Whirlpool of India Limited — Q3 FY24 earnings call

Call held 2 Feb 2024

Management summary

Whirlpool India demonstrated a strong volume-led recovery in Q3 FY24, rebounding from a challenging first half. The company is aggressively pursuing a premiumization strategy and cost productivity through its P4G program to offset significant material cost inflation and intense competitive pressure. While the parent company's stake sale raised analyst questions, management reaffirmed India's strategic importance and provided a confident multi-year growth outlook.

Highlights

  • Standalone revenue grew 19.2% YoY in Q3, driven by volume momentum and festive seasonality.

  • EBITDA stood at ₹39 crore with a 2.8% margin, representing 105% growth over the previous year.

  • Profit Before Tax (PBT) was ₹22 crore at a 1.6% margin, up 35% YoY.

  • Generated ₹470 crores in cash from operating activities for the first nine months of FY24.

  • Material costs have escalated to 69% of net revenue, up from a historical level of 62%.

  • Refrigerators and washers grew in high double digits during the quarter.

  • Parent company (Whirlpool Corp) announced a plan to sell up to 24% stake to retire global debt.

  • Management guided for high single-digit revenue CAGR and PBT margins over the long term.

Concerns

  • Intense Competitive Pressure

Key financials

2 periods

Headline

  • Revenue (Standalone)
    19.2%
    YoY +19.2%
  • EBITDA
    ₹39 Cr
    YoY +105%
  • EBITDA Margin
    2.8%
  • PBT
    ₹22 Cr
    YoY +35%

9M

  • Cash from Operations
    ₹470 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

SegmentRevenue ShareGrowth
Refrigerators55%15%
Washers30%15%
Elica (Cooking)——

Guidance & targets

Revenue

  • Revenue CAGR Revenue · Long term / Multi-year · High confidence High single digit
    We believe that these things should be able to get us over the long term, a high single digit revenue CAGR... over multi years.

    — Narasimhan Eswar, Managing Director

  • Full Year Revenue Growth Revenue · FY24 · High confidence >1.6%
    we expect the full year revenue growth to track moderately better than the cumulative growth delivered in the first nine months.

    — Narasimhan Eswar, Managing Director

Margin

  • PBT Margin Margin · Long term / Multi-year · Medium confidence High single digit

    From 11% today

    I would say a high single digit margin is something over the long term that one can aspire towards.

    — Narasimhan Eswar, Managing Director

Other

  • Royalty and Technical Fees Other · Ongoing · High confidence 1.5%
    we do not anticipate any change in the royalty and technical know-how percentages as a result of the shareholding pattern.

    — Aditya Jain, CFO

Risks & concerns

  • Intense Competitive Pressure

    high

    New and existing players are investing aggressively, leading to pricing uncompetitiveness in previous periods.

    Both acknowledged

  • Regulatory Cost Upcharge

    medium

    Energy and capacity rating changes in refrigerators required significant re-engineering and added costs.

    Management acknowledged

  • Material Cost Inflation

    medium

    Material costs have risen from 62% to 69% of net revenue over the last 6-7 years, structurally impacting margins.

    Management acknowledged

Areas of evasion (2)

  • Specific market share percentages by category
  • Exact budgetary spend on R&D and advertising

Q&A highlights

2 direct
Margin Outlook and Parent Stake Sale Direct
Double digit margins are going to be very challenging for anybody to get to, high single digit margin is the guidance that we are giving.

Management reset margin expectations from historical double-digits to high single-digits due to structural competitive and regulatory headwinds.

Asked by Aniruddha Joshi

Market Share Recovery and R&D Spend Partial
Share growth is certainly part of our whole story... we've got double digit shares across pretty much most of our portfolio.

Confirms that while market share was lost previously, the company is seeing a turnaround and considers share growth essential for its revenue targets.

Asked by Renu Baid Cugalia

Product Quality vs. Cost Cutting Direct
We have never contemplated a reduction in quality, not even contemplated, forget about putting it in the market.

Management strongly defended its brand equity against concerns that cost-cutting (P4G) might have compromised product quality.

Asked by Natasha Jain

2 min read 5 chapters

Detailed narrative

Standalone Revenue Rebound in Q3

Whirlpool India reported a significant turnaround in Q3 FY24 with standalone revenue growing 19.2% YoY. This recovery was driven by volume momentum following strategic price corrections made earlier in the year and favorable festive seasonality, with Diwali falling in November. Both the refrigerator and washer categories grew in high double digits during the quarter, signaling a recovery in consumer demand.

Strategic Premiumization Drive

The company is overdriving premiumization across all categories to improve realizations. Key product innovations include 'Ozone Refresh' technology in front-load washers, which refreshes clothes without water, and the industry's fastest convertibility in frost-free refrigerators (23 minutes). Management believes that superior consumer insights and best-in-class innovation are the only ways to maintain a leadership brand in a crowded market.

Addressing the Parent Stake Sale

A major point of discussion was Whirlpool Corporation's decision to sell up to 24% of its stake in the Indian subsidiary, reducing its holding from 75% to 51%. Management clarified that this move is solely intended to retire debt at the global parent level and does not signal a reduced commitment to India. They emphasized that India remains one of the strongest growth opportunities for the global corporation.

Cost Productivity via P4G Program

To combat margin erosion, Whirlpool has implemented the 'Productivity for Growth' (P4G) program. This initiative targets cost takeouts across all P&L lines, with a specific focus on material costs, which have risen from 62% to 69% of net revenue over the last seven years. The program aims to improve gross margins through design optimization, sourcing negotiations, and localization.

Market Share and Distribution Strategy

After losing significant market share in 2022 and early 2023 due to pricing uncompetitiveness, Whirlpool saw positive volume market share trends in Q3 FY24. The company has deployed a significantly larger number of retail executives to drive 'executional excellence' at the store level. Currently, Whirlpool covers about 60% of the total distribution available in the market, leaving a 40% gap for further expansion.

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