid funds and borrowings. Foreign exchange risks operations. foreign in investments net on export and import and materials raw risks affecting on Commodity price expenditure flows plus earnings produced. goods for components and Credit risks relating to financial and commercial activities. FINANCIAL RISK MANAGEMENT RISK FINANCIAL Financial risk management for Husqvarna Group entities is undertaken in accordance with the Group Financial Policy. Described below are the principles of financialHusqvarna risk management Group is exposed instrumentsapplicable including, to for example, a number liquid funds,to tradeHusqvarna receivables of and risks other receivables, trade relatingGroup. payables and other liabilities, to borrowings, financial instru these with associated and risks primary The instruments. derivative Note Opening balance, January 1, 2019 Opening balance, January Result the arising during year SEKm Opening balance, January 1, 2018 ments are: • • • • • The Board of Directors of Husqvarna Group has adopted a Group Financial Policy, as well as a Group Credit Policy to regulate the man agement of the Group's financial financial of control and risks. measurement where Treasury, Group Husqvarna risks are performed on a daily basis by a separate risk control function. Furthermore, Husqvarna Group’s policies include guidelines for manag ing operating risk relatingassignment of responsibilities to and financial the allocation of powers of attorney. instruments, e.g. through RISK FINANCING the clear Financing more become could loans risk existing of refersrefinancing the and requirements to the risk that the financingdifficult of or themore Group’s costly.maturities capital are evenly distributedThis over time,risk and that total short-termcan be borrowingsdecreased do not exceed available liquidity. Disregardingby ensuring seasonal variations, that net debt shall be long-term, according to the Financial Policy. The Group’s goals for long-term borrowings include an average time to maturity of at least two years, and an even distribution of maturities. A maximum of SEK 3.0bn in borrowings, originally long-term, is SEKm Other reservesOther agement and control of these risks. These risks are to be managed Financial The Policy. Financial the in stated limitations the to according Policy also describes the management of risks relating to pension fund assets. The purpose of the policy is to have enough funding available to minimize the Group's cost of capital and to achieve an effective man Tax on result arising during the year on result Tax statement income the to adjustments Reclassification statement income the to adjustments reclassification on Tax Result arising during the year Currency translation difference Currency arising during the year on result Tax Closing balance, December 31, 2019 Closing balance, December statement income the to adjustments Reclassification Tax on reclassification adjustments to the income statement income the to adjustments reclassification on Tax Currency translation difference Currency Closing balance, December 31, 2018

Notes – Group Notes – Group

- 41 14 - - –60 –25 146 341 282 267 –250 Total 9,646 2,602 9,875 swaps –4,099 –1,548 –3,439 –9,027 –14,984 Net debt incl. currency incl. currency

– – – 2018 –48 –35 –34 –22 550 –253 –410 –663 –173 –304 –236 9,136 1,041 >2025 9,875 swaps Net debt excl. currency excl. currency – –

2 –15 –117 2024 –44 439 396 307 101 623 –1,771 –1,903 3,535 swaps –4,679 10,635 11,315 Net debt incl. currency incl. currency – –

–10 2019 –167 2023 42 –55 –26 207 –1,558 –1,735 1 –184 –343 –445 1,201 9,357 1,561 swaps 11,315 Net debt – – excl. currency excl. currency –12 –234 2022 –1,301 –1,547 At year-end the Group’s 2019, total interest-bearing liabilities, Husqvarna Group has, as mentioned, substantial seasonal variation Husqvarna Group has not breached any conditions in external loan Swedish(MTN)NoteMediumprogram, Term other bondfinancing months. The fixed interest term for these current investments was – – a and bilateral loan agreements. In addition, the Group has an unuti lized SEK 5bn committed revolving credit facility maturing in 2021. The facility is unutilized as of December Due to 2019. the 31, nature of its business, the Group has major seasonal variations in its funding needs. These variations have during been 2019 managed mainly by utilizing the Group’s commercial paper (CP) program and short-term loans. bank excluding pension liability, amounted of (10,013), which to SEK 11,786m (6,038)SEK 7,047m referred to long-term loans. During the the year, group issued bonds totalling SEK 1.0bn within its borrowings. five The seasonalyears peak of the indebtedness maturity. normally implies additional borrowings of SEK 2.5–3.5bn in excess of year-end account. borrowings, taking dividend into year. the during agreements Net debt – currency composition INTEREST RATE RISK Interest rate risk refers to the adverse effects of changes in market inter est rates on the Group’s net income. The main factor determining this risk is the interest-fixing period. funds liquid in risk rate Interest The holding periods of investments are mainly short-term. The majority of investments are undertaken with maturities of between 0 and 3 days18 (20) at the end A downward of 2019. shift in the yield curve of by income interest Group’s the reduce would point percentage one approximately and SEK (13) the 19m Group’s equity by SEK (10). 15m borrowings in risk Interest-rate The Financial Policy states that the benchmark for the long-term loan portfolio is an averagecan choose to deviate fixed from this benchmark interest on the basis of a risk man term of 6 months. GroupTreasury date established by the Board of Directors. However, the maximum average fixed interestswap agreements, term are used to manageis the interest3 years. rate risk by changing Derivatives, such as interest rate SEKm USD SEK EUR JPY CZK GBP RUB CNY CHF Other Total –11 –342 2021 –1,234 –1,587 – – – – – – - 8,000 7,000 5,000 20,000 Facility amount –12 – –250 –435 2020 89 –4,099 –2,753 2018 –7,549 207 925 252 686 Total Total 4,946 1,908 1,000 10,013 borrowings – – – – – – 8,000 7,000 5,000 20,000 Facility amount – 2 93 2019 611 284 300 Total Total 1,761 5,445 2,100 1,192 11,786 2 borrowings 89 / Annual Report 2019 / Husqvarna Group 1 revolving revolving The currency composition of Husqvarna Group’s borrowings is is borrowings Group’s Husqvarna of currency composition The Most of the previousright operating of use assets and lease liabilities, leases because of the adoptionfinance have of IFRS 16. Previous been leases recognised haveand leasebeen liabilities. from included For further January information onas the transition 1, 28. comparativeand 2019 to IFRS refer as 16 to note 1 information for right of use assets Please note that the table includes the forecast future nominal For interest more payment and, detailed thus, does not correspond to the information net book value in the balance sheet. on derivative contracts, see table under “Credit risk in financial activities” in this note. Borrowings SEKm mitted credit facilities, shall equal at least 2.5% of rolling 12-month sales. At year-end, this ratio In ). % (16.3 addition, was 17.8 the Group shall have sufficient liquid resourcesworking capital during the next months. 12 to finance the expected seasonalBorrowings build-up in financingThe Husqvarna of managedGroup is centrally Group by Treasury in order to ensureraised at Parent Company efficiency level and transferred to subsidiaries as and internalrisk loans or capital control. injections. In this process, variousDebt derivatives isare usedprimarily to convert the funds to the required currency. Financing is also undertaken locally, mostly in countries in which there are legal restrictionspreventing financing through Group companies. The majorGroup’spartthefinancingof currently is conducted through Liquid funds Liquid Liquid funds consist of cash and cash equivalent and other short-term deposits including derivative assets at fair market value. Husqvarna Group’s goal is that the level of liquid funds, including unutilized com Futureundiscounted cashflows loans otherof and financial liabilities 2019 December31, of as 1 2 Market programs Market Husqvarna Group has a MTN program, denominated in SEK, to issue long-term debt in the domestic capital market. The total amount of the program is SEK 8.0bn. In addition, Husqvarna Group has a Swedish CP program. The total amount of the program is SEK 7.0bn. The table outstanding two shows these programs. amounts under Borrowings assets. Group’s the currency distribution of the upon dependent currency preferred the obtain to used are Currency derivatives distribution. 1 SEKm Trade payables Trade Derivative liabilities, foreign exchange Derivative liabilities, foreign Lease liabilities Medium Term Note Medium Term Program Commercial papers Commercial Total financial liabilities financial Total Bonds, bank loans and other loans Other bond loans Other short-term loans Derivative liabilities, interest rate Derivative liabilities, interest Committed facility credit Derivative liabilities Committed credit facility Committed credit Total Long-term bank loans Lease liabilities

- - - n.a rate 9.57 9.40 0.74 10.69 hedge Average Average 2020 2020 2020 2020 Maturity 2020–2024 2,058 7,844 3,796 15,179 16,674 amount Nominal

The table “Future undiscounted cashflows of loans and other finan As of December USD 1,625m 2019, of 31, net investments in foreign Foreign exchange sensitivity from transaction and translation and transaction from sensitivity exchange Foreign exposure Husqvarna Group is particularly exposed to changes in the exchange rates of EUR and USD. Furthermore, the Group has exposures against a number of other currencies. Using a static calculation and disregarding any effects from hedges, a 10% increase or decrease in the value of all currencies againstitems SEK and tax by would approximately765m SEK (570) +/– for one affect year. A 10% theincrease Group’s of USD would affect the result Group’s result with SEK –190m (–385) before anda corresponding financial decrease of EUR with SEK 500m (550). This assumes the same distribution of earnings and costs as in and 2019 does not include any dynamic effects, such aschanges in competitive ness or consumer behaviour arisingfrom such changes inexchange rates. It is also worth noting that, due to the seasonality in Husqvarna Group’s sales, these flowsthroughout the calendar and year. For more informationresults on risks related to are section. Management Risk see currency exposure, not distributed evenly ACCOUNTING HEDGE Husqvarna Group applies hedge accounting for hedging of interest rate risk, forecasteding of net investments commercial in foreign operations. The hedge relationships cash are flows expected to be highly effectiveand, and nowhen material sources of hedgeapplicable, occur. ineffectiveness expected to are hedg risk rate interest of accounting Hedge The total market value for hedges of interest rate risk amounted to SEK –59m as of December of 2019 which 31, SEK –36m is reported in the hedge reserve. Assuming an unchanged market interest rate, the effects on income after SEK 2m for Q2,Q1, SEK 8m for Q3 and SEK 2m for Q4. financial During the year items no ineffectivenessfor 2020 has occurred would in the hedging of interestbe rateSEK risk. –1m for cialliabilitiesshows December2019”futurethe of as cashflows 31, of the interest rate hedges.unchanged market interest The rates, would cashflows SEK 3m be for SEK –19m Q1, forduring Q2, SEK 2m for Q3 and SEK 2m for Q4. 2020, assuming risk exchange foreign of accounting Hedge The total market valueSEK 2m as of December for of 2019 which 31, hedges SEK 23m is reported in the of commercialhedge reserve. Assuming flows an unchanged exchangeamounted rate, the effects on toincome after financialfor Q2, SEK 8m for Q3 anditems SEK 2m for Q4. for 2020 would be SEK 2m for Q1, SEK11m operations were hedged. The total market value of derivatives for net investment hedging amounted to SEK 407m of which SEK 458m is reported in the hedge reserve. During the year no ineffectiveness has occurred in the hedging of currency risk. instruments hedging as designated Derivatives 2019 SEKm Net investment hedges Derivatives in net investments operations hedges of foreign hedges flow Cash hedge flow cash in Derivatives risk currency of foreign against SEK – of which USD exposure against SEK – of which EUR exposure hedge flow cash in Derivatives rate risk of interest - - - - - 59 - - - –887 –377 –334 –420 –418 –375 - 2,471 3,769 –3,488 amount Total hedge Total 2018 –56 575 457 575 492 508 4,988 1,246 –3,255 –5,530 - 2019 Fore casted flows casted –61 –676 –432 –397 –380 –482 –380 1,619 4,400 –3,211 amount Total hedge Total 2019 991 590 559 552 537 290 522 4,101 –2,233 –5,909 90 / Annual Report 2019 / Husqvarna Group - 2020 Fore casted flows casted The table below shows the forecasted transaction flows (imports and formly. This calculation is based on a parallel shift of all yield curves simultaneously by one percentage point. The Group has seasonal debt for which the interest risk is not calculated due to its short-term nature. As per December the 2019 31, average interest rate in the total loan portfolio was 3.6 % (5.0). At year-end, Husqvarna Group had out which to currencies major The centrally. managed is exposure rency Husqvarna Group is exposed are EUR, USD, CAD and AUD. flows commercial from exposure Transaction The Financial Policy stipulatesfixing price hedgingthe consideration of forecasted into taken sales currencies, and pur foreign in chases the of 75–100% Normally, environment. competitive the and periods invoiced between hedged are months and7–12 forecastedfor flows forecasted while months, flows are hedged 50–75%.up to Group subsidiariesand primarilyincluding cover their risks in commercial 6 currency flows throughcurrency risksGroup and covers suchTreasury. risks externally by utilizing currency Group derivatives. Treasury assumes the amounts comparative and 2019 year-end at hedges exports) 2020, for for the previous year. flows Commercial age point shift in interest rates would impact the Group’s interest expenses by approximately 25m SEK +/– (6) before tax. Interest rates uni change not may currencies different and maturities different with standing interest rate derivatives with a nominal amount of SEK 5,296m (5,270) hedging the interest rate risk. RISK EXCHANGE FOREIGN Foreign exchange risk refers to the adverse effects of changes in and income Husqvarna Group’s on rates currency exchange foreign equity. In order to manage such effects, the Group covers these risks within the framework of the Financial Policy. The Group’s overall cur the interest from fixedterm for the non-seasonalto floating debt was (3.0) 1.7 years at year-end. Onor the vice basisversa. of The volumes average and fixed interest interest fixings at the end of 2019, a one-percent lating income statements of foreign subsidiaries into SEK. Husqvarna Group does not hedge such exposures. The translation exposure aris ing from income statements of foreign subsidiaries is included in the below. sensitivity analysis operations foreign in investments net Exposure from The net assets and liabilities in foreign subsidiaries constitute differ translation a net a generates which operations, foreign in investment The hedging effect on operating income amounted to SEK –83m (–204) during At year-end, 2019. the unrealized exchange rate result on for ward contracts, all maturing in 2020, amounted to SEK 10m (140). Sweden outside entities of consolidation on exposure Translation Changes in exchange rates also affect the Group’s income when trans ence in connection with consolidation. In order to limit negative effects on Group equity resulting from translation differences, part of the Group’s net investments in foreign operations is hedged with foreign exchange derivatives. A decline in value of a net investment is offset by exchange rate gains on foreign exchange derivative contracts. The rela tionship between the net investment and derivative is reviewed and and reviewed is derivative and investment net between the tionship monthly. adjusted Currency SEKm EUR CAD AUD RUB NOK CHF Other DKK USD SEK

Notes – Group Notes – Group

- 0 - - 36 99 16 60 n.a n.a 7% –27 –14 122 293 248 328 152 869 168 187 82% 11% - 2018 2018 portfolio % of total Cash flow Cash 1 11 hedge reserve 2018 Not – 5 –6 77 –40 180 151 333 187 664 187 223

2019 2019 available n.a n.a customers –14 –34 –54 Number of 8% 4% measuring 88% for the period Change in fair Change in fair value used for ineffectiveness ineffectiveness portfolio % of total

1 12 2019 Not n.a n.a available liabilities customers Number of statement Line item in the financial the Non Current Non Current Current assets Current Current liabilities Current

54 n.a n.a 103 127 amount Carrying A plan for repayment is normally designed for customers with past Exposure 3 months Total adjustment IFRS 9 Transition Adjusted opening balance, January 1 Reversed unused provisions Impairment of trade receivables Currency exchange rate differences Currency Closing balance, December 31 Exposure SEK 15–100m Exposure Concentration of risk credit Exposure >SEK 100m Exposure

