Published on October 25th, 2013 | by The GC Team0
Electrolux cuts costs and jobs as Q3 earnings miss target
Electrolux has announced that it will cut 2,000 jobs and launch a new round of cost cuts to counter tough market conditions in Europe, after posting a bigger than expected fall in third-quarter earnings.
The company said it has initiated actions to reduce annual costs by SEK 1.8 billion by improving manufacturing footprint and reducing overhead costs, mainly within Major Appliances Europe.
A decision has been taken to close a refrigerator and freezer plant in Australia and concentrate production in Rayong, Thailand. The company is also to carry out a review of its manufacturing setup in Italy.
Net sales during the quarter amounted to SEK 27,258m, while income for the period fell from SEK 923m to SEK 656m.
Keith McLoughlin, President and CEO of Electrolux (pictured), said the operation in North America continues to deliver strong sales and earnings growth while Europe continues to suffer from weak demand.
“In response to the current market situation in Europe, we will initiate activities to further adapt the Group’s cost structure. Although the situation in Europe remains challenging, it is encouraging to note that the organic growth for the Group in the third quarter of 4.9% exceeds our target of 4% and shows that we continue to deliver on our innovation and growth strategy.”
Emerging markets continued to show strong top-line growth, but earnings were impacted by negative currency movements.
McLoughlin said the company expects European demand for appliances to decline by 1-2% for the full year of 2013.
The charges related to the overhead cost reduction programme and the manufacturing footprint programme will be taken in Q4 2013 and in 2014 and are estimated to be around SEK 3.4 billion.
The total benefit is expected to be approximately SEK 1.8 billion on an annual basis.
“We expect these actions to have a positive impact on our cost position and contribute to our margins going forward,” commented McLoughlin.