Electrolux 2010 Annual Report Download - page 6

annual report 2010 | part 1 | ceo statement
CEO dialogue
The former President and CEO of Electrolux Hans Stråberg and the new President
and CEO Keith McLoughlin discuss a number of issues concerning the operations
and strategy of Electrolux.
On the operating margin, which reached a full 6.1% for
2010, the highest level ever in the current structure.
(Hans)
I am especially pleased with achieving this high operating margin in
a year marked by relatively difficult conditions. Demand in our larg-
est markets, North America and Europe, was far from convincing.
We experienced downward pressure on prices in certain segments
and raw-material prices rose steeply. The increase in our profitability
was therefore mainly attributable to our own efforts. We retained our
focus on low costs and launched new savings programs early in the
recession, our restructuring program continued as planned and we
intensified activities focusing on our new global initiatives.
Meanwhile, we have had the resources to take aggressive actions
during 2010. We launched multiple new products and increased
brand investments; initiatives that have helped enhance the mix. An
example of this is the strengthening of our brand positions in North
America. The improvement in income for the vacuum
cleaner business largely derived from an improved
mix through the launch of new products. Moreover,
new income and sales records were noted in Latin
America and Southeast Asia and Professional
Products recorded its highest ever operating margin.
Another key milestone was the near completion
of the major restructuring program that we initiated
in 2004, with some of the final
decisions being taken in
December 2010. The pro-
gram will generate com-
bined cost savings of
SEK 3.4 billion per
year. We have created an entirely new plant structure with nearly
60% of our production taking place in low-cost areas; the share in
2004 was about 20%.
(Keith)
And our new, global initiative will enable us to further enhance our
competitiveness. We anticipate being able to reduce manufacturing,
purchasing and product costs by a total of SEK 2.5 billion on an
annual basis as of 2015. Additional positive effects include increas-
ing the leverage of product development.
However, what continues to be the most important factor for us is,
naturally, how successful we are at developing new products that
consumers want and are willing to pay a premium for. For example,
the successful launch of new innovative products in the US in recent
years has strengthened our position in the higher price segments
and has raised our profitability, despite a weak underlying market.
When demand in the US gains real momentum, consumption
of premium products will increase, thus generating strong
leverage for sales of Electrolux products.
We are also strengthening our position in the Euro-
pean premium market. Our first task is to reposition the
AEG brand by launching new products in a number of
the Central European markets, and we will continue to
introduce Electrolux-branded appliances in the premium
segment throughout Europe. We will also continue to
launch new products within our floor-care operation. The
most recent example of this was our successful range of
green vacuum cleaners.
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