Monday, July 25, 2011

Whirlpool swings to $161m loss

By Jeremy Lemer in New York, July 21, 2011

Whirlpool, the US household-appliance maker, swung to a loss in the second quarter as it settled a legal dispute and struggled to cope with a “difficult economic environment” characterised by higher raw material prices and volatile demand.
Jeff Fettig, chief executive, said consumer demand was being hurt by “high unemployment, low consumer confidence, and recessionary housing levels” in North America and Europe while high inflation was starting to hit emerging markets...
Whirlpool’s sales in North America slid 7 per cent to $2.4bn, but rose 14 per cent to $841m in Europe, the Middle East and Africa and gained 25 per cent to $1.3bn in Latin America.
Whirlpool shares closed down 3.8 per cent at $72.78. Over the year to date, the stock price has fallen about 17 per cent on fears that a sagging economic recovery would dent consumer demand.
The Benton Harbor, Michigan-based company reported a loss of $161m, or $2.10 per share, in the three months to the end of June compared to a net profit of $205m, or $2.64 per share, in the same period last year.
Much of the loss stemmed from $522m in expenses to settle a long-standing dispute with Banco Safra over an unauthorised loan undertaken in 1989 by an employee of a company that later became part of Whirlpool.
Excluding non-operating charges, Whirlpool earned $2.76 per share compared to $2.82 in the same period in 2010. Sales rose 4 per cent to $4.7bn, thanks largely to currency effects, but global shipments of white goods rose year over year.
Whirlpool, which makes the Whirlpool, Maytag and Amana brands of home appliances, employs about 71,000 people and had annual sales of about $18bn in 2010.
Mr Fettig said he expected “global economic volatility to continue in the near term”, and said the company was now forecasting record full-year raw material and oil related costs of between $450m and $500m – double the company’s estimate in early February.
But he added that the company would aggressively pursue margin improvements by raising prices, introducing new, less material-heavy products and by optimising its supply chain to reduce freight and warehousing costs.
Whirlpool reaffirmed its full-year guidance for operating earnings per share of between $12 and $13 and free cash flow guidance of between $400m and $500m, but said that the current environment meant it would likely hit the low end of the range.