October 26, 2018 / 6:53 AM / 18 days ago

UPDATE 1-Electrolux trims demand outlook, sees higher costs as tariffs bite

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STOCKHOLM, Oct 26 (Reuters) - Swedish home appliance maker Electrolux trimmed market demand expectations on Friday and forecast higher costs due to rising raw material prices and tariffs this year while warning of a similar impact in 2019.

The company said its North American market had faced higher cost inflation due to tariffs and seen softer sales to private labels, prompting it to revise its market demand guidance to flat to up 1 percent from flat to growth of 2 percent.

The rival of U.S. Whirlpool forecast market growth of about 1 percent rise in Europe rather than a previously expected 1 to 2 percent due to sagging demand in Britain as the country prepared to leave the European Union.

The company had already cut its North America demand forecast in July after it hiked prices to offset rising tariff costs.

Under CEO Jonas Samuelson, Electrolux has worked to raise profitability through greater efficiency and cutting low-margin products and the firm was well on its way, reaching its operating margin target of at least 6 percent last year.

Samuelson said on Friday a stronger product mix and price increases had helped it make further progress in the quarter, but that it had not been enough to offset cost rises. Its operating margin contracted to 5.8 percent in the third quarter from a year-ago 6.8 percent.

Adjusted operating earnings at the owner of the Electrolux, Frigidaire and AEG brands came in at 1.76 billion Swedish crowns ($193 million), down from 1.98 billion a year ago and in line with the 1.75 billion seen in a Reuters poll of analysts.

Electrolux said it estimated that the negative impact from raw materials, tariffs and currency would be about 3 billion crowns in 2018 - higher than its earlier expectation of about 2.7 billion - and forecast a similar cost level for 2019.

The company said it would raise prices further to mitigate cost inflation. On Thursday, Whirlpool said it expects about $300 million in costs related to higher raw materials expenses and tariffs. ($1 = 9.1310 Swedish crowns) (Reporting by Esha Vaish in Stockholm; editing Niklas Pollard)

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