July 17 (Bloomberg) -- Electrolux AB, the world's second- largest maker of household appliances, may say second-quarter profit fell 15 percent after raw-material prices rose, a strike hurt production and the company incurred costs from job cuts.

Net income probably dropped to 1.02 billion kronor ($140 million) from 1.2 billion kronor a year earlier, according to 13 analysts surveyed by SME Direkt. The Stockholm-based company reports results tomorrow at 8 a.m. local time.

Electrolux, displaced this year as industry leader by Whirlpool Corp., is shifting output to cheaper countries including Poland to help compensate for the increased price of materials such as copper and plastic. A five-week strike at the company's AEG-brand factory in Nuremberg, Germany, disrupted sales of dishwashers and washing machines in Europe.

``Competition is heating up,'' said Michael Andersson, an analyst at Evli Bank in Stockholm with a ``reduce'' rating on the stock. ``Raw materials will pressure them again and the Nuremberg strike could have a fairly negative effect on AEG.''

Shares of Electrolux, which makes Frigidaire freezers and Insight cookers, have fallen 20 percent this year, valuing the company at 29.7 billion kronor. That compares with a 6.3 percent drop in Sweden's benchmark OMX Stockholm 30 index. The stock today fell 2.5 percent to 96 kronor.

Of 19 analysts tracked by Bloomberg who cover Electrolux, five have a ``buy'' rating on the company's stock, eight say ``hold'' and six recommend selling.

Anders Edholm, a spokesman for the company, declined to comment in advance of the earnings release. The company has beaten analyst estimates for operating profit for the past four quarters. It last fell short in the first quarter of 2005.

Copper Costs

Profitability has been hurt after the price of copper reached a record $8,800 a metric ton on May 11, spurred by a shortfall in supply and increased demand from China, where economic growth has averaged 8.8 percent in the past five years.

Copper cost $7,158 a ton in the second quarter on average at the London Metal Exchange, more than double a year earlier.

Plastics companies such as Ems-Chemie Holding AG of Switzerland have also increased polymer prices to help compensate for higher oil and energy costs. The price of crude oil reached a record $78 a barrel July 14, driven by concern about escalating violence in the Middle East.

Chief Executive Officer Hans Straaberg is half way through a plan to reduce production costs by closing and relocating factories, he said April 25. The Nuremberg site, scheduled to shut next year, was crippled by a strike over severance payments. The plant, which makes dishwashers for AEG, will be the 16th shuttered in higher-cost countries in the last three years.

Flymo, Weed Eater

Electrolux will also book a charge of as much as 60 million kronor to cover the cost of closing its compact- appliance factory in Torsvik, Sweden, affecting 160 jobs.

Other measures taken by Straaberg include the spinoff last month of the company's Husqvarna AB garden tools unit, which makes Flymo lawnmowers and Weed Eater hedge trimmers, tractors and leaf blowers.

The 49-year-old CEO has also developed technologies featured in products such as the Trilobite, the world's first robot vacuum cleaner, which first scans a room before using ultrasound to maneuver around furniture and clean the floor without anyone needing to be present.

Straaberg said on June 20 that he aims to boost Electrolux's operating profit to as much as 6 percent of sales, matching the industry average, in the next couple of years. The company had a margin of 3.9 percent last year.

`So Competitive'

``The white-goods market is so competitive,'' said Evli's Andersson. ``The focus will continue to be on whether they lower costs to retain the margins.''

Electrolux last year reduced the effect of a 4 billion- kronor gain in raw-material prices by reining in purchasing and research-and-development expenses.

The maker of washing machines and steam cleaners was overtaken as the world's largest appliances company after Whirlpool's $1.68 billion takeover of Maytag Corp.

Straaberg received compensation totaling 22.4 million kronor for last year, including pension benefits, according to the company's annual report. That was 24 percent more than in 2004.

To contact the reporter on this story: Nicolas Johnson in Paris nicojohnson@bloomberg.net.

Last Updated: July 17, 2006 14:08 EDT