Electrolux 2014 Annual Report Download - page 13

Our vision, mission and strategy
In , we took yet another step towards the achievement
of our vision to be the best appliance company in the world
as measured by our customers, employees and shareholders.
Our mission – our financial goals – is to reach an EBIT margin
of six percent with an asset turnover of four times, leading to
a return on net assets in excess of  percent. Combined with
four percent organic growth over a business cycle we aim to
generate significant value for our stakeholders. Growth can
also be achieved through acquisitions. Although we did not
accomplish all our financial goals, we saw a good operational
and financial recovery. Our strategy to reach our vision and
financial goals is being described in this report and is based
on four strategic pillars; profitable growth, innovation, opera-
tional excellence and people and leadership.
Earnings recovery
The initiatives to restore profitability in our operations in
Europe have shown good results. Cost savings combined
with higher production efficiency and an active product
portfolio management resulted in significant improvement
in operating income. The European market appears to have
stabilized and we expect a market growth of – percent
in .
Markets in Latin America and Asia/Pacific were challenging
during the year with weak demand and currency headwinds.
It is therefore encouraging to see that we managed to defend
earnings through price and mix improvement and timely
actions to take out costs. The impact of these measures was
particularly evident in the latter part of the year.
In North America, our operations were negatively
impacted by the major transition required to meet new energy
standards affecting refrigeration and freezers. The new cook-
ing plant in Memphis is still being ramped up, which also had
an adverse impact on cost efficiency. We expect the transition
process for refrigeration and freezers to continue in the first
half of . From a demand perspective, the North Ameri-
can market is solid and we expect continued market growth
in the range of – percent in .
Small Appliances continued to launch new products on
a global scale. Part of the vacuum cleaners offering was
renewed and two high-end ranges within small domestic
appliances were introduced. Our Professional Products oper-
ations demonstrated a solid, positive trend throughout the
year. In early , we announced the acquisition of a profes-
sional dishwasher producer in China.
Launches of new products continued
We continue to expand our offering of new, innovative
products. In  steams ovens with sous-vide function
were introduced in Europe. In Latin America, we renewed
our washing machines, refrigerators and cookers offering. In
North America, several new products were introduced. When
developing new products, our focus is not only on design
and features but also on consumers’ requirements in relation
to energy and water efficiency. During the year, we took an
important step in the area of connected products, joining the
AllSeen Alliance as a premier member. Electrolux is investing
in this technology, which involves appliances communicating
with each other, consumers and other devices.
For most of our business areas, the product mix improved
during the year, despite many markets being characterized
by low or negative volume growth. With the rolling out of
new product launches also in , we believe there is good
potential for continued mix improvements.
Manufacturing footprint program in its final stage
The manufacturing footprint program launched in  is
now in its final stage. The aim of the program is to increase
the Group’s competitiveness, among other, through moving
production from high-cost regions to low-cost regions. Today,
almost  percent of our manufacturing takes place in low-
cost countries compared with  percent ten years ago.
Restructuring measures during the year included a review
of our operations in Italy, where we reached an agreement
with Italian authorities and union representatives aimed at
improving efficiencies. We also initiated consultations with
employee representatives regarding production at two plants,
one in Sweden and one in Switzerland. A decision was taken
to cease production at the plant in Switzerland. In North
America, the cooking plant in L’Assomption, Quebec ceased
production and manufacturing is now being concentrated to
the new, large-scale plant in Memphis, Tennessee. In Asia/
Pacific, we are in the process of transferring production from
Australia to Thailand. All of these measures will also contrib-
ute to securing an efficient production base in the future.
Although there will likely be restructuring programs going
forward, we expect these to be much less extensive.
Acquisition of GE Appliances announced in September
One of the milestones in  was the agreement to acquire
GE Appliances. The acquisition is the largest in Electrolux
history of almost  years. GE Appliances is one of the pre-
mium manufacturers of kitchen and laundry products in the
US, with annual sales of around USD . billion. We expect
the transaction to close in . Significant cost synergies
have been identified, which will be realized within three to
four years following the closing of the transaction. The acqui-
sition of GE Appliances will enable Electrolux to grow not
only in North America, but will strengthen our presence and
capabilities on a global scale.
Important role in the area of sustainability
Electrolux is a global company with sales in more than 
countries. We are also a large employer and thus have an
important role to play with respect to environmental and
social responsibilities. Our active work in these fields has
been recognized and, among other, Electrolux has been
named industry leader in the prestigious Dow Jones Sustain-
ability Index. Achievements in the year include an update of
the Electrolux Workplace Code of Conduct. Electrolux is a
signatory of UN Global Compact.
Well positioned ahead of 
 was also a good year for our shareholders. Electrolux
share price increased by  percent and significantly out-
performed Nasdaq Stockholm. Over the past ten years, the
annual average total return of the Electrolux share has been
 percent.
The operational and financial improvement would not have
been achievable without the strong contribution of our ,
employees around the globe. I would like to thank all of them
for their efforts during the year and I feel confident that we will
be able to continue to excel also in .
The Group is well positioned to continue to grow profitably
in , with a focus on further increasing shareholder value.
We expect to close the pending acquisition of GE Appliances
during the year, which will contribute strongly to the achieve-
ment of the Group’s vision of being the best appliance com-
pany in the world as measured by our customers, employees
and shareholders.
Stockholm, February 
Keith McLoughlin
President and Chief Executive Officer
ELECTROLUX ANNUAL REPORT 