–60 - - - - - 3,796 8,301 8,373 - 16,674 200 amount 2018 Nominal 2,119 1,294 3,613 193 2019 2,197 1,230 3,620 91 / Annual Report 2019 / Husqvarna Group different levels, from low risk to high risk. In the table below, trade Forecasted interest cash flows from floating rate borrowings rate floating from flows cash interest Forecasted Forecasted cash flows from sales/purchases from flows cash Forecasted Interest rate swap agreements Interest Foreign exchange forward contracts exchange forward Foreign Total As of December net 2019 trade 31, receivables, after provisions for bad debt, amounted to SEK 3,620m which (3,613), consequently equals the book the Hence, receivables. trade in losses to exposure maximum value equals the fair market value of the receivables. The size of the pat seasonal the upon directly dependent however, portfolio is, credit Low to moderate risk Medium risk to elevated risk High risk tern of Husqvarna Group’s sales. This means that credit exposure is sig nificantly higher duringvision for bad debt, basedthe on a probablity first of default, is recorded six at monthsinception of the trade of receivables each and adjusted duringcalendar the lifetime between difference the is provision of the of amount The receivable. the year. A pro the asset’s carrying amount and the present value of estimated future cash flows, discountedfinancialthe (187),amounted of223m end the debtSEK year at 2019 to at the effective of whichinterest SEK refer 206m to invoices (171) due. For trade receivables rate. Provisions and changes value fair income comprehensive other through recorded for bad 2019. during immaterial been have provisions SEKm COMMODITY PRICE RISK COMMODITY PRICE Commodity price risk is the risk of increase in the cost of direct and indi rect materials should underlying commodity prices rise on the global markets. Husqvarna linked is price the whereby suppliers, with agreements through prices Group is exposed to fluctuationsto the raw material price on the world market. This exposure canin be commodity commod pure to refers which direct commodity exposure, into divided as defined is which exposure, commodity indirect and exposure, ity Commodity price component. a portion of a only from arising exposure risk is managed through contracts with the suppliers rather than through the use of derivatives.A 10% rise or fall in the price of steel used in Husqvarna Group’s products will affect the Group’s results before financial items and taxelse being equal.by The sameapproximately effect on the price of aluminium would SEKimpact +/– the results 160m 45 by SEK (50) +/– and a 10% change(200), in the price of everythingplastics would give an effect on results 150m of SEK +/– (110). RISK CREDIT A financial asset is intractual default obligations. Financial credit assetsidentifies when Group are written Husqvarna the offrecovery. when of therecounterpartyexpectation is no reasonable fails to riskpay its in tradecon receivables, financialreceivables trade in activities risk Credit and non currentHusqvarna Group sellsassets. to a substantial number of customers including dealers, retailers and professional users. Sales are made on the basis of normal delivery andnormally payment arranged by third parties. terms. The Credit Policy of the Group Customer credits includes customer for process management the that ensures financing solutionscustomer rating, creditare limits, decision levels and management of bad debts. The Board of Directors decides on customer credit limits exceeding SEK 100m. Husqvarna Group uses an external provider for classification of thehas creditworthiness intervals. different three into divided been have receivables of its customers. The classification 2019 SEKm Foreign exchange forward contracts exchange forward Foreign Impact of hedging intruments on the financial statement

- – - 65 78 66 33 75 115 177 206 555 434 172 215 Fair 1,346 3,058 4,622 9,557 value 5,956 14,818 – 2018 65 78 66 33 75 115 177 206 555 434 172 207 1,346 3,058 4,622 9,554 5,956 14,807 amount Carrying

– – 1 58 55 407 127 126 203 322 103 474 229 Fair 1,911 3,298 4,099 9,660 value 6,801 14,272 – – 1 2019 58 55 407 127 126 203 322 103 474 229 1,911 3,298 4,099 9,741 6,801 14,353 amount Carrying To determineTo the fair value of the Group’s borrowings, theprevailing quoted prices (unadjusted) in active markets for identical assets or lia bilities (Level 1); inputs other than quoted prices included within Level 1 that are derived (i.e. indirectly or prices) as directly (i.e. either observable, from prices) (Level 2); and inputs that are not based on observable market data (Level 3). FAIR VALUE ESTIMATION VALUE FAIR Below is a descriptionbased of financial on the classification instrumentshave been incarrieddefined the fair at as valuefollows:fair• value,hierarchy. The different levels • • The Group´s financial Derivativesinstruments belong carried tousing current Level at quoted marketfair interest 2 as ratesvalue future and exchange rates forare simi cashderivatives. instruments.lar flows have been discounted market rates for the respective periods have been used and the Group’s credit risk has been taken into account. Changes in credit spreads have been disregarded whenshort-term determining financial fair equivalents, cash and cash investments, short-term other valuereceivables, instruments of financial such leases. tradeas payables trade and otherFor liabilities, receivables and short term borrowings the fair value equalsand their carryingother amount as the impact of discounting is not significant. Fair valuecash of flowslong-term using a borrowingsrate2 in the fairbased value hierarchy. on arethe based borrowing on discounted rate, and are within Level - - - 0 5 400 –395 2020- 0 2018 266 2019 44,600 –44,334 – 1 333 –332 2021– 2019 –25 251 2020 42,815 –42,539 92 / Annual Report 2019 / Husqvarna Group 1 2 The table below shows the gross volume of outstanding foreign of which currency derivatives related to net investments in foreign in foreign to net investments derivatives related of which currency hedge accounting is applied operations where of which currency derivatives related to net investments in foreign to net investments in foreign derivatives related of which currency hedge accounting is applied operations where Financial leases is discontinued as a result of the adoption of IRFS 16 January 1, 2019. For further information on the transition to IFRS 16 refer to note 1 and 28. Trade receivables not sold but part of factoring programmes. Maturity, SEKm Maturity, SEKm Financial assets loss or profit through value fair at assets Financial hedge accounting is not applied – of which derivatives where – of which currency derivatives where hedge accounting for cash flow hedges is applied is hedges flow cash for accounting hedge where derivatives currency which of – applied is hedges flow cash for accounting hedge where derivatives interest which of – – Financial assets at fair value through other comprehensive income other comprehensive Financial assets at fair value through receivables Trade Credit risk in otherHusqvarna non-current Group’s long term holdings in securities consist of US assetsgovernment bonds. The credit risk is recognized as immaterial due to the high creditworthiness of the issuer. uid funds are mainly made in interest-bearing instruments with high liquidity and involve issuers with a long-term credit rating of at least A-, as defined by Standardto maturity & Poor’s for the liquid funds wasor days 18 (20)similar at the end A sub of 2019. institutions.stantial part of the exposure arises from derivatives The transactions. average time contracts. derivative exchange Credit risk in financial activities financial in risk Credit Exposure to credit risk arises from the investment of liquid funds and through counterparty risks related to derivatives. In order to limit expo sure to credit risk, a counterparty list has been created specifying liq in Investments counterparty. each the for exposure approved maximum 1 2 Total financial assets financial Total Financial liabilities loss or profit through value fair at liabilities Financial hedge accounting is not applied – of which derivatives where Other receivables Cash and cash equivalents – of which currency derivatives where hedge accounting for cash flow hedges is applied is hedges flow cash for accounting hedge where derivatives currency which of – Financial assets measured at amortized cost Financial assets measured assets Other non-current receivables Trade Other liabilities Financial leases – of which interest derivatives where hedge accounting for cash flow hedges is applied is hedges flow cash for accounting hedge where derivatives interest which of – – at amortized cost Financial liabilities measured payables Trade Total financial liabilities financial Total Borrowings Amount sold Amount purchased Net settled derivatives (NDF) Net

Notes – Group Notes – Group - - - - 55 57 18 17 1.6 2.4 2.1 2.3 8.9 8.4 4.2 4.5 –7.4 –7.8 Total Total 4,486 5,440 2,427 1,943 –2,543 –3,013 48 52 16 16 0.4 1.1 1.8 1.8 7.5 7.8 2.4 2.5 262 341 175 125 –6.6 –6.5 –137 –166 Other Other – – – – 12 11 0.8 1.6 1.7 1.7 5.7 6.3 0.8 0.9 943 943 –5.6 –5.1 1,012 1,012 Germany Germany – – – – 79 77 10 11 44 44 0.5 0.6 5.4 5.2 192 202 –4.9 –5.1 –148 –158 Japan Japan 2018 2019 – – – – 66 65 12 12 US US 5.9 6.3 431 499 151 172 –5.3 –5.7 –280 –327 4.1/4.3 3.00/3.25 2 38 43 23 23 1.8 2.5 2.0 7.3 8.0 The schedules include reconciliations of the opening and closing closing and opening the of reconciliations include schedules The The pension plans in Japan, UK, Sweden and the US are so called 838 –9.4 11.8 10.9 –628 –746 –10.2 1,466 1,965 1,219 recognized in the income statement, other comprehensive income and and income comprehensive other statement, income the in recognized balance sheet. The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. balances of thepresent as opening and value closing balances of the of fair value the of plan assets defined and of the changesbenefit in net provisions during the year. In a fewobligation, countries, the Group provides as mandatorywell lump sum payments, in accordance with law obliga These retirement. with conjunction in agreements, collective or tions are included inand the amount at year-end present to SEK 54m (46). Husqvarna Group has no value of regarding Further information plans. the medical post-employment defined benefit obligationpension cost is available in note 4. The Group’s defined benefitclosed, some time ago, for future pension pension accrual. Out of the Group’s plans mostin the extensiveUK and in the definedUS weresmall benefit in comparison plans, there tocover all the employees. are One Group’s of the plans istwo a funded cashin balance other Japan plan and defined (however,the other is an unfunded planbenefit based on career-average salary. plans) that pen through financed are obligations pension the where plans funded sion funds whose operations are regulated by the legislation in the rele vant country. The pension funds are separate legal entities with their own Board of Directors/Trustees etc., which might consist of representa tives from both the company and the employees, which are responsible for the management of the pension fund asset. Sweden Sweden - 18 19 2.0 2.9 2.5 3.2 9.4 5.2 3.6 UK UK 2018 1,109 3,377 114 113 1,943 –8.9 –8.3 10.1 –2,543 –158 –195 1,192 1,421 –1,350 –1,616 2019 1,215 4,225 2,427 –3,013 93 / Annual Report 2019 / Husqvarna Group Provisions for pensions and other post-employment benefits post-employment other and pensions for Provisions 1 1 21 The pension plan for the Group’s employees in Germany is an financed through a pension fund. fund. pension a through financed

SEK 158m have been recorded as other non-current assets and have SEK 2,101m been recorded as provision for pensions. SEK 195m have been recorded as other non-current asset and SEK 2,622m have been recorded as provision for pensions. Present value of obligations for Present unfunded plans employment benefits recognized in the balance sheet: balance the in recognized benefits employment value of obligations for funded plans Present Fair value of plan assets plans benefit defined for provisions Net gations. As well as the assets relating to the benefit plans, the amounts Theschedules are showingin Husqvarna Group and the the assumptions obligations used to determine these obli of the defined benefit plans SEKm Specification of net provisions for pensions and other post- other and pensions for provisions net of Specification Note In many ofthe countries in which Husqvarna Group has operations the employees are covered by pension defined plans either in addition as classified to statutory are plans social pension Such insurance. security extensive most Group’s The plans. benefit defined or plans contribution defined benefit pensionand Japanplans (two are in plans). the UK,except TheSweden, pension for theGermany, plans plan in inthe Germanyplans these implyUS that there are assets countries and in legal entities employees. oneformer thatand exist of solely employees theto to are benefits plans fundedfinance in Japan. Funded born Sweden, in employees collar White plan. balance cash unfunded 1978 plan orthe of earlier, benefit pension old-age The are(ITP2). coveredplan benefit defined by a final salary collectivelyis bargained 1 1 SEKm SEKm Total funding level (%) Total funding level (%) Total Present value of obligation value Present Present value of obligation value Present Duration Duration Fair value of plan assets Fair value of plan assets Actuarial assumptions (%) Discount rate Actuarial assumptions (%) Discount rate Surplus/Deficit Surplus/Deficit Inflation Inflation Sensitivity analysis (%) Discount rate (–0.5%) Sensitivity analysis (%) Discount rate (–0.5%) Discount rate (+0.5%) Discount rate (+0.5%) Inflation (+0.5%) Inflation (+0.5%) Inflation – – – 1 67 63 18 31 –11 –56 155 121 121 –144 Total 1,943 1,698 1,902

– – – – – 3 4 –5 99 –86 –60 –64 121 121 –2,543 –2,555 –2,615 2018 plan assets Fair value of

– – 5 0 –2 67 18 95 –11 –56 –84 –99 149 151 4,486 4,253 4,517 of obligation Present value Present – – – 0 3 36 38 35 –25 670 182 371 –145 –310 Total 2,427 1,943 2,163 Husqvarna Group is through its defined benefit obligations exposed approximately of contributions expects make company to The obligation benefit defined the of duration average weighted The

– – – – – 0 7 a satisfactory level in relation to the debt, the Group will gradually reduce the investment risk by shifting into assets with lower volatility. to a number of risks, of which the following have the greatest impact on the Group’s pension liability: rate Discount The discount rate reflectsis used forthe measuringestimatedin the the discounttimingrate present will have a material of effect benefit on the value pension obligation ofpayments thebut will also impact obligation. the bonds interest corporate andAA-rated income rate, and expense discount the reported determine To A in the fluctuation net. finance indexes matching the duration of the pension obligations are applied in most countries. When valuing Swedish pension liabilities Husqvarna Group uses mortgage bonds when determining discount rate. risk Inflation Most of the obligationsleads to higher are debt. The return linked of the majority of the plan to assets inflation has a low correlation and an increase with inare inflation,inflation protected while against the increaseholdings a rise in in inflationof theindex-linked deficit and thatthus bonds wouldcompensates occur otherwise. risk Longevity for the Since most of the pension assumptions expectancy obligationslife higher mean that thoselife, coveredfor bybenefits the receive will plan have a significant impact on the pension toliabilities. the plansSEK 158m (141) during 2020. years18 (17). –6 –61 –72 107 –135 –310 –310 –3,013 –2,543 –2,608 % 1.3 1.5 0.4 2019 plan assets 36.7 15.0 16.9 17.8 10.4 Fair value of 100.0

– – 0 6 3 2018 36 35 40 10 –25 –84 670 173 175 107 961 393 443 464 197 681 –107 5,440 4,486 4,771 2,543 SEKm of obligation % Present value Present 5.3 1.6 0.4 7.6 38.9 14.5 17.0 14.7 100.0 : 1 2019 49 12 159 438 512 442 229 1,172 3,013 SEKm 94 / Annual Report 2019 / Husqvarna Group demographic assumptions For the funded defined benefit pension plans (Sweden, UK and US and UK (Sweden, plans pension benefit defined funded the For Approximately 98% (98) of total plan assets refers to listed assets. Experience assumptions Actuarial gains and losses due to assumptions financial in changes Exchange rate differences on foreign plans on foreign Exchange rate differences Contributions: – Employers plans: Payments from payments Benefit – – Settlements Closing balance, December 31 Divestments and transfers – Plan participants None of the assets above refers to shares in the Parent Company or real estates occupied by the Group. represent around 89% of total pension assets) the Group’s strategy is a combination of matching the assets with the liabilities and trying to achieve as high return as possible within the investment guidelines. This is partly done by investing in longer duration bonds designed to match the development of the debt and also by investing in corporate bonds, index-linked bonds and shares with the purpose of achieving a high return in various market conditions long term. As the maturity of the pension commitments decreases and/or the value of the assets reaches 1 Planassets comprise followingtheof The movement in the present value of the net defined benefit obligation SEKm Opening balance, January 1 Opening balance, January Current service cost Current Past service costs and gains/losses on settlements expenses Interest Remeasurements: Return on plan assets Actuarial gains and losses due to Actuarial gains and losses changes in Equity instruments – Equities Interest-bearing securities Interest-bearing – Government bonds – Corporate bonds – Index-linked bonds – Interest rate funds – Interest Properties Liquid funds Assets held by insurance company Total

Notes – Group Notes – Group - - - 27 - 121 109 148 109 - 2018 2018 27 130 114 157 114 2019 2019 Related partyRelated transactions Pledged assets and contingent liabilities 1 25 24 Husqarna Group is involved commercial, product liability and other Refers to endowment that is pledged in favor of the recipient. pany is self-insured to a certain extent, and is also insured against excessive liability losses for certain claims. Husqvarna Group continu Note Sales to related parties are carried out on market-based terms. See the Parent Company’s directly owned subsidiaries in the Parent Company’s note Shares 16, in subsidiaries. Information about the Board of Directors reported in are those to compensation and Management Group and note 4, Employees the and Group Husqvarna between occurred andhave significance employeeany benefits. NoBoard of Directorsunusual or Group Management. transactions of In addition to the aboveof contractual contingent undertakings are provided as part liabilities, of Husqvarna any that year-end Group’s at indication no was There business. of course normal guarantees forpayment will be fulfillment required in connection with any contractual guaran tain dealers financingcompany. During goods 2019 their amounting to a value werefloorplanning of SEK (13) 14m activities. floorplanning with connection in back bought with an external financing disputes in the ordinary course of business. Such disputes involve personal property compensatory or damages, damages for claims com The damages. punitive also occasionally and injury compensation take and disputes, and claims pending evaluates and monitors ously these that believes Company The necessary. deemed action when activities help to minimize the risk. Due to complexity of these disputes, it is difficult and position financial consolidated to the affectingpredict outcome adverse a favorable outcomeresult could occur. of each claim and an tees. Furthermore, there is an obligation, in the event of dealer’s bank ruptcy, to buy back repossessed Husqvarna Group products from cer 1 liabilities Contingent SEKm On behalf of external counterparties external of behalf On Guarantees and other commitments Total Note assets Pledged SEKm Pension obligations Real estate mortgages Total - 87 66 45 –14 172 278 606 751 597 726 585 610 –928 Total 2018 2,557 1,366 1,195 2 63 37 89 180 321 269 –154 Other 57 229 714 778 780 137 300 2019 2,995 – – 15 –36 –10 297 328 297 Claims –4 16 450 203 122 329 325 –466 ments commit- Warranty Warranty

