STOCKHOLM -- Electrolux shares plunged 24 per cent on Friday as weak U.S. demand hit its first-quarter results, hours after it announced a US$1 billion rights issue and a North American tie-up with Chinese rival Midea.
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.
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 WHR.N competitor lowered its full-year North America market outlook to “negative” from “neutral to negative” due to weak U.S. demand.
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 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.”
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.
(Reporting by Greta Rosen Fondahn; Editing by Anna Ringstrom and Susan Fenton)
