Interim Report July – September, 2005

Interim Report July – September, 2005 Stockholm, October 25, 2005 · Net sales for the first nine months of 2005 amounted to SEK 95,818m (92,031), income forthe period was SEK 2,203m (2,511) or SEK 7.57 (8.35) per share. · Operating income in third quarter rose by 23%, excluding items affecting comparability, margin improved to 5.3% (4.7). · Significant increase in income for Indoor Products driven by strong performance in North America and improved results for Asia/Pacific. · Positive impact from mix/price as efforts in product development and other strategic areas are generating results. · Strong quarter for Professional Outdoor Products. Amounts in SEKm, Third Third Nine Nine unless otherwise quarter quarter months months stated 2005 20041) Change, % 2005 20041) Change, % Net sales 32,109 29,588 8.5 95,818 92,031 4.1 Operating income2) 781 1,113 -29.8 3,979 3,657 8.8 Operating income, excluding items affecting comparability 1,703 1,389 22.6 4,901 5,318 -7.8 Margin, % 5.3 4.7 5.1 5.8 Income after financial 965 -43.4 3,452 3,387 items 546 1.9 Income after financial items, excluding items 1,241 18.3 4,374 5,048 affecting comparability 1,468 -13.4 Margin, % 4.6 4.2 4.6 5.5 Income for the period 153 702 -78.2 2,203 2,511 -12.3 Income for the period, excluding items 885 17.1 3,086 3,592 affecting comparability 1,036 -14.1 Earnings per share, 2.43 -78.2 7.57 8.35 SEK3) 0.53 -9.3 Earnings per share, excluding items 3.08 15.6 10.60 11.94 affecting comparability, SEK 3.56 -11.2 Value creation 642 457 185 1,863 2,463 -600 Return on equity, % 11.8 13.3 Return on equity, excluding items 16.5 19.0 affecting comparability, % 1) Restated to comply with IFRS. Please refer to page 20 for details. 2) Operating income includes items affecting comparability in the amount of SEK –922m (-276) for the third quarter and SEK -922m (-1,661) for the first nine months. 3) Before dilution, based on an average of 291.2 (291.3) million shares for the third quarter after buy-backs and 291.2 (300.7) million for the first nine months of the year. As of January 1, 2005, the Group applies International Financial Reporting Standards (IFRS), previously known as IAS, in accordance with the European Union regulation. The Annual Report for 2005 will be the first to be prepared in accordance with these standards, changes in the Group’s accounting principles may be required, as neither the IFRS nor the interpretations that are to be implemented within the EU as of 31 December 2005 are known with certainty at present. The transition to the new standards is expected to have limited effect on the Group’s income and equity, see page 20. Net sales and income Third quarter Net sales for the Electrolux Group in the third quarter amounted to SEK 32,109m as against SEK 29,588m for the same period in the previous year. Sales were positively impacted by volume/price/mix, as well as changes in exchange rates. Changes in net sales Third quarter % 2005 Changes in Group structure -0.3 Changes in exchange rates 4.2 Changes in volume/price/mix 4.6 Total 8.5 Operating income declined by 30% to SEK 781m (1,113), corresponding to 2.4% (3.8) of net sales. Income after financial items decreased by 43% to SEK 546m (965), which corresponds to 1.7% (3.3) of net sales. Income for the period decreased by 78% to SEK 153m (702), corresponding to SEK 0.53 (2.43) in earnings per share. Items affecting comparability Operating income for the third quarter of 2005 includes items affecting comparability in the amount of SEK -922m (-276). These include charges for previously announced plant closures and the divestment of the Group’s Indian operation, see table below. More information can be found on page 9. Items affecting comparability Third Third Nine Nine quarter quarter months months SEKm 2005 2004 2005 2004 Restructuring provisions and write-downs: Appliances and outdoor products, Europe -503 -503 Floor-care products, North America -153 -153 Appliances, Australia -103 -103 Vacuum-cleaner plant in Västervik, Sweden -20 -187 Refrigerator plant in Greenville, USA -979 Other: Divestment of Indian operation -419 -419 Settlement agreement in vacuum-cleaner -239 lawsuit in the US Total -922 -276 -922 -1,661 Income excluding items affecting comparability Excluding the above-mentioned items affecting comparability, operating income for the third quarter of 2005 increased by 23% to SEK 1,703m (1,389), corresponding to 5.3% (4.7) of net sales. Income after financial items increased by 18% to SEK 1,468m (1,241), representing 4.6% (4.2) of net sales. Income for the period increased by 17% to SEK 1,036m (885), corresponding to SEK 3.56 (3.08) in earnings per share. Effects of changes in exchange rates Changes in exchange rates compared with the third quarter of 2004, including both translation and transaction effects, had a positive impact of approximately SEK 141m on operating income. Transaction effects net of hedging contracts amounted to SEK 76m, mainly due to the weakening of the US dollar against the Canadian and Australian dollar and the Euro against several other currencies. Translation of income statements in subsidiaries had an effect of approximately SEK 65m. Financial net Net financial items for the third quarter declined to SEK -235m compared to SEK -148m for the corresponding quarter in 2004. The decline refers mainly to higher interest rates on borrowings in US dollar, increased net borrowings and lower interest income. First nine months of 2005 Net sales for the Electrolux Group in the first nine months of 2005 increased to SEK 95,818m from SEK 92,031m in the corresponding period in 2004. Changes in net sales Nine months % 2005 Changes in Group structure -0.1 Changes in exchange rates 0.4 Changes in volume/price/mix 3.8 Total 4.1 Operating income increased by 9% to SEK 3,979m (3,657), corresponding to 4.2% (4.0) of net sales. Income after financial items increased by 2% to SEK 3,452m (3,387), which corresponds to 3.6% (3.7) of net sales. Income for the period decreased by 12% to SEK 2,203m (2,511), corresponding to SEK 7.57 (8.35) per share. Items affecting comparability The above mentioned operating income figure for the first nine months of 2005 include items affecting comparability in the amount of SEK -922m (- 1,661), see table on the previous page. Income excluding items affecting comparability Excluding items affecting comparability, operating income for the first nine months of 2005 declined by 8% to SEK 4,901m (5,318), representing 5.1% (5.8) of net sales. Income after financial items decreased by 13% to SEK 4,374m (5,048), corresponding to 4.6% (5.5) of net sales. Income for the period decreased by 14% to SEK 3,086m (3,592), corresponding to a decline in earnings per share to SEK 10.60 (11.94). Effects of changes in exchange rates Changes in exchange rates compared to the previous year, including both translation and transaction effects, had a positive impact of approximately SEK 203m on operating income for the first nine months. Approximately SEK 38m of this amount