Annual Report 2015 R e s p e c t i n g n a t u r e – c a r i n g f o r p e o p l e The year and operations Board of Directors’ Report Financial statements Other information Husqvarna Group in brief A global leading producer of outdoor power products Husqvarna Group is a global leading producer of outdoor power products for forest, park and garden care. Products include chainsaws, trimmers, robotic lawn mowers and ride-on lawn mowers. The Group is also the European leader in garden watering products and a global leader in cutting equipment and diamond tools for the construction and stone industries. The Group’s products and solutions are sold under brands including Husqvarna, Gardena, McCulloch, Poulan Pro, Weed Eater, Flymo, Zenoah and Diamant Boart via dealers and retailers to consumers and professionals in more than 100 countries. Net sales in 2015 amounted to SEK 36bn and the Group has more than 13,000 employees in 40 countries. Divisions Husqvarna Gardena A global leader with a broad and innovative Share of Group A European leader in garden watering and Share of Group range of premium outdoor products such as net sales hand tools. The leadership position is built net sales chainsaws, trimmers and mowers for forest, park on offering innovative products based on and garden care. Products are sold to profession- consumer insight driven design and a strong als and demanding consumers through servicing 49% brand recognition among the passionate 13% dealers in more than 100 countries. Brands gardeners. Products and solutions are mainly include Husqvarna, Zenoah and Jonsered. sold at leading retailers. Consumer Brands Construction Targets the broader mass consumer segments Share of Group A global leader in professional equipment Share of Group in the forest and garden areas with a wide net sales and diamond tools for cutting and drilling in net sales product offering. Brands include PoulanPro, concrete, stone, masonry, tile and asphalt. McCulloch, Flymo and WeedEater and the Brands include Husqvarna for the construction products are sold mainly in North America 27% industry and Diamant Boart for the stone 11% and Europe at leading retailers. industry. The division is represented in more than 70 countries. The year and operations Board of Directors’ Report Financial statements Other information Husqvarna Group in brief Our offering Contents The year and operations 1 Husqvarna Group in brief Wheeled products 4 Report by the President Products that facilitate efficient 6 The year in summary everyday lawn care – riders, 7 Financial goals garden tractors, zero-turn 10 Strategy mowers, lawn mowers, tillers 16 The market and snow throwers to be used in 20 Husqvarna Division your own garden or in parks and 22 Gardena Division larger green spaces. 24 Consumer Brands Division 26 Construction Division 30 Sustainable and responsible business Board of Directors’ Report Handheld products Electric products 35 Content financial information 36 Report by the Board of Petrol-powered chainsaws, A range of electric and Directors trimmers, leaf-blowers, brush battery-powered wheeled and 44 Risk management cutters and similar products for handheld products as well as 48 Corporate Governance professional forest and green robotic lawn mowers. Choose Report space care, or for maintaining from powerful machines for 54 Internal control over your own garden. professional use or products financial reporting relevant for consumers. 56 Board of Directors and Auditors 58 Group Management Financial statements Watering and garden 60 Financial statements – Group hand tools 60 Income statement 61 Comprehensive income A wide selection of watering statement solutions and hand tools for a 62 Balance sheet well-kept garden such as water 63 Cash flow statement hoses, couplings, sprinklers, water 64 Statement of changes in controls, pumps and various kinds equity of hand tools for trimming, cutting 65 Notes and pruning. 90 Financial statements – Parent company 90 Income statement 90 Comprehensive income statement 91 Balance sheet Construction products 92 Cash flow statement Equipment to cut, drill, grind and finish as well as products for the 93 Statement of changes in demolition of concrete, steel and other hard materials used by equity the stone industry for renovation and construction of commercial 94 Notes buildings and infrastructure projects. 101 Declaration by the Board of Directors and the President and CEO 102 Auditor’s Report Other information 103 Definitions 104 Five-year review 105 Quarterly data Accessories and parts 106 The share 108 Heritage To go with our products, we also offer accessories and parts that 110 Annual General Meeting 2016 facilitate, improve or enhance their 112 Contact use. These include everything from The formal Annual Report and the lubricants to safety equipment and consolidated accounts are included on clothing. pages 36-101. Annual Report 2015 Husqvarna Group 1 The year and operations Board of Directors’ Report Financial statements Other information Husqvarna Group in Brief The world of Husqvarna Group Urbanization and the longing for a better future is a global megatrend that is shaping the world. One hundred years ago, there were only 12 cities with more than one million people and now there are 500, most of which are in Asia. This puts stress on the environment, but it is also a possibility to reduce poverty. For the first time in history, a global middle class is emerging. This is an opportunity, but also a challenge, since we are already facing resource scarcity on the planet. 