Electrolux 2006 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...Durables Kitchen Laundry Floor-care Markets Professional Products Strategy Product development Brand New products Growth Cost efficiency New Electrolux Built-in kitchen Risk Electrolux share Talent management Remuneration Electrolux ICON Sustainability Board of Directors Report Net sales and Income...

  • Page 3
    ... dishwashers, washing machines, vacuum cleaners and cookers sold under esteemed brands such as Electrolux, AEG-Electrolux, Zanussi, Eureka and Frigidaire. In 2006, Electrolux had sales of SEK 104 billion and 59,500 employees. Electrolux plants Electrolux market presence Electrolux product offering...

  • Page 4
    ... machines was moved from Denmark to Thailand. Electrolux strategy The Group's current restructuring program will generate annual savings of approximately SEK 3 billion from 2010 onward. The number of new products created through consumer-focused product development is increasing rapidly. Work...

  • Page 5
    ...USA Germany Brazil UK France Italy Canada Australia Sweden Spain Other 31,704 7,610 5,969 5,157 5,081 5,011 4,724 4,319 3,680 2,742 27,851 10,552 2,274 6,465 1,177 1,479 8,417 1,474 2,351 3,021 911 21,370 » Net sales SEKm 1) » Operating income SEKm 1) » Earning per share SEK 1) » Number...

  • Page 6
    ... all vacuum-cleaner manufacturing to low-cost countries, we have developed and continue to develop innovative products in tune with consumer demands and we focus our marketing on the Electrolux global brand. In 2006, close to 50 percent of our ï¬,oor-care sales were of models less than two years old...

  • Page 7
    ... Brand is a vital asset for a consumer products company like Electrolux. We will continue to focus a large share of our marketing resources on developing Electrolux as a strong and global brand. Consumers in our markets should always regard Electrolux as their first choice when buying new household...

  • Page 8
    ... care and ï¬,oor care. In 2006, Electrolux sold approximately 40 million products in 150 countries. The products are sold under several brands and some 50 percent are sold under the global brand Electrolux. The Group's largest markets are in Europe and North America. Professional Products account...

  • Page 9
    ...are sold under the Electrolux brand. In the North American market, most of these appliances are sold under the Frigidaire brand. Electrolux also manufactures products which are sold by retail chains under own brands. » Kitchen appliances, share of total Group sales » Product categories, share of...

  • Page 10
    ... major competitors in the global market. The market positions of Asian producers in the European and North American markets are still limited, but they have made gains in certain product categories over the past few years. Products A large share of Electrolux sales in both North America and Europe...

  • Page 11
    The "Thinking of you" campaign was rolled out across Europe in the beginning of 2006. Every advertisement communicates Electrolux as the Thoughtful Design Innovator. The Electrolux Combination Oven combines hot air and steam for the best possible result.

  • Page 12
    .... In Australia, the main competitors are Fischer & Paykel and LG. Products Electrolux has developed and launched a range of innovative washing machines and tumble dryers that simplify and improve the cleaning process. The Time manager washing machine that was launched in the European market in 2006...

  • Page 13
    The message in the "Thinking of you" advertisements is universal, even though they are translated into different languages. The Electrolux Iron Aid dryer uses steam to reduce the need for ironing.

  • Page 14
    .... In North America, bagless models are already dominant. Brands In Asia and Latin America, the Group sells vacuum cleaners under the Electrolux brand. In Europe, the Electrolux brand accounts for 70 percent of sales, complemented by the Volta, Tornado and Progress brands. Eureka, the Group's largest...

  • Page 15
    Being a thoughtful company means that Electrolux has a responsibility for developing sustainable products in a sustainable way. Twinclean is a bagless vacuum cleaner that also cleans its own filters.

  • Page 16
    ... countries, such as France, the UK and The Netherlands. In general, the European market is dominated by a large number of small, local and independent chains focused on electrical and electronic products as well as home furnishings. The greater share of Electrolux products are sold through retail...

  • Page 17
    ...'s core appliances are currently sold for the most part under the Frigidaire brand, and vacuum cleaners mostly under the Eureka brand. The Group is planning extensive investments in new products and the Electrolux brand in the US market. The goal is to increase the Electrolux brand's share of sales...

  • Page 18
    ... In other major markets, i.e. Mexico and Argentina, Electrolux sales are relatively low. The Group produces core appliances and vacuum cleaners at four plants in Brazil. Competitors The Latin American market is relatively consolidated, with the four largest manufacturers accounting for approximately...

