Electrolux hit as consumers feel the pinch

City A.M. Reporter
HOME appliances giant Electrolux yesterday warned that weak demand in the US and Europe combined with rising raw materials costs would hurt second-half earnings, underscoring harsh conditions for consumer companies.

Electrolux, the world’s second largest maker of appliances like fridges and cookers, posted worse than expected second-quarter results alongside its gloomy forecast and saw its shares drop as much as 13 per cent to two-year lows yesterday.

That followed a surprise loss on Monday for Philips, Europe’s largest maker of consumer electronics. The Electrolux warning also boded ill for its larger rival, Whirlpool, the appliances world number one, which reports tomorrow.

“It is a weak economic macro environment and appliance demand is directly connected to consumer confidence and discretionary income,” Electrolux chief executive Keith McLoughlin said, referring to the US market, where he said demand fell 10 per cent in the quarter.

Important European markets like Spain and Italy were also sharply lower, hit by austerity and debt worries, he added.

Electrolux, buffeted by the debt crisis in southern Europe and a fragile US economy, reported core earnings of 745m crowns (£70.3m) versus 911m crowns forecast in a poll of analysts and 1.5bn crowns a year ago.

In a statement, the company said it did not expect earnings in the second half to reach those of the second half of 2010

As well as weak demand, Electrolux has suffered higher costs from soaring metals and plastics prices. It stuck to a forecast for raw materials cost rises of 2bn crowns this year.