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Electrolux braces for more disruptions from global supply chain squeeze

Stock MarketsJul 20, 2021 06:47AM ET
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© Reuters.

By Anna Ringstrom

STOCKHOLM (Reuters) -Europe's biggest home appliances maker, Electrolux, reported earnings above pre-pandemic levels on Tuesday but saw its shares slump 9% after it warned of worsening component supply problems in coming months.

The Swedish group posted an operating profit of 1.98 billion crowns ($228 million) for the second quarter, versus a loss of 62 million a year earlier. In the second quarter of 2019, it generated a profit of 1.62 billion crowns.

The rebound came on the back of a 39% sales increase as consumers kept spending more on home improvement during the pandemic.

However, irregular deliveries of electronic components - mainly microcontrollers - due to a global supply chain squeeze hampered production, and the April-June profit lagged analysts' expectations.

"The global supply challenges experienced in the first half are expected to have a higher impact in the second half of the year," Electrolux said in a statement.

"The market for electronic components is expected to be somewhat more constrained in the third quarter and, hence, we anticipate challenges to fully meet the market’s product mix requirements," it said, adding that the situation was likely to remain uncertain for an extended period of time.

The news sent Electrolux's shares down 9% by 1009 GMT, reducing a year-to-date rise to 13%.

CEO Jonas Samuelson told Reuters that sub-suppliers and suppliers were struggling to stock up on the various kinds of microcontrollers that are essential in most appliances.

"The supply chain has simply been drained," he said. "The ability to respond quickly to swings in the demand mix is limited because there are no buffers in the system. This situation has gradually worsened this year and we will probably see even more of those effects."

The rival to Whirlpool (NYSE:WHR) said that in the second quarter it had fully offset higher costs for raw materials, electronic components and logistics through price increases to customers, and that it expected to manage to do so for the full year as well.

It expects demand to start normalising in the second half - the new normal being higher than before the pandemic as people remain more hygiene conscious and spend more time at home - albeit with big regional variances driven by pandemic developments and government stimulus programmes.

Electrolux on Monday said it was raising its dividend policy and proposed to distribute 17 crowns per share this year through a share redemption. It also said it planned to buy back more shares.

($1 = 8.6991 Swedish crowns)

Electrolux braces for more disruptions from global supply chain squeeze
 

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