Electrolux 2009 Annual Report Download

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Annual Report 2009 Operations and strategy
1
...to a
consumer-driven
company
From a
manufacturing
company...
Products
Brand
Cost

Table of contents

  • Page 1
    Annual Report 2009 1 Operations and strategy ...to a consumer-driven company Products Brand Cost From a manufacturing company...

  • Page 2
    ... Electrolux strategy On the right track Product development Brand Innovative products Costs Financial goals External factors Next step Sustainability Employees Remuneration The share Risks Financial review The story of Electrolux Board of Directors and Auditors Group Management Events and reports...

  • Page 3
    ...real needs of consumers and professionals. Electrolux product range includes cookers, ovens, hoods, refrigerators, freezers, dishwashers, washing machines, tumble-dryers and vacuum cleaners under esteemed brands such as Electrolux, AEG-Electrolux, Eureka and Frigidaire. In 2009, Electrolux had sales...

  • Page 4
    ...the Frigidaire brand contributed to mix improvements. Electrolux sales volumes showed a continued increase in comparison with 2008. Sales were substantially higher, and the Group captured additional market shares in Brazil. Operating income improved on the basis of positive price and mix development...

  • Page 5
    ...relocated to low-cost countries and measures were implemented to reduce the production-cost structure. The Group's structural efforts to decrease tied-up capital in the working capital have contributed to the strong cash ï¬,ow in 2009. The potential for profitable growth is better than ever. On the...

  • Page 6
    avsnitt " 2 We have taken a big step forward towards achieving our overall financial goal of an operating margin of at least 6% over a business cycle. There is therefore reason to be more optimistic about the coming year. " Hans Stråberg President and CEO

  • Page 7
    ... to position Electrolux as a premium brand worldwide, which gives us a good base for capturing a considerable share of this market. This gives us a competitive advantage which we are going to be even better at making use of. Launches of entire product ranges The Group's process for consumer-focused...

  • Page 8
    ... this strategy for the comprehensive launch of Electrolux-branded products in the premium segment in North America in 2008, and for the re-launch there of the Frigidaire brand in the mass-market segment in 2009. During 2009, we also reinforced our position in the European built-in product category...

  • Page 9
    ... success of our strategy is also confirmed by the trend for the Electrolux share, which saw the trading price almost triple during 2009. Even more important is the long-term development that has benefited shareholders. Between 2003 and 2009, the total yield amounted to approximately 20% annually...

  • Page 10
    ..., long-term position in the profitable premium segment. • Promote water- and energy efficient products. Electrolux market share 17% core appliances 14% ï¬,oor-care • Appliances Bosch-Siemens, Indesit, Whirlpool. • Vaccum cleaners Dyson, Miele, BoschSiemens, TTI Group (Dirt Devil and...

  • Page 11
    ... as Argentina and Mexico. • In Brazil, strengthen the position in the premium segment. • Food-service Promote energy- and water efficient products. Tailor products for fastfood chains. • Laundry Promote energy- and water efficient products. 2nd largest producer of appliances in Brazil...

  • Page 12
    ... report 2009 | part 1 | trends A ï¬,exible, sustainable home Consumers prefer household appliances that can be tailored to changing needs. This is stimulating increased demand for greater ï¬,exibility in household appliances and ï¬,oor-care products. Consumers also prefer products that are water...

  • Page 13
    ... on sustainable development and also reduce the household's total cost. Growing numbers of consumers therefore expect each new generation of products to feature lower energy and water consumption as well as lower noise levels and greater recyclability. Legislation and directives are simultaneously...

  • Page 14
    annual report 2009 | part 1 | operations Operations "Thinking of you" expresses the Electrolux offering: To maintain continuous focus on the consumer, whether it's product development, design, production, marketing, logistics or service. Electrolux achieves profitable growth by offering products ...

  • Page 15
    ... terms of, e.g., design preferences and electrical standards. Kitchen products, share of Group sales Product categories, share of kitchen products Increased demand for dishwashers Million units Dish 11% 58% 40% 49% Cold (refrigerators, freezers) Hot (cookers, hobs, ovens) 8 6 4 2 0 04 05...

  • Page 16
    ... annual report 2009 | part 1 | product categories | consumer durables | kitchen Brands In Europe, approximately 60% of the Group's sales of kitchen appliances are Electrolux-branded (including double-branding). Other major Group brands in Europe include AEG-Electrolux and Zanussi. In North America...

