惠而浦 (WHR) 2012 Q1 法說會逐字稿

Good morning and welcome to Whirlpool Corporation's first quarter 2012 earnings release call.

Today's call is being recorded.

For opening remarks and introductions I would like to turn the call over to Senior Director, Investor Relations, Joe Lovechio.

Thank you and good morning.

Welcome to the Whirlpool Corporation first quarter 2012 conference call.

Joining me today are Jeff Fettig, our Chairman and CEO, Mike Todman, President of Whirlpool International, Marc Bitzer, President of Whirlpool North America and Larry Venturelli our Chief Financial Officer.

Our remarks today track with the presentation available on the investor section of our website at whirlpoolcorp.com.

Before we again let me remind you that as we conduct this call we will be making forward-looking statements to assist you in understanding Whirlpool Corporation's future expectations.

Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K and 10-Q, as well as in the appendix of this presentation.

Turning to slide three, we want to remind you that today's presentation includes non-GAAP measures.

We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of, or are unrelated to results from our ongoing business operations.

We also think that the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations.

Listeners are directed to the appended section of our presentation beginning on slide 36 for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

With that let me turn the call over to Jeff.

Well, good morning everyone and thank you for joining us on the call today.

As you saw earlier this morning, we released our first quarter financial results.

Overall we had a very strong start to the year as we benefited from our margin expansion efforts and our continued innovation investments.

Our previously announced and implemented cost-based price actions along with our cost reduction initiatives have put us on track to deliver our full year 2012 guidance.

We had particularly strong operating performance in our North America and Latin America regions.

In fact in North America, ongoing operating business profits tripled year-over-year despite a 10% industry unit decline in demand.

I think the strength of our global brand portfolio is evident as we continue to see strong consumer preference for our innovative new product launches, which overall is driving very positive mix in many of our key markets.

And despite the weaker than expected demand, our working capital in the first quarter is at a record low, driven largely by lower inventory levels.

As a reminder during our last call we clearly defined what we call our ongoing business operational performance which excludes unusual items restructuring expense and tax credits.

You can see our results for the quarter on slide six.

Sales were relatively flat despite weaker appliance demand, unfavorable currency and the effects of lower BEFIEX monetization.

Our diluted earnings-per-share from ongoing business operations improved to $1.41 a share compared to $0.64 a year ago.

With our operating earnings more than doubled.

And we saw year-over-year implements in our free cash flow from business operations which we will discuss in detail later.

Turning to slide seven, you will see a summary of our current demand outlook for the year.

Overall our outlook remains unchanged as we continue to expect flat to slightly positive demand growth around the world for the year.

However, in different parts of the world we have seen a slower start to the year but overall, globally, we see the same demand levels as we originally forecasted.

In North America we're currently seeing demand trending towards the lower end of our previous flat-to-plus-three range.

In Latin America, in part due to a continuation of the Brazilian tax holiday program combined with strong underlying economic fundamentals both in Brazil and other Latin American countries, after a very good first quarter we see demand at the high end of our plus-two-to-plus-five percent range for the region for the year.

In Europe we continue to forecast an industry decline ranging from minus two to minus five percent for the full year, as consumer confidence in the Euro zone remains weak.

And finally, in Asia we expect our full year demand in Asia to be at the lower end of our previously stated plus-two-to-plus-four percent after a relatively weak demand level in Q1.

I will now turn to slide eight which shows our key business drivers for the year and how they are tracking versus our previous guidance.

As I mentioned overall we continue to benefit from the already announced global cost-based price increases.

As we progress through the year we will comp against the 2011 global price increases.

So we do expect price mix to continue to be a positive driver of margin expansion throughout the year but at a lesser rate than we saw in the first quarter.

Our restructuring cost in capacity initiatives are on track and these benefits will ramp up and accelerate throughout the year in 2012.

In addition we will continue to bring the canes of strong innovation which will contribute to the overall improvement in our revenue growth, our mix and overall operating profit.

And finally, we estimate raw material inflation to be at the higher end of our $300 million to $350 million range but we still expect to more than offset all of this inflation through strong productivity benefits which will ramp up in the second half the year.

So overall we're pleased with the very good start in the first quarter.

