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ELECTROLUX

Electrolux welcomes rising profits

Electrolux, the world's biggest producer of household appliances, on Wednesday reported a rise in net profit in the third quarter but forecast subdued growth in Europe and North America for the full year.

Net profit including exceptional items was 440 million Swedish kronor compared to a loss of 263 million kronor in the same period last year, Electrolux said in a statement.

On a comparable basis and excluding the impact of restructuring costs, net profit stood at 809 million, 36 percent up on the figure for the same period a year ago, the group said.

Shares in Electrolux showed a gain of 5.73 percent to 129.25 kronor in midday trading on the Stockholm stock market.

The group however forecast modest growth in demand for the full year in its key European and North American markets.

“Market demand … in 2006 is expected to show some growth in both Europe and North America as compared to 2005,” Electrolux said.

Sales grew by 0.5 percent to 26.08 billion kronor, a shade below market forecasts of 26.82 billion.

The group said sales were virtually unchanged in Europe but down 3.5 percent in North America and 6.2 percent in Asia Pacific, with Electrolux blaming exchange rate costs. Sales were up 39 percent in South America on the back of strong demand, the group said.

Chief executive Hans Stråberg said in a statement that the transfer of production from high-cost countries to countries with a lower cost base was “in an intensive phase in Europe.”

The company had moved 25 percent of its European production to lower cost countries over the past two years, he said.

“As reported at the beginning of the year, I expect the operating result for (2006) … to be somewhat higher than 2005,” Stråberg said.

“Increasing costs for raw materials, a weakening North American market and a continued challenging competitive environment are concerns,” he added.

Electrolux proposed a 5.6 billion kronor cash distribution to Electrolux shareholders through a share redemption scheme “on the basis of the strong balance sheet after the spin-off of Husqvarna.”

The group sold Husqvarna, its outdoor appliances division, in June.

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.