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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Well.

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Speaker 3: Shares of Whirlpool are trading hire today. This is the

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Speaker 3: company that owns the Maytag and Kitchen Aid brands, had

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Speaker 3: its annual investor day and shared how it's counting on

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Speaker 3: small appliance businesses to help turn around sales. Worldpool shares

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Speaker 3: up by six tens of one percent right now, All right, so.

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Speaker 1: Let's talk a little bit about strategy and the business

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Speaker 1: outlook and how the consumer is doing. Let's get to

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Speaker 1: the interview. Great to have back with us, Worldpool Chairman, President, CEO,

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Speaker 1: and COEO Mark Bitzer. He's joining us from the New

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Speaker 1: York Stock Exchange where he presided over the company's investor day. Mark,

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Speaker 1: So good to have you back with us. Hope you

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Speaker 1: are well. Let's start a little bit broadly, because we've

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Speaker 1: got some US consumer confidence news down in February. For

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Speaker 1: the first time in four months, Americans views deteriorating about

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Speaker 1: the outlook for the company, the job market, and financial conditions.

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Speaker 1: What signs of strain and stress are you seeing, specifically

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Speaker 1: when it comes to consumers, How would you describe them?

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Speaker 2: So, Carol, first of all, thanks for having me back

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Speaker 2: on your show. Let me maybe talking. I mean, obviously

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Speaker 2: our purchase, like a durable appliance, is heavily driven by

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Speaker 2: consumer competence and housing in general. So what we did

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Speaker 2: see already the last year is that actually our replacement

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Speaker 2: side of a business where people just explain replace a

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Speaker 2: product under the rest that has been very strong and

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Speaker 2: even up. But the discretionary side we actually already lost

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Speaker 2: year saw coming back coming down large as a result

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Speaker 2: of if interest rates rising, housing kind of being very

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Speaker 2: slow and slowing down throughout the year. That ultimately depressed

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Speaker 2: the discretionary side. So what you're describing we saw already

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Speaker 2: last year, and we probably I mean in our earnings

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Speaker 2: call also we said it's probably going to be around us,

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Speaker 2: certainly for Q one and Q two, and then we

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Speaker 2: need to see what happens with interest and mortgage rates

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Speaker 2: and everything else. But I think where we need to

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Speaker 2: be a catalyst from wet side to really lift consumer.

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Speaker 3: Set, Well, what would that catalyst be, Mark, Like, what

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Speaker 3: are you looking for at the purch of Whirlpool?

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Speaker 2: Yeah, I mean, in particularly on North America business, which

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Speaker 2: you know there's a strong correlation with existing home sales

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Speaker 2: and housing market in general. We always we shouldn't forget that.

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Speaker 2: You know, the average mortgage rates which are right now

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Speaker 2: locked in with homeowners is three point seven percent. So

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Speaker 2: I think to really bring supply on the market and

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Speaker 2: get people ready to sell their existing homes, I think

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Speaker 2: you need to see mortgage rates, you know, certainly below

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Speaker 2: six percent, probably more like five and a half percent

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Speaker 2: to really kind of unfreeze the market again. Because you know,

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Speaker 2: what we saw the last two years is the market

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Speaker 2: pretty much dropped from six point four million existing home

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Speaker 2: sales to three point eight That's a dramatic job. We

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Speaker 2: call it a shot freeze, and it takes that momentum

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Speaker 2: of a catalyst on the interest rates site to kind

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Speaker 2: of unfreeze a fall the market. And that's what we

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Speaker 2: I mean, we don't see it short term, I mean,

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Speaker 2: and of course, well everybody's got to watch what the

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Speaker 2: FED will do, but I think over time it will

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Speaker 2: kind of be a key catalyst for growth.

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Speaker 3: So make that connection for our investor audience about that

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Speaker 3: key catalyst here and why a person who is sitting

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Speaker 3: at a three point five US three point seventy five

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Speaker 3: percent mortgage won't necessarily go out and buy a new

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Speaker 3: appliance from Whirlpool. But if they were to sell that

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Speaker 3: home to somebody at a favorable mortgage rate, that person

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Speaker 3: moving in would then buy a new appliance from Whirlpool.

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Speaker 3: Why would't the person who lives there now end up

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Speaker 3: buying it if it actually need if they actually need

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Speaker 3: a new washer dryer.

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Speaker 2: Yeah, so it's again, I mean, if it just needs

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Speaker 2: a new wash and dryer, we would see better a

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Speaker 2: replacement market. And you know it's again if you break

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Speaker 2: down and let me zoom out a little bit, break

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Speaker 2: down our fundamental demand. Our demand has replacement as discretionary

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Speaker 2: and new homes. These are basically our fundamental free demand.