We are, as we look out through the rest of the year, we believe we are on track to deliver our EPS and free cash flow guidance for the year.

At this point in time I will turn it over to Marc Bitzer for an update on our North America operations.

Thank you, Jeff and good morning everyone.

Let me start by giving my perspective on North America's performance for the quarter.

I show on slide 10 overall US industry unit shipment decreased 10% during the quarter.

Despite a very weak industry demand, our ongoing business operations margin grew to 6.7% during the quarter, up from 2.3% in the prior year.

This is largely the result of our previously announced and fully implemented cost-based price increases, and an overall improved product price mix.

It is important to note that our market share is up sequentially, which clearly speaks to a success of our innovation [in] marketplace and our flawless execution of the price increases.

Raw materials continue to be a headwind for us and we have announced an additional cost-based price increase effective July 1.

In addition our costs and capacity reduction initiatives are on track for the region.

Turning to slide 11, net sales of $2.2 billion decreased 1% from last year driven by an overall unit volume decline.

We saw our North America unit shipments down 7% in the first quarter which is slightly ahead of the US industry decline of 10%.

Operating profit reached $151 million versus the $59 million in previous years.

Ongoing business operating profit was also $151 million as compared to $52 million in 2011 which means we nearly tripled our operating margin.

Turning to slide 12, you can see just a few examples of [our] innovative cooking product launches.

You also see a picture of our new Cleveland Tennessee manufacturing facility.

The facility officially opened during this month and includes a state-of-the-art production facility and distribution center and will be the largest premium cooking plant in the world.

As demonstrated by our improving market share, despite our cost-based price increases, it is clear that our innovation is a competitive advantage and key to our success in the marketplace.

We have a strong cadence of new product innovations planned throughout the year.

I want to highlight the progress we made against our business priorities for North America during the quarter as you can see in slide 13.

As mentioned before, we have successfully implemented our cost-based price increases, [our] cost and capacity reduction initiatives as well as our ongoing productivity programs will ramp up during the second half the year and are on track to generate the expected benefits.

We were also able to leverage our strong product innovation during the quarter realizing not only sequential margin improvements, but a sequential share gain.

Now before I turn it back over to Mike I want to take a moment to address the recent ITC decision related to our bottom mount refrigerator anti-dumping petition.

We know that facts clearly demonstrated that bottom mount refrigerators from south Korea and Mexico were being dumped in the United States market.

And in March the Department of Commerce confirmed that, in fact, dumping has occurred, and issued a final anti-dumping and countervailing duty determination, assigning both anti-dumping and countervailing duty margins.

Obviously we are extremely disappointed with the ITC decision, and we will explore every option including appeal through law [for] the apparent disconnect between Commerce final determination, the dumping is occurring, and the final ITC determinations that these dump imports did not cause injury to US industry and their workers.

In addition, and this is very important, going forward we will continue to monitor foreign producer behavior in the marketplace.

If we see a reverse into a dumping activity that prevailed prior to 2012 we will take all appropriate legal actions.

It is very important to note that this decision does not influence the actions that we took last December when we filed anti-dumping and countervailing duty petitions for large residential clothes washer from South Korea and Mexico.

Now I would like to turn it over to Mike for his review of our international operations.

Thanks, Marc.

You will find an overview of our international business performance on slide 15.

We had solid performance in our Latin American region both within and outside of Brazil.

The region reported sales of $1.3 billion, up 3% from the prior-year period with appliance unit shipments up 2%.

Excluding the impact in currency, sales increased 7%.

We saw improved price mix across the region.

There was strong demand for T3 products which include washing machines, refrigerators and ranges, while as previously discussed we elected to move away from lower end, unprofitable microwave ovens and air conditioners.

Strong sales and product price mix gains were partially offset by higher material costs and lower monetization of Brazilian BEFIEX tax credits.

As we discussed on the last call the Brazilian government declared an appliance sales tax holiday in December.

The program originally set to expire on March 31, was extended for an additional 90 days through June 30th, 2012 as expected.

Irrespective, however, of the stimulus program we continue to be very positive about the prospects for our Brazil and Latin American international business.

Europe remained challenging during the quarter with continued weak consumer demand across the Euro zone.

