Good morning, good afternoon, good evening, perhaps. Welcome, everyone, to the presentation and discussion of the fourth quarter and full year 2015 results for the Electrolux Company. With me here today, I have our CFO, Tomas Eliasson, and our Head of IR, Catarina Ihre. Electrolux's new President and CEO, Jonas Samuelson, is also on the call with us today. Let's begin the presentation. If you turn to the first slide, let's start with a summary of the full year. In 2015, Electrolux achieved total sales of SEK 124 billion, corresponding to a growth of 10.1%, of which 2.2% was organic, 0.1% was from acquisitions, and 7.8% was from currency translation effects. The increase in sales was driven by good performance in our operations in Europe, North America, and Professional Products.
The group's EBIT increased by 34% versus last year, excluding the costs related to the not completed acquisition of the GE Appliances. The EBIT margin was 3.9% versus 3.2% the previous year. EMEA, which accounted for about 30% of the group sales, showed strong improvement. Focus on profitability, built-in kitchen products, and reducing complexity and costs in our portfolio contributed to the results. Our North American operations started 2015 with higher costs due to production-related issues. The team there has been very successful in restoring profitability in that sector. In Latin America, we experienced significant challenges due to the weak macroeconomic environment, falling consumer confidence, as well as currency headwinds. Price increases and cost actions have partly mitigated those challenges.
We concluded the year with a very strong cash flow of SEK 7.5 billion, including all costs related to the not completed GE acquisition. Hence, we are entering 2016 with a strong financial position. The board's proposal of a dividend of SEK 6.50 per share reflects Electrolux's commitment to continue to deliver value to all of our stakeholders. With that, let's turn the page and look at the Q4 highlights. In the fourth quarter, Electrolux showed positive organic growth in our two largest markets, in Europe and North America, and also in our professional business. The growth was mainly driven by higher volumes, but also improved price mix across most of the business areas. There was also a small contribution from acquisitions in Q4. The market trend in both North America and all key Western European countries continued to be positive.
In Latin America, the Brazilian market continued to decline significantly. In the quarter, we took costs related to the not completed GE transaction, including the termination fee. We also took a restructuring charge in our small appliance business, which impacted our group EBIT negatively. Our reported operating income came in at a negative SEK 202 million in the quarter. Underlying earnings, excluding the cost related to the GE transaction, were stable and showed a margin of 4.6% in this quarter versus 4.4% a year ago. Earnings improved in three of our business areas versus last year and achieved higher margins as a result of improved price mix and efficiency. Cash flow in Q4 was quite strong. Turn the page. I'd like to briefly mention a few market highlights during the quarter.
During Q4, we announced that Electrolux had joined Google's Early Access program for its Brillo operating system and Wave communications protocol for the internet, aimed at developing connected appliances for smart homes. We are excited and look forward to working with our partners within connectivity and to bring new and better solutions to our consumers. Also in the quarter, Electrolux Professional Products received an international award for the best sustainable innovation with its high-end thermaline cooking range. I'm very proud of that accomplishment by our professional team. Finally, I'd like to highlight, recently, Standard & Poor's confirmed its upgrade of the company's corporate credit rating to BBB+. This is positive news, of course, and underlines the financial strength of the company as we move into 2016 with new opportunities.
The next chart is the sales in local currencies, and in the chart, you see sales development for the group. In the quarter, we continued to have a good sales trend, driven by positive organic growth as a slight contribution from the acquired growth, which is about 10 basis points in the quarter. Over the last couple of years, Electrolux has achieved a compounded annual growth that's been close to our strategic target to grow 4% annually. Now I'll hand over to Jonas Samuelson, my successor as the new President and CEO of the company, to cover the development of our business in the area of EMEA during Q4. Jonas, please.
Thank you, Keith. Good morning, everybody. During the fourth quarter, Major Appliances EMEA continued to show positive organic sales growth, driven by good mix and higher volumes. Demand for appliances in all key Western European countries increased, while demand in Eastern Europe was impacted by continued sharp declines in Russia and Ukraine. Electrolux sales volumes grew in most key European markets, and we continued to gain share in the last quarter of the year. Product mix improved due to the ongoing strategic focus on higher-margin products. Prices, on the other hand, continues to be under pressure in Europe and are impacting us negatively. Our results increased by 50% versus previous year, and our EBIT margin reached 7.4% in the quarter. This was a result of higher sales volumes, improved product mix, and benefits from the ongoing cost efficiency programs.
Price pressure continued, of course, as mentioned, to impact our earnings. Let's turn the page and talk about the market development in Europe. On the surface, this slide looks, it gives a pretty bleak picture, but actually, excluding Russia and Ukraine, the European market continued to grow in the fourth quarter and was up by 3%, if again, excluding Russia and Ukraine. Including these markets, as you can see, the market was negative, actually, by over 5%. Demand in Western Europe as well increased by 3% and has now increased for 8 consecutive quarters, and it was particularly strong in the Nordics, in the U.K., in Switzerland, and in Spain. Demand in Eastern Europe was positive, excluding Russia and Ukraine, but including these countries, the region declined by 24%.
As you can imagine, Russia fell by about 40%, and same with Ukraine in the fourth quarter, very sharp declines there. We do expect the European market to continue to be solid in 2016 and grow by about 2%-3% for the full year. We also forecast the markets in Eastern Europe, excluding then Russia and Ukraine, to grow by about 2%. Of course, the development in those two markets, Russia and Ukraine, remains uncertain. I'll hand it back to you, Keith.
