Electrolux Interim Report Q4 2010

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Highlights of the fourth quarter of 2010. Net sales amounted to SEK 27,556m (28,215) and income for the period was SEK 677m (664), or SEK 2.38 (2.34) per share. Net sales increased by 1.6% in comparable currencies.

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  • 1.theasConsolidated results 2010Stockholm, February 2, 2011Highlights of the fourth quarter of 2010 Net sales amounted to SEK 27,556m (28,215) and income for the period was SEK 677m (664), or SEK 2.38 (2.34) per share. Net sales increased by 1.6% in comparable currencies. Strong growth in Latin America and Asia/Pacific offset lower sales volumes in Europe and North America. Operating income amounted to SEK 1,714m (2,023), corresponding to a margin of 6.2% (7.2), excluding items affecting comparability. Strong performance for the operations in Asia/Pacific, Latin America and for Contents Professional Products. Net sales and income2 Operating income in North America and Europe declined, following higher costsMarket overview 3 for raw materials and lower sales prices.Business areas3Cash flow 6Highlights of the full year of 2010Financial position6 Electrolux showed a record profit and reached the operating margin targetStructural changes7 of 6% for the full-year 2010, excluding items affecting comparability.Proposed dividend 9 All business areas outperformed previous years results.Financial statements 12 Improvements in product mix and cost savings offset higher costs for raw materials and downward pressure on prices. The Board proposes a dividend for 2010 of SEK 6.50 (4.00) per share. The Board proposes a renewed AGM mandate to repurchase own shares. ChangeChangeSEKm Q4 2010Q4 2009%2010 2009%Net sales 27,556 28,215 -2106,326 109,132-3Operating income952 805 185,4303,761 44Margin, % 3.52.9 5.13.4Income after financial items925 801 155,3063,484 52Income for the period 677 66423,9972,607 53Earnings per share, SEK1)2.382.3414.04 9.18Return on net assets, %- -27.8 19.4Excluding items affecting comparabilityItems affecting comparability-762-1,218 -1,064-1,561Operating income1,714 2,023-156,4945,322 22Margin, % 6.27.2 6.14.9Income after financial items1,687 2,019-166,3705,045 26Income for the period 1,204 1,583-24 4,739 3,851 23Earnings per share, SEK1)4.235.57 16.6513.56Return on net assets, %- -31.0 26.21) Basic, based on an average of 284.7 (284.4) million shares for the fourth quarter and 284.6 (284.0) million shares for the full year of 2010, excluding shares held by Electrolux. For earnings per share after dilution, see page 12.For definitions, see page 21.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 hotlineInvestor RelationsE-mailSE-105 45 Stockholm, Sweden+46 8 657 65 07+46 8 738 60 03 ir@electrolux.seVisiting address TelefaxWebsite Reg. No.S:t Gransgatan 143+46 8 738 74 61www.electrolux.com556009-4178

2. 2Consolidated results 2010Net sales and incomeFull year of 2010Net sales for the Electrolux Group in 2010 amounted toFourth quarter of 2010SEK 106,326m, as against SEK 109,132m in the previous year. InNet sales for the Electrolux Group in the fourth quarter of 2010comparable currencies, net sales increased by 1.5%, followingamounted to SEK 27,556m (28,215). Changes in exchange rates had sales growth in Asia/Pacific and Latin America.a negative impact on net sales. Net sales increased by 1.6% in com-parable currencies. Strong sales growth in Asia/Pacific and Latin Operating incomeAmerica offset lower sales volumes in Europe and North America. Operating income for 2010 increased to SEK 5,430m (3,761). All ope-rations showed improvements. Improvements in mix, cost savings andChange in net sales changes in exchange rates had a positive impact on income compa-% Q4 2010 2010red to the previous year. Income after financial items amounted toChanges in exchange rates-3.9-4.1 SEK 5,306m (3,484). Income for the period increased to SEK 3,997mChanges in volume/price/mix 1.61.5(2,607), corresponding to SEK 14.04 (9.18) in earnings per share.Total-2.3 -2.6Items affecting comparabilityOperating incomeOperating income for 2010 includes items affecting comparability inOperating income for the fourth quarter of 2010 amounted to the amount of SEK -1,064m (-1,561), see table on page 12. Exclu-SEK 952m (805) and income after financial items toding items affecting comparability, operating income for 2010SEK 925m (801). Increased costs for raw materials, lower sales pri- increased to SEK 6,494m (5,322) and income after financial itemsces and marketing investments had a negative impact on operatingto SEK 6,370m (5,045). Income for the period was SEK 4,739mincome in the quarter, while improvements in mix had a positive (3,851), corresponding to SEK 16.65 (13.56) in earnings per share.impact. Income for the period amounted to SEK 677m (664), cor-responding to SEK 2.38 (2.34) in earnings per share.Effects of changes in exchange ratesChanges in exchange rates compared to the previous year, inclu-Items affecting comparability ding both translation, transaction effects