October 27, 2017 / 6:22 AM / a year ago

Electrolux profit tops forecasts, stands by outlook

STOCKHOLM (Reuters) - Swedish home appliance maker Electrolux (ELUXb.ST) reported a slightly bigger than expected rise in third-quarter operating earnings on Friday as a stronger product mix more than offset higher raw material prices.

FILE PHOTO: A man walks past an Electrolux shop in Riga, Latvia November 12, 2013. REUTERS/Ints Kalnins/File Photo

The maker of appliances under brands such as Electrolux, Frigidaire and AEG also stood by its outlook for rising costs for materials such as steel this year as well as its guidance for an increase in market demand on both sides of the North Atlantic.

With CEO Jonas Samuelson at the helm since last year, Electrolux has focused on reaching a long-elusive 6 percent margin goal by exiting unprofitable product lines in favor of more lucrative business in areas such as kitchen appliances. The company achieved the margin target in the second quarter for the first time since 2010.

Operating earnings in the third quarter rose to 1.96 billion Swedish crowns ($234 million) from a year-ago 1.83 billion, just beating a mean forecast of 1.90 billion in a poll of analysts.

Electrolux, whose stock has outperformed the STOXX Europe personal and household goods index .SXQP with a 23 percent gain this year, said its operating margin rose to 6.7 percent from 5.9 percent a year ago, above the 6.2 percent seen by analysts.

The company said it had stepped up cost savings in the third quarter and now expected them to total 3.0 percent this year compared with its previous forecast of 2.3 percent.

Higher raw material prices, primarily for steel, have begun taking a growing chunk out of earnings for white goods makers, forcing rival Whirlpool (WHR.N) to cut its 2017 profit outlook this week and forecast further headwind in 2018.

Electrolux said it still expected steeper costs for raw material to sting 2017 earnings to the tune of 1.4 billion crowns compared to last year.

The company, which also competes with Asian firms such as LG Electronics (066570.KS) and Haier Group, also stood by its outlook for market growth for home appliances of about 1 percent in Europe and 3-4 percent in North America.

Reporting by Niklas Pollard; Editing by Simon Johnson and Jane Merriman

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