Okay, Jonas, thank you. Also congratulations to you and your team on continued fantastic performance in Europe. Well done. Let's look at North America. Our operations in North America continued to recover and showed a year-over-year improvement in the fourth quarter. Both organic sales growth and earnings increased substantially in the quarter. Our sales growth increased in almost all key categories and saw our continuous progress in refrigeration, freezers, and cooking products. Higher air conditioning selling also contributed positively in the quarter. Profitability in refrigeration and freezers has now been restored, and the work to ramp up and increase efficiency in a new cooking plant in Memphis is underway and making progress. We estimate that this work will continue into the first half of 2016.
Earnings in North America improved significantly versus last year, and we achieved an operating margin of 4.7% in the quarter. Recovery and profitability was a result of positive price mix and improved cost productivity. Now let's turn the slide and talk about the market development in North America. The market demand for core appliances in North America increased by almost 8% in the fourth quarter. The gradual improvement in the housing market, coupled with low interest rates and consumer confidence, have continued to support demand growth for appliances in the U.S. market. Both replacement and the builder channel have shown good development this year, hence, the market growth ended strongly with 6.3% for the full year.
We believe the underlying market for appliances in North America will remain solid in 2016 and expect the full year market growth to be in the range of 3%-4%. If you look at Latin America, market demand for appliances in Brazil deteriorated significantly in the fourth quarter, and the economic outlook in the region remains weak. Challenging market conditions continued to affect our volumes and mix negatively in the quarter. Market volumes in Brazil dropped 27%, while the demand in other Latin American countries were stable. To mitigate the weak markets and offset some of the economic losses, our team has taken significant cost actions. We have also implemented price increases to compensate for the continued currency headwinds and inflation. These measures have, to some extent, mitigated the negative development.
The decline in earnings in Brazil was partially offset by good financial performance in Argentina and Chile. Let's turn the slide and talk about our operations in Asia Pacific. Market demand in the three subregions of Asia Pacific showed a mixed pattern in the fourth quarter. Demand in Australia continued to grow by increased sales in core appliances, while demand in China was stable and Southeast Asia softened. Electrolux sales declined in the quarter as a result of our proactively reducing business activity in China, which affected our top line negatively. Our sales in Australia and Southeast Asia continued to show growth. New product launches and previous price increases contributed positively. Earnings in Asia Pacific declined year-over-year and were impacted by an inventory write-down of approximately SEK 45 million in the fourth quarter. Over the past quarters, we have actively downsized our operations in China.
That work continued in the fourth quarter. Both Australia and Southeast Asia performed well and had a positive impact. Let's turn and continue with small appliances. Sales in our Small Appliance business was negatively impacted by lower volumes in the U.S., Latin America, and Asia. Sales in Western Europe, however, showed good performance. Premium products within floor care and small domestic appliances improved the mix. The Small A ppliance business continued to be exposed to currency headwinds in the quarter, which impacted the EBIT negatively. We have taken price actions to offset part of the negative currency impact. As previously communicated, a cost reduction program was initiated in the quarter with the aim of restoring profitability to the sector. We have a strong focus on the business and are taking measures to reduce structural costs across several of the key markets.
The charge for this program was taken in the quarter and mattered to SEK 190 million. We expect full-year annual cost savings from this restructuring of SEK 120 million from the end of 2016. Now let's turn to our professional business. Professional products continued to show strong performance in Q4 and benefited from growth in its strategic markets, particularly in the laundry segment. Sales growth was positive in Europe, North America, and the Middle East Africa, while the trend in Eastern Europe was weaker. The acquisition of the manufacturer of professional dishwashers in China, a company called Veetsan, had a positive impact of 2.7% on sales for this sector. In the last quarter of the year, our professional operations achieved a record EBIT margin of 15%, as earnings increased 38% versus the prior year.
This was driven by higher prices and operating efficiency. Now I'd like to turn to Tomas to go through our financials and our cash flow note for both the fourth quarter and the full year. Please, Tomas, I turn it to you.
Yeah. Okay, thank you, Keith. Let's flip page and start with the financial overview, as usual, and with the financial highlights. Starting with sales. Reported sales was up 1.3% in the quarter, of which 0.2% was organic, acquired was 0.1%, and the positive currency impact was 1% on the top line. For the full year, reported sales was up 10.1%, where of organic sales growth was 2.2%. Reported earnings in the 4th quarter were down compared to last year, impacted by costs related to the non-completed GE transaction. Putting that aside, earnings were strong for the group, with very good year-on-year improvements in the two largest businesses, EMEA and North America, as well as in the professional business.
Cash flow remained at a high level in the fourth quarter, SEK 1.6 billion, and we should also remember that that includes the costs related to the GE transaction of SEK 1.7 billion in the quarter. The full year cash flow was SEK 7.5 billion, an increase of 13%. If we take out the GE costs for the full year on the EBIT line, the full year cash flow was SEK 9.5 billion, and that is actually the best cash flow ever in the history of the company. Reported earnings per share was SEK 5.45 for the year. Let's go to the next page and take a look at the sales and earnings bridge. Starting with organic growth and with the price mix part of it.
