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Whirlpool CFO on Q3 earnings: ‘Supply chain issues are COVID-driven’

Jim Peters, Whirlpool CFO, joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss the company’s third-quarter earnings report and more.

Video Transcript

BRIAN SOZZI: The great home renovation trend during COVID-19 rages on. And that continues to benefit the bottom line of appliance giant Whirlpool, which blew a third quarter profit estimates last night. Whirlpool CFO Jim Peters joins us now. Jim, good to see here. So during this quarter, I actually went out, and I bought new appliances for my kitchen. But I had to wait a couple weeks. When will those-- when will the supply chain just get back to normal times, where I can go into a store, get an appliance, and it'll show up the next day.

JIM PETERS: Well, first off, thank you for having me, and it's good to be here. And I guess you're right. There has been a strong increase focus in the home, which, obviously, helped us from a third quarter perspective, whereas we said we had outstanding results. And that increased demand that you're seeing-- you went out and purchased an appliance-- what we really saw initially in the beginning of COVID is we saw people purchasing things more like freezers and lower-end refrigerators and microwaves.

But as the trend shifted to invest in the home as people were spending more time in their kitchens and their laundry rooms, they began to upgrade the mix of what they were buying, and so they were looking to add new appliances and upgrade their kitchens. With that, obviously, what we had to do is we had certain issues that went on whether within our factories, where we had to space people out and slow production down to make it safer, or our suppliers had issues along the way.

And so the supply chain things you're seeing right now are COVID-driven. As we talked about this morning on our earnings call, we expect those. Right now, we've got our production back to a point where it's meeting the level of demand and even slightly exceeding it. But we expect that it'll take at least until the first quarter as we begin to catch up with the demand that's been out there.

ALEXIS CHRISTOFORUS: I know you've got a very strong balance sheet right now, and you're going to be able to pay down the short-term debt that you took on during the pandemic. What happens after that? When you have some of that cash to play with, are you looking at acquisitions? Are you going to hang on to that money as you ride out the pandemic? What are the plans there?

JIM PETERS: Yeah, I'd say that's a good question. Obviously, we talked about, earlier today, that our cash flow is stronger than it normally is at this point in the year, and so we do intend to pay down all of our short-term debt that we had taken on at the beginning of the crisis. As we look to next year, we intend to increase, obviously, our capital expenditures, which we brought down this year, and continue to invest in our products. We raised our dividend. And then the other uses that we have, we'll continue to evaluate.

Obviously, our longer-term capital allocation strategies don't change, but there still is some uncertainty in the world out there. And so I think it'll be at least until early to mid next year where we really start to talk differently about what that capital allocation change might be.

BRIAN SOZZI: I think it's fair to say, Jim, many of us continue to be surprised by the strength in the US housing market. We just had another strong existing home sales report out this morning. What's happening in the housing market? How does that shape Whirlpool's financials next year?

JIM PETERS: Yeah, well, I think the positive thing in the housing market is, as we've said, you're seeing an increase in new home construction, existing home sales, an increase in remodeling, and the trends that I talked about earlier. So all of those play very positive for us, and are trends that not only play positive in, what I'll say, is the near to mid-term, but also in the long term. Because if you think about new housing construction, as that picks up, the houses aren't finished for six to nine months, and so the appliances don't go in until the end.

So we'll continue to see a strong trend driven by those things I just talked about. And with mortgage rates being where they are today as well as just the move of people from outside of some of the larger cities into some of the suburban areas or to second homes, that continues to be positive for us in terms of that focus on whether it's remodeling those kitchens or new homes that are being built.

ALEXIS CHRISTOFORUS: Jim, President Trump visited a Whirlpool factory in Ohio in August, where I believe he created a couple of hundred jobs. I know that he slapped tariffs on appliances and components coming from China during his presidency. From where you sit, has Trump been good for US trade?

JIM PETERS: Here's the thing that I would say, and I do believe that some of the things that have gone on in terms of balancing the trade with China were necessary and continue to be necessary. I think as we look at some of the things that we've had around dumping within our industry and some of the things that were done, either within the Trump administration or before, were necessary to make it a level playing field, which we're very much for for fair trade out there.

Obviously, we also, though-- while we had the positive of that, we also had the negative of tariffs on many of the components that came in. But that's just part of instituting a policy in that that will balance trade. And I think if you look at it in terms of our ability to deal with that, we were able to offset that with pricing over the last couple of years and maintain our margins within the US at a very healthy level-- in fact, expanding, continuously expanding margins within the US.

BRIAN SOZZI: All right, we'll leave it there. Whirlpool CFO Jim Peters, good to see you.

JIM PETERS: Good to see you. Thanks a lot, guys.