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Pension ruling hits Electrolux Professional profit

Electrolux Professional’s Center of Excellence crop
Electrolux Professional is based in Luton.

Electrolux Professional’s latest financial results detail that a number of factors have negatively impacted the company’s performance.

Now publicly available from Companies House, the annual report for the UK commercial equipment branch of the Italian-headquartered manufacturer reveals that for the 12 months to 31 December 2018, the foodservice equipment division’s turnover fell by 14%, from £19.3m to £16.6m.

Director Fabio Zarpellon analysed in the report: “The foodservice business sales performance weakened, reflecting the challenges in a softened market faced by key customers.”

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Operating profit was also cut by nearly 28% from £2.1m to £1.5m for 2018. Electrolux Professional reported that this was partially due to guaranteed minimum pension (GMP) equalisation between benefits for men and women. This resulted from a high court ruling in October last year in a case brought by Lloyds Banking Group Pensions Trustees against the bank itself.

Zarpellon stated how this affected Electrolux Professional: “Following the high court judgement in the Lloyds case, an estimate of £500,000 of the financial effect of GMP equalisation on the benefits of the defined benefits pension scheme has been treated as a ‘plan change’ in the income statement (split £275,000 laundry and £225,000 foodservice). This has adversely affected the operating profit margin.”

Nevertheless, he added: “Despite the pension equalisation, foodservice was able to maintain a strong profit margin driven by product mix.” The operating profit margin for 2018 was 9.34%, compared to 11.1% for 2017.

Elsewhere, the report stated that Electrolux Professional is mitigating Brexit risks such as increased customs tariffs, compliance costs and port delays by adding alternative routes and transport modes into the UK and increasing available warehousing facilities and stock holding where necessary.

In an overall business summary, Zarpellon wrote: “The company continues to focus on gaining market share with new products and enhancements of existing products focused on delivering solutions to key market segments.

“The business continues with the strategy to deliver profitable growth through product innovation, operational excellence and to be the industry leader in offering sustainable products.”

The report also detailed a ‘post balance sheet event’, as on 31 January 2019, the ultimate parent company AB Electrolux announced that it is preparing for the separation of the professional products business from the AB Electrolux group of companies.

The statement revealed: “The Electrolux board of directors has initiated work intending to propose that a shareholders meeting decided to split the group into two listed companies, Electrolux for household appliances, and Electrolux Professional for professional appliances, ad to distribute the shares of Electrolux Professional to the shareholders of AB Electrolux in 2020.

“The Electrolux board of directors believes that such a split will enable both companies to focus on their respective opportunities to drive profitable growth, with distinct strategies for innovation and customer focus.”

Tags : businessElectroluxElectrolux Professionalfinancial resultsfinancials
Clare Nicholls

The author Clare Nicholls

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