If we first look at the sales contribution, it was 4.6%, and the earnings contribution was SEK 865 million. If you compare that SEK 865 million with a negative currency transaction effect of SEK 732 million, you can see that in total, we have compensated for the currency impact this quarter, even though it's, of course, different in various regions and markets. We're a little bit behind in Brazil, but we're a bit ahead in other markets. All in all, price mix exceeds the negative currency effect.
If we look at the other part of organic growth, volumes were down 4.4% in the quarter, mainly driven by Major Appliances in Latin America and China, and Small Appliances, except for Europe, which is not too bad. The effect on the EBIT on the volume, of the negative volume is negative, as you can see, -SEK 40 million. We should remember here that this is impacted by the restructuring charge of SEK 190 million that Keith talked about in Small Appliances. The underlying leverage in other businesses were positive, mainly driven by the continued strong recovery in EMEA and in North America, and also the very good development in the professional business.
Acquisitions contributed with SEK 6 million on the EBIT line in the quarter, and the minus SEK 1,659 that you see in the other column, that's the cost related to the non-completed, GE transaction. In total, we had a margin accretion of 2.6% from the organic part, which mitigated the dilution from currency, but, it was not enough to offset the cost related to the GE deal. Let's then move over to currencies on the next slide. Fourth quarter 2015, we had SEK 769 million in negative currency effects. SEK 732 was transactional, and SEK 37 million negative was translation. The U.S. dollar has continued to strengthen against emerging market currencies and some other currencies as well, and, we have seen continued movements during this period.
As during previous quarters, it's the Latin American operation, both for major and small appliances, that are taking the biggest hit. The weakening local currencies makes our sourcing much more expensive. In total, SEK 485 million in the quarter. If we then look forward into 2016, with the currency rates that we have today, no ups or no downs, we expect Q1 to be similar to Q4, which means a negative effect of between SEK 700 million and SEK 800 million. For the full year, with these rates, we have seen some of the important currencies weakening even more, compared to what we saw in November 2015, when we made our last guidance. This is mainly about Canadian dollars and Brazilian reais.
Then, of course, we have, then we have the Argentinian peso, which is now floating. All of those three continues to have an even bigger negative impact on the year. We estimate the effect to be around SEK 2 billion negative for 2016, and also SEK 200 million in negative translation. That would take the total of negative currencies to SEK 2.2 billion. However, we must say that we of course aim to mitigate all of this with price mix, just as we have done very successfully over the last couple of years. Let's move pages to the GE Appliances acquisition costs.
What would like to do here now is just to remind you of the costs that we've had during the year, through all the 4 quarters and for the full year. In addition to the transaction and integration costs, we also have a termination fee or the breakup fee in the quarter of SEK 1,493 million. The termination fee was booked in group common cost, so it's not booked in the North American business. We also had to write off the capitalized funding cost in the quarter of SEK 187 million, as the deal did not happen. If we sum up 2015, this means that the total transaction costs amounted to SEK 408 million.
This is all booked in group common costs. The integration cost was SEK 158 million for the full year, this is booked in the North American business. The termination fee was SEK 1.5 billion, this is booked in group common costs. Then we have the funding cost of SEK 187 million. All in all, SEK 2.2 billion for the full year. If we leave them, if we leave the income statement, then I move over to the cash flow and the balance sheet. As we have mentioned, cash flow was very solid in the quarter, ended at SEK 1.6 billion, this includes then the GE-related costs of SEK 1.7 billion.
For the full year, cash flow improved very strongly, and the major changer here was working capital. CapEx was stable with no major changes. We look back two years, we've had a very strong cash conversion in 2014 and 2015. It's given us a strong balance sheet. It's the strongest since 2011, since before the CTI and Olympic acquisitions. This means that we have the funds and the firepower to continue with our investments, as well as continue to look at other acquisitions. Finally, let's take a little bit longer perspective than on the cash flow. Q4 is normally a good quarter, although not the best quarter in the year.
Q2 is normally the best quarter, but if we would add back the GE-related costs of SEK 1.7 billion, you can see here in the chart that the Q4 will actually be better than the Q2 this year. Very strong cash flow year. With that, I would like to hand back to Keith for a summary and conclusions.
Okay, Tomas, thank you. Let's move on and summarize this presentation with the outlook for Q1 and full year 2016. Just to turn to the outlook page. Looking ahead into the first quarter of 2016 and the full year, we expect that growth will continue for Electrolux and for the appliance industry. We expect the positive growth trend in Europe to continue, although the development, as Jonas mentioned earlier, in Russia and the Ukraine, remains weak. We anticipate appliance demand in North America to remain positive in 2016, supported by lower unemployment, consumer confidence, and improvement in the housing market. Latin America continues to be weak with low visibility. Expect demand in Brazil to further deteriorate before it stabilizes. Demand in Australia appears to be stable. There may be room for continued market growth.
In China, we expect demand to be soft in the year. In terms of price and mix, we expect a slightly positive net impact in EMEA, North America, Latin America, and Asia Pacific in the first quarter, although slightly different impacts between price and mix in the various regions. We expect raw material costs to have a positive net impact, both in the first quarter and for the full year, primarily driven by steel and plastics. We continue our cost reduction activities to increase efficiency and reduce structural costs. We expect benefit from savings to approximately SEK 750 billion. Our CapEx outlook remains stable in the range of SEK 4 billion for the year. Finally, we continue to monitor the development in our main markets and acknowledge the macro and commodity uncertainties that we have seen in some key emerging markets recently.
