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Electrolux wires up cost cutting measures after customer demand hit

·2-min read
Electrolux manufactures big ticket household electricals  (Electrolux)
Electrolux manufactures big ticket household electricals (Electrolux)

White goods manufacturer Electrolux is to initiate a round of cost cutting on the back of inflationary pressures, weaker- than-expected market demand and disappointing third quarter results.

The household name that produces everyday electrical products including fridges, washing machines, vacuum cleaners and tumble dryers has seemingly been hit by customer pull back on purchasing big ticket items in the face of a potential global economic recession.

Electrolux said that the cost cuts are expected to “result in a material positive earnings contribution” next year, but that market demand for core appliances in Europe and across the US so far in the third quarter is estimated to have decreased at a “significantly accelerated pace” compared with the second quarter as consumers feel the squeeze on their finances.

The company said that the purchasing slowdown was a result of the impact of high inflation on consumer durables purchases and low consumer confidence.

It also indicated that supply chain imbalances resulting in significant production inefficiencies and increased costs had impacted its operations along with an expensive one-time cost from its withdrawal from the Russian market in reaction to the country’s invasion of Ukraine.

Electrolux said that cost reductions would focus on reducing variable costs, with “special attention to eliminating cost inefficiencies in our supply chain and production” with reductions primarily take place in Europe and North America and that a “turnaround” plan would be implemented by Ricardo Cons, currently head of business for Latin America who has now been promoted to the same post in North America at Electrolux.

He succeeds Nolan Pike, who takes up a new position at the group and will continue to report to Anna Ohlsson-Leijon chief commercial officer at Electrolux. A new leader of Electrolux Latin America is anticipated to be appointed shortly.

In July, Electrolux reported a “relatively flat” second quarter sales growth of 0.3% across the group.