and hedging contracts,Operating income for the fourth quarter of 2010 includes itemshad a positive impact of approximately SEK 660m on operatingaffecting comparability of SEK -762m (-1,218) referring to restructur-income for 2010. The effects of changes in exchange rates referreding provisions related to appliances in North America and Europe, mainly to the operations in Europe, Asia/Pacific and Latin America.see table on page 12. Excluding items affecting comparability, ope- The weakening of the euro against several other currencies and therating income amounted to SEK 1,714m (2,023). strengthening of the Australian dollar and the Brazilian real againstthe US dollar positively affected operating income.Effects of changes in exchange rates The transaction effects amounted to approximately SEK 740mChanges in exchange rates compared to the previous year, inclu- and the translation of income statements in subsidiaries to approx-ding translation, transaction effects and hedging contracts, had aimately SEK -130m. In addition, results from hedging contracts hadlimited impact on operating income for the fourth quarter of 2010,a positive effect of approximately SEK 50m on operating income.compared to the same period in the previous year, and amountedto approximately SEK 20m. Transaction effects amounted to approx- Financial netimately SEK 100m. Translation of income statements in subsidiariesNet financial items for the full-year 2010 improved tohad no impact on operating income in the quarter. Results fromSEK -124m, compared to SEK -277m for the corresponding periodhedging contracts had an impact of approximately SEK -80m onin the previous year. The improvement is mainly due to lower inte-operating income, compared to the previous year.rest rates on borrowings and lower net borrowings.Financial netNet financial items for the fourth quarter of 2010 increased toSEK -27m, compared to SEK -4m for the corresponding period inthe previous year.Share of sales by business area,Operating income and margin*for the full year of 2010SEKm%2,400 12Consumer Durables, 94%1,800 9Europe, Middle Eastand Africa, 38%1,200 6North America, 32%Latin America, 16%600 3Asia/Paci c, 8%0 0Q1 Q2 Q3Q4Q1 Q2 Q3Q4Professional Products, 6% 20092010 600 3 * Excluding items affect- EBIT EBIT margining comparability. 3. 3Consolidated results 2010Market overviewEurope, where demand increased by 13%. Demand in Western Europe stabilized in the fourth quarter. Demand declined in South-Electrolux main markets for appliances showed increases in the ern Europe in large markets such as France and Spain. Demand infourth quarter of 2010. Demand in the North American marketGermany, the UK and the Nordic countries increased in the quarter.increased by 2% and the European market by 3%.Total demand in the European market stabilized in 2010 and For the year as a whole, demand in the North American marketincreased by 2%, after more than two years of decline.increased by 5%. The growth derives from a very low level after Group sales decreased in the fourth quarter and for the full-yearmore than three years of decline. One contributing factor to the 2010, on the basis of lower volumes and price pressure in the mar-growth in 2010 was the state-sponsored rebate program forket. Sales volumes have been impacted by the fact that the Germanenergy-efficient products in the second quarter. retailer Quelle, one of the Groups largest customers, declared The overall European market improved somewhat during thebankruptcy at the end of 2009.fourth quarter, primarily due to considerable growth in Eastern Operating income declined for the fourth quarter compared toEurope, where demand increased by 13%. Demand in Western the corresponding quarter of the previous year, primarily on theEurope stabilized. Demand in Southern Europe declined in large basis of price pressure, lower volumes and higher costs for rawmarkets such as France, and Spain. Demand in Germany, the UK materials. In the fourth quarter price pressure was particularly noti-and the Nordic countries increased in the quarter. ceable in Southern Europe, in the Nordic countries and in Russia. In Total demand in the European market stabilized in 2010 andaddition, income was impacted by considerably higher costs forincreased by 2%, after more than two years of decline. raw materials and increased investments in marketing. In the fourth The market in Brazil increased in the fourth quarter in compari-quarter, Electrolux continued the launch started in the third quarterson with the same period of last year. Most other markets in Latin of a new range of built-in products in several European markets.America also improved. Marketing investments were further intensified due to the launch. Market demand for appliances in Europe and North America isFor the full-year 2010, operating income improved considerablyexpected to show a modest growth in 2011. Demand in Europe iscompared to the previous year, above all due to a positive mix deve-expected to increase by approximately 2% and demand in North lopment. Increased sales of