Electrolux profits fall on weak sales, strong krona

STOCKHOLM, Oct 21 (AFP) - Electrolux, the Swedish manufacturer of household appliances, said Tuesday it expected weaker 2003 earnings after reporting a 38-percent slump in third-quarter net profit owing mainly to feeble sales in North America and the strong krona.

The results were worse than analysts had expected, and Electrolux shares plunged on the news, closing down 8.40 percent at 163.5 kronor on the Stockholm stock exchange.

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Third-quarter net profit fell to 767 million kronor (85 million euros, 99 million dollars) from 1.24 billion kronor in the same period of 2002, as sales fell by 4.3 percent to 30.4 billion kronor.

"The result in North America is clearly the culprit, in particular in consumer durables," said Gustaf Lindskog, Electrolux analyst at Alfred Berg.

Third-quarter operating income at the group's consumer durables division in North America fell to 544 million kronor from 1.135 billion kronor in the second quarter, with operating margin slumping to 4.9 percent from 8.6 percent.

"There was no reason not to expect good margins there, particularly after their capital markets day in which they said North America was doing very well, " Lindskog added.

Electrolux's overall net profit fell by 6.3 percent to 1.14 billion kronor from 1.22 billion kronor when calculated on a comparable basis.

Items affecting comparability included a capital loss of 85 million kronor related to the divestment of the company's compressor operation, which was unexpected, and a previously announced 293 million kronor provision for loan guarantees at the company's launderette business in Germany.

Electrolux said a rise of the krona, notably against the US and Canadian dollars and against the pound, had also cut operating profit by 220 million kronor and recurrent profit, another way of comparing results, by 210 million kronor, it said.

Electrolux president and chief executive Hans Straaberg said he was pleased with the overall result, but acknowledged that the US market was giving the group headaches.

"This is basically a good result for Electrolux. But we are having problems with our vacuum cleaner operations in the United States where the competition has been and is much tougher than we expected," Straaberg said in a reference to low-price vacuum cleaners.

"We hope to be able to compete by launching new products later this year," he added.

Apart from consumer durables, he said he was pleased with how sales of white goods and outdoor products had developed in the United States.

"We've gained market share and increased our sales and result," he said.

Electrolux said it expected market demand for appliances in the fourth quarter to be "flat or slightly up in both Europe and North America," compared with the same period a year earlier.

It forecast full-year operating profit to be "somewhat lower" than in 2002, excluding items that affect comparability.

Meanwhile, Electrolux announced that it was planning to shut down one of its refrigerator plants in the United States, in Greenville, Michigan, at a cost of 1.2 billion kronor (155 million dollars, 133 million euros).

The plant, which has 2,700 employees, has a "weak financial position and other production sources are being considered, including a move to Mexico", it said in a statement.

Discussions with union representatives are underway.

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