The Australian market for appliances has gone soft according to Electrolux management with the Swedish Company only achieving sales increases by lifting prices.
Late after announcing what was described as a less than stellar result Electrolux AB plunged the most in almost 3 years after reporting that costs are increasing, and customers have balked at paying higher prices for its products.
Australia was the only Electrolux market to be described as negative when the company reported their Q3 results, Australia is in the Oceania market. Asia Pacific was described as positive.
In the company’s third-quarter earnings report, president/CEO Jonas Samuelson said that retailers can expect price rises in 2019.
He blamed the impact of Trump administration tariffs, higher raw materials costs and lower OEM sales to Sears which was bankrupted last week will lead to global price hikes from Electrolux in the new year. He said that current macro trends indicate slightly softer market demand for Australia.
He added, “Further price increases will be implemented to mitigate cost inflation.”
The Trump administration imposed a 10 percent tariff on USD 200 billion of Chinese imports in September 2018, these duties are scheduled to increase to 25 percent on January 1.
The US government also imposed sharp tariffs on imported steel and aluminum earlier this year.
Globally profit from North America was much worse than expected, due to higher costs and negative impact from private-label cooking products after the bankruptcy of Sears.
The companies guidance suggests that headwinds from the rising costs, tariffs and forex headwinds are tougher than expected, and cost savings smaller than expected, according to Christer Magner Gard, head of DNB Equities, Sweden.
He expects analysts to chop their consensus profit estimates by about 7 percent for 2019.
Citigroup says the focus now is on the extent to which the higher costs can be offset by savings and price mix.
CEO Jonas Samuelson said on a conference call on Friday night that the company is fully committed to offsetting these headwinds through price increases.
The biggest raw-material challenge looking forward is higher oil prices, which translates into higher costs for chemicals and plastics in the coming year, Samuelson said. He said tariffs on components and finished goods made in China are having “a significant impact on our cost base, which we are then recovering in pricing.”
The shares fell as much as 14 percent, the most in a trading day since December 2015, touching their lowest since April 2014.
Electrolux was down 9.1 percent to 163.75 kronor as of 10:15 a.m. in Stockholm, shedding 4.6 billion kronor in market value.
Third-quarter operating earnings at the owner of the Electrolux, Frigidaire and AEG brands came to 1.76 billion Swedish crowns (USD 193 million), down from 1.98 billion crowns a year earlier.
However, earnings were boosted by a provision reversal of about 170 million crowns in Latin America that was not included in analysts’ estimates and Electrolux shares plunged on the news.
Operating earnings at Electrolux’s US operation were also well below forecasts, which Handelsbanken analyst Karri Rinta called unexpected given strong results from Whirlpool a few days earlier.
“These are weaker numbers and an outlook that will make people more concerned about next year,” Rinta said.— Channel News