built-in products, primarily in the Ger-America by approximately 3% in 2011. man market, and a higher proportion of sales stemming from the central regions of Europe contributed to an improved product mix. In addition, lower warranty costs had a positive impact on operatingBusiness areas income.Changes in net sales and operating income by business area in Previous employee cutbacks and cost-saving measures conti-comparable currencies are given on page 16.nued to positively impact operating income, while lower volumes, price pressure and higher marketing and brand investments had aConsumer Durables Europe, Middle East and Africa negative impact. Floor-care productsSEKm Q4 2010 Q4 2009 20102009Market demand for vacuum cleaners in Europe continued toNet sales10,760 11,731 40,038 44,073 improve in the fourth quarter and the full-year 2010 compared to theOperating income565 875 2,703 2,349corresponding periods in 2009.Operating margin, %5.3 7.56.8 5.3 Group sales increased in the fourth quarter compared to the cor- responding period in the previous year. Operating income deterio- rated, however, as a result of increased costs for sourced productsIndustry shipments of core appliances in Europe and higher market investments. Nevertheless, product mix impro- vements continued to impact income positively in the quarter.Units, year-over-year, %Q4 2010 2010For the full-year 2010, Group sales increased and operatingWestern Europe 0 1 income improved substantially. This is a result of increased sales ofEastern Europe (excluding Turkey) +13 +6 products in the premium segment, which improved the productTotal Europe 3 2 mix.Core appliancesDemand for core appliances in Europe increased by 3% in thefourth quarter of 2010 compared with the corresponding quarter inthe previous year, primarily due to considerable growth in EasternConsumer Durables Europe, Middle East and Africa Industry shipments of core appliances in Europe*SEKm%%1200122010001010800 80 Q1 Q2 Q3 Q4 Q1 Q2Q3 Q4600 610400 420200 230 20092010 0040 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Western EuropeEastern Europe 20092010* Units, year-over-year, %.EBITEBIT margin 4. 4 Consolidated results 2010Consumer Durables North AmericaFloor-care products In the fourth quarter of 2010, demand for vacuum cleaners in North America was in line with the same period for in the previous year.SEKm Q4 2010 Q4 200920102009 Demand increased for the full-year 2010. Group sales declined bothNet sales7,4017,865 33,77635,726 in the fourth quarter and the year as a whole on the basis of lowerOperating income317 450 1,5741,476 sales volumes and price pressure in the market. The Group refrai-Operating margin, %4.3 5.74.74.1 ned from participating in sales at campaign prices in the fourth quarter.Operating income declined for the quarter and the full year, dueIndustry shipments of core appliances in the US to lower volumes, higher costs for sourced products and lower pri- ces in the market.Units, year-over-year, %Q4 2010 2010Core appliances2 5Major appliances 3 4Core appliancesMarket demand for core appliances in North America increased inthe fourth quarter of 2010 compared to the corresponding quarterin the previous year. Demand is estimated to have increased by 2% in the fourth quar-ter. For the year as a whole, demand increased by 5%. The growthderives from a very low level after more than three years of decline.One contributing factor to the growth in 2010 was the state-spon-sored rebate program for energy-efficient products in the secondquarter. Group sales declined in the fourth quarter, compared to the cor-responding period in the previous year. Since the end of 2009,Electrolux has been terminating certain sales contracts under pri-vate labels that have poor profitability. This has positively impactedthe product mix. Operating income declined for the fourth quarter, primarily on thebasis of substantially higher costs for raw materials, lower volumesand increased sales at campaign prices. The pressure on prices inthe market continued to be intense in the fourth quarter, primarilydriven by pre-Thanksgiving campaigns. The transfer of the wash-ing-machine production from WebsterCity, Iowa, to Juarez, Mexico,temporarily brought about lower capacity utilization in the quarter.However, increased sales of cooking products made a positivecontribution to the income and product mix. Group sales in the full year of 2010 were in line with the previousyear. Operating income increased on the basis of an improved pro-duct mix.Industry shipments of core appliancesConsumer Durables North Americain the US*SEKm% % 800 810 600 6 5 Q4 Q1 Q2Q4 400 4 0 Q1Q2 Q3Q3 200 2500 10Q1 Q2 Q3Q4 Q1 Q2 Q3Q4200 215400 200920104202009 2010 EBITEBIT margin* Units, year-over-year, %. 5. 5Consolidated results 2010Consumer Durables Latin AmericaSoutheast Asia and China Market demand in Southeast Asia and China is estimated to have continued to show a considerable increase in the fourth quarter ofSEKmQ4 2010Q4 2009 20102009 2010, compared to the corresponding period in the previous year.Net sales5,304 4,401 1...