Electrolux AB, (ELUXB) the world’s second-biggest maker of home appliances, reported quarterly earnings that beat estimates and boosted its forecast for European demand, sending the shares up the most since 2009.
Earnings before interest, taxes and one-time items increased 4 percent to 749 million kronor ($114 million) in the first quarter of 2014, the Stockholm-based maker of AEG stoves said in a statement today. The median estimate of 11 analysts compiled by Bloomberg was 613 million kronor.
Electrolux rose as much as 11 percent in Stockholm, the steepest intraday advance since July 16, 2009. Profit margins were better than expected in Europe, the Middle East and Africa, and Latin America, according to analysts at Nordea Bank AB. The maker of Frigidaire refrigerators is reducing expenditure and moving production to low-cost countries in an effort to boost profitability after years of stagnating sales.
The first-quarter outcome was “clearly better than feared,” the Nordea Bank analysts said today in a note.
The shares gained 10 percent to 170.50 kronor at 12:04 p.m. in Stockholm, erasing their decline this year. Prior to today, the stock had fallen 8.3 percent in 2014, versus a 1.4 percent drop for bigger rival Whirlpool Corp. (WHR) The Benton Harbor, Michigan-based maker of KitchenAid appliances today reported adjusted earnings per share for the first quarter of $2.20, missing the $2.31 that analysts had anticipated.
“The underlying performance remains solid with a very strong recovery in March,” Electrolux Chief Executive Officer Keith McLoughlin said today in a separate statement.
Electrolux said it now expects demand to increase by as much as 3 percent in Europe this year. The company previously said it saw “slightly positive” demand in the region.
After a long period of decline, European demand for appliances started to recover during the quarter, Electrolux said. The market grew by 3 percent, with demand increasing in several major countries, such as Germany, France and Italy.
“This is a huge change,” McLoughlin said by phone.
Whirlpool reiterated today that the company expects shipments to increase by as much as 7 percent this year in North America and that shipments may increase by as much as 2 percent for Europe, Middle East and Africa.
Electrolux reiterated that market demand in the U.S. is anticipated to increase by 4 percent this year.
North American demand gained slightly in the first quarter as growth was held back by severe winter conditions at the start of the year, the company said.
U.S. shipments of home appliances, as measured by the key AHAM-6 indicator, rose 8.9 percent in March after declining in January and February, according to data published by the Association of Home Appliance Manufacturers earlier this month.
Demand declined in Brazil during the quarter, though other Latin American markets showed growth.
First-quarter sales at Electrolux advanced 1.2 percent to 25.6 billion kronor, compared with the 25.3 billion median estimate of 13 analysts surveyed by Bloomberg.
Exchange-rate movements reduced quarterly income by 620 million kronor, worsening from a hit of 442 million kronor in the fourth quarter. The impact was largely offset by price increases and changes to the sales mix, Electrolux said.
The effect of currencies on profit will be about half as much in the second quarter, McLoughlin said on the phone.
Earnings estimates for the year are likely to rise by a “mid-single-digit” amount after today’s results, analysts at Espirito Santo said in a note, noting that the first quarter only represents about 12 percent of annual profit.
To contact the reporter on this story: Katarina Gustafsson in Stockholm at firstname.lastname@example.org