  • Page 19
    ... the market leader for front-loaded washing machines. This position is being leveraged to expand the operation for kitchen appliances. In China, Electrolux is one of a group of international brands in the intermediate and premium segments for core appliances and vacuum cleaners, while the low-price...

  • Page 20
    ... storage systems, food trolleys and ventilation. Electrolux supplies commercial laundries, hotels and hospitals with a range that includes washing machines, tumble dryers and equipment for ironing and finishing. Electrolux has the widest service network in the sector. Production is located close to...

  • Page 21
    The world-famous chef Tetsuya Wakuda uses Electrolux products in his restaurant Tetsuya's and at home. This was seen in an Australian advertising campaign which strongly emphasized the the advantages of Electrolux being a producer of kitchen appliances for both consumers and professional users.

  • Page 22
    ...focused industrial company to an innovative, market-driven company that builds on consumer insight. The Group's current restructuring program, which involves moving half of production to low-cost countries, will generate annual savings of approximately SEK 3 billion from 2010 and onward. The number...

  • Page 23
    ... are developed, and sales rise for products that consumers are willing to pay a higher price for. Resources for product development are in turn increased, and a positive spiral is created. Global product development Electrolux household appliances and equipment are sold in about 150 countries, and...

  • Page 24
    ... to ensure that the product is successful. » Electrolux process for consumer-focused product development - "Thinking of our users" Strategic market plan On which areas should we focus our innovation work? Which changes in consumer behavior can create business opportunities? Where are the growth...

  • Page 25
    ...next few years, a range of laundry appliances will be launched with a strong focus on efficiency and good environmental features. Commercial launch preparation In parallel with product development, we develop marketing based on the consumer insight that the process has generated. Range management...

  • Page 26
    ... in the Electrolux brand accounted for approximately 70 percent of resources for market communication process in 2006. Strong local brands are combined with the Electrolux brand in order to reinforce the link to Electrolux and make marketing more powerful. The share of Group products sold under the...

  • Page 27
    ... and is currently valued at approximately USD 10 billion annually. The goal is to increase the Electrolux brand's share of sales in the US, primarily through sales of products in the premium segment. At present, the Group sells mostly in the medium-price segment, under the local brand Frigidaire. In...

  • Page 28
    ... sold very well. The working group that created the book were awarded second prize for their creative thinking in the Electrolux Global Brand Award 2005. Launch of induction hobs in the US Experience of development of induction hobs for the European market played an important role when this product...

  • Page 29
    ... in the end of 2006. It was developed in cooperation with Sharp and is a forerunner of the new E:Line series of refrigerators now being launched in the region. Pots in the SMART range for professionals can be tailored in the kitchen with a number of accessories. Electrolux Design Lab The fourth...

  • Page 30
    ... Sales of household appliances are growing rapidly in Eastern Europe, Latin America and Asia. As household purchasing power increases, demand grows for products such as cookers, refrigerators and washing machines. In Western Europe and North America, appliances are being replaced at a faster rate...

  • Page 31
    ... such as Eastern Europe, Latin America and parts of Asia in terms of both production and the market. Demand for modern household appliances is increasing strongly in developing countries. Local presence and the broad experience of growth markets that Electrolux has acquired create opportunities for...

  • Page 32
    ... made in 2006, and three new plants were opened. A new plant for professional washing machines was opened in Thailand. The new plants feature modern design as well as a production ï¬,ow with very good productivity and performance. In the US, the Group closed the world's largest refrigerator plant in...

  • Page 33
    ... production structure in 2009 After the ongoing restructuring program is completed in 2009, the majority of Electrolux appliances will be produced in low-cost countries in Eastern Europe, Asia and Latin America. This transformation has already been implemented for ï¬,oor-care products. Electrolux...

  • Page 34
    ... product development and marketing, and investments in the Electrolux brand have payed off. On the basis of the successful transformation of the ï¬,oor-care operation, the Group is now implementing a similar strategy for core appliances. Production is being moved to low-cost countries. The current...

  • Page 35
    .... In order to shorten the time required to develop new products that respond to consumer needs, Electrolux has invested heavily in improving the internal process for product development All development work within the Group is now based on insight into how consumers think, feel and act when they...

