AB Electrolux (publ) Annual Report 2018

FY2018 Annual Report · AB Electrolux (publ)

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Electrolux
Annual Report 2018

Well positioned to
create value

–

A strong focus on innovation to improve the consumer
experience and a track record of successfully increasing
cost efficiency and flexibility are important competitive assets.
In combination with a healthy cash flow and a strong
balance sheet, this make Electrolux well positioned
to continue to deliver shareholder value.

global leader

Electrolux is a global leader in household appliances and
appliances for professional use. We reinvent taste, care and
wellbeing experiences for more enjoyable and sustainable
living around the world. We offer thoughtfully designed,
innovative and sustainable solutions, under well-established
brands including Electrolux, AEG and Frigidaire.

Focused proFitable growth strategy
We focus on consumer-relevant product innovations
to drive profitable growth. Our global presence offers
economies of scale, and we invest in modularized
product architectures and further cost efficiency and
flexibility in production. Sustainability is a key business
driver, and our profitable growth is supported by a strong
balance sheet and healthy cash flow generation.

124

BILLION SEK
IN SALES

MILLION PRODUCTS
SOLD ANNUALLY

150

SALES IN MARKETS

54,000

EMPLOYEES

Table of contents

CEO STATEMENT

Good progress despite strong
headwinds in 2018
Well positioned to benefit from
global trends
How to achieve profitable growth
Well positioned to create value

Taking the next steps to
accelerate profitable growth

REPORTING

Report by the Board of Directors
Notes
Proposed distribution of earnings
Auditors’ report
Eleven-year review
Operations by business area, yearly
Quarterly information
Sustainability reporting
Corporate governance report

Events and reports
Annual General Meeting
100 years of better living

10
10
13

17
44
81
82
86
88
89
90
101

119
120
121

The Annual Report for AB Electrolux (publ), 556009-4178,
consists of the Report by the Board of Directors and Notes to
the financial statements, pages 17—81. The Annual Report is
published in Swedish and English.

ANNUAL REVIEW ON THE WEB

Please find more information about business development,
strategy and business areas in the Electrolux Annual Review
2018, accessible on all your digital platforms. These sections
were previously included in the Annual Report.

Please visit the Electrolux Annual Review 2018 at:
www.electroluxgroup.com/annualreports/2018

SUSTAINABILITY

The Electrolux sustainability framework and execution
are described in the Sustainability reporting section on
pages 90—99. The full Electrolux Sustainability Report is
published online in March 2019 at:
www.electroluxgroup.com/sustainabilityreport2018

341

298

Printed matter

Larsson Offsettryck

Electrolux, AEG and Zanussi are the registered trademarks of
AB Electrolux. For further information about trademarks, please
contact Electrolux Group Intellectual Property, Trademark.

Concept, text and production by Electrolux
Investor Relations and Hallvarsson & Halvarsson.

CEO STATEMENT

Good progress in a
challenging environment

sales growth

1.7

percent

operating margin1)

5.4

percent

operating cash flow 2)

3,649

SEKm

dividend 3)

8.50

SEK per share

1) Excluding non-recurring items.
2) After investments.
3) Proposed by the Board.

business areas

share of
group sales

Major Appliances

Europe, Middle East
and Africa (EMEA), 34%

Major Appliances
North America, 31%

Major Appliances
Latin America, 14%

Major Appliances
Asia/Pacific, 7%

Home Care &

SDA, 6%

Professional
Products, 7%

sales by region

33%

39%

15%

Core markets
Growth markets

CEO statement 5

Jonas Samuelson, Electrolux President and CEO.

I am pleased with our performance
in 2018 in the face of challenging
conditions. Our focus on innovation
to improve the consumer experience
and our high cost efficiency are key
competitive assets. Combined with
price increases, these factors had
a positive impact on our earnings,
but could not fully compensate for
the strong headwinds we faced
primarily from raw material and
currency.

Our performance in 2018 was very encouraging in several key
areas. We launched a large number of new innovative products
designed to deliver outstanding consumer experiences. We
continued to improve our cost efficiency throughout the Group,
and we carried out large parts of our re-engineering program
that aims to drive profitable growth in the years ahead. We also
reinforced our position as a sustainability leader in the industry,
which is an ever-more crucial competitive advantage as sustain-
ability is playing an increasingly important role for consumers
and is a key driver of demand.

6 CEO statement

Good progress despite strong
headwinds in 2018
Underlying operating income and margin
contracted due to the negative impact of
raw material and currency. In fact, it is very
unusual for us to experience such strong
headwinds from both these factors in the
same year. In addition, the U.S. trade tariffs
that were imposed during the year had an
adverse effect. Therefore it was important
that we managed to implement price
increases and improve the mix by providing
more relevant, innovative product offer-
ings. We continued to perform favorably in
terms of cost efficiencies, mainly as a result
of continuous improvements. Sales growth
was 1.7%, driven mainly by price increases

“We reported strong
organic sales growth in
EMEA and continued to
gain market shares.”

and mix improvements across most business
areas although acquisitions also contributed.
We reported strong organic sales growth
in EMEA, mainly due to our consistent focus on
innovative products under premium brands,
and we continued to gain market shares in
the focus areas of laundry and built-in kitchen.
Operating income excluding non-recurring
items improved as higher volumes, mix

improvements and increased cost efficiency
offset higher costs for raw materials and
currency headwinds. Strong growth in Eastern
Europe continued to drive overall market
demand in Europe, while demand in Western
Europe declined somewhat.

Our North American operation was signifi-

cantly impacted by increased raw material
costs and U.S. trade tariffs as well as from
lower volumes, partly related to private label.
To mitigate the cost inflation, several cost-
based price increases were announced and
implemented. We also announced a major
re-engineering of our Anderson freezer/
fridge factory to increase our competitive-
ness by providing a sharper product offering
and achieving higher efficiency. To simplify
operations, lower costs and increase focus

earnings development1)

operating income bridge1)

SEKbn

7.4
8

0
EBIT
2017

1.5

7.4

0.8

6.7

-2.0

-0.9

-0.1

Organic
EBIT
contribution
2017

Organic
contribution

Raw
material
& tariﬀs

Cost
eﬃciency

Raw
material
& tariﬀs

Currency

Cost
eﬃciency

Currency

Acq/
Divest

EBIT
2018

Operating income excl. non-recurring items in
2018 was SEK 6,653m (7,407), corresponding to
a margin of 5.4% (6.1).

Our focus on innovation to improve the consumer experience and our high cost efficiency
are key competitive assets. Combined with price increases these had positive impact
on operating income (EBIT), but could not fully compensate for the strong headwind we
faced, primarily from raw material and currency.

1) Operating income excluding non-recurring items.

ELECTROLUX ANNUAL REPORT 2018

CEO statement 7

Taste
By making it possible to make
great-tasting food.

We sell cookers, hobs, ovens, hoods, micro-
wave ovens, refrigerators, freezers and dish-
washers for households and professional
kitchens throughout the world. Electrolux is
a leader in kitchen appliances and new func-
tionalities are continuously being developed.

In 2018, Taste innovations included the new
SenseProbe induction hob with sous-vide and
a world-first wireless and battery-less probe,
that provides precise and automated assis-
tance when cooking, and the AEG UltraFresh+
fridge-freezer, with smart cooling technology
that automatically regulates the perfect
environment for food.

share of
group sales

Taste, 69%
Care, 21%
Wellbeing, 10%

AEG SenseProbe

Three clear areas
for innovation

Care
By making it possible to care for your clothes
so they stay new for longer.

Washing machines and tumble dryers are the core of
our product offering for washing and garment care.
Demand is driven by innovations that promote
user-friendliness and resource efficiency.

Care innovations in 2018 included the development of
a new sensor system that enables tumble dryers to sense
when clothes are perfectly dry.

Pure F9 cordless vacuum cleaner

Wellbeing
By making it possible to achieve healthy
wellbeing in your home.

Electrolux vacuum cleaners, air-conditioning equipment,
water heaters, heat pumps, small domestic appliances,
and accessories are sold to consumers worldwide. We
have a strong, global distribution network and an attrac-
tive product offering, including service.

In the Wellbeing segment in 2018, we launched the ground-
breaking cordless vacuum cleaner Electrolux Pure F9 that
uses powerful battery technology and innovative design to
combine the performance of a traditional vacuum cleaner
with the freedom of a stick vacuum.

Electrolux
PerfectCare 900

8 CEO statement

Frigidaire Gallery Black Stainless Suite

on the most profitable products, we reduced
the number of products by about 50%.

The ongoing cost-efficiency initiatives in
Latin America continued to be effective and
an important phase of the re-engineering
of the freezer/fridge plant in Curitiba was
concluded. Investments in manufacturing
re-engineering play a key role in driving prof-
itable growth. Macroeconomic turbulence
impacting currencies had a negative impact,

along with raw material cost. This was offset
by price increases, mix improvements and
higher cost efficiency.

In Asia/Pacific, organic sales growth
was driven largely by two-digit profitable
growth in laundry and food preparation in
Southeast Asia, offering products tailored to
specific consumer needs in these regions. For
example, cold water technology in washing
machines enables consumers in Indonesia

to get perfectly cleaned clothes despite
electricity limitations. However, operating
income declined as currency headwinds
and increased cost for raw material were not
fully offset by higher sales volumes and mix
improvements.

In line with its strategy, Home Care & SDA
was in a product transition phase with lower
volumes as a consequence. The shift in
market demand toward cordless vacuums

Targets1)

operating margin

capital turnover-rate

return on net assets

7,407

6,274

2,741

5.2

6.1

5,310

4.3

Target
≥6%

4.5

5.0

5.8

5.9

5.3

Target
≥4 times

29.9

36.0

20,957

20,572

23,381

22.7

Target
>20%

25,166

24,848

14.2

11.0

2.2

3,581

3.2

Operating income, SEKm
Operating margin, %

Capital turnover-rate, times

Average net assets, SEKm
Return on net assets, %

In 2018, operating income included
non-recurring items of SEK -1,343m.

Reducing the amount of capital tied up in opera-
tions creates opportunities for profitable growth.

Sustained profitability and a small, efficient
capital base enable us to achieve a high
long-term return on capital.

1) Financial targets are over a business cycle.

ELECTROLUX ANNUAL REPORT 2018

CEO statement 9

accelerated, and I am therefore very pleased
to see that we strengthened our offering with
the launch of the ground-breaking premium
cordless vacuum cleaner Pure F9. The business
area completed its product portfolio review
after divesting the North American commer-
cial and central vacuum cleaner businesses.

An improved product mix contributed
positively to earnings.

Professional Products continued its prof-

itable growth journey based on product
innovation and increased market coverage.
The new laundry line launched in 2018 uses
cutting-edge innovations and connectivity

solutions to maximize uptime and best-in-
class energy savings. Acquisitions strength-
ened the beverage offering and added
functional sales expertise through laundry
rental services. Earnings remained solid.

case studies – profitable growth

Increase competitiveness
in the U.S. through factory
re-engineering

Electrolux is investing approximately USD 250m
in the Anderson facility to drive profitable growth
in North America with new lines of innovative
Frigidaire refrigerator and freezer products.
The investment will increase efficiency through
automation and modularized products. The
automation level will be significantly higher;
from below 10% to around 35%.

Learn more on Electrolux Annual Review 2018 at:
www.electroluxgroup.com/annualreports/2018

29.9

36.0

20,957

20,572

23,381

22.7

25,166

24,848

14.2

11.0

Average net assets, SEKm

Return on net assets, %

sales growth

employee engagement

sustainability

123,511

121,093

120,771

124,129

112,143

Target
80

1.1

2.2

-1.0
16

0.5

1.7

Net sales, SEKm
Sales growth, %1)

1) Total sales growth excluding currency translation

effects.

Target
≥4%

Target1)
-50%

–

Engagement index

Product use
Greenhouse gas

Manufacturing
Transport

In 2017, a mini survey was carried out to monitor
the teams with low scores in previous surveys.
The survey showed progress.

1) Reduce CO₂ impact by 50% in 2020 focusing on product

efficiency in the main product categories. Sales
volumes and emission factors are normalized to 2005.

To reach the growth target, we are continuing
to strengthen our positions in core markets,
new markets and segments.

The employee engagement survey (EES) is an
important tool to assess engagement, leader-
ship and commitment to strategy.

Sustainability leadership is a key business driver
and important to realizing the Electrolux strategy
for profitable growth.

ELECTROLUX ANNUAL REPORT 2018

10 CEO statement

Trends in our industry

Growing
global
middle class

Consumer
power

Trends
in our
industry

Digitalization

Consolidation

Sustainability

trends
The increasing pace of change in the global
market stems from a number of trends that
influence volumes and the types of products
that are in demand, but also how these products
are produced, marketed and sold.

Well positioned to benefit from
global trends
Electrolux is operating in a global market
that is being transformed by a number of
important trends. A key trend is the rise of
consumer power. I am therefore convinced
that our consumer-focused business model
gives us a competitive advantage in today’s
market where the consumers are very well
informed about their options. Our experience
innovation and brand/product focus are
therefore specifically tailored to appeal to
targeted consumer segments and needs.
As a global business with local presence
in regions like Africa, Middle East, Eastern
Europe, Latin America and Southeast Asia,
we have opportunities to leverage the
continued rapid growth of the global middle
class. Along with digitalization and sustain-
ability, these trends necessitate significant
investments and drive industry consolidation.

With our leadership in sustainability and
our re-engineering investments, Electrolux
is well positioned to drive growth.

How to achieve profitable growth
Electrolux has a clear strategy to deliver
profitable growth and create shareholder
value. We define profitable growth as sales
growth of at least 4% and an operating
margin of at least 6% over a business cycle.
At the heart of our strategy is a strong con-
sumer focus. I firmly believe that to achieve
our targets, we first need to offer outstanding
consumer experiences and, with our deep
understanding of consumer needs, we are
well positioned to do so. We will continue to
use our global strength to support invest-
ments in consumer-driven product innova-
tion, and over the past number of years we
have successfully sharpened our brands AEG
and Frigidaire to target specific consumer

segments and trends. The Electrolux brand
is now being sharpened in a similar way.

A clear consumer focus
Innovation is crucial to our continued suc-
cess, especially in an industry where the
consumers have the power. I am very proud
that we launched a large number of new
innovative products in 2018. Successful
launches of new products under premium
brands contributed to an improved product
mix, and we continue to invest in R&D to
develop new generations of products under
well-established brands with a clear proposi-
tion. Product development focuses on three
main areas to offer outstanding consumer
experiences: great-tasting food, care for
clothes and healthy wellbeing in the home,
see page 7.

ELECTROLUX ANNUAL REPORT 2018

CEO statement 11

Focused strategy for profitable growth

path to profitable growth

Electrolux applies a three-step model for
all business areas. It starts with ensuring
stability and predictability in all key
processes in combination with clear focus.
In the second step, the business model
has resilience to external factors and clear
competitive advantages that enable
profitability over time. The third step is to
accelerate growth in a targeted way.

1
Stability &
Focus

2
Sustainable
Profitability

3
Targeted
Growth

Profitable
Growth

A clear consumer
focus sets us apart

Execution to increase
competitiveness

With drivers that
prepare us for the future

Taste, Care
& Wellbeing
Innovation

Branded
Star Products
with
Preferred
Partners

Outstanding
Consumer
Experiences

Engaging
Ownership
& Quality
Experience

Operational Excellence

Talent, Teamship & Continuous Improvement

Emerging Markets
Acceleration

Digital
Transformation

Sustainable
Development

electrolux
business modell

To achieve the Group’s
purpose – Shape living
for the better – and drive
profitable growth, Electrolux
uses a business model
that focuses on creating
Outstanding Consumer
Experiences.

Increased competitiveness
It is in our DNA to continuously strive to further
improve efficiency and quality across the
organization, from production to adminis-
tration. Our global product architecture and
automation program strengthens competi-
tiveness and increases flexibility and product
speed to market. In 2018, we implemented
some elements of our re-engineering pro-
grams, in which we expect to invest a total
of SEK 8bn over a 4–5 year period, starting
in 2018. These investments will drive growth
through the manufacture of innovative prod-
ucts as well as strong cost improvements.
Teamship is essential to successfully launch
new, innovative products, meet operational
excellence targets and move toward prof-
itable growth. A clear company purpose
and culture that promote engagement and
attract talents is also key.

“Sustainability is
increasingly important to
consumers, and therefore
a key driver of demand.”

Future drivers
Emerging markets acceleration, digitization
and sustainability are key drivers that we focus
on to strengthen our competitiveness going
forward. We see an opportunity to target the
global emerging markets with a clear market
positioning, targeted product platforms and
innovation road map. During the year, we
announced the merger of the two organiza-
tions within APAC and MEA, which are regions
with similar market dynamics and this will
position Electrolux well to drive future growth.

Digital manufacturing helps us minimize
product cost while maximizing quality and
flexibility. Through connected appliances,
digitalization is a key tool to create new con-
sumer experiences and innovations at dif-
ferent stages - from exploring alternatives to
using the product. Importantly, it also enables
us to be in closer contact with the consumer
throughout the lifespan of the product.

I am very proud that Electrolux remains
a sustainability leader in the appliance indus-
try. This is crucial as sustainability is increas-
ingly important to consumers, and therefore
a key driver of demand. Efficient sustainable
operations also help reduce cost. For the past
17 years, Electrolux has been a signatory of
the UN Global Compact, and we are recog-
nized as industry leader in the prestigious
Dow Jones Sustainability Index.

ELECTROLUX ANNUAL REPORT 2018

12 CEO statement

case studies – profitable growth

How premium laundry
added >30% EBIT
improvement

Electrolux identified a potential to grow
profitably in the premium laundry cat-
egory in Europe under the AEG brand,
with the help of a sharpened brand and
product offering. Investment in focused
innovation based on consumers’ Care
habits led to the launch of a new gener-
ation of AEG laundry products. A clear
understanding of consumer relevance
inherent in the development process
resulted in increased market shares
and outstanding consumer experience
ratings across Europe. One year after
the launch for the AEG brand in Europe,
operating income (EBIT) in premium
laundry increased by >30% and the price
index for laundry increased by 7.5 per-
centage points. This is a clear example
of how we execute our profitable
growth strategy.

Learn more on Electrolux Annual
Review 2018 at: www.electroluxgroup.com/
annualreports/2018

case studies – profitable growth

Induction focus
accelerates
profitable growth
in EMEA

For several years, the business area
Major Appliances EMEA consistently
focused on induction hob innovation
as an important profitable growth
area. Based on consumer insights
and in-house developed technology,
Electrolux has been able to outpace
the high market growth in this built-in
kitchen segment and has increased
its European market share by more
than 5 percentage points over the
past ten years. Induction is a true
star product with high margins and
strong growth prospects.

Learn more on Electrolux Annual
Review 2018 at:
www.electroluxgroup.com/
annualreports/2018

ELECTROLUX ANNUAL REPORT 2018

CEO statement 13

Key areas to drive profitable growth

Strong focus on consumer experience
innovation through focused brands that drive mix

Focused and innovative product portfolio with proven consumer benefits
Well-established brands with strong innovation heritage
Leading position in targeted areas
Leading position in sustainability is growing sales and lowering cost
Clear strategy to increase aftermarket sales

Modularized products in automated production
with digitally integrated global supply chain

Strong track record of delivering cost reductions
Global product architecture and automation program
is instrumental to continue drive cost efficiency
Global presence offers economies of scale

Healthy cash flow generation and a strong
balance sheet supporting further growth

Strong balance sheet and firepower offer growth opportunities
Healthy cash flow generation
Increasing earnings stability through product mix and cost efficiency

Acquisitions drive growth
Acquisitions are integral to the efforts to
strengthen and expand our product offering
and drive profitable growth. In 2018, we
acquired Schneidereit, a German supplier of
laundry rental solutions for professional cus-
tomers. This enables us to develop our func-
tional sales offering and drive aftermarket
sales. We also acquired SPM Drink Systems,
an Italian leading manufacturer of primarily
professional dispensers of frozen beverages.
The acquisition is part of the strategy to
strengthen our full-service offering for the
professional market.

Well positioned to create value
The expertise and commitment of our
employees remain crucial to our success,

and I would like to thank all our employees
for their important contributions throughout
the year.

In 2019, Electrolux will turn 100. This means

that we have been reinventing what great
taste, care and wellbeing experiences mean
for our consumers for a century. In doing
so, we have enhanced the quality of life for
hundreds of millions of people around the
world. Our journey toward profitable growth
continues in 2019 and beyond. A strong focus
on consumer experience innovation and
sharpened brands will remain a vital driver in
order to improve the mix. Modularized prod-
ucts produced in automated production with
a digital global supply chain are important to
increase cost efficiency and flexibility. Growth
is further supported by a healthy cash flow

ELECTROLUX ANNUAL REPORT 2018

generation and our strong balance sheet.
I am confident that we are well positioned
with the right business focus in this challeng-
ing cost environment to continue to deliver
shareholder value.

Stockholm, February 2019

Jonas Samuelson
President and CEO

14 Taking the next steps to accelerate profitable growth

Taking the next steps to
accelerate profitable growth

During the past years, Electrolux have made many improvements in terms of focusing its brands
and product offering on consumer experience innovation as well as invested in modularization
and automation. This has resulted in a substantial improvement of Electrolux performance
in 2017 and 2018. In 2019, Electrolux turns 100 and is now taking the next step to accelerate
profitable growth with the announcements in the beginning of 2019 that work has been initiated
to prepare a separation of the Professional Products business area and the creation of a sharper
and more focused consumer business.

Separating Electrolux Professional aiming
to create substantial shareholder value

Sharpened and more focused consumer
business to accelerate profitable growth

The Electrolux Board of Directors announced on January 31,
2019, they had initiated work intending to propose that a share-
holders meeting decides to split the Group into two listed com-
panies, “Electrolux” for household appliances and “Electrolux
Professional” for professional appliances. The Board of Directors
believes that such a split has the potential to create substantial
shareholder value over time, given that the two businesses have
different end markets, customers and success drivers. A split
will enable both companies to focus on their respective oppor-
tunities to drive profitable growth, with distinct strategies for
innovation and customer focus, as well as a high level of capital
efficiency. The separation costs are expected to be relatively low.

If the shareholders decide in favor of such a proposal,
AB Electrolux shareholders will receive shares in Electrolux
Professional in proportion to their shareholding in AB Electrolux.
The intention is to list Electrolux Professional on Nasdaq
Stockholm during the first half of 2020. The Board expects to
provide an update on the preparations and a more detailed
time plan around mid-year 2019.

Electrolux Professional: creating shareholder
value as a stand-alone company
• The only supplier with a full and integrated hospitality
industry offer under one brand
– Pursuing further market leadership through innovation

and organic and M&A driven expansion into new segments

• Global footprint in a resilient, steadily growing underlying
end market
• Attractive financial profile with good growth and margin
potential
– Increased agility to leverage market and M&A opportunities

as a stand-alone company

• Unlocking shareholder value through fair stock market
valuation

As Electrolux now becomes even more focused on the consumer
business, there are tremendous opportunities to drive profitable
growth. This will be done by accelerating innovation in the key
experience areas, developing the aftermarket presence through
a world-class ownership solutions offering and leveraging the
continued digital evolution of the marketplace. An organization
with four consumer-focused business areas and strong global
capabilities both in the front and back end of the operations
will enable Electrolux to deliver in these areas. Electrolux finan-
cial targets will remain unchanged following a separation of
Professional Products.

Four regional consumer business areas
Electrolux is revising its business area structure to create four
consumer-focused regional business areas, ensuring a unified
approach to each market with common branded platforms
and interactions with consumers. This means the Home Care &
SDA business area, currently responsible for Electrolux offering
of vacuum cleaners and other products for wellbeing in the
home, is being combined with the four current major appliances
business areas.
• Unified approach with common branded platforms
and interactions with consumers
• Leverage new business models, digital transformation
and evolving routes to market
• Accelerate emerging markets consumer value proposition
to drive growth

Creating a global function for Consumer Experiences
To accelerate product and ownership experience innovation,
Electrolux is also pulling together central functions focused on
consumer experiences into a new organizational structure,
headed by a Group Chief Experience Officer. This organization is
globally responsible for areas such as marketing, design, prod-
uct lines, digital consumer solutions and ownership experience.
• Accelerate product and ownership innovation
• Translating experience innovation into brand storytelling

and product design

• Drive connected ownership solutions for aftermarket growth

ELECTROLUX ANNUAL REPORT 2018

VISIT OUR ONLINE REPORT

Electrolux Annual Review 2018

–

Some of the information previously included in the Annual Report can now
be found in the Electrolux Annual Review 2018, accessible on all your
digital platforms. The Annual Review includes comprehensive information about
business development, strategy for profitable growth, business areas as well
as profitable growth case studies.

Please visit: www.electroluxgroup.com/annualreports/2018

Report by the
Board of Directors

Board of Directors’ report and financial statements 17

Report by the
Board of Directors

• Net sales increased to SEK 124,129m (120,771).
• Organic sales grew by 1.3%, contribution from acquisitions/divestments was 0.4%
and currency translation had a positive impact of 1.1%.
• Organic sales growth for Major Appliances EMEA, Major Appliances Latin America,
Major Appliances Asia/Pacific and Professional Products.
• Operating income amounted to SEK 5,310m (7,407), corresponding to a
margin of 4.3% (6.1).
• Excluding non-recurring items of SEK –1,343m, operating income amounted
to SEK 6,653m, corresponding to a margin of 5.4% (6.1).
• Operating cash flow after investments amounted to SEK 3,649m (6,877).
• Income for the period amounted to SEK 3,805m (5,745), corresponding to
SEK 13.24 (19.99) per share.
• The Board proposes a dividend for 2018 of SEK 8.50 (8.30) per share, to be paid
in two installments.

Key data

seKm

Net sales

Sales growth, %1)

Organic growth, %

Acquisitions, %

Divestments, %

Changes in exchange rates, %

Operating income2)

Operating margin, %

Income after financial items

Income for the period

Earnings per share, SEK3)

Dividend per share, SEK

Operating cash flow after investments5)

Return on net assets, %

Capital turnover-rate, times

Net debt/equity ratio

Return on equity, %

Average number of employees

2018

124,129

2017

Change, %

120,771

1.7

1.3

0.7

–0.3

1.1

5,310

4.3

4,887

3,805

13.24

8.504)

3,649

22.7

5.3

0.08

18.2

0.5

–0.4

1.4

–0.4

0.2

7,407

6.1

6,966

5,745

19.99

8.30

6,877

36.0

5.9

0.01

31.9

54,419

55,692

–28

–30

–34

1) Change in net sales adjusted for currency translation effects.
2) Operating income for 2018 includes non-recurring items of SEK –1,343m. Excluding these items, operating income amounted to SEK 6,653m corresponding

to a margin of 5.4% (6.1), see Note 7.

3) Basic, based on an average of 287.4 (287.4) million shares for the full year, excluding shares held by Electrolux.
4) Proposed by the Board of Directors.
5) See page 30.

AB Electrolux (publ), 556009–4178
Annual Report 2018, page 17–81
Sustainability Reporting 2018, page 90–99
Corporate Governance Report 2018, page 101–118

ELECTROLUX ANNUAL REPORT 2018

18 Board of Directors’ report and financial statements

2018 in summary

• Sales growth was 1.7%, mainly driven by price increases and mix improvements.
• Four business areas reported organic sales growth.
• Operating income declined to SEK 5,310m (7,407) and includes non-recurring items of SEK –1,343m (0).
• Increased prices, mix and cost efficiency partly offset higher input costs, lower volumes and currency
headwinds.
• A large number of new innovative products were launched. Schneidereit and SPM Drink Systems
were acquired.

Market overview
Market demand for core appliances in Europe increased by
1% in 2018. This was driven by strong growth of 7% in Eastern
Europe, while demand in Western Europe declined by 1%. In
the U.S., market demand for core appliances declined by 1% in
2018, partly related to higher industry prices. Uncertainties in
the political and economic environment in Brazil and Argentina
impacted market demand negatively why, consumer demand
for core appliances is estimated to have decreased in 2018.
Consumer demand in Chile is, however, estimated to have
increased. Overall market demand for appliances in Australia
declined slightly in 2018 due to a weaker economy and slow-
ing property market. The market in Southeast Asia remained
favorable and is estimated to have increased.

Net sales and operating income
Net sales for the Electrolux Group increased by 2.8% in 2018.
Organic sales increased by 1.3%, the net contribution of acqui-
sitions and divestments was 0.4% and currency translation had
a positive impact of 1.1%. Organic growth was driven by price
increases and mix improvements. Major Appliances EMEA

reported strong organic sales growth as a result of increased
sales volumes and product mix improvements. Cost-based price
increases and improved mix explain Major Appliances Latin
America’s high organic sales growth. Major Appliances Asia/
Pacific’s higher sales was a result of strong growth in Southeast
Asia while Professional Products grew organically across all
three areas food, laundry and beverage.

Lower volumes, primarily under private labels, impacted
Major Appliances North America’s sales negatively. Home
Care & SDA was in a product transition phase with lower sales
volumes as a consequence.

Operating income amounted to SEK 5,310m (7,407),
corresponding to a margin of 4.3% (6.1). Operating income
include costs of SEK 1,343m, whereof SEK 596m relates to
restructuring costs for the consolidation of freezer production
in North America, SEK 493m relates to an investigation by the
French Competition Authority and SEK 254m to an unfavorable
court ruling in France, see Note 7. Excluding these non-recurring
items, operating income amounted to SEK 6,653m, correspond-
ing to a margin of 5.4% (6.1).

INDUSTRY SHIPMENTS FOR CORE APPLIANCES IN THE U.S.

INDUSTRY SHIPMENTS FOR CORE APPLIANCES IN EUROPE

MILLION UNITS

A total of approximately
48 million core
appliances were sold
in the U.S. in 2018, which
is on par with the top
levels in 2005 and 2006.

Sources: Europe: Electrolux estimates, U.S.: AHAM. For other markets
there are no comprehensive market statistics.

Financial overview by business area

seKm

Net sales

Operating income

Major Appliances Europe, Middle East and Africa

Major Appliances North America

Major Appliances Latin America

Major Appliances Asia/Pacific

Home Care & Small Domestic Appliances

Professional Products

Other, Common Group costs, etc.

Total Group

Operating margin, %

Operating margin excl. non-recurring items, %1)

1) For more information on non-recurring items, see Note 7.

MILLION UNITS

100

A total of approximately
94 million core
appliances were sold
in Europe in 2018,
which is about 4%
lower than the record
year of 2007.

2018

124,129

2,220

972

464

648

398

1,134

–527

5,310

4.3

5.4

2017

Change, %

120,771

2,764

2,757

425

750

431

1,054

–775

7,407

6.1

–20

–65

–14

–8

–28

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 19

Financial targets over a business cycle

SALES GROWTH

OPERATING MARGIN

SEKM

125,000

100,000

75,000

50,000

25,000

-25,000

-2

Net sales
Sales growth
Target: at least 4%

Total sales growth excluding
currency translation effects.

SEKM

7,500

6,250

5,000

3,750

2,500

1,250

Operating income
Operating margin
Operating margin
excl. non-recurring items
Target: at least 6%

For non-recurring items included in operating
income, see Note 7 and page 88.

CAPITAL TURNOVER-RATE

RETURN ON NET ASSETS

TIMES

Capital turnover-rate
Target: at least 4 times

SEKM

30,000

25,000

20,000

15,000

10,000

5,000

Average net assets
Return on net assets
Target: >20%

Increased prices, mix and cost efficiency partly offset higher
input costs, lower volumes and currency headwinds. The solid
earnings trend for Major Appliances EMEA continued and
operating income excluding non-recurring items improved as
a result of higher volumes, mix improvements and increased
cost efficiency. Operating income for Major Appliances Latin
America continued to recover and improved mainly due to cost-
based price increases. Professional Products reported solid
operating income. Home Care & SDA’s operating income was
fairly in line with previous year.

Major Appliances North America’s earnings declined due

to high cost inflation and lower volumes, which were partly
mitigated by price increases and mix improvements. Operating
income in Major Appliances Asia/Pacific declined, primarily due
to currency headwind.

Strategic initiatives to improve profitability
Electrolux has a clear strategy to deliver profitable growth and
create shareholder value. At the heart of the strategy is a strong
consumer focus.

In 2018, Electrolux continued executing on the path to profit-

able growth. Mix improved through continued active product
portfolio management and a large number of new innovative
products designed to deliver outstanding consumer experi-
ences were launched. The investments in modularized products
in automated production continued. These are important to
further increase the competitiveness in order to drive growth
through more innovative products as well as lowering costs.
Through improved ways of working, a higher resource efficiency
and simplification, the cost structure improved. Electrolux also
reinforced its position as a sustainability leader in the industry.

Launches of new products
Electrolux aims to drive profitable growth by creating out-
standing consumer experiences. Product development focuses
on three main areas: great tasting food, care for clothes and
healthy wellbeing in the home.

In 2018, Taste innovations included the new SenseProbe
induction hob with sous-vide and a world first wireless and
battery-less probe, that provides precise and automated

ELECTROLUX ANNUAL REPORT 2018

assistance when cooking, and the AEG UltraFresh+ fridge-
freezer, with smart cooling technology that automatically
regulates the perfect environment for food.

Care innovations in 2018 included the development of a new
sensor system that enables tumble dryers to sense when clothes
are just enough dry.

In the Wellbeing segment the groundbreaking cordless
vacuum cleaner Electrolux Pure F9 was launched in 2018. Pure
F9 uses powerful battery technology and innovative design
to combine the performance of a traditional vacuum cleaner
with the freedom of a stick vacuum.

Acquisitions
To broaden the product offering and create a strong platform
for growth in new segments and markets, acquisitions are an
integrated part of Electrolux strategy. In 2018 Schneidereit, a
supplier of laundry rental solutions for professional custom-
ers, as well as SPM Drink Systems, which expands Professional
Products’ current beverage offering and its role as a fullservice
solution provider, were acquired, see page 32 and Note 26.

Changes in Group Management during 2018
As of 1 October 2018, the following changes in Group Manage-
ment were effective:

Dan Arler, previously Head of Major Appliances Europe,
Middle East and Africa (EMEA) and Executive Vice President of
AB Electrolux, was appointed Head of Major Appliances APAC &
MEA and Executive Vice President of AB Electrolux. Dan Arler suc-
ceeded Kenneth L. Ng who decided to retire from the company.

Anna Ohlsson-Leijon, previously Chief Financial Officer (CFO)

of AB Electrolux, was appointed Head of Major Appliances
Europe and Executive Vice President of AB Electrolux.

Therese Friberg, previously CFO of Major Appliances EMEA,

was appointed new CFO of AB Electrolux.

As of 1 January 2019, the major appliances organization in
Middle East and Africa (MEA), which has previously been part
of Major Appliances Europe, Middle East and Africa (EMEA),
is included in Major Appliances Asia/Pacific (APAC).
For more information, visit www.electroluxgroup.com

20 Board of Directors’ report and financial statements

Net sales and income

• Sales growth was 1.7%, mainly driven by price increases and mix improvements.
• Operating income amounted to SEK 5,310m (7,407), corresponding to a margin of 4.3% (6.1).
• Excluding non-recurring items of SEK –1,343m, operating income amounted to SEK 6,653m (7,407),
corresponding to a margin of 5.4% (6.1).
• Increased prices, mix and cost efficiency partly offset higher input costs, lower volumes and currency
headwinds.
• Income for the period amounted to SEK 3,805m (5,745), corresponding to SEK 13.24 (19.99) per share.

Net sales
Net sales for the Electrolux Group in 2018 amounted to
SEK 124,129m (120,771) an increase of 2.8%. Organic sales
increased by 1.3%, the net contribution of acquisitions and
divestments was 0.4% and currency translation had a positive
impact of 1.1%.

Organic growth was driven by price increases and mix
improvements. Major Appliances EMEA, Major Appliances
Latin America, Major Appliances Asia/Pacific and Professional
Products reported organic sales growth, while lower volumes
resulted in lower sales for Major Appliances North America
and Home Care & SDA.

Operating income
Operating income for 2018 amounted to SEK 5,310m (7,407),
corresponding to a margin of 4.3% (6.1). Operating income
include costs of SEK1,343m, whereof SEK 596m relates to
restructuring costs for the consolidation of freezer production
in North America, SEK 493m relates to an investigation by the
French Competition Authority and SEK 254m to an unfavorable
court ruling in France. Excluding these non-recurring items,
operating income amounted to SEK 6,653m, corresponding
to a margin of 5.4% (6.1).

Increased prices, mix and cost efficiency partly offset
higher input costs, lower volumes and currency headwinds.
Operating income excluding non-recurring items increased for
Major Appliances EMEA, Major Appliances Latin America and
Professional Products, while Major Appliances North America

and Major Appliances Asia/Pacific reported a decline. Home
Care & SDA’s operating income was fairly in line with previous
year. For more information on the performance by business
area, see page 22–25.

Effects of changes in exchange rates
Changes in exchange rates had a negative impact of SEK 896m
on operating income year-over-year. The impact of transaction
effects was SEK –1,024m. Translation effects amounted to
SEK 128m.

Financial net
Net financial items amounted to SEK –423m (–441).

Income after financial items
Income after financial items amounted to SEK 4,887m (6,966),
corresponding to 3.9% (5.7) of net sales.

Taxes
Total taxes for 2018 amounted to SEK –1,081m (–1,221),
corresponding to a tax rate of 22.1% (17.5).

Income for the period and earnings per share
Income for the period amounted to SEK 3,805m (5,745),
corresponding to SEK 13.24 (19.99) in earnings per share
before dilution.

NET SALES AND OPERATING MARGIN

EARNINGS PER SHARE

SEKM

125,000

100,000

75,000

50,000

25,000

Net sales
Operating margin
Operating margin
excl. non-recurring items

7.5

6.0

4.5

3.0

1.5

0.0

SEK

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 21

Consolidated statement of comprehensive income

note

3, 4

5, 7

6, 7, 29

3, 8

11, 18

2018

124,129

–100,908

23,221

–12,986

–5,101

177

5,310

–423

4,887

–1,081

3,805

–448

128

–319

—

–2

203

224

–95

3,710

3,805

3,710

13.24

13.14

287.4

289.5

2017

120,771

–95,222

25,549

–12,897

–5,550

305

7,407

–441

6,966

–1,221

5,745

1,229

–440

789

–1,224

–17

–1,145

–356

5,389

5,745

5,390

–1

19.99

19.88

287.4

289.0

seKm

Net sales

Cost of goods sold

Gross operating income

Selling expenses

Administrative expenses

Other operating income and expenses

Operating income

Financial items, net

Income after financial items

Taxes

Income for the period

Items that will not be reclassified to income for the period:

Remeasurement of provisions for post–employment benefits

Income tax relating to items that will not be reclassified

Items that may be reclassified subsequently to income for the period:

Available-for-sale instruments

Cash flow hedges

Exchange–rate differences on translation of foreign operations

Income tax relating to items that may be reclassified

Other comprehensive income, net of tax

Total comprehensive income for the period

Income for the period attributable to:

Equity holders of the Parent Company

Non–controlling interests

Total comprehensive income for the period attributable to:

Equity holders of the Parent Company

Non–controlling interests

Earnings per share

For income attributable to the equity holders of the Parent Company:

Basic, SEK

Diluted, SEK

Average number of shares

Basic, million

Diluted, million

ELECTROLUX ANNUAL REPORT 2018

22 Board of Directors’ report and financial statements

Operations by business area

• Strong organic sales growth and solid underlying earnings in Major Appliances EMEA.
• Major Appliances North America negatively impacted by high cost inflation and lower volumes.
• High organic sales growth and improved earnings in Major Appliances Latin America.
• Major Appliances Asia/Pacific showed strong growth in Southeast Asia but lower
operating income.
• Product transition phase for Home Care & SDA with operating income fairly in line with 2017.
• Profitable organic growth for Professional Products with solid earnings.

Electrolux operations are organized into six business areas.
Within Major Appliances, the business areas are geographically
defined, while the business areas Home Care & Small Domestic
Appliances and Professional Products are global. The Group’s
operations include products for consumers as well as profes-
sional users.

Products for consumers comprise major appliances, i.e.
refrigerators, freezers, cookers, dryers, washing machines,
dishwashers, room air-conditioners and microwave ovens.
Floor-care products, water heaters, heat pumps, small domestic
appliances as well as consumables, accessories and service
are other important areas for Electrolux.

Professional products comprise food-service equipment for
hotels, restaurants and institutions, as well as laundry equipment
for apartment-house laundry rooms, launderettes, hotels and
other professional users and also beverage products.

SHARE OF SALES BY BUSINESS AREA

Major Appliances Europe, Middle East
and Africa, 34%
Major Appliances North America, 31%
Major Appliances Latin America, 14%
Major Appliances Asia/Paciﬁc, 7%
Home Care & Small Domestic Appliances, 6%
Professional Products, 7%

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 23

Major Appliances Europe, Middle East and Africa

Market demand in Europe increased by 1% in 2018. This was
driven by strong growth of 7% in Eastern Europe, while demand
in Western Europe declined by 1%.

Electrolux operations in EMEA reported an organic sales
growth of 5.3% in 2018. Product mix improvements and higher
sales volumes in the focus areas laundry and built-in kitchen
products contributed positively and resulted in market share
gains under premium brands. Acquisitions had a positive
impact of 1.0% on sales and referred to the 2017 acquisitions
Kwikot and Best.

Operating income included non-recurring costs of SEK 747m,
whereof SEK 493m related to an investigation by the French
Competition Authority and SEK 254m to an unfavorable court
ruling in France, see Note 7. Excluding these costs, operating
income improved. Higher volumes, mix improvements and
increased cost efficiency offset the negative impact of raw
material cost increases and currency headwinds.

KEY FIGURES

seKm

Net sales

Organic growth, %

Acquisitions, %

Operating income

Operating margin, %

Operating margin excl. non-recurring items, %1)

Net assets

Return on net assets, %

Capital expenditure

NET SALES AND OPERATING MARGIN

2018

2017

42,732

38,524

5.3

1.0

0.6

2.1

2,220

2,764

5.2

6.9

3,392

55.4

1,621

7.2

3,538

78.9

1,420

SEKM

50,000

40,000

30,000

20,000

10,000

Net sales
Operating margin
Operating margin
excl. non-recurring items

Average number of employees

20,725

20,573

1) For information on non-recurring items, see Note 7 and page 88.

Major Appliances North America

Market demand for core appliances in the U.S. declined by 1%
in 2018, partly related to higher industry prices. Market demand
for all major appliances, including microwave ovens and
home-comfort products, was flat.

Electrolux operations in North America reported an organic
sales decline of 6.2%. Lower sales volumes under private labels
as well as of air conditioners had a negative impact on sales.
Sears, a major private label customer, filed for restructuring

under Chapter 11 in October. Cost-based price increases and
mix improvements contributed positively to sales.

Operating income and margin declined due to lower volumes
and increased costs related to raw material, logistics and trade
tariffs. Cost-based price increases and mix improvements had,
however, a positive earnings impact. Restructuring costs of
SEK 596m for the consolidation of freezer production in North
America were charged to operating income, see Note 7.

KEY FIGURES

seKm

Net sales

Organic growth, %

Operating income

Operating margin, %

Operating margin excl. non-recurring items, %1)

Net assets

Return on net assets, %

Capital expenditure

NET SALES AND OPERATING MARGIN

2018

2017

38,875

40,656

–6.2

972

2.5

4.0

2,395

37.7

2,071

–6.1

2,757

6.8

2,117

123.7

1,467

SEKM

50,000

40,000

30,000

20,000

10,000

Net sales
Operating margin
Operating margin
excl. non-recurring items

7.5

6.0

4.5

3.0

1.5

0.0

Average number of employees

12,971

14,255

1) For information on non-recurring items, see Note 7 and page 88.

ELECTROLUX ANNUAL REPORT 2018

24 Board of Directors’ report and financial statements

Major Appliances Latin America

Consumer demand for core appliances in Brazil and Argentina
is estimated to have decreased in 2018. Uncertainties in the
political and economic environment impacted market demand
negatively, particularly in Argentina where the market declined
significantly after currency devaluation. Consumer demand in
Chile is estimated to have increased in 2018.

Electrolux operations in Latin America reported an organic

sales growth of 9.8% in 2018. Cost-based price increases and
mix improvements contributed positively to sales, although

the price increases had a somewhat negative impact on sales
volumes.

Operating income and margin improved. Price increases and

mix improvement impacted positively, while increased costs for
raw material and currency headwinds impacted negatively.
Operating income includes a positive impact from a reversal of
a provision related to an administrative case in the amounting
to approximately SEK 170m.

KEY FIGURES

seKm

Net sales

Organic growth, %

Operating income

Operating margin, %

Net assets

Return on net assets, %

Capital expenditure

Average number of employees

NET SALES AND OPERATING MARGIN

2018

2017

17,076

17,302

9.8

464

2.7

7.9

425

2.5

5,554

5,850

8.0

714

7.4

711

9,282

10,381

SEKM

25 000

20 000

15 000

10 000

5 000

-5 000

Net sales
Operating margin

8.0

6.5

5.0

3.5

2.0

0.5

-1.0

Major Appliances Asia/Pacific

Overall market demand for appliances in Australia declined
slightly in 2018 due to a weaker economy and slowing property
market. The market in Southeast Asia remained favorable and
is estimated to have increased.

Organic sales for Electrolux increased by 3.7%. This was a
result of strong growth in Southeast Asia, especially in laundry
and cooking.

Operating income and margin declined. Currency headwinds
and increased cost for raw material were not fully compensated
by higher sales volumes and mix improvements.

KEY FIGURES

seKm

Net sales

Organic growth, %

Acquisitions, %

Operating income

Operating margin, %

Net assets

Return on net assets, %

Capital expenditure

Average number of employees

NET SALES AND OPERATING MARGIN

2018

9,165

3.7

—

648

7.1

2017

8,759

5.6

0.7

750

8.6

1,971

1,625

34.8

413

40.8

418

3,819

3,792

SEKM

10,000

8,000

6,000

4,000

2,000

Net sales
Operating margin

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 25

Home Care & Small Domestic Appliances

In 2018, the overall market for vacuum cleaners increased,
driven by the cordless category, while demand for the corded
category declined. The trend shift in market demand toward
cordless products accelerated.

Organic sales for Electrolux declined by 1.1%. The product
mix improved as a result of active product portfolio manage-
ment while sales volumes declined, mainly related to lower
sales volumes of corded vacuum cleaners. The 2017 acquired
smart kitchen appliance company Anova had a positive impact
of 0.7% on sales while the divestment of the commercial and

central vacuum-cleaner businesses in North America in 2018
had a negative impact of –5.4%.

Operating income and margin were fairly in line with previous

year. A strategic decision to focus the business on the strongest
categories improved the mix which contributed to earnings. The
business area was still in a product transition phase with lower
volumes and higher investments in new product launches as a
consequence.

In 2018, the commercial and central vacuum-cleaner
businesses in North America were divested, see page 32.

KEY FIGURES

seKm

Net sales

Organic growth, %

Acquisitions, %

Divestments, %

Operating income

Operating margin, %

Net assets

Return on net assets, %

Capital expenditure

Average number of employees

2018

7,616

–1.1

0.7

–5.4

398

5.2

2017

7,808

–4.2

4.7

–6.6

431

5.5

2,410

1,822

18.3

249

30.1

190

3,042

2,360

NET SALES AND OPERATING MARGIN

SEKM

10,000

8,000

6,000

4,000

2,000

-2,000

Net sales
Operating margin
Operating margin
excl. non-recurring items1)

-2

1) For information on non-recurring items,

see Note 7 and page 88.

Professional Products

Overall market demand for professional food-service and
professional laundry equipment improved across most regions
in 2018. Demand increased in Europe and Asia, while it declined
in North America.

Electrolux organic growth was 3.5%. Sales increased across

all three areas food, laundry and beverage. Sales grew in
several markets and were particularly strong in Europe, North
America, Middle East and Africa. Acquisitions had a posi-
tive impact of 4.7% on sales and refer to the acquisitions of

Schneidereit and SPM Drink Systems in 2018 as well as the 2017
acquisition of Grindmaster-Cecilware.

Operating income remained solid. Price increases and higher

sales volumes offset increased cost for raw material and addi-
tional investments in customer care and innovation.

In 2018 Schneidereit, a supplier of laundry rental solutions
for professional customers, as well as SPM Drink Systems were
acquired, which expands Professional Products’ current bever-
age offering and its role as a fullservice solution provider, see
page 32.

KEY FIGURES

seKm

Net sales

Organic growth, %

Acquisitions, %

Operating income

Operating margin, %

Net assets

Return on net assets, %

Capital expenditure

NET SALES AND OPERATING MARGIN

2018

8,666

3.5

4.7

1,134

13.1

2,957

45.9

169

2017

7,723

5.6

6.6

1,054

13.7

1,728

64.3

167

SEKM

8,000

6,000

4,000

2,000

Net sales
Operating margin

Average number of employees

3,166

2,947

ELECTROLUX ANNUAL REPORT 2018

26 Board of Directors’ report and financial statements

Financial position

• Equity/assets ratio was 25.6% (26.4).
• Return on equity was 18.2% (31.9).
• Return on net assets was 22.7% (36.0).
• Financial net cash position amounted to SEK 1,989m (2,437).

Working capital and net assets
Working capital as of December 31, 2018 amounted to
SEK –16,848m (–15,873), corresponding to –13.5% (–13.4) of
annualized net sales. Operating working capital amounted to
SEK 3,789m (4,288), corresponding to 3.0% (3.6) of annualized
net sales.

Average net assets were SEK 23,381m (20,572),
corresponding to 18.8% (17.0) of annualized net sales.

Return on net assets was 22.7% (36.0).

Liquid funds

Liquidity profile

seKm

Liquid funds

% of annualized net sales1)

Net liquidity

Fixed interest term, days

Effective annual yield, %

Dec. 31, 2018 Dec. 31, 2017

12,249

18.1

8,187

1.1

11,974

17.0

9,024

1.8

1) Liquid funds in relation to net sales, see note 30 for definition.
For additional information on the liquidity profile, see Note 18.

Liquid funds as of December 31, 2018, amounted to
SEK 12,249m (11,974), excluding back-up credit facilities.
Electrolux has an unused committed back-up multi- currency
revolving credit facility of EUR 1,000m, approximately
SEK 10,300m, expiring 2023.

