Electrolux Raises U.S. Forecast as Appliance Sales IncreaseKatarina Gustafsson
Electrolux AB, the world’s second-biggest maker of home appliances, raised its forecast for North American market growth after strong first-quarter sales and earnings in the U.S. balanced weakening European demand.
The electrical-goods maker now expects demand in North America to increase by 3 percent to 5 percent this year, compared with a previous forecast for growth. Electrolux reiterated its forecast European demand for core appliances to drop this year. The shares rose 3.7 percent to 175.8 kronor at the 5:30 p.m. close in Stockholm, the most in 7 months.
“We were positive on the U.S. at the start of the year and now we’ve upgraded that forecast based on developments in the first quarter and our confidence is growing that we will see positive development year-on-year,” Chief Executive Officer Keith McLoughlin said in an interview with Bloomberg Television.
The maker of AEG vacuum cleaners and Frigidaire freezers is selling new products and cutting costs to counteract weakness in its European markets where cash-strapped consumers have reined in spending. Electrolux is also vying to capture growth in emerging markets, while moving production to low-cost countries. North America represented 28 percent of the company’s sales last year, according to data compiled by Bloomberg, while Europe, the Middle East and Africa stood for 31 percent.
Operating income fell 30 percent to 638 million kronor in the quarter, dragged down by 318 million kronor in negative impact from currency movements in mainly Latin America, Europe and in the manufacturer’s small appliances business. McLoughlin said he expects negative currency effects in Latin America to diminish over the course of the year, letting the company benefit from continued strong growth in the region, which represented 20 percent of sales last year.
Analysts at Credit Suisse said currency effects were the key reason first-quarter earnings fell shy of analysts’ expectations.
“Given the soft start of the year, we expect consensus expectations to continue to drift,” the bank said in a note to clients. “However, we find strong U.S. performance as reassuring and expect the business to improve further during the year, offsetting weakness in Europe.”
Whirlpool Corp., the world’s largest home appliances maker, yesterday reiterated its full-year forecast as it posted first-quarter adjusted earnings per share that beat analysts’ estimates while sales fell short. Whirlpool, based in Benton Harbor, Michigan, said it continues to expect full-year 2013 U.S. industry unit shipments to increase 2 percent to 3 percent.
Electrolux said net sales of major appliances in North America increased to 7.68 billion kronor from 7.11 billion kronor a year earlier helped by strong volumes as well as improved price/mix. Regional operating income more than tripled to 457 million kronor from 131 million kronor. McLoughlin said he sees evidence that the recovery in the U.S. housing market is “finally generating increased consumption of appliances.”
Group sales fell to 25.3 billion kronor from 25.9 billion kronor a year earlier, missing the average estimate of 25.5 billion kronor. Sales grew 3.8 percent excluding changes in exchange rates, which had a negative impact of 5.9 percent, the company said. So-called organic sales growth was mainly attributable to North America, Asia Pacific and Latin America, Electrolux said.
“Europe is challenging,” McLoughlin said in an interview. He predicted demand for appliances will be down 1 percent to 2 percent this year in the region.
“At some point, demand in Europe will rebound and, combined with a recovery and a stronger market in North America and continued strong growth in our emerging markets, Electrolux will exceed all key financial objectives,” McLoughlin said.
Net income was 361 million kronor ($54.7 million) in the three months ended March, down from 501 million kronor a year earlier. The average estimate of 15 analysts surveyed by Bloomberg was profit of 517.5 million kronor.