Electrolux Experiences Weak Growth Across Europe
Electrolux the global maker of home appliances announced a note of caution about its business in Europe by predicting the market growth at its low end of its financial forecast after it reported quarterly profit that was slightly better than had been expected early Monday.
The company, based in Sweden, is vying for leadership in the market with rival Whirlpool based in the U.S. and Haier based in China. The company expected European demand, which is close to one third of its overall sales, to grow only 1% in 2014 at the bottom of its projected 1 to 3% growth.
CEO Keith McLoughlin said the market across Europe was still weak and weaker than had been anticipated at the start of the year.
Despite European weakness, years of closures of plants and cost cutting measures across the region helped to boost the company profitability, which has enabled Electrolux to report earnings of 29% that were better than had been expected, lifting its stock price by 6.5% Monday morning.
Handelbanken Capital said in a note that the strong Europe margins should help drive strong revisions to the estimates of 2015 for the household appliance maker.
Electrolux posted operating profit for the third quarter of 1.388 billion Swedish crowns equal to $193 million. That compared to a forecast by analysts of 1.33 billion crowns.
The recent acquisition by the company of the appliance business of General Electric for $3.3 billion will increase the company’s returns from a U.S. market in resurgence in which sales industry wide of six top home appliance categories are all up 5% for the year through September.
U.S. market growth said McLoughlin of between 4% and 5% in 2014 was reasonable compared to the previous forecasts by the group of only 4% growth.
The North American and European market each are close to one third of the sales for the group, but growth in sales in Europe has only been modest, as the economic recovery in the region has sputtered of late.
In Europe, growth prospects have soured over recent months, which leaves an outlook for household appliance sales in more doubt.