Second quarter financial results for Whirlpool Corporation missed analysts estimates by about 19-cents, but revenue estimates came in largely in line with Wall Street expectations as the Benton Harbor-based appliance giant scored 8-percent sales growth in the North American market and a more than 3-percent gain overall.
Whirlpool announced today second-quarter net earnings of $189 million, or $2.52 per diluted share, compared to $320 million, or $4.15 per diluted share, reported for the same prior-year period. Net earnings were negatively impacted primarily by higher income tax expenses of approximately $90 million, compared to the same prior-year period, driven by the timing of tax planning activities in the same prior-year period. Second-quarter ongoing business earnings per diluted share totaled $3.35 compared to $3.50 in the same prior-year period. The general consensus of earnings estimates by analysts for the second quarter had been in the range of $3.54 per share.
Chairman & CEO Jeff Fettig said, “We delivered very strong results in North America and Latin America and improved EMEA operating margins.” He added, “We also continued to deliver significant improvements in our free cash flow generation and remain confident in our full-year free cash flow goals.”
Second-quarter net sales were $5.3 billion, compared to $5.2 billion in the same prior-year period. Those numbers were right at the Wall Street expectations for revenues. Excluding the impact of currency, sales increased more than 3-percent.
Second-quarter operating profit totaled $274 million, or 5.1-percent of sales, compared to $368 million, or 7.1-percent of sales, in the same prior-year period. Second-quarter ongoing business operating profit totaled $373 million, or 6.9-percent of sales, compared to $437 million, or 8.4-percent of sales, in the same prior-year period. Cost productivity and unit volume growth partially offset unfavorable impacts from raw material inflation and product price/mix.
For the six months ended June 30, 2017, Whirlpool reported cash used in operating activities of $(191) million compared to $(404) million in the same prior-year period. The company reported free cash flow of $(356) million for the first six months of 2017 compared to $(547) million in the same prior-year period, driven by their focus on working capital optimization.
SECOND-QUARTER REGIONAL REVIEW
Whirlpool North America
Whirlpool North America reported second-quarter net sales of $3.0 billion, compared to $2.8 billion in the same prior-year period. Excluding the impact of currency, sales increased 9-percent.
The region reported second-quarter operating profit of $354 million, or 11.8-percent of sales, compared to $340 million, or 12.3-percent of sales, in the same prior-year period. The operating profit increase was driven by very strong unit volume growth in its core and adjacent businesses, while operating margin declined due to unfavorable impacts from raw material inflation and foreign currency.
The company continues to expect full-year 2017 industry unit shipments in the U.S. to increase by 4 to 6-percent.
Whirlpool Europe, Middle East and Africa
Whirlpool Europe, Middle East and Africa reported second-quarter net sales of $1.2 billion, compared to $1.3 billion in the same prior-year period. Excluding the impact of currency, sales decreased by 5-percent.
The region reported break-even second-quarter operating profit compared to operating profit of $46 million, or 3.5-percent of sales, in the same prior-year period. Ongoing business segment operating profit was break-even compared to ongoing business segment operating profit of $60 million, or 4.6-percent of sales, in the same prior-year period.
Compared to the prior-quarter period, the region reported sequential quarter operating profit improvement of $17 million, driven by improved product availability compared to the first quarter.
The company continues to anticipate solid second-half operating profit recovery driven by its simplified brand structure, additional product availability improvements and the deployment of marketing actions to support new product launches.
The company continues to expect full-year 2017 industry unit shipments to be flat to up 2-percent.
Whirlpool Latin America
Whirlpool Latin America reported second-quarter net sales of $848 million, compared to $826 million in the same prior-year period. Excluding the impact of currency, sales decreased 1-percent.
The region reported second-quarter operating profit of $59 million, or 7.0-percent of sales, compared to $50 million, or 6.1-percent of sales, in the same prior-year period, driven by favorable product price/mix and cost productivity which more than offset raw material inflation and unit volume declines.
The company continues to expect full-year 2017 industry unit shipments in Brazil to be flat.
Whirlpool Asia
Whirlpool Asia reported second-quarter net sales of $358 million, compared to $363 million in the same prior-year period. Excluding the impact of currency, sales were flat.
The region reported a second-quarter operating loss of $(32) million, or (9.1)-percent of sales, compared to operating profit of $16 million, or 4.4-percent of sales, in the same prior-year period. Ongoing business segment operating profit totaled $8 million, or approximately 2-percent of sales, compared to $29 million, or 8.1-percent of sales, in the same prior-year period. Favorable impacts from cost productivity, unit volume growth and foreign currency were more than offset by raw material inflation and unfavorable product price/mix. Additionally, the company made an adjustment in its China business of $(40) million, primarily to align trade promotion accruals from prior periods to their global standards.
The company expects that cost mitigation efforts and product price/mix, driven by innovative product launches and previously-announced cost-based price increases, will improve operating margins in the second half of the year. They continue to expect full-year 2017 industry unit shipments to be flat to up 2-percent.
Regional Summary
Incoming CEO and current President & Chief Operating Officer Marc Bitlzer says, “We are pleased with double digit unit volume growth, continued market share gains and strong operating margins in North America, as our industry-leading brands and innovative products continue to deliver significant value, despite the impact of raw material inflation during the quarter.” He adds, “We expect profitable growth in EMEA during the second half of this year, and remain confident in our ability to manage through volatility in emerging markets.”
OUTLOOK
For the full-year 2017, Whirlpool now expects to generate cash from operating activities of $1.65 to $1.7 billion and continues to expect to generate free cash flow of approximately $1 billion. Included in this guidance are primarily acquisition-related restructuring cash outlays of up to $165 million, legacy product warranty and liability costs of $70 million, pension contributions of $45 million and, with respect to free cash flow, capital spending of $650 to $700 million.
For the full-year 2017, Whirlpool Corporation now expects earnings per diluted share of $12.40 to $12.90 and ongoing business earnings per diluted share of $14.50 to $15.00.
CEO Fettig says, “Our strong free cash flow generation gives us ample flexibility to effectively execute our balanced capital allocation strategy, and we plan to continue returning strong levels of cash to our shareholders through our increased dividend and $2.35 billion share repurchase authorization.”
The Company paid an increased dividend of $1.10 and repurchased $200 million in common stock during the second quarter, plus the Board of Directors approved an additional $2 billion share repurchase authorization, bringing the Company’s total authorization to $2.35 billion, with the company intending to continue repurchasing stock throughout the remainder of 2017.
