The Electrolux Group’s financial goals contribute to maintaining and strengthening the company’s leading, global position in the industry, and generate a healthy total return for Electrolux shareholders.
6%
Operating
margin
>20%
Return on
net assets
4%
Sales
growth
Value
creation
x
=
4x
Capital
turnover-rate
Over the past ten years, Electrolux shareholders have received an average annual total return of approximately 10%. The Group’s capacity to create healthy cash flow and to enhance operational efficiency plays a major role in contributing to this value creation. There is further potential for profitability by increasing margins. Based on the strategic framework, innovative products are to contribute to higher profitability and a margin of at least 6%. A capital turnover-rate of at least 4 times combined with an operating margin of 6% should yield a minimum return on net assets of at least 20%. Further potential for value creation is possible if Electrolux can increase sales while retaining this profitability level. All business areas have to achieve a sustainable profitability level before investments are made in targeted profitable growth. The objective is an average annual sales growth of 4%.
Electrolux is focused on achieving sustainable profitability in all business areas, with high priority on securing an operating margin of at least 6% over the business cycle. This will be achieved through innovative product launches and active product portfolio management, in combination with product- and structural cost efficiencies.
Operating margin improved to SEK 5.2% (3.9)1). Operating income improved across most business areas, although earnings for the operations in Latin America were impacted by continued weak market demand. Four of six business areas achieved an operating margin above 6%. Increased
efficiency and product-mix improvements contributed to
the positive earnings trend. Actions to improve profitability in Small Appliances intensified and the Eureka brand in the US was divested.
1) Excluding costs of SEK 2,059m related to the not completed acquisition of GE Appliances.
| 12 | 13 | 14 | 15 | 16 | |
| Operating income | 4,000 | 1,580 | 3,581 | 2,741 | 6,274 |
| Operating margin | 3.6 | 1.4 | 3.2 | 2.2 | 5.2 |
| Goal, 6% | 6 | 6 | 6 | 6 | 6 |
GOAL
6%
RESULT 2016
5.2%
Electrolux strives to achieve 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 working capital. Reducing the amount of capital tied up in operations creates opportunities for profitable growth.
The capital turnover-rate increased to 5.8 times (5.0) in 2016. The Group’s ongoing activities to operationally and structurally reduce working capital and increase efficiency within operations contributed to this favorable development.
| 12 | 13 | 14 | 15 | 16 | |
| Capital turnover-rate | 4.1 | 4 | 4.5 | 5 | 5.8 |
| Goal, 4 times | 4 | 4 | 4 | 4 | 4 |
GOAL
4x
RESULT 2016
5.8x
Focusing on growth with sustained profitability and a small, efficient capital base enables Electrolux to achieve a high long-term return on capital. With an operating margin that reaches the target of at least 6% and a capital turnover-rate of at least 4 times, Electrolux will achieve a return on net assets of at least 20%.
Return on net assets amounted to 29.9% (11.0). Average net assets and working capital declined during the year. Average net assets were reduced to SEK 20,957m (24,848), corresponding to 17.3% (20.1) of net sales. Working capital declined to SEK –14,966m (–12,234), corresponding to –11.7% (–9.9) of net sales.
| 12 | 13 | 14 | 15 | 16 | |
| Average net assets | 26543.0 | 27148.0 | 25166.0 | 24848.0 | 20957.0 |
| Return on net assets | 14.8 | 5.8 | 14.2 | 11 | 29.9 |
| Goal 20% | 20 | 20 | 20 | 20 | 20 |
GOAL
20%
RESULT 2016
29.9%
All business areas have to achieve a sustainable profitability level before investments are made in targeted profitable growth. In order to reach the growth goal, the Group continues to strengthen its positions in core markets, new markets and segments. Organic growth is complemented by acquisitions.
Net sales amounted to SEK 121,093m (123,511), corresponding to organic sales decline of 1.1%. Active product portfolio management to exit from unprofitable
product categories, weak market demand in Latin America and lower sales under private labels in North America impacted sales during the year. Acquisitions had an impact on sales of 0.1%.
| 12 | 13 | 14 | 15 | 16 | |
| Net sales | 109994 | 109151 | 112143 | 123511 | 121093 |
| Sales growth | 9.4 | 4.5 | 1.1 | 2.2 | -1 |
| Goal 4% | 4 | 4 | 4 | 4 | 4 |
GOAL
4%
RESULT 2016
-1.0%
Sustainability leadership is crucial to realizing the Electrolux strategy for profitable growth. The objective is to steadily improve at meeting people’s needs and enhancing their daily lives in a sustainable way. In 2016, the most resource-efficient Electrolux products represented 20% of products sold and 28% of gross profit.
Electrolux can best contribute to re-mediating the climate change issue through efficient products. The absolute majority of CO2 impact during the lifetime of an appliance is from product use. Through more efficient products and operations the Group aims to cut the CO2 impact by 50% by 2020 relative to 2005 levels. As of 2016, 14 million tonnes have been cut, representing about half of the target.
| 05 | - | 14 | 15 | 16 | |
| Product use | 45.40 | 35.60 | 33.50 | 33.40 | |
| Green House Gas | 7.40 | 5.40 | 5.20 | 5.20 | |
| Manufacturing | 0.60 | 0.40 | 0.40 | 0.30 | |
| Transport | 0.40 | 0.40 | 0.40 | 0.30 | |
| 2020 Target 50% | 50.00 | 50.00 | 50.00 | 50.00 | 50.00 |
GOAL 2020
-50%
RESULT 2016
-27%