The Electrolux Group’s financial targets 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 14%. 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 for best-in-class consumer experiences 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 at least 6% should yield a minimum return on net assets of 20%. Further potential for value creation is possible if Electrolux can increase sales and improve its profitability level. The business has to achieve a sustainable profitability level before further 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 a 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 6.1% (5.2). Four business areas achieved an operating margin above 6%. Cost efficiencies and product mix improvements contributed to the favorable margin development in 2017. Electrolux has focused on the most consumer relevant and profitable product categories and exiting unprofitable categories and markets, which has improved the product mix.
* Financial targets over a business cycle.
| 13 | 14 | 15 | 16 | 17 | |
| Operating income | 1,580 | 3,581 | 2,741 | 6,274 | 7,407 |
| Operating margin | 1.4 | 3.2 | 2.2 | 5.2 | 6.1 |
| Target, at least 6% | 6 | 6 | 6 | 6 | 6 |
TARGET*
6%
RESULT 2017
6.1%
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 and the goal of at least 4 times capital turnover has been exceeded. Reducing the amount of capital tied up in operations creates opportunities for profitable growth.
The capital turnover-rate increased to 5.9 times (5.8) in 2017. The Group’s ongoing activities to operationally and structurally reduce working capital and increase efficiency within operations contributed to this favorable development.
* Financial targets over a business cycle.
| 13 | 14 | 15 | 16 | 17 | |
| Capital turnover-rate | 4 | 4.5 | 5 | 5.8 | 5.9 |
| Target, at least 4 times | 4 | 4 | 4 | 4 | 4 |
TARGET*
4x
RESULT 2017
5.9x
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 35.8% (29.9). Average net assets and working capital declined during the year. Average net assets were reduced to SEK 20,713m (20,957), corresponding to 17.0% (17.3) of net sales. Working capital declined to SEK –15,721m (–14,966), corresponding to –12.2% (–11.7) of net sales. Net operating working capital (inventories, trade receivables and accounts payable) improved to SEK 4,305m (4,543), corresponding to 3.3% (3.5) of net sales.
* Financial targets over a business cycle.
| 13 | 14 | 15 | 16 | 17 | |
| Average net assets | 27148.0 | 25166.0 | 24848.0 | 20957.0 | 20713.0 |
| Return on net assets | 5.8 | 14.2 | 11 | 29.9 | 35.8 |
| Target >20% | 20 | 20 | 20 | 20 | 20 |
TARGET*
>20%
RESULT 2017
35.8%
All business areas have to achieve a sustainable profitability level before moving into targeted profitable growth, see Electrolux business model. 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 and the target is a total sales growth of at least 4%.
Net sales increased to SEK 122,060m (121,093), organic sales was slightly down while acquisitions/divestmens contributed to sales by 1.0%. Four business areas reported organic sales growth. The active product portfolio approach of exiting from unprofitable product categories and lower volumes under private labels in North America impacted sales negatively.
* Financial targets over a business cycle.
| 13 | 14 | 15 | 16 | 17 | |
| Net sales | 109151 | 112143 | 123511 | 121093 | 122060 |
| Sales growth | 4.5 | 1.1 | 2.2 | -1.0 | 0.6 |
| Target, at least 4% | 4 | 4 | 4 | 4 | 4 |
Total sales growth excluding currency translation effects.
TARGET*
4%
RESULT 2017
0.6%
Electrolux places substantial focus on talent management to attract, recruit, develop, and retain excellent talents with diverse backgrounds. Teamship is the Electrolux way of working. It’s about setting aligned goals that allow clear choices and continuous improvement. It’s about knowing how to collaborate. It’s about transparency and a learning organization. Finally, it is about engagement and a passion for Best-in-class consumer experiences.
Electrolux employee engagement (EES) is an important tool for leaders to assess engagement, leadership, organizational capabilities and commitment to strategy and purpose. The survey allows for external comparison with other high-performing learning organizations.
* 80% represents best-in-class, while 67% is the benchmark for other high-performing organizations.
| 14 | 15 | 16 | |
| Engagement index | 59 | 64 | 67 |
| Target, 80% | 80 | 80 | 80 |
In 2017, a mini survey was carried out to monitor the teams with low scores in previous surveys. The survey showed progress. A new comprehensive survey will be carried out in 2018.
TARGET*
80%
RESULT 2016
67%
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 2017, the most resource-efficient Electrolux products represented 19% of products sold and 28% of gross profit.
Electrolux can best contribute to remediating climate change 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 2017, 15 million tonnes have been cut, representing more than half of the target.
HALVING THE CLIMATE IMPACT, MILLION TONNE'S CO2
| 05 | - | 15 | 16 | 17 | |
| Product use | 42.00 | 30.50 | 29.90 | 29.20 | |
| Green House Gas | 7.20 | 5.20 | 5.10 | 4.90 | |
| Manufacturing | 0.60 | 0.40 | 0.30 | 0.20 | |
| Transport | 0.40 | 0.40 | 0.30 | 0.30 | |
| 2020 Target, 50% | 50.00 | 50.00 | 50.00 | 50.00 | 50.00 |
TARGET 2020
-50%
RESULT 2017
-31%