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Speaker 2: Driver replacement is very strong because of what we've seen

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Speaker 2: in post COVID and of certainly during COVID, people spend

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Speaker 2: more time at home, so the appliants usage is higher.

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Speaker 2: High usage rates drive early replacements. So that side of

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Speaker 2: business is very strong and we see by today. But

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Speaker 2: what is right now soft is the discretionary side, which

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Speaker 2: particularly comes with existing home sales, and over many decades,

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Speaker 2: what we typically saw kind of the month before and

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Speaker 2: the month after people buying a new home or existing home.

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Speaker 2: That's when you have increased purchase and appliance and everything.

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Speaker 2: So so because of what we typically see the people

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Speaker 2: moving in, one of the first things we might do

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Speaker 2: is replace the kitchen or at least replace the appliances,

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Speaker 2: so that part of the demand is today missing. And

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Speaker 2: again it's think about yourself. If you're a homeowner, you're

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Speaker 2: locked in at three point seven rate. I mean, it's

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Speaker 2: are you willing to kind of refinance or buy a

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Speaker 2: new home mortgage rate right now on six point eight

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Speaker 2: or six point nine percent? The chances all, okay, that's

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Speaker 2: right now what we've see in the market, and you

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Speaker 2: can't blame a consumer for that mark.

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Speaker 1: I feel like you're describing me. You know, we bought

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Speaker 1: a new hot water heater because we had to. We

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Speaker 1: didn't have a choice, right that was replacement. We thought

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Speaker 1: about maybe purchasing something else new that we didn't need

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Speaker 1: to end discretion, and we said, you know, we're going

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Speaker 1: to not do it right now. So like, I totally

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Speaker 1: get what you say is going on. Having said that,

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Speaker 1: then let's talk a little bit about your investor day

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Speaker 1: and some of what you're doing. Our team writing up

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Speaker 1: how you guys are going to focus or are focusing

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Speaker 1: on smaller appliances it seems to be when what consumers

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Speaker 1: are willing to spend money on, the margins are better.

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Speaker 1: Talk to us a little bit about that strategy and

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Speaker 1: how it can move the needle, especially when it comes

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Speaker 1: to top line growth and margin growth.

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Speaker 2: Yeah. So so, Carol, what we spoke about is, you know,

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Speaker 2: as a company, we've been in a multi year what

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Speaker 2: we call portfolio transformation, and what the basic men do

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Speaker 2: is over past decades we've had a fairly dispersed global business.

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Speaker 2: We were from China to Chile, in all places of

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Speaker 2: the world, and what we've decided on the major's business,

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Speaker 2: but we want to focus on the markets that we

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Speaker 2: have an undeniable strong position which offer us the America's

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Speaker 2: North America, South America. We have good business in India

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Speaker 2: and that's what we'll focus on. So we over the

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Speaker 2: years we sold off the majority of our China business,

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Speaker 2: we sold off Russia, and right now we're just in

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Speaker 2: the kind of final weeks before we can close our

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Speaker 2: European transaction where we would only have a smaller portion

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Speaker 2: of a business. So with that we have a fundamentally

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Speaker 2: different business portfolio. One essentially of it's the major business

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Speaker 2: in America's in India and we have our small domestic

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Speaker 2: appliance business that was in some ways we could describe

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Speaker 2: it as a hidden gem from the past because it

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Speaker 2: was hidden in a segmentaryport results of all the different regions.

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Speaker 2: But if you look at that, that is probably it's

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Speaker 2: our strongest brands. It has passion across all demographics and

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Speaker 2: age groups, and we feel we have a license of

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Speaker 2: robot business certainly from a consumer perspective. So and a

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Speaker 2: lot of our resources going forward will go into our

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Speaker 2: small domestic appliance business because it's certain one which we love,

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Speaker 2: strong margins and an exceptionally strong consumer precision.

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Speaker 1: How small what percentages? Is the smaller appliance business mark

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Speaker 1: right now in terms of revenues and how big do

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Speaker 1: you think it could become if we look at the

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Speaker 1: kind of revenue pie.

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Speaker 2: Yeah, so today it is quote unquote only a one

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Speaker 2: billion dollar business, but it has fifties and ebit margins,

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Speaker 2: so it's a very margin attractive business. But you know,

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Speaker 2: our presence in if you look at the categories of

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Speaker 2: small domestic applianes, it's largely small. It's large stamp mixers

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Speaker 2: and so products, But we have so much opportunity to

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Speaker 2: grow in coffee, and we just announced the day also

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Speaker 2: we will bring a fully automatic expresso maker in May

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Speaker 2: this year in other parts of business, so we strongly

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Speaker 2: believers ample opportunity to grow the business.

