惠而浦 (WHR) 2015 Q4 法說會逐字稿

Good morning, and welcome to Whirlpool Corporation's fourth-quarter 2015 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 of Investor Relations, Mr. Chris Conley.

Thank you and good morning.

Welcome to the Whirlpool Corporation fourth-quarter 2015 conference call.

Joining me today are Jeff Fettig, our Chairman and Chief Executive Officer; Marc Bitzer, our President and Chief Operating Officer; and Larry Venturelli, our Chief Financial Officer.

Our remarks today track with the presentation available on the Investor section of our website at www.WhirlpoolCorp.com.

Before we begin, 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 our other periodic reports, as well as on slide 1 and in the appendix of this presentation.

Turning to slide 2, we want to remind you that today's presentation includes non-GAAP financial measures.

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

Listeners are directed to the appendix 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 thanks for joining us today.

As you saw in our press release this morning, we reported record revenue, ongoing profit and earnings per share for full-year 2015.

Overall our integration activities in Europe and Asia progressed well, and as planned, we delivered significant integration benefits both in the fourth quarter and for the full year.

Our ability to deliver these record results despite significant volatility in the global economic environment does demonstrate the strength of our execution and the benefits of our larger global operating platform.

If you turn to slide 5, I will review the 2015 financial results, where you see that we delivered strong revenue growth for the year.

Our revenues were up 5% versus last year and 18% excluding currency impact.

Our ongoing business earnings were a record $12.38 per share, and, as we expected, we delivered $620 million in free cash flow.

Turning to slide 6, you can see our 2016 priorities in what we expect to be another record year.

We do believe that the challenges we successfully managed in 2015 will carry over into 2016.

And by that, we mean we expect the emerging markets will continue to be weak or decline, but we do see that largely offset by growth in our developed markets.

We also anticipate that the strong dollar era that we are experiencing will continue into this year.

So within this environment, our focus in 2016 is to continue to grow revenues, and we see great opportunities to expand our operating margins.

We plan to invest to grow globally in both our core appliance business and adjacent businesses.

We will deliver significant new product innovation to the market, and we continue to expect to deliver very strong cost productivity.

So, turning to slide 7, where we show our guidance for 2016, we expect to deliver ongoing earnings per share of $14 to $14.75 a share, which represents 15%-plus growth versus last year.

We also expect free cash flow generation of between $700 million to $800 million, which is a substantial improvement versus the prior year.

And while 2015 was a year where we faced several challenges, I think we were able to demonstrate our ability to create value for our shareholders through strong operational execution in this environment.

And our current guidance reflects our expectation that this level of execution will continue, as we do expect to deliver another year of record results in 2016.

So at this point, I'd like to turn it over to Marc Bitzer to review our global operations.

Thanks, Jeff, and good morning everyone.

Turning to slide 9, we will review North America's performance in the fourth quarter.

As emphasized in our last earnings call, our strategy in North America has not changed.

We performed perfectly in line with our expectations as we grew revenues and substantially expanded margins in the fourth quarter.

We grew our revenue 6.2% excluding currency, and expanded operating margins to 12.4%, an all-time record.

As expected, with our recently launched products fully available and newly fully floored, the investments we've made to drive growth in our US business delivered sequential [D6] market share improvement in the fourth quarter.

In addition to a leverage from the revenue growth, our very strong operating margins in the fourth quarter were driven by our ongoing cross-productivity programs and favorable mix from our new product introductions, which more than offset nearly $30 million in unfavorable currency impact in Canada and Mexico.

Turning to slide 10, we outlined our 2016 operational priorities for North America region.

Our expectation is that the industry will continue to show strong 5% annual growth behind improved housing trends and consumer sentiment.

And we expect to grow our revenues at or above industry levels.

We also expect to continue accelerating growth of our new products to capitalize on this increased consumer demand, and to drive improved price mix and revenue growth.

Our strong cost productivity programs will continue to drive margin improvement and remain focused on growing outside the core.

We anticipate that these actions will more than offset a point of margin impact from negative currency based on today's rate for the Canadian dollar and Mexican peso.

We expect to deliver operating margins between 11.5% and 12.5%, which is fully in line with our long-term goals and another improvement over prior year.

I will now share the fourth-quarter results for our Europe, Middle East, and Africa region, as shown on slide 11.

Sales were $1.5 billion compared to $1.7 billion in prior year.

Excluding currencies, sales were up 8.1%.

Ongoing operating profit was $88 million compared to $101 million in the fourth quarter of 2014.

During the fourth quarter, strong execution of our integration plans and ongoing cost productivity mostly offset $45 million in unfavorable currency impacts as well as the impact of a significant industry decline in Russia.

Last year, we saw an unusually strong fourth quarter in Russia as trade-in consumers bought heavily ahead of the devaluation.

As planned and expected, we also invested in marketing technology and products this quarter.

For the full year, we delivered 4.5% operating margin, which is fully consistent with our guidance at the beginning of the year in spite of $160 million in currency impacts and weaker demand in Eastern Europe.

On slide 12, as we look toward the full year 2016, our priorities remain unchanged, with a strong focus on integration activities, ongoing cost productivity, and growth from new products both within and beyond the core.

