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.