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UPDATE 1-Electrolux beats profit forecast, raw materials rises spur cost cuts
April 28, 2017 / 6:53 AM / 8 months ago

UPDATE 1-Electrolux beats profit forecast, raw materials rises spur cost cuts

* Q1 op profit SEK 1.54 bln vs forecast 1.33 bln

* Q1 op margin 5.3 pct vs forecast 4.6 pct

* Raises 2017 forecast for raw material costs

* Says to accelerate cost savings drive (Adds quote, detail, background)

STOCKHOLM, April 28 (Reuters) - Home appliance maker Electrolux reported a bigger than expected rise in first-quarter earnings on Friday and said it would step up cost-trimming efforts in the face of mounting raw materials prices.

After a robust 2016, the maker of white goods under brands such as Electrolux, Frigidaire, AEG and Zanussi is facing headwinds from rising metal prices even as demand for white goods remains at decent levels.

The rival of U.S. Whirlpool Corp stuck by its forecast for market demand to grow 2-3 percent in North America this year as well as its 1 percent growth outlook for Europe, its two biggest markets.

The company said operating earnings rose to 1.54 billion Swedish crowns ($174 million) from a year-ago 1.27 billion to come in ahead of a mean forecast of 1.33 billion in a poll of analysts.

Electrolux said steeper raw material prices were expected to result in 1.4 billion Swedish crowns ($158 million) higher costs in 2017, up from a previous forecast of 900 million, and flagged further cost trimming ahead.

It said it now saw cost savings of 2.2 billion crowns this year, up from a previous estimate of 1.6 billion, sufficient to offset the rise in input costs for metals such as steel.

“The work to increase net cost efficiency throughout the Group is making good progress and will, together with improved product mix, support our target of reaching a sustainable profitability with margins of at least 6 percent,” the company said in a statement.

The Swedish company has been focused on boosting profitability in recent quarters under CEO Jonas Samuelson. While like-for-like sales dipped slightly last year, it still came far closer to reaching its long-elusive margin target.

Electrolux said its operating margin rose to 5.3 percent in the first quarter from 4.5 percent in the year-ago period, easily beating a 4.6 percent mean forecast.

Electrolux, which also competes with Asian firms such as LG Electronics and Haier Group, has seen its shares rise about 15 percent this year, in line with the STOXX Europe personal and household goods index. ($1 = 8.8392 Swedish crowns) (Reporting by Niklas Pollard and Johannes Hellstrom; editing by Alexander Smith)

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