Electrolux first quarter report, 2000

FIRST QUARTER REPORT, 2000 - Net income per share rose by 30% over last year - Amounts in SEKm, First quarter, First quarter, Change, unless otherwise indicated 2000 1999 % Net sales 31,229 29,053 7 1) Operating income 2,050 1,656 24 Margin,% 6.6 5.7 Income after financial items 1,786 1,384 29 Margin,% 5.7 4.8 Net income per share, SEK 3.25 2.50 30 2) Value creation 691 183 278 Return on equity, % 18.4 14.9 1) Includes capital gain of slightly more than SEK 200m, and a provision in the same amount for restructuring within Professional indoor products. 2) See definition on page 3. * Stronger demand in all major markets * Higher operating income and margin for both Consumer Durables and Professional Products Value created almost three times greater than in first quarter last year Board proposes repurchasing own shares to AGM Net sales and income Sales for Electrolux in the first quarter of 2000 rose to SEK 31,229m, as against SEK 29,053m for the corresponding period last year. This corresponds to an increase of 7.5%, of which -3.3% refers to changes in Group structure, +1.4% to changes in exchange rates, and +9.4% to price/mix/volume. For changes in Group structure, see page 5. Operating income rose by 24% to SEK 2,050m (1,656), corresponding to 6.6% (5.7) of net sales, and income after financial items rose by 29% to SEK 1,786m (1,384), corresponding to 5.7% (4.8) of net sales. Net income rose by 30% to SEK 1,188m (912), which corresponds to SEK 3.25 (2.50) per share. Operating income includes a capital gain of slightly more than SEK 200m on the divestment of the major part of the operation in professional refrigeration equipment, which was completed on January 31, 2000. A provision in a corresponding amount was made during the quarter for continued restructuring, in order to put the new Professional Indoor Products organization in place. Changes in exchange-rates during the period, i.e. both transactions and translations, had a net positive effect of approximately SEK 170m on operating income for the period. Cash flow The cash flow generated by operations after investments and adjusted for exchange-rate effects amounted to SEK -1,970m (-3,699). The improvement is traceable mainly to the proceeds on divestment of the operation in professional refrigeration equipment as well as to higher income. Cash flow is normally weak during the first and second quarters, as a result of a build-up of inventories and accounts receivable prior to a seasonal increase in sales of outdoor products, room air-conditioners and refrigerators and freezers. Equity and net debt/equity ratio Equity as of March 31, 2000 amounted to SEK 26,390m (23,991), which corresponds to SEK 72.10 (65.50) per share. Average net assets for the period amounted to SEK 37,510m (41,484). The return on equity after taxes was 18.4% (14.9), and the return on net assets was 21.9% (16.0). Net borrowings declined to SEK 15,539m (21,166) and the net debt/equity ratio improved to 0.57 (0.85). Liquid funds at the end of the period amounted to SEK 8,552m (8,872). Value creation During the first quarter of 2000 the Group created total value of SEK 691m, as compared to SEK 183m in the first quarter of last year. The increase refers to a higher sales growth, increased operating income as well as lower net assets. The value created in each business area is shown in the table below. In 1997-1999 the Group achieved annual average growth in value of SEK 1,200m. The goal for the next three years is to continue this positive trend, which means creating growth in value of at least SEK 1,000m annually. Value creation is defined as operating income excluding items affecting comparability, less a weighted average cost of capital (WACC) on average net assets. The Group's WACC is calculated at 14% before tax. Operations by business area Consumer Durables The market for white goods in Western Europe increased in volume by about 9% over the first quarter of 1999. Group sales of white goods in Europe, through Electrolux Home Products, showed good growth in volume. Operating income improved as a result of higher volumes and greater internal efficiency. The costs for the formation of a pan-European organization have not yet been compensated for by lower operational costs. In the US, the market for white goods showed an increase in volume of about 7%. Sales for Frigidaire Home Products