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Weak European demand hits Electrolux profits

Swedish home appliance maker Electrolux reported a fall in second quarter profits in the second quarter on Friday, citing difficulties in European markets.

Weak European demand hits Electrolux profits

The company, which makes household equipment such as washing machines, said

it was looking increasingly to emerging markets to grow its business.

“All of our operations in Europe continued to suffer from weak demand resulting in negative price development,” the company’s CEO Keith McLoughlin said in a statement.

Profits during the quarter were down by eight percent from the same quarter in 2012 to 642 million kronor ($98 million).

That was below average expectations of 677 million kronor among analysts polled by Dow Jones Newswires.

Net sales were almost stable, down by a mere 0.3 percent from the same quarter last year to 27.67 billion kronor. The figure was slightly higher than analyst forecasts of 27.44 billion kronor.

At constant exchange rates, net sales growth was six percent, according to Electrolux.

The underlying weakness, especially pronounced in southern Europe, in the Benelux countries and France, was offset by strong growth in the Americas, although profits did not match that growth, he added.

“We expect demand in Europe to rebound and in combination with our measures in the region, earnings will recover,” he said.

The Swedish company also sees potential in North America, where demand for

appliances is down by almost one quarter compared with the level in 2006, at the peak of the bubble in US real estate.

Electrolux said it maintained its drive to expand in emerging economies, which now account for more than 35 percent of sales.

“In a few years time, our ambition is to increase our exposure (in the emerging economies) to be 50 percent,” he said.

AFP/The Local

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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.