In 2015, market demand for appliances weakened significantly in Brazil. Electrolux implemented extensive adjustments in its operations. However, through its strong position in the region, the Group has excellent prerequisites for long-term, profitable growth.
Ruy Hirschheimer, Head of Major Appliances Latin America
The Electrolux brand occupies a strong position in Latin America through its innovative products and close collaboration with market-leading retail chains. Brazil is the Group’s largest market in the region and accounted for about 60% of Electrolux sales. In major Latin American countries such as Brazil, Chile and Argentina. Electrolux is the market leader in a large number of product categories in appliances.
The Latin American market is dominated by a few large manufacturers. Import duties and logistical costs mean that the bulk of products are produced domestically. The degree of consolidation is also high among retailers. Together, these factors contribute to strengthening the potential of established manufacturers in the region. Brazil accounts for about 50% of the total market.
Following a number of years of growth, the market in Latin America weakened in 2014, and this trend accentuated in 2015.
The declining macroeconomic conditions in Brazil meant that market demand for appliances decreased significantly during the year. Demand also declined in several other markets while demand in Argentina increased.The weak market impacted Electrolux appliance sales in Latin America and organic sales decreased by 2% in 2015.
During the year, the USD strengthened against many Latin American currencies, resulting in increased costs for imports of semi-finished and finished products. Price increases mitigated the negative currency impact.
Electrolux is continuing to expand in Latin America through investments in product development and is well positioned when market demand recovers. Over the year, about 100 new products from all product categories were launched, such as the first frost-free refrigerators manufactured under the Electrolux brand in Argentina and a washing machine with energy-saving technology in Chile.
In Brazil, the first multi-door refrigerator and connected products, such as an air-conditioner and a top-load washer and dryer, were examples of product innovations introduced to the market.
An extensive cost-reduction program was implemented across all units in Latin America to adjust costs to lower demand. One of the results of this was a significant reduction of inventory and, thereby reduced working capital. In addition, capacity adjustments were initiated at the region’s seven production units. Negotiations were started with suppliers to reduce costs, for purchasing raw materials and components.
Major Appliances in Latin America continued to be impacted by weakening market conditions and organic sales declined by 1.5% in 2015.
Operating income deteriorated, mainly as a result of the continued sharp downturn in the Brazilian market. Actions were taken during the year to adjust the cost base to the lower demand.
The new Electrolux Multi-door Refrigerator is the most flexible multi-door refrigerator on the market, with adjustable and retractable shelves, removable compartments and internal ice maker. It also has a differentiated drawer that keeps fruit and vegetables fresh for longer. It keeps food fresh for up to 60% longer time than an ordinary drawer as it has controlled airflow and avoids oxidation.
The new Top Load (15kg) Washer and Dryer is the first on the market with a WiFi connection that allows consumers full control of the product from anywhere in the home, enabling them to turn the product on and off and set the correct program for the particular wash. That means more freedom for consumers to
do other activities while the washer and dryer is operating.