GLOBAL OVERVIEW. Marc Bitzer. President and Chief Executive Officer

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Transcription:

Third-Quarter Second-Quarter 2018 2018 Earnings Review

GLOBAL OVERVIEW Marc Bitzer President and Chief Executive Officer 2

2018 THIRD-QUARTER HIGHLIGHTS All-time record ongoing EPS of $4.55 and EBIT margin expansion in 3 of 4 regions Very strong price/mix improvement; positive in all regions North America delivered strong revenue and share growth with ongoing EBIT margin expansion to 12% Announced new strategic actions to refocus and right-size the EMEA business Recently announced cost-based price increases, including U.S. kitchen and Brazil Tax rate favorability driven by tax planning and pension pre-funding 3

PROGRESS TOWARD LONG-TERM GOALS Profitable Growth Margin Expansion Cash Conversion Long-Term Goals 3-5% Annual Organic Net Sales Growth 10% EBIT Margin 5-6% FCF as % of Net Sales Net Sales YoY Change Ongoing YoY Free FCF as % EBIT Margin (1) Change Cash Flow (2) of Net Sales Q3 2018 $5.3B (2)% 6.2% (~1.5% ex currency) (0.4)pts $(874)M* nm FY 2018 (Forecast) ~$21.2B Flat ~6.4% Flat ~$600M** ~3% *Includes ~$350M pension contribution **Includes ~$200M of voluntary items, including pension contribution Record Ongoing EPS of $4.55 Expect Full Year Ongoing EPS of $14.50-$14.80 (High End of Previous Range) 4

Q3 2018 ONGOING EBIT MARGIN (1) DRIVERS (Approximate impact) 2017 Ongoing EBIT Margin 6.6% Price / Mix +2.50 Net Cost (excluding Raw Material/Tariff Inflation)* +0.25 Raw Material/Tariff Inflation -1.75 Marketing & Technology Investments -0.75 Currency -0.50 2018 Ongoing EBIT Margin 6.2% *Inclusive of Fixed Cost Takeout, Ongoing Cost Productivity (including conversion and freight and warehousing) and Restructuring Benefits Q3 5

KEY PERFORMANCE DRIVER: PRODUCT PRICE/MIX Region Q3 2018 Q3 2018 Drivers Total Company +2.5% North America Up Benefits of price/mix actions Launch of Whirlpool brand connected kitchen products EMEA Up Benefits of price/mix actions across the region Latin America Up Benefits of price/mix actions, primarily in Brazil Asia Up Benefits of price/mix actions Cost-Based Price Increases Have Delivered Significant Benefits Year-to-Date 6

REGIONAL OVERVIEW Jim Peters Executive Vice President and Chief Financial Officer 7

NORTH AMERICA THIRD-QUARTER RESULTS Net Sales ($B) Ongoing EBIT (3) ($M) Ongoing EBIT Margin (3) +5% +7% +0.2pts $2.9 $3.0 $336 $360 11.8% 12.0% Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Strong top line growth driven by positive price/mix and share gains, despite soft industry demand Record ongoing EBIT, despite ~$40M raw material/tariff inflation and ~$25M higher freight costs Announced cost-based price increase on U.S. kitchen effective late December 2018 8

LAUNCH OF INNOVATIVE NEW PRODUCTS ACROSS NORTH AMERICA New Connected Kitchen New Connected Front Load New Connected Top Load Integrated with Yummly Guided Cooking and Voice-Enabled devices Industry-first low profile microwave that fits and vents like a hood Launched in Q3 2018 Includes connected, All-in-One Washer/Dryer Industry leading innovations across the line Launching in Q4 2018 New consumer-relevant innovation and aesthetics across mass and premium top load laundry Launching in 2019 9

EMEA THIRD-QUARTER RESULTS Net Sales ($B) EBIT (3) ($M) EBIT Margin (3) $1.3-11% $1.1 -$2 nm -0.2% -3.2pts -$39-3.4% Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Volume declines lessened in the quarter, but continued to negatively impact productivity Continued raw material inflation unfavorably impacted EBIT (3) by ~$20M Operational and currency related challenges in Turkey unfavorably impacted EBIT by ~$20M Announced strategic actions to drive the region back to profitability 10

ACTIONS TO REFOCUS EMEA BUSINESS Stabilize Volumes While Sustaining Price/Mix Restore trade relationships and recover lost flooring Refocus marketplace investments to most profitable segments Realize benefits from new product launches Major Appliance Business Unit Volume Change vs 2017 H1 Q3 Q3 Q4 Est. -18% -12% -8% Refocus and Right-Size Our Business Exit Turkey domestic sales operations* Exit Hotpoint small appliances Evaluating South Africa operations New $50M fixed-cost reduction 2018 Represents Forecast ~$230M Net Sales ~$(60)M EBIT Q4 Est. $100 Million Annualized EBIT Improvement Opportunity * Does not include existing manufacturing operations Committed to Returning to Profitability 11

