STOCKHOLM, April 24 (Reuters) - Swedish home appliances maker Electrolux reported on Friday a surprise operating loss for the first quarter, and said sales declined organically by 0.5% in the period.
Electrolux's shares fall 24% on US slump, $1 billion rights issue
Electrolux Faces Major Setbacks Amid Weak U.S. Demand and Strategic Overhaul
By Greta Rosen Fondahn
Electrolux Shares Plunge Following Disappointing Results
STOCKHOLM, April 24 (Reuters) - Electrolux shares plunged 24% on Friday as weak U.S. demand hit its first-quarter results, hours after it announced a $1 billion rights issue and a North American tie-up with Chinese rival Midea.
Restructuring Efforts and Market Challenges
The appliance maker, which has struggled in the face of weak demand and cut-price competition, has been restructuring and focusing on more premium categories to try and lift profitability. Its tie-up with Midea and separate measures announced late on Thursday would result in 3,000 job cuts, it said.
Impact of U.S. Market Slump
The Swedish company blamed a slump in U.S. demand as well as higher U.S. tariff costs as it swung to an operating loss of 266 million Swedish crowns ($29 million) in January-March from a year-earlier 452 million profit. Analysts had forecast a 280 million crown profit.
Its shares, already down 5% this year, tumbled 24% to their lowest in 17 years.
Electrolux, whose brands also include Frigidaire and AEG, said sales in North America, which accounts for a third of group sales but where the group has struggled for years, shrank organically by 12%, leading to a 0.5% decline in its global sales in the first quarter.
The Whirlpool competitor lowered its full-year North America market outlook to "negative" from "neutral to negative" due to weak U.S. demand.
Restructuring Measures and Strategic Partnership
RESTRUCTURING MEASURES
After the market close on Thursday, Electrolux announced plans to cooperate with Midea within refrigeration and laundry products manufacturing, and a 9 billion Swedish crown rights issue to fund the partnership and other restructuring measures.
CEO's Vision for the Future
CEO Yannick Fierling told analysts on a call on Thursday the initiatives would change Electrolux's future by accelerating growth in North America, increasing efficiency across the group and strengthening its balance sheet.
He told Reuters on Friday the company was looking at how it could increase the potential of the tie-up with Midea further, but called it "purely a partnership".
Market Reactions and Analyst Commentary
Citi analysts said the size of the rights issue was more than half of Electrolux's market value, and could hit the company's shares in the short term.
SB1 Markets analyst Johan Eliason also said the rights issue would weigh on shares in the short term, as well as a worse-than-expected quarter in North America.
"But I do believe that, in the long run, this partnership will be a positive thing," Eliason said of the tie-up with Midea.
Financial Details and Reporting
($1 = 9.2584 Swedish crowns)
(Reporting by Greta Rosen Fondahn, editing by Anna Ringstrom and Susan Fenton)
