Electrolux first quarter report, 1999

Encl. FIRST QUARTER REPORT, 1999 - Continued positive trends for income and margin - First quarter 1999 1998 Change, % Net sales, SEKm 29,053 28,567 1.7 Operating income, SEKm 1,656 1,376 20.3 Margin, % 5.7 4.8 Income after financial items, SEKm 1,384 1,060 30.6 Income before taxes, SEKm 1,392 1,075 29.5 Net income, SEKm 912 667 36.7 1) Net income per share, SEK 2.50 1.85 Return on equity, % 14.9 13.0 1) 5:1 stock split in June 1998. Figure for the first quarter of 1998 has been adjusted accordingly. * Higher sales and income in North America * Improved income for all business areas * Restructuring program on track * Electrolux share to be listed in euro and kronor as of June 7 Net sales and income Sales for Electrolux in the first quarter of 1999 amounted to SEK 29,053m as against SEK 28,567m last year. This corresponds to an increase of 1.7%, of which -4.5% refers to divestments, +0.8% to changes in exchange rates, and +5.4% to price/mix/volume. Operating income rose by 20% to SEK 1,656m (1,376), corresponding to 5.7% (4.8) of sales. Income before taxes rose by 30% to SEK 1,392m (1,075), corresponding to 4.8% (3.8) of sales, and net income rose by 37% to SEK 912m (667), corresponding to SEK 2.50 (1.85) per share. Changes in exchange-rates during the period had only a marginal effect on income. All business areas reported higher operating income, with improved margins for Household Appliances and Professional Appliances. Cash flow The cash flow generated by the Group's business operations after investments amounted to SEK -3,699m (-2,658), adjusted for exchange-rate effects. The decline is traceable mainly to higher sales volume and a resulting increase in the amount of capital tied up in accounts receivable. The first and second quarters normally feature a weak cash flow resulting from higher inventories and accounts receivable prior to seasonal increases in Encl. sales of such products as room air-conditioners, refrigerators and freezers and outdoor products. Equity and net debt/equity ratio Equity including minority interests rose to SEK 24,864m (21,784), which corresponds to SEK 67.90 (59.50) per share. Equity was lower than at year-end 1998 as a result of the devaluation of the Brazilian real and the strengthening of the Swedish krona, mainly against currencies in the euro block. The return on equity after taxes was 14.9% (13.0), and the return on net assets was 16.0% (13.6). The definition of net assets has been changed as of 1999, so that they now comprise only assets that generate operating income, i.e. interest-bearing financial receivables amounting to SEK 3,049m are excluded. The figure for the previous year has been adjusted accordingly. Net borrowings declined to SEK 21,166m (22,894), and the net/debt equity ratio improved to 0.85 (1.05). Liquid funds as of March 31, 1999 amounted to SEK 8,872m (9,729). Major changes in the Group Current restructuring program The ongoing restructuring program that was launched in June 1997 has proceeded according to plan. The program will be largely completed during the first half of this year. Between June 1997 and March 31, 1999 a total of 9,974 people have left the Group, of whom about 774 during the first quarter of 1999. A total of SEK 2,010m has been utilized of the provision of SEK 2,500m that was made for the program during the second quarter of 1997. SEK 190m was utilized during the first quarter of 1999. A total of 19 plants have been shut down or divested, of which one during the first quarter of 1999. Negotiations regarding shutdowns have been initiated or completed for another two units. A total of 32 warehouses have been shut down, of which two during the first quarter. Decisions have been made regarding the shutdown of an additional six warehouses. Acquisitions and divestments At the end of March 1999 the Group acquired the European operation in the American company McCulloch, which produces light-duty chain saws, trimmers, hedge trimmers and leaf blowers. In 1998 this operation reported sales of USD 81 million (approximately SEK 650m), and had 250 employees. The acquisition gives the Group the right to use the McCulloch brand outside North America. McCulloch's consumer products complement the Group's Husqvarna product range. Substantial synergies can be achieved in both sales and production. The divestment of AB Lux, the Group's direct-sales operation, has not been completed since the purchaser's financing has not been finalized. Listing in euro and kronor In order to facilitate trading and distribution of Electrolux shares, the Board decided in February to apply for a listing in both euro and kronor on the Stockholm Stock Exchange. This