  • Page 36
    ... is part of the Group's most extensive product launch ever. It aims to strengthen, lift up and "premiumize" the Electrolux brand on the European market. One of the most striking elements on the built-in appliances is the thin, white, illuminated line across the products. The line personalizes the...

  • Page 37
    33

  • Page 38
    risk Managing risk to maximize returns Electrolux is exposed to risks in the course of daily operations. Limiting and controlling risks enable business opportunities to be realized in the interest of maximizing returns. The Group is exposed to two main types of risks, related to either business ...

  • Page 39
    ... structure of the market. The Group's strategy is based on product innovation and brand-building, and one of its goals is to minimize and counteract price competition for the products it sells. Customer exposure Consolidation among the Group's major customers, e.g., homeelectronics chains...

  • Page 40
    ... are reported under net financial income. In 2006, costs for hedging foreign net assets amounted to SEK 236 million. Interest-rate risks At year-end 2006, external borrowings by Electrolux amounted to SEK 6,118 million. The majority of these borrowings were in EUR and SEK. The average rate of...

  • Page 41
    37

  • Page 42
    ... of the Outdoor Products operations, Husqvarna, the trading price of Electrolux B-shares rose by 11 percent and at year-end was SEK 137.00. This represents a total market capitalization of SEK 39 billion, corresponding to approximately 1 percent of the Stockholm Stock Exchange. Total return in 2006...

  • Page 43
    ... shareholders and listed as Husqvarna AB on the O-list of the Stockholm Stock Exchange. As of June 8, 2006, the Electrolux share price was adjusted for the Husqvarna spinoff. Distribution of capital through redemption of shares In July 2006, the Board of Directors announced that it would review...

  • Page 44
    ... for shares at a fixed price. The value of the options is linked to the trading price of the Electrolux B-share. During 2006, senior managers in Electrolux purchased 5,234,483 B-shares under the terms of the employee stock option programs. The incentive programs corresponded at year-end 2006 to...

  • Page 45
    ...rank the Electrolux Group highly, including Dow Jones STOXX Index, USA FTSE4Good Series, UK Oekom Research, Germany Vigeo, Corporate Responsibility Rating, France Global Climate 100 Index, KLD Research and Analytics, USA. » Total return of Electrolux B-shares on the Stockholm Stock Exchange, 2002...

  • Page 46
    ..., the Group's focus on building up operations in Central and Eastern Europe has been supported by the presence of a number of trainees from the region. Electrolux in 2006 retained 70 percent of its AIESEC interns. » Employees, by geographical areas Europe 49% North America 28% Latin America 10...

  • Page 47
    .... Performance share program In addition to fixed and variable remuneration, there is a longterm share-related component. For a large listed company like Electrolux, with tens of thousands of shareholders, it is important that in their daily activities the President and senior management are moving...

  • Page 48
    Electrolux ICONâ„¢ introduced Electrolux as a core appliance company to the US market in 2004. The product lines are positioned in the exclusive part of the premium segment. In 2006, the product lines were also launched in Latin America. 44

  • Page 49
    45

  • Page 50
    ... Suppliers Revenues Cost of goods and services Value added Capital expenditure, R&D, marketing, etc. 103,848 -77,142 26,706 -6,175 100,701 -73,577 27,124 -5,512 Distributed to stakeholders Employees Salaries Employer contributions Public sector Shareholders Taxes Dividend payments Credit...

  • Page 51
    ... accounted for 11 percent of total sold units in 2006, and 16 percent of gross profit. 100 90 80 70 60 50 2006 2005 2004 2003 2002 Reduction in energy consumption for products sold in Europe, with energy index set at 100 percent in the year 2002. Refrigerators/ Dishwashers freezers Washing...

  • Page 52
    ... market share each year. Based on current national laws this applies for products sold after August 2005 in most countries. Provisions for future recycling of products sold after August 2005 are required in only a few EU member states. The estimated annual cost of handling waste for Electrolux...

  • Page 53
    ...of Conduct defines high employment standards for all Electrolux employees in all countries and business sectors as well as for all subcontractors. The Code incorporates issues such as child and forced labor, health and safety, workers rights and environmental compliance. Internal communication and...

  • Page 54
    ... and at the same time access new markets, Electrolux is shifting production from countries with a higher cost base to those offering lower costs. A decision to close factories or downsize production affects individuals and communities. Responsibly managing the consequences of these decisions...

