World's 2nd Largest Appliance Maker Electrolux
"Q3 Operating Profit Plummeting"
Supply Chain Disruptions and Inflation Impact
Domestic Appliance Companies Also Facing Inevitable Performance Hit
Electrolux
[Asia Economy Reporter Lee Ji-eun] A warning has been issued that global home appliance sales will sharply decline in the third quarter due to soaring inflation and concerns about an economic recession. As the global home appliance market shows weakness, domestic home appliance companies such as Samsung Electronics and LG Electronics are also expected to be inevitably affected.
On the 12th (local time), Sweden's Electrolux stated in its third-quarter market demand report, "Product purchase demand from consumers in North America and Europe is lower than expected, so operating profit in the third quarter of this year is expected to decrease significantly." It predicted that the third-quarter operating performance in the North American region will surpass the previous quarter's deficit. Electrolux is the world's second-largest home appliance company after Whirlpool in the United States.
The sharp decline in sales revenue is analyzed to be due to increased production costs caused by supply chain disruptions and weakened consumer sentiment due to inflation. The resumption of outdoor activities, which had been halted due to COVID-19, also affected the reduced demand for home appliance replacement.
Electrolux decided to implement a cost reduction program, anticipating that the decline in demand for home appliances in the North American and European markets will continue. The program focuses on reducing increased production costs caused by supply chain bottlenecks. Research and development (R&D) expenses and marketing costs will also undergo significant cuts.
Samsung Electronics and LG Electronics are also expected to see a roughly 30% decrease in operating profit as demand in major markets such as North America and Europe is anticipated to decline. Nam Jong-dae, a researcher at Ebest Investment & Securities, projected Samsung Electronics' home appliance division's third-quarter sales at 16.5 trillion won and operating profit at 500 billion won. This means sales are expected to increase by 17% year-on-year, but operating profit is expected to decrease by 34.21%. He analyzed that with the continuous decline in this year's TV shipment targets, rising production costs due to inflation, and weakened consumer purchasing power, inventory accumulation is inevitable.
Kwon Sung-ryul, a researcher at DB Financial Investment, forecasted that LG Electronics' H&A (Home Appliance & Air Solution) division's operating profit in the third quarter will be 355 billion won, down 29.76% compared to the third quarter of last year. For TVs, which were in deficit in the second quarter, operating profit is expected to be 20 billion won in the third quarter, a 90.4% decrease year-on-year.
The demand slump in the home appliance market does not appear to be resolved in the near term. Jonas Samuelson, CEO of Electrolux, stated, "Demand in the European and U.S. markets is expected to remain weak in 2023," adding, "We have launched a program to reduce costs across the group, with structural cost reductions mainly taking place in North America and Europe."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
