Jan 30, 2023
Whirlpool Sees Subdued Demand in 2023 on Slowing Economy
(Bloomberg) -- Whirlpool Corp. said it expects easing raw material costs to provide relief to profitability in 2023, even as economic activity loses steam. The shares rose in late trading.
The company expects inflation for inputs such as steel and resins to moderate, which, combined with a cost-cutting initiative, should lower expenses by $800 million to $900 million, Whirlpool said in a statement Monday. The maker of KitchenAid refrigerators sees improved operating margins this year after taking a hit in 2022, and its forecast for free cash flow surpassed estimates.
“On the material cost reduction, we’re already seeing that beginning to come through, and we’re already entering into contracts where we have lower costs,” Chief Financial Officer Jim Peters said in an interview.
Whirlpool started cutting expenses in 2022, including a 4% workforce reduction, as it opted to not replace workers who left the company. It’s also renegotiating pricey logistics agreements entered into earlier in the pandemic when ocean freight and other transportation was difficult to come by, among other changes.
The shares rose 1.6% in extended trading in New York. The stock has advanced 8.5% so far in 2023.
Whirlpool sees 2023 revenue at $19.4 billion, a decline of 2% from the previous year, but still above analysts’ average estimate of $19.1 billion.
Demand is softening as a soaring cost of living and a cloudy economic outlook make would-be customers cautious. New US home starts, a key driver of appliance demand, declined last year for the first time since 2009, while sales of existing houses fell in December to the slowest pace in over a decade.
But the Benton Harbor, Michigan, manufacturer sees demand recovering in the second half of 2023. Even if existing home sales don’t pick up, Peters expects that consumers will need to replace aging appliances.
“Many consumers don’t want to leave the home where they’ve got that 3% or less mortgage right now, but it does offer an opportunity to do some remodeling,” Peters said, adding that replacement demand drives about half of Whirlpool’s business.
Whirlpool had partially released quarterly results and annual guidance on Jan. 17 when it announced a new ownership structure for its European major domestic appliance line. The company also agreed in principle to sell its Middle East and Africa business, and it offloaded its Russia operations in mid-2022.
(Updates shares, adds CFO commentary in the third and ninth paragraphs.)
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