Electrolux warned it will incur deeper than expected cuts to profitability in 2019 and 2020 from merging some factories in the US, a move that has left the world’s second-largest maker of consumer appliances unable to fulfil some orders on time.
Shares in the Swedish group sank on Monday morning after it issued a statement late on Sunday cautioning that problems with the consolidation of its US fridge and freezer production in a new facility in Anderson, South Carolina — as well other smaller issues — would cost $70m in the fourth quarter, compared with an earlier forecast of $25m.
Electrolux said that the move from current refrigerator operations in Minnesota and an existing factory in Anderson to the new facility had resulted in “temporary capacity constraints” that had affected some deliveries. It also warned that destocking at one large, unnamed US customer and accounting adjustments would hurt operating profit.
The group’s shares fell by 11 per cent to SKr222.30 on Monday morning as analysts scrambled to downgrade their profit forecasts.
Lucie Carrier at Morgan Stanley said the news implied an 11 per cent cut to 2019 consensus operating profit targets and 8 per cent for 2020. Citi analysts suggested it could mean fourth-quarter operating profit this year was a quarter lower than expected.
Electrolux also cut its estimate of cost savings from the restructuring programme in 2020 by three quarters, to about SKr200m ($21m) against previous guidance of SKr800m.
Electrolux added that the full savings should be SKr3.5bn from 2024.
Shares in Electrolux have been on a rollercoaster ride in recent years as investors have balanced worries about tariffs and raw material costs with attempts to boost profitability and spin-off its professional business.
The shares had risen by nearly 50 per cent since October 2018 but are now a quarter below their peak from two years ago.
Jonas Samuelson, Electrolux’s chief executive, called the profit warning a “temporary setback” and sought to convince investors that the company had the situation under control. It already announced a leadership change at the top of its North American business on Thursday.
The Swedish group said that the capacity constraints in Anderson would ease “gradually” in the first half of next year but that it had decided to run both facilities in South Carolina in the second half of 2020 to ensure it could meet market demand. That meant that most of the cost savings from the new factory would be realised in 2021, rather than 2020 as first thought.
US President Donald Trump’s trade policy and threats of tariffs on steel and aluminium have caused big challenges for manufacturers such as Electrolux. The Swedish group first put on hold a $250m investment in a cooking factory in Tennessee in 2018, only to revive it almost a year later while closing a plant in Memphis.
