The settlement of a collection dispute helped drive Whirlpool, the world's biggest appliance maker, to a loss in the second quarter. While its results excluding that and other unusual items beat Wall Street's expectations, weaker-than-expected demand and higher-than-anticipated costs mean the company will continue to raise prices and sharpen its cost control efforts.
Whirlpool is not alone, as prohibitive costs and the dour global economy are affecting the entire appliance industry. Swedish competitor Electrolux AB reported on Tuesday that its second-quarter profit was nearly halved due to weaker demand in key markets and higher raw material costs.
Benton Harbor, Mich.-based Whirlpool Corp., whose other brands include Maytag and Kitchenaid, said Thursday that it is contending in particular with rising material and oil-related costs.
These pressures and the uncertain economy prompted the company to announce that it now expects full-year earnings to come in at the low end of its previous guidance.
Its stock slid $2.86, or 3.8 percent, to close at $72.78 Thursday.
"What we expected late last year was some economic recovery in our developed markets. We certainly didn't foresee the extraordinary inflation that we have experienced this year or the weakening of demand levels," Chairman and CEO Jeff Fettig said during a conference call.
Whirlpool lost $161 million, or $2.10 per share for the three months ended June 30. That compares with net income of $205 million, or $2.64 per share, a year ago.
The appliance maker announced in June that its Brazilian subsidiary would pay $603 million to Brazilian bank Banco Safra S.A. to settle a legal dispute that had spanned two decades.
Excluding about $3.78 per share related to the settlement and $1.08 per share for increased accruals tied to developments in antitrust matters related to its Embraco subsidiary, adjusted earnings were $2.76 per share.
That surpassed the $2.73 per share that analysts surveyed by FactSet predicted.
Quarterly revenue climbed 4 percent to $4.73 billion thanks to favorable currency trends, but that is still just shy of Wall Street expectations. Sales rose in Latin America, Europe, the Middle East and Africa, but declined in Asia due to slowing demand in India.
North America continues to be a soft spot, with sales down 7 percent to $2.4 billion. U.S. unit shipments of major appliances declined about 10 percent.
Fettig said that demand is being hurt by high unemployment, weak consumer confidence and the troubled housing market.
He said North American demand was down almost 10 percent in the second quarter _ on par with levels seen during its 2009 lows in the midst of the recession.
Marc Bitzer, president of North America, said that Whirlpool will make some additional price hikes in the region in August because of more material cost increases.
Fettig remains optimistic that price increases in some countries should lead to a stronger performance during the second half of the year.
Brian Sozzi of Wall Street Strategies Inc. said in a client note that because some of these price hikes have yet to take effect in certain countries, Whirlpool's "margins were exposed to disappointing unit shipments, cost inflation and weak pricing power."
Whirlpool now says full-year earnings will probably be at the low end of its $12 to $13 per share range. The guidance excludes charges related to the Brazilian settlement and Embraco antitrust matters.
Analysts forecast full-year earnings of $11.82 per share.