Good morning. I'm Sam Darkatsh, and on behalf of Raymond James, I would like to welcome you to the Whirlpool Corporation presentation for today. With us from Whirlpool, Roxanne Warner, Senior Vice President, Corporate Controller, as well as Scott Cartwright, Head of Investor Relations and Global Finance. Roxanne, I think you said your presentation's about 20, 25 minutes or so, which may give us a few minutes for Q&A, but the breakout session following will be really more designed for the detailed Q&A. And with that, Roxanne, welcome back.
Thank you. Thanks, Sam. Hi, everyone. Good morning. Thank you for joining Whirlpool Corporation today. Scott and I are really pleased to be here, so I'll jump right on in because I'm sure there are going to be questions at the end, so a little bit about Whirlpool Corporation. We are the leading appliance manufacturer company with a significant focus on improving life at home. Our revenue is approximately $17 billion, as reported last year. We have about 44,000 employees and roughly 40 research centers and manufacturing centers across the globe. Our sales by segments are primarily, as you see here, in the Americas, and I'll go through that in a bit more detail, but we do have a presence in Asia, and SDA Global has a presence across the globe, including Europe.
Our sales by category is roughly split, with a heavy focus on refrigeration and laundry, as well as cooking and dish. Over the last two to three years, we embarked on a portfolio transformation, and we did that for two main reasons. One of the things that we've noticed is that there is a trend away from being a global company. We believe that winning for us requires us to have an important presence on a regional scale, and this is particularly our MDA business, or our major domestic appliance business. With our small domestic appliance business, we do believe that the global presence is still necessary. But the other key thing that you would see with us is that we're really focusing on our higher growth, higher margin businesses.
And this is slightly different than what you may have seen in the past, where we would invest an additional dollar with the focus on trying to restructure and rebuild businesses. So for us right now, it's all about being number one and making sure we have higher margin. What that means is we now have three strong pillars as a company. You have all the way on the left side here, we have our small appliance business, and this is the one business that I said is more global in nature. I will double-click on that one in a second. In the very center is our strongest portion of our business, which is our major appliance business. And this is our business particularly in the Americas as well as India.
Then all the way on the right, you see our commercial appliance business, and this is a business that we love a lot. It's one that's right now very small, but there's a lot of opportunity, particularly from a margin standpoint. Over the last year, a couple of years, we've done some additions and subtractions as part of our portfolio transformation. We have added InSinkErator. A couple of years ago, we bought InSinkErator for roughly $3 billion. Our InSinkErator business is a number one from a disposal business perspective, with a lot of opportunity, particularly in the hot water business. We also bought Elica in India, and this is a significant business that helps us as it relates to the kitchen growth, particularly in India.
As we have discussed, in terms of focusing on higher margin businesses, we've done a lot of subtractions across the globe on businesses that were particularly negative EBIT margin. So this is, as you see on the slide, our current position of Whirlpool Corporation. In North America, we have a number one share position, Latin America number one share position, SDA Global number one mixer brand in the world, and then we also have Asia, which is our number three share position and very well- positioned for continued growth. Our North America business represents roughly $10 billion of revenue, and this is a business that is very well- positioned for growth from a top-line perspective, but also from a margin expansion perspective. There are two key drivers for us.
One is the eventual recovery of the housing market, and I know a lot of you have probably heard about that comment, but that is also true for Whirlpool Corporation, but we're not only relying on that. We also have significant opportunity that we are unlocking through new product introductions, which I'll also touch on, so North America has three key demand components. We have the discretionary business, new construction, and replacement. There's something really interesting, particularly happening in the appliance industry where the replacement demand continues to be very, very strong. As you look across the last 10 years, you would see that replacement demand has actually increased by roughly 10 points, and that's driven by two key things, so one, as we all know, post-COVID, we've had a lot of focus on hybrid work, and what that has done is it's accelerated the replacement cycle.
Because as you'd imagine, with folks being at home and using the appliances, it actually increases the rate at which these appliances would need to be changed or replaced, and so this is a significant driver of our top-line results as of right now. The other key thing is as we look back to 2014, 2015, 2016, there was significant growth in the appliance industry. And so as you think about replacement and the replacement average period of years being eight to 10 years, you're really coming up on a period of time where you're driving a lot more replacement purchases. The area where we're seeing a bit of a falloff as we think about demand is actually in discretionary, and discretionary demand is where you really start thinking about mix and good mix, right? You're thinking about margin improvement, and that typically comes from the discretionary area.
