By Marie Mannes
COPENHAGEN -Sweden's Electrolux on Monday announced plans to cut costs and warned its profit would drop as high inflation and low consumer confidence softened demand for its home appliances, sending its shares down as much as 7%.
Demand for core appliances in Europe and the United States has decreased at a significantly accelerated pace in the third quarter compared with the second, with high retailer inventories and supply chain imbalances increasing costs and inefficiencies, Electrolux said.
"Third quarter earnings for the group are expected to decline significantly compared to the second quarter 2022 also excluding the one-time cost to exit the Russia market," Electrolux said in a statement.
In the April-June quarter, Electrolux booked a weaker-than-expected operating profit of 560 million Swedish crowns ($53.4 million), hit by a loss in its North America business and supply chain constraints.
Europe's biggest home appliances maker said cost reductions would primarily take place in Europe and North America, resulting in a material positive earnings contribution in 2023.
"The program, which starts immediately, will focus on reducing variable costs, with special attention to eliminating cost inefficiencies in our supply chain and production," the company said in a statement.
Electrolux said it had appointed its head of Latin America, Ricardo Cons, to conduct the turnaround program, making him head of its North America business.
It added that it would comment further on cost reduction targets for 2023, and potential material restructuring costs, in its third quarter report due on Oct. 28.
The company also said the board did not intend to initiate further share buybacks before next year's annual general meeting.
Its shares had pared losses to trade 1.4% lower at 0824 GMT.
Earlier in September, Electrolux said it would sell its Russian business to local management after pausing operations in the country following the attack on Ukraine.
($1 = 10.4865 Swedish crowns)
