Electrolux axeing jobs in fresh cost cuts after profit miss

Reuters

* Q3 core profit of 1.08 bln SEK misses forecast

* Cost cuts to generate 1.8 bln SEK in annual savings

* Raises full-year estimate for U.S. demand to 7-9 pct

* Says European market remains challenging

By Mia Shanley and Johannes Hellstrom

STOCKHOLM, Oct 25 (Reuters) - Swedish home appliancescompany Electrolux announced 2,000 job losses andlaunched a new round of cost cuts to counter tough marketconditions in Europe after posting a bigger than expected fallin third-quarter earnings on Friday.

Appliance manufacturers, including market leader Whirlpool, have been busy reducing costs and shifting productionto emerging markets to protect their margins as they wait forrecoveries to take hold on both sides of the Atlantic.

Electrolux, second only to Whirlpool in size, said it isclosing a factory in Australia to concentrate on production inThailand and will also review production in Italy.

It added that a new overhead reduction programme will resultin 2,000 job cuts, about 3.3 percent of its total workforce atthe end of last year, bringing about 1.8 billion Swedish crowns($282.9 million) in annual savings by 2016.

The new measures come even though Chief Executive KeithMcLoughlin expects the European outlook to start improving soon.

"But we can't run this company on hope, so we are takingaction now," he said. "We're going to reduce our costs, and whenthe recovery does happen we'll come out stronger."

Some analysts were not convinced.

"Given that historical cost-saving programmes have this farnot led to structurally higher margins, we have found it hardgetting enthusiastic about the new programme," DNB analysts saidin a note, adding that they expect the consensus market forecastfor 2014 core earnings to be lowered by 5-7 percent.

EUROPE DRAGS

Electrolux, which makes machines ranging from espressocoffee makers to cookers and owns brands including Frigidaire,AEG and Zanussi, has greater relative exposure to Europe thanits arch rival Whirlpool.

The U.S. group, consequently, has not suffered as badly andthis week reported that the fledgeling U.S. recovery helped itto more than double third-quarter profit.

"Our European operations continued to be affected bychallenging market conditions, especially in Southern Europe,having a negative impact on volumes and earnings," McLoughlinsaid on Friday.

Shares in Electrolux fell 7.4 percent by 1018 GMT at 160crowns, underperforming a 1 percent decline in the Stockholm,blue-chip index.

The company also came up against currency headwinds,particularly in Latin America, where the Brazilian real weakenedconsiderably against the U.S. dollar.

Its earnings before interest and tax (EBIT) fell to 1.08billion crowns in the third quarter, down from 1.42 billion inthe same period last year and below an average forecast of 1.3billion crowns in a Reuters poll.

Electrolux raised its full-year outlook for the UnitedStates, saying it now expects demand to rise by 7-9 percent,against its previous estimate of 5-7 percent. In Europe,meanwhile, it expects a fall of 1-2 percent.

Europe and North America each account for about a third ofElectrolux's revenues, followed by Latin America at 20 percentand Asia Pacific at 8 percent.

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