Working capital and net assets

seKm

Inventories

Trade receivables

Accounts payable

Operating working capital

Provisions

Prepaid and accrued income
and expenses

Taxes and other assets and
liabilities

Dec. 31,
2018

16,750

21,482

% of
net
sales1)

13.5

17.3

Dec. 31,
2017

14,655

20,747

% of
net
sales1)

12.4

17.5

–34,443

–27.7

–31,114

–26.3

3,789

–7,565

3.0

4,288

–7,823

3.6

–11,745

–11,038

–1,327

–1,300

Working capital

–16,848

–13.5

–15,873

–13.4

Property, plant and equipment

21,088

Goodwill

Other non-current assets

Deferred tax assets and
deferred tax liabilities

Net assets
Annualized net sales2)

Average net assets

Annualized net sales3)

Return on net assets, %

8,239

5,516

5,580

23,574

124,399

23,381

124,129

22.7

1) Annualized, see Note 30.
2) Calculated at end of period exchange rates.
3) Calculated at average exchange rates.

19,192

7,628

4,749

4,981

19.0

20,678

17.5

118,464

18.8

20,572

17.0

120,771

36.0

RETURN ON NET ASSETS

CAPITAL TURNOVER-RATE, TIMES/YEAR

SEKM

30,000

25,000

20,000

15,000

10,000

5,000

Average net assets
Return on net assets

Average net assets for 2018 increased
to SEK 23,381m (20,572). Return on net
assets was 22.7% (36.0).

TIMES

Capital turnover-rate

The capital turnover-rate decreased
to 5.3 (5.9) times in 2018.

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 27

note

December 31, 2018

December 31, 2017

17, 18

21,088

8,239

3,919

397

6,448

246

532

952

41,822

16,750

21,482

738

139

4,507

176

11,697

55,490

97,312

1,545

2,905

–2,394

19,683

21,738

21,749

6,198

868

4,346

5,281

16,693

34,443

984

17,105

3,952

102

2,284

58,870

75,563

97,312

19,192

7,628

3,741

337

5,712

212

455

459

37,736

14,655

20,747

830

3,839

358

11,289

51,806

89,542

1,545

2,905

–2,615

18,630

20,465

20,480

6,587

730

3,089

5,753

16,159

31,114

924

15,849

2,695

251

2,070

52,903

69,062

89,542

Consolidated balance sheet

seKm

ASSETS

Non-current assets

Property, plant and equipment

Goodwill

Other intangible assets

Investments in associates

Deferred tax assets

Financial assets

Pension plan assets

Other non-current assets

Total non-current assets

Current assets

Inventories

Trade receivables

Tax assets

Derivatives

Other current assets

Short-term investments

Cash and cash equivalents

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity attributable to equity holders of the Parent Company

Share capital

Other paid-in capital

Other reserves

Retained earnings

Non-controlling interests

Total equity

Non-current liabilities

Long-term borrowings

Deferred tax liabilities

Provisions for post-employment benefits

Other provisions

Total non-current liabilities

Current liabilities

Accounts payable

Tax liabilities

Other liabilities

Short-term borrowings

Derivatives

Other provisions

Total current liabilities

Total liabilities

Total equity and liabilities

ELECTROLUX ANNUAL REPORT 2018

28 Board of Directors’ report and financial statements

Cont. Financial position

Net debt

seKm

Short-term loans

Short-term part of long-term loans

Trade receivables with recourse

Short-term borrowings

Financial derivative liabilities

Accrued interest expenses and pre-
paid interest income

Total short-term borrowings

Long-term borrowings
Total borrowings1)

Cash and cash equivalents

Short-term investments

Financial derivative assets

Prepaid interest expenses and
accrued interest income

Liquid funds2)

Dec. 31, 2018 Dec. 31, 2017

1,429

2,355

168

3,952

4,062

6,198

10,260

990

1,501

204

2,695

228

2,950

6,587

9,537

11,697

11,289

176

132

243

358

242

As of December 31, 2018, Electrolux had a net financial cash
position of SEK 1,989m compared to the net financial cash posi-
tion of SEK 2,437m as of December 31, 2017. Net provisions for
post-employment benefits increased to SEK 3,814m. In total,
net debt amounted to SEK 1,825m, an increase by SEK 1,628m
compared to SEK 197m as of December 31, 2017.

Long-term borrowings as of December 31, 2018, includ-
ing long-term borrowings with maturities within 12 months,
amounted to SEK 8,553m with average maturity of 2.6 years,
compared to SEK 8,088m and 2.4 years at the end of 2017.

During 2019, long-term borrowings amounting to approxi-

mately SEK 2,400m will mature.

The Group’s target for long-term borrowings includes an
average time to maturity of at least two years, an even spread
of maturities and an average interest-fixing period between
0 and 3 years. A maximum of SEK 5,000m of the long-term
borrowings is allowed to mature in a 12-month period. At year-
end, the average interest- fixing period for long-term borrowings
was 1.0 years (0.6).

At year-end, the average interest rate for the Group’s total

12,249

11,974

interest-bearing borrowings was 2.5% (2.1).

Financial net debt

–1,989

–2,437

Net provisions for post-employment
benefits

Net debt

Net debt/equity ratio

Total equity

Equity per share, SEK

Return on equity, %

Equity/assets ratio, %

3,814

1,825

0.08

21,749

75.67

18.2

25.6

2,634

197

0.01

20,480

71.26

31.9

26.4

1) Whereof interest-bearing liabilities amounting to SEK 9,982m as of December 31, 2018

and SEK 9,078m as of December 31, 2017.

Rating
Electrolux has an investment-grade rating from Standard &
Poor’s, A- with a stable outlook.

Rating

Standard &
Poor’s

Long-term
debt

Outlook

Short-
term debt

Short-term
debt, Nordic

A-

Stable

A-2

K-1

Net debt/equity and equity/assets ratio
The net debt/equity ratio was 0.08 (0.01). The equity/assets
ratio was 25.6% (26.4).

Equity and return on equity
Total equity as of December 31, 2018, amounted to
SEK 21,749m (20,480), which corresponds to SEK 75.67
(71.26) per share. Return on equity was 18.2% (31.9).

LONG-TERM BORROWINGS, BY MATURITY

NET DEBT/EQUITY RATIO1)

EQUITY/ASSETS RATIO1)

SEKM

3,000

2,500

2,000

1,500

1,000

500

In 2019, long-term borrowings
in the amount of approximately
SEK 2,400m will mature. For information
on borrowings, see Note 2 and 18.

0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
-0.1

24-

1) Both ratios were significantly affected from 2012 and onwards by the changed

pension accounting from the updated IAS 19 Employee Benefits.

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 29

Changes in consolidated equity

seKm

Attributable to equity holders of the parent company

Share
capital

Other
paid-in
capital

Other
reserves

Retained
earnings

Total

Non-
controlling
interests

Opening balance, January 1, 2017

1,545

2,905

–1,471

14,729

17,708

Effect from change in accounting principles

Adjusted opening balance

Income for the period

Available for sale instruments

Cash flow hedges

Exchange differences on translation of foreign operations

Remeasurement of provisions for post-employment benefits

Income tax relating to other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period

Share-based payments

Dividend

Acquisition of non-controlling interest

Total transactions with equity holders

Closing balance, December 31, 2017

Effect from change in accounting principles

Adjusted opening balance

Income for the period

Cash flow hedges

Exchange differences on translation of foreign operations

Remeasurement of provisions for post-employment benefits

Income tax relating to other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period

Share-based payments

Dividend

Acquisition of non-controlling interest

Total transactions with equity holders

Closing balance, December 31, 2018

—

1,545

—

2,905

–1,471

—

–1,222

—

–17

–1,143

—

1,545

2,905

–2,615

—

1,545

—

–1

2,905

–2,615

—

–2

200

—

221

—

1,545

2,905

–2,394

–126

14,603

5,745

—

1,229

–440

789

6,534

–356

–126

17,582

5,745

–1,222

1,229

–457

–354

5,391

–356

–2,155

–2,507

18,630

–17

18,614

3,805

—

–448

128

–316

3,490

–35

–2,507

20,465

–18

20,448

3,805

–2

204

–448

151

–95

3,710

–35

–2,385

—

–2,421

19,683

—

–2,421

21,738

For more information about share capital, number of shares and earnings per share, see Note 20.

—

–1

—

–1

—

–15

—

–3

Total
equity

17,738

–126

17,612

5,745

–1,223

1,229

–457

–355

5,389

–356

–2,155

–11

–2,522

20,480

–18

20,463

3,805

–2

203

–448

151

–95

3,710

–35

–2,385

–3

–2,424

21,749

ELECTROLUX ANNUAL REPORT 2018

30 Board of Directors’ report and financial statements

Cash flow

• Operating cash flow after investments amounted to SEK 3,649m (6,877).
• Capital expenditure amounted to SEK 5,629m (4,679).
• R&D expenditure amounted to 3.2% (3.0) of net sales.

Operating cash flow after investments
Operating cash flow after investments in 2018 amounted to
SEK 3,649m (6,877). The decline was due to lower earnings,
higher investments and lower cash flow from working capi-
tal, mainly due to timing effects. Acquisitions had a negative
impact of SEK 902m while divestments had a positive impact of
SEK 293m. For more information on acquisitions see page 32
and Note 26.

Capital expenditure
Capital expenditure in property, plant and equipment in 2018
amounted to SEK 4,650m (3,892), corresponding to 3.7% (3.2)
of net sales. Including investments in product development
and software, capital expenditure amounted to SEK 5,629m
(4,679). Investments in 2018 were mainly related to new products
and architectures, manufacturing efficiency, automation and
re-engineering.

Cash flow

seKm

Capital expenditure by business area

2018

2017

seKm

Operating income adjusted for non-cash items1)

10,547 11,405

Major Appliances

Change in operating assets and liabilities

–1,000

267

Europe, Middle East and Africa

Operating cash flow

9,547 11,672

% of net sales

Investments in tangible and intangible assets

–5,629 –4,857

North America

Changes in other investments

Operating cash flow after investments

–269

% of net sales

3,649

6,877

Latin America

Acquisitions and divestments of operations

–609 –3,405

% of net sales

Operating cash flow after structural changes
Financial items paid, net2)

3,041

3,472

Asia/Pacific

–361

–227

% of net sales

Taxes paid

–1,140 –1,421

Home Care & Small Domestic Appliances

Cash flow from operations and investments

1,540

1,824

% of net sales

Dividend

Share-based payments

–2,385 –2,155

Professional Products

–210

–483

% of net sales

Total cash flow, excluding change in loans and
short-term investments

–1,056

–814

1) Operating income adjusted for depreciation and amortization and other non-cash items.
2) For the period January 1 — December 31, 2018. Interests and similar items received

SEK 192m (199), interests and similar items paid SEK –551m (–357) and other financial items
paid SEK –2m (–69).

Other

Total

% of net sales

2018

2017

1,621

1,420

3.8

3.7

2,071

1,467

5.3

714

4.2

413

4.5

249

3.3

169

1.9

393

3.6

711

4.1

418

4.8

190

2.4

167

2.2

306

5,629

4,679

4.5

3.9

R&D expenditure
The expenditure for research and development in 2018, includ-
ing capitalization of SEK 436m (355), amounted to SEK 3,960m
(3,621) corresponding to 3.2% (3.0) of net sales.

OPERATING CASH FLOW AFTER INVESTMENTS

CAPITAL EXPENDITURE

SEKM

10,000

8,000

6,000

4,000

2,000

SEKM

6,000

5,000

4,000

3,000

2,000

1,000

Operating cash flow after investments in
2018 amounted to SEK 3,649m (6,877).

Capital expenditure
Depreciation and amortization

Capital expenditure in 2018 including
product development and software
amounted to SEK 5,629m (4,679).

ELECTROLUX ANNUAL REPORT 2018

Consolidated cash flow statement

seKm

Operations

Operating income

Depreciation and amortization

Other non-cash items

Financial items paid, net1)

Taxes paid

Cash flow from operations, excluding change in operating assets and liabilities

Change in operating assets and liabilities

Change in inventories

Change in trade receivables

Change in accounts payable

Change in other operating liabilities and provisions

Cash flow from change in operating assets and liabilities

Cash flow from operations

Investments

Acquisition of operations

Divestment of operations

Capital expenditure in property, plant and equipment

Capital expenditure in product development

Capital expenditure in software

Other

Cash flow from investments

Cash flow from operations and investments

Financing

Change in short-term investments
Change in short-term borrowings2)

New long-term borrowings

Amortization of long-term borrowings

Dividend

Share-based payments

Cash flow from financing

Total cash flow

Board of Directors’ report and financial statements 31

note

2018

2017

5,310

4,150

1,088

–361

–1,140

9,046

–1,619

–582

2,317

–1,116

–1,000

8,046

–902

293

–4,650

–416

–563

–269

–6,506

1,540

193

951

1,736

–1,531

–2,385

–210

–1,245

295

11,289

113

11,697

7,407

3,977

–227

–1,421

9,757

–1,377

–1,992

3,418

218

267

10,024

–3,405

—

–3,892

–418

–369

–116

–8,200

1,824

539

–386

1,002

–1,695

–2,155

–483

–3,178

–1,354

12,756

–113

11,289

Cash and cash equivalents at beginning of period

Exchange-rate differences referring to cash and cash equivalents

Cash and cash equivalents at end of period

1) Interests and similar items received SEK 192m (199), interests and similar items paid SEK –551m (–357) and other financial items paid SEK –2m (–69).
2) Whereof net cash change in short-term loans SEK 397m (-341).

ELECTROLUX ANNUAL REPORT 2018

32 Board of Directors’ report and financial statements

Acquisitions, divestments and other facts

Acquisitions
Schneidereit GmbH
On February 22, 2018 Electrolux completed the acquisition of
Schneidereit GmbH, a supplier of laundry-rental solutions for
professional customers in Germany and Austria. The agreement
to acquire the company was announced on January 22, 2018.
The acquisition enables Electrolux to develop its offering
within the professional laundry business and supports the long-
term profitable growth in Europe.

Net sales for the acquired business Schneidereit GmbH in
2016 amounted to around EUR 18m (around SEK 175m) and
the company has approximately 110 employees throughout
Germany.

SPM Drink Systems
On October 2, 2018 Electrolux completed the acquisition of SPM
Drink Systems, an Italian leading manufacturer of professional
dispensers of frozen and hot beverages and soft ice-cream, as
part of the strategy to increase its presence in the hospitality
industry.

The acquisition supports Electrolux strategy for profitable

growth. Together with the 2017 acquisition of Grindmaster-
Cecilware in North America, it strengthens Electrolux presence
in the fast-growing beverage segment.

The acquired operations had combined net sales in 2017 of

approximately EUR 30m and 110 employees. The company’s
headquarters and main manufacturing facilities are based in
Spilamberto, Modena, Italy.

Asbestos litigation in the U.S.
Litigation and claims related to asbestos are pending against
the Group in the U.S. Almost all of the cases refer to externally
supplied components used in industrial products manufac-
tured by discontinued operations prior to the early 1970s. The
cases involve plaintiffs who have made substantially identical
allegations against other defendants who are not part of the
Electrolux Group.

As of December 31, 2018, the Group had a total of 3,460

(3,372) cases pending, representing approximately 3,502
(approximately 3,435) plaintiffs. During 2018, 1,355 new cases
with approximately 1,355 plaintiffs were filed and 1,267 pending
cases with approximately 1,288 plaintiffs were resolved.

Electrolux. It is not possible to predict the number of future
lawsuits.

In addition, the outcome of asbestos lawsuits is difficult to
predict and Electrolux cannot provide any assurances that
the resolution of these types of lawsuits will not have a mate-
rial adverse effect on its business or on results of operations
in the future.

For information on certain additional legal proceedings, see Note 25 Contingent liabilities.

Divestments
BEAM and Sanitaire in North America
On August 8, 2018, Electrolux announced the divestment of its
U.S.-based commercial and central vacuum cleaner businesses
in North America, including the brands Sanitaire and BEAM. The
decision is in line with the strategy of the business area Home
Care & SDA to focus on global brands and product categories.
The divested operations had combined revenues in 2017 of

around USD 70m.

For more information on acquisitions and divestments of operations, see Note 26.

Comments on impact from development in Sears
Electrolux commented on October 15, 2018, the announcement
by Sears Holdings Corporation, a major U.S. customer, that it
has filed voluntary petitions for relief under Chapter 11 of the
U.S. Bankruptcy Code.

Following the announcement, Electrolux intends to work with

Sears’ restructuring officer to explore the prospects of continu-
ing its business with Sears, while continuing to manage the
financial and operational exposure.

To ensure business continuity and to mitigate the financial

exposure, Electrolux has been actively planning for various
Sears’ contingencies while also growing the business with other
customers. Therefore, the Group does not currently assess a
need for material one-time costs as an immediate consequence
of Sears’ restructuring under Chapter 11.

However, while it is difficult to predict the outcome of Sears’
attempt to restructure its business and the various scenarios it
may entail, it cannot be ruled out that there may be a material
impact on the future sales and earnings of Electrolux business
area Major Appliances North America. Major Appliances North
America’s exposure to Sears was at the end of the third quarter
of 2018 about 10% of the business area’s total revenues.

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 33

Raw material impact
Materials account for a large share of the Group’s costs.
Electrolux purchases raw materials and components for
approximately SEK 50bn, of which approximately SEK 20bn
refers to the former in 2018. Fluctuations in commodity prices
impact the Group’s input costs and, therefore, its profitability.
In order to mitigate increased input costs related to higher
raw material prices, Electrolux may have to take actions to
increase cost efficiency, negotiate purchasing contracts for
commodities such as steel and chemicals or increase the
prices of its products.

Political and macro risk
Political uncertainties and weak macro-economic conditions
may indirectly impact demand for appliances. This has impli-
cations for Electrolux business and strategy in regions which
carry a high political and macro risk. Such regions have been
Latin America and the Middle East and Africa. Consequently,
Electrolux must take proactive steps to assess the risks and
manage them accordingly.

Risks, risk management and risk exposure are described in more detail in Note 1 Accounting
principles, Note 2 Financial risk management and in Note 18 Financial instruments.

Sensitivity analysis year-end 2018

Change +/-

Pre-tax earnings
impact -/+, seKm

Risk

Raw materials1)

Carbon Steel

Stainless Steel

Plastics

Currency2) and interest rates

USD to EUR

USD to CAD

EUR to GBP

USD to BRL

EUR to CHF

CNY to USD

THB to AUD

USD to AUD

EUR to RUB

USD to THB
Translation exposure to SEK3)

10%

700

200

750

350

260

240

180

120

100

520

Interest rate

1 percentage point

1) Changes in raw materials refer to Electrolux prices and contracts, which may differ

from market prices.

2) Transactional exposure.
3) Assuming the Swedish krona appreciates/depreciates against all other currencies.

RAW MATERIALS EXPOSURE 2018

Carbon steel, 35%
Plastics, 37%
Copper and aluminum, 7%
Stainless steel, 10%
Other, 11%

In 2018, Electrolux purchased raw materials for
approximately SEK 20 billion. Purchases of steel
accounted for the largest cost.

External risks

Active risk management is essential for Electrolux to drive
successful operations. The Group’s strategic framework in com-
bination with the external environment generate opportunities
but also risks which in turn impact how the company manages
those risks in the daily operations. Electrolux monitors and mini-
mizes key risks in a structured and proactive manner.

The Group has several processes to manage risks through
operational activities that are performed by the business area
boards. Electrolux organizational structure and system for inter-
nal control and risk management are included in the Corporate
Governance report.

The Group has also established internal bodies that manage
risk exposures. Example of other internal bodies are: Enterprise
Risk Management Board, Insider Committee, Ethics & Human
Rights Steering Group, Audit Board and the Tax Board.

External risks
Macroeconomic trends, political uncertainties and overall
changes in industry dynamics are factors that may impact the
appliance industry and the markets in which Electrolux oper-
ates. To manage external risks, Electrolux puts close attention
to understanding the economic and political development in its
key markets and pro-actively manage and adapt operations.
External risks include:

Variations in demand
In times of weak markets and decline in demand for the
Group’s products, decisive actions and cost savings initiatives
throughout the Group have proven that Electrolux can make
timely adjustments to its production and cost structure. In times
of strong market demand, it is essential that Electrolux can ben-
efit from its global scale by delivering new innovative products
and outstanding consumer experiences with a high speed to
market.

Changing industry dynamics
The fast pace of change in the industry has led to new trends,
such as increased consumer power, digitalization, consolida-
tion and sustainability. These changes place increasing demand
on investments and ability to adapt, but also opens up major
opportunities. Electrolux has in recent years invested in R&D and
new innovations and transformed its business into a consumer-
oriented company with strong focus on consumer benefits.
Electrolux has also set ambitious targets to strengthen its sus-
tainability footprint. For more information, see Sustaina bility
reporting 2018.

Price competition
Electrolux markets are experiencing price competition. This is
particularly evident in the low-cost segments and in product
categories with significant overcapacity. In markets with high
inflation combined with currency-rate fluctuations, Electrolux
has a better possibility to carry out price increases to offset
potential negative effects.

Regulatory changes
Regulatory changes (industry, environmental, social, labor and
human rights) can impact reputation and the Group’s ability to
successfully conduct business. There are a number of processes
in place to control these risks such as internal and supplier audit-
ing, environmental management and certification, the Ethics
program and the safety management system. The regulatory
environment is monitored in order to be prepared for changes
that impact the business.

ELECTROLUX ANNUAL REPORT 2018

34 Board of Directors’ report and financial statements

Share information and ownership

Distribution of shareholdings

Shareholding

1–1,000

1,001–10,000

10,001–20,000

20,001–

Total

Ownership, %

Number of
shareholders

As % of
shareholders

3.2

3.8

0.8

92.2

100

44,857

4,526

173

314

49,870

89.9

8.2

0.3

0.6

100

Source: Holdings and Euroclear Sweden as of December 31, 2018.

Articles of Association
AB Electrolux Articles of Association stipulate that the Annual
General Meeting (AGM) shall always resolve on the appoint-
ment of the members of the Board of Directors. Apart from that,
the articles do not include any provisions for appointing or
dismissing members of the Board of Directors or for changing
the articles.

A shareholder participating in the AGM is entitled to vote for

the full number of shares which he or she owns or represents.
Outstanding shares in the company may be freely transferred,
without restrictions under law or the company’s Articles of
Association. Electrolux is not aware of any agreements between
shareholders, which limit the right to transfer shares.

The full Articles of Association can be downloaded at

www.electroluxgroup.com

Effect of significant changes in ownership structure
on long-term financing
The Group’s long-term financing is subject to conditions which
stipulate that lenders may request advance repayment in
the event of significant changes in the ownership of the com-
pany. Such significant change could result from a public bid to
acquire Electrolux shares.

Share price performance
The Electrolux share is listed on the exchange Nasdaq
Stockholm. The Electrolux B share decreased by 29% in 2018,
underperforming the broader Swedish market index, OMX
Stockholm, which decreased by 8% during the same period. The
opening price for the Electrolux B share in 2018 was SEK 264.30.
The highest closing price was SEK 278.20 on January 31 while the
lowest closing price was SEK 172.20 on October 26. The closing
price for the B share at year-end 2018 was SEK 187.10.

Total shareholder return during the year was –26%. Over the

past ten years, the average total return on an investment in
Electrolux B shares has been 14% annually. The corresponding
performance for the OMX Stockholm Return Index was 13%.

Share capital and ownership structure
As of December 31, 2018, the share capital of AB Electrolux
amounted to approximately SEK 1,545m, corresponding to
308,920,308 shares. The share capital of Electrolux consists of
Class A shares and Class B shares. An A share entitles the holder
to one vote and a B share to one-tenth of a vote. All shares enti-
tle the holder to the same proportion of assets and earnings and
carry equal rights in terms of dividends. In accordance with the
Swedish Companies Act, the Art icles of Association of Electrolux
also provide for specific rights of priority for holders of different
types of shares, in the event that the company issues new shares
or certain other instruments.

According to Electrolux Articles of Association, owners of
Class A shares have the right to have such shares converted to
Class B shares. The purpose of the conversion clause is to give
holders of Class A shares an opportunity to achieve improved
liquidity in their shareholdings. Conversion re duces the total
number of votes in the company. There were no conversion
of shares in 2018.

The total number of registered shares in the company

amounts to 308,920,308 shares, of which 8,192,539 are Class A
shares and 300,727,769 are Class B shares, total number of votes
amounts to 38,265,316.

Major shareholders

Investor AB

Swedbank Robur Funds

BlackRock, Inc.

Alecta Pension Insurance

AMF Insurance & Funds

Norges Bank Investment Management

Fiduciary Management, Inc. of Milwaukee

Vanguard

TIAA - Teachers Advisors

Nordea Funds

Share
capital, %

Voting
rights, %

16.4

28.4

4.8

4.7

4.4

2.6

2.1

1.8

1.5

3.9

3.8

4.7

4.5

1.7

1.5

1.2

Total, ten largest shareholders

42.5

53.1

Source: Holdings and Euroclear Sweden as of December 31, 2018.

OWNERSHIP STRUCTURE

According to Holdings and Euroclear Sweden, there were
49,870 shareholders in AB Electrolux as of December 31,
2018. Investor AB is the largest shareholder, owning 16.4%
of the share capital and 28.4% of the voting rights. Informa-
tion on the shareholder structure is updated quarterly at
www.electroluxgroup.com

Swedish institutions and mutual funds, 56%
Foreign investors, 38%
Swedish private investors, 6%

At year-end, about 38% of the total share capital
was owned by foreign investors.

Source: Holdings and Euroclear Sweden as of
December 31, 2018.

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 35

Distribution of funds to shareholders

Proposed dividend
The Board of Directors proposes a dividend for 2018 of SEK 8.50
(8.30) per share, for a total dividend payment of approximately
SEK 2,443m (2,385). The proposed dividend corresponds to
approximately 64% (42) of income for the period.

The dividend is proposed to be paid in two equal install-
ments, the first with record date April 12, 2019 and the second
with record date October 11, 2019. The first installment is esti-
mated to be paid on April 17, 2019 and the second installment
on October 16, 2019.

The Group’s goal is for the dividend to correspond to at least

30% of income for the period. Historically, the Electrolux divi-
dend rate has been considerably higher than 30%. Electrolux
has a long tradition of high total distribution to shareholders
that includes repurchases and redemptions of shares.

Proposal for a renewed mandate on acquisition
of own shares
Electrolux has, for several years, had a mandate from the Annual
General Meetings to acquire own shares.

The Board of Directors proposes the Annual General Meet-
ing 2019 to authorize the Board of Directors, for the period until
the next Annual General Meeting, to resolve on acquisitions of
shares in the company and that the company may acquire as
a maximum so many B shares that, following each acquisition,
the company holds at a maximum 10% of all shares issued by
the company.

The purpose of the proposal is to be able to use repurchased

shares on account of potential company acquisitions and the
company’s share related incentive programs, and to be able to
adapt the company’s capital structure.

As of December 31, 2018, Electrolux held 21,522,858 B shares

in Electrolux, corresponding to approximately 7.0% of the total
number of shares in the company.

Number of shares

Number of shares as of January 1, 2018

8,192,539

300,727,769

308,920,308

21,522,858

287,397,450

Total number of shares as of December 31, 2018

8,192,539

300,727,769

308,920,308

21,522,858

287,397,450

As % of total number of shares

7.0%

A shares

B shares

Shares, total

Shares held
by Electrolux

Shares held
by other
shareholders

TOTAL DISTRIBUTION TO SHAREHOLDERS

SEKM

7,500

6,000

4,500

3,000

1,500

Electrolux has a
long tradition of high
total distribution to
share holders that
includes dividends as
well as repurchases
and redemptions of
shares.

Dividend

Repurchase of shares

Redemption of shares

ELECTROLUX ANNUAL REPORT 2018

36 Board of Directors’ report and financial statements

Employees

Electrolux corporate culture
Teamship is the Electrolux way of working. It’s about setting
aligned goals that allow clear choices and continuous improve-
ment. It’s about knowing how to collaborate. It’s about transpar-
ency and a learning organization. Finally, it’s about engage-
ment and passion about outstanding consumer experiences.
Wherever Electrolux operates in the world, the company

applies the same high ethical standards and principles of
conduct.

Electrolux has a global Ethics Program, encompassing both

ethics training and a whistle-blowing system – the Electrolux
Ethics Helpline. Through the Ethics Helpline, employees can
report suspected misconduct in local languages. Reports
may be submitted anonymously if legally permitted.

Code of Conduct
The Group has a Code of Conduct that defines high employ-
ment standards for all Electrolux employees in all countries and
business areas. It incorporates issues such as child and forced
labor, health and safety, workers’ rights and environmental
compliance. Key policies in this context include the Workplace
Policy, the Anti-Corruption Policy and the Environmental Policy.

Number of employees
The average number of employees decreased in 2018 to 54,419
(55,692), of whom 2,016 (2,039) were in Sweden. At year-end, the
total number of employees was 51,798 (56,708).

Salaries and remuneration in 2018 amounted to SEK 17,363m

(16,470), of which SEK 1,406m (1,406) refers to Sweden.

Proposal for remuneration guidelines for
Group Management
The Board of Directors will propose the following guidelines
for remuneration and other terms of employment for the Pres-
ident and CEO and other members of Group Management of
Electrolux to the Annual General Meeting (AGM) 2019. Group
Management currently comprises eleven executives. The
proposed guidelines for 2019 correspond to the guidelines
approved by the AGM in 2018.

The principles shall be applied for employment agreements

entered into after the AGM 2019 and for changes made to
existing employment agreements thereafter.

Remuneration for the President and CEO is resolved upon by
the AB Electrolux Board of Directors, based on the recom-
mendation of the Remuneration Committee. Remuneration for
other members of Group Management is resolved upon by the
Remuneration Committee and reported to the Board of Directors.

For a detailed description on remuneration to Group Management and related costs,
see Note 27.

Electrolux shall strive to offer total remuneration that is fair and
competitive in relation to the country or region of employment
of each Group Management member. The remune ration terms
shall emphasize ‘pay for performance’, and vary with the
performance of the individual and the Group. The total remuner-
ation for Group Management may comprise the components
set forth hereafter.

Fixed compensation
The Annual Base Salary (ABS) shall be competitive relative
to the relevant country market and reflect the scope of the job
responsibilities. Salary levels shall be reviewed periodically
(usually annually) to ensure continued competitiveness and
to recognize individual performance.

Variable compensation
Following the ‘pay for performance’ principle, variable compen-
sation shall represent a significant portion of the total compen-
sation opportunity for Group Management. Variable compen-
sation shall always be measured against pre-defined targets
and have a maximum above which no payout shall be made.
Variable compensation shall principally relate to financial

performance targets.

Non-financial targets may also be used in order to strengthen

the focus on delivering on the Group’s strategic plans. The tar-
gets shall be specific, clear, measurable and time bound and
be determined by the Board of Directors.

Short Term Incentive (STI)
Group Management members shall participate in an STI plan
under which they may receive variable compensation. The
objectives in the STI plan shall mainly be financial. These shall
be set based on annual financial performance of the Group
and, for the business area heads, of the business area for which
the Group Management member is responsible.

EMPLOYEES

65,000

55,000

45,000

35,000

25,000

15,000

SEKM

2.5

2.0

1.5

1.0

0.5

0.0

Average number of employees
Net sales per employee

The average number of employees
decreased to 54,419 (55,692) in 2018.

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 37

The maximum STI entitlements shall be dependent on job
position and may amount up to a maximum of 100% of ABS.
Reflecting current market conditions, the STI entitlement for
Group Management members in the U.S. may amount up to a
maximum of 150% of ABS if the maximum performance level is
reached.

STI payments for 2019 are estimated1) to range between no
payout at minimum level and SEK 58m (excluding social costs)
at maximum level.

Long Term Incentive (LTI)
Each year, the Board of Directors will evaluate whether or not a
LTI-program shall be proposed to the General Meeting. LTI pro-
grams shall always be designed with the aim to further enhance
the common interest of participating employees and Electrolux
shareholders of a good long-term development for Electrolux.

For a detailed description of all programs and related costs, see Note 27.

Proposal for performance-based long-term share
program 2019
The Board of Directors will propose a performance-based
long-term share program for 2019 to the AGM 2019. The pro-
posed program will be connected to performance targets for
the Group established by the Board for (i) earnings per share,
(ii) return on net assets and (iii) adjusted organic sales growth, for
the 2019 financial year. The proposed program will include up to
350 senior managers and key employees. Allocation of perfor-
mance-based shares, if any, will take place in 2022. Details of the
program will be included in the notice to the AGM 2019.

The costs for the LTI program proposed for 2019 are esti-
mated1) to SEK 463m (including social costs) at maximum level.

Extraordinary arrangements
Other variable compensation may be approved in extraordi-
nary circumstances, under the conditions that such extraordi-
nary arrangement, in addition to the target requirements set out
above, is made for recruitment or retention purposes, is agreed
on an individual basis, does not exceed three (3) times the ABS
and is earned and/or paid out in installments over a minimum
period of two (2) years.

1) Estimation is made on the assumption that Group Management is unchanged.

Costs for extraordinary arrangements during 2018 amounted
to approximately SEK 3.2m. Currently there are no outstanding
extraordinary arrangements.

Pension and benefits
Old age pension, disability benefits and medical benefits shall
be designed to reflect home-country practices and require-
ments. When possible, pension plans shall be based on defined
contribution. In individual cases, depending on tax and/or
social security legislation to which the individual is subject,
other schemes and mechanisms for pension benefits may be
approved.

Other benefits may be provided on individual level or to the
entire Group Management. These benefits shall not constitute
a material portion of total remuneration.

Notice of termination and severance pay
The notice period shall be twelve months if the Group takes the
initiative and six months if the Group Management member
takes the initiative.

In individual cases, severance pay may be approved in addi-
tion to the notice periods. Severance pay may only be payable
upon the Group’s termination of the employment arrangement
or where a Group Management member gives notice as the
result of an important change in the working situation, because
of which he or she can no longer perform to standard. This may
be the case in e.g. the event of a substantial change in owner-
ship of Electrolux in combination with a change in reporting line
and/or job scope.

Severance pay may for the individual include the continu-
ation of the ABS for a period of up to twelve months following
termination of the employment agreement; no other benefits
shall be included. These payments shall be reduced with the
equivalent value of any income that the individual earns during
that period of up to twelve months from other sources, whether
from employment or independent activities.

Deviations from the guidelines
The Board of Directors shall be entitled to deviate from these guide-
lines if special reasons for doing so exist in any individual case.

ELECTROLUX ANNUAL REPORT 2018

38 Board of Directors’ report and financial statements

Sustainability and environmental facts

Electrolux retains global industry leadership in
Dow Jones Sustainability Index 2018
In 2018, and for the twelfth consecutive year, Electrolux was
recognized as a leader in the household durables industry in
the prestigious Dow Jones Sustainability Index (DJSI). Electrolux
thereby ranks among the top 10% of the world’s 2,500 largest
companies for social and environmental performance. Addition-
ally, Electrolux has received recognition from other indexes and
organizations, including RobecoSAM, UN Global Compact 100
and OEKOM Prime. Electrolux is also included in the Climate A
List by CDP.

Sustainability reporting 2018
The Group’s sustainability framework – For the Better –
comprises of three areas: Better Solutions, Better Operations
and Better Society. For more information on the Group’s
sustainability work and progress during 2018, read Electrolux
sustainability reporting section on pages 90–99.

Mandatory permits and notification in Sweden and elsewhere
Electrolux operates two plants in Sweden, which account for
approximately 1.2% of the total value of the Group’s production.
Permits are required by authorities for one of these plants and are
also required to submit notification. The permits cover such areas
as thresholds or maximum permissible values for air and water-
borne emissions and noise. No significant non-compliance with
Swedish environmental legislation was reported in 2018.

Manufacturing units in other countries adjust their opera-
tions, apply for necessary permits and report to the authori-
ties in accordance with local legislation. The Group follows a
precautionary principle with reference to both acquisitions of
new plants and continuous operations. No significant non-
compliance with applicable environmental legislation was
reported in 2018.

Electrolux products are affected by legislation in various
markets, principally involving energy consumption, producer
responsibility for recycling, and restriction and management
of hazardous substances. Electrolux continuously monitors
changes in legislation, and both product development and
manufacturing are adjusted to reflect these changes.

Events after year-end 2018

January 31. Electrolux reinitiates U.S. manufacturing and product
investment, announces manufacturing consolidation projects
The Electrolux Group is reinitiating an investment, estimated at
USD 250m, in Springfield, Tennessee, and consolidating all U.S.
cooking manufacturing into that facility. Electrolux will also transfer
refrigeration manufacturing from its Santiago, Chile, facility to other
locations. The measures will lead to restructuring charges in the first
quarter 2019 of approximately SEK 1bn, whereof approximately
SEK 300m will have a cash flow impact.

As Electrolux reinitiates the project and consolidates into

Springfield, the company will also cease production at its Memphis,
Tennessee facility. Production at the facility is expected to continue
through 2020. The Springfield, Tennessee expansion will be complete
and production will begin during the fourth quarter 2020.

The increased global use of modular product platforms has also

contributed to a decision to cease manufacturing of refrigerators
at Electrolux factory in Santiago, Chile, to improve efficiency and
sharpen the local product offering.

The charges will be reported as non-recurring items in the
results for the first quarter of 2019, affecting the business areas
Major Appliances North America (approximately SEK 800m)
and Major Appliances Latin America (approximately SEK 225m).

Electrolux anticipates annual savings of approximately SEK 1bn

with full effect from 2022 as a result of the measures announced.

January 31. Electrolux prepares for separation and stock exchange
listing of Professional Products business area
The Electrolux Board of Directors has initiated work intending to
propose that a shareholders meeting decides to split the Group into
two listed companies, “Electrolux” for household appliances and
“Electrolux Professional” for professional appliances, and to distribute
Electrolux Professional to the shareholders of AB Electrolux in 2020.
Electrolux Board of Directors believes that such a split has the
potential to create substantial shareholder value over time, given
that the two businesses have different end markets, customers and
success drivers.

A split will enable both companies to focus on their respective

opportunities to drive profitable growth, with distinct strategies
for innovation and customer focus, as well as a high level of capi-
tal efficiency. The separation costs are expected to be relatively

low. Electrolux financial targets will remain unchanged following a
separation of Electrolux Professional.

If the shareholders decide in favor of such a proposal, AB Electrolux

shareholders will receive shares in Electrolux Professional in pro-
portion to their shareholding in AB Electrolux. The intention is to list
Electrolux Professional on Nasdaq Stockholm during the first half of
2020. The Board expects to provide an update on the preparations
and a more detailed time plan around mid-year 2019.

A distribution of Electrolux Professional is expected to meet the
requirements of Lex Asea, which in brief means that there should not
be any immediate tax consequences for Sweden-based shareholders
of AB Electrolux since they should only be taxed on the value of the
shares received in Electrolux Professional when they sell them.

February 1. Electrolux sharpens organization
to drive profitable growth
Electrolux implements strategic and organizational changes to
reinforce its ability to create outstanding consumer experiences
and drive profitable growth in its consumer business.

Electrolux is revising its business area structure to create four

consumer-focused regional business areas, ensuring a unified
approach to each market with common branded platforms and inter-
actions with consumers. This means the Home Care & SDA business
area, currently responsible for Electrolux offering of vacuum cleaners
and other products for wellbeing in the home, is being combined with
the four current major appliances business areas.

To accelerate product and ownership experience innovation,

Electrolux is also pulling together central functions focused on
consumer experiences into a new organizational structure, headed
by a Group Chief Experience Officer (CXO). This organization is glob-
ally responsible for areas such as marketing, design, product lines,
digital consumer solutions and ownership experience. Ola Nilsson,
currently head of Home Care & SDA, has been named Group CXO
and Executive Vice President. Related to this change of roles and
responsibilities within Group Management, Chief Operations Officer
Jan Brockmann is also being named Executive Vice President.

The changes announced are effective as from 1 February 2019.
Electrolux will publish its first quarterly report based on the updated
business area structure on April 26, 2019.

For more information, visit www.electroluxgroup.com

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 39

Parent Company income statement

Income statement

seKm

Net sales

Cost of goods sold

Gross operating income

Selling expenses

Administrative expenses

Other operating income

Other operating expenses

Operating income

Financial income

Financial expenses

Financial items, net

Income after financial items

Appropriations

Income before taxes

Taxes

Income for the period

Total comprehensive income for the period

seKm

Income for the period

Other comprehensive income

Available for sale instruments

Exchange rate differences

Cash flow hedges

Income tax relating to other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period

note

2018

38,911

–33,560

5,351

–3,247

–1,410

–804

–110

7,967

–695

7,272

7,162

–1,743

5,419

5,488

2017

35,168

–30,034

5,134

–2,967

–1,795

–105

268

7,142

–855

6,287

6,555

182

6,737

–201

6,536

2018

5,488

2017

6,536

–5

–1

5,540

6,573

The Parent Company comprises the functions of the Group’s
head office, as well as five companies operating on a commis-
sion basis for AB Electrolux.

Net sales for the Parent Company, AB Electrolux, during
2018 amounted to SEK 38,911m (35,168) of which SEK 31,806m
(28,695) referred to sales to Group companies and

SEK 7,105m (6,473) to external customers. Income after

financial items was SEK 7,162m (6,555), including dividends from
subsidiaries in the amount of SEK 7,179m (6,496). Income for the
period amounted to SEK 5,488m (6,536).

Income tax related to group contributions is reported in the

income statement. Income tax related to cash flow hedges is
reported in other comprehensive income.

Capital expenditures in tangible and intangible assets
amounted to SEK 594m (672). Liquid funds at the end of the
period amounted to SEK 7,244m, as against SEK 6,066m at
the start of the year.

Undistributed earnings in the Parent Company at the end of
the period amounted to SEK 22,078m, as against SEK 19,364m
at the start of the year. Dividend to shareholders for 2017
amounted to SEK 2,385m.

For information on the number of employees, salaries and
remuneration, see Note 27. For information on shareholdings
and participations, see Note 29.

ELECTROLUX ANNUAL REPORT 2018

40 Board of Directors’ report and financial statements

Parent Company balance sheet

seKm

ASSETS

Non–current assets

Intangible assets

Property, plant and equipment

Deferred tax assets

Financial assets

Total non–current assets

Current assets

Inventories

Receivables from subsidiaries

Trade receivables

Derivatives with subsidiaries

Derivatives

Other receivables

Prepaid expenses and accrued income

Short-term investments

Cash and bank

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity

Restricted equity

Share capital

Statutory reserve

Development reserve

Non–restricted equity

Retained earnings

Income for the period

Total equity

Untaxed reserves

Provisions

Provisions for pensions and similar commitments

Other provisions

Total provisions

Non–current liabilities

Payable to subsidiaries

Bond loans

Other non–current loans

Total non–current liabilities

Current liabilities

Payable to subsidiaries

Accounts payable

Other liabilities

Short–term borrowings

Derivatives with subsidiaries

Derivatives

Accrued expenses and prepaid income

Total current liabilities

Total liabilities and provisions

Total liabilities, provisions and equity

note

December 31, 2018

December 31, 2017

1,714

144

453

35,943

38,254

2,813

21,110

1,172

127

256

392

—

7,244

33,157

71,411

1,545

3,017

875

5,437

16,590

5,488

22,078

27,515

442

691

1,133

3,011

2,656

5,735

30,519

1,720

416

2,334

1,479

36,586

43,454

71,411

1,530

168

282

33,616

35,596

2,640

17,769

1,079

250

336

—

6,066

28,267

63,863

1,545

3,017

506

5,068

12,828

6,536

19,364

24,432

444

438

791

1,229

3,332

2,777

6,181

25,969

1,723

580

1,501

279

228

1,297

31,577

38,987

63,863

ELECTROLUX ANNUAL REPORT 2018

Board of Directors’ report and financial statements 41

Parent Company change in equity

Restricted equity

Non-restricted equity

Statutory
reserve

Development
reserve

Fair value
reserve

Retained
earnings

Total
equity

3,017

226

Share
capital

1,545

—

1,545

—

1,545

3,017

—

3,017

—

1,545

3,017

—

280

—

280

506

—

506

—

369

—

369

875

—

–1

—

–37

—

–5

—

15,574

20,370

6,536

—

6,536

–356

–280

–2,155

–2,791

19,319

—

19,319

5,488

—

5,488

–35

–369

–2,385

–2,789

22,018

–1

6,573

–356

–2,155

–2,511

24,432

–37

24,395

5,488

–5

5,540

–35

–2,385

–2,420

27,515

seKm

Opening balance, January 1, 2017

Income for the period

Available for sale instruments

Exchange rate differences

Cash flow hedges

Income tax relating to other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period

Share-based payment

Development reserve

Dividend

Total transactions with equity holders

Closing balance, December 31, 2017

Effect of change in accounting principles

Adjusted opening balance

Income for the period

Available for sale instruments

Exchange rate differences

Cash flow hedges

Income tax relating to other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period

Share-based payment

Development reserve

Dividend

Total transactions with equity holders

Closing balance, December 31, 2018

ELECTROLUX ANNUAL REPORT 2018

42 Board of Directors’ report and financial statements

Parent Company cash flow statement

seKm

Operations

Income after financial items

Depreciation and amortization

Capital gain/loss included in operating income

Share-based compensation

Group contributions

Taxes paid

Cash flow from operations, excluding change in operating assets and liabilities

Change in operating assets and liabilities

Change in inventories

Change in trade receivables

Change in current intra-group balances

Change in other current assets

Change in other current liabilities and provisions

Cash flow from operating assets and liabilities

Cash flow from operations

Investments

Change in shares and participations

Capital expenditure in intangible assets

Capital expenditure in property, plant and equipment

Other

Cash flow from investments

Total cash flow from operations and investments

Financing

Change in short-term investments

Change in short-term borrowings

Change in intra-group borrowings

New long-term borrowings

Amortization of long-term borrowings

Dividend

Cash flow from financing

Total cash flow

Cash and cash equivalents at beginning of period

Exchange-rate differences referring to cash and cash equivalents

Cash and cash equivalents at end of period

2018

2017

7,162

412

332

–35

–1746

–92

6,033

–173

–93

–2,358

–109

–236

–2,969

3,064

–2,726

–549

–45

–3,231

–167

231

3,282

1,661

–1,501

–2,385

1,288

1,121

6,066

7,244

6,555

317

114

–454

230

–112

6,650

–46

–60

–5,769

120

–77

–5,832

818

–1,428

–597

–75

–2,095

–1,277

904

851

–231

—

–1,229

–2,155

–1,860

–3,137

9,167

6,066

ELECTROLUX ANNUAL REPORT 2018

Notes

44 Notes

All amounts in SEKm unless otherwise stated

Notes

Contents

Note 1

Accounting principles

Note 2

Financial risk management

Note 3

Segment information

Note 4

Revenue recognition

Note 5

Operating expenses

Note 6

Other operating income and expenses

Note 7

Material profit or loss items in operating income

Note 8

Leasing

Note 9

Financial income and financial expenses

Note 10

Taxes

Note 11 Other comprehensive income

Note 12

Property, plant and equipment

Note 13 Goodwill and other intangible assets

Note 14 Other non-current assets

Note 15

Inventories

Note 16 Other current assets

Note 17

Trade receivables

Note 18

Financial instruments

Note 19 Assets pledged for liabilities to credit institutions

Note 20

Share capital, number of shares and
earnings per share

Note 21 Untaxed reserves, Parent Company

Note 22 Post-employment benefits

Note 23 Other provisions

Note 24 Other liabilities

Note 25 Contingent assets and liabilities

Note 26 Acquired and divested operations

Note 27 Employees and remuneration

Note 28

Fees to auditors

Note 29 Shares and participations

Note 30 Definitions

Note 31

Proposed distribution of earnings

Auditors’ report

AB Electrolux (publ), 556009-4178

ELECTROLUX ANNUAL REPORT 2018

Notes 45

All amounts in SEKm unless otherwise stated

Note 1 Accounting principles

This section describes the comprehensive basis of preparation which has
been applied in preparing the financial statements. Accounting principles
for specific accounting areas and individual line items are described in the
related notes. For additional information on accounting principles, please
contact Electrolux Investor Relations.

The following apply to acquisitions and divestments:
• Companies acquired are included in the consolidated income statement

as of the date when Electrolux gains control.

• Companies divested are included in the consolidated income statement

up to and including the date when Electrolux loses control.

Basis of preparation
The consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as endorsed by the
European Union (EU). The consolidated financial statements have been
prepared under the historical cost convention, as modified by revaluation
of financial assets at fair value through other comprehensive income and
financial assets and liabilities (including derivative financial instruments) at
fair value through profit or loss. Some additional information is disclosed
based on the standard RFR 1 issued by the Swedish Financial Reporting
Board and the Swedish Annual Accounts Act. As required by IAS 1, Electrolux
companies apply uniform accounting rules, irrespective of national legisla-
tion, as defined in the Electrolux Accounting Manual which is fully compliant
with IFRS. The policies set out below have been consistently applied to all
years presented with the exception of new accounting standards where
the application follows the rules in each particular standard. For informa-
tion on new standards, see the section on new or amended accounting
standards below.

Enumerated amounts presented in tables and statements may not
always agree with the calculated sum of the related line items due to round-
ing differences. The aim is for each line item to agree with its source and
therefore there may be rounding differences affecting the total when add-
ing up the presented line items.

The Parent Company applies the same accounting principles as the
Group, except in the cases specified in the section entitled ‘Parent Company
accounting principles’.

The financial statements were authorized for issue by the Board of Direc-
tors on February 14, 2019. The balance sheets and income statements are
subject to approval by the Annual General Meeting of shareholders on April
10, 2019.

Principles applied for consolidation
The consolidated financial statements have been prepared by use of the
acquisition method of accounting, whereby the assets and liabilities and
contingent liabilities assumed in a subsidiary on the date of acquisition are
recognized and measured to determine the acquisition value to the Group.
The cost of an acquisition is measured as the fair value of the assets
given, equity instruments issued and liabilities incurred or assumed at the
date of exchange. The consideration transferred includes the fair value of
any asset or liability resulting from a contingent consideration arrange-
ment. Costs directly attributable to the acquisition effort are expensed as
incurred. On an acquisition-by-acquisition basis, the Group recognizes any
non- controlling interest in the acquiree either at fair value or at the non-
controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair value of the identifiable
net assets acquired is recorded as goodwill. If the fair value of the acquired
net assets exceeds the cost of the business combination, the identification
and measurement of the acquired assets must be reassessed. Any excess
remaining after that reassessment represents a ‘bargain purchase’ and is
recognized immediately in the statement of comprehensive income.

The consolidated financial statements for the Group include the financial
statements of the Parent Company and its directly and indirectly owned
subsidiaries after:
• elimination of intra-group transactions, balances and unrealized intra-

group profits, and

• carrying values, depreciation and amortization of acquired surplus values.

Definition of Group companies
The consolidated financial statements include AB Electrolux and all compa-
nies over which the Parent Company has control, i.e., the power to direct the
activities; exposure to variable return and the ability to use its power. When
the Group ceases to have control or significant influence, any retained inter-
est in the entity is remeasured at its fair value, with the change in carrying
amount recognized in profit or loss.

