Profits disappoint as Electrolux is hit by rise in raw material costs
Published 04/02/2010 | 05:00
ELECTROLUX, the world's second-biggest appliance maker, disappointed the markets yesterday after fourth-quarter profits were less than expected.
Electrolux faces a growing burden from rising raw material costs, jeopardising efforts to overcome a consumer slump with lower expenses and premium products.
The Stockholm-based company's earnings contrast with those of bigger rival Whirlpool, which said on Tuesday that fourth-quarter profit had more than doubled.
"This is a disappointment relative to expectations, while still a good result given the environment," said Andreas Willi, an analyst at JP Morgan.
Electrolux has closed factories in western Europe and relocated farther east in order to cut costs as the recession caused consumers to delay on the purchase of household appliances and raw material prices increased. The company said in October that it would close a washing machine factory in Spain, cutting 450 jobs.
Electrolux is in "the final phase" of shifting production to countries with lower labour costs than in western Europe, Chief Executive Officer Hans Straaberg said yesterday. The programme began in 2004, and when completed later this year, about 60pc of Electrolux's production will be in low-cost countries, he said.
Introducing own-brand models in the US and closing factories to trim costs helped Electrolux report net income of 664m kronor (€65.7m).
Electrolux is gaining market share in the US premium segment, which it entered in 2008 with the introduction of its Electrolux-branded products, Straaberg said.
"We have managed to take a 5pc to 10pc market share in that segment in the two years, which we are very satisfied with," he said. (Bloomberg)