In the performance conference call for the second quarter of 2025, Whirlpool Corporation discussed how they are confronting challenges in a complex external environment, including high interest rates, changes in trade policies, and decreasing consumer confidence. Despite the short-term pressures, the company achieved net sales growth in all departments, particularly showing strong performance in their SDA global business by launching new products. However, the market experienced short-term chaos due to the large imports from Asian competitors prior to the implementation of tariffs, increasing the intensity of promotional competition. Nevertheless, the company remains confident in long-term success and believes that these impacts are temporary.

Facing the long-term impact of competitors and lack of market confidence, the company adjusted its full-year expectations, expecting the tariff impact to fully manifest later this year, but remains optimistic about improving its North American business next year. The company believes it will benefit from the new tariff policies and emphasizes its advantage in domestic production. Despite challenges, the company has successfully implemented pricing strategies, reduced costs, strengthened its financial position, and maintained a strong investment case. The company looks forward to opportunities brought about by new product launches, changes in trade policy, and the recovery of the US real estate market. In the second quarter, despite a decline in net sales due to decreasing global demand, SGA's global business continued to grow, with a stable global EBIT profit margin. Cost control and stable raw material costs have a positive impact on profit, but tariff costs and currency fluctuations have a negative impact. The company is confident in creating long-term value.

In the second quarter, the net sales of MDA's North American business decreased year-on-year, mainly due to the uncertainty in the U.S. economy and changes in tariff policies leading to consumer sentiment decline. Despite facing challenges, a profit margin of approximately 6% was achieved through cost-cutting measures. In Latin America, the net sales of MDA's business decreased by 1%, with the Mexican market showing a profit margin of 6%, benefiting from price and cost optimizations. In Asia, although net sales decreased, a profit margin of over 7% was still achieved, with continued market share growth amid geopolitical tensions. SDA's global business performed strongly, achieving growth in net sales, particularly in high-growth categories such as semi-automatic and fully automatic coffee machine products, and is expected to continue the growth momentum in the second half of the year. Despite fluctuations in the macroeconomic environment, the company remains confident in its growth potential in the North American region.

The dialogue detailed how Whirlpool, in the North American home appliance market, is creating significant value growth through three key strategies. Firstly, the company has enhanced its market leadership through extensive product portfolio updates, with the launch of the KitchenAid Suite expected to have a significant impact by the end of 2025. Secondly, its strong domestic manufacturing capabilities give it an advantage under new tariff and trade policies. Unlike competitors who rely heavily on imports, most of Whirlpool's products and materials are sourced domestically, which is a unique advantage in the current economic environment. Lastly, despite challenges in the U.S. housing market, the long-term market fundamentals point towards years of recovery, providing Whirlpool with a huge market opportunity. In conclusion, Whirlpool is considered to be one of the companies best positioned to benefit from the housing market recovery.

Whirlpool is strengthening its brand portfolio in the North American market by introducing innovative products such as induction cooktops with advanced ventilation systems and top-loading washing machines with Pet Pro technology. The company emphasizes its manufacturing footprint in the United States, giving it a competitive advantage under current trade policies. At the same time, Whirlpool is actively preparing to benefit from the expected housing market recovery in North America, particularly in new home construction and existing home sales, which are expected to drive growth in appliance demand. The company also highlights its leading position in the builder business and three key catalysts for long-term structural growth: new products, a strong brand portfolio, and a unique domestic production layout.

The company has adjusted its financial forecast and market strategy for the fiscal years 2024-2025 in response to the current macroeconomic environment's uncertainty and short-term market pressure. Net sales for 2024 are expected to be around $15.8 billion, with a continuing EBIT profit margin of 5.7%. Net sales and EBIT profit margin for 2025 are expected to remain steady. Additionally, the company is facing deteriorating global consumer sentiment, currency impacts, and uncertainty in tariff policies, leading to adjustments in expectations for pricing, cost-cutting measures, and tariff impacts. Regional markets have also been adjusted according to the current industry conditions and consumer demands to address market challenges.

The company emphasizes three priorities in its capital allocation: investing in innovative products to drive organic growth, reducing debt levels, and returning cash to shareholders. Despite facing fluctuations in the macroeconomic environment and a prolonged downturn in the housing market, the company remains committed to product innovation, cost reduction, and implementing previously announced pricing actions. Additionally, the company is adjusting its annual dividend rate, strengthening its balance sheet, and maintaining sufficient liquidity to ensure the ability to invest in the future and repay debt. The company is confident in its strategy and long-term value creation.

The conversation discussed the situation of a large influx of imported household appliances before the tariff adjustments and its impact on the retail market. Although it is difficult to provide exact estimates, it was mentioned that overall sales in the market slightly decreased in a certain quarter, while imports of household appliances from Asia increased significantly, especially those from areas other than China with a growth rate of over 20%. In addition, it was also mentioned that although there is some uncertainty, including consignment inventory from potential competitors, the current estimate is that excess Asian imports may take several months to be absorbed by the market. With the effects of the tariffs becoming apparent, it is expected that this situation will gradually improve.

