Electrolux beats profit forecast as savings pay off, but US demand weakens
Electrolux Surpasses Expectations Amidst Challenging Market Conditions
By Greta Rosen Fondahn
Strong Financial Performance in Q2
STOCKHOLM, July 29 (Reuters) - Electrolux reported a surprise rise in core profits on Wednesday, but said market conditions weakened in North America, a key region for the home appliances maker as it tries to turn around its business and restructure operations.
Profit and Sales Growth
Group operating profit excluding non-recurring items at the Swedish company, whose brands include Frigidaire and AEG, rose to 1.2 billion crowns ($124 million) in the April-June period from a year-earlier 797 million, beating analysts' 617 million crown forecast as organic sales grew 2%.
Shares rose 20% in early trade.
One-Off Boosts to Results
The result was boosted by a U.S. refund of $34 million in tariffs and by a 174 million crown change to the group's retiree group health plan, Electrolux said.
Regional Performance and Market Challenges
Growth Outside North America
Group sales rose in its EMEA-APAC (Europe, Middle East & Africa and Asia-Pacific) and Latin America regions.
US Weakness Persists
"In North America, weak market conditions and tariff-related cost pressure continued to weigh on performance," said CEO Yannick Fierling.
The appliance maker has faced weak demand and cut-price competition, with particularly its North American business — which represents around a third of sales — struggling to turn an operating profit in recent years. Electrolux shares reflect that, trading more than 75% below their peak in 2021.
Strategic Moves and Restructuring
It carried out a steeply discounted 9 billion Swedish crown rights issue in June to fund a tie-up with Chinese rival Midea in North America, restructure its global business and reduce debt.
Cost Savings and Analyst Insights
Impact of Cost Savings
"The results show that the cost savings actions are bearing fruit while demand in Europe and North America, two important markets, remains subdued," JPMorgan analysts said in a note.
Electrolux said cost savings helped contribute 1.4 billion crowns to earnings in the quarter.
Ongoing Economic Uncertainty
The company, however, said economic uncertainty and inflation concerns weighed on consumer confidence in North America, where Whirlpool is its main rival. It reported a 2.9% organic drop in sales there and maintained a negative market outlook.
Tariffs and Future Outlook
While price increases had compensated for some of the tariffs on steel, aluminium and copper content, the cost pressure "will remain and impact earnings in the coming quarters", Fierling said.
Additional Information
($1 = 9.6759 Swedish crowns)
(Reporting by Greta Rosen Fondahn, Editing by Terje Solsvik and Tomasz Janowski)