continued to show strong growth, and operating income improved over the previous year. Demand for room air-conditioners was higher than last year in the US market. Group sales in this product area rose, and operating income improved. Demand for white goods rose in Brazil as well. The Brazilian white-goods operation achieved higher sales volume. Operating income declined, however, as a result of weak price trends. As a whole the Group's white-goods operation reported good growth in operating income, and margin improved. Demand for floor-care products rose strongly, particularly in the US, but the European market also increased. The floor-care product line continued to achieve good growth in sales and income in both markets. Income also improved in Asia and Oceania as a result of restructuring. Overall, operating income showed a significant increase over last year and margin improved. In Outdoor products, the Group reported good sales growth in Europe and the US. Operating income improved for both the European and the American operations. Total sales for Consumer Durables were higher than in the first quarter of 1999. Operating income rose considerably, and margin improved. Professional indoor products Demand for food-service equipment in Europe was largely unchanged. Overall sales for this product line declined somewhat in comparison with the first quarter of last year. Operating income improved, however, on the basis of a strong performance in Southern Europe and the effects of previously implemented restructuring. Sales of laundry equipment rose in several markets in Europe as well as in the US, but declined in others, including Japan. Total operating income for this product line was somewhat lower than in the first quarter of 1999, and margin declined, primarily as a result of an unfavorable product mix. Demand rose for absorption refrigerators and other products for the recreational vehicle industry, in both Europe and the US. The Group's leisure appliances product line reported continued good growth in sales and income. Market demand for compressors and motors rose in Europe, the US and Asia in comparison with the first quarter of 1999. The Group achieved higher sales volumes, and the components product line reported substantially higher operating income and margin. Professional outdoor products Demand for professional chainsaws rose in all markets except Eastern Europe. The market in Western Europe showed strong growth following storms at the beginning of the year. The Group achieved strong sales growth and a substantial improvement in operating income. The US operation in landscape maintenance equipment that was acquired in October 1999 reported improved sales and income. Overall, sales for Professional Products increased over last year after adjustment for divested operations. Operating income and margin improved considerably. Major changes in the Group The divestment of the major part of the operation in professional refrigeration equipment was completed as of January 31, 2000. Divestment of the remaining operations in Brazil, China and Eastern Europe is scheduled for completion during the spring of 2000. In 1999 this product line had sales of SEK 2,279m and about 2,000 employees. Divested operations, i.e. professional refrigeration equipment, food and beverage vending machines and the major part of direct sales, contributed approximately SEK 1,000m in net sales and approximately SEK 60m in operating income during the first quarter of 1999. Repurchase of own shares The Board of Directors of AB Electrolux has decided to propose that the Annual General Meeting authorize the Board during the period up to the next Annual General Meeting to decide on acquisition and sale of the Company's own shares of series A and series B. The intention is among other things to continuously be able to adapt the capital structure to the needs of the Company, thereby contributing to increased shareholder value, or in connection with financing of potential company acquisitions. The proposal stipulates that a maximum of 10% of the total number of shares may be acquired, and that sale may be effected with respect to shares held by the Company. Both acquisition and sale would be implemented through offers directed to all shareholders, or by transactions on any stock exchange or regulated market where the Company's shares are quoted. Sales may also be made in