Share Watch: Husqvarna harvests a return from stress-free gardening

Think of it. You are stretched out on the sun lounger, a cool drink in your hand, when ‘the boss’ reminds you the grass needs cutting. “No sweat,” you respond. “Give us over that remote control and I’ll get that robot thingy started.”

Then you immediately forget about the garden and go straight back to the gin and Fever Tree tonic and John Grisham’s latest blockbuster. Life has become so less complicated since the invention of the robotic lawn mower – or so Husqvarna’s advertising goes.

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The Swedish group, our target company this week, has been pioneering robotic lawn mowers powered by solar batteries in the last five or six years and sales have been growing at around 20pc a year. Their potential in hotels, sports fields and public parks is extraordinary, in spite of the fact you can pay up to €5,000 (Irish prices) for a top-of-the-range model. With North America becoming a growth opportunity for the company, robotic lawnmowers are assuredly becoming Husqvarna’s future.

It is an interesting company with an impeccable background in mass-market engineering. It is currently a leading producer of outdoor products for gardens, forests and parks and also a leader in hand power tools for the construction industry. Its brands – Husqvarna, Flymo (UK), McCulloch and Diamant Boart – are sold through more than 25,000 independent dealers worldwide, with Europe accounting for half of sales and North America one-third.

The company goes back as far as the late 17th century when it made muskets and shotguns which it continued to do for nearly 300 years. It extended into things like sewing machines, bicycles, cast iron pots, foods grinders, stoves and motorcycles.

In 1978 it was acquired by the giant Electrolux group but after almost three decades it was offloaded and listed on the Swedish stock exchange. Today the company is HQ’d in Stockholm, has a presence in 100 countries, employs 13,000 and is valued by the stock market at €4bn.

Using its expertise in engines, Husqvarna became a serious player in the motorbike business during the early 20th century. Ireland’s great pre-war motor racing hero Stanley Woods used a Husqvarna in a Isle of Man TT race. In the middle of the century the company successfully launched an engine driven lawnmower. A decade later, following the decline of its motorbike business and using its engine technology, it developed the chainsaw specifically for forestry and tree care. Forestry and lawnmower products today account for 80pc of total sales.

The group has three business units: Husqvarna, Gardena and construction. The first is the core of the company and accounts for two-thirds of revenue with products like lawnmowers, chain saws, hedge trimmers and leaf blowers. However the market is highly competitive with brands like Honda, Black and Decker and Stihl.

Gardena produces quality garden tools like secateurs, hoses, digging tools and water pumps and accounts for 20pc of group sales mostly (95pc) to Europe. Its smallest unit is construction products for professionals, like power cutters, floor tile and masonry saws and grinding machines. It has a solid market position showing continuous growth in the last decade.

Last year was a disappointing one, a set back from recent years of growth. Group sales of €3.8bn saw a small increase but operating profits decreased to €0.3bn with margins falling a fifth to 8pc. This was due to raw material costs, US tariffs and some financial headwinds.

Its shares are up more than a third from its yearly low and now trade at €7, just short of its five-year high of €8.50 earlier this year. Husqvarna shares are worthwhile, however in today’s challenging environment and investors are heading for defensive stocks.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.

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