Given what you're seeing here with existing home sales and the falloff that you're having with existing home sales, that's actually impacting your discretionary demand negatively. This is where you hear a lot about interest rates and the impact on interest rates on the existing housing industry, and that's what's driving a situation where we've actually seen discretionary demand fall by 10 points in the last 10 years. You have that shift between replacement and discretionary. The other key driver for us is really around new housing. As I said, I'm sure I don't have to tell this team, particularly those in the U.S., what's happening as it relates to the housing industry and the fact that we are undersupplied, etc .
I think what is more important is that Whirlpool is well- positioned for whatever that housing rebound comes, being the number one with eight out of the 10 U.S. builders. We are well- positioned to capture that benefit whenever that demand pops up. But as I said, we don't want to rely and wait as a company on when the housing recovery comes. We are focused on what's within our control. And so that's why in 2025, for example, we're actually launching over 30% of our products in North America. So we are relaunching our products. We're bringing out an entirely new KitchenAid line. We continue our innovation as it relates to JennAir induction cooktops. And there are even things that's not mentioned here that we've won awards in. For example, we recently won an award for our Maytag Pet Pro front load washer and dryer.
And this is another great innovation where if you have pets, for example, the machine is designed to help to take the hair out of your clothing and even sanitize it. So we're continuing to launch products that we know will capture the discretionary demand when it comes, but also help us to benefit and win consumers in 2025. The other area that we are really winning and well- positioned is in Latin America. So we just talked about North America, so heading south a bit for Latin America. In Latin America, we have a number one share position. We had significant top-line growth in Latin America in 2024, and that was really driven again by the innovative launches that we've had, as well as our pattern of continued cost reduction. And we're really looking forward to Latin America and continuing to win here in 2025.
One of the jewels of Whirlpool Corporation is our KitchenAid brand. The KitchenAid brand is a brand that continues to be on lists that even includes companies such as Apple. When you think about the KitchenAid small appliance business, you often think about stand mixers. We actually had one that we just launched. It was the Evergreen Stand Mixer. It's right here that just recently went viral. The KitchenAid small domestic appliance is a global business that often resonates with consumers for two reasons. One, from a functionality standpoint, our products are known to last for a very, very long time. The stand mixers, for example, have an average life cycle of 17 years and are often passed from generation to generation. But there's also an emotional connection.
You would very often see consumers with tattoos of our small domestic appliance, particularly the stand mixer on their foot. There is just the emotional connection due to the design, the connection with exactly what the consumer wants to use it for. And so this is actually a gem of our business that we are really looking forward to continuing to grow as we did in 2024 and doing so at very strong margins. As we think about growth, you may say, well, what gives you that permission to grow? This is an area of our business with very strong brand preference. As you look here on the right-hand side of the screen, you see, for example, the KitchenAid stand mixer, 52% brand preference. And then we have other areas and other segments that we are entering, such as espresso machine that already has a 21% brand preference.
And so our focus is really continuing to grow this business by investing in the stand mixer, continuing to invest in attachments related to the stand mixer, but also expanding in other categories that you have small appliance playing in. And then very lastly, of the four reporting segments, it's Asia. We announced in Q4 2024 earnings call that we intend to reduce our ownership of the Whirlpool of India from 51% to roughly 20% later this year. The Whirlpool of India team has done a fantastic job as it relates to investing in the Whirlpool brand and growing the Whirlpool brand through innovative products. Our announcement that we made in Q4 2024 earnings call has generated significant interest, particularly with third-party large investors, and we will evaluate all of the potential transaction structures to maximize value for both Whirlpool of India and Whirlpool Corporation.
So more to come on this later in the year. So what does this mean for 2025? As we gather the four reporting segments, we are actually showing a 3% appliance growth on a like-for-like basis from 2024 to 2025, margin expansion of 100 basis points, and then as we look to free cash flow, moving from $385 million in 2024 to a guidance of $500 million -$600 million in 2025. And how do we plan to do this? Particularly from a margin standpoint, you're seeing the heavy focus on price mix, and this has to do with the 100+ product launches that I just touched on that's happening in North America, for example, in addition to previously announced pricing actions that we've made in North America as well as Latin America. The other element that we haven't really touched on a lot is net cost.
So this will be a key driver for us in 2025, as it has been in both 2024 and 2023, where we focused on reducing costs significantly through a couple of areas. Organization simplification being one, because as you think about portfolio transformation, as you simplify the business, you have opportunities to reduce costs there. But then there are other elements such as manufacturing efficiency, logistics in particular, where we've had a lot of inflation in the past couple of years. Those are also key areas that we will continue to focus on and build on our reputation of actually continuing to have structural cost takeout. And then marketing and technology investments is something that we plan to continue to do. As you think about having 100+ launches, you also have to advertise, transition costs, etc. , to ensure that the marketplace actually knows that you're bringing out these products.
