Electrolux shares drop 12% as Q1 results show mixed performance and cash flow woes

Investing.com -- Electrolux (ST:ELUXb) shares plunged over 12% Tuesday after the company reported a mixed first-quarter performance, with solid sales growth and improved operating income offset by ongoing cash flow challenges and an uncertain market outlook.

The Swedish appliance maker posted net sales of SEK 32.6 billion, a 5% increase from SEK 31.1 billion a year earlier. 

The company saw organic sales growth of 7.9%, driven primarily by higher volumes in North America and Latin America. 

Operating income for the quarter improved, reaching SEK 452 million, a stark turnaround from a loss of SEK 720 million in the same period last year. 

This resulted in an operating margin of 1.4%, up from -2.3% in 2024. The company attributed the improvement to cost-efficiency measures that generated SEK 1.4 billion in savings, though price development had a slight negative impact on earnings.

Despite the favorable operating income, net income came in at SEK 42 million, compared to a net loss of SEK 1.2 billion in the first quarter of 2024. Earnings per share for the period were SEK 0.16, up from a loss of SEK 4.55 last year. 

However, operating cash flow after investments was negative SEK 3.1 billion, widening from a negative SEK 2.7 billion in Q1 2024, reflecting seasonal outflows of working capital that offset improved earnings and lower investment levels.

By region, North America saw a 12.2% increase in organic sales, driven by higher volumes, particularly in premium laundry, refrigeration, and cooking products.

The region’s operating loss shrank dramatically to SEK 337 million, from SEK 1.2 billion in the previous year. 

Latin America reported a strong operating income of SEK 436 million, with a stable operating margin of 6.2%, despite significant currency headwinds.

Europe, Asia-Pacific, Middle East, and Africa delivered modest results, with a slight 1.2% increase in organic sales and an operating margin of 3%.

As Electrolux’s chief executive Yannick Fierling noted, the market environment had become more uncertain. 

As a result, the company downgraded its outlook for North America from "neutral" to "neutral to negative" for the remainder of 2025.

The outlook for Europe and Latin America remains neutral. The company also adjusted its business outlook due to changes in U.S. trade policies, forecasting a positive impact from price adjustments and cost efficiencies, but with a significant negative external impact from tariffs and currency fluctuations.

Electrolux’s financial position showed some stress, with net debt rising to SEK 30.8 billion as of March 31, 2025, up from SEK 27.9 billion at the end of 2024. 

The company’s net debt-to-EBITDA ratio stood at 3.4, the same as year-end, but improved from 5.2 a year earlier. Return on net assets (RONA) showed improvement, climbing to 4.7% compared to a negative 7.3% in the first quarter of the previous year.