Husqvarna AB Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Fredrik Ivarsson - ABG Sundal Collier ASA - Analyst : Thank you so much. Good morning, gents. Few questions from my side. If we can start with what you said regarding the positive trend you saw throughout the quarter. Was this mainly a sign of, I guess, less pessimism among the retailers? Or is it also a reflection of stronger end consumer demand if you've seen anything of that? And also, if you can say anything about the market conditions through the start of Q2. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 24, 2024 / 8:00AM, HUSQb.ST - Q1 2024 Husqvarna AB Earnings Call

Question: Fredrik Ivarsson - ABG Sundal Collier ASA - Analyst : Yeah, I appreciate it. Thanks a lot. And second question on the changes you did in the US management team a while ago. You mentioned a need for strategic change, I suppose. Can you tell us more about this? What's going to be different going forward? And what went wrong historically or during the last couple of years?

Question: Fredrik Ivarsson - ABG Sundal Collier ASA - Analyst : Okay. So no real big changes in contrast to what we've seen already?

Question: Fredrik Ivarsson - ABG Sundal Collier ASA - Analyst : Okay, okay. Thanks. And last question from my side. On construction, can you tell us what kind of changes in mix you saw versus Q4, and how that impacted the margin? Because it was a little bit weaker than, at least, I expected. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 24, 2024 / 8:00AM, HUSQb.ST - Q1 2024 Husqvarna AB Earnings Call

Question: Fredrik Ivarsson - ABG Sundal Collier ASA - Analyst : Yup. Thanks a lot. That's all my questions.

Question: Gustav Hageus - SEB Equities - Analyst : Thanks. This is Gustav Hageus with SEB. Thanks for taking my questions. Could we start with sort of an update on your exits in US? How far along are you? What do you expect will be the facing now for the remaining quarters in the year? And how do you feel about the assortment you have now in your portfolio post those exits? That'd be helpful. Thanks.

Question: Gustav Hageus - SEB Equities - Analyst : So more to come in quarter two and then that more or less will draw it to an end and how you feel about your product portfolio into Haiti to after those exits. Are there also other categories which we could expect you to address at some point?

Question: Gustav Hageus - SEB Equities - Analyst : Okay. And on professional robotic mowing then, you had a comment here, 30 of the 50 top golf courses in the US now use some type of Husqvarna mower. Could you be a little bit more granular in terms of CEORA and actually cutting on fairways and so forth? What do you foresee? How are discussions going? And also, do you see the incumbents changing their assortment meaningfully and sort of trying to convert also into robotics? Or are you still breaking fresh grounds here? The competitive landscape would be interesting to get some points on.

Question: Gustav Hageus - SEB Equities - Analyst : And could you give us a sense of where Sweden was a year ago? You said 20% of golf courses now have Husqvarna. Where was it roughly a year ago?

Question: Gustav Hageus - SEB Equities - Analyst : And what are the main pushbacks outside of Sweden in terms of golf and others for you not to expand even faster?

Question: Gustav Hageus - SEB Equities - Analyst : Okay. I appreciate that. Thanks for taking my questions.

Question: Bj÷rn Enarson - Danske Bank - Analyst : Thank you. I have a question on the ongoing EV transition. I mean, that impacts, of course, the lawn mower segments and the handheld, et cetera. What are the long-term margin drivers there, do you say? I mean, obviously, right now, they are -- quite a positive mixed effect, especially on the loan mower side. But isn't it so that, generally, EV products have lower profitability if you look at other industries, et cetera? And maybe if you have some comments on that. And also perhaps, on the handheld side, where I guess that profitability right now, perhaps, is not better than the old products. Thank you.

Question: Bj÷rn Enarson - Danske Bank - Analyst : And on robotics, I mean, a little bit more long term, of course, there will be more of them -- more competition, et cetera, et cetera. And I guess, you're thinking about kind of a commoditization within this segment as well. Is focus then to drive more (inaudible) of profitability to add on new features and also to remain in the very high-end segment? Or don't you see that there might be a pressure on profitability within that segment looking at? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 24, 2024 / 8:00AM, HUSQb.ST - Q1 2024 Husqvarna AB Earnings Call

Question: Bj÷rn Enarson - Danske Bank - Analyst : Very interesting. Thank you. And one last question, if I may, on -- I would also assume that the aftermarket part plays a quite big role, especially on the professional side, although early in its launches. But the aftermarket must be a driver for profitability within that segment, I guess.

