Electrolux's Profits Rise 10% In 3rd Qtr.
By Alan Wolf -- TWICE, 11/20/2006
Stockholm, Sweden — Electrolux overcame a strike in Germany, suppliers problems in Mexico, a challenging North American market and higher raw materials costs to post a 10 percent increase in operating income for the third quarter ended Sept. 30.
Operating income, excluding one-time charges, was $152 million for the three-month period, while net sales remained essentially flat year-over-year at $3.5 billion.
In the North American market, operating income increased 14 percent over the comparable period last year to $44 million on net sales of $1.2 billion. Revenue slipped nearly 4 percent for the quarter due to changes in the exchange rate. Nevertheless, sales of freezers and cooking equipment increased, improving the division's "leading market position in these product categories," while its market share in laundry "has stabilized after a period of intense competition and price pressure," the company said.
The startup of Electrolux's new production facility in Juarez, Mexico, is proceeding on plan, the manufacturer reported, although any cost savings realized by moving production there were offset by transitory problems with component supplies and increased transportation costs due to higher fuel prices. Higher raw materials costs throughout its North American operations also adversely impacted results.
A bright spot for the company's North American unit was its floor care business, which enjoyed the fruits of a rebound in U.S. demand. Sales exceeded the year-ago period and operating income improved substantially due to lower costs for materials, increased sourcing from low-cost countries and an improved product mix, Electrolux said. Also boosting floor care business in the third quarter was the development of a new in-store display for accessories.
In prepared remarks, president/CEO Hans Straberg acknowledged the 10 percent gain in operating income, but refused to rest on those laurels. "This does not mean that I am satisfied," he wrote, citing the supplier problems in Juarez and higher raw materials costs in a "weakening North American market." Straberg also used the company's success in floor care to demonstrate that "it is possible to have good margins in a tough market if you have the right products and the right marketing at a competitive cost position."
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