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Whirlpool Results Better Than Expected
Jul 22, 2009
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Whirlpool's second quarter earnings and sales were down, but results were still better than had been expected for the world's largest appliance maker, thanks to aggressive cost-cutting measures. Whirlpool said North American profits were up. While Whirlpool revised down its expectations for industry unit shipments in Europe for the full year 2009 (from 10% to 13%), other regions were revised upwards. The government stimulus for appliances in Brazil has spurred sales significantly, and that industry should see growth in unit shipments in 2009. Asia unit shipment expectations for 2009 have also been revised from flat-to-down 5% to flat –to-up 5%.

Whirlpool Corp. reported this morning that second-quarter 2009 earnings were $1.04 per diluted share compared to $1.53 per diluted share reported for the second quarter of 2008. Net sales were $4.2 billion, down 18% from 2008. Excluding the impact of foreign exchange, 2Q sales declined about 10%

Operating profits were helped by Whirlpool cost reduction initiatives and a favorable product price/mix – but that wasn't enough to overcome globally depressed appliance industry sales.

"Consumer demand for appliances was significantly lower in the second quarter, which negatively impacted our global unit volumes," said Whirlpool Chairman and CEO Jeff M. Fettig. "Late last year, we took actions to restructure our business, aligning our capacity and resources to lower demand levels. Our results reflect these actions, and we will continue to execute our plans to address this volatile global economic environment."

North America Profits Are Up

North American 2Q sales of $2.4 billion were down 17% from 2Q 2008. Excluding currency effects, sales were down 14%. U.S. industry unit shipments of major appliances (T7, which includes washers, dryers, refrigerators, freezers, dishwashers, ranges, and compactors) declined 14%.

The North America region operating profits were $120 million compared to $101 million in 2008, again credited to favorable product price/mix and cost reduction initiatives.

Whirlpool expects that the U.S. appliance industry unit shipments as a whole will be down 10 – 12% for the full year of 2009.

Europe Profits Down

Whirlpool Europe 2Q sales of $786 million were down 25% from 2Q 2008. Excluding currency effects, sales declined approximately 13%.

Overall industry unit demand was down approximately 12% from 2008.

The region reported a 2Q operating loss of $12 million compared with a profit of $50 million in 2008. European unit sales were substantially lower and currency fluctuations hurt results, nut these negatives were partially offset by cost reduction initiatives and favorable product price/mix.

Whirlpool changed its expectations for overall European appliance industry unit shipments in 2009. Previously the company expected full-year 2009 unit shipments to be down 10%. Now it expects them to be down 13%.

Brazil's Stimulus Helps Latin American Results

Latin America 2Q net sales were down 16% to $844 million; excluding currency translation, sales were up 1%. This sales increase was driven by jump in Brazilian appliance volume that resulted from a government incentive program. Appliance and compressor sales outside Brazil continued to decline. Whirlpool's 2Q Brazilian appliance sales increased 28% excluding currency translation.

Operating profit was $75 million in the second quarter compared with $133 million in the prior year, a result blamed mostly on unfavorable currency fluctuations, lower monetization levels of tax credits, and material and oil costs. Whirlpool expects full-year 2009 Brazilian appliance shipments to increase better than 10%, compared to its previous expectation of sales that were flat or down as much as 5%. Whirlpool credits Brazilian government tax reductions on certain appliances, which has helped spur consumer demand.

Whirlpool Asia

Whirlpool Asia's 2Q sales were $184 million, up 3% from 2Q 2008. Excluding the impact of currency, sales were up 19%. Operating profit was up as well, to $11 million compared to $5 million in the same quarter of 2008. The increase in operating profit resulted from higher unit volume and cost reductions. These favorable items were partially offset by unfavorable product price/mix.

Whirlpool expects full-year 2009 industry unit shipments in Asia to be flat-to-up as much as 5%. Its previous expectation was for of unit shipments of flat-to-down 5% from 2008 levels.

Outlook

For the full-year 2009, Whirlpool expects earnings per diluted share between $3.50 and $4.00 compared with the prior expectation of $3.00 to $4.00 per diluted share. For the full year, the company expects to generate free cash flow between $300 million and $400 million. The company's earnings and free cash flow projections are based upon current economic forecasts and business plans.

"When we provided our 2009 outlook earlier this year, we established three key operating priorities in anticipation of a difficult macroeconomic environment: cost reduction, price/mix and lower working capital," said Fettig. "While the demand environment remains a significant challenge, we are making strong progress in our key priorities to offset the volume declines."

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