We expect industry to be approximately flat to 2%, primarily driven by continued strong demand in Western Europe.

Based on today's rate, weakness in the ruble and euro will continue, but we plan to more than offset over point of margin impact from currency through ongoing cost productivity and acquisition synergies.

Overall, we expect operating margins to be between 7% and 8% for the year, which is another substantial year-over-year improvement and very consistent with, and even ahead of, our long-term goals.

Now I will discuss our Latin America results on slide 13.

Sales for the quarter were $845 million.

Excluding the impact of currencies, sales decreased 8%.

Our operating profit for the quarter totaled $58 million or nearly 7% of sales, which represents a substantial improvement in operating margin versus the prior two quarters.

These margin levels are a clear indication that we have readjusted our business for today's operating environment through already-deployed price, mix actions, and cost and capacity reductions.

On slide 14, we summarized our priorities in Latin America.

We expect demand through continued volatility and are fully prepared to deploy further actions if necessary.

We will continue to invest in new products, grow our business out of Brazil core appliances, and are well positioned to capitalize on growth in Brazil when demand does return.

We expect industry decline of 10%, and based on today's rates, half a point of margin impact from currency, primarily in the first half of the year.

Through growth in our non-Brazil operations, the benefits of previously announced cost-based price increases, implemented reduction of fixed costs, and improved mix from our new products, we expect to mitigate both currency and demand impact.

Based on our expectations of demand down 10% and the Brazilian real at current spot rates, and with the benefit of our offsetting actions for 2016, we expect operating margins between 6.5% and 7.5% despite lower revenue due to the currency and emerging market demands.

Now we turn to our fourth-quarter results in the Asia region, which are shown in slide 15.

Net sales were $312 million in comparison to $282 million in the prior-year period.

Excluding the impact of currency, our sales increased 15%.

Our fourth-quarter ongoing operating profit was $11 million compared to $17 million in the prior-year period.

Ongoing operating margins were 3.6%, driven by record margins in India and integration benefits in China that were offset by a weak demand and increased product and marketing investments.

While these investments in China temporarily reduced our margins in the fourth quarter, we expect them to lead to strong growth in margins in the future.

Turning to slide 16, we're sharing our 2016 priorities for Asia operations.

We will continue to focus on distribution expansion and ongoing cost productivity programs.

Our expectation is for flat industry growth in the region.

For additional clarity about our assumptions, we are forecasting a 5% industry growth in India and a 2% to 3% industry decline in China.

Overall, we expect strong margin performance of 7% to 8%, driven by our larger growth platform and the benefits of our strong innovation pipeline.

On slide 17, we summarize our regional margin goals.

We expect 2016 to be another year of record performance and see opportunities for strong margin expansions in all regions.

And now I'd like to turn it over to Larry.

Thanks Marc, and good morning everyone.

As Jeff mentioned, we had a solid year of performance.

You may recall that we entered the year with significant currency headwinds and weakened emerging market demand.

Given these challenges, our first-half ongoing earnings of approximately $4.85 per share were flat with 2014.

However, based on the actions we took throughout the year, we were able to deliver second-half ongoing earnings of $7.55 per share, which is up 15% from last year's results.

Our second-half earnings momentum and our fourth-quarter run rate entering 2016 are solid.

Turning to our fourth-quarter results on slide 19 and 20, revenues were $5.6 billion.

Currency had a $700 million top-line impact; but excluding currency, sales were up 4%.

We achieved all-time record ongoing earnings of $4.10 per share, driven by acquisition synergies and ongoing cost productivity programs as well as price mix from new product introductions and previously announced cost-based price actions.

You will note from the slides that SG&A as a percent of sales on a GAAP basis decreased approximately 1.5 points.

While we did make incrementally higher marketing investments this year to support our product introductions, those were more than offset by acquisition synergies and a planned reduction in acquisition related costs.

Our effective tax rate for the year was under 21%.

This represents approximately a $0.20 improvement versus our prior full-year guidance.

In summary, we are pleased with the results for the quarter.

Now turning to 2016, we expect another record year.

We will continue to be impacted by currency and emerging market demand.

However, we are confident in the actions we are taking to offset these headwinds and deliver 15%-plus earnings-per-share growth in 2016.

First on slide 21, you can see that we absorbed nearly $6 from the combination of emerging market demand weakness and currency devaluation in 2015.

As Marc discussed in the regional reviews, our operational focus and additional actions deployed during the year drove record revenue and earnings performance despite these challenges.

Now turning to slide 22, we share the 2016 assumptions for emerging market demand and currency headwinds included in our guidance.

As Jeff mentioned, based on current exchange rates we expect currency devaluation to continue, although at a reduced level compared to the prior year.

Accordingly, we anticipate a negative impact of approximately $1 billion in sales and $2.50 in earnings per share from currency headwinds.

Additionally, we're anticipating continued demand weakness in most emerging markets.

As a result, we will offset $0.50 in earnings-per-share impact from that.

It's important to note that these emerging market countries now represent 15% of our global sales.

Finally, on slides 23 and 25, we summarize key actions that we would expect will offset the impact from currency and emerging market demand.