refers to translation of income statements in subsidiaries. Transaction effects net of hedging contracts had a positive impact of approximately SEK 165m. Outlook for full year 2005*) Demand for appliances in 2005 is expected to show some growth in both Europe and the US as compared to 2004. Higher costs for materials and components will have an adverse effect on the Group’s operating income. Efforts to strengthen the Group’s competitive position through investments in product development and in building the Electrolux brand will continue. Operating income for the full year of 2005, exclusive of items affecting comparability, is expected to be somewhat lower than in 2004. *) The outlook has not been changed from when it was first published in February, 2005. Cash flow Cash flow from operations and investments in the third quarter of 2005 was lower than in the corresponding quarter of 2004. The decrease refers mainly to the divestment of the Indian operation and increased capital expenditure. Higher accounts receivables had a continued negative impact, mainly driven by higher sales. Cash flow from operations in the third quarter improved over the previous year. Cash flow for the nine months period was also lower than in the previous year mainly due to changes in working capital, particularly accounts payable and accounts receivables. The difference in accounts payable is mainly due to an unusually favorable trend in 2004. Cash flow Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Cash flow from operations, excluding change in operating 2,136 1,786 6,166 5,828 7,140 assets and liabilities Change in operating assets and 1,968 liabilities 2,204 -3,416 -884 1,442 Cash flow from operations 4,104 3,990 2,750 4,944 8,582 Divestment of the Indian operation -359 - -359 - - Capital expenditure in tangible -1,293 -1,145 -3,364 -2,952 -4,515 fixed assets Other -195 -107 -574 -542 -843 Cash flow from investments -1,847 -1,252 -4,297 -3,494 -5,358 Cash flow from operations and 2,257 2,738 -1,547 1,450 3,224 investments Inventories amounted to SEK 18,350m (15,730), and accounts receivable to SEK 25,548m (23,396), corresponding to 14.2% (13.5) and 19.8% (20.0) of annualized net sales, respectively. Accounts payable amounted to SEK 17,054m (15,482), corresponding to 13.2% (13.3) of annualized net sales. Financial position Equity Total equity as of September 30, 2005, amounted to SEK 25,706m (23,461), which corresponds to SEK 88.22 (80.57) per share. Return on equity was 11.8% (13.3). Excluding items affecting comparability, return on equity was 16.5% (19.0). Net borrowings Net borrowings increased to SEK 6,024m (3,651), mainly as a result of negative cash flow from operations and investments. Changes in exchange rates also had a negative impact. The net debt/equity ratio increased to 0.23 (0.16). The equity/assets ratio was largely unchanged at 33.0% (33.7). September 30, September 30, Net borrowings 2005 2004 December 31, SEKm 2004 Interest-bearing liabilities 11,976 12,224 9,843 Liquid funds -5,952 -8,573 -8,702 Net borrowings 6,024 3,651 1,141 Net debt/equity ratio 0.23 0.16 0.05 Equity/assets ratio, % 33.0 33.7 35.6 Net assets Net assets as of September 30, 2005, amounted to SEK 30,991m (26,343). Average net assets for the period were SEK 30,516m (28,288). Adjusted for items affecting comparability, average net assets amounted to SEK 33,758m (31,722), corresponding to 26.4% (25.9) of net sales. The return on net assets was 17.4% (17.2), and 19.4% (22.4), excluding items affecting comparability. Working capital Working capital as of September 30, 2005, amounted to SEK 2,841m (1,738), corresponding to 2.2% (1.5) of annualized net sales. The increase refers mainly to inventories and accounts receivables. Value created Total value created during the third quarter of 2005 amounted to SEK 642m (457). Value created during the first nine months of 2005 was SEK 1,863m as compared with SEK 2,463m in the previous year. The decline was mainly due to lower operating income, excluding items affecting comparability. The capital turnover rate was 3.78 (3.87). Operations by business area in the third quarter Indoor Products (Changes in net sales and operating income by business area in constant exchange rates are stated on page 16.) Consumer Durables, Europe Consumer Durables, Europe Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 11,206 10,793 31,253 31,106 42,703 Operating income 714 781 1,616 2,189 3,130 Operating margin, % 6.4 7.2 5.2 7.0 7.3 Total industry shipments of core appliances in Europe in the third quarter of 2005 rose in volume by 1% compared to the corresponding quarter in 2004. Shipments in Western Europe declined by approximately 1%, while Eastern Europe showed an increase of approximately 8%. Third Nine Industry shipments of core appliances in Europe quarter months In units, year-on-year, % 2005 2005 Western Europe -1.3 -0.2 Eastern Europe (excluding Turkey) 7.9 5.0 Total Europe 1.0 0.9 Group sales of appliances in Europe rose somewhat over the previous year as a result of good volume growth in Eastern Europe and an improved product mix. Sales in Western Europe declined following lower demand in several markets and a continued weak trend in deliveries for private labels in Germany. Operating income declined somewhat. Market demand for floor-care products in Europe showed an upturn from the previous year. Sales for the Group’s European operation were slightly down. Operating income and margin improved substantially, mainly as a result of previous restructuring. Consumer Durables, North America Consumer Durables, North America Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 9,553 8,034 25,204 23,090 30,767 Operating income 290 174 808 793 1,116 Operating margin, % 3.0 2.2 3.2 3.4 3.6 Industry shipments of core appliances in the US rose by almost 4% compared to the third quarter of 2004. Shipments of major appliances, i.e., including room air-conditioners and microwave ovens, rose by approximately 13%. Industry shipments of core appliances Third Nine in the US quarter months In units, year-on-year, % 2005 2005 Core appliances 3.8 1.8 Major appliances 12.7 4.2 Group sales of appliances in North America increased substantially in most categories. Operating income showed a strong improvement as a result of higher volumes, implemented price increases and a more favorable product mix. Higher costs for materials as well as costs related to the ongoing transfer of production to the new plant in Mexico continued to have a negative impact. Market demand for floor-care products in the US was somewhat higher than in 2004. Sales for the Group’s US operation rose slightly. Operating income showed a strong improvement,compared with a weak quarter in 2004, as a result of implemented restructuring. Consumer Durables, Latin America Consumer Durables, Latin America Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 1,381 1,125 4,002 3,000 4,340 Operating income 26 0 11 86 135 Operating margin, % 1.9 0.0 0.3 2.9 3.1 Market demand for core appliances in Brazil was weaker