  • Page 55
    ... product development and brand building • The Board proposes a dividend of SEK 4.00 (7.50) per share. The level of the dividend reï¬,ects the fact that Husqvarna is no longer part of the Group and that SEK 5.6 billion has been distributed to shareholders through a redemption procedure Contents Net...

  • Page 56
    ...of Outdoor Products operations, Husqvarna. For information on income for the period and earnings per share including discontinued operations, see page 55. CONTINUING OPERATIONS Net sales Net sales for the Electrolux Group in 2006 amounted to SEK 103,848m, as against SEK 100,701m in the previous year...

  • Page 57
    ... Note 2006 2005 Net sales Cost of goods sold Gross operating income Selling expenses Administrative expenses Other operating income Other operating expenses Items affecting comparability Operating income Financial income Financial expenses Financial items, net Income after financial items Taxes...

  • Page 58
    ...currently employing approximately 150 persons. In September 2006, it was decided to scale back production in Australia, including closing the washer/dryer and dishwasher plants in Adelaide over the next 18 months. Production will be moved gradually to other Electrolux factories. The dishwasher plant...

  • Page 59
    ... to earnings per share of SEK 10.89 (9.19). Return on net assets was 21.2% (17.8). Key data excluding items affecting comparability SEKm 2006 Change 2005 Effects of new definition of gross operating income SEKm 2006 Adjusted 2006 Change Net sales Cost of goods sold Gross operating income Margin...

  • Page 60
    ... Trade receivables Accounts payable Provisions Prepaid and accrued income and expenses Taxes and other assets and liabilities Working capital % of annualized net sales Property, plant and equipment Goodwill Other non-current assets Deferred tax assets and liabilities Net assets Return on net assets...

  • Page 61
    ... December 31, 2006 December 31, 2005 ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments in associates Deferred tax assets Derivatives Financial assets Total non-current assets Current assets Inventories Trade receivables Tax assets Derivatives Other...

  • Page 62
    ...of directors report Net borrowings Net borrowings at year-end decreased to SEK -304m (2,974) as a result of the allocation of debt to the Outdoor Products operations and the strong cash ï¬,ow from operations during the year. Net borrowings SEKm December 31, 2006 December 31, 2005 Rating Electrolux...

  • Page 63
    ...foreign operations Net-investment hedge Translation differences Share-based payment Share-based payment Income for the period recognized directly in equity Income for the period Total recognized income and expenses for the period Divestment of minority Repurchase and sale of shares Dividend SEK 7.00...

  • Page 64
    ... (1.7) of net sales. R&D projects during the year referred mainly to new products and design projects within appliances, including development of new platforms. Major projects included new cookers and washing machines in North America and a harmonizing of design for built-in products in Europe. For...

  • Page 65
    ... in other current assets Change in accounts payable Change in operating liabilities and provisions Cash ï¬,ow from change in operating assets and liabilities Cash ï¬,ow from operations Investments Divestment of operations Capital expenditure in property, plant and equipment Capitalization of product...

  • Page 66
    ... major appliances, i.e., refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens, as well as ï¬,oor-care products. Professional products comprise food-service equipment for hotels, restaurants and institutions, as well as laundry equipment...

  • Page 67
    board of directors report Consumer Durables, North America Key data 1) Consumer Durables, North America SEKm 2006 2005 Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees 1) Excluding items affecting comparability. 36,...

  • Page 68
    ...the top-load washing machine category. Sales were in line with the previous year in local currency. Operating income rose on the basis of an improved product mix and savings from restructuring. China Market statistics for shipments of major appliances in China indicate strong growth in 2006 for both...

  • Page 69
    ...Operational risks Electrolux is exposed to risks in connection with its business operations. The Group's ability to improve profitability and increase shareholder value is largely dependent on success in development of new, innovative products and in maintaining cost-efficient production. Managing...

  • Page 70
    ... 10% of the total number of shares. In 2006, 19,400,000 shares were repurchased for a total amount of SEK 2,194m, corresponding to an average price of SEK 113 per share. Senior managers purchased 5,234,483 B-shares from Electrolux under the terms of the employee stock option programs. As of December...

  • Page 71
    board of directors report Employees Talent management Talent management is a strategic priority for Electrolux, especially at a time when the Group is rapidly being transformed to a more market- and consumer-oriented company. Over the past years, Electrolux has established processes and tools that ...