At year-end 2018, the Group consisted of 164 (153) companies with

246 (214) operating units.

ELECTROLUX ANNUAL REPORT 2018

Associated companies
Associates are all companies over which the Group has significant influ-
ence but not control, generally accompanying a shareholding of between
20 and 50% of the voting rights. Investments in associated companies are
accounted for in accordance with the equity method.

Foreign currency translation
Foreign currency transactions are translated into the functional currency
using the exchange rate prevailing at the date of each transaction.

Monetary assets and liabilities denominated in foreign currencies are
valued at year-end exchange rates and any exchange-rate differences are
included in income for the period, except when deferred in other compre-
hensive income for the effective part of qualifying net investment hedges.

The consolidated financial statements are presented in Swedish krona
(SEK), which is the Parent Company’s functional currency and the Group’s
presentation currency according to IAS 21.

The balance sheets of foreign subsidiaries are translated into SEK at
year-end closing rates. The income statements are translated at the aver-
age rates for the year. Translation differences thus arising are included in
other comprehensive income.

Exchange rates

SEK

Exchange rate

ARS

AUD

BRL

CAD

CHF

CLP

CNY

EUR

GBP

HUF

MXN

RUB

THB

USD

2018

2017

Average

0.3087

6.50

2.39

6.71

8.91

End of
period

0.2373

6.34

2.32

6.59

9.15

Average

0.5176

6.53

2.66

6.57

8.67

End of
period

0.4729

6.41

2.48

6.55

8.41

0.0136

0.0129

0.0131

0.0134

1.31

10.26

11.57

0.0321

0.4517

0.1392

0.2691

8.70

1.30

10.28

11.38

0.0320

0.4556

0.1292

0.2754

8.97

1.26

9.64

11.03

0.0312

0.4499

0.1463

0.2517

8.54

1.26

9.84

11.09

0.0317

0.4160

0.1419

0.2516

8.21

New or amended accounting standards applied in 2018
The following new, amended or improved accounting standards were
applicable from January 1, 2018: IFRS 2 Share-based Payments; IFRS
4 Insurance Contracts; IFRS 9 Financial Instruments; IFRS 15 Revenue
from Contracts with Customers; IAS 40 Investment Property; and Annual
Improvements 2014–2016. The effects from the application of IFRS 9 and
IFRS 15 are described in section ‘New or amended accounting standards to
be applied after 2017’ on pages 96–98 in the Annual Report 2017. The other
new, amended or improved standards did not have any material impact on
Electrolux financial statements.

New interpretations of accounting standards
Interpretation 22 Foreign Currency Transactions and Advance Consid-
erations, issued by the International Financial Reporting Interpretation
Committee (IFRIC), was applicable from January 1, 2018 and has had no
material impact on the financial statements of Electrolux.

New or amended accounting standards to be applied after 2018
The following new, amended or improved accounting standards have been
published but are not mandatory for 2018 and have not been early adopted
by Electrolux: IFRS 3 Business Combinations; IFRS 9 Financial Instruments;
(endorsed by the EU on March 22, 2018); IFRS 16 Leases (endorsed by the
EU on October 31, 2017); IFRS 17 Insurance Contracts; IAS 1 Presentation
of Financial Statements; IAS 8 Accounting Policies, Changes in Accounting

46 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 1

Estimates and Errors; IAS 19 Employee Benefits; IAS 28 Investments in Asso-
ciates and Joint Ventures; Annual Improvements 2015–2017. The standards
have not yet been endorsed by the EU unless stated above. The effects from
the application of IFRS 16 are described below. The other new, amended
or improved standards mentioned above are not expected to have any
material impact on the financial statements of Electrolux.

IFRS 16 Leases
IFRS 16 Leases is a major revision of how to account for leases, provid-
ing a comprehensive model for the identification of lease arrangements
and their treatment in accounting and reporting. IFRS 16 supersedes IAS
17 Leases and its accompanying interpretations. The standard’s effective
date is January 1, 2019, and it was endorsed by the EU on October 31, 2017.
Electrolux will apply IFRS 16 from January 1, 2019. Extensive preparatory
work has been performed throughout the group in order to implement IFRS
16. Work has comprised assessing the full impact of IFRS 16, identifying and
reviewing lease contracts, designing processes, implementing a common
system solution for the group in order to fulfill the accounting and report-
ing requirements, and collecting and analyzing lease contract data. The
general impact of IFRS 16, the outcome of the preparatory work and the
preliminary effects from applying the standard are described below.

The application of IFRS 16 affects primarily lessee accounting of operat-
ing leases, as it requires almost all leases being recognized on the balance
sheet, while lessor accounting remains basically unchanged. Electrolux
is a lessee of a large number of assets such as warehouses, office prem-
ises, vehicles, and certain office equipment, while the group’s activities as
a lessor are limited. Changes in lessee accounting are expected to have
a significant impact on the group’s financial statements as a major part
of the group’s operating leases will be recognized on the balance sheet
upon transition to IFRS 16. Optional exemptions which allow for excluding
short-term leases and leases of low-value assets from recognition on the
balance sheet will be applied. The group’s finance leases exposure is limited
and thus the related effects from applying IFRS 16 are limited, given this and
the fact that finance leases are grandfathered upon transition.

Under IFRS 16, a contract is, or contains, a lease if the contract con-
veys the right to control the use of an identified asset for a period of time
in exchange for consideration. The current distinction between operating
and finance leases is removed for lessees and instead the standard requires
recognition of a right-of-use asset and a financial liability for all contracts
meeting the definition of a lease.

Transition to IFRS 16
Electrolux will adopt IFRS 16 under the modified retrospective approach as
per the transition date January 1, 2019. In accordance with the standard,
comparative information will not be restated. Instead, the cumulative effect
of initially applying the standard will be recognized as an opening balance
adjustment. All right-of-use assets will be measured at its carrying amount
as if the standard had been applied since the commencement date and the
lease liabilities will be measured as the present value of the remaining lease
payments at transition. The incremental borrowing rate at the date of transi-
tion is used for measuring both the right-of-use assets and the lease liability.
In applying IFRS 16 for the first time, the group will use practical expedi-
ents permitted by the standard, when applicable. The practical expedients
used include the following:
• There will be no reassessment of whether a contract is, or contains, a lease
at the date of transition. This means that the standard is applied to all con-
tracts that were identified as containing a lease under IAS 17 and IFRIC 4.
• Operating leases with a remaining lease term of less than 12 months as at
January 1, 2019, will be accounted for as short-term leases, i.e. not recog-
nized on the balance sheet at transition.

• Initial direct costs are excluded from the measurement of right-of-use

assets at the date of transition.

• Hindsight is used in determining the lease term for contracts containing an

option to extend or terminate the lease.

Under IFRS 16, both net assets and net debt will increase due to the recogni-
tion of the right-of-use assets and the lease liabilities. Lease fees, currently
reported as an operating expense, will be replaced by a depreciation of the
right-of-use assets and an interest expense related to the lease liabilities.
The income statement will also be affected from a timing perspective, as
lease fees are currently expensed on a straight-line basis. Under IFRS 16, the
total lease-related expense is typically higher in the earlier years of a lease
and lower in the later years of a lease. This is due to the interest expense
reducing over time as the liability is amortized.

Cash flow from operations will increase as today’s lease fees are included
in cash flow from operations but under IFRS 16 the major part of the cash
payments will relate to the amortization of the lease liability and conse-

quently affect cash flow from financing. Only the part of the payments that
reflects interest will affect cash flow from operations. However, lease fees
related to leases not recognized on the balance sheet, i.e. short-term and
low-value leases, will continue to affect cash flow from operations in full.
The effects on the balance sheet, income statement and cash flow will
consequently affect related key metrics.

A preliminary assessment indicates an opening balance adjustment as
per January 1, 2019, with the following approximate effects on the balance
sheet, without taking into consideration any related adjustments of prepaid
and/or accrued amounts at transition:
• Right-of-use assets: SEK 3,100m
• Deferred tax assets: SEK 60m
• Lease liabilities: SEK 3,400m
• Retained earnings: SEK –240m

Based on the preliminary amounts above, net assets would increase by
SEK 3,160m, and net debt by SEK 3,400m. The preliminary net assets effect
is expected to affect the segments as follows: Major Appliances Europe:
SEK 700m, Major Appliances North America: SEK 900m, Major Appliances
Latin America: SEK 200m, Major Appliances Asia/Pacific, Middle East and
Africa: SEK 700m, Home Care & SDA: SEK 150m, Professional Products:
SEK150m and Common Group SEK 360m.

The Group’s preliminary assessment is that the adoption of the new
accounting rules will have a slightly positive impact on operating income
and a minor effect on income for the period for the full year 2019. Cash flow
from operations will increase and cash flow from financing decrease by
approximately SEK 900m as repayment of the principal portion of the lease
liabilities will be classified as cash flow from financing.

New interpretations of accounting standards
The International Financial Reporting Interpretation Committee (IFRIC) has
issued Interpretation 23 Uncertainty over Income Tax Treatments. Manda-
tory effective date is 1 January, 2019. The interpretation was endorsed by
the EU on 23 October, 2018. No material impact is expected on the financial
statements of Electrolux.

Critical accounting policies and key sources of estimation uncertainty
Use of estimates
Management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare the financial statements in conformity with IFRS.
Actual results may differ from these estimates under different assumptions or
conditions. Below, Electrolux has summarized the accounting policies that
require more subjective judgement by management in making assumptions
or estimates regarding the effects of matters that are inherently uncertain.

Asset impairment and useful lives
Non-current assets, including goodwill, are evaluated for impairment
yearly or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impaired asset
is written down to its recoverable amount based on the best information
available. Different methods have been used for this evaluation, depending
on the availability of information. When available, market value has been
used and impairment charges have been recorded when the information
indicated that the carrying amount of an asset was not recoverable. In the
majority of cases, however, market value has not been available, and the
fair value has been estimated by using the discounted cash flow method
based on expected future results. Differences in the estimation of expected
future results and the discount rates used could have resulted in different
asset valuations. The yearly impairment testing of goodwill and other
intangible assets with indefinite useful lives, including sensitivity analyses
performed, has not indicated any impairment. See Note 13 on page 58 for
more information.

Property, plant and equipment are depreciated on a straight-line
basis over their estimated useful lives. Useful lives for property, plant and
equipment are estimated between 10 and 40 years for buildings and land
improvements and between 3 and 15 years for machinery, technical instal-
lations and other equipment. Management regularly reassesses the useful
lives of all significant assets. The carrying amount for property, plant and
equipment at year-end 2018 amounted to SEK 21,088m. The carrying
amount for goodwill at year-end 2018 amounted to SEK 8,239m.

Deferred taxes
In the preparation of the financial statements, Electrolux estimates the
income taxes in each of the tax jurisdictions in which the Group operates
as well as any deferred taxes based on temporary differences. Deferred
tax assets relating mainly to tax loss carry-forwards, energy-tax credits and

ELECTROLUX ANNUAL REPORT 2018

Cont. Note 1

temporary differences are recognized in those cases when future taxable
income is expected to permit the recovery of those tax assets. Changes in
assumptions in the projection of future taxable income as well as changes
in tax rates could result in significant differences in the valuation of deferred
taxes. As of December 31, 2018, Electrolux had a net amount of SEK 5,580m
recognized as deferred tax assets in excess of deferred tax liabilities. As
of December 31, 2018, the Group had tax loss carry-forwards and other
deductible temporary differences of SEK 6,008m, which have not been
included in the computation of deferred tax assets.

Current taxes
Electrolux provisions for uncertain outcome of tax audits and tax litigations
are based on management’s best estimates and recorded in the balance
sheet. These estimates might differ from the actual outcome and the timing
of the potential effect on Electrolux cash flow is normally not possible to
predict.

In recent years, tax authorities have been focusing on transfer pricing.
Transfer-pricing matters are normally very complex, include high amounts
and it might take several years to reach a conclusion.

Trade receivables
Receivables are reported net of provision for expected credit losses. The
net value reflects the amounts that are expected to be collected, based on
circumstances known at the balance sheet date. Changes in circumstances
such as higher than expected defaults or changes in the financial situa-
tion of a significant customer could lead to significantly different valuations.
At year-end 2018, trade receivables, net of provisions for expected credit
losses, amounted to SEK 21,482m. The total provision for expected credit
losses at year-end 2018 was SEK –935m.

Post-employment benefits
Electrolux sponsors defined benefit pension plans for some of its employees
in certain countries. The pension calculations are based on actuarial
assumptions regarding, e.g., mortality rates, future salary and pension
increases. The calculation of the pension obligation also depends on the
discount rate. Changes in assumptions directly affect the defined benefit
obligation, service cost, interest income and expense. The discount rate used
for the calculation of expenses during 2018 was 2.54% in average, which was
the same rate used to estimate liabilities at the end of 2017. Sensitivities for
the main assumptions are presented in Note 22 on page 67.

Restructuring
Restructuring charges include required write-downs of assets and other
non-cash items, as well as estimated costs for personnel reductions and
other direct costs related to the termination of the activity. The charges
are calculated based on detailed plans for activities that are expected to
improve the Group’s cost structure and productivity. In general, the out-
come of similar historical events in previous plans are used as a guideline
to minimize these uncertainties. The total provision for restructuring at year-
end 2018 was SEK 1,210m.

Warranties
As is customary in the industry in which Electrolux operates, many of the
products sold are covered by an original warranty, which is included in the
price and which extends for a predetermined period of time. Provisions for
this original warranty are estimated based on historical data regarding
service rates, cost of repairs, etc. As of December 31, 2018, Electrolux had a
provision for warranty commitments amounting to SEK 2,095m.

Disputes
Electrolux is involved in disputes in the ordinary course of business. The
disputes concern, among other things, product liability, alleged defects in
delivery of goods and services, patent rights and other rights and other
issues on rights and obligations in connection with Electrolux operations.
Such disputes may prove costly and time consuming and may disrupt
normal operations. In addition, the outcome of complicated disputes is
difficult to foresee. It cannot be ruled out that a disadvantageous outcome
of a dispute may prove to have a material adverse effect on the Group’s
earnings and financial position.

Calculation of loss allowance
When measuring expected credit loss the Group uses reasonable and
supportable forward looking information, which is based on assumptions
regarding the future movement of different economic drivers and how these
drivers will affect each other.

If the expected credit loss rates on trade receivables between 16 and
60 days past due had been 10% higher/lower as of December 2018, the

ELECTROLUX ANNUAL REPORT 2018

Notes 47

All amounts in SEKm unless otherwise stated

loss allowance on trade receivables would have increased/decreased
SEK 0.7m (0.7).

If the expected credit loss rates on trade receivables between 61 and
180 days past due had been 10% higher/lower as of December 2018, the
loss allowance on trade receivables would have increased/decreased
SEK 4.6m (2.3).

Accounting principles applicable from January 1, 2019
IFRS 16 Leases is applied by Electrolux from January 1, 2019. The effects
from the application of the new standard are described in section ‘New
or amended accounting standards to be applied after 2018’ on page 45.

Leases
The major part of the group’s lease arrangements are those under which the
group is a lessee. The group’s activities as a lessor are limited. This section
therefore focuses on the principles applied for lessee accounting.

A contract is, or contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for
consideration. Such an assessment is performed at inception of a contract.
An identified lease agreement is further categorized by the group as either
a short-term lease, a lease of a low-value asset or a standard lease. Short-
term leases are defined as leases with a lease term of 12 months or less. The
group’s definition of low-value assets comprises all personal computers and
laptops, phones, office equipment and furniture and all other assets of a
value less than SEK 100k when new. Lease payments related to short-term
leases and leases of low value assets are recognized as operating expenses
on a straight-line basis over the term of the lease. The group applies the term
‘standard lease’ to all identified leases which are categorized as neither
short-term leases nor leases of a low-value asset. Thus, a standard lease
is a lease agreement for which a right-of-use asset and a corresponding
lease liability are recognized at commencement of the lease, i.e. when the
asset is available for use. The group’s right-of-use assets and its long-term
and short-term lease liabilities are presented as separate line items in the
consolidated statement of financial position.

Assets and liabilities arising from a lease are initially measured on a pres-
ent value basis. The lease liability is determined as the present value of all
future lease payments at the commencement date, discounted using the
Group’s calculated incremental borrowing rate determined by country and
contract duration (>12–36 months, >37–72 months and >72 months).

The following lease payments are included in the measurement of a lease

liability:
• fixed payments, less any lease incentives,
• variable lease payments that are based on an index or a rate, initially

measured using the index or rate as at the commencement date,
• amounts expected to be payable under residual value guarantees,
• the exercise price of a purchase option if reasonably certain to exercise

that option, and

• payments of penalties for terminating the lease, if the lease term reflects

the exercise of that option.

Variable lease fees that do not depend on an index or rate (including prop-
erty tax related to leased buildings) are not included in the measurement the
lease liability. The related variable payments are charged to the statement
of comprehensive income as incurred.

The lease liability is subsequently measured by reducing the carrying
amount to reflect the lease payments made and by increasing the carrying
amount to reflect interest on the lease liability, using the effective interest
method.

A right-of-use asset is measured at cost comprising the amount of the
initial measurement of the lease liability, any lease payments made at or
before the commencement day, less any lease incentives received, and any
initial direct costs, and restoration costs (unless incurred to produce inven-
tories) with the corresponding obligation recognized and measured as a
provision under IAS 37. The right-of-use asset is subsequently measured at
cost less accumulated depreciation, any impairment losses as well as any
remeasurement of the lease liability.

A remeasurement of the lease liability, and a corresponding applicable

adjustment to the related right-of-use asset, is performed when
• the lease term has changed or there is a change in the assessment of exer-
cise of a purchase option, in which case the lease liability is remeasured
by discounting the revised lease payments using a revised discount rate.
• the lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in
which cases the lease liability is remeasured by discounting the revised
lease payments using the initial discount rate (unless the lease payments
change is due to a change in a floating interest rate, in which case a
revised discount rate is used).

48 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 1

• a lease contract is modified and the lease modification is not accounted
for as a separate lease, in which case the lease liability is remeasured
by discounting the revised lease payments using a revised discount rate.

A right-of-use asset is normally depreciated on a straight-line basis over the
shorter of the asset’s useful life and the lease term. However, if ownership of
the asset is reasonably certain to be transferred at the end of the lease, the
right-of-use asset is depreciated over its useful life. Depreciation of a right-
of-use asset starts at the commencement date of the lease.

A lease payment related to a standard lease is accounted for partly as
amortization of the lease liability and partly as interest expense in the state-
ment of comprehensive income.

Lease components are separated from non-lease components for
leases regarding buildings (offices, warehouses etc.). For leases regard-
ing other asset classes (machinery, vehicles etc.) the lease components
and any associated non-lease components are accounted for as a single
arrangement.

In determining the lease term, extension options are only included if it
is determined as reasonably certain to extend. Periods after termination
options are only included in the lease term if the lease is reasonably certain
not to be terminated. A lease term is reviewed if a significant event or a
significant change in circumstances occurs which affects the assessment.

Parent Company accounting principles
The Parent Company has prepared its Annual Report in compliance with
Swedish Annual Accounts Act (1995:1554) and recommendation RFR 2,
Accounting for Legal Entities of the Swedish Financial Reporting Board. RFR
2 prescribes that the Parent Company in the Annual Report of a legal entity
shall apply all International Financial Reporting Standards and interpre-
tations approved by the EU as far as this is possible within the framework
of the Annual Accounts Act, taking into account the connection between
accounting and taxation. The recommendation states which exceptions
from IFRS and additions shall be made. Revenue from contracts with
customers are reported in accordance with IFRS 15 and financial instru-
ments are reported in accordance with IFRS 9 in the Parent Company for
the first time in 2018. The effects from applying the standards have been
assessed as not material.

Shares in subsidiaries
Holdings in subsidiaries are recognized in the Parent Company financial
statements according to the cost method of accounting. The value of sub-
sidiaries are tested for impairment when there is an indication of a decline
in the value.

Foreign currency translations
The Annual Report is presented in Swedish krona (SEK), which is the Par-
ent Company’s accounting currency according to the Swedish Annual
Accounts Act. One of the companies operating on a commission basis for
AB Electrolux changed its functional currency to euro as from January 1,
2015. Translating differences thus arise as from 2015. The balance sheet
of the commissioner company has been translated into SEK at year-end
rates. The income statement has been translated at the average rate for
the year. Translation differences thus arising have been included in Other
comprehensive income.

Anticipated dividends
Dividends from subsidiaries are recognized in the income statement after
decision by the annual general meeting in the respective subsidiary. Anti-
cipated dividends from subsidiaries are recognized in cases where the
Parent Company has exclusive rights to decide on the size of the dividend
and the Parent Company has made a decision on the size of the dividend
before the Parent Company has published its financial reports.

Taxes
The Parent Company’s financial statements recognize untaxed reserves
including deferred tax. The consolidated financial statements, however,
reclassify untaxed reserves to deferred tax liability and equity. Tax on group
contribution is reported in the income statement.

Group contributions
Group contributions provided or received by the Parent Company are
recognized as appropriations in the income statement. Shareholder con-
tributions provided by the Parent Company are recognized in shares and
participations which are subject to impairment tests as indicated above.

Pensions
The Parent Company reports pensions in the financial statements in accor-
dance with RFR 2. According to RFR 2, IAS 19 shall be adopted regarding
supplementary disclosures when applicable.

Intangible assets
The Parent Company amortizes trademarks in accordance with RFR 2. The
Electrolux trademark in North America is amortized over 40 years using the
straight-line method. All other trademarks are amortized over their useful
lives, estimated to 10 years, using the straight-line method.

The central development costs of the Group’s common business system
are recorded in the Parent Company. The amortization is based on the
usage and go-live dates of the entities and continues over the system’s
useful life, estimated to 5 years per unit using the straight-line method. The
applied principle gives an estimated amortization period of 10 years for
the system.

Development reserve
The Parent Company’s financial statement recognize a development
reserve in compliance with Swedish Annual Accounts Act. An amount equal
to the period’s total expenditure of own developed intangible assets has
been transferred from unrestricted equity to the development reserve within
restricted equity.

Appropriations and untaxed reserves
The Parent Company reports additional fiscal depreciation, required by
Swedish tax law, as appropriations in the income statement. In the balance
sheet, these are included in untaxed reserves.

Financial statements presentation
The Parent Company presents the income statement and the balance
sheet in compliance with the Swedish Annual Accounts Act (1995:1554) and
recommendation RFR 2.

ELECTROLUX ANNUAL REPORT 2018

Notes 49

All amounts in SEKm unless otherwise stated

Note 2 Financial risk management

Financial risk management
The Group is exposed to a number of risks from liquid funds, trade receiv-
ables, customer-financing receivables, payables, borrowings, commodities
and foreign exchange. The risks include:
• Interest-rate risk on liquid funds and borrowings
• Financing risk in relation to the Group’s capital requirements
• Foreign-exchange risk on commercial flows and net investments in

foreign subsidiaries

• Commodity-price risk affecting the expenditure on raw materials and

components; and

• Credit risk relating to financial and commercial activities

The Board of Directors of Electrolux has established several policies for
the Group (hereinafter all policies are referred to as the Financial Policy)
to monitor and manage the financial risks relating to the operations of
the Group.

Group Treasury in Stockholm, supported by three regional treasury
centers located in Asia, North America, and Latin America provide services
to the business, co-ordinate access to financial markets, monitor and
manage the financial risks through internal risk reports, which analyze
exposures by degree and magnitude of the risk.

The Group seeks to minimize the effects of these risks by using derivatives
to hedge these risks exposures. The Group’s Financial Policy governs the
use of financial derivatives, which provide principles on foreign exchange
risk, interest rate risk, credit risk, the use of financial derivatives and non-
derivative financial instruments, and the investment of excess liquidity. The
internal auditors review on a continuous basis compliance with policies and
exposure limits.

Interest-rate risk on liquid funds and borrowings
Interest-rate risk refers to the adverse effects of changes in interest rates
on the Group’s income. The main factors determining this risk include the
interest-fixing period.

percentage point, excluding immaterial revaluation effects. Electrolux
acknowledges that the calculation is an approximation and does not take
into consideration the fact that the interest rates on different maturities and
different currencies might change differently.

Capital structure and credit rating
The Group defines its capital as equity stated in the balance sheet includ-
ing non-controlling interests. On December 31, 2018, the Group’s capital
amounted to SEK 21,749m (20,480). The Group’s objective is to have a
capital structure resulting in an efficient weighted cost of capital and
sufficient credit worthiness where operating needs and the needs for
potential acquisitions are considered.

To achieve and keep an efficient capital structure, the Financial Policy
states that the Group’s long-term ambition is to maintain a long-term rating
within a safe margin from a non-investment grade. In December 2018,
Standard & Poor’s confirmed Electrolux A-rating with stable outlook. The
A-2 short-term corporate credit rating and the short-term Nordic regional
scale rating of K-1 were also affirmed.

Rating

Long-term
debt

Outlook

Short-
term debt

Short-term
debt, Nordic

Standard & Poor’s

A-

Stable

A-2

K-1

When monitoring the capital structure, the Group uses different figures,
which are consistent with methodologies used by rating agencies and
banks. The Group manages the capital structure and makes adjustments
to it in light of changes in economic conditions. In order to maintain or
adjust the capital structure, the Electrolux Board of Directors may propose
to adjust the amount of dividends paid to shareholders, return capital to
shareholders, buy back own shares or issue new shares, or sell assets to
reduce debt.

Liquid funds
Liquid funds as defined by the Group consist of cash and cash equiva-
lents, short-term investments, financial derivative assets, prepaid interest
expenses and accrued interest income. Electrolux target is that the level of
liquid funds including unutilized committed credit facilities shall correspond
to at least 2.5% of annualized net sales. In addition, net liquid funds defined
as liquid funds less short-term borrowings shall exceed zero, taking into
account fluctuations arising from acquisitions, divestments, and seasonal
variations. The main criteria for the investments are that the instruments
are highly liquid and have creditworthy issuers. See Credit risk in financial
activities on page 50.

Financing risk
Financing risk refers to the risk that financing of the Group’s capital require-
ments and refinancing of existing borrowings could become more difficult
or more costly. This risk can be decreased by ensuring that maturity dates
are evenly distributed over time, and that total short-term borrowings do
not exceed liquidity levels. The financial net debt, total borrowings less liquid
funds, excluding seasonal variances, shall be long-term according to the
Financial Policy. The Group’s goals for long-term borrowings include an
average time to maturity of at least 2 years, and an even spread of maturi-
ties. A maximum of SEK 5,000m of the long-term borrowings is allowed to
mature in a 12-month period. For more information, see Note 18.

Interest-rate risk in liquid funds
All liquidity is invested in interest bearing instruments, normally with
maturities between 0 and 3 months. A downward shift in the yield curves
of one percentage point would reduce the Group’s interest income by
approximately SEK 115m (111). For more information, see Note 18.

Foreign exchange risk
Foreign exchange risk refers to the adverse effects of changes in foreign
exchange-rates on the Group’s income and equity. In order to manage such
effects, the Group covers these risks within the framework of the Financial
Policy. The Group’s overall currency exposure is managed centrally.

Borrowings
The debt financing of the Group is managed by Group Treasury in order
to ensure efficiency and risk control. Debt is primarily raised at parent
company level and transferred to subsidiaries through internal loans or
capital injections. In this process, swap instruments are used to convert
the funds to the required currency. Short-term financing is also undertaken
locally in subsidiaries where there are capital restrictions. The Group’s
borrowings contain no financial covenants that can trigger premature
cancellation of the loans. For more information, see Note 18.

Interest-rate risk in borrowings
Group Treasury manages the long-term loan portfolio to keep the average
interest-fixing period between 0 and 3 years. Derivatives, such as interest-
rate swap agreements, are used to manage the interest-rate risk by chang-
ing the interest from fixed to floating or vice versa. For those derivatives
Electrolux practice hedge accounting, which have affected Other compre-
hensive income by SEK –1.5m during 2018. On the basis of 2018 long-term
interest-bearing borrowings with an average interest fixing period of 1.0
years (0.6), a one percentage point shift in interest rates would impact the
Group’s interest expenses by approximately SEK +/–61m (52). This calcula-
tion is based on a parallel shift of all yield curves simultaneously by one

Transaction exposure from commercial flows
The Financial Policy stipulates to what extent commercial flows are to be
hedged. In 2016 the Financial Policy was updated so that hedging with
currency derivatives in most cases only are applied on invoiced flows. This
means that currency exposures from forecasted flows should normally
be managed by natural hedges, price adjustments and cost reductions.
However, in cases when both price and volume is committed, Electrolux
may hedge also forecasted flows. For those derivatives Electrolux practice
hedge accounting, which has affected Other comprehensive income by
SEK 2m during 2018.

Group subsidiaries cover their risks in commercial currency flows mainly
through the Group’s treasury centers. Group Treasury thus assumes the currency
risks and covers such risks externally by the use of currency derivatives.

The Group’s geographically widespread production reduces the effects
of changes in exchange-rates. The remaining transaction exposure is
either related to internal sales from producing entities to sales companies
or external exposures from purchasing of components and input material
for the production paid in foreign currency. These external imports are often
priced in U.S. dollar (USD). The global presence of the Group, however, leads
to a significant netting of the transaction exposures. For additional informa-
tion on exposures and hedging, see Note 18.

ELECTROLUX ANNUAL REPORT 2018

50 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 2

Translation exposure from consolidation of entities outside Sweden
Changes in exchange-rates also affect the Group’s income in connection
with translation of income statements of foreign subsidiaries into SEK.
Electrolux does not hedge such exposure. The translation exposures arising
from income statements of foreign subsidiaries are included in the sensitivity
analysis mentioned below.

Foreign-exchange sensitivity from transaction and translation exposure
The major net export currencies that Electrolux is exposed to are the U.S.
dollar, the Chinese renminbi and the euro. The major import currencies
that Electrolux is exposed to are the British pound, the Australian dollar,
the Canadian dollar and the Brazilian real. These currencies represent the
majority of the exposures of the Group, but are largely offsetting each other
as different currencies represent net inflows and outflows. A change up or
down by 10% in the value of each currency against the Swedish krona would
affect the Group’s profit and loss for one year by approximately SEK +/–
730m (1,010), as a static calculation. The model assumes the distribution
of earnings and costs effective at year-end 2018 and does not include any
dynamic effects, such as changes in competitiveness or consumer behavior
arising from such changes in exchange-rates.

Sensitivity analysis of major currencies

Risk

Currency

BRL/SEK

AUD/SEK

GBP/SEK

CAD/SEK

CHF/SEK

RUB/SEK

THB/SEK

CNY/SEK

EUR/SEK

USD/SEK

Change

Profit or loss
impact 2018

Profit or loss
impact 2017

–10%

–345

–295

–286

–261

–184

–116

128

129

383

984

–233

–295

–323

–255

–177

–94

121

336

824

Exposure from net investments (balance sheet exposure)
The net of assets and liabilities in foreign subsidiaries constitute a net
investment in foreign currency, which generates a translation difference
in the consolidation of the Group. This exposure can have an impact on
the Group’s total comprehensive income, and on the capital structure.
The exposure is normally handled by natural hedges including matching
assets with debts in the same currency. In exceptional cases the exposure
can be managed by currency derivatives implemented on Group level
and carried out by the Parent Company. For those derivatives Electrolux
practice hedge accounting, which has affected Other comprehensive
income by SEK –65m during 2018.

A change up or down by 10% in the value of each currency against the
Swedish krona would affect the net investment of the Group by approxi-
mately SEK +/– 3,230m (2,977), as a static calculation at year-end 2018.
A similar valuation of outstanding hedges, would have an effect on the
Group’s equity of approximately SEK +/–154m (148).

Commodity-price risks
Commodity-price risk is the risk that the cost of direct and indirect materials
could increase as underlying commodity prices rise in global markets. The
Group is exposed to fluctuations in commodity prices through agreements
with suppliers, whereby the price is linked to the raw-material price on the
world market. This exposure can be divided into direct commodity expo-
sure, which refers to pure commodity exposures, and indirect commodity
exposure, which is defined as exposure arising from only part of a com-
ponent. Commodity-price risk is mainly managed through contracts with
the suppliers. A change in price up or down by 10% in steel would affect the
Group’s profit or loss with approximately SEK +/– 800m (800) and in plastics
with approximately SEK +/– 600m (700), based on volumes in 2018.

Credit risk
Credit risk in financial activities
Exposure to credit risks arises from the investment of liquid funds, and
derivatives. In order to limit exposure to credit risk, the Group has adopted
a policy of only dealing with creditworthy counterparties. A counterpart list
has been established, which specifies the maximum permissible exposure in
relation to each counterpart. The Group only transacts investments of liquid
funds and derivatives with issuers and counterparts holding a long-term
rating of at least A- credit rating, as these are considered to have low credit
risk for the purpose of impairment assessment. Standard & Poor’s or similar
independent rating agencies supply the credit rating information. Group
Treasury can allow exceptions from this rule, e.g., to enable money deposits
within countries rated below A-, but this represents only a minor part of the
total liquidity in the Group.

The Group strives for master netting agreements (ISDA) with all coun-
terparts for derivative transactions. Assets and liabilities will only be netted
from a credit risk perspective for counterparts with valid ISDA-agreements.
As a result of these policies and limitations, the expected credit loss from
external financial activities is not material. However, since Group Treasury
manage a majority of the subsidiary financing through internal loans from
the parent, there is a material credit risk originating from internal loans.

The opening expected credit loss provision in the parent company for
2018 amounted to SEK 46m primarily originate from internal loans to Latin
America. The closing expected credit loss reservation in the parent com-
pany amounted to SEK 72m, an increase of SEK 26m, mainly due to higher
country risk for Argentina.

To reduce the settlement risk in foreign exchange transactions done with
banks, Group Treasury uses Continuous Linked Settlement. Continuous
Linked Settlement eliminates temporal settlement risk since both legs of a
transaction are settled simultaneously.

Credit risk in trade receivables
Electrolux sells to a substantial number of customers in the form of large
retailers, buying groups, independent stores, and professional users. Sales
are made on the basis of normal delivery and payment terms. The Electrolux
Group Credit Policy defines how credit management is to be performed in
the Electrolux Group to achieve competitive and professionally performed
credit sales, limited bad debts, and improved cash flow and optimized
profit. On a more detailed level, it also provides a minimum level for cus-
tomer and credit- risk assessment, clarification of responsibilities and the
framework for credit decisions. The credit-decision process combines the
parameters risk/reward, payment terms and credit protection in order to
obtain as much paid sales as possible. In some markets, Electrolux uses
credit insurance as a mean of protection. Credit limits that exceed SEK 300m
are as from December 2018 approved by the Audit Committee (and by the
Board of Directors until December 2018). For many years, Electrolux has
used the Electrolux Rating Model (ERM) to have a common and objective
approach to credit-risk assessment that enables more standardized and
systematic credit evaluations to minimize inconsistencies in decisions. The
ERM is based on a risk/reward approach and is the basis for the customer
assessment. The Electrolux Rating Model consists of three different parts:
Customer and Market Information; Warning Signals; and a Credit Risk
Rating (CR2). Through CR2 the customers are classified in risk categories.

Credit approvals and other monitoring procedures are also in place to
ensure that follow-up action is taken to recover overdue debts. Further-
more, the Group reviews the recoverable amount of each trade debt and
debt investment on an individual basis at the end of the reporting period to
ensure that adequate loss allowance is made for irrecoverable amounts.
In this regard, management considers that the Group’s credit risk is signifi-
cantly reduced. Trade receivables relate to a large number of customers,
spread across diverse industries and geographical areas. However, there
is a concentration of large credit exposures on a number of customers in,
primarily, the U.S., Latin America and Europe. Concentration of credit risk
related to a single counterparty did not exceed 11.7 % total trade receiv-
ables at any time during the year. For more information, see Note 17.

The Group defines default as customers where significant financial dif-
ficulties have been identified. A receivable is written off when there is indica-
tions of no realistic prospect of recovery or at a 360 days overdue whichever
is the earliest. There is a limited use of enforcement activities.

ELECTROLUX ANNUAL REPORT 2018

Notes 51

All amounts in SEKm unless otherwise stated

Note 3 Segment information

Reportable segments – Business areas
The Group’s operations are divided into six reportable segments based on
differences in products: Major Appliances Europe, Middle East and Africa;
Major Appliances North America; Major Appliances Latin America; Major
Appliances Asia/Pacific; Home Care & SDA and Professional Products.

Net sales

Operating income

2018

2017

2018

2017

Major Appliances Europe,
Middle East and Africa

42,732

38,524

2,220

2,764

The Major Appliances business areas are geographically defined, while
the Home Care & SDA and Professional Products business areas are global.
The segments are regularly reviewed by the President and CEO, the Group’s
chief operating decision maker.

Major Appliances
North America

Major Appliances
Latin America

Major Appliances and Home Care & SDA are producing appliances for
the consumer market. Products within Major Appliances comprise mainly
of refrigerators, freezers, cookers, dryers, washing machines, dishwashers
and microwave ovens. Home Care & SDA include vacuum cleaners and
other small appliances. Professional Products produces equipment and
appliances for food-service and laundry solutions for professional users.

The segments are responsible for the operating results and the net assets
used in their businesses, whereas financial items and taxes, as well as net
debt and equity, are not reported per segment. The operating results and
net assets of the segments are consolidated using the same principles as for
the total Group. The segments consist of separate legal units as well as divi-
sions in multi-segment legal units where some allocations of costs and net
assets are made. Operating costs not included in the segments are shown
under Common Group costs, which mainly are costs related to group man-
agement activities typically required to run the Electrolux Group.

Major Appliances Asia/Pacific

Home Care & SDA

Professional Products

Common Group costs

Total

Financial items, net

Income after financial items

38,875

40,656

972

2,757

17,076

17,302

9,165

7,616

8,666

8,759

7,808

7,723

124,129 120,771

—

124,129 120,771

—

464

648

398

1,134

5,836

–527

5,310

–423

4,887

425

750

431

1,054

8,182

–775

7,407

–441

6,966

Inter-segment sales exist with the following split:

2018

2017

Major Appliances Europe, Middle East and Africa

1,105

Sales between segments are made on market conditions with arm’s-

Major Appliances North America

length principles.

Major Appliances Latin America

Major Appliances Asia/Pacific

Professional Products

Eliminations

995

705

—

308

640

318

2,068

2,014

The segments are responsible for the management of the operational assets and their performance is measured at the same level, while financing is man-
aged by Group Treasury at group or country level. Consequently, liquid funds, interest-bearing receivables, interest-bearing liabilities and equity are not
allocated to the business segments.

Assets
December 31

Equity and liabilities
December 31

Net assets
December 31

Major Appliances Europe, Middle East and Africa

Major Appliances North America

Major Appliances Latin America

Major Appliances Asia/Pacific

Home Care & SDA

Professional Products

Other1)

Liquid funds

Total borrowings

Pension assets and liabilities

Equity

Total

1) Includes common functions, tax items.

Major Appliances Europe, Middle East and Africa

Major Appliances North America

Major Appliances Latin America

Major Appliances Asia/Pacific

Home Care & SDA

Professional Products

Other2)

Acquisitions/Divestments

Financial items

Taxes paid

Total

1) Cash flow from operations and investments.
2) Includes Group functions.
3) Includes SEK –178m related to the acquisition of the Continental brand.

ELECTROLUX ANNUAL REPORT 2018

2018

27,389

17,405

12,085

6,123

6,011

6,101

9,418

84,531

12,249

—

532

—

2017

25,575

14,840

12,602

5,788

5,341

4,434

8,533

77,113

11,974

—

455

—

97,312

89,542

Depreciation and
amortization

2018

1,404

1,112

627

374

215

168

249

—

2017

1,365

1,119

633

300

199

151

210

—

2018

23,997

15,010

6,531

4,152

3,601

3,144

4,523

2017

22,037

12,723

6,752

4,163

3,519

2,706

4,535

2018

3,392

2,395

5,554

1,971

2,410

2,957

4,895

2017

3,538

2,117

5,850

1,625

1,822

1,728

3,998

60,958

56,436

23,574

20,678

—

10,260

4,346

21,749

97,312

—

9,537

3,089

20,480

89,542

—

Capital expenditure

Cash flow1)

2018

1,621

2,071

714

413

249

169

393

—

2017

1,420

1,467

711

418

190

167

306

—

2018

2,122

885

–9

376

–487

1,004

–242

–609

–361

–1,140

1,540

—

2017

2,154

2,975

2603)

971

317

1,112

–912

–3,405

–227

–1,421

1,824

4,150

3,977

5,629

4,679

52 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 3

Geographical information

USA

Brazil

Germany

Sweden (country of domicile)

Australia

Italy

France

United Kingdom

Switzerland

Canada

Other

Total

Net sales1)

2018

2017

38,275

39,462

11,995

11,721

6,509

5,782

4,813

4,718

4,381

4,062

3,429

3,035

5,938

5,283

5,011

4,088

4,149

3,969

3,188

3,689

37,130

34,273

124,129 120,771

1) Revenues attributable to countries on the basis of customer location.

Note 4 Revenue recognition

Revenue recognition
Electrolux manufactures and sells appliances mainly in the whole-
sale market to customers being retailers. Electrolux products include
refrigerators, dishwashers, washing machines, cookers, vacuum cleaners,
air conditioners and small domestic appliances. Electrolux offer complete
solutions for both consumers and professionals.

Sales are recorded net of value-added tax, specific sales taxes, returns,
and trade discounts. Revenues arise from sales of finished products and
services.

Sale of finished products including spare parts and accessories
Sales of products are revenue recognized at a point in time i.e when control
of the products has transferred, being when the products are delivered to
the customer. Delivery occurs when the products have been shipped to
the specific location, the risks of obsolescence and loss have been trans-
ferred to the customer, and either the customer has accepted the products
in accordance with the sales contract, the acceptance provisions have
lapsed, or there is objective evidence that all criteria for acceptance have
been satisfied. In practice, transfer of control and thus revenue recognition
normally depends on the contractual incoterm.

Transaction price — Volume discounts
The products are often sold with volume discounts based on aggregate
sales over a specific time period, normally 3–12 months. Revenue from these
sales is recognized based on the price specified in the contract, net of the
estimated volume discounts. Accumulated experience is used to estimate
and provide for the discounts using either the expected value method or
an assessment of the most likely amount. Revenue is only recognized to the
extent that it is highly probable that a significant reversal will not occur. A
contract liability is recognized for expected volume discounts payable to
customers in relation to sales made until the end of the reporting period. The
estimated volume discount is revised at each reporting date.

Receivables, contract assets and contract liabilities
A receivable is recognized when the goods are delivered as this is the point
in time that the consideration is unconditional because only the passage of
time is required before the payment is due. If the consideration is conditional
to additional performance, a contract asset is recorded.

If Electrolux receive prepayments from customer a contract liability is

recorded. See table on page 53.

Sale of goods and services combined
When contracts include both goods and services the sales value is split
into the separate performance obligations as applicable and revenue is
recognized when each of the separate performance obligations is satis-
fied. In general, types of performance obligations that may occur are prod-
ucts, spare parts, installation, service and support and education.

Tangible and intangible fixed assets located in the Group’s country of domi-
cile, Sweden, amounted to SEK 2,040m (1,888). Tangible and non-tangible
fixed assets located in all other countries amounted to SEK 31,206m (28,673).
Individually, material countries in this aspect are Italy with SEK 3,885m
(3,219), USA with SEK 9,016m (7,474) and Poland with SEK2,462m (2,347),
respectively.

No single customer of the Group represents 10% or more of the external

revenue.

Sale of services in a separate contract
Electrolux recognizes revenue from services related to installation of
products, repairs or maintenance service when control is transferred being
over the time the service is provided. For service contracts covering a longer
period revenue is recognized on a linear basis over the contract period.

Sale of licenses in a separate contract
Electrolux is licensing trade names to other companies. The license provides
the licensee a right to access intellectual property throughout the license
period and revenue is recognized over time. The most common license type
for Electrolux is sales based royalty where the revenue is recognized when
the sales occur.

Payments to customers
Agreements can be made with customers to compensate for various
services or actions the customer takes. This relates to e.g. agreements
under which Electrolux agrees to compensate the customer for e.g.
marketing activities undertaken by the customer. The main rule is that if the
payment is related to a distinct service or product it shall be accounted for
as a purchase of that service or product. If not it shall be deducted from
the related revenue stream. In practice, if the contract doesn’t include any
requirement of follow up from Electrolux side and/or reporting back from
the customer that the service is performed, the payment shall be accounted
for as a reduction of revenue.

Customer incentives
Customer incentives include promotional activities as e.g. coupons, gift
cards, free products and loyalty/cash points. Customer incentives are
additional performance obligations providing the customer with a mate-
rial right, i.e. the customer is purchasing a product or service in the original
purchase and the right to a free or discounted product or service in the
future. The customer is effectively paying in advance for future products or
services. Revenue is therefore allocated to two performance obligations,
the originally purchased product and the product bought in the future (pay-
ment in advance). A liability is recognized for the rebate until it’s used or
expires unused.

Within Electrolux a common promotional activity is to offer free products
in combination with other sales. When the free products are related to
the Electrolux product range, revenue is allocated to both the ordinary
products sold and the free products.

When the free products are unrelated to the Electrolux product range,

the free products are recognized as marketing/sales cost.

Warranties
The most common warranty for Electrolux is to replace a faulty product
under legal and common practice warranty terms. In those cases warranty
is recognized as a provision. Electrolux also sells extended warranty where
the revenue is recognized during the warranty period, which usually starts

ELECTROLUX ANNUAL REPORT 2018

Notes 53

All amounts in SEKm unless otherwise stated

Cont. Note 4

after the legal warranty period. Sometimes warranty offered is including a
service part and if it is difficult to separate the warranty from the service the
two are bundled together and revenue is recognized over the warranty
period.

Sales with a right of return
A right of return is not a separate performance obligation, but it affects the
transaction price for the transferred goods. Returns rights are commonly
granted in the retail and consumer industry.

Regarding a right of return which follows from legislation, statutory
requirements, business practice or is stipulated in the contract with the
customer, revenue is not recognized for goods expected to be returned.
Instead, a liability is recognized for expected refunds to customers. An asset
is also recorded for the expected returned item. The estimated amount of
returned goods in each sale with a right of return, is based on a probability-
weighted approach or most likely outcome, whichever is most predictive.
The estimate is revised on each reporting date.

Principal versus agent
I some countries Electrolux acts as an agent, i.e. Electrolux arranges for
goods or services to be provided by an external supplier to the customer.
Electrolux records as revenue the commission fee earned for facilitating
the transfer of goods or service or the net amount of consideration that the
company retains after paying the other party the consideration received in
exchange for the goods or services to be provided by that party.

Freight charges
In most cases freight is included in the price of the product sold and revenue
is recognized at the same time as for the product.

Consignment stock or sell-through arrangement
For some customers Electrolux keeps the inventory of products in the ware-
house of the customer or in the customer’s outlet. Transfer of control of the
products are done when the customer lifts the product from the warehouse
or when the product is sold to the end consumer. Electrolux recognize
revenue when the control has been transferred or when there is a legal right
of forcing a sales transaction.

Revenue types and flows
The vast majority of the Group’s revenues of SEK 124,129m (120,771)
during the year consisted of product sales. Revenue from service activities
amounted to SEK 1,843m (1,772). The Group’s net sales in Sweden amounted
to SEK 5,782m (5,283). Exports from Sweden during the year amounted to
SEK 36,190m (31,384), of which SEK 32,619m (28,321) were to Group sub-
sidiaries. The major part of the Swedish export comes from one of the
Swedish entities acting as a buying/selling hub for the European business
meaning that most of the European product flows are routed via this entity.

Disaggregation of revenue
Electrolux manufactures and sells appliances mainly in the wholesale
market to customers being retailers. Electrolux products include refrig-
erators, dishwashers, washing machines, cookers, vacuum cleaners, air
conditioners and small domestic appliances. Major Appliances and Home
Care & SDA focus on the consumer market and Professional Products on
professional users. Sales of services are not material in relation to Electrolux
total net sales as described above. Product and geography are considered
important attributes when disaggregating Electrolux revenue. Therefore,
the table below presents net sales related to Major Appliances, Home Care
& SDA and Professional Products per geographical region.

Disaggregation of revenue

Geographical region

Europe, Middle East and Africa

North America

Latin America

Asia Pacific

Total

2018

2017

Major
Appliances

Home Care
& SDA

Professional
Products

Total

Major
Appliances

Home Care
& SDA

Professional
Products

42,732

38,875

17,076

9,165

107,847

3,891

926

887

1,912

7,616

6,951

849

—

866

53,574

40,650

17,963

11,942

38,524

40,656

17,302

8,759

8,666

124,129

105,241

3,628

1,427

975

1,778

7,808

6,141

764

—

819

7,723

120,771

Total

48,292

42,847

18,277

11,356

The table below presents the opening and closing balances of contract liabilities as well as movements during the year.

Contract liabilities

Opening balance, January 1, 2018

Gross increase during the period

Paid to/settled with customer

Revenue recognized during the year

Contracts cancelled during the year

Other changes to contract balances

Exchange-rate differences

Closing balance, December 31, 2018

Advances from Cus-
tomers

Customer bonuses/
incentives

Short-term

Long-term

Contract
liabilities, total

Prepaid income – service & warranty

118

1,098

—

–1,105

—

114

4,222

13,305

–12,721

—

–301

–14

165

4,656

175

—

–193

–14

114

184

—

–11

139

4,506

14,630

–12,721

–1,309

–326

128

185

5,093

ELECTROLUX ANNUAL REPORT 2018

54 Notes

All amounts in SEKm unless otherwise stated

Note 5 Operating expenses

Cost of goods sold and additional information on costs by nature
Cost of goods sold includes expenses for the following items:
• Finished goods i.e. cost for production and sourced products
• Warranty
• Environmental fees
• Warehousing and transportation
• Exchange-rate changes on payables and receivables and the effects

from currency hedging

Operating expenses

Direct material and components

Sourced products

Depreciation and amortization

Salaries, other renumeration and employer
contribution

Other operating expenses

Operating expenses, total

2018

2017

49,679

15,176

4,150

47,956

16,192

3,977

22,014

27,800

20,364

24,875

118,819

113,364

Cost of goods sold includes direct material and components amounting
to SEK 49,679m (47,956) and sourced products amounting to SEK 15,176m
(16,192). The depreciation and amortization charge for the year amounted
to SEK 4,150m (3,977). Costs for research and development amounted to
SEK 3,836m (3,566).

Government grants relating to expenses have been deducted in the
related expenses by SEK 74m (79). Government grants related to assets
have been recognized as deferred income in the balance sheet and will be
recognized as income over the useful life of the assets. The remaining value
of these grants, at the end of 2018, amounted to SEK 882m (879).