Question: Bj÷rn Enarson - Danske Bank - Analyst : Perfect. Thank you.

Question: Adela Dashian - Jefferies - Analyst : Yes, good morning. One question continuing on the topic of the professional robotic mowers, is there a life cycle difference in these products versus the ones that are for residential use that we should be aware of?

Question: Adela Dashian - Jefferies - Analyst : Precisely.

Question: Adela Dashian - Jefferies - Analyst : Longer than the other product segments or --?

Question: Adela Dashian - Jefferies - Analyst : Got it. Okay. And then I also noticed -- maybe a question for Terry. I noticed an uptick in the leverage here in the quarter. Do you feel comfortable at these levels, or is there a high likelihood that we will see lower levels for the remainder of the year as cash flow generation gets even stronger and inventories continue to get reduced (technical difficulty)?

Question: Adela Dashian - Jefferies - Analyst : Got it. Thank you.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Yes, hi. This is Johan at Kepler Cheuvreux. Sorry if I repeat some of the questions. I dropped out of the call for some period. On robotics, while we were on this subject, you said the full-year sales last year ended at, I think, SEK8.1 billion. Are we still on a rolling 12-month basis above SEK8 billion in sales?

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Okay. And then you mentioned that your underlying cash flow for Q1 last year would have been a negative SEK2 billion if you hadn't used the financing. That's, obviously, an improvement of SEK1 billion underlying in the quarter this year. Now how much did you use financing in Q2 last year, just to get the numbers right ahead of next quarter? Thanks.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Okay, good. And then looking at the US business, you mentioned that the Orbit brand and the Gardena brand are growing. And then you're exiting some other brands. Is the Gardena brand in the US growing from some building up of inventories within your new retail partner over there already? Or is that an impact to come in the coming quarters?

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Good. And then thinking about your brand strategy in the US, I think you previously sort of, many years ago, announced, okay, we will also allow the Husqvarna brand to be used with Lowe's, for example. But otherwise, we will keep it to the dealer channel rather. How is the brand strategy in the US working now with the several brands you have and now also the Gardena brand over there?

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Okay. And then you have introduced this Husqvarna platform on the 18-volt platform. Is that still primarily aimed for the dealer channel, or how do you position those products?

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Okay, good. And then just a final question. You announced acquisition of Total Diamond. Has the deal closed, or when is it supposed to close? Thank you.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : But you don't report any additional sales from it in the quarter, in the notes, what I can find.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Okay, good. Thank you. That's all.

Question: Karri Rinta - Svenska Handelsbanken AB - Analyst : Yes, thanks. Karri (technical difficulty). Just one question to save some time. This ongoing transformation from petrol to electrified, can you remind us of how much of your current sales comes from petrol-powered products? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 24, 2024 / 8:00AM, HUSQb.ST - Q1 2024 Husqvarna AB Earnings Call

Question: Karri Rinta - Svenska Handelsbanken AB - Analyst : Yeah, I know that, but how much is motorized and not motorized? So what I'm looking at is how much is petrol of overall sales.

Question: Karri Rinta - Svenska Handelsbanken AB - Analyst : Yeah. But it doesn't give me the number. Okay, fair enough. Then this ongoing transition, so is there a -- I mean, now you're actively pushing towards electrification and away from petrol-powered. But is there a certain natural point where this relationship will settle? Is it the -- two-thirds electrified, one-third of petrol-powered? So I think at that point, the petrol-powered has reached a sort of long-term steady state, or will it continue even beyond that point?

Question: Karri Rinta - Svenska Handelsbanken AB - Analyst : And then finally, do we need to get to the two-thirds electrified before the handheld battery is margin accretive, or can it happen earlier? And then secondly, once we are there, your remaining petrol-powered portfolio, will it have at least the same margins that you have today? Or have you lost so much volume that it will have lower margins than what you have today in your petrol-powered products?

Question: Karri Rinta - Svenska Handelsbanken AB - Analyst : All right. Thank you very much.