Electrolux 2007 Annual Report Download

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Annual Report 2007 | Operations and strategy
2007 was an intensive launch year in Europe. Next step is
North America in 2008. For more information,
visit www.electrolux.com
Would you like
to know more
about why
new products
are so
important?

Table of contents

  • Page 1
    Annual Report 2007 | Operations and strategy Would you like to know more about why new products are so important? 2007 was an intensive launch year in Europe. Next step is North America in 2008. For more information, visit www.electrolux.com

  • Page 2
    ... Durables Kitchen Laundry Floor-care Europe North America Latin America Asia/Pacific Professional Products Electrolux launch in North America Strategy Product development Brand New products Growth Cost efficiency Brazil Our people Remuneration Financial review Electrolux story Sustainability Board...

  • Page 3
    ...cleaners and accessories are sold to consumers worldwide. A strong global distribution network and an attractive product offering have enabled Electrolux to increase its market share. Production is located exclusively in low-cost countries. PROFESSIONAL PRODUCTS Electrolux sells a range of products...

  • Page 4
    ...new products adversely affected income and operating income declined compared to 2006. Consumer Durables North America 31% 35% Group sales of appliances in North America rose in comparable currencies during 2007, on the basis of higher sales volumes. Market shares increased in a declining market...

  • Page 5
    ... 50% of the products are sold under the Electrolux brand. Investment in product development corresponded to about 2% of sales. Almost 50% of Electrolux production is now located in low-cost countries. Global sales growth for Electrolux was 4%. Despite lower income in Europe, operating income rose...

  • Page 6
    ... of the operation in Brazil and the entire operation in ï¬,oor-care equipment show clearly that we are on the right track. The next two major challenges are in Europe and North America. The product launch in Europe in 2007 and in North America in 2008 are the largest ever for Electrolux, and will...

  • Page 7
    ...our sales. A good foundation The year 2007 was an eventful one for Electrolux. With the exception of appliances in Europe, we achieved higher income in all business areas. The operation in ï¬,oor-care was again successful, with greater market shares. The operation in Latin America showed record-high...

  • Page 8
    ... brand enable Electrolux to create a foundation for improved profitability. PRODUCT CATEGORIES - what we sell Share of sales Consumer Durables, 93% Kitchen, 58% Laundry, 20% Floor care, 8% Other, incl. distributor sales, services and spareparts, 7% Professional Products, 7% Food-service equipment...

  • Page 9
    ...increase in sales of low-end products to a steadily expanding customer base. Profitable built-in products Kitchen appliances are either stand-alone or built-in. The trend to built-in appliances is increasing and shows strong growth particularly in Europe and Australia. Manufacturers of kitchens for...

  • Page 10
    .... Consequently, production plants are located close to the market. Cookers and ovens Electrolux has strong market positions for stand-alone cookers and ovens, as well as for hobs, both electric and gas. These product categories are among the most profitable within kitchen appliances. Almost all...

  • Page 11
    The coming launch in North America is supported by strong digital marketing efforts. Please visit www.electroluxappliances.com to get a glimpse of the new appliances! The campaign site above shows Electrolux Built-In Kitchen that was launched in Europe in 2007. 7

  • Page 12
    ... washing machines and tumble dryers with low energy and water consumption. The Group is one of the world's largest producers of front-loaded washers. The market Virtually all households have washers Demand for laundry products shows a pattern similar to that for kitchen appliances. Today, virtually...

  • Page 13
    The traffic to Electrolux websites has more than doubled the last couple of years. These two campaigns for the washing machine Time Manager and the tumble dryer Iron Aid were launched in over 15 countries during 2007 and were visited by more than 700,000 people. 9

  • Page 14
    ...are willing to pay premium prices. Most of the Group's vacuum cleaners are developed and sold globally, which makes Electrolux unique compared to the Group's competitors. All production of Electrolux vacuum cleaners is located in lowcost countries. About two-thirds are supplied by producers in China...

  • Page 15
    These campaigns were used to promote the launches of two design products, Ergorapido and Ultrasilencer. Both campaigns were featured on many design blogs. 11

  • Page 16
    ...demand in 2007 for core appliances and vacuum cleaners grew by 1.3% and 2.6%, respectively. Virtually all households in Europe have access to refrigerators and cookers, and many to washing machines. The share of households with freezers, dishwashers and tumble dryers is considerably lower in Eastern...

  • Page 17
    ... for some time. A large share of sales by retailers is driven by campaigns. Kitchen specialists like those in Europe have a small part of the US market. Instead, kitchens are normally built on-site by construction firms, which also purchase appliances. Electrolux products are sold largely through...

