Electrolux Q1 2019 interim report: Price increases offsetting headwinds
Highlights of the first quarter of 2019
- Net sales amounted to SEK 29,710m (27,906). Sales growth was 1.6%, driven by price increases and mix improvements across all business areas.
- Operating income amounted to SEK 248m (764), corresponding to a margin of 0.8% (2.7).
- Operating income includes restructuring costs of SEK 1,054m (596) relating to consolidation of manufacturing in North America and Latin America. Excluding these costs, operating income amounted to SEK 1,302m (1,360), corresponding to a margin of 4.4% (4.9).
- Price increases fully offset the headwinds from higher raw material costs, trade tariffs and currency.
- Operating cash flow after investments amounted to SEK -2,770m (-2,671).
- Income for the period decreased to SEK 79m (551), and earnings per share was SEK 0.28 (1.92).
- Revised business area structure with four consumer-focused regional business areas and one business area for Professional Products in effect as of January 1, 2019.
President and CEO Jonas Samuelson’s comment
In the first quarter, we continued to execute on our profitable growth strategy in a challenging cost environment. It is great to see that most of our business areas showed good organic growth. Sales growth amounted to 1.6%, driven by higher prices and improved product mix. Underlying operating income was fairly in line with last year. I am particularly pleased that our price execution fully offset the strong headwinds we faced from higher raw material costs, trade tariffs and currency.
The earnings trend for our operations in Europe and Professional Products remained solid. The business area Asia-Pacific, Middle East and Africa continued to have strong growth in Southeast Asia, while in Australia sales declined. In North America and Latin America, cost-based price increases fully compensated headwinds. Our North American operation was also this quarter impacted by lower private label volumes.
We continue to expect market demand in 2019 for appliances in Europe to be slightly positive and in Southeast Asia to be positive. The Latin American market recovered in the quarter and is, hence, anticipated to be slightly positive for the full-year. In North America and Australia the markets were softer than initially expected and our full year view is therefore slightly negative.
The uncertainty on trade tariffs impacts our visibility. Based on current levels, we estimate the negative year-over-year impact from raw materials, tariffs and currency to be approximately SEK 1.7-1.9bn in 2019, compared to the previous estimate of approximately SEK 2.0-2.4bn. We continue to expect price to offset these significant external headwinds.
We firmly believe consumer focused innovation is a key driver to achieve profitable growth. In 2019, Electrolux turns 100 years old and a strong consumer focus has been our guiding compass, resulting in ground-breaking products providing better living for people. I am therefore excited that 2019 is a launch intensive year, including significant kitchen range launches in Europe and Asia-Pacific. In addition, we are accelerating our consumer focused innovation through a new organizational structure, as of January 1, comprising four regional business areas and a global consumer experience function. In parallel, the preparations for the intended separation of Professional Products are proceeding.
I am confident that we are well positioned to create value.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, April 26. Jonas Samuelson, President and CEO and Therese Friberg, CFO will comment on the report.
Details for participation by telephone are as follows:
Participants in Sweden: +46 8 566 426 51
Participants in UK/Europe: +44 3333 000 804
Participants in US: +1 631 9131 422
Pin code: 14144070#
Slide presentation for download: www.electroluxgroup.com/ir
Link to webcast: https://edge.media-server.com/m6/p/8u4oboah
For further information, please contact:
Sophie Arnius, Head of Investor Relations +46 70 590 80 72
Merton Kaplan, IR Manager, +46 73 885 78 03
Daniel Frykholm, Electrolux Press Hotline, +46 8 657 65 07
This is information that AB Electrolux is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 0800 CET on April 26, 2019.
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 and Frigidaire, we sell more than 60 million household and professional products in more than 150 markets every year. In 2018 Electrolux had sales of SEK 124 billion and employed 54,000 people around the world. For more information go to www.electroluxgroup.com.