Electrolux Interim Report Q2 2009

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Highlights of the second quarter of 2009. Net sales amounted to SEK 27,482m (25,587) and income for the period to SEK 658m (99), or SEK 2.32 (0.36) per share. Net sales declined by 8.4%, in comparable currencies, due to continued sharp market downturn in Electrolux main markets.

Transcript

  • theas

    SEKm Q2 2009 Q2 2008Change

    %First half

    2009First half

    2008Change

    %

    Net sales 27,482 25,587 7.4 53,300 49,780 7.1

    Operating income 1,052 254 314.2 666 249 167.5

    Margin, % 3.8 1.0 1.2 0.5

    Income after financial items 932 140 565.7 439 -9 N/A

    Income for the period 658 99 564.6 312 -7 N/A

    Earnings per share, SEK1) 2.32 0.36 1.10 -0.02

    Return on net assets, % - - 6.4 2.5

    Excluding items affecting comparability

    Items affecting comparability 25 -539 -399 -505

    Operating income 1,027 793 29.5 1,065 754 41.2

    Margin, % 3.7 3.1 2.0 1.5

    Income after financial items 907 679 33.6 838 496 69.0

    Income for the period 633 491 28.9 693 351 97.4

    Earnings per share, SEK1) 2.23 1.74 2.44 1.24

    Return on net assets, % - - 9.9 7.1

    1) Basic, based on an average of 283.9 (283.5) million shares for the second quarter and 283.8 (282.7) million shares for the first half of 2009, excluding shares held by Electrolux. For earnings per share after dilution, see page 11.

    For definitions, see page 19.

    For further information, please contact Peter Nyquist, Head of Investor Relations and Financial Information, at +46 8 738 60 03.

    AB ELECTROLUX (PUBL)Postal address Media hotline Investor Relations E-mailSE-105 45 Stockholm, Sweden +46 8 657 65 07 +46 8 738 60 03 ir@electrolux.se Visiting address Telefax Website Reg. No.S:t Gransgatan 143 +46 8 738 74 61 www.electrolux.com 556009-4178

    Contents

    Net sales and income 2

    Market overview 3

    Business areas 3

    Cash flow 6

    Financial position 6

    Financial statements 11

    Stockholm, July 16, 2009

    Highlights of the second quarter of 2009

    Net sales amounted to SEK 27,482m (25,587) and income for the period to SEK 658m (99), or SEK 2.32 (0.36) per share.

    Net sales declined by 8.4%, in comparable currencies, due to continued sharp market downturn in Electrolux main markets.

    Operating income amounted to SEK 1,027m (793), excluding items affecting comparability.

    Continued strong cash flow gives Electrolux a solid financial position.

    Despite continued weak markets, operating income in Europe and North America improved due to cost reductions, lower costs for raw materials and price increases.

    Electrolux continues to gain market shares in the North American, Latin American and Australian markets for appliances.

    Interim reportJanuary - June 2009

  • Net sales and income

    Second quarter of 2009Net sales for the Electrolux Group in the second quarter of 2009 amounted to SEK 27,482m (25,587). Sales were positively impacted by changes in exchange rates, while changes in volume/price/mix had a negative impact. Net sales decreased by 8.4% in comparable currencies. Change in net sales

    % Q2 2009First half

    2009

    Changes in Group structure 0.0 0.0

    Changes in exchange rates 15.8 15.1

    Changes in volume/price/mix -8.4 -8.0

    Total 7.4 7.1

    Operating incomeOperating income for the second quarter of 2009 increased to SEK 1,052m (254) and income after financial items to SEK 932m (140). Income for the period amounted to SEK 658m (99), cor-responding to SEK 2.32 (0.36) in earnings per share.

    Items affecting comparabilityOperating income for the second quarter of 2009 includes items affecting comparability in the amount of SEK 25m (-539) referring to a sale of a real estate in Changsha in China. The factory in Changsha was closed in the first quarter of 2009, see table on page 11.

    Excluding items affecting comparability, operating income amounted to SEK 1,027m (793).

    The launch of Electrolux in North America in 2008 had a net negative impact on the second quarter previous year in the amount of approximately SEK -230m. Operating income for the second quarter of 2009 was in line with the previous year, excluding these launch costs.

    Effects of changes in exchange ratesChanges in exchange rates compared to the previous year, inclu-ding both translation and transaction effects, had an impact of SEK -249m on operating income for the second quarter of 2009 compared to the same period in the previous year. Transaction effects net of hedging contracts amounted to SEK -250m and refer-red mainly to the strengthening of the US dollar and the euro against several other currencies. Translation of income statements in subsi-diaries had an impact of SEK 1m.

    The effect of changes in exchange rates on income after financial items amounted to SEK -267m.

    Financial netNet financial items for the second quarter of 2009 amounted to SEK -120m, compared to SEK -114m for the corresponding period in the previous year.

    First half of 2009Net sales for the Electrolux Group in the first half of 2009 amounted to SEK 53,300m as against SEK 49,780m in the previous year. In comparable currencies net sales declined by 8.0%.

