Electrolux Group Interim report Q1 2024
Highlights of the first quarter of 2024
- Net sales amounted to SEK 31,077m (32,734). Organic sales decreased by 3.7% mainly driven by negative price. Weaker market demand resulted in lower volumes for the Group except in Latin America where increased consumer demand contributed to higher sales.
- Mix improved supported by the new modularized platforms and attractive product offering, despite the challenging market conditions.
- Operating income was SEK -720m (-256), corresponding to a margin of -2.3% (-0.8). Business area North America reported an operating loss of SEK 1,204m, mainly due to continued high price pressure. Business area Latin America continued to perform well. Previously implemented cost efficiency measures contributed positively to earnings by SEK 0.6bn.
- The new organization has been successfully implemented and expanded cost reduction measures are progressing according to plan. Earnings are expected to benefit from this mainly in the second half of 2024, as previously communicated.
- Income for the period amounted to SEK -1,230m (-588) and earnings per share were SEK -4.55 (-2.18).
- Operating cash flow after investments was SEK -2,686m (-5,092), reflecting a normal seasonal pattern.
President and CEO Jonas Samuelson’s comment
After having had the privilege to serve more than eight years as President & CEO of Electrolux Group, I have decided to leave my position on January 1, 2025. This is a good time to hand over to a successor who can put all energy into leading this great company into the next phase during the coming years. We have set a clear strategic direction with focus on the mid- and premium segments through our strong brands, new modularized product architectures, and focused, sustainable, and consumer experience driven innovation. The implementation of the new simplified and focused organization is on track, and we are delivering on our cost reductions. By announcing this already now I want to give the Board ample time to find the right successor, while I give my full dedication to the company during the rest of the year.
During the first quarter of 2024, the new organization has been successfully implemented and operations are running according to plan. The new structure with three regional business areas and two global business lines, reporting directly to me, will further leverage the Group’s global scale with fewer layers, increased focus and reduced costs. Due to the time lag before executed measures gain traction, savings are expected to mainly benefit earnings in the second half of 2024, as previously communicated.
2024 has started on a similar note as 2023 ended, with the cumulative effect of high inflation, high interest rates and geopolitical tensions continuing to weigh on consumer sentiment, which remained weak in our major markets. Although consumer confidence indicators seem to have bottomed out, this is, with the exception of Latin America, not yet visible in demand on our main markets. Weak residential construction and remodeling activity continued to lead to weaker market demand in the important built-in kitchen category in Europe. The price pressure in North America and high promotional activity in other markets characterizing the latter part of 2023 continued in the first quarter. This resulted in a negative price, year-over-year. We expect price also in the second quarter to be negative year-over-year for the Group as a whole. However, we anticipate promotional intensity in North America to moderate sequentially throughout the year.
Organic sales declined by 3.7% driven by negative price and lower volumes that were partially offset by a positive mix. Our ability to continue generating a positive mix in this challenging market environment shows that our focus to strengthen our position in the mid- and premium categories continues to be effective. The positive reception of our products continued to be reflected in high consumer star ratings in the first quarter. We anticipate to accelerate mix contribution further as consumer sentiment recovers and new housing and renovations take a larger share of sales.
As expected, income for the Group was negative in the first quarter. Business area Latin America delivered another strong quarter, driven by increased consumer demand in Brazil, while market conditions in Europe remained weak. Business area North America reported a loss of SEK 1.2bn in the quarter, and the lower price levels established at the end of 2023 remained in the first quarter. The legacy cooking factory in Springfield was closed in the fourth quarter, and the ramp-up of production in the new factory continues as planned. Production output is stable, but full productivity is not yet reached. We expect the ramp-up, in terms of volume and cost efficiency, to be finalized by the end of 2024.
We continue to successfully execute on the substantially expanded cost-reduction activities previously outlined in response to the increasing competitive pressure and weak market. We still have much work to do to meet this year’s ambitious target of savings of SEK 4-5bn, but the target is in sight. As previously communicated, the positive earnings impact from the simplified structure and measures to reduce product cost is expected mainly in the second half of the year. Our strategic divestment initiatives of non-core assets are progressing at different speeds, with the pace being adapted to the geopolitical situation and market environment. The liquidity in the Group remains strong, with a total liquidity, including revolving credit facilities, of SEK 32bn.
In line with our previously communicated outlook for 2024, we expect organic contribution to earnings from volume, price and mix combined for the Group to be negative in full-year 2024. The new market price levels established towards the end of 2023 largely remained in the first quarter. For the full year 2024, the negative price is anticipated to be partially offset by growth in our focus categories such as premium laundry and kitchen products under our main brands Electrolux, AEG and Frigidaire. We expect External factors to be positive for the year, mainly driven by lower raw material costs, however mitigated by negative currency effects.
In conclusion, market conditions remain challenging, and it is essential that we stay agile and ready to adapt to rapid changes in our environment. It is key that we continue to focus on strengthening our position in selected mid- and premium categories to consistently drive a positive mix. Our main priorities are to finalize the implementation of a leaner organization and deliver on our cost-reduction targets to return to profitable growth.
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.
To only listen to the telephone conference, use the link:
https://edge.media-server.com/mmc/p/brt7y8ix
OR
To both listen to the telephone conference and ask questions, use the link:
https://register.vevent.com/register/BI4c1be0ccefb74e0c8b3f98987f8dd42f
Presentation material available for download
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, on 26-04-2024 08:00 CET.
