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Electrolux Q1: Earnings Up Sales Down

Stockholm, Sweden — Electrolux reported operating income of $4.6 million for the first quarter, ended March 31, compared with a year-ago loss of about $4.7 million, excluding one-time charges.

Including restructuring provisions and write-downs for plants in Europe and Asia, the company lost $46 million in operating income, compared with a $600,000 loss during the first quarter of last year.

Excluding the impact of currency fluctuations, net sales fell 8.4 percent to $3.1 billion due to “dramatic decreases in demand” for major appliances within the company’s main global markets, it said.

Electrolux CEO Hans Straberg attributed the positive earnings to such belt-tightening measures as headcount reductions, production shifts to low-cost countries and lowered product costs.

The company also cut capital expenditures and reduced its inventory position by ramping down production and idling plants, he said.

In addition, new product introductions, including last year’s launch of the premium Electrolux line in the U.S., has allowed the manufacturer to selectively raise prices and improve its product mix.

The new Electrolux line has been well received, Straberg said, delivering the company an approximate 5 percent share of the North American premium appliance segment. Electrolux continues to invest in a new range of Frigidaire-branded products, while “drastically” cutting operational costs amid the “dramatic” downturn in North American demand, which has continued now for 11 consecutive quarters.

Net sales reached $1.1 billion in North America during the first quarter, a 25.7 percent increase, but declined 3.1 percent when currency fluctuations were excluded. The North American unit lost $21.3 million in operating income, representing a nearly 15 percent decline that moderated to a 3.1 percent decrease in comparable currencies.

The company attributed the division’s drop-off in real sales to continued low sales volumes and the ongoing shift in demand to lower-priced products. It ascribed the earnings decline to lower sales volume, higher steel costs and investments in Electrolux brand marketing, which were somewhat offset by price hikes and lowered operational costs.

While the Electrolux launch helped improve the division’s product and margin mix, costs related to the introduction dragged down operating income by about $24 million.
The company said it will take advantage of the weak market conditions in North America to take even greater share, albeit without using price to compete, and will maintain its marketing expenditures for the balance of the year.

Straberg added that despite the dramatic drop-off in global demand, the company’s cash flow remains strong, which will allow it to “take advantage of the business opportunities that will re-emerge when the market turns around.”