Electrolux 2014 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... best appliance company as measured by our customers Customer value is based on the products and the services Electrolux provides. Innovative products, closely based on the Group's professional expertise, are launched at an increasing pace across the globe. Cover: In 2014, Electrolux Grand Cuisine...

  • Page 3

  • Page 4
    Electrolux vision is to be the best appliance company as measured by our employees Growth, innovation and operational excellence always begin with people. Dedicated employees from diverse backgrounds play a crucial role in creating an innovative corporate culture.

  • Page 5

  • Page 6

  • Page 7
    ... be the best appliance company as measured by our shareholders The combination of continuous growth, high profitability, a stable cashflow, and an optimal capital base generates a high total return for shareholders. Over the past ten years, the average annual total return on the Electrolux share has...

  • Page 8
    ...for households and businesses, with products such as refrigerators, dishwashers, washing machines, cookers, vacuum cleaners, air conditioners and small domestic appliances. Under esteemed brands including Electrolux, AEG, Zanussi, Frigidaire and Electrolux Grand Cuisine, the Group sells more than 50...

  • Page 9
    ...Appliances North America Major Appliances Latin America Major Appliances Asia/Pacific Small Appliances Professional Products The Electrolux Share and Risk management Share development Electrolux and the capital markets Risk management Reporting Report by the Board of Directors Notes to the financial...

  • Page 10
    ... Appliances Latin America SHARE OF GROUP SALES Major Appliances Asia/Pacific 4.3% The Group's products are sold in more than 150 countries. The largest of these are in Europe and North America. Electrolux is expanding its presence in growth markets, such as Latin America, Africa, the Middle East...

  • Page 11
    ...% Average net assets Return on net assets Goal % % Average growth *Financial goals are excluding items affecting comparability. 4 SEnm , , % Net sales Organic sales growth ) Goal % 1) % , , , , OF AT LEAST 4% ANNUALLY In local currencies and comparable unites ELECTROLUX ANNUAL REPORT 2014...

  • Page 12
    ... Increased results in challenging markets 2014 was a good year for Electrolux. In challenging markets, operating income increased by 18 percent to SEK 4.8 billion and the EBIT margin rose to 4.3 percent from 3.7 percent in 2013. We generated a good cash flow of SEK 6.6 billion during the year...

  • Page 13
    ...the year, which will contribute strongly to the achievement of the Group's vision of being the best appliance company in the world as measured by our customers, employees and shareholders. Stockholm, February 2015 Keith McLoughlin President and Chief Executive Officer ELECTROLUX ANNUAL REPORT 2014...

  • Page 14
    ...to be the best appliance company in the world as measured by customers, employees and shareholders. Customers - Customers' perception of Electrolux is based on the products the Group sells and the service it provides. The pace of innovation and the number of product launches have increased in recent...

  • Page 15
    ... be the best appliance company in the world, as measured by our customers, employees and shareholders. Mission - financial goals wuat we want to acuieVe 6% Operating margin of at least 6% 4x Capital turnover-rate of at least 4 times 20% Return on net assets of at least 20% 4% Average growth of...

  • Page 16
    ... most energy-efficient products, represented 13% of products sold and 25% of gross profit. The Group's operating margin increased to 4.3%, excluding items affecting comparability. Capital turnover-rate of at least 4 times Electrolux strives for an optimal capital structure in relation to the Group...

  • Page 17
    ..., Electrolux would achieve a return on net assets (RONA) of at least 20%. The figure reported for 2014 was 17%. Average growth of at least 4% annually In order to reach the growth goal, the Group continues to strengthen its positions in the premium segment, expand in profitable high-growth product...

  • Page 18

  • Page 19
    Strategic development

  • Page 20
    ... A key factor in the Electrolux consumer-oriented productdevelopment process is the close collaboration between marketing, R&D and design, as is the transfer of know-how from the professional business to consumer products. Over a number of years, the Group has progressively increased investment...

  • Page 21
    ... value is based on the products and the services that Electrolux provides. Electrolux develops solutions that facilitate the everyday lives of consumers. Innovative products, closely based on the Group's professional expertise, are launched at an increasing pace across the globe. Macro drivers New...

  • Page 22
    ... North America, a number of innovative products was launched under the Frigidaire and Electrolux brands in 2014. Focus on sustainability opens opportunities for new products. In Europe, one example is the Ã-KOKombi washer/dryer under the AEG brand, which utilizes heat-pump technology to reduce water...

  • Page 23
    Electrolux product development focuses on a number of areas aimed at contributing to the culinary dining experience. Key is the transfer of know-how and experience from the Group's professional business to consumer products. ELECTROLUX ANNUAL REPORT 2014 21

  • Page 24
    ...needed to increase the rate of investment in product development and global growth. Completion of the transaction is mainly subject to regulatory approvals. The acquisition is expected to close during 2015. Electrolux net sales in growth markets SEnm , , , , , Latin America Asia Middle East, Africa...

  • Page 25
    ... Electrolux core markets Western Europe North America, Australia, New Zealand, Japan 13% Electrolux growth markets Africa, Middle East, Eastern Europe, Latin America, Southeast Asia, China 87% 100 million people Increasing global demand for major appliances, million units Between 2009 and 2014...

