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Annual Report 1999
THE WORLD’S NUMBER ONE CHOICE
LEADERSHIP
powerful brands
consumer durables
value creation
INNOVATIVE PRODUCTS
customer focus
professional products

Table of contents

  • Page 1
    Annual Report 1999 L E A D E R S H I P c o n s u m e r d u r a b l e s powerful brands value creation I N N O V A T I V E P R O D U C T S p r o f e s s i o n a l p r o d u c t s customer focus THE WORLD'S NUMBER ONE CHOICE

  • Page 2
    ...concepts and key ratios Quarterly figures Net sales and average number of employees, by country Board of Directors Group organization Electrolux shares Human resources The Group's environmental activities Annual General Meeting Financial reports in 2000 Investor Relations and Financial Information...

  • Page 3
    ..., lawn mowers and garden tractors. Every year consumers in more than 150 countries buy more than 55 million Group products, which are sold under famous brands such as AEG, Zanussi, Frigidaire, Eureka, and Husqvarna. THE ELECTROLUX GROUP THE WORLD'S NUMBER ONE CHOICE Electrolux Annual Report 1999 1

  • Page 4
    ...Household Appliances 99 98 Professional Appliances 99 98 Outdoor Products 99 98 Outdoor Products 99 98 Net sales by region Europe 50.2% Operating income by region1) -20 0 20 40 60 80 63.0% 74.0% 44.3 % 41.9 % -7.3% -15.9% Employees by region Europe 56.0% Europe 99 98 North America 39.9% North...

  • Page 5
    ...in food and beverage vending machines, and the major part of the direct sales operation. An agreement was also reached for the divestment of professional refrigeration equipment.These operations had total annual sales of almost SEK 5,000m and about 9,000 employees. Alliances An agreement was signed...

  • Page 6
    ...durables comprise mainly white goods, i.e. refrigerators, freezers, cookers, washing machines, dishwashers and room air-conditioners. In 1999, white goods accounted for 74% of total sales in consumer durables, and more than half of total Group sales. Other product lines include floorcare products as...

  • Page 7
    ...professional laundries. Other product lines include components, i.e. compressors and motors, and absorption refrigerators for caravans and hotel rooms. Market position Food-service equipment Market leader in Europe, world's second largest producer. Brands Dito Sama, Dometic, Electrolux, Electrolux...

  • Page 8
    ... 1997 and 1999 the trading price for Electrolux B-shares rose by 170%, while the general index for the Stockholm Stock Exchange increased by 101%. We are now entering a new phase where the focus is on growth and proactive investments in customer relations and product management. At the same time, we...

  • Page 9
    ...in our daily operations. In 1999 we divested the operation in food and beverage vending machines and the major part of the operation in direct sales. An agreement was also reached in December for the divestment of the professional refrigeration product line. The vending-machine operation was highly...

  • Page 10
    ... every Western European country. In order to better coordinate operations on a pan-European basis, we are changing the structure and organization for major appliances in Europe.The national organizations are being coordinated through a new company, Electrolux Home Products, with headquarters in...

  • Page 11
    ...as several models of cyclone vacuum cleaners. NOW, a new range of refrigerators, enables the consumer to select various combinations of colors and materials for the door, handle and fittings. Products introduced within Professional Appliances include a new steam oven that received a major award The...

  • Page 12
    ... exchange-rate exposure. In addition, the European market will become more transparent.We will have to devote more time to strategic marketing issues that are related to pricing and product specifications. Electrolux will Internet Telephone Kitchen Touch Screen Satellite Service Providers Service...

  • Page 13
    ..., customers and personnel. In 1999 the project for an open internal labor market covering all management positions was expanded, and will be completed in 2000. A program was started for recruiting about 15 young managers annually for the next three years, and giving them opportunities for career...

  • Page 14
    ... cookers, refrigerators, freezers, washing machines, dishwashers, room airconditioners and microwave ovens, which in 1999 accounted for 74% of sales in this business area. Other product lines include floor-care products, absorption refrigerators for caravans and hotel rooms, compressors, and motors...

  • Page 15
    ... to major international customers will also be managed in this company. Operations in the US The US market for white goods, i.e. deliveries from domestic producers plus imports, exclusive of microwave ovens and room air-conditioners, amounted to 38.6 (35.8) million units in 1999. Structural changes...

