Stockholm, Sweden — A double-barreled whirlwind of negative currency evaluation and pricing pressure cut into fourth quarter sales and earnings for Electrolux major appliances sold into North America.
Although demand increased in North America during the three months, ended Dec. 31, the strengthening of the Swedish krona against the U.S. dollar had a negative impact on sales and income.
At the same time, the U.S. market was characterized by an increased downward pressure on prices, which were offset by improved manufacturing efficiencies, savings from restructuring and lower costs for materials and components.
Electrolux sales in North America in the fourth quarter dropped to $1.2 billion, from $1.3 billion the previous year, while operating income for the three months decreased to $54.7 million, from $67.5 million. Margin in the fourth quarter slipped to 4.5 percent, vs. 5.2 percent year-on-year.
In the United States, industry shipments of majaps increased in volume by about 7 percent, while shipments of room air conditioners and microwave ovens rose by about 4 percent. For the 12 months, majap shipments moved up 4 percent, while room air and microwaves rose 8 percent.
Sales of room air and microwaves showed good growth in North America. As a result of higher volume, lower costs for materials and improved manufacturing efficiency, 12-month operating income and margin increased for these products.
However, fourth quarter operating margin for room air and microwaves was lower year-over-year due to downward pressure on prices and a less favorable product mix, as well as substantially lower sales of air conditioners.
Electrolux, which instituted a restructuring program at the end of 2002, said the total cost for room air and microwaves in North America utilized by the end of 2003 reached $55.7 million, leading to $14.1 million in savings for the year. An additional $6.3 million in savings is expected in 2004.
For the 12 months, majap sales in North America dropped to $6.3 billion, from $6.8 billion a year earlier, while operating income for the same period decreased to $405.8 million, from $459.9 million.
Consolidated Electrolux fourth quarter sales dipped 7.4 percent, to $4 billion, from $3 billion in 2002. Much of the slide was attributed to a change in exchange rates and group structure. Comparable sales, adjusted for changes in exchange rates, climbed 3.3 percent.
Consolidated operating income for the three months moved into the black, from a loss of $79.2 million in 2002, to income of $231.7 million in the same quarter in 2003. Operating income, excluding items affecting comparability was $243.7 million in the fourth quarter, compared with $250.4 million year-on-year. Operating margin improved to 6.2 percent, from 6.1 percent, excluding items affecting comparability.
Consolidated net income for the fourth quarter reached $162.3 million, compared with a loss of $134.4 million in the same three months last year. Net income, excluding items affecting comparability, hit $174.3 million, up from $171.7 million the previous year.
For the 12 months, consolidated Electrolux sales fell 6.8 percent, to $17.4 billion, from $18.7 billion. Operating income for 2003 decreased 7.2 percent to $1 billion, from $1.1 billion in 2002. Net income decreased 6.2 percent last year, falling to $671.8 million, from $716.3 million in 2002.
Electrolux said market demand in 2004 is expected to show some growth from the previous year in North America.