  • Page 26
    ...-third of the product development spend is environment-related and includes energy and water efficiency. Material efficiency is growing in importance. Electrolux has successfully introduced recycled material in vacuum cleaners and other household appliances. A Green Range performance indicator for...

  • Page 27
    ... the increasing demand for energy and cost-efficient appliances. In 2014, the Green Range represented 13% of products sold and 25% of gross profit. A key challenge is to rapidly transfer innovation from the premium to the mass-market segment. Global Green Range 13% Consumer products with the best...

  • Page 28
    ... identifies major global potential for air-conditioning equipment and water heaters. To build increased consumer awareness of the value of efficient appliances, Electrolux focuses on efficiency and other sustainability benefits in its global marketing. Market surveys in Australia, Brazil, France...

  • Page 29
    .... Sustainability Award Marketing Excellence Award Design Award EMS Best Practice Award Product Award Invention Award Consumer Care Award Leadership Award Purchasing Award Sales Award Supplier Award At a separate event Electrolux presents an annual Supplier Award ELECTROLUX ANNUAL REPORT 2014 27

  • Page 30
    ... launch of new, innovative consumer products in the premium segment is supported by a strong link to the Group's expertise in professional products. Design awards In 2014, Electrolux received several prestigious design awards, such as Red dot design, iF design, Good Design Australia, Plus X Award...

  • Page 31
    ... these products are preferred by more consumers. 8 STRATEGIC BRANDS Market segment appliances ULTRA LUXURY PREMIUM Electrolux Electrolux North America Latin America Europe Australia ELECTROLUX GRAND CUISINE Electrolux AEG Electrolux MASS MARKET Frigidaire Eureka Electrolux Frigidaire Zanussi...

  • Page 32
    ... Electrolux strategy. The objective is to develop smarter, more accessible, resource-efficient solutions that meet people's needs and improve their lives. Sustainability priorities target three areas Products, services and markets to sustainably provide resource-efficient products and services...

  • Page 33
    ...To build increased consumer awareness of the value of efficient appliances, Electrolux focuses on efficiency and other sustainability benefits in marketing across the Group. Sustainability is one of four prioritized areas in product development. At least one-third of the product development spend is...

  • Page 34
    ... peaks. In 2014, refrigerator production was concentrated in the Asia/Pacific region to Rayong in Thailand. The cooking plant in L'Assomption, Quebec, Canada, was closed and production transferred to the new plant in Memphis, Tennessee, in the US. In Europe, discussions were initiated with employee...

  • Page 35
    ...sustainable appliances. Design is a central part of the Innovation Triangle, whereby the close collaboration between design, R&D and marketing enables new products to reach the market at a faster pace and ensures that these products are preferred by more consumers. ELECTROLUX ANNUAL REPORT 2014 33

  • Page 36
    ... resources. Two years ahead of schedule, in 2012, the Group achieved the 2014 goal of a 20% reduction in water consumption in operations. Together with World Wildlife Fund, Electrolux mapped water-related risks associated with Group factories. As a result, new and more stringent targets are set for...

  • Page 37
    ... components and modules Purchasing Manufacturing R&D Common processes and shared services Focus on differentiated products Premium segment Low cost, lean go-to-market, market sets prices Mass-market segment Shared global strength Sharp consumer focus Low-end ELECTROLUX ANNUAL REPORT 2014 35

  • Page 38
    ... in a global company with a strong focus on quality, innovation, design and sustainability. Employees by geographic area 2014 Europe, % North America, % Australia, New Zealand and Japan, % Africa and Middle East, % Latin America, % Southeast Asia and China, % 36 ELECTROLUX ANNUAL REPORT 2014

  • Page 39
    ... permitted. The majority of the reports during 2014 related to discrimination and harassment. The Electrolux Purpose is shared through a program, which aims to further increase employee understanding of the value the company generates beyond financial and market objectives. The program contributes...

  • Page 40
    ...Drive for Results We strive for a visible, measurable benefit from everything we do. We do not confuse efforts with results, and value matters more to us than mere volumes. We focus on the essential and aim at simple, informal, lean and direct ways of doing things. 38 ELECTROLUX ANNUAL REPORT 2014

  • Page 41
    ELECTROLUX ANNUAL REPORT 2014 39

  • Page 42

  • Page 43
    Markets and Business areas

  • Page 44
    ...-held vacuum cleaners. Penetration is high in Australia and New Zealand and demand is primarily driven by design and innovations as well as water and energy efficiency. Competition between manufacturers from Asia and Europe is intense. Market demand for major appliances Million units Market value...

  • Page 45
    ...terms of volume. The domestic manufacturers Haier Group and Midea dominate in China. Similar to other growth markets, consumers prioritize refrigerators, washing machines and air-conditioners as prosperity rises. Energy-efficient products are growing in popularity. Market demand for major appliances...

  • Page 46
    ... high energy and water efficiency. Continued prioritization of compact, user-friendly and quiet household appliances in Japan and South Korea. Share of Group sales 2014 Share of sales in the region 2014 % % 5%  Major appliances  Small appliances  Professional food-service and laundry...

