Electrolux Profit Misses Estimates as Europe, Currency WeighKatarina Gustafsson
Electrolux AB, the world’s second-biggest maker of home appliances, reported profit and sales that missed analyst estimates, weighed down by lackluster European demand and the strength of the dollar. The stock fell the most in almost two-and-a-half years.
Fourth-quarter earnings before interest and taxes and one-time costs fell 23 percent to 1.22 billion kronor ($187 million), the Stockholm-based maker of AEG stoves and Frigidaire refrigerators said in a statement today. The average of 11 analyst estimates compiled by Bloomberg was 1.38 billion kronor.
“Due to headwinds in the European market and significant currency fluctuations our earnings have declined,” Chief Executive Officer Keith McLoughlin said in a separate statement. “However, the actions that have been initiated will address the European situation to improve its profitability.”
The Swedish company is reducing expenditure and moving production to low-cost countries to counteract economic weakness in Europe while trying to capture growth by introducing products, including a new collection in China.
Electrolux shares fell 8.8 percent to 139.2 kronor in Stockholm, the steepest decline since August 2011 and the lowest price since July 2012. The stock has lost 17 percent over the past year, compared with an increase of 12 percent for the OMX Stockholm 30 Index.
Electrolux reiterated that demand in the North American market is expected to increase by 4 percent this year and raised its forecast for the European market, where it now sees a “slightly positive” development, compared with an earlier prediction of unchanged demand.
The Swedish manufacturer’s North American market forecast contrasts with that of larger rival Whirlpool Corp. The Benton Harbor, Michigan-based maker of KitchenAid appliances, yesterday forecast U.S. industry shipments will increase by as much as 7 percent this year.
David J Cederberg, an analyst at Pareto Securities, said Electrolux’s earnings report was “weak” with North America a disappointment and a weaker market outlook than expected, especially compared with Whirlpool’s forecast yesterday.
Fourth-quarter sales decreased 1 percent to 28.9 billion kronor at Electrolux. Analysts had anticipated 29.5 billion kronor, the average of 14 estimates. Exchange-rate movements had a negative impact of 442 million kronor on operating income in the quarter, compared with a year earlier, the Swedish manufacturer said.
Operations in Latin America, the Asia Pacific region, Europe, the Middle East and Africa were hurt by a stronger U.S. dollar and euro against local currencies, especially in emerging markets, Electrolux said.
“The company continues to face a favorable outlook in the U.S. and troughing out Europe, supplemented by further cost savings,” Andre Kukhnin, an analyst at Credit Suisse with a neutral rating on the shares, said in a note to clients today. “However, the headwinds of slowing Latin America and further foreign-exchange impact are likely to escalate.”
One-time items of 1.5 billion kronor related to an overhead-cost reduction program weighed on Electrolux’s results. The board proposed a dividend for 2013 of 6.50 kronor a share, unchanged from a year earlier.