The Group’s operating income includes net exchange-rate differences in
the amount of SEK –161m (90). The Group’s Swedish factories accounted for
1.2% (1.3) of the total value of production.

Selling and administration expenses
Selling expenses include expenses for brand communication, sales driving
communication and costs for sales and marketing staff. Selling expenses
also include the cost for impairment of trade receivables.

Administration expenses include expenses for general management,
controlling, human resources, shared service and IT expenses related to
the named functions. Administration costs related to manufacturing are
included in cost of goods sold.

Note 6 Other operating income and expenses

Other operating expenses

2018

2017

2018

2017

Group

Parent Company

Loss on sale of property, plant
and equipment

Impairment

Fine to competition authority

Provision for reorganization
procedure

Other

Other operating expenses, total

–38

—

–493

–254

–92

–877

–18

—

–5

–23

—

–310

–493

—

–1

–104

—

–804

–105

Other operating income and
expenses, net

177

305

–804

–104

Note 7 Material profit or loss items in operating income

This note summarizes events and transactions with significant effects, which
are relevant for understanding the financial performance when comparing
income for the current period with previous periods, including items such as:
• Capital gains and losses from divestments of product groups or major

units

• Close-down or significant down-sizing of major units or activities
• Restructuring initiatives with a set of activities aimed at reshaping a major

structure or process
• Significant impairment
• Other major non-recurring costs or income

Material items in the 2018 operating income are specified in the table below.
Restructuring charge refers to the consolidation of freezer production in
North America. Fine to competition authority refers to the completed inves-
tigation by the French Competition Authority. Provision for reorganization
procedures refers to the unfavorable court ruling in France, extending a
reorganization procedure of a former subsidiary to include Electrolux Home
Products France SAS. In 2017, no material items were identified.

Material profit or loss items

Restructuring charge

Fine to competition authority

Provision for reorganization procedure

Total

Other operating income

2018

2017

2018

2017

Other operating income and expenses

Group

Parent Company

Cost of goods sold

Effect from material profit or loss items by function

Gain on sale of property, plant
and equipment

Gain on sale of operations
and shares

Pension curtailment

Claim for recovery of overpaid tax

Reversal of restructuring provision

Bargain purchase (neg. goodwill)

Earn-out adjustment

Other

115

205

—

130

140

150

194

216

134

—

328

Total

—

Other operating income, total

1,054

2018

–596

–493

–254

–1,343

2018

–596

–747

–1,343

2017

—

2017

—

ELECTROLUX ANNUAL REPORT 2018

Note 8 Leasing

The Group generally owns its production facilities. The Group rents some
warehouse and office premises under leasing agreements and has also
leasing contracts for certain office equipment. Most leasing agreements in
the Group are operational leases and the costs are recognized directly in
the income statement in the corresponding period.

Finance leases are capitalized at the inception of the lease at the lower
of the fair value of the leased property or the present value of the minimum
lease payments. Leased assets are depreciated over their useful lives. If
there is no reasonable certainty that the lessee will obtain ownership by the
end of the lease term, the assets are fully depreciated over the shorter of the
lease term or remaining useful life.

Note 10 Taxes

Current taxes

Deferred taxes

Taxes included in income
for the period

Taxes related to OCI

Taxes included in total
comprehensive income

Notes 55

All amounts in SEKm unless otherwise stated

Group

Parent Company

2018

2017

–1,209 –1,540

128

319

–1,081 –1,221

151

–457

–930 –1,678

2018

–92

161

—

2017

–112

–89

–201

—

–201

Financial leases
Electrolux has no material financial leases.

Deferred taxes 2018 include an effect of SEK –41m (–139) due to changes
in tax rates. The consolidated accounts include deferred tax liabilities of
SEK 91m (98) related to untaxed reserves in the Parent Company.

Operating leases
The future amount of minimum lease-payment obligations are distributed
as follows:

2019

2020–2023

2024–

Total

Operating leases

1,211

3,051

733

4,995

Expenses in 2018 for rental payments (minimum leasing fees) amounted to
SEK 1,308m (1,230). Among the Group’s operating leases there are neither
material contingent expenses, nor restrictions.

Note 9 Financial income and financial expenses

Financial income

Interest income

from subsidiaries

from others

Dividends from subsidiaries

Other financial income

Total financial income

Financial expenses

Interest expenses

to subsidiaries

to others

Exchange-rate differences, net

Pension interest expenses, net

Other financial expenses

Total financial expenses

Group

Parent Company

2018

2017

2018

2017

—

106

—

183

—

782

541

7,179

6,496

106

183

7,967

7,142

—

–235

–360

–47

–269

–529

–11

–92

–161

–624

–229

–84

–122

—

–260

–695

–132

–275

–320

—

–128

–855

Financial items, net

–423

–441

7,272

6,287

Interest expenses to others, for the Group and Parent Company, include
gains and losses on derivatives used for managing the Group’s interest fix-
ing. For information on financial instruments, see Note 18.

Theoretical and actual tax rates

Theoretical tax rate

Non-taxable/non-deductible income
statement items, net

Non-recognized tax losses carried forward

Utilized non-recognized tax losses
carried forward

Other changes in recognition of deferred tax

Withholding tax

Other

Actual tax rate

2018

24.7

–0.4

6.6

0.0

–4.5

1.8

–6.1

22.1

2017

27.7

–2.7

0.3

–1.5

–11.1

1.8

3.0

17.5

The theoretical tax rate for the Group is calculated on the basis of the
weighted total Group net sales per country, multiplied by the local statutory
tax rates.

Non-recognized deductible temporary differences
As of December 31, 2018, the Group had tax loss carry-forwards and other
deductible temporary differences of SEK 6,008m (7,134), which have not
been included in computation of deferred tax assets. The decision not to
recognize certain temporary differences is based on an assessment where
the likelihood of future utilization is evaluated for each of the temporary
items. The Group typically does not recognize temporary differences in
situations where it is considered the ability to utilize these to be limited.
The non-recognized deductible temporary differences will expire as follows:

2019

2020

2021

2022

2023

And thereafter

Without time limit

Total

December 31, 2018

141

133

110

455

5,031

6,008

ELECTROLUX ANNUAL REPORT 2018

56 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 10

The tables below show deferred tax assets and liabilities at the end of each
reporting period and the change in net deferred tax assets and liabilities.

Note 11 Other comprehensive income

Deferred tax assets and deferred tax liabilities

Deferred tax assets:
Property, plant and equipment

Provision for Pension obligations
Provision for restructuring
Other provisions
Inventories
Accrued expenses and prepaid income
Unused tax losses carried forward
Other deferred tax assets
Deferred tax assets before netting of deferred tax
assets and liabilities
Netting of deferred tax assets and liabilities
Deferred tax assets net

Deferred tax liabilities:
Property, plant and equipment
Other provisions
Inventories
Other taxable temporary differences
Deferred tax liabilities before netting of deferred tax
assets and liabilities
Netting of deferred tax assets and liabilities
Deferred tax liabilities net

2018

2017

322

945
170
998
145
467
674
3,768

7,489
–1,041
6,448

300

932
360
1,196
227
464
860
2,312

6,651
–939
5,712

738
159
315
697

627
150
286
606

1,909
–1,041
868

1,669
–939
730

Deferred tax assets and liabilities net

5,580

4,981

Deferred tax assets and liabilities, net opening balance
before restatement due to change in accounting principles

Restatement of opening balance due to change in
accounting principles

Deferred tax assets and liabilities, net opening balance

Recognized in income statement

Recognized in other comprehensive income

Acquisitions of operations

Exchange rate differences

Deferred tax assets and liabilities, net closing balance

2018

2017

4,981

5,588

1
4,982
128
142
110
218

5,580

42
5,630
319
–440
–240
–288

4,981

Other deferred tax assets include tax credits related to the production of
energy-efficient appliances amounting to SEK 1,665m (1,631).

Items that will not be reclassified to income
for the period:
Remeasurement of provisions for post-employment
benefits
Opening balance, January 1
Gain/loss taken to other comprehensive income
Income tax relating to items that will not be reclassified
Closing balance, December 31

Items that may be reclassified subsequently to income
for the period:
Available-for-sale instruments
Opening balance, January 1
Change in accounting principle1)
Gain/loss taken to other comprehensive income
Transferred to profit and loss
Closing balance, December 31

Cash flow hedges
Opening balance, January 1
Gain/loss taken to other comprehensive income
Transferred to profit and loss on sale
Closing balance, December 31

Exchange differences on translation of
foreign operations
Opening balance, January 1
Net investment hedge
Translation differences
Closing balance, December 31

Income tax
Opening balance, January 1
Income tax relating to items that may be reclassified
Closing balance, December 31

Non-controlling interests, translation differences

Group

2018

2017

449
–448
128
129

–340
1,229
–440
449

1
–1
—
—
—

–6
–4
2
–8

0
—
4
–3
1

–101
–6
101
–6

–2,495 –1,273
–65
–39
269 –1,183
–2,291 –2,495

–114
23
–91

–97
–17
–114

–1

Other comprehensive income, net of tax

–95

–355

1) At transition to IFRS 9 a financial instrument classified as Available for sale was reclassified to

Financial asset at fair value through profit and loss.

Income taxes related to items of other comprehensive income were
SEK 128m (–440) for remeasurement of provisions for post-employment
benefits and SEK 23m (–17) for financial instruments for hedging.

ELECTROLUX ANNUAL REPORT 2018

Notes 57

All amounts in SEKm unless otherwise stated

Note 12 Property, plant and equipment

Group
Acquisition costs
Opening balance, January 1, 2017
Acquired during the year
Acquisition of operations
Transfer of work in progress and advances
Sales, scrapping, etc.
Exchange–rate differences
Closing balance, December 31, 2017
Acquired during the year

Acquisition of operations

Transfer of work in progress and advances
Sales, scrapping, etc.
Exchange-rate differences
Closing balance, December 31, 2018

Accumulated depreciation
Opening balance, January 1, 2017
Depreciation for the year
Transfer of work in progress and advances
Sales, scrapping, etc.
Impairment
Exchange-rate differences
Closing balance, December 31, 2017
Depreciation for the year
Transfer of work in progress and advances
Sales, scrapping, etc.
Impairment
Exchange-rate differences
Closing balance, December 31, 2018
Net carrying amount, December 31, 2017

Net carrying amount, December 31, 2018

Land and land
improvements

Buildings

Machinery
and technical
installations

Other
equipment

Plants under
construction
and advances

Total

1,418
10
42
9
–74
–37
1,368
13

91
–8
66
1,532

224
20
0
–9
0
–12
223
19
49
–4
2
14
303
1,145

1,229

10,194
108
196
234
–181
–198
10,353
201

167
–78
461
11,114

4,701
318
0
–155
0
–85
4,779
363
–31
–54
33
235
5,325
5,574

5,789

40,167
916
200
1,530
–1,629
–1,481
39,703
1,178

807
–2,225
1,673
41,156

30,309
2,496
8
–1,572
20
–1,029
30,232
2,530
–92
–2,130
146
1,346
32,032
9,471

9,124

2,640
234
14
22
–85
–36
2,789
221

180
–118
69
3,161

2,132
222
–8
–78
0
–23
2,245
265
74
–110
0
62
2,536
544

625

2,088
2,623
7
–1,795
40
–119
2,844
3,036

–1,245
–39
156
4,752

416
1
0
0
0
–31
386
0
0
1
14
30
431
2,458

4,321

56,507
3,891
459
0
–1,929
–1,871
57,057
4,649

0
–2,468
2,425
61,715

37,782
3,057
0
–1,814
20
–1,180
37,865
3,177
0
–2,297
195
1,687
40,627
19,192

21,088

Property, plant, and equipment are stated at historical cost less straight-line
accumulated depreciation, adjusted for any impairment charges. Land is
not depreciated as it is considered to have an unlimited useful life. All other
depreciation is calculated using the straight-line method and is based on
the following estimated useful lives:
• Land and land improvements
• Buildings
• Machinery and technical installations
• Other equipment

0–15 years
10–40 years
3–15 years
3–10 years

Total impairment in 2018 was SEK 35m (0) on buildings and land, and
SEK 146m (20) on machinery and other equipment and SEK 14m (0) on
plants under construction. The majority of the impairment relates to the
business area Major Appliances North America.

Parent Company
Acquisition costs
Opening balance, January 1, 2017
Acquired during the year
Transfer of work in progress and advances
Sales, scrapping, discontinued operations etc.
Exchange-rate differences
Closing balance, December 31, 2017
Acquired during the year
Transfer of work in progress and advances
Sales, scrapping, etc.
Exchange-rate differences
Closing balance, December 31, 2018

Accumulated depreciation
Opening balance, January 1, 2017
Depreciation for the year
Sales, scrapping, discontinued operations etc.
Exchange-rate differences
Closing balance, December 31, 2017
Depreciation for the year
Sales, scrapping, etc.
Exchange-rate differences
Closing balance, December 31, 2018
Net carrying amount, December 31, 2017
Net carrying amount, December 31, 2018

ELECTROLUX ANNUAL REPORT 2018

Land and land
improvements

Buildings

Machinery
and technical
installations

Other
equipment

Plants under
construction
and advances

4
—
—
–3
—
1
—
—
—
—
1

4
0
–3
—
1
0
0
—
1
0
0

57
—
—
–56
—
1
—
—
—
—
1

57
0
–56
—
1
0
0
—
1
0
0

729
—
—
–671
2
60
—
5
0
3
68

725
16
–688
1
54
6
0
3
63
6
5

392
61
4
–7
2
452
16
21
–30
3
462

337
17
–6
2
350
28
–26
2
354
102
108

49
14
–4
—
1
60
29
–26
–34
2
31

—
—
—
—
—
—
—
—
—
60
31

Total

1,231
75
0
–737
5
574
45
0
–64
8
563

1,123
33
–753
3
406
34
–26
5
419
168
144

58 Notes

All amounts in SEKm unless otherwise stated

Note 13 Goodwill and other intangible assets

Goodwill
Goodwill is reported as an indefinite life intangible asset at cost less accu-
mulated impairment losses.

Product development
Electrolux capitalizes expenses for certain own development of new
products provided that the level of certainty of their future economic
benefits and useful life is high. The intangible asset is only recognized if the
product is sellable on existing markets and that resources exist to complete
the development. Only expenditures which are directly attributable to the
new product’s development are recognized. Capitalized development
costs are amortized over their useful lives, between 3 and 5 years, using the
straight-line method.

Software
Acquired software licenses and development expenses are capitalized on
the basis of the costs incurred to acquire and bring to use the specific soft-
ware. These costs are amortized over useful lives, between 3 and 5 years,
using the straight-line method.

Trademarks
Trademarks are reported at historical cost less amortization and impair-
ment. The Electrolux trademark in North America, acquired in 2000, is
regarded as an indefinite life intangible asset and is not amortized in the
group accounts. One of the Group’s key strategies is to develop Electrolux
into the leading global brand within the Group’s product categories. This
acquisition gave Electrolux the right to use the Electrolux brand worldwide,
whereas it previously could be used only outside of North America. The total
carrying amount for the Electrolux brand is SEK 410m, included in the item
Other in the table on page 59. All other trademarks are amortized over their
useful lives, estimated to 5 to 10 years, using the straight-line method.

Customer relationships
Customer relationships are recognized at fair value in connection with
acquisitions. The values of these relationships are amortized over the esti-
mated useful lives, between 5 and 15 years, using the straight-line method.

Intangible assets with indefinite useful lives
Goodwill as at December 31, 2018, had a total carrying value of SEK 8,239m.
The allocation, for impairment-testing purposes, on cash-generating units
is shown in the table below.

Goodwill, value of trademark and discount rate

All intangible assets with indefinite useful lives are tested for impairment at
least once every year. Single assets are tested more often in case there are
indications of impairment. The recoverable amounts of the cash-generating
units have been determined based on value in use calculations. The cash-
generating units equal the business areas. Costs related to group services
and global leverage activities are carried by the cash-generating units and
therefore included in the impairment testing of each cash-generating unit.
Common group costs, related to group management activities typically
required to run the Electrolux Group cannot be allocated on a reasonable
and consistent basis to any of the cash-generating units and are therefore
included in the impairment test of the total of all cash-generating units.

Value in use is calculated using the discounted cash flow model based
on by Group management approved forecasts for the coming four years.
The forecasts are built up from the estimate of the units within each business
area. The preparation of the forecast requires a number of key assumptions
such as volume, price, product mix, prices for raw material and compo-
nents, which will create a basis for future growth and gross margin. These
figures are set in relation to historic figures and external reports on market
growth. The cash flow for the last year of the four-year period is used as
the base for the perpetuity calculation. The discount rates are based on
the pre-tax Electrolux Group WACC (Weighted Average Cost of Capital)
with addition of a country risk premium for each individual country. The
individual country discount rates are used to calculate a weighted average
discount rate for each cash-generating units

The pre-tax discount rates used in 2018 were for the main part within a
range of 9.3% (9.4) to 12.0% (11.9). For the calculation of the in-perpetuity
value, Gordon’s growth model is used. According to Gordon’s model, the
terminal value of a growing cash flow is calculated as the starting cash flow
divided by cost of capital less the growth rate. Cost of capital less growth of
2% (2%) is within the range of 7.3 to 10.0%.

Sensitivity analyses have been carried out based on a reduction of the
operating margin by 0.5 percentage points and by an increase in the cost of
capital by one percentage point respectively. None of the sensitivity analyses
led to a reduction of the recoverable amount below the carrying amount
for any of the cash-generating units, i.e. the hypothetical changes in key
assumptions would not lead to any impairment. The calculations are based
on management’s assessment of reasonably possible adverse changes in
operating margin and cost of capital, yet they are hypothetical and should
not be viewed as an indication that these factors are likely to change. The
sensitivity analyses should therefore be interpreted with caution.

Major Appliances Europe, Middle East and Africa

Major Appliances North America

Major Appliances Latin America

Major Appliances Asia/Pacific

Professional Products

Home Care & SDA

Total

2018

2017

Goodwill

Electrolux
trademark

Discount
rate, %

Goodwill

Electrolux
trademark

Discount
rate, %

2,513

493

940

1,510

1,439

1,344

8,239

—

410

—

410

9.9

9.3

12.0

9.6

10.1

9.9

2,506

451

1,114

1,528

776

1,253

7,628

—

410

—

410

10.0

9.4

11.9

9.9

10.0

ELECTROLUX ANNUAL REPORT 2018

Cont. Note 13

Goodwill and other intangible assets

Acquisition costs

Opening balance, January 1, 2017

Acquired during the year

Acquisition of operations

Internally developed

Reclassification

Fully amortized

Sales, scrapping etc.

Exchange-rate differences

Closing balance, December 31, 2017

Acquired during the year

Acquisition of operations

Internally developed

Reclassification

Fully amortized

Sales, scrapping etc.

Exchange-rate differences

Notes 59

All amounts in SEKm unless otherwise stated

Group
Other intangible assets

Product
develop-
ment

Goodwill

Software

Other

Total other
intangible
assets

Parent
Company

Trademarks,
software, etc.

3,239

3,520

1,729

8,488

3,180

4,742

—

3,220

—

–334

7,628

—
6171)

—

–4

–2

—

418

–29

–112

–11

–75

3,430

—

415

–51

–268

–44

144

—

225

–129

–38

–51

3,688

121

441

–870

–106

3,418

2,366

391

—

–129

—

–20

2,608

377

—

–870

—

–60

2,118

1,080

1,300

174

764

—

–78

2,601

214

—

–1

–52

–45

–30

2,688

724

229

—

–27

926

251

—

–52

—

–30

1,095

1,675

1,593

318

764

643

—

–241

–49

–204

9,719

122

216

856

—

–1,190

–195

152

9,680

5,376

920

—

–241

–80

5,978

972

—

–1,190

–9

–85

5,761

3,741

3,919

174

—

423

—

–40

3,752

102

—

447

—

–512

–13

3,810

1,934

284

—

–3

2,222

378

–512

–5

2,096

1,530

1,714

Closing balance, December 31, 2018

8,239

3,574

Accumulated amortization

Opening balance, January 1, 2017

Amortization for the year

Reclassification

Fully amortized

Impairment

Exchange-rate differences

Closing balance, December 31, 2017

Amortization for the year

Reclassification

Fully amortized

Impairment

Sales, scrapping etc.

Exchange-rate differences

Closing balance, December 31, 2018

Carrying amount, December 31, 2017

Carrying amount, December 31, 2018

—

7,628

8,239

2,286

300

—

–112

–33

2,444

344

—

–268

–9

–25

2,548

986

1,026

1) Including an adjustment of a provisional value of SEK 10m within the measurement period related to an acquisition during 2017.

Included in the item Other are trademarks of SEK 813m (901) and customer relationships etc. amounting to SEK 780m (774). Amortization of intangible assets
is included within Cost of goods sold with SEK 409m (472), Administrative expenses with SEK 320m (266) and Selling expenses with SEK 243m (182) in the
income statement. Electrolux did not capitalize any borrowing costs during 2018 or 2017.

ELECTROLUX ANNUAL REPORT 2018

60 Notes

All amounts in SEKm unless otherwise stated

Note 14 Other non-current assets

Note 17 Trade receivables

Group
December 31,

Parent Company
December 31,

2018

2017

2018

2017

—

952

—

459

32,245 29,823

219

225

3,459

3,548

35,943 33,616

Shares in subsidiaries

Participations in other companies

Long-term receivables in
subsidiaries

Other receivables

Total

Note 15 Inventories

Raw materials

Products in progress

Finished products

Advances to suppliers

Total

Group
December 31,

Parent Company
December 31,

2018

2017

2018

2017

3,590

3,288

346

277

—

12,790 11,058

2,813

2,640

—

16,750 14,655

2,813

2,640

Inventories and work in progress are valued at the lower of cost, at normal
capacity utilization, and net realizable value. Net realizable value is defined
as the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make
the sale at market value. The cost of finished goods and work in progress
comprises development costs, raw materials, direct labor, tooling costs,
other direct costs and related production overheads. The cost of invento-
ries is assigned by using the weighted average cost formula. Provisions for
obsolescence are included in the value for inventory.

The cost of inventories recognized as expense and included in Cost of

goods sold amounted to SEK 87,658m (85,684) for the Group.

Write-downs due to obsolescence amounted to SEK 272m (257) and
reversals of previous write-downs amounted to SEK 364m (300) for the
Group. The amounts have been included in the item Cost of goods sold in
the income statement.

Note 16 Other current assets

Miscellaneous short-term receivables

Provisions for doubtful accounts

Prepaid expenses and accrued income

Prepaid interest expenses and accrued
interest income

Total

Group
December 31,

2018

2017

2,935

2,426

–138

–35

1,467

1,207

243

241

4,507

3,839

Trade receivables

Provisions for impairment of receivables

Trade receivables, net

Provisions in relation to trade receivables, %

2018

2017

22,417 21,548

–935

–801

21,482 20,747

4.2

3.7

IFRS 9 introduced a new impairment model for financial assets, moving from
an ‘incurred loss model’ to an ‘expected loss model’. This affects the calcu-
lation of provisions for bad debts and resulted in an expected loss being
provided for on all financial receivables, including those not overdue. The
effect from applying the new model on trade receivables led to an increase
of the bad debt provision for the Group of SEK 18m, equivalent to 2.3% of the
provision as per December 31, 2017. The effect is based on the recalcula-
tion of the bad debt reserve as per year-end 2017 and is recognized as
an opening balance adjustment in 2018. This adjustment affected Trade
receivables, Deferred tax and Equity (Retained earnings).

Trade receivables are recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method, less pro-
vision for expected losses. The Group applies the simplified approach for
trade receivables and uses a matrix to estimate the expected losses. The
change in amount of the provision is recognized in the income statement
within selling expenses. The expected loss calculation is based on historical
data and is adjusted with a forward looking analysis, including macro-
economic factors impacting the different customer segments and more
specific factors such as signs of bankruptcy, officially known insolvency
etc. Electrolux uses credit insurance as a mean of protection. The Group’s
internal guidelines to the companies is to at least reserve 0.01% for current
trade receivables and for receivables maximum 15 days past due. For trade
receivables past due between 16 to 60 days Electrolux reserves 1% and
increase to 5% for receivables past due between 61 to 180 days. Trade
receivables that are 6 months past due but less than 12 months is reserved
at 45% and receivables that are 12 months past due and more are reserved
at 100%. Percentages are for year end. At year end, there is no significant
impact on provisions from changes in the forward looking factors.

Provisions for impairment of receivables

Provisions, January 1

Effect of change in accounting principles

Acquisition of operations

New provisions

Actual credit losses

Exchange-rate differences and other changes

2018

–801

–18

–4

–212

135

–35

2017

–757

—

–18

–212

152

Provisions, December 31

–935

–801

The fair value of trade receivables equals their carrying amount as
the impact of discounting is not significant. Electrolux has a significant
credit exposure on a number of major customers, primarily in the U.S.,
Latin America and Europe. Receivables concentrated to customers with
credit limits amounting to SEK 300m or more represent 33% (36) of the
total trade receivables. The creation and usage of provisions for impaired
receivables have been included in selling expenses in the income state-
ment.

Miscellaneous short-term receivables include, for example claims related to
VAT, operational taxes, and insurance claims.

Timing analysis of trade receivables past due

Trade receivables not overdue

Past due 1 - 15 days

Past due 16 - 60 days

2 – 6 months overdue

6 –12 months overdue

More than 1 year overdue

Total trade receivables past due
but not impaired

Impaired trade receivables

Total trade receivables

Past due, including impaired, in relation
to trade receivables, %

2018

2017

20,571 20,485

481

239

191

911

935

401

460

801

22,417 21,746

8.2

5.8

ELECTROLUX ANNUAL REPORT 2018

Notes 61

All amounts in SEKm unless otherwise stated

which means that the provision for bad debts will equal the lifetime expected
loss. To measure the expected credit losses, trade receivables are grouped
into six categories based on shared credit risk characteristics and days past
due. If the provision is considered insufficient due to individual consider-
ations, the provision is extended to cover the extra anticipated losses.

De-recognition
Financial assets, or a portion thereof, are derecognized when the contrac-
tual rights to receive the cash flows from the assets have expired, or when
they have been transferred and either (i) the Group transfers substantially
all the risks and rewards of ownership, or (ii) the Group neither transfers nor
retains substantially all the risks and rewards of ownership and the Group
has not retained control.

Financial liabilities
Classification and subsequent measurement
All of the Groups financial liabilities, excluding derivatives, are classified
as subsequently measured at amortized cost. Derivatives with
negative fair values are classified as at fair value through profit or loss.

De-recognition
Financial liabilities are derecognized when they are extinguished, i.e. when
the obligation specified in the contract is discharged, cancelled or expires.

Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date on which the
derivative contract is entered into and are subsequently re-measured at
fair value. All derivatives are carried as assets when fair value is positive
and as liabilities when fair value is negative. Fair value gain or loss related
to derivatives not designated or not qualifying as hedging instruments is
recognized in profit or loss.

The Group applies the hedge accounting requirements of IFRS 9. For
derivatives designated and qualifying as hedging instruments, the method
of recognizing the fair value gain or loss depends on the nature of the item
being hedged. Derivatives are designated as either:
• Hedges of the fair value of recognized assets or liabilities or firm

commitments (fair value hedges);

• Hedges of highly probable future cash flows attributable to a recognized

asset or liability (cash flow hedges); or

• Hedges of a net investment in a foreign operation (net investment hedges).

The Group documents, at the inception of the hedge, the relationship
between hedged items and hedging instruments, as well as its risk manage-
ment objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at the hedge inception and on
an ongoing basis, of whether the derivatives that are used in hedging trans-
actions are highly effective in offsetting changes in fair values or cash flows
of hedged items based on the following hedge effectiveness requirements:
• There is an economic relationship between the hedged item and the

hedging instrument;

• The effect of credit risk does not dominate the value changes that result

from that economic relationship; and

• The hedge ratio of the hedging relationship is the same as that result-
ing from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to
hedge that quantity of hedged item.

Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as
fair value hedges are recorded in the statement of comprehensive income,
together with changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk.

Cash flow hedge
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognized in equity via
other comprehensive income. The gain or loss relating to the ineffective
portion is recognized immediately in the statement of comprehensive
income. Amounts accumulated in equity are recycled to the statement
of profit or loss in the periods when the hedged item affects profit or loss.
They are recorded in the income or expense lines in which the revenue or
expense associated with the related hedged item is reported.

Note 18 Financial instruments

Additional and complementary information is presented in the following
notes to the Annual Report: Note 2, Financial risk management, describes
the Group’s risk policies in general and regarding the principal financial
instruments of Electrolux in more detail. Note 17, Trade receivables,
describes the trade receivables and related credit risks.

The information in this note highlights and describes the principal finan-
cial instruments of the Group regarding specific major terms and conditions
when applicable, and the exposure to risk and the fair values at year end.

Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognized when the entity
becomes party to the contractual provisions of the instrument. Regular way
purchases and sales of financial assets are recognized on trade-date, the
date on which the Group commits to purchase or sell the asset.

At initial recognition, the Group measures a financial asset or financial
liability at its fair value plus or minus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs
that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability, such as fees and commissions. Trans-
action costs of financial assets and financial liabilities carried at fair value
through profit or loss are expensed in profit or loss.

Financial assets
Classification and subsequent measurement
The Group classifies its financial assets in the following measurement
categories:
• Fair value through profit or loss (FVPL);
• Fair value through other comprehensive income (FVOCI); or
• Amortized cost.

The classification requirements for debt and equity instruments are
described below.

Debt instruments are those instruments that meet the definition of a financial
liability from the issuer’s perspective, such as trade receivables, loan
receivables as well as government bonds.

The Group classifies its debt instruments into one of the following two
measurement categories:

Amortized cost: Assets that are held for collection of contractual cash
flows where those cash flows represent solely payments of principal and
interest (SPPI), and are not designated as FVPL, are measured at amor-
tized cost. The carrying amount of these assets is adjusted by any expected
credit loss allowance recognized (see impairment below). Interest income
from these financial assets is included in the financial net using the effective
interest rate method.

Fair value through profit or loss (FVTPL): Assets that do not meet the
criteria for amortized cost are measured at fair value through profit and
loss. A gain or loss on a financial debt investment that is subsequently
measured at fair value through profit or loss and is not part of a hedging
relationship is recognized in the financial net in the period in which it arises.
Interest income from these financial assets is included in the financial net
using the effective interest rate method. Trade receivables sold on non-
recourse terms are categorized as ‘Hold to Sell’ with gain or loss reported
in operating income.

The Group reclassifies debt investments when and only when its business

model for managing those assets changes.

Equity instruments are instruments that meet the definition of equity from the
issuer’s perspective; that is, instruments that do not contain a contractual
obligation to pay and that evidence a residual interest in the issuer’s net
assets. Gains and losses on equity investments at FVPL are included in the
financial net in the statement of comprehensive income. The Group does
not have any material investments in equity instruments.

Impairment and expected loss
The Group assesses on a forward-looking basis the expected credit losses
(ECL) associated with its debt instrument assets not carried at fair value.
The Group recognizes a provision for such losses at each reporting date.
The measurement of ECL reflects an unbiased and probability-weighted
amount based on reasonable and supportable information available such
as past events, current condition and forecasts of future economic condi-
tions. For trade receivables, the group applies the ‘simplified approach’,

ELECTROLUX ANNUAL REPORT 2018

62 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 18

Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly
to cash flow hedges. Any gain or loss on the hedging instrument relating to
the effective portion of the hedge is recognized directly in equity via other
comprehensive income; the gain or loss relating to the ineffective portion is
recognized immediately in the statement of comprehensive income. Gains
and losses accumulated in equity are included in the statement of compre-
hensive income when the foreign operation is disposed of as part of the
gain or loss on the disposal.

Liquidity profile

Cash and cash equivalents

Short-term investments

Financial derivative assets

Prepaid interest expenses and accrued
interest income

Net debt
At year-end 2018, the Group’s financial net debt amounted to SEK –1,989m
(–2,437). The table below presents how the Group calculates net debt and
what it consists of.

Liquid funds
% of annualized net sales1)

Net liquidity

Fixed interest term, days

December 31

2018

2017

11,697 11,289

176

132

358

243

242

12,249 11,974

18.1

17.0

8,187

9,024

1.1

1.8

Net debt

Short-term loans

Short-term part of long-term loans

Trade receivables with recourse

Short-term borrowings

Financial derivative liabilities

Accrued interest expenses and prepaid
interest income

Total short-term borrowings

Long-term borrowings

Total borrowings

Cash and cash equivalents

Short-term investments

Financial derivative assets

Prepaid interest expenses and accrued
interest income

Liquid funds

Financial net debt

Net provision for post-employment benefits

Net debt
Revolving credit facility (EUR 1,000m)1)

December 31

2018

1,429

2,355

168

2017

990

1,501

204

3,952

2,695

4,062

6,198

10,260

228

2,950

6,587

9,537

11,697

11,289

176

132

358

243

242

12,249

11,974

–1,989

–2,437

3,814

1,825

2,634

197

10,277

9,844

1) The facilities are not included in net borrowings, but can be used for short-term and long-

term funding.

Liquid funds
Liquid funds as defined by the Group consist of cash and cash equivalents,
short-term investments, financial derivative assets and prepaid interest
expenses and accrued interest income. Cash and cash equivalents consist
of cash on hand, bank deposits and other short-term highly liquid invest-
ments with a maturity of 3 months or less.

The table to the right presents the key data of liquid funds. The carrying

amount of liquid funds is approximately equal to fair value.

Effective yield, % (average per annum)

1) Liquid funds in relation to net sales, see Note 30 for definition.

For 2018, liquid funds, including unused revolving credit facilities of
EUR 1,000m, amounted to 18.1% (17.0) of annualized net sales. Net liquidity
is calculated by deducting short-term borrowings from liquid funds.

Interest-bearing liabilities
Borrowings are initially recognized at fair value net of transaction costs
incurred. After initial recognition, borrowings are valued at amortized cost
using the effective interest method.

In 2018, SEK 1,531m of long-term borrowings matured or were amor-
tized. These maturities were partly refinanced to the amount of SEK 1,736m.
At year-end 2018, the Group’s total interest-bearing liabilities amounted
to SEK 9,982m (9,078), of which SEK 8,553m (8,088) referred to long-term
borrowings including maturities within 12 months. Long-term borrowings
with maturities within 12 months amounted to SEK 2,355mm (1,501). The
outstanding long-term borrowings have mainly been made under the
European Medium-Term Note Program and via bilateral loans. The majority
of total long-term borrowings, SEK 8,001m (7,609), is raised at parent
company level. Electrolux also has an unused committed multicurrency
revolving credit facility of EUR 1,000m maturing 2023. However, Electrolux
expects to meet any future requirements for short-term borrowings through
bilateral bank facilities and capital-market programs such as commercial
paper programs.

At year-end 2018, the average interest-fixing period for long-term
borrowings was 1.0 years (0.6). The calculation of the average interest-
fixing period includes the effect of interest-rate swaps used to manage the
interest-rate risk of the debt portfolio. The average interest rate for the total
borrowings was 2.5% (2.1) at year end.

The fair value of the interest-bearing borrowings was SEK 7,967m. The fair
value including swap transactions used to manage the interest fixing was
approximately SEK 7,965m.

Changes in liabilities arising from financing

Long-term borrowings (including
short-term part of long-term)

Short-term borrowings (excluding
short-term part of long-term)

Total

Cash Flow

Non Cash flow

Opening
Balance

Amortization

New debt

Net cash
change

Acquisitions

Exchange rate
differences

Closing
Balance

8,088

1,194

9,282

–1,531

1,737

—

–1,531

—

1,737

—

397

134

147

246

8,553

–128

118

1,597

10,150

ELECTROLUX ANNUAL REPORT 2018

Cont. Note 18

The table below sets out the carrying amount of the Group’s borrowings.

Notes 63

All amounts in SEKm unless otherwise stated

Borrowings

Issue/maturity date
Bond loans1)

2013-2020
2013-2020
2014–2019
2014–2019
2014–2019
2017–2024
2018–2023
2018–2023
2018–2025
Total bond loans

Other long-term loans1)
1996–2036

2013–2021
2015–2021
2017–2026

Total other long-term loans
Long-term borrowings

Short-term part of long-term loans2)
2012-2018
2013–2018
2013–2018

2013–2021

2013–2021
2014–2019
2014–2019
2014–2019

Total short-term part of long-term loans

Other short-term loans

Total other short-term loans
Trade receivables with recourse
Short-term borrowings
Long-term and short-term borrowings
Fair value of derivative liabilities
Accrued interest expenses and prepaid
interest income

Total borrowings

Description of loan

Interest rate, % Currency

Carrying amount,
December 31

Nominal value
(in currency)

2018

2017

Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program
Euro MTN Program

3.440
Floating
Floating
2.340
1.000
Floating
1.125
Floating
3.724

Fixed rate loans in Germany
Amortizing long term bank loan in Sweden,
long part
Long-term bank loans in Sweden
Amortizing long term bank loan in Sweden
Other long-term loans

7.870

Floating
Floating
Floating

SEK
SEK
SEK
SEK
EUR
SEK
SEK
SEK
USD

EUR

SEK
USD
USD

Euro MTN Program
Euro MTN Program
Euro MTN Program
Amortizing long term bank loan in Sweden,
short part
Amortizing long term bank loan in Sweden,
short part
Euro MTN Program
Euro MTN Program
Euro MTN Program
Other short-term part of long-term loans

2.910
Floating
2.875

Floating

Floating
Floating
2.340
1.000

SEK
SEK
SEK

SEK

SEK
SEK
SEK
EUR

Short-term bank loans in Egypt
Short-term bank loans in Brazil
Short-term bank loans in Thailand
Other bank borrowings and
commercial papers

Floating
Floating
Floating

EGP
BRR
THB

170
830
750
250
100
350
200
800
73

461
170
75

270
600
400

231

308
750
250
100

363
292
942

170
830
—
—
—
350
200
806
655
3,011

170
830
750
250
982
350
—
—
—
3,332

400

381

461
1,522
673
131
3,187
6,198

—
—
—

—

308
750
250
1,026
21
2,355

182
675
259

313
1,429
168
3,952
10,150
81

769
1,392
616
97
3,255
6,587

270
600
400

231

—
—
—
—
—
1,501

208
61
212

509
990
204
2,695
9,282
228

10,260

9,537

1) The interest-rate fixing profile of the borrowings has been adjusted with interest-rate swaps.
2) Long-term borrowings with maturities within 12 months are classified as short-term borrowings in the Group’s balance sheet.

Short-term borrowings pertain mainly to countries with capital restrictions. The average maturity of the Group’s long-term borrowings including long-
term borrowings with maturities within 12 months was 2.6 years (2.4), at the end of 2018. The table below presents the repayment schedule of long-term
borrowings.

Repayment schedule of long-term borrowings, December 31

Debenture and bond loans

Bank and other loans

Short-term part of long-term loans

Total

ELECTROLUX ANNUAL REPORT 2018

2019

—

2,355

2020

1,000

412

—

1,412

2021

—

1,779

—

1,779

2022

—

103

—

103

2023

1,006

103

—

1,109

2024—

1,005

790

—

1,795

Total

3,011

3,187

2,355

8,553

64 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 18

Other interest-bearing investments
Interest-bearing receivables from customer financing amounting to SEK 0m
(0) are included in the item Trade receivables in the consolidated balance
sheet. The Group’s customer-financing activities are performed in order
to provide sales support and are directed mainly to independent retailers
in Scandinavia. The majority of the financing is shorter than 12 months.
There is no major concentration of credit risk related to customer financing.
Collaterals and the right to repossess the inventory also reduce the credit
risk in the financing operations. The income from customer financing is
subject to interest-rate risk. This risk is immaterial to the Group.

Commercial flows
The table below shows the forecasted transaction flows, imports and
exports, for the 12-month period of 2019 and hedges at year-end 2018.

The hedged amounts are dependent on the hedging policy for each
flow considering the existing risk exposure. The effect of hedging on oper-
ating income during 2018 amounted to SEK 25m (–107). At year-end 2018,
the unrealized fair value of forward contracts for hedging of forecasted
transaction flows amounted to SEK 2m (–12).

Forecasted transaction flows and hedges

Inflow of currency, long position

Outflow of currency, short position

Gross transaction flow

Hedges

Net transaction flow

AUD

2,966

–136

2,830

–554

2,277

BRL

3,295

–314

2,981

–648

2,333

CAD

2,547

–162

2,385

CHF

2,064

–238

1,827

–216

1,610

CLP

1,342

CNY

352

EUR

GBP

THB

USD

Other

Total

3,898

3,443

1,945

2,336

11,637

35,826

–386

–1,906

–8,843

–624

–3,690 –12,557

–7,133 –35,826

957

–1,554

–4,945

2,819

–1,745 –10,221

4,504

–197

760

1,295

108

–931

–168

1,559

–86

–258

–4,837

1,887

–1,913

–8,662

4,418

—

Maturity profile of financial liabilities and derivatives
The table below presents the undiscounted cash flows of the Group’s contractual liabilities related to financial instruments based on the remaining period at
the balance sheet date to the contractual maturity date. Floating interest cash flows with future fixing dates are estimated using the forward-forward interest
rates at year-end. Any cash flow in foreign currency is converted to Swedish krona using the FX spot rates at year-end. The short-term liabilities from account
payables are matched by positive cash flow from trade receivables. The loan maturities can be offset by the available liquidity and/or a combination by new
issued bonds, commercial papers or bank loans. On top of the other sources, Electrolux has an unused committed credit facility of EUR 1,000m.

Maturity profile of financial liabilities and derivatives – undiscounted cash flows

Loans

Net settled derivatives

Gross settled derivatives

whereof outflow

whereof inflow

Accounts payable

Financial guarantees

Total

≤ 0.5
year

> 0.5 year
< 1 year

> 1 year
< 2 years

> 2 years
< 5 years

> 5 years

Total

–2,684

–1,260

–1,659

–3,173

–1,720

–10,496

–20,740

20,794

–34,443

–992

–875

877

—

–1

—

–1

—

–3

–21,615

21,671

–34,443

–992

–38,065

–1,257

–1,660

–3,174

–1,720

–45,877

Net gain/loss, fair value and carrying amount on financial instruments
The tables below present net gain/loss on financial instruments, the effect in the income statement and equity, and the fair value and carrying amount of
financial assets and liabilities. Net gain/loss can include both exchange-rate differences and gain/loss due to changes in interest-rate levels.

Net gain/loss, income and expense on financial instruments

Recognized in operating income

Financial assets and liabilities at fair value through
profit and loss

Loans and receivables

Financial assets and liabilities at amortized cost

Total net gain/loss, income and expense

Recognized in financial items

Financial assets and liabilities at fair value through
profit and loss

Loans and receivables

Available–for–sale financial assets

Financial assets at amortized cost

Other financial liabilities at amortized cost

Total net gain/loss, income and expense

2018

2017

Gain/loss
in profit
and loss

Gain/loss
from OCI

Income

Expense

Gain/loss
in profit
and loss

Gain/loss
in OCI

Income

Expense

—

–279

–193

–56

—

–116

146

–26

—

107

—

107

—

–193

—

–311

–504

–107

197

—

216

–286

–104

—

130

–44

—

190

—

190

—

–9

—

–638

–647

ELECTROLUX ANNUAL REPORT 2018

Cont. Note 18

Fair value and carrying amount on financial assets and liabilities

Financial assets

Financial assets at fair value through profit and loss

Available-for-sale

Trade receivables

Loans and receivables

Derivatives

Short-term investments

Financial assets at fair value through profit and loss

Loans and receivables

Cash and cash equivalents

Financial assets at fair value through profit and loss

Loans and receivables

Cash

Financial assets

Financial assets at fair value through profit and loss

Trade receivables

Financial assets at amortized cost

Derivatives

Financial assets at fair value through profit and loss

Derivatives in hedge accounting

Short-term investments

Financial assets at fair value through profit and loss

Financial assets at amortized cost

Cash and cash equivalents

Financial assets at fair value through profit and loss

Financial assets at amortized cost

Total financial assets

Financial liabilities

Long-term borrowings

Financial liabilities measured at amortized cost

Accounts payable

Financial liabilities at amortized cost

Short-term borrowings

Financial liabilities measured at amortized cost

Derivatives

Total financial liabilities

Notes 65

All amounts in SEKm unless otherwise stated

20181)

20171)

Hierarchy
level

Carrying
amount

Hierarchy
level

Carrying
amount

—

246

21,482

139

120

176

175

11,697

5,847

5,850

33,740

6,198

34,443

3,952

102

44,695

212

192

20,747

358

164

194

11,289

2,863

2,719

5,707

—

32,693

6,587

31,114

2,695

251

40,647

1) Carrying amount equals fair value except for long and short-term borrowings where the fair value is SEK 45m (66), respectively SEK 12m (16) higher than the carrying amount.

Fair value estimation
Valuation of financial instruments at fair value is done at the most accurate
market prices available. Instruments which are quoted on the market, e.g.,
the major bond and interest-rate future markets, are all marked-to-market
with the current price. The foreign-exchange spot rate is used to convert
the value into SEK. For instruments where no reliable price is available on
the market, cash flows are discounted using the deposit/swap curve of the
cash flow currency. If no proper cash flow schedule is available, e.g., as in
the case with forward-rate agreements, the underlying schedule is used for
valuation purposes. To the extent option instruments are used, the valuation
is based on the Black & Scholes formula.

flows at the current market-interest rate that is available to the Group for
similar financial instruments. The Group’s financial assets and liabilities are
measured according to the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities.
At year-end, the fair value for level 1 financial assets was SEK 176m (164)
and for financial liabilities SEK 0m (0).

Level 2: Inputs other than quoted prices included in level 1 that are
observable for assets or liabilities either directly or indirectly. At year-end,
the fair value for level 2 financial assets was SEK 21,621m (20,834) and for
financial liabilities SEK 102m (251).

The carrying value less impairment provision of trade receivables and
payables are assumed to approximate their fair values. The fair value of
financial liabilities is estimated by discounting the future contractual cash

Level 3: Inputs for the assets or liabilities that are not entirely based on
observable market data. At year-end, the fair value for level 3 financial
assets was SEK 246m (212) and for financial liabilities SEK 0m (0).

Note 19 Assets pledged for liabilities to credit institutions

Real-estate mortgages

Other

Total

ELECTROLUX ANNUAL REPORT 2018

Group
December 31

Parent Company
December 31

2018

2017

2018

2017

—

66 Notes

All amounts in SEKm unless otherwise stated

Note 20 Share capital, number of shares and earnings per share

The equity attributable to equity holders of the Parent Company consists of
the following items:

Other paid-in capital
Other paid-in capital relates to payments made by owners and includes
share premiums paid.

Share capital
As per December 31, 2018, the share capital of AB Electrolux consisted of
8,192,539 Class A shares and 300,727,769 Class B shares with a quota value
of SEK 5 per share. All shares are fully paid. One A share entitles the holder to
one vote and one B share to one-tenth of a vote. All shares entitle the holder
to the same proportion of assets and earnings, and carry equal rights in
terms of dividends.

Share capital

Share capital, December 31, 2017

8,192,539 Class A shares, quota value SEK 5

300,727,769 Class B shares, quota value SEK 5

Total

Share capital, December 31, 2018

8,192,539 Class A shares, quota value SEK 5

300,727,769 Class B shares, quota value SEK 5

Total

1,504

1,545

1,504

1,545

Other reserves
Other reserves include the following items: Cashflow hedges which refer
to changes in valuation of currency contracts used for hedging future for-
eign currency transactions; and exchange-rate differences on translation
of foreign operations which refer to changes in exchange rates when net
investments in foreign subsidiaries are translated to SEK. The amount of
exchange-rate changes includes the value of hedging contracts for net
investments. Finally, other reserves include tax relating to the mentioned
items.

Retained earnings
Retained earnings, including income for the period, include the income of
the Parent Company and its share of income in subsidiaries and associated
companies. Retained earnings also include remeasurement of provision for
post-employment benefits, reversal of the cost for share-based payments
recognized in income, income from sales of own shares and the amount
recognized for the common dividend.

Earnings per share

Income for the period attributable to
equity holders of the Parent Company

Number of shares

Shares, December 31, 2017

Class A shares

Class B shares

Total

Owned by
Electrolux

Owned by
other share-
holders

Earnings per share

Total

Basic, SEK

Diluted, SEK

—

8,192,539

21,522,858 279,204,911 300,727,769

21,522,858 287,397,450 308,920,308

Average number of shares, million

Basic

Diluted

2018

2017

3,805

5,745

13.24

13.14

19.99

19.88

287.4

289.5

287.4

289.0

Conversion of Class A shares into Class B shares

Class A shares

Class B shares

Sold shares

Class A shares

Class B shares

Shares, December 31, 2018

Class A shares

Class B shares

Total

—

8,192,539

21,522,858 279,204,911 300,727,769

21,522,858 287,397,450 308,920,308

Basic earnings per share is calculated by dividing the income for the period
attributable to the equity holders of the Parent Company with the average
number of shares. The average number of shares is the weighted average
number of shares outstanding during the year, after repurchase of own
shares. Diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares outstanding with the estimated num-
ber of shares from the share programs. Share programs are included in the
dilutive potential ordinary shares as from the start of each program. The
dilution in the Group is a consequence of the Electrolux long-term incentive
programs.

The average number of shares during the year has been 287,397,450
(287,397,450) and the average number of diluted shares has been
289,503,125 (289,020,186).

Note 21 Untaxed reserves, Parent Company

Accumulated depreciation in excess of plan

Brands

Licenses

Machinery and equipment

Buildings

Other

Total

Group contributions

Total appropriations

December 31, 2018

Appropriations

December 31, 2017

382

442

–20

–3

1,746

1,743

357

444

ELECTROLUX ANNUAL REPORT 2018

Notes 67

All amounts in SEKm unless otherwise stated

Sweden
The main defined benefit plan in Sweden is the collectively agreed pension
plan for white collar employees, the ITP 2 plan, and it is based on final salary.
Benefits in payment are indexed according to the decisions of the Alecta
insurance company, typically those follow inflation. The plan is semi-closed,
meaning that only new employees born before 1979 are covered by the
ITP 2 solution. A defined contribution solution (ITP 1) is offered to employees
born after 1978. Electrolux has chosen to fund the pension obligation (ITP 2)
by a pension foundation. The foundation’s Board of Directors consists of an
equal number of members from Group staff functions and representatives
from the company. There is no funding requirement for an ITP pension foun-
dation. Benefits are paid directly by the company and, in case of surplus,
the company can reimburse itself for the current and the previous year’s
pension cost and/or take a contribution holiday.

