STOCKHOLM, July 20, 2023 /PRNewswire/ --
Highlights of the second quarter of 2023
President and CEO Jonas Samuelson's comment
The weak market demand environment, with lower consumer purchasing power resulting in more consumers shifting to lower price points, continued also in the second quarter. Lower residential construction and remodeling activity caused significantly weaker demand within the built-in kitchen category, mainly impacting us in Europe where we have a strong position in this category. This resulted in significantly lower sales volumes compared to last year. In light of this challenging market situation, I am pleased that we managed to keep mix flat in the quarter thanks to our attractive offering.
Promotional activity remained high because of the lower consumer demand. Price contributed somewhat positively to earnings, essentially driven by last year's price increases, and thus tapering off in the quarter, while promotions increased significantly compared to last year. Given this, we expect net price to turn negative from the third quarter.
In the second quarter, organic sales declined by 8.4% year-over-year, while underlying operating profit was in line with last year thanks to the execution of the Group-wide cost reduction and North America turnaround program. Most prerequisites for stable operations are now in place with premium freight and spot buys at a minimum level, new ocean freight rates employed during the quarter and improved manufacturing efficiency. 83% of the 3,800 headcount reduction target was achieved. In the quarter, the combined earnings contribution from higher cost efficiency and lower innovation and marketing costs was approximately SEK 1.6bn, year-over-year, with a significant portion realized in business area North America. This was a significant step-up sequentially, where realization of logistic savings was a significant driver, along with improved productivity in North America. For the full-year 2023, we are now targeting savings of at least SEK 5bn, year-over-year. In 2024, the aim is to achieve savings of over SEK 7bn compared to 2022.
In the quarter, raw material cost was neutral. However, currency deteriorated and we continued to face higher cost inflation from labor and energy, year-over-year. The combined headwind from external factors was to a significant extent offset by price.
On a positive note, we had a material improvement in our operating cash flow after investments in the quarter to SEK 3.1bn.
Consumer sentiment related to consumer durables purchases is projected to remain negatively impacted by the high inflation and interest rate environment throughout 2023. Consequently, we expect market demand for full year 2023 to be negative for all regions, and hence revise the outlook for Asia-Pacific, Middle East and Africa to negative from neutral.
As part of our ongoing work to sharpen our strategic focus to grow profitably in selected home appliance categories in the mid- and premium segments, primarily under our main brands Electrolux, AEG and Frigidaire, we have initiated preparations to divest non-core assets with total potential value of approximately SEK 10bn. Although the businesses in Egypt and South Africa are profitable and the non-core brands we are now looking at divesting are all well-known in their respective markets, these assets, i.e., mass appliance brands and water heaters, do not have sufficiently strong synergies with our core strategy to warrant the required focus and investment from us. These actions will provide resources to execute our strategy at speed and scale, as well as supporting the work to optimize the capital structure.
In the challenging times we are now experiencing, it is vital to continue with strategic portfolio management to be able to provide attractive and relevant consumer experience innovations under our strategic brands. Further structural simplification and complexity reduction are thus being evaluated to enable increased speed, focus and profitability. Efficiency is a prerequisite and our number one priority this year remains; to deliver on the Group-wide cost reduction and North America turnaround program and further accelerate cost improvements.
Telephone conference 09.00 CET
A telephone conference is held at 09.00 CET today, July 20. Jonas Samuelson, President and CEO, Therese Friberg, CFO, and Anna Ohlsson-Leijon, CCO, will comment on the report.
To only listen to the telephone conference, use the link:
https://edge.media-server.com/mmc/p/sodz9rru
OR
To both listen to the telephone conference and ask questions, use the link:
https://register.vevent.com/register/BI071ca5bc626a4c57bdf64549ff31fd2c
Presentation material available for download
www.electroluxgroup.com/ir
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 20, 2023.
For further information, please contact:
Sophie Arnius, Investor Relations, +46 70 590 80 72
Electrolux Group Press Hotline, +46 8 657 65 07
The following files are available for download:
Interim Report Q2 2023_FINAL |
