Rising raw materials costs and a soft U.S. majap market took their toll on Electrolux, which reported low single-digit declines in sales and profits for their North American consumer durables operation in the fourth quarter of 2006.
Net sales for the period fell 3.6 percent year-over-year to $1.2 billion, based on an average exchange rate of 7.38 kronor to the dollar in 2006, but handily outpaced U.S. industry shipments which declined 8.4 percent during the comparable three months. Operating income fell 1.6 percent to $72.2 million for the quarter.
For the full calendar year, net sales in North America grew 4 percent to $4.9 billion, compared with a 1 percent decline in U.S. industry shipments, and operating income rose 8 percent to $198.1 million, minus the effect of currency fluctuations.
Operating margins were 6.2 percent for the quarter and 4 percent for the year.
Electrolux president/CEO Hans Straberg said the North American operations showed improvement over 2005 despite softness in the latter part of the year and increased raw materials costs. The results, he said, indicate that the company’s strategy of “developing new, innovative products, building a strong brand and creating a competitive cost foundation” is beginning to gain traction.
The company said that “significantly higher” raw materials costs were offset in North America by an improved product mix and savings from restructuring. Electrolux is also beginning to realize greater savings from its new plant in Juarez, Mexico, following a period of “temporary disturbances” stemming from problems with supplied components.
The manufacturer said that its market share in laundry has stabilized, although competition in North America remains “intense.” In floor care, U.S. sales and operating income increased for the year despite slightly lower demand and a decline in Electrolux’s fourth-quarter sales. The sales downturn, affecting low-end products, stemmed from a decision to not participate in a seasonal discount sale in November, and resulted in an improved product mix and increases in operating income and margin. Floor care profits also improved thanks to lower costs for materials and increased sourcing from low-cost countries, the company said.