Electrolux CEO Jonas Samuelson sees appliance demand improving.
CEO looks ahead to lower costs, increased demand
By Jonas Samuelson, President/CEO, Electrolux Group
The following excerpts were taken from Jonas Samuelson’s fourth-quarter and full-year earnings commentary, released last week by Electrolux.
2023 proved to be another challenging year. High inflation, rising interest rates and geopolitical tensions continued to weigh on consumer sentiment, which remained weak in our major markets.
The overall reduced purchasing power led to more consumers shifting to lower price points and postponing purchases in discretionary categories. This, in combination with the industry’s higher degree of promotional activity, resulted in an earnings decline for the full-year despite continued good execution on the group-wide cost reduction and North America turnaround program, launched in 2022.
In three out of four business areas we managed to navigate this challenging market environment in a fairly good way. Our problem remains the North American business area, which continues to be lossmaking. It is truly disappointing that the significant cost savings we have realized in North America are not showing on the bottom line, but rather consumed by the industry’s high degree of promotional activity. This situation worsened toward the end of the year, when price pressure in the U.S. intensified, triggered by weaker demand than expected during Black Friday.
The transition of cooking manufacturing in Springfield [Tennessee] also weighed on profitability in the quarter, with higher costs due to closure of the legacy factory and production inefficiencies in the new factory. This process limits the product availability in our second-largest category after refrigeration.
I am convinced that the investments we have made in the new factory and new innovative modular product architectures are the right ones for future competitiveness in the cooking category. It is pleasing to see that despite a very challenging quarter in North America, our strategy focusing on growth in targeted high-value categories resulted in a positive mix. The ramp-up of the new Springfield factory is expected to be finalized in terms of volumes and cost efficiency by the end of 2024.
Looking into the beginning of 2024, weak consumer sentiment is anticipated to continue with consumers shifting to lower price points and postponing purchases in discretionary categories. However, as inflationary pressure is subsiding and interest rates are expected to come down, we expect demand in major markets to stabilize in the course of the year.
As outlined previously, we are implementing substantial additional cost reduction activities with the objective to generate total positive year-over-year earnings contribution of SEK 4 billion to SEK 5 billion from cost efficiency and investments in innovation and marketing combined in 2024. In light of the Red Sea situation there is, however, a degree of uncertainty related to ocean freight costs.
The challenging market environment that we are experiencing emphasizes the importance of staying agile and ready to adapt to rapidly changing conditions. Our main priority remains delivering on our cost reduction targets and to efficiently implement the new, simplified organizational structure announced in October. We thereby aim to successfully leverage our global scale and strengthen our position in selected mid- and premium categories to restore margins and return to profitable growth.
Jonas Samuelson is president/CEO of Electrolux Group, a 105-year-old global appliance manufacturer based in Stockholm, Sweden, that sells approximately 60 million kitchen, laundry, floor care and room air products annually in over 120 markets.