Electrolux Predicts More Europe Woes as Profit Misses EstimatesNiklas Magnusson and Janina Pfalzer
Electrolux AB, the world’s second-biggest appliance maker, forecast that consumer doldrums in Europe will continue to hurt business after fourth-quarter earnings missed analysts’ estimates.
“We’ve seen that the consumer demand in Europe, particularly in western Europe, has been weakening throughout 2012 and we expect that to continue,” Chief Executive Officer Keith McLoughlin said by phone today. “We expect, year-over-year, negative demand for appliances in 2013 versus 2012 in western Europe.” The stock dropped as much as 2.3 percent in Stockholm trading.
To make up for the European slump, the Swedish maker of Frigidaire refrigerators and AEG vacuum cleaners has pushed for higher prices in North America and Europe, expanded in emerging markets, and added new products. Electrolux is also closing or cutting back production at some plants. Net income rose 32 percent to 291 million kronor ($46 million), missing the average 368 million-krona estimate of 11 analysts.
Electrolux dropped as much as 3.8 kronor to 164.20 kronor in Stockholm trading and was down 1.1 percent as of as of 9:20 a.m., valuing the company at 51.3 billion kronor.
McLoughlin said the company is betting that business in North America and Latin America will be able to make up for the woes in Europe.
Operations in North America and Latin America, which currently account for 50 percent of total sales, showed strong sales and earnings growth, the CEO said. “In 2013, we believe that the weak market in Europe will be offset by growth in North America and the emerging markets.”
Fourth-quarter sales rose 2.9 percent to 29.2 billion kronor, driven by a 15 percent increase in sales of major appliances in North America, beating an average analyst estimate of 28.5 billion kronor.
The Swedish company proposed to pay a dividend of 6.5 kronor per share for 2012, unchanged from a year earlier.
Electrolux said in October it will close production of top-load washing machines in Revin, France. The company will also cut back operations at a refrigerator plant in Mariestad, Sweden, and a cooking products site in Schwanden, Switzerland. The actions are part of a plan announced last year to move more production to low-cost, high-growth countries. Electrolux has about 50 plants globally.
Whirlpool Corp., the world’s largest appliance maker, reported higher than estimated fourth-quarter earnings yesterday, helped by cost cuts and a reduction in capacity. Sales dropped 2.4 percent to $4.8 billion.
Electrolux’s organic fourth-quarter sales growth rate of 7.5 percent was impressive for a consumer-oriented company in the current difficult times, Anders Trapp, analyst at SEB Enskilda, said today by phone. The company is “taking a lot of market share” in the U.S. based on Whirlpool’s earnings report yesterday, he said.
Electrolux shares surged 55 percent in 2012, while Sweden’s OMX Stockholm 30 benchmark index gained 12 percent and Whirlpool more than doubled in value.