By Dominic Chopping
STOCKHOLM — Electrolux AB said late Sunday that costs related to a manufacturing reorganization in North America will hit the group’s fourth quarter operating income by $70 million, up from an earlier estimate of $25 million.
The Swedish home-appliance maker /zigman2/quotes/203332100/delayed SE:ELUX.B +1.62% is consolidating its U.S. refrigerator/freezer manufacturing and transitioning to new product platforms. It is investing around $250 million in automation, digitalization and new food-preservation product platforms at a new facility in Anderson, South Carolina which will replace manufacturing in St Cloud, Minnesota and manufacturing at an adjacent facility in Anderson.
This transition has resulted in temporary capacity constraints, affecting deliveries to some customers in the fourth quarter, it said.
“As a result of this, as well as of increased costs, the transition is now expected to have a larger impact on operating income in the fourth quarter than the approximately $25 million communicated previously.”
The operating income will also be hurt by de-stocking at a key U.S. customer and accounting adjustments from prior periods, it said.
Electrolux said it expects the capacity constraints in Anderson to be gradually resolved during the first half of 2020, but to safeguard its ability to meet market demand for its products it has decided to extend the transition period and run its two Anderson facilities in parallel into the second half of 2020.
This means the bulk of cost savings from the investment will be realized from 2021 instead of 2020.
It said the full scope of the company’s investment program and streamlining measures are on track to generate approximately 3.5 billion Swedish kronor ($372 million) of annual cost savings, with full effect from 2024.
Related savings in 2020 are now expected to be around SEK200 million, from an earlier estimate of around SEK800 million.