President and CEO Hans Stråberg's comments on the third-quarter results of 2010

President and CEO Hans Stråberg's comments on the third-quarter results
of 2010

Strong result in a volatile market  

Electrolux presents a very strong result for the third quarter.
Substantial increases in raw material costs and increased investments in
marketing account for somewhat lower earnings than last year. Despite
this, we reached an operating margin of 6% for the first three
quarters. 

This result strengthens my conviction that our goal of a 6% operating
margin for the full-year 2010 is within reach.

I want to take special notice of the operations in Europe, which report
a good result for the third quarter, even excluding certain positive
non-recurring items. The earnings are primarily the result of continued
success within the profitable built-in segment. I am convinced that,
through the launch of our new premium built-in products, we can expect a
continued positive development. The products were unveiled at the
important IFA trade show in Berlin. Our customers who visited the trade
show were very impressed by our products and the comprehen­sive
marketing efforts that will support the launch. 

The operations within professional products succeeded in a very
difficult market to reach an operating margin of 14%, the highest ever.
This shows that our strategy—a very competitive product offering in
combination with stringent control of costs—is also successful in this
segment. 

The operations in Asia/Pacific have once again managed to achieve record
earnings; this is a result of their taking advantage of strong growth in
Southeast Asia, turning around the negative trend in China and
successfully manoeuvring in a tough Australian market. 

The market continues to be volatile, and different types of stimulus
measures make the forecasting of develop­ments difficult, not least in
North America. There, we experienced a very strong second quarter as a
result of the government-sponsored rebate programs to promote
energy-efficient products. Consumers took advantage of this opportunity
by advancing their purchases of appliances, which in turn resulted in a
drop in demand during the third quarter. As a result of the market
volatility, price promotions were intensified at the end of the quarter,
especially in the US. 

In the third quarter, our costs for raw materials increased by nearly
SEK 500 million compared to last year. The prices of many of our raw
materials have again begun to rise, which will increase costs in 2011. 

We are now expanding in regions of strong growth. In this quarter, we
reached a preliminary agreement to acquire the majority of the Egyptian
company Olympic Group, the largest appliances company in the
fast-gro­wing North African and Middle East regions. We also acquired a
washing-machine plant in Ukraine to strengthen our position in Eastern
Europe and Russia. 

As previously reported, I will, after 27 years—nine of which as
President and CEO—leave Electrolux at year-end 2010. This was not an
easy decision for me, but after leading the work to change Electrolux
from a manufactur­ing-driven to a consumer-driven company by investing
in innovative products, strong brands and a cost-efficient production, I
consider my mission accomplished. My decision was made easier by the
fact that I can hand over the baton to Keith McLoughlin, with whom I've
worked closely for eight years. He will lead Electrolux in its next
phase of development toward profitable growth and continued cost
efficiency. 

After the three first quarters of 2010, we have exceeded our margin goal
of 6%. This is a result of the implemen­tation of our strategy to focus
on innovative products, strong brands and a cost-efficient production.
One quar­ter remains, and I am confident that 2010 will be the year we
reach our target of an operating margin of 6%.

 

Stockholm, October 27, 2010 

Hans Stråberg
President and Chief Executive Officer