Electrolux Margins On-Target Despite Lower 3Q Sales
Oct 27, 2010
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Stockholm-based appliance giant Electrolux today reported net sales of SEK 26,326 million (approx. US$3,898 million) for the third quarter of 2010, down from SEK 27,617 in the third quarter of 2009. Income for the period was SEK 1,381 million (approx. $205 million), compared to SEK 1,631 in the third quarter of 2009. Net sales decreased 2.3% in comparable currencies.
In his comments on Oct. 27, 2010, Electrolux President and CEO Hans Stråberg called the results "very strong" and said lower earnings stemmed from substantial raw materials cost increases and more marketing spending. "Despite this," he said, "we reached an operating margin of 6% for the first three quarters. This result strengthens my conviction that our goal of a 6% operating margin for the full-year 2010 is within reach."
EUROPE: Stråberg pointed out that Europe, despite lower volumes, was reporting good results for the quarter, even without the help of some positive non-recurring items, and he gave credit to the success of the OEM's profitable built-in appliance business. "I am convinced that, through the launch of our new premium built-in products, we can expect a continued positive development," he said, and added that customers who were at the launch of the line during the recent IFA trade show "Were very impressed by our products and the comprehensive marketing efforts that will support the launch."
PROFESSIONAL APPLIANCES: Stråberg said professional products is in a difficult market but the business reached its highest-ever operating margin, 14%. "This shows that our strategy - a very competitive product offering in combination with stringent control of costs - is also successful in this segment," he said.
ASIA/PACIFIC: Asia/Pacific operations once again achieved record earnings, which Stråberg said came from the company taking advantage of Southeast Asian growth, turning around a negative trend in China, and "successfully maneuvering in a tough Australian market."
NORTH AMERICA: Stråberg said that the second quarter of 2010 was very strong, thanks to an appliance rebate program funded by the stimulus package. "Consumers took advantage of this opportunity by advancing their purchases of appliances, which in turn resulted in a drop in demand during the third quarter," Stråberg said. "As a result of the market volatility, price promotions were intensified at the end of the quarter, especially in the U.S."
RAW MATERIALS: Electrolux paid about $74 million extra for raw materials in 3Q 2010 than in 3Q 2009. With raw materials costs on the rise again, which will raise costs overall in 2011.
EXPANSION INITIATIVES: Stråberg pointed out two major steps by Electrolux in 3Q 2010 to expand in developing markets. For one, it started the process of acquiring Egypt's appliance maker Olympic Group, which Stråberg called "the largest appliances company in the fast-growing North African and Middle East regions." Electrolux also acquired a washing machine plant in Ukraine to helps its position in Eastern Europe and Russia.
STRÅBERG RETIRES: The Electrolux CEO also made note of his previously announced retirement. Stråberg has been with the company for 27 years, including nine years as president/CEO. As of the beginning of 2011, Keith McLoughlin will assume the leadership position in the company.
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