The appliance maker cut its ongoing earnings forecast to a loss of about $1.30 a share, from a profit of $2.50 to $3.00. It expects about $300 million of free cash flow and lower debt.
Whirlpool started the year expecting to earn about $7 a share. It now expects to lose money.
The appliance maker reported a third-quarter ongoing loss of 21 cents a share, against a profit of $2.09 a year earlier and analysts' average estimate of a $1.01 profit compiled by S&P Global. Net sales fell 8.8% to $3.68 billion, below forecasts of about $3.93 billion. On a GAAP basis, Whirlpool lost $249 million, or $3.80 a share.
It cut its full-year ongoing earnings forecast to a loss of about $1.30 a share from a profit of $2.50 to $3.00, and its sales forecast to about $14.5 billion from about $15 billion. Bloomberg counted it as the third reduction this year.
The shares fell 5.91% to $26.45 in regular trading on Monday, before the results, and were about 9% lower in extended trading.
Where the profit went
The ongoing operating margin fell to 2.6% from 4.5%, on lower sales and higher costs. The company cited higher raw-material and fuel costs; the Wall Street Journal also pointed to weak housing. Chief Executive Marc Bitzer said cost cuts and price increases had produced margin progress from one quarter to the next, but that "the pace of recovery is slower than expected."
The GAAP loss was larger because of charges the company excludes from ongoing results: a $124 million write-down of its stake in Whirlpool of India, a $54 million charge tied to the bankruptcy reorganization of a large Latin American retail customer, $35 million of restructuring, $24 million of it for its Supsa plant, and $13 million of deal costs. Those items account for most of the $273 million loss in the corporate "Other" line, against $28 million a year earlier.
The cash pivot
Against the earnings cut, Whirlpool held to a cash message. It now expects about $700 million of operating cash flow and about $300 million of free cash flow for the year, and net debt below $4.5 billion at year-end, better than its earlier target of below $5 billion. The company said its debt maturities are clear until 2028.
That target asks a lot of the fourth quarter. Through nine months, operating cash flow was negative $826 million and free cash flow negative $1.08 billion, so the full-year goal requires a large release of working capital in the final three months.
Whirlpool suspended its common dividend in the second quarter. Its diluted share count rose 16% from a year earlier, after equity and mandatory convertible issuance this year.
Two readings
One reading is that the balance sheet is now the story, and it is improving. Debt is coming down faster than planned, maturities are pushed out, and price increases in North America and Latin America in the fourth quarter give margins a path back.
The other is that the earnings base keeps moving. Repeated cuts this year, a forecast swing of more than $8 a share from January, new charges tied to India and a Latin American customer, and a cash target that depends on one quarter leave investors little to anchor on.
What to watch
Management's comments on the India stake and Latin American credit exposure, fourth-quarter price realization against demand, the working-capital release behind the cash target, and any comment on covenant headroom.