Electrolux Group Q1 2023 Interim report
Highlights of the first quarter of 2023
- Net sales increased to SEK 32,734m (30,118), corresponding to an organic growth of 2.2%. Price remained solid, while weaker market demand resulted in lower volumes for the Group as a whole. New product ranges contributed to higher volumes and market share gains for the business areas North America and Latin America.
- Operating income amounted to SEK -256m (1,575), corresponding to a margin of -0.8% (5.2). Operating income included non-recurring item of SEK -561m (656), that for the first quarter of 2023 related to the discontinuation of production at the Nyíregyháza factory in Hungary in 2024. Excluding non-recurring items, operating income amounted to SEK 305m (919), corresponding to a margin of 0.9% (3.1).
- The year-over-year decline in underlying operating income was mainly a result of lower volumes. North America's earnings improved significantly sequentially, although the business area still reported a loss in the quarter. The Group-wide cost reduction and North America turnaround program is progressing according to plan and had a positive contribution.
- Income for the period amounted to SEK -588m (950) and earnings per share were SEK -2.18 (3.40).
- Operating cash flow after investments was SEK -5,092m (-5,280).
President and CEO Jonas Samuelson’s comment
Our number one priority for 2023 is a successful implementation of the Group-wide cost reduction and North America turnaround program. I am therefore pleased that the execution is going according to plan with positive contribution in the quarter. Underlying operating income improved sequentially to SEK 305m in the first quarter 2023 compared to SEK -612m in the fourth quarter 2022, mainly driven by business area North America. Organic sales growth in the quarter was 2.2%. Our solid price execution continued, while volumes declined as a result of the weaker market demand compared to last year. Lower consumer purchasing power also resulted in pressure on sales mix.
Our strategy with the consistent focus on innovation and efficiency, has in recent years delivered good financial results in three of our four business areas. It is our North American business area operating margin that has been challenged, impacting our ability to meet Group financial targets. The investments made in modularized product architectures and in highly automated and modern factories have laid the foundation to lift our performance and take out both the temporary cost challenges and the more structural impediments to profitability in North America. I am pleased to see good traction on these actions in the quarter.
At the Capital Markets Update on March 20, the focus was on our path to reach an operating margin of at least 6% mid-term, both for the Group and for business area North America. A key component is the estimated earnings contribution of above SEK 7bn in 2024 compared to 2022 from the cost reduction program, whereof SEK 4-5bn is expected in 2023. The actions and performance in the first quarter are fully aligned with our 2023 full-year cost reduction plan.
Another key earnings contributor to reach a Group operating margin of at least 6% mid-term is commercial growth in all four business areas. This is mainly enabled by leveraging recent investments in innovative, modularized product architectures that have resulted in very competitive product ranges. For North America, the aim is to grow in higher value categories, and already now the new products launched are winning in the marketplace with industry-leading consumer star ratings. This, combined with significant operational and cost improvements, makes me confident in our ability to significantly improve profitability in North America.
Aftermarket growth is also an important component to deliver on the commercial growth for the Group. The aftermarket business also has a more than four times higher profit margin than the appliance business. Electrolux aims to increase aftermarket sales to approximately 10% of Group sales by 2025, from around 7% in 2022.
Sustainability is at the core of our strategy and I am proud that we reached both of our 2025 science-based targets three years ahead of plan. We were not only among the first 100 companies to set a global ambitious climate target, but we are also among the very first companies to meet it.
The business and market outlooks for 2023 full year provided in the fourth quarter 2022 earnings report remain unchanged.
I am convinced that we have the right strategy as well as the experience and the organizational structure needed to navigate in a volatile environment and seize opportunities to deliver on our financial targets.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, April 28. Jonas Samuelson, President and CEO, Therese Friberg, CFO, and Anna Ohlsson-Leijon, CCO, will comment on the report.
To only listen to the telephone conference, use the link:
https://edge.media-server.com/mmc/p/z6tdbuoz
OR
To both listen to the telephone conference and ask questions, use the link:
https://register.vevent.com/register/BI3b5735a6e6734367af19229c58b765d7
Presentation material available for download
For further information, please contact:
Sophie Arnius, Head of Investor Relations
+46 70 590 80 72
Electrolux Group Press Hotline,
+46 8 657 65 07