than in the previous year. Group sales of appliances showed good growth in SEK. Operating income improved, despite the negative impact of higher material costs. Consumer Durables, Asia/Pacific Consumer Durables, Asia/Pacific Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 2,240 2,185 6,834 6,780 9,139 Operating income 0 -118 -29 -194 -289 Operating margin, % 0.0 -5.4 -0.4 -2.9 -3.2 Market demand for appliances in Australia declined from the previous year. Sales for the Group’s Australian operation were somewhat lower in local currency. Operating income improved substantially from a low level in the previous year, as a result of implemented price increases and previous restructuring. Group sales of appliances in China were higher than in 2004. Operating income declined, mainly due to higher costs for materials. The Group’s loss-making Indian operation was divested as of July 7, 2005, which had a positive effect on operating income for the region. Professional Products Professional Products Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 1,563 1,517 4,733 4,768 6,440 Operating income 117 111 305 340 445 Operating margin, % 7.5 7.3 6.4 7.1 6.9 Demand for food-service equipment in Europe is estimated to have been largely unchanged. The Group’s operation in this product area reported slightly higher sales, while operating income was largely unchanged. Demand for professional laundry equipment is also estimated to have been in line with the previous year. Group sales were largely unchanged and operating income declined, mainly due to negative impact from changes in exchange rates. Operations by business area in the third quarter Outdoor Products (Changes in net sales and operating income by business area in constant exchange rates are stated on page 16.) Consumer Products Consumer Products Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 3,583 3,546 15,841 15,833 17,579 Operating income 230 275 1,338 1,525 1,607 Operating margin, % 6.4 7.8 8.4 9.6 9.1 Demand for consumer outdoor products in Europe is estimated to have been somewhat higher than in the third quarter of 2004. The Group’s European operation reported good growth in sales. Operating income showed a strong improvement as a result of higher volumes, a more favorable product mix and higher sales of products imported from the US operation. Demand for consumer outdoor products in North America was lower than in the previous year. Group sales declined in USD. Operating income showed a substantial downturn as a result of lower volumes, inventory reduction and higher costs for materials. Professional Products Professional Products Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Net sales 2,575 2,374 7,927 7,407 9,623 Operating income 474 387 1,406 1,197 1,521 Operating margin, % 18.4 16.3 17.7 16.2 15.8 Group sales of chainsaws showed strong growth, partly impacted by an earlier seasonal sell-in to the trade than in 2004. Sales of commercial lawn and garden products were somewhat lower than in 2004. Sales of diamond tools and power cutters increased somewhat, mainly driven by higher demand in the US. Overall, Professional Outdoor Products showed a continued positive trend in both sales and operating income. Structural changes In July, 2005, the Board took the decisions to close the refrigerator plant in Fuenmayor, Spain, during the third quarter of 2006 and the lawn-mower plant in Parabiago, Italy, during the fourth quarter of 2005. The closures will involve personnel cutbacks of approximately 450 and 100, respectively. Decisions were also taken to downsize production at the refrigerator plants in Florence, Italy and Mariestad, Sweden, during 2006. The downsizing refers to unprofitable product categories and involves personnel cutbacks of approximately 200 and 150 employees, respectively. The total cost of the above measures amounts to SEK 503m, which was taken as a charge against operating income in the third quarter of 2005, within items affecting comparability. Of the total amount, SEK 81m refers to write-down of assets. On July 7, 2005, the Group divested its Indian appliance operation, including all three production facilities, to Videocon, one of India’s largest industrial groups. The agreement involved a cost of SEK 419m, which was taken as a charge against operating income in the third quarter of 2005 within items affecting comparability. The Indian operation had annual sales of approximately SEK 550m and about 1,100 employees. The operation has been loss-making for several years. The agreement involves a license for Videocon with the right to use the Electrolux brand in India for a period of five years, as well as the Kelvinator brand in India and selected markets for an unlimited time. Videocon is the market leader for consumer electronics and appliances in India, and has an extensive distribution network. Cooperation with Videocon offers the Group opportunities for continuing to strengthen the position for the Electrolux brand in the Indian market. Other items Asbestos litigation in the US Litigation and claims related to asbestos are pending against the Group in the US. Almost all of the cases refer to externally supplied components used in industrial products manufactured by discontinued operations prior to the early 1970s. Many of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not part of the Electrolux Group. As of September 30, 2005, the Group had a total of 980 cases pending, representing approximately 8,680 plaintiffs. During the third quarter of 2005, a total of 301 new cases with approximately 250 plaintiffs were filed and 306 pending cases with approximately 360 plaintiffs were resolved. Approximately 7,530 of the plaintiffs relate to cases pending in the state of Mississippi. Additional lawsuits may be filed against Electrolux in the future. It is not possible to predict either the number of future claims or the number of plaintiffs that any future claims may represent. In addition, the outcome of asbestos claims is inherently uncertain and always difficult to predict and Electrolux cannot provide any assurances that the resolution of these types of claims will not have a material adverse effect on its business or on results of operations in the future. Nomination Committee for proposal of Board members In accordance with the decision by the Annual General Meeting in April 2005, Electrolux shall have a Nomination Committee consisting of representatives of each of the four largest shareholders in terms of voting rights, and the Chairman of the Electrolux Board. Jacob Wallenberg, Chairman of AB Investor, is the Chairman of the Nomination Committee. The other members are Carl Rosén, Second Swedish National Pension Fund, Ramsay J. Brufer, Alecta Mutual Pension Insurance, Kjell Norling, Handelsbanken/SPP Funds, and Michael Treschow, Chairman of AB Electrolux. As of August 31, 2005, Investor’s shareholding in Electrolux corresponded to 24.7% of the voting rights in the company, the Second Swedish National Pension Fund’s to 2.8%, Alecta’s to 2.6%, and Handelsbanken/SPP’s