SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
No. (1)
No. (1)
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 of_July 2007
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)
(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: July 17, 2007 | By /s/ Richard S. Pietch | |
Stockholm, July 17, 2007 | ||
PRESS RELEASE | Page 1 of 22 |
Contents
Net sales and income 2
Outlook for 2007 4
Cash flow 4
Financial position 4
Business areas 6
Structural changes 9
Financial statements 12
Net sales and income 2
Outlook for 2007 4
Cash flow 4
Financial position 4
Business areas 6
Structural changes 9
Financial statements 12
Half-yearly Report 2007
Stockholm, July 17, 2007
Stockholm, July 17, 2007
• | Net sales for continuing operations increased to SEK 50,715m (49,875) and income for the period was SEK 1,037m (773), or SEK 3.70 (2.62) per share | |
• | Operating income rose by 16% in the first half of 2007, excluding items affecting comparability, compared to the same period last year | |
• | Strong sales volumes in North America led to gains in market share and improved earnings | |
• | Income from floor-care operations doubled in the second quarter | |
• | Continued strong growth in Latin America | |
• | Lower income for appliances in Europe due to delayed product launches and higher raw material costs | |
• | Lower cash flow reflecting strong growth and delayed product launches | |
• | Group outlook for 2007 is unchanged |
First | First | |||||||||||||||||||||||
Q2 | Q2 | Change | half | half | Change | |||||||||||||||||||
SEKm | 2007 | 2006 | % | 2007 | 2006 | % | ||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||
Net sales | 25,785 | 25,322 | 1.8 | 50,715 | 49,875 | 1.7 | ||||||||||||||||||
Operating income1) | 890 | 862 | 3.2 | 1,647 | 1,317 | 25.1 | ||||||||||||||||||
Operating income, excluding items affecting comparability | 921 | 844 | 9.1 | 1,678 | 1,444 | 16.2 | ||||||||||||||||||
Margin, % | 3.6 | 3.3 | 3.3 | 2.9 | ||||||||||||||||||||
Income after financial items | 752 | 783 | N/A | 1,422 | 1,170 | 21.5 | ||||||||||||||||||
Income after financial items, excluding items affecting comparability | 783 | 765 | 2.4 | 1,453 | 1,297 | 12.0 | ||||||||||||||||||
Margin, % | 3.0 | 3.0 | 2.9 | 2.6 | ||||||||||||||||||||
Income for the period | 545 | 541 | N/A | 1,037 | 773 | 34.2 | ||||||||||||||||||
Income for the period, excluding items affecting comparability | 576 | 546 | 5.5 | 1,068 | 923 | 15.7 | ||||||||||||||||||
Earnings per share, SEK2) | 1.94 | 1.83 | 3.70 | 2.62 | ||||||||||||||||||||
Value creation | 210 | 256 | -46 | 296 | 233 | 63 | ||||||||||||||||||
Return on net assets, % | — | — | 16.3 | 15.1 | ||||||||||||||||||||
Return on net assets, excluding items affecting comparability, % | — | — | 14.6 | 13.1 | ||||||||||||||||||||
Total, including discontinued operations3) | ||||||||||||||||||||||||
Income for the period | 545 | 1,165 | 1,037 | 1,972 | ||||||||||||||||||||
Earnings per share, SEK2) | 1.94 | 3.95 | 3.70 | 6.70 | ||||||||||||||||||||
1) | Operating income for the second quarter of 2007 includes items affecting comparability amounting to SEK -31m, compared to SEK 18m for the second quarter of 2006, see page 12. | |
2) | Basic, based on an average of 281.5 (295.0) million shares for the second quarter of 2007 after buy-backs. For earnings per share after dilution, see page 12. | |
3) | Discontinued operations, the Group’s former Outdoor Products operations, include the period January-May of 2006. |
For definitions, see page 20
AB ELECTROLUX (PUBL) | ||||||
POSTAL ADDRESS | MEDIA HOTLINE | INVESTOR RELATIONS | ||||
SE-105 45 STOCKHOLM | +46 8 657 65 07 | +46 8 738 60 03 | ir@electrolux.se | |||
VISITING ADDRESS | TELEFAX | WEB SITE | REG.NO. | |||
S:T GÖRANSGATAN 143 | +46 8 738 74 61 | www.electrolux.com | 556009-4178 |
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
The Group’s Outdoor Products operations were distributed under the name of Husqvarna to the Electrolux shareholders in June 2006. As of June 2006, Husqvarna is reported as discontinued operations in the income and cash flow statements for 2006. Assets and liabilities for Husqvarna were excluded from the balance sheet as of May 31, 2006. The balance sheet items are according to the historical financial statements. For information on Electrolux accounting and valuation principles, see page 21.
The comments in this Interim Report refer to continuing operations.
NET SALES AND INCOME
Second quarter of 2007
Net sales for the Electrolux Group in the second quarter of 2007 amounted to SEK 25,785m as against SEK 25,322m in the previous year. Sales were positively impacted by changes in volume/price/mix while changes in exchange rates had a negative impact. Sales increased by 4.8% in comparable currencies.
Changes in net sales | Q2 | |||
% | 2007 | |||
Changes in Group structure | 0.0 | |||
Changes in exchange rates | -3.0 | |||
Changes in volume/price/mix | 4.8 | |||
Total | 1.8 | |||
Operating income increased to SEK 890m (862), corresponding to 3.5% (3.4) of net sales. Income after financial items decreased to SEK 752m (783), which corresponds to 2.9% (3.1) of net sales. Income for the period increased to SEK 545m (541), corresponding to SEK 1.94 (1.83) in earnings per share.
Operating income improved in the second quarter compared to the corresponding quarter last year, mainly due to good sales growth in appliances in North America and Latin America, and continued strong performance in the floor-care operations. Income was positively affected by an improved product mix and more efficient production while lower income for appliances in Europe arising from delayed product launches and higher raw material costs had an adverse effect on the operating result.
Income excluding items affecting comparability
Operating income for the second quarter of 2007 includes items affecting comparability in the amount of SEK -31m (18) referring to costs for the previously announced closure of the cooker plant in Fredericia, Denmark. More information on restructuring can be found on page 9 and in the table on page 12.
Excluding items affecting comparability, operating income for the second quarter of 2007 increased by 9.1% to SEK 921m (844), corresponding to 3.6% (3.3) of net sales. Income after financial items increased by 2.4% to SEK 783m (765), representing 3.0% (3.0) of net sales. Income for the period increased by 5.5% to SEK 576m (546), corresponding to SEK 2.05 (1.85) 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 negative impact of SEK -45m on operating income for the second quarter of 2007. Transaction effects net of hedging contracts amounted to SEK -17m. Translation of income statements in subsidiaries had an effect of SEK -28m, mainly due to the strengthening of the Swedish krona against the US dollar.
The effect of changes in exchange rates on income after financial items amounted to SEK -53m.
Financial net
Net financial items for the second quarter increased to SEK -138m compared to SEK -79m for the corresponding period in the previous year. The increase is mainly due to higher net borrowings.
2 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
First half of 2007
Net sales for the Electrolux Group in the first half of 2007 amounted to SEK 50,715m as against SEK 49,875m in the previous year. Sales were positively impacted by changes in volume/price/mix, while changes in exchange rates had a negative impact. Sales increased by 6.1% in comparable currencies.
Changes in net sales | First half | |||
% | 2007 | |||
Changes in Group structure | 0.0 | |||
Changes in exchange rates | -4.4 | |||
Changes in volume/price/mix | 6.1 | |||
Total | 1.7 | |||
Operating income increased by 25.1% to SEK 1,647m (1,317), corresponding to 3.2% (2.6) of net sales. Income after financial items amounted to SEK 1,422m (1,170), which corresponds to 2.8% (2.3) of net sales. Income for the period from continuing operations improved to SEK 1,037m (773), corresponding to SEK 3.70 (2.62) in earnings per share.
