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Whirlpool's (WHR) India Unit to Buy Additional Stake in Elica
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Whirlpool Corporation’s (WHR - Free Report) India unit inked a deal to acquire an additional stake in Elica PB India for $57 million. Whirlpool India already owns a 49% stake in Elica India and is in the process of buying additional 38% shares, which will bring the total ownership to 87%. This will make Elica India a majority-owned subsidiary of Whirlpool India and its financial results will be included in that of the latter. Post the agreement completion, which is likely to be by September end, both companies will continue to operate as before.
With more people taking up cooking as a hobby due to the pandemic-induced stay-at-home trend, Whirlpool has been witnessing growing demand for cooking and built-in appliances. As a result, Elica’s robust product portfolio and strong distribution network in India will enable the company to offer better and premium cooking solutions for customers.
What Else Do You Need to Know?
Whirlpool remains well-poised on the back of strong customer demand and the execution of its cost-based pricing initiatives. As part of its efforts to improve margins and productivity, the company has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing raw material deflation opportunities, effectively managing working capital, and syncing supply chain and labor levels with demand. It recently announced significant cost-based price increases of 5% to 12% in various countries across the globe.
Backed by the actions, adjusted operating profit (“EBIT”) of $607 million in the second quarter of 2021 improved significantly from $204 million in the year-ago quarter. Adjusted operating margin expanded 640 basis points to 11.4%, with all regions registering meaningful margin expansions. This marked the company’s fourth successive quarter of double-digit margin growth.
The price mix improved 600 bps, owing to lower promotions and the aforesaid gains from cost-based pricing. The EBIT margin also reflected a 550-bps improvement from net costs related to a carry-over impact of structural cost takeout actions, higher volumes and cost-productivity initiatives. The company expects the positive margin momentum to continue throughout 2021, aiding the results.
Management raised its 2021 outlook on its last reported quarter’s earnings call. The company envisioned net sales (excluding currency impact) growth of 16% for 2021 compared with 13% growth mentioned earlier. It also raised the adjusted earnings per share outlook to $26.00 versus $22.50-$23.50 mentioned previously. For 2021, the EBIT margin is likely to be 10.5%, with 600 bps of margin expansion, driven by price and mix as well as gains from cost-based pricing actions. Management expected net cost takeouts to aid the margins by 175 bps in 2021, as the company realizes the carry-over benefits of its ongoing cost initiative and solid revenues.
Shares of this Zacks Rank #3 (Hold) stock have gained 20.3% in a year’s time compared with the industry’s growth of 18.5%.
Image Source: Zacks Investment Research
However, the global raw material cost inflation, particularly in steel and resins, is likely to hurt its business by $1 billion in 2021. The raw material cost inflation is expected to peak in the third quarter of 2021. The company also anticipated increased investment in marketing and technology to hurt margins by 125 bps in 2021.
Image: Bigstock
Whirlpool's (WHR) India Unit to Buy Additional Stake in Elica
Whirlpool Corporation’s (WHR - Free Report) India unit inked a deal to acquire an additional stake in Elica PB India for $57 million. Whirlpool India already owns a 49% stake in Elica India and is in the process of buying additional 38% shares, which will bring the total ownership to 87%. This will make Elica India a majority-owned subsidiary of Whirlpool India and its financial results will be included in that of the latter. Post the agreement completion, which is likely to be by September end, both companies will continue to operate as before.
With more people taking up cooking as a hobby due to the pandemic-induced stay-at-home trend, Whirlpool has been witnessing growing demand for cooking and built-in appliances. As a result, Elica’s robust product portfolio and strong distribution network in India will enable the company to offer better and premium cooking solutions for customers.
What Else Do You Need to Know?
Whirlpool remains well-poised on the back of strong customer demand and the execution of its cost-based pricing initiatives. As part of its efforts to improve margins and productivity, the company has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing raw material deflation opportunities, effectively managing working capital, and syncing supply chain and labor levels with demand. It recently announced significant cost-based price increases of 5% to 12% in various countries across the globe.
Backed by the actions, adjusted operating profit (“EBIT”) of $607 million in the second quarter of 2021 improved significantly from $204 million in the year-ago quarter. Adjusted operating margin expanded 640 basis points to 11.4%, with all regions registering meaningful margin expansions. This marked the company’s fourth successive quarter of double-digit margin growth.
The price mix improved 600 bps, owing to lower promotions and the aforesaid gains from cost-based pricing. The EBIT margin also reflected a 550-bps improvement from net costs related to a carry-over impact of structural cost takeout actions, higher volumes and cost-productivity initiatives. The company expects the positive margin momentum to continue throughout 2021, aiding the results.
Management raised its 2021 outlook on its last reported quarter’s earnings call. The company envisioned net sales (excluding currency impact) growth of 16% for 2021 compared with 13% growth mentioned earlier. It also raised the adjusted earnings per share outlook to $26.00 versus $22.50-$23.50 mentioned previously. For 2021, the EBIT margin is likely to be 10.5%, with 600 bps of margin expansion, driven by price and mix as well as gains from cost-based pricing actions. Management expected net cost takeouts to aid the margins by 175 bps in 2021, as the company realizes the carry-over benefits of its ongoing cost initiative and solid revenues.
Shares of this Zacks Rank #3 (Hold) stock have gained 20.3% in a year’s time compared with the industry’s growth of 18.5%.
However, the global raw material cost inflation, particularly in steel and resins, is likely to hurt its business by $1 billion in 2021. The raw material cost inflation is expected to peak in the third quarter of 2021. The company also anticipated increased investment in marketing and technology to hurt margins by 125 bps in 2021.
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