connection with company acquisitions with deviation from the preferential rights of shareholders. Payment for shares sold may be made in cash, in kind, or by offsetting of claims against the Company. Shares may be acquired or sold through transactions on a stock exchange or regulated market where the Company's shares are quoted only at a price per share within the at each time registered interval between the highest buying price and the lowest selling price. In order to cost-effectively meet Electrolux' obligations under the Company's 1998 and 1999 incentive programs, the Board has also decided to propose that the Annual General Meeting decides on selling Company shares within the framework of these programs. Outlook for 2000 During the first quarter of 2000 market demand was higher than last year in most of the Group's product areas. Demand is expected to remain good in all major markets during the rest of the year. In line with established targets, the Group should be able to create considerably more value in 2000 than in 1999. Stockholm, April 25, 2000 Michael Treschow President and CEO Factors affecting forward-looking statements The Report by the President and CEO and the Report by the Board of Directors contain "forward-looking" statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the financial goals or targets of Electrolux for future periods and future business and financial plans. Actual results may differ materially from these goals and targets due to a variety of factors. These factors include but may not be limited to the following; the success in developing new products and marketing initiatives, 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, competitive pressures to reduce prices, significant loss of business from major retailers, consumer demand, and the effect of local economies on product demand. Consolidated income First First Full statement, SEKm quarter,quarter, year, 2000 1999 1999 Net sales 31,229 29,053 119,550 Cost of goods sold -23,400 -21,559 -87,288 Selling expense -4,247 -4,314 -18,450 Administrative expense -1,537 -1,545 -6,261 Other operating income/expense 5 21 -131 Items affecting comparability - - -216 Operating income* 2,050 1,656 7,204 Margin, % 6.6 5.7 6.0 Financial items, net -264 -272 -1,062 Income after financial items 1,786 1,384 6,142 Margin, % 5.7 4.8 5.1 Taxes -620 -473 -2.005 Minority interests in net income 22 1 38 Net income 1,188 912 4,175 * Including depreciation in the amount of: -923 -985 -3,905 Consolidated balance sheet, SEKm March 31, March 31, Full year, 2000 1999 1999 Fixed assets 27,095 26,474 28,051 Inventories, etc. 16,940 17,656 16,171 Accounts receivable 26,083 24,749 21,513 Other receivables 5,903 5,175 5,597 Liquid funds 8,552 8,872 10,312 Total assets 84,573 82,926 81,644 Shareholders' equity 26,390 23,991 25,781 Minority interests 813 873 825 Interest-bearing liabilities and 24,091 30,038 23,735 provisions Non-interest-bearing liabilities 33,279 28,024 31,303 and provisions Total equity and liabilities 84,573 82,926 81,644 Consolidated cash-flow statement First First Full quarter,quarter, year, 2000 1999 1999 Operations and investments Income after financial items 1,786 1,384 6,142 Depreciation according to plan charged against above income 923 985 3,905 Capital gain/loss included in operating income - - -1,620 Provision for restructuring -21 -197 -507 Provision for pension litigation - - 1,841 Taxes paid -151 -24 -2,166 Changes in operating assets and liabilities -5,080 -4,619 1,065 Cash flow from operations -2,543 -2,471 8,660 Investments/divestments in operations 1,170 -322 1,702 Capital expenditure -924 -756 -4,439 Other 327 -150 -400 Total cash flow from operations and investments -1,970 -3,699 5,523 Change in short-term loans 2,055 7 -4,039 Change in long-term loans -1,704 1,525 -553 Dividend - - -1,099 Total cash flow -1,619 -2,167 -168 Liquid funds at beginning of year 10,312 11,387 11,387 Exchange-rate differences referring to liquid funds -141 -348 -907 Liquid funds at end of period 8,552 8,872 10,312 Change in net borrowings Total cash flow excl. change in loans -1,970 -3,699 4,646 Net borrowings at beginning of year -13,423 -17,966 -17,966 Exchange-rate differences referring to net borrowings -146 499 -103 Net borrowings at end of period -15,539 -21,166 -13,423 Net sales and operating income by business area, SEKm Net sales Operating income First First Full