Risks and uncertainty factors
A number of factors may affect Husqvarna Group’s operations in terms of operational and financial risks. Operational risks are managed by the operative units, and financial risks by Group Treasury.
Operational risks include general economic conditions, as well as trends in consumer and professional spending, particularly in North America andEurope, where the majority of the Group’s products are sold. An economic downturn in these markets may have an adverse effect on Group sales and earnings. Shifts in product technology as well as shifts in distribution structure could also have a negative impact on Group sales and earnings.
Demand for the Group’s products is also dependent on weather conditions. Dry weather can reduce demand for such products as lawn mowers and tractors, but can stimulate demand for watering products. Demand for chainsaws normally increases after storms and during cold winters.
Husqvarna Group’s operations are also subject to seasonal variations. Demand for consumer garden products and commercial lawn and garden products normally peaks in the second quarter, while the peak season for chainsaws is normally in the third quarter. The Group has adapted its production processes and supply chain to respond to these conditions. However, parameters such as cash flow and production levels follow the seasonal variations in demand, which results in relatively greater risk exposure for the Group over short periods of time.
The Group is currently implementing a number of structural changes as well as an adjusted organization. Restructuring and organizational changes always involve the risk of creating higher costs than anticipated and loosing key personnel.
Financial risks refer primarily to exchange rates, interest rates, financing, and credit risks. Risk management within the Husqvarna Group is regulated by a financial policy established by the Board of Directors. A higher indebtedness resulting from the seasonality of the Group’s operations involve greater exposure to changes in exchange rates and interest rates, as well as financing risks.
Husqvarna Group has completed a number of acquisitions. Although the Group has historically demonstrated ability to successfully integrate acquired businesses, such integration always involves certain risks. Net sales can be adversely affected and costs can be higher than anticipated.
For more information on risk factors and risk management, see the Annual Report 2012.