Form 6-K
No. (3)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
the Securities Exchange Act of 1934
For the Month ofOctober 2006,
Commission file number: 0-15741
AB ELECTROLUX
(Translation of registrant’s name into English)
S:t Göransgatan 143, SE-105 45 Stockholm, Sweden
(Address of principal executive offices)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AB ELECTROLUX (publ.) | ||
Date: October 27, 2006 | By /s/ Richard S. Pietch | |
PRESS RELEASE | Stockholm, October 25, 2006 Page 1 of 22 | ||||
Interim Report January — September, 2006
Stockholm, October 25, 2006
Stockholm, October 25, 2006
·Net sales increased to SEK 75,962m (72,050) and income for the period from continuing operations amounted to SEK 1,213m (485),
or SEK 4.16 (1.67) per share
or SEK 4.16 (1.67) per share
·European appliances results lower due to unfavourable change in mix
·North American appliances sales up and margin stable
·Floor-care products continue to grow and perform well
·Solid results for appliances in Latin America
·Negative trend in raw-material prices affected results for the quarter
·Board proposes redemption of shares at SEK 20 per share totalling approximately SEK 5,600m
·Group outlook for 2006 unchanged
Nine | Nine | |||||||||||||||||||||||
Q3 | Q3 | Change | months | months | Change | |||||||||||||||||||
SEKm | 2006 | 2005 | % | 2006 | 2005 | % | ||||||||||||||||||
Continuing operations: | ||||||||||||||||||||||||
Net sales | 26,087 | 25,951 | 0.5 | 75,962 | 72,050 | 5.4 | ||||||||||||||||||
Operating income1) | 685 | 151 | 353.6 | 2,002 | 1,400 | 43.0 | ||||||||||||||||||
Operating income, excluding items affecting comparability | 1,136 | 1,033 | 10.0 | 2,580 | 2,282 | 13.1 | ||||||||||||||||||
Margin, % | 4.4 | 4.0 | 3.4 | 3.2 | ||||||||||||||||||||
Income after financial items | 684 | -49 | N/A | 1,854 | 997 | 86.0 | ||||||||||||||||||
Income after financial items, excluding items affecting comparability | 1,135 | 833 | 36.3 | 2,432 | 1,879 | 29.4 | ||||||||||||||||||
Margin, % | 4.4 | 3.2 | 3.2 | 2.6 | ||||||||||||||||||||
Income for the period | 440 | -263 | N/A | 1,213 | 485 | 150.1 | ||||||||||||||||||
Income for the period, excluding items affecting comparability | 809 | 595 | 36.0 | 1,732 | 1,343 | 29.0 | ||||||||||||||||||
Earnings per share, SEK2) | 1.54 | -0.90 | N/A | 4.16 | 1.67 | 149.1 | ||||||||||||||||||
Value creation | 565 | 308 | 257 | 798 | 269 | 529 | ||||||||||||||||||
Return on net assets, % | 15.5 | 9.8 | ||||||||||||||||||||||
Return on net assets, excluding items affecting comparability, % | 15.9 | 13.6 | ||||||||||||||||||||||
Total, including discontinued operations:3) | ||||||||||||||||||||||||
Income for the period | 440 | 153 | 187.6 | 2,412 | 2,203 | 9.5 | ||||||||||||||||||
Earnings per share, SEK2) | 1.54 | 0.53 | 190.6 | 8.27 | 7.57 | 9.2 | ||||||||||||||||||
1) | Operating income includes items affecting comparability in the amount of SEK -451m (-882) for the third quarter 2006 and SEK -578m (-882) for the first nine months. | |
2) | Before dilution, based on an average of 285.8 (291.2) million shares for the third quarter after buy-backs and 291.6 (291.2) for the first nine months. For earnings per share after dilution, see page 12. | |
3) | Discontinued operations include the period January-May for 2006 and January-September for 2005. |
Interim report April — June 2005 / Stockholm, July 19, 2005 |
The Group’s Outdoor Products operations were distributed under the name of Husqvarna to the Electrolux shareholders in June 2006. The results for these operations are included in this interim report for the period January-May, 2006. The Husqvarna results are excluded from the sales and expense lines of the income statement and reported as a single net in the item “Income for the period from discontinued operations”.
Electrolux applies International Financial Reporting Standards (IFRS) as adopted by the European Union. This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, and RR 31 from the Swedish Financial Accounting Standards Council. There are no changes in the Group’s accounting and valuation principles compared with the accounting and valuation principles described in Note 1 of the Annual Report 2005. IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, has been applied for the accounting of the Husqvarna operations as described above and further on page 21.
Net sales and income
Third quarter
Net sales for the Electrolux Group in the third quarter of 2006 amounted to SEK 26,087m as against
SEK 25,951m in the previous year. Sales were positively impacted by changes in volume/price/mix, while changes in exchange rates had a negative impact.
SEK 25,951m in the previous year. Sales were positively impacted by changes in volume/price/mix, while changes in exchange rates had a negative impact.
Changes in net sales | Q3 | |||
% | 2006 | |||
Changes in Group structure | 0.0 | |||
Changes in exchange rates | -2.2 | |||
Changes in volume/price/mix | 2.7 | |||
Total | 0.5 | |||
Operating income increased to SEK 685m (151), corresponding to 2.6% (0.6) of net sales. Income after financial items improved to SEK 684m (-49), which corresponds to 2.6% (-0.2) of net sales. Income for the period from continuing operations increased to SEK 440m (-263), corresponding to SEK 1.54 (-0.90) in earnings per share.
There was no income from discontinued operations in the third quarter (416). Discontinued operations refers to the former Outdoor Products operations and includes the period January-May, 2006. Income for the period including discontinued operations amounted to SEK 440m (153), corresponding to SEK 1.54 (0.53) in earnings per share. For information on accounting principles for discontinued operations, see page 21.
Income excluding items affecting comparability
The above-mentioned operating income figure for the third quarter of 2006 includes items affecting comparability in the amount of SEK -451m (-882). This includes a charge of SEK -302m for the previously announced closure of the appliance factories in Adelaide, Australia, as well as a capital loss of SEK -173m for the divestment of the 50% stake in Nordwaggon AB, Sweden. Reversal of unused restructuring provisions amounted to SEK 24m. More information can be found on page 10 and in the table on page 12.
Excluding items affecting comparability, operating income for the third quarter of 2006 increased by 10.0% to SEK 1,136m (1,033), corresponding to 4.4% (4.0) of net sales. Income after financial items increased by 36.3% to SEK 1,135m (833), representing 4.4% (3.2) of net sales. Income for the period from continuing operations increased by 36.0% to SEK 809m (595), corresponding to SEK 2.81 (2.04) in earnings per share.
Effects of changes in exchange rates
Changes in exchange rates compared to the third quarter of 2005, including both translation and transaction effects, had a positive impact of SEK 78m on operating income.
Transaction effects net of hedging contracts amounted to SEK 86m, mainly due to the strengthening of the Euro against several other currencies. Translation of income statements in subsidiaries had an effect of SEK -9m.
The effect of changes in exchange rates on income after financial items amounted to SEK 63m.
Financial net
Net financial items for the third quarter improved to SEK -1m compared to SEK -200m for the same period in the previous year. The improvement is mainly due to lower net borrowings.
First nine months of 2006
Net sales for the Electrolux Group in the first nine months of 2006 increased to SEK 75,962m as against SEK 72,050m in the previous year. Sales were positively impacted by changes in volume/price/mix as well as exchange rates.
Nine | ||||
Changes in net sales | months | |||
% | 2006 | |||
Changes in Group structure | -0.5 | |||
Changes in exchange rates | 2.5 | |||
Changes in volume/price/mix | 3.4 | |||
Total | 5.4 | |||
Operating income increased by 43.0% to SEK 2,002m (1,400), corresponding to 2.6% (1.9) of net sales. Income after financial items improved to SEK 1,854m (997), which corresponds to 2.4% (1.4) of net sales. Income for the period from continuing operations increased to SEK 1,213m (485), corresponding to SEK 4.16 (1.67) in earnings per share.
