Electrolux AB shares plunged after the Swedish home appliance maker reported an unexpected loss and said it plans to offload assets worth about $1 billion.
(Bloomberg) — Electrolux AB shares plunged after the Swedish home appliance maker reported an unexpected loss and said it plans to offload assets worth about $1 billion.
The stock fell 23% in Stockholm trading, the biggest decline since Bloomberg records began in 1989.
The operating loss amounted to 124 million kronor ($12.1 million) in the second quarter, the company said Thursday, compared with the 669.8 million-kronor profit expected by analysts. The market outlook for all of Electrolux’s regions around the world is now negative for this year, it said.
“Electrolux’s second-quarter release paints a dire picture for the rest of 2023 as demand worsened, rather than stabilized,” wrote Bloomberg Intelligence analyst Iwona Hovenko. “This may require more promotional price cuts in the second half, which may hurt profit, especially amid continued cost headwinds.”
Read More: Electrolux Sinks on Worse-Than-Expected 2Q, Outlook: Street Wrap
The planned asset sales will include production facilities in Egypt, which produce Zanussi-branded appliances, and factories making water heaters in Egypt and South Africa, as well as non-strategic real estate, the company said. It plans to focus on making home appliances in the mid- and premium segments, primarily under the Electrolux, AEG and Frigidaire brands.
Simplifying Operations
“This will allow us to further increase focus on our main strategy, while giving us resources to simplify our operations,” Chief Executive Officer Jonas Samuelson said in a phone interview, while declining to give a time frame for when asset sales could be completed.
“It will take a while, but we are moving forward with great speed,” he said.
Last month, Chinese appliance maker Midea Group Co. dropped its pursuit of Electrolux after finding the Swedish group unreceptive to a transaction, Bloomberg News reported, citing people familiar with the matter. While plans have been put on hold, Midea has been interested in the company for years and it can’t be ruled out that the Chinese firm revisits the deal in the future, the people said.
Credit Rating
“It seems the turnaround is taking longer than expected and we would not be too surprised to see some form of negative rating action in the near term,” Mads Lindegaard Rosendal, a credit analyst at Danske Bank A/S, said in a note to clients.
Electrolux has a BBB+ rating with a stable outlook at S&P Global Ratings.
There haven’t been any recent conversations with S&P, Samuelson said, adding that the company has “strong liquidity, a cost program progressing very well and upcoming divestments that will strengthen the balance sheet further.”
“Demand is weak, but it will not remain that way forever,” he added. “So we are not worried about the credit rating.”
(Updates with record share drop in second paragraph)
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