Electrolux 1999 Annual Report Download - page 21

Electrolux Annual Report 1999 19
Report by the Board of Directors for 1999
94 95 96 97 98 9990 91 92 93
SEKm
Sweden
Outside Sweden
0
20,000
40,000
60,000
80,000
100,000
120,000
Net sales rose by 4% in 1999 for comparable units,
after adjustment for exchange-rate effects.
Net sales
0
1,250
2,500
3,750
5,000
6,250
7,500
941) 95 96 972) 982) 992) 90 91 92 93
Operating income, SEKm
Return on net assets, %
%
SEKm
1)
1994 Excluding capital gain of SEK 2,776m
2)
1997-99 Including items affecting comparability
0
4
8
12
16
20
24
Operating margin in 1999 improved to 6.0%, or 6.2%
excluding items affecting comparability.
Operating income and
return on net assets
0
1,250
2,500
3,750
5,000
6,250
7,500
93 95 96 992) 90 91 92
Income after financial items, SEKm
Return on equity, %
%
941) 972) 982)
1)1994 Excluding capital gain of SEK 2,776m
2)1997-99 Including items affecting comparability
SEKm
0
4
8
12
16
20
24
Return on equity in 1999 was 17.1%, or 17.2%
excluding items affecting comparability.
Income and return on equity
Net sales
Net sales for the Electrolux Group in
1999 rose to SEK 119,550m, as against
SEK 117,524m in the previous year, of
which 96% (95) or SEK 115,127m
(111,873) was outside Sweden. Of the
1.7% increase in sales, changes in the
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 for 8.6% (8.3) of the total
value of Group production.
Income and profitability
Group operating income amounted to
SEK 7,204m (7,028), which corresponds
to 6.0% (6.0) of net sales, and income
after financial items amounted to SEK
6,142m (5,850), which corresponds to
5.1% (5.0) of net sales. Net income
amounted to SEK 4,175m (3,975), corre-
sponding to SEK 11.40 (10.85) per share.
Items affecting comparability
The above income-figures include items
affecting comparability comprising a pro-
vision of USD 225m (SEK 1,841m)
referring to pension litigation in the US
(see page 22), and a capital gain of SEK
1,625m on divestment of the operation
in food and beverage vending machines.
In 1998 items affecting comparability
comprised net capital gains totalling SEK
964m on divestment of operations.
Exclusive of items affecting comparability,
operating income improved by 22% to
SEK 7,420m (6,064), corresponding to
6.2% (5.2) of net sales, and income after
financial items improved by 30% to SEK
6,358m (4,886), corresponding to 5.3%
(4.2) of net sales. Net income increased
by 30% to SEK 4,200m (3,235), corre-
sponding to SEK 11.45 (8.85) per share.
Effects of changes in exchange rates
Operating income for 1999 was favorably
affected by translation of income state-
ments in foreign subsidiaries in the
amount of approximately SEK 120m.
Changes in exchange rates in terms of
both translation and transactions had an
overall net positive effect of approximate-
ly SEK 380m on the Group’s operating
income.This refers mainly to the weak-
ening of the Swedish krona against the
dollar and related currencies as well as the
British pound.
At the start of the year Brazil aban-
doned its link to the dollar, and the
Brazilian real declined by about 32%
against the Swedish krona. Although the
euro declined against the krona at year-
end, the average rate for the year remain-
ed virtually unchanged.
For key ratios in which liquidity, net
assets, inventories and accounts receivable
are given in relation to net sales, the
exchange-rate effect has been eliminated
by translating net sales at year-end rates.
For further information on the
effects of changes in exchange rates, see
Currency risk, page 27.
Profitability
The return on equity was 17.1% (19.3),
and the return on net assets was 18.3%
(17.6).
Excluding items affecting compar-
ability, the return on equity was 17.2%
(14.8), and the return on net assets was
18.4% (14.7). For definitions of key
ratios, see page 52.
Net financial items
The continued upswing in the US econ-
omy led to a rise in interest rates, which
then spread to Europe during the second
half of the year.The average increases in
interest rates related to dollars and euros
were about 1% and 0.5% for short-term
rates, respectively, and about 1.5% for
long-term rates.
The net of Group financial income
and expense amounted to SEK –1,062m
(–1,178), which corresponds to –0.9%
(–1.0) of net sales.The improvement is
traceable mainly to lower average interest
rates, and reduction in tied-up capital.
Discontinuation of the Group’s hedging
of euro equity as of the start of the
fourth quarter had a positive impact of
SEK 135m.
In the fourth quarter, net financial
items were charged with a currency loss
amounting to SEK 240m resulting from
unauthorized trading by an employee at
the Group’s internal bank in Germany,
see page 23.
Exclusive of the impact of the dis-
continuation of the hedging of euro
equity and the currency loss mentioned
above, net financial items amounted to
SEK –957m, corresponding to 0.8% of
net sales.