Electrolux swings to profit in Q2, sees negative Europe and Asia demand

Reuters

Electrolux swings to profit in Q2, sees negative Europe and Asia demand

Jul 19, 2024 at 6:10 am GMT

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Q2 operating profit 419 mln SEK vs forecast 94 mln

Trims expected cost savings amid high freight rates

Cuts market demand outlook for Europe, Asia-Pacific

Recasts with more company, analyst comments, shares

By Marie Mannes

STOCKHOLM, July 19 (Reuters) -Electrolux ELUXb.ST swung to a much larger than expected profit in the second quarter amid signs of a long-awaited pick up in its North American business, briefly sending the appliances maker's shares sharply higher on Friday.

However, the Swedish company also trimmed its expected cost savings for the year to 4 billion crowns ($375 million), from 4-5 billion crowns previously, mainly due to increased spending on marketing and higher freight costs - in a sign of the impact on global companies from disruptions to trade in the Red Sea.

In addition, the company cut its market demand outlook for Europe and Asia-Pacific to "negative" from "neutral", as high inflation continues to hold back spending on big-ticket items.

After surging 10% at the open, Electrolux shares were trading up less than 1% by around 0820 GMT.

The company said it made an operating profit of 419 million crowns in the second quarter, up from a loss of 124 million crowns a year earlier and far ahead of the 94 million expected on average by analysts polled by LSEG.

Its North American arm has held back profitability for a while amid high costs, stiff competition from rival Whirlpool, and the slow ramp-up of its new Springfield cooking factory.

However, the company reported a 4.7% increase in quarterly organic sales in the region, driven by higher volumes - even as operating losses rose to 361 million crowns from 160 million of losses a year earlier.

Kepler Cheuvreux analyst Johan Eliason expressed "relief" that the division appeared to be turning a corner.

"It seems like in North America that these new plants seem finally to have been able to get the volumes out that they've been promising for the past two to three years now," he said.

CEO Jonas Samuelson told an analyst call there was still work to be done in the region, but that Electrolux was seeing continued improvements.

"With a lot of effort, new products and factories, we now have a really competitive offering ... This is of course what is the main thrust of our efforts in North America, but we still have work to do to fully ramp up Springfield," he said.

($1 = 10.6552 Swedish crowns)

Reporting by Marie Mannes; Editing by Jamie Freed and Mark Potter

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