Whirlpool entered the Indian market back in late 1980s, but was
thwarted by the duo of LG and Samsung who stormed the Indian electronics and
home appliances market. Whirlpool lost its dominant position in washing machine
and despite acquiring Kelvinator India in 1995, could not take the top slot in
refrigerators.
The company slipped into losses and in 2005 it roped in
Arvind Uppal from Nestle to turnaround the Indian operation. It shifted focus
to mass to mid-range products which caters to an overwhelming 80% of the Indian
market, adopting what LG did in its early days in India.
A great turn around…..
In the next seven years, under the able leadership of Arvind
Uppal, Whirlpool's current president for Asia-Pacific and managing director India,
it started it’s turn around journey.
From -125 Cr of net loss in FY05 to +166 Cr of profit after tax in FY11, the turnaround for the company has been quite robust. From D/E as high as 5.15 times in FY05 to becoming completely debt free in by FY10.
The Company had issued 15.23 Cr 10% Redeemable
Non-Convertible Cumulative Preference Shares of Rs.10 each to Whirlpool Canada
Holding Company in the year 2005 redeemable at the end of twenty years with
call and put options.
In FY11 the company redeemed 9.84 Cr shares using the put
option and further the balance 5.48 Cr shares were fully redeemed with dividend
paid in FY12.
With this the board served dual purpose
a) Reduce holding to 75% as per SEBI norms. The parent
Whirlpool of US holds 75% through Whirlpool Mauritius.
b) Clears the overhang of preferential dividend payments and
pave the way for payment of regular dividends for shareholders in future (no
interest payment, no pref. dividend)
Result >> In Q1FY13, while the topline grew by 10% Net
Profit grew by 26% due to EBITDA margin expansion, higher other income and
lower finance costs.
...but the journey ahead is not a smooth one.
"Leadership would not just mean bagging market share,
but also to build Whirlpool as a best-in-class technology brand," says Uppal
on growth ahead.
Recently the company launched 160 models across various
product categories, plans to spend Rs. 100Cr each in Capex and Marketing. The company targets
market leadership in refrigerators and washing machines within a year. It also
wants to be a top brand in air-conditioners and microwaves by then.
That’s all fine but where is the company standing via-à-vis competition.
Let’s have a look.
In the year ended March 31st, 2012:
Refrigerator:
3rd position with 13.8% share behind LG (36.6%) and
Samsung (19.8%)
Washing Machine:
3rd position again after LG and Samsung
Microwave:
4th largest brand
Air-conditioners: 5th
largest brand.
Whirlpool plans to invest more than Rs 750 Cr in India over the
next three years, invest in product innovation and development, capacity
augmentation and marketing at a time when the white goods industry is down to
single digit growth rate in a slowing economy.
Some of its recent launches such as direct-cool
refrigerators got great customer response across markets in India. The
management clearly states that they will not sacrifice profits for growth.
"We believe in profitable growth. My principle is
simple: volume is vanity, profit is sanity and cash is the reality," Uppal
said.
New product innovations and brand launches
Whirlpool recently rolled out a top-loading washing machine,
which washes clothes like a front-loading machine, giving superior cleaning.
Other examples of innovations include a split basket to wash delicate clothes
and a new line of refrigerators with a separate bottle chiller.
Plans are also in place to launch brands from Whirlpool's
global portfolio, like KitchenAid, which would operate in the super-premium
appliances segment. Whirlpool brand stretches from the mass to premium
segments.
Road ahead looks promising
As per recent estimates (Q1FY13) company is expected to do
revenue of 3,390 Cr in FY13 (YoY 12%) and 4,051 Cr in FY14. (yoy 20%).
Expected earnings are 167 Cr in FY13 and 220 Cr in FY14
translating to an EPS of 13.2 (FY13 yoy rise of 36%) and 17.2(FY14 yoy rise of
31%).
The debt free balance sheet, very strong cash flows, durable
brand moat (high debtor turnover of 25.6 times), rich parentage are the levers
which can led the market to pay a slight premium.
Till now due to debt and preference share burden the company
didn't paid any dividend, so dividends seem to be a distinct possibility going
forward.
Also management is positive on the exports front which
clocked a turnover of ~188 Cr in FY12 with 11% growth.
The company is at an interesting juncture, if things do turn
out as per plans can turn out to be a very rewarding journey for the
shareholders.
India, after all is the 5th largest market for America’s
largest home appliances maker and they sure want to make their mark this time
round giving their Korean competitors a hard time.
Market share and data sourced from:
ReplyDeletehttp://timesofindia.indiatimes.com/business/india-business/Whirlpool-eyes-top-slot-in-home-appliances-market/articleshow/16473380.cms
Whirlpool Annual Report 2012 :
http://www.bseindia.com/bseplus/AnnualReport/500238/5002380312.PDF
lovely story.congrats on such clarity of thoughts.
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