–2 11 –23 213 293 388 304 –272 95 / Annual Report 2019 / Husqvarna Group Other liabilities Other provisions restructuring Provisions for Provisions 23 22 balance, balance, balance, 1, 2019 provisions Other operating liabilities Total Other accrued payroll expenses Other accrued payroll Accrued customer rebates Other accrued expenses added tax Value Personnel taxes and other taxes Accrued holiday pay SEKm Note Restructuring Provisions for restructuring include the payments that are expected to occur in the coming years as a result of the Group’s decision to close the reduce production and rationalize certain production facilities, number of employees. The amounts are based on the Group’s best esti mates and are adjusted when changes to these estimates occur. commitments Warranty or repairing for expenses warranty potential comprise for Provisions replacing products sold. Provisions are made when the products are sold and are normally limited to months. 24 Claims Provisions for claims refer to claim reserves in the Group’s insurance companies mainly due to product liabilities but also property damage and business interruptions. The provisions are estimated based on actuarial calculations. Other Other provisions are in all material aspects referring to payroll related provisions. SEKm Note Opening January Provisions made Provisions Provisions used Provisions Unused amounts reversed Exchange rate differences Closing December 31, 2019 Current Current Non-current Non-current provisions

- - 38 46 35 12 16 - - –55 –12 115 115 457 191 191 306 294 –309 –105 2019 2018 2,694 1,304 3,516 7,047 6,038 9,656 11,193 Closing Closing balance, balance, December 31, December 31, December 31, December 31,

– – – – – – – – –

297 178 475 Other Other non-cash non-cash financing movement in financing in movement in – – – – – – – – 567 732 567 732 fair value fair value Changes in Changes in – – – 1 9 16 24 85 60 161 100 256 Foreign Foreign Foreign Foreign exchange exchange movement movement – – – – – – 16 Re Re –16 326 –326 1,114 –1,114 The net sales, contributed by the Light Compaction and Concrete classification classification

lectible. The fair value of trade and other receivables is SEK 35m and includeswith contractual trade receivables amount of SEK 29m. No trade receivables are expected to be uncol Summary balance sheet as of acquisition date February 1, 2018 Acquisition-related costs of SEK 6m have been charged to administra tive expenses in the consolidated income statement in 2017. com of statement consolidated the in included business, Equipment 346m. SEK to amounted date acquisition the since income prehensive Equipment Concrete Compaction & Light that income operating The transactions rec No immaterial. is period this during with contributed ognized before the acquisition date. SEKm plant and equipment Property, Other intangible assets Inventories and other current receivables Trade assets Cash and cash equivalents payables and other liabilities Trade 1 Total identifiable net assets net identifiable Total Goodwill cash Less acquired investments – flow cash Net Total net assets Total – – – – – – – – 52 52 –255 –255 within within - income income - - Cash flow Cash Cash flow Cash operating operating

1 1 – –5 –16 949 –838 –442 –581 –823 –704 Cash Cash 2,505 1,204 –1,159 flow from from flow flow from from flow financing financing

15 395 198 122 –105 2019 2018 3,516 1,314 2,898 6,038 4,486 7,719 11,158 balance, balance, Opening Opening January 1, January 1, 2

2 96 / Annual Report 2019 / Husqvarna Group Acqusitions Changes in financial liabilities Construction’s existing organization. The acquired

26 27 Husqvarna Group acquired 100% of the shares in Construction Tools The goodwill arising of SEK 115m from the acquisition is attributable liabilities”,“Net investment hedge” and “Change in other interest-bearing net debt excluding liquid funds”. liquid excluding debt net Cash interest-bearing other flowin “Change and from hedge” investment financial liabilities”,“Net liabilities is included in the Group’s consolidated cash flow statement under “Proceeds from borrowings”, “Repayment of borrowings”, “Repayment of lease Cash flow from financial liabilities is included in the Group’s consolidated cash flow statement under “Proceeds from borrowings”, “Repayment of borrowings”, “Net investment hedge” and “Change in other interest-bearing net debt excluding liquid funds”. Lease liabilites have increased with 1,502m because of the adoption of IFRS 16. Current interest-bearing interest-bearing Current (excl. lease liabilities) borrowings Current lease liabilities Current Current interest-bearing interest-bearing Current leases) finance (excl. borrowings chase price The of SEK acquisition 41m. included all the product, R&D and ride-on manufacturing and concrete walk-behind to assets relating powertrowels. Sales in the power trowel segment (acquired assets) in 2018 amounted to about SEK 150m. Equipment Concrete & Compaction Light of Acquisition Husqvarna Group acquired the Light Compaction and Concrete Equip Neuson GroupNeuson Husqvarna Group’s Construction Divisionhas in acquired 2019 the Concrete Power Trowel business from Wacker Neuson Group at a pur ment business from Atlas Copco on February 2018, the 1, global leader in this segment. The acquisition includes product lines, operations and R&D in Bulgaria, and specificforce Husqvarna sales and service within offering Construction the complements product Division’s range resources floors. that and surfaces concrete will rein EOOD, Bulgaria, and assets in mainly Sweden. to economies of scale from distributing the Light Compaction and Concrete Equipment business range of products in the Construction distribution network. Division’s Note Wacker from business Trowel Power Concrete of Acquisition SEKm Note 1 2 SEKm 1 Derivatives, net Non-current interest-bearing interest-bearing Non-current (excl. lease liabilities) borrowings Current obligations under Current leases finance Total financial liabilities financial Total incl. net derivatives Non-current lease liabilities Non-current Non-current interest-bearing interest-bearing Non-current leases) finance (excl. borrowings Non-current obligations Non-current leases finance under Derivatives, net Total financial liabilities financial Total incl. net derivatives

Notes – Group Notes – Group 0 34 592 696 312 395 218 670 6,064 1,622 7,105 5,534 1,585 6,038 1,314 1,627 2,101 4,622 2,557 3,516 22,502 17,607 40,109 16,009 11,810 12,290 40,109 restated Jan 1, 2019 – – – – – – – – – – – – – – – – – – – – – – – 167 167 –167 –167 b) IFRIC 23 – – – – – – – – – – – – – – – – – – – 379 379 1,502 1,123 1,502 1,502 1,123 1,502 a) IFRS 16 0 34 16 120 592 191 696 145 218 670 2018 6,064 7,105 5,534 1,585 6,038 1,794 2,101 4,622 2,557 3,516 21,000 17,607 38,607 16,009 10,854 11,744 38,607 Dec 31, Subsequent events Subsequent 29 Consolidated balance sheet balance Consolidated Note 2019 31, December to subsequent occurred have events significant No that wouldhave a materialstatements. impact on the Husqvarna Group’s financial SEKm Assets plant and Property, equipment Right of use assets Goodwill Other assets intangible Derivatives Other non-current Other non-current assets Deferred tax assets Deferred Total non-current assets non-current Total Total current assets current Total Total assets Total Equity and liabilities equity Total Borrowings Lease liabilities Derivatives Deferred tax liabilities Deferred Provisions for pensions Provisions and other post- benefits employment Other provisions Total non-current non-current Total liabilities Trade payables Trade Tax liabilities Tax Other liabilities Borrowings Lease liabilities Derivatives Other provisions Total current liabilities current Total Total equity and Total liabilities - - -

97 / Annual Report 2019 / Husqvarna Group Changes in accounting policies and reclassifications and policies accounting in Changes 28 weightedaverageThe discount January2019. rateat2.2%was as 1, Husqvarna Group adopts IFRIC 23 “Uncertainty over income tax The following table shows the adjustments for each individual line item. The Group has used the practical expedient permitted by the Husqvarna Group adopts IFRS 16 “Leases” retrospectively from ments” from January 1, 2019. IFRIC 23 is a new interpretationnew a is IFRIC23 uncertain ments”fromofJanuary2019. 1, income tax treatments tax income within current the and scope deferred of IAS Income 12 measure taxes. and IFRICrecognize 23 to how clarifies assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the authority. tax treatments”retrospectively withcumulativethefromJanuary 2019 1, effect of initiallyComparatives 2019. applyingfinancial 2018the been restated.for not have year the new standardUncertain tax liabilities recognized that of has SEK 167m previously been recognized on Januarydeferredas taxliabilities beenhasreclassified current to liabilitiestax 1, as at January 1, 2019, as a result of the adoption of IFRIC 23. sured at an amount equal to the lease liability at transition. Non-current assetsrecognizedtodue increasedJanuary 2019 1,502mon SEK 1, by right of use assets. The total effect in the income statement is not significant, decrease. items financial the there and increase income isoperating a slight shift in the income statement, b)where IFRIC 23 “UncertaintyHusqvarna Group applies IFRIC over 23 “Uncertainty income over income tax treat tax treatments” countedusingincrementalthe borrowing January2019. atrate as 1, The leaseliability recognizedincreased1,502mJanuary 2019 SEK of byas 1, as a result of the adoption of The IFRS16. Group had non-cancellable operating lease commitments of SEK 1,586m as at December 2018, 31, SEK 1,484m when discounted. The difference can be explained by the exceptions for short-term leases and low-value assets and the use of extension options as according to IFRS 16. standard to exclude initial direct cost for the measurement of the right of use asset at the date of initial application, and the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The right of use assets have been mea This note explains theIFRIC impact 23 “Uncertainty of the adoption over of IFRS income 16 “Leases”, tax treatments”. and IFRSa) “Leases” 16 transition Husqvarna“Leases”Group appliesfromJanuary 2019. 16 IFRS 1, IFRS 16 replaces IAS distinction the between as 17 operating sheet, balance “Leases”. the in recognized the (for asset an IFRS standard, new the 16Under resultedremoved. is leases finance and in most leases beingright to use the leased short-term for exceptions with recognized, is payments) lease make asset) and a financial assets. affects standard The low-value for and accounting leases the liability (the obligationthe Group’s operating leases (mainly buildings, to cars and forklifts). withcumulativetheJanuary 2019 effect1, initiallyof applying newthe standardComparativesrecognized January2019. on 2018the for1, financial year have notrecognized been lease liabilities restated. in relation to leases which have previously On adoptionbeen classified of IFRS 16 theas operatingGroupmeasured at the present value of the remaining leases lease payments, dis under IAS 17. These liabilities are Note 0 94 55 55 18 72 90 133 337 553 –78 550 145 –415 2018 2018 3,076 –1,612 –1,192 –1,334 17,185 –14,109 9 38 –2 –92 110 157 –40 2019 2019 8,213 8,530 8,530 8,622 8,512 1,464 4,212 8,528 –1,322 –1,308 –1,449 17,838 –13,626 13 12 11 11 10 4, 8, 9 7 5 5 5, 6 3 Note 98 / Annual Report 2019 / Husqvarna Group Result arising during the of tax period, net tax of net statement, income the to adjustments Reclassification Net Income Income before taxes before Income Income tax Income after financial items financial after Income Appropriations Financial expenses Financial income Income from financial items financial from Income companies participation in Group Income from Operating income Other operating income and operating expenses Administrative expenses Gross income Gross Selling expenses Cost of goods sold Net sales Parent Company income statement income Company Parent SEKm SEKm Parent Company comprehensive income statement income comprehensive Company Parent Net Income income Other comprehensive statement: income the to reclassified be may that Items hedges flow Cash tax of net income, comprehensive Other income comprehensive Total

Financial Statements – Parent Company Financial Statements – Parent Company 1 3 65 18 21 55 48 34 170 472 386 110 150 193 165 794 111 368 648 159 2,028 2,034 2,127 6,834 1,153 1,029 2,605 5,776 3,415 9,085 1,356 5,810 29,436 17,652 33,734 10,437 44,171 22,536 14,872 44,171 Dec 31, 2018 1 3 1 65 83 91 18 18 55 455 678 110 133 650 794 100 264 816 101 1,949 2,346 2,171 5,699 1,276 1,153 2,605 8,530 6,826 2,576 5,754 1,226 9,987 6,881 33,782 16,198 38,226 48,213 29,801 48,213 10,636 Dec 31, 2019

Note 14 15 16 19 17, 19 13 18 19 19 19 19, 20 20 19 12 22 23 19, 27 19 19, 27 19 19 19 21 99 / Annual Report 2019 / Husqvarna Group Shares in subsidiaries Shares assets Other non-current Trade receivables Trade Receivables from Group companies Group Receivables from Other receivables Tax receivables Tax Prepaid expenses and accrued income expenses Prepaid Parent Company balance sheet balance Company Parent SEKm Assets assets Non-current Intangible assets Property, plant and equipment Property, Financial assets Derivatives Deferred tax assets Deferred Current assets Current Inventories Total non-current assets non-current Total Receivables

Derivatives

Statutory reserves Cash and cash equivalents to R&D expenses Reserve related Total assets Total Equity and liabilities Restricted equity capital Share Revaluation reserve equity Non-restricted reserve Share-premium Fair value reserve Net Income reserves Untaxed Total current assets current Total forward brought loss or Profit equity Total Provisions benefits post-employment other and pensions for Provisions Other provisions Total provisions Total Non-current liabilities Non-current Borrowings Derivatives Total non-current liabilities non-current Total liabilities Current Borrowings Liabilities to Group companies Liabilities to Group Trade payables Trade Derivatives Other liabilities Total equity and liabilities Total Total current liabilities current Total – 0 9 –5 –3 40 83 10 784 551 342 265 530 658 165 539 –415 –390 –451 –100 –805 –499 –758 2018 4,830 –2,886 –1,286 –1,297 –9 55 17 20 –44 960 385 485 165 338 650 –227 –126 –637 –578 –838 –737 2019 8,512 1,050 9,903 7,121 1,222 –2,402 –1,287 –4,704 –2,782 –5,899 5, 14, 15 Note 15 27 14 16, 17 27 100 / Annual Report 2019 / Husqvarna Group Depreciation/amortization and impairment Depreciation/amortization Capital gains and losses Other non cash items Cash flow from operations from flow Cash items financial after Income Non cash items paid Taxes liabilities and assets operating in change excluding operations, from flow Cash

Change in operating assets and liabilities Change in operating assets Change in inventories Change in trade receivables Parent Company cash flow statement flow cash Company Parent SEKm Change in inter-company receivables/liabilities Change in inter-company Change in other current assets Change in other current financing from flow Cash flow cash Total Cash and cash equivalents at beginning of year Cash and cash equivalents at year-end Change in current liabilities and provisions Change in current liablilities and assets operating from flow Cash Cash flow from operations from flow Cash plant and equipment Investments in property, plant and equipment and intangible assets Sale of property, Repayment of borrowings Dividend paid to shareholders contribution paid/received Group Investments in intangible assets investments from flow Cash investments and operations from flow Cash Investments contribution Paid shareholder’s Financing New borrowings

Financial Statements – Parent Company Financial Statements – Parent Company – – –2 –2 55 90 24 145 Total 8,530 8,528 –1,286 –1,287 23,679 22,536 29,801

– – –2 55 24 55 –247 –438 8,530 8,530 –1,286 –1,287 19,378 17,707 24,727 forward Profit or Profit incl. profit profit incl. of the year loss brought loss brought 4 – – – – – – – – –2 90 –2 90 21 19 –69 reserve Fair value – – – – – – – – – – – – 2,605 2,605 2,605 Share- reserve premium premium