Our cost-based price increases and cost reduction initiatives are expected to progressively yield margin improvement sequentially throughout the year.

In Asia, Q1 industry demand in India and China was slower than expected.

China's economy grew at its weakest pace in nearly three years in the first quarter of 2012, and inflation in India continued to dampen demand.

However, we continue to expect recovery throughout the year as we comp against easier numbers.

If you turn to slide 16, you will see our Latin America first quarter results.

Operating profit for the quarter totalled $121 million compared to $174 million in the prior year.

Favorable product price mix was offset by lower monetization of tax credits, unfavorable currency and higher material costs.

On an adjusted basis, excluding Brazilian tax credits, operating profit for the quarter totalled $114 million compared to $108 million in the prior year period.

Turning to slide 17, in the first quarter our Europe, Middle East and Africa sales decreased 8% year-over-year to $688 million with units shipments down 4% compared to the prior-year period.

Excluding the impact of currency, sales decreased approximately 3%.

Operating profit of $5 million improved sequentially from the $32 million fourth quarter loss but was down from last year's prior year of $25 million.

Our first quarter results in the Asia region are shown on slide 18.

Net sales decreased 3% during the quarter to $202 million, down from $208 million in the prior-year period with unit shipments increasing 1%.

Excluding the impact of currency, sales increased approximately 2%.

The region's operating profit was $9 million for the quarter compared to $11 million in the prior year.

Overall favorable product price mix and volume growth was more than offset by unfavorable currency and material costs.

Turning to slide 19, you can see just a few examples of our international product launches during the quarter.

In addition to the products you see here our Bauknecht brand expanded into Hong Kong, allowing us to reach consumers in the super-premium segment in that growing market, and in Latin America we launched the region's first premium front-load laundry pair, leveraging our new global laundry platform for Brastemp brand consumers.

And in India, starting in March we are launching more than 150 new products during the year across six appliance categories.

The largest launch in the region's history.

The products deliver innovation, designs and features that consumers want and at price points that make the products accessible to every consumer segment.

In China as you will see on slide 20 we established a strategic alliance with the retailer Suning expanding our ability to reach large numbers of consumers through a respected trade channel.

As parts of the strategic alliance we have preferential access to Suning's national distribution network of 1,700 retail outlets throughout China, and preferential access to fast growing market segments in China's smaller but faster growing cities.

This relationship demonstrates our strong commitment to the China market.

Suning's distribution network as well as its excellent reputation as a leading electrical appliance retailer in China, make it the ideal choice for this partnership which is a key enabler to our China growth strategy to become the leading International appliance brand in China, and grow our domestic sales to $1 billion over the next several years.

Turning to slide 21, you will see the progress our international business made towards our operating priorities.

While demand remained soft in some markets we are beginning to see signs of growth returning for our business in emerging markets.

Our margin expansion efforts are on track through improved price mix, productivity, and realizing the committed restructuring benefits.

And lastly we are supporting our business with a strong year of innovation which is driving the growth and price mix improvements we are seeing across the Company.

Now I would like to turn it over to Larry Venturelli for his financial review.

Thanks, Mike, and good morning everyone.

First let me start by putting into context our first quarter performance relative to full year guidance.

During our last call and shown on slide 23 we guided to annual GAAP EPS of $5 to $5.50 per share, and ongoing business operations EPS of $6.50 to $7.

Free cash flow guidance was $100 million to $150 million with our ongoing business cash flow of $950 million to $1 billion dollars.

Our first quarter results are well on plan to deliver our annual guidance which we are reconfirming this morning.

You may recall the guidance reflected essentially flat industry growth for the year and was based on margin expansion driven from price and mix improvement, restructuring benefits from our cost and capacity reduction programs, ongoing productivity which we expect during the second half of this year will offset material cost headwinds.

And finally, we are increasing our marketing investment to support the significant new product innovation we are introducing this year.

As we discussed on our last call, we expect annual ongoing business operating profit margin to be between 5.5% to 6%.

On slide 24 you will note that our ongoing business operating profit margin essentially doubled from 2.7% in Q4 to 5.3% in Q1 essentially at the bottom of our full year range.

We are very pleased with our margin progression and remain confident in our guidance for the year.