We expect another very strong year in total cost productivity, given material trends, fixed cost reductions taken in Brazil, and our normal productivity programs.

Our acquisition synergies tied to cost and capacity reduction activities will ramp up during 2016.

We expect solid demand trends in developed markets, combined with positive impact from previous and new product launches and growth in adjacent businesses.

And our previously announced cost base price increases in Canada, Brazil, and Russia are in full effect.

On slide 24, you can see an update on the progress of our restructuring and acquisition integration activities.

We incurred $200 million in restructuring expense and delivered $200 million in benefits this year, consistent with previous communications.

For 2016, we expect $250 million in expense and continue to expect $175 million in benefits.

On slide 26, we highlight the cadence of Half 1 versus Half 2 earnings drivers we just addressed.

First, given historical seasonality, volume is stronger in the second half of the year.

In addition, we should have lower currency headwinds in the back half of the year based on current rates.

Traditionally we see much stronger seasonality in our cost productivity programs in the second half of the year, and our acquisition synergies will ramp up throughout the year.

As a result, we would expect full-year earnings seasonality, to approximate 40% in the first half and 60% in the second half.

On slide 27, our 2016 guidance is to deliver record ongoing earnings of $14 to $14.75 per share, a 15% increase year over year.

We are forecasting approximately $700 million to $800 million in free cash flow, which includes planned cash outlays of up to $200 million in restructuring related to the acquisitions, $150 million related to our previously announced product warranty cost in Europe, and capital spending of between $700 million to $750 million.

Our priorities for cash deployment have not changed, as shown on slide 28.

We did repurchase $155 million of stock during the fourth quarter and have $225 million remaining on our existing authorization.

We expect to complete our current share repurchase authorization this year.

Now I'd like to turn it back over to Jeff.

Thanks, Larry.

I'd now like to take a moment to update you on our long-range goals that we first outlined at our December 2014 Investor Day conference.

Overall, our long-term strategy remains on track, and we see tremendous opportunities from our larger global footprint, our leading position in key markets around the world, our continuation of stepping up levels of new product innovation, our strong brand portfolio with seven powerful brands, each with over $1 billion in revenues.

And over the mid to longer term, we do believe that our leading positions in several key emerging markets will be a great advantage for us.

So then, turning to slide 31, I would like to summarize our updated Management goals.

And again as we discussed earlier, last year and carrying over into this year, we have been hit by declines in emerging market demands and significant currency valuations.

This is really the only driver of our changing goals, because this has had a large impact on our original sales goal.

As a result, we now believe we can grow our revenues to $23 billion to $24 billion in sales by 2018 versus our previous goal of $26 billion to $28 billion.

Again, the difference is essentially all purely from currency translation, because we have rapidly adjusted to the changed global environment through our previously announced cost-based price increases, fixed cost reductions, and continued investment in new product innovation.

And we will continue to do so as we go forward.

We are offsetting these impacts, previously discussed, with what I believe is a very strong operational execution.

And as a result, we still expect to deliver operating margins consistent with our 2018 goals.

So we haven't changed our view at all, that we can deliver double-digit operating margins globally; and with that, we expect to reach also our goal of doubling our free cash flow by 2018.

In total, this will lead to strong earnings growth.

And we now plan to deliver strong growth in earnings per share to $20 to $22 per share in 2018.

And again, the difference between this and the previous is simply a reduction in revenues due to currency.

These revised targets would represent an improvement of 60% to 80% over today's levels of earnings and represent exceptionally strong value creation.

As always, there are risks of us putting out long-range goals like this.

But I think as we've demonstrated last year, we have been able to adjust to the environment and still deliver strong results.

So, turning to slide 32, you can very specifically see the drivers in our ongoing earnings-per-share improvements.

And again, we have multiple paths to drive value creation.

We will drive it through growth, acquisition synergies, and cost productivities.

And these big levers that we outlined in December 2014 have not changed.

We are on track with our acquisition synergies in Europe.

And we expect an additional $2 to $3 per share in benefits by 2018.

We are assuming demand in emerging markets like Brazil, Russia, and China begin to stabilize in 2017, but likely only drive moderate recovery growth during this planning cycle.

And we don't expect to see that until 2018.

Additionally, demand in the US is rebounding, consistent with our Investor Day assumptions, and we continue to see solid growth in our adjacent businesses.

We also now are seeing more and more growth which is enabled by our Indesit and China acquisitions, which are now part of our baseline revenue assumptions.

And finally and importantly, from a cost productivity perspective, we fully expect to continue with strong ongoing annual productivity improvements in addition to the benefits from favorable input costs that we're currently seeing.

And we see great opportunities to further leverage benefits from our global operating platform.

And I think over the last couple of years, we've had a good track record of delivering on those type of benefits.

So to sum up, we do expect to grow our earnings per share by nearly 60% to 80% over the next three years to between $20 and $22 per share.

And on slide 33, you can see the walk and how we expect to double our free cash flow.

As you can see from this chart, cash flow growth is largely earnings-driven.

Working capital is just a bit higher due to growth in the business.

We don't expect any fundamental changes in our rate of capital expenditures, which run about 3.5%, and this has not changed.

