Highlights of the second quarter of 2018
- Net sales amounted to SEK 31,354m (30,948). Sales growth was 0.7% with organic sales growth across most business areas.
- Operating income amounted to SEK 827m (1,919), corresponding to a margin of 2.6% (6.2).
- Operating income include costs of SEK 818m, whereof SEK 564m relates to an investigation by the French Competition Authority and SEK 254m to an unfavourable court ruling in France, both impacting Major Appliances EMEA. Excluding these non-recurring items, operating income amounted to SEK 1,645m, corresponding to a margin of 5.2% (6.2).
- Higher prices, mix improvements and cost savings contributed positively, however operating income was impacted by higher costs for raw materials and currency headwinds.
- Operating cash flow after investments amounted to SEK 1,805m (3,470).
- Income for the period decreased to SEK 517m (1,291), and earnings per share was SEK 1.80 (4.49).
President and CEO Jonas Samuelson’s comment
We continue to execute on our profitable growth strategy in a challenging cost environment. Sales growth amounted to 0.7%, mainly driven by higher prices and improved mix in our core appliances. Despite significantly higher raw material costs and currency headwinds, we delivered earnings in the second quarter in line with our overall expectation. Underlying operating income was SEK 1,645m, corresponding to a margin of 5.2%. It is encouraging to see that our focus on innovative products delivering great consumer experiences result in market share gains in our core branded product categories across the Group. We intensified our cost actions in the quarter and reprioritized some activities to mitigate the increased currency headwind.
EMEA’s strong performance continues, thanks to innovative products resulting in market share gains. Earnings for our operation in Asia/Pacific remained solid. Professional Products had a strong quarter with an operating margin of over 14% and a sales growth of close to 7%. The business area has great momentum across all segments. Home Care & SDA is in a product transition phase and is investing for important launches within the growing cordless vacuum cleaner segment.
Our operation in North America was impacted by significantly lower air care volumes, which, in combination with sharply increasing input costs, explain the drop in operating income compared to last year’s strong second quarter. The important steps we have taken in strengthening our core appliances under the Frigidaire brand are continuing to result in market share gains. The Latin American business area had a challenging quarter, including handling the nation-wide truck driver strike in Brazil. However, I am very pleased with the teams’ focus on implementing price increases and cost measures to mitigate the negative impact from accelerating raw material costs and currency.
In addition to the price increases already implemented, we have announced further price increases in key markets, primarily in North America and Latin America. In combination with cost reductions we are determined to mitigate the increasing headwinds from raw material costs and currency. We now estimate the negative year-over-year impact from raw materials to be approximately SEK 1.8 bn in 2018 and we plan for cost inflation following the recently announced trade actions under Section 301 in the U.S..
Current industry trends indicate a slightly softer market demand outlook for North America, Latin America and Australia, to a large extent driven by higher market prices caused by higher input costs.
We continue to take important steps in strengthening our product portfolio. I am excited about the important product launches we have in our pipeline for the second half of this year and continuing into 2019. This together with our ongoing reengineering programs in North America, Latin America and EMEA are important elements to achieve profitable growth.
Our focus on creating best-in-class consumer experiences, raising prices in key markets and cost management will allow us to mitigate the headwinds we are facing. Looking ahead, I am confident that we are well positioned to execute on our profitable growth strategy.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, July 18. The conference will be chaired by Jonas Samuelson, President and CEO of Electrolux. Mr. Samuelson will be accompanied by
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:
Link to webcast:
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
Arba Kokalari, 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 and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 0800 CET on July 18, 2018.