Electrolux axeing jobs in fresh cost cuts after profit miss

STOCKHOLM Fri Oct 25, 2013 8:28am EDT

A person walks past Electrolux headoffice in Stockholm in this December 15, 2008 file photo. REUTERS/SCANPIX/Janerik Henriksson/Files

A person walks past Electrolux headoffice in Stockholm in this December 15, 2008 file photo.

Credit: Reuters/SCANPIX/Janerik Henriksson/Files

STOCKHOLM (Reuters) - Swedish home appliances company Electrolux (ELUXb.ST) announced 2,000 job losses and launched a new round of cost cuts to counter tough market conditions in Europe after posting a bigger than expected fall in third-quarter earnings on Friday.

Appliance manufacturers, including market leader Whirlpool (WHR.N), have been busy reducing costs and shifting production to emerging markets to protect their margins as they wait for recoveries to take hold on both sides of the Atlantic.

Electrolux, second only to Whirlpool in size, said it is closing a factory in Australia to concentrate on production in Thailand and will also review production in Italy.

It added that a new overhead reduction program will result in 2,000 job cuts, about 3.3 percent of its total workforce at the end of last year, bringing about 1.8 billion Swedish crowns ($282.9 million) in annual savings by 2016.

The new measures come even though Chief Executive Keith McLoughlin expects the European outlook to start improving soon.

"But we can't run this company on hope, so we are taking action now," he said. "We're going to reduce our costs, and when the recovery does happen we'll come out stronger."

Some analysts were not convinced.

"Given that historical cost-saving programs have this far not led to structurally higher margins, we have found it hard getting enthusiastic about the new program," DNB analysts said in a note, adding that they expect the consensus market forecast for 2014 core earnings to be lowered by 5-7 percent.

EUROPE DRAGS

Electrolux, which makes machines ranging from espresso coffee makers to cookers and owns brands including Frigidaire, AEG and Zanussi, has greater relative exposure to Europe than its arch rival Whirlpool.

The U.S. group, consequently, has not suffered as badly and this week reported that the fledgling U.S. recovery helped it to more than double third-quarter profit.

"Our European operations continued to be affected by challenging market conditions, especially in Southern Europe, having a negative impact on volumes and earnings," McLoughlin said on Friday.

Shares in Electrolux fell 7.4 percent by 1018 GMT at 160 crowns, underperforming a 1 percent decline in the Stockholm, blue-chip index .OMXS30.

The company also came up against currency headwinds, particularly in Latin America, where the Brazilian real weakened considerably against the U.S. dollar.

Its earnings before interest and tax (EBIT) fell to 1.08 billion crowns in the third quarter, down from 1.42 billion in the same period last year and below an average forecast of 1.3 billion crowns in a Reuters poll.

Electrolux raised its full-year outlook for the United States, saying it now expects demand to rise by 7-9 percent, against its previous estimate of 5-7 percent. In Europe, meanwhile, it expects a fall of 1-2 percent.

Europe and North America each account for about a third of Electrolux's revenues, followed by Latin America at 20 percent and Asia Pacific at 8 percent.

(The story has been filed again to correct typographical error in headline, no other change.)

(Editing by David Goodman)

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