Income excluding items affecting comparability
The above-mentioned operating income figures for the first half of 2007 include items affecting comparability in the amount of SEK -31m, (see table on page 12). In the first half of 2006, items affecting comparability amounted to SEK -127m.
Excluding the above-mentioned items affecting comparability, operating income for the first half of 2007 increased by 16.2% to SEK 1,678m (1,444), corresponding to 3.3% (2.9) of net sales. Income after financial items improved by 12.0% to SEK 1,453m (1,297), representing 2.9% (2.6) of net sales. Income for the period increased by 15.7% to SEK 1,068m (923), corresponding to SEK 3.81 (3.13) 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 negative impact of SEK -44m on operating income. Transaction effects net of hedging contracts amounted to SEK 20m. Translation of income statements in subsidiaries had an effect of SEK -64m.
The effect of changes in exchange rates on income after financial items amounted to SEK -55m.
Financial net
Net financial items for the first half of 2007 increased to SEK -225m compared to SEK -147m for the same period in the previous year. The increase is mainly due to the increase in net borrowings.
Discontinued operations
Income for the period from discontinued operations amounted to SEK 1,199m in the first half of 2006 and refers to the former Outdoor Products operations, Husqvarna, which was distributed to Electrolux shareholders in June 2006. For information on accounting principles for discontinued operations, see page 21.
3 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
OUTLOOK – FOR THE FULL YEAR 2007*
Market demand for appliances in 2007 is expected to show continued growth in Europe, while the North American market is expected to decline as compared to 2006. Raw material costs are expected to have an adverse effect on the Group’s operating income.
Operating income in 2007 is expected to be somewhat higher than in 2006, excluding items affecting comparability.
*The outlook is unchanged from when it was first reported in February 2007.
CASH FLOW
Cash flow from operations and investments was SEK -600m in the second quarter of 2007.
Cash flow from operations totaled SEK 475m. Changes in operating assets and liabilities had a negative impact on cash flow during the quarter. Inventories have been built up since the end of 2006 in connection with product launches in Europe combined with the strong market growth. A somewhat weaker market in the second quarter and delayed product launches in various European countries resulted in high inventories and reduction in production volume during the quarter. The decrease in production also had an impact on accounts payable. Trade receivables rose during the quarter due to strong sales growth, particularly for major appliances in North America and Latin America and in the floor-care operations. Sales increased by almost 5% in comparable currencies.
Cash flow from investments totaled SEK -1,075m. Capital expenditure in the second quarter related mainly to the new plant for front-loaded washing machines in Juarez, Mexico, and to the Group’s new production facilities in Poland.
Cash flow in the second quarter of 2006 was positively affected by the proceeds of the divestment of the operations in Electrolux Financial Corporation in the US.
First | First | |||||||||||||||||||
Cash flow from continuing operations | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Cash flow from operations, excluding change in operating assets and liabilities | 1,166 | 854 | 1,706 | 1,779 | 5,263 | |||||||||||||||
Change in operating assets and liabilities | -691 | 770 | -966 | 676 | -703 | |||||||||||||||
Cash flow from operations | 475 | 1,624 | 740 | 2,455 | 4,560 | |||||||||||||||
Divestment of operations | — | 1,218 | — | 1,218 | 1,064 | |||||||||||||||
Capital expenditure in tangible fixed assets | -932 | -792 | -1,720 | -1,370 | -3,152 | |||||||||||||||
Other | -143 | 86 | -297 | -76 | -298 | |||||||||||||||
Cash flow from investments | -1,075 | 512 | -2,017 | -228 | -2,386 | |||||||||||||||
Cash flow from operations and investments | -600 | 2,136 | -1,277 | 2,227 | 2,174 | |||||||||||||||
FINANCIAL POSITION
To adapt the Group’s capital structure, an Extraordinary General Meeting in December 2006 decided on a mandatory redemption procedure of shares. The redemption procedure and the payment of the redemption amount of SEK 20 per share totaling SEK 5,579m were carried out at the end of January 2007. In April the ordinary dividend for 2006, authorized by the AGM, amounting to SEK 4 per share totaling SEK 1,126m was paid to shareholders.
EQUITY
Total equity as of June 30, 2007, amounted to SEK 13,973m (18,587), which corresponds to SEK 49.63 (64.03) per share. Return on equity was 14.9% (15.8). Excluding items affecting comparability, return on equity was 15.4% (17.0).
4 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
Net borrowings
Net borrowings increased to SEK 7,755m (-2,245). Compared to the previous year, net borrowings have been affected by the capital distribution to shareholders at the beginning of 2007, the dividend payment for 2006 and the negative cash flow. The net debt/equity ratio was 0.55 (-0.12). The equity/assets ratio was 22.6% (33.1).
Net borrowings | June 30, | June 30, | December 31, | |||||||||
SEKm | 2007 | 2006 | 2006 | |||||||||
Interest-bearing liabilities | 11,460 | 8,241 | 7,495 | |||||||||
Liquid funds | 3,705 | 10,486 | 7,799 | |||||||||
Net borrowings | 7,755 | -2,245 | -304 | |||||||||
Net debt/equity ratio | 0.55 | -0.12 | -0.02 | |||||||||
Equity/assets ratio, % | 22.6 | 33.1 | 22.7 | |||||||||
Working capital
Working capital as of June 30, 2007, amounted to SEK -267m (-4,527), corresponding to -0.3% (-4.5) of annualized net sales. Inventories amounted to SEK 14,164m (12,473) and trade receivables to SEK 21,152m (18,548), corresponding to 13.6% (12.5) and 20.3% (18.6) of annualized net sales, respectively. Accounts payable amounted to SEK 15,750m (14,606), corresponding to 15.2% (14.6) of annualized net sales.
Net assets and return on net assets
Net assets as of June 30, 2007, amounted to SEK 21,728m (16,051). Average net assets increased to SEK 20,231m (17,408).
Adjusted for items affecting comparability, average net assets amounted to SEK 23,041m (22,013), corresponding to 22.7% (22.1) of net sales. Items affecting comparability refers to restructuring provisions and provisions for post-employment benefits due to the IFRS transition.
The return on net assets was 16.3% (15.1), and 14.6% (13.1), 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.
Total value created during the first half of 2007 improved to SEK 296m as compared to SEK 233m in the previous year. The WACC rate for 2007 is computed at 12% as compared to 11% for 2006. The change in WACC rate had a negative impact of SEK 115m on value created in 2007. The capital-turnover rate was 4.40 (4.53).
5 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
OPERATIONS BY BUSINESS AREA IN THE SECOND QUARTER
Changes in net sales and operating income by business area in comparable currencies are given on page 16.
Consumer Durables, Europe
First | First | |||||||||||||||||||
Consumer Durables, Europe | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 10,496 | 10,336 | 21,050 | 20,335 | 44,233 | |||||||||||||||
Operating income | 299 | 376 | 769 | 781 | 2,678 | |||||||||||||||
Operating margin, % | 2.8 | 3.6 | 3.7 | 3.8 | 6.1 | |||||||||||||||
Industry shipments of core appliances | First | |||||||
in Europe | Q2 | half | ||||||
Units, year-on-year, % | 2007 | 2007 | ||||||
Western Europe | -0.4 | 0.4 | ||||||
Eastern Europe (excluding Turkey) | 6.0 | 9.1 | ||||||
Total | 1.1 | 2.4 | ||||||
Core appliances
Industry shipments of core appliances in Europe increased by 1% in the second quarter, compared to the same period last year. Demand grew strongly in Eastern Europe, but declined slightly in Western Europe. Demand continued to be weak in Germany during the quarter.
