Fairway cutting area HUSQVARNA GROUP ANNUAL REPORT 2019 GROUP ANNUAL REPORT HUSQVARNA Fairway cutting area 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 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. 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 — Introduction 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 Husqvarna Group at a glance a at Group Husqvarna • 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 con- crete 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 products. The undisputed market leader in robotic lawn mowers. Share of Group net sales Husqvarna Group at a glance a at Group Husqvarna 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 — Introduction 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