Electrolux blames difficult Australian decision on global downturn

The president and CEO of Electrolux’s global operations has described the closure of the company’s refrigeration manufacturing facility in Orange, New South Wales, as a “difficult” measure that was necessary to ensure ongoing “cost competitiveness”.

The announcement about the factory closure on Friday came off the back of the company’s third quarter results for 2013, in which Electrolux announced a marginal increase in global sales but a 24.4 per cent decline in earnings before interest and tax.

According to a statement from Electrolux president and CEO Keith McLoughlin, “Electrolux North America continues to deliver strong sales and earnings growth, while Europe continues to suffer from weak demand”.

Within the context of the “current market situation in Europe” McLoughlin said the company had “initiated a new overhead reduction program to adapt the Group’s cost structure”.

“We are also announcing the next phase of the Group’s manufacturing footprint program to improve our cost competitiveness,” he said. “The program was initiated during 2011 and planned to be fully executed 2014 -2016.”

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The decision to close the facility in Orange may be big news locally, but it is just a small part of the global picture for Electrolux. While Orange was singled out as part of Electrolux’s “manufacturing footprint program” other markets are not necessarily immune to the downturn the company has seen in Europe — Electrolux has confirmed that it will also investigate its major appliances manufacturing facilities in Italy.

Over the past five years, Electrolux’s global sales have stayed relatively stable, hovering slightly above the SEK (Swedish Krona) 100 billion mark. However, the brand’s most recent sales figures — SEK 110 billion for the 2012 financial year (equivalent to just over AUD $18 billion) — represent a significant decline from sales of SEK 133 billion in 2002. Over the same period, earnings before interest, tax, depreciation and amortisation fell from SEK 12 million down to SEK 8.5 million.

Unfortunately, the cost saving measures in Orange come at a time when the local market is performing quite well.

“Asia/Pacific reported an organic sales growth of over 20 per cent in the third quarter,” McLoughlin said. “China continued to show strong growth and Electrolux sales and market shares increased in Australia.”

But despite this strength, Electrolux’s Australian operations are still part of a bigger story for the company worldwide, and the long-term savings made by moving production to Thailand were no doubt hard to ignore.

Speaking about the move McLoughlin said “the difficult measures announced… [by Electrolux in Australia] combined with our strategic focus on growth in emerging markets and increased consumer relevant product innovations make us convinced that Electrolux is well positioned to meet and exceed our long-term key financial targets”.

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