Electrolux 1997 Annual Report Download

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Annual Report 1997
Global
Appliance
Company
The

Table of contents

  • Page 1
    The Appliance G lobal Company Annual Report 1997

  • Page 2
    ...Proposed distribution of earnings Auditors' report Statement of added value Eleven-year review D efinitions of financial concepts and key ratios Net sales and average number of employees, by country Board of D irectors G roup organization Electrolux shares H uman resources The G roup's environmental...

  • Page 3
    ...the world's largest producer of floor-care products, absorption refrigerators for caravans and hotel rooms, and compressors for refrigerators and freezers. Electrolux is also the largest or second largest company in the world for food-service equipment, professional laundry equipment, and forestry...

  • Page 4
    ... America Net sales SEK 35,728 m 31.6 % 23,912 Share of G roup sales No. of employees SEK 52,906 m 46.9 % 51,934 Share of G roup sales No. of employees Business areas' share of net Group sales, by region, %1) H ousehold Appliances Professional Appliances O utdoor Products EU Rest of Europe North...

  • Page 5
    ... office â- Holding company Household A ppliances Professional A ppliances O utdoor Products The size of a circle indicates a business area's share of net G roup sales in a region. 3 Electrolux Annual Report 1997 O ceania Net sales No. of employees SEK 1,085 m 1.0 % 585 Share of G roup...

  • Page 6
    ... Europe. Cleaning equipment O ne of the world's largest in vacuum cleaners and wet/dry cleaners. O U TD O O R PRO D U C TS Therma Juno Electrolux-Washex Electrolux-Senking Nyborg D ubix Wascomat Universal Nolin Kent LUX Professional Pulimat Forestry and garden equipment World's largest in chainsaws...

  • Page 7
    ... and wet /dry cleaners for professional users. O U TD O O R PRO D U C TS This business area includes garden equipment, chainsaws and other equipment for forestry work. G arden equipment includes lawn mowers and garden tractors, as well as portable equipment such as lawn trimmers and leaf blowers.

  • Page 8
    ...Jan 1998 Feb (c) SIX Findata Share price G eneral index The Annual G eneral Meeting authorizes distribution of all shares in the G ränges subsidiary to Electrolux shareholders. G ränges shares are listed on the Stockholm Stock Exchange as of May 21. In June, the Board of D irectors authorizes...

  • Page 9
    ... restructuring program, and a capital gain of SEK 604m on divestment of Husqvarna Sewing Machines. 2) Comprises mainly the recycling operation in Gotthard Nilsson AB. 3) Including a capital gain of approximately SEK 50m on divestment of the operation in goods protection. 5 Electrolux Annual Report...

  • Page 10
    ...professional users, and outdoor products. O ur judgement is that with this structure the G roup has a good potential for providing shareholders with sustained, competitive growth in the value of their invested capital. The final major change was the distribution of shares in the G ränges subsidiary...

  • Page 11
    ... ousehold Appliances, Professional Appliances and O utdoor Products, the only remaining operation is G otthard Nilsson, a recycling company with annual sales of almost SEK 2,000m. Restructuring program authorized For some years, Electrolux has reported weak income growth and an unsatisfactory return...

  • Page 12
    .... Although the program refers mainly to Europe, in particular to white goods, floor-care products and operations in Professional Appliances, most of the G roup's units will be affected in some way. In terms of plant shutdowns, Professional Appliances accounts for the greatest number as this business...

  • Page 13
    ... and CEO Five Group staffs Comprehensive strategic investments in IT for improved customer service and reduced costs for both partners. Additional coordination of purchasing to make better use of Group's size. Improved product-development process based on identified customer needs. Strategy for...

  • Page 14
    ... by the President and CEO Strong brands We are continuing work on building the G roup's global and international brands. These include Electrolux, which is the main brand in both H ousehold Appliances and Professional Appliances when we enter new markets in Eastern Europe, Asia and Latin America...

  • Page 15
    ..., Malaysia, Singapore, The Philippines and Indonesia, accounts for most of our sales in the region. In recent years the G roup has invested in establishing a presence in India and China, primarily for white goods. In January, 1997 we started selling own-make refrigerators under the Kelvinator brand...

