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 Electrolux, a smaller rival to America's Whirlpool <WHR.N>,
delighted investors who have watched it suffer from weak economies
and currencies in Europe and Brazil that cost cuts and improvement
in the North American market could not offset.
"You will see 8-10 percent earnings upgrades on this," Daniel
Cunliffe, analyst at Nomura, said on Friday.
Electrolux said markets such as Germany, France and Italy had picked
up and forecast demand would increase 1-3 percent this year in
Europe — which accounts for around one third of sales — rather than
the 0-2 percent it previously expected.
Helped by cost cuts, operating income in Europe rose to 142 million
Swedish crowns ($21.59 million) in the quarter from 11 million in
the year ago period.
"Importantly, the market in Europe has, in our view after several
quarters of negative growth bottomed out ... and is now gradually
recovering," CEO Keith McLoughlin said.
Electrolux, which sells under brands such as Frigidaire, AEG and
Zanussi as well as its own name, also stuck by its forecast of
growth in the U.S. market of 4 percent, despite a tough start to the
year when freezing weather hit sales volumes.
By comparison, Whirlpool — which reported higher profits and sales
on Friday — forecast United States demand would rise 5-7 percent
this year and industry shipments in Europe grow between 0 and 2
percent this year.
By 1125 GMT shares in Electrolux were up 9.45 percent, their biggest
one-day rise in some 5 years. So far this year the company's stock
had been down 8.3 percent against a rise of 2.4 percent for the
wider Stockholm index <.OMXS30> and a flat Stoxx 600 European
Industrial Goods and Services index <.SXNP>.
CHALLENGES REMAIN
However, the company warned that though European volumes would
improve, there was still pressure on prices, while its second
biggest market Brazil remained weak.
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"In the near term .. the next 4-6 quarters, we are not anticipating
a positive inflationary environment in Europe. In fact we are
anticipating it will continue to be deflationary," McLoughlin said.
An economic slowdown in Brazil prompted a fall in demand there in
the first quarter and negative currency effects meant that operating
income in Latin America declined slightly despite the region posting
strong organic sales growth due to higher sales of premium products
and price increases.
McLoughlin said he expected demand to continue to fall in Brazil in
the second quarter, but hoped for a recovery in the second half of
the year.
"The visibility of that demand picture is not great," he said.
"Could it (recovery) be Q3, Q4, Q1 next year? It could be. Our
current view is first half down, second half starting to recover."
Whirlpool said on Friday it expects industry shipments in Latin
America to be flat in 2014.
Overall, Electrolux said adjusted operating earnings rose to 749
million Swedish crowns ($114 million) from a year-ago 720 million to
come in above a mean forecast of 541 million in a Reuters poll of
analysts.
($1 = 6.5777 Swedish crowns)
(Editing by Sophie Walker)
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