February 4, 2020 / 7:27 AM / 14 days ago

Power tools group Husqvarna in the red as U.S. retailers trim inventories

STOCKHOLM (Reuters) - Husqvarna (HUSQb.ST), the world’s biggest maker of gardening power tools, was in the red in the fourth quarter with a bigger than expected operating loss as it said sales in the United States were hit by retailers reducing inventories.

The company, which appointed a new CEO last month, had returned to profit in the third quarter of last year, as restructuring and efficiency measures helped it get back on track after a tough 2018.

However, the rival to Deere & Company, Black & Decker (SWK.N), Honda Motor (7267.T) and Fiskars (FSKRS.HE) has been hit by weakening demand in North America.

Shares in the company fell nearly 4% after it reported a fourth-quarter operating loss of 493 million crowns ($51.2 million). That was smaller than a loss of 1.10 billion crowns a year earlier but was bigger than analysts’ forecasts for a 349 million crown loss, according to Refinitiv estimates.

The company sold some unprofitable businesses last year, and in November flagged more cost cuts and exits in 2020.

The world’s biggest maker of robotic lawn mowers, garden watering systems and garden tractors, and the No.2 in trimmers and chainsaws, does the bulk of its business toward the end of the first quarter and in the second - ahead of and during the peak gardening season in the northern hemisphere.

“The seasonal order situation and readiness are in line with the plans for the year,” said Chief Executive Kai Warn, who is stepping down in April and handing over to company veteran Henric Andersson.

Warn warned that as the company sources components in China, it could start to be affected by the impact of the coronavirus if the virus continues to spread.

“Based on the current status of information, we do not foresee any significant business disturbances related to the Corona virus outbreak, if component supply is normalized during the next few weeks, whereas it might become material if they remain in March,” he said, without elaborating further.

In the fourth quarter, European demand was good while the United States, its biggest market, was weak.

“The market development in Europe was favorable, with good growth for robotic lawn mowers and battery products, while the market was weak in the U.S., particularly for the wheeled segment, as trade partners continued to lower their inventories,” it said.

Wheeled products includes walk-behind mowers and trimmers.

While petrol-engined products account for the bulk of Husqvarna’s sales, the group is betting on growing demand for battery-driven tools which are greener and less noisy.

Husqvarna proposed an unchanged dividend of 2.25 crowns per share.

Reporting by Anna Ringstrom; Editing by Simon Johnson and Susan Fenton

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