  • Page 16
    Business areas 1999 Operations in Latin America and Asia Floor-care products Professional Appliances • Slightly improved market conditions for food-service equipment in Europe, lower demand for refrigeration equipment • Higher income for both foodservice equipment and laundry equipment • ...

  • Page 17
    ... operation in food and beverage vending machines was divested as of September 30, 1999. It is included in Group sales for the year in the amount of SEK 870m. An agreement for divestment of the operation in refrigeration equipment was reached in November 1999.The major part of this product line was...

  • Page 18
    ...Flymo subsidiaries, with production in Europe, as well as Frigidaire Home Products in the US.The American operation accounts for more than half of sales in this business area. Professional products comprise mainly chainsaws, clearing saws and landscape maintenance equipment under the Husqvarna brand...

  • Page 19
    ... Group's entire European and North American operations with global control, system operation, resource management and development processes. ITS has 800 specialists at 36 different locations in 15 countries.Their task is to position IT as a strategic process tool for the Electrolux Group. Enabling...

  • Page 20
    ... products Garden equipment Light-duty chainsaws Europe North America Rest of the world Professional Products Indoor Outdoor Food-service equipment Laundry equipment Leisure appliances Components Chainsaws Trimmers, etc. Landscape maintenance equipment Power cutters 18 Electrolux Annual Report 1999

  • Page 21
    ... Group's structure accounted for -3.1%, changes in exchange rates for +0.7%, and volume and price/mix for +4.1%. For changes in Group structure, see page 23. Exports from Sweden in 1999 amounted to SEK 9,265m (8,963), of which SEK 7,317m (6,513) was to Group subsidiaries.The Swedish plants accounted...

  • Page 22
    ... year, and margin improved. The market for floor-care products increased in volume in both Europe and the US. Group operating income and margin showed considerable improvement as a result of increased volumes, a better product mix and higher internal efficiency. 20 Electrolux Annual Report 1999

  • Page 23
    ...leisure appliances on the basis of good demand in both Europe and the US. Demand for compressors and motors was weak in most markets, except for the US. Both sales and operating income for the Group's component operation were lower than last year. Overall, sales for the Household Appliances business...

  • Page 24
    ... refrigerators within Frigidaire Home Products in the US, as well as two development projects in the European white-goods operation. One of these refers to a common platform for a new series of washing machines, and the other to a new series of frost-free combi-refrigerator/freezers. Another current...

  • Page 25
    ... products such as PCs,TVs, videos, room air-conditioners, vacuum cleaners and white goods. Toshiba is one of the leading whitegoods companies in Japan. For the fiscal year ending March 1999, the company reported sales of JPY 5,300 billion (approximately SEK 370 billion). Electrolux Annual Report...

  • Page 26
    ... the Board of Directors for 1999 Average number of employees Average number of employees: Sweden Outside Sweden Total By geographical area: Europe North America Rest of the world Total By business area: Household Appliances Professional Appliances Outdoor Products Other Total 1999 1998 8,881 84...

  • Page 27
    ... reviewed in terms of such factors as price, brand and market position. The Group is well prepared to implement new pricing strategies at the appropriate time.The effect of the euro on both sales and purchasing has to be considered in product design and development. Electrolux Annual Report 1999 25

  • Page 28
    ... of Directors for 1999 Relations with customers and suppliers The euro is gradually being used in transactions with suppliers. Purchasing in euros facilitates price comparisons and reduces both currency risks and uncertainty. Trade in euros with customers has been limited to date. Electrolux is...

  • Page 29
    ...mainly through the parent company's Medium Term Note program in London and Stockholm, and through Private Placements. Commercial Paper programs were established during the year in Poland and India. At year-end 1999, the Group's total interest-bearing borrowings, inclusive of interest-bearing pension...

  • Page 30
    ... 11 100 1) Includes currencies in Canada, Hong Kong, Taiwan, Singapore, Oceania and the Latin American countries, except for Brazil, which is included in "Other." Exposure arising from commercial flow Transactions between Group companies, suppliers and customers generate a flow exposure. About 75...