Group sales of core appliances in Europe rose slightly during the second quarter, primarily as a result of an improved product mix. Operating income was, however, lower than in the same quarter last year due to higher raw material costs and delayed product launches. The Group continued to launch new products at a fast pace across Europe during the quarter, but the process of replacing existing products was delayed in several European markets. Consequently, the Group continued selling existing products in the affected markets at competitive prices. The new product offering has been well received in markets where it has been launched. A problem with a purchased component for a small series of dishwashers increased warranty costs of 8 EURm during the quarter.
Floor-care products
Demand for floor-care products in Europe increased slightly in the second quarter compared to the same period last year. The Group continued to gain market share during the quarter. Group sales rose on the basis of higher volumes. Operating income increased strongly in response to higher sales volumes and lower costs for the Group’s own produced and externally sourced products.
6 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
Consumer Durables, North America
First | First | |||||||||||||||||||
Consumer Durables, North America | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 9,043 | 9,287 | 17,665 | 18,384 | 36,171 | |||||||||||||||
Operating income | 422 | 383 | 680 | 596 | 1,462 | |||||||||||||||
Operating margin, % | 4.7 | 4.1 | 3.8 | 3.2 | 4.0 | |||||||||||||||
Industry shipments of appliances | First | |||||||
in the US | Q2 | half | ||||||
Units, year-on-year, % | 2007 | 2007 | ||||||
Core appliances | -1.8 | -5.1 | ||||||
Major appliances | -10.5 | -10.0 | ||||||
Major appliances
Industry shipments of core appliances in the US declined somewhat in the second quarter compared to the same period last year. Shipments of major appliances (i.e., including room air-conditioners and microwave ovens) declined significantly.
Group sales of major appliances in North America rose by 5% in comparable currencies during the quarter due to higher sales volumes. The Group’s market share continued to increase in the quarter, mainly as a result of strong sales in the refrigerator, laundry and dish-care product categories. Limited sales exposure to the weak US housing market contributed to the positive performance. Operating income improved slightly in local currencies, in spite of higher raw material costs, with increased volumes and production efficiencies having a positive impact. The operating margin was unchanged.
Floor-care products
Demand for floor-care products in the US declined in the second quarter compared with the same period last year. Group sales decreased slightly in local currencies, while operating income rose significantly due to an improved product mix and lower production costs.
Consumer Durables, Latin America
First | First | |||||||||||||||||||
Consumer Durables, Latin America | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 2,161 | 1,697 | 4,144 | 3,466 | 7,766 | |||||||||||||||
Operating income | 103 | 76 | 185 | 153 | 339 | |||||||||||||||
Operating margin, % | 4.8 | 4.5 | 4.5 | 4.4 | 4.4 | |||||||||||||||
Industry shipments of major appliances in Brazil increased by 19% in the second quarter of 2007 compared to the same period in last year. Brazil is the Group’s major market in Latin America.
Group sales in Latin America rose by 27% in the second quarter on the basis of a number of new product launches. Electrolux is now the leading brand in major appliances in the Brazilian market and is also successfully building its presence in other markets in the region. Operating income increased due to higher sales volumes and an improved product mix, which more than offset higher raw material costs.
7 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
Consumer Durables, Asia/Pacific and Rest of world
First | First | |||||||||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 2,314 | 2,196 | 4,390 | 4,290 | 8,636 | |||||||||||||||
Operating income | 47 | 54 | 49 | 7 | 163 | |||||||||||||||
Operating margin, % | 2.0 | 2.5 | 1.1 | 0.2 | 1.9 | |||||||||||||||
Australia and New Zealand
Demand for major appliances in Australia increased in the second quarter, compared to the same period last year. Group sales rose in local currencies, mainly reflecting strong growth in front-loaded washing machines, while operating income remained unchanged mainly due to increased spending on brand development.
China
Market data for shipments of major appliances in China indicate strong growth in the second quarter, compared to the same period last year, with the high end of the market posting the strongest gains. The Group’s exposure is currently more oriented towards the low end of the market and was therefore unable to leverage from the strong growth of the premium segment. However, the Group’s strategy in the region is to increase its presence at the higher end of the market and thereby raise overall profitability. The operations in China continued to be loss making.
Professional Products
First | First | |||||||||||||||||||
Professional Products | Q2 | Q2 | half | half | Full year | |||||||||||||||
SEKm | 2007 | 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 1,767 | 1,749 | 3,455 | 3,337 | 6,941 | |||||||||||||||
Operating income | 140 | 143 | 243 | 226 | 535 | |||||||||||||||
Operating margin, % | 7.9 | 8.2 | 7.0 | 6.8 | 7.7 | |||||||||||||||
Global demand for food-service and laundry equipment is estimated to have grown slightly in the second quarter compared to the same period in 2006.
Food-service equipment
Group sales of food-service equipment rose slightly in the second quarter as a result of higher prices. Operating income decreased, mainly due to lower sales volumes. Significantly higher raw material costs, especially for stainless steel, were offset by increased prices and cost savings in the second quarter.
Laundry equipment
Group sales of laundry equipment were unchanged in the second quarter compared to the same period last year. Operating income was also in line with 2006. Higher prices offset a decrease in sales volumes and higher raw material costs. Electrolux launched a new generation of professional laundry products during the second quarter.
8 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
STRUCTURAL CHANGES
As previously announced, the Board has decided to close the cooker plant in Fredericia, Denmark. Production in Fredericia will be discontinued by the end of 2007 and relocated to other plants in Europe. Approximately 150 employees will be affected by the closure. The closure involves a total cost of approximately SEK 70m, of which SEK 31m was taken as a charge against operating income in the second quarter of 2007, within items affecting comparability. The remaining costs for the closure will be charged against operating income within items affecting comparability during the second half of 2007.
OTHER ITEMS
Changes In management
Gunilla Nordström has been appointed head of Electrolux Major Appliances Asia Pacific. Gunilla Nordström succeeds Peter Birch, who is retiring. She will be a member of Group Management and report to President and CEO Hans Stråberg. Gunilla Nordström, 48, is currently President of Sony Ericsson Mobile Communications (China) Co. Ltd. and Corporate Vice President of Sony Ericsson Mobile Communications AB. She will assume her new position in August and will be based at the Electrolux regional head office in Singapore.
Carina Malmgren Heander has been appointed new Senior Vice President of Group Staff Human Resources and Organizational Development for the Electrolux Group. She will be part of Group Management and report to Hans Stråberg. Carina Malmgren Heander, 47, is currently Senior Vice President Human Resources for Sandvik AB. Before joining Sandvik, she held various management positions at ABB. She will assume her new position during the third quarter of 2007 and will be based in Stockholm, Sweden. Her predecessor, Harry de Vos, has been appointed Senior Vice President of Human Resources for ASML, a Dutch company.
Transfer of own shares
For the last few years Electrolux has acquired own shares for the purpose of using these shares to finance potential company acquisitions and as a hedge for the Group’s incentive programs.
In accordance with the proposal by the Board of Directors, the AGM in 2007 decided to authorize the Board to transfer own shares in connection with company acquisitions during the period up until the AGM in 2008. The AGM also authorized transfers of repurchased B-shares to cover costs that may arise as a result of the previous employee stock-option programs for 2001-2003 and the Electrolux Performance
Share Program 2005.
Share Program 2005.
In the second quarter of 2007, senior managers purchased 149,515 B-shares from Electrolux under the terms of the employee stock-option programs. As of June 30, 2007, Electrolux held 27,381,099 B-shares, corresponding to 8.9% of the total number of outstanding shares. See table on page 15.
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. Some 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 June 30, 2007, the Group had a total of 1,707 cases pending, representing approximately 2,620 plaintiffs. A total of 192 new cases with approximately 192 plaintiffs were filed and 186 pending cases with approximately 245 plaintiffs were resolved during the second quarter of 2007. Approximately 520 of the plaintiffs relate to cases pending in the state of Mississippi.