to 1.9%. According to a disclosure notice on September 15, 2005, Investor increased its holding in Electrolux by 5,231,300 B-shares, and thus has 26.0% of the voting rights. The Nomination Committee will prepare proposals for the AGM in 2006, including Board members and fees, auditors and fees, and the Nomination Committee for the AGM in 2007. As part of the process of spinning-off the Group’s operation in Outdoor Products to the Electrolux shareholders, the Nomination Committee will also provide recommendations to Electrolux regarding the composition of the Board of the Outdoor operation. Shareholders who wish to submit proposals to the Nomination Committee should send an email to nominationcommittee@electrolux.com Stockholm, October 25, 2005 Hans Stråberg President and CEO We have reviewed the Report for the third quarter ended September 30, 2005, for AB Electrolux (publ). We conducted our review in accordance with the recommendation issued by FAR. A review is limited primarily to enquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Interim Report does not comply with the requirements for interim reports in the Annual Accounts Act and IAS 34. Stockholm, October 25, 2005 PricewaterhouseCoopers AB Peter Clemedtson Anders Lundin Authorized Public Accountant Authorized Public Accountant Partner in charge Consolidated income statement Third Third Nine Nine Full quarter quarter months months year SEKm 2005 20041) 2005 20041) 20041) Net sales 32,109 29,588 95,818 92,031 120,651 Cost of goods sold -24,272 -22,526 -73,025 -69,536 -91,021 Gross operating income 7,837 7,062 22,793 22,495 29,630 Selling expenses -4,593 -4,311 -13,640 -13,165 -17,369 Administrative expenses -1,551 -1,357 -4,407 -4,084 -5,560 Other operating income/expenses 10 -5 155 72 66 Items affecting comparability -922 -276 -922 -1,661 -1,960 Operating income*) 781 1,113 3,979 3,657 4,807 Margin, % 2.4 3.8 4.2 4.0 4.0 Financial items, net -235 -148 -527 -270 -355 Income after financial items 546 965 3,452 3,387 4,452 Margin, % 1.7 3.3 3.6 3.7 3.7 Taxes -393 -263 -1,249 -876 -1,193 Income for the period 153 702 2,203 2,511 3,259 Attributable to: Equity holders of the Parent 702 2,203 2,510 3,258 Company 153 Minority interest 0 0 0 1 1 153 702 2,203 2,511 3,259 *) Operating income includes: - depreciation and -739 -2,469 -2,252 -3,038 amortization -842 - operating income for the -37 -48 -88 -125 divested operation in India - - gains/losses from cash 15 -267 -36 -76 flow hedges -66 Earnings per share, SEK 0.53 2.43 7.57 8.35 10.92 After dilution, SEK 0.52 2.43 7.53 8.35 10.91 Number of shares after buy- 291.4 291.2 291.4 291.2 291.2 backs, millions Average number of shares after 291.2 300.7 buy-backs, millions 291.2 291.3 298.3 1) Restated to comply with IFRS. Please refer to page 20 for details. Items affecting comparability Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Restructuring provisions and write- downs Appliances and outdoor products, -503 -503 Europe Floor-care products, North America -153 -153 -153 Appliances, Australia -103 -103 -103 Vacuum-cleaner plant in Västervik, -20 -187 -187 Sweden Refrigerator plant in Greenville, -979 -979 USA Cooker factory in Reims, France -289 Tumble dryer plant in Tommerup, -49 Denmark Reversal of unused restructuring 39 provision Other Divestment of Indian operation -419 -419 Settlement agreement in vacuum- -239 -239 cleaner lawsuit in the US Total -922 -276 -922 -1,661 -1,960 Consolidated balance sheet September 30, September 30, December 31, SEKm 2005 20041) 20041) Assets Goodwill 3,835 3,595 3,336 Other intangible assets 2,157 1,845 1,921 Tangible assets 18,642 15,909 16,033 Other fixed assets 4,719 4,608 4,333 Total fixed assets 29,353 25,957 25,623 Inventories, etc. 18,350 15,730 15,742 Accounts receivable 25,548 23,396 20,627 Other current receivables 4,375 4,492 4,402 Short-term investments 980 1,792 1,027 Cash and cash equivalents2) 4,972 6,781 7,675 Total current assets 54,225 52,191 49,473 Total assets 83,578 78,148 75,096 Equity and liabilities Total equity*) 25,706 23,461 23,636 Provisions 15,831 14,795 14,012 Financial liabilities 11,677 12,224 9,843 Accounts payable 17,054 15,482 16,550 Other operating liabilities 13,310 12,186 11,055 Total equity and liabilities 83,578 78,148 75,096 Contingent liabilities 1,287 1,227 1,323 *)Whereof attributable to minority interest 1 11 10 1) Restated to comply with IFRS. Please refer to page 20 for details. 2) Cash on hand, bank deposits and other short-term highly liquid investments with a maturity of three months or less. Consolidated cash flow statement Third Third Nine Nine Full quarter quarter months months year SEKm 2005 20041) 2005 20041) 20041) Operations Income after financial items 546 965 3,452 3,387 4,452 Depreciation and amortization 842 739 2,469 2,252 3,038 Provisions and capital gains/losses 859 207 627 1,248 1,271 Change in accrued and prepaid 99 16 144 130 52 interest Taxes paid -210 -154 -526 -1,189 -1,673 Change in operating assets and liabilities Change in inventories 568 603 -901 -700 -1,516 Change in accounts receivable 675 1,183 -2,713 -1,887 -5 Change in accounts payable 47 -173 -969 533 2,238 Change in other operating assets 678 604 1,167 1,170 725 and liabilities Cash flow from operations 4,104 3,990 2,750 4,944 8,582 Investments Acquisition and divestment of -359 -359 - operations Capital expenditure in tangible -1,293 -1,145 -3,364 -2,952 -4,515 fixed assets Capitalization of product -151 -166 -423 -476 -669 development and software Other -44 59 -151 -66 -174 Cash flow from investments -1,847 -1,252 -4,297 -3,494 -5,358 Total cash flow from operations and 2,257 2,738 -1,547 1,450 3,224 investments Financing Change in other liquid funds 991 -318 418 2,603 3,368 Change in interest-bearing -2,496 -557 264 -504 -1,874 liabilities Dividend - - -2,038 -1,993 -1,993 Redemption and repurchase of 34 -40 35 -3,154 -3,154 shares, net Cash flow from financing -1,471 -915 -1,321 -3,048 -3,653 Total cash flow 786 1,823 -2,868 -1,598 -429 Cash and cash equivalents at 4,360 5,009 7,675 8,207 8,207 beginning of period2) Exchange-rate differences -174 -51 165 172 -103 Cash and cash equivalents at end of 4,972 6,781 4,972 6,781 7,675 period2) Change in net borrowings Total cash flow, excluding change in loans and 2,291 2,698 -3,550 -3,697 -1,923 other liquid funds Net borrowings at beginning of -8,535 -6,408 -1,141 101 101 period Exchange-rate differences 220 59 -1,333 -55 681 Net borrowings at end of period -6,024 -3,651 -6,024 -3,651 -1,141 1) Restated to comply with IFRS. Please refer to page 20 for details. 