Electrolux Lifts U.S. Forecast Amid Improving Housing Market
Electrolux AB, (ELUXB) the world’s second-biggest maker of home appliances, raised its forecast for the U.S. amid improvement in the nation’s housing market.
Demand for appliances in the world’s biggest economy could increase by as much as 7 percent this year, Chief Executive Officer Keith McLoughlin said today, having previously forecast growth of as much as 5 percent. Electrolux shares rose as much as 3.9 percent even as the Stockholm-based company reported profit that missed estimates because of weakness in Europe.
“Rising appliance consumption in North America is largely due to the strengthening of the housing market and this development is expected to continue,” McLoughlin said in a statement. Conditions in Europe are “challenging,” though are seen “gradually improving” in the second half, he said.
Electrolux gets almost a third of revenue from North America, which is benefiting as homeowners purchase more dishwashers, cooktops and irons. U.S. homebuilder confidence rose more than forecast in July to the highest since January 2006, according to figures released this week.
“We had a fantastic performance in North America,” McLoughlin said in a telephone interview. “We have a recovering market and we are outperforming.”
“The outlook was more positive than we expected, with Electrolux seeing an improvement in Europe that started in June and a continued good U.S. market,” Andreas Willi, an analyst at JPMorgan Chase & Co., wrote in a note.
Net income for the three months ended June 30 fell to 642 million kronor ($98 million) from 699 million kronor a year earlier, the maker of AEG vacuum cleaners and Frigidaire freezers said in the statement. The average of 13 estimates gathered by Bloomberg was 669 million kronor.
Earnings were hurt by slow demand in Europe, which led to “negative price development,” the company said.
Demand for appliances in the region is still estimated to decline in 2013, Electrolux said.
The results were also weighed down by adverse currency movements such as a weakening British pound and the strengthening of the U.S. dollar against the Brazilian real.
Exchange-rate shifts reduced operating income by 181 million kronor in the quarter. The impact is likely to be greater in the third and fourth quarters, mostly because of the depreciation of the Brazilian real, Chief Financial Officer Tomas Eliasson said in a telephone interview.
Group sales fell to 27.7 billion kronor from 27.8 billion a year earlier, beating the 27.4 billion-kronor average estimate.
Competitor Whirlpool Inc., (WHR) the maker of KitchenAid and Maytag appliances, reports second-quarter earnings later today.
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