9 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
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.
RISK MANAGEMENT
Risks in connection with the Group’s operations can, in general, be divided into operational risks related to business operations and those related to financial operations. Operational risks are normally managed by the operative units within the Group, and financial risks by the Group’s treasury department.
Operational risks
Electrolux is currently exposed to risks in connection with its business operations. The Group’s ability to improve profitability and increase shareholder value is largely dependent on success in development of new, innovative products and in maintaining cost-efficient production. Managing fluctuations in the prices of raw materials and components and restructuring are vital for maintaining and increasing the Group’s competitiveness.
Financial risk management
Furthermore the Group is exposed to a number of risks related to, for example, liquid funds, trade receivables, customer financing receivables, payables, borrowings, commodities and derivative instruments. The risks are, primarily:
• | Interest-rate risks on liquid funds and borrowings | ||
• | Financing risks related to the Group’s capital requirements | ||
• | Foreign-exchange risks on earnings and net investments in foreign subsidiaries | ||
• | Commodity-price risks affecting expenditure on raw materials and components to be used in production | ||
• | Credit risks related to financial and commercial activities |
Risk management, risks and risk exposures are described in the Annual Report of 2006, Electrolux.com/annualreport2006.
PARENT COMPANY, AB ELECTROLUX
The Parent Company comprises the functions of the Group’s head office, as well as five companies operating on a commission basis for AB Electrolux.
Net sales for the Parent Company, AB Electrolux, for the first half of 2007 amounted to SEK 2,832m (2,918) of which SEK 1,413m (1,541) referred to sales to Group companies and SEK 1,419m (1,377) to external customers. Income after financial items was SEK 466m (5,586), including dividends from subsidiaries in the amount of SEK 431m (5,455). Income for the period amounted to SEK 489m (5,612).
Capital expenditure in tangible and intangible assets was SEK 44m (8). Liquid funds at the end of the period amounted to SEK 552m (5,916) as against SEK 4,280m at the start of the year.
Undistributed earnings in the Parent Company at the end of the period amounted to SEK 8,368m, as against SEK 8,668m at the start of the year. Dividend payment to shareholders for 2006 amounted to SEK 1,126m and in January 2007, SEK 5,579m was distributed through a redemption procedure.
The income statement and balance sheet for the Parent Company are presented on page 19.
10 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
The Board of Directors and the President and CEO certify that the interim report gives a true and fair overview of the Parent Company AB Electrolux and the Group’s operations, their financial position and results of operations, and describes significant risks and uncertainties facing the Parent Company and other companies in the Group.
Stockholm, July 16, 2007
Marcus Wallenberg
Chairman of the Board of Directors
Chairman of the Board of Directors
Peggy Bruzelius
Vice Chairman of the Board of Directors
Vice Chairman of the Board of Directors
Torben Ballegaard Sørensen | Louis R. Hughes | |
Board member | Board member | |
John Lupo | Johan Molin | |
Board member | Board member | |
Caroline Sundewall | Barbara Milian Thoralfsson | |
Board member | Board member |
Hans Stråberg
Board member, President and CEO
Board member, President and CEO
Ola Bertilsson Board member, union representative | Gunilla Brandt Board member, union representative | Ulf Carlsson Board member, union representative |
11 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
Costs for inventories and transport of finished products to customers are reported as of 2007 under costs of goods sold within gross operating income in the consolidated income statement. These costs were previously reported under selling expenses. The reason for the change is that these costs are to a great extent related to sales volumes and net sales, and that selling expenses in many cases are interpreted as overhead costs. Comparative figures in the income statements for 2006 have been adjusted according to the change. The adjustment for the second quarter of 2006 involves a reduction of SEK 871m in gross operating income as costs of goods sold increased and selling expenses decreased by the corresponding amounts. The adjustment on gross operating income and selling expenses for the full year 2006 amounts to SEK 4,339m. Operating income and margin for 2006 are unchanged.
CONSOLIDATED INCOME STATEMENT
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 25,785 | 25,322 | 50,715 | 49,875 | 103,848 | |||||||||||||||
Cost of goods sold | -21,201 | -20,347 | -41,754 | -40,568 | -84,003 | |||||||||||||||
Gross operating income | 4,584 | 4,975 | 8,961 | 9,307 | 19,845 | |||||||||||||||
Selling expenses | -2,617 | -2,966 | -5,136 | -5,532 | -10,955 | |||||||||||||||
Administrative expenses | -1,052 | -1,185 | -2,155 | -2,344 | -4,467 | |||||||||||||||
Other operating income/expenses | 6 | 20 | 8 | 13 | 152 | |||||||||||||||
Items affecting comparability | -31 | 18 | -31 | -127 | -542 | |||||||||||||||
Operating income* | 890 | 862 | 1,647 | 1,317 | 4,033 | |||||||||||||||
Margin, % | 3.5 | 3.4 | 3.2 | 2.6 | 3.9 | |||||||||||||||
Financial items, net | -138 | -79 | -225 | -147 | -208 | |||||||||||||||
Income after financial items | 752 | 783 | 1,422 | 1,170 | 3,825 | |||||||||||||||
Margin, % | 2.9 | 3.1 | 2.8 | 2.3 | 3.7 | |||||||||||||||
Taxes | -207 | -242 | -385 | -397 | -1,177 | |||||||||||||||
Income for the period from continuing operations | 545 | 541 | 1,037 | 773 | 2,648 | |||||||||||||||
Income for the period from discontinued operations | — | 624 | — | 1,199 | 1,199 | |||||||||||||||
Income for the period | 545 | 1,165 | 1,037 | 1,972 | 3,847 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Parent Company | 545 | 1,165 | 1,037 | 1,972 | 3,847 | |||||||||||||||
Minority interest in income for the period | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
* Operating income includes: | ||||||||||||||||||||
Depreciation and amortization | -692 | -706 | -1,384 | -1,394 | -2,758 | |||||||||||||||
Continuing operations | ||||||||||||||||||||
