By Giulio Piovaccari and Esha Vaish
PERDONE, Italy (Reuters) – Electrolux expects to accelerate annual sales growth at its professional products unit above 7 percent after carving it out next year, its executives told Reuters, citing opportunities to pick up U.S. targets and add fast-food chains as customers.
The company in February announced plans to spin off its most profitable business to investors, allowing it to access capital to chase high-value acquisitions in its sector, which so far it had not been able to do given the higher multiples in its niche sector versus the parent consumer unit.
CEO Jonas Samuelson told Reuters professional products had recorded a compound annual growth rate of 7 percent since 2013 thanks in part to organic growth, which he expected to continue to outpace the wider market.
“That’s an indication of the potential that the professional business already has and I think there are significant opportunities to accelerate growth, mainly on the inorganic side,” he said at the company’s capital markets day on Wednesday.
Alberto Zanata, head of professional products, said the unit was keen to secure restaurant chain customers, moving beyond its current stronghold with hotels and institutions, and was now rolling out beverage stations at Subway.
“We are heavily weighed on Europe, and the international chains are most of all American, and to serve them you have to grow in North America, and that’s why one of the priority for acquisitions is to get companies in North America,” he said.
Sources have told Reuters that professional products is expected to achieve a mid to high teens EBIT valuation, in line with U.S. peers Welbilt and MiddleBy and Germany’s Rational but stock markets have been roiled in recent months.
Electrolux and its rival Whirlpool have lost value in the past year, are facing higher then expected costs and lower demand due to Washington’s trade war with Beijing.
Samuelson repeated an estimate on Wednesday that the maker of Electrolux, Frigidaire, AEG and Anova brands would see negative impact from raw materials, tariffs and currency at 2 billion to 2.4 billion Swedish crowns in 2019.
He said the professional products’ carve out would result in a margin dilution of 0.6 percentage percent but that he expected U.S. factory upgrades to boost efficiency and allow the consumer unit to meet the group target of at least 6 percent margins.
“We’re making some very significant product and manufacturing investments both in Latin and North America to bring them up to the same level as we have in Europe,” he said.
(Reporting by Giulio Piovaccari in Perdone, Italy and Esha Vaish in Stockholm; editing by David Evans)