So turning to slide 34, I'd just reconfirm we are committed to achieving our vision of becoming the best global brand and consumer products company.

As a reminder, we are number one globally in three out of the four regions in the world.

We're the largest Western company in Asia; we have a top market position in five of the top seven largest appliance markets in Europe; and we also have the number one position in the US, Canada, and Brazil.

So in total, we have very high confidence that our growth plans give us an outstanding opportunity to continue driving significant shareholder returns.

And we believe 2016 will be a strong step forward towards reaching our 2018 goals.

So with that, I will end our formal remarks, and we would like to open it up for questions.

(Operator Instructions)

Sam Darkatsh, Raymond James.

I've got a couple questions here.

First off regarding Latin America, Jeff, you're looking at a margin up 1% or 2% year on year on obviously continued very challenging times.

You don't normally do this, but can you help us with what your margin expectations are for the subcomponents of that region for the Brazilian white goods, Embraco and the non-Brazilian white goods just to get a sense of what that margin growth means year on year?

Sam, I mean just breaking that out, I will not give you specific but I will give you directionally.

There are three or perhaps four segments you can look in that business.

The most impacted for all the reasons we talked about is the Brazilian appliance business because of the currency and because of demand being down almost 25% with expectation -- So that's where the heavy hit, but I would say and I think I said this before, we've been in Brazil market for over 60 years, and we've never lost money in that market.

And we continue to be in a positive profit position.

So even in that tough situation, but our margins were hurt very badly in appliances.

In our adjacent businesses, other than offsetting the inflation, they've remained intact.

Embraco, which is our global compressor business, was hurt by demand in emerging markets and currency but not nearly as much, and we had a reasonably good year in Embraco.

In bar international, I would just say that we got hit by all the same -- currency devaluations came at different times.

We have a big position for example in Columbia, Columbia peso is devalued by 50%.

Late in the year, Argentina obviously devalued, so we adjust, but there's a larger basket of countries to do.

So those margins although hurt some were not hurt as bad.

So the predominant work I would say has been to do, which we've already announced, the cost-based price increases, which we've already announced and carryover into this year.

We've done significant fixed cost reduction, almost 30% I think.

We drive the heck out of productivity, but we still have to offset inflation and negative demand.

So -- and I think Marc said it exactly correct.

If you base on our assumption of today's spotting currency and the market going down another 10%, we feel pretty good about our ability to improve our margins.

If we have another round of volatility, we will have to adjust again.

And we're fully prepared to do that.

The only other thing I'd add to Jeff's is, Sam, just remember that pricing increases went into effect throughout last year.

Fixed cost reductions were taken throughout last year, so you still haven't seen the full run rate in the margins in the fourth-quarter exit rate.

Two more quick questions if I could, they're housekeeping related.

First off, the fourth quarter your free cash flow was below where your guidance was, the implied guidance.

Now I know some of that I think is pension contribution, some of it is a little maybe lower CapEx, but it doesn't explain the entirety of the variance.

Larry, could you help us with what happened in free cash flow in the fourth quarter?

Sam, I think we guided to $600 million to $700 million.

I believe we ended at $620 million, so pretty close to the midpoint.

I would say that working capital was a little bit higher, but that was more due to timing in receivables than anything else.

I think we were very happy with where we ended up and pretty much consistent with our guidance.

And then the last question -- as it relates to 2016 guidance, could you help us with what your expectations are for raw materials and tax and pension and some of the other below the line items?

I can help you with some of the below the line items, Sam.

Tax rate -- in the prepared remarks, we said 22% to 24%.

And then you also asked about pension.

We will not have a pension contribution this year.

We're fully funded from a funding perspective, so you will not see a US contribution this year.

You will see a small amount that will go out for the foreign plans.

Yes and Sam, on the cost side, if you look at the walk that Larry provided for the margins, I think the way I would look at costs are we're going to have a very significant cost year this year.

And we do look at total costs, which is comprised of our synergies, our restructuring as well as our ongoing productivity, which includes change in raw material costs.

And as we talk about -- and by the way, we think that's the best way to look at it because that gives you a net number, which you ought to expect to see in the P&L or in the margins, which is what we show.

The challenge talking about, which caused a little bit of confusion last year, is when you have this volatility in currency, we certainly saw lower net material costs last year.

I think we said over $100 million.

But we also had -- part of that, the actual gross number was higher than that, but it's offset by currency increases in markets like Brazil and Russia and so on and so forth.

Bottom line is, we're going to have a big year of productivity.

If you look at the margin walk, it's roughly between all those factors it's about a $400 million reduction, of which I would suspect net -- and it really depends on currency, raw materials -- we ought to expect the same type of improvement we saw this year.

Bob Wetenhall, RBC Capital Markets.

Nice quarter Jeff and great execution.

I was hoping you guys and maybe Marc could touch on the North American market.

It looks like you guys got 3% volume.

I wanted to also understand your assumptions.

The press release, it says 5% growth.

How do you think about volumes going into 2016?

And with that, I noticed price was also up slightly more than 3 points North America.

That's probably something I wasn't expecting to that extent of strength.

What's the promotional environment like, and what are your expectations for volume in 2016 in North America?

