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Fri, Jul 17, 2009 - Page 10 News List

Electrolux emboldened by jump in operating profit

BLOOMBERG

Electrolux AB chief executive officer Hans Straaberg plans to start rebuilding inventories after the Swedish appliance maker grabbed market share in Europe and North America and beat profit estimates.

“The challenge for us right now is to find the right balance between the accelerator and the brake,” Straaberg said. “After the summer, we will need to build up our inventories from the very low levels we have today to handle the increased demand that occurs during the second half.”

The maker of Frigidaire appliances reported a 29 percent jump in operating profit to 1.05 billion kronor (US$134 million), beating the 582 million kronor estimate from a Bloomberg analyst survey. The world’s No. 2 appliance manufacturer rose 10 percent in Stockholm trading.

Electrolux, like larger rival Whirlpool Corp, is in the midst of a revamp that’s shifting factories to Mexico and lower-cost countries. At least two-thirds of the 3,000 planned job cuts announced in December have been carried out as Straaberg strives to cut 1.1 billion kronor in annual costs.

The global appliance market is bearing the brunt of a drop in demand brought about by shrinking consumer spending and faltering construction markets. That’s added to the pressure on Straaberg to wring savings from merging plants and cutting back on employees.

Straaberg will put in place a new organizational structure beginning in the fall to “fully realize synergies” between product development, manufacturing and purchasing, he said.

Net income advanced to 658 million kronor from 99 million kronor after the clampdown on costs began to take effect, and in the absence of year-earlier expenses for re-branding in North America and a European overhaul of factories.

Revenue added 7 percent to 27.48 billion kronor. Eastern European markets continued to show a “dramatic” slump in demand in the second quarter.

The appliance industry as a whole is expected to shrink further this year, the company said.

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