Q4 2024 Whirlpool Corp Earnings Call
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Speaker Change: Ladies and gentlemen, this is the operator. Today's call is scheduled to begin momentarily. Please stand by, we will begin shortly.
Marc Bitzer: and Scott Cartwright, and we'll see you next time. I'm Marc Bitzer.
Marc Bitzer: Ladies and gentlemen, this is the operator. Today's call is scheduled to begin momentarily. Please stand by. We thank you for your patience.
Marc Bitzer: Good morning and welcome to Whirlpool Corporation's fourth quarter 2024 earnings call. Today's call is being recorded.
Speaker Change: Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, and Jim Peters, our Chief Financial and Administrative Officer.
Speaker Change: Our remarks today track with the presentation available on the investor section of our website at Whirlpoolcorp.com.
Speaker Change: Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations.
Speaker Change: Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports.
Speaker Change: We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our earnings presentation.
Speaker Change: We believe the measures are important indicators of our operations as they exclude items that may not be indicative of results from ongoing business operations.
Speaker Change: We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations.
Speaker Change: Listeners are directed to the Supplemental Information Package posted on the Investor Relations section of our website for reconciliation of non-GAAP items to the most directly comparable GAAP measures.
Marc Bitzer: At this time, all participants are in listen-only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc.
Marc Bitzer: Thanks, Scott. And good morning, everyone. As we look back at 2024, we have to acknowledge that our financial performance has not yet been at the level where we all expect it to be.
Marc Bitzer: At the same time, we are pleased with the progress we made throughout the year in improving our operational performance and accelerating our portfolio transformation.
Marc Bitzer: The completion of a Europe transaction was a key milestone in our ongoing portfolio transformation, unlocking significant value creation opportunities.
Marc Bitzer: Operationally, we delivered substantial cost reduction initiatives of approximately $300 million, while at the same time stabilizing and in some cases reversing the negative input cost trends we had experienced before.
Marc Bitzer: We also simplified our organization and enabled business unit autonomy, delivering structural cost savings of more than $100 million.
Marc Bitzer: As a result, since the first quarter, we have sequentially increased ongoing EBIT margin by 170 basis points, achieving three consecutive quarters of margin expansion.
Marc Bitzer: The sequential margin expansion in combination with a favorable tax rate allowed us to deliver over $12 of ongoing earnings per share.
Marc Bitzer: We executed our capital allocation priorities and returned approximately $400 million of cash to shareholders in dividends, while paying down $500 million of debt, reinforcing our commitment to reducing our debt levels.
Marc Bitzer: We achieved significant work and capital efficiency, resulting in $385 million in free cash flow.
Marc Bitzer: As we look into 2025, we do not anticipate a sudden improvement of what has been a very challenging macro environment, in particular in the U.S.
Marc Bitzer: We are highly optimistic about the mid- and long-term prospects of the U.S. housing market, at the same time realistic about the pace of recovery, and expect only a slow and gradual improvement in 2025.
Marc Bitzer: We are following the various initiatives and ideas coming from the new administration. While some of these might be favorable for our business, we have not factored them into our outlook and instead we remain focused on what is within our control.
Marc Bitzer: As you will hear later in more detail, we will stay very disciplined in our cost controls.
Marc Bitzer: While we're not assuming significant raw material cost savings, we have already lined up cost actions amounting to $200 million and have started to develop additional opportunities to exceed this target.
Marc Bitzer: In the U.S., we have just recently announced a further reduction in the depth of our promotion pricing program. This, in combination with a compelling lineup of new and innovative products, is expected to help drive favorable price and mix in 2025.
Marc Bitzer: I'm confident that our expected 2025 margin expansion and free cash flow improvement puts us firmly on our path to a higher growth, higher margin company.
Marc Bitzer: Turning to slide six, I will provide an overview of our fourth quarter results.
Marc Bitzer: We had a fourth quarter with 2% organic growth, which, as a reminder, excludes currency and the Europe transaction, driven by strength in our SDA, global and international business.
Marc Bitzer: Globally, EBIT margins expand both sequentially and year-over-year driven by previously announced promotional programs and pricing actions in MDA North America and MDA Latin America.
Marc Bitzer: We delivered ongoing earnings per share of $4.57 and maintained our dividend of $1.75.
Marc Bitzer: Turning to slide 7, I will provide an overview of our fourth quarter ongoing event, Margin Drivers.
Marc Bitzer: tried to mix unfavorable impact and margin by 100 basis points slightly falling short of our initial expectations.
Marc Bitzer: Price and Mix was negatively impacted by a retailer destocking in our MDA North American business, coupled with very strong sellout as consumer confidence rebounded following the US presidential election.
Marc Bitzer: Aside from his one-time impact, our price and mix saw the expected benefit from the pricing actions in MDA North America and MDA Latin America.
Marc Bitzer: Our cost take-out actions delivered 175 basis points year-over-year, led by our continued manufacturing supply chain efficiency and our organizational simplification actions.
Raw materials were essentially flat as expected.
Marc Bitzer: Marketing and technology had an unfavorable 50 basis point impact as we increased investments in our new products.
Marc Bitzer: Currency reduced margin by 25 basis points year-over-year as the Brazilian real weakened relative to US dollar. The European transaction positively impacted the fourth quarter by 75 basis points as expected.
Marc Bitzer: Ultimately, we are pleased to have expanded margins year-over-year by 80 basis points.
Marc Bitzer: And now I will turn it over to Jim to review our Q4 and full-year segment results and our perspective on 2025, including our capital allocation priorities.
Jim Peters: Thanks, Marc. Good morning, everyone. Turning to slide 8, I'll review fourth quarter and full year results for our MDA North America business.
