STOCKHOLM, Sweden, Oct. 21, 2002 (PRIMEZONE) -- Electrolux (Nasdaq:ELUX)
- Net income per share rose by 58% to SEK 13.10
- Marked upturn in income for North American operation, although from a low level in 2001
- Substantial improvement in income and margin for appliances in Europe
- Higher income for both Professional Indoor and Outdoor Products for comparable units
- Net debt/equity ratio improved to 0.13 as a result of continued strong cash flow
Net sales and income
Net sales for Electrolux in the first nine months of 2002 amounted to SEK 102,564m, compared with SEK 103,922m for the same period in 2001. This corresponds to a decrease of 1.3%, of which -2.2% is attributable to exchange rate fluctuations, -3.9% to changes in Group structure, and +4.8% to volume/price/mix.
Operating income amounted to SEK 8,294m (6,330), corresponding to 8.1% (6.1) of sales. Income after financial items was SEK 8,104m (5,453), corresponding to 7.9% (5.2) of sales. Net income increased to SEK 6,051m (4,156), which corresponds to SEK 18.40 (12.20) per share.
Items affecting comparability
The above mentioned income figures for the first nine months of 2002 include items affecting comparability amounting to SEK 1,910m (1,357).
Income excluding items affecting comparability Excluding items affecting comparability, operating income increased by 28% to SEK 6,384m (4,973), corresponding to 6.2% (4.8) of sales, and income after financial items increased by 51% to SEK 6,194m (4,096), corresponding to 6.0% (3.9) of sales. Net income increased by 52% to SEK 4,300m (2,824), corresponding to SEK 13.10 (8.30) per share.
Financial net
Net financial items amounted to SEK -190m (-877). The improvement is mainly due to lower interest rates and reduced net borrowings.
Impact of changes in exchange rates In terms of both transaction and translation effects, changes in exchange rates during the period had a negative impact on income after financial items of approximately SEK -155m. The corresponding impact in the third quarter is estimated to approximately SEK -220m. This impact is mainly related to the strengthening of the Swedish krona against the US dollar.
New accounting principle for R&D as of January 1, 2002 A new Swedish accounting standard, RR 15 Intangible assets, came into effect as of January 1, 2002. According to this standard, costs for development of products and software should be capitalized.
Development costs of SEK 155m referring to projects initiated during the first nine months have been capitalized. Income for the previous year has not been adjusted in this respect.
The five other Swedish accounting standards issued by The Swedish Financial Standards Council effective as of January 1, 2002 have not had any material effect on the Group's accounts.
Third quarter
Sales in the third quarter of 2002 declined to SEK 31,760m (32,793). Of the total decline of 3.2%, -7.8% is attributable to changes in exchange rates, -2.6% to changes in Group structure, and +7.2% to volume/price/mix.
Operating income decreased to SEK 1,781m (2,442), corresponding to 5.6% (7.4) of sales. Income after financial items declined to SEK 1,728m (2,202), which corresponds to 5.4% (6.7) of sales. Net income was SEK 1,239m (1,928), corresponding to SEK 3.80 (5.65) per share.
Income excluding items affecting comparability Excluding items affecting comparability, operating income increased by 62% to SEK 1,756m (1,085), corresponding to 5.5% (3.3) of sales, and income after financial items increased by 102% to SEK 1,703m (845), corresponding to 5.4% (2.6) of sales. Net income increased by 105% to SEK 1,222m (596), corresponding to SEK 3.75 (1.75) per share.
Cash flow
Cash flow from operations, adjusted for changes in exchange rates, amounted to SEK 7,604m (7,818). The improvement in income in the first nine months of 2002 has been offset by a lower decrease in working capital than in the previous year, as well as the final payment in the first quarter of USD 94 million (approximately SEK 990m) related to the PBGC pension litigation.
Financial position
Equity
Equity as of September 30, 2002 amounted to SEK 30,664m (31,968), which corresponded to SEK 95.00 (93.70) per share. Return on equity was 26.6% (19.2). Excluding items affecting comparability, the return on equity was 18.9% (13.0).
Net assets
Average net assets for the period amounted to SEK 37,584m (45,177) excluding items affecting comparability and SEK 36,551m (43,249), including items affecting comparability. This decrease is primarily due to divestments and restructuring as well as exchange rate effects. Return on net assets was 30.3% (19.5). Return on net assets excluding items affecting comparability was 22.6% (14.7).