Income for the period including discontinued operations amounted to SEK 2,412m (2,203), corresponding to SEK 8.27 (7.57) in earnings per share. Income from discontinued operations refers to the former Outdoor Products operations and amounted to SEK 1,199m (1,718).
Income excluding items affecting comparability
The above-mentioned operating income figures for the first nine months of 2006 include items affecting comparability in the amount of SEK -578m (-882). More information can be found in the table on page 12.
Excluding items affecting comparability, operating income for the first nine months of 2006 increased by 13.1% to SEK 2,580m (2,282), corresponding to 3.4% (3.2) of net sales. Income after financial items improved by 29.4 % to SEK 2,432m (1,879), representing 3.2% (2.6) of net sales. Income for the period from continuing operations increased by 29.0% to SEK 1,732m (1,343), corresponding to SEK 5.94 (4.61) in earnings per share.
Effects of changes in exchange rates
Changes in exchange rates compared to the previous year, including both translation and transaction effects, had a positive impact of SEK 148m on operating income. Transaction effects net of hedging contracts amounted to SEK 112m. Translation of income statements in subsidiaries had an effect of SEK 36m.
The effect of changes in exchange rates on income after financial items amounted to SEK 125m.
Financial net
Net financial items for the first nine months of 2006 improved to SEK -148m compared to SEK -403m for the same period in the previous year. The improvement is mainly due to the decrease in net borrowings following the allocation of debt to the Outdoor Products operations.
Outlook — for full year 2006*
The outlook is unchanged from when it was first reported in February 2006:
Market demand for appliances in 2006 is expected to show some growth in both Europe and North America as compared to 2005. Efforts to strengthen the Group’s competitive position through investments in product development and in building the Electrolux brand will continue.
Operating income for the Electrolux Indoor Products operations in 2006 is expected to be somewhat higher than in 2005, excluding items affecting comparability.
*) Please note that the outlook relates only to the Indoor operations.
Cash flow
Cash flow from operations and investments in the third quarter of 2006 declined compared with the same period in the previous year and was mainly related to operating assets and liabilities. Cash flow from operations excluding change in operating assets and liabilities increased as a result of the improved earnings. The decline in operating assets and liabilities was primarily due to increased trade receivables related to growth in sales and changes in customer mix.
Cash flow from investments improved over the third quarter of the previous year. Capital expenditure decreased in the quarter. Capital expenditure mainly referred to major appliances within Europe and investments in new plants in low-cost countries.
Cash flow from operations and investments increased significantly in the first nine months of 2006 over the previous year. The increase reflects a significant improvement in inventory and accounts payable as well as the proceeds of the divestment of the operations of Electrolux Financial Corporation in the US. The reduction of extra inventory following the closure of the American Greenville plant was an important factor.
Nine | Nine | |||||||||||||||||||
Cash flow from continuing operations | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Cash flow from operations, excluding change in operating assets and liabilities | 1,580 | 1,354 | 3,359 | 3,429 | 5,266 | |||||||||||||||
Change in operating assets and liabilities | -946 | 66 | -635 | -2,537 | -1,804 | |||||||||||||||
Cash flow from operations | 634 | 1,420 | 2,724 | 892 | 3,462 | |||||||||||||||
Divestment of operations | -154 | -359 | 1,064 | -359 | -370 | |||||||||||||||
Capital expenditure in tangible fixed assets | -770 | -1,007 | -2,140 | -2,532 | -3,654 | |||||||||||||||
Other | -101 | -179 | -177 | -438 | -461 | |||||||||||||||
Cash flow from investments | -1,025 | -1,545 | -1,253 | -3,329 | -4,485 | |||||||||||||||
Cash flow from operations and investments | -391 | -125 | 1,471 | -2,437 | -1,023 | |||||||||||||||
Financial position
Equity
Total equity as of September 30, 2006, amounted to SEK 18,303m (25,706), which corresponds to SEK 64.95 (88.22) per share. Return on equity for the first nine months of 2006 was 14.0% (11.8). Excluding items affecting comparability, return on equity was 17.0% (16.5).
Net borrowings
Net borrowings decreased to SEK -504m (6,024) as a result of the allocation of debt to the Outdoor Products operations and the strong cash flow from operations that the Group generated in the first nine months of 2006. The net debt/equity ratio was -0.03 (0.23). The equity/assets ratio was 30.9% (33.1).
Net borrowings | Sept. 30, | Sept. 30, | Dec. 31, | |||||||||
SEKm | 2006 | 2005 | 2005 | |||||||||
Interest-bearing liabilities | 9,112 | 11,976 | 8,914 | |||||||||
Liquid funds | 9,616 | 5,952 | 5,940 | |||||||||
Net borrowings | -504 | 6,024 | 2,974 | |||||||||
Net debt/equity ratio | -0.03 | 0.23 | 0.11 | |||||||||
Equity/assets ratio, % | 30.9 | 33.1 | 33.8 | |||||||||
The balance sheet items for 2005 are given in the Interim Report in accordance with the historical financial statements. In accordance with International Financial Reporting Standards, previous periods have not been adjusted for the distributed Outdoor Products operations. In the table below, working capital and net assets for the Electrolux Group’s current operations are presented, exclusive of the Outdoor Products operations.
Sept. 30, | Dec. 31, | |||||||||||||||||||
excluding | excluding | |||||||||||||||||||
Working capital and net assets | Sept. 30, | Outdoor | Sept. 30, | Outdoor | Dec. 31, | |||||||||||||||
SEKm | 2006 | 2005 | 2005 | 2005 | 2005 | |||||||||||||||
Inventories | 12,392 | 13,591 | 18,350 | 12,342 | 18,606 | |||||||||||||||
Trade receivables | 21,571 | 20,933 | 25,548 | 20,944 | 24,269 | |||||||||||||||
Accounts payable | -15,299 | -14,126 | -17,054 | -14,576 | -18,798 | |||||||||||||||
Provisions | -13,292 | -13,692 | -14,628 | -14,945 | -15,609 | |||||||||||||||
Prepaid and accrued income and expenses | -6,800 | -7,166 | -8,133 | -6,971 | -7,762 | |||||||||||||||
Taxes and other assets and liabilities | -2,279 | -996 | -1,242 | -593 | -737 | |||||||||||||||
Working capital | -3,707 | -1,456 | 2,841 | -3,799 | -31 | |||||||||||||||
Property, plant and equipment | 14,287 | 15,011 | 18,642 | 14,776 | 18,622 | |||||||||||||||
Goodwill | 2,024 | 2,148 | 3,835 | 2,144 | 3,872 | |||||||||||||||
Other non-current assets | 3,552 | 3,302 | 3,926 | 3,540 | 4,169 | |||||||||||||||
Deferred tax assets and liabilities | 1,339 | 1,829 | 1,747 | 1,281 | 1,533 | |||||||||||||||
Net assets | 17,495 | 20,834 | 30,991 | 17,942 | 28,165 | |||||||||||||||
Return on net assets, % | 15.5 | 9.8 | 17.4 | 5.4 | 13.0 | |||||||||||||||
Return on net assets, excluding items affecting comparability, % | 15.9 | 13.6 | 19.4 | 17.8 | 20.6 | |||||||||||||||
Value creation, SEKm | 798 | 269 | 1,863 | 1,305 | 2,913 | |||||||||||||||
Figures for the previous year in the comments below concerning working capital, net assets and value created are excluding Outdoor Products operations according to the table above.
Working capital
Working capital as of September 30, 2006, amounted to SEK -3,707m (-1,456), corresponding to -3.6% (-1.4) of annualized net sales. Inventories amounted to SEK 12,392m (13,591) and trade receivables to SEK 21,571m (20,933), corresponding to 11.9% (13.0) and 20.7% (20.0) of annualized net sales, respectively. Accounts payable amounted to SEK 15,299m (14,126), corresponding to 14.7% (13.5) of annualized net sales.