Jim Peters: Net sales declined 1% in the fourth quarter driven by negative price mix.
Jim Peters: This was primarily driven by the impact of the structural retailer destocking previously mentioned.
Jim Peters: In addition, following the U.S. presidential election, we saw consumer sentiment improve with strong sellout.
Jim Peters: With many trade customer incentives tied to sellout volume during the Black Friday period, we saw a negative price mix impact within the quarter, resulting in EBIT margins of 6.7%, which was below our expectations for the quarter.
Jim Peters: Overall, the segment delivered a full-year EBIT margin of approximately 6.5%, largely in line with our most recent full-year guidance. Turning to slide 9, I'll review the results for our MDA Latin America business.
Jim Peters: In the fourth quarter, the segment had strong net sales growth of 7% year-over-year, excluding currency.
Jim Peters: driven by industry growth in Brazil and Mexico along with pricing actions implemented in the quarter.
Jim Peters: Fourth quarter EBIT margin of 7.6% expanded by 240 basis points year-over-year, driven by pricing, cost actions, and fixed cost leverage.
Jim Peters: Overall, we are pleased with the 140 basis points of margin expansion to deliver a 7% full year EBIT margin, meeting guidance expectations.
Jim Peters: Turning to slide 10, I'll review the results of our MDA Asia business.
Jim Peters: In the fourth quarter, the segment saw net sales growth of 9% year-over-year, excluding currency.
as share gains and strong industry drove volume growth.
Jim Peters: The segment delivered a 1.2% EBIT margin in the quarter with 170 basis points of margin expansion year-over-year from fixed-cost leverage. Overall, MDA Asia delivered a 3.9% EBIT margin for the full year with 160 basis points of expansion year-over-year.
Jim Peters: Turning to slide 11, I'll review the results of our SDA Global Business.
Jim Peters: The segment had multiple exciting launches in 2024 with new products introduced in high potential growth categories for our business.
Jim Peters: These new products, along with strong direct-to-consumer sales, delivered year-over-year net sales growth of 6% for the quarter.
Jim Peters: The segment delivered an EBIT margin of 12.5% in the quarter, impacted by increased marketing investments in our new products. Overall, SDA Global delivered a strong EBIT margin of 14.3% for the full year.
Jim Peters: Turning to slide 12, I will review our guidance for 2025.
Jim Peters: We have provided a reset baseline for 2024 results, excluding both the European Major Domestic Appliance business from Q1 of 2024.
Jim Peters: and India's July through December 2024 consolidated results from the anticipated Whirlpool of India market sale transaction that I will review in more detail shortly.
Jim Peters: The reset baseline excludes approximately 1.2 billion in net sales and approximately 6 million of EBIT, creating a like-for-like comparison for 2025 guidance.
Jim Peters: On a like-for-like basis, 2024 net sales were approximately $15.4 billion, with an ongoing EBIT margin of approximately 5.8%.
Jim Peters: We expect growth of approximately 3% to 15.8 billion in net sales in 2025. Driven by a strong product launch pipeline, expected to deliver share growth in MDA North America and continued strength in our SDA global and international businesses.
Jim Peters: On a like-for-like basis, we expect a 100-basis point ongoing EBIT margin expansion to be approximately 6.8%.
Jim Peters: Free cash flow is expected to deliver $500 million to $600 million, a 3.5% cash conversion of net sales, driven by improved earnings while sustaining lower working capital levels.
Jim Peters: We expect full year ongoing earnings per share of approximately $10.
Jim Peters: This includes an adjusted effective tax rate of 20 to 25 percent, which is an increase compared to 2024 and impacts 2025 ongoing earnings per share by approximately $7.
Jim Peters: Turning to slide 13, we show the drivers of our 2025 ongoing EBIT margin guidance.
Jim Peters: We expect a positive impact of 75 basis points from price mix from previously announced pricing actions in the Americas and new product launches.
Jim Peters: In North America, this reflects recently announced promotional pricing actions and the carryover pricing actions from Q2 2024, as well as the carryover pricing actions implemented in Latin America from Q4 2024.
Jim Peters: We also have a very exciting lineup of higher mix products and over a hundred new products launching this year.
Jim Peters: In MDA North America, we expect to transition over 30% of our products, the largest one-year transition in over a decade.
Jim Peters: We do not expect a material catalyst for existing home sales in 2025, and as a result, we expect stable demand year-over-year. Therefore, we are not factoring in an improvement in the mix from a discretionary demand rebound.
Jim Peters: We will drive further reductions to our fixed cost structure and expect 125 basis points of net cost margin benefit from more than $200 million of cost takeout actions.
Jim Peters: Based on previously executed supply agreements, we expect minimal to no impact on EBIT margin from raw materials this year.
Jim Peters: With a strong cadence of new product introductions this year, we plan to increase investments in marketing and technology, which will impact margin by approximately 50 basis points.
Jim Peters: Currency is expected to negatively impact margin by approximately 50 basis points as the Brazilian Rei has weakened relative to the US dollar.
Jim Peters: Finally, we expect our portfolio transformation to provide approximately 50 basis points of margin expansion due to the closure of the Europe transaction and anticipated India market sale transaction.
Turning to slide 14, I will review our
Jim Peters: Starting with industry demand, we expect the global industry to be approximately flat in 2025.
Jim Peters: In the U.S., we expect to see similar demand trends that we saw throughout 2024.
Jim Peters: Resilient replacement demand creates a solid foundation for industry volumes, while consumer discretionary demand continues to be negatively impacted by elevated mortgage rates.
resulting in weak existing home sales.
Jim Peters: Overall, we expect the MDA North America industry to be approximately flat. 2024 saw a significant industry improvement in Latin America, with the strength decelerating later in the year.