  • Page 31
    ... a euro cash pool, in order to concentrate all European financial and commercial flows in one place and manage them centrally. A payment system called the Global Clearing Center has been developed and will be used for all payments within Europe. Electrolux Financial Services The Group's expansion...

  • Page 32
    Consolidated income statement 1999 SEKm 1998 SEKm 1999 EURm 1998 EURm Net sales Cost of goods sold Gross ...(Notes 2, 6, 25) (Note 7) (Note 7) (Note 8) (Note 9) Net income per share, SEK, EUR Exchange rate: EUR 1 = SEK 8.55 (Note 10) 11.40 10.85 1.33 1.27 30 Electrolux Annual Report 1999

  • Page 33
    ...593 81,644 Current receivables Accounts receivable Other receivables Prepaid expense and accrued income Liquid funds Short-term placements Cash and bank balances Total current assets T O... 81,644 Contingent liabilities Exchange rate: EUR 1 = SEK 8.55 (Note 23) 957 Electrolux Annual Report 1999 31

  • Page 34
    ...pension litigation Taxes paid Cash flow from operations excl. change in operating assets and liabilities Change in operating assets and liabilities Change in inventories Change in accounts receivable Change in other current assets Change in current... -2,357 -96 -2,101 32 Electrolux Annual Report 1999

  • Page 35
    ...company income statement 1999 SEKm 1998 SEKm 1999 EURm 1998 EURm Net sales Cost of goods sold Gross operating income Selling expense Administrative expense Other operating income Other operating expense Operating income Group...25) (Note 7) (Note 7) (Note 18) (Note 8) Electrolux Annual Report 1999 33

  • Page 36
    ...Current receivables Receivable from subsidiaries Accounts receivable Tax refund claim Other receivables Prepaid expense and accrued income Liquid funds Short-term placements Cash and bank balances Total current... Exchange rate: EUR 1 = SEK 8.55 (Note 23) 4,707 34 Electrolux Annual Report 1999

  • Page 37
    ... to plan charged against above income Capital gain/loss included in operating income Taxes paid Cash flow from operations excl. change in operating assets and liabilities Change in operating assets and liabilities Change in inventories Change in accounts receivable Change in current intra-Group...

  • Page 38
    ... accounting and valuation principles Revenue recognition Sales of products and services are recorded as of the date of shipment, when the sale is invoiced. Sales include the sale value less VAT (Value-Added Tax), specific sales taxes, returns and trade discounts. 36 Electrolux Annual Report 1999

  • Page 39
    ... income _____ 1999 1998 Net sales and operating income, by business area Household Appliances Professional Appliances Outdoor Products Other Common Group costs Items affecting comparability Total Net sales and operating income, by geographical area Europe North America Rest of the world Items...

  • Page 40
    ... SEK 1,550m.The Group also has leasing contracts for office equipment on normal commercial terms. Group _____ Parent company _____ 1999 1998 Note 7. I N T E R E S T I N C O M E A N D E X P E N S E (SEKm) Interest income Interest income and similar items From subsidiaries From others Income from...

  • Page 41
    ... Timing differences Utilized tax-loss carry-forwards Dividend tax Other Actual tax rate 1999 1998 38.4 3.0 -1.2 0.6 -8.1 0.4 -0.5 32.6 38.6 3.5 -2.6 2.3 -8.0 0.6 -0.8 33.6 The theoretical tax rate of the Group is calculated on the basis of weighted total Group net sales per country, multiplied...

  • Page 42
    ... depreciation according to plan Opening balance Depreciation for the year Corporate acquisitions/divestments Sales, scrapping, etc. Exchange differences Closing balance Balance-sheet value Buildings and land Machinery and technical installations Other equipment Construction in progress...

  • Page 43
    ... company _____ 1999 1998 Real-estate mortgages Corporate mortgages Receivables Inventories Other Total 1,817 11 342 336 585 3,091 2,055 14 150 60 356 2,635 - - - - 11 11 - - - - 30 30 Note 16. E Q U I T Y (SEKm) Group Opening balance Transfer of retained earnings Dividend payment Translation...

  • Page 44
    ...two Group pension funds were established for the Group's Swedish companies in order to secure pension commitments related to the ITP plan, i.e. PRI pensions.The Electrolux Group's 1997 fund secures pensions through 1997, and the Electrolux Group's 1998 fund secures pensions from 1998 onward. In 1999...