Bob, it's Marc.

Let we try to answer these multiple questions.

Let me actually start with -- first obviously, we're very pleased with our North America in Q4.

I know there were some concerns out there, but these results would have quieted a lot of concerns.

Let me first of all on the units, because you mentioned the 3% unit.

First of all, and we said that in a number of previous calls, our unit shipments are not comparable to what is AHAM published numbers because we include a lot more in our units.

So the numbers are not fully comparable.

Having said that, what you can compare is our unit growth versus our organic (inaudible) growth, so the 3% versus 6%.

And you're exactly right, I mean that shows you just how strong our price mix was, which is a full result of disciplined promotion management, finding the results of our new product introductions.

So to have that kind of lift in such a promotion environment is an achievement that we're very proud of.

Now let me put it in broader context also for the fourth quarter.

Again, we delivered good ex-currency revenue growth 6%, record margin of 12.4%, which is exactly what we said we would do, drive growth and margin expansion.

What is also important to know is we had ex-currency revenue growth in all our business units, so Canada, Mexico, small domestic, majors, core appliances, which also means we had sequential market share growth Q4 compared to Q3, which is something which as you know we've been driving for very hard.

So now with regards to your question about our expectations for next year's market, as you know, we guide industry to 5%.

As I also said in my prepared remarks, we fully expect to grow our revenue in line or above that market assumption.

That's what we guide to, that's our expectation based on run rates which we have developed based on new product introductions, so we're I would say very confident behind these assumptions.

To comment on our broader industry assumption about 5%, as you know, as we guided in 2015, we initially came up with 4%, then we lifted to 5%, 5% plus.

The final number was 6.5%.

Beginning of the year, many people questioned if North America would come to these growth levels, and North America as an industry did.

Minus the larger driven, the confidence for 5% is we still do believe the housing is at best midpoint of the housing recovery in terms of cycle.

We do see consumer sentiment becoming bigger.

We do see wealth creation on the mid and lower income levels.

And so all these factors if you put it in our macroeconomic model, you have a lot of confidence behind the 5% industry growth.

Got it.

That makes a lot of sense.

And thanks for the detail on North America.

Jump ball in terms of question, I'd love to understand two things.

One, the margin walk between 2015 and 2016 in Europe to get to that 7% to 8% range, what's your confidence in executing against plan?

And putting aside the fact that we understand things change quickly in emerging markets, what's the likelihood that you can actually achieve positive margin momentum in Latin America?

And are you confident that Brazil will not lose money?

That's a lot of stuff, but if you could just take it apart, it would be great.

So Bob, it's Marc again.

So let me first answer Europe and Middle East and Africa.

As you know, we guided at the beginning of 2015 to 4% to 5%, and we hit exactly the midpoint.

I would say probably some people may be surprised that we're guiding now towards 7% or 8%, which as you recall, that was pretty much our targets in investor day.

We are fully confident in that 7% to 8%, and that confidence comes from we do see the benefits from restructuring synergies and ongoing cost productivity, which as you know when you run a business, if you have a confidence in cost, that gives you a lot of confidence.

It's just more predictable than any top-line assumptions.

If you look at 2015, they are both largely costs -- total cost driven.

We know we have the momentum, we know we have agreement of certain restructuring activities, and that carries into 2016.

You will also note that our volume assumption for industry is actually not overly bullish.

It's zero to 2%, and frankly that magnitude between zero and 2% is entirely driven by what happens to Russia.

So we basically are not overly bullish on Russia.

If Russia comes around faster, which we've seen in prior decades and cycles, then you could see an upside versus 2%, but that's a big assumption right now.

Again on Europe, in our view on all quarters, we delivered like clockwork.

And that gives us a lot of confidence for 2016 as well.

On Latin America, and that gets back to Jeff's comments.

First of all, let me underline -- Latin America's obviously heavily influenced by what assumption you take on Brazil, industry growth and the real.

So on today's spot rate of real, and with the assumption that Brazil goes down another 10%, which pretty much would be consistent with what we see right now.

So further deterioration in the marketplace, based on our already taking cost actions and price mix, which we have already deployed, we are very confident to hit that 6.5% to 7.5%, which is by the way not too far away from what we had in Q4.

So it's not like -- from a run rate perspective, it's not like we're planning for a huge step up.

But again, I want to reiterate the big assumption about the real exchange rates, and we've seen dramatic moves this year.

And it's a big assumption about the industry.

The only added color on that Marc had was that this 10% decline is our forecast for demand for the year in Brazil.

If you look at the progression of decline throughout 2015, the fourth quarter was the worst at almost 25%.

So as this carries over, our belief is the full year is probably plus or minus 10%, but by definition it will be higher in Q1 and Q2.

Denise Chai, Bank of America.

Just want to go back to North America.

Could you talk a little bit about how market shares have shifted in the last year and also comment on the impact of product transitions on product availability in the past year?

Because I think Marc said that the new products were fully available and almost fully floored.

So just wondering when that's going to be resolved.

Denise, it's Marc again.

Let me try to answer that.

So first of all, as I indicated, in Q4 we had sequential market share growth.

