Shares of Electrolux AB (0MDT.L,0GQ1.L,ELUXY.PK) were losing around 8 percent in the morning trading in Sweden after the home appliances giant reported Friday weak profit in its third quarter, despite improved sales. Further, the company raised its estimate of negative year-over-year impact from raw materials, tariffs and currency. The company also sees similar impact in fiscal 2019.
President and CEO Jonas Samuelson said, "With one quarter remaining in 2018, we have improved visibility and revise our market outlook for 2018 to more narrow ranges. The UK is still largely impacted by Brexit and hence the European market is expected to grow by approximately 1 percent in 2018. Current macro trends indicate slightly softer market demand for Australia."
For the third quarter, Electrolux' income declined 19 percent to 1.16 billion Swedish kronor from last year's 1.44 billion kronor. Earnings per share were 4.04 kronor, down from 5.01 kronor a year ago.
Operating income amounted to 1.76 billion kronor, 11 percent lower than 1.98 billion kronor last year. Operating margin was 5.8 percent, down from 6.8 percent a year ago.
The company said increased prices and mix contributed positively across all business areas. However, these could not fully offset the negative impact from higher raw material costs, currency headwinds and lower volumes.
Major Appliances North America also faced higher cost inflation from tariffs in addition to lower sales to private label.
Operating income grew 4 percent in Major Appliances Europe, Middle East and Africa, and 163 percent in Latin America. But, these were offset by 52 percent decline in North America, 19 percent drop in Asia/Pacific, as well as a 22 percent decline in Home Care & SDA income.
Net sales amounted to 30.44 billion kronor, 5 percent higher than 29.04 billion kronor a year ago. Sales growth adjusted for currency translation effects was 0.7 percent, mainly driven by price increases in several markets. Organic growth was 0.8 percent.
Looking ahead, the company now estimates the negative year-over-year impact from raw materials, tariffs and currency to be approximately 3 billion kronor in 2018, compared to the previous estimate of approximately 2.7 billion kronor.
For 2019, the company expects that combined headwinds could continue with a similar year-over-year impact as in 2018, based on current market conditions.
In Sweden, Electrolux shares were trading at 165.15 kronor, down 8.30 percent.
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