World number two home appliances maker Electrolux on Wednesday posted a slightly smaller quarterly core loss than expected and said it had frozen salaries in the face of a declining market in 2009. Planned Electrolux layoffs very likely to affect Hungary.
The company lost SEK 389 million ($47 million) before interest and taxes and excluding extraordinary items, compared with a year-earlier profit of 2.01 billion. The mean forecast in a Reuters poll had been for a SEK 481 million loss.
Electrolux also had a one-off net gain of SEK 42 million in the quarter, mainly related to a reversal of unused restructuring provisions. The firm said temporary shutdowns of production to cut inventories had weighed on operating income. The Swedish firm and its rivals have been hit by declining sales of consumer durables as the economic downturn has worsened.
Electrolux shares were up 2.4% at SEK 64.00 at 0817 GMT. A charge for cost-cutting measures included in the result was smaller than what Electrolux had flagged – SEK 1.05 billion versus previous guidance of about 1.2 billion. “Adjusted for that it’s worse than expected, not better. It is also interesting that they expect demand for appliances to decline in 2009. The consensus forecast is a rise of 6% in sales,” said Olof Cederholm, analyst at UBS.
Electrolux proposed no dividend for 2008 and said it would not forecast operating income for 2009 in light of market uncertainty. It said global demand for appliances was expected to continue to deteriorate in 2009. “In 2008, we experienced a drop in demand, which accelerated at the end of the year. Unfortunately, we see no market improvement in the short term,” Electrolux CEO Hans Straberg said in a statement. “Within the group we have implemented a wage freeze for 2009,” he said.
Including items, the quarterly pretax loss was SEK 530 million versus a year-earlier 1.58 billion profit and expectations for a 660 million loss. Sales totaled SEK 28.7 billion versus 27.6 billion and expectations for 28.1 billion. The world’s biggest appliance maker by sales, Whirlpool Corp, had slashed its full-year outlook at the end of October, saying it would cut 7% of its workforce.
Electrolux had warned in December it would undershoot its 2008 earnings forecast and announced more than 3,000 job cuts. It said on Wednesday the job cuts would total 3,100. The firm said it had limited need to refinance debt in 2009 and 2010.
Layoffs planned by Electrolux will affect all of the company’s divisions, factories and units, thus cuts are very likely in Hungary, too, though the number of redundancies will not be known until later, János Takács, who heads Electrolux’s holding company in central and eastern Europe, told MTI on Wednesday, after Electrolux reported a Q4 loss.
Electrolux employs 57,000 workers around the world, including 4,800 in Hungary. The company announced in December it planned to lay off 3,000 people in 2009. (Reuters, MTI)