Electrolux shares soar as Q4 beats forecasts

By Niklas Pollard and Victoria Klesty

STOCKHOLM (Reuters) - Number two global home appliance maker Electrolux (ELUXb.ST) posted a surprise rise in fourth-quarter profit on Wednesday as European demand offset a U.S. slowdown, pushing its shares up by nearly a fifth.

The stock rise was the largest intraday spike for almost 10 years for the firm, which was last year dislodged from its global number one spot as maker of large domestic appliances, or "white goods", by rival Whirlpool's (WHR.N) acquisition of Maytag.

By 1055 GMT, the stock was up 19 percent at 166.50 crowns.

"It is an almost uncannily good result. You almost have to rub your eyes in wonder," said an analyst.

A recent slowdown in demand for white goods in the United States, evidenced by rival Whirlpool last week, had many investors expecting a weak fourth quarter.

But Electrolux weathered the U.S. slump, and earnings before interest and tax (EBIT), excluding one-off items, rose to 2 billion Swedish crowns ($284.2 million) on the back of stronger profitability in its European business.

The outcome exceeded the highest forecast of 1.86 billion in a Reuters poll of 11 analysts. The mean forecast had predicted a drop in earnings from last year's 1.74 billion.

Shares in Electrolux, whose brands include AEG, Zanussi and Frigidaire, have risen about 40 percent since the start of 2007, boosted by speculation about a possible takeover in light of its strong balance sheet.

"Many institutions have been underweight in Electrolux and don't dare be that anymore. Also, the stock has been one of the most shorted stocks on the market, so there are many who need to cover their positions," said Kaupthing analyst John Hernander.

GOOD QUARTER

The maker of vacuum cleaners, washing machines, fridges and freezers said it expected operating income for 2007, excluding extraordinary items, to be somewhat higher than last year's, though raw material costs would hit results.

Electrolux Chief Executive Hans Straberg told Reuters the fourth quarter was "good" but not "exceptional", due to the U.S slowdown in demand on the heels of a weaker housing market.

The firm said it expected market demand for appliances to show continued growth this year in Europe, but to decline in North America compared with 2006.

"Indications are that 2007 will develop as 2006, that is with a weak seasonal introduction and with a strong conclusion," the firm said in a statement. Whirlpool last week cut its 2007 earnings outlook and said it saw U.S. industry-wide shipments of appliances down 2-3 percent in 2007.

Electrolux has been hit by fierce competition and rising costs for raw materials in recent years, prompting it to cut staff and move production to countries with lower labor costs in Asia, eastern Europe and Latin America.