Electrolux AB, Europe's largest appliance maker, plunged to four year lows after reporting that costs are increasing and customers in North America balked at paying higher prices for its products.
Profit from North America was much worse than expected, due to higher costs and negative impact from private-label cooking products after the bankruptcy of Sears.
Against previous estimate of about 2.7 billion kronor for 2018, the Swedish manufacturer of home appliances said that the combined cost of raw materials, tariffs and currency will total 3 billion kronor ($333 million) in 2018, and expects a similar hit in 2019.
The fact that these headwinds will be similar in 2019 was not priced into consensus estimates.
CEO Jonas Samuelson said the biggest raw-material challenge looking forward is higher oil prices, which translates into higher costs for chemicals and plastics in the coming year.
Samuelsone added that tariffs on components and finished goods made in China are having “a significant impact on our cost base, which we are then recovering in pricing.”
Electrolux share plunged as much as 14% to its lowest since April 2014, the most intraday since December 2015, before staging a modest come back...
And judging by the trends in affordability expectations (from UMich surveys), this is far from over...
The appliance make problems are spreading too - French appliance maker SEB fell as much as 14% in early trading.