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Arçelik, one of the world’s biggest household goods’ manufacturers through its Beko branded refrigerators and washing machines, has warned that next year will be “very tough” for Europe’s home appliance market as persistently high energy prices and rising borrowing costs hit consumers.
Turkey-based Arçelik expected the European appliances market to shrink 5 per cent on a unit sales basis in 2024, said chief executive Hakan Bulgurlu. He added that the contraction could reach 10 per cent “if things go bad”.
“I see headwinds pretty much everywhere at the moment in Europe,” Bulgurlu said in an interview with the Financial Times, adding that “it’s increasingly looking very likely that 2024 will continue to be very tough”.
The gloomy outlook from one of Europe’s biggest appliance makers highlights how the region’s economy is sustaining an outsize blow from elevated energy prices, rising interest rates and cooling Chinese demand.
“We’re predicting very, very low [economic] growth for Europe as a whole,” Bulgurlu said. He pointed to Germany as a particular weak spot, saying Europe’s economic powerhouse was “really slowing down”.
Germany’s federal statistical agency said on Monday that Europe’s largest economy had contracted for a third quarter in a row, pointing particularly to a slump in consumer spending amid high interest rates.
Large German chemical groups such as BASF, Evonik and Covestro have likewise in recent months warned of slowing demand for consumer goods, as they have reported severe slumps in sales of chemicals that go into a wide range of products ranging from plastics to cosmetics and furniture.
Industry-wide shipments of major home appliances in Europe fell 7 per cent in the third quarter on a year-on-year unit sales basis and were down 10 per cent in 2022, according to an estimate by Sweden-based Electrolux, which competes with Arçelik. Electrolux has also said it has a “negative” outlook on European sales volumes for 2023 as a whole.
Arçelik’s revenue in Europe was steady at €787mn in the third quarter of this year compared with the same period in 2022, according to the group’s quarterly earnings figures. The company had been helped by a rise in eastern European revenues and as price increases and an improved product mix dulled the impact of sharp unit declines in western Europe, Bulgurlu said.
Bulgurlu said he thought the cycle of price rises in Europe “is kind of through”. Still, he said “geopolitical risks” represented a major source of uncertainty since Arçelik’s business is sensitive to commodity prices. International crude benchmark Brent is up 20 per cent since the start of June and analysts say the oil price could rise more if the Israel-Hamas conflict escalates into a broader regional conflagration.
Despite the struggles in Europe, Arçelik is pushing ahead with a deal that will hand it control of Whirlpool’s European home appliance business. The EU approved the deal this month, but the UK has opened an in-depth review of the tie-up on concerns it “could reduce choice in the supply of washing machines, tumble dryers, dishwashers and cooking appliances”.
In contrast to the European market, Turkish demand for appliances has been high this year as soaring inflation has prompted consumers to buy up white goods as a store of value.
The government has been attempting to cool consumer demand through interest rate and tax rises that are part of a broad economic overhaul that began after President Recep Tayyip Erdoğan’s re-election in May. But Bulgurlu said Arçelik’s home market was still holding up “surprisingly well”.
Arçelik generated revenues in Turkey of TL22.4bn (€770mn) in the third quarter, up 121 per cent from the same period in 2022. The increase was a slimmer 37 per cent on a euro basis, according to FT calculations. Overall, the group’s operating profit before financial expenses rose 120 per cent in the third quarter to TL4bn, a rise of 37 per cent in euro terms.
Bulgurlu said he was “confident” Erdogan’s new economic team would be successful in reviving Turkey’s $900bn economy and luring back foreign investors who have fled after years of unorthodox economic policies. Arçelik issued a $400mn dollar-denominated bond in September, making it the first Turkish non-financial company to sell a bond on international markets since January 2022.
Bulgurlu said he expected Turkish consumer demand would eventually falter as the new economic programme took effect. “There will be a big slowdown. We will all suffer from it, but we’ll come out the other side a much healthier economy,” he said.
Additional reporting by Patricia Nilsson in Frankfurt