Net assets and return on net assets
Net assets as of September 30, 2006, amounted to SEK 17,495m (20,834). Average net assets for the period decreased to SEK 17,197m (19,132). Adjusted for items affecting comparability, average net assets amounted to SEK 21,604m (22,374), corresponding to 21.3% (23.3) of net sales. Items affecting comparability includes
restructuring provisions and the adjustment of pension liabilities in accordance with minimum liability in the US for 2002 and 2003 as well as the non-recurring effect of implementing the new accounting standard RR 29, Employee Benefits, in 2004. The return on net assets was 15.5% (9.8), and 15.9% (13.6), excluding items affecting comparability.
Value created
Value creation is the primary financial performance indicator for measuring and evaluating financial performance within the Group. The model links operating income and asset efficiency with the cost of the capital employed in operations. The model measures and evaluates profitability by region, business area, product line, or operation.
Value creation is the primary financial performance indicator for measuring and evaluating financial performance within the Group. The model links operating income and asset efficiency with the cost of the capital employed in operations. The model measures and evaluates profitability by region, business area, product line, or operation.
Total value created during the first nine months of 2006 was SEK 798m as compared to SEK 269m in the previous year, excluding the outdoor operations. The WACC rate for 2006 was computed at 11% as compared to 12% for 2005. The change in WACC rate had a positive impact of SEK 162m on value created in 2006. The capital-turnover rate was 4.45 (4.29).
Distribution of funds to shareholders
Repurchase and transfer of own shares
As in previous years, the Annual General Meeting 2006 authorized the Board of Directors to acquire and transfer own shares. The purpose of the repurchase program is to continuously enable adapting of the Group’s capital structure, thus contributing to increased shareholder value. Shares may be acquired on the condition that, following each repurchase transaction, the company holds a maximum of 10% of the total number of shares.
In the first nine months of 2006 15,300,000 shares were repurchased. Senior managers purchased 4,022,478 B-shares from Electrolux under the terms of the employee stock option programs. As of September 30, 2006, Electrolux held 27,098,761 B-shares, corresponding to 8.8% of the total number of outstanding shares. See table on page 16.
Proposed redemption of shares
On the basis of the strong balance sheet after the spin-off of Husqvarna, the Board of Directors proposes that a procedure for mandatory share redemption be approved by an Extraordinary General Meeting. The proposed redemption is SEK 20 per share. This corresponds to a total cash distribution of approximately SEK 5,600m to Electrolux shareholders, in addition to the ordinary dividend and the ongoing share buy-back program.
The mandatory redemption proposal is subject to approval at an Extraordinary General Meeting, which is scheduled for December 2006. Payment of the redemption amount is scheduled for early January 2007. A notice with detailed information will be distributed in the near future.
Operations by business area during the third quarter
Changes in net sales and operating income by business area in comparable currencies are given on page 17.
Consumer Durables, Europe
Nine | Nine | |||||||||||||||||||
Consumer Durables, Europe | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 11,226 | 11,206 | 31,561 | 31,253 | 43,755 | |||||||||||||||
Operating income | 672 | 714 | 1,453 | 1,616 | 2,602 | |||||||||||||||
Operating margin, % | 6.0 | 6.4 | 4.6 | 5.2 | 5.9 | |||||||||||||||
Industry shipments of core appliances | Nine | ||||
in Europe | Q3 | months | |||
Units, year-on-year, % | 2006 | 2006 | |||
Western Europe | +1.4 | +2.0 | |||
Eastern Europe (excluding Turkey) | +6.2 | +5.6 | |||
Total Europe | +2.6 | +2.8 | |||
Total industry shipments of core appliances in Europe increased by almost 3% over the third quarter of 2005. Shipments rose by 1% in Western Europe and 6% in Eastern Europe. The refrigeration product category led growth in the European market during the hot summer.
Group sales of core appliances in Europe in the third quarter were in line with the previous year, despite higher sales volumes. Sales were negatively impacted by changes in product mix due to lower market shares in high-value segments resulting from the strike in Nuremberg, Germany, as well as changes in exchange rates. Operating income declined somewhat, reflecting increased brand spend, higher costs for raw materials and the unfavorable change in product mix. Restructuring is proceeding according to plan and production is being moved rapidly to the Group’s appliance factories in low-cost countries. Cost-cutting programs continued to offset price increases in raw materials. In the third quarter, the Group began the launch of a new, innovative product range. The launch, which will continue into 2007, covers all product categories within core appliances. The Group’s market share improved somewhat over the second quarter of 2006.
The market for floor-care products in Europe increased by 3% over the third quarter last year. Group sales increased significantly on the basis of strong sales volumes for vacuum cleaners. Market shares increased. Operating income declined, however. The decline is traceable to a charge in the third quarter for warranty costs related to a defective product within small domestic appliances.
Consumer Durables, North America
Nine | Nine | |||||||||||||||||||
Consumer Durables, North America | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 9,216 | 9,553 | 27,600 | 25,204 | 35,134 | |||||||||||||||
Operating income | 333 | 290 | 929 | 808 | 1,444 | |||||||||||||||
Operating margin, % | 3.6 | 3.0 | 3.4 | 3.2 | 4.1 | |||||||||||||||
Industry shipments of appliances | Nine | ||||
in the US | Q3 | months | |||
Units, year-on-year, % | 2006 | 2006 | |||
Core appliances | -3.0 | +1.6 | |||
Major appliances | -8.9 | +4.1 | |||
Industry shipments of core appliances in the US decreased by 3% in comparison with the corresponding quarter of 2005. Shipments of major appliances, which includes room air-conditioners and microwave ovens, declined by 9%. The trend for industry shipments of core appliances during the first nine months was positive in comparison with last year.
Group sales of major appliances in North America declined in the third quarter due to changes in exchange rates. Sales of freezers and cooking equipment increased and improved the Group’s leading market position in these product categories. The Group’s position in the market for washing machines has stabilized after a period of intense competition and price pressure. Operating income in the third quarter was marginally higher and operating margin improved slightly. The startup of the Juarez factory in Mexico is proceeding according to plan. However, savings were adversely impacted by temporary disturbances resulting from problems with components supplies as well as increased transportation costs due to higher fuel prices. Higher raw material prices throughout the Group’s operations in North America had an adverse effect.
The market for floor-care products in the US recovered from a downturn earlier in the year, and shipments for the third quarter were at the same level as in the previous year. Group sales increased over 2005. Operating income improved substantially due to lower costs for materials, increased sourcing from low-cost countries, and an improved product mix. A new set-up for sales of accessories had a positive impact on results in the third quarter.
Consumer Durables, Latin America
Nine | Nine | |||||||||||||||||||
Consumer Durables, Latin America | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 1,913 | 1,381 | 5,379 | 4,002 | 5,819 | |||||||||||||||
Operating income | 83 | 26 | 236 | 11 | 123 | |||||||||||||||
Operating margin, % | 4.3 | 1.9 | 4.4 | 0.3 | 2.1 | |||||||||||||||
Unit shipments of major appliances in Brazil rose by 34% as compared with the third quarter of last year. Brazil is the Group’s major market in Latin America.
Group sales in Latin America showed strong growth, rising by 39% in the third quarter, mainly due to higher volumes. The unusual growth rate was partly traceable to depletion of retail inventories during the third quarter of last year. Operating income improved significantly in comparison with 2005 due to strong volume increases. Higher capacity utilization and better customer and product mixes also contributed to the improvement.
Consumer Durables, Asia/Pacific
Nine | Nine | |||||||||||||||||||
Consumer Durables, Asia/Pacific | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 2,101 | 2,240 | 6,391 | 6,834 | 9,276 | |||||||||||||||
Operating income | 58 | 0 | 65 | -29 | 13 | |||||||||||||||
Operating margin, % | 2.8 | 0.0 | 1.0 | -0.4 | 0.1 | |||||||||||||||
Australia and New Zealand
Market demand for major appliances in Australia increased in the third quarter in comparison with the corresponding period last year.
Group sales in the region increased in local currency due to strong sales growth for front-load washing machines and positive market response to recent product launches but declined in SEK. Operating income improved due to higher volumes, an improved product mix and savings resulting from previous restructuring.