2) Cash on hand, bank deposits and other short-term highly liquid investments with maturity of three months or less. Change in total equity Nine Nine Full months months year SEKm 2005 20041) 20041) Opening balance according to IFRS, excluding IAS 39 23,636 - - Effects of implementing IAS 39 -2 - - Adjusted opening balance according to IFRS 23,634 25,971 25,971 Dividend payment -2,038 -1,993 -1,993 Repurchase of shares, net 35 -112 -112 Redemption of shares - -3,042 -3,042 Changes in hedge reserve -37 - - Translation differences 1,909 126 -447 Income for the period 2,203 2,511 3,259 Closing balance 25,706 23,461 23,636 1) Restated to comply with IFRS. Please refer to page 20 for details. Key ratios Third Third Nine Nine Full quarter quarter months months year 2005 20041) 2005 20041) 20041) Earnings per share, SEK2) 0.53 2.43 7.57 8.35 10.92 Excluding items affecting 3.56 10.60 11.94 comparability, SEK 3.08 15.24 Return on equity, %3) 11.8 13.3 13.1 Excluding items affecting 16.5 19.0 comparability, % 18.3 Return on net assets, %4) 17.4 17.2 17.5 Excluding items affecting 19.4 22.4 comparability, % 21.9 Net debt/equity ratio5) 0.23 0.16 0.05 Capital expenditure, SEKm 1,293 1,145 3,364 2,952 4,515 Average number of employees 69,449 72,189 70,123 72,760 72,382 1) Restated to comply with IFRS. Please refer to page 20 for details. 2) Before dilution, based on an average of 291.2 (291.3) million shares after share redemption and buy-backs for the third quarter and 291.2 (300.7) million shares for first nine month of 2005. 3) Income for the period, expressed as a percentage of average equity. 4) Operating income, expressed as a percentage of average net assets. 5) Net borrowings, i.e., interest-bearing liabilities less liquid funds, in relation to total equity. Number of shares Shares held Outstanding Outstanding Shares held by other Number of shares A-shares B-shares by Electrolux1) shareholders Number of shares as 299,418,033 17,739,400 291,180,908 of January 1, 2005 9,502,275 Shares sold to senior managers under the stock option programs: First quarter - - -1,000 1,000 Second quarter - - -5,100 5,100 Third quarter - - -207,080 207,080 Total number of 9,502,275 299,418,033 17,526,220 291,394,088 shares as of September 30, 2005 1) As of September 30, 2005, Electrolux held 5.7% of the total number of outstanding shares. As of the first quarter of 2005, the Group’s reporting structure has been changed to comprise Indoor and Outdoor Products instead of as previously Consumer Durables and Professional Products. Information on historical quarterly figures according to this new reporting structure is available at www.electrolux.com/financials. Net sales by business area Third Third Nine Nine Full quarter quarter months months year SEKm 2005 2004 2005 2004 2004 Indoor Products Europe 11,206 10,793 31,253 31,106 42,703 North America 9,553 8,034 25,204 23,090 30,767 Latin America 1,381 1,125 4,002 3,000 4,340 Asia/Pacific 2,240 2,185 6,834 6,780 9,139 Professional Products 1,563 1,517 4,733 4,768 6,440 Total Indoor Products 25,943 23,654 72,026 68,744 93,389 Outdoor Products Consumer Products 3,583 3,546 15,841 15,833 17,579 Professional Products 2,575 2,374 7,927 7,407 9,623 Total Outdoor Products 6,158 5,920 23,768 23,240 27,202 Other 8 14 24 47 60 Total 32,109 29,588 95,818 92,031 120,651 Operating income by business area Third Third Nine Nine Full quarter quarter months months year SEKm 2005 20041) 2005 20041) 20041) Indoor Products Europe 714 781 1,616 2,189 3,130 Margin, % 6.4 7.2 5.2 7.0 7.3 North America 290 174 808 793 1,116 Margin, % 3.0 2.2 3.2 3.4 3.6 Latin America 26 0 11 86 135 Margin, % 1.9 0.0 0.3 2.9 3.1 Asia/Pacific 0 -118 -29 -194 -289 Margin, % 0.0 -5.4 -0.4 -2.9 -3.2 Professional Products 117 111 305 340 445 Margin, % 7.5 7.3 6.4 7.1 6.9 Total Indoor Products 1,147 948 2,711 3,214 4,537 Margin, % 4.4 4.0 3.8 4.7 4.9 Outdoor Products Consumer Products 230 275 1,338 1,525 1,607 Margin, % 6.4 7.8 8.4 9.6 9.1 Professional Products 474 387 1,406 1,197 1,521 Margin, % 18.4 16.3 17.7 16.2 15.8 Total Outdoor Products 704 662 2,744 2,722 3,128 Margin, % 11.4 11.2 11.5 11.7 11.5 Common Group costs, etc -148 -221 -554 -618 -898 Items affecting comparability -922 -276 -922 -1,661 -1,960 Total 781 1,113 3,979 3,657 4,807 1) Restated to comply with IFRS. Please refer to page 20 for details. Change in net sales by business area Change in net sales Third Nine quarter months 2005 2005 Third in constant Nine in constant quarter exchange months exchange rates Year-over-year, % 2005 rates 2005 Indoor Products Europe 3.8 -1.2 0.5 -0.8 North America 18.9 15.9 9.2 10.8 Latin America 22.8 0.8 33.4 19.3 Asia/Pacific 2.5 6.7 0.8 -0.4 Professional Products 3.0 1.1 -0.7 -1.0 Total Indoor Products 9.7 5.5 4.8 4.0 Outdoor Products Consumer Products 1.0 -4.5 0.1 1.2 Professional Products 8.5 5.4 7.0 6.6 Total Outdoor Products 4.0 -0.5 2.3 2.9 Total 8.5 4.3 4.1 3.7 Change in operating income by business area Change in Third Nine operating income quarter months 2005 2005 in constant in constant Third exchange rates Nine exchange rates quarter months Year-over-year, % 2005 2005 Indoor Products Europe -8.6 -8.3 -26.2 -26.9 North America 66.7 45.1 1.9 -0.9 Latin America N/A N/A N/A N/A Asia/Pacific N/A N/A N/A N/A Professional Products 5.4 4.5 -10.3 -11.5 Total Indoor Products 21.0 17.1 -15.7 -16.9 Outdoor Products Consumer Products -16.4 -23.2 -12.3 -11.5 Professional Products 22.5 20.5 17.5 16.8 Total Outdoor Products 6.3 2.4 0.8 1.0 Total, excluding items affecting comparability 22.6 18.3 -7.8 -8.5 Exchange rates in sek Nine Nine Full months months year 2005 2004 2004 USD, average 7.30 7.48 7.33 USD, end of period 7.75 7.34 6.61 EUR, average 9.21 9.15 9.12 EUR, end of period 9.32 9.06 9.00 GBP, average 13.43 13.54 13.38 GBP, end of period 13.67 13.21 12.69 Net sales and income per quarter Net sales and income 1st qtr 2nd qtr 3rd qtr 4th qtr Full year Net sales, SEKm 2005 29,740 33,969 32,109 2004 30,493 31,950 29,588 28,620 120,651 Operating income, SEKm 2005 1,308 1,890 781 Margin, % 4.4 5.6 2.4 20052) 1,308 1,890 1,703 Margin, % 4.4 5.6 5.3 20041) 762 1,782 1,113 1,150 4,807 Margin, % 2.5 5.6 3.8 4.0 4.0 20041) 3) 1,741 2,188 1,389 1,449 6,767 Margin, % 5.7 6.8 4.7 5.1 5.6 Income after financial items, SEKm 2005 1,211 1,695 546 Margin, % 4.1 5.0 1.7 20052) 1,211 1,695 1,468 Margin, % 4.1 5.0 4.6 20041) 684 1,738 965 1,065 4,452 Margin, % 2.2 5.4 3.3 3.7 3.7 20041) 3) 1,663 2,144 1,241 1,364 6,412 Margin, % 5.5 6.7 4.2 4.8 5.3 Income for the period, SEKm 2005 854 1,196 153 20052) 854 1,196 1,036 20041) 569 1,240 702 748 3,259 20041) 3) 1,179 1,527 885 954 4,545 Earnings per share, SEK4) 2005 2.93 4.11 0.53 20052) 2.93 4.11 3.56 20041) 1.86 4.06 2.43 2.57 10.92 20041) 3) 3.84 5.02 3.08 3.30 15.24 Value creation, SEKm 20052) 388 833 642 20041) 3) 810 1,196 457 591 3,054 1) Restated to comply with IFRS. Please refer to page 20 for details. 2) Excluding items affecting comparability, which amounted to SEK - 922m in the third quarter of 2005. 3) Excluding items affecting comparability, which amounted to SEK - 979m in the first quarter, SEK -406m in the second quarter, SEK -276m in the third quarter and SEK -299m in the fourth quarter of 2004. 