The Group’s global presence, with manufacturing and sales in many countries, creates currency exposure but also 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.
Main transaction flows
The main transaction flows and currency pairs are presented in the map together with an explanation of how they impact the Group.
Electrolux is a net importer into the market with flows mainly from China and production conducted in Mexico. In addition, operations in Canada have an exposure to USD as Electrolux imports products into the 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 is 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.
Sensitivity analysis of currencies
The major currencies for the Electrolux Group are the USD, EUR, CNY, BRL, AUD, GBP, CAD, CHF, CZK, RUB and VND. In general, income for Electrolux benefits from a weak USD, EUR and CNY and from a strong BRL, GBP, CAD, AUD, CHF, CZK, RUB and VND. In countries with large manufacturing and logistics centers, effects over time will to a large extent balance out due to natural hedging.
|Currency1)||Change +/-||Pre-tax earnings impact2) -/+ SEKm|
|USD to EUR||10%||390|
|EUR to GBP||10%||230|
|USD to BRL||10%||230|
|USD to CAD||10%||220|
|EUR to CHF||10%||200|
|THB to AUD||10%||140|
|CNY to USD||10%||140|
|EUR to CZK||10%||100|
|EUR to RUB||10%||90|
|USD to VND||10%||90|
|Translation exposure to SEK3)||10%||670|
1) Including transaction effects but not translation effects.
2) At year-end 2020.
3) Assuming the Swedish krona appreciates/depreciates against all other currencies.