BENTON HARBOR — Whirlpool Corp. (NYSE: WHR) announced that it will cut 5,000 positions in North America and Europe despite also reporting net income of $177 million or $2.27 a share, up from $79 million or $1.02 a share a year earlier.
The company also reported “adjusted” net income excluding non-operating charges of $2.35 a share, up from $2.22 a share a year earlier.
Operating profit, defined as net income minus interest and income tax, was $136 million, down from $234 million a year earlier, due to higher cost of goods sold and higher restructuring expenses. The improved reported net income was entirely due to favorable income tax treatment this year vs. last year.
Revenue was $4.63 billion, up from $4.52 billion, an increase of 2 percent the company said was driven entirely by favorable currency rate changes.
“During the quarter, we experienced weaker than expected global industry demand and elevated material costs,” said Jeff M. Fettig, Whirlpool Corporation chairman and chief executive officer. “As we previously indicated, in a period of uncertain economic growth and consumer demand, we would be prepared to take the necessary actions in order to expand our operating margins and improve our earnings. Given the weakening global economic environment, we are today announcing aggressive plans that will result in substantial cost and capacity reductions. The plans are the result of a comprehensive global review of our operations, products and manufacturing facilities.”
The company’s cost and capacity reduction plans include a workforce reduction of more than 5,000 positions primarily within North America and Europe (approximately a 10 percent workforce reduction in those regions). These plans include:
* Reduction of approximately 1,200 salaried positions.
* Closure of the refrigeration manufacturing plant in Fort Smith, Ark. by mid-2012. Production from Fort Smith will be consolidated into current North American sites to leverage existing resources and capacity.
* Relocation of dishwasher production from Neunkirchen, Germany to Poland in January 2012.
* Additional organizational efficiency actions in North America and Europe.
Overall capacity is expected to be reduced by approximately 6 million units based on today’s announcement and other actions.
These actions are expected to result in $400 million in annual cost savings by the end of 2013. The combination of these plans with announced price increases are expected to accelerate margin growth beginning in 2012. Restructuring expenses totaling approximately $500 million will be incurred over the period beginning in the fourth quarter of 2011 through 2013. The company now anticipates recording restructuring expenses of approximately $160 million in 2011 compared with its previous estimate of $75 million to $100 million.
Due to weaker than expected industry demand, lower production levels and a weak economic environment, Whirlpool Corporation now sees its outlook for 2011 GAAP diluted earnings per share in the range of $4.75 to $5.25 compared with its previous estimate at the low-end of the range of $7.25 to $8.25 per share.
Whirlpool North America: Third-quarter sales of $2.4 billion decreased 2 percent from the prior year. Overall, North America unit shipments decreased approximately 3 percent, with U.S. industry unit shipments of major appliances decreasing approximately 4 percent. The North America region reported operating profit of $62 million compared to $114 million in the previous year. Results were favorably impacted by the implementation of previously announced price increases and improved product mix. These factors were offset by lower industry volumes, higher material costs and actions taken to adjust production volume to industry demand. Based on the current economic outlook, the company now expects full-year 2011 U.S. industry unit shipments to decrease approximately 3 percent to 5 percent.
Whirlpool Europe, Middle East and Africa: Whirlpool Europe, Middle East and Africa reported third-quarter sales of $874 million, a 6 percent increase from the prior year. Unit shipments for the region were flat. Excluding currency translation, sales decreased approximately 3 percent. An operating loss totaling $(12) million in the third quarter was down from $26 million in operating profit during the prior-year period. Higher material costs, unfavorable product price/mix and lower production levels were partially offset by ongoing productivity and cost reduction initiatives. The company now expects full-year 2011 industry unit shipments to be flat to the prior year.
Whirlpool Latin America: Whirlpool Latin America reported third-quarter sales of $1.2 billion, an increase of 8 percent from the prior year. Latin America unit shipments decreased approximately 5 percent. Excluding currency translation, sales increased approximately 1 percent. The region reported operating profit of $147 million compared to $143 million in the previous year. Results were favorably impacted by ongoing productivity initiatives, increased monetization of tax credits and product price/mix. These factors were partially offset by higher material costs and lower industry demand. The company now expects full-year 2011 appliance industry shipments in the Latin America region to increase in the range of 0 to 5 percent.
Whirlpool Asia: Whirlpool Asia reported third-quarter sales of $215 million, an increase of 10 percent from the prior year. Asia unit shipments increased approximately 4 percent. Excluding the impact of currency, sales increased approximately 7 percent. Operating profit totaling $4 million in the third quarter was down from $5 million in the prior-year period. Unfavorable product price/mix and higher material costs were partially offset by volume growth and ongoing productivity and cost reduction initiatives. The company now expects full-year 2011 industry unit shipments in Asia to increase approximately 2 to 4 percent.
For the nine months, revenue was $13.76 billion, up from $13.33 billion a year earlier. Net income was $185 million or $2.37 a share, down from $448 million or $5.79 a share a year earlier.
More at www.whirlpoolcorp.com.