China
Market statistics for shipments of major appliances in China indicate continued good growth in the third quarter. Group sales of major appliances declined, reflecting the strategy that includes exiting unprofitable retail outlets, which is now largely completed. Operating loss was greater in the third quarter in comparison with last year, mainly due to lower volumes and higher outlays for promotion in connection with product launches.
Professional Products
Nine | Nine | |||||||||||||||||||
Professional Products | Q3 | Q3 | months | months | Full year | |||||||||||||||
SEKm | 2006 | 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 1,605 | 1,563 | 4,942 | 4,733 | 6,686 | |||||||||||||||
Operating income | 127 | 117 | 353 | 305 | 463 | |||||||||||||||
Operating margin, % | 7.9 | 7.5 | 7.1 | 6.4 | 6.9 | |||||||||||||||
Demand in Europe for both food service equipment and laundry equipment is estimated to have increased in the third quarter in comparison with the corresponding period last year.
Group sales of food-service equipment declined slightly in the third quarter despite higher volumes. Operating income improved, mainly due to increased prices and lower costs for marketing and administration.
Sales of laundry equipment in the third quarter increased due to higher volumes. Operating income was in line with the previous year. The transfer of production from Denmark to Thailand was completed in the third quarter.
Structural changes
As previously announced, the Group has decided to scale back production in Australia, which will include closing the washer/dryer and dishwasher plants in Adelaide over the next 18 months. Production will be moved gradually to other Electrolux factories. The dishwasher plant will close at the end of April next year and the washer/dryer plant by the end of the first quarter of 2008. Approximately 500 employees will be affected by the closures, which are part of the ongoing restructuring program that was announced in 2005. The closures involve a total cost of SEK 302m, which was taken as a charge against operating income in the third quarter of 2006, within items affecting comparability.
As previously announced, the Group has decided to scale back production in Australia, which will include closing the washer/dryer and dishwasher plants in Adelaide over the next 18 months. Production will be moved gradually to other Electrolux factories. The dishwasher plant will close at the end of April next year and the washer/dryer plant by the end of the first quarter of 2008. Approximately 500 employees will be affected by the closures, which are part of the ongoing restructuring program that was announced in 2005. The closures involve a total cost of SEK 302m, which was taken as a charge against operating income in the third quarter of 2006, within items affecting comparability.
As previously announced, Electrolux has signed an agreement on July 17, 2006, for divestment of the Group’s 50% stake in Nordwaggon AB to Transwaggon AB. The transaction involved a capital loss of SEK -173m, which was taken as a charge against operating income in the third quarter of 2006, within items affecting comparability. Nordwaggon is a Swedish-based railcar operator that was owned 50% by Electrolux and 50% by the Swedish state-owned AB Swedcarrier. Electrolux entered into this partnership in 1984 in order to fulfill a need for special-purpose railcars. Swedcarrier was a party to the transaction and has divested its 50% stake in Nordwaggon to Transwaggon. With the transaction, Electrolux was released from letters of support, issued jointly with Swedcarrier, for loans and leasing agreements totalling SEK 1,400m.
Other items
Asbestos litigation in the US
Litigation and claims related to asbestos are pending against the Group in the US. Almost all of the cases refer to externally supplied components used in industrial products manufactured by discontinued operations prior to the early 1970s. Many of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not part of the Electrolux Group.
As of September 30, 2006, the Group had a total of 1,505 cases pending, representing approximately 8,350 plaintiffs. A total of 407 new cases with approximately 520 plaintiffs were filed and 64 pending cases with approximately 220 plaintiffs were resolved during the third quarter of 2006. Approximately 6,480 of the plaintiffs relate to cases pending in the state of Mississippi.
Additional lawsuits may be filed against Electrolux in the future. It is not possible to predict either the number of future claims or the number of plaintiffs that any future claims may represent. In addition, the outcome of asbestos claims is inherently uncertain and always difficult to predict and Electrolux cannot provide any assurances that the resolution of these types of claims will not have a material adverse effect on its business or on results of operations in the future.
Nomination Committee for the Annual General Meeting 2007
In accordance with the decision by the Annual General Meeting in April 2006, Electrolux shall have a Nomination Committee consisting of representatives of each of the four largest shareholders in terms of voting rights, and the Chairman of the Electrolux Board.
Börje Ekholm, President and CEO of Investor, is the Chairman of the Nomination Committee. The other members are Ramsay J. Brufer, Alecta Mutual Pension Insurance, Carl Rosén, Second Swedish National Pension Fund, Annika Andersson, Fourth Swedish National Pension Fund, and Michael Treschow, Chairman of Electrolux.
The Nomination Committee will prepare proposals for the AGM in 2007, including Chairman of the AGM, Board members, Chairman of the Board, remuneration for Board members and the Nomination Committee for the following year.
Shareholders who wish to submit proposals to the Nomination Committee should send an e-mail to nominationcommittee@electrolux.com
Stockholm, October 25, 2006
Hans Stråberg
President and CEO
President and CEO
Review Report
We have reviewed the Interim Report for the period January 1 to September 30, 2006, for AB Electrolux (publ). Management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim financial information based on our review.
We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden RS and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.
Stockholm, October 25, 2006
PricewaterhouseCoopers AB
Peter Clemedtson | Dennis Svensson | |
Authorized Public Accountant | Authorized Public Accountant | |
Partner in Charge |
Consolidated income statement
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
SEKm | Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Net sales | 26,087 | 25,951 | 75,962 | 72,050 | 100,701 | |||||||||||||||
Cost of goods sold | -20,159 | -19,876 | -58,607 | -55,406 | -77,270 | |||||||||||||||
Gross operating income | 5,928 | 6,075 | 17,355 | 16,644 | 23,431 | |||||||||||||||
Selling expenses | -3,761 | -3,740 | -11,413 | -10,858 | -14,635 | |||||||||||||||
Administrative expenses | -1,052 | -1,313 | -3,396 | -3,657 | -4,945 | |||||||||||||||
