Stockholm: Electrolux, the world’s second biggest home appliances maker, forecast stronger demand throughout 2010, leaving its margin goal in reach, as it posted a bigger-than-expected rise in first-quarter profit.
The economic downturn on the heels of the financial crisis savaged demand for appliance makers across the world, but in recent months a budding recovery has helped firm up consumer spending, not least in emerging markets.
Electrolux, which makes home appliances under brands that include Frigidaire, Zanussi and AEG-Electrolux, said demand in its main markets had recovered faster than anticipated and was seen growing throughout 2010.
In its previous outlook, issued in February, the group said it saw only “modest” market growth this year.
In the mature markets on both sides of the Atlantic the economic recovery and linked revival of spending on white goods has been slower, but even there signs of recovery have emerged.
New orders of manufactured durable goods in the US recorded their biggest gain in over two years last month while home sales shot up to an eight-month high in a sign the hard-hit US economy may be on the mend. Rival Whirlpool, the world’s biggest home appliances maker, leveraged growth among the expanding middle class of Asia and Latin America to trounce market expectations earlier this weak and hiked its 2010 profit outlook.
The maker of Maytag and KitchenAid appliances forecast flat industry shipments in Europe this year and a 3-5% rise in the US, a slight hike of its previous outlook, while predicting continued strong growth in emerging markets.
Earnings before interest and tax rose to 1.33 billion crowns ($185.1 million), excluding extraordinary items, from a 38 million profit a year ago to come in above the 1.02 billion seen in a Reuters poll of analysts.
“It looks strong ... and exactly the points in focus have come in positive -- intact raw materials guidance -- and in terms of market development they are actually more positive,” said an analyst who asked not to be identified.
“The share should react positively.”
Chief executive Hans Straberg said in a separate statement that raw materials prices were expected to rise going forward, but that the cost increase would not exceed 1 billion crowns, leaving prospects for stronger margins.
“Although there is still great uncertainty and many things can happen in the remaining part of the year, 2010 could be the year we approach our goal of an operating margin of 6 percent.”
Sweeping cost cuts, which have seen Electrolux close plants in Europe and North America saddled with the higher labour expenses of the two regions, helped Electrolux cushion earnings as consumer demand folded last year.
Electrolux said it would evaluate measures to boost efficiency at its washing machine plant in Revin, France, and at its cooker plant in Forli, Italy, resulting in costs of about 200 million to be charged in the second quarter.