Whirlpool CEO: Steel prices have reached 'unexplainable levels'

At the beginning of 2018, appliance manufacturer Whirlpool Corporation (WHR) said it was “very thankful” for the Trump administration’s decision to impose tariffs on imported residential washing machines.

“After nearly a decade of litigation, we are thankful that the U.S. government has announced an effective remedy,” CEO Marc Bitzer told analysts on the company’s earnings call in January. “This decision is a victory for American workers and will enable new manufacturing jobs here in the United States, including the 200 new jobs we have announced at our Clyde, Ohio manufacturing plant. At this point, however, it is too early to quantify the financial impact on 2018, but this is without any doubt a positive catalyst for Whirlpool.”

Fast-forward to July, the company is already singing a different tune as the 25% tariffs imposed on imported steel from China have made the cost of raw materials used in building appliances more expensive.

On Monday, the maker of KitchenAid and Maytag appliance missed second-quarter earnings estimates, sending shares lower. The stock was last trading down just over 13%. Year-to-date, shares are 23% lower.

“Since mid-May, a number of elements in the macro environment worsened significantly,” Bitzer said on the company’s second-quarter earnings call on Tuesday. “In addition to continued raw material inflation, we experienced a temporary but significant decline in U.S. industry demand.”

The company expects raw material inflation to be approximately $350 million in 2018. Some of the hedging contracts for base metals have given the company “some protection” but they don’t insulate the company completely.

“The global steel costs have risen substantially and in particular in the U.S., they have reached unexplainable levels,” Bitzer said. “While the U.S. steel has also historically priced at a premium to the rest of the world, most recently, the U.S. steel is 50% more expensive than the rest of the world and simply cannot be explained by the input costs.”

As a result, the company has raised prices and may do so again.

“Tariffs and global trade actions”

“[Uncertainty] related to tariffs and global trade actions have also led to increased costs for certain strategic components and finished goods imports and exports. While these material headwinds are significant, we’ve also demonstrated our ability to overcome these types of challenges in the past through a variety of means including cost basis price increases, cost reductions, and efficiency improvements, and will continue to do so,” Bitzer said.

Whirlpool isn’t the only company weighing in on the impact of tariffs. It’s a topic that’s coming up on many conference calls this earnings season.

Also on Tuesday, motorcycle maker Harley-Davidson (HOG) CEO Matthew Levatich said the company made the “best decision given the circumstances” when it announced last month that it would increase its international manufacturing following retaliatory import tariffs levied by the European Union. At the time, the company said that those tariffs would ultimately make the average costs of bikes go up by $2,200 on the continent.

As a result of the tariffs, the company expects to incur between $45 million and $55 million in increased costs. Of those costs, about $15 million to $20 million is because of steel and aluminum prices increases due to tariffs. The remaining $30 million to $35 million in increased costs is because of the EU tariffs.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter. Send tips to laroche@oath.com.

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