On a year-over-year comparison, we had a slight market share loss.

That's basically a carry forward of momentum which we had from the mid cycle.

But again, the important thing is sequentially we see the business growing in the credit categories.

That is a very important element on this one.

To my earlier comment about product introductions, as you were well aware, we had a lot of product introductions the last 18 months in North America.

There was laundry, there was pretty much the entire refrigeration line which was driven by energy standards.

So we had -- we are behind an unusually high amount of product introductions, which of course always has a certain impact on the top line.

It's not just availability.

It's just the ramp up, ramp down, re-flooring.

Whenever you do that, you have an impact.

The availability supply chain from ex-factory is fully restored.

We are not yet 100% complete with the floor, but it's pretty much 80% or 90% done on the major product introductions.

Okay great, thanks.

And just a follow-up on the realized synergies in 2015?

Yes.

I mean, we said, Denise, in the prepared remarks between restructuring and synergies, we had about $200 million.

It was very consistent with what we said before, and synergies on both the Europe and Chinese business came in exactly what we said.

Megan McGrath, MKM Partners.

So just a quick follow-up on North America.

In terms of the competitive environment, could you just give us an update on that?

Certainly don't expect you to say that it got a lot better, but was there any change?

You talked a lot about the breadth versus the depth of the promotions that you saw starting last summer.

And any early indications in the early part of the year about what you're seeing there?

Megan, it's Marc, let me try to answer it.

During our last earnings call, we said we had a slightly elevated promotional intensity out there in the market, and I would say it was pretty much consistent also in Q4.

In that environment, we stuck to the strategy which we had for the last couple of years.

We participate when we create value for our brands and our Company.

That's what we've done.

So in that promotion environment which year over year was maybe slightly more intense, we basically fully relied on our new product.

That's what drove the margin and the price mix impact in that environment.

It's hard to, of course, anticipate what happens in 2016, and it is way too early in the year, but right now I would expect similar environment like the back half of 2015.

Okay thanks, that's helpful.

And I guess I wanted to touch on Asia, because it's the one region no one's asked about yet.

But can you talk us a little bit through this nice guidance that you have out there for the full year, but 4Q did drop off.

You said you increased some expenses on marketing and other investments in the quarter.

Is there any seasonality involved that we should think about when we're modeling 2016?

Could you maybe talk us through some of those investments that you made, are any of those going to carry into let's say the first part of 2016 as well?

Megan, it's Marc again.

Conceptually you got to split the Asia business into a largely India business and a China business and some of our smaller business.

Our India business is -- which is why we are a publicly traded company -- is in a very good shape, strong margins, steady margins and had also a really strong Q4.

In China, we had a -- I wouldn't call seasonality.

It's an anomaly.

We basically had a one-time investment in certain go to markets, and particularly in certain technology investments which are largely related to introductions of new washers which come to the market in April.

So I would not factor that in in an ongoing model because we know it's largely one-time expenses.

Samuel Eisner, Goldman Sachs.

So just going back to the China comments, I think there was some commentary that was given there where you were expecting down volumes for that market?

Can you talk a little bit about how the integration of the Hefei Sanyo transaction had such a large part of that market?

Just wouldn't that help out the overall volumes in the market?

I just want to better understand what you're seeing on the ground level.

Sam, it's Marc again.

China as a market from an industry perspective did not grow in 2015 and in fact was down on the T2 level by minus 2%.

We in our prepared remarks guided towards a minus 3% for next year, so a pretty by and large similar environment in China overall.

We just don't see right now the consumer sentiment and the housing activity strong enough to hit into positive territory.

Of course, that can change in that context, but right now that's our assumption going into the 2016 year.

And that is also based on fairly recent inputs from trade partners.

So that's what it is, which of course is a change compared to two or three years ago, but I think we have a way to operate in that environment.

The integration overall is successful.

of course there's a lot of work, as you put together different brands, but it is successful, it is on track.

And we are, as you see from the guidance, we're guiding to 7% to 8% for 2016, which by definition can not only come from India.

We anticipate also strong progress on our not only synergies from the cost side, but also from the revenue synergies on the China piece of the integration.

That's helpful, and just switching gears back to North America.

Can you just give a comment about how inventories stand right now in the channel?

What are your retailers showing?

There was some chatter in the fourth quarter that there was a good amount of sell into [at the low], so just curious what you are seeing at the retail level, thanks.

It's Marc again.

If you take Q4 as an industry, and there are -- first of all, there is not fully reliable sell-in, sell-out statistics for North America.

So that's based on the data which we've seen and how we triangulate it.

You always have in Q4 the beginning and heavy sell-in that's just into the promotion period.

If you just look at the quarter overall, we do not see elevated inventory levels as the year begins.

If at all, I would almost argue the opposite.

Regional inventories are not significantly elevated as the year begins.

It's a pretty normal situation, but yes, there was quite a bit of loading to promotions in October- November.

Jay McCanless, Sterne Agee.

With GE potentially being sold to another buyer, are you seeing any impact on the ground either in North America or in the Chinese market as that deal progresses?

And if so, what steps are you taking to get in front of that?

Jay, this is Jeff.

