As demand in Latin America contracts.
Strong demand for major appliances in Europe, the Middle East and Africa (EMEA) spurred income and margin growth in the category due to higher sales volumes, increased cost efficiency within manufacturing, and product-mix improvements.
Operating income for the group for the second quarter increased significantly compared to the same period previous year, amounting to SEK 1.56 billion ($240.96 million). However, net sales declined 4.4% to SEK 29.98 billion ($4.62 billion).
Of the group’s six business areas, four achieved an operating margin of above 6%. The improvement was particularly strong in major appliances EMEA and major appliances North America, while major appliances Asia/Pacific and professional products showed a stable development in earnings.
Electrolux global president and CEO, Jonas Samuelson (pictured above) said in an official company statement:
“Earnings continued to improve within major appliances, driven by higher sales volumes, positive contribution from product portfolio management and cost efficiency measures.
“In the quarter, we announced the acquisition of Vintec, an Australia and Singapore-based company which supplies a wide range of climate-controlled wine cabinets throughout the region. Vintec has a good strategic fit with our major appliances business and complements the product offering.
“The focus to achieve stability in all operations globally and to increase the operating margin continues. These efforts will, together with the development of innovative products delivering best-in-class consumer experiences, support cash generation and shareholder value.”
Asia Pacific
Overall market demand for core appliances in Australia, Southeast Asia and China increased year over-year.
- Repositioning and reduced sales activities in China continued to impact overall sales
- Sales in Australia and New Zealand continued to show favourable trends
- Sales in Southeast Asia increased significantly as a result of higher sales volumes across all product categories
- Concentration of refrigerator production to the facility in Rayong in Thailand was completed during the quarter and new products are being launched in several markets
Europe, Middle East and Africa
Demand in Western Europe increased by 5%, improving in most markets. Growth was particularly strong in Spain, the Nordics and the UK. Demand in Eastern Europe increased by 4% year-over-year. Overall, market demand in Europe increased by 4%.
- Growth was primarily a result of increased sales volumes and an improved product mix due to a strong focus on the most profitable product categories
- Income and margin increased significantly as a result of higher sales volumes, increased cost efficiency particularly within manufacturing, and product-mix improvements
- Outlook for UK demand and the British pound is uncertain, following the Brexit referendum
North America
Market demand for core appliances in North America increased by 3% in the second quarter and 5% year-on-year. Market demand for major appliances, including microwave ovens and home-comfort products, such as room air-conditioners, was in line with the same period previous year.
- Sales of core appliances declined somewhat, driven by products under private labels, while sales of products under own brands increased
- Sales of room air-conditioners and dehumidifiers grew significantly
- Operating income for the second quarter improved as a result of increased cost efficiency, higher volumes and product-mix improvements
Latin America
The macro-economic environment in Brazil continued to weaken and impacted market demand for core appliances, which declined significantly year-over year.
- Market demand has deteriorated for six consecutive quarters and is expected to remain weak
- Demand in several other Latin American markets, such as Argentina and Chile, also decline
- The group continued to take actions to adjust the cost base to the lower demand
- Price increases offset continued currency headwinds
Small Appliances
- Market demand for vacuum cleaners in Europe is estimated to have declined year-over-year, while demand for cordless hand-held vacuum cleaners increased significantly
- Market demand for vacuum cleaners in North America and Asia Pacific declined, while sales grew in Europe
- Positive sales mix impacted earnings due to increased sales in the premium segment in Europe
- The program to restore profitability, including cost reductions, downsizing of activities and active product portfolio management, continued and contributed positively to operating income for the quarter