DES MOINES, Iowa – Appliance maker Maytag Corp. (MYG) said Friday that profit plunged in the first quarter and slashed in half its full-year forecast. The company said it will take "more aggressive steps" to restructure its manufacturing operations and cut costs, but its shares tumbled more than 25 percent.
Shares of the company behind the Maytag, Hoover (search) and Jenn Air (search) brands fell $3.90, or 25.8 percent, to $11.20 on the New York Stock Exchange (search). That is well below its 52-week closing low of $13.30.
Quarterly income fell to $7.7 million, or 10 cents per share, for the three months ended April 2 from $38.7 million, or 49 cents, in the year-ago period. Earnings include restructuring charges amounting to about 4 cents per share, the company said.
Newton-based Maytag's earnings — excluding the charges — came in well below the average estimate of 20 cents per share from analysts polled by Thomson Financial.
Sales shrank 4 percent to total $1.17 billion from $1.22 billion a year earlier, just missing the $1.18 billion targeted by Wall Street analysts.
Declining sales of refrigerators and lower average prices for vacuum cleaners drove down appliance sales 3 percent to $1.11 billion, while commercial business dropped 26 percent to $54.7 million amid a continued slump in the vending industry, Maytag said.
Savings from restructuring activities implemented in 2004 only partially offset rising costs, the company said.
Maytag said higher costs — primarily for steel and energy-related items, and higher distribution costs — reduced its profits.
"We must immediately take more aggressive steps to improve our cost position by reducing our manufacturing footprint," Chairman and CEO Ralph Hake said. "This will require a manufacturing restructuring that addresses our noncompetitive supply chain costs and burden absorption issues."
In a conference call with analysts, Hake said the fate of about 1,500 jobs at Maytag's flagship laundry plant in Newton could be in jeopardy unless the company works swiftly to cut costs this year.
"We will work with the UAW in Newton and local and state representatives to determine the future of the Newton facility," Hake said in the call. He said products made at the Newton plant could be moved to lower cost plants or outsourced unless cost savings can be made.
Maytag has been based in Newton since it was founded in 1893.
Nonetheless, Hake said Maytag saw improvements in market share in all major appliance categories, signaling the actions the company had taken to improve its sales performance were taking hold.
"We expect further growth from new products scheduled for launch in the first half of 2005," he said. Those include the Maytag Neptune 27-inch washer and dryer, the Jenn Air suite of glass-front appliances and the Hoover FloorMate hard floor cleaner.
Maytag Services and Maytag International both generated double-digit revenue growth last quarter, the company added.
Looking ahead, Maytag now sees yearly earnings of 45 cents to 55 cents per share, including about 10 cents worth of restructuring expenses. That estimate is down sharply from earlier guidance of $1.10 to $1.30 per share.
Analysts currently see income of $1.10 per share on $4.77 billion in sales, compared with a profit of 88 cents and $4.72 billion in sales for 2004.
The Maytag report came a day after rival Whirlpool Corp. said first-quarter profit fell 14.9 percent because of higher costs for fuel and raw materials. The maker of Whirlpool and KitchenAid home appliances said net income fell to $86 million, or $1.26 per share, in the January-March period from $101 million, or $1.43 per share, a year ago. Sales increased 6.7 percent to $3.21 billion from $3.01 billion.
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