Highlights of the full-year of 2022
In full-year 2022, net sales were SEK 134,880m (125,631) and operating income excl. non-recurring items was SEK 831m (7,528). Earnings declined due to lower volumes, as a result of weaker market demand, and to elevated cost levels from production inefficiencies in North America. Strong price execution and attractive product and brand offering contributed positively to earnings.
Highlights of the fourth quarter of 2022
In the fourth quarter, net sales amounted to SEK 35,769m (35,372) and operating income to SEK -1,964m (882), corresponding to a margin of -5.5% (2.5).
Operating income includes non-recurring items of SEK -1,352m (-727). Excluding these non-recurring items, operating income amounted to SEK -612m (1,609), corresponding to a margin of -1.7% (4.5). The year-over-year decline was a result of lower volumes in all four business areas and significantly higher cost levels in Business Area North America, which reported an underlying loss of SEK 1.2bn.
Income for the period amounted to SEK -1,922m (596) and earnings per share were SEK -7.12 (2.09).
Operating cash flow after investments was SEK 242m (2,103).
The Board of Directors proposes that no payment of dividend will be made for 2022.
Decision on February 1, 2023, to discontinue production at the Nyíregyháza factory in Hungary from the beginning of 2024 will result in a negative non-recurring item of approximately SEK 550m in the first quarter of 2023.
President and CEO Jonas Samuelson’s comment
In 2022, new challenges presented themselves in addition to supply chain constraints: high general inflation, raised interest rates, soaring energy prices, and increased geopolitical tensions. These negatively impacted consumer demand for household appliances, especially evident in the latter part of the year.
In the fourth quarter, significantly lower sales volumes resulted in an organic sales decline of 8.4%. The volume decline across all regions was coupled with severely elevated cost levels in our North American operation. This resulted in an operating loss for the Group of SEK 612m, excluding non-recurring items. We have firm plans in place to structurally lower costs under the Group-wide cost reduction and North America turnaround program and in the quarter we continued to reduce discretionary spending. A strong focus on inventory management and adjusting production rates to the current demand environment resulted in an overall inventory reduction from previously high levels, especially of in-house produced finished products that at the end of the year were at overall normal levels.
On a positive note, I am pleased with how well received our product launches across all regions have been during 2022. This was particularly evident in the fourth quarter with the strong earnings contribution from our attractive product offering, even in this challenging demand environment with reduced consumer purchasing power. This strengthens my confidence in our ability to drive mix improvement also going forward, with an average consumer star rating of 4.64 for the Group in 2022. Another achievement was the strong net price realization across all regions, despite promotional activity returning to normal levels towards the end of 2022. I am very pleased that we through price increases fully offset significant cost inflation, primarily in raw material and logistics, both in the full-year as well as in the quarter.
It is encouraging that we have reduced our climate footprint significantly and already in 2022 reached the 2025 science-based climate target to reduce CO2 emissions in our own operations by 80% compared to 2015. We are now reviewing our targets going forward, raising the bar on our own sustainability agenda even further.
Based on our review of production capacity needs, we have decided to discontinue production at the Nyíregyháza factory in Hungary from the beginning of 2024. The strategic direction is to optimize the refrigeration production footprint from a cost perspective through both outsourcing and own production leveraging Group scale.
Looking into 2023, consumer sentiment is anticipated to continue to be negatively impacted by a high inflation and interest rate environment, although with regional differences. Demand for core appliances in 2023 full-year is therefore expected to be negative for all regions except for the Asia-Pacific, Middle East and Africa region, which is assessed to be flat compared to 2022.
On the back of this, we estimate our volumes in 2023 to decline year-over-year, partly mitigated by mix improvements from our strong offering. We expect External factors to be negative for the year, driven by energy and labor cost inflation as well as currency headwind and most of this will impact Europe and Latin America. Although we foresee benefits from lower raw material costs, the positive impact on earnings is reduced as a higher share than normal of raw material procured at last year’s rates will be consumed in 2023. This as a consequence of higher inventory levels of supplies and reduced production rate in the fourth quarter of 2022. Given the regional variations in cost inflation and demand outlook, we anticipate differences in the price dynamic for our business areas, with high promotional activity in North America. Hence, we see a challenge to fully offset an anticipated negative impact from External factors in 2023 full-year with price on a Group level. The expected positive year-over-year earnings contribution of SEK 4-5bn from Cost efficiency and reduced investments in innovation and marketing combined, related to the Group-wide cost reduction and North America turnaround program, is reconfirmed.
I am convinced that we have the right strategy as well as the experience and the organizational structure needed to navigate in volatile environment and seize opportunities. A successful implementation of the Group-wide cost reduction and North America turnaround program will be our number one priority for 2023.
Highlights of the full-year of 2022