  • Page 47
    ... targeting the Chinese premium segment, with functions adapted to this market. Focus on products for professional users in the laundry and food-service segments. Launch products in the rapidly growing market for compact vacuum cleaners and small domestic appliances. Share of Group sales 2014 Share...

  • Page 48
    ... innovative products leveraging our 90 years of expertise in professional appliances, particularly focused in the areas of combi-steam ovens, where Electrolux is the market leader, and in induction cooking. A new range of laundry products, including washers, dryers and combination washer/dryers has...

  • Page 49
    ... Additionally, heat pump technology achieves up to 70% energy savings compared to traditional condense dryers. Market demand for major appliances 2014 compared to 2013 Electrolux markets Average number of employees 2014 21,729 Western Europe Eastern Europe Egypt ELECTROLUX ANNUAL REPORT 2014 47

  • Page 50
    markets and business areas Major appliances North America The US appliance market posted continued growth in 2014. The Group continued to increase sales in the region by launching new, innovative products in several price segments and under several brands. During the year, Electrolux signed an ...

  • Page 51
    ...Flex Freezer The new Frigidaire Custom Flex Top Freezer with flexible storage possibilities is manufactured in North America using modularization and product innovation that were developed in the Electrolux manufacturing facility in Thailand. Market demand for major appliances 2014 compared to 2013...

  • Page 52
    ... offering in larger-capacity washing machines and refrigerators and cookers was renewed. Smaller capacity refrigerators, portable air-conditioning devices and larger capacity ovens were launched to further strengthen market shares in new product categories. During the year, Electrolux expanded its...

  • Page 53
    ... products to guests. Electrolux bottom freezer The new interactive refrigerator and freezer from Electrolux has...kitchens among consumers. Market demand for major appliances 2014 compared to 2013 Electrolux markets Average number of employees 2014 13,096 Brazil ELECTROLUX ANNUAL REPORT 2014...

  • Page 54
    ... in Australia. Growth in the appliance market in Southeast Asia has been strong in recent years, but demand declined in 2014. Electrolux sales has showed strong grown in the region and market shares have increased. Electrolux has a strong offering of premium products, for example, energy-efficient...

  • Page 55
    ... Southeast Asia. In 2014, the Electrolux Time Manager washing machine was named a winner at the Successful Design Awards, a competition that recognizes successful designs in the Chinese market. Market demand for major appliances 2014 compared to 2013 Electrolux markets Average number of employees...

  • Page 56
    ... • • • Continue launches of new, innovative products in vacuum cleaners and small domestic appliances Accelerate profitable growth, with particular focus on Asia and EMEA Restore profitability in North America and Latin America. Net sales Operating margin 54 ELECTROLUX ANNUAL REPORT 2014

  • Page 57
    ...cleaners and the trend is growing. In Europe, this category commands more than 50% of the market, while it is close to 70% in Asia. Market demand for vacuum cleaners 2014 compared to 2013 Electrolux markets Average number of employees 2014 2,614 Europe North America ELECTROLUX ANNUAL REPORT 2014...

  • Page 58
    ... washing and rinsing results. Electrolux professional washing machines and tumble-dryers are among the most energy and water-efficient in the market. Energy efficiency has a high priority in the development of professional food-service equipment. Some key launches during the year included Electrolux...

  • Page 59
    ... in 2014 strengthens the competitive position of Electrolux in the market for professional cooking ranges. Market demand for professional products 2014 compared to 2013 Electrolux markets Average number of employees 2014 2,582 Europe Emerging markets North America ELECTROLUX ANNUAL REPORT 2014...

  • Page 60

  • Page 61
    The Electrolux share and Risk management

  • Page 62
    ..., divided by the average number of shares after buy-backs. Market capitalization excluding buy-backs, plus net borrowings and non-controlling interests, divided by operating income. price in relation to earnings per share. 9) Continuing operations. 8) Trading 60 ELECTROLUX ANNUAL REPORT 2014

  • Page 63
    ...Slow start in North America due to weather conditions • Launch of new Ergorapido in Asia • Expanding the range of new products in Small Domestic Appliances • Electrolux holds CMD in Charlotte, North Carolina with focus on strategy and future growth • Electrolux Professional serves in FIFA...

  • Page 64
    ... number of registered shares in the company amounts to 308,920,308 shares, of which 8,192,539 are A shares and 300,727,769 are B shares. Major shareholders Share capital, % Voting rights, % Investor AB JP Morgan Asset Management Nordea Investment Management Alecta Pension Fund Swedbank Robur Funds...

  • Page 65
    Trading in Electrolux B shares 2013 2014 Share data Share listing1) Number of shares of which A shares of which B shares Quota value Market capitalization at December 31, 2014 GICS code2) Ticker codes 1) Trading Stockholm 308,920,308 8,192,539 300,727,769 SEK 5 SEK 71 bn 25201040 Reuters ELUXb.ST ...

  • Page 66
    ...'s head office in Stockholm, Sweden, as well as in the form of roadshows, primarily in major financial markets in Europe and the US. Electrolux also interacts daily with the capital markets. Furthermore, Electrolux arranges Capital Markets Days and the Annual General Meeting, providing shareholders...

