Electrolux profits plunge amid weak demand

Electrolux, a leading global maker of household appliances, posted Thursday a 48-percent plunge in net profit in 2011, as price pressure, high material prices and weak demand hit earnings.

Electrolux profits plunge amid weak demand

“The appliance market in the fourth quarter of 2011 remained very competitive. The headwinds of price pressure, higher raw-material costs and weak demand grew stronger as the year progressed,” chief executive Keith McLoughlin said in a statement.

He said these factors negatively impacted earnings by three billion kronor ($445 million).

Net profit for the full-year came in at 2.06 billion kronor, down from 3.99 billion a year earlier.

For the fourth quarter, net profit fell by 68 percent to 220 million kronor, far below the 476 million forecast by analysts surveyed by Dow Jones Newswires.

Electrolux’s share price was nonetheless up by 1.54 percent on a Stockholm stock exchange that was flat in midday trading.

The Swedish company is the the world’s second-biggest maker of household appliances behind US group Whirlpool.

“While we expect the trend going forward to shift in a more positive direction in the form of gradual improvements in prices, mix and lower costs, we do not anticipate that demand in mature markets will recover in the first half of 2012,” McLoughlin said.

“However, there could be a certain degree of improvement in the US market by the end of 2012, supported by a modest growth in the housing market,” he added.

The group said it expected demand in Europe to be stable or shrink slightly — by up to two percent — this year.

It also predicted rising costs for transport, which “makes it even more important to be successful with our price increases.”

For the full-year 2011, sales slipped by 4.4 percent to 101.6 billion kronor, but rose by three percent in the fourth quarter to 28.3 billion, which was higher than the 27.9 billion expected by analysts.

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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.