On slide 25, you will note that for the quarter GAAP EPS was $1.17 per share compared to $2.17 last year.

It's a very important to note that last year included $1.54 per share for BEFIEX tax credits and the energy tax credit program which was not extended this year.

Our 2012 first quarter results reflect only $0.8 per share from the BEFIEX tax credits.

Adjusting for restructuring expense and the previously mentioned tax credits our ongoing business operations delivered $1.41 per share more than doubling from the $0.64 last year.

Slide26 shows the drivers of our year-over-year ongoing business operations improvement which was entirely driven by margin expansion.

Price mix contributed approximately four points to our margin expansion during the quarter.

We expect strong year-over-year price mix for the first half of the year and will begin to comp against last year's price increases during future quarters.

Our cost and capacity reduction program is on track, and contributed approximately one point to margin improvement.

We remain confident in achieving the $200 million or one point of margin improvement this year as these benefits continue to build throughout the year.

And additionally we expect one point of margin improvement this program in 2013.

We did generate approximately a half a point of margin improvement from normal productivity.

Our productivity, consistent with our project pipeline, will build throughoutthe year and we expect to more than offset material headwinds during the second that of this year.

Material headwinds negatively impacted margins by approximately two-and-a-half points.

As Jeff mentioned we clearly estimate headwinds to be at the higher end of our previous three-- three-and-a-half-- $350 million range.

In summary delivering a 5.3% ongoing business operations margin during the first quarter which is our lowest volume quarter of the year, puts us well on track to achieving our annual guidance of five-and-a-half to six points.

I wanted to briefly discuss three items.

First our effective tax rate was 27% which is consistent with our annual guidance of 26% to 29%.

And it is important to note that last year we benefited from $54 million of energy tax credits.

Secondly restructuring expense was $34 million, up significantly from last year.

Slide 29 illustrates that we continue to expect the total expense of our restructuring program to be approximately $500 million through 2013.

And as I previously mentioned we are on track to deliver the $200 million in benefits in 2012 with an additional $200 million of benefits in 2013.

Thirdly, BEFIEX tax credits included in our GAAP results were $7 million compared to $66 million last year.

The biggest driver of this decrease was the tax break program initiated by Brazilian government which reduced the amount of BEFIEX credits we were able to monetize.

The program was started December 1, 2011, was extended an additional three months through June 30, 2012.

During our last call we told you that our 2012 guidance includes $60 million to $80 million of BEFIEX credits compared to $260 million -- $266 million recognized in 2011.

We modeled our 2012 guidance similar to the government's previous program which was extended to nine months.

Should the current seven month program not be extended to nine months, we would be able to monetize additional credits of approximately $45 million.

And just as a general reminder both restructuring expense and BEFIEX credits are excluded from our ongoing business operation results and guidance along with last year's energy tax credit one-time items.

Moving to our free cash flow results on slide 30 as expected we reported a free cash flow use of $515 million for the quarter compared to a use of $336 million last year.

These results include the final installment of $275 million related to the Brazilian collection dispute.

In comparison to last year we also had higher pension contributions, higher restructuring cash outlays, and significantly lower monetization of BEFIEX tax credits.

Slide 31 depicts the underlying cash flow through our operations after taking into account these short-term cash requirements.

As you can see, we are driving improvements in our cash flow from ongoing business operations as we largely put our legacy legal liabilities behind us this year.

Overall, working capital is at a first quarter record low driven largely by lower inventory levels.

On slide 32 you will see that our 2012 cash priorities remain, funding the business including capital expenditures and pension contributions, dividends, as I previously mentioned funding the remaining legacy legal liabilities which will largely be behind us after this year, and debt repayment.

Now I will turn it back over to Jeff.

Well let me sum up our comments today.

As you heard we are on pace to deliver our earnings and cash flow guidance for the year.

Even as we continue to expect flat to slight demand improvement, we are executing very well against all of our key initiatives and remain confident in our ability to meet our margin expansion targets.

Overall we delivered a very strong first quarter and we expect the full year 2012 to be a very strong year of operating profit performance improvement.

Long-term, we remain very confident in the opportunities that we see to grow the business as we have outlined in slide 35.

In shorter-term we will continue to rapidly adjust our -- our overall business to -- to adapt to changes that continue to take place in the overall global marketplace.

