STOCKHOLM, Feb. 2, 2024 /PRNewswire/ —
Highlights of the full-year of 2023
- In full-year 2023, net sales were SEK 134,451m (134,880) and operating income excl. non-recurring items was SEK 414m (831). Earnings declined mainly due to lower volumes following the weaker market demand as well as intensified price pressure in North America. The Group-wide cost reduction and North America turnaround program progressed well, resulting in a positive year-over-year impact of approximately SEK 5.5bn.
Highlights of the fourth quarter of 2023
- In the fourth quarter, net sales amounted to SEK 35,636m (35,769) and organic sales decreased by 0.8% mainly driven by negative price but also lower volumes, while mix improved. Operating income was SEK -3,215m (-1,964), corresponding to a margin of -9.0% (-5.5). Operating income included non-recurring items of SEK -2,491m (-1,352).
- Operating income excl. non-recurring items amounted to SEK -724m (-612), corresponding to a margin of -2.0% (-1.7). Business area North America reported an underlying loss of SEK 1,450m, mainly driven by intensified price pressure.
- Income for the period amounted to SEK -4,113m (-1,922) and earnings per share were SEK -15.23 (-7.12).
- Operating cash flow after investments improved to SEK 3,871m (242m), mainly driven by improved working capital. This led to an operating cash flow after investments for the full year of SEK 3,064m (-6,118).
- The Board of Directors proposes that no payment of dividend will be made for 2023.
President and CEO Jonas Samuelson’s comment
2023 proved to be another challenging year. High inflation, rising interest rates and geopolitical tensions continued to weigh on consumer sentiment, which remained weak in our major markets. The overall reduced purchasing power led to more consumers shifting to lower price points and postponing purchases in discretionary categories, especially impacting the for us important built-in kitchen category in Europe. This in combination with the industry’s higher degree of promotional activity resulted in an earnings decline for the full-year despite continued good execution on the Group-wide cost reduction and North America turnaround program, launched in 2022. In 2023, organic sales declined by 4%, operating income excluding non-recurring items was SEK 414m and operating cash flow after investments was SEK 3.1bn.
In three out of four business areas we managed to navigate this challenging market environment in a fairly good way, even if the weak market demand resulted in an earnings decline for 2023 in our European and Asia-Pacific operations.
I am pleased with our performance in Latin America, where earnings increased in a volatile market. Our problem remains the North American business area, that continues to be loss-making, ending the year with an underlying loss of SEK 1,450m in the fourth quarter. This resulted in a loss excluding non-recurring items for the Group of SEK 724m.
It is truly disappointing that the significant cost savings we have realized in North America are not showing on the bottom line but rather consumed by the industry’s high degree of promotional activity. This situation worsened towards the end of the year when price pressure in the U.S. intensified, triggered by weaker demand than expected during Black Friday. The lower market price levels, particularly in the business area’s key category refrigeration, were enabled by cost discrepancies in the industry between production located in North America and production located in certain parts of Asia. Execution of the turnaround program continues, mainly benefitting the second half of 2024. The transition of cooking manufacturing in Springfield also weighed on profitability in the quarter with higher costs due to closure of the legacy factory and production inefficiencies in the new factory. This process limits the product availability in our second largest category after refrigeration. I am convinced that the investments we have made in the new factory and new innovative modular product architectures are the right ones for future competitiveness in the cooking category. It is pleasing to see that despite a very challenging quarter in North America, our strategy focusing on growth in targeted high value categories resulted in a positive mix. The ramp-up of the new Springfield factory is expected to be finalized in terms of volumes and cost efficiency by the end of 2024.
Looking into the beginning of 2024, weak consumer sentiment is anticipated to continue with consumers shifting to lower price points and postponing purchases in discretionary categories. However, as inflationary pressure is subsiding and interest rates are expected to come down, we expect demand in major markets to stabilize in the course of the year. Demand for core appliances in 2024 full-year is therefore expected to be relatively neutral for all regions compared to 2023.
Organic earnings contribution from volume, price and mix combined for the Group is expected to be negative in 2024 full-year. This as the new price levels established end of 2023 in the market are assessed to remain in 2024. The negative price is anticipated to be partly 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. As outlined previously, we are implementing substantial additional cost reduction activities with the objective to generate total positive year-over-year earnings contribution of SEK 4-5bn from Cost efficiency and investments in Innovation and marketing combined in 2024. In light of the Red Sea situation there is however a degree of uncertainty related to ocean freight costs. The cost-reduction activities implemented will primarily contribute to earnings during the second half of 2024. Given the time lag before the actions will have full earnings impact, we do not expect sequential improvement of underlying operating income in the first quarter.
We are making progress on our strategic divestment initiatives of non-core assets with a combined potential value of approximately SEK 10bn over the coming years. The current market environment and geopolitical situation can, however, negatively impact the time to realize these divestments, or in certain cases the valuations achieved. In 2023, divestments of SEK 0.9bn were realized. Total liquidity, including revolving credit facilities, was SEK 33bn.
I am very proud that we had our second science-based climate target approved at the end of 2023 by the Science Based Targets initiative after achieving our first science-based target three years ahead of plan. The new target aims to reduce the company’s direct and indirect emissions resulting from its own operations (scope 1 and 2) by 85%, and to reduce the Group’s absolute scope 3 emissions (use of sold products, materials, transport of products and business travel) by 42% between 2021 and 2030.
The challenging market environment that we are experiencing emphasizes the importance of staying agile and ready to adapt to rapidly changing conditions. Our main priority remains delivering on our cost reduction targets and to efficiently implement the new, simplified organizational structure announced in October. We thereby aim to successfully leverage our global scale and strengthen our position in selected mid- and premium categories to restore margins and return to profitable growth.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, February 2. 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/enipj8gz
To both listen to the telephone conference and ask questions, use the link: https://register.vevent.com/register/BId49f529e9af74aefb1c96f92dc35c0a7
Presentation material available for download www.electroluxgroup.com/ir
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 02-02-2024 08:00 CET.
For more information:
Sophie Arnius, Investor Relations, +46 70 590 80 72
Electrolux Group Press Hotline, +46 8 657 65 07
The following files are available for download:
Interim Report Q4 2023_FINAL
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