Electrolux have a had a load of press this week stating that higher than expected costs in Europe and declining US markets had cast uncertainty over full-year forecasts. Or, in other words, they don’t know how the year is going to turn out for them.
The European performance being described by Electrolux as a “great disappointment” after expensive launches of new lines to go along with the “Thinking of you…” campaign and high production costs hit results.
Electrolux is already reviewing the future of its cooker factory at Spennymoor in County Durham, which employs about 500 people as we reported here, in this article on October 11th 2007.
The company has said that falling prices and stronger competition “significantly undermined” its profitability.
Chief executive Hans Straberg said underlying operating income would be “somewhat” higher than 2006, but added: “The risk for further decline in the US appliance market, continued raw material cost increases and cost pressures on our European margins add uncertainty to the accomplishment of the 2007 outlook.”
Mr Straberg said Electrolux was “working intensively” to lower its costs but warned it would take time to gain any improvements on costs.
Electrolux has also said it had seen weakening demand in key European markets including the UK, Germany and Spain.
European sales were 3% higher at 11.6 billion Swedish krona (£883 million) in the third quarter, but operating income slipped 25% to 514 million SEK (£39 million) and margins also fell. Electrolux said the lower operating income reflected the higher costs of its raw material and product launches.
The firm saw a much better performance in emerging markets. In Brazil for example, Electrolux’s major Latin American market, sales volumes rose by 20% due to strong sales of refrigerators and microwave ovens. The company’s Asia and Pacific operations also enjoyed good growth.
Overall group sales edged 1.5% higher to 77.1 billion SEK (£5.85 billion) in the first nine months of 2007.