Financial Risks

The following sections highlight financial risk areas that are relevant to Husqvarna Group. 

General 
The Group’s financial risks are managed based on the Group’s financial and credit policies, which are updated annually and approved by the Board. Management of financial risks is based largely on the use of financial instruments and is mainly centralized within the Group Treasury function, which operates in accordance with specified risk mandates and limits. For more information on accounting principles and financial risk management and financial instruments, see notes 1 and 20. The Group is operating within and closely monitoring the difficult and volatile global macroeconomic climate and is robustly managing liquidity and potentially higher financial charges. 

Financing risk 
Financing risk refers to possible delays, increased costs or cancellations related to financing of the Group’s capital requirements and refinancing of outstanding debt. Risks are reduced by maintaining an evenly distributed maturity profile of loans, maintaining access to credit facilities, and ensuring that short-term borrowings do not exceed current liquidity. 

Interest-rate risk 
Interest-rate risk refers to the adverse effects of changes in market interest rates on the Group’s net income. The main factor determining this risk is the interest-fixing period. The interest-rate risk is managed by changing the interest from fixed to floating or vice versa using derivatives such as interest-rate swaps. 

Foreign exchange risk 
As Husqvarna Group sells its products in more than 100 countries, has production in approximately ten countries and sources raw materials and components from various countries across the globe, the Group is exposed to exchange-rate fluctuations. These fluctuations affect the Group’s earnings in terms of translation of income statements in foreign subsidiaries, i.e., translation exposure, as well as in the sale of products on the export market and purchases of materials in foreign currencies, i.e., transaction exposure and in terms of the translation of balance sheet items such as trade receivables and trade payables. Changes in exchange rates also affect Group equity. Assets and liabilities of foreign subsidiaries are affected by changes in exchange rates, generating translation differences that impact equity. To limit negative effects on Group results and equity resulting from transaction exposure and translation differences, part of the Group’s transaction exposure and net investments in foreign operations is hedged using foreign-exchange derivatives. 

Credit risk 
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s credit risks are managed based on standardized credit ratings, credit limits, active monitoring of credits and routines for follow-up of trade receivables. The need for reserves for doubtful trade receivables is monitored continuously. Major credit limits are approved annually by the Board. The Group also utilizes credit insurance to reduce credit risk in trade receivables. Given the difficult macroeconomic climate, the Group is being extra vigilant in relation to customer payment performance, the build-up of aged debts and the risk of bad debt. The Group’s financial assets are used primarily for the repayment of loans. Liquid funds are placed in highly liquid interest-bearing instruments issued by institutions with a credit rating of at least A–, according to Standard & Poor’s or similar agencies.

Tax risk 
Husqvarna Group operates in many countries and undertakes a great number of cross-border transactions. The operations are subject to complex national and international tax rules that change over time. Husqvarna Group, like many multinational companies, employs a centralized transfer pricing model based on the Group’s operating model with central Group functions and global divisions. The Group is seeing a change in the regulatory environment in which there is a higher risk that tax authorities may challenge such models, which could result in an increase in tax exposure both historically and going forward. As in many countries, restrictions on tax deductibility of interest expenses on intra-Group loans apply in Sweden. Under the Swedish rules applicable from January 1, 2019, interest is deductible only if the recipient is resident in an EEA (European Economic Area) country or in a country with which Sweden has concluded a tax treaty or provided it is taxed at a level of at least 10%. Nevertheless, if the debt is entirely or almost entirely created with the purpose for the Group to obtain a substantial tax benefit, deduction is denied. At present, it is not clear how these rules should be interpreted and if these restrictions on deducting interest expenses apply to Husqvarna Group’s internal debt structure. For this reason, the Group has made provisions to reflect potential exposure related to these restrictions.

Find more in the 2023 Annual and Sustainability Report