– – – – – – – – – – 247 438 591 1,029 1,276 Reserve related to related R&D expenses 3 – – – – – – – – – – – – 21 21 21 reserves Restricted – – – – – – – – – – – – 1,153 1,153 1,153 Share capital 2 2 1 101 / Annual Report 2019 / Husqvarna Group 1 The reserve related to R&D and IT expenses is only applied in the parent Total dividend company. 2019 Information amounts to SEK 1,297m about (1,298), the of which accounting Husqvarna principle AB received Restricted is available reserves SEK 10m for revaluation relates (12) to reserve B-shares in the together Parent with statutory in company’s third reserves. party note 1. share swap agreement. Relates to result and reclassification adjustments to the income statement for Cash flow hedges, net of tax, which are recognised in other comprehensive income. Parent Company statement of changes in equity SEKm Information regarding the Parent Company’s shares, share capital and share-premium reserve is available in the Group’s note 19. 1 2 3 4 Opening balance, Janaury 1, 2018 Opening balance, Janaury Net income Other comprehensive income Other comprehensive income comprehensive Total Share-based payments Share-based Change of Restricted reserves to capitalized R&D related Dividend SEK 2.25 per share Dividend SEK 2.25 per share Closing balance, December 31, 2018 Net income income Other comprehensive income comprehensive Total Closing balance, December 31, 2019 Share-based payments Share-based to related Change of Restricted reserves capitalized R&D - 48 15 20 155 170 2018 2018 Total 1,924 2,260 2,621 1,979 1,999 13,001 14,516 17,185 17,185 Pension expenses 87 7 23 420 477 2019 2019 443 484 2,408 2,632 3,179 12,798 14,572 17,838 17,838 Social Women expenses 2018 2018 13 Men 45 (0) 1,215 1,502 1,260 1,515 Salaries and remunerations remunerations (whereof bonuses) (whereof Financial risk management risk Financial distribution sales Net 15 19 119 134 Total 2,146 2,165 Pension expenses 2 3 6 29 1 406 538 435 544 Social Net sales amounted of to which SEK 17,838m (17,185), SEK 13,983m referred (13,612) to sales to Group companies and 3,855 m (3,573) to external customers. Women Contingent liabilities Contingent The Parent Company has signed guarantees in favor of subsidiaries which in accordance withHowever, the Parent Company IFRS applies RFR 2 and are recognizes these classified liabilities. contingent guarantees as as a financial guarantee. Leasing The Parent Company applies RFR 2 and recognizes all leasing as a linear period. lease the over cost expenses R&D to related Reserve From sheet. balance the in IT and R&D capitalizes company parent The and2016 forward, a restricted reserve is presented for internally gener ated R&D where and IT, an amount equal to this year’s capitalization restricted reserves to free from transfered amortization is with reduced reserves. The restricted reserve dissolves in line with the amortizations. Net sales are distributed on the following geographic markets markets geographic following the on distributed are sales Net SEKm 1 category product per distribution sales Net SEKm Note Husqvarna Group applies common risk managementfor all units. Group Treasury is part of the Parent Company and the description of financial risk managementmaterial aspects applicableavailable also for the Parent Company. in the Group’s note 20 is in all Note Europe North America Rest of the World Total products park- and garden Forest-, Construction products Other Total expenses 2019 2019 - -

13 Men 86 (0) 1,249 1,608 1,335 1,621 Salaries and remunerations remunerations (whereof bonuses) (whereof geography and per 102 / Annual Report 2019 / Husqvarna Group Employees and employeebenefitsEmployeesand Parent Company’s Accounting principles Accounting Company’s Parent 4 1 The Parent Company accounts for tax depreciation in accordance accordance in tax depreciation accounts for Company Parent The Board, President and CEO and Group Management and CEO and Group President Board, Other employees Total Salary and remuneration Salary and SEKm Note employees of number Average ing and taxation. The Parent Company is following the same principles same the following is Company Parent The taxation. and ing as described in the Group note with 1, the below exceptions. Segments Informationis reported in accordancewith the Swedish Annual Accounts Act and contains disclosures of net sales divided by product category. assetsIntangible The Parent company amortize all brands on a straight-line basis during the useful life, which according to group policy is estimated at years. 10 equipment and plant Property, The Parent Company uses methods for depreciations described in the section “Property, described below. is which exception, some plant and equipment” in the Group’s note 1 withwith the Swedish tax law as appropriations in the Income statement. depreciation the to addition in for accounted are depreciations These described in thesection note 1 and are reported as untaxed “Property, reserves in the Balance sheet. plant and equipment” in subsidiaries in theShares Group’s impairment. deducted cost for at reported are subsidiaries in Shares acquisi an to related price, purchase additional Expenses potential and tion are included in the acquisition value of the investment. Investments are tested annually for impairment or if there is an indicationof that the book value of the investment is higher than the recoverable amount. income. reportedas are Dividends Pensions Husqvarna Group appliesand liabilities. The Parent IAS Companyapplies 19 Employee theSwedish Safe-guarding Act Commitments Benefits (Tryggandelagen). Pension of for pension assets contributions Group Husqvarna AB applies the alternative rule in RFR 2, and accounts for the in appropriations as paid and received contribution group both statement. income Husqvarna AB’s (publ) Annual Report has been prepared in accordance accordance in prepared been Report has Annual (publ) AB’s Husqvarna with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s standard RFR 2. The Parent Company follows the International Financial Reporting Standards (IFRS) adopted by to EU, the extent possible within the framework for the Swedish Annual Accounts Act and Swedish Safe-guarding of Pension Commitments Act between account relationship the considering and (Tryggandelagen), Note For further information regarding remunerations to the Board of Directors, PresidentGroup’s long and term CEO and incentive the Group Management program see the together Group’s note 4. with the Sweden Total Total Board, President and CEO and Group Management and CEO and Group President Board,

Notes – Parent Company Notes – Parent Company – – – 0 62 38 56 32 56 94 –20 –41 –33 770 116 553 172 –217 –348 –258 –788 –505 –165 2018 2018 2018 –1,612 –1,518 - – – 59 98 57 84 23 –81 –15 –55 –24 100 282 148 255 157

–358 –585 –458 –586 –159 2019 2019 2019 8,289 8,213 –1,322 –1,165 1 2 2 Financial income and expense and income Financial Operating leases participation from Income companies Group in 11 10 9 (–1,059). –669m whereof Interest income Interest whereof – on deposits – on derivatives held for trading whereof Interest expense Interest whereof – on borrowings derivatives interest hedges, cashflow on – – on derivatives held for trading Interest expense on derivatives held for trading includesderivatives interest expense for hedging on net investments SEK –410m (–327). Currency exchange rate difference on derivatives held for trading includes cur rency exhange rate differences on derivatives for hedgingSEK net investments differences rate Exchange – on borrowings 1 2 Note SEKm Financial income income Interest subsidiaries – from – on derivatives held for trading – from others – from Impairment Profit/Loss on sales of shares in Group in shares of sales on Profit/Loss Total Note There are no materialcontingent expenses or restrictions among for payments the rental Expenses for leases. operating Company’s Parent facilities, machinery etc. (minimum lease payments) amounted toSEK 85m (84) in 2019. Future minimum lease payments are allocated as follows: SEKm Within 1 year Total Note SEKm Dividends 1–5 years > 5 years Exchange rate differences rate Exchange – on borrowings – on derivatives held for trading expenses financial Other Total financial expenses financial Total net expenses, and income Financial Total financial income financial Total expenses Financial expense Interest – to subsidiaries – to others

– 1 0 0 0 0 6 7 0 0 784 –213 - –213 2018 2018 2018 2018 9,484 1,873 4,494 16,635

– 0 1 0 6 0 9 7 9 0 –56 960 –56 2019 2019 2019 2019 9,638 1,904 3,881 16,383

103 / Annual Report 2019 / Husqvarna Group Fees to auditors to Fees operating expensesoperating Other operating income and and Other income operating in operating income operating in Exchange rate gains and losses Expenses by nature 1 8 7 6 5 Included in selling expenses within operating income. operating expenses within selling in Included Other services fees to EY Total Tax advices Tax Other operating income – Operations and shares Total expenses operating Other Loss on sale of: plant and equipment – Property, Total SEKm EY Audit fees for the annual audit engagement Audit fees not included in the annual audit engagement Note sented in the Group’s note 1. Gain on sale of : equipment plant and – Property, Note SEKm Operating income includes SEK 49m of (–74) foreign exchange hedging Information income. comprehensive other in reported previously result related to the accounting of fair value in financial instruments is pre Costs for supplies and raw materials Exchange rate gains and losses in operating income 1 Note SEKm SEKm Remuneration to employees Amortization/depreciation and impairment Other Total Note Total - – – 6 3 - –5 –5 –5 –6 –5 17 31 22 31 22 –78 –55 127 174 127 127 133 133 170 170 170 2018 2018 2018 SEKm Dec 31, Balance, – – 2018 Net – – – – – – – 0 2.8 –4 –4 33 58 83 83 –7.5 22.0 –4 222.2 169.0 – 70.5 2019 –88 Tax, % Tax, –92 cation 2019 Reclassifi- – –1 –4 – – – – – – – – 5 5 –84 –92 –5 –5 10 8,622 1,842 –10 SEKm –1,845 2018 income hensive statement - in compre – – 2019 Recognized – – – – – 4 4 4 8 –1.0 –0.0 –0.0 21.4 –1.0 –4 –8 –21.4 –20 127 Tax, % Tax, Liabilities 107 2019 in income statement Recognized – – 0 Tax –5 31 22 35 18 20 68 –10 127 180 170 2018 Balance, 1 Jan 1, 2018 13 – – 0 0 –4 –8 –4 Assets 33 58 33 58 91 83 83 2019 2019 Dec 31, Balance, Actual tax rate in the Parent Company is explained by a non-taxable dividend from sub sidiaries of SEK 8,289m (770) anda result from shares of SEK 282m (–) asment well as of shares impair in subsidiaries SEK 358m (217). Profit before tax before Profit Note SEKm tax on income for the period Current tax income/expense Deferred rate tax actual and Theoretical 1 Total Theoretical tax rate Theoretical Non-taxable income statements items Non-deductable income statement items Change in valuation tax of deferred Effect of tax rate change of Effect Withholding tax Actual tax rate tax Actual – – – – – – – – cation 399 395 794 2018 Reclassifi- 0 0 0 1 0 1 – – 399 395 794 income hensive 2019 statement - in compre Untaxed Reserves Recognized 1 2 0 36 – – –88 12 –127 325 337 2018 in income statement Recognized – – – –5 –5 31 22 127 170 110 110 2019 Appropriations Balance, Jan 1, 2019 104 / Annual Report 2019 / Husqvarna Group Appropriations and untaxed reserves untaxed and Appropriations

equipment 12 liabilities, net SEKm SEKm Changes in deferred taxes deferred in Changes Note Tax items recognized in Other comprehensive liabilities assets tax and Deferred income amounts to SEK 1m (–5) for items related to cash flow hedges. SEKm Non-current assets Non-current Group contribution, Group received Provisions for pensions and similar commitments Provisions Non-current assets Non-current Group contribution, paid Group Other provisions Accumulated depreciation Accumulated depreciation in excess of plan on Machinery and Financial and operating liabilities Provision for pensions and Provision similar commitments Brands and other intangible assets Tax losses carried forward Tax Total Deferred tax assets and liabilities and assets tax Deferred Other provisions Set-off of tax Set-off Deferred tax assets and liabilities, net liabilities, and assets tax Deferred Financial and operating liabilities Tax losses carried forward Tax and Deferred tax assets tax Deferred

Notes – Parent Company Notes – Parent Company – – – – 0 –3 –3 24 –19 499 247 204 578 556 805 –222 –212 –279 –279 Total Total 2,971 1,222 3,248 1,214 4,812 3,009 1,458 2,346 3,248 1,214 2,034 3,804 3,310 5,338 2,028 – – – 169 201 456 – – – – – – – – – – – – – – 625 614 1,038 1,239 Other 377 530 335 697 714 697 697 714 –210 –318 advances – 37 130 379 –235 –235 progress and progress 1,742 1,270 1,165 1,544 Construction in Brands – – – – – 0 5 –2 –2 10 12 21 19 12 79 83 24 216 136 236 153 236 174 153 253 –44 –44 257 567 Other 2,032 1,283 1,520 2,555 1,035 Product Product equipment development – – – – –3 –2 106 186 920 211 171 233 281 881 881 –220 –210 1,875 1,947 1,370 1,947 1,089 1,066 2,459 technical 1 installations Machinery and – – – – – – – – 6 5 7 12 16 14 161 338 175 356 177 356 191 175 181 368 In the income statement depreciation is accounted for withinby SEK 382m cost (444), of goods within sold selling expenses by SEK 0m (0) and within administrativeexpenses by SEK 304m (112). SEKm 1 2018 Opening accumulated acquisition value Impairment Investments Sold, scrapped Sold, scrapped Closing accumulated amortization and impairment Closing accumulated acquisition value Closing balance, December 31, 2018 Opening accumulated amortization and impairment Amortization leasehold Buildings and improvements 27 –10 –13 686 637 Total 5,338 3,310 4,013 5,962 1,949 2 – – – – – – – – – – – 0 5 0 5 6 5 5 7 –1 12 12 12 11 – –1 –4 197 128 625 821 543 1,239 1,363 Other Land and land improvements – – – 0 130 249 1,544 1,165 1,295 1,544 Brands –9 –9 27 359 508 2,555 1,520 1,897 3,054 1,157 Product Product development 105 / Annual Report 2019 / Husqvarna Group Property, plant and equipment and plant Property, Intangible assetsIntangible 1 1 1 15 14 The net book value for land is SEK 5m (5). In the income statement depreciation is accounted for within cost of goods sold by SEK242m (198), within selling expenses by SEK 0m (0) and within administrative expenses by SEK 5m (6). Investments Sold, scrapped Reclassification Depreciation Closing balance, December 31, 2019 2018 Opening accumulated acquisition value Closing accumulated acquisition value Opening accumulated depreciation and impairment Impairment Sold, scrapped Closing accumulated depreciation and impairment Reclassification Impairment Sold, scrapped Reclassification Closing accumulated depreciation and impairment Closing balance, December 31, 2018 Note SEKm Note SEKm 2 1 Investments Sold, scrapped Depreciation Reclassification Closing accumulated acquisition value Opening accumulated depreciation and impairment 2019 Opening accumulated acquisition value 2019 Opening accumulated acquisition value Impairment Investments Sold, scrapped Sold, scrapped Closing accumulated amortization and impairment Closing accumulated acquisition value Closing balance, December 31, 2019 Opening accumulated amortization and impairment Amortization 0 0 0 0 0 3 0 0 1 1 79 57 19 16 15 271 444 2018 5,503 9,816 1,172 1,667 2,127 29,436 12,499 Net book, SEKm 2018

8 1 0 0 0 0 0 3 0 0 1 79 57 19 16 472 271 486 2019 1,690 2,171 9,816 value, 10,535 33,782 12,499 Net book SEK m 2019 95 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Holding, % Inventories 18 34-1946153 20-4233540 559170-2617 559170-2609 556199-0683 556037-1964 556745-5893 516406-0393 2005.025971.07 36437115 40003760065 PVT-DLU8KXM 611319 11159436 26205328 900.047.189-0 82354277RT0001 0400.604.654 Registration number Note SEKm Provisions for obsolescence are included in the value of the inventory and amounts to SEK 83m (77). Provision made during the year amount to (58) and SEK 104mSEK 111m (49) has been reversed. Inventoriesvalued to net realizable valueproducts amounted and SEK 0m (0) referring to raw materials. to SEK 70m (68) referring to finished Supplies including raw materials Products in progress Products Finished products Advances to suppliers Total 38 27 65 2018 24 41 65 2019 Husqvarna U.S. Holding, Inc. Millhouse Insurance Company Gardena Flymo AB Gardena Poulan Pro Trademark Holding AB Trademark Poulan Pro McCulloch Trademark Holding AB McCulloch Trademark Husqvarna Holding Aktiebolag Husqvarna Intellectual Property Holding AB Husqvarna Intellectual Property Husqvarna Försäkrings AB Husqvarna South Africa (Proprietary) Limited Husqvarna South Africa (Proprietary) Husqvarna Slovensko s.r.o. SIA Husqvarna Latvija Outdoor Power Products Husqvarna Kenya Ltd Husqvarna Outdoor Power Products Husqvarna Finance Ireland Ltd Husqvarna Finance Ireland Husqvarna Eesti Osaühing Husqvarna Danmark A/S Husqvarna Colombia S.A. Husqvarna Canada Corp. Husqvarna Belgium SA Subsidiaries 106 / Annual Report 2019 / Husqvarna Group Other non-current assets Shares in subsidiaries in Shares 17 16 Total U.S. U.S. Sweden Sweden Sweden Sweden Sweden Sweden South Africa Slovakia Latvia Kenya Ireland Estonia Denmark Colombia Canada Belgium Other long-term receivables Total SEKm Note Receivables Group Country Note During the 2019 net bookvalue of Husqvarna Belgium SA has been impaired with SEK 358m and a capitalDuring an capital reduction 2019, injection with SEK 328m. has been made to Husqvarna U.S Holding, Inc with SEK 5,032m.numbersubsidiariesTherealsoa ofis Motorsågen 2019. subsidiaries,theto 1 ABdetailed has beena specification sold externally Group companiesof duringavailable is request on from Husqvarna AB, InvestorRelations.