  • Page 18
    ...largest producer in the country, and the Electrolux-brand has strong positions in all segments. In other major markets such as Mexico and Argentina, Electrolux sales are low, but increasing. For additional information about the Group's operations in Brazil, see page 34. Group sales in Latin America...

  • Page 19
    ... is Electrolux largest market for household appliances in the Asia/Pacific region. In Southeast Asia, the Group is leveraging the leading position in front-loaded washing machines in order to expand operations in kitchen appliances. Consumer Durables Asia/Pacific and Rest of world's share of sales...

  • Page 20
    ... The greatest share of sales of Electrolux food-service equipment is through dealers. This strategy has proved to be more successful and cost-efficient than direct sales due to the complexity of the customer structure. Electrolux brand The Group's products for professional kitchens are sold mainly...

  • Page 21
    An example of an especially successful coordination between consumer durables and professional products is the 2007 campaign in Australia in which Electrolux consumer and professional products were marketed simultaneously. 17

  • Page 22
    ... of direct sales is larger for professional laundry equipment than for food-service equipment, although there is a similar trend to greater reliance on dealers. The greater share of Electrolux laundry equipment is sold through dealers in Europe, Asia and North America. Electrolux brand and product...

  • Page 23
    19

  • Page 24
    ... in the Group's history in North America. The plan is to gain a significant long-term presence in the premium segment, which shows a considerably higher profitability than the mass market, where the Group holds a strong position today. The new Electrolux-branded appliances represent a great value...

  • Page 25
    21

  • Page 26
    ... production to low-cost countries. The task of building the Electrolux brand into a strong, global leader is continuing on the basis of large investments in marketing as well as launches of new Electrolux-branded products in the Group's major markets in Europe and North America. Innovative products...

  • Page 27
    ... demand. Success story: Market Fresh for Asian kitchens During 2007, Electrolux successfully launched a new range of refrigerators in Southeast Asia. The product development team conducted extensive research and found there was a great need to ensure that food retained its original nutritional...

  • Page 28
    ...and design have been decided upon. This model of the vacuum cleaner Ergospace will be launched in spring 2008. Primary development Strategic market plan Identification of consumer opportunities Concept development Product development Commercial launch preparation From the business opportunities...

  • Page 29
    ...with product development. Swedish designer Pia Wallén's vacuum cleaner Ultrasilencer was presented at the Asplund Design Shop in Stockholm, Sweden, in the autumn 2007. Launch execution Range management Phase-out Focus is now moved forward in the process, to launch execution and range management...

  • Page 30
    ... Electrolux brand comprise vacuum cleaners and high-end appliances. In 2008, a new line of appliances will be launched under the Electrolux brand in the premium segment. The goal is over time to achieve a substantial share in the high end of the North American market in order to improve the product...

  • Page 31
    ..., peaceful and quiet. The vacuum cleaner is produced in a limited edition and is sold by selected retailers. Success story: Brand transition in France Since 1995, Group appliances for the high end of the French market have been double-branded as Arthur Martin Electrolux. The brand transition was...

  • Page 32
    ... | new products Innovative products and marketing Generation 4000 Electrolux new series of professional laundry products combines elegant design and cutting-edge technology with energy-efficiency and user-friendliness. Generation 4000 includes a wide range of washing machines, tumble dryers and...

  • Page 33
    ...accounts for more than half of the plastics used in Ultrasilencer Green, and 90% of the unit can be recycled after disposal. Like all vacuum cleaners in the Ultrasilencer series, it is silent. Design awards Elextrolux has received several design awards. Products are perceived as having new and good...

  • Page 34
    ...demand for such products as cookers, refrigerators and washing machines. In Western Europe and North America, the rate of replacement for appliances is accelerating despite an improvement in product quality. This trend is driven by innovative products featuring attractive design, useful features and...

  • Page 35
    ..., products or brands that can help the Group achieve greater market share in the premium segment. Success story: Strong growth in Eastern Europe Since 1991, Electrolux has experienced rapid growth in Eastern Europe. Electrolux now has an 15% share of the Eastern European appliance market, and...

  • Page 36
    ... in virtually all Electrolux plants. Restructuring 2007 Electrolux manufacturing footprint by 2010 Plant closures and cutbacks Torsvik Fredericia Nuremberg Adelaide New plants Juarez Mexico Washing machines Sweden Denmark Germany Australia Compact appliances Cookers Dishwashers, washing machines...

