(Updates with quotes from the conference call and additional details about capital spending, cash flow and cost reductions.)
By Bob Tita
Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- Whirlpool Corp.'s (WHR) third-quarter profit fell 47%, but the household-appliance maker raised its profit forecast for 2009 as it slashes its costs in the U.S. and sees improving sales in Latin America and Asia.
The world's largest maker of household appliances by sales expects appliance shipments in the U.S. to fall 10% this year from 2008, slightly better than it previous estimate that shipments would fall as much as 12%. Whirlpool's third-quarter sales in North America -- its largest market -- slipped 9% from last year, but operating income from the region nearly doubled to $140 million.
"We have been able to eliminate substantial costs across the enterprise," Chairman and Chief Executive Jeff Fettig said during a conference call Friday with analysts. "We're substantially reducing our break-even level" to compensate for lower sales volume.
The Benton Harbor, Mich., company has closed plants in Tennessee and Mississippi and it intends to shutter a plant in Indiana next year and move the its refrigerator assembly operations to Mexico. The company also lowered its distribution expenses by consolidating its warehouse network.
In Latin America, where the company's third-quarter sales rose 12%, the company expects appliance shipments in Brazil to increase by at least 15% this year, up from the 10% increase seen earlier. Whirlpool's sales in Brazil have been aided by sales tax breaks aimed at stimulating the economy, but the company predicted the strength in Brazilian sales would continue even after the purchase incentives end.
Whirlpool forecast a 10% increase industry appliance shipments in Asia, up from its earlier projection of flat to up 5%. The company's third-quarter sales in Asia rose 18%, with robust demand coming from India. In Europe, however, sales in the quarter fell 17% and the company expects industry shipments for the region to decline about 13% for the year.
Whirlpool raised its 2009 profit target to about $4.25 a share, compared with its prior estimate of $3.50 to $4 a share. The company also raised its projected year-end levels of cash after capital expenditures to $500 million to $600 million from $300 million to $500 million. The company expects capital expenditures for the year to be in a range of $475 million to $525 million.
In September, Fettig said a sustained recovery in the appliance industry was unlikely before 2011 and he expects demand being choppy in 2010 with some gradual improvement. The company did not offer an outlook for 2010 on Friday.
Rising unemployment levels and falling real estate values have caused consumers to postpone purchases of appliances during the recession. Appliance makers also face headwinds from the slump in U.S. housing construction and tighter credit on appliance purchases. The appliance industry is hoping a $300 million federal rebate program for purchases of energy-efficient appliances will lure shoppers back to alliance retailers' show rooms. But many states' rebate programs are not expected to start until early next spring.
Whirlpool reported third-quarter earnings of $87 million, or $1.15 a share, down from $163 million, or $2.15 a share, a year earlier. The latest results included a charge of 50 cents a share stemming from a settlement with Brazilian authorities over anticompetitive allegations leveled at Whirlpool's affiliate for appliance compressors. Revenue in the quarter fell 8.2% to $4.5 billion. Analysts surveyed by Thomson Reuters had forecast earnings of 77 cents a share on $4.28 billion in sales.
Shares of Whirlpool were recently trading up 3.6% at $76.22.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com
(Nathan Becker contributed to this report.)