  • Page 67
    ... increased by 6% in 2014. During the year, Electrolux was impacted by the transition of new products due to the new energy requirements for refrigerators and freezers by the Department of Energy. Q What are your specific thoughts on the consolidation of the appliance market in Europe? The European...

  • Page 68
    ... management of risk Financial policy | Credit policy | Pension policy | Code of Ethics | Environmental policy Electrolux monitors and minimizes key risks in a structured and proactive manner. Over the years, capacity has been adjusted in response to demand, working capital has undergone structural...

  • Page 69
    ... parts of the risks related to pensions. For additional information, see Note 22. Other risks Reputational, regulatory and sustainability risks can potentially impact Electrolux ability to successfully conduct business. There are a number of processes in place to control these risks such as internal...

  • Page 70
    ... currencies in emerging markets also impacted operations in Asia/Pacific and Europe, the Middle East and Africa. USD/CAD MXN/USD North America The principal currency pairs for the North American operations are the USD/CAD and MXN/USD. A significant portion of production is conducted in Mexico and...

  • Page 71
    ..., a weak CNY versus USD has a positive effect on the Group. USD/AUD Main translation effects: USD/SEK, EUR/SEK. Foreign-exchange transaction exposures, forecast 2015 SEnm , , , Grtss transactitn fltw Hedges Net USD EUR CNY EGP CLP CHF AUD CAD GBP BRL ELECTROLUX ANNUAL REPORT 2014 69

  • Page 72
    Report by the Board of Directors and Notes AB Electrolux (publ), 556009-4178 Annual Report 2014, page 71-131 70 ELECTROLUX ANNUAL REPORT 2014

  • Page 73
    ... for 2014 of SEK 6.50 (6.50) per share. Key data SEKm 2013 2014 Change, % Net sales Operating income Margin, % Income after financial items Income for the period Earnings per share, SEK1) Dividend per share, SEK Net debt/equity ratio Return on equity, % Average number of employees Excluding...

  • Page 74
    ... for Small Appliances and Major Appliances Asia/Pacific. Earnings for Major Appliances North America were negatively impacted by cost increases related to the transition of products to comply with new energy requirements and the ramp up of the new cooking plant in Memphis, Tennessee in the US. Price...

  • Page 75
    ... In Latin America and Asia/Pacific, new products in appliances, vacuum cleaners and small domestic appliances are being launched continuously. Capital turnover-rate times ...Capital turnover-rate Goal, times Return on net assets SEnm Average net assets Return on net assets Goal, % Key ratios are...

  • Page 76
    ... Organic sales grew for Major Appliances North America, Latin America and Asia/Pacific and for Professional Products. The product mix improved and prices increased in several regions while sales volumes declined. 2014 was a year with a strong focus on the most profitable products and sales channels...

  • Page 77
    ... income for the period attributable to: Equity holders of the Parent Company Non-controlling interests in income for the period Earnings per share For income attributable to the equity holders of the Parent Company: Basic, SEK Diluted, SEK Average number of shares Basic, million Diluted, million...

  • Page 78
    ... part of the strategy to grow in this market segment, see page 78. Major Appliances Europe, Middle East and Africa, % Major Appliances North America, % Major Appliances Latin America, % Major Appliances Asia/Pacific, % Small Appliances, % Professional Products, % 76 ELECTROLUX ANNUAL REPORT 2014

  • Page 79
    ... of employees Major Appliances North America Market demand in North America for core appliances increased by 6% in 2014 compared with 2013. Market demand for major appliances including microwave ovens and home-comfort products, such as room air-conditioners, increased by 6% in 2014 year-over year...

  • Page 80
    ... Barbecues has annual sales of AUD 17 million, approximately SEK 110m. The operation was consolidated in the Electrolux Group as of September 30, 2014, based on a preliminary purchase price allocation. Sales and income are included as of October 2014. Key figures SEKm 2013 2014 Net sales and...

  • Page 81
    ... on net assets, % Capital expenditure Average number of employees Professional Products Overall market demand for professional food-service and professional laundry equipment is estimated to have improved year-over-year. Market demand increased in the Nordic countries and the UK, where Electrolux...

  • Page 82
    ... comparability, increased to 17.1% (14.0). Financial net debt decreased to SEK 4,868m (7,673). Net assets and working capital Working capital amounted to SEK -8,377m (-5,800), corresponding to -6.6% (-5.1) of net sales. Net assets and working capital % of annualDec. 31, ized net 2013 sales % of...

  • Page 83
    ... balance sheet SEKm Note December 31, 2013 December 31, 2014 ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments in associates Deferred tax assets Financial assets Pension plan assets Other non-current assets Total non-current assets Current assets...

  • Page 84
    board of directors' report Cont. Financial position Net debt Net debt SEKm Dec. 31, 2013 Dec. 31, 2014 Borrowings Liquid funds Financial net debt Net provisions for post-employment benefits Net debt Net debt/equity ratio Equity Equity per share, SEK Return on equity, % Equity/assets ratio, % 14,...

