Shares of Whirlpool (WHR) Get Washed Out on Q3 Earnings and FY11 Outlook
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Whirlpool Corporation (NYSE: WHR) Friday reported third-quarter results and offered some insight into the company’s near-term future. Shares of Whirlpool are trading down 10.75 percent in the pre-market hours.
GAAP net earnings for the quarter totaled $177 million, or $2.27 per share. On an adjusted basis, earnings rose just under 6 percent to $2.35 per share, below the consensus of $2.75 per share.
Sales in for the quarter increased 2 percent to $4.6 billion, but missed the consensus of $4.76 billion. Sales rose 6 percent to $874 million in the company’s Europe, Middle East, and Africa segment; 8 percent to $1.2 billion in its Latin America segment; 10 percent to $215 million in its Asia segment; but fell 2 percent to $2.4 billion in its North America segment.
The cost of goods sold increased roughly 4.7 percent to $4.052 billion, resulting in a gross margin of $573 million, below its third-quarter 2010 gross margin of $648 million.
Cash and cash equivalents depleted by 58 percent from $1.368 billion at the beginning of January 2011 to $511 million at the beginning of October 2011.
Management announced plans to cut work force expenses by $400 million annually through a 10 percent reduction in its work force, or over 5,000 workers primarily within North America and Europe. The layoffs will take place by the end of 2013. The lost jobs will be partially due to the closure of the refrigeration manufacturing facility in Fort Smith, Ark. by mid-2012. Around 1,200 of the laid of employees will be salaried positions.
The company has cut its 2011 guidance due to weaker-than-expected industry demand, lower production levels and a weak economic environment. Management at Whirlpool now forecasts earnings of $4.75 to $5.25 per share for fiscal 2011, well below its previous forecast of $7.25 to $8.25 per share. The company also said it now expects to loss between $150 and $200 million in cash during the year, compared to its previous free cash flow estimate of $160 to $260 million.
"During the quarter, we experienced weaker than expected global industry demand and elevated material costs," said Jeff Fettig, Whirlpool Corporation Chairman and CEO. "Consumers continue to show strong preference for our unmatched global brand portfolio and new product innovations, and we are beginning to see the benefits from previously announced price increases. However, our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs.
"As we previously indicated, in a period of uncertain economic growth and consumer demand, we would be prepared to take the necessary actions in order to expand our operating margins and improve our earnings. Given the weakening global economic environment, we are today announcing aggressive plans that will result in substantial cost and capacity reductions. The plans are the result of a comprehensive global review of our operations, products and manufacturing facilities," Fettig concluded.
GAAP net earnings for the quarter totaled $177 million, or $2.27 per share. On an adjusted basis, earnings rose just under 6 percent to $2.35 per share, below the consensus of $2.75 per share.
Sales in for the quarter increased 2 percent to $4.6 billion, but missed the consensus of $4.76 billion. Sales rose 6 percent to $874 million in the company’s Europe, Middle East, and Africa segment; 8 percent to $1.2 billion in its Latin America segment; 10 percent to $215 million in its Asia segment; but fell 2 percent to $2.4 billion in its North America segment.
The cost of goods sold increased roughly 4.7 percent to $4.052 billion, resulting in a gross margin of $573 million, below its third-quarter 2010 gross margin of $648 million.
Cash and cash equivalents depleted by 58 percent from $1.368 billion at the beginning of January 2011 to $511 million at the beginning of October 2011.
Management announced plans to cut work force expenses by $400 million annually through a 10 percent reduction in its work force, or over 5,000 workers primarily within North America and Europe. The layoffs will take place by the end of 2013. The lost jobs will be partially due to the closure of the refrigeration manufacturing facility in Fort Smith, Ark. by mid-2012. Around 1,200 of the laid of employees will be salaried positions.
The company has cut its 2011 guidance due to weaker-than-expected industry demand, lower production levels and a weak economic environment. Management at Whirlpool now forecasts earnings of $4.75 to $5.25 per share for fiscal 2011, well below its previous forecast of $7.25 to $8.25 per share. The company also said it now expects to loss between $150 and $200 million in cash during the year, compared to its previous free cash flow estimate of $160 to $260 million.
"During the quarter, we experienced weaker than expected global industry demand and elevated material costs," said Jeff Fettig, Whirlpool Corporation Chairman and CEO. "Consumers continue to show strong preference for our unmatched global brand portfolio and new product innovations, and we are beginning to see the benefits from previously announced price increases. However, our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs.
"As we previously indicated, in a period of uncertain economic growth and consumer demand, we would be prepared to take the necessary actions in order to expand our operating margins and improve our earnings. Given the weakening global economic environment, we are today announcing aggressive plans that will result in substantial cost and capacity reductions. The plans are the result of a comprehensive global review of our operations, products and manufacturing facilities," Fettig concluded.
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