Electrolux AB, Europe’s largest maker of kitchen appliances, abandoned its full-year profit target and said it will cut more than 3,000 jobs after demand plunged in Europe and North America.
Operating profit at the maker of Frigidaire appliances totalled 2.7 billion kronor ($340 million) as of November and a goal of 3.3 billion kronor will be impossible to reach after a sudden drop in orders, the Stockholm-based company said.
Electrolux fell as much as 7.4 per cent in the Swedish capital on Monday after cutting its 2008 outlook for a third time this year. It is the latest global appliance maker to announce job cuts after the global credit crunch and US housing slump clips demand. Larger rival Whirlpool Corp is eliminating 5,000 positions and the maker of KitchenAid gear on October 28 forecast lower annual profit.
“This is not enough in our view to offset the triple headwinds of weak mix, falling volumes and rising raw-material costs,” said Ben Maslen, an analyst at Merrill Lynch & Co He rates the stock “underperform.” The job cuts, equal to 5 per cent of Electrolux’s workforce, and other measures will cost about 1.2 billion kronor. The expense will be booked in the fourth quarter. The company aims to save about 1.1 billion kronor annually, it said.
Electrolux stock has slid 31 per cent this year as product roll outs cut into margins and consumers postponed appliance purchases. Chief Executive Officer Hans Straaberg said last month that European price gains won’t be enough to compensate for higher costs.
The company faces an unprofitable end to the year as demand for appliances in Europe and North America continued to show a “sharp” decline in December, it said.
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The planned job cuts will affect both factory workers and office-based employees and further details will be announced early next year, spokesman Anders Edholm said in a phone interview.
The Swedish manufacturer upgraded its European product range last year and increased prices as it jostled with Bosch Siemens Hausgeraete GmbH for the number one spot in Europe.
It is postponing some stove and refrigerator production in Sweden as consumers in developed markets delay purchases on fears of a long-lasting recession.
“Not even demand from emerging markets seems to be able to make up for a slowing economy after a number of gloomy economic statistics recently,” said Henrik Degrer, a fund manager at Svenska Handelsbanken AB, which manages $27 billion in equities.
Straaberg is shifting factories to lower-wage countries, including Mexico and Thailand, as part of a five-year efficiency drive introduced in 2004. The program may extend into 2010, Edholm said.
“It doesn’t come as a huge surprise, nobody really believed their forecast would be met,” said Mauritz Redin, Stockholm- based head of Swedish equities at Alfred Berg AB, which manages $27 billion in assets. “It’s a bit strange that they come out with it this late. People will be disappointed.”
Electrolux fell as much as 5.5 kronor to 69 kronor and was trading at 71 kronor as of 11:18 am local time.