4) Before dilution, based on an average of 291.2 (306.7) million shares after share redemption and buy-backs for the first quarter, 291.2 (304.1) for the second quarter and 291.2 (291.3) for the third quarter of 2005. Average number of shares amounted to 291.2 million shares for the fourth quarter of 2004. Net sales by business area per quarter SEKm Indoor Products 1st qtr 2nd qtr 3rd qtr 4th qtr Full year Europe 2005 9,931 10,116 11,206 2004 10,386 9,927 10,793 11,597 42,703 North America 2005 7,173 8,478 9,553 2004 7,365 7,691 8,034 7,677 30,767 Latin America 2005 1,198 1,423 1,381 2004 925 950 1,125 1,340 4,340 Asia/Pacific 2005 2,119 2,475 2,240 2004 2,222 2,373 2,185 2,359 9,139 Professional Products 2005 1,431 1,739 1,563 2004 1,558 1,693 1,517 1,672 6,440 Total Indoor Products 2005 21,852 24,231 25,943 2004 22,456 22,634 23,654 24,645 93,389 Consumer Products 2005 5,417 6,841 3,583 2004 5,611 6,676 3,546 1,746 17,579 Professional Products 2005 2,463 2,889 2,575 2004 2,409 2,624 2,374 2,216 9,623 Total Outdoor Products 2005 7,880 9,730 6,158 2004 8,020 9,300 5,920 3,962 27,202 Operating income by business area per quarter SEKm Indoor Products 1st qtr 2nd qtr 3rd qtr 4th qtr Full year Europe 2005 416 486 714 Margin, % 4.2 4.8 6.4 20041) 646 762 781 941 3,130 Margin, % 6.2 7.7 7.2 8.1 7.3 North America 2005 168 350 290 Margin, % 2.3 4.1 3.0 20041) 282 337 174 323 1,116 Margin, % 3.8 4.4 2.2 4.2 3.6 Latin America 2005 -4 -11 26 Margin, % -0.3 -0.8 1.9 20041) 35 51 0 49 135 Margin, % 3.8 5.4 0.0 3.7 3.1 Asia/Pacific 2005 -13 -16 0 Margin, % -0.6 -0.6 0.0 20041) -28 -48 -118 -95 -289 Margin, % -1.3 -2.0 -5.4 -4.0 -3.2 Professional Products 2005 51 137 117 Margin, % 3.6 7.9 7.5 20041) 96 133 111 105 445 Margin, % 6.2 7.9 7.3 6.3 6.9 Consumer Outdoor Products 2005 421 687 230 Margin, % 7.8 10.0 6.4 20041) 522 728 275 82 1,607 Margin, % 9.3 10.9 7.8 4.7 9.1 Professional Outdoor Products 2005 422 510 474 Margin, % 17.1 17.7 18.4 20041) 354 456 387 324 1,521 Margin, % 14.7 17.4 16.3 14.6 15.8 Common Group costs, etc. 2005 -153 -253 -148 20041) -166 -231 -221 -280 -898 Items affecting comparability 2005 - - -922 2004 -979 -406 -276 -299 -1,960 1) Restated to comply with IFRS. Please refer to page 20 for details. Five-year review 20041) 20032) 20022) 20012) 20002) Net sales, SEKm 120,651 124,077 133,150 135,803 124,493 Operating income, SEKm 4,807 7,175 7,731 6,281 7,602 Margin, % 4.0 5.8 5.8 4.6 6.1 Margin, excluding items affecting comparability, % 5.6 6.2 6.1 4.7 6.5 Income after financial items, SEKm 4,452 7,006 7,545 5,215 6,530 Margin, % 3.7 5.6 5.7 3.8 5.2 Margin, excluding items affecting comparability, % 5.3 6.0 6.0 3.9 5.6 Income for the period, SEKm 3,258 4,778 5,095 3,870 4,457 Earnings per share, SEK 10.92 15.25 15.60 11.35 12.40 Average number of shares after buy-backs, million 298.3 313.3 327.1 340.1 359.1 Dividend, SEK 7.00 6.50 6.00 4.50 4.00 Value creation, SEKm 3,054 3,449 3,461 262 2,423 Return on equity, % 13.1 17.3 17.2 13.2 17.0 Return on net assets, % 18.3 23.9 22.1 15.0 19.6 Net debt/equity ratio 0.05 0.00 0.05 0.37 0.63 Capital expenditure, SEKm 4,515 3,463 3,335 4,195 4,423 Average number of employees 72,382 77,140 81,971 87,139 87,128 1) Restated to comply with IFRS, except for IAS 39. If IAS 39 had been applied in 2004, the volatility in income, net borrowings and equity would most probably have been higher. Please refer to page 20 for details. 2) Comparative figures for the years 2000-2003 have not been restated. A restatement of those years would follow the same pattern as the restatement of 2004, i.e., the effects on income and equity would be limited. Definitions Capital indicators Annualized sales In computation of key ratios where capital is related to net sales, the latter are annualized and converted at balance day exchange rates and adjusted for acquired and divested operations. Net assets Total assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities, non-interest-bearing provisions and deferred tax liabilities. Working capital Current assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities and non- interest-bearing provisions. Net borrowings Total interest-bearing liabilities less liquid funds. Net debt/equity ratio Net borrowings in relation to total equity. Equity/assets ratio Adjusted equity as a percentage of total assets less liquid funds. Other key ratios Earnings per share Income for the period divided by the average number of shares after buy-backs. Operating margin Operating income expressed as a percentage of net sales. Value creation Operating income excluding items affecting comparability less the weighted average cost of capital (WACC) on average net assets excluding items affecting comparability. [(Net sales - operating costs = operating income) - (WACC x average net assets)]. The WACC for 2005 and 2004 is 12% before tax. For 2003 and 2002 the WACC was 13% and for previous years 14%. Return on equity Income for the period expressed as a percentage of average equity. Return on net assets Operating income expressed as a percentage of average net assets. New accounting principles as from 2005 As of January 1, 2005, Electrolux applies International Financial Reporting Standards (IFRS), previously known as IAS, which have been endorsed by the European Commission with the exception of IAS 39 as described below. Prior to 2005, Electrolux has prepared the financial statements in accordance with the standards and interpretations issued by the Swedish Financial Accounting Standards Council. This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, and RR 31 from the Swedish Financial Accounting Standards Council. IFRIC 6, Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment, has been applied as from August 13, 2005, for the accounting of recycling costs. Swedish Accounting Standards have gradually incorporated IFRS and, consequently, several IFRS issued prior to 2004 have already been implemented in Sweden. However, a number of new standards and amendments to and improvements of existing standards are adopted for the first time in 2005. The effects of the transition to IFRS are preliminary and based on interpretation of standards effective at present. IFRS could change during 2005 due to new interpretations submitted by the International Financial Reporting Interpretations Committee (IFRIC) and new IFRS effective as of January 1, 2006, which may allow early adoption. The effect on the Group’s income and equity referring to the transition is stated below. The transition to IFRS is accounted for following the rules stated in IFRS 1, First Time Adoption of International Accounting Standards, and the preliminary transition effects have been recorded through an adjustment to opening retained earnings as per January 1, 2004. This date has been determined as Electrolux date of transition to IFRS. Comparative figures for 2004 have been restated. IFRS 1 gives the option to elect a number of exemptions from other IFRS standards of which Electrolux has elected the following: · IFRS 3, Business combinations, has not been applied retrospectively to past business combinations and no restatement of those have been made. · Items of property, plant and equipment have not been measured at fair value, i.e., the carrying amounts according to Swedish GAAP have been kept. · All actuarial gains and losses have been