  • Page 72
    ... which the Group Management member is responsible. In addition, non-financial targets in line with Electrolux strategic plans may be used to create focus on issues of particular interest at Group, sector or the individual functional level. Long Term Variable Each year, the Board of Directors will...

  • Page 73
    board of directors report in order to manage a pan-European recycling scheme. During 2006, ERP handled waste in seven EU member states, and in 2007, two more countries will be added to the ERP's list. These nine states will account for 50% of the Electrolux obligation for recycling in Europe. ...

  • Page 74
    parent company BALANCE SHEET SEKm Note December 31, 2006 December 31, 2005 CHANGE IN EQUITY SEKm Share capital Restricted reserves Nonrestricted equity Total ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Total non-current assets Current assets ...

  • Page 75
    ... Accounting and valuation principles Financial risk management Segment information Net sales and operating income Other operating income Other operating expenses Items affecting comparability Leasing Financial income and financial expenses Taxes Goodwill and other intangible assets Property, plant...

  • Page 76
    ... or loss on sales. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Segment reporting The Group's primary segments, business areas, follow the internal management of the...

  • Page 77
    ... common Group services including corporate functions. Sales between segments are made on market conditions with arms-length principles. Revenue recognition Sales are recorded net of value-added tax, specific sales taxes, returns, and trade discounts. Revenues arise from sales of finished products...

  • Page 78
    ... classification as held for sale the asset or disposal group must be available for immediate sale in its present condition and its sale must be highly probable. A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of...

  • Page 79
    ... selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale at market value. The cost of inventories is assigned by using the weighted average cost formula. Appropriate provisions have been made for obsolescence. Trade...

  • Page 80
    ...the fair-value of the instruments at each closing date. For details of the share-based compensation programs, please refer to Note 22 on page 92. Government grants Government grants relate to financial grants from governments, public authorities, and similar local, national, or international bodies...

  • Page 81
    ... date and the reported amounts of net sales and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. Electrolux has summarized below the accounting policies that require more subjective judgment of the management in making...

  • Page 82
    ...doubtful accounts at year-end 2006 was SEK 584m. Post-employment benefits Electrolux sponsors defined benefit pension plans for some of its employees in certain countries. The pension calculations are based on assumptions about expected return on assets, discount rates and future salary increases...

  • Page 83
    ... for goods produced • Credit risk relating to financial and commercial activities The Board of Directors of Electrolux has approved a financial policy as well as a credit policy for the Group to manage and control these risks. Each business sector has specific financial and credit policies...

  • Page 84
    ...with the majority of the counterparts, i.e., if counterparty will default assets and liabilities will be netted. Credit risk in trade receivables Electrolux sells to a substantial number of customers in the form of large retailers, buying groups, independent stores, and professional users. Sales are...

  • Page 85
    ... professional products are reported separately. Operations within appliances comprise mainly major appliances, i.e., refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens. The Outdoor Products operations of the Group including the business...

  • Page 86
    ...'s operating income includes net exchange-rate differences in the amount of SEK 76m (11). The Group's Swedish factories accounted for 4.1% (4.1) of the total value of production. Costs for research and development for the Group amounted to SEK 1,393m (1,392) and are included in Cost of goods sold...

  • Page 87
    ... to changes in tax rates. The deferred tax assets in the Parent Company amounted to SEK 0m (0). The Group accounts include deferred tax liabilities of SEK 222m (227) related to untaxed reserves in the Parent Company. Theoretical and actual tax rates % 2006 2005 Theoretical tax rate Losses for which...

  • Page 88
    ... to close the Nuremberg factory resulted in a tax loss carry-forward of SEK 1,504m, which was not included in the computation of deferred tax assets in 2005. The theoretical tax rate for the Group is calculated on the basis of the weighted total Group net sales per country, multiplied by the local...

  • Page 89
    ... plans of the business sectors are reviewed by Group Management and consolidated to a total strategic plan for Electrolux that is finally approved by the Electrolux Board of Directors. The preparation of the strategic plans requires a number of key assumptions such as volume, price, product...

  • Page 90
    ...assets in operations within appliances, Europe were impaired. Accumulated impairments on buildings and land were at year-end SEK 671m (805) and on machinery and other equipment SEK 1,010m (1,035). The carrying amount for land was SEK 892m (1,028). The tax assessment value for Swedish Group companies...