At the moment, however, we don't see any immediate risks affecting the global economic development and our plans for 2016. With that, I'd like to turn it over to Jonas to comment on the new management appointments and then pass it on to Catarina to open up for questions. Jonas, please.
Yeah, thank you, Keith. Yeah, it's really a pleasure and a, and pride for me to be able to announce two very strong recruitments into the Electrolux Group management. The 1st appointment is Dan Arler, who joins the EMEA leadership team as CEO of the business area and as Executive Vice President of AB Electrolux. He has 14 years of experience in Electrolux and as a Senior Vice President, has successfully headed the product line kitchen in major appliances in EMEA. Dan has been instrumental in developing and implementing our strategy to focus on our profitable built-in kitchen products and to reduce the complexity of our overall portfolio. Also, today, we're appointing the successor to our interim CEO of North America, which is Keith, and that is Alan Shaw. Alan will join his new position on the 1st of February.
He has previously held key management positions at Husqvarna in North America, heading the North America and Latin America regions.
... And a CEO of the publicly listed company, Char-Broil, as well as a broad range of other senior management experience, including with a long career with Whirlpool. Alan's strong track record with leading consumer durable brands in North America makes him the right person to drive the continued profitable growth of the business area. I'm extremely pleased to welcome two such strong leaders with records of proven success to key positions in the group management. With that, I hand it back to Catarina.
Good morning, everyone. We just open up for a Q&A session now, and we have Keith and we have Tomas, and we have Jonas here to answer to your questions. Please, operator, go ahead with the first question.
Thank you. Ladies and gentlemen, if you wish to ask an audio question, please press zero one on your telephone keypad. In order to cancel your question, you may do so by pressing zero two. The first question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead. Your line is open.
Yes, good morning. Thanks very much for taking my questions. I've got a couple, and we'll go one at a time, please. Just firstly, on the strong performance in EMEA and professional divisions, could you just confirm that that's all clean underlying, there's nothing, even maybe operationally, one or positive in there?
Yeah, let me start with, they're clean. Tomas, any comments to that?
No, they are clean. Yes.
I can confirm that.
Mm-hmm. Okay.
Thank you very much. Secondly, on raw materials, just in the same kind of vibe as you commented on FX, that the rates have gone worse since you commented last time, so did kind of the raw materials spot prices. The 550 guidance that you're maintaining, is that now looking conservative? Within that, could you comment on how much you've locked in the steel for already for this year?
Let me give a little bit, and, Jonas, you can comment on Europe, of course. As you know, historically, we generally have longer and tighter contracts in Europe, and we're a little bit shorter and looser in terms of not locked in the U.S. That pattern continues into 2016. Again, we're monitoring this. As you know, the trends are moving in the right direction, so, you know, we'll continue to monitor it. We have a high degree of confidence that we'll be able to deliver these commodity positive impacts. Jonas, any comments on Europe or?
Yeah, no, I mean, obviously, the good news is that we are getting help from the commodity stuff, that some of the currency headwinds. Of course, we're, let's say, finalizing our outlook for 2016, and we'll come back also in the Capital Markets Day in February with a new update.
Got it. Just very final one, on the mix of cost savings in 2016, the SEK 750 across divisions, would that be similar to the mix that you saw in 2015 in terms of distribution of those cost savings by division?
It'll be similar. You know, we've taken some restructuring action in Small Appliances, so you get a little bit in different parts, but I think the pattern will be similar. Yes.
Small Appliances is on top of SEK 750?
That's right.
Great. Thank you very much.
Thank you.
Okay, thank you. Could we have our next question, please?
Yes, the next question comes from the line of James Moore from Redburn. Please go ahead. Your line is open.
Yes, good morning, everyone. It's James from Redburn. I've got three questions, if I could. The Latin American business is clearly continues to be under macro pressure. I know you took a lot of headcount out in the last couple of years. Could you size the headcount reduction that you plan for this year and the price lift that you plan for this year? Secondly, I wondered if we could talk a bit about the U.S. My impression from the outside is that the cooking segment is the opportunity, given the challenges you had with the move to Memphis. I wondered if you could update us to how that business is trading, and is the potential dependent on volumes filling back up, and how confident are you on that?
Finally, a question I've already asked before, but would just like a repeat of, please. On acquisitions, with all the management changes that we have seen, can you confirm that the business is still on track with the appetite to use its strong balance sheet? Could we see something in this fiscal year?
Okay, you're good up until the last one there, James. Let me try to peel through it, Tomas Eliasson or Jonas Samuelson, jump in, of course, anywhere. I'd say yes, on Brazil, to your point, you know, that market has continued to deteriorate. As you know, we've got a very long, experienced team there, they've been taking aggressive actions with cost including structurally with headcount. Candidly, they would say, I was just with them recently, you know, they've always kind of been a, you know, a month or two behind, so they're actually ramping, increasing the structural cost activities, specifically around headcount. In the last quarter, they'd said for the first time, they actually got ahead of it, actually matched the reduction in cost relative to the reduction in demand.
I would say, James, that in Latin America, it's continuing, and I think we were falling You know, we were a little bit behind taking actions, but now it feels like, you know, we're on top of it. Tomas, you were with me. Any comments on that?