Germany
There are several defined benefit plans based on final salary in Germany.
Benefits in payment are indexed every three years according to inflation
levels. All plans are closed for new participants. Electrolux has arranged
a Contractual Trust Arrangement (CTA) and the funds are held by a local
bank who acts as the trustee for the scheme. The assets are managed by
a fund management company, Electrolux performs an oversight on the
strategy via an investment committee with members both from Group staff
functions and the local German company. No minimum funding require-
ments or regular funding obligations apply to CTAs. If there is a surplus
under both German GAAP and IFRS rules, Electrolux can take a refund up to
the German GAAP surplus. Benefits are paid directly by the company and
Electrolux can refund itself for pension pay-outs. Over time, Electrolux will
have access to any residual funds after the last beneficiary has died.

Switzerland
In Switzerland benefits are career average in nature, with indexation
of benefits following decisions of the foundation board, subject to legal
minima. Contributions are paid to the pension foundation and a recovery
plan has to be set up if the plans are underfunded on the local funding
basis. Swiss laws do not state any specific way of calculating an employer‘s
additional contribution and because of that there is normally no mini-
mum funding requirement. The assets in the foundation is to a large extent
handled by local banks and they are working with both asset allocation
and selection within a framework decided by the Swiss foundation board.
Benefits are paid from the plan assets.

Other countries
There is a variety of smaller plans in other countries and the most impor-
tant of those are in France, Italy, Canada and Norway. The pension plans
in France and Italy are mainly unfunded. The Norwegian pension plans are
funded and in Canada there are both funded and unfunded pension plans.
A mix of final salary and career average exists in these countries. Some
plans are open for new entrants.

Note 22 Post-employment benefits

Post-employment benefits
The Group sponsors pension plans in many of the countries in which it has
significant activities. Pension plans can be defined contribution or defined
benefit plans or a combination of both. Under defined benefit pension
plans, the company enters into a commitment to provide post-employment
benefits based upon one or several parameters for which the outcome is
not known at present. For example, benefits can be based on final salary, on
career average salary, or on a fixed amount of money per year of employ-
ment. Under defined contribution plans, the company’s commitment is to
make periodic payments to independent authorities or investment plans,
and the level of benefits depends on the actual return on those investments.
Some plans combine the promise to make periodic payments with a prom-
ise of a guaranteed minimum return on the investments. These plans are
also defined benefit plans.

In some countries, Electrolux makes provisions for compulsory
severance payments. These provisions cover the Group’s commitment to
pay employees a lump sum upon reaching retirement age, or upon the
employees’ dismissal or resignation.

In addition to providing pension benefits and compulsory severance
payments, the Group provides healthcare benefits for some of its employees
in certain countries, mainly in the U.S.

The cost for pension is disaggregated into three components; service
cost, financing cost or income and remeasurement effects. Service cost
is reported within Operating income and classified as Cost of goods sold,
Selling expenses or Administrative expenses depending on the function
of the employee. Financing cost or income is recognized in the Financial
items and the remeasurement effects in Other comprehensive income. The
Projected Unit Credit Method is used to measure the present value of the
obligations and costs.

Net provisions for post-employment benefits in the balance sheet repre-
sent the present value of the Group’s obligations less market value of plan
assets. The remeasurements of the obligations are made using actuarial
assumptions determined at the balance sheet date. Changes in the present
value of the obligations due to revised actuarial assumptions and experi-
ence adjustments on the obligation are recorded in Other comprehensive
income as remeasurements. The actual return less calculated interest
income on plan assets is also recorded in other comprehensive income as
remeasurements. Past-service costs are recognized immediately in income
for the period.

Some features of the defined benefit plans in the main countries are

described below.

USA
The number of pension plans in the U.S. has been significantly reduced over
the years through plan consolidation. The defined benefit plans are closed
for future accruals and employees are offered defined contribution plans.
Pensions in payment are not generally subject to indexation. Funding posi-
tion is reassessed every year with a target to restore the funding level over
seven years. Surplus in the fund can be used to take a contribution holiday
and refunds are taxed at 50%. Benefits are mainly paid from the plan assets.

United Kingdom
The defined benefit plan is closed for future accruals and employees are
offered defined contribution. The funding position is reassessed every three
years and a schedule of contributions is agreed between the Trustee and
the company. The Trustee decides the investment strategy and consults with
the company. Benefits are paid from the plan assets.

ELECTROLUX ANNUAL REPORT 2018

68 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 22

Explanation of amounts in the financial statements relating to defined benefit obligations.

Information by country December, 31, 2018

Amounts included in the balance sheet

Present value of funded and unfunded obligations

8,221

1,790

6,257

4,052

3,779

3,396

1,151

28,646

Fair value of plan assets (after change in asset ceiling)

–7,814

–1,837

–6,354

–2,772

–2,631

–3,100

–324

–24,832

USA
Medical

USA

Sweden Germany

Switzer–
land

Other

Total

Total (surplus)/deficit

Whereof reported as:

Pension plan assets

Provisions for post-employment benefit plans

Total funding level for all pension plans, %

Average duration of the obligation, years

Amounts included in total comprehensive income
Service cost1)

Net interest cost

Remeasurements (gain)/loss

Total expense (gain) for defined benefit plans

Expenses for defined contribution plans

Amounts included in the cash flow statement

Contributions by the employer

Reimbursement

Benefits paid by the employer

Major assumptions for the valuation of the liability
Longevity, years2)

Male

Female

Inflation, %3)

Discount rate, %

Information by country December, 31, 2017

Amounts included in the balance sheet

407

–47

–97

1,280

1,148

296

827

3,814

—

9.4

—

–21

20.8

22.7

4.2

—

103

9.9

—

–22

—

20.8

22.7

6.5

4.2

—

102

14.7

–373

–307

–58

—

20.9

23.8

3.25

2.7

—

17.4

14.3

12.6

158

279

455

206

234

—

–125

—

626

–161

23.0

24.8

1.75

2.3

20.0

23.6

1.7

—

197

251

–40

—

22.5

24.5

1.25

0.7

—

–11

—

–55

—

532

4,346

12.7

320

448

816

640

–131

717

–362

21.2

23.6

2.4

2.63

USA
Medical

USA

Sweden Germany

Switzer–
land

Other

Total

Present value of funded and unfunded obligations

8,203

1,790

6,700

3,690

3,773

3,083

1,139

28,378

Fair value of plan assets (after change in asset ceiling)

–7,951

–1,826

–6,449

–2,822

–3,345

–3,008

–343

–25,744

252

–36

251

868

428

Total (surplus)/deficit

Whereof reported as:

Pension plan assets

Provisions for post-employment benefit plans

Total funding level for all pension plans, %

Average duration of the obligation, years

Amounts included in total comprehensive income
Service cost4)

Net interest cost

Remeasurements (gain)/loss

Total expense (gain) for defined benefit plans

Expenses for defined contribution plans

Amounts included in the cash flow statement

Contributions by the employer

Reimbursement

Benefits paid by the employer

Major assumptions for the valuation of the liability
Longevity, years2)

Male

Female

Inflation, %3)

Discount rate, %

—

10.1

–124

–764

–850

—

–20

20.0

22.3

3.6

—

102

9.9

—

–207

–198

–29

—

20.0

22.3

6.75

3.6

—

16.7

14.3

12.8

–42

–25

–55

—

22.1

24.5

3.25

2.5

146

102

263

—

–126

–94

–1

—

–120

–154

23.0

24.8

1.75

2.5

19.8

23.5

1.7

–36

–163

–197

–36

—

22.4

24.4

0.6

796

2,634

—

–29

–14

–13

—

–28

—

455

3,089

13.4

–1,229

–1,115

585

–134

–322

21.8

2.42

2.54

1) Includes a loss of SEK 51m in UK due to gender equalization of Guaranteed Minimum Pension.
2) Expressed as the average life expectancy of a 65 years old person in number of years.
3) General inflation impacting salary and pensions increase. For USA Medical, the number refers to the inflation of healthcare benefits.
4) Includes a total gain of SEK 237m related to plan amendments in Switzerland and the U.S.

ELECTROLUX ANNUAL REPORT 2018

Notes 69

All amounts in SEKm unless otherwise stated

Cont. Note 22

Reconciliation of change in present value of funded
and unfunded obligations

Opening balance, January 1

Current service cost

Special events

Interest expense

Remeasurement arising from changes
in financial assumptions

Remeasurement from changes in
demographic assumptions

Remeasurement from experience

Contributions by plan participants

Benefits paid

Exchange differences

Settlements and other

Closing balance, December 31

Reconciliation of change in the fair value of plan assets

Opening balance, January 1
Interest income1)

Return on plan assets, excluding amounts included in
interest1)

Effect of asset ceiling

Net contribution by employer

Contribution by plan participants

Benefits paid

Exchange differences

Settlements and other

Closing balance, December 31

1) The actual return on plan assets amounts to SEK –553m (2,505).

2018

2017

28,378 29,734

237

720

255

–232

764

–717

851

–132

–275

–76

–1,514 –1,526

1,539 –1,138

–32

–22

28,646 28,378

2018

2017

25,744 25,565

672

673

–1,225

1,832

–52

–224

–79

368

–1,514 –1,526

1,453 –1,071

–67

–61

24,832 25,744

Risks
There are mainly three categories of risks related to defined benefit obliga-
tions and pension plans. The first category relates to risks affecting the actual
pension payments. Increased longevity and inflation of salary and pensions
are the principle risks that may increase the future pension payments and,
hence, increase the pension obligation. The second category relates to
investment return. Pension plan assets are invested in a variety of financial
instruments and are exposed to market fluctuations. Poor investment return
may reduce the value of investments and render them insufficient to cover
future pension payments. The final category relates to measurement and
affects the accounting for pensions. The discount rate used for measuring
the present value of the obligation may fluctuate which impacts the valua-
tion of the Defined Benefit Obligation (DBO). The discount rate also impacts
the size of the interest income and expense that is reported in the Financial
items and the service cost. When determining the discount rate, the Group
uses AA rated corporate bond indexes which match the duration of the
pension obligations. In Sweden and Norway, mortgage-backed bonds
are used for determining the discount rate. Expected inflation and mortality
assumptions are based on local conditions in each country and changes in
those assumptions may also affect the measured obligation and, therefore,
the accounting entries.

Investment strategy and risk management
The Group manages the allocation and investment of pension plan assets
with the aim of decreasing the total pension cost over time. This means that
certain risks are accepted in order to increase the return. The investment
horizon is long-term and the allocation ensures that the investment port-
folios are well diversified. In some countries, a so called trigger-points
scheme is in place, whereby the investment in fixed income assets increases
as the funding level improves. The Board of Electrolux annually approves the
limits for asset allocation. The final investment decision often resides with
the local trustee that consults with Electrolux. The risks related to pension
obligations, e.g., mortality exposure and inflation, are monitored on an
ongoing basis. Buy-out premiums are also monitored and other potential
liability management actions are also considered to limit the exposure to
the Group.

Below is the sensitivity analysis for the main financial assumptions and the potential impact on the present value of the defined pension obligation. Note that
the sensitivities are not meant to express any view by Electrolux on the probability of a change.

Sensitivity analysis on defined benefit obligation

Longevity +1 year

Inflation +0.5%1)

Discount rate +1%

Discount rate –1%

USA

268

–655

779

USA
Medical

–158

183

Sweden Germany

284

423

–801

1,017

147

375

–612

801

241

–468

589

Switzer-
land

107

–393

482

Other

–90

104

Total

995

1,241

–3,177

3,955

1) The inflation change feeds through to other inflation-dependent assumptions, i.e., pension increases and salary growth.

In 2019, the Group expects to pay a total of SEK 389m in contributions to the pension funds and as payments of benefits directly to the employees.

MARKET VALUE OF PLAN ASSETS BY CATEGORY

2018

2017

Fixed income, SEK 12,103m
Equity, SEK 7,669m
Hedge funds, SEK 1,673m
Real estate, SEK 2,304m
Infrastructure, SEK 307m
Private equity, SEK 142m
Cash, SEK 634m

Fixed income, SEK 10,453m
Equity, SEK 9,603m
Hedge funds, SEK 2,633m
Real estate, SEK 2,109m
Infrastructure, SEK 377m
Private equity, SEK 79m
Cash, SEK 490m

ELECTROLUX ANNUAL REPORT 2018

70 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 22

Market value of plan assets without quoted prices

2018

2017

December 31

Fixed income

Real estate

Infrastructure

Private equity

2,302

2,107

307

142

377

The Swedish pension foundation carries plan assets at an amount of
SEK 200m related to property used by Electrolux.

Governance
Defined benefit pensions and pension plan assets are governed
by the Electrolux Pension Board, which resumes 3 to 4 times per year
and has the following responsibilities:
• Implementation of pension directives of the AB Electrolux Board of

Directors.

• Evaluation and approval of new plans, changes to plans or termination

of plans.

• Annually, approval of the Group’s and local pension funds’ investment

strategies.

• Annually, approval of the Group’s global and local benchmarks for

follow up of pension plan assets.

• Approval of the election of company representatives in the Boards of

Trustees.

• Approval of the financial and actuarial assumptions to be used in the

measurement of the defined benefit obligations.

Parent Company
According to Swedish accounting principles adopted by the Parent
Company, defined benefit liabilities are calculated based upon officially
provided assumptions, which differ from the assumptions used in the Group
under IFRS. The pension benefits are secured by contributions to a separate
fund or recorded as a liability in the balance sheet. The accounting prin-
ciples used in the Parent Company’s separate financial statements differ
from the IFRS principles, mainly in the following:
• The pension liability calculated according to Swedish accounting

principles does not take into account future salary increases.

• The discount rate used in the Swedish calculations is set by the Swedish
Pension Foundation (PRI) and was for 2018 4.0% (4.0). The rate is the same
for all companies in Sweden.

• Changes in the discount rate and other actuarial assumptions are

recognized immediately in the profit or loss and the balance sheet.

• Deficit must be either immediately settled in cash or recognized as a

liability in the balance sheet.

• Surplus cannot be recognized as an asset, but may in some cases be

refunded to the company to offset pension costs.

Change in the present value of defined benefit pension obligation for
funded and unfunded obligations

Opening balance, January 1, 2017

1,597

440

2,037

Funded Unfunded

Total

Change in fair value of plan assets

Opening balance, January 1, 2017

Actual return on plan assets

Contributions and compensation to/from the fund

Closing balance, December 31, 2017

Actual return on plan assets

Contributions and compensation to/from the fund

Closing balance, December 31, 2018

Amounts recognized in the balance sheet

Present value of pension obligations

Fair value of plan assets

Surplus/deficit

Limitation on assets in accordance with Swedish
accounting principles

Net provisions for pension obligations

Whereof reported as provisions for pensions

Amounts recognized in the income statement

Current service cost

Interest cost

Total expenses for defined benefit pension plans

Insurance premiums

Total expenses for defined contribution plans

Special employer’s contribution tax

Cost for credit insurance FPG

Total pension expenses

Compensation from the pension fund

Total recognized pension expenses

Funded

2,295

175

–73

2,397

–75

2,351

December 31

2018

2017

–2,164 –2,089

2,351

2,397

187

308

–628

–442

–746

–438

2018

2017

183

107

325

–75

250

156

102

291

–73

218

Current service cost

Interest cost

Benefits paid

–75

Closing balance, December 31, 2017

1,651

Current service cost

Interest cost

Benefits paid

–78

Closing balance, December 31, 2018

1,722

–29

438

–30

442

–104

2,089

–108

2,164

The Swedish Pension Foundation
The pension liabilities of the Group’s Swedish defined benefit pension
plan (PRI pensions) are funded through a pension foundation established
in 1998. The market value of the assets of the foundation amounted at
December 31, 2018, to SEK 2,772m (2,830m) and the pension commitments
to SEK 2,013m (1,934). The Swedish Group companies recorded a liability
to the pension fund as per December 31, 2018, in the amount of SEK 0m (0).
Contributions to the pension foundation during 2018 amounted to SEK 0m
(0). Contributions from the pension foundation during 2018 amounted to
SEK 91m (88).

ELECTROLUX ANNUAL REPORT 2018

Note 23 Other provisions

Group

Parent Company

Notes 71

All amounts in SEKm unless otherwise stated

Opening balance, January 1, 2017

1,667

1,812

1,615

Provisions for
restructuring

Warranty
commitments

Claims

Acquisitions of operations

Provisions made

Provisions used

Unused amounts reversed

Exchange-rate differences

Closing balance, December 31, 2017

Of which current provisions

Of which non-current provisions

Opening balance, January 1, 2018

Acquisitions of operations

Provisions made

Provisions used

Unused amounts reversed

Exchange-rate differences

Closing balance, December 31, 2018

Of which current provisions

Of which non-current provisions

—

–373

–34

1,290

303

987

1,290

—

718

–749

–108

1,210

411

799

128

1,404

–1,360

–44

–25

1,915

932

983

—

394

–519

—

–128

1,362

274

Other

2,950

343

Total

8,044

483

1,319

3,117

–848

–348

–160

3,256

561

–3,100

–426

–295

7,823

2,070

5,753

1,088

2,695

1,915

1,362

3,256

7,823

1,793

–1,679

–11

2,095

1,071

1,024

—

391

–464

—

108

871

–867

–512

1,397

2,863

269

533

1,128

2,330

3,773

–3,759

–631

330

7,565

2,284

5,281

Provisions for
restructuring

Warranty
commitments

Other

472

—

–148

–14

322

220

102

322

—

–122

–74

174

125

440

—

407

–432

—

421

339

421

—

–44

473

381

—

–26

—

–7

Total

966

—

431

–606

–14

791

302

489

791

—

–173

–74

691

217

474

Provisions are recognized when the Group has a present obligation as a
result of a past event, and it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognized as a provision is the
best estimate of the expenditure required to settle the present obligation at
the balance sheet date. Where the effect of time value of money is material,
the amount recognized is the present value of the estimated expenditures.
Provisions for warranty are recognized at the date of sale of the products
covered by the warranty and are calculated based on historical data for
similar products. Provisions for warranty commitments are recognized as a
consequence of the Group’s policy to cover the cost of repair of defective
products. Warranty is normally granted for one to two years after the sale.

Restructuring provisions are recognized when the Group has both
adopted a detailed formal plan for the restructuring and has, either started

the plan implementation, or communicated its main features to those
affected by the restructuring. Provisions for restructuring represent the
expected costs to be incurred as a consequence of the Group’s decision to
close some factories, rationalize production and reduce personnel, both for
newly acquired and previously owned companies. The amounts are based
on management’s best estimates and are adjusted when changes to these
estimates are known. The larger part of the restructuring provisions as per
December 31, 2018, will be consumed in 2019 and 2020.

Provisions for claims refer to the Group’s captive insurance companies.
Other provisions include mainly provisions for direct and indirect tax, envi-
ronmental liabilities, asbestos claims or other liabilities. The timing of any
resulting outflows for provisions for claims and other provisions is uncertain.

Note 24 Other liabilities

Accrued holiday pay

Other accrued payroll costs

Accrued interest expenses

Prepaid income grants

Other prepaid income

Other accrued expenses

Contract liabilities1)

Other operating liabilities

Group
December 31

Parent Company
December 31

2018

1,043

1,297

882

302

4,710

5,093

3,750

2017

1,057

1,726

879

4,009

4,506

3,602

2018

137

—

2017

213

315

—

1,210

738

—

Total

17,105 15,849

1,479

1,297

1) Movement in contract liabilities is presented in Note 4.

Other accrued expenses include for example accruals for fees, advertising
and sales promotion. Other operating liabilities include for example VAT
and operational taxes.

ELECTROLUX ANNUAL REPORT 2018

72 Notes

All amounts in SEKm unless otherwise stated

Note 25 Contingent assets and liabilities

Guarantees and other
commitments

On behalf of subsidiaries

On behalf of external
counterparties

Employee benefits in excess of
reported liabilities

Total

Group
December 31

Parent Company
December 31

2018

2017

2018

2017

—

1,044

1,009

992

1,039

490

477

148

—

1,015

1,187

1,534

1,497

A large part of the guarantees and other commitments on behalf of external
counterparties, is related to U.S. sales to dealers financed through external
finance companies with a regulated buy-back obligation of the products in
case of dealer’s bankruptcy.

In addition to the above contingent liabilities, guarantees for fulfillment of
contractual undertakings are given as part of the Group’s normal course of
business. There was no indication at year-end that payment will be required
in connection with any contractual guarantees.

Legal proceedings
Litigation and claims related to asbestos are pending against the Group
in the U.S. Almost all of the cases refer to externally supplied components
used in industrial products manufactured by discontinued operations prior
to the early 1970s. The cases involve plaintiffs who have made substan-
tially identical allegations against other defendants who are not part of
the Electrolux Group.

As of December 31, 2018, the Group had a total of 3,460 (3,372) cases
pending, representing approximately 3,502 (approximately 3,435) plain-
tiffs. During 2018, 1,355 new cases with 1,355 plaintiffs were filed and 1,267
pending cases with approximately 1,288 plaintiffs were resolved.

The Group continues to operate under a 2007 agreement with certain
insurance carriers who have agreed to reimburse the Group for a portion
of its costs relating to certain asbestos lawsuits. The agreement is subject
to termination upon 60 days notice and if terminated, the parties would be
restored to their rights and obligations under the affected insurance policies.
It is expected that additional lawsuits will be filed against Electrolux. It is
not possible to predict the number of future lawsuits. In addition, the out-
come of asbestos lawsuits is difficult to predict and Electrolux cannot provide
any assurances that the resolution of these types of lawsuits will not have a
material adverse effect on its business or on results of operations in the future.
In July 2004, a gas explosion occurred on Husqvarna’s property in
Ghislenghien, Belgium, resulting in the loss of 24 lives and substantial

personal injuries and property damage. In 2012, the Belgium Supreme
Court concluded that Husqvarna together with other parties were found
liable for the accident and jointly and severally liable for the damages. As a
former subsidiary of Electrolux, Husqvarna is covered by Electrolux liability
insurance program for 2004. This program is reinsured by external insurance
companies. Electrolux believes that losses which Husqvarna is covered for
under Electrolux insurance program are correspondingly covered by the
external reinsurance program.

The Group is involved in a legal proceeding in Egypt relating to the priva-
tization of an Egyptian subsidiary. The proceeding is currently on-going in
the court of first instance in Cairo, Egypt. Electrolux believes that the lawsuit
is without legal merit. In case of a negative outcome, Electrolux believes
that losses will largely be covered by guarantees obtained by Electrolux in
connection with the acquisition of the Olympic Group in 2011.

In October 2013, Electrolux became subject of an investigation by the
French Competition Authority regarding a possible violation of antitrust
rules. The Authority has thereafter decided to conduct two separate
investigations whereof one was completed in December 2018. The other
investigation is still ongoing, and the Authority has so far not communicated
any conclusions. Given the nature of the investigation, it cannot be ruled out
that the outcome could have a material impact on Electrolux financial result
and cash flow. At this stage it is however not possible to evaluate the extent
of such an impact.

In November 2017, the U.S. Department of Commerce (DOC) informed
the Group that it had set a preliminary and significantly increased tariff rate
of 72.41% on washing machines manufactured in Mexico by Electrolux and
imported into the U.S. between February 2016 and January 2017. In March
2018, Electrolux was informed by DOC that this preliminary tariff rate was
determined as final. Electrolux has appealed DOC’s decision. If the tariff
rate is not significantly reduced as a result of the appeal process, it could
lead to a one-time cost of up to USD 70m. However, Electrolux believes that
the company has a very strong legal case and has not made any provision
related to this potential cost at this stage.

Contingent assets
In December 2018, Electrolux obtained a judicial court certification attest-
ing a final and non-appealable decision in Brazil that Electrolux has the
right to recover overpaid tax for 2002-2014. In December 2018, Electrolux
filed a claim with the Brazilian tax authorities for the recovery of the over-
paid tax. Electrolux believes that there is strong support for the entire claim
filed. However, as the Brazilian tax authority has advocated a specific
calculation methodology for the recoverable amount, only a minor part,
corresponding to the tax authority’s methodology, has been recognized
as an asset per December 31, 2018. The claimed amount in excess of the
recognized asset is approximately SEK 1,400m.

ELECTROLUX ANNUAL REPORT 2018

Notes 73

All amounts in SEKm unless otherwise stated

Note 26 Acquired and divested operations

Acquired operations

Consideration:

Cash paid for acquisitions made during the year

Deferred consideration

Total consideration

Recognized amounts of assets acquired and
liabilities assumed:

Total net assets acquired

Assumed net debt

Goodwill

Total

Payments for acquisitions:

Cash paid for acquisitions made during the year

Cash and cash equivalents in acquired operations

Cash paid related to deferred consideration
from acquisitions made in earlier years

Payments for acquisition of non-controlling interest
in CTI SA and Somela SA, Chile

Total paid

2018

2017

Schneidereit

SPM

Other

Total

Anova

Grind-
master-
Cecilware

Kwikot

Best

Total

331

368

168

–93

293

368

470

—

470

189

–10

291

470

–10

804

861

870

263

1,133

838

1,632

—

139

109

—

3,449

402

838

1,771

109

3,851

368

–113

606

861

–57

1,098

1,133

308

–149

679

838

531

–207

1,447

1,771

129

–20

—

109

1,060

–433

3,224

3,851

2018

804

–49

144

902

2017

3,449

–61

3,405

Acquisitions in 2018
Schneidereit GmbH
On February 22, 2018, Electrolux completed the acquisition of Schneidereit
GmbH, a supplier of laundry rental solutions for professional customers
in Germany and Austria. The agreement to acquire the company was
announced on January 22, 2018. The acquisition enables Electrolux to
develop its offering within the professional laundry business and supports
the long-term profitable growth in Europe. Schneidereit adds a comple-
mentary business model, enabling Electrolux to help provide great expe-
riences to an even wider customer base while exploring functional sales
which is an interesting growth area in the industry for professional products.
Net sales for the acquired business Schneidereit GmbH in 2016 amounted
to around EUR 18m (around SEK 175m) and the company has around 110
employees throughout Germany.

The consideration consists of a cash payment of EUR 32.8m and a
deferred part (hold-back) of EUR 3.6m. The cash payment is equivalent to
SEK 331m and the deferred part is equivalent to SEK 37m. The cash flow
effect was SEK –303m excluding acquired cash and cash equivalents.

The acquired business is included in Electrolux consolidated accounts
per December 31 with financial statements for the period January–
December 2018, contributing to net sales and operating income ( including
amortization of surplus values) by EUR 18.7m and EUR 0k respectively,
approximately SEK 192m and SEK 0m respectively.

Goodwill recognized for the acquisition include the value of the added
business model with its growth potential and synergies identified. Goodwill
is not expected to be deductible for income tax purposes.

The operations are included in business area Professional Products.

SPM Drink Systems
On October 2, 2018, Electrolux completed the acquisition of SPM Drink
Systems, an Italian leading manufacturer of professional dispensers of
frozen and hot beverages and soft ice-cream, as part of the strategy to
increase its presence in the hospitality industry. The acquisition supports
Electrolux strategy for profitable growth and strengthens Electrolux pres-
ence in the fast-growing beverage segment.

The acquired operations had combined net sales in 2017 of approxi-
mately EUR 30m and 110 employees. The company’s headquarters and
main manufacturing facilities are based in Spilamberto, Modena, Italy.

The consideration consists of a cash payment of EUR 45.6m, equivalent
to SEK 470m. The cash flow effect was SEK –449m excluding acquired cash
and cash equivalents.

The acquired business is included in Electrolux consolidated accounts
from October 1, 2018, contributing to net sales and operating income
(including amortization of surplus values) by EUR 3.7m and EUR –0.7m
respectively, approximately SEK 38m and SEK –7m respectively.

For the full year 2018, the acquired business accounted for net sales and
operating income of EUR 31m and EUR 0.6m respectively, approximately
SEK 314m and SEK 6m respectively.

Goodwill from the transaction mainly relates to the value of the additional
presence in the fast-growing beverage segment both from a product range
and geographical perspective. The goodwill is not expected to be deduct-
ible for income tax purposes.

The purchase price allocation is not finalized. The expectation is that the
final version will not materially differ from the preliminary allocation made.
The operations are included in business area Professional Products.

Other
Other acquisitions of operations refers to the acquisition of a nationwide
provider of repair service and distribution of spare parts in Germany.

The operations are included in business area Major Appliances EMEA.

Transaction costs
Transaction costs related to the acquisitions in 2018 amount to SEK 12m
and have been expensed as incurred during the acquisition process in 2017
(SEK 4m) and 2018 (SEK 8m). The costs have been reported in the business
area’s operating income.

Acquisitions in 2017
Grindmaster-Cecilware
In February, 2017, Electrolux completed the acquisition of the U.S. based
Grindmaster-Cecilware business by acquiring 100% of the business via a
purchase of all shares in the parent company of the Grindmaster-Cecilware
Group in a cash transaction. The acquisition broadens Electrolux offering in
its food service business and will accelerate the growth of the Professional
Products business area by increasing access to the U.S. market.

Grindmaster-Cecilware is a leading U.S. based manufacturer of hot, cold
and frozen beverage dispensing equipment, including coffee machines.
The company is based in Louisville, Kentucky and has manufacturing facili-
ties in Louisville and in Rayong, Thailand.

Goodwill primarily relates to the increase in market presence in North
America, one of the largest global markets for professional appliances.
Goodwill is not expected to be deductible for income tax purposes.

Net sales and operating income in the acquired business in 2017
amounted to USD 64.9m (SEK 560m) and USD 2.6m (SEK 23m) respectively.
The Grindmaster-Cecilware business is included in Electrolux consolidated
accounts from March 1, 2017. For the period from the acquisition date until
the end of the reporting period the acquired business has contributed to
net sales and operating income (including amortization of surplus values)
by USD 53.1m and USD 1.3m respectively, approximately SEK 454m and
SEK 11m respectively.

ELECTROLUX ANNUAL REPORT 2018

74 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 26

In the first quarter of 2018, within the measurement period, additional net
liabilities of USD 1.1m (SEK 10m) were added to the acquisition balance
sheet resulting in an increase of goodwill with the same amount.

SEK –21m respectively. In 2018 the estimated outcome of the earn-out has
been reduced by USD 22.3m (SEK 194m). The adjustment of the earn-out
has impacted the operating income in 2018.

The business is included in business area Professional Products.

Kwikot Group
On March 1, 2017 Electrolux acquired all shares in Kwikot Pty Ltd, the par-
ent company in the Kwikot Group, via a cash transfer. The Kwikot Group is
South Africa’s leading water heater producer. The acquisition broadens
Electrolux home comfort product range and offers a strong platform for
growth opportunities in Africa. The acquisition significantly strengthens
Electrolux presence in South Africa. Kwikot is based in Johannesburg where
it also has production and its main warehouse. The company has about
800 employees.

Goodwill represents the value of increasing Electrolux presence in
Southern Africa. Goodwill is not expected to be deductible for income tax
purposes.

The acquired business reported a Net Sales and Operating Income of
ZAR 1,101m (SEK 712m) and ZAR 146m (SEK 95m) respectively in 2017. The
Kwikot business is included in Electrolux consolidated accounts from March
1, 2017. For the period from the acquisition date until the end of the report-
ing period the acquired business has contributed to net sales and operating
income by ZAR 933m and ZAR 116m respectively, approximately SEK 600m
and SEK 75m respectively.

Best Group
On August 10, 2017 Electrolux completed the acquisition of the kitchen
hoods company Best. Best is a European manufacturer of innovative and
well-designed kitchen hoods. The acquisition will reinforce Electrolux capa-
bilities for design, R&D and manufacturing of kitchen hoods. The Best Group
has approximately 450 employees, primarily at manufacturing sites in Cer-
reto d’Esi (central Italy) and Zabrze (southern Poland).

Net sales and operating income in the acquired business in 2017
amounted to EUR 36.7m and EUR –4.8m respectively, approximately
SEK 356m and SEK –46m respectively.

The Best business is included in Electrolux consolidated accounts from
August 11, 2017. For the period from the acquisition date until the end of
the reporting period the acquired business has contributed to net sales
and operating income by EUR 17.7m and EUR –2.1m respectively, approxi-
mately SEK 171m and SEK –20m respectively.

In 2018 within the measurement period the purchase price allocation
was adjusted due to the approval by the tax authorities to utilize tax losses
generated by the acquired business in the joint operation post acquisition.
The adjustment resulted in a negative goodwill of EUR 14.6m (SEK 150m)
which was released to the operating income.

The operations are included in business area Major Appliances EMEA.

Anova
On April 4, 2017 Electrolux completed the acquisition of the U.S. based
smart kitchen appliance company, Anova. Anova is a U.S. based provider
of the Anova Precision Cooker, an innovative connected device for sous
vide cooking that enables restaurant-quality results in the home.

The agreed up-front cash payment in the transaction amounts to
USD 115m, with a potential additional amount of up to USD 135m to be
paid depending on future financial performance. Part of the mentioned
cash payment and contingent pay-out is in the form of remuneration to
key employees connected to post-closing service. Anova’s direct-to-con-
sumer business model and digital focus are of strong strategic interest to
Electrolux.

The company has approximately 70 employees and contractors globally
and is headquartered in San Francisco, California. Sales are primarily car-
ried out online – directly to consumer and through major retailers.

Goodwill primarily relates to the expectations of profitable growth in the
emerging product categories of connected appliances and to be able
to utilize Anova’s direct-to-consumer business model with a digital focus.
Goodwill is not expected to be deductible for income tax purposes. Opera-
tions are included in the business area Home Care &SDA.

Net sales and operating income in the acquired business in 2017
amounted to USD 50.3m and USD –6.4m respectively, approximately
SEK 432m and SEK –57m respectively.

The Anova business is included in Electrolux consolidated accounts
from April 4, 2017. For the period from the acquisition date until the end
of the reporting period the acquired business has contributed to net
sales and operating income (including amortization of surplus values) by
USD 45.5m and USD –2.4m respectively, approximately SEK 389m and

Transaction costs
Transaction costs for acquisitions completed in 2017 amounted to SEK 70m
of which SEK 54m was incurred in 2017 and SEK 16m in 2016. Transaction
costs are reported in operating income by business area.

Divested operations

North American commercial and central vacuum
cleaner business, USA

Total cash received for divestments

2018

2017

293

—

Divested operations in 2018
In August 2018 the US-based North American commercial and central
vacuum cleaner business, including the brands Beam and Sanitaire was
divested. The total gross consideration was USD 37m (SEK 320m) resulting
in a capital gain of USD 24m (SEK 205m) and a cash flow effect in 2018 of
USD 34m (SEK 293m) after reducing the gross consideration with an agreed
hold-back and the transaction cost. Transaction costs incurred amount to
SEK 17m. The divestment has triggered rationalization activities and addi-
tional asset write-downs giving a negative impact in the Operating Income
of USD 14m (SEK 115m). The divested operations had combined revenues
in 2017 of around USD 70m.

The divestment and related effects are included in the business area

Home Care & Small Domestic Appliances.
No divestments were made in 2017.

ELECTROLUX ANNUAL REPORT 2018

Notes 75

All amounts in SEKm unless otherwise stated

Note 27 Employees and remuneration

Employees and employee benefits
In 2018, the average number of employees was 54,419 (55,692), of which
34,371 (35,774) were men and 20,048 (19,948) were women.

A detailed specification of the average number of employees by coun-
try has been submitted to the Swedish Companies Registration Office and
is available upon request from AB Electrolux, Investor Relations. See also
Electrolux website www.electroluxgroup.com.

Average number of employees, by geographical area

Europe

North America

Latin America

Asia/Pacific

Rest of world

Total

Group

2018

2017

21,669 21,258

8,361

9,755

15,631 15,975

5,307

3,450

5,223

3,481

54,419 55,692

Salaries, other remuneration and employer contributions

Parent Company

whereof pension costs1)

Subsidiaries

whereof pension costs

Total Group

whereof pension costs

2018

Salaries and
remuneration

Employer
contributions

1,155

16,208

17,363

587

224

4,064

736

4,651

960

Total

1,742

224

20,272

736

22,014

960

2017

Salaries and
remuneration

Employer
contributions

1,174

15,296

16,470

583

209

3,311

399

3,894

608

Total

1,757

209

18,607

399

20,364

608

1) Includes SEK 8m (6), referring to the President’s predecessors according to local GAAP.

Salaries and remuneration for Board members, senior managers and other employees

Parent Company

Other

Total Group

2018

2017

Board mem-
bers and senior
managers1)

320

384

Other
employees

1,091

15,888

16,979

Total

1,155

16,208

17,363

Board mem-
bers and senior
managers1)

281

347

Other
employees

1,108

15,015

16,123

Total

1,174

15,296

16,470

1) According to the definition of Senior managers in the Swedish Annual Accounts Act.

Of the Board members in the Group, 113 were men and 12 women, of whom
9 men and 4 women in the Parent Company. According to the definition of
Senior managers in the Swedish Annual Accounts Act, the number of Senior
managers in the Group consisted of 207 men and 67 women, of whom 7
men and 2 women in the Parent Company. The total pension cost for Board
members and senior managers in the Group amounted to SEK 36m (34).

Compensation to the Board of Directors
The Annual General Meeting (AGM) determines the compensation to the
Board of Directors for a period of one year until the next AGM. The com-
pensation is distributed between the Chairman, other Board Members and
remuneration for committee work. The Board decides the distribution of the
committee fee between the committee members. Compensation is paid out
in advance each quarter. Compensation paid in 2018 refers to one fourth of
the compensation authorized by the AGM in 2017, and three fourths of the
compensation authorized by the AGM in 2018. Total compensation paid in
cash in 2018 amounted to SEK 8.3m, of which SEK 6.9m referred to ordinary
compensation and SEK 1.4m to committee work1).

Compensation to Board members 2018

´000 SEK

Staffan Bohman, Chairman (from
AGM 2018)

Ronnie Leten (Chairman up to
AGM 2018)

Petra Hedengran

Hasse Johansson

Ulla Litzén

Bert Nordberg

Fredrik Persson

David Porter

Jonas Samuelson, President

Ulrika Saxon

Kai Wärn

Bo Rothzén (up to AGM 2018)

Gunilla Brandt (up to AGM 2018)

Ulf Carlsson

Viveca Brinkenfeldt-Lever

Peter Ferm

Ordinary
compen-
sation

Compen sation
for committee
work

Total
compen-
sation

1,612

215

1,827

519

595

—

595

—

347

1801)

343

—

180

—

100

—

544

942

775

938

595

775

595

—

695

595

—

Total compensation 2018

6,891

1,390

8,281

1) Includes compensation for work relating to investments, modularization and quality.

ELECTROLUX ANNUAL REPORT 2018

76 Notes

All amounts in SEKm unless otherwise stated

Cont. Note 27

Remuneration Committee
For information on the Remuneration Committee, see the Corporate
Governance Report on page 107.

Remuneration guidelines for Group Management
The AGM in 2018 approved the proposed remuneration guidelines. These
guidelines are described below.

Base salary is revised annually per January 1. The average base-salary
increase for members of Group Management in 2018 was 3.18% (4.27).

Variable salary in 2018 is based on financial targets on business area and
Group level. Variable salary for business area heads varies between a mini-
mum (no pay-out) and a maximum of 100% of annual base salary, which is
also the cap. Group Management members in the USA have a maximum of
up to 150% of annual base salary.

The overall principles for compensation within Electrolux are tied strongly
to the position held, individual as well as team performance, and competi-
tive compensation in the country or region of employment.

Group Management members that are Group staff heads receive
variable salary that varies between a minimum (no pay out) and a maximum
of 80%, which is also the cap.

The overall compensation package for higher-level management com-
prises fixed salary, variable salary based on short-term and long-term
performance targets, and benefits such as pensions and insurance.

The members of Group Management participate in the Group’s long-
term performance based share programs. For further information on these
programs, see below.

Electrolux strives to offer fair and competitive total compensation with an
emphasis on “pay for performance”. Variable compensation represents a
significant proportion of total compensation for higher-level management.
Total compensation is lower if targets are not achieved.

The Group has a uniform program for variable salary for management
and other key positions. Variable salary is based on financial targets and
may in certain circumstances include non-financial targets. Each job level
is linked to a minimum and a maximum level for variable salary, and the
program is capped.

Since 2004, Electrolux has long-term performance-share programs for
senior managers of the Group. The alignment of Electrolux top management
incentives with the interest of shareholders is a longstanding priority of the
Board of Directors. Ownership of Electrolux shares by the Group’s CEO and
other Group Management members is an important measure to strengthen
this alignment.

Thus the Board recommends that the CEO shall build up a personal hold-
ing of B-shares in Electrolux representing a value of one gross annual base
salary and for Group Management members to build up a personal holding
of B-shares in Electrolux representing a value of 50% of one gross annual base
salary.

Remuneration and terms of employment for the President in 2018
The remuneration package for the President comprises fixed salary,
variable salary based on annual targets, a long-term performance-share
program and other benefits such as pension and insurance.

For the President, the annualized base salary for 2018 has been set at

SEK 11.1m.

The variable salary is based on annual financial targets for the Group.
Each year, a performance range is determined with a minimum and a
maximum. If the performance outcome for the year is below or equal to the
minimum level, no pay-out will be made. If the performance outcome is at
or above the maximum, pay-out is capped at 100% of the annualized base
salary. If the performance outcome is between minimum and maximum, the
pay-out shall be determined on a linear basis.
The President participates in the Group’s long-term performance based
share programs. For further information on these programs, see below.

The notice period for the company is 12 months, and for the President
6 months. The President is entitled to 12 months severance pay based on
base salary with deduction for other income during the 12 months sever-
ance period. Severance pay is applicable if the employment is terminated
by the company. It is also applicable if the employment is terminated by the
President provided serious breach of contract on the company’s behalf or
if there has been a major change in ownership structure in combination with
changes in management and changed individual accountability.

Pensions for the President
The President is covered by the collectively agreed ITP plan, the alternative
rule of the plan, and Electrolux Pension Plan for CEO. The Electrolux Pension
Plan for CEO is a defined contribution plan. The employer contribution to the
plan for the President is equivalent to 35% of annual base salary, which also
includes the contributions for the benefits of the ITP-plan, alternative ITP and
any insurable supplementary disability and survivor’s pension. In addition
the Company provides a disability pension of maximum SEK 1.2m per year if
long term disability occurs. The retirement age for the President is 65.

The capital value of pension commitments for the President in 2018, prior
Presidents, and survivors is SEK 222m (236), whereof SEK 24m (22) relates to
the current President.

Remuneration and terms of employment for other
members of Group Management in 2018
Like the President, other members of Group Management receive a remu-
neration package that comprises fixed salary, variable salary based on
annual targets, long-term performance-share programs and other benefits
such as pensions and insurance.

The notice period for Group Management members employed in
Sweden is 12 months’ for the company and 6 months for the employee.
Certain members of Group Management are entitled to 12 months’ sever-
ance pay based on base salary with deduction for other income during the
12 months severance period. Severance pay is applicable if the employ-
ment is terminated by the company. It is also applicable if the employment
is terminated by the Group Management member provided serious breach
of contract on the company’s behalf or if there has been a major change
in ownership structure in combination with changes in management and
changed individual accountability.

For members of Group Management employed outside of Sweden,
varying terms of employment and benefits, such as company car, may
apply depending upon the country of employment.

Pensions for other members of Group Management
Group Management members employed in Sweden as from 2012 receive
a pension entitlement where the aggregated contribution is 35% of annual
base salary. The retirement age is 65 years.

Group Management members employed in Sweden before 2012 are

covered by the Alternative ITP plan, as well as a supplementary plan.

The Alternative ITP plan is a defined contribution plan where the
contribution increases with age. The contribution is between 20 and 35% of
pensionable salary, between 7.5 and 30 income base amounts. Provided
that the member remains in the position until age 60, the company will
finalize outstanding premiums in the alternative ITP plan. The contribution
to the supplementary plan is 35% of pensionable salary above 20 income
base amounts.

Electrolux provides disability benefits equal to 70% of pensionable salary
less disability benefits from other sources. Electrolux also provides survivor
benefits equal to the highest of the accumulated capital for retirement or
250 income base amounts.

The pensionable salary is calculated as the current fixed salary including
vacation pay plus the average variable salary for the last three years.
Accrued capital is subject to a real rate of return of 3.5% per year. For other
members of Group Management, employed in Sweden before 2012, the
retirement age is 60. The retirement age for one member employed prior to
2012 has been amended. The member’s employment and pension entitle-
ment is continued post age 60.

For members of Group Management employed outside of Sweden,
varying pension terms and conditions apply, depending upon the country
of employment.

Share-based compensation
Over the years, Electrolux has implemented several long-term incentive
programs (LTI) for senior managers. These programs are intended to attract,
motivate, and retain the participating managers by providing long-term
incentives through benefits linked to the company’s share price. They have
been designed to align management incentives with shareholder interests.

For Electrolux, the share-based compensation programs are classified
as equity-settled transactions, and the cost of the granted instrument’s fair
value at grant date is recognized over the vesting period which is 2.7 years.
At each balance sheet date, the Group revises the estimates to the number
of shares that are expected to vest. Electrolux recognizes the impact of
the revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.

In addition, the Group provides for employer contributions expected to
be paid in connection with the share-based compensation programs. The
costs are charged to the income statement over the vesting period. The
provision is periodically revalued based on the fair value of the instruments
at each closing date.

Performance-share programs 2016, 2017 and 2018
The Annual General Meeting in 2018 approved a long-term incentive
program. The program is in line with the Group’s principles for remuneration
based on performance, and is an integral part of the total compensation for

ELECTROLUX ANNUAL REPORT 2018

Notes 77

All amounts in SEKm unless otherwise stated

Group Management and other senior managers. Electrolux shareholders
benefit from this program since it facilitates recruitment and retention of
competent executives and aligns management interest with shareholder
interest as the program drives executive shareholding and the participants
are more aligned with the long-term strategy of the company.

The allocation of shares in the 2016, 2017 and 2018 programs is deter-
mined by the position level and the outcome of three financial objectives;
(1) annual growth in earnings per share, (2) return on net assets and (3)
organic sales growth (adjusted sales growth as from 2018). Performance
outcome of the three financial objectives will be determined by the Board
after the expiry of the one-year performance period.

For the 2016, 2017 and 2018 programs allocation is linear from minimum
to maximum. There is no allocation if the minimum level is not reached. If the
maximum is reached, 100% of shares will be allocated. Should the achieve-
ment of the objectives be below the maximum but above the minimum, a
proportionate allocation will be made. The shares will be allocated after the
three-year period free of charge.

If a participant’s employment is terminated during the three-year
program period, the participant will be excluded from the program and will
not receive any shares or other benefits under the program. However, in
certain circumstances, including for example a participant’s death, disability,
retirement or the divestiture of the participant’s employing company, a
participant could be entitled to reduced benefits under the program.

Each of the 2016, 2017 and 2018 program covers 210 to 282 senior
managers and key employees in almost 30 countries. Participants in the

2018 program comprise six groups, i.e., the President, other members
of Group Management, and four groups of other senior managers. All
programs comprise Class B shares.

The performance outcome of the performance target for the share
program for 2018 program was 1.5%, and 1.5% of maximum number of
shares will be allocated to the participants in 2021, which corresponds to
19,834 shares. The dilutive effect on earnings per share is not significant.
Maximum cost for 2018 program is estimated excluding employer con-
tributions to SEK 5m for the full period 2018 - 2020. The cost for employer
contributions will depend on the development of the share price.

For 2018, LTI programs resulted in a cost of SEK 125m (including a cost of
SEK 14m in employer contribution) compared to a cost of SEK 115m in 2017
(including a cost of SEK 27m in employer contribution). The total provision
for employer contribution in the balance sheet amounted to SEK 61m (55).

Repurchased shares for LTI programs
The Annual General Meeting in 2017 resolved that the company shall be
entitled to sell B shares in the company for the purpose of covering costs,
including social security charges, that may arise as a result of the 2015
program, but this mandate has not been used by the company.

Allocation of shares for the 2015 program
The 2015 performance-share program met 21% of the maximum perfor-
mance and performance shares were allocated during 2018 to the partic-
ipants according to the terms and conditions of the 2015 share program.

Remuneration to Group Management

’000 SEK unless
otherwise stated

Annual
fixed
salary1)

Variable
salary2)

Long-
term PSP
(cost)3)

Other
remuner-
ation4)

Total
pension
contri-
bution

Social
contri-
bution

Annual
fixed
salary1)

Variable
salary2)

Long-
term PSP
(cost)3)

Other
remuner-
ation4)

Total
pension
contri-
bution

Social
contri-
bution

President and CEO

11,326

2,226

7,939

3,896

6,224

10,849

8,480

7,508

3,710

7,331

2018

2017

Other members
of Group
Management5)

Total

49,594

60,920

11,180

13,406

28,482

36,421

4,514

4,519

14,538

18,434

19,284

25,508

49,572

60,421

43,512

51,992

24,101

31,609

25,443

25,446

13,792

17,502

21,608

28,939

1) The annual fixed salary includes vacation salary, paid vacation days and salary deductions for company car.
2) For 2018: variable salary earned 2018 and to be paid in 2019, and for 2017: variable salary earned 2017 and paid in 2018.
3) Cost for share-based incentive programs are accounted for according to IFRS 2, Share-based payments. If the expected cost of the program is reduced, the previous recorded cost is

reversed and an income is recorded in the income statement. The cost includes social contribution cost for the program.

4) Includes allowances and other benefits such as gross-up of tax, housing and company car, severance pay, pay for non-compete undertaking and costs for extraordinary arrangements.
5) Other members of Group management comprised of 11 people end of 2018 and 2017

Number of potential shares per category and year

Group 1, President and CEO

Group 2, other members of Group Management

Group 3

Group 4

Group 52)

Group 6

Maximum number of B shares1)

Maximum value, SEK3)

2018

47,605

17,032

10,032

5,126

3,728

2,444

2017

45,809

17,239

10,212

5,301

3,797

2,562

2016

2018

2017

2016

51,515 11,130,000 10,600,000 10,000,000

21,547

10,795

3,982,000

3,989,000

4,183,000

2,345,000

2,363,000

2,095,000

5,816

1,198,000

1,227,000

1,129,000

—

3,021

871,000

571,000

879,000

593,000

—

586,000

1) The maximum performance value for the participant in Group 1 will be 100 per cent, for participants in Group 2, 90 per cent, for participants in Group 3, 80 per cent, for participants in Group 4,

60 per cent, for participants in Group 5, 50 per cent and for participants in Group 6, 40 per cent of the participants annual base salary for 2018. At maximum performance the aggregated value
is converted to the average number of shares per participant in respective category. The calculation is based on a share price of SEK 194.12 for 2016, SEK 231.40 for 2017, and SEK 233.80 for
2018 which is the average closing price of the Electrolux Class B share on the Nasdaq Stockholm during a period of ten trading days before the day participants were invited to participate in
the program, adjusted for net present value of dividends for the period until shares are allocated.

2) New category introduced 2017.
3) The share allocation for the 2016 program will be at 75% of maximum. For the 2017 program, share allocation will be at 90% of maximum. For the 2018 program 1.5% of maximum will be allocated.

