The Group’s operations include products for consumers as well as professional users. Products for consumers comprise major appliances, i.e., refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens, floor-care products and small domestic appliances. Professional products comprise food-service equipment for hotels, restaurants and institutions, as well as laundry equipment for apartment-house laundry rooms, launderettes, hotels and other professional users.
In 2014, major appliances accounted for 87% (87) of net sales, professional products for 5% (5) and small appliances for 8% (8).
| Share of sales by business area | |
| Major Appliances Europe, Middle East and Africa, 31% | 31 |
| Major Appliances North America, 30% | 30 |
| Major Appliances Latin America, 18% | 18 |
| Major Appliances Asia/Pacific, 8% | 8 |
| Small Appliances, 8% | 8 |
| Professional Products, 5% | 5 |
Electrolux has joined the AllSeen Alliance, the broadest Internet of Everything open-source project, as a Premier Member. Membership in this collaborative initiative is a key enabler for Electrolux to help realize the promise of this technology and use connectivity to enhance the experience and end result of everyday tasks. For more information, visit www.electroluxgroup.com.
Electrolux has entered into an agreement to acquire the appliances business of General Electric (“GE Appliances”), one of the premier manufacturers of kitchen and laundry products in the United States, for a cash consideration of USD 3.3 billion. For more information, see page 87.
Electrolux acquired the Australian-based barbecue business BeefEater Barbecues, as part of the strategy to grow in this market segment, see page 78.
Market demand for the overall market for core appliances in Europe increased in 2014 by 2% year-over-year, after several years with weak markets. Demand in Western Europe rose by 2%, while demand in Eastern Europe was unchanged. Demand in Western Europe increased in most regions, growth was particularly strong in the Iberian and the Benelux countries. Demand in Germany, the UK, Italy and France also improved, while demand in the Nordics declined. Market demand in Russia and Ukraine was impacted by the political uncertainty in the latter part of the year.
Electrolux organic sales were unchanged year-over-year. An improved product mix in Europe compensated for continued price pressure and lower sales volumes, particularly in the Middle East and Africa.
Active product portfolio management and a strong focus on the most profitable product categories improved the product mix. Sales of products under premium brands, and built-in kitchen products increased.
Operating income improved significantly as a result of the ongoing structural actions to reduce costs and enhance efficiency as well as product mix improvements.
During the year, actions were taken to reduce overhead costs and to improve the competitiveness within manufacturing, see page 86.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 33,436 | 34,438 |
| Organic growth, % | –0.2 | –0.2 |
| Operating income | 347 | 1,444 |
| Operating margin, % | 1.0 | 4.2 |
| Net assets | 8,528 | 6,834 |
| Return on net assets, % | 3.8 | 18.2 |
| Capital expenditure | 1,294 | 977 |
| Average number of employees | 23,629 | 21,729 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 36596 | 34029 | 34278 | 33436 | 34438 |
| Operating margin | 6.3 | 2.1 | 3.2 | 1 | 4.2 |
Market demand in North America for core appliances increased by 6% in 2014 compared with 2013. Market demand for major appliances including microwave ovens and home-comfort products, such as room air-conditioners, increased by 6% in 2014 year-over year.
Major Appliances North America showed an organic growth of 2% in 2014, due an improved product mix, which mitigated the lower sales volumes. The favorable market environment, launches of new products and new distribution channels had a positive impact on sales, while new energy requirements in the US impacted sales volumes of refrigerators and freezers. Sales volumes of air-conditioners also declined.
Costs related to the comprehensive transition of refrigerators and freezers to comply with the new energy requirements in the US had a negative impact on operating income. The consolidation of production of cooking products to Memphis, Tennessee in the US, from L’Assomption, Quebec, Canada, was finalized in 2014. Production at the new cooking facility in Memphis is still in a ramp up stage, which impacted operating income negatively. A continued strong focus on premium products improved the product mix which contributed to operating income.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 31,864 | 34,141 |
| Organic growth, % | 7.6 | 2.2 |
| Operating income | 2,136 | 1,714 |
| Operating margin, % | 6.7 | 5.0 |
| Net assets | 5,280 | 6,587 |
| Return on net assets, % | 40.9 | 30.8 |
| Capital expenditure | 855 | 853 |
| Average number of employees | 12,597 | 14,918 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 30969 | 27665 | 30684 | 31864 | 34141 |
| Operating margin | 4.7 | 0.9 | 4.7 | 6.7 | 5 |
Market demand for core appliances in Latin America is estimated to have declined in 2014 year-over-year, and demand in Electrolux largest market Brazil declined. A slow-down in the economy and the FIFA World cup in Brazil had an adverse impact on overall demand for appliances in 2014.
Major Appliances Latin America showed an organic sales growth of 3% in 2014 driven by higher sales prices. Although sales volumes declined, Electrolux gained market shares in Brazil. Sales volumes in several other Latin American markets declined due to weak market conditions.
