Husqvarna stock drops after reporting decline in Q4 organic growth

Investing.com -- Husqvarna’s (ST:HUSQb) stock dropped by 7% on Wednesday after the company reported a decline in organic growth for the fourth quarter of 2024. 

The Swedish company reported net sales of SEK 8,464 million, marking a 2% decrease year-on-year and a 3% decline in organic growth. 

This result largely mirrored the preliminary figures shared earlier after a profit warning. The company also saw a significant drop in its profitability, with adjusted EBIT falling to SEK -694 million, a sharp decline from SEK -168 million in the same period last year. This led to a margin of -8.2%, compared to -1.9% in the fourth quarter of 2023.

Growth was seen in certain product categories, including wheeled and handheld items, as well as battery-powered products and parts and accessories. 

However, sales in the company’s watering products and robotic mowers took a hit, with robotic mower sales dropping around 11% to SEK 7.2 billion for the full year.

Analysts at Jefferies pointed to the decline in sales for key products as a significant factor behind the overall downturn in performance.

The drop in profitability was attributed to several challenges, including lower sales volumes, increased promotional activities, reduced production capacity utilization, and an unfavorable product mix. 

However, Husqvarna did manage to offset some of these pressures with cost savings amounting to SEK 145 million. 

In an effort to improve efficiency in its North American operations, the company also announced plans to divest its manufacturing facility in Orangeburg, South Carolina, to Flex (NASDAQ:FLEX) Ltd. 

This move, which will see Flex Ltd. take over production of Husqvarna Forest & Garden products under a long-term agreement, is expected to yield SEK 350 million in savings over five years, despite one-time costs of SEK 250 million in the fourth quarter of 2024 and additional costs in the first quarter of 2025.

The fourth-quarter results varied across Husqvarna’s different segments. The Forest and Garden division reported net sales of SEK 5,332 million, up 1% year-on-year, though it showed no growth organically. 

Meanwhile, Gardena, Husqvarna’s irrigation division, saw a 5% year-on-year drop in net sales, with organic sales down by 8%. 

Husqvarna’s construction division also faced struggles, with sales falling 8% year-on-year to SEK 1,820 million, and organic growth down by 9%.