Whirlpool of India Limited — Q1 FY25 earnings call

Call held 1 Aug 2024

Management summary

Whirlpool India delivered a robust Q1 FY25, characterized by record-high quarterly revenue and significant margin expansion driven by the 'P4G' (Profitability for Growth) cost productivity program. The company successfully arrested a three-year decline in profits, benefiting from a strong summer season that boosted refrigerator and AC sales. Management emphasized a shift toward 'profitable market share growth,' backed by new product launches and aggressive retail execution.

Highlights

  • Consolidated revenue reached ₹2,497 crores, representing a 22.5% YoY growth, the highest ever for any quarter.

  • Consolidated EBITDA surged 71% YoY to ₹211 crores, with margins expanding by 230 bps to 8.4%.

  • Profit Before Tax (PBT) nearly doubled YoY, reaching ₹196 crores with a 7.8% margin (up 300 bps).

  • Market share gains reported in 'triple digit basis points' for both refrigerators and washers.

  • Standalone business revenue grew 24% YoY to ₹2,384 crores.

  • Elica subsidiary delivered 8% revenue growth and a 40% YoY increase in consolidated profit.

  • Generated healthy consolidated cash of ₹491 crores during the quarter.

  • Strategic collaboration with HUL (Surf Excel) launched to enhance the laundry experience and drive penetration.

Concerns

  • Commodity and Freight Headwinds

  • Competitive Intensity

Key financials

  1. Consolidated Revenue ₹2,497 Cr +22.5%YoY
  2. Consolidated EBITDA ₹211 Cr +71%YoY
  3. EBITDA Margin 8.4%
  4. Consolidated PBT ₹196 Cr +100%YoY
  5. Cash Position ₹491 Cr

What they filed

Q1 FY27: revenue up 11.4%, net profit down 34.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,582 1,565 1,890 2,317 1,502 −5%1,624 +4%2,030 +7%2,582 +11%
EBITDA68 44 169 195 36 −47%65 +48%100 −41%120 −38%
Net profit42 27 111 135 27 −36%13 −52%67 −40%89 −34%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Standalone Business
    ₹2,384 Cr Revenue24% Revenue Growth128% PBT Growth
  • Elica (Cooking)
    8% Revenue Growth40% Profit Growth17.5% Peak Margin

Guidance & targets

Margin

  • Long-term Profit Margin Margin · Long term · Medium confidence High single digit
    We have called our high single digit in the long term and that's what I think, we can aspire to.

    — Narasimhan Eswar, Managing Director

  • Elica Ongoing Margins Margin · Ongoing · Medium confidence 15% to 16%

    Previously 17.5% → 15% to 16%

    I would expect ongoing basis, the margins to be more between the 15% to 16% kind of range, as we seek to invest to drive this wonderful business.

    — Narasimhan Eswar, Managing Director

Revenue

  • Revenue Growth Guidance Revenue · FY25 · Low confidence High single digits
    In the previous conference call you had indicated the revenue guidance in high single digits... I would say that we are not giving any guidance, etcetera for the full year.

    — Aniruddha Joshi (Analyst) referencing prior guidance

Risks & concerns

  • Commodity and Freight Headwinds

    high

    Management cited significant headwinds from ocean freight and commodity costs that are already impacting the industry.

    Management acknowledged

  • Competitive Intensity

    high

    New entrants like Beko and aggressive pricing from established players (LG, Samsung) make market share gains hard-fought.

    Both acknowledged

  • Regulatory Cost Pressures

    medium

    Frequent changes in BIS and energy ratings (every 2-3 years) add significant recurring costs to the business.

    Management acknowledged

Areas of evasion (3)

  • Specific market share percentages by segment
  • Import content/percentage of raw materials
  • Specific full-year revenue growth targets

Q&A highlights

2 direct, 1 evasive
Revenue Guidance Revision Evasive
I would say that we are not giving any guidance, etcetera for the full year... our focus will be to try to keep our market share strong.

Management refused to upgrade their 'high single digit' guidance despite a 22.5% growth in Q1, suggesting caution for the remainder of the year.

Asked by Aniruddha Joshi, ICICI Securities

Structural Margin Decline vs Pre-COVID Direct
The market is much more competitive than it was pre COVID... having massive margins probably is not very likely.

Management admitted that the historical 14-18% margins are unlikely to return due to increased competitive intensity and regulatory cost pressures.

Asked by Shrinidhi Karlekar, HSBC

Sequential Margin Contraction Direct
Your mix of the product, for example AC becomes significantly higher, which has a relatively lower margin compared to a core T2 product... you will see that sequentially, you will see your gross margins could be a little lower in quarter two versus quarter one.

Explains the seasonal impact of AC sales and promotional schemes on Q2 margins, tempering expectations after a strong Q1.

Asked by Umang Mehta, Kotak Securities

2 min read 5 chapters

Detailed narrative

Record Revenue and Margin Recovery

Whirlpool India reported its highest-ever quarterly revenue of ₹2,497 crores in Q1 FY25, a 22.5% YoY increase. This growth was underpinned by a strong summer season, which drove double-digit volume growth in refrigerators and air conditioners. EBITDA margins expanded significantly by 230 bps to 8.4%, primarily due to the 'P4G' cost productivity program, which contributed a 1.5% to 2% improvement in material costs. Management noted that this quarter successfully arrested a multi-year decline in profitability caused by COVID-19 and regulatory changes.

Market Share Gains and Strategic Focus

The company claimed significant market share gains in 'triple digit basis points' across its core categories of refrigerators and washers. India has been identified as one of the four global strategic focus areas for Whirlpool Corporation. The strategy involves 'profitable market share growth,' where investments are strictly ROI-based. Management highlighted that they are no longer just chasing volume but are focused on growing share while simultaneously improving margins through premiumization and mix management.

Product Innovation and Partnerships

New product launches, such as the DC glass door refrigerators and semi-automatic washers with 'dynamics technology' for better detergent mixing, were key growth drivers. The company also highlighted a strategic collaboration with HUL's Surf Excel brand, involving co-branded media campaigns and on-pack endorsements to drive penetration in the washing machine category. Additionally, Whirlpool increased its comprehensive warranty to 4 years for semi-automatic and 5 years for front-load washers to build consumer trust.

Elica Subsidiary Performance

Elica, Whirlpool's cooking appliance subsidiary, continues to perform well with an 8% revenue growth and a 40% increase in consolidated profit contribution. While Elica's margins peaked at 17.5% in FY24, management expects ongoing margins to settle in the 15-16% range as they reinvest profits to expand distribution and brand awareness. Elica is positioned as a pioneer in the low-penetration cooking market, with new innovations like auto-sense chimneys featuring brushless DC motors.

Competitive Landscape and Structural Challenges

Management acknowledged that the Indian consumer durables market is significantly more competitive than in the pre-COVID era (2018-2019). The entry of new players like Beko and aggressive pricing from incumbents have structurally lowered industry margins. Consequently, management signaled that returning to historical 14-18% PBT margins is unlikely, instead targeting 'high single digit' margins as a sustainable long-term goal. They also warned of upcoming headwinds from rising ocean freight and commodity costs.

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