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S&P Revises Whirlpool Corp.'s Outlook to Stable
Nov 24, 2003
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Standard & Poor's (S&P) Ratings Services said that it has revised its outlook on home appliance producer Whirlpool Corp. to stable from negative. At the same time, Whirlpool's 'BBB+' corporate credit rating was affirmed.

The outlook revision reflects Whirlpool's ability to maintain a moderate financial profile and credit protection measures despite global pricing pressures, fluctuating demand, and rising operating costs, the ratings agency said in a statement.

"The ratings reflect Whirlpool Corp.'s global leadership position in the mature and concentrated appliance industry, offset by exposure to economic fluctuations in key international markets and the U.S.," said Standard & Poor's credit analyst Jean C. Stout.

Benton Harbor, MI, U.S.-based Whirlpool continues to maintain the leading market share in several appliance categories across a number of different geographic regions, S&P said. The company's international sales and manufacturing capabilities provide geographic diversity.

Still, uncertain economic conditions worldwide have weakened demand and continued to pressure pricing, S&P said. Moreover, the changing dynamics of the U.S. appliance retail environment, including the growing importance of home improvement centers Home Depot Inc. and Lowe's Cos. Inc., remain a concern because competition and pricing pressures are likely to intensify. As a result, the company's ongoing need for product innovation will become even more important, the ratings agency added.

Nevertheless, Whirlpool's net revenues increased by about 9 percent (excluding acquisitions) for the 3 months ended Sept. 30, 2003, compared with the same period last year. S&P said the sales increase was driven primarily by higher demand for the company's products and an improved product mix in the key North American market. Even so, Whirlpool's margins were pressured by increased pension and post-retirement benefits, the negative currency impact on imported product to North America, and lower demand and higher material costs in Latin America that were not offset by manufacturing productivity gains and past restructuring efforts, it added.

Credit protection measures were the same as those at year-end 2002, S&P said in the statement. For the 12 months ended Sept. 30, 2003, Whirlpool's funds from operations to debt (adjusted for operating leases) was about 45 percent, with debt to EBITDA at 1.4x. The rating incorporates some flexibility for select acquisitions or share repurchases, S&P said.

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