Electrolux sees extra US costs hitting Q4 earnings

[STOCKHOLM] Appliance maker Electrolux AB said on Sunday its North American business would take a higher than forecast US$70 million earnings hit in the fourth quarter, partly due to extra costs related to its move into a new facility in South Carolina.

The company is investing about US$250 million in new product platforms at a new facility in Anderson, South Carolina. The plant will replace manufacturing in St Cloud, Minnesota and manufacturing at another facility in Anderson.

"The transition to the new facility has resulted in temporary capacity constraints impacting deliveries to some customers in the fourth quarter," Electrolux said.

The company, which previously forecast a negative impact of US$25 million on fourth-quarter earnings from the factory plan, said it expected the capacity constraints in Anderson to be gradually resolved in the first half of 2020.

It said the US$70 million impact now foreseen also included effects from accounting adjustments from previous quarters and a reduction in inventory by a US customer.

Electrolux said its new investment programme and streamlining measures were on track to generate about 3.5 billion kronor (S$506 million) of annual cost savings, with full effect from 2024. But it slashed the forecast for 2020 to 200 million crowns from 800 million kronor.

Analysts at Citigroup said the negative impact on 2020 earnings forecasts would weigh on shares, even though long-term saving by 2024 were confirmed.

Electrolux said it would run its two plants in Anderson in parallel into the second half of next year to meet market demand.

REUTERS