Electrolux's Sales, Profits Flat In Q4
By Alan Wolf -- TWICE, 2/11/2008
STOCKHOLM, SWEDEN — Electrolux reported flat sales and profits for its fourth quarter, ended Dec. 31.
Net revenue slipped 0.9 percent to $186.3 million, while operating income, excluding the effect of one-time events, rose 0.6 percent to $13.5 million.
Income was boosted by volume growth, cost savings and reimbursements from a decades-old asbestos litigation case, which helped offset disappointing results at the company's European division.
For the full year, net sales rose 0.9 percent to $705.9 million and operating income increased 5.7 percent to $32.6 million.
In North America, net sales fell 5.8 percent to $50.4 million during the fourth quarter amid lower demand, and rose 1.4 percent to $227.3 million for all of 2007 assuming comparable currency exchange rates year-over-year. Limited exposure to the home builders channel and a shift of consumer demand toward the mass-market segment helped grow majap sales nearly 2 percent for the full year, leading to market share gains, Electrolux said.
Meanwhile, fourth-quarter operating income in North America rose 30.1 percent to $4.4 million amid price increases, an improved product mix and lower operating costs. For all of 2007 operating income increased 27.3 percent to $11.5 million.
Early this year the company will introduce Electrolux as a major premium appliance brand in North America, with the goal of attaining a significant long-term presence within the high-margin premium market. The company presently holds a strong position in the considerably less-profitable mass-market segment through its Frigidaire brand. The launch cost will represent "a considerable investment in marketing," the company said, and will have a negative impact on 2008 operating income of $674 million in the first quarter, although the impact is expected to turn positive in 2009.
"In North America, [appliance] sales rose by 2 percent while the market declined by almost 6 percent," observed president/CEO Hans Straberg. "This is a fantastic effort by our people in North America, which gives me great expectations for our launch under the Electrolux brand during 2008."
Globally, the company introduced a record number of new products in 2007 and invested more than $13.5 billion in product development, an increase of 10 percent over 2006. "Investment in brands also rose in 2007, and we are approaching our goal for this investment to correspond to 2 percent of sales," Straberg said. "The Electrolux brand has been strengthened … [and] our research shows that many more consumers prefer the Electrolux brand than last year."
The company also continued to make the manufacturing process more competitive by relocating production to low-cost countries. "We now have approximately 50 percent of our production in such countries, which means that we are quickly approaching our goal of 60 percent by 2010," Straberg said.
Looking ahead, "We see a great uncertainty about the global economic trend," Straberg noted. "It is very difficult to forecast Electrolux operating income for 2008. We face a number of major challenges," he said — including the U.S. launch of the new Electrolux premium line.
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