Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Whirlpool Corp (WHR, Financial) achieved global sequential EBIT margin expansion, with North America seeing a 100 basis point increase due to pricing actions.
- The company delivered ongoing EPS of $3.43, supported by pricing actions, cost takeout, and a favorable adjusted effective tax rate.
- Strong working capital management improved inventory, generating approximately $130 million of cash in the third quarter.
- Whirlpool Corp (WHR) launched innovative new products, such as the Fresh Flow Vent System and KitchenAid's first four-door refrigerators, which are expected to drive future growth.
- The Latin America business segment demonstrated strong net sales growth of 9% year over year, excluding currency, with a solid EBIT margin of 6.9%.
Negative Points
- The US housing market remains constrained by elevated mortgage rates, impacting higher-margin discretionary demand.
- Net sales in North America were down 4% year over year due to unfavorable price mix and weak discretionary demand.
- Currency fluctuations negatively impacted margins, particularly due to the weakening of the Brazilian reais and Mexican pesos relative to the USD.
- The European transaction negatively impacted the third quarter by 25 basis points due to weak macro environment and integration efforts.
- The SDA global business saw a 3% year-over-year decrease in net sales, impacted by industry declines in the US and weak consumer sentiment.
Q & A Highlights
Q: Can you explain the variance in the third-quarter EBIT margin and the expectations for the fourth quarter?
A: James W. Peter, Executive Vice President and CFO, explained that the third-quarter variance was primarily due to the equity method investment loss in EMEA. For the fourth quarter, they expect continued margin expansion driven by pricing actions, cost takeout, and normalized production levels, which will improve cost absorption.
Q: What is the outlook for the SDA segment given the third-quarter performance?
A: Marc Bitzer, CEO, stated that they are on track with their full-year guidance for KitchenAid SDA, expecting over 7% revenue growth and around 15% margin. The third-quarter decline was due to seasonality, and they anticipate a strong fourth quarter supported by new product launches and increased marketing investments.
Q: Can you elaborate on the North American MDA margins and the impact of price mix?
A: Marc Bitzer noted that the positive impact from pricing actions is fully reflected in their numbers, while the negative mix is due to a high share of replacement demand in lower-margin categories. They expect a similar price mix dynamic in the fourth quarter.
Q: How is consumer sentiment affecting discretionary demand in North America?
A: Marc Bitzer highlighted that consumer sentiment is low due to the housing market's softness and pre-election uncertainty. However, they believe in the long-term housing demand dynamics and expect improvement as interest rates decrease.
Q: What is the impact of raw material costs, particularly steel, on future performance?
A: Marc Bitzer explained that they have long-term contracts for steel, which is their largest material cost. While there might be some favorability in raw materials, they do not expect significant movements for the full year. They will provide a comprehensive outlook in January 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
