Highlights of the fourth quarter of 2020
- Net sales amounted to SEK 33,902m (32,011). Organic sales increased by 17.5%, benefitting from continued high levels of home-improvement spending as well as positive mix and price development.
- Operating income amounted to SEK 2,498m (960), corresponding to a margin of 7.4% (3.0). Higher prices and innovative high-margin products were key drivers.
- Strong sales and earnings across all business areas.
- Income for the period amounted to SEK 1,860m (366) and earnings per share was SEK 6.47 (1.27).
- Operating cash flow after investments was SEK 5,364m (2,823).
- The Board proposes a dividend for 2020 of SEK 8.00 (7.00) per share, to be paid in two equal installments.
President and CEO Jonas Samuelson’s comment
The coronavirus pandemic in 2020 had a severe impact on all aspects of society. Our strategy and our agile ways of working helped us to safely manage the challenges and respond to changing consumer needs brought about by the pandemic.
The year was highly volatile with a challenging first half followed by a significant recovery during the second half. This resulted in a strong performance improvement for the full year, with an operating margin of 5.0% (2.7). The organic sales growth of 3.2% was driven by improved mix through increased sales of innovative premium products as well as by higher net prices. Aftermarket sales, one of our strategic focus areas, increased by 13% and accounted for about 7% of Group sales.
Organic sales growth in the fourth quarter was 17.5%. Sales continued to benefit from consumers allocating more of their household budgets to home improvement and we also executed well on price and mix. Operating margin increased significantly to 7.4% (3.0) and all business areas improved their earnings and delivered margins well above 6%.
Looking into 2021, visibility remains limited due to the ongoing pandemic. However, for the first half of 2021 we anticipate that the strong consumer demand from increased home-improvement spending experienced during the second half of 2020 will remain to some extent. In addition, retail inventories are currently low, in general. We therefore expect demand for the first half of 2021 to exceed normal seasonal levels across our main markets, although capacity and component availability will likely remain constraining factors. Assuming that consumer spending patterns start to normalize by mid-year, we estimate that also market demand will normalize during the second half of 2021. All together, we expect market demand for appliances for the full year 2021 to be positive in our main markets.
From 2021 we revise the format for how we communicate the business outlook in order to link it more strongly to the key drivers for profitable growth in our value creation strategy. Our strategic initiatives to reach the operating margin objective of at least 6% and sales growth of at least 4% generated significant improvements in 2020.
For 2021 we expect a continued positive organic contribution from volume, price and mix driven by a favorable market demand, higher prices compensating for raw material headwind, and increases in innovation/marketing investments, including a step-up in digitalization of our consumer interactions. During the past three years, mix improvements from innovation, brand and aftermarket sales growth have in total contributed more than SEK 3bn to operating income, realizing a very favorable return on investment.
Continuous cost improvements and execution of our re-engineering program, mainly related to the Anderson facility, will increase cost efficiency in 2021. However, these efficiency improvements will be partly offset by higher logistic costs and transition effects as we ramp-up more facilities in our re-engineering program towards the latter part of the year. As we also plan to accelerate innovation/marketing investments, given that market conditions remain favorable, total net cost in 2021 is expected to increase.
As a global appliance company, we are exposed to external factors such as raw materials, tariffs, currency and excess inflation. For 2021 we estimate a headwind, primarily due to raw material costs. During the past two years we have fully offset headwinds from raw material and currency with price increases and we expect to do so also in 2021 through already announced price increases.
I am proud of how we as an organization have navigated this challenging year with a strong focus on health and safety. For me it confirms that we have the right strategy and culture in place, allowing us to quickly act on challenges as well as seize opportunities. As the pandemic continues into 2021, we will continue to create value – safely and sustainably.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, February 2. 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: 32090696#
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. The information was submitted for publication, through the agency of the contact person set out above, at 0800 CET on February 2, 2021.