Risks and uncertainty factors

A number of factors can affect Husqvarna's operations in terms of operational risks and financial risks. Operational risks are managed by the operative units, and financial risks by the Group Treasury function.

Operational risks

Operational risks include general economic conditions and consumer spending, particularly in North America and Europe, where the majority of the Group's products are sold. An economic downturn in these markets may have an adverse effect on Group earnings.

Demand for the Group's products is also dependent on weather conditions. Dry weather can reduce demand for products such as lawn mowers and tractors, but can stimulate demand for irrigation systems. Demand for chainsaws normally increases after storms, and during cold winters.

Husqvarna's operations are also subject to seasonal variations. Demand for Consumer Products and Commercial Lawn and Garden normally peaks in the second quarter, while the peak season for chainsaws is normally the third quarter. Husqvarna has adapted its production processes and supply chain to respond to these conditions. However, parameters such as cash flow and production follow the seasonal variations in demand, which results in relatively greater risk exposure for the Group during short periods of time.

Financial risks

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. The higher indebtedness resulting from acquisitions as well as the seasonality of the Group's operations, involves greater exposure to changes in exchange rates and interest rates, and also affect the possibility of accessing capital.

Acquisitions

Husqvarna has completed a number of acquisitions during the past 12 months. Although the Group has historically demonstrated an 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 2008, page 34.