    Operating incomeOperating income for the first half of 2009 increased to SEK 666m (249) and income after financial items to SEK 439m (-9). Income for the period increased to SEK 312m (-7), corresponding to SEK 1.10 (-0.02) in earnings per share.

    Operating income for the first half of 2009 was negatively impac-ted by the North American launch in the net amount of SEK -200m. In the first half of 2008, non-recurring items were charged against operating income in the total amount of approximately SEK -780m, see table below.

    Electrolux North American launch and non-recurring items SEKm, approximately

    First half 2009

    First half2008

    Net impact of the launch of Electrolux, applian-ces North America -200 -350

    Cost-cutting program, appliances Europe -360

    Cost for a component problem for dishwashers,appliances Europe -120

    Capital gain, real estate, appliances Europe 130

    Cost for litigation, appliances North America -80

    Total -200 -780

    Items affecting comparabilityOperating income for the first half of 2009 includes items affecting comparability in the amount of SEK -399m (-505), see table on page 11. Excluding items affecting comparability, operating income for the first half of 2009 increased to SEK 1,065m (754) and income after financial items to SEK 838m (496). Income for the period was SEK 693m (351), corresponding to SEK 2.44 (1.24) in earnings per share.

    Effects of changes in exchange ratesChanges in exchange rates compared to the previous year, including both translation and transaction effects, had an impact of SEK -646m on operating income for the first half of 2009. Transaction effects net of hedging contracts amounted to SEK -638m. Translation of income statements in subsidiaries had an effect of SEK -8m.

    The effect of changes in exchange rates on income after financial items amounted to SEK -672m.

    Share of sales by business area, for the first half of 2009 Operating income and margin*

    * Excluding items affec-ting comparability.

    2,000

    1,500

    1,000

    500

    0

    500

    SEKm

    8

    6

    4

    2

    0

    2

    %

    EBIT EBIT margin

    2008 2009Q1 Q2 Q3 Q4 Q1 Q2

    Consumer Durables, 94%

    Europe, 38%

    North America, 36%

    Latin America, 11%

    Asia/Pacific and Rest of world, 9%

    Professional Products, 6%

    2

    Interim report January - June 2009

    3

    Interim report January - June 2009

  • Financial netNet financial items for the first half of 2009 decreased to SEK -227m compared to SEK -258m for the corresponding period in the pre-vious year. The improvement is mainly due to lower interest rates on borrowings.

    Market overview

    Most of Electrolux main markets for appliances continued to show a decline in the second quarter of 2009. The North American mar-ket has declined for twelve consecutive quarters. In the second quarter, industry shipments in the US declined by 14%. The Euro-pean market has been falling for six consecutive quarters, with Eas-tern Europe showing a continued dramatic downturn in the second quarter, declining by 30%. Demand in Western Europe declined by 9% and the total market in Europe by 14%. The market in Brazil increased in the second quarter due to temporary tax reduction on domestically-produced appliances. Most other markets in Latin America continued to decline.

    There are no indications of an immediate improvement in any of the Groups main markets, and, therefore, market demand for app-liances around the world is expected to decline further in 2009.

    Business areas

    Changes in net sales and operating income by business area in comparable currencies are given on page 15.

    Consumer Durables, Europe

    SEKm Q2 2009 Q2 2008First half

    2009First half

    2008Full year

    2008

    Net sales 9,935 10,500 20,110 21,025 44,342

    Operating income 257 294 382 102 -22

    Operating margin, % 2.6 2.8 1.9 0.5 0.0

    Industry shipments of core appliances in Europe

    Units, year-over-year, % Q2 2009First half

    2009

    Western Europe -9 -9

    Eastern Europe (excluding Turkey) -30 -30

    Total Europe -14 -14

    Core appliancesIndustry shipments of appliances in Europe declined by 14% in the second quarter of 2009 in comparison with the same period last year. Deliveries in Western Europe declined by 9%. Demand conti-nued to fall in a number of the Groups major markets, including

    Italy, Great Britain, France, and the Nordic region. Demand in Ger-many continued to increase somewhat. Deliveries of appliances in Eastern Europe declined by 30%.

    The weak market demand and lower sales of products under private label led to lower sales for the Group in comparison with the second quarter of 2008.

    Operating income improved in the second quarter. An improved country and product mix, previous price increases and savings related to redundancy of personnel and moving capacity to low-cost countries had a positive impact on operating income. Savings and lower costs for components and raw materials also had a posi-tive impact on income. Lower volumes, unfavorable currency effects and reduced utilization of capacity at the Groups plants had a negative effect on income.

    Floor-care productsMarket demand for vacuum cleaners in Europe continued to decline in the second quarter of 2009 in comparison with the same period in 2008.

    Group sales decreased as a result of lower sales volumes but market shares and price levels were stable. Operating income and margin declined as a result of lower volumes.

    Consumer Durables, Europe Industry shipments of core appliances in Europe*

    * Units, year-over-year, %.

