Whirlpool Corporation, the iconic American home appliance giant, has been a fixture in households across the globe for over a century. Founded in 1911 in Benton Harbor, Michigan, the company has weathered countless economic cycles, technological disruptions, and shifting consumer preferences to emerge as a resilient and innovative industry leader.

Business Overview:

Whirlpool's journey began in 1911 when the company was originally incorporated as the Upton Machine Company in St. Joseph, Michigan. The company's initial focus was on producing electric motor-driven wringer washers, a revolutionary concept at the time. In 1929, a significant milestone occurred when the company merged with the Nineteen Hundred Washer Company and changed its name to The Nineteen Hundred Corporation.

The 1950s marked a period of rapid expansion and innovation for Whirlpool. In 1950, the company introduced its first automatic washing machine, which became a catalyst for growth throughout the 1950s and 1960s as demand for home appliances surged. During this time, Whirlpool also began its international expansion, establishing operations in Canada, Mexico, and parts of Europe.

The 1970s and 1980s brought new challenges for Whirlpool as it faced increased competition from foreign manufacturers. In response, the company invested heavily in product innovation and manufacturing efficiency, which allowed it to maintain its position as a leading global appliance brand. Notable innovations during this period included the first built-in dishwasher and the first side-by-side refrigerator.

In the 1990s and 2000s, Whirlpool pursued a strategy of growth through strategic acquisitions, including the purchases of KitchenAid, Consul, and Brastemp. These acquisitions strengthened the company's brand portfolio and expanded its geographic reach. However, this period also saw challenges, including the 2008 financial crisis, which significantly impacted demand for home appliances.

Today, Whirlpool operates in over 170 countries, employing approximately 59,000 people worldwide. The company's diversified product offerings span major domestic appliances (MDA), including laundry, refrigeration, and cooking appliances, as well as small domestic appliances (SDA), such as kitchen tools and countertop appliances. Whirlpool's commitment to innovation has been a key driver of its success, with the company investing heavily in research and development to stay ahead of evolving consumer demands.

The global appliance industry has been facing macroeconomic volatility, supply chain disruptions, and shifts in consumer demand. Whirlpool has been navigating these challenges by implementing cost-saving measures, adjusting pricing, and launching innovative new products to maintain its market position. The company's key priorities include margin expansion, debt reduction, and returning cash to shareholders through dividends and share repurchases. Whirlpool remains focused on leveraging its strong brands, such as Whirlpool, KitchenAid, and Maytag, to drive growth and profitability.

Financial Performance:

Whirlpool's financial performance has been marked by both periods of growth and challenges. In 2023, the company reported annual revenue of $19.45 billion, with net income of $481 million. Operating cash flow for 2023 was $915 million, with free cash flow of $366 million. These results reflect the ongoing impact of macroeconomic challenges and the company's strategic initiatives.

For the third quarter of 2024, Whirlpool reported revenue of $3.99 billion, a decrease of 18.9% year-over-year, primarily driven by the divestiture of the European major domestic appliance business. Net income for the quarter increased 31.3% year-over-year to $109 million, largely due to lower income tax expense. Operating cash flow for Q3 2024 was $214 million, with free cash flow of $442 million.

For the nine months ended September 30, 2024, Whirlpool reported net sales of $12.47 billion, a decrease of 13.2% compared to the same period in the prior year. Net income for the nine-month period was $85 million, significantly higher than the $4 million reported in the same period of 2023. The company's operating cash flow for the nine months ended September 30, 2024, was $271 million, with free cash flow of $586 million.

Despite the near-term challenges, Whirlpool remains focused on driving operational efficiency and maintaining a strong financial position. The company has implemented various cost-saving initiatives, including organizational simplification and manufacturing optimization, to mitigate the impact of macroeconomic headwinds.

Liquidity:

Whirlpool has maintained a focus on liquidity management to ensure financial flexibility in the face of ongoing market challenges. The company's strong cash flow generation and disciplined capital allocation strategy have helped to maintain a solid liquidity position. As of September 30, 2024, Whirlpool reported total liquidity of $3.1 billion, consisting of $1.9 billion in cash and cash equivalents and $1.2 billion of available credit facilities.

The company's financial position as of September 30, 2024, includes:

• Cash and cash equivalents: $1.08 billion
• Debt/Equity ratio: 2.66
• Current ratio: 0.94
• Quick ratio: 0.55

Whirlpool maintains a $3.5 billion revolving credit facility and a committed $1.5 billion term loan. Additionally, the company has committed credit facilities in Brazil and India that provide borrowings up to approximately $195 million.

