Swedish-based appliance giant Electrolux reported first quarter 2012 net sales of SEK 25,875 million (approx. US$3,835 million), up from SEK 23,436 million (approx. $3,474 million) in the first quarter of 2011. Income in the first quarter was SEK 559 million (approx. $83 million), up from SEK 457 million (approx. $68 million) in 1Q 2011.
"The record-high sales growth was not only attributable to acquisitions, but was also driven by strong organic growth, especially in Latin America,"" said President and CEO Keith McLoughlin. "In North America, we are seeing that our price increases are having a positive impact, and our European appliance operation is regaining market share."
Net sales improved 10.4%; 3.5% was organic growth. The acquisitions of Egyptian appliance maker Olympic Group and Chilean appliance maker CTI raised sales 5.8%. The company saw especially strong organic growth in emerging markets. It also saw volume increases in Europe due to gains in market share gain in the built-in appliances segment. Operating income improved to SEK 943 million, up from SEK 696 million in 1Q 2011.
Electrolux's higher sales prices in North America were a positive impact on operating income. Higher raw materials costs were a negative factor, but less so than in recent quarters.
"Operations in Latin America recorded organic growth of 12% during the first quarter, partly driven by government tax incentives in Brazil," McLoughlin said.
Market demand for core appliances in North America was weaker in the quarter than the company had anticipated.
"However, we still expect a certain degree of improvement in the U.S. market by the end of 2012 supported by modest growth in the housing market," McLoughlin said. "Our price increases in the past year made a significant contribution to the improvement in first-quarter operating income. We raised our prices further in February and we believe that prices will be a key ingredient to improve earnings in North America during 2012."
Electrolux has seen its European market share slipping for several quarters, but that ended in 1Q 2012--Electrolux has gained market share in 2012.
"We are capturing shares in strategically important areas within the premium segments, such as built-in kitchen appliances," McLoughlin noted.
Key to this reversal has been a new line of appliances under the premium AEG brand, which McLoughlin said received a strong market response. "There is more to come in this respect," he added. "Last week at the Eurocucina kitchen fair in Milan, the major event during the year for kitchen appliances in Europe, we launched the next generation of high-end appliances under the Electrolux brand, The Inspiration Range, for the European market."
McLoughlin said that the new Electrolux line, along with the AEG products and the relaunch of Zanussi products for the mass-market segment, will give the company a highly competitive product offering across segments, and for the entire European market. The company will be increasing marketing spending to support the launches.
The company's outlook for the rest of 2012 is unchanged; that is, it sees gradual improvements in prices and mix as well as lower costs, but anticipates no improvement in demand demand in the mature markets (United States, Western Europe) in the first half of 2012.
The company still expects raw-material costs to exceed the 2011 level by a maximum of SEK 500 million, with most of that impact coming in the first half of the year. The company also expects increased costs for sourced products, transportation, and marketing in 2012.
"We expect earnings to be sequentially better for the second quarter and earnings for the second half of the year to be stronger, both compared to the first half of this year, and versus the second half of last year," McLoughlin said.
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