Electrolux, the Swedish home-appliance manufacturer, is set to release its third-quarter results on Friday. Here are the key details:
Net Profit
According to a FactSet poll, Electrolux is expected to report a net profit of 450 million Swedish kronor ($40.4 million), a significant improvement from a loss of SEK605 million in the same period last year. The loss in the previous year was mainly due to supply chain issues and higher costs in its North American business, resulting in a SEK1.2 billion loss. Additionally, the company faced a SEK350 million charge due to its exit from the Russian market.
Sales
Sales are anticipated to decline to SEK34.1 billion, compared to SEK35.24 billion reported last year. This information is based on a consensus forecast compiled by the company.
What to Watch
Cost Inflation
Electrolux has indicated that sales promotions increased significantly in the second quarter, although price increases also had a positive impact. However, the company anticipates that the net price effect will become negative starting from the third quarter. The second quarter saw continued higher cost inflation from labor and energy. Electrolux foresees negative external factors for the year ahead, driven by raw material costs, energy costs, trade tariffs, currency impact, and labor cost inflation exceeding 2%. Despite these challenges, pricing managed to partially offset the negative impact on earnings from these external factors.
Margins
Compared to the previous year, the operating margin in the second quarter decreased from 1.7% to minus 0.4%. This decline was primarily attributed to lower volumes resulting from weaker market demand, higher cost levels, and unfavorable currency fluctuations. Nevertheless, the cost reduction initiatives implemented across the entire group and the North America turnaround program had a positive impact on earnings during the second quarter.
Electrolux Expects Decline in Demand for Core Appliances in 2023
Electrolux, a leading provider of home appliances, is anticipating a challenging year ahead. The company forecasts negative demand for core appliances across all regions in 2023. This expected decline in volume and mix is projected to adversely impact earnings, although pricing strategies will help partially offset external factors.
Positive Outlook for Cost-Reduction Plan and North American Turnaround Program
Despite the anticipated challenges, Electrolux remains optimistic about its cost-reduction plan and North American turnaround program. These initiatives are expected to make a positive earnings contribution of at least SEK5 billion by 2023. The company’s efforts to streamline operations and enhance efficiency are likely to yield fruitful results.
Capital Expenditure for 2023
Electrolux has allocated SEK6 billion for capital expenditure in 2023. This investment underscores the company’s commitment to innovation and continuously meeting customer expectations.
In conclusion, while Electrolux foresees a challenging market with declining demand for core appliances in 2023, their proactive approach through cost reduction and turnaround programs is expected to yield positive results. The company remains steadfast in its commitment to providing high-quality appliances and innovative solutions to customers worldwide.