Whirlpool results miss estimates on Europe woes
(Reuters) - Whirlpool Corp (WHR.N), the world's largest appliance maker, missed Wall Street's expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar.
The news on Tuesday pushed shares of the maker of Maytag and KitchenAid appliances down more than 6 percent and raised concerns about sales in the euro zone for the rest of the year.
Investors should brace themselves for a long period of weakness in Europe, said Brian Sozzi, chief equities analyst of NBG Productions.
"It has gotten worse," Sozzi said. "There is no reason for me to think that it is going to improve any time soon."
Home appliance makers have struggled with higher raw materials costs and tepid demand in developed markets, especially in Europe, which is reeling from an economic crisis. European shoppers have cut back spending on discretionary items such as refrigerators and freezers.
Across the 17 countries that use the euro, business activity declined in July for the sixth straight month. Manufacturing output nosedived, particularly in Germany, suggesting a recession ahead.
"The European markets continue to face very challenging macroeconomic conditions which are impacting consumer demand," Whirlpool Chief Executive Officer Jeff Fettig told investors.
Whirlpool's second-quarter sales fell 4.6 percent to $4.51 billion, missing the analysts' average estimate of $4.63 billion, according to Thomson Reuters I/B/E/S.
Sales at the company's Europe, Middle East and Africa unit fell to $692 million from $841 million a year earlier. Excluding currency translations, sales declined about 7 percent, as did unit shipments for the region.
Whirlpool said it still expected shipments to Europe, the Middle East and Africa to fall 2 percent to 5 percent for 2012. Weak consumer demand across the euro zone forced the company to cut back production in the region, it said.
Sozzi said he was surprised that Whirlpool did not cut its shipment outlook for that market. The company is probably counting on price increases to offset the potential weakness in sales volume, he said.
Both Whirlpool and smaller rival Electrolux (ELUXb.ST) of Sweden have raised prices this year to offset weakness in demand in key markets.
Last week, Electrolux reported second-quarter earnings that beat forecasts as strength in emerging markets offset weak demand in mature ones, especially Europe.
Like many U.S. companies that sell outside their home turf, Whirlpool was hurt by a stronger dollar that brings down the value of its exported goods.
LOSING MARKET SHARE?
Based on the current economic outlook, Whirlpool expects U.S. unit shipments this year to be flat to down 2 percent.
Marc Bitzer, president of Whirlpool's North America unit, said demand was at "recessionary low levels" and that he expected only a "relatively modest" uptick in the company's largest market in the back half of the year.
Sozzi said he suspected Whirlpool was losing share to Electrolux and Korean rivals like LG Electronics (066570.KS), especially since Whirlpool North America unit shipments fell about 2 percent in the second quarter, while U.S. industry unit shipments of major appliances rose about 1 percent.
The company's net profit was $113 million, or $1.43 a share, compared with a year-earlier net loss of $161 million, or $2.10 a share. Excluding items, Whirlpool earned $1.55 a share, missing Wall Street's estimate of $1.64.
The appliance maker still expects earnings of $6.50 to $7.00 a share this year, while analysts have forecast $6.50. On a conference call, Whirlpool said its first-half profit, boosted by price increases and improved productivity, was ahead of the plan that it made while entering the year.
Shares of Whirlpool were down 6.4 percent at $63.02 in midday trading.
(Reporting by Dhanya Skariachan in New York; Editing by Lisa Von Ahn)
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