  • Page 16
    ...Electrolux plant in C uritiba, Brazil, where this C FC -free refrigerator was manufactured. 2. The A EG "Ã- ko Vampyr Rosso" vacuum cleaner. 3. A gas hob made of glass is part of Zanussi's "Yellow Kitchen" line of built-in products, launched in 1997. 4. The most water-efficient Electrolux dishwasher...

  • Page 17
    ... of the world's largest producers of white goods. This product area accounts for the greater share of sales in the H ousehold Appliances business area, and for more than half of total G roup sales. Electrolux is also the world leader in floor-care products, absorption refrigerators for caravans and...

  • Page 18
    ...refrigerators declined by 15% and freezers by 27%. In the previous year, the total market increased by more than 20%. The G roup's latest Frigidaire-brand dishwashers in the US feature lower consumption of water and lower noise levels than comparable A merican products. 14 Electrolux Annual Report...

  • Page 19
    ... for components and direct sales of floor-care products and components. Structural changes Within the framework of the current restructuring program, a small vacuumcleaner plant in Canada was closed. In addition, it was decided that a vacuum-cleaner plant in the UK with about 600 employees will be...

  • Page 20
    ... conditions in Europe • Continued good performance by laundry equipment • Income improves for food-service equipment, but remains at low level 1 Electrolux is the European leader in food-service equipment and is the world's second largest producer. 3 2 4 1. The G roup's combi-ovens are...

  • Page 21
    ... market leader in laundry equipment for apartment-house laundry rooms, coin bars, hotels and institutions. Electrolux is one of the world's largest producers of refrigerators and freezers for food retailers, and of vacuum cleaners and wet /dry cleaners for professional users. Most sales for this...

  • Page 22
    ... products sold by the Sears retail chain in the US under the C raftsman brand include this recently launched garden tractor. 4. The G roup's US subsidiary Frigidaire Home Products launched the market's first cordless leafblower in 1997 under the Weed Eater brand. 18 Electrolux Annual Report 1997

  • Page 23
    ... chainsaws, with a global market share of about 40%. The G roup is also the world's largest producer of lawn mowers, garden tractors and portable garden equipment such as lawn trimmers and leaf blowers. O perations are run through H usqvarna and Flymo, with production units in Europe, and Frigidaire...

  • Page 24
    ...ratios in which liquidity, net assets, inventories and accounts receivable are given in relation to net sales, the exchange-rate effects have been eliminated by translating net sales at year-end rates. For information on the effects of changes in exchange rates, see page 28. Profitability The return...

  • Page 25
    ... Pro forma, excluding G ränges. The Group's long-term financial goals O perating income as % of net sales Return on equity Inventories plus accounts receivable as % of net sales Net debt /equity ratio D ividend as % of net income 6.5 -7% 15 % 30 % < 1.0 30 - 50 % 21 Electrolux Annual Report 1997

  • Page 26
    ...personnel cutbacks. The remainder refers to removal costs and write-downs on inventories and other assets. The program is focused on H ousehold Appliances and Professional Appliances in Europe. For additional details of the program, see also the Report by the President and CEO on page 7. O perations...

  • Page 27
    ... the previous year on the basis of internal changes and a good performance by food and beverage vendors. Market conditions in Europe for laundry equipment improved somewhat during the second half of 1997. This product line reported somewhat higher sales volume, which together with reduced operating...

  • Page 28
    ...to 36.5% (39.1) of sales after adjustment for exchange-rate effects. The decline is traceable mainly to the provision for restructuring. Net assets include assets referring to customer financing in the amount of SEK 2,894m (2,810). Inventories and accounts receivable Inventories in 1997 amounted to...

  • Page 29
    ...and communication accounted for about 20% and new products for over 15 %. Costs for research and development in 1997 amounted to SEK 1,585m (1,580), corresponding to 1.4% (1.4) of net sales. Changes in Group structure All shares in the G ränges subsidiary were distributed to Electrolux shareholders...

