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Electrolux Earnings Top Forecasts, Shares Jump

Electrolux, the world's second-biggest home appliances maker, reported quarterly earnings above market expectations on Wednesday and forecast 2008 core income in line with 2007, sending its shares up.

Operating profit at the company, whose brands include AEG, Zanussi and Frigidaire as well as its own name, rose slightly to 2.01 billion Swedish crowns ($311.2 million) excluding non-recurring items, versus an average forecast of 1.74 billion in a Reuters poll.

Electrolux said it saw strong income from appliances in North America, Latin America and Asia/Pacific, Professional Products and floor-care operations. Cost savings also weighed in.

But lower results for appliances in Europe due to costs related to product launches had an adverse effect, it said.

Shares in the firm, which has begun to turn its eye back to growth after years of cutting costs and shifting production out of western Europe and North America, closed 1 percent higher.

"The result looks fine, but Europe looks really bad. U.S figures were better than expected, but the really good news is the outlook, that they are guiding for flat result this year," said an analyst who declined to be identified.

The Swedish firm said significant uncertainty in the overall global economy made it difficult to predict developments in 2008.

"Provided that market demand for appliances in Europe shows a slow growth in 2008 and that market demand for appliances in North America shows a slightly negative development, our outlook for 2008 is that operating income is expected to be in line with 2007, excluding items affecting comparability," Electrolux said.

The firm said marketing costs for its planned launch in 2008 of Electrolux as a major appliance brand in North America would weigh on full-year results.

"Furthermore, the European appliance operations will be negatively impacted by higher-than-anticipated costs for the product launches and the planned cost reduction program," Electrolux said.

Firm's Largest Division Hit by Lower Volumes

Quarterly operating income for consumer durables in Europe -- the firm's largest division -- dipped to 784 million crowns from 1.23 billion, below the 967 million consensus, hit by lower volumes, lower sales prices and launch costs. Sales however rose slightly to 12.79 billion against an expected 12.93 billion.

The firm said demand in Eastern Europe rose 10 percent in the quarter but demand in Western Europe declined 5 percent.

In North America, consumer durables income rose to 646 million crowns from 533 million, above a consensus 500 million.

The firm said price hikes, a better product mix, higher sales volumes and lower costs contributed. Sales at the unit dipped to 7.47 billion crowns from 8.57 billion, against an expected 7.77 billion and Electrolux said the unit's market share increased.

Group sales at the maker of vacuum cleaners, washing machines, refrigerators and freezers fell slightly to 27.64 billion crowns versus an expected 27.83 billion.

Electrolux said group sales were hit by changes in exchange rates, while changes in volume/price/mix had a positive impact.

The firm, surpassed by Whirlpool in 2006 as the world's biggest white goods maker, proposed a dividend of 4.25 crowns per share for 2007 compared with 4.00 crowns for 2006 and the average forecast of 4.17 crowns.

"The profit is 10 percent better than expected, but there are problems in the U.S and there are problems in Europe, and the outlook is cautious," said James Moore, analyst at Goldman Sachs, adding that shares in Electrolux, which have been battered lately, rose due to market relief the numbers were not "totally off target."

"However, their outlook for U.S. and Europe is a bit more optimistic than Whirpool's," Moore said.

Whirlpool, Electrolux's top rival, reported unexpectedly strong results on Monday in the face of the worst decline in industry demand, sending its shares soaring. It forecast weak demand in the United States and Europe.

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