    SEKm

    Q2 Q3

    EBIT EBIT margin

    600 6

    4

    2

    0

    2

    4

    6

    400

    200

    0

    200

    600

    400

    %

    2008 2009

    Q1Q4Q1 Q2

    Western Europe Eastern Europe

    10

    0

    10

    20

    40

    30

    %

    2008 2009

    Q1 Q2 Q3 Q4 Q1

    50

    Q2

    2

    Interim report January - June 2009

    3

    Interim report January - June 2009

  • Consumer Durables, North America

    SEKm Q2 2009 Q2 2008First half

    2009First half

    2008Full year

    2008

    Net sales 9,848 8,214 18,992 15,489 32,801

    Operating income 498 113 321 -41 222

    Operating margin, % 5.1 1.4 1.7 -0.3 0.7

    Industry shipments of core appliances in the US

    Units, year-over-year, % Q2 2009First half

    2009

    Core appliances -14 -15

    Major appliances -23 -20

    Major appliances Industry shipments of core appliances in the US declined by approximately 14% in the second quarter of 2009 in comparison with the corresponding period last year. This is the twelfth consecu-tive quarter of decline in shipments.

    Group sales of appliances in North America in comparable cur-rencies were lower in the second quarter as a result of continued low sales volumes and the ongoing shift in demand to products with lower prices. The decline in sales was partly offset by previous price increases. Sales in SEK increased due to the strengthening of the US dollar.

    Operating income for the second quarter of 2009 improved over the same period in the previous year. Lower sales volumes were offset by lower costs for purchases of raw materials, fixed cost reductions and implemented price increases. Operating income for

    the second quarter of 2008 was impacted by the launch of Electrolux in the amount of approximately SEK -230m.

    The new Electrolux-branded products continued to contribute to an improvement in the product mix.

    Floor-care productsMarket demand for vacuum cleaners in North America continued to show a decline in the second quarter of 2009 compared to the cor-responding period last year.

    Sales and operating income decreased as a result of deteriora-tion in product mix.

    Consumer Durables, North AmericaIndustry shipments of core appliances in the US*

    600

    450

    300

    150

    0

    150

    300

    SEKm %

    2008 2009

    Q1 Q2 Q3

    EBIT EBIT margin

    8

    6

    4

    2

    0

    2

    4

    Q1 Q2Q4

    5

    0

    5

    10

    15

    20

    25

    %

    2008 2009

    Q1 Q2 Q3 Q4 Q1 Q2

    * Units, year-over-year, %.

    4

    Interim report January - June 2009

    5

    Interim report January - June 2009

  • Consumer Durables, Latin America

    SEKm Q2 2009 Q2 2008First half

    2009First half

    2008Full year

    2008

    Net sales 3,326 2,548 5,951 4,952 10,970

    Operating income 142 133 192 289 715

    Operating margin, % 4.3 5.2 3.2 5.8 6.5

    Industry shipments of appliances in Latin America are estimated to have increased in the second quarter of 2009 compared to the same period in the previous year on the basis of higher industry shipments in Brazil. Industry shipments continued to decline in most of the other Latin American markets.

    In Brazil, industry shipments increased significantly on the basis of incentives introduced by the Brazilian government through tax reduction on domestically-produced appliances. Electrolux sales volumes increased in the second quarter over the same period last year and sales increased. The Group gained additional market sha-res in Brazil. Operating income improved on the basis of higher volumes and a better customer mix. Consumer Durables, Asia/Pacific and Rest of world

    SEKm Q2 2009 Q2 2008First half

    2009First half

    2008Full year

    2008

    Net sales 2,521 2,369 4,666 4,597 9,196

    Operating income 104 147 164 252 369

    Operating margin, % 4.1 6.2 3.5 5.5 4.0

    Australia and New ZealandIn Australia, market demand for appliances in the second quarter was somewhat down compared with the same period last year. Group sales in comparable currencies rose as a result of higher sales volumes and previous prices increases. Electrolux continued to gain market shares. Operating income was in line with the pre-vious year. Negative currency effects of purchases of products pri-ced in US dollars were to a large extent compensated by increased sales and implemented cost reductions.

    Southeast Asia and China Overall market demand in Southeast Asia is estimated to have declined in the second quarter of 2009 in comparison with the same period last year. The Groups sales volumes declined but sales increased slightly reflecting price increases and improved product mix. The operations in Southeast Asia continued to show good profitability. Market statistics for shipments of appliances in China indicate an

    Consumer Durables, Latin America Professional ProductsConsumer Durables, Asia/Pacific and Rest of world

    increase in the second quarter of 2009 in comparison with the same period in 2008. Operating income for the operations in China continued to be negatively impacted by costs related to the strategy of focusing on more profitable segments and geographies.

    Professional Products

    SEKm Q2 2009 Q2 2008First half

    2009First half

    2008Full year

    2008

    Net sales 1,850 1,944 3,577 3,697 7,427

    Operating income 165 225 270 408 774

    Operating margin, % 8.9 11.6 7....