Electrolux Q2 2022 Interim report: Constraints impacting volume and productivity

Highlights of the second quarter of 2022

• Net sales increased to SEK 33,749m (30,303), corresponding to an organic sales growth of 0.3%. Strong price execution across all business areas and mix improvements from product launches contributed to growth, while volumes declined significantly. Market demand was down in most regions.
• Operating income amounted to SEK 560m (1,983), corresponding to a margin of 1.7% (6.5). Supply chain and labor constraints resulted in substantially lower volumes and higher costs, especially in business area North America.  
• Income for the period amounted to SEK 257m (1,383) and earnings per share were SEK 0.93 (4.81).
• Operating cash flow after investments was SEK 403m (1,456).

President and CEO Jonas Samuelson's comment

In the quarter, organic sales were relatively flat, with positive price and mix execution offsetting significant production volume losses and lower consumer demand. As in the first quarter, we were impacted by significant supply chain challenges. Operating margin was 1.7%. Business areas Europe and North America were, however, disproportionally affected, while the situation improved sequentially for our other two business areas. The irregular deliveries of multiple components, mainly electronics, continued to significantly impact our volumes, cause severe production inefficiencies and increase costs for airfreight and spot buys. Through my colleagues' dedicated work, we successfully optimized the use of available components and managed to deliver solid mix improvements despite these circumstances and a weakening demand environment. However, we were still not able to fully meet the demand, particularly in laundry and premium cooking. We continue to collaborate closely with our suppliers to mitigate these supply chain constraints and expect sequential improvements from mid-2022, with continued risks of disruptions relating to the resurgence of the coronavirus as well as consequences of the war in Ukraine.

It is truly disappointing that our North American business area reported a loss in the quarter. The production output and efficiency challenges driven by supply disruptions and labor shortages caused a heavy impact on earnings. On top of this we had an issue with a critical faulty component, which was fixed in the quarter.

Through strong price execution, we offset significant cost inflation in the quarter, primarily in raw material and logistics. We remain confident to do so also for the full year, as we have done for the past four years. In an inflationary environment, price increases are more accepted in the market. This, combined with attractive products, makes us well-positioned to continue to be successful in raising prices if needed.

With inflation soaring to historically high levels, increased interest rates, global supply chain constraints, as well as uncertainty regarding the coronavirus pandemic and the war in Ukraine, the visibility for the rest of the year is limited. We maintain our regional market demand outlook for the full year 2022, with the exception of North America, which is revised to negative. However, we still estimate demand to be above pre-pandemic levels except for Latin America and Russian market's impact on Europe. We expect the main constraint for industry shipments to switch from the global supply chain situation in the first half of the year to a slowdown in consumer demand in the second half.  

I am very pleased with the strong consumer demand for our new innovative products and the earnings contribution from these launches. This is our most launch-intensive year ever and we expect the strong earnings contribution from mix for the 2022 full year to a large extent compensate for the volume decline, year-over-year.

Providing relevant innovations under well-established brands to our target consumers is a key driver for profitable growth. One great example of this is how we strengthen our emerging markets' water heater offering through an improved user experience, including increased energy efficiency. A star rating of 4.89 out of 5 in the important Egyptian market really affirms this. 

In volatile times as we are now experiencing, it is vital to continue on our long-term strategic journey while also being efficient and agile. Our strategic focus has so far been on better products, more targeted brands, and increased manufacturing efficiency. We now expand our scope beyond the product itself to all interactions we have with our consumers, including aftermarket. Through our new organization, as previously announced, with a dedicated Commercial & Consumer Journey team, we are ready to take our game to the next level by getting even closer to the consumer.  

Telephone conference 09.00 CET

A telephone conference is held at 09.00 CET today, July 21. Jonas Samuelson, President and CEO and Therese Friberg, CFO will comment on the report.

Details for participation by telephone

Sweden: [phone]

International/UK: [phone]

U.S.: [phone]

Pin/Passcode: 33503877#

Slide presentation for download

www.electroluxgroup.com/ir

Link to webcast

https://edge.media-server.com/mmc/p/mtyzd85i

For further information, please contact:

Sophie Arnius, Head of Investor Relations

[phone]

Paul Palmstedt, Electrolux Press Hotline

[phone]

This is information that AB Electrolux is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on July 21, 2021.

Electrolux is a leading global appliance company that has shaped living for the better for more than 100 years. We reinvent lifetime taste, care and wellbeing experiences for millions of people, always striving to be at the forefront of sustainability in society through our solutions and operations. Under our brands, including Electrolux, AEG and Frigidaire, we sell approximately 60 million household products in approximately 120 markets every year. In 2021 Electrolux had sales of SEK 126 billion and employed 52,000 people around the world. For more information go to www.electroluxgroup.com

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