The question about are we seeing anything in the market in either market, I think the answer would be no.

The GE business, you know the story.

I mean, they had an agreement with Electrolux, time expired, it didn't go through.

It's clear and it's been clear for some time that General Electric would sell their appliance business.

So the global people that you would expect to look at it had plenty of time to look at it, and obviously they wound up getting a substantially improved offer from Haier.

And so from that standpoint, they will go through their process, and we will know in four, five, six months how that's going to turn out.

But the question is, have we seen any changes?

No.

We compete with both companies.

Haier is a very substantial competitor in China, very successful, and this has created value doing that.

General Electric has been a very good and tough competitor in the US for forever.

So Chinese companies wanting to have a good market position in the US, this was an attractive opportunity.

And they apparently agreed, and that's probably why they paid the price they did.

Right.

And thank you for that.

The second question I have, and I think you guys touched on this earlier, but just with the decelerating year-over-year increase in North American units, do you feel like you're on the cusp of changing that through either growth in housing starts or a pickup in renovation/remodel?

And I apologize if I missed it, but if you all could comment on where you think unit growth should go in North America this year, especially in the US.

Jay, it's Marc.

I wouldn't read too much into our guidance of 5% versus 6% of this year.

I wouldn't call that a deceleration.

I think the 5% is the midpoint of the spectrum, which is probably -- you can put it 4% to 6% or maybe even 4% to 7%, whatever.

And a lot is driven by the housing consumer sentiment.

So I would not -- I would still refer to US as midpoint of a recovery cycle, of a long-term recovery cycle.

I don't see the end of the cycle, I don't see the deceleration.

And we're -- 5% is not a precise number.

It's a range, and it could be very well that we will see 6% at the end.

Jay, we did not include it in this deck, but I think we have it in our investor day site that what we outlined actually three years ago, was particularly in the case of the US, where the industry demand was relative to our 30-year cycle, 30-year average.

And basically the bubble of 2003 to 2005, the decline of financial recession and so on and so forth.

We laid out what we thought was a reasonable path of recovery.

And to Marc's point, we view we're only at the midpoint.

And if you look at the last three years, I would say our forecast, we're actually pretty good, plus or minus a point I think.

And we're still underneath a 30-year growth rate trend in the United States.

So we still have in our opinion pent up demand as well as every piece of the drivers of demand, replacement, new housing, existing home sales, and discretionary are going in the right direction.

So we view it as a very positive spot, and to Marc's point, it could be 5%, it could be 4%, it could be 6%.

Ken Zener, KeyBanc Capital.

A lot of slides in the deck there.

In Europe, considering that was such an important acquisition and profit driver, can you get -- you talked about cost restructuring -- can you get a little more granular?

Is it just on the execution of the cost side that you're expanding the margins, or are you actually -- can you describe perhaps the in-country dynamic that you're experiencing with this larger portfolio?

I mean, are you able to get better positions with the key retailers in countries, or what else is driving this?

Because given the realization of this margin in 2016, it seems to indicate in fact you might be realizing higher margins longer term than you've guided to in that long-term guidance.

Ken, it's Marc.

Let me first try to explain what happened in 2015 and maybe give you an indication for 2016 and how these dynamics come together.

If you just look at the full-year P&L in Europe, you realize there's -- if you take out the currency impact, there's a small revenue growth, but the margin that drove expansion came largely from the cost side, to be very straightforward.

And the cost side on the other hand, yes, there is some ongoing productivity coming from raw materials, which in the case for Europe is largely offset through negative currency.

That's a transactional impact.

So the net-net bar comes larger from realizing the synergies in procurement, in footprints, in SG&A.

So if you want to say that 2015 was largely a restructuring and synergy play.

It is however important to note that the fact that we held the top line in year 1 in a post-merger integration is a big deal, because you typically would see in such a competitive environment that you're being attacked from all sides.

And we even grow it, and some people ask us about the different pieces.

Even if you would break down the two legacy pieces, both elements grew organically, which again is a big deal in year 1 after such a complex integration.

Now shifting gears into 2016, again the cost side are carryover benefits and certain restructuring initiatives which we have just initiated and announced.

So that just gives you an unusually high amount of confidence because you're not relying on certain raw material assumptions or whatever -- it's in your control.

And I would say off the margin improvement and profit in Europe for 2016, it is still 70% or 80% is cost driven.

Now ultimately it comes back to a question of how much revenue growth can you drive if that's brand and product portfolio.

I would expect, and I will come back to more Jeff's point of the long-term plan, in the planning horizons it's 2017 or 2018, that's when you start seeing the revenue growth coming in.

And the simple reason for that one, it just takes a while to have all these product platform integration plans because that's the most complicated process.

And you see we already put a lot of new products now in the market.

The vast majority of the new joint products basically come 2017 and 2018, and that's when you should expect the top-line growth.

Even in the interim, the important thing is one of our biggest attractions of Indesit or why we bought it is ultimately for strong country position.

We're number one in five of top seven markets and in all transparency may largely drive a profit of Europe.

Our market share in these top five markets has held up or even expanded in the last year, so that's a very, very important achievement for us.

Okay.

Thank you for that.