Jim Peters: We expect the MDA Latin America industry to be up slightly between 0% and 3%.
Jim Peters: India has one of the fastest growth rates globally and we expect MDA Asia industry volumes to continue accelerating at 3 to 5 percent in 2025.
Jim Peters: Finally, we expect the SDA global industry to be approximately flat with our volume growth driven by new products and continued investments in our direct-to-consumer business.
Jim Peters: For MDA North America, we expect to deliver a full-year margin of approximately 7.5%. Previously announced pricing actions are expected to positively impact the first half margin, and additional cost actions are expected to ramp up throughout the year.
Jim Peters: For MVA Latin America, we expect EBIT expansion and a strong margin of approximately 7.5% from previously announced pricing actions and continued cost takeout.
For MDA Asia, we expect approximately 6% EBIT margin.
Jim Peters: As a reminder, the Asia guidance excludes Whirlpool of India in the second half of 2025 as the minority stake would no longer be consolidated.
Jim Peters: And, for SDA Global, we expect a strong EBIT margin of approximately 15%.
Jim Peters: Overall, we expect 150 basis point margin expansion year-over-year with an ongoing EBIT margin of approximately 6.8 percent.
Jim Peters: On slide 15, let me review how we are well positioned and expect to deliver growth and margin expansion in 2025.
Jim Peters: Our organic growth of approximately 3% will be fueled by our new product introductions.
Jim Peters: As mentioned, we have a very strong lineup of launches this year, with MDA North America transitioning over 30% of its products.
Jim Peters: Our refrigeration category will see a significant impact with approximately 40% turnover of our current products across all of our brands.
Jim Peters: With the new refrigeration products, we will not only appeal to a wide range of consumers, but also reduce manufacturing complexity.
Jim Peters: Launching in Q1, the new Maytag top load laundry pair improves functionality with an innovative deep fill option and adds efficiency and ease to consumers with a wrinkle prevent drying option.
Jim Peters: Finally, we recently launched our Whirlpool Spin & Load dishwasher rack, a revolutionary accessory built with inclusivity in mind.
Jim Peters: With an easy-to-use 360-degree spinning rack, this product increases accessibility for a wide range of our consumers. These products are just a few examples of how Whirlpool is improving life at home for our consumers.
Jim Peters: Our new product launches and best-in-class logistics capabilities support direct-to-consumer and builder channel growth, which we expect will deliver value-creating share gains in 2025.
Jim Peters: Turning to cost, as we look back at 2021 and 2022, we had unprecedented inflation of approximately $2.5 billion. However, we have not seen cost deflation to this magnitude yet, making our cost takeout priorities critical for our continued margin expansion.
Jim Peters: We've demonstrated our ability to deliver on our priorities by eliminating approximately 800 million dollars of net cost over the past two years.
Jim Peters: We will continue to deliver cost actions of over $200 million this year driven by our ongoing portfolio transformation that enables us to take additional cost actions to simplify our organization.
Jim Peters: product design changes that optimize cost while delivering innovative solutions, and further manufacturing efficiencies through our world-class manufacturing and automation solutions.
Jim Peters: To further highlight how we are investing in product leadership, on slide 16, I'm excited to review the new launches in our premium brands. The upcoming KitchenAid launch is the first full product redesign in a decade.
Jim Peters: Not only does this launch unlock a world of possibilities with customizable touchpoints such as knobs and handles to better integrate the appliance into consumers' homes, but it also will include new features and solutions that speak to consumer needs and creativity.
2025 also marks a very exciting launch in GenAir.
Jim Peters: The innovative induction downdraft cooktops not only enable infinite design potential, but also flexible induction cooking zones and a powerful and effective extraction that is quieter than a hood.
Jim Peters: The downdraft ventilation liberates your kitchen space from bulky upcraft hoods, clearing the view for windows and open-concept designs.
Speaker Change: Turning to slide 17, I will provide the drivers of our free cash flow guidance.
Speaker Change: We expect cash earnings of $1 to $1.1 billion, driven by earnings improvement and the closure of the Europe transaction, which, as a reminder, consumed $275 million of cash in 2024.
Speaker Change: We expect approximately $450 million of capital expenditures as we continue to invest in our products and fund organic growth. We plan to sustain the efficient working capital levels we achieved in 2024 and do not expect a material change in 2025.
Speaker Change: We expect approximately $75 million of restructuring cash outlays related to previously executed actions and further complexity reduction with our simplified organizational model.
Speaker Change: Overall, we expect to deliver free cash flow of $500 million to $600 million, or approximately 3.5% of net sales.
Turning to slide 18, I will review our
Speaker Change: Funding our organic growth is critical to delivering innovative products that meet our consumer needs. We will continue to invest in new products with approximately $450 million of CapEx expected this year.
Speaker Change: Secondly, we are strongly committed to maintaining our investment grade credit rating and reducing debt levels. We expect to pay down $700 million of debt in 2025, taking a significant step on our path to our two-times net debt leverage target.
Speaker Change: Thirdly, we are committed to returning cash to shareholders and last year marked the 69th year of steady or increasing dividends.
Speaker Change: We will continue to evaluate our dividend funding and ensure it aligns with our progress towards our long-term goals.
Speaker Change: As a reminder, dividend is approved quarterly by the Board of Directors. Lastly, share buybacks in M&A are not a priority for 2025.
Speaker Change: Turning to slide 19, Let Me Review Our Commitment to Improving Our Net Debt Leverage.
Speaker Change: Since 2022, we have paid down $1 billion of the Insincorator term loan debt and are strongly committed to further reducing our debt. We expect to pay down another $700 million in 2025.
Speaker Change: and expect to improve our net debt leverage to approximately 3.4 times. We are confident in our ability to further reduce our net debt leverage beyond 2025.