  • Page 37
    .... Electrolux Manufacturing System (EMS), a global program for more efficient production, has been implemented in virtually all Electrolux plants. The picture is from the well organized cooker plant in Rothenburg, Germany. Success story: Restructuring in Australia At year-end 2004, the plants in...

  • Page 38
    ...of 1997, all Group appliances and vacuum cleaners sold in Brazil are Electrolux-branded. These products are successful in all segments and are clearly differentiated in terms of name, design and size. Marketing at points-of-sale Electrolux applies a strategy of marketing products mainly at points-of...

  • Page 39
    ...the European average. Sales and market shares, appliances in Brazil 2003-2007 Improved productivity in plants SEKm 7,500 6,000 4,500 3,000 1,500 0 % 30 24 18 12 6 0 Since 2003, Electrolux sales in Brazil have increased by 127% in local currency. At the same time, market shares have improved from...

  • Page 40
    ... leadership programs. In 2008, the program is planned to be implemented in even more countries. In order to ensure that all internal talent is utilized, the Group maintains a talent management process in which more than 3,000 employees are evaluated annually. Approximately 50 top-level job openings...

  • Page 41
    ... activities the President and senior management are moving in the same direction as the owners, who do not participate in daily operations. The Electrolux incentive program is linked to the Groups' financial development and is maximized at a defined level, and covers about 160 persons. The Board...

  • Page 42
    ... in North America both operating income and market share increased despite lower market demand. In Australia, appliances showed increased profitability after a number of tough years. The ï¬,oor-care operation showed improved profitability in all regions. Income from sales of professional laundry...

  • Page 43
    ...market share increased. Operating income and margin improved as a result of a favorable price increases, an improved product mix, higher sales volumes and lower costs. OUTLOOK - FOR THE FULL YEAR 2008 In 2008, the Group will introduce Electrolux as a major appliance brand in North America. The plan...

  • Page 44
    ... vacuum cleaner, frees up time so consumers can do the things that really matter, like spending time with family and friends. It uses radar just like a bat to navigate under beds, tables and furniture. When the batteries run low, it returns by itself to the charging station to recharge. Electrolux...

  • Page 45
    ...absorption refrigeration technology, which used electricity, gas or kerosene to circulate water and safely turn heat into cold, was his first step towards diversifying Electrolux. It was a bold step, for not only had Electrolux secured its spot as the world leader in vacuum cleaners, but absorption...

  • Page 46
    ... into contact with the Group's products and operations. Focusing on sustainability generates business opportunities and enhances positive brand awareness for Electrolux. It contributes to employee satisfaction and ensures good relations with stakeholders. It is also vital for effective management of...

  • Page 47
    ... and business partner A proactive approach to sustainability lends trust and credibility to the Electrolux brand. The Group's corporate governance struc- Success story: IKEA - a relationship built on sustainable values As of summer 2009, consumers will find IKEAdesigned appliances manufactured by...

  • Page 48
    .... Board Member of AstraZeneca Plc, Stora Enso Oyj, Foundation Asset Management AB and The Knut and Alice Wallenberg Foundation. Previous positions: President and CEO of Investor AB, 1999-2005. Executive Vice-President of Investor AB, 1993-1999. Holdings in AB Electrolux: 20,000 B-shares. Related...

  • Page 49
    ... in Charge. Other audit assignments: Telefonaktiebolaget LM Ericsson and SEB, Skandinaviska Enskilda Banken AB. Holdings in AB Electrolux: 0 shares. Holdings in AB Electrolux as of December 31, 2007. For additional information on the Board of Directors, see page 92 in section Financial review. 45

  • Page 50
    ... Care and Small Appliances, Executive Vice-President Born 1958. B. Econ. In Group Management since 2006. Sales/marketing positions in Carlsberg Group, Denmark, 1980-1987. Senior management positions within Coca-Cola Company, 1987-2000. Senior VicePresident of Alliances/Partnerships for TDC Mobile...

  • Page 51
    ...America, joined Group Management in January 2008. Magnus Yngen Head of Major Appliances Europe, Executive Vice-President Born 1958. M. Eng. Lic.Tech. In Group Management since 2002. International sales and marketing positions, 1988-1995. Joined Electrolux in 1995 as Technical Director in the direct...

  • Page 52
    ... and up-dated information about, for instance, the Electrolux shares, financial statistics and corporate governance. On the website you can also read more about our brands as well as about our sustainability work. About Electrolux operations Our brands Sustainability Corporate governance Annual...

  • Page 53
    III

  • Page 54
    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 599 14 14-13/6