Shares of Electrolux fell by nearly a quarter today after the appliance maker reported an unexpected first-quarter loss, hours after announcing a $1 billion rights issue and a North American tie-up with Chinese rival Midea.
Electrolux, which has struggled in the face of weak demand and cut-price competition, has been restructuring and focusing on more premium categories to try and lift profitability.
Its tie-up with Midea and separate measures announced late last night would result in 3,000 job cuts, it said.
The Swedish company blamed a slump in US demand, due in part to higher US tariff costs, as it swung to an operating loss of 266 million Swedish crowns ($29m) in January-March from a year-earlier 452 million profit.
Its shares, already down 5% this year, tumbled 24% in early trade.
Analysts had forecast a 280 million crown profit, according to a poll provided by Electrolux before its results release last night.
The appliance maker, whose brands also include Frigidaire and AEG, said sales in North America, which accounts for a third of group sales but where the group has struggled for years, shrank organically by 12%, leading to a 0.5% decline in its global sales in the first quarter.
The Whirlpool competitor lowered its full-year North America market outlook to "negative" from "neutral to negative" due to the weak US demand.
After the market close yesterday, Electrolux announced plans to cooperate with Midea within refrigeration and laundry products manufacturing, and a 9 billion Swedish crown rights issue to fund the partnership and other restructuring measures.
CEO Yannick Fierling told analysts in a call the initiatives would change Electrolux's future by accelerating growth in North America, increasing efficiency across the group and strengthening its balance sheet.
Citi analysts said the size of the rights issue was more than half of Electrolux's market value, and could hit the company's shares in the short term.
SB1 Markets analyst Johan Eliason also said he expected the rights issue to weigh in the short term, as well as a worse-than-expected quarter in North America.
"But I do believe that, in the long run, this partnership will be a positive thing," Eliason said of the tie-up with Midea.
