2016 in summary

• Organic sales declined by 1.1%, active product portfolio management to exit from unprofitable product categories, weak market demand in Latin America and lower sales under private labels in North America impacted sales.
• Organic sales growth for Major Appliances EMEA, Major Appliances Asia/Pacific and Professional Products.
• Four of six business areas above 6% operating margin.
• Operations in Latin America continued to be impacted by weak market environment.
• Actions to improve profitability in Small Appliances intensified and the Eureka brand in the US was divested.
• Acquisition of the wine cabinet company Vintec in Asia Pacific and agreement to acquire leading water-heater company Kwikot in South Africa.

Market overview

Market demand for core appliances in Europe increased by 3% in 2016. Most markets showed growth and demand in Western Europe increased by 3% and demand in Eastern Europe by 4%. Market demand for core appliances in North America continued to improve and increased by 6%. Market demand for core appliances in Australia, China and Southeast Asia also improved. The weak macro-economic environment in Brazil continued to impact market demand for core appliances, which declined significantly year-over-year. Market demand has deteriorated for two consecutive years. Demand in Argentina also declined.

A total of approximately 74 million core appliances were sold in Europe in 2016, which is about 8% lower than the record year of 2007.

A total of approximately 47 million core appliances were sold in the US in 2016, which is close to the top levels in 2005 and 2006.

Sources: Europe: Electrolux estimates, US: AHAM. For other markets there are no comprehensive market statistics.

Net sales and operating income

Electrolux sales declined by 2.0%. Organic sales declined by 1.1% and currency translation had a negative impact of 1.0%. Sales increased for Major Appliances EMEA, Major Appliances Asia/Pacific and Professional Products, while weak market trends in Latin America had a negative impact on sales in the region. Lower sales under private labels and price pressure in the market impacted sales in North America. Electrolux actions to improve profitability in Small Appliances and in China included sales reductions to reposition the businesses and exit from unprofitable product categories. 

Operating income improved to SEK 6,274m (2,741) corresponding to a margin of 5.2% (2.2). Operating income for 2015 included costs of SEK 2,059m related to the not completed acquisition of GE Appliances. Excluding these costs the margin was 3.9%.

Operating income improved across most business areas, although earnings for the operations in Latin America were impacted by continued weak market demand. Increased efficiency and product-mix improvements contributed to the positive earnings trend. Operating income for Major Appliances EMEA continued to improve. Product-mix improvements, higher cost efficiency and increased sales volumes contributed to the positive earnings trend. Operating income for Major Appliances North America improved, mainly as a result of increased cost efficiency and lower costs for raw materials. Operating income for Major Appliances Asia/Pacific improved, primarily due to increased cost efficiency and a favorable earnings trend in Australia and Southeast Asia. Measures to restore profitability in Small Appliances intensified during the year and operating income improved. Professional Products continued to report a good earnings development.

Financial overview by business area

¹⁾ Common Group costs for 2015 include a termination fee of USD 175m (SEK 1,493m) and transaction costs of SEK 408m for the terminated acquisition of GE Appliances, see page 91.

Launches of new products

Electrolux strategy is to drive profitable growth by creating best-in-class consumer experiences supported by a strong focus on innovation. Electrolux is continuously expanding its product offering. In 2016, new innovative products under the Electrolux brand were introduced in Europe including the PlusSteam combination oven for home baking enthusiasts, the connected CombiSteam Pro Smart oven, and the blast chiller that brings the cook-and-chill technique of professionals to consumers. A new visual identity for the AEG brand and two new product ranges were introduced in Europe: The Mastery Range of kitchen products, offering the world’s first responsive kitchen experience, and the New Laundry Range, designed to redefine the perception of fabric care. In North America, an award-winning front-load laundry line under the Electrolux brand was launched. In Australia, new appliances continued to be launched under the major brand Westinghouse. Products under the AEG brand were introduced in China. In Latin America and Asia/Pacific, new products in appliances, vacuum cleaners and small domestic appliances are being launched ­continuously.

Strategic initiatives to restore profitability

The program initiated in 2015 to restore profitability and improve the global competitiveness of the business area Small Appliances intensified during the year. As a part of this program, a strategic decision to focus the North American Small Appliances business on its strongest categories was taken in 2016 and the Eureka brand in the US was divested.

Measures were also taken to restore profitability in China including exiting from unprofitable product categories and sales channels.

The weak market trend in Latin America continued to impact Electrolux earnings in the region. Cost measures to adapt to lower demand and to mitigate under-absorption of fixed costs in production were being undertaken.

Acquisitions

To broaden the product offering and create a strong platform for growth acquisitions are an integrated part of Electrolux growth strategy. In 2016, Electrolux made two acquisitions. Vintec, an Australia and Singapore-based company which supplies a wide range of climate-­controlled wine cabinets throughout the Asia Pacific region was acquired. An agreement was also made to acquire South Africa’s leading water-heater producer Kwikot Group.