Husqvarna: Orangeburg Production Problems Cost $55 Million
Oct 21, 2011
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Outdoor power equipment OEM Husqvarna AB reported that third quarter 2011 net sales, adjusted for exchange rate effects, were down 2%. Net sales were SEK 6,410 million (approx. US$965 million), down from SEK 6,907 million, and operating income for the quarter was SEK 113 million, down from SEK 411 million in 3Q 2010. Income for the 3Q period was SEK 55 million, down from SEK 402 in 3Q 2010.
Third quarter operating income was negatively affected by SEK -83 million. SEK 38 million (approx. $5.7 million) was directly related to production disturbances, SEK 21 million related to the termination of the former CEO’s contract, and SEK 24 million came from items affecting comparability. Changes in exchange rates had a positive effect of SEK 8 million.
Net sales for the group in the first nine months of 2011, adjusted for exchange rate effects, increased by 1%. Net sales for the Group amounted to SEK 25,363 million in the first nine months, compared to SEK 27,446 million in the first nine months of 2010. Operating income was SEK 1,787 million in the first nine months of 2011, compared to SEK 2,508 million in the first nine months of 2010. Income was SEK 1,220 million in the first nine months of 2011, compared to SEK 1,873 million in the first nine months of 2010.
In the first nine months of 2011 operating income was negatively affected by SEK -453 million, most of it the result of production problems Orangeburg, SC. Production problems accounted for SEK 368 million (approx. $55.4 million), SEK 21 million related to the termination of the former CEO’s contract and SEK 64 million referred to items affecting comparability. In addition, changes in exchange rates had a negative effect of SEK -335 million.
Early in the year Husqvarna said the Orangeburg riding mower manufacturing campus was having significant problems - described as an "increase in material complexity" – as it assimilated production from a recently closed Beatrice, NE plant and accommodated an ambitious number of new product launches.
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’s consumer business has been affected by the slowdown in the global consumer demand, the uncertain economic environment, and the unfavorable weather," said Acting CEO and President Hans Linnarson. "Operating income for the third quarter declined, mainly as a result of lower sales, unfavorable mix, and higher costs. We have maintained our market positions for forest and garden products both in Europe and North America, despite the supply chain challenges in North America. In some categories, like ride-on and robotic mowers in Europe, we have significantly increased our market shares."
Linnarson said that, in the first nine months of the year, sales in Europe & Asia/Pacific and Construction segments increased and sales in the Americas decreased, adjusted for exchange rate effects.
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