(Recasts, adds comments from CEO, analyst, updates shares)
By James B. Kelleher
July 23 Whirlpool Corp on Wednesday
posted a lower-than-expected quarterly profit and cut its
full-year earnings outlook, citing a sales drop triggered by its
pending acquisition of a Chinese rival.
The U.S. appliance maker said its sales in China plummeted
80 percent last quarter as retailers in that country,
anticipating its pending merger with Hefei Rongshida Sanyo
Electric Co and the new line the merged entity will
produce, stopped buying Whirlpool-branded products.
"Trade partners are liquidating their old inventory and
getting ready for the new inventory, which will come from the
combined company," Whirlpool CEO Jeff Fettig told Reuters in an
Whirlpool and Hefei Sanyo can't officially merge until
Chinese regulators sign off on the deal -- a process that Fettig
said is taking longer than anyone expected and may drag on
through the end of 2014.
"In the meantime we're ratcheting down our fixed costs as
fast as we can and we're preparing for the integration and
waiting for the approval," he said. "And when we get it, and we
merge ... this will all be behind us and we should see the flip
side of this, which will be good sales because they will not
have bought from us for months."
Whirlpool's fixed costs in China are tied up in two plants,
one in ChangXing and another in Shunde.
Whirlpool said it now expected to report full-year net
earnings of $10.30 to $10.80 a share, down from a previous
forecast range of $11.50 to $12.00.
S&P Capital IQ equity analyst Efraim Levy said that while
Whirlpool's China business isn't huge -- the company generated
just $200 million of its $18.8 billion in global sales there
last year -- it has significant fixed costs in the country. As a
result, the temporary drop in Chinese sales "just destroys
Hefei Sanyo's Chinese sales were about $850 million last
year, Fettig said.
Whirlpool said the outlook cut also reflected investment
banking, legal and accounting costs associated with its pending
acquisition of a majority stake in Italian rival Indesit
The news came as Whirlpool, the world's largest maker of
home appliances, reported disappointing earnings. The Benton
Harbor, Michigan-based company posted a second-quarter profit
of $179 million, or $2.25 a share, down from $198 million, or
$2.44 a share, a year earlier.
That was well below the $2.91-a-share profit that analysts
had expected, according to Reuters estimates.
Whirlpool, which sells its washers and dryers, stoves, and
refrigerators under its own name as well as brands including
Maytag, KitchenAid and Jenn-Air, said it had sold $4.7 billion
in goods during the quarter, unchanged from a year earlier.
It said that sales gains in North America were offset by
weakness in the rest of the world, including Latin America,
Europe and Asia.
In early afternoon trading on the New York Stock Exchange,
Whirlpool shares were up 51 cents, or 0.3 percent, at $143.71.
(Reporting by James B. Kelleher in Chicago; Editing by Lisa Von
Ahn and John Pickering)