Analysts engage in questions related to the development of the appliance market and the demand in Electrolux core markets. Forecasts of price and mix are important topics on which analysts focus in order to gain a better understanding of the operation on which they can base their longer term projections of Electrolux future performance.
Demand in almost all Western European markets has shown positive growth for several consecutive quarters, while demand in Eastern Europe has been stabilizing. The Group has strengthened its position in built-in-kitchen and in the laundry categories under its premium brands, driving key consumer experience benefits while maintaining good cost efficiency.
We sell products in over 150 countries and have approximately SEK 35 billion of annual currency in- and outflows which causes significant swings. In 2016, total negative currency impact was SEK 1,662 million. A significant part of the impact was related to Latin American currencies but also due to the weakening of the British Pound and the depreciation of the Egyptian Pound. Electrolux was able to offset the negative currency effects through price and mix improvements.
The underlying trend in North America has been stable over the past couple of years, as appliance manufacturers have generally showed a more disciplined pricing strategy. More recently, however, we have seen the price pressure in North America to have increased somewhat compared to last year. This was a result of aggressive promotional activities in combination with extended promotional holiday sales in the US.
Our Chinese operations are now stable after repositioning their strategy. We expect to grow organically and improve the business with the introduction of new products and brands with preferred partners, although we are yet a small player in the market. The size of the business is currently at a point where it doesn’t have a significant impact on the overall Asia/Pacific business area.
The UK is an important market for us and we are a major player in the UK construction industry. Recently, we have seen parts of the industry signaling a more cautious view as regards the market outlook which may have an impact on demand in the medium to long run. We intend to focus on defending our position and developing our business going forward despite the risk for softer demand and weaker currency development post-Brexit.
Predicting acquisitions is difficult, but we have in recent years worked intensively to develop a good pipeline and are working diligently on various opportunities. In 2016, we acquired the Australian wine cabinet company Vintec in our Asia/Pacific business. During the year we also signed an agreement to acquire the leading water heater company Kwikot in South Africa which will further strengthen our position in MEA, a strategic growth region for Electrolux.
With new innovative product launches, focus on offering best-in-class consumer experiences, strong brands and an active product portfolio management, we expect to continue to further drive mix improvements across our business areas. Although industry pricing is expected to have an overall negative impact on organic growth, we will offset this by improving the product mix.
In general, we have a good run rate of cost achievements over the past several years, with reducing costs through major manufacturing footprint programs which are now in their final phases. Going forward, we expect to improve overall cost efficiency and increase productivity in various areas throughout the Group.
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