Electrolux adapts manufacturing to offset difficulties with supply

In the fourth quarter interim report 2019, published on January 31, 2020, the company said that an extended period of supply chain disruptions in China related to the spread of the coronavirus (COVID-19) could potentially have a material financial impact on Electrolux. Now, given the rapid spread of the virus, impacting markets where Electrolux has a significant presence in terms of production and sales, the company believes the risks related to this have increased materially. These risks include supply chain disruptions, government countermeasures and changing consumer behavior. It is currently not possible to predict the duration or scope of the crisis, and therefore the full potential impact. “We’re stepping up our efforts to encourage more employees to work remotely and we’re reshaping the way we work at manufacturing sites in highly impacted areas to ensure the health and safety of our people. At the same time, we of course want to safeguard the needs of our consumers and trade partners,” says Jonas Samuelson, President and CEO of Electrolux, in a press release. The initial outbreak in China, where Electrolux sources significant volumes of finished products and components for all its business areas, has caused delays in deliveries, higher logistics costs and somewhat lower demand in East Asia in the first quarter 2020. However, the company says that it has worked to mitigate the impact and the situation among Chinese suppliers is now steadily improving. Based on these developments, Electrolux does not currently expect material effects from this alone going forward. The coronavirus outbreak in northern Italy is also impacting the Electrolux Group. Electrolux consumer business has five manufacturing sites in Italy, accounting for around one quarter of its European production volume and approximately 10% of global volumes. Furthermore, Electrolux purchases components for sites across Europe, but also other parts of the world from suppliers in northern Italy. This of course translates to that there may be supply chain disturbances because of temporarily reduced industrial activity in the region. Electrolux says that it from the very beginning took extensive measures in Italy to ensure the health and safety of its employees, and the spread of the coronavirus has not yet caused major disruptions to its operations in the country. The situation is however developing rapidly, and the company has now implemented additional measures to adapt manufacturing in Italy to a reduced production pace. The reduced pace will also adapt the output of products to be more in line with expected sales volumes in the near future. Electrolux operations in France has also been hit heavily by the pandemic. Since March 15, 2020, for example, French authorities have increased their countermeasures, and Electrolux Professional has started to experience difficulties in receiving components to, as well as in the outbound flow of products, its manufacturing units in France. As a response to this the company is implementing additional measures to adapt manufacturing at the affected sites to reduce production, including temporary closures.