Whirlpool Corporation announced third-quarter 2003 net earnings of U.S. $105 million, or $1.48 per diluted share, compared to $101 million, or $1.46 per diluted share, in the same period last year.
"We believe this earnings performance is solid, given our third-quarter challenge to overcome approximately $24 million from year-over-year increases in U.S. pension costs," said David R. Whitwam, Whirlpool Corporation's chairman and chief executive officer. "Our businesses helped drive this performance with record levels of productivity and significant cost reductions."
Third-quarter net sales of $3.1 billion increased 12.8 percent from last year, reflecting strong revenue growth in North America and Europe. (Excluding currency translations, sales increased 9 percent.) Operating profit of $204 million compared to $199 million in the prior year period, which included $16 million of pre-tax expense for restructuring and related activities.
Year-to-date sales of $8.8 billion increased 9.3 percent from the prior year period. (Excluding currency translations, year-to-date sales increased 7 percent.) Operating profit of $588 million compared to $571 million in the prior year period, which included $54 million of pre-tax expense for restructuring and related activities. Through September, year-over-year, increases in U.S. pension costs and the effects of lower Brazilian tax credits totaled approximately $90 million, which were largely offset by productivity improvements, cost reductions and savings from previous restructuring activities. The effects of these significant year-over-year changes will be mostly behind the company by the end of the fourth quarter.
"Given the cost and marketplace challenges we faced globally, we are pleased with our performance and with the contributions from our global businesses and brands," Mr. Whitwam said. "Innovative new products and services introduced to consumers through our global distribution network continue to drive stronger sales for the company and longer-term customer loyalty."
Whirlpool North America's sales of $2.03 billion increased 12.1 percent from the prior year period. Significant growth in unit shipments and revenue during the quarter reflected the continuing consumer demand for Whirlpool® and KitchenAid® branded products. Operating profit declined 1.8 percent, due primarily to a $22 million increase in U.S. pension costs from the prior year period. Improvements in productivity and cost reductions helped offset the year-over-year increase.
U.S. industry unit shipments of major appliances (T7*) increased 9.3 percent from the prior year period. Fourth-quarter shipments are expected to increase by approximately 3 percent. Given the industry performance in the third quarter, the company now expects full-year shipments to increase by approximately 3 percent.
Whirlpool Europe's sales of $704 million increased 18.7 percent from the prior year period. (Excluding currency translations, sales increased approximately 5 percent.) Operating profit improved 40 percent from the prior year on higher sales and unit volumes, as well as record levels of productivity and savings from previous restructuring activities.
During the quarter, appliance industry unit shipments increased slightly from the prior year period. Based on current economic conditions, the company now expects full-year industry shipments to grow approximately 2-to-3 percent from last year's level.
Whirlpool Asia's sales of $91 million increased 4.6 percent from the prior year period. (Excluding currency translations, sales were flat.) Operating profit was affected by challenging market conditions in Hong Kong, Taiwan and Korea. Results from India and China-Whirlpool's two largest businesses in the region-were flat.
Based on current economic conditions, the company expects full-year appliance industry shipments in the region to increase approximately 5 percent from last year's level.
Whirlpool Latin America's sales of $322 million increased 7.4 percent from the prior year period. (Excluding currency translations, sales were up approximately 1 percent.) Difficult macroeconomic conditions in the quarter dramatically reduced consumer spending and demand, resulting in a significant industry shipment decline of 10 percent. Within this environment, operating profit for the region declined 46 percent.
Based on current economic conditions, the company now expects full-year industry unit shipments to decline 12-to-14 percent from last year's level.
The company noted that there are several positive economic trends in Brazil, including: continued lowering of interest rates, declining inflation rates, and the passage in the Brazilian Congress of several economic reform programs to deal with budget challenges. In addition, lower interest-rate financing initiatives from the Brazilian government, banks, and retailers led to improved appliance order levels late in the third quarter. Order levels are expected to continue to improve for the remainder of the year and into 2004.
"We expect that our focus on global innovation and distribution will help drive continued improvement in the company's performance throughout the remainder of the year," Mr. Whitwam said. "In addition, our ongoing emphasis on productivity and cost reduction is expected to help offset the remaining pension and tax headwinds from 2002."
He added: "However, the steep economic challenges in Brazil have been worse than we anticipated. Despite current signs of improvement, we now believe that the full-year contributions from our Latin America business will fall short of our expectations. As a result, we currently project that full year earnings performance will be closer to the lower end of our previous 2003 guidance of $5.90 to $6.10 per share."
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