News

Electrolux Reports Third Quarter Results

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4.5

Andrew R. Michaud

• October 27, 2023

Electrolux, a leading Swedish home-appliance manufacturer, announced its financial results for the third quarter. Despite challenging market conditions, the company managed to achieve impressive numbers in various aspects.

Net Profit Surges

In a surprising turn of events, Electrolux reported a net profit of 123 million Swedish kronor ($11 million) for the third quarter. This marks a significant improvement compared to the loss of SEK605 million in the same period last year. Expectations were surpassed as the FactSet analyst poll projected a net profit of SEK450 million.

Sales Decline

Amidst the current economic climate, Electrolux experienced a 5.2% decrease in sales, amounting to SEK33.43 billion. Although this figure fell short of the SEK34.1 billion expected by industry experts, the company remains optimistic about future growth prospects.

Cost Savings Initiatives

Electrolux understands the need to adapt to changing market dynamics and enhance profitability. To address weak consumer demand and intense competitive pressure, the company has unveiled plans to restructure its operations and organizational structure. As part of these initiatives, Electrolux will trim its workforce by approximately 3,000 jobs.

While these measures are already underway, Electrolux acknowledges that further action is necessary to restore margins. Consequently, the company has set a target of achieving net cost savings between SEK10 billion and SEK11 billion by 2024, compared to the previous goal of over SEK7 billion.

Furthermore, Electrolux anticipates incurring a restructuring charge ranging from SEK2 billion to SEK2.5 billion in the fourth quarter. Looking ahead to 2023, the company aims to achieve annual cost reductions of approximately SEK6 billion, as compared to the prior target of at least SEK5 billion.

In conclusion, despite facing challenges in the market, Electrolux has demonstrated resilience and remains committed to driving sustainable growth. The implementation of comprehensive cost-saving measures and restructuring initiatives positions the company for long-term success.

Cost Inflation

Earnings for the company were adversely affected by several factors including lower volumes, negative pricing, currency headwinds, labor cost inflation, and energy inflation. Sales promotions remained high in all major markets, particularly in North America, resulting in a year-over-year decline in net price. Electrolux anticipates that the negative pricing trend will continue for the entire group in the fourth quarter.

Margins

The operating margin for the third quarter improved to 1.8% compared to a negative margin of 1.1% in the previous year. The adjusted operating margin also showed significant improvement, standing at 0.9% versus a negative margin of 0.1%. Operating income received a boost from a one-off gain of SEK294 million from the sale of its factory in Hungary. Additionally, the company's cost reduction efforts, North America turnaround program, and lower raw material costs contributed to improved margins.

Guidance

Electrolux maintains its expectation that demand for core appliances will remain negative across all regions in 2023. The volume/mix is projected to negatively impact earnings this year, although pricing will partially offset external factors such as raw material costs, energy costs, trade tariffs, currency fluctuations, and labor cost inflation of over 2%. The company now expects capital expenditure for 2023 to be below SEK6 billion, down from the previously estimated SEK6 billion. Chief Executive Jonas Samuelson stated that due to the time required for recently implemented measures to have a full impact on earnings, sequential improvement in underlying operating income is not anticipated for the fourth quarter.