Electrolux recorded an unexpected loss in the first quarter due to a drop in sales in the United States.
The stock price dropped by 24%.
The company plans to raise $1 billion in capital and enter into a partnership with Midea in North America.
Analysts warn that the rights issue could weigh on the stock price in the short term, but they see long-term benefits.
(Market reaction in paragraph 2, analyst comments in paragraphs 10-12)
by Greta Rosen Fondahn
Electrolux’s shares ELUXb.ST fell by nearly a quarter on Friday after the household appliances manufacturer announced an unexpected loss in the first quarter, just hours after announcing a $1 billion rights issue and a partnership in North America with its Chinese rival Midea 000333.SZ.
Electrolux, which has faced challenges due to weak demand and price competition, has undertaken restructuring and focused on higher-end categories to improve profitability. Its partnership with Midea and separate measures announced Thursday evening will result in the elimination of 3,000 jobs, the company said.
The Swedish company attributed this situation to a collapse in American demand, partly due to rising costs associated with U.S. tariffs, as it reported an operating loss of 266 million Swedish crowns ($29 million) between January and March, compared with a profit of 452 million the previous year.
Its stock, which had already lost 5% this year, dropped by 24% at the start of trading.
Analysts had expected a profit of 280 million crowns, according to a survey conducted by Electrolux before the release of its results Thursday evening.
The household appliances manufacturer, whose brands also include Frigidaire and AEG, stated that its sales in North America, which account for a third of the group’s revenue but where it has faced challenges for years, declined by 12% organically, leading to a 0.5% decrease in global revenue in the first quarter.
Rival Whirlpool WHR.N has revised down its full-year outlook for the North American market from “neutral to negative” to “negative,” citing weak American demand.
RESTRUCTURING MEASURES
On Thursday, after the market closed, Electrolux announced plans to collaborate with Midea in the manufacturing of refrigeration and laundry products, as well as a rights issue of 9 billion Swedish crowns to finance this partnership and other restructuring measures.
CEO Yannick Fierling told analysts in a teleconference on Thursday that these initiatives would change Electrolux’s future by accelerating growth in North America, improving group-wide efficiency, and strengthening its balance sheet.
Citi analysts noted that the rights issue amount represented over half of Electrolux’s market value and could weigh on the stock price in the short term.
Johan Eliason, analyst at SB1 Markets, also stated that he expected the rights issue to weigh in the short term, as well as a weaker-than-expected quarter in North America.
“But I sincerely believe that in the long term, this partnership will be a good thing,” Mr. Eliason said regarding the collaboration with Midea.
(1 $ = 9.2584 Swedish crowns)