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Speaker 3: Hey, I want to talk a little bit about the

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Speaker 3: cost cutting that you're targeting right now across the different

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Speaker 3: business lines. After incurring significant increases back in twenty twenty

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Speaker 3: two and in twenty twenty one, mark where within the

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Speaker 3: business are you finding these savings.

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Speaker 2: Yeah, So, first of all, to put it in context,

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Speaker 2: is you know, in the COVID years, we basically had

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Speaker 2: more two and a half billion of additional costs. That

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Speaker 2: was a big inflation with not only raw materials in

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Speaker 2: all parts of the business. Last year we clawed back

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Speaker 2: eight hundred million of that and this year we're targeting

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Speaker 2: number five hundred million, so we're not even fully back

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Speaker 2: to pre COVID cost levels. The opportunities which we see

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Speaker 2: this year, and that's a little bit different from last year.

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Speaker 2: We don't see a lot of tailwinds from raw materials,

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Speaker 2: so we pretty much expect steel and oil and everything

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Speaker 2: else to remain of a stable for us. But we

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Speaker 2: do see opportunity on cost takeout on products. We do

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Speaker 2: see further opportunities to reduce logistic costs because it's a

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Speaker 2: massive cost element for us because we're shipping big, bulky

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Speaker 2: products and just drive a lot of cost and logistics side.

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Speaker 2: But we're also looking at our overall overhead and infrastructure.

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Speaker 2: And what I mean with that is, you know, global

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Speaker 2: business required a fairly complex global organization. Wef are more

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Speaker 2: focus on our Americas. We have an opportunity to radically

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Speaker 2: also simplify how we organize, and that also drive some

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Speaker 2: cost savings.

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Speaker 1: I do wonder too, looking at your balance sheet. We

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Speaker 1: have this really great story at Bloomberg Exclusive today. It's

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Speaker 1: among our most read about how companies who have been

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Speaker 1: so addicted to debt are now seeking equity, so thinking

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Speaker 1: about selling shares rather than tapping the debt markets if

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Speaker 1: they need money. You, guys, what's your plan to do

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Speaker 1: you leverage your balance sheet specifically which has grown as

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Speaker 1: you've done some acquisitions. And I do wonder if investors

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Speaker 1: can kind of still count on the dividend going forward,

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Speaker 1: the sustainability of the dividend market. And just got about

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Speaker 1: a minute or so left.

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Speaker 2: Yes, So let me first start starts straight away for dividend.

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Speaker 2: We paid our dividend for sixty nine years, sixty nine

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Speaker 2: and in none of the sixty nine years we ever

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Speaker 2: had a dividend reduction. Actually, in the out of the

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Speaker 2: last over the last ten years and eight years, we

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Speaker 2: had a dividend increase. So we we are that yes,

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Speaker 2: that is well. Of course, it's every single dividend payment

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Speaker 2: requires a board approval. But I would I would say

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Speaker 2: this statement publicly if I don't feel the board feels

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Speaker 2: very strongly about it. So we are we strong believe

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Speaker 2: in dividend. We have a fund to pay the dividend,

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Speaker 2: and and more importantly, we have a basic guideline internal

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Speaker 2: where we say over the last three years, we look

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Speaker 2: at the average EPs and we took pay out thirty

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Speaker 2: thirty five percent of at the EPs over the last

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Speaker 2: three years, and we're pretty much on track on this one.

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Speaker 2: So more so more to a balance sheet is first

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Speaker 2: of all, keeping out in mind we have one point

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Speaker 2: six billion dollars for cash on hand, that's public number.

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Speaker 2: So what we do want to do and then you know,

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Speaker 2: we we knew exactly when we acquired the insincorated business

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Speaker 2: in Wisconsin, which is husually margin tract if we have

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Speaker 2: a strong position. We knew, of course it's a heavily

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Speaker 2: oden boundary, and we at two or three years to

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Speaker 2: kind of digest that acquisition related that we paid last

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Speaker 2: year down five hundred million, we'll pay down this year

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Speaker 2: five on a million. So what we guided today in

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Speaker 2: midmester today is kind of yeah, by twenty six we

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Speaker 2: want to be roughly in a two times that leverage.

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Speaker 2: So we feel I'm a right path, kind of real

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Speaker 2: und risk if you want to say so, and use

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Speaker 2: the boundary to the levels where we want to have it.

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Speaker 1: So appreciate it covered so much ground as you always do.

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Speaker 1: Mark bitzer Be Well, look forward to always our next conversation,

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Speaker 1: Chief executive Officer at Whirlpool