Electrolux Annual Report 2022

Plain-text annual report

Shape living for the better Annual Report 2022 CEO statement Governance and control Financial reports Additional information The navigation is clickable Electrolux Annual Report 2022 2 Contents CEO statement Strategy for proﬁ table growth Driving innovation Increasing eﬃ ciency Positioned for future value creation Summary 2022 5 6 8 9 12 13 Governance and control Corporate governance report Report by the Board of Directors Risk management Climate risk disclosures Statutory sustainability report EU Taxonomy report 14 15 31 44 51 56 61 Financial reports Consolidated and parent company accounts Notes Proposed distribution of earnings Auditor’s report 67 68 74 108 109 Additional information Eleven-year review 112 113 Operations by business area yearly 115 Quarterly information Deﬁ nitions Annual General Meeting Reports and events 116 118 120 121 Our corporate reporting Annual Report The Annual Report for AB Electrolux (publ), 556009-4178, consists of pages 31-50, 67-108. The Annual Report is adopted in Swedish. The English version is a translation of the Swedish original. Remuneration Report The Electrolux Remuneration Report is available online at www.electroluxgroup.com/en/ remuneration-report-2022 Sustainability Reporting The Electrolux sustainability frame- work and execution are described in the Statutory sustainability report on pages 47-48, 56-66. The full Electrolux Sustainability report is published online in March 2023 at: www.electroluxgroup. com/sustainabilityreport2022 electroluxgroup.com Please ﬁ nd more information about business development, strategy and business areas on the Electrolux Investor Relations webpage: electroluxgroup.com/ir Forward looking statements This report contains ‘forward-looking’ statements that reﬂ ect the company’s current expectations. Although the company believes that the expectations reﬂ ected in such forward-looking statements are reasonable, no assurance can be given that such expectations prove to have been correct as they are subject to risks and uncer- tainties that could cause actual results to diﬀ er materially due to a variety of factors. These factors include, but are not limited to, changes in consumer demand, changes in economic, market and competitive conditions, supply and production constraints, currency ﬂ uctuations, devel- opments in product liability litigation, changes in the regulatory environment and other government actions. Forward-looking statements speak only as of the date they were made, and, other than as required by applica- ble law, the company undertakes no obligation to update any of them considering new information or future events. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 3 Electrolux purpose is to shape living for the better by reinventing lifetime taste, care and wellbeing experiences for more enjoyable and sustainable living around the world. As a leading global appliance company, Electrolux places the consumer at the heart of everything it does, with a focus on delivering outstanding consumer experiences within the three innovation areas: Taste As a kitchen appliance leader, we want our products to enable consumers to prepare food with the right taste and texture, minimize food waste, and create healthy and nutritious meals. We continuously add new functionalities in terms of control, interaction and innovative digital technologies. Care Our laundry products aim to oﬀ er consumers out standing garment care, water and energy eﬃ ciency, and eﬀ ective low temperature washing. Demand for Electrolux washing machines and tumble dryers is driven by innovations that promote user- friendliness and garment care through tailored and adaptive programs combined with leading resource eﬃ ciency. Wellbeing We strive to create wellbeing products that are diﬀ erentiated by their visual appeal, and how they promote healthy indoor environments and sustainable living. Electrolux wellbeing products enable more people to sustainably beneﬁ t from comfortable temperatures as well as fewer particles in the air, in the water and on surfaces. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 4 Electrolux in brief A global leader in household appliances Sustainable consumer experience innovation is a key driver for long term proﬁ table growth, enabling users to prepare great-tasting food, care for their clothes so they stay new for longer and achieve healthy wellbeing at home. Proﬁ table growth is also enabled by consistently increasing operational eﬃ ciency through digitalization, automation and modularization. Sustainability is an integral part of Electrolux strategy. A solid balance sheet facilitates proﬁ table growth. Electrolux headquarters are located in Stockholm, Sweden, and the Electrolux share is listed on Nasdaq Stockholm. ~60 million products sold annually in ~120 markets for a total of SEK 135bn in sales Strategy for proﬁ table growth Our three innovation areas Sales by region 35% 18% 34% 4% 4% Sales by brand Other, 19% 35% 5% 31%1) 15% 1) Includes Frigidaire Gallery and Frigidaire Professional. Taste 64% of sales Product categories: Cookers, hobs, ovens, hoods, microwave ovens, refrigerators and freezers. Care 29% of sales Product categories: Washing machines, tumble dryers and dishwashers. Wellbeing 7% of sales Product categories: Vacuum cleaners, air-conditioning equipment, water heaters, heat pumps and small domestic appliances. Driving sustainable consumer experience innovation Increasing eﬃ ciency through digitalization, automation and modularization Solid balance sheet facilitates proﬁ table growth CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 5 “ Adapting to rapidly changing circumstances” Draft 1.o 2022-09-28 To be revised As the past few years have shown, swift adaptation to new circumstances is vital for Electrolux continuous success. In 2022, a new set of tough challenges presented themselves, in addition to supply chain constraints: high general inﬂ ation, raised interest rates, soaring energy prices, and increased geopolitical tensions. Of course, this multitude of economic constraints has had a negative impact on consumer demand for household appliances. For Electrolux, this meant a signiﬁ cantly weakened market demand with lower volumes, particularly in Europe and North America during the second half of 2022. Net sales for the Group increased by 7.4% to SEK 135bn, positively impacted by currency translation eﬀ ects. Organic sales however declined by 2.8%. Operating income excluding non-recurring items was SEK 831m (7,528). The decline in operating income was partly driven by the lower volumes in all business areas. In addition, we had signiﬁ cantly elevated cost levels, mainly from production and logistics ineﬃ ciencies in our North American operations, to some extent triggered by supply chain constraints. In light of the elevated cost levels and weaker market environment, we initiated a Group-wide cost reduction and North America turnaround program in September that aims to reduce our cost base with an excess of SEK 7bn once fully implemented. For the full year of 2023, the program is expected to result in a positive year-over-year earnings contribution of SEK 4–5bn. The program targets increased eﬃ ciency in production and supply chain, leveraging on our stronger global organization and optimizing investments in innovation and marketing. The majority of the savings will be realized in North America, where a number of actions will be taken to ensure cost competitiveness in the new production facilities in Anderson and Springﬁ eld, U.S. A successful implementation of the Group-wide cost reduction and North America turnaround program will be our number one priority for 2023. The execution of the turnaround will demand a strong and diligent leadership, and the new Business Area leader Ricardo Cons has a strong track record of improving margins as the former Head of Business Area Latin America. Signiﬁ cant cost inﬂ ation, mainly from raw material and logistics, was oﬀ set by price increases as our price execution remained strong across all regions. Executing the Group-wide cost reduction and North America turnaround program does indeed include some demanding challenges. However, I have a ﬁ rm. → “ A successful implementation of the Group-wide cost reduction and North America turnaround program will be our number one priority for 2023.” CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 6 conviction in our long-proven ability to adapt and I know that we have the right strategy, the experience and the organizational structure needed to resolve these issues successfully. The already strengthened global organization as well as the nearly completed SEK 8bn re-engineering investment initiative, provide a solid foundation for the measures within the cost reduction and turnaround program. On a positive note, I am pleased with how well received our product launches across all regions have been during 2022. This strengthens my conﬁ dence in our ability to drive product mix improvement also going forward. In recent years, mix improvements have contributed an average of SEK 1bn annually to operating income. At this point, I would like to take the opportunity to convey my warm thanks to all colleagues for their tireless and hard work. Strategy for proﬁ table growth Electrolux shapes living for the better by reinventing taste, care and wellbeing experiences, making life more enjoyable and sustainable for millions of people. Around the world, our products are an essential part of daily life. Our strategy for proﬁ table growth is ﬁ rmly based in the industry trends that drive the development of a changing household appliance market. Today’s consumers are more empowered and have greater expectations than ever before. Sustainable product innovation that is built on deep consumer insight is therefore essential in driving proﬁ table growth. By leveraging our scale through global innovation processes and modularized product architectures we have the ability to rapidly and eﬃ ciently bring attractive products to the market that meet the needs and desires → Industry trends: our long-term strategy is based on ﬁ ve key industry trends which impact our operations over time. Consumer power Greater consumer awareness and access to information increas- ingly empowers con- sumers. Consumers are increasingly choosing brands with a purpose that they feel matches their own values. Digitalization enhances consumer power, while enabling increasingly advanced products and direct contact with consum- ers, as well as greater productivity and ﬂ exibility in industrial operations. Sustainability Consumers and author- ities are increasing the demands on manufac- turers to develop and oﬀ er more sustainable products that meet demands in areas such as energy eﬃ ciency and circularity. Global scale is necessary due to the increasing pace of innovation and invest- ments requirements. Growing global middle class drives market growth in Africa, the Middle East, Eastern Europe, Latin America and Southeast Asia. Emerging markets represent a potential universe of over 6 billion consumers. Strategy for proﬁ table growth Driving sustainable consumer experience innovation Increasing eﬃ ciency through digitalization, automation and modularization Solid balance sheet facilitates proﬁ table growth Financial targets for proﬁ table growth (over a business cycle). The primary ﬁ nancial priority is achieving our ﬁ nancial targets of an operating margin of at least 6% and a return on net assets of over 20%, over a business cycle. Once established, our objective is sales growth of at least 4% annually, over a business cycle. Operating margin Return on net assets (RONA) Sales growth ≥6% >20% ≥4% CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 7 The Electrolux climate neutrality roadmap Targets: 80% reduction in carbon emissions in operations. Scope 1 and 21), 3) Climate neutral operations2) 25% reduction in carbon emissions in product use. Scope 31), 3) Climate neutral across the value chain This long-term ambition supports the United Nations Global Compact Business Ambition for 1.5° C. Scope 1, 2 and 3. 2015 2025 2030 2050 1) Science based target (SBT) 2) Company target (Scope 1 + 2 = 0) 3) Includes contributions from energy use and greenhouse gas fugitive emissions. “ I am conﬁ dent that our long-term strategy is the right path to follow, today and for the years to come.” of our targeted consumer groups. Digitalization and automation are additional important elements in providing cost-competitive products with high quality. We focus our investments to create a solid foundation for these two pillars - driving sustainable consumer experience innovation and increasing eﬃ ciency - in our strategy for proﬁ table growth. I am conﬁ dent that our long-term strategy is the right path to follow, today and for the years to come. Likewise, I am conﬁ dent that sustainability is a key business driver for Electrolux which grows our sales, lowers our costs, and strengthens relations with our stakeholders. More environmental-friendly and resource eﬃ cient appliances attract a growing range of consumers, contributing to improved margins. At our production plants, increased eﬃ ciency also entails energy savings and reduced water consumption. Our overall target to have a climate neutral value chain by 2050 is thus a ﬁ rmly integrated part of our strategy. → CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 8 Three main brands with distinctive target consumers Price index Premium (>150 index) Mass- premium (90–150 index) Value (<90 index) Conservative Modern Progressive Consumer orientation Driving innovation At Electrolux, innovation is built on deep consumer insights in the speciﬁ c target groups for our three main brands. These insights provide the foundation for how we develop attractive products that meet the demands of each consumer group and have had a positive contribution to sales and operating proﬁ t over the past few years. The three main brands – Electrolux, AEG and Frigidaire – represent 80% of our total sales. Sharing the same ambition to oﬀ er solutions that enable more sustainable living, each brand has its distinctive market position. The typical Electrolux consumer wants a progressive, sustainable premium brand, whereas the AEG consumers seek innovation, performance and premium quality. The general Frigidaire consumer looks for practical and aﬀ ordable household solutions to improve the lives of family and friends. Our innovation eﬀ orts are focused within three areas: Taste, Care and Wellbeing. Taste innovation includes our diﬀ erent kitchen appliances and is directed towards solutions for preparing great-tasting, healthier and more nutritious meals, and reducing food waste. User-friendly, resource-eﬃ cient washing machines and tumble dryers that enable clothes to be cared for, so they stay new longer is a focus of Care innovation, while the innovative eﬀ orts within Wellbeing are targeted on visually appealing vacuum cleaners and air-conditioning equipment that promote healthy homes. 24/39% Our most resource-eﬃ cient products accounted for 24% of units sold and 39% of gross proﬁ t in 2022. Recognized as a sustainability leader in the appliance industry, a big part of our innovation eﬀ orts are aimed at developing new environmentally friendly and resource-eﬃ cient products that can be brought to market on a large scale. Our most resource-eﬃ cient products also make good business sense, as they accounted for 24% of total units sold and 39% of gross proﬁ t in 2022. As product usage accounts for approximately 85% of the total carbon footprint of appliances, product eﬃ ciency is our greatest contribution to tackling climate change. We realize that this is a long-term undertaking, and it is a commitment we take very seriously. To inspire conscious behavior, we design products that intuitively help consumers to use them in ways that reduce the environmental footprint. For example, selecting smart washing programs with lower temperatures, steaming clothes for reduced water consumption, using more sustainable cooking techniques, or reducing food waste through intelligent refrigeration solutions. To give one example from this year’s launches, Electrolux presented its new range of food waste-saving fridges and freezers, that generate up to 20% less CO2 emissions than the previous range. Cutting-edge innovation is a crucial part of our long- term ambition for our entire value chain to be net zero emission by 2050. Circularity is also a key area. In addition to developing resource-eﬃ cient products, we strive to use a higher degree of recycled or recyclable materials in our appliances, thus reducing the greenhouse gas emissions from production, as well as incorporating more sustainable packaging. → CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 9 Beyond the product purchase, we are broadening our focus to develop a stronger consumer relationship throughout the consumer journey. This wider scope opens proﬁ table growth opportunities within our aftermarket business, including services and spares as well as consumables and accessories. By further developing our direct interaction possibilities with consumers, we can also increase consumer loyalty, beneﬁ tting sales overall. In 2022, Electrolux deployed a new Commercial & Consumer Journey Organization. Through this change, we can leverage our global scale to improve the purchase experience, how we onboard and connect new consumers, and how we support people in using their products in the best and most sustainable way. From a business perspective, it will strengthen our aftermarket oﬀ ering, as well as build closer ties with our consumers over time. Increasing eﬃ ciency To be successful in today’s market, eﬃ cient operations are required to oﬀ er products that are produced in a sustainable way, with quality and at competitive cost. It is also crucial for Electrolux to be able to eﬃ ciently and rapidly introduce new and innovative products to the market. Here, our experience, focus on modularization and global scale enable us to meet the evolving needs and desires of our targeted consumer groups. Electrolux is in the ﬁ nal stage of executing its SEK 8bn re-engineering investments, which focus on modularization and automation of selected production facilities in Europe and the Americas. Now in its ramp-up phase, the investment initiative → Strengthened consumers relations and higher margins with stronger aftermarket presence Today’s consumers expect more than high- quality appliances – they are expecting a positive experience throughout the life span of the products. Being truly consumer-centric, Electrolux innovation focus has expanded to delivering not just an outstanding product, but a complete consumer experience and lifetime value. To be relevant throughout the whole consumer journey, an important part is to strengthen Electrolux position on the after- market. A more pronounced presence on the aftermarket pres- ents several opportunities to further enhance consumer relations, forge loyalty to the Electrolux brands and increase recurring sales. As the aftermarket also represents a high-margin business, Electrolux aims to increase sales in this segment to approxi- mately 10% of Group sales by 2025, from around 7% in 2022. A notable example is the signiﬁ cantly increased sales on the aftermarket for water ﬁ lters in North America. Refrigerators that provide clean and healthy water and ice are important to North American households. Accordingly, they want to feel conﬁ dent that they are purchasing quality ﬁ lters designed for their speciﬁ c appliances. Thus, in recent years Electrolux has dramatically increased its innovative focus on refrigerators’ water ﬁ ltration systems and ice-making accessories with a dedicated team with state of art laboratory working on advanced ﬁ ltration solutions and ice-making. Based on thorough research on consumer behav- ior and through co-creation with target audiences, Electrolux has further enhanced the quality of the water ﬁ lters, to elimi- nate harmful contaminates, and added features to remind the consumers of the ﬁ lter replacement cycle. Such features are for example lights on the refrigerator indicating when it is time to replace the ﬁ lter, QR codes on the ﬁ lters themselves, and easily accessible “ﬁ nd my ﬁ lter” web tools. Electrolux has also established new and eﬃ cient communica- tion channels to reach consumers and to raise awareness of the importance to use the right ﬁ lter for their appliance for optimal water taste and safety. At present, Electrolux receives about 2 million page visits per year to the water ﬁ lter site and the year- over-year growth of visitors has been double-digit. The targeted approach has resulted in an average of 10% annual sales growth of water ﬁ lters over the last ﬁ ve years in North America. The successful growth of this water ﬁ lter business has also entailed sustainability gains. This as increased use of clean water from refrigerators is estimated to have led to a sig- niﬁ cant decrease in the consumption of mineral water in plastic bottles. The ﬁ lter technology developed for North America has been extended to refrigerators sold across all regions. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 10 will signiﬁ cantly leverage global scale by deploying Group-wide technologies and product architecture for our cooking and refrigeration/freezer solutions, reaching similarly high levels as our already established global frameworks for dishwashers and front-loaded washing machines. Modularization and production automation are critical to eﬃ ciency. Through modularization, we optimize our production and innovation by developing technology and product architecture for our appliances at Group level. Modularization also means that we shorten the path from innovation to product launch, increase quality assurance, and lower our costs and resources used in product development. We can clearly see that modularization allows increased ﬂ exibility and lower costs for material. Simultaneously, increased automation contributes to higher productivity, while also improving quality and workplace safety. Investments in digitalization are important to eﬃ ciently manage sourcing, supply chain, logistics, and consumer interaction. A combination of global strategic sourcing, a reduced number of components in our modularized production, and digitalization provides us with eﬃ ciency gains, increased ﬂ exibility and lowers the risk of disruption. We are also reducing our climate footprint signiﬁ cantly. With a reduction of 82%, Electrolux in 2022 reached its 2025 science-based climate target to reduce CO2 emissions in our own operations by 80% compared to 2015. Whilst lower production volumes have contributed, our teams’ eﬀ orts to ramp up resource- eﬃ cient manufacturing across our production facilities, while speeding up the transition to utilize an increased “ Through modularization, we optimize our production and innovation by developing technology and product architechture for our appliances at Group level.” share of renewable energy mean we have reached our target ahead of schedule. We are now reviewing our targets going forward, raising the bar on own sustainability agenda even further. → -82% During 2022, Electrolux reached its 2025 science-based climate target to reduce CO2 emissions in our own operations by 80% compared to 2015. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 11 Attractive and sustainable ovens from renewed Brazilian facility Innovation, eﬃ ciency and sustainability are cornerstones in Electrolux strategy to drive proﬁ table growth. Investments in the Sao Carlos cooking facility in Brazil have resulted in a sharper product oﬀ ering which is gaining market shares in attractive categories, while at the same time being produced in a more cost and resource eﬃ cient way. Growing proﬁ tably in Latin America over the past years, Electrolux is further improving and expanding its mix of products with a focus on built-in ovens. Oﬀ ering consumers a range of new sought-after features, these appliances are manufactured in Sao Carlos, one of the facilities included in the Group’s SEK 8bn re-engi- neering investment initiative. This initiative has enabled a higher degree of modularization and automation, which together with the beneﬁ ts of an innovation pro- cess at Group level, have resulted in an attractive line of more eﬃ ciently produced cooking appliances, as well as reduced supply chain complexity and consider- able sustainability gains. Faster innovation and fewer components Thanks to a shared product architecture, the cost and time it takes to develop and launch a new product can be reduced by approximately 30%. As modularized features ﬁ t in a majority of the products they can be used throughout the Group. The new line of built-in ovens produced at the Sao Carlos plant are equipped with features such as air fryer, convection and a sealed cavity and in response to anticipated desires from consumers, will soon also oﬀ er a steam function. As this feature is already included in ovens sold in Europe, the shared product architecture allows the steam function to be added in the ovens for the Latin American market with no further innovation eﬀ orts and only minor addi- tional investement. Modularization also encompasses the ability to lower the number of components, thus reducing the com- plexity of the production process. At Sao Carlos, both the steam system and the oven’s sealed cavity, which is welded, come as ready-to-use modules that can be swiftly inserted in the oven structures at the assembly line. Through the re-engineering initiative the number of parts used at the facility has been reduced by more than 40%. The smaller number of components as well as fewer suppliers, also make it easier for Electrolux as a Group to manage any supply chain constraints. Well-received resource-eﬃ cient products The production facility in Sao Carlos and the new line of built-in ovens produced there entail signiﬁ cant steps to reduce the climate footprint. For example, the new state-of-the-art process for enameling the ovens has reduced the water consumption from 6.6 liters to 1.8 liter per produced oven. For the consumer, the welded cavity in the built-in ovens means that the appliance uses around 30% less energy to preheat. At the same time, integrated features such as the air fryer and steam function also enable users to enjoy more sustainable cooking and healthy living. The built-in ovens produced at the Sao Carlos plant have received high scores from the consumers in Latin America, with an average star rating of impressive 4.7 on a ﬁ ve-point scale. 30% Thanks to a common product architecture, the cost and time it takes to develop and launch a new product can be reduced by approximately 30%. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 12 Positioned for future value creation Optimizing the capital structure During the year, an important area for Electrolux Board of Directors has been to continue optimizing the Group’s capital structure. The Board aims to keep a solid investment grade rating, as deﬁ ned by leading rating institutes, meaning that over time net debt should not exceed two times EBITDA. As a tool to reach an optimal capital structure, the Board, like in the previous year, decided to buy back shares in 2022. The share buyback program launched on April 29 totaled 8,000,000 series B shares and was completed on September 2. Together with the share buyback program initiated in 2021 and completed in February 2022, Electrolux has repurchased a total of 17,369,172 own series B shares for a total amount of SEK 3,032m. As proposed by the Board and resolved by the 2022 Annual General Meeting, 25,842,915 own shares of series B that were held by the company as of December 31, 2021, were canceled, to further improve earnings per share. The Board currently does not intend to initiate additional share buybacks. Long-term strategy – with ability to adapt Weakened demand for household appliances on our major markets is expected to continue, and be negative for the full year 2023. With this in mind, it is a key priority to vigorously implement the Group- wide cost reduction and North America turnaround program. In doing so, we can beneﬁ t from our eﬀ orts within the re-engineering initiative as well as leverage our strengthened globalized organization. The global scale and modularization are also vital for our ability to swiftly and eﬃ ciently oﬀ er new and attractive products to the consumers. As shown during the past years, our ability to adapt to a rapidly changing environment is instrumental to our success. It is a conﬁ rmation that we have the right strategy and culture to respond quickly to challenges and seize opportunities. I am conﬁ dent in executing on our long-term strategy, where consumer-centric, sustainable innovation and eﬃ ciency are key to driving proﬁ table growth. Stockholm, February 2023 Jonas Samuelson Electrolux President and CEO “ I am conﬁ dent in executing on our long-term strategy, where consumer-centric, sustainable innovation and eﬃ ciency are key to driving proﬁ table growth.” CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 13 Summary 2022 The business environment in 2022 was highly challenging. Market demand declined in most of Electrolux main markets as high gen- eral inﬂ ation, increased interest rates, and geopolitical tensions had a negative impact on consumer demand. Lower sales volumes resulted in an organic sales decline for Electrolux by 2.8%. The volume decline was coupled with severely elevated cost levels in the North American operations from production ineﬃ ciencies, partly triggered by supply chain constraints. This resulted in a signiﬁ cant earnings drop and the operating margin amounted to 0.6%, excluding non-recurring items, compared to 6.0% last year. To address the challenges, a Group-wide cost reduction and North America turnaround program was initiated. The net price realization was strong across all regions, despite promotional activity returning to normal levels towards the end of 2022 compared to low levels throughout 2021. Price fully oﬀ set signiﬁ cant cost inﬂ ation, primarily in raw material and logistics. 2022 was an intensive product launch year across regions, partly enabled by the ongoing investment initiatives in modular- ized product platforms. Through an attractive product oﬀ ering delivered under well-established brands, Electrolux continued to generate a positive product mix, even in the challenging demand environment with reduced consumer purchasing power in many markets. Aftermarket sales increased slightly, remaining at 7% of total sales for the year. Supply chain constraints and irregular supply caused signi- ﬁ cantly elevated cost levels due to production ineﬃ ciencies Operating income (EBIT) bridge1) SEKbn 18 18 9.1 7.5 12 12 6 6 0 0 -0.4 -9.0 -6.1 -0.2 EBIT 2021 Organic contribu- tion Innovation and marketing Cost eﬃ ciency External factors Acq/ Divest 1) Excluding non-recurring items, all numbers are rounded. 0.8 EBIT 2022 subsequent low planning visibility as well as increased use of spot buys and air freight. Measures under the Group-wide cost reduc- tion and North America turnaround program to return to stability and increase proﬁ tability were initiated towards the end of the year. However, the high inventory of products produced before the measures were implemented, resulted in a delayed earnings impact. Investments in innovation and marketing increased to support product launches and further develop capabilities for consumer direct interaction, while discretionary spending was reduced following the weak market environment. Sales growth SEKbn 150000 150 100000 100 50000 50 0 0 -50000 Operating margin SEKbn 8000 8 6000 6 4000 4 2000 2 0 0 %1) 15 15 10 10 5 5 0 0 -5 -5 % 8 8 6 6 4 4 2 2 0 0 Return on net assets SEKbn 40000 40 30000 30 20000 20 10000 10 0 0 % 40 40 30 30 20 20 10 10 0 0 18 18 19 19 20 20 21 21 22 22 18 18 19 19 20 20 21 21 22 22 18 18 19 19 20 20 21 21 22 22 Net sales Sales growth Target: ≥4% 1) Total sales growth excluding currency translation eﬀ ects. Operating income Operating margin Operating margin excl. non-recurring items Target: ≥6% Average net assets Return on net assets Target: >20% Note: Financial targets are over a business cycle. CO2 emissions The ambition is to achieve climate neutrality by 2050. An important step is the Science Based Targets set for 2025. The Group achieved its combined Scope 1 and 2 Science Based Target of 80% reduction in CO2 emissions for opera- tions by reaching 82% in 2022, compared to 78% in 2021. One of the main reasons is the increased use of electri- city from renewable sources. The Scope 3 target of 25% reduction in CO2 emissions, covering use of sold products, reached beyond 25% reduction in emissions in 2022. The year-over-year decrease in sales volumes impacted the Scope 3 result positively in 2022, however the target was achieved also without considering the decline in volumes. Scope 1 and 2 Scope 3 82% reduction compared to 2015 >25% reduction compared to 2015 Electrolux has set two Science Based Targets for 2025 compared to 2015. The ﬁ rst target is 80% reduction in carbon emissions in operations i.e. Scope 1 (direct emissions) and Scope 2 (indirect emissions). The second target is 25% reduction in carbon emissions in product use i.e. Scope 3 (indirect emissions). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 14 Governance and control Corporate governance report Report by the Board of Directors Risk management Climate risk disclosures Statutory sustainability report EU Taxonomy report 15 31 44 51 56 61 Corporate governance report 2022, page 15–30 Annual report 2022, page 31–50, 67–108 Climate risk disclosures 2022, page 51–55 Statutory sustainability report 2022, page 47-48, 56–66 AB Electrolux (publ), 556009–4178, S:t Göransgatan 143, SE-105 45 Stockholm, Sweden. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 15 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 diﬀ erent brands, we sell approximately 60 million products in approximately 120 markets every year. Our large installed base of approximately 400 million products globally gives us high aftermarket sales potential. Corporate Governance Report This Corporate Governance Report provides 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 together ensure a robust global governance framework and strong corporate culture. Board’s focus areas during the year 2022 has been a challenging year for Electrolux. We, and the sur- rounding world, have experienced severe negative impacts on the global economy from factors such as increasing inﬂ ation, rapidly escalating energy prices and interest rates, which in turn have had a negative eﬀ ect on the demand for consumer durables. Also the supply side has been diﬃ cult with disruptions in the supply chain and shortages of key components, causing loss of production and productivity in our factories. This was especially the case in North America where the ongoing production transformation, including the ramp-up of two new facilities and several new product platforms, aggravated the situation and resulted in an elevated cost level. This in combination with the rapid weakening of demand, starting end of the summer, led to a signiﬁ cant loss for the business area North America in 2022. To mitigate the eﬀ ects of reduced consumer demand and adjust to the above-mentioned realities, a substantial Group-wide cost reduction and North America turnaround program was announced in September 2022. An overriding priority for the Board in 2022 has been to support management in the necessary and rapid adjustment of priorities, which were triggered by the new macro environment. It is essential to increase cost eﬃ ciency in the North American business and ensure that we can fully leverage the investments in manufacturing and product platforms. This has been a main theme during practically all Board meetings during the year. The work to continue the streamlining of the company into a consumer centric organization has progressed, including strengthening the globally responsible product lines and improving the commercial coordination between our geographical business areas. These mea- sures will contribute to Electrolux competitiveness in a challenging global market. Another focus area for the Board is related to the company’s capital structure; a work initiated in 2021 when the Group’s ﬁ nancial position was very strong after a period of strong cash generation. A share redemption program followed by share buybacks have been used to optimize the capital structure, where the Board’s objective is to maintain a solid investment grade rating, as deﬁ ned by leading rating institutes. When the initial program for 2022 was completed in September, the Board decided not to initiate additional share buybacks until further notice in light of sharply deteriorating market conditions, and increased debt levels from lower earnings and temporarily increased working capital requirements. The net income loss in 2022 led the Board to propose that no payment of dividend will be made for the ﬁ scal year 2022. Although aligned with our policy targeting a dividend of approximately 50% of the annual income, this is of course not a decision we took lightly, and our strong ambition is to return to dividend paying conditions as soon as possible. I would like to thank my fellow Board members for the good coop- eration, the constructive contributions and engaged work. Finally, I thank the Electrolux management and all employees for an excep- tional work eﬀ ort during a challenging and turbulent 2022. Staﬀ an Bohman Chairman of the Board CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 16 Governance structure Shareholders by the AGM Nomination Committee External Audit Board of Directors People Committee Audit Committee Group Internal Audit President and Group Management Business area Boards Internal Bodies Major external regulations • Swedish Companies Act. • Rulebook for issuers. • Swedish Code of Corporate Governance. Major internal regulations • Articles of Association. • Board of Directors’ working procedures. • Policies for information, ﬁ nance, credit, accounting manual, etc. • Processes for internal control and risk management. • Code of Conduct, Anti-Corruption Policy and Workplace Policy. Governance in Electrolux Electrolux strives to maintain strict norms and eﬃ cient governance processes to ensure that all operations create long-term value for shareholders and other stakeholders. This involves the maintenance of an eﬃ cient organizational structure, systems for internal control and risk management and transparent internal and external reporting. The Electrolux Group comprises 133 companies with sales in approximately 120 markets. The parent company of the Group is AB Electrolux, a public Swedish limited liability company. The company’s shares are listed on Nasdaq Stockholm. The governance of Electrolux is based on the Swedish Companies Act, Nasdaq Nordic Main Market Rulebook for Issuers of Shares (”Rulebook for Issuers”) and the Swedish Code of Corporate Gov- ernance (the “Code”), as well as other relevant Swedish and foreign laws and regulations. The Code is published on the website of the Swedish Corporate Governance Board, which administrates the Code: www.corporategovernanceboard.se This corporate governance report has been drawn up as a part of Electrolux application of the Code. Electrolux did not report any deviation from the Code in 2022. 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 2022. Electrolux formal governance structure is presented to the right. Electrolux is a leading global appliance company that has shaped living for the better for more than 100 years. We reinvent taste, care and wellbeing experiences for millions of people around the world, always striving to be at the forefront of sustainability in society through our solutions and operations. Under our brands, including Electrolux, AEG and Frigidaire, we sell approximately 60 million household products in approximately 120 markets every year. In 2022, Electrolux had sales of SEK 135bn and employed 51,000 people around the world. For more information go to the Group’s website, www.electroluxgroup.com. AB Electrolux (publ) is registered under number 556009-4178 with the Swedish Companies Registration Oﬃ ce. The registered oﬃ ce 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. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 17 Highlights 2022 • Re-election of Staﬀ an Bohman as Chairman of the Board. • Re-organization and establishment of new global Commercial & Consumer Journey organization. • Resolution to repurchase a maximum of 8,000,000 own Class B shares during the period May 2, 2022 to October 21, 2022 for a total maximum amount of SEK 1,250 million. Shares and shareholders The Electrolux shares are listed on Nasdaq Stockholm. At year-end 2022, Electrolux had 83,248 shareholders according to Monitor by Modular Finance AB. Of the total share capital, 62% was owned by Swedish institutions and mutual funds, 25% by foreign investors and 13% by Swedish private investors, see below. Investor AB is the largest shareholder, holding 17.9% of the share capital and 30.4% of the voting rights. The ten largest shareholders accounted for 43.7% of the share capital and 52.2% of the voting rights in the company. Voting rights The share capital of AB 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 earnings and carry equal rights in terms of dividends. Owners of A shares can request to convert their A shares into B shares. Conversion reduces the total number of votes in the com- pany. As of December 31, 2022, the total number of registered shares in the company amounted to 283,077,393 shares, of which 8,192,348 were Class A shares and 274,885,045 were Class B shares. The total number of votes in the company was 35,680,852.5. Class B shares represented 77% of the voting rights and 97% of the share capital. Dividend policy Electrolux target is for the dividend to correspond to approximately 50% of the annual income. The Annual General Meeting (AGM) in March 2022 decided to adopt the Board’s proposed dividend of SEK 9.20 per share for the ﬁ nancial year 2021 which, in accordance with the Board’s proposal, was paid out in two equal installments. Ownership structure Swedish institutions and mutual funds, 62% Foreign investors, 25% Swedish private investors, 13% Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority (Finansinspektionen) as per December 31, 2022. The foreign ownership was 25% at year-end 2022 and 29% at year-end 2021. 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 i nformation regarding the ownership structure, see above. The information on ownership structure is updated quarterly on the Group’s website. Shareholders meeting General Meetings of shareholders The decision-making rights of shareholders in Electrolux are exercised at shareholders’ meetings. The AGM of AB Electrolux is held in Stockholm, Sweden, during the ﬁ rst 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 shareholder’s pres- ence at the meeting, either personally or by proxy. In addition, 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 requirements for participation apply to shareholders with holdings in the form of American Depos- itary Receipts (ADR) or similar certiﬁ cates. Holders of such certif- icates are advised to contact the ADR depositary bank, the fund manager or the issuer of the certiﬁ cates well in advance before the meeting in order to obtain additional information. Individual shareholders requesting that a speciﬁ c issue be included in the agenda of a shareholders’ meeting can normally request the Electrolux Board to do so using a speciﬁ c address published on the Group’s website. 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 Swedish Compa- nies Act stipulates that proposals must be approved by shareholders representing a larger number of the votes cast and the shares repre- sented at the meeting. 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. • Remuneration Report. • Other important matters. Annual General Meeting 2022 Due to the risk of the spread of the coronavirus and pursuant to temporary legislation, the AGM 2022 was held digitally and through advance voting (so-called postal voting) on March 30, 2022. The AGM was webcasted live and shareholders had the option to either vote digitally at the AGM or to vote in advance through postal voting. An excerpt of from the AGM including the CEO’s reﬂ ections from the past year and the future strategy was made available on the Group’s website. The shareholders had also the possilibty to submit questions ahead of the AGM 2022. Decisions at the Annual General Meeting 2022: • Re-election of all the Board members. • Re-election of Staﬀ an Bohman as Chairman of the Board. • Election of PricewaterhouseCoopers AB as auditors. • Remuneration to the Board members. • Dividend, cancellation of shares and subsequent bonus issue. • Authorization to acquire own shares and to transfer own shares on account of company acquisitions and certain incentive programs. • Amendments of the Articles of Association. Attendance at AGMs 2018–2022 % 80 80 60 60 40 40 20 20 0 0 % of share capital % of votes Shareholders Attendance 1200 1,200 900 900 600 600 300 300 0 0 19 19 18 18 22 22 870 shareholders, representing a total of 48.0% of the share capital and 62.6% of the votes, were present through postal voting at the 2022 AGM. 20 20 21 21 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 18 Annual General Meeting 2023 The next AGM will be held on Wednesday, March 29, 2023 in Stock- holm. Additional information about the AGM 2023 will be published in the notice convening the Annual General Meeting. 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 Nomination Committee. 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 bank- ing 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 shareholders and their representatives shall be announced as soon as they have been appointed. If the share- holder structure changes during the nomination process, the com- position 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 recom- mendation on the election of auditors. The Nomination Committee’s proposals are publicly announced no later than on the date of notiﬁ cation of the AGM. Shareholders may submit proposals for nominees to the Nomination Committee. 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, if deemed necessary. • Auditors and auditors’ fees, when these matters are to be decided by the following AGM. Nomination Committee for the AGM 2022 The Nomination Committee for the AGM 2022 was comprised of six members. Johan Forssell of Investor AB led the Nomination Committee’s work. For the proposal for the AGM 2022, 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 partic- ular 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 background, gender, experience, competence and term of oﬃ ce are represented among the Board members. The Nomination Committee proposed re-election of all Board members. The Nomination Committee also proposed re-election of Staﬀ an Bohman as Chairman of the Board. After the election at the AGM 2022, three out of seven Board members elected at the share- holders’ meeting are women (in this calculation, the President and CEO 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 Pricewater- houseCoopers AB as the company’s auditors for the period until the end of the AGM 2023. A report regarding the work of the Nomination Committee was included in the Nomination Committee’s explanatory statement that was published before the AGM 2022. Further information regarding the Nomination Committee and its work can be found on the Group’s website. Nomination Committee for the AGM 2023 The Nomination Committee for the AGM 2023 is based on the ownership structure as of August 31, 2022, and was announced in a press release on September 23, 2022. The Nomination Committee’s members are: • Johan Forssell, Investor AB, Chairman • Carina Silberg, Alecta • Sussi Kvart, Handelsbanken Funds • Tomas Risbecker, AMF Tjänstepension och Fonder • Staﬀ an Bohman, Chairman of Electrolux • Fredrik Persson, Board member of Electrolux 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 eight members without deputies, who are elected by the AGM, and three members with deputies, who are appointed by the Swedish employee organizations 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 mem- bers of the committees of the Board are elected, among other things. The Chairman of the Board of Electrolux is Staﬀ an Bohman. All current members of the Board elected by the AGM, except for the President and CEO, are non-executive members. Two of the eight Board members, who are elected by the AGM, are not Swedish citizens. For additional information regarding the Board of Directors, see pages 24-25. Independence The Board is considered to be in compliance with the Swedish Companies Act’s and the Code’s requirements for independence. The assessment of each Board member’s independence is presented in the table on page 25. All Board members except for Petra Hedengran and Jonas Samuelson have been considered independent. Petra Hedengran has been considered independent in relation to the company and the administration of the company, but not in relation to major share- holders of Electrolux. Jonas Samuelson has been considered inde- pendent in relation to major shareholders of Electrolux but not, in his capacity as President and CEO, in relation to the company and the administration of the company. Jonas Samuelson has no major shareholdings, nor is he a part- owner in companies having signiﬁ cant business relations with Electrolux. Jonas Samuelson is the only member of Group Manage- ment who is a Board member. The Board’s tasks One of the main tasks of the Board is to manage the Group’s opera- tions in such a manner as to assure the shareholders that their inter- ests in terms of a long-term proﬁ table 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 estab- lished by the Board. The Articles of Association of Electrolux are available on the Group’s website. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 19 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 speciﬁ c role and tasks, as well as the responsibilities delegated to the committees appointed by the Board. 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 know-ledge of the company. • Secure the eﬃ cient functioning of the Board. • Ensure that the Board’s decisions are implemented eﬃ ciently. • Ensure that the Board evaluates its work annually. The working procedures for the Board also include detailed instruc- tions to the President and CEO and other corporate functions regarding issues requiring the Board’s approval. Among other things, these instructions specify the maximum amounts that various deci- sion-making functions within the Group are authorized to approve as regards credit limits, capital expenditure and other investments. 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 to be held in conjunction with the pub- lication of the Group’s full-year report and interim reports. One or two meetings are to be held in connection with visits to Group oper- ations, subject to travel restrictions or other concerns. Additional meetings are held when necessary. The Board deals with and decides on Group-related issues such as: • Main goals. • Strategic orientation. • Essential issues related to ﬁ nancing, investments, acquisitions and divestments. • Follow-up and control of operations, communication and organization, including evaluation of the Group’s operational and sustainability management. • Appointment of and, if necessary, dismissal of the President and CEO. • Overall responsibility for establishing an eﬀ ective system of inter- nal 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. The Board’s work in 2022 During the year, the Board held 12 meetings. The attendance of each Board member at these meetings is shown in the table on page 25. 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 meetings. Electrolux Gen- eral Counsel serves as secretary at the Board meetings. Each scheduled Board meeting includes a review of the Group’s results and ﬁ nancial position, as well as the outlook for the forthcom- ing quarters, as presented by the President and CEO. 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 invest- ments exceeding SEK 25m. Normally, a member of Group Management 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 below. Key focus areas for the Board during 2022 • Eﬀ ects and impacts of the coronavirus pandemic and imbalances in the global supply chain. • Eﬀ ects and impacts of the war in Ukraine. • Adapting Electrolux strategy and business model to global industry drivers such as increased consumer power, digitalization, sustainability, consolidation,and a growing middle class. • Re-organization and establishment of the new Commercial & Consumer Journey organization to further strengthen the product and service oﬀ ering. • Continued focus on optimizing the Group’s capital structure by initiating a share buyback program. • Group-wide cost reduction and North America turnaround program to return to stability and increase proﬁ tability. Ensuring quality in ﬁ nancial reporting The working procedures determined annually by the Board include detailed instructions on the type of ﬁ nancial 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 ﬁ nancial information regard- ing 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 ﬁ nancial reporting, as well as major changes in these principles. The tasks of the Audit Committee also include reviewing reports regarding internal control and ﬁ nancial 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 and CEO or any other member of Group Management. The external auditors also attend the meet- ings of the Audit Committee. Overview of various items on the Board’s agenda and Committee meetings 2022 • Q4, Consolidated results. • Report by external auditors. • Dividend. • Proposals for the AGM. Statutory Board meeting: • Appointment of committee • Signatory powers. • Rules of procedure of the Board. members. Ordinary Board meetings Audit Committee People Committee • Q1 Quarterly ﬁ nancial statements. • Q2 Quarterly ﬁ nancial statements. • Q3 Quarterly ﬁ nancial statements • Board work evaluation. Each scheduled Board meeting included a review of the Group’s results and ﬁ nancial position, as well as the outlook for the forthcoming quarters. January February March April May June July August September October November December CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 20 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 pro- cedures, the working climate and 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 develop- ment 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 Chair- man is led by one of the other members of the Board. Evaluation tools include questionnaires and discussions. In 2022, Board members responded to written questionnaires. 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 are determined by the AGM and paid to the Board members who are not employed by Electrolux. The AGM 2022 decided to increase the fees to the Chairman and the Board members, see table below. 