  • Page 30
    ...Proposed dividend The Board of D irectors proposes an unchanged dividend of SEK 12.50 per share, for a total dividend payment of SEK 915 m. O utside Sweden Sweden The average number of G roup employees declined to 105,950 in 1997, mainly as a result of divestments. 26 Electrolux Annual Report 1997

  • Page 31
    ... the turn of the century should not involve any major problems for the G roup in terms of products or internal systems. O ption program The Board has decided to introduce an option program for about 100 senior Electrolux managers. The program runs annually, and the allotment of options is based on...

  • Page 32
    Report by the Board of Directors for 1997 Loans raised during the year D uring the year the major share of the G roup's liquid funds was used for redemption of long-term loans. Borrowings during the year referred mainly to new markets and comprised mainly bank loans. The G roup's interest-bearing ...

  • Page 33
    ... in Sweden and Italy. A new unit was established in Singapore during the year, with the task of coordinating liquidity and financing in Asia. Electrolux Financial Services Electrolux Financial Services supports the G roup's operative units with financial solutions for customers and suppliers, and...

  • Page 34
    ...income Interest expense Income after financial items Minority interests in income before taxes Income before taxes Taxes Net income Net income per share, SEK 113,000 - 81...Note 4) (Note 5) (Notes 2, 6, 24) (Note 7) (Note 7) (Note 8) 1,283 - 931 352 4.80 (Note 9) 30 Electrolux Annual Report 1997

  • Page 35
    ... Equity Share capital Statutory reserves Retained earnings Net income Minority interests Provisions Provisions for pensions and similar commitments O ther provisions Financial liabilities Long-term bond loans Mortgages, promissory notes, etc. Short-term loans O perating liabilities Accounts payable...

  • Page 36
    ...Taxes Net income 5,791 - 4,559 1,232 1,713 - 746 - 736 45 - 19 1,489 2,388 - 2,257 1,620 102 1,722 - 70 1,652 5,123 - 4,135 988 1,441 - 739 - 611 35 - 162 952 1,766 - 1,240 1,478 - 80 1,398 - 135 1,263 (Note 3) (Note 4) (Note 24) (Note 7) (Note 7) (Note 18) (Note 8) 32 Electrolux Annual Report...

  • Page 37
    ... 16) (Note 17) D ecember 31, 1996 Equity Share capital Statutory reserve Retained earnings Net income Untaxed reserves Provisions Provisions for pensions and similar commitments O ther provisions Financial liabilities Payable to subsidiaries Bond loans Mortgages, promissory notes, etc. Short-term...

  • Page 38
    ... Shares and participations Long-term notes receivable and accounts receivable Change in intra-G roup balances Machinery, buildings, land, construction in progress, etc. O ther fixed assets Income on sales of fixed assets Liquid funds generated by operations, after investments Financing Change...

  • Page 39
    ... of Zanussi, White and American Yard Products, and in other cases according to RR1:96. The depreciation according to plan thus computed is charged against operating income. In accordance with the recommendations of the Swedish Financial Accounting Standards Council for changes in reporting of...

  • Page 40
    ...hedges for equity in foreign subsidiaries are reported in the parent company at the rate prevailing on the date when the loan or contract arose. With regard to forward contracts intended as hedges for the cross-border flow of goods and services, accounts receivable and accounts payable are valued at...

  • Page 41
    ...other loans and borrowings, net Premiums on forward contracts intended as hedges for equity in subsidiaries have been amortized as interest in the amount of SEK 8m (145). In the consolidated accounts, exchange differences in the parent company on loans and forward contracts 1997 - 1,267 - 18 1,285...

  • Page 42
    ... Number of shares in 1997 and 1996: 73,233,916 Net income per share, SEK 1997 1996 352 4.80 1,850 25.30 G roup Parent company Total Brands, etc. Note 10. I N T A N G I B L E A S S E T S (SEKm) O pening balance Acquired during the year Sold during the year D epreciation for the year Exchange...

  • Page 43
    ... O pening balance D epreciation for the year Corporate acquisitions/divestments Sales, scrapping, etc. Exchange differences on opening balances in foreign subsidiaries, etc. Closing balance Balance-sheet value Tax assessment value, Swedish G roup companies: Buildings SEK 784m (1,686), land SEK 128m...