  • Page 17
    ...kitchen KELLY CONFIDENTIAL The launch of Electrolux major appliances is endorsed by brand ambassador Kelly Ripa in North America and the close collaboration with this well-known TV-personality is used to bring product launches to life. Kelly's cake-off application supports the Electrolux induction...

  • Page 18
    ... global position in laundry products, with the largest market share being for front-loaded washing machines. Electrolux is also one of the leading manufacturers of energy- and water-efficient laundry products. The Electrolux-branded laundry products that were launched in 2008 in North America have...

  • Page 19
    ...households can save by upgrading old appliances based on the country and city that they live in. Visit www.electrolux.com/ecosavings The user can easily switch between monetary savings or energy or water savings. It is also possible to look at aggregated savings, should the entire country or Europe...

  • Page 20
    ... sold in the US are under the Eureka brand, but sales of more exclusive Electrolux-branded vacuum cleaners are increasing. Innovations Continuous development of innovations as well as models with attractive design for which consumers are willing to pay higher prices are prerequisites for success...

  • Page 21
    ... During 2009, Electrolux launched the silent vacuum cleaner Ultrasilencer. Rather than talk about decibels, which is difficult to relate to, Electrolux chooses to focus on the benefits with a silent vacuum cleaner and the sounds you can enjoy. Visit www.electrolux.se/ultrasilencer The lab report...

  • Page 22
    avsnitt annual report 2009 | part 1 | business areas | consumer durables | europe Consumer Durables, Europe Electrolux continued to capture market shares in the profitable segment for built-in products. Three new products were successfully launched in the premium segment for vacuum cleaners. ...

  • Page 23
    ...™ dishwashers feature a program for automatic sensing of washing requirements that consumes only 8 litres of water during a washing cycle. 8litres Built-in, 31% Free-standing, 69% Markets and competitors CORE APPLIANCES Major markets • UK • Germany • France • Russia Major competitors...

  • Page 24
    ... Lowe's, Sears, Home Depot and Best Buy. Sears and Home Depot also have strong positions in Canada. Vacuum cleaners are sold mainly through supermarkets. A large part of sales through retailers are driven by marketing campaigns. Kitchen specialists like those in Europe account for only a small share...

  • Page 25
    ...the product mix. Electrolux now has a strong product offering in North America. Retailers and competitors CORE APPLIANCES Major retailers • Sears • Lowe's • Home Depot • Best Buy Major competitors • Whirlpool • General Electric • LG VACUUM CLEANERS Major retailers • Lowe's • Sears...

  • Page 26
    ... retail chains. In other major markets such as Mexico and Argentina, Electrolux sales are low but growing. Most of the Group's products for the North American market are produced in Juarez, Mexico. This market presence is a large advantage for the Group's expansion. The Electrolux-branded products...

  • Page 27
    ... level. The Electrolux Blue Touch has been developed on the basis of consumer insight. This competitive model is generating a steadily increasing market share for the Group in this product category. See page 38. LATIN Strong position Market, retailers and competitors CORE APPLIANCES Major market...

  • Page 28
    avsnitt annual report 2009 | part 1 | business areas | consumer durables | asia/pacific Consumer Durables, Asia/Pacific Electrolux continued to capture market shares in Australia and Southeast Asia despite a decline in demand in 2009. Launches of new products have strengthened the brand. In China...

  • Page 29
    ... Electrolux is a very strong brand in Southeast Asia. Innovative products developed to meet the region's specific needs in terms of temperature, humidity and food culture have generated strong growth in recent years Market shares in Australia 42% core appliances 26% ï¬,oor-care products Markets...

  • Page 30
    ... annual report 2009 | part 1 | business areas | professional products Professional Products A high rate of innovation and a well-developed global service network are vital competitive advantages for Electrolux. The Group continues to focus on energyand water-efficient products under the Green...

  • Page 31
    ... professional food-service equipment is sold worldwide under the brands Electrolux and Zanussi. Molteni is the Group's niche-brand for exclusive cookers. Products and market position Electrolux supplies restaurants and professional kitchens with complete solutions. The Green Spirit range offers best...

  • Page 32
    ...development of new products and laundry processes for lower energy consumption and improved washing performance. The product offering includes washing machines, tumble-dryers and ironing equipment. Approximately 70% of sales refers to Europe, and 20% to North America. The Group's strongest positions...

  • Page 33
    ... and its global service network are vital competitive advantages within professional operations. Investment in product development and nearness to customers have contributed to stable growth in profitability. Estimated market share Food service Laundry Europe North America Asia Global 16...