Earnings per share, SEK | 1.94 | 1.83 | 3.70 | 2.62 | 9.17 | |||||||||||||||
Diluted, SEK | 1.93 | 1.82 | 3.69 | 2.61 | 9.14 | |||||||||||||||
Total | ||||||||||||||||||||
Earnings per share, SEK | 1.94 | 3.95 | 3.70 | 6.70 | 13.32 | |||||||||||||||
Diluted, SEK | 1.93 | 3.93 | 3.69 | 6.65 | 13.27 | |||||||||||||||
Number of shares after buy-backs, million | 281.5 | 290.3 | 281.5 | 290.3 | 278.9 | |||||||||||||||
Average number of shares after buybacks, million | 281.5 | 295.0 | 280.5 | 294.5 | 288.8 | |||||||||||||||
Diluted, million | 282.0 | 296.7 | 281.0 | 296.7 | 289.8 | |||||||||||||||
ITEMS AFFECTING COMPARABILITY
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Restructuring provisions and write-downs | ||||||||||||||||||||
Appliances plant in Fredericia, Denmark | -31 | — | -31 | — | — | |||||||||||||||
Appliances plant in Torsvik, Sweden | — | -43 | — | -43 | -43 | |||||||||||||||
Appliances plant in Nuremberg, Germany | — | — | — | -145 | -145 | |||||||||||||||
Appliances plants in Adelaide, Australia | — | — | — | — | -302 | |||||||||||||||
Reversal of unused restructuring provisions | — | — | — | — | 60 | |||||||||||||||
Capital gain/loss on divestments | ||||||||||||||||||||
Divestment of Electrolux Financial Corp, USA | — | 61 | — | 61 | 61 | |||||||||||||||
Divestment of 50% stake in Nordwaggon AB, Sweden | — | — | — | — | -173 | |||||||||||||||
Total | -31 | 18 | -31 | -127 | -542 | |||||||||||||||
12 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
CONSOLIDATED BALANCE SHEET
SEKm | June 30, 2007 | June 30, 2006 | Dec. 31, 2006 | |||||||||
Assets | ||||||||||||
Property, plant and equipment | 15,094 | 14,041 | 14,209 | |||||||||
Goodwill | 2,078 | 2,009 | 1,981 | |||||||||
Other intangible assets | 1,833 | 1,736 | 1,780 | |||||||||
Non-current derivatives | — | 47 | — | |||||||||
Other non-current assets | 4,215 | 4,065 | 3,988 | |||||||||
Total non-current assets | 23,220 | 21,898 | 21,958 | |||||||||
Inventories | 14,164 | 12,473 | 12,041 | |||||||||
Trade receivables | 21,152 | 18,548 | 20,905 | |||||||||
Other current assets | 3,656 | 3,717 | 3,709 | |||||||||
Current derivatives | 181 | 741 | 318 | |||||||||
Short-term investments | 470 | 3,284 | 1,643 | |||||||||
Cash and cash equivalents | 2,720 | 6,063 | 5,475 | |||||||||
Total current assets | 42,343 | 44,826 | 44,091 | |||||||||
Total assets | 65,563 | 66,724 | 66,049 | |||||||||
Equity and liabilities | ||||||||||||
Equity attributable to equity holders of the Parent Company | 13,972 | 18,586 | 13,193 | |||||||||
Minority interests | 1 | 1 | 1 | |||||||||
Total equity | 13,973 | 18,587 | 13,194 | |||||||||
Long-term borrowings | 3,732 | 4,814 | 4,502 | |||||||||
Non-current derivatives | 2 | 8 | — | |||||||||
Deferred tax liabilities | 1,225 | 1,273 | 1,205 | |||||||||
Provisions for post-employment benefits | 6,441 | 7,391 | 6,586 | |||||||||
Long-term provisions | 3,963 | 4,352 | 4,258 | |||||||||
Total non-current liabilities | 15,363 | 17,838 | 16,551 | |||||||||
Accounts payable | 15,750 | 14,606 | 15,320 | |||||||||
Tax liabilities | 1,678 | 1,022 | 1,651 | |||||||||
Share redemption | — | — | 5,579 | |||||||||
Short-term liabilities | 10,047 | 9,377 | 9,293 | |||||||||
Short-term borrowings | 7,162 | 2,620 | 2,582 | |||||||||
Current derivatives | 412 | 725 | 247 | |||||||||
Other provisions | 1,178 | 1,949 | 1,632 | |||||||||
Total current liabilities | 36,227 | 30,299 | 36,304 | |||||||||
Total equity and liabilities | 65,563 | 66,724 | 66,049 | |||||||||
Contingent liabilities | 1,276 | 1,395 | 1,022 | |||||||||
13 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
CONSOLIDATED CASH FLOW STATEMENT
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Operations | ||||||||||||||||||||
Income after financial items | 752 | 783 | 1,422 | 1,170 | 3,825 | |||||||||||||||
Depreciation and amortization | 692 | 706 | 1,384 | 1,394 | 2,758 | |||||||||||||||
Capital gain/loss included in operating income | 0 | -61 | 0 | -61 | 112 | |||||||||||||||
Restructuring provisions | -81 | -203 | -764 | -288 | -737 | |||||||||||||||
Share-based compensation | 15 | 17 | 35 | 37 | 86 | |||||||||||||||
Change in accrued and prepaid interest | 68 | 35 | 27 | -110 | -38 | |||||||||||||||
Taxes paid | -280 | -423 | -398 | -363 | -743 | |||||||||||||||
Cash flow from operations, excluding change in operating assets and liabilities | 1,166 | 854 | 1,706 | 1,779 | 5,263 | |||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||
Change in inventories | -246 | -118 | -1,791 | -846 | -748 | |||||||||||||||
Change in trade receivables | -405 | -140 | 703 | 1,118 | -856 | |||||||||||||||
Change in other current assets | 12 | -147 | -59 | -153 | -354 | |||||||||||||||
Change in accounts payable | -118 | 1,108 | 76 | 789 | 1,779 | |||||||||||||||
Change in other operating liabilities and provisions | 66 | 67 | 105 | -232 | -524 | |||||||||||||||
Cash flow from change in operating assets and liabilities | -691 | 770 | -966 | 676 | -703 | |||||||||||||||
Cash flow from operations | 475 | 1,624 | 740 | 2,455 | 4,560 | |||||||||||||||
Investments | ||||||||||||||||||||
Divestment of operations | 0 | 1,218 | 0 | 1,218 | 1,064 | |||||||||||||||
Capital expenditure in property, plant and equipment | -932 | -792 | -1,720 | -1,370 | -3,152 | |||||||||||||||
Capitalization of product development | -118 | -110 | -228 | -194 | -515 | |||||||||||||||
Other | -25 | 196 | -69 | 118 | 217 | |||||||||||||||
Cash flow from investments | -1,075 | 512 | -2,017 | -228 | -2,386 | |||||||||||||||
Cash flow from operations and investments | -600 | 2,136 | -1,277 | 2,227 | 2,174 | |||||||||||||||
Financing | ||||||||||||||||||||
Change in short-term investments | -188 | -3,440 | 997 | -2,901 | -805 | |||||||||||||||
Change in borrowings | 1,060 | 902 | 4,037 | -290 | -1,408 | |||||||||||||||
Dividend | -1,126 | -2,222 | -1,126 | -2,222 | -2,222 | |||||||||||||||
Redemption of shares | — | — | -5,582 | 0 | — | |||||||||||||||
Repurchase and sale of shares | 12 | -537 | 118 | -96 | -1,463 | |||||||||||||||
Cash flow from financing | -242 | -5,297 | -1,556 | -5,509 | -5,898 | |||||||||||||||
Cash flow from continuing operations | -842 | -3,161 | -2,833 | -3,282 | -3,724 | |||||||||||||||
Cash flow from discontinued operations | ||||||||||||||||||||
Cash flow from operations | 0 | 1,795 | 0 | -2,446 | -2,446 | |||||||||||||||
Cash flow from investments | 0 | -233 | 0 | -727 | -727 | |||||||||||||||
