With record setting quarter, company CEO sees rising raw materials costs as a sign of economic recovery.
In the first quarter, the Swedish appliance maker, Electrolux, has returned to being a profit making operation, and the company said it was helped by exchange rates and harnessing prices on raw materials.
"The positive development from last year continues as Electrolux shows its best first-quarter result in appliances ever," said Hans Stråberg, President and CEO of the Stockholm based multinational firm. "The result for 2009 was one of the best ever for Electrolux, and the first quarter of 2010 continues in the same way, with a new record and all operations showing strong improvements," he continued.
Rebounding from last year's first quarter loss of SEK 346 million ($47 million), Electrolux posted a net profit for the same period this year of SEK 911 million ($124 million). Nonetheless, sales for the quarter fell by 3% from SEK 25.8 billion ($3.5 billion) in 2009 to SEK 25.1 billion ($3.4 billion) this year. At the end of the day, market reactions saw only a slight increase in the price of shares in the famous maker of vacuums and refrigerators.
Looming in the future, increases for Electrolux of up to SEK 1 billion in raw materials prices have stock traders worried, but not Stråberg. "Prices of certain raw materials continue to rise. When the global economy picks up the pace, we expect even higher raw material prices," he predicts, but adds that fixed contracts from last year along with the markets willingness to pay for necessary price hikes would leave Electrolux relatively unscathed.
"Data show no historical correlation between increasing raw-material costs and poorer earnings for Electrolux, which is a result of the fact that we have been able to compensate for increased raw material costs with higher prices and cost savings. In addition, we know that increasing raw-material prices often coincide with an economic recovery, and thus also an increased demand for appliances," noted Stråberg.
Electrolux is realizing a strong growth now in the North American market and, for the first time after ten quarters of decreases, is also faring well in Europe.
"In North America, we've improved our operating income through a better product mix," he explained. In Europe, he said that Electrolux is gaining market shares in the built-in segment with notable successes in Germany and through their affiliation with IKEA. He hoped that 2010 could see Electrolux nearing their goal of an operating margin of 6%.
"The result for 2009 was one of the best ever for Electrolux, and the first quarter of 2010 continues in the same way," says Hans Stråberg, President and CEO of Electrolux.