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Electrolux Falls as Nomura Cuts Rating on Costs: Stockholm Mover

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Sept. 27 (Bloomberg) -- Electrolux AB declined to the lowest level in more than two months in Stockholm trading after Nomura Holdings Inc. reduced its recommendation on the stock citing rising costs that will delay profitability improvements.

The world’s second-biggest maker of home appliances fell as much as 1.6 percent to 171.50 kronor, the lowest intraday level since July 15. The stock dropped 0.9 percent to 172.80 kronor at 9:27 a.m. in the Swedish capital, giving the Stockholm-based company a market capitalization of 53.5 billion kronor ($8.3 billion). Volume was about 20 percent of the three-month daily average.

“We now believe the group is much earlier in its investment phase than we previously thought, with costs set to rise even further next year, in particular in Asia, pushing out margin recovery by yet another year,” Daniel Cunliffe, a London-based analyst at Nomura, said in a note to clients today.

Nomura downgraded the stock to neutral from buy and cut its 12-month price estimate to 195 kronor from 200 kronor. The average price estimate on the shares is now 189 kronor, the lowest since Sept. 5, according to data compiled by Bloomberg.

While slower growth in emerging markets has eased pressure on raw materials, currency volatility in those markets has increased, Cunliffe said. The risks, including a higher investment level in China and slowing volume growth in Latin America, offset a recovery in the U.S. and in Europe, Middle East and Africa, he said.

Electrolux is due to report third-quarter earnings Oct 25.

To contact the reporter on this story: Katarina Gustafsson in Stockholm at kgustafsson@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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