And then Jeff, given all the product transitions and rollouts that you had this year, I mean, I think in one of the conference calls one or two quarters ago, you said in hindsight perhaps you wouldn't have had so many moving parts at one time.

Are there any operational/execution issues that are happening in 2016 that we could be aware of that you are a little more focused on just so we don't find out that you were worried about it in hindsight?

Ken, if I could really simplify and give you a couple of perspectives, we did have and we talked about some very, very large new product transitions which affected millions of units of volume.

We always have product transition, so that is not new.

And I would say if the rest of the world was somewhat stable, that you wouldn't probably have even noticed the impact of the product transition problems we had last year.

The fact of the matter is, we had -- in the way I described it, the currency devaluation, and it's part of life, but it is the most impactive movement in currencies we've seen ever since we tracked currency.

It cost us over $4 a share.

At the same time, emerging markets in general, particularly Latin America.

It seems like a long time ago, but in 2014, we had an all-time record year in Latin America.

Last year, one year, our earnings went down by $300 million, and the cash went down by $300 million.

We had record years in every other region in the world.

So it wasn't the operational challenges we had on product transition.

It was that on top of dealing with a massive currency issue, a massive decline in demand issue, and it means we had to do a lot of things really well to still grow our earnings by 9% last year.

So I guess -- let's fast-forward into this year, and I should say we did very well on the cost side last year for a host of reasons, including the synergies, the restructuring, raw material markets, etc cetera.

So coming into this year, what we all have to mention is we still have big currency and demand headwinds.

But they are less than half the size of last year if things stay as we see them today.

We're going to have another great year of cost productivity.

And I would say we have no major known operational execution problems today like we had a year ago.

So that's I guess as clear as I could try to be to hopefully address your point.

David MacGregor, Longbow Research.

Congratulations on a good quarter in a tough environment.

I wanted to just pick up on a couple of other questions that have been asked, and first is really what we're talking about product availability.

Assuming that you've addressed this and you get that business back in 2016, what does that represent in terms of incremental North American revenue?

David, it's Marc.

It's hard to quantify and obviously we would not want to quantify for competitive reasons, but there is in particular the first half of 2015 and Q3 we were impacted.

Not just by availability but also flooring and the new product introductions, and that's by definition.

Again, as I said before, in Q4 that was behind us.

So it's largely behind us.

But yes, you have in total probably have more than a point of market share.

More than a point of market share.

Yes.

Okay, good.

Secondly, can you talk about Canadian and Mexican operations and specifically what impact weaker demand had on that 2.9% North American segment unit growth number?

David, it's Marc again.

First of all, when you look at the numbers, the Canadian market was down 8% in Q4.

And to put it in context, Canadian market in the financial recession did not dip as deep as North America, so it held up for much longer.

But obviously with consumer confidence, oil, the Canadian market is soft, and we do expect it to be soft also going forward.

In addition to the markets -- and as we in the estimating showed, Canada used to be roughly a $1 billion business for us in the old currency exchange rate.

So you have a demand size, and on top of that, the currency move for the Canadian dollar has been massive.

Keeping in mind there's no production in Canada, so you have a full currency impact.

Having said that, in context, I think our team through very disciplined cost base price increase which we already had announced and executed, we maintain a good margin unfortunately at a much lower base.

But the margin in Canada is very intact, very robust, but it's just a much lower base.

Mexico is a slightly different story.

The Mexico market is steady pretty much, slightly down, but there's not the huge downside as in Canada.

Mexico's a top-line issue because also your Mexican peso was [MXP18] is just dramatically devalued.

So that has obviously a negative impact on the pure revenue side.

It doesn't impact us so much on the ongoing margin side because we largely -- Mexican production is 60% local to local production or 70%.

Eric Bosshard, Cleveland Research.

This is Tom on for Eric.

I was wondering if you could size the savings from [saferoll] input costs within 4Q and 2015 more specifically, and then anything directionally you can give us on how that flowed through by segment in 2015.

This is Jeff.

No; actually, I don't have that level of detail in front of us because our input costs -- we buy obviously all the time.

We have contracts, we have hedges, so on and so forth.

We have that information.

I just -- we don't have it in front of us right now.

What Jeff said in his prepared remarks, the total productivity would be 1.5 to 2 points, and we'd expect each region of the world to have productivity.

Michael Rehaut, JPMorgan.

Just wanted to get a little more granular on a couple of things.

First off, the 15% of global sales I think you highlighted was your total emerging markets exposure.

I just wanted to get a sense, was that on 2015 revenues or expected 2016 revenues?

And if you could at least give a sense of a breakdown or the order of magnitude.

I assume Brazil is the largest, but some of the other components by country.

Michael, to answer your question, what I would say is that's on 2016 base, the 15%.

In order of magnitude, obviously Brazil would be our largest emerging market followed by Russia -- I'm sorry, China.

It would be Brazil, China, Russia and then India.

And it appears we have no further questions at this time.

I will return the floor to Mr. Chris Conley for closing comments.

Listen everyone, we appreciate you joining us today, and we look forward to talking to you at our next earnings call.

Ladies and gentlemen, this does conclude today's program.

Thanks for your participation.

You may now disconnect.