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 ﬁ ve 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. Remuneration to the Board of Directors 2020–2022 (applicable as from the respective AGM) SEK 2022 2021 2020 Chairman of the Board 2,400,000 2,285,000 2,200,000 Board member 700,000 665,000 640,000 Chairman of the Audit Committee Member of the Audit Committee Chairman of the People Committee Member of the People Committee 300,000 290,000 280,000 190,000 185,000 160,000 175,000 170,000 150,000 120,000 115,000 100,000 Member of ad hoc Committee 60,000 — — Board’s report on remuneration pursuant to Chapter 8, Section 53 a of the Swedish Companies Act (Remuneration Report). The People Committee consists of the following three Board members: Petra Hedengran (Chairman), Staﬀ an Bohman and Karin Overbeck. At least two meetings are convened annually. Additional meetings are held as needed. In 2022, the People Committee held six meetings. The attendance of each Board member at these meetings is shown in the table on page 25. Signiﬁ cant issues addressed include evaluation, 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, review of the Remuneration Report for 2022 and review and preparation of long-term incentive program for 2023. The Head of HR and Communications participated in the meetings and was responsible for meeting preparations. People Committee Audit Committee Committees of the Board The Board has established a People Committee and an Audit Committee. The major tasks of these committees are preparatory and advisory, but the Board may delegate decision-making powers on speciﬁ c 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 the AGM’s election of Board members. The Board has also determined that issues may be referred to ad hoc committees dealing with speciﬁ c matters. In 2022, the Board decided to establish a Share Buyback Committee with the purpose of dealing with matters related to the share buyback programs. The Committee consisted of two Board members, Fredrik Persson (Chairman) and Ulla Litzén. People Committee One of the People Committee’s primary tasks is to propose guide- lines for the remuneration to the members of Group Management. The Committee also proposes changes in remuneration to the President and CEO, for resolution by the Board, and reviews and resolves on changes in remuneration to other members of Group Management on proposal by the President and CEO. The Committee shall also oversee and make recommendations to the Board regard- ing the development, recruitment and succession planning of the President and CEO and the Group Management. In addition, the Committee shall oversee the overall organizational structure and advise Group Management regarding people plans and develop- ment of the company culture. The Committee shall also review the The People Committee’s tasks include for example: • To prepare and evaluate remuneration guidelines for Group Management. • To prepare and evaluate targets and principles for variable compensation. • To prepare terms for pensions, notices of termination and severance pay as well as other beneﬁ ts for Group Manage ment. • To prepare and evaluate Electrolux long-term incentive programs. • To review the Remuneration Report. • To oversee and make recommendations regarding the develop- ment, recruitment, and succession planning as well as evaluate the performance of the President and the other members of Group Management. • To oversee the overall organizational structure and advise Group. Management regarding people plans and develop- ment of the company culture. Audit Committee The main task of the Audit Committee is to oversee the processes of Electrolux ﬁ nancial 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 consisted of the following four Board members: Ulla Litzén (Chairman), Staﬀ an 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. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 21 In 2022, the Audit Committee held seven meetings. The attendance of each Board member at these meetings is shown in the table on page 25. Electrolux managers have also had regular contacts with the Committee Chairman between meetings regarding speciﬁ c issues. The Group’s Chief Financial Oﬃ cer and from time to time other senior management members have participated in the Audit Committee meetings. 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 ﬁ nancial statements for legal entities outside of Sweden are performed as required by law or applicable regulations in the respective countries, including issuance of audit opinions for the various legal entities. The Audit Committee’s tasks include for example: • To review the ﬁ nancial reporting. • To monitor the eﬀ ectiveness of the internal control, including risk management, concerning the ﬁ nancial reporting. • To follow up the activities of the Group Internal Audit as regards to organization, recruiting, budgets, plans, results and audit reports. • To review and 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 ﬁ nancial reporting as well as the role of the Committee in this process. • To review, and when appropriate, preapprove the external auditors’ engagements in other tasks than audit services. • To evaluate the objectivity and independence of the external auditors. • To support the Nomination Committee with proposals when electing external auditors. External auditors External auditors The AGM in 2022 elected Pricewaterhouse- Coopers AB (PwC) as the Group’s new external auditors for one year, until the AGM in 2023. The election of PwC was preceded by a thorough procurement process and recommen- dation by the Audit Committee. Authorized Public Accountant Peter Nyllinge is the auditor in charge of AB Electrolux. PwC provides an audit opinion regarding AB Electrolux, the ﬁ nan- cial statements of the majority of its subsidiaries, the consolidated ﬁ nancial statements for the Electrolux Group and the administration of AB Electrolux. The auditors also conduct a review of the report for the second quarter. SEKm PwC Audit fees Audit related fees Tax fees All other fees Total fees to PwC Deloitte Audit fees Audit-related fees Tax fees All other fees Total fees to Deloitte Audit fees to other audit ﬁ rms Total fees to auditors 2022 2021 2020 56 0 1 10 67 — — — — — 0 67 — — — — — 59 2 0 0 61 0 61 — — — — — 63 2 4 0 69 0 69 Deloitte were the Group’s external auditors for the the previous years 2020 and 2021. 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 eﬀ ec- tive governance, internal control and risk management 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 eﬃ cient operations, compliance with relevant laws and regulations and reliable ﬁ nancial reporting. Internal audit assignments are conducted according to a risk based plan developed annually and approved by the Audit Commit- tee. 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 signiﬁ cant risks identiﬁ ed within the Group and its business areas. The audits are executed using a methodology for evaluating the design and eﬀ ectiveness of internal controls to ensure that risks are adequately addressed and processes are operated eﬃ ciently. Opportunities for improving the eﬃ ciency in the governance and internal control and risk management processes identiﬁ ed in the internal audits are reported to responsible business area manage- ment 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 ﬁ ndings identiﬁ ed in the audits. For additional information on internal control, see pages 28-29. Company Management of Electrolux Electrolux – a global leader with a purpose to shape living for the better Electrolux has a strategic framework that con- nects its business model with a clear company purpose – Shape living for the better. To achieve the purpose and drive proﬁ table growth, Electrolux uses a business model which focuses on creating outstanding branded lifetime consumer experiences. By creating desirable solutions and outstanding experiences that enrich peoples’ daily lives and the health of the planet, Electrolux wants to be a driving force in deﬁ ning enjoyable and sustainable living. Focus is to invest in innovations that are most relevant for creating the outstand- ing consumer experience to make great tasting healthy food, help consumers to preserve their clothes longer and to increase wellbeing in the home. Targeted growth and optimization of the product portfolio to the most proﬁ table product categories and products with distinct con- sumer beneﬁ ts, will strengthen the presence of Electrolux in the prod- uct categories and channels where the Group is most competitive. Electrolux objective is to grow with consistent proﬁ tability, see the ﬁ nancial targets below. Financial targets over a business cycle The ﬁ nancial 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 proﬁ tability. • 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%. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 22 Sustainable Consumer Experience Innovation Commercial Excellence Outstanding Branded Lifetime Consumer Experiences World Class Ownership Solutions Emerging Markets Acceleration Operational Excellence Talent Teamship Continuous Improvement A sustainable business Sustainability leadership is crucial to realizing the Electrolux strategy for long-term proﬁ table growth. In 2022, Electrolux most resource- eﬃ cient products represented 24% of products sold and 39% of gross proﬁ t. The company takes a consistent approach to sustainability in the countries where Electrolux operates. Understanding and engaging in challenges such as climate change, creating ethical and safe workplaces, and adopting a responsible approach to sourcing and reorganizations are important for realizing the business strategy. Electrolux has a Code of Conduct, which sets out the framework of how Electrolux shall conduct its operations in ethical and sus- tainable ways. The Code of Conduct, which has been approved 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. There is regular training and communica- tion of the Code of Conduct and Group Policies, and in 2022 online trainings in the Code of Conduct and the Anti-corruption Policy were rolled out to oﬃ ce based employees. At year end the completion rates were 89% and 87% for the Code of Conduct and anti-corrup- tion trainings respectively. The Ethics Program encompasses a global whistleblowing sys- tem – Ethics Helpline – through which suspected misconduct can be reported in local languages. Reports may be submitted anony- mously if legally permitted. The largest categories of reports in 2022 related to workplace conduct, verbal abuse and other types of 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 assess- ments 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. During 2022 a local impact assessment was made in South Africa. The Group’s sustainability performance strengthens relations with investors and Electrolux is recognized as a leader in the household durables industry. In 2022, Electrolux was included in the Dow Jones Sustainability Index (DJSI) World and Europe indexes. 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 ﬁ nances in all jurisdictions where the Group operates. The Group has approximately 51,000 employees with sales in approximately 120 markets. Of Electrolux Group total tax contribution, as deﬁ ned in the below chart, corporate tax represented approximately 9.1% in 2022. Corpo- rate income taxes are only a portion of the Group’s total contribution to public ﬁ nances 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 indirect contributions to governments. The total contribution to public ﬁ nances for 2022 amounted to approximately SEK 10.4bn whereof approximately half related to emerging markets. Electrolux most transparent contribution to public ﬁ nances around the world is corporate income taxes, see Note 10. Corporate income taxes amounted to SEK 0.9bn in 2022, representing a global eﬀ ective tax rate of the Group of 21.0%. Electrolux total taxes 2022 Employer tax & fees, 30.5% Corporate tax, 9.1% Property tax, 1.9% Customs, 24.8% Indirect tax, 28.5% Environmental tax & fees, 5.3% Management and company structure Electrolux aims at implementing strict norms and eﬃ cient processes to ensure that all operations create long-term value for shareholders and other stakeholders. This involves the maintenance of an eﬃ cient organizational structure, systems for internal control and enterprise risk management, and transparent internal and external reporting. Following the re-organization eﬀ ective as of July 1, 2022, the Group consists of three global organizational areas, Consumer Experience & Product Lines, Commercial & Consumer Journey, and Operations. Electrolux is also organized into four geographically deﬁ ned business areas, Europe, North America, Latin America and Asia-Paciﬁ c, Middle East and Africa. The business area heads report to the Head of Commercial & Consumer Journey. The Group organization also includes the following group staﬀ functions supporting the business, Finance & Legal, HR & Communi- cations, Business Development & Strategy, and IT & Digital. There are also a number of internal bodies which are forums that are preparatory and decision-making in their respective areas, see chart on page 23. Each body includes representatives from concerned functions. President and Group Management President and Group Management Group Management currently includes the President and CEO, the three organizational area heads, four business area heads and two group staﬀ heads. The President and CEO is appointed by and receives instructions from the Board. The President and CEO, in turn, appoints other members of Group Management and is responsible for the ongoing management of the Group in accordance with the Board’s guide- lines and instructions. A diversiﬁ ed 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 proﬁ table growth in accordance with the Group’s strategy. Electrolux Group Management represents six diﬀ erent 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 organizations have been established to, for example, increase the pace of innovation in prod- uct development, reduce complexity in manufacturing and optimize purchasing. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 23 Changes in Group Management The following changes in the Group management have been made during 2022. Eﬀ ective as of July 1, 2022, Anna Ohlsson-Leijon was appointed new Chief Commercial Oﬃ cer and head of the new Commercial & Consumer Journey organization, focusing on commercial growth and consumer journey development. Chris Braam was appointed new Head of Business Area Europe, replacing Anna Ohlsson-Leijon in her previous role. The business area heads, responsible for Europe, North America, Latin America, and Asia-Paciﬁ c, Middle East and Africa, report to Anna Ohlsson-Leijon in the role of Chief Commercial Oﬃ cer for the Group. The business area heads remain members of Group Management. Eﬀ ective as of January 1, 2023, Ricardo Cons was appointed new CEO and head of Business Area North America. Nolan Pike left his position as Head of Business Area North America in September 2022. Leandro Jasiocha was appointed CEO and head of Business Area Latin America, replacing Ricardo Cons in his previous role. For details regarding members of Group Management, see pages 26-27. Key focus areas for the President and Group Management in 2022 • Responding to the dynamic environment caused by imbalances in the global supply chain, increased geopolitical tensions, and high general inﬂ ation. • Group-wide cost reduction and North America turnaround pro- gram initiated. • Executing on extensive product launches across business areas. • Leveraging global scale for commercial execution and consumer journey development. • Continuing to drive sustainable consumer experience innovation under sharpened brands. • Strengthening consumer relations beyond product purchase, including aftermarket business. Internal bodies President and Group Management Internal bodies Insider & Disclosure Committee Enterprise Risk Management Board Ethics & Human Rights Steering Group Sustainability Board Tax Board Pension Board Sourcing Board Audit Board • Implementing price increases to mitigate cost inﬂ ation. • Continued implementation of the new sustainability framework, launched in 2020. 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 and CEO is then resolved upon by the Board, based on proposals from the People Committee. Changes in the remuneration to other members of Group Management is resolved upon by the People Committee, based on proposals from the President and CEO, and reported to the Board of Directors. Electrolux shall strive to oﬀ er 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 beneﬁ ts such as pension and insurance. Following the ’pay for performance’ principle, variable compensa- tion shall represent a signiﬁ cant portion of the total compensation opportunity for Group Management. Variable compensation shall always be measured against predeﬁ ned targets and have a maximum above which no pay-out shall be made. The targets shall principally relate to ﬁ nancial 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 in March 2022 decided on a long-term share program for 2022 (LTI 2022) for up to 900 senior managers and key employees. For additional information on remuneration, remuneration guide- lines, long-term incentive programs and pension beneﬁ ts, see Note 27. Timeline for the long-term incentive program for senior management 2022 2022 2023 2024 2025 Performance period Start 1 2 3 The calculation of the number of performance shares, if any, is connected to two performance targets for the Group established by the Board; (i) cumulative earnings per share, and (ii) CO2 reduc- tion. Allotment of performance shares, if any, to the participants will be made in 2025. Year Invitations to partici- pants in the program. Performance shares allotted. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 24 Board of Directors and Auditors Staﬀ an Bohman Chairman Born 1949. Sweden. B.Sc. in Economics and Business Administration. Elected 2018. Member of the Electrolux Audit Committee and the Electrolux People Committee. Other assignments: Chairman of the Board of the Research Institute of Industrial Econom- ics and the German-Swedish Chamber of Commerce. Board Member of Atlas Copco AB and Åke Wiberg Foundation. Member of 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: 180,000 B-shares. 120,279 call options, issued by Investor AB entitling the right to purchase Electrolux B-shares. Jonas Samuelson President and CEO Born 1968. Sweden. M.Sc. in Economics and Business Administration. Elected 2016. Other assignments: Board member of Axel Johnson AB and Volvo Cars AB. Previous positions: Various senior positions within Electrolux including CFO of AB Electrolux, COO Global Operations Major Appliances and Head of Major Appli- ances EMEA. Chief Financial Oﬃ cer and Executive Vice President of Munters AB. Various senior positions within General Motors, mainly in the U.S., and Saab Automo- bile AB. Holdings in AB Electrolux: 65,211 B-shares. Petra Hedengran Born 1964. Sweden. M. of Laws. Elected 2014. Chairman of the Electrolux People Com- mittee and member of the Electrolux Audit Committee. Other assignments: Gen- eral 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 Advokatﬁ rman Lindahl. Various positions within the ABB Financial S ervices 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: 15,900 B-shares. Henrik Henriksson Born 1970. Sweden. B.Sc. in Business Administration. Elected 2020. Other assignments: President and CEO of H2 Green Steel AB. Board member of Hexa- gon AB, Creades AB, SAAB AB and the Confederation of Swedish Enterprise (Sw. Svenskt Näringsliv). Previous positions: Various senior positions within Scania, including President and CEO of Scania AB. Holdings in AB Electrolux: 425 B-shares. Ulla Litzén Born 1956. Sweden. B.Sc. in Economics and M.B.A. Elected 2016. Chairman of the Electrolux Audit Committee. Other assignments: Board member of Epiroc AB, Ratos AB, Stockholm School of Economics and the School of Economics Association. 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: 12,000 B-shares. Karin Overbeck Born 1966. Germany. Mas- ter’s degree in Economics, Marketing and Finance. Elected 2020. Member of the Electrolux People Committee Other assignments: CEO of Freudenberg Home and Cleaning Solutions GmbH. Member of Executive Council, Freudenberg Group. Vice President and member of the Board of the German Brands Association. Previous positions: Various senior positions within the KAO Corporation as well as in L’Oréal, Tchibo and Unilever. Holdings in AB Electrolux: 3,135 B-shares. Fredrik Persson Born 1968. Sweden. M.Sc. in Economics. Elected 2012. Member of the Electrolux Audit Committee. Other assignments: Chairman of the Board of JM AB, the Confederation of European Business (BusinessEurope) and Ellevio AB. Board mem- ber of Holmen AB, Hufvudsta- den 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: 5,000 B-shares. David Porter Born 1965. USA. Bachelor’s degree, Finance. Elected 2016. Other assignments: Head of Microsoft Stores, Corporate Vice President, Microsoft Corp. Chairman of Serta Simmons Bedding LLC. Previous positions: Head of Worldwide Product Distribu- tion at DreamWorks Anima- tion SKG. Various positions within WalMart Stores, Inc. Holdings in AB Electrolux: 3,315 B-shares. Holdings in AB Electrolux are stated as of December 31, 2022 and includes holdings of related natural and legal persons, when applicable. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 25 Employee representatives Viveca Brinkenfeldt Lever Born 1960. Representative of the Federation of the Salaried Employees in Industry and Services. Elected 2018. Board meeting attendance: 12/12 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: 11/12 Holdings in AB Electrolux: 100 B-shares. Wilson Quispe Born 1978. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2022. Board meeting attendance: 12/121) Holdings in AB Electrolux: 4,900 B-shares. Employee representatives, deputy members Ulrik Danestad Born 1969. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2020. Holdings in AB Electrolux: 20 B-shares. Secretary of the Board Ulrika Elfving Born 1973. M. of Laws. General Counsel of AB Electrolux. Secretary of the Electrolux Board since 2022. Holdings in AB Electrolux: 1,134 B-shares. Committees of the Board of Directors People Committee Petra Hedengran (Chairman), Staﬀ an Bohman and Karin Overbeck. Audit Committee Ulla Litzén (Chairman), Staﬀ an Bohman, Petra Hedengran and Fredrik Persson. Auditors PricewaterhouseCoopers AB Peter Nyllinge Born 1966. Authorized Public Accountant. Other audit assignments: Getinge AB, Saab AB and Sandvik AB. Holdings in AB Electrolux: 0 shares. The board’s remuneration during 2022, meeting attendance and independence Total remuneration 20 22, ’000 SEK Board meeting attendance People Committee attendance Audit Committee attendance Ad hoc Committee (Share Buyback Committee) Independence1) Staﬀ an Bohman Petra Hedengran Henrik Henriksson Ulla Litzén Karin Overbeck2) Fredrik Persson David Porter Jonas Samuelson 2,604 965 691 961 781 879 691 — 10/12 11/12 9/12 10/12 12/12 12/12 9/12 12/12 6/6 6/6 5/6 7/7 7/7 7/7 7/7 2/2 2/2 No No 1) For further information about the independence assessment, see page 18. 2) Karin Overbeck was appointed as member of the People Committee in connection with the AGM 2022. Holdings in AB Electrolux are stated as of December 31, 2022 and includes holdings of related natural and legal persons, when applicable. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 26 Group Management Jonas Samuelson President and CEO Born 1968. Sweden. M.Sc. in Economics and Business Administration. In Group Management and employed since 2008. Other assignments: Board member of Axel Johnson AB and Volvo Cars 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 Oﬃ cer 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: 65,211 B-shares. Therese Friberg Chief Financial Oﬃ cer, Executive Vice President Born 1975. Sweden. B.Sc. in Business Adminis- tration. In Group Management since 2018 and employed since 1999. Previous positions: CFO of Major Appliances EMEA. Other senior positions within Electrolux including Head of Group Business Control and Sector Controller Home Care & SDA. Holdings in AB Electrolux: 14,527 B-shares. Chris Braam CEO and head of Business Area Europe Born 1969. The Netherlands. B.Sc in Business Economics and Business Administration. In Group Management since 2022 and employed since 2011. Previous positions: SVP Sales and Services, Business Area Europe. Other senior positions in Nokia Mobile Phones, Benelux and VP Sales Middle East & Africa. Holdings in AB Electrolux: 6,429 B-shares. Adam Cich CEO and head of Business Area Asia Paciﬁ c, Middle East and Africa Born 1968. Poland. M.Sc. in Business Adminis- tartion. In Group Management since 2020 and employed since 1996. Previous positions: SVP Sales and Acting Head of Business Area Asia Paciﬁ c, Middle East and Africa. Head of Sales in Central and Eastern Europe for Business Area Europe. Other senior positions in Electrolux include leadership posi- tions within sales and product line in Poland, Russia and CEE region. Holdings in AB Electrolux: 3,219 B-shares. Ricardo Cons CEO and head of Business Area North America Born 1967. Brazil. Bachelor in Business Admin- istration, Finance and Marketing, MBA in Team Management. In Group Management since 2016 and employed in 1997–2011 and since 2016. Previous positions: Head of Business Area Latin America. 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: 11,906 B-shares. Holdings in AB Electrolux are stated as of December 31, 2022 and includes holdings of related natural and legal persons, when applicable. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 27 Carsten Franke Head of Operations, Executive Vice President Born 1965. Germany. Engineer’s degree (Dipl.- Ing) in Mechanical Engineering. In Group Man- agement since 2020 and employed since 2005. Previous positions: Various senior roles within Business Area Europe including Chief Opera- tions Oﬃ cer, Vice President Supply Chain, Vice President Industrial Operations and Vice Pres- ident Electrolux Lean Manufacturing System. Positions prior to Electrolux include manage- ment roles at Knorr-Bremse AG and Maschinen- fabrik Reinhausen. Holdings in AB Electrolux: 5,096 B-shares. Leandro Jasiocha CEO and head of Business Area Latin America Born 1976. Brazil. Master in Business Adminis- tration, M.Sc. in International Supply Chain/ Purchasing. In Group Management since 2023 and employed in 1995-2000, 2002-2016 and since 2018. Previous positions: Various senior positions within Electrolux including Vice President Consumer Journey Latin America and Vice President Product Lines Latin America. Positions prior to Electrolux include management positions at Hyva Global B.V. and Henkel Chemicals. Holdings in AB Electrolux: 1,125 B-shares. Ola Nilsson Head of Consumer Experience & Product Lines, Executive Vice President Born 1969. Sweden. M.Sc. in International Busi- ness Administration. In Group Management since 2016 and employed since 1994. Other assignments: Board member of Fractal Gaming Group AB. Previous positions: Various senior positions within Electrolux including CEO of Home Care & SDA, Senior Vice President Product Line Laundry Major Appliances EMEA and President Small Appliances Asia Paciﬁ c. Holdings in AB Electrolux: 20,257 B-shares Anna Ohlsson-Leijon Chief Commercial Oﬃ cer, Executive Vice President Born 1968. Sweden. B.Sc. in Economics and Business Administration. In Group Management since 2016 and employed since 2001. Other assignments: Board member of Atlas Copco AB and Schneider Electric SE. Previous positions: Head of Business Area Europe and CFO of AB Electrolux. Other senior positions within Electrolux including CFO of Major Appliances EMEA and Head of Electrolux Corporate Control & Services. Chief Financial Oﬃ cer of Kimoda. Various positions within PricewaterhouseCoopers. Holdings in AB Electrolux: 18,472 B-shares. Lars Worsøe Petersen Head of HR & Communications Born 1958. Denmark. M.Sc. in Economics and Business Administration. In Group Management since 2011 and employed in 1994–2005 and since 2011. Previous positions: CHRO, Senior Vice President at Husqvarna AB, 2005–2011. Various senior positions within Electrolux including Head of Human Resources for Major Appliances North America and Head of Electrolux Holding A/S in Denmark. Holdings in AB Electrolux: 26,875 B-shares. Holdings in AB Electrolux are stated as of December 31, 2022 and includes holdings of related natural and legal persons, when applicable. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 28 Internal control over ﬁ nancial reporting The Electrolux Control System (ECS) has been developed to ensure accurate and reliable ﬁ nancial reporting and preparation of ﬁ nancial statements in accordance with applicable laws and regulations, generally accepted accounting principles and other requirements for listed companies. The ECS adds value through clariﬁ ed roles and responsibilities, improved process eﬃ ciency, 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 ﬁ ve 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 deter- mines the individual and collective behavior within the Group. It is deﬁ ned by policies and directives, manuals, and codes, and enforced by the organizational structure of Electrolux with clear responsibility and authority based on collective values. The Electrolux Board has overall responsibility for establishing an eﬀ ective system of internal control. Responsibility for maintaining eﬀ ective internal controls is delegated to the President and CEO. The governance structure of the Group is described on page 16. Speciﬁ cally for ﬁ nancial reporting, the Board has established an Audit Committee, which assists in overseeing relevant policies and important accounting principles applied by the Group. 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 AntiCorruption Policy, as well as in policies for informa- tion, ﬁ nance, and in the accounting manual. Together with laws urth Q u arter Fo Risk assessment First Q u a r t e r Improve Inform and communicate Control activities Monitor T hir d Q u C ontrol env i r o n m e S e c arter n t n o u d Q a rter and external regulations, these internal guidelines form the control environment and all Electrolux employees are held accountable for compliance. All entities within the Electrolux Group must maintain adequate internal controls. As a minimum requirement, control activities should address key risks identiﬁ ed within the Group. Group Management has the ultimate responsibility for internal controls within their areas of responsibility. Group Management is described on pages 26–27. The ECS Program Oﬃ ce, a department within the Group Internal Audit function, has developed the methodology and is responsible for maintaining the ECS. To ensure timely completion of these activ- ities, speciﬁ c roles aligned with the company structure, with clear responsibilities regarding internal control, have been assigned within the Group. Control environment — Example Code of Conduct Minimum standards in the areas of environment, health and safety, labor standards and human rights. The Code of Conduct is mandatory for Electrolux units. Group Finance Policy Details the general framework for how ﬁ nancial operations shall be organized and managed within the Group. The policy contains directives and other mandatory standards issued by the Group Finance organization. Credit Directive Rules for customer assessment and credit risk that clarify responsibilities and are the framework for credit decisions. 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 instructions for the Group‘s reporting entities are contained in the Electrolux Accounting Manual. The Accounting Manual is mandatory for all reporting units. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 29 Risk assessment Risk assessment Risk assessment includes identifying risks of not fulﬁ lling the fundamental criteria, i.e., complete- ness, accuracy, valuation and reporting for signiﬁ cant accounts in the ﬁ nancial reporting for the Group as well as risk of loss or misappropriation of assets. At the beginning of each calendar year, the ECS Program Oﬃ ce 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 diﬀ erent processes generating transactions that end up in signiﬁ cant accounts in the ﬁ nancial reporting have been identiﬁ ed. 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 as well as process eﬃ ciency. Control activities mitigate the risks identiﬁ ed and ensure accurate and reliable ﬁ nancial reporting Control activities include both general and detailed controls aimed at preventing, detecting and correcting errors and irregu- larities. In the ECS, the following types of controls are implemented, documented and tested: • Manual and application controls — to secure that key risks related to ﬁ nancial 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. Control activities — Example Enterprise risk assessment — example accounts receivable Closing Routine — Risks assessed Process Closing Routine Risk assessed Control activity Risk of incorrect ﬁ nan- cial reporting. Manage IT — Risks assessed Order to Cash — Risks assessed Manage IT Risk of unauthorized/ incorrect changes in the IT environment. Order to Cash Risk of not receiving payment from custom- ers 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 environ ment are authorized, tested, veriﬁ ed and ﬁ nally approved. Customers’ payments are monitored and outstanding payments are followed up. Application automatically blocks sales orders/deliv- eries when the credit limit is exceeded. Monitor Improve Monitor and Improve Monitor and test of control activities is performed periodically to ensure that risks are properly mitigated. The eﬀ ectiveness of control activities is moni- tored continuously at four levels: Group, business area, reporting unit, and process. Monitoring involves both formal and informal procedures applied by management, process owners and control operators, including reviews of results in comparison with budgets and plans, analytical procedures, and key-perfor- mance 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 control and processes for ﬁ nancial reporting. Group Internal Audit proac- tively proposes improvements to the control environment. The Head of Group Internal Audit has dual reporting lines: to the President and CEO and the Audit Committee for assurance activities, and to the Chief Financial Oﬃ cer 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 ﬁ nancial 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 informa- tion 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 responsible 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 Oﬃ ce and coordinators in the business areas. Information about the status of the ECS is pro- vided periodically to business area and Group Management, the Audit Board and the Audit Committee. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 30 Financial reporting and information Electrolux routines and systems for information and communication aim at providing the market with relevant, reliable, correct and vital information concerning the development of the Group and its ﬁ nan- cial position. Speciﬁ cally for purposes of considering the materiality of information, including ﬁ nancial reporting, relating to Electrolux and ensuring timely communication to the market, an Insider & Disclosure Committee has been formed. Electrolux has an information policy and an insider policy meeting the requirements 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 signiﬁ cant eﬀ ect on the share price. • Presentations and telephone conferences for ﬁ nancial analysts, investors and media representatives on the day of publication of full-year and quarterly results. Stockholm, February 17, 2023 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 2022 on pages 15-30 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 16 The auditor’s examination of the corporate governance statement. This means that our examination of the corporate governance statement is diﬀ erent and substantially 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 suﬃ cient 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 21, 2023 PricewaterhouseCoopers AB Peter Nyllinge Authorized Public Accountant Partner in Charge Helena Kaiser de Carolis Authorized Public Accountant This is a translation of the Swedish language original. In the event of any diﬀ erences between this translation and the Swedish language original, the latter shall prevail. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 31 Report by the Board of Directors • Net sales amounted to SEK 134,880m (125,631). Excluding currency translation eﬀ ects, sales declined by 3.6%. • Operating income amounted to SEK –215m (6,801), corresponding to a margin of –0.2% (5.4). Excluding non–recurring items of SEK –1,046m (–727), operating income amounted to SEK 831m (7,528), corresponding to a margin of 0.6% (6.0). • Income for the period amounted to SEK –1,320m (4,678), corresponding to SEK –4.81 (16.31) per share. • Operating cash ﬂ ow after investments amounted to SEK –6,118m (3,200). • 13,049,115 own series B shares were repurchased for an amount of SEK 2,138m. • The Board of Directors proposes that no payment of dividend will be made for 2022. Key data SEKm Net sales Sales growth, %1) Organic growth, % Acquisitions, % Divestments, % Changes in exchange rates, % Operating income2) Operating margin, % Income after ﬁ nancial items Income for the period Earnings per share, SEK3) Operating cash ﬂ ow after investments Return on net assets, % Capital turnover-rate, times/year Average number of employees Net debt/EBITDA Equity per share, SEK Dividend per share, SEK Return on equity, % 2022 134,880 2021 Change, % 125,631 7 –3.6 –2.8 — –0.8 10.9 –215 –0.2 –1,672 –1,320 –4.81 –6,118 –0.6 3.7 50,769 3.83 60.92 —4) –7.0 14.3 14.2 0.2 — –6.0 6,801 5.4 6,255 4,678 16.31 3,200 28.5 5.3 51,590 0.71 65.74 9.20 24.4 n.m. n.m. n.m. n.m. 1) Change in net sales adjusted for currency translation eﬀ ects. 2) Operating income for 2022 included non-recurring item of SEK -1,046m (-727). Excluding these items, operating income for 2022 amounted to SEK 831m (7,528), corresponding to a margin of 0.6% (6.0), see Note 7. 3) Basic, based on an average of 274.7 (286.9) million shares for the full year, excluding shares held by Electrolux. 4) Proposed by the Board of Directors. Note: n.m. (not meaningful) is used when the calculated number is considered not relevant. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 32 Net sales and income • Net sales increased by 7.4%. This was a result of a positive currency translation eﬀ ect of 10.9%, while organic sales decreased by 2.8% and acquisitions and divestments combined had a negative impact of 0.8%. • Operating income amounted to SEK –215m (6,801), corresponding to a margin of –0.2% (5.4). • Excluding non–recurring items of SEK –1,046m (–727), operating income amounted to SEK 831m (7,528), corresponding to a margin of 0.6% (6.0). • The decrease in operating income excluding non– recurring items was primarily driven by lower volumes and signiﬁ cantly elevated cost levels as a result of ineﬃ ciencies in production and logistics. • Strong price execution oﬀ set signiﬁ cant cost inﬂ ation, including currency headwinds. • Successful product launches generated a favorable mix despite a challenging market environment. • Income for the period amounted to SEK –1,320m (4,678), corresponding to SEK –4.81 (16.31) per share. Net sales Net sales in 2022 amounted to SEK 134,880m (125,631), which is an increase of 7.4%. Currency translation had a positive impact of 10.9%, while organic sales decreased by 2.8% and acquisitions and divest- ments combined had a negative impact of 0.8%. The organic sales decrease was driven by lower volumes due to continued supply chain constraints in the ﬁ rst half of the year and lower market demand. Price developed strongly in all business areas driven by list price increases, while promotional activity returned to normal levels towards the end of 2022. Successful product launches generated a favorable mix, despite a challenging market environ- ment. Aftermarket sales increased slightly. Operating income Operating income for 2022 amounted to SEK -215m (6,801), corre- sponding to a margin of -0.2% (5.4). Operating income included non-recurring items of SEK -1,046m relating to a settlement regard- ing the arbitration in a U.S. tariﬀ case, a loss from the exit from the Russian market, restructuring charges across business areas and Group common cost for the Group-wide cost reduction and North America turnaround program, the divestment of the oﬃ ce facility in Zürich, Switzerland, and termination of a U.S pension plan, trans- ferred to a third party. For more information, see Note 7. Excluding these non-recurring items, operating income amounted to SEK 831m (7,528), corresponding to a margin of 0.6% (6.0). The decrease in operating income excluding non-recurring items was primarily driven by lower volumes and signiﬁ cantly elevated cost levels from production and logistic ineﬃ ciencies, mainly in business area North America. A Group-wide cost reduction and North America turnaround program was announced in September to return to stability and increase proﬁ tability. However, the high inventory of products produced before the measures were imple- mented, resulted in a delayed earnings impact. Net price realization was strong, oﬀ setting signiﬁ cant cost inﬂ ation, and mix was positive. Investments in innovation and marketing increased to support product launches and further develop capabilities for consumer direct interaction. each business area, see page 33-35. For more information on the performance of Financial net Net ﬁ nancial items amounted to SEK –1,457m (–546). The change was mainly a result of higher interest rates and debt levels. Income after ﬁ nancial items Income after ﬁ nancial items amounted to SEK -1,672m (6,255), corresponding to -1.2% (5.0) of net sales. Sales growth SEKm 150000 150,000 100000 100,000 50000 50,000 0 0 -50000 18 18 19 19 20 20 21 21 22 22 Operating margin SEKm 8000 8,000 6000 6,000 4000 4,000 2000 2,000 0 0 Net sales Sales growth Target: at least 4% % 15 15 10 10 5 5 0 0 Total sales growth excluding currency translation eﬀ ects. -5 -5 % 8 8 6 6 4 4 2 2 0 0 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 117. 18 18 19 19 20 20 21 21 22 22 Financial targets are over a business cycle. For comparable reasons the ﬁ gures in the graphs above are exclusive of the discontinued business area Professional Products. Taxes Total taxes for 2022 amounted to SEK 352m (–1,577), corresponding to a tax rate of 21.0% (25.2). Income for the period and earnings per share Income for the period amounted to SEK -1,320m (4,678), corre- sponding to SEK -4.81 (16.31) in earnings per share before dilution. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 33 Operations by business area • Sharp volume decline in Europe due to weak market conditions. • Signiﬁ cantly elevated cost levels in North America, partly triggered by supply chain constraints. • Strong price execution oﬀ set signiﬁ cant cost inﬂ ation in Latin America. • Successful product launches in Asia-Paciﬁ c, Middle East and Africa. Market demand overview The market demand declined in most of Electrolux main markets in 2022 compared to last year when demand, in general, was strong. During the ﬁ rst half of the year, supply chain constraints limited the ability to fully meet underlying demand, while increased general inﬂ ation, interest rates and geopolitical tensions impacted consumer sentiment and purchasing power negatively during the second half. Market demand for core appliances in Europe, excluding Russia, decreased by 10% in 2022, where Eastern Europe declined by 13% and Western Europe by 10%. In the U.S., market demand for core appliances decreased by 6%. In Latin America, overall consumer demand is estimated to have decreased by double-digit, driven by Brazil and Chile. In addition to the economic pressure on consumers, Chile was positively impacted last year by government incentives. In Argentina, consumer demand is estimated to have increased, driven by improved product availability and as a result of the negative impact of lockdowns in 2021. In Asia-Paciﬁ c, Middle East and Africa, consumer demand for appliances is estimated to have increased in 2022 across main markets, although declining towards the end of the year as consumer conﬁ dence and purchasing power were negatively aﬀ ected by higher inﬂ ation and weaker global macro sentiment. Industry shipments for core appliances in Europe Million units 110 110 100 100 90 90 80 80 70 70 04 06 08 10 12 14 16 17 20 22 A total of approximately 87 million core appliances were sold in Europe in 2022. Source: Electrolux estimates. As from 2018, market volumes in Eastern Europe have been revised, considering additional sources. Estimates exclude Russia. Industry shipments for core appliances in the U.S. Million units 60 60 55 55 50 50 45 45 40 40 35 35 04 06 08 10 12 14 15 18 20 22 A total of approximately 52 million core appliances were sold in the U.S. in 2022. Source: AHAM. Core appliances includes AHAM 6 (washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens) and cooktops. For other markets there are no comprehensive market statistics. Business areas Electrolux operations are organized into four regional business areas: Europe, North America, Latin America and Asia-Paciﬁ c, Middle East and Africa. The Group’s operations include products for consumers comprising of major appliances, e.g. 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. Share of sales by business area Europe, 34% North America, 35% Latin America, 18% Asia-Paciﬁ c, Middle East and Africa, 13% Financial overview by business area SEKm Net sales Operating income Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Group common costs, etc. Total Group Operating margin, % Operating margin excl. non-recurring items, %1) 2022 2021 Change, % 134,880 125,631 7 –83 n.m. –21 –13 –18 n.m. 683 –2,394 1,058 1,308 –870 –215 –0.2 4,002 688 1,336 1,511 –737 6,801 5.4 0.6 6.0 1) For more information on non-recurring items, see Note 7. Note: n.m. (not meaningful) is used when the calculated number is considered not relevant. Europe Market demand in Europe, excluding Russia, decreased by 10% in 2022. Eastern Europe declined by 13% and Western Europe by 10%. The business area reported an organic sales decline of 8.6% in 2022, driven by lower volumes. Consumer demand was negatively impacted by increased general inﬂ ation, interest rates, and geopo- litical tensions. In addition, supply chain constraints limited the ability to fully meet underlying demand during the ﬁ rst half of the year. Price realization was strong, driven by list price increases implemented during the year, and mix developed favorably. Paused operations in Russia, before subsequent exit from the market, contributed to the organic sales decline. Operating income and margin decreased year-over-year, pre- dominantly due to lower volumes. Price oﬀ set the signiﬁ cant cost inﬂ ation, primarily in raw materials and logistics, while supply chain constraints and irregular supply caused additional cost. Towards the end of the year, reduced discretionary spending impacted earnings positively and actions to adjust production to a weaker market demand under the Group-wide cost reduction program were initiated. Non-recurring items of SEK -774m were included in the operating income relating to a loss from the exit from the Russian market, a restructuring charge for the Group-wide cost reduction program, and divestment of the oﬃ ce facility in Zürich, Switzerland, see Note 7. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 34 Europe, Net sales and operating margin SEKm % 50 000 50,000 40 000 40,000 30 000 30,000 20 000 20,000 10 000 10,000 0 0 Net sales Operating margin Operating margin excl. non-recurring items1) 10 10 8 8 6 6 4 4 2 2 0 0 18 18 19 19 20 20 21 21 22 22 Europe, Key ﬁ gures SEKm Net sales Organic growth, % Acquisitions, % Divestments, % Operating income Operating margin, % Operating margin excl. non-recurring items, %1) Net assets Return on net assets, % Capital expenditure Average number of employees 1) For information on non-recurring items, see Note 7 and page 117. 2022 2021 46,573 49,384 –8.6 0.1 –2.2 683 1.5 3.1 5,768 15.1 3,310 18,250 10.6 0.1 — 4,002 8.1 8.1 1,749 224.4 2,787 17,914 North America Market demand for core appliances in the U.S. decreased by 6% in 2022. Market demand for all major appliances, including microwave ovens and home-comfort products, decreased by 8%. The business area reported a slight organic sales decline of 0.9%. Volumes decreased as a result of weaker market demand as well as a strategic shift from certain sourced products. In addition, supply chain constraints and labor shortages negatively impacted the abil- ity to fully meet underlying demand during the ﬁ rst half of the year. Price developed strongly driven by list price increases implemented during the year, while promotional activity returned to normal levels towards the end of 2022. Sales of new product ranges, primarily pro- duced in the two new factories, contributed to a favorable mix. Operating income was negative. This was a result of signiﬁ cantly elevated cost levels from severe production ineﬃ ciencies, espe- cially in the two new factories being ramped up, partly triggered by supply chain constraints. In addition, logistic ineﬃ ciencies including increased spot buys of components and use of air freight had a neg- ative impact. A turnaround program was announced in September to return to stability and proﬁ tability. However, the high inventory of products produced before the measures were implemented, resulted in a delayed earnings impact. In addition, lower sales volumes impacted earnings negatively. Price oﬀ set signiﬁ cant cost inﬂ ation, mainly in raw material and logistics. Non-recurring items of SEK 241m (-727) were included in the operating income relating to a settlement regarding the arbitration in a U.S. tariﬀ case, a restructuring charge for the Group-wide cost reduction and North America turnaround program and termination of a U.S. pension plan, transferred to a third party, see Note 7. sales developed strongly. Volumes declined due to challenging market conditions. Operating income and margin decreased year-over-year, driven by lower volumes. Price oﬀ set signiﬁ cant cost inﬂ ation, mainly in raw material. Investments in innovation and brand-strengthening initiatives increased to support product launches. A non-recurring item of SEK -80m was included in the operating income relating to a restructuring charge for the Group-wide cost reduction program, see Note 7. North America, Net sales and operating margin SEKm % 60000 60,000 45000 45,000 30000 30,000 15000 15,000 0 0 -15000 Net sales Operating margin Operating margin excl. non-recurring items1) 24 24 18 18 12 12 6 6 0 0 -6 -6 18 18 19 19 20 20 21 21 22 22 North America, Key ﬁ gures SEKm Net sales Organic growth, % Operating income Operating margin, % Operating margin excl. non-recurring items, %1) Net assets Return on net assets, % Capital expenditure 2022 2021 47,021 40,468 –0.9 –2,394 –5.1 –5.6 11,854 –20.5 1,738 12.7 688 1.7 3.5 9,376 8.7 1,311 Latin America, Net sales and operating margin SEKm % 25000 25,000 20000 20,000 15000 15,000 10000 10,000 5000 5,000 0 0 Net sales Operating margin Operating margin excl. non-recurring items1) 10 10 8 8 6 6 4 4 2 2 0 0 18 18 19 19 20 20 21 21 22 22 Latin America, Key ﬁ gures SEKm Net sales Organic growth, % Operating income Operating margin, % Operating margin excl. non-recurring items, %1) Net assets Return on net assets, % Capital expenditure Average number of employees 2022 2021 24,303 19,958 4.2 1,058 4.4 4.7 33.7 1,336 6.7 6.7 8,724 5,893 13.1 979 25.9 933 9,571 10,749 Average number of employees 12,995 13,558 1) For information on non-recurring items, see Note 7 and page 117. 1) For information on non-recurring items, see Note 7 and page 117. Latin America Overall consumer demand for core appliances in Latin America in 2022 is estimated to have declined double-digit. In Chile and Brazil, demand is estimated to have decreased, while demand is estimated to have increased in Argentina. The business area reported an organic sales growth of 4.2% in 2022. Price developed strongly driven by list price increases imple- mented during the year, while promotional activity returned to nor- mal levels towards the end of 2022. Product launches and improved product availability generated a favorable mix and aftermarket Asia-Paciﬁ c, Middle East and Africa Consumer demand for appliances is estimated to have increased in the region in 2022 across main markets, although softening towards the end of the year as consumer conﬁ dence and purchasing power were negatively aﬀ ected by higher inﬂ ation and weaker global macro sentiment. The business area reported a slight organic sales decline of 0.5%. Price developed favorably driven by list price increases implemented during the year. Product launches contributed to a positive mix, while volumes declined. Volumes were mainly impacted negatively CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 35 by supply chain constraints in the ﬁ rst half of the year and by weaker market demand towards the end of the year. Other facts Operating income and margin decreased year-over-year, due to lower volumes. Price oﬀ set signiﬁ cant cost inﬂ ation, including currency headwinds. A non-recurring item of SEK -66m was included in the operating income relating to a restructuring charge for the Group-wide cost reduction program, see Note 7. Asia-Paciﬁ c, Middle East and Africa, Net sales and operating margin SEKm % 20000 20,000 15000 15,000 10000 10,000 5000 5,000 0 0 Net sales Operating margin Operating margin excl. non-recurring items1) 12 12 9 9 6 6 3 3 0 0 18 18 19 19 20 20 21 21 22 22 Asia-Paciﬁ c, Middle East and Africa, Key ﬁ gures 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 Average number of employees 1) For information on non-recurring items, see Note 7 and page 117. 2022 2021 16,984 15,820 -0.5 — 1,308 7.7 8.1 8.4 0.9 1,511 9.6 9.6 6,370 4,900 21.9 850 31.7 727 8,040 7,876 Changes in Group Management during 2022 Eﬀ ective as of July 1, 2022, Anna Ohlsson-Leijon was appointed new Chief Commercial Oﬃ cer and head of the new Commercial & Consumer Journey organization, focusing on commercial growth and consumer journey development. Chris Braam was appointed new Head of Business Area Europe, replacing Anna Ohlsson-Leijon in her previous role. The Business Area heads, responsible for Europe, North America, Latin America and Asia-Paciﬁ c, Middle East and Africa, report to Anna Ohlsson-Leijon in the role of Chief Commercial Oﬃ cer for the Group. The Business Area heads remain members of Group Management. Eﬀ ective as of January 1, 2023, Ricardo Cons was appointed new CEO and head of Business Area North America. Nolan Pike left his position as Head of Business Area North America in September 2022. Leandro Jasiocha was appointed CEO and head of Business Area Latin America, replacing Ricardo Cons in his previous role. Statutory sustainability report For sustainability related information, please see Statutory sustain- ability report on page 47-48 and 56–66. The Statutory sustainability report has been prepared in accordance with disclosure require- ments set out in the Swedish Annual Accounts Act, chapter 6, para- graph 11. 