(Updating with closure of Torsvik plant, Q2 60 mln skr charge)
STOCKHOLM (AFX) - Electrolux AB posted a better-than-expected first-quarter profit after financials of 1.221 bln skr, buoyed by strong sales growth, positive currency effects, and after one-off costs amounted to just 145 mln skr, versus analysts' expectations of 227 mln.
Analysts had forecast a profit of 1.140 bln skr, according to a survey by SME Direkt.
The 145 mln skr costs stem mainly from industrial action at Electrolux's Nuremberg appliances plant in Germany after the company announced it was shifting production to Poland.
'The big negative effect in this quarter was of course the long strike at the Nuremberg plant appliances factory in Germany. The strike lasted much longer than we had expected. Even though our organization worked hard to rearrange production, we did experience a downturn in our sales in several countries,' said Electrolux's chief executive, Hans Straoberg.
Sales increased by 14 pct to 33.891 bln skr, positively affected by currencies, as well as volume/price/mix changes. Consumer durable sales were particularly strong in North America rising 27 pct to 9.097 bln skr.
'Group sales in major appliances in North America showed significant growth in comparable currencies on the basis of higher sales volumes and price increases implemented in 2005,' said Electrolux.
The company reiterated its outlook for the European and North America indoor appliances markets to show 'some growth' in 2006 versus 2005, and for full-year operating profit at its indoor operations to be 'somewhat higher' than in 2005, excluding items affecting comparability.
Despite the strikes at Nuremberg the company said it will continue to move production to low-cost countries.
It announced it has now taken a decision to close its compact appliances factory at Torsvik, Sweden, and transfer production to existing facilities in Poland, incurring an expected second-quarter restructuring cost of 60 mln skr.
Operating profit increased by 76 mln skr or 6 pct to 1.384 bln skr, buoyed by positive currency effects of 98 mln skr.
Operating margins slipped to 4.1 pct from 4.4 pct. The company said it had higher costs when it ran both its US Greenville plant in Michigan, US, and its new plant in Juarez, Mexico, in tandem during the quarter. The Greenville plant is due for closure with all production going to Mexico.
Higher raw material prices also dented margins and the company cautioned that prices for steel and oil would 'remain a question mark' in 2006. stockholm@afxnews.com sjr/har COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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