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Electrolux Q2 Sales Rise 6.3%

7/19/2005 08:45:00 AM Eastern

Stockholm, Sweden — Buoyed by a “good trend in sales, particularly in North America,” Electrolux AB reported a 6.3 percent jump in consolidated revenue during the second quarter, hitting $4.3 billion, compared with $4.1 billion in the year-ago period. Adjusted for changes in exchange rates, sales rose 5.8 percent.

Sales of consumer durables in North America increased 10.2 percent in the second quarter, reaching $1.1 billion in the period, up from $983.2 million the previous year. The segment, which includes major appliances, saw industry shipments of core appliances increase by almost 1.8 percent in the three months ended June 30.

Other factors in North American majap sales included “marked growth” in the quarter; positive volume, price and product mix development in several categories; and an increase in operating income despite a substantial impact from raw materials costs and costs for relocation of production.

North American operating income in the second quarter reached $44.7 million, up from $43.1 million in the same three months in 2004.

For the six months, North American sales jumped to $2 billion, up from a year-over-year $1.9 billion, while first half operating income came in at $66.2 million, down from a year-earlier $79.1 million.

However, on a consolidated basis, Electrolux reported a decline in operating income in the second quarter, to $241.6 million from a year-on-year $279.7 million, excluding items affecting comparability, due mainly to a $166.2 million increase in raw materials costs. The company said it raised prices in several markets, but still could not compensate for the materials cost increase. “The price hikes were not enough to offset higher costs,” president/CEO Hans Straberg said during a conference call.

Consolidated net income for the three months fell to $152.9 million from a year-on-year $158.5 million.

The company did report that more than half of the total increase in materials costs was offset by internal measures and cost-cutting. Implemented price increases and an improved product mix also contributed to income, said the company.

The demand for majaps is expected to show “some growth” in the United States in 2005, compared with the prior year, said Electrolux, while higher costs for both materials and components will continue to have an adverse effect on company profitability.

Efforts to strengthen the company’s competitive position through investments in product development and building the Electrolux brand will continue, it said. In addition, the manufacture plans to ramp up production of side-by-side refrigerators at its new Juarez, Mexico, plant during the back half of the year, while cutting back output from its refrigeration factory in Greenville, Mich. The move will improve the company’s cost structure and will yield savings by the second half of 2006, Straberg said.

However, Electrolux still anticipates somewhat lower operating income in 2005, exclusive of items affecting comparability.

In the first half, consolidated sales rose 2 percent, reaching $8.1 billion, up from the previous year’s $8 billion.

Consolidated operating income for the period, excluding items affecting comparability, climbed to $408.8 million, from $325.2 million in 2004. Net income for the first half increased to $262.1 million, from $231.3 million in the same six months last year. — Additional reporting by Alan