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 manufactured by discontin- ued operations prior to the early 1970s. The cases involve plaintiﬀ s who have made substantially identical allegations against other defendants who are not part of the Electrolux Group. As of December 31, 2022, the Group had a total of 3,365 (3,315) cases pending, representing approximately 3,371 (approximately 3,324) plaintiﬀ s. During 2022, 1,054 new cases with approximately 1,054 plaintiﬀ s were ﬁ led and 1,004 pending cases with approxi- mately 1,007 plaintiﬀ s 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 obliga- tions under the aﬀ ected insurance policies. It is expected that additional lawsuits will be ﬁ led against Electrolux. It is not possible to predict the number of future lawsuits. In addition, the outcome of asbestos lawsuits is diﬃ cult to predict and Electrolux cannot provide any assurances that the resolution of these types of lawsuits will not have a material adverse eﬀ ect on its business or on results of operations in the future. For information on certain additional legal proceedings, see Note 25 Contingent liabilities. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 36 Financial position • Financial net debt position amounted to SEK 19,828m (4,645). • Net debt/EBITDA ratio was 3.83 (0.71). • Equity/assets ratio was 15.0% (19.3). • Return on net assets was –0.6% (28.5). Working capital and net assets Working capital as of December 31, 2022, amounted to SEK –13,731m (–17,726), corresponding to –9.9% (–13.7) of annualized net sales. Operating working capital amounted to SEK 7,504m (5,407), corresponding to 5.4% (4.2) of annualized net sales. Average net assets were SEK 36,684m (23,860), corresponding to 27.2% (19.0) of annualized net sales. Return on net assets was -0.6% (28.5). Liquid funds Liquid funds as of December 31, 2022, amounted to SEK 17,800m (11,236), excluding back-up credit facilities. As per December 31, 2022, Electrolux had an unused committed back-up multi-currency sustainability linked revolving credit facility of EUR 1,000m, approxi- mately SEK 11,100m, maturing 2027, an unused revolving credit facility of SEK 2,500m, maturing 2023, and an unused revolving credit facility of SEK 3,000m, maturing 2024. 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, 2022 % of net sales1) Dec. 31, 2021 % of net sales1) 24,374 21,487 17.7 15.6 20,478 23,110 15.9 17.9 –38,357 –27.8 –38,182 –29.6 7,504 –8,693 5.4 5,407 4.2 –7,368 Liquidity proﬁ le SEKm Liquid funds % of annualized net sales1) Net liquidity Fixed interest term, days Eﬀ ective annual yield, % –12,567 –14,371 24 –1,394 Capital turnover-rate Times/year 1) Liquid funds in relation to net sales, see page 118 for deﬁ nition. For additional information on the liquidity proﬁ le, see Note 18. Dec. 31, 2022 Dec. 31, 2021 17,800 24.9 8,724 13 0.8 11,236 24.4 5,560 9 0.3 Capital turnover-rate Target: at least 4 times/year 8 8 6 6 4 4 2 2 0 0 Working capital –13,731 –9.9 –17,726 –13.7 Property, plant and equipment, owned Property, plant and equipment, right-of-use 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, % 1) Annualized, see page 118 for deﬁ nition. 2) Calculated at end of period exchange rates. 3) Calculated at average exchange rates. 29,876 25,422 3,906 7,081 6,224 6,940 2,771 6,690 4,775 5,269 40,297 29.2 27,201 21.1 138,040 129,124 36,684 27.2 23,860 19.0 134,880 –0.6 125,631 28.5 18 19 20 21 22 Return on net assets SEKm 40000 40,000 30000 30,000 20000 20,000 10000 10,000 0 0 Average net assets Return on net assets Target: >20% % 40 40 30 30 20 20 10 10 0 0 18 18 22 22 Financial targets are over a business cycle. For comparable reasons the ﬁ gures in the graphs above are exclusive of the discontinued business area Professional Products. 21 21 19 19 20 20 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 37 Dec. 31, 2022 Dec. 31, 2021 Long-term borrowings, by maturity SEKm Net debt As of December 31, 2022, Electrolux had a ﬁ nancial net debt position (excluding lease liabilities and post-employment provisions) of SEK 19,828m, compared to the ﬁ nancial net debt position of SEK 4,645m as of December 31, 2021. In 2022, a total of SEK 2,521m was distributed to shareholders as dividend and shares of series B were repurchased for a total amount of SEK 2,138m. Net provisions for post-employment beneﬁ ts were SEK -245m (891) and lease liabilities amounted to SEK 4,264m (3,055) as of December 31, 2022. In total, net debt amounted to SEK 23,848m, an increase by SEK 15,257m compared to SEK 8,591m per December 31, 2021. Long-term borrowings and long-term borrowings with maturities within 12 months amounted to a total of SEK 31,343m as of Decem- ber 31, 2022 with average maturity of 4.0 years, compared to SEK 14,392m and 1.9 years at the end of 2021. During 2023, long- term borrowings amounting to approximately SEK 2.6bn 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-ﬁ xing 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. During 2022, the Board of Directors approved exceptions from these targets in order to ensure adequate long-term funding during the global downturn in the economy. The maximum amount of long-term borrowings maturing in any given 12-months period was SEK 9,125m at the end of 2022. At year-end, the average interest-ﬁ xing period for long-term borrowings was 2.3 years (1.2). At year-end, the average interest rate for the Group’s total interest- bearing borrowings was 3.4% (1.4). Net debt and equity ratios The net debt/EBITDA ratio was 3.83 (0.71) and the net debt/equity ratio was 1.45 (0.46). The equity/assets ratio was 15.0% (19.3). Equity and return on equity Total equity as of December 31, 2022, amounted to SEK 16,449m (18,610), which corresponds to SEK 60.92 (65.74) per share. Return on equity was -7.0% (24.4). 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 prepaid interest income Total short-term borrowings Long-term borrowings Total borrowings1) 5,732 2,605 40 8,377 445 254 9,076 28,738 37,813 1,288 4,187 87 5,563 48 65 5,675 10,205 15,881 Long-term ﬁ nancial receivables 185 — Cash and cash equivalents Short-term investments Financial derivative assets Prepaid interest expenses and accrued interest income Liquid funds Financial net debt Lease liabilities Net provisions for post- employment beneﬁ ts Net debt Net debt/EBITDA Net debt/equity ratio Total equity Equity per share, SEK Return on equity, % Equity/assets ratio, % 17,559 10,923 168 51 21 165 144 4 17,800 11,236 19,828 4,264 –245 23,848 3.83 1.45 16,449 60.92 –7.0 15.0 4,645 3,055 891 8,591 0.71 0.46 18,610 65.74 24.4 19.3 1) Whereof interest-bearing liabilities amounting to SEK 37,075m as of December 31, 2022 and SEK 15,681m as of December 31, 2021. 10000 10,000 8000 8,000 6000 6,000 4000 4,000 2000 2,000 0 0 23 24 25 26 27 28- Net debt/EBITDA ratio In 2023, long-term borrowings in the amount of approximately SEK 2.6bn will mature. For infor- mation on borrowings, see Note 2 and 18. 4.0 4 3.0 3 2.0 2 1.0 1 0 0 13 14 15 16 17 18 19 20 21 22 Equity/assets ratio % 50 50 40 40 30 30 20 20 10 10 0 0 13 14 15 16 17 18 19 20 21 22 Rating Electrolux has an investment-grade rating from S&P Global Ratings, A– with a negative outlook. Long-term debt Outlook Short-term debt Short-term debt, Nordic S&P Global Ratings A– Negative A–2 K–1 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 38 Cash ﬂ ow • Operating cash ﬂ ow after investments amounted to SEK –6,118m (3,200). • Capital expenditure amounted to SEK 7,389m (6,043). • R&D expenditure amounted to 3.4% (3.1) of net sales. Operating cash ﬂ ow after investments Operating cash ﬂ ow after investments in 2022 amounted to SEK -6,118m (3,200). The year-over-year comparison reﬂ ects a lower operating income and decreased accounts payable as a result of eﬀ orts to reduce high inventory levels caused by supply chain imbal- ances and logistic constraints. In addition, a higher level of invest- ments impacted cash ﬂ ow negatively. Capital expenditure Capital expenditure in property, plant and equipment in 2022 amounted to SEK 5,649m (4,847). The investments were mainly related to new products and architectures, manufacturing eﬃ ciency and re-engineering, including automation and modularization. Including investments in product development and software, capital expenditure amounted to SEK 7,389m (6,043), corresponding to 5.5% (4.8) of net sales. Cash ﬂ ow SEKm 2022 2021 Capital expenditure by business area Operating income adjusted for non-cash items1) Change in operating assets and liabilities Operating cash ﬂ ow 6,845 –6,367 478 12,185 –3,175 9,010 SEKm Europe % of net sales North America Investments in tangible and intangible assets –7,389 –6,043 % of net sales 2022 3,310 7.1 1,738 3.7 979 4.0 850 5.0 512 2021 2,787 5.6 1,311 3.2 933 4.7 727 4.6 285 7,389 5.5 6,043 4.8 233 Latin America % of net sales Asia-Paciﬁ c, Middle East and Africa % of net sales Other Total % of net sales R&D expenditure The expenditure for research and development in 2022 including capitalization of SEK 740m (578), amounted to SEK 4,640m (3,864) corresponding to 3.4% (3.1) of net sales. Operating cash ﬂ ow after investments SEKm 10000 10,000 5000 5,000 0 0 -5000 -5,000 -10000 -10,000 18 19 20 21 22 Capital expenditure SEKm Operating cash ﬂ ow after investments in 2022 amounted to SEK -6,118m (3,200). 8000 8,000 6000 6,000 4000 4,000 2000 2,000 0 0 8000 Capital expenditure Depreciation and amortization 6000 4000 Capital expenditure in 2022 including product development 2000 and software amounted to 0 SEK 7,389m (6,043). 18 18 19 19 20 20 21 21 22 22 For comparable reasons the ﬁ gures in the graphs above are exclusive of the discontinued business area Professional Products. Changes in other investments Operating cash ﬂ ow after investments Acquisitions and divestments of operations 793 –6,118 –366 Operating cash ﬂ ow after structural changes –6,484 Financial items paid, net2) Taxes paid Cash ﬂ ow from operations and investments Payment of lease liabilities Dividend Redemption of shares Repurchase of shares Share-based payments –1,238 –1,514 –9,236 –960 –2,521 — –2,138 –217 3,200 –1,006 2,194 –470 –1,480 244 –880 –2,299 –4,886 –894 –259 Total cash ﬂ ow, excluding changes in loans and short-term investments –15,073 –8,975 1) Operating income adjusted for depreciation and amortization and other non-cash items. 2) Interests and similar items received SEK 71m (58), interests and similar items paid SEK –1,206m (–430) and other ﬁ nancial items paid SEK –103m (–98). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 39 Share information and ownership Share price performance1) The Electrolux shares are listed on the exchange Nasdaq Stock- holm, Sweden. The Electrolux B share decreased by 36% in 2022, underperforming the broader Swedish market index, OMX Stockholm, which decreased by 25% during the same period. The opening price for the Electrolux B share in 2022 was SEK 219.50. The highest closing price was SEK 221.90 on January 3, while the lowest closing price was SEK 114.72 on September 29. The closing price for the B share at year-end 2022 was SEK 140.78. Total shareholder return during the year was -31%. Over the past ten years, the average total return on an investment in Electrolux B shares has been 4.8% annually. The corresponding performance for the OMX Stockholm Return Index was 11%. Share capital and ownership structure As of December 31, 2022, the share capital of AB Electrolux amounted to approximately SEK 1,545m, corresponding to 283,077,393 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 entitle 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 Articles of Association of Electrolux also provide for speciﬁ c rights of priority for holders of diﬀ erent 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 reduces the total number of votes in the company. 150 A shares were converted to B shares in 2022. The total number of registered shares in the company amounts to 283,077,393 shares, of which 8,192,348 are Class A shares and 274,885,045 are Class B shares, and the total number of votes amounts to 35,680,853. 1) The historical development of the Electrolux share price has been adjusted to take into account the distribution of Electrolux Professional AB to Electrolux shareholders on March 23, 2020. The share price is also adjusted for all types of corporate actions, including splits and redemptions, with the exception of dividends. Ownership structure Distribution of shareholdings Swedish institutions and mutual funds, 62% Foreign investors, 25% Swedish private investors, 13% Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority (Finansinspektionen) as of December 31, 2022. Major shareholders Investor AB Handelsbanken Funds Swedbank Robur Funds Alecta Occupational Pension BlackRock, Inc. Vanguard Carnegie Funds Lannebo Funds Folksam Nordea Funds Share capital, % Voting rights, % 17.9 5.4 4.4 3.7 2.9 2.7 1.9 1.8 1.5 1.5 30.4 4.3 3.5 4.2 2.3 2.2 1.5 1.4 1.2 1.2 Total, ten largest shareholders 43.7 52.2 Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority (Finansinspektionen) as of December 31, 2022. According to Monitor by Modular Finance AB, there were 83,248 shareholders in AB Electrolux as of December 31, 2022. Investor AB is the largest shareholder, owning 17.9% of the share capital and 30.4% of the voting rights. Information on the shareholder structure is updated quarterly at www.electroluxgroup.com. Shareholding Ownership, % Number of shareholders As % of shareholders 1–1,000 1,001–10,000 10,001–20,000 20,001– Total 5.0 6.4 1.3 87.3 100 75,813 6,800 266 369 83,248 91.1 8.2 0.3 0.4 100 Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority (Finansinspektionen) as of December 31, 2022. Articles of Association AB Electrolux Articles of Association stipulate that the Annual General Meeting (AGM) shall always resolve on the appointment 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 General Meeting 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, with- out 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. Eﬀ ect of signiﬁ cant changes in ownership structure on long-term ﬁ nancing The Group’s long-term ﬁ nancing is subject to conditions, which stipulate that lenders may request advance repayment in the event of signiﬁ cant changes in the ownership of the company. Such sig- niﬁ cant change could result from a public bid to acquire Electrolux shares. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 40 Distribution of funds to shareholders Dividend 2021, buybacks and cancellation of shares The Annual General Meeting in March 2022 decided to adopt the Board’s proposed dividend of SEK 9.20 per share for 2021, which was paid out in two equal installments. On April 29, 2022, AB Electrolux announced a share buyback pro- gram of a maximum of 8,000,000 series B shares for a total maximum amount of SEK 1,250m between May 2, 2022, and October 21, 2022. This program was completed on September 2, 2022, when a total of 8,000,000 series B shares had been repurchased for a total amount of SEK 1,138m. During the full year of 2022 a total of 13,049,115 series B shares were repurchased for a total amount of SEK 2,138m. The total amount included 5,049,115 shares repurchased during 2022 as part of the buyback program initiated in October 2021. Following buybacks during 2021, the Annual General Meeting in March 2022 decided to adopt the Board’s proposal to cancel all shares of series B that Electrolux owned on December 31, 2021 with a simultaneous bonus issue without issuing any new shares to restore the share capital level, improving earnings per share. During 2022, a total of 25,842,915 share of series B were cancelled. Proposed dividend According to the company’s dividend policy, Electrolux target is for the dividend to correspond to approximately 50% of the annual income. As the annual income for 2022 was negative, the Board of Directors proposes that no dividend shall be distributed for the ﬁ scal year 2022. Proposal for resolution on acquisition of own shares Electrolux has, for several years, had a mandate from the Annual General Meetings to acquire own shares. Even though the Board of Directors currently has no intention to exercise an authorization to acquire additional own shares, the Board of Directors proposes the authorization is to be renewed as an authorization is valid until the following Annual General Meeting. The Board of Directors would then be able to decide to repurchase own shares, if the conditions are appropriate and the Board of Directors were to ﬁ nd it would be in the best interests of the company and the shareholders. The Board of Directors therefore proposes the Annual General Meeting 2023 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 shares of series B 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, the company’s share related incentive programs as well as to be able to adapt the company’s capital structure. As of December 31, 2022, Electrolux held 13,049,115 shares of series B in Electrolux, corresponding to approximately 4.6% of the total number of shares in the company. Total distribution to shareholders SEKm Number of shares1) 10000 10,000 8000 8,000 6000 6,000 4000 4,000 2000 2,000 0 0 13 14 15 16 17 18 19 20 21 22 Dividend Distribution of Electrolux Professional AB Redemption Electrolux has a long tradition of high total distribution to sharehold- ers. In 2022 Electrolux repurchased own shares of series B for a total amount of SEK 2,138m. A shares B shares Shares, total Shares held by Electrolux Shares held by other shareholders Number of shares as of January 1, 2022 8,192,498 300,727,810 308,920,308 25,842,915 283,077,393 Change during the year –150 –25,842,765 –25,842,915 –12,793,800 –13,049,115 Total number of shares as of December 31, 2022 8,192,348 274,885,045 283,077,393 13,049,115 270,028,278 As % of total number of shares 1) For more information on number of shares, see Note 20. 4.6% CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 41 Employees Electrolux corporate culture Teamship is the Electrolux way of working. It is about setting aligned goals that allow clear choices and continuous improvement. It is about knowing how to collaborate. It is about transparency and a learning organization. Finally, it is about engagement and passion about creating 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 whistleblowing system – the Electrolux Ethics Helpline. Through the Electrolux Ethics Helpline, employees can report sus- pected misconduct in local languages. Reports may be submitted anonymously if legally permitted. Code of Conduct The Group has a Code of Conduct that deﬁ nes high employment 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 poli- cies in this context include the Workplace Policy, the Anti-Corruption Policy and the Environmental Policy. Number of employees The average number of employees of Electrolux decreased in 2022 to 50,769 (51,590), of whom 1,720 (1,526) were in Sweden. Salaries and remuneration in 2022 amounted to SEK 19,644m (16,829), of which SEK 1,561m (1,210) refers to Sweden. Employees 60000 60,000 55000 55,000 50000 50,000 45000 45,000 40000 40,000 SEKm 2,8 2.80 2,6 2.60 2,4 2.40 Average number of employees Net sales per employee 2,2 2.20 2,0 2.00 The average number of employees decreased to 50,769 (51,590) in 2022. 18 18 19 19 20 20 21 21 22 22 For comparable reasons the ﬁ gures in the graph are exclusive of the discontinued business area Professional Products. Remuneration guidelines for Group Management The following guidelines were approved by the Annual General Meeting 2020 and apply until the Annual General Meeting 2024 unless any changes are proposed. The guidelines apply to the remuneration and other terms of employment for the President and CEO, other members of the Group Management of Electrolux (’Group Management’) and, if appli- cable, remuneration to board members for work in addition to the board assignment. The Group Management currently comprises ten executives. member. These guidelines enable the Company to oﬀ er the Group Management a competitive total remuneration. More information on the Company’s strategy can be found on the Company’s website, www.electroluxgroup.com. The remuneration terms shall emphasize ‘pay for performance’, and vary with the performance of the individual and the Group. The total remuneration for the Group Management shall be in line with market practice and may comprise of the following components: ﬁ xed compensation, variable compensation, pension beneﬁ ts and other beneﬁ ts. The guidelines shall be applied to employment and consultancy Employment contracts governed by rules other than Swedish agreements entered into after the Annual General Meeting in 2020 and to changes made to existing agreements thereafter. The guidelines shall be in force until new guidelines are adopted by the General Meeting. These guidelines do not apply to any other remu- neration decided or approved by the General Meeting. Remuneration for the President and CEO and, if applicable, members of the Board of Directors is resolved upon by AB Electrolux Board of Directors, based on the recommendation of the People Committee. Remuneration for other members of Group Manage- ment is resolved upon by the People Committee and reported to the Board of Directors. The People Committee shall also monitor and evaluate programs for variable remuneration for the Group Manage- ment, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the Company. The Board of Directors shall, based on the rec- ommendation from the People Committee, prepare a proposal for new guidelines at least every fourth year and submit it to the Annual General Meeting. The President and CEO and other members of the Group Management do not participate in the Board of Directors’ processing of and resolutions regarding remuneration related matters in so far as they are aﬀ ected by such matters. Note 27 of the Annual Report includes a detailed description of existing remuneration arrangements for Group Management, including ﬁ xed and variable compensation, long-term incentive programs and other beneﬁ ts. Electrolux has a clear strategy to deliver proﬁ table growth and create shareholder value. A prerequisite for the successful implementation of the Company’s business strategy and safeguarding of its long- term interests, including its sustainability, is that the Company is able to recruit and retain qualiﬁ ed personnel. To this end, it is necessary that the Company oﬀ ers competitive remuneration in relation to the country or region of employment of each Group Management may be duly adjusted for compliance with mandatory rules or estab- lished local practice, taking into account, to the extent possible, the overall purpose of these guidelines. Fixed compensation The Annual Base Salary (’ABS’) shall be competitive relative to the relevant market and reﬂ ect the scope of the job responsibili- ties. Salary levels shall be reviewed periodically (usually annually) to ensure continued competitiveness and to recognize individual performance. Variable compensation Variable compensation consists of both short-term and long-term incentives. Long-term incentives consist of long-term share-related incentive programs (’LTI programs’). Such programs are resolved upon by the General Meeting and are therefore excluded from these guidelines. Each year, the Board of Directors will evaluate whether or not an LTI program shall be proposed to the General Meeting. LTI programs shall be distinctly linked to the business strategy and shall always be designed with the aim to further enhance the com- mon interest of participating employees and Electrolux shareholders of a good long-term development for Electrolux. For more infor- mation regarding these programs, including the criteria which the outcome depend on, please see the Remuneration report at www.electroluxgroup/en/remuneration-report-2022. Following the ‘pay for performance’ principle, variable compen- sation shall represent a signiﬁ cant portion of the total compensation opportunity for Group Management. Variable compensation shall always be measured against pre-deﬁ ned targets and have a maxi- mum above which no payout shall be made. Variable compensation shall mainly relate to ﬁ nancial perfor- mance targets. Non-ﬁ nancial targets may also be used in order to CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 42 strengthen the focus on delivering on the Company’s business strat- egy and long-term interests, including its sustainability. The targets shall be speciﬁ c, clear, measurable and time bound and be deter- mined by the Board of Directors. Short Term Incentive (STI) Members of the Group Management shall participate in an STI plan under which they may receive variable compensation. The objec- tives in the STI plan shall mainly be ﬁ nancial and the measurement period shall be one year. The objectives shall mainly be set based on ﬁ nancial performance of the Group and, for the business area heads, of the business area for which the Group Management member is responsible, such as proﬁ t, ﬁ nancial eﬃ ciency and sales. Financial objectives will comprise at least 80% of the weighting. Non-ﬁ nancial objectives may be related to sustainability, customer satisfaction, quality or company culture. To which extent the criteria for awarding variable cash remu- neration has been satisﬁ ed shall be determined by the People Committee when the measurement period has ended. For ﬁ nancial objectives, the evaluation shall be based on the annual ﬁ nancial performance in accordance with the most recent interim report for the fourth quarter made public by the Company. The maximum STI entitlements shall be dependent on job position and may amount to a maximum of 100% of ABS. Reﬂ ecting current market conditions, the STI entitlement for Group Management mem- bers employed in the U.S. may amount to a maximum of 150% of ABS. Extraordinary arrangements Additional variable compensation may be approved in extraordi- nary circumstances, under the conditions that such extraordinary arrangement 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. Such additional variable remuneration may also be paid on an individual level for extraordinary performance beyond the individual’s ordinary tasks and shall in these situations not exceed 30% of the ABS and be paid in one installment. Right to reclaim variable remuneration Terms and conditions for variable remuneration should be designed to enable the Board, under exceptional ﬁ nancial circumstances, to limit or cancel payments of variable remuneration provided that such actions are deemed reasonable (malus). The Board shall also have the possibility, under applicable law or contractual provisions and subject to the restrictions that may apply under law or contract, to in whole or in part reclaim variable remuneration paid on incor- rect grounds (claw-back). Pension and beneﬁ ts Old age and survivor’s pension, disability beneﬁ ts and healthcare beneﬁ ts shall be designed to reﬂ ect home country practices and requirements. When possible, pension plans shall be based on deﬁ ned contribution. In individual cases, depending on provisions in collective agreements, tax and/or social security legislation to which the individual is subject, other schemes and mechanisms for pension beneﬁ ts may be approved. Deﬁ ned pension contributions shall not exceed 40% of the ABS unless the entitlement is higher under appli- cable collective agreements. Other beneﬁ ts, such as company cars and housing, may be pro- vided on an individual level or to the entire Group Management. Costs relating to such beneﬁ ts may amount to not more than 20% of the ABS. Members of the Group Management who are expatriates, may receive additional remuneration and other beneﬁ ts to the extent reasonable in light of the special circumstances associated with the expatriate arrangement. Such beneﬁ ts shall be determined in line with the Group’s Directive on International Assignments and may for example include relocation costs, housing, tuition fees, home travel, tax support and tax equalization. Notice of termination and severance pay The notice period shall be twelve months if Electrolux takes the initiative to terminate the employment and six months if the Group Management member takes the initiative to terminate the employment. In individual cases, contractual severance pay may be approved in addition to the notice periods. Contractual severance pay may only be payable upon Electrolux 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 own- ership of Electrolux in combination with a change in reporting line and/or job scope. Contractual severance pay may for the individual include the continuation of the ABS for a period of up to twelve months following termination of the employment agreement; no other beneﬁ ts 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 of income, either from employment or from other business activities. In addition to the above, compensation for any non-compete undertaking may be awarded. Such compensation shall be based on the ABS at the time of notice of termination of the employment, unless otherwise stipulated by mandatory collective agreement provisions, and be awarded over the period for which the non- compete clause applies, which should not exceed twelve months after termination of the employment. The compensation shall be reduced by an amount corresponding to any income that the person receives from other sources of income, either from employment or from other business activities. Salary and employment conditions for employees In the preparation of the Board of Directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the Company have been taken into account by including information on the employees’ total income, the compo- nents of the remuneration and increase and growth rate over time, in the People Committee’s and the Board of Directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable. Consultancy fees If a member of the Board of Directors (including through a whol- ly-owned subsidiary) should carry out services to Electrolux in addition to the board assignment, speciﬁ c fees for this can be paid out (consultancy fees), provided that such services contribute to the implementation of Electrolux business strategy and the safeguarding of Electrolux long-term interests, including its sustainability. Such consultancy fee may for each member of the Board of Directors not exceed the annual remuneration for the board assignment. The fee shall be in line with market practice. Deviations from the guidelines The Board of Directors may temporarily resolve to deviate from the guidelines, in whole or in part, if in a speciﬁ c case there is special cause for the deviation and a deviation is necessary to serve the Company’s long-term interests, including its sustainability, or to ensure the Company’s ﬁ nancial viability. The People Committee’s tasks include preparing the Board of Directors’ resolutions in remu- neration related matters. This includes any resolutions to deviate from the guidelines. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 43 Events after year-end January 11. Electrolux announced loss for the fourth quarter 2022 Electrolux announced that operating income in the fourth quarter of 2022 was estimated to be approximately SEK -2.0bn (0.9), including non-recurring items of SEK -1.4bn (-0.7). February 1. Electrolux to discontinue production at Nyíregyháza factory in Hungary Electrolux has decided to discontinue production at the Nyíregyháza factory in Hungary from the beginning of 2024. The company will take a restructuring charge of approximately SEK 550m which will be reported as a non-recurring item aﬀ ecting operating income for Business Area Europe in the ﬁ rst quarter of 2023. The decision follows a review of production capacity needs includ- ing an investigation into the competitiveness of the Nyíregyháza factory, which employs around 650 people and manufactures refrigeration products. The strategic direction is to optimize the refrigeration production footprint from a cost perspective through both outsourcing and own production leveraging Group scale. The decision means that remaining investments in refrigeration products that are part of the earlier communicated global re- engineering investments of SEK 8bn, which started in 2018, will be revised and redirected in line with the strategic direction of Electrolux. Electrolux is exploring possibilities to divest the factory in Nyíregyháza and is committed to collaborating with relevant authorities and stakeholders to support its employees in the best possible way during this phase. The cash ﬂ ow impact is estimated to be approximately SEK 300m, mainly in 2024-2025. The ﬁ nal operating income and cash ﬂ ow eﬀ ects will be determined by the exchange rate on the relevant recording dates. February 9. Electrolux Nomination Committee proposes re-election of board members In preparation for the Electrolux Annual General Meeting on March 29, Electrolux Nomination Committee has decided to propose the re-election of all board members. Staﬀ an Bohman is proposed to be re-elected as Chairman of the Board of Directors, and Petra Hedengran, Henrik Henriksson, Ulla Litzén, Karin Overbeck, Fredrik Persson, David Porter and Jonas Samuelson as Board Members. For more information, visit www.electroluxgroup.com CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 44 Risk management Overview and governance Active risk management is essential for Electrolux to drive successful operations. Electrolux continuously monitors its identiﬁ ed key risks as well as new and evolving risks, aiming to respond ﬂ exibly to internal or external changes. The Group’s risk management approach follows a decentralized structure, where all business areas are responsible for their risk man- agement. However, the Board of Directors is ultimately responsible for Electrolux risk management. In addition to the business areas, the Group has established internal bodies that manage risk exposures on a regular basis. Examples of internal bodies are the Enterprise Risk Management (ERM) Board, the Ethics & Human Rights Steering Group, the Audit Board and the Tax Board. Sustainability risks are also reported to the Sustainability Board led by the CEO, tasked with assessing priorities, monitoring progress and evaluating risks. A number of Group functions are accountable for identifying and managing non-ﬁ nancial risks in their area of responsibility. Risks are reported to Group Management and fed into the materiality process. Insurance and loss prevention Electrolux transfers part of its risks via tailored insurance programs. Insurable risks are continuously evaluated and monitored by the ERM Board. The Group also owns two captives to ensure customized insurance solutions and costs eﬃ ciencies. ERM Board Group Risk Management Europe North America Latin America Asia Paciﬁ c, Middle East and Africa Electrolux loss prevention strategy is also widely developed, to ensure that the Group assets have the right level of protection against risks such as natural hazards, which could lead to property losses and business interruption. The Group has established loss pre- vention procedures and standards to be applied by each Electrolux site. Business continuity plans are also elaborated and regularly reviewed to ensure successful responses to disruptive events related to natural hazards. Annual risk surveys and visits are performed, and a consolidation of the results is reported to the ERM Board. ERM as part of the Group’s risk management Electrolux has implemented an Enterprise Risk Management program which covers Electrolux business areas as well as global functions. It is overseen by Group Management and the ERM Board, which is also responsible for securing appropriate insurance coverage for insurable risks and assesses and facilitates the prioritization of the Group risks. The ERM framework includes processes aimed to identify and miti- gate as well as communicate and report risks with a special focus on key risks that can signiﬁ cantly aﬀ ect the business, including consid- eration of environmental, social and governance matters. Electrolux follows a risk mapping process which is a management tool for formal collection and incorporation of risk information into decision making and governance processes. The risk mappings are therefore a key part of Electrolux ERM and help to increase the understanding that risk management is a critical factor for decision making and for driving value. The core of the risk mapping process is to identify and evaluate existing and emerging risks, thus enabling the possibility of leveraging risk and risk management options that extract value. Risks are categorized in accordance with Electrolux Group Risk Universe, which includes the following risk categories: strategic, external and internal risks. Strategic risks are risks that can jeop- ardize the execution of the Group’s strategy and are impacted by external factors such as industry shifts, macro economic devel- opments or political instabilities. External risks consist of natural hazards, geopolitical risks, market risks or regulations, which can negatively impact the Group’s performance. Internal risks mainly ERM Reporting December: ERM Board Speciﬁ c topic discussed, i.e. update on key risks. r urth Q u a rt e o F T h i r d Q u February: BA leadership ERM status, risks and mitigation actions reviewed per BA/ Group Function - follow up workshop facilitated by Group Risk Management. April: BA Board Integration of BA key risks and mitigation actlons in the strategy plan discussion. First Q u a r t e r n d Q uarter September: BA Board ERM direction and actions for next year decided. a rter o c S e July: GMM ERM status, risks and mit- igatlon actions for next year presented and ERM process re-evaluated. June: ERM Board ERM status, risks and mitigation actions consolidated for Group. consist of operational risks such as sustainability risks, cyber security risks, supply chain risks and talent retention risks. Electrolux also monitors emerging risks. Such risks can either develop from macro-level changes such as global warming, consumer behavior or the introduction of AI – artiﬁ cial intelligence, or from risks that are more local (resulting from industry/sector prospects and trends etc.). The Group’s risk appetite is based on the impact on its strategy that a risk would have if it materializes. Key risks are linked to action plans to close risk management gaps and follow up how risks are evolving after implementation of risk reducing measures. Risk owner- ship for critical risks is assigned to business area executives or indi- viduals formally appointed to work with speciﬁ c risks. The approach ultimately supports a risk culture that encourages engagement and accountability within the organization. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 45 Key risks for the Group Electrolux identiﬁ ed strategic, external and internal key risks are presented below. Financial risks are presented in more detail in Note 2, Financial risk management. Climate-related risks are discussed in more detail in the section on Climate Risk Disclosures. Major shifts in the industry As the society is becoming more digital, consumer behavior changes, leading to structural shifts in many industries, including consumer goods. These shifts have accelerated as a consequence of the coronavirus pandemic. Electrolux sees many opportunities deriving from these developments but also prepares for risks. One potential emerging risk is that the company fails to reach strategic goals due to a lack of business agility and an inability to anticipate external developments. The Group is carefully monitoring the evolv- ing competitive landscape including new operators and business models, changes in alliances and increased competition. Innovation capability Electrolux ability to invest in growth and innovation, including new markets and segments, is crucial for its strategy. Not executing on the Group’s strategic priorities in a timely manner may aﬀ ect the Group’s delivery of sustainable consumer experience innovation and proﬁ table growth. Therefore, portfolio management is essential for Electrolux, ensuring the right allocation of resources for relevant innovation in the product and service categories. Digital transformation Digital transformation through automation, modularization and dig- ital manufacturing is part of Electrolux ambition to drive operational excellence. It is crucial for the Group to execute on its re-engineering initiative within operations to adapt to the rapidly changing industry and consumer needs and to continue to be cost eﬃ cient. An inability to follow through on the initiative may lead to lower performance, delays or higher costs. Digitalization and automation in manufac- turing and supply chain processes also result in an emerging risk related to the inability to attract and train personnel for the new skills required. Electrolux therefore closely monitors its re-engineering ini- tiative, continuously evaluates its impact on the business and reﬁ nes its recruitment processes and training programs. Geopolitical risks Electrolux closely monitors events which may have negative impact on the macroeconomic or geopolitical factors aﬀ ecting its markets. The developments may lead to economic downturn, aﬀ ect access to markets and changed consumer behaviors impacting the Group’s sales negatively. Political instability remains high, like Brexit in Europe, Taiwan in Asia, the trade war between the U.S. and China, the tensions in the South China Sea or the conﬂ ict between Russia and Ukraine. Electrolux is closely monitoring the development related to the Russia’s invasion of Ukraine, with the security and safety of its employees and their families in priority. Procedures intended to avoid breach of sanctions and other restrictions imposed on Russia and Belarus are in place. Electrolux is continu- ously assessing the risk in Ukraine to continue or interrupt its limited sales and production in its Ukrainian factory located in the western part of the country. The Group also decided to discontinue its sales operations and business in Russia. As a consequence of the war, inﬂ ation and energy prices increase will have a consequence on consumer’s behavior, and on the production costs. To mitigate the risk, Electrolux might review the production plans and product pricing. Finally, disruption of supply of gas from Russia to the Group’s European factories has also been a higher risk during 2022. This could negatively impact Electrolux proﬁ tability. Contingency plans with alternative energy have been evaluated and implemented where possible. Instabilities, conﬂ icts and emerging new geopolitical areas of concern can also disrupt manufacturing and supply chain systems, aﬀ ect Electrolux costs for production, energy, raw material and transportation as well as currency exchange rate development, which in turn aﬀ ect the ﬁ nancial result of the Group. Electrolux continuously works on business continuity plans based on possible consequences of such events. Regulatory risks Electrolux is subject to a vast range of regulations, laws and industry standards. As the regulatory landscape evolves, it is important to monitor and mitigate risks related to legal and product regulatory compliance, antitrust, trade rules, supply chain due diligence, contractual risks, protection of IP/patents, conﬁ dential information, personal data protection, insider information etc. Non-compliance could lead to sanctions, ﬁ nes, higher costs or inability to continue manufacturing some products. To mitigate these risks, Electrolux has inhouse lawyers, in all business areas as well as centrally, to monitor regulatory changes and to attend to compliance matters. Regular training for employees is among the most important actions. In addition, the development regarding sustainability can result in new regulatory requirements. They could impact product devel- opment, supply chains, operations and sales. Carbon taxes are expected to have an impact on energy intensive industries such as power generation, transport, steel, aluminum, and plastics produc- ers. Finished goods could also be directly impacted through carbon import duties, such as the European Union ‘carbon border adjust- ment mechanism’. To mitigate these risks, Electrolux drives resource and energy eﬃ ciency throughout the value chain. The Group aims to be fully supplied with electricity generated from renewable sources. That is not only reducing carbon emission, but also reducing the risk from carbon related taxes. Market risks A ﬁ nancial crisis and an economic downturn may aﬀ ect consumers’ purchasing power and behavior, resulting in a lower market demand that could impact Electrolux sales. Major changes in society, resulting from coronavirus pandemic and also from the war in Ukraine, led to emerging risks such as changes in consumer behavior and their spending, especially in Europe and in North America where the majority of Electrolux products are sold. To mitigate these risks, Electrolux closely follows market and sales developments and changes in consumer behavior. Electrolux also focuses on an agile manufacturing set-up for fast adaptation to changes in demand. In times of strong market demand, it is also essential that Electrolux can beneﬁ t from its global scale by delivering new innovative products and outstanding consumer experiences with a high speed to market. Electrolux markets are also subject to price competition. This is particularly evident in the low-cost segments and in product cate- gories with signiﬁ cant overcapacity. In markets with high inﬂ ation combined with currency rate ﬂ uctuations, Electrolux has a better possibility to carry out price increases to oﬀ set potential negative eﬀ ects. Raw material and logistics impact Fluctuations in commodity prices impact the Group’s input costs and, therefore, its proﬁ tability. Materials account for a large share of the Group’s costs. Electrolux purchases raw materials and components for approximately SEK 54bn, of which approximately SEK 26bn referred to raw materials in 2022. Logistics accounted for approx- imately 7% of net sales in 2022. In order to mitigate increases in prices for raw material, components and logistics, Electrolux raises prices of its products, improves cost eﬃ ciency and negotiates more favorable purchasing contracts for commodities such as steel and chemicals. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 46 Change +/– Pre-tax earnings impact –/+, SEKm Sensitivity analysis year-end 2022 Risk Raw materials1) Carbon Steel Stainless Steel Plastics Currency2) and interest rates USD to EUR USD to CAD EUR to GBP EUR to CHF USD to BRL USD to AUD THB to AUD MXN to USD USD to CLP USD to VND Translation exposure to SEK3) 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Interest rate 1 percentage point 1) Changes in raw materials refer to Electrolux prices and contracts, which may diﬀ er from market prices. 2) Transactional exposure. Translation eﬀ ects not included. 3) Assuming the Swedish krona appreciates/depreciates against all other currencies. Raw materials exposure 2022 Carbon steel, 36% Plastics, 23% Stainless steel, 14% Copper and aluminum, 10% Other, 17% 900 400 600 540 420 290 280 270 170 130 130 130 110 130 10 Ethics related compliance risks Electrolux is exposed to a broad range of ethics and sustainability related factors such as human rights, including privacy aspects, employment conditions and corruption. Violation of anti-corruption legislation could lead to large ﬁ nes or administrative, civil or criminal sanctions. Additionally, violations of human rights and ethics related norms could impact the Group’s brands or the corporate reputation negatively. To mitigate these risks, Electrolux has extensive internal governance procedures and policies and conducts training for employees. Key people and talents Evolving industry trends and new technologies require new talents in key areas. The inability to attract competences for the future, or a lack of strong succession planning, may impact Electrolux position in the market negatively. An emerging risk for Electrolux is also the inability to attract talents, by not being able to accommodate their post-pandemic work preferences. This could have a negative impact on Electrolux innovation strategy. To mitigate this risk, Electrolux constantly works with the company values and uses communication channels like social media to share those directly or via existing employees. The Group also builds and continuously reviews its talent pipeline and adapt its work conditions. The safety and wellbeing of its employees is also crucial for the Group. Electrolux continues to monitor the eﬀ ects of the coronavirus on its employees. One of the mitigation actions has been to maintain the agile way of working. Supply chain risks Electrolux is heavily dependent on deliveries of raw material and components to its factories and a functioning global logistics sys- tem that can deliver products from the supply and manufacturing systems to its customers and consumers. The availability of many components depends on suppliers. Shortages of electronic and other components including disturbances in logistical systems might aﬀ ect Electrolux ability to produce, cost for production, raw material and exchange rate development, which in return aﬀ ects the Group’s ﬁ nancial result and market shares negatively. Electrolux has experienced temporary disruptions in some of its operations, delays in delivery of components and production slowdowns. Also disturbances aﬀ ecting the ability of Electrolux suppliers of ﬁ nished goods to manufacture and deliver products might aﬀ ect the Group’s ﬁ nancial result and market shares negatively in case of shortfalls in delivery or quality issues. A global pandemic like the coronavirus, natural catastrophes, political unrest or large ﬁ res impact global suppliers and the supply chain. This causes manufacturing and deliv- ery disruptions which may impact customers signiﬁ cantly as well as increase costs associated with layoﬀ s, manufacturing adaptation, etc. Electrolux builds and adapts its business continuity plans to address these key risks and also collaborates with selected large suppliers to monitor some of their major risks. IT and cyber risks The digital transformation of the global economy, and of Electrolux more speciﬁ cally, leads to great opportunities. As Electrolux uses technology to speed up the information exchange, it also creates greater exposure. Electrolux continuously prepares for cyber attacks by assessing its cyber risk proﬁ le, remediates where recommended and proactively manages its defense. The new way of working of many of Electrolux employees, customers and suppliers, as a result of the coronaviruspandemic, increased the cyber risks. Cyber security control failures have become an emerging risk closely monitored by Electrolux. Speciﬁ c trainings have been performed to improve awareness. IT failures, for example in key applications or hardware, may also have signiﬁ cant impacts on delivery, production, sales and other critical systems and functions. Electrolux IT department constantly monitors these risks to protect Electrolux systems and information. