Electrolux Surges Amid Strong U.S. Growth, Improving Marginsby
Forecast U.S. market growth raised to 4 percent to 5 percent
Margin improvement in all units except Latin America
Electrolux AB, Europe’s biggest maker of home appliances, surged the most in a year after more than doubling first-quarter profit and increasing its forecast for U.S. growth.
Operating profit increased to 1.27 billion kronor ($157 million) from 516 million kronor in the year-ago period, when North American operations reported a loss, the Swedish company said in a statement Thursday. The average of analyst estimates compiled by Bloomberg was 1.05 billion kronor. The stock climbed as much as 10 percent.
“We had solid growth in EMEA -- 7 percent -- and solid growth in North America,” Chief Executive Officer Jonas Samuelson said in his first quarterly conference call with analysts since taking the helm in February. “I wish I could say it’s due to new management, but it’s a bit of a different story in different sectors.”
Volume growth in the U.S. market for appliances remained healthy, and increased by 8 percent in the first quarter, Samuelson said. Electrolux expects the U.S. market for home appliances to grow by 4 percent to 5 percent this year, raising its previous forecast of 3 to 4 percent. It still expects the Western European market to expand by 2 to 3 percent.
Life After GE Deal
Samuelson took over from Keith McLoughlin, whose attempt at buying General Electric Co.’s appliances unit for $3.3 billion fell apart following resistance from the U.S. Department of Justice. The unit was later sold to China’s Qingdao Haier Co. for $5.4 billion, potentially bringing a more aggressive competitor into the U.S. appliances market.
Shares of Electrolux rose 9.5 percent to 233.10 kronor as of 12:24 p.m. in Stockholm.
The beat was driven by a a better-than-expected result in Europe, Johan Eliasson, an analyst at Kepler, said in a note. The company’s operating margin in the region strengthened to 6.1 percent, as a result of volume growth and a larger share of sales of more profitable products.
Operating margins increased in all divisions except the company’s Latin American unit, which has been hurt by weakening demand and currencies.
“We have had a very strong focus in recent years on built-in kitchens under Electrolux and AEG brands, as well as premium products within laundry and drying,” Samuelson said in a phone interview. “Those are very fruitful innovation areas, where we see continued opportunities.”
The company’s U.S. operations were burdened last year by manufacturing problems in its Memphis plant that makes cooking products, and Samuelson said it will continue to work on increasing efficiency into the second half of this year.
“In the first quarter we were able to produce according to demand, but it still takes large efforts in the form of staffing and overtime,” Samuelson said. “We’re working on improving efficiency in that area.”