Whirlpool (WHR) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong revenue growth of 32% year-over-year, surpassing 2019 levels, driven by robust consumer demand and effective pricing actions [10] - Ongoing EPS reached $6.64, an improvement of $4.57 year-over-year, with an ongoing EBIT margin of 11.4%, reflecting a year-over-year improvement of 640 basis points despite 400 basis points of cost inflation [11][12] - Positive free cash flow of $769 million was generated, supported by strong earnings and successful divestitures [12] Business Line Data and Key Metrics Changes - North America experienced a revenue growth of 22%, driven by strong consumer demand and effective go-to-market strategies [16] - The Europe, Middle East, and Africa (EMEA) region saw double-digit growth in all key countries, with a year-over-year EBIT improvement of $97 million [18] - Latin America reported a significant net sales increase of 76%, with EBIT margins of 9.7% [19] - Asia faced a revenue decline of 1% due to supply chain disruptions, but still achieved year-over-year EBIT growth of $23 million [20] Market Data and Key Metrics Changes - The company expects continued strong demand in North America, driven by home nesting trends and an undersupplied housing market [30] - The EBIT guidance for North America was updated to approximately 17%, reflecting increased cost efficiencies [31] - The company anticipates free cash flow of approximately $1.7 billion, representing 7.5% of net sales, driven by stronger top-line growth [32] Company Strategy and Development Direction - The company is committed to investing over $1 billion in capital expenditures and R&D to drive innovation and growth [33] - Increased share repurchases are expected in the second half of 2021, signaling confidence in the business [35] - The company aims to maintain strong shareholder value while navigating a volatile macroeconomic environment [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing supply chain constraints and inflationary pressures but expressed confidence in the company's ability to navigate these challenges [24][25] - The company raised its guidance for net sales growth to approximately 16% and EPS to about $26, reflecting a year-over-year increase of over 40% [25] - Management emphasized that the current operating environment will persist longer than anticipated, with a new normal emerging that differs from pre-COVID conditions [95][96] Other Important Information - The company repaid a $300 million maturing bond and issued its inaugural sustainability bond, reflecting its commitment to corporate citizenship and environmental performance [36] - The company has a healthy cash balance and is positioned for potential M&A opportunities, although no immediate acquisitions are planned [76][77] Q&A Session Summary Question: Market share performance in North America - Management noted that supply chain constraints hindered market share growth in Q2, but they expect gradual improvements moving forward [42][43] Question: Revised margin guidance - Management highlighted that carryover from prior year cost reductions and ongoing cost management initiatives contributed to improved margin guidance [44][45] Question: Importance of market share vs profitability - Management stated that both market share and profitability are important, with a focus on delivering strong financial performance while expanding market share [49][50] Question: Differences in 2021 performance - Management attributed the strong performance to early recognition of raw material cost inflation and effective pricing actions [51][53] Question: Raw material inflation expectations - Management expects raw material inflation to peak in Q3 but does not anticipate a negative price-cost relationship [59][60] Question: Inventory changes in Q2 - Management explained that inventory increases were due to a low starting base and efforts to normalize inventory levels in certain regions [66][67] Question: Latin America sales guidance - Management acknowledged potential volatility in Latin America but expressed confidence in strong demand from Brazil and Mexico [68] Question: M&A priorities - Management confirmed that capital allocation priorities remain unchanged, focusing on funding the business and returning cash to shareholders [74][76] Question: Pricing environment in Europe - Management indicated that they have implemented price increases in response to inflationary pressures and expect continued benefits [80][81]