Whirlpool hopeful about 2013 after cost cuts boost profit

Thu Jan 31, 2013 9:52am EST

A worker walks out of the Whirlpool plant at the end of his shift in Evansville, Indiana November 23, 2009. REUTERS/Brian Snyder

A worker walks out of the Whirlpool plant at the end of his shift in Evansville, Indiana November 23, 2009.

Credit: Reuters/Brian Snyder

(Reuters) - Whirlpool Corp (WHR.N) reported a higher-than-expected quarterly profit and gave a strong outlook for 2013 on Thursday as price increases and cost cuts helped the world's largest appliance maker counter lackluster demand in Europe and North America.

The fourth-quarter results from the maker of Maytag and KitchenAid appliances reflect a larger trend in corporate America, which has focused increasingly on keeping a tight lid on costs to stay profitable while sales are weak.

Whirlpool, whose shares rose nearly 4 percent, has benefited from closing manufacturing facilities in North America, moving some production to lower-cost countries such as Mexico and using common parts across its lineup of dishwashers, refrigerators and washing machines. It has also been focusing less on lower-end appliances to protect margins.

"Those actions, combined with improving trends in U.S. housing and growth opportunities in emerging markets, create positive momentum going into 2013," Chief Executive Officer Jeff Fettig said in a statement.

Whirlpool forecast full-year earnings of $9.25 to $9.75 a share, excluding restructuring charges, Brazilian tax credits and U.S. energy tax credits. Analysts on average were expecting $9.17.

Swedish rival Electrolux (ELUXb.ST) is due to report quarterly results on Friday.

Whirlpool has done a "really good job of managing through a cyclical downturn," Longbow Research analyst David MacGregor said, referring to the company's efforts to eke more profit out of every dollar of sales in the past few years.

Besides cost cuts, price increases have helped boost Whirlpool's profit, a trend MacGregor expects to continue.

Despite the state of the economy, U.S. consumers have been willing to pay more for eco-friendly appliances that help them reduce their electricity bills over the long term and for devices with hi-tech features.

"It's innovation that will drive pricing," MacGregor said. "So to the extent that companies can continue to bring new features that consumers are prepared to pay for, then they will continue to have pricing power."

EMERGING MARKETS TO THE RESCUE

Whirlpool's net income fell to $122 million, or $1.52 a share, in the fourth quarter, from $205 million, or $2.62 a share, a year earlier. Excluding special items, the company earned $2.29 a share, beating the analysts' average estimate of $2.23, according to Thomson Reuters I/B/E/S.

Sales fell 2.4 percent to $4.79 billion, while analysts expected $4.88 billion.

Appliance makers have struggled with tepid demand in mature markets like Europe and North America, forcing them to raise prices and rely more on still-growing markets like Latin America and Asia.

Whirlpool, whose sales rose in Latin America and Asia during the quarter, expects 2013 industry unit shipments to increase 3 percent to 5 percent in each of those markets.

Sales in North America fell about 3 percent to $2.5 billion. The company expects some improvement in that market, its largest, due to a recent housing uptick in the United States.

Based on the current economic outlook, Whirlpool said it expected industry unit shipments to rise 2 percent to 3 percent in the United States in 2013.

The company is less optimistic about Europe. It expects 2013 industry unit shipments to stay flat in the Europe, Middle East and Africa region.

MacGregor said Whirlpool's shipment outlook for 2013 was "achievable."

Shares of Whirlpool were up 3.6 percent at $112.66 in early trading.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

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