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ELECTROLUX

Electrolux earnings fall below expectations

Fourth quarter results for Swedish white goods manufacturer Electrolux failed to meet expectations, as the rising cost of raw materials put additional cost pressure on the company.

Electrolux earnings fall below expectations

The company reported fourth quarter earnings of 1.71 billion kronor ($257.8 million), slightly below the forecast of 1.78 billion kronor and down from 2.02 billion kronor for the same period of 2009.

Analysts had expected Electrolux to earn 1.8 billion kronor, according to a Reuters survey.

Turnover came to 275.6 billion kronor, compared with 282.2 billion a year ago.

The board has proposed raising shareholder dividend payments to 6.50 kronor per share, compared with last year’s dividend of 4.00 kronor per share.

Commenting on the report, CEO Keith McLoughlin noted that higher raw materials costs had affected results in North America and Europe.

“We expect that the costs for raw materials in 2011 will increase between 1.5 and 2 billion kronor over the previous year, with full impact as from the start of the year,” he said in a statement.

Despite cost pressure in several of the company’s markets, McLoughlin said he saw “very good opportunities” for the company to provide shareholders with high returns in the future.

As a way to compensate for rising costs, Electrolux plans on raising prices on products sold in North America, as well implementing “selective price increases” in Europe and other markets around the world.

Profits for the year reached 4 billion kronor, up from 2.6 billion kronor in 2009, representing “the best ever” annual results for Electrolux, according to McLoughlin.

Nonetheless, the company saw its share price plunge more than five percent

to 172.50 kronor within minutes of trading start on the Stockholm stock exchange, with observers hinting that a cautious outlook and smaller-than-expected dividend were to blame.

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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.