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 47 Sustainability risks Electrolux has deﬁ ned a number of sustainability goals. The ability to achieve these environmental, social and governance (ESG) goals are subject to a number of risks. Electrolux ability to meet its ESG goals and accurately and transparently report on such progress presents increasing risks from operational, ﬁ nancial, legal and other perspectives. The growing concern for ESG issues and an increasing interest from legislators to regulate companies responsibilities for ESG issues in their supply chains, leads to added legal exposure and may ultimately negatively aﬀ ect Electrolux ability to sell products. Electrolux is therefore closely monitoring these risks. Environment The main environmental risks are related to regulatory and customer requirements. Not meeting requirements could result in ﬁ nes or lim- itations 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 consumption and to intro- duce more recycled materials in products are saving costs. Climate-related risks Tackling climate change by reducing greenhouse gas emissions is one of the most urgent challenges facing society. According to the latest Intergovernmental Panel on Climate Change (IPCC) Report released in August 2021 (IPCC Sixth Assessment Report), human activity is already changing the climate in unprecedented and sometimes irreversible ways. The report calls for strong and sus- tained reductions in emissions of carbon dioxide (CO2) and other greenhouse gases to limit climate change. As product energy use is responsible for around 85% of Electrolux climate impact, product eﬃ ciency is where Electrolux can make its greatest contribution to tackling climate change. Electrolux is reduc- ing CO2 emissions from its manufacturing facilities, product transport, and the energy consumed during their use. To increase the internal focus on actions to reduce climate change, a performance target linked to the Group’s Science Based Target, within the long-term share-related incentive programs for senior managers, was introduced in 2021. The ERM includes climate-related risks in line with the Climate Read more on pages 51-55). Risk Disclosure ( Electrolux has a thorough risk mapping and decision-making process that manages all risks for the Group. As described in the Climate Risk Disclosure, the two diﬀ erent climate scenarios result in a variety of risks and opportunities for Electrolux throughout its value chain as described below. Primary rapid transition risks Increased costs related to designing resource-eﬃ cient products – Electrolux has product development roadmaps with the objective to meet forthcoming energy labelling standards, such as the EU new labelling standards and stricter minimum energy performance standards (MEPS) to be implemented between 2021 and 2023. Carbon taxes – Electrolux is well prepared to meet the risks of higher carbon taxes by driving resource and energy eﬃ ciency throughout the value chain. Carbon taxes on ﬁ nished goods could also increase carbon import duties, such as the EU ‘ carbon border adjustment mechanism’. Other transition risks have been identiﬁ ed, mostly related to the increased reporting requirements as well as the potential change of consumer behavior. These scenarios are already integrated in Electrolux ERM risks. Primary acute and chronic physical risks Electrolux operations – Electrolux well established loss prevention program called Blue Risk, have not found that Electrolux factories have signiﬁ cant risks related to greater acute and chronic physical risks due to more frequent and severe weather systems and chang- ing climate conditions. Adequate insurances are also in place to mitigate this risk. However, more detailed modelling to better identify the long-term eﬀ ects will be conducted, based on reputable external sources. Electrolux suppliers – Signiﬁ cant risks exist among Electrolux suppliers. Increased frequency of extreme weather events such as ﬂ oods, hurricanes or temperature rises could cause disruption to Electrolux network. The company has a large amount of ﬂ exibility in its supply chain, which will adapt to the changing conditions to meet market needs as more resilient suppliers are likely to survive and thrive. Insurance is also purchased to mitigate the risk. Transport systems – The global logistical systems Electrolux relies on for the movement of its raw materials, components and ﬁ nished goods are thought to be resilient to acute and chronic physical risks as alternative logistical arrangements are likely found. More investi- gation is required to mitigate the risk. Social Electrolux reputation is built on trust, which means that all actions and decisions 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. The key human rights risk areas include freedom of association, discrimination and working conditions. Other risk areas are labour rights at suppliers and corruption. The Electrolux Code of Conduct contains the Group’s Human Rights policy statement, ﬁ rmly stating that human rights shall be respected. All employees are required to do the Code of Conduct e-learning as part of onboarding and recurring campaigns. Electrolux monitors performance and manages risks through inter- nal and external audits, yearly audits for manufacturing units, local human rights assessments, education, the Ethics Helpline, manage- ment-labor dialogue, as well as health and safety committees. Risks in the supply chain are addressed through audits and training eﬀ orts as part of the Responsible Sourcing program and the Conﬂ ict Miner- als program. Electrolux conducts human rights impact assessments at both Group and local level, in line with the UN Guiding Principles on Business and Human Rights. Five issues constitute the Group’s salient human rights issues. The methodology for the assessments has been aligned to the ERM overall process in 2022. It focuses on identifying the risk of harming people, as a direct or indirect result of Electrolux operations. An assessment was made in South Africa in early 2022 and China was underway under year-end. Corruption poses a threat to sustainable economic and social development around the world. Corruption could also have severe negative impacts for the Group by obstructing business growth, increasing costs and imposing serious legal and reputational risks. Operating all over the world, including countries in emerging mar- kets, Electrolux is exposed to risks related to corruption and bribery. These risks may arise in several phases of the value chain, such as in purchasing and sales. Electrolux has zero tolerance of corruption and works continuously to raise awareness among employees in order to minimize the risk for corruption. Measures against corrup- tion are included in the Anti-Corruption Policy, which all employees CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 48 are required to follow. This policy provides guidance to employees on how to do the right thing and explains which actions constitute unlawful and inappropriate behavior. Employees can report ethical misconduct through a whistleblower system. In 2022, 584 (411) reports were received, out of which 12 (11) reports in the area of business integrity were investigated. Impacts throughout the value chain Finally, 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 opportunities, minimize or enhance impacts, and understand boundaries. It also helps the company to understand how its actions and impacts are interrelated. It also identiﬁ es the degree of Electrolux inﬂ uence along the value chain, and the value created for the company and the society. The follow- ing table identiﬁ es the Group’s key sustainability risks and Impacts throughout the value chain, and how they are managed. 7. End-of-life 1. Product development 6. Consumer use 5. Sales 2. Suppliers 3. Electrolux – operations 4. Transport 1. Product development Close collaboration between Design, Marketing and R&D enables new products to oﬀ er best-in- class consumer experiences. The ambition is to develop solutions with lead- ing environmental performance. Timely innovation is key to meeting forthcoming legal requirements and market demands. The focus is on energy, water and material eﬃ ciency, as well as chemical use in appliances. 2. Suppliers Electrolux relies on thousands of ﬁ rst-tier suppli- ers, many in emerging markets. The focus is on safeguarding Electrolux standards and devel- oping supplier capacity to improve sustainability performance. Electrolux also requires all its suppliers to comply with the Electrolux Supplier Workplace Standard and the Workplace Directive. These requirements are the same as Electrolux internal policies. Risks How impacts are managed Ability to inﬂ uence Generating value • Not meeting regulatory or market requirements. • Not meeting consumer expectations. • Not adapting to a low-carbon economy. High • Continuously improve product eﬃ ciency. • Increase use of recycled materials. • Eliminate harmful materials. • Integrate future requirements into product development plans. • Participate in the UN’s United for Eﬃ ciency program. Products with leading environmental performance deliver consumer value in line with the business strategy, while reducing negative impact on the environment. • Connections to social, ethical and human rights violations. • Severe weather conditions caused by climate change could negatively aﬀ ect supply. • Business interruptions due to unethical business practices in the supply chain. • Apply a risk-based approach to identify suppliers in scope. • Assess the climate impact of key suppliers. • Conduct auditing to safeguard standards. • Hold training and drive improvement programs. Medium Enforcing Electrolux standards supports human rights and raises environmental, labor and economic standards, particularly in emerging markets. This also builds trust and a resilient supply chain, while reducing business and reputational risks. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 49 Risks How impacts are managed Ability to inﬂ uence Generating value 3. Electrolux – operations Electrolux has 34 ﬁ nished goods factories and 6 factories making components and accessories, and sales in approximately 120 markets, with approximately 51,000 employees. The main focus areas are to reduce the environmental footprint, maintain high ethical standards and working conditions, as well as to have a positive impact in local communities. • 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. High • Implement and maintain systems for environment, resource eﬃ ciency, and health and safety. • Governance systems and training to enforce sustain ability policies. • Assess the climate impact on operations. • Conduct human rights impact assess- ments. Support local community programs. Electrolux creates community beneﬁ t by providing jobs, knowledge transfer and economic opportunities. Positive employee relationships promote competence develop- ment, employee wellbeing and job satisfaction. Local community engagement creates good stakeholder relations, improves employee pride and enhances brand reputation. 4. Transport 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’s operations. The Group uses its purchasing power to inﬂ uence the logistics industry by developing more sustainable transport solutions in collaboration with our logistics partners. 5. Sales Electrolux sells approximately 60 million products in approximately 120 markets every year, primar- ily through retailers. Energy and performance labeling, and sustainability communication allow us to raise product eﬃ ciency awareness among consumers. • Emissions from transportation. • Labor conditions in logistics companies. • Disruptions in supply chain can impact climate footprint due to shifts in mode of transportation. • Disruptions caused by severe weather as a result of climate change • Failure to eﬀ ectively inform consumers on product use. • Not meeting consumer expectations on product eﬃ ciency. • Limited opportunity to inﬂ uence deci- sion-making at the point-of-purchase. • Failure to meet customer expectations in areas such as anti-corruption and labour standards. • Implement collaborative solutions to mitigate logistics-related impacts. • Promote eﬃ cient modes of transport Medium Helping to create a more sustainable trans- port industry strengthens the Group’s brand reputation. Transport is included in the Electrolux carbon target. It also supports suppliers in their work to improve their environmental and labor standards. Medium • Continuously improve product perfor- mance and eﬃ ciency. • Improve pre- and point of purchase communication. • Secure third party endorsement of prod- ucts (such as best-in-test recognitions). • Communicate on themes such as food storage, reducing food waste, caring for clothes and textiles. • Conduct Group-wide trainings on anti-corruption. • Assessments and audits of Electrolux and suppliers’ factories. Promoting transparency and the Group’s sustainable product oﬀ ering contributes to retailer sustainability goals, strengthens brands and builds customer loyalty. As sales of the Group’s products with leading environmental performance demonstrate, an eﬃ cient product oﬀ ering is a proﬁ table strategy. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 50 Risks How impacts are managed Ability to inﬂ uence Generating value 6. Consumer use As the main environmental impacts of Electrolux products occur when they are used, product energy and water eﬃ ciency is a top priority. Greater use of connected products in the future will help improve optimal product use. • Not meeting expectations on product performance. • Consumers not using products in an optimal way. • Product safety. • Data privacy for users of connected products • Continuously improve product performance and eﬃ ciency. • Prepare for increased data privacy regulation. • Follow the product safety governance and procedures. • Increase development and sales of connected products. Medium 7. End-of-life Legislation on appliance recycling is being intro- duced in more markets. On average, materials account for approximately 7% of a product’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 materials from collected end-of-life large appliances must be recovered. • Not meeting expectations beyond legislation. • Waste of resources due to a lack of recycling. • Illegal trade of discarded products and recycled materials Low • Establish a more circular business by using recycled materials. • Eliminate harmful materials to enable higher quality recycled materials and decrease environmental impact. • Promote proper recycling as part of producer responsibility Appliances deliver social beneﬁ ts that many take for granted – such as food preservation, hygiene standards, freeing up time from household chores, and facilitating equal opportunities – factors that are particularly signiﬁ cant in emerging markets. Providing eﬃ cient products, raising consumer aware- ness and increasing appliance connectivity can help counter rising global CO2 emissions, while reducing food waste and the wear of clothes. Building resource-eﬃ cient and closed-loop systems help reduce environmental impact and overall resource consumption. Innova- tive designs that allow material reuse save money and energy, and increase consumer trust in the Electrolux brand. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 51 Climate risk disclosures Governance Governance Strategy Risk management Disclose the organization’s governance around climate- related risks and opportunities. Disclose how the organiza- tion identiﬁ es, assesses, and manages climate-related risks. Disclose the actual and potential impacts of climate- related risks and opportunities on the organization’s businesses, strat- egy, and ﬁ nancial planning where such information is material. Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and oppor- tunities where such information is material. This is the third Electrolux climate report based on the Task Force on Climate-related Financial Disclosure (TCFD) recommendations. Assessments, ﬁ ndings and conclusions in this Climate risk disclosures report replace earlier ones. The purpose of the report is to assess how climate change could aﬀ ect Electrolux in the long term, but also the role Electrolux plays in mitigating climate change. In accordance with the TCFD recommendations, this report is based on two potential future climate scenarios and how these could impact climate-related risks and opportunities for Electrolux in the future. The main event in 2022 that had an impact on this report was the 27th UN Climate Change Conference of the Parties (COP27) in Sharm el-Sheikh, Egypt. The IPCC Sixth Assessment Report (AR6) concluded that the climate pledges announced at COP 27, if met in full and on time, would be enough to hold the rise in global temperatures to 1.8 °C by 2100. The scenarios used for the assessment in this disclosure have been selected to represent two possible future development paths, where each scenario is characterized by diﬀ erent societal impacts. For each scenario, long-term perspectives of 10 and 30 years have been used to assess climate-related risks and possibilities based on what the Group considers to be best available knowledge. The climate report describes the Group’s continuous assessment of climate-related risks and opportunities based on stakeholder expectations, scientiﬁ c ﬁ ndings, regulatory requirements and frame- works for company reporting. Electrolux is committed to annually publish a climate report based on the TCFD recommendations and the company plans to further develop its reporting going forward, as climate science and more extensive analyses evolve. This report is structured around the four TCFD elements describing how organiza- tions operate: governance, strategy, risk management, and metrics and targets. All these elements are connected to climate-related risks and opportunities. Electrolux has governance structures to eﬀ ectively manage climate-related risks and opportunities. The Electrolux climate change strategy is managed by Group Sustainability (GS) in close cooperation with other Group functions and the company’s business areas. The Head of GS reports to the Head of Consumer Experience & Product Lines (CXO) and has reg- ular meetings with the Sustainability Board and Group Management. The Electrolux Sustainability Board, chaired by the CEO, is a forum to raise sustainability topics and review the implementation of the diﬀ erent sustainability programs. Other members of the Sustainability Board are the Chief Financial Oﬃ cer (CFO), Head of Operations, CXO, Chief Commercial Oﬃ cer, CHRO & Communications, General Counsel and Head of GS. The Sustainability Board gives recommen- dations to Electrolux Group Management, which makes decisions about sustainability and climate-related issues. The CEO reports climate-related progress to the Board, which oversees the overall company strategy. Group Risk Management manages the Electrolux Enterprise Risk Management (ERM) program. This program is governed by the ERM board, which consists of the CEO, CFO, General Counsel, VP Group Treasury, Head of Group Internal Audit, and Head of Group Risk Management. The ERM program manages risks related to direct climate impacts and covers both identiﬁ ed and emerging risks, and with a time-horizon of around three years. Electrolux includes physical climate risks in the ERM and reports the outcome to the Sustainability Board. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 52 Strategy Climate change is a core element of the Electrolux Group sustain- ability framework, which includes the company’s Climate Goals, various climate-related activities and work with its stakeholders. For the Better 2030 The Group’s sustainability framework – For the Better 2030 – consists of Better Company, Better Solutions and Better Living. It covers all the lifecycle stages of the company’s products – from raw materials and manufacturing to product use and how Electrolux can contribute to more sustainable living for consumers around the world. For the Better 2030 includes the company’s work with climate change and its Climate Goals through the Electrolux Climate Neu- trality Roadmap (see illustration). Climate-related topics in the sus- tainability strategy include the Goal “Be climate neutral and drive clean, resource-eﬃ cient operations” (Scope 1 and 2 emissions) and the Goal “Lead in energy- and resource-eﬃ cient solutions” (Scope 3 emissions). Scope 1 and 3 are also addressed through the Goal to “Eliminate harmful materials”, by phasing out hydroﬂ uorocarbons (HFCs). See the Electrolux Annual Report 2022, Statutory Sustainability Report, on page 56. The Electrolux Climate Neutrality Roadmap The company’s long-term ambition is to ensure that its entire value chain is climate neutral by 2050. This supports the United Nations Global Compact – Business Ambition for 1.5° C, which Electrolux President and CEO Jonas Samuelson has signed. Toward 2030, the company’s targets are: • Science Based Target – aims to reduce company Scope 1 and 2 emissions by 80% between 2015 and 2025, and the absolute Scope 3 emissions from the use of sold products by 25% during the same time period. • For the Better 2030 sustainability framework target – aims to achieve climate neutral operations by 2030 (Scope 1 and 2 emissions). The Electrolux climate neutrality roadmap Targets: 80% 25% reduction in carbon emissions in operations. Scope 1 and 21), 3) Climate neutral operations2) reduction in carbon emissions in product use. Scope 31), 3) Climate neutral across the value chain This long-term ambition supports the United Nations Global Compact Business Ambition for 1.5° C. Scope 1, 2 and 3. 2015 2025 2030 2050 About TCFD The international Task Force on Climate-related Financial Disclosure (TCFD) was formed in 2015 by the Financial Stability Board and tasked with correcting the shortage of information regarding companies’ work with, and management of, climate change. In 2017, the TCFD released climate-related ﬁ nancial disclosure recommendations designed to help companies promote more informed investment, credit and underwriting decisions and enable stakeholders to better understand the ﬁ nancial system’s exposure to climate-related risks. 1) Science based target (SBT) 2) Company target (Scope 1 + 2 = 0) 3) Includes contributions from energy use and greenhouse gas fugitive emissions. Initiatives contributing toward the company’s strategy Electrolux has a variety of initiatives that are fundamental for driving its climate objectives forward. These include ﬁ nancial mechanisms and partner collaborations. Electrolux Green Financing Framework In 2022, Electrolux launched the Green Financing Framework, which helps it to fund climate investments and other environmental initiatives. This complements the existing Electrolux Green Bond Framework that was launched in 2019 and was the ﬁ rst initiative in the industry to fund climate investments and other environmental initiatives. Long-term Incentive program To increase the internal focus on actions to reduce climate change, a performance target linked to the Group’s Science Based Target, within the long-term share-related incentive programs for senior managers was implemented in 2022, in addition to the programs in 2021 and 2020. Examples of Electrolux climate-related collaborations United for Eﬃ ciency (U4E) – Electrolux participates in the United Nations led initiative United for Eﬃ ciency to support developing countries and emerging economies in setting up eﬀ ective product performance and labelling systems to help facilitate a complete market transformation to energy-eﬃ cient cooling appliances. Currently, only 50% of the use phase emissions from products sold by Electrolux are covered by product eﬃ ciency standards. The Cool Coalition – The Cool Coalition was initiated by UNEP with the objective to improve the energy eﬃ ciency and to reduce the environmental impact of cooling appliances. Electrolux has made the commitment to phase out or replace high-impact greenhouse gases in all appli- ances with gases that have low global warming impact by 2023. Green shipping – in 2022, Electrolux made two agreements with the shipping companies Maersk and CMA-CGM to reduce the company’s sea transport greenhouse gas emissions by 15% during the year. With new agreements in place, 25% of Electrolux Group’s total sea freight was transported using the most eﬀ ective solutions for decarbonizing currently available in the market. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 53 The Electrolux climate scenarios Electrolux mainly uses two diﬀ erent climate scenarios based on data from the International Panel on Climate Change (IPCC) and the International Energy Agency (IEA) to assess the resilience of its business. This includes potential medium- and long-term climate- related risks and opportunities throughout the appliance industry value chain. According to the TCFD Recommendations, companies should base their climate-related risks and opportunities on two diﬀ erent climate scenarios. In alignment with these recommendations, the two scenarios Electrolux uses have diﬀ erent levels of projected emission reductions over the time horizons of 10 years and 30 years1). They are referred to as the Rapid Transition Scenario and the Changing Climate Scenario. Major scenario impacts on the Electrolux value chain The Rapid Transition and Changing Climate scenarios would both have material impact on the entire Electrolux value chain. However, their major impacts on the value chain would diﬀ er slightly (see the illustration). The Rapid Transition Scenario The Changing Climate Scenario This scenario would involve rapidly declining emissions in the coming decades, mainly driven by legislation and taxes, resulting in a global average temperature rise of between 0.3°C to 1.7°C by 2100. This pathway would require transitional changes to achieve the UN Paris Climate Agreement, including a decline in emissions from 2020. This scenario would involve slowly declining emissions resulting in a temperature increase of between 2.1°C to 3.5°C by 2100. This “intermediate” pathway would follow the current emission path to peak in 2040 with long-term physical risks as a result of climate change. Key climate implications • A mean global warming increase by 1.5 to 1.7 °C between 2046 and 2065. • A mean sea level increase of 0.09 m to 0.19 m between 2046 and 2065. Key climate implications • A mean global warming increase of approximately 1.5 °C in 2030 and 2.0°C • A mean sea level increase of between 0.09 m in 2030 and 0.20 m in 2050. in 2050. Implications for the appliance industry • Stringent product energy legislation – will impact product development • Carbon taxes – will impact suppliers, operations and sales. • Digitalization and smart demand-side management – will impact product and sales. development and sales. Implications for the appliance industry • Greater acute physical risks due to more frequent and/or more severe weather systems, such as hurricanes and ﬂ oods – will impact suppliers, operations and transport in the appliance industry. • Greater chronic physical risks from changing climate conditions, such as droughts – will impact suppliers, operations and transport in the appliance industry. The climate implications in this scenario are based on the IPCC Scenario RCP 2.6 and the IEA SDS Scenario2). The climate implications in this scenario are based on the IPCC Scenario RCP 4.5 and the IEA STEPS Scenario3). 1) Electrolux has based its climate scenarios and impacts on two diﬀ erent Representative Concentration Pathways (RCPs) developed by the IPCC (IPCC, 2014: Climate Change 2014: Synthesis Report). An RCP describes a greenhouse gas (GHG) concentration trajectory resulting in diﬀ erent climate futures, and ultimately results in diﬀ erent risks and opportunities for Electrolux based on this forecast. The Electrolux report for 2022 has been updated based on the IPCC report “AR6 Climate Change 2021: The Physical Science Basis”, presented in August 2021. 2) See the Reporting Principles on page 55 for more technical detail on the Rapid Transition Scenario. 3) See the Reporting Principles on page 55 for more technical detail on the Changing Climate Scenario. Major impacts from the two scenarios along the value chain Rapid Transition Scenario Product development Suppliers Electrolux operations Transport Sales Consumer use End-of-Life Changing Climate Scenario CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 54 Climate risk management Electrolux has a thorough risk mapping and decision-making process that manages all risks for the Group. The two diﬀ erent climate scenarios result in a variety of risks and opportunities for Electrolux throughout its value chain. Enterprise Risk Management The Electrolux Enterprise Risk Management (ERM) framework and related processes identify, mitigate, communicate and report risks that can signiﬁ cantly aﬀ ect the business. Electrolux follows a risk mapping process for the collection and incorporation of risk infor- mation into decision making and governance processes. The ERM includes climate-related risks in line with the section Climate Risk Disclosure. Climate-related risks usually have a longer time-horizon than other ERM risks. Read more in the Risk section on page 44. The Rapid Transition Scenario As a sustainability leader in its industry, Electrolux is well-positioned to meet the demands for stringent product energy legislation, carbon taxes and digitalization in the near future – to continue to create long-term shareholder value. As approximately 85% of an appliance’s climate footprint is in its use phase, Electrolux can play a role in meeting the need for energy eﬃ cient appliances that help mitigate the impact of climate change. Primary rapid transition risks • Increased costs related to designing resource-eﬃ cient products – Electrolux has product development roadmaps with the objective to meet forthcoming energy labelling standards, such as the new EU labelling standards and stricter minimum energy performance standards (MEPS) to be fully implemented by 2023. • Carbon taxes – Electrolux is well prepared to meet the risks of higher carbon tax, as the Group drives resource and energy eﬃ ciency throughout the value chain. Carbon taxes on ﬁ nished goods could also increase carbon import duties, such as the EU Carbon Border Adjustment Mechanism. Opportunities • Industrial shift to renewable energy – Electrolux is already well on its way to carbon neutral operations by 2030 (Scope 1 and 2 emissions). Based on the projections in a study by Bloomberg New Energy Finance¹, Electrolux will not be negatively aﬀ ected in its operations by the shift from fossil-based to renewable electricity. An industry shift to renewable energy could therefore provide Electrolux with a competitive advantage. • Product eﬃ ciency – More stringent product legislation and higher energy prices could drive the demand for energy eﬃ cient Electrolux products in the market. The International Monetary Fund (IMF) has concluded that a carbon tax of USD 75 per metric ton of CO2 would increase the average electricity price across G20 countries by 43%. • A growing market – The growing middle class, in particular in Asia and Africa, will continue to expand the market for household appliances. • Electriﬁ cation – The IEA estimates that there is potential for 2.6 billion people to switch from wood burning stoves to using clean cooking appliances. Electrolux can help meet this demand for clean and eﬃ cient appliances. The Changing Climate Scenario In this scenario, Electrolux must adapt to a changing climate in terms of more frequent and/or more severe weather systems and greater chronic physical risks from changing climate conditions. Electrolux has started to include “The Changing Climate Scenario” in its loss prevention program, Blue Risk, to improve the resilience of its own operations, supply chain and transport systems, and plans to make more detailed assessments in the coming years. Action on this insight will enable Electrolux to continue to create long-term share- holder value. Primary acute and chronic physical risks • Electrolux operations – Recent internal assessments have not concluded that Electrolux factories have signiﬁ cant risks related to greater acute and chronic physical risks due to more frequent and severe weather systems and changing climate conditions. However, more detailed analyses will be conducted based on reputable external sources, such as the IPCC: • Acute physical risks – IPCC predicts that the scenario will result in greater acute physical risks, such as more frequent hurricanes. • Chronic physical risks – IPCC does not predict a signiﬁ cant increase in chronic physical risks due to this scenario in the next 30 years, although uncertainty is high. • Electrolux suppliers – Signiﬁ cant risks exist among Electrolux suppliers, although the company has ﬂ exibility in its supply chain, which will adapt to the changing conditions to meet market needs as more resilient suppliers are likely to survive and thrive. • Transport systems – The global logistics system Electrolux relies on for the movement of its raw materials, components and ﬁ nished goods are thought to be resilient to acute and chronic physical risks as alternative logistical arrangements can be found. However, more investigation is required. Opportunities • A growing market – The growing middle class, in particular in Asia and Africa, will continue to expand the market for household appliances. • Consumer demand – The need for air conditioning is expected to grow in a warmer world, particularly in Asia and Africa with a growing middle class. Electrolux can meet this growing market demand. • Electriﬁ cation – The IEA estimates that there is potential for 2.6 billion people to switch from wood burning stoves to using clean (from a carbon emission perspective) cooking appliances. Electrolux can help meet this demand for clean and eﬃ cient appliances. Future development Electrolux will continue to develop its climate scenario analyses and assess the potential impacts on its operations. Future development includes to: • Deﬁ ne climate risks for speciﬁ c factory locations • Update the Electrolux water risk assessment using the WWF Water Risk Filter for Electrolux factories 1) According to a third-party study discussed in International Monetary Fund (2019). Fiscal Monitor, How to Mitigate Climate Change page 21. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 55 Metrics and Targets Electrolux has comprehensive reporting systems that include various metrics and targets to assess and manage relevant climate-related risks and opportunities. section on page 57. Read more in the For the Better 2030 Electrolux annually responds to the CDP Climate questionnaire and the CDP Water questionnaire. Electrolux also reports in accor- dance with the GRI Standards. The following climate related KPIs are reported in the separate Sustainability Report: • Energy consumption within the organization • Direct and Indirect CO2 emissions, including fugitive emissions • Greenhouse gas emissions intensity in metric tons CO2 per million SEK • Reduction of GHG emissions • Emissions of ozone-depleting substances • Science Based Target results (Scope 1, 2, and 3) • Electrolux CDP report (www.cdp.net) Details on the company’s overall climate performance are found on page 58 in the Annual Report and detailed performance is reported in the standalone Electrolux Sustainability Report 2022. Reporting principles This section provides some additional technical detail behind the scenarios and the report’s assumptions. Electrolux has based its climate scenarios and impacts on two diﬀ erent Representative Concentration Pathways (RCPs) developed by the IPCC (IPCC, 2014: Climate Change 2014: Synthesis Report). An RCP describes a greenhouse gas (GHG) concentration trajectory resulting in diﬀ erent climate futures, and ulti- mately results in diﬀ erent risks and opportunities for Electrolux based on this forecast. In 2021, the Physical Science Basis, IPCC Sixth Assessment Report (AR6) was published. The AR6 underpinned the scientiﬁ c consensus of the ﬁ ndings in the report. This report has been updated with the latest predictions regarding temperature and sea level rise from the AR6. The Rapid Transition Scenario The Rapid Transition Scenario is based on RCP 2.6, which would involve rapidly declining emissions in the coming decades, resulting in a global average temperature rise of approximately between 1.3–2.4 °C by 2100. For this scenario, the International Energy Agency (IEA)1) concludes that overall CO2 emissions need to peak around 2020 and enter a steep decline thereafter to achieve a 75% reduction by 2050. The building sector, including appliances, will see a similar drop, mainly through energy eﬃ ciency, renewable energy technologies and a shift to low-carbon electricity. This means reducing carbon emissions by an average of 6% per year to one-eighth of current levels by 2050. At the same time, demand for electricity in the building sector is expected to increase as a result of a growing consumer base, as well as a rising demand for equipment such as air con- ditioners and the replacement of gas and wood-burning stoves with electric appliances. The IEA concludes: • Signiﬁ cant policy eﬀ orts are needed for cooling equipment and appliances to accelerate technological progress in energy eﬃ ciency in these end uses, particularly with substantial growth in appliance and air conditioner (AC) ownership expected in the coming decade. • Digitalization and smart demand-side management will further reduce energy use. A combination of stringent product energy legislation as well as carbon dioxide taxes would be required, which would impact on product development, supply base, operations and sales in the appliance industry. Higher carbon dioxide taxes are recommended by the IEA and in the EU Green Deal framework. Carbon prices are expected to have an impact on energy intensive industries such as power generation, transport, steel, aluminum and plastics producers. Finished goods could also be impacted through carbon import duties, such as the EU Carbon Border Adjustment Mechanism. The World Bank has estimated that carbon prices of at least USD 40–80/tCO2 by 2020 and USD 50–100/ tCO2 by 2030 are required to cost-eﬀ ectively reduce emissions in line with the temperature goals of the Paris Agreement.2) In a report from the International Monetary Fund (IMF), it was concluded that a carbon tax of USD 50 per metric ton in advanced countries (G20) would lead to an average electricity price increase of 33%, while a carbon tax of USD 75 per metric ton would lead to an increase in price of 43%.3) Climate-related risks and impacts of the Rapid Transition and the Changing Climate scenarios Scenario The Rapid Transition Scenario The Changing Climate Scenario Risk Area Product energy legislation Carbon dioxide price/tax Physical Risk – acute Physical Risk – chronic Potential impact on Electrolux Transformation investments Increase in price for raw materials Interruptions in manufacturing and supply chain Relocation of manufacturing Financial impact area Costs, Sales, Reputation Costs, Sales Costs, Sales Costs Risk (0–3 years) Emerging Risk (3–10years) Long-term Risk (10– years) Today, prices for renewable and fossil-based electricity are comparable, but prices are expected to decline for renewables by around 50% over the next 10 years, while fossil-based electricity will increase by 40% according to data from Bloomberg New Energy Finance. With a USD 75 per metric ton carbon tax, the price of natural gas, both for industry and households (mostly for heating and cooking) would rise signiﬁ cantly, by 70% on average.3) The Changing Climate Scenario The Changing Climate Scenario is based on RCP 4.5, which would involve slowly declining emissions resulting in approximately between 2.1–3.5°C temperature increase by 2100. The IPCC has conducted risk assessments for each region, including the potential for risk reduction through adaptation and mitigation, as well as limits to adaptation. In the near term (2030 or in 10 years), projected levels of global mean temperature increase are not expected to diverge substantially between diﬀ erent emission scenarios. However, the IPCC predicts that by the mid-century (in 30 years), climate change will impact human health, with more frequent hot and fewer cold temperature extremes over most land areas. It is also very likely that heat waves will occur with a higher frequency and longer duration. The average intensity of tropical cyclones, the proportion of Category 4 and 5 tropical cyclones and the associated average precipitation rates are projected to increase with a 2°C global temperature rise. Sea lev- els continue to rise at an increasing rate. Extreme sea level events that are historically rare (once per century in the recent past) are projected to occur frequently (at least once per year) in many locations by 2050. The Changing Climate Scenario will increase acute physical risks due to more frequent and/or more severe weather systems, such as hurricanes and ﬂ oods. It will also increase chronic physical risks from changing climate conditions, such as droughts and sea level rise. These physical impacts pose risks for disruption in the appliance industry, due to the global nature of its operations and supply chain – particularly in the manufac- turing of materials and components that are situated in parts of the world that are more likely to be aﬀ ected by physical risks. World Energy Outlook The World Energy Outlook (WEO), published annually by the IEA, includes critical analysis and descriptions of trends in energy demand and supply.4) It explores possible scenarios, how they could develop and some of the main uncertainties to predict the consequences of diﬀ erent choices and what they mean for energy secu- rity, environmental protection and economic development. The IEA deﬁ nes two scenarios: • The Sustainable Development Scenario (SDS) – a deep decarbonization scenario that considers how people should gain access to critical energy services while also meeting climate goals. • The Stated Policies Scenario (STEPS) – reﬂ ecting current policies and plans. The SDS Scenario is considered to reﬂ ect the Group’s Rapid Transition Scenario, while the STEPS Scenario is more in line with the Changing Climate Scenario. The IEA report provides recommendations to policy makers regarding sectors and product categories in order to achieve the targets in the scenarios. Disclosure limitations and future development The following aspects have not been included in this Report: • Growing consumer demand – driven by a growing middle class, increasing global incomes, electricity access rates and ownership of appliances and air conditioners. • Price elasticity – consumer willingness to pay a higher price for more eﬃ cient appliances as a result of more stringent energy eﬃ ciency legislation. • Mitigable risks – chronic physical risks will develop over time and could be mitigated by taking action well before they have materialized to reduce negative impact. • Climate risk disclosures are currently not included in ﬁ nancial risk management processes. Forward-looking statements This report contains ‘“forward-looking” statements that reﬂ ect the company’s current expectations. Although Electrolux believes that the expectations reﬂ ected in such forward-looking statements are reasonable, no assurance can be given that such expectations prove to be correct as they are subject to risks and uncertainties that could cause the actual results to diﬀ er materially due to a variety of factors. These factors include, but are not limited to, changes in consumer demand, changes in economic, market and competitive conditions, supply and production constraints, currency ﬂ uctuations, developments in product liability litigation, changes in the regulatory environment and other government actions. Forward-looking statements are only accurate as of when they were formulated, and other than as required by applicable law, the company undertakes no obligation to update any of them in light of new information or future events. 1) IEA (2018). Perspectives for the Energy Transition: The Role of Energy Eﬃ ciency. 2) The World Bank Group (2020), State and Trends of Carbon Pricing. 3) International Monetary Fund (2019). Fiscal Monitor, How to Mitigate Climate Change. p21 4) IEA, The Worl1d Energy Outlook (WEO) 2019 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 56 Statutory sustainability report Electrolux is a global leader in household appliances and sustainability is an integral part of the company’s business model. This section presents the Group’s sustainability work and its progress in 2022. technological development requires new business approaches, and planetary boundaries are inﬂ uencing decision making at all levels. Such global megatrends create challenges for Electrolux – and also bring about business opportunities. Electrolux shapes living for the better by reinventing taste, care and wellbeing consumer experiences, making life more enjoyable and sustainable for millions of people around the world. As a leading global appliance company, Electrolux places the consumer at the heart of everything it does. Through the company’s brands, including Electrolux, AEG and Frigidaire, approximately 60 million household products are sold in approximately 120 markets every year. In 2022, Electrolux had sales of SEK 135 bn and employed approximately 51,000 people around the world. For more information, visit www.electroluxgroup.com. Business model and sustainable development To achieve the Electrolux purpose – Shape living for the better – and drive proﬁ table growth, Electrolux uses a business model that focuses on creating outstanding branded lifetime consumer expe- riences 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. 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 deﬁ ning enjoyable and sustainable living. The focus is to invest in innovations that are most relevant for creating outstanding branded lifetime consumer experiences within great tasting food, the best care for clothes and to increase wellbeing in the home. With 60 million home appliances sold annually, Electrolux has long recognized the impact the company has on the environment and in society. Sustainability is a key part of the strategy, integrated in everything the Group does, as the company recognizes the growing importance of sustainability performance. 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 in a changing world The world in which Electrolux operates is constantly changing. Demographic trends are increasing pressure on resources, rapid Demographics Global demographic trends – such as population growth, the growing middle class, an aging population and urbanization – are increasing the demand for home appliances, which in turn puts more pressure on natural resources. According to the Brookings Institute the global middle class is expected to increase by 700 million people by 20301). This represents a new universe of consumers. Implications for Electrolux: • Signiﬁ cant growth potential in emerging markets. • Continued need to decrease the overall environmental footprint 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. Resources and planetary boundaries The need to reduce greenhouse gas emissions, and adapt to a changing climate and resource limitations, will drive manufacturers toward circular business models that promote resource eﬃ ciency, reduced use of hazardous chemicals and waste reduction. 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. • Problems with plastic waste pollution increase pressure on recy- cling solutions. Technology New technologies are scaled rapidly and globally, with purchasing decisions increasingly inﬂ uenced 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 require transparency and sustainable business practices. • Digitalization will drive the next wave of operational eﬃ ciency, including closer integration with suppliers. • Connectivity oﬀ ers opportunities for new business models that result in better resource eﬃ ciency. • IoT enables a lifelong relationship between producers and con- sumers but requires high standards of data security and privacy. Average CO2 impact during the lifetime of appliances1) Recycling, 1% Materials, 7% Manufacturing, 1% Transportation, 1% Product usage, 85% Greenhouse gases, 5% The product life cycle perspective guides how to best reduce climate impacts. The greatest carbon emis- sion impacts in the Electrolux value chain occur from energy consump- tion when products are used. See page 58 for more details on the company’s Climate Goals. 1) The graph is based on the Group’s total CO2 impact in 2015 (82 million metric tons) used for setting Science Based Target. Materiality Material issues are topics that represent the most signiﬁ cant eco- nomic, environmental and social impacts for Electrolux. The materiality process aims to identify and understand the topics that are important for 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 dialogue, expert opinion and consumer surveys, and other sources of infor- mation to develop an up-to-date understanding of the prevailing business context. The material issues selected are expressed in the Group’s sustain- ability framework – For the Better 2030 – with ten areas with deﬁ ned 2030 sustainability goals, which are supported by key performance indicators. 1) The World’s Growing Middle Class (2020–2030), https://elements.visualcapitalist.com/the-worlds-growing-middle-class-2020-2030/ CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 57 For the Better 2030 “For the Better 2030” is the Electrolux sustainability framework, which drives the Group toward its ambitious sustainability Goals for 2030 and to become climate neutral across its value chain by 2050. Better Company Electrolux places the highest demands on environmental and social performance throughout the company as well as its suppliers, acknowledging the supply chain as an extension of its own aspirations. For the Better 2030 Better Company Better Solutions Better Living Lead in energy and resource-eﬃ cient solutions Make healthy and sustainable eating the preferred choice Be climate neutral and drive clean and resource-eﬃ cient operations Act ethically, lead in diversity and respect human rights Oﬀ er circular products and business solutions Drive supply chain sustainability Eliminate harmful materials Make clothes last twice as long with half the environmental impact Make the home a healthier place to thrive in, with half the carbon footprint Supporting the UN Sustainable Development Goals and the Electrolux Climate Goals The framework consists of nine Goals and the Electrolux Climate Goals as shown in the illustration above. These are the main areas Electrolux focuses on as they optimize the company’s contribution to society. Operational resource eﬃ ciency Index 100 100 80 80 60 60 40 40 20 20 0 0 Water consumption Energy consumption CO2 emissions 18 19 20 21 22 Year Be climate neutral and drive clean and resource-eﬃ cient operations Electrolux will continue to reduce its environmental footprint by shifting to renewable energy and optimizing energy use and other resources throughout its operations. The ambition is to have climate neutral operations by 2030 (Scope 1 and 2). In 2022, the company’s Scope 1 and 2 greenhouse gas emissions from its operations were reduced by 82% (78) compared to 2015, and the production energy eﬃ ciency per unit improved by 41% (43) compared to 2005. By the end of 2022, 59% (56) of the total energy used in Electrolux opera- tions came from renewable sources. In addition, the Group has its own on-site solar photovoltaic systems in seven countries. Electrolux responds to the annual questionnaires from CDP, a global non-proﬁ t that runs an environmental disclosure system for companies, cities, states and regions, on climate and water. In 2022, Electrolux was recognized for its sustainability leadership with an “A-” score in both climate and water. Act ethically, lead in diversity and respect human rights Electrolux strives to earn the trust of everyone impacted by its oper- ations, demonstrating its commitment to ethics, diversity and human rights through its words and actions. This includes working to ensure the health and safety of Electrolux employees and promoting societal beneﬁ t through community investment activities. The Group noted a Total Case Injury Rate (TCIR) of 0.36 (0.43) per 100 employees in 2022, which compares favorably to other companies in the industry. During the year, safety actions included removing forklift trucks from assembly areas in all Electrolux factories and ﬁ tting them with warn- ing lights. Electrolux also continued employee health and safety training, which is mandatory for all new employees. In the area of business ethics, 584 (411) cases were reported through the Ethics Helpline, including 12 (11) reports in the area of business integrity that were investigated in 2022. Business integrity includes allegations related to corruption, fraud, theft, internal control and anti-trust. In the area of human rights during the year, the focus was on conducting an assessment in South Africa. In 2022, close to 16,000 employees completed the e-learning on the Anti-Corruption Policy. Drive supply chain sustainability Electrolux takes its sustainability leadership agenda into the supply chain by assuring that suppliers comply with the Group’s high expec- tations, no matter where they are located. The company encourages and supports suppliers to make the transition to more sustainable practices. Development activities have been carried out with suppli- ers and a total of 303 (237) supplier audits were performed in 2022, including both physical and digital audits. The Electrolux Supplier Awards continued to encourage and motivate suppliers to be best in class in terms of sustainability performance. Electrolux also secured the commitment from its top 300 suppliers to disclose emissions and set targets through the CDP Supply Chain Program, which will play a key role in achieving the company’s target for net zero carbon emis- sions throughout its supply chain by 2050. Better Solutions Electrolux works to continuously improve its products and services to make them better for consumers and the planet, and to take leadership on global sustainability challenges with a scientiﬁ c and long-term approach. Lead in energy and resource-eﬃ cient solutions Tackling climate change and the increasing demand for water are among the most urgent challenges facing society. The Group con- tributes by oﬀ ering resource-eﬃ cient products that help consumers to live better lives, save money and reduce their environmental footprint. In 2022, the company’s most eﬃ cient products represented 24% of products sold but 39% of gross proﬁ t. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 58 Emission reductions 2022 The Electrolux climate neutrality roadmap Scope 1 and 21,2) Scope 31,3) 82% reduction compared to 2015 >25% reduction compared to 2015 Targets: 80% 25% reduction in carbon emissions in operations. Scope 1 and 21), 3) Climate neutral operations2) reduction in carbon emissions in product use. Scope 31), 3) Climate neutral across the value chain This long-term ambition supports the United Nations Global Compact Business Ambition for 1.5° C. Scope 1, 2 and 3. 2015 2025 2030 2050 1) Science based target (SBT) 2) Company target (Scope 1 + 2 = 0) 3) Includes contributions from energy use and greenhouse gas fugitive emissions. The result for 2022 reached beyond target despite the reduction of sales volumes. The Group has had an approved Science Based Target in line with the Paris Agreement (COP 21), since 2018. To drive the internal focus on actions to reduce climate change within Electrolux, a performance target is linked to the Group’s Science Based Target, within the long-term share-related incentive programs for senior managers. Oﬀ er circular products and business solutions Electrolux aims to contribute to the circular economy by integrating recycled materials into product platforms, promoting recyclability, using more sustainable packaging solutions, increasing the avail- ability of spare parts to repair Electrolux products, and developing circular business solutions. In 2022, Electrolux focused on circular business and recycled plastics. The new 700 Maxispace Green- Zone fridge is the ﬁ rst fridge to be made with inner liners made from 70% recycled plastic. New circular business models were launched during the year, such as a subscription service in Singapore that includes the setup, delivery, repair and recycling of appliances, and a consumer appliance take-back solution in Brazil. Eliminate harmful materials Electrolux has a robust approach to choosing materials for its products to protect human health and the environment. The Group continues to implement its common process for chemical manage- ment. New scientiﬁ c ﬁ ndings and stakeholder requirements are used to update the Group’s Restricted Materials List. During the year, the global roll out of the Eco@web tool continued. In 2022, Electrolux completed the phase out of HFCs in its North American operations by removing HFCs from room air conditioners and portable air conditioners. Better Living Electrolux uses its global reach and presence to drive and contrib- ute to positive change by empowering consumers to make more sustainable choices, reaching beyond the company’s own products and footprint. Make healthy and sustainable eating the preferred choice Electrolux will promote sustainable eating by helping consumers to reduce food waste, adopt more plant-based diets, minimize nutri- tion loss in cooking, and enhance sustainable eating experiences. By oﬀ ering new products, solutions and partnerships, Electrolux can promote more sustainable eating. In 2022, Electrolux intro- duced GRO – a future concept aimed at reinventing the kitchen and enabling people to enjoy food in a more sustainable way for both their health and the planet. Technologies introduced to new models during the year included the NutriFresh inverter refrigerator that reduces food waste by keeping the temperature stable and provid- ing higher humidity so that fruit and vegetables stay fresh for longer. Electrolux launched new steam ovens and quantiﬁ ed the nutritional beneﬁ ts of steaming ingredients. The website Replate.com was enhanced during the year by the Electrolux Food Foundation and its partners to inspire people to adopt more sustainable food habits. Make clothes last twice as long with half the environmental impact Electrolux has the objective to make clothes last longer and reduce the environmental impact of garment care while caring for all fabrics. By providing new products, solutions, campaigns and partnerships, Electrolux can promote more sustainable garment care. In 2022, various product innovations that care for garments to make them last longer and reduce environmental impact by enabling consumers to use less energy, water and detergent were launched. New solutions included a ﬁ lter that collects microplastics from clothes to avoid them ending up in the environment. In 2022, the “Break the pattern” campaign was launched to raise consumer awareness of the envi- ronmental impacts of throw-away fashion habits. Make the home a healthier place to thrive in, with half the carbon footprint Electrolux will inspire more sustainable habits in caring for homes, pioneer knowledge and new standards for a healthier home envi- ronment, and enable wellbeing at home with reduced environmen- tal impact. By providing new products, solutions and partnerships, Electrolux can make the indoor environment healthier and more sus- tainable. In 2022, Electrolux developed a Wellbeing Index to deﬁ ne and measure the elements of clean air, comfortable air, clean water, comfortable water and clean ﬂ oors. Electrolux removed paint from its stick vacuum cleaners to promote indoor air quality and reduce environmental impact. The Group’s connected Air Puriﬁ ers feature smart sensors that optimize energy consumption by adjusting the fan operation in line with the level of airborne particles. