Carmine D.

Electrolux Reaps Benefit of Year-Ago Cost Cutting

By IAN EDMONDSON

STOCKHOLM -- Appliance maker Electrolux AB reported a sharp rise in second-quarter net profit Thursday, after restructuring costs weighed on year-earlier results, and said the U.S. market was showing early signs of recovery.

Net profit jumped to 658 million Swedish kronor ($84.8 million) from 99 million kronor a year earlier, when it booked restructuring costs of 539 million kronor. Savings initiatives and lower raw-material costs helped push up its bottom line.

Higher prices for Electrolux's products and the weakness of the Swedish krona against the dollar and euro, meanwhile, helped lift revenue 7.4% to 27.48 billion kronor from 25.59 billion kronor.

The company reaped benefits from a shift in production to lower-cost countries, where it has increased efficiencies and lowered its purchasing and product costs. Electrolux launched a restructuring program in 2004 that aims to save 3 billion kronor in annual costs. In December, it said it would lay off more than 3,000 staff, or about 5% of its work force.

Electrolux, known for its vacuums, shown on display in Sweden, is seeing signs of a market bottom in North America.

The company reaped benefits from a shift in production to lower-cost countries, where it has increased efficiencies and lowered its purchasing and product costs. Electrolux launched a restructuring program in 2004 that aims to save 3 billion kronor in annual costs. In December, it said it would lay off more than 3,000 staff, or about 5% of its work force.

Most of the company's main markets for appliances continued to show a decline in the second quarter of 2009, Electrolux said.

"There are no indications of an immediate improvement in any of the group's main markets, and, therefore, market demand for appliances around the world is expected to decline further in 2009," the company said in a statement.

Still, Electrolux said it had gained market share in North America, Latin America and Australia.

"In North America we see certain early signs that we are beginning to reach the bottom," Chief Executive Hans Straaberg said in a statement.

Even though the number of refrigerators, dishwashers, vacuum cleaners and other products the company delivered in North America fell 14% in the second quarter, the decline was an improvement on the 16% drop recorded in the first quarter.

Electrolux -- one of the world's largest manufacturers of household appliances after Whirlpool Corp. -- owns the Electrolux, AEG-Electrolux, Zanussi, Eureka and Frigidaire brands.

Shipments to North America have fallen for 12 consecutive quarters, and in Europe for six quarters. The two markets account for almost three-quarters of Electrolux's sales.

The Swedish appliance maker's cautiously optimistic comments on the U.S. offer further evidence that the worst of the recession in the world's biggest economy might be over. That sentiment was echoed by Finland's handset maker Nokia Corp., which Thursday said a slump in demand appeared to "bottoming out."

Investors cheered the results, despite the cautious outlook, and shares were up 9.4% in afternoon trading in Stockholm. The value of the stock has more than doubled in the past six months to trade at its highest level since October 2007.

Write to Ian Edmondson at ian.edmondson@dowjones.com

Printed in The Wall Street Journal, page B4

My pleasure Venson.  Gives some excellent insight from the management into the status of vacuum sales globally and what's being done to cut costs/expenses to improve the bottom line with sales/profits waning.  Other companies, whether they are publicly traded like Electrolux [whose stock price has done well over the past 6 months], or not, have to do the same cost containment when faced with these economic conditions.  It is a huge myth perpetrated by those who don't know better to say privately owned companies are spared the cost paring done by publicly traded ones.  If you are in any business good times/bad, privately and/or publicly owned, if you are not constantly cutting excess superfluos costs and expenses [especially in prolonged bad times; read sales/profits falling year over year] then you will not be in business long.

Carmine D.

According to the Association of Home Appliance Manufacturers:

In 2005, the USA sales of "large" household appliances was a record breaking 47 MILLION.

After 2005, sales declined and since sagged to 39.7 MILLION in 2008

So far this year sales are down 14 percent.

Outlook for 2009 Holiday sales season: dismal.

Carmine D.

Stephen Baker of market researcher NPD Group says that ...."The fact that with most of these products [electronics], people already have one.  In this enrironment, retailers are scuffling trying to get customers to buy another."  Read:  Retailers will try to maintain year over year holiday sales and profits with promotions such as buy-one-get-one-free specials and pushing add-ons such as free home installation services.

BTW, Forbes released its latest top 400 USA wealthiest people.  The cut off now is $950,000,000.  The dollar threshold has gone down from ONE BILLION $ to make the Forbes list.

Carmine D.

Carmine D.

  You may not be aware of it but the Independent doesn't currently sell Electrolux (Eureka -Lux) but J.C.Penney, Lowe's and Sears do.They are the only ones right now that I know of that are allowed to sell them. Electrolux appliances are sold at these stores . So the service center for Sears, J.C. Penney and Lowe's would be responsible.

                                                                                                                                                                   Procare

Hello Venson:

I know you are an avid reader of the "old gray lady."  I was but now prefer the WSJ.  Whenever I read an article relevant to here I'll post.

WRT Electrolux and the faulty wand contacts, it does not meet the Consumer Product Safety Commission guidelines for a recall, as did the Electrolux Pronto earlier this year: a potential safety and health hazard.  However, as the premier brand and product line for vacuums for Eureka, the defect merits some positive proactive response by the maker to authorized dealers, indies, retailers and customers to alert them and mitigate the default especially under warranty.

Carmine D.