Yes, absolutely. I mean, we of course, James, we can't talk about what we are about to do for the future in this area, but the volumes are sort of down, you know, 20%-25%, and I just have to take out structural costs accordingly. It's that magnitude, so it's massive.
Yep. On the U.S. question, James, I think your logic pattern is sound, right? Yes. For the U.S. to improve substantially going forward, the cooking business has to improve. In order for the cooking business has to improve, Memphis has to produce enough volume for that leverage to happen. I think your logic pattern is sound, and I would agree with that. I would tell you that, you know, we're tracking every week with improved performance in that facility. As we've talked many times, it's a large, complex facility with many PNC, SKUs, so we're still ramping through that, and it will take most of the first half of the year to get it to the position where we'll be delivering substantial improvement.
I think you'll see that in the second half, I think, again, your logic pattern, we would agree with, that the U.S. improvement is tied to cooking and the improvement in the volume in that business. Lastly, on M&A, and again, Tomas, you can jump in here, we have believe it or not, we've actually never stopped or slowed down our M&A steering committee process. At the time, throughout the year, Tomas, myself, and our general counsel, kind of co- or tri-chaired an M&A steering committee, we met every 6 weeks, I would say, Tomas, roughly. That process continued throughout the entire year and prior years, it never slowed down.
I would say that our ability and about, relative to being current in terms of properties and opportunities and what the markets are, is very good. Tomas?
Yeah, I mean, this machine, it takes time to start the machine, and it was a decision during the GE period, if we use that word, to not to stop it because it takes such a long time to get it moving again. We've been active, sort of, in the background here. We are constantly in discussions with a number of targets, but you never know when it happens. It can happen next week, it can happen next year.
Yeah.
Yeah.
Of course, James, you know, Jonas will chair that going forward, but, and I guess the last thing is, no, we're not gonna answer your last question, which is, are we gonna do one, to Tomas's point. As soon as we know, we'll let you know.
Can I just step back? Thanks. Can I just step back on the U.S. business?
Yeah.
Have you got any prior examples of when you lose a load of share due to a technical issue like that, I guess there is no natural share that one should just claim to have because you used to have it. What, what could give you confidence that the volume goes back up? Is there indication of interest? Is there order? How does that work? Are there any precedents on something like that?
Yeah, I guess the primary signal is the demand from our customers and their customers. The products that are coming out of that plant are selling well at retail. We're seeing, you know, we're having lots of conversations with lots of our big customers around meeting demand. That's probably the best signal.
You're seeing that?
We are.
Excellent. Thank you very much.
Thank you, James.
Before we move on, could I just, as a friendly reminder, please, take one question at a time. With that, our next question, please.
The next question comes from the line of Andreas Willi from JP Morgan. Please go ahead. Your line is now open.
Yes, good morning, everybody. My first question is on Europe, two parts to it. The competitive environment, you talked about the still the price pressure. Maybe you can say a little bit more where that's coming from. Is that because of the declines in Eastern Europe, and therefore, volume coming into more the rest of Europe? Is it Turkey? Is it the Korean players? Is it the normal established players? Maybe a bit more color on that. Related to that, obviously, you've done extremely well. You're back at your 6% margin in Europe, probably earlier than most expected a year or two ago. What's your ambition there? Is 6 the right number, or are we just basically get there earlier, or is this just an intermediate step?
Okay, let me, Jonas, if you would?
On the competitive pressure, I actually cannot say that there's any real change in the pattern. This has been ongoing for many years, and we expect it to continue. What's happening is that there's a continued, relatively rapid price decline of any product that's been in the market, let's say, more than a year. Then if you do well, you're then able to offset that by introducing new product at higher price points with new technology, new innovation, new consumer benefits. That is the race in Europe, and that will remain the race we see.
That's where we've adopted our strategy through driving mix, driving cost efficiency, cost out, and betting on the product areas where we have the capability to lead in terms of consumer innovation. There's no particular, let's say, you know, change in the source of competitive pressure. It's just a very, very highly competitive market with all the players that are active there. I think that's kind of just the name of the game, and we know how to play it. Secondly, on the margin, of course, you know, we have a long-standing financial objective as a company to be above 6%, or at or above the 6% across the business cycle.
That means that I think our big sectors like EMEA, like North America, needs to be above that. That is for sure our aim and what we see as a reasonable objective.
My follow-up question on the U.S. market, both you and GE grew revenues quite a bit less than the market volume. Maybe you could talk about price. GE mentioned increased price pressure. You said, yeah, positive price mix, maybe just a bit of an update, what's happening on pricing in the U.S. market? Thank you.
Yeah, the U.S. price for the quarter was relatively flat, actually slightly positive. It's relatively stable. Mix was positive, as you mentioned. Volume was positive, and, you know, the relative our relative growth relative to market in total, of course, is we gained market position and share in certain categories, refrigeration, freezers, dishwashers. As you would surmise, we lost some in cooking, right? That's what's happening there.
On overall, you must have lost quite a bit of share if you had 4% growth in an 8% volume market with positive price mix.
Yeah, we lost share in cooking and laundry, and we gained share in the categories I mentioned.
Thank you.
Thank you. Could we have our next question, please, operator?
The next question comes from the line of Björn Enarson from Danske Bank. Please go ahead. Your line is open.
