STOCKHOLM, SWEDEN –
Lower prices, higher raw-material costs and weak demand contributed to a 68 percent decline in Electrolux’s fourth-quarter earnings.
Profits totaled 220 million kronor for the three months, ended Dec. 31.
Results were also squeezed by plant rationalization and headcount reduction costs as the majap maker worked to bring its manufacturing capacity in line with lower global demand.
Net sales rose 3 percent worldwide to 28.4 billion kronor.
In North America, sales fell 5.9 percent to 6.3 billion kronor excluding the unfavorable impact of currency exchange rates, and operating income declined 74 percent to 76 million kronor due to lower demand and unit volume; reduced capacity utilization; higher costs for raw materials, sourced products and transportation; and restructuring charges.
For the full year, net sales fell 4.4 percent worldwide to 101.6 billion kronor, and net income declined 48.4 percent to 2.1 billion kronor.
“Already at the end of 2010 demand for appliances started to decline, while costs for raw materials increased and prices for our products began to decrease,” president/CEO Keith McLoughlin said in a statement. “This downward trend gained momentum as 2011 progressed,” as rising raw-material costs and lower prices curtailed results by more than 3 billion kronor.
Nevertheless, the company generated nearly 4 billion kronor in operating income and “a strong underlying cash flow,” he said, and will continue to optimize operations by reducing capacity and costs.
McLoughlin has also shaken up his senior ranks. Tomas Eliasson will join Electrolux mid-month as chief financial officer, and Stefano Marzano, formerly chief design officer for two decades at Royal Philips Electronics, has assumed that role for the Swedish majap maker, heading up a new, centralized design group.
Marzano, together with chief technology officer Jan Brockman and chief marketing officer MaryKay Kopf, will lead a new corporate structure called the “Innovation Triangle,” which was created to better coordinate the company’s R&D, marketing and design functions throughout the product development process, with an increased focus on customers and end users.
Looking ahead, McLoughlin forecast “a certain degree of improvement in the U.S. market by the end of 2012, supported by a modest growth in the housing market.”
He also described 2012 as “an intensive launch year,” which will require increased expenditures for marketing and product development. That, plus anticipated higher costs for sourced products and transportation, will make it all the more important for a recent round of price hikes to stick, he indicated.
McLoughlin said this year’s game plan calls for the company to:
• further strengthen the Electrolux brand position;
• continue to develop innovative products that consumers prefer;
• further improve operational efficiency, and;
• maintain a strong balance sheet “to be prepared for both uncertainties and opportunities.”