Speaker Change: Turning to slide 20, we have clear actions to address the upcoming death maturities.
Speaker Change: 1.85 billion dollars of debt is maturing in 2025 of which 350 million dollars is a senior note due in May and 1.5 billion dollars is the remaining term loan from the insincorator acquisition due in October
Speaker Change: With the meaningful debt repayment of approximately $700 million expected in 2025, we expect to refinance the remaining $1.1 to $1.2 billion.
Speaker Change: As we look ahead, we have ample space in our flexible debt ladder to optimize our refinancing plans.
Speaker Change: In addition to our free cash flow generation of five to six hundred million dollars in 2025, we expect to generate cash from the anticipated India market sale transaction.
Turning to slide 21, let me review the
Speaker Change: We currently hold a 51% stake in Whirlpool of India and intend to reduce our ownership stake to approximately 20%.
Speaker Change: This transaction, subject to board approval, aligns with our ongoing portfolio transformation. We hold number one positions in all our business segments outside of MDA Asia, and this will allow us to focus on our leading share and brand portfolio positions.
Speaker Change: However, we continue to believe Whirlpool of India has a strong long-term trajectory for growth. This transaction will enable Whirlpool of India to focus on growth acceleration as an independent business.
Speaker Change: along with utilizing their well-funded business to invest further in products and innovation. We believe these actions will also deliver value to Whirlpool of India shareholders.
Speaker Change: This transaction is expected to not only accelerate growth in Whirlpool of India, but also allow us to utilize the 550 to 600 million dollars of net cash generation towards our debt repayment.
Marc Bitzer: We would also have continued revenue from our Whirlpool brand license in India. This transaction is expected to close mid to late 2025. Now I will turn the call over to Marc.
Marc Bitzer: Thanks Jim. Turning to slide 22, let me review what you heard today.
Marc Bitzer: I'm proud of what the team has accomplished in 2024 through a very challenging macro environment.
Marc Bitzer: The European transaction was a major milestone delivering value to shareholders.
Marc Bitzer: We anticipate a transaction to reduce our stake in Whirlpool of India that we announced today also unlocks additional shareholder value and further strengthens our balance sheet.
Marc Bitzer: We delivered approximately $300 million of cost savings and see further opportunities to deliver more than $200 million in 2025.
Marc Bitzer: We are excited about our very strong pipeline of new products that will launch in 2025, helping us to drive sustained growth and margin progression.
Marc Bitzer: Our Latin American business remains a bright spot delivering strong top-line growth and substantial margin expansion.
Marc Bitzer: We expect our global SDA business to continue to accelerate growth in high-potential categories as their new products resonate with consumers.
Marc Bitzer: And overall, I'm confident that we have the right strategy and operational priorities in place to deliver our guides of 3% organic net sales growth and 150 basis points of market expansion.
Marc Bitzer: And now we will end our formal remarks and open it up for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad. Your first question comes from the line of Susan McClary from Goldman Sachs. Your line is open.
Thank you, good morning everyone.
Thanks, Susan.
Speaker Change: Mark, my first question is thinking a little bit about the shift that you saw in volumes this quarter. You mentioned that there was a significant destock at one of the retailers. Can you talk a bit about was that Whirlpool specific? And then with that, how should we also think of the move in industry volumes, perhaps, in your volumes, relative to AHAM, and perhaps relative to some of the geopolitical trade actions that could be coming through with the new administration?
Susan's old
Speaker Change: Let me split the answer in two pieces. One, the AHAM, the latter one, and then first about the retail destocking. You know, the retail destocking ultimately is a
Speaker Change: I would call it a reflection of supply chain efficiency. You know, post, I don't know if it's a couple of years ago now, post-COVID, inventory levels at retail were high because supply chain was not very stable and I think
Speaker Change: We have a stable supply chain. We jointly took out a lot of inefficiencies in the supply chain and have a much more efficient supply chain to secure availability. So it is a reduction of inventory. It's a one-time reduction because you just take it down to the levels where it is, but it's not more.
Speaker Change: would we have wished to happen that to occur over many quarters? No, but it's now behind us. So again, not too much to read into this one apart from, yep, it's an efficient supply chain and you don't need the inventory levels as you may have needed it two or three years ago.
Speaker Change: but it was sizable and of course by the impact of LQ4.
Speaker Change: On AM, and again this is a little bit of a similar comment as we made in Mureling calls, the AM numbers this year had, I would say, an unusual amount of distortion and re-reporting.
Speaker Change: and as such I'm a little bit careful reading too much into the monthly or sometimes even quarterly EAM numbers.
Speaker Change: Overall, I think on our 25 or 24 market share, it's been stable to slightly down. It improved after our promotional price change in April. It's eventually improved and we feel pretty good.
Speaker Change: And, of course, even though we don't have industry data, but we have our specific sell-out data, which actually we pay more attention to.
Speaker Change: And that particular following the election was very strong. So we feel very good about the momentum which builds towards the end of the quarter, which didn't translate into sell-in, but the sell-out was very, very strong.
Now, to your question with regard to geopolitical...
Speaker Change: Did we expect or anticipate some, call it more, Asia imports coming in November, December into the U.S.?
Speaker Change: Yes, and we continue to expect that, I mean not all the customs data are available, but I would expect once you see all the customs data that you will see an increase of people trying to load inventory prior to potential policy changes.
Speaker Change: Again, we don't have final data, but based on, if you look at container tariffs and everything else, I think it's very fair to assume that you saw a temporary increase of shipments from Asia, but again, we don't have a final data on this one.
