Inflation hammers Whirlpool Q3 profits
Whirlpool saw Europe, Middle East and Africa (EMEA) sales fall eight per cent in the third quarter of 2017.
The group reported that Q3 GAAP (that’s ‘generally accepted accounting principles’) operating profits had plummeted to $11 million (£8.3m), or 0.8 per cent of sales, compared with $40m, or three per cent of sales, in the same quarter last year.
Ongoing segment operating profit also fell, to $11m, or 0.8 per cent of sales, compared with $48m or 3.7 per cent of sales, in Q3 2016.
Although net sales remained relatively flat at $1.3 billion in the third quarter, Whirlpool said that sales and profits were impacted by “unfavourable” product price/mix, raw material inflation and unit volume declines, which more than offset favourable cost productivity and restructuring benefits.
The company said it expected full-year 2017 industry shipments to be flat up to two per cent.
“We are pleased with our revenue growth and free cash-flow improvement, but are not satisfied with our operating margins, which were impacted by raw material inflation, unfavourable price/mix and slow progress on our European integration,” said Marc Bitzer (pictured), chief executive of Whirlpool Corporation. “Thus, we are implementing strong actions to deliver our long-term goals, including recently-announced global cost-based price increases and a fixed-cost reduction initiative.”
Globally, Whirlpool saw third-quarter GAAP operating profit fall from $374m, or 7.1 per cent of sales, in 2016 to $331m, or 6.1 per cent of sales, in 2017.
Ongoing operating profit for Q3 totalled $376m, or 6.6 per cent of sales, falling from $417m in the same quarter in the previous year.
However, third-quarter net sales increased from $5.2bn in 2016 to $5.4bn, a growth of more than three per cent. Excluding the impact of currency sales increased by two per cent.
The company reported free cash flow of $348m for the first nine months of 2017, compared with $466m over the same period last year, which was driven by the company’s focus on working capital optimisation.
For the full year in 2017, Whirlpool now expects to generate cash from operating activities of $1.55bn to $1.6bn and free cash flow of around $900m.
“We reaffirm our 2020 goals and are confident that our existing and newly-announced actions will put us firmly back on track to deliver our commitments,” said Jim Peters, executive vice-president and chief financial officer of Whirlpool Corporation. “As we continue to execute our plans for value creation, we will continue returning strong levels of cash to our shareholders.”