Electrolux Seeks Cost Savings to Offset Post-Brexit Slowdown

  • Expects 1.6 billion-krona boost from cost cuts, efficiency
  • “Signs of softer demand” in markets including the U.K.

Electrolux AB said it expects savings and increased efficiency to help buoy earnings next year as Europe’s largest appliance maker battles a slowdown in parts of Europe, including the U.K., following the country’s vote to leave the European Union.

A reduction in costs and improvements to efficiency will generate a 1.6 billion Swedish kronor ($175 million) financial boost next year, Electrolux said in a statement Friday. Electrolux shares traded 3.3 percent higher as of 9:50 a.m. in Stockholm, and Swedbank analyst Anders Roslund said the outlook was greeted with some relief after a 9 percent decline in the stock in the past month.

“Electrolux is one of the losers when rates and metal prices increase, and there has been a rotation into cyclical manufacturing companies and out of more consumer-related companies,” Roslund said. “The fact that the savings are expected to be as large as 1.6 billion kronor is a slight relief.”

The Swedish company forecast European demand for appliances will grow by about 1 percent next year, down from 2 to 4 percent in 2016. A slowdown in construction after Britain’s vote to exit from the EU is starting to hurt demand for ovens, hobs and other kitchen equipment.

Electrolux reported a U.K. market decline of about 4 percent in the three months through September. In response to a weakening of the pound, Electrolux is one of several companies that have hiked prices of its products in the U.K.

Relief

North American growth will also ebb, with volume growth of 2 to 3 percent forecast for 2017. In October, when the company posted third-quarter earnings, it lowered its 2016 outlook for the region to between 3 and 4 percent.

A slowdown was in the cards and analysts hope that the company can grow faster than the market.

“Two to 3 percent in the U.S. is pretty good, and 1 percent in Europe is alright,” Roslund said. “It’s not a huge difference from this year, and Electrolux is gaining market share.”

Chief Executive Officer Jonas Samuelson, appointed after his predecessor Keith McLoughlin failed in his attempt to buy General Electric Co.’s appliances unit late last year, is trying to reach a 6 percent operating-profit margin target by improving under-performing units and increasing sales of new and more profitable products such as steam ovens and washers designed to handle delicate fabrics.

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