  • Page 34
    ... major markets. Cost The Group's comprehensive restructuring program will soon be completed, which means that Electrolux will have a competitive production structure in which approximately 60% of appliances are manufactured in low-cost countries. All production of vacuum cleaners is already located...

  • Page 35
    ... 6% over a business cycle. • Organic growth of at least 4% annually, on average. • Capital turnover rate of at least 4. • Return on capital employed of at least 25%. Activities • Continue strengthening the position of the Electrolux brand in the global premium segment. • Complete...

  • Page 36
    ... consumer insight. In North America, the successful launch of the Electrolux brand for household appliances in the premium segment during 2008 was followed by a re-launch of the Frigidaire brand in the mass-market segment during 2009. In Europe, the Group has captured market shares with new products...

  • Page 37
    ...to a consumer-driven company Products Brand Cost From a manufacturing company... Structural measures and adjustment of cost levels...For a number of years, Electrolux has been relocating production to low-cost countries and reducing the number of employees. Production has become more efficient,...

  • Page 38
    annual report 2009 | part 1 | strategy | product development Product development based on consumer insight The Electrolux process for consumer-focused product development is the foundation of all new products, for both consumers and professional users. Below is an example from the ï¬,oor-care ...

  • Page 39
    ... part of the family. LAUNCH EXECUTION RANGE MANAGEMENT PHASE-OUT All market communication is designed to create a powerful image of Electrolux, irrespective of product or market. Marketing plans are integrated in product development at an early stage, and all activities are coordinated in order...

  • Page 40
    ... Asia, most of the Group's appliances and all vacuum cleaners are sold under the Electrolux brand. In Europe, the share of Electrolux-branded (including double-branded) core appliances is approximately 55%, and is increasing steadily. In North America and Australia, the share of these products...

  • Page 41
    ... segment. The Dream kitchen application was developed to support the launch of the Electrolux built-in range. Entire product series under a single brand Households buy appliances infrequently, which means that the consumer has limited knowledge of what has happened in the market since the last...

  • Page 42
    annual report 2009 | part 1 | strategy | innovative products Innovative products "Thinking of you" is the key message in Group marketing communication. It highlights Electrolux strong focus on consumers. But thoughtfulness also refers to employees, suppliers, other stakeholders and the environment....

  • Page 43
    ... products received several design awards during 2009 for combining cuttingedge design with functionality. DESIGN LAB Complete solutions for industrial kitchens In 2009, the seventh annual Electrolux Design Lab encouraged design students worldwide to think about the household appliances...

  • Page 44
    ... back production 9 new plants have been opened Electrolux currently has production facilities in 17 countries. Modern, highly productive plants have been built in Asia, Mexico and Eastern Europe. In addition to producing innovative high-quality products for the Australian, North American and...

  • Page 45
    ... 11 Approximately 60% of the Group's production of appliances will be in LCC when the restructuring program has been completed. All production of floor-care products has already been relocated. Standard modules for different products Electrolux is currently working on identifying the number of...

  • Page 46
    annual report 2009 | part 1 | strategy | costs Utilizing global strength Electrolux continues to step by step work on reducing costs for product development, purchasing and manufacturing by utilizing the Group's global scope and strength. The aim is to develop, produce and launch profitable ...

  • Page 47
    annual report 2009 | part 1 | strategy | financial goals Financial goals Electrolux goals for operating margin, growth, capital structure and return on capital employed are intended to enable creation of greater value. In addition to maintaining and strengthening the Group's leading global ...

  • Page 48
    ... shares in high-price segments and in growth markets. Capital turnover rate of at least 4 Electrolux strives for an optimal capital structure in relation to the goals for profitability and growth. In recent years, the Group has invested in new, modern production facilities in low-cost countries...

  • Page 49
    ... intensified. This has involved reviewing everything from supplier contracts and inventory management to invoicing of customers. It has resulted in a lower level of structural working capital, i.e., the share of capital that is not affected by changes in business conditions, as well as a stronger...

  • Page 50
    annual report 2009 | part 1 | strategy | external factors External factors affecting operations Electrolux ability to achieve higher profitability and a higher return to shareholders is based on quality products, strong brands and cost-efficient operations. Electrolux operations are naturally ...

  • Page 51
    ... frost-free refrigerators and induction hobs show continued strong growth. Governmental incentives for stimulating consumer purchasing of energy- and water-efficient household products have been implemented by governments in several countries, including Brazil, the US and Australia. Electrolux has...