The discussion was focused on manufacturers adjusting their promotional plans for the second half of the year, especially shifting from P-map support and housing discounts to more "buy more, save more" type of promotional activities. Mention was made of competitors shifting their promotional focus towards higher-end products, which may impact profit margins. Although no specific forward-looking statements were provided, an analysis of past actions implied contemplation of future promotional pricing strategies.

During the second quarter, the company reduced the intensity and duration of promotional activities, partly due to intense market competition and the impact of tariff costs. In replacement demand-driven markets, the promotional investments bring limited uplift effects, and may even prematurely consume future demand, so the company decided to reduce the depth and length of promotions. Although no forward-looking statements are provided, it is expected that future promotional activities will be similar to the current ones. The industry had deep promotions on July 4th quarter, but later faced oversupply and sales pressure, leading to a normalization of the market after promotions. For the upcoming Labor Day and Black Friday, the promotional environment is expected to be more moderate than in the past, but this is currently just speculation.

After the last earnings call, the company observed that due to tariff delays, competitors are increasing their imports, leading to an increase in inventory extending into the third quarter. Through analyzing data such as container shipping rates, the company found that each tariff delay is accompanied by an additional round of cargo loading. Although the volume of shipments from China is starting to stabilize, imports from other Asian countries are significantly increasing. With the new tariff measures taking effect, it is expected that this trend will be replicated in non-China Asian countries. The company expects that, as each month passes and the tariff measures take effect, pre-loaded inventory will gradually decrease, and the market environment will gradually return to normal.

During the discussion, it was mentioned that the new guidelines reflect changes in marginal profits due to delays in tariffs, although the company expects to still be a winner in the long term. The discussion also emphasized the introduction of new products and long-term growth strategies in the North American market, while pointing out that current challenges are due to sales environment pressures caused by market competition and additional imported inventory. The company stressed that these impacts are temporary and do not fundamentally change the investment story, and steps are being taken to address the current market environment.

The company demonstrated strong performance in the SDA business, mainly driven by the launch of new products and the growth of direct-to-consumer business, especially in the North American and European markets. Despite facing various challenges including tariffs, the profit margin of this business remains stable, demonstrating the strength of the brand and the attractiveness of the products. Meanwhile, the company discussed decisions regarding capital allocation, including proposing to the board of directors to reduce dividends to better manage the balance sheet and create financial space for future investments and debt repayments, while still committing to returning cash to shareholders.

In the North American market, Whirlpool's MBA sales experienced short selling in the second quarter, with overall short selling data showing either flat or slight decline. The company lost some market share in April and May due to early promotional price adjustments, but saw a rebound towards the end of the quarter. Sales in July were positive for Whirlpool, but overall market volume is expected to remain at zero to negative growth. While market performance in terms of unit sales is decent, the demand for product mix is mainly driven by replacement needs, and consumer sentiment has a negative impact on the health of the product mix. Therefore, launching new products is crucial to enhance the product portfolio in the face of unfavorable market mix trends. However, current consumer sentiment and sluggish existing home sales volumes are reflected in the health of the product mix, posing a challenge to the overall market.

The company discussed the progress of sales in India, expecting to be completed by the end of this year, with a transaction amount between 5.5 billion and 6 billion US dollars. The current progress is smooth, and the potential buyers are gradually being narrowed down. At the same time, strategies were discussed to deal with the impact of tariffs through price adjustments and cost control measures, as well as temporary market share decline in the North American market due to promotional pressure and product preloading. Emphasis was placed on pursuing long-term stable market share rather than short-term growth brought about by temporary promotions.

The company has lowered its expectations for appliance demand, mainly due to subdued consumer sentiment in North America and uncertainty impact, despite consumers having higher household assets. In Latin America, overall economic slowdown has affected demand, while demand in Asia, especially India, is influenced by seasonal factors. In addition, the demand for small household appliances is significantly influenced by consumer sentiment, showing strong cyclicality. It is important to closely monitor changes in consumer sentiment and their impact on the industry in the future.

In the discussion, senior management revealed that the proportion of Direct-to-Consumer (DTC) business in their company is in the mid to high single digits, especially in Latin America and the small household appliance business where DTC business is close to a quarter. Although DTC business complements rather than competes with traditional retail business, its profit margin structure is different from the overall business, becoming more profitable as the revenue base increases. In addition, senior management also discussed their expectations and strategies for market share in North America, emphasizing that through new product launches and reasonable pricing and promotion strategies, the company aims to maintain and increase its market share.

The company management detailed the reasons for adjusting capital allocation decisions in the conversation, emphasizing their understanding of the current business environment and cautious planning for the future. They mentioned that in the past few months, the company closely monitored the implementation of tariff policies and their impact on business volume, and decided to adjust capital allocation to increase financial flexibility and increase investment in the American manufacturing industry to seize the opportunities brought by government policies. Despite adjusting performance guidance, the management team remains unchanged in their investment strategy for the company and their view on the medium to long-term housing market, emphasizing that market feedback on new products has given them confidence. Finally, the management expressed their strong confidence in the future development of the company and look forward to communicating with investors again at the next earnings conference call.