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Cost cuts help Whirlpool post surprise profit

By Dhanya Skariachan
/ Source: Reuters

By Dhanya Skariachan

BANGALORE (Reuters) - Whirlpool Corp reported a surprise quarterly profit on Monday as cost-cutting efforts helped the world's biggest appliance maker weather a slump in global sales, and it backed its 2009 profit forecast.

Shares of the maker of Maytag and KitchenAid appliances rose as much as 20 percent on the news, making the stock one of the top percentage gainers on the New York Stock Exchange.

The results came a week after Whirlpool's largest rival, Sweden's Electrolux , also reported an unexpected first-quarter profit on tough cost-saving measures.

"Our efforts during the quarter to reduce headcount and decrease spending in most areas are yielding very good results," Whirlpool Chief Executive Jeff Fettig said on a call with analysts.

Whirlpool, which has been in talks with banks about renewing credit lines, has frozen salaries, reduced its contribution to retirement plans and taken other steps to cut costs.

In April, the company announced plans to close its washing machine factory in Shanghai to consolidate its Chinese operations.

Whirlpool, which ceased production at a Mississippi plant this month and plans to close a facility in Tennessee in August, expects to reduce capital spending by at least 10 percent for the full year.


Whirlpool, whose products also include refrigerators, freezers, dishwashers and dryers, has seen sales crumble during the global slowdown. It had warned earlier in the year that profits would continue to fall in 2009.

"From a topline perspective, we saw significant weakness across most major markets during the first quarter with the exception of Brazil, India, and China, where demand was relatively stable," Chief Financial Officer Roy Templin said.

Whirlpool, whose brands include Jenn-Air, Amana, Brastemp, Consul and Bauknechtand, reported first-quarter earnings of $68 million, or 91 cents a share, down from $94 million, or $1.22 a share, a year earlier.

Adjusted for one-time items, profit came to 59 cents a share, while analysts on average were expecting a loss of 18 cents, according to Reuters Estimates.

Sales at the Benton Harbor, Michigan-based company fell 23 percent to $3.6 billion.


On a conference call, Whirlpool said it saw a somewhat more challenging market than it previously had expected for the second quarter and rest of the year.

"Some consumers continue to delay replacement purchases, even for appliances that are beyond repair, due to the economic uncertainty," said Michael Todman, president of Whirlpool's North American division.

While Whirlpool's businesses in Asia and Brazil delivered strong results, demand was significantly lower in other Latin American markets and in Europe.

Based on current economic conditions, the company expects 2009 U.S. industry unit shipments to fall about 10 percent to 12 percent from 2008 levels, compared with its prior outlook of a 10 percent decline.

In Europe, Whirlpool expects 2009 industry unit shipments to decline some 10 percent from 2008 levels. It had previously expected a fall of 8 percent in the region.

Whirlpool, which has seen some consumers trade down to lower-priced brands from competitors in the slump, said: "The first half of 2009 has been and will continue to be a very challenging market from a demand decline perspective."

The company, however, expects demand to improve in the second half of the year. It backed its 2009 profit forecast of $3 to $4 a share.

For 2009, Whirlpool sees free cash flow of $300 million to $400 million.

Whirlpool shares were up $4.77, or 11.7 percent, at $45.50 in afternoon New York Stock Exchange trade after rising as high as $48.93 earlier on Monday.

(Editing by Derek Caney, Maureen Bavdek and Lisa Von Ahn)