Whirlpool, Electrolux buoyant but see volatility

Whirlpool, Electrolux buoyant but see volatility

New York/Stockholm: World-leading home appliances makers Whirlpool and Electrolux beat quarterly earnings forecasts on Wednesday, but said the market and economic outlook was volatile.

The two white-goods giants were battered by the global downturn but have been in recovery mode since cost cuts. Growth is coming from emerging markets, while consumers in developed key US and European markets remain cautious.

The outlook remains clouded by fears of a double-dip recession in the United States and the need for demand-dampening austerity measures in several European Union states.

“As we have previously noted, we continue to see a volatile and rapidly changing global economy, which we expect to continue in the near term," Whirlpool chief executive and chairman Jeff Fettig said.

The company, which tops Electrolux in global sales with its own brand and the Maytag marque, reported adjusted third-quarter earnings per share of $2.22 versus a forecast $1.76. Sales came in at $4.52 billion, above the estimate of $4.49 billion.

“The actions we have put in place have allowed us to offset negative environmental factors and maintain our full-year adjusted earnings outlook," he added.

Electrolux’s third-quarter adjusted operating profit of 1.98 billion crowns ($298 million) beat the average forecast of 1.64 billion crowns in a Reuters poll, but was down from 2.23 billion in the same period of 2009.

Sales fell 5% to 26.3 billion crowns, lagging the poll forecast of 27.1 billion.

Whirlpool’s Fettig said the company had, as expected, faced a challenging environment in the quarter, leading to a significant slowing in sales growth compared with the first half.

“Our ongoing focus on cost reductions, productivity and innovative product launches continues to enable us to adapt to changes in the macroeconomic environment," he said.

Asia-Pacific Growth

Electrolux, which owns the Frigidaire, Zanussi and AEG-Electrolux brands, got its main operating earnings boost from Asia-Pacific, which accounted for more than 8% of group sales in the quarter.

It said market demand in southeast Asia and China was estimated “to have shown a considerable increase".

“The market continues to be volatile and different types of stimulus measures make the forecasting of developments difficult, not least in North America," chief executive Hans Straberg said in a statement.

The operating margin over nine months was 6.1% which, he said, meant a 6% goal for the year was within reach.

Operating earnings in Europe, the Middle East and Africa -- which generated nearly 40% of sales -- were flat year on year. Earnings in North America and Latin America fell.

Based on Tuesday’s closing prices, Electrolux stock has risen 3.3% this month, while Whirlpool has gained 4.8%.

Electrolux shares were unchanged by 04:20 pm, having initially risen 3%.

Analysts said the market had later focused on the headwinds facing Electrolux, including raw materials costs.

Straberg told Reuters in an interview that raw materials costs would rise 300 million crowns in the fourth quarter, year on year, and by 1.5 billion crowns in 2011.

Electrolux saw demand drop in the US market as customers brought forward purchases to the second quarter due to government-sponsored rebate programmes.

An end to tax incentives in Brazil also meant demand had stagnated there, it said. Though Latin America sales increased in the quarter, profits went down due to higher raw materials costs, price pressure and a poorer customer mix.

Sales in the Europe, Middle East and Africa region fell, mainly due to the fact German retailer Quelle went bankrupt at the end of 2009, it said.