Net assets as of September 30, 2002 in relation to sales was 25.9% (29.9).
Net debt/equity and liquid funds
Net borrowings decreased to SEK 4,187m (9,678). The net debt/equity ratio decreased to 0.13 (0.30).
Liquid funds at the end of the period were SEK 15,038m (15,125).
Deficits in pension plans
The decline in the stock markets has reduced the value of the Group's pension assets.
Operating income for the third quarter of 2002 has been negatively impacted by a provision of SEK 45m related to a deficit in the Swedish pension plans.
As of September 30, 2002 the Group's pension funds in the US, which have previously been over-funded, were under-funded by approximately USD 87m (approximately SEK 810m). Assuming no change in market valuation and interest rates, the Group's US subsidiary would be required to either record a pension liability against equity in the fourth quarter of 2002, make a cash contribution or a combination of the two. The Group would also likely recognize an increased pension expense in 2003.
Value created
The total value created by the Group during the first nine months of 2002 amounted to SEK 2,720m, compared with SEK 229m in the first nine months of 2001. The improvement is mainly a result of an increase in operating margin to 6.2% (4.8), due primarily to higher volumes in Consumer Durables in the US and Europe. The capital turnover rate for the Group increased to 3.64 from 3.07 in the preceding year.
Repurchase of shares
The Electrolux Board has authorized repurchase of own shares in accordance with the authorization by the Annual General Meeting in April 2002.
The AGM authorized the Board of Directors to acquire and transfer own shares during the period up to the next AGM. Shares of series A and/or B may be acquired on condition that after each repurchase transaction the company owns a maximum of 10% of the total number of shares.
The purpose of the share repurchase program has been to ensure the possibility to adapt the capital structure of the Group and thereby contribute to increased shareholder value, or to use the repurchased shares in connection with the financing of potential acquisitions and the Group's option program.
Following the reduction of the share capital of AB Electrolux in May 2002, the company's share capital consists of 10,000,000 A-shares and 328,712,580 B-shares, totaling 338,712,580 shares. After the reduction Electrolux owned 9,148,000 previously repurchased B-shares.
During the third quarter Electrolux repurchased 6,774,252 B-shares. As of September 30, 2002, the company owned a total of 15,922,252 B-shares, equivalent to 4.7% of the total number of outstanding shares. The highest price paid during the third quarter was SEK 169 per share and the lowest price was SEK 151. The average price paid was SEK 160.
Outlook for the rest of 2002 (See Note)
Market demand for the rest of the year is estimated to be flat or slightly down in both Europe and North America compared with the previous year.
Notwithstanding the above expectations for market demand, and on the basis of the ongoing restructuring measures as well as the costs related to the new refrigerator line in the US in 2001, the Group should achieve a significant improvement in operating income and value created for the full year 2002, excluding items affecting comparability.
Stockholm, October 22, 2002
Hans Straberg President and CEO
Note: This statement is an adjustment to the outlook included in the Group's half-yearly report issued on July 18, 2002, which stated: "Market demand during the second half of 2002 is expected to be generally flat in both Europe and North America compared with the same period in the previous year. However, there is still uncertainty regarding consumer confidence and spending in the US. During both the third and fourth quarters comparison of industry shipments of appliances will be against strong quarters in 2001. Notwithstanding expectations for flat market demand, and on the basis of the ongoing restructuring measures, as well as the costs related to the new refrigerator line in the US in 2001, the Group should achieve an improvement in operating income and value created for the second half of 2002, compared with the same period in 2001. Operating income and value creation for the full year of 2002 is thus expected to show a significant improvement, excluding items affecting comparability."
Factors affecting forward-looking statements This report contains "forward-looking" statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the financial goals or targets of Electrolux for future periods and future business and financial plans. Actual results may differ materially from these goals and targets due to a variety of factors. These factors include, but may not be limited to the following; the success in developing new products and marketing initiatives, progress in achieving operational and capital efficiency goals, the success in identifying growth opportunities and acquisition candidates and the integration of these opportunities with existing businesses, progress in achieving structural and supply-chain reorganization goals, competitive pressures to reduce prices, significant loss of business from major retailers, consumer demand, effects of currency fluctuations and the effect of local economies on product demand.
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