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 59 Managing sustainability – Risks and opportunities Aspect Policies Key areas Environment Better Living Anti-corruption • Environmental Policy • Workplace Policy • Product design • Eﬃ ciency in operations • Workplace Policy • Supplier Workplace Standard • Workplace Directive • Anti-Corruption Policy • Conﬂ ict of Interest Policy • Child and forced labor • Conﬂ ict of interest • Health and safety, working hours, compensation • Bribes or other improper beneﬁ ts • Inﬂ uencing legislation • Discrimination and harassment • Business partners and customers • Environmental management systems • Freedom of association, collective bargaining • Political contributions The full text of Electrolux policies is available at www.electroluxgroup.com/en/category/sustainability/codes-and-policies Governance The Group’s sustainability framework – For the Better 2030 – is directly overseen by the Group Management and the business area management teams that have been engaged in the development of the priorities and objectives for the nine Goals and the Climate Goals. The Electrolux Sustainability Board, led by the CEO, is tasked with assessing priorities, monitoring progress and evaluating risks. The Sustainability Board proposes actions and targets to Group Management and will be essential in achieving Electrolux sustain- ability targets going forward. Electrolux holds regular training and communication on the Code of Conduct and has introduced key Group Policies. All oﬃ ce- based staﬀ must acknowledge the Code of Conduct by electronic signature. Each business area is responsible for contributing to the fulﬁ llment of the Group’s sustainability targets under the ten Goals, and several of the performance indicators 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, Group Operations, External Aﬀ airs, and Chemicals. A number of Group functions are accountable for identifying and managing non-ﬁ nancial risks in their area of responsibility. Risks are reported to Group Management and fed into the materiality process. Key sustainability governance responsibilities: Group Sustainability manages sustainability in close cooperation with other Group staﬀ functions and the business areas. The Head of Group Sustainability reports to the Head of Consumer Experience & Product Lines and has an annual meeting with the Electrolux Board to report sustainability progress and develop the company’s strategic direction for sustainability work going forward. The CEO also reports sustainability progress to the Board, which oversees the overall company strategy. The Electrolux Sustain- ability Board, chaired by the CEO, is a forum to raise sustainability topics and review the implementation of the diﬀ erent sustainability programs. Other members of the Sustainability Board are the Chief Financial Oﬃ cer, Head of Operations, Head of Consumer Experi- ence & Product Lines, Chief Commercial Oﬃ cer, CHRO & Communi- cations, General Counsel and Head of Group Sustainability. The Sustainability Board gives recommendations to Electrolux Group Management, which makes decisions about sustainability topics. Any critical concerns are promptly raised with the Board for discussion. The Ethics Helpline (whistleblower function) and programs for ethics and human rights are overseen by the Ethics & Human Rights Steering Group. Environment From a product lifecycle perspective, Electrolux has a relatively large environmental impact – including energy consumption, and the use of materials and chemicals. Generally, the most signiﬁ cant impacts occur during a product’s use phase, and the Group’s strat- egy is to improve product environmental 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 proper disposal. Require- ments on the Group’s operations and in the 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 certiﬁ ed. Group requirements for suppliers are described in the Supplier Workplace Standard and the Workplace Directive. Compliance is mandatory when evaluating potential and existing suppliers. The Group’s strategic suppliers of components and ﬁ nished products must take energy eﬃ ciency measures, and report on energy and water. Some of these suppliers have also been included in the WWF Water Risk Filter assessment. 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 proﬁ t margins. Electrolux products are aﬀ ected by legislation in areas including energy consumption, producer responsibility, and the management of hazardous substances. Some customers have requirements that go beyond legislation. The main environmental risks are related to regulatory and customer requirements. Not meeting requirements could result in ﬁ nes or limitations on 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 consumption and to introduce more recycled materials in products are saving costs. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 60 Electrolux has a Green Financing Framework, which helps it to fund climate investments and other environmental initiatives. The proceeds are to be used to ﬁ nance or reﬁ nance projects covered by the environmental areas of the Electrolux sustainability framework, For the Better 2030. This may include investments in R&D to improve the energy or water eﬃ ciency of appliances, the development of recycled materials or the increased use of renewable solar energy at Electrolux factories. Read more about the Electrolux Green Bond Framework and Green Bond Impact Report: www.electroluxgroup.com/en/ green-bond-framework-29317/ Social, labor and human rights The reputation of Electrolux is built on trust, which means that all actions and decisions must be governed by principles of ethics, integrity, and respect for people and care for the environment – no matter where in the world the Group operates. Consumer trust in companies and how they contribute to society inﬂ uence purchasing decisions. 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 For the Better 2030 Goals mentioned above reﬂ ect 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 contains the Group’s Human Rights policy statement, ﬁ rmly stating that human rights shall be respected. All employees are required to take the Code of Conduct e-learning as part of onboarding and recurring cam- paigns. The Group’s human rights commitment is further detailed through a Human Rights Directive. The Workplace Policy, the Sup- plier Workplace Standard and the Workplace Directive contain mandatory requirements relating to labor rights, health, safety and environment within both Electrolux and its suppliers. Electrolux continues to drive a company culture based on ethics, integrity and respect by providing leadership that demonstrates and nurtures inclusion and accountability. Electrolux monitors performance and manages risks through internal and external audits of manufacturing units, local human rights assessments, education, the Ethics Helpline, management- labor dialogue, as well as health and safety committees. Risks in the supply chain are addressed through audits and training eﬀ orts as part of the Responsible Sourcing program and the Conﬂ ict Minerals program. Human rights procedures engage many functions throughout the organization, from Human Resources to Purchasing and Group Operations. Accountability for the ethics program and the oversight of human rights lies with the Ethics & Human Rights Steering Group, which comprises of senior management representatives from Group functions. Electrolux conducts human rights impact assessments at both Group and local level, in line with the UN Guiding Principles on Busi- ness and Human Rights. Five issues and three business processes constitute the Group’s salient human rights issues. The methodology for the assessments focuses on identifying the risk of harming people, as a direct or indirect result of Electrolux operations. Anti-corruption Corruption poses a threat to sustainable economic and social development around the world. Corruption could also have severe negative impacts for the Group by obstructing business growth, increasing costs and imposing serious legal and reputational risks. With operations all over the world, including countries in emerging markets, Electrolux is exposed to risks related to corruption and bribery. These risks may arise in several stages of the value chain, such as in purchasing and sales. Electrolux has zero tolerance for corruption and works continu- ously 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 employees on how to do the right thing and explains which actions constitute unlawful and inappro- priate behavior. Employees can report ethical misconduct through the Electrolux whistle-blower system. Electrolux provides Group-wide e-learning courses on anti- corruption. These initiatives complement the tailored training that certain functions such as sales, procurement and senior manage- ment receive (roles that are more exposed to corruption risks). Such 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 the review and assessment of corruption risks. For more information on how the Group manages risks and impact throughout the value chain, see the Risk Management section. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 61 EU Taxonomy report Introduction This is the 2022 EU Taxonomy report by Electrolux, which is prepared in accordance with the EU taxonomy regulation for the establish- ment of a framework to facilitate sustainable investment. The purpose of the taxonomy is to establish common deﬁ nitions and reporting on the economic activities that are in line with the EU sustainability objectives for 2030. As a leading global appliance company, Electrolux must adhere to local legislation regarding, for example, product energy eﬃ ciency and product labelling, wherever it operates in the world. There are no global performance standards (in terms of energy eﬃ ciency) for appliances but rather fundamental diﬀ erences in the standards for various markets around the world. The EU Taxonomy describes, among other things, which economic activities are within the scope of the taxonomy (“taxonomy eligible activities”) and which of such activities qualify as environmentally sustainable (“aligned economic activities”), by meeting the EU Tax- onomy’s technical screening criteria. For Electrolux products to be deemed “aligned” with screening criteria, activities must comply with certain EU speciﬁ c standards (EU Regulation 2017/1369). For the above reasons, Electrolux has deemed that the eligible activities in this report should focus on the EU market1). In 2022, the EU market accounted for 27% of Group Net Sales. The EU Taxonomy framework is still under development. Therefore the content and format of this report will develop over time in parallel with the progress of the taxonomy. The current format of this report is aligned with the regulation requirements. Reporting on Key Performance Indicators According to the EU Taxonomy framework, Electrolux is considered to be a manufacturer of energy eﬃ ciency equipment for buildings. The economic activities reported in the result tables are only those activities that have the potential to comply with technical screening criteria that deem them aligned with economic activity within the current EU Taxonomy framework. The applicable technical screening criteria for potentially aligned economic activities for Electrolux are: • household appliances • cooling and ventilation systems 1) The European Union member states. 2) Regulation (EU) 2017/1369 of the European Parliament and of the Council of July 4, 2017. 3) “Manufacturer” refers to a natural or legal person who manufactures a product or has a product designed or manufactured, and markets that product under its name or trademark (Regulation (EU) 2019/1020). These activities are rated in the highest two populated classes of energy eﬃ ciency in accordance with EU Regulation (EU) 2017/1369, and other relevant legislation. The numerator in the Key Performance Indicators presented in the result tables only encompasses household appliances and cooling and ventilation systems that are sold by Electrolux in the EU market under its own brands. Not all household products sold by Electrolux worldwide or products sold under private brands are included due to the aforementioned reasons. Eligibility in 2021 and 2022 This is the second year Electrolux reports on eligibility. In 2022, the proportion of eligible turnover was 17% compared to 19% in 2021. The proportion of eligible CapEx was 29% in 2022 and was 31% in 2021. The proportion of eligible OpEx was 23% in 2022 and was 29% in 2021. This shows that the relative sales of eligible products decreased in 2022 and had an impact on results. Background and Electrolux approach The main technical screening criteria for substantial contribution to climate change mitigation for Electrolux products are based on the EU framework regulation for the energy labelling of appliances and air conditioners (the “EU Labelling Framework”)2). The energy labels for washing machines, washer dryers, dish washers and refrigerators/ freezers have been revised. Tumble dryers, ovens, hoods and air conditioners continue to use the older energy scales, but the scales are expected to be revised in the coming years. The new energy labelling schemes have much stricter perfor- mance requirements resulting in a major downgrade of the energy classes, e.g. a refrigerator previously in energy eﬃ ciency class A+++ could be now class C, D or E after rescaling without any signiﬁ cant change in its energy consumption. Since the applicable taxonomy screening criteria only deem products environmentally sustainable if they are within “the highest two populated classes of energy eﬃ - ciency”, this rescaling, as well as a gradual shift of sales towards more eﬃ cient appliances, will create dynamic conditions for what will be deﬁ ned as an environmentally sustainable product. Electrolux is investing in new product architectures with further improved energy eﬃ ciency with the objective of meeting the current and future technical screening criteria for potentially aligned eco- nomic activities and a top priority is to bring more eﬃ cient products to consumers. For instance, in Europe Electrolux is investing in the refrigeration lines in the Italian Susegana plant for this purpose. The Group monitors the development of product legislation to be prepared for future changes. The long-term ambition of Electrolux is to ensure that its entire value chain is climate neutral by 2050. To achieve this, improving product eﬃ ciency is fundamental since carbon emissions resulting from the consumption of energy from non-renewable sources during the product use dominates. Included activities Eligible activities in this report include economic activities for Electrolux that, according to the taxonomy regulation, could poten- tially be deﬁ ned as “taxonomy aligned” activities based on the technical screening criteria: • Electrolux is a manufacturer of energy eﬃ cient equipment for buildings, i.e. household appliances and cooling and ventilation systems. • The sales of products covered by the EU framework for energy labelling regulation are included, e.g. washing machines, washer dryers, tumble dryers, dish washers, refrigerators/freezers, ovens, hoods and air conditioners. • Only sales in the EU market are assessed as taxonomy eligible. This is because the necessary information for the assessment of products is only available for products sold in the EU in order to determine if they are deﬁ ned as “taxonomy aligned”. In addition, energy labelling standards around the world are not uniform. • “Manufacturer” is deﬁ ned by Electrolux as either in-house man- ufacturing or a third-party manufacturer, and these products are sold under the Group’s brands or trademarks3). Electrolux products sold under private labels are excluded. Electrolux considers this approach to be in compliance with the EU Taxonomy regulation, its purpose and the deﬁ nition of “manufactur- ing” as set out in other relevant EU legislation. Excluded activities As most Electrolux products (approximately 70%) are sold outside the EU market, they are not in the scope of the EU framework regu- lation for energy labelling and therefore will not be compatible with the technical screening criteria in the taxonomy. The energy labelling varies from market to market, and it sends strong signals to consumers who want to buy products with superior performance. However, diﬀ erent energy labelling systems are not comparable for the pur- pose of the EU Taxonomy report. This is because various energy CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 62 labeling systems around the world use diﬀ erent criteria to classify domestic appliances. Several product categories sold in the EU are not included in the EU framework for energy labelling and therefore not assessed as taxonomy eligible in the EU taxonomy, e.g. cooktops and small kitchen appliances. Vacuum cleaners are also excluded from the taxonomy as the regulation for energy labelling has been repealed. Since 1997, Electrolux has internally tracked the most-resource eﬃ cient products sold by the Group and each year the criteria have become more stringent. Read more in the Better Solutions section on page 57. Turnover Economic activities (1)1) A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1) Manufacture of energy eﬃ cient equipment for buildings A.2 Taxonomy-Eligible but not environmentally sustain- able activities (not Taxono- my-aligned activities) Turnover of Taxonomy-eligible but not environmentally sus- tainable activities (not Taxon- omy-aligned activities) (A.2) Manufacture of energy eﬃ cient equipment for buildings Absolute turnover (3) (SEKm) Propor- tion of turnover (4) (%) Climate change mitiga- tion (5) Climate change adapta- tion (6) Water and marine resources (7) Code(s) (2)2) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Climate change mitiga- tion (5) Climate change adapta- tion (6) Water and marine resources (7) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Minimum safe- guards (17) Taxonomy aligned proportion of turnover, year N (18) Taxonomy aligned proportion of turnover, year N-1 (19) Category (enabling activity or) (20) Category (transi- tional activity) (21) Substantial contribution criteria (%) DNSH criteria (“Does Not Signiﬁ cantly Harm”) (Y/N) 3.5 5,691 4 100 0 N/A3) N/A3) N/A3) N/A3) Y Y Y Y Y Y 4 N/A E 3.5 17,892 13 Total (A.1 + A.2)4) 3.5 23,583 175) B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non- eligible activities (B) 3.5 111,297 83 Total (A + B) 3.5 134,880 100 1) Turnover is the proportion of net turnover that is derived from products or services, which equals Electrolux total Net Sales. See the Consolidated statement of comprehensive income on page 68. 2) EU economic activity code. 3) Regulation for these areas is not yet released. 4) Eligible economic activities are those that have technical screen criteria to formally permit such activities to potentially being deemed as aligned economic activity within the current EU Taxonomy framework, i.e. sales of washing machines, washer dryers, tumble dryers, dish washers, refrigerators/freezers, ovens, hoods and air conditioners under own brand names on the EU Market. CapEx refers to Electrolux investments in assets used to manufacture these products regardless of where they are located. OpEx refers to expenses associated with maintaining the value of these assets. 5) Turnover eligibility in 2021 was 19%. 4 N/A E CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 63 CapEX Economic activities (1)1) A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) Manufacture of energy eﬃ cient equipment for buildings A.2 Taxonomy-Eligible but not environmentally sustain- able activities (not Taxono- my-aligned activities) CapEx of Taxonomy-eligible but not environmentally sus- tainable activities (not Taxon- omy-aligned activities) (A.2) Manufacture of energy eﬃ cient equipment for buildings Substantial contribution criteria (%) DNSH criteria (“Does Not Signiﬁ cantly Harm”) (Y/N) Absolute CapEX (3) (SEKm) Propor- tion of CapEX (4) Climate change mitiga- tion (5) Climate change adapta- tion (6) Code(s) (2) Water and marine resources (7) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Climate change mitiga- tion (5) Climate change adapta- tion (6) Water and marine resources (7) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Minimum safe- guards (17) Taxono- my-aligned proportion of CapEx, year N (18) Taxonomy aligned proportion of CapEx, year N-1 (19) Category (enabling activity) (20) Category (transi- tional activity) (21) 3.5 512 7 100 0 N/A N/A N/A N/A Y Y Y Y Y Y 7 N/A E 3.5 1,609 22 Total (A.1 + A.2)2) 3.5 2,120 29 B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy-non- eligible activities (B) 3.5 5,269 71 Total (A + B) 3.5 7,389 100 1) Capital expenditure (CapEx) are additions to tangible and intangible assets during the year. The total CapEx is reported in Note 12 and 13. 2) Eligible economic activities are those that have technical screen criteria to formally permit such activities to potentially being deemed as aligned economic activity within the current EU Taxonomy framework, i.e. sales of washing machines, washer dryers, tumble dryers, dish washers, refrigerators/freezers, ovens, hoods and air conditioners under own brand names on the EU Market. CapEx refers to Electrolux investments in assets used to manufacture these products regardless of where they are located. OpEx refers to expenses associated with maintaining the value of these assets. 7 N/A E CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 64 OpEx Economic activities (1)1) A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) Manufacture of energy eﬃ cient equipment for buildings A.2 Taxonomy-Eligible but not environmentally sustain- able activities (not Taxono- my-aligned activities) OpEx of Taxonomy-eligible but not environmentally sus- tainable activities (not Taxon- omy-aligned activities) (A.2) Manufacture of energy eﬃ cient equipment for buildings Code(s) (2) Absolute OpEx (3) (SEKm) Propor- tion of OpEx (4) Climate change mitiga- tion (5) Climate change adapta- tion (6) Water and marine resources (7) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Climate change mitiga- tion (5) Climate change adapta- tion (6) Water and marine resources (7) Circular economy (8) Pollution (9) Biodiver- sity and ecosys- tems (10) Minimum safe- guards (17) Taxonomy aligned proportion of OpEx, year N (18) Taxonomy aligned proportion of OpEx, year N-1 (19) Category (enabling activity) (20) Category (transi- tional activity) (21) Substantial contribution criteria (%) DNSH criteria (“Does Not Signiﬁ cantly Harm”) (Y/N) 3.5 281 5 100 0 N/A N/A N/A N/A Y Y Y Y Y Y 5 N/A E 3.5 1,005 18 Total (A.1 + A.2)2) 3.5 1,286 23 B. TAXONOMY-NON-ELIGIBLE ACTIVITIES OpEx of Taxonomy-non- eligible activities (B) 3.5 4,231 77 Total (A + B) 3.5 5,517 100 1) Operating expenditure (OpEx), in the context of the taxonomy and according to the regulation, is deﬁ ned as direct non-capitalized costs that relate to research and development (R&D), building renova- tion measures, short-term lease, maintenance and repair, as well as direct expenditure relating to the day-to-day servicing of assets, i.e. not the total operating expenses, but only expenses associated with maintaining the value of assets linked to eligible products. In this report, R&D and maintenance are included as the other areas deemed to be non-material. 2) Eligible economic activities are those that have technical screen criteria to formally permit such activities to potentially being deemed as aligned economic activity within the current EU Taxonomy framework, i.e. sales of washing machines, washer dryers, tumble dryers, dish washers, refrigerators/freezers, ovens, hoods and air conditioners under own brand names on the EU Market. CapEx refers to Electrolux investments in assets used to manufacture these products regardless of where they are located. OpEx refers to expenses associated with maintaining the value of these assets. 5 N/A E CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 65 Minimum safeguards Electrolux adheres to strict norms and strives to maintain eﬃ cient governance processes to ensure that all operations create long- term and sustainable value for shareholders and other stakeholders. This involves an eﬃ cient organizational structure, systems for internal control and risk management and transparent internal and external reporting. It is the assessment of Electrolux that it adheres to the Minimum safeguards.1) Certain Electrolux processes and procedures in respect of four core areas, which are relevant for adherence to the Minimum safe- guards, are further outlined below. It is assessed that adequate processes are in place in such areas, both to capture legal actions taken towards the company, its subsid- iaries and senior management and to prevent substantiated failures or wrongdoings in these areas and to undertake remedial actions, including to improve processes, to ensure that any such failures or wrongdoings are unlikely to be repeated.2) Human rights Electrolux conducts human rights impact assessments at both Group and local level, in line with the UN Guiding Principles on Business and Human Rights. For more information, please see section “Social, labor and human rights”, on page 60. Corruption Electrolux has zero tolerance for corruption and works continuously to raise awareness among employees to minimize the risk for corruption. Measures against corruption are included in the Group’s Anti-Corruption Policy, which all employees are required to follow. For more information, please see section “Anti-corruption”, on page 60. Taxation One important aspect of the Electrolux company purpose – Shape living for the better – is to act as a good corporate citizen and tax- payer wherever Electrolux operates. see the Corporate Governance Report, section “Electrolux as a taxpayer”, on page 22. For more information, please Fair competition The Group’s commitments, including fair competition, are speciﬁ ed in its Code of Conduct and Anti-Trust Policy, including supporting guidelines. Do no signiﬁ cant harm Climate mitigation activities will only be considered as aligned if they do not negatively impact the ﬁ ve “do no signiﬁ cant harm” criteria listed below. Climate adaptation The Electrolux Enterprise Risk Management (ERM) framework and related processes identify, mitigate, communicate and report risks that can signiﬁ cantly aﬀ ect the business – including climate change. Electrolux follows a risk mapping process for the collection and incorporation of risk information into decision making and gover- nance processes. The ERM includes climate-related risks in line with the Climate Risk Disclosure. Climate-related risks usually have a longer time-horizon than other ERM risks. Electrolux has assessed two diﬀ erent climate scenarios that result in various risks and oppor- tunities for Electrolux throughout its value chain. Read more in the Risk Management section, on page 44. Water and marine resources The company’s water management is based on the WWF Water Risk Filter, which helps identify which Electrolux factories are located in water scarce areas. Decisions around the company’s management targets is based on the tool. The Electrolux Green Spirit program shares water management best practice, monthly reporting on water performance indicators as well water mapping globally. Circular economy Electrolux has an important role to play in enabling people to live more circular lives through its products and solutions. Electrolux con- tributes to the circular economy by integrating recycled materials into its product platforms and by promoting circular business mod- els. The company also designs its products to optimize longevity and recyclability at their end-of-life. In operations, the Electrolux Zero Waste to Landﬁ ll program has the objective to ﬁ nd opportunities for material reuse and recycling, and at the same time decrease the amount of waste sent to landﬁ ll and/or incinerated without energy recovery. Electrolux protects people and the environment by man- aging chemicals carefully and continuing to replace those that cause concern. Pollution In the EU, the Group complies with all relevant regulations related to substances in products through the Electrolux Restricted Material List. The list includes all substances that are restricted and banned according to EU regulations. Approved exemptions of restricted substances are present in our products where there is no technical alternative currently available, as our products are essential to society. All European manufacturing sites have environmental permits they abide by to meet local environmental legislation requirements. This includes controlling pollution. Biodiversity and ecosystems All Electrolux European manufacturing sites are certiﬁ ed to the ISO 14001 environmental management system, which integrates biodi- versity considerations. The Electrolux Workplace Policy prohibits its operations from operating in protected areas. These manufacturing sites have environmental permits they abide by to meet local envi- ronmental legislation requirements. This includes protecting local biodiversity and ecosystems. 1) As deﬁ ned in Articles 3 and 18 of European Union Regulation (EU) 2020/852. 2) During 2022, one of Electrolux subsidiaries was found to have been in breach of local competition law, without further possibility to appeal. However, this matter originated from certain business undertakings that took place prior to 2010 and the reasons for this breach of local competi- tion laws and well as underlying circumstances were promptly remedied and local processes improved in ways so that a repetition of this breach is unlikely. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 66 Sustainability reporting The sustainability reporting section in the administration report has been developed to fulﬁ ll the requirements in the Swedish Annual Accounts Act and the EU Taxonomy Regulation (EU 2020/852). For more detailed information on Electrolux and sustainability, read the latest Sustainability Report prepared according to the GRI Standards at: www.electroluxgroup.com/sustainability Sustainability reporting and information The Electrolux sustainability routines and systems for information and communication aim to provide key stakeholders with accurate, relevant and timely information concerning the Group’s progress on its sustainability framework, For the Better 2030. The sustainability reporting section in the administration report has been developed to fulﬁ ll the requirements of the Swedish Annual Accounts Act. This report also highlights how the Group’s priorities reﬂ ect its commitment to the ten principles of the UN Global Com- pact. Unless otherwise indicated, sustainability disclosures include all operations that contributed to Group performance for the calen- dar year 2022. Sustainability information is shared regularly in the form of: • Electrolux Sustainability Report, including the United Nations Guiding Principles Reporting Framework • Electrolux Sustainability in Brief • Mandatory reporting regarding transparency in the supply chain • Press releases • Meetings with key stakeholders worldwide • Responses to questionnaires from investors and analysts • Annual submission to CDP for Climate and Water Reports, policies and press releases are available at www.electroluxgroup.com. 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 year 2022 on pages 47-48, 56–66 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 diﬀ erent 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 suﬃ cient basis for our opinion. Opinion A statutory Sustainability Report has been prepared. ELECTROLUX — A LEADER IN THE HOUSEHOLD DURABLES INDUSTRY The Group’s sustainability performance strengthens relations with investors and Electrolux is recognized in the household durables industry by Dow-Jones sustainability index and recieved a score of A– for climat & water from CDP. Additionally, Electrolux has received recognition from other indexes and organizations, including S&P Global, MSCI and ISS ESG. Stockholm, February 17, 2023 AB Electrolux (publ) Board of Directors Stockholm February 21, 2023 PricewaterhouseCoopers AB Peter Nyllinge Authorised Public Accountant Partner in Charge Helena Kaiser de Carolis Authorised Public Accountant This is a translation of the Swedish language original. In the event of any diﬀ erences between this translation and the Swedish language original, the latter shall prevail. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 67 Financial reports Consolidated statement of comprehensive income Consolidated balance sheet Changes in consolidated equity Consolidated cash ﬂ ow statement Parent Company income statement Parent Company balance sheet Parent Company change in equity Parent Company cash ﬂ ow statement 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 68 69 70 71 72 72 73 73 74 76 79 80 82 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 beneﬁ ts Note 23 Other provisions Note 24 Other liabilities Note 25 Contingent assets and liabilities Note 26 Acquired and divested operations expenses 82 Note 27 Employees and remuneration Note 7 Material proﬁ t or loss items in Note 28 Fees to auditors operating income Note 8 Leases Note 9 Financial income and ﬁ nancial expenses Note 10 Taxes Note 11 Other comprehensive income Note 12 Property, plant and equipment, owned Amounts are stated in MSEK unless otherwise stated. 82 82 84 84 85 86 Note 29 Shares and participations Note 30 Transactions with related parties Note 31 Proposed distribution of earnings Auditor’s report AB Electrolux (publ), 556009–4178. S:t Göransgatan 143, SE-105 45 Stockholm, Sweden. The registered oﬃ ce of the Board of Directors is in Stockholm, Sweden 87 88 89 89 89 90 96 96 97 97 101 102 102 102 103 106 107 108 108 109 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 68 Consolidated statement of comprehensive income 2022 2021 SEKm Note 2022 2021 SEKm Net sales Cost of goods sold Gross operating income Selling expenses Administrative expenses Other operating income and expenses Operating income Financial income Financial expenses Financial items, net Income after ﬁ nancial items Taxes Income for the period Items that will not be reclassiﬁ ed to income for the period: Remeasurement of provisions for post–employment beneﬁ ts Income tax relating to items that will not be reclassiﬁ ed Items that may be reclassiﬁ ed subsequently to income for the period: Cash ﬂ ow hedges Exchange–rate diﬀ erences on translation of foreign operations Income tax relating to items that may be reclassiﬁ ed Other comprehensive income, net of tax Total comprehensive income for the period Note 3, 4 5, 7 134,880 125,631 Income for the period attributable to: –117,177 –101,647 Equity holders of the Parent Company 17,703 23,984 Non–controlling interests Total 5, 7 5, 7 –12,997 –5,752 6, 7, 29 3, 8 9 9 10 22 11, 18 11 11 830 –215 88 –1,545 –1,457 –1,672 352 –1,320 1,614 –411 1,204 39 2,643 1 2,684 3,887 2,568 –11,835 –4,972 –376 6,801 Total comprehensive income for the period attributable to: Equity holders of the Parent Company Non–controlling interests 44 Total Earnings per share For income attributable to the equity holders of the Parent Company: Basic, SEK Diluted, SEK Average number of shares1) Basic, million Diluted, million 1) Average numbers of shares excluding shares held by Electrolux. –589 –546 6,255 –1,577 4,678 2,746 –584 2,161 –35 1,284 9 1,258 3,419 8,097 –1,320 4,678 0 0 –1,320 4,678 2,567 8,096 0 0 2,568 8,097 –4.81 –4.75 16.31 16.21 274.7 278.0 286.9 288.5 20 20 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 69 Consolidated balance sheet SEKm ASSETS Non-current assets Property, plant and equipment, owned Property, plant and equipment, right-of-use 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 Note December 31, 2022 December 31, 2021 SEKm Note December 31, 2022 December 31, 2021 12 8 13 13 29 10 18 22 14 15 17, 18 18 16 18 18 29,876 3,906 7,081 5,223 24 7,672 259 2,164 904 57,108 24,374 21,487 1,208 99 5,098 168 17,559 69,994 127,102 25,422 2,771 6,690 4,000 76 5,746 65 1,732 634 47,136 20,478 23,110 959 204 4,632 165 10,923 60,471 107,607 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 Long-term lease liabilities Deferred tax liabilities Provisions for post-employment beneﬁ ts Other provisions Total non-current liabilities Current liabilities Accounts payable Tax liabilities Other liabilities Short-term borrowings Short-term lease liabilities Derivatives Other provisions Total current liabilities Total liabilities Total equity and liabilities 20 20 20 20 18 8 10 22 23 18 24 18 8 18 23 1,545 2,905 –651 12,644 16,443 7 16,449 28,738 3,210 731 1,919 4,655 39,253 38,357 1,453 17,543 8,377 1,054 578 4,037 71,400 110,653 127,102 1,545 2,905 –3,335 17,489 18,604 6 18,610 10,205 2,173 476 2,623 4,664 20,142 38,182 1,704 19,745 5,563 882 75 2,704 68,854 88,996 107,607 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 70 Changes in consolidated equity SEKm Opening balance, January 1, 2021 Income for the period Cash ﬂ ow hedges Exchange diﬀ erences on translation of foreign operations Remeasurement of provisions for post-employment beneﬁ ts Income tax relating to other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the period Share-based payments Dividend Bonus issue Redemption of shares Repurchase of shares Acquisition of non-controlling interest Total transactions with equity holders Closing balance, December 31, 2021 Income for the period Cash ﬂ ow hedges Exchange diﬀ erences on translation of foreign operations Remeasurement of provisions for post-employment beneﬁ ts Income tax relating to other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the period Share-based payments Dividend Bonus issue Cancellation of shares Repurchase of shares Acquisition of non-controlling interest Total transactions with equity holders Closing balance, December 31, 2022 For more information on share capital, number of shares and earnings per share, see Note 20. — — — — — — — — — 772 –772 — — — 1,545 — — — — — — — — — 129 –129 — — — 1,545 Share capital Other paid-in capital Other reserves Retained earnings Total Non-controling interests Total equity Attributable to equity holders of the Parent Company 1,545 2,905 — — — — — — — — — — — — — — –4,593 — –35 1,284 — 9 1,258 1,258 — — — — — — — 2,905 –3,335 — — — — — — — — — — — — — — — 39 2,644 — 1 2,684 2,684 — — — — — — — 2,905 –651 18,846 4,678 — — 2,746 –584 2,161 6,839 –116 –2,299 –772 –4,113 –894 –1 –8,195 17,489 –1,320 — — 1,614 –411 1,203 –117 –72 –2,521 –129 129 –2,138 2 –4,729 12,644 18,702 4,678 –35 1,284 2,746 –576 3,419 8,096 –116 –2,299 — –4,886 –894 –1 –8,195 18,604 –1,320 39 2,644 1,614 –411 3,887 2,567 –72 –2,521 — — –2,138 2 –4,729 16,443 7 0 — –0 — — –0 0 — –0 — — — –1 –1 6 0 — –0 — — 0 0 — 0 — — — 0 0 7 18,709 4,678 –35 1,284 2,746 –576 3,419 8,097 –116 –2,299 — –4,886 –894 –1 –8,196 18,610 –1,320 39 2,644 1,614 –411 3,887 2,568 –72 –2,521 — — –2,138 2 –4,729 16,449 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 71 Consolidated cash ﬂ ow statement SEKm Operations Operating income Depreciation and amortization Other non-cash items Financial items paid, net Taxes paid Cash ﬂ ow 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 assets, liabilities and provisions Cash ﬂ ow from change in operating assets and liabilities Cash ﬂ ow 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 and other intangibles Other Cash ﬂ ow from investments Note 2022 2021 SEKm Cash ﬂ ow from operations and investments 8, 12, 13 9 –215 5,390 1,670 –1,238 –1,514 6,801 4,489 895 –470 Financing Change in short-term investments Change in short-term borrowings New long-term borrowings –1,480 Amortization of long-term borrowings Payment of lease liabilities 4,093 10,235 Dividend Redemption of shares Repurchase of shares Share-based payments Cash ﬂ ow from ﬁ nancing Total cash ﬂ ow Note 18 18 2022 –9,236 –4 5,355 22,244 –6,158 –960 –2,521 — –2,138 –217 15,601 6,365 2021 244 8 –291 1 –284 –880 –2,299 –4,886 –894 –259 –9,785 –9,541 Cash and cash equivalents at beginning of period Exchange-rate diﬀ erences referring to cash and cash equivalents Cash and cash equivalents at end of period 10,923 20,196 271 267 17,559 10,923 –1,556 4,074 –4,026 –4,859 –6,367 –2,274 –6,401 –2,253 5,372 106 –3,175 7,059 26 26 12 13 13 — –1,006 –367 — –5,649 –4,847 –740 –1,001 795 –578 –618 233 –6,962 –6,815 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 72 Parent Company Parent Company income statement SEKm Net sales Cost of goods sold Gross operating income Selling expenses Administrative expenses Other operating expenses Operating income Financial income Financial expenses Financial items, net Income after ﬁ nancial items Appropriations Income before taxes Taxes Income for the period Total comprehensive income for the period SEKm Income for the period Other comprehensive income Exchange rate diﬀ erences Cash ﬂ ow hedges Income tax relating to other comprehensive income Other comprehensive income, net of tax Note 2022 2021 4 42,063 43,805 –37,873 –36,717 7,088 –3,746 –1,992 –75 1,275 3,717 –457 3,260 4,535 –20 4,515 –405 4,110 2021 4,110 6 9 9 21 10 4,190 –3,320 –2,470 –1,860 –3,460 3,920 –1,073 2,847 –613 –60 –673 437 –236 2022 –236 13 5 –1 17 Total comprehensive income for the period –219 4,133 Derivatives with subsidiaries The Parent Company comprises the functions of the Group’s head oﬃ ce in Sweden, as well as ﬁ ve companies operating on a commis- sion basis for AB Electrolux. Net sales for the Parent Company, AB Electrolux, during 2022 amounted to SEK 42,063m (43,805) of which SEK 34,865m (36,581) referred to sales to Group companies and SEK 7,198m (7,224) to external customers. Income after ﬁ nancial items was SEK -613m (4,535), including dividends from subsidiaries amounting to SEK 3,167m (3,434). Income for the period amounted to SEK -236m (4,110). Derivatives Other receivables Prepaid expenses and accrued income Cash and bank Total current assets Total assets Income tax related to group contributions is reported in the income statement. Income tax related to cash ﬂ ow hedges is reported in other comprehensive income. Capital expenditures in tangible and intangible assets amounted to SEK 1,222m (860). Liquid funds at the end of the period amounted to SEK 12,899m, compared to SEK 6,705m at the start of the year. Undistributed earnings in the Parent Company at the end of the period amounted to SEK 9,353m, compared to SEK 15,002m at the start of the year. Dividend payments to shareholders for 2021 amounted to SEK 2,521m. For information on the number of employees, salaries and remuneration, see Note 27. For information on share- holdings and participations, see Note 29. Parent Company balance sheet SEKm ASSETS Non–current assets Intangible assets Property, plant and equipment Deferred tax assets Financial assets Total non–current assets 21 2 0 23 Current assets Inventories Receivables from subsidiaries Trade receivables Note December 31, 2022 December 31, 2021 13 12 14 15 17 2,923 267 824 37,175 41,189 3,688 17,622 677 273 96 270 494 12,899 36,019 77,208 2,201 273 309 37,144 39,927 3,376 12,531 1,256 83 179 364 490 6,705 24,984 64,911 SEKm Note December 31, 2022 December 31, 2021 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 20 21 22 23 18 18 Short–term borrowings 18 Derivatives with subsidiaries Derivatives Accrued expenses and prepaid income Total current liabilities Total liabilities and provisions Total liabilities, provisions and equity 24 1,545 3,017 2,251 6,813 9,589 -236 9,353 16,166 668 434 1,492 1,926 75 25,456 3,240 28,771 19,957 2,153 483 5,061 174 482 1,367 29,677 60,374 77,208 1,545 3,017 1,552 6,114 10,892 4,110 15,002 21,116 586 424 1,072 1,496 75 9,774 365 10,214 22,410 2,318 509 4,158 104 49 1,951 31,499 43,209 64,911 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 73 Parent Company change in equity Restricted equity Non-restricted equity SEKm Share capital Statutory reserve Development reserve Fair value reserve Opening balance, January 1, 2021 1,545 3,017 1,162 Income for the period Exchange rate diﬀ erences Cash ﬂ ow hedges Income tax relating to other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the period Share-based payments Development reserve Dividend Bonus issue Redemption of shares Repurchase of shares Total transactions with equity holders Closing balance, December 31, 2021 Income for the period Exchange rate diﬀ erences Cash ﬂ ow hedges Income tax relating to other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the period Share-based payments Development reserve Dividend Bonus issue Cancellation of shares Repurchase of shares Total transactions with equity holders Closing balance, December 31, 2022 . — — — — — — — — — 772 –772 — — — — — — — — — — — — — — — 1,545 3,017 — — — — — — — — — 129 –129 — — 1,545 — — — — — — — — — — — — — 3,017 — — — — — — — 389 — — — — 389 1,551 — — — — — — — 700 — — — — 700 2,251 –15 — 21 2 0 23 23 — — — — — — — 8 — 13 5 –1 17 17 — — — — — — — 25 Retained earnings 19,468 4,110 Total equity 25,177 4,110 — — — — 4,110 –116 –389 –2,299 –772 –4,113 –894 –8,583 14,995 21 2 0 23 4,133 –116 0 –2,299 0 –4,886 –894 –8,194 21,116 –236 –236 — — — –236 –72 –700 –2,521 –129 129 –2,138 –5,431 9,328 13 5 –1 17 –219 –72 0 –2,521 0 0 –2,138 –4,731 16,166 Parent Company cash ﬂ ow statement SEKm Operations Income after ﬁ nancial items Depreciation and amortization Capital gain/loss included in operating income Share-based compensation Group contributions Taxes paid Cash ﬂ ow 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 ﬂ ow from operating assets and liabilities Cash ﬂ ow from operations Investments Change in shares and participations Capital expenditure in intangible assets Capital expenditure in property, plant and equipment Other Cash ﬂ ow from investments Total cash ﬂ ow from operations and investments Financing Change in short-term borrowings Change in intra-group borrowings New long-term borrowings Amortization of long-term borrowings Dividend Redemption of shares Repurchase of shares Cash ﬂ ow from ﬁ nancing Total cash ﬂ ow Cash and cash equivalents at beginning of period Exchange-rate diﬀ erences referring to cash and cash equivalents Cash and cash equivalents at end of period 2022 2021 –613 549 1,821 –72 22 –79 4,535 437 104 –116 19 –169 1,628 4,811 –312 579 –6,317 173 88 –5,789 –4,161 –874 –102 5,509 –265 472 4,740 9,551 –1,535 –4,536 –730 –1,119 –103 –360 –3,117 –130 –1,632 –7,028 –7,278 2,523 4,885 –1,342 22,255 –7,680 –2,521 94 –2,799 0 –104 –2,299 — –4,886 –2,138 –894 13,459 –10,888 –8,365 15,049 6,181 6,705 13 12,899 21 6,705 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 74 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 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 ﬁ nancial statements. Accounting principles for speciﬁ c accounting areas and individual line items are described in the related notes. For additional information on accounting principles, please contact Electrolux Investor Relations. Basis of preparation The consolidated ﬁ nancial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). The consolidated ﬁ nancial statements have been prepared under the historical cost convention, except for ﬁ nancial instruments at fair value (including derivative ﬁ nancial instruments). 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 legislation, as deﬁ ned 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 information 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 rounding diﬀ erences. The aim is for each line item to agree with its source and therefore there may be rounding diﬀ erences aﬀ ecting the total when adding up the presented line items. The Parent Company applies the same accounting principles as the Group, except in the cases speciﬁ ed in the section entitled ‘Parent Company accounting principles’. The ﬁ nancial statements were authorized for issue by the Board of Directors on February 17, 2023. The balance sheets and income statements are subject to approval by the Annual General Meeting of shareholders on March 29, 2023. Principles applied for consolidation The consolidated ﬁ nancial 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 consider- ation arrangement. Costs directly attributable to the acquisition eﬀ ort 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 identiﬁ able net assets acquired is recorded as goodwill. If the fair value of the acquired net assets exceeds the cost of the business combination, the identiﬁ cation 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 ﬁ nancial statements for the Group include the ﬁ nancial statements of the Parent Company and its directly and indirectly owned subsidiaries after: • elimination of intra-group transactions, balances and unrealized intra-group proﬁ ts, and • carrying values, depreciation and amortization of acquired surplus values. Deﬁ nition of Group companies The consolidated ﬁ nancial statements include AB Electrolux and all companies 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, any retained interest in the entity is remeasured at its fair value, with the change in carrying amount recognized in proﬁ t or loss. At year-end, the Group consisted of 133 (136) companies with 189 (192) operating units. 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. Associated companies Associates are all companies over which the Group has signiﬁ cant inﬂ uence but not control, generally accompanying a shareholding of between 20 and 50% of the voting rights. Investments in associ- ated 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 measured at year-end exchange rates and any exchange-rate diﬀ erences are included in income for the period, except when deferred in other comprehensive income for the eﬀ ective part of qualifying net investment hedges. The consolidated ﬁ nancial 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 average rates for the year. Translation diﬀ erences thus arising are included in other comprehensive income. Exchange rates SEK 2022 2021 Exchange rate Average End of period Average End of period ARS AUD BRL CAD CHF CLP CNY EUR GBP HUF MXN RUB THB USD 0.0785 0.0589 0.0904 0.0880 7.00 1.95 7.73 10.59 0.0116 1.50 10.63 12.45 0.0272 0.5028 0.1495 0.2881 10.09 7.09 2.00 7.70 11.29 0.0121 1.51 11.12 12.54 0.0277 0.5333 0.1426 0.3019 10.43 6.42 1.59 6.82 9.40 6.57 1.62 7.07 9.88 0.0113 0.0107 1.33 10.15 11.78 0.0283 0.4216 0.1159 0.2685 8.57 1.42 10.24 12.21 0.0277 0.4407 0.1207 0.2705 9.04 New or amended accounting standards applied in 2022 The following amended accounting standards were applicable from January 1, 2022: Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16. Onerous Contracts – Cost of Fulﬁ lling a Contract – Amendments to IAS 37. Annual Impovements IFRS Standards 2018–2020, and Reference to the Conceptual Frame- work – Amendments to IFRS 3. Deferred Tax related to Assets and Liabilities arising from a Single Transaction – amendments to IAS 12, CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 75 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated and Disclosure of accounting Policies – Amendements to IAS 1 and IFRS Practice Statement 2. The amendments listed above did not have any material impact on Electrolux ﬁ nancial statements. The carrying amount of property, plant and equipment at year-end 2022 amounted to SEK 29,876m. The carrying amount for goodwill at year-end 2022 amounted to SEK 7,081m. New or amended accounting standards to be applied after 2022 Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for December 31, 2022, reporting periods and have not been early adopted by Electrolux. These Standards, amendments of interpretations are not expected to have a material impact on Electrolux in the current or future reporting periods and on foreseeble future transactions. 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 ﬁ nancial statements in conformity with IFRS. Actual results may diﬀ er from these estimates under diﬀ erent assumptions or conditions. Below, Electrolux has summarized the accounting policies that require more subjective judgement by management in making assumptions or estimates regarding the eﬀ ects of matters that are inherently uncertain. Asset impairment and useful lives Non-current assets, including goodwill, are evaluated for impair- ment yearly or whenever events or changes in circumstances indi- cate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its recoverable amount, being the higher of fair value less costs of disposal and value in use. Impairment charges are recorded when the information shows that the carrying amount of an asset is not recoverable. In many cases, market value is not available and the fair value has been estimated by using the discounted cash ﬂ ow method based on expected future results. Diﬀ erences in the estimation of expected future results and the discount rates used may result in diﬀ erent asset valuations. The yearly impairment testing of goodwill and other intangible assets with indeﬁ nite useful lives, including sensitivity analyses performed, has not indicated any impairment. See Note 13 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, 15 years for land improvements and between 3 and 15 years for machinery, technical installations and other equipment. Manage- ment regularly reassesses the useful lives of all signiﬁ cant assets. Deferred taxes In the preparation of the ﬁ nancial 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 diﬀ er- ences. Deferred tax assets relating mainly to tax loss carry-forwards, energy-tax credits and temporary diﬀ erences are recognized in those cases when future taxable income is expected to permit the recovery of those tax assets. Changes in assumptions in the projec- tion of future taxable income as well as changes in tax rates could result in signiﬁ cant diﬀ erences in the valuation of deferred taxes. As of December 31, 2022, Electrolux had a net amount of SEK 7,672m recognized as deferred tax assets in excess of deferred tax liabilities. As of December 31, 2022, the Group had tax loss carry-forwards and other deductible temporary diﬀ erences of SEK 4,401m, which have not been included in the computation of deferred tax assets. Current taxes Electrolux estimates regarding uncertain outcome of tax audits and tax litigations are based on management’s best estimates and recorded in the balance sheet. These estimates might diﬀ er from the actual outcome and the timing of the potential eﬀ ect on Electrolux cash ﬂ ow 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 and calculation of loss allowance Receivables are reported net of provision for expected credit losses. The net value reﬂ ects 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 ﬁ nancial situation of a signiﬁ cant customer could lead to signiﬁ cantly diﬀ erent valuations. When measuring expected credit loss the Group uses reasonable and supportable forward looking information, which is based on assumptions regarding the future movement of diﬀ erent economic drivers and how these drivers will aﬀ ect each other. A sensitivity analysis is presented in Note 17. At year-end 2022, trade receivables, net of provisions for expected credit losses, amounted to SEK 21,487m. The total provision for expected credit losses at year-end 2022 was SEK 493m. Post-employment beneﬁ ts Electrolux sponsors a number of deﬁ ned contribution and deﬁ ned beneﬁ t pension plans for its employees. The pension calculations, referring to deﬁ ned beneﬁ t plans, are based on actuarial assump- tions regarding discount rates, mortality rates, as well as future salary and pension increases. The calculation of the pension obligation also depends on the discount rate. Changes in assumptions directly aﬀ ect the deﬁ ned beneﬁ t obligation, service cost, interest income and expense. The discount rate used for the calculation of expenses during 2022 was 3.67% in average. Sensitivities for the main assump- tions are presented in Note 22. 