Electrolux records an unexpected loss in the first quarter due to a drop in sales in the United States.
The stock price fell by 24%.
The company plans a $1 billion capital increase and a partnership with Midea in North America.
Analysts warn that the rights issue could weigh on the stock price in the short term but see long-term benefits.
(Add market reaction in paragraph 2, analyst comment in paragraphs 10-12)
by Greta Rosen Fondahn
Electrolux shares ELUXb.ST fell by nearly a quarter on Friday after the household appliance manufacturer announced an unexpected loss in the first quarter, just hours after announcing a $1 billion rights issue and a partnership in North America with its Chinese rival Midea 000333.SZ.
Electrolux, facing weak demand and price competition, undertook a restructuring and refocused on higher-end categories to improve profitability. Its partnership with Midea and separate measures announced Thursday night would lead to the elimination of 3,000 jobs, it said.
The Swedish company attributed this situation to a collapse in American demand, partly due to rising costs related to U.S. tariffs, as it recorded an operating loss of 266 million Swedish crowns ($29 million) between January and March, compared to a profit of 452 million in the previous year.
Its stock, which had already lost 5% this year, dropped by 24% at the start of trading.
Analysts had expected a profit of 280 million crowns, according to a survey conducted by Electrolux before the release of its results Thursday night.
The household appliance manufacturer, whose brands also include Frigidaire and AEG, stated that its sales in North America, accounting for a third of the group’s revenue but where it has been struggling for years, dropped by 12% organically, leading to a 0.5% decline in global revenue in the first quarter.
Whirlpool’s competitor WHR.N revised its outlook for the North American market from “neutral to negative” to “negative” due to weak U.S. demand.
RESTRUCTURING MEASURES
On Thursday, after the market closed, Electrolux announced plans to cooperate with Midea in the manufacturing of refrigeration and laundry products, as well as a rights issue of 9 billion Swedish crowns to finance this partnership and other restructuring measures.
CEO Yannick Fierling told analysts on a conference call on Thursday that these initiatives would change the future of Electrolux by accelerating growth in North America, improving the group’s efficiency, and strengthening its balance sheet.
Citi analysts indicated that the rights issue amount represented more than half of Electrolux’s market value and could weigh on the stock price in the short term.
Johan Eliason, analyst at SB1 Markets, also stated that he expects the rights issue to weigh in the short term, along with a weaker-than-expected quarter in North America.
“But I sincerely believe that in the long term, this partnership will be a good thing,” Mr. Eliason said regarding the collaboration with Midea.
(1 $ = 9.2584 Swedish crowns)