And so that's something that's going to be critical for us here in 2025. And then this is a quick snapshot so you can see what this means for each segment. So North America, which had previously delivered 6.5% EBIT margin here in 2024, we're showing 100 basis points of expansion to 7.5%. Latin America, a 50 basis points improvement to 7.5% as well. And then MDA Asia to 6% and SDA Global definitely showing top-line growth despite the industry being flat and then having 15% of margin expansion. In terms of free cash flow guidance, the $500 million-$600 million of free cash flow guidance in 2025 is largely driven by two key factors in cash earnings. One, of course, the margin expansion, as we just talked about, having the 100 basis points.
Then, as we had discussed with the portfolio transformation, we had a divestiture of our European business, which absorbed roughly $275 million of free cash flow per year. And so now that we don't have that business anymore, that will therefore be incremental to our free cash flow here in 2025. Capital allocation priorities. We are focused on three key things here in 2025. One, funding the business. And this means putting $450 million aside to continue our record of product innovation and ensuring that we continue to launch products that will win the consumers not only now, but when the housing recovery eventually happens. The other key thing is debt paydown. We are committed to paying down $700 million of debt in 2025 and then continuing to progress to our target of net debt leverage of 2x . And then lastly, it is funding our dividend.
We are committed to funding the dividend as we have been doing for returning cash to our shareholders since 1955. What is another key priority for us here in 2025 is going to be share buyback and the value creating M&A. It is key for us to have these priorities to ensure that we can strengthen our balance sheet. With that, the three key reasons that we've discussed about Whirlpool being an attractive investment are one, portfolio transformation, having a more simplified business that's really focused on higher growth and higher margin. Secondly, value creation through our Americas business and our small domestic appliance businesses. This is through ensuring that we have innovative products, that we continue to invest in the business and prepare and make sure we're well- positioned for when a housing recovery does happen.
And then lastly, ensuring that we deliver on our capital allocation priorities as we've done in the past, which involves funding the business and improving our net debt leverage and remain committed to funding our dividend. So with that, that brings me to the end of our presentation, and I think right on time. So thank you all, and I'm open for Q&A.
Yeah, yeah, please. Question, Rich. And Roxanne, if I could ask you to repeat the questions after you receive them. Thank you.
[audio distortion] Why would you not change the dividend policy just to help accelerate the dividend payment and potentially buyback? It seems like that cuts the dividend.
Thank you. So the question is, why wouldn't we revisit the dividend policy to help us to accelerate the business, right? And ensure that we're able to maximize the use of our free cash flow because the dividend itself seems very large, hefty. So thank you. So here's what I would say is our dividend policy as of this time is one that shows that we have a dividend of roughly 30% of our trailing ongoing results. Correct? Yeah. Our trailing ongoing results. And this is something that we actually review on a quarterly basis. Right now, particularly given what we see as the potential of our business, we believe that the dividend as of right now reflects what we would expect. But as I want to reiterate, this is something that will be reviewed and can be reviewed on a quarterly basis by the Board. And if needed, we can make adjustments.
But for now, based on what we see as our potential and what we believe it will happen here in 2025 and 2026, we believe the dividend as of right now meets the policy. Thank you.
Question here. [audio distortion]
It's not an area where we see, for example, margins of approximately 10%. We do see it as an opportunity, and we plan to remain in India for an extended period of time. I mean, it remains a strategic benefit for us, but we do believe that there is more value to the overall Whirlpool Corporation by the intent of the transaction that we have announced. We do have the benefit of gaining roughly $500 million-$600 million from a cash standpoint, but as I said, we will continue to have a holding of approximately 20% of India.
And just to be clear, India as of right now has an EBIT margin of roughly 4%. [audio distortion] So the question is related to tariff. I didn't repeat the question before. The question is related to tariff and basically wanting to get an idea of the potential exposure, if I were to summarize it. What I would say, we do produce 80% of what we sell in America in America. So we have another 20%. Of that 20%, we can say it's roughly split between Canada and Mexico. The other key thing for us is that particularly with the majority of our raw materials, such as steel, we do have locked-in contracts for a minimum of one year.
As we think about our exposure, while the guidance as of right now does not factor in tariff exposure, we also believe that given that we are producing 80% of what we sell in the U.S. in the U.S. and that we do have locked-in contracts, that we are in a pretty good position as of right now.
