Electrolux initiated a restructuring program in 2004 to make the Group’s production competitive in the long term. It will be completed in 2011 and more than half of production of appliances will be located in low-cost areas. The total cost of the program will be approximately SEK 8.5 billion, and the program is expected to generate annual cost savings of SEK 3.4 billion with full effect as of 2013. Restructuring provisions and write-downs are reported as items affecting comparability within operating income.
Throughout 2010, Electrolux introduced restructuring activities and aquisitions. These activities are described below.
December 2010
Electrolux consolidates cooking manufacturing in North America
Electrolux is to consolidate its North American cooking manufacturing to Tennessee, USA, by building a new plant in Memphis. This site offers an optimal geographical location towards customers and suppliers. Electrolux currently operates a factory in Springfield. The new factory will together with the existing cooker factory in Springfield establish Tennessee as a cooking production centre for Electrolux in North America, enabling Electrolux to realize synergies in manufacturing, R&D, purchasing, etc.
Production in Memphis is expected to start in mid-2012, and the factory is expected to be fully operational in 2013. The new manufacturing site, which represents an investment of USD 190m, corresponding to approximately SEK 1,300m, will receive investment support from state, county and city governing bodies, which is pending their final approval.
Production at Electrolux cooking facility in L’Assomption, Quebec, Canada, will be transferred to the new facility in Memphis. Transfer of production from the factory in L’Assomption will begin in mid-2012, and the factory will close in the fourth quarter of 2013. The factory has approximately 1,300 employees. The closure will incur a total cost of approximately SEK 430m, which was taken as a charge against operating income in the fourth quarter of 2010, within items affecting comparability.
Electrolux to reduce workforce in Europe
In Europe, Electrolux will reduce its workforce within manufacturing of appliances by approximately 800 employees in 2011 and 2012. No factory will be closed. Changes will be implemented gradually, and fully finalized in the fourth quarter of 2012. The redundancies will incur a total cost of approximately SEK 360m, which was taken as a charge against operating income in the fourth quarter of 2010, within items affecting comparability.
October 2010
Electrolux intends to acquire Olympic Group in Egypt
As part of Electrolux strategy to grow in emerging markets,
Electrolux last October announced its intention to acquire Olympic Group for Financial Investments S.A.E. Olympic Group is the largest manufacturer of household appliances in the fast-growing Middle East and North Africa regions.
Olympic Group, listed on the Egyptian Stock Exchange, has 7,300 employees and manufactures washing machines, refrigerators, cookers and water heaters. In 2009, net sales amounted to 2.1 billion Egyptian pounds (EGP), approximately SEK 2.5 billion. Olympic Group’s estimated volume market share of appliances in Egypt is approximately 30%.
In October, Electrolux signed a Memorandum of Understanding with Paradise Capital to acquire Paradise Capital’s 52% controlling interest in Olympic Group. Electrolux intends to launch a Mandatory Tender Offer for the remaining shares in the company. Upon completion of the transaction, the ownership in the associated companies Namaa and B-Tech will be acquired by Paradise Capital.
The estimated enterprise value of Olympic Group, excluding the above mentioned associated companies, is approximately EGP 2.7 billion or SEK 3.2 billion. The acquisition is subject to satisfactory completion of the due diligence process that has been initiated, regulatory clearances and agreements on customary transaction documentation. Upon completion of the acquisition, Olympic Group will against a management fee enter into a management agreement with Electrolux and Paradise Capital for continued technical and management support.
Given recent turmoil in Egypt, Electrolux is assessing the situation.
August 2010
Electrolux acquires washer plant in Ukraine
Electrolux has signed an agreement to acquire a washing-machine factory in Ivano-Frankivsk, Ukraine, with approximately 150 employees.
The acquisition strengthens Electrolux presence and manufacturing base in Central and Eastern Europe. Ukraine participates in the free trade framework within the Commonwealth of Independent States (CIS), which includes Russia, Kazakhstan, Armenia, Azerbaijan and other countries.
The washer factory is acquired from Antonio Merloni S.p.A. and the purchase price is EUR 19m. Closing of the deal is expected to take place in the first quarter of 2011, and is subject to approval by competition authorities.
April 2010
Improving efficiency in appliances plants in Italy and France
Electrolux is continuing its restructuring work in Europe. In the second quarter of 2010, work was initiated on how efficiency at the washing-machine plant in Revin, France, and at the cooker plant in Forlì, Italy, can be improved. The costs are estimated at approximately SEK 210m, which were charged against operating income, within items affecting comparability, in the second quarter of 2010.
January 2010
Production of cookers in Sweden to be phased out
It has been decided to discontinue the Group’s production of cookers in Motala, Sweden. In the first quarter of 2011, the greater part will be phased out and an external part will take over production of large cookers and compact-kitchens. Approximately 240 people are employed at the plant. Costs for the discontinuation, SEK 100m, were charged against operating income, within items affecting comparability in the first quarter of 2010.