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.
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 was 4.3% (6.1) and included non-recurring items of SEK -1,343m. Excluding these non-recurring items, margin amounted to 5.4% (6.1). Three business areas achieved an operating margin above 6%. Price increases, improved product mix and cost efficiencies partly offset lower volumes and significant headwinds, primarily from raw material and currency. Electrolux focus on the most consumer relevant and profitable product categories, exiting unprofitable categories and markets, has improved the product mix significantly.
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% over a business cycle.
Net sales increased to SEK 124,129m (120,771) and sales growth was 1.7% (0.5). Organic growth was 1.3% (-0.4), driven by price increases and mix improvements. Four business areas reported organic growth. Net contribution from acquisitions and divestments was 0.4%.
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 decreased to 5.3 times (5.9) in 2018, mainly as a result of increased investments and acquisitions.
Return on net assets
Focusing on growth with sustained profitability and a small, efficient capital base enables Electrolux to achieve a high long-term return on capital. 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%.
Return on net assets amounted to 22.7% (36.0). Average net assets increased to SEK 23,381m (20,572), corresponding to 18.8% (17.0) of net sales. Working capital declined to SEK –16,848m (–15,873), corresponding to –13.5% (–13.4) of net sales. Net operating working capital (inventories, trade receivables and accounts payable) improved to SEK 3,789m (4,288), corresponding to 3.0% (3.6) of net sales.
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 outstanding 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. In 2018, the Engagement index increased to 72 compared to 67 in 2016. Driving the result is an improvement on previous low-scoring teams as well as strong company engagement, commitment to quality, new ways of working and direct understanding of how the Electrolux purpose connects to daily work.
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 2018, the most resource-efficient Electrolux products represented 21% of products sold and 29% 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 2018, 15 million tonnes have been cut, representing more than half of the target.