Whirlpool 2006 Annual Report Download - page 27

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• In 2006, Europe unit volumes increased 4.9%, as
compared to 2005, outpacing industry growth. Europe’s
net sales increased $223 million, to a record $3.4 billion,
or approximately 6% excluding currency fluctuations.
Europe’s strong results were driven by gains in market
share, new product introductions and improved mix of
product, primarily attributable to the Whirlpool brand
and expansion of our built-in appliance business. During
2005, Europe unit volumes increased 2.1%, outpacing
industry growth. Solid demand for Whirlpool branded
products and continued strong performance within our
built-in appliance business drove the increase. Currency
did not have a material impact on sales during the year.
• In 2006, Latin America unit volumes increased 22.4%
versus 2005, due mainly to continued strength in the
Brazilian economy and appliance market and market
share gains. Net sales increased $468 million as
compared to 2005, or approximately 16%, excluding
currency fluctuations, due to higher volume and new
product introductions. In 2005, Latin America unit
volumes increased 1.5% versus 2004, due mainly to
increases in the Brazilian appliance market. Net sales
increased 17.2% as compared to 2004, or approximately
6% excluding currency fluctuations, to $2.0 billion, due
primarily to increased unit volumes and cost-based price
adjustments on compressors and appliances.
• In 2006, Asia unit volumes increased 6.1% versus 2005,
with a corresponding increase in net sales of 8.3%,
driven by strong demand, particularly in India, along with
improved pricing and favorable product mix. Excluding
currency fluctuations, net sales increased approximately
10%. In 2005, Asia unit volumes increased 3.1% as
compared to 2004, driven mainly by industry growth and
new product introductions. Net sales improved 10.5%, or
approximately 8% excluding currency fluctuations, due
largely to an improved product mix and cost-based price
adjustments implemented in 2005.
Gross Margin The consolidated gross margin percentage in
2006 decreased 60 basis points versus 2005. Consolidated
results in 2006 were significantly impacted by higher
material and oil-related cost increases and the unfavorable
mix impact of Maytag. These higher costs and acquisition
integration costs were partly offset by increased productivity,
regional tax incentives and acquisition efficiencies.
The consolidated gross margin percentage in 2005
decreased 90 basis points versus 2004. Consolidated
results in 2005 were significantly impacted by higher
material and oil-related cost increases which were
somewhat mitigated by the combination of cost-based price
adjustments and productivity improvements. Consolidated
gross margin also benefited from regional tax incentives and
was negatively impacted by higher incentive compensation.
Significant regional trends were as follows:
• The 2006 North America gross margin decreased 190
basis points compared to 2005, due primarily to higher
material costs, lower industry demand, unfavorable
Maytag product mix, acquisition integration and purchase
accounting costs and higher merchandising costs. Margin
declines were partially offset by productivity improvements
and acquisition efficiencies. The 2005 North America
gross margin decreased 120 basis points as compared to
2004, largely due to higher material and oil-related costs.
Results in 2005 also reflect the impact of cost-based
price adjustments, productivity improvements and higher
incentive compensation.
• In 2006, Europe gross margin improved by 50 basis
points versus 2005, as productivity improvements more
than offset lower comparable model pricing and higher
material and oil-related costs. European operations
continue to realize savings from ongoing restructuring
efforts. The 2005 Europe gross margin decreased 210
basis points as compared to 2004, largely driven by
higher material and oil-related costs, partially offset by
increased productivity, an improved product mix and, to a
lesser extent, a gain on the sale of assets.
• In 2006, Latin America gross margin increased 310
basis points versus 2005, due primarily to significantly
improved volumes, productivity improvements, cost control
initiatives and regional tax incentives which combined
to more than offset higher material and oil-related costs
and unfavorable currency exchange rates. The 2005
Latin America gross margin increased 290 basis points
as compared to 2004, as the combination of cost-based
price adjustments, increased productivity and regional tax
incentives more than offset higher material and oil-related
costs, unfavorable currency and increased incentive
compensation.
• The 2006 Asia gross margin increased 390 basis points
as compared to 2005, due to productivity improvements,
improved product mix, and cost-based price adjustments
partially offset by higher material and oil-related costs.
The 2005 Asia gross margin increased 20 basis points
as compared to 2004, due to improved product mix,
productivity improvements and cost-based price
adjustments partially offset by higher material and
oil-related costs.
Financial Summary