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Electrolux reports steep earnings drop

Swedish household appliance-maker Electrolux on Tuesday reported a profit slump because of high materials prices and weak demand, and warned of difficult trading conditions for the rest of the year.

Electrolux reports steep earnings drop

Net profit for the second quarter dropped by 46.0 percent from the figure last year, and the price of shares in the group slumped by 11.2 percent to 128.40 kroner in early trading in a market showing an overall gain of 1.2 percent.

In the quarter, net profit amounted to 561 million kronor ($85.5 million) from 1.03 billion kronor in the second quarter of last year.

This fell short of the average estimate by analysts polled by Dow Jones Newswires of 649 million kronor.

Sales fell by 12.0 percent to 24.14 billion kronor. The polled analysts had expected a fall of 9.0 percent.

Chief executive Keith McLoughlin said: “As expected weak demand in key markets, lower prices and increases in raw material costs had a negative impact on second-quarter results.”

He said “We do not expect earnings in the second half of the year to reach the level achieved in the second half of 2010.”

The group was taking action, including raising prices in key markets and cost-efficiency measures, he said.

European operations had turned in disappointing results, he said, commenting that increased competition had upped pressure on prices and the group had lost market share at the lower end of the market.

“The very weak demand in Italy, a key market for Electrolux, also had an adverse impact.”

Electrolux is the second-biggest maker of household electrical goods after the US group Whirlpool.

In response to the fall of demand in rich countries, it has undertaken restructuring programmes and has developed production abroad in recent years, closing several sites in Europe and North America.

At the end of June, the group employed 50,000 people or 1,200 fewer than at the end of June in 2010.

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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.