Whirlpool Corporation is stepping back from some of its European, Middle East and Africa operations, becoming a 25% partner in a new company, teamed with a Turkish counterpart, Arcelik A.S. It’s a complicsted transaction designed to save cash and re-focus the company’s efforts on business segments that deliver the best shareholder returns.
Here’s what Whirlpool had to say about the moves announced today regarding its European businesse:
Whirlpool Corporation (NYSE: WHR) today announced the completion of the strategic review of its Europe, Middle East and Africa (EMEA) business and entered into a definitive contribution agreement with Arçelik A.Ş (“Arcelik”) which significantly accelerates Whirlpool’s portfolio transformation. Under the terms of the agreement, Whirlpool will contribute its European major domestic appliance business, and Arcelik will contribute its major domestic appliance, consumer electronics, air conditioning, and small domestic appliance businesses into the newly formed entity of which Whirlpool will own 25% and Arcelik 75%(1). Separately, Whirlpool agreed in principle to the sale of Whirlpool’s Middle East and Africa business to Arcelik(1). Whirlpool will retain ownership of its EMEA KitchenAidsmall domestic appliance business.
The new entity is expected to have combined sales of over €6 billion(1) and will be well-positioned to deliver value to consumers through attractive brands, sustainable manufacturing, product innovation, and consumer services. The combined businesses are expected to generate cost synergies of over €200 million.
“Today’s announcement marks yet another major and important milestone in our ongoing portfolio transformation,” said Marc Bitzer, Chairman and Chief Executive Officer of Whirlpool Corporation. “This allows us to participate in significant value creation from the repositioning of the business and cost synergies through our minority interest.”
Unlocking Significant Value Creation
The transaction announced today is expected to deliver net present value of future cash flows of over $750 million, primarily through predictable cash flows from multi-year licensing of the Whirlpoolbrand and the potential monetization of Whirlpool’s minority interest. As previously announced, Whirlpool separately sold its Russia business to Arcelik in August of 2022 for up to $260 million of deferred payments. The Russia business will not be part of the new combined company.
Post closing, Whirlpool expects full-year cash provided by operations and free cash flow(3) to increase by approximately $100 and $250 million, respectively, in addition to future proceeds from a licensing agreement entered into in connection with the transaction and any dividends from the new entity.
Separately, Whirlpool looked back on 2022 and offered preliminary guidance on its 2023 projected performance:
During the fourth-quarter, the Company’s North America region experienced a significant one-off supply chain disruption primarily involving one critical supplier which has since been resolved. This disruption negatively impacted the Company’s sales, production volumes, and EBIT margins in the fourth-quarter of 2022.
Additionally, for the full-year 2022, cash provided by operating activities is expected to be approximately $1.4 billion, and free cash flow(3) is expected to be approximately $800 million. For the full-year 2022, the Company expects GAAP and adjusted tax expense of approximately $260 million and $50 million respectively, or an effective GAAP and adjusted tax rate of approximately 21% and 4%, respectively.
Looking forward to 2023, the Company expects supply constraints to significantly improve during the first quarter, as they have already begun to ease. The Company expects 2023 operational performance to be similar to 2022, including continued expectations of $500 million net cost takeout. Additionally, the Company expects full-year 2023 GAAP and adjusted tax rate (non-GAAP) of 14 to 16 percent.
The preliminary results for the full-year ended December 31, 2022, are estimates based on information available to management as of the date of this release, are still subject to procedures by our independent auditor, and are subject to further changes upon completion of the company’s year-end closing procedures.
The Company will provide a full update in its release of fourth-quarter and full-year 2022 results along with 2023 guidance, now scheduled for 4:05 p.m. ET on Monday, January 30, 2023. Whirlpool Corporation will then hold a conference call to discuss its performance with the investment community at 8 a.m. ET on Tuesday, January 31, 2023.