recognized at the date of transition to IFRS. This is the same approach that was chosen when implementing the Swedish Standard RR 29, Employee Benefits. · The cumulative translation differences for all foreign operations, according to the rules in IAS 21, The Effects of Changes in Foreign Exchange rates, are deemed to be zero at the date of transition to IFRS. · Of previously recognized financial instruments, SEK 643m have been designated as available for sale, SEK 8,060m as assets at fair value through the profit or loss and SEK 364m as liabilities at fair value through the profit or loss. · No restatement of comparative figures has been made for IAS 39, Financial Instruments: Recognition and Measurement ,which is applied as from January 1, 2005. Since 2002, Electrolux has prepared the transition to IFRS including a thorough review of all IFRS rules, amendments to the Electrolux Accounting Manual as well as the Group’s reporting format and a special audit carried out in a number of the Group’s reporting units. The areas below represent the preliminary differences. Other accounting principles remain unchanged as a result of the transition to IFRS. For a description of these accounting principles, see Electrolux Annual Report for 2004. Share-based payments IFRS 2 is applied for share-based compensation programs granted after November 7, 2002, and that had not vested on January 1, 2005. IFRS 2 differs from previously applied accounting principles in that an estimated cost for the granted instruments is charged to the income statement over the vesting period. For Electrolux the share-based compensation programs are classified as equity-settled transactions, which means that the instruments’ fair value at grant date will be recognized over the vesting period. In addition, the Group provides for estimated employer contributions in connection with the share-based compensation programs. The provision is periodically revalued. Previously, only employer contributions related to these instruments have been recognized, and no charge was taken to the income statement for equity instruments granted as compensation to employees. Business combinations In business combinations, IFRS 3 requires a thorough inventory of intangible assets and does not allow provisions for restructuring activities. IFRS 3 stipulates that goodwill shall not be amortized but submitted to impairment test at least once a year. Goodwill amortization has therefore ceased and comparative figures for 2004 have been restated. Electrolux has even previously carried out impairment test of goodwill at least once a year and, therefore, has not taken any additional impairment charge at the date of transition to IFRS. IFRS 3 also prohibits the recognition of negative goodwill. At transition, negative goodwill has been written off through an SEK 40m adjustment to opening retained earnings as per January 1, 2004. Electrolux made no acquisitions in 2004 and, as stated above, has chosen the alternative not to restate business combinations made in earlier years. Other intangible assets The transition rules stated in IFRS 1 stipulate that a company at transition recognizes intangible assets that qualify for recognition under IAS 38, Intangible Assets, even though these intangible assets have previously been expensed. Electrolux has made an inventory of the Group’s intangible assets resulting in a net adjustment of SEK 20m in other intangible assets as per January 1, 2004. Other According to the new format the consolidated income statement now ends with “Income for the period”, which is the old “Net income” without deducting minority interests. Total equity in the consolidated balance sheet includes minority interests. Cash and cash equivalents in the consolidated cash flow statement consist of cash on hand, bank deposits and other short-term highly liquid investments with a maturity of three months or less. Previously, liquid funds were used in the consolidated cash flow statement, i.e., including also other short-term highly liquid investments with a maturity of more than three months. Previous periods have been restated. Cash and cash equivalents, as compared to the old liquid funds measure, decreased by SEK 4,395m as of January 1, 2004, SEK 1,792m as of September 30, 2004 and SEK 1,027m as of December 31, 2004. Preliminary IFRS transition effects on the consolidated income statement for the third quarter 2004 Income Income statement statement before after SEKm transition IFRS 2 IFRS 3 IAS 38 transition Net sales 29,588 - - - 29,588 Operating income 1,092 -14 38 -3 1,113 Income after financial items 944 -14 38 -3 965 Income for the period 677 -11 38 -2 702 Income for the period per share, basic, SEK 2.35 -0.04 0.13 -0.01 2.43 Preliminary IFRS transition effects on the consolidated income statement for January – September 2004 Income Income statement statement before after SEKm transition IFRS 2 IFRS 3 IAS 38 transition Net sales 92,031 - - - 92,031 Operating income 3,577 -26 118 -12 3,657 Income after financial items 3,307 -26 118 -12 3,387 Income for the period 2,421 -19 118 -9 2,511 Income for the period per share, basic, SEK 8.05 -0.06 0.39 -0.03 8.35 Preliminary IFRS transition effects on the consolidated income statement for the full year 2004 Income Income statement statement before after SEKm transition IFRS 2 IFRS 3 IAS 38 transition Net sales 120,651 - - - 120,651 Operating income 4,714 -50 155 -15 4,804 Income after financial items 4,359 -50 155 -15 4,449 Income for the period 3,148 -35 155 -12 3,256 Income for the period per share, basic, SEK 10.55 -0.12 0.52 -0.04 10.91 Preliminary IFRS transition effects on the consolidated opening balance January 1, 2004 Opening balance Opening balance SEKm before transition IFRS 2 IFRS 3 IAS 38 after transition Intangible fixed assets 4,782 - 31 20 4,833 Other fixed assets 20,037 -16 - - 20,021 Current assets 53,415 - - - 53,415 Total assets 78,234 -16 31 20 78,269 Equity 25,887 37 31 16 25,971 Provisions 14,285 -53 - 4 14,236 Financial liabilities 12,182 - - - 12,182 Operating liabilities 25,880 - - - 25,880 Total liabilities and equity 78,234 -16 31 20 78,269 Preliminary IFRS transition effects on the consolidated balance sheet September 30, 2004 Balance Balance before after SEKm transition IFRS 2 IFRS 3 IAS 38 transition Intangible fixed assets 5,283 - 149 8 5,440 Other fixed assets 20,535 -18 - - 20,517 Current assets 52,191 - - - 52,191 Total assets 78,009 -18 149 8 78,148 Equity 23,263 43 149 6 23,461 Provisions 14,854 -61 - 2 14,795 Financial liabilities 12,224 - - - 12,224 Operating liabilities 27,668 - - - 27,668 Total liabilities and equity 78,009 -18 149 8 78,148 Financial instruments In January 1, 2005, the Group implemented the new accounting standard IAS 39, Financial Instruments: Recognition and Measurement. IAS 39 has been amended during 2005 and the amendment is not yet endorsed by the European Union, but is expected to be endorsed before year-end. The amended standard has been applied retrospectively as from January 1, 2005. The opening