  • Page 52
    ... to position Electrolux as a global premium brand that stands for innovative, energy-efficient products that feature attractive design and are driven by a profound understanding of consumer needs. Increasing the share of products sold in the higher price segments enables a better product mix...

  • Page 53
    ...-dryers in the premium segment, through smart innovations and design for which consumers are willing to pay more. Turning around operations in Germany, the UK and Spain Germany, the UK and Spain are major markets for household appliances in which the Group is working to simplify the product offering...

  • Page 54
    ... Policy are in line with these principles. DJSI World Index The Group's sustainability performance helps attract and strengthen relations with investors. In 2009 and for the third year, Electrolux ranked among the top 10% of the world's 2,500 largest companies in the Dow Jones Sustainability World...

  • Page 55
    ... of conduct. CLIMATE CHALLENGE 2012 Energy savings target (GRI EN18) % Target 85% (2012) Major appliances Europe Major appliances North America Major appliances Asia/Pacific Major appliances Latin America Floor Care and small appliances Professional Products Electrolux Group Savings (in...

  • Page 56
    ...-year life span. Through the green product ranges, each business sector is innovating and promoting a product offering that is waterand energy-ef ficient, with climate-smart features. The products' contribution to sales is reported annually. Eco Savings, an online calculator launched by Electrolux...

  • Page 57
    ...ko Institut e.V.'s LCA of a washing machine, 2004. End of life +4% (energy recovery) Over 80% of a large appliance such as a washing machine can be recycled. Electrolux participates in take-back schemes in Europe. In accordance with the EU WEEE Directive, which defines producer responsibility for...

  • Page 58
    ... in order to enhance competence, generate new ideas and develop future leaders. The most important tool for increasing internal mobility is the Group's Open Labor Market (OLM) database, where all available office jobs are posted. EAS reï¬,ects integration of the People Vision The annual Employee...

  • Page 59
    ... Group-wide Europe, 50% North America, 26% South America, 16% Asia/Pacific, 7% Rest of the world,

  • Page 60

  • Page 61

  • Page 62
    annual report 2009 | part 1 | capital market | electrolux shares Electrolux and the capital market Electrolux communication with the capital market aims at supplying relevant, reliable, accurate and updated information about the Group's development and financial position. Financial information is ...

  • Page 63
    ..., the Electrolux share had a low valuation at the start of 2009. In combination with the recovery of stock markets, this provided a good potential for a good performance of the share in 2009. The share price development for the Electrolux B-share in 2009 was the best in the company's history. An...

  • Page 64
    ... Electrolux launch (kitchen) in North America New borrowings - prolonged maturities Electrolux launch (laundry) in North America Reduced complexity in Europe - >600 to leave the Group Decision to close factory in Scandicci and improve efficiency in Susegana, Italy Recommendations from analysts...

  • Page 65
    ...Sep 2009 Dec 2009 Stabilized demand in North America Dramatic decline in demand in Eastern Europe Strong growth in Brazil Less decline in Europe Price increases in Europe early 2009 Structural improvement of working capital Decision to cancel dividend Decision to close factories in Webster, USA...

  • Page 66
    annual report 2009 | part 1 | capital market | electrolux shares Conversion of shares In accordance with Electrolux Articles of Association, owners of A-shares have the right to have such shares converted to B-shares. Conversion reduces the total number of votes in the company. In January 2010, at ...

  • Page 67
    .../ Kevin Scott appointed Head of Major Appliances North America Electrolux once again included in Dow Jones Sustainability World Index Nomination Committee for Electrolux AGM 2010 Electrolux to discontinue production at factory in Alcalá, Spain Interim report January-September and CEO Hans Stråberg...

  • Page 68
    annual report 2009 | part 1 | risks Managing risks to maximize returns The household appliances sector was affected by the continued recession in 2009. Demand continued to decline in several of the Group's major markets. Retailers were affected by turbulence in financial markets and reduced access...

  • Page 69
    ... the fourth quarter of 2009. This reduced the Group's sales of appliances under private labels. New sales to IKEA in Europe partly offset the decline in sales. Electrolux has a special process for evaluating credits and tracking the financial situation of retailers. Management of credits as well as...

  • Page 70
    annual report 2009 | part 1 | risks Restructuring for competitive production A large share of the Group's production has been moved from high-cost to low-cost countries. The restructuring program was launched in 2004. The remaining costs for this program will be taken in 2010, and the new ...

