Whirlpool Reports Q2 Lower Earnings, Record Sales
Jul 21, 2005
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Appliance maker Whirlpool Corporation announced second-quarter 2005 net earnings of U.S. $96 million, or $1.42 per diluted share, compared to $106 million, or $1.53 per diluted share, in the same period last year.

The decline in earnings was driven by significantly higher material and oil-related costs, the Benton Harbor, MI, U.S.-based appliance maker said. However, it also said that its reported net sales of $3.6 billion were a second-quarter record and increased 9 percent from last year.

"We are pleased with our global operating performance given the significant magnitude of the material cost increases in the second quarter and throughout the first half of the year," said Jeff M. Fettig, Whirlpool's chairman, president, and CEO. "The success of the actions we have been taking to adjust to the global cost environment has positioned us well for the balance of the year."

For the first-half of 2005, sales of $6.8 billion increased 8 percent from the prior-year period. Year-to-date earnings of $182 million were significantly impacted by material and oil-related costs of approximately $370 million and declined 12 percent from the first half of 2004, Whirlpool said.

"We expect positive year-over-year earnings momentum to increase during the remainder of the year as our combined ongoing actions continue to build and overcome the material cost increases," Mr. Fettig said.

Whirlpool's North American operations reported record second-quarter revenue of $2.2 billion, an increase of 5 percent from the prior-year period. The company's U.S. unit shipments of major appliances were equal to last year as strong Whirlpool branded performance was offset by lower OEM shipments, the company said. Total U.S. appliance industry unit shipments were up approximately 2 percent.

Continued higher material and oil-related costs led to a 12-percent decline in operating profit. During the quarter, Whirlpool announced an additional price increase on selected products, effective July 3, 2005, to mitigate higher oil-related costs. The company expects full-year 2005 industry unit shipments in the region to increase by approximately 1 to 2 percent.

Whirlpool's European sales of $770 million increased 9 percent from the prior-year period, also representing a record second quarter. Strong volume gains and the strength of Whirlpool brand performance drove the improved results, the appliance maker said. The sales improvements were achieved despite an estimated decline in industry unit shipments of approximately 3 percent. Whirlpool expects full-year industry unit shipments in the region to either be flat or down 1 percent.

Whirlpool's Latin America sales of $494 million increased 26 percent from the prior-year period. Industry unit shipments of appliances are estimated to have increased 8 percent during the quarter. The company expects macro-economic conditions in Brazil to remain positive during the second half of the year and anticipates a 4- to 5-percent increase in the region for industry unit shipments in 2005.

Whirlpool's Asian sales of $123 million increased 12 percent from the prior-year period due to improved market share performance and new product introductions. Whirlpool expects full-year industry unit shipments in the region to increase 3 to 5 percent in 2005.

"Our focused action plans to mitigate higher material and oil-related costs are on track and are being effectively executed," said Mr. Fettig. "Given that oil prices remain volatile, we expect full-year material and oil-related cost increases closer to the higher end of our previous guidance of $500 million to $550 million, much of which has been absorbed in our first-half results."

Whirlpool said that it expects full-year earnings per share of $5.90 to $6.10 and free cash flow to be in the $250 million to $300 million range.

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