Electrolux AB, the world's largest maker of appliances, said profit fell for a fifth straight quarter as demand declined for vacuum cleaners and equipment for restaurants. The Swedish company may close a factory in the U.S.
Net income dropped 38 percent to 767 million kronor ($98 million) in the third quarter, the Stockholm-based company said. Sales fell 4.3 percent. Electrolux said it may take a 1.2 billion- kronor charge for closing a U.S. plant. The company declined to say where the factory is and how many workers it employs.
Chief Executive Hans Straaberg has cut more than 4,000 jobs since December and trimmed expenses in an effort to combat price competition from Maytag Corp. and Whirlpool Corp. Lower prices have cut into Electrolux's earnings by eroding profit margins.
``This is a difficult industry,'' said Andreas Willi, an analyst at J.P. Morgan Chase & Co. in London with a ``neutral'' recommendation on the stock.
Electrolux shares fell 9.5 kronor, or 5.3 percent, to 169 kronor at 11:22 a.m. in Stockholm. The drop cut this year's rise to 23 percent. Whirlpool, the biggest U.S. appliance maker, has gained 36 percent this year, while No. 3 Maytag has dropped 10 percent.
The Swedish company has cut 4,330 jobs of the 5,000 it said it planned to cut in December of last year. That program aims to save 415 million kronor by the end of 2005.
Straaberg repeated a forecast that operating profit will be ``somewhat lower'' this year, probably less than 10 percent excluding one-time items, while demand for appliances in Europe and North America will be little changed or ``slightly'' higher in the fourth quarter.
Trilobite
The company said it would disclose the location of the U.S. plant it may close only after speaking to workers there. Electrolux by leaving the U.S. would follow in the footsteps of Maytag, which moved appliance production to Mexico to lower costs.
``Electrolux is one of the only companies with plants in North America,'' said Gustaf Lindskog, an analyst at Alfred Berg in Stockholm. ``That's the name of the game in this industry -- they constantly have to look over their shoulder'' at what other companies are doing to cut costs.
Under Straaberg, Electrolux is adding its name to products such as refrigerators and dishwashers to increase recognition of the brand. It's also introducing higher-priced products such as the Trilobite, a robotic vacuum cleaner, and Auto Mower, a machine that will mow the lawn on its own, in an effort to boost margins.
Third-quarter net income includes a one-time item of 293 million kronor that the company used to cover loan guarantees to launderette operators in Germany who use Electrolux machines. Electrolux also posted a capital loss of 85 million kronor related to the divestment of its compressor unit. Sales totaled 30.4 billion kronor in the quarter.
Industry Trend
Electrolux's results in North America surprised some investors, who said they expected a better performance based on industry figures. Sales of floor-care products there dropped, leading to a ``substantial downturn'' in operating income, the company said.
``Consumers in the U.S. have bought lower-priced products,'' Straaberg said in an interview. The trend ``was more drastic this quarter.''
Shipments of major home appliances in the U.S. rose 15 percent in September, boosted by deliveries of cooking and laundry appliances, data from the Association of Home Appliance Manufacturers showed. The Washington-based trade group represents makers of major and portable appliances and appliance components sold in the U.S.
``If they can't produce good margins in that kind of an environment, I am asking myself what the margins will look like'' if growth in the U.S. slows down, said Tom Bystedt, who helps manage about $400 million at 3C Asset Management in Helsinki.
Maytag said last week earnings fell 40 percent in the third quarter and will decline more than expected this quarter because of slumping sales of its Hoover vacuum and rising costs.
Electrolux said it had 535 asbestos cases pending at the end of the quarter, with 166 new cases filed. The company resolved 12 cases in the quarter. The pending lawsuits represent about 20,700 plaintiffs, the company said.
Net income dropped 38 percent to 767 million kronor ($98 million) in the third quarter, the Stockholm-based company said. Sales fell 4.3 percent. Electrolux said it may take a 1.2 billion- kronor charge for closing a U.S. plant. The company declined to say where the factory is and how many workers it employs.
Chief Executive Hans Straaberg has cut more than 4,000 jobs since December and trimmed expenses in an effort to combat price competition from Maytag Corp. and Whirlpool Corp. Lower prices have cut into Electrolux's earnings by eroding profit margins.
``This is a difficult industry,'' said Andreas Willi, an analyst at J.P. Morgan Chase & Co. in London with a ``neutral'' recommendation on the stock.
Electrolux shares fell 9.5 kronor, or 5.3 percent, to 169 kronor at 11:22 a.m. in Stockholm. The drop cut this year's rise to 23 percent. Whirlpool, the biggest U.S. appliance maker, has gained 36 percent this year, while No. 3 Maytag has dropped 10 percent.
The Swedish company has cut 4,330 jobs of the 5,000 it said it planned to cut in December of last year. That program aims to save 415 million kronor by the end of 2005.
Straaberg repeated a forecast that operating profit will be ``somewhat lower'' this year, probably less than 10 percent excluding one-time items, while demand for appliances in Europe and North America will be little changed or ``slightly'' higher in the fourth quarter.
Trilobite
The company said it would disclose the location of the U.S. plant it may close only after speaking to workers there. Electrolux by leaving the U.S. would follow in the footsteps of Maytag, which moved appliance production to Mexico to lower costs.
``Electrolux is one of the only companies with plants in North America,'' said Gustaf Lindskog, an analyst at Alfred Berg in Stockholm. ``That's the name of the game in this industry -- they constantly have to look over their shoulder'' at what other companies are doing to cut costs.
Under Straaberg, Electrolux is adding its name to products such as refrigerators and dishwashers to increase recognition of the brand. It's also introducing higher-priced products such as the Trilobite, a robotic vacuum cleaner, and Auto Mower, a machine that will mow the lawn on its own, in an effort to boost margins.
Third-quarter net income includes a one-time item of 293 million kronor that the company used to cover loan guarantees to launderette operators in Germany who use Electrolux machines. Electrolux also posted a capital loss of 85 million kronor related to the divestment of its compressor unit. Sales totaled 30.4 billion kronor in the quarter.
Industry Trend
Electrolux's results in North America surprised some investors, who said they expected a better performance based on industry figures. Sales of floor-care products there dropped, leading to a ``substantial downturn'' in operating income, the company said.
``Consumers in the U.S. have bought lower-priced products,'' Straaberg said in an interview. The trend ``was more drastic this quarter.''
Shipments of major home appliances in the U.S. rose 15 percent in September, boosted by deliveries of cooking and laundry appliances, data from the Association of Home Appliance Manufacturers showed. The Washington-based trade group represents makers of major and portable appliances and appliance components sold in the U.S.
``If they can't produce good margins in that kind of an environment, I am asking myself what the margins will look like'' if growth in the U.S. slows down, said Tom Bystedt, who helps manage about $400 million at 3C Asset Management in Helsinki.
Maytag said last week earnings fell 40 percent in the third quarter and will decline more than expected this quarter because of slumping sales of its Hoover vacuum and rising costs.
Electrolux said it had 535 asbestos cases pending at the end of the quarter, with 166 new cases filed. The company resolved 12 cases in the quarter. The pending lawsuits represent about 20,700 plaintiffs, the company said.
3287.99
1275.09