Notes – Parent Company Notes – Parent Company 7 11 11 27 34 679 472 165 455 650 387 –60 319 402 –320 Total Total Total 2018 6,872 5,740 9,402 5,754 1,226 9,191 9,085 1,356 7,907 7,535 –9,270 –5,754 –1,226 16,701 20,034 –16,630 – – – 0 61 20 81 –604 –604 2019 >2024 – – –

–15 – 1 – – 2024 11 11 –1,778 –1,793 472 165 455 650 6,872 5,740 9,402 5,754 1,226 9,191 9,085 1,356 7,520 6,857 Other 16,382 19,632 – – – –10 financial assets financial 2023 –1,558 –1,568 1 Other financial liabilites financial Other – – – –12 2022 –1,302 –1,314 – – – – – – – – – – – – – – 98 98 166 124 144 124 166 144 – – –11 –12 2021 Aging analysis for past due, but not impaired trade receivables trade impaired not but due, past for analysis Aging SEKm <3 months >3 months Total past due but not impaired Total –1,345 –1,368 –12 –308 Financial assets for which Financial assets for which 2020 –2,683 –5,754 –1,226 –9,983 Financial liabilities for which hedge accounting is applied hedge accounting is applied

– – – – – – – – – – – – – – 512 263 175 304 263 512 175 304 valued at fair value at fair value Financial assets valued Financial liabilities 1 1 107 / Annual Report 2019 / Husqvarna Group Financial assetsand liabilities 19 Trade receivables past due but not impaired amount to (34) SEK81m Please note that the table includes the forecast future nominal interest payment and, thus, does not correspond to the net book value in the balance sheet. For long-term receivables to Group companies, see note 17. 2019 Liabilities Borrowings Liabilities to Group companies Liabilities to Group Trade payables Trade Derivatives 2018 Liabilities Borrowings Total Liabilities to Group companies Liabilities to Group Trade payables Trade Derivatives Total 2019 Assets Derivatives companies Receivables Group 1 SEKm Futureundiscounted cashflows loans otherof and financial liabilities 2019 December31, of as 1 SEKm Derivatives The main part of the Group’s derivatives is held by the Parent Company. Disclosures regarding the derivatives are available in the Group’s note 20. receivables Trade Husqvarna AB’s trade receivables amount to SEK 455m as (472) per 2019. 31, December as of December 2019. 31, Note Financial assets and liabilities per category per liabilities and assets Financial SEKm Trade receivables Trade Other receivables Total Cash and cash equivalents 2018 Assets Derivatives Trade receivables Trade Other receivables Total companies Receivables Group Cash and cash equivalents Bonds, bank loans and other loans Liabilities to Group Companies Liabilities to Group Derivative liabilities, interest rate Derivative liabilities, interest Derivative liabilities, foreign exchange Derivative liabilities, foreign Trade payables Trade Total financial liabilities financial Total 2 1 48 24 98 –1 72 89 76 24 2.5 - 111 170 100 –100 2018 Total 2018 Return 6 14 21 15 21 –14 26 86 41 59 2.5 Other –47 107 –21 100 2019 2019 2018 8 34 32 23 31 –35 45 19 19 Warranty Warranty Return commitments 63 36 38 10 48 –51 41 59 100 2019 Provisions for Provisions re-structuring Other provisions 23 Pension costs recognized in the Income statement Provisions for restructuring for Provisions See the Group’s note 22 for further information regarding Husqvarna restructuring programmes.Group´s commitments Warranty repairing for expenses potential warranty all comprises for Provisions or replacing products sold and are normally limited to months. 24 The employees are covered either by pension as plansclassified in addition are to statutoryplans pension Such insurance. security social plans pension The plans. benefit defined or plans contribution defined are funded which imply White that employees. thereformer are assetsand in legal a employees entityto benefits that existfinance to solely collar pension employees,old-age The (ITP2). plan benefit defined bornbargained collectively 1978 or earlier, are coveredbenefit by of a finalthe plan salary is financedEmployees primarily born 1979 are pensions about information or More plan. pension throughcontribution later are a pension covered byfund. ITPpresented 1, in which Group notes 4 and 21. is a defined Note SEKm Of total net expenses of SEK 86m SEK 44m (170), is (91) recognized in cost of goods(20) sold, in SEK selling 11m expenses and(59) SEK 31m in pen own for 2020 expected payments The expenses. administration sions amounts to SEK 26m. Principal actuarial assumptions% at balance sheet date Discount rate The major categoriesassets of plan and assets the return as a percentage on these categories of% total plan SEKm Own pensions service costs Current Benefits paid Benefits Pension costs pensions Insured Insurance premiums pensions for expenses net Total Opening balance January 1, 2019 Equity instruments Provisions made Provisions Debt instruments Provisions used Provisions Total Closing balance, December 31, 2019 Current provisions Current Non-current Non-current provisions 5 7 3 – 0 –2 –4 15 77 33 14 59 61 72 48 48 48 183 –24 680 152 198 178 303 648 –632 2018 2018 2018 2018 2018 5 0 1 1 1 –4 –4 12 35 11 14 75 18 48 71 69 117 –21 –26 751 245 270 161 243 816 –750 2019 2019 2019 2019 2019 obligations 108 / Annual Report 2019 / Husqvarna Group Provisions for pensions for Provisions Other liabilities Other current assetsOther current 22 21 20 Net provision for pensions Net provision Fair value of plan assets fund pension the of Surplus/deficit Surplus of the pension fund, not recognized Of total net provisions, (48) SEK 1m is within the scope of the Swedish Safe-guarding of Pension Commitments Act. Present value of the funded pension Present Opening balance, January 1 Specification of the change in the net provision for pensions for provision net the in change the of Specification SEKm SEKm Other accrued payroll expenses Other accrued payroll Accrued customer rebates Other accrued expenses Personnel taxes and other taxes Total Note pensions for provision net the of Specification in the income Costs for pensions recognized statement paid Benefits SEKm Note Accrued holiday pay Closing balance, December 31 Note SEKm New provisions Reversed unused provisions Miscellaneous short-term receivables and leases rents Prepaid premiums insurance Prepaid The credit risk in financial assets is describedBorrowings in the Group’s The mainnote part of the borrowings20. in Husqvarna Group is reported within the Parent Company. Fordisclosures regarding fair value and interest exposure, see the Group’s note 20. Provision for overdue accounts receivables accounts overdue for Provision SEKm 1 January balance, Opening added tax Value Write off accounts receivables off Write expenses Other prepaid Total Closing balance, December 31 Closing balance, December

Notes – Parent Company Notes – Parent Company - - - 2019 2,576 6,826 3,415 5,776 9,402 9,191 1,287,456 26,063,942 27,351,398 Closing balance, Closing balance, December 31, 2019 December 31, 2018 – – – – – – 1 movement movement Other non-cash Other non-cash – 50 75 50 138 213 movement movement Related partyRelated transactions events Subsequent Foreign exchange exchange Foreign exchange Foreign – – – – 25 26 1,114 –1,114 Group’s financial strength, liquidity and overall position. Calculated on the number of outstanding shares as per December 2019. 31, Reclassification Reclassification Husqvarna AB, as the parent company of the Group, may be directly liable for such obligations (for example, if it is directly named in such a lawsuit) and/or may have indirect liability for the same, such as when an intra-company guarantee is in place. Please refer to the Groups note for24 more details. TheBoard is of the opinionable on both the Company that and the Group level the with regard to the dividend demands proposed on the Company and Group equity imposed above by the type, is justifiscope and risks of the business and with regard to the Company and the SEKt 1 Note Sales to related parties are carried out on market-based terms. Informa tion about the Board of Directors and Group Managment and compen sation to those are reported in Group note 4, EmployeesHusqvarna between and occurred employeehave transactions unusual No benefits. Group and the Boardof Directors or Group Management. The value of insignificant. are transactions business those Note No significant eventsdate thathave would have a material impactoccured on the Parent Company’s subsequent statements. financial to the balance sheet the following allocation proposes The Board profits: available of of SEK 2.25 per share Dividend to the shareholders To be carried forward To Total 1 1 161 - –839 –586 1,000 2,530 1,944 93 13 121 431 121 537 2018 2019 2018 Cash flows Cash flows Cash 2,605,747 8,530,250

16,215,401 27,351,398 3,415 5,776 2,812 4,222 9,191 7,034 97 15 129 466 129 578 balance, balance, 2019 2019 January 1, 2019 January 1, 2018 Opening Opening 109 / Annual Report 2019 / Husqvarna Group Proposed distribution of earnings distribution of Proposed Changes in financial liabilitiesfinancial in Changes Pledged assets and contingent liabilities 1 28 27 24 Theproposted record dates are April 6, 2020 for the first payment Cash flow from financial liabilities is included in the Parent Company’s cash flow statemenet under “Proceeds from borrowings” and “Repayment of borrowings”. Cash flow from financial liabilities is included in the Parent Company’s cash flow statemenet under “Proceeds from borrowings” and “Repayment of borrowings”. Refers to endowment that is pledged in favor of the recipient. Retained earnings Net income Total SEKt Note The Board of Directors proposes a dividend for of 2019 SEK 2.25 per share (2.25) corresponding to a total dividend payment of SEK 1,287m (1,286) based on the number of outstanding shares at the end It of 2019. is also proposed that the dividend will be paid in two instalments to bet AGM: the of disposal the at are profits following The reserve premium Share On behalf of external counterparties external of behalf On Bank guarantee Pension obligation Total ter match the Group’s cashper share in April and flow the remaining SEK 1.50perprofile, share in October. with one payment of SEK 0.75 payment. second the for 2020 October 6, and Note On behalf of Group companies On behalf of Group Pension obligation As described in note to 24 the Group’sFinancial Statements, the Husqvarna Group is exposed to certain contingent liabilities disputes. regarding related and litigation, commercial guaranties, commercial Contingent liabilities Contingent SEKm 1 Pledged assets Pledged SEKm Note Pension obligation 1 SEKm 1 SEKm Total Current interest-bearing borrowings interest-bearing Current borrowings interest-bearing Non-current borrowings interest-bearing Current Total financial liabilitites financial Total borrowings interest-bearing Non-current liabilitites financial Total principles uncertainties facing uncertainties Board member Board Lars Pettersson

Kai Wärn Carita Svärd Board member Board Katarina MartinsonKatarina President and CEO and Board member Board and and member Board employee representative employee Daniel NodhällDaniel Board member Board Hamish Mabon Hamish Tom Johnstone Tom Ernst AB & Young Chair of the Board Group’s of the development of the Group’s a fair review Company provides Parent Stockholm, February 27, 2020 Stockholm, February 27, Authorized Public Accountant Public Authorized Company’s financial position and results of operations. of results and position financial Company’s position and results of operations and describes material risks and risks material describes and operations of results and position Our audit report was issued on February 2020 27, Ulla Litzén Board member Board Board member Board Soili Johansson Soili Christine Robins Board member and and member Board employee representative employee 110 / Annual Report 2019 / Husqvarna Group Board member Board Bertrand Neuschwander financial statements of the Parent Company have been prepared in accordance with generally accepted accounting accepted generally with accordance in prepared been have Company Parent the of statements financial Sweden and give a true and fair view of the Parent Parent the of view fair and true a give and Sweden the Parent Company and the Company included in the companies Group. the Parent in The Board of Directors and the President and CEO declare that the consolidated financial statements have been prepared in prepared been have statements financial consolidated the that declare CEO and President the and Directors of operations. Board of The results and position financial Group’s the of view fair and true a give and EU, the by adopted as IFRS with accordance The Declaration by the Board of Directors of the Board Declaration by and and CEO the President and the The statutory Administration Report of the Group and the Parent Company’s operations, financial operations, Company’s Parent the and

Declaration by the Board of Directors and the President and CEO

------respond to our assessment of the risks of material misstatement respond procedures, audit our of results The statements. financial the of the matters below, performed to address including the procedures finan accompanying the on opinion audit our for basis the provide tions. The underlying computations are furthermore complex. We complex. We furthermore tions. The underlying computations are have consequently assessed that goodwill and other assets with matter. audit key a represent lives indefinite this key audit matter How our audit addressed As part of our audit we have assessed and audited key parameters, the discount rate the application of acknowledged valuation theory, and Capital”) of Cost Average ”Weighted – WACC as to (referred How our audit addressed this key audit matter How our audit addressed in all entities that hold The existence of inventory is addressed have attended stock counts for all material inven We inventory. on the have performed audit procedures tory locations. We finished to components from inventories, all of value acquisition goods. Our audit to determine that inventory has been carried at value is performed the lower of acquisition value and net realizable inventory aging as well as inventory turnby means of reviewing as well as by means of grouping product over for each respective level we have furthermore of obsolete items. At the group review for internal to the reserve related performed audit procedures inventory. in profits Impairment tests of goodwill and other assets with lives indefinite Description to amounted lives useful indefinite with assets other and Goodwill 10.7 billion SEK as of December 31, 2019. Management conducts impairment impairment tests annually as well as in cases where each for amount recoverable The identified. been have indicators cash generating unit is determined as the value in use, which is fore of based method flow cash discounted the under computed Key assumptions in these computations are results. casted future discount rates. The and appropriate margin expected growth, based on assumptions is to its nature impairment test process and judgements, not least due to it being based on estimates of factors financial other and market the in developments future the market or economic condi by expected future affected that are cial statements. Inventory of Existence and Valuation Description the of assets total the of portion significant a represents Inventory for obsolescence, net of provisions The value of inventory, Group. inven as of December 31, 2019, was 10.9 billion SEK. The Group’s tory is carried at the lower of the acquisition value in accordance with the the weighted average cost formula and net realizable write-down estimated the reflects value realizable net The value. for older articles, physically damaged goods, excess inventory seasonality in pronounced and selling expenses. The Group’s the dif increase products sales together with weather-dependent consequently have We inventory. of value the estimating in ficulty a assessed that valuation represents and existence of inventory for provisions Additional information regarding key audit matter. carried obsolescence as well as the portion of inventory which are disclosed in value after selling expenses are at net realizable (“Inventory”). 17 note group ------112 / Annual Report 2019 / Husqvarna Group wise fulfilled our ethical responsibilities in accordance with accordance in responsibilities ethical our fulfilled wise We have fulfilled the responsibilities described in the Auditor’s Auditor’s the in described responsibilities the fulfilled have We We believe that the audit evidence we have obtained is suffi is obtained have we evidence audit the that believe We We therefore recommend that the general meeting of share recommend therefore We on the annual accounts and consoli Our opinions in this report A corporate governance statement has been prepared. The prepared. A corporate governance statement has been In our opinion, the annual accounts have been prepared in In our opinion, the been prepared annual accounts have dated accounts as a whole, but we do not provide a separate dated accounts as a whole, but we do not provide our description opinion on these matters. For each matter below, in that context. the matter is provided of how our audit addressed of section statements financial the of audit the for responsibilities our to these matters. Accordingly, including in relation our report, designed to audit included the performance of procedures fessional judgment, were of most significance in our audit of the of audit our in significance most of were judgment, fessional period. annual accounts and consolidated accounts of the current in the context of our audit of, and addressed These matters were the annual accounts and consoli in forming our opinion thereon, cient and appropriate to provide a basis for our opinions. to provide cient and appropriate Matters Audit Key those matters that, in our pro Key audit matters of the audit are dards in Sweden. Our responsibilities under those standards are are under those standards in Sweden. Our responsibilities dards are Responsibilities section. We further described in the Auditor’s in accordance company and the group independent of the parent ethics for accountants in Sweden and have with professional other This includes that, based on the best of our these requirements. to in the services referred knowledge and belief, no prohibited to the Audit Regulation (537/2014) Article 5.1 have been provided company or its applicable, its parent where audited company or, companies within the EU. controlled Basis for Opinions with International Stan conducted our audit in accordance We on Auditing (ISA) and generally accepted auditing stan dards dated accounts are consistent with the content of the additionaldated accounts are audit com company’s that has been submitted to the parent report with the Audit Regulation (537/2014) Article 11. mittee in accordance holders adopts the income statement and balance sheet for the company and the group. parent nance statement is in accordance with the Annual Accounts Act. nance statement is in accordance statutory administration report and the corporate governance statutory administration report consistent with the other parts of the annual statement are accounts and consolidated accounts, and the corporate gover dance with the Annual Accounts Act and present fairly, in all mate fairly, dance with the Annual Accounts Act and present Decem 31 of as group the of position financial the respects, rial the for flow cash and performance financial their and 2019 ber with International Financial year then ended in accordance the (IFRS), as adopted by EU, and the Reporting Standards Annual Accounts Act. We have audited the and consolidated annual accounts accounts We for theof Husqvarna AB (publ) The annual accounts year 2019. included on and consolidated accounts of the company are pages 41–110 in this document. in all fairly, with the Act and present Annual Accounts accordance as company parent the of position financial the respects, material flow cash and performance financial its and 2019 December 31 of with the Annual Accounts for the year then ended in accordance in accor Act. The consolidated accounts have been prepared To the general meeting of the shareholders of Husqvarna AB (publ), org nr 556000-5331 nr Husqvarna the shareholders of org of the general AB (publ), meeting To accounts consolidated and accounts annual the on Report Opinions Auditor’s report Auditor’s