  • Page 91
    ... amounts to SEK 30m (24). 2) Pension assets are related to Sweden and Switzerland. Miscellaneous short-term receivables include VAT and other items. Note 14 Inventories Group December 31, 2006 2005 Parent Company December 31, 2006 2005 Note 16 Trade receivables At year-end 2006, the Group's trade...

  • Page 92
    ...the trade receivables and related credit risks. The information in this note highlights and describes the principal financial instruments of the Group regarding specific major terms and conditions when applicable, and the exposure to risk and the fair values at year-end. Net borrowings At year-end...

  • Page 93
    ... sales support and are directed mainly to independent retailers in Scandinavia after the divestment of the Group's customer financing operations in the US in June 2006. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer...

  • Page 94
    ... The tables below present the fair value and nominal amounts of the Group's derivative financial instruments for managing of financial risks and proprietary trading. Derivates at market value December 31, 2006 Assets Liabilities December 31, 2005 Assets Liabilities Interest-rate swaps Cash-ï¬,ow...

  • Page 95
    ... for liabilities to credit institutions Group December 31, 2006 2005 Parent Company December 31, 2006 2005 Number of shares Owned by Electrolux Owned by other shareholders Total Shares, December 31, 2005 A-shares B-shares A-shares B-shares Cancelled shares A-shares Repurchased shares - 19,400...

  • Page 96
    ...See also Electrolux website www.electrolux.com/ir, Company overview. Salaries, other remuneration and employer contributions for continuing operations Salaries and remuneration Average number of employees for continuing operations, by geographical area 2006 Group 2005 Europe North America Rest of...

  • Page 97
    ... in certain countries mainly in the US. The Group's major defined benefit plans cover employees in the US, UK, Switzerland, Germany and Sweden. The German plan is unfunded and the plans in the US, UK, Switzerland and Sweden are funded. A small number of the Group's employees in Sweden is covered...

  • Page 98
    ... statement for continuing operations Pension benefits 2006 Other postHealthcare employment benefits benefits Total Pension benefits 2005 Other postHealthcare employment benefits benefits Total Current service cost Interest cost Expected return on plan assets Amortization of actuarial...

  • Page 99
    ... -1,388 15,602 The pension plan assets include ordinary shares issued by AB Electrolux with a fair value of SEK 41m (62). In 2007, the Group expects to pay the total of SEK 1,068m in contributions by employer and benefits paid directly by the company. In 2006, this amounted to SEK 1,365m of which...

  • Page 100
    ... business Closing balance, December 31, 2006 Amounts recognized in the balance sheet December 31, 2006 963 164 64 - 1,191 41 61 - 1,293 2005 Present value of pension obligations Fair value of plan assets Surplus/(deficit) Limitation on assets in accordance with Swedish accounting principles Net...

  • Page 101
    ... programs In 2001, a new stock option plan for employee stock options was introduced for less than 200 senior managers. The options can be used to purchase Electrolux B-shares at an exercise price that is 10% above the average closing price of the Electrolux B-shares on the Stockholm Stock Exchange...

  • Page 102
    ... 132.36 for 2005 and SEK 180,58 for 2006, calculated as the average closing price of the Electrolux B-share on the Stockholm Stock Exchange during a period of ten trading days before the day participants were invited to participate in the program, adjusted for net present value of dividends for the...

  • Page 103
    ... At the Electrolux Annual General Meering 2006, the shareholders decided to follow the proposal from the Board of Directors to do a pro rated allotment of the 2004 and 2005 performance share program to the Husqvarna participants. The intention was to completely separate the two companies from each...

  • Page 104
    ...adverse effect on Electroluxs results of operations and financial condition. Tax effects of the distribution Electrolux has received a private letter ruling from the US Internal Revenue Service (IRS) with regard to the distribution of the shares in Husqvarna and the US corporate restructurings that...

  • Page 105
    ... variable salary, and the program is capped. In 2004, Electrolux introduced a new long-term performance share program that replaced the option program for less than 200 senior managers of the Group. The performance share program is linked to targets for the Group's value creation over a three-year...

  • Page 106
    ... 132.36 for 2005 and SEK 180.58 for 2006, calculated as the average closing price of the Electrolux B-share on the Stockholm Stock Exchange during a period of ten trading days before the day participants were invited to participate in the program, adjusted for net present value of dividends for the...

