Always in Flux

With almost EUR 12 billion in revenues, Electrolux is one of Sweden’s largest companies. To remain competitive, it strives for operational excellence. It has already come a long way, but the need to improve efficiency never stops, says CFO Tomas Eliasson.

Mr Eliasson, you became the CFO of Electrolux just this year. What’s your assessment of the company?

For more than 25 years, I’ve been with companies like this – European-based companies with a global presence. And to be honest, from a structural point of view, many of the challenges and the questions – short and long-term – are exactly the same. How do you interact with your customers? What should your market presence be like? How do you expand in an emerging market? How do you leverage on your scale and optimize production, supply management and administration?

But Electrolux is new to you in that it deals in consumer durables.

I was going to come to that, exactly. I have never been in consumer durables before. The difference between this and my previous business-to-business companies is that here you need to have more consumer insight, understand consumer behaviour better and put more focus on branding. I’m not saying that this is not important in other companies as well, but here it is just a bit more important.

Is managing volatility harder at a B-2-C than at a B-2-B company?

Not necessarily. Volatility is much more driven by the balance between the need for investment and recurring revenues. If you take a business which is very dependent on, say, the construction of new factories or new power stations, then the business becomes very volatile. When the business cycle is up, then there is huge demand. When the business cycle is down, it dries up pretty quickly. But the larger the proportion of recurring revenues you have, the more stable the business is. I don’t think it matters as much if it’s consumer or non-consumer.

But does that really affect your work as a CFO?

You make a good point. It does not affect my core finance work that much, but this is not to say it is not important.

Electrolux wants to achieve operational excellence. How far has the company progressed in this area?

Our manufacturing restructuring programme that we launched in 2004 has yielded annual savings of about SEK 3 billion (EUR 281m) to date. Last year we communicated further such measures, which we anticipate will add further annual savings of at least SEK 1.6 billion. Aside from this, we are reducing product costs and lowering capital intensity by utilising our global strength in modularisation, shared services and better aligned purchasing and R&D. These initiatives have already started to yield clear results, and expect to generate annual savings of SEK 3 billion with full impact from 2015.

Article from: CFO

Read the entire article herepdf145.53 kB

EY refers to one or more of the member firms of Ernst & Young Global Limited (EYG), a UK private company limited by guarantee. EYG is the principal governance entity of the global EY organization and does not provide any service to clients. Services are provided by EYG member firms. Each of EYG and its member firms is a separate legal entity and has no liability for another such entity's acts or omissions. Certain content on this site may have been prepared by one or more EYG member firms