Electrolux 2015 Annual Report Download - page 71

Analysts’ questions at  quarterly
telephone conferences
How does the demand picture look in your core markets?
In , Electrolux core markets showed good demand
while growth markets continued to weaken throughout the
year. Demand for appliances in North America continued
to be good following two consecutive years of healthy
recovery. In Western Europe, market demand was better
than expected and improved sequentially while markets in
Eastern Europe continued to weaken due to the geopolitical
uncertainty. The markets in Latin America showed a mixed
pattern. Demand in Brazil declined sharply while other
markets in the region were stable. The development in Asia/
Pacific remained mixed with positive growth in Australia and
Southeast Asia while demand in China slowed down.
Can you tell us more about your earnings
recovery in North America?
The US market for appliances continued to be solid
and grew by % for the full year . Demand showed
consistent strength, supported by improved consumer
confidence and the gradually improving housing market.
During the year, Electrolux achieved good organic growth
and strengthened its position in several core categories.
The work to restore profitability within cold products was
successful. Earnings in this category were previously
impacted by the transition of the product ranges, following
the new energy requirements by the Department of Energy.
This in combination with improved cost efficiency resulted
in a positive development for our North American business
during the latter part of the year.
Can you give us an update on the GE Appliance deal?
On July , , the US Department of Justice sued
Electrolux and GE to stop the proposed acquisition, which
then continued in a trial at a federal court. On December
, GE notified Electrolux that it was terminating the
agreement pursuant to which we had agreed to acquire
the appliance business of GE. Therefore, the transaction will
not be completed. Although we are disappointed that the
acquisition will not be completed, we are convinced that
the Group has strong capabilities to continue to grow and
develop its position as a global appliances manufacturer.
We aim to grow our operations globally both organically
and through acquisitions, which is supported by a strong
balance sheet and good cash generation.
What are your thoughts on the consolidation
of the appliance market in Europe?
The European appliance market is a highly fragmented
market where the top five players have a share of less than
%. For several years, the market has been characterized
by overcapacity, low volume growth and persistent price
pressure. Although it is difficult to predict the near-term
implications of the consolidation that is taking place, in
general, a market consolidation is a good thing and could
be positive for the appliance industry and the consumers.
Can you tell us more about the sustainability
of your earnings in Europe?
For the first time in many years, demand for appliances
improved in almost all markets in Europe during the year. In
Western Europe, there has been positive growth for several
consecutive quarters. In this market, our European business
has successfully managed the product portfolio and gained
market share in profitable segments such as premium and
built-in kitchen appliances. Our ongoing cost savings
programs have continued to contribute to earnings and
have in effect led to lower structural costs in our operations.
As a result, the combined actions have helped the business
to be more stable and resilient.
How do you mitigate currency headwinds?
We have a high exposure to currency fluctuations since
the Group operates in over  countries. Electrolux has
approximately SEK  billion of annual currency in- and
outflows. In , the total negative impact from both
currency transaction and translation effects to earnings was
approximately SEK –, million. A significant part of the
negative impact was from Latin Amerian currencies, which
depreciated against the USD. During the year, Electrolux
was able to offset the negative currency effects by price and
mix improvements.
North America 32%
Acquisitions 13%
Price/Mix 10%
Europe 9%
Latin America 7%
Currency 6%
Asia 6%
Cost savings 4%
Other 13%
Analysts engage in questions related to
the development of the appliance market
and the demand in Electrolux core mar-
kets. Price, mix and outlook are important
topics on which analysts focus in order to
gain a better understanding of the oper-
ation for which they can base their longer
term projections of Electrolux future per-
formance. The telephone conferences are
available at www.electroluxgroup.com/ir.
Q&A
ECTROLUX ANNUAL REPORT 