Whirlpool (WHR) Q1 2017

Marc Robert Bitzer – president and chief operating officer

Currency movements and inflation were a drag on margins

“We also expanded margins through cost productivity and unit volume growth, despite $40 million of higher raw material inflation and about $10 million of unfavorable currency from Mexican peso. As a result, our margins expanded by more than 70 basis points to 11.2% for the quarter..Our operating margins were negatively impacted by approximately $20 million of currency and demand impact in our UK business, consistent with our expectations…Steel prices are higher, but resins were substantially higher throughout the quarter, but started coming down in late March. So, yes, we faced some raw material increase in North America. ”

Europe was a miss…

“…we’re very pleased to have three of our four regions fully on track, probably even on the high end of the margin. Europe was a miss. There’s no questioning around this one…what is important is we strongly consider this of being a temporary nature and not structural, this is nothing and also if you look at the issues, there’s nothing structural… March, I would say we stabilized the situation and we exited the quarter with a much stronger performance compared to January, February”

..resulting in muted growth expectations.

“we now expect 0% to 2% industry growth in 2017, a slight reduction from our prior guidance. We’re expecting growth in Russia and Eastern Europe to be offset by slight weakness in Western Europe and the UK. Based on current market rates, currency weakness in the UK is now expected to be largely offset by the strengthening Russian ruble, but increased raw material inflation will have a negative impact on margins for our full year. ”

Mixed performance in Asia

“We continued to deliver strong performance in India, and demand growth in that country has remained robust. We also continued to grow volumes in China, despite an operational environment in China which continues to be challenging. Chinese industry declines continued and raw material inflation in the region was higher than expected, negatively impacting margins by approximately $20 million. We also saw an unfavorable mix in China, ”

James Peters – CFO and Executive Vice President

On Inflation and currency

“We are experiencing raw material inflation at higher levels than we expected in January…We are also seeing less impact from currency and expect the full-year impact of currency on EBIT margins to be approximately flat.”

Keurig 3Q15 Earnings Call Notes

5% decline in revenue due to slower installed bas growth and increased competition in pods

“The 5% decline in revenue in the quarter was below our expectations, as we continued to experience challenging category dynamics, due to slower than expected installed base growth and increased competitive activity in pods.”

More unlicensed brands leading to excess capacity at manufacturers and aggressive pricing

“As we bring in more previously unlicensed brands to our system, we believe other pod manufacturers have excess capacity, which has led them to respond with more aggressive pricing. Additionally, some branded partners have remained promotional. During the third quarter, the challenges were greater than anticipated and impacted pod volumes. ”

Growth in measured channels is strong, but weakness in some unmeasured channels

“Volume growth in the U.S. measured channels continues to be strong at 15% total category growth in the quarter, according to IRI. However, we continued to see weakness in several unmeasured channels, including the specialty channel and digital.”

Brewer volumes down 18% as work through inventory

“Brewer volumes were down 18% in the quarter, as we continued to work through the high levels of inventory at retail on Reservoir Brewers and experienced lower sales of MINI brewers, as we continue to restock that product at retailers. Brewer price realization declined in the quarter due to investments we made in brewer promotions to work through inventory.”