was the first such application by a Swedish company, and the listing will be effective as of June 7, 1999. Operations by business area Encl. Household Appliances The market for white goods in Western Europe declined somewhat in comparison with the first quarter of 1998. The decrease refers largely to Germany and the UK. The Group's white-goods operation in Europe achieved higher sales volume and improved operating income. Considerably lower deliveries to Russia had an adverse effect on income. Demand in the US white-goods market was higher than in the same period last year. The Group's American white-goods operation reported continued good sales growth, as well as improved operating income. The market for white goods in Brazil continued to decline sharply. Group sales were lower and operating income declined. Overall, operating income and margin for white goods improved in comparison with the first quarter of 1998. In terms of other operations in Household Appliances, demand for floor care products increased somewhat in Europe and was unchanged in the US. Sales for this product line were somewhat higher than in the corresponding period last year. Operating income and margin improved considerably on the basis of good performances by both the US and the European operations. Increased demand also led to higher sales volume and improved income for leisure appliances. Sales for the component product line were lower than in the first quarter of 1998, however, and operating income declined. Total sales for the Household Appliances business area were largely unchanged from the first quarter of 1998. Operating income and margin improved. Professional Appliances Market conditions for food-service equipment improved in comparison with the same period last year. The Group achieved higher sales volume as well as a considerable improvement in operating income. Good growth in sales and income was also reported for food and beverage vending machines. Sales of laundry equipment declined in comparison with the first quarter of 1998 as a result of lower volume for heavy-duty laundry equipment in the US and the divestment of Senkingwerk. Operating income for this product line was lower, but margin improved. Sales also declined for refrigeration equipment, as a result of a less favorable product mix and lower sales volumes in the ASEAN countries and South America. This product line reported lower operating income. Sales for Professional Appliances as a whole declined in comparison with the same period last year, while operating income and margin improved. Outdoor Products Demand for professional chain saws was lower, particularly in Europe and Latin America. Husqvarna reported lower sales than in the first quarter of 1998 and operating income declined, although from a high level. Within garden equipment in Europe, the Group achieved higher sales volume and improved operating income. Sales of outdoor products in North America rose in comparison with the same period last year. Operating income for the Group's American operation showed a considerable improvement. Total sales and operating income for Outdoor Products were higher than in the first quarter of 1998, although margin was somewhat lower. Stockholm, April 27, 1999 Michael Treschow Encl. President and CEO Consolidated income First First Full statement, SEKm quarter, quarter, year, 1999 1998 1998 Net sales 29,053 28,567 117,524 Cost of goods sold -21,559 -21,221 -86,899 Selling expense -4,314 -4,424 -18,058 Administrative expense -1,545 -1,507 -6,336 Other operating 21 -39 -167 income/expense Items affecting comparability - - 964 Operating income* 1,656 1,376 7,028 Margin, % 5.7 4.8 6.0 Financial items, net -272 -316 -1,178 Income after financial items 1,384 1,060 5,850 Margin, % 4.8 3.7 5.0 Minority interests in income 8 15 76 before taxes Income before taxes 1,392 1,075 5,926 Margin, % 4.8 3.8 5.0 Taxes -480 -408 -1,951 Net income 912 667 3,975 * Including depreciation in -985 -1,058 -4,125 the amount of Consolidated balance sheet, SEKm March March 31, Full 31, 1998 year, 1999 1998 Fixed assets 26,474 27,285 27,885 Inventories, 17,656 18,738 16,957 etc. Accounts 24,749 23,904 21,859 receivable Other 5,175 5,374 5,201 receivables Liquid funds 8,872 9,729 11,387 Total assets 82,926 85,030 83,289 Shareholders' 23,991 20,930 24,480 equity Minority 873 854 953 interests Interest-bearing liabilities and 30,038 32,623 29,353 provisions Non-interest-bearing liabilities 28,024 30,623 28,503 and provisions Total equity and liabilities 82,926 85,030 83,289 Statement of changes in financial position, SEKm First First Full quarter, quarter, year, Encl. 1999 1998 1998 Income after financial items 1,384 1,060 5,850 