Speaker Change: Okay, that's very helpful, Culler. And then, turning to price, you mentioned that you have another promotional price increase that is out there. Can you give us your thoughts on the ability to realize that effort in there, given the operating backdrop and the demand environment that you outlined on the call? And how we should be thinking about the potential for a mix as those new products that you talked about gain some momentum?
Speaker Change: Yes, it was a good question. So let me maybe just split in two pieces. One is more the promotional investments or promotional depth and the other one is more the mixed element. You know, and again stepping back even what we communicated in
Speaker Change: last year when we did the first kind of reduction of promotional depth.
Speaker Change: And then ultimately, it's a reflection of a marketplace. And again, I'm zooming out here a little bit, but it's...
Speaker Change: You know, last year we saw a 30-year low of existing home sales, existing home sales that drive discretionary demand. The market right now is strongly driven by replacement demand, and in that environment it just does not make economic sense to go very deep on promotional investment.
Speaker Change: That's what we corrected last year in April, and frankly, we found traction. We're very pleased with the progress which we saw Q2 and Q3, and it also largely was sustained in Q4. So the decision which we made last year was absolutely the right one.
Speaker Change: Given that the environment around it has not structurally changed, we continue to see the same opportunity going forward. It just does not make sense to go that deep and that long on promotion periods and that's what we communicated already throughout trade environment and
Speaker Change: Based on what we've done last year, we're very confident that it will find traction.
Speaker Change: Now, we have a part, and I think Jim alluded to this one earlier, and that is big for us, in particular North America. Again, I want to reemphasize, in the last 10 years, we've never launched as many new products in North America as in 25.
Thank you.
Speaker Change: and you know and you followed our industry for a long time. Our industry mix is the name of a game and mix comes with new product introduction. So what we showed earlier, an entire new KitchenAid line we haven't launched for 10 years. We have with JennAir a fantastic new downdraft and we basically renewed the entire refrigeration range in North America.
Speaker Change: That, we're very confident with LiveMix. So the combination of promotional lack or reduced promotional depth.
Speaker Change: product mix come from new product introduction gives us some confidence while we kind of communicate now one point or minimum one point of positive pricing in 25.
Speaker Change: Your next question comes from the line of Michael Reholt from J.P. Morgan. Your line is open.
Michael Reholt: If you could kind of give us a sense of how those product launches are expected to impact
Michael Reholt: you know, the financials throughout the year, you know, perhaps on a quarterly basis or first half, second half in terms of impact on revenues, you know, price mix, perhaps even margin. I'm particularly interested in
Michael Reholt: what you anticipate the impact will have on mix for the year and also if there's any sort of.
Michael Reholt: above average let's say you know I don't want to say one-time costs in a new products are always kind of a constant part of your efforts every year but if it's an outsized level if that's kind of a let's say a particular headwind this year relative to perhaps next year
Marc Bitzer: So Michael, again, overall we communicate one point of positive pricing. Now that is a combination of what I mentioned earlier, the promotional and the mix.
to your point and
Marc Bitzer: you know, but also mix has multiple components. One, of course, there's just a positive mix from getting the new products at an attractive price or margin point.
Marc Bitzer: But yes, we also invest in product transitions. That is fully factored in. You could call these transitions that are also, to some extent, one-time expenses, but they're factored in. So it's a kind of a combination of all these elements.
Marc Bitzer: In terms of a timing, these launches are spread throughout the year. So there's a number of refrigeration products which we introduced in March.
Marc Bitzer: display and show kind of a general product at the CABIS, that will be large in Q2, and the KitchenAid launch is later in Q3. So it's pretty much spread throughout the year, so there's not one quad where everything comes through.
but it's pretty much spread throughout the year.
Marc Bitzer: The reason why we're actually very bullish on the positive impact on mix is also keep in mind KitchenAid and General Premium Brands. And to have new attractive products, in particular Premium Brands, typically gives you a good lift in the margin.
Marc Bitzer: And the other side of the equation, refrigeration tends to be below our average margin to have now new products with frankly a better cost base, but also help on that side. So that's why these products matter a lot and based just on our margin profile, I think we will get a good list.
Marc Bitzer: So, this gets amplified as a benefit as you go forward, and that segment begins to, you know, improve. So, that's why we're really excited about this launch, kind of ahead of improvement in the discretionary segment, because I think then you'll just see even more significant benefits as that starts to come back.
Speaker Change: Thanks for that. Secondly, I wanted to hit on a couple areas that, you know, one, just a clarification on the inventory reduction that hit you in the fourth quarter, you know, curious if you could kind of quantify perhaps
Speaker Change: What you estimate the impact was that you know on on both sales and You know the the lost incremental leverage of that if you know you sold that your sell-through rate
Speaker Change: if you have any estimate on how that impacted, you know, 4Q North American sales. Secondly, any comments on, if you've been able to kind of...
quantify
Speaker Change: tariff exposure if, you know, we have 25% tariff, let's say, on China, Mexico, and Canada.
Speaker Change: So, Michael, obviously, you made an impact. We cannot give you the size of that impact of what he's talking about. We refer to sizable and we don't use that term easily.
Speaker Change: Directionally, you can say that the delta between Q4 North America run rates and versus what we had in mind is largely almost entirely driven by this one.
Speaker Change: But it's a one-time, it's behind us, so that's why, but that's directly to size. So it was meaningful, but again, it's behind us and ultimately, yeah, it comes with a much better supply chain efficiency.
Speaker Change: The second part on tariff, and we alluded to this one in the
Speaker Change: you know, again, remind everybody, more than 80% of our products which we sell in the U.S. are produced in the U.S. That is very different for our competitors. We are a U.S. producer.
Speaker Change: And we're highly dependent on the U.S. and we're proud to be in the U.S. So, most people read that you should be beneficiary from tariff. As you also know, tariff has...
