Electrolux currency exposure
The Group's global presence, with manufacturing and sales in a number of countries creates currency exposure for the Group. The principal exchange rate effect arises from transaction flows, but Electrolux is also affected by translation effects when the Group's sales and costs are translated into SEK.
Electrolux is a net importer into the market with flows mainly from China and production conducted in Mexico. In addition to this, the operation in Canada has an exposure to USD as Electrolux imports products into that market.
Most of the finished products originate from own factories in the region, while imported input goods such as raw materials and components to a large extent are denominated in USD.
A major part of the currency flows in Europe is denominated in EUR, with external imports primarily in USD. Electrolux faces currency exposure when the cost base in the factories differs from the domestic sales.
The majority of the operations comprises of local production.
The Group sources a large volume of input goods and finished goods from China to Electrolux globally. A major part of these are invoiced in USD but also in CNY.
The main import flows are based in THB from the Electrolux facility in Thailand, but imports in USD are also significant.
Largest currency exposures, 2019 SEKm
Exchange rate exposure
The Group's global presence, with manufacturing and sales in a number of countries, offsets exchange rate effects to a certain degree. The principal exchange rate effect arises from transaction flows - when purchasing and/or production is carried out in one currency and sales occur in another currency. Every month Group Treasury collects forecasts of the transaction flows for the coming 12 months from the operating units and hedges the invoiced flows.
To some extent, the Group also utilizes currency derivatives to hedge forecasted flows with both committed price and volumes. The results from the currency hedges are transferred to the operating units. It is the business areas' responsibility to manage the FX risk of the forecasted flows through immediate price adjustments and cost reductions.
Electrolux is also affected by translation effects when the Group's sales and costs are translated into SEK. The translation exposure is primarily related to currencies in those regions where the Group's most substantial operations exist.
Currency effects 2019
Compared with the previous year, changes in exchange rates for the full year 2019 had a negative impact on operating income. The total currency effect (translation effects and transaction effects) amounted to SEK -476m. The transaction effect was SEK -696m and translation effect SEK 220m.
The major part of the currency headwind was related to weaker currencies in Latin America, resulting in higher import cost. Australia also faced a strong headwind as the Australian dollar weakened during 2019, making Australian imports more expensive. The negative effects were somewhat reduced by cheaper imports from China to the U.S.
Sensitivity analysis of currencies
The major currencies for the Electrolux Group are the USD, EUR, CNY, BRL, AUD, GBP, CAD and CHF. The currency pairs and flows are presented in the map together with an explanation of how they impact the Group. In general, income for Electrolux benefits from a weak USD, EUR and CNY and from a strong BRL, GBP, CAD, AUD and CHF.
In countries with large manufacturing and logistics centers, effects over time will to a large extent balance out due to natural hedging.
|Currency1) and interest rates2)||Change +/-||Pre-tax earnings impact, -/+ SEKm|
|USD to EUR||10%||380|
|USD to BRL||10%||290|
|EUR to GBP||10%||260|
|USD to CAD||10%||260|
|CNY to USD||10%||210|
|EUR to CHF||10%||200|
|THB to AUD||10%||130|
|EUR to RUB||10%||120|
|EUR to CZK||10%||110|
|USD to AUD||10%||100|
|Translation exposure to SEK3)||10%||370|
|Interest rate||1 percentage point||40|
1) Including transaction effects but not translation effects.
2) All figures in the table refer to the consumer business, exclusive of Electrolux Professional.
3) Assuming the Swedish krona appreciates/depreciates against all other currencies.