By Greta Rosen Fondahn
STOCKHOLM (Reuters) -Home appliances maker Electrolux missed expectations for second-quarter underlying profit on Friday due to weak demand in Europe, sending its share price down 16%.
Operating profit at the Swedish group, whose brands also include Frigidaire, AEG and Volta, totalled 797 million crowns ($82 million) as its North American business drove organic sales growth of 2%. That compared to 419 million crowns a year ago.
Excluding a 180 million crown one-off gain from the sale of a trademark in India, however, profit fell short of the 710 million crowns forecast by a poll provided by Electrolux.
Electrolux said its main brands continued to outperform the market in Europe but that general market demand declined with increased competitive pressure.
“Europe has been an extremely tough market in the second quarter. We have seen very aggressive price levels in Europe,” CEO Yannick Fierling told analysts and journalists during a call. “The market in Europe … was especially depressed and difficult.”
While there were indications of an improvement in the European market towards the end of the period, it was too early to say whether that would continue in the third quarter, he said.
CFO Therese Friberg said the improvement was in volumes, whereas price pressure remained.
Shares in Electrolux were down 16% at 1030 GMT, taking a year-to-date fall to 34%.
Electrolux said that in both Europe and North America demand was affected by uncertainty due to geopolitical developments, with households continuing to shift to cheaper products.
The company, a rival of China’s Midea and U.S. firm Whirlpool, maintained a “neutral to negative” full-year market outlook for North America, and a “neutral” outlook for Europe and Asia-Pacific markets as well as Latin America.
OFFSET TARIFFS
Analysts at JPM, with a “neutral” stance on Electrolux shares, said in a note that underlying profits were soft and increased competitive pressure in Europe and high promotional activity and competitive pressure in North America were unfavourable signs.
Electrolux’s North America business, however, which has struggled for years due to high costs and factory underperformance, swung to profit, outperforming the wider market in the region.
The division, which last year accounted for a third of group sales, made a profit of 57 million crowns.
Electrolux said in April that Washington’s tariff plans had hit consumer sentiment, and lowered its North America market outlook, adding that it aimed to offset tariff increases with more price hikes.
Fierling said on Friday that the decision had succeeded in allowing the company to offset the impact of tariffs, and it would continue the strategy.
“We reiterate our aim to offset tariff-related cost increases in North America through price increases,” he said.
Fierling told Reuters he saw no pre-buying effect in anticipation of higher tariffs.
Electrolux produces most of its goods sold in North America in the region, with production both in the U.S. and Mexico. It imports some components and products, including from China.
($1 = 9.7272 Swedish crowns)
(Reporting by Greta Rosen Fondahn; Editing by Anna Ringstrom, Joe Bavier and Susan Fenton)