LATIN AMERICA THIRD-QUARTER RESULTS Net Sales ($M) Ongoing EBIT (3) ($M) Ongoing EBIT Margin (3) $966-9% $878 $55 +11% $61 5.7% +1.3pts 7.0% Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Strong improvement in home appliance EBIT margin Solid share gains and ex-currency revenue growth of ~2% Positive price/mix more than offset raw material inflation and currency of ~$15M 12

ASIA THIRD-QUARTER RESULTS Net Sales ($M) EBIT (3) ($M) EBIT Margin (3) $373-9% $339 $9 +46% $13 2.4% +1.4pts 3.8% Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Strong EBIT improvement in China, despite weak industry demand Solid margin performance in India tempered by short-term industry demand softness Positive price/mix more than offset raw material inflation of ~$10M 13

2018 GUIDANCE Marc Bitzer Jim Peters President and Chief Executive Officer Executive Vice President and Chief Financial Officer 14

2018 GUIDANCE OVERVIEW Profitable Growth Margin Expansion Cash Conversion Long-Term Goals 3-5% Annual Organic Net Sales Growth 10% EBIT Margin 5-6% FCF as % of Net Sales Net Sales YoY Change Ongoing YoY Free FCF as % EBIT Margin (1) Change Cash Flow (2) of Net Sales FY 2018 (Forecast) ~$21.2B Flat ~6.4% Flat ~$600M* ~3% *Includes ~$200M of voluntary items, including pension contribution Expect to Deliver Record Ongoing Earnings Per Share (1) of $14.50 - $14.80 in 2018 15

2018 ONGOING EBIT MARGIN (1) GUIDANCE PROGRESSION (Approximate impact) Current Previous Comments 2017 Ongoing EBIT Margin 6.4% 6.4% Price / Mix +2.0 +2.0 Global price/mix actions on-track Net Cost (excluding Raw Material/Tariff Inflation)* +0.75 +1.25 Fixed cost reduction fully-implemented and on-track Volume weakness impacting conversion/productivity Fuel inflation impacting freight costs Raw Material/Tariff Inflation -1.75-1.75 Continue to expect ~$350M cost increase Marketing & Technology Investments -0.75-0.75 Supporting global and regional product launches Currency -0.25-0.25 Currency volatility impacting GBP, BRL and RUB 2018 Ongoing EBIT Margin ~6.4% ~6.9% *Inclusive of Fixed Cost Takeout, Ongoing Cost Productivity (including conversion and freight and warehousing) and Restructuring Benefits Expect to Deliver Margin Expansion Through Price/Mix and Fixed Cost Takeout 16

2018 REGIONAL GUIDANCE NAR Current Previous Ongoing EBIT% (3) ~12% Unchanged Industry ~1% 1 2% EMEA Current Previous EBIT% (3) (2) (3)% ~(1)% Industry 1 2% Unchanged ASIA Current Previous LAR Current Previous Ongoing EBIT% (3) ~6% Unchanged Industry ~1% Unchanged EBIT% (3) ~5% Unchanged Industry 2 4% Unchanged Strong Performance in NAR, LAR and Asia Offset by Weakness in EMEA 17

2018 FREE CASH FLOW (2) DRIVERS (Approximate impact) Current Previous Comments 2017 Free Cash Flow $707M $707M Cash Earnings ~$50M ~$150M Continued business weakness in EMEA Raw material/tariff and freight headwinds Working Capital ~$125M ~$125M Significant inventory reduction in NAR and EMEA Restructuring Cash Outlays ~$(125)M ~$(125)M Higher cash outlays related to Embraco Italy plant closure Global fixed cost reduction initiative Capital Expenditures ~$50M - Reduced capital expenditures related to project timing Excluding Voluntary Items ~$800M ~$850M Pension Funding/Other Item ~$(200)M - 2018 Free Cash Flow ~$600M ~$850M Opportunistic pension pre-funding of ~$350M in Q3 partially offset by real estate portfolio optimization in Q4 Strong Free Cash Flow Enabled Us to Take Avantage of Pension Pre-Funding Opportunity 18