  • Page 85
    ... income for the period Share-based payment Dividend SEK 6.50 per share Acquisition of non-controlling interest Total transactions with equity holders Closing balance, December 31, 2013 Income for the period Available for sale instruments Cash flow hedges Exchange-rate differences on translation of...

  • Page 86
    ... in property, plant and equipment in 2014 amounted to SEK 3,006m (3,535). Capital expenditure corresponded to 2.7% (3.2) of net sales. Investments in 2014, mainly related to investments within manufacturing facilities for efficiencies, new products and production capacity. Capital expenditure SEKm...

  • Page 87
    ...Capital expenditure in property, plant and equipment Capital expenditure in product development Capital expenditure in computer software Other Cash flow from investments Cash flow from operations and investments Financing Change in short-term investments Change in short-term borrowings New long-term...

  • Page 88
    board of directors' report Structural changes In 2013, Electrolux communicated actions to reduce annual costs by SEK 1.8bn for a charge of SEK 3.4bn. Cost savings will be achieved through manufacturing footprint restructuring as well as through overhead-cost reductions. These actions relate mainly ...

  • Page 89
    ...more than 90% of its revenue in North America. GE Appliances' product portfolio includes refrigerators, freezers, cooking products, dishwashers, washers, dryers, air-conditioners, water-filtration systems and water heaters. Its revenue split by major product category is approximately 35% cooking, 25...

  • Page 90
    ... 2014. Investor AB JP Morgan Asset Management Nordea Investment Management Alecta Pension Fund Swedbank Robur Funds Norges Bank Investment Management Government of Singapore SHB Funds AMF Insurance & Funds Unionen Total, ten largest shareholders Board of Directors and Group Management, collectively...

  • Page 91
    ...adapt the company's capital structure, thereby contributing to increased shareholder value, and to continue to be able to use repurchased shares on account of potential company acquisitions and the company's share-related incentive programs. The Board of Directors proposes that the AGM 2015 resolves...

  • Page 92
    .... Utilization of production capacity may also decline in the short term. In 2014, demand for appliances increased in North America and stabilized in Europe after several years of weak demand. Demand in Australia and emerging markets as China and Southeast Asia declined. The global economic trend is...

  • Page 93
    ... of management, the Talent Management program, Succession Planning, the internal Open Labor Market, and the web-based Employee Engagement Survey. Code of Conduct The Group has a Code of Conduct that defines high employment standards for all Electrolux employees in all countries and business areas...

  • Page 94
    ...be connected to performance targets for the Group established by the Board for (i) earnings per share, (ii) return on net assets and (iii) organic sales growth, for the 2015 financial year. The proposed program will include up to 250 senior managers and key employees. Allocation of performance-based...

  • Page 95
    ... products are used. Electrolux aims to develop and actively promote increased sales of products with lower environmental impact. Mandatory permits and notification in Sweden and elsewhere Electrolux operates three plants in Sweden, which account for approximately 1.7% of the total value of the Group...

  • Page 96
    board of directors' report Parent Company income statement Income statement SEKm Note 2013 2014 Net sales Cost of goods sold Gross operating income Selling expenses Administrative expenses Other operating income Other operating expenses Operating income Financial income Financial expenses ...

  • Page 97
    Parent Company balance sheet SEKm Note December 31, 2013 December 31, 2014 ASSETS Non-current assets Intangible assets Property, plant and equipment Deferred tax assets Financial assets Total non-current assets Current assets Inventories Receivables from subsidiaries Trade receivables Tax-refund ...

  • Page 98
    board of directors' report Parent Company change in equity Restricted equity SEKm Share capital Statutory reserve Non-restricted equity Fair value reserve Retained earnings Total equity Opening balance, January 1, 2013 Income for the period Available for sale instruments Cash flow hedges Income ...

  • Page 99
    Parent Company cash flow statement SEKm 2013 2014 Operations Income after financial items Depreciation and amortization Capital gain/loss included in operating income Share-based compensation Group contributions Taxes paid Cash flow from operations, excluding change in operating assets and ...

  • Page 100
    ... Other non-current assets Inventories Other current assets Trade receivables Financial instruments Assets pledged for liabilities to credit institutions Share capital, number of shares and earnings per share Untaxed reserves, Parent Company Post-employment benefits Other provisions Other liabilities...

  • Page 101
    ... Group, except in the cases specified below in the section entitled Parent Company accounting principles. The financial statements were authorized for issue by the Board of Directors on January 27, 2015. The balance sheets and income statements are subject to approval by the Annual General Meeting...

  • Page 102
    ... doubtful accounts at year-end 2014 was SEK 619m. Post-employment benefits Electrolux sponsors defined benefit pension plans for some of its employees in certain countries. The pension calculations are based on actuarial assumptions about, e.g., mortality rates, future salary and pension increases...

  • Page 103
    ... The Parent Company presents the income and balance sheet statements in compliance with the Swedish Annual Accounts Act (1995:1554) and recommendation RFR 2. Note 2 Financial risk management Financial risk management The Group is exposed to a number of risks coming from liquid funds, trade...

  • Page 104
    ... to it in light of changes in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, buy back own shares or issue new shares, or sell assets to reduce debt. Financing risk Financing...