retained earnings at January 1, 2005, were adjusted and no restatement of comparative figures for 2004 have been made. No calculation of possible effects of IAS 39 on the 2004 financial statements has been made. If IAS 39 had been applied in 2004, the volatility in income, net borrowings and equity would most probably have been higher. Under IAS 39, all financial assets and liabilities including ordinary and embedded derivatives are recognized in the balance sheet. Valuation of financial instruments depends on the classification. The Group classifies its financial instruments in the following categories: · Financial assets at fair value through profit or loss.This category consists of financial assets held for trading, mainly derivatives with positive fair value, and those designated at fair value through profit or loss at inception. Assets in this class are subsequently carried at fair value with changes in fair value included in the income statement. · Loans and receivables are non-derivative financial assets with fixed or determinable payments and no active market. Assets in this class are carried at amortized cost and are subject to impairment test. · Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Assets in this class are subsequently carried at fair value with changes in fair value recognized in equity. · Fair value liabilities through profit or loss, which consist of derivatives with negative fair value. Liabilities in this class are subsequently carried at fair value with changes in fair value included in the income statement. · Other liabilitiesare carried at amortized cost. Financial assets are classified as current assets if they are held for trading or expected to be realized within 12 months of the balance sheet date. Derivatives and hedge accounting The standard stipulates that all financial derivative instruments shall be classified as assets or liabilities at fair value through profit or loss and be recognized at fair value in the balance sheet. Changes in the fair value of derivative instruments shall be recognized in the income statement unless hedge accounting is applied, The standard allows for hedge accounting only if certain criteria are met, e.g., documentation, linking with exposure and effectiveness testing. In connection with cash flow and hedging of net investment hedge accounting, changes in the fair value of derivative instruments are reported in equity until the hedged item is recognized in the income statement. The majority of derivatives used by the Electrolux Group are used for hedging purposes, i.e., to mitigate various financial risks. The risk management practices and the fair values of such instruments are described in the Annual Report for 2004. The standard defines three types of hedging relationships: · Fair value hedge, a hedge entered into to mitigate changes in an asset’s or liability’s fair value. · Cash flow hedge, a hedge entered into to mitigate the risk of variability in the cash flows of a recognized asset or liability, or a highly probable forecast. · Net investment hedge, a hedge entered into to mitigate the changes in fair value from foreign-exchange volatility of the value of the net investment in a foreign entity. The Group applies hedge accounting on the management of foreign currency risk in net investments and transaction flows and on the management of interest-rate risk in the debt portfolio. On January 1, 2005, the Group recorded the fair value of all derivatives on the balance sheet with the net value affecting equity. SEK 445m was recorded as current assets and SEK 447m was recorded as financial liability. The net effect on equity was SEK –2m. The implementation of IAS 39 introduces higher volatility in income, net borrowings and of the Group’s equity. This volatility cannot be predicted with certainty, but it is the target for the Group to achieve hedge accounting and limit the volatility of the income statement as far as possible to a justifiable cost. Preliminary IFRS transition effects on the consolidated opening balance January 1, 2005 Closing Opening balance balance after after SEKm transition IAS 39 transition Fixed assets 25,623 - 25,623 Current assets 49,473 445 49,918 Total assets 75,096 445 75,541 Equity 23,636 -2 23,634 Provisions 14,012 - 14,012 Financial liabilities 9,843 447 10,290 Operating liabilities 27,605 - 27,605 Total liabilities and equity 75,096 445 75,541 Presentation and telephone conference A combined presentation and telephone conference will be held at 14:00- 18:00 CET on October 25, 2005, at the Electrolux head office at S: t Göransgatan 143 in Stockholm. The presentation will be chaired by Hans Stråberg, President and CEO of Electrolux. Mr Stråberg will be accompanied by Fredrik Rystedt, CFO. Additional management presentations at announcement of Q3 results In addition to the CEO and CFO presentations, updates will be given on Major Appliances, Europe and Asia/Pacific by Johan Bygge, Major Appliances, North and Latin America by Keith McLoughlin, and Outdoor Products by Bengt Andersson. Slide presentations will be available on the Electrolux website: www.electrolux.com/latestreport. Financial Reports in 2006 Consolidated Results 2005 February 14 Interim Report January – March April 24 Annual General Meeting April 24 Interim Report April – June July 18 Interim Report July – September October 25 For more information Financial information from Electrolux is also available at www.electrolux.com/ir. Factors affecting forward-looking statements This report contains “forward-looking” statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the financial goals and targets of Electrolux for future periods and future business and financial plans. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially due to a variety of factors. These factors include, but may not be limited to the following; consumer demand and market conditions in the geographical areas and industries in which Electrolux operates, effects of currency fluctuations, competitive pressures to reduce prices, significant loss of business from major retailers, the success in developing new products and marketing initiatives, developments in product liability litigation, progress in achieving operational and capital efficiency goals, the success in identifying growth opportunities and acquisition candidates and the integration of these opportunities with existing businesses, progress in achieving structural and supply-chain reorganization goals.

About Us

Electrolux shapes living for the better by reinventing taste, care and wellbeing experiences, making life more enjoyable and sustainable for millions of people. As a leading global appliance company, we place the consumer at the heart of everything we do. Through our brands, including Electrolux, AEG, Anova, Frigidaire, Westinghouse and Zanussi, we sell more than 60 million household and professional products in more than 150 markets every year. For more information go to www.electroluxgroup.com.

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