Electrolux Q3 opg little changed, but says outlook now more uncertain

Electrolux Q3 opg little changed, but says outlook now more uncertain - UPDATE

	Published : Mon, 22 Oct 2007 08:02 By : Agencies Print this Story

(Updating with outlook details, sales, business area breakdown)

STOCKHOLM (Thomson Financial) - Electrolux AB said third quarter profit after financial items, excluding items affecting comparability, fell 8.6 pct year-on-year to 1.037 bln skr, hit primarily by sharply higher borrowing costs, with the company saying its full year outlook is now more uncertain.

Underlying operating profits rose 1.4 pct to 1.152 bln skr, supported by good volume growth, an improved product mix and more efficient production. This was offset by lower income for appliances in Europe arising from costs related to product launches, and higher costs for raw materials.

Underlying operating margins were unchanged at 4.4 pct.

Market expectations were for an underlying third-quarter profit after financials of 1.119 bln skr, and an underlying operating profit of 1.241 bln skr, and margins of 4.7 pct, according to SME Direkt.

'Operating income improved in the third quarter compared to the corresponding quarter last year, mainly on the basis of strong income for appliances in North America and Latin America as well as continued good performance by floor-care operations in Asia/Pacific,' the company said.

Electrolux reiterated that operating income in 2007 is expected to be somewhat higher than in 2006, excluding items affecting comparability, and that market demand for appliances in 2007 is expected to show continued growth in Europe, while the North American market is expected to decline compared to 2006.

It also reiterated that raw material costs are expected to have an adverse effect on the group's operating income for the fourth quarter.

'However, the risk for further decline in the US appliance market, continued raw material cost increases and cost pressures on our European margins add uncertainty to the accomplishment of the 2007 outlook,' the company said, adding that its recent product launches in Europe, which have been well received, have incurred higher than anticipated costs.

Commenting on the European product launches, CEO Hans Straaberg said the comprehensive and coordinated launches meant that the company prioritised time over costs.

'This has led to many products having too high production costs compared to our expectations. We are working intensively to solve the problems, but it will take time before we achieve the expected improvement. During the third quarter, we also noted a weakening of demand in some of our most important markets in Europe, mainly Germany, and this has also affected our development,' Straaberg said.

Sales rose 1.1 pct to 26.374 bln skr, versus market expectations of 26.525 bln skr. Sales were positively impacted by changes in volume/price/mix while changes in exchange rates had a negative impact. Sales increased by 3.7 pct in comparable currencies.

Electrolux said changes in exchange rates compared to the previous year, including both translation and transaction effects, had an impact of 85 mln skr on operating profits.

Among its major business units, Consumer Durables Europe saw operating margins shrink to 4.4 pct from 6.0 pct, with sales up 3.5 pct.

'The new products have been well received and have supported Electrolux average sales prices in most of the group's markets and strengthen the position of the brand,' Electrolux said.

In Consumer Durables North America, operating margins rose to 4.5 pct from 3.6 pct, with sales falling 6.8 pct. It said the group's market share continued to increase, mainly as a result of strong sales in the dish and laundry product categories.

In Consumer Durables Latin America, sales rose 8 pct in comparable currencies, with operating margins rising to 5.3 pct from 4.3 pct.

In the Professional Products division, operating profits were flat as margins slipped to 7.3 pct from 7.9 pct, while in Asia/Pacific and Rest of the World operating margins jumped to 4.2 pct from 2.8 pct.

hans.chumakonde@thomson.com

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Electrolux Q3 opg little changed, but says outlook now more uncertain - UPDATE