Auditor’s report Auditor’s report ------If we, based on theIf we, this concerning performed work informa As part of an audit in accordance with ISAs, we exercise profes with ISAs, we exercise As part of an audit in accordance In preparing the annual accounts and consolidated accounts, In preparing of to the Board The Audit Committee shall, without prejudice sures made by the Board of Directors and the Managing Director. and the Managing Director. of Directors made by the Board sures of Directors’ of the Board Conclude on the appropriateness use of the going concern basis of and the Managing Director’s the annual accounts and consolidated accounting in preparing also draw a conclusion, based on the audit evi accounts. We dence obtained, as to whether any material uncertainty exists doubt significant cast may that conditions or events to related ability to continue as a going and the group’s on the company’s Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to responsive design and perform audit procedures fraud or error, and sufficient is that evidence audit obtain and risks, those to a basis for our opinions. The risk of not to provide appropriate fraud is from detecting a material misstatement resulting as fraud may involve error, from higher than for one resulting or intentional omissions, misrepresentations, collusion, forgery, the override of internal control. rel internal control Obtain an understanding of the company’s that are to design audit procedures evant to our audit in order but not for the purpose of in the circumstances, appropriate of the company’s an opinion on the effectiveness expressing internal control. of accounting policies used and Evaluate the appropriateness disclo of accounting estimates and related the reasonableness • sonable assurance is a high level of assurance, but is not a guaran sonable assurance is a high level of assurance, with ISAs and gener tee that an audit conducted in accordance in Sweden will always detect a ally accepted auditing standards can arise material misstatement when it exists. Misstatements material if, individually or considered and are fraud or error from influence to expected be reasonably could they aggregate, the in the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. scepticism throughout sional judgment and maintain professional also: the audit. We • • • Responsibilities of the Board of Directors and the Managing Managing the and Directors of Board the of Responsibilities Director responsible are and the Director Managing of Directors The Board of the accounts and consolidated annual for the preparation with in accordance accounts and that they give a fair presentation the the Annual Accounts Act and, concerning consolidated with IFRS as adopted by the EU. The accounts, in accordance also responsible are and the Managing Director of Directors Board as theyenable determine is necessary to for such internal control and consolidated of annual accounts accounts that thepreparation whether material misstatement, to fraud or error. due from free are responsi are and theManaging Director of Directors The Board ability to and the group’s ble for the assessment of the company’s continue as a going concern. They disclose, as applicable, mat to going concern and using the going concern basis ters related of accounting. The going concern basis of accounting is however and the Managing Director of Directors not applied if the Board to cease operations, or has no intends to liquidate the company, alternative but to do so. realistic and tasks in general, among other responsibilities Director’s process. reporting financial company’s the oversee things responsibility Auditor’s assurance about whether to obtain reasonable Our objectives are the annual accounts and consolidated accounts as a whole are material misstatement, whether due to fraud or error, from free thatRea includes our opinions. report and to issue an auditor’s tion, conclude that there is a material misstatement of thisis a material misstatement other tion, that conclude there have nothing that fact. We to report required information, we are in this regard. to report ------113 / Annual Report 2019 / Husqvarna Group 1–40 and 115–124. The Board of Directors and the Managing of Directors 1–40 and 115–124. The Board consolidatedaccountsand theaccounts on annual opinion Our In connection with our audit of the annual accounts and con We have finally assessed the appropriateness of disclosures in disclosures of appropriateness the assessed finally have We ally inconsistent with the annual accounts and consolidated we also take into account our knowl accounts. In this procedure edge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. solidated accounts, our responsibility is to read the information is to read solidated accounts, our responsibility materi is information the whether consider and above identified Director are responsible for this other information. responsible are Director any does not cover this other information and we do not express this other information. form of assurance conclusion regarding This document also contains other information than the annual accounts and consolidated accounts and is found on pages Other Information than the annual accounts and accounts annual the than Information Other accounts consolidated tions, including – as appropriate – validation of assumptions by tions, including – as appropriate obtaining audit evidence. As part of our audit we have used the as well as applying our own projections/assessments Group’s have – where tax legislation. We understanding of each relevant historical ability to prognosticate – assess the Group’s relevant we have assessed the the outcome of income tax matters. Finally, note 2 (“Key in group provided of disclosures appropriateness (“Tax”). 10 note Group as well as assumptions”) and estimates rying amount is expected to be realized by means of taxable rying amount is expected to be realized tax planning opportunities may be where income in the future, at both a corpo have included tax professionals We considered. to analyze and level in order rate level and for the cross-border tax posi the Group’s test the assumptions made upon reaching ties as well as performing an independent assessment of whether tax assets to deferred or not. With regards is required a provision assessments as to whether the car the Group’s we have reviewed We have audited the completeness and valuation of the amounts We taxes, including income deferred and as both current recorded uncertain tax positions. For such matters we have as part of our assessed communication with the tax authori audit procedures How our audit addressed this key audit matter How our audit addressed tems. Tax liabilities, which to their nature are based on estimation, are liabilities, to their which nature tems. Tax a key audit matter in that the material. Income taxes represent are judgmental, and inherently complex, they are underlying issues are material. the amounts involved are The Group conducts its operations in a significant amount of tax of amount significant a in operations its conducts Group The jurisdictions, all of which have their own rules and legislation is the Group transactions. Consequently, cross-border regarding they subject to audits authorities by local tax in each country where company is the key party in a conduct operations. The parent and thus holds a number of patents, so-called principal structure time time to entities within the trademarks and similar assets. From that may range tax proceedings subject to ongoing are Group tax audits to tax litigation at multiple levels of the court sys from Income taxes Income Description Group note 14 (“Intangible assets”), in particular with regards to regards with particular in assets”), (“Intangible 14 note Group as to key sensitivities computing when provided the disclosures the value in use. tivitythe of computations, including independent performing an likely events that is a risk reasonable assessment of whether there would amount the recoverable could give rise to a situation where be lower than the amount. This assessment has also carrying success at prognostication. historical addressed the Group’s other source data that has been applied by the Group. We have for have We data that applied has been the by Group. other source applied parameters data sources, to external instance compared growth market future of assessments or inflation expected as such valuation model. theand have assessed sensitivity of the Group’s to included valuation have specialists in our audit team in order We sensi the on placed been has emphasis Specific work. this perform ------

- The Board of Directors is responsible for the company’s orga the for company’s is responsible Directors of The Board Ernst & Young AB with Hamish Mabon as main responsible AB with Hamish Mabon as main responsible Ernst & Young Reasonable assurance is a high level of assurance, but is not a Reasonable assurance is a high level of assurance, with generally accepted As part of an audit in accordance has undertaken any action or been guilty of any omission which or can give rise to liability to the company, in any other in contravention way has acted of the Companies Act, the Act or the Annual Accounts Articles of Association. tions of the company’s profit or loss is based primarily on the audit the on primarily based is loss or profit company’s the of tions based are performed Additionaltheaccounts. of auditprocedures judgment with starting point in risk and mate on our professional This means that we focus the examination on such actions, riality. material for the operations and that are and relationships areas deviations and violations would have particular importance where examine and test decisions under situation. We for the company’s taken, support for decisions, actions taken and other circum to our opinion concerning discharge relevant stances that are of Directors’ As a basis for our opinion on the Board liability. from exam we loss or profit company’s the of appropriations proposed statement and a selection reasoned of Directors’ ined the Board to be able to assess whether the of supporting evidence in order with the Companies Act. is in accordance proposal Box 7850 SE-103 99 Stockholm, was appointed audi P.O partner, tor of Husqvarna AB by the general meeting of the shareholders auditor since the on the April 9, 2019 and has been the company’s April 10, 2014. Stockholm February 27, 2020 AB Ernst & Young Hamish Mabon Authorized Public Accountant pany’s and the group’s financial situation and ensuring that the that ensuring and situation financial group’s the and pany’s so that is designed the accounting, man organization company’s otherwise affairs financial company’s the and assets of agement Director The Managing manner. in a reassuring controlled are to the Board shall manage the ongoing administration according guidelines and instructions and among other mat of Directors’ company’s the fulfill to necessary are that measures take ters withhandle law and the management accounting in accordance manner. of assets in a reassuring responsibility Auditor’s Our objective concerning the audit of the administration, and is to obtain liability, from about discharge our opinion thereby of assurance degree audit evidence to assess with a reasonable the or Managing of Directors whether any member of the Board in any material respect: Director • • appropria Our objective concerning the audit of the proposed opinion our thereby and loss, or profit company’s the of tions of assurance degree about this, is to assess with reasonable with the Companies Act. is in accordance whether the proposal with generally guarantee that an audit conducted in accordance in Sweden will always detect actions accepted auditing standards or that or omissions that can give rise to liability to the company, are loss or profit company’s the of appropriations proposed the with the Companies Act. not in accordance judgment professional in Sweden, we exercise auditing standards the audit. The scepticism throughout and maintain professional appropria examination of the administration and the proposed nization and the administration of the company’s affairs. This affairs. nization and the administration of the company’s otherincludes among things continuous of the assessment com ------

- 114 / Annual Report 2019 / Husqvarna Group We believe that the audit evidence we have obtained is suffi is obtained have we evidence audit the that believe We We recommend to the general meeting of shareholders that to the general meeting of shareholders recommend We We must also provide the Board of Directors with a statement of Directors the Board must also provide We of Directors, the matters communicated with the Board From Obtain sufficient and appropriate audit evidence regarding the regarding evidence audit appropriate and sufficient Obtain the within activities business or entities the of information financial an opinion on the consolidated accounts. We to express group of supervision and performance for the direction, responsible are for our opinions. solely responsible remain audit. We the group tinue as a going concern. and content of the structure Evaluate the overall presentation, annual accounts and consolidated accounts, including the dis and whether the accounts and consolidated annual closures, the transactions underlying events in a and accounts represent manner that achieves fair presentation. concern. If we conclude that If we conclude concern. we exists, uncertainty a material to the report attention to draw auditor’s in our required are in the accounts and consolidated annual disclosures related inadequate, to modify our are disclosures if such accounts or, theopinion about and consolidated annual accounts accounts. the based on audit up evidence obtained are Our conclusions events or future However, report. to the of our auditor’s date to cease to con conditionsa company and a group may cause fiable considering the requirements which the company’s and the and company’s the which requirements the considering fiable type of operations, size and risks place on the size of the group’s consolidation require equity, and the group’s company’s parent ments, liquidity and position in general. The Board of Directors is responsible for the proposal for appro for the proposal is responsible of Directors The Board divi a of proposal the At loss. or profit company’s the of priations dend, this includes an assessment of whether the dividend is justi cient and appropriate to provide a basis for our opinions. to provide cient and appropriate the and Directors of Board the of Responsibilities Managing Director We conducted the audit in accordance with generally accepted conducted the audit in accordance We under those in Sweden. Our responsibilities auditing standards Responsibilities further described in the Auditor’s are standards company and the independent of the parent are section. We ethics for accountants in with professional in accordance group in responsibilities ethical our fulfilled otherwise have and Sweden with these requirements. accordance Basis for opinions the profit be appropriated in accordance with the proposal in the in proposal the with accordance in appropriated be profit the and that the members of the statutory administration report be discharged and the Managing Director of Directors Board year. financial the for liability from Report on other legal and regulatory requirements Report on other legal and regulatory Opinions In addition to our audit of the annual accounts and consolidated of accounts, we have also audited the administration of the Board of Husqvarna AB (publ) for and the Managing Director Directors of the company’s appropriations the year 2019 and the proposed loss. or profit ters in the auditor’s report unless law or regulation precludes dis precludes unless law or regulation report ters in the auditor’s about the matter. closure ing the most important assessed risks for material misstatement, describe these mat the key audit matters. We therefore and are that we have complied with relevant ethical requirements regard ethical requirements that we have complied with relevant ing independence, and to communicate with them all relation be thought to bear ships and other matters that may reasonably safeguards. applicable, related on our independence, and where the in significance most of were that matters those determine we audit of the annual accounts and consolidated accounts, includ cant deficiencies in internal control that we identified. we that control internal in deficiencies cant We must inform the Board of Directors of, among other matters, of Directors must inform the Board We must also inform the planned scope and timing of the audit. We signifi any including audit, our during findings audit significant of • •

Auditor’s report Allocation of the Consumer Brands Division 9.4 9.4 7.8 4.5 6.9 –15 341 –0.3 –6.9 10.0 –344 5,056 2,388 5,320 2,106 4,931 4,881 5,015 4,591 4,375 2,388 1,228 2,716 25,285 27,221 27,156 17,264 18,701 17,171 17,742 16,355 12,208 13,381 12,290 13,151 11,980 restated restated restated restated restated Q3 2017 Q3 2018 Full-year 2016 Full-year 2017 Full-year 2018

71 71 –62 884 980 –11 –47 –171 –884 –325 7,325 8,012 7,376 1,414 4,947 1,220 4,054 1,262 1,025 4,430 1,326 4,073 4,337 3,533 2,834 3,405 3,189 3,357 of CBD of CBD of CBD of CBD of CBD Allocation Allocation Allocation Allocation Allocation

1 1 47 1.3 Q3 Q3 –19 388 –0.5 12.9 12.9 11.5 10.7 14.2 10.6 2016 2018 2018 3,642 2,317 4,100 2,277 3,669 3,856 3,689 3,707 3,395 2,317 2,112 2,727 8,675 8,885 9,962 8,623 2017 2017 17,960 19,209 19,780 12,317 14,647 12,741 13,669 12,018 10,547 Full-year Full-year Full-year

71 9.2 8.9 1.7 –77 –1.8 12.3 12.3 14.1 –626 2015 –14.5 4,185 4,310 4,112 2,373 5,320 8,867 4,881 1,154 9,347 6,298 5,688 2,298 1,250 1,154 25,798 15,052 18,701 17,171 20,369 18,258 10,940 13,381 12,290 14,071 12,570 restated restated restated restated restated Full-year Q4 2018 Q2 2017 Q4 2017 Q2 2018

89 65 70 –36 –47 945 987 –56 –47 –486 8,174 1,091 4,135 1,220 4,054 2,703 1,025 4,430 2,628 5,214 1,442 4,788 1,464 3,044 2,834 3,405 3,772 3,324 of CBD of CBD of CBD of CBD of CBD Allocation Allocation Allocation Allocation Allocation

