Electrolux Tops Estimates; Says Target `Within Reach'
Electrolux AB, the world’s second- biggest appliance maker, reported third-quarter earnings that beat analysts’ estimates and said this year’s profitability goal is “within reach.”
Net income declined to 1.38 billion kronor ($204 million) from 1.63 billion kronor a year earlier, the Stockholm-based company said today in a statement. The average estimate in a Bloomberg survey of 15 analysts was for 1.11 billion kronor. Sales fell 5 percent to 26.3 billion kronor.
“This result strengthens my conviction that our goal of a 6 percent operating margin for the full-year 2010 is within reach,” Chief Executive Officer Hans Straaberg said in the statement.
Straaberg, who said last month he will leave at the end of the year, initiated a restructuring program in 2004 that is likely to be completed in 2011, resulting in annual cost savings of 3 billion kronor. Once completed, some 60 percent of the company’s products will be made in lower-cost countries such as Poland, Hungary, Mexico, China and Thailand.
Electrolux gained as much as 5.9 kronor, or 3.5 percent, to 175.7 kronor in Stockholm, and traded at 175 kronor as of 9:36 a.m. Before today, Electrolux had gained 1.4 percent this year, underperforming the OMX Stockholm 30 Index, which has risen 16 percent in the period. The world’s largest appliance maker, Whirlpool Corp., has gained 4.8 percent this year.
North American Demand
Operating income in the quarter was 1.98 billion kronor, corresponding to a margin of 7.5 percent, compared with income of 2.29 billion kronor a year earlier with a margin of 8.3 percent.
Demand for appliances in North America declined an estimated 2 percent in the third quarter, while Electrolux’s other main markets continued to show signs of recovery, the company said. Straaberg, who will be succeeded by Keith McLoughlin as CEO, attributed the lower earnings in the quarter to a “substantial increases in raw material costs and increased investments in marketing.”
Sales of consumer durables in North America fell 6 percent in the quarter to 8.35 billion kronor, while operating profit slipped 38 percent to 439 million kronor “primarily as a result of considerably higher costs for raw materials, lower volumes and increased price promotion,” the company said.
Consumer durables sales grew 7 percent in Latin America and 11 percent in the Asia Pacific region. Sales fell 10 percent in Europe in the division to 10.21 billion kronor.
“The market continues to be volatile, and different types of stimulus measures make the forecasting of developments difficult, not least in North America,” Straaberg said.
The maker of Frigidaire dishwashers and refrigerators on Oct. 11 agreed to buy a 52 percent stake in Egyptian household appliance maker Olympic Group Financial Investments to tap demand in the fast-growing appliance markets in the Middle East and North Africa.
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