Speaker Change: have positive consequences and sometimes they have also unintended negative consequences. So once we know what might be communicated, then we can give you a proper dimension of this one. But right now it's not factored in, but ultimately we're a U.S. producer.
Speaker Change: Your next question comes from the line of Laura Champagne from Loop Capital. Your line is open.
Laura Champagne: Thanks for taking my question. The small appliances business was a little bit light of what we were looking for in sales, but especially margins, so I know you're making marketing investments.
Speaker Change: and new products there. How do you get comfort that your marketing investments are targeted correctly and that the product is strong enough to support those investments?
Laura Champagne: Yes, so Laura again put in context we the overall SDA market
Laura Champagne: Similar to a major market is moving sideways. So you hadn't seen a lot of growth in the S&P market. Actually, most subsegments are actually negative on the S&P market.
Laura Champagne: We achieved a solid single-digit growth in Q4, but yes, we would like to see this business at double-digit sales growth, and that's our clear expectation. The marketing investments you saw, we broke it down for the company overall, but not for the business segment.
Laura Champagne: Well, we showed in the presentation that the marketing investments in Q4 were up almost half a point of overall company margin.
Laura Champagne: a big portion of that was for the SDA business. We launched Coffee Maker, we launched KitchenAid Gold, the Evergreen, so there's a lot of investments and they're investments in our future. In particular, when you
Laura Champagne: enter a larger new category like for us fully automatic coffee maker, you have to...
Laura Champagne: I mean, you have a wonderful product and Bawe gets very high remarks from consumers and trade. But of course, you need to tell the market that you have a new product. And we're very pleased with the momentum which we see on these subsegments, but it will take some time to build these segments and to build the awareness in this segment. But that's...
Laura Champagne: The margin in Q4 was entirely impacted by, yes, we invested a lot in these new product launches and talking about these new product launches.
All right, thank you.
Speaker Change: Your next question comes from a line of David McGregor from Longbow Research. Your line is open.
Good morning everyone. Thanks for taking the question.
Speaker Change: When you think back to the third quarter call, and you had talked about fourth quarter margin expansion, you talked about pricing, cost actions, the recovery and production rates, and then...
Speaker Change: and I'm the co-founder of ReduceDemia, a joint venture drag. I just wanted to focus in on that recovery in production rates for a moment and just talk about the extent to which you were able to achieve that or how it factored into the numbers and then should we be thinking about that as a potential benefit in 2025?
Thanks for tuning in.
Yeah, it's a David Bitt.
So David
Speaker Change: Your observation is correct. In short, basically when we realized the de-stocking of a trade in Q4, we of course adjusted our production volumes.
Speaker Change: because we didn't want to keep the factories just running and building inventories. So, we enter the year with actually fairly low inventories. By the way, as a side note, that's why we also have cash flow. Don't factor in that we can get additional working capital efficiencies because if at all, we probably slightly have to expand inventory.
Speaker Change: So, we're starting the year not with, hey, we've got to reduce inventory, we actually, versus what we think is sell-out, I think we will have...
Speaker Change: healthy and steady production volumes. To what extent that drives some leverage or volume leverage, it could, but let's see how the quad and VU progresses. But you're absolutely right, we certainly did not get a volume leverage in Q4, quite the opposite.
Speaker Change: Yeah, David, I mean, just to reiterate, as Marc said, I mean, we really came out of the year with what we would say are lower but more appropriate inventories and
Speaker Change: I think, you know, throughout this year, depending where the market goes and all that, we'll continue to try and obviously keep our production and our inventory levels matched to our sales. And so while there could be some upside because of some of the, you know, a little bit of upside in the production, we're still going to keep that match throughout this year. So it's not a significant amount of upside in production.
Speaker Change: basically of the refrigeration line, all the design for manufacturing opportunities that come with an initiative like that.
Speaker Change: It strikes me that there should be a little more in the way of pricing benefit in there than what you've got in the mix. I'm just wondering if there's offsets or, I mean, you've talked already about some of the promotional effort that needs to be done.
Speaker Change: to be done to support that initiative. But it struck me as a bit of a light number, and I'm just wondering if you could open that up and talk a little more about that.
Speaker Change: David, on my new product introduction, there's two factors. First of all, there's just timing. I mean, as I said, it takes pretty much an entire year to launch all these products. And in particular, the KitchenAid line comes in Q3, so there's a timing element.
Speaker Change: and the offsetting element, and I think Michael Wehart was referring to his own earlier, all the new products don't come with transition expense.
this next time.
Speaker Change: But, inherently, I mean, these new products, in particular on the premium side, they will drive upside for us.
Speaker Change: Your next question comes from the line of Sam Darkash from Raymond James. Your line is open.
Good morning, Marc. Good morning, Jim. How are you?
Good morning, Sam.
Speaker Change: Two quick questions. First, these are pretty straightforward, but what's the expected North American margin progression that you're expecting this year?
Speaker Change: So Sam, overall, you know, we guide for seven and a half, we don't break it down quarterly. I would expect you would see more balanced seasonality throughout the year.
Speaker Change: So we're not planning for a hockey stick. So we continue to work on all the dimensions and we know we have some carryover benefits. So I think it will be more balanced from a seasonal perspective.
Speaker Change: Yeah, I mean Sam, think about it, a lot of the cost actions we put in place
Speaker Change: in 2024 will continue and strengthen throughout 2025 and early 2025. And then with the promotional pricing that we announced in December, obviously you start to get the benefits earlier in the year for that. So, I mean, that's why Mark said it will probably be less of a progression throughout the year and more steady.
