Whirlpool Corp (WHR.N) reported a higher-than-expected quarterly profit on Tuesday as it benefited from price increases and improved productivity, prompting the world's largest appliance maker to raise its earnings outlook for the year.
The news, which boosted Whirlpool shares to their highest level since April 2011, came the day after Swedish rival Electrolux (ELUXb.ST) said it expected demand to stay weak in Europe and that it planned to push ahead with cost and production cuts in that market.
Appliance makers have struggled with higher raw materials costs and tepid demand in Europe, forcing them to raise prices and rely more on still-growing markets like Latin America.
Whirlpool, the maker of Maytag and KitchenAid appliances, had raised prices in July. Both Electrolux and Whirlpool had also done so last year to pass soaring raw material costs on to customers. At the time, analysts worried if the moves could hurt their market shares, especially as South Korean rivals such as LG Electronics Inc (066570.KS) and Samsung Electronics Co Ltd (005930.KS) kept prices unchanged.
Despite the skepticism, Whirlpool has managed to push through substantial price increases, especially in its largest market, North America, said NBG Productions chief equities analyst Brian Sozzi.
"They had ... the guts to raise prices in 2011 in a market overall that was not very receptive, and they stuck," Sozzi said.
On a conference call, Whirlpool executives admitted that the company had lost some market share in North America and Europe.
"Our share loss is actually very small," said Marc Bitzer, president of Whirlpool's North America unit. In North America, he said, most of the market share loss was in the lower-end appliance segment, and Whirlpool actually gained share at the higher end.
Sales declined in the third quarter, as they did for many other manufacturers exposed to Europe and changes in foreign exchange rates. Whirlpool's sales fell to $4.50 billion from $4.63 billion, while analysts were looking for $4.58 billion.
The company continues to expect 2012 industry unit shipments to be flat to down 2 percent in the United States and to show an increase of 7 percent to 10 percent in Latin America. It forecast declines of 5 percent to 7 percent in Asia and 2 percent to 3 percent in Europe, the Middle East and Africa.
TIGHT LID ON COSTS
To cope with uneven demand around the globe, Whirlpool has focused on cutting costs. Last fall, the company took some drastic actions, from reducing manufacturing capacity to axing about a tenth of its workforce in North America and Europe.
Whirlpool has also closed some manufacturing facilities in North America and moved some production to lower-cost countries such as Mexico. In recent years, it also started using common parts across its lineup of dishwashers, refrigerators and washing machines.
Whirlpool's third-quarter net earnings fell to $74 million, or 94 cents a share, from $177 million, or $2.27 a share, a year earlier.
Excluding restructuring expenses, Brazilian tax credits and other special items, the company said it had earned $1.80 a share. Analysts on average were looking for a profit of $1.60 on that basis, according to Thomson Reuters I/B/E/S.
For the full year, Whirlpool forecast earnings of $6.90 to $7.10 a share, excluding items, up from its prior outlook of $6.50 to $7.00.
Whirlpool shares were up 4.8 percent at $90.45 Tuesday on the New York Stock Exchange. They touched a high of $90.83 earlier in the session.
(Reporting by Dhanya Skariachan in New York; Editing by Lisa Von Ahn and Sofina Mirza-Reid)