Electrolux predicts lower sales volumes, and will send shares plummeting

By Marie Mannes and Anna Ringstrom

STOCKHOLM (Reuters) – Sweden’s Electrolux on Thursday forecast lower sales volumes in 2023 due to weak consumer confidence and said it may not be able to fully pass on higher energy and labor costs, sending its shares sharply lower.

Europe’s largest appliance maker said it expected demand to slow this year across Europe, North America and Latin America.

“It is expected that a high inflation and interest rate environment will continue to have a negative impact on consumer sentiment,” said CEO Jonas Samuelson.

Samuelson saw a “challenge” in fully offsetting the impact of negative external factors on pricing in 2023, he said.

Electrolux warned on January 11 that continued high costs and weak demand would lead to an estimated fourth-quarter operating loss of about 2.0 billion Swedish crowns ($194.14 million).

Despite heavy investment in North American plants, the company has struggled to be profitable in the region as its ramps have been delayed by supply chain constraints and high raw material costs.

Although restrictions are starting to ease, Electrolux’s North American results have been hurt in recent quarters. In contrast, Whirlwind predicted this week a full-year profit above Wall Street estimates.

In September, Electrolux left the head of its North American area and was replaced by Ricardo Cons, the former head of Latin America, who was tasked with leading a new turnaround program. The company also began a company-wide cost reduction program.

Samuelson reiterated guidance that the changes would result in an earnings contribution of 4 billion-5 billion crowns year on year.

The maker of brands such as Frigidaire and Anova said it would not pay a dividend this year, a decision that surprised analysts.

Regarding 2023, the negative impact of external factors “is surprising because of the market and we expected a positive contribution from lower raw material costs”, said JPMorgan.

Electrolux said that while it predicted the benefits of lower raw material costs, these would be reduced because most of the raw materials it will use in 2023 were purchased at 2022 rates.

Shares in the group fell as much as 11% in early trade and were down about 10% at 1024 GMT, hitting the bottom of the pan-European Stoxx 600 index.

Electrolux reported an operating loss of 1.96 billion crowns against 882 million crowns a year earlier. He indicated in September that he expected demand to remain weak in Europe and North America in 2023.

($1 = 10.3021 Swedish kroner)

(Reporting by Marie Mannes and Anna Ringstrom; Additional reporting by Greta Rosen Fondahn; Editing by Raissa Kasolowsky and Jan Harvey)

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