Electrolux Group Interim report Q2 2024
Highlights of the second quarter of 2024
- Net sales amounted to SEK 33,819m (32,653). Organic sales increased by 6.8% driven by higher volumes in all business areas while price was negative. Despite challenging market conditions, mix improved supported by the new modularized platforms and attractive product offering.
- Operating income amounted to SEK 419m (-124), corresponding to a margin of 1.2% (-0.4). Excluding non-recurring items, earnings were SEK 519m in the second quarter 2023. Higher volumes and improved mix partly offset negative price. Cost efficiency contributed SEK 0.3bn to earnings.
- Group operating income improved by more than SEK 1bn compared to the first quarter 2024, with a significant reduction of the loss in North America.
- Latin America developed strongly with a high organic sales growth and a rolling 12-months operating margin of 7%.
- Continued weak market in Europe driven by built-in kitchen categories.
- Income for the period amounted to SEK -80m (-648) and earnings per share were SEK -0.30 (-2.40).
- Operating cash flow after investments was SEK 1,226m (3,137), with the second quarter 2024 reflecting a normal seasonal pattern.
President and CEO Jonas Samuelson’s comment
While consumer demand in our main markets remained mixed in the second quarter, our products were well received by consumers. We outperformed the market in Europe and North America and continued to drive a positive mix with quarterly sales growth of 7%, year-over-year. Operating profit improved sequentially by more than SEK 1bn in the second quarter and, with an EBIT of SEK 419m, we returned to profit for the Group. Operating cash flow was positive at SEK 1.2bn and liquidity remains strong.
Latin America continued to deliver strong results, with the rolling 12-month EBIT margin reaching 7% in the second quarter. Earnings in Europe, Asia-Pacific, Middle East and Africa declined with subdued consumer spending in Europe where market demand was predominantly replacement driven. The operating loss in North America was significantly reduced compared to the first quarter, and we are making good progress in our efforts to return to profitability. The ramp-up of production in the new cooking factory in Springfield continued as planned with improved production output and productivity in the quarter. I am very pleased with the reception of our products in the market. The cooking products produced in Springfield contributed to a record-high consumer star rating overall of 4.6 out of 5 in North America, with industry leading ratings in all key categories. Our ability to continue generating a positive mix, and stabilizing net price sequentially, in this challenging market environment shows that our focus to strengthen our position in the mid- and premium categories continues to be effective.
Market conditions in the second quarter remained similar to the most recent quarters, with the cumulative effect of high inflation and high interest rates continuing to weigh on consumer sentiment. The exception was Brazil, where the improved consumer sentiment supports demand. In general, inflation has been somewhat more sticky than anticipated, continuing to weigh on discretionary spend. This has slightly delayed the anticipated improvement in demand, particularly in Europe. Hence, we have revised the outlook for market demand in “Europe, Asia-Pacific” in full year 2024 from neutral to negative. In Europe, housing construction and kitchen remodeling remain at very subdued levels, while replacement market demand has stabilized, with high promotional intensity. Demand in North America has been stable year to date, supported by the aggressive pricing environment, despite weak housing markets.
Price was negative during the first half of 2024, with price pressure in North America reflecting the lower price levels established in late 2023, and high promotional activity in other markets. As previously communicated, we expect price to be negative for full year 2024, also impacting the second half negatively. However, we anticipate the promotional intensity in North America to continue to stabilize sequentially throughout the year.
We continue to execute on the cost-reduction activities with significant cost benefits expected to impact the second half of the year. Increased investments in marketing to capitalize on the momentum of our attractive product offering are yielding good returns and, as in the second quarter, we project to increase investments in Innovation and marketing in the second half of 2024. Ocean freight rates have increased recently, and taking this headwind from logistics costs into account, we are now targeting cost savings of approximately SEK 4bn in 2024, excluding investments in Innovation and marketing.
On the product side we are currently introducing a new smart laundry range aimed at improving clothing longevity and reducing the use of resources, where selected models have an energy rating above A – the highest energy class in the EU. This is one example of our actions toward meeting our new science-based targets for 2030, where an important part is to reduce scope 3 emissions by 42% between 2021 and 2030.
We are making progress on our strategic divestment initiatives of non-core assets, and as announced after closing of the second quarter, on July 18, 2024, we have agreed to divest the water heater business in South Africa for an enterprise value of approximately SEK 1.4bn. This is in line with our sharpened strategic focus on the mid- and premium segments, primarily under our main brands Electrolux, AEG and Frigidaire.
Looking ahead we aim to leverage further on the leaner and more simplified organization, continue to execute on our ambitious cost-reduction targets, and focus on our main brands to strengthen our position in selected mid- and premium categories as consumer demand in our main markets starts to recover. These are our key priorities to continue restoring margins and return to profitable growth.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, July 19. 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/qsfvkkvv
OR
To both listen to the telephone conference and ask questions, use the link:
https://register.vevent.com/register/BI519ec9bc3310495e962284e36dfe9e9f
Presentation material available for download
This disclosure contains information that Electrolux Group is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014) and the Swedish Securities Markets Act (2007:528). The information was submitted for publication, through the agency of the contact person, on 19-07-2024 08:00 CET.