Thursday, home appliances manufacturer Electrolux AB (ELUXY.PK, ELXB.L) reported a fall in its second-quarter profit, mainly impacted by restructuring costs related to refrigeration production in Italy. The new product launch in North America, as well as changes in exchange rates also reduced the profit. Further, the company revised its fiscal 2008 operating income guidance, and also said it named Enderson Guimaraes as new head of Major Appliances Europe, succeeding Magnus Yngen.
Second-quarter income for the period plunged 81.8% to SEK 99 million from SEK 545 million last year. Earnings per share amounted to SEK 0.36, down from SEK 1.93 in 2007.
The 2008-quarter results included SEK 539 million related to costs for concentration of refrigeration production in Italy, while prior year results included costs for appliances plant in Fredericia, Denmark of SEK 31 million.
Excluding items affecting comparability, income for the period fell 14.8% to SEK 491 million from last year's SEK 576 million. Adjusted earnings per share dropped to SEK 1.74 from last year's SEK 2.05.
Changes in exchange rates had a negative impact of SEK 62 million in the second quarter, the company said. Also, the new product launch under the Electrolux brand in North America had a negative impact in the amount of approximately SEK 230 million.
Net sales dropped 0.8% to SEK 25.59 billion from SEK 25.79 billion a year ago impacted mainly by changes in exchange rates, while changes in volume/price/mix had a positive impact. Excluding exchange rate changes, net sales increased 2.4%.
Among divisions, Consumer Durables, Europe recorded net sales of SEK 10.500 billion, almost flat with lat year's SEK 10.496 billion. Industry shipments of core appliances in Europe declined 2.2% in the quarter.
In Consumer Durables, North America, net sales fell to SEK 8.21 billion from SEK 9.04 billion last year. Industry shipments of appliances in the US showed a strong decline in the second quarter. Core appliances shipments fell 8.2%, and major appliances shipments dropped 7.8%.
Operating income fell 71.5% to SEK 254 million from SEK 890 million last year. Adjusted operating income declined 13.9% to SEK 793 million from SEK 921 million last year.
For the first six months of fiscal 2008, Electrolux's income decreased to SEK 7 million or SEK 0.02 per share from SEK 1.04 billion or SEK 3.69 per share last year. Adjusted income for the period was SEK 351 million or SEK 1.24 per share, down from SEK 1.07 billion or SEK 3.81per share.
Year-to-date net sales declined 1.8% to SEK 49.78 billion from last year's SEK 50.72 billion, due to changes in exchange rates.
The company is concentrating its production of refrigerators in Italy in its factory in Susegana, while ceasing production in Scandicci. The changes of the refrigerator production in Italy, which affected about 450 employees at the Scandicci plant and approximately 300 in Susegana, are expected to be complete in the second half of 2009.
Looking ahead, Electrolux expects new product launch under the Electrolux brand in North America to have a negative impact on operating income of approximately SEK 100 million in the third quarter.
The company noted that the launch is expected to have a negative impact for each quarter of 2008 as it initially includes a considerable investment in marketing. Meanwhile, it is expected to have a positive impact on the operating income in 2009.
Further, the company revised its fiscal 2008 operating income guidance, and now expects operating income of SEK 3.30 billion to SEK 3.90 billion, excluding items affecting comparability. Previously, the company was expecting adjusted operating income to be in line with previous year.
The revision is based on an expected decline of 1% to 2% from last year for market demand for appliances in Europe, and a 5% to 8% fall in market demand for appliances in North America. Earlier, the company's forecast was an unchanged market demand for appliances in Europe, while the company noted that market demand for appliances in North America shows a decline.
Electrolux repeated that the increasing uncertainty in the overall global economy makes it continuously difficult to predict the development in 2008.
In addition, the company appointed Enderson Guimaraes as new head of Major Appliances Europe, succeeding Magnus Yngen, who has been appointed President and CEO of Husqvarna AB. Guimaraes will assume his new position on October 1, 2008, and will be based in Brussels, Belgium.
Guimaraes, currently Senior Vice President Product and Branding within Major Appliances Europe, will become a member of Group Management and report to the President and Chief executive officer Hans Stråberg.
ELUXY.PK closed Wednesday's trading at $23.74, up $1.14.
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