The comments and figures in this report refer to continuing operations unless otherwise stated
Highlights of the second quarter of 2020
- Net sales amounted to SEK 23,476m (29,232). Organic sales declined by 16.6%, due to lower volumes. The development of the coronavirus pandemic impacted market demand significantly in our main markets and also resulted in supply constraints in North America.
- Operating income amounted to SEK -62m (1,219), corresponding to a margin of -0.3% (4.2).
- Comprehensive cost measures executed to mitigate the effects from the pandemic on earnings.
- Negative currency impact on operating income of approximately SEK 360m.
- Income for the period amounted to SEK -141m (1,006), and earnings per share was SEK -0.49 (3.50).
- Operating cash flow after investments was SEK 122m (-25).
President and CEO Jonas Samuelson’s comment
The coronavirus pandemic affects all of us, personally and professionally. Our top priority is to safeguard the health and safety of our employees and to ensure business continuity as household appliances are essential for consumers’ daily life.
During the months of March through May, we experienced significant volume drops across most of our regions due to the pandemic. As restrictions were eased or removed, demand picked up in June, even if the pace of recovery varies greatly between regions. In some markets, such as many European countries, the recovery pace in the latter part of the quarter has been faster than predicted. It was therefore encouraging that we in June had an organic growth of 3%. I am also pleased that despite challenging conditions we improved our mix this quarter as well. A good example is Australia where newly launched products continue to gain good traction.
We have also delivered on the temporary cost and cash mitigation actions initiated in March; well above our expectations. This shows that both agility and cost focus are part of our DNA. We continue to follow through on our re-engineering and streamlining initiatives, yielding further structural efficiencies to strengthen our cost competitiveness also longer term. As we earlier announced, the coronavirus situation leads to delays in some of our strategic investments of up to half a year and has also impacted the ramp-up of our new Anderson factory in the U.S. due to supply disruptions from Mexico and shutdowns/ absenteeism, which also have impacted all our North American plants. This of course pushes cost savings from these investments forward, but I want to emphasize that we still expect our re-engineering and streamlining initiatives to generate approximately SEK 3.5bn of annual cost savings, with full effect from 2024.
Despite the strong cost reduction execution in the quarter, it was not possible to offset both the 17% organic sales drop and a significant currency headwind and, as we have previously communicated, the quarter was slightly loss-making.
The pandemic situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact on demand will be for the second half of the year. It depends on several factors such as virus resurgences, the extent of additional restrictive measures and the effectiveness of the massive stimulus packages on consumer confidence and demand. In the near term, we see good demand, partially driven by pent-up demand from April/May and the strong stimulus programs. However, for the full year 2020 we continue to expect negative demand in most of our main markets. Hence, as previously communicated, we expect a material financial impact related to the pandemic for the full year 2020, primarily due to the impact in the second quarter.
The increased time spent at home due to the pandemic has quickly changed consumer behavior. The importance of high-quality appliances with relevant features and benefits become more apparent. On the same note, we see consumers paying more attention to health and hygiene; meaning there is an increasing need for products that can boost wellbeing such as vacuum cleaners, air and water purifiers, dish washers and washing machines. Finally, consumers have become more digital and online purchases are growing significantly. These changes in consumer behavior reinforce our strategy and we keep accelerating innovation to deliver relevant products and services, including further development of our e-commerce capabilities.
Our strong commitment to sustainability remains unchanged and we see an opportunity to increase sustainable efforts as people change their behaviors due to the crisis.
Although we are experiencing a challenging time, I am confident that Electrolux remains well positioned to create value. I especially want to thank my colleagues for their great commitment as we continue to execute on our strategy.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, July 17. Jonas Samuelson, President and CEO and Therese Friberg, CFO will comment on the report.
Details for participation by telephone are as follows:
Participants in Sweden: +46 8 566 426 51
Participants in UK/Europe: +44 3333 000 804
Participants in US: +1 631 9131 422
Pin code: 74667634#
Slide presentation for download:
Link to webcast:
For further information, please contact:
Sophie Arnius, Head of Investor Relations +46 70 590 80 72
Åsa Öhman, 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 17, 2020.