Operational Highlights:

One of Whirlpool's key strengths has been its ability to adapt to changing market conditions. In the face of the COVID-19 pandemic, the company quickly pivoted to address evolving consumer needs, such as increased demand for home appliances as more people spent time at home. Whirlpool also demonstrated its resilience in navigating supply chain disruptions and raw material price volatility.

During the third quarter of 2024, Whirlpool continued to execute on its operational priorities, delivering 50 basis points of sequential global margin expansion. The company's North American business, which has faced significant headwinds, achieved 100 basis points of sequential margin expansion, driven by the implementation of strategic pricing actions and cost optimization efforts.

In the SDA (Small Domestic Appliances) segment, Whirlpool's KitchenAid brand has remained a strong performer, with the company launching a range of innovative new products, including the Evergreen design Stand Mixer and the KitchenAid Go Cordless system. These new offerings have resonated well with consumers and are expected to continue fueling growth in the SDA business.

Whirlpool's international operations have also been a source of strength, with the company's Latin American and Asian segments reporting solid year-over-year sales growth, excluding the impact of foreign currency. The strategic decision to contribute the company's European major domestic appliance business to a newly formed entity with Arçelik is expected to further strengthen Whirlpool's global footprint and financial position.

Product Segments and Performance:

Whirlpool operates in two main product segments: Major Domestic Appliances (MDA) and Small Domestic Appliances (SDA).

Major Domestic Appliances (MDA) Segment: The MDA segment includes Whirlpool's laundry, refrigeration, and cooking appliances. This segment is further divided into regional sub-segments:

• MDA North America: Net sales for this segment decreased 4.3% and 6.0% for the three and nine months ended September 30, 2024, respectively, primarily driven by unfavorable product price/mix.

• MDA Latin America: Net sales for this segment increased 0.4% and 7.6% for the three and nine months ended September 30, 2024, respectively, primarily driven by increased volumes, partially offset by unfavorable foreign currency and product price/mix.

• MDA Asia: Net sales for this segment increased 9.1% and 9.4% for the three and nine months ended September 30, 2024, respectively, primarily driven by increased volumes and favorable product price/mix.

• MDA Europe: This business was contributed to a newly formed entity with Arçelik as of April 1, 2024, and is no longer reported as a separate segment.

Small Domestic Appliances (SDA) Segment: The SDA segment includes Whirlpool's small domestic appliance products, such as the InSinkErator business. Net sales for this segment decreased 3.0% and increased 3.6% for the three and nine months ended September 30, 2024, respectively, primarily driven by volume and product price/mix.

Challenges and Outlook:

While Whirlpool has demonstrated its ability to adapt to changing market conditions, the company is not without its challenges. The ongoing macroeconomic volatility, including high inflation, rising interest rates, and geopolitical tensions, have created a challenging operating environment. The US housing market, a crucial driver of Whirlpool's North American business, has been impacted by elevated mortgage rates, dampening consumer demand for discretionary home improvement projects.

To address these challenges, Whirlpool has remained focused on executing its operational priorities, including pricing actions, cost optimization, and strategic portfolio management. The company has reaffirmed its full-year 2024 guidance, which includes:

• Net sales of approximately $16.9 billion
• Ongoing EBIT margin of approximately 6%
• Ongoing EPS of approximately $12
• Free cash flow of approximately $500 million

Whirlpool also reaffirmed its Q4 2024 North America MDA EBIT margin guidance of 8-9%. The company updated its full-year 2024 adjusted effective tax rate guidance to approximately negative 18% to 22%, down from the previous guidance, due to the benefits from tax planning strategies related to the European transaction. Starting in 2025, Whirlpool expects its adjusted effective tax rate to be approximately 20% to 25%, though its cash tax rate will be significantly lower.

It's worth noting that in the previous quarter, Whirlpool had provided a target of 6.3% ongoing EBIT margin for Q3 2024. However, the actual Q3 2024 ongoing EBIT margin came in at 5.8%, a 50 basis point variance, which represented around $20 million. This margin miss was largely due to the negative impact from the company's 25% stake in the EMEA business.

Looking ahead, Whirlpool's long-term growth prospects remain promising, driven by the company's strong brand portfolio, commitment to innovation, and global diversification. As the housing market eventually recovers and consumer sentiment improves, Whirlpool is well-positioned to capitalize on these market dynamics and continue delivering value for its shareholders.

Conclusion:

Whirlpool's history as a leading home appliance manufacturer has been marked by both periods of success and challenges. The company's ability to adapt to evolving market conditions, implement strategic cost-saving initiatives, and maintain a diversified global footprint have been instrumental in navigating the complexities of the current operating environment. With a focus on innovation, operational efficiency, and prudent financial management, Whirlpool is poised to weather the ongoing macroeconomic headwinds and continue its legacy as a trusted and innovative leader in the home appliance industry.