  • Page 45
    ... 1999 1998 Parent company _____ 1999 1998 Accrued holiday pay Other accrued payroll costs Accrued interest expense Prepaid income Other accrued expense Total 884 1,274 437 924 4,167 7,686 894 1,150 394 1,190 3,536 7,164 180 116 249 3 343 891 176 155 240 4 236 811 Electrolux Annual Report 1999...

  • Page 46
    ...,635) were women. For specification of number of employees by country, see page 56. Group _____ 1999 1998 Number of employees by geographical area Europe North America Rest of the world Total 1999 Salaries, other remuneration and employer contributions (SEKm) Salaries and remuneration 52,032 23...

  • Page 47
    ..., by geographical area (SEKm) Boards and Presidents 1999 Other employees Boards and Presidents 1998 Other employees Sweden Parent company Other Total Sweden EU excluding Sweden Rest of Europe North America Latin America Asia Africa Oceania Total outside Sweden Group total 19 31 50 151 41 74 22...

  • Page 48
    ... 1 0 0 223 Holding, % Book value, SEKm Other companies Email Ltd, Australia Primus Capital Fund II, USA Winful J/V, China Nordwaggon AB, Sweden Kotimaiset Kotitalouskoneet Oy, Finland Inox Taglio SRL, Italy Other 5.1 - 5.0 50.0 50.0 10.0 129 100 17 9 5 2 19 281 46 Electrolux Annual Report 1999

  • Page 49
    ... o n t i n u e d ) Subsidiaries Major Group companies: Austria Holding, % Belgium Brazil Canada China Denmark Finland France Germany Hungary India Italy Luxembourg Mexico The Netherlands Norway Spain Sweden Switzerland United Kingdom USA Electrolux Hausgeräte G.m.b.H. Electrolux Austria...

  • Page 50
    ...unrealized gains and losses included in current earnings. Debt and marketable equity securities not classified as either held-tomaturity or trading are classified as available for sale and recorded at fair value, Electrolux uses forward exchange contracts to hedge certain future transactions, based...

  • Page 51
    ... 8 11 -2 -1 2,294 3,748 855 28 -56 -1 27 4,601 C. Equity (SEKm) 1999 1998 Equity as reported in the consolidated balance sheet Adjustments before taxes: Acquisitions Restructuring and other provisions Pensions Foreign currency transactions Securities Other Taxes on the above adjustments Other...

  • Page 52
    ...consolidated financial statements, the Group's unappropriated earnings amount to SEK 12,914m. No allocation to restricted equity is required. Thousands of kronor The Board of Directors... MICHAEL TRESCHOW LOUIS R. HUGHES KAREL VUURSTEEN INGEMAR LARSSON President 50 Electrolux Annual Report 1999

  • Page 53
    ...report To the Annual General Meeting of the shareholders of AB Electrolux (Corporate identity no. 556009-4178) We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of AB Electrolux for the year 1999...

  • Page 54
    ... stock splits, bonus issues and new issues. In connection with new issues, the number of shares is computed as the average number of shares for the year. Number of shares In computation of key ratios where capital is related to net sales, the latter are annualized and converted at year-end exchange...

  • Page 55
    ...-4.8 0.5 5) 1999: 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. Return on equity Net borrowings Net income expressed as a percentage of opening equity.The latter...

  • Page 56
    ... gain of SEK 1,625m also in the third quarter. 2) Exclusive of items affecting comparability, which in 1998 comprised a total net capital gain of SEK 964m, of which SEK 555m in the second quarter, SEK 250m in the third quarter and SEK 159m in the fourth quarter. 54 Electrolux Annual Report 1999

  • Page 57
    ...sales by business area, SEKm Household Appliances Professional Appliances Outdoor Products 1999 1998 1999 1998 1999 ... 9.3 -398 -436 Professional Appliances Outdoor Products Common Group costs 1) Including a charge of SEK 175m in 1998 referring to Brazil and Asia. Electrolux Annual Report 1999 55

  • Page 58
    ...1,233 711 182 283 3,771 109 179 135 1,469 228 39 20 42 8,401 56,329 1999 1998 _____ NORTH AMERICA Net sales, SEKm % of Group total Net sales, SEKm % of Group total 1999 1998 _____ Number of employees Number of employees USA Canada Total 43,759 3,916 47,675 36.6 3.3 39.9 38,114 3,567 41,681 32...