So with that I will conclude our formal remarks and at this point in time I would like it open it up and take any questions that any of you may have.

Thank you, sir.

(Operator Instructions).

With that we will take our first question from the site of Eric Bosshard.

Your line is open.

Good morning.

Hey Eric.

(multiple speakers) Morning

Curious about North America specifically.

You showed good progress with price, and units obviously were softer -- I think softer than what you would have expected.

As you look through the balance of the year, how are you seeing retailers respond to how things played out in 1Q and if you think is this a sustainable situation.

Hey Eric.

It's Marc.

Let me try to answer your question.

Put it in two different buckets.

One is the units, the other one is the pricing as you mentioned.

First of all units, as we reported units were down on industry shipments 10%, which is slightly worse than expected.

At the same time you have got to also note that during the quarter we saw quite a bit of trade inventory reduction, which is as you know difficult to peg but I would peg it around 3% so true sell-through about (inaudible) minus seven, and in addition you compared to previously (inaudible) industry inventory build.

So you've got to take that into account.

With that in mind we still forecast the full year industry shipment to be roughly flat, which is at the low end of our previous guidance.

So that's the unit side.

On the pricing, our pricing stuck but it's more important even if the quality of our pricing it was just not [like-to-like] and we also had a very strong mix in our Q1 performance and we see that continuing.

So we're -- we remain in fact very confident that our full year which is in line with our previous guidance.

I guess to refine the question a little bit how are the retailers looking at pricing and promotion with sell-through down 7% in the first quarter how are they thinking about the balance between unit sell-through and profitability?

And Eric as you know most major retailers they report their numbers in a month from now so it's difficult to say, but I would argue that most retailers see similar benefits as we have.

You know, you can -- you can sustain a softer unit environment if you price realization through the entire industry, [by a chain] (inaudible) year but it's -- it's too early to say that in a data [base] we've got to wait for the retailers report.

Eric this is Jeff.

I would add maybe to Marc comments this is really as we talked about particularly the second half of last year, this is a replacement market, you know, as we look through the data and see the type of purchases it's not a discretionary market due to where consumer confidence is now.

If you look at the retailers that have reported over the -- this point, the smaller retailers the ones that are doing well are expanding their margins they're benefit ting from -- they understand that it's a replacement market.

They're benefiting from margin improvement and they're get comp store sales increases because of those higher revenues and that's something that I guess as you think about being a fundamental replacement market is -- is easy for them to understand.

I guess following onto that you commented that you thought price mix would be the most favorable in 1Q and would ease a little bit 2Q to 4Q.

It sounded like that was a function of comparisons but should we be thinking that there's any change or erosion in what took place in 1Q on the price and promotional change?

Help us understand a little bit better if you would there

Yes, Eric.

No.

That is not the case.

We -- when we talked about the plus-- four plus points of price mix in Q1 year-over-year is based on the comparison.

As you perhaps recall we began it varied per market but we had a very significant price increase in North America, I think April 1st of last year so that -- it is not an erosion of current pricing or mix.

It is a comparison of against the pricing we took last year.

Eric, it's Marc Bitzer.

In addition to this one, first of all 4% that Jeff referred to is globally.

North America was north of that number.

The other thing is we have announced a price increase July 1st so that is already out there in the market and we are executing that.

Great.

Thank you.

We'll move next to the site of David McGregor.

Your line is open.

Yes good morning and congratulations on a pretty good quarter in a pretty brutal environment.

Thanks.

(multiple speakers) Thanks, David.

I guess just on the price increases, if we could pick up from where you just left off, Marc.

What percentage of your current North American revenues will be impacted by that.

My understanding is that it's going to be a moreselective kind of a price increase.

I'm just trying to get a sense of breadth here.

David, it's Marc Bitzer.

As you know we don't communicate the details.

I mean of course our trade partners make up the price list and that is well out in the market.

I can only characterize in general terms.

It's not of the same magnitude as the April last year one, but we're serious about this one and we have real, material cost increases, and we reflect that in our cost base price increases.

And to what extent have all your competitors gone along with this so far?

David, honestly, I can't comment on this one.

You probably need to ask (inaudible) I'm sorry.

Okay.

