Lower prices, higher raw-material costs and weak demand contributed to a maammoth 68% decline in Electrolux’s fourth-quarter earnings.
While net sales rose 3% worldwide to 28.4 billion kronor profits totaled 220 million kronor for the three months ending on December 31st 2011.
For the full year, net sales fell 4.4% worldwide to 101.6 billion kronor, and net income declined 48.4 percent to 2.1 billion kronor.
The results have also squeezed by plant rationalisation and staff reduction costs as the appliance manufacturer works to bring its manufacturing capacity in line with lower global demand.
In North America, sales fell 5.9% to 6.3 billion kronor excluding the unfavorable impact of currency exchange rates, and operating income declined 74% to 76 million kronor. This is largely due to lower demand and unit volume, reduced capacity utilisation, higher raw material costs, sourced products and transportation as well as restructuring charges.
“Already at the end of 2010 demand for appliances started to decline, while costs for raw materials increased and prices for our products began to decrease,” CEO Keith McLoughlin (pictured) said in a statement. “This downward trend gained momentum as 2011 progressed,” as rising raw-material costs and lower prices curtailed results by more than 3 billion kronor.
Nevertheless, the company generated nearly 4 billion kronor in operating income and “a strong underlying cash flow,” he said, and will continue to optimize operations by reducing capacity and costs.
Mr McLoughlin has made many changes to senior positions which is widely perceived as a move to allow Electrolux to innovate.
Tomas Eliasson will join Electrolux mid-month as chief financial officer, and Stefano Marzano, formerly chief design officer for two decades at Royal Philips Electronics, has assumed that role heading up a new, centralised design group.
Marzano, together with chief technology officer Jan Brockman and chief marketing officer MaryKay Kopf, will lead a new corporate structure called the “Innovation Triangle,” which was created to better coordinate the company’s research and development, marketing and design functions throughout the product development process with an increased focus on customers and end users.
Looking ahead, McLoughlin forecast “a certain degree of improvement in the U.S. market by the end of 2012, supported by a modest growth in the housing market.”
He also said that 2012 would be “an intensive launch year,” which will require increased expenditures for marketing and product development. That, plus anticipated higher costs for sourced products and transportation, will make it all the more important for a recent round of price hikes to not be undermined.