1 1 to North America, has been included in the Husqvarna Division. The segment reporting in will 2019 consist of three divisions: Husqvarna, Gardena and Construction. A restatement of the segment reporting in the new structure is presented below. 3.9 Q4 Q4 Q2 Q2 –41 127 –1.2 –4.2 13.0 12.7 17.9 17.9 19.1 –140 2015 2018 2018 3,240 3,323 3,021 2,284 4,100 6,164 3,856 1,201 6,719 4,856 4,224 2,233 7,896 1,180 8,885 1,201 9,246 2017 2017 17,624 10,917 14,647 12,741 15,155 13,470 10,547 10,299 Full-year 12.3 12.3 11.4 9,238 1,044 8,484 6,863 6,520 1,054 1,044 21,541 21,067 14,678 14,547 restated restated Q1 2017 Q1 2018

22 –26 –26 3,102 2,435 5,593 1,562 6,184 1,744 4,031 4,440 of CBD of CBD Allocation Allocation

1 * * * * Q1 Q1 17.7 17.7 16.8 2018 6,136 1,070 6,049 5,301 4,776 1,032 1,070 2017 15,948 14,883 10,647 10,107 115 / Annual Report 2019 / Husqvarna Group * * Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Net sales Operating income

Net sales Operating income Net sales * Alternative Performance Measure, refer to the section “Definitions” for further information. SEKm SEKm SEKm Husqvarna Allocation of the Consumer Brands Division Consumer the of Allocation The Consumer Brands Division is reported as a separate division for 2018, but has been dissolved and integrated into the Husqvarna and GardenaEuropeanThedivisions part, January2019. thatof as 1, been has sales, net Brands Consumer 15% approximately for accounted included in the Gardena Division and the remaining 85%,mainly related SEKm SEKm Net sales Operating income

Liabilities Net Assets Assets

Operating margin, % Operating margin, Liabilities Net Assets Assets

Operating margin, % Operating margin, Operating income Liabilities Net Assets Assets Operating margin, % Operating margin, Net sales Operating margin, % Operating margin, Assets Operating margin, % Operating margin, Operating income

Liabilities Assets

Net Assets Liabilities Net Assets 66 64 12 9.3 8.0 8.0 5.2 8.0 4.2 4.1 1.0 651 527 665 527 425 1,564 7,151 8,771 6,596 8,118 1,255 1,467 8,264 1,397 9,398 1,762 9,219 1,731 8,232 1,408 7,304 6,867 7,636 7,488 6,824 restated restated restated restated restated Q3 2018 Q3 2017 Full-year 2017 Full-year 2016 Full-year 2018

–68 –47 196 433 222 589 636 469 417 –41 –68 –49 –50 908 723 671 874 856 –135 CBD CBD –361 1,341 1,521 1,563 1,317 1,312 1,307 1,343 1,273 of CBD of CBD of CBD Allocation Allocation Allocation Allocation of Allocation of 62 8.3 8.3 6.0 808 595 786 113 991 706 595 786 113 12.5 11.8 11.6 11.6 11.8 2017 2016 2018 1,368 7,430 5,630 1,034 5,033 1,033 6,801 6,952 8,091 1,126 7,876 1,262 6,959 6,396 6,144 6,965 6,614 5,968 Full-year Full-year Full-year Q3 2018 Q3 2017 5.9 5.8 727 746 382 595 375 595 580 17.9 17.9 20.3 –274 –224 –498 –30.8 –36.7 –66.8 3,325 8,771 1,467 6,431 2,859 7,742 1,343 9,398 1,762 2,472 9,292 2,012 7,304 6,399 7,636 7,988 7,280 10,460 restated restated restated restated restated Q2 2018 Q2 2017 Q4 2017 Q4 2018 Full-year 2015

10 10 15 –61 555 171 433 142 533 608 636 736 627 –52 908 700 671 914 884 –209 CBD CBD –211 –285 1,341 1,762 1,308 1,307 1,650 1,511 of CBD of CBD of CBD Allocation Allocation Allocation Allocation of Allocation of

Q4 Q4 556 604 735 591 585 586 585 565 12.7 12.5 21.1 21.1 24.3 –213 –172 –213 2015 2017 2018 –30.9 –35.3 –35.3 2,770 7,430 1,034 4,669 2,326 6,434 8,091 1,126 8,810 1,736 7,781 1,385 6,396 5,699 6,965 7,074 6,396 Full-year Q2 2017 Q2 2018 264 264 297 10.6 10.6 12.9 2,483 2,310 2,213 9,645 2,026 7,892 7,619 10,105 restated restated Q1 2017 Q1 2018

46 –37 424 595 643 808 –37 955 984 1,598 1,792 of CBD of CBD Allocation Allocation

* * * * Q1 Q1 301 301 251 14.6 14.6 14.6 2017 2018 2,059 1,715 8,507 1,570 7,853 1,218 6,937 6,635 116 / Annual Report 2019 / Husqvarna Group * * Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Excl. items affecting comparability Excl. items affecting Excl. items affecting Excl. items affecting comparability Excl. items affecting Excl. items affecting comparability Net sales Net sales * Alternative Performance Measure, refer to the section “Definitions” for further information. SEKm Assets SEKm SEKm Operating income SEKm Net sales Operating income Operating margin,% Liabilities Net sales Operating income SEKm Gardena Net sales Operating income Operating income Net Assets Assets Liabilities Net Assets Assets Liabilities Net Assets

Operating margin,% % Operating margin, Operating margin,% Assets Operating margin,%

Liabilities Assets Net Assets Liabilities Net Assets

Allocation of the Consumer Brands Division Definitions ------Capital indicators Capital employed Capital less non-interest-bearing equity including debt liabilities and Total deferred tax liabilities. expenditure Capital Investments in property, plant and equipment, right of use assets and intangible assets. liabilities bearing Interest fair and liability pension net borrowings, short-term and Long-term liabilities. derivative value funds Liquid Cash and cash equivalents, short-term investments and fair value assets. derivative assets Net assetsTotal excludingliquid funds and interest-bearing assets deferred and provisions less non-interest-bearing liabilities, operating tax liabilities. Net debt Net debt describes the Group’s gearing and its ability to repay operating its (see business ordinary debts Group´s the from generated cash from cash flow below), if futurethey were net all interest due today.total interest-bearing costs It’s liabilities also will plus dividend used impact payable, less liquidto fundsandanalyze interest-bearing earnings. assets. Forhow a reconciliation Net of net debt refer debt to sheet. balance the below table is defined as capital working Operating payables. trade less receivables trade and Inventories Capital measures ratio Equity/assets Equity attributable to equity holders of the Parent Company as a per centage of total assets. rate turnover Capital Net sales last twelve months divided with average net assets. Net debt/EBITDA excl. items affecting comparability Average net debt in relation to EBITDA last twelve months, excluding items affecting comparability. Net debt/equity ratio Net debt in relation to total equity. sales capital/net working Operating Average operating working capital as a percentage of net sales last twelve months. Other measures flow cash operating Direct Direct operating cashGroups flow operating is a measure business.ing itemsof affecting the comparability, cash adjusted The generated for change measure in trade payables,inventory and is tradeby receivables definedthe and investments in property,as directoperat of EBITDA, reconciliation a plant assets. For intangible and and equipment exclud ing cash flow refer to the table below the comparability affecting cashItems flow statement. assistTo in understanding Husqvarna Group’s operations, we believe that it is useful to consider certain measures and ratios exclusive of affectingitems affecting Items comparability. comparability includes items that are non-recurring, performance operating understanding the important for be to ered have affecting items compara a The between periods. results significant comparing when impactbility and are disclosed are on page 43. Allconsid measures and ratios in this report have been disclosedthen excluding including items affecting comparability items as a second measure affecting when appropriate. deemed comparability first andflow cash Operating Operating cash flowthe is Group’sa measure ordinary of the amounttotal business cashof cash flow operations. generatedfrom property divestments of subsidiaries/operations, divestmentsand of operations by The assets. financial measure of investments/divestments and and equipment investments,and isplant defined as excludingFor a reconciliationacquisitions statement. flow of operating cash flow refer to table below the cash ------117 / Annual Report 2019 / Husqvarna Group ance and all quarter-end closing balances included in the reporting the in included balances closing quarter-end all and ance quarters. five i.e period, Growth measures Net sales adjusted for changes in exchange rates Change in net sales adjusted for currency translation effects. Netare sales also disclosed adjusted for currency translation effects asHusqvarna Group istions a global in other currencies than the company reporting currency (SEK) and generating the currency rates have proven to be volatile. significant transac Net sales growth percent. in period previous to compared sales net in Change growth Organic Change in net sales, adjusted for acquisitions, divestments and cur effects. translation rency measures Profitability EBITDA EBITDA is a measure of earningsbefore interest, taxes, depreciation, Husqvarna measures EBITDA charges. impairment amortization and Group’s operating performanceand the ability to generate cash from operations, without considering the capital structure of the Groupfiscal or its environment. statement. income For a reconciliation of EBITDA refer to tableEBITDA margin below the EBITDA as a percentage of net sales. margin Gross Gross income as a percentage of net sales. Last twelve monthsLast (LTM) twelve months rolling has been included to assist stakeholderstheir in analysis of the seasonality that the Husqvarna Group’s business is to. exposed margin Operating Operating income as a percentage of net sales. Return on capital employed Operating income plus financial income (last twelve months) as a per panies. Refer below report. this in presented and to referred used, for a list of definitions of all measures amounts average of Computation and indicators In computation of key ratios where averages of capital balances are included, the average capital balances are based on the opening bal employed. capital average of centage equity on Return Net income attributable to equity holders of the Parent Company last twelve months as a percentage of average equity attributable to equityholders of the Parent Company. Share-based measures Earnings per share, after dilution Net income attributable to equity holders of the Parent Company divided by the weighted average number of shares outstanding (net of treasury shares), after dilution. Equity per share, after dilution Equity attributable to equity holders of the Parent Company dividedthe by weighted average number of shares outstanding (net of treasury shares), after dilution. holdersshould not consider these as substitutes, but rather as addi tions, to the financialIFRS. reporting Please note measures thatmay not be comparable the to similarly alternativeprepared titled measures used by other com in accordance performance with measures as defined, Definitions This report includesreporting framework financial applicable to Husqvarna performance Group, measures (alternative which measures other are is based there addition, In on IFRS. as required by themeasures) usedfinancial by management and other stakeholders to analyze be cannot that operations Group’s the performance of and trends directly read or derived from the financial statements. Husqvarna stake 1 1 1 1 50 44 7.8 8.2 9.2 5.9 1.7 1.65 11.8 28.1 11.0 0.49 12.4 14.6 22.7 3.28 1,388 1,732 4,508 3,980 2,980 3,941 6,431 6,375 7,923 2,718 5,699 7,896 574.2 2,483 1,888 2,827 2015 2015 2015 2015 –1,153 13,572 25,798 36,170 13,061 19,436 29,669 10,174 1 1 1 1 cash flow. 53 44 25 8.9 8.9 9.4 8.0 1.7 1.95 13.9 12.2 30.8 0.48 13.7 15.2 3.66 1,889 1,666 4,680 4,382 3,218 4,101 6,596 6,833 8,763 2,967 6,144 8,675 574.1 2,796 2,104 3,218 2016 2016 2016 2016 –1,164 12,704 25,285 35,982 14,365 21,198 32,978 11,096 operating 1.5 1.5 48 44 1, 5 1, 5 9.6 9.6 9.3 1.7

2.25 12.9 13.0 10.0 29.1 0.46 14.7 17.4 27.3 4.62 1,892 1,847 5,121 5,105 3,790 5,015 7,151 7,199 8,831 4,596 6,394 8,885 574.2 3,290 2,660 3,790 –1,315 13,252 27,221 39,394 15,667 22,866 35,418 11,472 2017 2017 2017 2017 1 1 1 1 5 8 41 9.7 7.8 7.9 7.6 7.3 1.6 106 2.25 12.4 25.6 0.62 28.0 2.12 –248 2,235 5,712 4,000 3,241 5,762 8,118 9,875 5,366 6,965 572.3 1,561 1,213 2,070 2018 2018 2018 2018 –1,930 13,206 27,156 41,085 16,009 10,058 10,547 25,883 38,607 10,502 51 41 8.7 8.8 9.3 1.5 2.25 13.7 10.2 13.2 29.6 12.9 14.7 0.65 30.2 4.42 2019 2019 2019 2019 2,676 2,232 5,833 5,779 3,915 6,340 8,343 5,833 7,733 572.4 3,122 2,528 3,690 –2,089 12,708 27,506 42,277 11,315 17,283 10,379 15,371 28,565 41,981 12,529 4 3 118 / Annual Report 2019 / Husqvarna Group 2 Husqvarna excl. items affecting comparability, %* comparability, Husqvarna excl. items affecting %* comparability, excl. items affecting Gardena %* comparability, Construction excl. items affecting Restatement of 2017 due to IFRS 15 transition, reclassification of certain exchange rate effects, and reclassification of certain sales between segements. Hedges related to financing have been moved from operations to financing activities (SEK – 64m for 2015). The equivalent amount has affected the Dividend pay out ratio is defined as total dividend in relation to the net income excluding non-controlling interest. Restatement of divisions due to allocation of the Consumer As proposed by the Board. Brands Division, refer to “Allocation of the Consumer Brands Division”. Other key ratios Capital expenditure Dividend pay-out ratio, % Average number of employees Average Salaries and remunerations, SEKm Salaries and remunerations, Financial position and key ratios, SEKm Income after financial items financial after Income Net Income amortization and impairment Of which depreciation, EBITDA margin, % EBITDA margin, % Operating margin, EBITDA* Operating income comparability* Operating excl. items affecting income %* comparability, excl. items affecting Operating margin Gross income Gross % margin, Gross Construction Gardena Husqvarna Income and key ratios, SEKm Net sales Equity/assets ratio, % SEKm flow, Cash Return on capital employed, % Return on equity, % Return on equity, Capital turn-over rate, times Net debt/equity ratio Net debt* Total equity Total Operating working capital Construction Gardena Husqvarna Net assets Total assets Total Dividend per share, SEK Dividend per share, Average number of shares after dilution, millions number of shares Average Equity per share after dilution, SEK Equity per share Earnings per share after dilution, SEK Earnings per share Operating cash flow* cash Operating * Alternative Performance Measure, refer to section “Definitions” for further information. Five-Year Review Five-Year 4 5 1 2 3

Five-Year Review Quarterly Data 9.3 5.0 9.6 8.2 4.62 2.12 4.42 12.9 11.7 10.2 12.3 10.7 14.2 11.6 12.5 8,831 9,875 7,199 2,528 1,213 2,660 3,915 3,241 3,790 3,690 2,070 3,790 8,343 6,340 5,762 5,015 8,118 7,151 27,506 10,379 10,058 11,315 42,277 41,085 39,394 27,156 27,221 Full-year Full-year Full-year Full-year 61 0.1 5.0 6.8 1.7 Q4 Q4 Q4 Q4 –70 –70 710 746 727 –4.4 –1.1 –4.8 –5.5 10.9 –922 –387 –310 –282 –493 –1.61 –0.67 –49.0 –14.5 –66.8 –30.8 4,108 8,831 9,875 7,199 6,470 6,130 6,408 1,551 1,398 1,217 4,310 4,185 –1,104 10,379 10,058 11,315 2.8 5.8 4.9 1.6 7.4 6.9 4.1 1.0 Q3 Q3 Q3 Q3 210 269 414 225 433 414 433 –6.9 0.37 0.47 11.4 13.3 14.6 –185 –124 –0.32 5,204 9,215 8,040 6,440 8,042 7,449 8,429 1,630 1,575 1,446 1,260 5,015 4,931 1,564 1,255 11,238 10,107 11,609

