Problems at Orangeburg Hurt Husqvarna's 1Q Results
Apr 11, 2011
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Husqvarna's Orangeburg, SC riding mower manufacturing campus has had significant problems in recent months, and those problems had a direct impact on the company's bottom line in the first quarter of 2011.
Orangeburg is dealing with an "increase in material complexity" at the same time it is trying to assimilate the production from the recently closed Beatrice, NE plant and accommodate an ambitious number of new product launches.
Husqvarna said it has made fixes and production did increase gradually during the first quarter - but so did the costs associated with this fixes. Production output should increase into the second quarter but higher manufacturing costs will be higher throughout the season.
Husqvarna is one of the world's biggest makers of outdoor power equipment and the Orangeburg plant primarily produces riding lawn mowers for the North American market; some exports go to Europe and other global markets.
Husqvarna said first quarter 2011 sales and operating income for the Americas were lower than had been expected as a result of the Orangeburg problems.
For the Husqvarna Group as a whole, adjusted sales were up 6% and adjusted operating income was up 7% when compared to 1Q 2010. Net sales for the group in 1Q 2011 were SEK 8,774 million (approx. US$1400 million) compared to SEK 9,082 million in 1Q 2010. Adjusted for exchange rates sales increased by 6% or by approximately SEK 490 million. Operating income for the group amounts to SEK 662 million, compared to 778 million in 1Q 2010. Adjusted for exchange rates income increased by 7% or approximately SEK50 million.
Net sales for Europe & Asia/Pacific amounted to SEK 4,541 million in 1Q 2011, compared to SEK 4,459 million in 1Q 2010. Adjusted sales increased 10% or by approximately SEK 400 million. Operating income for Europe & Asia/Pacific was SEK 815 million, compared to last year's SEK 732 million. Adjusted operating income increased 32% or by approximately SEK 200 million.
Net sales for the Americas were SEK 3,588 million in 1Q 2011, down from SEK 4,028 million in 1Q 2010. Adjusted for exchange rate effects sales were flat. Operating income for Americas amounts to SEK -94 million in 1Q 2011, compared to SEK 81 million in 1Q 2010. Adjusted for exchange rates, income declined by approximately SEK -175 million.
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