November 12, 2010 / 9:09 AM / 10 years ago

UPDATE 2-Electrolux sets new cost-saving plan

* Targets annual cost savings of approx 2.0-2.5 bln crowns

* Savings to take full effect as of 2015

* Cost of initiatives approx 500 mln a year in 2011, 2012

* Eyes 4 pct organic sales growth per year

* Shares down 2 pct

(Adds analyst quote, details)

By Patrick Lannin and Johannes Hellstrom

STOCKHOLM, Nov 12 (Reuters) - Electrolux AB (ELUXb.ST) ELUXB.ST, the world’s second-largest home appliance maker, plans further cost cuts as it battles slack demand and intense competition.

The world number two after U.S. rival Whirlpool (WHR.N) has been gradually shifting production to low-cost countries to help offset weak demand. It has been closing plants and cutting jobs in higher-cost locations.

“The initiatives are expected to generate annual cost savings of approximately 2.0-2.5 billion Swedish crowns ($297-$371 million), with full effect as of 2015, and will contribute to maintaining the competitiveness of Electrolux,” the white goods maker said in a statement.

“Costs for the global initiatives are estimated at approximately 500 million crowns per year for 2011 and 2012.”

It said it would achieve the savings via synergies, standardisation of parts across product ranges and by optimizing global purchasing. It also said it was aiming for organic sales growth of more than 4 percent per year.

Electrolux shares fell 3 percent in opening trade, but by 1042 GMT they were 1.6 percent lower at 166.9 crowns while the benchmark OMXS30 index .OMXS30 was down 0.6 percent. The stock has more than tripled in value since hitting a low of just above 50 crowns in late 2008.

Investment bank Credit Suisse said in a comment the statement from Electrolux was positive and the 2015 target looked conservative. It also said it was looking for any details about how Electrolux would use its cash, whether it would focus on acquisitions or returning funds to shareholders.

Electrolux in 2004 launched a restructuring programme which resulted in factory closures and job losses.

The aim was by the end of the programme in 2011 to have more than half of its production in low-cost countries, with savings of about 3 billion crowns a year.

Electrolux and Whirlpool both reported third-quarter results last month which beat market expectations, but warned of weak demand in top markets such as the United States.

Austerity measures in several important European Union nations are also expected to dampen demand, leaving the consumer goods group relying on emerging markets for growth. (Editing by Hans Peters and David Holmes) ($1=6.733 Swedish crown)

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