Yes, thank you. Björn here. A question on again, on productivity in North America. You're talking about gradual improvements on the Memphis plant, of course, and I guess that is when you say that you're talking about the sequential development, and you expect that to continue through the first half. If you remember, first of last year, you warned on due to productivity, and a lot of that was, I guess, related to the cold side, the ref and freezers, and you have now restored that. How should we look about upon productivity in the first half coming up, with still Memphis, a little bit of a drag?
Yeah, actually, I think you said it well. I went, the cold businesses, refrigeration and freezers that had issues related to the DOE transition is behind us, so those businesses are performing well and tracking, and we expect that to continue going forward. It's taken us, you know, a little bit longer on the Memphis, as we've communicated previously. No new news there. The first half, I think, will still have the drag of Memphis, and we should start to see that year-over-year positive effect in the second half. Is that?
Is Memphis tougher in the first half 2016 than in first half 2015? And if it's possible to get some quantification of the issues in the first half between the two issues, should say.
Okay. Yeah. I got you. Sorry, I missed the question. Yeah, the comp between first half and first half and second half and second half. Yeah, we won't break it out that finite, right, to go by product line within a given quarter or two, and even by plant. Certainly, it'll be better in the first half than the first half of this year. You know, it will be, just as you say, a continuous kind of sequential improvement. It's not gonna be a boom, you know, a jump, you know, 1 month to another month. It's gonna be, you know, week after week, month after month, a continuous improvement.
We think it'll take us to about midyear to get that to a position where we're gonna be contributing the way we'd like to see that plant contributing.
Okay. Thank you.
Bjorn, should we move on to our next question?
The next question comes from the line of Martin Wilkie from Citi. Please go ahead. Your line is now open.
Good morning. It's Martin from Citi. A couple of questions. The first one is just on your cost plans. I think you've said in the past that some of the effects of the cost benefits in 2016 is the annualization of cost plans that were put in place last year. I obviously think that the big cost plans that you've had in place in the past are now essentially done, and that your biggest lever to offset some of the headwind you're seeing is gonna be price mix. Just in terms of how we think about margin development, that price mix becomes the big component as opposed to cost savings. I've got a second question on cash, if you want to see that one first, that'd be great. Thank you.
Actually, yes, certainly mix and price mix is an important component, but I would not underestimate the importance of continued cost productivity in this business. It shifted, right? It has shifted, as we've talked about previously, from moving factories, right, and closing factories and moving factories. Now the primary source of the ongoing cost productivity will be the leveraging and the integration of the group, primarily through things like the modularization, right, and platforming. That's where in global purchasing connected to that. That's where the source of productivity will be coming from, different than shutting down and moving plants. For sure, I would not assume that the only benefit we're gonna get or we'll have the opportunity to get is through mix or price.
We have to get, you know, continuous and substantial annual productivity in this business, and that's how we're gonna get it.
Okay. No, that's that makes sense. Then just a second question on cash. I mean, as you said, you've had very strong cash this quarter and last, and a lot of that looks to come from working capital, which I suppose is unusual when markets are growing, that you can release that working capital. I mean, how sustainable is that better cash conversion as we go into 2016, or were there any unusual effects in the last couple of quarters that should be seen as a blip more than anything else? Thanks.
Yeah. As you know, and if you've been following us for a while, this is actually a trend, right, and a pattern, a very consistent pattern of productivity and improvement, and liberating value through balance sheet productivity, working capital productivity. It's not a unique phenomenon here, right? This has been going on for several years. We did have one excursion, but we've been back on track for the last couple of years. Now, again, you know, fair enough, the point is, you know, does it get tougher as you start to get to, you know, we're below 7% of sales, right? That's it. Now we're starting to get to pretty low levels, and does that, you know, does that productivity and value liberation get tougher as you go forward?
Sure, it does. You know, I wouldn't say that we're stopping here. Tomas, you know, you've been in the middle of this in every sector. Any comments on the working capital productivity?
Yeah, just a quick one, Martin. I mean, over time, of course, cash conversion can never be anything but 100%. You know, it's the same kind of money, earnings and cash, of course, just timing difference. What has happened over the last 3 years is that we had a setback in working capital in 2013. What has happened now in 2014 and 2015 is that we worked that back, plus we have got our arms really good around inventory management, et cetera, et cetera. Yeah, going forward, we don't plan to increase the working capital, but it's getting, of course, tougher, as Keith says here, to take... I mean, we can't improve like this, going forward.
We plan to improve, but not maybe as big as we have over the last two years.
Okay, that's very helpful. Thank you.
Thank you so much. Could we have our next question, please?
The next question comes from the line of Matthew Spur from Royal Bank of Canada. Please go ahead. Your line is now open.
Morning. I had a question on Argentina. Looking in last year's geographic breakdown, it was about just under 10% of Latin America. Presumed with Brazil going down and Argentina being okay, that's gone up. Related to that, with the devaluation of the currency there, is there any similar issue that we need to take into account with Brazil, similar to what we had with Brazil, as in just your supply chain model there? Was there any sort of one-off related to the Argentine currency that we sort of need to add back for the quarter's result in Latin America? Thanks.
Yeah, let me start, and I'll flip it to Tomas on the currency implication. You're right. The mix of the business in Latin America has shifted, and our business in Argentina has actually been quite strong. The net, you know, distribution of sales between the countries of Brazil and Argentina and Chile has shifted in a direction that you noted. It's a fair question relative to the currency effect. Tomas, can you speak to.
