Electrolux 2015 Annual Report Download - page 96

Electrolux ability to increase profitability and shareholder
value is based on three elements: innovative products,
strong brands and cost-efficient operations. Realizing this
potential requires effective and controlled risk management.
Risks in connection with the Group’s operations can, in
general, be divided into operational risks related to busi-
ness operations and those related to financial operations.
Opera tional risks are normally managed by the operative
units within the Group, and financial risks by the Group’s
treasury department.
Risks and uncertainty factors
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. Electrolux ability
to increase profitability and shareholder value is largely
dependent on its success in developing innovative prod-
ucts under strong brands and maintaining cost-efficient
operations and production. Major factors for maintaining
and increasing competitiveness include managing fluctu-
ations in currency rates, prices for raw materials and com-
ponents as well as efficiency measures. In addition to these
operational risks, the Group is exposed to risks related
to financial operations, e.g., interest risks, financing risks,
currency risks and credit risks. The Group’s development
is strongly affected by external factors, of which the most
important in terms of managing risks include:
Variations in demand
Demand for appliances is affected by the general business
cycle. A deterioration in market conditions may lead to
lower sales volumes as well as a shift of demand to low-
price products, which generally have lower margins. Utili-
zation of production capacity may also decline in the short
term. In , demand for appliances increased in mature
markets such as North America, Europe and Australia while
demand in emerging markets as Latin America, China and
Southeast Asia declined. The global economic trend is an
uncertainty factor in terms of the development in the future.
Price competition
Most of the markets in which Electrolux operates features
price competition. Some of Electrolux markets experienced
price pressure during . The Group’s strategy is based
on launching innovative and consumer relevant products
under strong brands, and is aimed, among other things, at
minimizing and offsetting price competition for its products.
A continued downturn in market conditions involves a risk of
increasing price competition.
Changes in prices for raw materials and components
The raw materials to which the Group is mainly exposed
comprise steel, plastics, copper and aluminum. Market
prices declined during . Bilateral agreements are used
to manage price risks. To some extent, raw materials are
purchased at spot prices. There is considerable uncertainty
regarding trends for the prices of raw materials.
Exposure to customers and suppliers
Electrolux has a comprehensive process for evaluating
credit risk and tracking the financial health of its customers.
Management of credit limits as well as responsibility and
authority for approving credit limits are regulated by the
Group’s credit policy. Credit insurance is used to reduce
credit risks. 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.
Access to financing
The Group’s loan-maturity profile for  repre sents matur-
ities of approximately SEK ,m in long-term borrowings.
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 .
Risks, risk management and risk exposure are described in more detail in Note 
Accounting principles, Note  Financial risk management and in Note  Financial
instruments.
Sensitivity analysis 
Change +/-
Pre-tax earn-
ings impact,
SEKm
Raw materials)
Steel % 
Plastics % 
Currencies) and interest rates
USD/BRL % 
USD/EUR % 
USD/CAD % 
EUR/GBP % 
EUR/CHF % 
USD/CLP % 
USD/ARS % 
THB/AUD % 
USD/AUD % 
EUR/RUB % 
Translation exposure) % 
Interest rate  percentage 
) Changes in raw materials refer to Electrolux prices and contracts, which may differ
from market prices .
) Includes transaction effects.
) Assuming the Swedish krona appreciates/depreciates against all other currencies.
In , Electrolux purchased raw materials for
approximately SEK  billion. Purchases of steel
accounted for the largest cost.
Raw-materials exposure 
Carbon steel, %
Plastics, %
Copper and aluminum, %
Stainless steel, %
Other, %
Risks and uncertainty factors
  ’ 
 ECTROLUX ANNUAL REPORT 