Electrolux profit beats estimates following price increases
Electrolux AB, the world’s second- biggest appliance maker, reported profit and sales that beat analysts’ estimates after it raised prices in North America. The company’s shares rose the most in almost three months.
Second-quarter net income rose to 761 million kronor ($110 million) from 561 million kronor a year earlier, Stockholm-based Electrolux said in a statement today. Twelve analysts on average estimated a profit of 604 million kronor in a Bloomberg survey. Sales climbed 15 percent to 27.8 billion kronor, topping the average estimate of 26.6 billion kronor.
“North America, where price increases came through more than expected, impressed on the margin side,” said Johan Dahl, an analyst at Erik Penser Bankaktiebolag in Stockholm who recommends that investors buy Electrolux’s shares. “Europe, where Electrolux is growing more than the overall market, impressed as well.”
The maker of Frigidaire refrigerators and AEG vacuum cleaners has suffered from a decline in consumer confidence in mature markets and high raw-material costs, leading it to push for higher prices in North America and Europe over the past year and plans to close plants in the regions.
Electrolux rose as much as 7.1 percent, the biggest intraday gain since April 25, and was up 4.4 percent at 151.10 kronor as of 11:04 a.m. in Stockholm. The shares have jumped 38 percent this year, beating the 5.5 percent rise of the OMX Stockholm 30 Index.
Daewoo bid
Operating income for Electrolux’s North American major appliance business more than tripled to 512 million kronor from 138 million kronor, and the operating margin in the region rose to 6 percent from 1.8 percent. The operating margin for Europe, Middle East and Africa rose to 2.6 percent from 2 percent.
“It’s pretty good work by the team in a macro environment where some of the mature markets like Europe are struggling,” Chief Executive Officer Keith McLoughlin said in a phone interview.
Shipments of dishwashers and refrigerators rose 2.2 percent in North America in June, compared with a gain of 0.9 percent a month earlier, the Association of Home Appliance Manufacturers said July 17.
Electrolux is potentially interested in buying Daewoo Electronics Corp., which is for sale again, McLoughlin said. The South Korean appliance maker was set to be sold to Iranian company Entekhab Industrial Group before that deal collapsed last year. Electrolux made a bid for Daewoo at the time.
Closing factories
“Given that a major manufacturer of appliances is for sale somewhere around the world, we are paying attention,” McLoughlin said, declining to say if Electrolux has placed a new bid. “We are aware of the situation and looking at it.”
Electrolux, which has about 50 factories, plans to close several in North America and Europe, McLoughlin, an American who took over at the start of 2011, reiterated today. The company, which competes with Benton Harbor, Michigan-based Whirlpool Corp., today reiterated its forecast that its raw material costs will increase by no more than 500 million kronor this year. Whirlpool, the world’s biggest appliance maker, is scheduled to report earnings on July 24.