Electrolux overall goal is to create shareholder value while aiming to maintain a long-term relationship with its shareholders. In its communication with the capital markets, Electrolux aims to provide reliable, accurate and updated information about the Group’s business development and financial position.
On November 16, 2017, Electrolux held its CMD at the headquarters in Stockholm. A large number of investors, financial analysts and representatives from media were present to listen to presentations by members of the Group management team, providing insight into strategy, business outlook, consumer experience, operational excellence and the Group’s continued journey toward profitable growth.
President and CEO Jonas Samuelson opened proceedings with a strategic overview, including a review of what was said at the preceding CMD in February 2016 and what Electrolux had since delivered in profitability, growth and cash flow. He noted that the prerequisites for profitable growth were coming into place, and restated the Group’s ambition to deliver at least 6% EBIT margin over a business cycle. He also touched upon how far each of the six business areas had progressed on the path to profitable growth.
Several of the presentations focused on the delivery of great consumer experiences as a key to achieving profitable growth. Connectivity and digitalization are important industry trends that impact product development in the three main areas of great tasting food, care for clothes and healthy well-being in the home. Participants were given a few glimpses of exciting new features, including voice-activated products. Chief Marketing Officer Lars Hygrell outlined initiatives to further strengthen the AEG, Frigidaire and Electrolux brands.
Jan Brockmann, Chief Global Operations Officer, talked about initiatives to enhance product competitiveness by continuous improvement in all areas including modularization, digital supply chain and reengineering programs. The level of capital expenditure investments to drive targeted growth will increase, particularly due to comprehensive re-engineering programs at plants in North America and Latin America. Further to the increased cost efficiency, the investments will also open growth opportunities through new innovative products.
A presentation from the Capital Markets Day 2017 is available at www.electroluxgroup.com/cmd2017
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Analysts engage in questions related to the development of the appliance market and the demand in the Electrolux core markets. Forecasts of price, mix and volumes are important topics on which analysts focus in order to gain a better understanding of the operation on which they can base their longer term projections of future performance.
Examples of analysts’ questions during 2017
Can you explain how you are driving continued price/mix improvements across your business areas?
By focusing on innovation and supporting new product launches to offer best-in-class consumer experiences with the strongest brands, Electrolux expects to drive further mix improvement across business areas. Launch of new products under premium brands such as Electrolux and AEG will be key for the product mix. Active product portfolio management will also support the mix, mitigating to some extent the negative impact from industry price pressure. In several of the Group’s markets, Electrolux has also announced price increases as a result of headwinds from raw material costs.
Can you explain the potential of your
product portfolio management?
Product portfolio management is our way to drive focus on consumer benefits, profitability and growth. For a few years, Electrolux has executed structured portfolio management in EMEA, and more recently in Asia/Pacific and Home Care & SDA, which has benefited the business areas with improved mix and positive contribution to earnings. Electrolux is committed to the portfolio management approach by focusing resources on star products, focus categories and brands driving higher contribution margins. In the long run, this will enable more efficient marketing, delivery and sales execution and fuel growth with competitive products.
What are your market outlook for your core regions?
The overall positive demand trend across most markets in 2017 is expected to continue in 2018. The European appliance market is expected to show growth of 1-2% in 2018, with demand growth in most countries. Demand for appliances in North America remains favorable and is anticipated to grow by 2-3%. The market recovery in Latin America continues with an expected growth of 3-5%. Australia is expected to grow 1-2% and the market outlook for Southeast Asia remains positive.
How do you view the tough pricing environment in North America?
The U.S. appliance market is a competitive market attracting a lot of volume, and therefore focus and attention from international appliance makers. This has resulted in continued price pressure in the market in recent years, driven mainly by aggressive promotional activities in combination with extended holiday sales in the U.S. Electrolux has recently announced prices increases in North America.
What will be the key driver for cost efficiencies going forward?
In general, we have had a good run rate of cost achievements for several years, with reduced structural costs through major manufacturing footprint programs which are now completed. Since the start of 2017, Electrolux has shown strong performance in net cost efficiencies, offsetting increased inflation and raw material costs. This was mainly driven by improvements in variable costs but also from efficiencies linked to operational structural costs. We expect to continue to drive continuous improvement across our businesses and also mitigate headwinds from inflationary costs.
Can you comment on your M&A strategy?
In recent years, we have actively worked to develop a good M&A pipeline in order to support our strategy and path to profitable growth through acquisitions. In 2017, we completed five deals, acquiring the smart kitchen appliance company, Anova in Home Care & SDA, the South African water-heater company Kwikot in EMEA, the U.S.-based Grindmaster-Cecilware for our professional business, the kitchen-hoods company Best in Europe and the Continental brand in Brazil. These acquisitions strengthens our market position and contribute to sales and earnings growth across our businesses. We will continue to evaluate potential acquisitions that fit our best-in-class consumer excellence strategy within Taste, Care and Wellbeing.
The telephone conferences are available at www.electroluxgroup.com/ir.