The Electrolux Group’s financial goals contribute to maintaining and strengthening the company’s leading, global position in the industry, and to generating a healthy total return for Electrolux shareholders.
6%
Operating
margin
>20%
Return on
net assets
4%
Average
growth
Value
creation
x
=
4x
Capital
turnover-rate
Over the past ten years, Electrolux shareholders have received an average annual total return of approximately 12%. The Group’s capacity to create healthy cash flow and to enhance operational efficiency play a major role in contributing to this value creation. There is further potential for profitability by raising margins. According to the strategy, innovative products are to contribute to higher profitability and a margin of at least 6%. A capital turnover-rate of at least 4 times combined with an operating margin of 6% should yield a minimum return on net assets of 20%. Further potential for value creation is possible if Electrolux can increase sales while retaining this profitability level. The objective is annual organic growth of 4%.
Electrolux can achieve a high level of profitability by maintaining its focus on innovative products and offerings, strong brands and enhanced efficiency. In 2015, the Electrolux Green Range, which includes the most energy and water efficient products, represented 20% of products sold and 32% of gross profit.
Operating income includes costs of SEK 2,059m related to the not completed acquisition of GE Appliances. Excluding these costs, the margin was 3.9% (3.2). Operating income for Major Appliances EMEA contributed strongly to the results for 2015. Professional Products also reported a positive development, while operating income for the other business areas declined. Soft market demand, particularly in emerging markets such as Latin America, and severe currency headwinds had a negative impact on operating income for 2015.
Electrolux strives to achieve an optimal capital structure in relation to the Group’s goals for profitability and growth. In recent years, efforts to reduce working capital have been intensified. This has resulted in a lower level of structural working capital. Reducing the amount of capital tied up in operations creates opportunities for rapid and profitable growth.
The capital turnover-rate increased to 5.0 times (4.5) in 2015. The Group’s ongoing activities to operationally and structurally reduce working capital and increase efficiency within operations contributed to this favorable development.
| 11 | 12 | 13 | 14 | 15 | |
| Operating income | 3017 | 4000 | 1580 | 3581 | 2741 |
| Operating margin | 3 | 3.6 | 1.4 | 3.2 | 2.2 |
| Goal 6% | 6 | 6 | 6 | 6 | 6 |
| 11 | 12 | 13 | 14 | 15 | |
| Capital turnover-rate | 4.6 | 4.1 | 4 | 4.5 | 5 |
| Goal 4 times | 4 | 4 | 4 | 4 | 4 |
GOAL
>6%
RESULT 2015
2.2%
GOAL
>4x
RESULT 2015
5.0x
Focusing on growth with sustained profitability and a small, efficient capital base enables Electrolux to achieve a high long-term return on capital. With an operating margin that achieves the target of 6% and a capital turnover-rate of at least four times, Electrolux will achieve a return on net assets of at least 20%.
Return on net assets amounted to 11.0% (14.2). Average net assets and working capital declined during the year but return on net assets was negatively impacted by lower operating income. Average net assets declined to SEK 24,848m (25,166), corresponding to 20.1% (22.4) of net sales. Working capital declined to SEK –12,234m (–8,377), corresponding to –9.9% (–6.6) of net sales.
In order to reach the growth goal, the Group continues to strengthen its positions in the premium segment, expand in profitable high-growth product categories, develop service and aftermarket operations and increase the offering of resource-efficient products. Organic growth is complemented by acquisitions to allow more rapid implementation of the growth strategy.
Net sales amounted to SEK 123,511m (112,143), corresponding to organic sales growth of 2.2%. Major Appliances North America, Major Appliances EMEA and Professional Products reported organic sales growth. The product mix improved and prices increased in several regions while sales volumes declined. 2015 was a year with a strong focus on the most profitable products, which improved the mix. Acquisitions had an impact on sales of 0.1%.
| 11 | 12 | 13 | 14 | 15 | |
| Average net assets | 22091 | 26543 | 27148 | 25166 | 24848 |
| Return on net assets | 13.7 | 14.8 | 5.8 | 14.2 | 11 |
| Goal 20% | 20 | 20 | 20 | 20 | 20 |
| 11 | 12 | 13 | 14 | 15 | |
| Net sales | 101598 | 109994 | 109151 | 112143 | 123511 |
| Organic sales growth | 0.2 | 5.5 | 4.5 | 1.1 | 2.2 |
| Goal 4% | 4 | 4 | 4 | 4 | 4 |
GOAL
>20%
RESULT 2015
11%
GOAL
>4%
RESULT 2015
2.2%
Financial goals over a business cycle, excluding items affecting comparability.