Opportunities Challenges 2 3/2/2016 Latin America is an attractive - PowerPoint PPT Presentation

Brazil’s Latin America Our Strategy Our Ambition Opportunities Challenges 2 3/2/2016

Latin America is an attractive long-term market opportunity... Relevant major appliances... Large growing population... Improving social class... Global major appliance ndustry (Sell-out) LA major appliance industry (Sell-out) Total of SEK 1,780bn 2015 Basis SEKbn % • Brazil 58 36% • Mexico 26 16% • Argentina 23 15% Latin America • Chile 9 6% ~9% • Andean 19 12% • CA & Caribbean 19 12% • Others 6 4% 160 100% Large growing population Improving social class migration 2015 Basis million 24% • Brazil 37% 206 ABC • Mexico 125 34% D • Argentina 42 38% • Chile E 18 • Andean 97 42% • Others 25% 148 635 2000 2012 Source: Electrolux BMI, World Bank, IMF; CEPAL (Latin America Economic Association) - GDP per Capita of 18 Biggest Countries, and Euromonitor 3

The key categories represents over 70% of total major appliances industry in the region... Market size in value - 2015 sell-in (SEKbn) Food Preservation Food Preparation Fabric Care (Refrigerators + Freezers) (Cookers + Microwave owens) (Washers + W&D) Brazil 13.5 41.7% 12.7 50.7% 7.6 32.4% Argentina 3.4 10.4% 1.8 7.3% 2.1 8.8% Chile 1.7 5.1% 1.1 4.4% 1.5 6.4% Mexico 6.2 19.0% 4.2 16.6% 5.8 24.6% Andean 4.8 3.0 4.9 14.8% 11.9% 20.9% Central America 2.9 9.1% 2.3 9.1% 1.6 6.9% & Caribbean Total Total Total ~23.4bn (22.4%) ~32.5bn (31.1%) ~25.1bn (24.0%) Source: Electrolux Planning and BMI Depts. 4

Electrolux aims to be the #1 player in the region... Vision Be the #1 Player in Latin America Being the “Best” Appliance company in the world measured... Our response • … by our Customers Best in class products for all brands in major markets • Leader in consumer satisfaction • Top 3 brand in all market in Latin America • Leader in key categories in major markets • … by our Employees Leading employee engagement • … by our Shareholders Sustainable earnings growth • Lowest cost • Lower asset base • Leading high growth and margin segments 5

Sustainable profit growth for many years, but there is a challenging short- term environment, mainly in Brazil… In comparable basis Net Sales EBIT NOWC (SEKbn) (%) (%) 25.0 3.2 40% 15% 36% 22.5 -14bp 2.8 CAGR CAGR 2000-15 35% 2000-15 2000-15 18.8 18.5 20.0 2.4 17.5 2.0 30% 28% 15.0 1.6 12.5 25% 6.1% 1.2 10.0 0.8 20% 7.5 2.5% 15% 0.4 5.0 15% 0.0 2.5 14% -0.5% 2.4 0.0 -0.4 10% 2014 2014 2014 2000 2015 2000 2015 2000 2015 6

Continued growth in the region but Brazil is weakening... In SEKm; comparable basis Major Appliance Market (Value) * Electrolux Net sales 80,000 16,000 12,914 66,944 -14% -12% Brazil 14,000 Brazil 70,000 12,000 60,000 CAGR: 6.3% 10,000 CAGR: 13.7% 11,396 57,571 50,000 (2000-2015) (2000-2015) 8,000 40,000 6,000 30,000 22,978 4,000 1,651 20,000 2,000 10,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 120,000 9,000 102,519 8,000 Other LA Other LA 6,5247,150 98,056 7,000 100,000 6,000 CAGR: 4.7% +5% CAGR: 16.4% +10% 5,000 (2000-2015) (2000-2015) 80,000 4,000 3,000 60,000 2,000 51,144 730 1,000 CTI acquisition (2011) 40,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 (*) Source: Electrolux BMI Dept. & Euromonitor Sell-out Data 7

Sharp retraction in Brazil, partially offset by other countries... EBIT Brazil Other LA 2003 2015 8

Commodity prices affecting Latin America, with political and economic consequences in Brazil… GDP % Local currency devaluation Brazil 68% Chile 34% 0.1 2.5 Mexico 2.1 Chile Mexico 32% 0.2 Argentina Argentina 17% -0.2 (Before new Brazil -1.0 Government) -4.0 -4.1 -4.7 2009 2010 2011 2012 2013 2014 EX15 EX16 Jan-14 Dec-14 Dec-15 Source: Bloomberg, Focus Survey (BCB), JP Morgan, IMF and EIU (Economist Intelligence Unit) 9