2018 CAPITAL ALLOCATION STRATEGY Fund the Business Target Status Capex / R&D Mergers & Acquisitions Capex: ~3.5% of net sales R&D: ~3% of net sales Explore value-creating M&A to accelerate strategy On-track On-track Embraco sale, expected closing 2019 Continue to be opportunistic Return to Shareholders Dividends Target 25-30% of trailing 12-month earnings Status Increased quarterly dividend for 6 th consecutive year Share Repurchase Continue repurchasing Maintain strong Targeted Capital Structure On-track investment grade rating Repurchased $1.1B year-to-date ~$850M authorization remaining 19

CURRENT PLANNING ASSUMPTIONS FOR 2019 Guidance Component Industry Growth Cost Inflation EBIT Margin Restructuring Expenses & Tax Expectations Modest global industry growth of 0-2% U.S. Industry growth of approximately 1% Sustained (but not increasing) raw material/tariff inflation headwinds of approximately $300M Previously-announced cost-based price increases, mix opportunities from new product launches, and strong cost discipline to mitigate headwinds Expect to deliver EBIT margin expansion Significantly reduced restructuring expenses Effective 2019 tax rate expectation of less than 20% Full 2019 Guidance Will Be Provided on Our January Earnings Call 20

Q&A AND CLOSING REMARKS 21

22

APPENDIX 23

2018 GUIDANCE COMPONENTS (APPROXIMATE IMPACT) Income Statement FY2018E FY2017A Raw Material Inflation $(350)M $(350)M Restructuring Expense $250M $275M Interest Expense $190M $162M Adjusted Tax Rate ~10.5% 14.7% Weighted-Average Diluted Shares Outstanding 68.1M* 74.4M Cash Flow Statement FY2018E FY2017A Capital Expenditures $625M $684M Pension Contributions ~$350M $42M Dividends Paid $232M** $312M Amount of Stock Repurchased $1,100M** $750M Restructuring Cash Outlays $300M $175M EMEA Legacy Product Warranty n/a $69M *Estimated full-year weighted-average diluted shares outstanding inclusive of actual share repurchases as of 9/30/2018 **YTD as of 9/30/2018 24

CAUTIONARY STATEMENT This presentation contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries ("Whirlpool") that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this presentation may include, but are not limited to, statements regarding expected earnings per share, cash flow, productivity and raw material prices. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers, and the impact of the changing retail environment; (2) Whirlpool's ability to maintain or increase sales to significant trade customers and the ability of these trade customers to maintain or increase market share; (3) Whirlpool's ability to maintain its reputation and brand image; (4) the ability of Whirlpool to achieve its business plans, productivity improvements, and cost control objectives, and to leverage its global operating platform, and accelerate the rate of innovation; (5) Whirlpool's ability to obtain and protect intellectual property rights; (6) acquisition and investment-related risks, including risks associated with our past acquisitions, and risks associated with our increased presence in emerging markets; (7) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from political, legal and economic instability; (8) information technology system failures, data security breaches, network disruptions, and cybersecurity attacks; (9) product liability and product recall costs; (10) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (11) our ability to attract, develop and retain executives and other qualified employees; (12) the impact of labor relations; (13) fluctuations in the cost of key materials (including steel, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (14) Whirlpool's ability to manage foreign currency fluctuations; (15) impacts from goodwill impairment and related charges; (16) triggering events or circumstances impacting the carrying value of our long-lived assets; (17) inventory and other asset risk; (18) the uncertain global economy and changes in economic conditions which affect demand for our products; (19) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans; (20) litigation, tax, and legal compliance risk and costs, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same; (21) the effects and costs of governmental investigations or related actions by third parties; and (22) changes in the legal and regulatory environment including environmental, health and safety regulations, and taxes and tariffs. Additional information concerning these and other factors can be found in Whirlpool's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. 25

USE OF NON-GAAP FINANCIAL MEASURES This presentation includes certain non-gaap financial measures, which we refer to as ongoing (1) measures: Ongoing net sales, ongoing earnings per diluted share, earnings before interest and taxes (EBIT), EBIT margin, ongoing EBIT, ongoing EBIT margin, ongoing segment EBIT, ongoing segment EBIT margin Other non-gaap financial measures included in this presentation are free cash flow (2), free cash flow as percentage of sales and net sales (excluding currency), which we also refer to as organic net sales. Please refer to the supplemental information pack located in the events section of our Investor Relations website at investors.whirlpoolcorp.com for a reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures. (1) Ongoing measures are non-gaap measures. See our website for reconciliation information. (2) Free cash flow is a non-gaap measure. See our website for reconciliation information. (3) Segment EBIT (including ongoing segment EBIT) represents our consolidated EBIT broken down by the Company s reportable segments. Consolidated EBIT also includes corporate Other/Eliminations of $(944) million. 26