Electrolux is planning on taking cost-cutting steps, including changes to manufacturing in North America and Europe, after disappointing third-quarter 2011 financial results. The details of these cost-cutting measures, however, will not be announced for another two weeks.
Electrolux reported third quarter 2011 group net sales of SEK 25,650 million (approx. US $3,983 million), down from SEK 26,326 million in the third quarter of 2010. While net sales were up 1.5% in comparable currencies, exchange rates had a negative impact on net sales. The acquisition of Egypt's Olympic Group had a positive impact of 0.7% on net sales. One month of Olympic Group sales are included in the net sales in the quarter.
Electrolux President and CEO Keith McLoughlin said 3Q market conditions remained tough. "Demand declined further in several of Electrolux main markets in Southern Europe and the U.S., at the same time as the cost of raw materials increased," he said in a statement. "Aside from continuing improving price and mix, we must accelerate our efforts to adapt our cost structure. In this challenging environment, we have been able to continue generating solid cash flow."
McLoughlin said falling consumer confidence has had a tangible impact in Electrolux's mature markets. "Our results for the first three quarters declined by nearly 50%, from SEK 4.8 billion in 2010 to SEK 2.5 billion in 2011. Rising raw-material costs and lower prices accounted for most of this SEK 2.3 billion decrease," McLoughlin said.
In North America, McLoughlin expects approximately 35 million appliances will be sold in 2011, about as many as in 1998 and 25% lower than in the peak year of 2005.
In Europe, he expects about 65 million appliance to be sold, comparable to 1999 and 15% lower than the industry peak in 2006.
McLoughlin said the company will make changes to its production capacity in North America and Western Europe and will take steps to cut operating costs.
"More details on our activities to improve capacity utilization, bring down overhead costs and improve efficiency through global operations will be presented at Electrolux Capital Markets Day in Stockholm on November 15," McLoughlin said.
Markets that are growing: the Middle East and Latin America. 3Q 2011 saw the company finalize its acquisition of Olympic Group, which McLoughlin called "The largest appliance company in the expanding North African and Middle Eastern regions."
Electrolux has seen strong organic growth in Latin America, which will be augmented by the acquisition of Chilean appliance maker CTI. McLoughlin said the acquisition will make Electrolux the largest appliance company in Chile and Argentina and will strengthen its position in other fast-growing Latin American markets.
Electrolux has also seen strong organic growth in Southeast Asia and Eastern Europe. "Our pro-forma sales in growth markets will account for approximately 35% of total sales," McLoughlin said. "This provides a stable platform for growth, enabling us to address the issue of the slowdown in demand in markets in more mature regions."
to Daily News