* Q2 operating profit 1.12 bln SEK, above consensus fcast
* Says consumer demand is likely to remain low
* U.S. consumer goods market maybe reached bottom -CEO
* Sees somewhat lower shipments in Q3 vs year-ago
* Sees margin hurt by unfavourable sales mix in Q3
(Adds detail, analyst, share price)
By Victoria Klesty and Anna Ringstrom
STOCKHOLM, July 17 Garden and construction tool
maker Husqvarna (HUSQb.ST) posted a slightly smaller drop than
expected in second-quarter profit on Friday as consumer product
sales in the United States rose despite the global recession.
Husqvarna said shipments in the third quarter -- just as in
the second quarter -- would drop somewhat year-on-year as the
global economic downturn kept hurting demand for lawn mowers and
hedge cutters as well as chainsaws and power cutters.
"Uncertainty remains regarding shipments due to the
recession. Consumer demand is likely to remain low and retailers
are expected to continue to focus on maintaining inventories at
low levels," it said.
Chief Executive Officer Magnus Yngen told Reuters that while
the European market for its consumer goods -- it's biggest
business before professional goods -- may continue to decline,
the U.S. market may have reached bottom. "I think we see that it
is bottoming out," he said.
Husqvarna reported operating income of 1.12 billion Swedish
crowns ($143 million), compared with a year-earlier 1.32 billion
and a forecast for 1.09 billion in a Reuters poll from July 14.
Yngen said Husqvarna had taken market shares in the U.S. and
had no plans for further major savings programmes.
"The decline in operating income refers to lower volumes,
particularly for Professional Products, as well as a less
favorable product/country mix. Pricing in the quarter remained
stable in both Europe and North America," Husqvarna said.
"Cash flow showed a continued positive trend, and our
efforts to reduce inventories and accounts receivables have paid
MARGIN PRESSURE IN Q3
Sales in April to June -- the firm's most important quarter
as it marks the start of the gardening season -- fell 7 percent,
adjusted for changes in exchange rates and acquisitions, to 11.5
billion crowns, versus a forecast for 11.6 billion.
Husqvarna warned third-quarter operating margins would be
hit by an unfavourable product mix as mass-market consumer
products would make up a larger share of group sales, while the
share of higher-margin professional products would be lower.
Evli Bank analyst Michael Andersson said the report was
overall good news, with consumer goods sales in the Unites
States unexpectedly rising for the third consecutive quarter.
"That must be seen as a sign that market has hit bottom.
Consumer products were also up in Europe."
Shares in Husqvarna however fell, by 5 percent to 44.50
crowns at 0842 GMT. A trader said a surprisingly strong report
by Swedish appliances maker Electrolux (ELUXb.ST) on Thursday,
helped by lower raw material costs, had pushed up investors'
hopes for Husqvarna. [ID:nSAF000044]
"Hopes grew Husqvarna may have earned as much from the (raw
materials) price change. It (the share) is now back to roughly
where it was before the Electrolux report," the trader said.
Evli's Andersson said professional products disappointed
with its 23-percent decline in sales. "That is because of
weakness in their construction segment. They also say this will
be sustained in the third quarter and hurt margins."
Husqvarna estimates that more than nine-tenths of the world
market for its products is located in North America and Europe,
where customers have grown increasingly wary due to the economic
($1=7.818 Swedish crowns)
(Editing by Mike Nesbit)