SHARE
COPY LINK

ELECTROLUX

Electrolux profits more than double

Shares in Electrolux, the world's biggest household appliances maker, surged Wednesday by 20 percent after the company announced its 2006 net profit had more than doubled owing to strong sales and a successful restructuring plan.

Net profit rose to 3.84 billion kronor for the year, up from 1.76 billion in 2005.

The Electrolux share jumped by 20 percent on the Stockholm stock exchange on the news, to 168 kronor, as the company predicted another strong year for 2007 despite rising costs for raw materials.

“A very strong report,” Danske Securities analyst Michael Andersson told financial daily online Dagens Industri.

“The result was primarily much better than expected, which in turn is a result of the fact that (the group’s operations in) Europe did much better than expected,” he said.

Operating margins in Europe in the fourth quarter soared by 22.8 percent, to 9.7 percent from 7.9 percent. For the full-year, margins were up by 3.4 percent to 6.1 percent.

“All business areas in Electrolux increased their results compared with the previous year and new, exciting products made a crucial contribution,” Electrolux chief executive Hans Stråberg said in a statement.

“Europe, which went through a difficult time at the beginning of the year due to the strike (at the company’s plant) in Nuremberg, Germany, improved its operating margin from 5.9 to 6.1 percent,” he said.

Turnover for the full year increased by 3.1 percent. In the fourth quarter, sales totalled 27.8 billion kronor, down by 2.7 percent but above analysts’ expectations of 27.4 billion kronor.

Sales rose by 1.09 percent in Europe, 2.9 percent in North America and 33.5 percent in Latin America, but were down by 6.9 percent in the Asia-Pacific region and the rest of the world.

Net profit for the October-December period was 1.43 billion kronor, compared to a loss of 440 million in the fourth quarter of 2005.

Net profit excluding items affecting comparability, such as the restructuring operations, climbed by 17.5 percent to 3.14 billion.

The Swedish group recalled that restructuring costs linked to factory closings in Europe had negatively impacted the final quarter of 2005. Electrolux closed five factories, including one in Germany.

The group also spun off its outdoor appliances division Husqvarna in June 2005, and has moved 25 percent of its European production to lower cost countries over the past two years.

“Our strategy is working,” Stråberg said, adding that efforts to create “a competitive cost foundation is beginning to yield results.”

For 2007, Electrolux predicted an operating profit slightly higher than in 2006, when it almost quadrupled to 4.03 billion kronor compared to 1.04 in 2005. Excluding exceptional items, it reached 4.57 billion kronor compared to 4.02 billion a year earlier.

“Market demand for appliances in 2007 is expected to show continued growth in Europe, while the North American market is expected to decline as compared to 2006,” the group said, noting that the cost of raw materials was expected to have an adverse effect on operating income.

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.