Electrolux Q1 interim report 2020: Proactive cost actions and strengthened liquidity
The comments and figures in this report refer to continuing operations unless otherwise stated
Highlights of the first quarter of 2020
- Net sales declined to SEK 26,578m (27,408). Sales growth was -5.1%, due to lower volumes. The development of the coronavirus pandemic impacted market demand at the end of the quarter.
- Operating income amounted to SEK 122m (-53), corresponding to a margin of 0.5% (-0.2). The comparison period included non-recurring items of SEK -1,054m.
- The negative impact on operating income from the coronavirus situation was approximately SEK 400m. Comprehensive measures were initiated to mitigate the effects of lower demand and production constraints.
- Significant currency headwinds of approximately SEK 600m.
- Income for the period amounted to SEK -86m (-162), and earnings per share was SEK -0.30 (-0.56).
- Operating cash flow after investments was SEK -2,938m (-3,017).
- Issued new bond loans and secured a new credit facility totaling approximately SEK 11.4bn in March-April.
- Distribution of Electrolux Professional and listing on Nasdaq Stockholm.
- AGM resolved not to distribute any cash dividend to the shareholders for the financial year 2019.
- In Q2 2020, a significant loss is expected. Sales declined by approximately 30% in April, with a gradual recovery expected going forward.
President and CEO Jonas Samuelson’s comment
The world is facing an unprecedented health challenge from the coronavirus pandemic and it affects us all, personally and professionally. Our top priority has been to safeguard the health and safety of our employees and ensuring business continuity as household appliances are essential for consumers’ daily lives.
In the first quarter of 2020, sales declined by 5% and operating income amounted to SEK 122m. As previously communicated, we continued to experience production constraints and inefficiencies from the U.S. manufacturing consolidation. We started to see the initial significant revenue impact from the pandemic towards the end of the quarter, with an estimated direct impact on operating income in the quarter of approximately SEK -400m. The currency headwind was almost SEK -600m; to a large extent indirectly linked to the coronavirus’ impact on the global economy. We have implemented comprehensive actions to mitigate the impact on earnings and cash flow from this exceptional market situation. I am very pleased that we continue to see a favorable effect from mix improvements as well as price increases.
As previously communicated, we expect a material financial impact in 2020, related to the coronavirus situation. For the second quarter in 2020 we expect a significant loss. In April sales were down by approximately 30% but we expect a gradual recovery going forward.
In several of our main markets both demand and production have been severely impacted by the strict countermeasures initiated by local authorities from mid-March, including the closure of industrial activities, retail shops and cross-border transit. In some markets, where physical stores have had to close, we have seen a significant increase in online sales, but not enough to materially offset physical retail decline. We have worked extensively to mitigate the impact from the initial outbreak in China, from where we source significant volumes of finished products and components, resulting in a limited impact in the first quarter.
In light of the sharp demand decline, we have implemented comprehensive mitigation actions. In addition to furloughs for employees affected by reduced activity, these actions include significantly reduced discretionary spending and reprioritizing capital expenditure by deferring and scaling back investments. This means that some of our investments in the re-engineering program will be impacted. For our two strategic U.S. investments; the Anderson refrigeration factory is largely completed, while the Springfield cooking facility will be delayed by up to half a year. We have also strengthened our management processes to monitor our working capital. To further strengthen the liquidity buffer, we have issued new debt and secured an additional credit facility. Given our cash position at the end of March, adding the new borrowings issued in April and our current credit facilities, we have accessible cash and unutilized credit lines of more than SEK 30bn. Finally, we have also received support from our shareholders at the AGM 2020 to withdraw the annual dividend to preserve our balance sheet strength.
At Electrolux, our purpose to shape living for the better also guides us in these difficult times. Supporting society, the Electrolux Food Foundation has made funding available to help people in need. Our people have donated time, products and raw materials to contribute to the healthcare effort.
I am convinced we are taking the necessary steps to address the challenges posed by the coronavirus pandemic and to ensure Electrolux continues to be well-positioned for the future to deliver on our profitable growth strategy. I am grateful for our shareholders’ and my colleagues’ support through these challenging times.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, May 7. 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: 54591041#
Slide presentation for download:
Link to webcast:
https://edge.media-server.com/mmc/p/ni7gcfki
For further information, please contact:
Sophie Arnius, Head of Investor Relations +46 70 590 80 72
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 May 7, 2020.
Electrolux is a leading global appliance company that has shaped living for the better for more than 100 years. We reinvent taste, care and wellbeing experiences for millions of people, always striving to be at the forefront of sustainability in society through our solutions and operations. Under our brands, including Electrolux, AEG and Frigidaire, we sell approximately 60 million household products in approximately 120 markets every year. In 2019 Electrolux had sales of SEK 119 billion and employed 49,000 people around the world. For more information go to www.electroluxgroup.com