July 16, 2014 / 6:37 AM / 3 years ago

UPDATE 1-Early European spring, cost cuts boost Husqvarna Q2 profit

* Q2 op income 1.38 bln SEK vs forecast 1.24 bln

* Sales, profits rise in all business areas

* Q2 op margin rise to 12.5 pct

* Says comparisons growing tougher in Q3 (Adds detail, background)

STOCKHOLM, July 16 (Reuters) - Outdoor equipment maker Husqvarna posted a bigger than expected rise in earnings in its seasonally key second quarter as an early spring spurred demand in Europe and cost cuts lifted profitability.

The second quarter is key for Husqvarna, the world’s biggest maker of outdoor power tools such as lawn mowers and trimmers, as the gardening season moves into top gear on both sides of the North Atlantic, where it chalks up nearly all its sales.

Operating profit at Husqvarna, which is seen generating more than half its full year profit in the second quarter, rose to 1.38 billion crowns ($202 million) from a year-ago 1.02 billion to top a forecast of 1.24 billion in a Reuters poll of analysts.

The Swedish company said strong demand, above all in Europe where a favourable weather added impetus, and cost cuts across the group had lifted earnings, but added a note of caution concerning the current quarter.

“From a demand perspective the third quarter may be more challenging in terms of comparison with prior year, as 2013 benefited from a favourable garden season,” Chief Executive Kai Warn said in a statement.

Husqvarna is in the midst of a drive to boost its operating margin to 10 percent in 2016 and turn the corner on problems in its North American business that was hit by a botched move of production and rising cost for deliveries to retailers.

“The positive signs in the first quarter have all trended into the second quarter; the reduction of direct material costs is sustained and we are driving favourable mix by prioritizing our premium brands,” Husqvarna said.

The company, a rival of Stanley Black & Decker, Deere and Toro, said its operating margin rose to 12.5 percent from 10 percent a year ago with its Americas unit lifting its profitability to 5.0 percent from 3.7 percent.

Profitability at the group hits a seasonal high in the second quarter and its operating margin stood at 5.3 percent for the full year of 2013. ($1 = 6.8236 Swedish Crowns) (Reporting by Niklas Pollard and Helena Soderpalm; Editing by Alistair Scrutton)

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