  • Page 59
    ... 1998 _____ ASIA Far East Net sales, SEKm % of Group total Net sales, SEKm % of Group total 1999 1998 _____ Number of employees Number of employees Japan China India Thailand Hong Kong Indonesia South Korea Malaysia Singapore Taiwan Vietnam The Philippines Other Total Middle East 1,031 1,003 953...

  • Page 60
    ... in food-service equipment. Elected 1998. Holding in AB Electrolux: 500,000 A-shares, through a company. Born 1949, B.S., M. Eng., MBA. Executive VicePresident, General Motors Corporation, Detroit, USA. Board Chairman: Saab Automobile AB. Board Member: British Telecom plc, Deutsche Bank AG. Elected...

  • Page 61
    ... of the Swedish Confederation of Trade Unions. Deputy Member, 1996-1998. Ordinary Member, 1999. Holding in AB Electrolux: 0 shares. Born 1953. Representative of the Federation of Salaried Employees in Industry and Services. Elected 1996. Holding in AB Electrolux: 500 B-shares. 15 12 Gert...

  • Page 62
    ... E. Cook Head of business sector White goods and Outdoor products North America Born 1943, Graduate in Law. President Roper Corporation, USA 1985. Joined Electrolux in 1988 as President American Yard Products, USA. President Frigidaire Home Products 1997. Executive Vice-President AB Electrolux 1997...

  • Page 63
    ... Robert E. Cook White goods Europe and New markets MatsOla Palm Outdoor products outside North America Bengt Andersson Floor-care products and Small appliances Hans Stråberg PROFESSIONAL PRODUCTS Indoor products Detlef Münchow Outdoor products Bengt Andersson Electrolux Annual Report 1999 61

  • Page 64
    ... Share capital and number of shares 1) As from 1999 the Electrolux B-share is listed in euros on the stock exchanges in Stockholm and Paris. 2) American Depositary Receipts. One ADR corresponds to two B-shares. Trading volume In 1999, 277.6 million (268.9) Electrolux shares were traded on the...

  • Page 65
    ...77,745 Shareholders by country Source: DN Ägarservice Major shareholders in AB Electrolux USA 28% Number of Ashares Number of Bshares Total Share Voting number of capital, rights, shares % % Sweden 50% 4th National Pension Insurance Fund - Nordbanken investment funds - Investor 9,182,390 SPP...

  • Page 66
    ...years. Open internal labor market Since 1995, the Electrolux University has offered training programs in such areas as leadership, strategic development, project management and quality control.These programs and other training shall be linked more closely to the Group's strategies, business systems...

  • Page 67
    ...consumer products, greater resource-efficiency involves both environmental benefits and cost savings for the user. Electrolux refrigerators and freezers sold in Europe during 1999 featured 6% higher energy-efficiency. For combined refrigerators/freezers the increase was 4%, and for chest freezers 13...

  • Page 68
    ...more effective models provides both economic and environmental savings.The visitor can select comparisons at the level of a household, a city or a country. A pilot project for Functional Sales was launched in Gotland, Sweden in November 1999.The business principle is for the customer to pay per wash...

  • Page 69
    ...new, resource-efficient products creates major business opportunities, particularly in Europe and North America. In the North American market, which has been dominated by top-loading washing machines with vertical axis, the new front-loading and waterefficient Frigidaire Gallery Tumble Action Washer...

  • Page 70
    ... the criteria of the Nordic Environmental Label. Cover 250 g, inside pages 170 g. License no. 444015 Production: Electrolux, Investor Relations Graphic design: Pauffley, London, UK Technical production and printing: Tryckindustri Information, Solna, Sweden, 2000 68 Electrolux Annual Report 1999

  • Page 71

  • Page 72
    Electrolux Annual Report 1999 The Electrolux Group. The world's No.1 choice. AB Electrolux SE-105 45 Stockholm, Sweden Visiting address S:t Göransgatan 143, Stockholm Telephone +46 8 738 60 00 Telefax +46 8 656 44 78 www.electrolux.com 5991413-66/6