4 Min Read
By Patrick Lannin and Veronica Ek
STOCKHOLM, Feb 1 (Reuters) - Swedish home appliances maker Electrolux said booming emerging markets and an improvement in North America would help offset poor sales and price pressure in Europe in 2013 after posting a smaller-than-expected rise in fourth-quarter earnings.
Operating income in its Latin American business jumped 90 percent to 657 million crowns, well above a forecast for 459 million, and the company forecast further growth in the region.
"We have increased our exposure to emerging markets, which now represent more than 35 percent of sales, and we expect this figure to reach 50 percent within five years," said chief executive Keith McLoughlin.
Electrolux, second only to U.S. rival Whirlpool in size, reported fourth-quarter operating earnings, stripping out one-off items, rose 13 percent to 1.63 billion Swedish crowns ($256 million), compared with a forecast for 1.70 billion in a Reuters poll.
Sales for the fourth quarter came in at 29.2 billion crowns, just ahead of the forecast 28.4 billion and the company said profitability had been held back by Europe as consumers continue to struggle with austerity measures in the aftermath of the euro zone debt crisis.
It forecast low single digit growth in the U.S., where improving consumer confidence enabled it to raise prices last year, and a low single digit demand drop in Europe.
"It reads to me like the politicians and financial experts have done good work in easing or preventing a euro zone break up or collapse. My take is that someone needs to tell the European consumer because they're not buying," McLoughlin said.
Cost-cutting measures such as factory closures meant Electrolux took a previously advertised charge of 1 billion crowns in the quarter, leaving operating earnings after one-offs at 596 million crowns versus last year's 512 million, also below the average forecast of 695 million crowns.
The emerging markets providing a buffer for Electrolux are also helping its rival Whirlpool, which on Thursday reported a higher-than-expected quarterly profit and gave a strong 2013 outlook.
The U.S. market looked more optimistic due to some recovery in the housing market, which benefits the company as people think about buying new appliances when they move house.
Unemployment needed to drop from the current 7.8 percent closer to 6 percent for a good pick up in demand, said McLoughlin, whose company's brands include those under its own name as well as Frigidaire, Zanussi and AEG.
Electrolux shares were down 2.7 percent at 163.50 crowns by 0958 GMT, but they have risen 50 percent since the start of last year. The shares trade at 10.9 times expected 2013 earnings, lower than Whirlpool's 11.9 times, according to Thomson Reuters Starmine data.
McLoughlin said the group aimed to launch more new products - which attract higher ticket prices even if volumes are down - again this year, and continue cutting costs.
Another leg to its growth plan is more acquisitions. McLoughlin told Reuters he thought deal sizes between $200 and $500 million would be on the menu. In 2011 the company bought Egyptian appliances maker Olympic and then Chilean appliances company CTI.