Performance-share program 2018

Adjusted organic sales growth, %1)

Earnings per share, SEK

Return on net assets, %

Total allocation

Financial objectives

Allocation of shares

Minimum

Maximum

Actual

Outcome, %

Weight, %

1.0

18.4

29.8

4.0

20.4

34.8

1.4

17.52)

29.22)

14.9

Alloca-
tion, %

1.5

1) Calculated as organic sales growth including total sales impact from prior year acquisitions and divestments.
2) Including adjustments for acquisitions and divestments.

ELECTROLUX ANNUAL REPORT 2018

78 Notes

All amounts in SEKm unless otherwise stated

Note 28 Fees to auditors

At the 2018 Annual General Meeting Deloitte was appointed auditor for the period until the 2019 Annual General Meeting. PricewaterhouseCoopers (PwC)
was appointed auditor for the period until the 2018 Annual General Meeting.

Deloitte
Audit fees1)

Audit-related fees2)

Tax fees3)

All other fees4)

Total fees to Deloitte5)

PwC
Audit fees1)

Audit-related fees2)

Tax fees3)

All other fees4)

Total fees to PwC6)

Audit fees to other audit firms

Total fees to auditors

Group

Parent Company

2018

2017

2018

2017

—

1) Audit fees consist of fees for the annual audit-services engagement and other audit services, which are those services that only the external auditors reasonably can provide, and include

the Group audit; statutory audits; comfort letters and consents; and attest services.

2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit of the accounts and annual reports of the Group and group
companies traditionally performed by the external auditors, and include consultations concerning financial accounting and reporting standards; internal control reviews; employee benefit
plan audits as well as review of interim reports.

3) Tax fees include fees for tax-compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations; tax advice related to mergers and

acquisitions; transfer pricing; requests for rulings or technical advice from tax authorities; tax-planning services; and expatriate-tax planning and services.

4) All other fees include fees for transaction support services, financial advisory and other services.
5) Of audit-related fees, SEK 0m pertains to Deloitte Sweden, of tax fees, SEK 0m pertains to Deloitte Sweden and of all other fees, SEK 1m pertains to Deloitte Sweden.
6) The fees for PwC, excluding audit fees, refer to the period January 1 - April 30, 2018.

Note 29 Shares and participations

Investments in associated companies
Electrolux participation in Gångaren 13 Holding AB, Sweden, remained
unchanged during the year. Gångaren 13 Holding AB is a real estate com-
pany owning the corporate head office in Sweden.

The holdings in the South African associated companies SYR Africa and
Llitha Solar (name changed from Shalamuka Kwikot) remained unchanged
during the year. SYR Africa supplies Kwikot with valves and has Kwikot as its
sole customer. Llitah Solar carry out marginal business activities. The invest-
ment in Kwikot Solar has been liquidated during the year.

The holdings in Next-Tech BVBA/SPRL, Belgium, remained unchanged
during the year. Next-Tech designs and sells software and hardware solu-
tions for domestic kitchen retailers.

In January 2018 Electrolux acquired 40% of the Chinese company
Guangdong De Yi Jie Appliances Co., LTD. The company sells AEG house-
hold appliances.

All associated companies are unlisted.

Investments in associated companies

Company

Gångaren 13 Holding AB, Sweden

SYR Africa (Pty), South Africa

Llitha Solar (Pty) LTD, South Africa

Kwikot Solar, South Africa

Next-Tech BVBA/SPRL, Belgium

Guangdong De Yi Jie Appliances Co., LTD, China

Total

2018

2017

Holding, %

Carrying
amount

Net
income1)

Holding, %

Carrying
amount

Net
income1)

199

109

397

–7

–41

–25

—

190

–1

111

—

337

—

1) Represents the Group’s share of net income and is reported in the line Other operating income and expenses in the consolidated statement of comprehensive income.

ELECTROLUX ANNUAL REPORT 2018

Cont. Note 29

Group companies
The following table lists the major companies included in the Electrolux Group. A detailed specification of Group companies has been submitted to the
Swedish Companies Registration Office and is available upon request from AB Electrolux Investor Relations.

Notes 79

All amounts in SEKm unless otherwise stated

Subsidiaries

Major Group companies

Holding, %

100

99.82

100

99.96

100

Argentina

Australia

Austria

Belgium

Brazil

Canada

Chile

China

Denmark

Egypt

Finland

France

Germany

Hungary

Italy

Frimetal S.A

Electrolux Home Products Pty. Ltd

Electrolux Austria GmbH

Electrolux Home Products Corporation N.V.

Electrolux do Brasil S.A.

Electrolux Canada Corp.

CTI S.A.

Electrolux (Hangzhou) Domestic Appliances Co. Ltd

Electrolux (China) Home Appliance Co. Ltd

Electrolux Home Products Denmark A/S

Electrolux Egypt for Home Appliances S.A.E.

Oy Electrolux Ab

Electrolux France SAS

Electrolux Home Products France SAS

Electrolux Professionnel SAS

Electrolux Deutschland GmbH

Electrolux Rothenburg GmbH Factory and Development

Electrolux Professional GmbH

Electrolux Lehel Kft

Electrolux Appliances S.p.A.

Electrolux Professional S.p.A.

Electrolux Italia S.p.A.

Mexico

Electrolux de Mexico, S.A. de C.V.

The Netherlands

Electrolux Associated Company B.V.

Norway

Poland

Russia

Singapore

South Africa

Spain

Sweden

Electrolux Home Products (Nederland) B.V.

Electrolux Home Products Norway AS

Electrolux Poland Spolka z.o.o.

LLC Electrolux Rus

Electrolux SEA Pte Ltd

Kwikot (Pty) Ltd.

Electrolux España, S.A.U.

Electrolux Laundry Systems Sweden AB

Electrolux HemProdukter AB

Electrolux Appliances AB

Switzerland

Electrolux AG

Thailand

Ukraine

United Kingdom

USA

Electrolux Professional AG

Electrolux Thailand Co. Ltd.

DC Electrolux LLC

Electrolux Plc

Electrolux Professional Ltd.

Electrolux Home Products, Inc.

Electrolux North America, Inc.

Electrolux Professional Inc.

ELECTROLUX ANNUAL REPORT 2018

80 Notes

All amounts in SEKm unless otherwise stated

Note 30 Definitions

This report includes financial measures as required by the financial report-
ing framework applicable to Electrolux, which is based on IFRS. In addition,
there are other measures and indicators that are used to follow up, analyze
and manage the business and to provide Electrolux stakeholders with use-
ful financial information on the Group’s financial position, performance and
development in a consistent way. These other measures and indicators are
considered essential in supporting the Group’s financial goals to achieve
a combination of continuous growth, high profitability, a stable cash flow,
and an optimal capital base to generate a high total return for Electrolux
shareholders. Thus, there are measures related to growth, profitability and
capital, share-based measures and capital indicators which are considered
relevant to present on a continuous basis. Below is a list of definitions of all
measures and indicators used, referred to and presented in this report.

Computation of average amounts and annualized
income statement measures
In computation of key ratios where averages of capital balances are related
to income statement measures, the average capital balances are based
on the opening balance and all quarter-end closing balances included in
the reporting period, and the income statement measures are annualized,
translated at average rates for the period. In computation of key ratios
where end-of-period capital balances are related to income statement
measures, the latter are annualized, translated at end-of-period exchange
rates. Adjustments are made for acquired and divested operations.

Growth measures
Change in net sales
Current year net sales for the period less previous year net sales for the
period as a percentage of previous year net sales for the period.

Sales growth
Change in net sales adjusted for currency translation effects.

Organic growth
Change in net sales, adjusted for changes in exchange rates,
acquisitions and divestments.

Acquisitions
Change in net sales, adjusted for organic growth, changes in exchange rates
and divestments. The impact from acquisitions relates to net sales reported
by acquired operations within 12 months after the acquisition date.

Divestments
Change in net sales, adjusted for organic growth, changes in exchange
rates and acquisitions. The impact from divestments relates to net sales
reported by the divested operations within 12 months before the divest-
ment date.

Profitability measures
EBITA
Operating income excluding amortization of intangible assets.

Capital turnover-rate
Net sales (annualized) divided by average net assets.

Share-based measures
Earnings per share, Basic
Income for the period attributable to equity holders of the Parent
Company divided by the average number of shares excluding shares
held by Electrolux.

Earnings per share, Diluted
Income for the period attributable to equity holders of the Parent Company
divided by the average number of shares after dilution, excluding shares
held by Electrolux.

Equity per share
Total equity divided by total number of shares excluding shares held
by Electrolux.

Capital indicators
Liquid funds
Cash and cash equivalents, short-term investments, financial derivative
assets1) and prepaid interest expenses and accrued interest income1).

Liquid funds in relation to net sales
The sum of liquid funds and non-utilized credit facilites divided by annualized
net sales.

Operating working capital
Inventories and trade receivables less accounts payable.

Working capital
Total current assets exclusive of liquid funds, less non-current other provisions
and total current liabilities exclusive of total short-term borrowings.

Net assets
Total assets exclusive of liquid funds and pension plan assets, less deferred
tax liabilities, non-current other provisions and total current liabilities
exclusive of total short-term borrowings.

Total borrowings
Long-term borrowings and short-term borrowings, financial derivative
liabilities1), accrued interest expenses and prepaid interest income1).

Total short-term borrowings
Short-term borrowings, financial derivative liabilities1), accrued interest
expenses and prepaid interest income1).

Interest-bearing liabilities
Long-term borrowings and short-term borrowings exclusive of liabilities
related to trade receivables with recourse1).

Financial net debt
Total borrowings less liquid funds.

EBITA margin
EBITA expressed as a percentage of net sales.

Net provision for post-employment benefits
Provisions for post-employment benefits less pension plan assets.

Operating margin (EBIT margin)
Operating income (EBIT) expressed as a percentage of net sales.

Net debt
Financial net debt and net provision for post-employment benefits.

Operating margin (EBIT margin) excluding non-recurring items
Operating income (EBIT) excluding non-recurring items, expressed as
a percentage of net sales.

Return on net assets
Operating income (annualized) expressed as a percentage of
average net assets.

Return on equity
Income for the period (annualized) expressed as a percentage
of average total equity.

Capital measures
Net debt/equity ratio
Net debt in relation to total equity.

Equity/assets ratio
Total equity as a percentage of total assets less liquid funds.

Other measures
Operating cash flow after investments
Cash flow from operations and investments adjusted for financial items
paid, taxes paid and acquisitions/divestments of operations.

Interest coverage ratio
Operating income plus interest income in relation to total interest expenses.

Non-recurring items
Material profit or loss items in operating income2) which are relevant for
understanding the financial performance when comparing income for the
current period with previous periods.

1) See table Net debt on page 62.
2) See Note 7 on page 54 for more information.

ELECTROLUX ANNUAL REPORT 2018

Notes 81

All amounts in SEKm unless otherwise stated

Note 31 Proposed distribution of earnings

The Board of Directors proposes that income for the period and retained earnings be distributed as follows:

A dividend to the shareholders of SEK 8.50 per share1), totaling

To be carried forward

Total

1) Calculated on the number of outstanding shares as per February 14 2019.

‘000 SEK

22,078,885

2,442,878

19,636,007

22,078,885

The Board of Directors has proposed that the Annual General Meeting 2019
resolves on a dividend to the shareholders of SEK 8.50 per share to be paid
in two installments. The record date for the first installment of SEK 4.25 per
share is proposed to be Friday April 12, 2019 and the record date for the
second installment of SEK 4.25 per share is proposed to be Friday Octo-
ber 11, 2019. On account hereof, the Board of Directors hereby makes
the following statement according to Chapter 18 Section 4 of the Swedish
Companies Act.

The Board of Directors finds that there will be full coverage for the
restricted equity of the Company, after distribution of the proposed dividend.
It is the Board of Directors’ assessment that after distribution of the pro-
posed dividend, the equity of the Company and the Group will be sufficient
with respect to the kind, extent, and risks of the operations. The Board of
Directors has hereby considered, among other things, the Company’s and
the Group’s historical development, the budgeted development and the
state of the market. If financial instruments currently valued at fair value in
accordance with Chapter 4 Section 14a of the Swedish Annual Accounts
Act instead had been valued according to the lower of cost or net realizable
value, including cumulative revaluation of external shares, the equity of the
company would decrease by SEK 121,395 thousand.

After the proposed dividend, the financial strength of the Company and
the Group is assessed to continue to be good in relation to the industry in

which the Group is operating. The dividend will not affect the ability of the
Company and the Group to comply with its payment obligations. The Board
of Directors finds that the Company and the Group are well prepared to
handle any changes in respect of liquidity, as well as unexpected events.

The Board of Directors is of the opinion that the Company and the Group
have the ability to take future business risks and also cope with potential
losses. The proposed dividend will not negatively affect the Company’s and
the Group’s ability to make further commercially motivated investments in
accordance with the strategy of the Board of Directors.

The Board of Directors declare that the consolidated financial state-
ments have been prepared in accordance with IFRS as adopted by the
EU and give a true and fair view of the Group’s financial position and results
of operations. The financial statements of the Parent Company have been
prepared in accordance with generally accepted accounting principles
in Sweden and give a true and fair view of the Parent Company’s financial
position and results of operations.

The statutory Administration Report of the Group and the Parent
Company provides a fair review of the development of the Group’s and the
Parent Company’s operations, financial position and results of operations
and describes material risks and uncertainties facing the Parent Company
and the companies included in the Group.

Stockholm, February 14, 2019
AB ELECTROLUX (PUBL)
556009–4178

Staffan Bohman
Chairman of the Board of Directors

Jonas Samuelson
Board member and President
and Chief Executive Officer

Petra Hedengran
Board member

Hasse Johansson
Board member

Ulla Litzén
Board member

Bert Nordberg
Board member

Fredrik Persson
Board member

David Porter
Board member

Ulrika Saxon
Board member

Kai Wärn
Board member

Viveca Brinkenfeldt-Lever
Board member,
employee representative

Ulf Carlsson
Board member,
employee representative

Peter Ferm
Board member,
employee representative

Our audit report was submitted on February 15, 2019
Deloitte AB

Jan Berntsson
Authorized Public Accountant

ELECTROLUX ANNUAL REPORT 2018

82 Auditors’ report

Auditors’ report

To the general meeting of the shareholders of AB Electrolux (publ)
corporate identity number 556009-4178

Report on the annual accounts and consolidated accounts

Opinions
We have audited the annual accounts and consolidated
accounts of AB Electrolux (publ) for the financial year
2018-01-01–2018-12-31. The annual accounts and consoli-
dated accounts of the company are included on pages 17–81
in this document.

In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly, in
all material respects, the financial position of the parent com-
pany as of 31 December 2018 and its financial performance
and cash flow for the year then ended in accordance with the
Annual Accounts Act. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act and
present fairly, in all material respects, the financial position of the
group as of 31 December 2018 and their financial performance
and cash flow for the year then ended in accordance with
International Financial Reporting Standards (IFRS), as adopted
by the EU, and the Annual Accounts Act. The statutory admin-
istration report is consistent with the other parts of the annual
accounts and consolidated accounts.

We therefore recommend that the general meeting of share-
holders adopts the income statement and balance sheet for the
parent company and the group.

Our opinions in this report on the annual accounts and
consolidated accounts are consistent with the content of the
additional report that has been submitted to the parent com-
pany’s audit committee in accordance with the Audit Regulation
(537/2014) Article 11.

Basis for Opinions
We conducted our audit in accordance with International
Standards on Auditing (ISA) and generally accepted auditing
standards in Sweden. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities section.
We are independent of the parent company and the group in
accordance with professional ethics for accountants in Sweden
and have otherwise fulfilled our ethical responsibilities in accor-
dance with these requirements. This includes that, based on
the best of our knowledge and belief, no prohibited services
referred to in the Audit Regulation (537/2014) Article 5.1 have
been provided to the audited company or, where applicable,
its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is suf-

ficient and appropriate to provide a basis for our opinions.

Other Disclosures
The audit of the report for the financial year 2017-01-01–
2017-12-31 has been performed by another auditor, who has
issued an auditor’s report dated 16 February 2018, with unquali-
fied opinions in the Report of annual accounts and consolidated
accounts.

Key Audit Matters
Key audit matters of the audit are those matters that, in our
professional judgment, were of most significance in our audit of

the annual accounts and consolidated accounts of the current
period. These matters were addressed in the context of our audit
of, and in forming our opinion thereon, the annual accounts
and consolidated accounts as a whole, but we do not provide
a separate opinion on these matters.

Revenue Recognition
Revenues in the group consists primarily of sales of appliances
to retailers recognized at a certain point in time for example,
when the products have been delivered to the customer. Net
sales in the group for 2018 amounts to SEK 124,129m and is
built up of a significant number of transactions. Due to the large
transaction volume, we have identified revenue recognition,
with specific focus on completeness and cut off, as a key audit
matter.

Accounting principles and disclosures related to revenue

recognition can be found in note 4.

Our audit procedures
Our audit procedures included, but were not limited to:
• assessing the group’s accounting principles for revenue
recognition and its compliance with IFRS,
• understanding the internal control environment regarding
revenue recognition and test of identified key controls
including IT-systems,
• analytical procedures, and
• detailed testing of sales transactions on a sample basis to
confirm proper cut off of revenue.

Valuation of trade receivables
The group has significant amounts of trade receivables from
its sales to customers in around 150 markets. There is a certain
concentration of credit risk exposure towards a few customers in
certain markets and there is a risk that some of the receivables
will not be paid. The risk might be higher in some geographies
due to weaker economic conditions or geopolitical uncertain-
ties. Procedures for collecting payments and assessing custom-
ers’ ability to pay together with appropriate accounting princi-
ples to recognize provisions for bad debt are important factors
to ensure a fair valuation of trade receivables.

Accounting principles and disclosures related to trade

receivables can be found in note 1 and 17.

Our audit procedures
Our audit procedures included, but were not limited to:
• assessing the group’s accounting principles for recognizing
bad debt for compliance with IFRS,
• evaluating processes and controls for credit assessments and
approval of credit limits,
• detailed testing on a sample basis against customer state-
ments alternatively cash receipts to confirm trade receivables,
and
• evaluation of management’s estimates of the provision for
bad debt.

ELECTROLUX ANNUAL REPORT 2018

Auditors’ report 83

dated accounts. In this procedure we also take into account our
knowledge otherwise obtained in the audit and assess whether
the information is otherwise appears to be materially misstated.
If we, based on the work performed concerning this infor-
mation, conclude that there is a material misstatement of this
information, we are required to report that fact. We have noth-
ing to report in this regard.

Responsibilities of the Board of Directors and
the Managing Director
The Board of Directors and the Managing Director are respon-
sible for the preparation of the annual accounts and con-
solidated accounts and that they give a fair presentation in
accordance with the Annual Accounts Act, and concerning the
consolidated accounts, in accordance with IFRS as adopted
by the EU. The Board of Directors and the Managing Director
are also responsible for such internal control as they determine
is necessary to enable the preparation of annual accounts and
consolidated accounts that are free from material misstate-
ment, whether due to fraud or error.

In preparing the annual accounts and consolidated

accounts, The Board of Directors and the Managing Director
are responsible for the assessment of the company’s and the
group’s ability to continue as a going concern. They disclose,
as applicable, matters related to going concern and using the
going concern basis of accounting. The going concern basis
of accounting is however not applied if the Board of Directors
and the Managing Director intends to liquidate the company,
to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board
of Director’s responsibilities and tasks in general, among other
things oversee the company’s financial reporting process.

Auditor’s responsibility
Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as
a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our
opinions. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with
ISAs and generally accepted auditing standards in Sweden will
always detect a material misstatement when it exists. Misstate-
ments can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these annual accounts and consolidated accounts.
An additional description of our responsibility for the audit of

the annual accounts and the consolidated accounts is on the
Swedish Inspectorate of Auditors web page:
www.revisorsinspektionen.se/revisornsansvar. This description
is a part of the auditor’s report.

Valuation of inventory
The group carries significant inventories of goods and spare
parts produced and held by several production and sales units
in many countries. Valuation of inventory requires clear policies
and is subject to management’s estimates regarding acquisi-
tion costs, excess inventory and net realizable value as well as
procedures for safeguarding and keeping track of inventory.
Accounting principles and disclosures related to inventories
can be found in note 15.

Our audit procedures
Our audit procedures included, but were not limited to:
• assessing the group’s accounting principles and the individual
entities’ accounting for inventory in compliance with IFRS,
• observations of physical inventory counts,
• on a sample basis testing of the valuation of inventory, and
• evaluating management’s estimates of the provision for
obsolescence.

Accounting for litigation
Electrolux is involved in litigations in the normal course of busi-
ness that could have a significant impact on the group results
and financial position.

For further information on the group’s litigations and legal
proceedings, refer to note 1, note 25 and the statutory adminis-
tration report.

Our audit procedures
Our audit procedures included, but were not limited to:
• quarterly meetings with the group head of legal regarding
ongoing litigation,
• obtaining legal statements from a selection of the groups
external lawyers, and
• evaluating managements judgments and estimates related to
litigations and the accounting treatment of these.

Other information than the annual accounts and
consolidated accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages
1-16 and 86-121. In connection to the publication of the annual
accounts and consolidated accounts additional other informa-
tion will be made public in two reports, the Electrolux Annual
Review 2018 (www.electroluxgroup.com/annualreports/2018)
and the Market overview 2018 (www.electroluxgroup.com/ir).
The Board of Directors and the Managing Director are respon-
sible for this other information.

Our opinion on the annual accounts and consolidated
accounts does not cover this other information and we do not
express any form of assurance conclusion regarding this other
information.

In connection with our audit of the annual accounts and
consolidated accounts, our responsibility is to read the informa-
tion identified above and consider whether the information is
materially inconsistent with the annual accounts and consoli-

ELECTROLUX ANNUAL REPORT 2018

84 Auditors’ report

Report on other legal and regulatory requirements

Opinions
In addition to our audit of the annual accounts and consoli-
dated accounts, we have also audited the administration of the
Board of Directors and the Managing Director of AB Electrolux
(publ) for the financial year 2018-01-01 – 2018-12-31 and the
proposed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that
the profit to be appropriated in accordance with the proposal in
the statutory administration report and that the members of the
Board of Directors and the Managing Director be discharged
from liability for the financial year.

Basis for Opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the
group in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements.

We believe that the audit evidence we have obtained is suf-

ficient and appropriate to provide a basis for our opinions.

Responsibilities of the Board of Directors and
the Managing Director
The Board of Directors is responsible for the proposal for appro-
priations of the company’s profit or loss. At the proposal of a
dividend, this includes an assessment of whether the dividend
is justifiable considering the requirements which the company’s
and the group’s type of operations, size and risks place on the
size of the parent company’s and the group’s equity, consolida-
tion requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s
organization and the administration of the company’s affairs.
This includes among other things continuous assessment of the
company’s financial situation and ensuring that the company’s
organization is designed so that the accounting, management

of assets and the company’s financial affairs otherwise are
controlled in a reassuring manner. The Managing Director shall
manage the ongoing administration according to the Board of
Directors’ guidelines and instructions and among other mat-
ters take measures that are necessary to fulfill the company’s
accounting in accordance with law and handle the manage-
ment of assets in a reassuring manner.

Auditor’s responsibility
Our objective concerning the audit of the administration, and
thereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing
Director in any material respect:
• has undertaken any action or been guilty of any omission
which can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropria-
tions of the company’s profit or loss, and thereby our opinion
about this, is to assess with reasonable degree of assurance
whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with gen-
erally accepted auditing standards in Sweden will always detect
actions or omissions that can give rise to liability to the com-
pany, or that the proposed appropriations of the company’s
profit or loss are not in accordance with the Companies Act.

An additional description of our responsibility for the audit of

the annual accounts and the consolidated accounts is on the
Swedish Inspectorate of Auditors web page:
www.revisorsinspektionen.se/revisornsansvar.
This description is a part of the auditor’s report.

Deloitte AB, was appointed auditors of AB Electrolux (publ) by
the general meeting of the shareholders on the 2018-04-05 and
has been the company’s auditor since 2018-04-05.

Stockholm, February 15, 2019

Deloitte AB
Signature on Swedish original

Jan Berntsson
Authorized Public Accountant

ELECTROLUX ANNUAL REPORT 2018

86 Eleven-year review

All amounts in SEKm unless otherwise stated

Eleven-year review

seKm

Net sales and income

Net sales

Organic growth, %

Depreciation and amortization

Items affecting comparability 2)/ Non-recurring items 6)

Operating income

Income after financial items

Income for the period

Cash flow

Cash flow from operations

Cash flow from investments

of which capital expenditure in
property, plant and equipment

Cash flow from operations and investments

Cash flow from operations and investments excluding
acquisitions and divestments of operations

Dividend, redemption and repurchase of shares

Capital expenditure in property, plant and equipment
as % of net sales

Margins 3)

Operating margin, %

Income after financial items as % of net sales

Financial position

Total assets

Net assets

Working capital

Trade receivables

Inventories

Accounts payable

Total equity

Interest-bearing liabilities

Provisions for post-employment benefits, net

Net debt

Data per share

Income for the period, SEK

Equity, SEK

Dividend, SEK4)

Trading price of B-shares at year-end, SEK

Key ratios

Return on equity, %

Return on net assets, %

Net assets as % of net sales 5)

Trade receivables as % of net sales 5)

Inventories as % of net sales 5)

Net debt/equity ratio

Interest coverage ratio

Dividend as % of total equity

Other data

Average number of employees

Salaries and remuneration

Number of shareholders

Average number of shares after buy-backs, million

Shares at year end after buy-backs, million

2008

2009

2010

2011

2012 1)

2013

2014

2015

2016

20171)

2018

5 years

10 years

Compound annual growth rate, %

104,792

109,132

106,326

101,598

109,994

109,151

112,143

123,511

121,093

120,771

124,129

2.6

1.7

–0.9

3,010

–355

1,188

653

366

4,949

–3,755

–3,158

1,194

1,228

–1,187

3.0

1.5

1.0

73,323

20,941

–5,131

20,734

12,680

15,681

16,385

13,946

4,556

1.29

—

66.75

2.4

5.8

18.1

17.9

11.0

0.28

1.86

—

55,177

12,662

52,600

283.1

283.6

–4.8

3,442

–1,561

3,761

3,484

2,607

8,297

–2,967

–2,223

5,330

5,326

2.0

4.9

4.6

72,696

19,506

–5,154

20,173

10,050

16,031

18,841

14,022

665

9.18

4.00

167.50

14.9

19.4

17.1

17.7

8.8

0.04

7.54

6.0

50,633

13,162

52,000

284.0

284.4

1.5

3,328

–1,064

5,430

5,306

3,997

7,680

–4,474

–3,221

3,206

3,199

–1,120

3.0

6.1

6.0

73,521

19,904

–5,902

19,346

11,130

17,283

20,613

12,096

0.2

3,173

–138

3,017

2,780

2,064

5,399

–10,049

–3,163

–4,650

906

–1,850

3.1

2.9

76,384

27,011

–5,180

19,226

11,957

18,490

20,644

14,206

–709

6,367

5.5

3,251

–1,032

4,000

3,154

2,365

7,080

–4,702

–4,090

2,378

2,542

–1,868

3.7

4.6

3.8

75,194

25,890

–6,505

18,288

12,963

20,590

15,726

13,088

4,479

10,164

8.26

6.50

14.04

6.50

191.00

20.6

27.8

18.2

17.7

10.2

–0.03

12.64

9.0

51,544

12,678

57,200

284.6

284.7

7.25

6.50

109.70

170.50

10.4

13.7

23.8

17.0

10.5

0.31

5.84

9.0

52,916

13,137

58,800

284.7

14.4

14.8

22.5

15.9

11.3

0.65

2.72

11.8

59,478

13,785

51,800

285.9

286.1

4.5

3,356

–2,475

1,580

904

672

4,455

–4,734

–3,535

–279

–74

–1,860

3.2

3.7

3.1

76,001

24,961

–5,800

19,441

12,154

20,607

14,308

14,905

2,980

10,653

2.35

6.50

168.50

4.4

5.8

21.8

17.0

10.6

0.74

2.11

13.0

60,754

13,521

51,500

286.2

1.1

3,671

–1,199

3,581

2,997

2,242

7,822

–3,759

–3,006

4,063

4,132

–1,861

2.7

3.2

2.7

85,688

26,099

–8,377

20,663

14,324

25,705

16,468

14,703

4,763

9,631

7.83

57.52

6.50

228.80

15.7

14.2

20.4

16.2

11.2

0.58

5.16

11.3

60,038

14,278

46,500

286.3

2.2

3,936

—

2,741

2,101

1,568

8,267

–3,403

–3,027

4,864

4,955

–1,870

2.5

2.2

1.7

83,471

21,412

–12,234

17,745

14,179

26,467

15,005

13,097

4,509

6,407

5.45

52.21

6.50

205.20

9.9

11.0

17.3

14.3

11.5

0.43

3.75

12.4

58,265

15,858

45,485

287.1

287.4

–1.1

3,934

—

6,274

5,581

4,493

10,165

–2,557

–2,830

7,608

7,432

–1,868

2.3

5.2

4.6

85,848

18,098

–14,966

19,408

13,418

28,283

17,738

10,202

4,169

360

15.64

61.72

7.50

226.30

29.4

29.9

14.2

15.2

10.5

0.02

3.75

10.5

55,400

15,886

48,939

287.4

–0.4

3,977

—

7,407

6,966

5,745

10,024

–8,200

–3,892

1,824

5,229

–2,155

3.2

6.1

5.8

89,542

20,678

–15,873

20,747

14,655

31,114

20,480

9,537

2,634

197

19.99

71.26

8.30

264.30

31.9

36.0

17.5

12.4

0.01

12.16

11.6

55,692

16,470

45,295

287.4

1.3

4,150

–1,343

5,310

4,887

3,805

8,046

–6,506

–4,650

1,540

2,149

–2,385

3.7

4.3

3.9

97,312

23,574

–16,848

21,482

16,750

34,443

21,749

9,982

3,814

1,825

13.24

75.67

8.50

187.10

18.2

22.7

19.0

17.3

13.5

0.08

9.05

11.2

54,419

17,363

49,870

287.4

27.4

40.1

41.4

12.6

5.6

5.1

–1.1

2.0

6.6

10.8

8.7

–7.7

5.1

–29.7

41.3

8.6

5.5

2.1

16.2

22.3

26.4

5.0

3.9

2.9

1.2

0.4

2.8

8.2

2.9

–3.3

–8.7

26.2

2.7

10.9

–2.2

5.1

–0.6

–0.1

3.2

–0.5

1) Amounts for 2012 have been restated where applicable as a consequence of the amended standard for pension accounting, IAS 19 Employee Benefits and 2017

as a consequence of the introduction of IFRS 15 Revenue from Contracts with Customers.

2) As of 2015 the accounting concept of Items affecting comparability is no longer in use. As from 2018, non-recurring items are presented, see definition in Note 30.
3) Items affecting comparability are excluded for the years 2005 to 2013. 2014 has been restated.
4) 2018: Proposed by the Board.
5) Annualized net sales, calculated at end of period exchange rates, 2018: 124,399 (2017: 118,464).
6) For more information, see Note 7.

ELECTROLUX ANNUAL REPORT 2018

2008

2009

2010

2011

2012 1)

2013

2014

2015

2016

20171)

2018

5 years

10 years

Compound annual growth rate, %

104,792

109,132

106,326

101,598

109,994

109,151

112,143

123,511

121,093

120,771

124,129

2.6

1.7

Eleven-year review 87

All amounts in SEKm unless otherwise stated

4.5

3,356

–2,475

1,580

904

672

4,455

–4,734

–3,535

–279

–74

–1,860

3.2

3.7

3.1

76,001

24,961

–5,800

19,441

12,154

20,607

14,308

14,905

2,980

10,653

2.35

6.50

168.50

4.4

5.8

21.8

17.0

10.6

0.74

2.11

13.0

60,754

13,521

51,500

286.2

1.1

3,671

–1,199

3,581

2,997

2,242

7,822

–3,759

–3,006

4,063

4,132

–1,861

2.7

3.2

2.7

85,688

26,099

–8,377

20,663

14,324

25,705

16,468

14,703

4,763

9,631

7.83

57.52

6.50

228.80

15.7

14.2

20.4

16.2

11.2

0.58

5.16

11.3

60,038

14,278

46,500

286.3

2.2

3,936

—

2,741

2,101

1,568

8,267

–3,403

–3,027

4,864

4,955

–1,870

2.5

2.2

1.7

83,471

21,412

–12,234

17,745

14,179

26,467

15,005

13,097

4,509

6,407

5.45

52.21

6.50

205.20

9.9

11.0

17.3

14.3

11.5

0.43

3.75

12.4

58,265

15,858

45,485

287.1

287.4

–1.1

3,934

—

6,274

5,581

4,493

10,165

–2,557

–2,830

7,608

7,432

–1,868

2.3

5.2

4.6

85,848

18,098

–14,966

19,408

13,418

28,283

17,738

10,202

4,169

360

15.64

61.72

7.50

226.30

29.4

29.9

14.2

15.2

10.5

0.02

3.75

10.5

55,400

15,886

48,939

287.4

–0.4

3,977

—

7,407

6,966

5,745

10,024

–8,200

–3,892

1,824

5,229

–2,155

3.2

6.1

5.8

89,542

20,678

–15,873

20,747

14,655

31,114

20,480

9,537

2,634

197

19.99

71.26

8.30

264.30

31.9

36.0

17.5

12.4

0.01

12.16

11.6

55,692

16,470

45,295

287.4

1.3

4,150

–1,343

5,310

4,887

3,805

8,046

–6,506

–4,650

1,540

2,149

–2,385

3.7

4.3

3.9

97,312

23,574

–16,848

21,482

16,750

34,443

21,749

9,982

3,814

1,825

13.24

75.67

8.50

187.10

18.2

22.7

19.0

17.3

13.5

0.08

9.05

11.2

54,419

17,363

49,870

287.4

27.4

40.1

41.4

12.6

5.6

5.1

–1.1

2.0

6.6

10.8

8.7

–7.7

5.1

–29.7

41.3

8.6

5.5

2.1

16.2

22.3

26.4

5.0

3.9

2.9

1.2

0.4

2.8

8.2

2.9

–3.3

–8.7

26.2

2.7

10.9

–2.2

5.1

–0.6

–0.1

3.2

–0.5

Depreciation and amortization

Items affecting comparability 2)/ Non-recurring items 6)

seKm

Net sales and income

Net sales

Organic growth, %

Operating income

Income after financial items

Income for the period

Cash flow

Cash flow from operations

Cash flow from investments

of which capital expenditure in

property, plant and equipment

Cash flow from operations and investments

Cash flow from operations and investments excluding

acquisitions and divestments of operations

Dividend, redemption and repurchase of shares

Capital expenditure in property, plant and equipment

Income after financial items as % of net sales

as % of net sales

Margins 3)

Operating margin, %

Financial position

Total assets

Net assets

Working capital

Trade receivables

Inventories

Accounts payable

Total equity

Interest-bearing liabilities

Provisions for post-employment benefits, net

Net debt

Data per share

Equity, SEK

Dividend, SEK4)

Income for the period, SEK

Key ratios

Return on equity, %

Return on net assets, %

Net assets as % of net sales 5)

Trade receivables as % of net sales 5)

Inventories as % of net sales 5)

Net debt/equity ratio

Interest coverage ratio

Dividend as % of total equity

Other data

Average number of employees

Salaries and remuneration

Number of shareholders

Average number of shares after buy-backs, million

Shares at year end after buy-backs, million

–0.9

3,010

–355

1,188

653

366

4,949

–3,755

–3,158

1,194

1,228

–1,187

3.0

1.5

1.0

73,323

20,941

–5,131

20,734

12,680

15,681

16,385

13,946

4,556

1.29

—

66.75

2.4

5.8

18.1

17.9

11.0

0.28

1.86

—

55,177

12,662

52,600

283.1

283.6

–4.8

3,442

–1,561

3,761

3,484

2,607

8,297

–2,967

–2,223

5,330

5,326

2.0

4.9

4.6

72,696

19,506

–5,154

20,173

10,050

16,031

18,841

14,022

665

9.18

4.00

14.9

19.4

17.1

17.7

8.8

0.04

7.54

6.0

50,633

13,162

52,000

284.0

284.4

1.5

3,328

–1,064

5,430

5,306

3,997

7,680

–4,474

–3,221

3,206

3,199

–1,120

3.0

6.1

6.0

73,521

19,904

–5,902

19,346

11,130

17,283

20,613

12,096

14.04

6.50

191.00

20.6

27.8

18.2

17.7

10.2

–0.03

12.64

9.0

51,544

12,678

57,200

284.6

284.7

0.2

3,173

–138

3,017

2,780

2,064

5,399

–10,049

–3,163

–4,650

906

–1,850

3.1

2.9

76,384

27,011

–5,180

19,226

11,957

18,490

20,644

14,206

7.25

6.50

10.4

13.7

23.8

17.0

10.5

0.31

5.84

9.0

52,916

13,137

58,800

284.7

–709

6,367

5.5

3,251

–1,032

4,000

3,154

2,365

7,080

–4,702

–4,090

2,378

2,542

–1,868

3.7

4.6

3.8

75,194

25,890

–6,505

18,288

12,963

20,590

15,726

13,088

4,479

10,164

8.26

6.50

14.4

14.8

22.5

15.9

11.3

0.65

2.72

11.8

59,478

13,785

51,800

285.9

286.1

Trading price of B-shares at year-end, SEK

167.50

109.70

170.50

1) Amounts for 2012 have been restated where applicable as a consequence of the amended standard for pension accounting, IAS 19 Employee Benefits and 2017

as a consequence of the introduction of IFRS 15 Revenue from Contracts with Customers.

2) As of 2015 the accounting concept of Items affecting comparability is no longer in use. As from 2018, non-recurring items are presented, see definition in Note 30.

3) Items affecting comparability are excluded for the years 2005 to 2013. 2014 has been restated.

4) 2018: Proposed by the Board.

6) For more information, see Note 7.

5) Annualized net sales, calculated at end of period exchange rates, 2018: 124,399 (2017: 118,464).

ELECTROLUX ANNUAL REPORT 2018

88 Operations by business area yearly

All amounts in SEKm unless otherwise stated

Operations by business
area yearly

seKm

Major Appliances Europe, Middle East and Africa

2014

2015

2016

20171)

2018

Net sales

Operating income

Margin, %

Major Appliances North America

Net sales

Operating income

Margin, %

Major Appliances Latin America

Net sales

Operating income

Margin, %

Major Appliances Asia/Pacific

Net sales

Operating income

Margin, %

Home Care & SDA

Net sales

Operating income

Margin, %

Professional Products

Net sales

Operating income

Margin, %

Other

Net sales

Operating income, common Group costs, etc.

Total Group

Net sales

Operating income

Margin, %

34,438

232

0.7

34,141

1,714

5.0

20,041

1,069

5.3

8,803

438

5.0

8,678

200

2.3

6,041

671

11.1

–743

37,179

2,167

5.8

43,053

1,580

3.7

37,844

2,546

6.7

43,402

2,671

6.2

38,524

2,764

7.2

40,656

2,757

6.8

42,732

2,220

5.2

38,875

972

2.5

18,546

15,419

17,302

17,076

463

2.5

9,229

364

3.9

8,958

–63

–0.7

6,546

862

13.2

—

–2,632

–68

–0.4

9,380

626

6.7

8,183

238

2.9

6,865

954

13.9

—

–693

425

2.5

8,759

750

8.6

7,808

431

5.5

7,723

1,054

13.7

—

–775

464

2.7

9,165

648

7.1

7,616

398

5.2

8,666

1,134

13.1

—

–527

112,143

123,511

121,093

120,771

124,129

3,581

3.2

2,741

2.2

6,274

5.2

7,407

6.1

5,310

4.3

1) Electrolux applies the new standard for revenue recognition, IFRS 15 Revenue from Contracts with Customer, as of January 1, 2018. Reported figures for 2017 have been restated to enable

comparison.

Non-recurring items1)

Major Appliances Europe, Middle East and Africa

Major Appliances North America

Major Appliances Latin America

Major Appliances Asia/Pacific

Home Care & SDA

Professional Products

Common Group cost

Total Group

2014

–1,212

–392)

–10

—

2015

—

–1582)

—

–190

—

–772)

–1,348

–1,9012)

–2,249

2016

2017

—

2018

–747

–596

—

–1,343

1) For more information, see Note 7.
2) Refers to costs related to the not completed acquisition of GE Appliances. Costs for preparatory integration work of SEK 39m for 2014 and SEK 158m for 2015 have been charged to operating
income for Major Appliances North America. Common Group cost includes transaction costs of SEK 110m for 2014 and SEK 408m for 2015 and a termination fee paid to General Electric in
December 2015 of USD 175m, corresponding to SEK 1,493m. In total, costs of SEK 2,059m related to GE Appliances were charged to operating income in 2015 of which SEK 63m in the first
quarter, SEK 195m in the second quarter, SEK 142m in the third quarter and SEK 1,659m in the fourth quarter.

ELECTROLUX ANNUAL REPORT 2018

Quarterly information

Quarterly information 89

All amounts in SEKm unless otherwise stated

Net sales and income by business area per quarter2)

seKm

Major Appliances Europe, Middle East
and Africa

Net sales

Operating income

Margin, %

Major Appliances North America

Net sales

Operating income

Margin, %

Major Appliances Latin America

Net sales

Operating income

Margin, %

Major Appliances Asia/Pacific

Net sales

Operating income

Margin, %

Home Care & SDA

Net sales

Operating income

Margin, %

Professional Products

Net sales

Operating income

Margin, %

Other

Q1
2018

Q2
2018

Q3
2018

Q4
2018

Full year
2018

Q1
2017

Q2
2017

Q3
2017

Q4
2017

Full year
2017

9,640

10,167

10,749

12,176

42,732

8,539

9,304

9,465

11,214

38,524

602

6.2

–214

–2.1

792

7.4

1,040

2,220

8.5

5.2

474

5.6

561

6.0

761

8.0

969

8.6

2,764

7.2

8,564

10,549

9,949

9,812

38,875

9,850

11,699

9,544

9,563

40,656

–167

–1.9

612

5.8

347

3.5

180

1.8

972

2.5

605

6.1

987

8.4

719

7.5

447

4.7

2,757

6.8

4,064

4,274

3,640

5,098

17,076

4,301

3,857

4,132

5,012

17,302

0.8

–56

–1.3

200

5.5

286

5.6

464

2.7

101

2.4

0.8

1.9

218

4.3

425

2.5

2,055

2,317

2,238

2,555

9,165

2,010

2,232

2,081

2,437

8,759

127

6.2

187

8.1

174

7.8

160

6.2

648

7.1

112

5.6

209

9.4

214

10.3

215

8.8

750

8.6

1,665

1,838

1,733

2,380

7,616

1,759

1,857

1,922

2,269

7,808

3.8

3.3

4.0

205

8.6

398

5.2

3.4

3.7

4.6

214

9.4

431

5.5

1,917

2,209

2,135

2,405

237

12.4

324

14.7

280

13.1

294

12.2

8,666

1,134

13.1

1,742

1,999

1,897

2,085

249

14.3

258

12.9

272

14.3

276

13.2

7,723

1,054

13.7

Operating income, common group costs, etc.

–133

–86

–107

–201

–527

–159

–194

–150

–273

–775

Total Group

Net sales

Operating income

Margin, %

Income after financial items

Income for the period
Earnings per share, SEK 1)

27,906

31,354

30,444

34,425 124,129

28,201

30,948

29,042

32,580 120,771

764

2.7

672

551

1.92

827

2.6

748

517

1.80

1,756

1,963

5,310

1,442

1,919

1,981

2,065

7,407

5.8

1,634

1,162

4.04

5.7

1,832

1,575

5.48

4.3

4,887

3,805

13.24

5.1

1,340

1,012

3.52

6.2

1,730

1,291

4.49

6.8

1,895

1,440

5.01

6.3

2,001

2,002

6.97

6.1

6,966

5,745

19.99

Number of shares after buy-backs, million

Average number of shares after buy-backs, million

287.4

1) Basic, based on average number of shares, excluding shares owned by Electrolux.
2) Electrolux applies the new standard for revenue recognition, IFRS 15 Revenue from Contracts with Customer, as of January 1, 2018. Reported figures for 2017 have been restated to enable

comparison.

ELECTROLUX ANNUAL REPORT 2018

90 Sustainability reporting

Sustainability reporting 2018

Electrolux is a global leader in household and professional appliances for kitchen and
laundry. Sustainability is part of the business model as a transformational driver. In this
section, the Group’s sustainability work and the results for 2018 are presented.

Frigidaire, we sell more than 60 million household and profes-
sional products in more than 150 markets every year. In 2018,
Electrolux had sales of SEK 124 billion and employed 54,000
people around the world. For more information, go to
www.electroluxgroup.com.

KEY RESULTS 2018

21/29%

The global Green Range accounted for
21% of total units sold and 29% of gross profit for
consumer products in 2018

>7,000

metric tons
recycled plastic
used in 2018

-17%

CO2 per manufactured
product in 2018 compared
to 2017

Thirteen local and three global
Electrolux Food Foundation projects
up and running.

Business model and sustainable development

To achieve the Electrolux purpose – shape living for the better
– and drive profitable growth, Electrolux uses a business model
that focuses on delivering outstanding consumer experiences
in taste, care and wellbeing. The objective is to create a steady
stream of consumer-relevant innovations under well-estab-
lished brands in key experience areas.

With over 60 million home appliances sold annually,

Electrolux has long recognized the impact the company has
on the environment and in society. Sustainable development

is defined as a transformational driver in the business model as
the company recognizes the growing importance of sustain-
ability performance and reputation. This includes the impact of
Electrolux business operations and products on the planet and
society.

Electrolux is continuously making progress on sustainability
and is acknowledged as a sustainability leader in the household
durables industry.

ELECTROLUX — A LEADER IN THE HOUSEHOLD DURABLES INDUSTRY

The Group’s sustainability performance strengthens relations with
investors. In 2018, and for the 12th consecutive year, Electrolux was
recognized as a leader in the household durables industry in the
prestigious Dow Jones Sustainability Index (DJSI). Electrolux thereby
ranks among the top 10% of the world’s 2,500 largest companies
for social and environmental performance. Additionally, Electrolux
has received recognition from other indexes and organizations,
including RobecoSAM, CDP and UN Global Compact Top 100.
Electrolux is included in the Climate A List by CDP for the third year
in a row.

ELECTROLUX ANNUAL REPORT 2018

Sustainability reporting 91

Electrolux in a changing world

The world in which Electrolux operates is constantly changing.
Demographic trends are increasing pressure on resources,
rapid technological development requires new business
approaches, and climate and resource concerns are influenc-
ing decision making at all levels. Such global megatrends create
challenges for the business – but also bring about business
opportunities.

Demographics
Global demographic trends – such as population growth, the
growing middle class, an aging population and urbaniza-
tion – are increasing the demand for home appliances, which
puts more pressure on natural resources. In the next 15 years,
another billion people are expected to buy their first refrigerator.

Implications for Electrolux:
• Significant growth potential in emerging markets.
• Continued need to improve the environmental performance
of products.
• Growing importance of the elderly consumer group and the
increasing number of smaller households.
• Potential for new business models, such as shared ownership.

Climate and resources
The need to reduce greenhouse gas emissions, and adapt to a
changing climate and resource limitations, will drive manufac-
turers toward circular business models that promote resource
efficiency, cleaner chemistry and waste reduction.

Materiality

Implications for Electrolux:
• Continued need to improve the environmental performance
of products.
• Pressure to reduce water consumption in areas with water
scarcity.
• Competition for some metals and minerals.
• Growing importance of the circular economy.
• Expectations to go beyond chemical legislation.

Technology
New technologies are scaled rapidly and globally, with purchas-
ing decisions increasingly influenced by online information and
social media. The Internet of Things (IoT) promises to connect
billions of products in the near future.

Implications for Electrolux:
• Greater consumer empowerment and awareness requires
transparency and sustainable business practices.
• Digitalization will drive the next wave of operational efficiency,
including closer integration with suppliers.
• Connectivity offers opportunities for new business models that
result in better resource efficiency.
• IoT enables a lifelong relationship between producers and
consumers, but requires high standards of data security and
privacy.

Material issues are topics that reflect the most significant eco-
nomic, environmental and social impacts.

of information to develop an up-to-date understanding of the
prevailing business context.

The materiality process aims to identify and understand
the topics that are important to stakeholders, as well as to the
Group’s business strategy. It is an important way of evaluating
the ability to create and sustain value.

Electrolux draws on insights from global trends and drivers,
market intelligence, product research, internal and external dia-
logue, expert opinion and consumer surveys, and other sources

The material issues have been formulated in the Group’s
sustainability framework – For the Better – as nine promises with
defined 2020 sustainability goals, and supported by key perfor-
mance indicators (KPIs) (more details in For the Better, page 92).
The correlation between the UN Sustainable Development
Goals and Electrolux sustainability framework shows that the
Group’s materiality analysis reflects societal priorities.

AVERAGE CO2 IMPACT DURING THE LIFETIME OF APPLIANCES1)

Recycling 1%
Materials, 7%
Manufacturing, 1%
Transportation, 1%
Product usage, 85%
Greenhouse gas, 5%

The product life-cycle perspective gives guidance for how to best
reduce environmental impact by indicating the degree of impact
in raw-material extraction, manufacturing, transportation, use and
end-of-life treatment. The most significant environmental impact
for Electrolux is carbon emissions as a result of energy consumption
when products are used. Electrolux is aiming to halve the life-cycle
climate impact of its products by 2020 relative to 2005 levels. If
successful, this will avoid approximately 25 million metric tons of
CO2- equivalents in emissions.

1) The graph is based on the Group’s total CO2 impact used for setting Science Based

Targets.

ELECTROLUX ANNUAL REPORT 2018

92 Sustainability reporting

For the Better

The Group’s sustainability framework – For the Better – comprises three areas: Better
solutions, Better operations and Better society. It includes a target to halve the Group’s
direct carbon emissions before the end of 2020 and nine promises to make a positive
difference for the better.

Better solutions

Better operations

Better society

Improve product performance
and efficiency

Ensure the best health
and safety

Solutions for healthy and
sustainable living for more people

Make better use of resources

Achieve more with less

Be a force for good

Eliminate harmful materials

Respect human rights and
ethical principles

Improve supply chain
sustainability

Climate targets

Better solutions

Meeting the growing global market for household appliances
without increasing environmental impact requires Electrolux to
improve product efficiency even further and to use resources
more efficiently.