So
Speaker Change: So, Sam, again, sell-through, I can refer to our numbers because, of course, we don't know the broader industry numbers. We have some indication. First of all, in general, just for clarification, I'm referring to a North American market, a U.S. market in particular. The sell-through in the industry and with us was pretty soft coming into the election.
Speaker Change: very soft. I mean, we're used to election cycles, but it was softer than before and picked up strongly post-election. So...
Speaker Change: Again, it's not completely different from previous election cycles, but just the magnitude of things were more pronounced. And so we saw very strong sellout kind of in December. I mean, it was very strong.
Speaker Change: So, that to some extent has slowed down a little bit in January, but of course we're not releasing January numbers, and you can say is that ever related, whatever else, but we certainly saw very good momentum in the market.
Speaker Change: towards the back half of Q4. And we feel very good about how we did in that market based on qualitative feedbacks which we get from our trade customers in terms of balance of sale which we either maintained or in some case even strengthened.
Speaker Change: I would, certainly for our numbers, you should strongly assume that our sellout in Q4 was quite a bit ahead of a sell-in which we had in the beginning.
Speaker Change: the quarter. I mean, that's consistent with a prior comment. So we, we know pretty much where we sell out is very precisely, and was well ahead of what we shipped into the industry.
Speaker Change: Your next question comes from the line of Rafe Jedrosich from Bank of America. Your line is open.
Hi, good morning. Thanks for taking my questions.
And on the first and just the the
Speaker Change: The 75 basis points of price mix that you're assuming the 25 are guidance.
Speaker Change: Can you give us a break to help us understand how much of that is carryover from 2024?
Speaker Change: versus Mix, versus the price related to the product launches? And maybe what's sort of the realization that you're seeing on the 25 price so far?
Yeah, so
overall on the price mix overall, so it's...
Speaker Change: There is a small portion of carryover, but that comes from last year's April, so you basically have essentially only one quarter of carryover. The bigger portion on the promotional changes come from what we just announced, which we start seeing pretty much as of our March numbers internally.
Speaker Change: So that's the larger portion, and yes, then the element of a new product launches. We're not splitting out in terms of how much the two different elements is, but that starts in particular building throughout the year.
Speaker Change: Okay, that's very helpful. And then just on the fourth quarter North America margin, were there any additional outside of the the price mix
Speaker Change: impact from that shift that you had on inventory. Was there an additional production headwind in the fourth quarter?
Speaker Change: When we look at the 25 guide, it does look like it's below what the prior expected fourth-quarter run rate was for North America. But this does feel like a one-time inventory shift, so we're just trying to understand if there are any other changes as we go into 25.
And so there was
Speaker Change: In Q4, beyond what we talked about, there's not a lot of upper moving parts. I mean, there's always moving parts in business, but not size below material. And yes, you had, and we saw what David McGregor was earlier commenting too. Yes, we adjusted our production to not get out of hand with our inventory. And that, of course, negatively impacted that one.
Speaker Change: So, as you referred to the 25 guidance of 7.5% EBIT,
Speaker Change: You know in all transparency, you know, we the last one or two years we we did not fully deliver to what we expected
Speaker Change: And, of course, going into this year, we want to be safeguarding what we commit to and make sure that all the pricing action, all the cost actions,
Speaker Change: really will deliver these numbers. So, whatever you want to read the 7.5%, but, you know, it's kind of we fully recognize
Speaker Change: The 7.5% does not reflect what is potential of that business because we all know where the business has been and where it can be, but at the same time we want to be very realistic and be assured that we absolutely can deliver that 7.5%.
Speaker Change: And I want to remind everybody that the 7.5% is a hundred basis point improvement on a full year type of Basis and so you got to look at not just the exit rate in the quarterly run rates, but on a full year basis That's a hundred basis points Additionally, you know as we point out, you know, we will have some incremental marketing and technology investments
Speaker Change: within the year and while probably KitchenAid had a disproportionate amount this year, as we put more marketing behind the new product launches in North America, it's probably a little bit more disproportionate to the North America market that we are going to invest behind the product launches we're doing this year. So, I think that's a couple things to keep in mind.
Speaker Change: Your next question comes from a line of Mike Dahl from RBC Capital Markets. Your line is open.
Mike Dahl: Thanks for taking my questions. Back on a couple of the tariff dynamics, understood that you're not in a position to necessarily quantify potential impacts at this point, but two things that might be helpful. You know, one, can you remind us what percentage of your cost of goods are in Mexico right now and how that compares?
Marc Bitzer: to your sense of the industry. And then you did mention, Marc, the dynamic around maybe some load-in on imports.
Marc Bitzer: ahead of potential tariffs. How have you accounted for that and whether or not there's puts and takes around that flowing into the market in your guide?
Michael Reholt: So Michael, first of all, again, to recalibrate everyone on production volumes.
Michael Reholt: What I said before, more than 80% of what we sell in the U.S. is produced in the U.S.
The remaining 20% typically don't speed up.
Speaker Change: but directionally put it half and half between China and Mexico, that's directionally with some pluses and minuses.
Thank you.
Speaker Change: But again, that's pretty much the profile. That is very different from our competitors. Our competitors are largely not U.S. producers.
Speaker Change: despite all the communication and verbiage, we put it differently. In total we produce more clients than probably the entire rest of the industry combined.
Speaker Change: And of course, there's multiple sources, countries where we're sourced from. It could be China, it could be Vietnam, Thailand, Mexico. It's spread on a number of bases. So, so yes, our profile is very different than competitive sets. But as I mentioned before, it's.
Speaker Change: At this point, we just don't know what might come with a tariff, and once we know, we very well know how to factor it in, but we just don't know what to factor in today.
Now, on the second part of your question, on the
presumed loading in of some Asian imports.
Thank you. Thank you.
