ATLANTA – Appliance maker Maytag Corp. (MYG), the focus of a blossoming takeover battle, reported lower-than-expected quarterly profit on Friday as sales gains were offset by higher steel and energy-related costs.
The company, which has agreed to be acquired by a private equity group but has a higher offer from rival Whirlpool Corp. (WHR), said sales were up in all major categories -- refrigeration, laundry, cooking, dishwashing and floor care.
But rising steel and resin costs, higher fuel and transportation costs, and lower vacuum prices offset sales growth.
Excluding one-time items, earnings were 7 cents a share, well short of the average forecast of 10 cents among analysts polled by Reuters Estimates.
Net earnings came to $3.5 million, or 4 cents a share, including charges of 3 cents a share related to a company overhaul and plant closing.
In the year-earlier second quarter, Maytag posted a loss of $41 million, or 52 cents a share.
Sales rose 6.7 percent to $1.23 billion.
Despite the sales improvement, Prudential Equity analyst Nicholas Heymann said in a research note that Maytag's "prospects for long-term viability remain dire" because of high debt and costs and "deteriorating franchises."
Sales of refrigerators and cooking products showed solid gains, and the company noted year-over-year growth in Hoover vacuums, which had been in a slump as consumers migrated to rival brands.
Consumers also showed interest in the redesigned Neptune front-loading washer-dryer duo and Jenn-Air (search) stainless steel dishwasher, Maytag said.
Commercial-product sales fell on continued weakness in the vending machine industry.
Operating income fell from the first quarter because of increased advertising costs.
The Newton, Iowa-based company has agreed to a takeover by private equity firm Ripplewood Holdings (search) at $14 a share. Late on Thursday, Maytag said its board was unable to determine whether an offer of $17 a share from Whirlpool would result in a superior deal.
Maytag, the No. 3 U.S. appliance maker, said it would still consider Whirlpool's $1.3 billion offer but added that its merger pact with Ripplewood bars it from talking with other bidders unless it determines a better deal is likely to be reached. Ripplewood's bid will come up for a Maytag shareholder vote next month.
"I don't think it's over for Whirlpool," said Richard Pzena, founder of Pzena Investment Management in New York, which owns 1 million Maytag shares. Given the higher Whirlpool offer, "no shareholders in their right mind would vote for the Ripplewood deal at $14 a share," he added.
Whirlpool's offer, disclosed on Sunday, topped two other bids, including a $16-a-share proposal from a group led by Chinese appliance maker Haier (search). That offer was withdrawn this week.
Analysts said a deal with Whirlpool, the largest U.S. appliance maker, might raise antitrust issues tied to market share.
Maytag reaffirmed its forecast for full-year earnings of 45 cents to 55 cents a share, including about 10 cents a share in restructuring charges. Analysts currently expect 49 cents a share, according to Reuters Estimates.
Maytag shares were down 4 cents to $15.61 in New York Stock Exchange (search) trading, while Whirlpool was down 58 cents to $77.32.
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