Constantly improve product performance and efficiency
Tackling climate change and the increasing demand for water
are among the most urgent challenges facing society. Electrolux
contributes by offering resource-efficient products that help
consumers and customers to live better lives, save money and
reduce their environmental footprint. In 2018, products with
leading environmental performances represented 21% of
products sold and 29% of gross profit. One example launched
recently is the professional laundry range Line 6000 with strong
environmental performance.

Make better use of resources
Materials used in household appliances are primarily steel,
plastic and electronical components. One of the ways of con-
tributing to greater resource efficiency is to increase the use of
recycled materials and support initiatives for product recycling.
Electrolux has increased activities in all business areas to reach
the target of 20,000 metric tons of recycled plastics by 2020.

Eliminate harmful materials
Electrolux has a robust approach to choosing materials for
its products and protecting human health and the environ-
ment. The Group continues to implement a common process
for chemical management. New scientific findings and stake-
holder requirements are used to regularly update the Group’s
Restricted Materials List.

OPERATIONAL RESOURCE EFFICIENCY

ELECTROLUX -50% CLIMATE TARGET FOR 2020

INDEX

100

Energy per standard unit
Energy consumption

CO2 emissions
Water consumption

Product use
Green House Gas

Manufacturing
Transport

2020
Target
-50%

The target is to reduce
climate impact by 50%
focusing on product
efficiency, and it
encompasses the main
product categories.
Sales volumes and
emission factors are
normalized to 2005

ELECTROLUX ANNUAL REPORT 2018

Sustainability reporting 93

Better operations

With 54,000 employees worldwide and operations in more than
58 countries, Electrolux influences people’s daily life around
the world. The Group works continuously to be more resource
efficient and ensure safe and ethical operations.

Achieve more with less
Efficient use of resources reduces environmental impact and
reduces costs. The Green Spirit program, a part of the Electrolux
Manufacturing System, has the objective to continuously reduce
energy use and to shift to renewables in the Group’s operations
around the world. In 2018, Electrolux reduced its energy con-
sumption by 2,7% (2.4%) and CO2 emissions by 14,9% (17.5%)
compared to 2017. In 2018, 30% of the total energy used came
from renewable sources.

Ensure the best health and safety
The Group’s safety mind-set involves preventing accidents and
keeping employees safe and sound, no matter where they are in

the world. Since 2014, the injury rate has declined by 37% across
the Group. The global incident rate (TCIR) was 0.59 (0.6) in 2018.

The approach to safety led to an estimated annual saving of

over SEK 39 million in 2018 compared with 2014, based on the
average financial costs associated with injuries and the num-
ber of injuries that incur lost days.

Always act ethically and respect human rights
Electrolux continues to build an ethical, trusted company,
where everyone impacted by the Group’s operations can feel
confident that their rights are respected. Electrolux has a global
ethics program encompassing both training and a whistle-
blowing system – the Electrolux Ethics Helpline – and in 2018,
247 (186) Helpline reports were made. Also, as part of the
Group’s approach to human rights, a local human rights
assessment was conducted in Ukraine in 2018.

Better society

As a global company, Electrolux affects millions of people —
customers, suppliers and local communities. Electrolux strives
to make a difference in society by helping all stakeholders
throughout the value chain to become more sustainable and
by promoting a positive impact in the communities in which the
Group operates.

Solutions for healthy and sustainable living for more people
Electrolux makes efficient appliances accessible to more peo-
ple, creating opportunities for a better life. As a global company,
Electrolux can contribute to a faster transfer of technology to
new growing markets. The Group participates in the United 4
Efficiency, a global program supporting developing countries
to move their markets to energy-efficient appliances. Resource-
efficient solutions improve the lives of people and minimize
environmental impacts.

Be a force for good
As a world-leader in kitchen appliances, the Group’s com-
munity investment activities focus on food — in cooperation

with employees and local stakeholders. Actions are facilitated
through the Electrolux Food Foundation, and the Feed the
Planet partnership together with the World Association of Chefs’
Societies (Worldchefs) and the world’s largest youth organiza-
tion AIESEC. In 2018, a strategy to replicate successful project
models and scale up the positive impact was established. The
objectives are to spread knowledge regarding sustainable
food habits and to help people in need. Several local and three
global projects were active in 2018. Some 15,000 people were
educated and 445,000 food donations were made.

Improve sustainability in the supply chain
Regardless of where the Group’s products and components are
manufactured, it must be done with respect for people and care
for the environment. As part of its responsible sourcing efforts,
Electrolux carried out 399 (387) supplier audits in 2018, and over
6,400 supplier employees were trained in the Electrolux Supplier
Workplace Standard and other relevant sustainability issues.
Electrolux has cooperated with shippers to reduce the climate
impact of container sea transport.

INCIDENT RATE1)

RESPONSIBLE SOURCING AUDIT FINDINGS

1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

200

400

600

800

1,000

Minor ﬁndings

Major ﬁndings

Critical ﬁndings

Zero tolerance

Initial audit
Follow-up audit

Remediation of non
compliances, comparing
follow-up audits
conducted in 2018 with
preceding audits.

1) Per 200,000 working hours.

ELECTROLUX ANNUAL REPORT 2018

94 Sustainability reporting

Managing sustainability – Risks and Opportunities

Governance

The Group’s sustainability framework – For the Better – is directly
overseen by the Group Management and the Business Areas’
Management teams that have been engaged in the develop-
ment of the priorities and objectives for the nine promises.

During 2018, a new Electrolux Code of Conduct was intro-
duced, which was approved by the Group Management and
the Board. The Code of Conduct is an overarching document of
the most important Group policies and directives, and is a guide
to the Electrolux way of doing business. In connection with the
introduction of the Code of Conduct, the structure of other main
steering documents (Group policies) has also been simplified
and clarified. From a sustainability reporting perspective, the
most relevant Group policies are presented below.

Each business area is responsible for contributing to the fulfill-

ment of the Group’s sustainability targets under the nine prom-
ises, and several of the KPIs are broken down and monitored at
business area level. Reference groups and steering groups with
Group Management and senior management participation are
in place for various programs; for example, the Ethics & Human
Rights Steering Group; Industrial Operations; External Affairs;
and Chemicals.

A number of Group functions are accountable for identifying
and managing nonfinancial risks in their area of responsibility.
Risks are reported to Group Management, and they feed the
materiality process.

Key sustainability governance responsibilities:
• Internal Audit evaluates and improves governance, internal
control and risk management processes.
• Group Risk Management benchmarks and monitors key risks
in operations and critical suppliers.
• Group Legal Affairs is responsible for implementing an anti-
corruption program.
• Each Business Area’s Sourcing Board is responsible for moni-
toring supplier compliance, with the support of the Respon-
sible Sourcing Team.
• Group Sustainability Affairs assesses materiality, develops
policies, targets, monitors the implementation of programs,
and manages the Responsible Sourcing program.
• The Ethics Helpline (whistle-blower function) and programs for
ethics and human rights are overseen by the Ethics & Human
Rights Steering Group.

Aspect

Environment

Social, labor and human rights

Anti-corruption

Policies

Environmental Policy
Workplace Policy

Key areas

• Product design
• Efficiency in operations

• Influencing legislation

Workplace Policy
Supplier Workplace Standard
Workplace Directive
• Child and forced labor
• Health and safety, working
hours, compensation
• Discrimination and harassment

• Environmental management
systems

• Freedom of association,
collective bargaining

The full text of Electrolux policies is available at www.electroluxgroup.com/en/category/sustainability/codes-and-policies

Anti-Corruption Policy
Conflict of Interest Policy

• Conflict of interest
• Bribes or other improper
benefits
• Business partners and
customers
• Political contributions

Environment

From an entire product life-cycle perspective, Electrolux has a
relatively large environmental impact – including energy con-
sumption, use of materials and chemicals. Generally, the most
significant impacts occur during a product’s use phase, and the
Group’s strategy is to improve product performance.

The Electrolux Environmental Policy outlines how Electrolux
aims to improve environmental performance in production and
product use, as well as how to design products for disposal.
Requirements in the Group’s operations and in supply chain are
described in the Workplace Directive. All Electrolux factories
with more than 50 employees are required to be ISO 14001
and ISO 50001 certified.

Group requirements on suppliers are described in the Sup-
plier Workplace Standard and the Workplace Directive. Com-
pliance is mandatory when evaluating potential and existing
suppliers. The Group’s major suppliers of finished products must
measure and monitor their energy use and report it through the

energy reporting standard. They have also been included in
the WWF Water Risk Filter assessment.

Electrolux responds to the annual CDP Climate Change and
Water questionnaires, and was included in the Climate Change
A-list, and scored as B in CDP Water in 2018.

The Group’s proactive approach aims to develop and
promote sales of products with lower environmental impact.
Readiness for more stringent product legislation, for example,
can lead to increased sales. For many years, products with
superior environmental performance have delivered higher
profit margins.

Electrolux products are affected by legislation including

energy consumption, producer responsibility, and management
of hazardous substances. Some customers have requirements
that go beyond legislation.

The main environmental risks are related to regulatory and
customer requirements (see pages 96–97). Not meeting require-

ELECTROLUX ANNUAL REPORT 2018

Sustainability reporting 95

ments could result in fines or limitations in production permits,
reduced sales or product withdrawal. Electrolux has processes
in place to mitigate these risks, including ISO management
systems, internal audits, a Responsible Sourcing program,
and targets in the product development plans.

The Group’s programs to reduce operational resource con-
sumption and to introduce more recycled materials in products
are saving costs.

In 2018, the Group’s Science Based Targets in line with the

Paris Agreement (COP 21) were approved.

Social, labor and human rights

Electrolux is built on trust, which means that all actions and deci-
sions must be governed by principles of ethics, integrity, and
respect for people and care for the environment – no matter
where the Group operates in the world.

Consumers are increasingly making purchasing decisions
based on the trust in companies and how they contribute to
society. Additionally, employees prefer to work for a company
with values that match their own. Respecting human rights and
being an ethical company goes beyond simply meeting legal
requirements. It is about guiding employees to know what is
right and wrong, and how to make decisions accordingly. The
goals in For the Better reflect the Group’s commitment to build
a strong culture for ethics and human rights.

The key human rights risks include freedom of association,
discrimination and working conditions. Other risks are privacy
of information, and corruption.

The Electrolux Code of Conduct was launched in 2018, and it

contains the Group’s Human Rights Statement, firmly establish-
ing that human rights shall be respected. This is further detailed
through a new Human Rights Directive. The Workplace Policy,
the Supplier Workplace Standard and the Workplace Directive
contain mandatory requirements relating to labor rights, health,
safety and environment within Electrolux and suppliers.

Anti-corruption

Corruption poses a threat to sustainable economic and social
development around the world and in particular in poor com-
munities. Corruption could also have severe negative impacts
for the Group by obstructing business growth, increasing costs
and imposing serious legal and reputational risks. Operating in
more than 58 countries all over the world, including countries
in emerging markets, means that Electrolux is exposed to risks
related to corruption and bribery. These risks may arise in sev-
eral phases of the value chain, such as in purchasing and sales.
Electrolux has zero tolerance for corruption and works

continuously to raise awareness among employees in order to
minimize the risk for corruption. Measures against corruption
are included in the Anti-Corruption Policy, which all employees
are required to follow. This policy provides guidance to employ-
ees on how to do the right thing and explains what actions
constitute unlawful and inappropriate behavior.

Employees can report ethical misconduct through a whistle-

blower system. In 2018, 247 (186) reports were received, out
of which 24 (19) reports in the area of business integrity were
investigated. “Business integrity” includes allegations related
to corruption, fraud, theft, internal control and anti-trust.

Electrolux conducts Group-wide e-learning courses on anti-

corruption. These initiatives complement the tailored training

ELECTROLUX ANNUAL REPORT 2018

Electrolux monitors performance and manages risks through
internal and external audits, an annual self-assessment process
for manufacturing units, local human rights assessments, edu-
cation, the Ethics Helpline, management-labor dialogue, as
well as health and safety committees. Risks in the supply chain
are addressed through audits and training efforts as part of the
Responsible Sourcing program.

Human rights procedures engage many functions through-
out the organization, from Human Resources to Purchasing and
Global Industrial Operations. Accountability for the ethics pro-
gram and oversight of human rights lies with the Ethics & Human
Rights Steering Group, which comprises senior management
representatives from Group functions.

Electrolux conducts human rights impact assessments at
both Group and local level. Six issues and three business pro-
cesses constitute the Group’s salient human rights issues. The
methodology is in line with the UN Guiding Principles on Business
and Human Rights, and good practices for human rights impact
assessments. The assessments span the Group’s entire activi-
ties in the country, including risks at suppliers and customers. In
2018, a local human rights impact assessment was conducted
in Ukraine.

that certain functions such as sales, procurement and senior
management receive (more exposed to corruption risks). Such
face-to-face training sessions have been conducted locally
throughout the organization by either in-house legal counsel
or by external experts. Training requirements are continuously
monitored and evaluated based on business needs, and the
legal and risk context. The local human rights assessments
include review and assessment of corruption risks.

76%

of employees trusted that the concerns reported
through the Ethics Helpline (Alertline in North America)
are handled confidentially and fairly in 2018.

96 Sustainability reporting

Impacts throughout the value chain

A value chain
perspective helps
Electrolux identify how
it can best manage its
impacts and create
maximal value.

This approach makes it
easier to identify opportuni-
ties, minimize or enhance
impacts, and understand
boundaries. It also helps the
company to understand
how its actions and impacts
are interrelated.

The following section
identifies the Group’s key
sustainability risks and
impacts, and how they are
managed. It also identifies
the degree of influence
along the value chain, and
the value created for the
company and the society.

Product
development

Suppliers

Electrolux
operations

Close collaboration between
Design, Marketing and R&D
enables new products to
offer best-in-class consumer
experiences. The ambition
is to develop solutions with
leading environmental per-
formance. Timely innovation
is key to meeting forthcoming
legal requirements and mar-
ket demands. The focus is on
energy, water and material
efficiency, as well as chemical
use in appliances.

Risks
• Not meeting regulatory or
market requirements.
• Not meeting consumer
expectations.

How impacts are managed
• Continuously improve prod-
uct efficiency.
• Increase use of recycled
materials.
• Eliminate harmful materials.
• Integrate future require-
ments into product develop-
ment plans.

Ability to influence - High

Generating value
Products with leading envi-
ronmental performance
deliver customer value in line
with the business strategy,
while reducing negative
impact on the environment.

Electrolux relies on several
thousand first-tier suppliers,
many in emerging markets.
The focus is on safeguard-
ing Electrolux standards and
developing supplier capac-
ity to improve sustainability
performance. Electrolux also
requires all its suppliers to
comply with Electrolux Sup-
plier Workplace Standard
and the Workplace Directive.

Risks
• Connections to social,
ethical and human rights
violations.
• Severe weather conditions
caused by climate change
could negatively affect
supply.
• Business interruptions due to
unethical business practices
in the supply chain.

How impacts are managed
• Apply a risk-based
approach to identify suppli-
ers in scope.
• Assess the climate impact
of key suppliers.
• Conduct auditing to safe-
guard standards.
• Hold training and drive
improvement programs.

Ability to influence - Medium

Generating value
Enforcing Electrolux stan-
dards supports human rights
and raises environmental,
labor and economic stan-
dards, particularly in emerg-
ing markets. This also builds
trust and a resilient supply
chain, while reducing busi-
ness and reputational risks.

Electrolux has 53 factories
and sales in 150 markets,
with approximately 54,000
employees. The main focus
areas are to reduce the envi-
ronmental footprint, maintain
high ethical standards and
working conditions, as well as
to have a positive impact in
local communities.

Risks
• Disruptions due to emissions
and discharges as a result of
incidents.
• Disruptions caused by
severe weather as a result
of climate change.
• Impact due to social, ethical
and human rights violations.
• Corruption related to weak
governance.

How impacts are managed
• Apply the environmental
management systems and
efficiency programs.
• Ensure the best conditions
for health and safety. Gover-
nance systems and training
to enforce sustainability
policies.
• Assess the climate impact
of operations.
• Support local community
programs.

Ability to influence - High

Generating value
Electrolux creates com-
munity benefit by providing
jobs, knowledge transfer and
economic opportunities. Posi-
tive employee relationships
promote competence devel-
opment, employee wellbeing
and job satisfaction. Local
community engagement
creates good stakeholder
relations, improves employee
pride and enhances brand
reputation.

ELECTROLUX ANNUAL REPORT 2018

Sustainability reporting 97

Transport

Sales

Consumer use

End-of-life

Electrolux sells more than 60
million products in over 150
markets every year, primarily
through retailers. Energy and
performance labeling, and
sustainability communication
allow us to raise efficiency
awareness among consumers.

Risks
• Failure to effectively inform
consumers on product use.
• Not meeting consumer
expectations on product
efficiency.
• Limited opportunity to influ-
ence decision-making at the
point-of-purchase.
• Corruption.

How impacts are managed
• Continuously improve
product performance and
efficiency.
• Improve pre- and point of
purchase communication.
• Secure third party endorse-
ment of products (such as
best-in-test recognitions).
• Communicate on themes
such as food storage, reduc-
ing food waste, caring for
clothes and textiles.
• Conduct Group-wide train-
ings on anti-corruption.

Ability to influence - Medium

Generating value
Promoting transparency
and the Group’s sustainable
product offering contrib-
utes to retailer sustainability
goals, strengthens brands
and builds customer loyalty.
As sales of the Group’s Green
Range demonstrate, an
efficient product offering is
a profitable strategy.

As the main environmen-
tal impacts of Electrolux
products occur when they
are used, product energy
and water efficiency is a top
priority.

Greater use of connected
products in the future will help
improve optimal product use.

Risks
• Not meeting expectations
on product performance.
• Consumers not using prod-
ucts in an optimal way.
• Product safety.
• Data privacy for users of
connected products.

How impacts are managed
• Continuously improve
product performance and
efficiency.
• Prepare for increased data
privacy regulation.
• Follow the product safety
governance and proce-
dures.
• Increase development
and sales of connected
products.

Ability to influence - Medium

Generating value
Appliances deliver social
benefits that many take for
granted – such as food pres-
ervation, hygiene standards,
freeing up time from house-
hold chores, and facilitating
equal opportunities – factors
that are particularly sig-
nificant in emerging markets.
Providing efficient products,
raising consumer awareness
and increasing appliance
connectivity can help counter
rising global CO2 emissions,
while reducing food waste
and the wear of clothes.

Legislation on appliance
recycling is being introduced
in more markets. On aver-
age, materials account for
approximately 7% of a prod-
uct’s life-cycle impact, and
Electrolux market research
indicates that it is a top
priority for consumers.

In Europe, the region
with the most comprehen-
sive producer responsibility
legislation, 80% of the materi-
als from collected end-of-life
large appliances must be
recovered.

Risks
• Expectations on produc-
ers to take responsibility
beyond legislation.
• Waste of resources due to
a lack of recycling.
• Illegal trade of discarded
products and recycled
materials.

How impacts are managed
• Establish more circular
business by using recycled
materials.
• Eliminate harmful materi-
als to enable higher quality
recycled materials and
decrease environmental
impact.
• Promote proper recycling as
part of producer’s respon-
sibility.

Ability to influence - Low

Generating value
Building resource-efficient
and closed-loop systems help
reduce environmental impact
and overall resource con-
sumption. Innovative designs
that allow material reuse
saves money and energy, and
increases consumer trust in
the Electrolux brand.

Addressing transportation is
part of a life-cycle approach
to the Group’s overall impacts.
Electrolux emits more CO2
transporting its goods than it
emits through the total energy
used in the Group operations.
Approximately 300,000
metric tons are emitted annu-
ally through the distribution of
goods via sea, land and air in
Europe, North America and
Brazil.

Risks
• Emissions from transporta-
tion.
• Labor conditions in logistics
companies.

How impacts are managed
• Implement collaborative
solutions to mitigate logis-
tics-related impacts.
• Promote efficient modes of
transport.

Ability to influence - Medium

Generating value
Helping to create a more
sustainable transport indus-
try strengthens the Group’s
brand reputation. Transport
is included in the Electrolux
carbon target. It also sup-
ports suppliers in their work to
improve their environmental
and labor standards.

ELECTROLUX ANNUAL REPORT 2018

98 Sustainability reporting

The sustainability reporting section in the administration report has been developed to fulfill the requirements in the Swedish Annual
Accounts Act. For more detailed information on Electrolux and sustainability, please read the Sustainability Report prepared based
on the GRI Standards at: www.electroluxgroup.com/sustainability

Auditor’s report on the statutory sustainability report
To the general meeting of the shareholders in AB Electrolux
(publ), corporate identity number 556009-4178.

Engagement and responsibility
It is the board of directors who is responsible for the statutory
sustainability report for the financial year 2018-01-01 –
2018-12-31 on pages 90-98 and that it has been prepared
in accordance with the Annual Accounts Act.

The scope of the audit
Our examination has been conducted in accordance with FAR’s
auditing standard RevR 12 The auditor’s opinion regarding the
statutory sustainability report. This means that our examination
of the statutory sustainability report is substantially different
and less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinion.

Opinion
A statutory sustainability report has been prepared.

Stockholm, February 15, 2019

Deloitte

Jan Berntsson
Authorized Public Accountant

Sustainability reporting and information
The Electrolux sustainability routines and systems for informa-
tion and communication aim at providing key stakeholders
with accurate, relevant and timely information concerning
the targets and results of the Group’s sustainability framework,
called For the Better.

The sustainability reporting section in the administration
report has been developed to fulfill the requirements in the
Swedish Annual Accounts Act. This report also highlights how
the Group’s priorities reflect its commitment to the 10 principles
of the UN Global Compact. Unless otherwise indicated, sustain-
ability disclosures include all operations that can potentially
affect Group performance for the calendar year 2018.

Sustainability information is shared regularly in the form of:
• Electrolux Sustainability Report, including
-United Nations Global Compact Communication on
Progress
-United Nations Guiding Principles Reporting Framework
• Sustainability in Brief
• Mandatory reporting regarding transparency in the
supply chain
• Press releases
• Meetings with key stakeholders worldwide
• Questionnaires from investors and analysts
• Annual submission to CDP for climate and water

Reports, policies and press releases are available at:
www.electroluxgroup.com

Stockholm, February 14, 2019

AB Electrolux (publ)
Board of Directors

Electrolux Sustainability Report 2018

ELECTROLUX ANNUAL REPORT 2018

VISIT OUR REPORT

Electrolux Sustainability Report 2018

–

www.electroluxgroup.com/sustainability

Corporate governance
report 2018

Corporate governance report 101

Corporate governance report

Chairman's introduction

As a leading global appliance company, Electrolux
shapes living for the better by reinventing taste, care
and wellbeing experiences to make life more enjoyable
and sustainable for millions of people. Through the
Group’s different brands, we sell more than 60 million
household and professional products in more than
150 markets every year. Our large installed base of 400
million products globally gives us high aftermarket sales
potential.

The global landscape in which Electrolux operates is chang-
ing. Demographic trends are increasing pressure on resources,
rapid technological development requires new business
approaches, and climate and resource concerns are influenc-
ing decision making at all levels. Such global trends create
challenges for the business but also business opportunities for
driving profitable growth.

Board's focus areas during the year
The Board sets the Group’s strategy and provides the gover-
nance framework within which the CEO and the Group Manage-
ment are mandated to drive the business. To be able to steer the
Group and support the Group Management, the Board needs to
have a firm grasp of the operational business drivers while also
monitoring macro trends. In June, the Board combined visits to
Electrolux sites in Italy with a two day board meeting focused on
discussing the strategy and drivers for value creation. By visiting
the Group’s sites the Board gets a firsthand understanding of the
business which is essential when setting the strategy and evalu-
ating investments and acquisitions.

An important driver for executing on our profitable growth
strategy is increasing the level of modularized products in auto-
mated production. Investments in this area strengthen Electrolux
competitiveness through innovative offerings focusing on con-
sumer experiences and at the same time increase our efficiency.
During the year, investments have been a focus area for the
Board as well as initiating the work to evaluate and prepare for
the intended separation of our Professional Products business
area from the Group, which was announced on January 31, 2019.
The Board believes that Electrolux Professional has significant
potential for long-term value creation as an agile stand-alone
company, which can pursue growth through market consolida-
tion and innovation, and that Electrolux core consumer business
also stands to benefit both in terms of growth and margins from a
sharpened focus on consumer experience innovation, the after-
market and emerging markets. The Board expects to provide
an update on the preparations and a more detailed time plan
around mid-year 2019.

To support the profitable growth ambitions the Board approved
several important acquisitions, such as strengthening the bever-
age offering for Professional Products through the SPM Drink
Systems acquisition as well as adding functional sales expertise
through the Schneidereit acquisition.

A new Code of Conduct
During 2018, the Board endorsed a new Code of Conduct,
which together with the Group policies, are key pillars in our
global, decentralized organization. With the Code of Conduct
and our other Group policies, we strengthen our corporate
culture to ensure that we act consistently and with high ethical
standards globally even in countries where local legislation may
be weaker. Electrolux has an agile organization, with a strong
corporate culture, able to swiftly take advantage of opportuni-
ties while acting responsibly and sustainably.

The Corporate governance report
This Corporate Governance Report provides more details of
the overall governance structure of Electrolux, the interactions
between the formal corporate bodies, internal policies and
procedures as well as relevant control functions and reporting,
which all combined ensure a robust global governance frame-
work and strong corporate culture.

As newly elected Chairman of Electrolux, I have this first year
focused on getting a deeper knowledge about the company
and its markets. This has included a close and frequent dialogue
with the CEO and his team during the year but also several visits
to our operations in Sweden, Germany, Italy, the U.S., Brazil and
Thailand. This has given me a chance to get a firsthand impres-
sion and to liaise with many engaged, committed and devoted
members of our organization. I am confident in our ability to
create consumer and shareholder value in the years to come.
To continue to stay competitive in a changing market, we are
sharpening our offering, organization and business model.
All together this will serve us well.

ELECTROLUX ANNUAL REPORT 2018

Staffan Bohman
Chairman of the Board

102 Corporate governance report

Governance in Electrolux

Electrolux aims at implementing strict norms and efficient gover-
nance processes to ensure that all operations create long-term
value for shareholders and other stakeholders. This involves the
maintenance of an efficient organizational structure, systems for
internal control and risk management and transparent internal
and external reporting.

The Electrolux Group comprises approximately 160 compa-
nies with sales in more than 150 markets. The parent company of
the Group is AB Electrolux, a public Swedish limited liability com-
pany. The company’s shares are listed on Nasdaq Stockholm.
The governance of Electrolux is based on the Swedish

Companies Act, Nasdaq Stockholm’s rule book for issuers and
the Swedish Code of Corporate Governance (the “Code”),
as well as other relevant Swedish and foreign laws and regu-
lations. The Code is published on the website of the Swedish
Corporate Governance Board, which admini strates the Code:
www.corporategovernanceboard.se

GOVERNANCE STRUCTURE

This corporate governance report has been drawn up as a
part of Electrolux application of the Code. Electrolux does not
report any deviations from the Code in 2018. There has been
no infringement by Electrolux of applicable stock exchange
rules and no breach of good practice on the securities market
reported by the disciplinary committee of Nasdaq Stockholm
or the Swedish Securities Council in 2018.

Below is Electrolux formal governance structure.

Shareholders
by the AGM

External Audit

Board of
Directors

Nomination
Committee

Remuneration
Committee

Audit Committee

Group Internal Audit

President and Group
Management

Business
area Boards

Internal Bodies

Major external regulations
• Swedish Companies Act.
• Nasdaq Stockholm’s rule book for issuers.
• Swedish Code of Corporate Governance.

Major internal regulations
• Articles of Association.
• Board of Directors’ working procedures.
• Policies for information, finance, credit, accounting manual, etc.
• Processes for internal control and risk management.
• Code of Conduct, Anti-Corruption Policy and Workplace Policy.

Electrolux shapes living for the better by reinventing taste, care and wellbeing experiences, making life more enjoyable and sustainable for millions of
people. As a leading global appliance company, we place the consumer at the heart of everything we do. Through our brands, including Electrolux, AEG
and Frigidaire, we sell more than 60 million household and professional products in more than 150 markets every year. In 2018, Electrolux had sales of
SEK 124bn and employed 54,000 people around the world. For more information, go to: www.electroluxgroup.com

AB Electrolux (publ) is registered under number 556009-4178 with the Swedish Companies Registration Office. The registered office of the Board of
Directors is in Stockholm, Sweden. The address of the Group headquarters is S:t Göransgatan 143, SE-105 45 Stockholm, Sweden.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 103

Highlights 2018
• Election of Staffan Bohman as a new Board member and Chairman of the Board.
• Election of Deloitte AB as new auditors.
• Performance-based, long-term incentive program for senior management.
• Continued focus on global ethics program and the implementation of a new Code of Conduct.

Shares and shareholders
The Electrolux share is listed on Nasdaq Stockholm. At year-
end 2018, Electrolux had 49,870 shareholders according to
Euroclear Sweden AB and Holdings. Of the total share capital,
56% was owned by Swedish institutions and mutual funds, 38%
by foreign investors and 6% by Swedish private investors, see
below. Investor AB is the largest shareholder, holding 16.4% of
the share capital and 28.4% of the voting rights. The ten larg-
est shareholders accounted for 42.5% of the share capital and
53.1% of the voting rights in the company.

Voting rights
The share capital of Electrolux consists of Class A shares and
Class B shares. One A share entitles the holder to one vote and
one B share to one-tenth of a vote. Both A shares and B shares
entitle the holders to the same proportion of assets and earn-
ings and carry equal rights in terms of dividends. Owners of A
shares can request to convert their A shares into B shares. Con-
version reduces the total number of votes in the company. As of
December 31, 2018, the total number of registered shares in the
company amounted to 308,920,308 shares, of which 8,192,539
were Class A shares and 300,727,769 were Class B shares. The
total number of votes in the company was 38,265,316. Class B
shares represented 78.6% of the voting rights and 97.3% of the
share capital.

Dividend policy
Electrolux target is for the dividend to correspond to at least 30%
of the income for the period. For a number of years, the dividend
level has been considerably higher than 30%.

The Annual General Meeting (AGM) in April 2018 decided
to adopt the Board’s proposed dividend of SEK 8.30 per share
for the fiscal year 2017 which, in accordance with the Board’s
proposal, was paid out in two equal installments. The Board of
Directors proposes a dividend for the fiscal year 2018 of SEK 8.50
per share to be paid in two equal installments, for a total divi-
dend payment of approximately SEK 2,443m.

Shareholders
meeting

General Meetings of shareholders
The decision-making rights of share-
holders in Electrolux are exercised at
shareholders’ meetings. The AGM of AB Electrolux is held in
Stockholm, Sweden, during the first half of the year.

Extraordinary General Meetings may be held at the discretion

of the Board or, if requested, by the auditors or by shareholders
owning at least 10% of all shares in the company.

Participation in decision-making requires the share holder’s
presence at the meeting, either personally or by proxy. In addi-
tion, the shareholder must be registered in the share register by
a stipulated date prior to the meeting and must provide notice
of participation in the manner prescribed. Additional require-
ments for participation apply to share holders with holdings
in the form of American Depositary Receipts (ADR) or similar
certificates. Holders of such certificates are advised to contact
the ADR depositary bank, the fund manager or the issuer of the
certificates in good time before the meeting in order to obtain
additional information.

Individual shareholders requesting that a specific issue be
included in the agenda of a shareholders’ meeting can normally
request the Electrolux Board to do so. The last date for making
such a request for the respective meeting will be published on
the Group’s website.

Decisions at the meeting are usually taken on the basis of
a simple majority. However, as regards certain issues, the Swed-
ish Companies Act stipulates that proposals must be approved
by shareholders representing a larger number of the votes cast
and the shares represented at the meeting.

Annual General Meeting 2018
The 2018 AGM was held at the Stockholm Waterfront Congress
Centre in Stockholm, Sweden, on April 5, 2018. 1,129 shareholders
representing a total of 47.1% of the share capital and 60.3% of the
votes were represented at the AGM. The President’s speech was
broadcasted live via the Group’s website and is also available
on www.electroluxgroup.com/corporate-governance, together
with the minutes. The meeting was held in Swedish, with simultane-
ous interpretation into English. All Board members, as well as the
Group’s auditor in charge, were present at the meeting.

OWNERSHIP STRUCTURE

ATTENDANCE AT AGMS 2014–2018

Swedish institutions and mutual
funds, 56%

Foreign investors, 38%
Swedish private investors, 6%

Source: Euroclear Sweden and Holdings
as per December 31, 2018.

The foreign ownership has decreased to 38% at year-end 2018 from 51% at year-end
2017.
Foreign investors are not always recorded in the share register. Foreign banks and
other custodians may be registered for one or several customers’ shares, and the
actual owners are then usually not displayed in the register. For additional information
regarding the ownership structure, see above.
The information on ownership structure is updated quarterly on the Group’s website:
www.electroluxgroup.com/corporate-governance

ELECTROLUX ANNUAL REPORT 2018

% of share capital
% of votes
Shareholders

ATTENDANCE

1,200

1,000

800

600

400

200

1,129 shareholders representing a total of 47.1% of the share capital and 60.3%
of the votes were present at the 2018 AGM.

104 Corporate governance report

Decisions at the Annual General Meeting 2018 included:
• Dividend payment of SEK 8.30 per share for fiscal year
2017 to be paid out in two equal installments of SEK 4.15
per share.
• Election of Staffan Bohman as new Board member
and re-election of the Board members Petra Heden-
gran, Hasse Johansson, Ulla Litzén, Bert Nordberg,
Fredrik Persson, David Porter, Jonas Samuelson, Ulrika
Saxon and Kai Wärn.
• Election of Staffan Bohman as Chairman of the Board,
replacing Ronnie Leten who had declined re-election.
• Change of the company's Articles of Association.
• Election of Deloitte AB as new auditors.
• Remuneration to the Board members.
• Approval of remuneration guidelines for Electrolux
Group Management.
• Performance-based, long-term incentive program for
2018 covering up to 350 managers and key employees.
• Authorization to acquire own shares and to transfer
own shares on account of company acquisitions and to
cover costs that may arise as a result of the share pro-
gram for 2016.

Annual General Meeting 2019
The next AGM of AB Electrolux will be held on Wednesday,
April 10, 2019, at Stockholm Waterfront Congress Centre
in Stockholm, Sweden.

For additional information on the next AGM and how to register attendance,
see page 120.

Nomination
Committee

Nomination Committee
The AGM resolves upon the nomination
process for the Board of Directors and the
auditors. The AGM 2011 adopted an instruction for the Nomina-
tion Committee which applies until further notice. The instruc-
tion involves a process for the appointment of a Nomination
Committee comprised of six members. The members should be
one representative of each of the four largest shareholders, in
terms of voting rights that wish to participate in the Committee,
together with the Chairman of the Electrolux Board and one
additional Board member.

The composition of the Nomination Committee shall be based

on shareholder statistics from Euroclear Sweden AB as of the
last banking day in August in the year prior to the AGM and on
other reliable shareholder information which is provided to the
company at such time. The names of the representatives and the
names of the shareholders they represent shall be announced as
soon as they have been appointed. If the shareholder structure
changes during the nomination process, the composition of the
Nomination Committee may be adjusted accordingly.

The Nomination Committee is assisted in preparing

proposals for auditors by the company’s Audit Committee and

the Nomination Committee’s proposal is to include the Audit
Committee’s recommendation on the election of auditors.
The Nomination Committee’s proposals are publicly
announced no later than on the date of notification of the
AGM. Shareholders may submit proposals for nominees to the
Nomination Committee.

Nomination Committee for the AGM 2018
The Nomination Committee for the AGM 2018 was comprised
of six members. Johan Forssell of Investor AB led the Nomination
Committee’s work.

For the proposal for the AGM 2018, the Nomination

Committee made an assessment of the composition and size of
the current Board as well as the Electrolux Group’s operations.
Areas of particular interest were Electrolux strategies and goals
and the demands on the Board that are expected from the
Group’s positioning for the future. The Nomination Committee
applied rule 4.1 of the Code as diversity policy in its nomination
work. The Nomination Committee considered that a breadth
and variety as regards age, nationality, educational back-
ground, gender, experience, competence and term of office is
represented among the Board members.

The Chairman of the Board, Ronnie Leten, had declined
re-election and the Nomination Committee proposed Staffan
Bohman as new Board member and as Chairman of the Board.
After the election at the AGM 2018, three out of nine Board
members elected at the shareholders’ meeting are women (in
this calculation, the President has not been included in the total
number of Board members).

The Nomination Committee also proposed, in accordance
with the recommendation by the Audit Committee, election of
Deloitte AB as the company’s new auditors for the period until
the end of the AGM 2019.

A report regarding the work of the Nomination Committee
was included in the Nomination Committee’s explanatory state-
ment that was published before the AGM 2018. Further informa-
tion regarding the Nomination Committee and its work can be
found on the Group’s website:
www.electroluxgroup.com/corporate-governance

Nomination Committee for the AGM 2019
The Nomination Committee for the AGM 2019 is based on the
owner ship structure as of August 31, 2018, and was announced
in a press release on September 26, 2018.

The Nomination Committee’s members are:
• Johan Forssell, Investor AB, Chairman
• Kaj Thorén, Alecta
• Marianne Nilsson, Swedbank Robur Funds
• Carine Smith Ihenacho, Norges Bank Investment Management
• Staffan Bohman, Chairman of Electrolux
• Fredrik Persson, Board member of Electrolux

The AGM resolves upon:
• The adoption of the Annual Report.
• Dividend.
• Election of Board members and, if applicable, auditors.
• Remuneration to Board members and auditors.
• Guidelines for remuneration to Group Management.
• Other important matters.

The Nomination Committee’s tasks include preparing
a proposal for the next AGM regarding:
• Chairman of the AGM.
• Board members.
• Chairman of the Board.
• Remuneration to Board members.
• Remuneration for committee work.
• Amendments of instructions for the Nomination Committee,
• Auditors and auditors’ fees, when these matters are to be decided

if deemed necessary.

by the following AGM.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 105

In accordance with the procedures and the Code, the
Chairman shall among other things:
• Organize and distribute the Board’s work.
• Ensure that the Board discharges its duties and has relevant
knowledge of the company.
• Secure the efficient functioning of the Board.
• Ensure that the Board’s decisions are implemented efficiently.
• Ensure that the Board evaluates its work annually.

The working procedures for the Board also include detailed
instructions to the President and other corporate functions
regarding issues requiring the Board’s approval. Among other
things, these instructions specify the maximum amounts that
various decision-making functions within the Group are author-
ized to approve as regards credit limits, capital expenditure and
other expenditure.

The working procedures stipulate that the meeting for the
formal constitution of the Board shall be held directly after the
AGM. Decisions at this statutory meeting include the election
of members of the committees of the Board and authorization
to sign on behalf of the company. In addition to the statutory
Board meeting, the Board normally holds seven other ordinary
meetings during the year. Four of these meetings are held in
conjunction with the publication of the Group’s full-year report
and interim reports. One or two meetings are held in connection
with visits to Group operations. Additional meetings, including
telephone conferences, are held when necessary.

The Board’s work in 2018
During the year, the Board held eight meetings. All meetings
except one were held in Stockholm, Sweden. The attendance of
each Board member at these meetings is shown in the table on
page 113.

All Board meetings during the year followed an agenda,
which, together with the documentation for each item on the
agenda, was sent to Board members in advance of the meet-
ings. Meetings usually last for half a day or one entire day in
order to allow time for presentations and discussions. Electrolux
General Counsel serves as secretary at the Board meetings.
Each scheduled Board meeting includes a review of the
Group’s results and financial position, as well as the outlook for
the forthcoming quarters, as presented by the President. The
meetings also deal with investments and the establishment of
new operations, as well as acquisitions and divestments. The
Board decides on all investments exceeding SEK 100m and
receives reports on all investments exceeding SEK 25m.

Normally, the head of a business area also reviews a current

strategic issue at the meeting. For an overview of how the
Board’s work is spread over the year, see the table on pages
106–107.

Remuneration to the Board of Directors 2016–2018
(applicable as from the respective AGM)

SEK

2018

2017

2016

Chairman of the Board

2,150,000 2,075,000 2,030,000

Board member

Chairman of the Audit
Committee

600,000

580,000

560,000

260,000

250,000

Member of the Audit Committee

140,000

120,000

95,000

Chairman of the Remuneration
Committee

Member of the Remuneration
Committee

125,000

120,000

75,000

60,000

Board of
Directors

The Board of Directors
The Board of Directors has the overall
responsibility for Electrolux organization
and administration.

Composition of the Board
The Electrolux Board is comprised of ten members without
deputies, who are elected by the AGM, and three members with
deputies, who are appointed by the Swedish employee organi-
zations in accordance with Swedish labor law.

The AGM elects the Chairman of the Board. Directly after
the AGM, the Board holds a meeting for formal constitution at
which the members of the committees of the Board are elected,
among other things. The Chairman of the Board of Electrolux is
Staffan Bohman.

All current members of the Board, except for the President,
are non-executive members. One of the ten Board members,
who are elected by the AGM, is not a Swedish citizen.

For additional information regarding the Board of Directors, see pages 112–113. The
information is updated regularly at the Group’s website: www.electroluxgroup.com

Independence
The Board is considered to be in compliance with relevant
requirements for independence. The assessment of each Board
member’s independence is presented in the table on page 113.

All Directors except for Petra Hedengran and Jonas

Samuelson have been considered independent. Petra Heden-
gran has been considered independent in relation to the com-
pany and the administration of the company, but not in relation
to major shareholders of Electrolux. Jonas Samuelson has been
considered independent in relation to major shareholders of
Electrolux but not, in his capacity as President and CEO, in rela-
tion to the company and the administration of the company.
Jonas Samuelson has no major shareholdings, nor is he a
part-owner in companies having significant business relations
with Electrolux. Jonas Samuelson is the only member of Group
Management with a seat on the Board.

The Board’s tasks
One of the main tasks of the Board is to manage the Group’s
operations in such a manner as to assure the owners that their
interests in terms of a long-term profitable growth and value
creation are being met in the best possible manner. The Board’s
work is governed by rules and regulations including the Swedish
Companies Act, the Articles of Association, the Code and the
working procedures established by the Board. The Articles of
Association of Electrolux are available on the Group’s website:
www.electroluxgroup.com/corporate-governance

Working procedures and Board meetings
The Board determines its working procedures each year and
reviews these procedures as required. The working procedures
describe the Chairman’s specific role and tasks, as well as the
responsibilities delegated to the committees appointed by the
Board.

divestments.

The Board deals with and decides on Group-related issues
such as:
• Main goals.
• Strategic orientation.
• Essential issues related to financing, investments, acquisitions and
• Follow-up and control of operations, communication and organiza tion,
• Appointment of and, if necessary, dismissal of the President.
• Overall responsibility for establishing an effective system of internal
control and risk management as well as a satisfactory process for
monitoring the company’s compliance with relevant laws and other
regulations as well as internal policies.

including evaluation of the Group’s operational management.

ELECTROLUX ANNUAL REPORT 2018

106 Corporate governance report

Key focus areas for the Board during 2018
• Dividend payment for the fiscal year 2017.
• Adapting Electrolux strategy and business model to
global industry drivers such as digitalization, consolida-
tion, increased consumer power, sustainability and a
growing middle class.
• Initiating the work to evaluate and prepare for a poten-
tial separation of Professional Products business area
from the Group.
• Investments in manufacturing for increased cost effi-
ciency, through automation and digitalization, mainly
in North America and Latin America.
• Acquisitions to broaden Electrolux offering:

— Schneidereit GmbH, a supplier of professional

laundry rental solutions in Germany and Austria.

— SPM Drink Systems, an Italian based manufac-

turer of professional dispensers for beverages and
ice-cream.

• Divestment of the U.S. commercial and central vacuum
cleaner businesses in North America.

Ensuring quality in financial reporting
The working procedures determined annually by the Board
include detailed instructions on the type of financial reports and
similar information which are to be submitted to the Board. In
addition to the full-year report, interim reports and the annual
report, the Board reviews and evaluates comprehensive finan-
cial information regarding the Group as a whole and the entities
within the Group.

The Board also reviews, primarily through the Board’s Audit
Committee, the most important accounting principles applied
by the Group in financial reporting, as well as major changes in
these principles. The tasks of the Audit Committee also include
reviewing reports regarding internal control and financial
reporting processes, as well as internal audit reports submitted
by the Group’s internal audit function, Group Internal Audit.
The Group’s external auditors report to the Board as
necessary, but at least once a year. A minimum of one such
meeting is held without the presence of the President or any

other member of Group Management. The external auditors
also attend the meetings of the Audit Committee.

The Audit Committee reports to the Board after each of its

meetings. Minutes are taken at all meetings and are made
available to all Board members and to the auditors.

Board work evaluation
The Board evaluates its work annually with regard to working
procedures and the working climate, as well as regards the
focus of the Board work. This evaluation also focuses on access
to and requirements of special competence in the Board. The
evaluation is a tool for the development of the Board work and
also serves as input for the Nomination Committee’s work. The
evaluation of the Board is each year initiated and lead by the
Chairman of the Board. The evaluation of the Chairman is led by
one of the other members of the Board. Evaluation tools include
questionnaires and discussions.

In 2018, Board members responded to written question-

naires. As part of the evaluation process, the Chairman also had
individual discussions with Board members. The evaluations
were discussed at a Board meeting.

The result of the evaluations was presented for the

Nomination Committee.

Fees to Board members
Fees to Board members is determined by the AGM and dis-
tributed to the Board members who are not employed by
Electrolux. The fees to the Chairman and the Board members
was revised during 2018, see page 105.

The Nomination Committee has recommended that Board
members appointed by the AGM acquire Electrolux shares and
that these are maintained as long as they are part of the Board.
A shareholding of a Board member should after five years
correspond to the value of one gross annual fee.

Board members who are not employed by Electrolux are
not invited to participate in the Group’s long-term incentive
programs for senior managers and key employees.

For additional information on remuneration to Board members, see Note 27.

OVERVIEW OF VARIOUS ITEMS ON THE BOARD’S AGENDA AND COMMITTEE MEETINGS 2018

• Q4, Consolidated results.
• Report by external auditors.
• Dividend.
• Proposals for the AGM.

Statutory Board meeting:
• Appointment of committee members.
• Signatory powers.

Ordinary Board meetings
Audit Committee
Remuneration Committee

•
• •
•
Jan

Feb

March

• Q1 Quarterly

financial statements.

• • •
• •

Apr

May

June

July

Aug

Sep

Oct

•

Nov

•

Dec

Each scheduled Board meeting included a review of the Group’s results and financial position, as well as the outlook for the forthcoming quarters.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 107

Remuneration
Committee
Audit Committee

Committees of the Board
The Board has established a Remunera-
tion Committee and an Audit Committee.
The major tasks of these committees are

preparatory and advisory, but the Board may delegate deci-
sion-making powers on specific issues to the committees. The
issues considered at committee meetings shall be recorded in
minutes of the meetings and reported at the following Board
meeting. The members and Chairmen of the committees are
appointed at the statutory Board meeting following election
of Board members.

The Board has also determined that issues may be referred

to ad hoc committees dealing with specific matters.

Remuneration Committee
One of the Remuneration Committee’s primary tasks is to
propose guidelines for the remuneration to the members of
Group Management. The Committee also proposes changes in
remuneration to the President, for resolution by the Board, and
reviews and resolves on changes in remuneration to other mem-
bers of Group Management on proposal by the President.

The Committee has as from the AGM 2018 consisted of the
following three Board members: Petra Hedengran (Chairman),
Staffan Bohman and Ulrika Saxon. At least two meetings are
convened annually. Additional meetings are held as needed.
In 2018, the Remuneration Committee held four meetings.
The attendance of each Board member at these meetings is
shown in the table on page 113. Significant issues addressed
include resolution on remuneration to new members of

Group Management, review and resolution on changes in the
remuneration to members of Group Management, follow-up
and evaluation of previously approved long-term incentive
programs and remuneration guidelines for Group Management
and general review and preparation of long-term incentive
program and remuneration guidelines for Group Management
for 2019. The Head of Human Resources and Organizational
Development participated in the meetings and was responsible
for meeting preparations.

Audit Committee
The main task of the Audit Committee is to oversee the processes
of Electrolux financial reporting and internal control in order to
secure the quality of the Group’s external reporting. The Audit
Committee is also tasked with supporting the Nomination
Committee with proposals when electing external auditors.

The Audit Committee has as from the AGM 2018 consisted
of the following four Board members: Ulla Litzén (Chairman),
Staffan Bohman, Petra Hedengran and Fredrik Persson. The
external auditors report to the Committee at each ordinary
meeting. At least three meetings are held annually. Additional
meetings are held as needed.

In 2018, the Audit Committee held seven meetings. The

attendance of each Board member at these meetings is shown
in the table on page 113. Electrolux managers have also had
regular contacts with the Committee Chairman between meet-
ings regarding specific issues. The Group’s Chief Financial Officer
and the Head of Group Internal Audit have participated in the
Audit Committee meetings.

Management.

The Remuneration Committee’s tasks include for example:
• To prepare and evaluate remuneration guidelines for Group
• To prepare and evaluate targets and principles for variable
• To prepare terms for pensions, notices of termination and severance
• To prepare and evaluate Electrolux long-term incentive programs.

pay as well as other benefits for Group Management.

compensation.

management, concerning the financial reporting.

The Audit Committee’s tasks include for example:
• To review the financial reporting.
• To monitor the effectiveness of the internal control, including risk
• To follow up the activities of the Group Internal Audit as regards to
organization, recruiting, budgets, plans, results and audit reports.
• To review (and from December, 2018 approve) certain credit limits.
• To keep informed of the external audit and the quality control

performed by the Supervisory Board of Public Accountants and to
evaluate the work of the external auditors.

• To inform the Board of the outcome of the external audit and explain
how the audit contributed to the reliability of the financial reporting as
well as the role of the Committee in this process.

engagements in other tasks than audit services.

• To review, and when appropriate, preapprove the external auditors’
• To evaluate the objectivity and independence of the external auditors.
• To support the Nomination Committee with proposals when electing

Ordinary Board meetings

Audit Committee

Remuneration Committee

• •

•

Jan

Feb

March

May

• • •

• •

Apr

external auditors.

• Q3 Quarterly

financial statements.

•
•

Aug

Sep

Oct

• Board work evaluation.

•
Nov

•
•
•
Dec

• Visit to one of the
Group’s operations.
• Rules of procedure

of the Board.

• Q2 Quarterly

financial statements.

•

June

•
•
•
July

ELECTROLUX ANNUAL REPORT 2018

108 Corporate governance report

External Audit

External auditors
The AGM in 2018 elected Deloitte AB
(Deloitte) as the Group’s new external

auditors for one year, until the AGM in 2019. The election of
Deloitte was preceded by a thorough procurement process and
recommendation by the Audit Committee. Authorized Public
Accountant Jan Berntsson is the auditor in charge of Electrolux.
Deloitte provides an audit opinion regarding AB Electrolux,

the financial statements of its subsidiaries, the consolidated
financial statements for the Electrolux Group and the adminis-
tration of AB Electrolux. The auditors also conduct a review of
the report for the second quarter.