Yeah.
Argentine peso?
Yes, I can. Yeah, I can do that quickly. No, there are no major effects on the earnings in the fourth quarter from the devaluation. Of course, there was a bit of a revaluation effect, of course, but no major ones. Going forward, what's gonna happen with Argentina? This is really a macro question. Will Argentina develop like Brazil or not? We don't have a view on that, of course, but if you read the macro, it seems that the consensus is that, of course, the economy will of course take a hit as such, when the currency goes down 30% and 40%, but most likely not as much as the Brazilian economy. For us, this is good.
We have big production facilities in Argentina and a more convertible currency, if I use that word, is good for us, which means that we can keep our production running.
Okay, thanks. I have one more on, which, I understand if you don't want to give an opinion, but with a, with a Chinese buyer of one of your major competitors or potential Chinese buyer of one of your major competitors in North America, do you have any views on how that might change the competition dynamics? You probably have a bit more experience coming up against them in other markets. Just probably the most general view is that it's probably not a good thing long-term, but whether you agree with that or view it, view it as some opportunity in some way, it'd be interesting.
Again, you know, it's... I've given up on trying to predict the future, but, you know, generally, as you know, the Chinese manufacturers have not had much success outside of China other than sourcing products. This is a different dynamic, right? You know, an acquisition of a major brand and, and business outside there. I think in the short term, a little bit maybe to your point, I don't... We expect a major implication 'cause there's no synergies, there's, you know, there's really no business in the, from Haier in the U.S. to liberate value from. It probably feels like in the short term, a lot like it feels like today, so I don't think there's any short term.
Long term, yeah, I mean, you could speculate that, you know, there could be changes, and certainly, you know, we've had a big Chinese competitor just get bigger, so that changes the competitive landscape. I think, to be fair, and, you know, as you know, I've been spending a fair amount of time in the U.S. recently with the team there's also opportunities that are gonna come from this. You know, we'll look at both sides of it. I know, of course, that Jonas will lead the team here in looking at, you know, the competitive dynamics globally and what the both those challenges are and those opportunities are. We think there'll be both.
Okay, thanks for that.
Thank you very much. Can we have our next question, please, operator?
The next question comes from the line of Lucie Carrier from Morgan Stanley. Please go ahead. Your line is now open.
Hi, good morning, gentlemen. Good morning, Catarina. My first question, I will have three, actually, but the first one is just maybe coming back on the previous answer you just gave, Keith, on the opportunities you are maybe seeing in a raising in North America from that announced deal. What are you know, what are in your thoughts in terms of those opportunities?
Again, I don't wanna be too specific because we're actually got action items against each of them, and I'd rather not hand the playbook right to the competitors. There's opportunities with customers, there's opportunities in product categories, there's opportunities in other suppliers. The entire system of the business, you know, this causes or creates opportunities, and we're exploring all of those. Sorry, I can't be more specific on that.
All right. Just my second question was on the professional product, actually. I was looking at one of your competitors yesterday in the U.S., which seemed not to be reporting kind of the same strength in terms of top-line growth and also margin. I mean, are you gaining share there? If so, in which category, and how have you made that move?
Okay, sorry, maybe, Where are we gaining share-
Yeah, that was in Professional product.
....In the U.S. right now, is that the question?
That was in Professional product. It seems that.
Oh, Professional.
You had a stronger development than some of your competitors.
Sorry. I'm sorry, yes. Actually, in Professional, a big part, we've had a very strong year and quarter in the laundry segment. You know, that's kind of been a big sector for us. We do see opportunities on the food service side as well. The big gain that we've had in Professional in the U.S. has been in laundry.
Thank you. Just the last one was on the Australian market. It's been quite solid throughout the year. What is your outlook for that market in 2016, also in relation with the macro development and and commodities kind of price decline?
Yeah, actually, for the appliance demand, we see positive demand and had seen positive demand in Australia this past year, you know, which is, you know, obviously better than the prior years for several years. You know, we're cautiously optimistic that the appliance demand in Australia will be positive going into 2016. We've got certainly have good momentum. The team has done a really nice job there of launching under the Westinghouse brand new, full array of products and cooking products in particular. We're cautiously optimistic about the Australian market at the moment.
Have you gained share actually in Australia throughout the year, in 2016?
Yes. In key categories, we have, yes.
Okay. Thank you very much.
Thank you.
Thank you, Lucie. We have room for a couple of more questions, so please go ahead.
Thank you. The next question comes from the line of David MacGregor from Longbow Research. Please go ahead. Your line is now open.
Yes, good morning, everyone. I wonder if you could just talk about the search for North American leadership and what particular skill strengths you were prioritizing in the selection that you made?
Yes, so I can talk a little bit to it, and Jonas, please jump in. The obvious criteria you would expect, David, so an experienced P&L leader, so in this case, you know, someone who's been the president of several divisions, been the president and CEO of public companies, you know, lots of experience in general management. In particular, and specifically, of course, we were looking for someone who had experience directly in consumer durables, so not, you know, CPG, but consumer durable experience. In this case, you know, Alan's got his, virtually his entire career there. It helped that he has specific experience in appliances. That doesn't hurt, of course, with his previous employment, and the fact that he gets the model, right?
