Electrolux provided an update on issues that are expected to affect operating profit for North American businesses in the fourth quarter of 2019.First of all, the consolidation of the production of refrigerators and freezers in the United States and the associated transition to new food platforms. Electrolux expects that the costs associated with the transition, volume effects and other issues this quarter will have a combined effect of a total of about -70 million US dollars.
Electrolux is currently investing around US $ 250 million in automation, digitization and new food storage platforms at a new facility in Anderson, South Carolina. This new plant will replace production in St. Cloud, Minnesota (closed in Q4) and production at a nearby facility in Anderson.
The transition to the new facility led to temporary capacity constraints affecting supplies for some customers in the fourth quarter of 2019. As a result of this, as well as an increase in expenses, the transition period is expected to have a greater impact on operating profit in the fourth quarter than approximately $ 25 million. U.S. previously reported. In addition, two other factors negatively affect operating profit: a reduction in inventories for a key customer in the United States and accounting adjustments for previous periods.
Overall, these problems, as noted above, are expected to affect Business Area North America’s operating income from approximately -70 million US dollars in the fourth quarter from the previous year. The report for the fourth quarter of 2019 will be published on January 31, 2020. Looking to the future, Electrolux expects Anderson’s capacity limits to be phased out in the first half of 2020.
To guarantee Electrolux’s ability to meet the market demand for its products with a constantly high level of quality, the company decided to extend the transition period and simultaneously launch its two Anderson facilities in the second half of 2020. This means most of the cost. Savings from investments will be implemented from 2021, and not from 2020.
The full scope of Electrolux’s ongoing investment program and rationalization measures is on track to achieve approximately SEK 3.5 billion in annual cost savings with full effect since 2024. The associated savings in 2020 are expected to be approximately SEK 200 million, mainly as a result of the Latin American reengineering activities and global rationalization measures that are being successfully promoted. Electrolux previously expected that by 2020, savings from the investment program and optimization will be about 800 million SEK.