Moody’s Investors Service, the credit rating agency of Moody’s Corporation (MCO) has upgraded its rating outlook on Whirlpool Corp. (WHR) to ‘Positive’ from ‘Stable’. At the same time, Moody’s also reaffirmed its senior unsecured ratings of Baa3 – a level above the junk status.
The upgradation in rating outlook reflects Moody’s confidence in the company’s efficient cost structure, better credit profile, improving demand trends across its operating regions and the expectation of strong earnings performances in the upcoming quarters. In fact, during October last year, Standard & Poor’s Ratings Services also raised Whirlpool’s outlook to positive, citing its credit measures and improved as well as consistent performance in the past quarters.
In 2010, Whirlpool earned a profit of $9.65 per share compared with $5.01 per share in 2009. Sales escalated by 7% year over year to $18.4 billion driven by product innovations, competent cost management and more importantly enough, an efficient execution of business plans.
Whirlpool has been continuously benefiting from its internal cost cutting and productivity initiatives, despite high raw material and fuel costs. One of the notable steps in this regard is the company’s multi-year project in Michigan with an objective to improve its productivity, operations and energy efficiency.
An improving global demand situation is another positive aspect. During the most recent quarter, Whirlpool saw an 18% increase of its sales in Latin America followed by a 9% growth in Asia with a marginal drop in the North American and the European markets.
The company identified huge opportunities in the emerging markets of Asia and Brazil and thus raised its 2011 outlook as well. The home-appliance maker estimated a 5%–10% rise in unit shipment in Brazil accompanied by a 6%–8% expansion in the Asian markets.
However, soaring raw material and energy prices may emerge as bigger threats in the near future. The company may fail to raise its product prices adequately in order to mitigate the impact of the rising costs. But Moody’s believes that increasing the prices of the more expensive products will serve the purpose.
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