Most economic indicators in Brazil are unfavorable... Consumer Confidence Index... Higher inflation and interest rate... 120 17% Accumulated in 12 months 14.25% 109 110 14% 100 11% Interest Rate (Selic) 11% 90 8% 80 5% Inflation (IPCA) 70 2% 75 60 -1% Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Dec-15 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Dec-15 Higher unemployment rate... Industrial Production Evolution Index... Thousands 105 1200 Brazilian net creation of formal job Rolling 12 Months (‘000 individual jobs) - Rolling 12 months 800 100 101.9 400 484 0 -12.4% 95 6.8% -400 8.4% -800 90 ~ -1,500 -1200 89.0 85 -1600 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Dec-15 Dec-15 (EX) Source: Bloomberg and Focus Survey (BCB) 10

The appliances industry also affected by credit restriction and high interest rates... In SEKm Market sell-out volume in Brazil (T3) Change in % vs. PY Volume by quarter 2014 2015 -6% -8% -15% 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: Electrolux estimates 11

The appliance industry forces have changed in Brazil... Main Suppliers • Foreign suppliers USD impact Affected by automotive • Domestic suppliers industry & other Competitors Retailers • Top3 (~55%) − Changed CEOs in last 6 months • Leaders (all categories) − Significant negative results (worst – GPA – Whirlpool − Price pressure from retailers in history, accumulating SEK – Mluiza − Profitability eroded – Electrolux ~200m in Q315) – MdV Major − Volume 20% to 30% down • New Comers − Low prices to mkt. + promotions − Low prices to enter the market (washers & split A/C) Appliances • Hypermarkets (~8%) − OK, but not profitable − Not profitable – Koreans • Solid Medium (~5%) Brazil • Niche (first price domestic) – Fast Shop − OK − Expanding with – Atlas – Lojas Cem − Lower margin consumer downtrade – Muller • Small (~14%) − 3 “Chapter 11” cases − Not profitable – Esmaltec • E-comm (~18%) − From double digit to single digit – Mabe (filed for growth - no profit Bankruptcy on − Electrolux: E-store (high February 10 th , 2016) profitability & growth) Products • Downgrade in price points • High level of idle capacity deteriorate conversion / absorption cost (high level of fixed cost) • Re-introduction of 1 st price cycle defrost products • Lower volume of imported products • Enhance export activities 12

How to set-up short-term challenges and prepare for future growth… S&OP • Channel inventory management • Distribution (stock-out avoidance) • Price increases (to mitigate significant currency headwinds) • Profitability & Cost to Serve management - customer & product mix Product Cost Optimization Capacity Adjustments Maximize • • Suppliers negotiation Plant re-configuration • – Optimization Scale optimization Cash Flow • product lines Streamlining Cost Reduction / Asset Management • Complexity reduction (SKUs, internal processes etc.) • Cost reduction plan (Overhead and SG&A, >20% in headcount reduction) • CAPEX optimization • NOWC improvement 13

We trust in our Best in Class strategy... • • • • Development of Customer and Scale in production Strong talent pools consumer based on product mix and purchasing in business critical differentiation improvement functions • Low costs together • • • Best in Class Direct sales and with value product Transform HR products & services new channels design towards Business and POS • • • Digital, digital, Product cost High performing • Brand strengths digital organization • SG&A • • Sustainability Adjacent products • NOWC • Acquisitions • Group synergies • Modularization 2.0 14

Innovation based on consumer insight, driving profitable growth... • Xxxx The Innovation Triangle Positioning – Xxxx Speed Focus Feature Value > 3x Cost – Xxxx 18 to 12 Months Consumer Value – Xxxx Ability to Extract Product – Xxxx Value Differentiation Design Marketing • Xxxx • Xxxx Profit Consumer Benefit 70% Consumer Price R&D Preference (We talked with more than 7,000 Alignment consumers in 2015) 15

All projects above 70% consumer rate... Consumer preference Infinity Steam I-Kitchen TL Washer I-Kitchen Cooker Line Extension & Dryer 95% 94% 96% 83% 16

3R prototyping culture... New target Rough, Rapid and Right 18 months from draft to launching 12 months Prototyping Concept & Final Line Investment Design Testing Product Extension 17

Quality market share improvement based on product launches... Brazilian Case ...reaching 100 product launches per year 18

Recognition... Design Awards... 19

Visual brand language aligned across the region in all products...few brands Prod. Visual Brand Class. Language Mexico Levels Brazil CA & Caribbean Andean Chile Argentina Super Premium Meaningful Best in Class Experience Premium Statement Pleasurable Sense Performance Best in Class Convenient Mass Usability Core 20

Electrolux i-Kitchen... 21

Top Load W&D with Wi-Fi... 22

Mini Silent − Washer... 23

New Home Pro Line 24