And I know it's pretty difficult doing business in Europe right now, but presumably you have got raw material cost inflation there as well so how do you go about securing a price increase in Europe if in fact that's possible right now.

Well, David, as you know, this is Mike Todman.

We announce price increase in Europe and we're in process of executing them.

We actually did see some positive price mix in the first quarter.

We expect to for that to progressively get better as we go throughout the year and we're just being -- we're sticking to and committed to the increases that we've announced.

Good.

Thanks very much and good luck.

Thanks, Dave.

(multiple speakers)

We'll move next to the site of Michael Rehaut.

Your line is open.

Hi.

Thanks.

Good morning, everyone.

Morning, Mike.

(multiple speakers)

Yes.

First just going back to better understanding pricing relating to the raw materials.

You know, conceptually should we be thinking that the -- the price increase announced for -- for July 1st to roughly offset the impact of the higher raw materials?

Is that a good way to think about it and maybe not just in North America but to the extent that you're trying to do this on-- continue to push price on a global basis.

Mike, it's Marc.

Let me just comment on North America.

The answer is yes.

The July one is conceptually reflecting the real material cost increase which we have as well as the last four ones also reflected a long-term trend of material cost increase.

Michael, the more macro question globally is absolutely we do expect offset raw material increases in part via pricing.

The other part productivity.

Not only in North America but around the world.

We have already announced in -- have either implemented or have announced in other markets in Latin America and India and other places price increases also, where we have high inflation.

When you have -- when you have a high inflation environment, there's really not any other options other than to do that.

Yes, Michael, this is Larry.

Just for reference if you go back to the last three years including 2012, we're absorbing close to a billion dollars of higher material cost inflation so we obviously are taking a pricing to recover that.

Great.

I appreciate that.

And just as a follow-up thinking about margins on a longer term basis, a two parter.

One, can you just remind us how you, thinking about incremental operating margins company wide for incremental sales what is that on an incremental margin basis -- operating margin basis?

And if you can also longer-term walk us through from a timing perspective the 8% consolidated operating margin goal that you've laid out in the past I believe on your Analyst Day a year ago -- correct me if I'm wrong -- I think you were thinking that could be achievable by 2015, was it, and if there is just any update on how you are thinking about that playing out.

Yes, Michael.

This is Jeff.

Let me take the last part first.

Actually the date we had talked -- back to the -- the actually fall of 2010 when we had the Investor Day we outlined our expectations to drive the business to at least 8% plus operating profit by 2014.

And as I said last fall and in February our expectations haven't changed.

Clearly last year was a setback given the environment, but as we announced last October we took very strong actions with our number one priority being margin expansion.

So this year based on what we gave in the guidance and what we have outlined in our plans we expect to be at 5.5% to 6% operating profit this year.

We also, as a reminder, will have next year approximately $200 billion which is roughly a full point of restructuring benefits in addition to what we get there and we will continue to invest in innovation and we will continue to do the things that we need to drive mix and expand margins, but what we have reiterated was our expectations that we would get to the 8% plus by 2014.

Now, shorter-term your question -- I will turn it over to Larry

Yes I'll just add to what Jeff said, Michael, in that guidance.

We're not assuming a huge improvement in demand in the global industry, when Jeff talks about that margin.

And we believe that we have the -- the visibility to get there.

Based on the things that we can control.

The question you asked on incremental margin if you look at our business and the cost we have taken out of the last several years, our cost of goods sold is highly variable in nature today, and if you look at our SG&A, it's I would say split between variable and fixed so that should help you with your incremental question.

Thank you.

Moving next to the site of Ken Zener.

Your line is now open.

Good morning.

Morning, Ken.

(multiple speakers)

Well done.

Congratulations.

It's too bad the ITC ruling doesn't sync with any logical extension of what dumping damage means.

And I 'd beinterested if you guys have a better understanding of what damage to an industry means.

But with the US volume down as much as it is, it does stand in contrast to consumer recovery we're seeing in some other durable items, housing, [nascent], cars.

Can you comment on the apparent disconnect, and if in your opinion it's -- how it might be related to price.

I know you talked about the absence of elasticity but it does seem surprising that the volume is not clicking up at all.

Thank you.

Ken, it's Marc.

