Electrolux AB, the world’s largest maker of household appliances, said second-quarter profit dropped 3.5 percent as weaker demand and competition from low-cost competitors prevented the company from raising prices.
Net income for the three months ended June 30 fell to 1.2 billion kronor ($150 million), or 4.09 kronor a share, from 1.24 billion kronor, or 4.06 kronor a share, a year earlier, the Stockholm-based company said today in a Waymaker statement. Revenue rose 6.3 percent to 34 billion kronor, it said.
Chief Executive Hans Straaberg, 48, aims to revive profit by moving production to countries such as Hungary where wages are lower and by introducing designer vacuum cleaners and stoves for which customers are willing to pay more. Electrolux, the maker of Frigidaire refrigerators, said in February it plans to spin off or sell its unit that produces outdoor products such as lawn mowers.
“Electrolux appears to be at an interesting crossroads, although there may be further short-term pain to bear with regard to full-year 2005 profits,” Patrick Marshall, an analyst with Credit Suisse First Boston in London, said in a July 7 note.
Operating profit excluding items affecting comparability slid to 1.89 billion kronor from 2.19 billion kronor a year earlier, Electrolux said. Analysts had forecast about 1.80 billion kronor.
Profitability
Measured as a proportion of sales, operating profit in the quarter was 5.6 percent excluding one-time items, down from 6.8 percent a year earlier. Whirlpool Corp., the biggest U.S. appliance maker, had an operating margin of 5.9 percent last year, while Maytag Corp., the No. 3 company in the industry, has a margin of 3.2 percent, according to Bloomberg data.
Whirlpool on July 17 offered $1.35 billion for Maytag to create a business with annual sales of about $18 billion. Electrolux had revenue of $16.4 billion in its last fiscal year.
Electrolux’s origins date back to 1910, when Swedish salesman Axel Wenner-Gren saw an American-made vacuum cleaner in a Viennese store window and got the idea to sell the cleaners door-to-door using a technique he learned in the U.S. By the 1920s, he even secured the blessing of Pope Pius XI to vacuum the Vatican for a year. The company now makes products ranging from diamond-tools cutters to Weed Eaters to talking washing machines.
From Bloomberg