Electrolux core profit slightly ahead of forecast, cuts market outlooks

STOCKHOLM (Reuters) - Swedish home appliance maker Electrolux's (ELUXb.ST) quarterly operating earnings came in slightly ahead of market forecasts on Wednesday but it downgraded its outlook for demand in North America, its biggest market.

The company, whose brands include Electrolux, Frigidaire, AEG and Anova, said it was determined to mitigate higher expenses from raw materials and currency headwinds with price increases and cost reductions.

Its shares rose 5 percent in early trade as the better-than-expected second-quarter results encouraged investors after a weak first quarter had sent its shares down 18 percent in the past three months.

However, the company faces challenge in coming quarters as it cut demand expectations for three of its five markets.

It said it expected demand in North America to grow by zero to 2 percent in 2018, lagging its previous forecast of 2-3 percent growth, while it also lowered its outlook for the smaller Latin American and Australian markets.

Over the past few years, Electrolux has focused on raising profitability - a key ambition for CEO Jonas Samuelson - through greater efficiency and cutting lower-margin products, reaching its operating margin target of at least 6 percent last year for the first time since 2010.

But a U.S.-China trade war has led to some unexpectedly strong price rises for many raw materials. The first set of U.S. tariffs on steel imports hit Electrolux's first-quarter results and prompted a hike in its 2018 cost forecast.

Since then tariffs imposed by both the United States and China have grown to cover goods worth $34 billion and Electrolux estimated that the negative impact from raw material price changes would be about 1.8 billion Swedish crowns (£155 million) in 2018, at the top end of its previous guidance.

Electrolux's adjusted operating earnings came in at 1.65 billion Swedish crowns for the second quarter, slightly ahead of a 1.61 billion crown forecast in a Reuters poll of analysts but down from a profit of 1.92 billion crowns a year ago.

(Reporting by Esha Vaish in Stockholm, editing by Niklas Pollard and Susan Fenton)