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 outcome of similar historical events in previous plans are used as a guideline to minimize these uncer- tainties. The total provision for restructuring at year-end 2022 was SEK 2,222m. 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, 2022, Electrolux had a provision for warranty commit- ments amounting to SEK 2,416m. 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 con- suming and may disrupt normal operations. In addition, the outcome of complicated disputes is diﬃ cult to foresee. It cannot be ruled out that a disadvantageous outcome of a dispute may prove to have a material adverse eﬀ ect on the Group’s earnings and ﬁ nancial position. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 76 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Parent Company accounting principles The Parent Company has prepared its Annual Report in compliance with Swedish Annual Accounts Act (1995:1554) and recommendation RFR2, Accounting for Legal Entities of the Swedish Financial Reporting Board. RFR2 prescribes that the Parent Company in the Annual Report of a legal entity shall apply all International Financial Reporting Standards and interpretations 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 that shall or can be made. Shares in subsidiaries Holdings in subsidiaries are recognized in the Parent Company ﬁ nancial statements according to the cost method of accounting. The value of subsidiaries 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 Parent Company’s accounting currency according to the Swedish Annual Accounts Act. One of the companies operating on a commis- sion basis for AB Electrolux has euro as its functional currency. The balance sheet of the commissioner company has been translated into SEK at year-end rate. The income statement has been translated at the average rate for the year. Translation diﬀ erences thus arising have been included in Other comprehensive income. Anticipated dividends Dividends from subsidiaries are recognized in the income state- ment after decision by the annual general meeting in the respective subsidiary. Anticipated 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 ﬁ nancial reports. Taxes The Parent Company’s ﬁ nancial statements recognize untaxed reserves including deferred tax. The consolidated ﬁ nancial state- ments, 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. Share- holder contributions provided by the Parent Company are recog- nized in shares and participations which are subject to impairment tests as indicated above. Pensions The Parent Company reports pensions in the ﬁ nancial statements in accordance with the exemption in RFR2. According to RFR2, IAS 19 shall be adopted regarding supplementary disclosures when applicable. Intangible assets The Parent Company amortizes trademarks in accordance with RFR2. 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. Development reserve The Parent Company’s ﬁ nancial statements recognize a develop- ment reserve in compliance with the Swedish Annual Accounts Act (1995:1554). An amount equal to the period’s total expenditure of own developed intangible assets has been transferred from unre- stricted equity to the development reserve within restricted equity. Appropriations and untaxed reserves The Parent Company reports additional ﬁ scal depreciation, required by Swedish tax law, as appropriations in the income statement. In the balance sheet, these are included in untaxed reserves. Leases All lease agreements where the Parent Company is a lessee are reported in accordance with the exemption to IFRS 16 in RFR2, i.e. right-of-use assets and lease liabilities are not reported in the balance sheet. The leasing fee is recognized as an expense on a straight-line basis over the lease period. Critical judgements and uncertainties Valuation of shares in subsidiaries is an area involving judgement and/or uncertainties for the Parent Company, in addition to the applicable critical accounting policies and key sources of estima- tion presented for the Group. 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 RFR2. Note 2 Financial risk management Financial risk management The Group is exposed to a number of risks from liquid funds, trade receivables, customer-ﬁ nancing receivables, payables, borrowings, commodities and foreign exchange. The risks include: • Liquidity risk from the Group’s liquidity requirements • Interest-rate risk on liquid funds and borrowings • Financing risk in relation to the Group’s capital requirements • Foreign-exchange risk on commercial ﬂ ows and net investments in foreign subsidiaries • Commodity-price risk aﬀ ecting the expenditure on raw materials and components; and • Credit risk relating to ﬁ nancial and commercial activities Comparative information regarding risks described and quantiﬁ ed in this note are for total Group, including discontinued operations, unless otherwise stated. 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 ﬁ nancial 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 ﬁ nancial markets, monitor and manage the ﬁ nancial risks through internal risk reports. The Group seeks to minimize the eﬀ ects of these risks by using derivatives to hedge the exposures. The Group’s Financial Policy governs the use of ﬁ nancial derivatives and provide principles for the management of foreign exchange risk, interest rate risk, credit risk, the use of ﬁ nancial derivatives and non-derivative ﬁ nancial instruments, and the investment of excess liquidity. The internal auditors review on a continuous basis compliance with policies and exposure limits. Policy compliance is reported on a monthly basis by Group Treasury to the Board of Directors. Liquidity risk Liquidity risk is deﬁ ned as the risk of the Group not being able to meet its payment obligations due to lack of liquidity or due to the inability to convert assets into liquidity without incurring a loss. Liquid funds as deﬁ ned by the Group consist of cash and cash equivalents, short-term investments, ﬁ nancial derivative assets, prepaid interest expenses and accrued interest income. Electrolux Financial Policy stipulates that the level of liquid funds including unutilized committed credit facilities shall correspond to at least 2.5% of annualized net sales, at year-end 2022 this level was 24.9% (24.4). In addition, net liquid funds deﬁ ned as liquid funds less short-term CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 77 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated borrowings shall exceed zero, taking into account ﬂ uctuations arising from acquisitions, divestments, and seasonal variations. At year-end 2022 the Group had net liquid funds of SEK 8,724m (5,560), well above target. Liquid funds shall be deposited in bank accounts or invested in instruments with high liquidity and issued by creditworthy issuers. See separate section “Credit risk in ﬁ nancial activities” within this note. The liquidity risk is considered low at the end of 2022 given the size of liquid funds available. Interest-rate risk on liquid funds and borrowings Interest-rate risk refers to the adverse eﬀ ects of changes in interest rates on the Group’s income. The main factors determining this risk include the interest-ﬁ xing period. Interest-rate risk in liquid funds Liquidity is either deposited in bank accounts or invested in instru- ments, normally with maturities between 0 and 3 months. A down- ward shift in the yield curves of one percentage point would reduce the Group’s interest income by approximately SEK 171m (108). For more information, see Note 18. Interest-rate risk in borrowings The debt ﬁ nancing of the Group is managed by Group Treasury in order to ensure eﬃ ciency 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 ﬁ nancing is also undertaken locally in subsidiaries where there are capital restrictions. The Group’s borrowings contain no ﬁ nancial covenants that can trigger premature cancellation of the loans. For more information, see Note 18. Group Treasury manages the long-term loan portfolio to keep the average interest-ﬁ xing period between 0 and 3 years. Derivatives, such as interest-rate swap agreements, are used to manage the interest-rate risk by changing the interest from ﬁ xed to ﬂ oating or vice versa. For those derivatives Electrolux practice hedge accounting, which has aﬀ ected other comprehensive income by SEK 5m (–2) during 2022. On the basis of 2022 long-term interest-bearing borrowings with an average interest ﬁ xing period of 2.3 years (1.2), a one percentage point shift in interest rates would impact the Group’s interest expenses by approximately SEK +/–162m (53) and the other comprehensive income by approximately SEK +/-1m (2). This calculation is based on a parallel shift of all yield curves simultaneously by one percentage point. Electrolux acknowledges that the calculation is an approxima- tion and does not take into consideration the fact that the interest rates on diﬀ erent maturities and diﬀ erent currencies might change diﬀ erently. The Group’s exposure to the reform of IBOR-rates is limited. At year- end 2022, the Group had one ﬂ oating rate loan denominated in USD maturing after the indicated USD LIBOR cessation date, see Note 18. Capital structure and credit rating The Group deﬁ nes its capital as equity stated in the balance sheet including non-controlling interests. On December 31, 2022, the Group’s capital amounted to SEK 16,449m (18,610). The Group’s objective is to have a capital structure resulting in an eﬃ cient weighted cost of capital and suﬃ cient credit worthiness where oper- ating needs and the needs for potential acquisitions are considered. To achieve and keep an eﬃ cient 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 2022, S&P Global Ratings conﬁ rmed the Group’s rating as shown in the table below. Rating Long-term debt Outlook Short-term debt Short-term debt, Nordic S&P Global Ratings A– Negative A–2 K–1 When monitoring the capital structure, the Group uses diﬀ erent key ﬁ gures, which are consistent with methodologies used by rating agencies and banks. The Group manages the capital structure and makes adjustments to adapt to changes in economic conditions. In order to maintain or adjust the capital structure, the Electrolux Board of Directors may propose to adjust dividends paid to sharehold- ers, return capital to shareholders, buy back own shares, issue new shares, or sell assets to reduce debt. Financing risk Financing risk refers to the risk that ﬁ nancing of the Group’s capital requirements and reﬁ nancing of existing borrowings could become more diﬃ cult 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 ﬁ nancial 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 even spread of maturities. The average time to maturity shall be at least 2 years and a maximum of SEK 5,000m of the long-term borrowings may mature during a 12-month period. During 2022, the Board of Directors approved exceptions from these targets in order to ensure adequate long-term funding during the global downturn in the economy. Foreign exchange risk Foreign exchange risk refers to the adverse eﬀ ects of changes in foreign exchange-rates on the Group’s income and equity. In order to manage such eﬀ ects, the Group hedges these risks within the framework of the Financial Policy. Electrolux uses external loans denominated in foreign currencies as well as various derivatives to facilitate internal lending and to manage the foreign exchange exposure for the Group. The Group’s overall currency exposure is managed centrally. Transaction exposure from commercial ﬂ ows The Financial Policy stipulates to what extent commercial ﬂ ows are to be hedged. Hedging with currency derivatives is, in most cases, applied on invoiced ﬂ ows. This means that currency exposures from forecasted ﬂ ows 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 ﬂ ows. For those derivatives Electrolux practice hedge accounting, which has aﬀ ected other comprehensive income by SEK 34 m (-37) during 2022. Group subsidiaries cover their risks in commercial currency ﬂ ows 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 eﬀ ects 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 compo- nents 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 signiﬁ cant netting of the transaction exposures. For additional information on expo- sures and hedging, see Note 18. Translation exposure from consolidation of entities outside Sweden Changes in exchange-rates also aﬀ ect the Group’s income in con- nection 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 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 78 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Australian dollar, the Canadian dollar and the Brazilian real. These currencies represent the majority of the exposures of the Group, but are largely oﬀ setting each other as diﬀ erent currencies represent net inﬂ ows and outﬂ ows. A change up or down by 10% in the value of each currency against the Swedish krona would aﬀ ect the Group’s proﬁ t and loss for one year by approximately SEK +/– 320m (730), as a static calculation. The model assumes the distribution of earn- ings and costs eﬀ ective at year-end 2022 and does not include any dynamic eﬀ ects, such as changes in competitiveness or consumer behavior arising from such changes in exchange rates. Sensitivity analysis of major currencies Risk Currency AUD/SEK BRL/SEK GBP/SEK CAD/SEK CHF/SEK PLN/SEK THB/SEK CNY/SEK EUR/SEK USD/SEK Change Proﬁ t or loss impact 2022 Proﬁ t or loss impact 2021 –10% –10% –10% –10% –10% –10% –10% –10% –10% –10% –457 –378 –279 –442 –330 –221 132 169 752 1 881 –388 –371 –303 –305 –238 –132 228 236 324 1,070 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 diﬀ erence 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 aﬀ ected other comprehensive income by SEK 0m (0) during 2022. There were no outstanding net investment hedges at year-end 2022. A change up or down by 10% in the value of each currency against the Swedish krona would aﬀ ect the net investment of the Group by approximately SEK +/– 3,197m (3,292), as a static calculation at year-end 2022. 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 ﬂ uctuations 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 exposure, which refers to pure commodity exposures, and indirect commodity exposure, which is deﬁ ned as exposure arising from only part of a component. Com- modity-price risk is mainly managed through contracts with the suppliers. A change in price up or down by 10% in steel would aﬀ ect the Group’s proﬁ t or loss with approximately SEK +/– 1,300m (900) and in plastics with approximately SEK +/– 600m (500), based on volumes in 2022. Credit risk Credit risk in ﬁ nancial 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 counter- parties. A counterpart list has been established, which speciﬁ es the maximum allowable 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. S&P Global Ratings 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 counterparts 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 credit risk from external ﬁ nancial activities is not material. Impact from netting agreements on gross exposure from derivatives December 31, 2022 Interest and currency risk derivatives reported as assets Interest and currency risk derivatives reported as liabilities December 31, 2021 Interest and currency risk derivatives reported as assets Interest and currency risk derivatives reported as liabilities Impact of netting agree- ments Gross amount Net position Change 99 –91 7 92% 578 –91 486 16% 204 –49 155 24% 75 –49 26 66% Group Treasury manage a majority of the subsidiary ﬁ nancing through internal loans from the Parent Company, there is a material credit risk originating from internal loans. The Parent Company cal- culates expected credit losses (ECL) from lending to its subsidiaries. The model deﬁ nes if it is the entity, or the country where the entity is situated, that accounts for the primary source of credit risk. The credit risk is translated into a probability of default factor based on S&P Global Ratings historic values. The lending exposure is multiplied by the probability of default and a loss given default to result in the ECL of the subsidiary. The model allows for a management overlay to adjust the ECL provision, if management possesses information that qualiﬁ es for such an adjustment. Management overlay takes forward looking factors into consideration. The opening expected credit loss provision in the Parent Company for 2022 amounted to SEK 74m (128) primarily originating from inter- nal loans to Argentina. The closing expected credit loss provision in the Parent Company amounted to SEK 69m (74). ECL provision for loans made to companies with a minority shareholding amounted to SEK 6m (7). To reduce the settlement risk in foreign exchange transactions done with banks, Group Treasury uses Continuous Linked Settlement (CLS). CLS eliminates temporary 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 and independent stores. Sales are made on the basis of normal delivery and payment terms. The Electrolux Group Credit Directive deﬁ nes how credit management is to be performed in the Electrolux Group to achieve competitive CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 79 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated and professionally performed credit sales, limited bad debts, and improved cash ﬂ ow and optimized proﬁ t. On a more detailed level, it also provides a minimum level for customer and credit risk assess- ment, clariﬁ cation 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. 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 incon- sistencies 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 diﬀ erent parts: Customer and Market Infor- mation; Warning Signals; and a Credit Risk Rating (CR2). Through CR2 the customers are classiﬁ ed 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. Furthermore, 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 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 9.6% (9.9) of total trade receiv- ables at any time during the year. For more information, see Note 17. The Group deﬁ nes default as customers where signiﬁ cant ﬁ nancial diﬃ culties have been identiﬁ ed , or when the receivable is more than 90 days past due, whichever occurs ﬁ rst. A receivable is written oﬀ when there are indications of no realistic prospect of recovery or at a 360 days overdue whichever occurs ﬁ rst. There is a limited use of enforcement activities. Note 3 Segment information Reportable segments — Business areas The Group’s operations are divided into four reportable segments: Europe; North America; Latin America and Asia-Paciﬁ c, Middle East and Africa. All the segments are producing appliances for the consumer market and products comprise mainly of refrigerators, freezers, cookers, dryers, washing machines, dishwashers, microwave ovens, air condi- tioners, vacuum cleaners and other small appliances. The segments are regularly reviewed by the President and CEO, the Group’s chief operating decision maker. The segments are responsible for the operating results and the net assets used in their businesses, whereas ﬁ nancial 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. Operating costs not included in the segments are shown under Group Common costs, which mainly are costs related to group management activities typically required to run the Electrolux Group. Sales between segments are made on market conditions with arm’s-length principles. Net sales Operating income Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Group Common costs Total 2022 2021 46,573 49,384 2022 683 47,021 40,468 –2,394 24,303 19,958 1,058 16,984 15,820 134,880 125,631 — — 134,880 125,631 Financial items, net Income after ﬁ nancial items — — — — Inter-segment sales exist with the following split: Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Eliminations 2021 4,002 688 1,336 1,511 7,538 –737 6,801 –546 6,255 2021 1,644 363 2 1,638 3,647 1,308 655 –870 –215 –1,457 –1,672 2022 1,904 500 0 1,917 4,321 The segments are responsible for the management of the opera- tional assets and their performance is measured at the same level, while ﬁ nancing is managed 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 2022 2021 2022 2021 2022 2021 32,041 30,165 30,229 26,890 14,830 18,141 26,273 28,416 18,375 17,513 9,417 8,937 1,749 5,768 11,854 9,376 8,724 5,893 13,821 12,722 12,579 10,175 7,679 7,451 5,141 4,893 6,370 4,900 7,581 5,282 106,953 94,639 66,657 67,437 40,297 27,201 — — 17,800 11,236 — — 185 — — — — — — 37,813 15,881 4,264 3,055 — 2,164 — 1,732 1,919 2,623 — 16,449 18,610 127,102 107,607 127,102 107,607 — — — — — — — — — — — — Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Other1) Total operating assets and liabilities Liquid funds Long-term ﬁ nancial receivables Total borrowings Lease liabilities Pension assets and liabilities Equity Total 1) Includes common functions and tax items. Depreciation and amortization Capital expenditure Cash ﬂ ow1) 2022 2021 2022 2021 2022 2021 1,787 1,934 617 1,520 1,455 483 3,310 1,738 979 2,787 1,311 933 –2,776 3,700 –966 –2,365 20 –585 682 371 669 363 850 512 727 285 214 –603 839 –392 — — — — –367 –1,006 — — — — 5,390 4,489 — — — –1,238 — 7,389 6,043 –470 –1,514 –1,480 244 –9,236 Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Other2) Acquisitions/ Divestments Financial items paid Taxes paid Total 1) Cash ﬂ ow from operations and investments. 2) Includes common functions. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 80 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Geographical information USA Brazil Germany Australia Canada United Kingdom Switzerland France Sweden (country of domicile) Poland Other Total Net sales1) 2022 2021 42,242 36,540 16,812 13,243 6,076 5,961 5,117 4,289 4,025 3,922 3,621 3,304 6,169 5,531 4,211 4,167 3,356 4,413 4,058 3,173 39,511 40,253 134,880 125,631 1) Revenues attributable to countries on the basis of customer location. Tangible and intangible ﬁ xed assets located in the Group’s country of domicile, Sweden, amounted to SEK 5,287m (4,503). Tangible and non-tangible ﬁ xed assets located in all other countries amounted to SEK 40,799m (34,380). Individually material countries in this aspect are USA with SEK 12,673m (10,608), Italy with SEK 6,977m (6,115) and Poland with SEK 3,768m (3,021) respectively. No single customer of the Group represents 10% or more of the external revenue. 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, freezers, dishwashers, washing machines, dryers, cookers, microwave ovens, vacuum cleaners, air conditioners and small domestic appliances. Sales are recorded net of value-added tax, speciﬁ c sales taxes, returns, and trade discounts. Revenues arise from sales of ﬁ nished products and services. Sale of ﬁ nished 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 speciﬁ c location, the risks of obsolescence and loss have been transferred 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 objec- tive evidence that all criteria for acceptance have been satisﬁ ed. In practice, transfer of control and thus revenue recognition normally depends on the contractual incoterm. 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 through- out 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. Transaction price — Volume discounts The products are often sold with volume discounts based on aggre- gate sales over a speciﬁ c time period, normally 3–12 months. Reve- nue from these sales is recognized based on the price speciﬁ ed 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 signiﬁ cant 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. Payments to customers Agreements can be made with customers to compensate for various services or actions the customer takes. This relates to e.g. agree- ments 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 prac- tice, 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. 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 liabil- ity is recorded. 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 satisﬁ ed. In general, types of performance obligations that may occur are products, spare parts, installation, service and support and education. 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. 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 material 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 eﬀ ectively 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 (payment in advance). A liability is rec- ognized for the rebate until it’s used or expires unused. Within Electrolux a common promotional activity is to oﬀ er 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 prod- uct 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 after the legal warranty period. Sometimes warranty oﬀ ered is including a service part and if it is diﬃ cult to separate the warranty from the service the two are bundled together and revenue is recognized over the warranty period. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 81 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Sales with a right of return A right of return is not a separate performance obligation, but it aﬀ ects 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 In some countries Electrolux acts as an agent, i.e. Electrolux arranges for goods or services to be provided by an external sup- plier 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 warehouse 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 recognizes revenue when the control has been transferred or when there is a legal right of forcing a sales transaction. Revenue types and ﬂ ows The vast majority of the Group’s revenues of SEK 134,880m (125,631) during the year consisted of product sales. Revenue from service activities amounted to SEK 2,240m (1,950). The Group’s net sales in Sweden amounted to SEK 3,621m (4,058). Exports from Sweden during the year amounted to SEK 41,307m (43,717), of which SEK 37,124m (39,655) were to Group subsidiaries. The major part of the Swedish export comes from two of the Swedish entities acting as buying/selling hubs for the European business meaning that most of the European product ﬂ ows are routed via these entities. Disaggregation of revenue 2022 2021 2022 2021 Group Parent Company Product Areas Taste Care Wellbeing Total 85,895 77,457 22,871 22,820 38,661 36,415 16,625 17,687 10,324 11,758 2,567 3,298 134,880 125,631 42,063 43,805 Disaggregation of revenue Electrolux manufactures and sells appliances mainly in the wholesale market to customers being retailers. Electrolux products include refrigerators, freezers, dishwashers, washing machines, dryers, cookers, microwave ovens, vacuum cleaners, air conditioners and small domestic appliances. Electrolux has four business areas with focus on the consumer market. Sales of services are not material in relation to Electrolux total net sales. Geography and product category are considered important attri- butes when disaggregating Electrolux revenue. The business areas, also being the Group’s segments, are based on geography: Europe, North America, Latin America and Asia-Paciﬁ c, Middle East and Africa. In addition, the table to the right presents net sales by prod- uct area Taste (cooking, refrigeration and freezer appliances), Care (dish and laundry appliances) and Wellbeing (e.g. air conditioners, cleaning appliances and small domestic appliances). Products within all product areas are sold in each of the reportable segments, i.e. the Business Areas. The table below presents the opening and closing balances of contract liabilities as well as movements during the years. Contract liabilities Opening balance, January 1, 2021 Gross increase during the period Paid to/settled with customer Revenue recognized during the year Contracts cancelled during the year Acquisition/divestment of operations Other changes to contract balances Exchange-rate diﬀ erences Closing balance, December 31, 2021 Gross increase during the period Paid to/settled with customer Revenue recognized during the year Contracts cancelled during the year Acquisition/divestment of operations Other changes to contract balances Exchange-rate diﬀ erences Closing balance, December 31, 2022 Advances from customers Customer bonuses/ incentives Short-term Long-term Prepaid income – service & warranty 139 1,153 — –1,141 — — 0 13 164 546 — –517 — –10 –14 1 170 5,696 22,244 –21,026 — –175 — 77 290 7,106 22,332 –22,300 — –337 –277 –126 693 7,091 200 206 — –196 –9 — — 17 218 175 — –3221) –22 — 5 20 74 319 43 — –4 –9 — –7 16 358 59 — –2431) 0 — –16 23 181 Total 6,354 23,646 –21,026 –1,341 –193 — 70 336 7,846 23,112 –22,300 –1,082 –359 –287 –151 737 7,516 1) Revenue recognized during the year on service and warranty contracts includes SEK 548m relating to contract obligations transferred to a third party in the U.S. For the Parent Company contract liabilities as per December 31, amounted to SEK 275m (318). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 82 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 5 Operating expenses Note 6 Other operating income and expenses Other operating income 2022 2021 2022 2021 Group Parent Company 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 eﬀ ects from currency hedging Operating expenses 2022 2021 Gain on sale of property, plant and equipment Settlement arbitration U.S. tariﬀ case Recovery of overpaid sales tax Direct material and components 50,828 42,919 Asbestos litigation Sourced products Depreciation and amortization Salaries, other renumeration and employer contribution Other operating expenses Total 18,033 5,390 18,413 4,489 Other Total 23,818 20,423 37,026 32,586 135,095 118,830 Material items in 2022 amount to SEK -1,046m and contain a settle- ment regarding the arbitration in u.s. tariﬀ case on washing machines imported into the U.S. from Mexico in 2016/2017, a loss from the exit from the Russian market, restructuring measures across business areas and Group common cost, the divestment of the oﬃ ce facility in Zürich, Switzerland and costs for a U.S. pension plan termination. Material items in 2021 amount to SEK –727m and refer to business area North America and an arbitration in U.S. tariﬀ case on washing machines imported into the U.S. from Mexico in 2016/2017. 726 185 656 58 59 15 1,514 — 90 41 130 446 — — — — — — — — — — — — Material proﬁ t or loss items Restructuring charge Oﬃ ce sale, Switzerland Arbitration/settlement U.S. tariﬀ case 2022 2021 –1,536 394 656 –350 –210 — — –727 — — –1,046 –727 2022 –863 –67 –547 431 –1,046 2021 — — — –727 –727 Group Parent Company Russia divestment Other operating expenses Russia divestment US pension plan termination Loss on sale of property, plant and equipment Arbitration in U.S. tariﬀ case Impairment Other Total 2022 –350 –210 –37 — — –87 2021 — — — –727 — –95 2022 –250 — — — –1,610 — –684 –822 –1,860 2021 U.S. pension plan termination — — — — –75 — –75 Total Eﬀ ect from material proﬁ t or loss items by function Cost of goods sold Selling expenses Administration expenses Other operating income and expenses Total Other operating income and expenses, net 830 –376 –1,860 –75 Note 8 Leases Note 7 Material proﬁ t or loss items in operating income This note summarizes events and transactions with signiﬁ cant eﬀ ects, which are relevant for understanding the ﬁ nancial perfor- mance 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 signiﬁ cant down-sizing of major units or activities • Restructuring initiatives with a set of activities aimed at reshaping major structure or process • Signiﬁ cant impairment • Other major non-recurring costs or income The major part of the group’s lease arrangements are those under which the group is a lessee. This applies to a large number of assets such as warehouses, oﬃ ce premises, vehicles, and certain oﬃ ce equipment. The group’s activities as a lessor are limited. A contract is, or contains, a lease if the contract conveys the right to control the use of an identiﬁ ed asset for a period of time in exchange for consideration. Such an assessment is performed at inception of a contract. An identiﬁ ed 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 deﬁ ned as leases with a lease term of 12 months or less. The group’s deﬁ nition of low-value assets comprises all personal computers and laptops, phones, oﬃ ce equipment and furniture and all other assets, inde- pendent of asset class, of lower value 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 Operating expenses Cost of goods sold includes direct material and components amounting to SEK 50,828m (42,919) and sourced products amount- ing to SEK 18,033m (18,413). The depreciation and amortization charge for the year amounted to SEK 5,390m (4,489). Costs for research and development amounted to SEK 4,291m (3,620). Government grants relating to expenses have been deducted in the related expenses by SEK 65m (60). 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 2022, amounted to SEK 484m (634). The Group’s operating income includes net exchange-rate diﬀ erences in the amount of SEK –388m (–78). The Group’s Swedish factories accounted for 0.1% (0.2) 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 manage- ment, 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. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 83 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated identiﬁ ed 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 ﬁ nancial position. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease liability is determined as the pres- ent 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: • ﬁ xed 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 by the lessee 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 reﬂ ects the exercise of that option. Variable lease fees that do not depend on an index or rate (including property tax related to leased buildings) are not included in the measurement of 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 car- rying amount to reﬂ ect the lease payments made and by increasing the carrying amount to reﬂ ect interest on the lease liability, using the eﬀ ective 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 inventories) 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 depre- ciation, any impairment losses as well as any remeasurement of the lease liability. Impairment of right-of-use assets is determined and accounted for in accordance with IAS 36. 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 exercise 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 ﬂ oating interest rate, in which case a revised discount rate is used), or • a lease contract is modiﬁ ed and the lease modiﬁ cation 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 com- mencement 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 statement of comprehensive income. Lease components are separated from non-lease components for leases regarding buildings (oﬃ ces, warehouses etc.). For leases regarding 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, being subject to continuous re-assessment. 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 signiﬁ cant event or a signiﬁ - cant change in circumstances occurs which aﬀ ects the assessment. Lease income and expenses Income from subleasing Lease expenses: Short-term leases Leases of low-value assets Variable lease payments Depreciation of right-of-use assets Group 2022 7 –11 –36 –195 –997 2021 7 –12 –35 –182 –876 Total lease expenses in operating income –1,239 –1,105 Lease liability interest expense –143 –105 Total cash outﬂ ow for lease contracts amounts to SEK 1,345m (1,215) for the year. The calculated average lease interest rate for the year was 3.8% (3.5). Lease commitments related to leases not yet com- menced per December 31 amount to SEK 73m (170). Maturity proﬁ le of lease liabilities is presented in Note 18. For the Parent Company, lease expenses for the year amounted to SEK 64m (113) and future lease payment obligations at year end amount to SEK 269m (208). The most relevant lease agreement for the Parent company during 2022 was IT equipment.. Property, plant and equipment, right-of-use Group Land Buildings Machinery Other equipment Total Carrying amount Opening balance, January 1, 2021 Acquisition of operations Additions Cancellations Depreciation Exchange rate diﬀ erences Closing balance, December 31, 2021 Acquisition of operations Additions Cancellations Depreciation Other changes Exchange rate diﬀ erences Closing balance, December 31, 2022 7 1,864 40 440 2,351 0 1 0 –1 0 7 — 4 — –1 — 1 7 1,125 –198 –633 — 13 –8 –14 24 196 –9 –228 31 1,335 –215 –876 128 1 15 145 2,293 32 439 2,771 0 1,582 –17 –752 0 299 — 1,819 –27 –998 0 — 1 — 0 232 –10 –12 –232 0 0 2 38 340 11 3,405 23 467 3,905 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 84 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 9 Financial income and ﬁ nancial expenses Note 10 Taxes Group Parent Company The theoretical tax rate for the Group is calculated on the basis For the Group in 2022, the majority of ‘Other’ relates to a capital gains tax in Switzerland. Current taxes Deferred taxes Taxes in income for the period Taxes related to OCI Taxes included in total comprehensive income 2022 2021 –1,028 –1,512 1,380 –65 352 –1,577 –409 –576 2022 –79 516 437 –1 2021 –169 –236 –405 0 –57 –2,153 436 –405 Deferred taxes include an eﬀ ect of SEK 14m (3) due to changes in tax rates. The consolidated accounts include deferred tax liabilities of SEK 138m (121) related to untaxed reserves in the Parent Company. Theoretical and actual tax rates Group Parent Company % 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 2022 19.6 –2.7 –4.4 2021 25.8 0.5 0.6 1.2 –0.9 7.3 –5.4 5.4 21.0 –0.2 3.6 –4.2 25.2 2022 20.6 2021 20.6 39.3 –16.9 — — 17.9 –11.7 –1.2 64.9 — — — 3.5 1.9 9.1 of the weighted total income after ﬁ nancial items per country, multiplied by the local statutory tax rates. Non-taxable/non-deductible items in the Parent Company are mainly related to dividends from subsidiaries. Non-recognized deductible temporary diﬀ erences As of December 31, 2022, the Group had tax loss carry-forwards and other deductible temporary diﬀ erences of SEK 4,401m (3,633), which have not been included in computation of deferred tax assets. The decision not to recognize certain temporary diﬀ erences 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 diﬀ erences in situations where the ability to utilize these is considered limited. The non-recognized deductible temporary diﬀ erences will expire as follows: Non-recognized temporary diﬀ erences 2022 2023 2024 2025 2026 2027 And thereafter Without time limit Total December 31 2022 n/a 10 30 141 85 57 53 4,026 4,401 2021 30 38 67 60 70 n/a 975 2,393 3,633 Financial income Interest income from subsidiaries from others Dividends from subsidiaries Other ﬁ nancial income Total Financial expenses Interest expenses to subsidiaries to others Lease liability interest expenses Pension interest expenses, net Exchange-rate diﬀ erences, net Other ﬁ nancial expenses Total Financial items, net Group Parent Company 2022 2021 2022 2021 — 88 — — 88 — 44 — — 44 723 30 264 2 3,167 3,434 — 17 3,920 3,717 — — –586 –286 –241 –201 –68 –260 –143 –105 10 17 –843 –1,545 –1,457 –17 –8 –173 –589 –546 — — — — 34 –665 –1,073 –49 –80 –457 2,847 3,260 Other ﬁ nancial expenses, for the Group and Parent Company, include gains and losses on derivatives used for managing the Group’s interest ﬁ xing. For information on ﬁ nancial instruments, see Note 18. For more information on post-employment beneﬁ ts, see Note 22. Cash ﬂ ow: Financial items paid, net Interest and similar items received amounted to SEK 71m (58), interest and similar items paid amounted to SEK –1,206m (–430) and other ﬁ nancial items received and paid amounted to SEK –103m (–98). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 85 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 2022 2021 Note 11 Other comprehensive income Deferred tax assets and liabilities, net opening balance Recognized in income statement 2022 2021 Recognized in other comprehensive income Acquisitions of operations Exchange rate diﬀ erences Deferred tax assets and liabilities, net closing balance 5,269 1,380 –411 — 702 5,588 –65 –584 1 329 6,940 5,269 As per December 31, the Parent Company reported deferred tax assets amounting to SEK 824m (309) which mainly relate to unused tax losses carried forward, pensions and restructuring provisions. All amounts in SEKm unless otherwise stated 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. Deferred tax assets and 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 Tax credits 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 diﬀ erences Deferred tax liabilities before netting of deferred tax assets and liabilities Netting of deferred tax assets and liabilities Deferred tax liabilities, net 374 334 466 888 107 616 994 327 422 230 817 93 579 422 3,650 2,915 2,903 1,711 10,342 7,505 –2,670 –1,760 7,672 5,746 952 63 622 1,764 926 81 339 890 3,402 2,236 –2,670 –1,760 731 476 Deferred tax assets and liabilities, net 6,940 5,269 Items that will not be reclassiﬁ ed to income for the period: Remeasurement of provisions for post-employment beneﬁ ts Opening balance, January 1 Gain/loss taken to other comprehensive income Income tax relating to items that will not be reclassiﬁ ed Closing balance, December 31 Items that may be reclassiﬁ ed subsequently to income for the period: Cash ﬂ ow hedges Opening balance, January 1 Gain/loss taken to other comprehensive income Transferred to proﬁ t and loss on sale Closing balance, December 31 Exchange diﬀ erences on translation of foreign operations Opening balance, January 1 Net investment hedge Translation diﬀ erences Closing balance, December 31 Income tax relating to items that may be reclassiﬁ ed Opening balance, January 1 Cash ﬂ ow hedges Net investment hedges Closing balance, December 31 Non-controlling interests, translation diﬀ erences Group 2022 2021 2,333 1,614 172 2,746 –410 3,537 –584 2,333 –21 5 34 18 14 2 –37 –21 –3,303 –4,588 –41 –5 2,684 1,289 –660 –3,303 –11 –7 8 –10 0 –19 8 1 –11 0 Other comprehensive income, net of tax 3,887 3,419 Income taxes aﬀ ecting other comprehensive income during the year amounted to a total of SEK –409m (-576) of which SEK –410m (–584) related to remeasurement of provisions for post-employment beneﬁ ts and SEK 1m (9) related to ﬁ nancial instruments for hedging. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 86 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 12 Property, plant and equipment, owned Property, plant, and equipment are stated at histor- ical cost less straight-line accumulated depreci- ation, 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 No depreciation • Land improvements 0–15 years • Buildings 10–40 years • Machinery and technical installations 3–15 years • Other equipment 3–10 years Total net impairment for the year was SEK 6m (—) on buildings and land, and SEK 19m (2) on machinery and other equipment and SEK —m (—) on plants under construction. The impairment 2022 relates to business areas Europe, North America and 2021 to business areas Asia-Paciﬁ c, Middle East and Africa. Group Acquisition costs Opening balance, January 1, 2021 Acquired during the year Acquisition of operations Transfers and reclassiﬁ cations Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2021 Acquired during the year Divestment of operations Transfers and reclassiﬁ cations Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2022 Accumulated depreciation Opening balance, January 1, 2021 Depreciation for the year Transfers and reclassiﬁ cations Sales, scrapping, etc. Impairment Exchange-rate diﬀ erences Closing balance, December 31, 2021 Depreciation for the year Transfers and reclassiﬁ cations Sales, scrapping, etc. Divestment of operations Impairment Exchange-rate diﬀ erences Closing balance, December 31, 2022 Net carrying amount, December 31, 2021 Net carrying amount, December 31, 2022 Land and land improve- ments Machinery and technical installations Plants under construc- tion and advances Other equipment Buildings Total Parent Company Acquisition costs Land and land improve- ments Machinery and technical installations Plants under construc- tion and advances Other equipment Buildings 1,334 130 950 232 –10 64 2,700 5 0 11 –100 176 2,792 284 29 70 –2 — 18 398 34 1 0 –1 0 43 476 2,302 2,317 10,414 378 914 1,867 –158 516 13,931 317 –1 533 –194 1,426 16,012 5,257 447 795 –147 — 262 6,614 541 –2 –167 — 6 706 7,699 7,317 8,314 37,974 1,236 1 269 –846 1,921 40,555 968 0 3,160 –2,136 4,794 47,342 29,098 2,025 –934 –811 2 1,449 30,829 2,551 –168 –1,912 — 19 3,584 34,903 9,726 12,438 2,797 185 1 333 –118 84 3,282 259 –4 198 –286 283 3,733 2,210 321 58 –109 — 65 2,545 355 6 –259 -14 0 217 2,849 737 883 5,119 2,918 106 –2,712 –4 286 5,712 4,100 0 –3,912 –6 583 6,478 338 — 1 0 — 34 374 — 162 — — 0 18 554 5,339 5,924 57,639 4,847 1,972 –11 –1,137 2,871 66,181 5,649 –5 -10 –2,721 7,262 76,356 37,187 2,822 –10 –1,069 2 1,828 40,759 3,481 -1 –2,337 –15 25 4,568 46,480 25,422 29,876 Opening balance, January 1, 2021 Acquired during the year Transfer of work in progress and advances Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2021 Acquired during the year Transfer of work in progress and advances Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2022 Accumulated depreciation Opening balance, January 1, 2021 Depreciation for the year Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2021 Depreciation for the year Sales, scrapping, etc. Exchange-rate diﬀ erences Closing balance, December 31, 2022 Net carrying amount, December 31, 2021 Net carrying amount, December 31, 2022 1 — — — — 1 — — — — 1 1 — — — 1 — — — 1 0 0 1 — — — — 1 4 — — — 5 1 — — — 1 — — — 1 0 4 213 480 71 15 7 2 308 6 85 –20 8 387 99 64 19 1 183 80 –14 8 257 125 130 — 5 –31 1 455 23 — –23 6 461 373 25 –31 1 368 25 –23 5 375 87 86 22 59 –20 — — 61 70 –85 — 1 47 0 — — — 0 — — — 0 61 47 Total 717 130 0 –24 3 826 103 0 –43 15 901 474 89 –12 2 553 105 –37 13 634 273 267 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 87 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 13 Goodwill and other intangible assets Goodwill Goodwill is reported as an indeﬁ nite life intangible asset at cost less accumulated impairment losses. Product development Electrolux capitalizes expenses for certain own development of new products provided that the level of certainty of their future economic beneﬁ ts 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, up to 5 years, using the straight-line method. Software Acquired software licenses and development expenses are capital- ized on the basis of the costs incurred to acquire and bring to use the speciﬁ c software. 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 impairment. The Electrolux trademark in North America, acquired in 2000, is regarded as an indeﬁ nite 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 the next page. 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 their estimated useful lives, between 5 and 15 years, using the straight-line method. Intangible assets with indeﬁ nite useful lives Goodwill as of December 31, 2022, had a total carrying value of SEK 7,081m. The allocation, for impairment-testing purposes, on cash-generating units is shown in the table below. All intangible assets with indeﬁ nite 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 that cannot be allocated on a reasonable and consistent basis to any of the individual cash-generating units are included in impairment testing in the total carrying amount of all cash-generating units combined. Value in use is calculated using the discounted cash ﬂ ow 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 components, which will create a basis for future sales growth and gross margin. These ﬁ gures are set in relation to historic ﬁ gures and external reports on market development. The cash ﬂ ow 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 adjustments for country speciﬁ c risk premiums and inﬂ ation rates for each individual country. The individual country discount rates are used to calculate a weighted average discount rate for each cash-generating unit. The pre-tax discount rates used in 2022 were within a range of 10.6% (9.6) to 16.0% (14.8). 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 ﬂ ow is calculated as the start- ing cash ﬂ ow divided by cost of capital less the growth rate. Cost of capital less growth of 2% (2%) is within the range of 8.6 to 14.0%. 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 assess- ment 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. As from 2019, right-of-use assets are included in the carrying amount of each cash-generating unit. Accordingly, lease payments, representing lease liability amortization and interest expense, are not considered in the forecasted cash ﬂ ows. However, the forecasted cash ﬂ ows have been charged with a ‘replacement capital expen- diture’ for right-of-use assets, calculated based on an assumed normalized level of depreciation per cash-generating unit and a calculated average remaining lease period of contracts existing at December 31. Goodwill, value of trademark and discount rate 2022 2021 Goodwill Electrolux trademark Discount rate, % Goodwill Electrolux trademark Discount rate, % Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Total 531 1,857 1,008 3,685 7,081 — 410 — — 410 10.6 11.5 16.0 11.9 499 1,610 909 3,672 6,690 — 410 — — 410 9.6 10.1 14.8 11.1 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 88 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Included in the item Other are trademarks of SEK 554m (584) and customer relationships etc. amounting to SEK 165m (173). Amortiza- tion of intangible assets is included within Cost of goods sold with SEK 412m (337), Administrative expenses with SEK 297m (255) and Selling expenses with SEK 203m (199) in the income statement. Note 14 Other non-current assets Shares in subsidiaries Participations in other companies Long-term receivables in subsidiaries Other receivables Total Group December 31 Parent Company December 31 2022 2021 2022 2021 — — — — — — 904 904 634 634 33,727 34,056 59 59 3,359 2,986 30 43 37,175 37,144 For Group, ‘Other receivables’ include mainly long-term operational tax credits. See Note 29 for information on the major subsidiaries held by the Parent Company. A detailed speciﬁ cation of the Parent Company’s shares in subsidiaries has been submitted to the Swedish Companies Registration Oﬃ ce and is available upon request from AB Electrolux Investor relations. All amounts in SEKm unless otherwise stated Goodwill and other intangible assets Acquisition costs Opening balance, January 1, 2021 Acquired during the year Acquisition of operations Internally developed Reclassiﬁ cation Fully amortized Sales, scrapping etc. Exchange-rate diﬀ erences Closing balance, December 31, 2021 Acquired during the year Acquisition of operations Internally developed Reclassiﬁ cation Fully amortized Sales, scrapping etc. Exchange-rate diﬀ erences Closing balance, December 31, 2022 Accumulated amortization Opening balance, January 1, 2021 Amortization for the year Reclassiﬁ cation Fully amortized Impairment Sales, scrapping etc. Exchange-rate diﬀ erences Closing balance, December 31, 2021 Amortization for the year Reclassiﬁ cation Fully amortized Impairment Sales, scrapping etc. Exchange-rate diﬀ erences Closing balance, December 31, 2022 Carrying amount, December 31, 2021 Carrying amount, December 31, 2022 Goodwill Product development Software Other Total other intangible assets Trademarks, software, etc. Group Other intangible assets Parent Company 6,369 — 57 — — — — 264 6,690 — –101) — — — — 401 7,081 0 — — — — — — 0 — — — — — — 0 6,690 7,081 2,443 — — 578 –13 –114 –14 101 2,981 — — 740 –1 –76 –111 394 3,927 1,149 335 –7 –114 — –6 28 1,385 390 — –76 –58 –48 178 1,771 1,596 2,156 2,748 261 5 332 7 –80 –43 105 3,335 409 — 592 7 –353 –56 341 4,275 1,409 329 — –80 — –24 54 1,688 466 1 –353 — –49 174 1,927 1,647 2,348 2,167 25 1 — 17 — — 6 2,216 — — — — — –7 77 2,286 1,320 127 17 — — — –5 1,459 56 — — — — 52 1,567 757 719 7,358 286 6 910 11 –194 –57 212 8,532 409 0 1,332 6 –429 –174 812 10,488 3,878 791 10 –194 — –30 77 4,532 912 1 –429 –58 –97 404 5,265 4,000 5,223 3,472 — — 730 — — –39 28 4,191 — — 1,119 — –126 –67 182 5,299 1,638 348 — — — –9 13 1,990 444 — –126 — –14 82 2,376 2,201 2,923 1) Including adjustment of provisional value within the measurement period related to acquisition with a value of SEK -10m for 2021. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 89 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 15 Inventories Raw materials Products in progress Finished products Note 16 Other current assets Group December 31 Parent Company December 31 2022 7,023 369 2021 5,139 264 2022 2021 — — — — VAT receivable Other tax recoverable 16,962 15,029 3,688 3,376 Miscellaneous short-term receivables Advances to suppliers 20 46 — — Provisions for doubtful accounts Total 24,374 20,478 3,688 3,376 Prepaid expenses and accrued income Inventories and work in progress are valued at the lower of cost, at normal capacity utilization, and net realizable value. Net realizable value is deﬁ ned 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 ﬁ nished goods and work in progress comprises development costs, raw materials, direct labor, tooling costs, other direct costs and related production overheads. The cost of inventories 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 90,219m (79,169) for the Group and SEK 37,873m (36,717) for the Parent Company. Write-downs due to obsolescence amounted to SEK 352m (215) for the Group and SEK 75m (22) for the Parent Company. Reversals of previous write-downs, due to inventories either scrapped or sold, amounted to SEK 42m (53) for the Group and SEK 0m (0) for the Parent Company. The amounts have been included in the item Cost of goods sold in the income statements. Group December 31 2022 1,692 254 1,905 –113 1,339 2021 1,057 204 2,041 –85 1,411 21 4 5,098 4,632 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 90 days. For trade receivables past due between 91 to 180 days Electrolux reserves 20%. Trade receivables that are 6 months past due but less than 12 months is reserved at 40% and receivables that are 12 months past due and more are reserved at 100%. The percentages for ECL are under continuous reassessment. There is no signiﬁ cant impact on provisions from changes in the forward looking factors. If trade receivables past due between 16 and 60 days had been 10% higher/lower as of December 2022, the loss allowance on trade receivables would have increased/decreased SEK 0.7m (0.7). If trade receivables past due between 61 and 180 days had been 10% higher/ lower as of December 2022, the loss allowance on trade receivables would have increased/decreased SEK 6.5m (7.7). Provision for accounts receivable Provision, January 1 Acquisition of operations New/released provisions Receivables written oﬀ against provision Sold operations Exchange-rate diﬀ erences and other changes Provision, December 31 Group Parent Company 2022 –466 — –93 114 1 2021 –698 0 –168 430 — –49 –493 –30 –466 2022 –9 — –8 — — — –17 2021 –17 — 8 — — — –9 New /released provisions of SEK -93m (-168) are mainly due to increased provisions for higher credit risk in Ukraine and the U.S. The fair value of trade receivables equals their carrying amount as the impact of discounting is not signiﬁ cant. Electrolux has a 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 40.4% (39.2) of the total trade receivables. The creation and usage of provisions for impaired receivables have been included in selling expenses in the income statement. Prepaid interest expenses and accrued interest income Total Note 17 Trade receivables Trade receivables Provision for expected credit losses Trade receivables, net Provisions in relation to trade receivables, % Group Parent Company 2022 2021 21,980 23,576 –493 –466 21,487 23,110 2022 694 –17 677 2021 1,265 –9 1,256 2.2 2.0 2.4 0.7 Trade receivables are recognized initially at fair value and sub- sequently measured at amortized cost using the eﬀ ective interest method, less provision for expected credit losses (ECL). The Group applies the simpliﬁ ed approach for trade receivables and uses a matrix to estimate the expected credit 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 through a management overlay which considers for- ward looking analysis, including macroeconomic factors impacting the diﬀ erent customer segments and more speciﬁ c forward-looking factors such as signs of bankruptcy, oﬃ cially 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 0.11 % for current trade receivables and for receivables maximum 15 days past CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 90 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Timing analysis of trade receivables past due Trade receivables not past due Total trade receivables past due, whereof: Past due 1–15 days Past due 16–60 days Past due 2–6 months Past due 6–12 months Past due more than 1 year Provision on expected credit loss Group Parent Company 2022 2021 2022 2021 19,269 21,404 637 1,247 2,218 1,706 598 783 518 275 44 425 519 462 288 12 493 466 40 34 2 4 0 0 17 694 9 9 0 0 0 0 9 1,265 Total trade receivables 21,980 23,576 Past due, in relation to trade receivables, % 12.3 9.2 8.2 1.4 Note 18 Financial instruments Additional and complementary information is presented in the following notes to the Annual Report: Note 2, Financial risk manage- ment, describes the Group’s risk policies in general and regarding the principal ﬁ nancial 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 ﬁ nancial instruments of the Group regarding speciﬁ c major terms and conditions when applicable, the exposure to risk and the fair values at year end. Financial instruments Initial recognition and measurement Financial assets and ﬁ nancial liabilities are recognized when the entity becomes party to the contractual provisions of the instrument. Regular way purchases and sales of ﬁ nancial 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 ﬁ nancial asset or ﬁ nancial liability at its fair value plus or minus, in the case of a ﬁ nancial asset or ﬁ nancial liability not at fair value through proﬁ t or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the ﬁ nancial asset or ﬁ nancial liability, such as fees and commissions. Transaction costs of ﬁ nancial assets and ﬁ nancial liabilities carried at fair value through proﬁ t or loss are expensed in proﬁ t or loss. Financial assets Classiﬁ cation and subsequent measurement The Group classiﬁ es its ﬁ nancial assets in the following measurement categories: • Fair value through proﬁ t or loss (FVPL); • Fair value through other comprehensive income (FVOCI); or • Amortized cost. The classiﬁ cation requirements for debt and equity instruments are described below. Debt instruments are those instruments that meet the deﬁ nition of a ﬁ nancial liability from the issuer’s perspective, such as trade receivables, loan receivables as well as government bonds. The Group classiﬁ es its debt instruments into one of the following two measurement categories: Amortized cost: Assets that are held for collection of contractual cash ﬂ ows where those cash ﬂ ows represent solely payments of principal and interest (SPPI), and are not designated as FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized (see impairment below). Interest income from these ﬁ nancial assets is included in the ﬁ nancial net using the eﬀ ective interest rate method. Fair value through proﬁ t or loss (FVPL): Assets that do not meet the criteria for amortized cost are measured at fair value through proﬁ t and loss. A gain or loss on a ﬁ nancial debt investment that is subsequently measured at fair value through proﬁ t or loss and is not part of a hedging relationship is recognized in the ﬁ nancial net in the period in which it arises. Interest income from these ﬁ nancial assets is included in the ﬁ nancial net using the eﬀ ective interest rate method. Trade receivables sold on non-recourse terms are catego- rized as ‘Hold to Sell’ with gain or loss reported in operating income. Equity instruments are instruments that meet the deﬁ nition 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 ﬁ nancial net in the statement of compre- hensive income. The Group does not have any material investments in equity instruments. Impairment and expected credit 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 reﬂ ects an unbiased and probability-weighted amount based on reasonable and support- able information available such as past events, current condition and forecasts of future economic conditions. For trade receivables, the Group applies the ‘simpliﬁ ed approach’, 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 insuﬃ cient due to individual considerations, the provision is extended to cover the extra anticipated losses. Derecognition Financial assets, or a portion thereof, are derecognized when the contractual rights to receive the cash ﬂ ows 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 of the asset. Financial liabilities Classiﬁ cation and subsequent measurement All of the Groups ﬁ nancial liabilities, excluding derivatives, are classiﬁ ed as subsequently measured at amortized cost. Derecognition Financial liabilities are derecognized when they are extinguished, i.e. when the obligation speciﬁ ed 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 proﬁ t 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 ﬁ rm commitments (fair value hedges); • Hedges of highly probable future cash ﬂ ows attributable to a recognized asset or liability (cash ﬂ ow hedges); or • Hedges of a net investment in a foreign operation (net investment hedges). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 91 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated The Group documents, at the inception of the hedge, the relation- ship between hedged items and hedging instruments, as well as its risk management 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 transactions are highly eﬀ ective in oﬀ setting changes in fair values or cash ﬂ ows of hedged items based on the following hedge eﬀ ectiveness requirements: • There is an economic relationship between the hedged item and the hedging instrument; • The eﬀ ect 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 resulting 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 com- prehensive income, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Cash ﬂ ow hedge The eﬀ ective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂ ow hedges is recognized in equity via other comprehensive income. The gain or loss relating to the ineﬀ ective portion is recognized immediately in the statement of comprehensive income. Amounts accumulated in equity are recycled to the statement of proﬁ t or loss in the periods when the hedged item aﬀ ects proﬁ t 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. Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash ﬂ ow hedges. Any gain or loss on the hedging instru- ment relating to the eﬀ ective portion of the hedge is recognized directly in equity via other comprehensive income; the gain or loss relating to the ineﬀ ective portion is recognized immediately in the statement of comprehensive income. Gains and losses accumulated in equity are included in the statement of comprehensive income when the foreign operation is disposed of as part of the gain or loss on the disposal. Net debt At year-end 2022, the Group’s ﬁ nancial net debt amounted to SEK 19,828m (4,645). The table below presents how the Group calculates net debt and what it consists of. 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 Long-term ﬁ nancial receivables Cash and cash equivalents Short-term investments Financial derivative assets Prepaid interest expenses and accrued interest income Liquid funds Financial net debt Lease liabilities Net provision for post-employment beneﬁ ts Net debt Revolving credit facilities1) December 31 2022 5,732 2,605 40 2021 1,288 4,187 87 445 254 48 65 9,076 5,675 28,738 10,205 37,813 15,881 185 — 17,559 10,923 168 51 21 17,800 19,828 4,264 –245 165 144 4 11,236 4,645 3,055 891 23,848 8,591 16,622 20,244 1) For details on the Group’s committed revolving credit facilities, see below under “Liquid funds”. The facilities are not included in net borrowings, but can be used for short-term and long-term funding. Liquid funds Liquid funds as deﬁ ned by the Group consist of cash and cash equivalents, short-term investments, ﬁ nancial 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 investments with a maturity of 3 months or less. The table below presents the key data of liquid funds. The carrying amount of liquid funds is approximately equal to fair value. Liquidity proﬁ le Cash and cash equivalents Short-term investments Financial derivative assets Prepaid interest expenses and accrued interest income Liquid funds % of annualized net sales1) 8,377 5,563 Net liquidity Fixed interest term, days Eﬀ ective yield, % (average per annum) 1) Liquid funds in relation to annualized net sales, page 119 for deﬁ nition. December 31 2022 2021 17,559 10,923 168 51 21 165 144 4 17,800 11,236 24.9 24.4 8,724 5,560 13 0.8 9 0.3 For 2022, liquid funds, including unused committed revolving credit facilities amounted to 24.9% (24.4) of annualized net sales, well above the Financial Policy target of 2.5%. Net liquidity is calculated by deducting short-term borrowings from liquid funds. Unused committed revolving credit facilities as per December 31, 2022 consists of multi-currency sustainability linked facility of EUR 1,000m (1,000), maturing 2027, SEK 2,500m (0), maturing 2023 and SEK 3,000m (0), maturing 2024. 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 eﬀ ective interest method. In 2022, SEK 6,158m (284) of long-term borrowings matured or were amortized. These maturities were partly reﬁ nanced to the amount of SEK 22,715m (0). At year-end 2022, the Group’s total interest-bearing liabilities amounted to SEK 37,075m (15,681), of which SEK 31,343m (14,392) referred to long-term borrowings including maturities within 12 months. Long-term borrowings with maturities within 12 months amounted to SEK 2,605m (4,187). The outstanding long-term borrowings have mainly been made under the Euro Medium Term Note (EMTN) Programme and via bilateral loans. The majority of total long-term borrowings, SEK 31,277m (14,297), is raised at Parent Company level. Electrolux also has unused committed revolving credit facilities of SEK 16,622m (20,244) (details stated above under “Liquid funds”). 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. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 92 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated At year-end 2022, the average interest-ﬁ xing period for long-term borrowings was 2.3 years (1.2). The calculation of the average inter- est-ﬁ xing period includes the eﬀ ect of interest-rate swaps used to manage the interest-rate risk of the debt portfolio. The average interest rate for the total borrowings was 3.4% (1.4) at year-end. The fair value of the interest-bearing borrowings was SEK 32,409m (14,547). The fair value including swap transactions used to manage the interest ﬁ xing was approximately SEK 32,662m (14,554). Changes in liabilities arising from ﬁ nancing 2022 Long-term borrowings (including short-term part of long-term) Short-term borrowings (excluding short-term part of long-term) Lease liabilities Total 2021 Long-term borrowings (including short-term part of long-term) Short-term borrowings (excluding short-term part of long-term) Lease liabilities Total Opening Balance Amortization New debt Net cash change Acquisitions Reclassi- ﬁ cations Additions/ Cancellations Exchange rate diﬀ erences Closing Balance Cash Flow Non Cash ﬂ ow 14,392 1,375 3,055 18,823 14,400 1,052 2,618 18,070 –6,158 — –948 –7,106 –284 — –880 –1,164 22,244 — — 22,244 1 — — 1 — 4,148 — 4,148 — –445 — –445 — — — — 30 733 — 762 — — — — — — — — — — 1,782 1,782 — — 1,154 1,154 864 249 374 1,487 245 36 163 444 31,343 5,772 4,264 41,379 14,392 1,375 3,055 18,823 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 93 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated The table below sets out the carrying amount of the Group’s borrowings. Borrowings Interest rate, % Currency Nominal value (in currency) 2022 2021 Issue/maturity date Description of loan Interest rate, % Currency Carrying amount, December 31 Carrying amount, December 31 Nominal value (in currency) 2022 2021 Description of loan Issue/maturity date Bond loans 2017–2024 2018–2023 2018–2023 2018–2025 2019–2024 2019–2024 2019–2024 2020–2023 2020–2023 2020–2025 2020–2027 2022–2027 2022–2027 2022–2025 2022–2026 2022–2024 2022–2024 2022–2027 2022–2025 2022–2025 2022–2030 Total bond loans4) Other long-term loans Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Floating1) 2) 1.125 Stibor 3M + 0.75 Fixed1) 1.103 0.885 Stibor 3M + 0.75 Stibor 3M + 1.85 1.995 Fixed1) 3) Fixed1) Stibor 3M + 0.6 1.705 Stibor 3M + 0.85 4.125 3) Stibor 3M + 1.15 4.363 4.838 Stibor 3M + 1.4 4.42 2.53) SEK SEK SEK USD SEK SEK SEK SEK SEK NOK USD SEK SEK SEK EUR SEK SEK SEK SEK SEK EUR 350 200 800 73 1,000 750 750 1,700 1,700 500 150 1,250 750 1,000 500 750 750 1,500 1,000 2,000 500 350 — — 761 1,000 750 753 — — 502 1,564 1,249 749 1,000 5,507 750 750 1,500 1,000 2,000 5,270 25,455 350 200 802 660 1,000 750 754 1,700 1,700 503 1,356 — — — — — — — — — — 9,774 2017–20264) 2022–20294) Amortizing bank loan Nordic Investment Bank, long-term part European Investment Bank Other long-term loans Total other long-term loans Long-term borrowings Short-term part of long-term loans5) 2019–20224) 2020–20224) 2020–20224) Euro MTN Programme Euro MTN Programme Euro MTN Programme Floating Fixed USD USD 75 282 301 2,939 42 3,282 365 — 66 431 28,738 10,205 Stibor 3M + 0.75 Stibor 3M + 0.60 0.405 SEK SEK SEK 1,250 2,550 250 1,252 — — 2,552 250 — 2018–20234) 2018–20234) 2020–20234) 2020–20234) 2017–20264) Euro MTN Programme Euro MTN Programme Euro MTN Programme Euro MTN Programme Amortizing bank loan Nordic Investment Bank, short-term part Other short-term part of long-term loans Total short-term part of long-term loans Other short-term loans Short-term bank loans in Canada Floating Short-term bank loans in Egypt Floating Short-term bank loans in Brazil Floating Short-term bank loans in Thailand Floating Short-term bank loans in Chile Floating Other bank borrowings and commercial papers Total other short-term loans Trade receivables with recourse Short-term borrowings Long-term and short-term borrowings Fair value of ﬁ nancial derivative liabilities Accrued interest expenses and prepaid interest income Total borrowings 1.125 Stibor 3M + 0.75 Stibor 3M + 1.85 1.995 SEK SEK SEK SEK 200 800 1,700 1,700 200 294 1,099 868 — — — — Floating USD 75 120 104 24 2,605 29 4,187 CAD EGP BRL THB CLP 30 — 934 231 — 1,946 732 18,917 221 230 212 — 829 — — 247 3,105 1,288 5,732 87 40 8,377 5,563 37,114 15,768 48 445 254 37,813 65 15,881 1) Private placement 2) The interest-rate ﬁ xing proﬁ le of nominal amount SEK 100m has been adjusted with an interest-rate swap, where ﬂ oating rate is swapped for ﬁ xed interest rate. The Group applies hedge accounting of cash ﬂ ows on the relation, and the net eﬀ ect on the income statement from this hedge for 2022 was SEK 5m (-2). 3) The interest-rate ﬁ xing proﬁ le of the loans has been adjusted with interest-rate swaps, where ﬁ xed interest rate is swapped for ﬂ oating interest rate. The Group applies hedge accounting of fair value on the relations, and the net eﬀ ect on the income statement from these hedges for 2022 was SEK 299m (13). 4) Long-term borrowings raised on Parent Company level amount to a total of SEK 31,277m (14,297). 5) Long-term borrowings with maturities within 12 months are classiﬁ ed as short-term borrowings in the Group’s balance sheet. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 94 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Other short-term loans 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 4.0 years (1.9), at the end of 2022. 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 2023 2024 2025 2026 2027 2028— Total — — 2,605 2,605 4,353 5,263 5,507 5,062 5,270 25,455 162 — 120 — 61 — — — 2,939 — 3,282 2,605 4,515 5,383 5,568 5,062 8,209 31,343 Commercial ﬂ ows The table below shows the forecasted transaction ﬂ ows, imports and exports, for the 12-month period of 2023 and hedges at year-end 2022. The hedged amounts are dependent on the hedging policy for each ﬂ ow considering the existing risk exposure. The eﬀ ect of hedging on operating income during 2022 amounted to SEK –169m (–108). At year-end 2022, the unrealized fair value of forward contracts for hedging of forecasted transaction ﬂ ows amounted to SEK 34m (-37). Nominal amount of forecasted transacion ﬂ ows hedged as per December 31, 2022, was SEK -689m (818). The hedge accounting relations have an average maturity period of 8 months (7). Forecasted transaction ﬂ ows and hedges AUD BRL CAD CHF CNY EUR GBP PLN THB USD Other Total Maturity proﬁ le of ﬁ nancial liabilities and derivatives – undiscounted cash ﬂ ows Loans Net settled derivatives Lease liabilities Gross settled derivatives whereof outﬂ ow whereof inﬂ ow Accounts payable Financial guarantees Total ≤ 0.5 year –8,660 –32 –545 –332 –34,154 33,821 –38,357 –1,491 > 0.5 year < 1 year > 1 year < 2 years > 2 years < 5 years > 5 years Total –677 –5,466 –17,749 –8,979 –41,531 11 –498 21 –703 723 — — –87 –858 3 -112 115 — — –105 –1,795 –67 –979 — — — — — — — — — — –280 –4,675 –308 –34,969 34,659 –38,357 –1,491 –49,417 –1,143 –6,408 –19,649 –10,025 –86,642 Net gain/loss, fair value and carrying amount on ﬁ nancial instruments The tables below and overleaf present net gain/loss on ﬁ nancial instruments, the eﬀ ect in the income statement and equity, and the fair value and carrying amount of ﬁ nancial assets and liabilities. Net gain/ loss can include both exchange-rate diﬀ erences and gain/loss due to changes in interest-rate levels. Net gain/loss, income and expense on ﬁ nancial instruments 2022 2021 Gain/loss in proﬁ t and loss Gain/loss in OCI Interest income Interest expense Gain/loss in proﬁ t and loss Gain/loss in OCI Interest income Interest expense Inﬂ ow of currency, long position Outﬂ ow of currency, short position Gross trans- action ﬂ ow 4,150 3,561 4,295 3,112 403 1,051 3,865 2,858 3,961 6,373 12,129 45,758 –250 –563 0 –309 –2,204 –8,413 –954 –1,103 –5,412 –22,920 –3,629 –45,758 3,900 2,998 4,295 2,803 –1,801 –7,362 Hedges –615 –668 –333 –295 964 –506 2,911 –166 1,754 –1,451 –16,547 8,500 –294 –328 2,436 –195 Net transac- tion ﬂ ow 3,284 2,330 3,962 2,508 –837 –7,868 2,745 1,461 –1,779 –14,111 8,305 0 0 0 Maturity proﬁ le of ﬁ nancial liabilities and derivatives The table below presents the undiscounted cash ﬂ ows of the Group’s contractual liabilities related to ﬁ nancial instruments based on the remaining period at the balance sheet date to the contractual maturity date. Floating interest cash ﬂ ows with future ﬁ xing dates are estimated using the forward-forward interest rates at year-end. Any cash ﬂ ow 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 ﬂ ow from trade receivables. The loan maturities can be oﬀ set 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 unused committed revolving credit facilities of SEK 16,622m (20,244), see details stated above under ‘Liquid funds’. Recognized in operating income Financial assets and liabilities at fair value through proﬁ t and loss Financial assets and liabilities at amortized cost Total net gain/loss, income and expense Recognized in ﬁ nancial items Financial assets and liabilities at fair value through proﬁ t and loss Financial assets at amortized cost Other ﬁ nancial liabilities at amortized cost Total net gain/loss, income and expense –169 –219 –388 17 — — 17 34 — 34 5 — — — — — — — 35 –37 –113 — –78 –37 — — — — — — — –727 88 — –41 299 –1,001 –36 387 –1,728 –8 — — –8 –2 — –5 –7 — 44 –76 — — –383 44 –459 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 95 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Fair value and carrying amount on ﬁ nancial assets and liabilities Fair value hierarchy level Fair value Carrying amount Fair value Carrying amount 2022 2021 Financial assets Financial assets at fair value through proﬁ t or loss Whereof short-term investments Whereof other ﬁ nancial assets Financial assets at amortized cost Whereof trade receivables Whereof short-term investments Whereof cash and cash equivalents Derivatives Whereof derivatives at fair value through proﬁ t or loss Whereof derivatives in hedge relations Total ﬁ nancial assets Financial liabilities Financial liabilities at amortized cost Whereof long-term borrowings Whereof short-term borrowings Whereof accounts payable Derivatives Whereof derivatives at fair value through proﬁ t or loss Whereof derivatives in hedge relations Total ﬁ nancial liabilities 1 3 2 2 2 2 425 166 259 39,048 21,487 2 17,559 99 60 39 425 166 259 39,048 21,487 2 17,559 99 60 39 227 162 65 34,036 23,110 3 10,923 204 204 — 227 162 65 34,036 23,110 3 10,923 204 204 — 39,572 39,572 34,467 34,467 74,123 27,368 8,398 38,357 578 279 299 75,472 28,738 8,377 38,357 578 279 299 54,207 10,455 5,570 38,182 75 68 7 53,950 10,205 5,563 38,182 75 68 7 74,701 76,050 54,282 54,025 Fair value estimation Valuation of ﬁ nancial 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 Swedish krona. For instru- ments where no reliable price is available on the market, cash ﬂ ows are discounted using the deposit/swap curve of the cash ﬂ ow cur- rency. If no proper cash ﬂ ow 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. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁ nancial liabilities is estimated by discounting the future contractual cash ﬂ ows at the current market-interest rate that is available to the Group for similar ﬁ nancial instruments. The Group’s ﬁ nancial assets and liabilities at fair value are measured according to the following hierarchy: • Level 1: Fair value is based on quoted prices in active markets for identical assets or liabilities. • Level 2: Fair Value is based on other than quoted prices included in level 1 that are observable for assets or liabilities either directly or indirectly such as interest rate curves and FX rates. • Level 3: Inputs for Fair Value Calculations of the assets or liabilities that are not entirely based on observable market data. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 96 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 19 Assets pledged for liabilities to credit institutions Number of shares Pledged assets Total Group December 31 Parent Company December 31 2022 2021 2022 2021 — — — — — — — — 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: Share capital As per December 31, 2022 the share capital of AB Electrolux consisted of 8,192,348 Class A shares and 274,885,045 Class B shares with a quota value of SEK 5.46 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, 2021 8,192,498 Class A shares, quota value SEK 5 300,727,810 Class B shares, quota value SEK 5 Total Share capital, December 31, 2022 8,192,348 Class A shares, quota value SEK 5.46 274,885,045 Class B shares, quota value SEK 5.46 Total 41 1,504 1,545 45 1,500 1,545 Owned by Electrolux Owned by other shareholders Total Shares, December 31, 2021 Class A shares Class B shares Total — 8,192,498 8,192,498 25,842,915 274,884,895 300,727,810 25,842,915 283,077,393 308,920,308 Conversion of Class A shares into Class B shares Class A shares Class B shares Redemption of shares Class A shares Class B shares Repurchase of shares Class A shares Class B shares — — — –25,842,915 — –150 150 — — — 13,049,115 –13,049,115 –150 150 — –25,842,915 — — Shares, December 31, 2022 Class A shares Class B shares Total — 8,192,348 8,192,348 13,049,115 261,835,930 274,885,045 13,049,115 270,028,278 283,077,393 Other paid-in capital Other paid-in capital relates to payments made by owners and includes share premiums paid in connection with share issues. Other reserves Other reserves include the following items: cashﬂ ow hedges which refer to changes in valuation of currency contracts used for hedging future foreign currency transactions and exchange-rate diﬀ erences 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 subsid- iaries and associated companies. Retained earnings also include remeasurement of provision for post-employment beneﬁ ts, 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 Earnings per share, SEK Basic Diluted Average number of shares, million Basic Diluted 2022 2021 –1,320 4,678 –4.81 –4.75 16.31 16.21 274.7 278.0 286.9 288.5 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 calcu- lated by adjusting the weighted average number of ordinary shares outstanding with the estimated number of shares from the share pro- grams. 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 274,658,318 (286,852,239) and the average number of diluted shares has been 277,996,529 (288,472,807). CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 97 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 21 Untaxed reserves, Parent Company December 31, 2022 Appropriations December 31, 2021 Accumulated depreciation in excess of plan Brands Licenses Machinery and equipment Buildings Other Total Group contributions Total appropriations 382 0 168 0 118 668 396 0 161 0 29 586 –14 0 7 0 89 82 –22 60 Note 22 Post-employment beneﬁ ts Post-employment beneﬁ ts The Group sponsors pension plans in many of the countries in which it has signiﬁ cant activities. Pension plans can be deﬁ ned contribution or deﬁ ned beneﬁ t plans or a combination of both. Under deﬁ ned beneﬁ t pension plans, the company enters into a commitment to provide post-employment beneﬁ ts based upon one or several parameters for which the outcome is not known at present. For example, beneﬁ ts can be based on ﬁ nal salary, on career average salary, or on a ﬁ xed amount of money per year of employment. Under deﬁ ned contribution plans, the company’s commitment is to make periodic payments to independent authorities or investment plans, and the level of beneﬁ ts depends on the actual return on those investments. Some plans combine the promise to make periodic payments with a promise of a guaranteed minimum return on the investments. These plans are also deﬁ ned beneﬁ t 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 beneﬁ ts and compulsory sever- ance payments, the Group provides healthcare beneﬁ ts for some of its employees in certain countries, predominantly so in the U.S. The cost for pension is disaggregated into three components; service cost, ﬁ nancing cost or income and remeasurement eﬀ ects. Service cost is reported within Operating income and classiﬁ ed 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 eﬀ ects 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 beneﬁ ts in the balance sheet represent 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 experience adjustments on the obligation are recorded in Other comprehensive income as remea- surements. The actual return less calculated interest income on plan assets is also recorded in other comprehensive income as remea- surements. Past-service costs are recognized immediately in income for the period. Some features of the deﬁ ned beneﬁ t plans in the main countries are described below. U.S. The number of pension plans in the U.S. has been signiﬁ cantly reduced over the years through plan consolidation. In 2022, the single remaining funded plan was terminated through a buyout transaction with an external insurance company, and only a small unfunded plan remains. Current employees participate in deﬁ ned contribution plans. United Kingdom The deﬁ ned beneﬁ t plan is closed for future accruals and employees are oﬀ ered deﬁ ned contribution. The funding position is reassessed every three years and a schedule of contributions is agreed between the Trustee and the company, if so required. The Trustee decides the investment strategy and consults with the company. Beneﬁ ts are paid from the plan assets. Sweden The main deﬁ ned beneﬁ t plan in Sweden is the collectively agreed pension plan for white collar employees, the ITP 2 plan. Beneﬁ ts in payment are indexed according to decisions made by Alecta’s Board of Directors. Indexation typically follow inﬂ ation. Electrolux secures its obligation for old age pension (ITP 2) through a pension foundation. The majority of employees are however covered by the collectively agreed deﬁ ned contribution plan (ITP 1). Germany There are several deﬁ ned beneﬁ t plans based on ﬁ nal salary in Germany. Beneﬁ ts in payment are indexed every three years according to inﬂ ation levels. All plans are closed for new partici- pants. 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 requirements 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. Beneﬁ ts 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 beneﬁ ciary has left the plan. Switzerland In Switzerland beneﬁ ts are career average in nature, with indexation of beneﬁ ts 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 speciﬁ c way of cal- culating an employer‘s additional contribution and because of that there is normally no minimum funding requirement. Beneﬁ ts are paid from the plan assets. Other countries There is a variety of smaller plans in other countries and the most important of those are in France, Italy and Canada. The pension plans in France and Italy are mainly unfunded. In Canada there are both funded and unfunded pension plans. A mix of ﬁ nal salary and career average exists in these countries. Some plans are open for new entrants. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 98 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Explanation of amounts in the ﬁ nancial statements relating to deﬁ ned beneﬁ t obligations. Information by country December 31, 2022 Information by country December 31, 2021 U.S. Medical U.S. UK Sweden Germany Switzer- land Other Total U.S. Medical U.S. UK Sweden Germany Switzer- land Other Total Amounts included in the balance sheet Present value of funded and unfunded obligations Fair value of plan assets (after change in asset ceiling) Total (surplus)/deﬁ cit Whereof reported as: Pension plan assets Provisions for post-employment beneﬁ t plans Total funding level for all pension plans, % Average duration of the obligation, years Amounts included in total comprehensive income Service cost Net interest cost Remeasurements (gain)/loss Total expense (gain) for deﬁ ned beneﬁ t plans Expenses for deﬁ ned contribution plans Amounts included in the cash ﬂ ow statement Contributions by the employer Reimbursement –33 –28 33 –28 — — 313 1,589 5,693 2,334 3,623 2,517 154 16,223 –1,446 –1,573 –6,370 –2,302 –2,374 –2,522 119 –16,468 –1,133 16 –677 31 1,249 –5 273 –245 –1,446 — –676 — — 313 462 16 99 — 112 –5 — –6 –2,133 279 1,888 31 1,249 99 66 100 –77 102 9.0 8.0 12.0 20.0 14.0 13.0 — 12.0 — 0 13 13 — 0 691 124 6 602 22 9 15 0 3 3 131 –9 236 –337 66 1,304 691 732 267 -322 72 1,426 22 — 141 — — 282 — — –80 –507 — — 70 — 137 Beneﬁ ts paid by the employer 6,086 Major assumptions for the valuation of the liability Longevity, years1) Male Female Inﬂ ation, %2) Discount rate, % 20.5 22.4 — 20.3 22.0 — 5.20 5.20 20.8 23.7 3.25 4.40 23.0 24.8 2.00 3.50 20.5 24.0 2.50 3.10 21.8 23.5 1.50 1.80 849 92 –587 6,659 21.0 23.4 2.54 3.66 0 — 12 — — — — Amounts included in the balance sheet Present value of funded and unfunded obligations Fair value of plan assets (after change in asset ceiling) Total (surplus)/deﬁ cit Whereof reported as: Pension plan assets Provisions for post-employment beneﬁ t plans Total funding level for all pension plans, % Average duration of the obligation, years Amounts included in total comprehensive income Service cost Net interest cost Remeasurements (gain)/loss Total expense (gain) for deﬁ ned beneﬁ t plans Expenses for deﬁ ned contribution plans Amounts included in the cash ﬂ ow statement Contributions by the employer Reimbursement Beneﬁ ts paid by the employer Major assumptions for the valuation of the liability Longevity, years1) Male Female Inﬂ ation, %2) Discount rate, % 7,442 1,783 7,941 2,876 4,088 2,683 798 27,611 –8,316 –1,776 –7,929 –2,464 –3,065 –2,979 –296 1,023 –874 412 12 7 — — — — — — — — — — 112 100 100 86 75 — — 111 –191 –26,720 891 607 — 1,732 — 2,623 24 97 10.3 9.2 15.2 22.2 14.3 12.8 — 14.0 — –16 –79 –95 — — 48 — — 12 12 23 — — — 3 159 19 –196 –1,889 23 9 –241 37 — –355 222 3 2 17 2 –2,746 –193 –1,712 –209 –318 7 –2,507 — — — — –86 109 — — 172 33 — — 20.7 22.6 3.00 2.60 20.7 22.3 — 2.60 20.8 23.6 3.50 1.60 22.7 24.8 1.75 1.60 20.4 23.8 2.00 0.90 21.8 24.8 1.00 0.10 678 57 –86 355 21.2 23.6 2.62 1.67 1 — 26 — — — — 1) Expressed as the average life expectancy of a 65-year-old person in number of years. 2) General inﬂ ation impacting salary and pensions increase. For USA Medical, the number refers to the inﬂ ation of healthcare beneﬁ ts. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 99 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated 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 ﬁ nancial assumptions Remeasurement from changes in demographic assumptions Remeasurement from experience Contributions by plan participants Beneﬁ ts paid 2) Exchange diﬀ erences Settlements and other Closing balance, December 31 2022 2021 27,611 28,874 164 — 467 222 — 416 –6,902 –507 310 533 39 –234 –417 35 –6,914 –1,586 2,029 –1,114 16,223 1,867 –1,059 27,611 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) Eﬀ ect of asset ceiling Net contribution by employer Contribution by plan participants Beneﬁ ts paid 2) Exchange diﬀ erences Settlements and other Closing balance, December 31 2022 2021 26,720 25,194 492 399 –4,361 –853 –533 39 1,880 –292 –30 35 –6,658 –1,232 2,167 –545 1,945 –1,179 16,468 26,720 1) The actual return on plan assets amounts to SEK 3,869m (2,279). 2) During Q4 2022 a U.S. pension plan buyout was completed with pension obligations transferred to a third party. This resulted in a reduction of gross pension liabilities and assets of SEK 6bn respectively at year-end 2022. Risks There are mainly three categories of risks related to deﬁ ned beneﬁ t obligations and pension plans. The ﬁ rst category relates to risks aﬀ ecting the actual pension payments. Increased longevity and inﬂ ation of salary and pensions are 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 ﬁ nancial instruments and are exposed to market ﬂ uctuations. Poor investment return may reduce the value of investments and render them insuﬃ cient to cover future pension payments. The third category relates to measurement and aﬀ ects the accounting for pensions. The discount rate used for measuring the present value of the obligation may ﬂ uctuate which impacts the valuation of the Deﬁ ned Beneﬁ t 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 deter- mining the discount rate, the Group uses AA rated corporate bond indexes which match the duration of the pension obligations. In Sweden, mortgage-backed bonds are used for determining the dis- count rate. Expected inﬂ ation and mortality assumptions are based on local conditions in each country and changes in those assump- tions may also aﬀ ect 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 diversiﬁ ed. In some countries, a so called trigger-points scheme is in place, whereby the investment in ﬁ xed income assets increases as the funding level improves. The Board of Electrolux annually approves the limits for asset allocation. The ﬁ nal investment decision often resides with the local trustee that consults with Electrolux. The risks related to pension obligations, e.g., mortality exposure and inﬂ ation, are mon- itored 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 ﬁ nancial assumptions and the potential impact on the present value of the deﬁ ned pension obligation. Note that the sensitivities are not meant to express any view by Electrolux on the probability of a change. Sensitivity analysis on deﬁ ned beneﬁ t obligation Longevity +1 year Inﬂ ation +0.5%1) Discount rate +1% Discount rate –1% U.S. U.S. Medical 7 — –33 38 87 — –117 130 UK 370 148 –599 734 Sweden Germany Switzerland Other 64 240 –405 507 219 212 –401 494 76 27 –253 313 5 12 –47 54 Total 828 639 –1,855 2,270 1) The inﬂ ation change feeds through to other inﬂ ation-dependent assumptions, i.e., pension increases and salary growth. In the coming year, the Group expects to pay a total of SEK 274m in contributions to the pension funds and as payments of beneﬁ ts directly to the employees. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 100 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Market value of plan assets by category 2022 2021 Fixed income, SEK 8,911m Equity, SEK 2,836m Real estate, SEK 2,014m Hedge funds, SEK 1,218m Infrastructure, SEK 739m Private equity, SEK 244m Cash, SEK 505m Fixed income, SEK 15,805m Equity, SEK 5,219m Hedge funds, SEK 2,598m Real estate, SEK 1,876m Infrastructure, SEK 518m Private equity, SEK 179m Cash, SEK 525m Market value of plan assets without quoted prices Fixed income Real estate Infrastructure Private equity December 31 2022 1,629 2,014 739 244 2021 1,412 1,876 518 179 Governance Deﬁ ned beneﬁ t 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. • Approval of the Group’s and local pension funds’ investment strategies. • 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 ﬁ nancial and actuarial assumptions to be used in the measurement of the deﬁ ned beneﬁ t obligations. Parent Company According to Swedish accounting principles adopted by the Parent Company, deﬁ ned beneﬁ t liabilities are calculated based upon oﬃ cially provided assumptions, which diﬀ er from the assumptions used in the Group under IFRS. The pension beneﬁ ts are secured by contributions to a separate fund or recorded as a liability in the bal- ance sheet. The accounting principles used in the Parent Company’s separate ﬁ nancial statements diﬀ er 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 2022 3,0% (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 proﬁ t or loss and the balance sheet. • Deﬁ cit 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 oﬀ set pension costs. Amounts recognized in the balance sheet Present value of pension obligations Fair value of plan assets Surplus/deﬁ cit 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 deﬁ ned beneﬁ t pension plans Insurance premiums Total expenses for deﬁ ned contribution plans Change in the present value of deﬁ ned beneﬁ t pension obligation for funded and unfunded obligations Special employer’s contribution tax Cost for credit insurance FPG Funded Unfunded Total Total pension expenses 440 2,255 Compensation from the pension fund Total recognized pension expenses December 31 2022 2021 –1,763 –1,393 2,278 2,464 515 1,071 –949 –434 –434 –1,495 –424 –424 2022 364 47 411 193 193 40 2 646 –80 566 2021 366 73 439 141 141 37 4 621 –1,264 –643 The Swedish Pension Foundation The pension liabilities of the Group’s Swedish deﬁ ned beneﬁ t 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, 2022, to SEK 2,278m (2,464) and the pension commitments to SEK 1,329m (969). The Swedish Group com- panies recorded a liability to the pension fund as per December 31, 2022, in the amount of SEK 0m (0). Contributions to the pension foundation during 2022 amounted to SEK 0m (0). Contributions from the pension foundation during 2022 amounted to SEK 80m (1,264). Opening balance, January 1, 2021 Current service cost Interest cost Beneﬁ ts paid Closing balance, December 31, 2021 Current service cost Interest cost Beneﬁ ts paid 1,815 356 56 –1,258 969 331 34 –5 Closing balance, December 31, 2022 1,329 Change in fair value of plan assets Opening balance, January 1, 2021 Actual return on plan assets Contributions and compensation to/from the fund Closing balance, December 31, 2021 Actual return on plan assets Contributions and compensation to/from the fund Closing balance, December 31, 2022 10 17 –43 424 33 13 –36 434 366 73 –1,301 1,393 364 47 –41 1,763 Funded 2,563 1,165 –1,264 2,464 –106 –80 2,278 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 101 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 23 Other provisions Provi- sions for restructuring Warranty commit- ments Opening balance, January 1, 2021 1,486 2,039 Acquisitions of operations Provisions made Provisions used Unused amounts reversed Reclassiﬁ cations Exchange-rate diﬀ erences Closing balance, December 31, 2021 Of which current provisions Of which non-current provisions 6 51 –282 –46 –52 77 1,240 566 674 — 544 –258 –13 19 96 2,427 1,201 1,226 Opening balance, January 1, 2022 1,240 2,427 Acquisitions of operations Provisions made Provisions used Unused amounts reversed Reclassiﬁ cations Exchange-rate diﬀ erences Closing balance, December 31, 2022 Of which current provisions Of which non-current provisions — 1,543 –520 –176 — 136 2,222 1,660 562 — 271 –307 –156 — 181 2,416 1,272 1,144 Group Claims 1,153 — 366 –520 — 25 94 1,118 301 816 1,118 — 424 –293 — — 144 1,391 346 1,045 Parent Company Provi- sions for restructuring Warranty commit- ments Other 551 — — –184 –5 — 3 365 259 106 365 — 805 –146 –113 — 38 949 778 171 507 — 96 — — — 7 610 153 457 610 — — –180 — — 30 460 111 349 52 — 44 — — — 1 97 12 85 97 — 8 –11 –15 — 4 83 8 75 Other 3,406 — 1,460 –872 –453 –1,104 146 2,584 635 1,948 Total 8,083 6 2,421 –1,932 –512 –1,112 413 7,368 2,704 4,664 2,584 7,368 — 994 — 3,231 –1,130 –2,250 –125 — 340 2,664 759 1,905 –457 — 801 8,693 4,037 4,657 Provisions are recognized when the Group has a present obliga- tion as a result of a past event, and it is probable that an outﬂ ow 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 eﬀ ect 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 commit- ments 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 either started the plan implementation or communicated its main features to those aﬀ ected 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 provision as per December 31, 2022, is expected to be consumed in 2023 and 2024. The provisions for claims refer to the Group’s insurance companies and include technical provision for both unearned premium and out- standing claims reserves including claims incurred but not reported (IBNR). Further, these captive provisions are related to the diﬀ erent insurance classes included in the Group’s insurance companies. Other provisions include mainly provisions for environmental liabil- ities, asbestos claims or other liabilities. The timing of any resulting outﬂ ows for provisions for claims and other provisions is uncertain. Total 1,110 — 140 –184 –5 — 11 1,072 424 648 1,072 — 813 –337 –128 — 72 1,492 897 595 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 102 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 24 Other liabilities Group December 31 Parent Company December 31 Accrued holiday pay Other accrued payroll costs Accrued interest expenses Contract liabilities1) Other accrued expenses Deferred government grants Other prepaid income VAT liabilities Personnel related liabilities 2022 1,107 1,183 254 7,516 3,607 484 179 1,017 854 2021 1,100 2,233 65 7,846 4,023 634 109 908 979 Other operating liabilities 1,342 1,848 2022 314 156 249 — 443 — 205 — — — 2021 290 692 62 — 712 — 195 — — — Total 17,543 19,745 1,367 1,951 1) Speciﬁ cation of the 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 credit balances for costumers. Note 25 Contingent assets and liabilities Group December 31 Parent Company December 31 2022 2021 2022 2021 Guarantees and other commitments On behalf of subsidiaries — — — — On behalf of external counterparties Total 1,491 1,491 1,309 1,309 1,097 1,097 996 996 A large part of the guarantees and other commitments on behalf of external counterparties, is related to pension commitments. In addition to the above contingent liabilities, guarantees for ful- ﬁ llment 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 discontin- ued operations prior to the early 1970s. The cases involve plaintiﬀ s who have made substantially identical allegations against other defendants who are not part of the Electrolux Group. As of December 31, 2022, the Group had a total of 3,365 (3,315) cases pending, representing approximately 3,371 (approximately 3,324) plaintiﬀ s. During 2022, 1,054 new cases with approximately 1,054 plaintiﬀ s were ﬁ led and 1,004 pending cases with approxi- mately 1,007 plaintiﬀ s 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 obliga- tions under the aﬀ ected insurance policies. It is expected that additional lawsuits will be ﬁ led against Electrolux. It is not possible to predict the number of future lawsuits. In addition, the outcome of asbestos lawsuits is diﬃ cult to predict and Electrolux cannot provide any assurances that the resolution of these types of lawsuits will not have a material adverse eﬀ ect on its business or on results of operations in the future. The Group is involved in a legal proceeding in Egypt relating to the privatization of an Egyptian subsidiary. The proceeding is currently on-going in the court of ﬁ rst instance in Cairo, Egypt. Electrolux believes that the lawsuit is without legal merit. 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 ﬁ nancial result and cash ﬂ ow. At this stage it is however not possible to evaluate the extent of such an impact. In 2019 an order was issued by the Italian Environmental Authorities for certain remediation actions connected to contamination at a manufacturing site in Aviano (Italy), a site that Electrolux subsidiary INFA s.p.a. (“INFA”) divested to the current operator of the site, Sarinox s.p.a. (“Sarinox”), in 2001. Following certain court proceedings, the order became ﬁ nal against Sarinox in the fourth quarter of 2021. Pursuant to the order, Sarinox shall, inter alia, participate in projects to improve the groundwater quality in the Friuli region, Italy (whereby interventions for a cost of EUR 42m are mentioned in the order), and take certain other measures to clean 42m cubic meters of con- taminated groundwater in the region. Although INFA is not liable to perform the obligations under the order from the Environmental Authority, it is possible that the situation can evolve and result in a liability for INFA in its capacity as former owner and operator or seller of the site. However, it is at this stage not possible to evaluate the extent of such a potential liability. No provision relating to this matter has been set. Note 26 Acquired and divested operations Acquisistions in 2022 There were no acquisitions completed during 2022. Divestments in 2022 Electrolux decided to exit Russia and has divested the business to local management through a sale of its Russian subsidiary on September 9, 2022. A capital loss of SEK 350m was recorded as a non-recurring item aﬀ ecting the operating income for Business Area Europe in the third quarter of 2022. Divestment of Russia Divested operations Fixed assets Other non-current assets Current assets Cash Non-current liabilities Current liabilities Currency eﬀ ects Other Capital loss Proceeds Divested cash Cash ﬂ ow eﬀ ect divested operations 2022 2021 12 26 39 546 –12 –20 –53 –10 –350 179 –546 –367 — — — — — — — — — — — — CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 103 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Acquisitions in 2021 CSAV Group On July 8, 2021, Electrolux acquired La Compagnie du SAV (CSAV) a French service provider specialized in repairing domestic appli- ances. Through the acquisition Electrolux strengthens its service net- work in France. CSAV is headquartered in Lisses, south of Paris, and employs around 200 people. Net sales in 2020 amounted to around EUR 25m. The operations are included in Business Area Europe. Gångaren 13 Holding AB On December 7, 2021, Electrolux acquired 50% of the shares in the Swedish company Gångaren 13 Holding AB. Before the acquisition, Electrolux held 50% of the shares in the company. The acquired company is accounted for as a fully owned subsidiary as from the acquisition date. Gångaren 13 Holding AB is the owner of Electrolux corporate head oﬃ ce in Stockholm. The purchase price for the additional 50% amounts to SEK 990m and as the acquisition mainly comprises a property, it has been classiﬁ ed as an asset acquisition, which means that it is included in the group accounts at accumu- lated cost, without eﬀ ects from deferred taxes. Acquired operations Consideration: Cash paid for acquisitions made during the year Fair value of holding Total consideration Recognized amounts of assets acquired and liabilities assumed: Total net assets acquired Assumed net debt / cash Goodwill Total Payments for acquisitions: Cash paid for acquisitions of operations Cash and cash equivalents in acquired operations Payments for acquisition of non-controlling interest in CTI SA and Somela SA, Chile Payment for acquisition of Gångaren 13 Holding AB Total paid Note 27 Employees and remuneration Average number of employees, by geographical area Employees and employee beneﬁ ts In 2022, the average number of employees was 50,769 (51,590), of which 31,350 (31,871) were men and 19,419 (19,719) were women. A detailed speciﬁ cation of the average number of employees by country has been submitted to the Swedish Companies Registration Oﬃ ce and is available upon request from AB Electrolux, Investor Relations. See also Electrolux website www.electroluxgroup.com. Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Total Group 2022 2021 19,574 19,026 8,215 8,383 14,339 15,852 8,641 8,329 50,769 51,590 Salaries, other remuneration and employer contributions Parent Company whereof pension costs1) Subsidiaries whereof pension costs Total 2022 2021 whereof pension costs 2022 Salaries and remuneration Employer contributions 1,538 — 18,106 — 19,644 — 832 349 3,342 624 4,174 973 2021 Salaries and remuneration Employer contributions 1,187 — 15,642 — 16,829 — 696 323 2,898 577 3,594 900 Total 2,370 349 21,448 624 23,818 973 1) Includes SEK 11m (5) refering to the President’s predecessors according to local GAAP. Salaries and remuneration for Board members, senior managers and other employees Parent Company Other Total 2022 Board mem- bers and senior managers1) Other employees 71 467 538 1,467 17,639 19,106 2021 Board mem- bers and senior managers1) Other employees 87 309 396 1,100 15,333 16,433 Total 1,538 18,106 19,644 1) According to the deﬁ nition of Senior managers in the Swedish Annual Accounts Act. Of the Board members in Group companies, 79 (84) were men and 25 (19) women, of whom 4 (5) men and 3 (3) women in the Parent Company. According to the deﬁ nition of Senior managers in the Swedish Annual Accounts Act, the number of Senior managers in the Group consisted of 187 (189) men and 70 (82) women, of whom 5 (6) men and 2 (2) women in the Parent Company. The total pension cost for Board members and Senior managers in the Group amounted to SEK 38m (27). — — — — — — — 2022 — — — — — 91 — 91 23 11 58 91 2021 91 –76 1 990 1,006 Total 1,883 323 18,540 577 20,423 900 Total 1,187 15,642 16,829 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 104 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Compensation to Board members ´000 SEK Ordinary compensation Compensation for committee work Total compensation Ordinary compensation Compensation for committee work Total compensation 2022 2021 Staﬀ an Bohman, Chairman 2,371 Petra Hedengran Henrik Henriksson Ulla Litzén Karin Overbeck Fredrik Persson David Porter Jonas Samuelson, President Kai Wärn (up to AGM 2021) Mina Billing (up to May 5 2022) Viveca Brinkenfeldt Lever Peter Ferm Wilson Quispe (as from May 9 2022) 691 691 691 691 691 691 — — — — — — 233 274 — 270 90 188 — — — — — — — 2,604 2,263 965 691 961 781 879 691 — — — — — — 659 659 659 659 659 659 — 159 — — — — 300 355 — 290 — 185 — — — — — — — 2,563 1,014 659 949 659 844 659 — 159 — — — — Total compensation 6,517 1,055 7,572 6,376 1,130 7,506 Compensation to the Board of Directors The Annual General Meeting (AGM) determines the compensa- tion to the Board of Directors for a period of one year until the next AGM. The compensation is distributed between the Chairman, other Board Members and remuneration for committee work. The Board decides the distribution of the committee fee between the commit- tee members. Compensation is paid out in advance each quarter. Compensation paid in 2022 refers to one fourth of the compensation authorized by the AGM in 2021 and three fourths of the compen- sation authorized by the AGM in 2022. Total compensation paid in cash in 2022 amounted to SEK 7.6m, of which SEK 6.5m referred to ordinary compensation and SEK 1.1m to committee work. Remuneration guidelines for Group Management The current remuneration guidelines were approved by the AGM in 2020. The guidelines apply until the AGM 2024 and are described below. The detailed guidelines can be found on page 41 in the Annual Report. Electrolux has a clear strategy to deliver proﬁ table growth and create shareholder value. A prerequisite for the successful implemen- tation of the Company’s business strategy and safeguarding of its long-term interests, including its sustainability, is that the Company is able to recruit and retain qualiﬁ ed personnel. To this end, it is nec- essary that the Company oﬀ ers competitive remuneration in relation to the country or region of employment of each Group Management member. These guidelines enable the Company to oﬀ er the Group Management a competitive total remuneration. The total remunera- tion for the Group Management shall be in line with market practice and may comprise the following components: ﬁ xed compensation, variable compensation, pension beneﬁ ts and other beneﬁ ts. Follow- ing the ‘pay for performance’ principle, variable compensation shall represent a signiﬁ cant portion of the total compensation opportunity for Group Management. Variable compensation shall always be measured against pre-deﬁ ned targets and have a maximum above which no payout shall be made. Variable compensation shall mainly relate to ﬁ nancial performance targets. Non-ﬁ nancial targets may also be used in order to strengthen the focus on delivering on the Company’s business strategy and long-term interests, including its sustainability. The targets shall be speciﬁ c, clear, measurable and time bound and be determined by the Board of Directors. Since 2004, Electrolux has oﬀ ered long-term performance share programs for senior managers of the Group. The alignment of Electrolux top management incentives with the interest of sharehold- ers 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 per- sonal holding 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 2022 The remuneration package for the President comprises ﬁ xed salary, variable salary based on annual targets, a long-term performance- share program and other beneﬁ ts such as pension and insurance. For the President, the annualized base salary for 2022 has been set at SEK 13.0m. The variable salary is based on annual ﬁ nancial and non-ﬁ nancial 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 from the company is 12 months, and from 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 severance 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 deﬁ ned 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 beneﬁ ts of the ITP-plan, alternative ITP and any insurable supplementary disability and survivor’s pension. In addition, the Company provides a disability pension of maxi- mum 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 2022, prior Presidents, and survivors is SEK 185m (183), whereof SEK 44m (42) relates to the current President. Remuneration and terms of employment for other members of Group Management in 2022 Like the President, other members of Group Management receive a remuneration package that comprises ﬁ xed salary, variable salary based on annual targets, long-term performance-share programs and other beneﬁ ts such as pensions and insurance. