By Christina Zander
STOCKHOLM--Shares in Electrolux AB surged Friday after
first-quarter earnings beat low market expectations following a
profit warning for its North American major appliances unit earlier
this month.
Electrolux, Europe's largest appliance maker by sales, said
revenue was boosted by positive currency translation effects but
that higher selling expenses and costs related to a transition of
the product range to new energy requirements in North America
weighed on the bottom line. A slower-than-expected ramp up of a new
oven production facility in Memphis, Tenn., also hampered
performance, it said.
The Stockholm-based company, which makes dishwashers, stoves and
washing machines, is trying to broaden its footprint in the U.S.
market and last year agreed to buy General Electric Co.'s
appliances business in a $3.3 billion deal that will almost double
its presence there and put Electrolux on a par with Whirlpool
Corp., the largest appliance maker by sales in the U.S.
Chief Executive Keith McLoughlin in a statement said he expects
the transaction to close this year and generate an additional $50
million in annual cost synergies, mainly within purchasing, on top
of the $300 million already identified.
Net profit fell 21% in the first quarter to 339 million Swedish
kronor ($39 million), compared with a profit of 431 million kronor
in the same period a year earlier. Sales rose 14% to 29.09 billion
kronor while operating profit declined 29% to 516 million
kronor.
Still, profits were "better than feared," said UBS analyst David
Hallden, triggering a 7.2% rise in the share price in morning
trading in Stockholm. Electrolux on April 8 brought down
expectations by saying first-quarter results in its North American
major appliances business would come in "significantly lower" than
expected. The unit reported an operating loss of 57 million kronor
for the period.
Mr. McLoughlin said in a statement that the company expects
full-year market growth in North America to be "towards the lower
end of the previously communicated range of 3-5%."
He said the company will work hard to turn around its U.S.
business by the end of this year.
Electrolux also said the macro-economic outlook for Latin
America has weakened in the past few months, particularly for
Brazil, and that market growth for appliances remains
uncertain.
In Europe, the market is expected to grow by 1% to 2%, but
developments in Russia, where sales declined sharply in the first
quarter, are "unclear," he said.
The company said demand for its products increased during the
first quarter in all markets except Australia, Russia and Brazil,
and that it planned to launch new product ranges this year.
Write to Christina Zander at christina.zander@wsj.com
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