Operating income improved year-over-year, mainly as a result of price increases and measures to adjust the cost base to lower demand.
During the year, the Brazilian real and other Latin American currencies weakened versus the USD. The negative impact from currencies and a high rate of inflation were to a large extent mitigated by price increases.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 20,695 | 20,041 |
| Organic growth, % | 6.1 | 2.8 |
| Operating income | 979 | 1,079 |
| Operating margin, % | 4.7 | 5.4 |
| Net assets | 6,554 | 6,913 |
| Return on net assets, % | 13.8 | 16.1 |
| Capital expenditure | 742 | 535 |
| Average number of employees | 14,239 | 13,096 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 16260 | 17810 | 22044 | 20695 | 20041 |
| Operating margin | 5.8 | 4.6 | 7.2 | 4.7 | 5.4 |
Market demand for major appliances in Australia, Southeast Asia and China declined in 2014.
Electrolux showed a slight organic sales growth in 2014, due to higher sales volumes in emerging markets particularly in Southeast Asia and due to price increases. The acquisition during the year of BeefEater Barbecues had a positive impact on sales by 0.6%.
Operating income declined mainly due to a negative country mix as sales volumes declined in Australia and increased in emerging markets as Southeast Asia. A negative currency development also impacted earnings, but was to a large extent mitigated by price increases.
An improved cost structure and lower marketing spend contributed to operating income.
In late August 2014, Electrolux acquired the Australian-based barbecue business BeefEater, as part of the strategy to grow in this market segment. BeefEater Barbecues has annual sales of AUD 17 million, approximately SEK 110m.
The operation was consolidated in the Electrolux Group as of September 30, 2014, based on a preliminary purchase price allocation. Sales and income are included as of October 2014.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 8,653 | 8,803 |
| Organic growth, % | 10.8 | 0.4 |
| Operating income | 467 | 448 |
| Operating margin, % | 5.4 | 5.1 |
| Net assets | 2,014 | 2,463 |
| Return on net assets, % | 21.0 | 18.9 |
| Capital expenditure | 267 | 349 |
| Average number of employees | 3,719 | 3,792 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 7679 | 7852 | 8405 | 8653 | 8803 |
| Operating margin | 10.3 | 9.4 | 8.9 | 5.4 | 5.1 |
Market demand for vacuum cleaners in Europe and North America declined in 2014.
Sales for the operations in Small Appliances declined mainly due to lower sales volumes. Lower sales of upright vacuum cleaners in the US and weak market conditions in Latin America impacted sales in 2014. Sales of small domestic appliances continued to increase year-over-year and displayed good growth in several regions.
Operating income declined, primarily as a result of lower volumes and price pressure. In addition, negative currency development mainly related to Latin America had an adverse impact on the results. This was to some extent mitigated by product mix improvements. Launches of new vacuum cleaners and small domestic appliances in the premium segment in Europe and Asia/Pacific improved the produxt mix in 2014.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 8,952 | 8,678 |
| Organic growth, % | 4.4 | –4.2 |
| Operating income | 391 | 200 |
| Operating margin, % | 4.4 | 2.3 |
| Net assets | 1,554 | 1,468 |
| Return on net assets, % | 22.1 | 12.5 |
| Capital expenditure | 225 | 162 |
| Average number of employees | 2,683 | 2,614 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 8422 | 8359 | 9011 | 8952 | 8678 |
| Operating margin | 9.5 | 6.5 | 5.1 | 4.4 | 2.3 |
Overall market demand for professional food-service and professional laundry equipment is estimated to have improved year-over-year. Market demand increased in the Nordic countries and the UK, where Electrolux holds a strong position. Demand in Eastern Europe declined. Demand in the US and emerging markets displayed growth year-over-year.
Electrolux showed strong organic growth and the Group gained market shares. Sales growth in Western Europe, which accounts for more than 60% of sales, and growth in emerging markets as Africa and the Middle East were the main contributors to this development.
The sales growth in emerging markets is primarily the result of the Group’s strategic initiatives to grow in new markets and segments, as well as launches of new products.
Operating income and margin improved as a result of higher sales volumes and price increases. Increased efficiency within operations also contributed to the improvement in operating income.
| SEKm | 2013 | 2014 |
|---|---|---|
| Net sales | 5,550 | 6,041 |
| Organic growth, % | 1.7 | 5.6 |
| Operating income | 510 | 671 |
| Operating margin, % | 9.2 | 11.1 |
| Net assets | 960 | 919 |
| Return on net assets, % | 54.1 | 70.4 |
| Capital expenditure | 76 | 75 |
| Average number of employees | 2,595 | 2,582 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 6389 | 5882 | 5571 | 5550 | 6041 |
| Operating margin | 11.6 | 14.3 | 10.6 | 9.2 | 11.1 |