  • Page 105
    ... Europe, Middle East and Africa; Major Appliances North America; Major Appliances Latin America; Major Appliances Asia/Pacific; and Small Appliances. Products within major appliances comprise mainly of refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners...

  • Page 106
    ... 2013 2014 Net assets December 31, 2013 2014 Major Appliances Europe, Middle East and Africa Major Appliances North America Major Appliances Latin America Major Appliances Asia/Pacific Small Appliances Professional Products Other1) Liquid funds Interest-bearing liabilities Pension assets/liablities...

  • Page 107
    ... Other operating income Group 2013 2014 Parent Company 2013 2014 Gain on sale of property, plant and equipment Gain on sale of operations and shares Other Total 33 2 - 35 27 45 104 176 - 9 - 9 - - - - The major part of other is related to government grants. ELECTROLUX ANNUAL REPORT 2014 105

  • Page 108
    ... -63 -721 - -181 - -37 -826 - 99 - -34 -455 Interest expense to others, for the Group and Parent Company, includes gains and losses on derivatives used for managing the Group's interest fixing. For information on financial instruments, see Note 18 on page 112. 106 ELECTROLUX ANNUAL REPORT 2014

  • Page 109
    ... tax credits related to the production of energy-efficient appliances amounting to SEK 463m (573). Note 11 Other comprehensive income Group 2013 2014 Items that will not be reclassified to income for the period Remeasurement of provisions for post-employment benefits Opening balance, January...

  • Page 110
    ... relates to the business area Major Appliances Europe, Middle East and Africa. Parent Company Land and land improvements Machinery and technical installations Buildings Other equipment Plants under construction Total Acquisition costs Opening balance, January 1, 2013 Acquired during the year...

  • Page 111
    .... Goodwill, value of trademark and discount rate 2013 Goodwill Electrolux trademark Discount rate, % Goodwill 2014 Electrolux trademark Discount rate, % Major Appliances Europe, Middle East and Africa Major Appliances North America Major Appliances Latin America Major Appliances Asia/Pacific Other...

  • Page 112
    ... intangible assets Group Other intangible assets Product Goodwill development Program software Total other intangible assets Parent Company Trademarks, program software, etc. Other Acquisition costs Opening balance, January 1, 2013 Acquired during the year Internally developed Reclassification...

  • Page 113
    ... item Cost of goods sold in the income statement. The fair value of trade receivables equals their carrying amount as the impact of discounting is not significant. Electrolux has a significant credit exposure on a number of major customers, primarily in the US, Latin America and Europe. Receivables...

  • Page 114
    ... notes to the Annual Report: Note 2, Financial risk management, describes the Group's risk policies in general and regarding the principal financial instruments of Electrolux in more detail. Note 17, Trade receivables, describes the trade receivables and related credit risks. The information in this...

  • Page 115
    ... in the Group's balance sheet. Short-term borrowings pertain mainly to countries with capital restrictions. The average maturity of the Group's long-term borrowings including longterm borrowings with maturities within 12 months was 2.8 years (3.3), at the end of 2014. The table below presents the...

  • Page 116
    ... balance sheet. The Group's customer-financing activities are performed in order to provide sales support and are directed mainly to independent retailers in Scandinavia. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer...

  • Page 117
    ... SEK 157 (194). Level 3: Inputs for the assets or liabilities that are not entirely based on observable market date. Electrolux has no financial assets or liabilities qualifying for level 3. Note 19 Assets pledged for liabilities to credit institutions Group December 31, 2013 2014 Parent Company...

  • Page 118
    ... the year has been 286,295,400 (286,200,115) and the average number of diluted shares has been 288,211,304 (287,317,610). Other paid-in capital Other paid-in capital relates to payments made by owners and includes share premiums paid. Note 21 Untaxed reserves, Parent Company December 31, 2013...

  • Page 119
    .... Net provisions for post-employment benefits in the balance sheet represent the present value of the Group's obligations less market value of plan assets. The remeasurements of the obligations are made using actuarial assumptions determined at the balance-sheet date. Changes in the present value of...

  • Page 120
    ... in the financial statements relating to defined benefit obligations. Information by country, December 31, 2013 USA USA Medical UK Sweden Germany Switzer- land Other Total Amounts included in the balance sheet Present value of funded and unfunded obligations Fair value of plan assets (after change...

  • Page 121
    ...inflation change feeds through to other inflation-dependant assumptions, i.e., pension increases and salary growth. In 2015, the Group expects to pay a total of SEK 330m in contributions to the pension funds and as payments of benefits directly to the employees. ELECTROLUX ANNUAL REPORT 2014 119

  • Page 122
    ... used in the Group under IFRS. The pension benefits are secured by contributions to a separate fund or recorded as a liability in the balance sheet. The accounting principles used in the Parent Company's separate financial statements differ from the IFRS principles, mainly in the following...

  • Page 123
    ... from the pension foundation during 2014 amounted to SEK 74m (67). 2013 2014 Current service cost Interest cost Total expenses for defined benefit pension plans Insurance premiums Total expenses for defined contribution plans Special employer's contribution tax Cost for credit insurance FPG Total...

