UPDATE 2-Husqvarna sees flat Q2 sales amid market caution

Tue Apr 27, 2010 7:19am EDT

* Q1 op profit 778 million crowns versus f'cast 779 million

* Market uncertainty remains, but sales rose at end of Q1

* Says inventories of products slightly lower vs year-ago

* Shares up 1.7 pct to 57.75 crowns

(Adds analyst comment, share price, detail)

By Katarina Gustafsson and Niklas Pollard

STOCKHOLM, April 27 (Reuters) - Garden and construction tool maker Husqvarna AB (HUSQb.ST) forecast flat sales year-on-year in the second quarter as lingering market uncertainty and retailer caution held back growth.

Demand for gardening products was pummelled by the economic downturn last year and retailers on both sides of the Atlantic have been careful about scaling up inventories amid lingering doubts over the strength of the recovery in consumer spending.

"In light of the late start to the season and the expectation of (better retail sales)... it is estimated that Husqvarna's sales in the second quarter will be in line with the second quarter of 2009 despite reduced listings in North America," the company said on Tuesday.

Shares in Husqvarna were up 1.7 percent at 57.75 crowns by 1118 GMT, virtually unchanged from before the report. They were outperforming a 0.75 percent decline in the Stockholm bourse's blue chip index .OMXS30.

"In terms of the guidance for Q2, I think it was a bit light. It was better than consensus estimates, but I had expected a little bit more," said an analyst who asked not to be identified.

Husqvarna, which makes lawn mowers, chain saws and other garden equipment as well as diamond-tipped tools for the construction industry, has rushed to cut costs in the face of the downturn, shedding more than 1,000 jobs since 2008.

The group posted operating profit of 778 million crowns ($108.3 million) versus a year-ago 786 million and a mean forecast of 779 million seen in a Reuters poll of analysts.

However, the results were dented by a charge of 50 million crowns for settlement of a U.S. lawsuit, Husqvarna said. Analysts had expected non-recurring costs of on average 22 million crowns in the period.

"The year had a slow start due to an unusually long and cold winter in several markets," the company said.

"The weather affected (sales to retailers) ... for the garden season and activities in the construction market. However, sales picked up and increased considerably towards the end of the quarter."

The group, spun out of white goods group Electrolux (ELUXb.ST) in 2006, said sales fell to 9.1 billion crowns from 11.2 billion a year ago, lagging the 9.5 billion seen by analysts.

Husqvarna said it would book a 50 million crown charge in the second quarter for the closing of a plant for construction gear in Greece and restructuring in Belgium, measures that were seen generating annual savings of 20 million from 2012. (Editing by David Holmes, Mike Nesbit) ($1=7.187 Swedish Crown)