  • Page 71
    ... are purchased in a different currency than in which finished products are sold. The table below shows the most important transaction exposures. Translation exposure is related mainly to currencies in the regions with the largest Group operations, i.e., EUR and USD. Changes in currency rates also...

  • Page 72
    ... markets Most of Electrolux main markets continued to show a decline in 2009. Demand for appliances in North America declined by 8% and demand in Europe by 11%. Industry shipments in Eastern Europe declined by 25% and Western Europe declined by 6%. Net sales declined Net sales for the Group in 2009...

  • Page 73
    ...impact of the Electrolux launch, appliances North America in the first quarter of 2009 and in 2008 Cost-cutting program, appliances Europe Cost for a component problem for dishwashers, appliances Europe Capital gain, real estate, appliances Europe Cost for litigation, appliances North America Total...

  • Page 74
    annual report 2009 | part 1 | financial review in brief avsnitt 33% 2009 PROGRESS Share of sales by business area Consumer Durables, 93% Europe, 38% North America, 33% Latin America, 13% Asia/Pacific and Rest of world, 9% Professional Products, 7% CONSUMER DURABLES 13% Market overview Some ...

  • Page 75
    ... for raw materials, favorable exchange rates, price increases and lower costs for production and administration. Net sales and employees 10 largest countries SEKm Employees Operating income by business area SEKm 2009 2008 USA Brazil Germany Australia France Italy Canada Sweden Switzerland United...

  • Page 76
    avsnitt report 2009 | part 1 | financial review in brief annual Working capital and net assets Dec. 31, 2009 % of annualized net sales Dec. 31, 2008 % of annualized net sales Net borrowings SEKm Dec. 31, 2009 Dec. 31, 2008 SEKm Borrowings Liquid funds Net borrowings Net debt/equity ratio Equity...

  • Page 77
    ...of the development of the market for 2009. Source: SIS Ägarservice and Electrolux as of December 31, 2009. Information regarding ownership structure is updated quarterly on www.electrolux.com/corpgov Ownership structure Investor AB is the largest shareholder, owning 12.7% of the share capital and...

  • Page 78
    ... world's first automatic 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...

  • Page 79
    ... home appliances. In fact, he had personally tracked down the headlining industrial designers, so that life for Electrolux customers would not only be cleaner and easier, but also more attractive. Looking at the Model xxx vacuum cleaner, Wenner-Gren said to Guild: "You have given Electrolux products...

  • Page 80
    ... Electr. Eng. Elected 2008. Previous positions: Executive Vice-President and Head of Research and Development of Scania CV AB, 2001-2009. Founder of Mecel AB (part of Delphi Corporation). Senior management positions with Delphi Corporation, 1990-2001. Holdings in AB Electrolux: 1,000 B-shares. John...

  • Page 81
    .... Elected 2005. Holdings in AB Electrolux: 0 shares. Secretary of the Board Cecilia Vieweg Born 1955. B. of Law. General Counsel of AB Electrolux. Secretary of the Electrolux Board since 1999. Holdings in AB Electrolux: 18,827 B-shares, 4,696 options. Auditors At the Annual General Meeting in 2006...

  • Page 82
    ... Appliances Europe, 2008. Head of Major Appliances Europe and Executive Vice-President of AB Electrolux, 2008. Holdings in AB Electrolux: 2,000 B-shares, 0 options. Carina Malmgren Heander Senior Vice-President, Human Resources and Organizational Development Born 1959. B. Econ. In Group Management...

  • Page 83
    ... Holdings in AB Electrolux: 2,700 B-shares, 0 options. Kevin Scott Head of Major Appliances North America, Executive Vice-President Born: 1959. Ph.D. in Chem. Eng. In Group Management since 2009. Technical, manufacturing, brand marketing and business management positions with DuPont, USA, 1985-1994...

  • Page 84
    ..., net sales with operating margin or, as shown here, operating income with operating margin, both excluding items affecting comparability. Electrolux Annual Report 2009 consists of two parts: • Operations and strategy • Financial review, Sustainability report and Corporate governance report...

  • Page 85
    ... About Electrolux operations Sustainability Corporate governance Annual General Meeting Graphs Tables Select information type Financial data Share development Dividend Ownership structure Shareholder information Display Compare with Download as MS Excel www.electrolux.com/ir Investor Relations...

  • Page 86
    Electrolux Annual Report 2009 | Operations and strategy www.electrolux.com/annualreport2009 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 14-22...