  • Page 124
    ... close during 2015. For further information on the acquisition, see page 87 in the Board of Directors report. In the first quarter of 2013, the Group acquired and subsequently partly divested the real estate company owning the corporate head office in Sweden to the Swedish Pension Foundation for SEK...

  • Page 125
    ...of the average number of employees by country has been submitted to the Swedish Companies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. See also Electrolux website www.electroluxgroup.com. Europe North America Latin America Rest of...

  • Page 126
    ... a pension entitlement where the aggregated contribution is 35% of annual base salary. The retirement age is 65 years. For members of Group Management employed outside of Sweden, varying pension terms and conditions apply, depending upon the country of employment. 124 ELECTROLUX ANNUAL REPORT 2014

  • Page 127
    ... date. Performance-share programs 2012, 2013 and 2014 The Annual General Meeting in 2014 approved an annual long-term incentive program. The program is in line with the Group's principles for remuneration based on performance, and is an integral part of the total compensation for Group Management...

  • Page 128
    ...into a number of shares. The number of shares is based on a share price of SEK 129.49 for 2012, SEK 159.57 for 2013 and SEK 140.86 for 2014, calculated as the average closing price of the Electrolux Class B share on the Nasdaq Stockholm during a period of ten trading days before the day participants...

  • Page 129
    ... following table lists the major companies included in the Electrolux Group. A detailed specification of Group companies has been submitted to the Swedish Companies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. Associated companies...

  • Page 130
    ... net sales In computation of key ratios where capital is related to net sales, the latter are annualized and converted at year-end exchange rates and adjusted for acquired and divested operations. Net assets Total assets exclusive of liquid funds, pension plan assets and interest-bearing financial...

  • Page 131
    ... member Ulrika Saxon Board member Ola Bertilsson Board member, employee representative Gunilla Brandt Board member, employee representative Ulf Carlsson Board member, employee representative Keith McLoughlin Board member and President and Chief Executive Officer ELECTROLUX ANNUAL REPORT 2014...

  • Page 132
    ... statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the Parent Company and the Group. 130 ELECTROLUX ANNUAL REPORT 2014

  • Page 133
    ... members of the Board of Directors and the President be discharged from liability for the financial year. Stockholm, February 19, 2015 PricewaterhouseCoopers AB Anders Lundin Authorized Public Accountant Partner in Charge Anna Rosendal Authorized Public Accountant ELECTROLUX ANNUAL REPORT 2014...

  • Page 134
    ... Total assets Net assets Working capital Trade receivables Inventories Accounts payable Equity Interest-bearing liabilities Provisions for post-employment benefits, net Net borrowings Data per share Income for the period, SEK Equity, SEK Dividend, SEK5) Trading price of B-shares at year-end, SEK Key...

  • Page 135
    ... 58,800 284.7 284.7 59,478 13,785 51,800 285.9 286.1 60,754 13,521 51,500 286.2 286.2 60,038 14,278 46,500 286.3 286.3 3.5 1.6 -2.2 -1.9 -1.7 -3.1 Cash flow from acquisitions and divestments is excluded. 2014: Proposed by the Board. Net sales are annualized. ELECTROLUX ANNUAL REPORT 2014 133

  • Page 136
    ...1,369 970 3.39 3.64 -77 286.3 286.3 112,143 3,581 3.2 4,780 4.3 2,997 4,196 2,242 7.83 11.30 -1,199 286.3 286.3 Basic, based on average number of shares, excluding shares owned by Electrolux. Restructuring provisions, write-downs and capital loss on divestments. 134 ELECTROLUX ANNUAL REPORT 2014

  • Page 137
    ...year 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Full year 2014 Major Appliances Europe, Middle East and Africa Net sales Operating income Margin, % Major Appliances North America Net sales Operating income Margin, % Major Appliances Latin America Net sales Operating income Margin, % Major Appliances Asia...

  • Page 138
    ...Corporate Governance. Articles of Association. Board of Directors' working procedures. Policies for information, finance, credit, accounting manual, etc. Processes for internal control and risk management. Electrolux Code of Ethics, Policy on Corruption and Bribery and Workplace Code of Conduct...

  • Page 139
    ... as new Board member. Re-election of PricewaterhouseCoopers AB as auditor. Performance-based, long-term incentive program for senior management. Update of Electrolux Workplace Code of Conduct. Continued focus on global ethics program, encompassing both training and a whistleblowing system. Shares...

  • Page 140
    ..., were present at the meeting. Decisions at the Annual General Meeting 2014 included: Dividend payment of SEK 6.50 per share for fiscal year 2013. Election of the new Board member Petra Hedengran and re-election of the Board members Lorna Davis, Hasse Johansson, Ronnie Leten, Keith McLoughlin...

  • Page 141
    ... Group Management is a board member of Atlas Copco AB. Keith McLoughlin has no major shareholdings, nor is he a partowner in companies having significant business relations with Electrolux. Keith McLoughlin is the only member of Group Management with a seat on the Board. The Board's tasks The main...

  • Page 142
    ... SEK 25m. Normally, the head of a business area also reviews a current strategic issue at the meeting. For an overview of how the Board's work is spread over the year, see the table below. Major issues addressed by the Board during 2014 submitted by the Group's internal audit function, Management...