Q2 Q2 Q2 Q2 2.43 2.41 2.63 13.5 15.3 15.4 14.0 17.4 15.8 20.8 15.5 12.3 14.1 17.9 20.3 8,688 8,862 7,602 1,380 1,401 1,506 2,125 1,925 2,002 2,125 1,925 2,002 3,373 1,720 1,590 1,341 9,347 8,867 3,325 2,859 12,224 12,069 10,768 11,340 14,270 13,069 13,789 Q1 Q1 Q1 Q1 940 988 1.72 1.64 1.99 11.2 11.2 12.3 12.5 11.8 11.9 14.1 11.8 12.3 11.4 10.6 12.9 9,506 9,198 9,800 1,140 1,686 1,373 1,425 1,644 1,373 1,425 2,630 1,494 1,328 1,197 8,484 9,238 2,483 2,310 13,889 12,243 12,561 13,548 12,303 12,746 13,651 1, 2 1, 2 1, 2 1, 2 1, 2 1, 2 1, 2 1, 2 Year Year Year Year 2018 2019 2019 2018 2017 2019 2018 2017 2017 2018 2019 2018 2017 2019 2018 2017 2019 2019 2018 2017 2019 2018 2019 2018 2017 2018 2017 2019 2019 2018 2019 2018 2017 2017 2018 2018 2019 2019 2017 2017 2017 2017 119 / Annual Report 2019 / Husqvarna Group Restated due to reclassification Restatement due of to certain allocation sales of thebetween Consumer segments. Brands Division, refer to “Allocation of the Consumer Brand Division”. Husqvarna Net sales by Division, SEKm Operating working capital Net debt* Financial position, SEKm Earnings per share after dilution, SEK Earnings per share Income for the period Operating margin excl. items affecting comparability, %* comparability, Operating excl. items affecting margin Operating income excl. items affecting comparability* Operating excl. items affecting income Husqvarna Operating income Operating margin by Division, % Operating margin Net sales Gardena Construction Gardena Construction Income, SEKm Quarterly Data 1 2 * Alternative Performance Measure, refer to section “Definitions” for further information. Turnover - e - oe t e t oe

o t

n noe no o e e ee ton no o e noe too Cone oo Nasdaq Stockholm SEK 43bn HUSQA SS, HUSQB SS Bloomberg: Nasdaq Stockholm: HUSQStockholm: Nasdaq A, HUSQ B SE0001662230 B-share US4481031015 equal one ADR B-shares ordinary Two Thomson Reuters: HUSQa.ST, Thomson Reuters: HUSQa.ST, HUSQb.ST

A-share SE0001662222 e n too

n Husqvarna B, price development 2019 development price B, Husqvarna SEK Number of shares: 576,343,778 Number of shares: Market capitalization Key facts Husqvarna AB shares Listing: 2019: at year-end Ticker codes: ISIN codes: Husqvarna ADR Ticker code: HSQVY ISIN code: Ratio: ADR Depositary a Level 1 American sponsors Group Husqvarna in the each repre US. The ADRs, which program Receipt (ADR) publicly traded in the US on the are B-shares, sent two ordinary The ADR is a USD denomi HSQVY. OTC Market, under symbol paid to investors and the associated dividends are nated security, in USD. Citibank is ADR depositary bank. Turnover oe t e t oe noe no o e e ont ton no o e noe too Cone oo 120 / Annual Report 2019 / Husqvarna Group

n too

Husqvarna B, price development 2015–2019 development price B, Husqvarna There are currently around 10 analysts who analyze and follow around currently are There on the share. and give recommendations Husqvarna Group Analyst coverage Analyst Conversion of shares Conversion of shares entitled to convert their are who hold A-shares Shareholders converted to were 421,922 A-shares into B-shares. A-shares in 2019. B-shares Share swap agreement swap agreement Share held by a the total number of Husqvarna AB shares At year-end, amounted to 4,141,164 swap agreement party as a share third (0.8) of the total to 0.7 percent (4,670,416) corresponding B-shares swap The purpose of the share number of outstanding shares. long-term is to hedge obligations under the Group´s agreement incentive programs. Dividend and dividend policy dividend and Dividend a dividend of SEK 2.25 per has proposed of Directors The Board (2.25) for 2019, divided into two payments. SEK 0.75 to be share 2020. The October, paid in April, 2020 and SEK 1.50 to be paid in (106) of net income. The policy is 51 percent dividend represents of net income. that the dividend normally shall exceed 40 percent

Listing and trading volume been listed have Stockholm on Nasdaq AB shares The Husqvarna in traded were (433) shares million 390 of total A 2006. June since to an 2019, withcorresponding a total value of SEK 30bn (33), or SEK (1.8) average daily trading volume of 1.6 million shares was 84 percent velocity for the122m (132). The turnover B-share 14 increased the(89) in 2019. During 2019, price of the B-share to the in Financial EU Markets to SEK 75 (66). According percent can also be traded on a (MiFID), a share Instruments Directive than other markets on i.e. (MTF), Facility” Trading “Multilateral is it is listed. The Husqvarna AB share the stock exchange where Chi-X and Turquoise. includingtraded on several MTFs BATS thefor the Nasdaq Stockholm exchange accounts However, majority of trading. The Share The SEK

The Share The Share 3.4% 4.3% 2.3% 4.0% 2.3% 83.7% 100.0% Votes, % Votes, of shares 4,950,000 296,259,153 385,136,895 385,136,895 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 576,343,778 Total number Total 7.4% 8.7% 2.4% 4.7% 3.7% 73.2% 100.0%

Capital, %

B-shares Number of 286,756,878 286,756,875 286,756,875 428,773,748 441,588,691 446,883,439 448,644,720 449,749,910 453,918,309 462,648,952 462,949,869 463,830,777 463,906,227 464,328,149 information information A-shares 9,502,275 98,380,020 98,380,020 Number of 147,570,030 134,755,087 129,460,339 127,699,058 126,593,868 122,425,469 113,694,826 113,393,909 112,513,001 112,437,551 112,015,629 Share price development Share ownership structure Shareholder Conversion of A-shares Analyst coverage of shares Repurchase capital Share and more, is available on and more, www.husqvarnagroup.com • • • • • • Further concerning the share The following information, Sweden 69.8% US 9.1% UK 2.3% Switzerland 1.9% Other countries 9.4% Anonymous ownership 7.4%

Distribution of shareholders by country by shareholders of Distribution n n n n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 100 Quotient value, SEK 100,001 – 1,000,000 1,000,001 – Totalt Shareholding by size in HusqvarnaShareholding AB Size of holding 1,001 – 10,000 10,001 – 100,000 Anonymous ownership 1 – 1,000 Share Share 48 78 91 68 78 92 68 2.9 2.25 4.64 4.62 3.23 3.22 27.3 1.8% 2.7% 1.6% 0.9% 0.8% 1.7% 0.8% 0.5% 2017 33.1% 25.1% 69.0% 31.0% 56,601 44,984 592,518,306 770,273,790 770,273,790 495,000,000 capital, SEK 100.0% Votes, % Votes, 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 1,152,687,556 66 90 63 66 90 63 3.4 106 2.25 2.12 2.12 28.0 2018 –0.43 –0.43 60,005 37,855 7.6% 4.9% 4.5% 4.4% 2.4% 2.3% 2.3% 2.2% 1.4% 16.8% 48.8% 51.2% 100.0% Capital, % 51 75 92 64 75 92 64 3.0 2.25 4.42 4.42 4.64 4.64 30.2 2019 63,153 43,237 1 121 / Annual Report 2019 / Husqvarna Group stock-split issue and bonus bonus issue no transactions rights issue to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from to B-shares A-shares conversion from 2 Dividend 2019 as proposed by the Board. price. share Dividend/year-end 2006: 2007: 2008: 2009: 2010: 2011: 2012: 2013: 2014: 2015: 2016: 2017: 2018: 2019: Husqvarna before listing 2006 Husqvarna before Source: Holdings/Euroclear as of December 2019. 31, 1 2 Share data Share Ägare Largest shareholders in Husqvarna shareholders AB Largest Share capital and number of shares of number and capital Share Övriga Totalt Vanguard AP-fonden Fjärde Summa för de tio största ägarna Andra AP-fonden BlackRock Lannebo Fonder Lundbergföretagen AB Lundbergföretagen Handelsbanken Fonder Fonder Didner & Gerge Swedbank Robur Fonder Investor Dividend payout ratio, % Yield, % Yield, Earnings per share, SEK Earnings per share, Year-end price, A-share, SEK price, A-share, Year-end Earnings per share after dilution, SEK Earnings per share Highest price, A-share, SEK Highest price, A-share, Operating cash flow per share, SEK share, per flow cash Operating Lowest price, A-share, SEK Lowest price, A-share, Operating cash flow per share, after share, per flow cash Operating dilution, SEK Year-end price, B-share, SEK price, B-share, Year-end Equity per share after dilution, SEK Equity per share Highest price, B-share, SEK Highest price, B-share, Dividend per share, SEK Dividend per share, Lowest price, B-share, SEK Lowest price, B-share, Number of shareholders Market capitalization, SEKm -

acquisitions of 1995 1995 Robotic lawn mower acquisitions such as AB Eater and Roper Corp sustainable, / Strengthened position in US in position Strengthened / / Automatic chain brake / Outdoor products in focus / Anti-vibration / 1969 with chainsaw first world’s the of Launch an integrated anti-vibration system that workers of the risk for forestry decreases - Ergo fingers.” white “vibration getting nomics has been an important part of design ever since. Husqvarna’s 1973 brake chain automatic first world’s The Brake™ (1999) followed by the Trio the risk of injury for forestry decreases workers. 1978 Husqvarna and out acquires Electrolux door product operations continue to door product expand through AB. Jonsereds and Partner 1980s and the growth Organic Poulan/Weed operations in the US. expand the Group’s - –1987

Motorcycles 1903 heating boilers and

Husqvarna’s first motorized first Husqvarna’s / Motorcycles

/ Construction productsConstruction / / Lawn mowers –1987

/ Chainsaws / – 1 9 7 8 When Norrahammars Ironworks in Swe- When Norrahammars Ironworks range the product den is acquired, expands to include mowers. lawn use is manu- lawn mower for commercial in 1947. factured 1959 As demand for bicycles, mopeds and exper declines, Husqvarna’s motorcycles tise in engines leads to new product - 1959 marks the start of the produc areas. tion of chainsaws. 1968 is cutter power first Husqvarna’s chainsaw. a redesigned Lightweight yet powerful engines give worldwide as the Husqvarna a reputation of the most successful track producer bikes. The opera- racing and motocross tion is divested in 1987. 1918 1903 1 8 7 4 Kitchen equipment

rifles machines. producing producing opportunity / Weapons factory / Sewing machines / Bicycles / Kitchen equipment 1872–1997 1872–1997 Sewing machine –1989 –1962

– 1 9 7 8 1689 takes When Swedish weapons production is hydropower in the late 17th century, off needed to handle certain mechanical operations. The drill works at the water falls in Huskvarna in southern Sweden is shot- last The facility. production first the in 1989. gun is produced 1872–1997 for machinery The The operation is divested in 1997. 1 8 7 4 turns out to be well suited for manufacturing sewing expands to kitchen equip- Production such as meat grinders ment in cast iron stoves and ovens. Husqvarna’s and later, a huge export success meat grinders are with over 12 million sold worldwide. 1896 Husqvarna bicycles become very popular The last registered. and many patents are in 1962. Husqvarna bicycle is produced 122 / Annual Report 2019 / Husqvarna Group user-centered solutions user-centered For 330 years, curiosity and passion for innovation have led to a long line of of line a long to 330 led For curiosity have years, innovation passion and for successful products very in solutions and weapons, different – from areas products outdoor power market-leading to motorcycles and machines sewing customers Husqvarnafor constantly the globe. Group around looks better for push the industryways to a difference forward those who shape to make and leadership spaces in through green urban and environments Turning technology Turning into into –1989 –1989

1689 Weapons factory Weapons

Heritage Heritage

, satellite- ™ 2019 EPOS based technology

2018 lawn mower Four-wheel drive Four-wheel professional robotic robotic professional

. ®

/ Professional robotic / New generation professional professional generation New / / Gardena Smart System / EPOS™ 2016 auto- and connected first market’s The mated system that integrate garden lawnmoving, is watering and robotic launched. 2017 chainsaws The launch of a new generation of chainsaws designed for the most demanding, users begins with the Husq- professional varna 572 XP 2018 lawn mowers lawn mowers Husqvarna launches robotic use, including designed for professional four-wheel-drive. with first the 2019 Introducing Husqvarna EPOS™ Husqvarna EPOS™ Introducing System), Operating (Exact Positioning a satellite-based technology that enables robotic mowing with virtual boundaries. 2017 chainsaws New generation controlled dem- controlled

performance as pet- products products 2016 System / Demolition robot Demolition / / AutoTune™ / Chainsaw chain / Powerful battery productsbattery Powerful / / Expanded presence in China Chainsaw chain and Gardena Smart and Gardena 2008 through in China is increased Production new a and Feng Jenn of acquisition the facility. production 2009 remote- first Husqvarna’s is launched. olition robot 2009 is a technological and envi- AutoTune™ in professional breakthrough ronmental fuel, of flow the regulates It chainsaws. optimizing performance and minimizing emissions. 2012 battery Husqvarna’s demonstrate similar but without machines, the rol-powered emissions. noise and direct 2016 chain, saw proprietary first Husqvarna’s was launched. Its excellent cutting X-CUT, performance optimizes the chainsaw experience.

doubles in size 2012 products 123 / Annual Report 2019 / Husqvarna Group Powerful battery powered robotic mower. mower. robotic powered ® acquisition of Diamant Boart.

/ Watering equipment and and equipment Watering / / Robotic lawn mower / Stocklisted / X-Torq / Diamond tools Diamond / robot 2009 2006 2007 cing fuel consumption and emissions. Husqvarna is listed on Nasdaq Stockholm. Japan expansion in Zenoah The acquisitions of Gardena, brands, and Klippo bring strong and complementary products geographic expansion. New engine technology for two-stroke New engine technology for two-stroke gear ratio while redu- engines increases 1995 com- first world’s the pioneers Husqvarna solar- mercialized 2002 2005 The construction business the through Demolition - 9, Annual General Meeting January–March Report Interim June January– Report Interim January–September Report Interim October Friday, and dividend the of part first the for 2020 9, The last day for trading in Husqvarna AB shares with a right to The last day for trading in Husqvarna AB shares see For information on how your personal data is processed, April 2 April 24 16 July October 20 Financial calendar 2020 calendar Financial Dividend year financial for dividend a proposed has Directors of Board The firstly installments, two in paid be to share per 2.25 SEK of 2019 record first the as 2020 6, April Monday, with share per 0.75 SEK October 6, 2020 as with Tuesday, secondly SEK 1.50 per share day, in accordance Assuming the resolves AGM day. the second record the estimated date for pay proposal, of Directors’ with the Board Sweden AB is Thursday, Euroclear ment of the dividend from April 2020 for the second part. day last The 2020. 2, April Thursday, is dividend the of part first the with a right to the second part for trading shares in Husqvarna AB October 2, 2020. of the dividend is Friday, noticebolagsstammor- www.euroclear.com/dam/ESw/Legal/Privacy- engelska.pdf - - 124 / Annual Report 2019 / Husqvarna Group

By telephone at +46 36 14 70 10 between 9:00 a.m. By telephone at +46 36 14 70 10 between 9:00 and 4:00 p.m. weekdays. Sweden AB, By post to Husqvarna AB, c/o Euroclear Box 191, SE-101 23 Stockholm, Sweden. P.O. Notify the Company of their intention to attend, stating the number of assistants attending no later than (maximum two), 27, 2020. March Friday, At www.husqvarnagroup.com. Be registered in the register of shareholders maintained by of shareholders in the register Be registered 27, 2020. March Sweden AB as of Friday, Euroclear Notice should include the shareholder’s name, social security Notice should include the shareholder’s tele and address number if any, number or company registration To participate in the AGM, shareholders whose shares are nomi are whose shares participate in the AGM, shareholders To in temporarily registered must have their shares nee registered that such ensure To 27, 2020. March their own name on Friday, 27, 2020, shareholders March is made prior to Friday, registration must inform the nominee well in advance of this date. Shares registered by nominees registered Shares phone number. Information provided together with the notice will Information provided phone number. and will be used solely for the be made subject to data processing in which case a power may vote by proxy, 2020 AGM. Shareholders of attorney must be submitted AB prior to the to Husqvarna AGM. • • • Notice of participation of Notice Notice of intent to participate can be given: • Participation who intend to participate in the must: AGM Shareholders •

The 2020 Annual General Meeting (“AGM”) of Husqvarna AB (publ) will will (publ) AB Husqvarna of (“AGM”) Meeting General Annual 2020 The Congress 2020 April 2, theat Elmia on Thursday, 4:00 at be held p.m. Sweden. Jönköping, 15, Elmiavägen Hall, Hammarskjöld Center, 2020 Annual General Meeting General Annual 2020

Annual General Meeting 2020 Contact CHAPTER 01 / 08

Johan Andersson Investor Relations [email protected] Shaping great +46 8 738 90 00 Åsa Larsson Media Relations experiences [email protected] +46 8 738 90 80

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