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Electrolux profits down on fourth quarter losses

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11:14 CET+01:00
Appliance maker Electrolux on Wednesday reported net fourth quarter losses of 474 million kronor ($57 million) due to weak demand and downsizing costs, compared to a profit of 1.15 billion kronor a year earlier.

For 2008 as a whole, net profits were down 88 percent at 366 million kronor, while full-year sales remained stable at 104.8 billion kronor.

The board has also suggested the company implement a wage freeze in 2009 and that it stop paying dividends to shareholders for 2008. Last year the Electrolux paid owners 4.25 kronor per share.

Electrolux CEO Hans Stråberg told the TT news agency that management would make less in 2009 because of the company's weak results for 2008.

“My total compensation, base salary and bonuses, will drop by 25 percent,” he said.

Sweden's Electrolux on Wednesday posted an 88 percent drop in full year profits and a fourth quarter loss and announced a savings programme that will affect employees in China and possibly Spain.

In the fourth quarter, when the economic crisis entered full-swing, sales rose by 3.7 percent to 28.6 billion kronor as the company raised its prices to meet rising production costs.

The company said it was making no forecast for 2009 "because of high uncertainty in the market."

"In 2008, we experienced a drop in demand, which accelerated at the end of the year. Unfortunately, we see no market improvement in the short term," Electrolux chief executive Hans Stråberg said in a statement.

The Electrolux share was up by 5.20 percent at 62.75 kronor on the Stockholm stock exchange in early afternoon trading on Wednesday, with analysts saying investors were reassured by the company's strong cash flow of 1.0 billion kronor, new cost-cutting measures and announcement of no dividend payments in 2009.

Electrolux cut 3,100 jobs in the fourth quarter because of the global economic downturn, a restructuring that entailed a cost of 1.1 billion kronor.

On Wednesday the company said it would freeze all salaries in 2009, while a factory in China that employs 700 people would be closed and staff transferred to another site in the country.

Electrolux has also launched a study into the future viability of a washing machine plant in Alcala, Spain that employs 500 people.

"The cash flow in the quarter was a positive 1.0 billion, which was very positive as the whole market came to a full stop at the end of November. So the cost cutting seems to be successful," Evli Bank analyst Michael Andersson told AFP.

For more than a year, the group has been in the process of restructuring its business to reduce production costs, moving factories to countries where labour is cheaper.

Electrolux, which sells appliances under the brands Electrolux, AEG-Electrolux, Zanussi, Eureka and Frigidaire, last year introduced a new high-end product line in the United States.

The launch, which the company described as "successful," entailed costs of 470 million kronor in 2008, it said.

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