Speaker Change: Again, we don't have all the custom data yet, but that's probably going to come in the next couple of weeks. But I would expect that you will see some load-in, which by the way, first of all, there's also a cartoon from Asia versus seasonality coming for Chinese New Year, so there's always a little bit of an element of loading in.
Speaker Change: I think this year, in anticipation of potential tariffs, I think you saw an acceleration of that load. But again, at this point, I don't have all the final facts.
Speaker Change: We concur that from the rumors of noise which we have marketplace and ultimately if you look at container costs, it's always a good indicator.
Speaker Change: Okay, that's so helpful. Thanks. My second question, I guess just around India.
Jim Peters: In terms of the net cash proceeds of $550 to $600, Jim, I think as of last quarter, you had close to $300 million in cash consolidated on your balance sheet related to Whirlpool India. I guess I just want to clarify that $550 to $600, is that
Jim Peters: the actual cash proceeds. But then when thinking about the balance sheet, in fact, we have to offset that. And so the net is closer to kind of $300 million in terms of what ends up being reflected on your
of cash that sits within India.
Jim Peters: It's always been with the significant minority shareholder base there. Our ability to use that to pay down debt of Whirlpool Corporation was very limited and very short term in nature.
Jim Peters: That's, again, where I think it, while it comes out of the calculation, we never really had the ability to use that cash for those purposes. What we used that cash for, historically...
Jim Peters: was to help that business grow and to invest in that business there and we did acquisitions of like Ellica there with that cash. So that is the the correct math and but the real situation is that's not cash we could have used anyway.
Speaker Change: Our next question comes from the line of Eric Bessard from Cleveland Research, and this will be our final question. Eric, your line is open.
Thanks. Two things. First of all, the
Speaker Change: Jim, I appreciate your comments on the 100 basis point North American margin progress.
It is still below what?
Speaker Change: previously was expected, and so I guess I'm curious what's different.
He indicated that the four-cubed North America margin was...
a one-time event, you've got an incremental price increase.
and Scott Cartwright. Thank you.
Speaker Change: Yeah, you know, I mean, Eric, I think part of what, you know, the expectations that people had started to build into that was that a recovery in the discretionary segment would probably at least be coming in a late 24, early 25. And what, as Marc said, we've really built into here right now is we've said, listen, we're not going to put in an anticipated recovery in the marketplace.
Speaker Change: You know, we don't know what's going to happen with the tariff situations yet.
Speaker Change: So, let's make sure that the guidance that we put out really reflects what we know, what we see in front of us.
Speaker Change: and it's something that we believe we can achieve. And then if some of these other dynamics occur, you know, we will throughout.
Speaker Change: you know, the period adjusts accordingly. I think the other thing to highlight is, yes, we are taking, you know, pricing right now. And again, we expect that to drive some benefits throughout the year. And we've talked about incremental costs.
Speaker Change: we're going to look for, you know, as we go throughout the year. So I think the opportunities are there to strengthen the margins, but right now what we see in front of us would say that 7.5% is the right, you know, the right starting point for the year.
Speaker Change: Okay, and then secondly, on the pricing, the December price increase, the, you know, four or five month benefit from last year, the big new product.
Speaker Change: contribution to price mix and then the 4Q negative impact you indicated came from price mix. Why does it not add up to more than 75 basis points for 25? It seems like there would be a pathway to better than that. Is there something on the other side of this?
you know here's here's what I'd say again
Speaker Change: You know, as I mentioned kind of in the last answer that we have, yes, we do, if you take the benefit that you get of a carryover, and that is only about four months of a benefit, you know, that makes up a small portion of it.
Speaker Change: So, you know, again, we do feel good about the pricing we're taking, but we know that we will have some just cost to transition.
Speaker Change: product throughout the year. So I think that's probably the biggest driver on it. The other thing on the mix...
as Marc talked about earlier.
Speaker Change: it comes ratably throughout the year as you ramp up these new products. And the KitchenAid launch is being later in the year. That's your biggest driver, one of your biggest drivers of mix. So we do anticipate a continued benefit into 2026 with that. But also, as I mentioned, as the discretionary segment recovers at some point, I think that'll be amplified and it'll be something that we'll see even more of on a go forward basis.
Speaker Change: So I think this was the last question. So let me maybe just close and also recognize we're almost running over time. So first of all, thanks for joining us today. I mean...
Speaker Change: Obviously, as you saw when we talked about 2025, we gave you a guide, first of all, which I want to emphasize, has a more normalized tax rate in there, so underlying operational EBIT, we're planning for quite an expansion.
Speaker Change: You also noted that we didn't bake in a lot of tailwinds, either on raw material, on tariffs or an immediate recovery in the housing, so we assume it remains a kind of a
Speaker Change: not overly helpful market environment, and we focus on what we can control. The reason why we, and we talked about these building blocks, why we're very confident about it is
Speaker Change: It starts with product launchers. We invested in engineering for these launchers already the last two years, so we know they're coming and we feel good about it.
Speaker Change: The pricing which we announced in North America and we also but we announced something in Latin America We already announced we know how to execute it will require discipline and we know how to do it in
Speaker Change: I would say based on our success, we will be successful.
Speaker Change: And on the cost side, the $200 million which we talked about, they don't build on raw material, they both build on actions which are now controlled. And as Jim alluded to earlier in the remarks, we're aiming actually for more. And we will give you more update in Q1.
Speaker Change: We think we have all the right building blocks in place to absolutely deliver on the guidance and if for whatever reason the environment around us becomes more favorable, then we can talk about it, but it's not baked in at this point.
Speaker Change: So again, thank you for joining me. Sorry, and I wish you all a wonderful day. Thanks a lot.
Speaker Change: ladies and gentlemen that concludes today's conference call you may now everyone else has left the call