  • Page 107
    ... financial accounting and reporting standards; internal control reviews; and employee benefit plan audits. 4) Tax fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations; tax advice related to...

  • Page 108
    ..., % 2005 Relation to the Electrolux Group 1) Carrying amount Receivables Income statement Net results Balance sheet Total assets Total liabilities Liabilities Sales Purchases Income Atlas Eléctrica, Costa Rica Nordwaggon, Sweden Sidème, France Viking Financial Services, USA Other Total...

  • Page 109
    ... values. The Outdoor Products operations have been consolidated in the Electrolux Group accounts up to May 31, 2006. In accordance with IFRS 5, "Non-current Assets held for sale and Discontinued Operations", the net results for the distributed Outdoor Products operations are reported in the Group...

  • Page 110
    .... • Employees working within the Outdoor Products operations, participated in various Electrolux Group pension, health-care, defined contribution, other benefit plans and incentive programs. The pro-rata costs, based on the identified number of Outdoor Products operations employees related to...

  • Page 111
    ...countries and business units due to country-specific factors such as interest rates, risk premiums, and tax rates. A higher return on net assets than the weighted average cost of capital implies that the Group or the unit creates value. Electrolux Value Creation model Net sales - Cost of goods sold...

  • Page 112
    ... the kind, extent, and risks of the operations. The Board of Directors has hereby considered, among other things, the Company's and the Group's historical development, the budgeted development and the state of the market. If financial instruments currently valued at actual value in accordance with...

  • Page 113
    ... SHAREHOLDERS OF AB Electrolux publ. Corporate identity number 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 2006. The company's annual accounts are...

  • Page 114
    ... Average number of employees Salaries and remuneration Number of shareholders Average number of shares after buy-backs Shares at year end after buy-backs 1) Continuing operations. 2) As of 1997, items affecting comparability are excluded. 3) 2006: Proposed by the Board. 4) Net sales are annualized...

  • Page 115
    eleven-year summary, all amounts in SEKm unless otherwise stated Compound annual growth rate, % 2002 133,150 5.5 3,854... 6.1 -2.6 4.8 5.6 -6.9 -13.4 -2.5 -7.9 -28.2 7.2 2.8 17.0 -5.6 -4.1 -13.6 1.4 -8.5 -6.0 -7.3 -7.3 -2.1 -1.0 1.6 3.7 -1.9 -1.6 1996 110,000 -3.0 4,438 5 years -5.2 10 years -0.6 111

  • Page 116
    ... 2005 2005 ¹) Value creation, continuing operations 2006 2005 Income for the period Earnings per share, SEK ²) 2006 2005 2006 2006 ¹) 2005 2005 ¹) 1) Excluding items affecting comparability. 2) Before dilution, based on average number of shares after buy-backs. Q1 Q2 Q3 Q4 Full year 24,553...

  • Page 117
    ... information, all amounts in SEKm unless otherwise stated NET SALES, BY BUSINESS AREA Amounts in SEKm unless otherwise stated Consumer Durables, Europe Consumer Durables, North America Consumer Durables, Latin America Consumer Durables, Asia/Pacific and Rest of the world Professional Products 2006...

  • Page 118
    ... working procedures • Electrolux Code of Ethics • Electrolux Policy on Countering Bribery and Corruption • Electrolux Workplace Code of Conduct • Policies for information, finance, credit, accounting manual, etc. • Processes for internal control and risk management Business Sector Boards...

  • Page 119
    ... the actual owners are not displayed in the share register kept by VPC. Information on shareholders and their holdings is updated continuously at the Group's website, www.electrolux.com/corpgov. Major shareholders as of December 31, 2006 1) Share capital, % Voting rights, % The Nomination Committee...

  • Page 120
    ... shareholders' meeting can request the Electrolux Board to do so in good time by mail to an address that is posted at the Group's website. The AGM is held annually in Stockholm, Sweden, during the first half of the year. The meeting decides on dividends, adoption of the annual report, election...

  • Page 121
    ... in companies that have significant business relations with Electrolux. Remuneration to Board members The Board is considered to be in compliance with the requirements for independence stipulated by the Stockholm Stock Exchange and the Swedish Code of Corporate Governance. All Directors elected...

  • Page 122
    ... remuneration to the President and Group Management, major issues considered during the year included remuneration in connection with the spinoff of the Group's Outdoor Products operations. Harry de Vos, Head of Group Staff Human Resources and Organizational Development, participated in the meetings...