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 105 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Base salary is revised annually per January 1. The average base- salary increase for members of Group Management in 2022 was 7.9% (5.9). Variable salary in 2022 is based on ﬁ nancial and non-ﬁ nancial targets on business area and Group level. Variable salary for business area heads and heads of Commercial and Consumer Journey, Operations and Consumer Experience & Product Lines varies between a minimum (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 maxi- mum of up to 150% of annual base salary. 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 members of Group Management participate in the Group’s long-term performance based share programs. For further informa- tion on these programs, see below. 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’ severance pay based on base salary with deduction for other income during the 12 months severance period. Severance pay is applicable if the employment 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 beneﬁ ts, 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 deﬁ ned contribution plan where the contribution increases with age. The contribution is between 20 and 40 % of pensionable salary, between 7.5 and 30 income base amounts. The contribution to the supplementary plan is 35% of annual base salary. Accrued capital is subject to a real rate of return of 3.5% per year. The retirement age (60) for one member employed prior to 2012 has been amended. The member’s employment and pension entitlement 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 beneﬁ ts linked to the company’s share price. They have been designed to align manage- ment incentives with shareholder interests. For Electrolux, the share-based compensation programs are classi- ﬁ ed as equity settled transactions, and the cost of the granted instru- ment’s fair value at grant date is recognized over the vesting period which is 3.0 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 compensa- tion 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 2020, 2021 and 2022 The Annual General Meeting in March 2022, approved a long-term incentive program for 2022. The program is in line with the Group’s principles for remuneration based on performance, and is an inte- gral part of the total compensation for Group Management and other senior managers. Electrolux shareholders beneﬁ t 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 General Meetings of Electrolux have also approved long-term incentive programs for 2020 and 2021. The allocation of shares in the 2020 and 2021 programs is deter- mined by the position level and the outcome of three objectives; (1) earnings per share, (2) return on net assets and (3) CO2 reduction. Performance outcome of (1) and (2) is determined by the Board after the expiry of the one-year performance period and (3) after the expiry of the three-year performance period. The allocation of shares in the 2022 program is determined by the position level and the out- come of two objectives; (1) cumulative earnings per share and (2) CO2 reduction. Performance outcome of (1) and (2) is determined by the Board after the expiry of the three-year performance period. For the 2020, 2021 and 2022 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 achievement of the objectives be below the maximum but above the minimum, a proportionate allocation will be made. For the President and other members of Group Management in the 2022 program the granted shares will be multiplied by 0.75-1.25 depending on the outcome of a relative total shareholder return target. 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 beneﬁ ts under the program. However, under 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 beneﬁ ts under the program. 2020 and 2021 program covers 253 respectively 282 senior man- agers and key employees whilst the 2022 program covers 817 par- ticipants in almost 30 countries. Participants in the 2020 and 2021 program comprise six groups, i.e., the President, other members of Group Management, and four groups of other senior managers. Participants in the 2022 program comprise seven groups, i.e., the President, other members of Group Management, and ﬁ ve groups of other senior managers. All programs comprise Class B shares. The performance outcome for the ﬁ nancial targets and the CO2 target in the share program for 2022 will be determined after the expiry of the three year performance period. For 2022, LTI programs resulted in a cost of SEK 179m (including a cost of SEK 19m in employer contribution) compared to a cost of SEK 138m in 2021 (including a cost of SEK 28m in employer contribution). The total provision for employer contribution in the balance sheet amounted to SEK 67m (52). Repurchased shares for LTI programs The Annual General Meeting in 2021 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 2019 program, but this mandate has not been used by the company. Allocation of shares for the 2019 program There was no allocation of the 2019 performance-share program as the minimum level was not reached. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 106 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Remuneration to Group Management 2022 2021 ’000 SEK Annual ﬁ xed salary1) Variable salary2) Long- term PSP (cost)3) Other remuner- ation4) Total pen- sion con- tribution Social contribu- tion Annual ﬁ xed salary1) Variable salary2) Long- term PSP (cost)3) Other remuner- ation4) Total pen- sion con- tribution Social contribu- tion President and CEO 13,310 1,300 9,359 9 4,550 8,080 12,719 12,400 9,177 8 4,340 7,260 Other members of Group Management5) 46,322 5,497 21,029 5,578 10,389 16,324 38,636 35,601 23,302 Total 59,632 6,797 30,388 5,587 14,939 24,404 51,355 48,001 32,479 2,750 2,758 9,649 12,801 13,989 20,061 1) The annual ﬁ xed salary includes vacation salary, paid vacation days and salary deductions for company car. and an income is recorded in the income statement. The cost includes social contribution cost for the program. 2) For 2022: variable salary earned 2022 and to be paid in 2023, and for 2021: variable salary earned 4) Includes allowances and other beneﬁ ts such as gross-up of tax, housing, company car, 2021 and paid in 2022. severance and termination pay, costs for extraordinary arrangements. 3) Cost for share-based incentive programs are accounted for according to IFRS 2, Share-based 5) Other members of Group Management comprised of 9 people at the end of 2022, and of payments. If the expected cost of the program is reduced, the previous recorded cost is reversed 8 people at the end of 2021. Number of potential shares per participant, per category and year Group 1, President and CEO Group 2, other members of Group Management Group 3 Group 4 Group 5 Group 6 Group 7 Maximum number of B shares1),2) Maximum value, SEK1),2) 2022 133,854 44,990 19,228 11,333 7,952 5,213 2,082 2021 59,702 18,213 10,609 6,029 4,437 2,841 — 2020 2022 2021 2020 69,637 16,249,876 12,400,000 11,693,460 21,148 12,576 7,394 5,318 3,604 — 5,461,725 3,782,796 3,551,120 2,334,331 2,203,430 2,111,712 1,375,778 1,252,228 1,241,534 965,312 632,840 252,709 921,495 590,054 — 892,922 605,219 — 1) The maximum performance value for the participant in Group 1 will be 100%, Group 2, 90%, Group 3, 80%, Group 4, 60%, Group 5, 50% and Group 6, 40% of the participants annual base salary in 2020-2022 programs. The maximum performance value for the participant in Group 7 in 2022 pro- gram will be 20% of the participants annual base salary. For participants in Group 1 and 2 in 2022 program the granted number of shares will be multiplied by 0.75-1.25 depending on the outcome of a relative total shareholder return target. At maximum performance the aggregated value is converted to the average number of shares and average value per participant in respective category. The calculation was based on a share price of SEK 184.84 for 2020, SEK 224.67 for 2021 and SEK 121.40 for 2022 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. Due to the extra cash distribution that was distributed during 2021, it was decided to adjust the maximum number of shares in the 2020 and 2021 programs. The maximum number of shares in the above table represents the adjusted numbers. 2) For the 2020 program the outcome was 98,8 % resulting in 1,329,948 shares for allocation. For the 2021 program the outcome of the ﬁ nancial targets was 100% resulting in 1,143,820 shares, 285,956 shares are still subject to the CO2 reduction target. Decision on ﬁ nal outcome and allocation of shares under the 2021 program will be made after the expiry of the three year performance period for the CO2 reduction target. Maximum value refers to value at grant. For the 2022 program the allocation will be determined by the Board in 2025 after the expiry of the three year performance period in 2024. Performance-share program 2022 Cumulative earnings per share, SEK1) CO2 Reduction, %1) Total shareholder return (TSR) multiplier2) Total allocation Objectives Allocation of shares Minimum Maximum Actual 1) TBD TBD Outcome, % Weight, % Allocation, % TBD TBD 80 20 100 1) Measured over 2022 – 2024, outcome will be presented in the 2024 annual report. Outcome of the CO2 reduction for the 2021 program and ﬁ nal outcome for the 2021 program will be presented in the 2023 annual report. 2) For Group Management members a multiplier is applied. The multiplier is relative Electrolux B-share TSR to the TSR of the FTSE EMEA Consumer Discretionary Index during the period 2022 – 2024. The multiplier at maximum TSR performance is 1.25 times vested number of shares and at minimum TSR performance 0.75 times vested number of shares. Note 28 Fees to auditors At the 2022 Annual General Meeting PwC was appointed auditor for the period until the end of the 2023 Annual General Meeting. PwC Audit fees1) Audit-related fees2) Tax fees3) All other fees4) Total fees to PwC5) Deloitte Audit fees Audit-related fees All other fees Total fees to Deloitte Audit fees to other audit ﬁ rms Total fees to auditors Group Parent Company 2022 2021 2022 2021 56 0 1 10 67 — — — — 0 67 — — — — — 59 2 0 61 0 61 12 0 — 8 20 — 1 0 1 — 21 — — — — — 11 0 — 11 — 11 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 ﬁ nancial accounting and reporting standards, internal control reviews as well as review of interim reports. 3) Tax fees include for example tax compliance and tax consultation services. 4) All other fees include fees for transaction support services, ﬁ nancial advisory and other services. 5) Of audit-related fees, SEK 0m pertains to PwC Sweden, of tax fees, no amount pertains to PwC Sweden and of all other fees, SEK 8m pertains to PwC Sweden. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 107 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 29 Shares and participations Investments in associated companies The holdings in the South African associated companiy Llitha Solar remained unchanged during the year. SYR Africa has been deregistered during the year . The holdings in Next-Tech BVBA/SPRL, Belgium, has been impaired during the year. Next-Tech Investments in associated companies designs and provides software and hardware solutions for domestic kitchen retailers. Electrolux participation in Gångaren 13 Holding AB, Sweden, increased from 50% to 100% through an acquisition in December, 2021. Gångaren 13 Holding AB is a real estate company owning the corporate head oﬃ ce in Sweden. All associated companies are unlisted. Company Gångaren 13 Holding AB, Sweden SYR Africa (Pty), South Africa Llitha Solar (Pty) LTD, South Africa Next-Tech BVBA/SPRL, Belgium Vitality Ventures Group, Hong Kong Tradeplace B.V., The Netherlands Total 2022 2021 Holding, % Carrying amount Net income1) Holding, % Carrying amount Net income1) n/a n/a 49 49 n/a 20 n/a n/a 24 0 n/a 0 24 n/a n/a — –54 –3 0 –57 n/a 50 49 49 22 20 — — 22 45 9 0 76 14 — — — –3 0 11 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. Regarding Gångaren 13 Holding AB net income refers to the Group’s share up until December 2021. Group companies The following table lists the major companies included in the Electrolux Group. A detailed spec- iﬁ cation of Group companies has been submitted to the Swedish Companies Registration Oﬃ ce and is available upon request from AB Electrolux Investor Relations. Subsidiaries Major Group companies Argentina Australia Austria Belgium Brazil Canada Chile China Denmark Egypt Finland France Germany Hungary Italy Mexico The Netherlands Norway Poland Romania Singapore South Africa Spain Sweden Switzerland Thailand Ukraine United Kingdom USA 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. Electrolux de Chile S.A. Electrolux (Hangzhou) Domestic Appliances Co. Ltd Electrolux (China) Home Appliance Co. Ltd Guangdong De Yi Jie Appliances 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 Deutschland GmbH Electrolux Rothenburg GmbH Factory and Development Electrolux Lehel Kft Electrolux Appliances S.p.A. Electrolux Italia S.p.A. Electrolux de Mexico S.A. de C.V. Electrolux Associated Company B.V. Electrolux Home Products (Nederland) B.V. Electrolux Home Products Norway AS Electrolux Poland Spolka z.o.o. SC Electrolux Romania SA Electrolux SEA Pte Ltd Electrolux South Africa (Pty) Ltd. Electrolux España, S.A.U. Electrolux HemProdukter AB Electrolux Appliances AB Electrolux AG Electrolux Thailand Co. Ltd. DC Electrolux LLC Electrolux Plc Electrolux Home Products, Inc. Electrolux North America, Inc. Holding, % 100 100 100 100 100 100 99.89 100 100 100 100 99.97 100 100 100 100 100 100 100 100 100 100 100 100 100 99.83 100 100 100 100 100 100 100 100 100 100 100 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 108 ‘000 SEK 9,352,571 9,352,571 9,352,571 Note: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 All amounts in SEKm unless otherwise stated Note 30 Transactions with related parties Note 31 Proposed distribution of earnings Transactions with associated companies Group Parent Company 2022 2021 2022 2021 The Board of Directors proposes that income for the period and retained earnings be distributed as follows: Net sales to associates Purchases from associates Receivables on associates Payables to associates Loans to associates 6 6 — 3 16 7 6 2 1 12 — — — 3 16 — — — 1 12 The Group’s related parties are its associated companies, joint ventures, the Parent company’s largest shareholder Investor AB, Board members of AB Electrolux and Group Management members. Commercial terms and market prices apply to all transactions with related parties. Investment details in associated companies are disclosed in Note 29. Transactions and balances with associated companies are disclosed in the table above. Investor AB controls approximately 30% (28) of the voting rights in AB Electrolux. The Group has not had any transactions with Investor AB during the year, other than dividends declared, and there are no outstanding balances with Investor AB. Investor AB has controlling or signiﬁ cant inﬂ uence over companies with which Electrolux may have transactions within the normal course of business. Commercial terms and market prices apply to any such transactions. Remuneration to members of the Board of Directors and Group management are disclosed in Note 27. To be carried forward Total According to the company’s dividend policy, Electrolux target is for the dividend to correspond to approximately 50% of the annual income. As the annual income for 2022 was negative, the Board of Directors has proposed that the Annual General Meeting 2023 resolves that no payment of dividend will be made for the ﬁ scal year 2022 and that the company's available funds shall be carried forward to the new accounts. The Board of Directors declare that the consolidated ﬁ nancial statements have been prepared in accordance with IFRS as adopted by the EU and give a true and fair view of the Group’s ﬁ nancial position and results of operations. The ﬁ nancial 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 ﬁ nancial 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, ﬁ nancial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group. Stockholm, February 17, 2023 AB ELECTROLUX (PUBL) 556009-4178 Staﬀ an Bohman Chairman of the Board of Directors Jonas Samuelson Board member and President and Chief Executive Oﬃ cer Petra Hedengran Board member Henrik Henriksson Board member Ulla Litzén Board member Karin Overbeck Board member Fredrik Persson Board member David Porter Board member Viveca Brinkenfeldt Lever Board member, employee representative Peter Ferm Board member, employee representative Wilson Quispe Board member, employee representative Our audit report was submitted on February 21, 2023 PricewaterhouseCoopers AB Peter Nyllinge Authorized Public Accountant Partner in charge Helena Kaiser de Carolis Authorized Public Accountant CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 109 Auditor’s 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 year 2022. The annual accounts and consolidated accounts of the company are included on pages 31–50 and 67-108 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 ﬁ nancial position of parent company as of 31 December 2022 and its ﬁ nancial performance and cash ﬂ ow 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 ﬁ nancial position of the Group as of 31 December 2022 and their ﬁ nancial performance and cash ﬂ ow 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 administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the Group. Our opinions in this report on the annual accounts and consol- idated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit com- mittee 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 fulﬁ lled our ethical responsibilities in accordance 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 suﬃ cient and appropriate to provide a basis for our opinions. Our audit approach We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated ﬁ nancial statements. In particular, we considered where management made subjective judgements; for example, in respect of signiﬁ cant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform suﬃ cient work to enable us to provide an opinion on the consolidated ﬁ nan- cial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The ﬁ nancial statements of the Electrolux Group consists of some 200 reporting units operating in 55 countries all over the world. The operations are managed and monitored through the regional Business areas – Europe, North America, Latin America and Asia-Paciﬁ c Middle East and Africa. We have therefore scoped our audit procedures for the reporting units within each Business area, taking into account control environment and business processes at the individual reporting unit level but also by assessing business performance reviews and management oversight and follow-up activities on Business area level. In establishing the overall Group audit strategy and plan, we deter- mined the type of work that needed to be performed at the reporting units in scope by component auditors. For the most signiﬁ cant entities we required a full audit on their complete ﬁ nancial reporting, for others we required speciﬁ ed audit procedures for the most signiﬁ cant proﬁ t and loss and/or balance sheet accounts depending on the nature of operations conducted at the reporting unit. The group consolidation, ﬁ nancial statement disclosures and a number of complex transactions were audited by the Group engagement team. These include pensions, tax provisions and impairment of goodwill. In addition, we have applied a centralized Group audit approach with respect to the Electrolux Control System (ECS), where key pro- cesses and controls are documented and tested by management and quality assured by internal audit , all of which is evidenced in a global internal control tool. The result from the centralized testing regarding ECS and centralized IT systems was shared with local auditors. Local teams was then instructed how to carry out their audit procedures based on the shared information. The reporting units in scope for the Group audit procedures rep- resent approximately 75 percentage of Group net sales. In addition, the Group audit team have carried out analytical procedures on Business area level to include also smaller reporting units. Local statutory audit procedures are conducted for all companies in the Group subject to statutory audit requirements by law. Our audit is carried out continuously during the year. In connection with the issuance of the interim report for the second quarter, we report our observations to Group management, Business area management and the Audit Committee. At year end, we also report our main observations to the entire Board of Directors. For the second quarter, we issue a public interim review report. The scope of our audit was inﬂ uenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the ﬁ nancial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to inﬂ uence the economic decisions of users taken on the basis of the consolidated ﬁ nancial statements. Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated ﬁ nancial statements. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the eﬀ ect of misstatements, both individually and in aggregate on the ﬁ nancial statements as a whole. Key Audit Matters Key audit matters of the audit are those matters that, in our profes- sional judgment, were of most signiﬁ cance 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 in the appropriate period Revenue is an important measure in terms of business follow-up and execution on the Electrolux Group strategies and comprise mainly of sales of appliances to retailers. Revenue also represents a signiﬁ cant line item in the Group consolidated income statement amounting to SEK 134.9bn in 2022. The vast majority of the Group’s revenue consists of straight-forward product sales where revenue is recognized when the signiﬁ cant risks and rewards connected with ownership of goods have been transferred to the buyer. In our audit of revenue recogni- tion, correct cut-oﬀ is considered a matter of high importance due to the complexity in transaction ﬂ ows. Disclosures in Note 4 Net sales and operating income, provides additional information on how the Group accounts for its revenue. Our audit included a combination of testing of selected internal controls over ﬁ nancial reporting with respect to revenue recognition, analytical procedures and detailed tests of signiﬁ cant customer contracts. Diﬀ erent contracts may contain diﬀ erent delivery terms that need to be considered in terms of revenue recognition. Our audit also included, if considered, material a sample tests of proof of delivery to conﬁ rm that risk had been transferred to the customer CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 110 as well as data analytics relating to manual and automated journal entries to ascertain reporting in the correct period. supporting documentation and read the presentation of the costs relating to programs for eﬃ ciency measures in the annual report. Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so. Valuation of inventory Electrolux keeps a signiﬁ cant stock of raw materials, components and work-in-progress at its production units and stores ﬁ nished goods mostly at its sales units and distribution centers. Valuation of inventory is important for a fair presentation of gross margin. Inventory is also a signiﬁ cant item in the consolidated balance sheet and amounted to SEK 24.4bn as of December 31, 2022. In 2022 high cost inﬂ ation and decreasing customer demand have been speciﬁ c considerations. Valuation of inventory and provisions for obsoles- cence requires clear policies and is subject to management’s esti- mates. Note 15 Inventories, provides information about the Group’s accounting principles for measuring inventory and additional infor- mation on the line item. Other opinions The audit of the annual report and consolidated accounts for the ﬁ nancial year 2021 has been performed by another auditor, who has issued an auditor’s report dated 22 February 2022, with unqual- iﬁ ed opinions in the Report of annual accounts and consolidated accounts. 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 2-13, 51-55 and 112-121. The Board of Directors and the Managing Director are responsible for this other information. In our audit we have assessed the companies’ inventory processes Our opinion on the annual accounts and consolidated accounts including routines for valuation and assessment of obsolescence in order to gain an understanding of risks and controls. Considering the company’s operations, system support, inventory turnover and other relevant factors we have tested the obsolescence models in the sub- sidiaries against accounting principles. We have traced the disclo- sures information included in Note 15 Inventories to the accounting records and other supporting documentation and ensured that they are in line with the disclosure requirements. Costs for eﬃ ciency measures Electrolux has announced a cost reduction and North America turn- around program. The purpose of the program is to mitigate a slower demand environment and to ensure optimized eﬃ ciency and cover initiatives across all business areas. In 2022, the Group has recorded costs for the program amounting to SEK 1.5bn. The vast majority of the costs are provisions involving management estimates on the timing and measurement of costs for reducing the number of employees. An accurate reporting of an eﬃ ciency program involves management estimates on the timing and measurement of costs for reducing the number of employees. This includes impact on other costs that the eﬃ ciency measures give rise to as well as the presentation of the eﬀ ects on the business going forward. Note 23 Other provisions, pro- vide information on the Group’s accounting principles for measuring restructuring costs and additional information on the line item. Our audit included reading the detailed plans for eﬃ ciency measures presented to the board as documentation to support the decisions. We also obtained evidence on a sample basis that the criteria for recording provisions were met and properly recorded as well as assessed management’s measurement of provisions through evaluation of a sample of supporting documentation. In addition we traced disclosure information to accounting records and other 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 con- solidated accounts, our responsibility is to read the information identiﬁ ed above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge other- wise obtained in the audit and assess whether the information other- wise appears to be materially misstated. If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other informa- tion, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated 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 prepa- ration of annual accounts and consolidated accounts that are free from material misstatement, 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 The Audit Committee shall, without prejudice to the Board of Directors’ responsibilities and tasks in general, among other things oversee the company’s ﬁ nancial 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 mis- statement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂ uence the economic decisions of users taken on the basis of these annual accounts and consoli- dated accounts. A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisor s- inspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report. Report on other legal and regulatory requirements Opinions In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of AB Electrolux (publ) for the year 2022 and the proposed appropriations of the company’s proﬁ t or loss. We recommend to the general meeting of shareholders that the proﬁ t 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 ﬁ nancial year. Basis for Opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those stan- dards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the Group in accor- dance with professional ethics for accountants in Sweden and have otherwise fulﬁ lled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suﬃ cient and appropriate to provide a basis for our opinions. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 111 Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for appropri- ations of the company’s proﬁ t or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justiﬁ able 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, consolidation requirements, liquidity and position in general. The Board of Directors is responsible for the company’s organi- zation and the administration of the company’s aﬀ airs. This includes among other things continuous assessment of the company's and the Group's ﬁ nancial situation and ensuring that the company’s organization is designed so that the accounting, management of assets and the company’s ﬁ nancial aﬀ airs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guide- lines and instructions and among other matters take measures that are necessary to fulﬁ ll the company’s accounting in accordance with law and handle the management 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 appropriations of the company’s proﬁ t or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the pro- posal 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 generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s proﬁ t or loss are not in accordance with the Companies Act. A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report. PricewaterhouseCoopers AB, Stockholm, was appointed auditor of AB Electrolux by the general meeting of the shareholders on the 30 March 2022 and has been the company’s auditor since the 30 March 2022. The auditor’s examination of the Esef report Opinions In addition to our audit of the annual accounts and consolidated accounts, we have also examined that the Board of Directors and the Managing Director have prepared the annual accounts and consolidated accounts in a format that enables uniform electronic reporting (the Esef report) pursuant to Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528) for AB Electrolux (publ) for the ﬁ nancial year 2022. Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report has been prepared in a format that, in all material respects, enables uniform electronic reporting. Basis for opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the Esef report. Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility section. We are independent of AB Electrolux (publ) in accordance with professional ethics for accountants in Sweden and have otherwise fulﬁ lled our ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is suﬃ cient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for ensuring that the Esef report has been prepared in accordance with the Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director determine is necessary to prepare the Esef report without material misstatements, whether due to fraud or error. Auditor’s responsibility Our responsibility is to form an opinion with reasonable assurance whether the Esef report is in all material respects prepared in a for- mat that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), based on the procedures performed. RevR 18 requires us to plan and execute procedures to achieve reasonable assurance that the Esef report is prepared in a format that meets these requirements. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inﬂ uence the economic decisions of users taken on the basis of the ESEF report. The audit ﬁ rm applies ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regula- tory requirements. The reasonable assurance engagement involves obtaining evi- dence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstate- ment in the report, whether due to fraud or error. In carrying out this risk assessment, and in order to design procedures that are appro- priate in the circumstances, the auditor considers those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opinion on the eﬀ ectiveness of those internal controls. The reasonable assurance engagement also includes an evaluation of the appropriateness and reasonableness of assumptions made by the Board of Directors and the Managing Director. The procedures mainly include a technical validation of the Esef report, i.e. if the ﬁ le containing the Esef report meets the technical speciﬁ cation set out in the Commission’s Delegated Regulation (EU) 2019/815 and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. Furthermore, the procedures also include an assessment of whether the Esef report has been marked with iXBRL which enables a fair and complete machine-readable version of the consolidated statement of ﬁ nancial performance, statement of ﬁ nancial position, statement of changes in equity and the statement of cash ﬂ ow. Stockholm, February 21, 2023 PricewaterhouseCoopers AB Signature on Swedish original Peter Nyllinge Authorized Public Accountant Partner in charge Helena Kaiser de Carolis Authorized Public Accountant This is a translation of the Swedish language original. In the event of any diﬀ erences between this translation and the Swedish language original, the latter shall prevail. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 112 Additional information Eleven-year review Operations by business area yearly Quarterly information Deﬁ nitions Annual General Meeting Reports and events 113 115 116 118 120 121 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 113 Eleven-year review SEKm Net sales and income Net sales Organic growth, % Depreciation and amortization Items aﬀ ecting comparability2)/ Non-recurring items6) Operating income Income after ﬁ nancial items Income for the period Cash ﬂ ow Cash ﬂ ow from operations Cash ﬂ ow from investments 20121) 2013 2014 2015 2016 20171) 2018 20187) 2019 2020 2021 2022 5 years 10 years Compound annual growth rate, % 109,994 109,151 112,143 123,511 121,093 120,771 124,129 115,463 118,981 115,960 125,631 134,880 2.2 2.8 5.5 4.5 1.1 2.2 –1.1 –0.4 1.3 1.2 –1.0 3.2 14.2 –2.8 3,251 3,356 –1,032 –2,475 4,000 3,154 2,365 1,580 904 672 3,671 –1,199 3,581 2,997 2,242 3,936 3,934 3,977 4,150 3,981 4,821 4,587 4,489 5,390 — 2,741 2,101 1,568 — 6,274 5,581 4,493 — –1,343 –1,343 –1,344 — –727 –1,046 7,407 6,966 5,745 5,310 4,887 3,805 4,176 3,754 2,854 3,189 2,456 1,820 5,778 5,096 3,988 6,801 6,255 4,678 –215 –1,672 –1,320 n.m. n.m. n.m. n.m. n.m. n.m. 7,080 4,455 7,822 8,267 10,165 10,024 8,046 –4,702 –4,734 –3,759 –3,403 –2,557 –8,200 –6,506 — 7,314 — –6,994 11,932 –5,115 7,059 –2,274 n.m. n.m. –6,815 –6,962 of which capital expenditure in property, plant and equipment –4,090 –3,535 –3,006 –3,027 –2,830 –3,892 –4,650 — –5,320 –4,325 –4,847 –5,649 Cash ﬂ ow from operations and investments 2,378 –279 4,063 4,864 7,608 1,824 1,540 Cash ﬂ ow from operations and investments excluding acquisitions and divestment of operations Dividend, redemption and repurchase of shares Capital expenditure in property, plant and equipment as % of net sales 2,542 –74 –1,868 –1,860 3.7 3.2 4,132 –1,861 2.7 4,955 7,432 5,229 2,149 –1,870 –1,868 –2,155 –2,385 –2,385 –2,443 –2,012 –8,079 –4,659 2.5 2.3 3.2 3.7 3.9 4.5 3.7 3.9 4.2 — — 321 6,816 244 –9,236 n.m. n.m. 348 6,824 1,250 –8,868 Margins3) Operating margin, % Income after ﬁ nancial 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 beneﬁ ts, net Net debt Footnotes, see next page. 4.6 3.8 3.7 3.1 3.2 2.7 2.2 1.7 5.2 4.6 6.1 5.8 4.3 3.9 3.6 3.3 2.7 2.1 5.0 4.4 5.4 5.0 –0.2 –1.2 75,194 76,001 85,688 83,471 85,848 89,542 97,312 — 106,808 99,604 107,607 127,102 25,890 24,961 26,099 21,412 18,098 20,678 23,574 20,306 26,172 20,265 27,201 40,297 –6,505 –5,800 –8,377 –12,234 –14,966 –15,873 –16,848 –17,077 –17,390 –19,191 –17,726 –13,731 18,288 12,963 19,441 20,663 17,745 19,408 20,747 21,482 19,824 20,847 19,944 23,110 21,487 12,154 14,324 14,179 13,418 14,655 16,750 15,451 16,194 13,213 20,478 24,374 20,590 20,607 25,705 26,467 28,283 31,114 34,443 32,996 33,892 31,306 38,182 38,357 15,726 14,308 16,468 15,005 17,738 20,480 21,749 — 22,574 18,709 18,610 16,449 13,088 14,905 14,703 13,097 10,202 4,479 2,980 10,164 10,653 4,763 9,631 4,509 6,407 4,169 360 9,537 2,634 197 9,982 3,814 1,825 — 10,989 15,412 15,681 37,075 — — 3,866 7,683 3,679 1,556 891 –245 8,591 23,848 7.3 14.3 0.7 10.7 4.3 –4.3 31.2 n.m. 161.0 5.4 4.5 5.7 6.5 6.2 0.5 11.0 n.m. 8.9 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 114 SEKm Data per share, SEK Income for the period Equity Dividend4) 20121) 2013 2014 2015 2016 20171) 2018 20187) 2019 2020 2021 2022 5 years 10 years Compound annual growth rate, % 8.26 55 6.50 2.35 50 6.50 7.83 57.52 6.50 5.45 52.21 6.50 15.64 61.72 7.50 19.99 71.26 8.30 13.24 75.67 8.50 9.93 6.33 — 78.55 8.50 7.00 13.88 65.10 8.00 16.31 65.74 9.20 –4.81 60.92 — 0.8 1.3 4.2 8.4 –1.0 3.5 –1.9 Trading price of B-shares at year-end 170.50 168.50 228.80 205.20 226.30 264.30 187.10 187.10 229.90 191.35 219.50 140.78 –11.8 Key ratios Return on equity, % Return on net assets, % Net assets as % of net sales5) Trade receivables as % of net sales5) Inventories as % of net sales5) Net debt/EBITDA Net debt/equity ratio Interest coverage ratio Dividend as % of total equity Other data Average number of employees Salaries and remuneration Number of shareholders 14.4 14.8 22.5 15.9 11.3 1.2 0.65 2.72 11.8 4.4 5.8 21.8 17.0 10.6 1.4 0.74 2.11 13.0 15.7 14.2 20.4 16.2 11.2 1.1 0.58 5.16 11.3 9.9 11.0 17.3 14.3 11.5 1.0 0.43 3.75 12.4 29.4 29.9 14.2 15.2 10.5 0.0 0.02 3.75 10.5 31.9 36.0 17.5 17.5 12.4 0.0 0.01 12.16 11.6 18.2 22.7 19.0 17.3 13.5 – 0.08 9.05 11.2 — 20.2 17.5 17.1 13.4 0.2 — — — 11.4 12.0 22.3 17.7 13.8 0.8 0.34 2.57 10.8 34.1 22.6 22.0 18.6 12.3 0.2 0.08 5.04 10.8 24.4 28.5 19.0 17.9 15.9 0.7 0.46 7.29 12.4 –7.0 –0.6 27.2 15.6 17.7 3.8 1.45 0.18 — 59,478 60,754 60,038 58,265 55,400 55,692 54,419 51,253 48,652 47,543 51,590 50,769 13,785 13,521 14,278 15,858 15,886 16,470 17,363 15,829 16,318 15,666 16,829 19,644 51,800 51,500 46,500 45,485 48,939 45,295 49,870 49,870 50,544 59,401 73,578 83,248 –1.8 3.6 12.9 –0.3 3.6 4.9 Average number of shares after buy-backs, million Shares at year end after buy-backs, million 285.9 286.1 286.2 286.2 286.3 286.3 287.1 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 287.4 286.9 283.1 274.7 270.0 1) Amounts for 2012 have been restated where applicable as a consequence of the amended standard for pension accounting, IAS 19 Employee Beneﬁ ts 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 aﬀ ecting comparability is no longer in use. As from 2018, non-recurring items are presented, see page 118 for deﬁ nition. 3) Items aﬀ ecting comparability are excluded for the years 2012 och 2013. 2014 has been restated. 4) 2022: Proposed by the Board. 5) Annualized net sales, calculated at end of period exchange rates. 6) For more information, see Note 7. 7) Certain amounts have been restated for discontinued operations as a consequence of the distribution of the Professional business area in 2020. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 115 Operations by business area yearly SEKm Europe Net sales Operating income Margin, % North America Net sales Operating income Margin, % Latin America Net sales Operating income Margin, % Asia-Paciﬁ c, Middle East and Africa Net sales Operating income Margin, % Other 2018 20191) 2020 2021 2022 Non-recurring items1) 43,321 45,420 46,038 49,384 46,573 2,128 4.9 2,493 5.5 3,643 4,002 7.9 8.1 683 1.5 Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Group common cost Total Group 20182) –747 –596 — — — 20193) –752 –1,071 1,101 –398 –224 –1,343 –1,344 2020 — — — — — — 20214) — –727 — — — –727 20225) –774 241 –80 –66 –367 –1,046 1) For more information, see Note 7 in the annual reports. 2) Non-recurring items 2018: SEK –596m refers to the consolidation of freezer production in North America, SEK –747m refers to business area Europe and includes a ﬁ ne of SEK –493m, relating to an investigation by the French Competition Authority, and a cost of SEK –254m relating to an unfavorable court ruling in France. 3) Non-recurring items 2019: SEK –829m relates to the consolidation of U.S. cooking production and SEK –225m to the closure of a refrigeration production line in Latin America, recovery of overpaid sales tax in Brazil of SEK 1,403m, a legal settlement in the U.S. of SEK –197m and restructuring charges for eﬃ ciency measures and outsourcing projects across business areas and Group common costs of SEK –1,496m. 4) Non-recurring items 2021: SEK -727m referes to business area North America and arbitration in U.S. tariﬀ case on washing machines imported in to the U.S. from Mexico in 2016/2017. 5) Non-recurring items 2022: SEK 656m refers to a settlement regarding the arbitration in U.S. tariﬀ case, SEK – 350m to a loss from the exit from the Rus- sian market, SEK -1,536m to restructuring charges across business areas and Group common cost for the Group-wide cost reduction and North Amer- ica turnaround program, SEK 394m to the divestment of the oﬃ ce facility in Zürich, Switzerland, and SEK -210m to the termination of a U.S pension plan, transferred to a third party. 39,804 38,954 38,219 40,468 1,104 2.8 –516 –1.3 1,215 3.2 688 1.7 47,021 –2,394 –5.1 17,963 19,653 16,915 492 2.7 1,821 9.3 666 3.9 19,958 1,336 6.7 24,303 1,058 4.4 14,375 14,954 979 6.8 446 3.0 14,788 1,038 7.0 15,820 1,511 9.6 16,984 1,308 7.7 Operating income, Group common costs, etc. –527 –1,055 –783 –737 –870 Total Group Net sales Operating income Margin, % 115,463 118,981 115,960 125,631 134,880 4,176 3.6 3,189 2.7 5,778 5.0 6,801 5.4 –215 –0.2 1) Earlier years presented have been restated due to changes in the business area structure in 2019. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 116 Quarterly information Net sales and income by business area per quarter SEKm Europe Net sales Operating income Operating margin, % North America Net sales Operating income Operating margin, % Latin America Net sales Operating income Operating margin, % Asia-Paciﬁ c, Middle East and Africa Net sales Operating income Operating margin, % Other Q1 2022 11,535 602 5.2 9,940 752 7.6 4,761 85 1.8 3,882 284 7.3 Q2 2022 11,345 142 1.2 11,905 –270 –2.3 6,628 303 4.8 4,231 426 10.1 Q3 2022 11,107 75 0.7 12,909 –1.227 –9.5 6,518 440 6.8 4,710 511 10.8 Q4 2022 Full year 2022 12,586 –135 –1.1 12,266 –1,649 –13.4 6,755 229 3.4 4,162 88 2.1 46,573 683 1.5 47,021 –2,394 –5.1 24,303 1,058 4.4 16,984 1,308 7.7 Q1 2021 11,637 1,122 9.6 9,002 493 5.5 4,516 423 9.4 3,871 393 10.1 Q2 2021 11,721 1,013 8.6 10,132 558 5.5 4,782 327 6.8 3,668 312 8.5 Q3 2021 11,905 833 7.0 10,378 196 1.9 4,910 387 7.9 3,736 362 9.7 Q4 2021 Full year 2021 14,122 1,034 7.3 10,955 –559 –5.1 5,750 200 3.5 4,545 445 9.8 49,384 4,002 8.1 40,468 688 1.7 19,958 1,336 6.7 15,820 1,511 9.6 Operating income, common group costs, etc. –148 –41 –184 –497 –870 –134 –226 –139 –237 –737 Total Group Net sales Operating income Operating margin, % Income for the period Earnings per share, SEK1) Number of shares after buy-backs, million Average number of shares after buy-backs, million 1) Basic, based on average number of shares, excluding shares owned by Electrolux. 30,118 1,575 5.2 950 3.40 278.0 279.5 33,749 35,244 560 1.7 257 0.93 274.3 276.3 –385 –1.1 –605 –2.23 270.0 272.0 35,769 –1,964 –5.5 –1,922 –7.12 270.0 270.0 134,880 –215 –0.2 –1,320 –4.81 270.0 274.7 29,026 2,297 7.9 1,556 5.41 287.4 287.4 30,303 30,929 35,372 125,631 1,983 6.5 1,383 4.81 287.4 287.4 1,639 5.3 1,143 3.98 287.4 287.4 882 2.5 596 2.09 283.1 285.6 6,801 5.4 4,678 16.31 283.1 286.9 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 117 Non-recurring items1) Europe North America Latin America Asia-Paciﬁ c, Middle East and Africa Common Group cost Total Group Q1 20222) — 656 — — — 656 Q2 2022 — — — — — — Q3 20223) –350 — — — — –350 Q4 20224) –424 –415 –80 –66 –367 –1,352 Full year 2022 –774 241 –80 –66 –367 –1,046 Q1 2021 — — — — — — Q2 2021 — — — — — — Q3 2021 — — — — — — Q4 20215) — –727 — — — Full year 2021 — –727 — — — –727 –727 1) For more information, see Note 7. 2) The non-recurring item of SEK 656m in the ﬁ rst quarter of 2022 refers to business area North America and a settlement regarding the arbitration in U.S. tariﬀ case on washing machines imported into the U.S. from Mexico in 2016/2017. 3) The non-recurring item of SEK -350m in the third quarter of 2022 refers to the business area Europe and the exit from the Russia market. 4) The non-recurring items of SEK -1,352m in the fourth quarter of 2022 refer to restructuring charge of SEK -1,536m for the Group-wide cost reduction and North America turnaround program, a capital gain of SEK 394m for the divestment of Electrolux oﬃ ce facility in Zürich, Switzerland, and SEK -210m from the termination of a U.S. pension plan, transferred to a third party. 5) Non-recurring item of SEK -727m in the fourth quarter of 2021 refers to business area North America and arbitration in U.S. tariﬀ case on washing machines imported into the U.S. from Mexico in 2016/2017. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 118 Deﬁ nitions This report includes ﬁ nancial measures as required by the ﬁ nancial reporting 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 useful ﬁ nancial information on the Group’s ﬁ nancial position, performance and development in a con- sistent way. These other measures and indicators are considered essential in supporting the Group’s ﬁ nancial goals to achieve a combination of continuous growth, high proﬁ tability, a stable cash ﬂ ow, and an optimal capital base to generate a high total return for Electrolux shareholders. Thus, there are measures related to growth, proﬁ tability and capital, share-based measures and capital indica- tors which are considered relevant to present on a continuous basis. Below is a list of deﬁ nitions 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. The calculation of Net debt/EBITDA is an exception, see deﬁ nition below. 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 eﬀ ects. Organic growth Change in net sales, adjusted for changes in exchange rates, acquisitions and divestments. 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. 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. Net debt/EBITDA Net debt at end of period in relation to EBITDA, excluding non-recurring items, calculated at average rates for the period. Equity/assets ratio Total equity as a percentage of total assets less liquid funds. 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 divestment date. Proﬁ tability measures EBITA Operating income excluding amortization of intangible assets. EBITA margin EBITA expressed as a percentage of net sales. EBITDA Operating income excluding depreciation and amortization. Operating margin (EBIT margin) Operating income (EBIT) expressed as a percentage of net sales. Operating margin (EBIT margin) excluding non-recurring items Operating income (EBIT) excluding non-recurring items, expressed as a percentage of net sales. 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. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 119 Capital indicators Liquid funds Cash and cash equivalents, short-term investments, ﬁ nancial 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 facilities 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, ﬁ nancial derivative liabilities1), accrued interest expenses and prepaid interest income1). Total short-term borrowings Short-term borrowings, ﬁ nancial 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. Net provision for post-employment beneﬁ ts Provisions for post-employment beneﬁ ts less pension plan assets. Net debt Financial net debt, lease liabilities and net provision for post- employment beneﬁ ts. Other measures Operating cash ﬂ ow after investments Cash ﬂ ow from operations and investments adjusted for ﬁ nancial 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 proﬁ t or loss items in operating income2) which are relevant for understanding the ﬁ nancial performance when comparing income for the current period with previous periods. 1) See table Net debt on page 37. 2) See Note 7 for more information. CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 120 Annual General Meeting Electrolux Annual General Meeting will be held on March 29, 2023 at 4.00 p.m. CET at Münchenbryggeriet, Torkel Knutssonsgatan 2, Stockholm, Sweden. Proposal for resolution on acquisition of own shares Electrolux has, for several years, had a mandate from the Annual General Meetings to acquire own shares. Additional information about the Annual General Meeting has been published in the notice convening the Annual General Meeting. Proposed dividend According to the company’s dividend policy, Electrolux target is for the dividend to correspond to approximately 50% of the annual income. As the annual income for 2022 was negative, the Board of Directors proposes that no dividend shall be distributed for the ﬁ scal year 2022. Even though the Board of Directors currently has no intention to exercise an authorization to acquire additional own shares, the Board of Directors proposes the authorization is to be renewed as an authorization is valid until the following Annual General Meeting. The Board of Directors would then be able to decide to repurchase own shares, if the conditions are appropriate and the Board of Directors were to ﬁ nd it would be in the best interests of the company and the shareholders. The Board of Directors therefore proposes the Annual General Meeting 2023 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 shares of series B 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, the company’s share related incentive programs as well as to be able to adapt the company’s capital structure. As of December 31, 2022, Electrolux held 13,049,115 shares of series B in Electrolux, corresponding to approximately 4.6% of the total number of shares in the company. Proposal for re-election of all board members The Nomination Committee has proposed re-election of all board members. Staﬀ an Bohman is proposed to be re-elected as Chairman of the Board of Directors, and Petra Hedengran, Henrik Henriksson, Ulla Litzén, Karin Overbeck, Fredrik Persson, David Porter and Jonas Samuelson as Board members. Kay dates regarding the AGM 2023 2022 September 23 Nomination Committee appointed for AGM 2023 2023 February 9 Proposals from Nomination Committee presented March 1 Notice to AGM published at the latest 21 Deadline for registration in share register 23 Deadline for notice of intent to participate in AGM 29 AGM 2023 CEO statement Governance and control Financial reports Additional information Electrolux Annual Report 2022 121 Reports and events The Electrolux website www.electroluxgroup.com/ir contains additional and updated information about such items as business development, strategy and the Electrolux share, as well as a platform for ﬁ nancial statistics. Q4Results 2022 presentation Jonas Samuelson, President and CEO Therese Friberg, CFO Sophie Arnius, Head of Investor Relations How we create value www.electroluxgroup.com/ir/create-value Interim Reports www.electroluxgroup.com/ir Shape living for the better Sustainability Report 2022 Capital Markets Update www.electroluxgroup.com/CMU Sustainability Report www.electroluxgroup.com/sustainabilityreport2022 Digital subscriptionservice can be accessed at www.electroluxgroup.com/subscribe Investor Relations www.electroluxgroup.com/ir Remuneration Report 2022 Remuneration Report 2022 www.electroluxgroup.com/en/remuneration-report-2022 Financial reports and major events in 2023 Feb 2 Year-end report 2022 Mar 20 Capital Markets Update Mar 29 Annual General Meeting Apr 28 Interim report January–March Jul 20 Interim report January–June Oct 27 Interim report January–September 341 298 Printed matter Larsson Offsettryck Electrolux, AEG and Zanussi are registered trade- marks of AB Electrolux. For further information about trademarks, please contact Electrolux Group Intel- lectual Property, Trademark. Concept, text and production by Electrolux Investor Relations and Hallvarsson&Halvarsson. AB Electrolux (publ), 556009-4178 Mailing address: SE-105 45 Stockholm, Sweden | Visiting address: S:t Göransgatan 143, Stockholm Telephone: +46 8 738 60 00 | Website: www.electroluxgroup.com

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