Appliance maker Electrolux reported strong organic growth in operations in North America, Latin America, and Asia, contributing to the positive trend in net sales. Electrolux President and CEO Keith McLoughlin said the company now expects Electrolux to exceed its target for organic sales growth of 4% in 2012. It would be the first time Electrolux achieved an organic growth of more than 4% since 2005, when the appliance market in Europe and North America peaked."
McLoughlin saw market demand for core appliances growing in North America in the third quarter - a trend he expects will continue to improve with the help of the housing market recovery."
Electrolux had overall net sales of SEK 27,171 million (approx. US$4.057 billion) in the third quarter of 2012, up from SEK 25,650 million (approx. $3.830 billion) in 3Q 2011
Income for the period was SEK 985 million (approx. $147 million) in 3Q 2012, up from SEK 825 million (approx. $123 million) in 3Q of 2012.
Net sales improved by 5.9% - 4.6% of this was organic growth, 5.1% from acquisitions, and -3.8% changes in exchange rates.
Electrolux said all business areas except Europe achieved an operating margin above 6%.
"In the third quarter, Electrolux recorded a significant year-on-year improvement in its sales and earnings despite considerable uncertainty in markets across the globe," said Electrolux President and CEO Keith McLoughlin. "In North America, improvements in price and mix along with operational efficiency contributed to an operating margin that exceeded 6%. Latin America reported strong results based on a continuing positive volume trend. Our appliances business in Europe is suffering from weak consumer confidence with falling volumes in some of our key markets."
McLoughlin said operations in Latin America recorded 3Q organic growth of close to 25%, helped in part by government tax incentives in Brazil. Those incentives are now extended to the end of 2012.
"Market demand for core appliances in North America in the third quarter was slightly positive and we expect this trend to continue to improve, supported by a gradual recovery in the housing market," McLoughlin said. "We will utilize the positive momentum and invest more in brand building activities with the aim of further strengthening the Group's position."
McLoughlin said soft performance in Europe in the quarter was mostly a result of to weak consumer confidence, which he sees spreading throughout Europe and impacting appliance demand in many important Electrolux markets - Southern Europe, the Nordic countries, and Benelux (Belgium, Netherlands, and Luxembourg).
The market situation in Europe is likely to get worse before it gets better and we are minimizing the negative effect by launching new products and eliminating costs. We are continuing to launch the next generation of high-end appliances under the Electrolux brand for the European market. Together with AEG products and the re-launch of Zanussi products for the mass-market segment, we will deliver a highly competitive product offering in all segments for the entire European market. Late last year, we announced our aim to further improve our manufacturing footprint to remain cost competitive. In line with this strategy, we today present a number of actions that will have a positive impact on the European cost position going forward.
"On a nine-month basis, Electrolux generated a sales growth of more than 10%, almost equally divided between organic and acquired growth," McLoughlin said. "We expect that Electrolux will exceed its target for organic sales growth of 4% in 2012. It would be the first time Electrolux achieved an organic growth of more than 4% since 2005, when the appliance market in Europe and North America peaked.
The company said a manufacturing footprint program announced in 2011 will be initiated to improve the cost position in Europe and charges will be taken in the fourth quarter of 2012.
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