Highlights of the fourth quarter of 2019
- Net sales for continuing operations, excluding Electrolux Professional, amounted to SEK 32,011m (32,021). Sales growth was -2,8%, mainly due to lower volumes in North America related to both consolidation of manufacturing and a weak market.
- Operating income for continuing operations amounted to SEK 960m (1,670), corresponding to
a margin of 3.0% (5.2).
- Three out of four business areas improved earnings, but lower volumes and transition costs related to the consolidation of manufacturing in North America impacted earnings negatively.
- Income for the period for the total Group, including Electrolux Professional, decreased to SEK 559m (1,575), and earnings per share was SEK 1.94 (5.48).
- Operating income for Electrolux Professional declined due to lower volumes and transition costs.
- Operating cash flow after investments for the total Group, including Electrolux Professional, was
SEK 3,226m (3,163).
- The Board proposes a dividend for 2019 of SEK 8.50 (8.50) per share, to be paid in two installments.
- The Board has decided to propose that an EGM is held to resolve on the distribution of Electrolux Professional.
President and CEO Jonas Samuelson’s comment
We are in an intense period of transformation and innovation. In 2019, we strengthened our platform for future growth by launching important new product ranges, initiating additional efficiency measures and investing in modularized products in automated manufacturing. During the year, we also announced our intention to split the Group into two listed companies – ‘Electrolux’ for household appliances and ‘Electrolux Professional’ for professional appliances.
In the fourth quarter, three out of four consumer business areas improved their earnings. Unfortunately, that is not evident by just looking at the Group’s operating margin of 3.0%. Our North American business area was significantly impacted by consolidation of U.S. refrigerators/freezers production to the new plant in Andersson, resulting in capacity constraints impacting sales volumes negatively as well as high manufacturing transition costs for running three facilities in parallel.
In the full year 2019, I am pleased that we continued to have a favourable sales and earnings impact from product-mix improvements. Our two major launches, under a sharpened Electrolux brand, in Europe and Australia were both well-received and contributed to earnings. We fully offset with pricing the significant headwinds from raw material costs, trade tariffs and currency we faced. However, the consolidation of U.S. production impacted sales and earnings negatively, notably in the fourth quarter. We also had higher marketing investments to support our product launches. Hence, operating margin excluding non-recurring items declined to 3.8% (4.8) in 2019 and sales growth was -1.3%.
Looking ahead, we expect the capacity constraints in Anderson to be gradually resolved during the first half of 2020, but we will have transition costs also impacting the third quarter. Given this situation, lower volumes and higher costs will impact earnings for the first quarter 2020 resulting in a loss for business area North America. It is a complex process to set up brand-new, highly automated and large-scale production flows with top quality as well as high output capacity. I am confident that the measures we are taking to strengthen our competitiveness in North America are the right ones, both making us more efficient and providing consumers with great new products. I also want to emphasize, that we are on track to generate approximately SEK 3.5 bn of annual cost savings, with full effect from 2024.
The extension of the Chinese New Year holiday, due to the coronavirus, will impact our sourcing and if Chinese suppliers are further affected it could potentially have a material financial impact. As we are sourcing significant volumes of finished products and components from China to all our business areas, we are now implementing contingency plans to mitigate a potential extended period of supply disruptions.
The overall demand trend across most markets in 2019 is expected to continue in 2020. We anticipate market demand for appliances in North America to be relatively flat and in Latin America to be positive. Demand in Europe as well as in the Asia-Pacific, Middle East and Africa region is expected to be slightly positive.
We estimate positive year-over-year impact from raw materials and tariffs in the range of approximately SEK 0-0.5 bn in 2020, while currency headwinds seem to continue.
Our journey toward profitable growth continues in 2020. As we now have an even more consumer-focused organization with key global capabilities to accelerate product innovation and efficiency, I am convinced that we are better positioned than ever to deliver long-term shareholder value.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, January 31. 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: 77477310#
Slide presentation for download:
Link to webcast:
For further information, please contact:
Sophie Arnius, Head of Investor Relations +46 70 590 80 72
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 January 31, 2020.