  • Page 44
    ... cannot be used for purchase of the company's shares, but will be redeemed in cash by the company. The change in the value of these synthetic options is included in the annual Electrolux income statement. At year-end the total liability was SEK 20m (15), and net income for the year has been charged...

  • Page 45
    ... reserve (L-fund) Accumulated depreciation in excess of plan on: Brands Machinery and equipment Buildings Exchange-rate reserve O ther financial reserves Tax allocation reserve Total O ther financial reserves include fiscally permissible allocations referring to receivables in subsidiaries in...

  • Page 46
    ... and Presidents 438 (98) 5,736 (499) 6,174 (597) O ther employees Salaries and remuneration by geographical area, for Board members, etc. and other employees (SEKm) Sweden Parent company O ther Total Sweden EU excluding Sweden Rest of Europe North America Latin America Asia Africa O ceania Total...

  • Page 47
    ...in their country of employment, with the right to receive pensions at 60 years of age at the earliest. Note 25. S H A R E S A N D P A R T I C I P A T I O N S Associated companies Atlas Eléctrica, S.A., Costa Rica Automatic Minibar System Ltd, UK Cefemo S.A.R.L., France Eureka Forbes Ltd, India IVG...

  • Page 48
    ..., % Subsidiaries Major G roup companies: Sweden Austria AB G otthard Nilsson H usqvarna AB Electrolux Beteiligungs G.m.b.H . Electrolux Austria G.m.b.H . Electrolux Systemtechnik G.m.b.H . N.V. Zanker, S.A. Electrolux Ltda Electrolux do Brasil S.A.* Electrolux (China) Co. Ltd Electrolux Zhongyi...

  • Page 49
    ... In accordance with the decision by the Annual G eneral Meeting in April 1997, all shares in Gränges AB were distributed to Electrolux shareholders on May 20, 1997. In accordance with Swedish accounting principles, G ränges has been removed from the G roup's financial statements for 1997, but is...

  • Page 50
    ...in SEK according to US G AAP (no. of shares in 1997 and 1996 = 73,233,916) B. Equity (SEKm) Equity as reported in the consolidated balance sheet Adjustments: Revaluation of fixed assets Acquisitions Pensions Securities Timing differences Taxes on the above adjustments O ther taxes Approximate equity...

  • Page 51
    ... distribution of earnings According to the consolidated financial statements, the G roup's unappropriated earnings amount to SEK 9,018m. No allocation to restricted equity is required. Thousands of kronor The Board of D irectors and the President propose that net income for the year and retained...

  • Page 52
    ... liability to the Company. We therefore recommend that the members of the Board of D irectors and the President be discharged from liability for the financial year. Stockholm, March 10, 1998 Ernst & Young AB G U N N A R W ID H AG EN A uthorized Public A ccountant 48 Electrolux Annual Report 1997

  • Page 53
    ... of added value Added value represents the contribution made by a company's production, i.e. the increase in value arising from manufacture, handling, etc. within the company. It is defined as sales revenues less the costs of purchased goods and services. Sales revenues for the Electrolux G roup...

  • Page 54
    ...ividend, adjusted for share issues 5) Trading price of B-shares at year-end 7) Key ratios Return on equity, % 1) 2) 3) Return on net assets, % 1) 2) 3) 10) Net assets as % of net sales 2) 3) 6) 8) 10) Accounts receivable as % of net sales 6) 8) Inventories as % of net sales 6) 8) Net debt /equity 10...

  • Page 55
    ... and untaxed reserves. 4) Adjusted in connection with introduction of FAS 106 and 109 in 1993. 5) 1997: Proposed by the Board. 6) Net sales are annualized. 7) Last price paid for B-shares. 8) As of 1992, adjusted for exchange-rate effects. 9) As of 1992, calculated as annual average. 10) As of 1993...

  • Page 56
    Net sales and average number of employees, by country 1997 EU Net sales, SEKm % of Group total Net sales, SEKm 1996 % of G roup total 1997 Number of employees 1996 Number of employees G ermany UK Italy France Sweden Spain The Netherlands D enmark Finland Belgium Austria Ireland G reece Portugal ...