Other operating income/expenses | 21 | 11 | 34 | 153 | 173 | |||||||||||||||
Items affecting comparability | -451 | -882 | -578 | -882 | -2,980 | |||||||||||||||
Operating income* | 685 | 151 | 2,002 | 1,400 | 1,044 | |||||||||||||||
Margin, % | 2.6 | 0.6 | 2.6 | 1.9 | 1.0 | |||||||||||||||
Financial items, net | -1 | -200 | -148 | -403 | -550 | |||||||||||||||
Income after financial items | 684 | -49 | 1,854 | 997 | 494 | |||||||||||||||
Margin, % | 2.6 | -0.2 | 2.4 | 1.4 | 0.5 | |||||||||||||||
Taxes | -244 | -214 | -641 | -512 | -636 | |||||||||||||||
Income for the period from continuing operations | 440 | -263 | 1,213 | 485 | -142 | |||||||||||||||
Income for the period from discontinued operations | 0 | 416 | 1,199 | 1,718 | 1,905 | |||||||||||||||
Income for the period | 440 | 153 | 2,412 | 2,203 | 1,763 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Parent Company | 440 | 153 | 2,412 | 2,203 | 1,763 | |||||||||||||||
Minority interest in income for the period | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
* Operating income includes: | ||||||||||||||||||||
Depreciation and amortization | -668 | -636 | -2,062 | -1,855 | -2,583 | |||||||||||||||
Operating income for the divested operation in India | — | — | — | -48 | -48 | |||||||||||||||
Continuing operations | ||||||||||||||||||||
Earnings per share, SEK | 1.54 | -0.90 | 4.16 | 1.67 | -0.49 | |||||||||||||||
Diluted, SEK | 1.52 | -0.90 | 4.13 | 1.66 | -0.49 | |||||||||||||||
Total | ||||||||||||||||||||
Earnings per share, SEK | 1.54 | 0.53 | 8.27 | 7.57 | 6.05 | |||||||||||||||
Diluted, SEK | 1.52 | 0.52 | 8.22 | 7.53 | 6.01 | |||||||||||||||
Number of shares after buy-backs, million | 281.8 | 291.4 | 281.8 | 291.4 | 293.1 | |||||||||||||||
Average number of shares after buy-backs, million | 285.8 | 291.2 | 291.6 | 291.2 | 291.4 | |||||||||||||||
Diluted | 287.7 | 292.4 | 293.5 | 292.4 | 293.2 | |||||||||||||||
Items affecting comparability
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
SEKm | Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Restructuring provisions and write-downs | ||||||||||||||||||||
Appliances plant in Torsvik, Sweden | — | — | -43 | — | — | |||||||||||||||
Appliances plant in Nuremberg, Germany | — | — | -145 | — | -2,098 | |||||||||||||||
Appliances, Europe | — | -463 | — | -463 | -495 | |||||||||||||||
Appliances plants in Adelaide, Australia | -302 | — | -302 | — | — | |||||||||||||||
Reversal of unused restructuring provisions | 24 | — | 24 | — | 32 | |||||||||||||||
Capital gain/loss on divestments | ||||||||||||||||||||
Divestment of Electrolux Financial Corp., USA | — | — | 61 | — | — | |||||||||||||||
Divestment of 50% stake in Nordwaggon AB, Sweden | -173 | — | -173 | — | — | |||||||||||||||
Divestment of Indian operation | — | -419 | — | -419 | -419 | |||||||||||||||
Total | -451 | -882 | -578 | -882 | -2,980 | |||||||||||||||
Consolidated balance sheet
SEKm | Sept. 30, 2006 | Sept. 30, 2005 | Dec. 31, 2005 | |||||||||
Assets | ||||||||||||
Property, plant and equipment | 14,287 | 18,642 | 18,622 | |||||||||
Goodwill | 2,024 | 3,835 | 3,872 | |||||||||
Other intangible assets | 1,804 | 2,157 | 2,228 | |||||||||
Non-current derivatives | 66 | 128 | 118 | |||||||||
Other non-current assets | 4,132 | 4,719 | 4,891 | |||||||||
Total non-current assets | 22,313 | 29,481 | 29,731 | |||||||||
Inventories | 12,392 | 18,350 | 18,606 | |||||||||
Trade receivables | 21,571 | 25,548 | 24,269 | |||||||||
Other current assets | 3,461 | 4,741 | 4,488 | |||||||||
Current derivatives | 209 | 315 | 421 | |||||||||
Short-term investments | 869 | 171 | 623 | |||||||||
Cash and cash equivalents | 8,118 | 4,972 | 4,420 | |||||||||
Total current assets | 46,620 | 54,097 | 52,827 | |||||||||
Total assets | 68,933 | 83,578 | 82,558 | |||||||||
Equity and liabilities | ||||||||||||
Total equity attributable to equity holders of the Parent Company | 18,302 | 25,705 | 25,887 | |||||||||
Minority interests | 1 | 1 | 1 | |||||||||
Total equity | 18,303 | 25,706 | 25,888 | |||||||||
Long-term borrowings | 4,641 | 5,244 | 5,257 | |||||||||
Non-current derivatives | 1 | 0 | 6 | |||||||||
Deferred tax liabilities | 1,045 | 1,203 | 1,417 | |||||||||
Provisions for pensions and other post-employment benefits | 6,957 | 8,792 | 8,226 | |||||||||
Long-term provisions | 4,391 | 3,512 | 4,377 | |||||||||
Total non-current liabilities | 17,035 | 18,751 | 19,283 | |||||||||
Accounts payable | 15,299 | 17,054 | 18,798 | |||||||||
Tax liabilities | 1,748 | 1,547 | 1,123 | |||||||||
Short-term liabilities | 10,281 | 11,761 | 11,006 | |||||||||
Short-term borrowings | 4,110 | 5,808 | 3,076 | |||||||||
Current derivatives | 213 | 627 | 378 | |||||||||
Other provisions | 1,944 | 2,324 | 3,006 | |||||||||
Total current liabilities | 33,595 | 39,121 | 37,387 | |||||||||
Total equity and liabilities | 68,933 | 83,578 | 82,558 | |||||||||
Contingent liabilities | 530 | 1,287 | 1,302 | |||||||||
Consolidated cash flow statement
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
SEKm | Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Operations | ||||||||||||||||||||
Income after financial items | 684 | -49 | 1,854 | 997 | 494 | |||||||||||||||
Depreciation and amortization | 668 | 636 | 2,062 | 1,855 | 2,583 | |||||||||||||||
Capital gain/loss included in operating income | 173 | 419 | 112 | 419 | 419 | |||||||||||||||
Restructuring provisions | -128 | 423 | -416 | 162 | 2,164 | |||||||||||||||
Share-based compensation | 27 | 17 | 64 | 46 | 88 | |||||||||||||||
Change in accrued and prepaid interest | 74 | 96 | -36 | 131 | 58 | |||||||||||||||
Taxes paid | 82 | -188 | -281 | -181 | -540 | |||||||||||||||
Cash flow from operations, excluding change in operating assets and liabilities | 1,580 | 1,354 | 3,359 | 3,429 | 5,266 | |||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||
Change in inventories | 211 | 421 | -635 | -2,231 | -935 | |||||||||||||||
Change in trade receivables | -2,168 | -958 | -1,050 | -1,308 | -1,749 | |||||||||||||||
Change in other current assets | 201 | 296 | -182 | -47 | 253 | |||||||||||||||
Change in accounts payable | 552 | -376 | 1,341 | -138 | 190 | |||||||||||||||
Change in other operating liabilities and provisions | 258 | 683 | -109 | 1,187 | 437 | |||||||||||||||
Cash flow from operating assets and liabilities | -946 | 66 | -635 | -2,537 | -1,804 | |||||||||||||||
Cash flow from operations | 634 | 1,420 | 2,724 | 892 | 3,462 | |||||||||||||||
Investments | ||||||||||||||||||||
Divestment of operations | -154 | -359 | 1,064 | -359 | -370 | |||||||||||||||
Capital expenditure in property, plant and equipment | -770 | -1,007 | -2,140 | -2,532 | -3,654 | |||||||||||||||
Capitalization of product development and software | -29 | -131 | -461 | -346 | -405 | |||||||||||||||
Other | -72 | -48 | 284 | -92 | -56 | |||||||||||||||
Cash flow from investments | -1,025 | -1,545 | -1,253 | -3,329 | -4,485 | |||||||||||||||
Total cash flow from operations and investments | -391 | -125 | 1,471 | -2,437 | -1,023 | |||||||||||||||
