Swedish appliance maker Electrolux reported on Tuesday its first-quarter 2003 financial results.
The company reported the following highlights:
Higher operating income for Consumer Durables in Europe
Continued positive trend in sales and income for appliances in North America in local currency
Substantial downturn in income for Consumer Durables outside Europe and North America Net Sales and Income
Net sales for the Electrolux Group in the first quarter of 2003 amounted to SEK 32,062 million, as against SEK 33,580 million for the same period in the previous year. This corresponds to a decrease of 4.5 percent, of which -11.2 percent refers to changes in exchange rates, +0.1 percent to changes in Group’s structure, and +6.6 percent to price/mix/volume.
Operating income declined to SEK 1,798 million, corresponding to 5.6 percent of sales, and income after financial items decreased to SEK 1,798 million, which corresponds to 5.6 percent of sales. Net income declined to SEK 1,246 million, corresponding to SEK 3.95 per share.
The above income figures for 2002 include items affecting comparability in the amount of SEK 1,885 million. This amount refers to a capital gain of SEK 1,800 million on the divestment of the remaining part of the leisure-appliances product line, and to a capital gain of SEK 85 million on the divestment of the European home-comfort operation.
Excluding items affecting comparability, operating income decreased by 5.7 percent to SEK 1,798 million, representing 5.6 percent of net sales. Income after financial items was unchanged and amounted to SEK 1,798 million, corresponding to 5.6 percent of net sales.
Net income increased by 1.5 percent to SEK 1,246 million, corresponding to SEK 3.95 per share.
Operating cash flow generated by business operations was SEK -3,845 million as compared to SEK -3,396 million in the previous year after adjustment for proceeds from divested operations in 2002. The decrease is mainly due to a higher increase in working capital than in the first quarter of 2002.
Operations by Business Area
Industry shipments of core appliances in Europe increased by almost 4 percent compared with the first quarter of 2002. The market in Western Europe grew by approximately 3 percent and Eastern Europe by approximately 8 percent. Group sales of appliances in Europe showed good growth, particularly in Eastern Europe. Operating income improved, mainly as a result of higher volumes and lower cost for materials.
In the U.S., industry shipments of core appliances were largely unchanged, compared with a strong first quarter in 2002. Shipments of major appliances, i.e. including room air-conditioners and microwave ovens, increased by approximately 6 percent. Group sales of core appliances in North America showed good growth in local currency, particularly in the refrigerator and cooker product areas. Operating income and margin improved.
Sales of room air-conditioners increased over the previous year. Operating income for the home comfort product area improved and was slightly positive.
Demand for appliances in Brazil declined from the previous year. The Group’s Brazilian operation reported somewhat higher sales in local currency. Operating income showed a strong improvement and reached break even, compared with a substantial loss in the first quarter of 2002. In India, Group sales decreased substantially as a result of ongoing restructuring and downsizing. Operating income for the Indian operation showed a substantial downturn, and a major loss was reported for the quarter. In China, Group sales decreased substantially, mainly due to ongoing consolidation and restructuring of operations, downward pressure on prices and a less favorable product mix. Operating income for the Chinese operation showed a considerable decline and was negative. The market for appliances in Australia increased in volume. Group sales for the Australian operation decreased, however. Operating income was largely unchanged as a result of synergies from the integration into the Electrolux Group.
Demand for floor-care products increased in Europe, while the US market showed a continued negative trend. Group sales decreased in both markets. Operating income and margin declined, mainly due to an unfavorable product mix and downward pressure on prices, particularly in the U.S.
Demand for outdoor products for the consumer market in Europe was largely unchanged. Group sales of garden equipment in Europe were in line with the previous year. Both operating income and margin showed a substantial improvement, as a result of implemented restructuring and higher internal efficiency. Demand for garden equipment in the US showed good growth due to favorable weather. Group sales increased in volume and operating income improved both in local currency and SEK.
Overall, sales for the Consumer Durables business area declined after translation into SEK. Operating income declined with a slightly lower margin.
Professional Indoor Products
Demand for food-service equipment was considerably weaker than in the previous year in most of the Group’s markets. Sales for this product line declined and operating income showed a substantial downturn.
Group sales of laundry equipment were also lower than in 2002, particularly in North America and Japan. Operating income decreased, but with an unchanged margin.
Demand for compressors was in line with the previous year. Group sales in this product category were largely unchanged for comparable units. Operating income showed a substantial improvement, although from a low level, as a result of implemented restructuring and write-downs of assets, as well as higher volumes of new products.
Overall, sales and operating income for Professional Indoor Products were lower than in the previous year. Operating margin improved slightly, however.
Professional Outdoor Products
Demand for chainsaws showed an upturn in both Europe and the US, particularly in the light-duty segments. Group sales of chainsaws increased in volume, partly on the basis of new distribution channels in North America.
Pre-seasonal sales of lawn and garden products showed strong growth, also to a large extent a result of new distribution channels. Sales of diamond tools and power cutters declined for comparable units as a result of weak demand from the construction market. Total sales in this product category increased, however, due to the acquisition of Diamant Boart as of July 1, 2002.
Overall, sales and operating income for Professional Outdoor Products were higher than in the previous year. Operating margin was largely unchanged.
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