The audit is conducted in accordance with the Swedish
Companies Act, International Standards on Auditing (ISA) and
generally accepted auditing standards in Sweden.

Audits of local statutory financial statements for legal entities
outside of Sweden are performed as required by law or applica-
ble regulations in the respective countries, including issuance of
audit opinions for the various legal entities.

At the 2018 Annual General Meeting Deloitte was appointed

auditors for the period until the 2019 Annual General Meeting.
PricewaterhouseCoopers (PwC) was appointed auditors for the
period until the 2018 Annual General Meeting.

Deloitte

Audit fees

Audit-related fees

Tax fees

All other fees

Total fees to Deloitte

PwC

Audit fees

Audit-related fees

Tax fees

All other fees

Total fees to PwC

Audit fees to other audit firms

Total fees to auditors

2018

2017

2016

—

For details regarding fees paid to the auditors and their non-audit assignments in the Group,
see Note 28.

Internal Audit

Group Internal Audit
The internal audit function is responsible
for independent, objective assurance, in

order to systematically evaluate and propose improvements for
more effective governance, internal control and risk manage-
ment processes.

The process of internal control and risk management has
been developed to provide reasonable assurance that the
Group’s goals are met in terms of efficient operations, compli-
ance with relevant laws and regulations and reliable financial
reporting.

Internal audit assignments are conducted according to a
risk based plan developed annually and approved by the Audit
Committee. The audit plan is derived from an independent risk
assessment conducted by Group Internal Audit to identify and
evaluate risks associated with the execution of the company
strategy, operations, and processes. The plan is designed to
address the most significant risks identified within the Group and
its business areas. The audits are executed using a methodology
for evaluating the design and effectiveness of internal controls
to ensure that risks are adequately addressed and processes
are operated efficiently.

Opportunities for improving the efficiency in the governance
and internal control and risk management processes identified
in the internal audits are reported to responsible business area
management for action. A summary of audit results is provided
to the Audit Board and the Audit Committee, as is the status of
management’s implementation of agreed actions to address
findings identified in the audits.

For additional information on internal control, see pages 116–117. For additional information
on risk management, see Note 1, Note 2 and Note 18.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 109

Company
Management of
Electrolux

Electrolux – a global leader with a purpose
to shape living for the better
Electrolux has a strategic framework that
connects a consumer experience focused
business model with a clear company purpose – Shape living for
the better. To achieve the purpose and drive profitable growth,
Electrolux uses a business model which focuses on creating
outstanding consumer experiences. By creating desirable solu-
tions and great experiences that enrich peoples’ daily lives and
the health of the planet, Electrolux wants to be a driving force
in defining enjoyable and sustainable living. Focus is to invest in
innovations that are most relevant for creating the outstanding
consumer experience to make great tasting food, the best care
for clothes and to increase wellbeing in the home.

Targeted growth and optimization of the product portfo-
lio to the most profitable product categories and products
with distinct consumer benefits, will strengthen the presence
of Electrolux in the product categories and channels where
the Group is most competitive. In addition to organic growth,
Electrolux sees a potential to grow through acquisitions. This is
supported by a strong foundation of Operational Excellence
and Talent, Teamship and Continuous Improvement, as well as
three important transformational drivers; Emerging markets
acceleration, Digital transformation and Sustainable develop-
ment. Electrolux objective is to grow with consistent profitability,
see the financial targets below.

A sustainable business
Sustainability leadership is crucial to realizing the Electrolux
strategy for long-term profitable growth. In 2018, Electrolux
most resource-efficient products represented 21% of products
sold and 29% of gross profit.

The company takes a consistent approach to sustain ability
in the countries where Electrolux operates. Understanding and
engaging in challenges such as climate change, creating ethi-
cal and safe workplaces, and adopting a responsible approach
to sourcing and restructuring are important for realizing the
business strategy.

In 2018, Electrolux further developed its Ethics Program and
established a new Code of Conduct, setting out the framework of
how Electrolux shall conduct its operations in ethical and sustain-
able ways. The Code of Conduct, which has been endorsed by
the Board, serves as an introduction to the Group Policies, and its
purpose is to increase the clarity on what the company's principles
mean for the employees. An educational campaign for employ-
ees has been prepared with a planned rollout during 2019.

The Ethics Program also encompasses a global whistleblow-
ing system – the Ethics Helpline – through which employees can
report suspected misconduct in local languages. Reports may
be submitted anonymously if legally permitted. The highest num-
ber of reports in 2018 related to discrimination and harassment,
such as the use of abusive language or disrespectful behavior.

In line with the UN Guiding Principles on Business and Human

Rights, Electrolux conducts human rights risk assessments at

both global and local levels since 2016. The methodology
for the assessments focuses on identifying the risk of harming
people, as a direct or indirect result of Electrolux operations, and
includes corruption risks as well as opportunities to increase
local positive impacts. In 2018, a local assessment was con-
ducted of the company's operations in Ukraine

In 2018, Electrolux maintained the position as industry leader

in the Household Durables category in the Dow Jones Sustain-
ability World Index. RobecoSAM publishes the Dow Jones
Sustainability Indices (DJSI), which evaluate the performance
of the world’s leading companies in sustainability – from each
industry on a global and regional level, respectively. The evalu-
ation is based on criteria such as corporate governance, risk
management, branding, climate change mitigation, supply
chain standards and labor practices.

Read more about Electrolux sustainability work:

www.electroluxgroup.com/sustainability

Electrolux as a tax payer
One important aspect of Electrolux company purpose – Shape
living for the better – is to act as a good corporate citizen and
taxpayer wherever Electrolux operates.

Electrolux plays an important role in contributing to public
finances in all jurisdictions where the Group operates. The Group
has approximately 54,000 employees operating in more than
58 countries and has about 50 manufacturing facilities across
five continents.

Of Electrolux total tax contribution, as defined in the below
chart, corporate tax represented approximately13% in 2018.
Corporate income taxes are only a portion of the Group’s
total contribution to public finances in Electrolux markets. In
addition to corporate income taxes, Electrolux pays indirect
taxes, customs duties, property taxes, employee related taxes,
environmental charges and a number of other direct or indi-
rect contributions to governments. The total contribution to
public finances for 2018 amounted to approximately SEK 8.0bn
whereof approximately half related to emerging markets.

Electrolux most transparent contribution to public finances

around the world is corporate income taxes, see Note 10.
Corporate income taxes amounted to SEK 1,081m in 2018,
representing a global effective tax rate of the Group of 22.1%.
Approximately 40% of the total corporate income taxes in
2018 related to the Group’s activities in emerging markets.
For more information on Electrolux tax policy, see:

www.electroluxgroup.com

ELECTROLUX TOTAL TAXES 2018

Employer tax & fees, 39 %
Corporate tax, 13%
Property tax, 2 %
Customs, 18%
Indirect tax, 24 %
Environmental tax & fees, 4%

Taste, Care
& Wellbeing
Innovation

Branded
Star Products
with
Preferred
Partners

Outstanding
Consumer
Experiences

Engaging
Ownership
& Quality
Experience

Operational Excellence

Talent, Teamship & Continuous Improvement

Emerging Markets
Acceleration

Digital
Transformation

Sustainable
Development

ELECTROLUX ANNUAL REPORT 2018

Financial targets over a business cycle
The financial goals set by Electrolux aim to strengthen the
Group’s leading, global position in the industry and assist in
generating a healthy total yield for Electrolux shareholders.
The objective is growth with improved profitability.
• Sales growth of at least 4% annually.
• Operating margin of at least 6%.
• Capital turnover-rate of at least 4.
• Return on net assets >20%.

110 Corporate governance report

Risk assessment
Electrolux monitors and minimizes key risks in a structured and
proactive manner. In general, there are two types of risks: Strate-
gic risks and manageable business risks. The strategic risks are
related to the Group’s strategy and are impacted by the external
environment. The business risks comprise of operational and
financial risks which are managed by the Group’s operational
units and Group Treasury, respectively.

Electrolux ability to increase profitability and shareholder
value is largely dependent on its success in developing innova-
tive products and create outstanding consumer experiences
under strong brands while maintaining cost- efficient operations.
Realizing this potential requires effective and controlled enter-
prise risk management.

Macroeconomic trends, changes in industry dynamics and
political risks are factors that impact the appliance industry and
the markets in which Electrolux operates. To manage exter-
nal risks and opportunities, Electrolux puts close attention to
understanding the economic and political development in its
key markets and pro-actively manage and adapt operations.
External risks include, variations in demand, price competition
and changes in prices for raw materials. Changing industry
dynamics such as digitalization, consolidation and sustainability
are other examples. In addition, the Group is exposed to risks
related to financial operations, e.g., interest risks, financing risks,
currency risks and credit risks.

Risk exposures are managed by internal bodies, see chart

below, and business area boards.

The purpose of the internal audit function, Group Internal
Audit, is to provide reasonable assurance that the Group’s goals
are met in terms of efficient operations, compliance with rele-
vant laws and regulations and reliable financial reporting, see
pages 116–117.

Management and company structure
Electrolux aims at implementing strict norms and efficient pro-
cesses to ensure that all operations create long-term value for
shareholders and other stakeholders. This involves the mainten-
ance of an efficient organizational structure, systems for inter-
nal control and enterprise risk management and transparent
internal and external reporting.

The Group has a decentralized corporate structure in which
the overall management of operational activities is largely per-
formed by the business area boards.

Electrolux operations have during 2018 been organized into
six business areas. Within Major Appliances, the business areas
are geographically defined, while the business areas Home Care
& SDA and Professional Products are global. On August 16, 2018
it was announced that with effect from January 1, 2019, the Major
Appliances organization in Middle East and Africa (MEA), which
then was part of Major Appliances Europe, Middle East and
Africa (EMEA), will be included in Major Appliances Asia Pacific
(APAC). On February 1, 2019, it was announced that the Home

Care & SDA business area will be combined with the four current
major appliances business areas with immediate effect.
During 2018 six group staff units have supported the business
areas: Finance, Legal Affairs, Human Resources and Orga-
nizational Development, Marketing and Branding, Global
Operations and Communications. As from February 1, 2019, the
following group staff functions are being implemented: Finance,
Legal Affairs, HR & Communications, Global Operations
and Global Consumer Experience organization. The Global
Consumer Experience organization is globally responsible for
areas such as marketing, design, product lines, digital con-
sumer solutions and ownership experience.

There are also a number of internal bodies which are forums

that are preparatory and decision-making in their respective
areas, see chart below. Each body includes representatives
from concerned functions.

In order to fully take advantage of the Group’s global pres-
ence and economies of scale, the Group has established Global
Operations with the responsibility for product development,
purchasing, manufacturing, design and quality.

President and
Group
Management

President and Group Management
Group Management currently includes
the President, the five business area heads
and five group staff heads. The President

is appointed by and receives instructions from the Board.
The President, in turn, appoints other members of Group
Management and is respon sible for the ongoing management
of the Group in accordance with the Board’s guidelines and
instructions. Group Management holds monthly meetings to
review the previous month’s results, to update forecasts and
plans and to discuss strategic issues.

A diversified management team
The Electrolux management team, with its extensive expertise,
diverse cultural backgrounds and experiences from various
markets in the world, forms an excellent platform for pursuing
profitable growth in accordance with the Group’s strategy.
Electrolux Group Management represents seven different
nationalities. Most of them have previous experience of
predominantly multinational consumer goods companies.
In recent years, a number of major initiatives have been

launched aimed at better leveraging the unique, global position
of Electrolux. In several areas, global and cross-border orga-
nizations have been established to, for example, increase the
pace of innovation in product development, reduce complexity
in manufacturing and optimize purchasing.

Changes in Group Management
The following changes in the Group management were made
with effect from October 1, 2018.

Dan Arler, previous Head of Major Appliances Europe,
Middle East and Africa (EMEA) and Executive Vice President of
AB Electrolux, was appointed Head of Major Appliances APAC

INTERNAL BODIES

President and Group
Management

Internal bodies

Insider
Committee

Disclosure
Committee

Enterprise Risk
Management Board

Ethics & Human Rights
Steering Group

Tax Board

Pension Board

Sourcing Board

Audit Board

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 111

& MEA and Executive Vice President of AB Electrolux; replacing
Kenneth L. Ng, who had decided to retire from the company.

Anna Ohlsson-Leijon, previous Chief Financial Officer (CFO)

of AB Electrolux, was appointed Head of Major Appliances
Europe and Executive Vice President of AB Electrolux.

Therese Friberg, previous CFO of Major Appliances EMEA,

was appointed new CFO of AB Electrolux.

The following changes in the Group management have been

announced with effect from February 1, 2019.

Ola Nilsson, previous Head of Home Care & SDA, was

appointed Group Chief Experience Officer (CXO) and Executive
Vice President of AB Electrolux, and as a consequence of the
new organizational structure, the Chief Marketing Officer Lars
Hygrell is no longer member of Group Management. Jan
Brockmann, Chief Operations Officer was also appointed as
Executive Vice President of AB Electrolux.

For details regarding members of Group Management, see pages 114–115
The information is updated regularly at the Group’s website:
www.electroluxgroup.com

Key focus areas for the President and
Group Management in 2018
• Appointment of new Group Management members.
• Focus on taste, care and wellbeing innovation areas
to provide outstanding consumer experiences.
• Program to improve quality and the ownership
experience for consumers.
• Product portfolio management to focus on star products
for profitable growth.
• Continues improvement to achieve a competitive cost
structure.
• Modularization, automation and digitalization within
manufacturing.
• Actions to mitigate increased costs for raw material,
trade tariffs in North America and currency headwinds,
particularly in Latin America.
• Increased investments in manufacturing for further
growth and cost efficiency mainly in North America and
Latin America.
• Digitalization such as connected appliances and digital
commerce.
• Acquisitions to broaden Electrolux offering:

— Schneidereit GmbH, a supplier of professional

laundry rental solutions in Germany and Austria.
— SPS Drink Systems, an Italian based manufacturer

of professional dispensers for beverages and
ice-cream.

• Divestment of the U.S. commercial and central vacuum
cleaner businesses in North America.

Business
Area Boards

Business areas
The business area heads are also mem-
bers of Group Management and have
responsibility for the operating income and net assets of their
respective business area.

The overall management of the business areas is the respon-
sibility of business area boards, which meet quarterly. The Presi-
dent is the chairman of all such boards. The business area board
meetings are attended by the President, the management of
the respective business area and the group staff heads. The
business area boards are responsible for monitoring on-going
operations, establishing strategies, determining business area
budgets and making decisions on major investments.

Remuneration

Remuneration to
Group Management
Remuneration guidelines for Group

Management are resolved upon by the AGM, based on the
proposal from the Board. Remuneration to the President is
then resolved upon by the Board, based on proposals from
the Remuneration Committee. Changes in the remuneration
to other members of Group Management is resolved upon by
the Remuneration Committee, based on proposals from the
President, and reported to the Board.

Electrolux shall strive to offer total remuneration that is fair
and competitive in relation to the country of employment or
region of each Group Management member. The remuneration
terms shall emphasize “pay for performance”, and vary with the
performance of the individual and the Group.

Remuneration may comprise of:
• Fixed compensation.
• Variable compensation.
• Other benefits such as pension and insurance.

Following the “pay for performance” principle, variable compen-
sation shall represent a significant portion of the total compen-
sation opportunity for Group Management. Variable compensa-
tion shall always be measured against pre-defined targets and
have a maximum above which no pay-out shall be made. The
targets shall principally relate to financial performance.

Each year, the Board of Directors will evaluate whether or not

a long-term incentive program shall be proposed to the AGM.
The AGM 2018 decided on a long-term share program for up to
350 senior managers and key employees.

For additional information on remuneration, remuneration guidelines, long-term
incentive programs and pension benefits, see Note 27.

TIME-LINE FOR THE LONG-TERM INCENTIVE PROGRAM FOR SENIOR MANAGEMENT 2018

2018

2019

2020

Performance period

Start

2021

Year

The calculation of the number of per-
formance shares, if any, is connected to
three performance targets for the Group
established by the Board; (i) earnings
per share (ii) return on net assets, and (iii)
adjusted organic sales growth, for the
2018 financial year. Allotment of perfor-
mance shares, if any, to the participants
will be made in 2021.

Invitations to
participants in
the program.

ELECTROLUX ANNUAL REPORT 2018

Performance
shares
allotted.

112 Corporate governance report

Board of Directors and Auditors

STAFFAN BOHMAN
Chairman

Born 1949. Sweden. B.Sc.
Econ. Elected 2018. Member
of the Electrolux Audit
Committee and the Electrolux
Remuneration Committee.

Other assignments: Chairman
of the Board of Ipco AB,
Upplands Motor Holding AB
and the German-Swedish
Chamber of Commerce.
Board member of Atlas Copco
AB and the Royal Swedish
Academy of Engineering
Sciences (IVA).

Previous positions: President
and CEO of Sapa and
DeLaval as well as Board
Member of, inter alia., Scania
AB, Inter-IKEA Holding NV and
Rezidor Hotel Group AB.

Holdings in AB Electrolux:
50,000 B-shares.

JONAS SAMUELSON
President and CEO

Born 1968. Sweden. M.Sc.
Econ. Elected 2016.

Other assignments: Board
Member of Polygon AB and
Axel Johnson AB.

Previous positions: Various
senior positions within
Electrolux including CFO of
AB Electrolux, COO Global
Operations Major Appliances
and Head of Major Appliances
EMEA. Chief Financial Officer
and Executive Vice President
of Munters AB. Various posi-
tions within General Motors,
mainly in the U.S., and Saab
Automobile AB.

Holdings in AB Electrolux:
32,070 B-shares.

PETRA HEDENGRAN
Born 1964. Sweden. M. of Laws.
Elected 2014. Chairman of
the Electrolux Remuneration
Committee and member of the
Electrolux Audit Committee.

Other assignments: General
Counsel and member of Group
Management of Investor
AB. Board Member of Alecta
and the Association for
Generally Accepted Principles
in the Securities Market (Sw.
Föreningen för god sed på
värdepappersmarknaden).

Previous positions: Attorney
and partner at Advokatfirman
Lindahl. Various positions
within the ABB Financial
Services including General
Counsel of ABB Financial
Services, Nordic Region.
Law Clerk with the Stockholm
District Court. Associate at
Gunnar Lindhs Advokatbyrå.

Holdings in AB Electrolux:
9,000 B-shares.

HASSE JOHANSSON
Born 1949. Sweden. M.Sc. in
Electrical Engineering. Elected
2008.

Other assignments: Chairman
of the Board of Dynamate
Industrial Services AB and
Uniter AB. Board Member
of Autoliv Inc., PowerCell
Sweden AB, Skyllbergs Bruk
AB, CalixKlippan Group
AB, DevPort AB and SEM
Electromagnet Holding AB.

Previous positions: Executive
Vice President and Head of
R&D of Scania CV AB. Founder
of Mecel AB (part of Delphi
Corporation). Various senior
management positions within
Delphi Corporation.

Holdings in AB Electrolux:
4,000 B-shares.

ULLA LITZÉN

Born 1956. Sweden. B.Sc.
Econ. and M.B.A. Elected 2016.
Chairman of the Electrolux
Audit Committee.

Other assignments: Board
Member of Epiroc AB,
Husqvarna AB, NCC AB and
Ratos AB.

Previous positions: President
of W Capital Management
AB, wholly-owned by the
Wallenberg Foundations.
Various leading positions
within the Investor Group
including Managing Director
and member of Group
Management of Investor AB.

Holdings in AB Electrolux:
4,000 B-shares.

BERT NORDBERG
Born 1956. Sweden. Engineer.
Elected 2013.

Other assignments: Chairman
of the Board of Vestas
Wind Systems A/S. Board
Member of Svenska Cellulosa
Aktiebolaget SCA, Axis
Communications AB, Essity AB
and Saab Group.

Previous positions: Chairman,
President and CEO of Sony
Mobile Communications AB.
Various leading positions
within the Ericsson Group.
Various positions within
Data General Corporation
and Digital Equipment
Corporation.

Holdings in AB Electrolux:
3,000 B-shares.

FREDRIK PERSSON
Born 1968. Sweden. M.Sc.
Econ. Elected 2012. Member
of the Electrolux Audit
Committee.

Other assignments:
Chairman of the Board of
JM AB, the Confederation
of Swedish Enterprise (Sw.
Svenskt Näringsliv) and ICC
Sweden. Board Member
of Hufvudstaden AB, ICA
Gruppen AB and Ahlström
Capital Oy.

Previous positions: Various
leading positions within Axel
Johnson AB including President
and CEO. Head of Research
of Aros Securities AB. Various
positions within ABB Financial
Services AB.

Holdings in AB Electrolux:
3,000 B-shares.

DAVID PORTER

ULRIKA SAXON

KAI WÄRN

Born 1965. USA. Bachelor’s
degree, Finance. Elected 2016.

Other assignments: Head of
Microsoft Stores, Corporate
Vice President, Microsoft Corp.

Previous positions: Head
of Worldwide Product
Distribution at DreamWorks
Animation SKG. Various
positions within WalMart
Stores, Inc.

Holdings in AB Electrolux:
1,250 B-shares.

Born 1966. Sweden. Studies
in Economics. Elected 2011.
Member of the Electrolux
Remuneration Committee.

Other assignments: President
and CEO of Bonnier Ventures.
Board Member of SF Studios,
Adlibris, KIT Story Engine, FLX,
Refunder and partner in AI
Sustainability Center.

Previous positions: Senior
positions within the Bonnier
Group including CEO of
Bonnier Magazines. Board
engagements in TocaBoca,
United Screens. Senior posi-
tions within marketing and
consultancy.

Holdings in AB Electrolux:
2,000 B-shares.

Born 1959. Sweden. M.Sc.
in Mechanical Engineering.
Elected 2017.

Other assignments: President
and CEO of Husqvarna AB.
Board Member of
Husqvarna AB.

Previous positions: Operations
Partner at IK Investment
Partners Norden AB.
President and CEO of Seco
Tools AB. Various positions
within ABB.

Holdings in AB Electrolux:
4,000 B-shares.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 113

SECRETARY OF THE BOARD

MIKAEL ÖSTMAN
Born 1967. M. of Laws and B.Sc. Econ. General
Counsel of AB Electrolux.

Secretary of the Electrolux Board since 2017.

Holdings in AB Electrolux: 8,369 B-shares.

COMMITTEES OF THE
BOARD OF DIRECTORS

Remuneration Committee
Petra Hedengran (Chairman),
Staffan Bohman and Ulrika Saxon.

Audit Committee
Ulla Litzén (Chairman), Staffan Bohman,
Petra Hedengran and Fredrik Persson.

AUDITORS

Deloitte AB

JAN BERNTSSON
Born 1964. Authorized Public Accountant.

Other audit assignments: Kinnevik AB and
Boliden AB.

Holdings in AB Electrolux: 0 shares.

ULF CARLSSON
Born 1958. Representative of
the Swedish Confederation of
Trade Unions. Elected 2001.

Board meeting attendance:
8/8

Holdings in AB Electrolux:
0 shares.

PETER FERM

Born 1965. Representative
of the Federation of Salaried
Employees in Industry and
Services. Elected 2018.

Board meeting attendance:2)
6/8

Holdings in AB Electrolux:
0 shares.

2) Elected April 5, 2018. Previously

deputy member.

At the Annual General Meeting in 2018, Deloitte
AB was elected as new auditors for a period of
one year until the Annual General Meeting in 2019.

EMPLOYEE REPRESENTATIVES

VIVECA
BRINKENFELDT-LEVER
Born 1960. Representative of
the Federation of the Salaried
Employees in Industry and
Service. Elected 2018.

Board meeting attendance:1)
4/8

Holdings in AB Electrolux:
0 shares.

1) Elected December 1, 2018.
Previously deputy member.

EMPLOYEE REPRESENTATIVES, DEPUTY MEMBERS

MONICA ANNALA
Born 1966. Representative of
the Confederation of Trade
Unions. Elected 2018.

Holdings in AB Electrolux:
0 shares.

RICHARD DELLNER
Born 1953. Representative
of the Federation of Salaried
Employees in Industry and
Services. Elected 2013.

JOACHIM NORD

Born 1966. Representative
of the Federation of Salaried
Employees in Industry and
Services. Elected 2018.

Holdings in AB Electrolux:
500 B-shares.

Holdings in AB Electrolux:
0 shares.

Holdings in AB Electrolux are stated as of
December 31, 2018 and includes holdings
of related natural and legal persons, when
applicable.

THE BOARD’S REMUNERATION DURING 2018, MEETING ATTENDANCE AND INDEPENDENCE

Staffan Bohman1)

Ronnie Leten1)

Petra Hedengran

Hasse Johansson3)

Ulla Litzén

Bert Nordberg

Fredrik Persson

David Porter

Jonas Samuelson

Ulrika Saxon

Kai Wärn

Total remuneration 20 18,
'000 SEK

Board meeting
attendance

Remuneration
Committee attendance

Audit Committee
attendance

Indepen dence2)

1,827

544

942

775

938

595

775

595

—

695

595

6/8

2/8

8/8

7/8

8/8

3/4

1/4

4/4

5/7

7/7

6/7

Yes

1) Ronnie Leten resigned as Board member and Chairman of the Board, and Staffan Bohman replaced him, at the AGM in April 2018.
2) For further information about the independence assessment, see page 105.
3) The total remuneration 2018 for Hasse Johansson includes compensation for work relating to investments, modularization and quality.

ELECTROLUX ANNUAL REPORT 2018

114 Corporate governance report

Group Management

JONAS SAMUELSON
President and CEO

—

Born 1968. Sweden. M.Sc. in
Business Administration and
Economics. In Group Management
and employed since 2008.

Other assignments: Board Member
of Polygon AB and Axel Johnson AB.

Previous positions: Various senior
positions within Electrolux including
CFO of AB Electrolux, COO Global
Operations Major Appliances
and Head of Major Appliances
EMEA. Chief Financial Officer and
Executive Vice President of Munters
AB. Various senior positions within
General Motors, mainly in the U.S.,
and Saab Automobile AB.

Holdings in AB Electrolux:
32,070 B-shares.

THERESE FRIBERG
Chief Financial Officer

—

Born 1975. Sweden. B.Sc. in
Business Administration. In Group
Management since 2018 and
employed since 1999.

Previous positions: CFO of
Electrolux Major Appliances
EMEA. Other senior positions
within Electrolux including Head of
Group Business Control and Sector
Controller Home Care & SDA.

Holdings in AB Electrolux:
6,259 B-shares

DANIEL (DAN) ARLER
Head of Major Appliances Asia
Pacific, Middle East and Africa,
Executive Vice President

—

Born 1969. The Netherlands. B.Sc. in
Marketing. In Group Management
since 2016 and employed since
2002.

Previous positions: Head of
Electrolux Major Appliances
EMEA. Other senior positions
within Electrolux including General
Manager of Electrolux Japan and
Senior Vice President Product Line
Kitchen in Major Appliances EMEA.
Management positions in Stanley
Works Europe and the Whirlpool
Corporation in Europe.

Holdings in AB Electrolux:
9,702 B-shares.

JAN BROCKMANN
Chief Operations Officer,
Executive Vice President

—

Born 1966. Germany. M.Sc. in
Mechanical Engineering, M.B.A.
In Group Management since 2011
and employed since 2010.

Previous positions: Various senior
positions within Electrolux including
Group Chief Technology Officer
and Head of R&D, Electrolux
Major Appliances. Various senior
product management positions
within Volkswagen Group. Project
Manager Automotive/Restructuring
in Roland Berger Strategy
Consultants GmbH. Key Account
and General Management posi-
tions within Valeo Group.

Holdings in AB Electrolux:
10,514 B-shares.

RICARDO CONS
Head of Major Appliances Latin
America, Executive Vice President

—

Born 1967. Brazil. Bachelor
in Business Administration,
Finance and Marketing, MBA in
Team Management. In Group
Management since 2016 and
employed since 1997–2011
and 2016.

Previous positions: Management
positions at Franke in Brazil.
Various senior positions at
Electrolux Brazil, including
President Small Appliances Latin
America, Sales and Marketing
Director Major Appliances.
Positions in Volvo Brazil.

Holdings in AB Electrolux:
0 shares.

OLA NILSSON
Chief Experience Officer,
Executive Vice President

—

Born 1969. Sweden. M.Sc.
in International Business
Administration. In Group
Management since 2016 and
employed since 1994.

Previous positions: Head of Home
Care & Small Domestic Appliances.
Various senior positions within
Electrolux including Senior Vice
President, Product Line Laundry
Major Appliances EMEA and
President Small Appliances
Asia Pacific.

Holdings in AB Electrolux:
5,235 B-shares

Holdings in AB Electrolux are stated as of December 31, 2018 and
includes holdings of related natural and legal persons, when applicable.

ELECTROLUX ANNUAL REPORT 2018

Corporate governance report 115

ALAN SHAW
Head of Major Appliances North
America, Executive Vice President

—

Born 1963. USA. B.S. in Economics
and Political science, M.B.A. in
Marketing. In Group Management
and employed since 2016.

Previous positions: Executive
Vice President at Husqvarna AB.
President and Chief Executive
Officer at Char-Broil LLC.
President and Chief Executive
Officer at Murray Group. Various
senior management positions in
Asia-Pacific and North America
at Whirlpool. Marketing Director
at a Whirlpool JV, Consul, in Brazil.
Product management positions at
Whirlpool Corporation.

Holdings in AB Electrolux:
0 shares.

LARS WORSØE PETERSEN
Head of HR & Communications,
Senior Vice President

—

Born 1958. Denmark. M.Sc.
in Economics and Business
Administration. In Group
Management since 2011 and
employed since 1994–2005 and
2011.

Previous positions: Head of
Group Staff Human Resources at
Husqvarna AB, 2005–2011. Various
senior positions within Electrolux
including Head of Human
Resources for Electrolux Major
Appliances North America and
Head of Electrolux Holding A/S
in Denmark.

Holdings in AB Electrolux:
18,102 B-shares.

ALBERTO ZANATA
Head of Professional Products,
Executive Vice President

—

Born 1960. Italy. University degree
in Electronic Engineering with
Business Administration. In Group
Management since 2009 and
employed since 1989.

Previous positions: Senior
management positions within
Electrolux including Head of
Professional Products in North
America and senior management
positions in Electrolux Professional
Products.

Holdings in AB Electrolux:
27,468 B-shares.

CHANGES IN GROUP MANAGEMENT ANNOUNCED
ON FEBRUARY 1, 2019

The following changes in the Group Management have been
announced with effect from February 1, 2019.

Ola Nilsson, previous Head of Home Care & SDA, was appointed
Group Chief Experience Officer (CXO) and Executive Vice President
of AB Electrolux, and as a consequence of the new organizational
structure, the Chief Marketing Officer Lars Hygrell is no longer member
of Group Management. Jan Brockmann, Chief Operations Officer was
also appointed as Executive Vice President of AB Electrolux.

ANNA OHLSSON-LEIJON
Head of Major Appliances Europe,
Executive Vice President

—

Born 1968. Sweden. B.Sc. in Business
Administration and Economics. In
Group Management since 2016
and employed since 2001.

Other assignments: Board member
of Alfa Laval AB.

Previous positions: Chief Financial
Officer of AB Electrolux. Other
senior positions within Electrolux
including CFO of Electrolux Major
Appliances EMEA and Head of
Electrolux Corporate Control &
Services. Chief Financial Officer of
Kimoda. Various positions within
PricewaterhouseCoopers.

Holdings in AB Electrolux:
8,798 B-shares.

MIKAEL ÖSTMAN
General Counsel,
Senior Vice President

—

Born 1967. Sweden. M. of Laws and
B.Sc. Econ. In Group Management
since 2017 and employed since
2002.

Previous positions: Various senior
positions within Electrolux including
Head of Electrolux Corporate Legal
Department and Head of Electrolux
Legal Affairs Europe. Corporate
Counsel at Telia Mobile AB. Lawyer
at Advokatfirman Vinge. Law Clerk
with the Stockholm District Court.

Holdings in AB Electrolux:
8,369 B-shares.

ELECTROLUX ANNUAL REPORT 2018

116 Corporate governance report

Internal control over financial reporting

The Electrolux Control System (ECS) has been developed to ensure accurate and reliable financial
reporting and preparation of financial statements in accordance with applicable laws and regulations,
generally accepted accounting principles and other requirements for listed companies. The ECS adds
value through clarified roles and responsibilities, improved process efficiency, increased risk awareness
and improved decision support.
The ECS is based on the Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The five components of this framework
are control environment, risk assessment, control activities, monitor and improve and inform and
communicate.

Control environment
The foundation for the ECS is the control environment, which
determines the individual and collective behavior within the
Group. It is defined by policies and directives, man-
uals, and codes, and enforced by the organ-
izational structure of Electrolux with clear
responsibility and authority based on
collective values.

Corruption Policy, as well as in policies for information, finance,
and in the accounting manual. Together with laws and external
regulations, these internal guidelines form the control

environment and all Electrolux employees are

held accountable for compliance.

The Electrolux Board has overall

responsibility for establishing an
effective system of internal con-
trol. Responsibility for maintain-
ing effective internal controls
is delegated to the President.
The governance structure of
the Group is described on page
102. Specifically for financial
reporting, the Board has estab-
lished an Audit Committee, which
assists in overseeing relevant
policies and important accounting
principles applied by the Group.

urth Q u arte r

Ele

c t r o l u x Control Syste

First

Risk
assessment

Improve

Inform and
communicate

Control
activities

All entities within the Electrolux Group
must maintain adequate internal

controls. As a minimum requirement,

control activities should address key
risks identified within the Group.
Group Management have the
ultimate responsibility for internal
controls within their areas of
responsibility. Group Manage-
ment is described on pages
114–115.

The ECS Program Office, a
department within the Group
Internal Audit function, has devel-
oped the methodology and is

responsible for maintaining the ECS.

The limits of responsibilities and
authorities are given in directives for
delegation of authority, manuals, policies
and procedures, and codes, including the Code
of Conduct, the Workplace Policy, and the Anti-

To ensure timely completion of these
activities, specific roles aligned with the
company structure, with clear responsibilities

regarding internal control, have been assigned

within the Group.

Monitor

ontrol env i r o n m e

arter

S e

a rter

n t

d Q

CONTROL ENVIRONMENT — EXAMPLE

Code of Conduct
Minimum standards in the area of environment,
health and safety, labor standards and human
rights. The Code of Conduct is mandatory for
Electrolux units.

Credit Directive
Rules for customer assessment and credit risk
that clarify responsibilities and are the frame-
work for credit decisions.

Internal Control Directive
Details responsibility for internal controls.
Controls should address the Minimum Internal
Control Requirements (MICR) within every appli-
cable process, for example “Order to Cash”.

Group Finance Policy
Details the general framework for how financial
operations shall be organized and managed
within the Group. The policy contains directives
and other mandatory standards issued by the
Group Finance organization.

Delegation of Authority Directive
Details the approval rights, with monetary,
volume or other appropriate limits, e.g.,
approval of credit limits and credit notes.

Accounting Manual
Accounting principles and reporting instruc-
tions for the Group‘s reporting entities are
contained in the Electrolux Accounting Manual.
The Accounting Manual is mandatory for all
reporting units.

ELECTROLUX ANNUAL REPORT 2018

Risk
assessment

Risk assessment
Risk assessment includes identifying risks
of not fulfilling the fundamental criteria, i.e.,
completeness, accuracy, valuation and reporting for significant
accounts in the financial reporting for the Group as well as risk of
loss or misappropriation of assets.

At the beginning of each calendar year, the ECS Program

Office performs a global risk assessment to determine the
reporting units, data centers and processes in scope for the
ECS activities. Within the Electrolux Group, a number of different
processes generating transactions that end up in significant
accounts in the financial reporting have been identified. All
larger reporting units perform the ECS activities.

The ECS has been rolled out to almost all of the smaller units
within the Group. The scope for smaller units is limited in terms of
monitoring as management is not formally required to test the
controls.

Control
activities

Control activities
Control activities mitigate the risks iden-
tified and ensure accurate and reliable

financial reporting as well as process efficiency.

Control activities include both general and detailed controls
aimed at preventing, detecting and correcting errors and irreg-
ularities. In the ECS, the following types of controls are imple-
mented, documented and tested:
• Manual and application controls — to secure that key risks
related to financial reporting within processes are controlled.
• IT general controls — to secure the IT environment for
key applications.
• Entity-wide controls — to secure and enhance the
control environment.

Corporate governance report 117

Monitor

Improve

Monitor and Improve
Monitor and test of control activities is
performed periodically to ensure that
risks are properly mitigated.

The effectiveness of control activities
is monitored continuously at four levels:

Group, business area, reporting unit, and process. Monitor-
ing involves both formal and informal procedures applied by
management, process owners and control operators, including
reviews of results in comparison with budgets and plans, analyti-
cal procedures, and key-performance indicators.

Within the ECS, management is responsible for testing key

controls. Management testers who are independent of the
control operator perform these activities. Group Internal Audit
maintains test plans and performs independent testing of
selected controls. Controls that have failed must be remediated,
which means establishing and implementing actions to correct
weaknesses.

The Audit Committee reviews reports regarding internal con-
trol and processes for financial reporting. Group Internal Audit
proactively proposes improvements to the control environment.
The head of Group Internal Audit has dual reporting lines: To the
President and the Audit Committee for assurance activities, and
to the CFO for other activities.

Inform and
communicate

Inform and communicate
Inform and communicate within the
Electrolux Group regarding risks and

controls contributes to ensuring that the right business
decisions are made.

Guidelines for financial reporting are communicated to
employees, e.g., by ensuring that all manuals, policies and
codes are published and accessible through the Group-wide
intranet as well as information related to the ECS.

To inform and communicate is a central element of the ECS
and is performed continuously during the year. Management,
process owners and control operators in general are respon-
sible for informing and communicating the results within the ECS.
The status of the ECS activities is followed up continuously
through status meetings between the ECS Program Office and
coordinators in the business areas. Information about the status
of the ECS is provided periodically to business area and Group
Management, the Audit Board and the Audit Committee.

ENTERPRISE RISK ASSESSMENT — EXAMPLE

CONTROL ACTIVITIES — EXAMPLE

Closing Routine — Risks assessed

Manage IT — Risks assessed

Order to Cash — Risks assessed

ELECTROLUX ANNUAL REPORT 2018

Risk assessed

Control activity

Process

Closing
Routine

Risk of incorrect financial
reporting.

Manage IT

Risk of unauthorized/incorrect
changes in the IT environment.

Order to Cash Risk of not receiving payment

from customers in due time.

Order to Cash Risk of incurring bad debt.

Reconciliation between general
ledger and accounts receivable sub-
ledger is performed, documented
and approved.

All changes in the IT environment
are authorized, tested, verified and
finally approved.

Customers’ payments are monitored
and outstanding payments are
followed up.

Application automatically blocks
sales orders/deliveries when the
credit limit is exceeded.

118 Corporate governance report

Financial reporting and information
Electrolux routines and systems for information and commu-
nication aim at providing the market with relevant, reliable,
correct and vital information concerning the development of
the Group and its financial position. Specifically for purposes of
considering the materiality of information, including financial
reporting, relating to Electrolux and ensuring timely communi-
cation to the market, a Disclosure Committee has been formed.
Electrolux has an information policy meeting the require-

ments for a listed company.

Financial information is issued regularly in the form of:
• Full-year reports and interim reports, published as
press releases.
• The Annual Report.
• Press releases on all matters which could have a significant
effect on the share price.
• Presentations and telephone conferences for financial
analysts, investors and media representatives on the day
of publication of full-year and quarterly results.
• Meetings with financial analysts and investors in Sweden
and worldwide.

All reports, presentations and press releases are published at: www.electroluxgroup.com/ir

Stockholm, February 14, 2019

AB Electrolux (publ)
The Board of Directors

Auditor’s report on the Corporate Governance Statement
To the general meeting of the shareholders in AB Electrolux
(publ), corporate identity number 556009-4178

Engagement and responsibility
It is the board of directors who is responsible for the corporate
governance statement for the year 2018 on pages 100–118
and that it has been prepared in accordance with the Annual
Accounts Act.

The scope of the audit
Our examination has been conducted in accordance with FAR’s
auditing standard RevU 16 The auditor’s examination of the cor-
porate governance statement. This means that our examination
of the corporate governance statement is different and substan-
tially less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinions.

Opinions
A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 the second
paragraph points 2–6 the Annual Accounts Act and chapter
7 section 31 the second paragraph the same law are consistent
with the annual accounts and the consolidated accounts and
are in accordance with the Annual Accounts Act.

Stockholm, February 15, 2019

Deloitte AB

Jan Berntsson
Authorized Public Accountant

Factors affecting forward-looking statements
This annual report contains “forward-looking” statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Such statements include, among others, the financial goals and targets
of Electrolux for future periods and future business and financial plans.
These statements are based on current expectations and are subject
to risks and uncertainties that could cause actual results to differ mate-
rially due to a variety of factors. These factors include, but may not be
limited to the following; consumer demand and market conditions in the
geographical areas and industries in which Electrolux operates, effects of

currency fluctuations, competitive pressures to reduce prices, significant
loss of business from major retailers, the success in developing new prod-
ucts and marketing initiatives, developments in product liability litigation,
progress in achieving operational and capital efficiency goals, the suc-
cess 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.

ELECTROLUX ANNUAL REPORT 2018

Events and reports 119

Events and reports

The Electrolux website www.electroluxgroup.com/ir contains additional
and updated information about such items as the Electrolux share and
corporate governance as well as a platform for financial statistics.

Electrolux
Annual Report 2018

Electrolux Annual Report 2018
www.electroluxgroup.com/annualreport2018

2018

Good progress in a challenging environment

• Net sales amounted to SEK 34,425m (32,580). Sales growth was 2.5%, driven by price increases and mix improvements

across most business areas.

• Operating income amounted to SEK 1,963m (2,065), corresponding to a margin of 5.7% (6.3). Four business areas

achieved above 6% margin.

• Excluding a non-recurring item of SEK +71m relating to the completion of the French antitrust proceeding, operating

income amounted to SEK 1,892m, corresponding to a margin of 5.5% (6.3).

• Positive earnings contribution from volume/price/mix across all business areas partly offset higher input costs and

currency headwinds.

• Major Appliances North America faced higher cost inflation from tariffs and a decline in sales to private label.
• Operating cash flow after investments amounted to SEK 3,163m (2,078).
• Income for the period decreased to SEK 1,575m (2,002), and earnings per share was SEK 5.48 (6.97).
• The Board proposes a dividend for 2018 of SEK 8.50 (8.30) per share, to be paid in two installments.
• The Board has announced the intention to prepare a separation and listing of the Professional Products business area.

Financial overview

SEKm

Net sales

Sales growth, %1)

Organic growth, %

Acquisitions, %

Divestments, %

Changes in exchange rates, %

Operating income2)

Operating margin, %

Income after financial items

Income for the period

Earnings per share, SEK3)

Operating cash flow after investments

Return on net assets, %

Q4 2018

34,425

Q4 2017 Change, %

32,580

2018

124,129

2017 Change, %

120,771

2.5

2.7

0.5

-0.7

3.1

1,963

5.7

1,832

1,575

5.48

3,163

—

5.4

4.0

1.9

-0.5

-4.7

2,065

6.3

2,001

2,002

6.97

2,078

—

-5

-8

-21

1.7

1.3

0.7

-0.3

1.1

5,310

4.3

4,887

3,805

13.24

3,649

22.7

0.5

-0.4

1.4

-0.4

0.2

7,407

6.1

6,966

5,745

19.99

6,877

36.0

-28

-30

-34

1) Change in net sales adjusted for currency translation effects.
2) Operating income in the fourth quarter of 2018 includes a non-recurring item of SEK 71m relating the French Competition Authority investigation that was concluded in the

quarter and impacts Major Appliances EMEA. Excluding this item, operating income amounted to SEK 1,892m corresponding to a margin of 5.5% (6.3). Operating income in
the full year of 2018 includes non-recurring items of SEK -1,343m. Excluding these items, operating income amounted to SEK 6,653m corresponding to a margin of 5.4% (6.1)
see pages 12 and 21.

3) Basic.

For definitions, see pages 29-30.

Electrolux Interim Report January – December 2018
Stockholm, February 1, 2019

Electrolux Annual Review 2018
www.electroluxgroup.com/annualreports/2018

Electrolux Interim Reports
www.electroluxgroup.com/ir

Electrolux Sustainability Report (GRI) 2018
www.electroluxgroup.com/sustainabilityreport2018

Financial reports and major events in 2019

1
Feb

27
Mar

10
Apr

26
Apr

18
Jul

25
Oct

Consolidated
report

Capital
Markets Day

Annual
General Meeting

Interim report
January–March

Interim report
January–June

Interim report
January–September

Electrolux subscription service can be accessed at
www.electroluxgroup.com/subscribe

ELECTROLUX ANNUAL REPORT 2018

Investor Relations www.electroluxgroup.com/ir

120 Annual General Meeting

Annual General Meeting

The Annual General Meeting will be held at 5 pm on Wednesday,
April 10, 2019, at Stockholm Waterfront Congress Centre,
Nils Ericsons plan 4, Stockholm, Sweden.

Participation
Shareholders who intend to participate in the Annual General
Meeting must
• be registered in the share register kept by the Swedish central
securities depository Euroclear Sweden AB on Thursday,
April 4, 2019, and
• give notice of intent to participate, to Electrolux on Thursday,
April 4, 2019, at the latest.

Notice of participation
Notice of intent to participate can be given
• on the Group’s website;
www.electroluxgroup.com/agm2019
• by telephone +46 8 402 92 79,
on weekdays between 9 am and 4 pm
• by mail to
AB Electrolux
c/o Euroclear Sweden AB
Box 191
SE-101 23 Stockholm
Sweden

Notice should include the shareholder’s name, personal identity
or registration number, address, telephone number and the
number of assistants attending, if any. Shareholders may vote by
proxy, in which case a power of attorney should be submitted to
Electrolux well in advance of the Annual General Meeting.
Proxy forms in English and Swedish are available on the

Group’s website: www.electroluxgroup.com/agm2019

Shares registered by trustee
Shareholders that have their shares registered in the name of a
nominee must, in addition to giving notice of participation in the
meeting, temporarily be recorded in the share register in their
own names (so called voting-rights registration) to be able to
participate in the General Meeting. In order for such registra-
tion to be effectuated on Thursday, April 4, 2019, shareholders
should contact their bank or trustee well in advance of that date.

Dividend
The Board of Directors proposes a dividend for the fiscal year
2018 of SEK 8.50 per share, for a total dividend payment of
approximately SEK 2,443m (2,385). The proposed dividend corre-
sponds to approximately 64% (42) of income for the period. The
dividend is proposed to be paid in two equal installments, the
first with the record date Friday, April 12, 2019, and the second
with the record date Friday October 11, 2019. The first install-
ment is estimated to be paid on Wednesday, April 17, 2019 and
the second installment on Wednesday, October 16, 2019.

Proposal for election of board members to
Annual General Meeting
In preparation for the Annual General Meeting, the Nomination
Committee has in January 2019 proposed the re-election of
all board members except Bert Nordberg, who has declined
re-election. Staffan Bohman was proposed to be re-elected
as Chairman of the Board of Directors, and Petra Hedengran,
Hasse Johansson, Ulla Litzén, Fredrik Persson, David Porter,
Jonas Samuelson, Ulrika Saxon and Kai Wärn as Board members.

DATES REGARDING THE AGM 2019

2018

2019

September

January

March

April

October

26 Nomination
Committee
appointed for
AGM 2019

28 Proposals from
Nomination
Committee
presented

6 Notice to AGM
estimated to be
published

4 Deadline for

notice of intent
to participate in
AGM and regis-
tration in share
register

10 AGM 2019

12 Proposed record
date for the first
installment of the
dividend payment

17 Estimated date for
payment of first
installment of
dividend

11 Proposed record date
for the second install-
ment of the dividend
payment

16 Estimated date for

payment of second
installment of dividend

ELECTROLUX ANNUAL REPORT 2018

Founded in Sweden in 1919
by entrepreneur Axel Wenner-Gren

1920s The Electrolux salesmen sold vacuum
cleaners all over the world, supported by
innovative marketing methods like the
vacuum cleaner car.

1930s The innovative and completely
silent absorption fridge could run on either
electricity or gas, and became
a global success.

1940s The launch of the groundbreaking
Assistent food processor was Electrolux first
venture into cooking products.

1950s Electrolux legendary ”floating wing”
W20 washing machine helped to shorten the
time consuming and cumbersome laundry
process considerably.

1960s The “Luxomatic” vacuum cleaner was
launched in 1964 and had innovations like an
adjustable nozzle and a cord winder.

1970s The Datalux cooker launched in 1978
had an electronic rear control panel featuring
a digital clock and a timer.

1980s The legendary Electrolux "Troika" with
Anders Scharp, Hans Werthén and Gösta
Bystedt made Electrolux into a global appliance
company through hundreds of acquisitions.

1990s The prototype of the world's first
robotic vacuum cleaner, the Trilobite,
was presented in 1997.

2000s The innovative battery-driven vacuum
cleaner Ergorapido was launched in 2004
following systematic product development
and consumer tests.

2010s Electrolux expanded its offering
of connected appliances, here with
Google Assistant.

100 years of better living

In 2019, Electrolux turns 100 years. Founded in Sweden in 1919
by entrepreneur Axel Wenner-Gren, Electrolux has shaped liv-
ing for the better for 100 years by reinventing what great taste,
care and wellbeing experiences mean for our consumers.

The Electrolux story is rich with groundbreaking innovations

and bold entrepreneurship, as well as with cutting edge sales
and marketing methods. It’s a history of rapid expansion and
acquisitions, as well as of consumer insight and world-class
design. All in the midst of major trends like globalization and
digitalization.

By creating more enjoyable and sustainable living for hun-
dreds of millions of people around the world, we have not only

impacted the lives of our consumers, but also the societies in
which they live.

During 2019, we will highlight and celebrate all these
achievements, but more importantly we will look forward by
putting our purpose into action and positively impact the
world’s greatest challenge: the way we all live our lives. 2019 will
therefore be the starting point for our most important initiative:
a global, long-term action plan to create a more enjoyable and
sustainable future.

More information about this and our history will be displayed

at the Annual General Meeting.

Mailing address: SE-105 45 Stockholm, Sweden | Visiting address: S:t Göransgatan 143, Stockholm
Telephone: +46 8 738 60 00 | Website: www.electroluxgroup.com

AB ELECTROLUX (PUBL), 556009-4178

annual review on the web
www.electroluxgroup.com/annualreports/2018