Whirlpool’s Q1 Performance A Washout, Net Declines 23%

Whirlpool, one of the leading manufacturers of home appliances, has seen a 2% fall in its revenues in Q1FY14, which came in at Rs 855.89 crore as against Rs 872.14 crore in Q1FY13. The net profit of the company has declined by 23% to Rs 49.69 crore.

During the quarter, the EBITDA margins have come under pressure due to the overall rise in input costs as well as the decline in its topline. Employee expenses also came in lower by 19% at Rs 66 crore. The cost of material (in absolute terms) dipped by 13.56% to Rs 376 crore. As a percentage of sales, this cost item now makes up 36% of the sales against 40% a year ago.

All the other costs have shown a rising trend. Inventories, for example, have more than doubled on a year-on-year basis. Stocks in trade also rose by 37%.

Whirlpool’s overall expenses rose by 1%, but the decline in the topline has seen the company reporting a 241 basis points decline in the EBITDA margins. This came in at 6.65% for the quarter.

Among the non-operating costs, the finance cost stood at a lower Rs 0.31 crore. This is because the company has no long-term or short-term liabilities. It also had a cash reserve of Rs 155 crore by the end of FY13.

The performance of this company remained lacklustre last year too, with marginal growth in the topline and a flat bottomline.

At its CMP of Rs 170, the stock is trading at a TTM PE of 19x. On a YTD basis, however, it has seen a huge correction of 36%. Over past many quarters, Whirlpool has been unable to maintain profitability and the return ratios have shown a huge decline. We remain sceptical about its performance and hence advise investors to avoid the scrip at this time.