  • Page 123
    ... statements for the Electrolux Group, and the administration of AB Electrolux. The audit is conducted in accordance with the Swedish Companies Act and the generally accepted Swedish auditing standards issued by FAR, which is the institute for the accountancy profession in Sweden (Swedish GAAS). The...

  • Page 124
    ... when the Outdoor Products operations of Electrolux were distributed to the shareholders and listed on the Stockholm Stock Exchange as a separate company. • Johan Bygge resigned as sector head for Major Appliances in Europe in October 2006. • Magnus Yngen, previously head of Floor Care and Small...

  • Page 125
    ... by business area, sector, product line and region. The model links operating income and asset efficiency with the cost of the capital employed in operations. Value created is also the basis for incentive systems for managers and employees in the Group. Since 1998, Electrolux has covered the annual...

  • Page 126
    ...the Board in overseeing relevant manuals, policies and important accounting principles applied by the Group in financial reporting, as well as major changes in these principles. Responsibility for maintaining an effective control environment and operating the system for risk management and internal...

  • Page 127
    ...complies with the requirements for an information policy that was introduced in 2004 by the Stockholm Stock Exchange in listing agreements. Financial information is issued regularly in the form of: • Interim reports, published as press releases. • The Annual Report. • An annual report on Form...

  • Page 128
    ... PricewaterhouseCoopers AB Born 1956. Authorized Public Accountant. Certified Public Accountant in the US, US CPA. Other audit assignments: Volvo Cars, 1999-2005. Holdings in AB Electrolux: 0 shares. Holdings in AB Electrolux as of December 31, 2006. For more information on the Board of Directors...

  • Page 129
    Corporate governance / Board of Directors and Auditors Michael Treschow Peggy Bruzelius Louis R. Hughes Hans Stråberg Caroline Sundewall Barbara Milian Thoralfsson Marcus Wallenberg Ulf Carlsson Gunilla Brandt Ola Bertilsson Bengt Liwång Gyula Math Peter Karlsson 125

  • Page 130
    ... as Technical Director within the direct sales operation LUX. Head of Floor Care International operations, 1999. Head of Floor Care Europe, 2001. Head of Floor Care and Small Appliances and Executive Vice-President of AB Electrolux, 2002. Head of Major Appliances Europe as of October 2006. Holdings...

  • Page 131
    corporate governance / group management Hans Stråberg Keith R. McLoughlin Detlef Münchow Magnus Yngen Morten Falkenberg Lars Göran Johansson Fredrik Rystedt Cecilia Vieweg Harry de Vos 127

  • Page 132
    ... and market conditions in the geographical areas and industries in which Electrolux operates, effects of currency ï¬,uctuations, competitive pressures to reduce prices, significant loss of business from major retailers, the success in developing new products and marketing initiatives, developments...

  • Page 133
    ... the European market, but it was also present in North America. In response to an increasingly competitive environment, Electrolux and other manufacturers may be forced to increase efficiency by further reducing costs along the value chain, including their suppliers. The development of alternative...

  • Page 134
    ... success. During 2006, Electrolux invested SEK 1,832 (1,743) million in research and development in continuing operations, corresponding to 1.8 (1.7) percent of net sales. R&D projects during the year mainly referred to new products and design projects within appliances including development of new...

  • Page 135
    ... relate to certain of its white goods products) as well as the obligation to recycle waste of electrical products. Electrolux is subject to certain environmental risks. Electrolux operations are subject to numerous European Union, or EU, national and local environmental, health and safety directives...

  • Page 136
    ... of operations and financial condition. Electrolux is also exposed to tax risks in relation to the spin-off. Electrolux has received a private letter ruling from the U.S. Internal Revenue Service (IRS) with regard to the distribution of the shares in Husqvarna and the U.S. corporate restructurings...

  • Page 137
    ...sustainability work. About Electrolux operations Our brands Sustainability Corporate governance Annual General Meeting Financial statistics Latest press releases Share development Dividend Ownership structure Shareholder information Latest interim report Current share price Financial reports...

  • Page 138
    AB Electrolux (publ) Mailing address SE-105 45 Stockholm, Sweden Visiting address S:t Göransgatan 143, Stockholm Telephone: +46 8 738 60 00 Telefax: +46 8 738 74 61 Website: www.electrolux.com