Financing | ||||||||||||||||||||
Change in short-term investments | 2,926 | 1,078 | 25 | 505 | -122 | |||||||||||||||
Change in borrowings | 506 | -237 | 216 | 1,022 | -933 | |||||||||||||||
Dividend | — | — | -2,222 | -2,038 | -2,038 | |||||||||||||||
Sale and repurchase of shares, net | -933 | 34 | -1,029 | 35 | 355 | |||||||||||||||
Cash flow from financing | 2,499 | 875 | -3,010 | -476 | -2,738 | |||||||||||||||
Cash flow from continuing operations | 2,108 | 750 | -1,539 | -2,913 | -3,761 | |||||||||||||||
Cash flow from discontinued operations | ||||||||||||||||||||
Cash flow from operations | — | 2,683 | -2,081 | 1,858 | 3,078 | |||||||||||||||
Cash flow from investments | — | -302 | -727 | -968 | -1,342 | |||||||||||||||
Cash flow from financing | — | -2,346 | 8,504 | -845 | -1,597 | |||||||||||||||
Cash flow from discontinued operations | — | 35 | 5,696 | 45 | 139 | |||||||||||||||
Total cash flow | 2,108 | 785 | 4,157 | -2,868 | -3,622 | |||||||||||||||
Cash and cash equivalents at beginning of period | 6,063 | 4,360 | 4,420 | 7,675 | 7,675 | |||||||||||||||
Exchange-rate differences | -53 | -173 | -459 | 165 | 367 | |||||||||||||||
Cash and cash equivalents at end of period | 8,118 | 4,972 | 8,118 | 4,972 | 4,420 | |||||||||||||||
Change in net borrowings | ||||||||||||||||||||
Total cash flow, excluding change in loans and other liquid funds | -1,324 | 2,290 | 3,916 | -3,550 | -970 | |||||||||||||||
Net borrowings at beginning of period | 2,245 | -8,535 | -2,974 | -1,141 | -1,141 | |||||||||||||||
Exchange-rate differences referring to net borrowings | -417 | 221 | -438 | -1,333 | -863 | |||||||||||||||
Net borrowings at end of period | 504 | -6,024 | 504 | -6,024 | -2,974 | |||||||||||||||
Change in total equity
Nine | Nine | |||||||||||
months | months | Full year | ||||||||||
SEKm | 2006 | 2005 | 2005 | |||||||||
Opening balance | — | 23,636 | 23,636 | |||||||||
Effects of implementing IAS 39 | — | -2 | -2 | |||||||||
Adjusted opening balance | 25,888 | 23,634 | 23,634 | |||||||||
Available for sale instruments | -8 | 0 | 24 | |||||||||
Change in revaluation and hedge reserve | 542 | -37 | -606 | |||||||||
Translation differences | -1,648 | 1,863 | 2,717 | |||||||||
Share-based compensation | 64 | 46 | 72 | |||||||||
Transactions recognized directly in equity | -1,050 | 1,872 | 2,207 | |||||||||
Income for the period | 2,412 | 2,203 | 1,763 | |||||||||
Total recognized income and expenses for the period | 1,362 | 4,075 | 3,970 | |||||||||
Divestment of minority | — | — | -9 | |||||||||
Repurchase and sale of shares | -1,029 | 35 | 331 | |||||||||
Dividend payment | -2,222 | -2,038 | -2,038 | |||||||||
Dividend of Husqvarna shares | -5,696 | — | — | |||||||||
Total transactions with equity holders | -8,947 | -2,003 | -1,716 | |||||||||
Closing balance | 18,303 | 25,706 | 25,888 | |||||||||
Key ratios1)
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | ||||||||||||||||
Continuing operations: | ||||||||||||||||||||
Earnings per share, SEK2) | 1.54 | -0.90 | 4.16 | 1.67 | -0.49 | |||||||||||||||
Excluding items affecting comparability, SEK | 2.81 | 2.04 | 5.94 | 4.61 | 9.28 | |||||||||||||||
Return on net assets, % | — | — | 15.5 | 9.8 | 5.4 | |||||||||||||||
Excluding items affecting comparability, % | — | — | 15.9 | 13.6 | 17.8 | |||||||||||||||
Capital expenditure, SEKm | -770 | -1,007 | -2,140 | -2,532 | -3,654 | |||||||||||||||
Average number of employees | 55,938 | 58,308 | 55,014 | 58,372 | 57,858 | |||||||||||||||
Including discontinued operations: | ||||||||||||||||||||
Return on equity, % | — | — | 14.0 | 11.8 | 7.0 | |||||||||||||||
Excluding items affecting comparability, % | — | — | 17.0 | 16.5 | 18.3 | |||||||||||||||
Net debt/equity ratio | — | — | -0.03 | 0.23 | 0.11 | |||||||||||||||
1) For definitions, see page 20.
2) Before dilution, based on an average number of shares after buy-backs, see page 18.
Number of shares
Shares held | ||||||||||||||||
Outstanding | Outstanding | Shares held by | by other | |||||||||||||
A-shares | B-shares | Electrolux | shareholders | |||||||||||||
Number of shares as of January 1, 2006 | 9,502,275 | 299,418,033 | 15,821,239 | 293,099,069 | ||||||||||||
Shares sold to senior managers under the stock option programs | ||||||||||||||||
First quarter | -2,490,825 | 2,490,825 | ||||||||||||||
Second quarter | -669,259 | 669,259 | ||||||||||||||
Third quarter | -862,394 | 862,394 | ||||||||||||||
Repurchase of shares | ||||||||||||||||
First quarter | — | — | ||||||||||||||
Second quarter | 6,000,000 | -6,000,000 | ||||||||||||||
Third quarter | 9,300,000 | -9,300,000 | ||||||||||||||
Number of shares as of September 30, 2006 | 9,502,275 | 299,418,033 | 27,098,761 | 281,821,547 | ||||||||||||
% of total number of shares | 8.8 | % | ||||||||||||||
Net sales by business area
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
SEKm | Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Consumer Durables, Europe | 11,226 | 11,206 | 31,561 | 31,253 | 43,755 | |||||||||||||||
Consumer Durables, North America | 9,216 | 9,553 | 27,600 | 25,204 | 35,134 | |||||||||||||||
Consumer Durables, Latin America | 1,913 | 1,381 | 5,379 | 4,002 | 5,819 | |||||||||||||||
Consumer Durables, Asia/Pacific | 2,101 | 2,240 | 6,391 | 6,834 | 9,276 | |||||||||||||||
Professional Products | 1,605 | 1,563 | 4,942 | 4,733 | 6,686 | |||||||||||||||
Other | 26 | 8 | 89 | 24 | 31 | |||||||||||||||
Total | 26,087 | 25,951 | 75,962 | 72,050 | 100,701 | |||||||||||||||
Operating income by business area
Nine | Nine | |||||||||||||||||||
months | months | Full year | ||||||||||||||||||
SEKm | Q3 2006 | Q3 2005 | 2006 | 2005 | 2005 | |||||||||||||||
Consumer Durables, Europe | 672 | 714 | 1,453 | 1,616 | 2,602 | |||||||||||||||
Margin, % | 6.0 | 6.4 | 4.6 | 5.2 | 5.9 | |||||||||||||||
Consumer Durables, North America | 333 | 290 | 929 | 808 | 1,444 | |||||||||||||||
Margin, % | 3.6 | 3.0 | 3.4 | 3.2 | 4.1 | |||||||||||||||
Consumer Durables, Latin America | 83 | 26 | 236 | 11 | 123 | |||||||||||||||
Margin, % | 4.3 | 1.9 | 4.4 | 0.3 | 2.1 | |||||||||||||||
Consumer Durables, Asia/Pacific | 58 | 0 | 65 | -29 | 13 | |||||||||||||||
Margin, % | 2.8 | 0.0 | 1.0 | -0.4 | 0.1 | |||||||||||||||
Professional Products | 127 | 117 | 353 | 305 | 463 | |||||||||||||||
Margin, % | 7.9 | 7.5 | 7.1 | 6.4 | 6.9 | |||||||||||||||
Total business areas | 1,273 | 1,147 | 3,036 | 2,711 | 4,645 | |||||||||||||||
Margin, % | 4.9 | 4.4 | 4.0 | 3.8 | 4.6 | |||||||||||||||
Common Group costs, etc. | -137 | -114 | -456 | -429 | -621 | |||||||||||||||
Items affecting comparability | -451 | -882 | -578 | -882 | -2,980 | |||||||||||||||
Operating income | 685 | 151 | 2,002 | 1,400 | 1,044 | |||||||||||||||
Change in net sales by business area
Nine months | ||||||||||||||||
Q3 2006 | Nine | 2006 in | ||||||||||||||
in comparable | months | comparable | ||||||||||||||
Year-over-year, % | Q3 2006 | currencies | 2006 | currencies | ||||||||||||
Consumer Durables, Europe | 0.2 | 1.3 | 1.0 | 0.0 | ||||||||||||
