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ELECTROLUX

Sales up but earnings down for Electrolux

Electrolux, the world's leading electrical appliance maker, reported a 53.2 percent fall in second quarter net earnings that it attributed to a rise in raw materials costs and delays in new product launches.

Shares in the Swedish group nonetheless rose 4.5 percent to 167 kronor in early trading, with investors focusing on a gain in sales that exceeded expert expectations.

Net earnings in the April-June period came to 545 million kronor ($82 million), down 53.2 percent from the same quarter last year.

But sales rose 1.8 percent to 25.78 billion kronor, beating expectations of 24.49 billion.

The company said that while it enjoyed strong sales volumes in Latin America the introduction of new products in Europe faced delays at a time when raw materials prices were rising.

At the operating level, profits rose 3.2 percent to reach 890 million kronor, reflecting strong sales in North and South America.

Electrolux predicted that operating profit this year would be “somewhat higher” than in 2006, when it came to 4.03 billion kronor.

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.