Michigan-based appliances maker, Whirlpool Corp. (WHR) recently entered into a national buying contract with another Michigan-based company namely Champion Home Builders, Inc., a subsidiary of Champion Enterprises, Inc.
As per the contract, new housing and modular homes by Champion Home Builders will include appliances of Whirlpool Corporation, particularly kitchen and laundry appliances for a number of life stages.
Champion Enterprises, Inc., together with its subsidiaries, produces and sells factory-built housing in the United States and western Canada. The company is also engaged in the production of steel-framed modular buildings in the United Kingdom that are used in prisons, military accommodations, hotels, residential units and other commercial applications.
Champion Enterprises has planned to incorporate a wide variety of products from the best brands in their homes to improve their product appeal to the homebuyers. The objective of the contract with Whirlpool is to capitalize on the appliance-maker’s brand value and acceptability in the nation. Whirlpool’s products include everything from entry-level to design-focused specialty appliances, together with a wide range of energy-efficient appliances.
On the other hand, Whirlpool will largely benefit from increased domestic demand, which has been badly affected by competition due to unfavorable trade issues. The most severe problem arises from the fact that the Korean government has indulged in an unfair trade practice of giving subsidies to Samsung Electronics Co. and LG Electronics Inc., which is not justifiable.
Thus, to maintain the company’s leadership position, Whirlpool has strategically targeted the emerging economies, which have huge potential going forward. The emerging economies of Asia and Latin America, particularly China, India and Brazil, are expected to see strong demand for appliances in the near future.
In the last financial year, the company showed notable improvements in Latin America and Asia, despite higher material costs and unfavorable foreign currency fluctuations. Shipments to Latin America climbed 18% while those to Asia jumped 9%.
As a result, Whirlpool exhibited a strong performance during fiscal 2010. Net profit almost doubled to $171 million or $2.19 per share from $95 million or $1.24 per share in the prior-year quarter. For full year 2010 net profit increased significantly to $7.97 per share from $4.34 per share in 2009. Sales for the fourth quarter were up 4% year over year to $5 billion while sales for the full year rose 7% to $18.4 billion. The company expects a higher shipment growth of 5%–10% in Brazil and 6%–8% in Asia.
We have a “Neutral” recommendation for Whirlpool Corp. in the long term.
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