Marc Bitzer.

Let me just try to answer that.

First of all on the question as to why (inaudible) recovering.

I would argue without being too much (inaudible) the rationale factors when you look at how housing affordability, mortgage rates, housing costs would speak in favor of a faster recovery of a demand.

What stands in the way is still consumer confidence which is still lagging behind.

We do not expect a major recovery of consumer confidence until the end of the year, and that will be the central point in terms of when we see the industry improving so I think it's already in the back of consumer confidence, not necessarily rational factors.

They would clearly speak in favor of a faster recovery.

The second part of your question pricing versus demand.

As Jeff mentioned before and we're basing our on [extension] our place in the market.

Which historically has been and is now also confirmed is not elastic to pricing.

Replacing -- if you replace the consumer you buy and that is not necessarily driven by (inaudible) of 10% discounts at all.

The only thing I would add, Ken, is that on the pricing question I mean if you look at the average pricing, all those are still below where they were three years ago so -- in a time where he had tremendous inflation and to reinforce Marc's point is the business that we are seeing is upgrading in mix.

So, again, I stick by what we have said.

I don't think pricing has had any impact on consumer demand in this market.

On the first comment the ITC, Marc really clearly laid out our position.

The only -- I would only reinforce two points.

One is the Department of Commerce conclusively determined there is dumping taking place in this marketplace from those markets.

At a large magnitude particularly for our type of industry.

The ITC rule was determined whether that was the cause of material damages to the industry and in this case Whirlpool, and it is unexplainable to us how that conclusion could have been reached and -- but we will not have the public opinion for probably another several weeks any way.

So until we see that, there's really nothing more we can say about it.

Understood and I -- when you guys get that public opinion, obviously I hope you it continue to post it to your Investor Relations page.

You can get things from there but it's complicated.

Is there any just broad comments you can make because to us it's unexplainable, however, despite your very rational decisions you have behavior that might undermine your rational decisions.

I mean if that's any color you could give to that I think that would be useful.

And has there been any Brazilian land development by competitors.

Thank you very much.

I'm sorry.

What was the last.

Brazilian land development.

Oh, okay.

By your competitors.

Yes.

You know, we can't give a lot of color right now on this other than a couple points.

One, I think anybody who's followed -- follows trade is as shocked as we were about this decision.

I think, clearly the people who did the work and came to the conclusion there is dumping it was crystal clear.

So in the end you have a group of folks who have their discussions and deliberations and that's where they came out.

And I cannot add any color to that.

(multiple speakers)I can only reiterate Marc's point that we don't accept that outcome based on what we know, and that we are going to continue every avenue possible on all fronts to ensure that illegal dumping in the United States that impacts American investment and jobs is -- is not acceptable in this global trade -- under global trade law.

So Larry you want to talk.

I think he asked questions on developments of -- new manufacturing in Brazil from competitive perspective and then from what we have seen so far.

No.

There has been no new developments from -- I think you're referring to Koreans.

Right.

I am.

Thank you.

We will line of Sam Darkatsh Your line is open.

Morning Jeff, Mike, Marc, Larry, how are you?

(multiple speakers) Great.

How are you?

Couple questions.

First off I thought Mike in your prepared remarks you mentioned that you were walking away from microwave and air conditioning units in Latin America.

If true, could you help quantify the impact of that in the quarter on your units and then also help reconcile the guidance for the year for Latin America units does that include or excluded the walk away business if you could help put some color around that.

Yes, yes.

I will.

First of all, we haven't completely walked away.

What we have done is on the lower end -- lower profitable segments of those categories, particularly microwaves, air conditioners, vacuum cleaners we've just elected not to sell.

It actually -- if you look at total units had -- had upwards of six points if you will on -- on the total units sales.

So it was -- it was fairly significant but it was a decision that we think makes a lot of sense.

And as we look at our guidance for the marketplace in total we have included a total T9 as we call it in Latin America view so it includes microwaves, it includes some air conditioners, it doesn't include some of the other items that -- that we saw.

So we should expect then, inferring from your words then, that the industry growth closer to the high end of the range less whatever the impact would be in this case six points for Whirlpool units for the year?

Is that how to look at that?

No.

Yes.

No.

