Swedish appliance maker Electrolux said fourth quarter 2010 net sales were SEK 27,556 million (approx. US$4,280 million), down from SEK 28,215 million in 4Q 2009. Income in the fourth quarter was SEK 677 million (approx. $105 million), up slightly from SEK 664 million in 4Q 2009. Net sales increased 1.6% in comparable currencies.
Electrolux said strong growth in Latin America and the Asia/Pacific region offset lower sales volumes in Europe and North America. Latin America and the Asia/Pacific region also saw strong performance for its Professional Products. Operating income in North America and Europe declined, following higher costs for raw materials and lower sales prices.
Electrolux showed a record profit and reached the operating margin target of 6% for the full-year 2010, excluding items affecting comparability. It reported that all business areas outperformed previous year’s results. Improvements in product mix and cost savings offset higher costs for raw materials and downward pressure on prices.
"Our operations have improved their results in a market that continues to be very competitive and in an environment with increasing costs for raw materials," said President and CEO Keith McLoughlin, who took over the position on Jan. 1, 2011, with the retirement of Hans Stråberg. "The good performance confirms that we have the right strategy; innovative products, investments in the Electrolux brand and cost efficiencies are paying off."
MCLOUGHLIN ON REGIONAL RESULTS
McLoughlin said, "We have improved our product mix in North America by successfully increasing sales under our own brands." The company continued phasing out products with lower profitability, mainly under private labels.
In Europe the company also benefited from an improved product mix and by building sales in the important built-in appliance segment, McLoughlin said. The company also improved its quality and cost base and in 2011 will continue to introduce new premium products in Europe.
McLoughlin said operations in Latin America had a very strong fourth quarter and surpassed their yearly record results from 2009.
Electrolux's Asia/Pacific business doubled its results for 2010 compared to 2009, McLoughlin said, and achieved an operating margin above 10%.
PRODUCT SECTOR RESULTS
Floor care has successful product launches in all regions in 2010, helping the business strengthen its product mix and achieve a strong operating margin for 2010, McLoughlin said.
Electrolux's Professional Products achieved record 4Q and full year 2010 results. "Our strategy to offer an innovative product range in combination with strict cost control works in this segment as well," McLoughlin said.
McLoughlin said efficiency measures taken in North America and Europe in 4Q 2010 will further improve the Electrolux manufacturing structure and expects they will save the company about SEK 2-2.5 billion (approx. $310-390 million) annually by 2015. Costs for these measures will be SEK 500 million in 2011 and 2012.
RAW MATERIALS INCREASES
McLoughlin noted that raw materials costs keep going up, including for steel, resins, and base metals. Electrolux signed contracts for a much of 2011's raw-material requirements but still expect raw materials costs will increase SEK 1.5-2 billion in 2011. To compensate for higher prices, the company announced price increases on appliances in North America and will increase prices selectively in Europe and other global markets. McLoughlin expected to see the positive effect of these increases in the second quarter of 2011.
"Demand in our largest markets recovered somewhat in 2010," McLoughlin said. "We expect that demand for appliances in North America and Europe will continue to grow modestly in 2011 with most of the growth in the second half of the year."
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