  • Page 143
    .... To prepare terms for pensions, notices of termination and severance pay as well as other benefits for Group Management. To prepare and evaluate Electrolux long-term incentive programs. To review the financial reporting. To monitor the effectiveness of the internal control, including risk...

  • Page 144
    ... of internal control and risk management has been developed to provide reasonable assurance that the Group's goals are met in terms of efficient operations, compliance with relevant laws and regulations and reliable financial reporting. Internal Audit For additional information on internal control...

  • Page 145
    .... Electrolux operates in competitive markets, most of which are relatively mature. Demand for appliances varies with general business conditions, and price competition is strong in a number of product categories. The Group's ability to improve profitability and increase shareholder return is based...

  • Page 146
    ... product development, purchasing and manufacturing. The Group also has a global Major Appliances Leadership Team (MALT) which includes the President, the CFO, the four Major Appliances business area heads, the Chief Marketing Officer, the Chief Technology Officer and the heads of the Product Boards...

  • Page 147
    ... management 2014 2014 2015 2016 2017 The calculation of the number of performance shares, if any, is connected to three performance targets for the Group established by the Board; (i) earnings per share (ii) return on net assets, and (iii) organic sales growth, for the 2014 financial year. Allotment...

  • Page 148
    ...Major Appliances North America and Executive Vice President of AB Electrolux, 2003, also Head of Major Appliances Latin America, 2004-2007, and Chief Operations Officer Major Appliances, 2009-2010. Senior management positions within DuPont, USA, 1981-2003. Total remuneration 2014, SEK Board meeting...

  • Page 149
    ... & Servera AB and the Swedish Trade Federation. Board member of several companies within the Axel Johnson Group, the Confederation of Swedish Enterprise and Lancelot Holding AB. Executive Vice President and Chief Financial Officer of Axel Johnson AB, 2000-2007. Head of Research of Aros Securities AB...

  • Page 150
    corporate goVernance report Group Management Keith McLoughlin President and Chief Executive Officer Born 1956. USA. B.Sc. Engineering. In Group Management since 2003. Henrik Bergström Head of Small Appliances, Executive Vice President Born 1972. Sweden. M. Sc. in Business Administration and ...

  • Page 151
    ... Europe, Middle East and Africa Jonas Samuelson Major Appliances North America Jack Truong Major Appliances Latin America Ruy Hirschheimer Major Appliances Asia/Pacific Gunilla Nordström Small Appliances Henrik Bergström Professional Products Alberto Zanata ELECTROLUX - ANNUAL REPORT 2014...

  • Page 152
    corporate goVernance report Internal control over financial reporting The Electrolux Control System (ECS) has been developed to ensure accurate and reliable financial reporting and preparation of financial statements in accordance with applicable laws and regulations, generally accepted accounting...

  • Page 153
    ...Monitor Inform and communicate Inform and communicate within the Electrolux Group regarding risks and controls contributes to ensuring that the right business decisions are made. Guidelines for financial reporting are communicated to employees, e.g., by ensuring that all manuals, policies and codes...

  • Page 154
    ... All reports, presentations and press releases are published simultaneously at www.electroluxgroup.com/ir. Auditor's report on the Corporate Governance Statement To the annual meeting of the shareholders of AB Electrolux (publ), corporate identity number 556009-4178 It is the Board of Directors who...

  • Page 155
    ... number of assistants attending, if any. Shareholders may vote by proxy, in which case a power of attorney should be submitted to Electrolux well in advance of the Annual General Meeting. Proxy forms in English and Swedish are available on the Group's website; www.electroluxgroup.com/agm2015. Shares...

  • Page 156
    uistory History Innovation is, and will always be, the driving force at Electrolux. The company's founder, Axel Wenner-Gren, was a visionary who developed products for the future. He underlined Passion for Innovation, Customer Obsession, and Drive for Results, and these comprise the core values of ...

  • Page 157
    ... Appliance manufacturer AEG is acquired. 2001 The household appliance division of Australian company Email is acquired. 2011 Appliance manufacturers Olympic Group in Egypt, and CTI in Chile, are acquired. The share of the Group's sales in growth markets increases rapidly. 2014 Electrolux signed...

  • Page 158
    .../ washing Electrolux products cookers, air-conditioners under esteemed brands include and small appliances such like Electrolux, AEG, Zanussi as vacuum cleaners, all AB Electrolux (publ) 556009-4178 and Frigidaire. In 2014, 60,000 employees. For more sold Electrolux had sales of information, go to...

  • Page 159
    ...electroluxgroup.com/ir Concept, text and production by Electrolux Investor Relations and Hallvarsson & Halvarsson. Electrolux, AEG and Zanussi are the registered trademarks of AB Electrolux. For further information about trademarks, please contact Electrolux Group Intellectual Property, Trademark.

  • Page 160
    AB Electrolux (publ), 556009-4178 Mailing address: SE-105 45 Stockholm, Sweden Visiting address: S:t Göransgatan 143, Stockholm Telephone: +46 8 738 60 00 Website: www.electroluxgroup.com On the web: www.electroluxgroup.com/annualreport2014