Electrolux 2010 Annual Report Download - page 7

I am especially pleased with
achieving this high operating margin
in a year marked by relatively diffi-
cult conditions. The increase in our
profitability was mainly attributable
to our own efforts.
Hans Stråberg
On the economy – and above all the historical downturn in
demand in the US and Europe.
(Hans)
From its peak in 2006, the US market has fallen by 25%, and sales
volumes are currently back at the levels observed in 1998. The
European market was also unusually weak in recent years. We have
seen a clear trend in consumer behavior take shape. Consumers
move down the price segments, favoring less expensive products
as long as the economic uncertainty prevailed. In parallel, we have
observed a growing need among an increasing number of house-
holds to replace old products with new models. The typical life span
of an appliance is between 10 and 12 years, and as the current size
of the US market is on 1998 levels we can expect that growth will be
driven by replacement.
(Keith)
But to get consumers in the US to upgrade, they need to believe that
the future looks promising. This in turn would strengthen the real-
estate market and encourage people to start renovating their homes
again. Various rebate programs, such as last year’s Cash for Appli-
ances in the US, are also driving demand. However, it is imperative
that these types of programs are suitably formulated and sustain-
able, otherwise they risk generating some kind of accordian effect
with a resulting decline in demand and large unsold stock in the
industry. This would benefit no one – neither manufacturer nor con-
sumer.
On trends – and on which is the
most significant and strongest
of them all.
(Hans)
Of all the trends that have
driven demand in recent
years, the growing environ-
mental awareness of consumers has been one of the strongest.
This has naturally benefited a company such as Electrolux, with its
focus on continuous improvement of the energy and water effi-
ciency of products. We have taken a leading position in this area.
(Keith)
And our status as leader is important, since this trend will become
more prevalent in the years to come, across the globe. Our position
at the cutting edge of development is highly significant for our
potential to grow successfully. We also have the resources to further
improve our product development, allowing us to more rapidly
launch new products that solve consumer problems, such as water
shortages and high electricity costs. We are also leading the debate
in the area, most recently with our highly acclaimed PR campaign
Vac from the Sea, which drew attention to the pollution of our seas
and linked it to the shortage of recycled plastic. Another trend that
Electrolux can derive a great deal of benefit from is the increasing
consumer interest in design. In this regard, the Group’s Scandina-
vian roots play a key role.
On growth – areas in which and how Electrolux can grow
while maintaining profitability.
(Hans)
Although we only reported a nominal growth in comparable curren-
cies for 2010, it was an important year from the perspective of
growth. For the first time in quite a while, we were able to complete
and announce strategic acquisitions in key growth markets. These
include the washer plant in the Ukraine, providing us with better
access to a large and expanding market in the east, and the signing
of a Memorandum of Understanding covering the acquisition of the
Egyptian company Olympic Group, making Electrolux a significant
player in the growth markets of North Africa and the Middle East.
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