Electrolux warns of bigger hit from U.S. factory overhaul
Electrolux AB, the Swedish maker of Frigidaire appliances, said it will incur a bigger-than-expected financial hit from merging fridge-and-freezer factories in the U.S. amid delivery disruptions.
The shares slumped 12% Monday after Electrolux said the reorganization of its plants, combined with accounting adjustments and destocking at a key U.S. client, will shave $70 million off fourth-quarter operating income compared with a previous estimate of $25 million. Savings targeted for next year will also take until 2021 to materialize, with just a fraction coming in 2020.
Electrolux now sees a cost reduction of 200 million Swedish kronor ($21 million) next year, down from a previous estimate of 800 million. The savings are part of a bigger plan to revamp the factory setup, an effort that includes shutting a plant for cooking products in Memphis, moving U.S. refrigerator-production to a new site in Anderson, South Carolina, and outsourcing production of vacuum cleaners in Hungary. The company still expects the measures to yield about 3.5 billion kronor in annual savings by 2024.
DNB analyst Christer Magnergard said the postponement of savings will cut about 8% from next year’s operating profit, and that the problems Electrolux has encountered in the U.S. increase the risk of further disruptions to the efficiency plan. He said it’s “alarming” that the company was unaware of issues earlier and that there’s a “clear risk” that the weak performance will continue to impact earnings through the first half of 2020.
Read more: https://www.detroitnews.com/story/business/2019/12/16/electrolux-warns-bigger-hit-us-factory-overhaul/40834975/
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