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Whirlpool Refuses to Halt Russian Operations, Considers Possible Sale
The appliance maker is also changing how it calculates free cash flow by excluding items that previously inflated the key metric by $23 million.
April 26, 2022
With approximately 6-percent of its EMEA segment revenue coming from Russia, Whirlpool Corporation (WHR), an appliance maker, has decided to continue operating in the country. In its latest 10-Q, Whirlpool appeared to try to insulate itself against any potential criticism by characterizing its Russian production as “limited” and “primarily to provide essential goods.”

The company employs 2,500 people in Russia, primarily at its Lipetsk, Russia manufacturing facility. On its earnings call, Whirlpool said the impact from the Russia-Ukraine conflict resulted in an approximate $16 million EBIT decline year-over-year. For the full year, Whirlpool expects the conflict to reduce EMEA segment revenue by $300 million.

We suspect operations in Russia will continue because they’re for sale.

Prior to the Russia-Ukraine conflict, Whirlpool was considering divesting part or all of its EMEA segment. On the earnings call, CEO Mark Bitzer had the following to say when asked for detail on the company’s Russian operations and how the conflict complicates a potential sale of the company’s EMEA segment:

“...we have a local for local production in Russia, which historically satisfied about 80% or 90% of our volumes in Russia. We are not importing goods from our European sites into Russia, but we maintain a very low level of production, basically keeping the lights on in our Russia factory. Is that sustainable over time? It's probably not. But right now, we keep it running to a certain volume, of course, fully compliant with all sanctions and everything else. I want to point out, Russia is not the reason why we look at strategic review in Europe. Russia has been a good and important market for Europe, but that's not the reason why we look at the strategic review. It's another factor in the broader equation in the long-term landscape and us, like many other companies will, of course, carefully consider what strategically is possible or not possible in Russia going forward.”

Separately, Whirlpool is also changing how it calculates free cash flow. Previously, the company’s adjusted free cash flow calculation included cash provided by (used in) operating activities less capital expenditures and including proceeds from the sale of assets/businesses, and changes in restricted cash. Going forward, Whirlpool will no longer include proceeds from the sale of assets/businesses and changes in restricted cash.

Without the items now excluded from the calculation, Whirlpool’s adjusted free cash flow for the first quarter of 2021 would have been $109 million instead of $132 million. The company doesn’t reconcile its adjusted free cash flow metric to a comparable GAAP measure.
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