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ELECTROLUX

Electrolux profits in high speed spin

Swedish white goods maker Electrolux beat market expectations with strong profits announced on Monday. But the firm also said it would close two plants in Iowa as part of its cost-cutting scheme.

Electrolux profits in high speed spin

Electrolux, which on Friday said it would close a Spanish plant with the loss of 450 jobs, said it would also shutter two washing machine factories in Iowa that employ 950.

The company in addition pledged to carry out further restructuring, cheering investors on the Stockholm exchange where Electrolux shares were showing a gain of 8.9 percent to 179.70 kronor in an overall stronger market.

Electrolux said that in the three months to September it earned a net profit of 1.63 billion kronor ($240 million), up 92 percent from a year earlier on the back of low raw material costs and previous cost-cutting measures.

Analysts surveyed by Dow Jones Newswires had forecast third quarter net profit at 782 million kronor.

Third quarter sales rose 5.0 percent to 27.6 million kronor, beating expectations of 27.1 billion kronor.

“Almost everything went our way this quarter. (A) cyclical trough in commodity prices and maintained prices have been decisive for our earnings improvement.

“Other contributing factors are a better product mix and significant cost reductions,” said the company, ranked as the world’s second largest home appliance manufacturer after the US group Whirlpool.

At the same time, it cautioned that “demand continues to be weak, although the rate of decline has slowed down.”

It pointed in particular to Europe, where it said the appliance market had further to fall.

Electrolux, after carrying out several reorganizations in recent years in a bid to cut costs, announced the elimination of 3,000 jobs in December in response to the global economic slowdown.

The company, which makes refrigerators, dishwashers and vacuum cleaners, has stepped up its restructuring efforts since 2004, in many cases moving production to low-wage countries.

Production at plants in Jefferson and Webster City, both in the mid-western American state of Iowa, will be transferred to Juarez in Mexico at an estimated cost of 630 million kronor.

The Jefferson plant is due to close in the last quarter of 2010 and the Webster City facility in the first quarter of 2011.

Electrolux recently said it had also launched a study on the viability of a stove-making plant in Sweden that employs 240 people.

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ELECTROLUX

Sweden’s Electrolux sees big US deal stopped

UPDATED: Shares in Swedish white goods giant Electrolux plummeted on Monday morning after US firm General Electric, which was poised to sell its appliance division to the Nordic firm, cancelled the agreement.

Sweden's Electrolux sees big US deal stopped
Electrolux's office in Kungsholmen, Stockholm. Photo: Fredrik Persson/TT
Electrolux, which sells brands including Frigidaire, AEG and Zanussi as well as its own name, is already the world's second-largest home appliance maker after Whirlpool.
 
It announced a year ago that it wanted to buy part of General Electric (GE).
 
But the US firm said on Monday that it has decided to cancel the agreement to sell its appliance division to the Swedish group which had offered last year to buy it for $3.3 billion.
 
The US Department of Justice had threatened to sue Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a US market share of some 40 percent.
 
Electrolux said it had made extensive efforts to obtain regulatory approval, and said it “regrets” that GE had terminated the agreement while the court procedure was still pending.
 
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the Group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer”, said Keith McLoughlin, President and CEO of Electrolux in a statement.
 
Shares in Electrolux — one of Sweden's most famous brands — initially dropped by 14 percent after the decision was announced, and remained 12 percent lower by mid-morning.
 
The failed deal has already cost the company millions of kronor in preparatory work and General Electric has requested a termination fee of $175 million.
 
GE revealed in a statement that it was still interested in selling the appliance division.
 
Monday's announcement took some analysts by surprise.
 
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets.
 
“It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG,” he said.