Pricing and mix impact for this year does not include potential pass-through tariffs.
Correct. We do not have tariff assumptions built in terms of guidance from a price mix standpoint.
The base expectation would be if they have pass-through tariffs.
We will assess at the time to understand whether or not we do need to take cost-based pricing or whether or not the contracts that we do have locked in have us protected enough. I think that's something that we will decide at the time.
The one thing I will say is, you know, this is not the first time that Whirlpool Corporation is operating in an environment that we have to face tariffs. And as you look back, even five to 10 years of our history pre-COVID, you would see that we've always been able to manage through that tariff environment, either through the contracts that we already have or through assessing the business and understanding what we need to do from a cost-based pricing standpoint.
Roxanne, talk about public form. You can talk about tone of business in the fourth quarter. Sell-through was actually quite strong, although sell-in was affected by some trade inventory, retail inventory drawdowns. I think those drawdowns have ended here in the first quarter. Please confirm or give color to that. But, we're also seeing kind of weak industrial production of appliances, and the credit card data at Home Depot and Lowe's has been a little squishy of late. If you could talk about what you're seeing more near-term from a demand standpoint?
Thank you. Thanks, Sam. So yes, as Sam touched on in Q4, we did see a lot of strong sell-through come in in two key areas of our business, actually, the North America major domestic appliances, but also in our small domestic appliances as well. So that was, it was very good, yes, costly and impactful from a price mix perspective, but we did see that benefit.
As we look here towards Q1, there's not a ton that I can share, outside of what we've already shared on the earnings call, but what I would say is the impact that we had discussed as it relates to the one-time significant inventory adjustment is one-time, and that's not something that's impacting us here in Q1. And we continue to see, I would say a strong continuation of the sell-through that we were seeing here in Q4.
Other questions here in the room?
[audio distortion] Retail experience with maybe creating a tax base room. Would you say that that retailer maybe had a North American producer, right? Maybe they were bringing in some of the overseas imports over that needed something?
Yeah. So to repeat the question, basically, for the retailer inventory adjustment that we saw, do we have any reason to believe that that was also tied to imports that were coming in in advance of tariffs or whatever were being announced? I would say, and it was also mentioned at the Q4 2024 earnings call, that those were two separate incidents. So the trade inventory adjustment that we saw in December was the realization of supply chain efficiencies that this retailer had announced previously.
Separately to that, our CEO did mention on the earnings call that there is belief that separately from that, there were imports, and I believe that there have been several reports that have come out since then, one of them even being in The Wall Street Journal that showed that there were a lot of imports that did come in for retailers as well in advance of tariff announcements, etc . But two separate incidents.
Question here, yes. [audio distortion]
Our thinking and guidance as it relates to existing home sales. As of right now, we do not have an assumption of any recovery related to existing home sales or the housing recovery in general assumed in guidance.
So if it were to happen, what we're really pleased by is making sure that we have the products there in advance, which is why we're really pleased with the timing of our launches, so that if it does pick up even in the second half, we're ready. But it's not something that we have assumed in the guidance.
You also announced on the prior call that you were looking to raise your PMAP prices or your promoted minimum advertised prices. First off, talk about the mechanics of why PMAP pricing has been the choice both last year and this year and the prospect of that additional price sticking in the channel.
Yeah, one of the things that we have talked about, and I even mentioned today, was, you know, the fact that we are seeing an increase in replacement demand. And in a situation where you're having an increase in replacement demand, it just does not make as much sense for you to have a situation where your promotions are running longer and deeper than you were before, because that's typically what you would be doing as you're trying to capture the discretionary demand.
And so because of that trend, what we have decided as a company is to really focus on reducing both the length and the depth of the PMAP, of the promotional pricing, which is why we've selected that way of basically embedding the pricing. And then it's something that if it changes from a demand standpoint, we can also very quickly react as we are able to react right now from a replacement standpoint.
We do believe that it will continue to be successful because we have seen in 2024 when we took the promotional pricing down, that we did see a situation where we saw sequential improvement in our price mix, and we spoke about that in the earnings call. We did see that continue to hold in Q4 separate from what we saw from a sell-through standpoint. And so we believe that that would also continue here in 2025. The team that is managing this, which is our commercial team, they have been managing PMAP duration and implementation for years, for decades. This is one of the ways that we typically run the business. And so we do have a ton of confidence in the execution.
Any other final questions before we move this to breakout? Then we'll move this to breakout. Roxanne, Scott, thank you again.