Cash flow from financing | 0 | 3,992 | 0 | 8,504 | 8,504 | |||||||||||||||
Cash flow from discontinued operations | 0 | 5,554 | 0 | 5,331 | 5,331 | |||||||||||||||
Total cash flow | -842 | 2,393 | -2,833 | 2,049 | 1,607 | |||||||||||||||
Cash and cash equivalents at beginning of period | 3,460 | 4,194 | 5,475 | 4,420 | 4,420 | |||||||||||||||
Exchange-rate differences | 102 | -524 | 78 | -406 | -552 | |||||||||||||||
Cash and cash equivalents at end of period | 2,720 | 6,063 | 2,720 | 6,063 | 5,475 | |||||||||||||||
Change in net borrowings | ||||||||||||||||||||
Total cash flow, excluding change in loans and short-term investments | -1,712 | 9,444 | -7,867 | 5,240 | 3,820 | |||||||||||||||
Net borrowings at beginning of period | -5,958 | -6,775 | 304 | -2,974 | -2,974 | |||||||||||||||
Exchange-rate differences referring to net borrowings | -85 | -424 | -192 | -21 | -542 | |||||||||||||||
Net borrowings at end of period | -7,755 | 2,245 | -7,755 | 2,245 | 304 | |||||||||||||||
14 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
CHANGE IN TOTAL EQUITY
First half | First half | Full year | ||||||||||
SEKm | 2007 | 2006 | 2006 | |||||||||
Opening balance | 13,194 | 25,888 | 25,888 | |||||||||
Available for sale instruments | 38 | — | 30 | |||||||||
Change in revaluation and hedge reserve | -57 | 699 | 387 | |||||||||
Translation differences | 734 | -1,995 | -2,081 | |||||||||
Share-based payment | 35 | 37 | 86 | |||||||||
Income for the period recognized directly in equity | 750 | -1,259 | -1,578 | |||||||||
Income for the period | 1,037 | 1,972 | 3,847 | |||||||||
Total recognized income and expenses for the period | 1,787 | 713 | 2,269 | |||||||||
Repurchase and sale of shares | 118 | -96 | -1,463 | |||||||||
Dividend | -1,126 | -2,222 | -2,222 | |||||||||
Distribution of Husqvarna shares | — | -5,696 | -5,696 | |||||||||
Redemption of shares | — | — | -5,582 | |||||||||
Total transactions with equity holders | -1,008 | -8,014 | -14,963 | |||||||||
Closing balance | 13,973 | 18,587 | 13,194 | |||||||||
KEY RATIOS1)
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Continuing operations | ||||||||||||||||||||
Earnings per share, SEK2) | 1.94 | 1.83 | 3.70 | 2.62 | 9.17 | |||||||||||||||
Excluding items affecting comparability, SEK | 2.05 | 1.85 | 3.81 | 3.13 | 10.89 | |||||||||||||||
Return on net assets, % | — | — | 16.3 | 15.1 | 23.2 | |||||||||||||||
Excluding items affecting comparability, % | — | — | 14.6 | 13.1 | 21.2 | |||||||||||||||
Capital expenditure, SEKm | 932 | 792 | 1,720 | 1,370 | 3,152 | |||||||||||||||
Average number of employees | 55,822 | 53,451 | 56,315 | 54,234 | 55,471 | |||||||||||||||
Including discontinued operations | ||||||||||||||||||||
Return on equity, % | — | — | 14.9 | 15.8 | 18.7 | |||||||||||||||
Excluding items affecting comparability, % | — | — | 15.4 | 17.0 | 21.1 | |||||||||||||||
Net debt/equity ratio | — | — | 0.55 | -0.12 | -0.02 | |||||||||||||||
Net debt/equity ratio, adjusted for share redemption | — | — | — | — | 0.40 | |||||||||||||||
1) | For definitions, see page 20. | |
2) | Basic, on average number of shares after buy-backs, see page 17. |
SHARES
Shares held | ||||||||||||||||
Outstanding | Outstanding | Shares held | by other | |||||||||||||
Number of shares | A-shares | B-shares | by Electrolux | shareholders | ||||||||||||
Number of shares as of January 1, 2007 | 9,502,275 | 299,418,033 | 29,986,756 | 278,933,552 | ||||||||||||
Shares sold to senior managers under the stock option programs First quarter | -1,277,399 | 1,277,399 | ||||||||||||||
Second quarter | -149,515 | 149,515 | ||||||||||||||
Shares alloted to senior managers under the Performance Share Program 2004 | — | — | -1,178,743 | 1,178,743 | ||||||||||||
Number of shares as of June 30, 2007 | 9,502,275 | 299,418,033 | 27,381,099 | 281,539,209 | ||||||||||||
As % of total number of shares | 8.9 | % | ||||||||||||||
15 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
NET SALES BY BUSINESS AREA
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Consumer Durables, Europe | 10,496 | 10,336 | 21,050 | 20,335 | 44,233 | |||||||||||||||
Consumer Durables, North America | 9,043 | 9,287 | 17,665 | 18,384 | 36,171 | |||||||||||||||
Consumer Durables, Latin America | 2,161 | 1,697 | 4,144 | 3,466 | 7,766 | |||||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | 2,314 | 2,196 | 4,390 | 4,290 | 8,636 | |||||||||||||||
Professional Products | 1,767 | 1,749 | 3,455 | 3,337 | 6,941 | |||||||||||||||
Other | 4 | 57 | 11 | 63 | 101 | |||||||||||||||
Total | 25,785 | 25,322 | 50,715 | 49,875 | 103,848 | |||||||||||||||
OPERATING INCOME BY BUSINESS AREA
First half | First half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Consumer Durables, Europe | 299 | 376 | 769 | 781 | 2,678 | |||||||||||||||
Margin, % | 2.8 | 3.6 | 3.7 | 3.8 | 6.1 | |||||||||||||||
Consumer Durables, North America | 422 | 383 | 680 | 596 | 1,462 | |||||||||||||||
Margin, % | 4.7 | 4.1 | 3.8 | 3.2 | 4.0 | |||||||||||||||
Consumer Durables, Latin America | 103 | 76 | 185 | 153 | 339 | |||||||||||||||
Margin, % | 4.8 | 4.5 | 4.5 | 4.4 | 4.4 | |||||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | 47 | 54 | 49 | 7 | 163 | |||||||||||||||
Margin, % | 2.0 | 2.5 | 1.1 | 0.2 | 1.9 | |||||||||||||||
Professional Products | 140 | 143 | 243 | 226 | 535 | |||||||||||||||
Margin, % | 7.9 | 8.2 | 7.0 | 6.8 | 7.7 | |||||||||||||||
Total business areas | 1,011 | 1,032 | 1,926 | 1,763 | 5,177 | |||||||||||||||
Margin, % | 3.9 | 4.1 | 3.8 | 3.5 | 5.0 | |||||||||||||||
Common Group costs, etc. | -90 | -188 | -248 | -319 | -602 | |||||||||||||||
Items affecting comparability | -31 | 18 | -31 | -127 | -542 | |||||||||||||||
Operating income | 890 | 862 | 1,647 | 1,317 | 4,033 | |||||||||||||||
CHANGE IN NET SALES BY BUSINESS AREA
First half | ||||||||||||||||
Q2 2007 | 2007 in | |||||||||||||||
in comparable | First half | comparable | ||||||||||||||
Year-over-year, % | Q2 2007 | currencies | 2007 | currencies | ||||||||||||
Consumer Durables, Europe | 1.5 | 1.9 | 3.5 | 4.6 | ||||||||||||
Consumer Durables, North America | -2.6 | 4.6 | -3.9 | 5.5 | ||||||||||||
Consumer Durables, Latin America | 27.3 | 26.4 | 19.6 | 23.6 | ||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | 5.4 | 6.7 | 2.3 | 6.2 | ||||||||||||
Professional Products | 1.0 | 2.4 | 3.5 | 5.7 | ||||||||||||
Total change | 1.8 | 4.8 | 1.7 | 6.3 | ||||||||||||
CHANGE IN OPERATING INCOME BY BUSINESS AREA
First half | ||||||||||||||||
Q2 2007 | 2007 in | |||||||||||||||
