Whirlpool's Q1 Profits Plunge 24% On Rising Costs And Weak U.S. Sales
By Alan Wolf On May 5 2008 - 5:00am
Rising oil and raw material costs plus an anemic U.S. majap market negatively impacted Whirlpool's first-quarter profits.
Earnings from continuing operations fell 24 percent to $94 million for the three months, ended March 31, while sales rose 5 percent to $4.6 billion on strength in the company's overseas markets.
"The combination of unprecedented material cost increases and seven consecutive quarters of lower U.S. demand have resulted in one of the most challenging operating environments we have seen in three decades," said chairman/CEO Jeff Fettig."
Operating profit for Whirlpool's North American operations fell 72 percent to $44 million and sales slipped 3 percent to $2.6 billion during the quarter.
The company attributed the declines to "significantly higher" material and oil-related costs, lower industry demand, and increased expenses due to new product launches and spending on consumer advertising.
Whirlpool noted that U.S. unit shipments declined 9 percent industry-wide in the first quarter, and are now expected to fall between 5 percent and 6 percent for the full year.
Outside North America, operating profit rose at each of the company's Asian, European and South American divisions.
To address the downturn, Whirlpool said it will proceed with previously announced price increases, accelerate productivity initiatives, continue to invest in its brands, and will help buoy its stock price by repurchasing $500 million in company shares.
Whirlpool will also continue to stress innovation in its new product development. Recent launches under the Whirlpool brand included:
the Cabrio steam dryer that uses a combination of mist and heat to steam away odors and relax wrinkles;
a new French door refrigerator with an external ice and water dispenser, extra-tall humidity-controlled crispers, a caddy for tall bottles and a can-pack keeper to store a case of beverages;
three new front-load laundry color options including chestnut, sapphire and red, and;
the latest compatible devices for the Centralpark Connection refrigerator which features a docking port that supplies power to CE devices and a plug-and-play platform that works interchangeably with a messaging center, a kitchen computer with organizational software, and an iPod compatible speaker system.
Recent Maytag brand launches include the Bravos steam dryer, which marks the first top-loading laundry pair to offer steam cycles, while KitchenAid introduced a 72-inch counter-depth French door refrigerator.
Recent Jenn-Air brand launches include a new French door refrigerator with an ice and water dispenser in the door, and an expanded SteamClean dishwasher line, which provides enhanced soil and spot cleaning when using the normal cycle.