Maytag Expecting Lower Q2 Results

Staff -- TWICE, 6/25/2001

NEWTON, IOWA — Faced with a softening floor care industry, lower retail sales margins and a very weak major appliances industry, Maytag has revised its expectations for second-quarter earnings.

The company now expects earnings to be about 25 percent lower than its previous guidance of 43 cents per share, which was the amount Maytag earned in the first quarter.

Maytag pinpointed this decline on overall softening of the floor care industry, coupled with continued weakness in model mix, with more product volume drifting to lower price points.

In addition, introduction of a new line of the company's Hoover floor care products has been delayed until the third quarter. This has led to lower manufacturing volume, which has led to unfavorable absorption of manufacturing costs. Maytag does not expect these inefficiencies in the second quarter to be repeated in the third.

"We now expect floor care industry shipments to be down for the second quarter, although Hoover's performance is expected to outpace the industry," said Leonard A. Hadley, former president/ CEO.

"In major appliances, we continue to operate in a very weak industry, although our performance is modestly outpacing the industry," he said. "Price competition continues in the marketplace, suppressing margins. Additionally, we are spending more on brand building and product development in this environment, which also weakens margins."

Maytag — which said industry shipments of majaps were down 7 percent, or 1 million units, through the first five months of the year, compared with the same period last year — continues to achieve significant share improvement in laundry and dishwashing, Hadley said.

"Maytag has built a corporate earnings stream in home and commercial appliances that has unique characteristics, yet there is a convergence of weaknesses in each business that, together, magnify weaker consolidated results," he said. "In response, we have renewed our focus on what is a core for us, reaffirmed our commitment to premium brand and positions in the marketplace, and have put in place initiatives to improve operating performance, most notably in logistics and in procurement."

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