2 Annual Report 2015 Husqvarna Group The year and operations Board of Directors’ Report Financial statements Other information Husqvarna Group in Brief With a rising middle class moving into cities, people’s interest At Husqvarna Group, we envision a world where people in caring for green spaces is expected to increase. Parks and can enjoy well-maintained gardens, parks and forests and green spaces play an important role in urban environments, experience refined buildings and roads. Our contribution is to providing a multifaceted set of environmental services provide professionals and consumers around the world with such as reducing water run-off and improving air quality by innovative quality products and solutions to make garden, park absorbing airborne pollutants. Many urban green spaces also and forest care as well as construction easier. have significant positive health effects by reducing stress and Respect for nature and caring for people guide us when we anxiety and encouraging people to exercise. As urban areas innovate. For many years, we have been focusing on innova- continue to grow, so will the importance of providing green tion, ergonomics and technologies that make petrol-powered spaces. Unlike many other areas of the city, gardens and parks products more energy-efficient and result in lower emissions, require more regular maintenance to benefit the community. as well as developing battery-powered products with petrol performance, but with lower noise and fewer vibrations. Annual Report 2015 Husqvarna Group 3 The year and operations Board of Directors’ Report Financial statements Other information Report by the President Strong performance during the first year with our new organization Husqvarna Group had yet another year of solid increases in operating income and margins with contributions from the Accelerated Improve- ment Program through cost improvements and selective growth in product leadership areas. 2015 was also a year of major change for the Group as we introduced a new organization. Along with the completed improvement program, this gives us a strong foundation to build on in our journey to reach the full potential of market leadership in 2020. ince 2015, the Group has been operating under a new percent drop in volume and unfavorable currency impacts, organization. The brand-based divisions focus on their specific earnings were higher than in the previous year. This is a strong sign Send-customer segments’ needs and respective business of the turnaround case for Consumer Brands, which aims to reach models. This is our solution to combine distinct focus with the a 5 percent operating margin by 2018. The turnaround will include breadth and strength of the Group. The new structure empowers a range of actions such as product cost improvements, changes each division through operational resources, accountability and in manufacturing footprint, more efficient logistics as well as global profit and loss responsibility with a clear focus on executing adjustments within sales and administration, and it will also require their strategies. a consistent business model execution over several years. But there are strategic synergies in acting as one group as well Finally, the Construction Division enjoyed another year of steady since there are important dependencies between the divisions. progress with growing sales, income and margins. In particular, in Husqvarna depends on Consumer Brands to provide sourcing the North American market, sales developed favorably. Continued and manufacturing to enjoy scale advantages, while Consumer investments to secure efficient products for our end-users and a Brands will benefit from innovation and technology developed high level of local service are paying off. in Husqvarna. Exploited correctly, this should give the Group a competitive advantage. Proud of our achievements to date Increased focus and capturing vital scale synergies will support Both 2014 and 2015 have shown the impact of selling more of us in achieving long-term profitable growth and maintaining our the right products to drive improved gross margin through strategic direction, and also help us realize our goal of market product mix. It has also shown the success of another part leadership by 2020. of the A ccelerated Improvement Program – direct material Three of our divisions, representing about 70 percent of total cost reductions. These excellent results were partly offset by Group sales, are performing above the Group target margin level unfavorable changes in exchange rates. In 2016, currency will be a of 10 percent, while Consumer Brands has yet to break even.