Good progress in a challenging environment
I am pleased with our performance in 2018 in the face of challenging conditions for Electrolux. Our focus on innovation to improve the consumer experience and our high cost efficiency are key competitive assets. Combined with price increases, these factors had a positive impact on our earnings, but could not fully compensate for the strong headwinds we faced mainly from raw material and currency. Net sales for 2018 increased to SEK 124bn and our organic growth was driven by price increases and mix improvements across most business areas.
Focused strategy for profitable growth
Electrolux has a clear strategy to deliver profitable growth and create shareholder value. Strong focus on consumer experience innovation and modularized products in automated production are, combined with a healthy financial position, key drivers for profitable growth.
Strong focus on consumer experience innovation through focused brands that drive mix
At the heart of our strategy is a strong consumer focus. I firmly believe that to achieve our targets, we first need to offer outstanding consumer experiences and, with our deep understanding of consumer needs, we are well positioned to do so. This is even more important in today’s market where consumers are very well informed about their options.
In 2018, we launched a large number of new innovative products and this contributed to the strong mix improvement we had in the year. Our innovation is focused on three clear consumer areas; Taste, Care and Wellbeing, where Taste is the largest area accounting for almost 70% or our sales.
In the Taste segment induction hobs are true star products. This is a focus area for us and we have had several innovations including the SenseProbe induction hob with sous-vide, and a world first wireless and battery-less probe, that provides precise, automated assistance when cooking.
In the Care segment innovations include the development of a new sensor system that enables tumble dryers to sense when clothes are just dry enough.
In the Wellbeing segment we launched the groundbreaking cordless vacuum cleaner Electrolux Pure F9 that uses powerful battery technology and innovative design, combining the performance of a traditional vacuum cleaner with the freedom of a stick vacuum.
We reinforced our position as a sustainability leader in the industry, which is an ever-more crucial competitive advantage. In 2018, the most resource-efficient Electrolux products represented 21% of products sold and 29% of gross profit.
A strong brand drives profitable growth. In recent years we have successfully sharpened our brands AEG and Frigidaire to target specific consumer segments and trends. The Electrolux brand itself is now being sharpened in a similar way; Making desirable experiences more sustainable through our Swedish values and professional expertise.
Modularized products in automated production with digitally integrated global supply chain
Modularized products produced in automated production with a digital global supply chain results in more competitive products as well as increased cost efficiency and flexibility. In the beginning of the year we announced a USD 250m investment in the Anderson facility to drive profitable growth in North America, with new lines of innovative Frigidaire refrigerator and freezer products. It is in our DNA to continuously strive to further improve efficiency and quality across the organization, from production to administration.
Healthy cash-flow generation and a strong balance sheet supporting further growth
Growth is further supported by a healthy cash-flow generation and our strong balance sheet. A strong balance sheet gives us firepower and offers acquisition growth opportunities. In 2018, we made two strategic acquisitions within the Professional Product business area.
Well positioned to create value
In 2019, Electrolux turns 100 years old and we are now taking the next step to accelerate profitable growth. In the beginning of 2019 we announced that preparations have begun for the separation of the Professional Products business area and for the creation of a sharper and more focused consumer business.
I am confident that Electrolux is well positioned with the right business focus in this challenging cost environment to continue to deliver shareholder value.
Stockholm, February 2019
President and CEO