Consumer Durables, North America | -3.5 | -0.3 | 9.5 | 6.4 | ||||||||||||
Consumer Durables, Latin America | 38.5 | 37.4 | 34.4 | 14.6 | ||||||||||||
Consumer Durables, Asia/Pacific | -6.2 | -1.2 | -6.5 | -7.3 | ||||||||||||
Professional Products | 2.7 | 4.0 | 4.4 | 3.5 | ||||||||||||
Total | 0.5 | 2.8 | 5.4 | 2.8 | ||||||||||||
Change in operating income by business area
Nine months | ||||||||||||||||
Q3 2006 | 2006 in | |||||||||||||||
in comparable | Nine months | comparable | ||||||||||||||
Year-over-year, % | Q3 2006 | currencies | 2006 | currencies | ||||||||||||
Consumer Durables, Europe | -5.9 | -4.0 | -10.1 | -14.5 | ||||||||||||
Consumer Durables, North America | 14.8 | 16.5 | 15.0 | 15.5 | ||||||||||||
Consumer Durables, Latin America | 219.2 | 155.6 | N/A | N/A | ||||||||||||
Consumer Durables, Asia/Pacific | N/A | N/A | N/A | N/A | ||||||||||||
Professional Products | 8.5 | 11.2 | 15.7 | 15.7 | ||||||||||||
Total excluding items affecting comparability | 10.0 | 11.4 | 13.1 | 11.3 | ||||||||||||
Exchange rates in sek
Nine | Nine | |||||||||||
months | months | Full year | ||||||||||
2006 | 2005 | 2005 | ||||||||||
USD, average | 7.49 | 7.30 | 7.46 | |||||||||
USD, end of period | 7.32 | 7.75 | 7.95 | |||||||||
EUR, average | 9.31 | 9.21 | 9.28 | |||||||||
EUR, end of period | 9.27 | 9.32 | 9.40 | |||||||||
GBP, average | 13.58 | 13.43 | 13.54 | |||||||||
GBP, end of period | 13.68 | 13.67 | 13.69 | |||||||||
Net sales and income per quarter
Q1 | Q2 | Q3 | Q4 | Full year | ||||||||||||||||||||
Net sales, SEKm | 2006 | 24,553 | 25,322 | 26,087 | ||||||||||||||||||||
2005 | 21,860 | 24,239 | 25,951 | 28,651 | 100,701 | |||||||||||||||||||
Operating income, SEKm | 2006 | 455 | 862 | 685 | ||||||||||||||||||||
Margin, % | 1.9 | 3.4 | 2.6 | |||||||||||||||||||||
2006 | 1) | 600 | 844 | 1,136 | ||||||||||||||||||||
Margin, % | 2.4 | 3.3 | 4.4 | |||||||||||||||||||||
2005 | 499 | 750 | 151 | -356 | 1,044 | |||||||||||||||||||
Margin, % | 2.3 | 3.1 | 0.6 | -1.2 | 1.0 | |||||||||||||||||||
2005 | 1) | 499 | 750 | 1,033 | 1,742 | 4,024 | ||||||||||||||||||
Margin, % | 2.3 | 3.1 | 4.0 | 6.1 | 4.0 | |||||||||||||||||||
Income after financial items, SEKm | 2006 | 387 | 783 | 684 | ||||||||||||||||||||
Margin, % | 1.6 | 3.1 | 2.6 | |||||||||||||||||||||
2006 | 1) | 532 | 765 | 1,135 | ||||||||||||||||||||
Margin, % | 2.2 | 3.0 | 4.4 | |||||||||||||||||||||
2005 | 436 | 610 | -49 | -503 | 494 | |||||||||||||||||||
Margin, % | 2.0 | 2.5 | -0.2 | -1.8 | 0.5 | |||||||||||||||||||
2005 | 1) | 436 | 610 | 873 | 1,595 | 3,514 | ||||||||||||||||||
Margin, % | 2.0 | 2.5 | 3.4 | 5.6 | 3.5 | |||||||||||||||||||
Income for the period, continuing operations, SEKm | 2006 | 232 | 541 | 440 | ||||||||||||||||||||
2005 | 312 | 436 | -263 | -627 | -142 | |||||||||||||||||||
Earnings per share, continuing operations, SEK2) | 2006 | 0.79 | 1.83 | 1.54 | ||||||||||||||||||||
2006 | 1) | 1.28 | 1.85 | 2.81 | ||||||||||||||||||||
2005 | 1.07 | 1.50 | -0.90 | -2.16 | -0.49 | |||||||||||||||||||
2005 | 1) | 1.07 | 1.50 | 2.04 | 4.58 | 9.19 | ||||||||||||||||||
Value creation, continuing operations, SEKm | 2006 | -23 | 256 | 565 | ||||||||||||||||||||
2005 | -108 | 69 | 308 | 1,036 | 1,305 | |||||||||||||||||||
Income for the period, SEKm | 2006 | 807 | 1,165 | 440 | ||||||||||||||||||||
2005 | 854 | 1,196 | 153 | -440 | 1,763 | |||||||||||||||||||
Earnings per share, SEK2) | 2006 | 2.78 | 3.95 | 1.54 | ||||||||||||||||||||
2006 | 1) | 3.27 | 3.97 | 2.81 | ||||||||||||||||||||
2005 | 2.93 | 4.11 | 0.53 | -1.52 | 6.05 | |||||||||||||||||||
2005 | 1) | 2.93 | 4.11 | 3.56 | 5.22 | 15.82 | ||||||||||||||||||
1) Excluding items affecting comparability. | ||||||||||||||||||||||||
2) Before dilution, based on average number of shares after buy-backs. | ||||||||||||||||||||||||
Number of shares before dilution | ||||||||||||||||||||||||
Number of shares after buy-backs, million | 2006 | 295.6 | 290.3 | 281.8 | ||||||||||||||||||||
2005 | 291.2 | 291.2 | 291.4 | 293.1 | 293.1 | |||||||||||||||||||
Average number of shares after buy-backs, million | 2006 | 294.0 | 295.0 | 291.6 | ||||||||||||||||||||
2005 | 291.2 | 291.2 | 291.2 | 291.9 | 291.4 | |||||||||||||||||||
Items affecting comparability | ||||||||||||||||||||||||
Restructuring provisions, write-downs and capital | 2006 | -145 | 18 | -451 | ||||||||||||||||||||
loss on divestment, SEKm | 2005 | — | — | -882 | -2,098 | -2,980 | ||||||||||||||||||
Net sales by business area per quarter
SEKm | Q1 | Q2 | Q3 | Q4 | Full year | |||||||||||||||||||
Consumer Durables, Europe | 2006 | 9,999 | 10,336 | 11,226 | ||||||||||||||||||||
2005 | 9,931 | 10,116 | 11,206 | 12,502 | 43,755 | |||||||||||||||||||
Consumer Durables, North America | 2006 | 9,097 | 9,287 | 9,216 | ||||||||||||||||||||
2005 | 7,173 | 8,478 | 9,553 | 9,930 | 35,134 | |||||||||||||||||||
Consumer Durables, Latin America | 2006 | 1,769 | 1,697 | 1,913 | ||||||||||||||||||||
2005 | 1,198 | 1,423 | 1,381 | 1,817 | 5,819 | |||||||||||||||||||
Consumer Durables, Asia/Pacific | 2006 | 2,094 | 2,196 | 2,101 | ||||||||||||||||||||
2005 | 2,119 | 2,475 | 2,240 | 2,442 | 9,276 | |||||||||||||||||||
Professional Products | 2006 | 1,588 | 1,749 | 1,605 | ||||||||||||||||||||
2005 | 1,431 | 1,739 | 1,563 | 1,953 | 6,686 | |||||||||||||||||||
Operating income by business area per quarter
SEKm | Q1 | Q2 | Q3 | Q4 | Full year | |||||||||||||||||||
Consumer Durables, Europe | 2006 | 405 | 376 | 672 | ||||||||||||||||||||
Margin, % | 4.1 | 3.6 | 6.0 | |||||||||||||||||||||
2005 | 416 | 486 | 714 | 986 | 2,602 | |||||||||||||||||||
Margin, % | 4.2 | 4.8 | 6.4 | 7.9 | 5.9 | |||||||||||||||||||
Consumer Durables, North America | 2006 | 213 | 383 | 333 | ||||||||||||||||||||
Margin, % | 2.3 | 4.1 | 3.6 | |||||||||||||||||||||
2005 | 168 | 350 | 290 | 636 | 1,444 | |||||||||||||||||||
Margin, % | 2.3 | 4.1 | 3.0 | 6.4 | 4.1 | |||||||||||||||||||
Consumer Durables, Latin America | 2006 | 77 | 76 | 83 | ||||||||||||||||||||
Margin, % | 4.4 | 4.5 | 4.3 | |||||||||||||||||||||
2005 | -4 | -11 | 26 | 112 | 123 | |||||||||||||||||||
Margin, % | -0.3 | -0.8 | 1.9 | 6.2 | 2.1 | |||||||||||||||||||
Consumer Durables, Asia/Pacific | 2006 | -47 | 54 | 58 | ||||||||||||||||||||
Margin, % | -2.2 | 2.5 | 2.8 | |||||||||||||||||||||
2005 | -13 | -16 | 0 | 42 | 13 | |||||||||||||||||||
Margin, % | -0.6 | -0.6 | 0.0 | 1.7 | 0.1 | |||||||||||||||||||
Professional Products | 2006 | 83 | 143 | 127 | ||||||||||||||||||||
Margin, % | 5.2 | 8.2 | 7.9 | |||||||||||||||||||||
2005 | 51 | 137 | 117 | 158 | 463 | |||||||||||||||||||
Margin, % | 3.6 | 7.9 | 7.5 | 8.1 | 6.9 | |||||||||||||||||||
Common Group costs, etc. | 2006 | -131 | -188 | -137 | ||||||||||||||||||||
2005 | -119 | -196 | -114 | -192 | -621 | |||||||||||||||||||
Items affecting comparability | 2006 | -145 | 18 | -451 | ||||||||||||||||||||
2005 | 0 | 0 | -882 | -2,098 | -2,980 | |||||||||||||||||||
Five-year review
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Pro forma | ||||||||||||||||||||||||
20051) | 2005 | 20042) | 20033) | 20023) | 20013) | |||||||||||||||||||
