Electrolux profits recover in second quarter

Electrolux, the world's leading electric appliance maker, said on Thursday it had bounced back to profit in the second quarter after a first-quarter loss, but was hit by the economic slowdown in Europe and restructuring costs.

In the period April to June, the group posted an 82-percent drop in net profit to 99 million kronor ($16.6 million dollarsfrom the same period a year earlier.

That was however significantly better than the first-quarter net loss of 106 million kronor.

The group also revised sharply downward its growth forecast for 2008, sending the share sliding four percent on the Stockholm stock exchange to 67.25 kronor in an overall market up by 2.3 percent.

Sales remained stable in the second quarter at 25.5 billion kronor, compared to 25.7 billion kronor in the same period in 2007, but operating profit fell by 72 percent to 254 million kronor, a drop attributed to a costly product launch in North America that negatively impacted earnings.

The closure of a factory in Italy had also set back second quarter earnings. Excluding costs linked to the closure, operating profit fell by 14 percent.

The product launch in the US “will give us a strong position in the profitable premium segment. It has begun well. Our products are today present in more than 2,000 retail outlets in the US, and we expect to reach about 3,000 retailers by the end of the year,” chief executive Hans Stråberg said in a statement.

He said Electrolux had maintained its earnings in North America despite a strong decline in demand.

In the second quarter operating margin slid to 3.1 percent from 3.6 percent in the same period a year ago, and to 1.5 percent in the first half from 3.3 percent in the first half of 2007.

For 2008, the group said it expected operating profit to come in lower than in 2007, in the range of 3.3 to 3.9 billion kronor. Earnings in Europe were expected to be down by one to two percent and in North America by five to eight percent.

Electrolux had previously said operating profit would be in line with that from 2007, 4.47 billion kronor.

The group is in the process of restructuring its business to reduce production costs, moving factories to countries where labour is cheaper.


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.