Electrolux financial goals contribute to maintaining and strengthening the Group’s leading, global position in the industry, and to generating a healthy total return to 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 17%. The Group’s capacity to create healthy cash flow and to enhance operational efficiency represent strong contributing factors 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 not less than 6%. A capital turnover-rate of at least four times combined with an operating margin of 6% should yield a minimum return 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 2014, the Electrolux Green Range, the most energy-efficient products, represented 13% of products sold and 25% of gross profit. The Group’s operating margin increased to 4.3%, excluding items affecting comparability.
Electrolux strives for 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 was 4.0 times in 2014.
| 10 | 11 | 12 | 13 | 14 | |
| Operating income | 6494 | 3155 | 5032 | 4055 | 4780 |
| Operating margin | 6.1 | 3.1 | 4.6 | 3.7 | 4.3 |
| Goal 6% | 6 | 6 | 6 | 6 | 6 |
| 10 | 11 | 12 | 13 | 14 | |
| Capital turnover-rate | 5.1 | 4.3 | 3.9 | 3.8 | 4 |
| Goal 4 times | 4 | 4 | 4 | 4 | 4 |
GOAL
>6%
RESULT 2014
4.3%
GOAL
>4x
RESULT 2014
4.0x
Focusing on growth with sustained profitability and a small but effective 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 would achieve a return on net assets (RONA) of at least 20%. The figure reported for 2014 was 17%.
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. During the year, an agreement was signed to acquire the US appliance producer GE Appliances from General Electric, the largest acquisition in the history of Electrolux, see page 87. Sales rose by 2.7% in 2014. The organic sales growth was 1.1%, currencies had a positive impact of 1.6%.
| 10 | 11 | 12 | 13 | 14 | |
| Average net assets | 20940 | 23354 | 28112 | 28915 | 27941 |
| Return on net assets | 31 | 13.5 | 17.9 | 14 | 17.1 |
| Goal 20% | 20 | 20 | 20 | 20 | 20 |
| 10 | 11 | 12 | 13 | 14 | |
| Net sales | 106326 | 101598 | 109994 | 109151 | 112143 |
| Organic sales growth<sup>1)</sup> | 1.5 | 0.2 | 5.5 | 4.5 | 1.1 |
| Goal 4% | 4 | 4 | 4 | 4 | 4 |
1) In local currencies and comparable operating units.
GOAL
>20%
RESULT 2014
17%
GOAL
>4%
RESULT 2014
1.1%
Financial goals over a business cycle, excluding items affecting comparability.