UPDATE 2-Electrolux sees Europe rebounding next year

Fri Jul 19, 2013 5:57am EDT

* Q2 op profit 1.04 bln SEK, in line with forecasts

* Sees stronger U.S. demand, expects better H2 for Europe

* Shares rise 5.0 percent

* Sweden's Husqvarna also upbeat on North America

By Mia Shanley and Sven Nordenstam

STOCKHOLM, July 19 (Reuters) - Home appliances maker Electrolux forecast a rebound in demand for its products in crisis-hit Europe in 2014 and raised its outlook for the United States this year as a housing recovery takes hold.

The Swedish company, second only to U.S. rival Whirlpool in household appliances, slashed costs and boosted its presence in emerging markets as it waited for a turnaround in its dominant U.S. and European markets.

Reporting second-quarter earnings right in line with analyst forecasts, the white goods giant was more bullish about prospects in North America and said its European markets should improve in the second half of the year.

"Looking ahead to next year and beyond, we expect demand in Europe to rebound and in combination with our measures in the region, earnings will recover," the company said in a statement.

Shares in the firm rose 5.0 percent by 0930 GMT.

It reported core operating earnings of 1.04 billion Swedish crowns ($158 million) in the second quarter, down from the comparable 1.11 billion in the same period of 2012 due in part to currency effects, and in line with a Reuters poll.

"The margins in North America (of 7.8 percent, up from 5.7 in 2012) and the fact that there was actually a positive development in market volumes in Europe are the positive factors in this report," said Johan Eliason, analyst at Kepler Cheuvreux.

"That indicates a turnaround in Europe is not too far away."

Overall sales were flat at 27.8 billion crowns. Electrolux said total industry shipments of core appliances in Europe rose one percent in the quarter - the first rise in six quarters.

FRIDGES TO COFFEE MAKERS

Electrolux, which makes machines ranging from espresso coffee makers to cookers and owns brands including Frigidaire, AEG and Zanussi, said its U.S. customers had turned more optimistic thanks to a stronger housing market.

It now sees U.S. demand for appliances rising 5 to 7 percent in 2013, up from 3 to 5 percent in its previous outlook.

Chief Executive Keith McLoughlin also said Europe's darkest days appeared to be behind it.

"While southern Europe continues to lag, there are some positive trends in Germany, the Nordics in particular and the UK," he told Reuters.

"Based on our numbers and what we see in the appliances world, you could conclude that Europe does seem to appear to have hit the bottom."

Europe and North America each make up about one-third of Electrolux's revenues, followed by Latin America at 20 percent and Asia-Pacific at 8 percent.

Appliance makers have struggled with tepid demand in mature markets, forcing them to rely more on still-growing markets, and have been shifting production from high-wage countries to lower-cost centres.

Swedish outdoor equipment maker Husqvarna was also upbeat about the outlook for North America, though it was cautious about Europe as it reported a slightly deeper than expected fall in second quarter earnings on Friday.

On Thursday, Moody's Investors Service eased the threat of a cut to United States sovereign ratings, raising the outlook to stable from negative, citing steady growth despite reduced government spending.

Since the start of 2012, Whirlpool's share price had gained 17.3 percent versus 9.0 percent for Electrolux.

Whirlpool has a relative advantage in being more exposed to the world's biggest economy, which accounts for half of its sales versus 30 percent for Electrolux.

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