Whirlpool Doubled Profits in 4Q, but Still Fell Short of Expectations
Whirlpool had expected to improve its results in the fourth quarter and post its first year-over-year quarterly earnings gains in two years. The company, which had already been struggling to lower its cost structure and integrate its 2006 acquisition of Maytag, took an additional hit from the recession and the housing crisis, as homeowners put off replacing old appliances.
But Whirlpool increased its guidance for 2010 to between $6.50 and $7.00 in earnings per share, and expects to increase sales in all regions except Europe. Sales rose to $4.9 billion in the fourth quarter, up 13% from $4.3 billion in 2008, or 5% after factoring out the effect of foreign currencies. Sales in North America rose 4% to $2.6 billion during the quarter, while European sales were down 2%, to $956 million. Sales in Latin America, Whirlpool's second-largest region by sales, were up 52% to $1.2 billion, while Asian sales rose 34% to $188 million. Whirlpool is forecasting 2010 sales in North America will rise 2% to 4%, Europe will remain flat, sales in Latin America will rise 5% to 10%, and sales in Asia will rise 3% to 5%.
CEO Jeff Fettig credited the improved results to a reduced cost structure and improved operations that allowed the company to increase profits and generate record cash flow despite a lower demand for appliances. Whirlpool generated $1.1 billion in free cash flow in the fourth quarter, compared to a negative cash flow of $100 million in the fourth quarter of 2008. For the year, free cash flow was $1.5 billion. The cash flow growth was aided by reduced inventories, and is expected to moderate this year; the company is projecting $400 million to $500 million in free cash flow in 2010.
"We have positioned the company to deliver strong earnings growth despite a continued challenging economic backdrop in the developed economies," Fettig said in a statement. "Cost reduction, cash flow generation and balanced market execution remain key operating priorities."