Regulatory News:
Electrolux (STO:ELUXA)(STO:ELUXB):
Maneuvering in a tough environment
The appliance market in the fourth quarter of 2011 remained very
competitive. The headwinds of price pressure, higher raw-material costs
and weak demand grew stronger as the year progressed. Despite this
challenging environment, we were able to generate an underlying
operating income of SEK 4 billion in 2011. Furthermore, we have taken
actions to increase prices, take out costs, acquire companies in
emerging markets and change the organization to strengthen the company’s
position as we entered 2012.
Already at the end of 2010, demand for appliances started to decline,
while costs for raw materials increased and prices for our products
began to decrease. This downward trend gained momentum as 2011
progressed, with rising raw-material costs and lower prices having a
headwind on results of more than SEK 3 billion in 2011. In this very
tough environment, we were able to generate an underlying operating
income of almost SEK 4 billion, which is above the level achieved in
previous years with similar conditions to 2011. At the same time we
generated a strong underlying cash flow, which is a result of our
intensified efforts to reduce working capital, which has enabled us to
maintain a strong balance sheet.
In 2011, we initiated and implemented a number of activities. We
finalized the acquisitions of the Egyptian company Olympic Group and the
Chilean company CTI. As a result of these acquisitions in combination
with the strong organic growth demonstrated by Electrolux in Latin
America, Southeast Asia and Eastern Europe, our pro-forma sales in
growth markets accounted for approximately 35% of total sales in 2011.
Decisions were taken to further adapt our production capacity in North
America and Western Europe in order to increase capacity utilization.
Actions were also taken to reduce overhead costs in line with the
current business environment. Furthermore, we are continuing our efforts
to enhance efficiency and reduce costs by capitalizing on our shared
global strength and scope. These efforts will generate a positive impact
at an escalating pace.
The Electrolux strategy to develop innovative and thoughtfully-designed
product solutions based on end-user insight was strengthened in 2011
through the establishment of “the Innovation Triangle” in Group
Management. The new and strengthened roles for the R&D, Marketing and
Design functions will generate synergies throughout the product-creation
process, with an even clearer focus on customers and consumers. This
will enable Electrolux to take more relevant, innovative product
solutions to market at a faster pace.
We are continuing to launch new products and the introduction of new and
innovative products under the AEG brand received strong market response.
In Latin America, we began to harvest the rewards of the new products
launched in early 2011. 2012 will be an intensive launch year, which
will require increased investments in marketing and product development.
While we expect the trend going forward to shift in a more positive
direction in the form of gradual improvements in prices, mix and lower
costs, we do not anticipate that demand in mature markets will recover
in the first half of 2012. However, there could be a certain degree of
improvement in the US market by the end of 2012, supported by a modest
growth in the housing market.
As we find ourselves in a more favorable commodity market, we do not
anticipate costs from raw materials to exceed the 2011 level by more
than SEK 500m, with the majority of the impact in the first half of the
year. During 2012, we will also see increased costs for sourced products
and transportation, which makes it even more important to be successful
with our price increases.
The result in 2011, achieved in a period of significant economic
decline, demonstrates that our strategy of increasing the pace of new
product offerings, investing in profitable growth areas and implementing
efficiency enhancements in production is a successful one. In 2012, we
will further strengthen the Electrolux brand position, we will continue
to develop innovative products that consumers prefer, we will further
improve our operational efficiency and we will maintain a strong balance
sheet to be prepared for both uncertainties and opportunities.
Stockholm, February 2, 2012
Keith McLoughlin President and Chief Executive Officer
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