Actually let me maybe give you a -- a more specific.

If you look at T3 units in the first quarter they were up around 20% in the industry.

We were up well over that in T3.

So -- but and so if you expand it to the other ones, the industry was up about 11% and -- and what we said is right now we see -- we have seen this stimulus, if you will, extended to tax holiday through the second quarter and -- and so that -- that's the only visibility that we have so we're just calling the industry now up to the high-end of our range 5% and it includes everything, okay?

Now, the T3 we expect to continue to be higher than -- than that 5%.

But the 2% to 5% is the T9?

That's correct.

Okay.

Last question and I will defer to others.

There's been some chatter in the marketplace about Daewoo specifically coming up for bid and perhaps your potential interest in it.

I understand that there's probably some sensitivities around talking about that specifically but, Jeff, could you talk about your appetite for acquisitions and where it might make sense going forward?

Yes.

First of all, we don't comment on rumors as Larry laid out our priority for the year in terms of our investments M&A was not on the priority list and we're very focused on -- we have some great investments and innovation that we're getting -- we expect to get great returns on.

Funding the business, funding the dividend and pension, paying off a legal liabilities those are our priorities for this year.

Thank you much.

And we have time for one last question.

For that we will go to the line of Josh Pollard.

And your line is open.

Thanks for sneaking me in.

There was no change in your guidance post pending what seams like a pretty a material piece of business with Suning in China.

Is this a relationship that doesn't go into place until 2013 or do you need to build facilities to begin a material ramp?

I'm just trying to understand why that isn't having more of an impact on your numbers.

Yes, Josh.

First of all, in terms of guidance we're tracking very well in our -- through the first quarter after a very strong start.

It's April and so there was -- we just felt confident in reinforcing the guidance that we have.

The Suning relationship has been built over a very long period of time and it is actually driving significant revenue growth off of a very small base in ChinaSo -- so I don't expect -- it will have a material impact on our China business, but that has not yet grown to a size where that's having a material impact on the total Whirlpool business.

So in other words, you guys are already -- you guys already have a relationship with Suning and you.

Oh, absolutely.

You went to preferential status.

Does that -- does that increase your -- what you would perfect to sell to them by 20%, 50%, double it?

At least double.

Okay.

And that's' double over five years or is that a double as soon as.

No.

Well, based on where we are now this year.

This year and next year.

Okay.

But it's not -- it's not very significant to your overall business?

Not yet, but it will be.

Okay.

And when I think about promotions, we're moving a little closer towards the holidays.

I wanted to understand how much you budgeted for promotions last year, how that compares to this year and on a quarterly basis how you guys think about spending those figures.

Josh, it's Marc BitzerAs you know we don't give specifics on promotion guidelines several quarters out.

We -- the only comment I want to make, we have set out a key priority price margin realization (inaudible) and we will stick within these guidelines.

But we will never give specific guidance on promotion spend per quarter.

Okay.

If that's the case can I sneak one more in?

Sure Josh.

I want to follow up on the previous question about your volume of 2% in Latin America.

20% was the industry on T3.

You guys were much higher than that.

T9 was up only 11%.

I'm trying to understand the real impact on your business.

Are you saying if you would have had all your normal volumes your volumes would have been up 8%?

Yes, Josh.

Again, the T3 are refrigerators washers and cooking products.

That is the predominant revenue source in our business, but over the last several years microwaves and air con, far as the -- the T9 have grown very largely.

But in short what is happening it was a very cool season so the air con business was down dramatically and -- and as Mark iterated and Mike our -- we had -- our priority was to -- is to expand margins so we sold a much, much better mix and we didn't sell a lot of units that were low.

So I mean the fact of the matter is I mean the simple answer to your question is on the T3, which is the core part of our business, we were up substantial -- the market was up 20% we were up more than that so the rest of the stuff was basically profitless units that weren't sold.

Okay, Josh, thanks.

So with that we're going to conclude here but again I would just end -- again we are he very pleased with the progress we made thus far in the year.

There are some moving parts but we feel like the actions we have put into place are going to allow us to deliver a very strong year of operating performance.

So thank you for joining us today.

We look forwards to talking to you next time.

And this concludes today's program.

Have a great day.

You may disconnect at this time.