Whirlpool Posts Lower Profits, Continues Maytag Turnaround

BENTON HARBOR, MICH. — Whirlpool reported higher sales for its North American operations during the fourth quarter, driven by the acquisition of Maytag earlier in the year, but lower profits for the region.

Whirlpool said fourth-quarter sales increased 29 percent vs. the year-ago period to $3.2 billion. The manufacturer said that industry unit shipments, which fell about 8 percent during the quarter, negatively impacted margins.

Fourth-quarter operating profit for the region was $148 million, which declined $79 million or 34.8 percent from the year-ago period, due to "significant increases in material costs, lower production as the manufacturer adjusted inventory levels with reduced industry demand, acquisition integration costs and increased merchandising expense," the company said.

For the fourth quarter, ended Dec. 31, 2006, companywide net sales increased 25 percent to $4.95 billion, up from $3.95 billion, and net earnings were down to $109 million from the previous year's $126 million.

For the year, ended Dec. 31, 2006, companywide net sales were $18.0 billion up from $14.3 billion the previous year, and net earnings were $433 million, up from $422 million in the prior year.

Jeff M. Fettig, Whirlpool chairman/CEO, said in a conference call that the company has absorbed some $1.6 billion in higher costs for steel, oil, precious minerals and appliance components, and anticipates another $400 million hike in material costs this year. He told analysts the company will recoup some of that outlay through previously announced price increases that will vary by product category and brand. "It's very import and very appropriate to pass a substantial portion of that to the marketplace," he said.

Commenting on the soft majap market, Fettig observed that "the rate of change during the year was fairly profound," with significant declines in industry shipments and demand in October. The momentum will continue through the first half of 2007, he said, when industry shipments are projected to fall 5 percent. Sales should improve in the back half of 2007, however, with the year ending out with 2 percent to 3 percent declines, based on stable mortgage rates, single-digit declines in existing home sales and a projected 15 percent decline in housing starts.

Within the U.S. market, Whirlpool brand's share has increased slightly in the U.S., said David Swift, president of Whirlpool North America, while Maytag brand, carried by pre-acquisition momentum, sustained "some share loss."

"We have to earn that share back with the trade and with consumers," Swift said, in a process that began last year with the launch of the Epic front-load laundry pair, and continues this year with the introduction of the Centennial commercial-grade top loader. That product, which features a heavy-gauge steel lid, smooth balance suspension and a "classic Maytag look" with its central control knob and metallic accents, will help gain back "significant share," he predicted.

"The trade wants to see a revitalized Maytag, and that's what we're going to do," Swift said. "Retailers are excited about the new Maytag products, and by next year we will be fully invested in a new line."

Indeed, revitalizing the Maytag brand by bringing new, innovative products to market faster is a top priority going forward, Fettig said. The company's 2007 game plan also calls for a greater emphasis on mid- to high-end products in order to improve margins, and driving "strong productivity" on the manufacturing side by "realizing efficiencies" afforded by the Maytag acquisition.