Weak demand and spiralling costs eat into profits at home appliances maker Electrolux

By HARRY GLASS
Updated: 06:04 EST, 19 July 2011

Profits tumbled at the world's second largest home appliances maker, Electrolux, due to the pervasive twin menaces of weak demand and higher raw material costs.

The same problems hit consumer electronics giant Philips, which reported a loss on Monday, and rival Whirlpool has felt similar pressures.

Electrolux's income for the second quarter came in at 561million kroner (£53million) versus 1billion kroner last year, a fall of 45 per cent.

Wash out: Electrolux has resolved to put up prices as costs have risen so much

'As expected, weak demand in key markets, lower prices and increases in raw material costs had a negative impact on second-quarter results,' Electrolux chief executive Keith McLoughlin said in a statement.

'Even though sequentially better, we do not expect earnings in the second half of the year to reach the level achieved in the second half of 2010,' he added.

McLoughlin said the result of the company's European business had been a disappointment - including 'important markets' such as the UK and Spain - citing lost market share in lower price brackets, intensified competition and price pressure.

Its average raw materials costs increased 65 per cent in the last year and a half, while transportation costs also ballooned.

The company therefore now intends to raise prices in Europe, as previously announced.

It will also aim for a further price rise in North America, McLoughlin added.