First First Full quarter quarte, year quarter, quarter, year, 2000 1999 1999 2000 1999 1999 Consumer Durables Europe 10,535 10,338 43,267 557 497 2,341 Margin, % 5.3 4.8 5.4 North America 12,603 10,768 42,466 935 757 3,054 Margin, % 7.4 7.0 7.2 Rest of the world 1,478 1,344 5,984 -101 -95 -401 Margin, % -6.8 -7.1 -6.7 Total Consumer 24,616 22,450 91,717 1,391 1,159 4,994 Durables Margin, % 5.7 5.2 5.4 Professional Products Indoor 4,398 4,910 20,450 423 384 1,912 Margin, % 9.6 7.8 9.3 Outdoor 2,140 1,629 7,100 325 230 963 Margin, % 15.2 14.1 13.6 Total Professional 6,538 6,539 27,550 748 614 2,875 Products Margin, % 11.4 9.4 10.4 Other 75 64 283 1 -8 -51 Common Group costs - - - -90 -109 -398 Items affecting - - - - - -216 comparability Total 31,229 29,053 119,550 2,050 1,656 7,204 Value creation, SEKm First First Full quarter, quarter, year 2000 1999 1999 Consumer Durables Europe 233 166 988 North America 460 247 1,035 Rest of the world -319 -362 -1,267 Total Consumer Durables 374 51 756 Professional Products Indoor 224 121 897 Outdoor 228 144 644 Total Professional Products 452 265 1,541 Common Group costs -89 -112 -399 Other -46 -21 -116 Total 691 183 1,782 Key ratios First First Full quarte, quarte, year, 2000 1999 1999 1) Net income per share, SEK 3.25 2.50 11.40 2) Return on equity, % 18.4 14.9 17.1 3) Return on net assets, % 21.9 16.0 18.3 4) Net debt/equity ratio 0.57 0.85 0.50 Capital expenditure, SEKm 924 756 4,439 Average number of employees 88,700 93,900 92,916 1) After a stock split of 5:1 in June 1998, the number of shares amounts to 366.2 million. 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 are excluded. 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 Net sales and income, per quarter st nd rd th 1 2 3 4 qtr Full year qtr qtr qtr Net sales, SEKm 2000 31,229 1999 29,05333,02129,070 28,406 119,550 Operating income, SEKm 2000 2,050 Margin,% 6.6 1999 1,656 2,151 1,539 1,858 7,204 Margin,% 5.7 6.5 5.3 6.5 6.0 1) 1999 1,656 2,151 1,755 1,858 7,420 Margin,% 5.7 6.5 6.0 6.5 6.2 Income after financial 2000 1,786 items, SEKm Margin,% 5.7 1999 1,384 1,835 1,354 1,569 6,142 Margin,% 4.8 5.6 4.7 5.5 5.1 1) 1999 1,384 1,835 1,570 1,569 6,358 Margin,% 4.8 5.6 5.4 5.5 5.3 Net income, SEKm 2000 1,188 1999 912 1,188 1,024 1,051 4,175 1) 1999 912 1,188 1,049 1,051 4,200 Net income per share, 2000 3.25 SEK 1999 2.50 3.25 2.80 2.85 11.40 1) 1999 2.50 3.25 2.85 2.85 11.45 Value creation, SEKm 2000 691 1999 183 657 380 562 1,782 1) Exclusive of items affecting comparability, which in 1999 comprised a provision of USD 225m (SEK 1,841m) in the third quarter, and a capital gain of SEK 1,625m also in the third quarter. Net sales by business area, per quarter, SEKm st nd rd th Consumer Durables 1 2 3 4 Full qtr qtr qtr qtr year Europe 2000 10,535 1999 10,338 10,633 10,960 11,336 43,267 North America 2000 12,603 1999 10,768 13,043 9,960 8,695 42,466 Rest of the world 2000 1,478 1999 1,344 1,557 1,511 1,572 5,984 Total Consumer Durables 2000 24,616 1999 22,450 25,233 22,431 21,603 91,717 Professional Products, Indoor 2000 4,398 1999 4,910 5,674 5,006 4,860 20,450 Professional Products, Outdoor 2000 2,140 1999 1,629 2,043 1,552 1,876 7,100 Total Professional Products 2000 6,538 1999 6,539 7,717 6,558 6,736 27,550 Operating income by business area, per quarter, SEKm st nd rd th Consumer Durables 1 2 3 4 Full qtr qtr qtr qtr year Europe 2000 557 Margin,% 5.3 1999 497 435 632 777 2,341 Margin,% 4.8 4.1 5.8 6.9 5.4 North America 2000 935 Margin,% 7.4 1999 757 1,025 650 622 3,054 Margin,% 7.0 7.9 6.5 7.2 7.2 Rest of the world 2000 -101 Margin,% -6.8 1999 -95 -98 -62 -146 -401 Margin,% -7.1 -6.3 -4.1 -9.3 -6.7 Professional Products, Indoor 2000 423 Margin,% 9.6 1999 384 645 431 452 1,912 Margin,% 7.8 11.4 8.6 9.3 9.3 Professional Products, Outdoor 2000 325 Margin,% 15.2 1999 230 265 198 270 963 Margin,% 14.1 13.0 12.8 14.4 13.6 Other 2000 1 1999 -8 -14 -7 -22 -51 Common Group costs 2000 -90 1999 -109 -107 -87 -95 -398 Items affecting comparability 2000 1999 -216 -216 This report has not been audited. Financial reports in 2000 nd Quarterly report, 2 quarter August 11 rd Quarterly report, 3 quarter October 27 Financial information from Electrolux is also available on Internet at www.electrolux.com ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/04/25/20000425BIT00650/bit0001.doc http://www.bit.se/bitonline/2000/04/25/20000425BIT00650/bit0002.pdf