Net sales, SEKm | 100,701 | 129,469 | 120,651 | 124,077 | 133,150 | 135,803 | ||||||||||||||||||
Operating income, SEKm | 945 | 3,942 | 4,807 | 7,175 | 7,731 | 6,281 | ||||||||||||||||||
Margin, % | 0.9 | 3.0 | 4.0 | 5.8 | 5.8 | 4.6 | ||||||||||||||||||
Margin, excluding items affecting comparability, % | 3.9 | 5.4 | 5.6 | 6.2 | 6.1 | 4.7 | ||||||||||||||||||
Income after financial items, SEKm | 697 | 3,215 | 4,452 | 7,006 | 7,545 | 5,215 | ||||||||||||||||||
Margin, % | 0.7 | 2.5 | 3.7 | 5.6 | 5.7 | 3.8 | ||||||||||||||||||
Margin, excluding items affecting comparability, % | 3.7 | 4.8 | 5.3 | 6.0 | 6.0 | 3.9 | ||||||||||||||||||
Income for the period, SEKm | -217 | 1,763 | 3,259 | 4,778 | 5,095 | 3,870 | ||||||||||||||||||
Earnings per share, SEK | -0.74 | 6.05 | 10.92 | 15.25 | 15.58 | 11.35 | ||||||||||||||||||
Average number of shares after buy-backs, million | 291.4 | 291.4 | 298.3 | 313.3 | 327.1 | 340.1 | ||||||||||||||||||
Dividend, SEK | 7.50 | 7.50 | 7.00 | 6.50 | 6.00 | 4.50 | ||||||||||||||||||
Value creation, SEKm | — | 2,913 | 3,054 | 3,449 | 3,461 | 262 | ||||||||||||||||||
Return on equity, % | — | 7.0 | 13.1 | 17.3 | 17.2 | 13.2 | ||||||||||||||||||
Return on net assets, % | — | 13.0 | 17.5 | 23.9 | 22.1 | 15.0 | ||||||||||||||||||
Net debt/equity ratio | — | 0.11 | 0.05 | 0.00 | 0.05 | 0.37 | ||||||||||||||||||
Capital expenditure, SEKm | — | 4,765 | 4,515 | 3,463 | 3,335 | 4,195 | ||||||||||||||||||
Average number of employees | — | 69,523 | 72,382 | 77,140 | 81,971 | 87,139 | ||||||||||||||||||
1) | Pro forma figures excluding the distributed Outdoor Products operations were presented in a press release of April 6, 2006 “Proposal on distribution of shares in Husqvarna AB to AB Electrolux shareholders”. The press release can be found onwww.electrolux.com website. | |
2) | Restated to comply with IFRS, except for IAS 39. If IAS 39 had been applied in 2004, the volatility in income, net borrowings and equity would most probably have been higher. | |
3) | Comparative figures for the years 2001-2003 have not been restated to comply with IFRS. A restatement of those years would follow the same pattern as the restatement of 2004, i.e., the effects on income and equity would be limited. |
Definitions
Capital indicators | ||
Annualized sales | In computation of key ratios where capital is related to net sales, the latter are annualized and converted at balance day exchange rates and adjusted for acquired and divested operations. | |
Net assets | Total assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities, non-interest-bearing provisions and deferred tax liabilities. | |
Working capital | Current assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities and non-interest-bearing provisions. | |
Net borrowings | Total interest-bearing liabilities less liquid funds. | |
Net debt/equity ratio | Net borrowings in relation to total equity. | |
Equity/assets ratio | Adjusted equity as a percentage of total assets less liquid funds. | |
Other key ratios | ||
Earnings per share | Income for the period divided by the average number of shares after buy-backs. | |
Operating margin | Operating income expressed as a percentage of net sales. | |
Value creation | Operating income excluding items affecting comparability less the weighted average cost of capital (WACC) on average net assets excluding items affecting comparability: [(Net sales - operating costs = operating income) - (WACC x average net assets)]. The WACC for 2006 is 11% before tax. For 2005 and 2004 the WACC was 12%. For 2003 and 2002 the WACC was 13% and for 2001 14%. | |
Return on equity | Income for the period expressed as a percentage of average equity. | |
Return on net assets | Operating income expressed as a percentage of average net assets. |
Discontinued operations
The Outdoor Products operations of the Group were distributed to shareholders in June, 2006 under the name of Husqvarna AB. The Outdoor Products operations were transferred to Husqvarna AB at book values.
In accordance with IFRS 5, “Non-current Assets held for sale and Discontinued Operations”, the net results for the distributed Outdoor Products operations are reported in the Group’s income statement under the item “Income for the period from discontinued operations”. This means that the figures for the former Outdoor Products operations are excluded from the sales and expenses reported in the income statement for the current period and for corresponding periods in 2005. Similarly, Outdoor Products operations are reported in the cash-flow statement under “Cash flow from discontinued operations”. The adjustments have been made on the basis of the actual reporting for the operations within the Outdoor Products operations. In addition, a representative share of common Group costs has been allocated. Adjustments have also been made for historical financing and tax charges for the Outdoor Products operations.
The balance sheet as of September 30, 2006 does not include Outdoor Products operations. Comparative periods in 2005 comprise the original figures, including the Outdoor Products operations.
Telephone conference and presentation
A presentation and a telephone conference will be held at 15.00 CET on October 25, 2006, at the Electrolux head office at S:t Göransgatan 143 in Stockholm. The presentation will be chaired by Hans Stråberg, President and CEO of Electrolux. Mr Stråberg will be accompanied by Fredrik Rystedt, CFO.
A slide presentation for the third quarter will be available on the Electrolux website www.electrolux.com/ir
Financial Reports in 2007
Consolidated Results 2006 | February 14 | |
Annual General Meeting | April 16 | |
Interim Report January — March | April 26 | |
Interim Report April — June | July 17 | |
Interim Report July — September | October 22 |
For more information
Peter Nyquist, Vice President, Investor Relations and Financial Information: +46 8 738 60 03 Financial information from Electrolux is also available at www.electrolux.com/ir
Factors affecting forward-looking statements
This report contains “forward-looking” statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the financial goals and targets of Electrolux for future periods and future business and financial plans. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially due to a variety of factors. These factors include, but may not be limited to the following; consumer demand and market conditions in the geographical areas and industries in which Electrolux operates, effects of currency fluctuations, competitive pressures to reduce prices, significant loss of business from major retailers, the success in developing new products and marketing initiatives, developments in product liability litigation, progress in achieving operational and capital efficiency goals, the success in identifying growth opportunities and acquisition candidates and the integration of these opportunities with existing businesses, progress in achieving structural and supply-chain reorganization goals.