Korey Thomas
Head of Investor Relations at Whirlpool
Thank you, and welcome to our second quarter conference call. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; Jim Peters, our Chief Financial Officer; and Joe Liotine, our Chief Operating Officer. Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we'll be making forward-looking statements to assist you in better 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, 10-Q and other periodic reports.
We also want to remind you that today's presentation includes non-GAAP measures. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of 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. Additionally, price increases or pricing actions referenced throughout this call reflect previously announced cost-based price increases. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to our most directly comparable GAAP measures.
[Operator Instructions] With that, I'll turn the call over to Marc. Thanks, Korey, and good morning, everyone. Before I get into the results of the quarter, I'd like to step back and share with you the progress that we're making structurally, improving Whirlpool for the better. We have a clear line of sight on the long-term success of the business and on driving shareholder value. Whirlpool has become a stronger entity today versus historically. We operate in healthy long-term growing markets, and our long-term growth outlook remains unchanged. Our brands are strong, and consumers use them daily and will use them even more in the future. Based on the initiatives that we are taking, Whirlpool will exit the current and temporary industry headwinds at our highest operating performance. Likewise, we're focused on simplifying and transforming our business portfolio through pruning of underperforming assets by investing in high-margin businesses. We are operating in unprecedented times. But thanks to our strong balance sheet, transformation efforts and the hard work of the team, Whirlpool continues to perform better today than in the past, and we'll see a record performance over the medium term. Today, we will discuss our second quarter results and highlight how we continue to successfully manage our business despite near-term pressures, while at the same time remaining focused on delivering towards our value creation goals over the long term. We are operating in a dynamic world, marked by rapid cost inflation, a war and geopolitical tensions as well as broader economic uncertainty and a subsequent negative impact on consumer sentiment. Throughout the past years, we have demonstrated that we take needed actions early and decisively. And we have done so again in the second quarter. We're confident in the actions we've taken to mitigate industry headwinds, including our focus on enhanced operating margins with strong global cost-based pricing and broad cost reduction initiatives throughout the world. And our strong margins, not only in Q2, are evidence that these initiatives are working. We are prepared for near-term pressures and remain focused on delivering over long term regardless of the circumstances. Turning to slide four, I will review our second quarter results. Our performance this quarter showed yet again some of our best results ever. I'm convinced that we have built a new Whirlpool that is stronger and better prepared for the future. In particular, we delivered solid ongoing EPS of $5.97 at 9% ongoing EBIT margins, with ongoing EPS approximately 50% better than the second quarter of 2019, even in the face of historic levels of cost inflation and the demand slowdown. We experienced mid-single-digit to double-digit demand slowdown in key countries in the second quarter alongside a rapidly strengthening dollar. And yet, we impressively delivered relatively stable revenue of down 2%, excluding the impact of currency. Even more impressive, North America delivered over 14% margin, demonstrating the structurally higher profit levels of a region. Next, with the confidence we have in our business and the strength of our balance sheet, we continue to fund innovation and growth while returning approximately $400 million to shareholders in the quarter. Additionally, we signed an agreement for the divestiture of Whirlpool Russia business, triggering $747 million of onetime, almost entirely noncash charges. We expect the Russia sale to close in the third quarter, and we believe it to be the best course of action for our employees, shareholders and overall business. Lastly, the near-term impact on demand from consumer sentiment led us to revise our full year ongoing EPS guidance of $22 to $24. However, to put it into context, this guidance represents the second highest full year ongoing EPS in the history of the company despite inflation running at 40-year highs and the additional headwinds that we've been discussing. Our free cash flow guidance of $1.25 billion remains unchanged. Again, we are confident in the actions we have in place to manage the near-term pressures by remaining focused on delivering over the long term. Turning to slide five, we show the drivers of our second quarter EBIT margin. Led by our fully executed cost-based price actions across the globe, we successfully delivered positive price/mix, resulting in 675 basis points of margin expansion. Net cost negatively impacted our margin by 175 basis points, largely driven by increased logistics and energy costs, alongside operational inefficiencies from supply disruptions. Lastly, and in line with our expectations, raw material inflation continues to be a significant headwind, negatively impacting margins by 750 basis points. This is a very solid performance, addressing a challenging environment and delivering operating margin of 9%. And now I'll turn it over to Joe to review our regional results.