in comparable | First half | comparable | ||||||||||||||
Year-over-year, % | Q2 2007 | currencies | 2007 | currencies | ||||||||||||
Consumer Durables, Europe | -20.5 | -21.6 | -1.5 | -1.5 | ||||||||||||
Consumer Durables, North America | 10.2 | 20.7 | 14.1 | 27.3 | ||||||||||||
Consumer Durables, Latin America | 35.5 | 36.0 | 20.9 | 25.9 | ||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | -13.0 | -11.5 | N/A | N/A | ||||||||||||
Professional Products | -2.1 | -0.7 | 7.5 | 8.5 | ||||||||||||
Total change, excluding items affecting comparability | 9.1 | 13.0 | 16.2 | 21.8 | ||||||||||||
16 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
EXCHANGE RATES
First half | First half | Full year | ||||||||||
SEK | 2007 | 2006 | 2006 | |||||||||
USD, average | 6.92 | 7.60 | 7.38 | |||||||||
USD, end of period | 6.86 | 7.27 | 6.87 | |||||||||
EUR, average | 9.20 | 9.33 | 9.26 | |||||||||
EUR, end of period | 9.25 | 9.24 | 9.05 | |||||||||
GBP, average | 13.64 | 13.55 | 13.58 | |||||||||
GBP, end of period | 13.74 | 13.32 | 13.49 | |||||||||
NET SALES AND INCOME PER QUARTER
Q1 | Q2 | Q3 | Q4 | Full year | ||||||||||||||||||
Net sales, SEKm | 2007 | 24,930 | 25,785 | |||||||||||||||||||
2006 | 24,553 | 25,322 | 26,087 | 27,886 | 103,848 | |||||||||||||||||
Operating income, SEKm | 2007 | 757 | 890 | |||||||||||||||||||
Margin, % | 3.0 | 3.5 | ||||||||||||||||||||
20071) | 757 | 921 | ||||||||||||||||||||
Margin, % | 3.0 | 3.6 | ||||||||||||||||||||
2006 | 455 | 862 | 685 | 2,031 | 4,033 | |||||||||||||||||
Margin, % | 1.9 | 3.4 | 2.6 | 7.3 | 3.9 | |||||||||||||||||
20061) | 600 | 844 | 1,136 | 1,995 | 4,575 | |||||||||||||||||
Margin, % | 2.4 | 3.3 | 4.4 | 7.2 | 4.4 | |||||||||||||||||
Income after financial items, SEKm | 2007 | 670 | 752 | |||||||||||||||||||
Margin, % | 2.7 | 2.9 | ||||||||||||||||||||
20071) | 670 | 783 | ||||||||||||||||||||
Margin, % | 2.7 | 3.0 | ||||||||||||||||||||
2006 | 387 | 783 | 684 | 1,971 | 3,825 | |||||||||||||||||
Margin, % | 1.6 | 3.1 | 2.6 | 7.1 | 3.7 | |||||||||||||||||
20061) | 532 | 765 | 1,135 | 1,935 | 4,367 | |||||||||||||||||
Margin, % | 2.2 | 3.0 | 4.4 | 6.9 | 4.2 | |||||||||||||||||
Income for the period, continuing operations, SEKm | 2007 | 492 | 545 | |||||||||||||||||||
2006 | 232 | 541 | 440 | 1,435 | 2,648 | |||||||||||||||||
Earnings per share, continuing operations, SEK2) | 2007 | 1.76 | 1.94 | |||||||||||||||||||
20071) | 1.76 | 2.05 | ||||||||||||||||||||
2006 | 0.79 | 1.83 | 1.54 | 5.01 | 9.17 | |||||||||||||||||
20061) | 1.28 | 1.85 | 2.81 | 4.95 | 10.89 | |||||||||||||||||
Value creation, continuing operations, SEKm | 2007 | 86 | 210 | |||||||||||||||||||
2006 | -23 | 256 | 565 | 1,404 | 2,202 | |||||||||||||||||
Income for the period, SEKm | 2007 | 492 | 545 | |||||||||||||||||||
2006 | 807 | 1,165 | 440 | 1,435 | 3,847 | |||||||||||||||||
Earnings per share, SEK2) | 2007 | 1.76 | 1.94 | |||||||||||||||||||
20071) | 1.76 | 2.05 | ||||||||||||||||||||
2006 | 2.78 | 3.95 | 1.54 | 5.05 | 13.32 | |||||||||||||||||
20061) | 3.27 | 3.97 | 2.81 | 4.99 | 15.04 | |||||||||||||||||
1) | Excluding items affecting comparability. | |
2) | Basic, based on average number of shares after buy-backs. |
Number of shares, basic | ||||||||||||||||||||||
Number of shares after buy-backs, million | 2007 | 281.4 | 281.5 | |||||||||||||||||||
2006 | 295.6 | 290.3 | 281.8 | 278.9 | 278.9 | |||||||||||||||||
Average number of shares after buy-backs, million | 2007 | 279.7 | 281.5 | |||||||||||||||||||
2006 | 294.0 | 295.0 | 291.6 | 280.4 | 288.8 | |||||||||||||||||
Items affecting comparability | ||||||||||||||||||||||
Restructuring provisions, write-downs and capital | 2007 | — | -31 | |||||||||||||||||||
loss on divestment, SEKm | 2006 | -145 | 18 | -451 | 36 | -542 | ||||||||||||||||
17 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
NET SALES BY BUSINESS AREA PER QUARTER
SEKm | Q1 | Q2 | Q3 | Q4 | Full year | |||||||||||||||||
Consumer Durables, Europe | 2007 | 10,554 | 10,496 | |||||||||||||||||||
2006 | 9,999 | 10,336 | 11,226 | 12,672 | 44,233 | |||||||||||||||||
Consumer Durables, North America | 2007 | 8,622 | 9,043 | |||||||||||||||||||
2006 | 9,097 | 9,287 | 9,216 | 8,571 | 36,171 | |||||||||||||||||
Consumer Durables, Latin America | 2007 | 1,983 | 2,161 | |||||||||||||||||||
2006 | 1,769 | 1,697 | 1,913 | 2,387 | 7,766 | |||||||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | 2007 | 2,076 | 2,314 | |||||||||||||||||||
2006 | 2,094 | 2,196 | 2,101 | 2,245 | 8,636 | |||||||||||||||||
Professional Products | 2007 | 1,688 | 1,767 | |||||||||||||||||||
2006 | 1,588 | 1,749 | 1,605 | 1,999 | 6,941 | |||||||||||||||||
OPERATING INCOME BY BUSINESS AREA PER QUARTER
SEKm | Q1 | Q2 | Q3 | Q4 | Full year | |||||||||||||||||
Consumer Durables, Europe | 2007 | 470 | 299 | |||||||||||||||||||
Margin, % | 4.5 | 2.8 | ||||||||||||||||||||
2006 | 405 | 376 | 672 | 1,225 | 2,678 | |||||||||||||||||
Margin, % | 4.1 | 3.6 | 6.0 | 9.7 | 6.1 | |||||||||||||||||
Consumer Durables, North America | 2007 | 258 | 422 | |||||||||||||||||||
Margin, % | 3.0 | 4.7 | ||||||||||||||||||||
2006 | 213 | 383 | 333 | 533 | 1,462 | |||||||||||||||||
Margin, % | 2.3 | 4.1 | 3.6 | 6.2 | 4.0 | |||||||||||||||||
Consumer Durables, Latin America | 2007 | 82 | 103 | |||||||||||||||||||
Margin, % | 4.1 | 4.8 | ||||||||||||||||||||
2006 | 77 | 76 | 83 | 103 | 339 | |||||||||||||||||
Margin, % | 4.4 | 4.5 | 4.3 | 4.3 | 4.4 | |||||||||||||||||
Consumer Durables, Asia/Pacific and Rest of world | 2007 | 2 | 47 | |||||||||||||||||||
Margin, % | 0.1 | 2.0 | ||||||||||||||||||||
2006 | -47 | 54 | 58 | 98 | 163 | |||||||||||||||||
Margin, % | -2.2 | 2.5 | 2.8 | 4.4 | 1.9 | |||||||||||||||||
Professional Products | 2007 | 103 | 140 | |||||||||||||||||||
Margin, % | 6.1 | 7.9 | ||||||||||||||||||||
2006 | 83 | 143 | 127 | 182 | 535 | |||||||||||||||||
Margin, % | 5.2 | 8.2 | 7.9 | 9.1 | 7.7 | |||||||||||||||||
Common Group costs, etc. | 2007 | -158 | -90 | |||||||||||||||||||
2006 | -131 | -188 | -137 | -146 | -602 | |||||||||||||||||
Items affecting comparability | 2007 | — | -31 | |||||||||||||||||||
2006 | -145 | 18 | -451 | 36 | -542 | |||||||||||||||||
18 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
PARENT COMPANY, INCOME STATEMENT
First | First | |||||||||||||||||||
half | half | Full year | ||||||||||||||||||
SEKm | Q2 2007 | Q2 2006 | 2007 | 2006 | 2006 | |||||||||||||||
Net sales | 1,430 | 1,500 | 2,832 | 2,918 | 6,204 | |||||||||||||||
