Whirlpool, Electrolux Cite U.S. Majap Momentum As June Shipments Soar

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NEW YORK – Two of the world’s largest major appliance manufacturers are forecasting continued growth in the U.S. majap market this year.

In separate second-quarter earnings reports, Whirlpool chairman/CEO Jeff Fettig and Electrolux president/CEO Keith McLoughlin projected full-year unit volume gains for the industry of between 4 percent and 5 percent domestically.

“The U.S. appliance market continues to recover, driven by both replacement demand and housing, with a total expected growth of 4 percent in 2014,” McLoughlin noted.

Fettig’s forecast was even more upbeat, pegging estimated unit volume growth at 5 percent this year.

Their projections followed a robust report from the Association of Home Appliance Manufacturers (AHAM), which showed an 11.3 percent spike in unit factory shipments in June. Leading the charge were seasonal spurts in dehumidifiers and ACs, up 66.2 percent and 21 percent, respectively. Also putting in impressive performances were freezers, up 22 percent; ranges, up about 12 percent; dishwashers, up 11 percent; and washers, up 10 percent.

The outlooks dovetailed with an upbeat assessment of consumer sentiment and retail sales in the back-half of 2014, issued by the National Retail Federation (NRF). According to the trade group, higher employment, consumer and business confidence, pent-up demand and manufacturing activity should contribute to “significantly faster” retail sales growth over the next five months.

Despite the glad tidings, Whirlpool and Electrolux both reported lower sales and earnings for their respective second quarters. For the former, lower unit volume, unfavorable currency rates, and increased material costs and investments led to a 10.2 percent decline in profits to $179 million for the three months, ended June 30, while net sales slipped 1.4 percent to $4.7 billion.

Whirlpool’s Fettig said the mitigating factors offset benefits from price increases, a greater mix of higher-margin products, and ongoing cost and capacity reductions. “Overall, the underlying fundamentals of our business remain strong and we continue to invest in our business through innovative new products and acquisitions,” he said. The latter include appliance manufacturers Hefei Rongshida Sanyo of Italy and Italy’s Indesit. Both deals are expected to close by year’s end.

In North America, sales rose 3.8 percent to $2.7 billion, while operating profit rose to a record $285 million, or 10.6 percent of sales, thanks to ongoing cost productivity and cost- and capacity-reduction benefits, which offset higher material costs, the impact of unfavorable foreign exchange rates, and increased investments in marketing, technology and product development.

During the quarter, the company received the industry’s first Energy Star qualification for clothes dryers; introduced a KitchenAid dishwasher whose ultra-fine filter and optional ProScrub cycle help reduce water usage; added Nest technology to its line of smart laundry products; and introduced Swash, an at-home clothing care system developed with P&G that refreshes, restores and removes wrinkles from apparel.

Meanwhile, restructuring charges and unfavorable exchange rates carried Electrolux into the red last quarter. The company lost 92 million kronor for the three months, ended June 30, compared with year-ago net earnings of 431 million kronor, while net sales dipped 5 percent to 26.3 billion kronor.

Nevertheless, the manufacturer reported improving margins due to a mix shift to more profitable products and greater worldwide production efficiencies, along with strengthening demand in key global markets.

In North America, net sales were essentially flat at 8.5 billion kronor despite a 7 percent increase in industry volume, and operating income rose 2.6 percent to 680 million kronor. Sales were impacted by a significant decline in room air shipments and a fire at a component supplier that constrained refrigeration and laundry product availability, McLoughlin said.

The improvement in operating income reflected a combination of price increases, a richer product mix and a focus on premium majaps, including cooking products and multi-door refrigeration, he noted.

During the quarter the company launched a comprehensive Frigidaire Gallery marketing campaign in the U.S. that has “significantly” increased brand demand, it said, and last month shut its cooking plant in L’Assomption, Quebec, and shifted production to its Memphis, Tenn., facilities.

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