In times of weak markets and decline in demand for the Group’s products, decisive actions and cost savings initiatives throughout the Group have proven that Electrolux can make timely adjustments to its cost structure. In times of strong market demand, it is essential that Electrolux can benefit from its global scale by delivering new innovative products and best-in-class consumer experiences with speed to market.
A number of Electrolux markets are experiencing price competition. This is particularly evident in the low-cost segments and in product categories with significant overcapacity. Electrolux has historically aimed to keep a disciplined approach in its pricing strategy. In markets with high inflation combined with currency rate fluctuations, Electrolux can choose to carry out price increases to offset potential negative effect.
Political uncertainties and weak macroeconomic conditions may indirectly impact demand for appliances. This has implications for Electrolux business and strategy in regions which carry high political and economic risks. Companies that invest in developing political capabilities and have alternative strategies can sustain their competitive advantage despite operating in risky markets. Consequently, Electrolux takes proactive steps to assess the risks and opportunities in its business environment and manage them accordingly.
The fast pace of change in the industry has led to new trends, such as increased consumer power, digitalization, consolidation and sustainability. These changes place increasing demand on investments and ability to adapt, but also opens up major opportunities. Electrolux has in recent years invested in R&D and new innovation and transformed its business into a consumer oriented company with strong focus on consumer benefits. Electrolux has also communicated ambitious targets to strengthen its sustainability footprint.
Materials account for a large share of the Group’s costs. Electrolux purchases raw materials and components for approximately SEK 45 bn, of which approximately SEK 19 bn referred to the former. Fluctuations in commodity prices impact the Group’s input costs and therefore its profitability. In order to mitigate increased input costs related to higher raw material prices, Electrolux may have to take actions to increase cost efficiency, negotiate purchasing contracts for commodities such as steel and chemicals or increase the prices of its products. For a sensitivity analysis on the impact of raw materials, see below.
| Risk | Change +/- | Pre-tax earnings impact,SEKm |
|---|---|---|
| Raw materials1) | ||
| Carbon steel | 10% | 600 |
| Stainless steel | 10% | 200 |
| Plastics | 10% | 700 |
1) Changes in raw materials refer to Electrolux prices and contracts, which may differ from market prices.
| Carbon steel, 31% | 31 |
| Plastics, 36% | 36 |
| Copper and aluminum, 7% | 7 |
| Stainless steel, 10% | 10 |
| Other, 16% | 16 |
