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Whirlpool, Electrolux fight raw materials cost rises

Whirlpool, Electrolux fight raw materials cost rises
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First Published: Wed, Apr 27 2011. 07 30 PM IST
Updated: Wed, Apr 27 2011. 07 30 PM IST
New York/Stockholm: Leading global home appliance makers Whirlpool Corp and Electrolux backed price rises to offset soaring raw materials costs and forecast modest growth in core North American and European markets.
Growth in emerging markets, where the two industry leaders are focusing increasing efforts, was expected at a more rapid pace, they said in quarterly reports on Wednesday.
Whirlpool, global market leader with its Maytag and KitchenAid appliances, reported a rise in its first-quarter net profit rose to $169 million, or $2.17 a share, from $164 million, or $2.13 a share, a year earlier.
Excluding items, the company earned $2.11 a share, handsomely beating analysts’ average estimate of $1.64, according to Thomson Reuters I/B/E/S.
Sales rose 3% to $4.40 billion, well above the analysts’ average estimate of $4.26 billion.
“Despite a substantial increase in material and oil-related cost inflation, we are maintaining our full year earnings and cash flow outlook,” Whirlpool chairman and chief executive Jeff Fettig said in a statement.
He said his company had carried out cost-based price increases in many regions around the world and remained focused on accelerating cost reduction and productivity improvements to manage rising raw materials prices.
For 2011, Whirlpool sees earnings of $12 to $13 a share.
The soaring cost of metals and plastics is an increasing headache for appliance makers and Electrolux, world number two with own brands as well as AEG and Frigidaire, forecast raw materials costs of 2 billion crowns ($328.6 million) this year.
Like Whirlpool, it has announced price rises, which Electrolux chief Keith McLoughlin said he expected would stick. The Electrolux price rise in North America has averaged 4% and the group wants hikes in Europe and Latin America.
Some analysts are sceptical price rises will pass muster with bargain-hungry shoppers.
Some of Whirlpool’s sales gains in the quarter are likely a reflection of some pre-buying ahead of April’s announced price increases, industry experts Longbow Research’s David MacGregor and Keybanc Capital Markets’ Kenneth Zener have said.
Demand
Whirlpool forecast full-year US industry unit shipments rising between 2% and 3%, while Electrolux saw demand rising in North America by 3-5% in 2011.
In Europe, the Middle East and Africa, Whirlpool expected industry growth of 2 to 4%, compared with Electrolux’s view of demand growth of 2%.
The outlook for other regions was more dynamic, with Whirlpool expecting industry shipments to rise 5% to 10% in Latin America and 6% to 8% in Asia.
Both companies have gained from their presence in fast-growing Latin American and Asian markets, fuelled by the purchasing power of a burgeoning middle class.
A sluggish economy and weak housing market had dented sales in mature markets such as North America. But the companies are now profiting from signs of a US recovery.
Both companies have taken plants away from high cost countries, with Whirlpool moving some operations to Mexico. Whirlpool has also started using common parts for its dishwashers, refrigerators and washing machines.
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First Published: Wed, Apr 27 2011. 07 30 PM IST