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Electrolux profit beats forecast on North American strength

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Home appliance maker Electrolux reported its best quarterly operating margin in almost seven years boosted by strong progress in its biggest market, North America, sending its shares up 6 per cent to a record high.

[STOCKHOLM] Home appliance maker Electrolux reported its best quarterly operating margin in almost seven years boosted by strong progress in its biggest market, North America, sending its shares up 6 per cent to a record high.

The maker of white goods under brands such as Frigidaire, AEG and Zanussi as well as its own name has been squarely focused on boosting profitability since CEO Jonas Samuelson took charge early last year.

Efforts to boost margins include exiting unprofitable lines to focus on more lucrative business in areas such as kitchen and laundry products.

Operating earnings rose to 1.94 billion crowns (S$319.2 million) from 1.56 billion a year ago, the Swedish company said.

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That was ahead of a mean forecast of 1.73 billion in a Reuters poll of analysts.

Its operating margin of 6.2 per cent was its highest since the third quarter of 2010, and also marked the first time since that it had hit its 6 per cent profitability target. Analysts had forecast an operating margin of 5.5 per cent in the quarter.

Profitability in North America accounted for the main positive surprise with margins reaching 8.4 per cent despite continued price pressure and declining private label sales.

The company said it expected cost savings of 2.3 billion crowns this year, marginally up from a previous estimate of 2.2 billion. It also confirmed that increased raw material prices were expected to result in 1.4 billion crowns of higher costs.

The rival of US Whirlpool Corp also raised its forecast for market demand in North America, saying it now expected it to grow 3-4 per cent this year versus 2-3 per cent previously.

"With a good trend during the first half of the year, the market for appliances in North America remains strong and we see the favourable macro environment continuing to support demand," Samuelson said in a statement.

Electrolux repeated its market outlook for 1 per cent growth in Europe.

To help boost margins, the company has also introduced modularisation - a technique which aims to reduce complexity, and allows manufacturers to raise the number of components common to a range of products.

Electrolux, which also competes with Asian firms such as LG Electronics and Haier Group, has seen its shares rise about 25 per cent this year, compared with a 13 per cent rise in the STOXX Europe personal and household goods index.

REUTERS

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