Another record result for Electrolux. The positive development from last year continues as Electrolux shows its best first-quarter result in appliances ever.
Electrolux strategy with focus on innovative products, strong brands and a cost-efficient production progresses as planned and has for the last 12-month period resulted in an operating margin of over 6%.
The result for 2009 was one of the best ever for Electrolux, and the first quarter of 2010 continues in the same way, with a new record and all operations showing strong improvements.
In North America, we’ve improved our operating income through a better product mix. This is a result of our successful increase in sales and market shares under our own strong brands Frigidaire and Electrolux. At the same time, we’ve consciously continued to phase out products with lower profitability, primarily under retailers’ own brands.
In Europe, we are continuing to take market share within the very important built-in segment. This is mainly due to the successes in the German market and our cooperation with IKEA. Another positive factor responsible for improving our result is our successful quality work, which has decreased our warranty costs.
Demand in our most important markets has recovered somewhat more quickly than we anticipated. This is primarily true of the US market, which showed strong growth in March. For the whole of Western Europe, we note a certain increased demand for the first time after ten quarters of decreases. The Brazilian market continues to grow, even though previously implemented tax subsidies were discontinued in the quarter. A steady improvement in demand is good news for Electrolux, because we can quickly adapt production, at the same time as we are launching new, innovative products.
Prices of certain raw materials continue to rise. When the global economy picks up the pace, we expect even higher raw-material prices. We have contracts for fixed prices on a significant portion of the year’s purchases and we do not expect our costs for raw materials in 2010 to increase by more than SEK 1 billion compared to last year. Data show no historical correlation between increasing raw-material costs and poorer earnings for Electrolux, which is a result of the fact that we have been able to compensate for increased raw-material costs with higher prices and cost savings. In addition, we know that increasing raw-material prices often coincide with an economic recovery, and thus also an increased demand for appliances.
Electrolux has for the last 12-month period achieved an operating margin of more than 6%. The margin improvement in combination with increased balance sheet efficiencies has also resulted in a return on capital employed above our target of 25%. Although there is still great uncertainty and many things can happen in the remaining part of the year, 2010 could be the year we approach our goal of an operating margin of 6%.
Stockholm, April 27, 2010
President and Chief Executive Officer