Electrolux 2015 Annual Report Download - page 73

Price competition
A number of the Electrolux markets are experiencing price
competition. This is particularly evident in the low-cost seg-
ments and in product categories with a great deal of over-
capacity. In , prices continued to be under pressure in
some of the Group’s major markets in Europe. In Latin Amer-
ica, high inflation combined with currency rate fluctuations
resulted in Electrolux carrying out several price increases to
offset the negative effect.
Exposure to customers and suppliers
The trading conditions for retailers in  were challenging
in some markets such as Brazil and some Eastern European
countries. Retailers in Western Europe and the U.S. showed a
slight improvement compared to the previous year.
Electrolux has a comprehensive process for evaluating
credits and monitoring the financial situation of customers.
Authority for approving and responsibility to manage credit
limits are regulated by the Group’s credit policy. A global
credit insurance program is in place for many countries to
reduce credit risk.
For more information, see Note  and Note .
Raw materials and components represent
the largest cost item
Materials account for a large share of the Group’s costs.
In , Electrolux purchased raw materials and compo-
nents for approximately SEK bn, of which approximately
SEK bn referred to the former. The Group’s exposure to
raw materials comprises mainly steel, plastics, copper and
aluminum.
Market prices for raw materials were under pressure
during the year and steel prices and prices for plastics
declined. Electrolux purchases of commodities and compo-
nents are to a large extent managed through bilateral con-
tracts. Some raw materials are purchased at market prices.
Restructuring for competitive production
A large share of the Group’s production has been moved
from high-cost to low-cost areas. Restructuring is a com-
plex process that requires managing a number of different
activities and risks. Increased costs related to relocation
of production can affect income in specific quarters. When
relocating, Electrolux is also dependent on the capacity
of suppliers for cost-efficient delivery of components and
semi-finished goods.
The major restructuring programs are in its final stages.
Although there will likely be restructuring programs going
forward, these are expected to be much less extensive.
Financial risks and commitments
The Group’s financial risks are regulated in accordance with
the financial policy that has been adopted by the Electrolux
Board of Directors. Management of these risks is centralized
to Group Treasury and is mainly based on financial instru-
ments. Additional details regarding accounting principles, risk
management and risk exposure are given in Notes ,  and .
Financing risk and interest-rate risks
For long-term borrowings, the Group’s goal is to have an
average maturity of at least two years, an even spread of
maturities and an average fixed-interest period of one to
three years.
Long-term borrowings as of December , , includ-
ing long-term borrowings with maturities within  months,
amounted to SEK ,m with average maturity of .
years, compared to SEK , and . years at the end of
. The average fixed- interest period for long-term bor-
rowings was . years. In , long-term borrowings in the
amount of SEK ,m will mature.
Liquid funds as of December , , amounted to SEK
,m, excluding short-term back-up credit facilities.
Electrolux has two unused committed back-up revolving
credit facilities. One multicurrency facility of SEK ,m
maturing in  and one multicurrency facility of EUR m,
approximately SEK ,m, maturing in . Electrolux
has also a committed revolving credit facility of USD m,
approximately SEK ,m, maturing in .
For additional information on loans, see Notes  and .
Pension commitments
At year-end , Electrolux had commitments for pensions
and benefits that amounted to approximately SEK bn.
Through pension funds, the Group manages pension assets
of approximately SEK bn. At year-end, approximately %
of these assets were invested in equities, % in bonds, and
% in other assets. Net provisions for post-employment
benefits amounted to SEK ,m.
Yearly changes in the value of assets and commitments
depend primarily on developments in the interest-rate mar-
ket and on stock exchanges. Other factors that affect pen-
sion commitments include revised assumptions regarding
average life expectancy and healthcare costs.
Costs for pensions and benefits are recognized in the
income statement for  in the amount of SEK m. In the
interest of accurate control and cost-effective management,
the Group’s pension commitments are managed centrally by
Group Treasury.
For additional information, see Note .
Other risks
Reputational, regulatory and sustainability risks can poten-
tially impact Electrolux ability to successfully conduct busi-
ness. There are a number of processes in place to control
these risks such as internal and supplier auditing, environ-
mental management and certification, the Ethics program
and the safety management system. The regulatory envi-
ronment is monitored in order to be prepared for changes
that impact the business. The process to identify material
sustainability issues is described in the Sustainability Report.
available at www.electroluxgroup.com.
Raw material exposure  Trend for steel and plastics prices,
weighted market prices indexed
Index







Q4Q3Q2Q1Q4Q3Q2Q1
Steel
Plastics
2014 2015
Carbon steel, %
Plastics, %
Copper and aluminum, %
Stainless steel, %
Other, %
UX AL T 