Maytag earnings tumble

Maytag earnings tumble
Date July 23, 2004
Section(s) Local News
DES MOINES (AP) — Maytag Corp. posted a loss Friday of $41.1 million, or 52 cents a share, due to falling sales in housewares and commercial products and major costs from a strike, legal costs and a corporate restructuring plan.

That compares to a profit of $25.2 million, or 32 cents a share, a year earlier.

Sales for the quarter were $1.15 billion, down 1 percent from $1.16 billion from a year ago.

Investors reacted negatively to the news, dropping the company’s stock price to a low of $18.54 in heavy trading this morning. The stock has hit 52-week lows three times this week.

The nation’s third largest appliance manufacturer wrote off 13 cents a share in restructuring charges for a refrigerator plant closing in Illinois and 11 cents for a company reorganization that shed 1,100 salaried jobs.

It also took 16 cents a share as a contingent for pending litigation involving front-loading washers where the company faces a class-action lawsuit for alleged design flaws and 9 cents a share for an adverse judgment in a case involving commercial distributorships for Amana products.

A three-week strike at the flagship laundry production plant in Newton cost the company about $5.5 million, said Ralph Hake, Maytag‘s chairman and chief executive.

A contract with union employees at Maytag‘s Amana refrigeration plant expires in September. Maytag‘s Galesburg refrigeration plant is scheduled to close in September and company’s new Reynosa, Mexico, refrigeration plant is operational.

The Hoover floor care division continued to drag down earnings with disappointing sales, Hake said.

“Our operational performance was disappointing,” he said. “The housewares segment loss had the largest impact because we anticipated a recovery at Hoover floor care.”

Hake said increased costs of steel hurt the appliance segment. A new labor contract with the United Auto Workers at Newton and the restructuring should help lower future costs, he said.

“Within our Major Appliances segment, Maytag Appliances underperformed because of material costs, under-absorbed burden and the strike at our Newton facility,” Hake said. “However, several major risks have been addressed, including the Newton work stoppage and costs related to early generation front-load washer litigation. Our ‘One Company’ cost savings plans, which will lower our cost structure dramatically, are on track.”

Discussing the Newton facility during the company’s earnings conference call, Hake noted that, including the renegotiation of the Newton production workers’ contract, the company will save $13 million in pension benefits. But even with the new contract, the Newton plant remains the company’s highest cost facility.

“”We did make progress in this Newton contract,” Hake said. “We did not get sufficient progress that Newton would be competitive today compared to our other laundry plants.”

Hake continued saying the company would need additional cost-saving for Newton “to be competitive and eligible for new products.”

In June, Maytag announced a corporate restructuring plan designed to eliminate $150 million in annual costs. The move eliminated 20 percent of the corporation’s salaried workforce with the closure of its Hoover headquarters facility in North Canton, Ohio, and the merger of Hoover, Maytag Appliances and Maytag Corporate business operations into one group. Locally, several hundred salaried positions are to be eliminated as part of the move.

The vending machine segment also saw lower than expected sales, Hake said.

Maytag appliance sales increased by 2.4 percent, far below the industry unit growth of 9.7 percent.

“In the second quarter, we gave back our first quarter branded market share gains,” Hake said.

Housewares sales, which includes Hoover, fell 13.5 percent, while commercial products dropped 8.2 percent.

Maytag lost $2.4 million, or 3 cents a share, for the first six months of the year on sales of $2.37 billion. That compares to a profit of $59.7 million, or 76 cents a share, on sales of $2.3 billion a year earlier.

Hake said new products to be launched in the last half of the year, including newly designed refrigerators, should help improve sales.

Hake said he expects 15 new products launched by Hoover should help turn around flagging sales in the floor care division.

Hake had announced in early June that the company would miss earnings expectations by a substantial amount.

Analysts had expected earnings of 40 cents a share for the quarter, according to a survey by Thomson First Call.

Hake said the company expects earnings for the year in the range of 20 to 30 cents a share which includes restructuring charges of about 80 cents a share.

That’s far below the expected $2 a share analysts had expected.

“While this quarter has been a huge setback and disappointment to all, we will recover,” Hake said, “Maytag is a better company than the second quarter indicates.”

Newton Daily News Reporter Andy Karr and Editor Peter Hussmann contributed to this story.


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