Depreciation according to 985 1,058 4,125 plan Capital gain/loss included in operating income - - -964 Provision for restructuring, not -197 -316 -1,122 affecting liquidity Taxes paid -24 -48 -2,135 Changes in operating assets -4,619 -3,703 -1,056 and liabilities Cash flow from operations -2,471 -1,949 4,698 Investments/divestments in -322 2,105 operations Capital expenditure -756 -711 -3,756 Other -150 2 875 Cash flow from operations and investments -3,699 -2,658 3,922 Change in short-term loans 7 4,904 954 Change in long-term loans 1,525 -2,232 -2,988 Dividend payment - - -915 Change in minority interest - - 6 Total cash flow -2,167 14 979 Liquid funds at beginning of 11,387 9,834 9,834 year Exchange-rate differences referring to liquid funds -348 -119 574 Liquid funds on March 31 8,872 9,729 11,387 Total cash flow excl. change in short-term loans -2,174 -4,890 25 Net liquid funds at beginning 112 46 46 of year Exchange-rate differences referring to net liquidity -171 -44 41 Net liquid funds on March 31 -2,233 -4,888 112 Net sales by business area, SEKm First First Full quarter quarter, year, , 1998 1999 1998 Household Appliances 20,266 20,140 84,581 Professional Appliances 2,563 2,722 11,574 Outdoor Products 6,155 5,157 19,295 Operating income by business First First Full area, SEKm quarter quarter, year, Encl. , 1998 1999 1998 Household Appliances 1,071 879 4,065 Margin, % 5.3 4.4 4.8 Professional Appliances 129 103 723 Margin, % 5.0 3.8 6.2 Outdoor Products 574 488 1,788 Margin, % 9.3 9.5 9.3 Common Group costs -109 -95 -436 Key ratios First First Full quarter, quarter year, 1999 , 1998 1998 1) Net income per share, SEK 2.50 1.85 10.85 2) Return on equity, % 14.9 13.0 19.3 3) Return on net assets, % 16.0 13.6 17.6 4) Net debt/equity ratio 0.85 1.05 0.71 Capital expenditure, SEKm 756 711 3,756 Average number of employees 93,900 101,800 99,322 1) After a stock split of 5:1 in June 1998, the number of shares amounts to 366.2 million. The figure for the first quarter 1998 has been adjusted accordingly. 2) Annualized net income for the year, expressed as a percentage of opening equity. 3) Annualized operating income, expressed as a percentage of average net assets. The definition of net assets has been changed as of 1999, so that they now comprise only assets that generate operating income, i.e. interest-bearing financial receivables amounting to SEK 3,049m are excluded. The figures for the previous year have been adjusted accordingly. 4) Net borrowings, i.e. interest-bearing liabilities less liquid funds, in relation to adjusted equity. The latter is defined as equity including minority interests. Quarterly figures st nd rd th Net sales and income, per 1 2 3 4 Full quarter qtr qtr qtr qtr year Net sales, SEKm 1999 29,053 1998 28,56732,30 28,51 28,13 117,52 8 6 3 4 Operating income, SEKm 1999 1,656 Margin,% 5.7 1998 1,376 2,224 1,675 1,753 7,028 Margin,% 4.8 6.9 5.9 6.2 6.0 1) 1998 1,376 1,669 1,425 1,594 6,064 Margin,% 4.8 5.2 5.0 5.7 5.2 Income after financial 1999 1,384 items, SEKm Margin,% 4.8 Encl. 1998 1,060 1,863 1,381 1,546 5,850 Margin,% 3.7 5.8 4.8 5.5 5.0 1) 1998 1,060 1,308 1,131 1,387 4,886 Margin,% 3.7 4.0 4.0 4.9 4.2 Income before taxes, SEKm 1999 1,392 1998 1,075 1,868 1,399 1,584 5,926 1) 1998 1,075 1,313 1,149 1,425 4,962 Net income, SEKm 1999 912 1998 667 1,230 985 1,093 3,975 1) 1998 667 862 766 940 3,235 Net income per share, SEK 1999 2.50 1998 1.85 3.35 2.70 2.95 10.85 1) 1998 1.85 2.35 2.10 2.55 8.85 1) Exclusive of items affecting comparability, which in 1998 comprised a total net capital gain of SEK 964m, of which SEK 555m in the second quarter, SEK 250m in the third quarter and SEK 159m in the fourth quarter. Net sales by business area, per quarter, SEKm st nd rd th 1 qtr 2 qtr 3 qtr 4 qtr Full year Household Appliances 1999 20,266 1998 20,140 21,512 21,345 21,584 84,581 Professional Appliances 1999 2,563 1998 2,722 2,999 2,760 3,093 11,574 Outdoor Products 1999 6,155 1998 5,157 7,246 3,790 3,102 19,295 Operating income by business area, per quarter, SEKm st nd rd th 1 qtr 2 qtr 3 qtr 4 qtr Full year Household Appliances 1999 1,071 Margin,% 5.3 1) 1998 879 813 1,057 1,316 4,065 Margin,% 4.4 3.8 5.0 6.1 4.8 Professional Appliances 1999 129 Margin,% 5.0 1998 103 223 177 220 723 Encl. Margin,% 3.8 7.4 6.4 7.1 6.2 Outdoor Products 1999 574 Margin,% 9.3 1998 488 751 348 201 1,788 Margin,% 9.5 10.4 9.2 6.5 9.3 Common Group costs 1999 -109 1998 -95 -93 -122 -126 -436 1) Including a charge of SEK 175m in 1998 referring to Brazil and Asia. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/04/27/19990427BIT00220/bit0001.doc The full report http://www.bit.se/bitonline/1999/04/27/19990427BIT00220/bit0002.pdf The full report