  • Page 57
    ... total Net sales, SEKm 1996 % of G roup total 1997 Number of employees 1996 Number of employees Far East Japan China Thailand Indonesia Malaysia India H ong Kong South Korea Taiwan Singapore The Philippines Vietnam O ther Total Middle East Saudi Arabia United Arab Emirates Lebanon Kuwait Iran...

  • Page 58
    .... Shareholding in AB Electrolux: 0 shares. Louis R. Hughes Born 1949, BS M.Eng., MBA. President, G eneral Motors International O perations, G lattbrugg, Switzerland. Executive VicePresident, G eneral Motors Corporation, D etroit, Michigan, USA. Board Chairman: European Council of American Chambers...

  • Page 59
    ... of the Federation of Salaried Employees in Industry and Services. Elected 1997. Shareholding in AB Electrolux: 0 shares. Gunnar Jansson Born 1954. Representative of the Swedish Confederation of Trade Unions. Elected 1996. Shareholding in AB Electrolux: 0 shares. H O N O RA RY C H A IRM A N O F TH...

  • Page 60
    ... O rganizational Development and M anagement Resources W hite goods Europe W hite goods and O utdoor products N orth A merica N ew markets, C omponents, Direct sales Professional appliances O utdoor products Floor-care, Leisure and C omplementary products 56 Electrolux Annual Report 1997

  • Page 61
    ... at Zanussi since 1970, head of the white-goods sales company in Italy 1986. Product-line Manager food-service equipment 1993. H ead of Professional Appliances business area 1995. Executive Vice-President AB Electrolux 1997. Shareholding in AB Electrolux: 0 shares. W hite goods Europe W hite goods...

  • Page 62
    ... ränges subsidiary would be distributed to Electrolux shareholders. Each share in Electrolux, whether A- or B-, entitled the holder to ½ share in G ränges. The company was listed on the O -list of the Stockholm Stock Exchange on May 21, 1997. The closing price on the first day of trading was SEK...

  • Page 63
    ..., Morgan G uarantee Trust Company is the depositary bank for AD Rs. Major foreign shareholders, by country (D ecember, 1997) Share capital, % Average daily trading volume of Electrolux shares on the Stockholm Stock Exchange, in thousands of kronor 1997 1996 1995 1994 1993 USA UK O ther Total 33...

  • Page 64
    ...97 Price and trading volume of Electrolux B-shares on the Stockholm Stock Exchange, 1993 -February 1998 900 800 700 600 500 400 300 200 10 000 8 000 6 000 4 000 2 000 1993 1994 1995 1996 1997 1998 Trading price per B-share at year-end Equity per share The price/equity ratio for Electrolux B-shares...

  • Page 65
    ... Young new employees will be offered greater opportunities for moving between countries and operations. Training during 1997 Courses given at the Electrolux University in 1997 included leadership, project management, strategic development and quality control. The G roup also offers an MBA program in...

  • Page 66
    ...G roup. In 1997, the subsidiary Frigidaire H ome Products in the US launched a front-loaded washer that uses 40% less water than conventional top-loaded machines. It received "The 1997 American Building Products Award" from H O ME Magazine, the leading consumer publication in the US. Energy labeling...

  • Page 67
    ... for refrigerators and freezers, washing machines, spin-driers and combined washer/driers. A similar system for dishwashers will be introduced in 1998. Studies are in progress regarding room air-conditioners, hot-water units and ovens, and will probably result in energy labeling of these products as...

  • Page 68
    ..., April 24, 1998 by mail to AB Electrolux, D ept. C -J, SE-105 45 Stockholm, Sweden, or by telephone at Int +46 8 738 67 93 or 738 63 38. Notice should include the shareholder's name, registration number if any, address and telephone number. Shareholders participating by proxy must submit a copy...

  • Page 69

  • Page 70
    AKTIEBOLAGET ELECTROLUX Lilla Essingen, SE -105 45 Stockholm, Sweden Telephone Int +46 8 738 60 00, Telex 11600 Elhead S Telefax Int +46 8 656 44 78, 656 66 92 www.electrolux.com 5991413 - 48 /4