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Electrolux Earnings Revival Gathers Pace as Europe Improves

July 18 (Bloomberg) -- Electrolux AB, the world’s second-biggest appliance maker, reported a second straight increase in quarterly profit amid improving demand in the U.S. and Europe.

Earnings before interest, taxes and one-time items rose 13 percent to 1.17 billion kronor ($171 million), Stockholm-based Electrolux said today, beating the 1.11 billion-kronor average of 10 analyst estimates compiled by Bloomberg. The previous quarter’s 4 percent gain was the first in more than a year.

Electrolux rose as much as 5 percent in Stockholm trading, the most since April 25. Demand in Europe is recovering and North America is gradually improving after years of largely stagnant sales. The company today repeated its forecast for growth in both markets this year.

“The improvement in our European operations continued in the second quarter,” Chief Executive Officer Keith McLoughlin said in a statement. “At the same time, the development in North America continues to show a solid trend.”

The Swedish maker of AEG stoves and Frigidaire refrigerators forecasts that market demand in the U.S. will increase by 4 percent this year, with demand in Europe expected to grow by as much as 3 percent.

An improved product mix, cost cutting in Europe and price increases in North America helped boost operating income in the second quarter, the company said.

The shares rose 4.5 percent to 178.50 kronor at 11:50 a.m., extending their gain this year to 6.5 percent.

Sales Decline

The earnings demonstrate a focus on cost efficiency, analysts at Banco Espirito Santo SA said in a note. Latin America, which accounts for 20 percent of revenue, was weak and will remain subject to “near-term headwinds,” they said.

Electrolux’s second-quarter sales declined 4.9 percent to 26.3 billion kronor, compared with the 28.5 billion kronor analysts had estimated. The drop was mainly due to market weakness in Latin America, the company said. Currency shifts had a negative impact of 1.1 percent, it said.

Sales in Latin America declined 26 percent in the quarter, weighed down by a slowing economy as well as the soccer World Cup in Brazil, the company’s second-biggest market. Electrolux said it has taken actions to reduce costs and increase prices during the quarter.

“Although we remain confident that Latin America will continue to grow in the medium to longer-term, visibility in the near-term is low,” McLoughlin said.

The strength of the dollar and euro against emerging-market currencies reduced operating income by 430 million kronor in the quarter, Electrolux said.

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

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Paul Jarvis, Robert Valpuesta

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