Highlights of the first quarter of 2018
- Net sales amounted to SEK 27,906m (28,201). Sales growth was 3.3%, while currency translation had a negative impact of 4.4%. Strong organic sales growth in Major Appliances EMEA and Asia/Pacific.
- Operating income amounted to SEK 764m (1,442), corresponding to a margin of 2.7% (5.1).
- Operating income includes restructuring costs of SEK 596m relating to the consolidation of freezer production in North America. Excluding these costs, operating income amounted to SEK 1,360m, corresponding to a margin of 4.9%.
- Product mix improvements and higher cost efficiency offset accelerating input costs pressures and unfavorable currency effects.
- Continued solid earnings development across most business areas, although earnings for Major Appliances Latin America was significantly impacted by higher costs for raw materials and currency headwinds.
- Operating cash flow after investments amounted to SEK -2.7bn (-1.0).
- Income for the period decreased to SEK 551m (1,012), and earnings per share was SEK 1.92 (3.52).
President and CEO Jonas Samuelson’s comment
Our profitable growth journey continued in the first quarter and we achieved sales growth of 3.3%, of which organic growth was 1.8%. In the quarter we initiated the consolidation of our North American production and took a restructuring charge. Excluding this charge, operating income was in line with last year. I am particularly pleased that our consistent focus on portfolio management and cost efficiency paid off, offsetting pressure from higher raw material costs and currency.
The earnings trend for our operations in EMEA, Asia/Pacific and Home Care & SDA remained positive and Professional Products’ performance was once again solid. In EMEA, the focus on innovative products under our premium brands continued to drive profitable growth and market share gains. Our North American business area was impacted by significantly lower air care volumes and continued lower volumes under private label. However, I am very pleased to see the strategically important newly launched Frigidaire product range delivering double digit growth resulting in market share gains in core branded appliances. The previously announced price increases in North America were gradually implemented during the quarter, and will start to have an impact during the second quarter. In Latin America we were not able to offset the negative impact from raw materials and currency as implemented price increases had a limited impact on the quarter.
The increase in raw material costs accelerated in the quarter, partly due to the announcement of trade barriers for steel in the U.S., but also other metals, plastics and logistics costs increased further. We now estimate the negative year-over-year impact from higher costs for raw materials to be SEK 1.6 -1.8bn in 2018 why we need to continue our cost efficiency efforts, and further improve pricing in most key markets.
Demand for appliances in most of our markets showed growth in the quarter and we expect this to continue and, hence, re-confirm our market view for 2018. In this supportive market environment we will continue to drive profitable growth by creating best-in-class consumer experiences through innovation. Our investments in connected appliances not only enhance the experience for consumers, but also create new business opportunities, and are a key part of our path to profitable growth. During the quarter we launched the first connected steam oven with an integrated camera, enhancing the cooking experience to a new level. In the U.S., our award-winning Pure i9 connected robotic vacuum cleaner was brought to consumers by leveraging the digital expertise and consumer-focused approach of Anova, which we acquired in 2017.
The coming years we are stepping up investments in product innovation and automation and the investments in our North American operation are a key part. Work is ongoing to tailor these investments given the recent trade announcements to allow high flexibility in our production, resulting in high adaptability and competitiveness for the important North American market. We are also complementing our initiatives for organic growth with acquisitions to accelerate profitable growth. During the quarter the German professional laundry company Schneidereit was acquired to expand our professional offering into rental solutions. Through our joint venture in China we introduced our premium AEG brand to the fast-growing high-end retail market in the quarter.
Our ambition to shape living for the better sets the direction for Electrolux for years to come.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, April 27. The conference will be hosted by Jonas Samuelson and Anna Ohlsson-Leijon, CFO.
Details for participation by telephone are as follows:
Participants in Sweden should call +46 8 505 564 74
Participants in UK/Europe should call +44 203 364 5374
Participants in US should call +1 855 753 2230
Slide presentation for download:
For further information, please contact:
- Sophie Arnius, Head of Investor Relations +46 70 590 80 72
- Merton Kaplan, IR Manager, +46 (0)73 885 78 03
- Daniel Frykholm, Electrolux Press Hotline, +46 8 657 65 07.
This is information that AB Electrolux is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 0800 CET on April 27, 2018.