Cost of goods sold | -1,265 | -1,337 | -2,488 | -2,596 | -5,428 | |||||||||||||||
Gross operating income | 165 | 163 | 344 | 322 | 776 | |||||||||||||||
Selling expenses | -156 | -160 | -320 | -316 | -693 | |||||||||||||||
Administrative expenses | -116 | -140 | -257 | -313 | -558 | |||||||||||||||
Other operating income | 10 | 30 | 19 | 71 | 171 | |||||||||||||||
Other operating expenses | -2 | -55 | -2 | -55 | -704 | |||||||||||||||
Operating income | -99 | -162 | -216 | -291 | -1,008 | |||||||||||||||
Financial income | 471 | 5,901 | 1,119 | 6,533 | 12,867 | |||||||||||||||
Financial expenses | -95 | -610 | -437 | -656 | -1,163 | |||||||||||||||
Financial items, net | 376 | 5,291 | 682 | 5,877 | 11,704 | |||||||||||||||
Income after financial items | 277 | 5,129 | 466 | 5,586 | 10,696 | |||||||||||||||
Appropriations | 5 | 4 | 10 | 9 | 14 | |||||||||||||||
Income before taxes | 282 | 5,133 | 476 | 5,595 | 10,710 | |||||||||||||||
Taxes | 8 | 10 | 13 | 17 | 58 | |||||||||||||||
Income for the period | 290 | 5,143 | 489 | 5,612 | 10,768 | |||||||||||||||
PARENT COMPANY, BALANCE SHEET
SEKm | June 30, 2007 | June 30, 2006 | Dec. 31, 2006 | |||||||||
Assets | ||||||||||||
Non-current assets | 24,732 | 26,808 | 24,133 | |||||||||
Current assets | 14,119 | 12,960 | 13,102 | |||||||||
Total assets | 38,851 | 39,768 | 37,235 | |||||||||
Equity and liabilities | ||||||||||||
Restricted equity | 4,562 | 4,562 | 4,562 | |||||||||
Non-restricted equity | 8,368 | 10,282 | 8,668 | |||||||||
Total equity | 12,930 | 14,844 | 13,230 | |||||||||
Untaxed reserves | 732 | 747 | 742 | |||||||||
Provisions | 551 | 593 | 595 | |||||||||
Non-current liabilties | 3,592 | 5,424 | 4,482 | |||||||||
Current liabilities | 21,046 | 18,160 | 18,186 | |||||||||
Total equity and liabilities | 38,851 | 39,768 | 37,235 | |||||||||
Assets pledged | 5 | 5 | 5 | |||||||||
Contingent liabilities | 1,356 | 1,177 | 1,341 | |||||||||
19 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
FIVE-YEAR REVIEW
Excluding | ||||||||||||||||||||||||
Husqvarna | ||||||||||||||||||||||||
2006 | 2005 | 2005 | 20041) | 20032) | 20022) | |||||||||||||||||||
Net sales, SEKm | 103,848 | 100,701 | 129,469 | 120,651 | 124,077 | 133,150 | ||||||||||||||||||
Operating income, SEKm | 4,033 | 1,044 | 3,942 | 4,807 | 7,175 | 7,731 | ||||||||||||||||||
Margin, % | 3.9 | 1.0 | 3.0 | 4.0 | 5.8 | 5.8 | ||||||||||||||||||
Margin, excluding items affecting comparability, % | 4.4 | 4.0 | 5.4 | 5.6 | 6.2 | 6.1 | ||||||||||||||||||
Income after financial items, SEKm | 3,825 | 494 | 3,215 | 4,452 | 7,006 | 7,545 | ||||||||||||||||||
Margin, % | 3.7 | 0.5 | 2.5 | 3.7 | 5.6 | 5.7 | ||||||||||||||||||
Margin, excluding items affecting comparability, % | 4.2 | 3.4 | 4.8 | 5.3 | 6.0 | 6.0 | ||||||||||||||||||
Income for the period, SEKm | 2,648 | -142 | 1,763 | �� | 3,259 | 4,778 | 5,095 | |||||||||||||||||
Earnings per share, SEK | 9.17 | -0.49 | 6.05 | 10.92 | 15.25 | 15.58 | ||||||||||||||||||
Average number of shares after buy-backs, million | 288.8 | 291.4 | 291.4 | 298.3 | 313.3 | 327.1 | ||||||||||||||||||
Dividend, SEK | 4.00 | 7.50 | 7.50 | 7.00 | 6.50 | 6.00 | ||||||||||||||||||
Value creation, SEKm | 2,202 | 1,305 | 2,913 | 3,054 | 3,449 | 3,461 | ||||||||||||||||||
Return on equity, % | 18.7 | — | 7.0 | 13.1 | 17.3 | 17.2 | ||||||||||||||||||
Return on net assets, % | 23.2 | 5.4 | 13.0 | 17.5 | 23.9 | 22.1 | ||||||||||||||||||
Net debt/equity ratio | -0.02 | — | 0.11 | 0.05 | 0.00 | 0.05 | ||||||||||||||||||
Capital expenditure, SEKm | 3,152 | 3,654 | 4,765 | 4,515 | 3,463 | 3,335 | ||||||||||||||||||
Average number of employees | 55,471 | 57,842 | 69,523 | 72,382 | 77,140 | 81,971 | ||||||||||||||||||
1) | 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. | |
2) | Comparative figures for the years 2002 and 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 year-end 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 borrowings less liquid funds. | |
Net debt/equity ratio | Net borrowings in relation to equity. | |
Equity/assets ratio | 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 rate before tax for 2007 is calculated at 12% compared to 11% for 2006, 12% for 2005 and 2004 and 13% for 2003 and 2002. | |
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. |
20 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
Accounting and valuation principles
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 2006. IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, has been applied for the accounting of the Husqvarna operations as described below.
Discontinued operations
The Outdoor Products operations of the Group were distributed to the shareholders in June 2006, under the name of Husqvarna AB. The Outdoor Products operations were transferred to Husqvarna AB at book values.
As of June 2006, Husqvarna is reported as discontinued operations in the income and cash-flow statements for 2006. Discontinued operations include the period January-May, 2006.
In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the net results for the distributed Outdoor Products operations in 2006 are reported in the Group’s income statement as a single net in the item “Income for the period from discontinued operations”. This means that the comparison figures for the former Outdoor Products operations are excluded from the sales and expenses reported in the income statements for 2006. Similarly, Outdoor Products operations are reported in the cash-flow statement for 2006 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.
Assets and liabilities for Husqvarna were excluded from the balance sheet as of May 31, 2006.
21 (22)
Half-yearly Report January — June 2007 | Stockholm, July 17, 2007 |
This interim report has not been audited.
Telephone conference and presentation
A telephone conference will be held at 15.00 CET on July 17, 2007. The conference will be chaired by Hans Stråberg, President and CEO of Electrolux, and Fredrik Rystedt, CFO.
A slide presentation for the second quarter of 2007 will be available on the Electrolux websitewww.electrolux.com/ir
Financial reports in 2007
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 atwww.electrolux.com/ir
The information in this interim report is that which Electrolux is required to disclose under the Securities Exchange and Clearing Operations Act and/or the Financial Instruments Trading Act. It was released for publication at 08.00 CET on July 17, 2007.
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.
22 (22)