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.