He understands the model around quality, cost, and delivery to our customers as a foundation and bringing relevant innovation in products and brands and channels. Importantly, in this case, understanding retail and understanding our big customers is an important part of this business. Of course, with those criteria, that, you know, we have in Alan, you know, a very good, strong fit and a leader and a proven leader to fit those categories. Jonas, you spent a lot of time with Alan.
Yeah. Yeah, Keith, I think you covered it all. Of course, I have had extensive meetings with Alan, and I can confirm that he fits the description you just mentioned, Keith. I think additionally, of course, an external recruitment always carries a certain amount of risk, here we're not talking about a true external recruitment. This is somebody who has, let's say, close ties with our, let's call it, sister company, Husqvarna, in this case. It's not he's not an unknown entity, and that, of course, adds to the strength, the profile you just mentioned, Keith.
Yeah.
Very, very happy about that recruitment.
Thank you for that detail. Just as a follow-up, I mean, the previous question about the developments with the Haier entry in the U.S. market. I'm just wondering how this differs from perhaps the entry of Samsung and LG a few years ago. I know they're coming into the market with a 16% share versus Samsung and LG, who came in with nothing. How do you see kind of the entry of Haier differing in terms of how it's going to impact you competitively from how Samsung and LG came in?
It's a, it's a different play, as you know, David, well. You know, the Koreans, their play has been, you know, bring innovation and design and product and, you know, burn a hole in the market. I don't mean that negatively, I just mean bring innovation at lower price, so more for less, and, you know, and bring, you know, huge value equations into markets to gain position, to gain market share, for, in the Koreans' case, an extended period of time, unprofitably. I mean, this is kind of what the picture has been. The Chinese, as you know, have not been successful with their external, if I can say that, non-domestic strategy, which has been more about, we can make a white box, you know, cheaper than somebody else from a brand you've never heard of.
That kind of model hasn't resonated well outside of domestic China. Of course, with the acquisition of GE Appliances, it's a different angle of attack, right? I don't think it's the same as the Koreans. To me, it's a third, if you will, angle, which is to take an existing business and now say, of course, I got to be thinking about, you know, how do we get value out of the combination of the Haier Domestic China Appliance Company and the GE Appliance Company? Again, you know, we'll see how that sorts out, but I think it's, again, the third and different model from both the Koreans and/or where Haier was previously.
If competition is increasing in cooking, does this result in a prioritization around laundry?
Okay. Yeah, I think, you know, in in our business, you know, you have to be a good, strong supplier in all key categories. It's a matter of balancing the portfolio in a way that you do that in a way that obviously that creates both value to the customers and also economic value for us and for you, the shareholders. We have to be strong in all categories.
Thanks very much. Good luck, Keith.
Thanks. We're starting to running out of time a bit here. I know there are a few more questions lined up, I would kind of ask you to give us a call after this session is out. With that, I would like to hand over to Keith to summarize the fourth quarter and the full year.
Okay. Thank you, Catarina, and thanks, everyone, for calling in. We got to have a quick summary page. I'll go through that quickly and let me summarize the last quarter of 2015. We closed Q4 with positive organic growth, driven by our two largest business units, as well as a positive contribution, as mentioned in the professional business. Our European operations showed very strong performance, with higher earnings and margins and sustainable cost structure development. Profitability in North America is being restored, and the ramp-up of cooking plant in Memphis is underway and making good progress. Professional products did very well in the quarter, hitting record-high margin levels in a single quarter of 15%.
The team in Latin America continues to show good cost execution and to increase prices to mitigate currency and the deteriorating market conditions in that region. Finally, cash flow was strong in the quarter and for the full year, 2015, as Tomas mentioned previously, you know, cash flow was at an all-time high in the history of the company. That's a good place to be and leaves the balance sheet, of course, in a very healthy position for 2016 and going forward. For me, now it's time to pass the baton, I pass that with very good confidence and success to Jonas as the new President and CEO of Electrolux beginning Monday, and I'll return to my family in the U.S.
Jonas, as you know, knows the company very well, has a proven track record in several key positions within the company. And with his background, I'm certain he and his team will lead Electrolux going forward and take it to an even higher level of performance, 'cause we will continue to be focused on being consumer-driven, leveraging our global scale, and a strong focus on bringing value to our shareholders, our customers, and our employees. I'll sign off, and with that, let me turn it over to Jonas to close the call. Jonas.
Thank you, Keith, and thanks very much for those words, and even more so, thank you for your leadership in really transforming this company over the last five years. It's. You will be missed, sorely missed by all of us, and I'm guessing that includes you on the phone here. I really want to say thank you for your enormous contributions to this great company. Indeed, we are looking forward with confidence into the continued transformation to become a truly consumer-led company that you have initiated and driven, Keith. With that, of course, my next job here is to travel around the world and get fully reacquainted with the various businesses that we have around the world.
Reacquainting with old friends. Of course, I have prior experience of the global aspect of the business, but of course, it's a few years ago that I was in the details. What we'll do, of course, is we'll give a status update on that in the upcoming Capital Markets Day. I really wanna provide a reminder to all of you to please sign up for that, the Capital Markets Day here in Stockholm on February 24th. It will happen here in our headquarters, together, of course, with other members from the senior management team. Just to remind you, the event will not be webcasted, so please don't forget to register your attendance before the 8th of February.
With that, I would like to thank everybody for listening and participating in this presentation. Thank you so much.